Delhi High Court
Union Of India & Ors. vs Garg Associates on 23 April, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP (COMM) 229/2016 & IAs 13462-63/2017
Reserved on: 2nd February, 2018
Date of decision : 23rd April, 2018
UNION OF INDIA & ORS. ......Petitioners
Through: Mr.Kirtiman Singh, CGSC with
Mr.Shailendra Kr. Mishra, Mr.Waize ali Noor,
Mr.Prateek Dhanda and Mr.Saeed Qadari,
Advs. Along with Mr.Anil Mehta, Ex. Engineer
(Retd.)
Versus
GARG ASSOCIATES .... Respondent
Through: Mr.Raman Kapur, Sr. Adv. with
Mr.R.P.Singh, Mr. Dhiraj
Sachdeva, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. The present petition has been filed by the petitioner challenging the
order dated 17th April, 2015 and the Arbitral Award dated 19th May, 2015
passed by the Sole Arbitrator awarding certain claims in favour of the
respondent.
2. At the outset, it is noted that the order dated 17 th April, 2015 was
merely an order passed in the course of the arbitration proceedings and is
not an Arbitral Award in terms of Section 31 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the 'Act'). However,
the said order, as would be evident from the discussion below, is
OMP (Comm.) No.229/2016 Page 1
intrinsically linked with the Impugned Arbitral Award dated 19th May,
2015 as the award, to a large extent is based on this order and so is
equally the challenge thereto by the petitioner.
3. The brief factual background leading up to the Impugned Arbitral
Award is noted as under:-
4. The petitioner had issued a Letter of Acceptance dated 26th July,
2008 awarding the tender for the work of modernization of Sena Bhawan,
New Delhi to the respondent. The stipulated date for completion of the
work was 6th February, 2010. The work was actually completed on 15th
June, 2012. There were disputes between the parties on the reason for the
delay and consequent claims of the respondent. The said disputes were
referred to arbitration by a Sole Arbitrator, vide order dated 22nd April,
2014 passed by this Court in Arbitration Petition No.480/2013.
5. Upon completion of the pleadings, the Arbitrator commenced
hearing of the oral submissions on 8th January, 2015. The claimant
/respondent concluded its arguments on that date. On 5 th February, 2015,
the petitioner herein commenced its arguments. The order passed on 5 th
February, 2015 records the objection of the petitioner herein to various
claims raised by the respondent. As far as claim no.3, which is with
respect to extra items, substituted items and deviated items beyond
deviation limit, the order records that the respondent has withdrawn its
claim in respect of extra items indicated in Para A of its Claim no.3 at
page 7 of its rejoinder to the reply of the petitioner. As far as Claim no.4
is concerned, which was for the amounts withheld by the petitioner, the
OMP (Comm.) No.229/2016 Page 2
Arbitrator, after recording the submissions of the parties, further recorded
as under:-
"The parties have agreed to undertake a joint inspection of
the defects in items of work listed out in the S.E's letter and
reconcile the gaps in their claims and file a joint report before the
next date of hearing. In case the Respondent succeeds in
convincing the Claimant that certain defects were not rectified, the
Respondent would be entitled to deduct proportionate amount from
the withheld amount and release the balance sum. However, if it is
found during the inspection that the Claimant had attended to all
the defects, it may be entitled to receive the balance amount. This
exercise should be completed within two weeks and a joint report
submitted to the Tribunal."
6. As far as Claim no.5, which is a Claim under clause 10 (C) of the
agreement for payment on account of increase in prices /wages due to
statutory order(s), the parties agreed to further deliberate on the issue and
work out the labour element required in each sub-component of the
project and revise the claim accordingly. Two weeks' time was given to
the parties to report the result of such an exercise. The parties further
agreed that as far as Claim nos.7,8,9 and 10 are concerned, the same
would have to be decided by the Arbitrator.
7. I have given a reference to the above order in detail as there is
some dispute between the parties as to whether they had arrived at any
settlement with respect to claim nos.3 and 5.
8. By the subsequent order dated 5th March, 2015, the parties reported
that they had done the joint inspection and found that except for
deduction in respect of water proofing, the other amounts were payable
OMP (Comm.) No.229/2016 Page 3
by the petitioner to the respondent. As noted above, this was claim no.4
of the respondent. As far as Claim no.5 is concerned, the parties were
allowed further four weeks' time to sort out the issue and file their report.
As far as Claim no.3 was concerned, the respondent agreed to file a
comprehensive note listing out the sums claimed against each item along
with analysis as to how the amounts have been worked out.
9. The matter thereafter came before the Arbitrator on 17th April,
2015 and the Arbitrator passed the following order:-
"1. In the last hearing held on 05/03/2015, the parties
had sought further four weeks' time for reconciling the
discrepancies pointed out in the claims under various heads/items
and filing a comprehensive report.
2. The parties submitted a joint report (Marked as
Exb.CX/3- Colly) listing out the final agreed amounts of claims
viz. Claims No.1,2,3,4 & 6 accepted by the parties as well as
Claims No.5,7,8,9 and 10 where the parties had different views
and left the matter to be decided by the Arbitral Tribunal. The
documents submitted by the parties including (Exb.CX/3 Colly)
which is jointly signed by both parties with notes of dissent of the
Respondent, wherever applicable, and the document(Marked as
Exb.RX/1-Colly) containing four statements of calculations
regarding amounts acceptable to the Respondent towards
escalation in labour wages under Clause 10C of the Agreement
have been taken on record.
3. With the above mentioned documents taken on record
and the parties having closed their oral arguments, the arbitral
proceedings stand concluded. Order is reserved."
10. As noted above, the petitioner has challenged the said order in the
present proceedings. It is submitted by the counsel for the petitioners that
the alleged 'joint report' marked as Ex.CX/3 by the Arbitrator was in fact
OMP (Comm.) No.229/2016 Page 4
the submissions made by the respondent in compliance with the direction
issued by the Arbitrator in the hearing held on 5 th March, 2015. This was
not a joint report at all. He further submits that the signatures of the
representative of the petitioner present in the arbitration proceedings were
taken by the Arbitrator on this document merely as a token of receipt of
the same and by putting such signatures as such, it cannot be said that the
petitioner was bound by the contents of the document or that this can be
treated as a joint report by the parties. He further draws my attention to
the remark given by the person signing this document on behalf of the
petitioner to the following effect:-
"subject to the decision of the Arbitrator"
11. He further submits that merely because this remark is not put on
every page of this document, it does not mean that where such remark is
not put, the contents of the document are deemed to have been
unconditionally accepted by the petitioner. He further submits that this
order was received by the petitioner on 18th April, 2015 and even before
the petitioner could lodge its protest, the Impugned Award was passed by
the Sole Arbitrator on 19th May, 2015, referring to these submissions of
the respondent as a joint report.
12. As far as Claim No.3 in respect of Extra items, Substituted items
and Deviated items, the Arbitrator in his Impugned Award has granted a
sum of Rs.7,50,746/- in favour of the respondent solely on the basis of
this alleged joint report marked as Ex.CX/3. He in fact records as under:-
OMP (Comm.) No.229/2016 Page 5
Thus, as per agreement reached by the parties and reflected
in the joint report (Exb. CX/3), the Claimant has accepted the
reduction in claim No.3 from Rs.22,90,050 to Rs.7,50,746/- only.
27. In view of the position stated in the previous
paragraph and the parties having reached an amicable settlement,
Claim No.3 is, thus, accepted to the extent of Rs.7,50,746/- only."
13. Counsel for the petitioners, in my opinion rightly so, submits that
the Arbitrator has completely misdirected himself in relying upon the
document dated 15th April, 2015 CX/3 as a settlement. This document
clearly was the submission made by the respondent to the Arbitrator and
not a joint report of the parties or some kind of settlement between the
parties with respect to amounts claimed by the respondent under Claim
no.3. Even a bare reading of the contents of this document shows that
there was no agreement between the parties in relation to Claim no.3. In
fact, the petitioner had resisted the said claim of the respondent and the
respondent had made the submissions in order to amicably settle its claim
with respect to the extra items, substituted items and deviated items. This
was a unilateral offer of the respondent. The contents of the document
CX/3 in this regard are reproduced hereunder:-
"Claim No.3 Rs.22,90,050/-
The details of Rs,22,90,050/- under different heads is given as
under:
i) Extra Items
The details given vide Annexure C-5,
Page -80 and 81 of S.O.F. › Rs.43,914/-
ii) Substituted Items
Vide Annexure C-6
Page 82 & 83 of S.O.F. › Rs.13,50,580/-
iii) Deviated Item
Vide Annexure C-7,
OMP (Comm.) No.229/2016 Page 6
Page 84 & 85 of S.O.F. › Rs.8,95,56/-
Total › Rs.22,90,050/-
However, to narrow doom the dispute the matter was mutually discussed
at length with the respondent who insisted to withdraw the under
mentioned items from Claim No-3:-
i) Extra item claimed vide
annexure C-5 page -81 Entire amount
ii) Substituted items vide
annexure C-6 page 82-83 of S.O.F. Item No.2/1 & 2/2
iii) Deviated item vide
annexure C-7 page-84 & 85 Item No.5(b), 27(a),
34(a), 87(a)
Taking overall view and to settle the matter amicably, the claimant
agree to withdraw the above amount from claim no.3 to settle the dispute
subject to the condition that the respondent has no objection against
reduced amount claimed by of the claimant and claim for the remaining
items as under:-
Extra item Nil
Substituted item 80,853/-
Deviated items 6,69,893/-
Total Rs. 7,50,746/-"
The revised substituted item and deviated items are enclosed as per
annexure C-118." (emphasis supplied)
14. Counsel for the petitioners has also drawn my reference to a letter
dated 15th July, 2015 addressed by the respondent to the petitioners
admitting that there was in fact, no settlement reached between the
parties on this issue and the withdrawal of the claim on certain items was
made by the respondent unilaterally and not due to any settlement. I
quote from the letter dated 15th July, 2015 in this regard as under:-
OMP (Comm.) No.229/2016 Page 7
"Claim no.3 - After Lengthy arguments during the hearing
the Ld. Arbitrator directed both the parties to discuss mutually and
try to resolve the issue to the extent possible.
Accordingly during discussion you requested us to withdraw
Claim no.3 in total. However after discussion we agreed to
withdraw the undermentioned items from Claim no.3.
1. Extra item vide C-5 Entire Claim
2. Substituted item vide C-6 Item no.2/1 & 2/2
3. Deviated item vide C-7 Item no.5(b), 27(a)
& 87a
It is clarified that it was our own decision to withdraw the
above items and it was not a joint decision.
(emphasis supplied)"
15. Learned senior counsel for the respondent, however, tried to
defend the Impugned Award by stating that claim no.3 had also been
settled between the parties as the petitioner was opposing certain items in
this claim and the respondent in order to amicably resolve the said
dispute, agreed to give up its claim on these items. He submits that in
this form, a settlement was reached between the parties and the petitioner
cannot be allowed to resile out of the same by raising technical pleas.
16. I am unable to agree with the said submission of the learned senior
counsel for the respondent. As noted above, the submissions dated 15 th
April, 2015 marked as Ex.CX/3 were the submissions of the respondent
to the Arbitral Tribunal and not a joint report. This had been duly
accepted by the respondent even in its letter dated 15 th July, 2015.
Though, counsel for the respondent submits that the letter dated 15 th July,
2015, being subsequent to the passing of the Impugned Award, cannot be
taken cognizance of by this Court, in my opinion, the admission made by
OMP (Comm.) No.229/2016 Page 8
the respondent on the purport and effect of the purported joint report
cannot be discarded as it has a nexus with the facts constituting the
award. Excluding this letter from consideration would in fact defeat the
principles of due process and would be opposed to the concept of public
policy. I draw my support in this regard from the judgment of the
Supreme Court in Venture Global Engineering vs. Satyam Computer
Services Ltd & Anr. (2010) 8 SCC 660, wherein the Supreme Court, has
held as under:-
39. Therefore, this Court is unable to accept the
contention of the learned counsel for the respondent that the
expression "fraud in the making of the award" has to be narrowly
construed. This Court cannot do so primarily because fraud being
of "infinite variety" may take many forms, and secondly, the
expression "the making of the award" will have to be read in
conjunction with whether the award "was induced or affected by
fraud".
40. On such conjoint reading, this Court is unable to
accept the contentions of the learned counsel for the respondents
that facts which surfaced subsequent to the making of the award,
but have a nexus with the facts constituting the award, are not
relevant to demonstrate that there has been fraud in the making of
the award. Concealment of relevant and material facts, which
should have been disclosed before the arbitrator, is an act of
fraud. If the argument advanced by the learned counsel for the
respondents is accepted, then a party, who has suffered an award
against another party who has concealed facts and obtained an
award, cannot rely on facts which have surfaced subsequently even
if those facts have a bearing on the facts constituting the award.
Concealed facts in the very nature of things surface subsequently.
Such a construction would defeat the principle of due process and
would be opposed to the concept of public policy incorporated in
the Explanation."
OMP (Comm.) No.229/2016 Page 9
17. Learned senior counsel for the respondent has further submitted
that if the petitioner was aggrieved by the order dated 17th April, 2015, it
should have immediately protested against the same rather than waiting
for the award to be passed and then challenge the same along with the
award.
18. This submission of the learned senior counsel for the respondent
cannot be accepted as the reading of the document itself suggests that the
Arbitrator has completely erred in appreciating the effect of the document
which really and truly was only a written submission filed by the
respondent before him. Even otherwise, the time period between the
order dated 17th April, 2015 and the passing of the Impugned Award on
19th May, 2015 cannot be said to be so large so as to deny the petitioner a
right to challenge the recordings made in the order dated 17th April, 2015,
even if on the face of the record, the same is found to be incorrect.
Though, it may be correct to state that the petitioner should have been
more vigilant and should have immediately protested against the order
dated 17th April, 2015 to the Arbitrator, however, in my opinion, such
delay cannot be said to be fatal to its objection and once it is found that
the recordings made by the Arbitrator in the order dated 17th April, 2015
are factually incorrect, principles of natural justice would require the
Impugned Award to be set aside on this ground alone.
19. The next challenge of the petitioner is to the award of a sum of
Rs.54,14,475/- in favour of the respondent under Claim No.5 on account
of revision in the minimum wages of labour based on Clause 10(C) of the
agreement. The learned counsel for the petitioners submits that the
OMP (Comm.) No.229/2016 Page 10
respondent was not entitled to any amount under the said agreement
inasmuch as the respondent had failed to comply with the pre-conditions
for maintaining the claims as stipulated in Clause 10(C) of the agreement.
He submitted that in terms of Clause 10(C) of the agreement, the
respondent was under an obligation to show documents in proof of
having paid the increased wages. He further submits that a claim under
Clause 10(C) of the agreement required giving of a notice to the Engineer
In-Charge by the respondent within a reasonable time of the respondent
becoming aware of any alteration in the wages of labour. He submits that
in the present case, the respondent had not given any such notice to the
petitioner and, therefore, is not entitled to maintain its claim under Clause
10(C) of the agreement.
20. The learned counsel for the petitioners has placed reliance on the
following judgments in support of his plea that in absence of compliance
with the condition mentioned in Clause 10(C) of the agreement the
Contractor would not be entitled to maintain a claim of increase in
wages:-
"(i) M/s Hindustan Construction Corporation vs. Delhi
Development Authority & Ors. - 2009 (4) RAJ 411 (Del)
(ii) Republic Construction Co. vs DDA - MANU/DE/1001/2009
(iii) R.B Jodhamal & Co. Pvt. Ltd. vs. Delhi Development
Authority - 1995 DLT (58) 315
(iv) Simplex Concrete Piles (India) Pvt. Ltd. vs Union of India -
2007 (3) ARBLR 394 (Delhi)"
21. I have considered the submission made by the learned counsel for
the petitioner. As a preface, I emphasize that the Arbitrator is the final
judge of the facts and inference to be drawn on the evidence led by the
OMP (Comm.) No.229/2016 Page 11
parties. The Arbitrator is also the final word on the interpretation of
contractual terms. The Arbitrator, in his Impugned Award has held as
under:
"32.......The parties proposed to further deliberate on the
issue work out the labour component in each major
component of the project and revise the claim
accordingly. According to the Respondent, revision of
wages was applicable only in respect of unskilled labour
and that semi-skilled and skilled labour were not entitled
to claim wages at enhanced rates. Shri Anil Mehta,
Ex.En.CPWD was, however, unable to establish this fact
with reference to the terms and conditions of the
agreement or any other statutory provisions. In response
to the contention of the Respondent that books of
accounts were not supplied by the Claimant, the Claimant
has stated that since the Respondent had never demanded
that books of accounts should be shown to it, the question
of submission of books of accounts would not arise.
Further, Clause 10 C of the contract in this regard lays
down, "The contractor shall, for the purpose of this
condition, keep such books of account and other
documents as are necessary to show the amount of any
increase claimed or reduction available and shall allow
inspection of the same by a duly authorized
representative of the Government, and further shall, at
the request of the Engineer-in-Charge may require any
documents so kept and such other information as the
Engineer-in-Charge may require."
The relevant portion of Clause 10 C thus clearly lays
down that the contractor is required to maintain his
books of account to be ready for inspection. The
respondent had never expressed a desire to inspect the
books of account and there was, as such, no violation of
Clause 10 C.
OMP (Comm.) No.229/2016 Page 12
33. In the joint report submitted by the parties, the
Claimant has reduced its claim from Rs. 1,21,76,514/- to
Rs. 54,14,475/- whereas the Respondent in a separate
report (Exhibit RX/1) has accepted a claim of Rs.
48,36,387/-, counting the enhanced wages in respect of
only the unskilled labour. As stated earlier, the
Respondent has not produced any evidence in support of
its contention that revised rates in minimum wages were
applicable only in case of unskilled labour. Even
otherwise, it does not appeal to logic as to why revision
in wages would be applicable for one category of labour
and not to the other. If the Respondent had included such
a clause in the agreement, the Claimant would have kept
this factor in view while quoting its rates at the time of
filing the tender. There is force in the Claimant's
contention that revision of minimum wages would over
the entire labour force including unskilled, semi-skilled
and skilled and is accepted.
34. In view of the position stated in the previous
paragraphs, I am inclined to support the case put forward
by the Claimant. Claim No. 5 is, thus, accepted to the
extent of Rs. 54,14,475/-."
22. The Arbitrator has therefore, considered the effect of Clause 10(C)
of the agreement and has concluded that the petitioner herein had never
expressed a desire to inspect the books of account and there was, as such,
no violation of Clause 10(C). The Arbitrator further relied upon the
certificate issued by the Deputy Labour Welfare Commissioner
confirming that there was no complaint pertaining to non-payment/less
payment in respect of the work undertaken by the respondent on
modernization of Sena Bhawan. The Arbitrator further holds that there
was no justification in confining the revision of rates of wages only to
OMP (Comm.) No.229/2016 Page 13
unskilled labour and for not extending the benefit of Clause 10(C) of the
agreement to the revision in rates of semi skilled and skilled labour.
23. I may also note that in the record of proceedings dated 05.02.2015
the Arbitrator recorded the following in respect to the Claim No.5:
"4. Claim No. 5 pertains to withholding of a sum of Rs.
1,21,76,514/- (revised) on account of revision of
minimum wages of labour. The learned Counsel for the
Respondent drew attention to Clause 10 C and stated that
the Claimant had failed to give prior intimation to the
Respondent in this regard and was, therefore, not entitled
to claim this amount. Further, the increase in minimum
wages from time to time was also not indicated to the
Respondent. The Claimant produced a copy of the
notification vide which the minimum wages payable to the
labourers were notified. It was also mentioned that non-
payment of minimum wages tantamounts to a criminal
offence for which the Claimant could have been
prosecuted if it had failed to pay the minimum wages as
notified by the Labour Department from time to time. The
Claimant drew attention to Exhibit C-9 which is the
certificate issued to the Respondent by the Dy. Labour
Welfare Commissioner confirming that there was no
complaint pertaining to nonpayment/less payment in
respect of the work undertaken by the Claimant on
Modernisation of Sena Bhawan. Shri Mehta, Executive
Engineer, CPWD, however, raised a point at this stage
that charging labour component at a uniform rate of 32%
for all the works undertaken in the project could not be
justified as the strength of labour deployed would differ
depending on the nature of work. The parties agreed that
they would further deliberate on this issue and work out
the labour element required in each sub component of the
project and revise the claim accordingly. This exercise
should also be completed within two weeks and the result
thereof reported to the tribunal.
OMP (Comm.) No.229/2016 Page 14
(emphasis supplied)"
24. The petitioner thereafter submitted the document marked Ex.RX/1,
wherein it made the following submissions in respect of the Claim No.5:
"1. Contractor M/s Garg Associates has submitted
the statement & Nos. for payment under Clause 10C
amounting to Rs. 80,74,557/- vide its Letter No. NIL
dt. 03/03/2015.
2. The items has been scrutinized by the office and
it is found that there was difference in coefficient of
labour. In some of the item even the quantity were on
the higher side. The items have been checked and the
corrected amount of the 10C work out to Rs.
48,36,387/-.
3. As per CPWD practice increase in labour for
unskilled labour is to be paid to the agency, where as
the Agency has claimed variable rates for skilled,
unskilled and semi skilled class, which is not in order.
4. It is to be ensured that as per clause 10-C the
amount is payable only, if the Agency actually pays
the enhance rates to the labour.
Put up for further n.a.pl.
Submitted to the Ld. Arbitrator for further favourable
necessary action please.
Sd/-
(Anil Mehta)
Respondent"
25. A reading of the above documents would show that the petitioner
itself had worked out an amount of Rs.48,36,387/- as payable to the
OMP (Comm.) No.229/2016 Page 15
respondent under Clause 10(C) of the agreement. The only condition put
to the same was a proof of the actual payment of such enhanced rate to
the labour by the respondent.
26. Before proceeding further with this claim, I would first reproduce
Clause 10(C) of the agreement:-
"Clause 10C
Payment on Account of Increase in Prices/Wages due to Statutory
Order(s)
If after submission of the tender, the price of any material
incorporated in the works (not being a material supplied from the
Engineer-in-Charge's stores in accordance with Clause 10
thereof) and/or wages of labour increases as a direct result of the
coming into force of any fresh or statutory rule or order (but not
due to any changes in sales tax/VAT) and such increase in the
price and/or wages prevailing at the time of the last stipulated date
for receipt of the tenders including extensions if any for the work,
and the contractor thereupon necessarily and properly pays in
respect of that material (incorporated in the works) such increased
price and/or in respect of labour engaged on the execution of the
work such increased wages, then the amount of the contract shall
accordingly be varied and provided further that any such increase
shall not be payable if such increase has become operative after
the stipulated date of completion of the work in question.
If after submission of the tender, the price of any material
incorporated in the works (not being) a material supplied from the
Engineer-in-Charge's stores in accordance with Clause 10
thereof) and/or wages of labour is decreased as a direct result of
the coming into force of any fresh law or statutory rules or order
(but not due to any changes in sales tax/VAT) and such decrease in
the prices and/or wages prevailing at the time of receipt of the
tender for the work. Government shall in respect of materials
incorporated in the works (not being materials supplied from the
Engineer-in-Charge's stores in accordance with Clause-10 hereof)
OMP (Comm.) No.229/2016 Page 16
and/or labour engaged on the execution of the work after the date
of coming into force of such law statutory rule or order be entitled
to deduct from the dues of the contractor, such amount as shall be
equivalent to the difference between the prices of the materials
and/or wages as prevailed at the time of the last stipulated date for
receipt of tenders including extensions if any for the work and the
prices of materials and/or wages of labour on the coming into
force of such law, statutory rule or order.
The contractor shall, for the purpose of this condition, keep such
books of account and other documents as are necessary to show
the amount of any increase claimed or reduction available and
shall allow inspection of the same by a duly authorised
representative of the Government, and further shall, at the request
of the Engineer-in-Charge may require any documents so kept and
such other information as the Engineer-in-Charge may require.
The contractor shall, within a reasonable time of his becoming
aware of any alteration in the price of any such materials and/or
wages of labour, give notice thereof to the Engineer-in-Charge
stating that the same is given pursuant to this condition together
with all information relating thereto which he may be in position to
supply."
27. Clause 19(B)(i),(ii) and (v) are also relevant as they cast an
obligation on the contractor/respondent to pay wages in accordance with
the Minimum Wages Act, 1948. The same are reproduced herein below:-
"CLAUSE 19 B
Payment of wages:
(i) The contractor shall pay to labour employed by him
either directly or through sub-contractors, wages not less than
fair wages as defined in the C.P.W.D. Contractor's Labour
Regulations or as per the provisions of the Contract Labour
(Regulation and Abolition) Act, 1970 and the contract Labour
(Regulation and Abolition) Central Rules, 1971, wherever
applicable.
OMP (Comm.) No.229/2016 Page 17
(ii) The contractor shall, notwithstanding the provisions
of any contract to the contrary, cause to be paid fair wage to
labour indirectly engaged on the work, including any labour
engage by his sub -contractors in connection with the said
work, as if the labour had been immediately employed by him.
xxxxxxx
(v) The contractor shall comply with the provisions of the
Payment of Wages Act, 1936, Minimum Wages Act, 1948,
Employees Liability Act, 1938, Workmen's Compensation Act,
1923, Industrial Disputes Act, 1947, Maternity Benefits Act,
1961, and the Contractor's Labour (Regulation and Abolition)
Act 1970 or the modifications thereof or any other laws relating
thereto and the rules made thereunder from time to time."
28. Clause 5 of the CPWD Contractor's Labor Regulation further
provides as under:-
"5. PAYMENT OF WAGES
xxxxxx
ix) A notice showing the wages period and the place and time of
disbursement of wages shall be displayed at the place of work and
a copy sent by the contractor to the Engineer-in-Charge under
acknowledgment.
x) It shall be the duty of the contractor to ensure the disbursement
of wages in the presence of the Junior Engineer or any other
authorized representative of the Engineer-in-Charge who will be
required to be present at the place and time of disbursement of
wages by the contractor to workmen."
29. A reading of the above Clauses would show that the respondent
was under an obligation to pay the minimum wages in accordance with
the notifications issued by the Appropriate Government from time to
time. The claim of the respondent was based on such Government
OMP (Comm.) No.229/2016 Page 18
notifications. It is also noted that the component of labour was left blank
in Schedule F of the agreement.
30. The learned senior counsel for the respondent had drawn my
attention to the certificate dated 12/14 June, 2013 issued by the office of
Deputy Labour Welfare Commissioner(C), Government of India
certifying that there is no complaint pertaining to non-payment/less
payment or otherwise in respect of the work undertaken by the
respondent. He submits that not only were the payments made in
presence of the authorized representatives of the petitioner but also, it is
not the case of the petitioner that there were any complaints of short
payment or non-payment of wages against the respondent. He further
draws my attention to the letter dated 20.12.2011 from the respondent to
the petitioner wherein the respondent had claimed that it maintained
proper evidence of payment of minimum wages and has never refused to
show such record to the representatives of the petitioner whenever asked
for.
31. The above documents show that the respondent was under an
obligation to pay the minimum wages as notified by the Appropriate
Government from time to time; such notifications were not in dispute; the
payment was to be made before the representative of the petitioner; the
petitioner did not contend that it had received any complaint of non-
payment/short payment of wages against the respondent; the concerned
labour authority had certified that there are no complaints received by it
against the respondent with regard to short payment/non-payment of
minimum wages; and the respondent offered to the petitioner inspection
OMP (Comm.) No.229/2016 Page 19
of its books of accounts. The finding of the Arbitrator that the respondent
had indeed fulfilled the conditions as mentioned in Clause 10(C) of the
agreement therefore, cannot be said to be unreasonable or perverse. In
any case, this being a matter of appreciation of evidence by the
Arbitrator, it would not be open for this Court to re-appreciate the same.
32. In view of the above, the judgments relied upon by the learned
counsel for the petitioner would have no application to the facts of the
present case.
33. In Associate Builders vs. DDA (2015) 3 SCC 49, the Supreme
Court, has issued a word of caution for the Courts exercising powers
under Section 34 of the Act in the following words:-
"33. It must clearly be understood that when a court is applying
the "public policy" test to an arbitration award, it does not act as
a court of appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied upon when he
delivers his arbitral award. Thus an award based on little evidence
or on evidence which does not measure up in quality to a trained
legal mind would not be held to be invalid on this score [ Very
often an arbitrator is a lay person not necessarily trained in law.
Lord Mansfield, a famous English Judge, once advised a high
military officer in Jamaica who needed to act as a Judge as
follows:
"General, you have a sound head, and a good heart; take courage
and you will do very well, in your occupation, in a court of equity.
My advice is, to make your decrees as your head and your heart
dictate, to hear both sides patiently, to decide with firmness in the
best manner you can; but be careful not to assign your reasons,
since your determination may be substantially right, although your
reasons may be very bad, or essentially wrong".
OMP (Comm.) No.229/2016 Page 20
It is very important to bear this in mind when awards of lay
arbitrators are challenged.] . Once it is found that the arbitrators
approach is not arbitrary or capricious, then he is the last word on
facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H.
Securities (P) Ltd. [(2012) 1 SCC 594 : (2012) 1 SCC (Civ) 342] ,
this Court held: (SCC pp. 601-02, para 21)
"21. A court does not sit in appeal over the award of an Arbitral
Tribunal by reassessing or reappreciating the evidence. An award
can be challenged only under the grounds mentioned in Section
34(2) of the Act. The Arbitral Tribunal has examined the facts and
held that both the second respondent and the appellant are liable.
The case as put forward by the first respondent has been accepted.
Even the minority view was that the second respondent was liable
as claimed by the first respondent, but the appellant was not liable
only on the ground that the arbitrators appointed by the Stock
Exchange under Bye-law 248, in a claim against a non-member,
had no jurisdiction to decide a claim against another member. The
finding of the majority is that the appellant did the transaction in
the name of the second respondent and is therefore, liable along
with the second respondent. Therefore, in the absence of any
ground under Section 34(2) of the Act, it is not possible to re-
examine the facts to find out whether a different decision can be
arrived at.
34. It is with this very important caveat that the two fundamental
principles which form part of the fundamental policy of Indian law
(that the arbitrator must have a judicial approach and that he must
not act perversely) are to be understood.
xxxxxx
42. In the 1996 Act, this principle is substituted by the "patent
illegality" principle which, in turn, contains three subheads:
xxxxxx
42.3. (c) Equally, the third subhead of patent illegality is really a
contravention of Section 28(3) of the Arbitration Act, which reads
as under:
"28. Rules applicable to substance of dispute. (1)-(2)
OMP (Comm.) No.229/2016 Page 21
(3) In all cases, the Arbitral Tribunal shall decide in accordance
with the terms of the contract and shall take into account the
usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An
Arbitral Tribunal must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the award can be set
aside on this ground. Construction of the terms of a contract is
primarily for an arbitrator to decide unless the arbitrator
construes the contract in such a way that it could be said to be
something that no fair-minded or reasonable person could do.
43. In McDermott International Inc. v. Burn Standard Co.
Ltd.,(2006) 11 SCC 181 this Court held as under: (SCC pp. 225-
26, paras 112-13)
"112. It is trite that the terms of the contract can be
expressed or implied. The conduct of the parties would also be a
relevant factor in the matter of construction of a contract. The
construction of the contract agreement is within the jurisdiction of
the arbitrators having regard to the wide nature, scope and ambit
of the arbitration agreement and they cannot be said to have
misdirected themselves in passing the award by taking into
consideration the conduct of the parties. It is also trite that
correspondences exchanged by the parties are required to be taken
into consideration for the purpose of construction of a contract.
Interpretation of a contract is a matter for the arbitrator to
determine, even if it gives rise to determination of a question of
law. [See Pure Helium India (P) Ltd. v. Oil and Natural Gas
Commission, (2003) 8 SCC 593:2003 Supp (4) SCR 561 and
D.D.Sharma v. Union of India.] (2004) 5 SCC 325.
113. Once, thus, it is held that the arbitrator had the
jurisdiction, no further question shall be raised and the court will
not exercise its jurisdiction unless it is found that there exists any
bar on the fact of the award."
34. Award on Claim No.5 being based on the interpretation of Clause
10(C) by the Arbitrator and the weight and inference drawn by him from
the evidence led by the parties, this Court cannot set aside such Award
OMP (Comm.) No.229/2016 Page 22
merely because it would have preferred another interpretation or arrived
at another conclusion on the evidence.
35. The next challenge of the petitioner is to the award of interest in
favour of the respondent under Claim no. 6. The Arbitrator has awarded
this interest at the rate of 18% per annum purportedly on the basis of a
settlement between the parties. As discussed by me above, in relation to
the challenge to Claim no. 3, merely because the representative of the
petitioner had signed a calculation sheet calculating the amount of
interest that may become payable by the petitioner to the respondent if
the interest is calculated at the rate of 18% per annum, it cannot be said
that the petitioner had also agreed that the respondent is entitled to indeed
claim interest at the rate of 18% per annum.
36. The learned senior counsel for the respondent submits that the
respondent had filed documents before the Arbitrator certifying that it
was paying interest at the rate of 17% per annum to the Punjab and Sindh
Bank and therefore, the award of interest at the rate of 18% per annum
was justified. I cannot accept the said argument. Under Section 31(7) of
the Act, the Arbitrator has a discretion to award interest at such rate as he
deems reasonable. In the present case, the Arbitrator has exercised such
discretion on a totally wrong premise that the parties have arrived at a
settlement on the rate of interest to be paid by the petitioner to the
respondent. Once this basic foundation is found to be incorrect, the award
of interest cannot be sustained.
37. The learned counsel for the petitioner has further argued that in
terms of Clause 7 of the agreement, the respondent would in fact, not be
OMP (Comm.) No.229/2016 Page 23
entitled to claim any interest on account of delay in making payment of
the running account bills. This submission of the learned counsel for the
petitioner cannot be accepted. Clause 7 of the agreement obliges the
petitioner to pay such amount of the running bill and creates an
entitlement for the same in favour of the respondent. This Court in The
Union of India vs. M/s City Promoter & Buildwell Pvt. Ltd. 2018 SCC
OnLine Del 7643, has rejected a similar argument based on Clause 64 of
the General Conditions of the Contract and therefore, I see no reason to
accept the argument of the learned counsel for the petitioners on this
ground.
38. The above discussion on Claim no. 6 would, therefore, leave the
question of final relief to be given to the parties. In Puri Construction
Pvt. Ltd. & Ors. vs. Larsen and Tubro Ltd. & Ors.
MANU/DE1316/2015, this Court has held that while exercising its
powers under Section 34 of the Act, the Court cannot modify, remit or
vary the award. This Court relied upon the judgment of the Supreme
Court in Mc Dermott International Inc. vs. Burn Standard Company
Ltd., (2006) 11 SCC 181. However, it is noticed that in Mc Dermott, the
Supreme Court also reduced the rate of interest awarded by the Arbitrator
from 10% to 7½ % p.a. therein, exercising its powers under Article 142
of the Constitution of India. In many other cases, this Court has also
modified the rate of interest awarded by the Arbitrator. In the present
case, the Arbitrator under Claim no.9 has awarded pendente lite and
future interest in favour of the respondent at the rate of 9% p.a.
Therefore, discretion on the reasonable rate of interest has been exercised
OMP (Comm.) No.229/2016 Page 24
by the Arbitrator. Accordingly, it is held that the respondent shall be
entitled to interest at the rate of 9% p.a. under Claim no.6.
39. The petitioner has further challenged the award of an amount of
Rs.18,48,000/- in favour of the respondent under Claim No. 8 as
expenditure incurred on the salaries of the supervisory and supporting
staff as well as on idle T & P over a period of 28 months on account of
prolongation of contract.
40. Before dealing with this submission, it is noted that in terms of the
contract, the Scheduled Date of Completion of work was 06.02.2010 and
the Actual Date of Completion of work was 15.06.2012. The Arbitrator,
after considering the submissions made by the parties as also the
documents produced before him, arrived at the following conclusion:-
"49. I am not convinced with the argument advanced
by the Respondent that extensions were given without
levying any penalties in view of the undertaking given by
the Claimant that it had not suffered any loss and that it
would not claim anything extra on this account. It is very
often seen that for securing payments against outstanding
dues, the Contractors are not left with any choice but to
furnish such undertakings with a view to obtaining
pending payments. It is interesting to note that neither
party has filed copies of their replies to the
communications received from the other party, which
would have given some idea as to the genuineness of the
issues raised in their respective complaints addressed to
each other. It appears that in the facts and circumstances
of the case, both parties were equally responsible for the
delays in the execution of the project, and it would be just
and fair that the burden of extra expenditure on the
salaries of supervisory staff and idle T & P is shared
equally by both parties during the prolongation period.
OMP (Comm.) No.229/2016 Page 25
50. Claim No. 8 is, thus partially accepted to the
extent of Rs.18,48,000/- only i.e. 50% of the amount
claimed."
(emphasis supplied)
41. The learned counsel for the petitioners submits that the Arbitrator
has ignored the undertaking given by the respondent while seeking
extension of time, whereby the respondent had clearly represented that it
had not suffered any losses due to the delay and will not claim anything
extra on this account. The learned counsel for the petitioners further
states that the award of 50% of the Claim is even otherwise without any
justification and completely ad-hoc.
42. On the other hand, the counsel for the respondent submits that the
Arbitrator has considered the evidence led before him, including the
undertaking of the respondent sought to be relied upon by the petitioner.
He further submits that the Arbitrator in this case, did not place reliance
on the undertaking giving cogent reason that the extension of time was
being given without levying any penalty, thereby, admitting that the
delay was not attributable to the respondent; damages, being a
consequential relief of delay amounting to breach of contract, the
Arbitrator was within his rights to have awarded such damages.
43. I have considered the submissions made by the counsels for the
parties. In the present case, the petitioner had granted extension of time
in favour of the respondent from time to time without levying any
liquidated damages. The counsel for the respondent has submitted that
upon completion of the work, the final bill was submitted on 01.11.2012.
OMP (Comm.) No.229/2016 Page 26
The petitioner, as per usual practice, refused to process the same till the
respondent gives an undertaking in its prescribed performa. It is only
upon giving of the undertaking that finally the bill was passed by the
petitioner on 02.03.2013. The respondent immediately invoked
Arbitration on 13.05.2013 without even waiting for the payment of the
final bill.
44. As noted above, the Arbitrator has indeed taken note of this
undertaking but has discarded the same on the ground that the petitioner
had granted extension of time without levying any penalties; both parties
were equally responsible for the delay; and also because very often the
Contractor is left with no choice but to give such undertakings in order to
secure the pending payments. In National Insurance Co. Ltd vs M/s.
Boghara Polyfab Pvt.Ltd, AIR 2009 SCC 170, the Supreme Court, while
considering the effect of giving undated receipts of full and final
settlement, had also taken note of such practice of taking receipts as a
condition precedent for releasing the payments otherwise due and
payable under the contract, and held that such discharge voucher cannot
be considered voluntary or as having resulted in discharge of the contract
by accord and satisfaction.
45. As far as the contention of the learned counsel for the petitioners
that the amount awarded has been given on ad-hoc basis rather than on
appreciation of the actual loss suffered by the respondent, the Supreme
Court in Dwarka Das vs. State of Madhya Pradesh & Anr., (1999) 3
SCC 500, had held that once the grant of damages in case of breach of
contract is found justified, the Court will not interfere with the
OMP (Comm.) No.229/2016 Page 27
quantification of the damages even if it was passed upon guess work,
provided the same appears to be reasonable.
46. In P.C. Sharma v. Delhi Development Authority, 2006(1) Arb.LR
403 (Delhi), this Court had held that if the delay is attributable to the
employer and the machinery is lying idle at the site, it was certainly open
for the Arbitrator to award damages, the same being separate from any
award which may be made under Clause 10(C) of the agreement.
47. In any case, it is settled law that in exercise of powers under
Section 34 of the Act, this Court would not sit as a Court of appeal over
the decision of the Arbitrator and arrive at its own conclusions based on
the evidence led before the Arbitrator. It is only where the award passed
shocks the conscience of the Court that this Court may set aside the
award on this ground. In Associate Builders (supra) the Supreme Court
had set aside the order passed by the High Court in that case, inter-alia
holding as under:-
"56....The formula then applied by the Division Bench was that it
would itself do "rough and ready justice". We are at a complete
loss to understand how this can be done by any court under the
jurisdiction exercised under Section 34 of the Arbitration Act. As
has been held above, the expression "justice" when it comes to
setting aside an award under the public policy ground can only
mean that an award shocks the conscience of the court. It cannot
possibly include what the court thinks is unjust on the facts of a
case for which it then seeks to substitute its view for the
arbitrator's view and does what it considers to be "justice". With
great respect to the Division Bench, the whole approach to setting
aside arbitral awards is incorrect. The Division Bench has lost
sight of the fact that it is not a first appellate court and cannot
interfere with errors of fact."
OMP (Comm.) No.229/2016 Page 28
48. In the present case, once the petitioner has also been held guilty of
having caused delay in the timely completion of the work, as is apparent
from some of the documents to which my attention had been drawn by
the learned senior counsel for the respondent, namely, the letters granting
the extension of time, the award of amount under Claim No.8 in favour of
the respondent cannot be said to be so unreasonable or unjustified, as
requiring an interference by this Court.
49. The final challenge of the petitioner to the Impugned Award is to
the grant of pendente lite and future interest in favour of the respondent
@ 9% per annum by the Arbitrator.
50. The learned counsel for the petitioners submits that the interest
awarded in favour of the respondent is unreasonable. I am unable to
accept the said submission of the learned counsel for the petitioners. The
award of interest @ 9% per annum cannot be said to be unreasonable in
the facts and circumstances of the present case. The Arbitrator, in any
case, has considered the issue of interest in detail and it would not be
open for this Court to sit in judgment over the exercise of discretion by
the Arbitrator in this regard.
51. In view of the above, the Impugned Award dated 19th May, 2015,
insofar as it grants Claim Nos.3 and 6 in favour of the respondent, is set
aside. The respondent shall, however, under Claim No.6 be entitled to
claim interest at the rate of 9% per annum for the pre-reference period on
the delayed payments.
OMP (Comm.) No.229/2016 Page 29
52. The petition is partly allowed in the above terms. The parties shall
bear their respective costs of the present proceedings.
NAVIN CHAWLA, J
APRIL 23, 2018/RN/rv
OMP (Comm.) No.229/2016 Page 30
