Delhi High Court
Ircon International Ltd vs Satya Prakash Builders Ltd on 1 September, 2017
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO(OS) (COMM) 106/2017
Date of decision 1st September, 2017
IRCON INTERNATIONAL LTD ..... Appellant
Through Mr. Chandan Kumar and Mr.
Rahul Kumar, Advocates.
versus
SATYA PRAKASH BUILDERS LTD ..... Respondent
Through
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE NAVIN CHAWLA
SANJIV KHANNA, J. (ORAL)
The records of the single Judge have been requisitioned and
perused.
2. We have heard the counsel for the appellant in this intra-Court
appeal under Section 13 of the Commercial Courts, Commercial
Division and Commercial Appellate Division of the High Courts Act,
2015 read with Section 37 of the Arbitration and Conciliation Act,
1996 (A & C Act, for short) impugning order dated 13th April, 2017
by which the objection of the appellant under Section 34 of the A & C
Act has been dismissed.
3. The undisputed position is that the appellant, Ircon International
Limited, had entered into a contract with the respondent Satya Prakash
Builders Limited dated 20th December, 2004 for construction of 811
dwelling units for the Married Accommodation Project of the Ministry
of Defence at New Cantonment, Allahabad.
4. The scheduled date of completion of work was 20 months after
the date of the contract i.e. 4th July, 2006. However, the contract was
completed on 31st December, 2008. According to the appellant, 51 st
Running Account Bill and Final Bill were submitted by the respondent
on 20th April, 2009 and were paid on 20th October, 2009 and 21st
November, 2009.
5. As certain disputes arose during the pendency of the contract,
the respondent-contractor had invoked clause 31 of the supplementary
agreement whereby disputes or differences were referred to the
Committee for resolution through mutual discussions, deliberation,
negotiations etc. Pursuant to the letter of the respondent-contractor
dated 9th June, 2006, the Committee appointed for dispute resolution
examined the disputes and differences and gave its decision which was
unacceptable to the respondent-contractor.
6. The respondent-contractor thereafter wrote a letter dated 25th
December, 2006 for appointment of an Arbitrator. In that letter, the
respondent had reserved their right to refer any further disputes that
may arise between the parties to arbitration. The Competent
Authority, namely Managing Director refused to appoint an Arbitrator.
This decision was communicated to the respondent-contractor vide
letter dated 24th January, 2007.
7. The respondent-contractor thereafter had filed petition under
Section 11 of the A & C Act, which was disposed of vide order dated
1st May, 2009, directing the Managing Director to offer a panel of
three retired employees of the respondent-contractor. The respondent-
constructor was entitled to nominate one of them as the sole
Arbitrator. The sole Arbitrator, it was observed, would go into the
claims and counter claims, if any, of the parties in accordance with
law.
8. Following the aforesaid procedure, Mr. A.A. Khandey, a retired
Project Director of the appellant was appointed as the sole Arbitrator
vide letter dated 8th March, 2010. Paragraph 1 of the said letter states
that the Managing Director of the appellant was pleased to nominate
the Sole Arbitrator to adjudicate disputes/claims mentioned by the
respondent-contractor in their letter dated 9th June, 2006, a copy of
which was enclosed. However, paragraph 2 of the said letter states
that the Arbitrator would undertake adjudication of the disputes/claims
of the respondent-contractor, if any, under the A & C Act and as per
the relevant clause of the contract.
9. The first objection raised by the appellant is that the learned
Arbitrator had permitted and allowed the respondent-contractor to
modify the amount claimed in the letter dated 9 th June, 2006 and also
add new claims to the claim petition.
10. The aforesaid objection raised by the appellant was considered
by the Arbitrator and has been rejected in the following words:-
"Honourable High Court, in its direction to MD/IRCON has not
restricted the scope of arbitration to the issues and amounts
contained in the letter of 9/6/06. In fact it has "directed that the
sole arbitrator shall go into the claims and counter claims, if
any, of the parties in accordance with law". MD/IRCON in the
letter of the appointment (Dated 08.03.2010) has also requested the
sole arbitrator to "undertake the adjudication of the disputes/claims
of the claimant and the counter claims of the respondent, if any,
under Arbitration & Conciliation Act, 1996 and as per the relevant
clauses of the contract agreement between the parties". If the
intention was to restrict the claims as in petitioner‟s letter of
09.06.2006, then Counter Claims of respondent could not be
included in the order. Therefore the objection of respondent is not in
order.
Besides more than 60 % work was executed during the intervening
more than two years period after this letter. The claimant has added
only those claims and amounts that could arise during the
intervening period. Therefore the objection of respondent was
overruled. Claimant as well as respondent was advised to submit
claims and counter claims respectively in line with directions of the
Honourable court, covering the complete duration of the project i.e.
from start to end (5/11/2004 to 31/12/2008)."
We are in agreement with the findings recorded by the Arbitrator,
which have been also affirmed by the single Judge. As noticed above,
the date of completion of work, as accepted, was 31st December, 2008.
The first letter invoking arbitration clause was written during the
pendency of the contract on 9th June, 2006. Petition under Section 11
of the A & C Act was filed in 2007, which was again before the
completion of work. While disposing of the petition under Section 11
of the A & C Act, Delhi High Court vide order dated 1st May, 2009,
had directed that the Arbitrator shall go into the claims and counter
claims, if any, of the parties in accordance with law. The court order
did not restrict and restrain the Arbitrator to only examine and decide
the claims in terms of the letter dated 9th June, 2006.
11. The next contention of the appellant pertains to claim No.1 in
respect of clearing of jungle at the site of work. As per the respondent-
contractor, this work was not included in Bill of Quantity (BOQ, for
short) and, therefore, the respondent-contractor was entitled to
Rs.7,64,740/-. This claim has been partly allowed by the Arbitrator
recording the following reasons:-
7.1 Claim No. 1:- Amount Rs. 7,64,740.00
Payment of extra work done in clearing the site full of jungle &
vegetation.
7.1.1 The claimant has submitted that respondents vide letter dated
23.11.2004 (Exhibit C-1/2) 18 days after award of contract on
05.11.2004, directed the claimant to ensure that site layout of all the sites
in New Cantt forming part of the contract should be completed by 28th
December 2004 for the approval of the Sub-area Commander. The
claimant has submitted that the area was a jungle, covered with bushes
and vegetation. The layout could be given only after the jungle is
cleared. The contractor has further submitted that they informed the
client regarding jungle clearance vide letter dated 21.12.2004 (ex.C-1/3).
It is further submitted that since the item is not covered by SSR-1996,
they will submit rate analysis based on market prices to enable release of
payment. The respondents however denied the payment vide their letter
dated 23.12.2004 (Ex.C1/4)
7.1.2 The respondents have stated the claim is not payable as the
contractor should give 7 days‟ notice before need for execution of any
item, not covered by approved BOQ arises. The respondents have
further stated that the SSR -91 Part 1 Specifications Para 3.3.4, 3.6 &
3.10 cover site clearance, etc and therefore no extra payment becomes
due.
7.1.3 During the hearing on 8th and 9th December 2011, instructions
were given to the Petitioner to elaborate and explain the work of jungle
clearance etc duly marked on site plans of different areas where the
dwelling units were constructed. The claimant submitted the same vide
letter No. A SPBLTD/MAP/ARB/4963 Dated 30.01.2012. The area
where jungle clearance was done is detailed in drawings & summarised
CH-9/1. Area is 66129.90 sqm.
7.1.4 The respondents on 23.04.2012 submitted as under:-
(i) surface excavation not exceeding 30cm & averaging 15 cm.
depth:-
S1-76 13287.81sqm @ Rs. 4.55/sqm =Rs. 60,459.54.
(ii) Surface Dressing not exceeding 15cms.
S1-86 [email protected]/Sqm =Rs1,20,090.43
(iii) Excavation over Areas:-
S1-79 [email protected]/sqm =Rs.2,04,363.29
Total amount paid (i+ii+iii) plus 37% tender appreciation
=5,27,331.00
The respondent also submitted that in addition to the above, the claimant
was paid Rs. 2.04 Lakhs towards excavation over areas for roads plus Rs.
27,12,288.00 for disposal of earth.
7.1.5 The Claimant submitted replies/ clarifications vide letter dated
27.05.2013. The respondent has not disputed that the work of jungle
clearance was done by the Claimant.
7.1.6 Appreciation of evidence:-
Respondents have not disputed jungle clearance by the claimant. In
fact they admit that the work has been done but payment for the same is
covered in item 1 & 2 of BOQ/76/81 of SSR 1996. Item 76 covers
surface excavation and item 81 covers excavation in trenches etc.
Therefore none of these items cover jungle clearance. After hearing both
parties, and examination of documents, I find that the details of work
done has been elaborated and established. It is also clear that jungle
clearing over an area of 66129.90sqm has been done by the claimant.
The respondent has not made payment for this work. The revised details
of the said work are:-
(i) Clearing jungle including uprooting:- 66129.90 Sqm @ Rs
1.53=Rs1,01,17874
(ii) Removing jungle plus uprooting-
[email protected]/cum=Rs.3,78,205.93
Add Tender [email protected]% = Rs.1,77,372.32
Total = Rs. 6,18,683.00
The claim is substantiated.
AWARD.............Rs. 6,18,673.00"
12. Counsel for the appellant submits that the claim no. 1 should
have been rejected for the respondent-contractor had not given 7 days‟
notice before execution or clearing the site to get rid of jungle and
vegetation. This assertion was also made before the Arbitrator and has
been rejected for the reason that the respondent-contractor had written
letter dated 21st December, 2004, stating that clearing of jungle was
not covered by SSR-1996 and they would be submitting rate analysis
based on market price. This claim was disputed and denied by the
appellant.
13. In these circumstances, we do not think that the argument of the
appellant carries any weight. The submission of the appellant is rather
technical for it is submitted that the respondent-contractor had not
written any letter within 7 days of award of work on 5th November,
2004. The letter dated 5th November, 2004, by the appellant had
directed the respondent-contractor to ensure that the site layout of all
the sites in New Cantonment forming part of the contract should be
completed by 28th December, 2004. We do not think that the said
contention carries any weight and warrants interference with the
Award.
14. The next contention of the appellant pertains to payment of
difference in price of TMT bars used instead of HYSD bars. BOQ had
provided HYSD bars, whereas the respondent-contractor had used
TMT bars. The appellant accepts that the respondent-contractor has to
be paid for the TMT bars as per clause 20 with reference to the current
market price. TMT bars were not included in the BOQ and the rate
was not available in MES SSR-1966.
15. During the course of hearing, learned counsel for the appellant
had submitted that the actual market price of the TMT bars as per
purchase invoice produced by the respondent-contractor was paid.
The assertion was that the Award in fact directs payment over and
above the invoice price paid. We had asked the learned counsel for the
appellant to point out the relevant paragraphs of the petition under
Section 34 of the A & C Act raising the aforesaid contention and
objection. Reference was made to paragraph 5.8 (CC). We find that
this objection was not specifically raised. This being the position, this
contention has to be rejected. In sub-paragraph DD the appellant had
submitted that the contractor had claimed Rs. 50 lakhs, but the
Arbitrator had awarded an amount of Rs.1.23 crores. We find that the
submission is wrong for the simple reason that even in the letter dated
9th June, 2006, the respondent-claimant had made a claim of Rs.1.41
crores.
16. The third objection raised by the appellant relates to enhanced
rates on account of statutory increase in wages and excise duty. The
aforesaid claim was examined by the Arbitrator, who has referred to
the specific notifications and thereafter, amount awarded has been
computed. Counsel for the appellant has submitted that the
respondent-contractor in the claims statement had used the word
„adjustment‟ and, therefore, the claim should have been rejected
because „adjustment‟ is not permissible under clause 18 of SCC. The
said contention has to be rejected for the reason that the word
„adjustment‟, if used in the claim statement, would not justify rejection
of the claim if there was increase in labour rates or wages pursuant to
statutory increases and prices of goods procured had increased on
account of increase in excise duty. Factually, the statutory increases
are not disputed.
17. During the course of hearing, learned counsel for the appellant
submitted that payment was made on account of increase in excise
duty on TMT bars, whereas separate payment had been made on
account of TMT bars under claim No.2. We had asked the counsel for
the appellant to point out whether any such objection was raised
before the Arbitrator or in the petition under Section 34 of the A & C
Act. It is fairly stated that no such objection was raised before the
Arbitrator or in the petition. We find that this argument was not raised
earlier and we do not know whether this is factually correct and are
unable to comment on the said argument. In given circumstances, we
would not allow the appellant to raise the said argument for the first
time in this appeal.
18. The last submission of the appellant relates to claim for idle
plant and machinery. Reference is made to certain clauses of the
contract to submit that the claim should not have been entertained.
This aspect has been examined in the impugned Award and dealt with
in the following manner:-
"b.Loss due to Idle Machinery & Plants:- Amount
Rs.1,72,3,924/-
The petitioner has claimed Rs.1,72,53,924.00 on this account.
Calculations are in Annexure-VI (b) giving the various
machines at site as well as the period for which each machine
and equipment remained idle. The work got delayed by more
than 29 months on account of respondents and therefore the
equipment and machinery must not have been utilized to the
fullest. The respondent has termed the claim as illegal and
not sustainable. They have stated that the claimant failed to
complete the work in the allotted time due to his own failures.
This is not correct as delay occurred due to the respondents as
brought out in para-7.6.3 & 7.6.4 above. Besides the
respondent granted extension to date of completion without
imposing any penalty on the petitioner thereby accepting that
delay did not occur on account of petitioner. It is a fact that
when work gets delayed the plant and equipment mobilized
by the contractor at site remains idle and therefore the loss.
The Respondents did not state anything about the calculations
of losses submitted by the Petitioner except stating that the
claim is not sustainable, being a fixed rate contract. Price
adjustment is not applicable in this contract as rates shall
remain fixed. It is pertinent to point out that the claimant is
not claiming increase in rates of BOQ but compensation for
loss due to idling of plant and machinery.
I have gone through the calculations submitted by the
petitioner Annexure VI (b). The rates used are from CPWD
DSR-2007 & therefore one cannot find any fault there. The
number of machines is on the higher side. Half the number
would easily be required for work of this type. Number of
days for which machines remained idle during the course of
contract would be 5 Months and not 6.5 months as claimed by
the claimant. Therefore loss on this account would be Rs.
(17253924/2)X5/6.5=Rs.6636124.00, which should be paid to
the petitioner.
Award Rs.66,36,124.00"
19. Immediately before, the Arbitrator had also dealt with the claim
for loss of overhead and profit amounting to Rs.6,10,70,579/- and had
rejected the same as the contract had stipulated and barred
compensation for the delay and price escalation. Albeit, the claim on
account of idle plant and machinery was treated as valid and
maintainable for there was delay in completion of work and the
respondent-contractor had suffered as the plant and machinery had
remained idle. The Arbitrator has recorded that the work got delayed
by more than 29 months and this was on account of the failure of the
appellant. We do not see any reason to interfere with the findings
recorded by the single Judge on the said claim.
20. In view of the aforesaid, we do not find any merit in the present
appeal and the same is dismissed without any order as to costs.
SANJIV KHANNA, J.
NAVIN CHAWLA, J.
SEPTEMBER 01, 2017
NA
