National Highways Authority Of ... vs M/S Tantia-Tbl (Jv)
2012 Latest Caselaw 1077 Del

    IN THE HIGH COURT OF DELHI AT NEW DELHI

                           O.M.P. 482/2009

                                          Reserved on: December 14, 2011
                                          Decision on: February 16, 2012

 M/S NATIONAL HIGHWAYS
 AUTHORITY OF INDIA                      ..... Petitioner
              Through: Mr. Yaman Kumar, Advocate.

                           versus

 M/S TANTIA-TBL (JV)                                  ..... Respondent
               Through:             Mr. George Thomas with
                                    Mr. Amit George, Advocates.

 CORAM: JUSTICE S. MURALIDHAR

                           JUDGMENT

16.02.2012

1. The Petitioner, National Highways Authority of India ('NHAI'), in this

petition under Section 34 of the Arbitration and Conciliation Act, 1996

('Act'), challenges an Award dated 5th May 2009 passed by the Arbitral

Tribunal ('Tribunal') arising out of the disputes between the Petitioner and

the Respondent M/s. Tantia-TBL (JV) pertaining to the contract for the

work of four laning of km 332.600 to km 316.00 (Aluva-Angamaly section)

of NH-47 in the State of Kerala (Contract Package No. NS-28/KL). The

contract dated 14th June 2001 was entered into between the NHAI and the

Respondent for the contract price of Rs. 66,45,73,827/-. The date of

commencement was 31st August 2001 and the intended date of completion

was 30th August 2003. The first extension of intended completion date

granted by the NHAI was up to 30th April 2004 and the second extension

was granted up to 31st May 2004 which is the actual date of completion.

The NHAI took over the project on 7th August 2004. The defect liability

completion certificate was issued on 7th February 2006. The contract price

was increased to Rs. 71,40,52,826/- (by 7.45%). M/s. Sai Consulting

Engineers Private Limited [formerly known as Sheladia Associates &

Consultants (India) Private Limited] was appointed by the NHAI as the

"Engineer" for the project in terms of the contract.

2. In terms of Clause 24.1 of the contract if the contractor believes that a

decision taken by the Engineer was either outside the authority or was

wrongly taken, the decision will be, at the first instance, referred to a

Dispute Review Expert ('DRE'). The decision of the DRE is final and

binding if neither party referred the dispute for arbitration under Clause

25.2.

3. The disputes between the parties were referred by the contractor to the

DRE by its letter dated 9th November 2005. However, the DRE by its letter

dated 24th November 2005 communicated its inability to adjudicate the

matter as the tenure of the DRE had come to an end and the NHAI had not

extended it. The Respondent contractor then referred the disputes to the

Tribunal in terms of Clause 25.

4. A preliminary objection raised before the Tribunal by the NHAI was that

the Respondent ought to have approached the Indian Road Congress

('IRC') under Clause 26.1 for designating another DRE. The Tribunal

observed that contingencies envisaged under Clause 26.1 of the contract,

i.e., resignation/death of the DRE or failure to fulfill its functions, were not

attracted. The DRE was willing to continue however the NHAI did not

extend its tenure.

5. Mr. Yaman Kumar, learned counsel appearing for the NHAI reiterated

the same objection that the Respondent was under obligation in terms of

Clause 26.1 to approach the IRC. He further submitted that merely because

the NHAI at that stage did not object to the appointment of the Tribunal it

could not be held to have waived its objection.

6. This Court is unable to appreciate the above submission. Clause 26.1 was

clearly not attracted in the instant case. The DRE did not show its

unwillingness to act. The DRE in fact, by its letter dated 24th November

2005, pointed out that it was unable to continue due to expiry of its term as

DRE. The NHAI was expected to extend its tenure, which it failed to do. In

the circumstances, the Respondent was justified in approaching the

Tribunal. The objection as regards the jurisdiction raised by the NHAI has

been correctly rejected by the Tribunal.

7. There were 15 items of claims filed by the Respondent before the

Tribunal. During the course of oral submissions before the Tribunal, the

Respondent withdrew four claims, i.e., Claim Nos. 7, 8, 12 and 14, thus

leaving 11 claims for adjudication by the Tribunal. Out of these 11 claims,

Claim Nos. 1, 2, 4, 6, 9, 10 and 15 were allowed in favour of the

Respondent whereas Claim Nos. 3, 5, 11 and 13 were rejected. To the

extent that seven of the claims made by the Respondent were allowed by

the impugned Award dated 5th May 2009 of the Tribunal, the present

petition has been filed by the NHAI.

8. Claim No. 1 is for loss suffered due to idling and under utilization of

machinery and equipments on account of compensation events. The claim

is for a sum of Rs. 5,24,12,282/- where the Tribunal awarded Rs.

2,62,01,141/-. Although the claim as regards idling of machinery of the

Respondent was for a period of fifteen months, the Tribunal allowed it for

eight months.

9. The case of the Petitioner is that the Respondent was also responsible for

the delay in completion of the contract and it had not carried out the work

in terms of the Work Programme as envisaged in Clause 27 of the contract.

It is submitted that Clause 44.1 (g) should not be read to include ordering of

variations as a compensation event. Secondly, the Tribunal had accepted

the basis of computation as given by the Respondent without going into the

veracity of the details mentioned in the cross reference of the said

document. Thirdly, there was no finding with regard to the documents

produced by the Respondent. Reliance is placed on the decision of this

Court in Delhi Development Authority v. Sunder Lal Khatri & Sons

(2009)1 Arb LR 240 (Del) (DB).

10. Countering the above submissions, Mr. George Thomas, learned

counsel for the Respondent pointed out that the monthly progress report of

the NHAI itself acknowledged the equipments deployed at the site and the

cost of machinery deployed. There was no objection raised as regards the

quantification placed on the value of the machinery by the Respondent

before the Tribunal. Apart from filing its evidence by way of affidavit, the

Respondent also demonstrated that the compensation was worked out not

on the basis of owning cost method but by adopting the formula fixed by

the Ministry of Surface Transport ('MOST'), Government of India.

Reliance is placed on the decision in Anant Raj Agencies v. Delhi

Development Authority 91 (2001) DLT 273.

11. It is seen that the Respondent had before the Tribunal limited the

number of months of extended deployment to the extent of documentary

proof available in the exhibits. The Respondent also restricted the number

of months of extended deployment for the Bituminous Concrete

Equipments. The Respondent placed before the Tribunal copies of progress

reports and invoices showing the total investments on all the machines. The

Tribunal has, in paras 21 to 39, analysed the relevant provisions of the

contract in this regard. It was noticed that Clause 44 of the Contract

stipulated that certain events were 'compensation events' unless they were

caused by the contractor. The Engineer was empowered under the said

provision to assess 'compensation events'. Clause 44.1 (g) qualified

variation as a 'compensation event'. Clause 40.4 of the GCC also permitted

variation to be treated as a 'compensation event'. The Engineer has, in the

present case, certified 365 days of compensation events. The documents on

record before the Tribunal showed that 'early warning' notices had been

issued by the Respondent to the NHAI and while seeking extension of time

the Respondent had notified such 'compensation events'. In the

circumstances, the Tribunal held that the Respondent herein has not

committed a breach of contract and the certificate issued by the Engineer

regarding compensation events was after being satisfied that there was no

breach of contract on the part of the Respondent. Further, the

'compensation events' were not considered in the price adjustment payment

or Clause 47 debarring the contractor from claiming additional cost for

'compensation events'.

12. The criticism of learned counsel for the NHAI to the impugned Award

as regards Claim No. 1 is not justified. The Tribunal analysed the

documents and the evidence placed on record and concluded that the delay

was attributable to NHAI. It was not reasonable to contend that since some

stretches were handed over, the Respondent ought to have completed the

work on those stretches. In para 37 of the Award the Tribunal held as

under:

"37. From the facts which have come on record, it is clear that claimant was asked to stop work on the above stretches by the Respondent on 17th November 2001 (Ex. C-5) and again vide letter dated 29th November 2001 (Ex. C-6). Claimant was asked to start the work on the same stretches. Once again vide letter dated 17th January 2002 (Ex.C-9) claimant was asked to stop work from 316.000 km to 319.000 km. Respondent was contemplating to provide elevated highway for Angamali Town portion. Matter did not end here. Respondent again vide letter dated 22nd March 2002 (Ex.C-10) asked the claimant to proceed with work on this stretch. Therefore, it is apparent that work of the complainant got prolonged because of indecisiveness on the part of the Respondent. It would be wrong on the part of the Respondent to contend that this indecisiveness of such stoppage of work did not actually cause any loss or damage to the claimant. The Engineer has admitted that the claimant brought machinery and equipments at site as per the programme and if that machinery could not be utilized because of indecisiveness of the Respondent claimant had obviously suffered loss."

13. This Court is unable to be persuaded to interfere with the finding of the

learned Tribunal as regards Claim No. 1.

14. Claim No. 2 was for infrastructure overhead expenses suffered on

account of compensation events which resulted in prolongation of the

contract. As against the claim of Rs. 1,83,93,690/- the Tribunal awarded to

the Respondent a sum of Rs. 1,38,86,131/-. The Respondent claimed

expenses for 9 months but the Tribunal reduced it to 8 months.

15. The criticism of learned counsel for the NHAI that the Respondent did

not substantiate it claim by producing the accounts book does not appear to

be justified. Since the delay was held to be on the part of NHAI, it was

held that the Respondent was not entitled to infrastructure overhead

expenses on the staff and infrastructure at site as well as at the Head Office.

The said decision of the Tribunal cannot be said to be contrary to law or to

the contractual provisions.

16. Claim No. 4 pertained to the loss suffered on account of financial

charges and insurance in the prolonged period of execution of completion

of work. As against the claim of Rs. 37,06,084/- the Tribunal awarded Rs.

32,11,242/-. The Tribunal noted that the Respondent admittedly extended

the bank guarantee for the additional period of execution and completion of

the work. Since the Respondent was required to keep the bank guarantee

alive till the end of the defect liability period, it would be entitled to extra

costs incurred on that score. The Respondent had set out the details of

expenses incurred in Annexure CA-4. However, the Tribunal, in the

absence of documentary evidence, disallowed the claim for financial

charges and reduced the amount. Its findings were based on an appreciation

of evidence.

17. Claim No. 6 was for losses incurred on account of variation and change

in specification of DBM (BOQ Item No. 4.04). The objection of learned

counsel for the Petitioner is that the said claim was barred by limitation and

also barred by the principle of constructive res judicata. A similar plea was

rejected by the Tribunal. The present claim was not covered by the earlier

arbitral Award dated 27th December 2004. It was for a subsequent period. It

is seen from the record that the Respondent submitted its rate to the NHAI

on 26th April 2003 in terms of Clause 38 of the contract. However, the

NHAI failed to submit any counter rate analysis. The NHAI also did not

challenge the rate analysis submitted by the Respondent. It is not in dispute

that reduction of work was more than 25% and more than 1% of BOQ

rates. Since the claim of the Respondent was to be paid unit rate wise units

got reduced as a result thereof. Further, no decision had been taken by the

Engineer. Therefore, Clause 40.2 was not attracted. The Engineer did not

find the quotation submitted by the Respondent to be unreasonable or

excessive. In the circumstances, no fault can be found with the impugned

Award as regards Claim No. 6.

18. Claim No. 9 pertained to compensation due to reduction in length of the

road and deletion of bridge from the original scope of work. Against the

claim of Rs. 2,80,33,280/- the Tribunal awarded in favour of the

Respondent a sum of Rs. 88,06,715/-. There was adequate evidence

produced by the Respondent which has been analysed by the Tribunal

which found that out of the total length the work reduced, 15% work was

over. The work of the bridge was also reduced from both sides. Since the

deletion of work was not covered under Clause 40 of the contract, the

Respondent was entitled to damages under Section 73 of the Contract Act.

The Tribunal held that the Respondent was entitled only to BOQ rates and

not damages. The decision as regards Claim No. 9 was based on

appreciation of evidence and cannot be held to be contrary to law.

19. Claim No. 10 was for compensation for loss suffered due to changes in

design of Mangalapuzha bridge. A perusal of the impugned Award shows

that due to the order of the High Court, the elevated portion on the Trichur

side had to be retained. Consequently, the Engineer decided to increase the

proposed road level by three meters. This change led to change of

methodology for the construction of Mangalapuzha bridge. The Respondent

had to procure steel, fabricate and erect the spans for supporting girder

leading to additional expenditure. The Respondent was compelled to do the

construction of girders in all the three spans as cast-in-cast type of

construction. The Tribunal held that the NHAI was held to be responsible

for change in the design that resulted in additional costs. It also held that

the NHAI had not denied the additional cost incurred by the Respondent.

Again the decision is based on an appreciation of evidence and cannot be

said to be perverse or illegal.

20. As regards Claim No. 15, the award of interest @ 12% per annum

cannot be held to be unreasonable or arbitrary. The law in this regard has

been explained by the Supreme Court in State of Rajasthan v. M/s. Ferro

Concrete Construction 2009 (3) Arb LR 140 SC.

21. No grounds have been made out for interference with the impugned

Award dated 5th May 2009 of the Tribunal. The petition is dismissed with

costs of Rs. 10,000/- which will be paid by the Petitioner to the Respondent

within a period of four weeks.

FEBRUARY 16, 2012                                   S. MURALIDHAR, J.
RK