Delhi High Court
Indian Oil Corporation Ltd vs Larsen & Toubro Limited on 1 June, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 366/2017
Reserved on: 7th March, 2018
Date of decision : 1st June, 2018
INDIAN OIL CORPORATION LTD ..... Petitioner
Through Mr.V.N. Koura, Ms.Paramjeet
Benipal and Mr.Abhinav Tandon,
Advs.
versus
LARSEN & TOUBRO LIMITED ..... Respondent
Through Mr.Rajiv Nayar and Mr.Ravindra
Shrivastava, Sr. Advs. with
Mr.Dhirendra Negi, Mr.Ananya
Kumar and Ms.Pragya Chauhan,
Advs.
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 challenging
the Arbitral Award dated 18th May 2017 read with the correction Order
dated 23rd June 2017, passed by the Arbitral Tribunal comprising of three
Arbitrators (hereinafter referred to as the 'Impugned Award'). The
Impugned Award holds the petitioner's claim for Price Discount on
account of alleged delay by the respondent in completion of Contract as
unjustified and contrary to the terms of the Agreement and directs the
petitioner to pay the withheld/ deducted amount of Rs.115,11,28,129/- to
the respondent, along with pre-award as well as future interest.
OMP(COMM) 366/2017 Page 1
2. The petitioner, so as to set up a 238.35 MW Captive
(Cogeneration) Power Plant (hereinafter referred to as "CPP") within its
Naptha Cracker Plant at Panipat ("NCPP"),to supply steam and power for
testing, commissioning and operating other units within the NCPP, issued
a tender for Project Management, Design, Detailed Engineering
Procurement, Manufacturing, Supply, Transportation, Storage,
Fabrication, Construction, Installation, Testing, Pre-commissioning and
Commissioning and Performance Guarantee Test Runs of the CPP. The
respondent, being the lowest eligible bidder, was awarded the aforesaid
work under the Turnkey Package 'EPCC 4' vide Fax of Acceptance dated
31st August 2006 and detailed Letter of Acceptance dated 15th September
2006. The parties herein, accordingly, entered into Contract
No.HQ/PJ/PNCP/2006-07/EPCC-4/01 dated 22nd September, 2006. The
conditions governing the parties were contained in various documents.
The contract price as per the detailed Letter of Acceptance was Rs.
1,143,07,66,500/-. The CPP included setting up of fifteen steam/power
generating units along with equipments, facilities and controls required to
connect and distribute fuels, utilities, power, and steam, and connect
various operating systems of the CPP, collectively referred to as the
Balance of Plants ("BOP"). The 'Electrical Control System' ("ECS") was
an integral component of such BOP.
3. The work to be executed was divided into three distinct Modules,
to be completed within a specified time as set out in Clause 5 of the
detailed Letter of Acceptance. The scope of work and schedule under
different modules provided in Clause 5 is mentioned hereinbelow:
OMP(COMM) 366/2017 Page 2
"5.0 TIME SCHEDULE
Module - 1 : 27 (Twenty Seven) Months upto Commissioning
Module - 2 : 29 (Twenty Nine)Months upto Commissioning
Module - 3 : 30(Thirty) Months upto Mechanical Completion
of the complete captive power plant (CPP) plus
two months for commissioning of the complete
CPP.
Module-1,2 & 3 shall be as follows:
Module-1 : One UB + One STG +
Balance of Plant (BOP)
Module-2 : One STG + 50% of GTGs &
HRSGs (Min. 2 nos. each, in case 50% is
a number in decimals, then the next
whole number shall be considered i.e. 2.5
shall mean 3)
Module-3 : Complete Captive Power
Plant including all associated facilities
as per the provisions of the Bidding
Document.
The Time Schedule shall be reckoned from the date of Fax of
Acceptance i.e. 31.08.2006."
4. The aforesaid Letter of Acceptance also mentions the price
adjustment to be made/weightage to be given to each Module in cases of
delay as below:
"8.0 PRICE DISCOUNT DUE TO DELAY
In case of delay, Owner shall be entitled to a discount as specified
vide clause 4.4.0.0 of GCC including its modifications in the
Amendment(s).
OMP(COMM) 366/2017 Page 3
Price Adjustment as per provisions of this clause shall be
applicable separately to each Module i.e. Module-1, Module-2,
and Module-3 for delays in completion of the relevant Module. The
percentage weightage of the total Contract Price to be considered
for application of Price Adjustment for each Module shall be as
follows:
• Module-1: 30%
• Module-2: 30%
• Module-3: 40%
Price Adjustment as per above clause shall be applicable on delays
in achieving Commissioning for Module-1 and/or Module-2, as
applicable, considering the above weightages, based on the
schedule defined in Sr.No.5 above.
However, for Module-3, Price Adjustment shall be applicable on
delays in achieving Mechanical Completion, considering the above
weightage forModule-3, as per original clause 4.4.2.0 of GCC."
5. Clause 4.4.2.0 of the General Conditions of Contract provides for
levy of price discount on the contract price by the petitioner in the case of
delay in achieving completion of work as per schedule. Clauses 4.3.5.0
and 4.3.6.0 therein provide for extension of time in cases of delay.
6. As per Clause 2.10.3.0 of the GCC, the respondent was to give
notice to the petitioner and Engineer-in-Charge incase a work front/job
site was not made available to the respondent to execute the work.
7. The Special Conditions of Contract, in Clause 18 as amended vide
Commercial Amendment No.6556/EPCC-4/C-02, place responsibility on
the petitioner to provide certain fuels to the respondent for pre-
commissioning and commissioning activities. Out of the fuels to be
supplied, certain fuels were identified by the petitioner as main and
alternate fuels. Clause 18 as amended is quoted as under:
OMP(COMM) 366/2017 Page 4
"Following is added as clause 18.0 to SCC:
"UTILITIES & FUELS"
OWNER shall provide main fuels for firing GTGs, HRSGs &
UBs and utilities for pre-commissioning and commissioning
activities free of cost to the CONTRACTOR. All other
consumables & chemicals, as required, shall be provided by
the CONTRACTOR as per the provisions of the Bidding
Document."
8. The Contract provided for a procedure to be followed towards
signifying completion of each Module by the respondent which contained
different stages. The stages were prescribed as : Format-I : intimation
regarding system completion, Format-II : defects/ deficiencies observed
in the work in the form of a checklist, Format-III : readiness for pre-
commissioning, Format-IV : certificate for readiness for commissioning
and Format-V : completion of commissioning.
9. The respondent prepared a Detailed Progress Schedule ("L2
Schedule") dated 27th January, 2007 for timely completion of the work,
which was approved by the Engineer-in-Charge. It is the case of the
petitioner that as per the said Schedule, Module 1 was to be
commissioned by 30.11.2008, Module 2 was to be commissioned by 31 st
January, 2009 and Module 3 was to be mechanically completed by 28 th
February, 2009 and commissioning thereof was to be completed by
another two months. The said dates were however, not adhered to by the
respondent and accordingly, extension of time was sought vide letter
dated 21st April, 2010. The said letter listed the reasons for the delay
OMP(COMM) 366/2017 Page 5
inter-alia delay by the petitioner in supplying main fuel RLNG and
inputs for ECS.
10. In the meantime, the respondent completed Module 1 on 28th
August, 2010 and Module 2 on 29th September, 2010. Module 3 was
mechanically completed by the respondent on 30th June, 2010.
11. In response to the letter dated 21st April, 2010, Engineers India
Limited ("EIL"), appointed as the Engineer-in-Charge by the petitioner,
submitted their recommendations dated 19th March, 2012 to the
petitioner, providing for levy of price discount of 3%, 3% and 4% in
respect of delays of 557 days, 495 days and 436 days attributable to the
respondent towards completion of each module respectively.
12. It is submitted by the petitioner that the analysis and
recommendations submitted by EIL were considered by the petitioner,
culminating into a Note dated 26th March, 2012, which contained its
'decision' wherein it accepted the recommendations given by EIL and
accordingly, noted as hereinunder:
"Therefore, as per contract GCC clause 4.4.0.0, the price discount
levied on module-3 commissioning is 10% but as per DLOA clause
No-8.0, the weightage for the module is given as 40% which shall
be applicable while considering the price adjustment. Hence,
based on the weightage the price discount levied for the module-3
commissioning is 4%.
Based on above module wise conclusions, it is proposed to levy the
price discount on EPCC-4 package (M/s L&T) in the tune of 10%
of contract value in line with terms & condition of contract."
13. The decision in terms of the Note of the petitioner was
communicated to the respondent on 5th April, 2012 vide letter by EIL,
OMP(COMM) 366/2017 Page 6
which enumerated the levy of price discount of 10% by the petitioner as
hereinbelow:
"This is in reference to your letter No.CPP/EPCC-
4/6556/LH/ES/L/FA/1750 dated 21.04.2010 and presentation given
by you on 16.11.2009 at EIL-HO on the subject matter.
As advised by IOCL, the time extension of EPCC-4 has been
granted by competent authority as under with price reduction of
10% of contract value as per GCC clause no.4.4.0.0:
Sl. Module Date of MC Date of
No. Commissioning
1 Module -1 NA 28.08.2010
2 Module-2 NA 29.09.2010
3 Module-3 30.06.2010 NA
This is for your information & record please."
14. In response to the EIL's communication, the respondent sought
clarification of the contents thereof as also release of the withheld amount
on account of price discount. Upon exchange of correspondence, the EIL
clarified the position in terms of letter dated 28th August, 2012, stating
that the request for extension of time without imposition of price
adjustment had been rejected by the petitioner and discount as mentioned
above had been imposed for the delay caused. The contents of the letter
are reproduced below:
"Dear Sir,
This is in reference to your letter No.CPP/EPPC-
4/6556/LH/ES/L/FA/1913 dated 02.07.2012. Please note that while
considering your request for extension of time without applying the
OMP(COMM) 366/2017 Page 7
Price Discount Clause, M/s IOCL have rejected your request for
extension of time from scheduled commissioning of Module-1,
Module-2 and Mechanical Completion of Module-3 on 30.11.2008,
31.01.2009 & 28.02.2009 respectively to 28.08.2010, 29.09.2010
& 30.06.2010 in achieving commissioning of Module-1, Module-2
and mechanical completion of Module-3 for the project and have
invoked and imposed Price Discount of 10% of the total
contractual value. This is without prejudice to IOCL's other right
and contentions under the contract and provisions of law.
Thanking you"
15. The parties were divided as to the meaning of the contents of
letters granting extension subject to levy of price adjustment, with the
petitioner claiming to have 'denied' the extension of time and the
respondent claiming to have been 'granted' the extension of time till the
actual dates of completion and consequently, claiming that no question of
levy of any discount arose. The respondent relies upon letters dated 5th
April, 2012 and 10th April, 2012 from ElL and yet another letter dated
23rd November, 2013 in support of its contention.
16. There were disputes between the parties with respect to the date of
and default of the petitioner in supplying the main fuel RLNG, alternate
fuels HSD and BFO, as well as ECS inputs to the respondent, which
allegedly led to a delay in completion of the Modules by the respondent.
As per the Schedule, the petitioner was required to supply to the
respondent HSD fuel on 1st May, 2008; BFO fuel on 1st May, 2008 and
RLNG on 1st June, 2008, however, HSD was actually supplied on 6th
June, 2009 and BFO on/about 2nd November, 2009. As regards RLNG,
the petitioner herein has asserted that it was ready to provide the same in
OMP(COMM) 366/2017 Page 8
April 2010, however, the respondent has contended that the petitioner
provided the fuel only on 4th August, 2010. As RLNG was required by
the respondent for commissioning of Modules 1 and 2, the respondent
attributed the delay in completion on the petitioner in this regard.
17. As regards other inputs, ECS inputs were to be supplied by the
petitioner by 15th December, 2006, however, as per the case of the
respondent, there were delays in provision of the same by the petitioner.
18. Upon raising of the final bill by the respondent, disputing the
release of amount minus the discount of Rs.115,11,28,129/- due to price
discount by the petitioner, the respondent invoked the Arbitration
Agreement contained in Clause 9.1.0.0 of General Conditions of Contract
vide notice dated 27th February, 2015. The Arbitral Tribunal having
entered reference on 18th August, 2015, passed the Impugned Award on
18th May, 2017, corrected by order dated 23rd June, 2017.
19. The Arbitral Tribunal has given its detailed findings on the issues
raised between the parties. The relevant findings are quoted for reference
hereinunder:
"208. Moreover, in light of law laid by the Hon'ble Supreme
Court in the case of Sethi Auto Service Station, in the Tribunal's
view the recommendation of EIL dated 19.03.2012 and the Office
Noting dated 26.03.2012 would not be an effective order. For the
above Recommendation/Noting, to culminate into an
executable/effective/enforceable order, ought to have been
communicated to L&T which was admittedly never done. In other
words, the recommendations of EIL dated 19.03.2012 and the
Office Noting dated 26.03.2012 are no order in the eye of law on
the application for EoT made by L&T.
OMP(COMM) 366/2017 Page 9
209. In this view of the matter, the Tribunal records its finding that
the communication dated 05.04.2012 has to be treated as truly
reflecting the decision made by the competent authority under the
Contract on the application for EoT whereby L&T was granted
extension of time till the actual dates of commissioning of Modules
1 and 2 and of mechanical completion of Module 3 of CPP. Of
course, the extension of time so granted was subject to price
discount. In the Tribunal's view once extension of time was granted
till the actual date of commissioning of Modules 1 and 2 and of
mechanical completion of Module 3, by virtue of Clause 4.3.9.0,
the extended date of completion shall be deemed to be the relative
date of completion in the Progress Schedule.
xxxxxx
254. It is clear from the record that the timelines as per L2
Schedule for supply of all the three fuels namely HSD, BFO and
RLNG were not maintained by IOCL. It also appears from the
record that L&T was also not ready to receive HSD, BFO and
RLNG on the dates IOCL was supposed to supply these fuels as
per L2 Schedule.
xxxxxxxxx
283. That L&T has raised Formats is not in dispute. The question
is, whether the date of raising the Formats can be taken as the only
date for readiness of the System/Sub-System/Equipment with
regard to which such Format(s) has/have been issued. In
Tribunal's view, in order to decide such controversy, Article 7 and
Article 8.17.1.0 have no application at all. How can a procedural
formality, particularly the date of submission of Format-III be
treated as the date of commissioning of a System/Sub-
System/Equipment when in fact such System/Sub-
System/Equipment has been commissioned earlier to that date. The
date of submission of such Format-III, in our view, for the reasons
already noted above would not be conclusive when actually and
factually the System/Sub-System/Equipment relating thereto has
OMP(COMM) 366/2017 Page 10
been commissioned earlier in point of time and had become
operational prior to that date.
xxxxxxx
285. That IOCL supplied RLNG to the Claimant on 04.08.2010 is
established by documentary as well as oral evidence. The letters
dated 04.08.2010 and 05.08.2010 by IOCL to L&T record this fact.
The oral testimony of CW-1 as well as RW-1 also establishes this
fact. The letter dated 19.03.2012 from ElL to IOCL shows that ElL
has also taken 04.08.2010 as the date on which RLNG was made
available.
xxxxxxx
316. The Tribunal finds merit in the submission of L&T that only
partial ECS inputs had been made available till 03.10.2008. This is
fortified by the Minutes of the Meeting dated 20-22.10.2008. In the
said meeting, it is recorded that all inputs were already provided
to L&T, except for three sub-stations for which L&T was advised
to proceed for engineering treating the available data as final.
xxxxxxx
328. The aforesaid clearly shows that IOCL was to make available
the ECS data. The L&T rightly submitted that ECS data inputs
were provided in piece meal and belated manner. We have come to
the conclusion that supply of ECS data was critical for mechanical
completion of Module 3. According to the contract, L&T was to
achieve mechanical completion of Module 3 (in accordance with
L2 Schedule) within 806 days from the availability of ECS inputs.
Even if it is taken that ECS data was made available on
03.10.2008, the revised date of Mechanical completion of Module
3 would be 18.12.2010. L&T had achieved Mechanical completion
of Module 3 on 30.06.2010.
xxxxxxxx
333. Third, the necessity of supply of fuel for firing UB for
commissioning Module 1 and supply of fuel for firing GTGs or
HRSGs for commissioning of Module 2 cannot be overlooked. A
condition cannot be read into the contract which does not exist.
There is no stipulation in the Contract that unless and until the
OMP(COMM) 366/2017 Page 11
Claimant had completed all obligation of Module 1 and Module 2
upto the stage of commissioning, the obligation of IOCL to supply
fuel would not arise. How can the stage of commissioning of
Module 1 or Module 2 be reached without completion of pre-
commissioning activities which necessarily required making
available fuel by IOCL to L&T.
xxxxxxxx
338. In light of the above discussion, the Tribunal holds that
although there was delay on the part of L&T in performance of its
obligations under the Contract, IOCL did contribute to the extra
time taken in completion of the Project and is responsible for delay
in supply of ECS data as well as supply of fuels. The Tribunal
further holds that both parties contributed to delay and delay is not
solely attributable to the Claimant.
339. In this view of ·the matter, even if it be assumed (although the
Tribunal has recorded its finding on Issue No.1 that L&T was
granted extension of time upto the actual date of commissioning
Module 1 and Module 2 and Mechanical Completion of Module 3
of the CPP) that there was no extension of time granted by IOCL,
the Tribunal holds that L&T is entitled to extension of time till the
actual dates of commissioning of Modules 1 and 2 and for
Mechanical Completion of Module 3. As a result of this finding,
Clause 4.3.9.0 comes into operation."
20. It is firstly submitted by the counsel for the petitioner that the
Arbitral Tribunal has erred in holding that the communication dated 5th
April, 2012, has to be treated as a decision granting extension of time
and, therefore, by virtue of clause 4.3.9.0, the extended date of
completion shall be deemed to be the relative date of completion in the
Progress Schedule and that the petitioner was not entitled to impose the
price discount. He submits that the petitioner had in fact denied
respondent's request for extension of time by the communication dated
OMP(COMM) 366/2017 Page 12
5th April, 2012 from the EIL. This had been further clarified by the EIL
in its letter dated 28th August, 2012, which has been reproduced above.
21. On the other hand, learned senior counsel for the respondent
submits that the EIL, in terms of clause 4.3.5.0 was empowered to
consider respondent's application for extension of time even after the
stage of completion of work, notwithstanding the fact that the application
may have been made prior to completion of work. Such extension of
time had been granted by way of letter dated 5th April, 2012. The internal
note dated 26th March, 2012 relied upon by the petitioner as its decision
to levy price discount of 10% cannot be taken into consideration as the
same was never communicated to the respondent. It is, therefore, urged
that the Arbitral Tribunal has rightly considered that once there is
extension of time granted by the petitioner/EIL, price discount could not
be levied by the petitioner.
22. I have considered the submissions made by the learned counsels
for the parties.
23. It would be useful to first quote the relevant clauses of the contract
as under:-
"4.3.5.0 Within 7 (Seven) days of the occurrence of any act,
event of omission which, in the opinion of the CONTRACTOR, is
likely to lead to delay in the commencement or completion of any
particular work(s) or operation(s) or the entire work at any job
site(s) and is such as would entitle the CONTRACTOR to an
extension of time specified in this behalf in the Progress
Schedule(s), the CONTRACTOR shall inform the OWNER and the
Engineer-In-Charge, in writing, of the occurrence of the act, event
or omission and the date of commencement of such occurrence.
OMP(COMM) 366/2017 Page 13
Thereafter, if even upon the cessation of such act or event or the
fulfillment of the omission, the CONTRACTOR is of the opinion
that an extension of the time specified in the Progress Schedule
relative to particular operation(s) or item(s) or works or the entire
work at the job site(s) is necessary, the CONTRACTOR shall,
within 7 (Seven) days after the cessation or fulfillment as
aforesaid, make a request to the Engineer-in-Charge for extension
of the relative time specified in the Progress Schedule. The
Engineer-in-Charge may on such request at any time prior to
completion of the works extend the relative time of completion in
the Progress Schedule for such period(s) as he considers
necessary, if he is of opinion that such act, event, or omission
constitutes a ground for extension of time in terms of the Contract
and that such act, event, or omission has in fact resulted in
insurmountable delay to the CONTRACTOR. The opinion/decision
of the Engineer-in-Charge in this behalf and as to the extension
necessary shall subject to the provisions of clause 4.3.6.0 hereof,
be final and binding upon the CONTRACTOR.
4.3.6.0 Notwithstanding the provisions of clause 4.3.5.0
hereof, the OWNER may at any time after final completion of the
Unit or works in all respects of its own initiative consider a request
for extension of time made by the CONTRACTOR to the Engineer-
in-Charge under Clause 4.3.5.0 or at the request of the
CONTRACTOR made by way of appeal either against the decision
of the Engineer-in-Charge taken under clause 4.3.5.0 or against
the Engineer-in-Charge's failure to take a decision under the said
clause, if satisfied of the existence of any ground(s) justifying the
delay, extend the date for completion of the work or any item or
operation thereof for such period(s) as the OWNER may consider
necessary, and the decision of OWNER as to the existence or
otherwise of any grounds justifying the extension and as to the
period(s) of extension necessary shall be final and binding upon
the CONTRACTOR.
xxxxxx
4.3.9.0 Upon an extension of the time for completion of the
work or any part of the work or any operation(s) involved therein,
OMP(COMM) 366/2017 Page 14
the extended date of completion shall be deemed to be the relative
date of completion in the Progress Schedule.
xxxxx
4.4.0.0 PRICE ADJUSTMENT FOR SLIPPAGE IN
COMPLETION
4.4.1.0 The Lumpsum Price specified in the Contract is based
(i) On the Mechanical Completion of the Unit(s) by the
CONTRACTOR; and (ii) On Mechanical Completion of the Unit(s)
within the time for Mechanical Completion of the Unit(s) specified
in the Time Schedule. The Lumpsum Price shall be subject to
adjustment by way of discount as hereinafter specified, if the
Unit(s) is/are not mechanically completed by the CONTRACTOR
or if the Unit(s) is/are mechanically completed subsequent to the
date of Mechanical Completion specified in the Time Schedule.
4.4.2.0 If Mechanical Completion of the Unit(s) is/are not
achieved by the date of Mechanical Completion of the Unit(s)
specified in the Time Schedule or if any works for which a separate
Progress Schedule has been established is/are not achieved by the
date of completion thereof specified in the relevant Progress
Schedule (each of the said date(s) is hereinafter referred to as the
"starting date for discount calculation"), the OWNER shall be
entitled to a discount in the Lumpsum Price in a sum equivalent to
the Lumpsum Price specified below for each week or part thereof
that the work remains incomplete beyond the starting date for
discount calculation, namely:
(i) For Mechanical Completion of the Unit(s) or completion
of the works as the case may be, achieved within 1(one) week of
the starting date for discount calculation-1/4 %(one quarter
percent) of the Lumpsum Price.
(ii) For Mechanical Completion of the Unit(s) or completion
of the works, as the case may be, achieved within 2 (two) weeks of
the starting date for discount calculation- ½ % (one half percent)
of the Lumpsum Price.
OMP(COMM) 366/2017 Page 15
(iii) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 3
(three) weeks of the starting date for discount calculation-3/4%
(three quarter percent) of the Lumpsum Price.
(iv) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 4
(four) weeks of the starting date for discount calculation - 1% (one
percent) of the Lumpsum Price. -
(v) For Mechanical Completion of the Unit(s) or completion
of the works, as the case may be, achieved within 5(five) weeks of
the starting date for discount calculation -1½%(one and one-half
percent) of the Lumpsum Price.
(vi) For Mechanical Completion of the Unit(s) or
completion of the works, as the case maybe, achieved within 6(six)
weeks of the starting date for discount calculation - 2½% (two
percent) of the Lumpsum Price.
(vii) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 7
(seven) weeks of the starting date for discount calculation - 2½%
(two and one half percent) of the Lumpsum Price.
(viii) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 8
(eight) weeks of the starting date for discount calculation - 3%
(three percent) of the Lumpsum Price.
(ix) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 9
(nine) weeks of the starting date for discount calculation- 4% (four
percent) of the Lumpsum Price.
(x) For Mechanical Completion of the Unit(s) or completion
of the works, as the case may be, achieved within 10 (ten) weeks of
the starting date for discount calculation- 5% (five percent) of the
Lumpsum Price.
OMP(COMM) 366/2017 Page 16
(xi) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 11
(eleven) weeks of the starting date for discount calculation - 6%
(six percent) of the Lumpsum Price.
(xii) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 12
(twelve) weeks of the starting date for discount calculation - 7%
(seven percent) of the Lumpsum Price.
(xiii) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 13
(thirteen) weeks of the starting date for discount calculation - 8%
(eight percent) of the Lumpsum Price.
(xiv) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within
14(fourteen) weeks of the starting date for discount calculation -
9% (nine percent) of the Lumpsum Price.
(xv) For Mechanical Completion of the Unit(s) or
completion of the works, as the case may be, achieved within 15
(fifteen) weeks of the starting date for discount calculation - 10%
(ten percent) of the Lumpsum Price.
4.4.2.1 The starting date for discount calculation shall be
subject to variation upon extension of the date for Mechanical
Completion of the Unit(s) or final completion of the works as the
case may be by the Engineer-in-Charge under Clause 4.3.5.0 or by
the OWNER under Clause 4.3.6.0, with a view that upon any such
extension there shall be an equivalent extension in the starting date
for discount calculation under Clause 4.4.2.0 hereof."
24. A reading of the above clauses would show that in terms of clause
4.4.1.0, the lumpsum price specified in the contract was subject to
adjustment by way of discount if the unit(s) is not mechanically
completed within the specified time schedule. The formula for
OMP(COMM) 366/2017 Page 17
calculating the discount is contained in clause 4.4.2.0 and is dependent
upon the period of the delay. Clause 4.4.2.1 provides that the starting
date for discount calculation shall be subject to variation upon extension
of the date for mechanical completion of the unit(s) or final completion
of the works by EIL under clause 4.3.5.0 or by the petitioner under clause
4.3.6.0. Clause 4.3.5.0 empowers the Engineer-in-Charge to extend the
relative time of completion in the Progress Schedule, if he is of the
opinion that due to occurrence of any act, event or omission, the
respondent/contractor is entitled to such extension of time. The
opinion/decision of the Engineer-in-Charge is subject to the provisions of
clause 4.3.6.0.
25. Clause 4.3.6.0 empowers the petitioner as an owner to, at any time
after final completion of the unit or works, consider a request for
extension of time made by the contractor and extend the date for
completion of the work or any item or operation thereof for such period
(s) as it may consider necessary.
26. In the present case, the respondent prayed for extension of time by
way of its letter dated 21st April, 2010, that is, during the period of
completion of works. EIL, in turn communicated the decision on such
application vide its letter dated 5th April, 2012, which clearly records that
the extension of time has been granted with price reduction of 10% of
contract value as per clause 4.4.0.0. This communication cannot be said
to be an unconditional extension of time granted by the Engineer-in-
Charge in terms of clause 4.3.5.0.
OMP(COMM) 366/2017 Page 18
27. Upon a clarification being sought by the respondent, EIL reiterated
this stand vide its letter dated 28th August, 2012, this time stating that the
application for extension of time without applying price discount had
been rejected and the petitioner as an owner has invoked and imposed
price discount of 10%.
28. The Arbitral Tribunal has treated the letter dated 5th April, 2012 as
a decision to extend the time for completion of the work and has rejected
the arguments of the petitioner that the reference to extension of time in
the said letter was merely a misnomer and it was actually a
communication of the decision to levy price discount. It further held that
as the recommendations made by the EIL and the decision taken thereon
by the petitioner in its noting dated 26th March, 2012 were not
communicated to the respondent, they were ineffective and that once the
extension of time was granted, the extended date of completion shall be
deemed to be the relative date of completion in the Progress Schedule,
and therefore, price discount cannot be applied.
29. In my view, this is a complete mis-reading of the letter dated 5th
April, 2012 addressed by EIL to the respondent. The said letter in no
ambiguous words states that the competent authority has taken a decision
to levy the price discount of 10% on the contract value in terms of clause
4.4.0.0. The said clause is applicable, as noted above, only where the
contractor is unable to complete the work within the specified time
schedule. Whether the decision to levy price discount on the respondent
was justified or not is an issue distinct from stating that the decision of
the competent authority was to grant extension of time unconditionally
OMP(COMM) 366/2017 Page 19
and, therefore, there can be no levy of price discount by the petitioner.
Therefore, the finding of the Arbitral Tribunal on this issue cannot be
sustained.
30. However, the above finding is not sufficient to set aside the
Impugned Award as the Impugned Award considers the question whether
the respondent would be entitled to an extension of time on its own merit.
Paragraphs 338 and 339 of the Impugned Award record such decision of
the Arbitral Tribunal and are reproduced hereinunder:-
"338. In light of the above discussion, the Tribunal holds that
although there was delay on the part of L&T in performance of its
obligations under the Contract, IOCL did contribute to the extra
time taken in completion of the Project and is responsible for delay
in supply of ECS data as well as supply of fuels. The Tribunal
further holds that both parties contributed to delay and delay is not
solely attributable to the Claimant.
L&T entitled for extension of time till the actual dates of
commissioning of Modules 1 and 2 and for Mechanical
Completion of Module 3.
339. In this view of the matter, even if it be assumed (although the
Tribunal has recorded its finding on Issue No.1 that L&T was
granted extension of time upto the actual date of commissioning
Module 1 and Module 2 and Mechanical Completion of Module 3
of the CPP) that there was no extension of time granted by IOCL,
the Tribunal holds that L&T is entitled to extension of time till the
actual dates of commissioning of Modules 1 and 2 and for
Mechanical Completion of Module 3. As a result of this finding,
Clause 4.3.9.0 comes into operation."
31. As far as merits of the claim of the respondent to seek extension of
time are concerned, the Arbitral Tribunal has placed reliance on the
OMP(COMM) 366/2017 Page 20
agreed L2 Schedule being the detailed Progress Schedule for the CPP.
The said Progress Schedule gives the schedule of milestones to be
achieved by the respondent as also the dates of the 'owner's input'. A
summary of the same is given by the Arbitral Tribunal in para 211 of the
Impugned Award, which is reproduced hereinunder:-
"211. The following facts are not disputed:
(i) As per the agreed L2 Schedule (being the Progress Schedule for
the CPP), IOCL was required to supply to L&T the fuels namely
HSD on 01.05.2008; BFO on 01.05.2008 and RLNG on
01.06.2008,
(ii) On supply of RLNG on 01.06.2008, L&T would have 182 days
(till 30.11.2008) to complete commissioning of Module 1 and 244
days (till 31.01.2009) to complete commissioning of Module 2.
(iii) HSD and BFO were supplied by IOCL to L&T on 06.06.2009
and 03.11.2009 respectively."
32. The Arbitral Tribunal further takes note of certain undisputed facts
which have a vital bearing on its decision. These are stated in para 214
of the Impugned Award which is reproduced hereinbelow:
"214.It is also not in dispute that:
(a) Start up fuel for UBs was HSD,
(b) The main and alternate fuels for GTG, HRSG and UB was
RLNG,
(c) HSD was identified as alternate fuel for GTG and HRSG,
(d) BFO was identified as alternate fuel for UBs, and
(e) After completion of CPP, GTGs, HRSGs and UBs were to be
operated on main and alternate fuels as identified in the
contract documents."
OMP(COMM) 366/2017 Page 21
33. After considering the oral and documentary evidence led by the
parties as also considering the relevant terms and conditions of the
contract, the Arbitral Tribunal found that the petitioner had failed to
maintain timelines as per the L2 schedule for the supply of HSD, BFO
and RLNG. Though the respondent was ready to receive the HSD in
April 2009, the petitioner supplied HSD to the respondent on 6th June,
2009. Further, RLNG was supplied to the respondent only on 4th August,
2010 and upon receipt of the same, the respondent completed all
commissioning activities in respect of Modules 1 and 2 on 28th August,
2010 and 29th September, 2010, respectively.
34. Counsel for the petitioner relying upon clause(s) 1.0.60.0, 3.0.1.0
of the GCC and clause 18 of the SCC, submits that the primary liability
to provide source of energy was on the respondent. The petitioner was to
supply the main fuels only to fire the generating equipment. He further
submitted that the obligation of the respondent to design, supply, erect or
construct, mechanically complete and commission the CPP was not
dependent upon the supply of HSD, BFO and RLNG by the petitioner.
Counsel for the petitioner further submitted that the L2 Progress
Schedule cannot be used to modify the obligations as provided in the
main Agreement.
35. On the other hand, learned senior counsel for the respondent
submits that in terms of clause 4.3.2.0, L2 Progress Schedule was to be
treated as part of the contract and it is only on respondent's failure to
commence or complete any work/operation within the prescribed dates
OMP(COMM) 366/2017 Page 22
that the respondent was to be treated as having committed breach of the
contract.
36. I have considered the submissions made by the counsels for the
parties. Clause 4.3.0.0 provides for time for completion. Clause 4.3.2.0
casts an obligation on the contractor to submit for approval a detailed
Progress Schedule. The said clause is reproduced hereinunder:-
"4.3.2.0 Within 28 (Twenty Eight) days from the date of receipt
of notification of acceptance of Bid the CONTRACTOR shall
submit to the OWNER for approval a detailed Progress Schedule
in graphical or other suitable form, giving dates of starting and
finishing of various operations and works within the scope of work,
providing sufficient margin to cover for contingencies and for final
testing and commissioning and consequential repairation,
replacement and/or supply. The Engineer-in-Charge and the
CONTRACTOR shall thereafter within another 14 (Fourteen) days
settle the Progress Schedule and the Progress Schedule so settled
shall be the approved Progress Schedule and shall form part of the
contract with attendant obligations upon the CONTRACTOR to
commence the various works/operations involved on or before
date(s) mentioned in this behalf in the approved Progress Schedule
and to conclude the said works/operations on or before date
mentioned in this behalf in the approved Progress Schedule and
default by CONTRACTOR to commence or complete within
prescribed date(s) any work or operation shall be deemed to be a
breach by the CONTRACTOR to which the provisions of clause
7.0.1.0 hereof relating to termination of contract shall apply, but
without prejudice to any other rights or remedies which the
OWNER may have in this behalf. "
37. Clauses 4.3.5.0 and 4.3.6.0 which provide for extension of time are
all related to this Progress Schedule which is duly approved by the
owner. Therefore, the contention of the counsel for the petitioner that the
OMP(COMM) 366/2017 Page 23
Progress Schedule has no relevance to the issue of extension of time or
for levy of price discount cannot be accepted.
38. As far as reliance on clauses 1.0.60.0 and 3.0.1.0 of the GCC is
concerned, the Tribunal rejects the same observing as under:-
"293. However, IOCL has taken the position that L&T could have
completed commissioning of Module-1 and 2 using only the
alternate fuel for each sub-Unit. This position of IOCL is not
supported by its witness RW-l. In answer to question 26 in the
cross examination, RW-1 stated that commissioning was actually
taking the fuel in and start the equipment. The equipment definitely
needed to check its performance with all the three fuels. Also, the
answer to the next question immediately following answer given by
RW-l to question 26 was apparently contradictory. The Tribunal
accordingly sought clarification by putting to her the question, "In
answer to Question No. 26, you have stated that the equipment
needs to check its performance with all the three fuels while in
answer to Question No.27, you have stated that commissioning can
be done using any fuel. Can you explain the difference in use of
fuel in checking the performance of the equipment and
commissioning?" To this question, RW-l answered,
"Commissioning means fuel and feed into the equipment and start
the equipment with production of the product of the equipment.
Hoverer, if there are more than one number of fuels, the
equipments requires to be checked with each fuel's each
performance so that the equipment performs in all the fuels as per
the specification."
294. RW-1 has admitted in her cross examination that RLNG
Skid/Fuel Conditioning Skid could be commissioned only with the
use of RLNG. RW-1 also admitted that BOP could not be
commissioned till RLNG was made available to L&T.
295. The testimony of RW-1 demolishes IOCL's stand that
commissioning could have been completed by L&T using only the
alternate fuels. Even otherwise, this stand of IOCL is contrary to
the provisions made in the Technical Specifications, particularly
OMP(COMM) 366/2017 Page 24
Clause 15.0, Clause 15.5, Section C1-21 of Technical
Specifications.
xxxxxxxx
No merit in IOCL's argument that unless and until L&T had
completed all obligations upto the stage of Module 1 and Module
2, IOCL had no obligation to supply the concerned fuel
330. The Tribunal finds it difficult to accept the argument
advanced on behalf of IOCL that unless and until L&T had
completed all obligations of Module 1 upto the stage of
commissioning, the question of IOCL's obligation to supply fuel to
fire the UB for commissioning Module 1 would not arise and
likewise until L&T had completed all obligations of Module 2, upto
the stage of commissioning, the question of IOCL being obliged to
supply fuel to firing the GTGs or the HRSGs for commissioning
Module 2 would not arise. This argument cannot be accepted
principally for five reasons.
331. First, neither the Contract nor L2 Schedule or any other
document forming part of Contract suggests so.
332. Second, a contract, such as the one, under consideration by
the Tribunal, before it is entered into by the parties, is preceded by
comprehensive submission and exchange of documents touching
upon all material aspects and requirements of the project that
brings complete clarity on all relevant matters so that parties are
well aware of the respective obligations right from the
commencement until completion of the project. All requirements
are fully envisaged in such contract as both parties being well
versed with a subject would not leave anything to chance or scope
of interpretation that may make it difficult to maintain timelines
resulting the project not being completed on time. Viewed thus,
nothing is found in the contract documents that supports the
argument of the Respondent that unless and until L&T had
completed all its obligations of Module 1 and Module 2 upto the
stage of commissioning, IOCL was not obliged to supply for firing
UB (for commissioning of Module 1) and for firing of GTGs or
HRSGs (for commissioning Module 2).
OMP(COMM) 366/2017 Page 25
333. Third, the necessity of supply of fuel for firing UB for
commissioning Module 1 and supply of fuel for firing GTGs or
HRSGs for commissioning of Module 2 cannot be overlooked. A
condition cannot be read into the contract which does not exist.
There is no stipulation in the Contract that unless and until the
Claimant had completed all obligations of Module 1 and Module 2
upto the stage of commissioning, the obligation of IOCL to supply
fuel would not arise. How can the stage of commissioning of
Module 1 or Module 2 be reached without completion of pre-
commissioning activities which necessarily required making
available fuel by IOCL to L&T.
334. Fourth, IOCL having accepted the responsibility of making
available the requisite fuel on particular dates cannot dishonor its
obligations under the pretext that unless and until L&T had
completed its obligation of Module 1 and 2 upto the stage of
commissioning, it had no obligation to supply fuel for the purposes
of firing UB for commissioning Module 1 and for the purposes of
firing GTGs or HRSGs for commissioning of Module 2.
335. Fifth, IOCL had at no time stated or expressed that its
acceptance of obligation of making available fuel for
commissioning of Module 1 and Module 2 was dependant on
completion of all obligations by L&T of Module 1 and Module 2
upto the stage of commissioning.
336. It also appears from the record that steam or condensate was
also not made available by IOCL to L&T when requested and that
resulted in delay of completion of project."
39. I do not find the above reasoning of the Arbitral Tribunal to be
unreasonable or perverse so as to warrant interference of this Court in
exercise of its powers under Section 34 of the Act.
40. In McDermott International Inc. v. Burn Standard Co. Ltd. &
Ors. (2006) 11 SCC 181, the Supreme Court had held that once the
OMP(COMM) 366/2017 Page 26
Arbitrator has the jurisdiction to entertain the dispute, interpretation of a
contract is a matter for the Arbitrator to determine. It was further held as
under:-
"112. It is trite that the terms of the contract can be express 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 and D.D.Sharma v. Union of India.]
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
face of the award."
41. In Navodaya Mass Entertainment Ltd. v. J.M.Combines (2015) 5
SCC 698, the Supreme Court reiterated the limited scope of interference
by the Court under Section 34 of the Act in the following words:-
"8. In our opinion, the scope of interference of the court is very
limited. The court would not be justified in reappraising the
material on record and substituting its own view in place of the
arbitrator's view. Where there is an error apparent on the face of
the record or the arbitrator has not followed the statutory legal
position, then and then only it would be justified in interfering with
the award published by the arbitrator. Once the arbitrator has
applied his mind to the matter before him, the court cannot
reappraise the matter as if it were an appeal and even if two views
OMP(COMM) 366/2017 Page 27
are possible, the view taken by the arbitrator would prevail. [See
Bharat Coking Coal Ltd. v. L.K. Ahuja, Ravindra & Associates v.
Union of India, Madnani Construction Corpn. (P) Ltd. v. Union of
India, Associated Construction v. Pawanhans Helicopters Ltd. and
Santna Stone & Lime Co. Ltd. v. Union of India.]"
42. In Associate Builders v. DDA (2015) 3 SCC 49, the Supreme
Court conducted detailed examination of the scope of the words 'public
policy of India' and held as under:-
"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".
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 re-appreciating the
OMP(COMM) 366/2017 Page 28
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."
xxxxxx
42. In the 1996 Act, this principle is substituted by the
"patent illegality" principle which, in turn, contains three
subheads:
42.1 (a) A contravention of the substantive law of India
would result in the death knell of an arbitral award. This
must be understood in the sense that such illegality must go
to the root of the matter and cannot be of a trivial nature.
This again is really a contravention of Section 28(1)(a) of
the Act, which reads as under:
"28. Rules applicable to substance of dispute.--(1) Where
the place of arbitration is situated in India.--
(a) in an arbitration other than an international
commercial arbitration, the Arbitral Tribunal shall
decide the dispute submitted to arbitration in
accordance with the substantive law for the time
being in force in India;"
OMP(COMM) 366/2017 Page 29
42.2.(b) A contravention of the Arbitration Act itself would
be regarded as a patent illegality - for example if an
arbitrator gives no reasons for an award in contravention of
Section 31(3) of the Act, such award will be liable to be set
asided.
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)
(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 National Highways Authority of India v. ITD Cementation
India Ltd., (2015) 14 SCC 21, the Supreme Court again reiterated the
scope of Section 34 of the Act as under:-
"25. It is thus well settled that construction of the terms of a
contract is primarily for an arbitrator to decide. He is entitled to
take the view which he holds to be the correct one after
considering the material before him and after interpreting the
provisions of the contract. The Court while considering challenge
to an arbitral award does not sit in appeal over the findings and
decisions unless the arbitrator construes the contract in such a
way that no fair-minded or reasonable person could do."
OMP(COMM) 366/2017 Page 30
44. I do not find any such case warranting an interference with the
Impugned Arbitral Award having been made out by the petitioner in the
present case.
45. Counsel for the petitioner has made further submissions on the
alleged delays of the respondent in commissioning Module 1 and 2. He
submits that Module 1 includes RLNG's Skid, which was part of the
Balance of Plant and was commissioned only on 28th August, 2010. He
submits that the delay up to 28th August, 2010 in commissioning Module
1 was, therefore, attributable only to the respondent. Similarly, for
mechanical completion of Module 2, as RLNG was not required, delay
till the date of completion, that is 30th June, 2010, was attributable solely
to the respondent.
46. The Arbitral Tribunal has considered the above submissions of the
petitioner and has held that in terms of L2 Progress Schedule, there was
an obligation on the petitioner to provide/make available the diverse
components/activities and some of the components/activities which the
petitioner was to provide were critical components and commissioning of
Modules 1 and 2 were dependent on them. The Arbitral Tribunal further
found that there was delay on part of the respondent in completion of
diverse tasks, however, at the same time, there was delay on part of the
petitioner in making available/providing some of the
components/activities which led to the delay in commissioning of
Modules 1 and 2. The Tribunal holds that the delay therefore, was not
OMP(COMM) 366/2017 Page 31
fully attributable to the respondent alone. Paras 311 and 312 of the
Impugned Award are relevant and are reproduced hereinbelow:-
"311. It is true that under the Contract, the obligation is upon the
Contractor (L&T) to design supply and construct CPP. However,
from the perusal of the Contract, it is clear that the Contract does
comprise of reciprocal promises. L2 Schedule which is part of the
Contract, when carefully seen, also indicates the order in which
owner (IOCL) is required to make available diverse components.
There remains no doubt that IOCL had obligation to provide /make
available the diverse components /activities. It goes without
saying that some of the components/activities which IOCL was
obliged to provide/make available to L&T as per the timelines
given in L2 Schedule were critical components and commissioning
of Modules 1 and 2 and Mechanical completion of Module 3 were
dependent on the tasks to be completed by L&T in time.
312. The material on record produced by IOCL does show delay
on the part of the L&T in completion of diverse tasks on time as
per timelines fixed under L2 Schedule, however, as there was delay
on the part of IOCL in making available/providing some of the
components/activities noted above, the Claimant-L&T could not
commission Modules 1 and 2 in time and Mechanical Completion
of Module 3 also could not be achieved in time. Thus, delay is
established to be contributory and not attributable to L&T alone."
47. The above being a finding of fact, this Court in exercise of its
powers under Section 34 of the Act cannot sit as a Court of appeal to
arrive at a different conclusion. The Arbitral Tribunal further observed as
under:-
"273. IOCL's witness RW-1 has deposed, that RLNG was made
available to L&T upon request on 04.08.2010 and the RLNG
Skid/Fuel Gas System at the CPP was commissioned by using it to
supply RLNG to various Systems and Sub-Systems which could be
fired by RLNG on 28.08.2010 and consequently commissioning
certificate for Module-1 was issued showing commissioning of
OMP(COMM) 366/2017 Page 32
Module on 28.08.2010. Thereafter, RLNG Skid/Fuel Gas System
and piping was progressively commissioned with respect to the
equipments comprised in Module 2 and Module 3. On completion
of the commissioning with regard to the equipment covered by
Module 2, commissioning certificate for Module 2 was issued to
the Claimant as of 29.09.2010.
xxxxxxxx
293. However, IOCL has taken the position that L&T could have
completed commissioning of Module-1 and 2 using only the
alternate fuel for each sub-Unit. This position of IOCL is not
supported by its witness RW-1. In answer to question 26 in the
cross examination, RW-1 stated that commissioning was actually
taking the fuel in and start the equipment. The equipment definitely
needed to check its performance with all the three fuels. Also, the
answer to the next question immediately following answer given by
RW-1 to question 26 was apparently contradictory. The Tribunal
accordingly sought clarification by putting to her the question, "In
answer to Question No.26, you have stated that the equipment
needs to check its performance with all the three fuels while in
answer to Question No.27, you have stated that commissioning can
be done using any fuel. Can you explain the difference in use of
fuel in checking the performance of the equipment and
commissioning?" To this question, RW-1 answered,
"Commissioning means fuel and feed into the equipment and start
the equipment with production of the product of the equipment.
However, if there are more than one number of fuels, the
equipments requires to be checked with each fuel's each
performance so that the equipment performs in all the fuels as per
the specification."
294. RW-1 has admitted in her cross examination that RLNG
Skid/Fuel Conditioning Skid could be commissioned only with the
use of RLNG. RW-1 also admitted that BOP could not be
commissioned till RLNG was made available to L&T.
295. The testimony of RW-1 demolishes IOCL's stand that
commissioning could have been completed by L&T using only the
alternate fuels. Even otherwise, this stand of IOCL is contrary to
OMP(COMM) 366/2017 Page 33
the provisions made in the Technical Specifications, particularly
Clause 15.0, Clause 15.5, Section C1-21 of Technical
Specifications."
48. In view of the above, the submission made by the counsel for the
petitioner regarding delay in commissioning of Modules 1 and 2 by the
respondent cannot be sustained.
49. It is next contended by the counsel for the petitioner that the
Arbitral Tribunal has erred in holding that the delay in Mechanical
Completion of Module 3 was due to the non availability of ECS data
from the petitioner. It is submitted that ECS forms part of BOP, which
falls under Module 1 and not Module 3. Relying upon the respondent's
letter dated 05.03.2010, it is submitted that even the respondent had
agreed that the ECS forms part of Module 1 commissioning and does not
in any manner affect the Mechanical Completion of Module 3.
50. I have considered the submission made by the counsel for the
petitioner. The Arbitral Tribunal has answered the above submission in
paragraph 327 of the Impugned Award as under:-
"327. On Issue Nos. 1, 2 and 3, it was argued that "The ECS
system formed part of Module 1 and not Module 3". This
submission is without any merit as ECS system consists of a fully
equipped ECS control room which receives and displays data
obtained from the data collection equipment located in CPP and
Sub-stations of the various units comprised in the NCC Complex.
The system also monitors and analyzes the data. To receive the
data from various Units and Sub-Station of each Unit was to be
provided with an RTU Penal. This Unit would at act as the data
collection centre for the Unit. The collected data from each Unit
OMP(COMM) 366/2017 Page 34
would be transmitted to ECS Control Room. The collection and
transmission of data network connected the Sub-stations to the
Control Room of the ECS System located in the CPP. This is also
evident from the contents of para 3 of the Affidavit of Mr.Ajay
Singh RW-2."
51. As Module 3 comprises of "Complete Captive Power Plant
including associated facilities as per the provisions of the Bidding
Documents", ECS being an important part of the Captive Power Plant,
would form part of Module 3 as well. EIL's letter dated 19.03.2012 and
the Note dated 26.03.2012 prepared by the petitioner itself also suggest
that ECS was an important input considered as a part of Module 3 by the
petitioner. The Arbitral Tribunal has further relied upon the L2 Schedule
which contemplated 806 days for achieving mechanical completion of
Module 3 from the availability of ECS inputs. The Arbitral Tribunal has
held that taking this time into consideration, it could not be said that there
was any delay on the part of the respondent to achieve mechanical
completion of Module 3. I do not find the said finding of the Arbitral
Tribunal to be perverse warranting any interference by this Court.
52. It is further contended by the counsel for the petitioner that the
Arbitral Tribunal has not only erred in holding that petitioner was
estopped from relying on dates of the Formats being submitted by the
respondent as the dates of completion of system but also holding that
there was waiver of insistence on Formats being submitted in accordance
with the Contract. He submits that the said finding is contrary to the
express terms of the Agreement, especially Article 8.17.1.0 of the
General Conditions of Contract, which stipulates that no waiver shall be
presumed or inferred unless any written communication is made. In this
OMP(COMM) 366/2017 Page 35
regard the counsel for the petitioner relied upon the following judgments
to contend that the Arbitral Tribunal was bound by the terms of the
Agreement and Award passed in ignorance thereof is liable to be set
aside:
1. Associated Engineering Co. v. Government of Andhra Pradesh
and another - (1991) 4 SCC 93
2. Rajasthan State Mines & Minerals Limited v. Eastern
Engineering Enterprises & Anr. - (1999) 9 SCC 283
3. New India Civil Erectors (P.) Ltd. v Oil and Natural Gas
Corporation - AIR 1997 SC 980
4. Ramnath International Construction Pvt. Ltd. v. Union of India
and Anr. - (2007) 2 SCC 453
5. Oil and Natural Gas Corporation Limited v. Western Geco
International Limited - 2014 9 SCC 263.
53. I have considered the above submission of the counsel for the
petitioner. The Contract requires the respondent to raise Formats I to V
while carrying out mechanical completion and commissioning activities.
The Arbitral Tribunal has considered the issue of submission of Formats
as under:-
"278. Although the Contract provides the procedure, manner and
time of raising Formats, and accordingly the date of readiness of
various Systems for commissioning but having regard to the fact
that the dates of achieving Format-III of diverse equipment are
much later than their respective dates of actual commissioning, it
is difficult to hold that the dates on which Format-III were raised
would be the date of readiness of the various Systems for
commissioning. It is admitted position that Format-III's were
submitted in respect of certain Units after commissioning of the
CPP. In our view, the dates of submission of Formats would not be
decisive.
OMP(COMM) 366/2017 Page 36
279. Moreover, IOCL has not been able to successfully rebut
L&T's case that it was at IOCL's instructions that works/Systems
be completed by L&T first and Formats issued later. IOCL by its
conduct is thus, estopped from now relying upon the dates of
Formats as the date of completion/Commissioning of the
concerned Systems. This also negates IOCL's contention that the
Formatting System under the contract cannot be assumed to have
been done away with and in any case IOCL cannot be said to have
waived the right of adherence to Formats in terms of the
provisions of the contract. It is not a matter of waiver but rather
conduct of IOCL that principle of estoppel arises in the fact
situation.
xxxxxx
283. That L&T has raised Formats is not in dispute. The question
is, whether the date of raising the Formats can be taken as the only
date for readiness of the System/Sub-System/Equipment with
regard to which sub Format(s) has/have been issued. In Tribunal's
view, in order to decide such controversy, Article 7 and Article
8.17.1.0 have no application at all. How can a procedural
formality, particularly the date of submission of Format-III be
treated as the date of commissioning of a System/Sub-
System/Equipment when in fact such System/Sub-
System/Equipment has been commissioned earlier to that date. The
date of submission of such Format-III, in our view, for the reasons
already noted above would not be conclusive when actually and
factually the System/Sub-System/Equipment relating thereto has
been commissioned earlier in point of time and had become
operational prior to that date."
54. A reading of the above would show that the Arbitral Tribunal has
taken note of the conduct of the parties during the execution of the work
under the Contract. It has also considered the nature of the Formats
provided in the Contract. The counsel for the petitioner could not dispute
OMP(COMM) 366/2017 Page 37
that the dates of commissioning of various equipments were earlier than
the dates of Format III. This itself shows that the parties did not consider
the submission of the Formats as having a vital bearing on the dates of
commissioning. What was therefore an issue before the Arbitral Tribunal
was the actual date of commissioning proved from the records of the case
rather than only relying upon the date of submission of the Formats. I do
not find the approach of the Arbitral Tribunal to be incorrect or
unreasonable. In view of the above, the judgments relied upon by the
counsel for the petitioner would be of no avail. It is not in dispute that
the Arbitral Tribunal is bound by the terms of the Agreement, however,
at the same time, if the Arbitral Tribunal has interpreted the terms of the
Agreement, unless it is shown that the same is perverse, the Award
cannot be set aside on this ground. It has further been held that the
correspondence exchanged between the parties is required to be taken
into consideration for the purpose of construction of a Contract.
(McDermott International Inc. (supra) and MSK Projects India (JV)
Ltd. v. State of Rajasthan & Anr. (2011) 10 SCC 573).
55. In view of the above, the submission of the counsel for the
petitioner cannot be accepted.
56. To the similar effect is the next challenge of the counsel for the
petitioner that it was mandatory for the respondent to give notice under
Clause 2.10.3.0 of the General Conditions of Contract if it was to seek
extension of time for any reason of delay on the part of the petitioner.
Though, the said submission of the counsel for the petitioner is correct, at
the same time, the Arbitral Tribunal has noted that not only had the
OMP(COMM) 366/2017 Page 38
respondent informed the petitioner of the delays in providing the fuels
and ECS inputs, but the petitioner itself considered the application filed
by the respondent seeking extension of time on its own merit and without
insistence on the formality of notice as required under Clause 2.10.3.0.
The relevant finding of the Arbitral Tribunal in this regard is as under:-
"159. It is true that the 16 documents (letter/emails) sent by L&T
between 23.04.2007 and 05.03.2010 which have been noted above
do not strictly satisfy the manner in which notice(s) was/were
required to be given under Clause 2.10.3.0. however, no such
objection was raised by EIL in its response to these letters/emails.
As a matter of fact until filing of Statement of defense at no point of
time objection was raised that the above emails/letters were not in
conformity with the contractual provisions. Even while considering
the Application for EoT, neither IOCL nor Engineer-in-Charge has
raised any objection that the letters/emails received from L&T
were not in the nature of notice(s) contemplated under Clause
2.10.3.0 read with 4.2.5.0."
57. The Arbitral Tribunal has further considered the effect of not
giving notice in strict compliance with Clause 2.10.3.0 on the application
for extension of time under Clause 4.3.5.0 and has held that even if it is
to be assumed that the Contractor has not given notice in terms of Clause
2.10.3.0, Clause 4.3.5.0 shall still be attracted. This again being a matter
of interpretation of the Agreement, which cannot be said to be totally
perverse, does not merit any interference by this Court in exercise of its
power under Section 34 of the Act.
58. In view of the above, I find no merit in the present petition and to
the challenge made by the petitioner to the Arbitral Award dated
OMP(COMM) 366/2017 Page 39
18.05.2017. The petition is accordingly dismissed, however, with no
order as to cost.
NAVIN CHAWLA, J
JUNE 01, 2018
RN/vp
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