Delhi High Court
Iilm World School vs S. S. Mann & Anr. on 30 October, 2018
$~34
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 30th October, 2018
+ OMP 564/2010
IILM WORLD SCHOOL ..... Petitioner
Through: Mr. Samrat Nigam, Mr. Sandeep
Mittal and Ms. Rekha, Advocates.
(M:9560952425)
versus
S. S. MANN & ANR. ..... Respondents
Through: Mr. Sandeep Sharma and Mr. Aman
Dhyani, Advocates. (M:9717464364)
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 has been filed challenging the award dated 21st May,
2010 passed by the learned Sole Arbitrator. The Respondent - Contractor
(hereinafter 'Contractor') was awarded a construction contract on 1st April,
2005 for building the IILM campus at Gurgaon. The total value of the
contract comprising civil/structural work was Rs.4,82,37,613/-. The contract
had an arbitration clause, which reads as under:
"14. ARBITRATION
In the event of any dispute arising out of or in relation
to this agreement between the parties hereto the same
shall first be sought to be settled by arbitration
governed by the Arbitration & Conciliation Act, 1996
and the rules framed there under, whose decision shall
be final and binding upon the parties Jurisdiction shall
be at Delhi for all cases."
2. Subsequent to the main contract awarding the work, a supplementary
contract/work order was awarded on 1st December, 2005 and thereafter, a
third work order was awarded on 7th December, 2005. The second work
order dated 1st December, 2005 is not subject matter of the present petition.
3. The Contractor carried out a substantial portion of the work but
thereafter, disputes arose between the parties. The Contractor filed a Section
11 petition before this Court. Vide order dated 2nd February, 2007, this
Court appointed a Sole Arbitrator to adjudicate upon the disputes between
the parties. The learned Arbitrator passed award dated 21st May, 2010
awarding various claims of the Contractor.
4. The Petitioner raised the following three objections in respect of the
impugned award.
i) That the claims in respect of work order dated 7th December,
2005 could not be adjudicated by the learned Arbitrator as there was no
arbitration clause in the said work order.
ii) That the Engineer-in-Charge had, made a noting on the final
bill, that a sum of Rs.17 Lakhs (Rs.11 Lakhs as security deposit + Rs.6
Lakhs above sum) was to be retained, until the Contractor cleared the
defects in the construction. Out of the said amount, the learned Arbitrator
has wrongly awarded to the Contractor a sum of Rs.13 Lakhs (Rs.11 Lakhs
+ Rs.2 Lakhs).
iii) That there is a calculation error of Rs.3 Lakhs in the final
award.
Each of the above objections shall be dealt with hereinafter.
i) That the claims in respect of work order dated 7th December,
2005 could not be adjudicated by the learned Arbitrator as there was no
arbitration clause in the said work order.
5. It is submitted by learned counsel for the Petitioner that the work
order dated 7th December, 2005 does not provide that the arbitration clause
in the original contract namely dated 1st April, 2005 would apply qua this
work order. He specifically relies upon clause 5 of the supplementary work
order dated 7th December, 2005 to argue that the arbitration clause is
conspicuous by its omission. It is, further, submitted that the learned
Arbitrator has, despite relying upon the judgements of the Supreme Court in
Alimenta S A v. National Agricultural Cooperative Market Federation of
India Ltd. (NAFED) 1987(1) SCC 615 and Sukanya Holdings Pvt. Ltd. v.
Jayesh H. Pandya (2003) 5 SCC 531 arrived at an incorrect legal
conclusion that the disputes qua the supplementary work order were
arbitrable.
6. On the other hand, learned counsel for the Respondents submits that
the original work order was itself for a sum of Rs.4.82 Crores and the
supplementary work order dated 7th December, 2005 was for a sum of
Rs.64.93 Lakhs. Since the original work order itself was above the total
amount of the final bill i.e. Rs.4.42 Crores, which was raised by the
Contractor, there was no issue in respect of disputes being non-arbitrable.
7. A perusal of the supplementary order dated 7th December, 2005,
clearly shows that the same is in continuation of the original work order
dated 1st April, 2005. The campus, where the construction is to take place is
the same, the project is the same and the work order is described as
"supplementary work order for extra items and quantities". The
supplementary work order itself refers to the main contract, which is
awarded to the Contractor.
8. Moreover, in the Section 11 petition, which was filed by the
Contractor, paragraph 12 reads as under:
"12. That vide Award letters dated 1.12.2005 and
7.12.2005, the supplementary works were also
awarded for construction of Underground Water
Tank and other extra items and quantities in the
contract for the work awarded to the Petitioners
vide Award letter dated 1.4.2004. (A copy of each
of the letters dated 1.12.2005 and 7.12.2005 are
annexed herewith as Annexure B Colly.)
As per the letter dated 1.12.2005, the work of
Underground Water Tank was tentatively valued
at Rs.16,19,836/- and the work of other extra
items and quantities i.e. Supplementary Work, as
per award letter dated 7.12.2005 was valued at
Rs.64,93,933/-. However, actual amount payable
was to be based on actual quantities on site
measurement on the basis of rates quoted in the
Bill of Quantities attached to the letters dated
1.12.2005 and 7.12.2005 respectively."
The prayer, however, in the said petition mentioned only the work order
dated 1st April, 2005, while seeking reference of disputes to arbitration.
9. The submission of the learned counsel for the Respondents cannot be
accepted, that this issue is no longer in dispute, in view of the reference
order dated 7th December, 2005. The order appointing the sole arbitrator
does not go into the issue as to whether the supplementary work order is
included in the reference or not.
10. It is, however, clear that the supplementary work order was in
continuation of the main work order, which was awarded to the Contractor.
The said supplementary work order has no independent existence. The
wording used in the supplementary work order also reveals the intention of
the parties i.e. in clause 5. The said clause provides as under:
"5. Other Terms & Conditions
All other terms & conditions of this
supplementary work like arrangement of water &
electricity, payment terms, recovery of Income
Tax (TDS) & Works Contract Tax, retention
money, insurance, statutory obligation, notices,
fees and charges etc would remain same as
mentioned in our Work Order dated 01.04.2005
issued & accepted by you."
The above clause is broad enough to hold that the intention of the parties
was to treat the supplementary work order, in continuation of, in addition to
and in furtherance of the main contract awarded to the contractor. All other
terms and conditions of the supplementary work order, except the ones
specified in the main contract were to remain the same as in the main work
order dated 1st April, 2005.
11. Learned Arbitrator cannot be faulted with for having considered the
two work orders as being integral to each other. The findings of the learned
Arbitrator are set out herein below:
"...................
I have carefully considered the respective
contentions of the parties on the question as to
whether the arbitration agreement as contained in
the first agreement dated 1st April, 2005 will also
form part of the agreement dated 7th December,
2005. While it is true that the arbitration
agreement has not been specifically mentioned in
the second agreement, however, one has to look to
the intention of the parties as can be gathered
from various documents including the agreements
on record. The parties, in my opinion, had
considered the works awarded both by the work
order dated 1st April, 2005 as well as work order
dated 7th December, 2005 as one contract.
Separate bills were never prepared in respect of
the work executed under the second agreement.
Running bills as well as the final bill were
prepared as if the work executed under the two
agreements was one. There is no reference
anywhere in any of the correspondence
exchanged between the parties that the work
carried out under the second work order was
under a separate contract or that the single bill
cannot be prepared in respect of both the
contracts. It is for the first time before the
Arbitral Tribunal that the plea about there being
two agreements in existence has been taken. I am,
therefore, of the considered opinion that the
arbitration agreement as contained in work order
dated 1st April, 2005 also by incorporation forms
part of the work order dated 7th December, 2005
and the disputes under the second agreement will
be covered by the arbitration clause as contained
in the first agreement. The judgments cited by
Mr. Chawla, in my opinion, are on their own facts
and are not applicable to the present
proceedings."
12. The above findings of the learned Arbitrator, on facts, are not
disputed i.e. no separate bills were prepared and the running bills and final
bill were treated as one. Parties themselves treated both the work orders as
being part of one contract. It is also agreed by Ld. Counsel for the
Petitioner, that the Petitioner raised a counter claim in respect of the
supplementary work order before the Ld. Arbitrator.
13. Moreover, in a recent judgment of the Supreme Court in Ameet
Lalchand Shah and Ors. v. Rishabh Enterprises and Ors., A.I.R. 2018 SC
3041 the Supreme Court has held that when there are multiple work
orders/agreements entered into in respect of a single commercial project, all
the disputes ought to be resolved through arbitral proceedings. Paragraph 21
of the said judgment is set out herein below:
"21. In a case like the present one, though there
are different agreements involving several parties,
as discussed above, it is a single commercial
project namely operating a 2 MWp Photovoltaic
Solar Plant at Dongri, Raksa, District Jhansi,
Uttar Pradesh. Commissioning of the Solar Plant,
which is the commercial understanding between
the parties and it has been effected through
several agreements. The agreement - Equipment
Lease Agreement (14.03.2012) for commissioning
of the Solar Plant is the principal/main
agreement. The two agreements of Rishabh with
Juwi India: (i) Equipment and Material Supply
Contract (01.02.2012); and (ii) Engineering,
Installation and Commissioning Contract
(01.02.2012) and the Rishabh's Sale and
Purchase Agreement with Astonfield (05.03.2012)
are ancillary agreements which led to the main
purpose of commissioning the Photovoltaic Solar
Plant at Dongri, Raksa, District Jhansi, Uttar
Pradesh by Dante Energy (Lessee). Even though,
the Sale and Purchase Agreement (05.03.2012)
between Rishabh and Astonfield does not contain
arbitration clause, it is integrally connected with
the commissioning of the Solar Plant at Dongri,
Raksa, District Jhansi, U.P. by Dante Energy.
Juwi India, even though, not a party to the suit
and even though, Astonfield and appellant No.1 -
Ameet Lalchand Shah are not signatories to the
main agreement viz. Equipment Lease Agreement
(14.03.2012), it is a commercial transaction
integrally connected with commissioning of
Photovoltaic Solar Plant at Dongri, Raksa,
District Jhansi, U.P. Be it noted, as per clause(v)
of Article 4, parties have agreed that the entire
risk, cost of the delivery and installation shall be
at the cost of the Rishabh (Lessor). Here again,
we may recapitulate that engineering and
installation is to be done by Juwi India. What is
evident from the facts and intention of the parties
is to facilitate procurement of equipments, sale
and purchase of equipments, installation and
leasing out the equipments to Dante Energy. The
dispute between the parties to various agreements
could be resolved only by referring all the four
agreements and the parties thereon to
arbitration."
14. In view of the latest decision of the Supreme Court and in view of the
facts of the present case, the objection is not sustainable and the findings of
the Arbitrator do not warrant any interference. The main contract and the
supplementary work order were part of a comprehensive assignment which
was rightly adjudicated in the arbitration proceedings.
ii) That the Engineer-in-Charge had, made noting on the final bill,
that sum of Rs.17 Lakhs (Rs.11 Lakhs as security deposit + Rs.6 Lakhs
above sum) was to be retained till the Contractor cleared defects in the
construction. Out of the said award, the learned Arbitrator has
wrongly awarded to the Contractor a sum of Rs.13 Lakhs (Rs.11 Lakhs
+ Rs.2 Lakhs).
15. Coming to the second objection in respect of retaining of the amount
of Rs.17 Lakhs as per the Engineer-in-Charge's noting, the said noting is
extracted herein below:
"The contractor has agreed to rectify all items as
defective within 15 days starting from 30th May,
2006. Till such time, Rs.6 lakh (in addition to
retention money of 2.5% -- 11,06,920/-) is held
and shall be paid to contractor on satisfactory
rectification of defects."
16. The fact that the Contractor accepted the said noting, is not in dispute.
The Petitioner would have, therefore, been entitled to
damages/compensation in respect of any defective work, which the
Petitioner would have got executed at the risk and cost of the Contractor.
However, unfortunately except in respect of a staircase, which was
renovated and rebuilt by the Petitioner, towards which Rs.6 Lakhs was
claimed by the Petitioner, there is no evidence on record to show any other
work or defects having been executed by the Petitioner at the risk and cost
of the Contractor.
17. Out of the claim for the sum of Rs.6 Lakhs qua construction of the
staircase, the learned Arbitrator has awarded a sum of Rs.4 Lakhs. The
remaining amount of security deposit and the retained amount of Rs.11
Lakhs has been refunded to the Contractor. In the absence of any evidence
to show that any of the defects were got executed by the Petitioner at the risk
and cost of the Contractor, the learned Arbitrator was left with no option but
to adopt the course of action he adopted. This objection is also not
sustainable.
iii) That there is a calculation error of Rs.3 Lakhs in the final award.
18. In respect of the calculation error, the Petitioner has filed an amended
petition. Amendment is allowed and the amended petition is taken on record.
In respect of any calculation error, if the same exists, the same would be
liable to be rectified especially since the Ld. Arbitrator has since passed
away. In the amended petition, the calculation error has been elaborated as
under:
"That further there is an error apparent on the
fact of the record with respect to the final amount
awarded by the Ld. Arbitrator as well. It is most
respectfully submitted that as per the Award of the
Hon'ble Tribunal, the following amount is
payable to the Claimant.
Total amount certified by the Architect Rs.4,42,51,651/-
Less amount paid
(Rs.3,89,46,673/- + Rs.8,00,000/-) = Rs.3,97,46,673/-
Less amount awarded for demolition of
staircase Rs.6,00,000/-
Less amount Awarded for cost of
construction of the Staircase Rs.4,00,000/-
Less amount awarded on account of delay
in construction Rs.2,85,362/-
Less amount awarded towards electricity
charges Rs.72,372/-
Therefore amount payable (including
Security deposit) Rs.31,47,244/-
(Rupees Thirty one lakhs forty seven thousand and two
hundred and forty four only)
That against the above amount, the Hon'ble
Tribunal has directed the Respondent to pay a
sum of Rs.23,26,315 + Rs.11,06,291/- =
Rs.34,32,606/- (Rupees thirty four lakhs thirty two
thousand six hundred and six only) thereby
clearly making a mistake apparent on the face of
the record. "
19. Learned counsel for the Respondents, while opposing that there is a
calculation error, is unable to satisfy the Court as in what manner the
calculations put forth by the Petitioner is inaccurate. A perusal of the award
makes it clear that the learned Arbitrator has, in addition to Rs.6 Lakhs
claimed by the Petitioner, deducted Rs.4 Lakhs from the final bill of the
Contractor as the staircase had to be reconstructed. Relevant portion of the
award reads as under:
"......... There is no evidence to show what is the
cost of the staircase claimed in the bill by the
claimant. The respondent has, however, spent a
sum of Rs.6 lakh for the re-construction of
staircase. In the absence of any evidence, only a
rough estimate can be made as to how much
amount would have been claimed by the claimant
for construction of the staircase in the bill.
Taking the fact that the respondent had spent a
sum of Rs.6 lakhs, I will presume that a sum of
Rs.4 lakhs have been claimed by the claimant
from the respondent for the construction of the
said staircases to which amount, the claimant is
not entitled as the staircases had to be demolished
because of defective workmanship.
............................"
Thus, the calculation given by the Petitioner is correct. Being something
which the learned Arbitrator has overlooked, the Court is bound to correct
the same. Accordingly, the amount payable is held to be Rs.31,47,244/-.
20. With these observations, the OMP is disposed of.
PRATHIBA M. SINGH
JUDGE
OCTOBER 30, 2018/dk
