Madras High Court
Roman Tarmat Limited vs M/S. It Expressway Limited on 9 August, 2021
O.P.No.306 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 9/8/2021
CORAM
THE HONOURABLE Mr.JUSTICE N. SATHISH KUMAR
O.P.No.306 of 2015
and
A.No.850 of 2020
Roman Tarmat Limited
rep. By its General Manager
Door No.6, Plot No.60
15th Cross Street, Tansi Nagar
Velacherry
Chennai 600 042. ... Petitioner
Vs
1. M/s. IT Expressway Limited
171 II Floor, TNMB Building
South Kesavaperumalpuram
Pasumpon Muthuramalingam Road
(Greenways Road) Raja Annamalaipuram
Chennai 600 028.
2. S.P.Krishnamoorthy
Presiding Arbitrator
C/o.Dr.K.Vasantha
New No.1, Old No.9 Police Commissioner Office Road
Opp. To Police Hospital
Egmore,
Chennai 600 008.
3. Mr.B.K.Thanupillai
Arbitrator
Flat No.4-10-1 Arihant Majestic Towers
1/18
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O.P.No.306 of 2015
J.N.Salai, Koyambedu
Chennai 600 107. ... Respondents
PRAYER : Petition filed under Section 34 of the Arbitration and
Conciliation Act, 1996, to set aside the arbitral award dated 2/8/2014 passed
by the respondents 2 to 4.
For Petitioner ... Ms.Nalini Chidambaram
Senior Counsel
for Ms.C.Uma
For Respondents ... Mr.D.Balaraman
for R.1.
------
ORDER
This Original Petition has been filed, to set aside the arbitral award,
dated 2/8/2014, passed by the respondents 2 to 4, directing the petitioner to
pay a sum of Rs.9,09,40,880/- to the first respondent.
2. The brief facts which lead to the filing and disposal of this
Original Petition are as follows:-
3. A contract was entered into between the petitioner and first
respondent, for construction of service road and foot path on LHS and RHS
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O.P.No.306 of 2015
in Rajiv Gandhi Salai (IT corridor), Chennai, Tamil Nadu. The salient
features of the contract agreement are as under:-
1 Date of submission of bid 23/2/2020
2 Isuse of letter of Intent 31/3/2010
3 Date of signing of 12/4/2010
Agreement
4 Date of commencement of 12/4/2010
work
5 Time period for completion 12 months
of work
6 Contractual date of 11/4/2011
completion
7 Contract price as per Rs.31,75,30,5
Agreement 60/-
4. The first respondent terminated the contract for slow progress and
for fundamental breaches committed by the petitioner. Hence, the matter
has been referred to the Three Member Arbitral Tribunal. The petitioner has
raised the dispute, to declare the termination notice, dated 30/11/2010,
issued by the first respondent, as arbitrary, illegal and premature and
directed the first respondent to pay a sum of Rs.7.68 crores, along with
interest, at the rate of 12%, from the date of filing of the claim statement, till
the date of payment.
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O.P.No.306 of 2015
5. The petitioner has completed only 17% of the work and from the
very inception, the work was slow and he has not provided with proper
designs. Therefore, as per the terms governing the parties, under the
contract, the contract has been terminated and there was no proper planning
in executing the work.
6. The first respondent has narrated and given the detailed reasons
for the delay attributable by the petitioner in the defence statement, which
may not be repeated once again.
7. Proceedings recorded by the Tribunal would indicate that the
claim statement filed originally did not contain any details and supporting
documents. Only after filing the statement of defence, an application has
been filed to seek amendment and thereafter, additional grounds have been
raised. Before the Tribunal, no oral evidence has been let in. They relied on
documentary evidence and contractual terms.
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O.P.No.306 of 2015
8. Challenging the order passed by the arbitral Tribunal, the present
Original Petition has been filed, praying for the relief stated supra.
9. Heard Ms.Nalini Chidambaram, learned Senior Counsel for the
petitioner and Mr.D.Balaraman, learned counsel for the first respondent.
10. Learned Senior Counsel appearing for the petitioner submitted
that award passed by the learned Tribunal has to be set aside, mainly on the
ground of inadequacy of reasons. The Arbitral Award was passed, based
on the submissions made by both sides and no proper discussion was made
by the learned Arbitrator.
11. It is contended by the learned Senior Counsel appearing for the
petitioner that the Contractor does not contain risk and cost Clause,
whereas the contract only indicate that the first respondent is entitled to levy
liquidated damages alone. Admittedly, 17% of the work has been
completed, whereas the new tender has been invited for the remaining work,
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O.P.No.306 of 2015
for an estimated value of Rs.45.33 crores. Tthere was no transparency in the
tender. Such differential cost sought to be recovered from the petitioner
without any evidence. Particularly, there is no Clauses in the contract to
recover such differential amount. Hence, it is the contention of the learned
Senior Counsel appearing for the petitioner that award is not sustainable in
the eye of law.
12. It is further contended by the learned Senior counsel appearing
for the petitioner that an application has been filed by the first respondent,
in A.No.850 of 2020, under Section 34 (4) of the Act, to adjourn the
proceedings in O.P.No.306 of 2015 and remit the award, dated 2/8/2014, to
the Arbitral Tribunal, comprising of respondents 2 to 4 and resume the
arbitral proceedings for assigning reasons for its findings in the award. The
first respondent himself has admitted that award lacks reasoning. This
ground itself is sufficient to interfere with the award. Hence prayed to set
aside the award.
13. Learned counsel appearing for the first respondent submitted that
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A.No.850 of 2020 has been filed with abundant caution, wherein it is
clearly mentioned that the award is the result of proper reasoning given by
the Tribunal.
14. With regard to the termination of the contract, no submission was
made by either side. Therefore, it is contended that the first respondent
cannot take advantage of such application which has been objected. Hence,
it is submitted that application was filed on the basis of the judgment of the
Hon'ble Apex Court to the effect that such application can be filed only
during the pendency of the petition, under Section 34 of the Act. Therefore,
with abundant caution, such application has been filed and that itself cannot
be a ground to hold that the petitioner is automatically entited to succeed.
15. As far as the merits of the contention is concerned, the learned
Arbitrators have considered the entire documentary evidence and
particularly, the terms governing the parties, passed an award. Therefore,
the same cannot be interfered with, under Section 34 of the Act and no
grounds were made out to interfere with the award, under Section 34 of the
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Act.
16. On a perusal of the entire award, learned Arbitral Tribunal has
given an anxious consideration, from paragraph 13 of the award.
Arbitrators have framed necessary issues in this regard and after considering
the submissions made by both sides, found that though the period of
completion of the work was 210 days, the completion period was extended
from 210 days 7 months to 12 months and the schedule of handing over site
possession under Section IV by the petitioner in S.O.C stands superseded.
The learned Arbitrator, after taking note of the drawings enclosed in the bid
documents, answered the second issue against the petitioner. Though the
reasons were not elaborate running to several pages, the reasons were based
mainly on the documents relied upon by the parties.
17. It is relevant to note that both sides have relied upon only on
documentary evidence. Merely because elaborate reasons have not been
given, it cannot be said that such order is bereft of any details. For every
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issues, the learned Arbitrator has given proper reasons.
18. Clause 16.1 and 2 reads as follows:-
"16.1 – The Contractor shall commence
execution of the construction/improvement works
on the start date and shall carry out the
construction/improvement works in accordance
with the program submitted by the Contractor, as
updated with the approval of the Engineer and
complete them in all respects by the intended
Completion Date.
16.2. All the time during the construction
period, Contractor shall notify the Engineer details
of drawings and instructions required and of why
and by when it is required. This notice shall be
given by the contractor at least one month advance
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correlating approved construction program."
19. Clause 45.1 deals with Penalty and Liquidated Damages and the
same reads as follows:-
"For Construction/Impovement Works
(a). In case of non-completion of the entire
construction/improvement works within the Intended
Completion Date as indicated in the Contract Data,
the Contractor shall pay liquidated damages to the
Employer at the rate per day stated in the Contract
Data for each day that the actual Completion Date is
later than the Intended Completion Date. The
liquidated damages amount shall be deducted from
payments due to the Contractor and shall not be
refundable. The total amount of liquidated damages
shall not exceed the amount defined in the Contract
Data.
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b. Time is the essence of the Contract and
payment or deduction of penalty or liquidated
damages shall not relieve the Contractor from his
obligation to complete the works as per agreed
Construction Program and Milestones or from any
other of the Contractor's obligations and liabilities
under the Contract or the Employer's right to invoke
the Performance Security.
c. If the Intended Completion Date is extended
after liquidated damages have been paid, the Engineer
shall correct any overpayment of liquidated damages
have been paid, the Engineer shall corret any
overpayment of liquidated damages by the Contractor
by adjusting the next payment certificate. The
Contractor shall be paid interest on the over payment
calcualted from the date of payment to the date of
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repayment at the ate of 8% p.a."
20. Clause 45.2 of the Conditions of Contract, reads as follows:-
"(a). In case the Contractor has not rectified
or addressed deficiencies as directed by the
Engineer at the time of Site Inspections during
defects liability period, the Employer retains the
right to get works done through a third party and
debit the cost and expenses incurred to the
Contractor. Alternatively, the Engineer may
recommend invoking of Performance Security in
part of full, as the case may be. In case, the
Contractor still fails to rectify or address
deficiencies even after Invoking Performance
Security, as described earlier, then the Employer
shall treat the event as fundamental breach of
Contract in terms of Clause 54 of Conditions of
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Contract."
21. A bare reading of the above makes it clear that in the event of
work has not been completed and if any defect is pointed out has not been
rectified during the defect liability period, cost and expenses incurred to get
the work done through the third parties should be recovered by the
employer.
22. Clause 54 of the Conditions of Contract deals with the
Termination of the contract. When the employer of the Contractor commits
fundamental breach of contract which may lead to termination of the
contract. It is the case of the first respondent that despite agreed to
complete the work, as agreed in the contract, the petitioner has completed
only 17% of the work. Despite two show cause notices issued, no progress
has been shown.
23. 54.2 (g) and (i) of the Conditions of Contract reads as follows:-
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(g). The Contractor has defaulted in fulfilling
his obligations under his Contract.
(i). If the Contractor, in the judgment of the
Employer has engaged in corrupt or fraudulent
practices in completing for or in the executing the
Contract.
24. Last paragraph of 54.2 reads as follows:-
"In case of default on the part of the Contractor
in carrying out the work as per programme, the
employer is entitled to employ and pay others to carry
out the work. The additional cost if any will be
recovered from the defaulting contractor."
25. It is to be noted that in case of default on the part of the
Contractor, in carrying out the work, as per programme, the employer is
entitled to employ and pay others to carry out the work. Admittedly, in this
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case, the petitioner had completed only 17% of the work and the remaining
works ought to be completed by issuing another tender for a sum of
Rs.45.33 crores.
26. It is the further contention of the learned Senior Counsel
appearing for the petitioner that such amount has been escalated which is
unreasonable. The contract provides only for the work by engaging third
parties and not by separate tender. Therefore, that cost cannot be recovered
from the petitioner herein.
27. It is to be noted that when the contract provides and empowering
the employee to complete the remaining work and recover the additional
cost incurred for such completion, such contractual term is binding on the
parties to the contract. The petitioner cannot complain the manner in which
the remaining work to be completed. It is not for the petitioner to dictate
the manner in which the remaining work to be completed by the employer.
The very terms referred under Clause 54.2 makes it very clear that the
employer is entitled to get the remaining works done through other persons
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and recover the additional cost. Merely because for remaining 83% work,
the contract was awarded for 45.33 crores that cannot be a reson that such
bid is not according to law.
28. Learned Arbitrator, in fact, has considered the submissions of
the petitioner that tender has not invited and bidding was not in a
transparent manner. In fact, the learned Arbitrator has perused the files
relating to the subsequent tenders and on a perusal of the records found that
the said contention of the petitioner is not maintainable and has no merits
and in fact, opined that tender has been invited, as per law.
29. The learned Arbitrators, who are the retired Chief Engineers of
the Highways Department has in fact allowed the claim of the petitioner for
the work done. Merely because an application has been filed with abundant
caution, cannot be a ground to hold that the petitioner is automatically
entitled to succeed. This Court is of the considered view that none of the
grounds contemplated under Section 34 of the Act is made out to interfere
with the well reasoned award.
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30. Accordingly, this Original Petition is dismissed. Consequently,
Application No.850 of 2020 is closed.
9/8/2021
mvs.
N.SATHISH KUMAR,J
mvs.
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O.P.No.306 of 2015
O.P.No.306 of 2015
9/8/2021
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