Delhi High Court
M/S.Contruction Rasa Pvt. Ltd. vs M/S.National Project Construction ... on 1 April, 2011
Author: Anil Kumar
Bench: Anil Kumar
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ I.A.No. 2515 of 1998 & CS(OS) No. 2172A/1997
% Date of Decision 01.4.2011
M/s Construction Rasa Pvt. Ltd. .... Plaintiff
Through Mr. Viraj R. Datar and Mr. Chetan
Lokur, Advocates
Versus
M/s National Project Construction Corporation .... Defendants
Ltd. & Anr.
Through Mr. Neeraj Kumar Gupta, Advocate
for Mr. Paritosh Budhiraja, Advocate
CORAM:
HON'BLE MR. JUSTICE ANIL KUMAR
Whether reporters of Local papers may be YES
allowed to see the judgment?
To be referred to the reporter or not? NO
Whether the judgment should be reported NO
in the Digest?
ANIL KUMAR, J.
*
1. This order will dispose of the petition filed under Section 14 of the Arbitration Act, 1940 by the plaintiff/Construction Rasa Pvt. Ltd. (hereinafter referred to as CRPL) for giving directions to defendant No. 2 Sh. K.C. Goyal, the Sole Arbitrator to file the award dated 28th September, 1997 and to make the award the Rule of the Court after dismissing the objections filed by National Project Construction Corporation Ltd. (hereinafter referred to as NPCC) under Section 30 and 33 of the said Act.
CS(OS) 2172A of 1997 Page 1 of 35
2. The relevant facts to comprehend the dispute for adjudication of the petition and objections are that, construction of civil works at Anpara, Shakti Nagar, UP was awarded by letter dated 26th December, 1981 to National Projects Construction Corporation Ltd. (hereinafter referred to as NPCC) defendant no.1 by UP Electricity Board. The said construction of civil works was thereafter awarded by another letter dated 27th December, 1981 by defendant no.1/NPCC to plaintiff/CRPL. The Work Order No. 148/3 dated 27th December, 1981 was for construction of service houses, fuel oil pump house etc.
3. The work was executed by the plaintiff, however, disputes arose between the parties. There had been an Arbitration Agreement effected between the parties, as enumerated in Clause 4 of the Work Order No. 148/3 dated 27th December, 1981, which is as under:-
Clause 4: Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specification, designs, drawings and instructions herein before mentioned and as the quality of workmanship of materials used on the work or as to any other questions, claims right matter or thing whatsoever in any way arising out of or relating to the contract designs, drawing, specifications, estimates, instructions, order or these conditions or otherwise concerning to works or the execution or failure to the execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitrator of the person appointed by the Managing Director of the National Projects Construction Corporation Limited acting as such at the time of dispute there will be no objection to any such appointment, the Arbitrator so appointed is a Corporation Officer, that he had to deal with the matters in CS(OS) 2172A of 1997 Page 2 of 35 dispute of difference. The Arbitrator so whom the matter is originally referred being transferred of vacating his office or being unable to act for any reason, the Managing Director as aforesaid at the time of such transfer, vacating of Office inability to act shall appointing another person to act as Arbitrator in accordance with the terms of the Contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by the Managing Director as aforesaid should act as Arbitrator and if for any reason that is not possible the matter is not to be referred to arbitration at all. The Arbitration may from time to time with the consent of the parties enlarge the time, for making and publishing the award.
Subject as aforesaid the provisions of the Arbitrator Act, 1940 or any Statutory modifications or any enactment thereof and the rules made there under and for the time being in force shall apply to the Arbitration proceedings, under this clause.
4. The disputes were referred to Sh. B.N. Waghrey, who was appointed as the sole arbitrator in 1989 by the Chairman and Managing Director of NPCC. However the Arbitration proceedings could not be completed before Sh. B.N. Waghray as he had resigned. After the resignation of Sh. B.N. Waghrey, Sh. K.C. Goyal, a retired member of Central Water Commission and Additional Secretary to the Govt. of India was appointed as an Arbitrator to proceed with the case from the stage at which it was left by Sh. Waghrey, by NPCC/defendant No.1.
5. The defendant No. 2/Sh. K.C. Goyal gave an award dated 28th September, 1997. The defendant No. 2, however, did not file the award as his outstanding dues were not cleared and consequently, the CS(OS) 2172A of 1997 Page 3 of 35 plaintiff/Construction Rasa Pvt. Ltd. filed the petition under Section 14 of the Arbitration Act, 1940 dated 4th October, 1997. Pursuant to the petition filed under Section 14 of the Arbitration Act, 1940, the defendant No.2 by letter dated 27th January, 1998, filed the original award dated 28th September, 1997 along with the Arbitration proceedings. Pursuant to filing of the original award and the Arbitration proceedings, the NPCC/defendant No. 1 filed the objections dated 12th March, 1998 under Section 30 and 33 of the Arbitration Act, 1940 and sought for setting aside the award. By the award dated 28th September, 1997, an amount of Rs. 3,98,473/- was awarded in favor of defendant No. 1 and a lump sum amount of Rs. 30,46,957/- was awarded in favor of the plaintiff and after adjusting the amount awarded to defendant No.1, a balance amount of Rs. 26,48,484/- had been awarded in favor of the plaintiff with interest @ 16% per annum on the principal amount with effect from 22nd July, 1989, that is when Sh. B.N. Waghrey, the earlier Arbitrator had entered upon reference, up till the date of the award, i.e., 28th September, 1997 and an interest @ 16% per annum on the principal amount from the date of the award till the date of payment or decree whichever is earlier.
6. The defendant No. 1/NPCC sought setting aside of the award on the ground that the Courts at Delhi does not have the territorial jurisdiction as the letter of intent dated 27thDecember, 1981 was issued by NPCC at their office in Shakti Nagar (UP) and the work order CS(OS) 2172A of 1997 Page 4 of 35 was also issued at Singrauli, Shakti Nagar (UP) and the agreement was also executed between the parties at Shakti Nagar whereas the work was executed at Anpara site, Shakti Nagar (UP), which is where the disputes also arose and therefore, no part of cause of action had arisen at Delhi.
7. The defendant No.1 has also contended that the Arbitrator had mis-conducted himself as he had acted in utter haste and had also acted malafide in passing the award. It is alleged that time and again the officers of NPCC were not dealt with properly and were humiliated and insulted and were not given proper opportunity to understand the questions during the examination.
8. The other objections raised by defendant No. 1/NPCC are that during the arbitration proceedings, defendant No. 1 was directed to produce documents which had no relevancy with NPCC‟s case, but could have instead been used by CRPL/plaintiff and also that NPCC was directed to lead negative evidence against themselves.
9. Regarding the utter haste in which the award was passed, it is pleaded that on 15th September, 1997, the defendant was put to notice and the Arbitrator had been showing the intention to pass the award, regardless of whether the extension of time had been agreed to by the defendant no.1 or not. It has been contended that even an application CS(OS) 2172A of 1997 Page 5 of 35 for removal of defendant No. 2 was filed on 29th September, 1997, however, the Arbitrator passed the award dated 28th September, 1997 hurriedly and consequently, the application for removal of the Arbitrator filed by defendant No. 1 in the High Court on 29th September, 1997 became infructuous. Reliance has also been placed on an application dated 24th September, 1997 filed before the Arbitrator complaining about his bias attitude towards defendant No. 1 and his officers yet the award was passed on 28th September, 1997 even though time for making the award was given up to 30th September, 1997.
10. The award dated 28th September, 1997 is also objected to on the ground that the claims were referred to the Arbitrator in terms of the letter dated 6th July, 1989 of the Chairman and the Managing Director of defendant No.1. The objection of the defendant No.1 is that the amounts of the claim which were referred by letter dated 6th July, 1989 were allowed to be modified despite the objections raised by defendant No.1 and that the Arbitrator had adjudicated the dispute as per the enhanced claims which according to defendant No. 1, could not be done by the Arbitrator and in the circumstances, the adjudication of the enhanced claims was beyond the scope of reference and as such the award is void on the face of record and is liable to be set aside.
11. Though the lump sum, unreasoned award had been given by the Arbitrator/defendant No.2, however, the defendant No. 1 has raised CS(OS) 2172A of 1997 Page 6 of 35 objections against the individual claims such as, that the claim No. 1 was originally for Rs. 20 lacs which was revised to Rs. 52,66,006/-. It is pleaded that against the said claim No.1, no amount was payable keeping in view the fact that the total value of work up to 14th RA bill was Rs. 81,52,128.40 and this was duly accepted by the petitioner as well and the petitioner was duly paid for up to 14th RA bill. According to defendant No. 1, the plaintiff was required to complete the entire work within 12 months, i.e., up to 31st December, 1982, however up till 16th April, 1985 even 70% of the work was not completed. The work was allegedly abandoned on 16th April, 1985 and as such final measurements were taken on 13th May, 1985 for finalization of the amount of the plaintiff and the total value of the work done was estimated to Rs. 83,64,155.74 on which Rs. 11,49,029.37 was payable as escalation. According to defendant No. 1, the balance work was completed by defendant No. 1 on his own and the total bills for the work including escalation up to 12th December, 1987 were for Rs. 161,87,022.31. The defendant no.1 allegedly had to get the work executed for Rs.66,73,836.20 after the abandonment of the work by the plaintiff on 16th April, 1985. Similarly, it has been contended that claim No.2 was illegally enhanced from Rs. 5,75,000/- to Rs. 6,11,014/- which was not payable by the defendant no.1 to the plaintiff. Regarding the security deposit, it was asserted that the same was adjusted as per Clause-8 of the conditions of the Work Order No. 148/3. Grievance was CS(OS) 2172A of 1997 Page 7 of 35 also made in respect of non furnishing of any performance bank guarantee for Rs. 1.25 lacs by the Plaintiff.
12. The defendant No.1/objector also objected to enhancement of Claims No. 3 to 10 and contended that the amounts claimed under respective heads could not be enhanced nor could it be considered by the Arbitrator. Regarding claim No. 11, it was asserted that no work was executed by the plaintiff, and that it was executed by another agency and also that the plaintiff had not even objected to that work being executed by the other agency during the contract period. Reliance was also placed on MB No. 76/70 by which payment was made to the agency who executed the work.
13. Regarding Claims No. 16, 18, 19, it is contended that they are not separate items of contract and no rate was given for them in the contract and these claims were duly paid for under other relevant items of the work.
14. Regarding Claim No. 12, the defendant No.1/NPCC contended that it was not admissible under Clause-10 of the General Condition of the Work Order No.148/3. Regarding claim No. 13, the defendant No. 1 objected that the load testing of RCC slab was to be carried out to the satisfaction of defendant No.1 as per the terms of the agreement and that nothing was payable on account of the expenses for the test. The CS(OS) 2172A of 1997 Page 8 of 35 objection regarding claim No.21 raised by defendant No. 1, is that the special claim is without any basis and in the circumstances, it is contended that the claims were not sustainable and were beyond the scope of the agreement. The award dated 28th September, 1997 awarding interest was also objected to on the ground that there was no justification for awarding interest as the final bill was on the negative side and no amount could be paid without making adjustment/deduction.
15. The plaintiff refuted the objections filed by defendant No. 1/NPCC and filed a reply dated 22nd July, 1998. The details of various adjournments sought on behalf of defendant No.1 were given by the plaintiff to substantiate his plea that the objection by the defendant no.1 is only to scuttle the arbitration and harass the plaintiff and to prolong the arbitration proceedings as long as possible. It has been contended that the objections have also been filed with a view to delay the payment of the amount awarded by the Arbitrator to the plaintiff company. The plaintiff denied that the Courts of Delhi does not have the jurisdiction. It was, however, not denied that defendant No. 2 was appointed by letter dated 6th April, 1993, which appointment was accepted by defendant No.2 by letter dated 18th April, 1993 but there after the defendant No. 1 had adopted dilatory tactics. The plaintiff has given the details of various proceedings before defendant No.2 to demonstrate that despite the due opportunities, the cross examination CS(OS) 2172A of 1997 Page 9 of 35 could be concluded only on 13th March, 1996 and thereafter various adjournments were sought by defendant No.1 for concluding the arguments. It is pleaded that on various dates the officials of the defendant No. 1 did not appear before the Arbitrator. The allegation made by defendant No.1 that the officials of defendant No.1 Corporation were not dealt with properly and were humiliated and they were not given proper opportunities were denied. Rather it was asserted that the officials who appeared before the Arbitrator, even of the rank of Assistant Engineers and Executive Engineers could not explain the facts, despite the Arbitrator explaining the queries in Hindi as well and they also failed to produce the relevant records and files. The plaintiff has contended that the objections raised by defendant No. 1 are vague and on mere allegations the award is not liable to be set aside.
16. The plaintiff has also contended that the time to make the award was expiring on 30th September, 1997 and as the defendant No. 1 did not agree for extension of time, therefore, the Arbitrator was left with no option and he gave the award dated 28th September, 1997. The learned counsel for the plaintiff/non-objector has very emphatically contended that an application was filed by the objector under Section 11 & 12 of the Arbitration Act, 1940 for the revocation of the authority of the Arbitrator on the ground that the Arbitrator was biased, which application came up for hearing before the Court on 29th September, 1997. The Court, however, neither stayed the Arbitration Proceedings CS(OS) 2172A of 1997 Page 10 of 35 nor revoked the authority of the Arbitrator nor directed the Arbitrator not to proceed with the arbitration and the application was adjourned for 17th November, 1997. It is also pertinent to note that the time to make the award was to expire on 30th September, 1997. However, the respondent/objector had not agreed to extend the time for making the award and hence the arbitrator had no option but to make the award before 30th September, 1997. From the record, it is apparent that it is none other than the objector, who is liable in the facts and circumstances.
17. The Arbitrator in the award dated 28th September, 1997, had also detailed about the delaying tactics adopted by the defendant .1. The relevant portion of the award detailing various steps taken by the Arbitrator on account of non-appearance on the part of the defendant no.1 are as under:-
"AND WHEREAS the learned Consultant for the claimants advanced his arguments on 15th and 16th October, 1996 and was to continue the same on the next dates of hearing which were fixed as 10th 11th and 12th December, 1996.
AND WHEREAS the respondent‟s representative continuously failed to appear, except for their counsel at the subsequent hearings, which were adjourned, a number of times as would be apparent from the proceedings dated 10.12.96 and 11.2.97.
AND WHEREAS the claimants consultant, therefore, filed his written arguments on that date i.e. 11.2.97 which were taken on record and a copy of the same supplied to the respondent‟s counsel and sent to the Unit Officer of the Respondents.CS(OS) 2172A of 1997 Page 11 of 35
AND WHEREAS, subsequent dates for the argument of the respondent‟s counsel were fixed as 8th, 9th and 10th April, 1997, 7th and 8th May, 1997 but the respondent‟s counsel, who appeared, could not start his arguments and stated that no respondent‟s representative has appeared on these dates and requested that the hearings be adjourned, as would be apparent from the proceedings dated 8th and 9th April, 1997 and 7.5.97 and 8.5.97.
AND WHEREAS in the interest of justice, the next date of hearings for arguments by the respondent‟s counsel were again fixed as 8th and 9th July, 1997 and registered notices were sent to the Unit Officer, Anpara Unit of the Respondent and the Chairman and Managing Director of NPCC Ltd., clearly notifying that if no representative of NPCC Ltd. appears on these dates and the Respondent‟s counsel does not start his arguments, the Arbitrator shall be constrained to make the AWARD, on the basis of the documents and affidavits and counter-affidavits already filed by the parties.
AND WHEREAS, Shri M.P. Singh, Assistant Executive Engineer of the Anpara Unit, did appear on the 8th and 9th July, 1997, yet the respondent‟s counsel did not start his arguments on the plea that he has not been properly briefed and requested for another adjournment.
AND WHEREAS, his request was again granted and the next dates of hearing were fixed as 19th, 20th and 21st August, 1997 with the clear stipulation that if the arguments are not advanced on these dates and the parties do not agree to extend the time which is expiring on 31.8.97, the Arbitrator shall made the AWARD on the basis of the records and affidavits and counter-affidavits already filed by the parties.
AND WHEREAS a large number of notices vide my letter no. KCG/PF/CRPL/RPNN/80/120 dated 10.4.97 and No. KCG/PF/CRPL/RPNN/80/124 dated 9.5.97 were sent to the Chairman and Managing Director of NPCC Ltd. by Registered post as well as by courier, with copies to the Unit Officer, Anpara Unit of NPCC Ltd., stating that if the respondents fail to appear and put up their arguments, the Arbitrator shall have no alternative but to give his award on the basis of the documents and affidavits and counter- affidavits filed by both the parties with him.CS(OS) 2172A of 1997 Page 12 of 35
AND WHEREAS, a last notice was again sent to Unit Officer, Anpara Unit, with copy to Chairman & Managing Director vide my letter no. KCG/PF/CRPL/RPNN/80/128 dated 18.7.97 on the same lines.
AND WHEREAS, the respondent‟s counsel filed an application during the hearing on 19.8.97, drawing the attention of the Arbitrator, that orders have not been passed on his earlier application, requesting that the claimants, CRPL be directed to file certain documents, in order to ascertain the correctness of their claims; and whereas on the request of the Respondent‟s counsel, such directions were issued and the hearings were adjourned for compliance of these directions, to the next dates which were fixed as 23rd and 24th September, 1997.
WHEREAS, M/s. CRPL submitted their reply to the above directions before the next date of hearing, drawing attention to their previous letter in this connection, where position of record is said to have been fully dealt with.
AND WHEREAS even on the 23rd September, 1997, the Respondent‟s counsel, requested that in view of the latest instructions received by him from his client, he may be allowed one day‟s time, to move an application in connection with the above arbitration matter, which request was granted.
AND WHEREAS on 24.9.97, the Respondent‟s counsel moved an application, that the arbitration proceedings be kept on hold and did not agree to extend the time for making the AWARD, beyond 30th September, 1997. He did not start any argument in countering the claims of CRPL or in support of NPCC‟s own claims.
WHEREAS, a large number of opportunities have already been allowed to the Respondents, who continuously failed to advance their arguments in the matter and a large number of notices were issued to the Unit Officer of NPCC Ltd., Anpara Unit and Chairman & Managing Director, giving them due opportunities to direct their counsel to start and complete his arguments, which they have failed to start. The latest application filed on 24.9.97 is only an effort to stall arbitration proceedings. This arbitration matter started in January, 1989 and has been continuing for over 8 years. It would not be in the interest of justice to allow the matter to prolong any further. "CS(OS) 2172A of 1997 Page 13 of 35
18. The application filed by the defendant no.1 for revoking of the authority of the Arbitrator was not pressed on 17th November, 1997, as the award had already been pronounced by the Arbitrator on 28th September, 1997. Since the defendant no.1 had not been ready to extend the time for making the award, nor on the application of the defendant no.1 to revoke the authority of the award, the arbitration proceedings were stayed, hence making award on 28th September, 1997 before the expiry of time for making award, cannot be construed or termed as misconduct of any type on the part of the Arbitrator. Consequently, the objection to this effect is not sustainable and is repelled.
19. The other objection of the defendant/objector is that the Arbitrator was appointed by the competent authority to adjudicate upon those claims only which were referred to him by letter of reference and he had no authority or jurisdiction to entertain any such claims, which were not the part of reference made to him by the Appointing Authority. Consequently, it is contended that the learned Arbitrator could not enlarge the scope of reference. The plea of the respondent is that the Arbitrator, in the facts and circumstances, has not only acted beyond his power and jurisdiction but has also entertained such new claims which did not form part of reference and he adjudicated upon them and consequently the entire award, which is a lump sum unreasoned award, is null and void and non-est in the eyes of law. CS(OS) 2172A of 1997 Page 14 of 35
20. Reliance has also been placed on the fact that the petitioner did not seek amendment of any of the claims which formed part of the reference made by the Managing Director of NPCC by his letter dated 6th July, 1989 nor had the Arbitrator passed any order allowing the plaintiff to bring in new or changed claims. In the circumstances, it is asserted that the claims of the plaintiff are beyond the terms of reference and are never the less barred under the contract entered between the parties. The objector has also pleaded that there are several claims which could not even be adjudicated by the sole arbitrator or which were otherwise based on no evidence and were outside the term of reference.
21. This objection of the respondent/objector is contested by the plaintiff contending, inter alia, that the claims were raised by the respondent and consequent thereto the plaintiff also raised 26 claims. However, while raising the claims, it was categorically stipulated that the plaintiff/claimant reserves his right to amend his claims as and when further records would be made available to the plaintiff. Consequently, when the records became available to the plaintiff, the amount of claims were modified by the plaintiff and they also filed two documents dated 27th September, 1989 and 13th October, 1989 explaining the details of their claims and modifying the amounts according to available records. The claims as raised by the plaintiff CS(OS) 2172A of 1997 Page 15 of 35 initially and the modified claims after the records were made available to plaintiff are as under:-
Claims Original Claims Claims modified
(Rs.)
Claim No.1 Amounting to Rs.20/- lakhs for 52,66,906/-
the balance amount for the works
executed, but not paid.
Claim No.2 Amounting to Rs.5,75,000/- for 6,11,014/-
refund of Security Deposit, release
of Bank Guarantee thereof.
Claim No.3 Amounting to Rs.50,000/- for 55,000/-
refund of the amount wrongly
deducted/withheld from the
claimants.
Claim No.4 Amounting to Rs.4,29,520/- for 1,12,622/-
refund of amount, deducted at
10% of the cost of steel and
cement and materials issued to
the claimants under the contract.
Claim No.5 Amounting to Rs.1,20,000/- for 5,22,672/-
refund of recovery made at penal
rate for materials issued by
respondents without submitting
the theoretical consumption
statement and without issuing any
proper and valid notice.
Claim No.6 Amounting to Rs. 11 lakhs for 7,89,568/-
balance payment of escalation in
the market prices of men and
material.
Claim No.7 Amounting to Rs. 40,000/- for 26,457/-
repairing respondent‟s old and
unserviceable centering and
shuttering and other tools and
plants.
Claim No.8 Amounting to Rs. 3 lakhs for 3,76,193/-
balance payment due to under-
payment for work of Facia.
Claim No.9 Amounting to Rs. 8 lakhs for 4,57,272/-
payment for leveling course under
CS(OS) 2172A of 1997 Page 16 of 35
water proofing treatment over roof.
Claim No.10 Amounting to Rs. 2,50,000/- for 2,50,000/-
hire charges of claimant‟s tools
and plants, machinery and
equipment under use of the
respondents.
Claim No.11 Amounting to Rs. 3 lakhs for 50,391/-
strengthening of Purlins due to
design defects.
Claim No.12 Amounting to Rs. 1,50,000/- for 1,20,041/-
payment for idle labour due to
respondent‟s delay.
Claim No.13 Amounting to Rs. 1,00,000/- for 24,721/-
payment for load testing for RCC
slabs.
Claim No.14 Amounting to Rs. 1 lakh for Dropped by the
payment for dewatering and Claimants
pressure grouting of walls, on the
SERVICE HOUSE side, due to
seepage from the plant area.
Claim No.15 Amounting to Rs. 1 lakh for Dropped by the
rectification of chajjas due to Claimants
design defects.
Claim No.16 Amounting to Rs. 1 lakh for 90,000/-
payment for extra work on water
treatment plant RAMP due to
design defect and due to delays by
respondents.
Claim No.17 Amounting to Rs. 1 lakh for Dropped by the
payment for doing the flooring Claimants
twice, for BST trenches, work
required to be done by the
respondents.
Claim No.18 Amounting to Rs. 1 lakh for 61,769/-
additional payment for extra
height of centering and shuttering
and scaffolding for RCC slabs.
Claim No.19 Amounting to Rs. 1 lakh for 88,588/-
replacing pre-cast RCC slabs due
to faulty design.
Claim No.20 Amounting to Rs. 50,000/- for Dropped by the
payment for providing glass strips Claimants
in the flooring.
Claim No.21 Amounting to Rs. 10,000/- for 22,069/-
cutting road and making good the
same.
CS(OS) 2172A of 1997 Page 17 of 35
Claim No.22 Amounting to Rs. 3 lakh for 1,06,215/-
payment due to difference of
actual weight at which steel was
issued and the book coefficient
weight at which payment was
made for steel work.
Claim No.23 Amounting to Rs. 3,50,000/- for 1,16,046/-
loss of profit due to arbitrary
reduction in the scope of work by
the respondents.
Claim No.24 Amounting to Rs. 12 lakhs for loss 12,00,000/-
and damages due to delay and
default and breaches of contract
by the respondents.
Claim No.25 (a) Pre-suit interest on the amount of 2,26,563/-
the claimants withheld/deducted
by the respondents wrongly and
unauthorisedly at 18% per annum
from the date it was withheld, till
the date of application for
arbitration.
Claim No.25 (b) For pendetilite and future interest
For pendentilite
on the amount of the award from interest the
the date of application to the date
amount cannot
of decree or payment whichever is be worked out by earlier at 18% per annum. the claimants unless the award is declared.
Claim No.25 (c) --- Future interest-
This amount will
also depend
upon the amount
awarded.
Claim No.26 Cost of arbitration at Rs. 2000/- For cost of
per hearing. arbitration which
is at the
discretion of the
Arbitrator.
22. In the circumstances it is asserted that no new claim was raised on behalf of the plaintiff. After the records were made available to the plaintiff, the amounts of the claim had been amended in accordance CS(OS) 2172A of 1997 Page 18 of 35 with the record. Therefore, the claims raised on behalf of plaintiff are not beyond the scope of reference made by the Chairman of defendant no.1. In any case while raising the claims the plaintiff had reserved his right to change or modify the claims on the availability of the records which were admittedly not with the plaintiff. The learned counsel for the plaintiff has also relied on (1998) 7 SCC 141, State of Andhra Pradesh Vs. I. Chandrasekhara Reddy & Ors. to contend that if the claimant has reserved his right in the notice to make additional claims, award allowing additional claims made later on could not be assailed. Reliance has also been placed on (1999) 9 SCC 188, H.L. Batra & Co. Vs. State of Haryana & Anr, holding that when an arbitrator is appointed for settling the disputes, addition of more claims to the original claim does not result into enlarging the scope of the arbitration contrary to law and all the claims which pertain to the contract and are within the terms of the reference then the award cannot be set aside on the grounds that it was beyond the scope of arbitration.
23. Perusal of the record reveals that Mr. K.C. Goyal, defendant No. 2/Arbitrator was appointed in place of Sh. B.N. Waghrey, Original Sole Arbitrator, who had resigned subsequently. Defendant No. 2 was appointed to proceed from the stage at which Sh. Waghrey had left. Sh. Goyal, defendant no.2 had accepted the appointment by letter dated 18th April, 1993. At that time 26 claims were raised by the plaintiff. The 26 claims which were originally referred were the same as detailed CS(OS) 2172A of 1997 Page 19 of 35 herein before. This cannot be disputed nor anything has been shown to the contrary that while raising 26 claims, it was not specifically stipulated and the right was not reserved by the plaintiff that he would not have the right to amend his claims as and when further records would be made available to him. From the pleas and contentions raised by the parties and the material available on the record, it is inevitable to infer that the entire record was not available with the plaintiff when the claims were made initially. The plaintiff had been entrusted with the sub-contract of constructing the thermal power station in a contract which initially was awarded to NPCC/objector. The learned counsel for the objector has also not been able to show that the entire record was available with the plaintiff and that no record was made available to him after the plaintiff had filed his claims in the first instance. If the plaintiff had to base his claims on the record and the entire record was not available to him, then subsequently, whenever the record was made available to the plaintiff, no embargo could be placed on his rights to modify his claims based on the records. Comparison of the claims raised by the plaintiff earlier and modified by him later on rather reveals that after seeing the records, the plaintiff had dropped some of the claims. This is also not disputed and cannot be disputed that while raising the claims in the first instance, he had reserved his rights to modify the claims as and when the records would be made available to him. Comparison of the original claims and the modified claims of the plaintiff also reveals that only the amounts were modified and no new CS(OS) 2172A of 1997 Page 20 of 35 claims were added. The claims which were raised in the first instance were adjudicable by the Arbitrator and were within the scope of the Arbitration Agreement between the parties. If the disputes/claims are within the scope of the Arbitration Agreement, modified claims would also be within the jurisdiction of the Arbitrator.
24. In I.Chandrashekhra Reddy (Supra), total claims including the claims in sub heads for Rs. 46,93,858/- were raised. Later on in the rejoinder the amount of claims were enhanced to Rs.80,03,950/-. The Arbitrator, however, awarded an amount of Rs. 38,34,097/- only. In para 9 of the said judgment, the Supreme Court had held that where a right to make additional claims was reserved in a notice by the claimant, he could not be prevented from making such claims later on. The Supreme Court had also noticed in the said judgment that no argument was raised before the Arbitrator to the effect that the claim put forward before the Arbitrator by the contractor was in excess of the original claim and therefore, could not be adjudicated upon. From the letters produced in that case, it was apparent that the claimant had reserved liberty to put forward further claims on topics of disputed items. Reliance has also been placed on State of Orissa & Anr. Vs. Civien Construction Company & Anr., AIR 1983 Orissa 48, where it was held that as per the terms of notice when the amount of claim was subjected to further variation, if found necessary, additional claim could be submitted by the claimant before the Arbitrator. CS(OS) 2172A of 1997 Page 21 of 35
25. In the present case also, while referring 26 claims to the Arbitrator, it was categorically stipulated that the claimant/plaintiff shall be entitled to modify the amounts whenever the records would be made available to the plaintiff. Letters dated 27th September, 1989 and 13th October, 1989, were filed with the earlier Arbitrator Sh. B.N. Waghrey explaining the details of the claims and modifying the amounts according to the available records. In the circumstances, the plea of the defendant/objector that no permission was granted or no liberty was sought by the plaintiff to modify the amount of the claims cannot be sustained. In any case, the defendant ought to have raised objection to modification of the amount of claims before the learned Arbitrator who had awarded the lump sum amount by a non speaking award. In absence of any such objection from the defendant, and the fact that right to file the modified claim was reserved, this objection of the defendant no. 1 is liable to be rejected.
26. In H.L. Batra (supra) the Supreme Court had held that the Arbitrator is appointed for the purpose of settling the disputes between the parties and if the disputes pertain to the agreement between the parties, additional claims, if raised, will not enlarge the scope of the Arbitrator. This is not disputed that in the present case, that the reference was not made under Section 20 of the Arbitration Act, 1948 and the disputes were not referred by the Court rather the Arbitrator CS(OS) 2172A of 1997 Page 22 of 35 was appointed by the defendant no.1 pursuant to the disputes between the parties. Therefore, all the disputes and claims which were within the scope of reference and which pertained to the agreement between the parties, could be referred to the Arbitrator and the Arbitrator was liable to adjudicate upon them and give an award in respect thereto.
27. The objections regarding the claims of the plaintiff besides the objection that some of them were enhanced, are that the claim no. 2 was not payable at all; against claim no. 4 deductions were made correctly and the payments were made according to the agreement and the plaintiff did not raise any objection; claim no.6 was not maintainable; claim number seven did not relate to any contract item; claim no. 9, the payments were released and duly accepted by the plaintiff; claim no. 10 is a contract item and not maintainable and regarding the claim no. 11, it was asserted that no work was executed by the plaintiff but by another agency and the plaintiff did not object to the same.
28. The objection has been made to claim no.12 on behalf of the plaintiff by which an amount of Rs.1,50,000/- was claimed for idle labour attributable to the delay on the part of the respondent. This amount of Rs.1,50,000/- on account of idle labour attributable to the defendant was modified to Rs.1,20,041/-. The general conditions agreed between the plaintiff and the defendant, however, in terms of Clause- CS(OS) 2172A of 1997 Page 23 of 35 10, categorically stipulated that no claim for idle labour on whatsoever ground will be entertained and no compensation shall be payable to the plaintiff. Learned counsel for the respondents/objectors has objected on the ground that the same is not an arbitrable claim. The counsel has very emphatically contended that the claim of idle labour is barred under the contract and relied on Clause 10 of Work Order 148/3. The said Clause 10 is as under:-
"10. No claim for idle labour on whatsoever ground it may be will be entertained by the corporation. Further no compensation shall be payable due to break down in machinery, water supply, or electricity, or delay in supply of material, or damages due to rain and floods or other reasons beyond control of NPCC."
Learned counsel has contended that though it is a lump sum award and no reasons have been given, yet since the claim has been considered which could not be considered by the arbitrator, therefore, the award is liable to be set aside.
29. Despite clause 10 if the claim is raised by the plaintiff, he would not be entitled for the amount so claimed nor would the Arbitrator be entitled to award the amount claimed. However, it cannot be held that it is beyond the scope or jurisdiction of the Arbitrator to adjudicate and hold that the amount claimed cannot be allowed to the plaintiff. Perusal of the objection raised by the respondent rather reveals that no such objection that the claim No. 12 is not within the jurisdiction of the CS(OS) 2172A of 1997 Page 24 of 35 Arbitrator has been taken in the objections filed under Section-30 and 33 of the Arbitration Act, 1940. If no such objection had been taken, then it would not be permissible to allow the respondent to raise such an issue before this Court. In any case, it cannot be held that the amount claimed under Clause-12 will be an "Excepted matter" and the charges for idle labor had to be determined by someone other than the Arbitrator. If under the agreement the plaintiff was not entitled for any amount on account of idle labor, no amount under this head could be awarded to the plaintiff. But it cannot be held that the Arbitrator did not have jurisdiction to consider the claim.
30. This is no more res judicata that where the resolution of dispute is through the forum of Arbitration, the parties can still agree for determination of certain issues/disputes by any higher authority of the employer/department along with condition of finality attached to any such determination. Such clauses are termed as "Excepted matters". It is only in such matters which are termed as "Excepted matters" the Arbitrator will not have jurisdiction, however, the claim of amount for idle labour under Clause-10 is not an "Excepted matter" because clause 10 of general conditions only disentitles the plaintiff to claim any amount. However, the jurisdiction of the Arbitrator is not barred, if the claim is raised the Arbitrator could consider it and hold that the plaintiff would not be entitled for the said amount. Since the award is a non speaking award it cannot be culled from the award whether the CS(OS) 2172A of 1997 Page 25 of 35 said claim has been allowed by the Arbitrator. This is also not the case of the respondent that the question of idle labour is to be adjudicated by some other authorities other than the arbitrator.
31. In Sudersan Trading Co. Vs. Govt. of Kerala and Anr., (1989) 2 SCC 38, it was held by the Supreme Court that it is not open to the Court to probe the mental process of the Arbitrator and speculate where no reasons are given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusions. Since, the award, which is challenged by the respondent is a non-speaking lump sum award, the defendant cannot contend that the amount on account of idle labour has been granted to the plaintiff. The total amount awarded to the plaintiff is much less than the total amount claimed including the amount claimed on account of idle labour charges. In the circumstances, it cannot be held that the Arbitrator has awarded Claim No. 12 to the petitioner for which the plaintiff is not entitled under Clause 10 of the general conditions of Work Order 148/3.
32. The learned counsel has placed reliance on Punjab State Electricity Board v. Punjab Pre-Stressed Concrete Works, 2001 VI AD (SC) 33 holding that when the award is a non speaking award and if it was not known whether any part of the award made by the arbitrator related to a particular claim which was not tenable, the award has to be set aside inasmuch as it is not possible to say that the award did not CS(OS) 2172A of 1997 Page 26 of 35 relate to claim which was not tenable and in the circumstances, it was held that there were sufficient reasons for setting aside the award and remitting the matter back to the arbitrator. However the case relied on by the defendant/objector is distinguishable. In the said case an amount of Rs.18.75 for claim no.1 was claimed in respect of increase in value of poles and there were other claims also totaling to Rs.39.50 lakhs. Arbitrator had awarded a sum of Rs.17.71 lakhs with interest. For other claims it was held that it was not known on what basis any of the other claims were awarded for items for which arbitrator had no jurisdiction. The case of the plaintiff is distinguishable is as much as none of the claims were beyond the scope of the Arbitrator and were arbitrable but in view of the clauses in the agreement the plaintiff was not entitled for the amount for the said claim. However from the language of the award it cannot be held that the amounts have been awarded to the plaintiff. Perusal of the claims of the plaintiff reveals that first claim was for Rs. 52,66,906/- whereas the Arbitrator has awarded only Rs.30,46,957/- and after considering the claims of the objector, a part of which were allowed the Arbitrator has awarded Rs.26,48,484/- only. In the circumstances like other cases relied on by the objector, in case of plaintiff it could be that only part of the claim no.1 has been awarded and none of the other claims have been awarded to the plaintiff.
CS(OS) 2172A of 1997 Page 27 of 35
33. Learned counsel has also challenged the award on the ground that claim No.13 for Rs.24,721/- was barred under Clause No.31.079 (A) of the Contract 14 AC clearly stipulating that no payment shall be made for carrying out load test on pre cost unit. Clause 31.079 (A) regarding measurement is as under:-
"Measurement:
(a) No payment shall be made for carrying out load test on pre cost unit. Unit rate for item of present RCC slabs shall be inclusive of the cost of testing."
34. Mr.Budhiraja, learned counsel for the defendant/objector has also challenged the consideration of Rs.88,528/- under claim No.19 for replacing pre costing RCC slabs due to faulty design. The objection by the respondents is based on Clause 10 of general conditions of the Work Order 148/3 and Clause 10.02 of Special Conditions of the Contract 14 AC.
35. Learned counsel has also relied on Clause 2.200 of Scope of Work for service house to contend that the payment for replacing pre cost RCC slabs due to faulty design could not be considered and the awarded by the arbitrator. The said Clause 2.200 is as under:-
"2.200 These drawings are representative and are only indicative of the nature of work included in this contract. The actual detailed construction drawings as prepared by the contractors shall be issued to the successful tenderer after the award of the work. However, all the drawings required for the execution of the entire works included in this contract shall not be made available simultaneously on CS(OS) 2172A of 1997 Page 28 of 35 award of work but shall be issued from time to time for various works as per programme and priorities fixed by the Engineer-in-Charge and depending on the actual progress of work. The architectural treatment indicated in the front elevation is only indicative in nature and changes, if any, shall have to be done by the contractor without any extra cost. Similarly, the quantities or work given are also likely to change. The contractor can quote rates for any extra item, he feels necessary for the completion and commissioning of this job. Immediately after the award of work, the contractor shall give a programme indicating therein any particular or special sequence in which he would like to carry out the work under this contract. However, the decision of the Engineer-in-Charge on such programmes and sequence of constructions shall be final and binding on the contractor. In case work is delayed due to delays in the issue of construction drawings, the contractor shall be given suitable extension of time as may be decided by the Engineer-in-Charge. However, the contractor shall not be entitled to any type of claim whatsoever on this account."
After perusal of the said clause the learned counsel for the objector had to agree that the said clause was only in respect of front elevation and was not applicable for all the construction done by the plaintiff. In the circumstances it could not be held that the plaintiff was not entitled for the extra work done by him as has been contended by the learned counsel for the objector.
36. The objection on behalf of the respondent that the claims of the plaintiff were beyond the scope of agreement has not been substantiated in the facts and circumstances. Besides making these general objections, the learned counsel for the respondent has not been able to show any claim which is not within the scope of agreement or CS(OS) 2172A of 1997 Page 29 of 35 which has not arisen on account of rights and liabilities between the parties. Therefore, it cannot be held that the claims of the plaintiff were not within the scope of agreement between the parties and could not be adjudicated by defendant no.2/Arbitrator.
37. The objection that several claims could not be adjudicated upon by the sole arbitrator is also without any legal basis. The learned counsel has not been able to show any claim which could not be adjudicated by the arbitrator, as being an „Excepted Matter‟. If under the agreement, the plaintiff was not entitled for any amount and the claim was raised, the Arbitrator was not to award the amount in respect of the said claim but it cannot be held that the claim was beyond the jurisdiction of the Arbitrator to adjudicate. In case of a non speaking award, Court cannot speculate with respect to the mental process of an Arbitrator. It is well settled that in matter of challenging the award, there are often two distinct and different grounds. One is an error apparent on the face of the record and the other is that the arbitrator has exceeded his jurisdiction. In the latter case the court can look into the arbitration agreement but under the former it cannot, unless the agreement was incorporated or recited in the award. An award may be remitted or set aside on the ground that the arbitrator, in making it, had exceeded his jurisdiction and evidence of matters not appearing on the face of it, will be admitted in order to establish whether the jurisdiction had been exceeded or not, because the nature of the CS(OS) 2172A of 1997 Page 30 of 35 dispute is something which has to be determined outside the award, regardless of what might be said about it in the award or by the arbitrator. Mere consideration of the claim would not render the award bad. Only in a speaking award the court can look into the reasoning of the arbitrator stipulated in the award. It is not open to the court to probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. In State of Andhra Pradesh and ors. Vs R.V.Rayamin and ors., (1990) 1 SCC 433, it was contended that the award has purported to grant damages on the basis of escalation of cost and prices; and such escalation was not a matter within the domain of the bargain between the parties and having taken that factors into consideration the award was bad. The Supreme Court had held that from reading the award it is clear that the arbitrator has considered the claim made on the basis of „escalation and damages‟ but he has awarded a total sum of Rs 19.39 lakhs insofar as he finds admissible in respect of the claims which the arbitrator has adjudged. It speaks no further. In such a situation it is not possible to contend that there was any exercise of jurisdiction by the arbitrator beyond his competence. The objections regarding claims beyond jurisdiction of the Arbitrator cannot be accepted in the facts and circumstances. Court cannot speculate the mental process of Arbitrator in a non speaking award and if under the agreement, the plaintiff was not entitled for any amount and the claim was raised, the Arbitrator is not to award the amount in CS(OS) 2172A of 1997 Page 31 of 35 respect of the said claim but it cannot be held that the claim is beyond the jurisdiction of the Arbitrator to adjudicate. The objections in this regard in respect to various claims cannot be accepted and are rejected in the facts and circumstances.
38. The objector has also objected to the grant of interest @ 16% per annum on the principal amount from the date the arbitrator entered into reference, i.e. 22nd July 1989 up to the date of award, 28th September, 1997 and also interest at the same rate from the date of award to the date of payment or decree whichever is the earlier. According to learned counsel for the defendant/objector the Court should take into consideration the changed economic scenario and the consistent fall in the rate of interest. In the circumstances it is contended that the rate of interest awarded by the Arbitrator must be reduced.
39. The Supreme Court in a number of judgments reported as Rajendra Construction Co. v. Maharashtra Housing & Area Development Authority and others, 2005 (6) SCC 678, McDermott International Inc. v. Burn Standard Co. Ltd. and others, 2006 (11) SCC 181, Rajasthan State Road Transport Corporation v. Indag Rubber Ltd., (2006) 7 SCC 700 & Krishna Bhagya Jala Nigam Ltd. v. G.Harischandra Reddy & Anr., 2007 (2) SCC 720 and State of Rajasthan Vs. Ferro Concrete Pvt. Ltd. (2009) 3 CS(OS) 2172A of 1997 Page 32 of 35 Arb.LR 140 (SC) has held that the changed economic scenario and the consistent fall in the rates of interest must be noticed by the Court and interest awarded by the Arbitrator can be reduced according to facts and circumstances of the case.
40. In the Rajendra Construction Company (Supra), the claimants had claimed interest in the suit, however, the matter was referred for arbitration, and arbitrator had awarded interest at the rate of 18% per annum on the principal amount from the date of the suit to the date of the award. The Apex Court keeping in view the facts and circumstances that a contract was entered into in 1987 and the work was completed in 1990 after extension granted by MHADA and that arbitrator had passed the award in 1995 with interest at 18% per annum had reduced the rate of interest from 18% to 10% per annum and had held that reduction of interest is proper and equitable and is in the interest of justice. In McDermott International Inc. (Supra) resorting to exercise its power under Article 142 of the Constitution of India in order to do complete justice between the parties, the Apex Court had directed that the claimants shall be entitled for interest at the rate of 6% per annum in place of 18% per annum. Relying on Mukand Ltd. v. Hindustan Petroleum Corporation Ltd., (2006)9SCC383 where the Supreme Court had confirmed the decision of the Division Bench upholding the modified award against the order of the learned single judge and had reduced the interest awarded by the learned single judge subsequent to CS(OS) 2172A of 1997 Page 33 of 35 the decree from 11% to 7 ½ % per annum, holding that 7 ½ % per annum would be reasonable rate of interest that could be directed to be paid to the claimants. For reducing the rate of interest long lapse of time was taken into consideration.
41. Similarly, in Rajasthan SRTC (Supra) since a long spell of time had passed since the amounts were claimed by the claimants and the interest at the rate of 12% per annum was considered to be burdensome to the company, therefore, the Apex Court in the facts and circumstances, had reduced the rate of interest from 12% to 6% per annum. In Krishna Bhagya Jal Nigam Ltd. (Supra), the Supreme Court considering the economic reforms in the country and that the interest regime had changed and the fact that interest rate had substantially reduced, reduced the interest from 18% to 9% per annum. Similarly, in UP Cooperative Federation Ltd. (Supra) the rate of interest was reduced in the entirety of the facts and circumstances.
42. In the present facts and circumstances the construction of civil works was awarded by letter dated 27th December, 1981 and work order no. 148/3 dated 27th December, 1981 was issued for construction of service houses, fuel pump houses, etc. The claims are about the work executed which was not paid; refund of security deposit; amount wrongly deducted; recovery made at penal rate etc. What was the rate of interest agreed or customary during the said period has not been CS(OS) 2172A of 1997 Page 34 of 35 established by any of the parties. Therefore, taking the totality of the facts and circumstances, and the law laid down by the Supreme Court, it will be just and appropriate to award simple interest at the rate of 9% per annum from the date the arbitrator entered upon reference, i.e. 22.7.1989 up to date of award, 28.9.1997 and simple interest also at the same rate from the date of award up to the date of payment made after passing the decree, by the defendant/objector.
43. For the foregoing reasons the objections filed by the respondent/objector being IA No. 2515/1998 under Section 30 and 33 of the Arbitration Act, 1940 for setting aside the award dated 28th September, 1997 passed by Shri. K.C.Goyal, Sole Arbitrator is dismissed and the said award is made rule of the Court. The plaintiff is also awarded interest, as stipulated hereinbefore from the date of award till the payment of awarded amount @ 9% simple interest per annum. Decree sheet be drawn. All the pending applications are disposed of. Considering the facts and circumstances, parties are left to bear their own costs.
ANIL KUMAR, J.
April 1st, 2011 rs CS(OS) 2172A of 1997 Page 35 of 35