Arora Construction Co. (Pvt.) ... vs Bharat Sanchar Nigam Limited & ...
2012 Latest Caselaw 5775 Del

         IN THE HIGH COURT OF DELHI AT NEW DELHI
                                        (Not reportable)
                     O.M.P. 521 of 2006

 ARORA CONSTRUCTION CO. (PVT.) LTD           ..... Petitioner
             Through: Ms. Anusuya Salwan with Ms. Renuka
                      Arora, Mr. Kunal Kohli and Mr. Vikas
                      Sood, Advocates.

                      Versus

 BHARAT SANCHAR NIGAM LIMITED & ANR                      ..... Respondents
             Through: None.

 CORAM: JUSTICE S. MURALIDHAR

                           ORDER

26.09.2012

1. The challenge in this petition under Section 34 of the Arbitration and

Conciliation Act, 1996 ('Act') is to an Award dated 31st July 2006 passed

by the learned sole Arbitrator (Respondent No. 2) in the disputes between

the Petitioner M/s. Arora Construction Co. (Pvt.) Ltd. (hereinafter referred

to as 'the Contractor') and Respondent No. 1 Bharat Sanchar Nigam

Limited ('BSNL') arising out of a contract for the work of construction of

administrative building at Sector 15-A, Faridabad (Haryana) SH: Building

portion and services.

2. In terms of the contract, the date of start of the work was 25th March

2000 and the stipulated date of completion was 24th August 2001. The

actual date of completion was 30th June 2003. The date of payment of the

final bill was 15th July 2003 and the amount of the final bill was Rs.

1,11,62,380.82.

3. The Superintendent Engineer (Civil), ['SE (Civil)'] BSNL invoked

Clause 2 of the contract which provided for penal compensation for delay.

After giving due notice to the Contractor by letter dated 9th December

2003, the SE (Civil) imposed a penal compensation of Rs. 4,25,672 for the

period of delay from 14th October 2001 to 30th June 2003. It is not in

dispute that the Contractor filed CS (OS) No. 2203 of 2003 in this Court

challenging the above levy of compensation which was an 'excepted

matter' and in respect of which no arbitral proceedings could have been

initiated.

4. As regards the claims of the Contractor against the BSNL arising out of

the contract, the arbitration clause was invoked by the Contractor and the

disputes were referred to the learned Arbitrator.

5. There were 16 items of claims. Claim No. 1 was for a sum of Rs.

1,38,158 on account of less payment made for broken glazed tiles. The

Contractor had demanded the rate of Rs. 390 per sq.mtr whereas BSNL had

paid at the rate of Rs. 206.89 per sq.mtr. By its letter dated 1st October 2002

the Contractor submitted its analysis of rates for the work of broken glazed

tiles in terms of which the rate per sq.mtr was worked out to Rs. 311.60 per

sq.mtr. It was contended by the Contractor, that BSNL did not refute the

above claim.

6. A perusal of the impugned Award as regards Claim No. 1 shows that

before the learned Arbitrator BSNL produced its rate analysis (Annexure

R-69) dated 26th March 2003 working out the rate as Rs. 206.89 per sq.

mtr. The original records in support of the said rate analysis were also

produced. The learned Arbitrator noticed that in terms of Clause 12 (v) of

the agreement, irrespective of the rate claimed by the Contractor, the

Engineer In-charge ('EIC') had to determine the rate of additional work on

the basis of prevailing market rate. The Contractor could not show any flaw

in the rate determination of BSNL. The learned Arbitrator accordingly

rejected Claim No. 1.

7. It is submitted by Ms. Anusuya Salwan, learned counsel appearing for

the Contractor, on the strength of the decision of the High Court of

Himachal Pradesh in S.M. Sareen v. State of H.P. 1991 Law Suit (HP)

187 that once a rate analysis was submitted at the initial stage by the

Contractor and was not disputed by BSNL, then such rate analysis

submitted by the Contractor had to be accepted.

8. In the instant case the learned Arbitrator was presented with two rate

analysis. One by the Petitioner in the form of letter dated 1st October 2002

(Annexure C-73) and the other of BSNL dated 26th March 2003 (Annexure

R-69). It was within the jurisdiction of the learned Arbitrator to opt for the

rate analysis of BSNL. It cannot be said that by accepting the rate analysis

of BSNL, the learned Arbitrator committed a patent illegality within the

scope of Section 34 of the Act.

9. Claim No. 8 was for a sum of Rs. 1,62,648 towards the sum less paid in

shuttering of shell. As regards the said claim also, the learned Arbitrator

held that the Contractor could not show any infirmity in the rate of Rs.

241.12 per sq.mtr worked out by BSNL as per the Delhi Schedule Rates for

archives, etc. The Contractor by its letter dated 15th June 2001 quoted the

rate of Rs. 500 per sq.mtr. BSNL by its letter dated 22nd June 2001 refuted

that claim and stated that the rate worked out was Rs. 241.12 per sq.mtr. It

was within the scope of the powers of the learned Arbitrator to accept the

rate worked out by BSNL over the rate submitted by the Contractor.

Consequently, the rejection of Claim No. 8 by the learned Arbitrator cannot

be said to be suffering from any legal infirmity.

10. Claim No. 12 was for a sum of Rs. 7 lakhs due to less measurement and

rates, etc. The learned Arbitrator while rejecting the said claim noticed that

the Contractor had not raised such a claim either during the execution of

the work or during the joint measurement or even thereafter when the final

payments were accepted by the Contractor. In the circumstances, rejection

of the said claim of the learned Arbitrator cannot be said to be erroneous.

11. The Award in respect of Claim Nos. 6 and 7 in the sum of Rs. 24,000

less payment in shuttering also does not call for interference. The learned

Arbitrator has given cogent reasons and found in respect of each of the two

claims, that no objections had been raised by the Contractor with regard to

measurement in shuttering either at the time of measurements or at the time

of finalization of bills.

12. The remaining objections of the Contractor as regards the Award are in

respect of Claim Nos. 2, 9 and 10. Claim No. 2 was for a sum of Rs.

4,80,000 on account of payment in respect of Clause 10 (CC) plus interest.

Claim No. 9 was for a sum of Rs. 11,24,570 due to loss of profit plus

interest and Claim No. 10 was for a sum of Rs. 35,28,000 on account of

overrun charges of the contract with interest.

13. The learned Arbitrator in the impugned Award rejected the above

claims 'for the present' on the ground that the action taken by the SE

(Civil) in levying the penalty of Rs. 4,25,672 for the period 14th October

2001 to 30th June 2003 under Clause 2 had not yet been held to be bad and

illegal since CS(OS) No. 2203 of 2003 filed by the Contractor in this Court

challenging the said penalty was still pending.

14. Ms. Salwan draws the attention of this Court to the decision of the

Supreme Court in J.G. Engineers Private Limited v. Union of India

(2011) 5 SCC 758, and the decisions of this Court in Dharam Construction

v. Delhi Development Authority 1998 1 AD (Delhi) 572, Puran Chand

Nangia v. DDA 2006 IV AD (Delhi) 168 and Indian Farmers Fertiliser

Co-operative Ltd. v. Duggal Constructions (India) Ltd. 186 (2012) DLT

658 (DB) to contend that the issue whether the delay in completion of the

work was attributable to the BSNL or the Contractor had to be necessarily

decided by the learned Arbitrator. She submitted that even in respect of the

accepted Clause 2, the question whether the penalty was justified would

hinge upon the question whether the delay in completion of the work was

caused by the Contractor.

15. In J.G. Engineers Private Limited v. Union of India the Supreme

Court analysed an identical clause. The clause in that case required

compensation to be paid by the Contractor for not completing the work

within the stipulated period. Clause 2 of the contract in that case was

analysed, as under:

"18. Thus what is made final and conclusive by Clauses (2) and (3) of the agreement, is not the decision of any authority on the issue whether the contractor was responsible for the delay or the Department was responsible for the delay or on the question whether termination/rescission is valid or illegal. What is made final, is the decisions on consequential issues relating to quantification, if there is no dispute as to who committed breach. That is, if the contractor admits that he is in breach, or if the arbitrator finds that the contractor is in breach by being responsible for the delay, the decision of the Superintending Engineer will be final in regard to two issues. The first is the percentage (whether it should be 1% or less) of the value of the work that is to be levied as liquidated damages per day. The second is the determination of the actual excess cost in getting the work completed through an alternative agency. The decision as to who is responsible for the delay in execution and who committed breach is not made subject to any decision of the respondents or its officers, nor excepted from arbitration under any provision of the contract.

19. In fact the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is, a court or an arbitral Tribunal."

16. The decisions of this Court relied upon by learned counsel for the

Contractor are consistent with the law explained in the above decision.

Consequently, the decision in the present case on the question of delay had

necessarily to be taken by the learned Arbitrator notwithstanding the

decision as to the quantification of such penalty by the assesse in terms of

Clause 2 of the contact which quantification could constitute an 'excepted

matter'. However, since the Contractor has challenged the levy of penalty

in this Court in CS(OS) No. 2203 of 2003 there is a possibility of

inconsistent views being expressed by the learned Arbitrator in the arbitral

proceedings and the Court in CS(OS) No. 2203 of 2003.

17. Faced with this position, Ms. Salwan submitted that the Contractor

would file an application in CS (OS) No. 2203 of 2003 seeking leave to

withdraw the said suit with liberty to have the question whether the delay in

completion of the work was attributable to the Contractor or the BSNL

referred to arbitration in addition to Claim Nos. 2, 9 and 10 which have not

been decided by the learned Arbitrator only due to the pendency of the suit.

18. In light of the law explained by the Supreme Court in J.G. Engineers

Private Limited v. Union of India it appears that the course suggested by

Ms. Salwan is an appropriate one and it would be open to the Contractor to

have the question concerning the party responsible for the delay in

completion of the work, even for the purposes of penalty under Clause 2,

referred to arbitration. This would obviate inconsistent findings in two fora.

19. In that view of the matter, subject to the Petitioner filing an application

in CS(OS) No. 2203 of 2003 seeking leave to withdraw the said suit with

liberty to have the disputes concerning penalty under Clause 2 of the

contract also referred to arbitration, in light of the law explained by the

Supreme Court in J.G. Engineers Private Limited v. Union of India, the

impugned Award in respect of Claim Nos. 2, 9 and 10 is set aside and

liberty is granted to the Contractor to seek reference of Claim Nos. 2, 9 and

10 including the disputes arising out of the levy of penalty under Clause 2

to arbitration in accordance with law. The impugned Award as to the

remaining clauses is upheld.

20. The petition is disposed of in the above terms.

S. MURALIDHAR, J.

SEPTEMBER 26, 2012 Rk