Delhi High Court
Ntpc Limited vs Sri Avantika Contractors(I) ... on 8 June, 2020
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 28.01.2020
% Pronounced on: 08.06.2020
+ O.M.P. (COMM) 370/2017, IA. Nos. 11989/2017, 15164/2017,
3984/2018, 4012/2018
NTPC LIMITED ..... Petitioner
Through: Mr. Vikas Singh, Senior Advocate
with Mr. Puneet Taneja and Mr.
Mrityunjai Singh, Advocates.
versus
SRI AVANTIKA CONTRACTORS (I) LIMITED. .... Respondent
Through: Mr. Sachin Datta, Senior Advocate
with Mr. Pallav Palit, Mr.
Lalitendra Gulani, Mr. Amit
Mahajan & Mr. Sankalp Brahma,
Advocates
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGMENT
1. Present petition has been filed under Section 34 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the „Act‟)
challenging the Award dated 07.07.2017 passed by the Arbitral Tribunal
to the extent it has allowed some of the Claims of the Respondent and has
rejected the Counter-Claims of the Petitioner herein. Respondent herein
was the Claimant before the Arbitrator and the Petitioner was the
Respondent.
2. It is the case of the Petitioner that vide letter dated 27.02.2012,
NTPC awarded the work of „Site Leveling and Infrastructure Works
Package‟ for its Kudgi Super Thermal Power Project Stage-I (3x800
MW), Karnataka to the Respondent. Contract Agreement was executed
on 02.04.2012 with the value of the work being Rs. 1,54,34,54,426/-. The
scheduled period for completion was 30 months with the start date as
27.02.2012 and completion date 26.08.2014.
3. Respondent agreed that it shall provide adequate manpower and
equipment at the site and would carry out mobilization of resources
within one month of the Letter of Award i.e., by the end of March, 2012.
Thereafter, the work of site clearance and leveling in the main plant area
was to be started. The reciprocal obligation of the Petitioner to handover
the land for construction work was to start after expiry of 30 days from
the date of Letter of Award as per Clause 6.0.0 of the Agreement.
4. Respondent committed breach in failing to mobilize its resources
within one month and deployed only one official, while the Petitioner
handed over approx. 175 acres of land in respect of Block Nos. 1 & 2 and
progressively handed over land from April, 2012 onwards which was
recorded in the Joint Survey records.
5. Scope of civil work to be executed by the Respondent, included
site leveling for the plant; construction of phase roads and drains in plant
area; sewerage in plant area; diversion of existing drains; raw water
reservoirs; plant boundary wall; watch towers and approach road from
State Highway. Subsequently, two Amendments were carried out and the
scope of work increased and consequently, the value of work. Petitioner
extended the original time period by a further six months i.e., till
February, 2015. On 24.03.2014, Petitioner terminated the Contract.
6. Disputes having arisen between the parties, the same were referred
to Dispute Resolution Board (DRB), but the decision was not acceptable
to both the parties. Respondent, therefore, invoked the Arbitration
Agreement on 30.11.2015 and the Arbitral Tribunal, entered upon
reference on 23.01.2016. Respondent filed its Statement of Claim raising
36 claims, while the Petitioner filed its Statement of Defence and also
raised 16 counterclaims. Respective claims and counter claims are as
under:-
"(A) Claims by the Claimant:
Description of Claims Amount in Rs.
Claim-1: Termination of contract with risk and costs
is illegal and arbitrary.
Claim-2: Refund of Performance Bank Guarantee 3,08,69,089
amount illegally encashed by the Respondent.
Claim-3: Refund of Mobilisation Advance Bank 4,50,00,000
Guarantee amount illegally encashed by the
Respondent.
Claim-4: Refund of retention money withheld at 10% 5,94,98,878
of the gross RA bills
Claim-5: Refund of Mobilisation Advance recovered 1,08,74,198
from RA Bill
Claim-6: Payment of total work done bills 57,01,01,198
Claim-7: Payment of expenditure incurred towards 4,80,000
labour charges and re-handling the steel of 30 metric
tonnes.
Claim-8: Payment of balance escalation amount. 6,74,09,612
Claim-9: Payments for unutilized aggregates for road 28,50,000
works.
Claim-10: Payments for production of aggregates for 45,00,000
filter from excavated rock.
Claim-11: Payments for sand collected at site. 44,10,000
Claim-12: Payments for sand extracted from back 1,20,00,000
waters.
Claim-13: Payments for clay bricks available at site 21,00,000
Claim-14: Payments for idling charges for heavy 5,75,53,337
machineries and equipment.
Claim-15: Payment of idling charges for skilled and 4,26,15,660
unskilled manpower.
Claim-16: Payment for extra lead charges of 1 km on 4,50,00,000
an average due to handing over of site in bits and
pieces by the Respondent.
Claim-17: Payment for stock piling of approved 60,00,000
quality rock excavated by blasting to be used for rock
fill works.
Claim-18: Payment for shuttering and scaffolding 1,10,00,000
materials.
Claim-19: Payment of advance paid to machinery 80,00,000
Claim-20: Payment of advance paid to skilled and 50,00,000
unskilled workers
Claim-21: Payment of advance paid to materials 60,00,000
Claim-22: Payment of advance paid to land owners 20,00,000
Claim-23: Payment of advance for office building 1,50,00,000
and staff accommodation.
Claim-24: Payment towards overheads and profits. 11,89,52,804
Claim-25: Payments towards litigation and legal 14,61,728
expenses.
Claim-26: Payment towards compensation for 5,00,00,000
trauma and mental agony suffered by the Claimant.
Claim-27: Payment towards loss of good will and 20,00,00,000
reputation.
Claim-28: Payment of expenditure incurred towards 20,00,000
construction of cement storage godown.
Claim-29: Payment towards construction of 15,00,000
workshop.
Claim-30: Payment towards office furniture, 35,00,000
computers, printers, etc.
Claim-31: Payment towards mess/canteen facilities 20,00,000
for the staff and workers.
Claim-32: Payment towards establishing a field 7,00,000
laboratory and with survey instruments.
Claim-33: Cost of MS Pipes 70,00,000
Claim-34: Payment of hire charges for the
equipment, infrastructure facilities taken over by the
Respondent.
Claim-35: Financial compensation towards payment
of interest at 18% per annum from the date the
amount fell due till the date of payment.
Claim-36: Financial compensation on account of cost
incurred towards the arbitral proceedings.
(B) Counter-Claims by the Respondent:
Description of Claims Amount in Rs.
Counter-Claim-1: Liquidated damage for delay 9,45,16,626
Counter-Claim-2: Risk & Cost 169,93,00,000
Counter-Claim-3: Recovery against owner issue 1,73,11,839
materials.
Counter-Claim-4: Repair charges of electrical 8,94,956
installations
Counter-Claim-5: Energy Consumption Charges 3,77,730
Counter-Claim-6: Transportation & loading charges 1,43,923
of Steel & Cement
Counter-Claim-7: Royalty Payments 81,56,850
Counter-Claim-8: Removal & Disposal of the 2,60,77,680
Dumped materials from the Reservoir area
Counter-Claim-9: Charges for final slope dressing of 32,00,000
Site levelling areas
Counter-Claim-10: Final bending & binding charges 1,50,000
of steel
Counter-Claim-11: Charges for final slope dressing 69,91,769
of embankment
Counter-Claim-12: Contingent water storage facility -
for hydro-test
Counter-Claim-13: Loss of Generation of Electricity -
Counter-Claim-14: Differential amount in execution -
of Levelling work
Counter-Claim-15: Payment towards litigation & 11,26,176
legal expenses
Counter-Claim-16: Payment of Interest -
7. After completion of pleadings, Tribunal framed the following
issues:-
"Issue-1: Whether the Respondent is liable for
various delays as set out in the Statement of Claims
and, if so, to what extent?
Issue-2: Whether the Claimant is liable for various
delays as set out in the Statement of Defence / Counter
Claims and, if so, to what extent?
Issue-3: Whether the termination of the Contract by
the Respondent at the risk and cost of the Claimant is
contractually and legally sustainable?
Issue-4: Whether the issue of measurements falls
within the jurisdiction .of the Arbitral Tribunal to
Adjudicate?
Issue-5: Whether the Claimant is entitled to the
claims from Claim-1 to Claim-36 as set out in the
Statement of Claims and, if so, to what amounts?
Issue-6: Whether the Respondent is entitled to its
Counter Claims from Counter-Claim-1 to Counter-
Claim-16 as set out in the Statement of Counter
Claims and, if so, to what amounts?"
8. Out of a total 36 claims raised by the Respondent for a total
amount of Rs. 139.14 crores, Tribunal awarded Rs. 50,21,54,497/-
towards claim Nos. 2, 4, 5, 6 and 24 and rejected the rest of the Claims.
Tribunal awarded interest @ 14% per annum from the date of cause of
action till the date of award and post Award interest @ 8.9 % Simple
Interest, from the date of the Award till payment. With respect to the
Counter-claims of the Petitioner, Tribunal awarded Rs. 2,67,23,699/-
towards Counter-claims No. 3, 4, 5 and 6. Accordingly, after setting off,
an amount of Rs. 47,54,30,798/- along with interest is due to the
Respondent.
9. Respondent set out various delays attributable to the Petitioner
while the Petitioner denied the same.
A. Delay-1: Due to Handing Over the Site Free from Encumbrances.
Provision of the Contract towards handing over the site is Clause
20, GCC and is as under:-
"20. Handing over of Site
20.1 The Employer shall make available the Site to the
Contractor as soon as possible after the award of the
Contract free of encumbrance. The Contractor shall
not be permitted to enter on (other than for inspection
purposes) or take possession of the Site until
instructed to do so by the Engineer-in-Charge in
writing.
20.2 The Employer reserves the right to hand over the
Site in parts progressively to the Contractor: The
Contractor will be required to take possession of the
Site without any undue delay and do Work on the
released fronts in parts without any reservation
whatsoever.
20.3 However, in case of any delay in handing over of
the Site to the Contractor, which delays the
performance of the Work, commensurate to the
resources, mobilized by the Contractor, then the
Contractor will be eligible for suitable extension in
time for completion of the Works or any other
compensation as per the provisions of GCC Sub-
Clause 29.7."
Clause containing provisions with respect to delay by the employer
is as under:-
"29.7 Delays by Employer or his Authorised
Representative
29.7.1 In case the Contractor's performance is
delayed due to any act of omission on the part of the
Employer or his authorised representative, then the
Contractor shall be given appropriate extension of
time for the completion of the Works, to the extent
such omission on the part of the Employer has caused
delay in the Contractor‟s performance of his work.
Regarding reasonableness or otherwise of the
extension of time, the decision of the Engineer-in-
Charge shall be final.
29.7.2 If such delays by the Employer have
resulted in any increase in the cost to the contractor,
the Contractor shall be eligible to claim demonstrable
and reasonable costs supported by full details of such
increased costs incurred by him with all documentary
evidence. The Employer shall examine the justification
for such a request for claim and if satisfied, the extent
of compensation shall be mutually agreed depending
upon the circumstances at the time of such an
occurrence."
In Clause 8 of SCC, 5 milestones were set for completion of the
work which are as under:-
Sl. Completion Details of works to be completed Value of
No. period from works (as
date of percentage of
Award total value of
contract) to
be completed
during the
specified
period
1. At the end of Site clearance and levelling in 20 %
6th month main plant area and other
priorities areas of Stage-I (Part),
Site clearance and levelling in
balance areas (Part)
excavation/embankment works
for raw water reservoir works
for live storage (part),
excavation / embankment works
for dead storage (Part), priority
area roads and drains in plant
area (Part), boundary wall for
plant area (Part).
2. At the end of Balance site clearance and 50%
12th month levelling in main plant area and
other priorities areas of Stage-I ,
Site clearance and levelling in
balance areas (Part), excavation
/ embankment works for raw
water reservoir works for live
storage (part), excavation /
embankment works for dead
storage (Part), finishing works
for reservoir for live storage
(Part), finishing works for
reservoir for live storage (Part),
finishing works for reservoir
dead storage (Part), priority
area roads and drains in plant
area (Part), watch towers (Part),
sewerage works (Part).
3. At the end of Site clearance and levelling in 70%
18th month balance areas (Part), balance
excavation / embankment works
for raw water reservoir works
for live storage, excavation /
embankment works for dead
storage (Part), finishing works
for reservoir for live storage
(Part), finishing works for
reservoir for live storage (Part),
finishing works for reservoir for
dead storage (Part), balance
priority area roads, drains in
plant area (Part), balance
boundary wall for plant area,
watch towers (Part), sewerage
works (Part), diversion drain
works (Part).
4. At the end of Balance site clearance and 90%
24th month. levelling in balance area,
excavation/ embankment works
for dead storage (Part),
excavation/ embankment works
for raw water reservoir works
for live storage, finishing works
for reservoir for live storage
(Part), finishing works for
reservoir for dead storage
(Part), balance works for drains
in plant area, balance works for
watch towers, sewerage works
(Part), balance works for
diversion drain works.
5. At the end of Balance excavation/ 100%
30th month. embankment works for raw
water reservoir works for dead
storage, finishing works for
reservoir for live storage (Part),
balance finishing works for
reservoir for dead storage,
balance sewerage works (Part).
(a) Petitioner contended that it had reserved its right to handover the
site in parts to the Respondent and relied on Clause 20.2 that no delay can
be attributed on account of site being handed over in parts and
progressively. Respondent contended that site free from hindrances was
not handed over on time and this delayed the execution of work. Tribunal
perused the Joint Protocol Statements regarding handing over of the site,
signed by both parties and observed that the first handing over of the site
was on 18.04.2012, which was two months after the Contract and despite
the Respondent requesting for Survey Numbers which were not yet
acquired, no information of the Survey Numbers and in some cases, even
the extent of the area handed over, was given. Tribunal found, based on
Clause 20.1, that the Employer was under a mandate to make the site
available as soon as possible, after the Award of the Contract, free of
encumbrance and Respondent was prohibited from entering upon the Site
or taking possession, until so instructed in writing by the Engineer-In-
Charge. Clause 20.3 provided that in case of delay in handing over the
site, Respondent was entitled to suitable extension of time/compensation
under Clause 29.7. A finding was rendered on a conjoint reading of
Clauses 20.1, 20.2 and 20.3, that the clauses could not be construed to
give an unqualified right to the Petitioner to handover sites in parts, at any
time and delay in handing over is not abated by Clause 20.2.
(b) Tribunal dealt with the dates of handing over of the blocks and the
remarks of the Respondent, while taking over the land, that survey
numbers had not been acquired in certain Blocks, while in the others,
though acquired, there was no free access and in one of the Blocks,
Petitioner had only handed over symbolic possession on 13.02.2013.
Respondent‟s letter dated 24.09.2013 indicated that work started in
December, 2012, only for Lagoon-1 comprising 175 acres, out of which
38 acres were still not handed over. Likewise for Lagoon-2, with total
area of 210 acres, nearly 147 acres were not available. The Tribunal
referred to a table (extracted in Para 35 of the Award) and concluded that
the start of work was delayed, resulting in initial delay of six months, and
this was on account of the delay in handing over the areas. Tribunal was
of the view that reasonable extension to the Respondent should have been
afforded by the Petitioner and the six months‟ extension granted was not
reasonable, as even on the date of termination, 24.03.2014, large areas
were not handed over to the Respondent.
(c) Petitioner had contended that Respondent had not mobilized its
men, material and machinery and thus the work got prolonged and relied
on certain Minutes of Meeting(s). Based on the Joint Protocol documents,
Tribunal found that various areas, required on priority, had been handed
over jointly by the Respondent, to the other agencies, after completion of
leveling between 18.08.2012 and 06.02.2014 and there was no delay by
the Respondent. The contention of delay in mobilization was also rejected
by the Tribunal on the ground that unless the land was handed over as per
the schedule, Respondent could not be faulted. Secondly, within 11
months from July, 2012 to May, 2013, total quantity of excavation and
site leveling was 50 lakh CUM, which could not be achieved without
adequate mobilization. Thirdly, Petitioner had issued two Amendments,
increasing the volume and the value of work. Amendement-1 was issued
on 18.11.2013, while revised L-2 network schedule was finalized on
09.11.2013. Amendment-2 was issued on 28.02.2014, increasing the
volume and value of the Contract and this was after the issue of revised
construction drawings for the reservoir on 19.02.2014. Despite the
Amendments, the Contract was terminated on 24.03.2014, within the
original contract period ending on 26.08.2014, ignoring that extension of
time had been granted upto February, 2015.
(d) Finally the Tribunal concluded as under:-
"44. In the light of the above findings and
observations, the Arbitral Tribunal holds that the
Respondent is liable for the delay due to handing over
of hindrance free site for execution of the work and
further that there was a continuing delay in the
handing over of 28% of land in the Lagoon-1 and 70%
of land in Lagoon-2 which entailed the Claimant for a
just and reasonable extension of the Contract for a
period of 13.50 months beyond the original end of
Contract i.e., 26.08.2014 to 11.10.2015."
B. Delay-2: Delay Due to Obstructions/Agitations by Land
Owners/Locals.
(a) Respondent contended that the intermittent delay of six months
between May, 2012 and March, 2014 was on account of obstructions
caused by the locals. Petitioner was obliged to provide hindrance free site
and address the issue of local disturbances and Respondent was thus
entitled to extension of time, on account of the default by the Petitioner,
under Clause 29.5 and Clause 7, GCC. Petitioner denied any delay and
argued that it had addressed all the issues promptly and yet, reasonable
extension of time was granted taking a practical view in the matter.
Taking the delay under this Head concurrent with the period of Delay-1,
Tribunal held that no additional time was required to be granted and held
as under:-
"48. The period of delay is sought from May-2012 to
March-2014. This delay is not for a continuous period
but it is intermittent days for which details are not
made available. In any case this delay falls under
Delay-1 which is continues till March-2014. As such
the Arbitral Tribunal finds that there are no grounds
to award to consider this delay."
C. Delay-3: Delay in Issuing Construction Drawings and Belated
Revision thereon.
(a) Respondent set out that there was delay in issuing construction
drawings as well as major revisions in the drawings for construction of
Lagoons I and II, which constituted more than 40% of the Amended
contract value. Petitioner refuted the same on the ground that main
revised layout drawings for reservoir were released on 02.04.2013,
incorporating additional area and further modified one on 19.02.2014,
recording that modification was necessitated due to failure of Respondent
to arrange filter materials in time. Relying on the letters on record, as well
as detailed Minutes of Meetings between the parties dated 12-13/11/2013,
Tribunal found that Respondent had requested for change in the design,
through their letters dated 13.04.2013 and 25.10.2013, especially for
modification in the design of reservoir embankment and after due
verification, Petitioner had modified the drawings and issued them on
19.02.2014. Petitioner was at liberty to reject the request but on the
contrary, it actually carried out the modifications and issued modified
designs on 19.02.2014.
(b) Tribunal concluded as under:-
"56. In view of the above the Arbitral Tribunal finds
that modified construction drawing in respect of
embankment sections of the reservoir work was issued
for execution on 19.02.2014. This period from
13.04.2013 to 19.02.2014 was on account of the
process of modification of the embankment design.
57. In view of the above findings and observations the
Arbitral Tribunal holds that delay for the above
period is a concurrent delay with Delay-1 period."
D. Delay-4: Delay Due to Non-Availability of Required River
Sand Due to Prohibition of Sand Mining by NGT and Non-
Availability of Required Aggregates Due to Ban on Quarrying by the
Karnataka State Pollution Control Board.
(a) Respondent submitted that due to the restrictions it was not
possible to extract sand from the river bed which had serious
implications, both, on time and cost. A request was also made to
Petitioner to recommend, as a special case, to the Deputy Commissioner,
for granting permission to borrow sand from certain adjoining projects/
areas and Respondent also undertook to clear the liability for payment of
Royalty. Aggregates were not available due to restrictions by the
Karnataka State Pollution Control Board on quarrying and letters in this
regard were placed before the Tribunal.
(b) Petitioner denied the contentions stating that river sand was
available in plenty in the nearby project until 05.08.2013, the date on
which ban was imposed by NGT. It was the inaction of the Respondent
which was the reason for poor progress towards construction of on the
boundary walls, drains watch towers etc. Besides, Petitioner had
permitted use of M-sand and it relied on various documents in this regard.
(c) Tribunal found that the letter of the Respondent dated 04.04.2012
was merely a letter intimating to the Petitioner that there was inadequacy
of sand and requested to make a recommendation to the Deputy
Commissioner to grant permission to borrow sand. Petitioner had
requested Deputy Commissioner for blasting license for aggregates and
NOC was given by him on 11.10.2012, where after, the Controller of
Explosives granted permission on 19.10.2012. The Order of NGT
regarding the ban was on 05.08.2013 and therefore, till that date no
responsibility could be cast on the Petitioner. In the light of the above,
the finding of the Tribunal is as under:-
"65. Further the Arbitral Tribunal finds from the
MOM dated 12-13/11/2013, Pg.1530, SOC Vo1.8,
reproduced earlier, at Para-5 of the MOM, regarding
scarcity of sand, the Respondent has stated that
"NTPC informed that they have already taken up the
issue with the state govt. at the level of secretary
mining and recently with chief secretary, Govt. of
Karnataka for early resolution for issue of sand
availability in the area. The issue is being pursued
with the State Govt. for specific allocation for the
Kudgi project and NTPC will inform of the further
developments". This aspect has been already dealt
with by the Arbitral Tribunal under delay regarding
issue of revision of drawings wherein it is held by the
AT that consequent upon the non availability of sand
the Respondent modified the designs as per the MOM
dated 12-13/11/2013, as observed earlier, and the
modified designs were issued for the reservoir
embankment on 19.02.2014.
66. In the light of the above facts, circumstances,
observations and findings of the AT, the delay due to
the consequent effect of non availability of sand and
aggregates resulted in modification of drawings and
continued up to 19.02.2014.
67. In view of the above, the Arbitral Tribunal holds
that the Delay-4 is a concurrent delay with Delay-1
period."
E. Delay-5: Delay in Release of Price Escalation Bill Amount
(a) Respondent set out the delay on the ground that monthly Bills for
price adjustment were based on value of work carried out in particular
months, while the Petitioner restricted the price adjustment Bills
considering the value of the work as per L-2 network, for a particular
month, which according to the Respondent, was contrary to the Contract
and there was delay in payments. Petitioner denied the contention relying
on Clause 25.6 and 25.7 GCC.
(b) Tribunal perused the Clauses and observed as under:-
"72. However as per Clause 25.6 the emphasised
portion, reproduced above, the provision therein
makes it clear that the eligibility for claims of price
adjustment shall lie always when the quantum of work
done is more than or equal to the scheduled quantum
of work as per the work schedule. As this is a
provision under the Contract the AT finds that when
the price adjustment is regulated as per the provisions
of the Contract by the Respondent no delay or
responsibility can be cast on the Respondent. Further
Clause-25.7 deals with entitlement for payment of
claim or liable for refund of Contract price adjustment
for the period beyond the schedule date of execution
of work viz., 26.08.2014. As the Contract was
terminated on 24.03.2014 within this Contract period
the question of applicability of Clause-25.7 does not
arise.
73. In the light of the above observations and findings,
the Arbitral Tribunal is of the considered opinion that
no delay can be cast on the Respondent with respect to
Delay-5."
F. Delay-6: Delay Due to Non-Payment of Work Done Bills as Per
the Contract.
(a) Respondent contended that it had raised RA Bill-15 in March 2014,
while Petitioner contended that this Bill did not take into account the
initial levels as produced by it. As per the Respondent, Volumes 6 & 7
contained disputed levels and the correct ones were jointly signed by the
authorized representative and were available in Volumes 3/1 to 3/10 of
the rejoinder. Petitioner disputed and submitted that Book 12 to Book 16
contained the agreed levels, jointly taken by the parties.
(b) Tribunal found that Book 12 to Book 16 were the same, as the
levels in Volume 6 & 7 of Statement of Claim and were disputed and
therefore, the focal point of dispute was whether the levels given by
Respondent in Volumes 3/1 to 3/10 were correct or those furnished by
Petitioner in Books 12 to 16. The Tribunal held as under:-
"76. The AT finds that the adjudication of this matter
and the consequent outcome of the adjudication are
covered under Issues 4 &5. In view of this, the AT
finds that it is unnecessary to go into these details of
dispute regarding the levels while deciding on the
delay under this issue. Be it as it may. The RA Bill-15
which was initially submitted in Feb-2014 for an
amount of Rs.47.15Cr and later re-submitted during
Mar-2014 and that the termination of Contract was
made on 24.03.2014. In view of this, the AT finds that
the date of RA Bill-15 and the date of termination of
the Contract are very close-by and no delay prior to
the date of submission of RA Bill-15 can be attributed
to the Respondent as the Contract was terminated on
24.03.2014. Hence, the AT finds that the consequences
of this delay in payment under this issue for the work
executed can only be construed as having an adverse
impact subsequent to the submission of this bill which
was first made in Feb-2014 and re-submitted on Mar-
2014 while the Contract was terminated on
24.03.2014.
77. Accordingly the AT finds that in so far as this
delay is concerned no delay in payment can attributed
to the Respondent leaving all the other contentions of
the parties regarding quantification which will be
addressed by the Tribunal respectively under Issues 4
& 5."
G. Delay-7: Delay Due to Execution of Increased Quantity and
Additional Items.
(a) Respondent had claimed delay of 7 months on ground of increased
quantity and value of work under Amendment-1 and accordingly claimed
compensation. Petitioner refuted the same on the ground that Clause 29.5,
GCC was not applicable for variations which were not beyond the limits
prescribed therein, as also for extra items, yet, on a practical view,
extension of six months was granted.
(b) Tribunal found, after analyzing Clause 29.5, that the provisions for
extension of time and cost were applicable where work schedules are far
beyond the Deviation limits and accordingly held as under:-
"82. Based on the provisions of permissible deviation
limit as specified in Sub-Clause-49.2.2 for the items of
work below the ground surface which includes the
excavation, the deviation limit is (+) 100% and (-
30%). A conjoint reading of (i) Clause-49.2 regarding
the permissible deviation limits; (ii) Clause-49.5
regarding work schedule for variation and deviations
limits for extra items and (iii) Clause-49.6 provisional
payments, the Arbitral Tribunal is of the considered
opinion that Clause-29.5 regarding extension of time
for completion does not apply to the works within the
deviation limits as specified in Clause 49.5.1, Clause-
49.6.1 and Clause-49.2.
83. In the light of these findings and observations and
also keeping in view that the variations do not
fallbeyond the deviation limits under Clause 49.2, the
Arbitral Tribunal holds that Clause-29.5.(b) will have
no application for this delay.
84. In view of the above facts and circumstances
under the provisions of the Contract, the Arbitral
Tribunal finds no delay can be attributed to the
Respondent with regard to Delay-7."
H. Delay-8: Delay in Prompt Decisions by the Petitioner.
(a) Respondent argued that there was abnormal delay in giving
decisions for the item of Rock Requiring Blasting (RRB) which had a
severe impact on the progress of work. Extension of time and cost was
claimed under Clause 29.5.1 (c) and Clause 29.7, GCC. Petitioner denied
the claims by stating that criteria for determining the quantity of RRB
were mentioned in the drawing and specifications. When the core
recovery is more than 50% based on the bore logs of Geotechnical
Investigations carried out at the site earlier by an agency, the same has to
be considered as RRB and there was no delay, as alleged and the
Petitioner had in any case granted 6 months extension.
(b) Tribunal after a detailed analysis of the documents on record and
the minutes of meeting, which were extracted in the Award, held as
under:-
"91. It is clear from the above minutes that
additional boreholes were to be taken only in the
areas where the excavation has not been made so as
to determine the rock quantity. This fortifies the view
of the tribunal expressed earlier that determination of
quantity of rock based on the boreholes for
investigation as provided under the Contract at such
far of distances may not be realistic.
92. Be it as it may, in so far as this delay is concerned,
this delay is with respect to the delay in prompt and
quick decisions with respect to the RRB.
93. From the above facts and circumstances, the
Arbitral Tribunal finds that there is a delay in taking
decisions for finding the final classification of RRB
but this delay is a concurrent delay with Delay-1
period."
I. Delay-9: Delay Due to Stoppage of Work Due to Stay Granted by
NGT.
(a) Respondent submitted that the work suffered with effect from
13.03.2014 due to status quo Order by NGT, while Petitioner denied the
same and contended that Respondent had slowed down the progress of
work in all areas and withdrawn some equipment from the site from June,
2013 onwards and completely stopped the work on 15.08.2013.
(b) Tribunal after perusing the Order of the NGT, letter of the
Petitioner communicating to the Respondent about the temporary
stoppage of work, as well as an Order dated 25.03.2014 passed by the
Supreme Court, held the delay to be concurrent with delay-I.
Issue No.1
10. Based on the observations made separately with respect to each of
the 9 periods of delay, Tribunal answered issue No. 1 as under:-
"103. Issue-1: Is answered in the Positive. Based on
the various delays as set out in the SOC, the Arbitral
Tribunal finds that the Respondent is liable for the
delays as dealt in detail from Delay-1 to Delay-9 and
the extent of delay as determined by the Arbitral
Tribunal is that the Claimant is entitled for reasonable
and fair extension of the Contract up to 11.10.2015."
Issue No.2
11. With respect to issue No. 2, Tribunal analysed the alleged reasons
for delay separately. With respect to performance of the Contract in the
initial days, Tribunal found that Delay-1 was attributable to the Petitioner
and the contention of the Petitioner alleging non-mobilization of
equipment and machinery in the first five months, was not sustainable.
For release of work fronts for site leveling works, Tribunal applied
Delay-1 mutatis mutandis to this Claim and rejected the contentions of
the Petitioner. For delay due to release of construction drawings,
belatedly, the Tribunal held the delay to be concurrent with Delay-3 and
did not agree with the Petitioner. For site leveling works, Tribunal held
that the delay was not on account of the Petitioner. For delay on account
of construction of boundary wall etc., Tribunal was of the view that these
delays were concurrent with Delay-1 to Delay-9. Finally, after analyzing
the respective allegations of delay by both the parties, the Tribunal
concluded that there was delay in the initial stages in handing over the
hindrance free site for execution of work and there was a continuing
delay in handing over of 28% of land in Lagoon-1 and 70% in Lagoon-2,
entitling the Respondent for extension of 13.50 months beyond the
original contract period.
12. The Issue was whether the termination of the Contract by the
Petitioner, at the risk and cost of the Respondent, was contractually and
legally sustainable. To examine the issue, the Tribunal first relied on the
findings under Issue Nos. 1 & 2 and then traced the entire chronology of
dates and events from the date of issue of the NIT, on 17.03.2011 till the
termination. Reference was made to several documents on record, as well
as Clauses of the Contract. Reliance was also placed on the Order of the
NGT and the Supreme Court in case of NTPC v. M.P. Patil, Civil Appeal
No. 3870 of 2014. Tribunal noted that the status quo order of NGT passed
on 13.03.2014 was vacated by the Supreme Court on 25.03.2014, in the
above mentioned Appeal. Detailed reference was thereafter made to the
judgment of the Supreme Court in Hind Construction Contractors v.
State of Maharashtra, AIR 1997 SC 720, for the proposition that where
the Contract provides for extension of time or levy of penalty for delay,
time is no longer of essence of the Contract. Applying the law to the
present contract and examining the sequence of events, Tribunal
answered the Issue as under:-
"162. The Arbitral Tribunal, in view of the above
facts & circumstances, observations, findings and
judicial pronouncement is of the considered opinion
that it is just and appropriate to hold that the
termination of the Contract on 24.03.2014 is
unlawful, wrongful and not sustainable. Accordingly
the question of considering any risk and cost of the
Claimant as imposed under the termination order is
also unlawful, wrongful and not sustainable.
163. In the light of the above findings, the Arbitral
Tribunal answers the Issue-3 in the negative and
holds that the termination of the Contract by the
Respondent at the risk and cost of the Claimant is
unlawful, wrongful and not sustainable."
Issue No. 4:
13. The dispute under this Issue pertained to the initial levels called the
Original Ground Levels (OGLs), as there was no dispute regarding the
final levels. Petitioner relied on Clause 37.6 of the Contract regarding a
prohibition for the Tribunal to exercise its jurisdiction with respect to
measurements. Clause 37.6 is as under:-
"37.6 Measurements shall be signed and dated by
both parties each day on the Site on completion of
measurement. If the Contractor objects to any of the
measurements recorded, a note to that effect shall be
made in the Measurement Book against the item
objected to and such note shall be signed and dated by
both parties engaged in taking the measurement. The
decision of the Engineer-in-Charge on any such
dispute or difference or interpretation shall be final
and binding on both the parties and shall be beyond
the scope of the provisions of settlement of disputes
under the Contract".
13(a). Petitioner contended that the issue of measurements was
already decided by the Engineer-In-Charge and thus, being an excepted
matter, was beyond the jurisdiction of the Tribunal. Respondent on the
other hand claimed that the measurements of the OGLs submitted along
with the Rejoinder Volumes 3/1 to 3/10 were the levels which were
signed by the Authorized Representative of the Respondent while those in
Books 12 to 16 submitted by the Petitioner, were not signed by the
Authorized Representative of the Respondent and this issue was open for
adjudication by the Tribunal.
13(b). The Tribunal analyzed Arbitration Clause 7.3, incorporated
in the Contract and was of the view that the Clause was wide enough,
enabling the parties to refer „any dispute or difference‟ to Arbitration and
the measurements relating to OGLs, not being an excepted matter, could
be adjudicated by the Tribunal. Relevant part of the finding of the
Tribunal is as under:-
"168. In view of this the main issue before the Arbitral
Tribunal particularly with respect to the Claim-6 for
adjudication is regarding which of the documents viz., the
Book-12 to Book-16, as relied by the Respondent, or the
Rejoinder Vol. 3/1 to 3/10, as relied by the Claimant,
contains the authorised signatories of the parties. Only
after this dispute is determined the quantification is a
different issue. This is a peculiar case where the parties are
disputing the initials levels in an excavation and therefore
this dispute does not fall under Clause-37.6 because the
entire Clause-37 deals with the measurements of the work
and not regarding any disputes in the initial levels itself as
prominently brought out by the parties in the instant case.
Further, taking initial levels is a preliminary task for
measurement and cannot be construed as measurement of
the quantity as contemplated under Clause-37.
169. The Respondent relied on in the case of 2014(9) SCC
246 between Harsha Constructions Vs Union of India &
Others and contended that wherein the Clause-39 therein of
that Contract was relied to advance the proposition that
when the Contract specifies that it will be final and binding,
it will be an excepted matter. On a perusal of the Arbitration
Clause-63 in that said Contract the Apex Court after
construing the provisions under the Arbitration Clause held
in Para-4 "Upon perusal of Clause-63 of the aforesaid
Contract it is quite clear that the matters for which
provision has been made in Clauses 18, 22(5), 39, 45(a), 55,
55-A(5), 61(2) and 62(1)(xiii)(B)(e)(b) of the general
conditions of Contract were „excepted matters‟ and they
were not be referred to the arbitrator". Therefore in this
case the Supreme Court was dealing with the arbitration
clause wherein specific clauses were excepted from the
purview of being referred to arbitration.
170. It is settled law that the Arbitration Agreement in a
Contract is an independent Contract based on the doctrine
of severability of the arbitration clause as being an
independent Contract from the entire Contract. It is also
settled law that the power of the Arbitrators shall be
confined to the provisions under the Arbitration Agreement.
As per Sec.7(2) of the AC Act an arbitration agreement may
be in the form of an Arbitration Clause in a Contract or in
the form of a separate agreement. Under Sec. 16(a) the AC
Act provides that "an Arbitration Clause which forms part of
a Contract shall be treated as an agreement independent of
the other terms of the Contract".
171. In the instant case before the Arbitral Tribunal, the
Arbitration clause7.3.1 & 7.3.2 read as follows:
"7.3 Arbitration
7.3.1 If either the Employer or the Contractor
is dissatisfied with the decision of DRB, or if
the DRB fails to give a ·decision within forty-
two(42) days of a dispute being referred to it,
then either the Employer or the Contractor, as
the case may be, within a further period of
twenty eight (28) days, may give notice to the
other party, with a copy for information to the
DRB, of its intention to commence arbitration,
as hereinafter provided, as to the matter in
dispute. No arbitration in respect of this
matter may be commenced unless such notice
is given.
7.3.2 Any dispute or difference in respect of
which a notice of intention to commence
arbitration as above has been given, it shall be
finally settled by arbitration".
172. Clause-7.3.2 of the Contract is the arbitration Clause
and it specifies "Any dispute or difference in respect of
which a notice of intention as per Clause-7.3.1 shall be
finally settled by Arbitration. It is clear that this clause does
not provide any exception for arbitration". Particularly
keeping in view the words 'any dispute or difference', which
is of the widest amplitude, it is to held that includes all
disputes and differences. In the case of Harsha
Constructions, supra, the arbitration clause itself provided
certain exceptions but which is not the case in the present
arbitration clause before the Arbitral Tribunal. Therefore,
the Arbitral Tribunal finds that based on the facts,
circumstances and provisions of the Arbitration Agreement
under the Contract, the Respondent's reliance on the
decision in the case of Harsha Constructions, supra, will not
apply and therefore it is rejected.
173. In the light of the above observations and findings, the
Arbitral Tribunal is of the considered opinion that the
Claim-6 which involves dispute in the initial levels falls
within the jurisdiction of the Arbitral Tribunal.
174. In view of the above facts, findings & Circumstances,
the Issue-4 is answered by the Arbitral Tribunal as above."
14. Having answered the issues as pointed above, Tribunal adjudicated
the Claims and Counter-Claims of the parties on merits and finally, after
setting off the amounts under the Counter-Claims allowed in favour of
the Petitioner, an Award of a sum of Rs. 47,54,30,798/- was made in
favour of the Respondent, with interest @ 14% p.a. from the date of
cause of action till the Award and interest @ 8.9% simple interest from
the date of the Award, till the date of payment.
15. Challenge to the Award by the Petitioner can be bifurcated into two
compartments:
(a) Award of Claim No. 6: Payment of Total Work Done and
Escalation on the Amount Determined under Claim No. 6.
(b) Termination of Contract and consequential Award under Claim
Nos. 2, 4, 5, 24 and rejection of counter Claim No.2 (risk and cost).
Claim No. 6: Payment of Total Work Done Bills
16. (A)(a). Principal contention of Learned Senior Counsel for the
Petitioner is that the Tribunal has dealt with a matter which was beyond
its jurisdiction, being an „excepted matter‟ under Clause 37.6 of GCC.
Under Clause 37.6, it was clearly provided that measurements shall be
signed and dated by both parties, each day, on the site, on completion of
measurements. Any objection of the Contractor would be noted in the
Measurement Book and the Note shall be signed by both the parties.
Decision of the Engineer-In-Charge on any dispute or difference or
interpretation on such measurements shall be binding on both the parties
and shall be beyond the scope of provisions of Settlement of Disputes.
Learned Senior Counsel submits that in accordance with the Dispute
Resolution Mechanism, when the matter was before the DRB, Petitioner
had taken an objection regarding the jurisdiction, being an excepted
matter. The Tribunal has completely overlooked the fact that OGL forms
a part of the measurements of the work executed. Recording of OGLs is
itself recording of measurements since this is the Zero Point or the start
point for determining the quantum of work done by a Contractor.
(b). As per Technical Specification 2.9.0 the „Mode of Measurement‟
for excavation is as under:-
"Contract Clause 2.9.0
2.9 MODE OF MEASUREMENT
The item of excavation & filling for site levelling work
shall be measured and paid for the volume of actual
earthwork in cutting measured in cum correct to two
decimal places. The volume shall be calculated based
on the spot levels of the area(s) in cutting, taken
jointly by the Engineer and the Contractor before
commencement of cutting (but after the site clearance
and removal of trees has been completed) and after
the cutting has been completed (i.e., after the area has
been finished to the required levels and slopes after
excavation). The spot levels shall be taken at 12.5
metres interval and at closer interval where pits;
undulations etc. are met with. These levels shall be
taken in two orthogonal directions / grids along
project grids. The spot levels shall be recorded in a
field book and plotted on plans and shall be signed
by the Contractor and the Engineer. The labour,
materials, tools, equipment, safeguards and
incidentals required for taking levels shall be supplied
by the Contractor at his own cost."
(c). Mr. Vikas Singh, Learned Senior Counsel explains that the first
step in the entire procedure is that the Contractor takes over the site and
removes the vegetation to expose the soil. Next, spot levels are taken at
maximum spacing of 12.5M intervals and are called OGLs. These levels
are segregated and kept Block-wise and form the initial set of
measurements. OGLs are taken using the total station, downloaded in the
computer, printouts taken and endorsed by both parties. Thereafter,
excavation/filling is carried out, followed by recording of Levels, post
excavation/filling and these Levels are called „Post Levels‟. The volume
excavated is then calculated. It is further argued that the work was
measured and duly paid till 14th RA Bill for the period 27.02.2012 (date
of start) till 30.09.2013, amounting to Rs. 55,18,25,188/-, without any
protest. 15th RA Bill was raised on 07.02.2014 for the period 01.10.2013
to 31.12.2013 for Rs. 47,15,34,723/- and being a fraudulent Bill, was
rejected by Engineer-In-Charge on 10.02.2014 and again on 18.03.2014.
16th RA Bill raised on 20.07.2014, after termination on 24.03.2014, for
Rs. 1,12,19,26,386/- (including the amount till 14th RA bill, and the 15th
RA bill and another sum for work done upto 24.03.2014) was for the first
time notified only in DRB proceedings and vehemently disputed by the
Petitioner. It is thus obvious that the OGL was a part of the overall
measurement of the work executed and could not have been adjudicated
upon by the Tribunal. Reliance is placed on the judgments in the case of
Harsha Constructions v. Union of India, (2014) 9 SCC 246 and
Rajasthan State Mines & Minerals Ltd. v. Eastern Engg. Enterprises,
(1999) 9 SCC 283, to argue that excepted matters are not „arbitrable‟
disputes, before an Arbitral Tribunal.
(d). In so far as the Award of Rs. 13,17,67,675/- plus interest is
concerned, it is argued that the Claim was based on no evidence and the
Tribunal has relied on fabricated levels which were never proved. There
were no disputes raised by the Respondent till 14 th RA bill and its
payment and only in the 15th RA Bill, Respondent raised a frivolous
Claim. Tribunal has reopened the entire measurements from the first RA
Bill, when the same was not even the Claim of the Respondent and while
doing so it has gone into the issue of the OGLs. Tribunal relied on OGLs
of the Respondent which were disputed by the Petitioner and rejected by
the Engineer-In-Charge. No evidence was led by the Respondent to prove
that the OGLs submitted by the Petitioner were not signed by the
Authorized Representative of the Respondent. The OGLs produced by the
Respondent were fabricated documents, which is evident from the fact
that they were purportedly jointly signed from April, 2012 onwards,
while they were forwarded to the Petitioner for signing only in February,
2013. In the letter dated 21.06.2013, Respondent admitted the recording
of levels by NTPC. Engineer-In-Charge called for a joint meeting on
10.07.2013, but Respondent refused to sign the Minutes. Tribunal was
informed that signing of the OGLs relied upon by the Respondent in
Volumes 3/1 to 3/10 was a matter of investigation with the CVC. After
the investigation ended, Disciplinary action was initiated against the
NTPC Offices and Penalties have been imposed. CBI has also registered
an FIR in this respect.
(e). It is further argued by Learned Senior Counsel for the Petitioner
that after adopting fabricated levels, Tribunal accepted the quantity of
excavation theoretically, based on Simpson‟s Rule and not the actual
quantity executed. Theoretical quantity does not account for the volume
of Rock and has inherent problems. It is beyond imagination that
Respondent claimed to have executed approximately 30 lakh CUM of
earth work between 01.10.2013 till termination, when it is undisputed that
until 14th RA Bill i.e., in 18 months, only 46 lakh CUM for earth work
was executed.
(f). It is next argued that the Tribunal committed a patent illegality in
awarding Price Escalation on the further quantity of soil excavation. The
Tribunal has in a perverse manner held the Petitioner guilty of delay in
handing over the site and thus, erroneously held the Respondent entitled
to further extension till 11.10.2015. Accordingly, Tribunal concluded that
termination of contract on 24.03.2014 was illegal and consequently
rejected the Counter-Claim of risk & cost. The finding of delay in
handing over the land with respect to Lagoon-I and Lagoon-II is also
erroneous.
(g). Learned Senior Counsel submits that the entire scope of work was
under three Heads i.e., Site Levelling, Lagoon work and other works like
roads, drains, sewerage etc. Clause 22 of GCC clearly provided that the
Employer reserved the right to hand over the site in parts progressively to
the Contractor. Under the first head, survey number wise land was made
available from April, 2012 onwards. As on March, 2013, 88.5% of the
cutting area as well as 89% of filling area was handed over to the
Respondent and is supported by a communication dated 04.03.2013.
Respondent could not carry out its activities due to the non-
availability/shortage of its own equipment and resources. No evidence of
non-availability of land was placed before the Tribunal by the
Respondent.
(h). In so far as the land for Lagoon-I and II was concerned, Tribunal
itself observed that major portion of the land was given on 12.12.2012.
Substantial land was in fact handed over in December, 2012 i.e., 70% for
Reservoir I and 25% for Reservoir II. Respondent was aware that
reservoir was for future units of Kudgi Super Thermal Power Project,
which was to come up at a later point in time and was not an immediate
necessity. In any case, the status of work on the date of termination shows
the poor progress of the Respondent itself, reason being, non-availability
of equipment and mobilization of resources. Petitioner had placed on
record several letters and Minutes of Meeting, in this regard.
(i). In so far as non-availability of river sand and delay in issue of
drawings is concerned, learned Senior Counsel argues that the
Respondent completely failed to mobilize/procure sand and due to the
slow progress, pushed the work to a situation where restrictions were
placed by the NGT vide its Order dated 05.08.2013. Petitioner again
started considering the request of the Respondent for modification of a
part of the embankment design. Petitioner permitted Respondent to even
use crushed/manufactured sand but still, the Respondent did not resume
work. Ultimately, Petitioner was left with no alternative but to revise the
drawing for Reservoir Embankment on 19.02.2014. This indulgence was
shown as the Respondent showed its willingness to complete the work in
a time bound manner till August 2014, by submitting a Catch-Up Plan on
14.12.2013.
(j). Learned Senior Counsel submits that looking at the continuous
failure on the part of the Respondent in completing the work, a 7 days‟
Show-Cause Notice was issued on 27.02.2014, still, there was no
progress on the part of the Respondent and hence, the contract was rightly
terminated by the Petitioner. Learned Senior Counsel has relied on the
judgment of the Supreme Court in Ssangyong Engineering &
Construction Co. Ltd. vs. National Highways Authority of India Ltd.,
2019 SCC OnLine SC 677, to contend that the Award is contrary to the
fundamental policy of India being patently illegal and can be interfered
with by this Court under Section 34 of the Act. Reliance is also placed on
the judgment in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.,
2019 SCC OnLine SC 1656, where the scope of interference under
Section 34 of the Act has been circumscribed.
(B)(a). Per contra, learned Senior Counsel for the Respondent
submits that the Tribunal on Issue Nos. 1 and 2 and Delay-1 to 9 has
examined Clauses 20.1, 20.2, 20.3, 29.5 & 29.7 conjointly and concluded
that Petitioner did not have unfettered right to hand over the Site, any
time it wished and observed that the delay in handing over the Site led to
delay in execution of the work. This is a pure finding of fact and cannot
be interfered with. Learned Senior Counsel has taken the Court to the
various findings of the Tribunal on this aspect and argued that the
conclusion that Respondent was entitled to a reasonable extension upto
26.12.2015 was a plausible view. Likewise, it has been argued that even
with respect to the other delays, the Tribunal has made an in-depth
analysis of the documents on record and the contractual clauses and
wherever the delay was not found attributable to the Petitioner, it was so
observed.
(b). With respect to Issue No. 3, Respondent argues that the Tribunal
has correctly held that the termination was unlawful and unsustainable
and therefore, Petitioner was not entitled to risk & cost. The conclusion is
based on the findings of delay attributable to the Petitioner under Issue
Nos. 1 & 2. The Tribunal also considered the judgment in Hind
Construction (supra) to hold that time was no longer of essence of the
Contract, as there were provisions for extension of time or levy of
penalty. The Tribunal correctly observed that, despite the status quo
Order of NGT being in operation on 24.03.2014, Petitioner illegally
terminated the contract. Since there was a Stay Order, the contention of
the Petitioner that no work progressed from 13.03.2014 was without any
basis.
(c). With respect to Issue No. 4, Learned Senior Counsel for the
Respondent argues that Issue No. 4 and Claim No. 6 are inter-twined.
Claim No. 6 pertains to non-payment of work done bills for site levelling
work. For adjudication of the said Claim, Tribunal was required to
ascertain the total quantity of earth works undertaken and quantity of
earth work for which consideration had been received by the Respondent,
against interim running accounts payment. Clause 2.9 under Section II,
Part B, of Detailed Technical Specifications provided for determination
of the total volume of the earth work executed. Bare reading of the Clause
provides that spot levels are to be recorded twice and jointly in the Field
Book and signed by the parties and the Engineer. Volume of the work is
calculated based on the difference in spot level at commencement and
end of the work. Recording the OGLs is the preliminary task for
quantification of the earth work done. These form the datum for further
excavation. Petitioner, relying on Clause 37.6 contended that initial levels
filed by them ought to be treated as correct and the recording of these
levels was a part of the measurements under Clause 37.6 and thus, an
excepted matter, without appreciating that the spot levels/initial levels
filed by the Petitioner were not genuine, on various grounds. The
Tribunal with its expertise and wisdom, made an analysis of the entire
factual matrix, looked into the Clauses of the Contract and came to a
finding that it was not an excepted matter. The view is a plausible view
and cannot be interfered with as held in various judicial pronouncements,
viz.: Ssangyong Engineering & Construction Co. Ltd. (supra);
Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49;
State of Jharkhand and Ors. v. HSS Integrated SDN & Anr., 2019 SCC
OnLine SC 1363; MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 and
NHAI v. Progressive-MVR, (2018) 14 SCC 688.
(d). In respect of Claim No. 6, learned Senior Counsel argues that the
final levels were never in dispute between the parties. Volume Nos. 3/1 to
3/10 running into 1670 pages, duly signed by AR of Respondent and an
officer on behalf of the Petitioner were believed to be genuine by the
Tribunal. Reliance was placed on the letter dated 25.02.2012 whereby
Respondent had authorized the said officer, Mr. Reddy, to sign the initial
levels on its behalf. Book 12 to Book 16 running into 600 pages was
signed by an officer of the Petitioner and one Mr. Augustine on behalf of
the Respondent, who was merely, a member of the survey team with no
authorization to sign the measurements. In this background, the Tribunal
believed the document which is signed by Authorized Representative of
both parties.
(e). Based on the correct set of initial levels accepted by the Tribunal, it
proceeded to quantify the Claim raised. Tribunal went into the detailed
calculation of the volume excavated and the other measurements etc. and
finally arrived at the figure that was awarded to the Respondent. The
other claims awarded by the Tribunal have been defended by the
Respondent by arguing that there was enough material available on
record to arrive at the findings in favour of the Respondent. It is not the
domain of this Court to enter into the findings of facts or calculations or
re-appreciate the evidence before the Tribunal.
(f). With respect to Claim under „Overheads‟ and „Loss of Profit‟, it is
argued that the Tribunal has rightly awarded overheads of 6% by carrying
out the necessary calculation based on the documents before it. Loss of
profit of 10% of the amount of the balance executed work has been
awarded as per the norms under the Construction Contracts. The Supreme
Court in case of Dwaraka Das v. State of Madhya Pradesh & Ors, AIR
1999 SC 1031 and the Division Bench of this Court in Himachal Joint
Venture v. Panilpina World Transport, 2008 SCC OnLine Del 922, have
upheld the Claim for loss of profit when the termination of contract is
held to be illegal. Reliance is also placed on the judgment in the case of
AT Brij Paul Singh & Ors v. State of Gujrat, AIR 1984 SC 1703.
17. I have heard the Learned Senior Counsels for the parties and
examined their rival submissions.
18. (a). Respondent had alleged delays under 9 Separate Heads
attributable to the Petitioner. Relying on Clauses 20.1, 20.2, 20.3, 29.5
and 29.7, Tribunal came to a conclusion that the Petitioner did not have a
vested right to hand over the site free of encumbrances in parts or
progressively. Relevant part of the Award is as under:-
"30. From the joint protocol documents from Pgs .
730 to 737 and with the remarks of the Claimant
seeking the survey nos. or seeking hand over of
physical possession, there is a delay in handing over
of possession. The contention of the Claimant is that
there is a delay and the contention of the Respondent
is that based on Clause-20.2 of GCC that the
Respondent can handover the site in part and
progressively deserves to be examined with respect to
the provision under Clause-20.1 reproduced earlier.
The Arbitral Tribunal finds from this Clause-20.1 the
Employer is mandated to make available the site to
the Claimant as soon as possible after the award of
the Contract free of encumbrance. Further the Clause-
20.1 also prohibits the Contractor from entering on
the site or take possession of the site until so
instructed by the Engineer-in-Charge in writing.
Further, Clause 20.3 provides that in case of any
delay in handing over of site to the Contractor which
delays the performance of the work, it is specified that
the Contractor will be eligible for suitable extension
of time or any compensation as per Clause-29.7. A
conjoint regarding of these Clauses 20.1, 20.2 & 20.3
cannot be construed as giving an unqualified right to
the Respondent to interpret Clause-20.2 as to mean
that the Respondent can give the sites in parts
progressively at anytime. Hence, the AT is of the
considered opinion that in the facts and circumstances
the delay in handing over cannot be abated by the
Sub-Clause-20.2.
31. Further the AT finds that the Clause-29.7.1,
reproduced earlier, also specifies that if there is a
delay due to any act of omission on the part of the
Employer or his representative then a time extension
would be an entitlement to the Claimant for
performance of this Contract. It is settled law that the
Contract is to be interpreted to bring homogeneity and
to make each clause consistent with the others and the
Contract should be read in its entirety. The Contract
also provides under Clause-29.5 for extension of time
for completion. It is pertinent to reproduce the
Clause-29.5.1.
"29.5. 1 The Time for Completion specified
shall be extended if the Contract is delayed or
impeded in the performance of any of the
obligations under the Contract by reason of any of
the following:
a) any occurrence of Force majeure as provided in
GCC Clause entitled 'Force Majeure', or
b) Work Schedules far beyond deviation limits and
Extra Items as provided in GCC Sub-Clause
49.5, or
c) any default of breach of the Contract by the
Employer, or delay on the part of other
contractors engaged by the Employer in
executing work not forming part of this Contract,
or
d) any suspension order given by the Employer
under GCC Sub-Clauses 50.1 (ii) and 50.1 (iii),
or
e) Any other sufficient cause which, in the opinion
of the Engineer-in-Charge, is beyond the
Contractor's reasonable control;
by such period as shall be fair and reasonable in
all the circumstances and as shall fairly reflect the
delay or impediment sustained by the Contractor."
(b). To arrive at this conclusion, the Tribunal analyzed various
contemporaneous documents on record, such as Joint Protocol Statements
recording the dates of handing over of the sites, agreed Schedules with
start dates and end dates, Minutes of Meetings, etc. Tribunal observed
that there was initial delay of 6 months in handing over the Site. The
reservoir sites were the longest time consuming works but, they were also
not handed over till 24.09.2013. Tribunal relied on Petitioner‟s
admission that it had handed over 100% land only in January, 2014 and
observed that around 16 months‟ time beyond the contract period would
have been required to complete the Lagoon work and therefore,
reasonable extension upto 26.12.2015 ought to have been given.
(c). Under Delay-2, the Tribunal found the delay to be concurrent with
Delay No. 1. Likewise, for Delay-3, Delay-8 and Delay-9, the delay was
found to be concurrent with Delay-1. Delay-7, 6 and 5 were held not
attributable to the Petitioner. Delay-4 was also found to be concurrent
with Delay-1, however, the Tribunal observed that mining of sand was
permitted prior to the Stay Order of the NGT. Respondent had made
requests to the Petitioner to seek permission from the State Authorities to
borrow sand from the adjoining projects and obtain necessary licenses.
The license for obtaining sand from aggregates through use of explosives
was granted only in December, 2012 and there was thus, a delay of two
months. The Tribunal found that the delay caused due to non-availability
of sand and aggregates was genuine. Finally the Tribunal concluded that
delay in the activity of reservoirs was the net delay towards the
completion of work under the Contract, while all other delays were either
concurrent or had no impact.
19. (a) The Tribunal found that the termination of the Contract was
unlawful and accordingly, the Claim for risk & cost was unsustainable.
Under Issue Nos. 1 & 2, it had concluded that delays were attributable to
the Petitioner under some heads and more particularly, delay in handing
over the site, which delayed the execution of the work. Reliance was
placed on the judgment in Hind Construction (supra) to hold that time
was not of the essence of the contract. Seven days‟ notice was issued by
the Petitioner to the Respondent alleging breach of contract. Respondent
replied vide its letter dated 04.03.2014 pointing out various factors such
as delay in handing over the site, delay in classification of rocks, increase
in quantities under the two Amendments, release of drawings belatedly,
etc. The Tribunal observed that this reply dated 04.03.2014 was not even
adverted to by the Petitioner in the Termination Order. Tribunal found
that the status quo Order of NGT was in operation on 24.03.2014 and yet,
the Contract was terminated on the said date, though, the Contractor was
entitled to an extension of time, beyond the Contract Period. According to
the Tribunal, the Petitioner being guilty of delay, terminated the contract,
which was in teeth of the judgments of the Supreme Court in State of
Karnataka v. Rameshwara Rice Mill, AIR (SC) 1987 1359 and J.G.
Engineers Private Ltd. v. Union of India & Another (2011) 5 SCC 758,
that no party can be an Arbiter in its own cause.
(b). The Tribunal, under Issue Nos. 1 and 2 dealt with the factum of
delay and reached a conclusive finding that Petitioner was responsible for
the various delays as alleged by the Respondent under Issue No.1. It
further, answered Issue No.2 regarding responsibility of Respondent for
the delays in the negative and held that the extension of 6 months was
insufficient and calculated 13.5 months as the correct duration for
extension, as should have been awarded. It further observed that these
findings shall apply mutatis mutandis to Issue No. 3.
(c). Petitioner has raised challenge to the Tribunal‟s findings in this
regard on the following 5 grounds:
1. Extension of Time:-
Petitioner has contended that the Tribunal gave perverse findings on grant
of extension. However, under Delay-1 Tribunal has in detail, dealt with
the issue of grant of extension of time and given a finding in favour of the
Respondent. In its consideration of Delay-1, the Tribunal gave well-
reasoned findings in Paras 30, 32, 36 and 38, in accordance with law and
its interpretation of the Contract, which is not open to be re-examined by
this Court under Section 34 of the Act. In this regard, the following
observations in Govt. of NCT of Delhi v. M/s. Kabil Pawan & Associates
(JV) 2012 SCC OnLine Del 5665 are relevant :-
"11. The law with regard to Section 34 of the said Act is
well settled that the Courts exercise limited jurisdiction over
the award of the Arbitrator and cannot go into the
merits of the case nor reappraise and re-examine the
evidence, nor look into the insufficiency of the evidence as
the scheme of the said provision aims at keeping the
supervisory role of the Court at a minimum level. It has also
been held that parties to the agreement make a conscious
decision to exclude the Court's
jurisdiction by opting for Arbitration as they prefer the
expediency and finality offered by it.
12. It is well settled that an award is not a subject
matter of an appeal nor can a challenge under Section 34 be
construed as an "appeal" against the award. [See (2001) 2
Arb LR 469 (Del) & (2008) 2 Arb LR 175].
2. Issues arising post grant of Extension of Time:-
(a) Increase in the quantity of item no. 1 and item no. 3 of BOQ
thereby increasing the value of the contract from Rs. 154.34 Crores
to Rs. 189.03 Crores:
Amongst other things, this challenge to the arbitral Award is premised on
the provisions of Clause 29.5 GCC read with Clauses 49.2 and 49.5 of
GCC, which provide for deviation limits. The Petitioner contends that
since earth work is an underground work, Clause 49.2.2.2 of GCC would
apply, which provides that in case item of work is below the ground
surface, the permissible limits of deviation over the original value of each
item will be +100% or -30%. This has to be seen in terms of BOQ Item
Nos. S 1 & 3, however there has been no discussion to this effect in the
Award. What is important to note is the discussion in the award
pertaining to river embankment and the quantities claimed by the
Respondent in Paras 139 and 140, read with Clause 49.1.1 regarding
ground work. This contention of the Petitioner cannot be accepted as the
Tribunal has considered this aspect in light of the various other delays
attributable to Petitioner, including delay in handing over. In CMDR.
S.P. Puri v. Alankit Assignments Ltd 2008 SCC OnLine Del 985, Court
held as under :
"9. Arbitrators are not required to give elaborate
judgments dealing with each and every ground or reason.
They have to consider the entire facts in proper perspective
and give an indication of the grounds and reasons that
prevailed upon them to decide the matter. Law requires
arbitrators to give reasons and nothing more. If the reasons
are clear and indicate the basis for the decision, the award
should be upheld and cannot be set aside. Law does not
require arbitrators to give detailed judgments dealing with
each and every contention raised by the parties. What is
required to be indicated is the basis on which the arbitrators
have taken a particular view. Arbitrators need not legal
luminaries, well versed with legal skills and having benefit
of legal training. Arbitrators can be men from the trade or
relatives etc. and enjoy substantial latitude and flexibility in
deciding matters in a just and equitable manner. If the
arbitrators have set out grounds and reasons in the award
why they are taking a particular view while deciding claims,
the award will be a reasoned award. Requirement in law is
that the arbitrators must give reasons. It is not the
requirement of Section 31(3) of the Act, that the arbitrator
must elaborately discuss all contentions raised by the
parties. To satisfy the requirements of the Act, reasons
should be intelligible comprehensible, but need not be
unnecessarily lengthy or elaborate. Reasons should indicate
and provide a precise link between questions/issues and the
conclusion reached in regard thereto. It is sufficient if the
arbitrator makes his mind clear in the award on what and
why decision is made. Short intelligible indications of the
grounds should be discernible to indicate the mind of the
arbitrator. Sufficiency of reasons depends upon facts of each
case, (refer Em & Em Associates v. Delhi Development
Authority, ILR (1987) 2 Del 526, Bank of Barod a v. B.J.
Bhambani, 1988 Supp SCC 785, Indian Oil Corporation v.
Indian Carbon Ltd., (1988) 3 SCC 36, Gujarat Water Supply
and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd.,
(1989) 1 SCC 532)".
(b) Modified drawings for reservoir embankment:-
While Petitioner contends that the drawings were issued on 29.03.2012,
the Tribunal has given a categorical finding that it was an admitted fact
that the modified drawings for the reservoir embankments were issued on
19.02.2014. Further, findings regarding MOM dated 12-13.11.2013 have
been given in Para 139 by the Tribunal including Petitioner‟s acceptance
and conduct with respect to the Respondent‟s list of 5 concerns/ points
raised by it in the MOM. A categorical finding has been given by the
Tribunal in this regard in Para 113.
(c) NGT ordered status quo with regard to construction of Kudgi
Super Thermal Project:-
The Tribunal gave detailed findings regarding stoppage of work due to
NGT Order in Paras 99 to 101 and held that the Respondent was not
responsible for the delay due to suspension of work from 13.03.2014 to
25.03.2014, both days inclusive. Petitioner on one hand contends that the
seven (07) days‟ notice came to an end on 05.03.2014 and since the
Respondent failed to take any steps, the contract had come to an end, but
only a "formal notification" of termination of contract was required to be
issued, after seeking necessary approvals from the Competent Authority.
While, on the other hand, it contends that on 14.03.2014, it had issued
necessary orders to all the subsisting contractors including respondent
herein for stoppage of work with respect to execution of Kudgi super
Thermal Power Project.
This contention of the Petitioner cannot be sustained in the light of
the provisions of Clause 51.3.1, especially sub-clause (b). Clause 51
provides for Termination for Contractor's Default and is as under:
"51.3.1. If the Contractor:
(a) xxx
(b)commits default in complying with any of the terms and
conditions of Contract and does not remedy it or take
effective steps to remedy it within seven (7) days after a
notice in writing is given to him in that behalf by the
Engineer-in-Charge ; or
...the Employer may, without prejudice to any other right to
remedy which shall have accrued or shall accrue thereafter
to the Employer by written notice cancel the Contract as a
whole or only such items of work in default, from the
Contract."
Thus, the Contract did not come to end, automatically by lapse of 7
days, and a written notice for cancellation was required to be served by or
on behalf of the Competent Authority.
3. Time was not of the essence of the contract:-
This finding of the Tribunal is premised on its conclusion that the
Petitioner was responsible for the delays and not the Contractor. Even
though it is contended that reliance on the case of Hind Construction
Contractors vs. State of Maharashtra 1979 (2) SCC 70 was misplaced,
but it was not shown how the reliance was misplaced. Judgement in the
case of Union of India v. M/s Gujrat Co-Operative Grain Growers
Federation Ltd., 2009 SCC OnLine Del 3979, squarely covers the
present case and relevant part is as under:
"3. By the impugned Award, the learned Arbitrator has
dismissed the claim of the petitioner for risk purchase costs
inter alia on account of the fact that time of performance
was not the essence of the contract. The Arbitrator relied
upon the judgment of this court reported as Panipat Food
Limited v. Union of India 1995 (60) DLT 258. I may note
that this judgment relies upon the judgment of the Supreme
Court reported as Hind Construction Contractors v. State
of Maharashtra AIR 1997 SC 720. These judgments lay
down the ratio that even if time of performance is mentioned
to be the essence of the contract, but if, the contract provides
for levy of liquidated damages for delay, then the time of
performance is not the essence of the contract though so
stated in the contract.
4. In the present case, the aforesaid two judgments apply
squarely because even in the extension letters given by the
petitioner, the application of the clause of liquidated
damages continued to operate. Therefore, I do not find any
fault in the Award by which it is held that time of
performance is not of the essence of the contract. Once time
of performance is not of the essence and no notice is given
fixing a specific date for performance of the contract, then in
such a case the contract cannot be cancelled on the ground
that time of performance is the essence of the contract.
Accordingly, I do not find any illegality or perversity in the
Award for this court to interfere under Section 34. It is
settled law that this court will not interfere with the Award
merely because two views are possible. In the facts of the
case, I find that the view taken by the Arbitrator is one
plausible view and therefore the same cannot be challenged
under Section 34.
Once the principal claim of the petitioner does not survive,
then, the issue of grant of interest also would not arise."
4. Non-consideration of Respondent's letter dated 04.03.2014 in
response to the notice issued by petitioner on 27.02.2014.
Tribunal has given detailed findings regarding the letter of the Petitioner
dated 24.03.2014 and concluded that the same has not adverted to the
Contractor‟s letter dated 04.03.2014. This is a finding of fact based on
evidence adduced before it and as such merits no interference. A co-
ordinate Bench of this Court in the case of National Highways Authority
of India v. Som Dutt Builders-NCC(JV), 2018 SCC OnLine Del 10783,
held as under:-
"18. It is not for this court to sit in appeal over the said
finding of fact recorded by the learned arbitral tribunal.
19. The Supreme Court in Associate Builders v. Delhi
Development Authority, (2015) 3 SCC 49 held as follows:
"12 ...................The third juristic principle is that a
decision which is perverse or so irrational that no
reasonable person would have arrived at the same is
important and requires some degree of explanation. It
is settled law that where-
1. a finding is based on no evidence, or
2. an arbitral tribunal takes into account something
irrelevant to the decision which it arrives at; or
3. ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse. A good
working test of perversity is contained in two
judgments. In H.B. Gandhi, Excise and Taxation
Officer-cum-Assessing Authority v. Gopi Nath &
Sons, 1992 Supp (2) SCC 312 at p.317, it was held:
7. .....It is, no doubt, true that if a finding of fact
is arrived at by ignoring or excluding relevant
material or by taking into consideration
irrelevant material or if the finding so
outrageously defies logic as to suffer from the
vice of irrationality incurring the blame of being
perverse, then, the finding is rendered infirm in
law.
In Kuldeep Singh v. Commr. of Police, (1999) 2 SCC
10 at para 10, it was held:
10. A broad distinction has, therefore, to be
maintained between the decisions which are
perverse and those which are not. If a decision
is arrived at on no evidence or evidence which
is thoroughly unreliable and no reasonable
person would act upon it, the order would be
perverse. But if there is some evidence on
record which is acceptable and which could be
relied upon, howsoever compendious it may be,
the conclusions would not be treated as
perverse and the findings would not be
interfered with."
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. 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,
this Court held:
"21. A court does not sit in appeal over the
award of an Arbitral Tribunal by reassessing or
re-appreciating the 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.
................"
20. Hence, merely because while passing the award the
learned Arbitral Tribunal has not referred to the
correspondence placed on record by the petitioner does not
vitiate the award. Arbitral Tribunal has instead given
greater weightage to the reports prepared by the petitioner's
officials when granting extension of time to arrive at the
findings of fact. The arbitrator is the master of quality and
quantity of evidence. No fault can be found in this
approach."
5. Termination Letter dated 24.03.2014 was not signed by
Competent Officer as per clause 5.1 of the contract:-
Tribunal while dealing with the Termination Letter, referred to Clause 5
of the GCC, whereby signatures of the Competent Authority were an
essential to constitute a valid notice of termination of Contract. Detailed
findings have been given in this regard by the Tribunal in Para 158.
Tribunal, in taking cognizance of the terms of the Contract between the
parties cannot be said to have committed an illegality. Moreover, when
the parties, of their own free will, chose to enter the Contract, they decide
to be bound and governed by the stipulations contained therein. In the
case of Rajasthan State Mines & Minerals Ltd. v. Eastern Engg.
Enterprises, (1999) 9 SCC 283, at page 308, the Supreme Court held as
follows, in view of which, it is evident that the Tribunal did not commit
any illegality :-
"42. The aforesaid judgment was considered in H.P.
SEB v. R.J. Shah and Co. [(1999) 4 SCC 214] and in para
26, the Court held as under: (SCC p. 225)
"26. In order to determine whether the arbitrator has
acted in excess of jurisdiction what has to be seen is
whether the claimant could raise a particular dispute
or claim before an arbitrator. If the answer is in the
affirmative then it is clear that the arbitrator would
have the jurisdiction to deal with such a claim. On the
other hand if the arbitration clause or a specific term
in the contract or the law does not permit or give the
arbitrator the power to decide or to adjudicate on a
dispute raised by the claimant or there is a specific
bar to the raising of a particular dispute or claim then
any decision given by the arbitrator in respect thereof
would clearly be in excess of jurisdiction."
xxx xxx xxx
44. From the resume of the aforesaid decisions, it can be
stated that:
XXX
(b) It is not open to the court to admit to probe the
mental process by which the arbitrator has reached
his conclusion where it is not disclosed by the terms of
the award.
(c) If the arbitrator has committed a mere error of
fact or law in reaching his conclusion on the disputed
question submitted for his adjudication then the court
cannot interfere.
XXX
(f) To find out whether the arbitrator has travelled
beyond his jurisdiction, it would be necessary to
consider the agreement between the parties
containing the arbitration clause. The arbitrator
acting beyond his jurisdiction is a different ground
from the error apparent on the face of the award.
(g) In order to determine whether the arbitrator has
acted in excess of his jurisdiction what has to be seen
is whether the claimant could raise a particular claim
before the arbitrator. If there is a specific term in the
contract or the law which does not permit or give the
arbitrator the power to decide the dispute raised by
the claimant or there is a specific bar in the contract
to the raising of the particular claim then the award
passed by the arbitrator in respect thereof would be in
excess of jurisdiction.
(h) The award made by the arbitrator disregarding
the terms of the reference or the arbitration
agreement or the terms of the contract would be a
jurisdictional error which requires ultimately to be
decided by the court. He cannot award an amount
which is ruled out or prohibited by the terms of the
agreement. Because of a specific bar stipulated by the
parties in the agreement, that claim could not be
raised. Even if it is raised and referred to arbitration
because of a wider arbitration clause such claim
amount cannot be awarded as the agreement is
binding between the parties and the arbitrator has to
adjudicate as per the agreement. This aspect is
absolutely made clear in Continental Construction
Co. Ltd. [(1988) 3 SCC 82 : (1988) 3 SCR 103] by
relying upon the following passage from Alopi
Parshad v. Union of India [AIR 1960 SC 588 : (1960)
2 SCR 793] which is to the following effect: (SCC p.
88, para 5)
"There it was observed that a contract is not
frustrated merely because the circumstances in
which the contract was made, altered. The
Contract Act does not enable a party to a
contract to ignore the express covenants thereof,
and to claim payment of consideration for
performance of the contract at rates different
from the stipulated rates, on some vague plea of
equity. The parties to an executory contract are
often faced, in the course of carrying it out, with
a turn of events which they did not at all
anticipate, a wholly abnormal rise or fall in
prices, a sudden depreciation of currency, an
unexpected obstacle to execution, or the like.
There is no general liberty reserved to the
courts to absolve a party from liability to
perform his part of the contract merely because
on account of an uncontemplated turn of events,
the performance of the contract may become
onerous."
(i) The arbitrator could not act arbitrarily,
irrationally, capriciously or independently of the
contract. A deliberate departure or conscious
disregard of the contract not only manifests the
disregard of his authority or misconduct on his part
but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot
ignore the law or misapply it in order to do what he
thinks just and reasonable; the arbitrator is a tribunal
selected by the parties to decide the disputes
according to law."
(d). This Court finds no infirmity with the finding of the Tribunal that
the Termination was unlawful. Accordingly, the challenge by the
petitioner to rejection of the counter claim in respect of charges for risk
and cost cannot be sustained.
20. (a) The Tribunal in order to decide Issue No.4, analyzed Clause 2.9
of the Technical Specifications, which has been extracted above. It also
examined Clause 37.6 which is the basis of the argument of the Petitioner
that the OGLs being „excepted matter‟ were not arbitrable. Tribunal was
of the view that the main issue that arose for consideration was regarding
the initial level itself wherein, not only was a quantity in dispute, but also
the signatures of the authorized representative of the Respondent, on the
documents produced by the Petitioner. While the Petitioner relied on
Book 12 to Book 16, Respondent relied on Volumes 3/1 to 3/10. Only
after the said dispute of the signatures was determined, the quantification
could be done in the perception of the Tribunal. The Tribunal
distinguished the judgment in the case of Harsha Construction (supra).
Relevant paras have been extracted in the earlier part of the judgment.
(b). The Tribunal drew a distinction between the measurements
envisaged under Clause 37.6 and the OGLs and concluded that Claim No.
6 involves disputes in initial levels, which was not an excepted matter
under Clause 37.6. Relevant paras of the Award are as under:-
"207. The Arbitral Tribunal has dealt with the
Respondent's contention that the measurements are
excepted matter as per Clause-37 of the Contract. The
Arbitral Tribunal after examining the various rival
contentions of the parties has held under Issue-4 as
follows:
"In the light of the above observations and
findings, the Arbitral Tribunal is of the considered
opinion that the Claim-6 which involves dispute in
the initial levels falls within the jurisdiction of the
Arbitral Tribunal".
208. The Arbitral Tribunal finds that the provisions under
the Contract with respect to taking of initial levels
deserve to be first traversed. Clause2.9.0, Pg.196
Contract Vol.1/3 under Section-II Part-B Detailed
Technical Specifications, states as follows:
"2.9.0MODE OF MEASUREMENT
The item of excavation & filing for site levelling
work shall be measured and paid for the volume of
actual earthwork in cutting measured in cum
correct to two decimal places. The volume shall be
calculated based on the spot levels of the area(s) in
cutting, taken jointly by the Engineer and the
Contractor before commencement of cutting (but
after the site clearance and removal of trees has
been completed) and after the cutting has been
completed (i.e., after the area has been finished to
the required levels and slopes after excavation).
The spot levels shall be taken at 12.5 metres
interval and at closer interval where pits,
undulations etc. are met with. These levels shall be
taken in two orthogonal directions/ grids along
project grids. The spot levels shall be recorded in
a field book and plotted on plans and shall be
signed by the Contractor and the Engineer. The
labour, materials, tools, equipment, safeguards and
incidentals required for taking levels shall be
supplied by the Contractor at his own cost".
(Emphasis supplied)"
209. It is clear from this clause that the spot levels of the
area in cutting shall be taken jointly by the engineer &
contractor before commencement of cutting and after the
site clearance and removal of trees has been completed.
This is being referred to as the original ground level or
the initial levels. These levels actually are the datum for
determining the quantities depending upon the depth to
which the excavation is to be made. Further, it is also
clear from the above clause that such joint levels shall be
taken after the cutting has been completed i.e., after the
area has been finished to the required levels and slopes
after excavation. This joint level is a second set of joint
level that should be taken jointly by the Engineer and the
Contractor after completion. This is being referred to as
the final levels which are to be reached as per the
Contract. Further it is also clear from this that these spot
levels shall be taken at 12.5 metres intervals and at closer
intervals where pits, undulations etc., are met with and
also that these levels shall be taken in two orthogonal
directions / grids along the project grid.
210. It is admitted by the parties that the initial levels are
taken in grids of 10m in two orthogonal directions viz.,
Northing and Easting directions. The Parties are not in
dispute regarding the final levels recorded after the
excavation has been made till the date of termination.
However, the main dispute is regarding the initial ground
levels i.e. Original Ground Level. As observed by the
Arbitral Tribunal earlier, while dealing with Delay-6,
there are two sets of initial levels produced before the
Arbitral Tribunal. The Claimant's initial levels are
furnished in Vo1.3/1 to 3/10 of the Rejoinder. The
Respondent's initial levels are furnished in Book -12 to
Book-16. The AT finds that these Book-12 to Book-16 are
the same as the levels in Vo1.6 &7 of SOC produced by
the Claimant. From these it is clear that the main dispute
is regarding the initial levels. Therefore, the question that
arises before the Arbitral Tribunal is as to whether the
Rejoinder Vo1.3/1 to 3/10 as furnished by the Claimant
are the appropriate joint levels or the Book-12 to Book-16
as furnished by the Respondent are appropriate joint
levels as per the Contract?
211. The Arbitral Tribunal has examined these documents
viz., Rejoinder Vo1.3/1 to Vol.3/10 of the Claimant and
Book-12 to Book-16 of the Respondent. The following are
the observations.
212. Both parties have agreed that the survey is
conducted by the Total Station Method (TSM) and that the
Northing and Easting forms the orthogonal grid and each
block is subdivided into number of sub-blocks
ofabout100m by 100m and the end blocks are adjusted for
the balance dimensions in each of the block. The spot
levels are taken by the TSM at10m intervals in each sub-
block in the orthogonal direction representing northing
and easting. Thereby roughly 100 spot levels are taken in
each sub-block subject to the variations caused on
account of the ends of the Sub-blocks. The dates on which
the levels were taken and recorded are also indicated
along with the grid boundary Northing and Easting. As
specified under Clause-2.9.0, Pg.196 Contract Vol.1/3
under Section-Il Part-B Detailed Technical
Specifications, the contractual provision is that "The spot
levels-shall be recorded in a field book and plotted on
plans and shall be signed by the Contractor and the
Engineer". By virtue of this being a survey by TSM the
raw data obtained from the levelling is only in the
electronic form and is utilized. However, in whatever
form the raw data is, it is necessary that as per the
Clause-2.9.0 all these data shall be signed by the
Contractor and the Engineer. With this back ground, as
admittedly stated by the parties, the Arbitral Tribunal
finds that the initial spot levels or the OGL, as is referred
to, forms the datum for all further excavations. It is for
this reason that it is the Engineering Practice in all
excavation works to have a joint signature of both the
Contractor and the Engineer duly authorised to avoid any
dispute at a later date. This is for the reason that once the
to player of the excavation is excavated, this original data
cannot be obtained and it will lead .to unnecessary and
avoidable disputes in excavation works as the OGL
becomes a non-susceptible and non-existent physical
quantity when once the top layer is excavated and it
cannot be re-measured. With this back ground invariably
in all Engineering contracts it is also the accepted trade
usages to have joint levels undisputedly before the
construction is started. This is also a requirement under
this Contract under Clause-2.9.0. Therefore, the Arbitral
Tribunal finds that essentially these documents Rejoinder
Vo1.3/1 to 3/10 relied by the Claimant andBook-12 to
Book-16 relied by the Respondent for the initial levels are
examined.
With regard to Rejoinder Vo1.3/1 to 3/10 of Claimant's
document for OGL Records:
a) The Rejoinder Vo1.3/1 is from Pg.1635 to Pg.1844 and
is in respect of Block-I and gives the plan or Block-I and
its disposition along with the adjacent boundaries. These
levels are signed by the authorized representative of
Claimant Mr. Prasath Konda Reddy and Mr. Praveen on
behalf of Respondent. In addition other officers of the
Claimant and Respondent have also signed.
b) The Rejoinder Vo1.3/2 is from Pg.1845 to Pg.1965 and
is in respect ofBlock-2 and gives the plan of Block-2 and
its disposition along with the adjacent boundaries. These
levels are signed by the authorized representative of
Claimant Mr. Prasath Konda Reddy and Mr. Praveen on
behalf of Respondent. In addition other officers of the
Claimant and Respondent have also signed.
c) The Rejoinder Vo1.3/3 is from Pg.1966 toPg.2127 and
is in respect ofBlock-3 and gives the plan of Block-3 and
its disposition along with the adjacent boundaries. These
levels are signed by the authorized representative of
Claimant Mr. Prasath Konda Reddy and Mr. Praveen on
behalf of Respondent. In addition other officers of the
Claimant and Respondent have also signed.
d) The Rejoinder Vo1.3/4 is from Pg.2128 to Pg.2364 and
is in respect of Block-4A and gives the plan of Block-4A
and its disposition along with the adjacent boundaries.
These levels are signed by the authorised representative
of Claimant Mr. Prasath Konda Reddy and Mr. Praveen
on behalf of Respondent. In addition other officers of the
Claimant and Respondent have also signed.
e) The Rejoinder Vol.3/5 is from Pg.2365 to Pg.2425 and
is in respect of Block-5 and gives the plan of Block-5and
its disposition along with the adjacent boundaries. These
levels are signed by the authorized representative of
Claimant Mr. Prasath Kanda Reddy and Mr. Praveen on
behalf of Respondent. In addition other officers of the
Claimant and Respondent have also signed.
f) The RejoinderVo1.3/6isfromPg.2426 to Pg.2546 and is
in respectofBlock-5and gives the plan of Block-6 and its
disposition along with the adjacent boundaries. These
levels are signed by the authorized representative of
Claimant Mr. Prasath Konda Reddy and Mr. Praveen on
behalf of Respondent. In addition other officers of the
Claimant and Respondent have also signed.
g) The Rejoinder Vol.3/7 is from Pg.2547 to Pg.2892 and
is in respect of Block -7 and gives the plan of Block-7 and
its disposition along with the adjacent boundaries. It is
also noted that this is a large block having 40 sub-blocks
of100m each. These levels are signed by the authorized
representative of Claimant Mr. Prasath Kanda Reddy and
Mr. Praveen on behalf of Respondent.
h) The Rejoinder Vo1.3/8 is from Pg.2893 to Pg.3153 and
is in respect ofBlock-9 and gives the plan of Block-9and
its disposition along with the adjacent boundaries. These
levels are signed by the authorized representative of
Claimant Mr. Prasath Kanda Reddy and Mr. Praveen on
behalf of Respondent.
i) The Rejoinder Vol.3/9 is fromPg.3154 to Pg.3248 and
is in respect ofBlock-10A and gives the plan of Block- 10A
and its disposition along with the adjacent boundaries.
These levels are signed by the authorized representative
of Claimant Mr.Prasath Konda Reddy and Mr. Praveen
on behalf of Respondent.
j) The RejoinderVol.3/10 is from Pg. 3249 to Pg.3311 and
is in respect ofBlock-13and gives the plan or Block -13
and its disposition along with the adjacent boundaries,
These levels are signed by the authorized representative
of Claimant Mr. Prasath Konda Reddy and Mr. Praveen
on behalf of Respondent.
From the above it is seen that: (i) in the Vo1.3/1 to 3/10
running from pages1635 to 3311 (nearly 1670 pages)
have been signed by the duly authorized representative of
the Claimant. Mr. Prasath Konda Reddy and Mr.Praveen
on behalf of the Respondent; (ii) but it is seen other
officers of the Claimant and the Respondent have also
signed only in the Vol.3/1 to 3/6 (nearly 900
Pages) and not signed in Vol. 3/7 to 3/10.
With regard to Book-12 to Book-16 of Respondent's
document for OGL Records:
i. The Book-12 is from Pg.1 to Pg.114 and is in respect of
Blocks 1 &2. These levels are signed by Mr .Praveen on
behalf of the Respondent and other officers of the
Respondent. There is a signature of one Mr. Augustine
who was stated by the Respondent to be the authorized
representative of the Claimant.
ii. The Book -13 is from Pg.1 toPg.111 and is in respect of
Blocks 3, 4B &5. These levels are signed by Mr. Praveen
on behalf of the Respondent and other officers of the
Respondent. There is a signature of one Mr. Augustine
who was stated by the Respondent to be the authorized
representative of the Claimant.
iii. The Book-14 is from Pg.1to Pg.112 and is in respect of
Blocks 4A &10A. These levels are signed by Mr. Praveen
on behalf of the Respondent and other officers of the
Respondent. There is a signature of one Mr. Augustine
who was stated by the Respondent to be the authorized
representative of the Claimant. .Further in so far as
Block-10A is concerned one Mr. Vivek has signed in place
of Mr. Praveen on behalf of the Respondent along with
other officers
iv. The Book-15 is from Pg.1 to Pg.133 and is in respect
of Blocks 6, 7, 12& 13. These levels are signed by
Mr.Praveen on behalf of the Respondent and other
officers of the Respondent. There is a signature of one
Mr.Augustine who was, stated. by the Respondent to be
the authorized representative of the Claimant. Further in
so far as Block-7, Pgs.58 to 98, is concerned one Mr.
Vivek has signed with date in place of Mr. Praveen on
behalf of the Respondent along with other officers.
Further in Pgs.99 to 133Mr. Praveen has signed but
without any date.
v. The Book-16 is from Pg.1to Pg.141 and is in respect of
Blocks 8 &9. These levels are signed by Mr. Praveen on
behalf of the Respondent and other officers of the
Respondent. There is a signature of one Mr. Augustine
who was stated by the Respondent to be the authorized
representative of the Claimant.
From the above it is seen that in the Book-12 to Book-16
nearly 600 pages have been signed by Mr. Praveen on
behalf of Respondent along with other officers of the
Respondent. But on all the pages there is only one
signature of Mr. Augustine who was stated by the
Respondent to be the authorised representative of the
Claimant."
(c). The Tribunal in my view has arrived at this finding based on the
interpretation of the contractual clauses as well as the technical
interpretation of various levels such as OGLs, site levelling and final
levels, as used in field of Construction Contracts and Engineering. The
Tribunal comprised of Technical Experts and it is not open to this Court
to substitute the said findings, more particularly, when as per settled law,
the Arbitrator is the master of quality and quantity of evidence before it.
The law on excluding an „excepted matter‟, from the scope of Arbitration
has been laid down by the Supreme Court in Madnani Construction
Corporation (P) Ltd v. Union of India & Ors, Civil Appeal No. 8385 of
2004 and relevant paras read as under:-
"19. A plain reading of Clause 45(a) of the GCC makes it
clear that re-measurement are to be made by the Engineer
or the Engineer's representative in the presence of the
Contractor. It may be done in the absence of the contractor
but that has to be done only after due notice. On a proper
construction of Clause 45(a) it appears that it gives the
contractor, (a) an opportunity to take a specific objection to
any recorded measurement within seven days of such
measurements; (b) Then any remeasurements is to be taken
by the Engineer or the Engineer's representative in the
presence of the contractor or in his absence after due
notice; if 11 the steps under (a) and (b) are strictly followed,
(c) no claim whatsoever by the contractor shall be
entertained about the classification or the accuracy of the
measurement.
20. Under Clause 62 of the GCC it is provided that matters
for which provisions have been made in Clause 45(a) shall
be excepted matters.
xxx xxx xxx
22. It is well settled that the arbitrator is the master of
facts. When the arbitrator on the basis of record and
materials which are placed before him by the railways
came to such specific findings and which have not been
stigmatized as perverse by the High Court, the High Court
in reaching its conclusions cannot ignore those findings.
23. But it appears that in the instant case, the High Court
has come to the aforesaid finding that the items mentioned
above are excepted matters and non-arbitrable by
completely ignoring the factual finding by the arbitrator and
without holding that those findings are perverse.
24. It goes without saying that in order to deny the claims of
the contractor as covered under excepted matters, the
procedure prescribed for bringing those claims under
excepted matters must be scrupulously followed. The clear
finding of the arbitrator is that it has not been followed and
the High Court has not expressed any dis-agreement on that.
Therefore, the finding of the High Court that those items are
non-arbitrable cannot be sustained."
(d) The Tribunal in entertaining this claim relied on its other finding
that the dispute did not fall under Clause 37.6 of the GCC, as it pertained
to initial levels of excavation and the entire Clause-37 deals with the
measurements of the work and not regarding any disputes in the initial
levels itself. It further held that taking initial levels is a preliminary task
for measurement and cannot be construed as measurement of the quantity
as contemplated under Clause-37. This is an interpretation to Clause 37.6
with respect to the Original Ground Level and not on measurement. In
this context, it is pertinent to refer to the Bombay High Court judgment in
Country Club (India) Ltd. v. Choudhury &Choudhury (India) Ltd. 2016
SCC OnLine Bom 8993, wherein the arbitrator had given an
interpretation to the „excepted matters‟ clause and the same was upheld
by the Court. Relevant para is as under:
"92. A perusal of the award indicates that though the
petitioner had given up the issue of jurisdiction initially
raised in the written statement on the ground that the claims
fell in the excepted category of matters, the learned
arbitrator still dealt with the oral submissions made by the
petitioner through their learned counsel on this issue at
great length in paragraphs 89 and 105 of the
impugned award and has rejected the submission of the
learned counsel for the petitioner on merits after
interpreting the terms and conditions of the contract. In my
view the interpretation of the learned arbitrator on the issue
whether any of the claims made by the respondent fell under
"excepted category of matters" or not is not only a possible
interpretation but is a correct interpretation. In my view
even if the interpretation of the learned arbitrator on the
provisions is a contract is a possible interpretation, such a
possible interpretation cannot be substituted by another
interpretation by this court under section 34 of
the Arbitration Act."
(e) Further, in determining the amount of work done, the Tribunal has
chosen Simpson‟s Formula as against Auto Plotter Software method after
holding that it is a reliable, reputed and time-tested method. This is the
domain of the Arbitrator as categorically held in McDermott
International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181,
wherein the following observations were made:
"106. We do not intend to delve deep into the matter as it is
an accepted position that different formulae can be applied
in different circumstances and the question as to whether
damages should be computed by taking recourse to one or
the other formula, having regard to the facts and
circumstances of a particular case, would eminently fall
within the domain of the arbitrator.
107. If the learned arbitrator, therefore, applied the Emden
Formula in assessing the amount of damages, he cannot be
said to have committed an error warranting interference by
this Court.
xxx xxx xxx
109. Sections 55 and 73 of the Indian Contract Act do not
lay down the mode and manner as to how and in what
manner the computation of damages or compensation has to
be made. There is nothing in Indian law to show that any of
the formulae adopted in other countries is prohibited in law
or the same would be inconsistent with the law prevailing in
India.
110. As computation depends on circumstances and methods
to compute damages, how the quantum thereof should be
determined is a matter which would fall for the decision of
the arbitrator. We, however, see no reason to interfere with
that part of the award in view of the fact that the
aforementioned formula evolved over the years, is accepted
internationally and, therefore, cannot be said to be wholly
contrary to the provisions of the Indian law."
(f) In so far as the Petitioner‟s objections regarding measurements
taken by the Tribunal and quantities relied upon, or the authority of Mr.
Augustine to sign as Authorised Representative of the Respondent etc.
are concerned, same are beyond the scope of examination under Section
34 of the Act and the same fall squarely within the Tribunal‟s domain,
which is best equipped to deal with the same on the basis of appropriate
technical expertise/know-how. In Associate Builders v. Delhi
Development Authority, reported in (2015) 3 SCC 49, it was clearly held
that that the Arbitrator is the final authority on the quantity and quality of
evidence and unless the Arbitrator's approach is found to be arbitrary or
capricious or so unfair and unreasonable that it shocks the conscience of
the court, the Award should be sustained. The Tribunal in giving these
findings has also referred to Section 19(4) of the Act which reads as
under:
"The power of the Arbitral Tribunal under sub-section (3)
includes the power to determine the admissibility, relevance,
materiality and weight of any evidence".
(g) It must also be noted that the Tribunal, after an in-depth study of
the measurements on record, observed that terms of the contract provided
that initial levels were to be jointly recorded in presence of both the
parties, appending their signatures on them. However, examination of the
initial level records showed that there were discrepancies including the
records not bearing the signatures of the Authorized Representative of the
Respondent. In the letter dated 15.06.2013, Petitioner had claimed that
initial level records were self certified without signatures of the
Respondent, but there were contradictions noticed by the Tribunal.
Tribunal observed that this was a strange case where parties were
disputing initial levels in excavation and thus the dispute does not fall in
Clause 37.6, because entire Clause 37 deals with measurements of work.
Most importantly, Tribunal notices that taking initial levels is a
preliminary task for measurement and cannot be construed as
measurement of quantity under Clause 37. This Court finds no reason to
interfere with the findings of fact of the Tribunal as well as the
interpretation given to Clauses 37.6 and main Clause 37.
(h) Based on the findings under Issue No. 4, Claim No.6 has been
allowed. Tribunal observed that the dispute in relation to initial level
arose in February, 2013 when Respondent supplied its set of OGL
records. It also observed that when two different set of documents are
produced, the set of documents signed by an unauthorized representative
has no weight and cannot be relied upon. Relying on the two letters dated
15.06.2013 and 21.06.2013, written by the Respondent disputing the
records maintained by the Petitioner, the Tribunal observed as under:-
"222. From the above two letters dated 15.06.2013 and
21.06.2013, the following emerges:
Letter dated 15.06.2013
a) The levels were taken at 10m intervals using TSM
observed jointly by the Respondent and the Claimant.
b) The level observed through the TSM were immediately
stored in the system as a soft copy in the presence of the
Respondent's Engineer and Claimant's Engineer. On
download of the stored level readings they are printed by the
Respondent's Engineer only and duly signed by the
Respondent's site Engineer and counter signed by the
Respondent's section incharge at the site.
c) The level document so prepared is filed and kept by the
Respondent and the level records are being maintained by
the Respondent.
d) That in each RA Bill, after receipt of the Claimant's bill,
quantities of earth work done by the Claimant monthly were
assessed by the Respondent and paid to the Claimant based
on the aforesaid level documents.
e) In Feb-2013 the Claimant‟s site in charge forwarded a
document to the Respondent which contained the recorded
levels of various blocks handed over and that on scrutiny of
these documents and comparing it with the spot levels of the
block record kept with the Respondent, difference of
recorded levels are noted and further that this discrepancy
observed was verbally communicated to the Claimant. But
no action has been taken from the Claimant's end.
Letter dated 21.06.2013
a) The contentions of the Respondent was denied by the
claimant as the pre-level of the areas were supposed to be
signed jointly by the Respondent and the Claimant as per the
Contract, while as per the Respondent's letter dated
15.06.2013 2nd para, it is the Respondent who is maintaining
the relevant records with self certification of the
Respondent's officials without obtaining the signature of the
Claimant's authorised representative.
b) That the Claimant requested the Respondent to verify the
block wise spot levels with respect to jointly signed records
to avoid any ambiguity for deriving the quantities for filling
and cutting.
223. From the above two letters the Arbitral Tribunal finds
that primarily the dispute in the levels started when the
Claimant in Feb-2013 forwarded the documents containing
the recorded levels of various blocks handed over. It is also
clear that the levels observed through TSM are immediately
stored as a soft copy by the Respondent and these stored
levels are printed by the Respondent. It is also admitted that
these level documents prepared by the Respondent are filed
and kept with the Respondent, Further, these printed
documents of levels duly signed by the Respondent's site
Engineer and counter signed by the Respondent's section in
charge of site levelling and infra works is the one which is
filed and kept by the Respondent. It is this document which
according to the Respondent is the basis for determining the
quantities month wise in all the bills of the Claimant.
However, the Arbitral Tribunal finds contrary to this
admission in the letter dated 15.06.2013 all the
measurements in the RA bills from 1 to 14 in respect of BOQ
Item-1 are based on layers for each block and not on initial
levels / OGL. Hence, based on the RA-Bills 1 to 14 what is
recorded in the measurement is the number of layers, the
length, the width and depth of meters in cutting. It is
conspicuously seen that in all these measurements, the
thickness· of each layer is 0.6m right from the beginning
irrespective of any variation in the ground levels
intrinsically recorded in the spot levels. Thus, these
quantities determined are only based on 0.6 m depth of the
excavation for the respective length and width of the blocks
considered as such these quantities are not based on the
jointly taken levels. Hence, the statement of the respondent
in its letter dated 15.06.2013 that "These level records are
being maintained by NTPC. In each R/A bill, after receipt of
your bill, quantities of earthwork done by SACIL monthly
have been assessed and paid by us, based on the aforesaid
level documents" is apparently contradictory to the factual
situation in the RA bills and hence not sustainable.
224. Further, as per the Respondent's letter dated
15.06.2013, the Respondent has stated that the levels
observed through TSM are immediately stored in system as a
soft copy in the presence of Claimant's Engineer and NTPC
Engineer. Further, the Respondent also stated that after
downloading this stored levels readings, the levels are
printed by the Respondent which is duly signed by the site
Engineer of the Respondent and countersigned only by the
Respondent's section in charge. The Arbitral Tribunal finds
that as per Clause-2.9.0 the initial levels to be taken are to
be signed by both the parties. Hence, the soft copy which
was printed is admittedly not signed by the Claimant's
Engineer although the TSM data is said to have been stored
in the system of the Respondent in the presence of Claimant's
Engineer. Storing the soft copy of data in the presence of
Claimant's Engineer is one thing but signing the data printed
from the soft copy by both parties is another thing. In this
case the printed copy is admittedly signed by only the
Respondent's Engineer. Hence, the Arbitral Tribunal finds
that the contentions of the Respondent are not sustainable in
this regard.
225. As regards the downloaded data which have been
produced by the Respondent in Book-12 to Book-16, the
dates on which these data have been downloaded, as already
observed by the Arbitral Tribunal, is from various dates
from June-2012 to Jan-2013. It is pertinent to find that
majority of these 600Pgs are signed with date by Mr.
Praveen on behalf of the Respondent and for dates between
Jun-2012 to Jan-2013 and some are signed by other person
on behalf of Respondent. However, the other signatory to
these documents is one Mr. Augustine who has not put any
date. As per the Respondent's letter dated 15.06.2013 the
printed data of levels are signed by the Respondent's site
Engineer and counter signed by the Respondent's section in-
charge of site levelling and infra works. However, in Book-
12 to Book-16 the contention of the Respondent is that these
are the joint levels of the Claimant and the Respondent. This
contention deserves to be held as not sustainable for the
reason that if this data was available on 15.06.2013, in all
fairness to the contentions made in Para-2 of the letter dated
15.06.2013, it was the responsibility of the Respondent to put
forth these data to the Claimant to demonstrate its
contention that the levels in Book-12 to Book-16 were the
correct and not the levels produced by the Claimant in Feb-
2013.
226. Further, the Arbitral Tribunal, finds from the
Claimant's letter dated 21.06.2013, in reply to the
Respondent's letter dated 15.06.2013, it has denied various
contentions of the Respondent and has reiterated the need
for taking the pre-levels documents to be signed jointly by
the Respondent and the Claimant as per the Contract and
further contended that the Respondent's letter dated
15.06.2013 - confirms that the Respondent is maintaining all
the relevant records with self certification of its officials
without obtaining the signature of the representative of the
Claimant. The Arbitral Tribunal finds that the Respondent
did not find it necessary to produce these documents in
Book-12 to Book-16, if it was available with it by Jan-2013,
even after Claimant submitted RA Bill-15 or the 16 & Final
Bill but has held these documents for reasons best known to
the Respondent. Be it as it may, the requirement of
authorized signatures of both Claimant and the Respondent
should be an undisputed fact as both of them should know
where they are standing with respect to the initial levels so
that the final quantities can be undisputedly determined. But
in this case the Arbitral Tribunal finds that the Claimant has
given all the documents in Vo1.3/1 to 3/10 to the Respondent
much prior to the final bill but the Respondent has held back
his documents in Book-12 to Book-16 until the matter
reached dispute resolution mechanism.
227. Based on the various observations and findings of the
Arbitral Tribunal in this regard, the logical conclusion to
which the Arbitral Tribunal is driven is that the documents
Book-12 to Book-16 signed by Mr. Praveen and Mr.
Augustine cannot be construed as a proper document for the
reasons recorded earlier. Various other contentions of the
parties are not relevant and material for deciding this aspect
and as such they stand rejected."
(i) In the opinion of the Tribunal, in case the initial levels relied by the
Petitioner were available on 15.06.2013, the same could have been
produced and shown to the Respondent to support the authenticity of
Book 12 to Book 16 as showing the correct levels. However, Petitioner
did not even produce these records even after the submission of 15 th &
16th RA Bills. Having rendered these findings, the Tribunal quantified the
amount under Claim No. 6 as under:-
"231. With regard to the quantification of the claim, the
Arbitral Tribunal finds that the Claimant has claimed in
respect of Items 1 & 3 i.e., the quantity paid and the details
of quantity claimed in RA Bill-14, RA Bill-15 and 16th &
Final Bill as under:
BOQ Items RA Bill-14 RA Bill-15 16th &
Final Pg.
Pg. 128 Pg. 575 SOC 624 SOC
Book-17 Vol.4 Vol.4
1. Earth 46,85,050 55,02,293 59,66,702
Work in Soil Cum Cum Cum
not requiring
blasting
3. 4,36,443 Cum 25,22,462 25,22,426
RRB Cum Cum
Total= 51,21,493 80,24,755 84,89,128
Cum Cum Cum
232. The total quantity of Items I & 3 is 51,21,493 Cum paid
in RA Bill- 14. While the Claimant has made a claim in RA
Bill-I5 for a total quantity of 80,24,755 Cum. Further, this
quantity is changed in 16th & Final Bill to 84,89,128 Cum.
The Claimant contends that the quantities in RA Bill-15 and
16th & Final Bill are based on the initial levels as per
Rejoinder Vo1.3/ 1 to 3/l0 for various blocks and the final
levels to be achieved as per the drawings. The Arbitral
Tribunal finds that there is no dispute with respect to the
final levels achieved in various blocks. The quantities as set
out by the Claimant in respect of these Items 1 & 3 in the
16th & Final bill are in variance from the quantities in the
RA Bill-15.
233. The Arbitral Tribunal finds that as far as the Item-I is
concerned, the Initial levels are to be considered as per
Rejoinder Vo1.3/1 to 3/10 for the reasons already recorded
by the Arbitral Tribunal and further finds that the total
volume of excavation from the initial level to the final level
includes both Items 1 & 3 of BOQ. It is specifically
observed by the Arbitral Tribunal that in so far as the item-1
is concerned the initial levels are not considered for
measurements. But they are in 0.6m layers where Length,
Breadth is recorded in all the 14 bills from RA Bill-1 to RA
Bill-14. The provision under the Contract is that the
quantities should be measured based on the initial levels and
the final levels reached. Hence for purpose of determination
of initial levels to arrive at the quantity, what should be the
initial level has been dealt with in detail in the earlier paras
and the Arbitral Tribunal has held that the initial levels are
as per documents in Rejoinder Vo.3/1 to 3/10 as appropriate
levels that are to be considered. Also the Arbitral Tribunal
finds that the quantities as claimed by the Claimant in RA
Bill-15 and 16th & Final Bill, in respect of Items 1 & 3 is
considering that the final levels are reached, while actually
the final levels were not achieved on the date of termination.
234. The Claimant produced its witness Mr. G.
Paramasivam, CW-1 for examination. The affidavit of CW-1
was sub mitted and the examination in Chief and Cross
examination were conducted. In this regard the Arbitral
Tribunal finds that, based on the initial levels in Rejoinder
Vol 3/1 to 3/10, the CW-l has determined the total volume of
excavation. The total volume of excavation is computed in
Annexure-2 of the affidavit by two different methods viz.,
auto-plotter software with cross sections and application of
Simpson's rule. The total quantity as per Auto Plotter
Software method is 73,62,256.141Cum. While the quantity
determined as per Simpson's rule is 72,49,731.121Cum. The
Simpson's rule is a time tested and established method in
vogue for many decades arid still continues to hold the field
of computation of quantities. Accordingly the Arbitral
Tribunal finds that the total quantity as determined by
Simpson's rule deserves to be considered which is
72,49,731.121Cum. Hence, the total excavation volume is
72,49,73 l.121Cum which includes the entire volume of
excavation from the original ground level up to the finished
final levels in blocks 1, 2, 3, 4A, 5, 6, 7, 8, 9 & 13. The CW-l
in Annexure-3 to the Affidavit, based on the actual levels that
have been achieved in the Blocks 1, 3, 4A, 6, 7, 8 & 9,
determined the balance quantity of excavation required to be
done in these blocks to reach the final level as per the
Contract. Based on this, the Blocks 4A, 6 & 8 are the three
blocks where the respective final levels are not achieved and
corresponding to these, the total quantity not achieved is
5,74,831.982Cum. The quantity not achieved in each of the
blocks 4A, 6 & 8 are respectively 1,37,841.481Cum,
3,30,777.183 Cum and 1,06,213.318 Cum. This quantity
5,74,831.982 Cum is the quantity which is not executed as on
the date of termination and as such this is to be deducted
from the total quantity of 72,49,731.121 Cum which is the
quantity determined based on Simpson 's rule for excavation
up to the final level. Hence, the actual quantity executed to
be considered is 66,74,899.139Cum (72,49,731.121Cum
minus 5,74,831.982Cum) which includes the total quantity of
both Items 1 & 3. Hence the Arbitral Tribunal holds that the
total excavation made from the initial levels as per Rejoinder
Vo1.3/1 to 3/10 and the actual levels of excavation as
achieved before termination is 66,74,899.139Cum.
235. It is seen from the RA Bill-14, the total quantity of
excavation of Items 1 & 3 is 51,21 ,493Cum which includes
excavation under Item-3 RRB for a quantity of 4,36,443Cum.
In so far as the quantity of RRB excavation under Item-3 is
concerned, the Arbitral Tribunal finds from the RA Bills 4 to
8 wherever the quantity of Item-3 RRB is determined, the
quantity is determined based on the levels of the rock which
are clearly marked. In view of this, the quantity of Item-
3RRB cannot be considered on the same footing of Item-l
where the initial levels have not been considered as per
documents in Rejoinder Vol. 3/ 1 to 3/ 10. Hence, the
Arbitral Tribunal finds that it is just and appropriate to hold
that the total quantity under Item-3 Viz., RRB shall be
4,36,443Cum only and not the quantity of 25,22,462 Cum as
claimed by the Claimant. This is in view of the fact that the
CW-l in its examination;' in answer to Question-33, has
clearly stated that his quantity determination is limited to the
quantity of cutting & filling and classification was not in his
scope. And further in Question-34 it was asked "Is it correct
-"that quantification carried out by you does not account for
the two separate items of earthwork in excavation". In reply
to this Question-34, the CW-l has stated "It is a consolidated
volume of both two separate items". Further answers to
Questions 35, 36 & 37 makes it clear that the volume
computation as given in Annexures 2 & 3 of the Affidavit of
CW-1 is for the total volume given in Annexures 2 & 3 of his
affidavit and that the calculations made by him are as per
Engineering Practice. In view of this the total quantity of
66,74,899.139 Cum comprising the entire volume of
excavation from the ground level up to the excavated levels,
it is just and ,appropriate to deduct the volume of RRB
quantity of 4,36,443Cum, which is measured and paid based
on the levels. Accordingly the balance quantity of 62,38,456.
139Cum (66,74,899.139Cum minus 4,36,443Cum) deserves
to be considered only under Item-I.
236. The Arbitral Tribunal finds that .the quantity paid
under Item-I up to RA Bille14 is 46,85,050Cum. Hence the
unpaid balance quantity is 15,53,406.139Cum
(62,38,456.139Curn minus 46,85,050Cum).
237. In the light of the above findings and observations, the
Arbitral Tribunal finds that it is just and appropriate to
award the balance unpaid quantity of 15,53,406.139 Cum at
the BOQ rate of Rs.87/- per Cum for Item-1 which amounts
to Rs.13,51,46,334/- and after effecting the discount of 2.5%,
as in BOQ, the amount wo5rks out to Rs.13,17,67,675/-.
238. In respect of total amount payable under the Contract is
concerned, the Arbitral Tribunal finds that there is no
dispute regarding the amount up to RA Bill-14 i.e.,
Rs.55,18,25,188/-. The main dispute arose in the RA B ill-15
when the quantities for the actual executed work based on
levels in respect of Items I & 3 were made. No payment was
made by the Respondent for this and the Contract was
terminated. Post termination of the Contract the Claimant
has made 16th and Final bill including the disputed
quantities in Item 1 & 3 for a total amount of
Rs.112,19,26,386/-. The Claim-6 is for an amount of
Rs.57,01,01,198/- in respect of the difference amount
between the amount paid in RA Bill-14 and unpaid amount
in 16th & Final Bill. The Arbitral Tribunal after examining
the rival contentions of the parties in respect of the disputes
in Items 1 & 3 has held that the Claimant is entitled for an
amount of Rs.13,17,67,675/- only in respect of items 1 & 3
and accordingly the Arbitral Tribunal awards the same.
239. The Arbitral Tribunal finds that the quantities of Items I
& 3 claimed in the 16th & Final Bill are quite exorbitant
when compared to the quantities agreed .in. the RA Bill-14
as stated in the above table. The issue relating to Items 1 &
3 has been adjudicated and the Arbitral Tribunal has come
to a finding in the earlier paras. In view of this and as
regards various other items & quantities under 16th & Final
Bill it was neither pleaded nor argued by the parties. Thus,
all other items under 16th & Final Bill stand rejected.
240. The Arbitral Tribunal finds that the total amount under
the Contract is the sum of RA Bill-14 which is already paid
and the amount of Rs.13,17,67,675/- as awarded which
works out Rs.68,35,92,863/ (Rs.55,18,25,188 plus
Rs.13,17,67,675).
241. Based on the above facts, circumstances and findings of
the Arbitral Tribunal, the Arbitral Tribunal awards an
amount of Rs.13,17,67,675/- towards this Claim-6."
(j) Tribunal observed that in the RA Bills 15 & 16, Respondent had
quantified the volume of earth work considering the final levels achieved
and considered the calculation of total volume of excavation filed by
CW-1. Calculation was done on the basis of time-tested Simpson‟s
Formula. Volume of RRB was deducted from the volume of excavation
so calculated. The amount which had been paid to the Respondent against
RA Bills 1 to 14 was also deducted and then the final Award was made.
No infirmity can be found with this part of the Award. Manner and
methodology of calculation, application of formulas and interpretation of
contractual clauses is purely the domain of the Tribunal and must pass
muster. There is no scope of interference by the Court with respect to
this claim.
Escalation on the amounts under claim no. 6:
21. (a) As per the Petitioner the Escalation bills upto RA Bill-14 were
paid as per the Petitioner, including arrears, arising out of revision of L2
schedule. This was accepted by the Respondent before the Tribunal.
Regarding award of Claim 8-Escalation in respect of RA Bill-15 by the
Tribunal, the two contentions of the Petitioner are that:
1). Pages 671 & 672 were in contravention of Clauses 25.6, 25.7, GCC
2). The amount payable as escalation should be adjustable against risk
and cost, based on the premise that the Termination was legal.
(b) Clauses 25.6, 25.7, GCC, were interpreted by the Tribunal and it
was of the view that Clause 25.7 shall not apply as it was in respect of
Price Adjustment for the period beyond the schedule date of execution of
work, if there is a delay on the part of the Respondent. Having already
held the delay attributable to the Petitioner, the Tribunal gave this
finding. It further held that since the Contract was terminated on
24.03.2014, prior to the end of original Contract period, Clause 25.7 will
not apply. Petitioner contended before the Tribunal that Clause-25.6
provides that the Contractor would be eligible for payment / recovery of
price adjustment or shall be liable for refund on the quantum of work
scheduled or the actual quantum of work done, provided that the quantum
of work done is more than or equal to the scheduled quantum. Relevant
portion of the Clause reads as under:
"Provided further that the Contract or would be eligible for
such claims or shall be liable for refund on the quantum of
Work scheduled or the actual quantum of Work done
provided always that the quantum of work done is more than
or equal to the scheduled quantum of work as per the agreed
Work Schedule."
(c) It is argued that the Tribunal in its Award has failed to deal with
this express provision of the contract and solely in light of its findings
under Claim 6, Tribunal directed the parties to calculate the amount due.
In my view, this was solely the domain of the Tribunal and a finding of
fact. It is useful to refer to the judgment in Food Corporation of India v.
A.M. Ahmed & Co., (2006) 13 SCC 779 at page 794, relevant para of
which reads as under:-
"32. Escalation, in our view, is normal and routine incident
arising out of gap of time in this inflationary age in
performing any contract of any type. In this case, the
arbitrator has found that there was escalation by way of
statutory wage revision and, therefore, he came to the
conclusion that it was reasonable to allow escalation under
the claim. Once it was found that the arbitrator had
jurisdiction to find that there was delay in execution of the
contract due to the conduct of FCI, the Corporation was
liable for the consequences of the delay, namely, increase in
statutory wages. Therefore, the arbitrator, in our opinion,
had jurisdiction to go into this question. He has gone into
that question and has awarded as he did. The arbitrator by
awarding wage revision has not misconducted himself. The
award was, therefore, made rule of the High Court, rightly
so in our opinion."
Under Claim No. 1, Tribunal has given detailed reasons for holding
that the Termination was unlawful. Claim Nos. 2, 4 and 5 are
consequential to the determination of the legality of the Termination
Order and cannot be interfered with.
22. (a) There were two sub-claims under Claim No. 24. One related to
claim for Overheads and other to Loss of Profit. The contention of the
Respondent for claiming Overheads was that 10% of the total cost is
normally provided towards overhead charges to cover up various costs
such as office expenses, legal charges, general establishment, watch and
ward, travelling expenses, salaries of staff, etc. The overhead cost is the
time related cost, which is incurred independent of the progress achieved
and is to be realized from the rates in the BOQ for the works executed
under the Contract. Due to the delays not attributable to the Respondent,
the work was delayed and therefore, Respondent sustained huge overhead
expenses. Petitioner disputed the claim and contended that Respondent
must first establish that the delay was on account of the Petitioner before
any such claim is made and also argued that there was no contractual
provision entitling the Respondent to overheads. Tribunal allowed the
claim as under :-
"292. The Arbitral Tribunal after hearing to the rival
contentions of the parties and perused the documents. This
claim is consequential to the determination of the legality or
otherwise of the termination of the Contract by the
Respondent at risk and cost of the Claimant. Under Issue-3
and Claim-1 the Arbitral Tribunal has held that the
termination of the Contract by the Respondent at the risk
and cost of the Claimant is unlawful, wrongful and not
sustainable. When once the termination made by the
Respondent is unlawful, wrongful and not sustainable, the
consequential effect is that the question of risk and cost to be
imposed on the Claimant does not arise and various
contentions of the Respondent raised regarding the
termination are not sustainable. Therefore, this Claim-24 is
an entitlement to the Claimant.
293. The Respondent relied on Clause 29.7 of the Contract,
this Clause has been dealt in detail while answering Issues 1
& 2 and therefore, the Arbitral Tribunal finds that in the
instant case based on the observations and finding of the
Arbitral Tribunal regarding Issues 1, 2 & 3, the reliance on
Clause 29.7 will not be of any assistance to the Respondent.
294. In the case of 2006 (6) SCALE 220 between
McDermott International Inc. and Burns Standards Co. Ltd.
and Others, the Apex Court held in para 116 regarding the
determination of compensation for loss of overheads after
dealing with formula adopted viz., Hudson‟s Formula,
Emden Formula and Eichley Formula and held as follows :
"116. We do not intend to delve deep into the matter
as it is an accepted position that different formulas
can be applied in different circumstances and the
question as to whether damages should be computed
by taking recourse to one or the other formula, having
regard to the facts and circumstances of a particular
case, would eminently fall within the domain of the
Arbitrator."
295. Further the Apex Court, in the above case, has held in
paras 119 & 120 regarding the methodology of
determination of compensation as follows :
"119. Sections 55 and 73 of the Indian Contract Act
do not lay down the mode and manner as to how and
in what manner the computation of damages or
compensation has to be made. There is nothing in
Indian law to show that any of the formulae adopted
in other countries is prohibited in law or the same
would be inconsistent with the law prevailing in India.
120. As computation depends on circumstances and
methods to compute damage, how the quantum
thereof should be determined is a matter which would
fall for the decision of the Arbitrator. We, however,
see no reason to interfere with that part of the award
in view of the fact that the aforementioned formula
evolved over the years, is accepted internationally
and, therefore, cannot be said to be wholly contrary
to the provisions of the Indian Law".
296. In view of the above, the compensation towards loss of
overheads is an entitlement to the Claimant. As regards the
quantification is concerned the Contract amount was
Rs.154,34,54,426/- . The final value of the work including
the RA Bill 14 and the amount awarded under Claim-6 for
the reasons stated therein is Rs.68,35,92, 863/- and not
Rs.112,19,26,386/- as claimed by the Claimant. The
overheads at 10% of the rates built in to the Contract is an
accepted standard trade practice in Engineering contracts
which is to be recovered from the value of the work
executed. However, the Arbitral Tribunal finds that it is
reasonable to consider 6% overheads in the nature of work
under this Contract. In view of this, considering 6% of the
contract amount of Rs.154.34 Cr. Works out to
Rs.9,26,07,265/- . This amount is time dependent cost
spread over the Contract period of 30 months. The average
monthly overhead costs over the period of 30 months of the
Contract is Rs.30,86,908/-. In the facts and circumstances
of this case the termination was made on 24.03.2014 while
the end of the original Contract period was 26.08.2014.
Thus during the 5 months of the original Contract period
from the date of termination till the end of original Contract,
the question of incurring any overheads or compensating for
such overheads during this post termination period is wrong.
Therefore, the overheads towards this period after
termination cannot be considered. Accordingly, the
overheads that can be reasonably considered is only up to
24.03.2014. Hence, based on the average monthly
overheads the total overheads for this period before
termination is Rs.7,71,72,721/-. Further the overheads
recovered at 6% is Rs.4,10,15,572/-. In the final value of
work done of Rs.68,35,92,863/- till termination including
the work done in the RA bill-14 and the amount awarded
under Claim-6. The unrecovered overheads is
Rs.3,61,57,149/-.
297. In the light of the above facts and circumstances and
findings of the Arbitral Tribunal, the Arbitral Tribunal
awards an amount of Rs.3,61,57,149/- towards loss of
overheads."
(b) Tribunal has made a detailed consideration of the Overheads
incurred by the Respondent. It has denied the Overheads during the five
months of the original Contract period from the date of termination till
the end of original Contract, but found the Respondent entitled for the
period upto 24.03.2014. Tribunal further relied on the judgment of the
Supreme Court in McDermott (supra) wherein the Supreme Court has
held that determination of compensation for loss of Overheads based on
different formulas and in the facts and circumstances of the case, would
be in the domain of the Arbitrator. Accordingly, the Tribunal worked out
the Overheads at 6% of the Contract amount relying on its findings under
Issue Nos. 1 and 2. There is no infirmity, in my view, in this part of the
Award.
23. (a) In so far as loss of profit is concerned, the Claim was allowed
as under:-
"302. In the light of the above it is settled law that when a
termination is held wrongful, awarding damages /
compensation for loss of profit of the unexecuted value of the
work is just and reasonable. Therefore, the Arbitral
Tribunal finds that the Claimant is entitled for this claim in
view of the fact that the Arbitral Tribunal has held under
Issue 3 and Claim 1 that the termination by the Respondent
at the risk and cost of the Claimant is unlawful, wrongful
and not sustainable. The Arbitral Tribunal finds that
awarding 10% profit is just, reasonable and appropriate in
the facts and circumstances.
303. As regards the quantification is concerned it is
undisputed that the Contract as entered into between the
parties is for an amount of Rs.154,34,54,426/-. The
termination made on 24.03.2014 is held to be unlawful,
wrongful and not sustainable under Issue-3. The Claim
made by the Claimant towards loss of profit is for an amount
of Rs.7,68,00,000/- at 10% of the balance unexecuted
amount which was considered by the Claimant on the
premise that the work completed was Rs.112..19 Cr by
considering the Contract value inclusive two amendments
which amounts to Rs.189.03Cr. The Arbitral Tribunal finds
that considering the amended value of the Contract is not
correct and only the Contract value as executed should be
the basis for determining the damages under this claim.
304. Further as the work completed as considered by the
Claimant is not just and appropriate, as held by the Arbitral
Tribunal, while dealing with Claim-6 and the value of the
work to be considered is only Rs 68,35,92,863 / -. The
balance unexecuted value of the work as per the Contract is
Rs.85,98,61,563/- (Rs.154,34,54,426 minus
Rs.68,35,92,863). 10% of the balance unexecuted value of
the Contract works out to Rs.8,59,86,156/-.
305. In the light of the above facts and circumstances the
Arbitral Tribunal finds it just and appropriate to limit this
amount under this head of the claim Rs.7,68,00,000/- as
claimed by the Claimant.
306. In view of the above facts, circumstances and findings
of the Arbitral Tribunal, the Arbitral Tribunal awards an
amount of Rs.7,68,OO,OOO/- towards loss of profit."
307. In the light of the above findings and observations of
the Arbitral Tribunal, the Arbitral Tribunal awards an
amount of Rs.11,29,57,149/- (Rs.3,61,57,149 plus
Rs.7,68,00,000/-) towards this Claim-24."
(b) Law, with regard to claiming loss of profit is no longer res integra.
Loss allegedly suffered has to be pleaded and proved through documents
and evidence. In NHAI vs. HCC, 2016 SCC OnLine Delhi 6112, this
Court has held that a person claiming loss of profit must establish that he
had the opportunity to deploy his resources in other ventures and those
ventures would have yielded profit. In the case of DDA vs. PC Sharma,
FAO(OS) 143/2006, decided on 02.02.2009, a Division Bench of this
Court held that in order to be entitled to loss of profits, a contractor will
be required to establish the loss. Loss of profits is a Claim in the form of
damages under Section 73 of the Indian Contract Act and therefore, must
be proved through evidence. In Kailash Nath Associates vs. DDA and
Anr., (2015) 4 SCC 136, Supreme Court held as under:-
"43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can
be stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated
amount payable by way of damages, the party complaining
of a breach can receive as reasonable compensation such
liquidated amount only if it is a genuine pre-estimate of
damages fixed by both parties and found to be such by the
court. In other cases, where a sum is named in a contract
as a liquidated amount payable by way of damages, only
reasonable compensation can be awarded not exceeding
the amount so stated. Similarly, in cases where the amount
fixed is in the nature of penalty, only reasonable
compensation can be awarded not exceeding the penalty so
stated. In both cases, the liquidated amount or penalty is
the upper limit beyond which the court cannot grant
reasonable compensation.
43.2. Reasonable compensation will be fixed on well-
known principles that are applicable to the law of contract,
which are to be found inter alia in Section 73 of the
Contract Act.
43.3. Since Section 74 awards reasonable compensation
for damage or loss caused by a breach of contract,
damage or loss caused is a sine qua non for the
applicability of the section.
43.4. The section applies whether a person is a plaintiff or
a defendant in a suit.
43.5. The sum spoken of may already be paid or be
payable in future.
43.6. The expression "whether or not actual damage or
loss is proved to have been caused thereby" means that
where it is possible to prove actual damage or loss, such
proof is not dispensed with. It is only in cases where
damage or loss is difficult or impossible to prove that the
liquidated amount named in the contract, if a genuine pre-
estimate of damage or loss, can be awarded.
43.7. Section 74 will apply to cases of forfeiture of earnest
money under a contract. Where, however, forfeiture takes
place under the terms and conditions of a public
auction before agreement is reached, Section 74 would
have no application."
(c) Bombay High Court in Essar Procurement Service Ltd. v.
Paramount Constructions, 2016 SCC Online Bom 9697 held that
Sections 73 & 74 of Contract Act require actual damage or loss and proof
cannot be dispensed with. In Ajay Singh v. Suneel Darshan, 2015 SCC
Online Bom 1412, a Division Bench of the Bombay High Court relying
on Maharashtra State Electricity Board v. Sterlite Industries (India)
Ltd., 2000 SCC Online Bom 89, held that if a party has not suffered any
loss, even if the defaulting party commits a breach, in the absence of
proof of loss, the opposite party cannot be awarded the claim of loss of
profit.
(d) Perusal of the Award shows that the Tribunal allowed the Claim by
taking profit as 10% of the value of the balance work as a norm. In my
opinion, this part of the Award is clearly against the settled law. In
Murlidhar Chiranjilal v. Harishchandra Dwarkadas & Anr., AIR 1962
SC 366, the Supreme Court clearly held as under:-
"9. The two principles on which damages in such cases
are calculated are well settled. The first is that, as far as
possible, he who has proved a breach of a bargain is to
supply what he contracted to get is to be placed, as far as
money can do it, in as good a situation as if the Contract
had been performed; but this principles is qualified by a
second, which imposes on a plaintiff the duty of taking all
reasonable steps to mitigate the loss consequent on the
breach, and debars him from claiming any part of the
damage which is due to his neglect to take such steps:
British Westinghouse Electric and Manufacturing Company
Limited v. Underground Electric Ry.Co. of London [(1912)
AC 673. at P.689]). These two principles also follow from
the law as laid down in Section 73 read with the Explanation
thereof. If therefore the contract was to be performed at
Kanpur it was the Respondent‟s duty to buy the goods in
Kanpur and rail them to Calcutta on the date of the breach
and if it suffered any damage thereby because of the rise in
price on the date of the breach as compared to the contract
price, it would be entitled to be reimbursed for the loss.
Even if the Respondent did not actually buy them in the
market at Kanpur on the date of breach it would be entitled
to damages on proof of the rate for similar canvas prevalent
in Kanpur on the date of breach, if that rate was above the
contracted rate resulting in loss to it. But the respondent did
not make any attempt to prove the rate for similar canvas
prevalent in Kanpur on the date of breach. Therefore it
would obviously be not entitled to any damages at all, for on
this state of the evidence it could not be said that any
damage naturally arose in the usual course of things."
24. This part of the Award deserves to be set aside being against the
settled law with respect to a claim for loss of profit.
25. Petition is partly allowed, upholding the Claims awarded in favour
of the Respondent under Claim Nos. 2, 4, 5 and 6 and partially under
Claim No. 24, but setting aside the Award to the extent the Tribunal has
allowed the Claim of Loss of Profit. Pending applications are also
disposed of.
JYOTI SINGH, J.
JUNE 8th, 2020
yo
