Bangalore District Court
Union Of India vs ) M/S. Rnr Constructions on 3 January, 2023
IN THE COURT OF THE LXXXIII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE AT BENGALURU CITY
[CCH-84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 3rd day of January 2023
COM.A.S.No.102/2018
Plaintiff Union of India
No.2, DC Area MES Road,
Yeshwantpura Post,
Bengaluru-560022.
Represented by its Garrison Engineer
(Air Force), Major Gaurav Prashar,
Aged about 37 years, Marathyahalli,
Kempapura, Yemalur Post,
Bengaluru-560037.
(By Sri.B.S, Advocate)
// versus //
Defendants 1) M/s. RNR Constructions,
1st Floor, No.17, 4th Main, 7th Cross,
Malleswaram, Bengaluru-560003.
Represented by its Managing Partner
Shri. Raman N.V.
2) Satish Chander,
Sole Arbitrator,
Additional Director General (Retd.,)
A1, 601, Windsor Avenue,
Near Ruby Hall Clinic, Wanowrie,
Pune-411022.
(D.1 by Sri.A.M, Advocate,
D.2 - Learned Arbitrator)
2
CT 1390_Com.A.S.102-2018_Judgment.doc
Date of Institution of the : 14/05/2018
petition
Nature of petition : Arbitration Petition
Date of commencement of : --
recording of the evidence
Date on which the Judgment :
was pronounced. 03/01/2023
: Year/ Month/s Day/s
Total duration s
04 07 20
JUDGMENT
Plaintiff has filed this arbitration suit praying to set aside the award passed by the learned Arbitrator on 8/2/2018 in respect of contract No.CE (AF)/BAN/44 /2011-12.
2. The plaintiff was the respondent before the learned Arbitrator and defendant No.1 was the claimant. Defendant No.2 is the learned Arbitrator.
3. Case of the plaintiff in brief is as under:
Plaintiff is a division of the Union of India and invited tender for Annexe buildings along with all associated services tarmac, hanger floor and and foundation for the peb hanger at Aste, Bengaluru. The defendant No.1 had applied for the same and the work was entrusted to defendant No.1 on 27/8/2011 for Rs.12,97,29,540.35. The scope of contract comprised of Schedule 'A' Part -I, Schedule 'A' Part -II to Part XI and part XII to Part XVII and work was required to be completed in three phases. Phase I was required to be 3 CT 1390_Com.A.S.102-2018_Judgment.doc completed in 4 months and phase II in 8 months and Phase III in 15 months from the commencement for all the 3 phases as 12/9/2011. Work could not be completed within the stipulated periods due to various reasons including the delays by the other agencies working on interconnected works with the subject work and therefore the contract period was extended from time to time on 8 times. The works in respect of phase I was completed on 31/7/2011, phase II on 23/11/2012 and phase 3 was completed on 21/7/2014. Certain disputes arose between the parties during the contract period which could not be resolved and after completion of work the claimant contractor invoked arbitration agreement for adjudication of dispute and second defendant came to be appointed as sole Arbitrator by order dated 20/8/2016 by the Hon'ble High Court. 1 st defendant preferred claim petition before the learned Arbitrator making claim No.1 to 19 claims. Out of these claims, 13 claims are allowed by the Arbitral Tribunal. The learned Arbitral Tribunal has passed impugned award dated 8/2/2018 awarding Rs.1,39,12,102/- along with interest @11% per annum for pendente lite and future 12% per annum. Counter claim made by the plaintiff was not considered by the learned Arbitrator.
4. Being aggrieved by this award, plaintiff employer has filed this arbitration suit on various grounds. Plaintiff is challenging finding of the 4 CT 1390_Com.A.S.102-2018_Judgment.doc Arbitrator only on claim No.4,6,10,11,13,14,16 and 18 on various grounds. It is stated that the learned Arbitrator has failed to appreciate the actual position of law and apply it to the facts and circumstances of the case. It is stated that the award passed by the learned Arbitrator is on the face of it contrary to establish position of law and is against public policy of India and liable to be set aside. It is stated that the Arbitrator has awarded the amount of Rs.6,90,800/- in respect of claim No.4 and the arbitrator has not considered the fact that the PS issue is regarding clarification of method of measurement which shall be as per net plan area and schedule 'A' takes precedence. It is stated that the defendant No.l has failed to fulfill its part of obligation under the contract and is estopped from making claim alleged to have arisen out of the contract. It is stated that the plaintiff being a government body has suffered huge loss and embarrassment as the work could not be carried out within the stipulated period agreed in the contract. It is stated that the claim No.10 for reimbursement of actual variation in prices of material which was beyond the condition of contract, the index of material and fuel was to be frozen on the date of commencement of last period of reckoning before the original date of completion. It is stated that the contract period has been extended on account of delay put-forth by the claimant which was beyond the control 5 CT 1390_Com.A.S.102-2018_Judgment.doc of both the parties and no claim in respect of compensation or otherwise howsoever arising on account of extension of time is admissible and the claim was not included in the list of claims and the claimant is debarred from raising any claim whatsoever beyond what is claimed at the time of submission of final bill. The arbitrator has awarded the amount beyond the express provisions of contract and decided the claim No.10. It is stated that the arrangement of T&P is the responsibility of the claimant and the T&P has been deployed as and when required on site and there was no idling of T&P due to prolongation of contract. The extract of work dairy reflecting deployment of T&P was also produced before the arbitration substantiating the defence of the plaintiff, but the same is not considered. It is stated that the learned Arbitrator has failed to appreciate that the extension of time has been requested by the claimant and accordingly extension was given and the same was accepted by the claimant without any reservation by signing the DO for granting extension. Moreover, the escalation as envisaged under the contract has been paid by the claimant. As per condition 11C, no claim in respect of compensation or otherwise how so ever arising as a result of extension granted under condition 11 shall be admitted. The contractor is not entitle for compensation and is only entitle for extension of time. It is stated that the 6 CT 1390_Com.A.S.102-2018_Judgment.doc decision of Hon'ble Supreme Court in Ramanth International is not considered by the learned Arbitrator. It is stated that the sole Arbitrator has not considered the fact that the claimant failed to mobilize resources and failed to engage specialist agency for execution of PEB work till April 2012 i.e. 9 months from commencement of work and the claimant again failed to progress the work resulting in grant of extension of time. It is stated that the arbitrator has failed to consider the fact that there was various review meetings held to take review of the overall project and minutes have been taken reference to conclude that the claimant was not responsible for delay. It is stated that the defence taken by the plaintiff about delay occurred because of initial delay by the respondent resulting in rescission of contract by the PEB hanger contractor and subsequent conclusion of risk and cost contract are not considered by the learned Arbitrator. It is stated that various contract provisions which was brought to the notice of the learned Arbitrator are not considered. It is stated that the learned Arbitrator has misconducted while publishing the award and it is by actual bias and is legal misconduct which is against public policy of India. It is stated that, when arbitrator exceeds the terms of agreement or passes an award, in the absence of any evidence, which is apparent on the face of the award, the same could be set aside. It is stated that 7 CT 1390_Com.A.S.102-2018_Judgment.doc award is in contravention of provision of the Act and substantive law governing the parties and such award can be set aside as held in the decision of ONGC v. Saw pipes. It appears from the impugned order that the learned Arbitrator while allowing claims 4,6,10,11,13,14 and 18 has not looked into the terms and conditions of the agreement. It is also stated that awarding interest is also against the decision of the Hon'ble Supreme Court. It is stated that the Arbitrator cannot award any interest for the preference period and under Section 31(7)(a) of the Arbitration Act and arbitrator is bound by the terms of the contract with regard to awarding of interest. It is stated that the finding of the learned Arbitratr allowing 12% interest on the whole amount over and above the other awards is too exorbitant and cannot be accepted. It is stated that the award is bad in law and is against public policy of India as it do not consider the actual position of law and is based on wrong interpretation of the law and therefore, award is liable to be set aside.
5. Defendant No.1 has filed objection and stated that petition is liable to be dismissed and it is filed without giving any reasons and without any material and devoid of merits. It is stated that 2 nd defendant who is the learned Arbitrator is the Additional Director General (Retd) of the plaintiff Department and he was appointed by the Hon'ble High Court on the request of the plaintiff and, defendant has raised no 8 CT 1390_Com.A.S.102-2018_Judgment.doc objection for his appointment. It is stated that the Arbitrator has passed comprehensive and reasoned award comprising of 182 paragraphs through 116 pages and the arbitrator has in detail considered the submission of both the parties and on recording the detailed analysis of the submissions of both the parties passed the impugned award on merits. It is stated that the plaintiff has failed to note that this court cannot sit in appeal over a reasoned award which is prima facie not against the public policy of India and re-examining and re-assessing the materials is not permissible and the impugned award can be set aside only if it is against public policy as set out in Section 34(2)(b) of the Arbitration & Conciliation Act. It is stated that the plaintiff do not claim that any grounds set out in Section 34(2)(a) are present in the present case. It is stated that scope of interference under Section 34 is very limited. It is stated that the learned Arbitrator based on the evidence produced before him only allowed 13 claims out of 19 claims sought by the defendant No.1. It is stated that even in respect of these 13 claims the complete amount sought has not been awarded by the learned Arbitrator. It is stated that the learned Arbitrator has passed a reasoned award based completely on the merits of the case. The defendant No.1 has stated that the plaintiff has falsely alleged that the learned Arbitrator has traversed beyond the 9 CT 1390_Com.A.S.102-2018_Judgment.doc agreement between the parties while deciding upon the said claim and this allegation is not taken during the arbitration proceedings and the learned Arbitrator duly considered the submissions of both the parties and on detailed analysis has come to the conclusion. It is stated that the plaintiff is stated that the defendant No.1 is estopped from raising claims under the contract between the parties when it has failed to fulfill its obligations under the contract and even the employer has released the payment in delayed manner and continuously delayed the project. It is stated that the 1 st defendant has claimed only an amount legitimately due to the defendant No.1. It is also stated that the project was delayed because of plaintiff and not because of both the parties. It is stated that the learned Arbitrator has noted that due to lapses on the part of the plaintiff as well as the agencies engaged by the plaintiff, delay is caused. It is stated that the delay is solely attributable to the plaintiff and accordingly, learned Arbitrator has awarded the claim in favour of the defendant No.1 in claim No.10. It is stated that in respect of claim No.11 due to delay attributable to the plaintiff and consequent prolongation of the project from 15 months to 35 months, tools and plants commissioned on site remained idle for long periods of time and they could not put to use because of the delay on the part of the plaintiff and the agencies engaged by plaintiff and the 10 CT 1390_Com.A.S.102-2018_Judgment.doc learned Arbitrator by considering all these, has partly allowed for an extent of Rs.24,15,000/- as against claim of Rs.55,51,900/-. It is stated that the learned Arbitrator has noted that there were no actions taken by the plaintiff to mitigate or contain the delay and based on the document and communication produced by both the parties, delay was found solely attributable to the plaintiff. It is stated that in accordance with the contract, agency for execution of the PEB works was to be arranged and engaged directly by the plaintiff and it was because of the default and lack of timely action on the part of the plaintiff that PEB work could not be completed in time. The communication referred by the learned Arbitrator in par 36 of the award clearly show that the delay was on the part of the PEB contractor and plaintiff and not of the defendant No.1. It is stated that the plaintiff took no steps to ensure that it takes timely action and contain any further delay and mitigate the damage done to all other agencies including the defendant No.1 and by considering the evidence, learned Arbitrator has found that time was neither essence of contract nor was made as essence of contract subsequently and the time was not the essence of contract. It is stated that Section 28(3) and Section 31(7)(a) and (b) of the Arbitration & Conciliation Act permits the arbitrator or the arbitral tribunal to impose interest on the sum awarded, for part or whole of the 11 CT 1390_Com.A.S.102-2018_Judgment.doc period between the date on which, cause of action arose and the date on which award is made or till the date of payment of the award amount and the learned Arbitrator has awarded only 12% interest which is reasonable and fair. The defendant has also denied other allegations made by the plaintiff in challenging the award. It is stated that the plaintiff has neither brought out as to how the award is against the public policy of India nor produced any material to show that the Arbitrator has gone beyond the contract between the parties while passing the award. It is stated that there are no merits in the present petition filed under Section 34 of the Arbitration & Conciliation Act. On all these grounds the arbitration suit is prayed to be dismissed.
6. In this case earlier on 5/9/2020 this Com.AS 102/2018 was disposed by the learned predecessor of this court. Judgment was challenged before the Hon'ble High Court. The Hon'ble High Court in AP No.5/2021 by its order dated 10/11/2021 has set aside the judgment passed by this court and has remanded the same to this court to decide the case in the light of direction given in the judgment. Hon'ble High court has framed two points for consideration and directed this court to give finding on these points. Accordingly, case is taken up.
7. In view of the direction of Hon'ble High Court, points to be considered are:
12CT 1390_Com.A.S.102-2018_Judgment.doc
1) Whether the plaintiff establishes that the arbitrator has exceeded its jurisdiction in passing the award in favour of first Defendant?
2) Whether the plaintiff further establishes that the award of the learned arbitrator is in conflict to the public policy of India in terms of section 34 of the Act?
3) What order?
8. Heard both the counsels. Both counsels have filed written arguments also. Perused records.
9. My answer to the above points are :
POINT No.1 : In the Negative.
POINT No.2 : In the Negative.
POINT No.3 : As per final order for the
following:
REASONS
10. Points No.1 and 2: Since both the points are interlinked with each other, they are taken together for discussion, to avoid repetition.
11. Challenging the finding of the learned Arbitrator on claim No.4,6, 10, 11, 13, 14, 16 and 18 present arbitration suit has been filed by the plaintiff who is the respondent before the learned Arbitrator. Plaintiff and defendant entered into contact agreement, as per which the defendant was required to carry out certain construction work specified in the contract. Contact also provides for dispute resolution through arbitration. Contract stipulated 15 months time for 13 CT 1390_Com.A.S.102-2018_Judgment.doc completion of the contract work. Admittedly, work was not completed within the stipulated time. 1 st defendant contractor sought extension of time on 8 times and plaintiff employer has granted the extension. Work is finally completed after several extensions and the work which was to be completed by 15 months was extended to 34 months and finally the work was completed. The defendant claims that on account of delay in carrying out the work, which according to the defendant was for the reason attributable to the employer and which are beyond the control of the contractor, the 1 st defendant has incurred additional expenses for completing the work. For claiming these expenses incurred and by making several other claims, 1st defendant has raised arbitration dispute and initiated arbitration and as per the order of Hon'ble High Court, learned Arbitrator was appointed and the arbitration proceedings were conducted. The learned Arbitrator has on 28/3/2016, passed the impugned award and directed the present plaintiff employer to pay Rs.1,10,36,425/- to the 1 st defendant with interest. Challenging the finding on the above said claim No.4,6,10,11,13,14,16 and 18, present arbitration suit has been filed. On looking to the petition and also the award, there were several claims totaling to 19 claims and learned Arbitrator has allowed claim No.2,3,4,6,8,9,10,11,12,13,14,16 and 18. All these claims are either partly or in fully allowed by the 14 CT 1390_Com.A.S.102-2018_Judgment.doc learned Arbitrator. However, challenge to the award by the present plaintiff is only in respect of 8 claims which are stated above. As held by the Hon'ble High Court in the Commercial Appeal No.5/2021 the main contention of the plaintiff is that the learned Arbitrator has exceeded his jurisdiction in awarding the compensation in favour of the 1st defendant and the award passed by the Arbitrator is in conflict with the public policy of India. Accordingly, these points are directed to be considered and then decided by this court in the light of the rival contentions. Since challenge to the award are on these 8 claims, finding of the learned Arbitrator on other claims need not be considered in deciding the present arbitration suit.
12. Claim No.4 in which Rs.6,90,800/- has been awarded by the learned Arbitrator is about non payment for actual quantity of dry lean concrete laid at site. Claim No.6 in which Rs.25,188/- is awarded as reimbursement of reduction due to freak high rates for increased quantity of dummy joints. Claim No.10 in which Rs.11,22,868.69 is awarded is as loss due to actual market increase in material, labour, fuel of work done due to delay not attributable to claimant over and above the contract escalation paid. Claim No.11 which is awarded along with claim No.14 and Rs.99,37,000/- has been awarded is towards reimbursement of overhead expenses for extended period. Claim No13 in 15 CT 1390_Com.A.S.102-2018_Judgment.doc which Rs.1,75,370/- is awarded is reimbursement of losses owing to curtailment withholding and delays in payment. The claim No.16 is regarding pendente lite and future interest in which 11% interest is awarded from 1/5/2015 to date of award and future interest @12% per annum is awarded from the date of award. In awarding the pendente lite interest of 11%, tribunal has awarded the interest only on the claim allowed in claim No.2,4,6,8,9 and on other claims pendente lite interest is not awarded. Claim No.18 which is towards cost of arbitration, Rs.11 lakhs is awarded.
13. On looking to the contention of the plaintiff and the defendant which are referred above, with regard to claim No.4, it is stated that this claim is considered by the learned Arbitrator by exceeding his jurisdiction and this claim is beyond the contract agreement agreed between the parties and PS clause is regarding clarification of method of measurement which shall be as per net plan area and it is stated that the defendant No.1 had failed to fulfill its obligation under the contract and it is estopped from making claim alleged to have arisen out of the contract. On looking to the finding of the tribunal, on claim No.4, by considering the rival contentions, tribunal has noted that PS clause 22.6 specifies that unit shall be cubic metre of concrete placed for the specified thickness shown on the drawings and has noted that the description provided 16 CT 1390_Com.A.S.102-2018_Judgment.doc for the said item of dry lean concrete as to a component and there is difference in interpretation between the parties on account of ambiguity and therefore the principles of contra proferentum which means that the contract is to be interpreted against the drafter of the document in place of ambiguity has been considered by the tribunal. The decision cited are also considered and the contention of the plaintiff that the claim is hit by condition 65 of GCC as it was not included in the list of claims submitted by the claimant at the time of signing the final bill is also noted. As per condition 65 of GCC no further claim shall be made by the contractor after submission of the final bill and these claims shall be deemed to have been waived and extinguished. However tribunal has noted that the claimant has raised issue on 20/3/2013 on which the engineer has passed a favorable recommendation, but same is not accepted by plaintiff. After completion of the work, when plaintiff asked claimant to sign the No Claim Certificate in the final bill, claimant had informed that he cannot sign the No Claim Certificate as he has number of claims, but by inadvertently present claim No.4 was missing, but there was a note stating that as claimant reserves the right to make further claims before the appropriate forum. By considering this and the decision of Delhi High Court in case of SS Jain v. DDA asserted that a claim is arbitrable unless barred by 17 CT 1390_Com.A.S.102-2018_Judgment.doc limitation and the final bill was paid on 29/10/2015 and claim statement was filed on 30/11/2016 and the tribunal by considering that, claimant had reserved the right to make further claim has found that claim No.65 of GCC is not attracted and found that the claim No.4 is arbitrable. Then the tribunal has considered that there is ambiguity in the unit specified because if the consolidated thickness is specified then the unit was required to be square metre and not cubic metre. Tribunal held that under doctrine of contra proferentum, advantage of ambiguity in the document has to accrue to the claimant as the respondent is the drafter of contract document. The tribunal by holding so, has come to the conclusion that the claimant is entitle to the additional payment on this account for spread thickness of 180 mm as originally recommended by the respondent GE, and thus awarded Rs.6,90,800/-.
14. In claim No.6, which is reimbursement of reduction due to freak high rates for increased quantity of dummy joints, the tribunal has awarded Rs.25,188/- to the present defendant No.1 and has considered several correspondences had between the parties and also noted that the contention of the present plaintiff that the increase in quantity beyond 5% of CA quantity in item declared as freak high and the same has been regularized through amendment to the contract which 18 CT 1390_Com.A.S.102-2018_Judgment.doc has been signed by the claimant. Defendant contended that after offering reduction in rate by letter dated 3/12/2013, claim is not tenable. The learned Arbitrator by perusing the records has found that respondent employer had requested the claimant to offer reduction against freakishly high rate in respect of item No.13 of Schedule 'A' Part XII during November 2013 in terms of departmental procedure, but the claimant in Ex.R.9 has shown his inability to offer any reduction. The tribunal has noted that the claimant has not agreed for reduction. However in July 2014 respondent i.e. the employer had initiated an amendment to the contract which was accepted by the claimant. By considering this scenario, tribunal found that immediately after rejecting of the request of the employer to offer reduction, amendment was entered that too just before issuing completion certificate and this show that this completion certificate was issued only after signing the amendment on 17/11/2014 and by considering the relevant factors, has found that the respondent initiated amendment to the contract after keeping quite for 7 months after rejection of the same by the claimant and has made a claim to sign the amendment just four days before date of completion and as such, there is no justification for the employer to initiate amendment to the contract after 28 months that too after claimant had shown his inability to offer any reduction. By 19 CT 1390_Com.A.S.102-2018_Judgment.doc considering this fact the tribunal came to the conclusion that claimant was made to sign the amendment to contract under financial duress as his payment / BGs as well as completion was held up. By considering this, tribunal has allowed this claim. The tribunal has noted that claim No.6 is arbitrable and there is no dispute with regard to amount worked out by the claimant and hence the claimant is entitle for Rs.25,188/- towards refund of less amount paid on account of reduction in rate through amendment to contract.
15. In claim No.13, which is reimbursement of losses owing to curtailment/withholding and delays in payment, tribunal has considered three aspects i.e. delay in payment in RARs, restricted payments in RARs and the delay in payment of undisputed part of final bill. The tribunal has considered delay payment of RAR and found that the majority of RARs have been paid within 1 to 5 days except RAR numbers mentioned in the award where the delay involved is ranging from 6 to 66 days and found that within the reasonable time the RARs paid. The tribunal has noted that when majority of RARs can be paid within 1 to 5 days, there is no justification for not making payment of other RARs within 5 days when the periodicity of RAR laid down in contract itself is 15 days and the tribunal found that in some RARs there is unreasonable and unexplained 20 CT 1390_Com.A.S.102-2018_Judgment.doc delay in payment for which reasonable compensation is to be paid to the contractor as it affects the cash flow of the contractor and has held that the claimant is entitled to reasonable interest on the delayed RAR payment beyond 5 days. In the second part, which is in the same claim which is with regard to restricted claim in RAR, tribunal has found, based on the material placed before it, that the defence of the respondent is not totally based on facts because the claimant had protested about the amount restricted from 6th RAR in Ex.R.41 on account of work executed against DO. It is seen by the tribunal that the amount has been disallowed for want of approval of higher authority. By considering this restriction in amount paid in RAR and considering that there are no other major restriction, tribunal has held that the claimant is entitle to reasonable compensation in the shape of simple interest on the amount so disallowed in 6th RAR only. In the third part of claim No.13, tribunal has considered that delay in payment of final bill. The tribunal has noted that the respondent delayed completion of the documentation i.e. finalization of DOs etc and then supplying the priced abstracts to the claimant to enable him to submit the final bill and subsequently final bill was prepared and undisputed final bill amounting to Rs.11, 27,008/- was paid on 29/10/2015. The contention of the respondent that final bill was delayed due to claimant is not tenable 21 CT 1390_Com.A.S.102-2018_Judgment.doc because, claimant can submit the final bill provided he has supplied all details required in terms of conditions of contract. Contention of the respondent that claimant has not submitted no claim certificate and that is the reason for delay in final bill is also not found favour of the learned Arbitrator, as when claimant submittws list of claims, asking him to sign the no claim certificate is not acceptable. The tribunal has noted that the final bill was payable within 9 months from the date of completion of work and as per that, final bill amount should have been paid by 20/4/2015, but it was paid on 29/10/2015 and therefore the claimant is entitle for reasonable compensation on the amount of final bill paid in the shape of reasonable interest. By considering all these these three parts of the claim has awarded Rs.1,75,370/- as against the claim for Rs.18,49,674-.
16. The claim No.10, 11 and 14 are all pertaining to reimbursement of expenses or reimbursement of loss due to delay in completion of the project for the reasons not attributable to the claimant. The claim No.10, 11, 14 and also claim No.12 and 15 are taken for discussion by the learned Arbitrator at once, as all these claims are based on delay in completion of the project and also the contention of the respondent that the compensation is not payable when the extension of time was given and that the payment is essence of the contract etc. The tribunal has considered several decisions which are 22 CT 1390_Com.A.S.102-2018_Judgment.doc cited by both the parties and also considered the different clausesa of the agreement between the parties. Tribunal has considered the contention of the contractor that, contract being standard form of contract it has to be strictly construed and clause 11 sets out in detail the various circumstances in which the performance of the contract could be delayed and the parties are bound by the term agreed upon in the contract, but, if one of the party to the contract is unable to fulfill its obligation, learned Arbitrator has authority to compensate the second party for the cost incurred and on the basis of the same these claims are made. Contention of the respondent that for the delay which is attributable to both the parties extension of time as per condition 11A and 11B is given and as per 11C, no claim whatsoever in respect of compensation is maintenable is also considered. Respondent has also relied on the decision in Ramanath International v. Union of India and even different provisions of the Indian Contract Act were placed before the learned Arbitrator and the learned Arbitrator has extensively dealt with those provisions and the conditions in the contract which are placed before him. From para 142 in page No.86 of the award till para 157 in page No.108 the Arbitrator has considered rival contentions after referring to the respective pleadings and the contentions taken. Learned Arbitrator has considered condition 23 CT 1390_Com.A.S.102-2018_Judgment.doc No.11 of IAFW 2249 which is GCC and found that there are several circumstances under which the extension of time could be given as provided in clause 11(A) and has considered even the reasons for delay as provided in clause 11(B) and also reproduced clause 11(C) which states that when extension is granted under condition A and B, no claim in respect of compensation shall be admitted.
17. Tribunal has noted that in the circumstances provided in clause 11(A) and 11(B) of the GCC, if time is extended, no claim is permissible as per 11©. Tribunal has also considered Section 55 of Indian Contract Act and found, by considering that contract which was to be completed within 15 months was extended by 8 extension of time for different reasons and the work got prolonged to 34 months as against original contract period of 15 months, has found that time is not essence of the contract. Tribunal has by considering reasons for each extensions, has found that except delay of about 120 days where condition No.11(C) will be attracted, for remaining delay, condition 11© do not apply as extension given do not fall under condition 11(A) or (B). Since condition No.11(C) bars payment of compensation, tribunal has found that for remaining extension and the delay, compensation is payable. Tribunal has also considered that time is not the essence of the contract as extension of time was 24 CT 1390_Com.A.S.102-2018_Judgment.doc given on 8 times and in all the cases delay was attributable to the employer as the PEB hanger contractor has rescinded the contract and execution of the work of PEB hanger, Air Conditioning Work and Fire Fighting works, which were given to other agency by the employer had delayed the work. The tribunal has also noted that the work which was to be completed within 15 months prolonged to 34 months and the way in which the extensions are granted show that the time is not essence of the contract and therefore as per second clause of Section 55 of contract Act, the promisee is entitle to compensation from the promisor for any loss occasioned to him by such failure.
18. While coming to this conclusion, Tribunal has also considered the decision in Ramanath International and found that facts are different and as per the said decision when contractor obtained extension of time for execution on account of delay attributable either to the contractor or the employer or both he will not be entitle to claim compensation on the ground of such delay in addition to the extension of time obtained by him is not applicable to the present facts, wherein, entire delay was found attributable to the employer and even the contractor never contemplated such inordinate delay and had not made any arrangement to face such delay. Tribunal has also noted that the delay due to third party agency with 25 CT 1390_Com.A.S.102-2018_Judgment.doc whom the contractor was required to work and after rescinding of contract by PEB hanger contractor, there was abnormal delay in appointing next agency which cannot be anticipated by the contractor. Tribunal has found that decision in Ramanath International is distinguishable from the present facts and it can be only applied to initial delay of 120 days which is under for condition in 11(C) stated above and for the balance delay, which is attributable to the employer, ratio is not attracted and the delay are not even covered under condition No.11(A) and (B) of GCC.
19. In deciding that time is not the essence of the contract, tribunal has relied on the decision in Hind Construction Company Limited v. State of J & K and also the decision of Punjab & Haryana High Court in Union of India v. Puran Chand Diwan. The tribunal has noted that prolongation of contract period has mainly resulted on account of delays by the employer appointed other agencies, due to which, claimant contractor had to suffer losses on various accounts like expenses towards deployment of tool and plants and machinery for longer period and other expenses on overheads and establishment etc. Tribunal has found that the employer is in breach on account of their appointed agencies for the delays and also for grant of piece meal extensions instead of refixing the reasonable revised time frame for completion of work, so as to make 26 CT 1390_Com.A.S.102-2018_Judgment.doc time as essence of contract, has committed breach of contract condition and held that the claimant is entitle to reasonable compensation towards losses suffered by him towards overheads and maintaining site establishment due to over stay at site and also for deployment of tools and plants and machinery at site for longer period and other consequential reliefs.
20. After giving finding that the time is not the essence of the contract and that condition No.11(C) of GCC do not apply and that the claimant is entitle for compensation for the loss suffered due to delay which is totally attributable to the employer and the other agencies engaged by the employer, has proceeded to consider each of this claim No.10, 11 and 14 and by considering the increase in material, labour, fuel of work done has awarded Rs.11,22,869/- in claim No.10 and awarded Rs.24,15,000/- in claim No.11 towards deployment of tools and plants and machinery over a longer period at site and Rs.75,22,000/- towards reimbursement of overhead expenses for the extended period. The tribunal has noted that an initial delay of about 4 months is not attributable to the respondent out of total delay of 19 months, as there is some delay of force majeure etc. After deducting this period and after deducting the element of common indirect expenses and then applying mitigating factor which the claimant was required to undertake to mitigate the losses, 27 CT 1390_Com.A.S.102-2018_Judgment.doc consequent to breach of contract, Tribunal worked out the amount of compensation for 15 months towards overhead expenses and expenses incurred towards maintaining site establishment of engineers and other supervisory/support staff at Rs.75,22,000/- in claim
14.
21. In claim No.16, which is on interest, claim for past, pendente lite and future interest has been considered. Tribunal has noted that on claim No.2,4,6,8 and 9 simple interest @11% shall be paid from 1/5/2015 to the date of award. The tribunal has noted that the claim of interest is justified when legitimate amounts due to one party is unauthorizedly held back or denied or delayed by another party thereby resulting in financial injury to the suffering party. A party deprived of the use of money to which he is legitimately entitled to for interest. The learned Arbitrator has also held that even as per Section 31 of Arbitration & Conciliation Act award of interest on the amounts in arbitral awards is permissible as there is no prohibition on grant of interest in the subject contract agreement. The tribunal has also noted that amount awarded under number of claims were payable to the claimant contractor during currency of contract and even though not paid during currency of contract, at the maximum they were payable with the final bill which under normal circumstances was payable by 28 CT 1390_Com.A.S.102-2018_Judgment.doc 20/4/2015 in terms of condition 65 and 66 of GCC. Therefore on these claims in 2,4,6,8 and 9 interest of 11% is awarded upto the date of award from 1/5/2015. From the date of award, tribunal has awarded interest of 12% per annum till the date of actual payment and held that a period of 3 months from the date of award is allowed to the plaintiff for making payment in terms of the award and if same is not paid, then the award amount shall carry intesrst @12% from the date of award. Therefore the tribunal has considered pendente lite interest upto the date of award from 1/5/2015 only on five claims. From the date of award interest is awarded on all the allowed claims.
22. In claim No.18, which is with regard to the costs, Tribunal has awarded Rs.11 lakhs in which Rs.9 lakh itself is the fee of the learned Arbitrator and the share of the respondent employer is Rs.4,50,000/- which was also paid by the claimant and by considering the expenses stated by the claimant regarding cost incurred, the learned Arbitrator has awarded Rs.11 lakhs cost payable by the respondent.
23. All these findings are challenged by the plaintiff in the present case. The learned counsel for the 1st defendant has relied on the decision reported in 2008 (2) ALR 285(SC) (Satna Stone and Lime Company Limited v. Union of India) in which in para 18 it is held, 29 CT 1390_Com.A.S.102-2018_Judgment.doc "...The arbitrator is the sole judge of the quantity as well as the quality of evidence and it will not be for the court to take upon itself the task of being a judge of the evidence before the arbitrator. The court should approve the award with the desire to support it, if that is reasonably possible rather than to destroy it, by calling it as illegal. This court has very limited jurisdiction to interfere with the reasoned award. Only when the award is based upon a proposition of law which is unjustified in law, the error of law must appear from the award itself or from any document or not incorporated in it or appended to it. It is not permissible to travel beyond and considered material not incorporated in or appended to the award..."
As held in this decision, Arbitrator is the sole judge of the quantity as well as quality of evidence and when the learned Arbitrator has passed this award, by giving opportunity to both the sides and by considering the documents produced before him and also considering the rival contentions, court under Section 34 cannot interfere in such award and court cannot re- appreciate the evidence.
24. In the decision reported in 2014 (4) ARBLR 307 (Associate Builders v. Delhi Development Authority) in para 12 it is held, "...It must clearly be understood that when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the 30 CT 1390_Com.A.S.102-2018_Judgment.doc arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score...."
25. In another decision reported in (2017) 13 SCALE 91 (SC) (Venture Global Engineering LLC and others v. Tech Mahindra Limited and others) it is held in para 176 as under:
"...The award of an arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the AAC Act and on no other ground. The court cannot act as an Appellate Court to examine the legality of award nor it can examine the merits of claim by entering in factual arena like an Appellate Court. It has to confine its enquiry only to the limited issue as to whether any ground specified in Section 34 of AAC Act is made out or not. Once the ground under Section 34 of the AAC Act is made out, the award then has to be set aside..."
As held in this decision, grounds on which the award can be set aside by the court under Section 34 is very limited. The court cannot re-appreciate the evidence on the ground of public policy etc.
26. On considering all these findings given by the learned Arbitrator the contention that the learned Arbitrator has exceeded his jurisdiction in deciding the claims is not acceptable. Though the condition No.11(C) of GCC states that the compensation is not payable 31 CT 1390_Com.A.S.102-2018_Judgment.doc when the extension of time is given in the condition mentioned in clause 11(A) and (B) and stated even in the decision in Ramanath International, learned Arbitrator has given reasons and has found that condition 11(C) cannot be applied as many of the extensions are not for any reasons mentioned in clause 11(A) or (B) and only extension for delay of 120 days is attributable to the conditions in 11(A). Other extensions are for the delay which are totally attributable to the employer, as other agencies engaged by the employer have not done work and even contract was rescinded and alternative arrangement was not made. The tribunal has noted that the contention that time was essence of the contract is also not acceptable as on 8 times extension of time was given without fixing the time by considering the progress of work and by considering the hindrance. By considering the decision in Hind Construction and other cases, tribunal has found that when contract itself provides for extension of time and in the present case 8 times extension has been given, time was not the essence of contract. As such for the loss suffered by the contractor, who is the promisee, contractor is entitle for compensation. Tribunal has noted that the work which was to be completed within 15 months was extended to 34 months and the contractor might not have anticipated such abnormal delay in completion of work and found that the 32 CT 1390_Com.A.S.102-2018_Judgment.doc extension of time can not compensate the contractor and this unreasonable extension of the period of contract has caused loss to the contractor and he is entitle for compensation.
27. Tribunal has considered each and every contention of the employer against the claim put forwarded by the claimant and has decided each of these claims as discussed above. On looking to the findings of the learned Arbitrator on these claims, learned Arbitrator has considered each and every contention and has made elaborate discussion and has given reasons for arriving at a particular finding. Tribunal has not allowed all the claims and not granted entire claimed amount. Tribunal has rejected many claims and rejected even claim for loss of profit and many other such claims. Even while awarding the amount, Tribunal has considered each and every point and not of left the amount as claimed though there is delay of 19 months from the original date of completion of the project, the tribunal by considering that there is condition 11(A) and 11(B) of the GCC which is applicable for 120 days and 11(C) bars awarding of compensation, has calculated the compensation only for 15 months and has also considered the duty of the claimant to take reasonable steps to mitigate the loss. In claim No.11, as against the claim for Rs.55,51,900/-, the tribunal has awarded Rs.24,15,000/- and in claim 33 CT 1390_Com.A.S.102-2018_Judgment.doc No.14 as against the claim of Rs.1,28,16,432/- Tribunal has awarded Rs.75,22,000/- and similarly in other claims also the tribunal has made a fair calculation and then arrived at the figure.
28. Learned counsel for the plaintiff has relied on the decision of Hon'ble Supreme Court in RNR Constructions and another v. Union of India. This decision is even considered by the learned Arbitrator and has found that the decision is not applicable. Learned counsel for the plaintiff has also relied on the decision in Bharat Coking Coal Private Limited v. L.K.Ahuja dated 12/4/2004 and this decision is also even referred by the learned Arbitrator. By considering the inordinate delay of 19 months in addition to the period fixed of 15 months in the contract and by considering that, condition for extension of time were made as mentioned in 11(A) and 11(B) and therefore, condition No.11(C) stating that compensation is not payable, is not applicable. Learned Arbitrator has found that this decision is not applicable to the present facts. On looking to the facts of the present case, there is no ground to have different opinion than that of the learned Arbitrator. Even if different view is also possible, still the court cannot go against the view of the learned Arbitrator unless the view of the learned Arbitrator is not even a plausible view. In the present case the view 34 CT 1390_Com.A.S.102-2018_Judgment.doc of the learned Arbitrator is a clear plausible view and therefore, it cannot be interfered.
29. Coming to awarding of interest, tribunal has noted that the claim in claim No.2,4,6,8,9 were payable as and when the work were carried out, and at the maximum, those amounts would have been paid with the final bill and as those amounts were not paid in the final bill, learned Arbitrator has awarded 11% interest on those awarded amount form 1/5/2015 to date of award. The tribunal has noted that there is no prohibition for grant of interest even under Section 31(7) (A), when contract do not bar awarding of interest. The learned Arbitrator is having discretion to award interest from the date of cause of action till the date of award. There is no such bar for awarding interest is placed before the court by the plaintiff. In claim No.2 there is award of Rs.41,250/-. In claim No.4 there is award of Rs.6,90,800/- and another claim No.6 there is award of Rs.25,188/- and in claim No.8 there is award of Rs.2,25,000/- and in claim No.9 there is award of Rs.15,750/-. On all these amounts which comes to around Rs.7 to 8 lakh, interest of 11% is awarded. The rate of interest awarded is very reasonable and learned Arbitrator has mentioned the reasons for awarding such interest. Therefore this awarding of interest upto the date of award cannot be said to be against public policy 35 CT 1390_Com.A.S.102-2018_Judgment.doc or is by exceeding the jurisdiction of the learned Arbitrator.
30. Learned counsel for the 1st defendant has relied on the decision reported in OP 252/2014 dated 20/5/2020 the Hon'ble High Court of Madras (J.K.Fenner (India) Limited v. Neyveli Lignite Corporation) has held in para 20 as under:
"The underlying principle conferring power on the arbitrator to grant interest for a pre- reference period in case where there is no prohibition in the arbitration agreement is on account of the fact that the forum of arbitration is created by the consent of parties and is a substitute for a conventional civil court. Therefore by implication the Arbitrator would have the same power to award interest in the same way and same manner as a court."
31. In a decision in Shri Kamachi Amman Construction v. the Divisional Railway Manager (Works) Plalghat cited by the plaintiff on the point that, as per sub Section (7) of Section 31 of the Act, Arbitrator is bound by the terms of the contract in awarding of interest from the date of cause of action to the date of award. It is held that where parties had agreed that no interest shall be payable Arbitral Tribunal cannot award interest from the date when the cause of action arose to date of award. Even before the learned Arbitrator this decision was cited and the learned Arbitrator has found that there is no specific prohibition on grant of interest in the contract 36 CT 1390_Com.A.S.102-2018_Judgment.doc agreement. Therefore this decision also will not help the plaintiff to challenge the point of interest awarded by the learned Arbitrator on five claims till passing of award.
32. While passing the award, learned Arbitrator has directed the employer to make payment within 3 months and on failure the same shall carry interest of 12% from the date of award. This awarding of interest, is also very reasonable and within the discretion of the learned Arbitrator. Similarly in claim NO.18 awarding of cost to the winner by the loosing party is very known legal principle and the learned Arbitrator is justified and within his discretion in awarding the said interest and costs.
33. On considering all these findings of the learned Arbitrator which are now challenged in the arbitration suit, the learned Arbitrator by applying the principle laid down in various decisions and also by considering the terms of the contract entered between the parties and also by using his rich experience has considered each and every contention and has passed the award. As there is inordinate delay in completion of the project and entire delay is wholly attributable to the employer and the agencies engaged by the employer and there are other lapses also like not engaging any other agencies after one agency rescinded the contract etc and by considering the expenses incurred and the over head 37 CT 1390_Com.A.S.102-2018_Judgment.doc charges and the idling of plant and machinery, the tribunal has passed the award. None of the finding of the arbitrator appears to be against public policy of India coming under Section 34(2) of the Arbitration & Conciliation Act or is patently illegal as per Section 34(2A) of the Arbitration & Conciliation Act.
34. Learned counsel for the plaintiff has relied on a decision reported in AIR 2003 SC 2629 (ONGC v. Saw Pipes), in which, Hon'ble Supreme Court has considered the grounds under which, award can be challenged under Section 34 and it is held that when Tribunal exceeds its power, it can be interfered and when the award is patently illegal the same can be set aside. However, it is also noted that, when illegality is of a trivial nature, it cannot be held that award is against public policy. On going through the decision, grounds for interference in the award as held in this decision are not made out by the plaintiff in the present case. Hence the decision do not help the plaintiff.
35. Contention of the plaintiff that the learned Arbitrator has exceeded his jurisdiction in awarding the compensation is not established. When time is found to be not essence of the contract, even as per the Contract Act, contractor is entitle for compensation for the loss suffered and the contention of the employer that the contract bars payment of compensation is not 38 CT 1390_Com.A.S.102-2018_Judgment.doc established and for the reasons mentioned in the award, contractor is entitle for compensation for the loss suffered for the reasons attributable to the employer for the period of 15 months. Though for the period of 4 months delay, compensation was not payable in view of condition No.11(C), for the remaining period of delay, compensation is payable. On looking to the entire award, plaintiff has failed to establish that the award is in conflict with the public policy of India. Therefore on both the grounds urged by the plaintiff and even on other contentions raised by the plaintiff in the present arbitration suit, plaintiff has failed to establish its contention and there are no grounds to interfere with the award passed by the learned Arbitrator.
36. On considering all these aspects, cited decisions, contentions of the parties and the finding of the learned Arbitrator, finding of the learned Arbitrator cannot be said to be against the public policy of India or is patently illegal. Contention of the plaintiff that the arbitrator has exceeded his jurisdiction in awarding the amount is not established. Therefore, there are no grounds to interfere with the award passed by the learned Arbitrator. Accordingly, point No.1 and 2 are answered.
37. POINT No.3 : For the discussion made on above points, following order is passed:
39CT 1390_Com.A.S.102-2018_Judgment.doc ORDER Arbitration Suit filed under Section 34 of the Arbitration & Conciliation Act challenging the award passed by the learned Arbitrator on 8/2/2018 with respect of contract No.CE (AF)/BAN/44 /2011-12, is dismissed.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 3rd day of of January 2023] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
***