Delhi High Court
Government Of Nct Of Delhi Public ... vs M/S N N Buildcon Pvt Ltd on 16 January, 2017
$~29
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 14/2017
GOVERNMENT OF NCT OF DELHI
PUBLIC WORKS DEPARTMENT ..... Petitioner
Through: Ms Nandita Rao, ASC with Mr
Sanjay Dewanand Ms Palak
Rohmetra, Advocates.
versus
M/S N N BUILDCON PVT LTD ..... Respondent
Through: Mr V. K. Jhanji, Senior Advocate
with Mr Vineet Jhanji, Ms Jyoti
Mendiretta, Mr Imran Moulaey and
Ms Deeksha Ladi Kakkar, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 16.01.2017
VIBHU BAKHRU, J
IA No.516/2017
1. For the reasons stated in the application, the delay in re-filing the
petition is condoned.
2. The application stands disposed of.
IA No.515/2017
3. Allowed, subject to all just exceptions.
4. The application is disposed of.
CAV.40/2017
5. The learned counsel for the caveator/respondent has entered
appearance. The caveat stands discharged.
O.M.P. (COMM) 14/2017 & IA No.514/2017
6. The Government of NCT of Delhi (hereafter 'GNCTD') has filed the
present petition under Section 34 of the Arbitration and Conciliation Act,
1996 (hereafter 'the Act') for setting aside the arbitral award dated
31.08.2016 (hereafter 'the impugned award') passed by the sole arbitrator,
Sh S.K. Singhal.
7. The impugned award was made in the context of disputes between
GNCTD and the respondent (hereafter 'NNBPL') in connection with the
execution of the works relating to the main building, principal's residence,
auditorium, girls hostel and staff quarters, including water supply, sanitary
installation, drainage and internal electrical works of Shaheed Rajguru
College of Applied Sciences for Women at Vasundhara Enclave, Delhi.
8. The contract for execution of the aforesaid works was awarded by
GNCTD to NNBPL by its letter dated 13.03.2009. The estimated cost of the
works was `21,37,89,580/- and NNBPL had tendered to execute the same
for a sum of `27,70,17,042/-. The stipulated date for commencement of the
works was 04.04.2009 and the works were to be completed within a period
of 20 months, that is, on or before 03.12.2010. The execution of the works
extended beyond the period of 20 months and the works were finally
completed on 04.03.2011. The final bill dated 29.09.2012 for
`31,76,28,140/- was raised by NNBPL, however, certain claims made by
NNBPL were not accepted. This led NNBPL to invoke the arbitration clause
and the sole arbitrator was appointed to adjudicate the disputes between the
parties.
9. The arbitrator considered the rival contentions and made the
impugned award in favour of NNBPL. The claims awarded included claim
on account of escalation to the extent of `38,28,686/- against NNBPL's
claim of `1,54,79,043/- (Claim No.3); `7,82,700/- on account of escalation
pertaining to electrical works (included as a part of Claim No. 7); and claim
for bonus in the sum of `1,38,50,852/- (Claim No.5).
10. Ms Nandita Rao, appearing on behalf of GNCTD advanced
contentions on two fronts. First, that the award of escalation under Clause
10CC of General Conditions of Contract (GCC) was perverse and contrary
to the plain language of the said clause. She submitted that the said clause
was amended by a circular dated 21.08.2013 in respect of Notice Inviting
Tenders issued after 21.08.2013, but the arbitrator had erroneously applied
the amended clause to the contract in question. She contended that the
escalation was only limited to the prices/wages prevailing at the time of
stipulated date of completion, that is, 03.12.2010, and the arbitrator could
not have adjusted the said date by taking into consideration the time for
extra items of work.
11. Second, that award of bonus - Claim No. 5 - is contrary to the express
terms of Clause 2A of GCC. She submitted that in terms of the said clause,
bonus was payable to a contractor at the rate of 1% of the tendered value per
month (subject to the maximum limit of 5% of the tendered value) for
completion of the contract ahead of the scheduled completion time. She
stated that this was an incentive to the contractor for a timely completion of
the works notwithstanding any hindrances that may be faced by the
contractor. She submitted that the scheduled completion time was specified
under the contract as 20 months from 04.04.2009. But, the arbitrator had
also considered the delays on account of hindrances as well as further time
for completion of additional work in computing the scheduled time for
completion for the purposes of awarding bonus and thus, in effect, had re-
written the contract. She also drew the attention of this Court to the
notification dated 02.05.2013 whereby the said clause (Clause 2A of GCC)
was amended prospectively. She earnestly contended that the arbitrator had
relied upon the amended clause to award bonus to the contractor and the
same was unsustainable. She further contended that the aforesaid issue had
been considered by two Division Benches of this Court and had expressed
differing views. She submitted that in case of Navyuga Engineering
Company P. Ltd v. Public Works Department and Anr.: FAO(OS)
264/2014 decided on 15.03.2016, a Division Bench of this Court had upheld
the decision of a Single Judge setting aside the award of such claim. She
submitted that in a later decision in Union of India v. M/s N.N. Buildcon
Pvt. Ltd.: FAO(OS) 438/2015 decided on 01.09.2015, a Division Bench of
this Court had taken a contrary view without considering the earlier decision
in Navyuga Engineering Company Ltd (supra) and therefore, the said
decision was per incuriam.
12. I have heard the learned counsel for GNCTD at length.
13. At the outset, it is necessary to refer to Clause 10CC of GCC as
applicable to the contract in question and as amended by the circular dated
21.08.2013. The relevant extract of the said clause - both pre-amendment
and post-amendment - are set out below:-
CLAUSE 10 CC (pre- CLAUSE 10 CC (post
amendment) amendment)
Payment due to Payment due to
increase/decrease in increase/decrease in
Prices/Wages (excluding Prices/Wages (excluding
materials covered under materials covered under
clause 10 (CA) after receipt clause 10 (CA) after receipt
of Tender for Works (Page of Tender for Works (Page
27) 27)
If the prices of materials If the prices of materials
...............provisions of clause ...............provisions of clause 5
5 of the contract without any of the contract without any
action under clause 2. action under clause 2.
However, for the work done However, for the work done
during the justified period during the justified period
extended as above, the extended as above, the
compensation as detailed compensation as detailed
below will be limited to below will be limited to
prices/wages prevailing at the prices/wages prevailing at the
time of stipulated date of time of updated stipulated date
completion or as prevailing of completion considering the
for the period under effect of extra work (to be
consideration, whichever is calculated on pro-rata basis as
less. No such compensation cost of extra work x stipulated
shall be payable for a work period/tendered cost). No such
for which the stipulated compensation shall be payable
period of completion is equal for a work for which the
to or less than the time as stipulated period of completion
specified in |Schedule F. is equal to or less than the time
as specified in Schedule F.
14. A plain reading of Clause 10CC as applicable to the contract indicates
that the contractor would be entitled to compensation for prices and wages
prevailing at the time of the stipulated date of completion or as prevailing
for the period under consideration, whichever is less. The arbitrator had
considered that in the present case, the period of execution of the works was
extended on account of additional items as well as on account of hindrances.
GNCTD had also accordingly extended the time for completion of the
contract without levy of any liquidated damages.
15. The arbitrator found that the extension of time on account of award of
additional work as per provisions of Clause 12.2 of the GCC was accepted
as 168 days by GNCTD and the civil component of the works was
completed on 04.03.2011, that is, after 91 days of the earlier contemplated
date of completion - 03.12.2010. He, accordingly, held that even without
considering the extension of time on account of hindrances, the extra period
of 91 days, as required by NNBPL, was clearly justified due to additional
work. He, accordingly, held that NNBPL was entitled to escalation till the
actual date of completion of the works as the actual date of completion -
which was 91 days ahead of 03.12.2010 but was less than 168 days - was
within the contractual period for completion of works if the time for
completion of additional work was included. The arbitrator held that the
extended period for completion of the works on account of award of
additional items would also have to be included as a part of the stipulated
period of the contract. He relied on the decision of the Rajasthan High Court
in Heera Singh v. State of Rajasthan and Ors.: 2007 (4) ArbLR417 (Raj)
in support of his view.
16. Although, the arbitrator referred to the circular dated 21.08.2013 by
which Clause 10CC was amended, however, the arbitrator did not base his
decision only on the amended clause. It is seen that he relied upon the
amended clause only in support of the rationale articulated by him. This is
clear from the fact that he expressly noted that the circular was not
applicable to the case in hand. However, the arbitrator proceeded on the
basis that the amendment introduced in Clause 10CC clearly indicated the
rationale - which he described as the "thought process" - for explicitly
amending the clause.
17. At this stage, it is relevant to mention that this Court while
considering a petition under Section 34 of the Act does not act as an
appellate court and it is not open for this Court to supplant its view over the
view of the arbitrator. The only questions to be considered are whether the
arbitrator had exceeded his jurisdiction and/or the award passed is opposed
to the public policy of India. In this case, the view taken by the arbitrator is
clearly a plausible and a reasonable view. The substratal rationale of Clause
10CC is to compensate the contractor for any variation in the price that may
occur during the period of the contract. Thus, the period of the contract
cannot be limited to the original period as contemplated, if additional works
are awarded to the contractor after execution of the contract; plainly, some
reasonable time must be provided for completion of the additional works
and it is only reasonable that the said period be included while computing
the stipulated period for completion of the contract. In this case, the
arbitrator found that in terms of the contract - and as accepted by GNCTD -
a period of 168 days was justified on account of additional works. However,
the arbitrator only allowed escalation upto the date of actual completion of
civil works which was 04.03.2011. The said view cannot be stated to be
perverse or patently illegal and thus, no interference is called for on this
count.
18. The arbitrator also on similar principle awarded claim for the
electrical component which was included in Claim No.7. No interference
with the said claim is also warranted for the reasons stated above.
19. In so far as the award of bonus is concerned (Claim No. 5), the same
is stipulated in Clause 2A of the GCC. The relevant clause, both pre and
post amendment are set out below:-
CLAUSE 2A (pre CLAUSE 2A (post amendment)
amendment) In case the contractor completes
In case, the contractor the work ahead of updated
completes the work ahead of stipulated date of completion
scheduled completion time, a considering the effect of extra
bonus @ 1% (one per cent) of work (to be calculated on pro-rata
the tendered value per month basis as cost of extra work x
computed on per day basis, stipulated period/tendered cost), a
shall be payable to the bonus @ 1% (one per cent) of the
contractor, subject to a tendered value per month
maximum limit of 5% (five computed on per day basis, shall be
per cent) of the tendered payable to the contractor, subject
value. The amount of bonus, to a maximum limit of 5% (five per
if payable, shall be paid along cent) of the tendered value. The
with final bill after amount of bonus, if payable, shall
completion of work. Provided be paid along with final bill after
always that provision of the completion of work. Provided
Clause 2A shall be applicable always that provision of the Clause
only when so provided in 2A shall be applicable only when
'Schedule F'" so provided in 'Schedule F'
20. As is apparent from the express language of Clause 2A of GCC, the
same contemplates award of bonus to the contractor for completing the
works ahead of the schedule. The arbitrator had interpreted the expression
'scheduled completion time' to also include additional time for additional
works as well as extension of time on account of hindrances that occurred
during the course of execution of work that justified extension of time. The
arbitrator had noted that in terms of the contract, extra time was permissible
and the time for completion was agreed to be extended in given
circumstances. The arbitrator referred to Clause 12.1 of the GCC and held
that the provisions of the contract recognized extension of time on account
of deviations resulting in additional costs over the tendered value.
21. The arbitrator had further found that on account of hindrances, the
time for completion of the contract as extended by a period of 177 days was
justified and accepted by GNCTD. The arbitrator found that the hindrances
on account of which extension of time was granted had cropped up because
of GNCTD 'not fulfilling fundamental obligation on their part'. The
arbitrator held that GNCTD was in breach of its fundamental obligations.
22. In the given facts, the arbitrator held that the delay on account of
hindrances would also have to be included while computing the stipulated
period of time. This is clearly in conformity with the rationale of awarding
bonus as an incentive to a contractor to complete the works ahead of the
schedule. The delay on account of GNCTD, which prevented the contractor
from executing the works, would clearly have to be excluded from
computing the time available to a contractor to complete the works. Looked
upon from another angle, an employer cannot be heard to state that it is
absolved from its liability to pay bonus - which is a part of consideration of
the contract - because of its own failure to perform its obligations. GNCTD
by its actions cannot frustrate the incentive granted to the contractor. Plainly,
an employer by creating hindrances and delaying the execution of the works
cannot deprive the contractor of the incentive for completing the works
within the time provided to it. This would clearly be unreasonable and
render Clause 2A unworkable.
23. A Division Bench of this Court in Union of India v. M/s N.N.
Buildcon Pvt Ltd. (supra), had considered a similar controversy in the
context of Clause 2A of GCC and held as under:-
"In the present case, the period of completion available to the
contractor was 14 months. Because of additional work
awarded to the contractor, the contractor would be entitled to
additional time of four months i.e. the total time available to
the contractor to complete the originally stipulated work and
the additional work was 18 months. In addition, the
contractor would be entitled to the benefit of the time during
which delay occurred on account hindrances caused by the
employer."
24. The decision in Navyuga Engineering Company P. Ltd v. Public
Works Department (supra) may not be applicable in this case since in that
case there is no finding that the delays on account of hindrances were solely
on account of the employer. Clearly, any hindrances which arise in the
normal course of execution, which are not caused by the employer and/or
are not attributable to the employer, cannot be taken into account while
computing the period for completion of the works for the purposes of
awarding bonus. As stated earlier, the bonus is provided as an incentive to
the contractor to adhere to the agreed timelines and to complete the works
within the stipulated period.
25. As observed earlier, an arbitral award can be interfered with only on
the grounds as indicated in section 34(2) of the Act. In the given
circumstances, no interference is called for with the impugned award as the
award was made neither without jurisdiction nor it is in conflict with the
public policy of India.
26. The petition is, accordingly, dismissed. Pending application is also
disposed of.
VIBHU BAKHRU, J
JANUARY 16, 2017
pkv
