Delhi District Court
M/S Budhiraja Electricals vs Union Of India on 21 January, 2023
IN THE COURT OF SH. AJAY GULATI-II,
ADDITIONAL DISTRICT JUDGE-01 (CENTRAL), THC, DELHI
ARBTN No. 21/2019
CNR No. DLCT01 005069 2015
M/s BUDHIRAJA ELECTRICALS
Through its partner,
Shri. Mohinder Lal Budhiraja
1464/1, Gurudwara Road
Kotla ubarakpur
New Delhi-110003 ......PETITIONER
VERSUS
UNION OF INDIA
Through Executive Engineer,
IIT Project Electrical Division
CPWD, IIT,
Campus Hauz Khas
New Delhi-110016 ......RESPONDENT
PETITION UNDER SECTION 34 OF THE ARBITRATION AND
CONCILLATION ACT, 1996 SEEKING SETTING ASIDE OF THE
AWARD DATED 05.03.2015.
JUDGMENT
1. The present petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the Arbitration Act seeking setting aside of the Arbitral Award dated 05.03.2015 passed by the Arbitral Tribunal comprising of Sole Arbitrator namely Sh. V. K. Malik.
2. Before delving into the facts of the present case, as well as the ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 1/12 contentions raised by the respective parties, it is appropriate to take note of the fact that before the Ld. Arbitrator, the petitioner had raised as many as 9 claims in which the Ld. Arbitrator had given partial relief to the petitioner by allowing its Claim no.1, Claim no.6, Claim no. 8 whereas the other claims raised by the petitioner were rejected by the Ld. Arbitrator.
3. During the pendency of the present proceedings, the Ld. Counsel for the petitioner had made a statement restricting the present objections only to claim no. 3 and 9 and the statement of the Ld. Counsel was recorded to this effect on 06.02.2018. However, later on vide separate statement of the Ld. Counsel for the petitioner, as recorded on 08.07.2022, the petitioner restricted his objections only in respect of re- jection of its Claim no. 3 i.e. more particularly Claim No 3.1 since Claim No. 3 was comprising into six parts and the Claim no. 3.1 was related to wrongful recovering Rs. 1,59,488/- made by the respondent on account of not providing the copper earth strips in rising mains as per Item no. 6 of the agreement.
BRIEF FACTS OF THE CASE
4. The respondent herein invited tenders from eligible and registered con-
tractors of CPWD in respect of electrical work i.e. "constructions of 96 Professor Apartment at IIT Hauz Khas, New Delhi (SH: SITC of LT Pe- nal, Rising Mains and Meter Board etc.)" for a total cost of Rs. 39,43,946/-.
5. The petitioner was found to be the lowest bidder and as such the tender was awarded to the petitioner vide letter no. 54 (4)/EE ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 2/12 (E)/IITPED/2011/2012 dated 08.03.2011.
6. The work order was to be completed on or before 03.06.2011 however the work was completed with the delay of 320 days since extension was granted by the respondent without levy of compensation and the petioner was paid an amount of Rs. 2,90,892/- towards third and final bill. Dispute and differences arose between the parties in respect to the payment of the contractual amount and as such the petitioner, vide his letter dated 14.08.2013, approached the Chief Project Manager (IIT- DPZ) CPWD, New Delhi for appointment of arbitrator under Clause 25 of the agreement dated 08.03.2011 bearing no. 4/EE (E)/IITPED/2010.
7. The Chief Project Manager (IITDPZ) CPWD, New Delhi vide his letter No 4(1) ARB/IITDPZ/2013/165 dated 02.09.2013 appointed Sh Vinod Kumar Malik as the Sole Arbitrator to adjudicate the disputes between the parties and as such the Ld Arbitrator entered into reference to adjudicate the dispute in between the parties. The petitioner, who was the claimant before the Ld. Arbitrator filed as many as 9 claims which was adjudicated by the Ld. Arbitrator vide impugned award dated 05.03.2015 and as mentioned above the petitioner has assailed the impugned award, by way of present objections, only in respect of Claim No. 3.
SUBMISSIONS ON BEHALF OF THE PETITIONER
8. Ld. Counsel for the petitioner while restricting his challenge to the findings given by the Ld. Arbitrator in respect of Claim no. 3 more particularly Claim No 3.1 since Claim no. 3 was comprising into six parts and the claim no. 3.1 was related to wrongfully withholding ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 3/12 Rs. 1,59,488/-, which as per the petitioner had illegally recovered by the respondent on account of not providing copper earth strips in rising mains as per item no. 6 of the agreement, has made the following submissions:-
i. It was submitted on behalf of the petitioner that the Ld. Arbitrator has wrongly rejected the claim of the petitioner in respect of claim no. 3.1 despite observing in para 3.1(v) of the impugned award that the copper earth strips were provided by the claimant however the claim was rejected while observing that said earth strips were stolen before completion of the work.
ii. It was further contended that the Ld. Arbitrator had wrongly relied upon Clause 17 of the contract to fasten the responsibility/liability on the petitioner in respect of the stolen earth strips since it has not been proved on record by the respondent that the said strips were stolen on account of any omission or negligence on the part of the contractor i.e. the petitioner herein or its employees.
iii. The Ld. Counsel for the petitioner further submitted that vide letter dated 18.02.2012, the AEE(E) had only notified the petitioner about the earth strips not connected and thus this clearly shows that as on that day the earth strips were available at the site and it was only in the provisional completion certificate, which was issued by the respondent on 24.04.2012, that too without carrying out join inspection, that the respondent had recorded that earth strips from all four block i.e. Block No.1 to 4 have been found stolen. However it ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 4/12 was only on 19.05.2012 that the said defects were notified to the petitioner herein and as such it was submitted that the petitioner had no responsibility to safeguard the said earth strips.
iv. Ld. Counsel for the petitioner has relied on the judgment passed by the Hon'ble High Court of Delhi in case of M/s. Buddhiraja Electricals Ltd. Vs. UOI i.e. OMP NO.
352/2015, DOD 10.07.2018 to contend that in similar circumstances, the Hon'ble High Court of Delhi has set aside the award passed by the arbitral tribunal since in that case also the respondent had made the recovery/withheld the money against the loss of cable earth strips.
ARGUMENTS ON BEHALF OF THE RESPONDENT
9. Ld. Counsel for the respondent, while supporting the award, has submitted that the Ld. Arbitrator has passed a reasoned award and the same does not call for any interference more particularly in the facts and circumstances of the present case since it is settled law that the proceedings under Section 34 of the Arbitration Act are summary in nature and the court, while exercising its jurisdiction under Section 34, does not sit in appeal over the arbitral award and the court cannot re-appreciate the evidence when the award given by the Arbitral Tribunal is found to be reasonable and plausible.
10. It was further contented on behalf of the respondent that the Ld Arbitrator has rightly relied upon Clause 17 of the agreement since as per the said clause if any damage happens to the work carried out by the contractor while the said work is in progress then it is the duty of ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 5/12 the contractor to rectify/remedy the said loss/damage.
11. Ld. Counsel for the respondent has also relied upon Clause 9 of the terms and conditions of the agreement which provides that it is the responsibility of the contractor to keep the material in safe custody until the work/site is finally taken over by the concerned department.
12. Ld. Counsel for the respondent has relied upon the following judgments:-
1. Eastern and North East Frontier Railway Co-operative Bank Ltd. Vs. B. Guha & Co. reported in MANU/WB/0027/1986.
2. MC Dermott International Inc. Vs. Burn Standard Co.
Ltd. & Ors. Reported in MANU/SC/8177/2006.
ANALYSIS AND FINDINGS
13. Before dealing with the rival contentions of the parties it is imperative to take note of the powers of the court under Section 34 of the Arbitration Act, 1996.
14. It is significant to take note of the fact that it has been time and again held by the Hon'ble Supreme Court of India and Hon'ble Delhi High Court that the powers of a Court under Section 34 of the Arbitration Act are very limited and a challenge led by a party to an arbitoral award is not in the form of a regular appeal or on the merits of the award and a proceeding under Section 34 of the Act are summary in nature and cannot be treated as an appeal against the award passed by the Arbitral Tribunal. It is also settled law that the Court reviewing an ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 6/12 award under Section 34 of the Act does not sit as an appellate court over the award passed by the Ld. Arbitrator or to re-examine and to re- appreciate the evidence and the findings given by the Arbitral Tribunal if the award is otherwise found to be reasonable and plausible. {Ref:-
Eastern and North East Frontier Railway Co-operative Bank Ltd. and MC Dermott International Inc. (Supra)}.
15. On the basis of the aforesaid parameters the award passed by the Ld Arbitrator has been examined in respect of Claim No. 3.1 which relates to the recovery made by the respondent in respect of loss of copper earth strips.
16. It is seen that while rejecting the claim of the petitioner on this count the Ld. Arbitrator has observed in para 3.1 (v) as under:-
"(v) I have considered submission made by both the parties. The second RA Bill was paid on 23.08.2011 allowing 95% payment and, therefore, it is quite clear that copper earth strips were provided by the contractor otherwise 95% rate would have not been allowed. There appears no doubt that copper earth strips provided by claimant were stolen before completion of work on 24.04.2012 as evident from AEE letter dated 18.02.2012 (R-
35/RD-2) and subsequent correspondence exchanged between both the parties including minutes of meeting held with CE. It is also not case of the contractor that the issue was not in their notice and recovery has been made without notice. Claimant has taken a stand that once the each of the rising main fixed with copper earth strips was commissioned, it stands handed over to respondent and they are no more liable for its security till completion of work. If earth strips were stolen requiring replacement, it was to be carried out by respondents at their expenditure. I find it hard to buy the argument advanced put forth by claimant. Moreover, under clause 17 of the contract, if any damage shall happen to the work while in progress any cause, it will be responsibility of contractor to make good the damage at his own expanses. I therefore hold that contractor was liable for safety of all works and materials till date of ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 7/12 completion of work. As such, I find no infirmity or illegality with the action of respondents and I reject the claim."
17. In order to appreciate the arguments advanced by the Ld Counsel for the parties, it is imperative to take note of the relevant Clause of the agreement i.e Clause 17 as well as the relevant terms and conditions of the agreement i.e. Clause 9.
18. The Clause-17 of the agreement is reproduced as under:
Contractor liable for Damages, defects during maintenance period "17. If the contractor or his working people or servants shall break, deface, injure or destroy any part of building in which they may be working, or any building, road kerb, fence enclosure, water pipe, cables, drains, electric or telephone post or wires, trees, grass or grassland, or cultivated ground contiguous to the premises on which the work or any part being executed, or if any damage shall happen to the work while in progress, from any cause whatever or if any defect, shrinkage or other faults appear in the work within twelve months (six months in the case of work costing Rs. 10 Lacs and below except road work) after a certificate or otherwise of its completion shall have been given by the Engineer-in-
Charge as aforesaid arising out of defect or improper materials or workmanship the contractor shall upon receipt of a notice in writing on that behalf make the same good his own expense or in default the Engineer-in-Charge cause the same to be made good by other workmen and deduct the expense from any sums that may be due or at any time thereafter may become due to the contractor, or from his security deposit or the proceeds of sale thereof or of a sufficient portion thereof. The security deposit of the contractor shall not be refunded before the expiry of twelve months (six months in the case of work costing Rs. 10 Lacs and below except road work) after the issue of the certificate final or otherwise, of completion of work, or till the final bill has been prepared and passed whichever is later. Provided that in the case of road work, if in the opinion of the Engineer-in Charge, half of the security deposit is sufficient, to meet all liabilities of the contractor ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 8/12 under this contract, half of the security deposit will be refundable after six months and the remaining half after twelve months of the issue of the said certificate of completion or till the final bill has been prepared and passed whichever is later.
In case of Maintenance and Operation works of E&M services the security deposit deducted from contractors shall be refunded within one month from the date of final payment or within one month from the date of completion of the maintenance contract whichever is earlier. "
19. Clause 9 of the terms and conditions is reproduced as under:-
Clause 9: Dispatch of materials to site and their custody "The contractor shall dispatch materials to site in consultation with the Engineer-in-Charge. Programme of dispatch of material shall be framed keeping in view the building progress. Safe custody of all equipment/items supplied by the contractor shall be the responsibility of the contractor till final taking over by the department".
20. A conjoint reading of Clause 17 with Clause 9 clearly shows that the liability on the contractor can be fastened where the damage caused is shown to be attributable to the contractor or its employees or where the work done by the contractor suffer from defects or defaults and further it shall be the responsibility of the contractor to maintain the safe custody of all equipments/items supplied by the contractor at the site till the final taking over by the department.
21. In the present case, it is not disputed that vide letter dated 18.02.2012 i.e. R-35/RD-2 the only grievance raised by the respondent qua the copper earth strips was that the said earth strips were not connected which clearly shows that the earth strips were provided/installed by the petitioner at the site. However at the time of issuance of provisional completion certificate the respondent has noted that the ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 9/12 copper earth strips from all the four blocks i.e. 1 to 4 were found stolen.
22. The Counsel for the petitioner has relied upon the judgment of the Hon'ble High Court of Delhi in the case of Buddhiraja Electricals Ltd. Vs. UOI i.e. OMP NO. 352/2015, DOD 10.07.2018 and it was submitted that the Hon'ble High Court in similar circumstances has set aside the award qua the claim in respect of non-payment towards the cable earth strips. The relevant paragraphs of the afrorementioned judgment are reproduced as under:
"3. The first challenge of the petitioner to the Impugned Award is to the recovery of Rs. 3,86,954/- made by the respondent from the final bill of the petitioner on account of not providing two runs of copper earth strip, size 25x5 mm stipulated under agreement item No. 3.
4. The payment for the cable earth strip had been made by the respondent to the petitioner while making payment against the first to the fourth Running Account Bills. The earth strip had not only been duly installed but also commissioned. There is no dispute to this aspect on part of the respondent. The respondent sought to make deductions on this account because the earth strip having been commissioned, was found stolen at the time of final hand over of the site by the petitioner to the respondent, which occurred on 31st July, 2012. The bone of contention between the parties is respondent could have made the said deduction. It is also relevant to note that earth strip was installed by the petitioner between the period of two years from 2010 to 2012.
7. A reading of the above clause would clearly show that it is applicable only where the damage caused is found attributed to the contractor or its workers or there is any defect found in the work carried out by the contractor.
8. It is not the case of the respondent that the theft has occurred due to any fault attributed tot he petitioner or its workers. It is not shown from any contractual term that the ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 10/12 petitioner was responsible for the safety of the work carried out by it in accordance with the instructions issued by the respondent, specially where the work period has extended to 26 months instead of and in place of two months as stipulated and the reason for such prolongation is wholly attributable to the respondent itself. As noted above, the earth strip had been commissioned over a period of two years between 2010 to 2012.
9. In view of the above, the finding of the Sole Arbitrator rejecting this claim of the petitioner cannot be sustained."
"emphasis supplied by me"
23. In the present case also it has not been disputed that the copper earth strips were not only installed but also commissioned by the petitioner and the work has been completed on 24.04.2012 i.e. almost 326 days beyond the stipulated date of completion i.e. 03.06.2011 and the said extension had been granted by the respondent without levy of any penalty.
24. The Ld Cousnel for the respondent has relied upon Clause 9 to contend that it was the responsibility of the contractor i.e. the petitioner herein to keep the safe custody of the goods/equipments supplied by the petitioner at site and since the copper earth strips were found stolen at the time of taking over the site therefore the loss towards the stolen earth strips has to be borne by the petitioner however this court is unable to concur with the said argument in as much as the said clause i.e. Clause 9 was never relied upon by the respondent before the Ld Arbitraor but even otherwise the said clause is not applicable in the facts and circumstances of the present case since the only purport of the said clause can be that the contractor would be responsible for loss of the goods/equipments which the contractor has brought or supplied ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 11/12 at the site since for completion of the contract the machines as well as the equipments are required to be kept/placed at the site for using and installing and until the equipments are installed and commissioned there cannot be any doubt that it shall be the responsibility of the contractor to keep them in safe custody however once the equipments have been duly installed and commissioned then it cannot be said that the contractor is responsible for safe custody even after installing the equipments and in the present case also it is an admitted fact that the petitioner has duly intalled and commissioned the earth strips and the respondent has not placed on record anything before the Ld Arbitrator to show that the copper earth strips were stolen due to the acts of the contractor or its employees and therefore the judgment of the Hon'ble High Court of Delhi in the case of Buddhiraja Electricals Ltd. (Supra) applies in full force to the facts of the present case and keeping in view the ratio led down in the said judgment it can be safely held that the reasoning given by Ld Arbitrator in rejecting the Claim no 3.1 of the petitioner qua the recovery of Rs 1,59,488/- made by the respondent for not providing the copper earth strips cannot be sustained.
25. In view of the above, the petition is partly allowed and the award dated 05.03.2015 is set aside only in respect of the objection qua Claim no 3.1 raised by the petitioner.
26. File be consigned to record room.
Announced in the open court (AJAY GULATI-II)
on 21.01.2023. ADJ-01/ Central District
Tis Hazari Court/Delhi.
ARBTN No. 21/2019 M/s Budhiraja Electricals vs. Union of India Page No. 12/12