Tripura High Court
Engineering Projects (India) Ltd vs M/S. M. P. Khaitan on 12 September, 2022
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HIGH COURT OF TRIPURA
AGARTALA
Arb. A. 3/2022
Engineering Projects (India) Ltd.,
North Eastern Regional Office, Regional Office at 4th Floor, Hindustan
Tower, Jawahar Nagar, N.H.-37, Guwahati- 781022
Having its local office at Agartala-
Engineering Projects(India) Ltd.,
21, Krishna Nagar Road, Bijoy Kumar Chowmuhani, near SBI Regional
Office, Agartala- 799001, Tripura, represented by its Deputy General
Manager (Tech.), Shri Abhijit Nandi.
----- Appellant(s)
Versus
M/s. M. P. Khaitan, Contractor,
15, Ganesh Chandra Avenue, 7th Floor, Kolkata-700013, West Bengal.
----- Respondent(s)
For Appellant(s) : Mr. P. Majumder, Advocate.
Ms. S. Debbarma, Advocate.
For Respondent(s) : Mr. Somik Deb, Sr. Advocate.
Mr. Abir Baran, Advocate.
Ms. R. Chakraborty, Advocate.
Mr. K. Debnath, Advocate.
Mr. S. Majumder, Advocate.
Date of Hearing : 13th July, 2022.
Date of Pronouncement : 12th September, 2022.
Whether fit for reporting : YES
_B_E_F_O_R_E_
HON'BLE THE CHIEF JUSTICE MR. INDRAJIT MAHANTY
HON'BLE MR. JUSTICE S.G. CHATTOPADHYAY
JUDGMENT & ORDER
[Per S.G. Chattopadhyay], J
This is an appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (Arbitration Act hereunder) against the judgment
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and order dated 25.02.2022 passed by the District Commercial Court,
West Tripura, Agartala in Civil Misc. (Arbitration) 03 of 2020.
[2] The factual context of the case is as under:
Appellant, M/s. Engineering Projects (India) Ltd. (EPIL for short) (a
Government of India Enterprise) signed an agreement in the form of
MOU with the Department of Agriculture, Government of Tripura on
15.11.2007 for construction of the College of Agriculture at Lembucherra.
Appellant split up the entire project into 3 packages for suitably executing
the work and floated Notice Inviting Tender (NIT for short) for
construction of the college building at Lembucherra which was in
package-1. The NIT was so published on 06.02.2008. Respondent, M/s.
M.P Khaitan, a registered contractor participated in the tender process
along with other contractors and submitted its tender. The tender
submitted by the claimant-respondent M/s. M.P. Khaitan having stood the
lowest, the General Manager, EPIL, Kolkata issued a Letter of Intent (LOI
for short) in favour of the claimant on 10.03.2008. An agreement was
thereafter executed between the appellant and respondent, M/s. M.P.
Khaitan on 25.04.2008. The LOI indicated that date of commencement of
the work would be reckoned from the 10th day of issuance of the LOI.
The contract between the parties which was valued at
Rs.22,79,80,148.70/- was stipulated to be completed within a period of
18 months i.e. by 20.09.2009. The different units which were to be
constructed under package-1 were to be as under:
Arb. A. 3 of 2022
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(i) Boys' hostel, (ii) Guest house, (iii) Workshop, (iv) Auditorium,
(v) Boys' hostel (PG), (vi) New college building complex with library and
canteen, (vii) Local shopping complex, (viii) Mini sports stadium, (ix)
Dispensary building and (x) Garage.
[3] Since completion of the work within time depended on the
performance of the reciprocal obligations, it was agreed upon between
the parties that the appellant would hand over the dispute free worksite,
designs and drawings etc. to the claimant-respondent within the
stipulated time and the appellant would also make timely payment to the
claimant-respondent as per the agreement.
[4] The claimant-respondent started the work in time and
applied due diligence for execution of the work in time but due to
frequent interruptions by the appellant, the claimant-respondent could
not complete the work within the stipulated period of 20.09.2009. By
20.09.2009, the claimant completed only one unit i.e. the PG hostel.
Seven other units were completed on 19.07.2011 at 22 months' delay.
Even on 19.07.2011, the garage could not be completed due to non-
availability of proper site.
[5] However, after delayed completion of the work, claimant-
respondent claimed completion certificate from the appellant but the
appellant, despite series of communications made by the claimant, did
not issue the certificate in his favour which deprived the claimant-
respondent of getting higher ranking from NBCC and Government
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contracts of higher amount. Aggrieved claimant-respondent moved the
Gauhati High Court by filing a writ petition seeking direction to the
appellant for issuing completion certificate. Pursuant to the order of the
High Court, completion certificate was issued to the claimant-respondent.
[6] Having received the completion certificate from the
appellant, claimant raised bill of a sum of Rs.92,74,632/-. Gross value of
the work was Rs.22,79,80,148.70/-. After deducting the amount already
paid to him during the execution of the work, claimant raised the bill of
Rs.92,74,632/- i.e. the balance payable to him.
[7] The appellant disputed the claim by raising various
objections. Claimant-respondent invoked the arbitration clause of the
agreement for referring the matter to the arbitrator for adjudication. The
impugned judgment of the Commercial Court indicates that initially one S.
Roy Chowdhury was appointed as sole arbitrator. The respondent filed his
claim statement supported by documents before the said arbitrator. The
arbitrator having resigned on 30.05.2018, the claimant-respondent
approached this High Court by filing Arb. Petition No.7 of 2018 seeking
appointment of the arbitrator and the present arbitrator was appointed by
this Court by an order dated 20.09.2018.
[8] In the course of arbitration, appellant filed counter claim
before the arbitrator. In its counter claim, appellant contended that
despite providing all contractual support, claimant-respondent delayed
the completion of the work. He took 22 months beyond the scheduled
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date of completion to complete the work. While granting extension, the
appellant reserved the right to recover damages as per the agreement
under Clause 72.1 which provided as under:-
"If the contractor fails to maintain the required progress
in terms of Clause 72.4 or relevant clause of ACC to complete
the work and clear the site on or before the completion date or
extended date of completion, he shall, without prejudice to any
other right or remedy available under the law to EPI on
account of such breach, pay as agreed compensation the
amount calculated at the rates stipulated below or such other
smaller amount as the Engineer in Charge (whose decision in
writing shall be final and binding) may decide on the amount
of tendered value of the work for every completed day/week
(as applicable) that the progress remains below that specified
in Clause 72.4.1 or the relevant clause in ACC or that the work
remains incomplete. This will also apply to items or group of
items for which a separate period of completion has been
specified."
[9] Appellant claimed compensation subject to ceiling of 10% of
the tendered value of the work i.e. Rs.22,79,80,148.70/-.
[10] In reply to the counter claim, claimant-respondent filed reply.
On the basis of the claim statement of the claimant-respondent, counter
statement of defence, the counter claim filed by the appellant and replies
filed by the claimant-respondent, the following issues were framed by the
learned arbitrator:
"1. Is the claimant entitled to get balance payment on value of
works done amounting to ₹92,74, 663/-?
2. Is the claimant entitled to damages on account of escalation
of charges due to high price rise in all sectors amounting to
₹91,24,126/-?
3. Is the claimant entitled to get damages on account of longer
retention of site and overheads amounting to ₹31,13,157/-?
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4. Is the claimant entitled to get damages being the share of
head office overheads for the overrun period amount to
₹4,61,998/-?
5. Is the claimant entitled to get damages for longer retention
of plants, machineries and equipments in the work site amount to
₹63,03,352/-?
6. Is the claimant entitled to get damages for making payment
of electricity charges during the overrun period amounting to
₹5,22,183/-?
7. Is the claimant entitled to get damages for illegally
withholding ₹17,12,104/- in 26th R.A. bill by granting interest @
18% p.a. for the period from 25.08.2011 to 07.02.2013 amounting
to ₹4,71,473/-?
8. Is the claimant entitled to get damages for providing facility
to EPIL for the extra period from 20.09.2010 to 18.07.12
amounting to ₹8,85,320/-?
9. Is the claimant entitled to get damages for incurring
insurance charges on car and WC policy amounting to ₹3,14,341/-?
10. Is the claimant entitled to get damages being the bank
commission on performance guarantee for the period from
20.12.2010 to 23.11.2012 amounting to ₹3,14,401/-?
11. Is the claimant entitled to get damages being the bank
commission on retention money bank guarantee amounting to
₹2,41,955/-?
12. Is the claimant entitled to get damages for longer retention
of Security deposit/Retention money of ₹10.00 lac by granting
interest @ 18% p.a. amounting to ₹4,10,940/-?
13. Is the claimant entitled to get damages on account of
travelling expenses etc. for the overrun period of 22.133 months @
₹10,000/- per month amounting to ₹2,21,333/-?
14. Is the claimant entitled to get damages amounting to
₹30,00,000/- for abnormal delay in issuance of completion
certificate of work and thereby depriving claimant from
participating in the tender process of higher category with NBCC
and other departments and causing loss?
15. Is the claimant entitled to the legal charges paid for filing
writ petition for getting appropriate justice from the Hon'ble High
Court relating to issuance of completion certificate amounting to
₹12,000/-?
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16. Is the claimant entitled to get interest @ 18% p.a. on
₹3,37,88,799/- w.e.f. 25.02.2013 till the date of actual payment?
17. Is the claimant entitled to get cost of the arbitration and
incidental thereto?"
[11] Issues framed by the learned arbitrator in the counter-claim
of the appellant are as under:
"a) Is the respondent entitled to get a compensation of
₹2,27,98,015/- being 10% of the tendered value for the delay
of 22 months in completing the work?
b) Is the respondent entitled to get any compensation as
penal amount from the respondent for making the claim under
issue no.15?
c) Is the respondent entitled to get a compensation of
₹1,13,38,880/- for sustaining additional expenditure of on-site
expenses, off-site expenses and loss of profit and over head
expenses for prolongation of the completion period?
d) Is the respondent entitled to get the cost of arbitration,
litigation and incidental expenses?
e) Is the respondent entitled to get interest @ 18% p.a. on
the counter claim if awarded?"
[12] The learned arbitrator by his arbitral award dated 21.11.2019
decided issue No.1, 2, 3, 7, 8, 10, 11, 12, 16 & 17 in the claim in favour
of the claimant-respondent and the other issues were decided against
him. In the counter claim, all issues were decided against the present
appellant.
[13] While deciding issue No.1, the learned arbitrator held that
even though there were minor deficiencies in executing the work, it was
accepted by the appellant without pointing out to any material irregularity
and the appellant continued to have the benefit of the work. It was
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therefore, decided that the claimant-respondent shall be entitled to 10%
profit in terms of Clause 69.1(iv) of the contract (GCC).
[14] Under issue No.2, it was decided by the learned arbitrator
that as the present appellant (respondent before the arbitrator) did not
dispute the claim or part on plausible ground, there was no scope of
reducing the claim of the respondent of Rs.91,24,126/- for escalation
charges.
[15] Under issue No.3, it was held that damages of a sum of
Rs.31,13,157/- on account of longer retention of the work site could not
be reduced for any reason.
[16] Under issue No.7, respondent-claimant was held entitled to
interest @ Rs.10% per annum from 25.08.2011 to 08.08.2013 since the
appellant illegally withheld the bill of a sum of Rs.17,12,104/-.
[17] Under issue No.8, claimant-respondent was allowed damages
for providing facilities including office accommodation and stationery to
the appellant for an extra period from 20.09.2010 to 18.07.2012.
[18] Issue No.10 & 11 were decided together by the learned
arbitrator. The claimant-respondent was allowed damages for paying
commission on retention of the bank guarantee for extra period due to
delay in completing the work for negligence on the part of the present
appellant.
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[19] Under issue No.12, respondent was allowed damages for
longer retention of his security deposit by granting 10% annual interest
thereon.
[20] Under issue No.16, claimant-respondent was allowed 10%
pandente lite interest from 25.02.2013 till the date of award. And under
issue No.17, clamant-respondent was allowed the cost of arbitration and
other incidental expenses.
[21] Aggrieved by and dissatisfied with the said arbitration award,
appellant filed an application under Section 34 of the Arbitration and
Conciliation Act, 1996 (Arbitration Act for short) before the learned
District Judge, West Tripura, Agartala for setting aside the impugned
arbitral award dated 21.11.2019. The said application of the appellant
was registered as Arbitration Case No.3 of 2020 before the learned
District Judge.
[22] The learned District Judge by judgment and order dated
25.02.2022 dismissed the prayer of the appellant for setting aside the
arbitral award dated 21.11.2019 passed in ARB/2018(2)/SS by the sole
arbitrator. The learned District Judge (District Commercial Court) held as
under:
"...7. In the light of the principles as referred to above, we may
proceed to consider the question that has been raised for and on
behalf of the petitioner.
As stated earlier; learned advocate for the petitioner has
raised the issue that while deciding the issue No.1, the Arbitrator has
granted 10% profit but did not specify the amount on which such
interest is to be calculated. In this connection when we dwell upon
the issue No.1 so framed by the arbitrator on the basis of the claim of
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the respondent, it surfaces that the issue was very specific, inter alia,
that if the respondent is entitled to get balance payment on the value
of work done amounting to Rs.92,74,663/-. The claim statement of
the respondent so laid before the arbitrator as well as the issue so
framed by the arbitrator make it abundantly clear that the interest is
to be calculated on the value of work done. So the argument so raised
by learned advocate for the petitioner stands not sustainable. As
regards the point so raised as to issue No.3, it was contended that the
petitioner did not get the opportunity to cross-examine the
respondent on the documents on the basis of which the relief was
granted. In this regard, we are of the considered opinion that such a
contention nevertheless brings the matter within the mischief of
section 34 of the Arbitration Act. That apart, the petitioner had the
opportunity to make request to the arbitrator in view of section 24 of
the Arbitration Act, but they omits to do so.
8. Now coming to issue No.9, it is apparent on the claim
statement so submitted by the respondent before the arbitrator that
the respondent specifically had claimed damages being suffered
towards payment of insurance charges for car and WC Policy. It
follows, therefore, the argument so placed by the learned advocate
for the petitioner, inter alia, that the issue No.9 stands beyond the
submission of arbitration cannot be accepted. Moreover, no relief was
granted by the arbitrator while deciding the issue No.9 on the
reasoning that such claim stands beyond the agreement.
9. Similar to that of the issue No.1 the interest @ 10% per
annum so granted by the arbitrator while deciding issue No.16, the
issue itself is very much clear as to the amount on which such interest
is to be calculated.
10. The scheme and scope of the provisions of Section 34 of
Arbitration Act aims at keeping the supervisory roles of the court at
minimum level, therefore, we cannot correct the errors, if any, done
by the arbitrator by sitting as an Appellate Court and also by re-
appreciating the matters on record, it can only be quashed leaving the
parties to begin the arbitration again if it is desired. The contentions
so raised on behalf of the petitioner do not bring the matter within
the mischief of any of the grounds as enumerated in Section 34(2) or
34(2-A) of the Arbitration Act in view of the law as referred to above.
In view of the discussion as we had herein-above I order as
follows.
ORDER
11. In the result, the application for setting aside the arbitral
award dated 21.11.2019 made in ARB/2018(2)/SS by the sole
arbitrator Mr. Subhas Sikdar, Retired District Judge stands
rejected......"
[23] As stated appellant has challenged the said judgment dated
25.2.2022 of the District Court by filing this appeal under Section 37 of
the Arbitration Act mainly on the following grounds:
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(i) The District Commercial Court did not appreciate the fact
that the sole arbitrator in his award dated 21.11.2019 did not
specify the amount of award for which the District Commercial
Court should have set aside the award.
(ii) The sole arbitrator while deciding issue No.16 awarded
interest on the award, but it was impossible to ascertain the
amount of interest since the amount of award was not specified by
the learned Arbitrator.
(iii) The sole arbitrator travelled beyond the terms of the
arbitration agreement for which the learned Commercial Court
should have dismissed the award of the arbitrator. The arbitrator
should have heard the Director of Agriculture for adjudication of
the dispute. The learned Commercial Court overlooked this aspect
and erroneously dismissed the petition under Section 34 of the
Arbitration Act.
[24] Heard Mr. P. Majumder, learned advocate appearing
alongwith Ms. S. Debbarma, learned advocate for the appellant. Also
heard Mr. Somik Deb, learned senior advocate appearing alongwith Mr. A.
Baran, Ms. R. Chakraborty, Mr. K. Debnath, and Mr. S. Majumder, learned
advocates for the respondents.
[25] Main contention of the appellant is that no amount of award
has been specified in the arbitrator's award and as such, the same should
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have been dismissed by the learned District Judge (District Commercial
Court).
[26] Mr. Somik Deb, learned senior advocate appearing for the
respondent on the other hand, contends that the arbitrator's award is
well-founded which does not call for any interference. Counsel contends
that by a detailed judgment, the District Commercial Court has rejected
appellant's petition under Section 34 of the Arbitration Act and upheld the
award made by the sole arbitrator by assigning good reasons. It is
contended by Mr. Deb, learned senior counsel that contention of the
appellant's counsel that the arbitrator has not specified the amount of
award is not acceptable because, the arbitrator has recorded issue-wise
findings and specified the amounts as admissible to the claimant-
respondent under the various heads. Learned senior counsel, therefore,
urges the Court to dismiss the appeal.
[27] We have gone through the entire facts and circumstances of
the case and the materials placed on record and considered the
submissions of learned counsel representing the parties. The arbitral
award dated 21.01.2019 is placed in file as Annexure-A. We have also
gone through the arbitral award. As stated, the sole arbitrator framed as
many as 17 issues in the claim of the present respondent and framed 5
issues in the counter claim filed by the present appellant and recorded
issue-wise findings in the claim as well as in the counter claim. In his
award, the sole Arbitrator seems to have specified the amounts awarded
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to the claimant-respondent under various heads. The appellant has failed
to establish any patent illegality in the arbitral award. Award of the sole
arbitrator is based on evidence and the arbitrator appears to have
examined each of the issues in detail and assigned sound reasons for
deciding those issues.
[28] It is a settled position of law that the Court cannot sit in
appeal and examine correctness of the arbitrator's award on merit. Court
can interfere only on limited grounds. In this regard, we can profitably
refer to the decision of the Hon'ble Supreme Court in the case of
McDermott International INC vs. Burn Standard Co. Ltd. and
Others reported in (2006) 11 SCC 181 wherein the Hon'ble Apex Court
has held as under:
"58. In Renusagar Power Co. Ltd. v. General Electric Co. this
Court laid down that the arbitral award can be set aside if it is
contrary to (a) fundamental policy of Indian law; (b) the interests of
India; or (c) justice or morality. A narrower meaning to the
expression "public policy" was given therein by confining judicial
review of the arbitral award only on the aforementioned three
grounds. An apparent shift can, however, be noticed from the
decision of this Court in ONGC Ltd. v. Saw Pipes Ltd. (for short
"ONGC"). This Court therein referred to an earlier decision of this
Court in Central Inland Water Transport Corpn. Ltd. v. Brojo Nath
Ganguly wherein the applicability of the expression "public policy"
on the touchstone of Section 23 of the Indian Contract Act and
Article 14 of the Constitution of India came to be considered. This
Court therein was dealing with unequal bargaining power of the
workmen and the employer and came to the conclusion that any
term of the agreement which is patently arbitrary and/or other wise
arrived at because of the unequal bargaining power would not only
be ultra vires Article 14 of the Constitution of India but also hit by
section 23 of the Indian Contract Act. In ONGC this Court, apart
from the three grounds stated in Renusagar, added another ground
thereto for exercise of the court's jurisdiction in setting aside the
award if it is patently arbitrary.
59. Such patent illegality, however, must go to the root of the
matter. The public policy violation, indisputably, should be so unfair
and unreasonable as to shock the conscience of the court. Where the
arbitrator, however, has gone contrary to or beyond the expressed
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law of the contract or granted relief in the matter not in dispute
would come within the purview of Section 34 of the Act. However,
we would consider the applicability of the aforementioned principles
while noticing the merits of the matter.
60. What would constitute public policy is a matter dependant
upon the nature of transaction and nature of statute. For the said
purpose, the pleadings of the parties and the materials brought on
record would be relevant to enable the court to judge what is in
public good or public interest, and what would otherwise be
injurious to the public good at the relevant point, as
contradistinguished from the policy of a particular Government. (See
State of Rajasthan v. Basant Nahata.")"
[29] The Apex Court in the case of Associate Builders vs.
Delhi Development Authority reported in (2015) 3 SCC 49
reiterated that Court can interfere only when the findings recorded by the
arbitrator are arbitrary, capricious, perverse and suffer from patent
illegality. Observation of the Hon'ble Apex Court is as under:
"33. It must clearly be understood that when a court is
applying the "public policy" test to an arbitration award, it does
not act as a court of appeal and consequently errors of fact
cannot be corrected. A possible view by the arbitrator on facts
has necessarily to pass muster as the arbitrator is the ultimate
master of the quantity and quality of evidence to be relied upon
when he delivers his arbitral award. Thus an award based on
little evidence or on evidence which does not measure up in
quality to a trained legal mind would not be held to be invalid on
this score. Once it is found that the arbitrators approach is not
arbitrary or capricious, then he is the last word on facts. In P.R.
Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P)
Ltd., this Court held: (SCC pp. 601-02, para 21)
"21. A court does not sit in appeal over the award of an
Arbitral Tribunal by reassessing or reappreciating the
evidence. An award can be challenged only under the
grounds mentioned in Section 34(2) of the Act. The
Arbitral Tribunal has examined the facts and held that
both the second respondent and the appellant are
liable. The case as put forward by the first respondent
has been accepted. Even the minority view was that the
second respondent was liable as claimed by the first
respondent, but the appellant was not liable only on
the ground that the arbitrators appointed by the Stock
Exchange under Bye-law 248, in a claim against a non-
member, had no jurisdiction to decide a claim against
another member. The finding of the majority is that the
appellant did the transaction in the name of the second
respondent and is therefore, liable along with the
second respondent. Therefore, in the absence of any
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ground under Section 34(2) of the Act, it is not possible
to re-examine the facts to find out whether a different
decision can be arrived at."
[30] Having applied the tests laid down by the Hon'ble Apex Court
to the case in hand, we are of the considered view that the arbitral award
impugned before us, does not call for any interference. The District
Commercial Court has rightly rejected appellant's petition for setting aside
the arbitral award. Resultantly, the appeal stands dismissed.
In terms of the above, the case is disposed of.
Pending application(s), if any, shall also stand disposed of.
(S.G. CHATTOPADHYAY), J (INDRAJIT MAHANTY), CJ
Sabyasachi G.
Arb. A. 3 of 2022
