Delhi High Court

Union Of India vs Agrawal Water Suppliers on 21 July, 2014

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*IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        O.M.P. No.375/2014
%                       Judgement Reserved on: 10th July, 2014
                       Judgement pronounced on: 21st July, 2014


       UNION OF INDIA                                ..... Petitioner
                         Through:     Mr.Kumar Rajesh Singh,
                                      Advocate.
                         versus

       AGRAWAL WATER SUPPLIERS      ..... Respondent
                  Through: Mr.S.W.Haider, Advocate

       CORAM:
       HON'BLE MS. JUSTICE DEEPA SHARMA

       JUDGMENT

1. This is a petition under Section 34 of the Arbitration and

Conciliation Act, 1996 challenging the impugned award dated

31.10.2013 of the sole arbitrator, whereby the learned arbitrator

has awarded a sum of Rs.4,50,384/- along with 12% single

interest on the amount awarded against claim no.3.

2. An award was passed by the arbitrator on 31.10.2013. The

petitioner has assailed the said award on the ground that it has

been passed in mechanical manner and no reason has been given

by the arbitrator for arriving at its conclusion. The award is not

supported by any evidence. It is further submitted that the award

is contrary to the tendered document. Learned arbitrator has also

failed to give the reasoning on how it had arrived at the finding

that the final bill of Rs.3,75,992/- is due after payment of

Rs.1248978/-. It is further submitted that the arbitrator has

wrongly awarded the interest on the awarded amount and it is

against the clause 16(2) of General Conditions of the Contract

(GCC) since the clause stipulates that no interest will be paid on

earnest money/security deposit or amount payable to contractor

under the contract. It is submitted that the award is contrary to

the law laid down by the Supreme Court in AIR 1997 SC 980

titled as The New India Civil Erectors (P) Ltd. vs. Oil & Natural

Gas Corporation and judgment of Gauhati High Court in

Arbitration Appeal No.4/2001 (DB) tilted as Union of India vs.

Major V.Nijhawan (Retd) which was upheld by the Supreme

Court in SLP (C) bearing no.14749/2002. Reliance is placed on

the findings of the Supreme Court in 2003 (5) SCC 705 titled as

ONGC vs. Saw Pipes Ltd. It is prayed that the award dated

31.10.2013 be set aside.

3. The notice was issued to the respondent. They have not

filed any reply. However, the arguments have been addressed

and a document has also been filed.

4. Arguments of both the parties have been heard at length. I

have also gone through the case laws relied upon by both the

parties.

5. The admitted facts of the case are that the petitioner had

been awarded work of "Leading of P Way Material i.e. Rail

Sleeper and other miscellaneous material from Shakurbasti and

other locations in the section of ADEN/Ghaziabad" on

15.10.2003 and the scheduled date of completion was fixed as

14.04.2004. The total amount of the work was Rs.12,63,562/-. A

detailed letter of acceptance was issued on 6.12.2003 after the

respondent had furnished the requisite earnest money/security

deposit of Rs.26,665/- vide FDR No.475014 dated 15.11.2003 for

the agreement of work being No.08/GZB/03-04 Nov.2003. The

work commenced from 15.10.2003 with completion period of 06

months i.e. 14.04.2004. The respondent, however, failed to

complete the work in stipulated period of time and the extension

for completion of the project was given on three occasions to the

respondents on their request and the period was extended upto

30th June, 2005. The following bills were raised by the respondent

alongwith their details as under:

S.N.               Bill No.                  Amount Paid

1                  CC-I                      Rs.197136/-
2                  CC-II                     Rs.96035/-
3.                 CC-III                    Rs.429186/-
4.                 CC-IV                     Rs.426621/-

6. All these bills were duly paid to the respondent and a total

sum of Rs.1248978/- was paid to the respondent. The final bill

submitted by the respondent was withheld by petitioner on the

grounds that the metal quantity was not as per the specifications

in the agreement and the respondent had failed to complete the

work order within the stipulated period of time and it had caused

financial loss to the petitioner. Since the dispute had arisen

between the parties, the respondent in terms of clause 64 of GCC,

invoked the arbitration clause and filed the Arbitral Petition

No.470/2007 before this court and the directions were issued by

the court to General Manager, Northern Railway to appoint the

Arbitrator for initiating the arbitral proceedings vide its order

dated 5.3.2008.

7. The petitioner has challenged the award of Rs.3,75,992/-

raised by respondent as final bill. It is contended that learned

arbitrator has not given any cogent reason while awarding the

said amount to the respondent which was beyond the contractual

amount of Rs.12,63,562.50. In all these cases relied upon by

petitioner it has clearly been observed that the learned arbitrator

cannot go against the specific stipulations/conditions contained in

the agreement between the parties and that the awarded can be set

aside if it is contrary to substantive provisions of law or

provisions of the Arbitration and Conciliation Act or against the

term of contract. From the careful perusal of the award it is

apparent that the learned Arbitrator has duly considered all the

facts and circumstances of the case and the evidences on record

while arriving to the conclusion that the respondent was entitled

to a sum of Rs.3,75,992/-. Findings of the learned Arbitrator is

based on a bill which was lying unpaid with the petitioner and

which clearly shows that the bill has been raised by the

respondent for the work done by it.

8. The payment of the said bill had also been acknowledged

by the petitioner for the execution of the work for which the

measurement had already been recorded. It is also admitted case

of the parties that the terms of the contract were extended from

time to time and several bills had been raised by the respondent

during extended period, which were duly paid by the petitioner.

Learned Arbitrator has observed that the respondent had admitted

the execution of the work for which the measurement had been

duly recorded and bill for an amount of Rs.3,75,992/- had been

prepared. Learned arbitrator has also relied on the documents of

completion of wok and preparation of final bill (FCC-V) entered

in the Measurement Book No.-7/GZB/2000 on 22.9.2005. It is

also observed that the bill was prepared by concerned official i.e.

DEN/GZB of the respondent and thereafter submitted to

Sr.DEN/II/DRM Office, New Delhi on dated 10.10.2005. It,

therefore, cannot be said that the findings of the arbitrator on this

count are without any evidence or that the arbitrator had travelled

beyond the stipulations/conditions of the agreement between the

parties.

9. The petitioner has also challenged the grant of interest at

the rate of 12% per annum from 22.9.2005 on the amount of

Rs.3,75,992/-

10. It is argued on behalf of petitioner that Sub clause (3) of

Clause 16 of General Conditions of the Contract prohibits the

grant of interest. Reliance is placed on the judgment of Gauhati

High Court in Major V.P. Nijhawan (Retd) (supra) and the

confirmation of said judgment of the Gauhati High Court in an

SLP (C) No.14749/2002 by the Supreme Court. The learned

counsel for the respondent has argued that in a judgment of this

court in OMP 437/2005 titled as Union of India vs. M/s Pradeep

Vinod Construction Co. this court had discussed the provisions

of Clause 16 (3) of General Conditions of Contract and also the

judgment of the Gauhati High court Major V.P. Nijhawan (Retd)

(supra) and has given the findings that the arbitrator has

jurisdiction to award interest. It is submitted that the said order

has been upheld by the Division Bench of this court in FAO (OS)

No.187/2006 and C.M.No.4959-54/2006.

11. I have given careful consideration to the rival contentions

of the parties and perused the record.

12. From perusal of the record, it is apparent that the petitioner

had awarded a contract to the respondent for the work of amount

of Rs.12,63,562.50 which was to be completed within a period of

six months i.e. by14.4.2004 but the date of completion of work

was extended from time to time and lastly the work was to be

completed by 20.9.2005. On completion of the work on

17.9.2005, final bill of amount of Rs.3,75,992/- bearing no. FCC-

V dated 22.9.2005 was prepared by concerned official after the

measurement of the work done by the respondent. This payment

was therefore over and above the original cost of work. This

payment of Rs.3,75,992/- therefore is not the part of the payment

of Rs.12,63,562.50 which amount was mentioned in the Contract.

The findings of the Gauhati High Court in Arbitration Appeal

No.4/2001 (DB) tilted as Union of India vs. Major V.Nijhawan

(Retd.), which were duly upheld by the Supreme Court in SLP

clause 3 of clause 16 of the General Conditions of the Contract,

the arbitrator does not have any jurisdiction to grant interest to

the contractor, therefore, have no bearing on the facts of this case.

13. There is no dispute to the fact that Clause 16 (3) of the

General Conditions of the Contract governs the parties. Under

this clause, the contractor is not entitled for the interest. This

clause has been elaborately discussed by this court in the case

OMP 437/2005 titled as Union of India vs. M/s Pradeep Vinod

Construction Co. This court has distinguished the said findings

and has observed as follows:

10. The last aspect urged by learned counsel for the petitioner is that no interest ought to have been awarded in view of there being a specific stipulation to the contrary contained in clause 16 (c). The said clause is as under:

"No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract, but government securities deposited in terms of sub clause (1) of the clause will be repayable with interest accrued thereto."

x x x x

12. In my considered view, what is envisaged by the said expression 'amounts payable to the contractor under the contract' would mean the amounts which have to be paid in normal course to the contracting party. This expression has to be also read with two other stipulations in respect of earnest money and security deposit. The object is that the earnest money and security deposit are liable to be detained till the completion of the contract. Not only amounts are payable to the contractor at various stages of the contract but there will be differences between the dates when such bills are raised and amounts are paid. It is in respect of these payments on behalf of the petitioner that no interest is payable. It cannot be said that if the petitioner unreasonably detains any amount, no interest would be payable. Similarly if it is found that there are claims arising on account of eventualities like additional work, breach by the petitioner of the terms of the contract, then the arbitrators cannot said to be devoid of any authority to compensate the suffering

party by grant of interest."