Bangalore District Court
Sree Rama Sai Constructions vs The Union Of India on 10 February, 2021
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH84]
:Present:
Ravindra Hegde, M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 10th day of February 2021
COM.A.S.No.129/2018
Petitioner Sree Rama Sai Constructions,
Represented by its Partner G. Raja,
# 102, Suryadeva Nilayam,
99/2 RT, S.R.Nagar,
Hyderabad500038.
(By Sri.S.F.A, Advocate)
// versus //
Respondents 1. The Union of India,
by its Sr.Divisional Engineer (Central)
South Western Railway,
Hubli Division,
Hubli580023.
2. Sri. Ramgopal,
Chief Engineer/CN,
South Western Railway,
No.18, Basaveshwara Road,
Bengaluru560046.
3. Smt.P.V.Leela,
Financial Advisor & Chief Accounts
Officer/CN,
South Western Railway,
No.18, Basaveshwara Road,
Bengaluru560046.
2
CT 1390_Com.A.S.1292018_Judgment .doc
4. Sri.P.R.S.Raman,
Chief Engineer/CN,
South Western Railway,
No.18, Basaveshwara Road,
Bengaluru560046.
(R.1 by Sri.S.R.K, Advocate
R.2 to R.4 - learned Arbitrators)
Date of Institution of the suit : 21/06/2018
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the Judgment : 10/02/2021
was pronounced.
: Year/s Month/s Day/s
Total duration
01 07 20
JUDGMENT
This petition U/S.34 of the Arbitration & Conciliation Act, 1996 is filed by the petitioner, challenging the award passed by the Arbitral Tribunal dated 27/3/2018. Respondents No.2 to 4 are learned Arbitrators.
2. The case of petitioner in brief is that he being aggrieved by the award dated 27/3/2018 in the arbitration proceedings between petitioner and respondent No.1, so far as it relates to denial of claim No.7,9,10,11,12,13,17, 18 and partial award on claim No.1 and claim No. 14, has filed this petition to set aside or modify the award in respect of those 3 CT 1390_Com.A.S.1292018_Judgment .doc claims. It is stated that the petitioner had accepted the tender notice dated 22/8/2012 published by the 1 st respondent and offer of the petitioner was accepted vide acceptance letter dated 15/4/2013 for total value of Rs.4,02,79,970/ and the works contract was for the Proposed Elimination of Level Crossing No.307, LC No.1 and LC No.6, LC No.22 by RCC Precast boxes by cut and cover method and the completion period was of six months from the date of issue of letter of acceptance dated 15/4/2013 and expiring on 14/10/2013. The currency of contract was extended from 15/10/2013 to 15/3/2014 on a token penalty of Rs.5,000/ payable by the petitioner and the petitioner has protested levying penalty. The work could not be completed due to the default of the respondent No.1 and petitioner asked for further extension of currency upto 31/12/2014, but extension was given upto 30/6/2014 without penalty. It is stated that immediately on receipt of letter of acceptance, the petitioner had started the work and had completed the work of precasting of RCC boxes at level crossing No.22 and on the say of the 1st respondent work was stopped at LC No.1 and manpower and machinery were shifted to LC No.307 and in October /November 2013 recasting of RCC box of LC 307 was over and in LC 6 precasting was completed in January 2014. The work given to the petitioner was requiring suspension of rail traffic for about 3 to 5 hours within which time the entire process to be completed and this traffic/line block was to be provided by the 1st respondent. After keeping RCC boxes, 4 CT 1390_Com.A.S.1292018_Judgment .doc precasted and ready for launching, the petitioner was waiting for line block from November 2013 and respondent No.1 informed that line block would be permitted on 6/2/2014 for LC No.307 and on 11/2/2014 for LC No.6 and the petitioner had kept ready the heavy machinery and specialized labour on 3/2/2014 itself and additional equipments was also ordered. However, the line block was postponed in the last moment to 13/2/2014 and 17/2/2014 respectively and even on those days line block was not given and further it was deferred by this entire deployment of specialized labour force and specialized machinery has rendered waste. It is also case of the petitioner that the respondent No.1 did not arrange the line block for LC No.307 and 6and did not permit the work to commence at LC No.1 till 30/6/2014 and allowed the currency to expire. It is stated that the respondent No.1 had issued 7 days notice on 19/5/2014 and 48 hours notice on 26/5/2014 to cover up its failure. It is stated that the respondent No.1 terminated the contract on 11/8/2014, after expiry of its currency on 30/6/2014 and the respondent No.1 despite many requests did not settle the balance bills or the final bill including the unproductive expenses incurred due to promise and failure of the respondent No.1 in providing the line block. The contract was frustrated due to failure of the respondent No.1 and EMD and PG was forfeited by the respondent No.1 illegally and hence the petitioner sought the claim to be resolved by Arbitral Tribunal as per contract conditions and concerned authority has appointed the 5 CT 1390_Com.A.S.1292018_Judgment .doc Arbitral Tribunal comprising of the respondents No.2 to 4 on 8/6/2015.
3. The Arbitral Tribunal has passed award on 27/3/2018. The learned Arbitral Tribunal has awarded 6 claims and petitioner is aggrieved by rejection of its claim No.7,9,10,11,12,13,17 and 18 and partially allowing claim No.1 and 14. It is stated that Arbitral Tribunal has erred in rejecting 8 claims and allowing 2 claims partially. It is stated that after holding that action of the respondent No.1 to terminate the contract is not in order and is apparently not justified under law, the learned Arbitrator ought to have allowed the claims made by the petitioner. It is stated that the Arbitrator has held that the claimant is not entitle for any penal action of forfeiture or recovery of any penal amount. It is stated that under claim No.1 refund of EMD amount of Rs.3,25,000/ which was submitted in the form of FDR was required to be allowed along with interest. It is contended that the claim No.7 and 9 regarding payment of compensation for the loss suffered due to blocking of capital and non execution of work owing to failure to grant permission to carry out the work and failure to provide line block and regarding amount paid to Palamur labour, the Tribunal ought to have awarded amount claimed and the order of the learned Arbitral Tribunal on claim No.7 and 9 is non speaking and devoid of any reasons and is contrary to its findings on fact and is in conflict with the most basic notions of justice and is liable to be set aside.
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4. Petitioner also contended that in claim No.10 for maintenance of assets for 15/4/2013 to 15/8/2014 for 16 months Rs.32,00,000/ claim was made by the petitioner, but the Tribunal has not granted that amount and has not properly considered the claim and the rejection of the claim is unsustainable under law and is against the basic notions of justice. It is also contended that in claim No.11 towards payment to two technical persons claims 12 and 13 regarding office rent, Supervisors and Watchman salary, the Arbitrator has not granted any amount and wrongly held that there is no such separate heads on which claim could be made. It is stated that the productivity of the two engineers employed was not tapped for any productive work and bill was paid only for the work executed not for the engagement of the engineers and labour and other over head expenses. Regarding claim No.14 for13 days block failed period from 3/2/2014 to 15/2/2014, though claim was made by the petitioner for 3 times normal rates, the Arbitral Tribunal has only awarded Rs.7,50,000/ and has not considered the claim and wrongly understood the claim as Rs.21,52,000/, though Rs.21,52,000/ was for one period and such three failed attempts have been made. Regarding claim No.17 petitioner contended that loss of profit of 10% claimed by the petitioner was not accepted and no award is made. It is stated that even after tribunal considering that profit becomes available to contractor only when the work is executed and as the work could not be completed, profit is not received and work was 7 CT 1390_Com.A.S.1292018_Judgment .doc not executed due to fault of the respondent No.1, no amount is awarded for loss of profit and the award is patently illegal and deserves to be set aside. With regard to claim No.18 towards loss of opportunity also it is contended that the award of the tribunal is not proper and it has not awarded any amount and the tribunal has not considered that due to fault of respondent No.1, petitioner has suffered loss due to wastage of manpower and heavy machinery and frustration of contract and is also prevented from tapping alternate opportunities and he suffered damage to the reputation also. On all these grounds, the petitioner has prayed to modify the award by allowing the claim No.7,9,10,11,12,13,17 and 18 and by directing the respondent No.1 to pay accrued interest on EMD under claim No.1 and pay full claim amount under claim No.14.
5. The respondent No.1 appeared and has filed written statement and stated that petition is not maintainable and requirement and ingredients of Section 34 of Arbitration & Conciliation Act are not made out and petition is liable to be dismissed. The averments of the petition are stated to be misleading and incorrect. It is stated that the 1 st respondent has imposed penalty of Rs.5,000/ for the delay in execution which itself show that petitioner failed to comply with the terms of contract and complete the work within six months. It is stated that immediately after getting letter of acceptance, by its letter dated 29/4/2013 the petitioner requested to postpone the work for 15 to 20 days. It is stated that the 8 CT 1390_Com.A.S.1292018_Judgment .doc petitioner was aware that the line block would be subject to availability and also would be given by taking into consideration the public interest. It is stated that, contention of the petitioner that the line blocks were not approved and that it was forced to deploy specialized labour forces, specialized machinery and they become waste etc. cannot be accepted. It is stated that the petitioner has not produced any document regarding such loss suffered and in order to cover up his lapses in not executing the work within the stipulated period, false allegations are made. It is stated that as work was not executed despite of extending the currency of the contract, the notice was given as per the terms of contract and it is stated that the contract was terminated for the fault on the part of petitioner and therefore final bill could not be prepared and question of paying any amount under price variation clause would not arise. It is stated that the learned Arbitral Tribunal has given sufficient opportunity to both the parties and awarded six claims and rejected other claims and partly allowed claim No.1 and 14. It is stated that the Arbitral Tribunal considering all aspects as per terms of contract, concluded that termination of contract under clause of GCC though it was an excepted matter, awarded Rs.7,50,000/ as compensation taking into consideration the evidence placed on record. It is stated that though the award was contrary to the terms of contract to avoid litigation and to put an end to the dispute, 1st respondent has complied with the terms of award. It is stated that merely because 1st 9 CT 1390_Com.A.S.1292018_Judgment .doc respondent complied with the terms of award, petitioner cannot take advantage of the findings which are recorded contrary to the contract and seek setting aside of the award. It is stated that the terms of award do not provide for payment of interest on EMD, PG or SD. It is stated that as per clause 61(1)of GCC, respondent No.1 has the right to terminate the contract and in as a consequence under clause 61(3), the petitioner shall have no claim to any payment of compensation. It is stated that deploying of any technical personnel is ancillary to the main work for which payment have been made, as such, the claim cannot be accepted. It is stated that the petitioner has not produced any evidence regarding machinery and equipments moved to the site for execution of work and the petitioner is not entitled any compensation under Clause 61 and 62 of GCC. However, the tribunal has granted Rs.7,50,000/. It is stated that claim for 10% towards loss of profit and 1 crore towards loss of opportunity, cannot be accepted in view of clause 61(3) of GCC. It is stated that the Tribunal has held that part of the profit was available with the petitioner against the claim awarded under claim No.5. It is stated that the Tribunal by over all evidence produced and the claim which was overlapping has accepted certain claims and various allegations made in the petition challenging a finding recorded by the Arbitral Tribunal are without any basis. It is stated that the grounds made in the petition does not cover the ingredients as mentioned U/S.34 and there is no ground 10 CT 1390_Com.A.S.1292018_Judgment .doc to interfere with the award. It is also stated that the respondent No.1 has complied with the award and he has paid Rs.42,33,347/ including interest to the petitioner on 11/7/2018. On all these grounds, petition is prayed to be dismissed.
6. Now the points that arise for consideration of this court are:
1) Whether the petitioner has made out grounds to modify or to set aside the award dated 27/3/2018 U/S.34 of the Arbitration & Conciliation Act in respect of different claims mentioned in the petition?
2) What order?
7. Both the parties have filed written arguments. Learned counsel for the petitioner addressed oral arguments also. Perused the records.
8. My answer to the above points are :
POINT No.1 : In the Negative.
POINT No.2 : As per final order for the following:
REASONS
9. POINT No.1 : Facts of the case are that,
respondent No.1 had awarded contract work of elimination of LC No.307, LC No.1, LC No.6 and LC No.22 by RCC precast boxes by cut and cover method to the petitioner on 15/4/2013 with due date of completion as 6 months i.e. 11 CT 1390_Com.A.S.1292018_Judgment .doc 14/10/2013. The currency of contract was extended from 15/10/2013 to 15/3/2014 on a token penalty of Rs.5,000/ and then on request of petitioner for extension of time upto 31/12/2014, extension was given upto 30/6/2014. During pendency of this contract, petitioner was informed not to proceed with the work in respect of LC No.1. The petitioner appears to have successfully completed the work of LC No.22. In respect of LC No.307 and LC No.6, due to not providing line block the petitioner could not carry out the work. Since the work requires suspension of rail traffic, during which entire process is to be completed, suspension of rail traffic which is called line block is very necessary and on three occasions the respondent No.1 has proposed line block, but later canceled. According to the petitioner he had kept expert labour of Palamur and brought heavy machineries to carry out the work and RCC blocks were precasted and kept ready for launching, subject to availability of line block. According to the petitioner due to non providing of line block with regard to both these LC No.306 and 6 work could not be completed and as he had kept men and machinery, due to the fault of respondent No.1, he suffered loss. As stated above the period of contract was extended till 31/6/2014, but due to non providing of line blocks, the work was not completed and respondent No.1 gave two notices to the petitioner during May 2014 and petitioner also requested respondent No.1 to provide line block to complete the contract, but work was not completed as line block was not given and respondent 12 CT 1390_Com.A.S.1292018_Judgment .doc terminated the contract on 11/8/2014 and then proceeded to encash the security deposit, bank guarantee and has failed to clear the Bill.
10. On petitioner raising dispute, as per the contract terms, respondents No.2 to 4 were appointed as Arbitrators and the Arbitral Tribunal was constituted and before the Arbitral Tribunal parties have appeared and made their claims and filed counter and documents. The Arbitral Tribunal after considering the matter has passed the Arbitral Award on 27/3/2018 and allowed certain claims and rejected certain claims of the petitioner and has partly allowed two claims of the petitioner. Respondent No.1 has not made any counter claim before the Arbitral Tribunal. After passing of the Arbitral Tribunal, the petitioner being aggrieved by rejection of his claim No.7, 9, 10, 11, 12, 13, 17, 18 and also partially allowing claim No.1 and 14, has filed this petition by contending that the award on these claims of the petitioner are against the public policy and are in conflict with the most basic notions of justice and is liable to be set aside. The respondent No.1 has disputed the contentions of the petitioner.
11. On looking to the Arbitral Award, it is clear that the petitioner's claim before the Arbitral Tribunal was considered under 18 heads and respondent had not made any counter claim. The Arbitral Tribunal awarded amount under claim No.1,2,4,5,6 and 14. With regard to claim No.3 on price variations, the Tribunal has held that the amount is to be 13 CT 1390_Com.A.S.1292018_Judgment .doc worked out by the respondent for the whole period of contract upto 30/6/2014 for the value of work executed by the claimant and to be paid as per the actual. The claim No.8 and claim No.16 are stated to have been withdrawn by the claimant. The remaining claims in claim No.7, 9, 10, 11,12, 13, 15, 17 and 18 are not allowed by the Arbitral Tribunal. The petitioner has challenged the award on claim No.7, 9, 10, 11, 12, 13, 17 and 18 and also not allowing of interest on the EMD in claim No.1 and awarding of only Rs.7,50,000/ in claim No.14 as against his claim for Rs.65,37,000/. Though on claim No.15 no award is made, the petitioner is not disputing the same.
12. As per Section 34 of the Arbitration & Conciliation Act, the Arbitral Award can be set aside by the court on establishing any of the grounds mentioned in Section 34 (2)
(a)&(b). On looking to the entire contention of the petitioner in the petition, none of the grounds as mentioned in Section 34(2)(a) is urged by the plaintiff, which are with regard to composition of Arbitral Award and violation of the arbitration agreement etc. According to the petitioner, the Award of the Arbitral Tribunal on the specific claims mentioned in the petition are against the public policy, as the rejection of these claims are devoid of any reasons and are contrary to the findings of the Arbitral Tribunal on the facts and these finding on these claims are in conflict with the most basic notions of justice and is liable to be set aside. Therefore, according to 14 CT 1390_Com.A.S.1292018_Judgment .doc the petitioner, the Arbitral Award on particular claims of the petitioner is in conflict with the public policy of India as appearing in Section 34(2)(b)(ii). Therefore, in this petition it is necessary for the petitioner to establish that the finding of the Arbitral Tribunal is in conflict with the public policy of India.
13. Learned counsel for respondent No.1 has relied on the decision of Hon'ble Supreme Court in Civil Appeal No.10531 of 2014 dated 25/11/2014 in Associate Builders v/s Delhi Development Authority. In this decision, the Hon'ble Supreme Court has considered several decisions starting from Renusagar and dealt with the grounds on which Arbitral Award could be challenged. On going through this decision, it is clear that the Arbitral Award could be challenged if it is opposed to the public policy of India. If the award is contrary to (a) fundamental policy of Indian Law or (b) The Interest of India or (c) Justice or morality or is patently illegal, award can be challenged. The patent illegality however should go to the root of the matter. If the award is so unfair and unreasonable that it shocks the conscience of the court, then also award can be set aside as held in a decision of Delhi Development Authority v/s R. Sharma and company referred in this decision. On going through this decision grounds on which Arbitral Award can be challenged as opposed to public policy, is when award of the learned Arbitral Tribunal is contrary to fundamental policy of Indian 15 CT 1390_Com.A.S.1292018_Judgment .doc Law or the interest of India or justice and morality or award is patently illegal or so unfair and unreasonable that it shocks the conscience of the court or it is in conflict with the most basic notions of justice. Only on establishing the presence of any of these circumstances, the award can be set aside. On any other grounds including that it is also possible to come to another conclusion, the award cannot be set aside. In the presence of the grounds on which the Arbitral Award could be challenged as held in the decision of Associate Builders referred above, the present petition is to be considered.
14. Since the petitioner is partly satisfied and partly unsatisfied with the award, the award as a whole cannot be considered as opposed to public policy or is in conflict with the basic notions of justice. Only on particular claim the award is disputed by the petitioner. Regarding claim No.1 which was for refund of EMD, the Arbitral Tribunal after holding that the action taken by the respondent to terminate the contract is not in order and apparently not justified under law and also holding that claimant is not liable for any penal action of forfeiture or recovery of any penal amount and it is entitle for the amount which have been withheld, has ordered refund of Rs.3,25,000/ towards refund of EMD. According to the petitioner, since EMD was given in FDR, the petitioner was also entitled for accrued interest on the EMD from the date of FDR till payment of EMD amount to the petitioner. The EMD appears to have been given on 15/4/2013 and the 16 CT 1390_Com.A.S.1292018_Judgment .doc contract has come to end by termination on 11/8/2014 with effect from 30/6/2014. Therefore, according to the petitioner the Arbitral Tribunal ought to have granted interest on this EMD amount which was given by way FDR and not awarding interest is against the law and basic notions of justice and is liable to be modified. However, on looking to the award there appears to be no such claim for interest on the EMD amount by the petitioner, claimant appears to have only prayed for return of the EMD amount and that has been accepted by the Arbitral Tribunal. For the award amount if not paid within 60 days from the date of award, interest of 6% is awarded by the Arbitral Tribunal. No doubt, as per clause 16 of the general conditions of contract dealing with earnest money and security deposit, it is mentioned in clause 16(3) that no interest will be payable upon the earnest money and security deposit or amount payable to the contractor under the contract, but government securities deposited in terms of sub clause (1) of this clause will be payable with interest accrued thereon. Therefore, when petitioner gave EMD in FDR, as per clause 16(3), the same was payable with interest accrued thereon. Therefore, from 15/4/2013 to 11/8/2014 on which date termination took place, the interest would have been considered by the learned Arbitrator. The EMD amount is Rs.3,25,000/, on which if interest is awarded from 15/4/2013 to 11/8/2014 it would not be a big amount on considering the total claim and also the contract amount. In the decision in ONGC v/s Saw Papers 2003(5) SCC 705 as 17 CT 1390_Com.A.S.1292018_Judgment .doc referred in Associate Builders case referred above, it is held that 'Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy'. Therefore, even if the petitioner was entitle for interest on Rs.3,25,000/ from the date of FDR to 11/8/2014, the interest would be small amount and any such defect of a trivial nature cannot be called as against the public policy. Moreover, as stated above the claimant/ petitioner appears to have not sought for interest on the EMD amount. Though under clause 16(3) if the EMD given by FDR accrued interest is to be payable to the contractor, the FDR receipts and the interest mentioned therein etc. were also appears to have not been placed before the Arbitral Tribunal. When Arbitral Tribunal has awarded EMD amount, only for not or deny payment of accrued interest for the period of about 16 months on Rs.3,25,000/, award on claim No.1 cannot be tried to be against public policy and cannot be set aside.
15. In claim No.14, for 13 days block period from 3/2/2014 to 15/2/2014 three times normal rates amounting to Rs.65,37,000/ was claimed by the petitioner and Arbitral Tribunal has awarded only Rs.7,50,000/. Tribunal by calculating rate of Rs.2,007/ per MT for a quantity of 1000 MT for carrying out the work at 4 LCs, as per the agreement, has held that rate for placement of precast RCC segmental boxes for each level crossing would come to Rs.5,01,750/ for 18 CT 1390_Com.A.S.1292018_Judgment .doc each level crossing and for two disputed level crossings it comes to Rs.10,03,500/ and by considering that machineries were not used at the spot, has awarded Rs.7,50,000/. Petitioner contended that the Tribunal has held that the heavy equipments and manpower brought by the claimant is not disputed and Tribunal has also accepted that for line block at LC No.307 and LC No.6 three dates were proposed, but not approved. It is contended that on all these three proposed dates the claimant was ready with men, materials and machineries and the Tribunal has considered only one such failure and misinterpreted the claim as Rs.21,52,000/ in total, but for each of those dates Rs.21,52,000/ was the claim of the claimant and the Tribunal has awarded only Rs.7,50,000/ which is patently illegal and deserves to be set aside and also contended that the claim of the petitioner is supported by vouchers. On looking to the Arbitral Award regarding claim No.14 the Tribunal has made a detailed discussion and has held that the petitioner had brought the heavy equipment and manpower and has observed that during the proceedings claimant has reduced his claim to Rs.21,52,000/ vide letter dated 29/8/2017 by giving the breakup of the manpower and machinery deployed by them and the expenditure incurred for the same for a period of 4 days. Tribunal also observed that petitioner has submitted payment vouchers towards manpower, machinery and other expenses incurred by them to substantiate their claim of Rs.21,52,000/ and by considering that authenticity of such 19 CT 1390_Com.A.S.1292018_Judgment .doc cash vouchers could not be verified and by considering the fact that for carrying out the line block work heavy machinery and manpower have to be mobilized well in advance of the line block day and the availability of such machinery at site has not been disputed by the respondent has considered the agreement and also by considering that the machineries were not utilized has awarded Rs.7,50,000/. Though the line block was proposed on 3 dates as admitted by the parties, but was not given, the petitioner has claimed compensation for 13 days as block period from 3/2/2014 to 15/2/2014 and also contended that it has paid 3 times the normal rates. The petitioner cannot expect the Arbitral Tribunal to award three times of the normal rates to the petitioner on the assumption that it had paid such amount for 13 days for not giving proposed line block by the respondent on 3 dates. Therefore, the Tribunal appears to have considered one such normal rate as the claim of the petitioner and stated that the claim amount is reduced to Rs.21,52,000/. For the expenditure incurred for the period of 4 days in respect of 2 LCs it has calculated the amount on the basis of the rates mentioned in the agreement and which came to Rs.10,03,500/ and by giving deduction for expenses not incurred, Tribunal has awarded Rs.7,50,000/. On looking to the reasons given by the learned Arbitral Tribunal, there appears to be no violation of any established law of the country or there is any such error which shocks the conscience of the court. As per the general conditions of contract at 61(3) even when the contract 20 CT 1390_Com.A.S.1292018_Judgment .doc is terminated owing paucity of funds or for any other cause, on determination of the contract, no claim to any payment of compensation on account of any profit or advantage which the contractor might have derived could be made. Still the learned Arbitral Tribunal has awarded Rs.7,50,000/ for the loss caused to the claimant, for non providing line blocks on 3 proposed dates during which petitioner had kept men and machinery ready to execute the work. On looking to the award of the Tribunal with regard to claim No.14, it cannot be held that it is against the public policy and the finding of the learned Arbitrator on claim No.14 cannot be interfered with U/S.34(2) of the Arbitration & Conciliation Act.
16. Finding on claim No.7 by the learned Arbitral Tribunal is with regard to payment of compensation for the loss suffered due to blocking of capital and non execution of work due to failure of the respondent No.1 to provide line block as per the agreement. Claim No.9 is the labour advance which is said to have been given by the petitioner. The Tribunal has not accepted claim No.7 and 9 and no award is made. With regard to claim No.7 the petitioner contended that as he was required to keep the capital for executing the work and as the work could not be executed due to the failure of the respondent No.1, he has suffered loss and it claimed Rs.15,00,000/. The Tribunal has considered that deployment of manpower and machinery on the dates of proposed line blocks, but held that payment of compensation for the loss 21 CT 1390_Com.A.S.1292018_Judgment .doc suffered due to blocking of capital and non execution to carry out the work and line block do not arise. As discussed above in claim No.14 the Tribunal after considering that the men and machinery were kept ready by the petitioner and due to non providing of line block the work could not be done has granted compensation of Rs.7,50,000/. It appears that the Tribunal, by considering that it has already awarded compensation under claim No.14 has denied the claim of the claimant on claim No.7 and 9. On considering the award, there appears to be no such error apparent on the face of the record which shock the conscience of the court and as the claim No.14 is exhaustive with regard to loss caused by the failure to provide line blocks of different periods covers arranging of men and machinery and also materials and engaging labour and these claims would also come under the same. As such there are no grounds to interfere with the award U/S.34(2) of the Act in respect of its findings on claim No.7 and 9.
17. Claim No.10, 11, 12 and 13 are the claims with regard to appointment of two technical persons, maintenance of office, supervisors and watchman for security etc. Even on these claims the Arbitral Tribunal has held that maintenance work is ancillary to the work and payment have been made for the works executed by the petitioner including final bill amount as per the order of the Tribunal. Tribunal also held that expenditure towards maintenance forms part of the bill.
22CT 1390_Com.A.S.1292018_Judgment .doc With regard to claim No.11, 12 and 13 the Tribunal has held that maintenance, appointing Supervisors, Security Maintaining Officer etc. are ancillary to the main work and as payment have been ordered for the works executed including the final bill in the award the expenditure towards these heads forms part of the said bill amount and hence the Tribunal has not considered awarding of any amount against these claims. As held by the Tribunal the maintenance, labour charges, security staff are all included in the final bill and the Tribunal has ordered to pay pending bill and also ordered payment of certain compensation for the loss suffered due to failure of the respondent No.1 to provide line blocks. All these ancillary claims like payment to project Engineers, Supervisors etc. are part of the main work. The agreement do not provide payment of separate amount for the security, watchmen, supervisors, site Engineers etc. As such, the finding of the Tribunal cannot be considered as against the agreed terms of the contract and is against the law or public policy as contended. Therefore, even on these claims the Tribunal award cannot be set aside.
18. As regards claim No.17 and 18 which are pertaining to loss of profit and loss of opportunity, the petitioner had claimed 10% of the contract amount as loss of profit and for loss of opportunity he had prayed Rs.1 crore by considering that termination of the contract has caused loss to him including loss of reputation and the Tribunal has not awarded 23 CT 1390_Com.A.S.1292018_Judgment .doc any compensation on these heads. The Tribunal in its award has considered that element of profit is already inbuilt in the rates and the profit becomes available to a contractor only when the work is executed and as the work could not be completed, he has not incurred the full amount to complete the work. Tribunal has also held that for the expenditure incurred towards deployment of machinery and manpower during the line block period which was subsequently cancelled, award has been made for payment of compensation and therefore payment of full profit is not justified. It also held that the profit is available to the claimant through the already paid running bills and also the final bills which is also awarded in claim No.5. Regarding claim No.18 the Tribunal has held that except not providing line block on 3 occasions in other part of the work the petitioner was well aware of the progress of the work and as such, no amount can be awarded towards loss of opportunity. On looking to the award regarding loss of profit and loss of opportunity, the Tribunal has considered the claim and then decided not to award any amount on this claim and this is a considered award and the award is justified with reasons provided by the Arbitral Tribunal. As such award on these claims cannot be considered as illegal or is coming under exception provided in Section 34(2). Even as per GCC clause 61 and 62, whether the termination is for the fault of the Railways or for the fault of the contractor, contractor cannot have any claim to any payment of compensation on account of any profit or 24 CT 1390_Com.A.S.1292018_Judgment .doc advantage which he might have derived from the execution of the work in full, but which he did not derive due to determination of the contract. In the present case as the Tribunal has held that it was the failure of the respondent No.1 in providing line block which has resulted in non completion of the work, as per clause 61(3) the contractor shall have no claim for any expected profit. Therefore, claim No.17 is against clause 61(3). Therefore, finding of the learned Arbitral Tribunal on these claims also cannot be interfered with.
19. On looking to the entire petition and the objection raised by the petitioner with regard to these particular claims which are partly allowed or not allowed by the learned Arbitral Tribunal, the finding of the Tribunal show that it has considered all these claims and then gave decision. On looking to the facts of the case and the award, the decision of the learned Arbitral Tribunal is not against any public policy which enables this court to set aside the said award. Learned counsel for the petitioner has relied on a decision of in (1984) 4 SCC 59 (Brij Paul Singh and others v/s State of Gujarat) in which the Hon'ble Supreme Court in para 9 has held that when the party entrusting the work commits breach of the contract, the contractor would be entitled to claim damages for loss of profit which he is expected to earn by undertaking the works contract. The Hon'ble Supreme Court also held in para 11 that 15% of the value of the remaining parts of the 25 CT 1390_Com.A.S.1292018_Judgment .doc work contract can be measured and can be awarded as damages for the loss of profit. This decision of the Hon'ble Supreme Court is relied in another decision reported in AIR 1999 SC 1031 (Dwaraka Das v/s State of Madhya Pradesh and another) cited by the counsel for petitioner and held that claim of expected profits is legally admissible on proof of the breach of contract by the erring party. A decision of the Hon'ble Supreme Court in (1977) 3 SCC 590 (Mohd. Salamatullah and others v/s Government of Andhra Pradesh) is also cited in which 15% of the contract price awarded as damages was upheld on account of estimated profits. In another judgment in (2011) 10 SCC 573 (M/s. MSK Projects (I) (JV) Ltd. v/s State of Rajasthan and another) also decision in A.T.Brij Paul Singh has been considered.
20. In the present case, clause 61 of the GCC itself provides that contractor cannot have any claim to any payment of compensation on account of any profit or advantage which he might have derived from the execution of the work. As such not awarding any damage towards loss of profit is in terms of the contract entered into between parties. Moreover, the Tribunal has considered that it has awarded compensation for the loss in claim No.14 and has also held that it has even awarded final bill and these bills contains even profit of the contractor. On looking to all these aspects there are no grounds to interfere with the finding of the 26 CT 1390_Com.A.S.1292018_Judgment .doc learned Arbitral Tribunal on different claims as prayed by the petitioner. The petitioner has failed to make out any grounds for setting aside the Arbitral Award passed by the learned Arbitral Tribunal as required U/S.34(2) of the Arbitration & Conciliation Act. Accordingly, the petition is liable to be dismissed. Hence, point No.1 is answered in the negative.
21. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER Petition U/S.34(2) of the Arbitration & Conciliation Act filed by petitioner is dismissed with cost.
[Dictated to the Judgment Writer; transcript thereof corrected, initialed and then pronounced by me, in the Open Court on this the 10th day of February 2021] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
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