Delhi High Court
National Building Construction ... vs A.M. Rasool Construction And ... on 7 March, 2012
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
O.M.P. 411/2003
Reserved on: 7th December, 2011
Decision on: 7th March, 2012
NATIONAL BUILDING CONSTRUCTION
CORPORATION LIMITED ..... Petitioner
Through: Ms. Ginny Jetley Rautray, Advocate.
versus
A.M. RASOOL CONSTRUCTION AND ENGINEERING
SERVICES PVT. LTD. ..... Respondent
Through: Mr. Arun Francis, Advocate.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
07.03.2012
1. This judgment disposes of the objections filed by the National
Building Construction Corporation Ltd. ('NBCC') to the Award dated 21st
July 2003 of the Sole Arbitrator in the disputes between NBCC and AM
Rasool Construction & Engineering Services Private Limited under
Sections 30 and 33 of the Arbitration Act, 1940 ('Act').
Background Facts
2. NBCC was assigned by the Government of Libya the work of
construction of 1305 houses at Benawalid and Ghat, Libya and a 120
bedded hospital project at Ghat, Libya. A contract was entered into
between NBCC and the Housing Corporation of Libya ('HCL'). In view
of the magnitude of the work, NBCC decided to appoint sub-contractors.
The work of construction of 100 houses at Kalala, Ghat, Libya on labour
rate basis was awarded to M/s. A.M. Rasool and Company, a partnership
firm, referred to as Piece Rate Worker ('PRW'). A Letter of Intent ('LOI')
dated 29th December 1978 issued by the NBCC to the PRW read as under:
"We are pleased to inform you that your offer for
construction of 100 houses as above at Ghat, Libya, on
labour rates, is acceptable to us subject to the
following conditions:
1. Tentative estimated value of the labour contract is
Libyan Dinars three lakhs ninety two thousand three
hundred seventy point sixty four (LD 3,92,370.64)
including 35% premium.
You shall have to furnish performance guarantee of 7-
1/2 (seven and half only) of the above sum in Indian
currency in the form of the contract from any
nationalized/scheduled Bank.
2. That you will mobilize on the site of work within six
weeks of the issue of this letter.
3. Advance of 10% of the estimated value of the
contract will be paid to you in Libyan Dinars against
Bank Guarantee from nationalized scheduled bank for
equivalent Indian Currency within 15 days of
furnishing the guarantee for performance of the
contract or mobile at site whichever is later. However,
this advance shall be limited to actual expenses to be
incurred by the PRW.
4. That the time of completion for construction of 100
houses shall be 18 months from the date of issue of
this letter of intent.
5. We are agreeable to give you a premium of 35%
over the rate given in the enclosed schedule of items.
6. Award of some more houses may be considered by
the Corporation at Ghat for execution in due course
after the Corporation is satisfied with the performance
of the PRW for construction of these 100 houses.
Additional houses that may be awarded to the PRW
shall be at the rates on which the work of 100 houses
at Ghat has been allotted.
7. PRW will extend all reasonable facilities to the
other contractor such as electrical works etc.
8. The variations shall be limited 25% of the contract
value."
3. The work of construction of 100 houses was to be completed in a
period of 18 months from the date of the LOI. The total value of the
contract was Libyan Dinar ('LD') 3,92,370.64 including 35% premium on
the scheduled rates as per Bill of Quantities ('BOQs') forming part of the
contract. The PRW was to furnish 7.5% performance guarantee and 10%
mobilization advance guarantee towards mobilization advance payable in
LDs which was limited to actual expenses. The permissible variation was
limited to 25% of the contract value.
4. The requirement was that PRW had to register the contract in Libya
with the Libyan Tax Department with all expenses on that account being
borne by the PRW. It was deemed that "the PRW has visited the site of
work before agreeing to these rates, terms and conditions after
considering all the factors required for working out such rates." NBCC
was to be responsible for any variation at any stage. No claims at any
stage were to be entertained as a consequence of variations "except
otherwise provided in the terms and conditions."
5. Clause 22 of the Financial Terms and Conditions ('FTC') and Clause
51 of the General Terms and Conditions ('GTC') between NBCC and
HCL were to form a part of the contract. Clause 4 of the GTC provided
that the following documents would form part of the tender documents:
(a) GTC of the contract between NBCC and HCL.
(b) FTC of the contract between NBCC and HCL.
(c) Technical Specifications (TS) and Conditions (Part
II)
(d) BOQ for each type of house.
6. Clause 10 of the GTC provided that PRW shall abide by the bye-laws
of the Indian Government and shall be responsible for any acts or
violations in that regard.
7. Clause 22 of the FTC between the parties read as under:
"Clause 22. The General Conditions of the Contract
entered into by the Corporation Libya shall be
application to PRW also."
8. Clause 51 of the GTC read as under:
"Clause 51. Enforcement of Libyan Laws and
Jurisdiction of Libyan Courts. The contract would be
explained and executed in accordance with Libyan
Laws and Regulations and only Libyan Courts would
exercise jurisdiction over any dispute arising from the
Contract."
9. On 30th April 1979 a Memorandum of Agreement was entered into
between the parties. A change in the type of houses as per the requirement
of Libyan clients was intimated by NBCC to the PRW and accepted by it.
It is stated by NBCC that the changes were covered in the 25% plus or
minus (variation) which was accepted by the PRW without reservations.
10. On 15th December 1981, a Supplementary Agreement was entered
into between the parties regarding enhancement of rates for construction
of the 100 houses of type M/4/G. In terms of the Supplementary
Agreement, NBCC agreed to pass on to the PRW a 50% enhancement in
the labour rates granted by the Libyan clients with effect from 1st April
1980. It was mentioned in the Supplementary Agreement as under:
"a) the Technical Specification Part I which was
deemed by the PRW to have been deleted vide Para
4(c) of the General Terms and Conditions appended
with the Letter of Intent Nos.343/M/F dated December
29, 1978 and 343/M/F dated 2.4.1980 shall be deemed
as a part of the contract with the PRW for the
construction of 100 houses type M/4/G at Ghat, Libya
from the date of starting of works.
b) The PRW will withdraw all claims which may have
arisen due to non-inclusion of Technical Specification
Part I in the earlier contract including claims due to
extra items and shall execute the items covered under
the BOC issued to him at agreed rate.
c) The PRW shall not put up any claim on account of
idle labour/wages for any reason whatsoever during
the pendency of the contract of the construction of 100
Houses M/4/G at Ghat, Libya.
d) The above said 50% increase in the labour rate of
the PRW shall be paid subject to the Corporation's
receiving a similar 50% enhancement in its rates from
the clients. The rates for items which do not exist in
BOQ (extra items) shall be decided according to the
relevant clause of the agreement and shall be payable
only on receipt of the amount from the clients.
e) The above agreement is entered into with the PRW
as a package deal with the proviso that whatever
escalation/benefits might be authorized by the
Corporation with reference to this agreement above."
11. The PRW by its letter dated 10th September 1981 stated that any extra
items claimed earlier on account of TS Part-I "shall be treated as
withdrawn, nor we shall submit any claim on this account in future.
However, items not covered under the scope of our Agreement and do not
exist in the BOQ shall be treated as extra items and we are prepared to
execute such extra items on an amicable basis subject to approval by
clients."
12. The construction of 100 houses was completed and handed over
initially to the NBCC by the PRW on 31st March 1983 and finally handed
over to the client by the NBCC on 31st March 1984.
13. In the meanwhile, NBCC assigned the PRW the additional work of
construction of 12 M/4/G type houses on the same terms and conditions
based on the final Agreement dated 30th April 1979. The letter dated 25th
January 1983 awarding this additional work reads as under:
"M/s. A.M. Rasool & Co.
Ghat
Subject: Deviation Order to Labour contract for
construction of 100 nos. M/4/G Houses.
Dear Sirs,
With reference to your letter dated 10.8.1992 and as
per agreement clause no.6 we hereby award the
construction of 12 nos. M/4/G/Houses at Kalala, Ghat
with the same terms and conditions of original
Agreement dated 30.4.1979 (Deviated as M/4/G
Houses on 11.2.1980) which was concluded for 100
Houses.
Completion time for this work will be six months from
the date of this letter."
14. By another letter dated 12th May 1983, the PRW was awarded the
work of construction of boundary wall for 20 class rooms at Ghat on the
same terms and conditions of the original Agreement dated 30th April
1979. The said letter reads as under:
"M/s. A.M. Rasool & Co.
Ghat
Subject: Deviation Order No.2 to Labour contract for
construction of 100 nos. M/4/G Houses Construction
of Boundary Wall for Schools and Hostels.
Dear Sir,
With reference to your letters dated 1.4.1983,
26.4.1983 and 28.4.1983, we hereby award you the
construction of Boundary Wall work at 20 Class Room
School and Hostel at Ghat with the same rates, terms
and conditions of the Original Agreement dated
30.4.1979 which was concluded for 100 M/4/G
Houses with a rebate of 11%.
The work will be executed as per Technical
Specifications of the Clients which are also applicable
for 100 M/4/G Houses as per your contract.
However, in case the clients allow T.S.R. 1981 rate for
this work, the rate shall be changed to the same as 100
Housing Rate i.e., by waving 11% rebate which is
offered by you now.
Completion time for this work will be four months
from the date of this letter i.e. dated 12.5.1983. Bill of
quantity for this work is enclosed as Annexure (A)."
15. The additional work of construction of boundary wall was completed
and handed over by the PRW to NBCC on 31st March 1984. However,
the construction of 12 houses was not completed within the stipulated
time. According to NBCC, the work of plumbing, sanitation, etc. was
abandoned by the PRW by its letter dated 22nd March 1987 and the
remaining work on the 12 houses was completed by NBCC and handed
over to the Libyan clients. According to the NBCC, the entire work of
construction was inordinately delayed on account of the laches, neglect
and poor performance in the execution of the work by the PRW.
16. According to the PRW, the work of construction of 100 houses at
Ghat, Libya and handing it over to NBCC by the PRW on 31st March,
1983 with a delay of 33 months, was caused due to the delays and
hindrances caused by NBCC. After the satisfactory completion of the
defect liability period specified for the said work, the said 100 houses
were finally handed over to NBCC on 31st March 1984. As regards the
boundary wall, the work was awarded by the letter dated 12th May 1983
and the stipulated period of completion was four months ending on 12th
September 1983. As regards the 12 houses, the completion period
specified was six months from 25th January 1983 i.e. it was to be
completed by 24th July 1983. It is stated that the work of 12 houses was
completed by the PRW and finally handed over to NBCC on 12th January
1992. It was denied that the work of plumbing, sanitation, etc. in relation
to 12 houses was abandoned by the PRW by the letter dated 22nd March
1987, as alleged by the NBCC. According to the PRW, this position was
acknowledged by the NBCC in its Certificate dated 18th January, 1995.
The case of the PRW is that after the handing over of 12 houses on 12th
January 1992, the PRW submitted the final claims by a letter dated 16th
March 1994.
Change in the constitution of the PRW
17. At this stage it is necessary to advert to the change in the constitution
of the PRW. As earlier noticed, the PRW was a partnership firm. It had
eight partners at the time of award of the contract in question by NBCC.
M/s. A.M. Rasool Construction and Engineering Services (P) Ltd., a
company incorporated under the Companies Act 1956 became a partner of
the PRW with effect from 24th March 19984. The first eight partners then
retired from the firm and only the company M/s. A.M. Rasool
Construction and Engineering Services (P) Ltd. continued. It took over all
the assets and liabilities of the firm. By a letter dated 17th April 1984 M/s.
A.M. Rasool Construction and Engineering Services (P) Ltd. informed
NBCC of the above change in the constitution of the PRW and that "M/s.
A.M. Rasool Construction and Engineering Services (P) Ltd. is henceforth
the sole proprietor of M/s. A.M. Rasool & Co. w.e.f. 01.04.1984." A
copy of the Memorandum and Articles of Association of M/s. A.M.
Rasool Construction and Engineering Services (P) Ltd. was enclosed with
the letter. A preliminary objection raised by NBCC to the locus of M/s.
A.M. Rasool Construction and Engineering Services (P) Ltd. to represent
the PRW was rejected by the learned Arbitrator by an interim Award
dated 23rd April 2000 which will be referred to hereafter. Accordingly, the
reference hereafter in this judgment to PRW is to M/s. A.M. Rasool
Construction and Engineering Services (P) Ltd.
18. Since the NBCC failed to settle the claims so submitted, the PRW
invoked the arbitration clause by a letter dated 13th June 1994 addressed to
NBCC. With NBCC failing to send any panel of arbitrators, the PRW
filed Suit No.99-A of 1995 under Section 20 of the Act in this Court on
10th January 1995. Against an order dated 20th December 1996 passed by
the Single Judge directing the CMD of NBCC to appoint an Arbitrator,
the PRW filed an appeal and thereafter a Special Appeal. By an order
dated 25th September 1997 the Division Bench allowed the appeal and
remanded the case to the learned Single Judge to appoint an arbitrator in
terms of Section 20 (4) of the Act. By an order dated 19th December 1997
the learned Single Judge appointed Mr. Justice G.C. Jain (Retired) as Sole
Arbitrator.
Preliminary objections of NBCC rejected by the Arbitrator
19. The PRW filed its statement of claim on 21st January 1998 and
NBCC filed its written statement and reply. Thereafter, Justice Jain
expired and the case came up again before this Court for the appointment
of another arbitrator. After hearing the PRW and NBCC, the Court by an
order dated 18th November 1998 appointed Mr. Justice M.P. Singh as
arbitrator.
20. NBCC raised five preliminary objections before the learned
Arbitrator in its letter dated 5th May 1999 which were rejected by the
learned Arbitrator by an interim Award dated 23rd April 2000. The first
was that there was no privity of contract with A.M. Rasool Construction
and Engineering Services (P) Ltd. as the original contract was only with
M/s. A.M. Rasool and Co., the firm. The second was that there was no
proper legal representation and authorization on behalf of the claimant.
The third was that the appointment of the Arbitrator could be made only
by a Libyan Court and the arbitration had to proceed according to Libyan
law. It was contended by NBCC that "the Arbitrator appointed by Delhi
High Court has no jurisdiction to proceed with the matter." The fourth
objection was that the claim was barred by the Indian law of limitation.
The fifth objection was that the reference made to the Arbitrator was
beyond the scope of the dispute.
21. As regards the first objection, it was held by the learned Arbitrator in
the order dated 23rd April 2000 that there was a change in the constitution
of AM Rasool & Co. even while the contract was being executed. The
PRW was taken over by M/s. A.M. Rasool Construction and Engineering
Services (P) Ltd. and the change was brought to the notice of NBCC by
letter dated 17th April 1984 annexing copy of the Memorandum and
Articles of Association. NBCC in its reply dated 19th April 1984 stated:
"In view of the change of proprietorship of your company we request you
to kindly call on this office to clarify certain points." Thereafter no
objection was raised by NBCC till the hearing of the claims before the
learned Arbitrator. The completion certificate dated 18th January 1995
clearly stated that the company was the contractor. It was noted by the
learned Arbitrator that "from 1.4.1984 till 4.5.1999 the date of hearing
before me, no objection was ever raised by the Respondent regarding the
constitution of the claimant company." The learned Arbitrator referred to
the correspondence exchanged between the parties after 17th April 1984
and even the pleadings before this Court up to the appointment of the
arbitrator, throughout which it was the company which was representing
the PRW, when no such objection was raised by NBCC. The learned
Arbitrator concluded that: "The claim petition is maintainable at the
instance of M/s. A.M. Rasool Construction and Engineering Services (P)
Ltd. which has become the sole Proprietor of M/s. A.M. Rasool &
Company." The objection was accordingly rejected.
22. The second preliminary objection was also rejected as the petition
under Section 20 of the Act had been filed by the Director of the PRW,
who had duly signed the verification clause on 10th January 1995. As
regards the third objection as to the jurisdiction of Indian courts, the
learned Arbitrator noted that when the Division Bench by order dated 25th
September 1997 set aside the order dated 20th December 1996 of the
Single Judge directing the CMD of NBCC to appoint an Arbitrator, and
remanded the matter to the Single Judge to proceed in accordance with
law and to appoint an Arbitrator as postulated by Section 20(4) of the Act,
no objection was raised by the NBCC as to the jurisdiction of the Delhi
High Court. The learned Single Judge appointed Justice Jain as the
Arbitrator. When an application was filed for appointment of another
Arbitrator in place of Justice Jain, after he expired, the Court passed the
order dated 18th November 1988 in which it was recorded that the counsel
for the NBCC had no objection to the prayer made in the application. The
order of the Division Bench holding that the appointment of the Arbitrator
is in accordance with Section 20(4) of the Act had become final. It was
further noticed that for more than six years, NBCC had participated in the
initiation and progress of the arbitration proceedings in Delhi. It should,
therefore, be deemed to have submitted to the jurisdiction of the Delhi
High Court. It was further observed by the learned Arbitrator that while
the main contract for execution of the work "may be governed by the
Libyan law but the procedural matter has to proceed in accordance with
Indian law, otherwise it will entail grave injustice to the Indian sub-
contractor who executed the work in Libya." There was no specific
mention in the contract that the arbitration would be held in accordance
with the Act. It was further held by the learned Arbitrator that the dispute
arising from the contract had to be decided by the learned Arbitrator
according to the Indian law of arbitration.
23. As regards the fourth preliminary objection as to limitation, it was
held by the learned Arbitrator that: "From the record it is evident that the
NBCC has admitted the completion of 100 houses in 1984, 12 houses on
12.1.1992. The letter dated 22.1.1986 cannot close the chapter of payment
because the completion of 12 houses was done on 12.1.1992 much after
22.1.1986." Further by letter dated 24th May 1993, NBCC had admitted
that LD 402896.55 was payable to the PRW. On 16th March 1994 the
PRW had submitted its claims and had invoked the arbitration clause on
13th June 1994 which was within three years from 12th January 1992.
Therefore, the invocation of arbitration was within time.
24. Analyzing the letter dated 21st January 1986 relied upon by the
NBCC, the learned Arbitrator held that the letter was an
acknowledgement of the pendency of the claim and its being considered
and not repudiated. Once NBCC had stated that the question of payment
was still under consideration, it meant that it had not been finally rejected.
It was held that the order for construction of 100 houses, for the
construction of 12 houses and then the boundary wall and hostel work
were not three different works. It was held: "All the works, for the
purpose of limitation, will be deemed to be one transaction as the
payments have been made cumulatively. The NBCC at all times treated
three works namely 100 houses, 12 houses, compound wall as one
project." Reference was made to the decisions of the Supreme Court in
Union of India v. L.K. Ahuja AIR 1988 SC 1172 and Maj. Inder Singh
Rekhi v. DDA, AIR 1998 SC 1007. The preliminary objection in regard to
limitation was accordingly rejected.
25. As regards the last preliminary objection, the learned Arbitrator
recorded the statement of counsel for the PRW that it would not claim
anything over and above what was covered by the two deviation orders
and the main order for 100 houses. Therefore, no further finding was
required to be given on the said preliminary objection.
Earlier Proceedings under Section 33
26. Thereafter, the NBCC filed OMP No.118 of 2000 in this Court under
Section 33 of the Act to have the effect of the arbitration agreement
determined. The contention of NBCC was that Clause 51 of the GTC of
the contract between NBCC and the HCL which was part and parcel of
the contract between NBCC and the PRW had ousted the jurisdiction of
Indian courts. By a judgment dated 21st February 2002 [NBCC v. A.M.
Rasool Construction and Engineering Services Pvt. Ltd., 2002 (2) Arb.
LR 183 (Delhi)] a learned Single Judge of this Court disposed of the said
petition holding, inter alia, that the arbitration clause in the contract
between the parties was an independent clause and Clause 51 of the GTC
of the contract between NBCC and HCL "had neither overriding nor
superseding effect." The intention of the parties was manifest that the
disputes had to be referred to the sole arbitration of the Project Director of
NBCC in India. Clause 14 of the contract between NBCC and the PRW
was "independent of all other clauses" including clauses of the GTC.
Since the contract was signed in India and the registered offices of the
parties were also situated in India, the conclusion was that "the parties had
expressly agreed for submission to Indian Courts in case any dispute
arises from the contract in question." In any dispute it was immaterial that
the contract was to be executed abroad or whether the contract was in the
nature of an international commercial transaction. While disputes between
NBCC and HCL were to be adjudicated upon by the Libyan court,
intention of the parties was clear that disputes between NBCC and PRW
would be "decided on Indian soil through the arbitration of the Project
Director." The petition was accordingly dismissed.
The impugned Award
27. The Arbitrator then proceeded with the matter and delivered the
impugned Award on 21st July, 2003. The conclusions of learned
Arbitrator in the impugned Award could be summarized as under:
(1) The PRW had submitted a detailed programme to the NBCC on
16th April 1979 requesting NBCC to proceed with the necessary
pre-arrangements of procurement of raw material at site.
Reminders were sent on 21st May 1979 and 8th July 1979. Even by
27th August1979 when the further letter was written the materials
had not been supplied. Another letter was sent on 11th October
1979 by the PRW. Due to non-supply of stones etc. the cement and
concrete work had to be stopped completely. The reinforcement
work could also not start because of non-supply of 10 mm dia, 1
mm dia and 14 mm dia steel. There was short supply of steel and
shuttering wood for at least two weeks. On 2nd April 1980 another
letter was sent complaining about non-availability of binding wire
and cement and pointing out that the PRW's labourers were sitting
idle for the last 5 days. The complaint made on 24th April 1980
stated that there was no stock of cement for the last one month and
the PRW was given only 35 bags of cement daily which was not
sufficient for any concrete work. Even the mixture machines were
not in working order. After referring to a number of such letters and
complaints, the learned Arbitrator concluded that PRW had
complied with Clause 12 GTC furnishing phase-wise requirement
of material well within time and rejected NBCC's objection in this
regard.
(2)The objection of the NBCC that there was no authorized
representative on behalf of the PRW to deal with the work was
rejected.
(3) The objection of the NBCC that the bank account had not been
opened by the PRW to enable payment to be made was also
rejected since even according to the statement submitted by the
NBCC, the bank account had become operational by 31st May
1979.
(4) The objection by the NBCC to the non-registration of the
contract within a particular time limit was held to be unfounded.
Moreover, the registration or otherwise of the contract would have
no effect on the work progress of the project.
(5) In terms of the documents produced, it appeared that the site
was handed over to PRW only on 17th June 1979, i.e., after more
than six months of the LOI.
(6) The layout plan and drawings were handed over to PRW by
NBCC only by the end of July 1979 and work started on 2nd
August, 1979. Therefore, the delay of seven months in this regard
was caused by the NBCC.
(7) NBCC filed a brief compilation of the labour strength showing
month-wise details from 30th April 1979 to 1986. The chart
produced showed that till October 1979 there were 45 workers and
the strength was increased up to 129 as against the maximum
required number of 178. Any delay on the part of the PRW in
completion of construction of 100 houses was impliedly condoned
by the NBCC. Although the construction started on 2nd August,
1979, NBCC on 11th February 1980 directed the PRW to construct
different types of M/4/G houses. This contributed to delay in
completion of the 100 houses. If it was unhappy with the delay in
completion of the work or with the required number of labour for
completing the project, NBCC could have cancelled the project or
imposed penalty of 1% per day of the value of the whole work
delayed subject to the maximum of the 10% of the contractual
value of the whole work as contemplated by Clause 7 of the FTC.
However, no such step was taken by NBCC and no notice was sent
to the PRW. The Libyan Government also extended the time for
completion of the project till 1989. Further, the allotment of two
additional works through deviation orders showed that NBCC was
satisfied with the work progress by the PRW. Therefore, the labour
strength did not contribute in the delay in completion of the project.
(8) The diversion of labour was of no relevance to the construction
of 100 houses since that had already been handed over on 31st
March 1983 whereas the diversion of workers to some other works
with ISCON at Wari was with effect from 8th December 1984.
(9) The mobilization advance commenced to be released with effect
from 14th May, 1979 and continued up to 8th September 1979 but in
small amounts. After referring to the entire correspondence in this
regard, it was concluded that "short payment and delayed payment
of mobilization advance by the NBCC has also caused delay in the
progress of 100 houses."
(10) Ex.C-789 showed that a total sum of LD 89500 had been
deducted by NBCC as income tax at source to the extent of 10%
from each bill of the PRW for the construction of 100 houses, 12
houses and compound wall. The tax department of the Libyan
Government wrote a letter dated 12th March 1987 to NBCC
requiring it to pay back the tax deducted to the PRW so that the tax
department could claim directly from the PRW for the years 1979
to 1983. The objection of NBCC regarding payment of tax was
rejected.
(11) NBCC had unnecessarily blocked LD 89500 over which
amount the PRW lost interest. There was an additional burden to
the PRW on account of labour strike with the NBCC's labour going
on strike, but for which no claim was made by the PRW.
(12) The handing over of the 100 houses after completion on 31st
March 1983 was two months after the extended period. But no
objection as to delay was raised at that stage by NBCC.
(13) NBCC issued a certificate on 11th February 1990 Exb.C-765
admitting that delay in completion of 12 houses was caused
because of non-supply of material to the PRW in time by NBCC.
The resultant overstay had caused extra burden to the PRW as most
of the workers were sitting idle and their labour cost was not paid
by the NBCC. The award of additional works through deviation
orders showed that NBCC was satisfied with the work of the PRW
in continuing with the completion of the 100 houses project.
(14) The letter dated 22nd March 1987 (Ex. C-725) sent by the PRW
was not an intimation about abandonment of the work but showed
that the PRW was placing before NBCC its difficulties in order to
avoid further delay in handing over the work and further pointing
out that without payment of bills it was not possible to carry on
with the work. On receipt of the said letter, NBCC never wrote to
the PRW stating that it has abandoned the work. Therefore, such a
plea was not permissible to be raised before the Arbitrator for the
first time.
(15) The contract dated 30th April 1979 had been modified by an
agreement dated 15th December 1981 by means of which Technical
Specification ('TS') Part-I was made applicable and through which
NBCC agreed to pass on the 50% enhancement in the rates granted
to it by the Libyan Clients in the form of 50% increase in the labour
rates in the works done by the PRW from 1st April 1980. NBCC by
its letter dated 26th June 1983 (C-425) informed the PRW that it had
released 50% as per the Agreement dated 15th December 1981. The
extra items were to be mutually settled after considering the
complete enhancement receipt by the NBCC from the Libyan
clients. NBCC wrote a letter stating that the payment would be
made to the PRW within seven days of receipt of payment from the
Libyan client. No objection was raised by the NBCC that the
enhancement was not payable. It was also not denied that LD
70350 had been released by the Libyan client to the NBCC.
However, the second enhancement of 50% claimed by PRW was
beyond the scope of the contract and was not payable.
(16) The PRW was fully justified in not mobilizing labour at site
before the site plan and drawing was made available by NBCC.
NBCC was required to prepare running account bills each month
for the works executed during the month at the BOQ rates in
cooperation with the PRW. However, in a period of 51 months
only 18 bills were prepared for the work of construction of 100
houses. Therefore, there was a breach of Clause 3(2) FTC by
NBCC.
(17) Time ceased to be the essence of the contract with NBCC itself
extending the time periodically without raising any objection even
at the time of handing over of the project of 100 houses. The
certificates issued by NBCC on 15.3.1982 (C-356), 12.8.1984 (C-
498), 12.8.194 (C-499), 29.10.1984 (C-511), 29.10.1984 (C-512),
11.2.1990 (C-765), 2.2.1991 (C-767) and 18.1.1995 (C-842) all
showed that the work had been completed to the satisfaction of the
Libyan clients and that there was no objection even by NBCC
regarding any dissatisfaction on its part. Ex.C-778 was a Certificate
dated 29.2.1999 issued by the Libyan authorities stating that the
PRW was a sub-contractor of NBCC for the construction of 100
houses and 12 houses and that the project was finally handed over
to the clients.
(18) Even after the initial handing over of the 100 houses on 31st
March 1983 and the final handing over in July 1984, and also after
handing over the compound wall on 31st July 1984 payments had
been received by NBCC from the Libyan clients. Since NBCC
failed to bring on record all the details of receipt of such monies by
it from the Libyan clients, an inference had to be drawn that
"NBCC has deliberately withheld the details in respect of the
payment made to it by the Libyan clients and the payments made to
all the sub-contractors, particularly to the PRW." The money
should have been paid to the PRW when it was received by NBCC
after the final handing over of the 100 houses. If the Libyan client
had paid for all the 432 houses, it was the duty of NBCC to pay the
PRW proportionately for the 100 houses.
(19) The learned Arbitrator then noted the admitted claims in
regard to the 100 houses, 12 houses and compound wall and then
proceeded to deal with the individual items of claim in respect of
each of those works. The tabulation of the claim and amounts
allowed by the learned Arbitrator in relation to the construction of
100 houses is as under:
S.No. Description of the claim Amount Claimed Amount
Allowed
1. Claim towards work LD 65,087.154 LD 43,391.436
accepted by the Libyan
employers of NBCC but
not incorporated in the bills
prepared and paid to PRW
by NBCC.
2. Escalation of rates granted LD 2,62,471.216 NIL
to NBCC by the Libyan
Employer but not passed on
to PRW.
3. Balance amount due for LD 2,50,940.719 Allowed in full
extra items (15 Nos.) paid
at much lower rate than to
which PRW was entitled.
4. Amount due under various LD 1,55,625.514 Allowed in full
extra items got executed by
the claimants not paid for
from the NBCC.
5. Extra expenditure incurred LD 1,16,216.255 Allowed in full
and/or losses suffered due
to overhead expenditure
including additional and
other establishment cost
during the un-contemplated
prolonged period of
contract.
6. Damages for extra LD 2,79,880.019 Allowed in full
expenditure and/or losses
suffered for
importation/deportation of
Technicians for un-
contemplated prolonged
period beyond the original
contract period.
7. Damages for the extra Rs.2,25,.536.65 Allowed in full.
expenditure incurred by
PRW by way of
commission paid to the
bank and ECGC and losses
suffered and the margin
money kept with the banker
for keeping the
mobilization advance
guarantee and performance
guarantee in force for the
un-contemplated prolonged
period of contract.
8. Refund of amount wrongly LD 2556.900 + Allowed in full.
deducted from 14th RA 8041.450
Bills allegedly being
incurred by NBCC for
repatriating 12 technicians
sent to Libya by NBCC
without consent by PRW
and interest thereon.
9. Work of additions and LD 9,542.000 Allowed in full.
alterations carried out in the
but not incorporated in the
bills or paid to PRW.
10. Refund of balance security LD 17,431.000 Allowed in full.
deposit of PRW.
11(a) Claim for interest of LD 33,205.055 Allowed in full.
outstanding amount of LD
17,431.000 lying with
NBCC as balance security
deposit (including interest
thereon).
(b) Interest on outstanding Interest at 18% per Allowed in full.
security deposit amount of annum.
LD 17,431.000.
12. Outstanding to be paid out LD 1,581.628 Allowed in full.
of 18th RA bill.
13(a) Interest on LD 1,581.628 LD 3,013.000 Allowed in full.
from 31.7.84 till 28.2.94
(20) As regards claims relating to construction work of 12 houses,
the learned Arbitrator allowed Claim Nos.1, 3, 4 and 5 relating to
measurement; Claim Nos. 6, 7, 8 and 15(a) relating to damages;
Claim Nos. 9(a), 9(b), 13(a) and 13(b) relating to interest; and
Claim Nos. 10, 11 and 12 relating to claim for release of security
deposit etc. As regards the work in relation to compound wall, he
allowed claims related to measurements in Claim Nos.1 (partly
allowed), 2 and 3; claim relating to damages in Claim No.6; claim
for release of security deposit in Claim Nos.8 and 9; and interest
claims in Claim Nos.7(a), 7(b), 10(a) and 10(b).
Proper law of the contract
28. One of the objections raised by NBCC concerns the proper law of the
contract between the parties which according to the NBCC was the
Libyan law. On the basis of the decision of the Supreme Court in
Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (1998) 1 SCC 305 it was
submitted by Ms. Ginny Jetley Rautray, learned counsel appearing for
NBCC, that the earlier decision of this Court in February 2002 in NBCC
v. A.M. Rasool Construction and Engineering Services Pvt. Ltd. (supra)
had only decided the issue of the curial law, i.e., the proper law of the
arbitration agreement as well as the procedural law of arbitration and not
the proper law of the contract, i.e., the law applicable to the substantive
contract. In other words, it was contended that even if one were to accept
that the arbitration proceedings could be held in India and that the arbitral
proceedings should be governed by the law of India, the proper law of the
contract was still the Libyan law. Referring to Clause 22 of the FTC
between the parties, it was stated that the general conditions of the
contract entered into by NBCC with the HCL would be applicable to the
PRW. Clause 51 of the GTC of the contract between NBCC and the HCL
made it clear that the contract would be executed in accordance with the
Libyan laws and regulations "and only Libyan Courts would exercise
jurisdiction over any dispute arising from the contract." It is therefore
submitted that the proper law governing the contract between NBCC and
PRW was the Libyan law.
29. According to Ms. Jetley, even the February 2002 judgment of this
Court acknowledged that all the terms of the GTC of the contract between
NBCC and the HCL became part and parcel of the contract between
NBCC and the PRW. She referred to the observation in para 40 of the
said judgment which acknowledged that "substantive laws of the contract
may be the Libyan laws". Consequently it was submitted that the question
as regards the proper law of the contract remained to be decided. It is
submitted that even the learned Arbitrator did not decide the issue and
merely observed that the law governing the contract would be the Indian
law.
30. Ms. Jetley submitted that the proper law of the contract could be
determined by examining the system of law to which the contract had the
closest and most real connection. In this context, it is pointed out that the
work was to be executed in Libya; the contract was required to be and in
fact registered under the Libyan law; the workers were to be paid wages
under rules those fixed by the Libyan Government from time to time
(Clause 8 GTC); PRW was to abide by the bye-laws of the Libyan
Government and was to be responsible for any acts of violation (Clause
10 of GTC); PRW was to bear all taxes and duties imposed as per the
Libyan laws (Clause 6(b) of FTC); PRW was to be paid in Libyan
Currency and any amount transferred would be as per Libyan Exchange
Control Regulation (Clause 9 of the FTC); PRW had to pay contributions
towards INAS or bear any other terms under the Libyan laws (Clause 10
of the FTC); PRW was to conform to all prevailing Libyan labour laws
(Clause 15 of the FTC). It is further submitted that even assuming that
the parties had not expressly stated that the proper law of contract would
be the Libyan law, by the application of the "doctrine of infection", the
same system of law had to govern both the main contract between NBCC
and HCL and the sub-contract between NBCC and the PRW. Reliance is
placed on the judgment in Wahda Bank v. Arab Bank Plc, [1996] CLC
408. Lastly, it is submitted that the February 2002 judgment did not
constitute res judicata since it decided the 'proper law of arbitration' and
not the 'proper law of the contract'. Moreover, the proceedings arose
under Section 33 of the Act which deals with the challenge to the
existence and validity of the arbitration agreement.
31. On behalf of the PRW, it is submitted by Mr. Arun Francis, learned
counsel for the Respondent that there is no specific objection taken by the
NBCC in the present petition that the Award is liable to be set aside since
the learned Arbitrator did not apply Libyan laws while deciding the
claims of the PRW. Reliance is placed on the decisions in Build India
Construction System v. Union of India (2002) 5 SCC 433, M/s Atlas
Export Industries v. M/s Kotak & Company (1999) 7 SCC 61, Delhi Jal
Board v. Vijay Kumar Goel 124 (2005) DLT 712 and National Thermal
Power Corporation v. Wig Brothers Builders & Engineers Ltd. 160
(2009) DLT 642. Secondly, it is submitted that inasmuch as the judgment
of February 2002 of the learned Single Judge while deciding OMP
No.118 of 2000 had categorically held that Clause 51 GTC would not
apply as far as the PRW was concerned, the issue of substantive law was
also decided and therefore the said judgment constituted res judicata.
Thirdly, it is submitted that if according to the Petitioner, the applicable
law was the Libyan law then the foreign law had to be proved before the
Arbitrator. This burden of showing what the Libyan law was, which
barred the PRW from claiming the amounts under the various claims, was
not discharged by the NBCC.
32. The above submissions have been considered. The decision in
Sumitomo Heavy Industries Ltd. draws a clear distinction between (a) the
proper law of reference, (b) the proper law of the arbitration agreement,
(c) law governing the arbitration proceedings (curial law) and (d) the
proper law of the contract. The parties could well choose to apply a
different law as far as the substantive contract itself was concerned. This
could be different from the law governing the arbitration proceedings, i.e.,
the manner in which the reference has to be conducted.
33. The proceedings filed by NBCC (OMP No.118 of 2000) under
Section 33 of the Act were triggered by the interim Award of the learned
Arbitrator dated 23rd April 2000. One of the preliminary objections raised
before the learned Arbitrator by NBCC concerned the jurisdiction of the
Arbitrator. It was contended that the appointment of the Arbitrator could
be made only by the Libyan Court "and the arbitration could proceed
according to Libyan law." The objection was really in relation to the
curial law. The learned Arbitrator held that the NBCC having not objected
to his appointment by the Delhi High Court, in substitution of the earlier
Arbitrator who expired, had conceded to the jurisdiction of the Delhi High
Court. The learned Arbitrator noted that the contract made no specific
mention that the arbitration would proceed in accordance with Libyan
law. It was held that it would be against public policy if in view of Clause
14 of the agreement and Clause 51 GTC the Project Director NBCC is
appointed as an arbitrator to adjudicate the dispute "and he is asked to
decide the matter in accordance with Libyan law here at Delhi." Further,
while "the main contract for execution of work may be governed by the
Libyan law, but the procedural matter has to proceed in accordance with
the Indian law otherwise it will entail grave injustice to the Indian sub-
contractor who executed the work in Libya." The preliminary issue raised
by NBCC before the learned Arbitrator was that the Libyan law would
govern the arbitral proceedings. It did not specifically urge that the
'proper law of the contract' was the Libyan law. Consequently, the
interim Award dated 23rd April 2000 of the learned Arbitrator did not
decide the issue concerning the proper law of the contract.
34. The above interim Award of the Arbitrator was examined in the 2002
judgment in OMP No.118 of 2000. A perusal of the said judgment
indicates that Clause 51 of the GTC of the contract between NBCC and
the HCL was considered. The discussion was essentially in the context of
Section 33 of the Act about the existence and validity of the arbitration
agreement. It was observed that "Section 33 concerns only with the term
relating to the arbitration in the contract and not with the other terms of
the contract which did not arise for consideration on an application under
that Section." The Court categorically held that Clause 51 of the GTC
would govern the curial law, i.e., the law that would govern the arbitration
proceedings. In para 43 it was held that the incorporation of the terms and
conditions of the contract between the NBCC and HCL by way of Clause
4 in the contract between the NBCC and the PRW "does not affect the
arbitration clause contained in the independent contract between the
parties. Intention of the parties was clear that they would decide their
disputes on the Indian soil through the arbitration of the Project Director."
It is in this context that the Court observed that even while "substantive
law of the contract may be the Libyan laws" it did not mean that the
Libyan law would also govern the arbitration proceedings.
35. A careful reading of the February 2002 judgment bears out the
submission of learned counsel for NBCC that it did not in fact decide
whether the proper law of the contract was the Libyan law. It only
observed in passing that it may be the Libyan law. Therefore, the said
decision does not constitute res judicata as regards the point concerning
the proper law of the contract. Therefore, the said issue arises for
consideration in the present proceedings.
36. It requires to be recalled that even at the stage of final hearing before
the learned Arbitrator it was not specifically urged by NBCC that the
'proper law of the contract' was the Libyan law. Also, in the present
petition challenging the Award, no specific ground has been raised on the
above point. It has been raised only in the rejoinder and later in the
written submissions. There is merit in the contention of learned counsel
for the PRW that such a point had to be specifically raised in the
substantive objection petition at the first instance. NBCC was required to
raise this substantive objection when it filed the Section 34 petition and
not later at the stage of rejoinder by which time the limitation for raising
such objection had already expired.
37. In the arbitral proceedings, following the interim Award, the parties
proceeded on the basis that it was the Indian law that would govern the
contract. The contract in the instant case does not expressly state that the
proper law of the contract is the Libyan law. It is this that has prompted
NBCC in its written submission to invoke the "doctrine of infection" by
relying in the judgment in Wahda Bank to contend that the parties should
have been deemed to have subjected both the main contract as well as the
sub-contract to the same law, i.e., the Libyan law. The proposition, though
attractive, appears not to help the NBCC in the present case. The question
to be asked is what the intention of the parties to the contract was. As
observed in National Thermal Power Corporation Ltd. v. The Singer Co.
(1992) 3 SCC 551 where the parties have neither expressly nor impliedly
chosen a proper law for the contract, the issue should be decided on the
touchstone of "how a just and reasonable person would have regarded the
problem like this and for this purpose where the contract was made, the
form and object of the contract, the place of performance, place of
residence or business of the parties, reference to the courts having
jurisdiction and such other links". The Court has to determine the system
of law with which the transaction "has the closest and most real
connection".
38. If one were to apply the above test in the instant case, it would not be
possible to arrive at a categorical answer. While the place of performance
of the contract was Libya, the registered office of both the parties was in
India. The contract was entered into in India. The earlier decisions of this
Court at the stage of appointment of the Arbitrator and later under Section
33 of the Act have decided that it is the Delhi Court that has the
jurisdiction in regard to the disputes between the parties. Those orders
have attained finality. No doubt, the subject matter of the contract and the
place of its performance was Libya but that by itself would not answer the
question concerning the "closest and most real connection". The attempt
at reference by way of incorporation of Clause 51 of the GTC and Clause
22 of the FTC governing the contract between NBCC and HCL into the
present contract seems incongruous in light of the parties agreeing under
Clause 14 to refer the disputes to an Indian Arbitrator. It seems unlikely
that the parties intended the Indian arbitrator to apply the Libyan law of
contract while deciding the disputes. Further, the burden was on NBCC to
prove what the Libyan law was. This makes it imperative for the party to
urge the ground concerning the proper law of the contract at the first
available opportunity and definitely at the beginning of the arbitral
proceedings.
39. In the instant case, far from urging the point before the Arbitrator, no
attempt was made by NBCC to prove before the Arbitrator what the
Libyan law governing the contract was. The question of applicability of a
foreign law is a question of fact which requires to be proved by leading
expert evidence. In the present case, NBCC made no such effort to prove
the Libyan law. The parties stated before the learned Arbitrator that no
oral evidence would be led and the matter may be decided on the basis of
the documentary evidence only. There was no document produced by
NBCC to show what the Libyan law relevant to the contract was and how
it should be applied. Only in relation to the claim concerning interest a
point was raised by NBCC that under the Libyan law, i.e. Islamic law, no
interest could be charged. The learned Arbitrator noted the objection and
observed "it was only at the argument stage that it was contended by the
counsel for the NBCC that in Muslim countries interest is unknown and
cannot be awarded. Except raising this oral objection, no law has been
shown barring payment of interest."
40. Apart from the above reasons, in a dispute that has gone for over 17
years, it becomes imperative for the Court to examine the consequences of
accepting this kind of a plea touching on the question of the applicable
law. If accepted, it would mean that the entire arbitration proceedings
have to be re-started since all the claims would have to be decided in
accordance with the Libyan law which even today NBCC has not been
able to prove. Without even knowing what the applicable law is it would
be a totally futile exercise to remand the case for deciding the claims and
counter claims in accordance with the Libyan law. Moreover, no injustice
can be said to have been done to NBCC on this score. Being an Indian
company, it cannot complain that the failure to decide the claims by the
Arbitrator in accordance with the Libyan law has caused it prejudice or
has resulted in miscarriage of justice.
41. Consequently, the submission made on behalf of NBCC that in terms
of the 'doctrine of infection' the parties should be deemed to have agreed
that the contract should be governed by the Libyan law is rejected. The
plea of NBCC that the Award is liable to be set aside since the claims of
the PRW and the counterclaims of NBCC were not decided in accordance
with the Libyan law should fail.
Objection as to limitation
42. The next objection by NBCC to the impugned Award is based on
limitation. Ms. Jetley referred to the various RA bills and payment
certificates to submit that as far as the payment in relation to the work of
construction of 100 houses, the measurements were taken and payments
made in April 1984 itself as recorded in the final bill (R-259). Even as
regards the construction of 12 houses, the final bill was prepared in
February 1990 and was accepted by PRW under protest. However, the
dispute regarding measurement was raised for the first time on 16th March
1994. As regards the compound wall, the work was completed in 1984,
final bill was prepared in 1987 and the claim on the basis of disputed
measurement was only made in 1994. Each of these contracts was
distinct and separate. It is submitted that the claims of the PRW were
therefore time barred and the interim Award dated 23rd April 2000 of the
learned Arbitrator rejecting this plea was erroneous.
43. The case of the PRW is that there is no specific objection raised by
the NBCC in the present petition as regards limitation. Under Article
119(b) if a party wants an award set aside, it should raise such plea within
30 days of the notice of filing of the Award. NBCC received a letter dated
15th September 2003 from the Arbitrator intimating it that the impugned
Award had been filed in this Court. NBCC filed objections to the Award
on 15th October, 2003. There was no objection taken by the NBCC that
the PRW's claims were barred by limitation. Such plea was taken only in
the rejoinder filed on 10th March 2005 for the first time and that too
without even amending the objection petition. This would clearly amount
to taking an additional ground after the period of limitation had expired.
44. The above objection of the PRW is valid. In Madan Lal v. Sunder
Lal AIR 1967 SC 1233 in the context of the Act, it was held in para 8 as
under:
"It is clear therefore from the scheme of the Act that if
a party wants an award to be set aside on any of the
grounds mentioned in s. 30 it must apply within 30
days of the date of service of notice of filing of the
award as provided in Art. 158 of the Limitation Act. If
no such application is made award cannot be set aside
on any of the grounds specified in s. 30 of the Act. it
may be conceded that there is no special form
prescribed for making such and application and in an
appropriate case an objection of the type made in this
case may be treated as such an application, if it is filed
within the period of limitation. But if an objection like
this has been filed after the period of limitation it
cannot be treated as an application to set aside the
award, for if it is so treated it will be barred by
limitation."
45. The interim Award dated 23rd April 2000 of the learned Arbitrator
extensively dealt with this point and held against the NBCC. The said
interim Award as regards the said point was not challenged by NBCC in
the present petition when it was first filed. The failure by NBCC to raise
the point of limitation, in the first place, in the objection petition and to
raise it two years later in the rejoinder would tantamount to permitting an
additional ground to challenge the Award after the period of limitation for
filing the objection has expired. On this ground, this Court rejects the
objection raised by the NBCC that claims of the PRW were barred by
limitation.
46. Independent of the above conclusion, it is seen that the view taken by
the learned Arbitrator on the issue of limitation is a plausible one to take.
This proceeds on the basis that the three contracts were not separate
contracts but part of the main contract for the work of construction of 100
houses. In fact the LOIs concerning the construction of 12 houses and the
boundary wall were by way of 'deviation orders' with reference to the
main contract. All the bills for the three constituent works make reference
to a single contract number. Ex. C-496 is a letter written by the NBCC to
the Libyan Tax Department wherein the contract for work was initially
registered for LD 378525 but was increased to LD 915000 due to
additional works, extra items etc. NBCC recommended enhancing the
registration of the single contract to the higher value. C-570 is another
letter from NBCC indicating that the contract for 100 houses 'has been
extended to 12 houses work at Kalala, in addition to work which is in
progress'. After the conclusion of the contract for 12 houses on 12th
January 1992, the reconciliation of arrears with dues was done by NBCC
and accordingly a Certificate (C-793) dated 24th May 1993 was issued
acknowledging that payment was due on account of running bills/final
bills/security deposit/performance guarantee and other miscellaneous
items. It was contended by learned counsel for NBCC that this document
and the letter dated 14th September 1993 (C-798) were not
acknowledgements for the purposes of Section 18 of the Limitation Act,
1963 since they had been made after expiry of the limitation period. Once
it is stated that the 18 RA bills were not final bills, the period of limitation
cannot be said to have begun running from that date. As explained in
Union of India v. L.K. Ahuja and Maj. Inder Singh Lekhi v. DDA, for
the purposes of limitation a dispute arises from the assertion of a claim
and its denial. There was no repudiation as such by NBCC of any of the
PRW's claims till they were raised in 1994 within two years of the final
payment in 1992. C842 is a letter by NBCC dated 18th January 1995
certifying that the PRW was the sub-contractor for the work of '100 + 12
houses and compound wall at Kalala, Ghat" and that they completed the
project to the satisfaction of the Libyan clients and "the works have been
handed over as per the details given."
47. The conclusion of the learned Arbitrator that the contract was a single
one comprising the three components viz., construction of 100 houses,
construction of 12 houses and the compound wall, was a plausible view to
take in the circumstances. It cannot be held to be contrary to the clauses of
the contract or the evidence on record. Consequently, there is no legal
infirmity in the interim award dated 23rd April 2000 of the learned
Arbitrator, as reaffirmed in the impugned final Award, negativing the
objection of NBCC that the PRW's claims were barred by limitation.
Objections as to individual claims
48. Before examining the objections in relation to individual clams it is
necessary to recapitulate the law as regards the scope of interference by
the Court. In Maharashtra State Electricity Board v. Sterlite Industries
(India) AIR 2001 SC 2933 it was observed (AIR, p.2936):
"9. The position in law has been noticed by this Court
in Union of India v. A.L. Rallia Ram AIR 1963 SC
1685 and Firm Madenlal Roshanlal Mahajan v.
Hukumchand Mills Ltd. [Indore] 1967 (1) SCR 105
to the effect that the arbitrator's award both on facts
and law is final; that there is no appeal from this
verdict; that the court cannot review his award and
correct any mistake in his adjudication, unless the
objection to the legality of the award is apparent on the
face of it. In understanding what would be an error of
law on the face of the award, the following
observations in Champsey Bhara & Company v.
Jivraj Balloo Spinning and Weaving Company Ltd.
[L.R. 50 I.A. 324], a decision of the Privy Council, are
relevant:
"An error in law on the face of the award means,
in their Lordships view, that you can find in the
award or a document actually incorporated
thereto, as for instance note appended by the
arbitrator stating the reasons for his judgment,
some legal proposition which is the basis of the
award and which you can they say is erroneous."
10. In Arosan Enterprises Ltd. v. Union of India JT
1999 (7) SC 122 this Court again examined this matter
and stated that where the error of finding of fact having
a bearing on the award is patent and is easily
demonstrable without the necessity of carefully
weighing the various possible view points, the
interference in the award based on erroneous finding of
fact is permissible and similarly, if an award is based
by applying a principle of law which is patently
erroneous, and but for such erroneous application of
legal principles, the award could not have been made,
such award is liable to be set aside by holding that
there has been a legal misconduct on the part of the
arbitrator."
49. As regards the objection on the individual claims, it is submitted that
the Award was disproportionately high inasmuch as the value of the
labour contract was LD 378525.582 whereas the Arbitrator had allowed
claims to the extent of LD 2191189 and Rs.2,25,530. The learned
Arbitrator has given cogent reasons for allowing the claims of the PRW
and has discussed the evidence in great detail. This Court does not
propose to sit in appeal over such findings of the learned Arbitrator by re-
examining the evidence.
50. According to NBCC there are several perverse findings in the
impugned Award that can be termed as perverse. The first is that the
learned Arbitrator held that there was no legal relationship between the
parties till 30th April 1979 when the contract was signed. It is submitted
that this finding is contrary to the LOI dated 29th December 1978 which
clearly stated that the time was to run from the date of issue of the LOI. It
is submitted that the submission of bank guarantee ('BG') by the PRW for
7.5% of the value of the contract, the mobilisation at the work site as well
as the time for completion were all computed with reference to the LOI.
51. The signing of a contract was envisaged in the LOI dated 29th
December 1978. The LOI was itself modified on 2nd April 1979, i.e., three
months after the original LOI was issued. The PRW submitted the
performance BG dated 6th April 1979 as well as the BG to secure the
mobilisation advance on 11th April 1979 based on the revised value
specified in the modified LOI. It was only after signing of the agreement
on 30th April 1979 that the enforceable rights and obligations of the
parties got crystallised. This finding of the learned Arbitrator, therefore,
cannot be said to be perverse.
52. The second perverse finding according to NBCC was the conclusion
by the learned Arbitrator that since the site was handed over only on 17th
June 1979 and the working drawings were delivered by the end of July
1979 there was no need for mobilisation of labour by the PRW prior
thereto. It is submitted that the obligation to mobilise labour arose from
the LOI itself since that had to be done within six weeks of the issue of
the LOI. It is further contended by the NBCC that no time was specified
for handing over of the site or delivery of the drawings. Further, the PRW
itself applied for extension of time for mobilisation as also for submission
of the BG.
53. The above contentions have been discussed by the learned Arbitrator.
It was noticed by the Arbitrator on 14th May 1979 that the first batch of
technicians had reached whereas the drawings had not been finalised and
even the site had not been handed over. From that date itself the
authorised person of PRW was available at the site. The site was handed
over only on 17th June 1979. Therefore, it is obvious that the PRW could
not afford to mobilise labour till such time the site is handed over since as
per clause 12 GTC idle labour was not to be paid for. The learned
Arbitrator has dealt with this issue concerning the availability of labour at
considerable length. These objections were not raised by NBCC at the
relevant time. Neither was the contract sought to be terminated nor did
NBCC impose any liquidated damages. Consequently, the finding of the
learned Arbitrator about the delay having been caused by NBCC in
handing over of the site as well as the drawings cannot be said to be
perverse.
54. It is then submitted that the finding of the learned Arbitrator that the
registration or non-registration of the contract could have no effect on the
progress of the work was perverse. It was submitted that this is contrary to
the Libyan laws in terms of which no foreign contractor could commence
work without getting the contract registered within sixty days of its
execution. As pointed out by the PRW, the contract was to be registered
with the Libyan revenue department and the PRW was to be registered
with the Libyan tax department. The work only started in 1979. The PRW
could not have commenced work without registration. Again NBCC does
not appear to have raised this issue with the PRW. There was nothing
produced by NBCC before the Arbitrator to show that there was any delay
in the registration of the contract by the PRW with the Libyan authorities.
55. NBCC contended that the finding of the learned Arbitrator that the
labour strength did not contribute to the delay in the continuation of the
project was perverse. It is submitted that the contract envisaged
deployment of 178 workers whereas the chart set out in the impugned
Award of the learned Arbitrator showed that at no stage during the
execution the PRW actually deployed those number of workmen.
56. As pointed out by the PRW the contract itself does not contemplate
deployment of any specified strength of workers. NBCC had estimated
that the peak strength labour requirement could be around 178 workers
but according to the PRW due to various changes by the NBCC in the
work, as instructed during the course of the execution, and due to the
delay in supply of materials by the NBCC, there were no sufficient work
fronts available for 178 workers. With Clause 12 of the FTC prohibiting
PRW from making a claim for idle labour, it had to plan the labour
strength from time to time considering available work fronts and
availability of materials. NBCC did not levy liquidated damages and
therefore it does appear that this was not the reason for the delay in
completion of the work. The learned Arbitrator's finding in this regard
cannot be held to be perverse.
57. The next issue raised by the NBCC was that the finding of the learned
Arbitrator that the delivery was accepted by it of 100 houses on 31st
March 1983 without objecting to the delay was perverse. This Court is
unable to accept the above contention since NBCC had extended time up
to 31st January 1983. At the time of the initial handing over of 100 houses
by PRW to it on 31st March 1983 NBCC did not raise the issue of delay. It
also did not invoke its right to levy liquidated damages in accordance with
Clause 7 of FTC. In the circumstances, the above finding of the learned
Arbitrator cannot said to be perverse.
58. It was contended by the learned counsel for the NBCC that there was
inconsistency in the findings of the learned Arbitrator regarding diversion
of labour. The contention is that while on the one hand the learned
Arbitrator held that alleged diversion had not caused any delay in the
completion of 100 houses since the diversion took place after the initial
handing over of 100 houses on 31st March 1983, he also rejected the
NBCC's contention that the diversion of labour had contributed to the
delay in the completion of 12 houses and compound wall on the same
basis. Yet again the learned Arbitrator had allowed claims relating to
measurement over and above those recorded and accepted by the PRW.
Reliance is placed on the decisions in Nangia Construction Private
Limited v. Rail India Technical & Economic Services
MANU/DE/3052/2009 and Bharat Builder v. Delhi Development
Authority MANU/DE/3451/2009.
59. The learned Arbitrator has categorically held that the diversion of
labour had not affected the work in relation to the completion of 100
houses. Since under Clause 12 GTC payment of compensation for idle
labour was barred, the PRW had to necessarily divert the idle labour to
other works since the site was not made available and materials required
were not supplied by NBCC in good time so as to keep the labour
engaged. As regards the 12 houses it was completed on 12th January 1992
although the allotted time was six months from 26th January 1983. Here
again the finding of the learned Arbitrator was that the delay is
attributable to the NBCC. The contention of PRW which has been
accepted by the learned Arbitrator is that labour was available and if the
materials had been supplied in good time, there would have not been any
need to divert labour to any other work and the construction of 12 houses
could have been completed in time. It has further been pointed out by the
learned Arbitrator that the NBCC did not levy liquidated damages on this
score as well. The learned Arbitrator's findings in this regard are plausible
and cannot be termed as perverse.
60. Learned counsel for the NBCC then argued at length on particular
items of claim in relation to the three works. As regards claim pertaining
to measurement, these were Claim No. 1 for 100 houses, Claim No. 1 for
12 houses and Claim No. 1 for the compound wall. The basis for these
claims were that under Clause 3 FTC payments were to be made by
NBCC to the PRW within seven days of receipt of payment by NBCC
from the Libyan clients. It is pointed out by learned counsel for the PRW
that the 18th RA Bill admittedly was not the final bill. He drew a
distinction between the final bills for the 12 houses and the compound
wall which were accepted by the PRW under protest. Consequently, it is
submitted that the claims were in accordance with the contractual
provisions. The objection of the NBCC is that there was no joint
measurement taken for the works not incorporated in the bills, for which
however, it had received payments from the Libyan clients.
61. The learned Arbitrator held the 18th RA bill for 100 houses (Ex.R-259)
did not indicate that it was the final bill. Further, it only mentioned that
the measurements had been accepted as full and final by the PRW and not
the amounts indicated therein. Moreover, there is no answer to the finding
of the learned Arbitrator that NBCC had prepared only 18 RA Bills in 51
months although it was required to prepare monthly bills. If this was on
account of the delays in the completion of the works, then the delay as
held by the learned Arbitrator was largely on account of NBCC itself.
62. The learned Arbitrator also rejected the contention of NBCC that the
PRW had abandoned the work. Moreover, the complete details of the
payments received by NBCC from Libyan clients were not made available
by it before the learned Arbitrator. The learned Arbitrator's reasoning in
relation to claims pertaining to measurements cannot be said to be
patently illegal or perverse.
63. It is next contended by NBCC that claims pertaining to extra items
which were paid at lower rates, i.e., Claim No. 3 for 100 houses, Claim
No. 4 for 12 houses and Claim No. 3 for compound wall, ought not to
have been allowed. The NBCC contended that as per Clause 6 (A) FTC,
rates for extra items had to be mutually settled and extras could have been
executed only on written instructions. Reliance is placed on the decisions
in Food Corporation of India v. Chandhu Construction 2007 (2) ALR
74 (SC), Bhagat Ram Sahani & Sons v. DSI DE 132 (2006) DLT 427
(DB) and Republic Construction Co. v. Delhi Development Authority
MANU/DE/1001/2009. A similar contention is raised by the NBCC in
regard to claims pertaining to extra items which were not incorporated in
the bills at all. These included Claim No. 4 for 100 houses, Claim No. 3
and 5 for 12 houses and Claim No. 2 for compound wall.
64. The learned Arbitrator, after analysing the documents, held that the
extra items included in the bills were indeed paid at much lower rate than
to which the PRW was entitled. Therefore, the claim for the balance
payment was justified. There was no regular practice of NBCC issuing
written orders to the PRW. As regards claims pertaining to extra items not
incorporated in the bills, they were not covered by TS1-1 or TS-2. The
PRW contested the plea of NBCC that it raised the extra item claim for
the first time in March 1994. It is submitted that the claims were raised
much earlier in 1980 and 1985. Further, it is pointed out that TS-1 did not
bar payment to the PRW for the extra works involved. The learned
Arbitrator observed that NBCC did not produce anything on record to
show that the rates claimed by the PRW were excessive. TS-1 was
analysed by the learned Arbitrator and it was held that there was no
provision therein barring extra payments. This being a plausible view to
take, it does not call for interference.
65. Learned counsel on both sides have placed detailed tabulations on
each item of claim in respect of the extra items. Without going into these
details it is sufficient for this Court to observe that these are all matters of
evidence which have been appreciated by the learned Arbitrator. This
Court is not persuaded to hold that the learned Arbitrator erred in either
analysing that evidence or in the reasons given for the conclusions.
66. As regards the claims pertaining to damages, i.e., Claims 5, 6 and 7
for 100 houses, Claims 6, 7 and 8 15A and 15B for 12 houses and Claim
No. 6 for the compound wall, NBCC contends that under the contract
rates were firm and included all expenses. These included the expenses of
keeping the BG alive and in any event the PRW was expected to keep the
BG alive till the end of the maintenance period.
67. The learned Arbitrator, after finding that the NBCC was in breach of
contract and responsible for delay in completion of work, held as a result
that NBCC could not deny the PRW the expenses incurred as a result of
the prolonged period of construction. The learned Arbitrator referred to
the judgment of the Supreme Court in Bengal Traders v. West Bengal
Electricity Board 2001 (2) RAJ 315 which held that although the rates
were firm it would not debar the contractor from claiming compensation
for the prolonged period of construction. It was further held that details
submitted by the PRW had not been denied by NBCC and that in any
event time had ceased to be the essence of the contract. The learned
Arbitrator's findings are based on a proper analysis of the evidence placed
on record and the applicable law. They cannot be held to be perverse or
patently illegal. The Award in respect of the claims pertaining to damages
therefore does not call for interference.
68. NBCC's objections to the Award in respect of the PRW's claims for
wrongful deductions i.e., Claims 8 and 9 for 100 houses, and Claim No. 5
for the compound wall, requires this Court to re-appreciate the evidence
which has already been examined in detail by the learned Arbitrator. In
sum the learned Arbitrator found that NBCC was unable to substantiate its
defence with reference to the documents on record. Even as regards to the
admitted claims, i.e., Claims 10 and 12 for 100 houses, Claims 10, 11 and
12 for 12 houses and Claims 8 and 9 for compound wall, the learned
Arbitrator found that despite specific directions, NBCC failed to produce
details of the payments received by it from the Libyan clients. In the
circumstances, no fault can be found with the learned Arbitrator for
drawing an adverse inference and holding that payments were received by
NBCC from the Libyan clients and it should proportionately make
payment to the PRW.
69. Allowing of the interest claims by the learned Arbitrator in relation to
100 houses, 12 houses and compound wall has been assailed by NBCC on
the ground that there was no provision in the contract in that regard; that
final payments had not been released from the Libyan clients, therefore,
payment for interest on the admitted amount did not arise and finally that
no interest was payable in Islamic countries. The learned Arbitrator held
that NBCC failed to prove the law which barred payment of interest.
Indeed, it is a matter of evidence and not mere contention. NBCC itself
had claimed interest on the counter claim. It also claimed interest from the
Libyan clients. As pointed by the learned Arbitrator the contract does not
prohibit the payment of interest. In the circumstance the objection on this
ground is also without substance.
70. Finally, it was contended that all amounts as claimed by the PRW had
been allowed by the learned Arbitrator without calling for any proof.
Reliance was placed on the decisions in Ishwar Singh & Sons v. Delhi
Development Authority MANU/DE/3483/2009 and Prominent Electric
Works v. Delhi Development Authority MANU/DE/2959/2009. It was
also claimed that the value of the contract value is only LD 37852582
whereas claims have been allowed by the learned Arbitrator to the tune of
LD 2191189 and Rs. 2,25,530 and that the Award is liable to be set aside
on this ground alone.
71. With the contract having been executed over several years, there was
bound to be escalation in the rates. Consequently, the mere fact that the
awarded amount exceeds the value of the contract originally entered into
cannot per se be a ground for setting aside the Award. As regards the
proof for the claims made by PRW, the documents produced by the PRW
as well as NBCC were analysed in great detail by the learned Arbitrator.
This contention is therefore rejected. There have been no submissions
made with regard to the rejection of NBCC's counterclaims.
72. For the aforementioned reasons, the objections of NBCC to the
impugned Award dated 21st July 2003 are hereby rejected and the said
Award is made rule of the Court. The petition is disposed of with costs of
Rs.30,000 which will be paid by NBCC to the PRW within four weeks.
Decree sheet be drawn up accordingly.
S. MURALIDHAR, J.
MARCH 07, 2012
s.pal
