Delhi High Court
M/S Bses Yamuna Power Ltd. vs M/S Talupula Engineering Co. on 29 April, 2015
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on February 10, 2015
Judgment delivered on April 29, 2015
+ O.M.P. 301/2007
M/S BSES YAMUNA POWER LTD.
..... Petitioner
Through: Mr.Deepak Kumar, Advocate
versus
M/S TALUPULA ENGINEERING CO.
..... Respondent
Through: Mr.Vaibhav Gaggar, Advocate
with Mr.Abhimanyu Chopra,
Advocate
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO
V.KAMESWAR RAO, J.
1. The challenge in this petition under Section 34 of the Arbitration &
Conciliation Act, 1996 ('Act' in short) is to the award dated December
26, 2006 passed by the learned Arbitral Tribunal ('Tribunal' in short)
consisting of three Members, whereby the Tribunal allowed eight claims
out of eleven claimed by the respondent with interest @ 12% p.a and
rejected the counterclaim of the petitioner herein.
Facts:
2. On November 27, 2002 the respondent submitted its bid for the
work of supply, erection and commissioning of 66KV 4 CKT tower line
from 220KV South of Wazirabad Grid Station, 66KV to Shastri Park
Grid Station. On December 20, 2002 the purchase order for supply of
material and a work order for erection and commissioning respectively of
the tower line for a lump-sum of Rs.1,74,50,000/- was placed on the
respondent. The work was to be completed within a period of 3 months.
It appears that an amendment was issued to the work order whereby the
completion period was increased to 4 months.
3. It is not disputed that the responsibility to design the work was that
of the petitioner. It is also noted from the award that after casting one
foundation it was found that the design as specified would not suit the
riverbed and the work was stopped by the petitioner. It is also noted that
after four months the petitioner awarded a consultancy contract to Power
Grid Corporation of India Ltd. (PGCIL) vide its work order dated April
28, 2003. The PGCIL took four months to finalize the design. In view of
the changes in the design, the petitioner issued fresh amendment to the
purchase order and work order on September 22, 2003 with a completion
period of 20 days and October 15, 2003 respectively. On October 01,
2003 a communication was sent by the petitioner to the respondent to
expedite the work. The respondent vide its letter dated October 01, 2003
had expressed its inability to complete the work by October 15, 2003 and
had requested for completing the work by January, 2004. A further
intimation was sent to the respondent on October 14, 2003 for completing
the work. In fact, a meeting was proposed on October 03, 2003 for the
following details:-
(i) Detailed planning to complete the job by October 30, 2003
(ii) Resource Requirement and Mobilization
(iii) Progress Plan versus Actual
(iv) Weekly Progressive Report
4. On November 05, 2003 a communication from the petitioner to the
respondent to expedite the pending work by November 30, 2003 was
sent. It is noted that various letters were sent from time to time i.e.
November 03, 2003, January 05, 2004 and March 20, 2004. On May 31,
2004 the respondent filed a Bar Chart promising to complete the work by
July 15, 2004. It is noted that the petitioner noting that despite final
discussion held in May 2004, no further communication as received from
the respondent for completion of the project by July 15, 2004, it issued
letter dated June 6, 2004 terminating the contract and awarding the
balance unexecuted job to another contractor at respondent's risk and
cost. On July 7, 2004, the respondent invoked the arbitration clause
seeking reference of the disputes to arbitration. The claim was filed by
the respondent pointing out certain acts of omission and commission on
the part of the petitioner. The respondent pointed out the hindrances put
forth by the farmers whose land was acquired for the purpose of the
work. The respondent pointed out the non-supply of tor steel by the
petitioner and non-payment of the bills for the work done which
according to the respondent had crippled its financial arrangement. The
respondent made the following eleven claims:-
1 Forfeiture of payment on account of 3.1 Rs.5,08,749.00
other contracts executed by the
Petitioner.
2 Illegally and wrongfully encashment of 3.2 Rs.20,00,000.00
Petitioner‟s 4 Nos. BGs of Rs.5.00
lakhs each.
3 Amount due to the Petitioner on 3.3 Rs.32,30,109.00
termination of the subject contract.
Interest on payments wrongfully 3.3.1 Rs.1,32,124.00
withheld.
4 Petitioner‟s material and P&T not 3.4 Rs.4,79,475.00
paid by respondent and seized by the
respondent from sub-station premises.
5 Advances paid by the Petitioner 3.5 Rs.2,00,000.00
against the contract but not retrieved
from the suppliers.
6 Idling of labour, machinery, watch & 3.6 Rs.59,36,000.00
ward and administrative expenses.
7 Interest charges on finance blocked by 3.7 Rs.12,02,619.00
the Respondent.
8 Loss of profit. 3.8 Rs.23,70,000.00
9 Dislocation of Petitioner‟s other works 3.9 Rs.80,00,000.00
due to dislocation of financial
arrangement, loss of reputation,
creditworthiness of the Petitioner with
bankers and harassment imposed by
the Respondent.
10 On account of litigation and 3.10 Rs.20,00,000.00
arbitration.
11 Reimbursement of sales tax Rs.20,67,683.57
TOTAL Rs.2,81,26,759.57
5. The petitioner herein filed a reply to the claim petition wherein the
petitioner's stand was that the respondent had deliberately and
mischievously kept the pace of work extremely slow. It had also alleged
the lack of financial capacity of the respondent to procure material and
complete the work. It had also averred lack of interest on the part of one
of the partners to ensure completion of work. The petitioner denied that it
did not have the government clearance to construct the tower line. It was
also averred that major portion of the land route was clear and wherever
some problem was there it was sorted out. The petitioner's stand also was
that all material which was sought, was supplied to the respondent. They
had denied any delay in making the payment. It was the stand of the
petitioner that number of times the respondent had sent wrong and false
bills. Some parts of the bills were even not payable.
6. The Tribunal before discussing the individual claims considered
the aspect of termination of the contract. It held that the rescission of the
contract was arbitrary, unjust and illegal. The reasoning given by the
Tribunal was: (i) no notice was given to the respondent before
terminating the contract; (ii) The Tribunal examined the note in which
the due date for completion of the work of 15 th July, 2004 was fixed by
noting the following:-
(a) Bar Chart (revised) to be submitted by TEC, with a completion
of job by 15th July, 04.
(b) Weekly Progress Report to be verified from GM (EHV) and
same is only to be submitted to Director (Operations).
(c) TEC representative has to attend the weekly meeting at BSES
Delhi, Head Office.
(d) BSES suggest to have a penalty of Rs.50,000/- for each day of
delay effective from 16th July, 04.
(e) TEC to confirm the same by 29/05/04.
7. The Tribunal was of the view that there was no mention of
termination of the contract in the note. There was only a suggestion of
penalty of Rs.50,000/- per day. The Tribunal was also of the view that the
termination was unjust, arbitrary, illegal and against the provisions of the
contract. According to the Tribunal, such abrupt and arbitrary recession
of the contract was without any notice given to the respondent and
despite alternate remedies, the contract was rescinded during extended
validity. The Tribunal was also of the view that, the conduct of the
petitioner was unrealistic inasmuch as against 20 days permitted by the
petitioner to the respondent, it took five months for the petitioner to get
the work executed through other agencies inasmuch as, as per the
testimony of the petitioner's witness, Sh.D.R.Gautam, the line was
energized only on February 27, 2005 i.e. 8 months after the recession of
the contract. The Tribunal had also concluded that the allegations of
negligence and deliberate mischief by the respondent are not
substantiated, and accordingly, held that the respondent was entitled to
compensation for monetary loss suffered by it, refund of security deposit
withheld/forfeited and bank guarantees encashed by the respondent,
amount due for the work actually done and not paid by the petitioner,
refund of the sums due to the petitioner under other contracts yet
forfeited by the respondent and the loss of profit, which would have
accrued to the respondent had the contract been allowed to stay on and
run its actual course as also the interest for the time for which, the
amounts due to the respondent have remained wrongly held up with the
petitioner.
8. In the above background, the Tribunal has awarded the following
claims in favour of the respondent and rejected the counterclaim of the
petitioner:
Claim No. Awarded Amount in Rs.
1 5,08,749/-
2 20,00,000/-
3 13,33,194/-
4 2,91,320/-
5 2,00,000/-
6 33,93,600/-
8 12,98,733/-
10 4,50,000/-
9. The Tribunal against claim No. 7, granted interest pendente lite
and future interest. The pendente lite interest granted is as under:
Claim No. Award (Rs.) Period Interest (Rs.)
1 5,08,749.00 30 months 1,52,624.00
2 20,00,000.00 29 months 5,80,000.00
3 13,33,194.00 29 months 3,86,626.00
4 2,91,320.00 - NIL
5 2,00,000.00 30 months 60,000.00
6 33,93,600.00 - NIL
7 NIL - NIL
8 12,98,733.00 - NIL
9 NIL - NIL
10 4,50,000.00 - NIL
11 NIL - NIL
Total 94,75,596.00 11,79,250.00
10. The final award of the Tribunal was for a sum of Rs.1,06,54,846/-
to be paid within a period of 30 days of receipt of the award. In the event
of the non-payment of the amount, the petitioner was directed to pay the
amount along with interest of 18% p.a. from the date of the award till the
date of actual payment.
11. The learned counsel for the petitioner would submit that the award
is based on no evidence and as such perverse. It is his case that the
Tribunal has overlooked the evidence and not considered the evidence
and the detail reply submitted by the petitioner in proper perspective. He
would state, that the Tribunal ignored the relevant clauses of the
agreement like clause 11 of the purchase order and work order as well as
clause 8 and 21 of the work order. He would state that the plea of
pending bills raised by the respondent for the work done failed to justify
the factum of work done since no work was done by the respondent and
also it was incorrect to state that the Electricity Act was not complied
with as no such provision of the Act has been cited by the Tribunal. It
was his case that the so called plea of farmers' protest taken by the
respondent was a non-existent as no such protest had caused hindrance to
the work done by the respondent, as the respondent carried out the work
at 20 sites out of 21 sites and no police complaint was ever lodged by the
respondent in that regard. He would also substantiate that the
compensation was paid only to two farmers with respect to tower No. 9
& 10 and for towers 7 & 8. Unfortunately, the respondent claimed the
bills as under, that shows the bills were dated even prior to payment of
compensation, which fortify the stand of the petitioner that some of the
bills raised by the respondent were incorrect:
"Bill dated Tower(s) involved
31.3.2004 5 and 10
22.9.2003 8 and 9
5.4.2004 5 and 10"
12. He would also state that the respondent claimed a delay of 15 days
attributable to the non availability of 25 MM Tor Steel vide
communication dated January 22, 2004 but the delay could not justify the
delay of 9 months which the respondent made in completion of the work.
He would concede to the fact that even though notice was not sent, in the
given facts, notice was not warranted. He would state that the petitioner
had necessary permission from the competent authority to run the tower
line. According to him, the reliance placed by the Tribunal upon the
communication of the respondent dated May 31, 2004 of completing the
work by July 15, 2004 was not a firm commitment. The termination of
the contract was not an abrupt one but owing the delay of 9 months that
the respondent had caused and according to him, the reliance placed by
the Tribunal that the third party contractor took 5 months time to
complete the same work, is of no consequence and no reliance should
have been placed on the said aspect. He would also submit, the finding
recorded that 20 days' time given were unrealistic, was not correct, as the
actual delay was of 9 months. On forceful dispossession, he would
submit that after the termination of the contract, the petitioner was within
its right to prevent the respondent from using the godown. He would also
challenge the procedure followed by the Tribunal in allowing the
respondent to place on record the documents which the Tribunal
considered while giving the award as contrary to the principles of natural
justice. Learned counsel for the petitioner would rely upon the following
judgments in support of his contentions:
(i) Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.,
AIR 2003 SC 2629
(ii) Associated Engineering Co. Vs. Government of Andhra
Pradesh and Anr., (1991) 4 SCC 93
(iii) Steel Authority of India Ltd. Vs. J.C.Budharaja, AIR
1999 SC 3275
(iv) Rajasthan State Mines and Minerals Ltd. Vs. Eastern
Engineering Enterprises and Anr., AIR 1999 SC 3627
(v) State of Maharashtra Vs. Digamber B Kulkarni, AIR
1979 SC 1339
(vi) Sikkim Subha Associates Vs. State of Sikkim, AIR 2001
SC 2062
13. On the other hand, learned counsel for the respondent would
justify the award. According to him, the Tribunal has rightly held that
the termination of the contract before the last date of completion of the
work was illegal as no notice terminating the contract was even given.
That apart, he would state, that the delay in execution of the work was
clearly attributable to the petitioner inasmuch as the contract having been
granted on December 20, 2002, could not be performed for want of
design. It was only in the month of September 2003 that the designs
were approved by PGCIL. By that time, the actual period of work had
expired. Further, he would state, that even by the amended work order,
the period of 20 days/October 15, 2003 fixed for completion of work was
impossible to be achieved for such a large scale of work. He would also
highlight the different impediments which the respondent had to face
because of which the execution could not be carried out, like the farmers'
protest, non supply of 25 MM Tor Steel and the delay in making the
payments by the petitioner which effected the financial arrangements of
the respondent. He would state that there was a delay also in the
inspection of the material. It is his case that on May 31, 2004, the
respondent had called upon the petitioner to compensate for the rise in
the price of the steel and the conductors from the past 6-7 months. He
would state, there was violation of different provisions of the work order.
According to him, the award rendered was with proper application of
mind and a reasoned one and this Court, in exercise of power under
Section 34 of the Act, would not like to interfere with the same. He seeks
the dismissal of the petition.
14. Having considered the submissions made by the learned counsel
for the parties, the first and foremost question that need to be considered
is whether the Tribunal was justified in holding the termination of the
contract, as arbitrary, unwarranted and illegal. Admittedly, the petitioner
had placed the purchase and work order on the respondent on December
20, 2002. A common stipulation existed in both the orders, whereby the
supply and commissioning was to be completed in three months. A
clause for liquidated damages existed in both the orders with a stipulation
that in the eventuality of delay in supply of material/delay in
commissioning, a liquidated damages of sum equivalent to 0.5 % of the
order value was to be imposed for every week's delay subject to a
maximum of 5% of the total order value. Once the maximum is reached,
the petitioner was within its right to consider termination of the contract.
The purchase and work orders were amended. The design of the work
was faulty. The petitioner had to approach the PGCIL for designing the
work. The PGCIL had designed the work, which led to the final
amendment to both the orders on September 22, 2003, which stipulated
that the material was to be delivered in 20 days and the commissioning
was to be completed in all respect on or before October 15, 2003. It may
be noted here that by this time, 9 months had elapsed. In any case, the
period of 20 days/October 15, 2003 was an unachievable period given the
magnitude and nature of work. Despite expiry of 20 days/October 15,
2004, the petitioner had not terminated the contract. The petitioner has
been writing to the respondent for expediting the work. The petitioner
has referred to many letters in that regard. It is also a conceded position
that the petitioner had agreed to increase in the total cost of the project
subject to completion of project by July 15, 2004. On May 31, 2004, the
respondent filed a bar chart promising to complete the work before July
15, 2004.
15. Regrettably much before the date of July 15, 2004 could be
reached, on June 04, 2004 the petitioner terminated the contract that too,
as noted by the learned Tribunal, without notice to the respondent. Once
the petitioner has confirmed the date as July 15, 2004 as the date of
completion of work, there was no reason to terminate the contract. No
doubt, vide the amendment to the work order dated September 22, 2003,
October 15, 2003 was the last date to complete the work which this Court
is also of the view was not possible to achieve but still it is noted that
from September, 2003 till June, 2004 even after lapse of 9 months the
work could not be completed but that would not entail the petitioner to
cancel the contract abruptly without notice. The learned Arbitral Tribunal
was right in its conclusion, whereby it has held the recession of the
contract as arbitrary, unjust and illegal.
16. That apart, clause 11 of the work order contemplates the
consequences in the eventuality of delay in supply/commissioning
beyond the stipulated delivery date due to reasons solely attributable to
the contractor, i.e. it contemplates, the petitioner shall without prejudice
to its other remedies under the contract deduct as liquidated damages a
sum of equivalent to 0.5% of the order value for each week or part
thereof delay until the actual date upto a maximum deduction of 5% of
order value. Once the maximum is reached, the petitioner could consider
termination of the contract without any liabilities to it. None of the
letters written by the petitioner between October 15, 2003 till May, 2004
refer to any claim being made by the petitioner, in that regard. The
conclusion of the Tribunal to hold the termination of the contract as
arbitrary, unwarranted and illegal cannot be faulted.
17. Insofar as the claims as awarded by the Tribunal are concerned,
claim No.1 relates to withholding/forfeiture of the amount due to the
respondents for the work executed by it relating to 66KV Towers line
work at Pappankalan, 220KV sub-station. The amount was a security
deposit given by the respondent for the said contract and was due to be
refunded on successful completion of the work. When the petitioner
rescinded this contract it refused to refund the security deposit on the
ground of pendency of disputes relating to this contract. There is a
finding by the Tribunal that there is no stipulation in the agreement which
entitles the petitioner to withhold the money due to the respondent under
some other contract. The Tribunal has held that withholding of this
amount was extra contractual penal measure unjustly enforced by the
petitioner. It has also concluded that since the recession of the contract
was held to be arbitrary, unjust and illegal the petitioner would liable to
pay for loss and damage to the respondent besides outstanding dues of
the respondent and accordingly granted the security deposit due for
refund under another independent contract. I agree with the above
conclusion of the Arbitral Tribunal. The petitioner could have justified
the withholding of the security deposit of a separate contract if there was
any stipulation in the present contract in that regard. Nothing has been
pointed to me by the learned counsel for the petitioner during arguments.
The award against this claim is justified.
18. Insofar as claim No.2 is concerned, the same relates to refund of
the amount of bank guarantees encashed by the petitioner. The Tribunal
came to conclusion that a recession of the contract during extended
validity and without any notice was arbitrary, unjustified and illegal
besides failure of the petitioner to discharge its contractual obligations,
on several counts. The Tribunal held, the encashment of bank guarantees
was not justified. It is a financial punishment inflicted by the petitioner
upon the respondent. The petitioner justified the invocation of bank
guarantees on the ground of liquidated damages, which according to the
Tribunal was never an issue between the parties. The Tribunal had
accordingly awarded the refund of Rs.20 lacs realized by the petitioner
through encashment of four bank guarantees.
19. The Tribunal having already held the termination of the contract
was illegal, unjust and unfair, the invocation of the bank guarantees could
not have been justified. It necessarily follows that the respondent would
be entitled to Rs.20 lacs against the bank guarantees so invoked. The
Tribunal has precisely held so and granted the refund of Rs.20 lacs under
this claim, which is justified.
20. Claim No.3 is a claim for actual work done. The claim was for
Rs.32,30,109/-. It was the case of the respondent that on the date of the
recession of the contract, mobilisation advance to the tune of
Rs.18,96,915.24/- was yet to be adjusted from the payment due to it. It
was also its case that an amount of RS.32,30,109/- was due for payment
for the work actually done by it, which was withheld by the petitioner.
21. In reply to the claim statement the petitioner had only made a bald
averment that the said amount is not payable to the respondent. The
Tribunal proceeds on a premise that the respondent has done a work for
Rs.32,30,109/-, which amount was withheld after recession of the
contract. The Tribunal accordingly adjusted the amount of
Rs.18,96,915.24/-, which is the mobilisation advance and granted
Rs.13,33,193.76/-. It is noted that the petitioner was called upon to
furnish statement of account relating to the contract. The petitioner had
accepted before the Tribunal that some bills have not been received by its
accounts branch and were with the field unit. In the absence of any
information forthcoming from the petitioner, the Tribunal relied on the
details furnished by the respondent and considering the gross value of the
work executed by the respondent and adjusting the mobilisation advance
against the bills for the work done, Tribunal granted Rs.13,33,194/-. The
petitioner in para (xxx) of the petition, has not disputed the work
done/bills raised. If that be so, the conclusion of Tribunal cannot be
faulted.
22. Insofar as claim No.4 is concerned, the same was on account of
material forcibly taken away by the respondent from sub-station
premises. The reply filed by the petitioner before the Arbitral Tribunal
was as under:-
"4. That the contents of para 4 of the claim petition are
wrong and denied. It is denied that any material
belonging to the claimant was confiscated by the
respondent as falsely alleged. The list given by the
claimant is a make belief, false and without any basis
whatsoever."
23. The Tribunal was of the view that the petitioner despite being
given various opportunities to produce original record of inventory of the
materials taken over by it, it had not submitted. The Tribunal also
concluded, while seizing the depot no independent witnesses were
associated and it was done in the absence of the respondent's
representative even after their vehement protest. The Tribunal relied upon
the respondent's submission with circumstantial evidence and proof. The
respondent had in fact produced a list of materials worth Rs.1,04,320/-
and T&P worth Rs.3,75,155/-, which were lying in the depot at the time
of forcible seizure by the petitioner. The Tribunal awarded full cost of
Rs.1,04,320/-, towards materials and Rs.1,87,000/- for T&P being
depreciated cost of T&P at 50% of the amount claimed, the total of which
comes to Rs.2,91,320/-.
30. It is noted, the aforesaid finding of the Tribunal is a finding of fact.
In the present petition, the petitioner has conceded that the petitioner was
within its right to prevent the respondent from using the depot. An
inference can be drawn that the respondent was forcibly dispossessed
from the depot. Even if the petitioner was within its right to take over the
possession of the depot, it could have taken it in the presence of the
representative of the respondent by preparing the inventory i.e. the list of
articles/material present in the depot. It appears, this procedure was not
followed. In the given facts, the Tribunal was justified in awarding the
amount.
24. Insofar as claim No.5 is concerned, the same relates to the
advances paid by the respondent to the suppliers. The case of the
petitioner in the petition is that the claim as awarded is contrary to
Section 73 of the Contract Act. It is also stated that the respondent had
nowhere in the claim petition stated that advance was paid to M/s. Equip
Tech Pvt. Ltd. The compensation for a remote and an indirect loss or
damages sustained by reasons of breach of contract cannot be granted.
The Tribunal relied upon the payment of Rs.2 lacs made by the
respondent vide cheque No.132317 dated 25.05.2004 on IDBI Bank Ltd.
There is no finding that the payment made by the respondent was for
purchase of the equipment to be supplied against the purchase/work
orders. A perusal of the claim would show that the respondent has not
named M/s Equip Tech Pvt. Ltd. in the claim petition. An impression was
given in the claim petition that the amount of Rs.2 lacs was paid to
various suppliers and not one. A perusal of the claim petition would also
show that no attempt was made by the respondent to retrieve the amount
from the suppliers. The amount granted by the Tribunal was without any
evidence. The Tribunal could not have awarded this amount. The same
need to be set aside. I order accordingly.
25. The claim No.6 relates to idle labour, machinery and plants, watch
and ward and administrative expenses. Against the amount of
Rs.59,36,000/- claimed, the Tribunal awarded Rs.33,93,600/-. The break-
up of the claim was Rs.28 lacs for payment of salaries and wages to
various staff engaged by the respondent for a period of 14 months. The
14 months appears to relate back to the initial work order and purchase
order. For idling of machines, the claim was for Rs.21 lacs and
Rs.7,56,000/- as expenses of watch and ward and Rs.2,80,000/- as
administrative expenses. The Tribunal denied the administrative
expenses. Against the other three heads of payment of staff salaries and
wages, idling of machines, expenses of watch and ward the Tribunal
granted 60% of the claim amount i.e. Rs.33,93,600/-. There is no denial
to the fact that the initial work order/purchase order was placed in the
month of December, 2002, which were replaced by new orders on
September 22, 2003. No work was carried out at least till September
2003, except relating to one tower. During the period, the men and
machinery, surely would be lying idle. The respondent has produced
evidence in support of the payment made to the workers and for
machinery. The Tribunal has confined the award to 60% of the amount
claimed, the amount coincides with the period of 9 months, during which
period no work was carried out. In the facts, claim allowed by the
Tribunal is justified and cannot be interfered with.
26. Against claim No.7 the Tribunal has awarded interest, 12% p.a.
The awarded amount (along with interest) was directed to be paid within
30 days, otherwise interest @ 18% p.a. was to accrue. The 12% interest
granted is higher than the normal banking interest prevailing. Even
though the difference may not be much, I note that this Court has been
granting interest between 9% to 10%, I deem it fit that the interest be
reduced from 12% to 10% in view of the judgments in the case reported
as (2005) 6 SCC 678 Rajendra Construction Co. vs. Maharashtra
Housing & Area Development Authority and Ors. & 166 (2010) DLT
99 Mittal Estates Private Ltd. vs. Delhi Development Authority & Ors.].
In view of this, the interest of 18% awarded by the Tribunal in the final
award on failure to make payment within 30 days is also reduced to 10%.
27. Claim No.8 was for loss of profit which has been quantified as
10% of the total contractual amount, which in the facts of this case is
justified.
28. The claim No.10 was for reimbursement of expenses on arbitration
and litigation, the Tribunal has awarded Rs.4,50,000/-, which included an
amount of Rs.2 lacs paid to the three Arbitrators and the amount of
Rs.2,50,000/- as expenses incurred by the respondent in pursuit of
arbitration, cannot be interfered with being discretionary and plausible.
29. The rejection of the counterclaim of the petitioner in the facts
moreso when the recession of the contract was held to be unjustified and
illegal cannot be faulted with.
30. Insofar as the judgments relied upon by the learned counsel for the
petitioner are concerned, the same are primarily on two propositions; (i)
that the Tribunal cannot go beyond the terms of the contract; (ii) that in
terms of clause 11 of the purchase/work orders the petitioner was within
its right to terminate the contract.
31. On the first proposition, reliance placed by the learned counsel for
the petitioner on the judgment of ONGC Ltd. (supra), Associated
Engineering Co. (supra), Steel Authority of India Ltd. (supra) and
Rajasthan State Mines and Minerals Ltd. (supra), suffice to state the
judgments are not applicable to the facts of the case. Nothing has been
brought to the notice of this Court which would demonstrate that the
Tribunal has gone beyond the terms of contract. Rather I note, the
conclusion of the Tribunal holding the recession of the contract was
unwarranted was by placing reliance on clause 11 of the contract.
32. Insofar as the judgments relied upon by learned counsel for the
petitioner in Digamber B. Kulkarni (supra) and Sikkim Subha
Associates (supra) to contend, that the default committed by the
respondent was sufficient to effect termination, are concerned, the same
would also be not applicable in view of the facts available on record.
Clause 11 of the work/purchase orders stipulates a procedure before
termination can be effected. There is a conclusion of the Tribunal that
such procedure was not followed. That apart it is also the conclusion of
the Tribunal that no notice was given to the petitioner before effecting the
termination much before the last date agreed to for completion of the
work. No doubt the petitioner may be right in contending that the
respondent had considerably delayed the execution of the work, still
nothing precluded the petitioner to follow the procedure laid down in the
contract and the principles of natural justice before rescinding the
contract.
33. In the end, it is summed up that the award of the Tribunal, except
to the extent, conclusion to claim No.5 and the interest of 12% under
claim No. 7 is reduced to 10% and the interest of 18% payable after the
expiry of 30 days is also reduced to 10%, is justified.
34. The contours of challenge in a petition under Section 34 are very
restricted, and note for benefit that this Court in a recent judgment in the
case reported as 217 (2015) DLT 678 National Highways Authority of
India vs. Oriental Structural India Pvt. Ltd. has held as under:-
"16. Thus, it is not every inference drawn or not drawn
by the Arbitral Tribunal from the material before it and
which the Court finds to have been wrongly drawn or
not drawn, which could be held to be resulting in
miscarriage of justice. Such inference / failure to
interfere by the Arbitral Tribunal, even if in the opinion
of the Court wrong, would permit interference under
Section 34 of the Arbitration Act only if it results in a
grossly unfair outcome.
17. There is another aspect of the matter. A detailed
inquiry into the correctness of the inference drawn / not
drawn by the Arbitral Tribunal would require the Court
not only to go through and dissect the arbitral record
which is often voluminous in cases as the present but to
also give an opportunity to the parties / their counsels to
address on the inferences drawn / not drawn by the
Arbitral Tribunal and to only thereafter form an
opinion. The same would again make a proceeding
under Section 34 of the Arbitration Act and hearing
thereof akin to an appeal from original decrees of the
Court and would be an antithesis to the very concept of
judicial review of arbitral award, even if the Court at
the end of such a marathon hearing were to conclude
that there has been no miscarriage of justice. It is thus
for the contracting party challenging the Arbitral
Tribunal to, in the memorandum of challenge itself,
make out a case of miscarriage of justice within the
parameters aforesaid. No such case has been made out
in the petition in the present case. Without any such
case having been made out in the memorandum of
petition, this Court would not embark upon an exercise
of requisitioning the arbitral record and giving an
opportunity to the parties / their counsels to address on
the correctness of the inference drawn / not drawn by
the Arbitral Tribunal and on the aspect of whether there
has been a miscarriage of justice.
18. Mention may also be made of another recent dicta in
Associate Builders Vs. DDA MANU/SC/1076/2014
where on conspectus of plethora of cases including
Western GECO International Ltd. supra, the judgment
of the Single Judge of this High Court dismissing the
petition under Section 34 of the Arbitration Act was
restored and the judgment of the Division Bench in
appeal there against interfering with the award was set
aside holding that the Division Bench exceeded its
jurisdiction in interfering with the pure finding of facts
forgetting that the arbitrator is the sole Judge of the
quantity and quality of evidence before him and that the
Division Bench has no business to enter into the pure
question of fact to set aside the award. It was further
held that the same cannot be done by any Court under
jurisdiction exercised under Section 34 of the Act. The
Supreme Court further held that the expression „justice‟
when it comes to setting aside an award under
the public policy ground can only mean that the award
shocks the conscience of the Court and that it cannot
possibly include what the Court thinks is unjust on the
facts of a case for which the Court then seeks to
substitute its own view for the arbitrator‟s view and
does what it considers to be „justice‟. The Supreme
Court observed that the Division Bench had lost sight of
the fact that it is not a first Appellate Court and cannot
interfere with errors of fact. The Supreme Court held
that if the arbitrators have decided the dispute with a
sound head and a good heart and after hearing both
sides, the Courts should not interfere with their award,
even if the Court disagrees with the reasons assigned by
the arbitrator."
35. With the above modification to the award the petition is disposed.
36. No costs.
(V.KAMESWAR RAO)
JUDGE
APRIL 29, 2015
km/akb
