Delhi High Court
Union Of India Through Chief ... vs Sikka Engineering Company on 6 December, 2018
Equivalent citations: AIRONLINE 2018 DEL 2619
Author: Navin Chawla
Bench: Navin Chawla
$~19
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(COMM.) 491/2018
Date of Decision : 6th December, 2018
UNION OF INDIA THROUGH: CHIEF ADMINISTRATIVE
OFFICERS ..... Petitioner
Through: Mr.Jagjjit Singh, Sr. Standing
Counsel for Railways with Mr.Vipin
Chaudhary, Mr.Preet Singh, Advs.
versus
SIKKA ENGINEERING COMPANY ..... Respondent
Through: Mr.Darpan Wadhwa, Sr. Adv. with
Mr. Mayank Bamniyal, Adv.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
IA 16687/2018 Exemption allowed subject to all just exceptions.
IA 16688/2018 (delay of 12 days in re-filing) This is an application seeking condonation of 12 days in re-filing the petition.
For the reasons stated in the application, the delay is condoned and the application stands allowed.
OMP (Comm.) No.491/2018 Page 1 OMP(Comm.) No.491/2018
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') has been filed by the petitioner challenging the Arbitral Award dated 25.04.2018 passed by the Arbitral Tribunal adjudicating the disputes that have arisen between the parties in relation to the Work Order No. ELCORE/T/OHE/Gr.179 (Mod.)/125/Pt.1 dated 17.10.2013 placed by the petitioner on the respondent with respect to overhead equipments including the wire for setting up of the system for Railway Electrification of Tracks.
2. The work was to be completed within nine months from 17.10.2013 to 16.07.2014. The work was finally completed by the respondent on 02.07.2016 when a Provisional Acceptance Certificate (PAC) was issued in favour of the respondent. The Safety Commissioner of Railways had also given clearance to open the line in the energized section.
3. It is the case of the petitioner that thereafter, on a complaint being received and due to the intervention of the PMO, investigation was carried out and it was found that wherever supplies of fabricated galvanized Steel Structures was made by M/s Jain Steel Industries, Mandi Govindgarh, the same were underweight. Accordingly, the weight measurement was conducted on 06.04.2017 and 07.04.2017 jointly by Vigilance CORE/ALD, RITES and the respondent along with the representative of M/s Jain Steel Industries and the petitioner, OMP (Comm.) No.491/2018 Page 2 and it was found that out of 108 Steel structures lying at the site as surplus material, 78 were underweight. The petitioner therefore, withheld the payment of the final bill to the respondent as also refused to release its Bank Guarantee. The petitioner also raised a counter claim for making recovery of the underweight steel supplied by the respondent.
4. The Arbitral Tribunal by the Impugned Award has rejected the plea of the petitioner primarily relying on the fact that M/s Jain Steel Industries was an approved vendor of the petitioner and in terms of the contract, the respondent could have purchased steel only from an approved vendor. The Arbitral Tribunal further found that before procuring the supplies, the material had been inspected by the respondent by RITES, which was the nominated agency of the petitioner itself. Thereafter, the material was again inspected once the same was received at the site. The PAC was issued on 02.07.2016 and the petitioner had also released payment of Rs. 13 crores to the respondent. CRS inspection was done on 29.08.2016 and a sanction dated 30.08.2016 was issued by CRS.
5. As far as the Joint Inspection is concerned, the Arbitral Tribunal has found certain deficiencies in the same. The relevant findings of the Arbitral Tribunal are quoted hereinunder:
"However the fact is, when the Joint Inspections were conducted in connection with the investigation of OMP (Comm.) No.491/2018 Page 3 the complaint of under-weight, there was no quality check of the fabricated galvanized steel structures conducted like any chemical test or check of other parameters like measurement of gauge, flange thickness and other dimensions / size etc. of the components/parts in accordance with the approved drawings and IS Specifications, to prove and establish the root cause of under-weight if it is any.
xxxxxxx As can be seen in the report above, weights of total 108 items were measured by the team and signed by their representatives but nowhere it is mentioned or certified that a particular steel structure was compared and found to be over/under- weight with respect to the standard weight of the same item as per its approved drawing and prescribed IS Specifications. The fact is the very purpose of carrying out joint inspections in detail for investigation by all possible experts agencies in their fields on complaint to cross-check and arrive at and to establish the reason of under-weight, if any, of the structures was not met with Joint-Inspection was not carried out for quality and quantity both. It appears it was only the simple exercise of weight measurement of items conducted because the Joint Inspection remained inconclusive in the absence of finding out which of the Steel-Structures were actually supplied and found under- weight and by how much percentage, find out to establish the cause of under-weight and fix accountability for the under-weight steel-structures."
"However as it appears from the Inspection Reports of the present case here that RITES seems to have not played its role of one such expertise, when Joint Inspections with Vigilance CORE/ALD, Firm M/S SIKKA Engg. Co., RE and supplier M/s JSI were conducted. Dimensions of any so called under-weight Portals were not checked in any Joint Inspections despite of the fact OMP (Comm.) No.491/2018 Page 4 that it was pointed out in one Dissent Note of 7-04-2017. It was insisted on to prove heavy variations/discrepancies in different Weighing Scales/Machines too and basically dimensions were required to prove whether all the materials supplied are well within the tolerance of IS specifications. As per the report, RITES have not been able to establish even in a single Joint Inspection conducted, any cause of under-weight of steel structures if any and complained about now and fix accountability. It was also found from the reply given to the said Dissent Note that RITES were having weight-measurement of steel structures, as the only terms of reference while doing Joint Inspections in connection with the complaint of under-weight. This was in no way sufficient to do complete investigation in the complaint of under-weight because the complaint was of under-weight supply and not of short-weight supply and that too of complete structures like Masts and Portals and not of their fabricated galvanised parts. Whereas in one more past example of 'In House Inspection of Bridge Mast' it was found that inspection had been conducted to the extent to measure all dimensions of angles, their length, hole diameter and unit weight etc. The Respondent admitted for record that they did not carry out weight measurement of different types of galvanized steel-structures (either Railway supplied or Contractor supplied from any of the Suppliers) in the past and invariably relied upon RITES Inspection Certificates in this regard. However, in the aftermath of receipt of a letter, CORE office carried out the sample weight measurement of different types of steel-structures supplied by M/S JSI to the Firm(M/S SIKKA Engg. Co.) for use in Gr.179 (UHP- SVDK Section) and discrepancies in weight were observed. The actual weight of different type of steel-structures was found (2 to 7%) lesser than the standard weight as under,"
OMP (Comm.) No.491/2018 Page 5 "The fact is it was the bulk supply of number of different types of fabricated galvanized items/parts like 3076-1, 3076-2, 3233 and 9027 etc. required and used for the fabrication of steel structures complete like Masts and Portals etc., which were procured from M/S JSI, for which the Claimant was paid for 95% of their total weight as mentioned in MRC. The number of the parts of steel structures were supplied to the Claimant, he was not aware of, whether any fabricated galvanized part is of under/over/right-weight. It is evident from one such RITES Inspection Certificate Book No.1996 & set No.066 dt. 6-02-2014 pertaining to the subject work, that it is for fabricated & galvanized different pieces/portions/parts of steel structure duly grilled and galvanized as per RDSO drawings and specifications and steel conforming to IS:2062 Gr.' A' and Zinc IS:209/1999 which is for 360 MT quantity on order, quantity now offered 260.73 MT and quantity now passed 260.73 MT and quantity still due is 99.26 MT. As indicated in the continuation sheet of the same Inspection Certificate, 80 No. items were checked which covered 3145 No. of pieces weighing 11.393 MT weight which were assembled for the complete fabrication of steel structures like Masts and Portals etc. Whereas it may be noted that the Claimant was supplied the fabricated and galvanized different parts of steel structure as passed by RITES which he transported to the site of work where the Respondent(RE) examined the steel structure parts, made entry in the MB for payment and gave permission to carry out the erection work in the section after assembling the supplied parts in the final shape/form of Masts and Portals complete. Therefore it is inconsistent to hold the Claimant responsible in connection with the complaint for the supply of steel structures as under-weight and hold his payments for the work he has done. As per the Contract Agreement(CA) , the Claimant was awarded the work of doing erection work of the procured to use the Steel Structures like Masts, Portals etc. complete and OMP (Comm.) No.491/2018 Page 6 onward till commissioning of the section which he has done to the entire satisfaction of RE, the Respondent."
6. Counsel for the petitioner, relying upon Clause 1.2.47 and 1.2.48 of the Agreement submits that notwithstanding the issue of PAC, if the material supplied is found to be defective, the petitioner could call upon the respondent to replace the same or to have the same rectified. He submits that the Arbitral Tribunal has therefore, erred in placing reliance on the PAC issued in favour of the respondent for allowing its claim and for rejecting the counter claim of the petitioner.
7. He further submits that M/s Jain Steel was only one of the approved vendors and the respondent having chosen to seek supplies form M/s Jain Steel Industries, cannot now absolve itself from taking responsibility of the defective material being supplied by the vendor.
8. I am unable to accept the arguments of the counsel for the petitioner. As noted by the Arbitral Tribunal, M/s Jain Steel Industries was one of the approved vendors of the petitioner. It was a condition of the contract that the respondent shall procure material only from one of the vendors approved by the petitioner. The respondent, therefore, cannot be faulted for having procured the material from M/s Jain Steel Industries. It was further a condition of the contract that before procuring such supply, the respondent shall also obtain certification with respect to the quality of the material from RITES, which again OMP (Comm.) No.491/2018 Page 7 was also the agency nominated by the petitioner itself. The petitioner never claimed supply of defective material during the currency of the work or thereafter.
9. The Arbitral Tribunal has noted that the work of the respondent under the contract was of a limited nature of designing, supplying and erection of single phase overhead equipment. In the course of such work, bulk supply of different types of fabricated galvanized items/parts were required and used, and the respondent was not aware whether any fabricated galvanised part was underweight.
10. The above being a finding of fact recorded by the Arbitral Tribunal, this Court cannot sit as a Court of appeal over such findings.
11. I therefore, find no merit in the objections of the petitioner to the grant of Claim no.1 in favour of the respondent and rejection of counter claim no.1 of the petitioner.
12. Counsel for the petitioner further challenges the grant of Claim no.8 which was for payment of bill for surplus material left with the respondent. He submits that in terms of Clause 1.2.53 of the Contract read with Clause 32 of the General Conditions of Contract (GCC) any surplus material not required by the petitioner has to be taken back by the respondent. In exercise of the right conferred in these clauses, the petitioner vide its letter dated 25.05.2017 had called upon the respondent OMP (Comm.) No.491/2018 Page 8 to remove all such surplus material, except steel items for which a Joint Inspection was carried out on 06.04.2017 and 07.04.2017. The respondent having failed to remove such material, cannot later raise a claim for the value of the same. The finding of the Arbitral Tribunal that such material has been specifically procured for the work of the petitioner and the respondent is entitled to the claim, is in complete ignorance of the two Clauses mentioned hereinabove.
13. The learned senior counsel for the respondent, on instructions, submits that the respondent is willing to take back all surplus material from the petitioner and if the same is returned, the respondent would not press its claim as awarded under Clause No.8 of the Impugned Award.
14 Counsel for the petitioner prays for time to seek instructions on the above offer.
15. Counsel for the petitioner next challenges the Award of extra expenses for shifting and removal of structural material from Katra Yard under Claim no.11. He submits that there was no evidence led by the respondent with regard to the extra work or in proof of the claim made under this head. He submits that in terms of the contract, the measurements done by the petitioner at the time of the issuance of the Provisional Certificate is deemed to be final.
OMP (Comm.) No.491/2018 Page 9
16. I find merit in the submission of the counsel for the petitioner. A reading of the Award on Claim no.11 would show that the same is unreasoned. Merely because the respondent had raised a bill of Rs.4,55,208/- on the petitioner, the said claim cannot be held to be justified or payable. It was for the respondent to establish that not only was this work done by the respondent at the behest of the petitioner, but also that the petitioner had agreed to pay for the same. It was for the respondent to have proved the amount to which the respondent would be entitled for having done such work. I do not find onus of proof to have been discharged by the respondent. In any case, as noted above, there are no reasons supplied by the Arbitral Tribunal for the award of this claim.
17. The Award in so far as Claim no.11 is concerned, is therefore, liable to be set aside.
18. List on 19th December, 2018 for the counsel for the petitioner to seek instructions on Claim no.8.
NAVIN CHAWLA, J
DECEMBER 06, 2018
RN
OMP (Comm.) No.491/2018 Page 10