Delhi High Court
M/S Dedicated Freight Corridor ... vs M/S Soma Enterprises Ltd. on 25 July, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 22nd March, 2016
Judgment pronounced on: 25th July, 2016
+ O.M.P. No.300/2015 & I.A. Nos.9783-84/2015
M/S DEDICATED FREIGHT CORRIDOR CORPORATION OF
INDIA LTD. (DFCCIL) ..... Petitioner
Through Mr.S.K.Taneja, Sr. Adv. with
Mr.J.K.Singh & Ms.Shaheen,
Advs.
versus
M/S SOMA ENTERPRISES LTD. ..... Respondent
Through Mr.Dharmendra Rautray,
Adv.with Mr.Ankit Khushu &
Ms.Tara Shahani, Advs.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. By way of this judgment, I propose to decide the objection
petition under Section 34 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the "Act") whereby the petitioner is
challenging the Award dated 4th January, 2015.
2. Brief facts of the case as per pleadings of the parties are that
the petitioner was awarded the work for design and construction of
54 important and major bridges of western freight corridor between
Vaitarna and Utran (approx. 200 Kms) on a lump sum contract
basis. The respondent accepted the proposal of the petitioner for
Rs.605.15 crores vide Letter of Acceptance ("LOA") dated 26th
December, 2008 and vide letter dated 17th February, 2009 it was
agreed that the date of commencement of work or the "Notice to
Proceed with work" shall be considered from 16th February, 2009
and 30 months period of completion of works on the entire 54
bridges shall be computed from that date. Accordingly, the date of
completion was 14th August, 2011.
3. The respondent by letter dated 16th January, 2009 submitted a
performance Security Bank Guarantee dated 7th January, 2009 for
an amount of Rs.48,41,20,000/- being 8% of the contract value to
the petitioner.
4. The Project information and scope of work contained in the
Invitations for Bids (IFB) at Clause 1.4 stated that out of the total
number of 54 bridges, 8 were important bridges, 6 were in Gujarat
and balance 2 were in Maharashtra. In case of major bridges, 27
were in Gujarat and 19 were in Maharashtra.
4.1 Clause 3.1.2 of the IFB, inter alia, provided that the bidder
was required to carry out requisite modifications to the General
Arrangement Drawings (GAD).
4.2 Clause 3.1.5 of the IFB stated that preliminary geotechnical
investigations have been carried out by DFCC and indicative GADs of
the proposed bridges have been developed.
4.3 Clause 5.1 of the General Conditions of Contract (GCC) dealt
with general obligations of the respondent/contractor and provided
as under:
"The Contractor shall carry out, and be responsible for,
the detailed design of the Works followed by detailed
drawings as well as construction drawings. These shall be
got approved from the Proof Consultant appointed by the
Employer followed by final approval of the Employer..."
5. As per the petitioner, the work included the design and
construction of 54 Nos. major bridges on lump sum contract basis.
GADs and preliminary geo-technical investigation data was made
available for majority of the bridge sites which was to be followed for
construction and commissioning of the bridges. Approach earthwork
and transition system on either side of the bridges, over a length of
50m to 100m, was also a part of the scope of this work.
6. In a meeting dated 8th April, 2009 between the petitioner and
the respondent it was agreed that the Geotechnical Investigation
report would be submitted together with GAD.
7. The "Appendix to Tender" stated that for the purpose of the
definition of the term "Section" in Clause 1.1.6.9 of the GCC the
expression "Section of Work" means "Each Bridge shall be treated as
an entity or Section of Work".
8. The work program submitted by the respondent to the
petitioner indicated specific dates for each milestone which was
accepted by the petitioner. The first 5 sections comprised of bridges
Nos. 139, 143, 263, 264 and 340 with completion dates as shown
below:
Preconstruction Activities
Milestone/Bridge Start-Finish Start-Finish Start-Finish Date of
No. Date of Date of Date of Handing over
GAD Sub-soil Detailed of work after
finalization testing and Engineering construction.
as per approval of (Incl.
program DFCC as Approval of
(incl. per DFCC)
Approval of
DFCC) program
139 14.3.2009 - 14.3.2009 11.5.2009 - 5.1.2010
10.5.2009 - 2.4.2009 3.7.2009
143 12.3.2009 - 12.3.2009 9.5.2009 - 5.5.2010
8.5.2009 - 1.7.2009
31.3.2009
263 8.3.2009 - 8.3.2009 - 5.5.2009 - 8.4.2010
4.5.2009 27.3.2009 27.6.2009
264 8.3.2009 - 8.3.2009 - 5.5.2009 - 4.3.2010
4.5.2009 27.3.2009 27.6.2009
340 25.3.2009 - 25.3.2009 22.5.2009 - 14.5.2010
21.5.2009 - 14.7.2009
15.5.2009
9. Certain disputes had arisen during the course of the work. The
respondent-contractor invoked arbitration clause vide clause No.20.6
of GCC of the Contract Agreement, by its letter dated 21 st January,
2012. The Arbitral Tribunal comprising of Sh.S.M.Singla, Sh.Ashok
Kumar Goel and Sh.Sudhir Kumar were constituted to adjudicate the
dispute between the parties.
10. Three claims were raised by the respondent. No claim was filed
by the petitioner. The details of which are recorded in para 6 of the
award has been reproduced herein below:
i) Claim No.1: Withdrawal of the illegal action of
levying of liquidated damages and
consequent payment of the recovered
amount of LD, including refund of
recovered Price Variation amounts,
along with compensation for time and
cost etc as well as grant of Extension of
time as per clause 8.3 of GCC (page
106 of CA)
Total Claim No.1: Rs.60.78 Crores
ii) Claim No.2: Compensation towards the additional
time and cost due to deviation made by
Respondent from the design parameter
stipulated in Employer's Requirement in
respect of bottom of pile cap levels.
This claim has further sub-claims from Claim 2(a) to Claim
2(e)(iv) as given below
Claim No.2(a): For bridges in case of channels that are
dry in the working season, Bridge No
239, 288, 366 and 370
Claim No.2(a)(i): Bridge No 239
Claim No.2(a) (ii): Bridge No 370
Claim No 2(b): Compensation towards the cost of
additional works executed due to
deviation made in Employer's
requirement in respect of pile cap levels
in Bridge No 358 & 359
Claim No 2(b) (i): Bridge No 358
Claim No 2(b) (ii): Bridge No 359
Claim No2(c): Compensation towards the additional
time and cost due to deviation made by
Respondent from the design parameter
stipulated in Employer's Requirement in
respect of bottom of pile cap levels of
Bridge No 135.
Claim No 2(d): Bridge No 387
Claim No 2(e)(i): Bridge No 368
Claim No 2(e)(ii): Bridge No 369
Claim No 2(e) Bridge No 401
(iii):
Claim No 2(e) Bridge No 417
(iv):
Total Claim No 2 is Rs.67.37 crores
Total Claim No 1 & 2 is Rs.128.15
crores
iii) Claim No 3: Interest on claims at 24% per annum
from the date the claim fell due with the
benefit of compounding on monthly
basis on the claim amount against
various claims stated herein.
11. After considering the evidence, material on record and written
submissions, the award was published by the Arbitral Tribunal in
case of Claim 1 as per para 9.1.5 which reads as under:
"i) The Liquidated Damages levied by Respondent under
Clause 8.6 of GCC/PCC/Annexure to tender as per their
notice (Ref. C1 Vol. 6 (exh no 331) dt. 17.07.2010) is
held valid for Br. No.139 only. For other Milestones
namely for Br. Nos.143, 263, 264 and 340, the notice is
not held tenable and therefore Liquidated Damages be
levied only for Br. No.139, from 05.01.2010 (milestone
of bridge 139) to the scheduled date of completion of the
work i.e. 14.08.2011. PVC indices are frozen for Br.
No.139 only, for this period. The amount deducted
towards LD/PVC frozen for other four bridges i.e. bridge
nos 143, 263, 264 & 340 be refunded.
ii) The levy of LD @ 0.1% per week while extending the
validity of contract beyond original date of completion
i.e. upto 31.12.2013 is held illegal and the amount of LD
so deducted be refunded to the Claimant.
iii) Freezing of respective PVC indices for Balance Work of
the contract, from the date of breach of 1st Milestone for
Br. No.139 i.e. 05.01.2010 is not correct, for the purpose
of operating the Price Variation Clause (Clause 14.7 of
GCC/PCC/Annexure to tender) for the Balance Work.
The PVC indices be frozen only for the balance work of
Br. No.139, for which only the LD has been found
tenable, from its milestone date, upto the original
scheduled date of completion (14/08/2011) and not
beyond this date, beyond which should be allowed as per
the PVC indices as then prevailing. The amount of PVC
frozen from 05.1.2010 for all the other bridges
recovered/disallowed to Claimant be also refunded/paid."
12. The award on the claim No.2 was published after discussion of
pleadings, document /evidence and arguments of the parties. The
details are given as under:
# Br.No. Claimed amount Rs. Awarded amt. Rs
1. 135 46,253,608 16 lakhs
3. 358 80,553,125 40 lakhs
4 359 90,665,070 30 lakhs
5 368 166,197,720 33 lakhs
6 369 24,837,875 13 lakhs
8 387 31,580,514 10 lakhs
9 401 145,806,927 13 lakhs
10 417 74,130,864 30 lakhs
185 lakhs
Note: The award calculations for each bridge, are based on the
analysis of various bridges done individually.
13. On Claim No.3, nil award was published which reads as under:
"9.3.1 Claim related to payment of interest on the award
amount
Clause 20.6.5. (ii) of G.C.C. at page 142 of the Contract
Agreement states:-
"Whether the arbitral award is for the payment of
money, no interest shall be payable on whole or any part
of money for any period till the date on which the award
is made."
Considering the specific clause of the Contract
Agreement, no interest is payable till the date on which
the award is made. Nil award."
The respondent's case before the Arbitral Tribunal.
14. As per the terms and conditions of the GCC, it was the
petitioner's obligation to approve the Design Basis Report ("DBR")
which formed the basis of the Detailed Engineering. The approval of
the DBR was necessary to facilitate preparation of Detailed Designs
and Drawings keeping in view the time line set out in the work
program. The timely approval of the DBR was therefore imperative
to enable the respondent to take up the Detailed Engineering and
then to construct the work as per the approved work program. It
was further submitted that there were several modifications in the
DBR up to 25th March, 2011 i.e. more than half the period allotted
for completion of work. The delay in approving the DBR by the
petitioner was, inter alia, due to the petitioner's attempt to go
beyond the Employer's Requirements and even instructing the
respondent to modify the load combinations at a variance from
Employer's Requirements.
14.1 The respondent had filed evidence before the Arbitral Tribunal
for all the delays attributable to the petitioner which had resulted in
non-achievement of the milestones for all 5 bridges within the date
of completion. In view thereof, the respondent asked the petitioner
to grant interim extension of Time ("EOT) to the specified date of
completion of the work for a period of 915 days from 14th August,
2011 pursuant to Clause 8.3 of the GCC vide letter dated 21 st July,
2011. The petitioner/ Employer's Representative, however, despite
delays attributable to it, issued notice dated 28th June, 2010 for levy
of Liquidated Damages ("LD") pursuant to Clause 8.6 of the GCC for
delay in completion of the milestones for the aforesaid bridges. The
respondent by letter dated 15th July, 2010 replied to the said notice
dated 28th June, 2010, inter alia, stating that the imposition of LD
does not arise and the approved program was based on bid
document and the same required revision due to various reasons, all
of which were beyond the respondent's control and not attributable
to it.
14.2 The respondent pointed out that the delay in achieving the
milestones were due to:
(i) Change in construction methodology (segmental to
full girder casting) and the consequential
implications.
(ii) Change in sequence of pre-construction activities
(with respect to the contract program).
(iii) Abnormal increase in quantum of foundation work
(with respect to the contract programme).
(iv) Delay in GAD approvals - more than programmed.
(v) Delay in design approval- more than programmed.
(vi) Delay in Land acquisition near the Major Bridge
locations and approaches.
(vii) Delay in Western Railway clearances.
(viii) Change in basic parameters viz. Pile cut-off levels
etc.
(ix) Change in bridge locations/alignment with respect
to Contract Agreement.
(x) Change in Employer's requirements.
(xi) Delay in approvals for tree cutting.
(xii) Delay in release of advance against mobilization
and Plant & machinery.
(xiii) Increase in test pile load /plate load capacity than
prescribed in employer's requirements.
(xiv) Approach roads, local problems, uncertainty of
availability of encumbrances free land, hindrances/
restrictions.
14.3 The delays attributable to the petitioner which affected the
work progress the Employer's Representative vide letter dated 17 th
July, 2010 imposed liquidated damages and recovered LD and Price
Variation from respondent's IPCs up to IPC - 17, by the time, the
claim statement was submitted to the Arbitral Tribunal. Clause 13.3
of the GCC deals with the Interim Payment Certificates (IPC) which
provides that the IPC shall be submitted by the
respondent/contractor at the end of each month showing the
amounts to which the contractor considers himself to be entitled "for
works executed by the contractor up to the end of the month". Thus,
the deductions made by the petitioner in the form of LD and Price
Variation from the respondent's monthly IPCs pertain to payments
which are already due to the respondent for works executed by it in
each month. No "additional claim" has been sought by the petitioner
under Clause 20.1 of the GCC and Claim No.1 is only refund of the
illegal recoveries made by the petitioner in the form of LD and Price
Variation.
14.4 It is submitted that the Employer's Representative vide letter
dated 7th January, 2012 informed the respondent that the date of
completion of the contract was extended from 15th August, 2011 to
30th December, 2013; fixing revised milestones for all the 54 bridges
(including the 5 bridges, in respect of which levy of LD was notified).
14.5 In addition to the levy of LD, the petitioner froze the price
indices to the level of January, 2010 under the pretext that LD was
levied. According to Clause 14.7 (i) of the GCC, the payment for
price adjustment would be on the basis of the formulae for
components such as labour, material, cement and steel as indicated
in Clause 14.7 of the GCC. It was provided that the price variation
will be calculated on the basis of monthly price index number
(average prices) etc. However, the petitioner after levying LD
decided to freeze the price indices to the level of January, 2010 for
the works i.e. all 54 bridges, based on an erroneous interpretation of
the words "balance of work" in Clause 14.7(i) of the GCC, as the
Employer's Representative had levied LD in respect of the 5 bridges
only, for failure to achieve their respective milestones vide letter
dated 17th July, 2010. It was contended by the respondent before
the Arbitral Tribunal that the "balance of work" means the balance of
work of the individual bridge-wise and not the whole of the work, as
the LD were levied by the petitioner for alleged delays on the part of
the respondent to achieve the milestones stipulated for each of the 5
bridges.
The Arbitral Tribunal had, no doubt, held that the imposition of
LD by the petitioner was illegal except in case of Bridge No. 139
from 5th January, 2010 to the original scheduled date of completion
of the work i.e., 14th August, 2011 (in para 9.1.5 (iii)):
"Freezing of respective PVC indices for Balance Work
of the contract, from the date of breach of 1st
Milestone for Br. No. 139 i.e. 05.01.2010 is not
correct, for the purpose of operating the Price
Variation Clause (Clause 14.7 of GCC/PCC/Annexure
to tender) for the Balance Work...The amount of PVC
frozen from 05.01.2010 for all the other bridges
recovered/ disallowed to Claimant be also refunded/
paid."
14.6 By way of Claim No.2, the compensation towards the
additional time and cost due to deviation made by the petitioner
from the design parameters stipulated in Employer's Representative
in respect of bottom of pile cap levels was claimed.
14.7 By way of Claim No.3 interest was claimed on the award
amount.
15. The respondent in its reply to the objection relied upon the
following provisions as contained in the Contract Agreement dated
17th March, 2009 as well as its comments:
"A. General Conditions of Contract:
i) "Time for completion" Clause 1.1.3.4 of GCC
Time for completing the works or a
section (as the case may be).
ii) "Section" Clause 1.1.6.9
Part of works specifically defined in
the Appendix to Tender as a Section
(if any)
iii) "Work Programme" Respondent to submit work
programme to ER within the time
stated in the Appendix to the Tender.
(Clause 4.14)
The approved Program is incorporated
in Agreement. According to this
programme, the design activity was to
commence by 19.4.2009
iv) "Time for Completion" "The whole of the works and each
Section (if any) shall be completed ...
within the Time for Completion for the
works or such Section (as the case
may be)". (Clause 8.2)
v) "Liquidated Damages" Failure to comply with Clause 8.2 of
GCC i.e."Time for Completion",
Respondent to pay DFCC sum stated
in the Appendix to Tender as LD for
such default (which sums shall be only
monies due from the Contractor for
such default).
"The Employer may, without prejudice
to any other method of recovery,
deduct amount of such damages from
any monies due or to become due, to
the Contractor". ER to give notice to
Respondent under sub-clause 15.1 of
entitlement to LD ("At any time after
the DFCC has become entitled to LD").
(Clause 8.6)
vi) "Interim Payment "The Contractor shall submit a
statement ... after the end of each
Certificate month, in a form approved by the.
Employer's Representative, showing
the amounts to which the Contractor
considers himself to be entitled ...
(a) the estimated contract value of the
Construction Documents produced and
the Works executed up to the end of
the month ... " (Clause 13.3)
vii) "Claims, disputes and "If the Contractor intends to claim any
arbitration additional payment under any Clause
of these Conditions or otherwise, the
Contractor shall give notice to the
Employer's Representative as soon as
possible and in any event within 28
days of the start of the event giving
rise to the claim." ... "lf the Contractor
fails to comply with this Sub-Clause,
he shall not be entitled to additional
payment." (Clause 20.1)
B. Particular Condition of Contract:
i) "Liquidated Damages: "Relevant Time for Completion for
each Miles stone and liquidated
damages to be levied by the
Employer for delay in achieving the
Mile stone shall be specified in
Appendix to Tender .... " (Clause
8.6)
C. Employer's Requirement: Section-V
i) "Design Data" "Design data given hereunder, for
Bridge Structures is based on
Employer's due diligence and
Engineering. Contractor shall use
these data for preparing his proposal
keeping in mind that he has to
compulsorily follow the requirements
stated herein and in the Specifications
at volume - III and elsewhere in the
Contract Document. (Clause 6)
ii) "Methodology"/ "9. Methodology
Segmental Construction" Following methodologies are
envisaged for important components
of bridges:
" ..... (f) Segmental construction for
precast PSC box girders proposed by
the Contractor shall be permitted
subjected to their submission of
detailed technical proposal in this
regard and DFCCs approval there
upon. (Clause 9 (f))
iii) "Design Manual" The Design Manual (or DBR) shall
incorporate all design requirements,
standards codes, loading cases etc.
which are relevant to and govern the
design. The Design Manual shall be
produced so that it can be used by
those involved in the preparation or
review of the design of the Permanent
Works as a comprehensive reference
text and efficient working document.
(Clause 4.2 (c) (I))
D. Technical Bid Form Qualification information Appendix
Form:Section-VII
Appendix to Tender
i) "Section of Work" "Each Bridge shall be treated as
entity or Section of Work". (Sr. No.
81 Clause 1.1.6.9)
ii) "Liquidated Damages" "Taking over of each bridge by the
Employer shall be a milestone for the
purpose of this sub clause. The
programme submitted by the
contractor in terms of sub clause
4.14 of General Conditions shall
clearly show the date of completion
of each mile stone. Approval of such
programme by the Employer will set
the date of completion of each mile
stone ... "
"Liquidated Damages
Liquidated Damages for delay for the
whole works - 0.1% of the Contract
Price per week.
Liquidated damages for delay in
completion of any Mile Stone -
0.001% of the Contract Price per
week.
Total liquidated damages shall not
exceed 5% of the Contract price."
(Sr. No. 16, Clause 8.6)"
16. It is held by the Arbitral Tribunal under these circumstances
that the petitioner is liable for the delay in handing over of land for
construction works for most of other bridges (excluding Bridge Nos.
139, 143, 263, 264 and 340). In respect of bridges where there
were no delays in handing over of land, the petitioner had delayed
the construction works due to non-approval/finalization of the DBR.
It is observed that the respondent had in fact submitted the details
showing the delay in approval of DBR by the petitioner vide its letter
dated 4th April 2014. The respondent also indicated the time taken
by it in re-submitting the DBR and the time taken by the petitioner
in communicating its remarks and conveying its approval thereafter.
The time taken by the petitioner was approximately 578 days.
17. The Arbitral Tribunal had recorded the placing of the said letter
by the respondent which evidenced the details on DBR submission
and grant of approval thereto. A statement showing the status of the
details of bridges (25 bridges) for which site was not handed over
was placed before the Arbitral Tribunal by the respondent in its
rejoinder to written submissions filed by the petitioner. It is
submitted that the petitioner had also delayed in making payment
against the work carried out by the respondent resulting in further
delay in the construction work.
18. The case of the petitioner before the Arbitral Tribunal as well
as before this Court is that the date of the completion of the entire
work was 30 months. However, by 14th August, 2011 the respondent
had completed only 20% work.
18.1 There was admitted delay on the part of the
respondent/contractor in the execution of the various milestone in
the submission of GAD and the Geo Technical Report. The entire
delay was on the part of the contractor and none of the milestones
were achieved within the date of completion i.e. 14th August, 2011.
The petitioner had rightly so notified the respondent about the levy
of liquidated damages for delaying the aforesaid five mile stone
(Bridge No. 139, 143, 340, 263 & 264) in terms of the clause no.
8.6(a) of the CA vide letter SCPL/SOMA/2010/664 dated 17th July,
2010.
18.2 The respondent thereafter on 21st July, 2011 requested for
extension of time for 915 days from 14th August, 2011 under clause
8.3 of GCC of CA. It is submitted by the petitioner that there was no
dispute regarding availability of land or for any financial
compensation. The petitioner granted extension up to 30th
December, 2013 after considering all the reasons with levy of LD
under clause 8.6 of GCC, vide letter No. SCPL/SOMA/2012/1622
dated 7th January, 2012. The said extension was accepted by the
respondent and was acted upon it.
18.3. Thus, the petitioner had rightly levied the LD on the
respondent/contractor on account of delay in completion and
inadequate progress under the relevant contract provision, the price
adjustment amount for the balance work from the date of LD was
pegged under clause No. 14.7 of GCC w.e.f 5th January, 2010. By
letter dated 7th January, 2012 the extension of time was conveyed
for the period 15th August, 2010 to 30th December, 2013 with levy of
LD as per clause 8.6 of GCC for the balance work.
18.4. The Arbitral Tribunal had wrongly held that LD could only be
imposed for Bridge No. 139 only (up to 5th January, 2010), and not
for other four bridges. Counsel submits that the findings are wholly
illegal and against the terms of the contract as in fact admittedly the
delay has occurred for 5 Bridges which has been acknowledged in
the para 9.1.4 of the award. Pertaining to Bridge No.139 it was
rightly held by the Arbitral Tribunal that in reply of Observations of
Employer's Representative, the respondent resubmitted the GADs
with part compliance of observations in several stages which
resulted in 8 revisions of the GAD. Thus, the respondent is
substantially responsible as the total time duration for completion of
Bridge 139 was 290 days as per the Mile stone dated 5th January,
2010. But the respondent/contractor had initially delayed 167 days
in submission of first GAD. The defect and deficiencies were rectified
in several stages, therefore, the delay is wholly on the part of
respondent.
18.5 With regard to Bridge No. 263, the said PSC BOX Girder Bridge
of 2 span each 19.8m long had the total time for completion as 389
days. The respondent/contractor had initially delayed 89 days in
submission of first GAD on 12th June, 2009. It is stated by the
petitioner that there was a further delay of rectification/corrections
of defect and deficiencies in several stages, resulting in 6 revisions
of GAD. Clause 9 (f) of Employer's Requirement of Contract
Agreement, permits contractor for Segmental methodology, but the
respondent/contractor failed to submit the technical details for heavy
haul rail bridges in this regard. It was highlighted in document MOM
of 6th August, 2009. Thereafter, the respondent had withdrawn the
clause 9 (f) unconditionally by their letter dated 19th December,
2009. Hence the entire delay was on the part of the respondent and
the milestone 4th August, 2010 could not be achieved. It is
submitted by the petitioner that the finding of the Arbitrator on this
issue is wholly illegal and against the terms of the contract.
18.6 In respect of Bridge No. 264, the PSC BOX Girder Bridge of 2
span each 19.8m long had the total time for completion as 354 days,
per Mile stone dated 4th March, 2010. The respondent/contractor
had initially delayed 87 days in submission of first GAD on 10th June,
2009. Further, he had delayed rectification/corrections of defect and
deficiencies in several stages, resulting in 4 revisions of GAD. Clause
9 (f) of Employer's Requirement of Contract Agreement permits
contractor for Segmental methodology, but the
respondent/contractor failed to submit the technical details for heavy
haul rail bridges in this regard which was brought to the notice of
Arbitral Tribunal by MOM dated 6th August, 2009. Thereafter, the
respondent/contractor had withdrawn the clause 9 (f)
unconditionally vide their letter dated 19th December, 2009. It is
stated that Arbitral Tribunal has not considered the above facts that
the entire delay was on the part of the respondent/contractor for not
achieving the milestone. It is submitted by the petitioner that the
finding of the Arbitrator on this issue is wholly illegal and against the
terms of the contract and therefore, the same is liable to be set
aside.
18.7 In respect of Bridge No. 340, it is submitted that as per the
contract provision of the Mile stone for completion of the Bridge is
409 days i.e. 14th May, 2010. The respondent/contractor had
delayed 151 days in submission of first GAD on 29th August, 2009.
Further, the respondent had also delayed the
rectification/corrections of defect and deficiencies in several stages,
resulting in 4 revisions of GAD. The Arbitral Tribunal held that rocky
strata was available at pier P1, then also the respondent/contactor
delayed 863 days in deciding the foundation pile to open foundation.
It is the submission of the petitioner that the entire delay was on the
part of the respondent/contractor but the Arbitral Tribunal has not
considered the above facts and held that both the parties are equally
responsible for the delay. It is submitted that the finding of the
Arbitral Tribunal on this issue is wholly illegal and against the terms
of the contract who has also erred in holding that freezing of PVC
indices of the contract from the date of first milestone bridge No.
139 i.e. 5th January, 2010 is not correct. It is submitted that the
Arbitral Tribunal had given perverse interpretation to clause No. 14.7
of GCC regarding the balance work.
19. It is stated by the petitioner that the claims for PVC amount is
an additional amount claimed by the contractor. In the absence of
28 days notice, no claim could be raised. The Arbitral Tribunal has
incorrectly interpreted clause No. 20.1 of GCC. It is alleged that the
award is perverse and has been passed against the admitted delay
on the part of the respondent. The Arbitral Tribunal has given the
incorrect interpretation of clause No. 14.7 and 20.1 of GCC.
20. It appears from the Award published that the Arbitral Tribunal
after considering the evidence on record held that the delay is
attributable to the petitioner in handing over of land for majority of
the bridges and the delay has been caused by the petitioner in
approving the DBR's.
21. It was held in the Award in Para 9.1.4 (b) and Para 9.1.5
which reads as under:
"Delay and corresponding levy of liquidated damages
on the whole work w.e.f 15.08.2011
The Respondents have levied LD on the whole work
and extended the validity of the contract up to
31.12.2013 under clause 8.6 of GCC/PCC read with
Annexure to tender (Page 288 of CA). While
extending the validity of contract the Respondents did
not consider the following factors:
...
(ii) There has been a substantial delay on the part of
the Respondents to hand over the land for many of
the bridges. The Respondents clarified, during oral
submission before the AT that process for acquisition
of land for 3 bridges was still in progress (document
R9 pages 2577 to 2580). As per the Respondents own
admission, land for 22 bridges was made available for
main bridge but balance land for approaches, wing
walls etc. was still not handed over to the Claimants
even up to 20.12.2012 i.e. well beyond the original
date of completion of work.
(iii) There have been several modifications in Design
Basis Report right up to 25.03.2011 i.e. more than
half the period allotted for completion of the work.
Though the preparation and obtaining approval of
DBR is the responsibility of the Claimants, but
Respondents have been attempting to go beyond the
Employers Requirement (ER) and even instructing the
Claimants for modifying the load combinations at a
variance from ER. The Respondents had instructed
the Claimants (C1/Vol.8 (exh. no. 481) dt.
24.10.2010) to revise the design submissions in
accordance with the latest approved design Manual
i.e. DBR 7. The Respondents have stated that this did
not affect the approval of detailed design, but the AT
cannot turn a blind eye to the events and considers
that this would have certainly contributed
substantially to the delay in finalizing the detailed
design of structures.
In view of the reasons stated above, it is held that the levy of
penalty while extending the validity of the contract beyond 18th
August, 2011 under clause 8.6 of GCC/PCC/Annexure to tender, up
to 31st December, 2013, is therefore not proper and not tenable.
22. The Arbitral Tribunal in 9.1.5 of the Award in case of Claim 1
held as under:
"(ii) The levy of LD @ 0.1% per week while extending
the validity of contract beyond original date of
completion i.e. up to 31.12.2013 is held illegal and
the amount of LD so deducted be refunded to the
Claimant."
23. It is submitted that the total amount recovered by the
petitioner towards LD on whole of the works prior to publishing of
the Award dated 4th January, 2015 was Rs.29,67,42,931/-. The
Arbitral Tribunal ordered refund of amounts recovered towards
Liquidated Damages up to 31st December, 2013, except for Bridge
No. 139 for the period 5th January, 2010 to 14th August, 2011. As
per the petitioner, the said findings are incorrect.
24. It is a matter of fact that the respondent no doubt sought
refund of the amount deducted towards LD and payment of the
amounts towards Price Variation along with interest from
respondent's IPCs up to IPC - 17 for an amount of Rs.60,77,56,824/-
as Claim No.1 (amount recovered by the petitioner as on the date of
filing of the Statement of Claim before the Arbitral Tribunal on 23rd
October, 2012) in the arbitration proceedings. It was the continuous
act of the petitioner to deduct the amount even after the disputes
were referred. There could have been two options either to invoke
fresh arbitration proceedings for subsequent period or to raise the
claim of LD etc. which were deducted by the petitioner. As it was the
recurring cause of action, I am of the opinion that the Arbitral
Tribunal has taken the correct view.
25. As regards the refund of Price Adjustment, the Arbitral
Tribunal in its meeting held on 12th January, 2014 directed the
respondent to file the details of the amounts payable by the
petitioner to the respondent. The respondent along with its letter
dated 24th January, 2014 bearing reference No.
Soma/DFCC/Vaitarana Utran (54 Bridges)/D&B/ND/Arbitration/020
filed the said details. Copy thereof was also sent to the petitioner.
Subsequently, the price adjustment amount payable up to 31st
December, 2013 was reworked by the respondent based on the
prices and submitted to the Arbitral Tribunal through letter No.
Soma/DFCC/Vaitarana-Utran(54Bridges)/ID&B/ND/Arbitration/021
dated 18th February, 2014, with an advance copy thereof to the
petitioner. The amount recoverable by the respondent was
Rs.77,64,82,018/-. The said amount was not disputed by the
petitioner before the Arbitral Tribunal. The net amount payable
towards price variation from December, 2013 to June, 2014 (IPC 29
to IPC 32 including supplementary Bill) is Rs.14,32,45,170/-. The
net amount payable towards price variation till the date of Award is
Rs.91,97,27,188/- as the respondent submitted a statement to the
petitioner for recovery of the LD and Price Adjustment on 18th
January, 2015 wherein it sought refund of the said Price Adjustment
and LD amount.
26. The petitioner has challenged the impugned award dated 4th
January, 2015, inter alia, mainly on the following grounds:-
i) "the impugned order is contrary to judgment of Supreme
Court in the matter of Hindustan Zinc Ltd. v. Friends
Coal Carbonisation [2006 (4) SCC 445] where the
Supreme Court has held that award contrary to terms of
the contract are patently illegal and opposed to the
public policy of the India and such award would be
opened to the interference by the court under Section
34(2)(b) (ii) of Arbitration & Conciliation Act, 1996.
ii) By means of different clauses the Contract Agreement
insist the compulsion of providing notice within stipulated
period of 28 days, to the employer by the contractor in
case of arising of any event or any action of employer or
his representative, which results in to loss of time and
money or leads toward any claim / extension of date of
completion of Work. The Tribunal has wrongly concluded
this aspect without proper appreciating the terms and
conditions of the contract between the parties. They had
not commented over the provisions of the contract
agreement in this regard. Doing so Tribunal has not
reasoned the issue completely. Hence the impugned
award is liable to be set-aside under Section 342(b)(i) of
Arbitration and Conciliation Act, 1996.
iii) The Arbitrator, has wrongly come to conclusion as made
in the award which is not based on any evidence and
contrary to the materials on record.
iv) The Arbitrator has granted interest at the rate of 12%
which is on higher side. The Supreme Court has held in
case of Krishna Bhagya Jala Nigam Ltd. v. G.
Harishchandra Reddy [AIR 2007 Supreme Court 817] &
A.P. State Trading Corpn. V. G.V. Malla Reddy Co.
[2011(2010) SCALE 476] that interest 9% is just and
proper.
27. The scope of interference of an arbitral award has been held
by the Supreme Court as well as by this Court in various decisions
which are as follows:
(i) In Union of India v. Bungo Steel Furniture Pvt. Ltd., AIR
1967 SC 1032, the Supreme Court held as under:
"...it is well settled that the Court has no jurisdiction to
investigate into the merits of the case and to examine
the documentary and oral evidence on the record for the
purpose of finding out whether or not the arbitrator has
committed an error of law and that the award of the
arbitrator can be set aside on the ground of error of law
on the face of the award only when in the award or in a
document incorporated with it ..
(ii) In Allen Berry and Co. Pvt. Ltd. v. The Union of India,
1971 (1) SCC 295, the Supreme Court held as under:
"8. ... Therefore, even when an arbitrator commits a
mistake either in law or in fact in determining the
matters referred to him, but such mistake does not
appear on the face of the award or in a document
appended to or incorporated in it so as to form part of it,
the award will neither be remitted nor set aside
notwithstanding the mistake."
(iii) In Municipal Corporation of Delhi v. Jagan Nath Ashok
Kumar, 1987 (4) SCC 497 at 503, the Supreme Court held as
under:
"4. Appraisement of evidence by the arbitrator is
ordinarily never a matter which the court questions and
considers. The parties have selected their own forum
and the deciding forum must be conceded the power of
appraisement of the evidence..... The arbitrator in our
opinion is the sole judge of the quality as well as
quantity of evidence and it will not be for this Court to
take upon itself the task of being a judge of the evidence
before the arbitrator."
(iv) In Indian Oil Corporation Ltd v. Indian Carbon Ltd, 1988
(3) SCC 36, the Supreme Court held that the jurisdiction to set aside
an award on the ground of an error apparent on the record is not to
be lightly exercised" and observed as under:
"The court does not sit in appeal over the award and
review the reasons. The court can set aside the award
only if it is apparent from the award that there is no
evidence to support the conclusions or if the award is
based upon any legal proposition which is erroneous. "
(v) In Puri Construction Pvt Ltd. v. Union of lndia, 1989 (1)
SCC 411, the Court held as under:
"7. When a court is called upon to decide the objections
raised by a party against an arbitration award, the
jurisdiction of the court is limited, as expressly indicated
in the Arbitration Act, and it has no jurisdiction to sit in
appeal and examine the correctness of the award on
merits."
(vi) In Sudarshan Trading v. Govt of Kerala, 1989 (2) SCC 38,
the Supreme Court held that a Court has no jurisdiction to examine
the different claims to find out whether in arriving at its decision the
arbitrators acted correctly or incorrectly. The Court cannot evaluate
conclusions of law or fact. It was observed as under:-
"31. Whether a particular amount was liable to be paid
or damages liable to be sustained, was a decision within
the competency of the arbitrator in this case. By
purporting to construe the contract the court could not
take upon itself the burden of saying that this was
contrary to the contract and, as such, beyond
jurisdiction. "
(vii) In State of Rajasthan v. Puri Construction Co. Ltd., 1994
(6) SCC 485, the court considered extensively the extent to which
Courts would interfere, both on issues of fact and of law. The
Supreme Court held inter alia that the arbitrator is the final arbiter
for the dispute between the parties and it is not open to challenge
the award on the ground that the arbitrator has drawn his own
conclusion or has failed to appreciate the facts. It held that the court
should not reappraise evidence in its anxiety to render justice.
(viii) In Steel Authority of India Ltd. v. Gupta Brother Steel
Tubes Ltd., (2009) 10 SCC 63, it was held as under:
"29. The legal position is no more res integra that the
arbitrator having been made the final arbiter of
resolution of disputes between the parties, the award is
not open to challenge on the ground that arbitrator has
reached at a wrong conclusion. The courts do not
interfere with the conclusion of the arbitrator even with
regard to construction of a contract, if it is a possible
view of the matter Where the arbitrator has given
elaborate reasons ........ and such view of the arbitrator
is a possible view, we are afraid in the circumstances,
award is not amendable to correction by the Court. "
(ix) In Swan Gold Mining Ltd. v. Hindustan Copper Ltd., (2015)
5 SCC 739, the Supreme Court held as under:
"12. It is equally well settled that the Arbitrator
appointed by the parties is the final judge of the facts.
The finding of facts recorded by him cannot be interfered
with on the ground that the terms of the contract were
not correctly interpreted by him.
19. The words "public policy" or "opposed to public
policy", find reference in Section 23 of the Contract Act
and also Section 34(2)(b)(ii) of the Arbitration and
Conciliation Act, 1996. As stated above, the
interpretation of the contract is matter of the Arbitrator,
who is a Judge, chosen by the parties to determine and
decide the dispute. The Court is precluded from re-
appreciating the evidence and to arrive at different
conclusion by holding that the arbitral award is against
the public policy. "
(x) In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram
Saran, (2012) 5 SCC 306, it was held as under:
"43. In any case, assuming that Clause 9.3 was
capable of two interpretations, the view taken by the
arbitrator was clearly a possible if not a plausible one.
It is not possible to say that the arbitrator had
travelled outside his jurisdiction, or that the view taken
by him was against the terms of contract. That being
the position, the High Court had no reason to interfere
with the award and substitute its view in place of the
Interpretation accepted by the arbitrator.'
(xi) In P.R. Shah, Shares and Stock Brokers Private Limited
v. B.H.H. Securities Private Limited, (2012) 1 SCC 594, the court
held as under:
"21. A court does not sit in appeal over the award of an
Arbitral Tribunal by reassessing or re-appreciating the
evidence."
(xii) In M/s. Chugh Kathuria Engineers (P) Ltd. v. Delhi
Development Authority 2013 (137) DRJ 152, a Division Bench of
this Court held as under:
"14. The Award cannot be challenged on the ground that
the Arbitrator had arrived at a wrong conclusion or that
the evidence had been appreciated in a manner different
from that in which the appellate court would have
appreciated it ..... This court is not an appellate body
where a reasoned Award has been passed by the
Arbitrator there is little scope for interference as the
Arbitral Tribunal is the sole judge of the quality as also
quantity of the evidence and it is not for the court to
take upon itself the task of being a judge on the
evidence which has been adduced before the Arbitrator. '
(xiii) In Navodaya Mass Entertainment Ltd. v. J.M. Combines,
(2015) 5 SCC 698, it was observed as under:
"6. In our opinion, the scope of interference of the Court
is very limited. Court would not be justified in
reappraising the material on record and substituting its
own view in place of the Arbitrator's view. Where there
is an error apparent on the face of the record or the
Arbitrator has not followed the statutory legal position,
then and then only it would be justified in interfering
with the award published by the Arbitrator. Once the
Arbitrator has applied his mind to the matter before him,
the Court cannot reappraise the matter as if it were an
appeal and even if two views are possible, the view
taken by the Arbitrator would prevail."
28. The contention of the petitioner, that the respondent failed to
mobilize adequate resources for the site work, its design and
drawing, was denied, as from the record of the arbitration
proceedings it would show that the respondent had engaged M/s
Tandon Consultants on 5th February, 2009 i.e. prior to the issuance
of letter dated 16th February, 2009 to proceed and the same had
been accepted by the petitioner vide letter dated 2nd March, 2009.
As regards the mobilization of the resources for site work, it was
submitted that due to failure of the petitioner to approve the Design
Manual on time for preparation of design and execution of works, the
said resources could not be put to optimum utilization and was lying
idle.
29. It appears from the record that the approved programme
provides for taking up the design works from 19th April, 2009, the
petitioner approved the Design Manual (7th Revision - R7) on 25th
March, 2011 vide letter of the Chief Project Manager, DFCC, Surat
(Exhibit - 621). The delay, inter alia, in approval of Design Manual
(DBR) resulted in delay in submission and approval of designs,
ultimately resulting in delay in execution of the works.
30. The Arbitral Tribunal in its award dated 4th January, 2015 had
concluded that there were several modifications to the DBR right up
to 25th March, 2011 i.e. more than half the period allotted for
completion of work. The petitioner's representative had also stated
that Design activity had come to halt from August, 2010 as the
petitioner was reviewing the DBR. The Arbitral Tribunal at para (iii)
of the award therefore held that "this would have certainly
contributed substantially to the delay in finalizing the detailed design
of structures".
31. It appears that the petitioner did not approve the Design
Manual on time for preparation of designs and execution of works.
It is also a matter of fact that the respondent had submitted to the
petitioner Monthly Progress Reports (MPRs) to the Employer's
Representative indicating the machinery and equipment deployed at
site. The said MPRs were part of the arbitral record and was
appended as Annexure - A to the rejoinder to the Statement of
Defence of the respondent for Interim Award. The respondent had
submitted extracts from the MPRs for the period from March 2009 to
February, 2013.
It was denied by the respondent as contended by the
petitioner that the designs and drawings submitted by the
respondent were having lot of errors and not complying with the
contract provisions.
32. The Arbitral Tribunal has come to a categorical finding of fact
in para (iii) of the award that the petitioner had been making several
modifications to the DBR right up to 25th March, 2011 and was in
fact going beyond the Employer's Requirements and even instructing
the respondent to modify the load combinations at a variance from
the Employer's Requirements.
33. The petitioner had admittedly instructed the respondent vide
letter dated 24th December, 2010 to revise the design submissions in
accordance with the latest DBR i.e. Revision - 7. All together the
petitioner required the respondent to carry out 7 revisions to the
Design parameters and ultimately Revision - 7 was approved by the
petitioner on 25th March, 2011 vide letter of the Chief Project
Manager, DFCC, Surat.
34. Therefore, in view of the said reasons, the Arbitral Tribunal
held that the petitioner was responsible for the delays for reasons
including revision of the DBR which resulted in delay in designs and
execution of works. The respondent had submitted the DBR to the
petitioner on 12th March, 2009 and the same was approved by the
petitioner on 25th March, 2011 after undergoing 7 revisions i.e. in
the 25th month out of 30 months contract completion period.
35. It is not denied by the petitioner that the petitioner instructed
the respondent to change the requirements leading to a number of
revisions of DBR and delay has occurred. Clause 6 of the Employer's
Requirements pertaining to "Functional and Outline Design" which
forms a part of the Agreement provides as under:
"Clause 6 - Design Data
Design data given hereunder, for Bridge structure is
based on Employer's due diligence and Engineering.
Contractor shall use these data for preparing his
proposal keeping in mind that he has to compulsorily
follow the requirements stated herein and in
specification at Volume - III and elsewhere in the
Contract Document."
36. In its Reply to the Statement of Claims at para 7 states as
under:
"The revision of DBR (R7) is not due to respondent
requirements but due to general engineering practice
vide which design for structures should be as
economical as possible. The design submitted by
claimant before approval of DBR (R7) was not
economical..."
37. In a way the petitioner admits that the revision of the DBR was
not necessary to meet the Employer's Representatives.
38. Thus, it appears to the Court that the petitioner imposed LD,
ignoring the fact that there were considerable delays in approval of
designs and despite Project Management Consultant (PMC)
qualifying its recommendation for imposing LD by stating "Subject to
no delay in approval of design". The Arbitral Tribunal had based its
findings by placing reliance on the documents on record and the
pleadings of the parties and had arrived at the conclusion that there
was substantial delay on the part of the petitioner in finalizing
detailed design of structures and therefore, the imposition of LD was
illegal and the amount of LD should be refunded to the respondent.
39. For example, the petitioner has merely relied upon the finding
in the Award dated 4th January, 2015 pertaining to Bridge No.139
only and not other 4 bridges, for which it has been held that LD
deducted by the petitioner and freezing of the Price Variation Clause
was illegal and not tenable, as the finding on bridge No.139 is
arrived against the respondent who does not now want to challenge
the same in order to avoid delay in the matter.
40. The petitioner further submits that the detailed engineering
phase should have been completed by 3rd July, 2009. It is admitted
by the respondent that on 4th September, 2009 the GAD of Bridge
No. 139 was submitted by the respondent showing the width top
slab as 10.80 m in line with the tender GAD. It is the petitioner who
did not approve the GAD, the petitioner rather asked the respondent
during a meeting held on 8th December, 2009 to submit revised GAD
proposing the width of top slab as 13.60m. Thereafter, respondent
submitted the revised GAD on 11th February, 2010 informing that it
reserves its right to claim for additional time and cost. The
respondent informed the petitioner on 8th July, 2010 for issuing
variation order. The Proof Consultants appointed by the petitioner
recommended to retain the top slab width at 13.60m for technical
reasons through its letter dated 3rd August, 2011. But the petitioner
informed the respondent through its letter dated 27th September,
2011 about the non agreement to the GAD as recommended by their
own proof consultants. It was the case of the respondent that the
petitioner took more than one year seven months to comment on
the width of top slab, thereby delaying the approval of the GAD. It
was the petitioner who gave its decision on width of top slab after
the original scheduled completion date. The GAD was ultimately
approved by the petitioner on 16th March, 2012; i.e., after more than
seven months of the original scheduled date of completion of
Contract. The detailed designs were approved thereafter on 11th
May, 2012.
41. All the above would indicate that the detailed Engineering
Phase could not be completed by 3rd July, 2009, as originally
planned, due to the delays for which the respondent could not be
blamed, who clarified that the LD imposed on Bridge No.139 by the
petitioner was not justified but still the Arbitral Tribunal has chosen
to decide the issue on LD for the said bridge against the respondent
who has now conceded the said findings.
42. With regard to the challenge of the petitioner in para I (b) that
the amount of award as per the invoice submitted by the respondent
contractor is Rs.122.98 Crores up to the period of 31 st December,
2013, on the ground that the Arbitral Tribunal was constituted to
decide the dispute up to 8th August, 2012. However, the award
which was published covered the period up to 31st December, 2013.
As such the Arbitral Tribunal cannot award more than what was
asked for in the claim.
43. It is evident that the total amount claimed as per the Award
dated 4th January, 2015 in respect of Claim No.1 and Claim No.2 put
together is Rs.122,98,81,370/-. The respondent has claimed refund
of Rs.29,67,42,931/- towards refund of Liquidated Damages
recovered up to December, 2014 and a sum of Rs.91,97,21,699/-
towards price adjustment amount on the value of work done up to
December, 2014. The total amount claimed in respect of Claim No.1
is Rs.121,13,81,370/-. Thus, the total amount claimed as per the
Award in respect of Claim No.1 and 2 put together is
Rs.122,98,81,370/-.
44. The summary of the award has been reproduced herein
below:-
"10.0 SUMMARY OF AWARD
10.1 Decisions of the Tribunal on the claims
preferred by the Claimant have been given above. In
the paragraphs that follow, summary of the award of
the Tribunal, that is relief granted is detailed claim-wise,
as also directions relating to payments of cost incurred
on arbitration etc
10.2 CLAIMS
10.2.1 Claim No.1
1) Penalty on Bridge No. 139 only is held tenable from
05.01.2010 (milestone of Br. No, 139) to the scheduled
date of completion of work that is up to 14.08.2011.Any
penalty recovered/deducted beyond 14.08.2011 be
refunded to the Claimant.
2) Penalty on 4 other bridges that is Br. No. 143, 263,
264 and 340 for breach of Mile stone, is not held
tenable. The amount deducted as penalty be refunded
to the Claimant.
3) The imposition of penalty while extending validity of
contract beyond the original date of completion of the
contract that is up to 31.12.2013 is held not tenable.
The amount of penalty so imposed be refunded to the
Claimant.
4) Freezing of PVC indices for Balance Work of Bridge
no. 139 is considered valid from 05.01.2010 till
14.08.2011 only. Beyond 14.08.2011, for Br. No. 139,
price variation shall be allowed as per the PVC indices,
as then prevailing, as per the Contract Agreement.
5) Freezing of respective PVC indices for Balance Work
of Contract from 05.01.2010 is not found to be tenable
for the purpose of operating the Price Variation clause
(Clause 14.7 of GCC/PCC/Annexure to tender). Price
variation be allowed as per the PVC indices for the
Bridges and the recovered/disallowed price variation
amount, be paid to the Claimants as per the prevailing
indices.
NOTE: The above award is in reference to the period
from start of contract to the date of reference of the
dispute to the Arbitral Tribunal i.e. up to 08.08.2012.
10.2.2 Claim No.2
An amount of Rs 185 lakhs is awarded.
10.2.3 Claim No.3
Nil award.
10.3 The Claimant shall prefer an invoice for the
awarded amounts and prefer the Bill to the
Respondents.
10.4 The Respondent shall arrange payment of the
awarded amount as preferred by the Claimants in 10.3
above, within 30 days of the date of submission by the
Claimants, failing which simple Interest at the rate of
12% per annum shall be payable on the amount due to
the Claimant on the basis of this Award, from the date
of the publication of the Award, to the date of payment.
10.5 Expenditure incurred by each Party in presenting
its case before the Tribunal, leading evidence, etc., shall
be borne by each Party themselves.
10.6 Cost incurred on the Arbitral Tribunal shall be
shared equally by the two Parties."
45. Thus, it is evident that the Arbitral Tribunal hold the entire
recovery by the petitioner of LD in respect of Bridge Nos. 143, 263,
264 and 340 to be refunded to the respondent and the amount of
PVC frozen by the petitioner from 5th January, 2010 for the said 4
bridges be also refunded to the respondent. Hence, this finding of
fact in the award of the Arbitral Tribunal needs the petitioner to
refund all the amounts recovered by it in respect of all the bridges
till date notwithstanding the amount claimed by the respondent in
the arbitration proceedings.
46. The claim of the respondent before the Arbitral Tribunal was
for refund of the amounts recovered towards Liquidated Damages
and pay for Price Adjustment amounts at the relevant indices
without freezing the indices, therefore, the submissions of the
petitioner that the Arbitral Tribunal cannot award a sum of money
more than what was asked for in the claim has no force. Section 31
(8) (b) (iii) of the Act pertain to the costs expended by each party in
conducting the arbitration proceedings and does not relate to claims
made by a party before the Arbitral Tribunal.
47. The other contentions raised by the petitioner are also without
any force as Clause 20.1 of the CA applies only where the claim is
for an "additional payment" by the respondent and it further
provides that the Contractor "shall not be entitled to additional
payment". The respondent has not claimed any additional payment
under Claim No. 1 as would be evident from a mere reading of the
claim head. Even if Claim No. 2 is interpreted as claim for additional
payment the last sentence of Clause 20.1 only speaks of
'entitlement' and does not put an embargo or prohibition on the
Arbitral Tribunal to allow the said claim. A conjoint reading of the
said clause would reveal that the intention of the clause is to require
the respondent to maintain the contemporary records of any event
which may give rise to additional payment and therefore, the
respondent's entitlement would come into play. Even otherwise the
said provision or any other provision for that matter does not bar or
restrict the grant of EOT simply because no notice has been given by
the respondent to the Employer's Representative within the
stipulated time period, even otherwise the respondent's claim for
refund of the amount withheld towards levy of LD by the petitioner is
not an 'additional payment' sought by it and therefore, does not fall
within the purview of Clause 20.1 of the CA. The said LD was levied
by the petitioner and deducted from the work done by the
respondent from its IPC.
Therefore, the payments already due to the respondent under
the IPCs for work done at site, which was deducted by the petitioner
towards LD and are now being asked by way of refund by the
respondent, do not qualify as 'additional payment' in terms of Clause
20.1 of the CA. Before the Arbitral Tribunal, the respondent had by
letter dated 21st December, 2010 to the petitioner refuted the
averments of the petitioner/Employer's Representative in respect of
the applicability of Clause 20.1 of the GCC, inter alia, stating that:
"Notwithstanding the above, the time period of 28 days,
indicated in Clause 20.1 of GCC is a guidance and
procedure clause and it is not limitation clause that
prohibits / prevents raising any matter of claim and/or
dispute etc. at a later stage. Hence, comments of
Respondent are not correct and against the condition and
spirit of the contract which was formulated by the
Respondent themselves."
48. It is rightly submitted by the respondent that the conjoint
reading of Clause 2.2, Clause 8.3 and Clause 20.1 of the GCC does
not support the submissions of the petitioner and does not apply to a
case where the respondent is not claiming additional payment and is
merely seeking a refund of the amounts already recovered or
deducted by the petitioner. Further, the refund of LD and PVC
recovered by the petitioner is not a "claim" by the respondent. The
petitioner having recovered the said amount towards LD and PVC
has raised a "claim" against the sum recovered and therefore, it is
the claim of the petitioner rather the claim of the respondent seeking
a refund towards LD and PVC from the petitioner.
49. It is evident that the recovery made by the petitioner is based
on the fact that there are alleged delays by the respondent as a
result of which the milestones for the 5 bridges could not be
achieved. The issue before the Arbitral Tribunal was, inter alia, as to
"whether the imposition of liquidated damages imposed by the
petitioner herein was justified?" The Arbitral Tribunal in its award
has unanimously held that petitioner was responsible for the delays
in achievement of the milestones and therefore, the petitioner is
liable to refund the amounts recovered from the respondent.
50. Assuming for the sake of argument that the claims are in
respect of additional payment, the said Clauses read together does
not prohibit or restrict the raising of the claims before the Arbitral
Tribunal by the respondent.
The interpretation of contractual terms lies within the domain
of the Arbitral Tribunal and need not be interfered with, even if it is
assumed that the provisions of the GCC, in particular Clause 20.1 is
mandatory and not directory, the respondent was able to satisfy the
requirements of the said clauses from the facts.
51. It is a matter of fact that the Employer's Representative before
the Arbitral Tribunal had notified the levy of LD in respect of 5
bridges to the respondent alleging non-achievement of milestones
for the said bridges vide letter dated 17th July, 2010. The respondent
thereafter represented to the Employer's Representative to withdraw
the proposed levy of LD vide its letter dated 16th August, 2010. The
Employer's Representative did not respond to respondent's letter
dated 16th August, 2010 until 15th November, 2010 wherein
Employer's Representative informed the respondent that he had
recommended recovery of LD and freezing of payment of Price
Adjustment Indices to the level of 5th January, 2010.
As soon as the Employer's Representative responded, the
respondent vide letter dated 16th November, 2010 issued notice
under Clause 20.1 and Clause 20.3 of the GCC seeking settlement of
dispute. Accordingly, the respondent informed the Employer's
Representative through the notice who was the part and parcel of
the petitioner. The levy of LD and freezing of Price Adjustment being
of continuous nature, the claim No. 1 cannot be treated to be
barred. The respondent was finally informed, who by letter dated
16th November, 2010 issued notice under Clause 20.1 and 20.3. The
respondent till 15th November, 2010 and 20th November, 2010 was
not sure that Employer's Representative would positively confirm the
recommendation of recovery of LD and freezing of payment of price
adjustment indices or not. The final decision of Employer's
Representative was unseen by the respondent who immediately on
the next day itself issued the notice under clause 20.1 and 20.3 of
the contract. Thus, assuming, the requirements of 28 days are
attracted to the Claim No. 1 as raised by the respondent being
mandatory in nature, the respondent has fulfilled the said
requirements by issuing notice on time from the relevant date i.e.
15th November, 2010.
52. The interpretation given by the petitioner has been rejected by
the Arbitral Tribunal. The same cannot now be the subject matter of
challenge in Section 34 petition unless the petitioner satisfies the
Court that the plausible view taken by the Arbitral Tribunal is wholly
perverse, contrary to the clause of contract and against the law. The
Arbitral Tribunal has held that the records were readily available with
the petitioner as well and therefore, there was no difficulty in
verification of the reasons of delay. From the conduct of the parties
at that point of time, one could easily find out the reasons of delay.
Although Clause 20.1 of the GCC does not talk of EOT, assuming it is
applicable, it would be at the option of the respondent whether or
not the provisions were effective, and by choosing not to apply for
an extension to cover acts of prevention the respondent is entitled to
render the liquidated damages provisions inoperative.
If the petitioner is allowed to interpret Clause 20.1 of the GCC
in the manner it is seeking to do, it would tantamount to permitting
the petitioner to take advantage of its own wrong.
53. It is undisputed that IPC No.3 was finally paid on 12th
November, 2010, being the first IPC from which the petitioner had
deducted LD i.e. marking "the start of the event giving rise to the
claim", it was from that date onwards which can be said to be the
"start of the event". Accordingly, the respondent issued a notice
dated 16th November, 2010 under Clause 20.1 of the GCC which was
within 28 days from the start of cause of action in view of conduct of
the parties. The notice having been issued by the respondent under
Clause 20.1 of GCC was within the time prescribed. The stipulation
of the time limit of 28 days under Clause 20.1 of GCC is even
otherwise contrary to Section 28 of the Indian Contract Act, 1872
(amended by Act No.4 of 2003) wherein it is provided that if a party
is restricted absolutely from enforcing his rights under or in respect
of any Contract, by the usual legal proceedings in the ordinary
tribunals, or which limits the time within which he may enforce his
rights, since the time limit for preferring the claim is 3 years under
Limitation Act.
54. Pertaining to Bridge No. 263 the Arbitral Tribunal in para 9.1.5
(i) of the Award has arrived at a finding of fact that the levy of LD
for Bridge Nos. 143, 263, 264 and 340 was not called for and the
amount deducted by the petitioner towards LD and Price Adjustment
for the said 4 bridges should be refunded as the
respondent/contractor submitted the GAD on 12th June, 2009, which
was approved on 4th February, 2010 by the petitioner after six
revisions. The revisions were made as per the advice of the
petitioner. There was therefore a delay of 218 days for approval of
GAD. The Arbitral Tribunal in para 9.1.4 (a) of the award had held in
respect of Bridges that ''without a major decision on the type of
super structure to be designed, the GAD could not have been
finalized". It was denied by the respondent that drawings were of
poor standard and delayed hampered due to respondent, rather, it
was submitted that Bridge No. 263 was one of the 13 bridges that
was proposed with segmental construction for the super structure.
Clause 9 (f) of the Employer's Requirements relating to Functional
and Outline Design provided for "segmental construction for precast
PSC box girders by the Contractor shall be permitted". Accordingly,
the respondent proposed segmental construction for Precast PSC
Box Girders. However, the petitioner denied permission for
segmental construction. Therefore, there was loss of time due to
change in the method of construction of PSC girders from segmental
construction to full girder casting despite Clause 9 (f) of the Contract
Agreement providing so. It is submitted that the Arbitral Tribunal in
para 9.1.4 (a) of the award has arrived at the conclusion as stated
below:
"It is the opinion of the AT that Respondents (Petitioner
herein) changed their view subsequent to award of the
work to the Claimants, after discussion with ROSa,
Railway Board, etc. and insisted for withdrawal of the
condition from the Claimants. Without a major decision on
the type of super structure to be designed, the GAD could
not have been finalized. The AT considers that the
Claimants are not responsible for delay in the process of
approval of GAD."
55. It is the admitted position which is not denied by the petitioner
that the Claim No. 1 is not limited to the levy of LD in respect of only
5 bridges but in fact the petitioner has levied LD in respect of 43 out
of 54 Bridges. The total amount of LD levied on the respondent and
recovered by the petitioner up to 30th December, 2013 works out to
Rs.27.79 Crores on the reason that the petitioner was paying
towards price adjustment.
56. It is evident that in the award, Arbitral Tribunal has not acted
arbitrarily, irrationally or independently of the contract who had
travelled outside the bounds of the contract and without jurisdiction
thus, the submissions of the petitioner has no force. In view of the
above, the objections of the petitioner are without any merit and the
same are dismissed. Pending applications also stand disposed of.
No costs.
(MANMOHAN SINGH)
JUDGE
JULY 25, 2016
