Delhi High Court
M/S Lunar Electricals vs National Buildings Construction ... on 5 July, 2019
$~11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 5th July, 2019
+ CS (OS) 854/2011
M/S LUNAR ELECTRICALS ..... Plaintiff
Through: Mr. Rakesh Kumar Singh, Advocate
with Mr. S. K. Chugh, partner in
person. (M:9810183600)
versus
NATIONAL BUILDINGS CONSTRUCTION
CORPORATION LTD & ORS. ..... Defendants
Through: Mr. Manoj Kumar Das, Ms. Geeta
Das and Mr. Deepak Kumar,
Advocates. (M:8527038398)
CORAM:
JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)
1. The present suit has been filed by M/s. Lunar Electricals (hereinafter
referred to as „Contractor‟) seeking to take on record the award by the Ld.
Sole Arbitrator dated 19th January, 2011. M/s. National Buildings
Construction Corporation Ltd. („NBCC‟) has filed objections to the award
under Sections 30 & 33 of the Arbitration Act, 1940.
2. Briefly stated, the background of the case is that the NBCC had called
for tenders in respect of "Internal Electrification works in HUDCO Vishala
Project, New Delhi" being Work Order (W.O.) No.22368 dated 27th August,
1991. The Contractor was awarded the works by letter of award dated 22nd
March, 1991. The total value of the contract was Rs.39.42 lakhs. The work
order dated 27th August, 1991 was issued after five months of issue of the
letter of award. The date of start of work was 23rd March, 1991 and the date
of completion was 21st November, 1992. The payments to the Contractor
were to be made in stages as follows:
"I. 30% on conduiting
II. 40% on wiring
III. 25% on completion of switch/plates
IV. 5% on testing and commissioning"
3. The work was not completed and for various reasons, disputes arose
between the parties. The Contractor left the site as of April, 1994.
Admittedly, the balance contract value, which was not executed, was to the
tune of approximately Rs.21 lakhs. Thus, the Contractor had executed only
approx. 50% of the work allotted. The case of the Contractor was that the
site was made available belatedly and thus, the contract could not be
executed within time. The 9th RA bill had been finalised by the time
arbitration was invoked. Various Sole Arbitrators were appointed from
time to time vide letters dated 26th October 1994, 19th July 1996, 9th October
2000 and 13th April, 2005. The last appointed Arbitrator - Shri M. K. Verma
finally gave the award on 19th January, 2011.
4. The Contractor, apart from alleging that there was a delay in making
the site available also alleged that the BOQ and specifications etc. were
being revised from time to time, as a result of which the original BOQ was
rendered redundant. The Contractor raised various claims including claims
for loss of profit, overheads, etc.
5. On the other hand, NBCC, after arbitration was invoked, called the
Contractor for joint measurement for finalization of the 10 th RA bill/final
bill. The joint measurements were conducted but the Contractor refused to
accept the 10th RA bill. The Contractor sought to justify the non-acceptance
of 10th RA bill by giving reasons.
6. NBCC filed its counter claim on the basis of the 10th RA bill as it was
NBCC's case that the advance amounts paid to the Contractor were in
excess, and it was entitled to recover a sum of Rs.2,91,018/-. NBCC also
raised various other counter claims in relation to supervision, watch and
ward, work executed at risk and cost, short procurement of material etc.
7. The ld. Arbitrator came to the following conclusion on the issue of
delay of contract and breach of contract.
"4.1 Respondents made 2nd Revision of BOQ / tender
Specifications /approved brands just two months prior
to expiry of completion period besides site was also not
available due to non-completion of civil work till
expiry of contract period.
4.2 It is amply clear from above facts that both parties
have defaulted and committed breach in performing
their obligations as per contract which lead to slow
progress, stoppage, abandonment of work and
ultimately risk &cost execution of work."
Thus, the Arbitrator concluded that both the parties have defaulted in
performing their obligations, which led to the slow progress of work.
8. After arriving at the above conclusions, the ld. Arbitrator awarded a
sum of Rs.2,36,301/- under Claim 1 and also directed refund of the retention
money of Rs.1,09,095/-. All the remaining claims of the Contractor have
been rejected and the counter claims of NBCC were also rejected. The
amounts were awarded in the following manner:-
"Claim 1: Amount of Work done and material at
site Rs. 10,19,862.13
1. 10th RA bill was prepared by the respondents after
issue of risk and cost execution letter to claimants. This
incorporated penal recoveries, some recoveries
towards risk and cost execution besides certain
recoveries not tenable as per contractual provisions.
This 10th R/A bill was disputed and not accepted by
claimants. The risk &cost / Penal recoveries / amounts
kept in deposit / amounts withheld deducted in 10th RA
bill can't be allowed since breach of contract has also
been committed by respondents as per para 4.0 above.
Thus, it will not be reasonable to consider 10th RA bill
prepared after issue of risk &cost notice.
2. R/A bills prepared by respondent were reconciled
and it is observed that undermentioned amounts were
withheld/kept in deposit/not paid to respondents
without any valid reason :
i) 9th RA bill for Rs. Rs.1,04,457.00
1,04,457.00 was
passed by
respondents but not
paid to claimants.
ii) An amount of Rs. 17,238.00
Rs.17,238.00 was
withheld towards
damages of cable.
While receiving the
materials from the
claimants, no
comments regarding
damaged cable were
recorded by the
respondents. Rather,
the handing /taking
over note signed by
respondents
mentions that
materials have been
received in good
condition (Ref C:12).
Test certificates
showing cables in
good conditions were
also provided to the
respondents.
iii) An amount of Rs. 6,000.00
Rs.6000/-was
withheld kept in
deposit without any
valid reason.
iv) An amount of Rs.1,680.00
Rs.1680/- was
rd
withheld from 3 RA
bill without any valid
reason
v) An amount of Rs.62,668.00
Rs.62,668.00 was
withheld on account
of EPF/labour
license etc.
As per contract, the
claimant is directly
required to pay dues,
if any, to the
concerned authority.
Further, respondents
have not been able to
produce any record
of having paid this
amount actually to
the concerned
authorities after
almost 15 years of
execution of this
work.
vi) An amount of Rs. 6,150.00
Rs.61,50.00 was also
withheld without any
valid reason from 8th
R/A bill.
vii) An amount of Rs.16,686.00
Rs.18,471.64 has not
been paid against
"material received
by NBCC but not
paid (Ref. Statement
"A" below)
viii) Higher amount have Rs.21,422.00
been withheld
Against BOQ items
towards part Rates
instead of 85% rate
(Ref. Statement-B
below)
Total Rs.2,36,301.00
............................................................
5.3 Claim 3: Refund of retention money
Rs.1,44,007.00
It has been concluded in para-4.0 above that NBCC
has also defaulted and committed breach in performing
obligations as per contract.
A Retention money i.e. Security Deposit @ 5%
amounting to Rs.1,09,095.00 was deducted from
Running accounts bills of claimants by the
respondents. Since the breach of contract was also
committed by the respondents, the claimants are
entitled for refund of retention money. Thus an amount
of Rs.1,09,095.00 is awarded against this claim.
.............................................
The arbitrator awarded interest in the following manner:
7.0 MISCELLANEOUS:
a. A simple interest @10% per annum is awarded in
favour of claimants on awarded amounts against claim
No.1 & claim No.3 from 26.10.1994 i.e. date of
appointment of 1st Sole Arbitrator Sh. J.N. Mehra. The
interest is payable till date of payment by the
Respondent."
9. The objections of NBCC have been perused. Mr. Manoj Kumar Das,
ld. counsel appearing for NBCC contends that the ld. Arbitrator is guilty of
misconduct, inasmuch as there are no reasons given for the award of the
amounts. The 10th RA bill has been completely ignored, and the ld.
Arbitrator has also ignored the affidavits of two engineers, namely Mr. Dilip
Bhaskar and Mr. S. S. Gaur, AE both of whom supported the 10th RA bill.
They had, in fact, conducted the joint measurements and had prepared the
10th RA bill, according to which a sum of Rs.2,25,791/- was payable by the
Contractor to NBCC. The fact, that the affidavit of Mr. Dilip Bhaskar was
filed, is mentioned in award at paragraph 3.8. The preparation of the 10th
RA bill is also mentioned at paragraph 2.13. However, despite mentioning
of these facts, the ld. Arbitrator failed to give any reasons for ignoring the
10th RA bill. He relies upon the following judgments in support of his
submission that if the relevant documents and evidence are not considered
by the ld. Arbitrator, the award is liable to be set aside.
K.P. Poulouse v State of Kerala & Anr. AIR 1975 SC 1259
Indu Engineering and Textiles v Delhi Development Authority Civil
Appeal 2881/1996 ( Decided on 11th July, 2001)
10. He further submits that the award of 10% interest from the date of
appointment of first Arbitrator i.e. on 26th October, 1994 is also
unreasonable as NBCC cannot be blamed for delay of the arbitral
proceedings. Even the rate of interest awarded is on the higher side.
11. On the other hand, Mr. Rakesh Kumar Singh, ld. counsel appearing
on behalf of the Contractor submits that the award is fairly reasoned. The
ld. Arbitrator has considered all the relevant facts. He has even observed in
paragraph 4.1 that the site was itself not available for execution of works
and thus, the ld. Arbitrator has awarded those amounts that were genuinely
payable to the Contractor. Moreover, since the ld. Arbitrator has not
accepted the stand of NBCC, the Contractor was liable to be paid for the
amount of work executed, as also refund of the retention money.
12. Mr. Singh further submits that the Ld. Arbitrator being a technical
Arbitrator, cannot be expected to give detailed reasoning and the reasons,
which have been given are sufficient to support the award in favour of the
Contractor. He further submits that the awarded interest is also completely
valid and justifiable in the facts, as the contract itself dates back to 1991 and
the matter has reached its conclusion several years later. He relies upon the
following judgments.
Indian Oil Corporation Ltd. v. Indian Carbon Ltd., AIR 1988 SC
U. P. Hotels & Ors. v. U. P. State Electricity Board, (1989) 1SCC
Bhagwati Oxygen Ltd. v. Hindustan Copper Ltd., 2005 IV AD
(SC) 554
Thazhathe Purayil Sarabi & Ors. v. Union of India & Anr., (2009)
7 SCC 372
13. He further submits that 10th RA bill was rightly rejected by the Ld.
Arbitrator, as the same was not prepared in accordance with the contract.
Moreover, the evidence of the engineers is not liable to be considered,
inasmuch as these were unilateral affidavits filed by NBCC and they were
not directed to be filed by the Ld. Arbitrator. The 10th RA bill was not even
signed by the officer concerned.
14. The Court has heard ld. counsels for the parties and has considered
their submissions. The Court has also perused the impugned award, the
written submissions filed and the case laws cited by ld. counsels for the
parties.
15. A perusal of the award shows that the Ld. Arbitrator has referred in
detail to the 10th RA bill and has recorded the submissions of the Contractor
in respect of the 10th RA bill as under:
"2.13 After issue of Risk and cost letter, the
respondents prepared 10th R/A Final bill which was
denied & not accepted by the claimants. Claimants
disputed the measurements recorded in this bill inter-
alia stating that bill has not been prepared on the basis
of joint measurements and respondents have made
penal/unwarranted recoveries not tenable as per
contract."
16. Thereafter, the Ld. Arbitrator, after going through submissions and
documents has held that the delay had been caused by both the parties
leading to slow progress, stoppage, abandonment and ultimately execution
of the work at risk and cost. Under these circumstances, the Ld. Arbitrator
has rejected almost all the claims of the Contractor but has only awarded to
the Contractor the amount payable as per the works executed. The award of
the amount under Claim 1 is fairly detailed and is based on the 9 th RA bill,
which was an admitted document between the parties. The 10th RA bill was
clearly denied by the parties and evidence would have been required to be
adduced to prove the same. Long protraction of the arbitration proceedings,
and the change of at least three Arbitrators, leading to the 4th Arbitrator
having rendered the award, shows that the process of pleadings and
exhibition of documents was repeatedly being undertaken before each of the
Arbitrators. Mr. Singh has referred to the letter dated 10th October, 1995
written by the earlier Arbitrator Mr. J. N. Mehra, who had directed the
parties to reconcile the 10th RA bill, which according to him, had not been
done. In view of these circumstances, it is clear that the Ld. Arbitrator has
gone by the 9th RA bill, which was last RA bill between the parties. Each of
the items of work, which has been executed by the Contractor, has been
enumerated by the Ld. Arbitrator and the amount has been awarded on that
basis. The award in respect of Claim 1 is, therefore, not to be faulted with in
any manner.
17. Insofar the retention amount is concerned, the admitted position is
that the Contractor did not execute the full awarded contract for whatsoever
reasons. As per the award rendered, clause 4 required the submission of
security deposit by the Contractor. The said clause reads as under:
"4. 5% of the value. of the work done shall be retained
security deposit from the running bills of the
contractor/ PRW's. The security deposit as such shall
be refunded after satisfactory completion of the work."
18. As per the above clause, the security deposit was liable to be
refunded only after satisfactory completion of the work. The Ld. Arbitrator
has actually arrived at the finding that there was abandonment of the work,
for which both the parties are liable. There is also risk and cost execution of
the work by NBCC as per the Ld. Arbitrator himself. This finding of the Ld.
Arbitrator has not been challenged by the Contractor. Clearly, there was,
therefore, no satisfactory completion of the work as admittedly
approximately 50% of the work remained unexecuted by the Contractor.
Under these circumstances, this Court is of the opinion that the award of
refund of retention amount is not liable to be sustained. Accordingly, the
said award under Claim 3 is, accordingly, set aside.
19. Insofar as interest is concerned, all the Arbitrators were appointees of
NBCC. The appointing authority was also Chairman/Director of NBCC.
Delays by the Arbitrators, who were employees of NBCC, cannot be
attributed to the Contractor. Moreover, 10% interest rate, which has been
awarded is also not unreasonable considering that the Contractor had to fight
long drawn battle with NBCC. Hence, interest as awarded is upheld under
Claim 1.
20. OMP is disposed of with the above observations.
PRATHIBA M. SINGH
JUDGE
JULY 05, 2019/dk/dj
