Delhi District Court
Union Of India vs Budhiraja Electricals on 27 September, 2024
In the Court of Ms. Anu Grover Baliga,
District Judge (Commercial Court-04),
South-East District, Saket Courts
New Delhi
OMP (COMM) 9/2022
Union of India Vs. M/s Budhiraja Electricals
In the matter of:
Union of India
Executive Engineer (E)
Gwalior Central Elect. Division
CPWD, 35 City Centre
Gwalior - 474011. ....Petitioner
Versus
M/s Budhiraja Electricals
1464/1, Gurudwara Road
Kotla Mubarkapur
New Delhi. ....Respondent
Date of institution : 14.02.2022
Date of reserving order : 19.09.2024
Date of pronouncement of order : 27.09.2024
ORDER
1. The present petition has been filed by the Union of India under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the award dated 02.11.2021 passed by Sh. Rajesh Banga, Ld. Arbitrator. The impugned award was delivered in the context of the disputes that had arisen between the parties in relation to a work contract awarded by the Petitioner to the Respondent for providing and installing street lights and compound lightening in the premises of IIT, Gwalior, M.P. The stipulated date of start of work was 07.08.2015 and though the date of completion of work was 06.11.2015, the work was actually completed on 10.12.2018. The Petitioner herein withheld an amount of Rs.2,50,000/- as liquidated damages, from the final bill cleared by it in favour of OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 1 of 32 the Respondent on account of delay caused by the Respondent in the completion of the work. On the other hand, the Respondent claimed that the Petitioner took almost two years to provide it with the layout plan/ drawings of the places where the poles had to be affixed in the campus area and therefore the delay caused was completely attributable to the Petitioner and that therefore the Petitioner had no right to withhold any amount on the grounds of liquidated damages. The Respondent in turn also sought damages to the extent of the losses suffered by it on account of overhead expenses, escalation of wages of labour amongst other grounds, due to prolongation of contract. The said disputes having arisen between the parties, their claims and counter claims were referred, in terms of the agreement entered between them, to the sole arbitration of Sh. Rajesh Banga. Ld. Arbitrator vide the impugned award accepted the claims of the Respondent herein and held that the delay had been caused due to the conduct of the Petitioner herein and thereby partly allowed the claims made by the Respondent and rejected the counter claims made by the Petitioner herein.
2. The Petitioner now challenges the impugned award mainly on the grounds that the award is against the public policy and the Ld. Arbitrator wrongly concluded that the delay was attributable to the Petitioner and that he traveled beyond the terms of the contract in awarding damages in favour of the Respondent and in rejecting the counter claim of the Petitioner. In the petition filed, the impugned award has been challenged on as many as 32 grounds. In the first nine grounds, various documents have been referred to to contend that the Ld. Arbitrator did not properly consider the said documents which show that the Respondent was always provided with the drawings/layout plan well in time and despite the said fact, he did not complete the project in time. In the next nine grounds, various clauses of the contract agreement executed between the parties OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 2 of 32 have been referred to to contend that Ld. Arbitrator has ignored the said terms and wrongly awarded damages in favour of the Respondent. In the remaining grounds, it has been contended that the Ld. Arbitrator wrongly rejected the counter claim of the Petitioner and that the Petitioner was fully justified in withholding a sum of Rs.2,50,000/- and that no interest whatsoever should have been awarded by the Ld. Arbitrator.
3. In its reply filed to the aforementioned detailed petition filed by the Petitioner, the Respondent has chosen to refer to various judgments of the Hon'ble Supreme Court and the Hon'ble High Courts to contend that the Petitioner has miserably failed to make out a case within the limited scope available for challenge under Section 34 of the Arbitration and Conciliation Act. It has been contended that the petition has been filed with an intent to make this Court reappreciate the evidence in a manner akin to a Regular First Appeal, which is impermissible in law and therefore the petition should be dismissed. It has been stressed in the reply that this Court must show restraint while examining the validity of the arbitral award and be conscious of the fact that it cannot reappreciate the evidence or sit in an appeal over the arbitral award and that the setting aside of the arbitral award is permissible only in very exceptional circumstances viz where the award is so opposed to the most basic notions of justice and morality so as to shock the judicial conscience of the Court.
4. In support of the petition and the reply filed thereto, Ld. Counsels of both the parties, Sh. Atul Sahi, Ld. Counsel for the Petitioner and Sh. Apurv Parashari, Ld. Counsel for the Respondent have also filed detailed written submissions.
5. Ld. Counsel for the Petitioner, Sh. Atul Sahi has submitted that the first OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 3 of 32 ground of challenge to the award is that the Ld. Arbitrator wrongly concluded that the delay in completion of the contract was due to the conduct of the Petitioner. He has submitted that the Respondent falsely asserted before the Ld. Arbitrator that it was never supplied with the drawings/layout plan of the places where the poles and the cables had to be affixed, though the true facts were that the Petitioner alongwith its communication dated 19.09.2015 had supplied the drawings and layout plan to inform the Respondent the places where the poles/cables were to be affixed. He points out that the said communication was placed before the Ld. Arbitrator and was given Ex.R8 and yet the Ld. Arbitrator ignored the said document and in his findings in this respect held that the Petitioner had provided the first layout plan to the Respondent/contractor only on 11.06.2016. He therefore submits that this is a patent illegality committed by the Ld. Arbitrator.
6. In reply to the said contention, Ld. Counsel for the Respondent, Sh. Apurv Parashari, has pointed out that in its rejoinder filed before the Ld. Arbitrator, the Respondent had categorically stated that the Petitioner must produce the layout plan which it is referring to in its letter dated 19.09.2015, for no such layout plan was ever handed over to the Respondent. He has further pointed out that the site book was also produced before the Ld. Arbitrator, which reflected clearly that the layout plan alongwith the drawings was given to the representative of the Respondent, for the first time on 21.10.2015. Ld. Counsel has further pointed out that in this respect, this Court may also have a look at C-10 and C-11, the letters written by the Respondent to the Petitioner, which record that the drawings handed over to the Representative of the Respondent on 21.10.2015 do not tally with the site and that the central court area, the parking area and the green lawn as shown in the layout drawing, do not even exist at the site. It is the submission OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 4 of 32 of Ld. Counsel Sh. Parashari that the entire correspondence entered between the parties placed before the Ld. Arbitrator reflects that the client of the Petitioner namely the IIT, Gwalior informed the Respondent that the initial layout plan was not shared by the Petitioner with them and that they are not agreeable to the poles being affixed at the places shown in the drawings/layout plans prepared by the Petitioner. He submits that it is therefore that the Ld. Arbitrator in his finding on the reasons for the delay in the execution of the contract has referred to approved layout plan and not merely the layout plan. Ld. Counsel Sh. Parashari has submitted that though it is his contention that this Court cannot reappreciate the evidence led before the Ld. Arbitrator, he is pointing out to the said exhibits/aforementioned correspondence to show that the submission of Ld. Counsel for the Petitioner that the finding of the Ld. Arbitrator is incorrect, is without any basis whatsoever.
7. In rebuttal, Ld. Counsel Sh. Sahi has sought to submit that the Petitioner and its client IIT, Gwalior were within their right to keep changing the drawings of the places where the poles were to be affixed. In this respect, he refers to the following Clause 12 of the contract entered between the parties:-
Clause 12: - The Engineer-in-Charge shall have power (i) to make alteration in, omissions from, additions to, or substitutions for the original specifications, drawings, designs and instructions that may appear to him to be necessary or advisable during the progress of the work ..... and the contractor shall be bound to carry out the works in accordance with any instructions ..... shall be carried out by the contractor on the same conditions in all respects including price on which he agreed to do the main work except as hereafter provided. ....
He has also sought to contend that had the Respondent progressed with the work at the required pace, the Petitioner and its client would not have had the opportunity to mull over and modify the drawings of the places where the poles OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 5 of 32 were to be affixed. The argument being, more the time a contractor takes to complete a project, more the opportunity the Principal gets to change the original plan of construction.
8. To appreciate the submissions made by both the Ld. Counsels, it will be relevant herein to reproduce the reasoning given by the Ld. Arbitrator to hold that it was the Petitioner herein who was responsible for the delay caused in the execution of the contract:
1.2 The main grievance of the claimant is that the correct/final lay-out drawing for the installation of street light poles was badly delayed by the respondent.
I note that respondent's ref dt 18.8.18 (exh c-74) admits that the first lay out plan was issued to contractor on 11.6.2016 and the part lay-out for the balance poles was issued on 13.8.2018. I wonder why the respondent entered into a contract in 2015 with stipulated period as 3 months when he was not in a position to finalise the layout drawing till 2018. I put a simple question here:
-How would a contractor install a street light pole when the location where it is to be installed on ground is uncertain? More so, when such uncertainty continues for a period as long as 3 years?
1.3 It is not in dispute that the contract was determined by the respondent in Jan16 and this was revoked in Feb 16. Once again, the contract was determined by respondent in July 16 and this was revoked in Dec 16. The own CE of respondent vide ref dt 27.12.16 held that the determination of contract was illegal.
The illegal determination of contract by the respondent, not just once, but twice further incapacitated the contractor to perform the work in the intervening period.
1.4 Thus the own documents of respondent establish beyond any doubt that the respondent failed in its contractual obligations to provide the drawings and was responsible for causing such abnormal delay in the work. The respondent brazenly beached the contractual obligations by deciding the lay out in a piece-meal manner in a period extending up to 3 years.
9. Now as narrated hereinabove, the aforementioned reasoning is being challenged on the ground that the Ld. Arbitrator wrongly held that the first layout plan was issued to the Respondent/contractor on 11.06.2016. However as pointed out by the Ld. Counsel Sh. Parashari the contention of the Petitioner that the first OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 6 of 32 layout plan was given to the Respondent/contractor by the Petitioner on 19.09.2015, has hardly any merit. It is to be noted that while holding that the layout plan was given to the Respondent/contractor for the first time on 11.06.2016, the Ld. Arbitrator has referred to Ex.C-74, a document issued by the Executive Engineer of the Petitioner. A perusal thereof reflects that the own Executive Engineer of the Petitioner has stated in the said communication that the layout plan duly approved by the client department for the work in dispute was given to the Respondent/contractor on 11.06.2016. In view of such a specific admission in the document of the Petitioner herein, it is unacceptable that it is still being argued that the Ld. Arbitrator wrongly recorded the fact that the layout plan was issued to the Contractor for the first time only on 11.06.2016. The contention that the Respondents could have started the work w.e.f. 19.09.2015 is completely contrary to the documentary evidence pointed out by Ld. Counsel for the Respondent. The said evidence includes the correspondence exchanged between the parties and clearly points out that the initial layout plan/drawings assertedly issued by the Petitioner on 19.09.2015 or the subsequent layout plan/drawings given to the Respondent/contractor on 21.10.2015 could not be acted upon by the Respondent/contractor because the drawings/layout plan did not even tally with the actual site and were not approved by IIT Gwalior, who was therefore not allowing the Respondent to commence with installation of poles.
10. Though Ld. Counsel for the Petitioner was at pains to explain the aforementioned documentary evidence, he then sought to contend that the Respondent even failed to clear the work within four months of 11.06.2016, the day the approved layout plan was supplied to him. He submits that it is for the said reason that the contract of the Respondent was determined in July, 2016.
OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 7 of 32 With respect to the said submission, it is to be firstly noted that the determination of the contract by the Petitioner was done within a month of the handing over of the said layout plan thereby hardly giving any time to the Respondent to act upon it. Secondly, as noted by the Ld. Arbitrator the own Chief Engineer of the Respondent vide his letter dated 27.12.2016 held that the determination of the contract by the Petitioner in July 2016 was illegal. In such view, it is unacceptable that the Petitioner is still harping that the determination of contract was legal and was done only on the ground that the Respondent was taking a long time to affix the poles. Further though no doubt the Petitioner did have the right to modify the drawings/layout plan, it cannot be stated that it had a right to not finalize the layout plan/drawing till 2018. It is an admitted fact on record that for almost two years, the Respondent was not informed about all the places where the poles would have to be installed. The Ld. Arbitrator in his award has referred to Ex.C74, a communication written by the Petitioner herein to the Respondent contractor giving therein a part layout for the balance poles as late as on 13.08.2018. In view of the said documentary evidence, Ld. Counsel for Petitioner Sh. Sahi had nothing more to state with respect to the finding of the Ld. Arbitrator that the delay in the execution of the contract was completely attributable to the Petitioners failure to supply, in time, the layout plan/drawings to the Respondent.
11. In view of the discussion hereinabove, this Court finds no grounds whatsoever to interfere the finding of the Ld. Arbitrator that the delay for the execution of contract was completely attributable to the Petitioner herein.
12. Coming now to the claims preferred by the parties and those allowed by the Ld. Arbitrator, it will be relevant herein to reproduce the same in a tabulated form.
OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 8 of 32 Claim Description of Claim Claim Award Amount No. Amount (in Rs.) 1. Loss of overhead due to prolongation of 17,53,874 5,70,000 contract of 1130 days as against stipulated (Clubbed together period of 92 days. with claims at SI No. 1, 6 & 7) 2. Losses and damages on account of delay in 1,93,340 Nil payment of full cost of material supplied due to non-utilization of material. 3. Losses and damages on account of 2,19,603 71,600 prolongation of contract and extra burden by the claimant on account of payment of wages to work forces at enhanced rate of wages. 4. Claim on account of losses and damages in 88,000 Nil the shape of infructuous legal and other expenses of filing writ petition in the High Court of MP at Gwalior for contesting claimant's right and quashing illegal show cause notice and termination orders of contract and subsequently attending meeting of Inquiry Committee at Bhopal / Gwalior including to and fro traveling expenses and preparation of case etc. 5. Claim on account of interest @7.5% on the 1,04,544 98,600 delayed payment of 1st Running Bill under clause 7 of agreement. 6. Claim on account of losses due to 3,55,006 (Clubbed together prolongation of contract and retention of with claims at SI watch & ward staff for the corresponding No. 1, 6 & 7) period of delay beyond stipulated period of contract. 7. Claim on account of deployment of 3,34,500 (Clubbed together supervisor regularly for 15 months with claims at SI beyond stipulated period of completion No. 1, 6 & 7) including expenses of hiring House on rent. 8. Claim on account of amount withheld on 2,50,000 2,50,000 account of pending extension of time (Clubbed along approval. with Counter- Claim No. 2 of respondent. ) OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 9 of 32
9. Claimant claim pre-suit interest on account Interest @ Simple interest @ of withholding Rs. 2,50,000/- till payment 10% PA on 8.5% per annum from 24.05.2019 @ 10% PA 2,50,000 on amount since awarded against 24.05.2019 claims (1, 6 & 7);
3, 8, 12 from 01.06.2020 to Date of award i.e., 02.11.2021 = 519 days on amount totaling Rs.
9,73,300/-
10. Claimant reserve right to claim Pendente- Pendente- Awarded as in SI lite and future interest @ 12% per annum lite & No. 9 and POST-
on awarded amount Future AWARD
interest @ INTEREST
12% PA
11. Claimant claims TOTAL COST OF 2,00,000 30,000 (Clubbed
ARBITRATION from the inception of along with
dispute on account of expenses incurred on Counter Claim
attending DRC meeting-legal expenses i/c No. 1)
Advocate fee for preparation of statement of
claims etc.
12. Additional Claim: - Claimant claims against 81,768 81,700
outstanding refund of Security Deposit
amounting to Rs. 81,768/-
13. Additional Claim: - Claimant claim pre-suit Awarded as in SI
interest @ 10% on Rs. 81,768/- w.e.f. the No. 9
date of our first application for refund of
security deposit dated 20.12.2019 to the date
of invocation of clause 25 of the agreement
i.e. 13.08.2020 for 237 days - Rs. 5,309/-
Total (claims at sI. no. 1 to 8 AND 11 & 12) 35,80,635 11,01,900
=A
Pendente-lite Interest @ 8.5% (at SI No. 9 1,17,636
=B
SUM (A +B) 12,19,536
OMP (COMM) 9/2022
Union of India Vs. M/s Budhiraja Electricals Page 10 of 32
Description of Counter Claim/s Counter Award amount (in
Claim Rs.)
Amount (in
Rs.)
1. on account of Cost of Arbitration 5,50,000 Nil
proceedings - Rs. 5,50,000/- (as in SI No. 11)
2. on account of compensation for delay under 3,27,072 Nil
Clause 2 of agreement after sanctioning of (as in SI No. 8)
extension of time (EOT) by competent
authority - Rs. 3,27,072/-
3. Additional counter claim:- on account of 3,21,382/- Nil
interest on the amount paid to the Claimant
as SECURED ADVANCE for the bona-fide
use of the material brought to the site - Rs.
3,21,382/-
Total 11,98,454 Nil
4. Additional Counter Claim:- on account of Interest@1 Not adjudicated
pre-lite, pendente-lite and future interest @ 8% by Ld. Arbitrator
18% on all the above three counter claims
POST AWARD INTEREST Claimant There shall be no
has claimed post award
future interest if the
interest @ payments is made
12% per within 60 days of
annum at date of receipt of
sl. no. 10 award by the
respondent, else
the award made
including the pre
award interest,
shall ear simple
post award
interest @ 11%
per annum from
date of award till
date of payment.
OMP (COMM) 9/2022
Union of India Vs. M/s Budhiraja Electricals Page 11 of 32
Claims 1, 3 , 6 and 7:
13. Now the contention of Ld. Counsel for the Petitioner Sh. Sahi is that the Ld. Arbitrator has wrongly allowed the claims 1, 3, 6 and 7 of the Respondent/contractor on account of retention of watch and ward staff and deployment of Supervisor for the corresponding period of delay beyond the stipulated period of contract and the overhead expenses and the extra burden borne by the Respondent/contractor for payment of wages at enhanced rate due to the prolongation of the contract. It is the contention of Ld. Counsel for the Petitioner that it was the duty of the Respondent contractor to have a supervisor at site at all time and to provide for watch and ward for the material brought by him at the site and "additional terms and conditions of the contract" made the same clear and that all the costs incurred by the Respondent contractor in this respect were already included in the costs of the contract awarded to the Respondent. He further submits that in case the Respondent/contractor had incurred any overhead expenses or other expenses on account of increased wages to the labour, he should have, in terms of Clause 12.4 of the contract tendered bills to the Petitioner. Ld. Counsel for the Petitioner has pointed out that as per the terms of Clause 12.4 of the contract governing the execution of the contract, the Respondent contractor was bound to have submitted his claims for additional payments to the Petitioner, once every three months. He submits that on the failure of the Respondent contractor to do so, the said Clause makes it clear that the contractor shall be deemed to have waived his rights.
14. Ld. Counsel for the Petitioner has further submitted that even if Clause 12.4 of the contract was not brought to the attention of the Ld. Arbitrator and it was not specifically argued before him, the Ld. Arbitrator should have taken note of all the terms of the contract before giving his decision on the dispute between OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 12 of 32 the parties. In this respect, he has relied upon the judgment of the Hon'ble Supreme Court dated 23.08.2024 in Civil Appeal Nos. 9781-9782 of 2024 titled as Pam Developments Private Limited Versus The State of West Bengal & Anr.
15. Ld. Counsel, Sh. Sahi has further contended that in allowing the aforementioned claims, the Ld. Arbitrator has gone much beyond the terms of the contract and that he had no jurisdiction to do so. He has submitted that the Ld. Arbitrator should have operated within the four corners of the contract executed between the parties and should not have ignored the specific terms of the contract. According to Ld. Counsel the Ld. Arbitrator has thus committed a jurisdictional error which is apparent on the face of the record and therefore the impugned award is liable to be set aside. In support of the said contention Ld. Counsel has relied upon the following judgments;
• Steel Authority of India Ltd. Vs. J.C. Budharaja Government and Mining Contractor (1999) 8 SCC 122.
• Food Corporation of India vs. Chandu Constructions 2007 (4) SCC 697.
16. In rebuttal, Ld. Counsel for the Respondent has stated that the tender awarded in favour of the Respondent was a fixed time - fixed price contract and that if the work could not be completed within the the said fixed time due to the fault of the Petitioner, the Respondent was entitled to be compensated for all the losses suffered by it on account of statutory increase in the wages to be paid to the labour and on the overhead expenses borne by it. He has pointed out that the Ld. Arbitrator has given cogent reasons for allowing the aforementioned claims in favour of the Respondent/contractor and reiterates that this Court has no powers to interfere with the said finding. In support of the said contentions, Ld. Counsel Sh. Parashari has relied upon the following judicial dicta:
i. Ssangyong Engineering & Highways Ltd. v. National Highways Authority OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 13 of 32 of India (2019) 15 SCC 131.
ii. Delhi Metro Rail Corporation v. Delhi Airport Metro Express Pvt. Ltd.
2024 INSC 292.
iii. Uppal Engg. Co. Pvt. Ltd. v. Bharat Immunologicals and Biologicals Corp.
Ltd. 2015 SCC OnLine Del 12733.
iv. Deconar Services Pvt. Ltd. v. National Thermal Power Corporation Ltd.
MANU/ DE./ 3367/ 2009.
v. Hindustan Construction Company Ltd. v. National Highways Authority of India 2023 INSC 768.
vi. Oswal Woolen Mills Ltd. v. Oswal Agro Mills Ltd. (2018) 16 SCC 219. vii. J. G. Engineers v. Union of India (2011) 5 SCC 758.
viii. Tarapore & Co. v. State of M.P. (1994) 3 SCC 521.
ix. Union of India v. Multi Tech Construction Co. 2023 SCC OnLine Del 2665
17. Ld. Counsel further submits that the reliance of Ld. Counsel for the Petitioner on Clause 12.4 is completely misplaced, for the additional payments being referred to in the said Clause pertain to the additional items or the additional work that were supplied or done by the contractor and does not refer to the claim of losses made by the Respondent/contractor.
18. The aforementioned submissions made by Ld. Counsel for the Petitioner make it clear that present is not a case where the Petitioner is alleging that the Respondent/contractor had not provided for watch and ward at the site or that his Engineer was not present at the site during the subsistence of the contract. The contention of the Petitioner is infact only that either the Ld. Arbitrator should have taken note that the expenses for the aforementioned were already included in the contract value awarded to the Respondent/contractor, or that the Respondent/contractor should have, in compliance of Clause 12.4 of the tender contract, submitted his bills to the Engineer-in-Charge, once every three months.
In the considered opinion of this Court, the reliance of Ld. Counsel for the Petitioner on Clause 12.4 is totally misplaced. The title of Clause 12 itself makes it clear that the terms of the same are with respect to the deviations/variations/extra items and their prices, etc. and it has nothing to do OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 14 of 32 with the claims that were made by the Respondent/contractor before the Ld. Arbitrator. It will be relevant herein to reproduce Clause 12 and Clause 12.4 of the contract:
Clause 12 Deviations/Variations Extent The Engineer-in-Charge shall have power (i) to make and Pricing alteration in, omissions from, additions to, or substitutions for the original specifications, drawings, designs and instructions that may appear to him to be necessary or advisable during the progress of the work ..... and the contractor shall be bound to carry out the works in accordance with any instructions ..... shall be carried out by the contractor on the same conditions in all respects including price on which he agreed to do the main work except as hereafter provided.
Clause 12.4: - The contractor shall send to the Engineer-in-Charge once every three months, an up-to-date account giving complete details of all claims for additional payments to which the contractor may consider himself entitled and of all additional work ordered by the Engineer-in-Charge which he has executed during the preceding quarter failing which the contractor shall be deemed to have waived his right.
19. The aforementioned terms make it apparent that the additional payments being referred to in Clause 12.4 are those which pertain to the additional work ordered by the Engineer-in-Charge and to be completed by the contractor, in terms of Clause 12. Clause 12.2 similarly refers to extra items that the contractor may have to bring to the site as per the directions of the Engineer-in-Charge. It is for these additional work and additional items that Clause 12.4 provides the bills to be submitted once every three months by the contractor to the Engineer-in-
Charge. It cannot by any stretch of imagination be held that it is under the said Clause that the Respondent/contractor was required to submit to the Engineer-in- Charge, the bills for overhead expenses, retention of ward and watch staff and deployment of supervisor or for increased labour wages.
OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 15 of 32
20. Further though it has been rightly submitted by Ld. Counsel Sh. Sahi that as per the terms of the contract, during the contract period, it was the duty of the Respondent/contractor to appoint ward and watch staff and deploy a supervisor and to pay wages to the labour and that the costs of the same were already included in the contract value, it is to be noted that the original contract period was only for three months and the same got extended to almost three years due to the acts / omissions of the Petitioner. In Deconar Services Pvt. Ltd.'s case (supra - the judgment relied upon by Ld. Counsel for the Respondent), the Hon'ble Delhi High Court has categorically held that a fixed price contract would be a fixed price contract only during the original period and surely it is an absurdity to suggest that irrespective of the extension of the contract well beyond the original stipulated date of completion and more so when the same is on account of breaches/delays by the Principal, the contractor would not be paid for the expenses borne by him beyond the stipulated period of the contract.
21. In view of them aforementioned judicial dicta, the Ld. Arbitrator has therefore rightly concluded that the Petitioner was bound to have compensated the Respondent/contractor for the expenses borne by him beyond the stipulated period of the contract. No interference in the said finding of the Ld. Arbitrator is therefore called for in this respect.
22. Now to appreciate the calculations made by the Ld. Arbitrator to award the sum of Rs.5,70,000/- as compensation in favour of the Respondent/contractor on account of the aforementioned claims, it will be relevant to reproduce the findings of the Ld. Arbitrator in this respect.
I note that in Schedule F (para 2(x) of the contract, percentage on cost of materials and labour, to cover all overheads and profit has been mentioned as 15%. CPWD OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 16 of 32 works manual adopts cost of total overhead expenditure as 7.5% of cost of work. The claim is based on overheads @ 5% of cost of work. I understand that when the work is extended to such length, there shall be some mitigation by partial reduction in deployed resources although complete mitigation is not feasible. Considering these facts, I hold that it would be reasonable to assess the component of recurring on-site overheads @ 3.5% of cost of work.
Tendered cost of work = Rs 32.7 lac
Stipulated time for completion = 3 months
Prime cost towards work
(excluding 15% CP & OH) = 32.7 × 0.85 = 27 lac
Overhead expenditure@ 3.5% of prime cost = 3.5% of 27 lac /3 divided by 3 months = say Rs 30,000/- per month.
The respondent is liable to compensate the claimant for the loss of overheads in the extended period limited to 19 months only. The corresponding amount shall be 30,000 x 19 months = Rs 5.70 lac only and this is a reasonable compensation towards the purpose.
I award Rs 5,70,000/- to claimant against claim no. 1, 6 & 7( taken together).
23. The aforementioned findings make it clear that the Ld. Arbitrator awarded compensation for the overhead costs on the basis of the contract provisions only. He took into account that out of the total 15% of the costs of materials and labour, provided for profits and overhead costs in the contract, 7.5 % thereof could be considered for overhead as per CPWD manual. He thereafter also duly took into account the mitigating circumstances and only thereafter awarded the overhead costs @3.5% which is much lesser than what was being claimed by the Respondent. Infact the approach taken by the Ld. Arbitrator can be stated to be much conservative in nature. It is to be noted that the Ld Arbitrator is himself a Chief Engineer posted at Ministry of Urban Affairs and would have had first hand experience of having supervised such contracts and his expertise reflects in the calculations made by him for awarding compensation and therefore in the considered opinion of this Court, brook no interference. The Hon'ble Supreme Court in Hindustan Construction Company v. National Highways Authority of India (supra) while considering an award passed by technical experts has made the following important observations:
"20. xxx This opinion was of technical experts constituted as arbitrators, who were OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 17 of 32 versed in contractual interpretation of the type of work involved; they also had first hand experience as engineers who supervised such contracts. When the predominant view of these experts pointed to one direction, i.e., a composite measurement, the question is what really is the role of the court under Section 34 of the Act.
21. This court, in M/s. Voestalpine Schienen GmbH v. DMRC commenting on the value of having expert personnel as arbitrators, emphasized that "technical aspects or the dispute are suitably resolved by utilizing their expertise when they act as arbitrators." Such an approach was commended also in Delhi Airport Metro Express (P) Ltd v DMRC wherein this court held that "The members of the Arbitral Tribunal, nominated in accordance with the agreed procedure between the parties, are engineers and their award is not meant to be scrutinized in the same manner as one prepared by legally trained minds. In any event, it cannot be said that the view of the Tribunal is perverse. Therefore, we do not concur with the High Court's opinion that the award of the Tribunal on the legality of the termination notice is vitiated due to the vice of perversity."
24. In view of the aforementioned judicial dicta and the reasons given by the Ld. Arbitrator, it is clear that no grounds are made whatsoever to interfere with the compensation granted by the Ld. Arbitrator for the loss of overheads suffered by the Respondent.
25. Similarly, with respect to the award of compensation on account of increase of wages, the Ld. Arbitrator has again referred to the contract value itself and held as follows:
I have already concluded that the delay in the work happened because of breach of contractual obligations by the respondent. The indecision regarding the lay out forced the contractor to do the work in the extended period whereas the agreed timeline under the contract was Aug- Nov 15. Further respondent has not disputed the fact that the wages of wireman increased from Rs 385/- per day (Sept15) to Rs 593/- per day when the work was actually executed in 2017-18. Similarly the respondent has not disputed the fact that the rates of Khallasi increased from Rs 290/- per day to Rs 448/- per day due to the delay in the work. No specific error or inconsistency in the calculation submitted by the claimant on page 68 of SoC has been pointed out by the respondent. The contract value is Rs. 32.7 lac. Assuming 15%, the labour component would be about Rs 4.9 lac. Even, if there is 20% increase in labour wages (although the data suggests even more increase), the reasonable amount would work out to Rs 98,000/-. The claim of Rs. 71,603/-is therefore very much reasonable.
OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 18 of 32
26. The submission of the Petitioner that the contract value included the labour cost component and therefore the Arbitrator could not have awarded additional payment on this account, as discussed hereinabove misses the point that labour that was initially employed for only three months, due to the omissions of the Petitioner, had to be retained by the Respondent for another two years. At this stage, it will be also relevant to take note that the terms of the contract itself, namely Clause 19B thereof, mandated that the contractor shall pay fair wages to the labour. The said Clause reads as:
Clause 19B Payment of wages:
(i) The contractor shall pay to labour employed by him either directly or through sub-contractors, wages not less than fair wages as defined in the C.P.W.D. Contractor's Labour Regulations or as per the provisions of the Contractual Labour (Regulation and Abolition) Act, 1970 and the contract Labour (Regulation and Abolition) Central Rules, 1971, wherever applicable.
27. In view of the aforementioned Clause, it becomes clear that the contract value took into account the fair wages notified at the time of inviting tenders. In such a situation, if the Ld. Arbitrator has taken into account that the minimum wages (which are lower than the fair wages) were raised afterwards, the tendered sum cannot be taken to be agreed amount for completing the contract, in the face of the directions of the Petitioner requiring the Respondent to pay wages at rates higher than those prescribed or notified at the time of inviting tenders. In similar facts in Tarapore's case (supra - the judgment cited by Ld. Counsel for the Respondent), the Hon'ble Supreme Court had refused to interfere with the award of the Ld. Arbitrator. This Court also finds no reasons to interfere with the award of the Ld. Arbitrator with respect to the finding on the aforementioned claim.
Claim 5:
28. Coming now to the claim 5 awarded by the Ld. Arbitrator towards the OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 19 of 32 interest on delayed payment of the running bill submitted by the Respondent/contractor, the findings of the Ld. Arbitrator on the said claim are as follows:-
5.0 Claim no. 5. Claim on account of interest 7.50% on the delayed payment of R.A/c. Bill under clause 7 of the agreement Rs 1,04,544/-
Reasons & Award: It is the case of the claimant that the first RA Bill submitted on 19.3.16 was paid in June17. The Claimant claims interest as per clause-7 of contract agreement. The respondent submits that the bill submitted on 19.3.16 was not in the format as per agreement. The respondent has not disputed the fact that the bill submitted in March16 was paid in June 17. As per clause-7 of agreement there is a time limit of 10 days to pay the running bill. Even if there was some dispute in the bill, the payment at least in respect of undisputed items should have been released. Further the respondent paid this amount as secured advance only. The respondent has not cited any cogent explanation as to how the format was not acceptable and how that would lead to delay of more than an year. There is no justification to delay payment by more than a year. The interest amount as per clause 7 shall be 10.88 lac x 7.5% x 14.5/12= Rs 98,600/-.
I award Rs. 98,600/- to claimant against claim 5.
29. Now the contention of Ld. Counsel Sh. Sahi with respect to the aforementioned finding is that the payment towards the said bill was infact in the nature of an advance and that the contract entered between the parties did not stipulate the submission of running bills at all for the supply of materials and that therefore the Ld. Arbitrator wrongly awarded the interest under the said head.
30. In reply to the said contention, Ld. Counsel for the Respondent has pointed out that the submission of Ld. Counsel for the Petitioner that the contract did not stipulate interim payments is completely misplaced in view of Clause 7 of the contract awarded to the Respondent. He has pointed out that the said Clause makes it clear that the contractor would be eligible to interim payment to the extent of Rs.8 Lakhs for the work done.
31. In rebuttal, Ld. Counsel Sh. Sahi has sought to contend that the said Clause OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 20 of 32 only pertains to "work done" and that the claim No.5 is with respect to the materials namely the poles brought at site by the Respondent and that therefore the said Clause does not come to the aid of the Respondent. He further submits that the evidence brought by the Petitioner before the Ld. Arbitrator made it clear that the payment against the bill raised by the Respondent was given in the nature of an advance against the supply of materials and that therefore no interest could have been awarded by the Ld. Arbitrator on the payment of the said advance.
32. This Court again finds no reason whatsoever to interfere with the finding of the Ld. Arbitrator on claim 5. As pointed out by Ld. Counsel for the Respondent, Clause 7 of the contract awarded to the Respondent stipulates that he will be entitled to interim payment for the work done and the work in the present case included both the supply and installation of poles. At this stage, it would also be relevant to reproduce Condition 2 of the General Conditions of the Contract (hereinafter referred to as GCC), which as per the own stand of the Petitioner, were also applicable to the contract in dispute. Condition 2 (i) defines what the expression "work" means and the same is as follows:
2. In the contract, the following expressions shall, unless the context otherwise requires, have the meanings, hereby respectively assigned to them:-
(i) The expression works or work shall, unless there be something either in the subject or context repugnant to such construction, be construed and taken to mean the works by or by virtue of the contract contracted to be executed whether temporary or permanent, and whether original, altered, substituted or additional.
33. The aforementioned definition therefore makes it clear that the expression "work" in the present case would include both the supply and the installation of poles. As such, the bill raised by the Respondent/contractor against the purchase and supply of poles at the site was with respect to the "work" done by the contractor and that he was entitled to therefore raise the same and be paid for it.
OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 21 of 32
34. The next contention of Ld. Counsel Sh. Sahi that because it was in the nature of advance, the Ld. Arbitrator could not have awarded interest thereon, again is based on a misinterpretation of the terms of GCC. Clause 7 of the same refers to interim bills/interim payments and is as follows:
"CLAUSE 7 Payment on Intermediate Certificate to be Regarded as Advances:
No payment shall be made for work estimated to cost Rs. Twenty thousand or less till after the whole of the work shall have been completed and certificate of completion given. For works estimated to cost over Rs. twenty thousand, the interim or running account bills shall be submitted by the contractor for work executed on the basis of such recorded measurement on the format of the department in the triplicate on or before the date of every month of the fixed for the same by the Engineer-in-Charge. The contractor shall not be the entitled to be paid any such interim payment if the gross work done together with the note payment/adjustment of advances of material collected, if any, since the last such payment is less then the amount specified in Schedule „F" in which case the interim bill shall be prepared on the appointed date of month after the requisite progress is achieved. Engineer-in-charge shall arrange to have the bill verified by taking or causing to be taken, where necessary, the requisite measurement of the work. In the event of the failure of the contractor to submit the bills. progress is achieved. Engineer-in-Charge shall prepare or cause to be prepared such bills in which event no claims whatsoever due to delays on payment including that of interest shall be payable to the contract. Payment on account of admissible shall be made by the Engineer-in-Charge certifying the sum to which the contractor is considered entitled by the way of interim payment at such rates as decided by the Engineer-in-Charge. The amount admissible shall be paid by 10th working day after the day of presentation of the bill by the Contractor to the Engineer-in- Charge or his Asst. Engineer together with the account of the material issued by the department, or dismantled materials, if any. In the case of works outside the headquarters of the Engineer-in-Charge, the period of ten working days will be extended to fifteen working days.
All such interim payments shall be regarded as payment by way of advances against final payment only and shall not preclude the requiring of bad, unsound and imperfect or unskilled work to be rejected, removed, taken away and reconstructed or re-erected. Any certificate given by the Engineer-in-Charge relating to the work done or materials delivered forming part of such payment, may be modified or corrected by any subsequent such certificate(s) or by the final certificate and shall not by itself be conclusive evidence that any work or materials to which it relates is/are in accordance with the contract and specifications. Any such interim way payment, or any part thereof shall not in any respect conclude, determine or affect in any way of powers of the Engineer-in- charge under the contract or any of such payments be treated as final settlement and adjustment of accounts or in any way vary or affect the contract.
OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 22 of 32
35. Now the underlined term makes it clear that the interim payments are regarded as advance only for the purpose that in case the work done by the contractor is found to be defective, the advance can be adjusted/recovered. It is not the case of the Petitioner in the present case that the material supplied by the Respondent for which the running bill was raised was found to be defective. In such view, the Petitioner cannot be heard to state that it will not pay any interest on the delayed payment of the bill. The aforementioned Clause 7 makes it clear that the contractor will not be entitled to any interest only if he fails to raise the bill and it is the Engineer-in-Charge who prepares the same. In the present case, it is the Respondent who had raised the bill which was duly passed by the Engineer-in-Charge. It also to be taken note of that a Clause akin to the aforementioned Clause 7 was the subject matter of interpretation before the Hon'ble Delhi High Court in the case titled as North Delhi Municipal Corporation and Anr. Vs. Sanjeev Kumar (RFA 430/2017) and the Hon'ble Delhi High Court categorically held that the Union of India or any of its Corporations cannot resort to Clause 7 and 9 of GCC for postponing the payment to a contractor indefinitely and it is bound to pay interest to the contractor who has duly completed his work.
36. In view of the aforementioned judicial dicta and the discussion hereinabove, this Courts finds no reasons whatsoever to interfere the finding of the Ld. Arbitrator on the aforementioned claims.
Claim 8/Counter Claim No.C2:
37. Under this head, the Respondent had claimed that from the payment of the Final Bill cleared by the Petitioner, it has illegally withheld an amount of Rs.2.5 Lacs for want of final sanction of "Extension of Time" from the competent authority as mentioned in Schedule F of the contract. On the other hand, in its OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 23 of 32 counter claim, the Petitioner had asserted that the EOT was sanctioned by the competent authority i.e the Superintending Engineer on 05.03.2021 and the said authority, in exercise of its powers conferred upon it in terms of Clause 2 of the agreement entered between the parties had vide its order dated 05.03.2021 also imposed a compensation of Rs.3,27,072/- on the Respondent on account of the delay caused by it in completion of the contract. The counter claim was therefore for this amount and it was submitted before the Ld. Arbitrator that the Petitioner was fully justified in withholding the amount of Rs.2.5 Lacs and that the same now stands adjusted against the compensation of Rs.3,27,072/-.
38. Now in the impugned award, the Ld. Arbitrator has allowed the aforementioned claim of the Respondent and rejected the counter claim of the Petitioner by reiterating that it was the Petitioner herein who had caused the delay in execution of the contract and that therefore the Petitioner could not have withheld an amount of Rs.2.5 Lacs at the time of clearing the final bill of the Respondent. The Ld. Arbitrator has relied upon the judgment of the Hon'ble Supreme Court pronounced in the case titled and reported as J.G. Engineers v. Union of India 2011(2) Arb. LR 84(SC), to hold that the Superintending Engineer had no authority to decide which of the parties had delayed the execution of the project and that it is for the Ld. Arbitrator to decide as to who had caused the delay.
39. The aforementioned finding is being assailed by the Petitioner interalia on the ground that the Ld. Arbitrator has wrongly observed that the Superintending Engineer in March, 2021 could not have retrospectively held that out of the 37 months in the delay of the execution of the contract, it is only 8.8 months which merit valid extension of time. It is the submission of Ld. Counsel for the OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 24 of 32 Petitioner, Sh. Sahi that in its two letters dated 07.04.2016 and 31.05.2016 vide which extensions were granted to the Respondent, the Petitioner had reserved its right to claim damages from the Respondent and therefore it is not a case where the Superintending Engineer for the first time vide his order dated 05.03.2021 decided that it was the Respondent who had delayed the execution of the project. It is therefore his submission that the Ld. Arbitrator erred in holding that the Superintending Engineer has sought to retrospectively extend the time for completion of the contract by only 8.8 months. Ld. Counsel has further submitted that since the Respondent accepted the said letters of extension, he cannot now turn around and challenge the finding of the Superintending Engineer.
40. With respect to the said contention, suffice to state that the Ld. Arbitrator has rightly referred to the judgment of the Hon'ble Supreme Court pronounced in J. G. Engineers case (supra) to hold that the Superintending Engineer had no authority to decide that it was the Respondent who had delayed the execution of the project. In the said case also, the Union of India was relying upon Clause 2 of the GCC to contend that its Superintending Engineer, in exercise of his powers under the said Clause, had rightly decided that it was the contractor who had caused the delay in execution of the contract. The Hon'ble Supreme Court negated the said submission of the Union of India and held that a contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach and that the said question can only be decided by only an adjudicating forum, that is, a court or an Arbitral Tribunal. In the said judgment, the Hon'ble Supreme Court has made the following pertinent observations;
"18. Thus what is made final and conclusive by Clauses (2) and (3) of the agreement is not the decision of any authority on the issue whether the contractor was OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 25 of 32 responsible for the delay or the Department was responsible for the delay or on the question whether termination/ recission is valid or illegal. What is made final, is the decision on consequential issues relating to quantification, if there is no dispute as to who committed breach. That is, if the contractor admits that he is in breach by being responsible for the delay, the decision of the Superintending Engineer will be final in regard to two issues. The first is the percentage (whether it should be 1% or less) oof the value of the work that is to be levied as liquidated damages per day. The second is the determination of the actual excess cost in getting the work completed through an alternative agency. The decision as to who is responsible for the delay in execution and who committed breach is not made subject to any decision oof the respondents or its officers, nor excepted from arbitration under any provision of the contract.
19. In fact 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 abiter 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."
41. In view of the said categorical judicial dicta, the Petitioner cannot be heard to contend that its Superintending Engineer had rightfully decided that the Respondent had caused the delay in the execution of the contract and that it should pay a compensation of Rs.3,27,072/- to the Petitioner. Thus this Court finds that no illegality has been committed by the Ld. Arbitrator in holding that the Superintending Engineer of the Petitioner could not have decided that it was the Respondent who had caused the delay .
42. Further it is to be noted that the Ld. Arbitrator has disapproved of the letter dated 05.03.2021 of the Superintending Engineer only on the ground that the extension of time could not have been done 02 years after the contract had actually been completed and it is in that respect that the Ld. Arbitrator has observed that the Superintending Engineer could not have retrospectively held that the valid extension of time of the contract can only be 8.8. months. The said observation, in no manner effects the finding of the Ld. Arbitrator namely that the Superintending Engineer could not have decided that it was the Respondent OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 26 of 32 who had caused the delay and then impose penalty upon the Respondent for the same. In view thereof, this Court finds no reasons to interfere the said finding of the Ld. Arbitrator that the Petitioner was not entitled to withhold an amount of Rs.2,50,000/- from the final bill amount due to be paid to the Respondent and that the Petitioner is not entitled to claim any compensation for the delay in the contract from the Respondent.
Claim No. 11 and Counter Claim No. 143. The grievance of the Petitioner with respect to the said claims is that the Ld. Arbitrator has though awarded Rs. 30,000/- to the Respondent towards costs of Arbitration, he has rejected to award any cost in favour of the Petitioner. Suffice to state that costs are awarded in favour of the party who is successful. Since the Ld. Arbitrator rightly held that it was the conduct of the Petitioner which caused losses to the Respondent, it was the Respondent alone who could have been awarded the costs of the Arbitration.
Claim No. 1244. With respect to the said claim, it is the assertion of the Petitioner that it was entitled to adjust the security deposit of Rs. 81,768/- against the compensation amount of Rs. 3.22 Lacs ordered by the Superintending Engineer and therefore the Ld. Arbitrator erred in directing the refund of the same to the Respondent. Suffice again to state that in view of the finding of the Ld. Arbitrator that the Superintending Engineer could not have determined any compensation amount, the said finding of the Ld. Arbitrator cannot at all be faulted with.
Claims 9, 10 and 13:
45. As regards these claims, all that has been submitted is that the Ld. OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 27 of 32 Arbitrator should not have awarded interest @ 8.5% per annum with effect from the date of invocation of the arbitration i.e. w.e.f. 01.06.2020 till the date of award and @ 11% per annum from the date of award till the date of payment. It has been submitted that the said rates of interest are exorbitant. It has been pointed out that the prevailing rate of interest on fixed deposit is only around 5.5% and that therefore the Ld. Arbitrator had no authority to allow post award interest @11% per annum. As regards the pre award interest, the submission is that since the contractual rate of interest agreed between the parties was only 7.5%, the Ld. Arbitrator could not have awarded it @ 8.5%. Ld. Counsel Sh. Sahi has sought to contend that provisions of Section 31(7)(a) of the Arbitration and Conciliation Act itself make it clear that where the rate of interest has been agreed between the parties, the Arbitrator is bound to award the said rate of interest only. It has been further submitted that in terms of Clause 2 of the agreement entered between the parties, the Ld. Arbitrator could not have awarded interest at all on the amount of Rs.2,50,000/- which was withheld by the Petitioner based on the decision of its Superintending Engineer.
46. In reply, Ld. Counsel for the Respondent has relied upon the judgments of the Hon'ble Supreme Court to contend that this Court should not interfere with the grant of interest allowed by the Ld. Arbitrator;
i. Larsen Aur Conditioning and Refrigeration Company v. Union of India 2023 INSC 708.
ii. Reliance Infrastructure Ltd. v. State of Goa (2024) 1 SCC 479. iii. Morgan Securities and Credits Pvt. Ltd. v. Videocon Industries Ltd. (2023) 1 SCC 602.
47. I have gone through the judicial dicta referred to by Ld. Counsel for the Respondent. The same makes it clear that the post award interest is entirely within the domain of the Ld. Arbitrator and does not warrant the interference from Courts in a petition under Section 34 of the Arbitration and Conciliation OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 28 of 32 Act. It has been observed in the said judicial dicta that the current rate of interest referred to in Section 31 (7) (b) refers to the lending rate of the banks and not to the rate applicable to fixed deposits. In view of the said dicta, the contention of the Petitioner that since the rate of the fixed deposits is currently 5.5%, the Arbitrator could not have awarded 11%, cannot be upheld at all. Further the submission of Ld. Counsel Sh. Sahi that since the amount of Rs.2,50,000/- was withheld by the Petitioner in exercise of its powers under Clause 2 of the GCC, no interest is payable to the Respondent, is absolutely without any merit. Once the Ld. Arbitrator arrived at the finding that the amount was illegally withheld by the Petitioner, the Respondent would be entitled to be granted interest thereon. No terms of the said Clause contain any prohibition in this respect. The said Clause interalia lays down that in case a contractor does not achieve the progress of work as per the milestones specified in the schedule of work, the Superintending Engineer would be entitled to withhold the amount shown against the milestone . The reference in the said Clause to the effect that in case the contractor catches up with the progress of work, the withheld amount will be released to him but that no interest would be payable thereon has no reference whatsoever to a situation like the present one where it is not the contractor but the Union of India who has been held responsible for the non progress of the work. This Court therefore finds no infirmity in the award of interest by the Ld. Arbitrator on the amount of Rs.2,50,000/- illegally withheld by the Petitioner.
48. As regards the post reference interest, which has been awarded only with effect from the date of invocation of arbitration and not for the period prior thereto, the judicial dicta referred to by Ld. Counsel for the Respondent makes it clear that the same is in the nature of pendente lite interest. In the considered opinion of this Court the mere fact that for the non clearance of running bills, the OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 29 of 32 parties had agreed that interest @7.5% would be payable, cannot be sufficient to hold that the Arbitrator could not have awarded pendente lite interest @8.5%. There is nothing on record to suggest that the parties while agreeing to refer their disputes to arbitration had ever agreed that no interest would be payable on the payment of money awarded by the Ld. Arbitrator. In such view, the reliance of the Petitioner on the provisions of Section 31(7)(a) to contend that the expression "unless otherwise agreed by the parties " used therein prohibited the Ld. Arbitrator to grant award more than 7.5% is absolutely misplaced. It is also to be borne in mind that the claims for which interest had been awarded by the Ld. Arbitrator are in the nature of compensation / damages awarded in favour of the Respondent for the breach committed by the Petitioner, of the terms of the contract entered between them and not in the nature of amounts due as per the terms of the contract. As such, in the considered opinion of this Court, the contractual rate of interest for the delayed payments of running bills would have no bearing on the rate of interest awarded by the Ld. Arbitrator.
Counter Claims No.3 and 449. The Petitioner seeks to challenge the finding of the Ld. Arbitrator on the Counter Claim 3 yet again by contending that it is the Respondent who caused the delay in execution of the contract and that therefore the advances given to him against supply of poles, remained blocked for almost three years and that therefore the same must be refunded to the Petitioner alongwith interest. This Court yet again finds no ground to set aside the finding of Ld. Arbitrator in this respect, for he has rightly observed that the Petitioner had made the aforementioned payments against the poles actually supplied by the Respondent and the poles could not be installed at the requisite time only due to the omissions of the Petitioner and that therefore there is no rationale to allow the said Counter OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 30 of 32 Claim. The submission of the Petitioner that the Ld. Arbitrator did not adjudicate on the Counter Claim 4 regarding the pendente lite and future interest claimed by the Petitioner, is patently a frivolous plea, for there was no question for the Ld. Arbitrator to have adjudicated the same when he had already rejected all the Counter Claims of the Petitioner.
50. At this stage, it will also be relevant to record that apart from the grounds taken in the petition, Ld. Counsel for the Petitioner had pointed out that the AR of the Petitioner, Sh.Narpesh Kumar has also filed certain written submissions before this Court and that this Court may consider the same. Suffice to say that the said written submissions filed by the AR of the Petitioner are much beyond the grounds taken in the petition and infact find no mention even in the statement of defence filed by the Petitioner before the Ld. Arbitrator. This Court has therefore found no reasons to refer to the same or to give its observations thereon. This Court is constrained to observe that while the Legislature has, in its wisdom, has laid down that arbitral awards should be respected by the parties who have invoked arbitration to settle their disputes, the Union of India, the Petitioner herein appears to be only wasting tax payers money in filing such a meritless petition against a well reasoned order of the Ld. Arbitrator. The observations of the Hon'ble Supreme Court in many recent cases that the Union of India, the Central Executive Authority must become a 'responsible litigant', hardly seems to be having no effect on the said Authority. For the mere sake of litigating, it continues to file such frivolous petitions under Section 34 of the Arbitration and Conciliation Act and continues to increase the pendency of such petitions.
51. In view of the detailed discussion hereinabove, this Court finds no merit in the petition filed under Section 34 of the Arbitration and Conciliation Act. There OMP (COMM) 9/2022 Union of India Vs. M/s Budhiraja Electricals Page 31 of 32 is neither any patent illegality committed by the Ld. Arbitrator nor can it be stated that his award is against the public policy. The present petition therefore stands dismissed. No orders as to costs. This file be consigned to Record Room.
ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2024.09.28
Announced in the open court BALIGA 15:43:36 +0530
on 27th September, 2024. (Anu Grover Baliga)
District Judge (Commercial Court-04)
South-East District/Saket Courts
New Delhi
OMP (COMM) 9/2022
Union of India Vs. M/s Budhiraja Electricals Page 32 of 32