Bangalore District Court
Larsen And Toubro Pvt Limited vs Bangalore Metro Rail Corporation ... on 13 December, 2024
1
Com.A.S.221/2018
KABC170103302020
IN THE COURT OF LXXXVII ADDL.CITY CIVIL &
SESSIONS JUDGE, BENGALURU (CCH.88)
Present: Smt. Roopa K.N., B.Sc., LL.B.,
LXXXVII Addl.City Civil &
Sessions Judge, Bengaluru.
Dated: 13th DECEMBER, 2024
Com.A.S.No.221/2018
APPLICANTS/ 1 Larsen & Toubro Pvt. Limited
PETITIONERS No.19, I & II floor,
Kumara Krupa Road,
Bengaluru - 560001
(Reptd by Sri.NDBR -Adv)
AND
RESPONDENTS 1. Bangalore Metro Rail Corporation
Limited,
BMRCL, B.M.T.C. Complex,
3rd Floor, K.H.Road,
Shanti Nagar, Bengaluru - 560027
2. Sri.R.Rajamani
Flat No.3, Rampriya AE - 172
11th Main Road, Annanagar,
Chennai - 600040
3. Sri.L.V.Shreerangaraju
#537, Jyestha, 3rd Main,
2
Com.A.S.221/2018
Hosakerehalli Cross,
Banashankari 3rd Stage,
Bengaluru - 560085
4. Capt S Raja Rao,
#279, I 'B' Cross, 8th Main,
4th Block, III Stage,
Basaveshwaranagar,
Bengaluru - 560079
(R-1 to 4 by Sri.SBK Advocate)
Date of Institution of the 02.11.2018
suit
Nature of the suit (suit on
pronote, suit for declaration
Arbitration Suit
& Possession, Suit for
injunction etc.)
Date of commencement of -
recording of evidence
Date on which judgment 13.12.2024
was pronounced
Total Duration Year/s Month/s Day/s
06 01 11
(ROOPA K.N.),
LXXXVII ACC & SJ (CCH-88),
(Commercial Court)
Bengaluru.
3
Com.A.S.221/2018
JUDGMENT
This Petition is filed by the petitioner under Sec.34 of Arbitration and Conciliation Act, 1996 seeking set aside of the impugned award dtd:04.08.2018 passed by the arbitrators in respect of DISPUTES UNDER CONTRACT AGREEMENT No: BMR/VIA & 3 STNS / R3A / EXTENSION / 2009 DATED: 05.03.2010.
2. The parties are referred as per their original rank before the arbitral tribunal for the sake of clarity.
The brief facts leading to filing of this petition are as follows; Both claimant and respondents before AT entered into the Contract on 05.03.2010 for the work of construction of elevated structures (viaduct) of length 4.80 Km(approx) from Yeshwanthpur station to Peenya depot and construction of 3 elevated metro stations VIZ. , Outer Ring Road station (ORR), Peenya industrial area station (PIA) and Peenya village station (PV) in the extension of north side of N-S corridor of Bang-a, ore Metro Rail Project at a Contract Price of Rs.303,29,55,778/- (Rupees Three Hundred Three Crores Twenty Nine Lakhs Fifty Five Thousand Seven Hundred and Seventy Eight Only). The period of the Contract was 24 months from the date of letter of Acceptance i.e., 17.12.2009 and ending on 16.12.2011. The Works could not be completed during the original contract. The Contract was extended by the Respondent. Contract specified 10 key dates in respect of Viaduct from KD-1 to KD-10 and 5 key dates in respect of three stations viz., 4 Com.A.S.221/2018 ORR, Peenya Village, PIA Stations. KD-1 to KD9 in case of Viaduct and KD-1 to KD-4 in case of Stations are intermediate Key dates while KD-10 in case of Viaduct and KD-5 in case of stations are the two final Key dates for both Viaduct and Stations which are coterminous for the completion of the Works as a whole. Admittedly, the commercial operation for the Metro was commenced on 01.03.2014, though some minor works were pending and the loop line site leading to the workshop from the PVS was not fully handed over to the Claimant. On account of variations, over-stay, release of amount withheld for allcgcd penalty, non-payment of price variations, etc., the claims were raised by the Claimant which were denied by the Respondent and have become disputes for adjudication before AT. The Respondent has also made several Counter-Claims as set out in his objection statement.
3. After holding a detailed enquiry and on hearing both side, the learned sole arbitrator partly allowed the claim petition and rejected claim No.3. Claimant aggrieved by the above award present petition is filed by this petitioner.
4. Now the point that arise for my consideration are;
5Com.A.S.221/2018
1. Whether, the present petition deserves to be allowed and the impugned award dtd:
04.08.2018 passed by the arbitrators in respect of DISPUTES UNDER CONTRACT AGREEMENT No: BMR/VIA & 3 STNS / R3A / EXTENSION / 2009 DATED:
05.03.2010 requires to be modified under Sec.34 of Arbitration and Conciliation Act?
2. What Order?
5. My findings on the above Points are as under:
Point No.1 : In the "Negative".
Point No.2 : As per the final order for the following reasons
-: R E A S O N S :-
6. POINT NO.1: Both claimant and respondents before AT entered into the Contract on 05.03.2010 for the work of construction of elevated structures (viaduct) of length 4.80 Km(approx) from Yeshwanthpur station to Peenya depot and construction of 3 elevated metro stations VIZ. , Outer Ring Road station (ORR), Peenya industrial area station (PIA) and Peenya village station (PV) in the extension of north side of N-S corridor of Bang-a, ore Metro Rail Project at a Contract Price of Rs.303,29,55,778/- (Rupees Three Hundred Three Crores Twenty Nine Lakhs Fifty Five Thousand Seven Hundred and Seventy Eight Only). The period of the Contract was 24 months from the date of letter of Acceptance i.e., 17.12.2009 and ending on 16.12.2011. The Works could not be completed during the original contract. The Contract was extended by the Respondent. Contract specified 10 key dates in respect of 6 Com.A.S.221/2018 Viaduct from KD-1 to KD-10 and 5 key dates in respect of three stations viz., ORR, Peenya Village, PIA Stations. KD-1 to KD9 in case of Viaduct and KD-1 to KD-4 in case of Stations are intermediate Key dates while KD-10 in case of Viaduct and KD-5 in case of stations are the two final Key dates for both Viaduct and Stations which are coterminous for the completion of the Works as a whole.
7. Admittedly, the commercial operation for the Metro was commenced on 01.03.2014, though some minor works were pending and the loop line site leading to the workshop from the PVS was not fully handed over to the Claimant. On account of variations, over-stay, release of amount withheld for allcgcd penalty, non-payment of price variations, etc., the claims were raised by the Claimant which were denied by the Respondent and have become disputes for adjudication before AT. The Respondent has also made several Counter-Claims as set out in his objection statement. The AT has framed the following issues for determination:
ISSUE-1: Whether the Claimant proves that the Respondent failed in handing over of land for the work in stretches as per the provisions of the Contract under Annexure-B of LOA?7
Com.A.S.221/2018 ISSUE-2: Whether the works under the Contract be deemed to have been taken over by the Respondent with effect from 28th February 2014 and the defect liability period under the Contract shall therefore be reckoned from the said date?
ISSUE-3: Whether the Claimant proves that the Respondent had caused delays in fulfilling its obligations under the Contract for timely execution of the work as per the Schedule and that these delays are attributable to the Respondent?
ISSUE-4: Whether the Claimant proves his entitlement to various Claims from Claim-(i) to Claim-(ix) as set out in Para-107 of the Claim statement?
ISSUE-5: Whether the Claimant proves that the Counter- Claims of the Respondent are not arbitrable under Sec. 16 of the Arbitration & Conciliation Act, 1996?
ISSUE-6: Whether the Respondent proves his entitlement for the Counter- Claims as set out in Para-5 of his Statement of Counter-Claim from Counter-Claim-1 to Counter-Claim-11?
8Com.A.S.221/2018 ISSUE-7: Whether the parties are entitled to the interest for the pre-award & post-award periods and if so at what rates in respect of the claims for which they are entitled to?
ISSUE-8: What Award?
The Arbitral Tribunal has framed eight issues as above and out of which at first Issue No.1 was taken for consideration.
ISSUE-I: Whether the Claimant proves that the Respondent failed in handing over of land for the work in stretches as per the provisions of the Contract under Annexure-B of LOA?
Findings of the AT:
The Arbitral Tribunal on hearing the rival contentions of the parties and upon perusing the various documents and the oral evidences adduced by the witnesses, held that "that primarily this issue is regarding the delay in handing over of the site as per the provisions of the Contract under Annexure-B of the LOA. The Claimant has put forth its case to contend that the Respondent has failed to adhere to the requirements of the provisions of the Contract in particular Annexure-P. of LOA with regard to handing over of 9 Com.A.S.221/2018 the land for execution of work. The Respondent's contention is that it has handed over the site progressively and in conformity with the provisions of the Contract, and as such there is no delay in handing over of the site. Further the Respondent also contended that the Claimant failed to execute the works even in areas where the site was made available".
8. If we peruse Vol.II Book-1 of the Contract, Annexure-B Pg. 49 of Vol.II Book-1 of the Contract the Contract provides for specific dates for handing over of site to the Contractor for starting the piling work in respect of 166 various piers in the viaduct portion as set out at priority No.1-9. Priority No.1 to 5 and Priority No.9 is for the Piers. Priority No.6, 7 & 8 are for the left hand curve to depot line, depot entry line on road portion and right hand curve to depot line respectively and Annexure- B to the LOA specifies the Priority Number for handing over of the three stations viz., Priority No.1 ORR Station, Priority No.2 PIA Station and Priority No.3 PV Station. Further as per Annexure-B, for the viaduct portion and the station portion, the dates of handing over of each priority for the pier and station were also specified. The dates of handing over were from 17.12.2009 to 16.04.2010 for the piers in the viaduct portion for Priority 10 Com.A.S.221/2018 Numbers 1 to 5 & 9. For priority nos. 6, 7.& 8 i,e the left hand curve of depot line, the depot entry line and right hand curve to depot line were from 16.02.2010 to 16.03.2010. Further, if we peruse, for the station portion the priority-1 is ORR station for which the dates of handing over are from 16.01.2010 & 16.03.2010 for the median and balance portion respectively. Priority-2 is the PIA Station for which the dates of handing over are from 16.02.2010 & 16.03.2010 for the median and balance portion respectively. Priority-3 is the PV Station for which the dates of handing over are from 16.03.2010 & 16.04.2010 for the median and balance portion respectively. On this basis , it could be safely held that, the provision under Annexure-B of the LOA is that,
a) for the Viaduct portion (i) the piers under priority nos. 1 to 5 & 9 were to be handed over from 17.12.2009 to 16.04.2010 and
(b) for the depot lines from Priorities 6, 7 & 8 the land was to be handed over from 16.02.2010 to 16.03.2010. The median portion and balance portion of the ORR Station. PIA Station & PV station were to be handed over from 16.01.2010 to 16.04.2010. With respect to these above dates, the actual dates of handing over of the sites for the viaduct portion are furnished in Table-E of the 11 Com.A.S.221/2018 Claimant's written synopsis at Pg. 17. Ex.C-59 referred to by the Claimant is a letter dated 15.01.2014 requesting for extension of time and same were admittedly received by the Respondent on the same date which shows that, the Claimant has clearly stated that it has requested time for the completion of available work front till 15.01.2014. And in so far as the PDR-425 to PDR-8 (PDR - Peenya Depot Right Side Curve) i.e., in respect of the 18 piers in the PDR portion the land was handed over fully without obstructions on 04.01.2014. As Claimant wrote various letters from 12.08.2013 to 03.01.2014 to the Respondent and in those letters EOT was sought till 31.05.2014 but it was recommended up to 30.06.2014. The question that arise in the mind of this court is that, whether the date of commencement of handing over of these 18 piers whether from 30.07.2013 or 04.01.2014 the handing over can be considered to have been done in accordance with the Annexure-B of LOA?
9. The respondent has also admitted that, the land between P445 & P450 for the construction of the loop line was handed over to the Claimant on 23.01.2013 inviting reference to Ex.R-9 Pg. 129, SOBJ Vol.I. Further, it could also be seen that, the Respondent has confirmed that the Right Hand side (RHS) land of ORR station was handed over on 26.04.2011 inviting reference Ex. R-10 Pg. 130, 12 Com.A.S.221/2018 SOBJ Vol.I and it is also not in dispute that the land measuring 902.5Sqm adjoining M/s. Jatti Motors for ORR Station was handed over to the Claimant on 01.02.2013 albeit for the purpose of underground tank and DG room and the PIA station and Pier lines of ORR Station on either side of median was handed over on 15.03.2010.
10. From the above observation it can be safely held that, as per the provision under Annexure-B of LOA, the land for the Viaduct portion and the station portion were to be completely handed over from 17.10.2009 to 16.04.2010, so as to enable completion of the work within the initial Contract period of 24 months ending on 16.12.2011. It is an admitted fact that various bits and pieces of the land for execution of the work were handed over beyond the scheduled date of completion of work itself i.e.. beyond 16.12.2011 and as admitted by the respondent the last date of land handing over between P445 & P450 is on 23.01.2013. It is further seen from the Ex.C-59, referring to the earlier letters, the Claimant had stated that the hindrance in respect of PDR-425 to PDR-8 continued up to 04.01.2014. It is also not in dispute that the land measuring about 902.5Sqm adjoining M/s. Jatti Motors for ORR Station was handed over to the Claimant on 01.02.2013.
13Com.A.S.221/2018
11. The Respondent relied on Clause-8.3, Clause-8.6 of GCC that, the failure of the employer to handover the site to the Claimant or giving necessary drawings / instructions etc., shall not vitiate the Contract and there will be no entitlement to the Contractor for damages or compensation thereof. Clause-32.1 of SCC specifies "The Employer will acquire and provide land for permanent works (within BMRCL Land) for access thereto over routes established by the Employer"
[Emphasis supplied). It is clear that the obligation of the Employer that it will acquire and provide the land for permanent works is an agreed term. An interpretation was made to mean that the terms "within BMRCL land"
in brackets be interpreted to mean only the BMRCL land and not other land. The same can be interpreted only to mean that the Employer will acquire and provide the land for permanent works and provision of land for permanent works is also included in this clause. If the area to be handed over is not in the BMRCL land then no meaning can be ascribed to the words 'acquire and provide' the land for works. This court is of the opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1 This court is of the 14 Com.A.S.221/2018 opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1 This court is of the opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1 This court is of the opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1 This court is of the opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1 This court is of the opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1 nal, it is trite that, a contractual clause deserves to be interpreted in the manner in which all words of the clause should be brought in to bring homogeneity to the clause and not create any conflict between the clauses itself and tribunal 15 Com.A.S.221/2018 was also right in holding that, that this clause is clear enough to interpret that the employer has the obligation to acquire and provide the land if it is not in the BMRCL land and also if the land is within the BMRCL land it has to provide access thereto.
12. In so far as the acquisition of land is concerned , tribunal by considerin the evidence of RW-1 held that, "
the land acquisition department of BMRCL deals with the land acquisition and in Question-28, the RW-1 also stated that he has not informed the land acquisition department of BMRCL regarding the dates of requirement of site for this project. In answer to Question-29 RW-1 has expressed that he does not know the basis on which the land acquisition department of BRMCL was determining the process of land acquisition. In answer to Question-30 RW-1 has categorically stated that once the land acquisition is done by the department, if any buildings were to be demolished, after demolishing it was handed over and otherwise the land was handed over after acquisition" . On the basis of the above discussion it is clear that ,there was additional land to be acquired by the Respondent for handing to the Claimant, although the process of land acquisition also vested with the Respondent.16
Com.A.S.221/2018
13. Clause-2.2 of GCC relied by the Respondent reads as follows:
"2.2 Access to and Possession of the Site The Employer shall grant the Contractor right of access to, and possession of, the Site progressively for the completion of Works. Such possession may not be exclusive to the Contractor will draw/modify the schedule for completion of Works according to progressive possessión/right of such sites.
If the Contractor suffers delay from failure on the part of the Employer to grant right of access to, or possession of the Site, the Contractor shall give notice to the Engineer in a period of 28 days of such occurrence. After receipt of such notice the Engineer shall proceed to determine any extension of time to which the Contractor is entitled and shall notify the Contractor accordingly.17
Com.A.S.221/2018 For any such delay in handing over of site, Contractors will be entitled to only reasonable extension of time and no monetary claims whatsoever shall be paid or entertained on this account".
14. The Respondent relied on this clause and contended that, it has given the right to access and possession of site progressively for completion of the work. It is very clear that, the progressive possession of site cannot have been the intention of the parties at the time of entering into Contract to mean that the possession of site would be given even after the completion of the original Contract period and during the extended period and hence the meaning that can be given to it is that the progressively the site would be handed over as per the agreed baseline programme which is for completion of the work within the original Contract period. Further it has to be held that, if the site itself is not handed over the progress of the work will get affected and this progress that gets affected will have an impact on the programme itself and the progress would get delayed. Hence, this court finds that, the progressive handing over contemplated under Clause-2.2 of GCC read with Annexure-B of LOA, Pg.49 Contract Vol.II Book-1, has 18 Com.A.S.221/2018 given specific dates of handing over of land to the Claimant for the Viaduct portion and the Station Portion as set out therein. The last column of the Table at Pg.49 of Annexure-B, supra, the first date of handing is 17.12.2009 and the last date of handing over is 16.04.2010. AT was right in holding that these dates alone would be the criteria for interpreting the meaning of progressive handing over under the Contract for the reason that the Annexure-B forming the part of the LOA has the Priority at Sl. No.(b) under Clause-1.5 of GCC, Pg.626 Contract Vol.II Book-2, while the special conditions is at Priority-(e) and the General Conditions of Contract is at Priority-(f). Hence, even as per the Contract it is clear that ,the progressive handing over would imply only as per Annexure-B of the LOA. In view of this the contention of the Respondent that there was no delay in land handing over, when actually the land was handed over at the pleasure of the Respondent and even admittedly after the original Contract period in violation of the agreed contractual provision under Annexure-B of the LOA is not sustainable. In view of the above discussions, it is clear that, the last portion of the land that was handed over to the Claimant was on 09.10.2013 and further even as on this date all hindrances were not removed and the hindrances were continued upto 04.01.2014 (Ex.C-59) and hence, unhindered land was 19 Com.A.S.221/2018 handed over only by 04.01.2014 and therefore, it is to be held that, this is not in conformity with the Annexure-B of LOA. It is very much clear from the above that, the Respondent has failed to handover the land in accordance with the provisions of Annexure-B of LOA and this delay is attributable to the Respondent. Hence, this court is of the opinion that, the above contention of the respondents relating to damages do not deserve to be taken in to consideration and therefore I hold that AT has not committed any patent illegality while answering Issue No.1.
15. ISSUE-2: Whether the works under the contract be deemed to have been taken over by the Respondent with effect from 28th February 2014 and the defect liability period under the Contract shall therefore be reckoned from the said date?
16. The counsel for petitioner (petitioner in 222/2018) before this court not fully argued on this issue. Respondent by relaying on Clause-2.4 of SCC (General) and stated that, the Respondent can issue Taking over certificate only after compliance with this clause which requires Certification of Completion of works to be issued by the Engineer only after the 'As Built' drawings were submitted by the Claimant in 20 Com.A.S.221/2018 accordance with this clause and they also relied on Clause-5.6 of GCC which states that, it was necessary for the Claimant to submit one Micro film copy, one full size original copy and six printed copies of the relevant 'as built' drawings and relied on Sub-Clause-9.1 of GCC that unless these are submitted taking over certificate' shall not be issued. The Respondent also relied on Sub- Clause-10.1 of GCC regarding the DLP wherein it is necessary that certification from the Engineer should be issued. Hence, the DLP would commence only after the Claimant submitted the as built drawings and Engineer issued the Certificate of Completion. The counsel Respondent( respondent in AP 222/18) contended that:
(a) the As built drawings for Viaduct and the Peenya Village stations were submitted by the Claimant on 29.06.2015; (b) the As built drawings for ORR station without signature was submitted by the Claimant on 06.07.2015; (c) the As built drawings for PIA station was submitted by the Claimant in June-2015 and in view of this no delay can be attributed to the Respondent in the matter of issuing the Taking Over Certificate (TOC) and that the TOC had been issued in accordance with the provision of the Contract.
17. The Arbitral Tribunal on hearing both side and also perusing the evidence held that, primarily this issue is 21 Com.A.S.221/2018 regarding (a) the determination of the deemed taken over date by the Respondent with effect from 28 th Feb-2014 (as the date of commercial operation was commenced from 01,03.2014) and (b) reckoning of the Defect Liability Period (DLP) under the Contract from the said date.
18. If we peruse the provisions relating to the taking over of works as contained under Clauses 901, 902 of GCC, Clause-2,4 of SCC and Clause-
IO of GCC regarding DLP. Clause-9.2 of GCC relates to taking of the parts of the works, which states that "The Engineer may at the sole discretion of the employer issue a Taking Over Certificate for any part of the Permanent Works. If the Employer uses any part of the works for revenue service before the Taking Over Certificate is issued,' (a) the part which is used shaZZ be deemed to have been taken over at the date on which it is used, subject to the Contractor completing the works which remain outstanding in the opinion of Employer; (b) the Engineer shall, when requested by the Contractor, issue a Taking Over Certificate after the Contractor has completed the outstanding works and has carried out tests on completion, including integrated testing and (c) the Contractor shall cease to be liable for the care of such part from such date when responsibility shall passed to the Employer". Clause-10 of GCC deals with DLP and 22 Com.A.S.221/2018 Clause- 10.1 specifies that "Defect Liability Period shall mean the defects liability period stated in the special conditions of Contract calculated from the date of taking over of Whole of the Works and not any subsection and part thereof, provided that, if any part of the works or subsystems or component of that part has been replaced, renewed or repaired, the Defect Liability Period in respect of that part or subsystem or components of that part shall start from the date of such replacement, renewal or repaired has been completed to the satisfaction of the Engineer. Clause-2.4 of SCC (General) relates to Completion Drawings and specifies that on completion of the work two sets of as built drawings should be furnished in a manner as set out in that clause and at the end of this clause it specifies "the Certificate of Completion of Works as per the provisions in the General Conditions of Contract shall not be issued by the Engineer in the event of Contractor's failure to furnish aforesaid 'as built drawings for the entire works", Hence, I am of the opinion that, clauses in the GCC speak only of Taking Over Certificate (TOC) and for Deemed Taking Over of any part of the work. If we read the provisions under Clauses 5.6, 9.1, 9.2 & 10.1 of GCC conjointly, same makes clear that, what GCC specifies is only TOC which is after completion of the works for which there is also the requirement of submission of 'As Built' drawings as provided under Clauses 5.6 of GCC & 2.4 of SCC. In the clauses 5.6, 9.1. 9.2 & 10.1 of GCC there is no mention of Certificate of Completion of Works (CCW) which is referred to in the provisions under Clause-2.4 of SCC at Pg.706, reproduced above, where it refers to a Certificate of Completion of Works which word is neither defined nor existing in the GCC. Clause-9.2 provides that if any part of the work is used by the Employer for revenue service, before the Taking Over Certificate (TOC) is issued, then such part which is used by the Employer shall be deemed to have been taken over at the date on which it is used. Further the clause also states with the provision that the Engineer at the request of the Contractor shall issue a TOC only after Contractor has completed the outstanding works and has carried out the tests. Further the clause alsc specifies that the Contractor shall cease to be liable for the care of such part from such date when responsibility shall be passed to the Employer. It is also clear that the Employer 23 Com.A.S.221/2018 has taken over this part and used it for revenue service before the TOC issued. This court feels appropriate that, the Taking Over Certificate as defined under Clause-1.1.4.4 of GCC means a certificate issued under Clause-9.1, and the Clause-9.1 is titled Taking Over Certificate'. Therefore, the TOC as per the definition under the Contract can be construed as the one issued only under Clause-9.1. Clause-9.2, relating to Deemed Taking Over, and it is clear that, the part which is used by the Employer shall be deemed to have been taken over on that date when it is used subject to provisions under Clause-9.2(a). Clause-9.2(b) mandates the Engineer that when the Contractor requests so the Engineer shall issue a TOC after the Contractor completes the requirements as stated therein. The TOC referred in Clause-9.2(b) is the same TOC as defined and specified under Clause-9.1, according to which the TOC shall be issued only after completion of whole Work. This court feels that, there is an inconsistency. As the definition of TOC as per Clause-9.1 is concerned, the TOC should be issued only after completion of Work. But the provision under Clause-9.2(b) specifies that the TOC shall be issued for deemed taken over works at the request of the Contractor by the Engineer, both these dates are inconsistent with each other, since the deemed taking over as per Clause-9.2 is invariably different from the taking over after completion of the whole works under Clause-9.1. Therefore keeping in view that the definition of TOC under definition Clause1.1.4.4 and the Clause- 9.1 it is inconsistent to say that there can be two taking over certificates one under Clause-9.1 for the whole of the Works and another under Clause-9.2(b) for deemed taking over certificate in respect of the work which was taken over in parts by the Employer.
24Com.A.S.221/2018
19. In view of the above discussions, this court is of the opinion that, as per Clause-9.2(c) the Contractor shall cease to be liable for the care of such part from such date when responsibility shall pass on to the Employer is an independent provision to make the Employer responsible for the part which is deemed to have been taken over under Clause-9.2 and this interpretation would become inconsonance with the definition of TOC, the provisions under Clause-9.1 and the provisions under Cl-9.2(b) and also the provisions under Clauses 5.6 & 10 of GCC and Clause-2.4 of SCC. Under these circumstances this court hold that, the CCW referred to in Clause-2.4 of SCC can be treated as TOC specified under the GCC of the Contract. Coming to the question of joint survey, same is signed by (i) the viaduct Contractor (Claimant), (ii) Track work Contractor, (iii) RE / Viaduct, (iv) RE / Track and (v) person from ITD Survey, which substantiates the statement of the Claimant that the viaduct was completed and handed over to other agencies even earlier to 28.02.2014. On the basis of above observations it is clear that, the works on the viaduct including the station reach was completed and handed over through GC to the other Contractors on different from 16.01.2012 to 06.04.2013. The commercial operation commenced admittedly from 1 st Mar-20140 The Claimant is seeking a direction from the Arbitral Tribunal that this reach which 25 Com.A.S.221/2018 was taken over by the Respondent for revenue service is to be declared as deemed taken over by the Respondent on 28.02.2014. In view this, court is of the opinion that, although the actual works were completed and handed over during the period from 16.01.2012 to 06.04.2013 this cannot be construed as taken over for purpose of revenue services in accordance with provision under Clause-9.2 of GCC since the commercial operation started only from 01.03.2014. In view of this this court opines that, it is just and appropriate to hold that, the works under the Contract which are put to commercial operation shall be deemed to have been taken over by the Respondent on 28,02.2014. Hence I hold that, the part of works which were deemed taken over of the viaduct and station reaches by the Respondent which was put to commercial operation is 28.02.2014. Regarding second part of this Issue-2 i.e. , reckoning of DLP is concerned, this court feels right that, Clause-10.1 of GCC defines the DLP to mean as what is stated in the SCC. Further, the Clause-10.1 also specifies that period to be reckoned for the DLP as from 'the date of Taking over of whole of the Works or subsystems or component of that part. As rightly observed by the AT ,this clause has two limbs they are (1) the Taking over of the whole of the Works; and (ii) Taking over of other systems which are replaced, repaired, renewed etc. The Arbitral Tribunal held that, 26 Com.A.S.221/2018 the import of the words Taking Over of whole of the Works would be relevant. Works as defined under GCC Clause-1.1.6.7 at Pg.625, Contract Vol.II, incans "the work to be executed in accordance with the Contract and shall include both Permanent Works and Temporary Works". Based on this the whole of Works under Clause- 10.1 is to be considered as the entire work is to be completed. As per Clause-10.1 of GCC, the DLP shall be as stated in the SCC calculated from the date of taking over of whole of Works.
20. If we peruse Sub-Clause-10.1 of SCC at Sl.No. 18 it reads as follows:
"Defect Liability Period shall mean, the defect liability period as stated in FT-1 to the Form of Tender or as extended under Sub-Clause-10.1 and 10.3 of GCC. After any parts of the works are taken over bu the Employer until the end of Defect Liability Period the Contractor shall provide, free of cost, competent and skilled personnel round the clock as required and maintain adequate stock of spares so as to promptly fulfil his obligations to remedy the defects or failure as laid down in Employer's requirements......".
21. The DLP as stated in FT-1 at Sl.No.5 at Pg.578, Contract Vol.II, is 12 months from the date mentioned in 27 Com.A.S.221/2018 the Taking Over Certificate for the whole of the Works. This Clause specifies that after any parts of the works are taken over by the Employer until the end of DLP the Contractor is obliged to perform as per that clause. On a conjoint reading of Clauses 5.6, 9, 10 of GCC and Clause-2.4 of SCC the following emerges relating to the DLP.
a) The DLP of 12 months commences from the date on which the TOC is issued after completion of the whole Works in accordance with Clause-9.1 of GCC.
b) For issuance of TOC, Clause-5.6 of GCC requires mandatorily the submission of 'As Built Drawings and Documents' as set out there under in the clause. The last line of Clause-5.6 specifies that the Work's shall not be considered to be completed for the purposes of Taking Over under Sub-Clause-9.1 until such documents have been submitted to the Engineer'.
22. From the above it is very clear that, the major part of the work is deemed Taking Over under Clause-9.2 of GCC by the Respondent for the purpose of commercial operation on 2802.2014. As these works were completed in all respects by 28.02.2014, these works of the Viaduct and station reaches have been held to be Deemed Taking Over under Clause-9.2. It is also clear that the TOC as specified under Clause-9.2(b) cannot be different from 28 Com.A.S.221/2018 the TOC under Clause-9.1 and therefore no taking over certificate can really be issued at an intermediate stage when the deemed taking over under Clause9.2. For this portion of the works the Claimant's responsibility ceases after the date of deemed taking over in terms of Clause- 9.2(c).
23. The contractual provision is clear that, the DLP is only one DLP as defined in the definition and specified in Clause-9.1. Therefore the DLP can commence only after TOC under Clause-9.1 is issued. It is also clear that the Clause-9.1 is for the whole of the Works. This deemed taking over date is undisputedly is 28.02.2014. The land for this was handed over to the Claimant during 2013 & 2014 and these works were not related to commercial operations.
24. This EOT-4 extension records as follows:
a. Viaduct From C1.05.2014 to 10.07.2014 b. Stations: ORR- From 16.03.2014 to 31.03.2015, PIA & PV- From 01.04.2014 to 31.03.2015. These extensions are the final extensions and they include all the previous extension granted. Hence, the Arbitral Tribunal held that, the final status of EOT as approved by the Respondent in Ex.C-338 puts the completion date of the entire work on 31.03.2015, although the completion date for the Viaduct 29 Com.A.S.221/2018 which was taken over under Clause-9.2 on 28.02.2014 as deemed taking over is put as 10.07.2014. Thus, the balance works of Viaduct were also deemed to have completed before 10.07.2014 and all other outstanding works in the station reaches have been extended up to 31.03.2015.
25. AT further held that, it is just appropriate and reasonable to conclude that on 24.02.2015 the entire work was completed under the Contract. Also it is not in dispute that the Viaduct portion (which includes the viaducts under station reaches) was taken over for commercial operations on 28.02.2014 and the commercial operations commenced from 01.03.2014, although there were certain minor works which were to be completed which were not germane to the commerciai operation as observed earlier by the AT. These works were also completed within 10.07.2014 for which the extension was granted on 17.04.2015 under EOT-4 in Ex.C-338. In this scenario the AT finds that the complete viaduct portion was completed admittedly on 10.07.2014 and the works of the stations were also completed on 24.02.2015.
26. Under the Contract that the DLP will start from the date of Taking over Certificate. In the present case the 30 Com.A.S.221/2018 entire viaduct portion was taken over under Clause-9.2 and was put to commercial use from 01.0302014. This deemed taken over portion forms the major portion of the Contract including the viaducts in all reaches including the station and some balance portion in the stations, If there is delay in the issue of taking over certificate for whatever reasons but the entire structure is taken over and put to use on an earlier date to the taking over certificate.
27. The date of completion of the entire works should be on 24.02.2015 under the Contract. Consequently the DLP will start from 25.02.2015 in accordance with the provision under the Contract.
28. ISSUE-3: Whether the Claimant proves that the Respondent had caused delays in fulfilling its obligations under the Contract for timely execution of the works as per the Schedule and that these delays are attributable to the Respondent?
29. Observations of tribunal: The Contract is an item rate Contract executed on 05.03.2010 subsequent to letter of Acceptance issued on 17.12.2009. The period of Contract was 24 months from the date of LOA and ending on 16.12.2011. The entire works under the 31 Com.A.S.221/2018 Contract involves the construction of 4.8km of Viaduct and three stations viz., ORR, PIA, PV Stations. In all these works the initial work to start with is the foundation works for the piers of the Viaducts and the station columns. These foundations were pile foundations involving boring of piles for each pier or station column, providing piles & pile caps and later execute the piers of the Viaduct or the columns of the Stations. Thereafter the piers are to be executed and then the precast, prestressed viaducts have to be launched between the piers in a sequential way and post-tensioned in each span so that the entire viaduct in the non station reaches and station reaches are made continuous as per the geometrical designs of the viaduct to enable laying the rail track, electrification works and signalling works to be undertaken by other agencies. The constructions of three stations were also in the scope of this Contract. Further, the works of loop lines connecting the main line to Peenya depot are also included in the Contract for which there are designated piers and the geometry of the viaduct which are to be executed as per the drawings. All these form permanent works under the Contract. The LOA was given with a handover schedule for the different stretches of the 4.8Km of Viaduct and 3 stations. Based on the handing over dates of stretches and availability of Good for Construction drawings by 16.01.2010, the 32 Com.A.S.221/2018 initial construction schedule was submitted vide letter dated 16.01.2010 and the detailed approved construction schedule vide letter dated 06.07.2010. The schedule of handover of land as per the Annexure-B to LOA the viaduct portion and the station portion the dates of handing over of each priority for the pier and station are also clearly specified from this it can be seen that, the dates of handing over are from 17.12.2009 to 16.04.2010 for the piers in the viaduct portion for Priority Numbers 1 to 5 & 9. In view of the delay in land handing over, the impacted progremme was made Ex.C-81, Pg.5475 SOC Vol.III Book-7. This impacted programme also included various other delays such as (i) non clearance of charted utilities; (ii) delays in payment; (iii) change in scope of work; (iv) shifting of BWSSB water line; (v) delay in clearance of piling near Taj Hotel; (vi) delay due to obstruction of trees; (vii) delay in release of GFC Drawings; (viii) increased pile depth criteria; (ix) delay in coordinates of off road piles; etc., regarding the pile cap delays related to KD-1. The final handing over baseline finish date was 16.12.2011 as against which the finished date for the impacted programme is shown at 01.04.2016 in respect of the stations.
30. Based on this, KD-5 which is the completion of the work as a Whole for the stations in respect of these 3 33 Com.A.S.221/2018 stations and the corresponding baseline dates, the impacted programme dates and the actual completion dates are shown which are as follows:
As per Actual Base line As per Completion KD-5 - Completion (treating it as finish as per Impacted of the work as a date of Contract refer Programme Whole commercial Ex.C-3 refer Ex.C-81 o eration ORR Station 16.12.2011 06.02.2015 01.03.2014 PIA Station 16.12.2011 21.03.2015 01.03.2014 PV Station 16.12.2011 16.09.2015 01.03.2014
31. As per ID No.729 the final handing over as per this programme is 01.04.2016. Also it is seen that all the IDs from 1 to 722 are completed before 19.09.2013 and commercial operation was made on 01.03.2014.
32. In so far as the delay in handing over of land is concerned as rightly held by the tribunal while answering Issue-1, the delay continued up to 04.01.2014 as against the last date of handing over hindrance free land on 16.04.2010 as per Annexure-B of LOA. This whole period of delay of 45 months cannot be considered as the delay in each of the works but it is to be considered as a delay for completion of the entire work, particularly the 18 pier locations which were completely handed over on 04.01.2014 without any hindrance.
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33. It is true that there were delays in handing over of the GFC Drawings for various components of work elaborated in the claim statement and various documents. These delays have impacted the completion of the work in accordance with the baseline programme. Extensions were granted based on the request of the Claimant and the causes of delay. It is an admitted that, the Viaduct portion including the station reaches were handed over to the various other agencies for track laying, electrification, signalling, etc., much prior to 28.02.2014 where after the trial runs were made on the track after the works were executed by the other agencies, statutory certificates were obtained prior to 28.02.2014 for running the metro and the commercial operation commenced on 01.03.2014. These delays are delays that are concurrent with the delay in handing over of last piece of site viz., 18 piers locations on 04.01.2014. All these delays other than the delay in handing over of land in accordance with the agreed dates at Annexure-B to LOA are to be construed as the longest delay that prevented the Claimant from completing the works in accordance with the agreed baseline programme under the Contract.
34. The Respondent granted EOT-3 under Ex.R-31, Pg. 194 dated 17.02.2014 SOBJ Vol.I, and the competent 35 Com.A.S.221/2018 authority of the Respondent has approved extension of time for R3A Contract as follows:
Viaduct EOT sanctioned from 16.010014 to 30.04.2014 without enal and with PVC a licable durin the extended eriod.
ORR EOT sanctioned from 02.11.2013 to Station 15.03.2014 with penalty @ Rs. 1.00 Lakh per day during the extended periodo PVC will stand frozen as on 31.10.2013.
PIA EOT sanctioned from 01.01.2014 to Station 31.03.2014 without penalty. Further EOT will be liable to penalty @ Rs. 1.00 Lakh er da . PVC will be frozen as on 01.01.2014.
PV EOT sanctioned from 01.01.2014 to Station 31.03.2014 without penalty. Further EOT will be liable to penalty @ Rs. I .00 Lakh er da . PVC will be frozen as on 01.01.2014.
35. Final EOT granted on 17.04.2015, Ex.C-338 Pg.7157, vol. IV Book-4. This EOT-4 extension records as follows:
a. Viaduct • From 01.05.2014 to 10.07.2014 b. Stations • ORR - From 16.03.2014 to 31.03.2015, PIA & PV - From 01.04.2014 to 31.03.2015 36 Com.A.S.221/2018 Thus, the Arbitral Tribunal held that, these delays admittedly at the time of EOT-1 cannot be attributed to the Claimant.
36. ISSUE-4: Whether the Claimant proves his entitlement to various claims from Claim-(i) to Claim-
(ix) as set out in Para-107 oi the Claim Statement? Claim (1) A Declaratory relief in favour of the Claimant holding that the entire R3A works shall be deemed to have been taken over by the Respondent with effect from 28th February 2014 and the Defect Liability Period with effect from 28th February 2014 and the Defect Liability period under the Contract shall therefore be reckoned from the said date. the AT held that, declaratory award with respect to Claim-i as follows:
a) The deemed date of taking over of the viaduct including the station reaches only is with effect from 28.02.2014 and the entire completion of the Works is put at 24.02.2015.
b) The DLP under the Contract shall be reckoned from 25.02.2015.
Claim-(ii): Claims on account of change in measurement (reduction in quantity) of parapet 37 Com.A.S.221/2018 construction and related costs incurred by the Claimant.
The AT held that, the reliance of the parties on Clause-27 of SCC is applicable only in respect of extra iteins that are not included in the BOQ. Since under this claim, the claim is in respect of Item-4 Sec. E of BOQ and for this Clause-27 of SCC does not apply and the only clause relevant for consideration is Clause-26 of SCC . The Arbitral Tribunal observed that, this is a very peculiar situation where the contracted quantity of the item has been reduced drastically not on account of site conditions but on account of a incorrect inclusion of the quantity in the Contract and opined that,various citations referred to by the parties on this claim are not applicable on facts and thereby awarded an amount of Rs.96,43,811/- towards this Claim-(ii).
Claim-(iii): Claim for time related costs by way of damages due to extended stay for reasons attributable to the Respondent.
37. The Claimant has set out its Claim-(iii) based on time related costs by way of damages due to extended stay for reasons attributable to the Respondent. The Claimant has given the summary of the delays on various counts as set out in ASOC. (vii) The Respondent before 38 Com.A.S.221/2018 the tribunal relied on judgments of the Apex Court on admissibility of expert opinion and referred to 2009 (9) SCC 709 Paras 16-21, (2000) 6 SCC 269 Para-40, 1999 (7) SCC 280 Paras 18 & 19, ILR 2008 (KAR) 1840 Paras 21 & 22. In case of 2009 (9) SCC 709 the Apex court held in Para-20 that "An expert is not a witness of fact and his evidence is really of an advisory character. The duty of an expert witness is to furnish the judge with the necessary scientific criteria for testing the accuracy of the conclusion so as to enable the judge to form his independent judgment by the application of these criteria to the facts provided by the evidence of case. The scientific opinion of evidence, if intelligible, conancing and tested becomes a factor and often an important factor for consideration along with other evidence of the case. The credibility of such a witness depends on the reasons stated in support of his conclusions and the data and material furnished which form the basis of his conclusions (See Malaikumar Ganguly Vs Dr. Sukumar Mukharjee SCC Page 249 Para 34)". The SCC case referred to in this para is 2009 (9) SCC 221. Further under Para-21 the Apex Court referring to (2000) 6 SCC 269 "In state of Maharashtra Vs Damu it has been laid down "that without examining the expert as a witness in the court no reliance can be placed on 39 Com.A.S.221/2018 an opinion alone". And further the Apex Court relied on (1979) 2 SCC 158 State (Delhi Admn) Vs Paliram and reiterated the observations made therein as "No expert would claim today that he could be absolutely sure that his opinion was correct, expert depends to a great extent upon the materials before him and the nature of question put to him". In the case of 1999 (7) SCC 280 the Apex court held in para-18 and reiterated the observations made in Para-20 of the citation 2009 (9) SCC 709. Further the Court held in Para-19 of the judgement that "The report submitted by an expert does not go in evidence automatically. He is to be examined as a witness and has to face the cross examination. This court in the case of Hazi Mohamınad Ekramul Haq Vs State of West Bengal concurred with the finding of the High Court in not pluding any rellanice upon the evidence of the expert witness on the ground that the evidence is merely an opinion unsupported by any reasons".
(viii) The Claimant relied on (i) AIR 1985 KAR 49; (ii) 2016 (2) ARBLR 1 (DEL); (iii) AIR 1963 CAL 163; (iv) 2006 (11) SCC 181; and (v) MANU/DE/2058/2009. This copurt also finds that, out of these citations only citation (iv) is the Supreme Court Judgment between McDermott International Inc Vs Burn Standard Co., 40 Com.A.S.221/2018 and the Claimant relied on Para-70. The Apex Court had considered in Para-69 of the Judgment that "It is not in dispute that MII had examined one Mr. D.J Parsen to prove the said claim. Honourable Apex Court noticed that different formula viz., (a) Hudson Formula, (b) Emden Formula, (c) Eichley Formula and held at the end of Para-69 "......... We do not intend to delve deep into the matter as it is an accepted position that different formulas can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula having regard to the facts and circumstances of the particular case, would eminently fall within the domain of the Arbitrator. If the learned arbitrator therefore applied the Emden Formula in assessing the damages he cannot be said to have committed an error warranting interference by this Court". Thus in the McDermott case there was a clear evidence before the Arbitral Tribunal by Mr. D.J. Parsen on the quantum of loss of overheads / loss of profit. It is only after observing all these the Supreme Court held in Para-70 as relied by the Claimant. For the above reason the Arbitral Tribunal was of the considered opinion that ,in the instant case the application of any formula does not arise for the reason that the Claimant wholly relied upon Ex.C-98 and as 41 Com.A.S.221/2018 such the reliance placed by the Claimant on McDermott case is misplaced. Based on the above the Arbitral Tribunal held that the Ex.C-98 is a report of American Appraisal appointed by the Claimant for determination of the time related costs, while the author of the document has not been posed for examination and therefore this Ex.C-98 cannot be considered as proper evidence. Further the Arbitral Tribunal held of the that under Sec.19(1) of the AC Act, the Evidence Act or the Civil Procedure Code will not govern the Arbitral Proceedings, but at the same time the principles of natural justice demands that it was necessary for the Claimant to have posed the author of the report for examination and cross examination by the Respondent so that proper opportunities are giver to both parties. In the absence of this and the power vested with Arbitral Tribunal under Sub-Sec.3 & Sub-Sec.4 of Sec.19 of the AC Act the Ex.C- 98 cannot be taken as proper evidence. Though it was held that the Claimant is entitled for suitable compensation during the extended period, the manner in which the claim is set out and pleaded based on C-98 without producing the author of the report for examination, the Arbitral Tribunal held that it is not just and appropriate to consider the document C-98 as a proper evidence for the quantification of this claim for the reasons recorded earlier.
42Com.A.S.221/2018
38. Claim-(iv): Claim on account of revised BOQ rates due to delay in land handing over beyond the original contractual completion date for 18 pier locations This claim as set out by the Claimant is for the work executed in the portion from P446 to P451 and PDR425 to PDR8 which fall under the 18 piers locations for which the land was not handed over . In so far as the delay in handing over of land is concerned, the delay continued up to 04.01.2014 as against the last date of handing over of hindrance free site on 16.04.2010 as per Annexure-B of LOA. Thus it is clear that this portion of the land was handed over in respect of the 18 pier locations without any hindrance only on 04.01.2014 which is nearly 25 months after the end of original Contract period i.e., on 16.12.2011. The Claimant's contention is that on account of delay in handing over, it had actually requested the Respondent to omit this portion and get it executed through another Contract by deleting this portion from the scope of the original Contract. However, the Respondent choose not to agree to this and finally handed over this area for execution without hindrance on 04.01.2014 by which time the Claimant had demobilized the pile driving machines because of the uncertainty in the date of handing over. Consequently the Claimant 43 Com.A.S.221/2018 contended that it was necessary for him to remobilize and execute the works costing a small portion if the contract incurring additional costs. It is also contended that this work is executed nearly 25 months after the original end of the Contract period while the rates quoted in 2009 cannot be made applicable in 2014 and had requested for application of the rates from other works of the Respondent where the bids were obtained in 2013-14 or the rates similar to that of the Pocket Works Contract which was bid for in 2012-13. The Respondent denied this claim and resisted the contentions of the Claimant and asserted that the delay caused was only because of the Claimant's inaction and failure to mobilise the men, material and machinery to execute the work. The Respondent further contended that the Claimant also demobilized certain resources without permission from the Respondent in clear violation of the provisions of the Contract. It was further asserted by the Respondent that the works were not suspended by the Respondent at any time and therefore there arose no reason to issue a suspension order as requested by the Claimant. The AT after hearing to the rival contentions of the parties held that the delay in handing over land and removing the hindrances for the 18 piers locations and held that, the Claimant is entitled for revised rate in respect of those 44 Com.A.S.221/2018 works which are executed in the 18 pier locations as claimed under this Claim-(iv).
39.The Claimant referred to MANU/SC/5270/2006 between K.N. Sathyapalan (dead) Vs State of Kerala, Para-20 of the Judgment is relevant which states as follows:
*20. Ordinarily, the parties would be bound by the terms agreed upon in the Contract, but in the event one of the parties to the Contract is unable to fulfil its obligations under the Contract which has direct bearing on the work to be executed by the other party, the Arbitrator is vested with the authority to compensate the second party for the extra costs incurred by him as a result of the failure of the first party to live up to its obligations. That is the distinguishing feature of the cases of this nature and M/s. Alopi Parshad's case (supra) and also Patel Engg. 's case (supra). As was pointed out by Mr. Dave, the said principle was recognized by this Court in P.M. Paul's (supra), where a reference was made to a retired Judge of this Court to fix responsibility for the delay in construction of the building and the repercussions of such delay. based on the findings of the learned Judge, this Court gave its approval to the 45 Com.A.S.221/2018 excess amount awarded by the arbitrator on account increase in price of materials and costs of labour and transport during the extended period of the Contract, even in the absence of any escalation clause. The said principle was reiterated by this Court in T.P. George's case (supra)."
40. The ratio of Sathyapalan's case aptly applicable to the case in hand . Having regard to the findings and observations of the AT in this matter, it was held that it is just and appropriate to allow this claim and award an amount of Rs.9,27,17,850/- towards this Claim as per Pg.8517, Vol.IX. It is made clear that no escalation is payable on this as the rates were based on KPWD 2011- 2012 Schedule of Rates plus 20%. In the light of the above, the Arbitral Tribunal awarded an amount of Rs.9,27,17,850/- towards Claim-(iv).
Claim-(v): Claims for reinforcement unpaid Quantities
41. This claim as set out by the Claimant in the ASOC is for an amount of Rs.2,84,61,516/- on account of reinforcement steel which had not been paid for. The Claimant referred to Clause-5.8 of Technical Specification vide Pg.885 of the Contract . The Claimant contended that, the steel quantity in respect of following works 46 Com.A.S.221/2018 under the contract had not been paid by the Respondent. The Arbitral Tribunal held that, these are under three heads Viz., (i) Segments under which U bars, B helicals, bars for profiling work of HDPE pipe and bars for the 60mm dia lifting holes; (ii) Guide rings / spacers in Piling Work; (iii) Chairs and helicals in pile caps, and referred to the letter dated 12.05.2012 at Ex.C-105. AT allowed this claim and awarded an amount of Rs.2,84,61,516/- towards this Claim-(v) and accordingly it is awarded.
Claim-(vi): Claims for refund of all amounts recovered / withheld as penalty.
42. This Claim-(vi) as set out by the Claimant in the prayer in ASOC is for refund of all amounts recovered / withheld as penalty for an amount of Rs.4,24,00,000/-.
163. The Claimant relied on Sub-Clause-8.4.1 & 8.5 regarding the recovery of Liquidated Damage (LD) and based on the facts and circumstances where the delay is not attributable to the Claimant, the Respondent has extended the time and also levied LD and had recovered the same in the RA Bills. The Claimant is seeking payment of the amount of LD which has been recovered on the grounds that: the delay was not attributable to the Claimant; but it was due to actions and inactions of the Respondent; the delay as set out by the Claimant has not 47 Com.A.S.221/2018 been determined but the Respondent has considered the delay attributable to the Claimant and had recovered the LD from the RA Bills. That this was an unilateral action against the provision of the Contract and law and as such the Claimant has sought for return / reimbursement the amount so deducted illegally from the RA Bills. The Respondent resisted the various contentions of the Claimant and contented that, the delays are not attributable to the Respondent and denied that there was no provision for imposing LD or curtailing the price variation. That the delay in completion of the project is solely attributable to the Claimant and therefore the Respondent is justified in imposition of penalty on the Claimant. As the project was already delayed the Respondent was constrained to commence commercial operation with bare minimal facilities to avoid further delay to the public. However, balance works were completed after commissioning of the Viaduct and stations. Accordingly the Respondent suffered losses and had to impose LD and curtail price variation. The Respondent denied the contentions that the action of levying penalty is against the law and it is settled law that the Employer can impose penalty on the Contractor if there is any delay in completion of the work attributable to the Contractor. Further, the Respondent denied that it had deducted the penalty in any arbitrary 48 Com.A.S.221/2018 manner and the Respondent is justified in levying the penalty and imposing the LD under the Contract. Both parties made their rival contentions regarding various delays.
43. The Contract provides penalty for delay in achieving the KDs in attachment to Appendix FT1, Pgs.580-581 Contract Book-2, The Clause 8.4.1 deals with Extension of Time.Insofar as Viaduct is concerned the final EOT-4 has been granted up to 10.07.2014 without levy of LD but freezing the price index from 30.04.2014. This EOT- 4 is granted on 17.04.2015 much subsequent to the completion of all works necessary for commercial operation on 28.02.2014 (i.e., deemed taker, over) and the completion of balance works on 10.07.2014. No LD is leviable in respect of the Viaduct as per the EOT-4 and works from 30.04.2014 10 10.07.2014 (i.c:, completion of the balance works of the viaduct portion in all respects) Price Variation is frozen on 30.04.2014. The Arbitral Tribunal finds that, since for these Viaduct works no LD is levied, freezing of the price indices on 30.04.2014 as per the EOT order is not sustainable as KD-10 is achieved. Insofar as Stations are concerned the final EOT-4 has been granted up to 31.03.2015 with LD and freezing the price index from 31.10.2013 in respect of ORR Station and from. 01.01.2014 in respect of PIA & PV 49 Com.A.S.221/2018 Stations. This EOT-4 is granted on 17.04.2015 much subsequent to the completion of all works necessary for commercial operation on 28.02.2014 (i.e., deemed taken over) and the completion of balance works on 24.02.2015 and the Claimant has also requested for issuing of a Taking Over Certificate. LD is levied in respect of all the three stations as per FOT-4 and Price Variation is frozen for ORR Station from 31.10.2013 and for PIA & PV- Stations from 01.01.2014.
44. Clause-8.2 of GCC specifies Time for Completion which specifies that Time is the essence of Contract will remain so at all times during the pendency of the Contract including the extended period of Contract. The Contractor shall ensure defect free completion and have passed the tests for completion, including Integrated Testing and Commissioning of the whole of the Works and/ parts thereof before the same is taken over by the Employer. In the present case it is not in dispute that the Viaduct was deemed to have been taken over on 28.02.2014 along with the three station stretches of the Viaduct and the commercial operation was commenced from 01.03.2014. It is pertinent to note here that both EOT-1 and EOT-2 granted for the Viaduct and the ORR Stations are without LD. And further these dates up to which the EOT-2 has been granted for Viaduct is 50 Com.A.S.221/2018 15.01.2014 as against the 23 months period specified in Annexure-FT1 for handing over of complete Viaduct to Track Laying Contractor. Thus the last date on which the work was scheduled to be completed as per Contract for the Viaduct was 23 months from 17.12.2009 to 16.11.2011. However on account of various delays not attributable to the Claimant the Respondent has granted EOT-4 up to 10.07.2014 for the Viaduct portion. As per the Contract based on Pgs.580 & 581, Contract Book-2, in attachment to Appendix-FT1 it is clear that the KD-10 for completion of the Viaduct and KD-5 for completion of the Stations are co-terminus with the end of Contract period as both Viaduct and Stations together were to be used for commercial operation since the stations are an integral part of the whole Contract. . It is true that when the commercial operation is commenced on 01.03.2014 the Viaduct reach including the stretches in the station reaches as well as the station themselves were to be in a state of completion so as to allow the commercial operation by providing the facility for the passenger movements and operation of the Metro itself. Therefore the Arbitral Tribunal held that the extensions granted in EOT-3 and EOT-4 for two different dates for the Viaduct and Stations are not only unreasonable but they are not in conformity with the necessity of having the viaducts and stations to be completed co-terminus with the 51 Com.A.S.221/2018 Contract for the reason that the Contract is to be construed as a whole and not independent items.
45. Based on the facts, circumstances and observations, the Arbitral Tribunal held that, this Claim-(vi) deserves to be allowed and an amount of Rs.4,24,00,000/- recovered / withheld as penalty / LD by the Respondent should be returned to the Claimant and awarded an amount of Rs.4,24,00,000/- towards this Claim-(vi) Claim-(vii): Claims for refund of all amounts payable as Price Variation which has been reduced by way of freezing.
46. This claim as set out by the Claimant in the ASOC and the relief prayed is for an amount of Rs.11,71,683/- towards the price variation amount consequent upon freezing of the price variation as per the EOT Provisions. The Arbitral Tribunal has already dealt with delays, 4 EOTS granted and has held that the delays are not attributable to the Claimant. While granting the EOTs as observed earlier the following are the remarks with respect to price variation in each of the EOTS EOT-3 & EOT-4 as shown below.
52Com.A.S.221/2018
47. It is held by the AT, that the delays are not attributable to the Claimant and consequently levy of LD by the Respondent is not admissible and has ordered for the refund of the already recovered amounts. All observations made therein will be applicable to claim regarding the delays. The Contract provides for Price variation under Clause-19.3 of SCC. This clause stipulates a mechanism of determination of the price variation to the rates quoted under the BOQ, in accordance with the Price Variation formula set out under the clause. From the 4 extensions granted (EOT-1 to EOT-4), the 3 letters of extensions for EOT-1 to EOT-3 do not specify any clause under which extension has been granted. It is also seen that EOT-4, which is the last extension, was granted on 17.04.2015, the Respondent has referred to Clause-8.4.3 & 8.5 of the Contract. Clause-8.4.3 relates to extension of time for delays due to Contractor. Clause-8.5 refers to liquidated damage for delay. The Arbitral Tribunal has held that there is no delay attributed to the Claimant and the levy of LD is not admissible and therefore the Clauses 8.4.3 & 8.5 referred to by the Respondent in the EOT-4 letter are wholly unsustainable. Based on the above facts and circumstances, the Arbitral Tribunal awarded an amount of Rs.11,71,683/- towards this Claim-(vii) 53 Com.A.S.221/2018 Claim-(viii): Reimbursement of all costs incurred by the Claimant in prosecuting the above claims
48. Tribunal observed that "Clause-17.12 of GCC specifics that the cost of arbitration shall be borne by the respective parties. The cost shall be inter alia includes the fees of the arbitrator as per rates fixed by the Employer from time to time. As the parties have agreed that the cost of arbitration shall be borne by respective parties. No award of cost is made." and accordingly rejected this claim.
ISSUE-5: Whether the Claimant proves that the Counter-Claims of the Respondent are not arbitrable under Sec.16 of the Arbitration & Conciliation Act, 1996?
49. AT held that in the instant case there is no bar for adjudicating the Counter- Claims by the Arbitral Tribunal and the Tribunal holds that it has jurisdiction under Sec. 16 to adjudicate on the Counter-Claims.
ISSUE-6: Whether the Respondent proves his entitlement for the Counter-Claims as set out in Para- 5 of his Statement of Counter-Claim from Counter- Claim-1 to Counter-Claim-11?
54Com.A.S.221/2018
50. The Respondent in SOBJ Vol.I, has set out 11 Counter-Claims on the grounds that the Claimant failed to complete the works within the scheduled time despite the fact that the Respondent had given possession of the site from time to time progressively as per the agreement for commencement of the work. Though there were delays in delivery of certain portion of the site, the Respondent contended that this delay was due to litigation that was pending between the owners of the acquired site and the Respondent. Further, it was submitted by the Respondent that there were other delays such as:
statutory approvals to be obtained, diversion of utilities and dismantling of structures for handing over of land. The Respondent had considered and granted extension of time on merits for such delays caused by the Respondent. Further, the Respondent contended that the Claimant has not mobilized sufficient men and machinery on account of which the Claimant failed to complete the project. Consequent upon various failures of the Claimant such as not mobilizing men, material, machinery and resources for completion of the work within the extended time, the Respondent was constrained to commence the operation of reach-3A on 13.02.2014 for public with partial basic facilities at stations causing inconvenience for the public. Further 55 Com.A.S.221/2018 the Respondent contended that the Claimant continued the work of finishing in all the stations and the viaduct till the end of July-2014 with several reminders and levy of penalty for the same. Consequent to these the respondent contended that the work was delayed by six to seven months and it suffered huge losses for delay in completion of the works as a whole. Further, despite repeated extensions of time granted to the Claimant the work could not progress satisfactorily and the Respondent had to bring in another agency for performing and completing the incomplete part of the work done by the Claimant for which the Respondent entrusted the work to M/s. KRIDL at risk and cost of the Claimant in terms of the Contract provisions. On account of all these the Respondent has set out 11 Counter-
Claims.
Counter-Claim-1: Recovery of Expenses incurred towards completion of balance works like restoration of roads, drains etc. at Viaduct and Stations
51. AT held that the Counter-Claim-1 deserves to be rejected and accordingly same was rejected.
56Com.A.S.221/2018 Counter-Claim-2: Recovery of Loss of Revenue due to delay in commissioning of the metro line for public operation.
52. This Counter-Claim as set out by the Respondent is for an amount of Rs.69,30,00,000/- for the recovery of loss of revenue due to delay in commissioning of the Metro line. This Counter-Claim made is on account of delays made by the Claimant due to which the Respondent suffered loss of revenue at Rs.8.64 lakhs per day from 18.12.2011 till 28.02.2014 as per Ex.R-106, Pg.428 SOBJ Vol.II. The Arbitral Tribunal held it just and appropriate to reject this Counter-Claim-2 and accordingly same was rejected.
Counter-Claim-3: Recovery of Expenditure due to extension of the services of the General Consultants for the extended period due to delay in completion of works;
53. This Counter-Claim-3 as set out by the Respondent is for an amount of Rs.5,75,48,615/- towards recovery of expenditure due to extension of the services for the GC for the extended period relying on Ex.R-107, Pg.429 SOEJ Vol.II. The basis of this Counter-Claim is that because of delays attributable to the Claimant in 57 Com.A.S.221/2018 completion of the Works, the services of the Consultants was to be extended beyond 01.01.2012 up to 30.07.2014 as set out in Ex.R-107.
Arbitral Tribunal held it just and appropriate to reject this Counter- Claim-3 and accordingly it was rejected Counter-Claim-4: Recovery of Price variation paid during the extended period;
54. This Counter-Claim-4 as set out by the Respondent is for an amount of Rs.26,23,26,728/- towards recovery of price variation paid during the extended period. the Arbitral Tribunal held it just and appropriate to reject this Counter-Claim-4 and accordingly it was rejected.
Counter-Claim-5: Recovery of Re-handling charges paid towards I. girder/segments and extra rate for GSS method of Jaunching;
55. This Counter-Claim-5 as set out by the Respondent is for an amount of Rs.67,51,120/- towards recovery of re- handling charges paid towards 'I' girder / segments and extra rate for Ground Support System (GSS) method of launching. This Counter-Claim is in respect of certain works executed for the loop line and some portion of Viaduct. Arbitral Tribunal held it just and appropriate to 58 Com.A.S.221/2018 allow the Counter-Claim-5 in part and accordingly awards an amount of Rs.31,21,461/- towards this Counter-Claim.
Counter-Claim-6: Recovery of Rental charges towards Batching Plant;
56. This Counter-Claim-6 as set out by the Respondent is for an amount of Rs. 72,53,280/- towards recovery of rental charges towards batching plant. The claim is for the recovery of the rental charges towards batching plant allotted by the Respondent free of cost which was situated near Peenya Depot to support the Claimant in early completion of the project. However, in view of the delay the Respondent has made this Counter-Claim and relied on Ex.R-110, Pg.437 SOBJ Vol.II. The Arbitral Tribunal held it just and appropriate to reject this Counter-Claim-6 and accordingly it was rejected.
Courter-Claim-7:Recovery of amount deposited by the Respondent to NHAI towards restoration of road, drain and other damages done by the Claimant during the course of construction activities;
57. This Counter-Claim-7 as set out by the Respondent is for an sincunt of Rs.1,37,48,332/- towards restoration of 59 Com.A.S.221/2018 road, drain and other damages caused by the Claimant during the course of construction activities. The Respondent contended that the Claimant had caused damages to the road, drains, barricades, bus shelters, signages, light poles etc., belonging to the NHAI and these properties of NHAI were not restored / repaired by the Claimant. That the Respondent had deposited an amount of Rs. 1.38Cr to NHAI towards the restoration of the above works. Accordingly it was contended that the damages to these properties of NHAI were caused by the Clamant and the amount deposited with NHAI is to be recovered from the Claimant and relied on Ex.R-111, Pg.438 SOBJ Vol.II and Ex.R-128 Pg.57 of its Rejoinder. The Arbitral Tribunal held it just and appropriate to reject this Counter-Claim-7 .
Counter-Claim-8: Recovery of rental charges towards shuttering and staging materials supplied by the Respondent;
58. This Counter-Claim-8 as set out by the Respondent is for an amount of Rs.2,34,92,460/- towards recovery of rental charges for shuttering and staging materials supplied by the Respondent. The Arbitral Tribunal held it just and appropriate to reject this Counter-Claim-8 and accordingly it was rejected.
60Com.A.S.221/2018 Counter-Claim-9: Recovery of additional expenditure towards raising the 66 KVA transmission line between Pier location P403-P405 and P407-P410;
59. This Counter-Clsim-9 as set out by the Respondent is for an amount of Rs. 75,38,990/- towards recovery of additional expenditure for raising the 66 KVA transmission line between Pier location P403-P405 and P407-P410. The Arbitral Tribunal held it just and appropriate to reject this Counter-Claim-9 .
Counter-Claim-10: Recovery of Land Rental charges;
60. This Counter-Claim-10 as set out by the Respondent is for an amount of Rs.8,88,62,454/- towards recovery of land rental charges. The Respondent contended that the Claimant had been allowed to stack the segments and l- girders, shuttering materials, steel and other materials including establishing their site office and stores in a land belonging to the Respondent in the interest of early completion of the works. That as the project got delayed for reasons attributable to the Claimant, the Respondent contended that there is no benefit to the Respondent for the support and co- operation extended by it. And it was further contended that the Claimant had not vacated the land occupied by it, as on date, which was causing delay 61 Com.A.S.221/2018 in property development activities proposed by the Respondent. Therefore, the Respondent has made a Claim of Rs.8,88,62,454/- towards the land rental charges for the area in which the Claimant had stored / stacked materials, establishment of site office, etc., in the land which belonged to the Respondent and relied on Ex.R-114.the Arbitral Tribunal rejected this claim.
Counter-Claim-11: Recovery of Penalty and Liquidated Damages for not achieving key dates
61. This Counter-Claim-11 as set out by the Respondent is for an amount of Rs.45,45,00,000/- towards recovery of penalty and liquidated damages for not achieving the key dates. The Respondent has set out this Claim on the ground that the Claimant had failed to achieve the key dates for completion of viaducts and stations as per the Contract Agreement. The Respondent has also contended that for non achievement of key dates viz., KD-1 to KD-9 for Viaduct and KD-1 to KD-4 for stations penalty / LD is liable to be recovered from the Claimant. Also it is contended that the LD for not achieving KD-10 & KD-5, which are for completion for the work as a whole including viaduct and stations shall have to be recovered from the Claimant and this total cost towards recovery of LD & penalty charges amounts to Rs.45.45Cr which is 62 Com.A.S.221/2018 sought to be recovered under this Claim. AT rejected this Counter-Claim-11.
ISSUE-7: Whether the parties are entitled to the interest for the pre- award & post-award periods and if so at what rates in respect of the claims for which they are entitled to?
62. The Arbitral Tribunal has held: (i) under ISSUE-4 certain claims are entitled to be awarded and accordingly the claims have been awarded in favour of the Claimant;
(ii) under Issue-6 the Arbitral Tribunal has dealt with the entitlement of the Counter-Claims of the Respondent and partly awarded the Counter-Claim-5. Further, under this Issue-7 the entitlement for interest for the pre-lite, pendent-lite and future interest as claimed by the Claimant and also the interest for these periods on the Counter-Claims is adjudicated. The AC Act Sec.31(7)(a) & (b) deal with interest. It is settled law that by virtue of Sec.31(7)(a) & 31(7)(b) under the arbitration act the period of interest are only two periods viz., the pre-award interest under Sec.31(7)(a) which meludes the pre-lite and pendent-lite interest while Sec.31(7)(b) deals with the post-award interest. These Sections read as follows:
63Com.A.S.221/2018 "31(7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the awurd is made interest, at such mte as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action, amse and the date on which the award is made.
31(7)(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment."
It is clear from the above provision of law that the pre-award interest under Clause-31(7)(a) is subject to any agreement between the parties. While the post award interest is a statutory provision which provides for interest at 18% per annum unless otherwise directed in the award.
The Contract provides under Clause-17.11 of GCC that "Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period, till the date on which the award is made". In view of this provision under the GCC read with Sec.31(7)(a) the initial line that "Unless otherwise agreed by the parties" the Arbitral 64 Com.A.S.221/2018 Tribunal held that, the Clause-17 of GCC is the Clause which empowers the Arbitral Tribunal to arbitrate and Sub-Clause-17.11 being a clear bar for payment of interest for the pre-award period and also keeping in view that both Claimant and the Respondent have setup their claims for interest at 18% for the pre-award period, and the Arbitral Tribunal held that award of interest being prohibited under Sub-Clause-17.11, no pre-award interest is awarded.
I have heard the arguments of both counsel and the decisions relied by them which are as follows CITATIONS OF PETITIONER 1 (2003) 12 SCC 144 SETH MOHANLAL HIRALAL
-VS-
STATE OF M.P.
2 (2009) 108 DRJ 297 AVI COACH BUILDERS AND OTHERS
(DB) -VS-
UOI
3 (2004) 9 SCC 619 MD.ARMY WELFARE HOUSING
ORGANISATION
-VS-
SUMANGAL SERVICES (P) LTD.,
4 (2003) 8 SCC 154 BHARAT COKING COAL LTD.,
-VS-
ANNAPURNA CONSTRUCTION
5 (2015) 3 SCC 49 ASSOCIATE BUILDERS
-VS-
DELHI DEVELOPMENT AUTHORITY
65
Com.A.S.221/2018
6 (2019) 16 SCALE HINDUSTAN CONSTRUCTION
823 COMPANY LIMITED
-VS-
UNION OF INDIA
7 (2019) 8 SCC 112 PAM DEVELOPMENTS
-VS-
STATE OF WEST BENGAL
8 2009 (111) DRJ 566 VEDA RESEARCH LABORATORIES LTD.,
-VS-
SURVI PROSECTS.
9 2011(3) ARB LR 502 STEEL AUTHORITY OF INDIA LTD., (DELHI) -VS-
AMCI PTY LTD. AND OTHERS 10 (1992) 1 SCC 719 DALPAT KUMAR AND ANOTHER
-VS-
PRAHLAD SINGH AND OTHERS
11 1995 SCC ONLINE HADIBANDHU SENAPATI AND
ORI 71 ANOTHER
-VS-
SMT.CHAMPAMANI BEHERA AND
OTHERS
12 (2005) 4 SCC 1 SIHOR NAGAR PALIKA BUREAU
-VS-
BHABHLUBHAI VIRABHAI AND
COMPANY
13 (2009) 2 SCC 426 MALWA STRIPS PVT LTD.,
-VS-
JYOTI LTD.,
14 (2012) 1 SCC 594 P.R.SHAH, SHARES AND STOCK
BROKER (P) LTD.,
-VS-
B.H.H.SECURITIES (P) LTD., AND
OTHERS
66
Com.A.S.221/2018
15 2019 SCC ONLINE SSANGYONG ENGINEERING AND
SC 677 CONSTRUCTION CO. LTD.,
-VS-
NATIONAL HIGHWAYS AUTHORITY
OF INDIA (NHAI)
CITATIONS OF RESPONDENT
1 (2012) 1 SCC 594 P.R.SHAH, SHARES AND STOCK BROKERS PRIVATE LIMITED
-VS-
B.H.H. SECURITIES PRIVATE LIMITED AND OTHERS 2 (2015) 3 SCC 49 ASSOCIATE BUILDERS
-VS-
DELHI DEVELOPMENT AUTHORITY 3 (2019) 15 SCC 131 SSANGYONG ENGINEERING AND CONSTRUCTION COMPANY LIMITED
-VS-
NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI) 4 (2019) 20 SCC 1 DYNA TECHNOLOGIES PRIVATE LIMITED
-VS-
CROMPTION GREAVES LIMITED 5 2021 SCC ONLINE UNION OF INDIA, CENTRAL PUBLIC KAR 15916 WORKS DEPARTMENT, BENGALURU
-VS-
WARSAW ENGINEERS AND ANOTHER 6 (2021) 9 SCC 1 NATIONAL HIGHWAYS AUTHORITY OF INDIA
-VS-
HAKEEM AND ANOTHER 7 (2024) 3 SCC 623 S.V.SAMUDRAM
-VS-
67Com.A.S.221/2018 STATE OF KARNTAKA AND ANOTHER 8 (2007) 13 SCC 43 K.N.SATHYAPALAN
-VS-
STATE OF KERALA AND ANOTHER 9 2023 SCC ONLINE LARSEN AIR CONDITIONING AND SC 982 REFRIGRATION COMPANY
-VS-
UNION OF INDIA AND OTHERS In case of Associate Builder Vs. DDA , Honourable Apex court has observed Grounds on which arbitral award may be assailed Section 34 in conjunction with Section 5 of the Arbitration and Conciliation Act, 1996 (1996 Act) makes it clear that an arbitral award that is governed by Part I of the 1996 Act can be set aside only on the grounds mentioned under Sections 34(2) and (3), and not otherwise. It is important to note that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration; also to provide that the Tribunal gives reasons for an arbitral award; to ensure that the 68 Com.A.S.221/2018 Tribunal remains within the limits of its jurisdiction;
and to minimise the supervisory roles of courts in the arbitral process. (Paras 15 and 16) III. Justice or Morality The third ground of public policy is, if an award is against justice or morality. These are two different concepts in law.
(i) Justice An award can be said to be against justice only when it shocks the conscience of the court. An illustration of this can be given. A claimant is content with restricting his claim, say to Rs 30 lakhs in a statement of claim before the arbitrator and at no point does he seek to claim anything more. The arbitral award ultimately awards him Rs 45 lakhs without any acceptable reason or justification. Obviously, this would shock the conscience of the court and the arbitral award would be liable to be set aside on the ground that it is contrary to "justice".
(ii) Morality 69 Com.A.S.221/2018 The other ground is of "morality". Just as the expression "public policy" also occurs in Section 23 of the Contract Act, 1872 so does the expression "morality". The Supreme Court has confined morality to sexual morality so far as Section 23 of the Contract Act, 1872 is concerned, which in the context of an arbitral award would mean the enforcement of an award say for specific performance of a contract involving prostitution. "Morality" would, if it is to go beyond sexual morality necessarily cover such agreements as are not illegal but would not be enforced given the prevailing mores of the day. However, interference on this ground would also be only if something shocks the court's conscience.
22. In para iv of the Judgement, definition of patent illegality has been discussed as follows;
IV. Patent Illegality : The fourth head of public policy, namely, patent illegality. It must be remembered that under the explanation to section 34 (2) (b)(ii) of the 1996 Act, an award is said to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. This ground 70 Com.A.S.221/2018 is perhaps the earliest ground on which courts in England set aside awards under English law. Added to this ground (in 1802) is the ground that an arbitral award would be set aside if there were an error of law by the arbitrator.
In the 1996 Act, the principle stands as the "patent illegality" principle which, in turn, contains three sub-heads:
(i) Contravention of substantive law of India
- A contravention of the substantive law of India would result in the death knell of an arbitral award. Violation of Indian statutes i.c. the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest.
Such award/judgment/decision is likely to adversely affect the administration of justice and would be regarded as being contrary to the fundamental policy of Indian law. Furthermore, the binding effect of the judgment of a superior court being disregarded would be equally violative of the fundamental policy of Indian law. This must be understood in the sense that such 71 Com.A.S.221/2018 illegality must go to the root of the matter and cannot be of a trivial nature. This again is a really a contravention of Section 28(1)
(a) of the 1996 Act.
(ii) Contravention of A&C Act, 1996 - A contravention of the Arbitration Act itself would be regarded as a patent illegality-for example if an arbitrator gives no reasons for an award in 9 contravention of Section 31(3) of the 1996 Act, such award will be liable to be set aside.
(iii) Contravention of the terms of the contract - In all cases, the Arbitral Tribunal shall decide in accordance with the terms. of the contract and shall take into account the usages of the trade applicable to the transaction. Thus, the third sub-head of patent illegality is really a h contravention of Section 28(3) of the Arbitration Act. This contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not 72 Com.A.S.221/2018 mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
23. While discussing on "Patent Illegality" Hon'ble Apex Court in para 42 held that;
42. In the 1996 Act, this principle is substituted by the "patent illegality"
principle which, in turn, contains three subheads:
42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act. which reads as under:73
Com.A.S.221/2018 "28. Rules applicable to substance of dispute (1) Where the place of arbitration is situated in India-
(a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"
42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.
42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute.-(1)-(2) (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the 74 Com.A.S.221/2018 transaction."
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground.
Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that do.
63. If we carefully peruse the award dtd:04.08.2018 all the 3 arbitrators have in detail discussed about all the technical issues and passed the above award. The learned counsel for petitioner in his written arguments drawn the attention of this court to the findings of Arbitration Tribunal on Issue No.3 and argued that, tribunal has committed patent illegality while partly allowing the claim petition of the claimant. I have also perused the decisions relied by both counsels for petitioner and respondent which are as follows;
CITATIONS OF PETITIONER 75 Com.A.S.221/2018 1 (2015) 3 SCC 49 ASSOCIATED BUILDERS
-VS-
DELHI DEVELOPMENT AUTHORITY 2 (2019) 15 SCC 131 SSANGYONG ENGG. & CONSTRUCTION COMPANY LIMITED.
-VS-
NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI) 3 (2018) 3 SCC 133 MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD.,
-VS-
DATAR SWITCHGEAR LTD.,
4 1960 SCC online GAMBHIRMULL
cal 52 MAHABIRPRASAD
-VS-
THE INDIAN BANK LTD.AND
ANOTHER
5 (1984) 4 SCC 59 A.T.BRIJ PAUL SINGH AND
OTHERS
-VS-
STATE OF GUJARAT
6 (2004) 5 SCC 109 BHARAT COKING COAL LTD
-VS-
L.K.AHUJA
7 1998 SCC ONLINE UNION OF INDIA
DEL 407
-VS-
INDIAN PROOFING AND
GENERAL INDUSTRIES
8 2009 SCC ONLINE MAHARASHTRA STATE
BOM 413 ELECTRICITY
DISTRIBUTION
-VS-
76
Com.A.S.221/2018
DSL ENTERPRISES PVT
LTD.,
9 1958 SCC ONLINE YARLAGADDA CHINA
AP 272 RATTAYYA AND ANOTHER
-VS-
DONEPUDI
VENKATARAMAYYA AND
OTHERS
10 1984 SCC ONLINE STATE OF KERALA
KER 198 -VS-
K.BHASKARAN
11 2007 SCC ONLINE VIDESH SANCHAR NIGAM
CAL 670 LTD
-VS-
SHAPOORJI PALLONJI AND
COMPANY LTD.,
12 (2006)11 SCC 181 MCDERMOTT
INTERNATIONAL INC.,
-VS-
BURN STANDARD CO. LTD.,
AND OTHERS
13 (2007) 8 SCC 466 NUMALLIGARH REFINERY LTD.,
-VS-
DAELIM INDUSTRIAL CO.
LTD., 14 (2011) 5 SCC 758 J.G.ENGINEERS PRIVATE LIMITED
-VS-
UNION OF INDIA AND
ANOTHER
15 2021 SCC ONLINE NAVAYUGA ENGINEERING
KER 5197 COMPANY LTD.,
REPRESENTED BY ITS
AUTHORISED SIGNATORY
77
Com.A.S.221/2018
-VS-
UNION OF INDIA
REPRESENTED BY THE
CHIEF ENGINEER
16 2009 SCC ONLINE POYSHA OXYGEN PRIVATE
DEL 2216 LTD.,
-VS-
ASHWINI SURI AND OTHERS
17 (2012) 1 SCC 594 P.R.SHAH, SHARES AND
STOCK BROKERS PRIVATE
LTD.,
-VS-
B.H.H.SECURITIES PRIVATE
LTD., AND OTHERS
CITATIONS OF RESPONDANT No.1
1 2024 SCC ONLINE SRINIVAS
SC 226 RAGHAVENDRARAO
DESAI (DEAD) BY LRS.
-VS-
KUMAR VAMANRAO ALIAS
ALOK AND OTHERS
2 2023 SCC ONLINE UNIBROS.
SC 1366 -VS-
ALL INDIA RADIO
3 (2022) 1 SCC Cases DELHI AIRPORT METRO 131 EXPRESS PRIVATE LIMITED
-VS-
DELHI METRO RAIL CORPORATION LIMITED.
4 Com.A.P.25/2021 Union of India 78 Com.A.S.221/2018
-VS-
M/s Warsaw Engineers and
others
5 CIVIL APPEAL S.V.SAMUDRAM
NO.8067/2019 -VS-
STATE OF KARNATAKA AND
ANOTHER
6 CIVIL APPEAL M/S LARSEN AIR
NO.3798/2023 CONDITIONING AND
REFRIGRATION COMPANY
-VS-
UNION OF INDIA AND
OTHERS
7 (2021) 9 SCC1 NATIONAL HIGHWAYS
AUTHORITY OF INDIA
-VS-
M.HAKEEM AND ANOTHER
8 (2021) 7 SCC 657 DAKSHIN HARYANA BIJLI
VITRAN NIGAM LIMITED
-VS-
NAVIGANT TECHNOLOGIES
PRIVATE LIMITED
9 (2006) 11 SCC 181 MCDERMOTT
INTERNATIONAL INC.
-VS-
BURN STANDARD CO.LTD.
AND OTHERS
10 COM.A.P.236/2021 M/S CHRISTY FRIEDGRAM
INDUSTRY
-VS-
DEPARTMENT OF WOMEN
AND CHILD DEVELOPMENT
79
Com.A.S.221/2018
On perusal of the observations made in the award along with the documents marked before the tribunal and the oral evidence, I am of the opinion that, the Arbitration Tribunal has not committed any patent illegality so as to modify the award. Further, Hon'ble Apex Court in many number of decisions held that, civil court cannot modify the award passed by the Arbitration Tribunal. Accordingly, I answer point No.1 in the "Negative".
64. POINT NO.2:- For the aforesaid reasons, I proceed to pass the following:
ORDER The petition filed by the petitioner under Sec.34 of Arbitration and Conciliation Act, 1996 is hereby dismissed.
Office to issue Soft copy of this Judgment to both sides by e-mail if furnished. (Dictated to the Stenographer, typed by her, corrected and then pronounced by me in open Court on this the 13th day of December, 2024).
(ROOPA K.N.), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive Dedicated Commercial Court) 80 Com.A.S.221/2018 Bengaluru.