Delhi High Court
Gail( India) Limited vs Armtech (India) Limited on 4 July, 2022
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 04 July, 2022
+ O.M.P. (COMM) 20/2020
ARMTECH (INDIA) LIMITED ..... Petitioner
versus
GAIL (INDIA) LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr. Rajesh Gupta & Mr. Harpreet Singh,
Advs.
For the Respondent : Mr. Vikas Mehta & Mr. Apoorv Khator,
Advs.
AND
+ O.M.P. (COMM) 33/2020 and IA No. 779/2020
GAIL (INDIA) LIMITED ..... Petitioner
versus
ARMTECH (INDIA) LIMITED ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr. Vikas Mehta & Mr. Apoorv Khator,
Advs.
For the Respondent : Mr. Rajesh Gupta & Mr. Harpreet Singh,
Advs.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
Signature Not Verified
Digitally Signed
Signing Date:04.07.2022
VIBHU BAKHRU, J
1. The aforesaid petitions are cross petitions under Section 34 of
the Arbitration & Conciliation Act, 1996 (hereafter the 'A&C Act')
impugning the Arbitral Award dated 24.09.2019 (hereafter the
'impugned award') rendered by an Arbitral Tribunal constituted of
Justice (Retd.) V.K. Gupta as the Sole Arbitrator (hereafter the
'Arbitral Tribunal').
2. The impugned award was rendered in the context of the
disputes that have arisen between the parties in connection with an
Agreement dated 01.05.2012, whereby Armtech (India) Limited
[petitioner in OMP(COMM) No.20/2020 - hereafter referred to as
'Armtech'] had agreed to execute the works relating to the "External
Development and External Services for 100 Type B and 20 Type D
Houses at Gain Gaon, Dibiyapur, Auraiya, Uttar Pradesh".
3. GAIL (India) Limited [petitioner in OMP(COMM) No.33/2020
- hereafter referred to as 'GAIL'], is a Government of India
undertaking, inter alia, engaged in the business of distribution of
natural gas, liquid hydrocarbons, LPG, manufacturing of
petrochemicals etc. One of GAIL's manufacturing unit is located at
Gail Gaon, Dibiyapur, District Auraiya, Uttar Pradesh.
4. GAIL issued a tender [bearing Tender No.
GAIL/PA11/35611/3300043656/SKG (E-bid No.8000003712]
inviting bids for executing the works of external development and
external services for 100 Type B and 20 Type D houses at Gail Gaon.
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Signing Date:04.07.2022
5. Pursuant to the aforesaid tender, Armtech submitted its bid.
Armtech was declared as the successful bidder and accordingly GAIL
issued a Fax of Acceptance (FOA) dated 01.02.2012. In terms of the
FOA, the estimated value of the Contract was fixed at
₹17,47,91,942.51/-. The works in question were to be executed within
a period of fifteen months commencing from the seventh day of the
issuance of the FOA dated 01.02.2012.
6. On 03.02.2012, GAIL handed over the site in question to
Armtech. Thereafter, on 28.03.2012, GAIL issued a Letter of
Acceptance (LOA) awarding the Contract for executing the works in
question to Armtech. The LOA issued by GAIL also included the
Schedule of Rates and the description of the works to be performed by
Armtech. Thereafter, on 01.05.2012, the parties entered into a formal
agreement (hereafter 'the Contract').
7. In terms of the Contract entered into between the parties,
Armtech furnished a Bank Guarantee dated 28.04.2012 for a sum of
₹1,74,79,200/-. The stipulated date for completion of the works was
07.05.2013. However, execution of the works was delayed.
8. Armtech sent a letter dated 25.04.2013 to GAIL seeking
extension of nine months' time for completion of the works in
question. This request of Armtech was acceded to and by a letter
dated 06.05.2013, GAIL provisionally extended the time for
completion of the Contract till 06.06.2013. Similarly, further
extensions were sought by Armtech and the same were granted by
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GAIL from time to time. GAIL granted the last extension by its letter
dated 19.12.2015 extending the terms of the Contract upto 20.02.2016.
9. Since the work was not completed by Armtech within the
extended period granted by GAIL, that is, upto 20.02.2016, GAIL
issued a Show Cause Notice dated 03.03.2016 alleging that Armtech
had failed to complete the works despite several opportunities. It
further put Armtech to notice that if the balance work was not
completed within fifteen days from the date of issue of the Show
Cause Notice dated 03.03.2016, the Contract entered into between the
parties would be terminated by GAIL and the balance work would be
carried out at Armtech's risk and costs. Armtech responded by a letter
dated 04.03.2016 assuring GAIL that it would complete the balance
works. Armtech also expressed its opposition to GAIL's contention
that the balance work would be executed at the risk and cost of
Armtech.
10. On 27.04.2016, GAIL issued a Full and Final Notice to
Armtech, inter alia, stating that the balance work would be executed
at the risk and costs of Armtech in terms of the Contract.
11. Armtech issued a letter dated 06.08.2016, whereby it submitted
its Action Plan for completing the remaining works. However, since
Armtech had failed to execute the balance work within the stipulated
period, GAIL invoked the two Bank Guarantees aggregating a sum of
₹1,99,79,200/- [Bank Guarantee No.1509ILG000814 dated
13.03.2014 for a sum of ₹25,00,000/- and Bank Guarantee No.
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Signing Date:04.07.2022
1509ILG002012 dated 28.04.2012 for a sum of ₹1,74,79,200/-].
Thereafter, GAIL issued a letter dated 21.10.2016 terminating the
Contract entered into between the parties in terms of Clause 29.1(a) of
the General Conditions of Contract (GCC).
12. GAIL awarded the balance unexecuted work to other
contractors viz. M/s Awasthi Traders, M/s Yes Engineering and M/s.
Asiatic Electrical & Switchgear Pvt. Ltd.
13. In view of the disputes between the parties, Armtech invoked
the Arbitration Agreement and sought reference of the disputes to
arbitration.
14. The tabular statement indicating the claims raised by Armtech
in its Statement of Claims is set out below:
"S. Claims Particulars Amount
No.
1. CLAIM NO.1 Claim on account of RA Bill No. 37 1,00,56,330.25/-
2. CLAIM NO.2 Claim on account of bank 2,00,00,000/-
guarantees extra contractually
encashed
3. CLAIM NO.3 Claim on account of pending 79,17,534/-
retention money
4. CLAIM NO.4 Claim on account of incorrectly 79,17,534/-
imposed penalty
5. CLAIM NO.5 Claim on account of amount held up 5,00,000/-
against electrical panel
6. CLAIM NO.6 Claim on account of tools and plants 2,76,59,609/-
detained at site
7. CLAIM NO.7 Claim on account of delay and its 1,35,60,500/-
consequences
8. CLAIM NO.8 Claim on account of admitted 80,46,734/-
outstanding balance as on
31.03.2016
9. CLAIM NO.9 Claim on account of interest from Based on actual
date of accrual upto date of payment calculation
@18% per annum
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10. CLAIM NO.10 Claim on account of costs 5,00,000/-
11. TOTAL 9,61,58,241.25"
15. GAIL also raised certain counter-claims. The tabular statement
indicating the said counter-claims is set out below:
"S. Counter Particulars Amount
No. Claims
1. Counter Price reduction on account of non- 87,39,597/-
Claim No.1 performance of claimant as per
clause 27 GCC
2. Counter Claim on account of pending house 2,15,394/-
Claim No.2 rent, electricity and water charges of
house no.1348, Nehru Kunj, GAIL
Gaon.
3. Counter A. Claim on account of balance road 12,70,404.69/-
Claim No.3 work executed through another
contractor including checklist jobs.
B. Claim on account of balance earth-
9,54,976.88/-
work executed through another
contractor including checklist jobs.
C. Claim on account of balance 2,82,695/-
electrical work in sub-station
constructed.
4. Counter Claim on account of site office at 12,21,000/-
Claim No.4 pump house, temporary sheds,
labour hutments etc. within GAIL
Gaon premises
TOTAL 1,26,84,067.57"
16. The Arbitral Tribunal delivered the impugned award on
24.09.2019. The Arbitral Tribunal held that both the parties were
responsible for the delay in execution of the Contract to some extent
but after a certain stage, the delay in execution of the works was
entirely for reasons attributable to Armtech. The Arbitral Tribunal
also held that GAIL had no option but to terminate the Contract in
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Signing Date:04.07.2022
question. Notwithstanding the said findings, the Arbitral Tribunal
partly allowed some of the claims made by Armtech and rejected all
counter-claims raised by GAIL. A tabular statement indicating the
claims allowed by the Arbitral Tribunal is set out below:
"S. Claims Particulars
No.
1. Claim No.2 Allowed to the extent of Rs.1,74,79,200.00/
2. Claim No.3 Allowed to the extent of Rs.30,00,000.00/
3. Claim No.4 Allowed to the extent of Rs.73,55,229.00/
4. Claim No.5 Allowed to the extent of Rs.5,19,809.00/"
17. GAIL is aggrieved by the impugned award to a limited extent.
It does not impugn the impugned award rendered by Arbitral Tribunal
in respect of Armtech's Claim No.2. It has confined its challenge to
the impugned award to the extent that the Arbitral Tribunal has partly
allowed Armtech's Claim Nos.3 and 5 and dismissed its counter-
claims.
18. Armtech has assailed the impugned award to the extent that
Arbitral Tribunal has rejected its Claim Nos.1 and 8 and further
confined the interest awarded from the date of the submission of claim
and not from the date of cause of action.
19. Given the nature of the allegations made before this Court, this
Court considers it apposite to consider the respective challenge of the
parties claim wise.
GAIL's Challenge to the Impugned Award [O.M.P.(COMM.)
33/2020]
Re: Claim No.3
Signature Not Verified
Digitally Signed
Signing Date:04.07.2022
20. Armtech claimed that GAIL had deducted an amount equal to
5% of the value of the electrical material supplied by it and retained
the same. It contended that the total value of the electrical material
supplied was ₹6,17,00,447/- and against the said amount, GAIL
withheld a sum of ₹30,85,022/- towards retention money. Armtech
claimed that it is entitled to a sum of ₹30,00,000/-. GAIL disputed the
said claim of Armtech and it contended that it had not deducted any
amount from the running bills. GAIL claimed that extensions were
granted subject to imposition of Price Reduction Schedule (PRS) in
terms of Clause 27 of the GCC. The Arbitral Tribunal found that in
terms of Clause 15A(iv)(ii)(d) of the Contract, 5% of the value of the
electrical material was to be withheld towards retention money. The
same was to be released after completion of the works. The Arbitral
Tribunal accepted GAIL's contention that it had withheld a sum of
₹30,82,002/- in terms of the said clause. However, since Armtech's
claim was limited to a sum of ₹30,00,000/-, the Arbitral Tribunal
awarded the same.
21. Mr. Mehta, learned counsel appearing for GAIL contends that
GAIL had not withheld any amount except on account of PRS. The
Arbitral Tribunal has accepted Armtech's claim towards imposition of
PRS, which was in the nature of liquidated damages (Claim No.4), and
had awarded an amount of ₹73,55,229/- against Claim No.4. Thus, the
amount retained by GAIL on account of PRS has been separately
awarded in favour of Armtech. Therefore, the impugned award
against Claim no.3 amounted to awarding the same claim twice over.
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Digitally Signed
Signing Date:04.07.2022
22. Mr. Gupta, learned counsel appearing for Armtech disputed the
said contention. He stated that the amount of ₹30,00,000/- had been
withheld separately from the bills relating to supply of electrical items.
This dispute is clearly a factual dispute. The Arbitral Tribunal is a
final adjudicator of questions of fact and such findings of the Arbitral
Tribunal cannot be interfered with in these proceedings. However, this
Court finds that the Arbitral Tribunal has not considered the issue
whether in fact any amount has been withheld by GAIL against
payments for electrical items. This Court had also asked the learned
counsels for the parties to establish from the records whether in fact
any amount had been withheld from the bills of electrical items. None
of the counsels for the parties has been able to clearly establish
whether any amount had been withheld. It appears that the Arbitral
Tribunal has proceeded solely on the basis that Clause 15A of the
Contract in question provided that 5% of the value of electrical items
would be withheld towards retention money. A decision on this
dispute would require reconciliation of the accounts. However, the
impugned award does not indicate that any such exercise was
conducted and if so whether the Arbitral Tribunal was satisfied that an
amount of ₹30,85,022/- was, in fact, withheld by GAIL towards
retention money. According to GAIL, it had withheld certain
amounts, however, the same was solely on account of PRS. GAIL
claims that in all it had retained a sum of ₹73,55,026/- towards PRS
which was separately awarded in favour of Armtech.
Signature Not Verified
Digitally Signed
Signing Date:04.07.2022
23. Since the issue whether, in fact, an amount of ₹30,00,000/- is
included in the sum of ₹73,55,026/-, which has been awarded in
favour of Armtech has not been decided by the Arbitral Tribunal, this
Court is of the view that the impugned award against Claim No.3 is
liable to be set aside.
Re: Claim No.4 and Counter-Claim No.1
24. Armtech's Claim No.4 and GAIL's Counter-Claim No.1 are
connected as they relate to levy of PRS. In terms of Clause 27 of the
GCC as applicable, the Contract Price is liable to be reduced by half
percent for every week on delay in completing the Contract, subject to
maximum of 5% of the total Contract price. According to GAIL, the
execution of the Contract was delayed by forty months. GAIL states
that Armtech is responsible for the said delay, therefore, a sum of
₹87,39,597/- towards 5% of the Contract value of ₹17,47,91,942/- is
liable to be deducted from the amount payable to Armtech. GAIL
stated that an amount of ₹48,60,138/- was withheld towards PRS till
payment of the 36th RA bill. In addition, GAIL had also encashed the
Bank Guarantee for a sum of ₹25,00,000/- which it stated was against
PRS. Thus, admittedly GAIL had recovered a sum of ₹73,60,138/-
against levy of PRS. Therefore, GAIL claimed a further sum of
₹13,79,459/- (₹87,39,597/- less ₹73,60,138/-) towards PRS (Counter-
Claim No.1). Armtech claimed that it was not liable to pay PRS as it
was not responsible for the delay in executing the works. Armtech
claims that the same was either for reasons beyond its control and / or
attributable to GAIL. Thus, it claimed refund of the amount withheld
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by GAIL. The Arbitral Tribunal held that GAIL was not entitled to
levy PRS and therefore, awarded a sum of ₹73,60,138/- in favour of
Armtech.
25. Mr. Mehta, learned counsel appearing for GAIL contended that
the issue whether GAIL was liable to impose PRS is based entirely on
the question as to which party had delayed the execution of the
Contract. He submitted that although the Arbitral Tribunal had found
that Armtech was responsible for the delay, however, despite the said
finding, the Arbitral Tribunal held GAIL was not entitled to recover
PRS. He submitted that the Arbitral Tribunal's conclusion is
inconsistent with the findings and therefore, the impugned award is
liable to be set aside.
26. Mr. Gupta, learned counsel appearing for Armtech countered
the aforesaid submissions. He submitted that there is no inconsistency
in the impugned award. He further submitted that the findings of the
Arbitral Tribunal must be read in the correct perspective. He
submitted that the Arbitral Tribunal had found that GAIL was
responsible for the initial delay dated May, 2014 and Armtech was
held to be responsible for the delay thereafter. The Arbitral Tribunal
had found that GAIL was not responsible for the delay after a
particular point of time. Therefore, the Arbitral Tribunal had balanced
the impugned award and had rejected GAIL's claim for liquidated
damages.
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Signing Date:04.07.2022
27. The Arbitral Tribunal had examined the question of delay and
recorded its findings at the outset. The said findings were repeated
verbatim while discussing the other claims. The relevant passage
recording the Arbitral Tribunal's finding with respect to which party
was responsible for the delay is set out below:
"........I shall determine the issue of delay first and
then proceed to determine if the termination of the
contract was validly done.
a) Determining the Responsibility of Delay: Both
the parties admit to the fact that there was delay
in the execution of the work and that time
extensions, even if these were provisional, were
granted by the respondent to the claimant. The
dispute however, remains as to which of the two
parties is responsible for the delay and the
apportionment of the delay, if possible.
Both the parties have drawn my attention to the
various minutes of meetings dated 21.05.2012,
06.07.2012, 11.09.2012 and 06.10.2012
(Annexure R-6 (colly)) wherein there are certain
shortfalls on part of both the parties. The
shortfalls are of the nature which would delay
the execution of work and therefore it appears
that the delay in the execution of work was
partially on account of both the parties. The
respondent relied upon letter dated 19.06.2015
alleging that the claimant had in fact admitted to
the validity of the levy of PRS by the
respondent. However, a scrutiny of the said letter
reveals that the claimant did not at any point of
time agree to the levy of PRS but simply
requested the respondent to affect the recovery
from the final bill. There is no concession given
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to the respondent on the merits of levy of PRS.
The respondent has also not been able to explain
the reason why the decision on the external earth
was given to the claimant as late as in May 2014.
It weighs very heavily on my mind that the work
to be executed under the contract is about the
external development of the township, which
relies critically on the earth work. In fact,
without adequate earth being available, it is
impossible to complete the work. I have also
observed that the work claimed to have been
done on the risk and cost of the claimant by the
respondent majorly consists of earth work and
road work. Both of these activities require earth
work. During the cross examination, RWI has
admitted that the source of earth was ultimately
communicated by the respondent to the claimant
and the same was about 10 kms away from the
site of work. Therefore the averment of the
claimant about inadequacy of the available earth
leading to delay appears plausible and
acceptable.
The respondent has strongly relied on letter
dated 27.04.2016(Annexure R-17) which it
claims was the final notice issued by it to the
claimant. A bare perusal of this document would
reveal that it did set timeline for rectification and
therefore, succeeds to qualify as a valid show
cause notice. Ultimately, the respondent
terminated the contract of the claimant on
21.10.2016 (Annexure R-20). However, the
same was objected to by the claimant on
24.10.2016 while pointing out the various flaws
on part of the respondent.
The respondent has shown adequate record to
demonstrate that the delay was mainly on part of the
claimant. Actually; the Claimant can be said to be
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responsible for the delay in its entirety after a
particular period of time and for that period of time,
the Respondent cannot be held responsible at all for
causing the delay. For the major part, therefore I hold
the Claimant responsible for the delay which took
place in the execution of the contract work and
ultimately resulted in the contact being terminated.
b) Validity of Termination of the Contract: It is
an undisputed fact that the contract has been
terminated by the respondent and as a
consequence thereof, the respondent has now
raised some counterclaims against the claimant
as well. It is the contention of the claimant that
the termination of the contract has been wrongly
done and thus the respondent could not have
acted against it, leading to the balance work
being done on the risk and cost of the claimant.
The primary reason for the termination of the
contract, as averred by the respondent was that
the work was being delayed by the claimant.
However, the claimant has alleged that the
decision, drawings, payments etc. were pending
as a result of which the work under the contract
could not be completed and the respondent took
advantage of this and terminated the contract. I
do not agree. In my considered opinion, under
the circumstances, the Respondent had no option
but to terminate the contract because it had
become clear that the Claimant was not in any
position to complete the work."
28. It is clear from the above that the Arbitral Tribunal had found
that both the parties were responsible for the delay to some extent. It
also appears that the Arbitral Tribunal had held GAIL responsible for
the delay in rendering a decision regarding external earth. Admittedly,
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sand mining had been proscribed in the State of Uttar Pradesh and
therefore, either sand for earth filling was required to be procured
from outside the State or in the alternative earth filling work was to be
performed by other types of soil. The decision regarding the site from
where earth could be excavated was therefore, vital for execution of
the works. The Arbitral Tribunal had found that there was delay on
the part of GAIL in taking the said decision, which was communicated
in May, 2014. However, there were other reasons as well, which had
also contributed in the delay in completion of the project. The Arbitral
Tribunal had accepted Armtech's contention that the delay was largely
attributable to the inadequacy of the available earth. But it has also
returned a finding that Armtech was "responsible for the delay in its
entirety after a particular period of time".
29. The Arbitral Tribunal had further emphasized that for the major
part, Armtech was responsible for the delay in execution of the work.
Notwithstanding the aforesaid, the Arbitral Tribunal had accepted
Armtech's claim that GAIL was not entitled to levy PRS. A perusal of
the impugned award indicates that Arbitral Tribunal had referred to
various decisions and its reasons for allowing Armtech's claim and
disallowing GAIL's, can be discerned from the discussion regarding
the said decisions.
30. The Arbitral Tribunal has referred to the decision in NCT of
Delhi v. R.K. Construction Company: (2003) 1 ALR 465 (Delhi) and
on the strength of the said decision had held that liquidated damages
have been wrongly levied as there was no notice indicating the
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timelines for such levy. Further the Arbitral Tribunal had referred to
the decision in the case of B.W.L. Ltd. V. MTNL: (2000) 2 ALR 190
(Delhi) and had observed that PRS had not been validly levied as there
was no specific order levying the PRS. The Arbitral Tribunal had also
referred to Beebcon Engineers Pvt. Ltd v. Bharat Heavy Electricals
Ltd.: (2006) 1 ALR 194 (Delhi) and had concluded that since both the
parties are responsible for the delay in execution of the work,
liquidated damages ought not to have been levied. In addition to the
above, the Arbitral Tribunal had also referred to Indian Oil
Corporation v. Llyod Steel Industrial Limited: (2007) 4 ALR 84
(Delhi) and observed that GAIL had failed to demonstrate any
tangible legal loss on account of delay and therefore, levy of
liquidated damages was illegal. The Arbitral Tribunal had also
referred to the decision in Bipromasz Bipron Trading SA vs. Bharat
Electronics Limited: (2012) 3 ALR 1 SC and held that levy of
liquidated damages is illegal and no order indicating the same has
been issued by GAIL.
31. It is clear from the impugned award that the Arbitral Tribunal's
decision to reject the levy of PRS is not premised solely on the basis
of which party is responsible for the delay but other considerations as
well. Admittedly, no specific timelines have been specified after the
lapse of which liquidated damages were levied. According to GAIL,
Armtech was responsible for the entire delay of forty months. This
contention has been rejected by the Arbitral Tribunal. The Arbitral
Tribunal also found that GAIL was responsible for a part of the delay
on account of the belated decision regarding external earth work. It
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was also Armtech's contention that substantial delays have been
caused as it was required to source earth from a distance of ten kms.
The Arbitral Tribunal found merit in the said contention.
32. The decision of the Arbitral Tribunal that GAIL was required to
demonstrate the legal loss or injury suffered by it and had failed to do
so is erroneous. The Contract related to works for extending facilities
to employees of GAIL and is doubtful whether GAIL was required to
provide any tangible measure for such losses. However, at the same
time, it also does not appear that GAIL had taken any unequivocal
stand that it was not possible to prove actual loss and the liquidated
damages were a genuine pre estimate of the loss suffered by it.
33. At this stage, it is necessary to recall that this Court is not
required to examine the impugned award as the first appellate court
sitting in appeal over the decision of the Arbitral Tribunal. The scope
of challenge under Section 34 of the A&C Act is limited. This Court
is unable to accept that the conclusion of the Arbitral Tribunal is
perverse and vitiates the impugned award on the ground of patent
illegality.
34. The Arbitral Tribunal has wide discretion in deciding the
disputes. Clearly some of the reasons provided by the Arbitral
Tribunal in support of its conclusion are plausible reasons. Therefore,
this Court is of the view that given the standards of examination under
Section 34 of the A&C Act, no interference is called for with the
decision of the Arbitral Tribunal.
Signature Not Verified
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Signing Date:04.07.2022
Re: Claim No.5
35. The Arbitral Tribunal awarded a sum of ₹5,19,809/- in favour
of Armtech and it found that GAIL had withheld the said amount from
the amounts due against supply of HT electrical panel. Admittedly,
the value of the said HT electrical panel was ₹35,19,809/- and GAIL
had paid an amount of ₹30,00,000/-. Undisputedly, GAIL was liable
to pay the balance amount of ₹5,19,809/-. GAIL claimed that in terms
of the understanding between the parties, the said payment was to be
made directly to the vendor (M/s Asiatic Electrical and Switchgear
Pvt. Ltd.) who had supplied the said HT electrical panel.
36. There is no dispute that GAIL had issued the letter of comfort to
the vendor in question confirming that it would pay the amount.
GAIL had thereafter paid a sum of ₹30,00,000/- to the said vendor.
The dispute is confined to the balance amount of ₹5,19,809/-. GAIL
claimed that it had retained an amount of ₹5,24,113/- and had remitted
the same to the vendor on 20.11.2017. Armtech had disputed that
GAIL had paid any further amount to the vendor in question against
the supply of HT electrical panel. The Arbitral Tribunal found that
GAIL had failed to establish that it had paid any part of the withheld
amount to the vendor against the supply of electrical panel. The fact
that GAIL had made any further payments to the vendor in question,
failed to persuade the Arbitral Tribunal that it had paid the withheld
amount of ₹5,24,113/- as GAIL had other transactions with the said
vendor and there is no material to establish that the amount of
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₹5,24,113/- had been paid by GAIL against the supply of electrical
panel.
37. GAIL has assailed the said finding as, ex facie, erroneous. Mr.
Mehta, learned counsel appearing for GAIL has been unable to point
out any material and / or document on record indicating that GAIL had
made payment for supply of electrical panel to the vendor in question.
Merely showing certain remittances would in the facts and
circumstances of the case not be dispositive of the question whether
GAIL had made any further payments in respect of supply of HT
electrical panel.
38. Mr. Mehta also contended that the Arbitral Tribunal had erred
in not appreciating that in any event Armtech was not entitled to any
payment against supply of electrical panel as the said payments were
required to be made directly to the vendor (M/s Asiatic Electrical and
Switchgear Pvt. Ltd.). The said contention is unpersuasive. The
vendor had supplied the electrical panel at the instance of Armtech.
Armtech would be liable to pay the consideration for the HT electrical
panel notwithstanding GAIL had issued a letter of comfort. GAIL was
also unable to show any invoice raised by the vendor against GAIL in
respect of supply of the HT electrical panel in question. Therefore, the
contention that GAIL was not liable to pay any amount to Armtech
against supply of HT electrical panel is unpersuasive. This Court finds
no ground to interfere with the decision of the Arbitral Tribunal to
award a sum of ₹5,19,809/- in favour of Armtech. The Arbitral
Tribunal awarded the said amount as claimed by Armtech
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notwithstanding the fact that GAIL had claimed that the balance
withheld amount was marginally higher - ₹5,24,113/-.
GAIL's Counter-Claim No.2
39. GAIL had claimed a sum of ₹2,15,394/- towards house rent,
electricity and water charges for the premises bearing House No.1348,
Nehru Kunj, Gail Gaon occupied by Armtech. The said premises was
allotted to Armtech as residential accommodation to facilitate the
execution of the work. Armtech had paid an amount of ₹1,44,752.44/-
for the period upto 30.06.2017. GAIL claimed that an amount of
₹1,88,265/- was payable upto the said date and in addition, Armtech
was also liable to pay house rent at the rate of ₹9,043/- per month with
effect from 01.07.2017 till 30.09.2017. The Arbitral Tribunal found
that Armtech was not at site and the possession of the entire premises
was under control of GAIL. Thus, it held that there was no
impediment for GAIL to take over the premises in question. In the
circumstances, the Arbitral Tribunal rejected GAIL's claim.
40. Mr. Mehta, learned counsel appearing for GAIL contended that
Arbitral Tribunal has erred in rejecting the claim made by GAIL as it
was established that certain materials and tools belonging to Armtech
were lying at site. Armtech had also made a claim in this regard. He
further submitted that the finding that Armtech was not occupying any
part of the area is, therefore, erroneous.
41. This Court is unable to accept that the decision of the Arbitral
Tribunal is perverse or, ex facie, erroneous. According to GAIL,
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Armtech had abandoned the work in December, 2015. There is no
dispute that GAIL was in control of the overall security of the area. In
view of the above, the decision of the Arbitral Tribunal warrants no
interference in these proceedings.
Re: GAIL's Counter-Claim Nos.3(a), 3(b) and 3(c)
42. GAIL had raised a counter-claim in respect of the amounts
incurred by it for execution of the remaining works. GAIL claims that
it had incurred an amount of ₹60,29,720.34/- for execution of the
remaining road work. The contract for the same was awarded to M/s
Awasthi Traders. In terms of the Contract between the parties, GAIL
was liable to pay a sum of ₹54,76,743.70/- to Armtech for the said
works. GAIL claimed the differential between the two amounts - that
is, between ₹60,29,720.34/- and ₹54,76,743.70/- - and in addition
claims a further markup of 10% as overhead expenditure. GAIL
computed the amount against execution of the works at
₹11,55,948.68/-. Similarly, GAIL claimed an amount of
₹1,14,456.01/- towards completion of pending checklist for road
works. Thus, in aggregate GAIL claimed an amount of
₹12,70,404.69/- for execution of the balance road works through
another contractor viz. M/s Awasthi Traders. Similarly, GAIL also
claimed a sum of ₹9,54,976.88/- for pending earth work along with
cost incurred for the checklist jobs and ₹2,82,695/- for execution of
certain electrical works.
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43. The Arbitral Tribunal rejected the aforesaid claim as it found
that GAIL had not prepared the Final Bill. The Arbitral Tribunal
concluded that since the Final Bill had not been prepared, it was
difficult to understand as to how GAIL had computed the balance
quantities. Further, the Arbitral Tribunal also found that no evidence
was brought on record at the appropriate time to reflect that the
amount as claimed had, in fact, been paid.
44. Mr. Mehta, learned counsel appearing for GAIL contended that
in terms of the Contract between the parties, GAIL was entitled to
recover the additional amount incurred for executing the remaining
work at the risk and costs of Armtech. He contended that since the
Arbitral Tribunal had found that the termination of the Contract was
valid, the necessary consequences - which included GAIL's right to
have the balance work executed at the risk and costs of Armtech -
followed.
45. The aforesaid contention is not persuasive. The Arbitral
Tribunal has not rejected GAIL's claim on the ground that it was not
entitled to get the remaining works executed at the risk and costs of
Armtech; it has rejected GAIL's claim on the ground that GAIL had
failed to substantiate the quantification of its claim. The Arbitral
Tribunal held that since GAIL had not prepared the Final Bill, it was
difficult to compute the additional quantity of work that was required
to be executed. The Arbitral Tribunal faulted GAIL for not
establishing its claim. This Court finds no ground to interfere with the
decision of the Arbitral Tribunal to reject GAIL's counter-claim
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against amounts incurred by it for getting the balance work executed
at the risk and costs of Armtech.
Re: GAIL's Counter-Claim No.4
46. GAIL had claimed a sum of ₹1,21,000/- from Armtech for
occupying certain area within the Gail Gaon premises. GAIL claimed
that Armtech had occupied approximately 15000 sq.ft. area for
providing labour hutments, temporary sheds and site office. GAIL
claimed that since it was deprived of utilizing the said area, Armtech
was responsible to compensate GAIL for the same. GAIL quantified
its claim at ₹1,00,000/- per month from the date of termination of the
Contract till handing over of possession (that is, from 21.10.2016 till
20.09.2017). In addition, GAIL claimed an amount of ₹1,21,000/- for
occupation of pump house building at the rate of ₹11,000/- per month
for the aforesaid period.
47. The Arbitral Tribunal found that Armtech was no longer at site
and since the entire area was under the overall security of GAIL, there
was no impediment for GAIL to use the said area.
48. This Court does not find the aforesaid reasoning to be
implausible or one that no reasonable person could possibly accept.
The decision of the Arbitral Tribunal is not impeachable as none of the
grounds set out in Section 34 of the A&C Act are established.
49. In view of the above, this Court finds no merit in GAIL's
petition and the same is liable to be dismissed.
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Armtech's challenge to the impugned award [O.M.P.(COMM.)
20/2020]
50. Armtech's challenge to the impugned award is confined to
rejection of its Claim No.1 and Claim No.8. Armtech has also
challenged the decision of the Arbitral Tribunal to award interest from
the date of claim and not from the date on which cause of action has
arisen.
Re: Armtech's Claim No.1
51. Armtech had claimed that it was entitled to a sum of
₹1,00,05,633.25/- being the amount invoiced under RA Bill No.37.
GAIL had not paid any amount against the aforesaid bill for the work
done upto the 36th RA bill. Armtech claimed that there was no dispute
that it had executed the works beyond the works as invoiced under the
36th RA bill and was entitled to be paid for the same. It claimed that
about 85% of the total work was executed upto the 36th RA bill
(amounting to ₹14,71,04,580/-). The work of ₹1,76,87,362/-
remained, out of which Armtech had executed works for a sum of
₹1,00,05,623.25/-. GAIL had disputed the said bill and claimed that
the same was fictitious. GAIL stated that it had not received the 37th
RA bill at the material time. GAIL claimed that it had received the 37th
RA bill along with a letter dated 22.01.2017 forwarding therewith the
letter dated 01.10.2016. The Arbitral Tribunal had examined the rival
contentions and concluded that Armtech had failed to establish the
work executed as claimed.
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52. Admittedly, the works were neither executed nor measured.
GAIL's claim for risks and costs was also denied by the Arbitral
Tribunal on the same ground. Admittedly, GAIL had issued a notice
calling upon Armtech to participate in joint measurements. GAIL
states that despite receipt of the notice, Armtech had not come forward
for the measurements. Armtech on the other hand claimed that its
representative was prevented by the security personnel. Admittedly,
there is no material on record to clearly establish the works executed
by Armtech after the 36th RA bill.
53. Mr. Gupta, learned counsel appearing for Armtech contended
that there was enough material on record for the Arbitral Tribunal to
make a reasonable assessment of the work done. He submitted that the
Arbitral Tribunal "ought to have applied rational guess work which
was arithmetically possible". He submitted that since 85% of the
works were executed, there is no dispute that works valued at
approximately ₹1,76,87,362/- remained to be executed. Since GAIL
claims to have got the work valued at ₹83,99,885/- executed through
other agencies, it is apparent that Armtech would have executed the
work amounting to approximately ₹1,00,00,000/-.
54. The onus to establish that it had executed the works as claimed
rested on Armtech. Armtech could have discharged the said onus by
producing primary documents. However, Armtech appears to have
relied predominantly on the 37th RA bill. As noted above, GAIL had
disputed receipt of the said bill at the material time and further
contended that the abstract of the work done was manipulated. In the
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given circumstances, the decision of the Arbitral Tribunal to reject
Armtech's claim on the ground that it had failed to establish the same
cannot be interfered with. The said finding has been returned by the
Arbitral Tribunal after evaluation of the material and evidence on
record. It is well settled that an Arbitral Tribunal is the final
adjudicator on the quantity and quality of evidence. This Court finds
no ground to interfere with this decision in these proceedings.
Re: Armtech's Claim No.8
55. Armtech claimed an amount of ₹80,46,734/- from GAIL.
Armtech had premised the said claim on the basis of a letter of
confirmation dated 09.04.2016 whereby GAIL had confirmed the
outstanding balance as on 31.03.2016. Armtech claimed that the said
amount was due and payable to it but GAIL had withheld the same
without any reason.
56. GAIL disputed the said claim on the ground that the letter relied
upon did not reflect the amounts due and payable to Armtech. GAIL
claimed that the said letter reflected the amounts recorded in its books
in anticipation of pending works in relation to various projects.
57. The Arbitral Tribunal rejected Armtech's claim as it found that
GAIL explanation was reasonable.
58. Mr. Gupta, learned counsel appearing for Armtech contended
that GAIL's stand is, ex facie, erroneous as there was no other project
against which any amount was due and payable. Further there was no
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possible reason as to why any amount would be reflected as due and
payable for the work which was yet to be completed.
59. It is possible that certain amounts may be payable to Armtech.
But this Court is not persuaded to accept that any interference with the
impugned award is warranted in these proceedings. This is because, if
any amount was indeed due and payable by GAIL, the onus to
establish the same rested on Armtech. Armtech could possibly
establish the same by producing primary documents including bills
raised and payments received. However, Armtech had premised its
claim entirely on GAIL's letter dated 09.04.2016. The decision of the
Arbitral Tribunal turned solely on the basis of its evaluation and
appreciation of that piece of evidence. The contents of the said letter
were disputed and Armtech did not produce any other material -
which ought to have been in its control - to establish the amount
payable. As noted above, the Arbitral Tribunal is the final adjudicator
of the quantity and quality of evidence. This Court is unable to find
that the decision of the Arbitral Tribunal is perverse or fall fouls of the
standards as set out in Section 34(2)(b)(ii) and Section 34(2A) of the
A&C Act.
Re: Armtech's Claim for Interest
60. The Arbitral Tribunal has awarded interest at the rate of 9% per
annum from the date of commencement of the arbitration proceedings
till actual realization of the awarded amount. Armtech claims that
interest ought to have been awarded from the date of the cause of
action and there is no reason for denial of such interest.
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61. It is well settled that the Arbitral Tribunal has wide discretion in
awarding interest. The pre-reference award is also subject to
substantive law. It does not appear that Armtech had set up a case for
award of interest under the Interest Act, 1978.
62. In view of the above, the decision of the Arbitral Tribunal to not
award interest for the period prior to invoking the arbitration cannot be
faulted.
63. In view of the above, GAIL's challenge to the impugned award
entered against Claim No.3 to the extent that a sum of ₹30,00,000/-
has been awarded by the Arbitral Tribunal to Armtech towards
pending retention money, is accepted. The impugned award to the said
extent is set aside. Armtech is at liberty to refer the said disputes to
Arbitration afresh.
64. The petitions are disposed of in the aforesaid terms. All pending
applications are also disposed of.
VIBHU BAKHRU, J
JULY 04, 2022
'gsr'
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