Delhi High Court
Mahanagar Telephone Nigam ... vs M/S Carrycon India Limited on 9 April, 2018
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 09.04.2018
+ O.M.P. (COMM) 288/2016 and IA Nos. 6842/2016,
4440/2017 & 5924/2017
MAHANAGAR TELEPHONE NIGAM LIMITED ..... Petitioner
versus
M/s CARRYCON INDIA LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner: Mr Saket Sikri, Mr Junaid Nahvi and Ms
Niyati Patwardhan.
For the Respondent: Ms Kamlakshi and Mr D. Saundarya Singh.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
Introduction
1. The petitioner (hereafter „MTNL‟) has filed the present petition
under Section 34 of the Arbitration and Conciliation Act, 1996
(hereafter „the Act‟) impugning the arbitral award dated 30.12.2015
(hereafter „the impugned award‟) delivered by the Arbitral Tribunal
constituted by a sole arbitrator, Mr Ashok Sharma, former CGM
(Law), MMTC (hereafter „the Arbitral Tribunal‟). The impugned
award was rendered in the context of disputes that had arisen between
the parties in respect of the „Agreement for Rehabilitation of Outdoor
Plant of GM (N-II) Area‟ dated 27.01.2003 (hereafter „the
Agreement‟).
2. The dispute between the parties related to the price payable by
MTNL for the work of laying of cables through Trenchless
Technology. Whilst, the respondent (hereafter „Carrycon‟) claimed
that MTNL was liable to pay for the said work at the rate of ₹412/- per
meter as agreed under the Agreement, MTNL disputed the same.
According to MTNL, the Agreement stood novated in so far as the
rates payable for the work and the same was payable at the rate of
₹230/- per meter. By the impugned award, the Arbitral Tribunal has
accepted Carrycon‟s claim that the Agreement was not novated and it
would be entitled to recover the differential amount (being the
difference between the amount paid at the rate of ₹230/- per meter and
as computed on the basis of ₹412/- per meter). Accordingly, the
Arbitral Tribunal has awarded a sum of ₹2,36,11,929.26/-
(₹2,17,81,929.26/- on account of the balance differential amount and
₹18,30,000/- on account of the security amount). The Arbitral Tribunal
has awarded a sum of ₹2,06,10,302.96/- along with pendente lite
interest at the rate of 10% per annum from 10.04.2007 till the date of
the impugned award. The Arbitral Tribunal has also awarded post
award interest at the rate of 12% per annum on the awarded amount
from the date of the award till the payment.
3. The controversy involved in the present petition relates to
Carrycon‟s claim for the balance differential amount in respect of the
downward revised rates from ₹412/- to ₹230/- per meter for the work
of laying of cables through Trenchless Technology.
4. Briefly stated, the relevant facts necessary to address the
aforesaid controversy are as under:-
4.1 MTNL issued a Notice Inviting Tender (NIT) on 25.11.2002 for
"rehabilitation of outdoor plant at Saraswati Vihar, Rohini, Badli and
Narela, Delhi which included the work of laying of cables through
Trenchless Technology". The NIT specifically provided that MTNL
reserved its right to award the work to three contracts in the specified
ratio of 50:30:20.
4.2 Carrycon submitted its bid pursuant to the said NIT, which was
accepted as the respondent was the lowest bidder and was declared the
L1 bidder. The parties entered into an agreement dated 27.01.2003
(„the Agreement‟) and Carrycon was awarded 50% of the said work at
the rate of ₹412/- per meter. Carrycon also furnished a Performance
Bank Guarantee of ₹12,50,000/-.
4.3 Material Management Cell (MM Cell), a division of MTNL
issued another Notice Inviting Tender (NIT) on 30.12.2002 for new
network creation through Trenchless Technology for the same work of
laying of cables through Trenchless Technology. The rates for the said
work were discovered to be lower than the rates for the work awarded
pursuant to the NIT dated 25.11.2002.
4.4 On 13.05.2003, a meeting was held between MTNL and
Carrycon regarding reduction of rates in the new tender for similar
work of laying of cables through Trenchless Technology. MTNL
insisted Carrycon to carry out the work at the reduced rates. Therefore,
Carrycon issued a letter dated 17.05.2003 to the DGM (C & A), GM
North of MTNL agreeing to the new rates proposed by the MTNL,
which would be applicable from the date of acceptance of new rates by
the MM Cell.
4.5 MTNL, by a letter dated 03.07.2003, informed Carrycon that the
base rate of ₹230/- per meter was approved by the Competent
Authority for the work of laying of cables through Trenchless
Technology and the said rate would be applicable from the date of the
Agreement that is, 27.01.2003.
4.6 Carrycon submitted its first bill dated 23.06.2003 for execution
of the part of the work contracted at the agreed rate of ₹412/- per
meter. However, MTNL cleared the said bill by unilaterally reducing
the rate to ₹230/- per meter.
4.7 The respondent sent letters dated 04.07.2003 and 17.07.2003
protesting against the conduct of MTNL in not adhering to the terms of
the Agreement and unilaterally changing the terms of understanding
arrived at between the parties on 13.05.2003.
4.8 Carrycon by its letter dated 29.12.2003 requested MTNL to
extend the validity period of contract by a further period of three
months with effect from 29.12.2003. Thereafter, Carrycon sent another
letter dated 04.01.2004 once again requesting MTNL to extend the
period of the contract. Carrycon also confirmed that it was ready to
work for the item of laying of cables at an approved rate of ₹ 230/- per
meter for all the work orders issued during the extending period. By a
letter dated 07.01.2004, MTNL extended the validity of the contract as
requested by Carrycon, albeit, for a period of three months. Carrycon
sought a further extension by its letter dated 15.04.2004. The same was
also acceded to by MTNL and by a letter dated 01.05.2004, the period
of contract was extended for a further period of three months. The
work under the Agreement was completed on 26.07.2004.
4.9 Carrycon issued a notice dated 26.12.2006 for payment of
balance amount at the rate of ₹412/- per meter but the MTNL did not
respond to the aforesaid notice.
4.10 Thereafter, Carrycon issued a notice dated 31.07.2007 to CGM,
MTNL invoking the arbitration clause.
5. Similar dispute was raised before a Coordinate Bench of this
Court in OMP 268/2003 captioned "Vichitra Const. v. MTNL" and by
an order dated 25.08.2004, it was held that MTNL cannot unilaterally
deduct the amount and was directed to release the differential amount
of ₹182/- per meter on submission of the bank guarantee. Carrycon
sought to rely on the said order.
The impugned award
6. Before the Arbitral Tribunal, MTNL contended that the claims
made by Carrycon were barred by limitation as they were preferred
beyond the period of three months provided under Clause XIX of the
NIT, for raising any claims or disputes. The said contention was
rejected by the Arbitral Tribunal by referring to the decision of this
Court in National Highways Authority of India v. MECON - GEA
Energy Systems India Ltd. : 199 (2013) DLT 397.
7. The Arbitral Tribunal framed the following issues:
"(i) whether the respondent is entitled to the amount of
₹2,36,11,929.26/- including the balance differential amount and
the security amount.
(ii) whether MTNL is liable to pay to the respondent at the rate
of ₹412/- or ₹230/- per meter.
(iii) whether the payment by MTNL to the respondent at the
rate of ₹230/- per meter constitutes full and final payment as per
the contractual provisions
(iv) whether there was any acceptance by the respondent to the
rate of ₹230/- per meter at which MTNL has made payments to
the respondent."
8. The Arbitral Tribunal held that pursuant to the discussions held
between the parties, Carryon had offered to amend the terms of the
Agreement entered into between the parties on 07.01.2003 and by a
letter dated 17.05.2003 had communicated its consent to accept the
reduced rates from the date of acceptance of new rates by the MM
Cell. However, this offer was not accepted by MTNL as MTNL by its
letter dated 03.07.2003 insisted that the reduced rates be applicable
with effect from the date of the Agreement. The Arbitral Tribunal
concluded that under the circumstances, there was no consensus ad
idem between the parties and, therefore, no contract came into
existence to provide services at the reduced rate of ₹230/- per meter.
9. The Arbitral Tribunal also rejected the contention that Carrycon
had accepted the new reduced rates by its conduct as the Arbitral
Tribunal observed that Carrycon had sent letters dated 07.07.2003 and
17.07.2003 protesting against MTNL‟s unilateral reduction in the rates
with effect from the date of the Agreement. MTNL‟s contention, that
the invoices raised by Carrycon at the rate of ₹230/- per meter
indicated its acceptance of the reduced rate, was also rejected as the
Arbitral Tribunal noted that the first invoice was raised at the rate of
₹412 per meter; however, MTNL had not paid the same. The Arbitral
Tribunal accepted the contention that Carrycon had raised invoices at
the reduced rates to avoid any tax complications and the same did not
indicate Carrycon‟s acceptance of those rates. The Arbitral Tribunal
also observed that the Performance Bank Guarantee was submitted by
Carrycon taking into account the contractual rate of ₹412/- per meter
and MTNL had not reduced the value of the Bank Guarantee required
to be furnished under the Agreement. The Arbitral Tribunal reasoned
that this was perhaps because MTNL was aware of the disputes and
desired to hold on to the higher security.
10. In view of the above, the issues struck by the Arbitral Tribunal
were decided in favour of Carryon and the Arbitral Tribunal awarded a
sum of ₹2,36,11,929.26/- in its favour. The Arbitral Tribunal awarded
a sum of ₹2,06,10,302.96/- along with pendente lite interest at the rate
of 10% per annum from 10.04.2007 till the date of the impugned
award. The Arbitral Tribunal has also awarded post award interest at
the rate of 12% per annum on the awarded amount from the date of the
award till the payment.
Submissions
11. Mr Sikri, the learned counsel appearing for MTNL contended
that the Arbitral Tribunal had fallen into error in not accepting that the
Agreement stood novated. He contended that the conclusion of the
Arbitral Tribunal that there can be no novation of the contract without
the parties entering into a fresh written agreement is patiently
erroneous and, therefore, the impugned award could not be sustained.
He urged that the letter dated 03.07.2003 expressly provided that the
approved rate of ₹230/- per meter would be applicable to the
Agreement between the parties and the same rate would be applicable
from the date of the Agreement that is, 27.01.2003. He submitted that
thus, in view of this letter dated 03.07.2003, there was no ambiguity
that the Agreement between the parties stood novated. He further
urged that the Arbitral Tribunal had erred in not appreciating that
Carrycon had raised invoices at the reduced rates and this clearly
indicated that Carrycon had agreed to perform the work at the lower
rate of ₹ 230/- per meter. He also referred to the letter dated
04.01.2004 and contended that Carrycon had clearly indicated its
willingness to perform the work of laying of cables through Trenchless
Technology at a consideration of ₹230/- per meter.
12. On a pointed query raised by the Court as to which was the date
on which the Agreement was novated according to MTNL, Mr Sikri
responded that the same was novated during the discussions held on
13.05.2003 and the same was also confirmed by Carrycon by a letter
dated 17.05.2003. He submitted that in its letter dated 17.05.2003,
Carrycon had indicated that the reduced rate would be effective from
the date of acceptance of the rate by the MM Cell. MTNL had
conveyed the decision of the Competent Authority that the same would
be applicable from the date of entering into the Agreement, that is,
27.01.2003.
13. Ms Kamlakshi, the learned counsel appearing for Carrycon
countered the submissions made on behalf of Mr Sikri. She submitted
that the impugned award could not be faulted as Carrycon had not
agreed to execute the work at reduced rates. She submitted that
initially Carrycon had agreed to accept reduced rates with effect from
the date on which the MM Cell approved the same. However, this offer
was not accepted, as MTNL insisted on unilaterally changing the terms
of the Agreement from 27.01.2003. Thus, there was no concluded
contract. In this regard, she further emphasized that MTNL had not
produced any material to show that the date on which the MM Cell had
approved the reduced rates and, therefore, the same could not be
applied. She further submitted that the Agreement to charge reduced
rates during the extended period of the Contract, as communicated by
the letter dated 04.01.2004, was also not binding on Carrycon as it had
agreed to work at a reduced rate under economic pressure, which is
also clearly evident from the tenor of the said letter.
Reasoning and Conclusion
14. The contention advanced on behalf of MTNL that the novation
of the contract on 13.05.2003 has been rejected by the Arbitral
Tribunal, as it found that there was no consensus ad idem between the
parties. Much reliance was placed by Mr Sikri on the letter dated
17.05.2003 sent by Carrycon. The relevant extract of the said letter
reads as under:-
"During the discussion we agree on the following
proposal:-
1. The base rate for laying of cable through trench less
would be the approved rates of MM cell plus the
enhancement for respective areas as per the agreement
entered with you.
2. The effective date of accepting the new base rate will
be from the date of acceptance of the new rate by your
MM cell.
As such we are continuing our work as agree upon."
15. According to MTNL, the aforesaid terms were not agreeable as
MTNL required that the new rates be applicable from the date of the
agreement (that is, 27.01.2003). This is clear from the letter dated
03.07.2003 sent by MTNL, which reads as under:-
"To
M/S Carrycon India Ltd.
A-128, Second Floor,
Meena Chamber,
Mohammadpur, Near B. C. P.
Africa Avenue
New Delhi - 110066
No.GM(N-II)/TECH/REHAB/TRENCHLESS/03-04/3
Dated
3/7/2003
Dear Sir,
With reference to your letter No.CCON/NDL/03-04,
dated 17/5/03 regarding the rates for laying of cable through
trench less method, it is intimated that after the discussions, it
is approved by the Competent Authority that the base rate for
laying of cable through trench less method will be the
approved rate of MM Cell circulated by the AGM (MM-1)
vide his letter No.AGM (MM-11)/MM-15/No Dig.LOI/03-
04/52 dated 6/8/03. The approved base rate of MM Cell for
Bore size upto 145 mm (All types of soil except rock) is
Rs.230/- per meter which is applicable in the present
agreement made with you for the Rehabilitation work instead
of Rs.412/- (Para 5.3, sub para (b) at Page No.37 of NIT book
let).
The above rate is applicable from the date of signing of the
agreement i.e. 27.01.2003."
16. In the aforesaid context, the Arbitral Tribunal had held that
there was no consensus ad idem between the parties. It held that the
letter dated 03.07.2003 constituted a counter offer, as it did not
unconditionally accept the terms as stated by Carrycon in its letter
dated 17.05.2003. This Court finds no reason to interfere with the said
conclusion in these proceedings. It is also relevant to note that MTNL
had not disclosed any material to establish the date on which the MM
Division had approved the reduced rates. Even before this Court, no
material has been produced to establish the same. However, insofar as
the work executed during the extended period, that is, after
25.01.2004, it cannot be disputed that Carrycon had agreed to execute
the same at the rate of ₹230/- per meter. This is clear from the letter
dated 04.01.2004 sent by Carrycon to MTNL. The said letter is set out
below:-
"Ref.....CCON/NDL/03-04
04.01.2004
To,
The Asst. General Manager (A) N-II
O/o GM (N-II), Sanchar Parisar
Sector III, Rohini,
Delhi
Dear Sir
Sub: Rates for laying of cable through Trenchless
method.
Ref.: GM (N-II)/Tech/Tender/Rehab/02-03 dated
25/11/02 and GM (N-
II)/Tech/Rehab/Trenchless/03-04 dated 16.12.2003.
We refer your above offer for extension of the tender for
further period. We are ready to work for the extended
period at the same rate and terms and conditions except
the laying of cable through trench less method.
We are ready to work for the item laying of cable through
trenchless method at MM Cell approved rate i.e. 230.00
per mtr. for all the work orders issued during the extended
period.
Thanking you,
Yours faithfully
FOR CARRYCON INDIA LIMITED
Sd/-
(Prakash Bhanu)
Executive Director"
17. A copy of the said letter produced by MTNL also indicates a
handwritten noting by the concerned officer of MTNL dated
06.01.2004, which reads as - "issue letter for extension".
18. It is apparent from the above that Carrycon had sought for
extension for the period of contract and had agreed to execute works
during the extended period at the rate of ₹230/- per meter since MTNL
had granted the extension as sought for. It is not open for Carrycon to
now contend to contrary.
19. This Court is of the view that the Arbitral Tribunal had clearly
fall in error in ignoring the import of the said letter. Accordingly, the
impugned award to the extent that it holds that Carrycon is entitled to
be paid at the rate of ₹412/- per meter for the work done during the
extended period that is, from 25.01.2004 to 26.07.2006, is
unsustainable and set aside.
20. The amount and the interest awarded to Carrycon, consequently
be reduced to the aforesaid extent. The petition is disposed of in the
above terms. All the pending applications are also disposed of. The
parties are left to bear their own costs.
VIBHU BAKHRU, J
APRIL 09, 2018
pkv/MK
