Delhi High Court
Gannon Dunkerley And Co Ltd vs M/S Zillion Infraprojects Pvt Ltd on 10 August, 2023
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 234/2023, I.A. 12401/2023
Reserved on : 13.07.2023
Pronounced on : 10.08.2023
IN THE MATTER OF:
GANNON DUNKERLEY AND CO LTD. ..... Petitioner
Through: Mrs. Pooja M. Saigal, Mr. Simrat
Singh Pasay and Mr. Nipun Gupta,
Advocates.
Versus
M/S ZILLION INFRAPROJECTS PVT LTD. ..... Respondent
Through: Nemo.
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
JUDGMENT
MANOJ KUMAR OHRI, J.
1. The present petition has been preferred under Section 34 of the
A&C Act1 assailing the Arbitral Award dated 23.12.2022 (hereafter, 'the
impugned Award') delivered by the Arbitral Tribunal comprising of a
Sole Arbitrator.
FACTUAL MATRIX
2. For the ease of reference, petitioner herein shall be referred to as
"Contractor" and the respondent/claimant as "Sub-contractor".
1 The Arbitration & Conciliation Act, 1996
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
3. The Contractor was awarded BTG Civil and Structural Work in
1350 MW thermal power project at Sinner, Nasik, Maharashtra by M/s
India Bulls Infrastructure Company Ltd. (Principal Employer)2, vide a
letter of award dated 05.05.2011. The contract value of the works
awarded was Rs. 201.51 crores.
4. Part of the works-pertaining to steel fabrication and erection- was
sub-contracted by the Contractor to the Sub-contractor under an MOU
dated 02.07.2011 executed by them. One of the conditions of the MOU
was that the terms and conditions of the contract between the PE and the
Contractor would be applicable to the Sub-contractor in respect of
portion of works sub-contracted to it.
5. Pursuant to the MOU, a letter of award dated 26.07.2011 was
issued by the Contractor in favour of the Sub-contractor.
6. The PE, Contractor and the Sub-contractor also entered into a
tripartite agreement dated 06.08.2011, defining the scope of work, role of
each party and the relationship between them.
7. In accordance with the Clause 13 of the MoU and Clause 1 of the
tripartite agreement, the Sub-Contractor, furnished an advance Bank
Guarantee in favour of the PE equivalent to 5% of the contract value
amounting to Rs.3,81,78,000/- from the State Bank of India, Jawahar
Vyapar Bhawan, 1, Tolstoy Marg, New Delhi, in favour of the PE, for
and on behalf of the Contractor.
Principal Employer, i.e., India Bull Infrastructure Company Ltd
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
8. The Sub-contractor undertook the works of structural steel
fabrication and erection for Mill & Bunker Bay at Unit 6-10, Phase-II,
Sinner TPP, Nasik between August, 2011 to November, 2011, when it
was verbally asked by the Contractor to stop the work.
9. In the meeting held on 17.11.2011 between the Contractor and
Sub-contractor, the former officially informed the latter, about the
foreclosure of the work at Phase II, and in its place, assigned the work of
structural steel fabrication and erection for Mill & Bunker Bay at Unit 4-
5, Phase I, Sinner TPP, Nasik.
10. As the Sub-contractor had to mobilise the equipment and
manpower from Phase II to Phase I, the parties agreed that the additional
cost incurred by the Sub-contractor, which was not part of the earlier cost
estimate, would be borne by the PE on actual basis.
11. On 05.12.2011, a fresh work order relating to Phase I work was
executed by the Contractor in favour of Sub-contractor. The work at
Phase I commenced in December, 2011 and was carried on till June,
2012, when the Contractor again orally informed the Sub-contractor to
stop the work.
12. The Sub-contractor complained that even though the Contractor
had received the payments from the PE for the work carried out by it at
both the sites, however, the Sub-contractor's running bills remained
unpaid by the Contractor.
13. Disputes between the parties remaining unresolved, the Sub-
contractor invoked the Arbitration clause. Resultantly, vide order dated
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
27.03.2019 passed in ARB. P. 64/2019, this Court referred the parties to
the AT3 comprising of Justice Ajit Bharioke (Retd.) as the Sole
Arbitrator.
14. Upon hearing the parties, the AT delivered the impugned Award
on 23.12.2022. The Sub-contractor filed an application under Section 33
of the A&C Act seeking correction of errors. The application was
opposed by the Contractor and was eventually rejected by the AT vide
order dated 15.02.2023.
DISPUTES BEFORE THE AT
15. The Sub-contractor filed its SOC4 raising the following claims
against the Contractor:-
S. Particulars Sub Total Gross Total
No. (INR) (INR)
A Outstanding Bills Retention
i Respondent/Applicant-Bills 3,42,02,465/-
Outstanding
amount
ii Extra Bill
Material Shifting - Bill being raised
Extra Bill - Excavation & Back filing - 7,65,780/-
Bill being raised 1,00,406/- 8,66,186/-
iii Retention receivable 85,06,717/-
Total A 4,35,75,368/-
B. CLAIM FOR IDLING OF
RESOURCES
AND MANPOWER
i Idling of T & P 2,91,20,300/-
Idle Charges of T & P at Site
ii Idling of staff labour and staff idle 47,01,029/-
payment of labour and staff
iii ESTABLISHMENT EXPENSES 8,74,500/-
Administrative expenses at site
Arbitral Tribunal
The Statement of Claim
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
Head Office allocated Expenses 36,05,928/- 44,80,428/-
iv INTEREST ON UNPAID DUES
Interest on RA-Bill amount 3,05,24,138/-
Interest on Retention Money 66,36,638/-
Interest charges on B.G. 46,15,364/- 4,17,76,140/-
v EXPENSES INCURRED-COULD
NOT BE
UTILIZED
Design & Drawing 20,04,358/-
Labour Colony Foundation, toilet, 24,28,486/-
water pipeline, Electrification, storage
tank etc. cost of R. T. Room, dark
room and others.
Mobilization of Tools & plants
Staff & Labour mobilization
Pre-fabricated structure material for
labour colony 30,28,757/-
7,44,500/-
35,76,246/-
Total 1,17,82,347/-
Proportionate share (Executed contract 12,93,321/-
value - 8,38,14,379/
Total Contract value -
Rs. 76,35,61,600/-) 1,04,89,026/-
vi EXPENSES INCURRED FOR THE
PROJECT
Damage & Losses of Electrodes & 9,08,435/-
Points etc.
Demobilization of Tools and Plants 39,66,484/-
Demobilization of staff and worker 7,44,500/- 56,19,419/-
Total B 9,61,86,341/-
Additional Interest upto 31.07.2018 1,86,16,378/-
Total Recoverable 15,83,78,088/-
16. All the claims were disputed by the Contractor through its SOD5.
It was contended by the Contractor that the claim was time barred. The
work had been suspended in the year 2012, and the raising of the claims
in the year 2018 was time barred. On merits too, the claims were denied.
Statement of Defence
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
Following is the substance of the disputes raised by the Contractor in
relation to each claim:
(i) Claim No 1: Outstanding bills and retention money. Contractor has
denied its liability on the ground that the PE could not process the bills in
view of the Sub-contractor's failure to join the process of reconciliation.
Contractor has referred to Clause 4 of the MOU, to contend that since the
Sub-contract was executed on 'back-to-back' basis with the main
contract between the Contractor and PE, until the bills raised by the Sub-
contractor are paid by the PE, the same don't become due for payment by
the Contractor.
(ii) Claim No 2: Contractor relied on Clause 7 of the MOU to contend
that the rates agreed to between the parties were firm and not subject to
escalation, and as such, no claim can be made towards alleged idling of
resources. In any case, it was denied that there was any idling of
resources suffered by the Sub-contractor at all.
(iii) Claim No 3: This claim was denied by the Contractor on the
ground that there is no provision in the MOU for such claim, besides
denying the fact that any establishment expenses were actually incurred,
as alleged.
(iv) Claim No 4: Claim towards interest has been disputed by the
Contractor on the ground that there is no agreement between the parties
for payment of interest since the same is not provisioned for in the MOU.
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
(v) Claim No 5: This claim is denied contending that the Bank
Guarantee was furnished by the Sub-contractor in favour of the PE and
thus, the Contractor was not liable for any claim in relation thereto.
(vi) Claim No 6: Contractor contended that this claim is already
covered by the Claim No 2 towards idling loss and therefore can't be
claimed twice as an independent claim.
(vii) Claim No 7: This claim is disputed by the Contractor on the
ground that sub-contractor has failed to substantiate the alleged
additional expense incurred by it, besides being beyond the provisions of
the MOU.
17. In the Arbitral proceedings, parties lead oral evidence by
examining their respective witnesses. While the Sub-contractor examined
two witnesses, the Contractor examined only one witness.
18. The Contractor did not file any counter-claim.
THE IMUGNED AWARD
19. The AT framed the following four issues for determination: -
"i) Whether the claim filed by the claimant for any part
thereof is barred by limitation?
ii) Whether the claim filed by the claimant is justified, if
so, to what extent?
iii) Whether the claimant is entitled to interest, if so, to
what extent?
iv). Relief."
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
20. The AT has rejected all the claims of the Sub-contractor, barring
Claim No 1 qua outstanding bills- which has been allowed at a reduced
sum, though. The AT has found the claim to be within limitation and has
rejected the Contractor's contention in this regard.
21. The AT while considering issues Nos. 2 and 3, dealt with the
individual claims separately. With respect to claim No.1 relating to
outstanding bills and retention receivables amounting to Rs.4,35,75,368/-
it noted that a total of 18 R.A. Bills aggregating to Rs.8,77,53,598/- were
raised by the Contractor upon the PE. As per the contract between the
parties, only 96% of the said billed amount i.e., Rs.8,42,43,454/- was due
and payable to the Claimant. Out of the said due amount, the Sub-
contractor had received only a sum of Rs.4,02,80,665/- (including TDS)
and thus sum of Rs.4,39,62,789/- was payable. The Contractor disputed
the said calculations and contended that the Sub-contractor had submitted
invoices for a total value of Rs.6,96,10,731/-. The PE made recoveries to
the tune of Rs.3,00,54,381/- against the invoices and after taking into
consideration the sum of Rs.4,02,80,665/- which was received by the
Sub-contractor, an excess payment of Rs.35,08,745/- was made to the
Sub-contractor.
22. The AT after referring to the cross-examination of C.S. Saxena,
former Chairman of the Sub-contractor company, found evidence lacking
relating to certification of work and quality in respect of the running bills
and thus, disbelieved the amount claimed in the claim no.1. It further
observed that even the Contractor, in his evidence, had failed to file a
detailed statement of account, to come to a conclusion as to what
amounts were due in favour of the Sub-contractor.
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
23. At the same time, the AT observed that in respect of RA Bill-05
dated 29.01.2016, the Sub-contractor had proved on record, a quality
certificate by FQA for payments issued in a joint inspection carried by
representative of PE and Contractor, a forwarding letter of the same date
written by the Contractor to the PE and a tax invoice also of the same
date in relation to the RA Bill-05. The AT came to the conclusion that
the tax invoice mentioned the current payable amount as
Rs.83,64,572.25/- and also previous balance of Rs.2,10,09,10.60,
totalling to Rs.2,93,73,673.85/-, and after adjusting retention of 5%, the
balance receivable by the Sub-contractor was shown as
Rs.2,79,04,990.16/-. After perusing Clause 4 of the MOU and Clause
5(iii) of the letter of Award dated 05.05.2011, the AT observed that the
said amount ought to have been released to the Sub-contractor after the
satisfactory completion of defect liability period of 12 months from the
date of completion of the work. The work was suspended in June, 2012
and never re-commenced thereafter, the defect liability period of 12
months was found to be long over. The Contractor placed no evidence on
record to show any defect in design, engineering material or
workmanship. Resultantly, the AT found no justification in retention of
the 5% retention amount. It thus concluded that the Sub-contractor was
entitled to 96% of the amount claimed in the RA Bill-05 which amounted
to Rs.2,81,98,726.89. The AT rejected Contractor's contention that the
Sub-contractor's entitlement to the said amount was dependent on the
Contractor receiving the said amount from the PE. In this regard, AT also
took note of the fact that the Contractor had nominated one Project
Manager and thus took upon itself the responsibility to coordinate
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
between the Sub-contractor and the PE in terms of Clause 14 of the
MOU. The AT further took note of the fact that the Contractor had itself
initiated arbitration proceedings against the PE with respect to RA Bill-
05, which were later terminated. This, in the opinion of the AT, had
foreclosed the Sub-contractor's right to claim its dues from the PE and
thus the Contractor was estopped from denying its liability to pay the
Sub-contractor.
24. The claim Nos. 2, 3, 4, 5 and 6 were rejected.
25. Consequently, the AT entered an Award for a sum of
Rs.2,81,98,726.89 alongwith interest @ 12% per annum from the date of
filing of the claim till realisation.
SUBMISSIONS BEFORE THIS COURT
26. In the present proceedings, learned counsel for the Contractor
submitted that the impugned Award is challenged only on the ground of
perversity. It was contended that the AT did not take into account the
detail ledgers of the Contractor as well as the emails including emails
dated 12.11.2018 and 01.06.2019, whereby the Contractor had requested
the Claimant for re-conciliation of the work executed by it. In the said
emails, it was communicated to the Sub-contractor that there was deficit
of 88.02 MT structural steel. Learned counsel also assailed the impugned
Award by contending that, while on one hand, the AT had disbelieved
the Sub-contractor's version for claim nos. 2, 3, 4, 5 & 6, it decided
claim no.1, to the aforesaid extent, in favour of the Sub-contractor. On
the aspect of Contractor's arbitration proceedings with the PE, it was
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
stated that the same resulted in a settlement on zero-zero basis and thus
the Contractor had no liability to pay the Sub-contractor.
ANALYSIS & CONCLUSION
27. Before delving into the merits of the contentions raised by the
Contractor, the Court deems it fit to recapitulate the scope of interference
against an Award under Section 34 of the A&C Act. The law is well
settled. The Court, while hearing an application under Section 34, is not
expected to act as an Appellate Court and re-appreciate the evidence6.
The conclusion of the Arbitrator which are based on no evidence or
having been arrived at by ignoring vital evidence are perverse and can be
set aside on the ground of patent illegality7.
28. With the aforesaid restrictive mandate of law, this court has
examined the award, and has not found any ground available to it under
Section 34 that calls for its intervention.
29. Contractor's criticism of the arbitral award for rejecting its
limitation argument is misplaced. Curiously, as per the Contractor's own
stand in the SOD, the claim was "pre-mature" on the ground that PE had
not released the payments to the Contractor "yet", for it to be, in turn,
released to the Sub-contractor. This plea is at odds with the plea of
limitation. Pertinently, it is not the pleaded case of the Contractor that
the bills had been rejected either by the Contractor itself or by PE, when
PSA SICAL Terminal (P) Ltd. vs. Board of Trustee of V.O.CHIDAMBRANAR Port Trust Tuticorin
and Ors., (2021) SCC OnLine SC 508.
Associate Builder v. DDA reported as (2015) 3 SCC 49 and Delhi Airport Metro Express(P) Ltd. v.
DMRC, (2022) 1 SCC 131.
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
they were raised between December 2011 to June 2012. Furthermore, the
Contractor itself has referred to letters dated 09.11.2017 and 12.12.2018
written by the PE, calling upon the Sub-contractor for reconciliation of
accounts. This being so, the plea of limitation by the Contractor is not
sustainable. The AT's finding on limitation is well reasoned and correct.
30. On merits, the AT has rejected all the claims, except partially
admitting Claim No 1 pertaining to the outstanding bills of the Sub-
contractor, to the extent competing evidence placed by the parties.
31. Contractor's objection regarding the AT's allowing payments to
be made to the outstanding bills of the Sub-contractor, despite alleged
lack of evidence is not made out.
32. In the SOC filed by the Sub-contractor, it claimed a sum of
Rs.8,77,53,598/- towards 18 outstanding RA Bills raised by it. In
response, the Contractor, in its SOD, has not denied the correctness of
the amounts claimed in the RA bills, but has denied its liability on the
plea that bills were not payable, since the same were pending
reconciliation with the PE. There is no plea in the SOD that the bills had
been rejected either by the Contractor or by the PE.
33. It is seen that despite lack of serious denial by Contractor of the
sums claimed in the RA bills, except to contend that the same were still
pending reconciliation with the PE, the AT did not accept the correctness
of the RA bills of the Sub-contractor, as it is.
34. A perusal of the impugned Award would show that the AT
recorded a finding that the Sub-contractor could not produce any
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
evidence that the Contractor had received payment from the PE, in
relation to the RA bills raised by it. The AT goes on to note that even the
Respondent has not produced any statement of account to assess the
quantum of work done. The AT has found lack of evidence, in relation to
the Contractor's allegation of poor quality of work executed by Sub-
contractor. Importantly, there was no denial by the Contractor that the
work had not been done by the Sub-contractor. Even the quantum of
work claimed by the Sub-contractor has not been disputed by the
Contractor, except to say that it was PE that was supposed to verify the
bills raise by the Sub-contractor. No doubt, there is an allegation of
failure of Sub-contractor to get reconciliation of the material supplied
and losses having being suffered by the Contractor due to delays in
completion of work. However, it can't be ignored that no counter claim
was filed by the Contractor against Sub-contractor on this count.
35. With the aforesaid pleaded facts, the AT had to look into the
evidence placed on record, to evaluate the quantum of work done by
Sub-contractor. The AT refused to grant the sum of Rs 8,77,53,598/- as
claimed by the Sub-contractor towards its RA bills as it is, since there
was no certificate or proof of joint measurement of work produced by the
Sub-contractor. The AT then relies upon a quality certificate for
payments (Ex. CW1/L) that was jointly issued by Sub-contractor and the
Contractor, in relation to RA Bill-05 of the Sub-contractor, which was
submitted to the PE along with the Contractor's own bill (Tax Invoice)
dated 29.01.2016. The certificate records that in the joint inspection, the
works billed in RA Bill-05 were found in conformity with the technical
specifications etc. Thus, there is no merit in Contractor's contention that
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
its email issued to Sub-contractor were not looked into by the AT. The
certificate reads as under:
RATTANINDIA NASHIK POWER QUALITY CERTIFICATE BY FQA
PROJECTS FOR PAYMENTS
1 Name of the Main Contractor 1 Gannon Dunkerley & Co. Ltd.
2. Name of Contract and Period 2 BTG. Fab.& Erc.Phase-II/27
month
3. Work order No. & Date 3 7008000001, Dt.01.8.2011
4 Area 4 BTG. Phase-II
5. State/Work 5 Fabrication & Erection
6. RA Bill No. 6 05
7. Period of Bill 7 01.6.2012 to 30.6.2012
It is certified that the works billed in RA BI No. 05 DL 2901-2016 has been executed
and all relevant checks/inspections associated tests as per approved GP
No.GDOL/FQP/IRL/02 Rev-1(Phase-II) Dated 05.09.2011 and contract Technical
Specification have been carried out and results are conformity. Surveillance on all
category 'C' checks have been carried out and found in conformity. Documentation
and records as per approved FQA have been maintained.
Note: Since work has been stopped by IRL, this bill consisting of unfinished items of
Phase-II. Items are certified as on site condition. 10% of amount held for balance
work of the job.
Sd/- Sd/-
Contractors Execution RATTANINDIA EXECUTION
Name/Sign/Date Name/Sign/Date
Certificate by FQA
2 Date of issue of Certificate 29/01/2016
Certified that 'A' class checks identified in FQP No.GDCL/FQP/IRL/02 R-01
(Phase-II) dated 05.9.2011 has been carried out and results are satisfactory.
Surveillance on Cat-'B' checks have been carried out and found in conformity.
Reviewed as basis of
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
inspection process.
Sd/- Sd/-
Contractor's FQA RATTANINDIA FQA
Name/Sign/Date Name/Sign/Date
36. The Tax Invoice dated 29.01.2016 relating to RA Bill-05, for the
period 01.06.2012 to 30.06.2012 shows that in the said RA Bill, besides
the currently payable amount of Rs.83,64,572.25/- a sum of
Rs.2,10,09,101.60/- was claimed towards previous balance.
37. AT relied upon the said joint certificate of the parties and the
Contractor's own Tax Invoice, which was the best evidence available on
record, to evaluate the value of work done by the Sub-contractor and the
sums payable to it. The AT committed no legal error in relying upon this
piece of evidence to evaluate the claim.
38. It is a settled position of law that the AT is the master of both
quality and quantity of evidence that it may rely upon to evaluate
claims.8 Since Indian Evidence Act does not apply to arbitral
proceedings, it can't be insisted that the evidence produced by the parties
must be tested on the rigorous rules of evidence laid down in the Indian
Evidence Act. The present case is not a case of lack of evidence, as is
sought to be contended by the Contractor, for the court to take notice of.
The AT has relied upon the evidence placed on record by the parties, and
being satisfied with the quality and quantity of evidence produced, has
given its findings. There is nothing perverse in the findings. Rather, the
Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
AT followed a judicial approach in adjudication of disputes rather than
an equitable approach to balance the equities between the parties.
39. Contractor's contention that AT's reliance on quality certificate is
contrary to its own finding in the impugned award that without the
certification of RA bills, the same cannot be considered as payable, is not
correct. There is no contradiction. The AT has refuted the claim made by
the Sub-contractor and did not admit the sums claimed by it in the RA
Bills, as the same were not certified. In rejecting the claim, the AT only
displayed a judicial approach by not admitting a claim based on mere
production of RA Bills, thereby rejecting the Sub-contractor's
contention. However, while assessing competing evidence, the AT found
that, whilst Sub-contractor did not produce any certificate in support of
its claim of Rs.8,77,53,598/- under the RA bills, however, from the
Contractor's own Tax Invoice, a sum of Rs.2,10,09,101.60 is claimed as
previous balance under the previous bills that may have been raised by
the Contractor. The AT chose to rely on Contractor's own invoice as
evidence for evaluation of claim and awarded a lesser amount of
Rs.2,79,04,990.16 after adjustment of 5% towards retention, in favour of
the Sub-contractor, rather than its original claim of Rs. 8,77,53,598/-,
which it could not substantiate with evidence. Pertinently, during the
course of submissions in the present case, learned counsel referred to the
Contractor's own notice dated 05.12.2019 issued to the PE invoking
arbitration, wherein it had claimed a sum of Rs.4,34,47,586/- towards
"Due against Certified Bills", as claim no.1. On query, it was answered
that the same included the amount as claimed by the Sub-contractor in its
RA Bill-05.
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
40. Contractor's sole defence in the SOD is the 'back- to-back' nature
of the MOU dated 02.07.2011, executed between the Sub-contractor and
Contractor with the LOA dated 05.05.2011 between Contractor and PE.
It is contended by the Contractor that the bills raised by the Sub-
contractor cannot be paid until the same are certified by the PE. There is
no such provision in the MOU dated 02.07.2011. However, it is
contended that since the MOU is a 'back-to-back' arrangement with the
LOA, by virtue of Clause 5 of the LOA dated 05.05.2011, which stands
incorporated by reference in the MOU dated 02.07.2011, the RA bills
raised by Sub-contractor don't become payable unless certified by the
EIC9 of the PE.
41. It is seen that the expression 'back-to-back' is freely used by the
Contractor to deflect is liability on to the PE. However, 'back-to-back',
in the absence of a general legal definition, would have a certain meaning
and connotation. Terms of the MOU dated 02.07.2011 must be seen, as
to what extent MOU between Contractor and PE has been incorporated
by reference. Clause 3 of the MOU dated 02.07.2011 says that all the
terms of the Main Contract shall be applicable for the execution of works
by the Sub-contractor. Clause 4 uses the expression 'back-to-back' basis,
to state that all the terms of the Main Contract shall apply to the MOU
between Contractor and Sub-contractor. Clause 6 says that the payments
received from PE shall be passed on to the Sub-contractor by the
Contractor. In Clause 10, it is stated that since the MOU is executed on
'back-to-back' basis, all labour licences shall be obtained by Sub-
Engineer Incharge
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
contractor and all liabilities pertaining to VAT shall be that of the Sub-
contractor.
42. 'Back-to-back' obligations would only mean what has been
incorporated by reference from the LOA into the MOU, is applicable to
the parties to the MOU. No doubt, in terms of Clause 5 of the LOA, the
bills raised by the Sub-contractor are subject to the certification of the
Contractor's bills by the PE, but the Contractor has not claimed that the
bills had been rejected by the PE. The only defence raised was that the
bills were pending reconciliation by the PE and that the claims by the
Sub-contractor were therefore premature. As noted above, the Contractor
itself had claimed the amount under RA Bill-05, in its own notice,
invoking arbitration against the PE.
43. Pendency of the bills with the PE for certification could be a
ground for Contractor to defer payments to Sub-contractor, until
certification is complete. This is a mechanism to be followed in the
regular course during the execution of the works. However, once the
parties are in a dispute, in relation to the bills claimed by the Sub-
contractor, Contractor cannot defer payments in perpetuity on the ground
of the pendency of certification, when it has not otherwise disputed the
correctness of the bills.
44. It is in these circumstances that the AT found it fit to rely upon the
Contractor's own tax invoice, along with a quality inspection certificate
submitted to the PE, to evaluate the claim of the Sub-contractor. As
stated above, the AT rejected the Sub-contractor's claim in the absence
of any proof submitted by it to claim the sum of Rs.8,77,53,598/-
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
however, the AT allowed a reduced amount relying upon the best
evidence placed on record by the parties.
45. Similarly, the AT's finding regarding retention money claim of the
Sub-contractor is without any judicial blemish. In terms of Clause 5(iii)
of the LOA, retention amount withheld by Contractor would be returned
by it, to the Sub-contractor upon the expiration of defect liability period
of 12 months, after the completion of work. As per record, the work was
stopped in June, 2012. There is neither any allegation nor any claim
made by the Contractor that Sub-contractor had failed to rectify the
defects found in its work, in the 12 months defect liability period. In the
absence of any claim, Contractor cannot justify withholding of retention
money that became due and payable to the Sub-contractor upon
completion of defect liability period, in terms of Clause of LOA which
period expired in June 2013.
46. For the foregoing reasons, there is no patent illegality found in the
award in question. Consequently, the Objections raised by the Petitioner
under Section 34 are not made out. The petition is dismissed alongwith
pending application(s).
(MANOJ KUMAR OHRI)
JUDGE
AUGUST 10, 2023
ga
Digitally Signed
By:NIJAMUDDEEN ANSARI
Signing Date:10.08.2023
18:39:59
