Delhi High Court
Union Of India Represented By Dg ... vs M/S Vascon Engineers Ltd on 25 May, 2022
$~122
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 25.05.2022
+ FAO(OS) (COMM) 135/2022 and CM Nos. 25139/2022,
25140/2022, 25141/2022, 25142/2022 & 25143/2022
UNION OF INDIA REPRESENTED BY DG MAP ..... Appellant
Through: Mr Rakesh Kumar, CGSC with Mr
Sunil, Advocate.
versus
M/S VASCON ENGINEERS LTD ..... Respondent
Through: Mr Arvind Sharma, Advocate.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE AMIT MAHAJAN
VIBHU BAKHRU, J. (ORAL)
1. The appellant has filed the present appeal impugning a judgment
dated 03.09.2021 passed by the learned Single Judge, whereby the
appellant's application under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereafter 'the A&C Act') seeking to set aside
an arbitral award dated 31.12.2020 (hereafter 'the Award'), was
rejected.
2. The Award was rendered in the context of the disputes that had
arisen between the parties in connection with the work of "Completion
of Balance Works of Construction of Dwelling Units Including Allied
External Services at Khirkee (Aundh) Pune Army" which was awarded
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
to the respondent (hereafter 'Vascon').
3. The work was to be completed in three phases. It was stipulated
that the first phase would be completed on or before 16.01.2010 and the
remaining two phases - phase two and phase three - would be
completed on or before 16.07.2011 and 04.03.2014 respectively. The
time for completion of the work was extended and there is no dispute
that the work was completed during the extension period.
4. In the context of the disputes that arose between the parties,
Justice (retd) Badar Durrez Ahmed, former Chief Justice of the Jammu
and Kashmir High Court was appointed as the Sole Arbitrator to
adjudicate the disputes. Before the Arbitral Tribunal, Vascon raised
several claims. The appellant also raised certain counter-claims. A
tabular statement indicating the claims raised by Vascon is set out
below:
CLAIMS OF VASCON
Issue Description Amount Amount awarded
No. Claimed (in Rs) (in Rs)
1 Balance payments for Rs 2,53,43,288/- Rs 24,16,874/-
works, including
deviations, additional
works (Parts 1 to 9 of
Claim 1)
2 Increase in rates of Rs 1,17,09,737/- Nil
cement, steel, sand and
coarse aggregates.
3 Increase in excise duly Rs 9,96,678/- Rs 9,96,678/-
4 Increase in labour costs Rs 78,85,812/- Nil
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
5 Stoppage of work Rs 1,81,07,757/- Rs 1,16,58,459/-
between September to
December 2009 and
March to June 2010
6 Shortfall in steel under Rs 66,79,365/- Nil
schedule of credit
7 Loss due to incorrect Rs 46,99,208/- Nil
progress stage stated in
the tender
8 Maintenance and Rs 750,000/- Nil
operation of water
supply installation after
handing over to users
9 Delayed / Underpayment Rs 35,45,629/- Rs 3,73,578/-
of RARs
10(a) Prolonged commitment Rs 163,71,838/- Nil
to contract
10(b) Prolonged commitment Rs 31,17,663/- Nil
of Claimant's T&P
10(c) Prolongation of the Rs 42,39,644/- Nil
validity period of the
Bank Guarantee
11 Costs of arbitration Rs 40,39,471/- Rs 25,85,153/-
12 Interest on due amounts @20% p.a. Rs 39,90,559/- @8%
for past, pendent-lite and p.a. for past and
future. pendente lite. For
future interest also
@ 8% p.a."
5. In the proceedings initiated by the appellant under Section 34 of
the A&C Act, the appellant confined its challenge to the Award of the
amounts awarded against four claims - Claim No. 3 (increase in excise
duty); Claim No.5 (stoppage of work between September to December
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By:Dushyant Rawal
2009 and March to June 2010); Claim No.11 (cost of arbitration); and
Claim No.12 (award of interest).
6. The learned Single Judge considered the aforesaid challenge and
found that the impugned order did not warrant any interference on the
anvil of standards under Section 34 of the A&C Act.
7. As noticed above, the appellant's challenge in these proceedings
is confined to the decision regarding award of compensation for loss
due to stoppage of work, costs, and interest.
8. In terms of Clause 11(b) of the General Conditions of Contract
(GCC), Vascon was entitled to compensation in respect of salaries and
wages paid during the period when the work was suspended for the
specified reasons. Clause 11 of the GCC is relevant and is set out below:
"11. Suspension of Works:
(a) The Contractor shall, on receipt of the order in
writing of the P.M., suspend the progress of the
Works or any part thereof for such time and in
such manner as the P.M. may consider
necessary for any of the following reasons:
(i) on account of any default on the part of the
Contractor; or
(ii) for proper execution of the Works or part
thereof for reasons other than the default of
the Contractor; or
(iii) for safety of the Works or part thereof.
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
The Contractor shall, during suspension, properly protect
and secure the works to the extent necessary and carry out
the instructions given in that behalf by the P.M.
(b) If the suspension is ordered for reasons (ii) and
(iii) in Sub para (a) above: -
(i) the Contractor shall be entitled to an
extension of time equal to the period of
every such suspension plus 25% for
completion of the item or group of items of
work for which a separate period of
completion is specified in the Contract and
of which the suspended work forms a part,
and
(ii) if the total period of all suspensions in
respect of an item or group of items of work
for which a separate period of completion is
specified in the Contract exceeds 60 days
the Contractor shall, in addition, be entitled
to compensation, as the P.M. may on the
basis of facts consider reasonable, in
respect of salaries and / or wages paid by
the Contractor to his employees and labour
at Site actually remaining idle during the
period of suspension.
(c) If the Works or part thereof is suspended on the
orders of the P.M. for more than four months at
a time, except when suspension is ordered for
reason (i) in sub Para (a) above, the Contractor
may after 60 days from receipt of such order
serve a written notice on the P.M. requiring
permission within fifteen days from receipt by
the P.M. of the said notice, to proceed with the
Works or part thereof in regard to which
progress has been suspended and if such
permission is not granted within that time, the
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Digitally Signed
By:Dushyant Rawal
Contractor if he intends to treat the suspension,
where it affects only a part of the Works as an
omission of such part by Government under
Condition 9 or where it affects the whole of the
Works, as an abandonment of the Works by
Government, shall within ten days of expiry of
such period of 15 days give notice in writing of
this intention to the P.M. In the event of the
Contractor treating the suspension as an
abandonment of the Contract by Government,
he shall have no claim to payment of any
compensation on account of any profit or
advantage which he may have derived from the
execution of the work in full but which he could
not derive in consequence of the abandonment.
He shall, however, be entitled to compensation,
as the P.M. may on the basis of facts consider
reasonable, in respect of salaries and / or wages
paid by him to his employees and labour at Site
actually remaining idle in consequence and also
for loss on materials collected which could not
be utilized on these or other works including
5% as overheads on materials, salaries and
wages."
9. Vascon had claimed an amount of ₹1,81,07,757/- as
compensation for stoppage of work between the period September to
December 2009 and March to June 2010. In support of his claim,
Vascon had produced statements which were marked as 10A, 10B and
10C. Vascon had also produced a Chartered Accountant's Certificate
in support of the said claim.
10. The statement marked as 10A indicates that Vascon had incurred
an expenditure of ₹3,42,697/- on salaries during stoppage of work from
18.09.2009 to 12.12.2009 (a total of 85 days). A tabular statement
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Digitally Signed
By:Dushyant Rawal
appended to the said statement marked as 10A sets out the details of the
individual employees and the remuneration paid to them during the
period in question.
11. In addition, Vascon had also produced a statement indicating the
salaries paid to the staff during the period 12.03.2010 to 02.06.2010.
The same indicated that a sum of ₹22,16,784/- was paid on that account.
The said statement was marked as '10B'. The statement marked as 10C
indicated the amount paid to labour during the said period. In addition
Vason also produced a Chartered Accountant's Certificate certifying as
under:
"(1) Salary paid to named site employees (8 persons)
with employee Code V-1016, 1023, 1039, 1123,
287, 540, 725, and 925 for the month of
November 2009 as Rs 120,952/-.
(2) Salary paid to site staff during the period
12.03.2010 to 02.06.2010 as worked out from the
books of the company as Rs 22,16,784/-.
(3) Total amount for the security guard and security
supervisor as per the bills and as recorded in the
books of the company as Rs 166,987/- March
2010 to June 2010."
12. Mr Kumar, the learned counsel appearing for the appellant states
that there is no cavil with the calculation in statement 10B. However,
the Arbitral Tribunal has erred in accepting the statement of expenses
as claimed under the statements marked as 10A and 10C. He submits
that the Chartered Accountant's Certificate certified the amount paid to
eight employees (as covered under the Statement 10B) during the month
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
of November 2009; it was silent in respect of payments made during the
period September, October and December 2009. He states that
similarly, the amounts claimed as paid to the labour were also not
certified. He contends that first of all, Vascon was required to satisfy
that certain employees had remained idle during the period work was
suspended; and second, that Vascon had paid salary and wages to those
workers. He submits that none of the two ingredients were satisfied in
this case. No evidence was produced by Vascon to support the claim for
compensation in terms of Clause 11(b) of GCC. Notwithstanding the
same, the Arbitral Tribunal has re-calculated the expense on
unsubstantiated assumptions as to the number of employees and
average wages, and has awarded the same.
13. In addition to the above, he submits that the costs as awarded is
unwarranted and the interest rate is excessive.
14. Insofar as Claim No.5 is concerned, the Arbitral Tribunal had
examined the material on record including the aforementioned three
statements marked as 10A, 10B and 10C and allowed the claim to the
extent of ₹1,16,58,459/- as against a sum of ₹1,81,07,757/- claimed by
Vascon. The relevant extract of the Award as also set out in the
impugned order, reads as under:
"150. Detail 10-A is in respect of the period
18/09/2009 to 12/12/2009 (i.e., the first period of
stoppage). Under serial no.1, claims have been made
for "Site staff salary expense" and an additional
"10% Head Office expense & staff'. The additional
10% is not permissible under the said clause 11 as
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
only employees and labour at site have to be
considered. Under serial no.2 rent of machinery has
been claimed which, also in not permissible under
the said clause 11 of the GCC. The salary paid by
the Claimant to its eight employees for the month of
November 2009 has been shown as Rs 1,20,952/-.
On this basis, the per day salary has been computed
at Rs 4,032/-. The Claimant has shown the stoppage
to be of 85 days when, in fact, it was of 84 days.
Hence, the claim on this account would be 84 x
4,032/- which would be Rs 3,38,688/-. The salary
paid has been certified by the Chartered Accountant
vide certificate no. 02/08/2018 dated 28/08/2018
(page 168 of Volume 5). No contrary evidence has
been provided by the Respondent apart from simply
refuting the calculation. Hence, for the period
18/09/2009 to 12/12/2009 the Claimant would be
entitled to a sum of Rs 3,38,688/- by way of
compensation under clause 11 of the GCC.
151. Detail 10-B is in respect of the period
12/03/2010 to 02/06/2020 (i.e., the second period of
stoppage). Under serial no. 1, claims have been
made for "Site staff salary expense" and an
additional "10% Head Office expense & staff'. As
stated above, the additional 10% is not permissible
under the said clause 11 as only employees and
labour at site have to be considered. Under serial
no.2 rent of machinery has been claimed which, also
in not permissible under the said clause 11 of the
GCC. The Claimant has claimed an amount of Rs
1,66,987/- towards security guard and security
supervisor under serial no.3. The Claimant has
claimed interest on mobilization advance under
serial no.4 and alleged loss due to Bank Guarantee
& margin money remaining blocked under serial no.
5. These items under serial nos. 4 & 5 are clearly
outside the ambit of clause 11 of the GCC and are
not admissible. The salary of Supervisors, engineers
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
and dedicated staff at site has been claimed at Rs
22,16,784/- for this period. Both the amounts of Rs
22,16,784/- and Rs 1,66,987/- have been certified by
the Chartered Accountant vide the said certificate
No. 02/08/2018 dated 28/08/2018 (page 168 of
Volume 5). No contrary evidence has been provided
by the Respondent apart from simply refuting the
calculation. Hence, for the second period of
stoppage the Claimant would be entitled to a sum of
Rs 23,83.771/- by way of compensation under
clause 11 of the GCC in respect of Detail 10-B.
152. Detail 10-C is also in respect of the period
12/03/2010 to 02/06/2020 (i.e., the second period of
stoppage) but pertains to the wages of labourers at
site. Referring to the Claimant's letter dated
12/03/2010 (C-14), it was submitted that the work
was directed to be stopped suddenly on 11/03/2010
when the strength of the labour force engaged by the
Claimant at site was 850. It was pointed out that this
was clearly stated in the said letter dated 12/03/2010.
There was no denial of this fact by the Respondent
at that point of time. It was also contended that since
the likely period of stoppage was not indicated, the
workforce at site had to be continued. It was further
stated that the entire workforce could not be
demobilised without paying compensation to them
and consequently it had to be retained till the end of
March 2010 and thereafter tapered off steadily to
about 150. The Claimant has worked out the wages
for 20 days of March at 54,40,000/- based on the
assumption of average wages of 320/- per day for
850 workmen. For the balance period up to
02/06/2010 it has computed a figure of 58,56,000/-
assuming the remaining workforce to be about 300.
Thereby, the Claimant has computed a total figure
of 1,12,96,000/-. This amount has not been certified
by the chartered accountant. Therefore, no sanctity
can be placed on the amount computed by the
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Digitally Signed
By:Dushyant Rawal
Claimant. However, the fact remains that it would
have taken time for the Claimant to demobilise the
workforce at site and therefore at any point of time
during the period of the second stoppage a
substantial number of labourers would have been
sitting idle at the site. The Respondent, however, has
filed R-112 indicating, inter alia, the deployment of
labour during this period. Taking those figures
against the Respondent, it can be seen from the said
document (R-112) that the total labour deployed
(skilled and unskilled) during the period 12/03/2010
to 02/06/2010 (83 days) was 27,925 (or 337 per day
on an average). Taking the number of 27,925
workmen as being idle during this period and
multiplying this with the average wages of Rs 320/-
per day, reasonable compensation has been worked
out as Rs 89,36,000/-.
153. Hence, the Claimant is entitled to an amount of
Rs 1,16,58,459/- (i.e., Rs 3,38,688/- under Detail 10-
A PLUS Rs 23,83,771/- under Detail 10-B PLUS Rs
89,36,000/- under Detail 10-C). Claim No. 5 is
allowed to this extent and Issue 5 is decided in
favour of the Claimant to this extent."
15. The learned Single Judge had examined the Award and had found
that it was based on material available on record and the methodology
of computation of compensation as accepted by the Arbitral Tribunal
was not grossly unreasonable.
16. This Court is unable to accept the contention that the Award is
not based on any material on record. Mr Kumar is correct that the
certificate issued by the Chartered Accountant only certified the salaries
paid to eight employees during the month of November 2009; however,
it did not preclude the Arbitral Tribunal from assessing Vascon's claim
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
for compensation for the month of September, October and December
2009, as well. The statement produced and marked as 10A reflected the
salaries paid during the said period. The Chartered Accountant's
Certificate did support the quantum of monthly salaries. The Arbitral
Tribunal had taken account of the same and had accepted the claim
made by Vascon to that extent.
17. The scope of interference under Section 34 of the A&C Act is
limited. This Court is not required to re-adjudicate or re-appreciate the
disputes between the parties. The Arbitrator is the sole adjudicator of
the evidentiary value of material produced by the parties. In the present
case, the Arbitral Tribunal has evaluated the material and this Court
does not find that the decision of the Arbitral Tribunal is manifestly
erroneous or one that no reasonable person could possibly accept. The
learned Single Judge has rightly held that no interference in the Award
would be warranted under Section 34 of the A&C Act.
18. The contention that it was not open for the Arbitral Tribunal to
assess the compensation payable as direct evidence regarding payment
of salaries was not produced, is unpersuasive. The Arbitral Tribunal
has accepted the average rate of wages as ₹320/- as claimed, as it is, ex
facie, reasonable. There is no material to indicate that the same was
seriously disputed by the appellant. There was ample material on record
for the Arbitral Tribunal to reasonably assess the damages as claimed.
As observed above, re-evaluation of evidence or material is not the
remit of this Court under Section 34 of the A&C Act.
19. Insofar as the payment of costs and interest is concerned, there is
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Digitally Signed
By:Dushyant Rawal
no ground whatsoever to assail the same. Vascon has prevailed in the
arbitration before the learned Arbitrator and therefore, there is also no
infirmity with the Arbitral Tribunal awarding costs. Vascon had
claimed interest (pre-award and future) at the rate of 20% per annum.
However, the Arbitral Tribunal has awarded interest at the rate of 8%
per annum.
20. This Court concurs with the decision of the learned Single Judge.
The present appeal is unmerited and, accordingly, dismissed. All
pending applications are also disposed of.
VIBHU BAKHRU, J
AMIT MAHAJAN, J
MAY 25, 2022
RK
Signature Not Verified
Digitally Signed
By:Dushyant Rawal
