Delhi High Court
National Highways Authority Of ... vs Bridge & Roof Co. Ltd. on 18 April, 2017
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: February 27, 2017
Date of decision: April 18, 2017
+ O.M.P. 1203/2013
NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Petitioner
Through: Mr. Arun Batta, Advocate.
versus
BRIDGE & ROOF CO. LTD. ..... Respondent
Through: Dr. P.C. Markanda, Senior Advocate with
Mr. Rajesh Markanda, Mr. A.P. Dhamija
and Mr. Sumeet Pushkarna, Advocates.
AND
+ O.M.P. 248/2014
NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Petitioner
Through: Mr. Arun Batta, Advocate.
versus
BRIDGE & ROOF CO. LTD. ..... Respondent
Through: Dr. P.C. Markanda, Senior Advocate with
Mr. Rajesh Markanda, Mr. A.P. Dhamija
and Mr. Sumeet Pushkarna, Advocates.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
18.04.2017
1. These are two petitions under Section 34 of the Arbitration and
Conciliation Act, 1996 („Act‟) filed by the National Highways Authority of
India („NHAI‟) against Bridge & Roof Company Limited (hereafter
Respondent/Contractor) challenging two Awards arising out of the same set
of facts. OMP No.1203 of 2013 challenges the majority Award dated 8 th
August 2013 passed by the Arbitral Tribunal („AT‟) allowing the claims of
the Respondent Contractor to an extent of Rs.200.64 crores. OMP No. 248
of 2014 challenges the majority Award of the AT dated 2 nd November 2013
rejecting the counter claims of NHAI to the extent of Rs.17,98,45,886
(inclusive of interest) towards advances given to the Contractor.
2. It must be mentioned at the outset that the claims of the Contractor and
the counter claims of NHAI were referred to two separate ATs. Although the
nominees of the NHAI and the Contractor respectively were same in both
ATs, the Presiding Arbitrator was different. The other significant feature is
that the dissenting Award in both ATs was given by the nominee of the
NHAI.
3. The Government of India through the Ministry of Shipping, Road
Transport and Highway launched a national highways development
programme which envisaged 4/6 laning and strengthening of the existing
national highways which included a stretch from Km 26.00 to Km 70.00 of
Bhogpur-Mukerian Section of NH-1A in the State of Punjab. The
Respondent‟s bid for undertaking to complete the work at the contract price
of Rs.201 crores was accepted. The contract agreement was entered into
between the parties on 4th October 2005.
4. The contract was a unit rate contract. The bidding documents contained
detailed bill of quantities („BOQ‟) containing the items of work with the
estimated quantities of each item to be excluded by the contract i.e. M/s.
Bridge & Roof Company Limited. The parties adopted the terms and
conditions of the contract as contained in the General Conditions of Contract
(„GCC‟) and Special Conditions of Contract („SCC‟) to the extent they
modified and amended the GCC clauses.
5. The date of start of work was 22nd November 2005. The stipulated date of
completion was 21st May 2008. According to NHAI, the Respondent
abandoned the work after 22nd April 2008. The firm of M/s. Engineers and
Management Associates was engaged by NHAI to supervise the
construction work. They were appointed as „Engineer‟ for the project.
6. In terms of the contract, NHAI was to give the Respondent 10 Kms of
land at the time of commencement of the project, 12 Kms after six months
of commencement and 22 Kms after 12 months of commencement.
According to NHAI all 22 Kms of land was made available to the
Respondent at the beginning of the project out of which 10.535 Kms land
between Km 28 to Km 45 was found to be obstruction free during the joint
survey. It is also alleged by NHAI that the said land was between a
concentrated stretch of Km 28 and Km 39 and Km 43 and Km 45. Besides
most of the site for structure work, according to NHAI was available to the
Respondent despite that the progress achieved by the Respondent was only
7% on account of poor planning and management at the site. It is stated that
the availability of land was delayed on account of land acquisition
formalities involved between the NHAI and the State authorities. This
according to NHAI was beyond its control. It is stated that the matter was
nevertheless resolved and land was progressively made available to the
Respondent after disbursement of compensation to the land owners. It is
claimed that in terms of the joint survey conducted on 26th March and 1st
May 2008 the availability of land was 14 Km and 20.485 Km respectively. It
is claimed that as on 21st May 2008, 25 Km of land was made available.
7. The case of the Respondent, however, is that the date of commencement
was not specified in the contract as 22nd November 2005. This hinged upon
compliance by NHAI with some of the express obligations contained in
Clause 41.1 of the Conditions of Particular Application („COPA‟). While it
is not disputed that the work was to be completed within 30 months of the
date of commencement, the contract contained a number of reciprocal
promises to be performed by NHAI. This included handing over of
possession of land in terms of Section VIII Schedule A to the contract;
handing over land in continuous stretches in terms of the construction
programme approved by Engineer; preparing and handing over drawings
and designs in time; making payment of advances and interim bills;
appointing of Engineer before the date of commencement and finally
determining compensation while granting extension of time („EOT‟). The
case of the Respondent is that on all these accounts there was as failure by
NHAI to comply with its obligations. The Respondent furnished to NHAI
four bank guarantees („BGs‟) amounting to Rs.35 crores covering the entire
project involving 44 Kms. The Respondent claimed to have mobilised the
machinery and equipment worth Rs. 30 crores for execution of the project. It
is stated that on account of various breaches committed by NHAI, the work
could not be completed. The work front availability till September 2008 i.e.
the date of termination of the contract was about 25% of the area that should
have been handed over to the Respondent.
8. There were ten claims filed by the Respondent for the aggregate value of
Rs.18,545.02 lakh. This was apart from interest and costs of arbitration.
While NHAI could have preferred a counter claim in this arbitration itself, it
chose to file an independent statement of claim before another AT as already
mentioned hereinbefore. 12 claims were filed by NHAI.
9. As far as the first arbitration is concerned, the majority of the first AT by
their Award dated 8th August 2013 held as under:
"1. In respect of the first Claim "for dues related to performance" we
award a sum of Rs. 360.12 lakh in favour of Claimant Bridge & Roof
Co. (I) Ltd. and against Respondent National Highways Authority of
India.
2. In respect of Claim no. 2 relating to "Delay Damage Claims" we
award a sum of Rs.11201.15 lakh in favour of Claimant Bridge &
Roof Co. (I) Ltd. and against Respondent National Highways
Authority of India.
3. As regards Claim no. 3 pertaining to "Termination losses" we
award a sum of Rs. 8324.05 lakh in favour of Claimant Bridge &
Roof Co. (I) Ltd. and against Respondent National Highways
Authority of India.
4. As regards Claim no. 4 "on account of Equipment advance" we
award a sum of Rs. 9.31 lakh in favour of Claimant Bridge & Roof
Co. (I) Ltd. and against the Respondent National Highways Authority
of India.
5. We decline Claim no. 5 relating to "litigation costs" which pertains
to cost incurred in proceedings in the Hon. Calcutta High Court and
Committee on Disputes. We leave the parties to bear their own
respective costs.
6. As regards Claim no. 6 pertaining to "maintaining validity of Bank
guarantees" we give a direction by way of award that National
Highways Authority of India shall release the Bank Guarantees
forthwith in favour of Claimant Bridge & Roof Co. (I) Ltd.
7. As regards Claim no. 7 relating to "interest" the same has been
awarded separately in respect of each claim.
8. We decline the Claim no. 8 pertaining to "loss of opportunity to
earn bonus".
9. As regards Claim no. 9 pertaining to "cost of confiscated material"
we award a sum of Rs. 170.23 lakh in favour of the Claimant Bridge
& Roof Co. (I) Ltd. and against the Respondent National Highways
Authority of India.
10. As regards Claim no. 10 pertaining to levy of "Custom Duty" the
same is to be adjudicated by Custom Authorities under Custom Laws
and we decline to give any award on the amount of Custom duty."
10. As far as the second arbitration concerning the claims of NHAI was
concerned, the issues framed by the second AT read as under:
"1. (a)Whether the claimant handed over site in terms of clause 1.4 of
ITB (p. 108 of Contract) read with Schedule A (p. 79 of contract)?
(b) If not, the consequences thereof?
2. (a) Whether handing over of the sites was in piecemeal and in
fragmented manner with hindrances?
(b) Whether the Claimant incapacitated the Respondent from
performing their reciprocal contractual obligations?
3.(a) Whether the Claimant caused delay in execution of work by
delaying drawings and making major changes therein?
(b) If yes, the effect thereof?
4. (a) Whether the action of the Claimant in terminating the contract
on 5.9.2008 was illegal and non-contractual?
(b) If so, the consequences thereof?
5. Whether by not challenging the findings of the DRB dated
24.12.2008 that termination of contract was not in order, the Claimant
is debarred from contending anything to the contrary in the arbitration
proceedings?
6. whether the claims preferred by the Claimant can be adjudicated in
view of the Preliminary Objections filed by the Respondent?
7. Whether the Claimant is entitled to the claims preferred by it?
8. Relief, including interest and costs?"
11. The majority of the second AT by their Award dated 2nd November,
2013 held as under:
i. Claim No.1 was rejected.
ii. Claim No.2 was allowed holding that NHAI was entitled to the
return of Rs.12,14,17,976 by way of principal amount of advances
and Rs.5,84,27,910 by way of interest for the period up to 31 st May,
2011. Out of the above amount it was held that NHAI would be
entitled to pendente lite and future interest till payment at 10% per
annum calculated with effect from 1st June, 2011 on the principal
amount of Rs.12,14,17,976.
iii. The remaining claims were all rejected.
12. This Court has heard the submissions of Mr. Arun Batta, Advocate
appearing for the NHAI and Mr. P.C. Markanda, learned Senior Advocate
appearing for the Respondent. In both arbitrations there was a separate
dissenting Award by the nominee of NHAI whereby the claims of the
Respondent were rejected and the claims of NHAI were allowed.
13. The scope of interference by this Court with an arbitral award under
Section 34 of the Act is limited. The legal position has been summarised by
the Supreme Court in NHAI v. ITD Cementation (2015) 14 SCC 21 as
under:
"25. It is thus well settled that construction of the terms of a Contract
is primarily for an arbitrator to decide. He is entitled to take the view
which he holds to be the correct one after considering the material
before him and after interpreting the provisions of the Contract. The
court while considering challenge to an arbitral award does not sit in
appeal over the findings and decisions unless the arbitrator construes
the Contract in such a way that no fair minded or reasonable person
could do."
14. Earlier, in Delhi Development Authority v. R.S. Sharma and Co. (2008)
13 SCC 80, the Supreme Court explained the legal position as under:
"From the above decisions, the following principles emerge:
(a)An award, which is
(i) contrary to substantive provisions of law; or
(ii) the provisions of the Arbitration and Conciliation Act, 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties;
is open to interference by the court under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary to:
(i) fundamental policy of Indian law; or
(ii) the interest of India; or
(iii) justice or morality.
(c) The award could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the court.
(d) It is open to the court to consider whether the award is against the
specific terms of contract and if so, interfere with it on the ground that
it is patently illegal and opposed to the. public policy of India"
15. Turning to the case on hand, one of the issues that arose before both the
ATs was regarding the party that was in breach of the contract. In this
context, both ATs examined if there was a failure by the NHAI to acquire
and provide land to the Respondent in terms of the contract.
16. The majority Award in the first AT returned the following findings:
" ... It is correct that land was not handed over to the Claimant as per
the contract terms and whatever site was given it was not in
continuous stretches. Claimant has said that effectively less than 2
months before the date of completion it was given possession of only
10.010 Km. (out of 44 Kms) .... When put to the learned counsel for
the Respondent, he could not deny the same .... "
"NHAI could not even perform its basic act/duties of providing land
to the Claimant and thus committed fundamental breach of the
agreement. .. "
" ...... A party which commits fundamental breach of the contract is
certainly' not 'in position to terminate the contract on' alleged breaches
of contract of the other party .... "
"Section 3E clearly provides for notice and surrendering of possession
thereof. Sending of letter like the one quoted above would not mean
that claimant is in possession of the land to build the road on the land
(and virtually dispossessing the land owner or any other person in
possession of the land in face of the provisions of Section 3E of the
Act). In (Any) other interpretation of Sec. meaningless.
"It is wrong to contend that in case of road projects land is handed
over merely by official letters. It is wrong to contend on the part of
NHAI that it handed over the site to the Claimant in terms of Clause
44 of the Contract read with Schedule A. ... "
17. As far as the second AT is concerned, the majority Award returned the
following findings of fact;
"M-1.22 It is held under issue no. 1 that the Claimant failed in
handing over site in terms of Clause 1.4 of ITB (p. 108 of Contract)
read with Schedule A (p. 79 of Contract). The Claimant has to suffer
the consequences thereof." (paragraph M. 1.22 on page 22 of the 2nd
award)
"M-2.26 It is held that from the documentary evidence it is amply
borne out that handing over the sites was in piecemeal and in a
fragmented manner with hindrances. The documents do spell out that
the Respondent was incapacitated from performing its obligation for
failure of the Claimant to perform their reciprocal contractual
obligations. Issue Nos. 2 (a) & (b) are decided accordingly."
"M-3.41 As a result of the above discussion, to sum up, we find the
work was possible only on 8-9 Kms on the RHS of the highway, 19
culverts, 14 Minor Bridges and 3 Major Bridges upto pier/well level
only. In addition, other hindrances such as (a) Change in culvert
drawing on 22.04.2008 (b) Non-issue of Abutment Well drawing of
Major Bridge at Km. 28+938; (c) Constant changes in drawings and
non-issue of drawings; (d) Fragmentation of site, and (e) one tree was
yet to be cut by the Claimant from the abutment A-1 of Major Bridge
at Km 59+505, the progress achieved by the Claimant was possibly
the maximum that could be physically achieved at site."
"M-3.45 The upshot of what has been stated hereinabove is that the
cause for delay in execution of work is attributable to the Claimant
and that amounts to breach of contract on the part of the Claimant,
NHAI and not the Respondent, B&R Co."
18. The ground raised by NHAI that its responsibility ended with the
notional handing over of land to the Respondent and that it was the duty of
the Respondent to make such land hindrance free was rejected by the
majority in both the ATs. The majority Award in the first AT in this regard
held as under:
"... It is obligatory for NHAI to make available (site) so as to enable
the Claimant to execute works thereupon. Site which was handed over
has to be such as to enable the Claimant to execute works. We agree
with the contention of the Claimant that merely handing over of land
on paper on which it is not possible to execute any work is thus not
envisaged in the contract. Land which was handed over ought to
legally belong to or owned by NHAI. NHAI in the present case has
not even paid the compensation to the landowner for acquisition of
land.
"It is a matter of fact that as late as February, 200B NHAI could only
deposit compensation for acquisition of 19.430 Km out of total length
of 44 Kms and when the term of the contract was ending on
20.5.200B.
"Claimant has contended that under Clause 110.3 it is only when
NHAI as employer had to be made payment to the authorities from
whom contractor
shall have to obtain necessary permission for removal of the trees and
utilities. Record of these proceedings does not show as to when NHAI
deposited the amount with the authorities.... .
"It does appear to us that in the circumstances of the present case
reliance of clause 110.1 of the Technical Specifications is not
correct." (p. 74 - 75 of award)"
19. The majority of the second AT, on the same issue, held as under:
"M-2.B It was submitted on behalf of the Respondent that in terms of
Clause 5.2 of COPA, Clauses 42.1, 42.2, 1.1 (f)(i), 1.1 (f)(vii), 1.4
ITB, Schedule VIII, Section A of the contract (reproduced above)
have precedence over Clause 110 of the Technical Specifications. The
above-said Clauses of Contract clearly obligate the Claimant to make
available "Site" so as to enable the Respondents to execute "Works"
thereupon. Thus, the Site which is handed over has to be such as to
enable the Respondents to execute Works. Mere notional handing
over of land on which it is not possible to execute any Works is not
envisaged by the contract. Further, the land handed over ought to
legally belong to the Claimant - In the present case (as demonstrated
above) Claimant has not acquired a major portion of the Site on which
the Works were to be carried out.
"M-2.12 During the course of hearing a very specific stand was taken
on behalf of Respondent that at no point of time the Claimant has ever
written to the Respondent and alleged that the works were being
delayed due to failure of the Respondent to co-ordinate with various
authorities/service providers. This stand of the Respondent could not
be refuted on behalf of the Claimant."
20. As already noticed by the majority in both Awards there were
admissions by the NHAI regarding its failure to comply with its obligations
as envisaged in the contract. This was in the joint surveys regarding
availability of land held on 21st December 2006, 26th March 2008 and 1st
May 2008. The Minutes of Meeting („MOM‟) dated 4th April 2006, 6th
December 2006, 3rd January 2007, 6th March 2007, 4th April 2007, 4th July
2007, 31st October 2007 and 6th February 2008 record the statements of the
Contractor regarding the entire stretch of land not made available. In
addition in its letter dated 31st January, 2008, the Respondent adverted to the
discussions held on 12th December, 2007 at the headquarters of NHAI
during which NHAI was unable to indicate any time schedule for handing
over the balance length of land. There were also admissions in the letters
granting EOT. The Engineer by his letter dated 6th May, 2008 recommended
EOT up to 31st May, 2009. In this letter it was clearly stated that as on 29th
February, 2008 "only 10.485 km of land was available to the Contractor out
of total 44 km length of project. With the present progress about 7% the
project is likely to be delayed by two years."
21. Even the DRB in its recommendations dated 22nd, 23rd and 24th
December 2008, observed that "in this case NHAI failed to fulfil their
material obligation of handing over site to M/s. B&R Co. Ltd. by giving
only 20.59% work front up to 21.5.2008 i.e. the scheduled completion date
of project...."
22. There was also an admission by the NHAI itself in its representation
before the AT to the following effect:
".... Considering the available work front of more than 10 KM and
most of the structures, the total scope of work available to the
Claimant was 34.59% out of which, considering all hindrances,
20.59% of progress should have been achieved by the Claimant till
May 2008. However, the progress achieved by the Claimant was only
7% due to its own fault and poor planning & management at site. No
doubt that the availability of land was delayed due to land acquisition
formalities involved between the Respondent and the State
Authorities, however, the matter was resolved and the land was being
progressively made available to the Claimant after disbursement of
compensation to the land owners ...."
23. In view of the overwhelming evidence before it on the issue, the
conclusion arrived at independently by the majority in both ATs that there
was a failure on the part of NHAI to hand over stretches of land to the
Respondent as envisaged under the contract cannot be held to be patently
illegal or perverse or shocking to the judicial conscience so as to attract any
of the grounds of invalidation of an Award as set out under Section 34 of the
Act.
24. The conclusion by the majority in each of the ATs on the question of the
illegality attached to the termination of the contract by the NHAI was more
or less the same. On this aspect the majority of the first AT held as under:
"NHAI could not even perform its basic act/duties of providing land
to the Claimant and thus committed fundamental breach of the
agreement. .. "
"NHAI was in position to hand over only 10-10.5 km. of site till 2
months prior to 21.5.2008, the date of completion of the contract. It
committed breach of the basic condition of the work. When there is
no land there cannot be any road. Records show that the balance site
had not been acquired by NHAI even till 5.9.2008 when the contract
was terminated. As a matter of fact NHAI was even unable to indicate
as to when the balance site would be made available to the Claimant.
It has also been shown by the Claimant that NHAI did not hand over
the site in continuous stretches as per approved construction
programme submitted in terms of Clause 14 read with Clause 42.1 of
the contract. In such a circumstance it may not be necessary for the
Tribunal even to comment on the statements made by the Claimant
which it said was based on the record that NHAI did not hand over the
drawings of major bridges and the drawings given were full of
discrepancies and to rectify that NHAI took long time. Not only that,
NHAI made numerous changes in the drawings once given and also
put numerous 'holds' on execution of the work and even changed the
requirements/specifications of the drawings pertaining to culverts.
Claimant says that as per NHAI itself the maximum work that could
have been carried out by the Claimant on the sites handed over to it
was 20.59% establishes the fact that NHAI committed breach of the
contract. A party which commits fundamental breach of the contract
is certainly not in position to terminate the contract on alleged
breaches of contract of the other party .... "
25. On the same issue the second AT held as under:
"M-4.11 It cannot be disputed that the Contract under consideration
does have reciprocal obligations of the parties. The Respondent could
not have performed its obligations unless the Claimant had performed
its obligations specially the one of making available the site for
work."
"M-4.21 In the light of the above discussion, under Issue No.4, it is
held that Claimant's action of terminating the Contract was illegal and
not in conformity with the provisions of the Contract. The Claims
which are based upon termination of contract cannot be allowed as
termination itself has been held to be illegal."
"M-7.3 As to Claim No.1 the first part of the claim, i.e. invocation of
Performance Bank Guarantee of Rs. 20.10 crore proceeds on the basis
that the Respondent failed to perform the contract in terms thereof
thereby leading to termination of contract. We have already found that
the contract could not be performed due to fundamental breaches of
contract committed by the Claimant itself as argued under Issue No.
1-2-3. Under Issue Nos. 4 and 5, we have held the termination of
contract by the Claimant was gross illegal. Since the termination of
the contract was illegal, the Claimant cannot be allowed to enforce the
terms of Clause 10.1 and 63 of the contract. They are not entitled to
any relief under the present sub-claim."
26. On the question whether there was a failure by NHAI to provide the
drawings of structures within the stipulated time, the factual finding of the
majority of the first AT was as under:
"As noted above in support of its contention that the Claimant was
directed time to time to extend the work which the Claimant failed to
do so. Reference was made to letters dated 27.3.2008; 16.4.2008 and
14.5.2008 from the Engineer. These letters are close to the date of
completion of the contract. With respect to these letters Claimant has
alleged that these letters were written only after Claimant was
pressing NHAI for payment of compensation. It is difficult to
appreciate what weight can be attached to such letters particularly
when examined in the context of failure on the part of NHAI in
handing over the site for construction of road in terms of the contract.
When Claimant pointed out steps taken by it or preventions faced by
it for construction or non-construction of culverts, minor bridges,
major bridges, Bhogpur fly-over, underpasses and walls, NHAI failed,
to respond to the same"
27. The majority of the second AT returned the following factual finding:
"M-2.13 On behalf of the Respondent, a lengthy tabulated statement
running into 50 printed pages has been compiled and made available
(see Vol. WS 1 pages 57-106). This table sets out reference to several
documents including correspondence and Minutes of Meeting,
picking up therefrom the nature of hindrances and obstructions. Some
of them are set out hereunder:
i. Land owners of acquired land not permitting work by the contractor
because they were not paid compensation.
ii. Drawings of major structures not made available by Claimant.
iii. Intervention of pipeline, a service utility, which could not be
crossed.
iv. Existence of various utilities hampering the works.
v. Six schools falling in the alignment (see Vol. 4, p. 486, Ex. R-88).
vi. Existence of -trees which were required to be cut subject to
permission from the Forest Department.
vii. An old existing bridge which needed to be dismantled to
accommodate the proposed bridge.
viii. Oral instructions of the Project Director NHAI to temporarily
suspend the road work between CH. 32+600 to CH 33+100 (a 500 m
stretch) due to abrupt change in the ,Longitudinal Profile between
GOOD FOR CONSTRUCTION DRAWINGS... and TENDER
DRAWINGS.
"M-2 .14 What we have stated hereinabove stands substantiated by
the documents available on record and these documents find a
reference in the tabulated statement made available on behalf of the
Respondent which we have referred to hereinabove."
28. Having perused the majority Awards of both ATs the Court is unable to
be persuaded to hold that the above factual findings are perverse or contrary
to the evidence on record or in any manner opposed to the fundamental
policy of Indian law in the manner envisaged under Section 34(2)(b)(ii) of
the Act.
29. Coming to the claims of the Respondent which were allowed by the
majority in the first AT it is seen that these too were based on findings of
fact. As far as the Respondent‟s claims were concerned:
a. Claim No.1 was for a sum of Rs.249.91 lakh for dues related to
performance security. The Respondent had submitted a detailed bill of work
done up to 5th September, 2008, i.e., the date of termination. NHAI was
unable to rebut any of the figures mentioned therein. Significantly it was
noticed by the majority of the first AT as under:
"It may be noticed that in spite of the details having been given in
respect of each of the sub-items of claims made by the Claimant,
respondent NHAI has not commented upon the merits of any such
sub-claims, which amounts to admission on the Part of NHAI."
Therefore, the Respondent was entitled to a sum of Rs.249.91 lakh. Interest
at 9% per annum was awarded on the said sum from the date of termination
till the date of the Award.
b. Claim No.2 was for a sum of Rs.7773.18 lakh towards delay damage
claims. The majority Award in this regard held as under:
"Claimant has made a claim for Delay damage by giving cogent
reasons as to what approach it adopted as far as Part B of Delay
damage claim is concerned. Reliance has been placed on the
"Standard Data Book For Analysis of Rates (First Revision) Published
by Indian Roads Congress on behalf of the Govt. of India, Ministry of
Shipping, Road Transport & Highways, New Delhi-23", on the basis
of which complete details have been given. There is no answer to any
of these details by NHAI or even that the Claim is not in accordance
with the criteria given in the Standard Data Book for Analysis of
Rates ..... NHAI does not contradict the same which amounts to
acceptance on its part ... "
30. Apart from reiterating the standing taken by it before the AT, NHAI has
been unable to point out in what manner the above factual findings by the
majority can be said to be opposed to the fundamental policy of Indian law.
31. Claim No.3 pertained to the termination loss and comprised claims for
loss of profit, damages for illegal confiscation of machinery and equipment
and demobilization costs. Applying the principles explained in A.T. Brij
Paul Singh & Bros. v. State of Gujarat (1984) 4 SCC 59; Mohd.
Salamatullah v. Government of Andhra Pradesh (1977) 3 SCC 590 and
Dwarka Das v. State of M.P. (1999) 3 SCC 500, the majority awarded loss
of profit at the rate of 12% of the balance value of work as that was held to
be reasonable in the circumstances of the case. Accordingly the loss of profit
was worked out as Rs. 2,244 lakhs. As regards the damages for illegal
confiscation of the machinery and demobilisation cost, it was noted that
NHAI had not filed any reply contradicting the claim. A sum of Rs.4,123.18
lakh was awarded towards illegal confiscation of the machinery and
Rs.81.72 lakh together with interest.
32. Claim No.4 was for replacement of Equipment Advance BG. The
Respondent was held entitled to compensation of bank commission charges
for the additional value of BG in the sum of Rs.9.31 lakh.
33. Claim No.6 was for keeping the BG alive. This was negated by the
majority since this claim was not made before the DRB. However, the action
of the NHAI in seeking to encash the BG was held wrongful. As rightly
pointed out by the Respondent, the BGs tendered by it should be returned
and the amount of advances adjusted from the amount awarded by the
majority of the first AT.
34. Claim No.7 was towards interest and the majority held that the
Respondent would be entitled to interest @ 9% per annum from the date of
cause of action till the date of Award.
35. Claim No.8 was towards loss of opportunity to earn bonus. This was
rejected.
36. Claim No.9 was for cost on material confiscated by NHAI. The
Respondent was held entitled to Rs.118.14 lakh, which claim anyway was
not disputed by the NHAI. This was awarded together with interest @ 9%
per annum from the date of termination till the date of Award. The AT noted
that even as per the joint inventory taken by the parties it was plain that 200
bags of useless set cement were returned to the Respondent in April, 2011
and four cutting edges, which were mentioned in the taking over certificate
of September, 2008 were not returned. It is the cost of these 200 bags and
the four cutting edges that have been awarded. Therefore, this was virtually
an undisputed amount.
37. Claim No.10 regarding liability to pay customs duty was rejected.
38. Turning to the second AT, the majority of which rejected all but one
counter claim of NHAI. It is seen that Claim No.1 was contingent on NHAI
being able to show that the termination of the contract was justified. This
would have then justified the invocation of the BG of Rs.20.10 crore. The
majority held that there were fundamental breaches of the contract
committed by NHAI. This has already been referred to hereinbefore. In the
impugned Award of the majority of the second AT, the finding in this regard
reads as under:
"M-7.3 As to Claim No.1 the first part of the claim, i.e. invocation of
Performance Bank Guarantee of Rs.20.10 crore proceeds on the basis
that the Respondent failed to perform the contract in terms thereof
thereby leading to termination of contract. We have already found that
the contract could not be performed due to fundamental breaches of
contract committed by the Claimant itself as argued under Issue No.
1-2-3. Under Issue Nos. 4 and 5, we have held the termination of
contract by the Claimant was gross illegal. Since the termination of
the contract was illegal, the Claimant cannot be allowed to enforce the
terms of Clause 10.1 and 63 of the contract. They are not entitled to
any relief under the present sub-claim."
39. As already noticed Claim No.2 of NHAI was allowed but made subject
to the first Award concerning the claims of the Respondent. This was the
right order to be passed since the issue was gone into by both ATs.
40. As regards Claim No.4 of NHAI, i.e., damage and/or deterioration in the
works on account of the alleged abandonment of the works by the
Respondent between 22nd May, 2008 and 5th September, 2008, the majority
Award found that the NHAI was unable to prove that the Respondent
abandoned the project. According to the majority "documents on record
show to the contrary." Further the documents placed on record by the NHAI
did not show the period when the alleged deterioration occurred. Thirdly,
there was no notice received by the Respondent either from the employer or
the Engineer for rectification of any loss, damage or defect in the work.
Additionally no notice or determination was made under Clause 20 or 63.3.
No proof of payment made to any successor agency was also produced. In
the circumstances the majority held that NHAI had been unable to
substantiate counter claim No.4.
41. Again apart from reiterating what was already submitted before the AT,
which has been rejected in comprehensive terms there was nothing placed
before the Court to persuade to hold that the above determination by the
majority was perverse or contrary to the evidence placed on record. The
Court is not sitting in appeal over the Award of the AT and is not expected
to re-appreciate the evidence.
42. Claim No. 6 of NHAI was towards costs of supervisions and
administration of the balance work in the sum of Rs.378.31 lakh. This was
held to be a mere extension of claim No.5, which had already been rejected.
The majority noted that the counsel for the NHAI was unable to point out
the provision in the contract which enabled recovery of such sum from the
Respondent. Apart from saying that the AT should have taken the entire
facts into consideration and law on the subject even in the present petition,
NHAI has failed to show the provision in the contract which would enable
the recovery of the above sum.
43. Claim No.7 of NHAI was for Rs. 3,17,09,225 towards repair and
maintenance. The findings of the majority of the AT in this regard in the
impugned Award read as under:
"M-7.22 During the course of hearings held on 01.06.2011, the
Tribunal had enquired from the Claimant - Whether there was
anything on record to show that the defects/discrepancies existed
when the Respondent left the work? A further question was put as to -
Whether an inventory/list had been prepared by the Engineer to show
what were the defects/discrepancies, if any, left by the Respondent?
To both these very pertinent questions, the Claimant had simply stated
that they would revert back.
"M-7.23 On behalf of the Claimant reliance was placed on Clauses
49.5 and 63.3 of the Contract according to which if the Contractor has
failed in carrying out instructions of the Employer (here referable to
repair and maintenance), then the value of the work done by the
Employer can be recovered from the Contractor. On behalf of the
Respondent, it was submitted that these clauses will not apply for
several reasons. Firstly, Clause 49 provides for rectification of defects
observed during the "Defect Liability Period". In the present case, the
contract was terminated on 05.09.2008 and hence, Clause 49 does not
have any application in this case. Secondly, Clause 49.4 envisages a
process of consultation between the Employer, Engineer and
Contractor before any liability can be saddled upon the Contractor. In
the present case, there is no evidence of any such consultation.
Thirdly, the sine qua non for application of both Clauses 49.4 and
63.3 is a Determination by the Engineer. In the present case, no such
determination of the Engineer has been placed on record.
"M-7.24 The claim is rejected."
44. It is submitted by NHAI that the majority of both ATs should have
appreciated the documentary proof placed on record by NHAI, the BOQ and
the contract agreement for rectifying the defects. That is precisely what the
majority in both ATs has done. Therefore, there is no merit in the contention
of the NHAI.
45. Claim Nos. 3, 8 and 9 of NHAI were rejected on the ground that there
was no evidence to substantiate the expenses allegedly incurred by the
NHAI. Apart from stating that the majority erred in rejecting the claims
nothing is placed on record to show in what manner the majority has erred.
46. Claim No.10 of NHAI was on account of toll collection. In other words
the case of the NHAI was that if the Respondent had not abandoned the
work and completed it as stipulated NHAI would have collected
Rs.66,95,08,984 as toll amount. As rightly pointed out by the majority of the
AT, having incorporated the liquidated damages clause in the contract, the
NHAI was not entitled to claim the above amount. In any event it failed to
prove the quantum of loss. Even in the present petition it is not explained
how the above amount has been calculated by the NHAI.
47. Claim No. 11 of NHAI was on account of loss of revenue to the
Government on account of exemption of excise duty on imported equipment
in the sum of Rs.43,27,520. Indeed NHAI did not have any authority on
behalf of the Union of India to decide upon the correctness of the exemption
availed by the Respondent. The claim was rightly rejected by the majority.
48. Claim No.12 of the NHAI was for a sum of Rs.50 crore due to loss of
life, damage to vehicle, excess consumption of petrol, oil and light, etc.
Here again there was no proof placed on record to justify the above claim.
49. No grounds whatsoever have been made out for interference with the
majority Award in both the arbitrations, i.e., the allowing the claims of the
Respondent and rejection of all but one claim of NHAI. It is clarified that it
would not be necessary for the Respondent to keep the BGs in question
renewed and the NHAI should return the BGs to the Respondent forthwith.
50. For all the aforementioned reasons, the Court finds no merit in either of
the petitions. They are accordingly dismissed with costs of Rs.20,000 in
each of the petitions, which would be paid by the NHAI to the Respondent
within four weeks.
S. MURALIDHAR, J
APRIL 18, 2017
dn/b'nesh
