Bangalore District Court
Karnataka Power Transmission vs Corportion Limited on 10 December, 2021
1
Com.A.S.110/2018
IN THE Court OF LXXXVII ADDL.CITY CIVIL &
SESSIONS JUDGE, (EXCLUSIVE DEDICATED
COMMERCIAL COURT)
AT BENGALURU (CCH.88)
THIS THE 10th DAY OF DECEMBER 2021
PRESENT:
SRI.CHANDRASHEKHAR U., B.Sc., LL.M.,
LXXXVII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.S.No.110/2018
PLAINTIFF/ Karnataka Power Transmission
RESPONDENT: Corportion Limited,
A company registered under the
provisions of the Companies Act,
1956 and having its corporate office
at Kaveri Bhavan, Bangalore 560
009. represented herein by its
Sri. Rizwan pasha, Executive
Engineer, Bangalore Major Works,
South Division, KPTCL
(Reptd by Sri. SS- Adv)
AND
DEFENDANTS : 1. M/S Deepak Cables (India) Ltd.,
A company registered under the
provisions of the Companies Act,
1956, represented by its Managing
Director, Shri K.Venkateshwara Rao,
No.7, N.S. Iyengr Street, Sheshadri
puram, Bangalore 560 020.
(Reptd by Sri. LMC -Adv)
2
Com.A.S.110/2018
Date of Institution of the 29.05.2018
suit
Nature of the suit (suit on
pronote, suit for declaration
& Possession, Suit for Arbitration Suit
injunction etc.)
Date of commencement of -
recording of evidence
Date on which judgment
was pronounced 10 .12.2021
Total Duration Year/s Month/s Day/s
03 06 11
(CHANDRASHEKHAR U),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive dedicated Commercial Court)
Bengaluru.
JUDGMENT
The plaintiff has filed the above petition under Section 34 of the Arbitration & Conciliation Act, 1996, (hereinafter called as 'the Act') read with Rule 4 of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules 2001, for setting aside the Award, dated 29.1.2018 3 Com.A.S.110/2018 as modified by the order, dated 23.4.2018 passed by the Arbitral Tribunal and for costs.
2. The brief facts of the case of the plaintiff are as hereunder:-
The plaintiff is a Government Company registered under the provisions of Companies Act, 1956 and is fully owned by the Government of Karnataka. Prior to 1.6.2002, the plaintiff was engaged in transmission and distribution of electricity in the State of Karnataka. With the reform measures coming into place in the year 1999, the business of distribution has been taken over by five distribution Companies, namely, BESCOM, MESCOM, GESCOM, HESCOM and CESC. During the year 2007-2008, the plaintiff invited bids from eligible bidders on 31.12.2007, for design, engineering, manufacture, supply, installation, testing and commissioning of 220 KV, 1000 sq. mm copper single core XLPE U.G. cable at KPTCL works for running of single circuit 220 KV, 1000 Sq. mm copper single core XLPE U.G. cable for a route length of 4.116 Kms from 220 4 Com.A.S.110/2018 KV NRS sub-station at Ananda Rao circle near 'A' station, and running of single circuit 220 KV, 1000 sq. mm copper single core XLPE U.G. cable for a route length of 1.35 Kms from the cable terminations tower point to 220 KV HSR Layout station in Bangalore on total turnkey basis. It was decided to improve the distribution in and around the area, improve the voltage condition in and around the area, to reduce overloading of 66 KV ring mains, to reduce the distribution energy loss, and achieve improvement in system stability. The work was divided into three independent and distinct portions namely supply portion, civil portion and erection portion. The plaintiff became successful bidder, vide Letter of Intent, dated 30.12.2008 for execution of supply portion, erection portion, and civil portion of the project work. Thereafter, revised LoI was issued on 20.5.2009 and consequently the period of completion was mentioned as 12 months from the date of issuance of amended LoI. The terms of the contract provides for Detailed Work Award, which was issued 5 Com.A.S.110/2018 subsequently and the defendant took 7 months to execute the contract agreements. As per clause No. 14.0 of GCC and 13.0 of SCC, empowers the plaintiff to levy liquidated damages subject to a maximum of 10% of the contract price in the event of defendant fails to successfully complete the commissioning within the time fixed under the contract and the defendant is liable to pay the plaintiff as liquidated damages and not as penalty. The project was completed with delay on 30.4.2014, i.e., beyond the stipulated time and since, there was certain dispute regarding price variation etc. Pursuant to the order of the Hon'ble High Court of Karnataka in CMP No. 121/2015, Arbitrator was appointed to decide the claim of the defendant relating to liquidated damages, price difference for supply of sand over and above DWA quantity, claim for disposal of earth debris over and above DWA quantity and few more claims as stated in the claim petition. In fact, the delays were alleged as attributable to the plaintiff by the defendant is delay in issuing detailed work award, delay 6 Com.A.S.110/2018 in obtaining permission for road cutting and approving route profile, the delay on account of obstruction caused by the association of private layout owners, delay in approval- execution of 220KV DC gantry structure, delay in obtaining permission from Lake Development Authority, delay in processing and payment of RA bills and etc. After filing of the claim petition and filing of written objection, Arbitral Tribunal, framed 6 issues and after examination of the witnesses and marking of documents allowed the claim of the defendant partly.
3. Being aggrieved by the said order of the Arbitral Tribunal, the present suit is filed on the grounds that, the observation of the Tribunal that the plaintiff has not produced any documents regarding payment on account of deviation in work 'A', price escalation beyond the original period of 12 months and cost of Bank Guarantees and the commission charges, etc. Since, there is no actual loss and proof of the same, granting of notional loss would not arise. As far as claim No.7, regarding payment on account of a 7 Com.A.S.110/2018 deviation in Work-A is concerned, the defendant has not produced any material to demonstrate that it has carried out to the tune of Rs.88,85,060/-. The award of Rs.5,00,000/- without there being any proof is incorrect and without any basis and liable to be set aside. Regarding to claim No.8, i.e., compensation for price escalation the tribunal has granted lump sum amount of Rs.4,00,00,000/- which is without any basis and against the clause No.40.2 of GCC. As far as claim No.12 regarding Bank Guarantees and commission charges is concerned, though the plaintiff failed to produce any records to support the claim, regarding Bank Guarantee charges a lump sum amount of Rs.20 lakhs has been granted without any basis which is against the decision in the case of Associate Builders Vs. Delhi Development Authority. As far as claim No.1 is concerned, the Awarding for refund of liquidated damages to the tune of Rs.3,44,76,994/- is unjustified and against the documents, which ought not to have been considered as 8 Com.A.S.110/2018 they are internal letters. It is further stated that the sanctity of internal communication cannot be relied upon to pass the claim.
4. As far as claim No.4 regarding final quantity variation and non-payment of the amount and interest thereon, the Tribunal has awarded Rs.1,79,69,615.85 without any reasons and against the admission of CW1 at question No.171. As far as claim No.5 is concerned, though, RW1 has admitted question No.76, that the RA bills submitted by the claimant contained the date of the bill and other details, but, no such admission is forthcoming and impugned award is against the public policy and patently illegal as held in various decisions of the Apex Court as it is against the terms of the contract. As far as claim No.6 is concerned, regarding road cutting charges of Rs.11,32,139/- was awarded without any proper document. The Tribunal has failed to appreciate the fact that the defendant has attempted to mislead the plaintiff by submitting a wrong certificate to claim the reimbursement 9 Com.A.S.110/2018 charges. Further, CW1 has admitted question No.167 regarding Ex.R14. The Arbitral Tribunal has not considered the clause No. 2.3 of SCC regarding restoration of surface to its original condition, but, failed while granting Award. The Arbitral Tribunal has awarded excess compensation which is ex facie contrary to substantive law of India and contrary to public policy. The impugned award is erroneous, patently illegal and goes to the very root of the matter and therefore, liable to be set aside. Accordingly, it has prayed for allowing the case.
5. The respondent has filed written statement admitting the acceptance of bid, Letter of Intent, amendment of bid, etc., but, it has further stated that the grounds urged by the plaintiff challenging the award of the Arbitrator to the extent of the Award of Arbitrator is concerned, the same is not a good ground under Section 34(2) of the Act. The award of the Arbitrator can be challenged on the ground mentioned in Section 34(2) of the Act. Reading of entire grounds in effect and substance 10 Com.A.S.110/2018 amounts to re-appreciation of the oral and documentary evidence, which is already been appreciated by the Arbitrator. The plaintiff is requesting the Court to re- appreciate the evidence, which has been appreciated by learned Arbitrator does not fall within the scope of Section
34. The defendant offered its bid for the work relating to design, engineering manufacture, supply, installation and testing in commissioning of 220KV 1000 Sq. mm copper single core XLPE U.G cable at site of KPTCL works as per running single circuit and after accepting the bid, Letter of Intent was issued, later it was amended and time was fixed for completion of work was 12 months from the date of amended LoI. The defendant has submitted Bank Guarantees to the extent of 15% of the contract value. Since, the plaintiff failed to provide detailed work award, the defendant could not commence the work, accordingly, it has issued a Letter dated 8.5.2009, requesting the plaintiff to issue DWA. Though, the time was fixed to complete the project due to delay in furnishing the amended LoI, 11 Com.A.S.110/2018 furnishing the design, drawing, and detailed work award and also obtaining of necessary permission from BBMP, Lake Development Authority and the inmates of Lake Dew Layout Association, and which is within the knowledge of the plaintiff. When the BBMP issued permission after issue of letter by the plaintiff, it directed to cover up the trenches by using 1800 mm thick sand and rate fixed by the plaintiff regarding extra work is incorrect and against the letter written by the plaintiff to BMRCL. The project 'B' was completed with a delay of 1441 days, which has been accepted by the arbitrator and therefore, the defendant is entitled to claim the same in addition to one already awarded. The defendant has attributed the delay on account of issue of DWA, obtaining road cutting permission, delay on account of obstruction by the Lake Dew residents Layout owners association, delay in approval of 220 KV double circuit gantry structure work, delay in obtaining permission from Lake Development Authority, delay in payment of running account bill affecting the cash 12 Com.A.S.110/2018 flow for executing project work. Non-payment of unit rate for the supply of sand and earth waste disposal of the quantity over and above the DWA quantity, delay in approval of quantity variation and final closure of the project, illegal recovery of liquidated damages, etc., and contended further that the Arbitral Tribunal has partly allowed the claim and partly rejected and the claim, which has been challenged in the present suit has been properly awarded by learned Arbitrator and this Court by acting under Section 34 cannot re-appreciate or revisit the findings. Accordingly, it has prayed for dismissal of the suit.
6. Heard learned counsel for the petitioner and respondent.
7. Now, the points that arise for my consideration are:-
1. Whether the Award passed by learned Arbitrator dated 29.1.2018 and modified order dated 23.4.2018 is against the material placed 13 Com.A.S.110/2018 before the Arbitrator and opposed to public policy and patently illegal?
2. What Order ?
8. 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.
REASONS
9. POINT NO.1: The plaintiff herein was the respondent before the Arbitrator and defendant was the claimant.
10. Learned counsel for the plaintiff would argue that the Arbitral Tribunal has allowed certain claims and disallowed the claims of the defendant herein and some of the claims are against the terms of the contract and learned Arbitrator has travelled beyond the terms and created a new terms and decided the case and as such, it is 14 Com.A.S.110/2018 patently illegal. When the Arbitrator goes beyond the terms of the contract or failed to consider the document, which ought to have been considered, and considering the documents, which ought not to have considered is the main grievance of the plaintiff herein. Further, the observation of learned Arbitrator regarding the delay in completion of the project was only because of the plaintiff, is incorrect for the various reasons stated before the Arbitrator by way of documentary and oral evidence. Regarding delay in issuing of DWA, he would argue that since, defendant/claimant committed mistakes in the bid that was not accepted and thereafter, after rectification of the discrepancy revised letter of acceptance was submitted by the defendant on 18.6.2009 and therefore, there is delay of one month. Further, there is a delay in furnishing Bank Guarantees and therefore, those delays cannot be attributed on the plaintiff, but, learned Arbitrator has entirely attributed the delay on the plaintiff, which is against the document placed before the Arbitral Tribunal.
15
Com.A.S.110/2018
11. Regarding delay in obtaining of road cutting permission, he would argue that the clause No.1.2 (H) of information for bidders, clause No. 15.5(G) of erection conditions of the contract and clause No. 2.3 of special conditions of contract, makes it clear that it is obligation on the part of the defendant to resolve all the right to resolve issues at any point of time. The defendant sought the intervention of the plaintiff and therefore, the defendant cannot attribute the delay on the part of the respondent. Further, as per the terms of the contract, the amount relating to road cutting permission shall be paid by the defendant and he can claim it back, but, as per Ex.P35, there is a delay of 20 days. Further, there is delay of 6 months in submission of route drawings by the defendants and it ought to have been submitted the same before 20.5.2009 and there is also delay in submitting PERT Chart, which was filed on 25.7.2009. Regarding the obstruction caused by the association of private layout owners, he would argue that the clause No.2.3 of special 16 Com.A.S.110/2018 conditions of the contract right to resolve issues, must be resolved by the defendant and the defendant has not taken any action on those aspects. Further, no line clearance is required, since the work to be carried out is underneath existing corridor of overhead transmission line. Further, the defendant has produced various internal documents regarding extension of time, meeting agenda, which ought not have been considered by learned Arbitrator.
12. Regarding delay in approval of execution of 220KV DC gantry structure, he would argue that it is not an additional work and the subject contract involved design, supply and erection cable termination structures at 220 KV substation and cable termination point. It is very clear from Ex.R35 and clause No.1.2 of invitation to bid. Further, there is admission on the part of the defendant that it did not carry out any work relating to gantry structure and even after 16 months, did not submit the design of gantry structure and jump arrangements to cable terminating point to overhead line, which includes two 17 Com.A.S.110/2018 numbers of multi circuit towers and one narrow base tower. Further, the work slip is required is only for payment and not for the quantity of the work.
13. Regarding delay in obtaining permission from Lake Development Authority, he would argue that it is burden on the defendant to obtain such permission and it is the plaintiff who has to assist them and nothing else. Lake Development Authority had arranged for draining out of complete lake water by duly restructuring the surrounding areas in order to develop pathways and for prevention of external drainage water. Regarding delay in processing and payment of RA bills, he would argue that the clause No.12.2 (ii) and (v) of ITB and 8.6 of SCC, a duty cast on the plaintiff to deduct at source, certain statutory levies and therefore, the defendant cannot harp upon it. The whatever the document produced at Ex.R34A was not traversed by way of cross-examination. Further, the defendant cannot claim interest from the date of R.A bills, but, only from the date of remittance of the said amounts 18 Com.A.S.110/2018 subject to proof. As per clause No. 34, 34.1, 34.3, 34.4 of GCC, 8.0, 8.2.1, 8.3 and 8.5 of SCC, the contractor is entitled to the sums raised in the corresponding invoices only upon substantiating the same with the particulars mentioned in clause No.34.4 of GCC. The defendant has not furnished requisite documents regarding corresponding invoices. The defendant wanted to claim wrongfully.
14. Regarding delay on account of non-payment of unit rate for supply of sand and disposal of earth debris for excess quantity and the claim No.2 regarding difference for supply of sand over and above DWA, claim No.3 relating to disposal of earth debris, etc., he would argue that in view of accord and satisfaction signed by defendant, he is not entitled to claim the same and Arbitral Tribunal ought not to have relied upon annexure C 124, that is internal communication of the plaintiff's department.
15. Delay in reimbursement of way leave charges paid to statutory clearances and claim No.6 for payment for road 19 Com.A.S.110/2018 cutting charges paid by the defendant, he would argue that it is bounden duty of the defendant to restore the same and asphalt the same subject to satisfaction of the BBMP and therefore, the same cannot be attributed to the plaintiff. Since, the defendant has not produced the document and produced Ex.R14, which relates to some other projects, it is not entitled to claim the same.
16. Regarding delay in approval of quantity variation over and above DWA quantity and claim No.4 regarding final variation executed over and above DWA quantity and interest and raise of FQV executed over and above DWA quantity and interest, he would argue that in order to closure of contract, the defendant had to submit the final quantity variation (FQV) statement duly indicating the actual quantities of various items of works executed. The defendant is also required to sign in the measurement books maintained by the plaintiff. The defendant, inspite of reminder had not signed the measurement book and 20 Com.A.S.110/2018 submitted FQV only on 17.5.2004 and therefore, it is not entitled to price variation amount.
17. Regarding recovery of liquidated damages, he would argue that since, the defendant has taken two extensions for completion of the work as per the terms of the contract, it is entitled to recover liquidated damages from the final bill and therefore, there cannot be any claim for refund of liquidated damages recovered by the plaintiff. After arguing about the delay aspect, he straightaway took the Court claim No.1 regarding recovery of liquidated damages and the Arbitral Tribunal has awarded Rs. 3,44,76,994/-, which was deducted by the plaintiff towards liquidated damages for non-completion of the project within the time stipulated. He would further argue that the observation with regard to absence of record for refund of Rs.76,77,000/- is contrary to document such as Ex.C189 and C192, which are the two extensions of time and a total sum of Rs.76,77,000/- was refunded. 21
Com.A.S.110/2018 The Arbitral Tribunal has not considered it. The Arbitral Tribunal solely based the observation on Ex. CC189 and 192, which are internal communications, which cannot be based to lay the decision as held in the case of Union of India and another Vs. Karthickchandra Mandol and another reported in (2010) 2 SCC 422, wherein, their lordships have held at para No.17 that "the next issue that we are required to consider pertains to internal communication, which are relied upon by the respondent and which were also referred by the Tribunal as well as the High Court. Exfacie, the aforesaid communications were exchanged between the Officer at the level of Board Hierarchy only.
18. In para No.18, it is held that "an order would be deemed to be a Government Order as and when, it cannot be said to be orders issued by the competent authority unless, they are issued in accordance with the law". 22
Com.A.S.110/2018
19. Further, in the decision reported in the case of State of Bihar Vs. Krupal Shankar and others, reported in 1987 3 SCC 34, wherein, it is held at para No.16 that:
16. " Viewed in this light, can it be said that what is contained in a notes file can ever be made the basis of an action either in contempt or in defamation. The notings in a notes file do not have behind them the sanction of law as an effective order. It is only an expression of a feeling by the concerned officer on the subject under review. To examine whether contempt is committed or not, what has to be looked into is the ultimate order. A mere expression of a view in notes file cannot be the sole basis for action in contempt. Business of a State is not done by a single officer. It involves a complicated process. In a democratic set up it is conducted through the agency of a large number of officers. That being so, the noting by one officer, will not afford a valid ground to initiate action in contempt. We have thus no hesitation to hold that the expression of opinion in notes file at different levels by concerned officers will not constitute criminal contempt. It would not, in our view, constitute civil contempt either for the same reason as above since mere expression of a view or suggestion will not bring it within the vice of sub-
section (c) of Section 2 of the Contempt of Courts Act, 1971, which defines civil contempt. Expression of a view is only a part of the thinking process preceding Government action."
20. So, with the help of above two decisions, he would argue that learned Arbitrator ought not to have considered 23 Com.A.S.110/2018 the internal communication, so as to base his reason regarding refund of liquidated damages collected by the plaintiff. Therefore, the award is in conflict with public policy of India and warrants interference.
21. Regarding claim Nos.2 and 3, he would argue that the plaintiff in its Official Memorandum, dated 15.4.2010 (Ex.C174) has fixed a sum of Rs. 2,800/- per cubic meter of sand inclusive of disposal of earth for quantities explained in DWA quantities and defendant has raised no objection to it and therefore, he ought not to have claimed the same. The Award of the price variation above Rs.2,800/- cannot be done when the obligation is discharged by way of accord and satisfaction. To support his claim, he cited the decision in the case of National Insurance Company Limited Vs. Bhoghra Polyfab Private Limited reported in (2009) 1 SCC 267, wherein, at para No.29, it is held that "it is clear that the arbitration agreement contained in a contract cannot be invoked to 24 Com.A.S.110/2018 seek reference of any dispute to arbitration, in the following circumstances, when, the contract is discharged on account of performance, or accord and satisfaction, or mutual agreement and the same is reduced to writing.
a) Where the obligation under a contract or fully performed and discharge of the contact by performing is acknowledged by way of full and final discharge voucher/receipt, nothing survive with regard to first discharge.
b) Where the parties will contract by mutual agreement, except performance or altered, modified and substituted obligation and confirm in writing, the discharge of contract by performance of the altered, modified or substituted obligation;
c) Where the parties to contract, by mutual agreement, absolved each other and performance of their respective obligation, (either on account of frustration or otherwise) and consequently, cancelled the agreement and confirmed that, there are no outstanding claims or dispute.
22. So, when the above decision is read along with accord and satisfaction accepted by the defendant, then, it cannot claim amount under claim Nos. 2 and 3.
23. The order passed by learned Arbitrator, regarding the same is incorrect and against the terms of the contract, 25 Com.A.S.110/2018 however, learned Arbitrator has not accepted the case of the defendant regarding claim Nos.2 and 3.
24. Now, coming to claim No.4, he would argue that the plaintiff had produced numerous communications, Ex.R21 to R33, evidences the request made by it to the defendant to sign the measurement book and indicating the non-completion of works in both works A and B and the Arbitral Tribunal has not considered those documents, which is the main grievance and the answer given by the defendant to question No.171, shows that, they have signed the accord and satisfaction with protest, but, the said document is silent. When that is the case, what is the effect has been held in the decision in the case of Oil and Natural Gas Company Vs. Western Geco and subsequent Judgment. In fact, it is apparent that the reason for delay is attributed to the plaintiff, despite no oral and documentary evidence placed before the Arbitral Tribunal. 26
Com.A.S.110/2018
25. Now, coming to claim No.5, he would argue that claim No.5 relates to interest on delayed payment on RA bill and Tribunal has awarded Rs.1,06,77,149/- and he would submit that the above claim is patently illegal as it is against the terms of the contract particularly, clause No.34, 34.1, 34.3, 34.4 of GCC and 8.0, 8.2.1, 8.3 and 8.5 of SCC, which envisages the procedures for submission of RA bills. The very grant of interest is against the above terms and therefore, it is against the public policy of India. He would further argue that it is settled law that the Arbitral Tribunal being a creature of contract, is bound by the provisions of contract. If the Award is against Section 28(3) of the Act, which prescribed that while deciding and making an Award, the Arbitral Tribunal shall in all the cases, take into account, the terms of the contract, therefore, the award is against the substantive law, amounts to patent illegality. Further, the Arbitral Tribunal has not considered Ex. R34 (A) and there was no cross-examination of RW1 by the defendant regarding admitting of Ex.R34(A) and by 27 Com.A.S.110/2018 considering the decision in the case of Muddasani Venkata Narasaiah (dead) through LR's Vs. Muddasani Sarojana, reported in (2016) 12 SCC 288, wherein, it is held that failure to denial and conduct of cross- examination of a witness, amounts to admission, but, the Arbitral Tribunal has not considered the same and same is liable to be set aside. As far as grant of interest is against terms of contract, which is against the ratio laid down in the case of Ssangyong Engineering & Construction Co. Ltd., Vs. National Highway Authority of India, reported in (2019) 15 SCC 131, wherein, at para No.51, it is held that, if a fair opportunity is not given, then, it is a ground available under Section 34(2) (a) (c) of the Act for setting aside the Award.
26. Now, coming to clause No.6, he would argue that Tribunal has awarded a sum of Rs.16,61,000/- towards road cutting charges. According to him, clause No.2.3 of SCC expressly states that restoration of surface to its original condition as per the requirement of the concerned 28 Com.A.S.110/2018 authorities, i.e, BBMP and same shall be carried out as prescribed by the respective authority. As per Ex.C35 the road cutting permission was granted and it is the duty of the defendant to restore road to its original condition and the very observation of the Tribunal is against the pre- existing condition of the contract. Therefore, the observation of the Arbitral Tribunal, thereby modifying the terms of the contract is contrary to basic notions of justice as held in the decision in the case of Ssyongyong Engineering and construction Co Ltd. When the award is against basic notions of justice and morality, which would shock the conscience of the Court, then, the same is liable to be set aside. According to him, the defendant was successful in hoodwinking the Tribunal by submitting certificate pertaining to other projects to contend that it pertains to the project in question, thereby played mischief. So, the findings of the Tribunal is perverse and contrary to the record.
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27. Now coming to claim No.7 regarding payment on account of deviation of work 'A' by the plaintiff at the behest of BMRCL, the Tribunal has awarded a lump sum amount of Rs. 5,00,000/-. Though there is no record to show the actual amount spent, the Tribunal has granted lump sum amount of Rs.5,00,000/-, which is also against the terms of the contract. It was the specific contention of the plaintiff herein that no work was carried out to incur additional cost in relation to the deviation and the defendant/contractor had not produced any material to demonstrate the supply of material or works carried out. Since, there is no record to that effect in Ex.R33 measurement book, how could the Tribunal grant a lump sum amount of Rs.5,00,000/-, which is also against the terms of the contract and it is violation of principles of natural justice. Though, Ex. R33 was confronted to CW1, solely relying upon Ex.207 is incorrect. The above observation is against the Judgment of Apex Court in the case of Dyna Technologies Private Limited Vs. 30 Com.A.S.110/2018 Crompton Greaves Ltd., reported in (2019) 20 SCC 1, wherein, it is held that the mandate under Section 31 (3) of the Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases, even be implied by the Court from a fair reading of the Award and the documents referred to thereunder, if need be. The aforesaid provision does not require an elaborate Judgment to be passed by the Arbitrators having regard to speedy disposal of dispute" So, according to learned counsel for the plaintiff, the Award of Rs.5,00,000/- without there being any reason is against the Section 31(3) and therefore, it is against the public policy of India.
28. Now, coming to claim No.8, towards the price escalation beyond the original period of 12 months, the Arbitral Tribunal has awarded Rs.4,00,00,000/- on the basis of escalation of price by relying upon the clause Nos.40.1 and 40.2 of GCC and learned Arbitrator has also relied upon Ex.C210, i.e., an order of KPTCL. Regarding 31 Com.A.S.110/2018 the said award of claim, he would argue that, that is against the provisions of contract, particularly, clause No. 2.3(a) and 2.11 of SCC, which provides that contractor/defendant is not permitted to seek any financial adjustment. Therefore, the prices applicable during the contract period is also applicable to the extended period of contract. So, by ignoring the same, learned Arbitrator has awarded Rs.4,00,00,000/-, as a lump sum amount, which is also against the clause No.40.2 of GCC, which provides for reasonable compensation. He would further argue that it is well settled principle of law, with regard to proof of loss and damages that the parties claiming compensation must prove the loss suffered by him/them. In the present case, the defendant has failed to prove the same. Therefore, the Award is against the principles governing the proof of damages.
29. Now, coming to the claim No.12, cost relating to maintaining of Bank Guarantee, etc., the Tribunal awarded 32 Com.A.S.110/2018 at Rs.20,00,000/-. According to learned counsel for the plaintiff, the Tribunal ought not to have granted the same. To support his claim, he relies upon the decision in the case of Maula Bux Vs Union of India reported in 1969(2) SCC 554, So, according to learned counsel for the plaintiff, the Award can be set aside, if it is found that it is against the terms of the contract, if the Arbitrator creates a new term in violation of the agreed terms to grant relief, which is against the basic notions of justice and shocks the conscience of the Court. Further, if, it is apparent on record that, learned Arbitrator has failed to consider the documents and failed to follow the relevant provisions of substantive law, then, it amounts to patent illegality and to sustain its case he relies upon the decision in the case of The Project Director, National Highways Authority of India Vs. M. Hakeem and others, PSA SICAL Terminals Pvt. Ltd., Vs. Boad of Trustees V.O. Chidambaram Port Trust Tuticorin, Patel Engineering Ltd., Vs. North Eastern Electric Power Corpn. Ltd., reported in (2020) 7 33 Com.A.S.110/2018 SCC 167 and some other decisions to base his claim and he is of the firm view that, the Award is against the terms of the contract, evidence on record and exceeding the jurisdiction to define the terms of the contract, which amounts to patent illegality.
30. Learned counsel for the defendant would argue that he has challenged the above award of the Arbitrator denying the claim Nos. 2, 3, 11, 13,14 and partly allowing claim No.7, is against the terms of the contract and erroneous, illegal for the reason that learned Arbitrator has not considered the terms of the contract and also various other aspects urged in the above petition. It is further argued that the plaintiff in order to execute their object and to create an infrastructure for distribution of electricity, has invited the tender for design, engineering, manufacture, supply, installation and testing of 220 KV 1000 Sq MM Copper single core underground cable for a route length of 4.116 Kms from proposed 220 KV NRS sub-station to the proposed 2 x 150 MVA, 220/66/11 KV substation at 34 Com.A.S.110/2018 Ananda Rao circle near 'A' Station, Bengaluru and also for a route length of 1.35 Kms from the cable terminations tower point to the 220 KV HSR Layout station in Bangalore on turnkey basis and the scope of the work at clause No.1.2 provides that the scope of works under this IFB covers running of three phase single circuit of 220 KV, 1000 Sq mm single core copper XLPE U.G cable and etc., and the salient features of the scope include, but not limited to, (a) over all project management, co-ordination,
(b) surveying of proposed cable route including digging and closing of trial pits, preparation of drawings, finalisation of cable route in consultation with owner's representative, (c) testing the evaluation of soil, resistivity, soil thermal resistivity, PH value of the solid along with the route base on the date final system to be designed. (d) Design the methods of installation of underground cable, cable laying, excavation and back filing of cable trench, supply and installation of associated materials like sand, bricks warning tape, protective slabs, pipes route indicators etc., 35 Com.A.S.110/2018 in the duct inclusive of all Civil works. (e) design manufacture, testing at works/test house, supply, storage, installation, testing at site and commissioning of 220 KV XLPE U.G cables with accessories like joints and terminations, (f) design, supply, erection, testing and commissioning of the surge voltage limiters, grounding switches, link boxes for earthing, (g) design, supply and erection of cable termination structures at all the 220 KV stations and cable terminating points, (h) obtaining clearances from forest, BDA, BWSSB, BBMP, PTCC, Railways and other agencies wherever required. Since, the plaintiff is having techno commercial qualification, it offered its bid for the said proposal and its bid was accepted and letter of intent was also issued, which discloses the value of the contract as Rs.7,23,37,448/- for supply of indigenous material for erection portion and a sum of Rs.9,894,89,015.54 for civil portions of the work. All the necessary documents were executed and the plaintiff accepted the letter of Intent and Bank Guarantees 36 Com.A.S.110/2018 were given, for a sum of Rs.4,93,83,571/-, Rs.2,46,91,786/, Rs.69,08,060/-, Rs.34,54,030/-, Rs.98,49,802/- and Rs.49,24,901/-. After furnishing of Bank Guarantees, the main concern of the defendant is that the Letter of Intent which was issued to the defendant was not according to the bid documents as the prices of import material were not properly reflected and therefore, the defendant requested the plaintiff to correct those arithmetical errors in the Letter of Intent. Thereafter, the defendant requested the plaintiff to issue detailed work award, after correcting LoI, but inspite of issue of letter, dated 8.5.2009, the defendant did not issue detailed work award containing the approved unit price and the total quantity required for the execution of work. He would further argue that the entire work was required to be completed within 12 months from the date of the original Letters of intent subject to plaintiff fulfilling their reciprocal obligations under the terms of agreement. The plaintiff failed to fulfill their obligations, issue of detail work award 37 Com.A.S.110/2018 mentioning of correct amount in the LoI. After almost 140 days from the date of first Letter of Intent by letter dated 20.5.2009, the plaintiff, issued amended LoI and since there was additional price for quantity, the defendant was requested to furnish additional performance security matching 15% of the performance security for entering into the agreement with the defendant. In total, the defendant has furnished Bank Guarantee to the tune of Rs.11,10,64,041/-. After mobilising the resource required for execution of the project work, it had also instructed the LS cables, South Korea for manufacturing of the underground cables for implementing the project work and dedicated workers were appointed for the project. However, the plaintiff failed to provide necessary assistance by obtaining statutory approval from the various departments for laying of underground cable. Since, the work involved required more than 12 months on account of failure on the part of the authority, i.e., BBMP to provide road cutting permission and the same is attributed to the plaintiff as 38 Com.A.S.110/2018 they failed to file application for road cutting permission, though, initially it is the responsibility of the defendant to pay such fee to the BBMP. There was in ordinate delay in issuing DWA and obtaining road cutting permission and approval of road profile in respect of work 'B' on account of the objection of Lake Dew Residency Layout owners Association in 3rd Phase/3rd Section of the laying of underground cable, removal of obstruction with the help of police force and approval of 220 KV double circuit gantry structure work by the plaintiff. Delay in obtaining of permission from lake development authority, etc., are the main reasons for delay and same has been attributed to the plaintiff. He would further argue that there was a delay in payment of running account bills, affecting the cash flow for execution of the project work and plaintiff failed to pay unit rate for the supply of sand and earth waste disposal of the quantities over and above the DWA quantity and there was delay in reimbursement of the statutory clearances from BBMP. Further, there was delay in approval of 39 Com.A.S.110/2018 quantity variation and approval of final closure of the project. So, since, the delay is on account of the plaintiff, the claim of the defendant was restricted by the Arbitrator, which according to learned counsel for the defendant is incorrect. Regarding delay in issue of detailed work award, he would argue that the detailed work award is essential for execution and completion of the project work within stipulated time and that there being detailed work award, no bills will be honoured by the plaintiff and it is essential part of the contract to commence the work, since, the contract involved supply, erection and civil portion of the work impose contractual on the part of the plaintiff to issue detailed work award containing approval price schedule and schedule quantity, which are essential for commencement of project work. The clause No.11 of the letter of Award provides for detail work and responsibility of the plaintiff to provide the same. After letter of intent, on 17.3.2009, the defendant wrote a letter to the plaintiff to issue DWA to start the work and there is delay of 212 40 Com.A.S.110/2018 days from the date of original Letter of Intent to issue DWA which was issued on 30.9.2009. The letter of Intent was issued after 71 days from the date of issue of first LoI. Further, as far as road cutting permission is concerned, there is inordinate delay in obtaining permission from the BBMP and without road cutting permission, no work could be commenced. The clause No.2.3 of SCC imposes the contractual obligation on the part of the defendant to obtain necessary approval before execution of the work. The plaintiff after 3 months 4 days, filed an application for seeking road cutting permission from the BBMP and it was the responsibility of the defendant to pay the required fee and to claim the same from the plaintiff. Initially, the BBMP, vide communication, dated 6.8.2008, refused to grant of permission for open trench method and it granted permission only on 2.9.2009 with various conditions. Since, the plaintiff was not stated about the priority project, there was delay in obtaining road cutting permission and which cannot be attributed to the defendant. The other 41 Com.A.S.110/2018 delay is due to obstruction by the Lake Dew Owners Association, they prevented the defendant from carry out the work in their area and subsequently, that was settled and due to which there was delay and the defendant had to incur more money for completion of the work. Since, there has been continuous obstruction by the residents of locality, the defendant had to file complaint to the police and with the help of the police, defendant had to complete the work in their area. Another delay is relating to approval of 220 KV double circuit gantry structure work. The defendant had to raise gantry structure work at the cable termination point for floating the energy, as per instruction of the plaintiff, the defendant had to construct 220 KV DC Gantry Structure to close the cover to the underground cable to be charged for supplying of electricity by using underground cable commissioned by the defendant. The plaintiff insisted for drawings of the said construction and therefore, there was some delay attributed to the plaintiff. Since, there was lake, it was necessary to obtain 42 Com.A.S.110/2018 permission letter from Lake Development Authority to put up, raise gantry structure and even after submitting of detail drawings on 9.8.2011, there was delay attributed to the plaintiff and ultimately after delay of 29 days, the fabrication drawings were approved with minor corrections. After obtaining approval of fabrication drawings, the defendant was required to place an order with the approved vendor to fabricate the gantry structure and kept ready for inspection. The approved vendor manufactured the gantry structure and kept ready for inspection and issued the dispatch instruction to the plaintiff. The defendant called upon the plaintiff to inspect the prototype manufactured to assemble at Hyderabad before final approval and it was accepted and approved by the plaintiff on 23.11.2011 at Hyderabad. Further, there was delay in issue of work slip by the plaintiff, regarding gantry structure for final approval and also to transport the materials from Hyderabad to the project site. There was inordinate delay in approving the work slip, by the plaintiff and said work 43 Com.A.S.110/2018 slip is essential for commencement of work and the same is attributable to the breaches committed by the plaintiff. There was delay in shifting of gantry structure for want of dispatch instruction by the plaintiff and there was delay of 46 days in issuing the same.
31. Further, the delay has been caused for providing action plan which was not adhered to by the plaintiff and there was serious dispute about dismantling of existing structure and installation of new DC gantry structure by the Private Layout Owners Association referred above and the plaintiff was required to procure the materials from BESCOM, such as cables, poles for doing the work of Lake Dew Owners Association. On 6.5.2013, the defendant requested the plaintiff to procure the necessary materials from BESCOM and the delay is in obtaining materials and further, at the time of completion of termination the defendant had to bring technician from South Korea and delay was due to the said reason also. Further, the delay was also due to permission from Lake Development 44 Com.A.S.110/2018 Authority and therefore, the said delay cannot be attributed to the defendant. The Lake Development Authority took 3 months to give such permission. Further, there was delay in payment of running account bills which actually affected the cash flow for executing the project work. As per clause No.8.5 of special conditions of contract stipulates that the plaintiff shall make the payment of running account bill within a period of 15 days from the date of passing of the bill, which is considered as an essential condition of terms of agreement. If, there is any delay, then, plaintiff shall pay the same with interest at 6% per annum. Further, clause No.34.3 of GCC provides that the defendant shall prepare and submit bills for the approval of the Engineer and the Engineer will have to pass the bill for making payment. The bill will have to be submitted in prescribed Anenxure-4 and submit the same for the payment of the bill and the same has to be submitted in a standard form as per clause No. 34.4. Since, there is inordinate delay in payment, it is nothing but, committing a fundamental breach of 45 Com.A.S.110/2018 agreement and therefore, learned arbitrator, while rejecting claim has not considered the same. The learned Arbitrator has given cogent reasons regarding the claim allowed fully. Further, the plaintiff has not paid the unit rate for the supply of sand and earth waste disposal of the quantities and in fact the defendant had to shift it from the site to a far away place, which is situated invariably about 35 to 40 Kms from the centre of the city. Further, it had to incur more money for back filling of the trench, which is an additional work and though the defendant has quoted a sum of Rs.8,082.46/- per cubic metre for the supply of sand, but, the plaintiff has not made good the amount towards use of the sand as claimed in the petition and clause No.24.1 provided for discrepancy in quantities indicated in the drawings and that specified in price schedule, actual quantities indicated in price schedule to be followed. During the execution of the contract, the owner reserves the right to increase or decrease the quantities of items under the contract, but, without any 46 Com.A.S.110/2018 change in unit price or other terms and conditions. Such variations unless otherwise specified in the accompanying special conditions of contract and or technical specification, shall not be subjected to any limitation for the individual items but, the total variation in all such items under the contract shall be limited to as percentage of contract price as specified in the special conditions of contract. The clause No.22 deals with the quantity variation, clause No.1.11 deals with contract price and clause No.2 deals with contract documents and according to learned counsel for the defendant, the bidding documents, proposal submitted by the defendant, agreed minutes of the meeting, Letter of Intent, quantity plan for manufacturing or the contract document, which has not been properly considered by learned Arbitrator. He would further argue that non-payment of amount relating to price variation pertaining to sand is against the terms of the contract and therefore, there is an error committed by the arbitrator, while dismissing the claim and partly allowing the claim. 47
Com.A.S.110/2018 Further, learned arbitrator has not referred to the cross- examination, available in question No.97 to 115 of RW1, which substantiate the claim of the defendant. Further, there is delay in reimbursement of the statutory clearances and amount spent by the defendant to obtain the clearance and approval of the quantity variation and final closure of the project. Further, the plaintiff has illegally recovered the liquidated damages without there being loss sustained by it. In fact, the plaintiff has deducted a sum of Rs.3,07,33,463/- as liquidated damages from the running account bills on different dates and the argument canvased by learned counsel for the plaintiff cannot be accepted. So, according to learned counsel for the defendant, learned Arbitrator has allowed the claim No.7 and denied claim Nos.2, 3, 9, 10, 11, 13 and 14, is against the record and terms of the contract. He took the Court to the statement of claim at page No.41, which shows that the BBMP has changed the depth of sand, which is the main reason for defendant losing huge amount. The defendant had to fill 48 Com.A.S.110/2018 the trench with sand having 1500 mm. Therefore, it had to get more sand for the said purpose, which is nothing, but, variation of terms of the agreement and for which it is entitled to compensation, entitled to refund of price variation, Arbitral Tribunal has not taken note of. The clause no. 22 and 23, provides for bid security amount and also period of validity of bids, etc. and according to learned counsel, the Award is contrary to the express language of the agreement. The clause No. 24.1 of the condition of the contract, provides for any discrepancy in quantities indicated in the drawings and that specified in price schedule, actual quantities indicated in the price schedule to be followed. The clause No.22.1 provides for power to alteration, amendment as stated therein. So, the clause No. 24 of the contract agreement provides for change of quantity, during the course of contract and therefore, the arbitrator is not correct in rejecting the claim. As far as claim No.2 is concerned, learned counsel for the defendant took the Court to page No.65 of the claim statement, filed 49 Com.A.S.110/2018 before the Arbitral Tribunal, wherein, the defendant has categorically contended that as per the earlier agreement, the original depth of the sand filling to the trench of 1000 mm, but, BBMP insisted for the depth of sand, to an extent of 1800 mm, which led the defendant to incur huge loss and it supplied total quantity of 6591.44 Cubic meter for both the works and the unit price fixed by the plaintiff at Rs.2,800/- per cubic meter is contrary to the express terms in the contract and further balance quantity of 1672 Cubic meter in works 'B', the plaintiff has not paid any rate, neither DWA rate nor the Work fixed rate, even there is provision to make the payment. The clause No.22 of Special conditions of the contract, specifically provides that the claimant is required for supply over and above detail award quantity to any extent, the claimant is entitled to the unit rate mentioned in the detailed work award which is binding agreement between the claimant and plaintiff. The unit rate mentioned in the Detailed Work Award for supply of sand is Rs.8,082.46 per cubic meter, but, against the 50 Com.A.S.110/2018 same plaintiff has fixed Rs.2,800/- per cubic meter for supply of sand and removal of earth by mixing the same, which is against the express terms of the contract. The plaintiff in its written statement at page 159, have stated that have denied the allegation of the defendant regarding payment towards sand and transportation of earth waste and it is specifically mentioned in para No. 48 of the written statement filed before the Arbitral Tribunal that "However during the time of seeking approval for road cutting permission from BBMP and other authorities, the concerned authorities insisted on the total depth of excavation to be 1500 mm, with sand fill for a depth of 920 mm and the remaining depth of 580 mm of road to be restored with granular sub base course, wet mix macadum and bituminous macadum as against the original quantities mentioned in the Detailed Work Award". The modification in the civil works and variations in quantities on account of the same are due to revised procedure of BBMP subsequent to calling for tender. So, when there is 51 Com.A.S.110/2018 admission on the part of the plaintiff about variation in quantity of sand on account of permission granted by the BBMP, then, who has to indemnify the defendant. Further, in para (E) of the written Statement filed before the Arbitral Tribunal, the plaintiff admits about issue of Official Memorandum, dated 15.4.2010 and accord approval for payment of Rs.2,800/- per cubic meter inclusive of all applicable taxes for riddled/sieved sand for back filling the trench including disposal of earth for excess quantities over and above the DWA quantities in accordance with the prevailing KPWD SR rates. This itself is incorrect, which is nothing but, going against the express terms of the contract. Thereafter, he referred to Ex.P174, which is available in Volume No.5, i.e., Official Memorandum, dated 15.4.2010, fixing the charges of Rs.2,800/- per cubic meter and it is specifically stated in para X, that in accordance with above tender clauses, the agency is insisting for payment of rate as quoted by them for sand and disposal of earth for the above four enquiries for the additional 52 Com.A.S.110/2018 quantities also. By the said Official Memorandum, they have fixed only Rs.2,800/ per cubic meter, which includes both sand as well as removal of earth waste. Thereafter, he referred to the Official Memorandum, dated 31.3.2011, i.e., Annexure 'D' 175, which speaks about the amount fixed for various works, particularly, erection portion, supply portion, civil portion, etc. and approval accord to the Work slip- 1 forwarded by the Chief Engineer, Electricity transmission zone, vide letter dated 29.3.2011, for the excess amount as noted towards supply, erection, civil and total amount. So, in view of the above fact, when there is clear decision taken by the defendant about payment towards excess work done, learned Arbitrator has not considered the same. Thereafter, he would argue about the evidence given by the Mr. K Venkateshwar Rao as PW1 and cross-examination of said PW1, at para No.72 to 74 of cross-examination of DW1 at question No. 97 to 115, which disclose certain admission regarding unit price fixed for sand at Rs. 8,082.46 and also the obligation on the part of 53 Com.A.S.110/2018 the defendant to supply additional quantity and other aspects. When, DW1 admits about additional work done by the defendant and when the contract stipulates for payment of 8082.46 cubic meter for the sand and removal of earth, then, the arbitrator has committed error in appreciating the evidence and denying the claim. With this background, he took the Court to running page No.138, at para No. 8.83, learned arbitrator having held that the payment are legitimately due to the defendant and they are bound to pay or else to have negative impact on the overall project, in para No. 8.84 has elaborately discussed about the delay in nonpayment of unit rate for supply of sand and disposal of debris for extra quantity. Learned Arbitrator though discusses about the case of the claimant, with reference to clause No. 24.43 of GCC and clause No.22.1 of SCC has come to the conclusion that the claimant has accepted the Official Memorandum fixing the comparative rate of Rs.2,800/- per cubic meter by conduct and in para No. 8.14, learned arbitrator by holding that since, the 54 Com.A.S.110/2018 claimant has signed the RA bill, it is nothing but, accord and satisfaction, therefore, it is nothing, but, claiming excess amount, according to learned counsel for the plaintiff is incorrect and accord and satisfaction is contrary to the express terms of the contract and therefore, learned Arbitrator ought to have discussed the same in his Award. The evidence of RW1 does not disclose about accord and satisfaction, and there is no pleadings by the plaintiff also. So, in a situation like this, whether accord and satisfaction would affect the defendant from claiming excess amount, has been discussed by the Apex Court in the case of State of Rajasthan Vs. Ferro Concrete Constructions Pvt Ltd., reported in (2009) 12 SCC 1, wherein, it is held at para 55 that:
55. "While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the 55 Com.A.S.110/2018 jurisdiction of the arbitrator, and wholly unsustainable".
32. Further, he has cited one more decision in the case of R.L Kalathia & Co., Vs. State of Gujarat, reported in (2011) 2 SCC 400, wherein, it is held at para No.13 that:
13. "From the above conclusions of this Court, the following principles emerge:
(i) Merely because the contractor has issued "no-
dues certificate", if there is an acceptable claim, the court cannot reject the same on the ground of issuance of "no-dues certificate".
(ii) Inasmuch as it is common that unless a discharge certificate is given in advance by the contractor, payment of bills are generally delayed, hence such a clause in the contract would not be an absolute bar to a contractor raising claims which are genuine at a later date even after submission of such "no-claim certificate".
(iii) Even after execution of full and final discharge voucher/receipt by one of the parties, if the said party is able to establish that he is entitled to further amount for which he is having adequate materials, he is not barred from claiming such amount merely because of acceptance of the final bill by mentioning "without prejudice" or by issuing "no-dues certificate".
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33. So, with the help of the above decisions, he would argue that though there is acceptance of the R.A bills, will not affect the right of the defendant as decision of the Arbitrator has to be based on the document and terms of the contract.
34. After referring to claim Nos. 2 and 3, he would argue about claim No.7 i.e., partial allowing of claim No.7 and in the said regard, he would argue that the Award of Rs.5,00,000/- towards duration of work is contrary to material documents produced before learned Arbitrator. Learned Arbitrator, has relied on Ex.C207, which categorically states that, the plaintiff itself has claimed the amount of Rs.88,85,060/- from BMRCL, but, when the plaintiff has claimed Rs.88,85,060/-, how could the arbitrator reduce it to Rs.5,00,000/-, which is erroneous and illegal. In the said regard, he took the Court to Ex.C207, which is available in Vol.5, page 903, i.e., letter dated 9.3.2010, addressed to BMRCL, requesting them to pay Rs.88,85,060/- towards deviation of the cable route, 57 Com.A.S.110/2018 but, learned Arbitrator has not considered which is against the settled principles of law relating to arbitration. The Award at ink page 164 speaks about the discussion relating to claim made towards deviation of works 'A' due to intervention of BMRCL and learned Arbitrator has referred to Ex.C207 also, but, while granting, he has restricted the same to Rs. 5,00,000/- which is against the document.
35. As far as, claim No.9 is concerned, learned Arbitrator at para No. 9.41 has stated by referring to the case of the defendant that the contract was required to import 220KV UG cable from South Korea and therefore, had quoted the price in US$, that it had quoted 4,84,789 US$ for supply of 1 Km of UG Cable under the contract, claimant was required to quote, the price in US$ though the payment was required to be made in Indian rupees as per the formula specified, that the cable was transported under the bill of lading, dated 30.6.2009 and received on 24.7.2009, that as per contract the relevant price formula was to be applied on 30.6.2009, when the prices of copper 58 Com.A.S.110/2018 and lead had increased, etc. Though, the plaintiff agreed to pay contractual rate of 4,84,789 US$ per Km to 3,07,000 US$ per Km and deducted Rs.3,33,84,440/- from the amount payable to the claimant. He refers to Tax invoice submitted by the defendant at Ex.C-91, which is in US$ for 43,60,040 US $ relating to supply of material as per the enclosed invoice and another invoice at Ex.C-92, which also discloses the invoice issued pertaining to material purchased. Now, clause No.13, stipulates, how the bills have to be prepared and there is a reference in the Award at Para No.9.43 regarding preparing the bill by referring to the formula etc. The clause No.13 of ITB, the bidders will have to quote the price keeping in mind, the price prevailing and variable. If, there is increase in the price, the plaintiff is required to increase the price, if there is a decrease in price, the defendant is entitled to lesser price. The formula is also provided, I am of the view that it is not necessary to state in the present Judgment as learned Arbitrator has clearly stated about it. The prices shall be 59 Com.A.S.110/2018 firm and fixed as on the next working day of London Metal Exchange, after 15 days, from the date of yellow price to award the work to the successful tenderer. Thereafter, he referred to Ex.R13 available in Volume-2, i.e., the circular issued by the plaintiff, dated 13th May 2008, to the effect that the bills should be submitted on time, with date and a direction is given to the Executive Engineer to make entry of the receipt of the bill, so as to process the same for disbursement of the amount. Having paid the amount, they have deducted on the ground of variation, which is not correct. So, regarding this aspect, he took the Court to Award, reasons given by learned Arbitrator to claim No.9 by referring to the decision in the case of Walchandnagar Industries Ltd., Vs. Cement Corporation of India reported in (2012) Arb LR 219 (DB) and State of Madhya Pradesh Vs. Raja Balbhadra reported in AIR 1964 MP 231 (internal page No.84 of the Award) and rejecting the claim of the plaintiff under claim No.9. According to learned counsel for the defendant, the defendant though submitted 60 Com.A.S.110/2018 bills for supply of underground cable as per the unit rate mentioned in DWA and the plaintiff has made payment in respect of works 'A' and 'B' and on the date of said payment, the rate of copper and lead was not reduced. Therefore, reduction of the amount by the plaintiff is incorrect. The plaintiff issued Official Memorandum on 3.12.2012 after lapse of 1182 days from the date of supply, adopting the negative price variation inter-alia stating that the prices of copper, lead and other materials used for manufacturing of the underground cable is reduced. The calculation adopted by the plaintiff has not been disclosed and there is no reason why they have reduced the amount to 3,07,000 US $ per Km against the DWA unit rate of 4,84,744.79 US $ per Km. Learned Arbitrator has not properly assigned reason and it calls for interference. The defendant stated the same in para 86 to 89 of the claim statement and assigned reason, why it is entitled for 4,84,744.79 US $ per Km against one fixed by the plaintiff and learned Arbitrator has not considered it. Even, in the 61 Com.A.S.110/2018 evidence of CW1, at question No.185, though, it is admitted that the negative price variation has not been calculated as per the formula mentioned in the tender document, then, how the Arbitrator could say no to the claim. The letter produced at Annexure C215, dated 3.12.2012 by the plaintiff disclose about the formula to be adopted and in para No.2, it is stated that the prices are variable in accordance with the relevant KPTCL declared price variation formula and indices for 220 KV XLCE UG cable as per clause No.13.0 of Section ITB and 33.0 of Section GCC of bid document and the base date applicable for price variation is 22.02.2008 i.e., the date of Techno Commercial Bid opening as detailed in clause No. 4 of DWA and it is opined that the variation is negative. He has also referred to the question put to RW1 and the answer given by the RW1 during the cross-examination, admission about submission of bills at Ex. C91 and 92 and payment made on respective dates and it is also admitted for question No. 130 that as per the predetermined formula mentioned in 62 Com.A.S.110/2018 clause No.13 of ITB for the base price of copper as per London Metal Exchange. However, the plaintiff has not produced any documents to show the base price at Rs.3,07,000/- US $, then, how could the Arbitrator deny claim of the defendant regarding variation.
36. Now, coming to claim No.10, interest on retention money, there is proper pleadings in the claim statement and also denied by the plaintiff and the Arbitrator having held that the delay has been attributed to the plaintiff, then, the defendant is entitled to interest from the date of retention of the money. The denial of interest of claim No.10 for the entire amount of Rs.4,42,27,714/-, even after finding that there is no dispute as to total amount of money deducted from running account bills and denying the balance interest on balance retention money is illegal in law. Learned Arbitrator having recorded a clear finding that the total amount of Rs.4,42,27,714/-, deducted from the running account bills is not in dispute and denial of the 63 Com.A.S.110/2018 same by learned Arbitrator is against the express terms of the contract and there is no denial by way of suggestion by the plaintiff regarding the amount deducted, therefore, the order of the Arbitrator is completely erroneous and illegal in law. The denial of overhead charges and loss of profit is also erroneous and illegal in law. Since, the period of contract is extended beyond the original period of the contract and the plaintiff itself has admitted on account of reasons given by them are beyond their control, the time was extended without paying liquidated damages and therefore, defendant is not responsible for the delay. During the period of contract, the interest could be awarded 6%, but, after completion of the work, the defendant is entitled to interest that could be granted in the market and denial of cost of arbitration proceedings is also erroneous and illegal and the defendant was made to run from pillar to post for the denial of various amount due to it as contended in earlier paras. So, the main crux of the argument of learned counsel is that the denial of the certain claims by 64 Com.A.S.110/2018 the Arbitrator and partial awarding claim No.7 is against the basic notions of law and therefore, liable to be set aside.
37. Now, coming to the decision quoted by learned counsel for the defendant, he refers to the decision in the case of Union of India Vs. V. Pundarikakshudu and Sons, reported in 2003 8 SCC 168, to the effect that, the delay and who is responsible for delay and the Arbitrator attributing the delay on both the sides is incorrect and having failed to consider the same, it amounts to illegal, misconduct. He has cited another decision in the case of Food Corporation of India Vs. Chandru Constructions and another, reported in (2007) 4 SCC 697, which deals with the aspect that if Arbitrator ignores the specific terms of the contract, it would be a question of jurisdictional error on the face of the Award falling within the ambit and legal misconduct which would be corrected by the Court. So, with the help of above decisions, he would argue that learned Arbitrator has not considered that plaintiff has 65 Com.A.S.110/2018 reduced the price variation against the DWA and agreed rate, but, failed to consider in the impugned order, therefore, it amounts to jurisdictional error.
38. Next decision is in the case of Durga Charan Rautray Vs. State of Orissa, reported in (2012) 12 SCC 513, to the effect that, even after payment of the final bill, it was opened to the party to seek re-agitating of dispute by way of Arbitration, even though, he has not raised any objection. By referring to the decision in the case of Bharat Coking Coal Ltd., Vs. Annpurna Construction, reported in (2003) 8 SCC 154, wherein, it is held that while accepting the payment of the preparation of the final bill, he would not raise any further claim. As such, we are satisfied that Judgment rendered in Bharat Coking Coal Ltd., leads to irresistible conclusion that despite receipt of payment on preparation of the final bill, it was still open to the appellant to raise unsatisfied claim before the Arbitrator under the contract agreement. 66
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39. The next decision is in the case of Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49, which deals with when the Arbitration Award can be set aside and there is no dispute about this fact.
40. Next decision is in the case of State of Bihar Vs. Tata Iron and Steel Company Ltd., reported in (2019) 7 SCC 99, relating to payment of interest and it is specifically stated, how the deed has to be construed to give a proper meaning. The decision in the case of Dyna Technologies Private Ltd., Vs. Crompton Greaves Ltd., reported in (2019) 20 SCC 1, which also deals with the fact that the power vested under Section 34 (4) to cure the defect can be derived, where the Arbitral Award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured, so as to avoid a challenge.
41. Next decision is in the case of Patel Engineering Ltd., Vs. North Eastern Electric Power Corporation Ltd., reported in (2020) 7 SCC 167 to the effect that when an 67 Com.A.S.110/2018 arbitral award can be set aside and what is patent illegality, etc., and when the Arbitrator fails to express opinion on the basis of the terms of the contract, then, it amounts to patent illegality, by referring to the decision in the case of Associate Builders Vs Delhi Development Authority reported in (2015) 3 SCC 49 and also Ssangyong Engineering & Construction Co. Ltd., Vs. National Highway Authority of India, reported in (2019) 15 SCC 131
42. Last decision is in the case of PSA SICAL Terminals Pvt. Ltd., Vs. Board of Trustees of V.O. Chidambaram Port Trust Tuticorin, reported in 2021 SCC Online SC 508, wherein, it is held at para No.81 that :
81. "However, ignoring the stand of TPT, by the impugned Award, the Arbitral Tribunal has thrust upon a new term in the agreement between the parties against the wishes of TPT. The royalty payment method' has been totally substituted by the Arbitral Tribunal, with the 'revenue-sharing method'.
It is thus, clear, that the Award has created a new contract of the parties by unilateral intention of SICAL as against the intention of TPT".
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43. When the Arbitral Tribunal has created a new contract for the parties by applying the said unilateral circular and by substituting the workable formula, it amounts to breach of fundamental principles of justice and in such case, the award is liable to be set aside. So, the main crux of the case of the defendant is that, the Arbitral Tribunal has not considered the documents, the express terms of the contract and to apply the terms of the contract to decide the price variation and return of liquidated damages and other claims regarding interest etc., then, it amounts to an error apparent on record, and therefore, the award is liable to be set aside so far as it relates to rejection of claims and allowing the claim No.7 in part.
44. I have gone through the award and reasons asigned by the learned Arbitrator. Whatever the claims allowed by the Arbitrator, are based upon the reasons, documents. We cannot expect the Arbitrator to pin point each and every documents and give his opinion on those 69 Com.A.S.110/2018 documents, just because, the parties are otherwise aggrieved by the award. We cannot expect the arbitrator to pin point each and every evidence, particularly, cross- examination, to have a different opinion. It is known fact that this Court under Section 34 of the Act cannot decide the case like appeal and it has no power to re-appreciate the evidence and adopts its view in the place of view expressed by learned Arbitrator. So, when the parties have failed to show that the award is against the terms of the contract or it is patently illegal and against the public policy or that learned Arbitrator has not followed the substantive law relating to the contract, etc., then, this Court cannot certainly interfere. Offcourse there may not be full reasons for granting Rs.5,00,000/- on account deviation of work at instance of BMRCL Rs.4,00,00,000/- towards price escalation and Rs.20,00,000/- towards cost, the entire award has to read to know as to whether the learned Arbitrator referred to various documents and clauses mentioned in the Contract agreements. The relief 70 Com.A.S.110/2018 granted at relief Nos. f, g, h will have to be taken along with reasons assigned for other claims and therefore, I don't find that there is any scope for interference much less one mentioned in Sec.34 of Act. Since, the scope is very limited, I am of the view that no grounds are made out by the plaintiff to interfere the award and as such, I answer point Nos.1 in the negative.
45. Point No.2: For the above said reasons, I proceed to pass the following.
ORDER The petition filed by the plaintiff under Section 34 of the Arbitration & Conciliation Act, 1996, is hereby dismissed. No costs.
(Dictated to the Stenographer, typed by him, corrected and then pronounced by me in open Court on this the 10th day of December, 2021).
(CHANDRASHEKHAR U), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive dedicated commercial Court) Bengaluru.
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