Modern Co-Operative Group ... vs Bharat Bijlee Ltd.
2012 Latest Caselaw 5518 Del

       IN THE HIGH COURT OF DELHI AT NEW DELHI

               CS (OS) No. 317A of 2000 & I.A. No. 2292 of 2000

                                                  Reserved on: 1st August, 2012
                                              Decision on: 14th September, 2012

       MODERN CO-OPERATIVE
       GROUP HOUSING SOCIETY LTD.                  ..... Plaintiff
                   Through: Mr. Rakesh Tiku, Sr. Advocate with
                             Mr. Abhinav Bajaj, Advocate.

                       versus

       BHARAT BIJLEE LTD.                                      ..... Defendant
                     Through:            Mr. Vinay Bhasin, Sr. Advocate with
                                         Mr. Ankur Bansal, Advocate

        CORAM: JUSTICE S. MURALIDHAR

                                JUDGMENT

14.09.2012

1. I.A. 2292 of 2000 is an application by the Defendant Bharat Bijlee Ltd. ('BBL') under Sections 30 and 33 of the Arbitration Act, 1940 ('1940 Act') raising objections to the impugned Award dated 1st January 2000 of the sole Arbitrator in the disputes between the Plaintiff Modern Co-operative Group Housing Society Ltd. (hereinafter 'the Society') and BBL arising out of an order placed by the Society on BBL for supply of six lifts for the Society.

2. The offer made by BBL for supply of the six lifts was accepted by the Society on 30th December 1987 for the value of Rs. 20,88,450. It was subject to a price variation claim ('PVC'). Payment was to be made pro- rata per lift as follows:

30% of contract value with the acceptance of the proposal.

60% of contract value plus PVC on material portion on receipt of advice from BBL that the materials are ready for dispatch.

10% of contract value plus balance PVC plus taxes and levies as applicable on completion of the installation work with the further provisions that BBL is delayed by any cause beyond its control, the final 10% plus taxes and levies as specified will be paid to BBL within 180 days from the date of its advice that the materials are ready for dispatch. Partial supplies when required shall be payable pro-rata as above. Any payment not made at due date would bear interest at the maximum rate of interest paid by BBL to its bankers.

3. In terms of the contract the Society was to provide within 50 weeks from the starting date the following items:

(i) lift pit,

(ii) lift shaft,

(iii) Machine Room with permanent power supply and,

(iv) preparatory work/Builder's work complete in all respects as per approved layout drawings, to enable BBL to undertake and carry out the erection work in the remaining period.

4. In terms of the agreed sequence of activities, the Society was to provide scaffolding and template in support of the lift shaft by 31st August 1989. However, the Society wrote to BBL only on 16th March 1990 stating that the site was ready for installation of lifts. According to BBL, it accepted the above statement of the Society and immediately took steps to despatch the materials from its factory site at Thane and raised proforma invoices for the six lifts for a net amount of Rs. 19,96,599. When BBL sent its team at the site for commencing the work, it found that the preparatory civil work was not yet complete. According to BBL, the civil work was not complete even up to September 1993 when BBL was forced to abandon the site. The case of BBL is that in terms of the contract the Society was to pay an advance of approximately Rs. 6,20,000 by 30th December 1987. The Society however paid only Rs. 20,000 by 30th December 1987. The balance amount of Rs. 6,00,000 was paid only on 11th July 1988.

5. As regards the balance payment of 60% which was for the materials required to be paid "on receipt of the advice that material is ready for dispatch", it is stated by the Society in its affidavit dated 30th March 2001 filed in these proceedings that it made payments of the said 60% amount as under:

           "S. No.         Date of Payment            Amount paid

          1.               29-5-1990                  Rs. 3,00,700.67
          2.               21-3-1991                  Rs. 3,00,700.67
          3.               25-5-1993                  Rs. 3,00,700.67"

6. The case of the Society before the learned Arbitrator was that the civil work was completed on 16th March 1990. It was further stated that a total amount of Rs. 15,22,102 was paid to BBL and yet not even a single lift was installed. On the other hand, the case of BBL was that the 60% payment was certainly not made on receipt of the advice from BBL that the material was ready for despatch. Even on the Society's own showing the entire 60% payment was made only by 25th May 1993. This necessarily involved PVC but the Society insisted that BBL should either agree to waive the PVC or pay interest on the advance payment of Rs. 6,20,000 paid by the Society which demand was outside the scope of the contract. Further the Society made payment only against one invoice in the sum of Rs. 3,00,700.67 towards one passenger lift.

7. It is stated by BBL that on receipt of the aforementioned payment on 29th May 1990 it immediately despatched the material. The receipt of the material was acknowledged by the Society on 31st July 1990. However, since the site was not ready for installation of the lift, the Society addressed a letter dated 21st August 1990 to BBL to give top priority to making arrangements for installation of the lift. BBL referred to a letter dated 27th August 1990 addressed by it to the Society pointing out the shortcomings

on the part of the Contractors in completing the preparatory work. On 5th September 1990, the Society wrote to BBL stating that the points connected with the lift installation had been cleared and the site was ready for installation. However, on visiting the site, BBL found that the points mentioned in the earlier letter dated 27th August 1990 had not been attended to and addressed a letter on 13th September 1990 in that regard to the Society.

8. BBL states that between 15th September 1990 up to 31st March 1991 it despatched six consignments of materials from its factory at Thane for supply of materials for installation of two more lifts without receiving any payment against the said supply in good faith and in anticipation that the Society will make the payment upon receipt of the said material. According to BBL, the materials received by the Society had to be kept in a safe and lockable store room. However, on 18th September 1990 the said store room was demolished at site by the Society prompting a telegram from BBL to the Society on 18th September 1990 stating that if the materials kept in the store room were not traceable, the resultant damage/loss would be on account of the Society.

9. On 3rd November 1990, BBL informed the Society of the commencement of the lift erection work and the Site Engineer was requested to commence cutting of pocket holes in both the lift shafts which was part of the Society's scope of work. The Society was also requested to provide M.S. I- Steel Sections which was also within its scope of work. On 17th December 1990 BBL addressed a letter to the Society pointing out that the above work was still not completed.

10. In its affidavit dated 25th March 1998 filed before the learned Arbitrator, BBL referred to the numerous meetings held between the parties

which would go to show that even on 25th April 1993, the scaffolding in Block A had not been re-fixed. Reference was made to the minutes of the meeting of 28th April 1993 in which a number of defects needing rectification were pointed out. The minutes of the meeting held on 7th May 1993 recorded that the scaffolding in Block B was incomplete. Scaffolding in Block A had just started and had reached only the first floor. Meanwhile, BBL had continued the work in Block B and commenced the work in Block A on completion of the scaffolding. However, the M.S. Sections were still not available for the work in machine room; pockets had not been cut for grouting of brackets and handrails had still not been provided in the staircase leading to the machine room. It was pointed out that these factors had slowed down the progress of the work.

11. The affidavit filed by BBL also referred to the various shortcomings which were recorded in the site meetings held up to August 1993. In particular it was pointed out that even as on 9th August 1993 the work of physical installation of one lift was dependent upon the Society installing Architrave tiles work without which neither the lift cage nor the lift doors could be installed. Pointing out that the Society had not still paid a sum of Rs. 8,40,943.01 even till September 1993, BBL stated that it had been forced to suspend the work thereafter. Ultimately BBL was left with no option but to terminate the contract by a letter dated 10th March 1995.

12. The Society filed a petition in this Court under Section 20 of the 1940 Act. During the course of those proceedings an offer was made by BBL, undertaking to complete the work upon the Society paying Rs. 8.44 lakhs, which was the balance due towards the material supplied by BBL, and an additional sum of Rs. 8 lakhs towards reconditioning/replacement of the materials which had already been supplied as had been indicated in the inventory prepared at the time of joint inspection by parties pursuant to the

orders of the High Court. However, the said offer was rejected by the Society and this was recorded in the order dated 9th April 1996 passed by the High Court. The learned sole Arbitrator was appointed by the Court by an order dated 9th April 1996.

13. With the sole Arbitrator appointed expiring during the pendency of the arbitral proceedings, another learned Arbitrator, a former Judge of this Court, was appointed by an order dated 26th April 1999.

14. In the impugned Award passed by the learned Arbitrator on 1st January 2000, the learned Arbitrator rejected Claim No. 1 of the Society for a sum of Rs. 50 lakhs on account of damages suffered by the Society. The learned Arbitrator found that no satisfactory evidence was led by the Society to prove the said claim.

15. Claim No. 2 was for a sum of Rs. 19,93,800 on account of interest on the amount deposited by the Society with BBL from time to time. Claim No. 4 was for a sum of Rs. 30 lakhs towards the sum spent by the Society for getting the work completed from outside agencies. Both the claims were considered together by the learned Arbitrator.

16. As regards Claim No. 2 the learned Arbitrator held that the Society was also responsible for the delay and for violation of some of the terms of the contract and, therefore, was not entitled to recover any interest on the amount paid by it to BBL. Claim No. 2 was accordingly rejected. As regards Claim No. 4, it was held that by its own conduct, BBL had waived the condition which required 60% of the contract value to be paid by the Society after receipt of the proforma invoices. It was observed by the learned Arbitrator that there was no justification for BBL "to suspend the erection work of even three lifts when the civil work also had already been

completed by the Claimant". The learned Arbitrator referred to the statement made by Mr. N.K. Suri, a witness of BBL in his cross- examination that the site had become ready in March 1990. Further, in the rejoinder filed by BBL with regard to its counter-claim, it was stated that the Society had completed the civil work only in March 1990 and BBL could commence installation only thereafter. Consequently, the learned Arbitrator concluded that BBL should compensate the Society towards the extra amount for getting the work completed through outside agencies. It was held that BBL was liable to pay a sum of Rs. 18.77 lakhs to the Society

17. Claim No. 3 was rejected and Claim No. 5 was not pressed by the Society. Under Claim No. 6, it was held that the Society was not entitled to refund of the amount paid by it to BBL. However, in the event that BBL failed to pay the sum awarded to the Society under Claim No. 4, the Society was to pay post-Award interest at 18% per annum. BBL's counter-claim was rejected.

18. It may be mentioned here that by the order dated 9th April 1996 appointing the sole Arbitrator to adjudicate the disputes, this Court permitted the Society to utilize the material available at the site in the installation of lifts as per the Society's own arrangement. However, the parties were given the liberty of raising their claims and counter-claims in that behalf before the learned Arbitrator.

19. This Court has heard the submissions of Mr. Vinay Bhasin, learned Senior counsel appearing for BBL and Mr. Rakesh Tiku, learned Senior counsel appearing for the Society.

20. Mr. Bhasin submitted that the learned Arbitrator has, in allowing Claim

No. 4 of the Society, grievously erred in inferring that BBL had by its own conduct waived the condition regarding payment of 60% of the contract value by the Society after receipt of the proforma invoices. This was contrary to the admitted position that the Society had failed to make the payment of 60% of the contract value within the stipulated time. There was exhaustive correspondence between the parties placed on record which showed that BBL had been insisting upon such payment throughout. He further submits that the evidence placed on record clearly showed that the preparatory civil work which was the obligation of the Society was not completed in March 1990, as erroneously assumed by the learned Arbitrator. He referred to the cross-examination of Mr. N.K. Suri and submitted that there is no admission to that effect by the said witness. The statement was made in a different context with regard to the raising of proforma invoices by BBL for the material pertaining to six lifts in April 1990 itself. Even the statement made in the rejoinder to the counter-claim was not understood in its context. In fact, the learned Arbitrator completely ignored the exhaustive evidence that was placed on record to show that the preparatory civil work was not completed even by September 1993.

21. Mr. Bhasin further pointed out that there was no basis for the learned Arbitrator to conclude that 90% of the payment had been made by the Society. Even the 60% payment without the PVC was admittedly completed by the Society only on 25th May 1993. The total amount till that date worked out to Rs. 15,22,102. He submitted that the learned Arbitrator himself observed that the PVC on material portion was not waived by BBL. By its letter dated 3rd April 1993 the Society itself had admitted that it had to clear the balance sum of Rs. 8,40,943. Therefore, there was no question of the Society having paid 90% of the contractual value for three lifts. He pointed out that prior to suspension of the work in September 1993, BBL supplied material for five lifts to the extent of more than Rs. 22 lakhs. This

evidence was completely ignored by the learned Arbitrator.

22. Mr. Rakesh Tiku, learned Senior counsel appearing for the Society, on the other hand, submitted that the learned Arbitrator had rejected the Claims 1, 2, 3, 5 and 6, only Claim No. 4 of the Society had been allowed in the sum of Rs. 18.77 lakhs together with post-Award interest at 18% per annum. Relying on the decisions in Arosan Enterprises Ltd. v. Union of India 1999 (6) SCALE 46; State of Uttar Pradesh v. Allied Constructions IV (2003) SLT 873; M/s. Hindustan Tea Co. v. M/s. K. Sashikant & Co. AIR 1987 SC 81 and Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar AIR 1987 SC 2316, he submitted that the Arbitrator was the sole judge of the quality and quantity of the evidence. It was beyond the jurisdiction of the Court to re-appreciate the evidence. The mere fact that the Arbitrator made a mistake of law or fact was no ground to challenge the Award.

23. Mr. Tiku submitted that an Award could be set aside only under one of the grounds under Sections 30 and 33 of the 1940 Act. He further submitted that the learned Arbitrator rightly drew the inference of BBL having waived the condition regarding payment of the 60% of the contractual amount by its own conduct. Reliance was placed on the decision in Jagad Bandhu Chatterjee v. Smt. Nilima Rani 1969 (3) SCC 445.

24. The above submissions have been considered. The only claim of the Society that has been allowed by the learned Arbitrator is Claim No. 4 which was for a sum of Rs. 30 lakhs on account of the amounts spent by the Society in getting the work executed through outside agencies. This claim was, in fact, considered along with Claim No. 2 under which the Society had claimed interest on the amount paid by it to BBL. While rejecting Claim No. 2, the learned Arbitrator held that the Society had not paid the

advance amount at the time of acceptance of the offer. The admitted position was that although as per the agreed terms the Society was to pay 30% of the contract value at the time of acceptance of the proposal, it paid only Rs. 20,000 upon such acceptance. The balance sum of Rs. 6 lakhs (of the 30%) was paid more than six months after the initial payment on 11th July 1988. The learned Arbitrator was correct in observing that the Society did not make the initial payment within time. The learned Arbitrator also noted that despite the terms of the contract requiring the Society to complete the preparatory civil work by 31st August 1989 it did not do so, and therefore, "was also responsible for the delay and for violation of some terms of the contract".

25. Even as regards Claim No. 4, the learned Arbitrator noted that "it is true that the initial delay in the erection of installation of lifts was on the part of the claimant society as explained hereinbefore". However, the inference drawn by the learned Arbitrator that BBL had waived the condition requiring payment of 60% of the agreed amount by the Society upon receipt of advice of the materials being ready for despatch does not appear to be based on any evidence. The learned Arbitrator has referred to the fact that BBL accepted Rs. 3,00,700.67 towards one passenger lift from the Society on 29th May 1990 and despatched the entire material for one lift from its factory. He also referred to the fact that up to 31st March 1991, BBL despatched the total material for four more lifts without receiving the payment against the aforementioned supplies. This conduct of BBL in making supplies of nearly four lifts could not have been construed as a 'waiver' of the condition regarding 60% payment.

26. Be that as it may, what was critical for the work of installation of lifts to commence was completion by the Society of its obligations under the contract. The sequence of the respective obligations of the parties, as has

been set out in para 5 of BBL's objections, and has not been seriously disputed by the Society, was as under:

       "S. No.         Activity                Responsibility

       1. Scaffolding and Template support
          support in lift shaft                Petitioner

       2. Marking of lift shaft                Respondent

       3. Pocket cutting in shaft
          for bracket grouting                 Petitioner

       4. Fixing of Angles for
          Landing Sill                         Petitioner

       5. Fixing of Landing Sill
          on Angles                            Respondent

       6. Bed Block grouting                   Petitioner

       7. Architrave                           Petitioner

       8. Landing PB/FPI box grouting          Petitioner

       9. Top track rag bolt grouting          Petitioner

       10. Landing door/manual door            Respondent

       11. Machine assembly                    Respondent

       12. Sling and roping                    Respondent

       13. Car cage assembly                   Respondent

       14. Truncking conduits fixing           Respondent

       15. Finishing of machine room
           holes etc.                          Petitioner

       16. Buffer block casting                Petitioner

       17. 3 Phase power supply
           provision with proper
           neutral and earthing                Petitioner

        18. Run lift in maintenance                   Respondent

       19. Final adjustment and high
          speed running                              Respondent

       20. Painting and finishing                    Respondent

       21. Inspections                               Respondent"

27. Incidentally the same sequence has been set out in para 10 of the affidavit dated 25th March 1998 filed by BBL before the learned Arbitrator. What is immediately evident is that the Society had to ensure that its obligations at Serial Nos. 1 to 9 above except the obligations at Serial No. 4, were in fact completed by it within the agreed time. It is apparent that the completion of the civil works was a sine qua non for the installation of the lifts. The learned Arbitrator appears to have completely missed this important aspect in concluding that since BBL had received 90% of the contract value it had no justification for not installing the lifts. Even this conclusion appears to be incorrect since the learned Arbitrator himself observed that the 90% amount of the contract value did not include the price variation of three lifts.

28. In coming to the conclusion that the civil works were completed in March 1990, the learned Arbitrator has referred to a statement made by Mr. N.K. Suri, a witness of BBL, in his cross-examination and taken that to be an admission. The learned Arbitrator also referred to the minutes of the meeting between the parties held on 1st May 1993 (Ex. RW 1/41) and concluded that "from the documents on record it is also clear that this preparatory/civil work necessary for the installation of lifts was completed on 16th March 1990". The said minutes of meeting of 1st May 1993 read as follows:

"1. Site Meeting was fixed with Shri G.D. Garg to review the

site status and progress at 11.00 A.M. BBL Representatives waited upto 1.30 P.M. and reviewed the statue with Mr. Ashwani and Mr. Singhal in absence of Shri Garg.

2. On finding the scaffolding in 'B' Block still incomplete, BBL expressed its concern and offered to carry out the balance rectification for the same if society is not in a position to organize.

3. The scaffolding in 'A' Block has just started and has come upto 1st floor.

4. BBL requested whole hearted cooperation and support to progress the work as per the earlier program chalked out. Mr. Ashwani has confirmed an immediate action in this regard."

29. The above minutes show that the scaffolding work in B Block was incomplete and the scaffolding work in A Block had just started and had come up to the first floor. Interestingly the minutes of meeting of 1st May 1993 have been signed by both parties. On 26th May 1993 a letter was written (Ex. RW 1/43) by BBL to the Society inter alia listing out the works which had yet not been completed. This included providing handrails for stair to machine room, deciding on the architrave tiles, arranging for I- beams for machine support and so on. On 12th June 1993 BBL wrote to the Society (Ex. RW 1/44) in which it was pointed out that a civil work was to be completed in Block A. Further outstanding works were listed out in the letter dated 30th July 1993 (Ex. RW 1/45). On 19th August 1993, BBL pointed out to the Society (Ex. RW 1/47) that the passenger's lift alignment in Block A had been completed but as regards the bed lift, the bracket fixing was in progress and in Block B, two floors of architrave had to be completed and in Block C, scaffolding work had to be started.

30. The above minutes and correspondence show that the obligation of the Society to complete the basic civil infrastructural works was in fact not fulfilled even as on May 1993 in respect of one block, and as on August

1993 in respect of remaining. The question of BBL therefore being able to install the lifts without the above basic work being completed could not have arisen. Although this Court is not expected to "re-appreciate" the evidence, this is a case where the learned Arbitrator has completely ignored the evidence on record and has simply not referred to it. The finding of the learned Arbitrator that the preparatory work necessary for installation of the lift was completed on 16th March 1990, is not supported by the evidence on record. The above finding has been rendered ignoring the uncontroverted evidence on record. Although the scope of interference by the Court with an Award is limited, this is an instance, as explained in State of Rajasthan v. Puri Construction Co. Ltd. (1994) 6 SCC 485, where "the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible viewpoints."

31. Without referring to the above evidence, the learned Arbitrator has based his conclusion on an answer given by Mr. Suri in his cross- examination. The relevant portion of the said cross-examination reads as under:

"In the present case, the Respondent company had sent the invoices for the goods of all the lifts. These invoices were sent somewhere in April, 1990. In the present case the Respondent company had received a letter dated 16.3.1990 wherein it was stated that the site was quite ready for the installation of lifts and on the basis of this letter the Respondent company had submitted the invoice. From the records, it appears that none from the Respondent company visited the site where the lifts were to be installed. Volunteered, by this I mean that around the said time (i.e. 16th April, 1990) nobody from the Respondent company visited the site. Since the contract commenced on 17th September, 1988, 50 weeks would be complete on or about 3rd September, 1989. The first set of invoices was submitted by the Respondent company on 9th April, 1990 and this set was for all the 6 lifts. From the said facts, it appears that the first invoice was sent 8 months after

the expiry of 50 weeks. Volunteered this was so because the site was not ready, which became ready only in the month of March, 1990."

32. It is difficult to appreciate how the above answer of Mr. Suri could be taken to be an admission of the completion of the civil works in the month of March 1990. The said statement appears to be made in the context of his explaining why the first invoice was not sent till eight months after the expiry of the 50 weeks.

33. The statement made in para 5 of the rejoinder to the counter-claim has to be appreciated in the context in which it has dealt with the said paragraph. The learned Arbitrator had before him the affidavits by way of evidence of both the Society and BBL. That was the evidence that the learned Arbitrator had to examine in deciding these issues. By way of the affidavit filed on behalf of BBL, exhaustive evidence was placed on record to show that the civil works had not been completed by the Society as on August 1993. No reference whatsoever has been made in the impugned Award to the said evidence by way of affidavit of BBL. There has been no cross-examination of Mr. Suri in respect of specific averments in relation to the non-completion of the civil works as detailed in his affidavit. The conclusion that the civil works had been completed by the Society in March 1990 was not based on the evidence on record and constituted a patent error apparent on the face of the Award. The impugned Award in respect of Claim No. 4 is therefore unsustainable in law and is liable to be set aside.

34. However, as regards the rejection of the counter-claim of BBL, this Court is unable to be persuaded to hold that the Award suffers from an error apparent on the face of the Award. The letter dated 3rd April 1993 referred to by BBL is in fact a letter written by it to the Society listing out what had been agreed to by the Society. It is not a letter from the Society to BBL. Be

that as it may, the fact remains that till such time the Society initiated the process of reference of disputes to arbitration, BBL on its own did not take steps in regard to its counter-claim.

35. For the aforementioned reasons, the impugned Award dated 1st January 2000 to the extent it has allowed Claim No. 4 of the Society in the sum of Rs. 18.77 lakhs together with post-Award interest at 18% per annum is hereby set aside. The impugned Award to the extent it dismisses the counter-claim of BBL is affirmed. I.A. No. 2292 of 2000 is disposed of in the above terms.

CS(OS) No. 317A of 2000

36. The impugned Award dated 1st January 2000 as modified by the Court as above is made rule of the Court. Decree sheet be drawn up accordingly. The suit is disposed of with no order as to costs.

S. MURALIDHAR, J.

SEPTEMBER 14, 2012 akg