Bangalore District Court
Chetas Control Systems Pvt.Ltd vs The Chief Engineer (N) on 7 October, 2016
1 A.S.No:83/2010
IN THE COURT OF THE III ADDL.CITY CIVIL & SESSIONS
JUDGE, BENGALURU CITY (C.C.H.No.25).
Dated: This the 7th day of October 2016
Present: Sri.Ron Vasudev, B.Com. LL.B, (Spl),
III Addl.City Civil & Sessions Judge,
Bengaluru.
A.S.No:83/2010
Applicant CHETAS CONTROL SYSTEMS PVT.LTD.
Having its registered office at 'Chetas
House', Plot No.1, Sidhatek Co-Operative
Society, S.No.8+9, Near Pashan Lake,
Sutaarwadi, Pashan, Pune-411 021.
Represented by its Authorised
representative Mr.Vijay Bagul.
(By Sri.DMG, Advocate)
V/S
Respondent THE CHIEF ENGINEER (N),
Karnataka Urban Water Supply & Drainage
Board, Jalamandali Compound,
Sri.M.Vishveshwaraiah Road, Dharwad.
(By Sri.HMN), Advocate)
(Ron Vasudev),
III Addl.City Civil & Sessions Judge,
Bengaluru.
2 A.S.No:83/2010
JUDGEMENT
This application is filed U/Sec.34 of The Arbitration & Conciliation Act, 1996
2. The substance of the application is that; the respondent herein invited tenders for manufacturing, supply, assembly, erection, testing, commission and commissioning of Woltman Helical Type bulk flow water meters at various locations in Belgaum, Hubli-Dharwad and Gulbarga Cities and pursuant to it the applicant submitted it's bid on 30.8.2006 and after evaluation of the bids received, finally the tender was awarded in favour of the applicant for contract valuing at Rs.1,09,00,000/-. Accordingly an agreement was came to be entered between the applicant and respondent on 21.5.2007 and notice was also issued by the respondent on the same day to commence the work. As per the said agreement the whole work of commissioning the meters has to be completed within four months from the date of that agreement, but because of lapses on the part of the respondent and on account of non-co-operation by its officials, the applicant could not complete the work in the stipulated time frame and duration of that agreement was extended from time to time. There was shortcoming in the technical calculation of the respondent leading to reduced out flow of water from the meter level as diameter of the supply pipes were considerably reduced as copared to the pipe lines supplying water to the meter. As a result there 3 A.S.No:83/2010 was shortage of supply to the consumers triggering proteset by them. Apart from that respondent did not engage the third party agency to inspect the meters at an earliest and there was no proper co-ordination in carrying out the project. That being the case all of a sudden and that too unilaterally the respondent appointed an Adjudicator by name S.Ramamurthy and the said Adjudicator exceeding his authority passed the impugned award not only revoking the agreement between the parties even he directed the applicant to make good of the loss on account of carrying out the work by some other agency, wherefore the applicant seeks to set aside the award dt.15.7.2010 and to grant such other reliefs as the matter warrants.
3. In response to the appeal notice the respondent appeared and filed its detailed written statement taking various contentions that it is the applicant, who did not carry out the work properly and instead of supplying, erecting and commissioning of 34 flow water meters, only 33 meters were supplied by it that too after inordinate delay and out of that 33 meters only 7 meters were fixed at the locations already identified and out of that 7 meters only 5 were functioning with several other works to be attended by the applicant, whereas the other two meters became defunct and despite issuing several warning letters to expedite the project, which was funded and supervisioned by World Bank, the applicant did not discharge its duties in time making the respondent to extend the duration of the project again and again and 4 A.S.No:83/2010 finally realizing the intention of the applicant and its inability to carry out the prestigious project, as provided under the clauses of the agreement, already designated Adjudicator was appointed and after holding an enquiry, the said Adjudicator has passed the impugned award and it is just and reasonable. That on account of lack of interest shown by the applicant in executing the work, the respondent could not complete the project in time leading to escalation in cost, wherefore it has prayed to dismiss the appeal.
4. In view of these rival submissions, now the following points would arise for my consideration:
1. Whether the applicant proves that the appointment of Adjudicator was unilateral act of respondent?
2. Whether the applicant proves that the said Adjudicator passed the impugned award in excess of his authority?
3. Whether the applicant proves that delay in commissioning of the project was due to the lack of co-operation of respondent and it's officials?
4. Whether the applicant is entitled for the reliefs as prayed for?
5. What order?5 A.S.No:83/2010
5. As evident from the case file parties have not chosen to lead any evidence on their behalf. They have produced documents and have filed their written arguments and I have carefully gone through them. In this background, my findings on the above points are as under:
Point No.1 to 4 - In the negative Point No.5 - As per final order, for the following:
REASONS Point No.1 & 2:
6. Since these two points are interwoven, I have taken them simultaneously.
7. On going through the entire case file and written arguments filed by the parties, with pain, I am forced to say that not only the applicant was totally negligent in executing the prestigious project, meant for three cities of North Karnataka, which was admittedly funded by World Bank and was to be carried out under it's strict supervision, it continued the same tendency of negligence and lack of interest in filing and contesting this matter. Perhaps it may be the feature of the applicant. I am compelled to make this observation as applicant has gone to the extent of making false submission even after he approached the court, I would explain this in the foregoing paragraphs elaborately.
6 A.S.No:83/20108. The first and foremost grievance of the applicant is that respondent could not have appointed the Adjudicator Mr.S.Ramamurthy unilaterally and the agreement entered by them did not provide for his appointment and it never consented it. In support of the said contention the applicant also referred to the decision of Hon'ble Supreme Court reported at AIR 2005 SC 214 (Dharma Prathishthanam Vs M/s Madhok Construction Pvt. Ltd.) and AIR 1980 ORISSA 142 (Niranjan Swian Vs State of Orissa and others), whereas it is the specific contention of the respondent that the Special Conditions of the Contract (hereinafter in short referred to as 'SCC') provided for appointment of the said person as an Adjudicator and the applicant having participated in the adjudication process, now it cannot raise it's fingers that, it did not consent for his appointment and the said person has exceeded his authority in passing the impugned award. As parties are in logger head with respect to the appointment of the said person as an Adjudicator, I have gone through the documents carefully.
9. It may be noted that along with the application the applicant has produced the list of documents dt.18.10.2001 containing copy of the impugned award passed by the said Adjudicator and the annexures, which are part of it and it has produced the extract of the resolution passed in the meeting of the Board of Directors appointing Mr.Vijay Bagul to sign and verify the pleadings on it's behalf and to represent it in this case. Except these documents no other 7 A.S.No:83/2010 piece of document is produced by the applicant to support it's tall claim. On the contrary the respondent has produced 115 documents running from Page No.29 to 538 and thereby it has placed almost all the documents on record to show that there was no negligence on it's part. On verifying the said records I find that some correspondences are missing, but I have no other option except to base my findings on the documents so made available by the parties. So in my opinion the careless attitude of the applicant in failing to produce the documents and correspondence that has taken between itself and the respondent and coming up with only the award passed by S.Ramamurthy reveals that, it has no serious interest in the matter and for the sake of fighting the litigation it has come up with this appeal. This is one part of the negligence of the applicant.
10. Now turning to it's allegation that the Adjudicator S.Ramamurthy was unilaterally appointed and it did not sign the SCC etc., as urged in Para-17 and 18 of it's written arguments, I have gone through the documents viz; the Invitation For Bid (IFB). The said IFB is produced at Page No.149 to 324 of list of documents of respondent. It is very minutely and comprehensively drafted document containing several sections like Instructions to the Bidder (ITB), Bid Data Sheet (BDS), General Conditions of Contract (GCC), Special Conditions of Contract (SCC), Schedule of Requirements, Technical specifications, drawings and formats etc., etc. So it was least expected from a bidder like 8 A.S.No:83/2010 applicant that he ought to gone through the instructions to the bidder before it submitted it's bid. The copies of the agreement and other allied papers produced by the respondent at Page No:29 to 135 show that exactly and in accordance with the ITB Clauses the agreement was entered between the parties. As per GCC Clause No:28.1 and 2 if any dispute or difference of any kind whatsoever shall arise between the purchaser and the supplier in connection with or arising out of the contract, the parties shall make every effort to resolve the dispute amicably or by mutual consultation and in the event if the parties fail to resolve the same even after 30 days through the process as mentioned above, then either of them may give notice to the other party of it's intention to refer the dispute to the Adjudicator and importantly as per Clause-28.2.1. the Adjudicator shall give a decision in writing within 28 days of receipt of notification of a dispute. The said relevant clause is at Page No.122. Apart from the said GCC, Sec.IV containing Special Conditions of Contract (SCC) at Clause-15, which is in the form of supplementary to the GCC Clause-28, provides that the purchaser proposes that Mr.S.RamaMurthy, Managing Director (Retired), KUWS&DB, No.617, 10th A Main, 4th Block, Jayanagar, Bangalore-560 011, Karnataka State, India be appointed as Adjudicator under the contract, at a daily fee of Rs.2500/- plus reimbursable expenses. If the bidder disagrees with this proposal, the bidder should so state in the bid. If in the Letter of Acceptance, the Supplier 9 A.S.No:83/2010 has not agreed on the appointment of Adjudicator, the Adjudicator shall be appointed by Managing Director, KUWSDB, Bangalore at the request of either party. This clause can be seen on Page No.132 of the documents produced by the respondent. At the foot of that page applicant as well as the respondent have put their office seals along with their signatures. The said SCC being part of the agreement entered by them, it is too much for the applicant to contend that that it did not consent for the appointment of S.Ramamurthy as an Adjudicator and his appointment by the respondent is an unilateral act. That is why at the beginning I said that not only in executing the project even while conducting the matter in this court the negligence of applicant is ex-facie visible. Having signed the agreement with it's company seal and signature in it's appeal as well as in the written arguments just to have an edge over the matter applicant falsely contended that it did not sign the SCC and it is signed by respondent only. It is nothing short of committing perjury, wherefore the so-called grievance of the applicant that the said Adjudicator had no right to resolve the dispute between them is liable to be rejected.
11. If at all the applicant had any grievance in appointing the said person as an Adjudicator, as provided in SCC Clause No.15, which is extracted as above and emphasis is supplied by me, the applicant ought to have proposed some other person's name or it should have stated it in the 10 A.S.No:83/2010 bid. In having failed to carry out it's duty, now it cannot finger at the respondent. In the written arguments at para- 21 the applicant contended that though respondent sent letter dt.15.3.2010, produced at Page No.517 of list of documents of the respondents, regarding the appointment of Adjudicator as per GCC and SCC, it did not respond to it, so referring to Sec.8 of the Arbitration Act and the decisions cited above it contended that the respondent ought not to have proceeded with the appointment of Adjudicator as such the said Adjudicator had no authority to decide the dispute. Looking at its above contention without any hesitation I say that applicant has no seriousness in the matter and it has demonstrated the same again and again and at every stage.
12. As admitted by itself when the respondent indicated it's intention to refer the dispute to the Adjudicator, atleast at that point of time it should have raised objection for his appointment giving a chance for it to take the matter to the competent forum under the provisions of The Arbitration Act, instead it, it appeared before the Adjudicator, participated in the proceedings and once it suffered the award, now it is making hue and cry about his authority. According to me the ratio laid down in Dharma Prathishthanam's case by the Hon'ble Apex Court, which is relied by the very applicant itself, is aptly applicable to the case in hand. As observed in that case by the Hon'ble Court, in case of arbitration without the intervention of the court, the parties must rigorously stick to the agreement entered 11 A.S.No:83/2010 into between the two. If the arbitration clause names an arbitrator as the one already agreed upon, the appointment of an arbitrator poses no difficulty. This is precisely what has happened in this case. The SCC clause referred above provided for appointment of a particular person, with his name and residential address, as an Adjudicator and it was consciously agreed to by the applicant, therefore it has to be rigorously adhered to by the parties and there is no option to seek for appointment of some other person in his place.
13. In the said decision Hon'ble Apex Court further observed that a unilateral appointment and unilateral reference--both will be illegal. It may make a difference if in respect of an unilateral appointment and reference the other party submits to the jurisdiction of the arbitrator and waives it's right which it had under the agreement, then the Arbitrator may proceed with the reference and the parties submitting to his jurisdiction and participating in the proceedings before him may later on be precluded and estopped from raising any objection in that regard. So even for a moment it is held that the said reference of respondent to Adjudicator S.Ramamurthy was a unilateral appointment and unilateral reference, as said earlier since his appointment was not objected by the applicant, rather it meekly participated in the adjudication proceedings and received the award, so now it cannot question the authority of the said person.
12 A.S.No:83/201014. In the light of the law laid down by the Hon'ble Apex Court of India, which is considerably after Niranjan Swain's case, I prefer to follow the ratio laid down in Dharma Prathishthanam's case. So I conclude that there is no justification in the contention of applicant that appointment and reference to Adjudicator S.Ramamurthy was unilateral act of respondent.
15. Now turning to the another contention that the said Adjudicator exceeded his authority and instead of making an effort to settle the dispute amicably between the parties as contained in GCC Clause-28.1, he ought not to have proceeded to decide the dispute and he has not decided the quantum of damages etc., I hold that when the combined reading of Clauses of GCC and SCC gave authority to the adjudicator to resolve the dispute between the two contracting parties, the scope and authority of the Adjudicator extends to decide the dispute as a whole, so he could not have left the dispute in half way by attending only some aspects of it. The correspondence made between the applicant and respondent and also the sittings made by the Adjudicator show that before he proceeded to decid the matter by passing award, enough negotiations were arranged between both parties and when nothing came out especially with the letter of the applicant dt.30.12.2008 giving only two options to the respondent either to find mutually agreed righteous solution or to cancel the project 13 A.S.No:83/2010 and stop the work etc., the Adjudicator had also no option except to decide the dispute.
16. In so far as quantification of damages is concerned, it is on the record that applicant had not commissioned all the meters only some of them were fixed and out of those limited number of fixed meters only few of them were functioning and the applicant having not completed the chamber construction and earth work of the said meters, unless the work carried out by the applicant was measured in presence of the parties, there was no chance for the Adjudicator to decide the quantum of money which this applicant is liable to pay after adjusting the liquidated damages for delay occasioned by it, therefore I find no shortcoming in the award passed by the Adjudicator and keeping open the said matter he terminated the contract as per Clause-24 of GCC and to take up the balance work at the cost and risk of this applicant. The said finding of the Adjudicator cannot be found fault with. So even the contention of applicant that Adjudicator has exceeded his authority and he failed to quantify the damages is liable to be rejected and accordingly it is rejected. In the light of the above findings and conclusion arrived I answer both these points in the negative.
Point No.3 & 4:
17. For the sake of convenience I have taken these two points simultaneously.
14 A.S.No:83/201018. It is serious grievance of the applicant that as there was a disproportion in the diameters of the pipe lines which were used as a inlet and outlet to the meter, there was a substantial reduction in the flow of water from the meter resulting shortage of supply to the consumers and they revolted against the short supply of water and in some places water pipe lines were also damaged. In other words it's contention is that if 1000 mm diameter pipe line is fixed to the meter to supply water and the other flange of the meter is connected to the 500 mm diameter pipe line it would certainly reduce the flow of water and this simple logic was not understood and attended by the respondent and when the respondent realized that it has ordered for wrong equipment, in order to avoid it's liability it unnecessarily started blaming this applicant. On hearing the said grievance it appears to me that before submitting it's bid the applicant has not at all gone through the IFB and ITB, which provided specific dimension pipe lines based on flow of water and not on diameter of the pipe lines. The Page No:97 of list of documents of respondent, which is part of agreement entered between the applicant and respondent, precisely reveal the diameter of the pipes including it's material discharge MLD and discharge in Cum/Hour for each location etc,. In terms of the said IFB and ITB the agreement was entered and if the applicant had any doubt about the technical feasibility of use of those pipe lines, it ought to have thrashed it out before entering in to the contract or 15 A.S.No:83/2010 atleast while submitting it's bid. Only raising the said issue after fixing of some of the meters and noticing their mal- function indicate that the applicant was not professionally qualified in handling the said project and it's immatureness in dealing with the prestigious project of World Bank. Page No.266 to 278 of the IFB and ITB specifically mentioned the details of the flow meters required for water supply to the each city separately. Hence I reject the contention of applicant that there was lack of technical knowledge on the part of respondent in understanding a smallest issue.
19. Regarding of non-issuing of Project Implementation Authority Certificate (PIAC) in time, lot of argument was canvassed by the applicant. It was contended that intentionally PIACs were issued belatedly so as to deprive it from getting the excise duty exemption. According to me even if such an act was committed by the respondent, that was not the reason to delay in the execution of the project. I think one letter of the manufacturer of the said meters, which is produced by the respondent, is more than enough to show how the applicant took the things for granted and it was quite sure that the implementation of the project in four months, including the monsoon season, was grossly inadequate, inspite of it, it ventured to enter into agreement as if it was well prepared in execution of the said project. The letter produced at Page No.363 by respondent with it's list of documents shows that it is the letter dt.24.8.2007 written by Water Tech s.r.l. of Italy, from 16 A.S.No:83/2010 whom the applicant was securing the meters. It is undisputed that applicant is not the manufacturer of the meters to be fixed in the different locations. The said letter of Water Tech shows that the said company expressed it's regret on account of it's inability to deliver the meters in time for the KUWS&DB Project Dharwad, because of the shortage of brass and polycarbonate materials and summer holidays there. It is material to note that on the date of agreement itself i.e. on 21.5.2007 the respondent had issued notice to proceed with the work and as per Sec.V, Schedule of Requirements (Page No.38), four months period was stipulated from the date of contract for delivery of the materials and commissioning of the project. Admittedly the said four months period was to be expired by 21.9.2007. That being the case in the month of August also the applicant had not secured all the water meters.
20. The correspondences hereinafter I am going to refer would demonstrate that delay was occasioned entirely due to the negligence of the applicant itself and for minor lapses of the respondent it cannot blame it altogether. Here I would concentrate mainly on the letters that were emanated from the applicant and then I will turn to the letters of respondent. Whenever I refer to each letter I would also furnish the page number in the brackets, which form the compilation of documents produced by respondent along with index dt.10.6.2013.
17 A.S.No:83/201021. The first letter in series is letter dt.16.7.2007 (353) and it reveals that on the said day i.e. almost after two months of agreement dt 21.5.2007 the applicant furnished the drawings of the meters when it was expected to complete the project by 21.9.2007. Next one is letter dt.24.11.2007 (377) wherein for the first time the applicant disclosed the truth stating that the water meters to be installed by it were to be imported, having EEC pattern approval and having bigger sizes up to 500 mm and their minimum normal delivery period is three months. Then on page no.2 of the said letter explaining the reason for delay in execution of the project applicant stated that the delay is caused due to the import supply and third party inspection which were beyond it's control. Then at the end it wrote and requested not to impose liquidated damages and allow it to extend time limit up to January 31st 2008. When as per the applicant it had not received the supply of meters in November 2007, it was incorrect on it's part to blame the respondent by alleging that because of third party inspection delay was caused. As per the letter of the applicant in the month of January and February 2008 it was able to get only 33 meters against 34 meters to be fixed. So there was no question of inspecting such meters which were not supplied in November 2007, the fax of Central Water and Board Research Station, Pune, a Government of India undertaking dt.28.11.2007 reveal that as on that day only seven meters were supplied for it's inspection. Another letter dt.19.2.2008 18 A.S.No:83/2010 (409) of applicant shows that through the said letter it requested the respondent to inform it well in advance for deputing it's technical staff because it is handling different projects and it is unable to send it's service engineers as per the schedule fixed by the respondent. Then on 7.5.2008 (428) the respondent wrote one more letter stating that it had discussion with the respondent and it undertook that it will complete the work within the stipulated time frame i.e. up to 25.6.2008 and it extremely regretted for the delay and requested to bear with it. Then through letter dt.29.5.2008 (435) the applicant communicated that as promised by it in it's letter dt.7.5.2008 it has taken action at all the places i.e. Hubbali-Dharwad, Belgaum and Gulbarga and by next week mostly it will complete the fixing of three meters at Dharwad and three meters at Belgaum and would also complete the excavation and the fabrication work. So once again it requested not to take any action against it by resorting to liquidate damages. Again through letter dt.21.6.2008 (440) the applicant communicated that now it has equipped with all material at site and wish to complete the work at earliest. The phraseology used there ie "Now we are equipped with all material at site and wish to complete" show that till that day it was not "well equipped" to handle the project. In another letter dt.4.7.2008 (448) applicant communicated that it has already started installing of meters, but due to rain at site and non-readiness working front i.e. shutdown, it 19 A.S.No:83/2010 is facing problem to install the meters at various locations, so again it sought extension of time for three more months.
22. In the application as well as in the written arguments applicant has urged enough about the improper shutdown of water flow, which hindered it in fixing the meters. It is true that if continuously water flows through the supply lines/pipes of 500 to 1000 mm pipes, it is not possible to fix the water meters, but to ensure that there must be proper shutdown to enable it to complete the fixing of meter, applicant should have communicated in writing, with proper schedule, to the respondent and it's subordinates to shutdown the supply. But in that regard not even a single letter is traceable from the applicant side to show that it made such communication to the respondent so as to blame it for it's non-performance. One more letter dt.28.8.2008 (457) indicate that due to heavy rain in Belgaum and Dharwad site work was delayed and fixing of water meters the shutdown was necessary and because of the rainy season and also due to the festivals arrangements of shutdown was difficulty. Thus the applicant itself conceded the practical difficulty of respondent because it has responsibility of supplying water to the millions of populations of those cities. Then in that letter itself the applicant put-forth that due to unavoidable practical reasons in order to complete the execution of the said project it requested to extend the time till October and it will assure that it will not going to ask any more time and would 20 A.S.No:83/2010 complete the project by 31st October 2008. The letter dt.4.11.2008 (471) shows that as on that date it had fixed nine meters at Dharwad and Hubbali, but due to shutdown confusion and fixing of over size meter, it is not able to fix the same and decision is still pending and it requested to release the payment for the completion of fixing of five bulk water meters. The purpose of referring to this letter is, as on 4.11.2008 in Dharwad division it had fixed just five meters. These letters, all belonging to the applicant, un-mistakably point out that because of ill-preparedness of it, it was facing difficulties and was not able to meet the ITB time schedule.
23. The final notices issued by respondent on 13.3.2008 (414) 27.3.2008 (419), 20.5.2008 (432), 17.6.2008 (438) and 24.10.2008 (325) chronologically show that continuously the respondent was following the applicant to expedite the project otherwise it would proceed against it not only by using the clause of liquidate damages even it would terminate the contract and would appoint the Adjudicator to resolve the dispute. Therefore viewed from any angle one cannot accept the contention of applicant that delay was caused due to the lack of co-operation by the respondent. For the aforementioned reasons absolutely I do not find any substance in any of the contention of applicant, so it has itself disabled from getting any kind of relief or to get set aside the impugned award. Hence I answer both these points in the negative.
21 A.S.No:83/2010Point No.5:
24. In the result, I proceed to make the following:
ORDER Application is dismissed with costs.
(Dictated to the Judgement Writer, transcription computerized, then corrected and pronounced by me in open court this the 7th day of October 2016) (Ron Vasudev), III Addl. City Civil & Sessions Judge, Bengaluru.22 A.S.No:83/2010