M/S.G.G.Hospitals vs M/S.Ascent Engineers & ...
2021 Latest Caselaw 20649 Mad

                                                                O.P.Nos.461, 503 and 669 of 2017


                                   IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                DATED : 07.10.2021

                                                      CORAM

                                   THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR

                                          O.P.Nos.461,503 and 669 of 2017

                     O.P.No.461 of 2017

                     M/s.G.G.Hospitals
                     Rep. By its Sole Proprietor,
                     Mrs.Kamala Selvaraj,
                     6E, Nungambakkam High Road,
                     Nungambakkam, Chennai – 600 034.                            .. Petitioner

                                                        vs

                     1.M/s.Ascent Engineers & Infrastructures Pvt Ltd.,
                       (Formerly M/s.Ascent Engineers, a Partnership Firm)
                       Rep. By its Managing Director,
                       Mr.Srinivasan S.Iyer,
                       No.12, 46th Street, 9th Avenue,
                       Ashok Nagar, Chennai – 600 083.

                     2.M/s.Larsen & Toubro Limited,
                       Mount Poonamalee Road,
                       Manapakkam, Chennai – 600 089.                         ..Respondents

O.P.No.503 of 2017

M/s.Ascent Engineers & Infrastructures Pvt Ltd., (Formerly M/s.Ascent Engineers, a Partnership Firm) Rep. By its Managing Director, Mr.Srinivasan S.Iyer, No.12, 46th Street, 9th Avenue, Ashok Nagar, Chennai – 600 083. .. Petitioner

Vs

1.M/s.G.G.Hospitals Rep. By its Sole Proprietor,

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O.P.Nos.461, 503 and 669 of 2017

Mrs.Kamala Selvaraj, 6E, Nungambakkam High Road, Nungambakkam, Chennai – 600 034.

2.Larsen & Toubro Limited, Mount Poonamalee Road, Manapakkam, Chennai – 600 089. ..Respondents

O.P.No.669 of 2017

M/s.Larsen & Toubro Limited, Mount Poonamalee Road, Manapakkam, Chennai – 600 089. .. Petitioner

vs

1.M/s.Ascent Engineers & Infrastructures Pvt Ltd., (Formerly M/s.Ascent Engineers, a Partnership Firm) Rep. By its Managing Director, Mr.Srinivasan S.Iyer, No.12, 46th Street, 9th Avenue, Ashok Nagar, Chennai – 600 083.

2.M/s.G.G.Hospitals Rep. By its Sole Proprietor, Mrs.Kamala Selvaraj, 6E, Nungambakkam High Road, Nungambakkam, Chennai – 600 034. .. Respondents

Prayer in O.P.No.461 of 2017: Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 praying this Court to set aside arbitral award dated 14.04.2017 and an order order of correction of the error dated 20.04.2017 and pass such further or other orders as this Court may deem fit and proper in the circumstances of the case.

Prayer in O.P.No.503 of 2017: Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 praying this Court to (a) setting aside the arbitral award dated 14.04.2017 as corrected/amended by an order dated 20.04.2017, passed by the Arbitrator herein, limited only in so far as the rate of interest awarded; grant of rebate of 2% and the cost factor, (b) awarding costs of the present petition; and (c) granting such further or other

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O.P.Nos.461, 503 and 669 of 2017

reliefs as may be deemed fit and necessary in the circumstances of the case.

Prayer in O.P.No.669 of 2017: Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 praying this Court (a) to set aside arbitral award dated 14.04.2017, corrected on 20.04.2017 passed by the learned arbitrator to the extent set out in this petition and (b) and pass such other or further orders as this Court may deem fit and proper in the circumstances of the case.

For Petitioner : Mr.V.Kuberan for M/s.Rank Associates (in O.P.No.503 of 2017)

Mr.S.R.Rajagopal for M/s.Ojas Law Firm (in O.P.No.461 of 2017)

Mr.R.Murari, Senior Counsel for Ms.Preeti Mohan (in O.P.No.669 of 2017)

For Respondents : Mr.S.R.Rajagopal for M/s.Ojas Law Firm Mr.R.Murari, Senior Counsel for Ms.Preeti Mohan for R2 (in O.P.No.503 of 2017)

Mr.V.Kuberan for M/s.Rank Associates for R1 Mr.R.Murari, Senior Counsel for Ms.Preeti Mohan for R2 (in O.P.No.461 of 2017)

Mr.V.Kuberan for M/s.Rank Associates for R1 Mr.S.R.Rajagopal for M/s.Ojas Law Firm for R2 (in O.P.No.669 of 2017)

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O.P.Nos.461, 503 and 669 of 2017

COMMON ORDER

O.P.No.461 of 2017 has been filed challenging the arbitral

award directing the petitioner/applicant to pay a sum of

Rs.1,10,24,982/- towards refund of retention money with interest

together as ordered in the award.

2. O.P.No.503 of 2017 is filed by the first respondent only

against the rate of interest awarded, rebate granted at 2% and the

cost factor.

3. O.P.No.669 of 2017 is filed against the arbitral award

challenging certain observations recorded against the

petitioner/applicant in the award. The above OP has been filed by

the second respondent in the main proceedings.

4. Since all three OPs are arising out of the same award, this

Court is inclined to dispose of all the three OPs by way of a common

order.

5. For the sake of convenience, petitioner in O.P.No.503 of

2017 viz, M/s.Ascent Engineers & Infrastructures Pvt Ltd., is

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O.P.Nos.461, 503 and 669 of 2017

referred as claimant, petitioner in O.P.No.461 of 2017 viz.,

M/s.G.G.Hospitals is referred as first respondent and the petitioner

in O.P.No.669 of 2017 viz., M/s.Larsen & Toubro Limited is referred

as second respondent.

6. The claimant is the Contractor for execution and

construction of the Hospital, for the first respondent. The first

respondent wanted to construct a new multi speciality hospital and

engaged the services of the second respondent by agreement dated

23.04.2008 i.e., Consultancy Service Agreement wherein the

second respondent was appointed for providing Architecture &

Engineering Services for the project besides overseeing and

supervising the day-to-day execution of the work and the payment

to be made by the first respondent.

7. The second respondent has identified the claimant as the

contractor and, accordingly, a Tripartite agreement dated

21.10.2009 between the parties came to be executed. The

construction was carried as per the drawings and specifications of

the second respondent and on instructions issued from time to time

and to carry out day-to-day activities under the supervision of

respondents 1 and 2. The second respondent after measurements

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and after satisfying with the completion certificate, raised the Bill of

Quantities.

8. The first respondent has not paid the outstanding amount

of Rs.4,08,33,039/- as on 15.11.2012. Hence it is the contention

that the claimant has raised for non-payment of the building

constructed by him and it is further stated that the entire

construction has been done as per the drawing and plan by the

second respondent, which has also been approved by the first

respondent. The first respondent has also started constructing the

fourth floor. As the fourth floor plan was not sanctioned, Chennai

Metropolitan Development Authority (CMDA) has issued a letter for

removal of unauthorized construction.

9. Hence, the contention of the first respondent is that the

planning permission was issued by the CMDA for construction of

double basement, ground floor plus three floors in the hospital

project. In the mean time, on the suggestion of the first respondent,

the claimant was entrusted with the construction of the hospital

project under the Tripartite agreement dated 21.10.2009 and on

01.02.2010 itself the first respondent handed over the site to the

claimant.

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10. Though the plan was sanctioned for three floors, the

claimant started construction in the fourth floor without the

knowledge of the first respondent during the month of May,2011. It

is his contention that the first respondent has not issued any written

instructions to the claimant and the second respondent for putting

up additional/extra works in the fourth floor of the project. It is the

main contention that they never gave any permission to put up

construction in the fourth floor. Thereafter, when the CMDA officials

came for site inspection, it was found that the construction of the

fourth floor was in deviation of the sanctioned plan and the same

had to be demolished. The first respondent came to know about the

unauthorized construction by then only and was requesting the

claimant and the second respondent to demolish the fourth floor in

accordance with the norms. As the second respondent is not willing

to demolish the same, the first respondent was constrained to

engage the third party contractor to rectify the situation.

11. Insofar as the second respondent is concerned, it is the

contention that no claim can be raised against the second

respondent. Based on the pleadings, the Tribunal has framed the

issues. On appreciation of the evidence on both sides, the Tribunal

has passed the following award:-

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“(I) Rs.2,69,74,070/- towards the certified Bills Account.

(II) Rs.1,10,24,982/- towards the refund of Retention Money, subject to the adjustment as directed below.

(III)Rs.21,15,363.44/- being the Interest @ 9% payable for the bleated payment of the certified RA Bills as on 28.02.2013.

(IV) Interest @ 9% P.A. From 01.03.2013 on Rs.2,69,74,070/- till date of realization of the said amount by the claimant from the 1st respondent.

(V) The claimant shall pay Rs.39,10,000/- being the 2% rebate assured to be given to the first respondent. This amount shall be set off and adjusted against the sum of Rs.1,10,24,982/- to be paid by the respondent and as against the sum, the claimant shall be entitled to and the respondent shall pay only Rs.71,14,982/- in full quit satisfaction of the amount awarded in (II) above.

(VI) Interest 9% P.A on Rs.21,15,363.40/- from the date of the award till the date of realization.

(VII) The counter claims raised by the 1st respondent shall stand rejected and dismissed. (VIII) The parties on either side shall bear their own respective costs of this Arbitration proceeding.”

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12. As against the award as well as the dismissal of the

counter claim raised by the first respondent, O.P.No.461 of 2017

has been filed by the first respondent. Similarly, O.P.No.503 of 2017

is filed by the claimant as against the interest portion and

O.P.No.669 of 2017 is filed by the second respondent as against

certain observation that was made by the arbitrator in the award.

13. The learned counsel appearing for the petitioner in

O.P.No.461 of 2017, vehemently contended that the learned

arbitrator has passed award beyond the terms of the contract and

hence he has re-written the contract. It is his further contention

that the consultancy service agreement entered into between the

first respondent and the second respondent makes it obligatory on

the part of the second respondent for preparation of master plan for

the proposed new hospital block. It is the contention that the

second respondent has to prepare all necessary drawings and

documentation necessary for getting necessary approval of

Government statutory bodies and to ensure compliance with the

codes, standard and legislation, as applicable. Similarly, Clause 7 of

the contract makes it very clear that the second respondent

submitted the completion report and drawings for project as

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required and assessed plan in terms of the Certificate. Tripartite

agreement entered into between the parties also makes it clear that

the second respondent has to supervise the entire construction and

the second respondent shall construct as per the approved plan.

14. It is his further contention that drawing plan of

construction of the fourth floor did not contain the signature of the

first respondent. Hence it is the contention that as per the contract

entered into between the parties, only as per the instructions and

drawings, the fourth floor has been constructed deviating the plan

sanctioned for third floor. Therefore, the first respondent has to

suffer severe damages in removing the deviation and hence it is the

contention that the learned arbitrator has not considered all these

facts and had re-written the contract.

15. Similarly, it is the contention that the construction of the

fourth floor was not in the knowledge of the first respondent and

only at the time of inspection by the CMDA officials, the owner of

the hospital came to know about the construction. Hence it is the

contention that the entire award has not been passed based on the

contractual terms and obligations entered upon between the parties

and, therefore, prays for setting aside the award. In support of his

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O.P.Nos.461, 503 and 669 of 2017

contention, the learned counsel relied upon the following decisions

that (i) Associate Builders v. Delhi Development Authority reported

in (2015) 3 SCC 49, (ii) MMTC Limited v. Vedanta Limited reported

in (2019) 4 SCC 163, (iii) Patel Engineering Limited v. North

Eastern Electric Power Corporation Limited reported in (2020) 7

SCC 167, Peddi Virayya v Doppalapudi Subba Rao and another

reported in 1957 SCC Online AP 341, (iv)Sheladia Associates Inc. v.

Tamil Nadu Road Sector Project II, Rep. By its Project Director

reported in 2019 SCC Online Mad 1783 and (v) State of Orissa and

another v. Kalinga Construction Co. Pvt Ltd.,reported in (1970) 2

SCC 861.

16. Learned counsel appearing for the claimant submitted that

the sanction was available only upto third floors and he was

engaged and acted as per the instruction of L&T Management. As

per the direction of the drawing of the L&T and with approval of the

first respondent, he has put up the construction in the fourth floor.

It is his further contention that the owner of the hospital does not

have any knowledge about the construction is beyond the factual

aspects and there were six instances available on record to show

that the hospital authorities are aware of the construction put up on

the fourth floor. There is a tacit approval of the owner for

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construction in the fourth floor. Hence it is his submission that when

the arbitral Tribunal has considered the entire aspect by

appreciating the evidence, the Court cannot re-appreciate the entire

evidence once again as an appellate court. No grounds have been

made out to interfere with the award. It is his further contention

that it is only grievance that the arbitrator has not awarded the

interest fully and a portion of the award alone has to be set aside.

17. Whereas the Learned Senior Counsel appearing for the

second respondent submitted that the second respondent was a

formal party in the case and this petition has been filed only to

challenge certain observations of the arbitral tribunal that the

second respondent has not participated in the proceedings, which is

contrary to the facts. Thus, the contention is that the OP has been

filed only to a limited extent.

18. It is not disputed by both sides that the Consultancy

Agreement was entered into between the owner and the applicant

herein and the L&T Management for providing services like drawing,

planing etc., It is relevant to note that the GG Hospital engaged the

services of L&T Limited for professional services for giving

architectural design and engineering design with various other

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O.P.Nos.461, 503 and 669 of 2017

detailed engineering services. Clause 2 to 6 sub-clause (6) makes it

clear that the L&T Management will provide necessary drawings and

documentation also to get approval from the Government statutory

bodies. However, the costs to be paid by the owner. It is also

agreed by L&T that even during construction such L&T has to check

and approve the drawings submitted by the contractor and visit the

site of work and wherever necessary to clarify the decision. The

entire document makes it clear that the main part of agreement

entered between the hospital and L&T is to provide design and

necessary documents of drawings etc., The claimant was engaged

to construct the hospital and accordingly, the Tripartite agreement

came to be executed between the parties. These facts are not in

dispute.

19. The construction put up by the claimant is not disputed up

to third floor of the hospital. The only dispute seems to be with

regard to the fourth floor violating the sanctioned plan. The

sanctioned plan was only up to third floor by the CMDA, whereas, in

the fourth floor construction have been raised in the month of

May,2011 as per the plan by L&T. It is the case of the owner that

they have no knowledge that such construction has been put up in

the fourth floor.

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20. The learned arbitral tribunal on appreciation of entire

evidence negatived the contention of the Hospital and recorded a

factual finding that in fact such construction was in violation of the

plan and the same has been put up with the knowledge of the

owner. Therefore, they cannot retain the running bills account for

the claim. The learned Arbitrator has not only considered the

documentary evidence but also the oral evidence of the parties and

concluded that the construction has been put up in the fourth floor

only as per the drawing and instructions furnished by the second

respondent which had necessary power along with Tripartite

agreement and the second respondent has obligatory under the

Tripartite agreement has also factually recorded that the hospital is

also aware of the construction of the fourth floor. Therefore, the

contention that they are not aware of the construction put up in the

fourth floor is dis-believed by the learned Arbitrator on appreciation

of evidence.

21. After appreciating the entire evidence, the learned

Arbitrator recorded the finding. It is also relevant to note the very

contention that the first respondent has no knowledge about the

construction of the fourth floor cannot be countenanced for the

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simple reason that Ex.C17 filed before the Arbitral tribunal would

show that the letter was written on behalf of the hospital authorities

enclosing the cost analysis for the fourth floor and it is agreed that

the cost of the fourth floor is Rs.360 lakhs. Similarly, letter

addressed to the owner of the hospital for bringing the officials for

inspection to be taken up in the fourth floor construction. Same

indicates that the owner of the hospital remained silent to go ahead

with the construction and the letter dated 3.07.2012 by the hospital

to the CMDA indicated that in fact they wanted to retain the fourth

floor building construction. The mail sent by the hospital authorities

available on record also indicate that they agreed to pay the amount

after getting the loan. All these facts clearly indicate that deviation

has been made with the knowledge of the owner of the hospital.

Therefore, it cannot be said that the owner had no knowledge in

bringing up the construction in her own building. This has been

appreciated factually by the learned Arbitrator. Therefore, the

contention that the Arbitrator has not taken note of the terms of the

contract has no legs to stand. In fact, the learned Arbitrator has in

detail discussed every issues and considered various documents

including the oral evidence.

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22. In such view of the matter, this Court is of the view that

once the learned Arbitrator has passed the award appreciating the

evidence, merely because, some view is possible, this Court cannot

substitute the counsel's own views, in the place of arbitrators view.

It is in the domain of the Arbitrator to interpret the contract and to

appreciate the evidence and that he has done it rightly in this

matter. The very contention that the owner had no knowledge about

the unauthorized construction put up in a massive building itself is

highly improbable and cannot be believed.

23. In such view of the matter, the contention of the learned

counsel to challenge the award in entirety has no legs to stand

though various judgments have been cited by the learned counsel

appearing for the petitioner in O.P.No.461 of 2017. On a perusal of

the award, this Court is of the view that the arbitrator has

appreciated every document and facts including the oral evidence

and gave the finding. Therefore, this Court cannot re-write the

award by substituting the view of the Applicant, who suffered an

award. On a perusal of the award, none of the grounds has been

made out to interfere with the very reasoned award passed by the

learned Arbitrator.

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24. As far as the interest portion challenged by the learned

counsel, the learned arbitrator in fact awarded interest from

28.02.2013 at the rate of nine per cent, the same cannot be said to

be perverse. Further, none of the circumstances pointed out by the

learned counsel to contend that the interest restricted by the

learned Arbitrator at 2% is perverse. Therefore, the O.P.

challenging the interest portion, namely, O.P.No.503 of 2017 also

fails.

25. The other O.P. filed by the second respondent challenging

the award on the ground that certain observations have been made

against L&T is also liable to be dismissed. It is to be noted that the

second respondent was only made as a formal party and no claim

whatsoever is made against them. In fact, no claim whatsoever is

also passed against them. Admittedly, no relief has been granted.

Therefore, the mere dismissal of the application filed under Section

16 by the arbitral tribunal cannot be a ground to interfere with the

well reasoned award passed as against the first respondent. What

is recorded is only that the second respondent has not participated

fully in the proceedings. Except filing the defence, they have not

participated in the proceedings, which has been recorded by the

arbitral tribunal and, therefore, by no stretch of imagination it can

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be said that such a finding is adverse and have any impact on the

second respondent. Accordingly, as there is no award passed

against them, the award passed by the learned arbitrator, cannot be

interfered with, for the sake of the second respondent merely based

on some observations recorded by the arbitrator.

26. For the foregoing reasons, the award passed by the

learned Arbitrator stands confirmed and all these Original Petitions

are dismissed. No costs.

07.10.2021

Index: Yes/No ssm

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O.P.Nos.461, 503 and 669 of 2017

N. SATHISH KUMAR, J.

(ssm)

O.P.Nos.503,461 and 669 of 2017

07.10.2021

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