Madras High Court
The Chief Project Manager vs Trimurthi Hi-Tech Company Pvt. ... on 28 July, 2021
1
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 28.07.2021
CORAM:
THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR
O.P.No.638 of 2019
1. The Chief Project Manager,
Railway Electrification,
Egmore, Chennai – 600 008.
2. Central Organisation for
Railway Electrification
No.1, Nawab Yusuf Road,
Civil Lines, Allahabad- 211 001.
Uttar Pradesh State. .. Petitioners
.Vs.
Trimurthi Hi-Tech Company Pvt. Ltd.,
Rep. by its Director,
Old No.56, New No.88,
1st Floor, Maddox Road,
Choolai, Chennai – 600 112. .. Respondent
***
Prayer: Petition filed under Section 34 (2) (a) (iv), (b) (ii) of the Arbitration and
Conciliation Act, 1996 praying to set aside the Arbitral Award passed by the
learned Arbitrator herein dated 29.07.2019 made in relation to disputes arising out
of Letter of Acceptance No.ELCORE/T/OHE/Gr.126(R&C)-1 dated 09.03.2009.
***
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2
For Petitioners : Mr.P.T.Ramkumar
For Respondent : Mr.S.Raghavan
ORDER
This Petition has been filed challenging the Award dated 29.07.2019 passed
by the learned Sole Arbitrator in respect of the dispute that arose between the 1st
respondent and claimant with regard to agreement dated 15.05.2009. The letter of
Acceptance (LOA) relating to Design, Supply, Erection, Testing and
Commissioning of 25 KV single Phase AC 50 Hz Traction Overhead Equipments,
Switching Stations, Booster Transformer Stations and LT Supply Transformer
Stations in Two chords between Bangalore-Chennasnadra loop via Hebbal Section
and Yeshwantpur Chikbanavar Section along with bypass line between
Lottergollahalli and Chikbanavar Section of S.W.Railway Group.126 (R&C) – 1.
2. Though the work had to be completed within six months, due to delay in
the project, the work could not be completed and therefore, several extensions
were granted. These extensions were granted under Clause 17 (B) of the General
Conditions of Contract. Hence, it is the contention of the claimant that the levy of
liquidated damages and also the penalty as per the contract is not correct and
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hence sought refund of a sum of Rs.47,26,310/- levied by the respondent.
3. The respondent filed a counter stated that the entire delay had to be
attributed to the contractor and despite several extensions having been granted,
nearly 11 extensions, finally, the work came to be concluded only on 18.07.2011.
While granting extensions under General Conditions of Contract as per the
contract, the claimant was ordered notice with regard to the penalty that could be
imposed as per the contract and these extensions were granted invoking the Clause
17 (A) of General Conditions of Contract without imposing any penalty and these
extensions have been sought by the respondent. The learned Sole Arbitrator
framed the issues and finally passed the award directing the respondent to return a
sum of Rs.47,26,310/- on the ground that delay was not entirely due to fault of the
claimant. Further no evidence was let in by the applicant to prove loss.
Challenging the same present application filed.
4. Mr.P.T. Ramkumar, learned counsel appearing for the petitioners would
mainly canvass that though the General Conditions of Contract provides for
levying Liquidated Damages, there is no evidence available on record to prove the
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loss of damages. As far as the penalty imposed in this regard, the contract clearly
provides for the imposition of such penalty. The learned Arbitrator ignored the
contractual terms agreed between the parties while passing award. Therefore, he
prays to set aside the award.
5. The learned counsel relied upon the judgment of the Hon'ble Supreme
Court reported in AIR 2003 SC 2629 (Oil & Natural Gas Corporation Ltd., Vs.
Saw Pipes Ltd.,) and contended that the terms clearly and unambiguously
stipulate the liquidated damages in case of breach of the contract. The employer
is entitled to recover from the contractor the penalty as agreed.
6. The learned counsel for the respondent submitted that the learned
Arbitrator has considered the entire aspect and also the evidence and found that
there is no evidence for legal injury or damages sustained by the Railways on
account of delay. The learned Arbitrator has recorded the factual findings. This
Court exercising its powers under Section 34 of the Arbitration and Conciliation
Act cannot interfere with the award by re-appreciating the entire evidence. Hence,
submitted the award cannot be interfered with and relied upon the judgment of the
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Hon'ble Apex Court reported in AIR 1963 SC 1405 (Fateh Chand Vs. Balkishan
Das) and 2005 (4) MLJ 86 (Ennore Port Limited (Successor of Chennai Port
Trust with regard to the Ennore Port Project) Vs. Hindustan Construction
Company Limited and Ors). It is not disputed by both sides that though the
original contract stipulates the period of six months to complete, the work on
account of various factors, the work came to be completed only on 18.07.2011. In
the mean while, 11 extensions were granted by the Railways and six extensions
were granted under Clause 17 (a) of General Conditions of Contract. It is relevant
to extract Clause 1.2.45 which reads as follows:
“Extension of Time 1.2.45:
If such a failure as aforesaid shall have from any cause which the
Purchaser may admit as being a reasonable ground for extension of time,
the General Manager/ Chief Electrical Engineer or his successor (s) /
nominee shall allow such additional time as he may in his absolute
discretion consider to be reasonably justified by the circumstances of the
case. Such extension shall be granted by the Purchaser in the Form No.18
(Part – V). The Contractor will apply for extension at least two months
before the expiry of the period of completion.
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The Competent Authority while granting extension to the currency of the
contract under Clause 17 (B) of the GCC may also consider levy of token
penalty as deemed fit based on the merit of the case”
Clause 1.2.44 which reads as follows:
If the Contractor fails to execute and complete the work within the time
specified in the Agreement or within the period of extension granted under
Para 1.2.45 except, in so far as the delay is on the Purchaser's account, the
Contractor shall accept reduction in the total amount payable to him by the
Purchaser upto the maximum rate of Rs.4,000/- per day for the actual
delay occasioned beyond the appointed time by which the work shall have
been completed under the contract. Such reduction shall be accepted by
the Purchaser in full satisfaction of the Contractor's liability arising from
delay only. This recovery for delay in completion will be applicable
separately for each stage of completion of overhead equipment, switching
stations or booster transformer stations when two or more stages of
completion are specified in the contract. The General Manager or his
successor shall at his sole discretion specify a time limit within which the
unfinished portion of the work shall be completed after serving on
contractor a notice of the Purchase's intention to effect the said recovery in
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the Form 17 (Part-IV). In the event of failure of the Contractor, the
Purchaser shall be at liberty to take action in accordance with provisions
in Para 1.2.29 and 1.2.30.
7. The above Clause stipulates that total amount payable by the purchaser as
a penalty at the maximum rate of 4,000/- per day for the actual delay of 61 days.
The power of the competent authority while granting the extensions under Clause
17 (b) of the General Conditions of Contract, is not absolute. Only on taking into
consideration of the facts and circumstances, the competent authority can levy a
token penalty, on the basis of the merit of every case. The learned Arbitrator has
also taken note of Performance Certificate issued by the Railways and has
observed that “the work was stopped intermittently on Railway's account and not
on Contractor's account due to abnormal increase in quantities of work in certain
cases and subsequent delay in approval of assessment. Further, there were cases
where works could not be progressed for want of Tower Wagon and blocks from
the Railway's side. On the whole performance to do the OHE works at the rate of
3 Kms per month on an average is hereby acknowledged” by Railways.
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8. The learned Arbitrator finally on the basis of the evidence found that
there is no legal injury or loss sustained by the Railways. Though, the General
Conditions of Contract provides the penalty as well as damages, the learned
Arbitrator took note of law declared in the case of Fateh Chand Vs. Balkrishnan
Das reported in AIR 1963 SC 1405 which reads as follows:
.... It does not justify the award of compensation when in consequence of
the breach no legal injury at all has resulted, because compensation for
breach of contract can be awarded to make good loss or damage which
naturally arose in the usual course of things, or which the parties knew
when they made the contract, to be likely to result from the breach.
.... The Court has to adjudge in every case reasonable compensation to
which the plaintiff is entitled from the defendant on breach of the contract.
Such compensation has to be ascertained having regard to the conditions
existing on the date of the breach. There is no evidence that any loss was
suffered by the plaintiff in consequence of the default by the defendant save
as to the loss suffered by him by being kept out of possession of the
property.
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... The plaintiff failed to prove the loss suffered by him in consequence of
the breach of the contract committed by the defendant, and we are unable
to find any principle on which compensation equal to ten percent of the
agreed price could be awarded to the plaintiff”
9. In the Judgment reported in 2005(4) MLJ 86 (Ennore Port Limited,
(Successor of Chennai Port Trust with regard to the Ennore Port Project) Vs.
Hindustan Construction Company Limited and Ors.) Hon'ble Division Bench of
this Court found that invoking the Clause under General Conditions of Contract
and Clause as well as penalty without proving the legal injury or loss by the
Railways is not sustainable under law and passed an award.
10. Though the learned counsel appearing for the Railway has placed much
emphasis on the ONGC & Sawpipes and the same is not applicable to the facts of
the present case It is to be noted that in the above case, nature of legal injuries
suffered by ONGC was clearly established on record and the Hon'ble Apex Court
taking note of the contractual terms, allowed the imposition of the penalty as per
the contract. Whereas, in this case as noted by the learned Arbitrator, no evidence
was let in by the respondent at any point of time that there was any legal injury or
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loss. In such view of this matter, when the law in this aspect is very clear that
without establishing legal injury or loss, liquidated damages is not permissible and
the liquidated damages by way of penalty is also not permissible. This Court finds
no infirmity in the order passed by the learned Arbitrator and none of the ground is
made out under Section 34 of Arbitration and Conciliation Act to interfere with
the award by the learned arbitrator.
Accordingly, this Original Petition is dismissed. No costs.
28.07.2021
Index : Yes / No
Internet: Yes
Speaking/Non-speaking order
dh
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N. SATHISH KUMAR, J.
dh
order in:
O.P.No.638 of 2021
28.07.2021
https://www.mhc.tn.gov.in/judis/
