Delhi High Court
Khazana Projects & Industries vs Indian Oil Corporation Limited on 13 November, 2019
$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 13.11.2019
+ O.M.P. (COMM) 469/2019
KHAZANA PROJECTS & INDUSTRIES ..... Petitioner
Through: Mr. Rajshekhar Rao, Mr. Siddharth
Joshi & Mr. Akshay Ringe, Advocates
versus
INDIAN OIL CORPORATION LIMITED ..... Respondent
Through: Mr. Raman Kapoor, Sr. Advocate
with Ms. Tannishtha Singh & Mr.
Abinash Agarwal, Advocates.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JYOTI SINGH, J. (ORAL)
I.A. 15661/2019
Exemption allowed, subject to all just exceptions.
Application stands disposed of.
I.A. 15662/2019
1. This application has been filed seeking condonation of 24 days delay
in re-filing the petition.
2. For the reasons stated in the application, the same is allowed and the
delay of 24 days in re-filing the petition is condoned.
3. Application stands disposed of.
O.M.P. (COMM) 469/2019
1. This is a petition under Section 34 of the Arbitration and Conciliation
Act, 1996 ('Act') seeking to set aside the award dated 28.08.2012 passed by
the learned Sole Arbitrator.
2. The petitioner and the respondent entered into a contract dated
11.06.1996 for carrying out the work of 'area development work in tank
farm and pump station premises at Haldia'.
3. Petitioner is a Company incorporated under the Companies Act and
the respondent is the Indian Oil Corporation Limited. Disputes having arisen
between the parties, Arbitrator was appointed by an order dated 20.02.2001
in AA No. 376/1998. In the statement of claim filed by the petitioner, the
following claims were made:-
SL. NO. DESCRIPTION OF CLAIM CLAIM
AMOUNT
(in Rs.)
1. Claims on account of delay in 1,09,96,500.00
handing over the clear sites of
work to the Petitioner by the
Respondent.
2. Claims for reimbursement of 3,13,675.00
royalty.
3. Claims for reimbursement of 59,84,857.00
rates.
4. Claim towards outstanding 14,96,214.00
accepted dues of the fourth R. A.
Bill.
5. Claim towards partly executed 11,10,435.56
quantity under Item 2.
6. Claim towards refund of 19,83,063.00
Security Deposit/Retention
Money.
7. Claim towards losses and 60,00,000.00
damages suffered due to illegal
and wrongful termination of the
Contract.
8. Claim towards loss of profit. 15,75,008.00
9. Claim on interest. As Accrued
4. The respondent had raised certain counterclaims which are as under:-
a) Respondent claimed a sum of Rs. 88.63,068.03/- towards
the difference between the total cost of the work executed and
the value of the work if the petitioner would have completed
the work;
b) The respondent sought Rs. 35,10.699.36/- towards
respondent's supervision charges for getting the work done at
the risk and cost of the petitioner;
c) The respondent sought Liquidated Damages @10%
according to Clause 4.4.0.0 of the GCC, which amounted to
Rs. 38,36,680.96/-;
d) The respondent adjusted an amount of Rs. 14,96,214.96/-
due towards the 4th RA Bill of the petitioner;
e) The respondent claimed interest @14% from 04.12.1999
till institution of the counter claims;
f) The respondent claimed pendente lite interest @ 21% per
annum;
g) The respondent claimed interest on the amount awarded
@ 21% per annum from the date of the Award till the date of
payment in full;
h) Further, cost of the arbitration proceedings was also
claimed by the respondent.
5. The learned Arbitrator after hearing the parties and examining the
documents and evidence on record, passed an Award on 28.08.2012.
6. As the case of the petitioner goes, the tender conditions required the
work to be executed within a period of 10 months. The petitioner was
declared a successful bidder and was awarded the work through a Letter of
Acceptance dated 31.05.1996. The Letter Of Acceptance (hereinafter
referred to as 'LOA') contained the value of the security deposit required to
be deposited as well as the time period of completion of the work to be eight
months reckoned from the date of issue of specific notice of commencement
of work by the Engineer-in-Charge.
7. As per the petitioner the obligation to complete the work within the
period stipulated necessarily implied that the entire site together with
necessary drawing would be made available to the petitioner on the date of
commencement of the work and there would be no hinderances on account
of the respondent. Prior to the LOA there were discussions between the
parties and it was decided that the work would be completed within eight
months from the date of handing over of the clear site to the petitioner for
earth filling. The same being subject to other conditions in the LOA.
8. The respondent through its letter dated 17.08.1996, after two and a
half months of the LOA intimated that commencement of work would be
reckoned from 17.08.1996 though the site had not been handed over by then.
The petitioner through letter dated 28.08.1996 immediately informed the
petitioner that the petitioner would not in a position to commence the work
as per the dead line since the clear site had not been handed over and there
were certain other hindrances on the site. In fact, the petitioner avers that
throughout the period of the work, clear site was not handed over and in
major duration of the work, the site was submerged under water.
Correspondences were thereafter exchanged between the parties with respect
to hindrances on the site.
9. As per the petitioner, the disputes were finally resolved only on
17.12.1996 and it was agreed that filling was to start from 25.09.1996 and
the work in full swing from 01.01.1997. The petitioner assured completion
of the work by end of May, 1997. The Petitioner avers that it commenced
the work of initial ground levels in the last week of December, 1996 which is
substantiated by respondent's own letter dated 10.01.1997. Thereafter,
however, there was unprecedented rain and the entire site was submerged in
water, which led to the stopping of the work. After the said hinderance
subsided, the transport vehicles of the petitioner were seized by the local
police, without any reason. The petitioner also avers that, thereafter, certain
disputes arose with regard to variation in certain drawings and this prevented
the petitioner from completing the work.
10. The respondent however issued a notice dated 29.03.1997, calling
upon the petitioner to show cause why the contract be not terminated and the
balance work executed through another agency, at the risk and cost of the
petitioner.
11. The petitioner responded pointing out that the delay was on account of
the hinderances by the respondent and non-availability of site. The petitioner
vide its letter dated 02.05.1997 requested the respondent to consider the date
of commencement as 25.12.1996 when the actual site was handed over and
sought the release of legitimate payments on the basis of joint measurements.
The petitioner also simultaneously resumed work at site but faced another
problem wherein the Kolkata Port Trust refused to provide the earth for
filling the adjoining areas.
12. The respondent finally repudiated the contract which was accepted by
the petitioner vide its letter dated 09.07.1997, but the petitioner offered to
execute the further work on modified rates. By letter dated 17.07.1997 the
respondent informed the petitioner that the last chance was being afforded to
mobilise and commence the work within 7 days. Finally, the contract was
terminated by the respondent vide letter dated 30.08.1997. The respondent
without carrying out any final measurements of the work executed by the
petitioner awarded the balance work to two other contractors.
13. The petitioner vide its letter dated 11.09.1997 sought reference of
dispute to arbitration and on their failure approached this Court for
appointment.
14. The learned arbitrator vide its award dated 28.08.2012 disallowed all
the claims of the petitioner and awarded a sum of Rs. 12,10,868.51/- against
the counterclaims raised by the respondent with interest @ 10% thereon with
effect from 04.12.1999 till the date of payment and also awarded cost of Rs.
5,29,440/- in favour of the respondent.
15. Learned counsel for the petitioner contends that the Arbitrator has
erred in its order dated 03.10.2003 in holding that all claims of the petitioner
other than claim No. 7 were arbitrable so far as they related to a period with
effect from 10 days prior to the notification of the claim. He submits that this
is against the contractual provisions. The Arbitrator failed to appreciate that
Clause 6.6.1.0 on which it has placed reliance is void under Section 28 of the
Contract Act. As per Section 28 any clause in a contract which extinguishes
the right of any party to enforce its rights is void to that extent. Clause
6.6.1.0 provides that if the claims are not notified within 10 days the rights
extinguish and this is exactly what Section 28 prohibits.
16. The next contention of the petitioner is that the contract was of a
nature which involved reciprocal obligations of both parties. The respondent
failed to provide a clear and hinderance free site to the petitioner. The
Arbitrator did not take cognizance of the various letters written by the
petitioner dated 28.08.1996, 06.09.1996 and 11.09.1996 showing non-
availability of clear site either on account of flooding or occupation by
cultivators of paddy crops. Since there were impediments created by the
respondent, the petitioner could not be penalized for not adhering to the
timelines. The event of flooding of the site was beyond the control of the
petitioner. It was not on account of a normal monsoon effect but much
beyond that. This prevented not only the excavation work but also carrying
out spot measurements.
17. It is further argued that the Arbitrator has erred in proceeding on the
basis that the period of completion of work was 8 months from the date of
notice of commencement of work issued by the respondent on 17.08.1996
and that the petitioner had failed to adhere to the time line. It is submitted
that this finding is contrary to the records in as much as in the bid documents
it was clearly mentioned that the period of completion was 10 months. Thus,
the Letter of Acceptance which provided a period of 8 months could not be
the basis of coming to a finding that the timeline was 8 months.
18. Learned counsel next contends that the counterclaims have been
wrongly awarded to the respondent, although the procedure of awarding the
risk and cost contract has not been followed. The respondent on termination
of the contract was required to carry out final measurements under Clause
7.0.4.0 and prepare a final Bill indicating the final extent of the work
executed by the petitioner. In the absence of this, no contract for balance
work could have been awarded.
19. The further argument pressed by the learned counsel for the petitioner
is that the counterclaim of Liquidated Damages has been wrongly allowed in
favour of the respondent. The claim for Liquidated Damages arises out of
Clauses 7.0.9.0 read with clauses 4.4.0.0 and 4.4.1.0 and was pre-estimated
at 5% of the total contract value. It is submitted that the Arbitrator has given
no reason or justification for awarding Liquidated Damages and the cardinal
principles of Sections 73 & 74 of the Contract Act have been overlooked.
Liquidated damages can be awarded for breach of contract and must be a
genuine pre-estimate of the damages. A penal stipulation cannot be enforced
in view of the fact that the essence of penalty is a payment of money in
terrorem of an offending party.
20. No other argument was addressed by the petitioner.
21. Learned counsel for the respondent on the other hand argues that, in so
far as the decision of entertaining the notified claims for a period beyond 10
days is concerned, the said order was passed by the Arbitrator way back in
the year 2003 and was never challenged by the petitioner. Learned senior
counsel further submits that all the arguments which are being sought to be
argued are in the nature of appreciating the evidence before the Arbitrator or
interpreting the clauses of the contract, which is beyond the domain of this
Court, in a petition under Section 34 of the Act. The parameters of the
judicial review in a petition under Section 34 of the Act have been clearly
laid down in various judgments by the Supreme Court and various High
Courts. Reliance is especially placed on the judgment of the Supreme Court
in the case of McDermott International Inc. vs. Burn Standard Co. Ltd.
and Ors. (2006) 11 SCC 181 and Associate Builders vs. Delhi Development
Authority (2015) 3 SCC 49.
22. I have heard the learned counsels for the parties.
23. The learned Arbitrator by its detailed order dated 03.10.2003 had
adjudicated the objection of the respondent that all the claims referred by the
petitioner were not arbitrable as they were neither notified claims nor
included in the petitioner's final bill in terms of clause 6.6.3.0. Claim No. 1
was notified on 27.11.1997, Claim No. 3 was notified on 06.05.1997 and
was held arbitrable with effect from 10 days before 06.05.1997. Claim Nos.
2, 4, 5 and 6 were held arbitrable but claim No. 7 was not held arbitrable.
The Arbitrator had passed this order on 03.10.2003 but the petitioner did not
challenge the said order and proceeded with the arbitration on the said basis.
In my view it is rightly contended by the respondent that it is not even open
to the petitioner at this stage to contest the question of arbitrable claims,
having accepted the said order of the Arbitrator in 2003. There is thus no
merit in the first objection of the petitioner.
24. As regard the arguments that Clause 6.6.3.0 is contrary to Section 28
of the Contract Act as the rights of a party to raise claims cannot be
extinguished, suffice would it be to state that the parties entered into the
contract with open eyes. It was agreed that certain claims would be treated
as notified claims and the time line for their notification was also fixed. If the
petitioner chose not to notify the claims in the manner stipulated in the
contract and include the same in the final bill, as per the time stipulated, no
error can be found with the order of the Arbitrator. The contract was entered
into by a mutual agreement between the parties and it is thus not open to the
petitioner to now challenge that the said provision is contrary to Section 28
of the Contract Act. Even otherwise there is no merit in this contention. In
this context, it is significant to note that two Co-ordinate Benches of this
Court have held that claims which are required to be notified under the
provisions of the contract and included in the final bill but are not so notified
by the claimant cannot be referred to arbitration. The said judgments are in
the case of Srico Projects vs. IOCL, 2017 SCC OnLine Del 6446 and
Institute of Geoinformatics vs. IOCL, 2015 SCC OnLine Del 9562.
25. A Division Bench of this Court in the case of Indian Oil Corporation
Limited vs. Institute of Geoinfomatics Pvt. Ltd. 2018 VIII AD (Delhi) 148
was examining the issue whereby the Arbitrator had adjudicated the claims
which were not 'notified' in terms of the provisions of the contract between
the parties. The Court held that the Arbitrator had no jurisdiction to
adjudicate the claims which are not 'notified' and the relevant portion of the
judgment reads as under;-
"6. ...15. It is quite clear that the disputes which
were not arbitrable. This court while disposing of
the arbitration petition under Section 11(6) of the
Act on 19.05.2015 had specifically held so. In the
light of this, there was no reason for the learned
Arbitrator to have gone ahead and adjudicated
upon those disputes. The impugned Award to the
extent that it deals with claims No. 1, 3, 4 and 5 is
held to be entirely illegal. The same has been
passed contrary to the provisions of the Act. The
Award to the extent it deals with claims No. 1, 3, 4
& 5 is set aside. Rest of the Award is upheld.
16. Petition stands disposed of. Liberty is granted
to the respondent to take steps as per law
regarding its claims No. 1, 3, 4 & 5."
7. The IOC, which is the appellant, urges that though its
argument with respect to arbitration by the tribunal of
excluded matters, succeeded, the result is piquant; it is left
facing an adverse award to the tune of ` 4.2 lakh and costs in
excess of ` 32 lakhs, for which no reason is ascribed by the
tribunal. Learned counsel for the respondent Institute urged
that the IOC's submissions were long drawn and it was
compelled to engage counsel and incur significant expense.
He also urged that the tribunal, in the award has indicated
sufficient reasons for granting the costs in this case.
8. This court notices that there was practically no controversy
with respect to the phraseology of the subject matter
exclusion; clearly the plain words of the terms (of contract)
and the interpretation given by this court referring the
dispute, precluded any adjudication in arbitration. If the
claimant Institute had a grievance, it was well within its right
to have sought remedies in accordance with law. The
tribunal's reasoning in brushing aside the non arbitrability
conditions were specious; the learned Single Judge therefore
was justified in holding otherwise, as the findings amounted to
patent illegalities within Sections 28 and 34 of the Act. The
tribunal unfortunately proceeded to ignore the clear and
express terms and gloss over this court's order; in doing so,
and in adjudicating claim nos. 1, 3, 4 and 5, it fell into error,
because it never had the jurisdiction to decide those in
arbitration. Such being the case, it was not justified at all in
penalizing IOC with substantial and heavy costs for such
adjudication-to the extent of ` 32,89,924/-; the same is hereby
set aside. The appeal FAO (Comm.) 189/2017 is allowed to
the above extent. FAO (Comm.) 197/2017 is for the above
reasons, dismissed."
26. Thus, in my view there is no merit in this contention of the petitioner.
27. In so far as the contention of the petitioner that the stipulated period of
completion should have been 10 months and not 8 months is concerned, the
same only deserves to be rejected. No doubt in the bid documents, the period
of completion was referred to as 10 months and in the Letter of Acceptance
the time stipulated was 8 months but there cannot be any doubt on the
proposition that once the bids are invited and any negotiations between the
parties result into an issue of Letter of Acceptance with certain conditions,
the conditions in the Letter of Acceptance cannot be given a go by. The
petitioner can hardly argue that the stipulations in the Letter of Acceptance
which came after the bid documents would be meaningless. In any case, the
Arbitrator has analysed the question of what was the time period for
completion of the work. The finding and observations of the Arbitrator on
this aspect is as under:-
"And what was the time period for completion of the
work? The letter of Acceptance dated May 31, 1996
stated that it wold be 8 months including monsoon and
mobilization and was to be reckoned from the date of
issue of specific notice of commencement of work by the
Engineer-in-charge". However by letter Exhibit C- dated
May 31, 1996 the Claimant took the position that the
contracted work will be completed within 8 months from
the date of handing over clear site to us for earth filling".
Obviously. The stand so taken in the letter was at
variance with what was stated in the above referred
Letter of Acceptance of May 31, 1996. This is not all, if
we look at the Special Condition of Contract in Clause
6.1.0 makes it amply clear that:
"Time for completion of works shall be thus 10
(Ten) calendar months. This time schedule shall be
inclusive of any monsoon falling in between and to
be reckoned from the date of issue of
fax/telegram/letter of acceptance of tender"
28. The Arbitrator concluded that the petitioner had himself assured that
he would complete the work in 8 months from the date of handing over the
site. This Court finds no reason to interfere with this finding of the Arbitrator
in the present petition.
29. On the issue raised by the petitioner with regard to the delay and
hinderances in handing over the site, the learned Arbitrator has in great
details analysed the contention and based on the documents and evidence on
record has held as under:-
It appears that meetings at site has also taken place
between the parties but to no effect and that is why on
January 27,1997 the Respondent Corporation felt
convinced that Claimant commitment into practice". This
is what is borne out from the letter of the Respondent
Corporation dated January 27, 1997. Through that letter
the Claimant was asked to spell out its action plan on the
following :-
(i) Mobilization of equipment, manpower.
(ii) Identification of borrow pit. Schedule of filling
and all other activities with minute break-ups.
(iii) Testing of soil and getting approval of EIC.
It appears that thereafter work did start but the claimant
was told that it was lagging behing the schedule and
therefore was called upon to step up the progress by
engaging a fleet of 43 Dumpers with a further addition of
equal number of trucks within 4 or 5 days. On march 13,
1997. The Respondent Corporation once again requested
the Claimant to increase rate of earth filling preferably
before the onse of monsoon and pointed out that any
delay in completion of the work would in turn affect the
activities of different agencies in the station area. On
29th and 31th of March. 1997 the Respondent
Corporation brought it to the notice of the Claimant that
as on March 31, 1997 only 35000 M3 (Approximately) of
earth could be brought as against targeted earth and that
the short fall was 26% thereby shooting up the asking
rate to 5400 M3 day to complete the work by May 1997
as promised and that the Claimant had also failed to
deploy 3 Nos. Of excavators by February 15, 1997 "as
promised" and that under the circumstances it was quite
"virtually impossible" for the Claimant to complete the
work within the contractual time. The Respondent
Corporation thus gave "last opportunity" to show cause
in writing within seven days of the receipt of the
communication as to why the contract be not terminated
and the balance unfinished work be not awarded to
another agency at Claimant's risk and cost. It is not that
the Claimant gave no reply. It did and it was on April 10,
1997. It claimed that by march, 1997 it had completed
earth work in excess of 1,03,000 cubic meters and took
the plea that the date of commencement of the contract
could be only from end of December, 1996. What is
further important to note is that through that reply to the
show cause notice the Claimant took the stand that the
monthly output would be increased to 85000 cubic
meters subject to land from C.T. being made available.
This reply was followed by further mutual discussions
which took place on May 22, 1997. As is borne out from
the letter of the Respondent Corporation of June I 0,
1997. Two things clearly emerge out from the said letter.
First, the claimant had agreed to handover filled-in
portion of a road and so also a portion of an adjacent
road by the end of May. 1997 and that the parties had
agreed to chalk out a revised work plan at a subsequent
meeting. However significantly what is further borne out
from that letter is that the Claimant had still not resumed
work. Subsequent to the said letter a meeting took place
between the parties on June 13, 1997. The position at the
time of the said meeting is clearly spelled out by the letter
of June 18, 1997 written the by the Respondent
Corporation. It shows that the work was at a stand still
and that although the Claimant had committed to
comclude the sork by may 31,1997 but till date the
Claimant had worked upto only 1,65,000 cubic meters
against the target of 3,12,000. The Claimant came up
with its won reasons and those are spelled out in its letter
of July 9,1997. It speaks of demand of upward revision of
tender rates. It also speaks of how refusal by Calcutta
Port trust to release their land for obtaining earth had
escalated the cost and how the claimant had also been
effected by all round increase in the wages of labours.
P.O.I. etc" it also spoke of delay in commencement of the
work on account of standing crops and approach road to
the work being still under construction. The Claimant
also pointed out that it had reached a situation when it is
no longer possible to support the job site costs. It thus
asked for enhancement by 40% in the rates for the item
no. 2.
XXX XXX XXX
I have referred to above in some detail what transpired
before the letter of termination of contract. What emerges
out from the evidence on the record and more so from the
contemporaneous record is that the Claimant had failed
repeatedly to honour its commitments not only under the
contract but made during mutual discussions to
commence the work in right earnest and to complete the
same. Even if it be taken that there were some
impediments before December 17, 1996. The Claimant
had agreed to commence the work and complete the same
by May 31, 1997 but then instead of fulfilling its
commitment the Claimant Corporation stopped work on
May 23, 1997 and demobilized the site in the first week of
june. 1997 and thereafter did no remobilize despite
repeated reminders by the Respondent corporation. What
further emerges out is that by letter of July 9, 1997. (C-
14) the Claimant demanded a "minimum increase" of
tender rates for item No. 2 by 40 % and that this was a
sine-qua-non to enable us to complete balance work"
thereby making it further clear that the work would be
commenced only on receipt of sanction of those rates.
This may be taken as repudiation of the contract.
30. This Court finds no reason to interfere and deviate from the said
finding. The Supreme Court in the case of McDermott International Inc. vs.
Burn Standard Co. Ltd. and Ors. (2006) 11 SCC 181 and Associate
Builders vs. Delhi Development Authority (2015) 3 SCC 49 has clearly laid
down the parameters for judicial review under Section 34 of the Act. This
Court in judicial review cannot upset the detailed findings of the Arbitrator
in the award impugned herein.
31. The next contention of the petitioner that requires to be dealt with is
that the respondent illegally awarded the contract for the balance unfinished
work. The Arbitrator has analysed the entire correspondence between the
parties for carrying out the work that was to be initially executed by the
petitioner, including the various meetings that the parties had in which the
petitioner assured that the work would be completed. In particular, reliance is
placed on a letter dated 04.08.1997 in which the representative of the
petitioner assured that a commitment in writing would be given for the
balance work failing which the respondent was at liberty to get the job done
at the risk and cost of the petitioner. The Arbitrator has come to a finding
from a perusal of the record that in fact no such commitment was received in
writing from the petitioner and therefore the respondent was justified in
taking the view that the petitioner was no longer interested and therefore
rightly took action to award the balance work at the cost of the petitioner.
Relevant part of the award is as under:-
It appears from the record that the Claimant had sent a
letter to the Respondent Corporation on June 27, 1997
making an effort at justifying the failure to adhere to its
commitment. It was responded to by Respondent
Corporation through its letter of July 17, 1997, it is a
detailed reply showing how the Claimant had failed to fulfil
its contractual obligations and commitments made. Through
the said letter the Respondent Corporation gave the
Claimant "last and final chance" to mobilize and commence
the work within seven days of the receipt of the letter failing
which the Respondent Corporation would have no option
but to execute the balance unfinished work by awarding to
other agencies at the risk and cost of the Claimant. The said
letter was followed by yet another letter of 19/26 July, 1997.
The said letter again detailed the failure on the part of the
Claimant to adhere to its contractual obligations and
commitments made from time to time. The letter shows that
there was a mutual discussion once again on August 4, 1997
in which the representative of the Claimant had assured that
a commitment in writing would be given for filling of 50,000
cubic meters during the month of August, 1997 failing which
Respondent Corporation would be at liberty to get the job
done at the risk and cost of the Claimant but no such
commitment had been received in writing and that under the
circumstances the Respondent Corporation was of the view
that the Claimant was no longer interested in commencing
the work and that the Respondent Corporation was at liberty
to take a appropriate action as deemed fit in the interest of
work. The Respondent Corporation wrote yet another letter
and it is of August 14, 1997. The letter again deals with all
the issues and failure of the Claimant to honour its
commitments made from time to time including the last one
of August 4, 1997 relating to filling of 67,000 cubic meters
in August, 1997. It appears that though on August 4, 1997
this commitment was made but no work was started. The
Respondent Corporation again offered to hold a meeting on
August 16, 1997. The Respondent wrote back on August
22,1997 asserting again that full site had never been handed
over of Phase - II or Phase - III and that as far as Phase - I
was concerned work had been "substantially completed". It
also spoke of water logging and flooding in the coastal
areas of Midnapore District, thus making it clear that it was
impracticable to proceed with the earth filling works. It once
again made complaint that its request for upward revision of
the rates had been declined and invoked arbitration clause.
The record shows that even thereafter some discussion had
taken place on August 6, 1997 as is borne out from the letter
of the Respondent Corporation dated August 28, (illegible).
What is borne out form the said letter is that the Claimant
was once again requested to remobilize and start with
immediately which the Claimant had agreed to confirm by
fax latest by 3:30P.M. on August 28, 1997 leading the
Respondent corporation to believe that the Claimant was no
longer interested resuming the work. On August 30, 1997
followed the letter of termination by the Respondent
Corporation.
32. The finding of the Arbitrator is not only a possible but a plausible
finding. If the petitioner failed to fulfil its commitments despite several
assurances, this Court does not feel the need to interfere with the finding of
the Arbitrator which is even otherwise justified in the facts of the case and
under the realm of contract law.
33. Lastly, this Court is required to deal with the contention that the
Arbitrator has wrongly allowed the counterclaim of the respondent on
account of Liquidated Damages and the same is against Sections 73 & 74 of
the Contract Act. The contract between the parties incorporated Clause
4.4.0.0 which enabled the respondent to levy a pre-estimated sum of
damages to the extent of 10 % of account of delay on the part of the
petitioner. The said Clause reads as under:-
"4.4.0.0 If there is any delay in the final completion of the
work at any job site or specific works in respect of which a
separate Progress Schedule has been established, beyond
the date for the final completion or the work or works
aforesaid at the job site as stipulated in the Progress
schedule, the Owner shall (without prejudice to any other
right of Owner in this behalf) be entitled to reduction in
price 1/2% {one-half percent) of the total contract value for
each week of delay or part thereof limited to a maximum of
10% (Ten percent) of the total contract value."
34. The arbitrator has come to a finding that the petitioner has failed to
complete the work awarded within the stipulated period. The Arbitrator also
analysed the affidavit filed by the respondent, which indicated the total
executed value of the contract as Rs. 3,83,66,805.64/-. The respondent had
claimed 10 % of the said value in terms of the provisions of the GCC.
Having held that the petitioner was responsible for the delay in execution,
the Arbitrator has nevertheless reduced the damages claimed from 10% to
5% taking into account that there was rainfall at the site and this reduction
would meet the ends of justice and balance the level playing field between
the parties. Relevant para of the award reads as under:-
"As already found above the Claimant Company failed to
complete the awarded contract within the stipulated period.
This invited clause 7.0.9.0 GCC which entitled the
Respondent Corporation to compensation in terms of
provisions of Clause 4.4.0.0. keeping of course. The total
contract value as defined in Clause 4.4.1.0 the Respondent
Corporation is entitled to reduction in price (of the total
contract value) for each week of delay or part thereof
limited to a maximum of 10% of the total contract value. The
record shows and this finds support from the affidavit of
Shri S. Das Deputy General Manager of the Respondent
Corporation that the total executed value of the contract was
Rs. 3,83,66,805.64. The Respondent Corporation has
claimed a sum of Rs. 38,36,680.96 as 10% of the said total
executed value of the contract. This ofcourse is in terms of
the provisions of the GCC as noted above. However, keeping
in view the totality of the circumstances as already noticed
above and keeping in view that the Claimant Corporation
was, undoubtedly faced with certain teething problems
including impediments like rainfall and inability to get earth
from the earlier considered site I do feel that the claim for
maximum of 10% needs to be toned down (illegible) so
because the Respondent Corporation has been amply
compensated on account of having got the work completed
from other sources. I may however hasten to add that though
rainfall did not provide any justification as far as delay in
completion of the work is concerned but it does invite
consideration as far as awarding of compensation in terms
of 4.4.0.0 is concerned. Keeping all these factors in view I
hope that reducing the limit from the maximum of 10% to
5% in the present case would rather meet the ends of justice
I therefore direct accordingly. "
35. This contention of the petitioner also therefore merits rejection.
36. In view of the above I find no merit in the present petition and the
same is hereby dismissed.
JYOTI SINGH, J
NOVEMBER 13, 2019/yo /
