Delhi High Court
Dhoot Developers Pvt. Ltd. (Jv) ... vs Totem Infrastructure Ltd on 17 November, 2020
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 20.08.2020
Pronounced on: 17.11.2020
+ O.M.P. (COMM) 256/2017 & IA 3532/2019
M/S DHOOT DEVELOPERS PVT. LTD. (JV)
M/S. BENGAL SILVER SPRING PROJECT
LTD. ...PETITIONER
Through Mr. Sandeep Sethi, Sr. Advocate
with Mr. S.K. Maniktala, Mr.
Vinod Kumar, Mr. Udit Maniktala
and Mr. Sheetij Chhillar,
Advocates
versus
TOTEM INFRASTRUCTURE LTD. .....RESPONDENT
Through Mr. A.K. Thakur, Mr. R.K.
Mishra, Mr. Rishi Raj and Ms.
Kavita Singh, Advocates
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGEMENT
1. Present Petition has been filed under Section 34 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the 'Act') for
setting aside the impugned Award dated 04.03.2017 passed by the
Arbitral Tribunal comprising of a Sole Arbitrator whereby the Tribunal
allowed some claims of the Respondent herein and rejected all the
counter claims of the Petitioner herein. The Petitioner herein was the
Respondent before the Tribunal and is being referred to as the Petitioner
while the Respondent who was the claimant is being referred to as
Respondent for the sake of convenience.
2. Before adverting to the contentions of the parties, it is necessary to
give a brief narrative of the facts. Petitioner is a Joint Venture of Dhoot
Developers Private Limited and Bengal Silver Spring Project Limited and
both are Companies incorporated under the Companies Act, 1956 and
engaged in the business of executing Civil Construction Contracts.
3. Petitioner - JV was awarded a contract by the DG-MAP (Ministry
of Defence) for the work of "Construction of Dwelling Units including
Allied services for Officers, JCOs /ORs at Gandhi Nagar, Chiloda and
Ahmedabad on 11.11.2010 with completion period being 25 months,
commencing on 11.11.2010 and ending on 10.12.2012 (hereinafter
referred to as 'Master Contract').
4. As per the case set out in the petition, Petitioner started the work
immediately on award of the contract despite some hindrances
encountered at the sites and executed preliminary mobilization work.
The mobilization period was 60 days under the Master Contract.
Petitioner engaged the Respondent as sub-contractor to execute the work
at Chiloda and Gandhi Nagar sites and a Letter of Intent (LOI) dated
21.02.2011 was issued. Value of work was Rs.113,79,35,257.10p.
Petitioner continued working at Ahmedabad site till 18.05.2011 when the
work at the said site was also sub-contracted to the Respondent and
second LOI dated 18.05.2011 was issued amending the first LOI, by
enhancing the scope of work thereunder. The value of enhanced work
was Rs.87,65,58,994.67 p.
5. Work executed by the Petitioner at the sites, before the same were
handed over to the Respondent, was measured and the agreed amount was
Rs.68 Lakhs. Agreement dated 25.05.2011 was executed and signed
between the parties regarding both the LOIs and is being referred to
hereinafter as 'Agreement'. The total value of the Agreement under both
LOIs was thus Rs.205,04,89,860.66p (Gross value including Cess and
WCT). Respondent furnished the following Bank Guarantees (hereinafter
referred to as 'PBGs') towards performance of its obligations under the
Agreement:
S.No. BG No. Date Amount (Rs.)
1. 2521FGPER004011 01.03.2011 5,68,96,763/-
2. 25211GPER013511 02.07.2011 5,55,89,513/-
Total 11,24,86,276/-
6. Respondent was entitled to interest bearing mobilization advance
against Bank Guarantee equivalent to 10% of the Agreement value and
was given the said amount. However, Respondent furnished BGs only for
Rs.18,52,98,466/- as follows :-
S.No. BG No. Date Amount (Rs.)
1. 2521GPER004111 01.03.2011 11,37,93,526/-
2. 2521GPER013111 02.07.2011 2,00,00,000/-
3. 2521GPER013211 02.07.2011 2,00,00,000/-
4. 2521GPER013311 02.07.2011 2,00,00,000/-
5. 2521GPER013411 02.07.2011 1,15,04,940/-
Total 18,52,98,466/-
7. On the request of the Respondent, Petitioner gave additional
advance to the tune of Rs.1.50 Crore in December 2011 / January 2012
and the Respondent furnished the following BGs for total value of Rs.3
Crores, towards additional advance.
S.No. BG No. Date Amount (Rs.)
1. 52640001911 22.12.2011 1,00,00,000/-
2. 52640002011 28.12.2011 1,00,00,000/-
3. 52640002111 31.12.2011 1,00,00,000/-
Total 3,00,00,000/-
8. The Respondent being conscious of the time lines as per the Master
Contract as also the time that had already lapsed, agreed to complete the
entire work under the Agreement, within the time frame originally
stipulated i.e upto 10.12.2012. The Master Contract stipulated various
internal Milestones to be achieved by the Respondent and envisaged
penalties for failure to achieve them. The Milestones were as under :-
Phase-I 5 Months (Deadline : 10.04.2011)
Phase-II 8 Months (Deadline : 10.07.2011)
Phase-III 12 Months (Deadline : 10.11.2011)
Phase-IV 18 Months (Deadline : 10.05.2012)
Phase-V 21 Months (Deadline: 10.08.2012)
Phase-VI 25 Months (Deadline : 10.12.2012)
9. Petitioner avers that it had agreed to bear any penalty upto
Milestone-IV that may be levied by the DG-MAP in respect of
'additional work under the second LOI and for the period already lapsed
as on the date of the second LOI i.e. 18.05.2011. Relevant portion of the
said LOI is as under :-
"The petty contractor had carried out work at 18 blocks as
of now and penalty, if any, applied on this additional work
upto milestone IV, shall be borne by us for the period as on
date already lapsed."
10. As per the Petitioner the Respondent defaulted in completing the
works under the Agreement in as much as the deployment of labour,
material, machinery and utilization of financial resources was most
inadequate resulting in inordinate delays. Respondent also diverted funds
from the Project as is evident from the fact that against the total
mobilization advance and the additional advance the total value of work
executed was much less and this is substantiated from the 5th/Final RA
Bill dated 31.01.2012 submitted by the Respondent and the evidence of
the Respondent's witness CW-1, in cross-examination.
11. As a result of the defaults, lapses and breaches by the Respondent,
project suffered huge delays and the milestones were not achieved. The
bills for September 2011 were in negative and the Respondent stopped
the work from September 2011 and abandoned the site amounting to
repudiation of the Agreement. Despite notices, warnings and joint
meetings at the site, Respondent neglected to continue the work and
finally the Petitioner invoked the BGs (Performance/Mobilization
Advance/Additional Advance) on 31.01.2012 for a total value of
Rs.31,77,84,749/- and terminated the Agreement on 06.02.2012.
12. To complete the narration, as per the Petitioner, the Petitioner
thereafter undertook the execution of the work at the sites, but could not
recover the lost ground as a result of which the Master Contract was
terminated by DG-MAP on 29.01.2013 w.e.f. 31.01.2013. Petitioner's
PBG for Rs.11,24,87,000/- was invoked by DG-MAP and the entire
mobilization advance was recovered. The plant and machinery, building
and construction material lying at the site was impounded by DG-MAP
and was subsequently released only after furnishing a BG for the value of
Rs.1,69,19,695/-, thus leaving the Petitioner to incur heavy Bank
Guarantee charges.
13. Respondent thereafter invoked the Arbitration Agreement between
the parties and raised several claims against the Petitioner. Vide order
dated 03.02.2012 passed in Arbitration Petition No.90/2012 filed by the
Respondent, this Court appointed a Sole Arbitrator. Respondent filed its
Statement of Claims and the Petitioner filed the Statement of Defence as
also raised certain counter claims. Evidence was led by both sides and
finally, after hearing arguments the Tribunal pronounced the Award on
04.03.2017. The Tribunal allowed Claims Nos.1 and 2 of the Respondent
and rejected Claim Nos.3, 4, 5 and 6. Against Claim Nos.7 and 8, the
Tribunal awarded interest at the rate of 12% p.a. with effect from
31.12.2011 on the awarded amounts. Counter Claims of the Petitioner
were rejected. The Claims and the Counter Claims raised by the parties
are as under :-
"Claim No.1 - an amount of Rs. 11,24,86,276/-along-with
an interest of 18 % per annum compounded monthly
towards wrongful encashment of the Performance Bank
Guarantees must be paid to the Claimant.
Claim No.2 - an amount of Rs.22,37,93,526/-along with an
interest of 18 % per annum compounded monthly towards
wrongful encashment of the Mobilisation Advance Bank
Guarantees must be paid to the Claimant.
Claim No.3 - an amount of Rs.11,27,88,524/- along with
interest of 18 % per annum compounded monthly towards
the work done as detailed in the Statement of Claim.
Claim No.4 - award of Compensation or Reimbursement
of Cost for the inventory including material like steel,
cement, electrical items, other major materials, wooden
shuttering, Steel shuttering, Plant & Machinery and office
furniture quantified by Claimant letter dated 2nd February,
2012 and submitted for the Respondent- Rs.18,06,66,594/-.
Claim No.5 - an amount as compensation to the tune of Rs.
37,37,67,679 for loss of profit which the Claimant would
have made upon the completion of the work under the said
Contract.
Claim No.6 - an amount as loss of business reputation to
the tune of Rs. 5.0 Crores for loss of opportunity which the
claimant lost by diverting its resources towards the present
contract.
Claim No.7 - that interest at the rate of 18 % per annum
compounded monthly be awarded in favour of the
Claimant and against the Respondent from the date which
has become due and payable , till the date of filing of the
present Statement of Claim in respect to the above claims
from (i) to (vi) herein above.
Claim No.8 - The pendent lite and future interest be
granted in favour of the Claimant and against the
Respondent @ 18% per annum till the date of payment
thereof by the Respondent."
"Counter Claim No.1 - Loss due to extra expenditure
required to be incurred on materials and labour
(escalation) for an amount of Rs.37,72,00,000/-.
Counter Claim No.2 - Outstanding liability of the
claimant on site for an amount of Rs.2,25,84,449/-.
Counter Claim No.3 - Expenditure on overheads for an
amount of Rs.5,06,00,000/-.
Counter Claim No.4 - Provision of new plant and
machinery for an amount of Rs.5,62,00,000/-.
Counter Claim No.5 - Loss of escalation in extended
period of contract for an amount of Rs.5,25,00,000/-.
Counter Claim No.6 - Extra expenditure on Bank
Guarantee / Insurance Cover / other misc. Expenses for an
amount of Rs.1 Crore.
Counter Claim No.7 - Compensation for delay as per
Clause 44 of the General Conditions of Contract for an
amount of Rs.22,50,00,000/-.
Counter Claim No.8 - Loss of Profit for an amount of
Rs.10,12,00,000/-.
Counter Claim No.9 - Cost on account of loss of
opportunity for an amount of Rs.37,50,00,000/-.
Counter Claim No.10 - Loss of reputation for an amount
of Rs.2 Crores.
Counter Claim No.11 - Excessive claims made by M/s.
Totem on account of labour escalation for an amount of
Rs.20,63,931/-.
Counter Claim No.12 - Less recovery of steel consumed
by the claimant from RA bills by the DG MAP for an
amount of Rs.25,20,000/-."
14. The issues framed by the Tribunal are as under :-
"RE: CLAIMS
1. Whether the claimant is entitled to claim from the
respondents an amount of Rs.11,24,86,276/- towards
wrongful encashment of the Performance Bank
Guarantee?
2. Whether the claimant is also entitled to claim an amount
of Rs.22,37,93,526/- from the respondent towards wrongful
encashment of Mobilisation Advance Bank Guarantees?
3. Whether the claimant is also entitled to claim an amount
of Rs.11,27,88,524/- towards the work done by the
claimant as detailed in the Statement of Claim?
4. Whether the claimant is also entitled to receive an
amount of Rs.18,06,66,594/- as compensation or re-
imbursement of cost as per the inventory as submitted to
the respondent vide letter dated 2nd February, 2012 for the
items specifically mentioned therein?
5. Whether the claimant is also entitled to claim an amount
of Rs.37,37,67,679/- as compensation for loss of profit?
6. Whether the claimant is also entitled to receive any
amount as loss of business reputation and if so, to what
amount?
7. If the aforesaid issues are answered in favour of the
claimant, whether the claimant shall also be entitled to
claim interest and if so, to what amount and what rate and
which period?
8. Whether the claimant is also entitled to pendent lite and
future interest. If so, at what rate?
RE: COUNTER CLAIMS:
1. Whether the respondent is entitled to claim from the
claimant an amount of Rs.37,72,00,000/- as extra
expenditure towards escalation?
2. Whether the respondent is entitled to claim from the
claimant an amount of Rs.2,25,84,449/- towards
expenditure allegedly incurred by the respondent being for
the discharge of the liability of the claimant at site?
3. Whether the respondent is also entitled to claim an
amount of Rs.5,06,00,000/- as compensation for the
expenses incurred by the respondent towards the over-
head at the time when no activity was actually carried out
by the claimant at site?
4. Whether the respondent is entitled to an amount of
Rs.5,62,00,000/- being depreciation, repair, running and
maintenance of plant and machinery which is 5% of
Rs.1,12,50,00,000/-?
5. Whether the respondent is entitled to claim an amount
of Rs.5,25,00,000/- for alleged loss due to escalation for
the extended period of the contract?
6. Whether the respondent would have to incur an expense
of Rs.1,00,00,000/- towards extra expenditure on bank
guarantee, insurance cover and other expenses and if so,
whether the respondent can recover the same from the
claimant?
7. Whether the respondent is entitled to claim any
compensation for delay as per clause 44 of the General
Conditions of Contract and if so, to what amount?
8. Whether the respondent is also entitled to be
compensated by the claimant for the loss of profit of Rs.
10,12,00,000/-?
9. Whether the respondent is also entitled to claim any
cost on account of loss of opportunity and if so, to what
amount?
10. Whether the respondent is also entitled to claim any
amount for the loss of reputation and if so to what
amount?
11. Whether the respondent is entitled to recover an
amount of Rs20,63,931/- which is allegedly excessive
claim made by the claimant and paid to them?
12. Whether the respondent is entitled to any amount
towards recovery of steel consumed by the claimant from
RA bills and if so, to what amount?
13. Whether the respondent is also entitled to claim a sum
of Rs.50,00,000/- for alleged rectification of the structural
work to be done at the site?"
15. It is this Award, which is assailed by the Petitioner, in the present
petition while there is no challenge to the Award by the Respondent.
16. Mr. Sandeep Sethi Learned Senior Counsel for the Petitioner raised
various contentions and the same, as captured claim-wise are as follows :-
A. Claim No.1
17. The claim related to an amount of Rs.11,24,86,276/- towards
wrongful encashment of the PBG. The contention is that the Tribunal has
held that the PBG to be conditional, which is contrary to the terms of the
PBG and the settled position of law. Perusal of the PBG itself shows that
the same was payable merely on demand. Interpreting the identical terms
of a BG, the Supreme Court in the case of Mahatma Gandhi Sahakra
Sakkara Karkhane v. National Heavy Engg. Coop. Ltd. & Anr. (2007) 6
SCC 470 and Gujarat Maritime Board v. Larsen & Toubro
Infrastructure Development Projects Ltd. (2016) 10 SCC 46 has held
that such BGs are unconditional BGs. In the alternative, it is contended
that even assuming that the BG was conditional, the conditions
mentioned therein being non-performance of the Respondent and loss or
damage suffered or caused or to be suffered/caused, were fulfilled
resulting in invocation by the Petitioner. Non-performance was clear from
the documents on record. Termination by the Petitioner of the Agreement
was for abandonment of work for more than three months which was not
denied or disputed by the Respondent in its Reply dated 07.02.2012 to the
Termination Letter. Abandonment of work for more than three months
clearly constituted non-performance and this fact was completely ignored
by the Tribunal. Significantly, the termination of contract was never
assailed by the Respondent. In so far as the loss suffered by the Petitioner
was concerned, the Respondent had stopped executing work since
September 2011 and DG-MAP had issued a Final Notice dated
04.01.2012, threatening termination of the Master Contract and
invocation of Petitioner's PBG. The Master Contract was in fact
subsequently terminated on 29.01.2013 and PBG encashed. Thus, on the
date of the Award, Petitioner had actually suffered loss due to non-
performance of the Respondent. This was specifically pleaded, proved
and argued before the Tribunal, as is evident from the documents on
record as well as answers to Question Nos.54,91, 94 and 24, 25, 27 put to
the Petitioner's witness in cross-examination. There is no finding despite
sufficient evidence on record by the Tribunal that the Petitioner has not
suffered any loss and despite this it was held that invocation of PBG was
wrongful. Ignoring the material evidence makes the Award perverse and
liable to be interfered.
18. It is also contended that once the termination of the Agreement was
not challenged by the Respondent and it had accepted the same, this was
enough to set aside the Award under Claim No.1. The Tribunal has also
not given any finding that the termination was wrongful. Without
prejudice to the said argument, it is contended that in about 11 and a half
months between 21.02.2011 and 06.02.2011, Respondent only executed
work worth Rs.8.94 Crores which is less than 5% of the Agreement value
of Rs.201 Crores to be executed in 21 and a half months. The quantum of
work done was admitted by the Respondent and also proved in evidence.
The other error pointed out by the Learned Senior Counsel is that
referring to the second LOI, the Tribunal held that the Petitioner had
undertaken to bear the penalty, if any, on the additional work upto
Milestone-IV. However, the expression 'this additional work' referred to
the work executed by petty contractor at the site covered by the second
LOI and not the entire work covered under both the LOIs. It was clearly
for the period that had already lapsed as on the date of the LOI and
Petitioner never agreed to bear all penalties upto Milestone-IV for the
entire Project Work. The interpretation given by the Tribunal is against
the terms of the Agreement and not at all a possible/plausible view.
B. CLAIM NO.2
19. Claim No.2 was for refund of Mobilization Advance BGs and has
been allowed in favour of the Respondent holding that the entire advance
was never released by the Petitioner. The contention is that there is an
incorrect computation of the BG amount. The Respondent had furnished
8 BGs for Rs.21,52,98,466/- but the Tribunal awarded Rs.22,37,93,526/-.
Respondent in its Claim Statement had admitted that one BG for Rs.1
Crore was not invoked and thus the invocation amount was
Rs.20,52,98,466/-. This error is apparent from the pleadings and the
evidence on record.
20. The second contention is that the Tribunal has wrongly rejected the
plea of the Petitioner that the entire mobilization advance was released to
the Respondent including material worth Rs.12,65,15,392/- supplied
against mobilization advance. The Tribunal rejected the plea holding that
there was little evidence to substantiate the same and has completely
ignored the documentary and oral evidence on record which constitutes a
legal misconduct. The Learned Arbitrator according to Mr. Sethi has
ignored various documents/evidence viz. RA Bill Nos.1/2/4/5 which
show that the entire mobilization advance had been received by the
Respondent and the interest liability has been computed on the entire
advance and even the recovery has been worked out on the entire advance
received. Reconciliation Statement has been erroneously rejected,
terming it 'undated sheet' and for want of endorsement by the
Respondent, whereas the document shows that it was both dated and
endorsed by both the parties. The statement was proved in evidence of the
Petitioner's witness who was duly cross-examined by the Respondent.
The finding of the Tribunal that the supply of material by the Petitioner to
the Respondent as per the Statement is not established, is perverse in as
much as it was admitted by the Respondent in his 5th RA Bill, which was
signed by the Respondent and was on record as a vital piece of evidence.
The Tribunal by referring to the letter dated 09.03.2011 held that only
Rs.7,62,57,703/- were paid towards mobilization advance which is an
incorrect finding from a bare perusal of the document at page 1766 of the
record which indicated that the said amount of Rs.7,62,57,703/- was paid
by cheque after adjusting the part amounts towards purchase of steel and
deduction of TDS. The Tribunal has accepted part of a letter only without
any reason for doing so. Importantly, prior to the filing of the claim
Respondent never made any communication disputing the payment of the
entire mobilization advance and even in its first communication after
invocation of BGs on 02.02.2012, no grievance was raised on the said
aspect. It is also argued that the Respondent itself stated that it had
received mobilization advance in cash to the tune of Rs.9,05,82,503/- yet
the Award in paras 23 and 26 records that only an amount of
Rs.7,62,57,703/- was paid.
21. It was further argued that Respondent's stand was that the material
was left at the site at the time of termination of contract thereby implying
that the material was supplied against the advance. Pertinently, having
admitted the receipt of material worth Rs.12.65 Crores, Respondent
remained liable to account for the same and prove that the material was
lying at the site when the contract was terminated, which it failed to do.
Respondent had raised Claim No.4 towards cost of material lying at the
site, which was rejected and this part of the Award is not challenged by
the Respondent and had attained finality. Once there was no material at
site, the invocation of BG was fully justified.
C. COUNTER CLAIM NO.2
22. The said Counter Claim was for Rs.15,504,271/- paid by the
Petitioner to unpaid vendors of the Respondent. Upon termination of the
Master Contract, DG-MAP gave a list of unpaid vendors of the
Respondent and the Petitioner notified the same to the Respondent and
paid to the vendors after verification by the Respondent. Details of the
payments were on record before the Tribunal and the Respondent did not
point out any discrepancy therein and rather admitted the documents
during admission/denial. Yet the counter claim was rejected holding that
apart from the list, the Petitioner had not produced documents showing
that the payments were made nor produced vendors to testify the said
fact. No affidavits were filed by the vendors testifying the genuineness of
the Petitioner's claim under this Head. This, according to Learned Senior
Counsel, is a finding which is perverse and contrary to records since there
were large number of documents including copies of request letters from
various vendors and copies of cheques issued to various vendors
alongwith receipts running into more than 100 pages, on record. In
addition, there was sufficient evidence in the form of oral testimonies of
RW-1, RW-2, RW-3, who were duly cross-examined by the Respondent
herein. None of this evidence has been considered by the Tribunal.
D. COUNTER CLAIM NO.7
23. The counter claim was for Delay Compensation for
Rs.20,50,48,986/- under Clause 44 GCC. Mr. Sethi contends that under
Clause 44 GCC, Respondent was liable for Delay Compensation of 0.5%
per week subject to maximum of 10% of Agreement value, for delayed
completion. The counter claim was rejected wrongly on the ground that
the delay was not solely attributable to the claimant as also that the
Petitioner itself obtained extension of deadline from DG-MAP on
13.08.2012. Thus, the principle of Clause 44 cannot be applied by the
Petitioner against the Respondent. It is argued that this part of the Award
deserves to be set aside on the same premise as under Claim No. 1. The
Tribunal completely ignored that termination of the contract was due to
the Respondent abandoning the work and the Respondent neither
disputed the abandonment nor assailed the termination of contract. Thus,
by no stretch of imagination, the Tribunal could have held the Petitioner
liable for delay along with the Respondent.
24. The Award also suffers from patent illegality as the Tribunal has
held that the Petitioner adopted a simplistic and erroneous approach
towards computation of the compensation payable as a proper course of
action should have been to charge 0.5% of the value of 'specific works'
delayed every week from the planned date of completion of that
particular work. The argument is that this approach of the Tribunal is
completely contrary to the terms and conditions of the Agreement and the
actual work done by the Respondent. Admittedly, Respondent had
stopped working from September 2011 till termination and against the
Agreement value of Rs.205 Crores to be executed in 22 months, had
admittedly executed work worth Rs.8.95 Crores in 12 months. Work-wise
computation of Delay Compensation computes to far more than 10% of
the Agreement value while as per Clause 44 GCC, the Delay
Compensation is restricted to a maximum of 10% of the Agreement
value, which the Petitioner had claimed. Importantly, Respondent never
objected to the method of computation.
E. COUNTER CLAIM NO.11
25. The counter claim was for refund of Rs.20,63,931/- paid in excess
on account of Labour Escalation. It is contended that admittedly
Rs.33,21,995/- was paid to the Respondent as 'on account payment'
towards escalation and subsequently it was found that an excess amount
had been paid which was recovered by DG-MAP from the Petitioner.
The reasoning given by the Tribunal for rejection was that if the payment
had been made without DG-MAP's approval then the Petitioner has itself
to blame. This is clearly contrary to the Agreement in as much as
according to Clause 54 GCC amounts paid during execution of the work
were 'on-account' and subject to the final bill. The contractual stipulation
has been ignored and it has been observed that it is inconceivable that any
amount could be paid by the Petitioner at its own risk and consequence,
before final bills were approved by the DG-MAP. The finding of the
Learned Arbitrator that there is no document on record to substantiate
that DG-MAP had approved only a sum of Rs.12,58,063.86/- paisa
against an amount of Rs.33,21,995/- billed by the Respondent, is contrary
to evidence led by RW-3 who was extensively cross-examined by the
Respondent.
26. Learned Senior Counsel for the Petitioner relies on the judgement
of the Supreme Court in ONGC v. Western Geco International Limited,
(2014) 9 SCC 263 to support the argument that once the learned
Arbitrator has failed to draw the correct inferences on the facts proved
through extensive evidence or admitted by the Respondent, the Award
can be interfered with and is liable to be set aside. Reliance is also placed
on the judgement in Associate Builders v. Delhi Development Authority
(2015) 3 SCC 49, to argue that if an Arbitrator ignores the vital evidence,
the same will render the Award wholly perverse and it is liable to
interference and also constitutes a legal misconduct.
27. Mr. Thakur learned counsel for the Respondent opposes the
petition firstly on the grounds that the Learned Arbitrator has passed the
Award taking into account the relevant facts, documents and evidence
and has come to a conclusion which is not only a possible but a plausible
one and it is not permissible for this Court in its scope of judicial review
to interfere in the well reasoned Award of the Tribunal. Mr. Thakur relies
on the judgement in Ssangyong Engineering and Construct Co. Ltd. v.
National Highway Authority of India, 2019 15 SCC 131 to argue that
the Supreme Court has reaffirmed and re-enunciated the proposition of
law that an Award of an Arbitral Tribunal is beyond interference, if it is
based on the understanding and interpretation of the Learned Arbitrator
culled out from the evidence on record and it is not for this Court to
substitute its view, even if an alternative view is possible. He therefore
argues that the Award should be upheld and the objections be dismissed.
28. Without prejudice to the said contention Mr. Thakur defending the
Award argues that it is not correct for the Petitioner to argue that the
delay in completion of the work was on the part of the Respondent.
Petitioner's own letter dated 21.12.2011 to the DG-MAP would reveal
that it sought extension of time due to hindrances and various other issues
including scarcity of steel, lack of Labour License, strike by the sand
suppliers, extra ordinary heavy rainfall etc. In the said letter Petitioner
never attributed any delay to the Respondent. The Agreement was
terminated without any reason or justification and none was spelled out in
the termination letter. The schedule date for completion of Agreement
was 10.12.2012 but the Petitioner terminated the same 10 months and 4
days prior to the said date, when the Respondent was at site only for a
period of 7 months, out of a total of 25 months. The Learned Arbitrator
passed the Award taking into consideration the pleadings, documents
filed by the parties and the evidence of the witnesses and the Petitioner is
trying to read portions of the Award out of context to show that there is
perversity in the Award, when there is none.
29. It is argued by Mr. Thakur that evidence has come on record that
from 11.11.2010 upto February, 2011 Petitioner was fully in-charge of
the site. Witness RW-2 in his evidence stated that it executed work worth
only Rs. 68 Lakhs upto 2011 and after the termination, Petitioner had not
done any work. During the period when the Respondent was awarded the
Contract and was in-charge of the sites, it had executed work worth Rs.
18 crores and even RW-3 had admitted the execution of work worth Rs.
989,81,706/-. Thus, it is evident that the work executed by the Petitioner,
prior to handing over the site to the Respondent and post termination was
negligible as compared to the lesser period for which the site was with the
Respondent. It is argued that the Respondent is clearly entitled to the
refund of entire PBG as it was the Petitioner who committed fundamental
breach of the Agreement, by not taking prior approval of the principal
employer in terms of Clauses 17 & 18 GCC. No document was placed on
record to show any such approval. Letter dated 21.12.2011 reveals that
there were hindrances at site which were not attributable to the
Respondent and there was not a whisper of any alleged non-performance
of the Respondent. The finding returned by the Tribunal is based on facts,
documents and evidence. Even after termination it is not the case of the
Petitioner that it had engaged some other sub-contractor to execute the
work and thus there is no evidence that it had suffered any loss, due to the
alleged non-performance.
30. In so far as the nature of the PBG is concerned, counsel for
Respondent argues that whether the PBG was conditional or
unconditional, there ought to have been a letter of invocation, in writing,
stating that the amount claimed was by way of loss or damage caused or
likely to be caused by reason of any breach by the Respondent. No such
letter was placed on record which would reflect any breach allegedly
committed by the Respondent. The judgements relied upon by the
Petitioner are in relation to invocation of BGs which is not the case here
as in the present case Respondent is only concerned about the realization
of the BG amount by the Petitioner without any breach by the
Respondent. The finding of the Tribunal after interpreting the Clause and
the BGs is a plausible interpretation and not amenable to interference in
exercise of jurisdiction under Section 34 of the Act.
31. Learned counsel submits that the contention of the Petitioner that
termination was not disputed and was admitted by the Respondent is
wholly incorrect. Letter dated 07.02.2012 written by the Respondent
challenges the termination being illegal, arbitrary, unilateral and in
violation of principles of natural justice. Even in the Statement of Claim
the termination was challenged. Issues were framed by the Tribunal in
presence of both the parties on 08.10.2012 and Petitioner never insisted
upon framing of an issue on termination and neither raised any ground of
challenge with respect to this in the present petition. It is further argued
that Arbitration Proceedings are not governed by strict provisions of CPC
and the Tribunal is not bound by it in terms of Section 19 of the Act.
Secondly, it is a common practice that in arbitration issues are framed
only on the basis of claims and in some cases, pleadings are also treated
as issues.
32. It is argued that the Respondent in terms of the Agreement initially
furnished mobilization advance BGs for a sum of Rs. 18,52,98,466/-
against which Petitioner paid a sum of Rs. 7,62,57,703/- in cash in terms
of Clause 26.2 of the GCC, which is reflected in the letter dated
09.03.2011. Subsequently, the Respondent furnished additional BG of Rs.
3 crores against which the Petitioner released an amount of Rs.
1,43,25,000/-. A sum of Rs. 7,81,33,095/- was recovered by the Petitioner
as reflected from RA Bill No. 5, which is an admitted document and is
also evident from the pleadings. RW-3 had also admitted to the said
recovery from the mobilization advance. In terms of Clause 26.2 GCC,
mobilization advance was to be paid to the Respondent within 30 days of
acceptance of BG. With regard to the balance amount it is the case of the
Petitioner that materials were supplied for which reliance is placed upon
the running bills. It is contended that since mobilization advance was
given only for mobilization of resources, therefore, even assuming,
though not admitting, that apart from the cash, advance was given by
supply of materials, what can be recovered by invocation of BG is only
the amount in cash. The material stated to be given in lieu of cash is still
lying at the site of DG-MAP and there is no allegation that the
Respondent has lifted the material from the site. Therefore, the invocation
of the BGs for the entire advance was bad in law as it amounted to unjust
enrichment of the Petitioner and double jeopardy to the Respondent.
33. In so far as the said claim is concerned the learned counsel submits
that the Learned Arbitrator in his wisdom has rightly left the claim of
work done to be decided after the arbitration proceedings between the
Petitioner and DG-MAP end and no infirmity can be found with this part
of the Award.
AWARD TOWARDS INTEREST
34. Mr. Thakur argues that the Petitioner has not argued against the
Award of Interest under the said claims and even otherwise the Award of
Interest is just and reasonable in the facts and circumstances of the case.
35. With regard to counter claim No. 2 counsel for the Respondent
argues that the Petitioner is relying upon documents before this Court
during the course of hearing, which were never put to the witnesses of the
Respondent before the Tribunal and therefore the reliance is per se
impermissible and no arguments can be made based on the said
documents. In so far as counter claim No. 7 is concerned, it is submitted
that the Petitioner is not entitled to the said amount as there was no
possibility for the Respondent to perform the Contract in view of the
breach committed by the Petitioner. Petitioner cannot take advantage of
its own wrong and claim any compensation for delay. The finding arrived
at by the Tribunal is a finding of fact and is based on interpretation of the
Agreement, and any interference by this Court is beyond the scope of its
jurisdiction under Section 34 of the Act. The same argument is made by
counsel for the Respondent with respect to counter claim No. 11.
36. I have heard the learned senior counsel for the petitioner and the
counsel for the respondent.
37. Claim No.1 pertains to the claim of the respondent herein for an
amount of Rs.11,24,86,276/- towards alleged wrongful encashment of
Performance Bank Guarantees and the said amount is the net consolidated
amount covered by two PBGs furnished by the respondent against
performance of its obligations under the agreement. The Learned
Arbitrator has allowed the claim of the respondent on two-fold grounds.
The Learned Arbitrator has interpreted the clauses of the BGs and
concluded that the bank guarantees in question were conditional and the
prerequisite for their invocation was a breach of the Agreement by the
respondent which occasioned or was likely to occasion loss or damage to
the petitioner herein. Having held that the BGs were conditional, the
Learned Arbitrator was of the view that the prerequisites of the
invocation were not satisfied inasmuch as a letter dated 21.12.2011
placed on record by the respondent indicated that the petitioner had
written to DG-MAP seeking extension of deadlines stated in the time
schedule and the document was admitted by the petitioner. In the said
letter, there was no mention by the petitioner that the respondent was
responsible for the alleged delay and the extension was sought on other
grounds such as labour, site hindrances etc. The Learned Arbitrator also
observed that the time interval between 11.11.2010 and 21.12.2011 was a
period for which according to the petitioner no work had been carried out
for 398 days after 410 days implying that the time was not the essence of
the contract as the extension sought by the petitioner was granted by DG-
MAP. The Learned Arbitrator also observed that the petitioner had
expressly agreed to bear the penalty which could be imposed on slow
progress of additional work up to Milestone-IV as in May 2011 and thus
it was wholly inequitable for the petitioner to terminate the agreement
and encash the BGs. The petitioner according to the Learned Arbitrator
should have waited till 10.05.2012 or till the DG-MAP assessed whether
the delay was solely attributable to the respondent as also for extension of
time lines, which was later granted on 13.08.2012.
38. Insofar as the finding of the learned Arbitrator that the PBGs in
question were conditional, in my view, the same cannot be sustained.
Relevant part of one of the bank guarantees is as follows:-
"We the Bank of Baroda, Corporate Financial Services
Branch, Himayat Nagar, Hyderabad do hereby undertake to
pay the amounts due and payable under this guarantee
without any demur, merely on a demand from the DDPL
(JV) BSSPL stating that the amount claimed is due by way of
loss or damage caused to or would be caused to or suffered
by the DDPL (JV) BSSPL by reason of any breach by the
said Contractor(s) of any of the terms and conditions
contained in the said Agreement or by reason of the
Contractor's failure to perform the said Agreement."
39. A bare perusal of the BG shows that the bank had undertaken to
pay the amounts due and payable under the guarantee, merely on demand
from the petitioner stating that the amount claimed was due or likely to be
due by way of loss or damage caused to it by reason of any breach of any
of the terms of the agreement or failure to perform the agreement, without
any demur. An identical clause in a bank guarantee came up for
interpretation before the Supreme Court in Mahatma Gandhi (supra) and
the Court after analyzing the provision, concluded that the Bank
Guarantee was unconditional. Court observed that the Bank Guarantee
being unconditional and irrevocable, it is not open to the Bank to raise
any objection whatsoever to pay the amounts under the guarantee. The
person in whose favour the guarantee is furnished by the bank cannot be
prevented by an injunction in enforcing the guarantee on the pretext that
the condition for enforcing the BG in terms of the agreement entered
between the parties has not been fulfilled. The Supreme Court while
distinguishing the earlier judgement of the Court in Hindustan
Construction Co. Ltd. v. State of Bihar (1999) 8 SCC 436, in the facts of
the case before it, in fact also took support from a passage from the said
judgement which is as follows:-
"9. What is important, therefore, is that the bank
guarantee should be in unequivocal terms, unconditional
and recite that the amount would be paid without demur
or objection and irrespective of any dispute that might
have cropped up or might have been pending between
the beneficiary under the bank guarantee or the person
on whose behalf the guarantee was furnished. The terms
of the bank guarantee are, therefore, extremely material.
Since the bank guarantee represents an independent
contract between the bank and the beneficiary, both the
parties would be bound by the terms thereof. The
invocation, therefore, will have to be in accordance with
the terms of the bank guarantee, or else, the invocation
itself would be bad."
40. Finally the Court in Mahatma Gandhi (supra) held as follows:-
"28. ......What is relevant, therefore, is the terms
incorporated in the guarantee executed by the bank. On
careful analysis of the terms and conditions of the
guarantee, we find the guarantee to be an unconditional
one. The respondent, therefore, cannot be allowed to
raise any dispute and prevent the appellant from
encashing the bank guarantee."
It would be relevant to extract for ready reference the terms of the
bank guarantee involved in the said case as under:-
"1. In consideration of the above premises, the
guarantor hereby undertakes to pay to the purchasers
within 30 days of demand, without demur such a sum not
exceeding Rs 92,40,000 (Rupees ninety-two lakhs forty
thousand only), representing 3% of the contract price as
the purchasers may demand upon the failure of the
supplier to conduct the trial test of the sugar plant by
24th July, 2003 and also upon the failure of the sellers to
commission the project (plant and machinery) before
December 2003.
2. The guarantor shall pay to the purchasers on demand
the sum without demur and without requiring the
purchasers to invoke any legal remedy that may be
available to them, it being understood and
agreed firstly that the purchasers shall be the sole judge
of and as to whether the amount of bank guarantee has
become recoverable from the sellers or whether the
sellers have committed any breach(es) of the terms and
conditions of the said agreement and the extent of losses,
damages, costs, charges and expenses caused to or
suffered by or that may be caused to or suffered by
purchasers from time to time shall be final and binding
to the guarantor and secondly that the right of the
purchasers to recover from the guarantor any amount
due to the purchasers under this guarantee shall not be
affected or suspended by reasons of the fact that any
dispute or disputes have been raised by the sellers with
regard to their liability or that proceedings are pending
before any Tribunal/arbitrator(s) or court with regard
thereto or in connection therewith and thirdly that the
guarantor shall immediately pay the aforesaid
guaranteed amount to the purchasers on demand and it
shall not be open to the guarantor to know the reasons of
or to investigate or to go into the merits of the demands
or to question or challenge the demand or to know any
facts affecting the demand, and lastly that it shall not be
open to the guarantor to require the proof of the liability
of the sellers to pay the amount, before paying the sum
demanded under Clause 1 above.
***
8. The invocation of this guarantee shall be by a letter as
herein signed by the purchasers and countersigned by
the Commissioner of Sugar, Bangalore, Karnataka
State."
41. The same issue again arose before the Supreme Court in Gujarat
Maritime (supra). In the said case the terms of the Bank Guarantee were
as follows:-
"(b) We, Yes Bank Ltd., do hereby undertake to without any
reference to the lead promoter or any other person and
irrespective of the fact whether any dispute is pending
between GMB and the lead promoter or any court or
tribunal or arbitrator relating thereto, pay the amount due
and payable under this guarantee without any demur,
merely on demand from GMB stating that the said lead
promoter's failure to perform the covenants of the same. Any
such written demand made by GMB on the Bank shall be
conclusive, absolute and unequivocal as regards the amount
due and payable by the Bank under this guarantee.
However, Bank's liability under this guarantee shall be
restricted to an amount not exceeding Rs.5,00,00,000
(Rupees five crores only)."
42. The contention raised by the guarantor in the said case was that the
invocation of the BG depending on the cancellation of the contract and
once the cancellation is not justified, the invocation also is not justified.
The Supreme Court observed that the said contention cannot be
appreciated. The Bank Guarantee is a separate contract and is not
qualified by the contract on performance of the obligations. No doubt, in
terms of the Bank Guarantee also, invocation is only against a breach of
the conditions in the LOI, but, between the beneficiary and the bank it is
stipulated that the decision of the beneficiary as to the breach shall be
absolute and binding on the bank. The Court interpreted a similar Bank
Guarantee to be clearly unconditional and irrevocable and held as
follows:-
"13. The guarantee given by the Bank to the appellant
contains only the condition that in case of breach by the lead
promoter viz. the first respondent of the conditions of LoI,
the appellant is free to invoke the bank guarantee and the
Bank should honour it "... without any demur, merely on a
demand from GMB (appellant) stating that the said lead
promoter failed to perform the covenants...". It has also
been undertaken by the Bank that such written demand from
the appellant on the Bank shall be "... conclusive, absolute
and unequivocal as regards the amount due and payable by
the Bank under this guarantee". Between the appellant and
the first respondent, in the event of failure to perform the
obligations under the LoI dated 6-2-2008, the appellant was
entitled to cancel the LoI and invoke the bank guarantee. On
being satisfied that the first respondent has failed to perform
its obligations as covenanted, the appellant cancelled the
LoI and resultantly invoked the bank guarantee. Whether the
cancellation is legal and proper, and whether on such
cancellation, the bank guarantee could have been invoked
on the extreme situation of the first respondent justifying its
inability to perform its obligations under the LoI, etc. are
not within the purview of an inquiry under Article 226 of the
Constitution of India. Between the Bank and the appellant,
the moment there is a written demand for invoking the bank
guarantee pursuant to breach of the covenants between the
appellant and the first respondent, as satisfied by the
appellant, the Bank is bound to honour the payment under
the guarantee."
43. In my view, the said judgements squarely cover the present case
and the bank guarantees in question are unconditional and the finding of
the Learned Arbitrator runs contrary to the observations of the Supreme
Court.
44. Thus, insofar as Claim No.1 is concerned the Award cannot be
sustained as the basic premise on which the Learned Arbitrator had
proceeded is that the bank guarantees were conditional and in the absence
of proving the breach by the respondent and the loss/damage to the
petitioner, the invocation was illegal. This premise cannot be accepted as
the bank guarantees are clearly unconditional. As held by the Supreme
Court, once the BGs are unconditional or irrevocable, the bank is bound
to honour and encash the BGs in favour of the beneficiary without any
proof of breach or loss.
45. The issue can be looked at from another angle. As rightly argued
by senior counsel for the petitioner, even if it is assumed for the sake of
argument that the bank guarantee was conditional, the award to the extent
it allows claim No.1 in favour of the respondent cannot be upheld in law.
First and foremost, the finding of the Learned Arbitrator that it was
wholly inequitable for the petitioner to terminate the agreement was
beyond the jurisdiction of the Learned Arbitrator as termination was not
even challenged by the respondent. In fact, a perusal of the issues framed
would also substantiate the stand of the petitioner that the termination
was not a subject matter of challenge before the Learned Arbitrator.
Counsel for the petitioner had elaborately brought before the Court that
between 21.02.2011 to 06.02.2012 respondent had executed work of
Rs.8.94 crores which was less than 5% of the contract value of Rs.201
crores, to be executed in about 21½ months. Termination of the contract
was for abandonment of the work for more than three months prior to the
date of termination i.e. 06.02.2012 and this was not disputed by the
respondent in its reply dated 07.12.2012 to the letter of termination. The
petitioner had specifically brought out in its evidence the loss or damage
suffered due to non-performance of the respondent and more importantly,
the Learned Arbitrator has not only observed that there was significant
disparity between the degree of work completed but the Learned
Arbitrator has nowhere observed that the petitioner has not suffered any
loss and yet held that the invocation of bank guarantee was wrongful.
46. Learned Senior Counsel for the Petitioner is also right in his
contention that the Learned Arbitrator has wrongly observed that the
petitioner had undertaken to bear all penalties for delays up to Milestone-
IV and was aware of the slow progress of the work in question. Perusal of
the second LOI dated 18.05.2011 substantiates the stand of the petitioner
that it had agreed to bear the penalty, if any, on "additional work" which
referred to the work executed by the respondent covered by the second
LOI and not the entire work covered under both the LOIs. Moreover, it
was, as rightly contended, "for the period as on date already lapsed" on
the date of the second LOI and the Petitioner had not agreed to bear all
penalties up to Milestone-IV, for the entire project works. Relevant part
of the LOI is as follows:-
"Date : 18th May 2011
No.: DDPL-BSSPL/DGMAP/PKG-25/11/188
M/s. Totem Infrastructure Ltd.,
6, Totem House,
Punjagutta,
Hyderabad-500 082
AMENDMENT TO LETTER OF INTENT NO.LOI/11/022
Kind Attn.: Devendra Jha (Head-Building Division)
SUBJECT: CONSTRUCTION OF DWELLING UNITS
INCLUDING ALLIED SERVICES FOR OFFICERS,
JCOs/Ors. AT AHMEDABAD, GANDHINAGAR AND
CHILODA (SW AC(U), 258 SU & 857 SU).
REFERENCE : OUR LOI NO.LOI/11/022 dated 21st
February 2011
Dear Sir,
Further to our LOI No.LOI/11/022, vide letter No.DDPL-
BSSPL/DGMAP/PKG-25/11/167 dated 21st February 2011,
for the construction of dwelling units on turnkey basis for 3
Blocks of 72 DU at Gandhinangar, 26 Blocks of 793 DU at
Chiloda (Pocket -1, 2) and 41 Blocks of Miscellaneous
Structures like Guard Post, Garbage Bins, Car Garages,
Scooter Garages & Service Centre with Toilet Block, etc. at
Gandhinagar & Chiloda (hereinafter referred to as the
"Work") amounting to Rs.113,79,35,257.10 (Rupees One
Hundred Thirteen Crore Seventy Nine Lacs Thirty Five
Thousand Two Hundred Fifty Seven and paisa Ten only) as
per annexure attached.
The above work has been enhanced to Rs.201,44,94,251.77
(Rupees Two Hundred One Crore Forty Four Lacs Ninety
Four Thousand Two Hundred Fifty One and paisa Seventy
Seven only) from the existing value of Rs.113,79,35,257.10
by allocating additional work of our Ahmedbad and
Gandhinagar sites, as per the attached "SUMMARY" sheet.
However, there is some small work already carried out by
other petty contractor on these additionally allocated sites,
for which the amount shall be decided mutually between us
and shall be debited to your account. The petty contractor
had carried out work at 18 blocks as off now and penalty, if
any, applied on this additional work upto milestone IV, shall
be borne by us for the period as on date already lapsed.
All other terms and conditions of our LOI No.LO/11/022
dated 21st February 2011 shall remain unaltered and
applicable for the entire work.
You are requested to please submit the revised work plan,
including these additional work in the original plan for our
record.
The detailed work order / agreement shall be issued to you
shortly on receipt of Performance Guarantee for the
additional work. The mobilization advance shall be
released on receipt of mobilization bank guarantee for the
remaining value of work.
Kindly return one copy of this amendment to LOI, duly
signed, in token of acceptance of all terms and conditions.
Thanking you,
Yours faithfully,
For
M/s. Dhoot Developers Private Limited (JV)
M/s. Bengal Silver Spring Projects Limited
Received & Accepted
M/s. Totem Infrastructure Ltd."
47. It is no doubt a settled law that interpretation of a contract is in the
domain of an Arbitrator and if the interpretation or the view of the
Learned Arbitrator is not only a plausible but a possible interpretation, the
Court in the scope of its judicial review under Section 34 of the Act shall
not interfere. However, in my view, in the present case the perusal of the
provisions of the LOI shows that the interpretation is opposed to the clear
and unambiguous language of the letter and the parties never intended
that the liability of penalty would be borne by the Petitioner for all works
up to Milestone-IV. The Award thus calls for interference to this extent.
48. Even otherwise in the absence of a challenge to the termination it
could not be held that the Respondent was not responsible for the delay.
If the Respondent was aggrieved by the action of the Petitioner it should
have challenged the termination on the ground that the Respondent had
neither abandoned the work nor caused any delay. Acceptance of the
termination can only imply that the Respondent accepted that it was
responsible for non-performance of the contract within the timelines.
49. Claim No.2 of the Respondent was with regard to a claim for an
amount of Rs.22,37,93,526/- towards wrongful encashment of
Mobilization Advance BGs, being the net consolidated amount covered
by 8 BGs furnished by the respondent against Mobilization Advance,
provided by the Petitioner under the Agreement. Under the LOI dated
21.02.2011 Petitioner had agreed to provide a Mobilization Advance of
10% of the contract value against equivalent amount of irrevocable BGs.
It was also the term of the LOI that the recovery of such advance shall be
made from each RA Bill in equal installments and as per the Master
Contract. Accordingly, proportionate to the contract value the petitioner
was required to grant Mobilization Advance of Rs.20,50,48,986/- and the
respondent had as per record furnished Mobilization Advance BGs to the
extent of Rs.21,52,98,466/- over a period of time, from 01.03.2011 till
31.12.2011. It is undisputed that under clause 26.2 of the GCC in the
Master Contract between the Petitioner and DG-MAP, payment of
Mobilization Advance was in one installment within a 30 days period
from the date of submission of the BGs. Petitioner received Mobilization
Advance of Rs.17.10 crores from DG-MAP. While it is the case of the
Respondent that it had received only a sum of Rs.7,62,57,703/- by cheque
in March 2011 and Rs.1,43,25,000/- by cash in December 2011 which is
significantly less than the 10% contract value, the claim of the Petitioner
was that it had paid Mobilization Advance worth Rs.20,50,48,986/- as per
the Agreement. Learned Arbitrator observed that the Petitioner has set up
a curious plea by asserting that it had paid the entire Mobilization
Advance whereas its own witnesses had deposed that only an amount of
Rs.7.85 crores was paid by cheque/cash, Rs.22,75,871/- was by way of
TDS and Rs.12,65,15,392/- was in the form of material at the
construction site. The Learned Arbitrator relied on the letter dated
09.03.2011 sent by the Petitioner to the Respondent to conclude that only
a sum of Rs.7,62,57,703/- was paid by way of cheque and beyond that
there was little evidence to suggest that material worth the balance
amount was provided. Reliance was also placed on clause 26.2 whereby
the Mobilization Advance was payable only in one installment and did
not envisage the payment in the form of material supplies. The Learned
Arbitrator also held that the Petitioner had recouped the amount of
Rs.7,62,57,703/- in monthly installments from the RA Bills and for this
placed reliance on the testimony of RW-3. Accordingly, the Learned
Arbitrator held that the invocation of Mobilization Advance BGs was
unjustified.
50. Respondent contended before this Court that the Learned
Arbitrator has rightly allowed Claim No.2 inasmuch as the entire
Mobilization Advance was never paid by the Petitioner. Respondent had
initially furnished Mobilization Advance BG for a sum of
Rs.18,52,98,466/- against which the Petitioner paid a sum of
Rs.7,62,57,703/- in cash, in terms of clause 26.2, which is reflected in the
letter dated 09.03.2011. Subsequently, Respondent furnished additional
bank guarantee of Rs.3 crores against which the Petitioner released an
amount of Rs.1,43,25,000/- and therefore the total Mobilization Advance
given to the Respondent was Rs.9,05,82,703/-. Out of the said amount
sum of Rs.7,81,33,095 was recovered by the Petitioner as reflected from
RA Bill No.5, which is an admitted document and even the Petitioner's
witness RW-3 in answer to question 27 read with question 70 admitted
this position. The alternate contention is that even assuming that apart
from the cash amount of Rs.9.05 crores advance was given by supply of
materials, since the advance was for mobilization of resources, the same
cannot be recovered by invocation of bank guarantee as the same has to
be restricted to the amount given in cash. The material, if any, is lying at
the site of DG-MAP and there are no allegations that the Respondent
lifted the material. Thus, the invocation of the entire BG amount of
Rs.21,52,98,466/- was illegal and amounted to unjust enrichment of the
Petitioner and double jeopardy of the Respondent and the claim was
rightly allowed by the Learned Arbitrator.
51. Petitioner on the other hand firstly assails this part of the Award on
the ground that there is an incorrect computation of the BG Amount.
According to the Petitioner the invocation was only for Rs.21,52,98,466/-
but the Learned Arbitrator has awarded Rs.22,37,93,526/- which is
contrary to pleadings and evidence. At this stage I may note that during
the course of the arguments counsel for the Respondent, on instructions,
had candidly admitted this error of computation on the part of the
Learned Arbitrator. It is true that initially the respondent had in the
pleadings computed the amount towards BGs as Rs.22,37,93,526/- and
the issue was accordingly framed. However, one BG out of the eight, for
Rs.1 crore was not invoked and therefore the total amount comes out to
Rs.21,52,98,466/-.
52. Insofar as the total Mobilization Advance given by the Petitioner is
concerned I find force in the contention of the counsel for the Petitioner
that there was enough evidence to substantiate that the Petitioner had paid
the entire Mobilization Advance. While it is the settled law that the Court
cannot substitute its views for that of the Learned Arbitrator or arrive at
an independent finding after re-appreciating evidence, but it is equally
settled that in case the Learned Arbitrator ignores vital
documents/evidence/admissions, the Award can be interfered with. In this
context I may usefully allude to the judgement of the Supreme Court in
Associate Builders (supra), relevant paras of which are as follows:-
"31. 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:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such
decision would necessarily be perverse.
32. A good working test of perversity is contained in two
judgments. In Excise and Taxation Officer-cum-Assessing
Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it
was held: (SCC p. 317, para 7)
"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 :
1999 SCC (L&S) 429] , it was held: (SCC p. 14, para 10)
"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."
53. I may also refer to relevant passages from the judgement of the
Supreme Court in Ssangyong (supra) as under:-
"40. The change made in Section 28(3) by the Amendment
Act really follows what is stated in paras 42.3 to 45
in Associate Builders [Associate Builders v. DDA, (2015) 3
SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the
construction of the terms of a contract is primarily for an
arbitrator to decide, unless the arbitrator construes the
contract in a manner that no fair-minded or reasonable
person would; in short, that the arbitrator's view is not even
a possible view to take. Also, if the arbitrator wanders
outside the contract and deals with matters not allotted to
him, he commits an error of jurisdiction. This ground of
challenge will now fall within the new ground added under
Section 34(2-A).
41. What is important to note is that a decision which is
perverse, as understood in paras 31 and 32 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground
for challenge under "public policy of India", would
certainly amount to a patent illegality appearing on the face
of the award. Thus, a finding based on no evidence at all or
an award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside on the
ground of patent illegality. Additionally, a finding based on
documents taken behind the back of the parties by the
arbitrator would also qualify as a decision based on no
evidence inasmuch as such decision is not based on evidence
led by the parties, and therefore, would also have to be
characterised as perverse."
54. The Supreme Court in a recent judgement in South East Asia
Marine Engg. & Constructions Ltd. v. Oil India Ltd., (2020) 5 SCC 164
interfered in the Award on the ground that the interpretation of the
Arbitral Tribunal was not even a possible view and held as follows:-
"11. In order to answer the questions raised in this appeal
we first need to delve into the ambit and scope of the court's
jurisdiction under Section 34 of the Arbitration Act. Section
34 of the Arbitration Act provides as under:
"34. Application for setting aside arbitral award.--
(1) Recourse to a Court against an arbitral award
may be made only by an application for setting aside
such award in accordance with sub-section (2) and
sub-section (3).
(2) An arbitral award may be set aside by the Court
only if--
(a) the party making the application furnishes proof
that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the
law to which the parties have subjected it or, failing
any indication thereon, under the law for the time
being in force; or
(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or
of the arbitral proceedings or was otherwise unable to
present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so
submitted, only that part of the arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the Arbitral Tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was
in conflict with a provision of this Part from which the
parties cannot derogate, or, failing such agreement,
was not in accordance with this Part; or(b) the Court
finds that--
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time
being in force, or
(ii) the arbitral award is in conflict with the public
policy of India.
Explanation.--Without prejudice to the generality of
sub-clause (ii) it is hereby declared, for the avoidance
of any doubt, that an award is in conflict with the
public policy of India if the making of the award was
induced or affected by fraud or corruption or was in
violation of Section 75 or Section 81.
(3) An application for setting aside may not be made
after three months have elapsed from the date on
which the party making that application had received
the arbitral award or, if a request had been made
under Section 33, from the date on which that request
had been disposed of by the Arbitral Tribunal:
Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause from
making the application within the said period of three
months it may entertain the application within a
further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1),
the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for a
period of time determined by it in order to give the
Arbitral Tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in
the opinion of Arbitral Tribunal will eliminate the
grounds for setting aside the arbitral award."
12. It is a settled position that a court can set aside the
award only on the grounds as provided in the Arbitration
Act as interpreted by the courts. Recently, this Court
in Dyna Technologies (P) Ltd. v. Crompton Greaves
Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.,
(2019) 20 SCC 1 : 2019 SCC OnLine SC 1656] laid down
the scope of such interference. This Court observed as
follows : (SCC pp. 11-12, para 24)
"24. There is no dispute that Section 34 of the
Arbitration Act limits a challenge to an award only on
the grounds provided therein or as interpreted by
various Courts. We need to be cognizant of the fact
that arbitral awards should not be interfered with in a
casual and cavalier manner, unless the Court comes
to a conclusion that the perversity of the award goes
to the root of the matter without there being a
possibility of alternative interpretation which may
sustain the arbitral award. Section 34 is different in
its approach and cannot be equated with a normal
appellate jurisdiction. The mandate under Section 34
is to respect the finality of the arbitral award and the
party autonomy to get their dispute adjudicated by an
alternative forum as provided under the law. If the
Courts were to interfere with the arbitral award in the
usual course on factual aspects, then the commercial
wisdom behind opting for alternate dispute resolution
would stand frustrated."
13. It is also settled law that where two views are possible,
the Court cannot interfere in the plausible view taken by the
arbitrator supported by reasoning. This Court in Dyna
Technologies [Dyna Technologies (P) Ltd. v. Crompton
Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC
1656] observed as under : (SCC p. 12, para 25)
"25. Moreover, umpteen number of judgments of this
Court have categorically held that the Courts should
not interfere with an award merely because an
alternative view on facts and interpretation of
contract exists. The Courts need to be cautious and
should defer to the view taken by the Arbitral
Tribunal even if the reasoning provided in the award
is implied unless such award portrays perversity
unpardonable under Section 34 of the Arbitration
Act."
xxx xxx xxx
25. Having regard to the law discussed herein, we do not
subscribe to either the reasons provided by the Arbitral
Tribunal or the High Court. Although, the Arbitral Tribunal
correctly held that a contract needs to be interpreted taking
into consideration all the clauses of the contract, it failed to
apply the same standard while interpreting Clause 23 of the
contract.
26. We also do not completely subscribe to the reasoning of
the High Court holding that Clause 23 was inserted in
furtherance of the doctrine of frustration. Rather, under the
Indian Contract law, the effect of the doctrine of frustration
is that it discharges all the parties from future obligations.
In order to mitigate the harsh consequences of frustration
and to uphold the sanctity of the contract, the parties with
their commercial wisdom, chose to mitigate the risk under
Clause 23 of the contract.
xxx xxx xxx
31. The interpretation of the Arbitral Tribunal to expand
the meaning of Clause 23 to include change in rate of
HSD is not a possible interpretation of this contract, as the
appellant did not introduce any evidence which proves the
same."
55. The petitioner has been able to bring out that the various RA Bills
placed before the Learned Arbitrator being RA Bill No.1/2/4/5 indicate
that the Respondent had admitted that the entire Mobilization Advance
had been received. Respondent had computed the interest liability on the
entire Mobilization Advance of Rs.20.50 crores and installments towards
recovery of the advance had also been worked on the complete amount of
Rs.20.50 crores. Petitioner is also right in its contention that the Learned
Arbitrator rejected the reconciliation statement evidencing the receipt of
the entire amount purely on the finding that the statement was an undated
sheet and had no endorsement by the Respondent. The statement however
as shown by the learned senior counsel during the hearing shows that it
was duly dated and endorsed/signed by the representatives of the parties.
The statement was produced and proved in evidence by the Petitioner's
witness as Ex.RW-1/5 and the witness was cross-examined by the
Respondent with respect to the said document. Significantly the fifth RA
bill is signed by the Respondent and was filed by the Respondent. This
vital evidence and material documents, in my view, have been ignored by
the Learned Arbitrator.
56. Learned Senior Counsel for the petitioner has also argued and in
my view rightly so, that the letter dated 09.03.2011 clearly indicated that
in fact Rs.11,37,93,526/- was paid as Mobilization Advance and not
Rs.7,62,57,703/- as held by the Learned Arbitrator. The said amount
comprised of payment of Rs.7,62,57,703/- by cheque, Rs.22,75,871/- as
deduction on account of TDS and the balance amount paid to the vendors
on behalf of Respondent for purchase of steel. The said letter was proved
in evidence and Petitioner's witness RW-3 was cross-examined in the
said respect. In fact, the Respondent never disputed the statutory
deduction and the amount paid to the vendors for purchase of steel. The
interpretation given to the letter dated 09.03.2011 and the conclusion
drawn therefrom is not borne out from the evidence on record and cannot
be sustained.
57. The finding of the Learned Arbitrator with regard to there being
little evidence with respect to the material supplied is contrary to the
documents placed on record being the RA Bills. There is also force in the
contention of the Petitioner that prior to the filing of the Statement of
Claim Respondent had never communicated regarding less Mobilization
Advance paid by the Petitioner. In case the amount was less, there was no
reason for the Respondent to have furnished the Bank Guarantees for the
entire amount. Even the letter dated 02.02.2012 being the first
communication after invocation of BGs lays no grievance that the entire
Mobilization Advance was unpaid.
58. Insofar as the material is concerned it is rightly argued that the
Respondent had pleaded that material was given in lieu of Mobilization
Advance but was left at site upon termination of the contract. Therefore,
the finding of the Learned Arbitrator that no material was supplied is
contrary to the pleadings of the Respondent. Admittedly, in December
2011 Respondent had furnished further BGs for Rs.3 crores for ad-hoc
advances, which were released. If the Respondent had not paid the entire
Mobilization Advance against the BGs submitted in July 2011 it would
not have issued further BGs in December 2011. Therefore, in my view
the finding that the entire Mobilization Advance was unpaid cannot be
upheld. However, there is force in the contention of the Respondent that
the Petitioner had recouped a sum of Rs.7,81,33,095/-and this is clearly
reflected from RA Bill No.5 which is an admitted document. The
Respondent has in its various letters placed before the Learned Arbitrator
dated 09.03.2011 taken a categorical stand with respect to recovery of the
said amount and significantly there is no denial in any of the
communications by the Petitioner. Thus, the Petitioner is entitled to
invocation of the Mobilization Advance BGs only for the balance
amount.
59. As far as Claim No.3 is concerned the same was for an amount of
Rs.11,27,88,524/- towards the work done by the Respondent as detailed
in the Statement of Claim. The Learned Arbitrator has observed that there
is considerable confusion over the exact amount of work done by the
Respondent. While the Respondent has stated that the total value of work
done as on the date of termination was Rs.18,16,51,464/- but in cross-
examination its witness CW-1 stated that the net value of the work done
was Rs.8,26,69,758/-. Learned Arbitrator has further noted that as per
clause 12 of the Master Contract pertaining to the payment, the bills
raised by the Respondent have to be approved by the Project Manager
and the DG-MAP, after which payments are to be released. This
according to the Learned Arbitrator shows that the DG-MAP is the
Authority to finally certify the bills and only then the payments are
released. Under these circumstances, the Learned Arbitrator has observed
as follows:-
"32. It is important to note that as per Clause 12 of the
Master Contract pertaining to 'Payments', the Bills raised by
the Claimant have to be approved by the Project Manager
and the DG-MAP after which payments are released to the
Claimant. Clause 12 mandates that the cheque issued to the
Claimant can be encashed only after the amount is credited
into the account of the Respondent. This shows that the DG-
MAP is the authority to finally certify the Bills and payments
are released on the basis of its certification. As regards the
claim of the Claimant in relation to RA Bill No. 5 and the
claims made in terms of letter dated 02.02.2012, any amount
due and payable to the Claimant has to be first certified by
the DG-MAP.
33. This is a term which binds all the parties viz., the
Claimant, the Respondent as well as the DG-MAP (as per
Clause 12 of the Master Contract) and cannot be lost sight
of in these arbitration proceedings as well.
34. Under such circumstances, even though the Claimant
cannot be entitled to unsubstantiated sums to the extent
claimed under the Issue, the Claimant will be entitled to any
amount received by the Respondent in lieu of work which is
the subject matter of RA Bill No. 5 or the claims made by the
Claimant mentioned at Schedule C to letter dated
02.02.2012. These amounts would have been paid to the
Respondent by DG-MAP after due certification in terms of
Clause 12 of the Master Contract and as such the
Respondent cannot be entitled to unjust enrichment at the
cost of any legitimate claim of the Claimant.
35. The Respondent and DG-MAP are already in the midst
of arbitration proceedings on various issues including
payments due to the Respondent. Any amount which is
awarded to the Respondent for the above-mentioned heads
will be payable to the Claimant and the claimant will be
entitled to claim such amounts or any further amount if it
could be so established from the respondents by initiating
appropriate proceedings after award is passed in the other
arbitration proceeding."
60. While the respondent contends that this was the most plausible
course of action followed by the Learned Arbitrator, the Petitioner
contends that once the Learned Arbitrator has observed in the earlier part
of the Award that at no point during the evidence or closing submissions,
the Claimant elaborated how it has deduced the amounts claimed, this
was sufficient to dismiss the claim and it was not open to the Learned
Arbitrator to leave the dispute open for a second round of litigation. In
fact, the Respondent had never pleaded that this claim could only be
ascertained after the proceedings between the Petitioner and the DG-
MAP are concluded.
61. The Learned Arbitrator has left the adjudication of claim No.3 to
be decided after the culmination of the arbitration proceedings between
the Petitioner and DG-MAP, which at the stage of passing of the award
were pending. While the Learned Arbitrator has no doubt held that the
Respondent cannot be entitled to unsubstantiated sums under the said
claim but has also observed that it would be entitled to the amount
received by the Petitioner in lieu of the work, which is subject matter of
RA Bill No.5 or the claims made by the Respondent in schedule-C of
letter dated 02.02.2012. The basis of the Award under Claim No.3 is
Clause 12 of the Master Contract which reads as follows:-
"12. PAYMENT
Payment of Totem's bills shall be made by way of cheque in
advance based on the bills prepared and approved by DG
MAP after receipt of details from site. The cheque shall be
presented immediately on realization of that bill by DG
MAP to the account of DDPL (JV) BSSPL. The stage wise
payment shall be as per the schedule mentioned in the
contract."
62. Under the said clause which pertains to payments, the bills raised
by the Respondent have to be approved by the Project Manager and the
DG-MAP, only after which the payments can be released and in fact
Clause-12 further mandates that the cheque issued to the Respondent can
be encashed only after the amount is credited into the account of the
Petitioner. The Learned Arbitrator has rightly observed that the DG-MAP
is the Authority to finally certify the bills and on the basis of its
certification, payments are to be released. Thus, there is no gainsaying
that the claims of the Respondent in relation to RA Bill No.5 and under
the letter dated 02.02.2012, would also be subject to the said caveat. As a
corollary the amounts would have to come first into the account of the
Petitioner after due certification and depending on that the amounts, if
any, can be released to the Respondent herein. As the arbitration was
pending, it was uncertain as to the amounts to which the Petitioner would
be entitled and therefore looking at the close connection between the two
arbitrations, Learned Arbitrator left the claim to be decided after the
proceedings between the Petitioner and the DG-MAP conclude. I find no
infirmity with this finding of the Learned Arbitrator.
63. The second part of the challenge in the present petition by the
Petitioner is to the rejection of its Counter Claim Nos.2, 7 and 11.
Counter Claim No.2 of the Petitioner was for an amount of
Rs.2,25,84,449/- towards expenditure incurred by the Petitioner for
discharge of liability of the Respondent at the site, which it claims to have
paid to the Respondent's unpaid vendors. The Counter Claim was
rejected by the Learned Arbitrator on the ground that the Petitioner had
only placed on record the list of vendors to whom the payments were to
be allegedly made, but apart from this list, no documents were produced
evidencing the actual payment to the unpaid vendors nor it produced any
vendor as witness to testify the fact. No affidavits were filed by the
vendors proving the genuineness of the claims under this head and the
Petitioner never raised this issue with the Respondent in any letter or
correspondence.
64. The stand of the Petitioner to challenge this portion of the Award is
that upon termination of the contract DG-MAP gave a list of vendors of
the Respondent whose outstanding payments were to the tune of
Rs.2,52,47,442/-. Petitioner notified this to the Respondent vide e-mail
dated 22.11.2011 and paid Rs.1,55,04,271/-, after verification by the
Respondent, which according to the Petitioner is a fact ignored by the
Learned Arbitrator. The argument is that despite plethora of documents
on record evidencing details of payments made by the Petitioner the
Learned Arbitrator has rejected the counter claim contrary to the evidence
and on this ground the Award is perverse.
65. I find force in the contention of the Learned Senior Counsel for the
Petitioner that the Petitioner had placed on record various documents
evidencing payments made to some unpaid vendors of the Respondent
which was significantly admitted by the Respondent during
admission/denial of the documents. These documents included request
letters of various vendors, copies of the cheques issued to the vendors as
well as receipts received from them in acknowledgment and ran into as
many as 100 pages. In addition, there was evidence in the form of
testimony of the Petitioner's witness RW-1 (questions 82-85) who was
cross-examined as well as testimony of RW-2 and RW-3 who withstood
the cross-examination by the Respondent. The finding that no documents
were produced by the Petitioner in support of the payments made,
therefore is in ignorance of the documentary and oral evidence on record
and as held by the Supreme Court in Ssangyong (supra) would make the
findings contrary to law. The Award to the extent it rejects the Counter
Claim deserves to be set aside.
66. Counter Claim No.7 relates to delayed compensation amounting to
Rs.20,50,48,986/- under Clause-44 of the GCC. Rejecting the Counter
Claim the Learned Arbitrator has held that delay in progress of the work
was not solely attributable to the Respondent and that the Petitioner had
itself obtained extension of deadline from DG-MAP on 13.08.2012. In
view of this, the principle of Clause-44 cannot be applied against the
Respondent. Clause-44 GCC is as follows:-
"44. Compensation for delay
If the Contractor fails to complete the Works and clear the
site on or before the date(s) fixed for completion, he shall
without prejudice to any other right or remedy of
Government on account of such breach, be liable to pay
compensation as under :-
Zero point five percent (0.5%) of the Contract value of the
item or group of items of Work (excluding the Contract
value of such individual items as are completed and taken
over by P.M. on or before the date(s) fixed for completion,
in terms of condition 43 hereof) for which a separate period
of completion is given in the Contract, for every week that
the whole of the work in respect of the item or group of item
of work concerned remains uncompleted, even though the
Contract as a whole be completed by the latest date
specified in the Contract for any item or group of items of
Works.
For the purpose of this condition the 'Contract Value' shall
be the value at contract rates of the work as actually
ordered including all deviation orders on the Contractor.
When the delay is not a full week or in multiples of a week
but involves a fraction of a week, the compensation payable
for that fractions shall be promotional to the number of days
involved.
Provided always that the total amount of compensation to be
paid under this condition shall not exceed ten percent of the
Contract value."
67. Reading of the award makes it clear that the rejection of the
Counter Claim is essentially on account of the findings of the Arbitrator
against the Petitioner in Claim No.1. I have already held under Claim
No.1 that the Learned Arbitrator was not justified in adjudicating on the
legality of the termination as the termination was never challenged before
the Learned Arbitrator. Since the Respondent accepted the termination it
was not open to argue that it was the Petitioner who was responsible for
delay and that the Respondent had not abandoned the work. Thus the
premise of rejecting Counter Claim No.7 in my view is incorrect.
Moreover, the Learned Arbitrator has held that the Petitioner adopted a
simplistic and erroneous approach towards computation payable under
this head and the proper course of action would have been to charge 0.5%
of the value of the "specific works" which has been delayed for every
work from the planned date of completion of that "particular work".
68. Learned Senior Counsel for the Petitioner has rightly urged that the
Respondent had stopped working from September 2011 till termination
and in 22 months had executed work worth Rs.8.94 crores only. Work-
wise computation of delay compensation computes to more than 10% of
the contract value and therefore as rightly contended it had to be
restricted to a maximum of 10% of the contract value under Clause 44
GCC and which is what was claimed by the petitioner. In fact, the
respondent never objected to the method of computation. It was thus not
open to the Learned Arbitrator to reject the entire Counter Claim of the
Petitioner assuming for the sake of argument that an error was found in
the methodology of computation. This portion of the Award in my view
deserves to be set aside.
69. Insofar as Counter Claim No.11 is concerned, the same was for
refund of Rs.20,63,931/- paid in excess on account of labour escalation.
The case of the Petitioner is that admittedly Rs.33,21,995/- was paid to
the Respondent as "on account payment" towards escalation.
Subsequently however it was found that Rs.20,63,931/- had been paid in
excess, which was recovered by DG-MAP from the Petitioner and
therefore recoverable from the Respondent. The Learned Arbitrator while
rejecting the counter claim observed that if the payment had been made
without the approval of the DG-MAP then clearly the petitioner had itself
to blame. Petitioner contends that under Clause 54 GCC the amount paid
to the Respondent was "on account" payment, subject to adjustment in
the final bill. The Arbitrator has referred to Clause 12 of the Agreement
which provided the manner of payment of the Respondent's bills, which
significantly was relied upon by the Petitioner itself. The Arbitrator
relying on Clause 12 has observed that the mechanism envisaged under
the terms of the Agreement required the Petitioner to provide an advance
cheque to the Respondent only after the Respondent's bills had been
approved by DG-MAP. The cheque was to be encashed only after DG-
MAP paid the amount of that bill into the account of the Petitioner and
therefore according to the Learned Arbitrator it is inconceivable that any
amount could be paid by the Petitioner to the Respondent at its own risk
and consequences before the bills were formally approved by DG-MAP.
The Arbitrator also found that there was no document on record to
substantiate the Petitioner's assertion that DG-MAP had approved only a
sum of Rs.12,58,063.86/- against an amount of Rs.33,21,995/- claimed by
the Respondent. The fact that the Petitioner's Project Manager approved
the bill was not denied by the Petitioner and if the payment had been
made without the approval of DG-MAP, then the Petitioner had itself to
blame.
70. I have considered the reasoning of the Arbitrator and also perused
Clause 12 of the Agreement, which has been extracted in the earlier part
of the judgement. It is obvious that Clause 12 envisages a mechanism that
the bills of the Respondent were subject to final approval by the DG-
MAP and only after the amount was credited into the account of the
Petitioner, the payments were to be released to the Respondent. The
Supreme Court in SEAMAC (supra) has reiterated the proposition of law
that the Court in a judicial review, while deciding a challenge under
Section 34 of the Act to an Award by the Arbitrator cannot interfere in
the view of the Arbitrator unless there is patent illegality of the threshold
envisaged under the Section. If the view of the Arbitrator is a plausible or
a possible view the same has to be upheld. The view of the Arbitrator
with respect to counter claim No.11 of the Petitioner in my view is a
plausible view and a correct interpretation of Clause 12 of the Agreement
and calls for no interference.
71. In view of the above the petition is partly allowed.
72. The Award dated 04.03.2017 is upheld with respect to Claim No.3
and Counter Claim No.11 as well as other portions not challenged before
this Court. Award is set aside with respect to Claim Nos. 1 and 2 and
Counter Claim Nos.2 and 7 to the extent noted above. Petitioner is at
liberty to agitate the said Claims and Counter Claims, in accordance with
law.
73. Pending application also stands disposed of.
JYOTI SINGH, J
NOVEMBER 17th , 2020
yg/yo/dkb
