Delhi High Court
National Projects Construction ... vs M/S Interstate Construction ... on 2 August, 2021
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 02.08.2021
+ O.M.P. (COMM.) 78/2021
NATIONAL PROJECTS CONSTRUCTION
CORPORATION LIMITED ..... Petitioner
versus
M/S INTERSTATE CONSTRUCTION
COMPANY ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Rajat Arora and Ms Renu Bhandari,
Advocates.
For the Respondent : Mr M. Lall and Mr Sajjan Singh,
Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. National Projects Construction Corporation Limited (hereinafter
'NPCC') has filed the present petition under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter the 'A&C Act')
impugning an arbitral award dated 28.10.2020 (hereafter 'the impugned
award') rendered by the Arbitral Tribunal comprising of Justice
(Retired) R.C. Jain, as the Sole Arbitrator.
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By:DUSHYANT
RAWAL
2. The impugned award was rendered in the context of disputes that
had arisen between the parties in connection with the two separate Work
Orders: (i) Work Order No. 917344/838 dated 19.06.1984 in respect of
the work "excavation of foundation package work-II 3 x 500 MW of
National Thermal Power Corporation Limited, Ramagundam Super
Thermal Power Project, Ramagundam"; and (ii) Work Order No.
917344/2382 in respect of "Foundation package work etc.
Ramagundam". NPCC was engaged by National Power Thermal
Corporation (NTPC) for execution of certain works. NPCC, in turn, had
entered into the contract with the respondent for completion of the said
works in terms of the aforementioned Work Orders. The works
contracted to the respondent in terms of the Work Orders was completed
in the year 1987. NPCC paid the respondent for the work done after
withholding certain sums on account of recoveries. The respondent
disputed the said recoveries. In addition, the respondent also raised
certain claims but they were not accepted by NPCC. It was stated that
recommendations were made by certain officers of NPCC in respect of
certain claims made by the respondent. However, NPCC asserts that the
said recommendations were not accepted by its superior officers.
3. The respondent invoked the Arbitration Clause by a notice dated
17.05.1993. However, NPCC did not take immediate steps for the
appointment of an arbitrator. Finally, by a communication dated
07.10.1997, the then Chairman and Managing Director of NPCC
appointed Sh. Shivo Moy Ghosh, Additional General Manager, NPCC
as a Sole Arbitrator to adjudicate the subject disputes. Thereafter, on
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By:DUSHYANT
RAWAL
20.01.1998, the respondent filed its Statement of Claims before the
learned Arbitrator claiming an aggregate amount of ₹4,46,29,404/-
along with pendente lite and future interest at the rate of 24% per
annum. The disputes remained pending with the learned Arbitrator for
a considerable period of time. The averments made in the petition
indicate that certain directions had been passed by the learned
Arbitrator. The respondent being aggrieved by the said directions, had
filed a petition under Section 14 of the A&C Act (being OMP
214/2002), inter alia, praying that the mandate of the learned Arbitrator
be terminated and an independent arbitrator be appointed in his place.
4. By an order dated 11.10.2004, this Court terminated the mandate
of Sh. Shiva Moy Ghosh and appointed Sh. A.S. Chandhiok, Senior
Advocate as the Sole Arbitrator. NPCC challenged the said order
before the Division Bench of this Court [FAO (OS) 241/2004]. The said
appeal was disposed of by an order dated 02.02.2005 and the Division
Bench of this Court, appointed Sh. L.R. Gupta, former Director General
of CPWD as the Sole Arbitrator in place of Sh. A.S. Chandhiok.
5. Shri L.R. Gupta, entered upon reference on 26.01.2006. At that
stage, NPCC filed its reply to the Statement of Claims before the
Arbitral Tribunal. NPCC also moved an application dated 23.02.2007
seeking to challenge the authority of Sh. Jagdish Raj Yadav to file the
Statement of Claims on behalf of the respondent. The learned
Arbitrator dismissed the said application by an order dated 03.08.2007.
NPCC challenged the said order by filing a petition under Section 34 of
the A&C Act (being OMP No. 537/2007). While the said petition was
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By:DUSHYANT
RAWAL
pending, Sh. L.R. Gupta resigned as the Arbitrator on 23.06.2008. It is
stated in the petition that he expired in the year 2013.
6. The petition filed by NPCC - OMP No. 537/2007 captioned
"National Project Construction Corporation Ltd. v. M/s. Inter State
Constructions" - was disposed of by this Court by an order dated
30.01.2017.
7. The respondent filed a petition under Section 15 of the A&C Act
[being OMP (T) (COMM) 30/2018] seeking appointment of a Sole
Arbitrator in place of Sh. L.R. Gupta. The said petition was disposed of
by an order dated 31.05.2018 and Justice (Retired) R.C. Jain, former
Judge of this Court, was appointed as a Sole Arbitrator to adjudicate the
disputes between the parties.
8. The learned Arbitrator accepted his appointment and held the
first hearing on 03.05.2019. It is seen from the above that the arbitral
proceedings between the parties spanned over twenty-seven years and,
finally culminated in the impugned arbitral award.
9. The parties did not lead any oral evidence before the Arbitral
Tribunal and agreed to rely on the documents and material placed on
record.
10. A tabular statement indicating the claims made by the respondent
before the Arbitral Tribunal's award in respect of those claims is set out
below:
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By:DUSHYANT
RAWAL
Claim Particulars Amount Amount
No. Claimed Awarded
(a) Escalation at 10% for work order ₹20,71,322.00 ₹20,71,322.00
(b) Escalation at 10% for work order ₹1,84,418.77 ₹1,84,418.77
(c) Refund of panel recovery of steel
taking 5% of scrap wastage in place
of 3% wastage:-
I) Steel difference ₹1,75,132.00
II) M.S. Found Steel ₹1,806.42
III) 12 Dia M.S. ₹68,750.00
IV) Structural Steel ₹2,513.28
V) Steel Plates ₹2,649.84
VI) Scrap made in Labour rates ₹12,000.00
Total ₹2,62,850.70 ₹1,82,463.70
(d) Unreasonable Recoveries:-
i) Cribes ₹3,747.75
ii) Shutter Plates ₹38,322.65
iii) B.F.P. Hire charges for ₹15,776.31
shutter plates
iv) B.F.P. Hire charges for ₹64,521.00
shutter plates
v) Refund of 28% overhead ₹60,833.00
supply for metal
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By:DUSHYANT
RAWAL
vi) Dozer Recovery for work ₹10,676.00
order no. 48/4
vii) Cubes failure (never given in ₹34,701.92
writing of any cube failure of any
member)
viii) Chain pulley block (not with ₹8,000.00
us)
ix) Clamps (already returned) ₹14,990.00
x) Pipes (already returned) ₹89,353.00
Total ₹3,40,921.63 ₹60,833.00
(e) Work done by other agencies but not ₹84,447.00 ₹84,447.00
in our scope like plastering etc.
(f) Held amounts:-
i) Amount held on account of ₹3,95,000.00
grouting T.G.
ii) Amount held on account of ₹20,000.00
grouting C.E.P
iii) Staging held amount of T.G. ₹3,09,203.14
iv) Work order no. 48/4 ₹43,000.00
withheld amount
v) Work order no. 47/11 ₹51,803.00
withheld amount
vi) Work order no. 48/ shutter
plates held ₹23,000.00
vii) Curing held amount 48/4
₹3,000.00
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By:DUSHYANT
RAWAL
viii) Work order no. 48/4 E.S.P. ₹10,000.00
rectification held amount
ix) Work order no. 48/4 T.G. ₹5,000.00
₹8,60,004.14
held amount for final shape ₹8,60,004.14
Total
(g) Balance payable in bills
i) Payable in bills 47/11 ₹64,376.76
ii) S.D. 47/11 total balance ₹2,02,870.00
iii) Work Order no. 48/4 money ₹84,000.00
payable in bills
Total ₹3,51,246.76
(h) Difference in excavation ₹1,31,464.00
(i) Booking of C.E.P. in Package-IV as ₹17,690.00
agreed by E.D.S.R. differences
(j) Claims of not allotting quarry as ₹2,66,000.00
agreed by E.D.S.R.
(k) 1200m3of stone aggregate brought ₹13,40,000.00
from Karim Nagar for rate
differences of ₹70/- m3extra and the
claim was agreed by EDSR referred
to our letter ISC/Claims/1 dt.
14.10.89 para III
(l) Idle labour charges refer our letter ₹4,81,000.00
ISC/Claims/1 dt. 14.10.89, para IV
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By:DUSHYANT
RAWAL
(m) 2% interest rate difference on ₹50,000.00
mobilization advance
(n) Interest on delayed release of S.D. ₹2,40,000.00
refer para 9 of our letter ISC/Claims
1 dt. 14.10.89
(o) Mental anguishes, torture and loss ₹60,00,000.00
of social status suffered refer Letter
No. ISC/Claims/1 dt. 14.10.89 para
II
(p) Addl. 24% interest for 10.5 years ₹3,19,57,039.00
w.e.f. July 1987 up to Dec. 1997
Total ₹4,46,38,404.00 ₹34,43,490.61
11. Apart from the above amount, the Arbitral Tribunal also entered
an award for payment of interest to the respondent as under:
(a) Pre-reference/past period interest at the rate of 18% per annum
on the sum of ₹34,43,490.61/- with effect from July 1987 up till
19.01.1998.
(b) Pendente-lite interest at the rate of 12% per annum with effect
from 20.01.1998 up till 31.12.2008 on the total amount (that is,
principal amount and the amount of interest of the pre-
reference/past period).
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By:DUSHYANT
RAWAL
(c) Pendente-lite interest at the rate of 12% per annum with effect
from 01.01.2017 till the date of the award on the total amount
(that is, principal amount plus amount of interest of the pre-
reference/past period).
(d) Future interest at the rate of 18% per annum from the date of the
award till the date of payment on the total amount (that is,
principal amount added to the amount of interest of the pre-
reference/past period).
12. Apart from the above, the Arbitral Tribunal also awarded costs
quantified at ₹12,50,000/- to the respondent and directed NPCC to bear
its own costs.
Submissions
13. Mr Rajat Arora, learned counsel appearing for NPCC, assailed
the impugned award, principally, on two fronts. First, he submitted that
the award of escalation in respect of the two separate Work Orders
(₹20,71,322/- plus ₹1,84,418.77/-) is without any justification and the
respondent did not establish the same. He submitted that there was no
material placed before the Arbitral Tribunal by the respondent to
substantiate that there was any escalation in either the labour rates or
the cost of material used. He also pointed out that the Work Orders in
question did not include any clause, which entitled the respondent to
claim any escalation. Notwithstanding the same, the Arbitral Tribunal
had awarded escalation on the ground that NPCC had not produced the
documents as required by the respondent. He stated that the approach
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RAWAL
of the Arbitral Tribunal is patently erroneous as no adverse inference
could have been drawn against NPCC. He submitted that the burden of
proof to establish its claims rested on the respondent and NPCC was not
required to disprove the same. He also submitted that initially orders
had been passed allowing respondent's application for inspection of
records but despite the same, the respondent had not taken the necessary
steps to inspect the records available with NPCC. He submitted that the
works was completed way back in 1987 and NPCC could not be
expected to produce the records pertaining to the said works after more
than two and a half decades.
14. He also submitted that there was no basis for the claim of
escalation of ₹1,84,418.77/-. He submitted that the Work Order No.
47/11 was only for a sum of ₹5 lacs and even if it is assumed, that NPCC
had agreed to reimburse escalation in respect of the work done beyond
that amount, the escalation calculated at 10% of the contract value
would be much less than the amount awarded by the Arbitral Tribunal.
He submitted that the Arbitral Tribunal had noted that the respondent
had not provided any reason for quantifying its claim in respect of Work
Order No. 47/11 at ₹1,84,418.77/- and yet had awarded the said amount
in favour of the respondent.
15. Next, he submitted that the Arbitral Tribunal had awarded
interest at exorbitant rates. It had awarded interest for the pre-reference
period from July 1987 to 19.01.1998 at the rate of 18% per annum. The
Arbitral Tribunal had awarded pendente lite interest at the rate of 12%
per annum for the period between 20.01.1998 till 31.12.2008. The
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By:DUSHYANT
RAWAL
Arbitral Tribunal had awarded future interest at the rate of 18% per
annum in view of the provisions of Section 31(7)(b) of the A&C Act.
He submitted that the Arbitral Tribunal had failed to notice that the
provisions of Section 31(7)(b) of the A&C Act had since been amended
and the interest had been reduced to 2% per annum above the current
rate of interest prevalent on the date of the award. He submitted that the
current rate of interest was in the vicinity of 7% per annum and
therefore, award of future interest at the rate 18% per annum was
patently illegal.
Reasons and Conclusion
16. The first and foremost question to be examined is whether the
impugned award is patently illegal inasmuch as the Arbitral Tribunal
has accepted the respondent's claim for escalation.
17. The respondent had claimed escalation at the rate of 10% on the
value of work done and had quantified its claim at ₹20,71,322/- in
respect of Work Order No. 48/4 and ₹1,84,418.77/- in respect of Work
Order No. 47/11. It is apparent from the record that the respondent had
not produced any material to establish that it had incurred additional
costs justifying its claim for escalation. However, it is material to note
that NPCC had not raised any dispute on that count. A plain reading of
the reply filed on behalf of NPCC to the Statement of Claims indicates
that NPCC had sought to contest the aforesaid claim on the ground that
there was no provision for payment of escalation under the Work
Orders. NPCC claimed that the respondent was not entitled to any
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By:DUSHYANT
RAWAL
escalation as it had accepted the Work Orders on its terms, which did
not include any provision for payment of escalation. Nonetheless, it did
not dispute that subsequently it had agreed to pay the escalation to the
respondent. By its letter no. 917337/2383 dated 24.12.1984, NPCC had
agreed to delete the clause that stated that no escalation would be
payable and had replaced the same by a clause that provided that 85%
of the amount of escalation received from clients would be paid subject
to a maximum of 10% of the contract value. It also provided that the
base date for calculation of escalation would be 15.09.1984. It was
pointed out that only Work Order No. 48/4 had been modified and no
such modification was carried out insofar as the terms and conditions
of Work Order No. 47/11 was concerned. However, NPCC had also
agreed to provide escalation above the value of ₹5 lacs.
18. Before the Arbitral Tribunal, NPCC claimed that the escalation
that was accepted by NPCC was paid and nothing further was required
to be paid to the respondents. Insofar as the respondent's claim that it
was entitled to 85% of the escalation paid by NTPC (the principal
employer to NPCC) subject to 10% of the value of work is concerned;
NPCC had contested the said claim principally on the ground that the
base date on which the escalation was required to be computed was
15.09.1984 whereas NTPC had awarded the contract to NPCC earlier
and therefore, the escalation payable by NTPC to NPCC was to be
calculated in reference to a different base date.
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By:DUSHYANT
RAWAL
19. It is, thus, clear that there was no controversy whether the
respondent had incurred the escalation as claimed by it. NPCC did not
contest the respondent's claim on that ground.
20. The respondent's claim for escalation in respect of Work Order
No. 48/4 was based on Clause 14.1 of the Special Conditions of
Contract as modified by a letter dated 24.12.1984. Clause 14.1 of the
Special Conditions, as applicable to the Work Order, reads as under:
"The item rates quoted by the Contractor will be
treated as firm rates till the completion of work and no
escalation will be paid to the contractor on any account
or for any reasons, whatsoever on any of the items."
21. However, by a letter dated 24.12.1984, NPCC communicated to
the respondent that it had awarded the contract to the respondent on the
terms and conditions as stated in the tender documents with certain
modifications. The modification being that Clause 14.1 of the Special
Conditions, as included in the tender documents, was deleted and
substituted by the following clause:
"Eighty five percent of the amount of escalation
received from clients will be paid to you subject to a
maximum of ten percent of the contract value. Base date
for calculation of escalation will be 15.09.84."
22. It was also admitted by NPCC in its reply to the Statement of
Claims that even though Work Order 47/11 did not provide for any such
modification, NPCC had considered the respondent's request in this
regard and agreed to apply the same clause as modified in Work Order
No. 48/4. However, in respect of claim relating to Work Order No.
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RAWAL
47/11, NPCC raised an additional defence that the escalation as agreed
was to be applicable only in respect of works executed beyond the value
of ₹5 lacs.
23. In view of the above, the principal controversy before the Arbitral
Tribunal was whether the respondent was entitled to 85% of the
escalation amount received by NPCC from its client (NTPC) in respect
of the work executed by the respondent. In respect of Work Order No.
48/4, the only defence that was raised by NPCC was that the respondent
was not entitled to such escalation as claimed because the base date for
the escalation received from NTPC was much earlier than the base date
of 15.09.1984 as agreed between the parties. Therefore, escalation
could not be calculated on that basis and consequently, no escalation
was payable. As noticed above, in respect of Work Order no. 47/11,
NPCC raised an additional defence that the respondent was entitled to
escalation only in respect of work done beyond the initial award of ₹5
lacs.
24. As is apparent from the above, the controversy did not require the
respondent to place the actual escalation incurred by it.
25. In the supplementary written submissions filed by NPCC before
the Arbitral Tribunal, it was contended that the Work Orders in question
also provided that the payments would be made on submission of
Running Account Bills (RA Bills). NPCC had referred to Clause 7.0 of
the Work Orders, which stipulated that 75% of the value of work done
would be paid as an advance on submission of the RA Bills and on
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RAWAL
receipt of the payments from NTPC against its RA Bills. The balance
amount would be paid after verification. NPCC contended that in terms
of the terms and conditions as applicable to the Work Orders in
question, it was essential for the respondent to submit a RA Bill for
claiming any payment from NPCC and, the said bill was required to be
prepared on the basis of actual measurements recorded by the
authorized person in the presence of the concerned party. NPCC had
contended that since all items having financial value were required to
be entered into the measurement book, the respondent's claim could not
be accepted as it had failed to produce the RA Bills, Measurement
Books, Level Books etc., which were essential for adjudicating the
respondent's claim.
26. As noticed above, this is not the defence raised by NPCC in its
reply to the Statement of Claims.
27. The Arbitral Tribunal examined the aforesaid controversy. Since
it was admitted that Clause 14.1 of the Special Conditions as applicable
to the Work Order had been modified to provide for payment of 85% of
the amount of escalation received from clients subject to maximum of
10% of the contract value, there was no doubt that the contract between
the parties stipulated for payment of escalation.
28. The Arbitral Tribunal also noted that there was no dispute that
NPCC had received the escalation from NTPC in respect of the works
falling within the scope of the Work Orders.
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By:DUSHYANT
RAWAL
29. The Arbitral Tribunal accepted the respondent's claim that it was
entitled to receive escalation in terms of the said clause. And, thus, was
entitled to 85% of the escalation amount that was received by NPCC
from NTPC subject to a maximum of 10% of the contract value. The
respondent proceeded on the basis that the respondent was not required
to produce any other document since its claim was based entirely on the
interpretation of Clause 14.1 of the Special Conditions as modified by
the letter dated 24.12.1984.
30. It is in the aforesaid context that the Arbitral Tribunal noted that
NPCC had not disclosed the amount of escalation received by it from
NTPC despite the Arbitral Tribunal passing orders for the same. The
same coupled with the fact that NPCC did not dispute that it had
received escalation from NTPC in respect of the works executed under
the Work Orders in question, the Arbitral Tribunal concluded that the
escalation would be payable at the maximum amount of 10% of the
contract value under the work orders.
31. Clearly, the respondent could not have produced any material to
establish the quantum of escalation received by NPCC from NTPC as
that fact was only within the special knowledge of NPCC (or NTPC)
and it was required to disclose the same pursuant to the directions issued
by the Arbitral Tribunal.
32. The contention that NPCC could not be called upon to produce
the said details more than two and a half decades after the contract had
been completed, is also unpersuasive. The issue of escalation was not a
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RAWAL
dead issue and was a subject matter of controversy between the parties
even prior to the respondent issuing the notice of arbitration on
17.05.1993. It has been averred by NTPC in the present petition that
certain recommendations had been made by GGM, NPCC, by a letter
dated 27.12.1990 but the same was not accepted by the superior
officers. Thus, NPCC was required to preserve the records relevant to
the dispute. In any view of the matter, the respondent had invoked the
arbitration on 17.05.1993 and thereafter, there can be no excuse for
NPCC not to have preserved the relevant records. The quantum of
escalation received by NPCC from NTPC was relevant as the
respondent had claimed 85% of the said escalation received in respect
of the work executed under the Work Orders, which was to be paid to
it. In this context, the adverse inference drawn by the Arbitral Tribunal
cannot be faulted.
33. The Arbitral Tribunal also did not accept the contention that no
escalation was payable in respect of the initial amount of ₹5 lacs. The
Arbitral Tribunal found that there was no material to substantiate the
same. It found that there was no reason to confine the escalation only to
the value of the work exceeding ₹5 lacs. The Arbitral Tribunal accepted
that NPCC had agreed to pass through the escalation received from
NPCC to the extent of 85% subject to 10% of the contract value under
the Work Orders in question. In this view, there was no requirement for
any further calculation to be made.
34. Accordingly, the Arbitral Tribunal entered an award in the sum
of ₹20,71,322/- being 10% of the value of work executed under Work
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RAWAL
Order No. 48/4. Insofar as Work Order No.47/11 is concerned, the
Arbitral Tribunal found that the value of the Work Order was extended
initially for a sum of ₹5 lacs but by a corrigendum letter dated
07.08.1986, it was enhanced to ₹20,71,322/-. Thus, the respondent
would be entitled to 10% of the said amount. However, the respondent
had restricted its claim only to an amount of ₹1,84,418.77/-. Although
the respondent had not provided any calculation for the said amount,
since the same was less than 10% of the contract value, the Arbitral
Tribunal awarded the said amount in favour of the respondent. The
Tribunal also noted that NPCC had not challenged any of the figures as
put forth by the respondent. It had also not provided material to compute
the amount of escalation as payable in terms of the clause as agreed
between the parties. In addition to the above, the Arbitral Tribunal also
noted that the GGM (NPCC) had, by its letter dated 27.12.1990,
approved the escalation as claimed by the respondent and had
recommended payment of the same. Although the said
recommendations may not have been accepted by the superior officers,
there can be no dispute that the value of the said claims at some stage
had been examined by the officials of NPCC and no dispute regarding
the figures had been raised at least. None was placed before the Arbitral
Tribunal.
35. As noticed above, the dispute raised by NPCC was on the
principle that the escalation as claimed could not be awarded.
According to NPCC, it was not required to pass through the escalation
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RAWAL
received from NTPC but the same had to be recomputed based on a
different base date.
36. The view expressed by the Arbitral Tribunal is plainly a plausible
one and warrants no interference by this Court in proceedings under
Section 34 of the A&C Act. The contention that the respondent was
required to produce sufficient material to substantiate its claim as
noticed above, is unmerited. In view of the interpretation of modified
Clause 14.1 of the Special Conditions as applicable to the Work Order,
the Arbitral Tribunal's decision to draw an adverse inference against
NPCC for not producing the documents to substantiate the amount of
escalation received from NTPC, cannot be faulted.
37. The next question to be examined is whether the interest awarded
by the Arbitral Tribunal is exorbitant and unsustainable.
38. The respondent had claimed interest at the rate of 24% per annum
for a period of ten years and six months with effect from July 1987 to
December 1997. The respondent had quantified the said amount at
₹3,19,57,039.00/-. In addition to the above, the respondent had also
claimed pendente lite and future interest at the rate of 24% per annum.
39. The Arbitral Tribunal had considered the said claim for pre-
reference interest, pendente lite interest and future interest separately.
In respect of the pre-reference interest, the Arbitral Tribunal awarded
interest at the rate of 18% per annum on the claims awarded with effect
from July 1987 to 19.01.1998 being the date on which the Statement of
Claims was filed. The Arbitral Tribunal did not allow the respondent's
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RAWAL
claim for interest at the rate of 24% per annum as it found the said rate
to be on a higher side. The Arbitral Tribunal noted that the primary
lending rates of nationalized banks were at their peak during the last
two decades of the twentieth century and the first decade of the present
century. Keeping that in view, the Arbitral Tribunal considered the rate
of interest at 18% per annum to be appropriate. Although it is contended
on behalf of NPCC that the said interest is excessive, there is no material
that has been placed on record to contradict the aforesaid reasoning. The
Arbitral Tribunal had noted that during the period in question, that is,
July 1987 to 19.01.1998, the nationalized banks were also lending at the
rate of 18% per annum. NPCC had produced no material to dispute the
same. It is common knowledge that the interest rates during the said
period were high. The A&C Act was enacted in the year 1996 and
Clause (b) of Section 31(7) of the A&C Act as originally enacted also
provided for future interest at the rate of 18% per annum. Thus, the
Arbitral Tribunal's decision to award pre-reference interest at the rate
of 18% per annum warrants no interference by this Court.
40. As far as pendente lite interest is concerned, the Arbitral Tribunal
has awarded 12% per annum for the period 20.01.1998 till 31.12.2008
and from 01.01.2017 till 28.10.2020. Plainly, pendente lite interest at
the rate of 12% per annum cannot by any stretch be considered to be
exorbitant or unreasonable. Moreover, the Arbitral Tribunal has not
awarded interest for the period 31.12.2008 to 01.01.2017. The Arbitral
Tribunal did not award any pendente lite interest for the period of eight
years from 2009 to 2016 as it accepted that during this period, the
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RAWAL
respondent was remiss and had pursued its claim before the Arbitral
Tribunal diligently. Sh. L.R. Gupta, the then Arbitrator had resigned
with effect from 26.03.2008, however, the respondent had not taken
reasonable steps for seeking appointment of another arbitrator in his
place. Such a petition was filed after this Court had disposed of NPCC's
petition under Section 34 of the A&C Act on 30.01.2017.
41. The respondent has not challenged the decision of the Arbitral
Tribunal in rejecting its claim for pendente lite interest for the said
period of eight years.
42. The Arbitral Tribunal has awarded 18% future interest from the
date of the award till the date of the payment. The Arbitral Tribunal has
awarded the said interest relying on the provisions of Section 31(7)(b)
of the A&C Act on an assumption that the said provision has also
provided for award of future interest at the rate of 18% per annum.
However, Clause (b) of Section 31(7) of the A&C Act was substituted
by the Arbitration and Conciliation (Amendment) Act, 2015 with
retrospective effect from 23.10.2015. In terms of the amended clause,
the arbitral award, unless the award otherwise directs, would carry
interest at the rate of 2% higher than the current rate of interest prevalent
on the date of the award. The explanation to Section 31(7)(b) further
provides that the expression "current rate of interest" would have the
same meaning as assigned to it under Clause (b) of Section 2 of the
Interest Act, 1978.
43. Section 2(b) of the Interest Act, 1978 defines the expression
"current rate of interest" to mean the highest of the maximum rates at
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By:DUSHYANT
RAWAL
which interest may be paid on different classes of deposits by different
classes of scheduled banks in accordance with the directions given or
issued to banking companies generally by the Reserve Bank of India
under the Banking Regulation Act, 1949.
44. In view of the above, the Arbitral Tribunal's reasoning to award
future interest at the rate of 18% is ex facie erroneous.
45. The Arbitral Tribunal had also noted that the interest rates during
the last two decades of the last century and the first decade of this
century were at their peak and the same has since reduced. Thus, the
award of interest at the rate of 18% per annum from the date of the
award is not in consonance with the observations made by the Arbitral
Tribunal, which recognized that the interest rate had fallen considerably
during the second decade of this century.
46. In view of the above, this Court considers it apposite to set aside
the impugned award to the extent the Arbitral Tribunal had awarded
future interest at the rate in excess of 9% per annum.
47. The Arbitral Tribunal had awarded a sum of ₹1,82,463.70 in
respect of penal charges for recovery of steel beyond three percent. The
Arbitral Tribunal found that NPCC could recover penal charges for steel
by adjusting 5% as scrap wastage and not 3%. The Tribunal noted that
NPCC by its letter dated 05.05.1992 had confirmed that an allowance
of 5% wastage of steel had been accepted by NPCC and necessary
adjustments were under process. In view of the above, the decision of
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By:DUSHYANT
RAWAL
the Arbitral Tribunal to enter an award for excess recovery on account
of steel cannot be faulted.
48. In addition, the Arbitral Tribunal also entered an award of
₹60,833/- on account of excess recovery as it found that NPCC had
already recovered charges for the aggregate and 28% overheads on the
same and thus, no additional recovery on account of supply of aggregate
could be made. This Court finds no ground to interfere with this
reasoning as well.
49. The Arbitral Tribunal had further accepted the respondent's
claim for a sum of ₹84,447/-, which had been deducted by NPCC from
its final bill as work done by another agency. The respondent had
claimed that the said work did not fall within the scope of works and
therefore, no amount could be deducted for getting the said work done
from another agency. The Arbitral Tribunal found that there was no
material to establish that the said charges were in relation to works that
fall within the scope of the two Work Orders awarded to the respondent.
The Arbitral Tribunal also allowed the respondent's claim aggregating
to a sum of ₹8,60,006.14/- on account of amounts withheld by NPCC.
NPCC had withheld the said amounts on various grounds including on
account of work claimed to be done at the respondent's risk and cost.
The Arbitral Tribunal found that NPCC had been unable to substantiate
withholding of such amounts. This Court finds no reason to interfere
with the said award as well.
50. Although Mr Arora had briefly touched upon the said claims, he
had fairly stated that the decision of the Arbitral Tribunal on merits
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By:DUSHYANT
RAWAL
could not be assailed as perverse, without any material or patently
illegal. As noticed above, he had largely confined his arguments to
award of the respondent's claim for escalation and interest.
51. In view of the above, the present petition is partly allowed to the
extent that the award of future interest at the rate exceeding 9% per
annum from the date of the award till the date of the payment is set
aside.
52. The petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J
AUGUST 02, 2021
RK
Signature Not Verified
By:DUSHYANT
RAWAL
