Delhi District Court
The Chief Engineerburser H.E.Project, ... vs M/S K.K. Chibber Construction on 30 March, 2024
IN THE COURT OF SH. AJAY KUMAR JAIN:
DISTRICT JUDGE COMMERCIAL COURT 03 - SOUTH
EAST DISTRICT, SAKET COURTS, NEW DELHI.
OMP (COMM) 35/21
1. THE CHIEF ENGINEER
BURSER H.E. PROJECT, N.H.P.C.
At Kishtwar, Distt. Kishtwar
2. CHIEF MANAGING DIRECTOR
N.H.P.C. LIMITED
NHPC OFFICE COMPLEX
SECTOR 33, HARYANA
3. THE DIRECTOR PROJECT
NHPC LTD,
OFFICE COMPLEX, SECTOR 33
FARIDABAD ...PETITIONERS
VERSUS
M/S K K CHIBBER CONSTRUCTION
RAM NIWAS, KOTLA ROAD
KHANNA, PUNJAB
Through K.K. Chibbar ....RESPONDENT
Date of Institution : 24.09.2021
Date when final arguments heard : 21.03.2024
Date of Judgment : 30.03.2024
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction
Dt. 30.03.2024 Pg. 1 of 47
JUDGMENT
1. Vide this judgment, I shall decide, the present petition under section 34 of Arbitration and Conciliation Act, 1996 for setting aside the impugned award dated 11.12.2010 passed by Ld. Sole Arbitrator.
2. The brief facts of the case as per the statement of claim that the claimant was awarded the work for construction 'Geological Exploration by driving a drift of size 1.52 x 2.13M Section, 400M long for power house at about EL+/-1760M on the right bank of the River Marusudar at Dramghduram power house, site of Burashar project. The contract for the said project was awarded vide allotment letter dated 02.07.2004 for the total cost of work of Rs. 55,62,557/- with date of start of the work 31.07.2004 with stipulated period of completion 10 months from date of start. After receipt of the award the claimant mobilized men, machinery/equipment and other financial resources for taking of the execution of the contract, however, while moving the machinery/equipment alongwith working staff, one portable magazine existing enroute prevented the claimant to carry the machinery/equipment by mechanical transport as a consequence of which same was unloaded manually and machinery was dismantled and the information of the same has been given to the department. After shifting the machinery/equipment required for OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 2 of 47 drilling purpose the respondent department was requested to fix the alignment level of the drift so that the machinery could be reassembled at the nearest place and it was also impressed upon the department to procure the exclusive license for being supplied to the claimant for execution of the contract, however, due to non-availability the blasting material, the execution work came to grinding halt and as a consequence claimant contractor had to make payment to skilled and unskilled labour who were sitting ideal on account of non-availability of explosive and non confirming of alleviation. The claimant sought indemnification on account of pecuniary losses and therefore, the department vide communication dated 12.01.2005 asked the claimant to interact with the official from the department.
3. The department also changed the location which necessitated the claimant to shift the machinery/equipment resulting heavy pecuniary investment and consequential loss. The Department also failed to provide necessary drilling materials which were necessary for execution of item of the drilling. Though, the claimant vide communication dated 03.02.2005 identified the persons who would be receiving the blasting material for and on behalf of claimant. Despite drilling of holes, the operation of blasting would not carry out for want of blasting OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 3 of 47 material. The extra expenses also incurred for carriage of machinery/equipment due to change in alignment.
4. The claimant also requested the department to appoint an Arbitrator, however, the department not only failed to take appropriate measure but discontinued disbursement to the claimant and department in its own for keeping the contract alive granted extension up to 03.12.2005. The Department however, failed to provide the blasting material as a consequence of which further execution of contract was not possible. The claims of Rs. 18,76,500/- were submitted, however, the department vide communication dated 03.08.2005 tried to blame the claimant for not arranging the blaster which is not borne out of the record. The claimant at one point of time made an attempt to procure the explosives, however the concerned authority denied the same and stated that they would supply the blasting material.
5. Instead of addressing to the real issues like non availability of the blasting material and consequential non supply of the same by the petitioner/department which resulted in stoppage of the work. The department tried to find a novel way of issuing communication for execution of work without procuring the requisite items, however, instead of readdressing and selling the grievances of the claimant, the department vide communication dated 14.11.2002/14.11.2006 unilaterally and in a OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 4 of 47 very arbitrary manner terminated the contract and directed the forfeiture of the earnest money deposited by the claimant together with the seizure of the machinery lying at the spot. The claimant thereafter, move Punjab and Haryana High Court., thereafter, the Ld. Arbitrator was appointed. The claimant thereafter filed seven claims before the Ld. Arbitrator.
6. In reply to statement of claims, the petitioner/department stated that the claims filed by the claimant are vexatious and frivolous and as per Clause 53 of the contract, all the decisions taken under clauses 7, 8, 10, 13, 17, 18, 21, 23, 24, 29, 32, 34, 37, 38, 40, 41 and 44 by the Engineer In charge, shall be final and binding on the contractor and therefore, all the issues/claims raised by the claimant are out of jurisdiction of this Arbitral Tribunal. Furthermore, as per the minutes of meeting dated 23.09.2005 between the committee members and the claimant, the issues were amicable settled between the parties leaving no scope for referring the same for arbitration, therefore, the same are not arbitrable.
7. It is pleaded that the claimant's plea that there was a blockade due to the portable magazines restricted him from carrying the machinery on head load is untenable, false and after thought, and the claimant was well aware of the fact of surrounding and the area where the exploration was to be OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 5 of 47 conducted. The claimant also started demanding payments beyond the scope of work and the claimant vide letter dated 30.09.2004 was informed that the payments shall be made as per the contract/award. The claimant was well aware of the site work as to be execution. The claimant was to shift /install the compressor on the right bank of the river which was already agreed by the parties at the time of signing of the contract, however, claimant to save its own expenses installed the compressor on the left bank of the river in violation of the terms and conditions of the agreement. The demand for idling charges raised by him vide his letter dated 02.04.2005 was untenable. The claimant himself not in a position to take up the drilling of the face till last week of March, 2015 due to non availability of required drilling hose and other accessories at site. The claimant also defaulted in even appointing a licensed blaster. Despite the conduct of the claimant, the Chief Engineer of the project invited the claimant to solve all the pending issues and to amicable proceed with the matter, however, claimant was in no mind to settle the factitious issues. With regard to change of location, claimant was already convinced, however never shifted to the right bank of the river. The claimant even was informed through letter dated 06.04.2005 that the person who was nominated for receiving the explosives was not a licensed blaster and as such OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 6 of 47 explosive could not be handed over to said person due to security reasons. The claimant was also issues a letter by the Chief Engineer stating that the dispute raised by him could not be referred to be settled through Arbitration in terms of clause 53 of the contract. The Engineer In Charge in view of provisions of clause 55 read with clause 53 did not appoint any arbitrator at the request of this claimant. The running account bill issued by the claimant was also cleared by the petitioner. The claimant without any reason suspended the work after receiving the money. The explosives are lying under the security of the forces and the petitioner cannot be held liable for any losses incurred by the claimant due to his own wrong doings. The claimant had violated the terms and conditions of the contract, suspended the work, therefore, petitioner seized the machinery of the claimant in terms of the contract. The petitioner have not violated any condition of the contract.
On application U/s 11 of Arbitration and Conciliation Act, Sole arbitrator Justice Sh. B.A. Khan (Retired) was appointed. During the arbitration proceedings, the claimant filed the statement of claim and the petitioner filed the reply to statement of claim. Thereafter issues were framed and on the basis of documents and submissions, the impugned award dt. 11.12.2010 was passed by Ld. Arbitrator.
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 7 of 47
Submissions of counsel for petitioner/ corporation
8. Ld. counsel for the petitioner/ department submitted that the respondent/claimant accepted the tender and entered into the General Condition Contract (GCC) dated 29.01.2004. It was agreed by the claimant to shift the compressor up to site of work as per the letter of award dated 02.07.2004, however, the claimant shifted the machinery on the left bank of the river as per his convenience and to carry out the drilling of drift by connecting GI pipe. On 20.12.2005, claimant was informed that suspension of work by him was in contravention to the provisions of GCC, the claimant thereafter approached the petitioner to settle the concerns which arisen during the project work. On 23.09.2005, a settlement was arrived between the petitioner and respondent/claimant on all the issues. The petitioner on 15.10.2005 issued a letter to the respondent confirming that 30% payment against item no. 3 shall be released to the respondent on completion of 5m length of the drift instead of 50m as approved, however, it was clarified that other terms and conditions of GCC shall remain unchanged. The claimant/respondent failed to act upon the points agreed and abandoned the project work on 26.11.2005 without informing the petitioner. On 19.02.2006, letter was issued to the claimant as a final notice to start the work, however, the respondent instead of OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 8 of 47 completing the work choose to invoke the arbitration proceedings. Thereafter, on 16.04.2007, the Hon'ble Punjab and Haryana High Court appointed the Ld. Arbitrator under section 11 (6) of the Act. The Ld. Arbitration was pleased to frame the eight issues which were decided vide award dated 11.12.2010 allowing the claim summing Rs. 37,91,080/-.
Ld. counsel for the petitioner further submitted that the issue no. 1 is the Arbitrator's jurisdiction. The claims submitted by the claimant falls under 'excepted matters' in terms of Clause 53 of the GCC, therefore these could be decided by the Engineer In Charge only, however, Ld. Arbitrator rejected the contention of the petitioner on the ground that the petitioner neither oppose the application for appointment of arbitrator nor raised any plea that disputes raised fell within excepted matters under Clause 53 before the Hon'ble High Court. Ld. Counsel further submitted that jurisdiction issue could be raised first before the Ld. Arbitrator during arbitration proceedings. The Arbitral Tribunal is a creature of the contract and it has got no jurisdiction to decide the disputes which could not be referred to the Arbitral Tribunal in terms of contract. The Hon'ble Supreme Court in case title 'Harsha Constructions Vs. Union of India, (2014) 9 SCC 246' categorically held that it was not open to the Arbitrator to decide the issues which were not arbitrable disputes, OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 9 of 47 therefore, if contract specifically excluded certain disputes to be an excepted matters i.e. outside the purview of arbitration. The petitioner had raised objection regarding arbitrability of the disputes before the Ld. Arbitral. The Ld. Arbitral ought to have decided the objection on merits by interpreting the Clause no. 53 and 55, however, rejected the contention merely on ground that it has assumed jurisdiction pursuant to the appointment under orders of the Hon'ble Punjab and Haryana High Court which was not chosen to be challenged by the petitioner and proceeded to decide the issues which were not arbitrable being excepted matters.
Ld. Arbitrator while deciding the claim no. 1 has acted illegally by not considering the clause 18 of the condition of contract/GCC which empowers the respondent to do the deviation in the original specification or drawing or design of the work. Furthermore, the Engineer In Charge vide award Clause 15.2 has powers to modify the claims which shall be deemed to be integral part of the awarded contract and the contractor shall be bound by the same. It is matter of record that claimant has agreed to final deviation in terms of letter of award dated 06.04.2005. Moreover, the costing aspect due to the shifting of compressor was also decided as item no. 5 of the settlement dated 23.09.2005.
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 10 of 47
9. Ld. Counsel for the petitioner submitted that it is matter of record that the claimant and the petitioner had the joint meeting on 23.09.2005 and it was settled that the issues of idling charges will be calculated w.e.f. 11.04.2005. The petitioner extended the time for the project work without prejudice to its rights to recover the liquidated damages from the claimant. The claimant despite of the extension of time for completing the project work chose to abandon the said work on 26.11.2005, however, Ld. Arbitrator failed to consider this fact and awarded idling charges from 11.04.2005 to 14.11.2006. It is pertinent to mention that the Ld. Arbitrator has considered the period at the time claimant had abandoned the project work from 26.11.2005, therefore, the awarded amount is neither justifiable nor appropriate in terms of GCC, hence, liable to be set aside.
10. Ld. Arbitrator awarded the refund of earnest money of Rs. 1,10,000/- to the claimant against the terms of the GCC. This particular issue is related to deviation as per Clause 38 of the Contract/GCC which deals with default by the contractor and termination of contract in full or in part and any dispute related to this clause shall be governed by Clause 53 on which the decision of the Engineer In Charge shall be final and binding on the contractor. Further, in terms of Clause 55 which deals with arbitration specifically excludes the matter which falls under the OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 11 of 47 Clause 53, hence, this claim was not arbitrable . The respondent admittedly abandoned the project work, therefore, not liable to seek the refund of the said security deposit. Ld. Arbitrator wrongly held that the petitioner is not entitled to sought the recovery of Rs. 4,40,000/- out of Rs. 5,50,000/- allotted for shifting of machinery by respondent and wrongly recorded in the award that there is any allotment letter. The amount paid to the respondent was in terms of settlement dated 23.09.2005 which was not complied with by the claimant, therefore, the petitioner is entitled to the recovery of Rs. 4,40,000/-.
11. In respect to claim no. 8, Ld. Arbitrator while passing the impugned award had acted illegally by allowing the cost of Rs. 5,10,000/- as the cost of arbitration to the claimant, however, no specific issue was framed qua the claiming of the cost by the claimant/respondent. It is a settled law that the Ld. Arbitrator cannot adjudicate the issue which was not referred to him. Section 31A (2) of the act was introduced by the way of amendment of the Act in 2015 which is much after the passing of the award that dated 11.12.2010, therefore, the claim of Rs. 5,10,000/- awarded by the Ld. Tribunal is liable to be set-aside.
12. Ld. counsel for the petitioner further submitted that the amended Act 2015 could have been applicable only in the case on pending arbitral proceedings at the time advent of 2015 OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 12 of 47 Act and the same is therefore not applicable. Ld counsel submitted that the plea of the claimant Contra Proferentum is misplaced and it is also not the case before the Ld. Arbitral Tribunal or the Hon'ble High Court under section 11 (6) of the Act. Furthermore, this court cannot entertain the petition as the Ld. Arbitrator was appointed by the Hon'ble Punjab and Haryana High Court and in terms of section 42 of the Arbitration and Conciliation Act, all the subsequent application shall be filed before the jurisdiction of Hon'ble Punjab and Haryana High Court, hence the present court has no jurisdiction. Ld. Counsel further submitted that the claims submitted by the claimant fell within excepted matters in terms of Clause 53 of the GCC, therefore, these could be decided by the Engineer In Charge whose decision was final and binding on the parties. This objection was raised before the Ld. Arbitral Tribunal regarding non arbitrability of the disputes, however, the Arbitral Tribunal wrongly decided the dispute beyond the purview of the Arbitration clauses, hence, the award is liable to be set aside (relied upon 'Mitra Guha Builders (India) COmpany Vs Oil and Natural Gas Corporation Limited, MANU/SC/1539/2019; Nonit Ram Rajput and sons Vs. Delhi Development Authority, 1998(70)DLT 562 and Ratnam Sudesh Iyer Vs. jackie Kakubhai Shroff, 2021 SCC Online 1032).
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 13 of 47 Submissions of Ld. Counsel for claimant/ respondent.
13. Ld. counsel for the claimant/respondent submitted that the Ld. Arbitrator allowed substantially three claims out of total eight claims and granted almost half of the amount which has claimed to the tune of Rs. 37,91,020/-, however, the respondent not making the payment but continuing the litigation since 2010.
14. The respondent raised the plea that the project could not be completed within 10 months, however, admittedly the Corporation consumed eight months in fixation of location and alignment of the drift, further unilaterally extended the period of contract twice without even consulting the claimant/respondent, hence, Ld. Arbitrator in issue no. 2 rightly stated that the Department/Corporation is liable to be compensated by the petitioner/Corporation to the idle charges for staff and machinery. The delay is solely attributable to the petitioner/Corporation and the claimant is always ready with staff and machinery to perform its part of contract but the Corporation firstly failed to fix the location and alignment of drift and secondly failed to make available the explosives to the respondent. Even technical condition no. 4 of the agreement shows that the place of issue of explosives was to be finalized after the award of work by the Corporation but no such thing has done at any stage. Ld. OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 14 of 47 Arbitrator in issue no. 3 rightly observed that the Corporation unilaterally extended the contract term, therefore conscious of the difficulties and its defaults and was not in a position to tackle the issue related to supply of explosives. The minutes of settlement meeting dated 23.09.2005 nowhere shows that there was any fault on the part of the claimant. There is no misconduct on the part of the Ld. Arbitrator who only granted the claims related to idle charges for the machinery and staff, and has taken on record all the submissions and documents of both the parties. The Ld. Arbitrator also have rejected almost half of the claims of the claimant which shows the Ld. Arbitrator followed the procedure. The Ld. Arbitrator only allowed claims of compensation for unilateral change of location, idle charges for machinery and staff, return of earnest money and the cost of arbitration.
15. The Ld. Arbitrator rejected the claim no.2 for demand of unpaid amount out of allocated amount of Rs. 5,50,000/- on shifting of compressor head. The Ld. Arbitrator also rejected the claim no. 4 & 5 for return of machinery to the contractor stores and POL explanation. Claim no. 7 regarding expected profit has also been rejected, and claim no. 8 i.e. cost of the arbitration also partly allowed.
16. Ld. Counsel for the respondent submitted that the Ld, Arbitrator rejected the plea of 'excepted matters' rightly on OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 15 of 47 the ground that he was appointed under section 11 by the Hon'ble High Court and was not raised in the proceedings before the Hon'ble High Court vide which the Arbitrator was appointed.
17. Ld. counsel for the respondent/claimant submitted that the present petition under section 34 of the Act filed on 23.09.2021 which is not in continuation of the prior abortive proceedings and the Hon'ble Supreme Court in case title 'Ssangyong Engineering and Construction Ltd Vs. N.H.A.I, (2019) 15 SCC 131' held that the amended arbitration proceedings of section 34 shall apply to all courts proceedings where application under section 34 is made out after 23.10.2015 and this is reiterated by Hon'ble Supreme Court in 'Ratnam Sudesh Iyer Vs. Jackie Kakubhai Shrof, (2021) SCC OnLine SC 1032'.
18. Ld. counsel for the claimant/respondent submitted that the petitioner misinterpreted the clauses no. 53 and 55 (conjointly) to mislead the court. The simple reading of both the clauses means that what falls under the 'excepted matters' is only those decisions of Engineer In charge which are taken in writing by invoking any of the enumerated clause under Clause 53. Therefore, the decisions of Engineer In Charge which is given in writing by invoking any enumerated Clauses and also in terms of the provisions of the respected clauses referred in Clause 53 shall OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 16 of 47 only fall in accepted matters, however, in present case, no decision were taken by the Engineer In Charge. Hon'ble High Court of Delhi in case titled "Lift and Shift India Pvt. Ltd. Vs. CWC, OMP 64/2009 dt. 06.03.2017" held that as and when the dispute is left undecided by the authority then it would amount to abandonment of right. Consequently the Ld. Arbitrator shall has right to decide the dispute even though the subject matter falls in excepted matters. Ld. Counsel submitted that Apex court in case titled "Batliboi Environmental Engineers Ltd. Vs. HPCL dt. 21.09.2013 held that the party autonomy should not be treated as an absolute defence against constitutional and basic human rights to have a fair and just resolution of the dispute. Ld. Counsel submitted that in M/s Tulsi Narayan Garg Vs. Madhya Pradesh Road Development Authority, 2019 SCC Online SC 1158 held that adjudication of issue relating to breach condition and adjudication of assessing damages arising out of the breach are two different and distinct concept and this right to assess damages arising out of a breach would not include a right to adjudicate upon as to whether there was any breach at all. Further the Hon'ble Supreme Court held that one of the parties to an agreement cannot reserve to himself the power of adjudicate whether the other party has committed breach. Adjudication has to be done by an independent person or body and not by the other OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 17 of 47 party to the contract. Ld. Counsel submitted that in J.G. Engineers (P) Ltd. Vs. Union of India, (2011)5 SCC 758 held that the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbitrator to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is a court or an arbitral tribunal. Reliance was placed upon the case of State of Karnataka vs. Sh. Rameshwara Rice Mills, (1987)2 SCC 160. Ld. Counsel submitted that all the issue in the present matter are beyond the scope of 53 in conjunction with Section 55, however, even if an issue or dispute is covered under excepted matter then the matter in dispute becomes arbitrable. Delhi High Court in case titled Union of India Through General Manager Vs. M/s Chiraj Stock & Security Pvt. Ltd, OMP(Comm) 417/2018 dt. 28.02.2024 held that when one party to a contract fulfills his contractual obligations with extreme delay which could not have been anticipated while entering into the contract and consequently the other party has to face extra costs, idle expenses etc. on account of extended period of completion of work, then under such circumstances the suffering party can claim such extra expenses/ damages from the other paty in view of Section 55 & Section 73 of the Contract Act, despite the facts OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 18 of 47 that such non-fulfillment of the contractual obligations are governed by the clauses of the contract, which are covered under excepted matters clause; where the decision of the defaulting party is final and binding upon the suffering party, and further where rights of the suffering party is taken away to refer the dispute to arbitration. Ld. Counsel submitted that in present case the contractor many times repudiated the contract due to non- availability of explosives and on this account, face damages/ idle charges and there is an acknowledgement in this regard by the corporation who extended the contracts suo moto and also agreed to pay the escalation. Ld. Counsel submitted that there is no infirmity in the impugned award passed by Ld. Arbitrator. Hence, the present petition be allowed.
19. Both the parties also filed written submissions.
20. Arguments heard. Record perused.
21. Before analysis of case, the extract of issues as well as findings of the award reproduced as under :
".........The following issues were framed in the matter after, the exchange of the draft issues by the parties and on hearing the Counsel :-
1. Whether the arbitrator has the jurisdiction to arbitrate the claims made by the Claimant in the face of Clause 53 of the contract? OPD
2. Was a unilateral change made in the alignment of the drift by Respondent Corporation involving carriage of machinery by the claimant 6 km away from the fixed spot? OPP OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 19 of 47
3. Was there a failure of the Respondent Corporation in making available blasting material and / or of the Claimant In appointing licensed blaster which resulted in stalling of the execution of the contract giving rise to the claim for idling charges of machinery and staff from August 2004 to September 2007? OPP
4. Was Claimant entitled to any amount on account of return of machinery and escalation in POL charges in the facts and circumstances of the case? OPP
5. Was the earnest money and machinery of the claimant seized by the Respondent Corporation Illegally and contrary to the terms of the contract? OPP
6. Whether the Claimant has received any excess amount from the Respondent Corporation? OPD
7. What was the import of the purported settlement reached by the parties dated 23.09.2005 and was it frustrated and not implemented due to default of the Claimant? OPP The Learned Counsel for parties have submitted written submission in reference to these issues. Their contentions are briefly recorded as under:-
On the first issue related to Jurisdiction of the Arbitrator, it is submitted for the Claimant that as the Contract Agreement contains Arbitration clause and as disputes raised fall outside the clauses 53 and 36 of "General conditions of contract", the Arbitrator's Jurisdiction remains intact and is not liable to be questioned. Besides, Corporation had admitted all facts invoking the Arbitration clause (55.1) and had not objected to Arbitrator's Jurisdiction in its reply to the Claimant application under section 11 (6) of the Arbitration Act before P & H High Court and had also failed to challenge Arbitrator's order dated 16.04.2004 appointing Arbitrator, which order had attained finality. Reliance in this regard is placed on Supreme Court judgments in "Konkan Rly.
Corporation Ltd. Vs. Rani Construction Pvt. Ltd", OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 20 of 47 and "Konkan Rly. Corporation Ltd Vs. Mehul Construction".
On issue no. 2, It is submitted that drift was to be located at EL- 1760 on the right bank of the river Marusudar as per contract letter dated 02.07.2004 and Dranghduran was the Power House site of Bursar project. The work was awarded after negotiation in which it was clarified at serial no. 3 of the Annexure about shifting of compressor including accessories from Kishtwar to Dranghduran. But contrary to this, the location was shifted from EL- 1760 to EL-1610 and Claimant was asked to shift further near village Kharaipaknu i.e. across Dranghduran to the left bank of the river Involving a distance of approximately 5.5 km and this way the Corporation committed deviation of the terms of the Agreement by unilaterally changing the location thrice causing a huge financial burden to the claimant. The Claimant was, therefore, entitled to be paid for the extra lead of 5.5 km.
On the third issue which relates to alleged failure of Corporation to supply blasting material to the Claimant, it is alleged that Corporation took its own time first to obtain the licence of explosives and then to finalize the place of issue of explosives under technical condition no. 4 of the Contract Agreement. It also faced the difficulty of non-availability of explosives and as a result it could not supply explosives to contractor in time with drilling work coming to a standstill. The license of Claimant's blaster Md. Iqbal who was deputed to receive explosives along with Saukat All vide Claimant's letter dated 03.02.2005 was never in issue because Corporation had given explosives to the same person earlier for the first blast on 06.10.2005. This position was acknowledged by Corporation in Settlement Meeting of 23.09.2005.
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 21 of 47
In reference to Issue no. 4 (Claim for payment for return of machinery and escalation POL charges), it is submitted that since the work remained under undeclared suspension and as the Claimant could not execute any further work due to failure of Respondent Corporation first to fix location within the time and then to make available the explosives, the Claimant was accordingly entitled to return carriage charges of Rs. 5,55,000 to Kishtwar and Rs. 3,02,500 from Bhangvati to Dranghduran totaling to Rs. 8,57,500/-.
On other issues (5,6,7) it is submitted chat since the delay in the execution of the contract was caused by the Respondent Corporation, its action of termination of contract was illegal and therefore it could not have forfeited Claimant's earnest money and forfeited his machinery.
The case of the Respondent Corporation which is mostly a repetition of the stand taken in its reply is:
(1) that the Arbitrator had no Jurisdiction to arbitrate the disputes raised by the Claimant in term clause 53 of the Contract Agreement, (II) that Claimant is not entitled to any money on account of extra lead (distance) due to shifting of machinery and equipment to changing locations and alignments as he had failed to place the compressor on the bank of Marusudar river and had stationed it on the left bank for his own convenience and in violation of the terms of the agreement, (iii) that the Claimant is not entitled to any "idle charges for staff or machinery as he had suspended the work on his own and had not nominated the licensed blaster which was mandatory under the Agreement even though the blast material was available and even as he was informed about this by letter dated 06.04.2005, (iv) that the Respondent had rightly terminated the contract and seized the Claimant's machinery and forfeited his earnest money after issuing several notices to him to resume the work under Clause 3 of GCC, (v) that the OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 22 of 47 Claimant's claim for return of outstanding amount of Rs. 1.10 lakhs from the Account head of mobilization of machinery. providing Rs. 5.50 lakhs for this was also not acceptable as he had only completed 11.40 m out of 400m of the drift at site and had received Rs.
4.4 lakhs which was recoverable from him with 18% interest, (vi) the Claimant is also not entitled to any return charges of machinery to his stores (Rs. 8,52,500) as a total amount allotted for "Mobilization of machinery head" was Rs. 5.5 lakhs of which he had received Rs. 4.40 lakhs and lastly the Claimant suspended the work on his own and violated the terms of the contract for his ulterior motive of extorting more money from Respondent. He is not entitled to any costs of arbitration as he pushed the Respondent into unwanted litigation.
On consideration of the record and submissions made by the Learned Counsel of parties the issue-wise findings are recorded as under:-
Issue No. 1 (Arbitrator's Jurisdiction) First about Arbitrator's Jurisdiction. Respondent's case is that Issue raised by the Claimant fell within "Excepted Matters" in terms of Clause 53, therefore, these could be decided by the Engineer In-charge only whose decision was final and binding on the Contractor. The plea has been raised by Respondent for the first time and it appears to be too late in the day to do so and to clutch at straws by questioning the Arbitrator's Jurisdiction. If Corporation genuinely believed that Arbitrator suffered lack of Jurisdiction, what prevented it from raising it in its reply to Claimant's Section 11 Application for appointment of Arbitrator? The fact remains that it did not oppose that application. Nor did it raise any plea that disputes raised fell within the "Excepted Matters" under Clause 53. It admitted almost all the facts for Invoking Arbitration under Clause 55.1 and OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 23 of 47 allowed the High Court order appointing Arbitrator to assume finality.
Respondent could not now be allowed to turn round and question Arbitrator's jurisdiction at a belated stage and more importantly when the Respondent had submitted to the Jurisdiction of the Arbitrator and undergone a full-dress adjudication so to say projecting its case from all possible angles. Respondent's attempt to turn the clock back and to reverse the process to the detriment of Claimant is unacceptable at this stage. This obviates the necessity of examining the nuances of Clause 53 of Contract Agreement and other clauses cited by the Respondent in its objections to find out whether the issues raised fell within the "Excepted Matters" to be decided by the Engineer-in-charge only. Moreover, the Arbitrator has assumed this jurisdiction consequent of his appointment under the orders of the Punjab & Haryana High Court which appointment was not chosen to be challenged by the Corporation.
I, therefore, hold that the Arbitrator enjoys the requisite jurisdiction to arbitrate the raised disputes in the facts and circumstances of the case. The preliminary objection is rejected and Issue No. 1 is decided against the Respondent.
Issue No. 2 (Unilateral location and alignment change of drift by Corporation) A perusal of the tender documents shows that subject matter of work was "Geological Exploration by driving the drift of size 1.52 into 2.13 m section, 400m lying for Power House cavern located at EL- 1760m on right bank of Marusudar River at Dranghduran Power House site". The contract was awarded by Corporation order dated 02.07.2004 after negotiations in which it was clarified vide annexure attached to the order at item no. 3 that OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 24 of 47 "compressor was to be shifted including accessories and allied Items from Kishtwar to Dranghduran". That being so, if the machinery was to be necessitated to be taken to a distance beyond Dranghduran it would fall outside the agreed terms unless of course it could be justified by some other way, which was not done.
Having noticed that, it also emerges as an admitted position that the location and alignment of the drift was changed thrice by the Corporation authorities unilaterally first from EL-1760 at Dranghduran, which was fixed in the contract to EL-1610 and finally to EL-1705.
The Claimant's case is that he brought in the machinery to Dranghduran on 03.08.2004 (the Patimahal controversy for which no claim for compensation is made apart) and thereafter he was asked to shift further to near village Khariapaknu and across Dranghduran on the left bank of Marusudar River, involving a distance of approximately 5.5 km and which he did way beyond Dranghduran, he was asked to shift El-1610 due to change, in alignment and level of drift. But due to the cliff of EL-1610 it was decided to install the machines at nearest possible point to EL-1610 which necessitated extension of GI/Hosepipes. This involved an extra lead to EL-1610 of approximately 5.5 km but once the machines were resembled and compressor was restarted, Respondent Corporation again shifted the site from EL-1610 to EL-1705 and to avoid any further shifting, the compressor was decided to be at the left bank.
The Respondent has only harped on the Claimant's failure to install the machinery on the right bank of the River Marusudar and his interest to keep it on the left bank for his own convenience ignoring the developments in between whereby under its designers OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 25 of 47 instruction it had to change the location and alignment of the drift thrice which is acknowledged by it in its letter dated 06.04.2005. It is not denied that Claimant was asked to shift machinery from Drenghduran further to Kharaipakanu village, a distance of about 6 km away.
It is no good for the Corporation to say that Claimant had done it for his own convenience. The fact remains that location and the alignment was changed thrice and there was a departure from the one fixed in the Contract Agreement and if this necessitated shifting of machinery from place to place and if it was ultimately stationed on the left bank of the river to avoid the repeated movement, Claimant's claim for extra lead (distance) compensation could not be turned or wished away. He becomes entitled to compensation for this which is determined at Rs. 55,000 per km and works out to Rs. 3,02,500/- in all plus Rs. 55,000/- as cost of GI / Hose pipe.
Looking at it from the other angle the location and alignment was eventually fixed on 08.04.2005 by the Junior Engineer In-charge and drilling was first time done on 11.04.2005 Involving loss of 8 months in the process when the contract was to be executed within 10 months and had to be completed on 31.05.2005.
Therefore, if maximum contract period was consumed by the Corporation authorities in fixation of location and alignment of drift who could be blamed for the delay in execution of the contract within the stipulated time and if this was attributable to Corporation which it is, why should it be rot held liable to compensate the contractor for the "Idle charges" of the staff and machinery also from the date he brought in the machinery to 08.04.2005 or the date on which the location was finally fixed or 11.04.2005 when first blast was done in the first instance. So long as shifting of location was not covered by the terms of contract, Corporation could OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 26 of 47 not go on shifting it from place to place to the detriment of the contractor. This issue of "Idle Charges" would be examined in detail while dealing with the next issue.
Therefore, Corporation is held liable and Claimant is found entitled to Rs. 3,02,500 for extra lead Rs. 55,000 km + 55,000 as cost of GI/Hosepipes bringing the total to Rs. 3,57,500/-. This issue is decided against the Respondent.
Issue No. 3 (Non supply of explosives material) This issue is a major and crucial issue and on this depends the backbone of the contractor's claim for "Idle charges for staff and machinery" coupled with the delay in fixation of location and alignment. A look at the "Technical condition no. 4" shows that the place of issue of explosives, was to be finalized after the award of work by Respondent. No such thing was done at any stage and not even during the currency of contract for unknown reasons or for reasons best known to the Corporation. It seems that the Corporation came to face some difficulties in obtaining the licence first and then setting up of magazine depot for the project and finally in finalizing the place of issue under the contract. The non-availability of explosives for whatever reason and non availability of escorts emerges on the face of record. All this seems to have combined to adversely affected free flow of supply of explosives and the consequent hampering of contract execution. The fact that explosives could not be made available to the contractor is also borne out by the Corporation authorities' remedial actions in seeking resolution of issues with contractor culminating in the Settlement Meeting of 23.09.2005 and in two Suo-moto extension granted in contract term. In the settlement meeting it was mutually agreed and decided:-
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 27 of 47
(a) To facilitate early start of work of cooperation would be extended to claim out by the Respondent,
(b) Rates of gala excavation would be submitted by the Claimant,
(c) "Idling charges would be permissible" w.e.f. 11.04.2005,
(d) POL escalation on account of increase in rates of fuel/ lubricants shall be worked out on the basis of June 2004 index,
(e) Monthly release would be made in favour of the Claimant,
(f) Blast for drifting would be carried out under the supervision of the Respondent,
(g) Contractor was to provide the blaster and the blasts for drifting were to be carried out under the supervision of departmental licensed blaster.
The decisions taken at the meeting and mutually accepted by the parties, leave no scope for doubt that Corporation had found Claimant contractor entitled to "Idling charges" w.e.f. 11.04.2005 the date of first drilling at the project. He is also found entitled to (POL) escalation on account of increase of late of fuel/ lubricants with June 2004 as the base Index.
This decision also negates the Corporation's stand taken in its objections and argued by its counsel that explosives could not be issued to the Claimant as he had failed to nominate the licensed blaster. The minutes of the meeting nowhere indicate that license of claimants appointed blaster; Iqbal, was at issue. All that is asked from the contractor is to provide the blaster for work and also that the blast for drilling would be carried out by him under the supervision of departmental licensed blaster considering various aspects of safety and security.
The Corporation's last bid stand that explosives could not be supplied to the contractor because of his alleged unlicensed blaster can't be lent any credence OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 28 of 47 whatsoever. The record shows that the explosives material was earlier received by the same blaster when the first drilling was done. The Corporation failed to show from any official record that non- supply of explosives to the contractor was for his failure to depute a licensed blaster. Nor was it shown that the explosives material was available for being supplied but could not be so supplied for this reason. In fact, when Corporation Counsel was asked to show the official record containing reason for refusal to supply the explosives, he produced stock position of an allied magazine depot in the area which could not help resolve the issue.
The Respondent relies upon his letter dated 05.07.2005 to support the non supply of explosives material to Claimant. But perusal of the letter only acknowledges that blasting material could not be supplied to the contractor and it does not say that it could not be issued because of his "unlicensed blaster". The other allied factor that requires to be noticed is that Corporation extended contract term twice, first by order dated 05.07.2005 till 31.12.2005 and then by order dated 29.12.2005 till 31.03.2006 Suo-moto. Why did it do so on its own? The only inference that can be drawn is that it was conscious of its difficulties and its default and was not in a position to tackle the issues related to supply of explosives material and also that Claimant had no hand in the resultant stand-off so to say. Had it been the contractor's fault, Corporation would have extended the term of the contract at his request and for his reasons, but that was not so. Moreover, even after the two extensions granted the problem related to supply of explosives seems to have persisted to frustrate the execution of the contract.
Therefore, it presents no difficulty to conclude that Corporation could not discharge its obligations with regard to fixation of location which was done 8 OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 29 of 47 months after the contract and supply of explosives to the contractor in time resulting in execution of contract going haywire. The result was that work remained under undeclared suspension casting the burden of "Idle charge" for staff and machinery on the contractor. The Corporation is said to have paid the "idle charges" to the other contractor Shiv Lal in similar circumstances and on higher rates than quotas by Claimant. That also strengthens Claimant's case for being compensated in the circumstances.
On this reasoning this issue is also decided against Respondent Corporation and Claimant contractor is found entitled to "idle charges" for staff and machinery in terms of the Settlement reached between the parties dated 23:09.2005. In this he was found entitled to "idle charges" from 11.04.2005 when the first drilling took place and in response, he submitted a bill to the Corporation on this count in which he quoted Rs. 46,860 pm for compressor, Rs. 31,450 pm for generator and Rs. 48,000 pm for staff and Rs. 30,000 for GI and Hose Pipes. If rate for each item was multiplied by 18 months from date of deployment of machinery till the termination of the contract, this amount would come to Rs. 28,13,580/-. It may be noted here that the salary/ wages component paid to staff by Claimant during relevant period was checked from his receipt register which is supported by his affidavit.
The Claimant contractor is accordingly found entitled to the amount of Rs. 28,13,580/- as "idle charges" for staff and machinery from 11.04.2005 to 14.11.2006 (date of termination of contract). The Claim on this count is, therefore, partly allowed. Issue No. 3 is, accordingly, decided partly in favour of the Claimant and partly rejected.
Issue No. 4 (Payment for return of machinery to contractor's store and POL escalation):
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 30 of 47 Annexure to Allotment Letter dated 02.07.2004 at serial no. 3 provides for Rs. 5.50 lakhs for shifting of compressor Including accessories and allied items from Kishtwar to Dranghduran. It does not provide for any payment of charges for return of the machinery either after the execution of the contract or on the failure of such execution. In other words the contract imposes no obligation on Corporation to pay the return charges of machinery to him which seems otherwise covered in the provision made for the shifting of machinery head. Therefore, there is no way to fasten this liability or Corporation, more so in view of total allotted amount of Rs. 5.50 lakhs for this head. The contractor had already received his 4.40 lakhs out of this which is sought to be recovered from him by the Corporation for his having completed only 11.40 m of drift out of 400m. The amount is not returnable to the Corporation in the face of the findings on connected issues attributing delay in the execution of the contract which was to be completed in 10 months to the Corporation. As the Claimant was not found responsible for this delay and as total payment was provided for shifting of compressor and other machinery in terms of serial no. 3 was fixed at Rs. 5.50 lacs, it would be unjust to recover the paid amount on the basis of the mileage of the drift done by him. This also disentitles the Claimant from claiming the unpaid amount of Rs. 1.10 lakhs from this amount as he has been awarded idle charges for machinery. He cannot have his cake and eat too. The Claimant is also not entitled to any POL escalation as the work remained under undeclared suspension for most of the time as no fuel was consumed during execution. Issue No. 4 is decided against the Claimant.
Issue No. 5 (Termination of contract):
Both termination of the contract by the Corporation and seizure of machinery and forfeiture of earnest OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 31 of 47 money by it become unsustainable in the facts and circumstances of the case.
Looking back at the sequence of events it has been seen through and through that Corporation had failed to discharge its obligation in fixing the location and supplying of explosives to contractor resulting in undeclared suspension of work and leading to Suo- moto extensions granted by the Corporation twice in the term of the contract had admittedly expired on 31.03.2006, i.e. before the termination of the contract on 14.11.2006. That being so, there was no contract in existence at the time it was ordered to be terminated. In other words there was nothing to be terminated as the term of the contract had lapsed on its own. That takes away the basis of the termination of the contract and makes it unsustainable and as also the seizure of machinery and forfeiture of earnest money. The Corporation is accordingly liable to and is directed to release the machinery and the earnest money of Rs. 1.10 lakhs to Claimant. This issue accordingly is decided against the Respondent Corporation.
Issue No. 6 (Excess amount received by the Claimant) The Respondent has not proved that any excess amount was received by the Claimant during or after the execution of the contract. It has only sought recovery of Rs. 4.40 lakhs out of Rs. 5.50 lakhs allotted for shifting of machinery by Claimant at serial no. 3 of annexure to Allotment letter. Since the machinery was admittedly shifted and deployed and as payment was provided under the terms of the contract, the question of recovery of Rs. 4.40 lakhs on the basis of the mileage of drift done by him does not arise. This issue also goes against Respondent.
Issue No. 7 (Purport of Settlement dated
23.09.2005)
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction
Dt. 30.03.2024 Pg. 32 of 47
The minutes of the meeting of 23.09.2005 leading to the mutual settlement between the parties shows that both sides were conscious of the confronting problems and wanted to rescue the project. In this Respondent Corporation has come clean by acknowledging that explosives material could not be made available to Claimant and that he was entitled to "idle charges" for staff and machinery etc. Record shows that in compliance the Claimant submitted a bill for payment but thereafter nothing is known where the matter got derailed. The Corporation is taking spacious plea that Settlement had to be implemented according to Government norms. Be that so but it has nowhere indicated what was payable to Claimant pursuant thereto. It would have been understandable if Corporation had determined a different amount and furnished the, basis for this. But this was not to be and Corporation failed to go by this settlement also and is now saying it is not bound to honour It, displaying an arbitrary conduct in the process. The matter may not have come to this pass had the Corporation Implemented this Settlement. It is in this perspective that purported settlement of 23.09.2005 is made basis for allowing the contractor's Claim.
Conclusion:-
In view of the aforesaid findings on the Issues, the Claimant succeeds to the extent indicated:-
The Claimant's first claim is allowed and he becomes entitled to payment of Rs. 3,57,500/. The Claimant's second claim of Rs. 1,10,000/- is rejected.
The Claimant's third Claim for "Idle charges" is partly allowed and he is held entitled to payment of Rs. 28,13,580/-on account of "Idle charges" for his staff and machinery.
The Claimant's fourth claim pertaining to POL escalation is rejected.
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 33 of 47
The Claimant's fifth claim demanding Rs. 8,52,000/- for taking back the machinery from the site to his store (return carriage) is also rejected. The Claimant's sixth claim for return of earnest money of Rs. 1,10,000/- is allowed. The Claimant's seventh Claim for expected profit of Rs. 7,30,520 is rejected.
The Claimant's final claim for costs is partly allowed and he is found entitled to payment of Rs. 5,10,000/- as costs of arbitration.
Consequently, the claimant is entitled to a total amount of Rs. 37,91,080/- (Rupees Thirty Seven Lacs Ninety One Thousand Eighty Only).
The aforesaid amounts have been awarded after due calculation and the Respondent Corporation is directed to pay the same to the Claimant within two months from today.
Original Register be returned to the Claimant.
22. The Ld. Arbitrator framed seven (7) issues which are as follows :
1) Whether the arbitrator has the jurisdiction to arbitrate the claims made by the Claimant in the face of Clause 53 of the contract? OPD
2) Was a unilateral change made in the alignment of the drift by Respondent Corporation involving carriage of machinery by the claimant 6 km away from the fixed spot? OPP
3) Was there a failure of the Respondent Corporation in making available blasting material and / or of the Claimant In appointing licensed blaster which resulted in stalling of the execution of the contract giving rise to the claim for idling charges of machinery and staff from August 2004 to September 2007? OPP
4) Was Claimant entitled to any amount on account of return of machinery and escalation in POL charges in the facts and circumstances of the case? OPP OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 34 of 47
5) Was the earnest money and machinery of the claimant seized by the Respondent Corporation Illegally and contrary to the terms of the contract? OPP
6) Whether the Claimant has received any excess amount from the Respondent Corporation? OPD
7) What was the import of the purported settlement reached by the parties dated 23.09.2005 and was it frustrated and not implemented due to default of the Claimant? OPP
23. With regard to issue no. 1, Ld. Arbitrator held that the petitioner/ corporation raised the plea that the dispute held with 'excepted matter' in terms of clause 53, however, observed that this issue of jurisdiction was not taken while opposing the application Section 11 of Arbitration Act, therefore this obviates the necessity of examining the nuances of clause 53 of the contract agreement and other clauses cited by the respondent in its objection, hence, decided the issue no. 1 in favour of claimant and against the corporation/ petitioner.
24. With regard to issue no. 2, Ld. Arbitrator observed that as per admitted position the location and alignment of drift was charged thrice by the corporation unilaterally, and so long as shifting of location was not covered by the terms of contract, the corporation could not go on shifting it from place to place to the detriment of the contractor, therefore, the corporation is held liable for a total amount of Rs. 3,57,500/- and this issue is decided against the corporation/ petitioner.
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 35 of 47
25. With regard to issue no. 3 i.e. non supply of exclusive material, Ld. Arbitrator repelled the contentions of the corporation that it could not issue the explosive to the unlicensed blaster. The ld. Arbitrator also observed that the corporation extended contract terms twice which itself suggests that the corporation was conscious of its difficulties and its default and even after two extension the problem relating to supply explosive seems to have persisted to frustrate the execution of contract, therefore concluded that the corporation could not discharge its obligation with regard to fixation of location which was done eight months after the contract, therefore decided the issue no. 3 in favour of claimant and also found that the claimant is entitled for idle charges for staff and machinery.
26. With respect to issue no. 4 regarding payment of return of machinery to the contractor force and POL escalation, Ld. Arbitrator decided this issue no. 4 against the claimant.
27. With regard to issue no. 5 i.e. termination of contract, Ld. Arbitrator observed that the corporation had failed to discharge its obligation in fixing the location and supplying of explosive to the contractor resulting in undeclared suspension of work, leading to suo moto extension by the corporation in term of the contract to salvage of situation. The second term of the contract had admittedly expired on 31.03.2006 i.e. before OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 36 of 47 termination of contract on 14.11.2006. Therefore, no contract in existence at the time when it was ordered to be terminated. It is observed by the Ld. Arbitrator that there was nothing to be terminated as the terms of the contract had lapsed on its own. Therefore, the corporation is liable and directed to release the machinery and earnest money of Rs. 1.10 Lacs to the claimant. The issue no. 4 is accordingly decided against the petitioner/ corporation.
28. With respect to issue no. 6 regarding excess amount received by the claimant, it is observed by the Ld. Arbitrator that the petitioner/ corporation has not proved that any excess amount was received by the claimant during or after the execution of contract, therefore decided this issue against the petitioner/ corporation.
29. With regard to issue no. 7 i.e. the effect of purported settlement dt. 23.09.2005, Ld. Arbitrator observed that the petitioner/ corporation come clean by acknowledging that the explosive material could not be made available to the claimant and he was entitled for idle charges for staff and machinery. Thereafter the claimant submitted the bills for payment, however, the matter got delayed. The corporation is taking spacious plea that the terms of settlement had to be implemented according to Government norms, however, the corporation nowhere indicated OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 37 of 47 what amount was payable, therefore the corporation failed to go by this settlement and now its saying that it is not bound to honour, displaying, arbitrary conduct in the process. It is also observed by the Ld. Arbitrator that the matter may not come to pass had corporation implemented this settlement. Therefore, the purported settlement dt. 23.09.2005 was made basis for allowing the contractor's claim and the claimant is also awarded cost of Rs. 5,10,000/-.
30. The main ground raised by the petitioner is that as per the clause 53 of the contract, all the decisions taken under clauses 7, 8, 10, 13, 17, 18, 21, 23, 24, 29, 32, 34, 37, 38, 40, 41 and 44 by the engineering charge shall be final and binding to the contractor and all the issues raised by the claimant falls within the above clauses, therefore out of the jurisdiction of the Ld. Arbitral Tribunal. Furthermore, terms and conditions of the settlement dt. 23.09.2005 arrived between the committee members and the contractor were not adhered and complied by the contractor who willfully violated them and suspended the work, and this was not appreciated by the Ld. Arbitrator, therefore the award was liable to be set aside.
31. The Ld. Arbitrator had decided all the issues in detail and with reasons, and this court in present jurisdiction cannot re-appreciate the evidence nor could look into the merits OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 38 of 47 of the case. The Ld. Arbitrator while deciding issue no. 7 regarding the settlement dt. 23.09.2005 observed that despite acknowledging that explosives could not be made available, thus the claimant was entitled for idle charges. The corporation had not determined any amount, therefore itself failed to go by the settlement. There is nothing perverse or patent illegality in this observation of Ld. Arbitrator. Therefore, the ground that the contractor not adhered or complied with the terms and conditions of settlement cannot be looked into.
32. The second main contention taken in the grounds that as per clause 53 of the contract, all the decisions taken under clauses 7, 8, 10, 13, 17, 18, 21, 23, 24, 29, 32, 34, 37, 38, 40, 41 and 44 by the engineer in-charge shall be final and binding to the contractor and falls out of the jurisdiction of the Ld. Arbitral Tribunal. The Ld. Arbitrator while dealing the contentions of the jurisdiction observed that this ground was not taken by the claimant in reply to the application U/s 11 of Arbitration Act before Hon'ble High Court vide which the Ld. Arbitrator was appointed, furthermore, the said order was not challenged.
33. It is contended by the Ld. Counsel for petitioner that jurisdiction of Ld. Arbitrator could be challenged during the arbitration proceedings and furthermore, the petitioner categorically raised the issue regarding the non-arbitrarily of the OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 39 of 47 dispute before the arbitral tribunal. The Ld. Arbitrator however, not gone through the terms of contract, and the present contract specifically excludes certain disputes to be an 'excepted matters' i.e. outside the purview of the arbitration. The Ld. Arbitrator cannot reject the plea of exclusion of disputes being 'excepted matters' merely on the basis of the fact that no objection were raised before Hon'ble High Court or neither the order appointing the ld. Arbitrator by Hon'ble High Court was challenged. Ld. Counsel submitted that Apex Court in Mitra Guha Builders (Supra) held that clause 2 conferred on Superintendent Engineer authority to decide the liability and quantum of payment. The finality in clause 2 revealed the intention of the parties to make those disputes arbitrable. Ld. Counsel submitted therefore when the parties themselves are decided to have the same adjudicated by the particular officer then the same falls within 'excepted matter' and the arbitrator has not jurisdiction to decide the same. Ld. Counsel submitted that in this case the Apex Court has distinguished the BSNL case relied by Ld. Counsel for petitioner.
34. However, Supreme Court in State of Karnataka Vs. Sh. Rameshwaram Rice Mills (Supra) held that wording of the relevant clause did not confer the finality to the power of officer of employer to determine question of breach, it held that in any event such power cannot be conferred. In J.G. Engineers case, it OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 40 of 47 is held that the consequential decision of SE in regard to quantification/ levy of liquidated damages is final if there is no dispute as to who committed the breach i.e. if the contractors admits that he is in breach or if the arbitrator finds that the contractor is in breach but in present case, the arbitrator categorically held that delay is on the part of the petitioner due to which the claimant suffered. Therefore, in these circumstances, the case of Mitra Guha Builders as relied upon by counsel for petitioner is of no help to the case of the petitioner. The dicta that a party to the agreement cannot be an arbiter in its own cause has been further re-affirmed in Tulsi Narayan Garg Case (Supra),which was dealing with the question whether the state could have levied damages and initiated recovery for the same when the dispute is pending before arbitral tribunal. In Union of India Vs. M/s Chiraj Stock and Security Pvt. Ltd. (Supra) Delhi High Court also held that the suffering party can claim extra expenses and damages from other party despite the fact that such non-fulfillment of the contractual obligations are governed by the clauses of contract which are covered under excepted matter clause. Thus, in present facts and circumstances merely because the dispute fall in excepted matters category do not make them non-arbitrable.
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 41 of 47
35. In present case, Ld. Arbitrator had decided the issue of unilateral charges of location and alignment of drift by the corporation, non supply of explosive material, termination of contract, no excess amount received by the claimant and the purported settlement dt. 23.09.2005. These issues even if found to be in the category of excepted matters then also becomes arbitrable in view of the judgments as discussed above. The Ld. Arbitrator is within its power to grant the claim in terms of the issues along with the costs as awarded in the present case.
36. Scope of interference under section 34 of Arbitration and Conciliation Act with Arbitrator's award is very limited. The Court would not be justified in reappraising the material on record and substituting its own view in place of the view taken by Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail as held by Hon'ble Supreme Court in the case of Navodaya Mass Entertainments Ltd. v. J.M. Combines reported in (2015) 5 SCC 698.
37. Hon'ble Supreme Court in the case of 'Sutlej Construction Ltd. v. State (UT of Chandigarh) reported in (2018) 1 SCC 718' has held that when it comes to setting aside of an award under the public policy ground, it would mean that the OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 42 of 47 award should shock the conscience of the court and would not include what the court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice. Paragraph nos. 10 to 13 of the said judgment are extracted below:-
"10. We are not in agreement with the approach adopted by the learned Single Judge. The dispute in question had resulted in a reasoned award. It is not as if the arbitrator has not appreciated the evidence. The arbitrator has taken a plausible view and, an in our view, as per us the correct view, that the very nature of job to be performed would imply that there has to be an area for unloading and that too in the vicinity of 5 km as that is all that the appellant was to be paid for. The route was also determined. In such a situation to say that the respondent owed no obligation to make available the site cannot be accepted by any stretch of imagination. The unpreparedness of the respondent is also apparent from the fact that even post-termination it took couple of years for the work to be carried out, which was meant to be completed within 45 days. The ability of the appellant to comply with its obligations was interdependent on the respondent meeting its obligations in time to facilitate appropriate areas for unloading of the earth and for its compacting. At least it is certainly a plausible view.
11. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice".
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 43 of 47
12. The approach adopted by the learned Additional District Judge, Chandigarh was, thus, correct in not getting into the act of re-appreciating the evidence as the first appellate court from a trial court decree. An arbitrator is a chosen Judge by the parties and it is on limited parameters can the award be interfered with. 13. The learned Single Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court. In fact, even in second appeals, only questions of law are to be determined while the first appellate court is the final court on facts. In the present case, the learned Single Judge has, thus, acted in the first appeal against objections dismissed as if it was the first appellate court against a decree passed by the trial court."
38. The scope of interference with an arbitral award under Section 34 of the Act has been considered and discussed by Hon'ble Supreme Court in a judgment rendered in the case of 'MMTC Ltd. v. Vedanta Ltd. reported in (2019) 4 SCC 163'. Paragraph nos. 11 to 14 of the said judgment are extracted below:
"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 44 of 47 statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 45 of 47 Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
39. In the case of 'Maharashtra State Electricity Distribution Company Ltd. v. Datar C.C.L. Ltd. reported in (2018) 3 SCC 133' it has been held by Hon'ble Supreme Court that "the proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of evidence on record are not to be scrutinised as if the Court was sitting in appeal now stands settled by catena of judgments pronounced by this Court without any exception thereto."
40. Ld. Arbitrator has passed the award upon consideration of material placed before him. There is nothing on record that the relevant material is not placed before the Ld. Arbitrator. There is nothing perverse or patent illegality in the findings of the Ld. Arbitrator.
41. The Ld. Sole Arbitrator has drawn inferences and conclusions after the factual appreciation in the light of the legal OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction Dt. 30.03.2024 Pg. 46 of 47 principles. The views of the Ld. Sole Arbitrator can not be found fault with only for the reason that some other views can emerge by appreciating the same set of facts and evidence, until and unless it is shown that such a view is totally obnoxious and unsupported by the sound legal principles.
42. This Court cannot substitute its own views or the views of the parties with the view taken by the Ld. Arbitral Tribunal, if the view taken by the Ld. Arbitrator is not in conflict with the settled legal position. There is nothing to suggest that the findings and conclusions rendered by the Ld. Arbitrator are per- se perverse, illegal or non- sustainable or against public policy.
43. Accordingly, the present petition under Section 34 of the Arbitration and Conciliation Act as pressed into service by the petitioner is therefore not sustainable within the scope and ambit of the provision, therefore, liable to be dismissed and accordingly dismissed and disposed of.
44. File be consigned to record room after necessary compliance.
Announced in Open Court (Ajay Kumar Jain)
on 30th March, 2024 District Judge, Comm-03
South-East, Saket Courts, Delhi
OMP (COMM) 35/21 The Chief Engineer, Burser, H.E. Project, NHPC Vs. M/s K.K. Chibber Construction
Dt. 30.03.2024 Pg. 47 of 47