Delhi High Court
H.R. Builders vs Delhi State Industrial & ... on 11 August, 2021
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 11.08.2021
+ O.M.P. (COMM.) 324/2018
M/S H.R. BUILDERS ..... Petitioner
versus
DELHI STATE INDUSTRIAL & INFRASTRUCTURE
DEVELOPMENT CORPORATION LTD. ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Avinash Kumar Trivedi, Advocate
with Mr Ayush P. Shah, Advocate.
For the Respondent : Ms Firdouse Qutb Wani, Advocate
with Mr Gajender Sharma and
Mr Satish Chandra, ARs for DSIIDC.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J.
1. The petitioner (hereinafter „HRB‟) 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
13.04.2018 (hereinafter „the impugned award‟) rendered by an
Arbitral Tribunal comprising of a Sole Arbitrator.
2. The impugned award was rendered in the context of disputes
that have arisen between the parties in connection with a contract
awarded to HRB for refurbishment and upgradation of twenty-five
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RAWAL
government schools. The Arbitral Tribunal has rendered a net award
of ₹3,04,91,623/- along with interest in favour of HRB.
3. Briefly stated, the relevant facts that are necessary to address
the controversy are as under:
4. The Government of NCT of Delhi launched a project for
refurbishment and upgradation of 198 schools run by the Government
of NCT of Delhi. The respondent (hereinafter „DSIIDC‟) was
entrusted with implementation of a part of the project covering
twenty-five schools.
5. On 08.07.2009, DSIIDC invited tenders for entire works (both
civil and electrical) to be executed in respect of twenty-five schools
being a part of the project entrusted to DSIIDC. HRB submitted its bid
for executing the aforesaid works. After negotiations, DSIIDC
accepted HRB‟s offer to execute the said works for a total
consideration of ₹35,46,00,174/-. On 18.08.2009, DSIIDC issued a
Letter of Acceptance (LoA) awarding the work of "Integrated
Infrastructure Development of Delhi Govt. Schools" under the sub-
head "Improvement and Upgradation of 25 Government Schools
Buildings in North West 'A' District (Composite Work)".
6. The work was to commence on 28.09.2009 and it was stipulated
that the work would be completed on or before 27.09.2010.
7. Thereafter, on 30.09.2009, the parties entered into a formal
agreement (hereinafter „the Agreement‟) for execution of the works.
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RAWAL
8. DSIIDC did not handover the work of twenty-five schools as
agreed to under the Agreement but handed over work pertaining to
only twenty-three schools. There were considerable delays in
completion of the works contracted to HRB and, the same were finally
completed on 18.01.2012; that is, after a delay of 478 days.
9. DSIIDC withheld part payments of the Final Bill and also made
certain recoveries from the amount payable to HRB. According to
DSIIDC, HRB had defaulted in performance of its obligations under
the Agreement within the stipulated time. HRB disputed the same.
According to HRB, the delay in execution of the works was due to
various reasons attributable to DSIIDC and it was not responsible for
any delay.
10. DSIIDC also claimed that the works executed were faulty and
sought to recover damages from HRB. HRB, on the other hand,
claimed that it was not only entitled to the payments withheld by
DSIIDC but was also entitled to compensation on account of
escalation and prolongation of works as well as profits for the works
reduced from the scope of the Agreement (work relating to two
schools which were not handed over to HRB).
11. In view of the aforesaid disputes, HRB invoked the Arbitration
Clause to refer the disputes to arbitration and requested that an
Arbitral Tribunal be constituted to adjudicate the disputes. On
24.10.2016, the Chief Engineer of DSIIDC appointed Sh. O.P. Bhatia,
Former Additional DG (Works Special), CPWD as the Sole Arbitrator
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to adjudicate the subject disputes.
12. HRB filed its Statement of Claims before the Arbitral Tribunal.
DSIIDC filed its Statement of Defence as well as counter claims
amounting to ₹20,05,00,000/-. One of the claims (Claim No.1)
preferred by HRB was greater in value than as indicated by HRB in its
request for arbitration, which was subsequently referred by Chief
Engineer of DSIIDC to the Arbitral Tribunal. In its request for
arbitration, HRB had, inter alia, claimed ₹53,90,498/- as payment due
under the Final Bill. However, in its Statement of Claims, HRB made
a claim of ₹1,40,94,470/- as due and payable under the Final Bill.
13. In addition, HRB also claimed ₹5,00,000/- as costs of
arbitration (Claim No.9). The said claim was also not included in the
claims that were initially made by HRB in its request for arbitration
before the concerned Authorities of DSIIDC. Consequently, this claim
was also not included in the disputes referred by the Chief Engineer,
DSIIDC to the Arbitral Tribunal.
14. In view of the above, on 29.03.2017, HRB sent a letter to the
Chief Engineer, DSIIDC requesting it to modify the amount of Claim
No.1 from ₹53,90,498/- to ₹1,40,94,470/- and, to also refer the claim
relating to costs of the arbitral proceedings quantified at ₹5,00,000/-,
to the Arbitral Tribunal.
15. In response to the aforesaid request, the Chief Engineer,
DSIIDC sent a letter dated 27.06.2017 to the Arbitral Tribunal
forwarding HRB‟s communication requesting that its claim for the
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RAWAL
enhanced value and its claim for costs be referred to the Arbitral
Tribunal, and requested the Arbitral Tribunal to peruse the same and
give its "decision/observations".
16. The Arbitral Tribunal responded to the said communication by
an e-mail dated 28.06.2017. The contents of the said e-mail are
reproduced below:
"Reference: Respondent‟s letter no. 1712 dtd. 27.6.2017
With reference to the above, I am to mention here that
either party can include its claim in the S.F./C.S.F.
regarding cost of arbitration even if it has not been
referred by the Chief Engineer as this claim can be
awarded by the A.T. under section 31 A (1) of the A &
C Act.
Making a reference to modify amount of any claim is
prerogative of the appointing authority for which cannot
give any decision or observations. However, I am to
make it clear that my award in respect of any claim will
not exceed the amount of claim referred to me."
17. In view of the above, on 26.08.2017, HRB filed an application
under Section 23(3) of the A&C Act praying that it may be permitted
to amend Claim No.1 and also claim costs for the arbitration
proceedings. On 05.09.2017, DSIIDC filed a reply to the said
application opposing the same.
18. The said application was disposed of by the Arbitral Tribunal
by an order dated 27.09.2017 allowing HRB to pursue its claim for
costs but denying its prayer for considering its Claim No.1 at the
enhanced value.
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by:DUSHYANT
RAWAL
19. Aggrieved by the same, HRB preferred a petition before this
Court under Article 227 of the Constitution of India [being CM(M)
No.1458/2017 captioned 'M/s HR Builders vs. DSIIDC']. While the
said petition was pending, the Arbitral Tribunal rendered the
impugned award. Consequently, on 10.07.2018, HRB withdrew its
said petition [CM(M) No.1458/2017] with liberty to agitate its
grievance by filing a petition under Section 34 of the A&C Act.
20. Thereafter, HRB filed the present petition.
21. At this stage, it is relevant to examine the impugned award. The
tabular statement indicating the award made against the respective
claims/counter-claims as summarized by the Arbitral Tribunal in the
impugned award is re-produced below:
Cla Claim in brief Amount Amount as Amount Re
im referred by per S.O.C. awarded m
No. the C.E.
ar
ks
1. Payment of 53,90,498 1,40,94,470 42,87,422
F/bill
2. Release of 1,28, 71,710 1,27,96,042 1,12,37,900
withheld
amounts and
amount of
illegal
recoveries
3. On a/c of 3,69,490 3,69,490 2,77,117
D.VAT
(W.C.T.) and
labor cess
4. On a/c of 5,10,02,733 3,04,86,958 91,38,560
escalations in
the extended
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RAWAL
period of
contract
5. Damages due to 3,32,43,766 3,32,43,766 48,45,700
keeping staff,
estt; and
machinery in
the extended
period
6. Loss of profit 67,02,683 67,02,683 NIL
due to reduction
in scope of
work
7. Revalidation 7,97,850 7,97,850 NIL
charges of
B.G.s due to
prolongation of
contract.
8. Interest on Amount not Intt. On (i) Intt. On
delayed specified withheld delayed
payments of RA amounts payment of RA
& F/bills, Rs.1,61,94,82 bills=2,27,424
withheld 1 + intt. On (ii) Intt. @
amounts as well other claims 8.5% p.a. on
as above @ 15% amounts
amounts awarded under
claim
nos.1,2&3 as
per details
9. Cost of 5,00,000+A. 2,00,000+2,77,
arbitration T.‟s fee 500 (under
section 38(2)
of the A&C
Act-1996)
Total 11,03,78,730 11,51,86,080 Rs.3,04,91,623
+ Intt. + intt. + intt. On
amounts
awarded under
claim
nos.1,2,&3 as
per details
Counter Claims:
1. Loss of 20,00,00,000/- 20,00,00,000/- NIL
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RAWAL
name,
reputation of
DSIIDC and
loss of work
of the
DSIIDC
2. Cost of 5,00,000/- + fee 5,00,000/- + fee NIL
arbitration and expenses
Total 20,05,00,000/- 20,05,00,000/- NIL
Submissions
22. Mr Trivedi, learned counsel appearing for HRB, assailed the
impugned award on two grounds. First, he submits that the Arbitral
Tribunal has grossly erred in not considering HRB‟s claim for
payment of the Final Bill over and above the amount that it had
initially claimed and, which was included along with a letter referring
the disputes to arbitration. He submitted that initially HRB had
quantified its claim for payment of Final Bill (Claim No.1) at
₹53,90,498/-. The claims as intimated to the concerned authorities of
DSIIDC were annexed to the letter dated 24.10.2016 issued by the
Chief Engineer (CE), DSIIDC appointing the learned Sole Arbitrator
to adjudicate the said disputes. He submitted that the said amount was
found to be erroneous, and therefore, HRB had enhanced the amount
under Claim No. 1 to ₹1,40,94,470/-. It had also sent a letter to the CE,
DSIIDC to refer the same to the learned Arbitrator. DSIIDC also sent
a communication to the learned Arbitrator seeking his decision,
however, the Arbitral Tribunal had confirmed that it would not award
any amount in excess of the amount initially claimed. He submitted
that this approach was erroneous as the Arbitral Tribunal was required
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RAWAL
to adjudicate the disputes and a variation in the amount of claim(s)
referred to the Arbitral Tribunal would not affect its jurisdiction to
adjudicate the same.
23. Next, Mr Trivedi submitted that the Arbitral Tribunal‟s decision
to reject HRB‟s claim for loss of profits on the unexecuted work
(Claim no.6) as well as its claim for bank charges for keeping the
Bank Guarantee alive (Claim No.7) is patently erroneous, illegal and
is liable to be set aside.
Reasons and Conclusion
24. The Arbitral Tribunal had restricted HRB‟s claim for payment
of the Final Bill to ₹53,90,498/- on the ground that it was the amount
of claim as referred to the Arbitral Tribunal. HRB had filed an
application under Section 23(3) of the A&C Act praying that it‟s claim
for payment of the Final Bill to the amount of ₹1,40,94,470/- be
considered as it has already applied to the Competent Authority
requesting it to modify the amount. However, the Arbitral Tribunal
rejected the same on the assumption that it was beyond its jurisdiction.
25. It is not disputed that HRB had applied to the Competent
Authority to refer the claim for the enhanced amount by a letter dated
29.03.2017. Prior to the said date, HRB had already filed a Statement
of Claims claiming a sum of ₹1,40,94,470/- as Claim No.1. HRB did
not receive any response to its letter, and therefore, sent a reminder on
29.05.2017. In response to the same, the CE, DSIIDC addressed a
letter dated 27.06.2017 and forwarded HRB‟s request to the Arbitral
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RAWAL
Tribunal and sought its "decision/observation". There is no procedure
for DSIIDC to have sought for any opinion of the Arbitral Tribunal in
this regard as HRB‟s request was merely to enhance the value of the
claim in respect of a subject matter of a claim (the payment of the
Final Bill) that had already been referred to the Arbitral Tribunal.
Plainly, it was not open for DSIIDC to restrict the right of HRB to
refer any dispute to arbitration. However, the Arbitral Tribunal
responded to the letter dated 27.06.2017 vide an e-mail dated
28.06.2017 clarifying that any award in respect of any claim would
not exceed the value of the claim. The import of the Arbitral Tribunal
was effectively to pre-empt HRB from pursuing its claim for the
amount as stated in the Statement of Claims.
26. Clause 25 of the Agreement requires all disputes that have not
been settled by the Superintendent Engineer or the Chief Engineer to
be referred to arbitration. In the present case, the dispute relating to the
payment of Final Bill remained unresolved and therefore, was referred
to arbitration.
27. At this stage it is also relevant to set out Claim No.1 as
articulated by HRB. The same is set out below:
"CLAIM No.1. A Sum of Rs.5390498/- on a/c
of final bill
The claimants rely on the submission made
under the head delay in payment in brief history
of the case and further submit that they
submitted the final bill vide their letter dated
25.04.12(C-26) amounting to Rs.325 lac read
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by:DUSHYANT
RAWAL
with C-27, C-28, C-29 dated 21.08.12, 01.10.12,
03.12.12 respectively, but the payment of the
same has not been released except some ad-hoc
payment of Rs.l,61,01,314/-. Now after perusal
of the final bill as prepared by the respondents
having filed, (The copy of the said bills filed
herewith as Annexure-B (Colly) for civil as well
for electrical) and the claimants are only
confining to the amount further due to them
which has been computed as under:-
The net amount payable worked out by the
respondents for both component
As per their final bill annexed as annexure-B
Rs.4287422/
a)Add for the amount recovered against item
No.152a to 242 =Rs.2000074/- (Detail as per
Annexure-B-1)
b)Add amount less paid due to part qty of BOQ
item paid at
Less than quoted rates (Civil) detail as annexure-
B2 = Rs.354719/
c) ........ do ....... do ... (electrical) ....... do ...... B3
= Rs.638185/-
d) Add for the excess security recovered for
SI/WS/water
Proofing etc. [Detail as per Annexure-C (Colly)]
= 3153423/-
e)Add for refund of security deposit of electrical
component=1660573/-
(Amount same as shown recovered in final bill)
f) Add credit amount claimed against part (a)
above = Rs.2000074/-
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RAWAL
Total amount = 1,40,94,470/-
Brief Description of each part:-
Part- a):-
No amount can be recovered against item No
.152 (a) to 242 because the nomenclature of
these items starts with credit which means that
the amount should be added. Further the special
condition on page 169 of the contract stipulates
that the Serviceable materials is the property of
the respondents, hence also no recovery can be
made. Instead credit is required to be given for
cleaning and making it usable for the
respondents which has been done the materials
was stacked properly at a place so desired by the
respondents. As a matter of fact Rs.20,00,074 is
further required to be added as credit to
claimants for the services rendered. Which has
been added at (f)
Part-(b) & (c):- Since there is no notice under
clause 12.3, therefore the quoted rates cannot be
reduced and that there is no notice under clause
12.3.
Part d):- As per S. No.7 on page 136 of the
contract under the heading BIDDERS TO
ENSURE THAT:-
Security deposit @. 5% of the actual cost of
work done for various specialized works under
the sub-head such as water proofing works,
water supply and sanitary installation etc. shall
be retained in addition to guarantee bond at the
time of release of security deposit, for 10 years
& 5 years to be reckoned from the date after the
expiry of maintenance period.
Therefore from the above it is clear that the rate
of deduction is 5% and on the item mentioned in
the condition and not on tiles or stone work.
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RAWAL
Secondly the amount is to be retained from the
amount of security deposit at the time of release
and not from the bills. Therefore deduction from
the bill itself is wrong.
Apart from the above the respondents have
deducted excess amount of security deposit
which is matter of claim and for other amount
deducted from the bills as well from the final
bill, the interest will also be claimed.
Part e):- The security deposit of civil work have
been released and there is no reason for not
refunding the same for electrical component
because there is no notice of any defect during
the maintenance period and that the maintenance
period is over.
Therefore the Ld. Arbitrator is requested to
please award the amount in favour of the
claimants."
28. It is apparent from the above that HRB‟s claim not only
included the amount of the Final Bill that remained unpaid (that
is,₹42,87,422/-) but also other claims, which according to HRB were
due and payable and were required to be included in its final Bill. The
same included a claim for a sum of ₹20,00,074/- for amounts
recovered against certain items (detailed as set out in Annexure B-1 to
the Statement of Claims); claim of ₹3,54,719/- and ₹ 6,38,185/- on
account of difference in the rates at which certain payments for work
was calculated; excess security recovered for SI/WS/Water Proofing
as detailed in Annexure-C, quantified at ₹31,53,423/-; refund of
security deposit for the electrical component quantified at
₹16,65,573/-; and a credit for ₹20,00,074/-.
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RAWAL
29. Although HRB had sought to include the above claims as a part
of its Claim No.1 (payment of Final Bill), it is apparent that the
controversy was not limited to the payments which were admittedly
due against the Final Bill and were withheld by DSIIDC.
30. Having stated the above, it is also relevant to note that it is not
disputed that the claims made by HRB arise from the Agreement and
thus, clearly fall within the scope of Arbitration Clause. The
concerned officials of DSIIDC could have addressed the said claims
and in case of a dispute, referred the same to the Arbitral Tribunal.
Considering that an Arbitral Tribunal had already been constituted and
HRB had requested that its claim for the payment under the Final Bill
not to be restricted to ₹53,90,498/- but be considered for the enhanced
amount, there was no reason for CE, DSIIDC to have not considered
the same or referred it to arbitration.
31. However, the Arbitral Tribunal has taken a strict view and
restricted HRB‟s claim to an amount of ₹42,87,422/-, which was
admittedly payable but had been withheld by DSIIDC. The Arbitral
Tribunal did not consider the other disputes, which HRB had
subsumed under its Claim No.1 for an aggregate sum of
₹1,40,94,470/-
32. Admittedly, the said disputes were not referred to the Arbitral
Tribunal and its decision not to consider the same, cannot be faulted.
33. HRB‟s contention that it is left remediless is erroneous and it is
not precluded from seeking reference of the said disputes/claims
aggregating ₹98,07,048/- (₹1,40,94,470/- minus ₹42,87,422/-), which
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RAWAL
were not considered by the Arbitral Tribunal. As noticed above, HRB
has already raised the said claims and has also requested CE, DSIIDC
to refer the same to arbitration.
34. In view of the aforesaid clarification, no interference with the
impugned award is warranted on the ground that the Arbitral Tribunal
had confirmed itself to the claim referred to it.
35. Insofar as the Arbitral Tribunal‟s decision regarding HRB‟s
Claim Nos. 6 and 7 is concerned, this Court finds no infirmity with the
said decision. The Arbitral Tribunal had noted that DSIIDC was
within its right to vary the quantity as well as the schools and
therefore, loss of profit in respect of the work relating to two schools
that were not handed over to HRB could not be allowed. The said
view is a plausible one and given the limited grounds on which the
arbitral award can be interfered with, the impugned award warrants no
interference by this Court.
36. Similarly, this Court finds that the Arbitral Tribunal has not
committed any patent error in rejecting HRB‟s claim for bank charges
for extending the Bank Guarantee on the ground that the same would
be subsumed under Overhead Charges, which also include financial
costs.
37. The petition, is accordingly, dismissed.
VIBHU BAKHRU, J
AUGUST 11, 2021nn/RK
Signature Not Verified
by:DUSHYANT
RAWAL
