M/S Harjinder Singh Namdhari vs National Building Construction ...
2015 Latest Caselaw 2962 Del

$~*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+                              O.M.P. 171/2013

                                              Reserved on: March 17, 2015
                                              Date of decision: April 15, 2015

        NATIONAL BUILDINGS CONSTRUCTION
        CORPORATION LTD.                             ..... Petitioner
                     Through: Mr. Manoj Kumar Das, Advocate.

                               versus

        M/S HARJINDER SINGH NAMDHARI                  ..... Respondent
                      Through: Mr. Sanjay Bansal, Advocate.

                                        AND

+                              O.M.P. 215/2013

        M/S HARJINDER SINGH NAMDHARI                   ..... Petitioner
                      Through: Mr. Sanjay Bansal, Advocate.

                               versus

        NATIONAL BUILDING CONSTRUCTION
        COMPANY LTD.                               ..... Respondent
                     Through: Mr. Manoj Kumar Das, Advocate.

        CORAM: JUSTICE S. MURALIDHAR

                               JUDGMENT

% 15.04.2015

1. The challenge in these two petitions under Section 34 of the Arbitration

and Conciliation Act, 1996 („Act‟) is to an impugned Award dated 12 th

November 2012 passed by the learned Arbitrator in the dispute between the

parties arising out of the work for execution of foundation, tower, erection,

stringing etc. for 220 KV D/C Jalandhar, Hamirpur Transmission Line

Project which was awarded by National Building Construction Corporation

Limited („NBCC‟) (the Petitioner in O.M.P 171 of 2013) to M/s. Harjinder

Singh Namdhari ('the Contractor').

2. In terms of the contract work order dated 26 th /29th August 1998, the

Contractor was required to execute the foundation, tower erection and

stringing work in respect of the following Sections:

        A. AMB to Nadaun line Sector          -AP 42 to 57

        B. Kartarpur to Chauhal line Sector         -AP 02 to 27

3. The value of the contract was Rs.46,69,447. It was to be completed within

seven months. The starting date was 1st September 1998 and the date of the

completion was to be 31st March 1999.

4. According to NBCC, as on 31st March 1999, the Contractor had executed

the work for a value of only Rs.19 lakhs. The foundation work was executed

only to the extent of 45% and only 60% of the erection work in AMB-

Nadaun Section was completed. No stringing work had yet been started.

According to NBCC the work could not be completed on account of the

failure of the Contractor to mobilize labour, arrangement of T&P, lack of

planning and bad workmanship. According to NBCC, the Contractor, around

August 2001 abandoned the work without completing it. The NBCC

accordingly encashed the performance bank guarantee („PBG‟) and got the

work executed at the risk and cost of the Contractor. According to NBCC

the Contractor had been paid Rs.63,67,142 and there was no amount due.

According to the Contractor, however, the value of the work executed by it

was Rs.79,26,677. It is further stated by the Contractor that for the Nadaun

section the last date of measurement was 20th October 2000 and for the

Kartarpur to Chauhal Section it was 31st December 2000.The last bills for

the two sections were the 10th bill dated 23rd October 2000 and the 23rd bill

dated 31st December 2000 respectively. There was no further measurement

taken or payment made thereafter.

5. It was further contended that the extension was granted by the NBCC

without levying any compensation for any delay and further that the work

was not terminated by NBCC. According to the Contractor, NBCC failed to

provide the site on account of right of way problems, non-payment of crop

compensation, failure to carry out the check survey in time and failure to

provide the foundation classification, contour plan apart from there being

shortage of steel. It was further alleged that NBCCL had agreed to pay the

dewatering charges and increased the rates after the stipulated date of

completion and for the quantities exceeding the deviation limit.

6. The Contractor invoked the arbitration clause by sending a legal demand

notice dated 7th July 2001. Thereafter, two sole Arbitrators appointed in

succession by the NBCC resigned, and the third sole Arbitrator failed to

commence proceedings up to 30th April 2006. This Court then directed by

order dated 24th April 2007 that another sole Arbitrator be appointed.

However, even that sole Arbitrator failed to expeditiously conduct the

arbitration. Finally by order dated 26th November 2010, the Court appointed

Mr. S.C.Vasudeva as Arbitrator. He proceeded to hear the claims and

counter claims of the parties and passed the impugned Award.

7. There were sixteen items of claims filed by the Contractor. Of these the

following claims were allowed by the sole Arbitrator by the impugned

Award:

(i) Claim No.2 for release of retention money: Rs.3,94,033.

(ii) Claim No.3 towards reimbursement of turn over tax: Rs.

1,44,638.

(iii) Claim No. 4 for release of amount withheld under different RA

bills: Rs. 11,250.

(iv) Claim No.5 revision of rates for extra quantities of work done

beyond contractual provisions after 31st March 1999: Rs. 5,73,289.

(v) Claim No.6 for release of PBG: Rs.4,67,000.

(vi) Claim No. 9 for charges of idle labour: Rs.1,00,000.

(vii) Claim No. 15 for simple interest: @9% pa on the amount

awarded under Claims 2,3,4 and 6 with effect from 7th July 2001 and

Claims 5 and 9 with effect from the date of the Award.

8. As regards the counter claims of NBCC, the following were allowed by

the learned Arbitrator.

(i) Counter Claim No.2 for recovery on account of excess

consumption of steel: Rs.1,78,918.

(ii) Counter Claim No. 3for recovery on account of excess

consumption of nuts and bolts, other accessories and earthwires

Rs.80,493.

(iii) Counter Claim No.5 for hire charges of T&P: Rs.50,000.

(iv) Counter Claim No.8 towards for excess amount spent on testing

of materials: Rs.60,000.

9. The learned Arbitrator also awarded the simple interest @9% on the sum

awarded against the Counter Claims 2,3,5 and 8 w.e.f. 20th December 2001.

10. The Court has heard the submissions of Mr. Manoj K. Das, learned

counsel for the NBCC and Mr. Sanjay Bansal, learned counsel for the

Contractor.

11. The challenge by the NBCC to the impugned Award is to the extent of

the Contractor‟s Claim Nos. 5,6 and 9 and the award of interest thereon. It is

submitted that Clauses 10 and 28 of the work order stipulated that the rates

would remain firm up to the actual date of the completion. There was to be

no escalation on whatsoever account till the completion of contract in its

entirety. It is submitted that the learned Arbitrator erroneously held that the

date of completion in the above context meant „stipulated date of

completion‟ as per the contract. Further it was submitted that the learned

Arbitrator awarded an enhanced rate of 15% above the BOQ rates without

any basis.

12. The Court finds that as regards Claim No.5, the Arbitrator has

categorically held that NBCC alone could not be held responsible for the

delay. In fact he held that the Contractor was responsible for 30% for delay

and NBCC for 70%. This appears to be a pure guess work. Further the Court

notices that Clauses 10 and 28of the work order clearly state that rates are

firm till the completion of the work. There was no occasion for the learned

Arbitrator to hold that the rates held good only during the stipulated period

of completion and not beyond. In New India Civil Erectors (P) Ltd. v. Oil &

Natural Gas Corporation(1997) 11 SCC 75 in a similar circumstance where

the clause in the contract stated that the price was firm and "not subject to

any escalation under whatsoever ground till the completion of the work", the

Court held that "The learned arbitrators, could not therefore have awarded

any amount on the ground that the appellant must have incurred extra

expense in carrying out the construction after the expiry of the original

contract period". It was held that the stipulation clause in the contract was

binding on the parties as well as the Arbitrator. It was categorically held

"Merely because time was made the essence of the contract and the work

was contemplated to be completed within 15 months, it does not follow that

the aforesaid stipulation was confined to the original contract period".

13. Reliance placed by the learned counsel for the Contractor on the decision

in K.N. Sathyapalan v. State of Kerala 2006 (4) Arb LR 275(SC) appears to

be misplaced since that was not a case where the clauses in the contract

clearly stated that the prices would be firm. In any event, once it was found

by the Arbitrator that it was not NBCC alone which was responsible for

delay, the question of giving a go by to the clauses of the contract and

awarding enhancement over the rates by 15% did not arise. The decision in

Bengal Traders v. West Bengal State Electricity Board 2001(2) RAJ

315(SC) is also distinguishable on facts. There it was found that the claim

was not for escalation but for damages.

14. The Court accordingly finds that the learned Arbitrator has in deciding

Claim No. 5 failed to apply the clauses of the contract which were binding

on the parties and has therefore committed a patent illegality. The Award in

respect of Claim No.5 cannot be sustained and is hereby set aside.

15. The next challenge to the Award is in respect of Claim No.9. The learned

Arbitrator has awarded to the Contractor Rs.1 lakh for idle labour. Here the

learned Arbitrator held the NBCC to be primarily responsible for the delay.

However, the learned Arbitrator has not explained why he considers the

amount of Rs.1 lakh to be reasonable despite noting the contention of NBCC

that "no proof of payment actually made has been furnished." It was further

pointed out that the Contractor also failed to prove the duration for which

payment for idle wages was allegedly made. In fact the learned Arbitrator

notices that in their letter dated 15th February 2000 the NBCC has clarified

that the Claimant‟s labour was sitting idle "because of not getting the

wages". In the circumstances, the award of Rs.1 lakh under Claim No.9

appears to be based on no evidence whatsoever and is also inconsistent with

the finding in regard to Claim No.5 where the Arbitrator found the

Contractor to be responsible for 30% of the delay. As explained by the

Supreme Court in K.P.Poulose v. State of Kerala, AIR 1975 SC 1259, this

would amount to legal misconduct by the Arbitrator. The Award in respect

of Claim No.9 is therefore also not sustainable in law and is hereby set aside.

16. As regards Claim No.6 which was for refund of the amount of BG to the

tune of Rs.4,67,000, the learned Arbitrator appears to have based the Award

on the ground that the Contractor cannot be held responsible for the delay

because "primary breach of contract (was) on the part of the Respondent".

The above finding appears to be inconsistent with the finding rendered

elsewhere in the impugned Award where the Arbitrator observed as under:

".........all was not well as regards Claimant‟s resourcefulness and efforts were concerned as they too were dis-organized to some extent, lacked professional competence in some measure and were lacking in resources".

17. It is also been inconsistent with the finding in respect of the Claim No.5

that the Contractor was responsible for 30% of the delay. Consequently, the

release of Rs.4,67,000 under Claim No.6 appears to be wholly unjustified.

18. Consequently, the impugned Award as regards Claims 5,6 and 9 is

hereby set aside. The Award of interest on the said sums under Claim No. 15

is also set aside. However, the Award in respect of Claim No.2 is upheld.

19. The challenge by the Contractor in OMP No. 215 of 2013 is to the

Award to the extent it allowed some of the counter claims of the NBCC and

to the extent certain claims of the Contractor were not allowed.

20. Counter claim No.2 concerned the recovery on account of excess

consumption of steel to the tune of Rs. 3,57,836. This was a contract where

the NBCC was to supply the materials for the work to be performed by the

Contractor. Documents had been placed on record before the learned

Arbitrator to show the final quantity of steel of various diameters which

have been supplied to the Contractor but not accounted for. Before the

learned Arbitrator it was shown that the quantity consumed as per bill on

record was 112.4376 metric ton (MT) whereas in a letter dated 16th July

2001 issued by NBCC only 96.9029 MT was shown. Consequently, the

counter claim was allowed only to the extent of Rs. 1,78,918.

21. According to the learned counsel for the Contractor it was in the letter

dated 28th January 2001, tendered along with the statements of claims that

the quantity of steel consumed was indicated. The balance quantity in terms

of the said letter did not match with the quantity claimed in the counter

claim. According to the Contractor the quantity of steel paid in the 11th and

25th bills aggregated to 112.46 MT.

22. The Court is of the view that this is a purely factual determination on

which the view of the learned Arbitrator should be held to be conclusive.

23. It is then contended that on the material accounts statement , the learned

Arbitrator had passed a contradictory Award and restricted the claim of

withheld amount to the extent of Rs. 53,000. However, without referring to

those documents both Counter Claims 2 and 3 were allowed, with Counter

Claim 3 being recovery on account of excess consumption of nuts and bolts

and other accessories and earth wire.

24. The learned Arbitrator noted that the Contractor had not submitted the

MAS account as per the terms of the work order. Moreover, NBCC‟s

counter claim for other accessories and earth wire were not allowed. The

claim was modified only to Rs.80,493. Consequently, the Award to that

extent does not call for interference.

25. The award in respect of counter-claim No. 5, i.e., hire charges of T&P,

has also been challenged by the Contractor. The Court finds that only a sum

of Rs. 50,000 has been awarded and for valid reasons. This was after noting

that an amount of Rs. 51,000 has been withheld by the Respondent from the

dues of the Contractor. The Court finds that no ground has been made for

interfering with the said award.

26. Counter-claim No. 8 was for a sum of Rs. 2,28,150 towards excess

amount spent on testing of materials. The learned Arbitrator noted that only

the expenditure incurred towards travel has been furnished but no concrete

documentary evidence had been produced by the NBCC in support of the

expenditure . The Court finds that the award of Rs. 60,000 was not based on

any evidence whatsoever and therefore, this award is liable to be set aside.

27. As a result as far as the challenge to the award in respect of counter-

claims is concerned, the Court is inclined to set aside the award as regards

counter-claim No. 8 and the corresponding interest on the said sum.

28. The net result is that OMP No. 171 of 2013 is disposed of by setting

aside the impugned Award in respect of Claim Nos 5,6, 9 and interest on the

said sums under Claim No. 15. OMP No. 215 of 2013 is disposed of by

setting aside the award in respect of counter-claim No 8 and the award of the

corresponding interest on the said sum. The impugned Award in all other

respects is upheld.

S. MURALIDHAR, J

APRIL 15, 2015 mg