Delhi High Court
Punjab National Bank vs Prime Engineers Consultants on 2 August, 2018
$~4
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Order: August 02, 2018
+ FAO(OS) 233/2013, C.M. Appl. No. 7339/2018
PUNJAB NATIONAL BANK
..... Appellant
versus
PRIME ENGINEERS CONSULTANTS
..... Respondent
+ FAO(OS) 234/2013
PUNJAB NATIONAL BANK
..... Appellant
versus
PRIME ENGINEERS AND CONSULTANTS
..... Respondent
Counsel for the Appellant:
Mr. Rajesh Kumar Gautam, Advocate
Counsel for the Respondent:
Ms.Anusuya Salwan, Ms. Nikita Salwan, Advocates
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA
ORDER
%
S. RAVINDRA BHAT, J. (ORAL)
1. In both these appeals under Section 37 of the Arbitration &
Conciliation Act (hereinafter referred as the "Act"), the Punjab
National Bank (hereinafter referred as "PNB") questions the decision
of the learned Single Judge/adjudicating its objections to two separate
awards, rendered by one common Tribunal. The Tribunal adjudicated
the disputes with respect to two works contracts awarded by PNB -
first related to the Office premises (in Branch Office) and the other
Staff Quarters.
2. The disputes, which were the subject matter of arbitration
proceedings before the Tribunal, were contracts entered into on
19.05.1994. The respondent (hereinafter called the "Contractor"),
which was entrusted with the execution of works, demanded various
amounts as due and payable by PNB, later disputed its liability and
primarily contended - in the arbitration proceedings, that some of the
claims were barred on account of the Clause 5.46 since they fall in the
category of "excepted matters". With respect to the other claims,
various other objections were raised. The Tribunal adjudicated all
these and granted different amounts to the Contractor (` 31 lakhs in
respect of the premises for branch and ` 16 lakhs in respect of the
Staff Quarter Complex). The PNB agreed and had approached this
court under Section 34. In those proceedings contentions urged were
mainly three fold; firstly, that the award so far as it dealt with delayed
execution, was an "accepted matter" and, that the Tribunal had
proceeded beyond the contract; likewise the Award of interest in
respect of the delay in the refund of earnest money deposited and
security amount, was inadmissible under the contract; and lastly, that
the Tribunal patently erred in law in discarding the expressly agreed
price variation clause (Clause 5.41) in both the contracts and goes on
ahead in the simpler arithmetical calculation on the subject.
3. The learned Single Judge noticed PNB's primary objections
with respect to the arbitrability in having regard to Clause 5.46 but
proceeded and rejected in the following terms:
9. It has been rightly pointed out by Ms. Anusuya
Salwan, learned counsel appearing for the Respondent,
that the learned Arbitrator was justified in examining
whether the plea of arbitrability of some of the in fact
tenable. In MIs. J.G. Engineers Pvt. Ltd v. Union of
India AIR 2011 SC 2477, it was explained by the
Supreme Court that even where a contract provides that
a named officer will have the final say in respect of
certain items of claim, it would be open to the learned
Arbitrator to examine whether in fact the plea of
arbitrability was tenable. Reference was made to the
earlier decisions of the Supreme Court in State of
Karnataka v. Shree Rameshwara Rice Mills
Thirthahalli (1987) 2 SCC 160 and Bharat Sanchar
Nigam Limited v. Motorola India Pvt. Ltd, AIR 2009
SC 357. Ultimately in was concluded on the facts of the
case that "the question whether Appellant was
responsible or Respondents were responsible for the
delay in execution of the work, was arbitrable". It was
further held that "once it is held that the contractor was
not responsible for the delay and the delay occurred only
on account of the omissions and commissions on the part
of the Respondents, it follows that provisions which make
the decision of the Superintending Engineer or the
Engineer-in-charge final and conclusive, will be
irrelevant. Therefore, the Arbitrator would have
jurisdiction to try and decide all the claims of the
contractor as also the claims of the Respondents".
10. Turning to the case on hand, as pointed out by the
Respondent Clause 5.46 requires the named officer to
take a decision in relation to the claims which constituted
'excepted' matters. The PNB does not appear to have
demonstrated before the learned Arbitrator that the
named officer took such decision. The mere acceptance
of the final bill by the Respondent would not amount to a
waiver of its claims. Such a plea is in the teeth of Section
28 of the Act. This was not a case where the Respondent
gave an undertaking that it would not raise any claim.
Therefore the mere acceptance of the payment under the
final bill did not preclude the Respondent from raising
claims before the learned Arbitrator. The objection
rinsed by the PNB to both the impugned Awards on the
issue of arbitrability is hereby rejected."
XXX
16. The other substantial sums as far as Cases-I and II
are concerned was with reference to price deviation. This
pertained to Claim No.3 (b) in Case-I and Claim No.
1(g) and Claim No. 4(b) in Case-Il. Under Clause 5.41
PVA would be admissible for the period of would not be
admissible for the delay attributable to the Contractor. It
was admissible for delay beyond six months. The
Respondent submitted along with its statement of facts
the quantification of the claims whereas no alternative
quantification was provided by the PNB. In the
circumstances, the learned Arbitrator has accepted the
quantification submitted by the Respondent. The above
determination of the PVA payable by the PNB does not
appear to the Court as suffering from any illegality. The
learned Arbitrator also clarified that he was not deciding
the question whether the PNB was right in its decision.
The scope of examination was confined to the
correctness of the arithmetical computations and
interpretations of the clause and its sub clauses. This is
consistent with the legal position explained in MIs. J.G.
Engineers Pvt. Ltd. Accordingly this Court does not find
any reason to interfere with the impugned Awards as
regards payment of PVA."
17. The other substantial sums awarded by the learned
Arbitrator in Case-I was with reference to deviated
quantities. This was Claim No.2 in both Cases-I and II.
Clause 5.35 (vii) of the agreement provided for payment
of quantities up to a variation of plus 25% at the tender
rates. In respect of minus 25% variation, the clause is
silent as I regards the rates. The grievance of the
Respondent was that instead of adopting the agreed rates
for increase beyond 25% and adhering to tender rates
for decrease beyond 25%, the PNB made arbitrary and
unjustified reduction in both categories of items. The
PNB tried to explain its actions by alleging that the work
was sub-standard and that the rates were reduced on
account of defects. The learned Arbitrator observed that
"it seems surprising that sub-standard work was found
only in reduced quantities and not in increased quantities
(no evidence shown to the contrary)". The other defence
taken was that since the Respondent had accepted the
final bills, it should be taken to have waived its claims.
The learned Arbitrator has rightly rejected this defence
while dealing with the preliminary objections as to
arbitrability."
4. Mr. Rajesh Gautam, learned counsel appearing for the PNB
urges that the impugned judgment requires to be set aside as the
Award in this case discloses a patent error of law. It is submitted that
the Tribunal virtually ignored Clause 5.46 which clearly spelt out that
the finality to the Engineer Incharge's decision with respect to the
cases for delay. It is submitted that the reliance placed upon J.G.
Engineers Pvt. Ltd. vs. UOI, (2011) 5 SCC 758, in the circumstances
of the case was not warranted. Learned counsel elaborated, by stating
that in J.G. Engineers (supra), the condition interpreted was not as
clear with respect to the delay or causes of delay in the execution of
the contract as in the present instances. Clearly therefore, the Tribunal
exceeded its jurisdiction; such excess amounted to violation of Article
28(3) of the Act, which warranted interference so far as the Award
pertains to "excepted matters". Likewise, learned counsel urged that
the Tribunal ignored clause 5.41 in which the parties have agreed in
unequivocal terms that interest for a period beyond six months, would
not be admissible in respect of EMD and security amounts. Learned
counsel in this regard, relied upon Union of India vs. Bright Power
Project (India) Private Limited, (2015) 9 SCC 695, in which the
Supreme Court had occasioned to deal with the identical clause. The
court then held that the Tribunal's power to grant relief is
circumscribed by such condition. Likewise, it was submitted that the
Tribunal acted contrary to the mandate of the parties in the contract
inasmuch as it proceeded to discard the price variation clause holding
it to be complicated and instead substituting it with what the
Arbitrator felt was a more reasonable and simpler method of
calculation.
5. Ms. Salwan, learned counsel appearing for the Contractor urged
that the reasoning of the learned Single Judge in the impugned order
is sound and does not call for interference. She relied upon the
judgment in J.G. Engineers (supra) to say that the court generally
stated that the contract conditions which tendered to execute certain
specific items, should be read in the proprietary and in no
circumstances, should the aggrieved party denied the forum to
ventilate its grievances. Urging that the conditions interpreted by the
Supreme Court were in no way different, learned counsel stated that
the decision is to be read in a broad way and not in narrow manner. It
was thus contended that the Tribunal's finding with respect reference
to the cause of delay was upon its objective analysis of the facts and
circumstances and not dependent upon one of the parties (i.e. the
bank's Engineers) interpretation of it or the facts of the case. Being a
neutral and impartial adjudicator, his decision should be left alone and
considered final. As far as the grant of interest comes, learned counsel
supported the Award submitting that there was inexplicable delay
which necessitated the Award beyond the period stipulated. She
highlighted that the PNB unreasonably did not allow the EMD and
security amount to be converted into Fixed Deposits. Given these
facts, the grant of rates of interest for period beyond the agreed or
stipulated time cannot be construed as patent error. It was submitted
with respect to last item (price variation) that the Tribunal was a sole
Arbitrator and an expert in the field i.e. Retired Director General of
CPWD. In his opinion, the conditions that PNB had raven into
contract was price variation was undue complicated as it assimilated
conditions that were peculiar different sectors. Instead the Arbitrator
adopted a broad common sense and simple approach or mathematical
calculation while dealing with price variation. In this view of the
matter, it is submitted that the decision of the learned Single Judge
does not call for interference.
6. The relevant conditions of the contract, (i.e. Clause 5.41 so far
as it pertains to the dispute), which are the subject matter, are set out
below:
5.41 PRICE VARIATION ADJUSTMENT
The rate quoted shall be firm throughout the tenure of
the contract (including extension of time, if any,
granted) and will not be subject to any fluctuation due to
increase on account of sales tax, octroi and other taxes
and levies etc. However price variation adjustment to
the value of work payable to the contractor at tendered
rates shall be made towards variation in the prices of
materials and labour in the manner specified hereunder:
If, after the written order to commence the work and
during the operative period of this contract including any
authorized extensions of the original stipulated
completion period:-
(a) there be any variation in the consumer price
index-general index- for industrial workers (Base
1982= 100) (source data published from time to
time in Indian Labour Journal) by the Labour
Bureau, Government of India).
(b) there be any variation in the All India Whole sale
Price Index for all the commodities (Base 1981-
82=100) (as published from time to time in the
RBI bulletin based on the date issued by the office
of Economic Adviser to the Government of India).
Price Variation adjustment (PVA) towards (10 labour
component and (2) material component shall be
calculated in accordance with the formulae A and b
respectively, given below, subject to stipulations
hereinafter mentioned.
Formula (A) for labour
VL = 0.87 P K1 x (c1-C0)
Formula (B) for materials
VM = 0.87 x P K2 x 11-10
100 100
Where -
VL = Amount of Price Variation Adjustment - increase
or decrees in rupees due to Labour Component.
VM - Amount of Price Variation Adjustment - increase
or decrease in rupees on account of materials
component.
Note: Bill (noted hereunder) signified the period of
actual execution and not date of measurement or
preparation bill.
P - Cost of work done during the period under
consideration (bill period) excluding advances on
materials cost of extra/substituted items and/or
adjustments thereof.
K1 = Percentage of labour component as calculated as
indicated in Note (1) below.
K2 = Percentage of materials component as indicated in
Note (1) below.
CO = Consumer price index - general index number for
industrial workers (Base 1982 = 100) referred to at (a)
above, ruling on the last date for receipt of tenders, and
as applicable to the centre, nearest to the place of work,
for which the index is published.
C1 = Average of above mentioned consumer price index
number during the period under consideration (bill
period).
10 = All India wholesale price index number for all
commodities referred to at (b) above, ruling on the last
date for receipt of tenders and as applicable to the
centre, interest, to the place of work for which the index
is published.
11 = Average of above mentioned monthly All India
Wholesale Price index numbers during the period under
consideration (bill period).
Note: (1) K1 shall be taken as under:-
a. Component of work: Civil work including
ancillary works and external work and
R.C.C./tanks, septic tank etc. If any for sanitary
and plumbing work. 30%
b. Sanitary and plumbing works including fittings
and fixtures (internal work only)
20%
c. Electrical installations work including fittings and
fixtures (external and internal works).
20%
Note: (2) K2 shall be taken as under:-
a. Civil work including ancillary works as detailed
under Note (1)(a) above.
70%
b. Sanitary and plumbing works including fittings
and fixtures as detailed under Note (1) above.
80%
c. Electrical installations work including fittings and
fixtures as detailed under Note (1)(c) above.
20%
Stipulations:
1. P.V.A. clause is operative either way i.e. if the
variations in above referred price indicates are on
the plus side, PVA shall be payable in the
contractor and if they are on the negative3 side
PVA shall be recoverable from the contractor, for
the respective bill period of occurrence of
fluctuations.
2. The rates quoted by the contractor shall be treated
as firm for the value of work required to be done
in the first 6 months of the contract period from
the date of written order to commence work, and
no PVA is admissible on the same on any grounds
whatsoever. The value of work required to be done
during the first 6 months of the contract period
shall be taken as 80% of the value of work to be
done on pro-rata basis in 6 months as compared to
the total stipulated completion period. No PVA is
admissible on the value of work required to be
done in the first 6 months as worked out above,
even if this value of work is actually done in a
period longer than 6 months. However, in case of
any delay in the first 6 months due to genuine
reasons which are not attributable to the
contractor and which are beyond his control, such
period of delay will be deducted from 6 months,
and the value of work tobe done will be 80% of the
prorate value of work to be done in such reduced
period of prorate basis.
iii. (a) For works where the original stipulated period
of completion is not more than 6 months no PVA
whatsoever is permissible under this clause.
However, if the period of completion is delayed
beyond 6 months on account of genuine reasons
which are not attributable to the contractor and
which are beyond his control, PVA will be
admissible on the value of work done only in
excess of value of work required to be done on a
prorate basis in the first 6 months minus the
period of such genuine delay.
iii. (b) For purposes of admissibility of PVA all the
cumulative period of extensions granted for
reasons which are solely attributable to the
contractor is excluded from the total extended
period of the contract and PVA shall not be
admissible on the value of work done during such
period of extensions, which are granted for
keeping the contract current, but only due to
reasons for which the contractor was solely
responsible. Periods for extensions granted on
account of genuine reasons which are not
attributable to the contractor and which are
beyond his control will, however, be included in
the period for which PVA is admissible.
iii. (c) Notwithstanding anything to the contrary
mentioned in any other clause-clause of the
contract, extensions of the contract period shall be
granted by the Architect only with prior approval
of the bank. Extensions granted by the Architect
without bank's prior approval shall not bind the
bank for payment of PVA for work done in the
concerned period of extension.
iv. (a) Where the total costs of work done beyond the
value of work required to be done in the first 6
months (vide note (ii) and (iii) above) does not
exceed Rs.10 lacs and the total amount of PVA
worked out on the basis of provisions of foregoing
stipulations will be limited to an upper ceiling of
10% of such value of work done in excess of value
of work required to be done in the first 6 months.
iv. (b) Where the total value of work done beyond the
value of work required to be done in the first 6
months exceeds Rs.50 lacs the PVA on the first
Rs.50 lacs will be calculated as provided for in the
foregoing para and for the balance value of work
done for which PVA is admissible subject to
foregoing conditions, the PVA will not have the
upper ceiling of 10% but it will be worked out at a
lower rate i.e. at 80% of the amount worked out.
v. In working out the amount of PVA as per all the
foregoing stipulations, value of such extra items or
such portions of extra items the rates of which are
derived from the prevailing market rates of
materials and labour will not be included in the
value of work done. Value of only such extra items
or such portions of extra items, rates of which are
derived from tendered rates will be included in the
value of work on which PVA is calculated.
vi. For claiming the payment of PVA the contractor
shall keep such books of accounts and other
documents, vouchers, receipts etc. as may be
required by the bank/Architect, for verification of
the increased claims for reductions, to be made as
t he case may be and he shall also allow inspection
of books, documents, by the Site Engineer and
bank's Engineer and/or other duly authorized
representation of the bank/Architects and furnish
such information as may be required or called for
to enable verification of the claim within a week of
such request.
vii. The contractor is required to submit to the bank,
through the Architect, his claims for PVA
separately for each running bill for the individual
bill period for the work paid to him by the bank.
He will also be required to submit detailed
calculations in support of the claims.
viii. No claim will be entertained from the contractor
for interest or any other grounds for non-payment
or for any delay in payment of PVA due to late
publication or non availability of the necessary
price indices or due to delay in preparation of the
running or final bills.
ix. In view of adjustments for variations of prices of
materials and labour which have been covered in t
his clause no other adjustments for any reasons
whatsoever like statutory measures, taxes, levies
escalation in prices of Cement & Steel etc. will be
allowed.
x. In all cases of disputes under this clause the
decision of the competent authority who shall
given a reasonable hearing to the contractor in
person (not through Agents/Advocates) shall be
final and binding.
xi. If any material at fixed rate or services rendered
by the Employer, the value of the same shall not be
taken into consideration for calculating PVA.
XXX XXX XXX XXX
5.46 EXCERPTED MATTERS FROM ARBITRATION
If the dispute or differences pertain to the undernoted
matters (called excepted matters) the decision and in
writing of the officer named in the contract shall be final,
conclusive and binding on the parties. Instruction,
transactions with local authorities, proof of quality of
material. Assigning or under letting of the contract
certificate as to the causes of delay on the part of the
contract certificate as to the cause of delay on the part of
the contractor and justifying extension of time.
Rectifying of defects pointed out during the defects
liability period. Notice to the contractor to the effect
that he is not proceeding with due diligence certificate
that the contractor has abandoned the contract. Notice
of determination of contract by the employer.
XXX XXX XXX XXX
5.12 EARNEST MONEY AND SECURITY DEPOSIT
The tenderer will have to deposit an amount of
Rs.25,000/- in cash, demand draft only (not in the form of
Bank Guarantee) in favour of Punjab National Bank at
the time of submission of tender as an Earnest Money.
The employer is not liable to pay any interest on the
Earnest Money. The Earnest Money of the unsuccessful
tenderers will be refunded without any interest soon after
the decision to after the decision to award the work is
taken or expiry of the validity period of the tender.
The successful tenderer to whom the contract is awarded
will have to deposit as initial security deposit a further
sum to make up 2% of the value of the accepted tender
including the Earnest Money. The initial Security
Deposit will have to be made within 14 days from the
date of acceptance of tender, failing which the Employer
at his discretion may revoke the letter of acceptance and
forfeit the earnest money deposit furnished along with
the tender. The initial security deposit shall be accepted
in the form of cash or D.D. and not by Bank Guarantee.
Apart from the initial security deposit made as above,
retention money shall be deducted from progressive
running bills 8% of the gross value of each running bill
until the total security deposit i.e. the initial security
deposit plus the retention money equals.
(a) 10% of the first rupees one lakh of the
tendered cost of work
(b) 7.50% on the next rupees one lakh of the
tendered cost of work
(c) 5% on the remaining amount of the tendered
cost of work, subject to a ceiling on total
security deposit at rupees ten lakhs
(Rs.10,000,00/-)
The initial security deposit including earnest money shall
be refunded to the contractor after 14 days of issue of
virtual completion certification by the Employer. The
retention money shall be refunded to the contractor one
month after the defect liability period is over provided he
has satisfactorily carried out all the works and attended
to all the defects in accordance with the conditions of
contract and has received the Employer and architect's
certificate that the contractor has rectified all the defects
to the satisfaction of employer and architect subject
however to clause 6.15, 5.29 and 5.43. No interest is
allowed on initial security deposit. Earnest money and
Retention money.
7. In J.G. Engineers (supra), the Supreme Court had to deal with
clause 25(2) and 25(3) of the Contract. These are described in the
following manner:-
17. xxx xxx xxx
(i) Clause (2) provides that if the work remains
uncommenced or unfinished after proper dates, the
contractor shall pay as compensation for every
day's delay an amount equal to 1% or such small
amount as the Superintending Engineer (whose
decision in writing shall be final) may decide on
the estimated cost of the whole work as shown in
the tender. What is made final is only the decision
of the Superintending Engineer in regard to the
percentage of compensation payable by the
contractor for every day's delay, that is, whether it
should be 1% or lesser. His decision is not made
final in regard to the question as to why the work
was not commenced on the due date or remained
unfinished by the due date of completion and who
was responsible for such delay.
(ii) Clause (2) also provides that if the contractor
fails to ensure progress as per the time schedule
submitted by the contractor, he shall be liable to
pay as compensation an amount equal to 1% or
such smaller amount as the Superintending
Engineer (whose decision in writing shall be final)
may decide on the estimated cost of the whole
work for every day the due quantity of the work
remains incomplete, subject to a ceiling of ten per
cent. This provision makes the decision of the
Superintending Engineer final only in regard to
the percentage of compensation (that is, the
quantum) to be levied and not on the question as to
whether the contractor had failed to complete the
work or the portion of the work within the agreed
time schedule, whether the contractor was
prevented by any reasons beyond its control or by
the acts or omissions of the respondents, and who
is responsible for the delay.
(iii) The first part of Clause (3) provides that if the
contractor delays or suspends the execution of the
work so that either in the judgment of the
Engineer-in-charge (which shall be final and
binding), he will be unable to secure the
completion of the work by the date of completion
or he has already failed to complete the work by
that date, certain consequences as stated therein,
will follow. What is made final by this provision is
the decision of the Engineer-in-charge as to
whether the contractor will be able to secure the
completion of the work by the due date of
completion, which could lead to the termination of
the contract or other consequences. The question
whether such failure to complete the work was due
to reasons for which the contractor was
responsible or the Department was responsible, or
the question whether the contractor was justified
in suspending the execution of the work, are not
matters in regard to which the decision of the
Engineer-in-charge is made final.
(iv) The second part of Clause (3) of the
agreement provides that where the contractor had
made himself liable for action as stated in the first
part of that clause, the Engineer-in-charge shall
have powers to determine or rescind the contract
and the notice in writing to the contractor under
the hand of the Engineer-in-charge shall be
conclusive evidence of such termination or
rescission. This does not make the decision of the
Engineer-in-charge as to the validity of
determination or rescission, valid or final. In fact
it does not make any decision of the Engineer-in-
charge final at all. It only provides that if a notice
of termination or rescission is issued by the
Engineer-in-charge under his signature, it shall be
conclusive evidence of the fact that the contract
has been rescinded or determined.
(v) After determination or rescission of the
contract, if the Engineer-in-charge entrusts the
unexecuted part of the work to another contractor,
for completion, and any expense is incurred in
excess of the sum which would have been paid to
the original contractor if the whole work had been
executed by him, the decision in writing of the
Engineer-in-charge in regard to such excess shall
be final and conclusive, shall be borne and paid by
the original contractor. What is made final is the
actual calculation of the difference or the excess,
that is, if the value of the unexecuted work as per
the contract with the original contractor was Rs. 1
lakh and the cost of getting it executed by an
alternative contractor was Rs. 1,50,000 what is
made final is the certificate in writing issued by
the Engineer-in-charge that Rs. 50,000 is the
excess cost. The question whether the
determination or rescission of the contractor by
the Engineer-in-charge is valid and legal and
whether it was due to any breach on the part of the
contractor, or whether the contractor could be
made liable to pay such excess, are not issues on
which the decision of Engineer-in-charge is made
final.
8. After outlining, the execution clauses and interpreting it, the
court observed as follows:
"18. Thus what is made final and conclusive by Clauses
(2) and (3) of the agreement, is not the decision of any
authority on the issue whether the contractor was
responsible for the delay or the Department was
responsible for the delay or on the question whether
termination/rescission is valid or illegal. What is made
final, is the decisions on consequential issues relating to
quantification, if there is no dispute as to who committed
breach. That is, if the contractor admits that he is in
breach, or if the arbitrator finds that the contractor is in
breach by being responsible for the delay, the decision of
the Superintending Engineer will be final in regard to
two issues. The first is the percentage (whether it should
be 1% or less) of the value of the work that is to be levied
as liquidated damages per day. The second is the
determination of the actual excess cost in getting the
work completed through an alternative agency. The
decision as to who is responsible for the delay in
execution and who committed breach is not made subject
to any decision of the respondents or its officers, nor
excepted from arbitration under any provision of the
contract."
9. It is quite evident from the juxtaposition of the execution
condition, which was a subject matter of J.G. Engineers Pvt. Ltd. on
the one hand and Clause 5.46 on the other, that the stipulation with
regard to what is executed is categorical "as to the cases of delay on
the part of the contract certificate, as to the part of contract and
justifying extension time". Clearly therefore, the Contractor in the
present case could not have sought arbitration before the Tribunal
with respect to their excepted matters.
10. This court also notes that in J.G. Engineers Pvt. Ltd. (supra),
the condition with respect to delay was not as forthright as in the
present case. It was in that context that the court went on to hold that
the cases for delay are an arbitrable issue, whereas the controversy for
delay as to who is responsible would be arbitrable and the other
consequential issues with respect to calculation would be left to the
Engineer. In this case, however the condition is categorical inasmuch
as to what are the cases of delay that are non-arbitrable and are
excepted matters. This court is also of the opinion that there is no
merit in the Contractor's submission that such excepted matters leave
it with no forum. The judgments in this regard i.e. with respect to the
forums excluded matters [Vishwanath Sood vs. Union of India and
another, (1989) 1 SCC 657, General Manager, Nothern Railway vs
Sarvesh Chopra reported in (2002) 4 SCC 45] only meant that the
dispute is not arbitrable; however, the Contractor is at liberty to
approach the concerned forum i.e. the court for appropriate
adjudication.
11. In view of the aforesaid discussion, it is held that the impugned
judgment to the extent it holds that the Award with respect to the
cases of delay and the consequential amounts awarded to the
contractor cannot be sustained.
12. With respect to the price variation clause and with respect to
the interest on delay, stipulated beyond a particular period, this court
notices that the judgment in Bright Power Project (India) Private
Limited (supra) is equally forthright. The court had then occasioned to
consider the conditions and stated in its reasoning as to why such
interest is impermissible in law, which reads as under:
"10. Thus, it had been specifically understood between
the parties that no interest was to be paid on the earnest
money, security deposit and the amount payable to the
contractor under the contract. So far as payment of
interest on government securities, which had been
deposited by the respondent contractor with the
appellant is concerned, it was specifically stated that the
said amount was to be returned to the contractor along
with interest accrued thereon, but so far as payment of
interest on the amount payable to the contractor under
the contract was concerned, there was a specific term
that no interest was to be paid thereon.
11. When parties to the contract had agreed to the fact
that interest would not be awarded on the amount
payable to the contractor under the contract, in our
opinion, they were bound by their understanding. Having
once agreed that the contractor would not claim any
interest on the amount to be paid under the contract, he
could not have claimed interest either before a civil court
or before an Arbitral Tribunal."
13. This court is bound by the reasoning in Bright Power Project
(supra), the interest to the extent it was granted in excess of the
stipulated and agreed amount is therefore inadmissible and clearly
amounts to an error in law inasmuch as it proceeds beyond the
contractual condition.
14. The Arbitrator with respect to the price variation clause stated
as follows:-
"The complicated clause 5.41 has been made more
cumbersome and difficult to operate by the stipulations
that follow, It seems surprising that for a simple type of
construction work, such a bulky contract-agreement has
been framed - which looks like a collection of various
provisions existing in different P.W.D. or private
contracts. There is no need to mention here that bulkier
the document, greater arc the chances of errors,
repetitions, and internal self. contradictions -both
technical and legal. Simpler tenders would encourage a
simpler and more competitive response."
15. In this court's opinion, the Arbitrator clearly transgressed the
expressly agreed condition in proceeding to discard what in his
judgment was "complicated terms" and preferring the method that
was to his own liking. Parties' autonomy to write the contract and
impose such conditions as binding upon each other is only
emphasized in all legal proceedings - be it in arbitration or in courts.
It is only when parties expressly consent to discard or waive or
modify condition that the court or appropriate forum and proceed to
do so. In this case, there was no such consent or consensus. Clearly
therefore, the unilateral decision of the Arbitrator to re-write the
contract contravene Section 28(3) and amounted to a patent error of
law, calling for interference with the Award.
16. In view of the above reasoning, this court is of the opinion that
the impugned judgment cannot be sustained so far as the three aspects
dealt with the concerned. It is accordingly set aside as is the award in
respect of claims 1(a), 1(c) and 3(b) made in FAO (OS) No.233/2013
and the award in respect of claim 1(a), 1(d) and 4(b) in FAO (OS) No.
234/2013 for the same reasons. It is, however, open to the Contractor
to withdraw the amount except to the extent that the appeals stand
allowed, and are accordingly directed to appear before the Registrar
on 23.08.2018 for consequential purposes.
17. The appeals are partly allowed to the extent indicated above.
S. RAVINDRA BHAT, J
A. K. CHAWLA, J
AUGUST 02, 2018
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