Bangalore District Court
The Government Of Karnataka vs Gammon India Limited on 19 March, 2022
IN THE COURT OF LXXXIX ADDL.CITY CIVIL & SESSIONS
JUDGE, BENGALURU. (CCH-90)
Present: Sri.S.J.Krishna, B.Sc., LL.B.,
LXXXIX Addl.City Civil &
Sessions Judge, Bengaluru.
Dated: 19th MARCH 2022
Com.A.P.No.138/2019
PLAINTIFFS : 1. The Government of Karnataka,
Represented by
The Project Director,
The Project Implementation Unit (PIU),
Karnataka State Highways,
Improvement Project (KSHIP),
K.R.Circle, Bengaluru-560 001.
(By M/s.Dua Associates, Advocates)
-Vs-
RESPONDENT: 1. Gammon India Limited,
Gammon House, Veer Savarkar Marg,
Prabhadevi,
Mumbai-400 025.
2. V.s.Karandikar,
Secretary, PWD Maharasthra (Retd.,)
1702, 17th Floor, Matoshree Heights,
D.L.Vaidya Marg, Shivaji Park,
Mumbai-400 028.
3. Rama Murthy,
8-1-330 to 346, House No.10,
Villa Grande, Toli Chowki,
/2/
Com.A.S.No.138/2019
Shaik Pat, Hyderabad,
Telangana-500 008.
4. G.C.Tallur,
Former Secretary to Govt., PWD.,
"SUSHANTY", No.90, 2nd Main,
11th Cross, Nirmal Nagar,
Dharward-580 003.
(By Sri.K.R.Murali Krishna, Advocate)
Date of Institution of suit : 09.09.2019
Nature of suit : U/sec.34 of the Arbitration and
(suit on pronote, suit for Conciliation Act,1996
declaration and
possession suit for
injunction, etc.,)
Date of commencement : -
of recording of evidence
Date of judgment : 16.02.2022
Total duration : Year/s Month/s Day/s
02 04 07
(S.J.KRISHNA)
LXXXIX ADDL.CITY CIVIL &
SESSIONS JUDGE, BENGALURU.
(CCH-90)
JUDGMENT
The plaintiff has field this suit under Section 34 of Arbitration & Conciliation Act, 1996 praying the Court to set aside the award dated 22.03.2019 passed by the learned Arbitral Tribunal consisting of the respondent No.2 to 4 and also to set aside the order dated 10.06.2019 passed by the /3/ Com.A.S.No.138/2019 arbitral tribunal to the extent it directed the plaintiff to bear the cost of the arbitration and pass any other order as the Hon'ble Court deems fit in the circumstances of the case.
02. For the sake of convenience, the plaintiff is referred to as 'respondent' and the defendant No.1 is referred to 'claimant' as before the learned Arbitral Tribunal.
03. In order to resolve the dispute that arose between the claimant and the respondent arising out of agreement No.1EIUKS-2ADBSTG2EPCAEP612/2011-12 dated 27.12.2011 executed between the Claimant and the Respondent, the arbitral tribunal was constituted.
04. The claimant has nominated the respondent No.3 as its nominee arbitrator. The respondent has nominated respondent No.4 as its nominee Arbitrator. The Secretary General, Indian Roads Congress, New Delhi has appointed respondent No.2 as the Presiding Arbitrator.
05. The claimant has filed its statement of claim before the learned Arbitral Tribunal.
/4/ Com.A.S.No.138/2019 The summary of the case of the claimant is as under:
06. That the claimant is a well established Company duly registered under the Company's Act 1956 engaged as a contractor and is the only constructing company having accredited with ISO 9001 certificate for all fields of Civil Engineering Works including design and has an experience of over 90 years credited with completion of several projects all across the country.
07. The respondent Karnataka State Highways Improvement Projects known as KSHIP is a project headed by its Project Director and is an organization having autonomous powers initiated by the State of Karnataka but not a Department of Karnataka State Government and its Project Director is not a public Officer.
08. The Claimant was awarded the contract work of up gradation of the road from Davanagere Km.0+000 0 Km.105+630 of State Highway 76 by the respondent. An agreement thereto was entered into between the parties on 27.12.2011 and the order to commence the work was issued by the respondent vide letter dated 21.03.2012. The scope of work under the contract was bifurcated into two sections. Section I is the link 42-A for 53.65 kms and the Section II is the /5/ Com.A.S.No.138/2019 link 42-b for 51.98 kms. The time for completion for Section I is 9 months from the date of commencement i.e., ending on 03.02.2014. The time for completion for Section II is 33 months from the date of commencement i.e., ending on 03.04.2015.
09. During the pre-bid meeting held on 31.01.2011 the respondent assured the claimant of providing Encumbrance free stretches as per Sub-clause 2.1 of Contract date. But the respondent failed to do so. Per contra the respondent went on claiming that it provided encumbrance free structure in bits and pieces contending that the claimant is bound to execute the contract work in such work in pieces. The claimant resisted such directions of the respondent and demanded the respondent to comply with Clause 2.1 of Contract Agreement and to provide continuous Encumbrance Free Stretches. Immediately upon issuance of notice to proceed with work on 21.03.2012 the Claimant took necessary steps to commence and complete the work and mobilized equipment, machinery for execution of the work. It had also deployed adequate technical and support staff. The claimant has immediately mobilized the required staff for execution of work. But inordinate delay caused by the respondent in handing over stretches in Section I and Section II as per the priority in accordance with Clause 2.1 of contract conditions completely /6/ Com.A.S.No.138/2019 disrupted the claimant's resource planning. The claimant duly informed the respondent about the commencement of preliminary survey work with a request for joint inspection to carry original ground levels. There were errors in survey work carried out by the respondent which rendered the efforts and progress made from February 2012 to April 2012 go in vain for no fault of the claimant. This important factor was not resolved for a long time by the respondent in spite of repeated requests made by the claimant.
10. The claimant has opposed the date of commencement fixed as 21.03.2012 by the Engineer on the ground that the respondent did not satisfy the per-conditions mentioned in Clause 8.1 of Contract Agreement. The claimant has made 53 correspondences on various dates demanding the respondent to clear hindrances like electrical poles, Transformers, Existing trees, structures underground cables, water supply lines etc., But the respondent never cared to clear them. In spite of there being no land acquired as claimed by the respondent it has directed the claimant to submit program on mere presumptions. The claimant was thus, made to submit program without knowing exactly when it would be provided with continuous encumbrance free stretches by the respondent. In order to overcome its failure in acquiring the land the respondent returned the programs submitted by the /7/ Com.A.S.No.138/2019 claimant on one or other grounds. There were variations in Final Road Levels and there was delay while execution of survey activities due to non co-ordination of temporary Bench Marks and Geo Positioning System references. The respondent even failed to issue guidelines for construction drawings from time to time.
11. The claimant contended that due to variations in final road levels it could not design major structures which would therefore required to be revised for technical reasons in future. There was delay by the authorities in issuance of statutory permits for establishing plant and machinery and operating quarry to produce aggregates.
12. The claimant has furnished performance Bank Guarantee which is Item No.1 of the schedule in the statement of claims and 8 mobilization Bang Guarantees which are shown in Item No.2 to Item No.9 in the statement of claims. The dispute board meetings were held on 27.04.2013 21.09.2013 and on 01.03.2014. There were also several meetings with the Engineer and respondent but none of the meetings could result in removing the barricades for progress of the work.
/8/ Com.A.S.No.138/2019
13. The claimant has issued notice of termination of the contract by its notice dated 02.07.2014. There after the claimant terminated the contract vide its letter dated 15.07.2014 which was delivered to the respondent on 16.07.2014. Though the respondent was well aware of the fact of notice of termination by the claimant has issued notice termination of the contract vide its notice dated 03.07.2014. The respondent has terminated the contract vide its letter dated 17.07.2014. In the notice dated 03.07.2014 or in the letter dated 17.07.2014 the respondent did not whisper about the fact of issuance of notice of termination of the contract dated 02.07.2014 and letter of termination of contract dated 15.07.2014 issued by the claimant. Though the respondent was aware that the claimant has terminated the contract already, has issued notice of termination and letter of termination only with a view to avoid its immediate obligation of returning the performance Bank Guarantees and to avoid its liability to the claimant. The respondent invoked the bank guarantees the claimant approached the Court of Law and obtained an interim order against the respondent from encashing the Bank Guarantees.
14. In spite of request made by the claimant on 16.10.2013 the respondent failed to grant extension of time to /9/ Com.A.S.No.138/2019 the claimant. The respondent has failed to comply with Clause 8.4(b) of the Contract Agreement.
15. In the pre-bid meeting held on 31.01.2011 the 'Additional Addendum to Bid Documents' provided that the claimant may request for issuing of a taking over certificate only for continuous length of road of not less than 10 kms. But in the first instance, the respondent failed to hand over such continuous 10 kms stretch of the project road to the claimant. The claimant was thus, prevented to work in continuous 10 kms stretches of the road by the respondent. The respondent has violated sub-Clause 10.2 of the contract Agreement. The routine maintenance was stipulated in Clause 4.25 of Part B Specific Provisions is incidental only in such sections of the road where the claimant could commence the execution of the main work. The claimant carried out the routine maintenance for the entire project road during April to July 2012 but the same was weather beaten in certain patches by the monsoon. The Engineer has also certified measurements up to July 2012.
16. The claimant has stated that the respondent has failed to hand over Right of Way free of encumbrance in time as per Clause 2.1 Part A of Contract Data. The respondent has failed to comply with Clause 8.1(b) of General Conditions of contract. The respondent failed to grant extension of time as /10/ Com.A.S.No.138/2019 per claimant as per Clause 8.4 R/w Clause 4.12. The respondent failed to grant extension of time despite the requests made for the same by the claimant on untenable grounds. The respondent has violated Clause 10.2. There was delay in grant of permit license or approvals by the statutory authorities of the State. The respondent knowing full well that it had no required land in its possession directed the claimant to submit the work progress returning the same for submitting fresh programs. The respondent wrongly dealt with routine maintenance work. The respondent revoked the Bank Guarantee and the claimant was forced to move the Courts of Law to restrain the respondent from invoking the Bank Guarantee. The claimant is entitled for a total compensation of ₹.69,53,90,052/ and interest thereon at 18% p.a. by the respondent from the date of amount withheld or loss sustained by it.
17. The claimant has initially claimed a total amount of ₹.95,57,46,848-00 under five different heads. The Claimant has acknowledged that it has received a total sum of ₹.26,03,55,796/- inclusive of ₹.20,69,84,004/- as mobilization advances and ₹.5,33,71,792/- for work done till May 2014 from the respondent. After deducting ₹.26,03,55,796/-, the claimant has claimed ₹.69,53,91,052/-. The claimant has made a prayer for grant of relief before the learned Arbitral Tribunal to return /11/ Com.A.S.No.138/2019 the claimant the Schedule Bank Guarantees submitted by the claimant direct the respondent to pay the claimant compensation of ₹.69,53,91,052/- against additional cost sustained because of breach of contract interest at 18% pa from the date of the amount withheld or loss sustained till the actual date of release of payment award costs incurred by the claimant in the arbitration proceedings and such other reliefs.
18. The Learned AT on noticing the arithmetical error committed by the Claimant has rectified the error by taking the claim of compensation made by the Claimant at ₹.69,53,90,052/- instead of ₹.69,53,91,052/-.
19. The respondent has filed its statement of defense with counter claims. The respondent made counter claims of ₹.261.93 crores in its Statement of Defense dated 25.05.2015. However, the respondent got amended its counterclaim and sought for award of ₹.306.18 Crores.
The case of the respondent before the learned Arbitral Tribunal is as under:
20. The claims made by the claimant are vague and not supported by proof. No record has been produced by which provides the basis for any of its claims. The pre-bid meeting /12/ Com.A.S.No.138/2019 was held on 31.01.2011 and the minutes of the same form part of tender document and was also incorporated in the Contract agreement. The columns 14, 18, 22 and 49 of pre-bid meeting minutes clarify that the bidders were made fully aware of the nature of the site on which they were required to execute the work and were also made aware of the fact that the land acquisition was at an advance stage. The claimant was under an obligation to be fully aware of the conditions prevailing at the site prior to submission of its bid as per Clause 4.10 of general conditions of contract.
21. The respondent has denied all the allegations and claims made by the claimant as baseless. The respondent is entitled for counterclaim under various heads to the tune of ₹.306.18 Crores. The respondent had furnished large extent of encumbrance free site to the claimant. From Clause 2.1(a) of General Conditions of contract it is clear that in case of any delay in handing over possession of the site, the claimant is entitled to either seek extension of time or payment of any cost and therefore, as per the terms of the contract it was open for the claimant to complete construction in the available stretches and then seek compensation for the alleged delay in handing encumbrance free site. There was acquiescence of delay as it chose to continue with the work in the available fronts both by way of express correspondences and by conduct /13/ Com.A.S.No.138/2019 and thus in view of Section 39 of Indian Contract Act, 1872 the claimant was not entitled to terminate the contract on the ground that the entire land was not handed over free from encumbrances. The very fact that the claimant sought extension of time established that the claimant acquiesced and continued the work.
22. During the dispute board meeting dated 01.03.2014 there was an admission by the representative of the claimant that 70% possession of the land required for construction of the project has been given so far and the remaining portion of the 30% which involves acquisition of land and removal of shifting of utilities.
23. The respondent had sufficiently performed its obligation in handing over encumbrance free land. The respondent relied on the various documents and claimed that the claimant acquiesced with the fact that whether or not the respondent complies with its obligations under the contract the claimant would continue to perform its work under its obligation. The claimant did not take up the work despite sufficient fronts being available to it but only with an intention of preempting the termination by the respondent the claimant issued notice to terminate dated 02.07.2014. The respondent /14/ Com.A.S.No.138/2019 issued letter of commencement on 21.03.2012 for the claimant to commence the work.
24. The project site was handed over to the claimant as shown under.
1. Link 42A road from Davanagere Km 0+000 to Chennagiri km 53.65 through Santhe bennur i.e., Section- I
2.Link 42B road from Chennagiri Km 0+000 to Beerur km 51.980 through Ajjampura i.e., Section II.
In terms of Class 1.1.13.3 of the particular conditions of Contract, the claimant was required to complete section I within 9 months and Section II within 33 months from the date of commencement. But the claimant failed to complete the work accordingly.
25. The claimant miserably failed to mobilize the requisite men and machinery at any point time during the period of contract. In terms of Clause 8.3 of the contract, the claimant was required to submit a detailed work program from the date of commencement. The claimant submitted a program which was not approved by the Engineer. There were instructions given from Engineer to submit revised program from time to time. The claimant submitted such program but failed to adhere to them. The claimant failed to carry out routine maintenance work of the existing Sections despite /15/ Com.A.S.No.138/2019 several reminders by the Engineer which made the respondent to invoke Clause 7.6 C of general conditions of the contract whereby the respondent got the routine maintenance were carried out by other agencies. The respondent incurred expenses in defending the cases filed by the claimant against it before the Court of Law.
26. The claimant failed to complete the work not only in accordance with the contract but also in accordance with the decisions taken in several meetings. The Engineer issued notices under Clause 15.1 but the claimant issued vague replies on false grounds contending that delay in execution of the work was for want of encumbrance free land, availability of encroachment free right of way clearance from the forest department for tree felling and non availability of quarry.
27. The claimant failed to adhere to the directions of the respondent to work in available fronts. There was no connection between the issues of acquisition of land and execution of work by the claimant who could well have completed the structures which were a major part of the contract. All the given time the respondent in possession of hindrance free stretches of land to enable the claimant to carry out the project work. The claimant could have carried out the work in stretches of 500 meter on either side of the road at /16/ Com.A.S.No.138/2019 any given time allowing movement of traffic as per Clause B2.2.8.2 of the Specifications.
28. The respondent provided sufficient working fronts to the claimant to start the work and claimant could have taken up the work of structures till such time the land acquisition issues were resolved.
29. The claimant with the sole intention to preempt termination of the contract by the respondent terminated the contract of the grounds that are mentioned in the notice of termination dated 02.07.2014 which are factually incorrect, malafide and made up only to save its skin in order to avoid respondent's legitimate claims.
30. In terms of Clause 15.28A b & c the respondent issued notice of termination on 03.07.2014. After commencement of arbitral proceedings, two fresh contracts were awarded by respondent in two packages AEP6 A and AEP6B by splitting the original contract.
31. Based on the rival pleadings, and the draft issues furnished by the parties, the learned Arbitral Tribunal has framed 7 issues on 27.04.2016 as under:
/17/ Com.A.S.No.138/2019 ISSUES
1. Whether the termination of the contract made by the claimant is contractually valid?
2. Whether the termination of the contract made by the respondent is contractually validity?
3. Whether under the general conditions of contract the claimant has any obligation to commence work in stretches less that 10 kms?
4. Whether the claimant has performed all its obligations under the contract?
5. Whether the respondent has performed all its obligations under the contract?
6. Whether the claimant is entitled to seek Return of the claim petition scheduled Bank Guarantees?
7. Whether the claimant proves that it is entitled to the amount claimed under various heads in all amounting to a sum ₹.69,53,90,052/-?
8. Whether the respondent is entitled for compensation as claimed under its counterclaim totaling to ₹.261,93,00,000 and interest.
32. The claimant has not adduced any oral evidence but exhibited documents. The respondent has examined Sri.Donkappa and exhibited the documents. After the conclusion of the trial and upon hearing the learned counsel on record, the learned Arbitral Tribunal has passed its award on 22.03.2019.
/18/ Com.A.S.No.138/2019
33. The Learned Arbitral Tribunal has recorded that:
'The members of learned Arbitral Tribunal having carefully gone through all the pleadings detailed oral and written arguments made by the parties terms and conditions of the contract specifications of the contract, documentary evidence filed by the parties, legal citations relied upon by the parties, facts of the case and members of the learned Arbitral Tribunal having applied their mind to every mater put before them decide the claims and make award.
The Arbitral Tribunal holds that the counterclaims of the respondent are rejected except in respect of counterclaim No.8 under the head unrecovered mobilization and equipment advances for ₹.19.18 Crores which is included in the set off amount of ₹.26,03,55,796/- at B in the table.
The Arbitral Tribunal directs the respondent to pay award amount of ₹.30,44,19,173/- to the claimant. learned Arbitral Tribunal directs the respondent to pay to the claimant interest on this amount award at 15.58% p.a. compounded monthly from 16.07.2014 to the date of award.
The respondent shall pay the amount as mentioned above within 90 days of award, failing which the same shall be paid with interest at 18% p.a simple interest from the date of award till the date of realization by the claimant.
The Arbitral Tribunal directs both parties to bear their respective costs of this arbitration proceeding except the expenditure on arrangement of venue and secretarial assistance which will be shared equally by the parties.
/19/ Com.A.S.No.138/2019 The Arbitral Tribunal respondent to return to the claimant all the bank guarantees within 30 days from the date of award failing which the respondent shall pay to the claimant an amount of ₹.19.18 Crores in addition to the award amount of ₹.30,44,19,173/- as mentioned herein above. This amount will carry 18% pa simple interest from the date of award till the date of realization by the claimant. The Arbitral Tribunal directs the respondent to pay to the claimant an amount of ₹.31,760/- towards its 50% share of expenditure for arrangement of venue and secretarial assistance after verification of detailed account with supporting vouchers submitted by the claimant to the respondent. This amount shall be paid within 90 days from the date of award failing which it will carry 18% pa simple interest from the date of award till the date of realization.
The Arbitral Tribunal directs the respondent to pay ₹.5,67,123/- as its 50% share of expenditure made by the claimant for travel from Hyderabad to places of meeting, lodging, boarding and local traveling for the learned Arbitrator Sri.D.Srirramurthy after verification of detailed account with supporting vouchers submitted by the claimant to the respondent. This amount shall be paid within 90 days from the date of award failing which it will carry 18% p.a. simple interest from the date of award till the date of payment by the respondent.'
34. The learned Arbitral Tribunal has passed Order on application of the claimant dated 23.03.2019. The learned Arbitral Tribunal has directed the respondent to pay 50% of the amount spent by the claimant. The learned Arbitral Tribunal /20/ Com.A.S.No.138/2019 has further directed the parties to pay ₹.1,00,000/- towards fee for two sitting and ₹.40,000/- charges for days other than meeting days expenses as per the bills submitted by the arbitrators to the parties. The above payments shall be made by 1st July 2019. If the respondent does not make the payment by this date the claimant shall make the payment on behalf of respondent by 10.07.2019.
35. The respondent being aggrieved by the impugned award has filed the present suit.
The respondent has furnished the brief facts of the case.
36. The respondent has urged that the impugned award passed by the learned Arbitral Tribunal is not maintainable either in law or on facts of the case.
37. The respondent is contending that the award is liable to be set aside for the following reasons:
38. The learned Arbitral Tribunal failed to appreciate the facts of the case in entirety and adopted a myopic and biased approach and erroneously accepted the defendants' case in its entirety.
/21/ Com.A.S.No.138/2019
39. The learned Arbitral Tribunal has given a finding on issue No.3 holding that the defendant was not obliged to perform works in stretches in less than 10km. The said finding is not based on any contractual clause. On the contrary in Clause B2.2.2.8.2 of specifications at page 16 of volume 2 of contract document has been violated. As per Clause B2.2.8.2 of the specifications it is clear that ordinarily the defendant had to work in stretches on 500 meters that too on one side of the road. Such being the case on the basis of wrong reasoning, the learned Arbitral Tribunal held that the defendant was not obligated to commence works in stretches lesser than 10 km. The learned Arbitral Tribunal ought to have appreciated the vital fact that the road in question was a live road which was being used. Consequently it was difficult to commence the work at stretches of 10 km. The above finding of learned Arbitral Tribunal is contrary to contract agreement and is therefore liable to be set aside.
40. In the work programs submitted by the defendant, the defendant has specified that it would work in lengths of 1 km which establishes that the defendant itself was agreeable to work in stretches of 1 km. It is clear from the reading of the contract documents statement of claims, documents produced by the defendant, the statement of defendant and counterclaim and the documents produced by the plaintiff that /22/ Com.A.S.No.138/2019 the plaintiff and defendant agreed that the defendant had to improve the existing road in terms of the contract document. The plaintiff had to hand over kilometer 5+000 to 13+000 and 35+700 to 53+000 in link 42A Section 1 and km 28+000 and 37+000 and 38+000 to 51+000 in link 42B Land Section II on the commencement date. The plaintiff has to hand over the balance road length within 6 months from the commencement date. In the event of there being any delay in handing over the land as per the conditions the defendant was entitled to for extension of time value of work done and compensation.
41. The learned Arbitral Tribunal failed to appreciate that it is an admitted case of the defendant and also the plaintiff that though entire land was not handed over on the commencement date the plaintiff handed over sufficient stretches of land to the defendant on the commencement date and defendant executed some work to the extent of ₹.5 Crores for a period of 2 years on the lands, the possession of which was handed over and those which were periodically made available to it and that by mid 2014 the defendant refused to continue with the works in the existing encumbrance free lands and terminated the contract. Such being the case, the findings of the learned Arbitral Tribunal that the plaintiff committed breach of Clause 2.1 of the general conditions of /23/ Com.A.S.No.138/2019 contract is contrary to the contract stipulations as well as the facts which have transpired in the manner.
42. The learned Arbitral Tribunal ought to have further appreciated that it was very clear from the contract that time was not the essence of the contract and that therefore, it was not open for the defendant to terminate the contract for reasons of alleged non handing over of the work fronts.
43. The learned Arbitral Tribunal has not explained what it means by bits and pieces and continues stretches of encumbrance free land. The learned Arbitral Tribunal has ignored Clause B2.2.8.2 of specifications of the contract. The learned Arbitral Tribunal relied on terms of the loan agreement entered into between the plaintiff and the Asian Development Bank, while coming to the conclusion that the entire stretch of land should have been handed over to the defendant. The said finding and placing reliance on the agreement between the plaintiff and the Asian Development Bank is beyond the terms of contract.
44. The learned Arbitral Tribunal has carelessly accepted almost all the contentions of the defendant without even considering the contentions of the plaintiff in right perspective.
/24/ Com.A.S.No.138/2019 Hence, the award passed by the learned Arbitral Tribunal is biased.
45. The impugned award passed by learned Arbitral Tribunal is opposed to public policy of India and patently illegal. One of the main contentions of the plaintiff before learned Arbitral Tribunal was that on the commencement date substantial stretches were handed over to the defendant for execution of works and the defendant knowing very well the status of land continued with work on available stretches thereby acquiescing to continue with the work and there it was not open for the defendant to terminate the contract that on the guise that all the stretches were not handed over completely that too without completing the work on available stretches.
46. The learned Arbitral Tribunal has not considered the letters relied on by the plaintiff while passing the impugned award.
47. The learned Arbitral Tribunal has rightly recorded that the defendant commenced the works on the available lands but term the same as having been done in good faith. Though there was no evidence regarding the alleged good faith. However, the learned Arbitral Tribunal has erred held in /25/ Com.A.S.No.138/2019 holding that the above mentioned letters issued by the defendant and the admissions in the first dispute Board Meeting on 27.04.2013 progressive meeting on 15.10.2013 and 3rd DB meeting on 01.03.2014 are part of regular implementation of the contract and cannot be construed as acquiescence.
48. The learned Arbitral Tribunal has failed to appreciate the vital fact that it is the regular correspondence and particularly the letters sent by the defendant, the representation of the parties in the meetings and the conduct of the parties which are the most relevant aspects to establish that a party has acquired with continuation of work. Therefore, the finding of the learned Arbitral Tribunal regarding the acquiescence by defendant is contrary to established principles of law and is liable to be set aside.
49. As per Clause 8.1 and 8.3 of the general conditions of contract it is clear that if the commencement date had not happened the defendant was free to terminate the contract and that only on happening of commencement of date that the defendant was required to furnish the work program under Clause 8.3 of General Conditions of Contract.
/26/ Com.A.S.No.138/2019
50. It is evident from the record that after the commencement date was stipulated as 21.03.2012 the defendant furnished its work program which establishes that the defendant acquiesced in continuation work in the available funds.
51. The learned Arbitral Tribunal ought to have appreciated that even in case of reciprocal promises the above principles of law would be applicable.
52. The learned Arbitral Tribunal has held in holding that the plaintiff has committed breach of its primary obligation of the handing over encumbrance free stretches to the defendant on the date of commencement. A plain reading of Clause 2.1 of General Conditions of Contract along with other clauses of the Contract it becomes clear that not handing over of the entire stretches of the land is not detrimental especially when there are sufficient stretches to carry out works because in the event of delay in handing over the some stretches of land which does not go to the route of substantial consideration. The defendant was bound to continue to perform its part of the contract.
53. In terms of defendant's own admission on 01.03.2014 in 3rd DB meeting there was about 70% of encumbrance free /27/ Com.A.S.No.138/2019 stretches available for the defendant to carry out project work. The defendant has failed to demonstrate its intent and capacity to execute the work even in the available stretches of road. The learned Arbitral Tribunal without application of mind and without even considering the contentions of the plaintiff in this regard has accepted the contention of the defendant and held that the defendant was not able to fulfill its obligations because the entire site was not handed over to the defendant free of encumbrance. It is significant to note that the defendant did not examine any witness to meaning of the term 100% possession of land required for the construction of the project has not been given so far. Remaining portion is around 30% which involves acquisition of land and or removal or shifting of utilities in the meeting of the third dispute board. The learned Arbitral Tribunal ought to have accepted as on 01.03.2014 the date of third DB meeting there was more than 70% encumbrance free stretches available for the defendant to carry out project work.
54. The technical presentation by Mr.Amarnath Jat... and Engineer at SMEC, the contract supervision consultant for the project road demonstrated though the strip chart that sufficient stretches for available for works and that the defendant did not execute the work for no apparent reason. This has not been considered by learned Arbitral Tribunal /28/ Com.A.S.No.138/2019 despite it being a vital document. A reading of Ex.C.19 also establishes that in the year 2013 continues stretches spanning to 5 km were available for the defendant to execute the work. Whereas, as per the work program submitted by the defendant the defendant had plan to execute the works in the stretches of 1 km. There is absolutely no explanation whatsoever on the part of defendant as to why the work was not completed in those stretches. However, the learned Arbitral Tribunal has failed to appreciate the same. The learned Arbitral Tribunal's observation that issuance of notification under Section 19 of Karnataka State Highways Act, 1954 KSH Act is not sufficient for acquiring the lands required for the project is contrary to the provisions of KSH Act and is therefore wholly arbitrary. As per the scheme of KSH Act, the land vest with the plaintiff soon after notification is issued under Section 19 of KSH Act. The learned Arbitral Tribunal has not followed the principles of the citations relied on by the plaintiff. The learned Arbitral Tribunal should have considered the status of acquisition only in terms of provisions of KSH Act and not the National Highway's Act and not to have held that the lands required for the project vested in the State soon after issuance of several notifications under Section 19 of KSH Act viz., Notifications from 06.03.2012 to 23.09.2013. However, the learned Arbitral Tribunal has placed reliance on judgments rendered in respect of acquisitions under National Highways Act and has held that /29/ Com.A.S.No.138/2019 acquisition could not be completed till compensation is paid and possession is taken.
55. The learned Arbitral Tribunal's reliance on the judgments regarding the National Highways Act is wholly misplaced and perverse. The learned Arbitral Tribunal has not considered that there is a separate procedure for taking possession of the notified land under National Highways Act as well as KIAD Act. Based on learned Arbitral Tribunal's mis- interpretation wrong application of law, the award is liable to be set aside.
56. The learned Arbitral Tribunal has failed to appreciate that the termination by the defendant itself being invalid the awarding of monetary claims to the defendant is ex-facie liable to be set aside.
57. The learned Arbitral Tribunal failed to consider all materials placed by the plaintiff and defendant and the contentions raised by the defendant in proper perspective. The learned Arbitral Tribunal awarded the claims of defendant based on document which are self serving and not admissible in evidence. The defendant has not produced any statement of accounts or examined any witness in support of its claim. The defendant has also not produced any documents to /30/ Com.A.S.No.138/2019 substantiate its claim of mobilization sufficient machinery and man. The learned Arbitral Tribunal placed reliance on the copies of alleged monthly progress reports produced by the defendant whereas the plaintiff had denied those documents.
58. The learned Arbitral Tribunal ought to have appreciated that the defendant had not examined any witnesses to prove any of its claims including the claims for various losses such of loss of profits, loss of overheads etc., In the absence of any valid substantial evidence the learned Arbitral Tribunal erred in allowing the claims of the defendant which is supported to the principles of natural justice. The reasoning adopted by the learned Arbitral Tribunal in allowing the claims is contrary to the position of law in this regard.
59. The learned Arbitral Tribunal has passed the impugned award allowing monetary claims even without considering the question of actual deployment of men and machinery and the actual loss suffered by the defendant. The award so far as it grants compensation to the defendant is contrary to Section 28 of Arbitration & Conciliation Act and is also against to the principles of law laid down by the The Hon'ble Supreme Court of India and various High Courts in a catena of judgments. The plaintiff had listed out the breaches committed by the defendant and defendant was guilty of /31/ Com.A.S.No.138/2019 deliberate defaults and reckless misconduct and on the basis of the certain monetary claims was made against the defendant.
60. The learned Arbitral Tribunal has not considered any of the contentions in this regard or the monetary claims and the reasons for which the plaintiff terminated the contract.
61. The learned Arbitral Tribunal held in holding that there is no proof of abandonment of works by the defendant. In fact as per Clause 15.2(b) of GCC , the plaintiff was entitled to terminate the contract if the defendant abundant site or demonstrate the intention not to proceed with the work. The very fact that the defendant ought to terminate the contract on 15.07.2014 even before the termination notice was issued by the plaintiff clearly demonstrates that as on the date of issuance of termination notice by the plaintiff, the defendant had no intention of continuing with the works of the project.
62. The learned Arbitral Tribunal ought to have appreciated that the plaintiff proved that owing to termination of the contract, the plaintiff had to entrust the work to third party agencies and get the work of the project completed and that as per the general conditions of the contract, the /32/ Com.A.S.No.138/2019 defendant was obligated to compensate the plaintiff for the same.
63. The learned Arbitral Tribunal ought to have considered all the contentions raised by the plaintiff regarding the counterclaims and evidence adduced by it and the learned Arbitral Tribunal ought to have allowed the counterclaim of the plaintiff.
64. As per Clause 2.1 r/w Clause 20.1 of GCC, the defendant was entitled for extension of time and payment of cost plus profit which would be included in contract price.
65. In the event there was any delay in handing over sufficient work fronts, the defendant could issue a notice under the said Clause within 28 days from having become aware of the situation or circumstances that would entitled the defendant for any payment. However, no such notice was received from the defendant making it very clear that the intention of the defendant was to abandon the project.
66. The learned Arbitral Tribunal has awarded interest at the rate 15.58% compounded monthly from 16.07.2014 till the date of award i.e, 22.03.2019 without even contract providing /33/ Com.A.S.No.138/2019 for a the same, against the terms of the contract and therefore the award is liable to be set aside.
67. The plaintiff has prayed to call upon respondent No.2 to 4 to furnish details of the arbitral awards passed by them in favor of the defendant and also to explain as to why they did not disclose the same to the plaintiff during the arbitral proceedings. The award reeks of malafides on the part of respondent No.2 to 4 in as much as they have acted in partisan manner to help the defendant and have not acted fairly. For this reason also the award is liable to be set aside. For the foregoing reasons the award is liable to be set aside and the Court may be pleased to grant such other reliefs as are deemed necessary in the circumstances of the case.
68. After the service of notice, the claimant appeared before the Court and has filed its statement of objections to suit filed by the respondent.
69. The claimant has stated that the suit filed by the plaintiff is neither maintainable on question of law or on question of facts and there is no legal relationship by virtue of entering into any contract between the State of Karnataka and the claimant.
/34/ Com.A.S.No.138/2019
70. The claimant has stated that there is neither any contract agreement entered into between the Government of Karnataka represented by its Project Director of Karnataka State Highway's Improvement Project and the claimant or there exist any award which is passed by learned Arbitral Tribunal in a matter between Government of Karnataka and the defendant.
71. The claimant has stated that there is a contract agreement entered into between the project Director of the Karnataka State Highways Improvement Project and the claimant in respect of which certain dispute arose. In consequence of which an Arbitral Tribunal was formed which passed its award dated 10.06.2019. The very cause title shown by the plaintiff is made purposefully varied from that of the cause title shown in award in question for the reasons best known to the plaintiff. The cause title in the award placed before the Hon'ble Court as document No.1 by the plaintiff and the cause title in the plaint of the presence suit are different and hence, the suit is not maintainable. That the plaintiff if really to be the Government of Karnataka it should have been represented by Government advocates and not by a private advocate unless special provision or order is made to that effect by a proper legal courts. In the case on hand the /35/ Com.A.S.No.138/2019 vakalath is filed by the private advocate firm on behalf of the plaintiff without any such notification issued in terms of law enabling them to appear before the Hon'ble Court or to file this appeal for the Government of Karnataka. The Karnataka State Highway Improvement Project KSHIP is only an initiative and instrumentality of the Government but not a department of the government by itself. In fact it is an autonomous body.
72. The claimant has stated that the averments made in para 1 to 6 are all mater of facts need not be traversed. The plaintiff stating to the effect that the Government of Karnataka had applied for a secured loan from Asian Development Bank through the Central Government of India for Karnataka State Highways may be true but it is not true that the Government of Karnataka itself stood as employer and called for bids through international competitive bidding for the up gradation of the State Highways for certain packages on 08.01.2011. In order to ease for the leading bank to have control over the project a separate entity was established known to be Karnataka State Highways Improvement Project in short known as KSHIP.
73. The suit is also bad and barred in law as there is no valid legal issued raised by the plaintiff challenging the award under Section 34 of Arbitration & Conciliation Act.
/36/ Com.A.S.No.138/2019
74. The claimant has denied the averments made by the plaintiff except those expressly admitted by it.
75. The averments made at para 19 of the plaint stating to the effect that award is only one sided in favor of the defendant wholly arbitrary perverse capricious illegal and contrary to the terms of the contract between the parties is absolutely false and statement made by the plaintiff since out of frustrations and disappointment as the arbitral tribunal fairly thrown the light on the truth and passed a justifiable award.
76. The averments made by the plaintiff that the learned Arbitral Tribunal failed to appreciate the facts of the case in entirety in entirety and adopted the myopic and biased approach and erroneously accepted the defendant's case in its entirety is false. The learned Arbitral Tribunal has awarded only part of the claim made by the claimant which can be seen in the award itself. The learned Arbitral Tribunal has rejected the claim made by the claimant at Col.No.4 and 5 and claims under many other heads are partly allowed.
77. A mere allegation with high words does not prove the contention of the plaintiff. The plaintiff is contending that the learned Arbitral Tribunal has given a finding on Issue No.3 /37/ Com.A.S.No.138/2019 holding that the defendant was not obligated to perform works in stretches less than 10 kms is not based on contractual clause and on the contrary in Clause B.2.2.8.2 of the specifications at page 16 Vol.2 of the contract document gives a clear indication that ordinarily the defendant had to work in stretches on 500 meters that too on one side of the road is not only false but a statement made purposefully to mislead the justice as this is a highly technical issue well known to the Engineers with professional skill. Understanding of the said clause by the plaintiff is totally wrong and it is totally misplaced and amounts to misinterpretation of the said clause which relates only to method of working on the project road with ongoing traffic. The methodology is limited to explaining how road improvement work has to be carried out on a live road without hindering the ongoing traffic and it has do nothing to the with the handing over of requisite length of road by the plaintiff to the defendant. The learned Arbitral Tribunal has rightly observed that having mandatory taking over stretches of 10 kms the corollary would be naturally apply whereby plaintiff too had to make available similar stretches of 10 km lengths to the claimant which was not done. The finding of learned Arbitral Tribunal has no question of law and it is only finding of question of fact and hence such ground raised by the plaintiff holds no water for challenging the award under Section 34 of Act.
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78. The contention of the plaintiff that the learned Arbitral Tribunal has not explained as to what it means by bits and pieces continues stretches of encumbrance free land is an allegation made against an authority asking to explain the very common technical word to the plaintiff which is an organization having well versed experts in Civil Engineering. The findings of the learned Arbitral Tribunal are again findings of the fact and do not attract intervention by the Hon'ble Court under Section 34 of Act.
79. The contention of the plaintiff to the effect that by going through the work program admitted by the defendant as per Ex.C.8 the defendant has specified that it would work in lengths of 1 km and this establishes to the effect that the defendant himself was agreeable to work in stretches of 1 km is false. No way the defendant agreed to work in stretches of 1 km or much less than that and the program is nothing to do with the contentions raised by the plaintiff.
80. The averments made at para 26 of the plaint stating that both the parties agreed that the defendant had to improve the existing load in terms of the contract document and the plaintiff has to hand over certain chainages as shown Section 1 and Section 2 on the commencement date is false. Handing over of chainages of existing road does not mean that /39/ Com.A.S.No.138/2019 the plaintiff has handed over the said chainages along with the additional width of land required for augmentation by providing right of way to the defendant. No doubt in the event there being any delay in handing over the land with right of way the defendant was entitled for extension of time but itself is not the entire spirit of the contract agreement in question.
81. The contention of the plaintiff to the effect that it is failed to appreciate that it is admitted case of the defendant and as well as the plaintiff that though the entire land was not handed over on the commencement date the plaintiff handed over sufficient stretches of land to the defendant on the commencement date and the defendant executed some work for a period of 2 years and by mid 2014 the defendant refused to continue with the works and terminated the contract and hence the finding of learned Arbitral Tribunal regarding breach of Clause 2.1 is contrary to the contractual stipulations as well as the facts which have transferred in the matter is denied as false.
82. The plaintiff cannot take the co-operation tried to be extended by the defendant to save the interest of the project into advantage and contend that the terms and conditions stipulated in the contract agreement is only for name sake and not to be followed in realities. The further contention of the /40/ Com.A.S.No.138/2019 plaintiff stating that time is not the essence of the contract as there is a provision for extension of time holds no water as by grant of extension of time is only the time period is extended and such extended period also becomes the essence of the contract agreement in question.
83. The contention of the plaintiff that learned Arbitral Tribunal ought not to have relied on the terms of the loan agreement entered into between the plaintiff and the Asian Development Bank while coming to the conclusion that the entire stretches of land should have been handed over to the defendant for the reason that the defendant is not a party to the said loan agreement is denied as false. By terms and conditions of the contract agreement in question it is evident that by virtue of loan agreement between the plaintiff and the funding bank the accounts of the defendant is subjected to scrutiny by funding bank and authorities and to that effect there are various documents which have been entered into between the parties herein. The plaintiff is trying to canvass its contention that the breach of contract by it with the funding bank in regard to the undertaking by it to the effect that the entire land required for the project will be acquired first and then only an agreement of contract should be made with the contractor by providing the right of way of the stretches has no bearing on the promise made to the contractor by virtue of /41/ Com.A.S.No.138/2019 the terms and conditions of the contract entered into with the contractor and such contention holds no water.
84. The contention of the plaintiff that the learned Arbitral Tribunal has carelessly accepted almost all contentions of the defendant without even considering the contentions of the plaintiff in right perspective and the manner in which the learned Arbitral Tribunal has dealt with the contentions of the plaintiff demonstrates that the learned Arbitral Tribunal took up on itself the role of defending the defendant's claims instead of evaluating the same is totally false and the words and sentences used is not in a way it should be in law of pleading. The allegations against learned Arbitral Tribunal seems made without even considering or understanding that the words used while making such allegations are made against the Hon'ble learned Arbitral Tribunal which is held to be Court in the eyes of law. Such allegations do not constitute a ground to challenge the award in question under Section 34 of the Act.
85. The averments made by the plaintiff under the head conflict with public policy of India and patent illegality by stating that on the commencement date substantial stretches were handed over to the defendant for execution of works and the defendant knowing very well the status of land continued /42/ Com.A.S.No.138/2019 with work on the available stretches and thereby acquiescing to continue with the work and hence it was not open for the defendant to terminate the contract on the guise that all the stretches were not handed over completely that too without completing the work on available stretches is denied as false and such contentions holds no water.
86. The contention of the plaintiff that the learned Arbitral Tribunal has even erred in holding that certain letters issued by the defendant and the admissions in certain meetings are a part of regular implementation of the contract and cannot be construed as acquiescence and denied as false.
87. The further contention of the plaintiff that the learned Arbitral Tribunal failed to appreciate the vital fact that it is regular correspondence and particularly the letter sent by defendant and the representations of the parties in the meeting and the conduct of the parties which are most relevant aspects to establish that the party has acquiesced with a continuation of a work and hence the finding of learned Arbitral Tribunal regarding acquiescence by the defendant is contrary to established principles of law is denied as false.
88. The averments are argumentative in nature and cannot be construed as pleading. The contention so raised by /43/ Com.A.S.No.138/2019 the plaintiff is without looking into the conduct of the defendant who by virtue of 53 letters right from the date of agreement till the date of termination of the contract herein every letter the defendant has expressed his contentions, intentions demands and requests seeking the plaintiff to comply with the terms and conditions of the contract. The plaintiff is trying to take a shelter under acquiescence without there being any basis for it or for any supplementary agreements executed between the parties. In a way the plaintiff is trying to set aside the entire contract agreement and contend that the contractor should continue to work whether or not the plaintiff complies with its obligations under the contract and if such contention is taken into account and the same will be against the principles of law and natural justice.
89. The averments made by the plaintiff to the effect that as per Clause 8.1 and 8.3 of the GCC it is clear that if the commencement date had not happened the defendant was free to terminate the contract and that only on happening of the commencement date that the defendant was required to furnish the work program under Clause 8.3 of GCC is again a pleading in the form of written arguments and such contention is also false.
/44/ Com.A.S.No.138/2019
90. The commencement date is fixed unilaterally by the plaintiff and suppressing the materials facts with the contract at in regard to the status of the land acquired by it and such suppression amounted to fraud played on the contractor who by that time had invested several crores of rupees and was not in a position either to go ahead with the project or to resend with it. It is made clear that it is on the promises the contract and the status of the plaintiff as model employer which made the contractor to extend its cooperation by commencing the work under protest and demands with the plaintiff to comply with the terms and conditions of the contract.
91. The pleadings are suppressive in nature and the plaintiff has not approached the Hon'ble Court with clean hands. No question of law is involved in this regard and the learned Arbitral Tribunal has expressed its reasons and decided that the contentions taken by the Plaintiff under the shelter "Acquiescence" holds no water.
92. The averments made at II (a)(v) is totally argumentative in nature and thus requires no traversing and hence not traversed.
93. The averments made at II(b)(i) stating to the effect that the Arbitral Tribunal has erred in holding that the plaintiff /45/ Com.A.S.No.138/2019 had committed breach of its primary obligation of handing over encumbrance free stretches to the defendant on the date of commencement is denied as false. The further averment stating to the effect that a plain reading of Cl.2.1 of GCC along with other clauses of the Contract, not handing over entire stretch as epr the terms and conditions of the Contract is not detrimental especially when there are sufficient stretches to carryout works because in the event of delay in handing over some of stretches of land 'which does not go to the root of substantial consideration', the defendant was bound to continue to perform its part of the Contract is denied as totally false. If such contention of the plaintiff is to be taken for discussion, it would mean that the terms and conditions stipulated in the contract agreement making it obligatory on the part of the plaintiff will be only for name sake and all the clauses making the defendant to perform its obligation as compulsory. Such contentions are not fit even for discussion.
94. The further contention made by the plaintiff regarding the defendant's admissions on availability of 70% of encumbrance free stretches in the 3rd DB meeting held on 01.03.2014 is denied as false. The further averments stating that learned Arbitral Tribunal ought to have appreciated that the defendant did not examine any witnesses to prove the meaning of the term 100% possession of land required for /46/ Com.A.S.No.138/2019 construction has not given so far. Remaining portion is around 30% which involves acquisition of land and removal or shifting of utilities and therefore learned Arbitral Tribunal ought to have accepted that as on 01.03.2014 the available stretches was more than 70% is denied as false.
95. It is submitted that whether there is admission or denial by defendant does not alter the facts of availability of encumbrance free stretches of land. The records made available by plaintiff before learned Arbitral Tribunal made very clear about the status of the land held by the plaintiff and handed over to the defendant on various dates.
96. The contentions of the plaintiff to the effect that it is apparent from the other documents on record that the plaintiff and the engineer took initiation to clear the hindrances and encumbrances on the site and that over a period of time substantial extent of required site was free from encumbrances and hindrances. But however, the learned Arbitral Tribunal failed to appreciate this vital fact and in a myopic manner struck to its view point that the entire site was not handed over to the defendant is denied as false.
97. The very averments is an admission by the plaintiff to the effect that as on the date of alleged commencement date /47/ Com.A.S.No.138/2019 it had not comply with the terms and conditions of the contract and provided that the right of way of the stretches to the defendant. The further contention of the plaintiff that one Mr.Amarnath Jha an engineer demonstrated through the strip chart that sufficient stretches were available for works is another admission by the plaintiff that it had not provided the stretches as per the terms and conditions of the contract but compelling the defendant to agree to work in available stretches. It is submitted that there is no supplementary agreement making the defendant to carryout work in the available stretches at the whims and fancies of the plaintiff.
98. The further contention of the plaintiff to the effect that a reading of Ex.C.19 also establishes that in the year 2013 continuous stretches spanning to 5 kms were available for the defendant to execute the work. But the defendant gave a program of work only for 1 km and learned Arbitral Tribunal ought to have considered this fact and should have decided that termination of the contract by defendant is a breach of contract is denied a false and such contentions of the plaintiff does not hold any water. The contention of the plaintiff that the learned Arbitral Tribunal's observation that the issuance of notification Under section 19 of KSHIP Act is not sufficient for acquiring the land acquired for the project is contrary to the provisions of SKSRIP Act and as per KSHIP Act the land vest /48/ Com.A.S.No.138/2019 with the plaintiff as soon as a notification is issued is a contention not acceptable in the eye of law. The judgments referred to by the plaintiff before the learned Arbitral Tribunal had no relevance for the case on hand. The further averment stating to the effect that the principles laid down in National Highways Act and Karnataka Industrial Area Development Act ought not to have been considered by the learned Arbitral Tribunal as they substantially differs from KSHIP Act is not a contention acceptable. If it is accepted that a mere notification gives possession of the land to the plaintiff the same cannot be handed over to the defendant without clearance of encumbrances, hindrances and encroachments. There is much difference between the realities and deemed provisions of the taking possession of a land and therefore the contentions raised by the plaintiff in this regard does not hold any water. The contention of the plaintiff to the effect that the finding of the learned Arbitral Tribunal upholding the termination of the contract by the defendant as valid and awarding monetary claims is ex-facie liable to be set aside is denied as false. The learned Arbitral Tribunal has rightly upheld the contention of the defendant and awarded in terms of law. No documents produced by the defendants were contended to be inadmissible by the plaintiff before the learned Arbitral Tribunal. There was no need to lead evidence of any witness to prove the statement of accounts as the statement of accounts /49/ Com.A.S.No.138/2019 were made in terms of law and the claims have made on the said statement of accounts accepted under law. The other contentions made by the plaintiff are argumentative in nature and which is vague and not acceptable in law.
99. The contention of the plaintiff to the effect that the plaintiff had contended breach of contract by the defendant under various heads on the basis of which it has argued that the defendant was guilty of deliberate defaults and reckless misconduct and on the basis of the same the plaintiff has made some claims but the learned Arbitral Tribunal has not considered the same is denied as false.
100. The learned Arbitral Tribunal has not found any basis in the contentions so rose by the plaintiff and thus rightfully and lawfully rejected the claims made by the plaintiff against the defendant. The further contention to the effect that the defendant issued its intention to terminate the contract and even confirmed the termination well before termination of the contract demonstrates that the defendant had no intention of continuing the project is partly true. All the efforts made by the defendant to convince the plaintiff to act in terms of contract went in vain and therefore the defendant decided to terminate the contract such decision of the defendant is the right given to him under the terms and /50/ Com.A.S.No.138/2019 conditions of the contract and should not be construed as the defendant abandoned the site.
101. The further contention of the plaintiff to the effect that in the event there was any delay in handing over sufficient work fronts, the defendant could issue a notice and Clause 2.1 read with Clause 20.1 of GCC within 28 days from having become aware of any situation or circumstances that would entitle the defendant for any payment and in case on hand no such notice was received from the defendant making it very clear that the intention of the defendant was to abandon the project is to denied as false. The various circumstances several notices as nearly as 53 and details of such letters are available on record.
102. The further contention of the plaintiff to the effect that the learned Arbitral Tribunal has awarded 15.58% interest compounded monthly from 16.7.2014 till date of award i.e, 22.03.2019 without even the contract providing for it and hence the same is against the terms of the contract is denied totally false.
103. The learned Arbitral Tribunal has observed that as per Clause 14.8 as amended in part B specific provisions of the Contract Agreement, any delayed payment to the contract /51/ Com.A.S.No.138/2019 entitles him to receive financing charges compounded monthly on the amount unpaid during the period of delay which are to be calculated at 1% over the prime lending rate fixed by the State Bank of India. The learned Arbitral Tribunal further found that the same works out to 15.58% the details of the reasons for which the Hon'ble learned Arbitral Tribunal granted such financing charges are available in the award itself.
104. The plaintiff's further contention to the effect that the respondent No.2 to 4 may be called upon by the Hon'ble Court and direct them to furnish the details of the arbitral awards passed by them in favor of the defendant and also to explain as to why they did not disclose the same to the plaintiff during the arbitral proceedings is again a false statement made only to see that the award in question is challenged under Section 34 of the Act and do not deserve to be traverse. The further averments stating that the awards reeks of malafides on the part of respondent No.2 to 4 in as much as they have acted in partisan manner to help the defendant and have not acted fairly is also a false statement made by plaintiff out of disappointment and frustration due to its failure to prove its case before the Hon'ble learned Arbitral Tribunal in terms of law. The claimant has prayed the Court to dismiss the suit with exemplary cost.
/52/ Com.A.S.No.138/2019
105. In this case the Learned Counsel for the Plaintiff/Respondent has furnished the copies of Arbitral Record and the Learned Counsel for the Defendant No.1/Claimant has furnished copy of Ex.C46. The learned Counsel on record have submitted that in view of submission of copies of arbitral proceedings there is no necessity to call for records from the Learned Arbitral Tribunal.
106. I have gone through the materials available on record. The Learned Counsel for the plaintiff and defendant have relied on precedents as listed below.
107. I have gone through the decisions and provisions of Law cited by them and applied the law as applicable to facts of the case.
108. The Learned Counsel for the Plaintiff has relied on the following Citations and extracts of Commentaries in support of his case:
Sl.No. Particulars
1. Union Of India Vs.Murugesan
2021 SCC Online 895
2. Dyna Technologies Private Limited
Vs.Crompton Greaves Limited
2019 (20) SCC 01
/53/
Com.A.S.No.138/2019
3. Extract of Pollock and Mulla - The Indian Contract and Specific Relief Acts
4. Baun Foundation Trust and another Vs. Faredoon Rustom Tirandaz and another
5. Extract of Section 73 of the Indian Contracts Act, 1872
6. Kanchan Udyog Limited Vs. United Spirits Limited (2017) 8 SCC 237
7. Ishwar Dass Jain (Dead) thr.LRs. Vs. Sohan Lal (Dead by LRs AIR 2000 SC 426
8. Central Bureau of Investigation Vs.V.C.Shukla (1998) 3 SCC 410
9. Extract of Section 34 of Indian Evidence Act, 1872
10. Delhi Development Authority Vs. Sunder Lal Khatri (2009) ILR 3 Delhi 648
11. Avi Coach Builders and Others Vs.Union of India MANU/DE/0123/2009= 2009(1)ARBLR8254(Delhi)
12. Associate Builders Vs.Delhi Development Authority (2015) 3 SCC 49
13. Ssangyong Engineering and Construction Company Limited Vs.National Highway Authority of India (NHAI) (2019) 15 SCC 131
14. M/s.Hind Construction Contractors Vs.State of Maharastra /54/ Com.A.S.No.138/2019 (1979) 2 SCC 70
15. Union of India Vs.S.Kesar Singh - AIR 1978 J & K 102
16. Burn and Co., Ltd., Vs.Thakur Sahib Sree Lukhdirji of Morvi State
17. Bhanumati Jaisukhbhai Bhuta Vs.Ivory Properties & Hotels Private Limited and another [(2020) SCC Online Bom 960]
18. The Board of Trustees of Port of Mumbai Vs. Afcons Infrastructure Limited [(2013) SCC Online Bom 960]
19. Vidhyadhar Vs. Manikrao and others [MANU/SC/0172/1999]
20. Edifice Developers and Project Engineers Ltd., Vs. M/s Essar Projects (India) Ltd., [2013 SCC OnLine Bom 5]
21. Essar Procurement Services Ltd., Vs. Paramount Constructions [MANU/MH/2511/2016]
22. Competent Authority Vs. Bagrangore Jute Factory (2005) 13 SCC 477
23. Sannaragappa Vs.State of Karnataka and others AIR 2013 KAR 112
24. Sannaragappa Vs.State of Karnataka and Others (2017) 12 SCC 797
25. Sulochana Chandrakant Vs.Pune Municipal Transport and Others
26. RSIDIC and anothr Vs. Diamond and /55/ Com.A.S.No.138/2019 Gem Development Corporation and another (2013) 5 SCC 470
109. The Learned Counsel for the Claimant/defendant has relied on the following citations in support of his case:
1. A.T.Brij Paul Singh & Ohters Vs. State of Gujarat AIR 1984 SC 1703
2. Delhi Development Authority Vs. S.S.Jetley 2001 (1) ARBLR 289 Delhi
3. State of Kerala Vs. K.Bhaskaran AIR 1985 KER 49
4. NHAI Vs. HCC Ltd., OMP No.633/2012 Delhi High Court Indian Kanoon Dco-142262332
5. McDemott International Inc Vs. Burn Standard Co., Ltd., SC {Appeal(Civil)4492 of 1998 dt:12.05.2006}.
6. Simplex Concrete Piles India Ltd., Vs.Union of India ILR (2010) 2 Del 699
7. Union of India Vs. Raj Constructions Co., Ltd.,(MANU/DE/2058/2009)
8. Anurodh Constructions Vs. DDA LAWS DLH 2005 8-64 /56/ Com.A.S.No.138/2019
110. The following points arise for my determination:
1) Whether the Plaintiffs/respondents prove that the impugned award dated: 04.04.2019 and 10.06.2019 passed by the Learned Arbitral Tribunal in Arbitral Tribunal in Arbitration Case between the Claimant and the Respondent is opposed to the principles enunciated under Section 34 of Arbitration & Conciliation Act, 1996 and renders itself liable to be set aside?
2) What Order?
111. My findings on the above points are as follows:-
Point No. 1 : - In the NEGATIVE Point No. 3 : - As per final orders for the following REASONS
112. Point No.1 & 2 : The Plaintiff has filed this suit under section 34 of Arbitration & Conciliation Act, 1996 praying the Court to set aside the arbitral Award passed by the learned Arbitral Tribunal on 04.04.2019 and 10.06.2019 in arbitral proceedings conducted between the Claimant and the Respondent.
113. In order to determine the suit it is useful to refer to Section 34 of Arbitration and Conciliation Act, 1996 which reads as under:
/57/ Com.A.S.No.138/2019 ARBITRATION AND CONCILIATION ACT, 1996 [Section : 34] Application for setting aside arbitral award (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if- (a) the party making the application establishes on the basis of record of the Arbitral tribunal that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral /58/ Com.A.S.No.138/2019 Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
[Explanation 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
/59/ Com.A.S.No.138/2019 (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33 , from the date on which that request had been disposed of by the arbitral Tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral Tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub- section (5) is served upon the other party.
114. The Respondent has invoked Section 34 of Arbitration & Conciliation Act, 1996 challenging the impugned /60/ Com.A.S.No.138/2019 Award passed by the learned Arbitral Tribunal. In such circumstances, it is necessary to discuss the facts of the in the light of the ratio of the following decision of Hon'ble Supreme Court of India reported in 2021 SCC OnLine SC 1027 STATE OF CHHATTISGARH Vs. M/S. Sal Udyog Private Limited LAWS(SC) 2021 11 2 SUPREME COURT OF INDIA
14. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) [2019] 15 SCC 131, speaking for the Bench, Justice R.F. Nariman has spelt out the contours of the limited scope of judicial interference in reviewing the Arbitral Awards under the 1996 Act and observed thus :
"34. What is clear, therefore, is that the expression "public policy of India ", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law " as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar "
understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate /61/ Com.A.S.No.138/2019 Builders [Associate Builders v. DDA,(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be under- stood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], as it is only such Arbitral Awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 /62/ Com.A.S.No.138/2019 to 39 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as understood in Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be per- mitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v DDA(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available /63/ Com.A.S.No.138/2019 to set aside an Arbitral Award. Para 42.2 of Asso- ciate Builders [Associate Builders v DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204], while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award.
Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on /64/ Com.A.S.No.138/2019 documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterized as perverse. "
(emphasis added)
115. Hence, it is clear from the ratio of above decision that this Court while exercising jurisdiction under section 34 of Arbitration & Conciliation Act, 1996 shall not adopt the approach of an Appellate Court and shall not substitute its view to the view of the learned Arbitrator and shall examine the impugned Award within the parameters of Section 34 of the Act. It is settled law that the Court while dealing with an application under Section 34 of Arbitration & Conciliation Act, 1996 is required to exercise its jurisdiction within the frame work of Section 34 and Section 34 (2A) of the Act. The plaintiff has to establish that the impugned order is against to the fundamental law of India and must be patently illegal.
116. Keeping in mind the ratio of decisions cited above the facts of the present case are discussed.
117. The claimant has raised an objection that the present suit is filed in the name of the Government of Karnataka, Karnataka State Highways Improvement Project- KSHIP. Where as in the proceedings before the Arbitral Tribunal /65/ Com.A.S.No.138/2019 the respondent was named as Karnataka State Highways Improvement Project-KSHIP, an initiative of Government of Karnataka. Therefore, the Constitution of the suit itself is not proper.
118. To this objection the respondent has stated that the Government of Karnataka State Highways Improvement Project-KSHIP represented by its Project Director has filed the present suit. The KSHIP is a unit of Public Works Department of the Government of Karnataka and the various correspondence available on record shows that KSHIP is part of PWD Department, Karnataka, moreover the agreement between the claimant and the respondent dated 27.12.2011 was executed between the parties. Wherein the project Director of KSHIP represented the State of Karnataka on behalf of the Governor under Article 299 of the Constitution of India.
119. All contracts made in the exercise of Executive Power of Union or a State. Therefore, the contract was entered into on behalf of and in the name of Governor of Karnataka. In such circumstances filing of suit in the name of Government of Karnataka is not fatal to the case of the plaintiff.
120. There is no dispute regarding the contractual relation between the claimant and the respondent. The /66/ Com.A.S.No.138/2019 parties to the Contract are bound by the terms and conditions stipulated in the contract. The dispute between the parties is that who has breached the terms of contract and who is liable to compensate the other party. The contentions of the Claimant and the Respondent are summarized for the purpose of brevity.
The Claimant is contending that
1) the Respondent has failed to handover Right of way free of encumbrance in time as per Clause 2.1 Part A-Contract Data;
2) the Respondent has failed to comply with Cl.8.(b) of GCC;
3) the Respondent failed to grant extension of time as prayed by the Claimant as per Cl.8.4 r.w.Cl.4.12. The Respondent has failed to grant extension of time despite the request made for the same by the claimant on tenable grounds;
4) the respondent has violated Cl.10.2;
5) there was delay in grant of permits, licenses or approvals by the statutory authorities of the State Cl. 8.5.
6) the Respondent knowing well that it had no required land in its possession, directed the Claimant to submit Work programs returning the same for submitting fresh programs;
7) the respondent wrongly dealt with routine maintenance work;
/67/ Com.A.S.No.138/2019
8) the respondent invoked Bank Guarantee and the claimant was forced to move the Courts of law to restrain the respondent from invoking the Bank Guarantee;
9) the Claimant is entitled for a total compensation of ₹.69,53,90,052/- and interest thereon @ 18% p.a. by the Respondent from the date of amount withheld/loss sustained by it.
121. The summary of the defence and contentions of the Respondent is as under:
1) failure to adhere to stipulated time lines;
2) non mobilization of resources within mobilization period;
3) non-compliance of conditions under Sl.No:1 to 8 of technical specifications (Contract Agreement-Vol.2) within 3 months from the date of Contract;
4) failure to seek approvals, permissions and licenses;
5) failure to adhere to routine maintenance of Section-I and Section-II as per GCC Cl.4.25;
6) failure to maintain the project road in a motorable traffic worthy condition;
7) delay in execution of the work pertaining to all activities including mobilization and insufficient man power at the site in spite of there being availability of hindrance and encumbrance free site to an extent of 80%;
/68/ Com.A.S.No.138/2019
8) failure to deploy adequate manpower and resources;
9) delay in construction of bridges and cross drainage work;
10) failure to adhere to traffic management, safety and environmental requirements;
11) there was availability of hindrance free land at any given time but the Claimant failed to work knowing well that as per Cl.B 2.2.8.2 of Technical specifications, it had to work in lengths not more than of 500 mtrs.;
12) the claimant is liable to pay a total compensation of ₹.306.18 crores and interest thereon @ 18% p.a. to the Respondent from the date of filing of Counter Claims.
122. ISSUE No.1: Whether the termination of the Contract made by the Claimant is contractually valid?
a) The learned Arbitral Tribunal has analyzed GCC Clause 2.1 and Sub-Clause 8.3 it has examined that the employer shall give the contractor right of access to and possession of all parts of the site within the time stated in the contract data. The right and possession may not be exclusive to the contractor. If under contract the employer is required to give to the contractor possession of any foundation, structure, plant or means of access the employer shall do in the time and manner stated in the specifications. However, the employer may withhold any such right or possession until the /69/ Com.A.S.No.138/2019 performance security has been received. If no such time is stated in the contract data the employer shall give the contractor right of access to and possession of the site within such times as required enabling the contractor to proceed without disruption in accordance with the program submitted under Sub-Clause 8.3. If the contractor suffers delay or incurs costs as a result of a failure by the employer to give any such right or possession within such time the contractor shall give notice to the Engineer and shall be entitled subject to sub- clause 20.1 to an extension of time for any such delay if completion is are will be delayed under Sub-Clause 8.4., payment of any such cost plus profit which shall be included in the contract price. After receiving the notice, the engineer shall proceed in accordance with sub-Clause 3.5 to agree or determined these matters. However, if and to the extent the employers failure was caused by the any error or delay by the contractor including an error in or delay in the submission of any of the contractors documents. The contractors shall not be entitled to such extension of time, cost or profit. The learned Arbitral Tribunal after examining the relevant clauses and the facts of the case has come to the conclusion that it is contractually explicit that the respondent should committed to give encumbrance free possession of certain portion of land to the contractor on the commencement date and the remaining land within 6 months thereof. The respondent if failed to /70/ Com.A.S.No.138/2019 provide timely access to encumbrance free stretches as per Clause 2.1 of GCC or contract data it amounts to breach of his promise given in the Pre-bid meeting as well as the provisions of contract clause 2.1. The learned Arbitral Tribunal has rejected the contention of the respondent that it had possession of sufficient work fronts in various chainages where the contractor could have done the work but they records show that the contractor right from the commencement of work opposed to carryout work in such bits and pieces for want of continuous stretches of encumbrance free lands in terms of the contract. Therefore, the learned Arbitral Tribunal rejected the contention of the respondent. The learned Arbitral Tribunal has scrutinized Clause 8.1 of GCC and various other clauses like Sub-Claus 2.4, employer financial arrangement clause 1.3 compliance with law, advance payment under sub- clause 14.2 and sub-Clause 16.2 regarding the termination by contractor. The contractor shall commence the execution of the works as soon as it is reasonably practicable after the commencement date and shall then proceed with the work with the due expedition and without delay. In this case the claimant is contending that the executive engineer KSHIP Division without recording the agreement of both the parties unilaterally and arbitrarily fixed the date of commencement as 21st March 2012. Therefore it is erroneous as there was no compliance by the respondent to all the sub-Clauses of GCC /71/ Com.A.S.No.138/2019 Clause 8.1. The claimant has opposed the fixing of commencement as 21st March 2012 as soon as it was learnt that the respondent was not in possession of the required land and that the land acquisition was still ongoing. The claimant has requested the engineer to re-fix the commencement date by writing a letter dated 17th September 2012. On 18.03.2013 also the claimant requested the resident Engineer to furnish the documents regarding the possession of lands. The engineer did not rectify the date of commencement. The learned Arbitral Tribunal has observed that the respondent has not produced any document in reply to the letters of the claimant. The engineer on 14th April 2014 replied to the claimant in respect of the demand for the documents made by the contractor. The learned Arbitral Tribunal has observed that the reply of engineer makes it clear that even as on 14.04.2014 the respondent had not provided any documents to the claimant in support of its possession of site. Thus, the learned Arbitral Tribunal has come to the conclusion that the claimant was kept in dark about the very possession of site by the respondent. After verifying the correspondence between the claimant and respondent and the engineer the learned Arbitral Tribunal has come to the conclusion that the respondent was well aware of the fact that it had not acquired the land and hence was not in a position to hand over the encumbrance free structure to the claimant as required by /72/ Com.A.S.No.138/2019 GCC Clause 2.1 to enable the claimant to plan and execute the work. The claimant commenced the work in good faith believing that the respondent had acquired the land and was in a position of handing over the Encumbrance free structures in terms of GCC Clause 2.1 of the contract. The learned Arbitral Tribunal considered the implications of non-compliance of providing Encumbrance free structures land and dealt in detail with respect to technical specifications. The learned Arbitral Tribunal has referred to the cross-examination of RW.1 and noted minutes of DB meetings held on 27.01.2013, 21.09.2013, 01.03.2014 that hindrances were existing and were yet in the process of being removed. The details of hindrances recorded during the joint verification conducted by the representative of the contractors and resident Engineer SLEC in link 42A and Line 42B on 28.06.2013 and 29.06.2013 respectively. Ex.C19 dated 09.10.2013 shows in script chart the existence of hindrances as recorded in the joint survey. The learned Arbitral Tribunal has come to the conclusion that the claimant had been continuously requesting for hindrance free structures right from the beginning of the contract till 25.04.2014. The learned Arbitral Tribunal has also considered the matter of submission of program contemplated in the contract agreement GCC Clause 8.3 r/w specific provisions. The claimant has duly informed the respondent regarding the commencement of preliminary survey with a request for joint /73/ Com.A.S.No.138/2019 inspection to carry original ground levels. Errors were found in OGNS rendering progress made from February to April 2012 went in vain for no fault of the claimant. The critical factor was not resolved for a long time in spite of repeated request by the claimant. The learned Arbitral Tribunal has considered variations in temporary bench marks and OGL which was noticed during preliminary survey. The learned Arbitral Tribunal has also taken into consideration that there were delays in granting statutory permissions by various authorities like Deputy Commissioner Karnataka State Pollution Control Board, Karnataka State Mines & Geology Department for stone quarry establishing operating stone crushers and hot mix plants in spite of repeated request by the claimant. The claimant without being its rights under the contract appears to have done all it could do to continue and complete the work by giving cooperation to the respondent. On a detail analysis of the materials available on record, the learned Arbitral Tribunal has come to the conclusion that the it is unfair to the claimant to hold acquiescence to what was otherwise normal correspondence. The Plaintiff/ respondent canvassed that in view of Section 39 of Contract Act and upon the ratio of the precedents relied on by him, the finding of the learned Arbitral Tribunal that 'acquiescence' cannot be attributed to the Contractor has to be set aside. As observed above, this Court while functioning under section 34 of the Act is not exercising /74/ Com.A.S.No.138/2019 powers of an Appellate Court. The learned Arbitral Tribunal has come to the said conclusion based on factual matrix of the case and the said finding is not patently illegal. The view taken by the Arbitral Tribunal to interpret clauses of Contract and application of law cannot be substituted by this Court merely because there is a possibility of another view of the matter. The learned Arbitral Tribunal has considered the citations and other material relied upon by the respondent and has come to the conclusion that the respondent has not disclosed at any time this specific possession of land acquired by it and which was free of hindrances. From the very commencement till the termination date the claimant persistently requested the respondent to handover the hindrance free structures in adequate lengths. The learned Arbitral Tribunal after going through the judicial precedents has come to the conclusion that a mere publication to acquire land is not sufficient and there should be actual possession of hindrances free lands so as to enable the contractor to carry out the project. The validity of termination of contract by the contractor was examined in the backdrop of Clause 16.2 GCC. The learned Arbitral Tribunal has come to the conclusion the respondent has breached the provisions of the contract and has observed that the records show that the payment under IPC for May 2015 though certified was not made to the claimant even beyond 42 days and thus the respondent /75/ Com.A.S.No.138/2019 breached the contract. The claimant issued notice of the intention to terminate the contract under Clause 16.2 on 02.07.2014 and confirmed the termination of the contract on 16.07.2014. The learned Arbitral Tribunal has come to the conclusion that the termination of contract by claimant is contractually valid because the respondent materially failed to perform its obligations thus causing breach of the contract. The claimant left with no alternative invoked Clause 16.2 (b),
(d) and I of GCC and terminated the contract. Accordingly, ISSUE No.1 is answered in favor of the contract, which calls for no interference by this Court.
123. Issue No.2: Whether the termination of the contract made by the respondent is contractually valid?
a). Under Issue No:2 the learned Arbitral Tribunal has considered the validity of termination of contract made by the Plaintiff herein. The Learned Arbitral Tribunal has noticed that as per Clause 15.1 of GCC the employer is entitled to issue notice if the contractor feels to carry out any obligation under the contract the engineer may by notice required the contractor to make good the failure and to remedy it within a specified reasonable time. If the contractor fails to comply with Sub-Clause 4.2 performance security or with a notice under Sub-Clause 15.1 notice to correct or abandons the works /76/ Com.A.S.No.138/2019 otherwise playing the demonstrates their intention not to continue performance of his obligation under the contract or without reasonable excuse fails to proceed with the works in accordance with clause 8 commencement delays and suspension or to comply with notice issued under sub-clause 7.5 rejection or sub-clause 7.6 remedial work within 28 days after receiving it sub-contracts the whole of the works or assigns the contract without the required agreement are becomes bankrupt or insolvent, goes into liquidation has a receiving or administration order made against him compounds with his creditors and or carry on business under a receive trustee or manager for the benefit of his creditors or if any act is done or event occurs which under applicable laws as a similar effect to any of these acts or events or gives or offers to give directly or indirectly to any person, any bribe, gifts, gratuity, commission or other thing of value as an inducement or reward for doing or forbearing to do any action in relation to the contract or for showing or forbearing to show favor or disfavor to any person in relation to the contract or if any of contractors personnel agents or sub-contractors givers or offers to give directly or indirectly to any person any such inducement or reward as if described in the sub-paragraph F however lawful inducements and rewards to contractors personal shall not entitled termination; . Carryout HIV or AIDS and human trafficking awareness program for labor, /77/ Com.A.S.No.138/2019 disseminate information at work sites on risks of sexually transmitted diseases and HIV or AIDS as part of health and safety measures for those employees during construction and follow and implement all statutory provisions on labor including equal pay for equal work, health, safety, welfare, sanitation or working condition and for employing or use children as labor. These are the circumstances under which the employer may terminate the contract. The respondent has issued the notices on 6 different occasions and the claimant replied all the letters. The employer has terminated the contract only after the termination of the contract by the claimant. The learned Arbitral Tribunal has rejected the contention of the respondent that the contractor has abandoned the work and had no intention to continue performance of its obligations under the contract. The learned Arbitral Tribunal has also observed that the Asian Development Bank loan documents have mandated upon the respondent to invite tenders only after complete land acquisition. This mandate had been floated by respondent who invited tenders without acquiring all requisite land. This caused ensuring problem claimant in achieving his plant progress and rejected the contention of the respondent that the claimant had abandoned the work. The learned Arbitral Tribunal has referred to the agreement entered into between the respondent and Asian Development Bank. The said agreement in Schedule V /78/ Com.A.S.No.138/2019 clause 4.A mandated that the SEA shall ensure all land rights of way and other land related rights required for the project road are acquired or otherwise made available to the PIU KSHIP similarly Clause No.4E mandated that all affected persons are compensated in accordance with the resettlement plant. The land rights in land made free from any encumbrances, any obstructions are cleared. All from the related sections required to be handed over to the contractor for and prior to commencement of construction thereof. In accordance with the work schedule under the related civil works contract. It was for the state executive agency to ensure that the said conditions were complied. The Karnataka Public Works Department was the State Executive authority. The learned Arbitral Tribunal has observed that two critical conditions by SEA relating resulting in problems due to lands which were not acquired even after the commencement of work which ledge to frequent problem at the ground level.
b). The plaintiff/respondent is contending that the learned Arbitral Tribunal erred in referring to the agreement between the Respondent and Asian Development Bank and acted beyond the terms of reference. It is evident that the Claimant is not a party to the agreement entered in to between the Respondent and Asian Development Bank. The terms and conditions of the agreement makes it clear that the /79/ Com.A.S.No.138/2019 works carried out by the Claimant and the accounts maintained by the Claimant in respect of the works carried out by it are subject to scrutiny of the Asian Development Bank as per the contract between the Claimant and the Respondent. Though there is no direct nexus between the Claimant and Asian Development Bank, the Claimant is bound to subject to the assessment of its work and accounts by Asian Development Bank. In such circumstances, the reliance placed by the learned Arbitral Tribunal on the terms and conditions of the contract entered in to between the Respondent and Asian Development Bank cannot be found fault with.
c). The learned Arbitral Tribunal has observed that the Executive Engineer, Shimogga Division who was then acting as an engineer without recording the agreement of both the parties as required under GCC Clause 8.1 unilaterally and arbitrarily fixed the commencement date as 21st March 2012. On going through the correspondence within the parties, the learned Arbitral Tribunal has concluded that there was no handing over of stretches of land to the claimant in terms of GCC Clause 2.1 as on the commencement date. The claimant did not accept the fixation of the commencement date as it was done by Engineer in violation of Clause 8.1. The learned Arbitral Tribunal has come to the conclusion that the /80/ Com.A.S.No.138/2019 termination by the employer or the respondent is not contractually valid and rightly answered Issue No.2 in the Negative, which calls for no interference by this Court.
124. Issue No.3: Whether under the general conditions of the contract, the claimant has any obligation to commence work in stretches less than 10 kms?
a). The Learned Arbitral Tribunal has considered extensively considered the main bone of contention between the parties i.e. the obligation of the Claimant to commence and carry out work in the available stretches less than 10 KMS.
b). The respondent is contending that in terms of Clause B 2.2.8.2 of the specifications contract agreement volume 2 it is clear that the claimant is obligated to work in stretches of 500 meters the relevant portion of the afore mention clause is that the continuous length along with one side of the road in which such work shall be carried out would be limited normally to 500 meters at a place. The respondent is contending that a plain reading of the above clause of contract makes it clear that the addendum is applicable to taking over by the respondent and not handing over of the site by the respondent. The claimant's contention that the aforesaid addendum applies for handing over of the site is complete /81/ Com.A.S.No.138/2019 misconceived and lacks application of mind. It is not permissible to add any new stipulation in the contract without consent of the parties or to interpret the contract by using extraneous material. The respondent is contending that the learned Arbitral Tribunal has not considered the ratio of Rajastan State Industrial Development and Investment Corporation Vs. Diamond and Gem Development Corporation Ltd., 2013 5 SCC 470. The learned Arbitral Tribunal has considered the rival claims regarding the alleged obligation of the claimant to commence work in stretches less than 10 kms. The learned Arbitral Tribunal has considered Volume 1 Section 8 part B of specific provision sub-Clause 10.2 taking over parts of the works and addition made at Sub-Clause 10.2 rooting of traffic over completed section will not constitute use of the work by the respondent and added new sub-clause 10.2. The contractor may use parts of the works for which no Taking over Certificate has been issued yet for the routing of traffic as part of the traffic management plan. This however shall not be construed the use of works by the employer. The contractor may request for issuing a Taking over Certificate only for continuous length of road of not less than 10 km. A taking over Certificate shall not be requested and will be issued unless all road safety measures have been implemented in full and all destructs affecting the road safety have been rectified. The defect notification clear for any completed parts of works will /82/ Com.A.S.No.138/2019 start with the date of issue of taking over certificate for this particular part of the works and will end 365 days after the start of DLP for the last part of works for the section of works containing this part. The learned Arbitral Tribunal has considered Clause B.2.2.8.2 quoted by the respondent. It has observed that the proceedings of the pre-bid meeting held on 31.01.2011 are added as additional addendum to bid documents providing that that claimant may request for issuing a Taking Over Certificate only for continuous length of road of not less than 10 kms. Having thus be taking over conditional and limited to 10 kms the respondent did not give such continuous 10.0 kms lengths to the claimant thus prevented the contractor from under taking his work in such continuous stretches. The learned Arbitral Tribunal considered the contention of the respondent that by virtue of Clause B.2.2.8.2 are specification Volume 2 of contract agreement the claimant ought to have worked in stretches less than 10 kms and held that it is misplaced and amounts to misrepresentation of the said clause which relates only to method of working on the project road with ongoing traffic. The methodology is limited to explaining how road improvement work has to be carried out on a live road, without hindering the ongoing traffic; it has nothing to do with the handing over of requisite length of road by the respondent to the claimant. Having mentioned taking over to stretches of 10 /83/ Com.A.S.No.138/2019 kms the Corollary would naturally apply whereby the respondent to had to make available similar stretches of 10 kms lengths to the claimant which was not done. The respondent has not placed any materials before the learned Arbitral Tribunal in support of its contentions. The learned Arbitral Tribunal has taken into consideration the contention of the respondent that the claimant submitted a work program dated 18.04.2012 committing that it would work in stretches of 1 km therefore the claimant is estopped from contending that it cannot do work in stretches less than 10 kms. The learned Arbitral Tribunal has rightly rejected this contention of the respondent after considering Ex.C.13 the letter written by the respondent to claimant dated 07.09.2012 and held that there is no document show that the claimant expressly agreed to work in bits of even 1 km when he has contended right through he ought to have will provided with stretches of adequate length. A work program prepared by the claimant to work in each km cannot be misconstrued as an acceptance on his part to work in bits and pieces. As per Clause 2.1 of GCC the respondent had to provide stretches in terms of these clauses. After analyzing the materials available on record the learned Arbitral Tribunal has come to the conclusion that the respondent having mandatorily taking over lengths of 10 kms ought to have handed over similar lengths which would have naturally been the case he abide in word and spirit GCC Clause /84/ Com.A.S.No.138/2019 2.1 r/w PCC clause 2.1. According to which he had to hand over at very beginning km 5 to 13.50 and km 13.70 to km 53.00 of Section 1 and km 28.5 to km 37 and km 38 to km 51 of Section 2. The learned Arbitral Tribunal has observed that with the additional contractual raider whereby the balanced lengths 2 had to be handed over within from 6 months the commencement dates. Claimant would have lengths of more than 10 kms in both the sections to work in. Such an ideal reality of handing over by the contract did not materialize due to defaults in handing over attributable to the respondent. The finding of Learned Arbitral Tribunal is based on the materials available before it and the Tribunal has properly analyzed the facts in a proper perspective and a finding of fact cannot be made a subject matter of scrutiny in a suit filed under section 34 of the Act. The learned Arbitral Tribunal has held that the claimant has no obligation to commence work in stretches less than 10 kms and rightly answered Issue No.3, which calls for no interference by this Court.
125. Issue No.4: Whether the claimant has performed all its obligations under the contract? And
126. Issue No.5: Whether the respondent has performed all its obligations under the contract?
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a). The Learned Arbitral Tribunal has verified whether the claimant and respondent have performed their mutual obligations under the Contract and who has breached the terms and conditions of the Contract at length under Issue No:4 and 5.
b). The respondent is contending that these issues are at written submission of Issue No.4 and Issue No.5. The claimant has submitted in many documents that the delay was for reasons attributable to the claimant. As evident from Ex.C.17 and Ex.R.16 there is an admission in the above documents that the delay in execution of work of because of cash flow issues with the claimant company non-mobilization of resources from the claimant company. However the learned Arbitral Tribunal neglected the above vital admission contained in Ex.R.16 and Ex.C.27. Therefore the award is perverse and is liable to be set aside. The claimant is contending that the admission of Mr.Rajan in the minute of meeting Ex.C.27 that 70% of land was handed over and that the cash flow with the claimant was poor. The claimant is contending that the said alleged admission of Rajan is not relevant because it is only Mr.Rajan's pereption. Mr.Rajan's words have not weight and his words have no meaning. As against this, the respondent is contending that it is an undisputed fact that the Mr.Rajan is an employee of the claimant, Ex.C.27 is the claimant's own /86/ Com.A.S.No.138/2019 document on which the claimant placed reliance to show that the entire land was not handed over therefore it was for the claimant to disprove the contents of its own documents. The learned Arbitral Tribunal did not accept it even though there is no evidence to the contrary. On Issue No.4 and 5 the learned Arbitral Tribunal has given its findings after analyzing Clause 4.1 of GCC with respect to contractor's general obligations and recorded that the claimant has argued that there are no allegation leveled against the claimant by the respondent of non-compliance of any of the obligations mentioned in the said Clause except that the claimant failed to adhere to the instructions of the engineer in executing the work in the available work in fronts which were in bits and pieces. He has contended that under the contract the claimant is expected to carry out work according to the engineers instructions if they are in terms of the contract. The claimant has performed its obligations of furnishing performance security to the respondent in terms of Clause 4.2 GCC which is admitted by the respondent. The learned Arbitral Tribunal has observed that the records show that the claimant has not violated any clauses in the contract which makes him liable for non- performance of any of his obligations under the contract. Contrary to the stand of the claimant the respondent has contended that the engineer had issued notices to correct as per Ex.R.1, R.5, R.20 and the GCC Clause 15.1 to proceed with /87/ Com.A.S.No.138/2019 the maintenance and other work in accordance with GCC Clause 8.1. Despite which the claimant expressed no intention to continue with the work respondent also contended that in view of the claimant's inaction to proceed with the remedial work of maintaining the existing road, the engineer issued a letter dated 13.11.2013 to the claimant stating that the respondent intended to employ other agencies to maintain the existing road. On 11.06.2014 the respondent issued letter to the Executive Engineer, Shivamogga for maintaining various stretches of existing road and hence according to the respondent this issue is to be held in the negative and against the claimant.
c). The learned Arbitral Tribunal has observed that while discussing issue No.2 learned Arbitral Tribunal has observed that from a plain reading of these notices and replies thereto that the respondent had failed in performing its prime obligation of providing requisite stretches of hindrance free land in consequence of which the claimant could not perform its obligations under the contract. The notices were in the form of contentions which is not the spirit of GCC Clause 15.1. The learned Arbitral Tribunal has held that notices issued by the engineer were thus not in the true spirit of the clause in as much as the engineer did not point out the exact defaults of the claimant calling upon him to rectify within a reasonable /88/ Com.A.S.No.138/2019 time which the engineer failed to indicate. The engineer issued as many as 6 notices and GCC Clause 15.1 each one of which was effectively replied to by the claimant obviously satisfied with which the respondent restrained from terminating the contract. The learned Arbitral Tribunal further observed that it was the respondent who was wrongly expecting the claimant to execute the work without facilitating the same by providing requisite stretches of hindrance free land which can only be interpreted as expecting performance in material alteration to the very rights, liabilities and legal positions of the claimant. The learned Arbitral Tribunal has further observed that addendum to bid documents that under Clause B.2.22.2.1, all paragraphs of sub-clause 3003.1 are deleted a new paragraph is added. As during the execution by the contractor of the works in any of the milestones or sections of the contract the maintenance of earthen shoulders in that milestones or sections shall be incidental to the work and shall be responsibility of the contractor and at his own cost. The above cited amendment to the contract agreement that the claimant had no obligation to carryout routine maintenance work in the sections not handed over to it because as per contract the claimant was responsible for maintenance of only those milestones or section where it was executing the works. The letter dated 30.12.2013 written by the claimant to the engineer that the maintenance of the existing road was not /89/ Com.A.S.No.138/2019 incidental work and was payable. The claimant has relied on BOQ Item No.1.04 and 1.05 Clause 3003.1 and 3004.2. The claimant has provided the details of routine maintenance work it carried out. The claimant had informed the engineer that quantities provided in the BoQ Item 1.04 were exceeded to more than 1.25 times of the quantity in the BOQ. The engineer has certified routine maintenance work up to July 2012 as reported in Annexure 1 claimant's letter dated 14.05.2014. The claimant has reported the same in his letter dated 26.09.2013. The claimant has made it clear to the Project Director that the act of the respondent in engaging other agencies for routine maintenance fell under GCC Clause 13.1D and as such the claimant was absolved of all liabilities towards the same including the quality of work. On the basis of materials available on record the learned Arbitral Tribunal has observed that the claimant had complied with its obligations in mobilizing the required men, machinery, equipment and plants. For the respondent was demanding mobilization of additional men, machinery and equipment without there being adequate stretches of encumbrance free land.
d). Regarding Issue no.5 the learned Arbitral Tribunal has considered various terms and conditions of contract like Clause 2.1, 2.4 and Clause 8.1B. The learned Arbitral Tribunal has observed that the respondent failed to remove /90/ Com.A.S.No.138/2019 obstructions like electrical poles, trees and structures, the respondent or engineer failed in granting EOT on time. After considering the failures of respondent in performing its obligations under the contract in various other aspects such as in clarifying the variations in TBM, OGL and FRLS etc., the learned Arbitral Tribunal has come to the right conclusion that Issue No.4 has to be answered in the Affirmative and Issue No.5 in the Negative, which calls for no interference by this Court.
127. Issue No.6: Whether the claimant is entitled to seek return of the claim petition schedule bank guarantee?
a). Under Issue No:6 the Learned Arbitral Tribunal has considered the entitlement of the Claimant to have the bank guarantee returned to it by the Respondent.
b). In respect of this issue No.6 the respondent has stated that under GCC Clause 4.2 there are two types of bank guarantees under the contract in question. Performance bank guarantees and advance payment security bank guarantees. The finding on this issue in so far as performance bank guarantees concerned is solely dependent on Issue No.1. Therefore, a finding on issue No.1 is set aside the finding on this issue also has to be set aside.
c). The learned Arbitral Tribunal has referred to Clause 4.2 of PCC and 14.2 of GCC which mandates the claimant to /91/ Com.A.S.No.138/2019 provide performance bank guarantee banks security in the amount of 10% of accepted contract amount in the form of unconditional bank guarantee in accordance with the standard bidding document. Clause 14.2 GCC provides that the claimant is eligible for interest free advance payment to an amount equivalent to 10% of the accepted contract amount in 2 equal installments under certain conditions and upon furnishing bank securities for equivalent advance amount received by it. As per Clause 4.2 of PCC the claimant has to deliver the performance security to the respondent within 28 days of after receiving the letter of acceptance and sending a copy to the engineer. Such performance security shall be in the amount of 10% of accepted contract amount in the form of an unconditional bang guarantee in accordance with the standard bidding document. Claimant has to ensure that the performance security remains valid and enforceable until the claimant has executed and completed the work and remedied any defects. If the terms of the performance security specify its expiry date, claimant shall extend the validity of the same until the work has been completed and any defects are remedied. Respondent shall not make a claim under the performance security except for the amount which the respondent is entitled under the contract. The respondent shall indemnify and hold the claimant harmless against all damages, losses and expenses including legal fees and /92/ Com.A.S.No.138/2019 expenses resulting from a claim under the performance security to the extent which the respondent was not entitled to make such a claim. The respondent shall return the performance security to the claimant within 21 days after receiving a copy of the performance certificate. Clause 15.4 of GCC provides that after a notice of termination under Sub- Clause 15.2 termination by employer has taken effect the employer shall forfeit the performance security. Clause 16.4 of GCC provides that after a notice of termination under Sub- Claus 16.2 termination by contractor has taken effect the employer shall promptly return the performance security to the contractor.
d). This Court is of the view that the learned Arbitral Tribunal has rightly answered Issue No.1 holding that the termination of the contract by claimant under Clause 16.2 B.D and I is contractually valid and at the same time has rightly held Issue No.2 against the respondent. In such circumstances, the claimant is entitled for return of performance bank security. The second category of security furnished by the claimant is advance payment security bank guarantee towards the cost of mobilization, machinery and equipment under Clause 14.2 of GCC the advance payment shall be made in two installments by the employer/ Respondent. The employer will make an interest free advance /93/ Com.A.S.No.138/2019 payment to the contractor for the cost of mobilization in respect of the works in an amount equivalent to 5% of the accepted contract amount namely the letter of acceptance payable in the proportions of foreign and local currencies of the accepted contract amount. The second installment: the employer will pay another interest free advance payment in an amount equivalent to 5% of the accepted contract amount named in the letter of accepted if so requested in contractor not later than 6 months from the commencement date towards the machinery and equipment. During the pre-bid meeting held on 31.01.2011 the respondent has clarified by referring to Clause 14.2 and stated that 5% second installment of advance is payable against the bank guarantee on completion of mobilization of equipment and machinery to the site and certified by the engineer. The respondent has made payment of ₹.10,12,86,449/- to the claimant on its request on the same day, the amount towards the first installment of 5% of the accepted contract amount. This advance amount was released in IPC dated 21.03.2012 upon claimant's request on the same day on which the engineer intimated respondent about fixing the date of commencement as 21.03.2012. Upon engineer verifying the list of machinery invoice submitted by the claimant second installment of advance was paid in IPC 2 dated 18.09.2012. The advance payments made by the respondent the claimant are interest free and to be repaid by /94/ Com.A.S.No.138/2019 claimant in terms of contract. Claimant has stated that he has received ₹.20,69,84,004/- advance towards mobilization. The claimant has also stated that he has received ₹.533.71 lash towards work done and certify. The Clause 14.2 provides for repayment of advance amount received by the claimant. Termination of the contract by the claimant was held valid therefore any amount which has not be repaid by the claimant prior to the termination of the contract by it receive become due by the claimant. The respondent has admitted that it has recovered a sum of ₹.1,51,84,004/- towards advance payment paid by it in respect of mobilization and balance is only 19.18 Crores. Therefore, the respondent is entitled to recover this amount from the claimant by way of deducting the same out of the amount which the respondent is liable to pay to the claimant under the award. The learned Arbitral Tribunal after discussing this issue has concluded that the claimant is entitled to return of all the schedule bank guarantees given by it to the respondent and the balance of the advance amount is to be deducted out of the amount to be paid by the respondent and has rightly answered Issue No:6 in the Affirmative, which calls for no interference by this Court.
128. Issue No.7: Whether the claimant proves that it is entitled to the amounts claimed under various heads in all amounting to a sum of ₹.69,53,90,052/-? And /95/ Com.A.S.No.138/2019
129. Issue No.8: Whether the respondent is entitled for the compensation as claimed under its statement of defense or counterclaim totaling to ₹.306.18 Crores and interest?
a). The Learned Arbitral Tribunal considered the entitlement to have the reliefs prayed in the Claim petition and Counter Claim by Claimant and Respondent respectively.
b). The claimant has submitted that the learned Arbitral Tribunal has based its findings on the report of the statutory auditor and has considered all the contentions when the statutory auditor gives certificate it is binding. The respondent is contending that this contention has no basis in law there is no provision of law which says that the certificates of the statutory auditor is binding. Further the discussion of the learned Arbitral Tribunal on the premise that Ex.C.46 is sacrosanct and that on the basis of Ex.C.46 the claimant is entitled for compensation. The award does not place reliance on any certificate but places reliance only on Ex.C.46 which is a photocopy and which has been denied by respondent. This claim has also been denied on the statement of defense. If compensation is awarded on the basis of document which is denied then such an award is liable to be set aside. Though the claimant did not adduce any oral evidence on this claim despite the fact that the respondent disputed the claim and its /96/ Com.A.S.No.138/2019 calculations therefore adverse inference is drawn against the claimant. An analysis of Ex.C.46 shows that most of it contains unsigned documents some documents which are signed or signed only by the representatives of the claimant. Without considering the contentions of the respondent the learned Arbitral Tribunal has arbitrarily allowed this claim relying on PWD, Shimogga Circle, Shimogga for the year 2012-13 without considering any of the contentions raised by the respondent. Therefore the award on this aspect is liable to be set aside. learned Arbitral Tribunal has rejected all the counterclaims and awarded only counterclaim No.8 regarding refund of mobilization advance. The sole reason for rejection of the counterclaim is that termination by the claimant is valid. Consequently if the findings of the learned Arbitral Tribunal on Issue No.1 are set aside then the findings on this issue also will have to be set aside. Further the learned Arbitral Tribunal has not considered whether the counterclaims particularly counterclaim No.2 can be considered interdependently or not. The learned Arbitral Tribunal has failed even to considered the pleadings as regards counterclaim No.2 where the award is to be set aside in so far as counterclaim No.2 is concerned.
130. Initially the claimant has made a claim for ₹.63,34,56,948/- and the claimant had received total gross amount of ₹.26,03,55,796/- and made a claim for /97/ Com.A.S.No.138/2019 ₹.37,31,01,152/-. Subsequently, the claimant amended its claim statement and claimed that grand total amount payable to the claimant is ₹.95,57,46,848/- out of which the amount which has been already paid by KSHIP i.e., ₹.26,03,55,796/- was given deduction and the balance claim amounts to ₹.69,53,90,052/-. The learned Arbitral Tribunal has found an error in totaling of the above claims by the claimant in the said statement of claims account by ₹.1 and considered the claim of ₹.95,57,46,848/- instead of 95,57,46,849/-.
131. The claimant has admitted receipt of ₹.26,03,55,796/- from the respondent which is inclusive of 5,33,71,792/-towards work done till May 2014 and the amount of advance which it received for mobilization. Thus, the amount payable under this claim will be set off from the amount of award and the net amount of award was calculated by learned Arbitral Tribunal.
132. The learned Arbitral Tribunal has considered Ex.C.46 and documents A1 to A12 wherein month wise Bills of Quantity of statement of amount supported by respective measurement quantity sheets IPCs monthly progress report and other related documents etc., are filed to support the claims of the claimants under the heads mentioned whose evidentiary value was considered by learned Arbitral Tribunal at length.
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133. The learned Arbitral Tribunal has observed that the claimant has made claim under heads work done certified by the engineer and payment pending with KSHIP for work done till May 2014 for a sum of ₹.3,79,48,626/-. Price variation by engineer and payment pending with KSHIP for work done till May 2014 for a sum of ₹.64,08,572/-. Release of retention against security deposit for a sum of ₹.53,53,627/-. Release of withheld amount for a sum of ₹.2,89,000/-. The claimant has produced annexure A12 to Ex.C.46.
134. The learned Arbitral Tribunal has keenly observed the differences and considered the actual amount payable to the claimant. The learned Arbitral Tribunal has noticed differences in the claim made by the claimant under the head work done certified by engineer and payment pending with KSHIP for work done till May 2014 for a sum of ₹.3,79,48,626/- the learned Arbitral Tribunal has noticed that from IPC No.08 for May 2014 the actual sum to be ₹.3,17,05,497/- which amounts to a reduction of ₹.62,43,129/-. Under the head price variation by engineer and payment pending with KSHIP for work done till May 2014 for a sum of ₹.64,08,572/-,The learned Arbitral Tribunal has noticed from IPC No.08 for May 2014 the actual sum to be paid at ₹.59,57,758/- which amounts to a reduction of ₹.4,50,814/-. Under the head release of retention against security deposit for a sum of ₹.53,53,627/- learned /99/ Com.A.S.No.138/2019 Arbitral Tribunal has noticed from IPC No.08 for May 2014 the actual sum to be ₹.40,54,528/- which amounts to a reduction of ₹.12,99,099/-. Under the head release of withheld amount for a sum of ₹.2,89,000/- learned Arbitral Tribunal has noticed that no such mention in IPC No.08 for May 2014 which amounts to a reduction of whole amount of ₹.2,89,000/-. The learned Arbitral Tribunal has concluded that the net claim payable to the payment works to ₹.2,96,66,584/- against item No.2.1, 2.2, 2.5 and 2.6 of its claim. In support of the claims of the claimant under the heads work done value for the month of June 2014 for a sum of ₹.1,05,96,559/- claimant has produced annexure A6 to Ex.C.46 price variation for work done for the month of June 2014 for a sum of ₹.27,64,512/-. In support of claim release of payment against variation amount BOQ Item No.1.01 procure and purchase and supply brand new vehicle for a sum of ₹.6,41,921/-. The claimant has produced Annexure A 9 to Ex.C.46. In support of the claim under the head reimbursement of expenses incurred on excise duty for a sum of ₹.13,91,679/- the claimant has produced Annexure A 10 to Ex..C.46. The learned Arbitral Tribunal has observed that the cited document mentions only ₹.8,64,825/- and has allowed 8,64,825/- by reducing ₹.5,26,854/-. In support of the claim under the head reimbursement of dispute resolution board members fee for a sum of ₹.3,75,000/- the learned Arbitral Tribunal has observed that the respondent has claimed /100/ Com.A.S.No.138/2019 ₹.11,00,000/- under the same head but has not filed any supporting document. Mere plea in the pleadings cannot be considered unless the parties prove their contentions with their supporting documents. The claim made by the respondent under the said head in the counterclaims was rejected by the learned Arbitral Tribunal. The learned Arbitral Tribunal has held that the claimant is entitled to ₹.5,69,60,600/- against ₹.6,57,69,496/- reducing the claim by ₹.62,43,129/-. The learned Arbitral Tribunal has similarly reduced the claim made by the claimant. The learned Arbitral Tribunal has awarded an amount of ₹.5,69,60,600/- against the claim No.2. The learned Arbitral Tribunal has observed that it has considered the claim and the supporting calculations put forth by the claimant. The learned Arbitral Tribunal has also considered the points raised by the respondent. The learned Arbitral Tribunal has noted that the respondent has not challenged the quantification of the claim made by the claimant. The learned Arbitral Tribunal has held that the claimant has proved its claim by filing adequate evidence and it is therefore entitled for the claim on merits. However, as regards the amount to be awarded the learned Arbitral Tribunal was of the opinion that it should be restricted to the cost of machinery component assumed by the claimant while submitting its bid. The learned Arbitral Tribunal has noted that the contractor has executed a work of ₹.950.68 lakhs the /101/ Com.A.S.No.138/2019 contractor by executing this amount of work has recovered proportionate cost of plant and machinery which works out to 51,77,281/- after deducting this amount from the amount of claim payable to the claimant the net amount of the claim works out to ₹.10,51,41,827/-. Regarding additional indirect cost site and HO over due to impossibility to perform due to non-handling over of land as per contract, the learned Arbitral Tribunal has awarded a sum of ₹.15,62,35,503/-. However, the claimant has claimed ₹.15,62,34,657/- and the said amount was awarded by the learned Arbitral Tribunal as against Claim No.7.3.2.
135. Regarding loss of profit due to impossibility to perform due to non-handling over land as per contract the claimant has claimed a sum of ₹.19,30,66,093/-. The learned Arbitral Tribunal has considered the said claim and has awarded an amount of ₹.19,30,66,093/- against claim No.7.3.3.
136. Regarding physical value of site stock available at site as on June 2014 the learned Arbitral Tribunal has accepted the contentions of the respondent and rejected the claim made by the claimant.
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137. The learned Arbitral Tribunal has considered claims made due to the effect of the termination under 3 sub-claims, expenditure for demobilization of machinery after termination of contract at 5% of contract value i.e,. ₹.10.13 lakhs. The learned Arbitral Tribunal has held that overhead charges includes mobilization and demobilization of resources hence, the claims for demobilization of machinery for the second time cannot be allowed as it amounts to claiming the same claim twice. Accordingly, the learned Arbitral Tribunal has rejected the claim of the claimant. Cost of repatriation of staff due to termination, the claimant has claimed a sum of ₹.1,84,17,000/- towards Cost of repatriation of staff after termination of the contract. The learned Arbitral Tribunal has observed that the claimant has not furnished any document in support of its claim. There may be expenses under the said head but nothing prevented the claimant before the tribunal has to how it arrived at figure ₹.1,84,17,000/- as the expenses incurred under the said head. The learned Arbitral Tribunal by referring to Clause 18.6E and 16.4B of GCC rejected the claim made by the claimant under the said. The claimant has claimed ₹.20,25,72,900/- towards expenditure on account of mobilizing the machinery which become infractous as a result of termination of contract. The learned Arbitral Tribunal has rejected the claim after referring the Clause 16.4 of GCC.
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138. The Respondent at first instant while filing statement of defense made counterclaim for ₹.261.93 Crores and subsequently got amended the counterclaim to ₹.306.18 Crores.
139. The learned Arbitral Tribunal has observed that it has already held that the termination of the contract by the claimant is valid and for the reasons attributable to the respondent. Therefore, the learned Arbitral Tribunal has held that the respondent is not entitled to receive any damages i.e, counterclaim from the claimant. The learned Arbitral Tribunal has considered the various heads under which the counterclaims are made by the respondent. The learned Arbitral Tribunal has held that the counterclaim except counterclaim No.8 unrecovered mobilization and equipment advance rejected all other claims made by the respondent.
140. The learned Arbitral Tribunal has clarified that the respondent shall not encash the bank guarantees lodged by the claimant with the respondent as the learned Arbitral Tribunal has given set off to 19.18 Crores from the total amount of award payable to the claimant by the respondent. As for as the counterclaim No.8 the respondent has contended that it is entitled to recover the unrecovered mobilization and equipment advances of ₹.19.18 Crores. The learned Arbitral /104/ Com.A.S.No.138/2019 Tribunal has observed that while discussing Issue No.6 it has already held that the respondent is entitled to recover unrecovered mobilization and equipment advances by deducting the same from the amount payable by it to the claimant. The learned Arbitral Tribunal has also considered the payment of cost and awarded and directed that 50% of expenditure of ₹.7,43,520/- I.e, ₹.3,71,716/- incurred by the claimant shall be paid by the respondent to claimant after verification of detailed account with supporting vouchers submitted by the claimant to the respondent and the learned Arbitral Tribunal has also directed the respondent to pay the said amount within 90 days from the date of award failing which the interest shall be charged at 18% p.a from the date of award till the payment by the respondent.
141. The learned Arbitral Tribunal has awarded interest at 15.58% as per contract conditions and it shall be compounded monthly from the date of cause of action I.,e 16.07.2014. After considering the entire materials available on record the learned Arbitral Tribunal has directed the respondent to pay a sum of ₹.30,44,90,170/- to the claimant. Counterclaims of respondent are rejected except counterclaim No.8 under the head unrecovered mobilization and equipment advances for ₹.19.18 Crores.
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142. The learned Arbitral Tribunal has awarded that an amount of ₹.30,44,19,90,173/- is to be payable by the respondent to the claimant along with interest at 15.58% p.a. compounded monthly from 16.07.2014 to the date of award, failing which the interest shall be charged at 18% p.a.
143. The learned Arbitral Tribunal has also directed the respondent to return all the bank guarantees within 30 days from the date of award. The learned Arbitral Tribunal has passed an order on 10.06.2019 on the application of the claimant and directed the respondent to pay 50% share in the expenses to the Claimant.
144. From the materials available on record it is evident that though the respondent has raised several contentions which are attractive at the first blush, after going through the analysis and reasons furnished by the learned Arbitral Tribunal I am of the opinion that the respondent has failed to make out any grounds to interfere with the impugned award. Accordingly, Point No.1 answered in the NEGATIVE.
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145. Point No.2: In view of the findings on Point No.1, I pass the following ORDER The suit filed by the plaintiff under section 34 of Arbitration and Conciliation Act, 1996 praying the Court to set aside the award dated 22.03.2019 passed by the Arbitral Tribunal and also to set aside the Order dated 10.06.2019 to the extent that the Arbitral Tribunal directed the plaintiff to bear the costs of the arbitration in Arbitration Proceedings between Gammon India Ltd., and Karnataka State Highways Improvement Project- KSHIP represented by the Project Director is hereby dismissed with cost.
The award Dated:22.03.2019 and the Order dated 10.06.2019 passed by the learned Arbitral Tribunal in Arbitration Proceedings between Gammon India Ltd., and Karnataka State Highways Improvement Project-KSHIP represented by the Project Director is hereby confirmed.
(Dictated to the Stenographer, transcribed and typed by her, the corrected and pronounced by me in the Open Court on this 19 th March 2022) (S.J.KRISHNA) LXXXIX ADDL.CITY CIVIL & SESSIONS JUDGE, BENGALURU.
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