Delhi High Court
Ircon International Ltd. vs C.R.Sons Infra Projects Ltd. on 14 December, 2018
$~9
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(COMM) 287/2018 & IA 8886/2018
Date of Decision : 14th December, 2018
IRCON INTERNATIONAL LTD. ..... Petitioner
Through: Mr.Chandan Kumar, Adv.
versus
C.R.SONS INFRA PROJECTS LTD. ..... Respondent
Through: Nemo
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the „Act‟) has been
filed by the petitioner challenging the Arbitral Award dated
27.02.2018 passed by the Sole Arbitrator adjudicating the disputes that
have arisen between the parties in relation to the award of work of
Construction of Corporate office building of IRCON at C-4, District
Centre, Saket, New Delhi vide Agreement dated 17.08.2004.
2. Disputes having arisen between the parties, the same were
referred to the Sole Arbitrator vide order dated 16.12.2009 passed by
this Court in Arbitration Application No.254/2008. The summary of
OMP(Comm.) No.287/2018 Page 1
the Award passed by the Sole Arbitrator is contained in paragraphs
316 to 318 of the Impugned Award and is reproduced hereinbelow:
"316. In view of the above, I hereby award the amount to the
claimant as per detail given below:-
Claim number Amount Claimed Amount Awarded
317. Claim no.1 2,70,25,343/- 11,83,921.94
Claim no.2 94,48,182/- Nil
Claim no.3 31,37,844/- 31,37,844/-
Claim no.4 28,20,312/- Nil
Claim no.5 15,00,000/- Nil
Claim no.6 1,57,28,568/- Nil
Claim no.7 2,81,78,867/- 9% simple interest p.a.
w.e.f. January, 2010.
Claim no. 8 20,00,000/- Rs.5.50 Lakhs
Total Rs.48,71,765.94
318. In view of the above I hereby pass award in favour of the
claimant and against the respondent in the sum of Rs-
48,71,765.94 (Rupees Forty Eight Lakhs Seventy One
Thousand Seven Hundred Sixty Five Rupees and Ninety
Four Paise Only) with simple interest @9% per annum
w.e.f. January, 2010 till realization. In addition the
claimant is also entitled to an amount of Rs.4,900/-
towards stamp duty."
3. The petitioner has challenged the Impugned Award only to a
limited extent in so far as it awards a sum of Rs.9,28,204.96 in Claim
no.1 in favour of the respondent and a further sum of Rs.5.50 lacs as
costs of the arbitration proceedings under Claim no.8.
4. As far as the amount of Rs.9,28,204.96, counsel for the
petitioner submits that the Arbitrator in his Impugned Award has
OMP(Comm.) No.287/2018 Page 2
categorically observed that the respondent had not challenged the
deductions made by the petitioner in the final bill and infact, had
accepted the correctness of the final bill. In spite of there being no
challenge to the correctness of the final bill, the Arbitrator on his own
went into the question of the justification of deductions of
Rs.9,28,204.96 made by the petitioner in the final bill and held that the
same were not justified and therefore, awarded the said sum in favour
of the respondent. In this regard, he places reliance on paragraphs 203
to 206 of the Impugned Award, which are reproduced hereinbelow:
"203. It may however be stated that in the present case the
claimant did not refute the details given in the final
bill and the deductions made by the respondent in the
said final bill either in respect of the amount or in
respect of the various heads under which deductions
were made. In the statement of claim the claimant did
not point out the incorrectness in the final bill
prepared by the respondent and the deductions made
thereunder. The claimant only harped upon its own
bill which is Annexure-XX and which is not proved at
all.
204. In view of the fact that the claimant has failed to
prove its claim no.1, even this amount of
Rs.72,27,806/- is not payable to the claimant. The
claimant has compared the amount claimed under
various items namely item no.1.07 (supplying the
chemical emulsion), item no.1.08 (Diluting &
injecting chemical emulsion, item no.3.01 (P/L in
position machine batched, machine mixed & machine
vibrated design mix conc. Of specified grade for
RCC-M 20, RCC), item no.3.05 (Centering &
Shuttering), item no.3.05(i) (for weather shade,
chajjas etc.), item no.3.07 (reinforcement of RCC
OMP(Comm.) No.287/2018 Page 3
work), item no.4.01 (brick work with CM 1.6 in
foundation & plinth), item no.8.01 (20 mm thick kota
stone flooring), item no.8.03 (62 mm CC Flooring
"Hardcrete"), item no.10.04 (washed stone grit
plaster), Ex.1 (supplying & filling good earth), Ex.6
(Kota stone slab 25mm thick in risers of steps,
skirting), (finishing wall / ceiling with texture paint).
According to the claimant under the aforesaid items
the respondent has arbitrarily reduced the quantity in
the final bill of various items than the previous
running bills like 10th RA Bill, 11th RA Bill, 12th RA
Bill, and 13th RA Bill and in some items the rate
claimed is different than that proposed by the
respondent. This contention of the claimant is without
any basis. The measurements are duly signed. No
such comparison with previous RA Bills can be
allowed. The Tribunal is not supposed to make such a
fishing and roving inquiry in the absence of any
evidence adduced on record. The claimant cannot be
permitted to agitate on the basis of comparison of
what was paid or not paid upto 12th RA Bill which
was the subject matter of the previous Ld. Arbitrator
who has already passed award dated 10.02.2009.
205. Since at the time of arguments the claimant on its own
has based its claim on the basis of the final bill of the
respondent, the amount payable shown in the said
final bill is Rs.39,84,117.98 which has to be taken as
correct. Out of the said amount the claimant has
made recovery of the amount of Rs.37,28,401/- as per
following details:-
1. Income Tax 56,020/-
Total deductions to be made P/F 8,59,084.96
2.
fastener to the canopy area
Fixing / refixing of scaffolding for 52,236/-
3.
above work
4. Refixing of granite stone from the area 16,884/-
OMP(Comm.) No.287/2018 Page 4
where stones had fallen
5. Advance 16,71,805/-
6. Secured advance 4,85,778/-
Labour Cess 5,86,593/-
7.
___________
Total 37,28,400.96
206. No objection can be taken to the amount deducted
toward income tax of Rs.56,020/-, advance of
Rs.16,71,805/-, secured advance of Rs.4,85,778/- and
labour cess of Rs.5,86,593/-. The total amount of
these deductions comes to Rs.28,00,196/-. However,
deductions of Rs.8,59,084.96 towards P/F fastener to
the canopy area, Rs.52,236/- towards refixing /
refixing of scaffolding for above work and Rs.16,884/-
towards refixing of granite stone from the area where
stones had fallen cannot be accepted. These three
deductions amount to Rs.9,28,204.96. There is
nothing on record to show that the claimant was
called upon to do the jobs towards P/F fastener to the
canopy area, fixing / refixing of scaffolding for above
work and refixing of granite stone from the area
where stones had fallen and that the claimant refused
to carry out the work in terms of the conditions of
contract. As such the amount of Rs.9,28,204.96
cannot be permitted to be deducted from the amount
payable to the claimant. From out of the amount of
Rs.39,84,117.98 payable to the claimant the
permissible deductions are of Rs.28,00,196/-. Hence
the amount payable to the claimant is Rs.2,55,716.98
which is the balance amount shown payable under the
final bill plus Rs. 9,28,204.96 totalling
Rs.11,83,921.94. "
(Emphasis supplied)
5. In spite of time being granted, the respondent has failed to file
any reply to the petition. Today, in spite of a pass over, none appears
for the respondent.
OMP(Comm.) No.287/2018 Page 5
6. A reading of the Impugned Award shows that the claim of the
respondent was based on a purported bill marked as Ex.CW-1/20.
The Arbitrator has discussed the said bill in detail in the Impugned
Award and has held that the respondent failed to prove the same.
The Arbitrator further held that the respondent itself has placed
reliance on the final bill prepared by the petitioner and as noted above,
in paragraph 203 of the Impugned Award, has held that the respondent
did not refute the details given in the final bill and the deductions
made therein. Once, there was no challenge to the deductions made in
the final bill, there was no occasion for the Arbitrator to go into the
justification of the deductions so made by the petitioner. The
deductions being disallowed were with respect to defects in the work
carried out by the respondent. If such defects had been accepted by
the respondent and deductions on that account had also been accepted
by the respondent, it was not within the jurisdiction of the Arbitrator
to thereafter disallow such deductions on the ground that the petitioner
had not called upon the respondent to remove such defects. This was
not in dispute before the Arbitrator.
7. In view of the above, the Award in so far as it directs the
payment of Rs.9,28,204.96 in favour of the respondent under Claim
no.1 is set aside.
8. Counsel for the petitioner further submits that out of total of 7
claims, apart from the claim of costs raised by the respondent, the
Arbitrator has found three claims raised by the respondent to be not
proved. Even for Claim no.1, against an amount of Rs.2,70,25,343/-
OMP(Comm.) No.287/2018 Page 6
claimed by the respondent, only a sum of Rs.11,83,921.94 was
awarded by the Arbitrator in favour of the respondent. Out of
Rs.11,83,921.94, the award for Rs.9,28,204.96 was unjustified. As far
as Claim no.3 is concerned, he submits that this was a minor claim
raised by the respondent when compared to the other claims of the
respondent. He submits that therefore, the Arbitral Tribunal has erred
in awarding costs of Rs.5.50 lacs in favour of the respondent under
Claim no.8.
9. The Sole Arbitrator has discussed the issue of costs under Claim
no.8 as under:
"310. Under the said head, the claimant claims an amount of
Rs.20,00,000/-. The details and calculation in this respect are
annexed as Annexure-XXVII colly.
311. In its reply it is stated by the respondent that the claimant
avoided proceeding with the on-going arbitration and as per
arbitrator's letter he wanted a change of arbitrator. It is thus
the claimant who has been dragging his feet. The claimant
should bear the cost of this litigation.
312. In its rejoinder it is stated by the claimant that the
respondent has failed to clear the dues of the claimant and
therefore the claimant had to revoke the arbitration clause for
his claims and as such it is the respondent who had to bear the
cost of litigation.
313. Section 31A of Arbitration and Conciliation Act, 1996
provides regime for costs. "Costs" means reasonable costs
relating to-
i) the fees and expenses of the arbitrators, Courts
and witnesses;
OMP(Comm.) No.287/2018 Page 7
ii) legal fees and expenses;
iii) any administration fees of the institution
supervising the arbitration; and
iv) any other expenses incurred in connection with the
arbitral or Court proceedings and the arbitral
award.
314. In determining the costs, arbitral tribunal should have
regard to the circumstances, including-
(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the
case;
(c) whether the party had made a frivolous
counterclaim leading to delay in the disposal of
the arbitral proceedings; and
(d) whether any reasonable offer to settle the
dispute is made by a party and refused by the
other party.
315. The claimant is entitled to the fee paid to the
arbitral tribunal. The claimant paid an amount of
Rs.4,63,147/- towards fees. Considering the fees
and expenses incurred by the claimant of the
Tribunal, legal fees and expenses, I feel that in the
fact and circumstances of this case the claimant is
entitled to cost of Rs.5.50 Lakhs in all."
10. Though the Arbitrator has correctly noted the provisions of
Section 31A of the Act, he has failed to appreciate that the majority of
the claims raised by the respondent were found to be frivolous and not
proved.
11. As noted above, the respondent has infact, succeeded only to a
very minor extent in two out of six claims raised by it. This
therefore, was not a case where the petitioner could have been
burdened with the costs of arbitration proceedings.
OMP(Comm.) No.287/2018 Page 8
12. In the Schedule to the Commercial Courts, Commercial
Division and Commercial Appellate Division of High Courts Act,
2015, the Illustration appended to sub-section 2 of Section 35 of the
CPC as amended provides that where the plaintiff seeks a money
decree for breach of contract and damages and the Court finds that
though the plaintiff is entitled to the money decree, the claim for
damages is frivolous and vexatious, the Court may impose costs on the
plaintiff, for having raised frivolous claims for damages.
13. In the present case, as majority of the claims raised by the
respondent were found to be frivolous, the award of costs of the
arbitration proceedings against the petitioner cannot be sustained.
14. In view of the above, the Award in so far as it directs payment
of Rs.9,28,204.96 under Claim No.1 and Rs.5.50 lacs under Claim
no.8 is set aside. Parties shall bear their own costs.
NAVIN CHAWLA, J
DECEMBER 14, 2018
RN
OMP(Comm.) No.287/2018 Page 9
