Delhi High Court
Airports Authority Of India vs M/S Parnika Commercial & Estate ... on 19 February, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP 117/2015
Reserved on: 1st February, 2018
Date of decision: 19th February, 2018
AIRPORTS AUTHORITY OF INDIA ..... Petitioner
Through: Mr.Sunil Ahuja, Adv.
versus
M/S PARNIKA COMMERCIAL & ESTATE (P) LTD. & ANR.
..... Respondents
Through: Mr.Bhupesh Narula, Adv.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
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 Airports Authority of India challenging the Arbitral Award
dated 05.09.2014 passed by the Sole Arbitrator. The challenge to the
Award is confined to grant of claim no. 1,4,7.1 and the Additional Claim
no. 2 as also the interest on the awarded amounts.
2. Claim no. 1 raised by the respondent before the Sole Arbitrator
was for a sum of Rs. 4,58,000/- towards the recovery of liquidated
damages imposed by the petitioner.
3. The respondent had been granted the work of "extension of Rajiv
Gandhi Bhavan, (Operational Complex) at Safdarjung Airport, New
Delhi" vide Agreement dated 12.02.2007 by the petitioner. The stipulated
dates of start and completion of work were 15.02.2007 and 14.02.2008
respectively. The work was completed on 23.07.2010 i.e. after a delay of
851 days. The petitioner granted the extension of time without levy of
OMP No.117/2015 Page 1
compensation / liquidated damages up to 08.05.2010 and granted
extension of time from 09.05.2010 to 23.07.2010 on levy of liquidated
damages of Rs. 4,58,000/-, which was recovered from the final bill paid
to the respondent. The Arbitrator, after considering the Hindrance
Register; the fact that earlier there was a recommendation to grant
extension of time without levy of compensation; as also the specific
hindrances after 09.05.2010, allowed the claim of respondent. Paragraph
5.21 of the Impugned Award is reproduced herein under:-
"5.21 The compensation has been levied for the period
9.5.2010 to 23.7.2010 which implies that the work should
have been completed latest by 8.5.2010. It is recorded in
the Hindrance Register that certain hindrances were
removed only after 9.5.2010 such as:
i. Underground fuel tank location finalized on 4.6.2010;
ii. Restriction in working on week days in connecting
corridor lifted on 17.6.2010;
iii. Barracks allowed to be dismantled for development
works on 21.6.2010;
It is obvious that the items of works which were held up on
account of the above hindrances could not have been
completed by 8.5.2010. The Claimant has to be given
adequate time for completing these items after the
respective hindrances were removed. Therefore, EOT up
to 23.7.2010 without levy of compensation appears to be
justified."
4. Learned counsel for the petitioner submits that the hindrances as
noted in the paragraph quoted above were minor in nature and would not
have affected the work of the respondent. He submits that the said
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hindrances, therefore, could not have resulted in the grant of extension of
time without compensation.
5. I am unable to agree with the submissions made by the counsel for
the petitioner. The hindrances, as recorded by the Arbitrator, are not
denied by the petitioner. The same cannot be said to be minor in nature.
In any case, whether these hindrances would result in the grant of the
extension of time without compensation, is an issue to be determined by
the Arbitrator, which he has done in the Impugned Award after taking
into account the Hindrance Register. The view of the Arbitrator, in my
opinion, cannot be said to be perverse or so unreasonable so as to warrant
interference by this Court in the exercise of its power under Section 34 of
the Act.
6. In claim no.4, the respondent has claimed an amount of Rs.
9,97,76,315/- towards reimbursement of losses on account of non-
payment of enhanced contract rates by 30%. The Arbitrator, in the
Impugned Award, has granted a sum of Rs. 55,73,217/- in favour of the
respondent against this claim.
7. The Arbitrator, while awarding the above amount in favour of the
respondent, has relied upon Clause 53.1(A) and 53.1(B) of the Contract
which provides the formula for calculating cost of escalation on price of
cement, steel, bitumen and other materials and wages of labour
respectively. The Arbitrator has held that, in view of these clauses in the
agreement, the petitioner was not justified to consider only 85% of the
value of the work for working out the payments under these clauses or to
contend that the Wholesale Price Indices adopted for these clauses do not
reflect the real escalation in construction cost. The Arbitrator held that
OMP No.117/2015 Page 3
the respondent would be entitled to an increase in the cost of the
materials and labour only in accordance with clause 53.1(A) and 53.1(B)
of the Contract and as these have been paid only up to 08.05.2010, which
was the date up to which the petitioner had granted extension of time
without levy of compensation, and as in terms of the Impugned Award it
had been held that the respondent was entitled to the extension of time up
to 23.07.2010 i.e. the date of actual completion of the work without levy
of compensation, the respondent was also entitled to escalation for the
work done from 09.05.2010 to 23.07.2010. The Arbitrator, relying upon
the calculations submitted by the respondent in this regard, granted a sum
of Rs. 53,73,217/- in favour of the respondent. The Arbitrator recorded
that such calculations had not been objected to by the petitioner.
8. The learned counsel for the petitioner submits that the said claim
should not have been granted for the reason that the extension of time
beyond 08.05.2010 was due to the fault of the respondent. I have already
rejected the said contention of the petitioner. As far as calculation of the
amount is concerned, it is not shown how the same is incorrect.
Therefore, I find no merit in the objections raised by the petitioner on the
grant of claim no. 4 in favour of the respondent.
9. The next challenge of the petitioner is to the award of
Rs.72,27,039/- in favour of the respondent under claim no. 7.1. In claim
no. 7.1, the respondent had claimed an amount of Rs. 12,18,13,492/-
towards the loss of profit/profitability and overheads due to prolongation
of the Contract.
10. The Arbitrator having held that the prolongation of the work was
due to reasons attributable to the petitioner, relying upon the Schedule
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'E' of the Contract, has held that, as the Contract Value was
Rs.33,25,87,883/-, the expected profit thereon would workout to be Rs.
2,49,44,091/-. The Arbitrator thereafter, worked out the average delay in
earning the profit to be 560 days and awarded interest for this period of
delay at the rate of 10% per annum equivalent to Rs. 38,27,039/-. The
Arbitrator rejected the claim of the respondent for loss of profit at the rate
of 15%.
11. The learned counsel for the petitioner submits that once the
escalation of the cost has been granted in favour of the respondent, the
claim for loss on account of prolongation of work could not have been
granted. I am unable to agree with the said submission.
12. In Associate Builders vs. DDA (2015) 3 SCC 49, the Supreme
Court had held that if the employer is at fault and the Contract is
prolonged for an inordinate period of time, it cannot be said that the
contractor cannot be compensated for the same. It was further held that
the Clause pertaining to increase in price of material incorporated in work
or wages or labour increase will not be applicable to a claim for damages.
13. In Assam State Electricity Board and Others v. Buildworth
Private Limited (2017) 8 SCC 146, the Supreme Court while dealing
with the claim of escalation and idling charges, held that once there was a
delay in execution of Contract due to employer, the employer was liable
for consequences of the delay, namely, an increase in price and the other
party would be entitled to a Claim for damages.
14. In view of the above, merely because the respondent had been
granted escalation in cost due to prolongation of work, it could not have
OMP No.117/2015 Page 5
been denied the loss of profit and in this case, actually the loss of interest
on such profit for the period for which the work was prolonged.
15. The second component of claim no. 7.1 was towards overheads.
The Arbitrator has considered the minimum staff and other miscellaneous
expenses and worked out the extra site-overhead expenses as Rs. 2 Lakhs
per month and for the prolongation period of seventeen months, awarded
Rs. 34 Lakhs on this account in favour of the respondent.
16. The learned counsel for the petitioner submits that once the claim
of escalation had been granted under claim no. 4, a separate amount
could not have been granted by the Arbitrator for the alleged overhead
expenses. I am unable to accept the said argument of the counsel for the
petitioner. While granting claim no. 4 the Arbitrator had specifically
excluded the claim with respect to overhead expenses. Therefore, there
was no overlap between claim no. 4 and this sub-head of claim no. 7.1.
As noted above, the Arbitrator worked out the minimum staff required to
be engaged at the site and the expenses for engaging them as also other
miscellaneous expenses required to be expended as site overheads. It
could not be shown how the same is in any manner incorrect. This Court,
in exercise of its power under Section 34 of the Act does not act as a
Court of appeal against such finding of the Arbitral Tribunal. The claim,
having been duly examined by the Arbitrator, the Award made by the
Arbitral Tribunal cannot be stated to be perverse or patently illegal. The
challenge to the award of claim for overhead expenses, therefore, cannot
be sustained.
17. The other challenge to the Impugned Award is to the grant of Rs.
1,89,774/- against Additional Claim no. 2 of the respondent. The said
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Additional Claim was with respect to escalation on the amount of Award
under clause 53 of the agreement and further interest at the rate of 18%
per annum from the date it became due till realization.
18. The Arbitrator in the Impugned Award has under claim no. 2 and
various sub-heads thereof, awarded certain amounts in favour of the
respondent towards the deductions made by the petitioner. While
granting the claim under Additional Claim no. 2, the Arbitrator has
awarded the claim of escalation on these amounts.
19. The counsel for the petitioner submits that the escalation having
been granted in claim no. 4, it could not have been again granted in
Additional Claim no. 2. This submission of the counsel for the petitioner
is clearly fallacious as what was granted under claim no. 4 was without
taking into account the amount awarded under claim no. 2, which
resulted in the increase in the quantity of work. While granting
Additional Claim no. 2, the Arbitrator has therefore, granted escalation
only on the amounts that were awarded in favour of the respondent under
claim no. 2 and were not a part of Claim No.4. There being no challenge
to the Award on claim no. 2, I do not see any merit in the objections
raised against the Award of escalation under Additional Claim no. 2 or
the amount so awarded. These are clearly different from what was
granted in favour of the respondent under claim no. 4.
20. The last challenge of the petitioner is to the award of interest at the
rate of 10% per annum on the awarded amounts. The only ground of
challenge raised in the petition is reproduced herein under:-
"Claim 9:- AWARDING THE INTEREST @ 10% P.A. FOR
DIFFERENT DAYS.
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The Ld. Tribunal has wrongly awarded the interest @ 10%
on various claims which is on very high side and being
against banking practices is liable to be set aside."
21. I do not see any reason being made out in the objection for setting
aside the award of interest as granted in the Impugned Award.
22. Though in the petition challenge was also made to claim no. 6, no
submission in this regard was made in the oral hearing by the counsel for
the petitioner.
23. In view of the above, I find no merit in the present petition and the
same is accordingly dismissed with cost quantified at Rs. 25,000/-.
NAVIN CHAWLA, J
FEBRUARY 19, 2018/rv
OMP No.117/2015 Page 8
