Delhi District Court
South District vs Delkon India Pvt. Ltd on 9 February, 2023
IN THE COURT OF DISTRICT JUDGE (COMM-02),
SOUTH DISTRICT, SAKET COURT, NEW DELHI
OMP (COMM.) 63/21
Bharat Heavy Electricals Ltd.
A company incorporated under the
laws of India, having its registered
office at : BHEL House, Siri Fort,
New Delhi-110049
Also at : Power Sector - Northern Region,
HRDI & PSNR Complex,
Plot No. 25, Sector-16A,
Noida-201301, Uttar Pradesh
Through its Executive Director and Unit Head
Shri Kaushik Acharya ..... Petitioner
Versus
Delkon India Pvt. Ltd.
240, 2nd Floor, 25 - A Park Street,
Kolkata-700016 and
also at : Flat No. 1, D-36,
South Extension Part-II, New Delhi ..... Respondent
Date of Institution: 11.10.2021
Arguments concluded on : 16.01.2023
Date of Judgment: .09.02.2023
JUDGMENT
1. This is a petition U/s 34 of Arbitration & Conciliation Act, 1996 (hereinafter referred to as "Act") whereby an award dated 02.06.2021, passed by the Ld. Arbitral Arbitrator is challenged by the petitioner, Bharat Heavy Electricals Ltd. (BHEL).
2. In brief, facts leading to filing of this petition, as stated by petitioner, are that petitioner had invited bids for the execution of erection, testing and commissioning of 2x210 MW Boilers at Feroze Gandhi Thermal Power Project, Unchahar, Uttar Pradesh. Respondent's bid was successful and accordingly a Letter of Intent dated 21.06.1996 was issued in favour of the respondent, which was followed by a Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 1 of 26 Contract No. 50/96 executed between the petitioner (BHEL) and the respondent (Delkon). Total value of the works awarded to the respondent was Rs.3,13,20,000/-. Date for completion of the work was stipulated as 29 months to commence within 15 days from the date of issuance of the LOI. According to clause 4 of the Contract, respondent was to immediately get in touch with the Construction Manager of the petitioner at the work site for further instruction regarding the commencement of the work in order to complete the work in time keeping in view clause 52 of the contract which refers to the Time Schedule. It is stated that the contract was terminated by the petitioner on 15.01.1997 relying on Clause 25.3 of the Contract. Disputes having arisen, Ld. Sole Arbitrator Shri S.K. Uppal was appointed under the Contract on 14.08.2009 to adjudicate upon the claims and counter claims arising out of the Contract, after High Court of Delhi had set aside an earlier award published by a sole arbitrator appointed at the request of the respondent. Petitioner is aggrieved by the award w.r.t. some of the counter claims i.e. counter claim no. 1, 3, 5, 7, 13, 15 and 22 only in favour of the respondent which have been tabulated below which form the subject matter of the present challenge :-
Counter Claim Particulars Award
Claim No. 1 Towards transportation of un-erected Awarded
material transported
Claim No. 3 Towards cost of pre-assembly and part Awarded
welding completed
Claim No. 5 Towards costs of erection and alignment Awarded
work done
Claim No. 7 Towards illegal withholding of plant and Awarded
equipment
Claim Nos. 13 & Towards cost of mobilization and Awarded Partially 15 demobilization of tools and plant, Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 2 of 26 equipment and manpower Claim No. 22 Towards interest Awarded partially
3. This court has heard submissions advanced by Ms. Mani Gupta, Ld. Counsel appearing for the petitioner and Shri K.S. Mahadevan, Ld. Counsel appearing for the respondent and perused the material placed on arbitral record.
4. The legal position is well settled that a broad distinction has to be maintained between the decisions which are perverse and those which are not and interference by the Court under Section 34(2)(b)(ii) does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. An award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. ('MMTC Ltd. Vs. Vedanta Ltd.', AIR 2019 SC 1168; 'Union of India vs. Chenab Construction Company (Regd.)', 2019 SCC OnLine Del 10515; 'Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India (NHAI)', (2019)15SC C 131), 'Parsa Kente Collieries Limited vs. Rajasthan Rajya Vidyut Utpadan Nigam Limited', AIR2019 SC 2908; 'Patel Engineering Ltd. Vs. North Eastern Electric Power Corporation Ltd. (NEEPCO)', 2020 SCC OnLine SC 466 and 'Anglo America Metallurgical Coal PTY Ltd. vs MMTC Ltd.' 2020 SCC OnLine SC 1030).
Transportation of un-errected material transported (Claim No. 1) Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 3 of 26
5. First of all with respect to counter claim no. 1 i.e. transportation of un-erected material transported is concerned, Ld. counsel for the petitioner submitted that counter-claim is based on no evidence in so far as the rate of Rs.270/- per MT is concerned, in fact, despite being given an opportunity to file documents in support of counter claim, Delkon failed to do so. It is submitted that Ld. Arbitrator has substituted the evidence on his own discretion. The arbitrator noted that the application of 10% of the rate is arbitrary.
6. Ld. counsel for the petitioner submitted that proposition of law is that award should not be interfered with in a cavalier, casual manner unless the perversity goes to the root of the matter; ground of patent illegality is available if the decision of the arbitrator is found to be perverse, outside the terms of the contract; award is patently illegal if (i) ignores vital evidence or is based on no evidence at all; (ii) gives no reason and (iii) wanders outside the terms of the contract or is against law; Losses cannot be based on conjectures or surmises, and have to be pleaded and proved by the party claiming it; a party that claims loss is liable to prove the same; an award based on no evidence is liable to be aside; the award cannot be based on surmises, conjectures; once the contractor consents to no interest clause, the arbitrator being creature of contract has no such power to award interest for even the future interest and rate of interest awarded by the arbitrator has to be reasonable and cannot be arbitrary. He relied upon "South East Asia Marine Engineering & Constructions Ltd. (SEAMEC Ltd) Vs. Oil India Limited", (2020) 5 SCC OnLine 164; "Patel Engineering Ltd. Vs. North Eastern Electric Power Corporation Ltd. (NEEPOC)", (2020) 7 SCC 167;
"Associate Builders Vs. Delhi Development Authority", (2015) 3 SCC Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 4 of 26 49; "PSA Sical Terminals Pvt. Ltd. Vs. The Board of Trustees of V.O. Chidambranar Port Trust Tuticorin & Ors.", 2021 SCC OnLine SC 508; "Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd.", (2022) 1 SCC 131; "Rishabhkumar Vs. Secretary to the Govt. of India", 2021 SCC OnLine Bom 4561; "Indo Nabin Projects Ltd. Vs. Powergrid Corporation of India Limited", 2018 SCC Online Del 8405; "Dyna Technologies (P) Ltd. Vs. Crompton Greaves Ltd.", (2019) 20 SCC 1; "Chittaranjan Maity Vs. Union of India", (2017) 9 SCC 611; "Bharat Heavy electricals Ltd. Vs. Globe Hi-Fabs Ltd.", (2015) 5 SCC 718; "Bharat Heavy Electricals Ltd. Vs. Tata Projects Ltd.", (2015) 5 SCC 682; "Garg Builders Vs. Bharat Heavy Electricals", 2021 SCC OnLine SC 855; "India Yamaha Motor Pvt. Ltd. Vs. Divya Ashish Jamwal", (2019) SCC OnLine Del 6912; "Shah Jagshi Jethabhai Vs. J.N. Construction", (2012) SCC OnLine Bom 154; "Haryana Vidyut Prasaran Nigam Limited Vs. Cobra Instalaciones Y. Services, S.A. & Shyam Indus Power Solution Pvt. Ltd (JV)", MANU/DE/1353/2022; "Union of India Vs. Manraj Enterprises", (2022) 2 SCC 331 and "Vedanta Limited Vs. Shenzhen Shandong Nuclear Power Construction Co. Ltd.", (2019) 11 SCC 465.
7. Total amount of material to be transported from the stores to the place of work (site) was 11,600 MT (part of contract, page 270 of the Petition) and the total material that was transported from the stores to the site was 331.826 MT, out of which the material which was erected was 218.768 MT and the material that was transported which was therefore, un-erected was 113.058 MT (331.826 MT - 218.768 MT). This claim is for the transportation cost of un-erected material i.e. 113.058 MT. Ld. counsel for Delkon submitted that the Local Commissioner in his report Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 5 of 26 has given a finding that this was the quantum of un-erected material which had been transported. Petitioner/Claimant does not dispute the above quantity of 113.058 MT and thus, by not disputing this quantity, the Claimant/Petitioner acknowledged that the Respondent/Counter- Claimant needs to be paid for transportation costs of un-erected material and hence the Respondent/Counter-claimant is therefore, entitled to be compensated for the costs so incurred, therefore, the only question remains about quantifying the costs. Contention of the Counter-claimant was that this payment can be quantified under Clause 57.3 (1A)(i) of the Contract, which deals with progressive payments under the contract on pro-rata basis. Under this Clause, the Respondent/Counter-claimant was to be paid 15% of the contract rate on pro-rata basis upon completion of pre-assembly work. The unit rate under the contract was Rs.2,700/- per MT.
8. The contract may not specifically deal with a situation where progressive payments may be made for work done prior to the stage of completion of pre-assembly work but it has been rightly held by the Arbitrator that transportation of (un-erected) material from stores to site would be necessary for the subsequent work of pre-assembly and erection. Delkon would obviously have completed the work of pre- assembly and erection if the contract had not been illegally terminated. It is submitted that transportation from stores to site of material to be later erected would therefore constitute "work done" at the time of illegal termination for which the Respondent/Counter-claimant would have to be compensated, therefore, in such cases, it is reasonable figure out a rate of 10% of the contract rate on pro-rata basis when the contract stipulates a rate of 15% on pro-rata basis upon completion of pre-assembly work.
Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 6 of 26LOI dated 21.06.1996 clearly stated that the work of transportation shall also be within the scope of work. Thus, 10% of the contract rate on pro- rata basis has been worked out to Rs. 270/- per MT (10% of Rs. 2,700/- above) and thus, if 113.058 MT of transported material remained un- erected at the time of termination of the contract, the cost of transportation of un-erected material would work out to Rs.30,526/- which was the sum awarded by the Ld. Arbitrator under this head and therefore, contention that the award of this sum is without any evidence is without any basis.
9. The contract in question entered into between the parties itself furnishes ample evidence for the award of this sum. Another contention raised by the Petitioner/Claimant was that transportation charges or costs was part of overheads and that this situation was covered by the unit rate analysis of the contract applicable to overheads. Petitioner, therefore, contended that compensation on this score was not payable, however, the situation cannot fall under overheads since this is not a case of transportation of manpower, material and equipment belonging to the contractor (Respondent) into and out of the site. This is a case of transportation of material belonging to the principal employer (Claimant) alone, and that too within the site itself and it was precisely for this reason that the Ld. Arbitrator rightly concluded that transportation of un-erected material would be a part of erection work and that the erection contract rate specified at Clause 57.3 IA(i) would alone be applicable and not overheads.
10. Award of the amount of Rs.30,526/- under this head upon the application of erection rates prescribed by the contract itself is therefore, justified. Petitioner's/Claimant's case that Arbitrator was of Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 7 of 26 the view that this rate of 10% was arbitrary. There is no denying the fact that the Petitioner/Claimant has not challenged this portion of award to the effect that the termination of the contract by it was illegal. It is submitted that Petitioner/Claimant does not dispute the un-erected quantity of 113.058 MT, therefore, Petitioner/Claimant acknowledged that the Respondent/Counter Claimant is required to be paid/compensated for the costs incurred by it in the transportation of the material. In the existing circumstances, the rate of 10% (of the contract rate for pre-assembly and erection) applied to compute the costs incurred cannot be said to be unreasonable, what is important to understand is that work of transportation of material was absolutely necessary for the work of pre-assembly and erection, part of the scope of the work and therefore, being part of pre-assembly and erection, therefore, the only clause that could have been applied to compute compensation under this head was Clause 57.3 IA(i) and thus, this court is in agreement with the submission of Delkon that the award of Rs.30,526/- was therefore, legal, reasonable, and justifiable. None of the judgments relied upon by the Claimant/Petitioner to challenge the award of claim in this regard is applicable in the instant case.
Cost of pre-assembly and part welding completed (Claim No. 3)
11. As regards, cost of pre-assembly and part welding completed, Ld. counsel for the petitioner submitted that Clause 57.3(IA)
(i) does not deal with the break-up of the cost but instead pertained to the payment milestone and that the Arbitrator's interpretation is not a plausible interpretation. It is submitted that counter claim has been awarded on the basis of no evidence in so far as the rate of 12% is concerned. It is submitted that there are no reasons provided by the Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 8 of 26 Arbitrator in support of his conclusion in so far as application of the rate of 12% is concerned.
12. In response, Ld. counsel for the respondent submitted that the contract provides for a rate of 15% for completion of pre-assembly work and petitioner does not dispute that pre-assembly includes welding also, therefore, when part-welding has been done it is reasonable and proper to assume a rate of 12%. The quantum of material for which this claim is made is 12.908 MT and there is no dispute between the parties on this quantum. The work for which this claim is made is covered by Clause 57.3 IA(i) of the contract. As per this Clause, Respondent/Counter-claimant was to be paid 15% of the contract rate on pro-rata basis upon completion of pre-assembly work and it has already been said that the unit rate under the contract is Rs.2,700/- per MT. It has been rightly held by the Ld. Arbitrator that pre-assembly work gets completed only when required welding of pre-assembled items also gets completed, and when these items are then ready for erection and in fact, counter claim no. 2 allowed on this basis has not been challenged by the petitioner.
13. Since in the instant Counter-claim, the welding work has not been fully completed but has only been completed in part, the rate of 15% set out in Clause 57.3 IA (i) of the contract could not be fully applied and thus, a lower percentage would therefore, have to be applied, hence the Ld. Arbitrator, upon a proper analysis of the claim and the quantum of work done, rightly applied a rate of 12% of the contract rate on pro-rata basis for this claim. It is submitted that 12% of the contract rate comes to Rs.324 per MT [12% of Rs.2,700], therefore, for 12.908 MT the claim awarded works out to Rs.4,182/-. This court finds that the Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 9 of 26 rate of 12% applied is appropriate and reasonable and there is no dispute between the parties as to the quantity of material involved which had been pre-assembled and where part welding has been done. No contract between the parties can provide for every situation, however, would not mean that a contractor cannot be compensated for work done merely because the contract does not provide for any specific rate for work done up to a particular stage. In such cases therefore, it is reasonable to award a rate which is lower than the rate prescribed by the contract for work done up to that stage of prescription. This is exactly what Ld. Arbitrator has done in the instant case when he has applied rate of 12%, which is lower than the rate of 15%, and thus, no fault can be found with rate of 12% which appropriate and reasonable.
14. The contention of the petitioner is that Clause 57.3 IA(i) of the contract does not deal with break-up of cost but it deals with payment milestone and that therefore, the Arbitrator's interpretation is not a plausible interpretation, however, while it is true that it does not deal with break-up of cost, it certainly does not relate to a milestone payment which is specifically covered by Clause 57.3 IIB of the contract. Milestone payment is reached only when the erection work is completed, however, this stage never reached since the contract was terminated much before this stage, therefore, the only applicable clause would be Clause 57.3 IA for the purpose of computation of this claim. This court finds no merits in contention of the Petitioner that there is no evidence for applying the rate of 12% or that the Arbitrator has not given reasons for applying this rate, since the evidence for the grant of this rate lies in Clause 57.3 IA(i) itself. Furthermore, the Ld. Arbitrator has given elaborate reasons for applying the rate of 12%. Therefore, there is no Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 10 of 26 merits in the contention that the arbitrator has not given reasons.
15. It is pertinent very curious to note is Counter Claim No. 2 and Counter Claim No. 3 are of the same nature and difference being that while in Counter Claim No. 2 the work of welding was completed, in this Claim the work of welding was not completed at the time of illegal termination, therefore, if in Counter Claim No. 2 the Respondent could accept that the applicable clause is Clause 57.3 IA(i) of the contract and that the rate under this Clause was 15%, then, this court finds merit in the contention of Delkon that the only applicable clause for the purpose of this Counter-claim would also be the same Clause 57.3 IA(i), therefore, the award of Counter Claim No. 3 at the rate of 12% when the work of welding was not completed is justifiable and reasonable.
Cost of errection and alignment work done (Claim No. 5)
16. As regards, cost of erection and alignment work done, Ld. counsel for the petitioner submitted that the Ld. Arbitrator has not relied on the documents correctly. It is submitted that in the Local Commissioner's report, the alignment done was reported as two figures and instead of relying on the admitted figure i.e. 53.231 MT), the Ld. Arbitrator has without any reason or justifications, has worked out the average of the two figures, which is not permissible and the payment milestone has no correlation with the value of work done and this had to be proved independently by the counter-claimant/respondent.
17. In response, Ld. counsel for Delkon submitted that they had preferred a claim for 153.526 MT towards erection and alignment work done, whereas BHEL claimed only 53.231 MT of material had been aligned. In view of the conflicting claims of both parties on the quantity Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 11 of 26 of material aligned, the Local Commissioner's report was before the Arbitrator. These conflicting claims find mention in the Local Commissioner's report. Ld. Arbitral Tribunal observed that in the absence of any other document in this dispute of measurement, Tribunal has no way to ascertain the quantum of this alignment activity executed by respondent. Under the conditions, Tribunal considered a mid-way or mean approach as appropriate. Ld. Arbitrator took the mean of these two figures to arrive at the figure of alignment work executed and it is held that quantity of 103.379 MT had been aligned (average of 153.526 MT and 53.231 MT). Having held that 103.379 MT was the weight of alignment done, the Ld. Arbitrator applied the rate (pro-rata) stipulated in Clause 57.3 I(A)(ii) of the contract to arrive at the cost of alignment work done.
18. Ld. Arbitrator found merit in the contention of the Petitioner's that the Respondent had not completed the work of grouting on the columns aligned and the Ld. Arbitrator thus, held that the Respondent would not be entitled to the entire rate of 50% (pro- rata) set out in Clause 57.3 I(A)(ii) of the contract for the purpose of ascertaining the value of alignment done. Ld. Arbitrator therefore, reduced rate of 3% towards grouting work which had not been carried out by the Respondent and accordingly, it was held that claimant would be entitled to be paid at the rate of 47% on pro-rata basis for the work of alignment and thus, 47% of the contract rate on pro-rata basis works out to Rs.1,269 per MT (Unit rate is Rs. 2,700/- per MT). Thus, if a quantity of 103.79 MT had been aligned, the cost of alignment work done amounts to Rs.1,31,188/- and this was the sum that was awarded by the Ld. Arbitrator under this head.
Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 12 of 2619. It is the contention of the Petitioner that instead of relying on the admitted figure of 53.231 MT which it, the Petitioner, had laid before the Local Commissioner the Ld. Arbitrator had averaged the figures claimed by the two parties, i.e., 153.526 MT claimed by the Respondent and 53.231 MT claimed by the Respondent. Petitioner contended that the Ld. Arbitrator had not given any reasons for taking the average. Interestingly, the Petitioner has not disputed the rate of 3% which the Ld. Arbitrator has deducted towards grouting work which the Arbitrator had held had not been done by Delkon while doing the work of alignment. This shows that Ld. Arbitrator has worked out the percentages and the amount in a judicious and reasonable manner and, therefore, no merit is found in the contention of the petitioner.
20. A reading of the Local Commissioner's report would show that each of the two parties had made endorsements on the quantity of material aligned. The two parties had also signed the report as acknowledgement of the endorsements. It was the specific contention of the Delkon that it had completed the alignment works for 'B' Pass but that the Petitioner had not checked, verified, or inspected the alignment. Ld. counsel for the respondent submitted that in the light of this specific contention made by the Respondent therefore, the Petitioner was necessarily required to show that it had checked, verified, and inspected the quantities of alignment, as claimed by the Respondent, and that based on such verification and inspection, the Respondent had not completed the alignment of 153.526 MT. It is submitted that the onus thus, shifted to the Petitioner to disprove the Respondent's claim that it had aligned 153.526 MT. The onus shifted because it was the Respondent that had provided the figures of all material transported, erected, and pre-
Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 13 of 26assembled (with full welding or part welding) to the Local Commissioner. These measurements with reference to transportation, erection and pre-assembly were provided only by the Respondent. It is submitted that the Petitioner did not provide any of these measurements and also failed to adduce any material showing that it had checked, verified, and inspected the Respondent's claims of alignment, and that on such verification and inspection, Respondent had not aligned the quantity claimed and thus, the claim of the Petitioner's that the Respondent had not completed the alignment works for 'B' Pass of a quantity of 153.526 MT was not proved.
21. Ld. counsel for the respondent submitted that the measurements provided by Delkon that it had aligned 153.526 MT ought to have been taken by the Ld. Arbitrator to be correct in entirety and Delkon was therefore, actually entitled to payment of this claim for the whole of the quantity of 153.526 MT aligned rather than the lessor averaged quantity of 103.379 MT which Ld. Arbitrator has granted. It is submitted that a reading of the Local Commissioner's report would show that there is only a very small variation in quantities (of material transported, erected, and pre-assembled) between what the Delkon has claimed and what the Local Commissioner allowed.
22. It is submitted that in spite of every positive material available on the record of the case showing that the Respondent had actually aligned 153.526 MT, the Ld. Arbitrator granted only 103.379 MT on this score, after taking the average of the two figures furnished by the respective parties. It is submitted that the Ld. Arbitrator adopted the "mean" approach only because he felt that there was no other material available showing the quantity of material aligned. Ld. Arbitrator, in Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 14 of 26 fact, ought to have seen that the Local Commissioner's report itself furnished sufficient evidence of 153.526 MT having been aligned, therefore, the adoption of the "mean" approach only favoured the Petitioner. Petitioner cannot therefore, be said to be prejudiced or cannot be said to suffer any loss by the measurement determined by the Arbitrator on the adoption of the "mean" approach. This court finds no merit in the submissions of the Ld. counsel for the petitioner that the Ld. Arbitrator has not given any reasons for adopting the "mean" approach. Ld. Arbitrator has very clearly said that he was adopting this approach because he felt that there was no other material available on the basis of which the quantum of alignment could be determined.
23. Last contention about this Counter Claim put forward by the Petitioner is that "payment milestone" had no correlation with the value of work done and had to be proved independently by the Delkon. This contention is misconceived as award of this Counter-claim is not based on any "payment milestone" but based on "progressive payments", which clearly finds mention in Clause 57.3 I of the contract. Ld. Arbitrator was therefore, justified in awarding this claim pro-rata on the basis of Clause 57.3 IA(ii) of the contract. In view of aforenoted reasons, challenge made by the Petitioner to the award of Rs.1,31,188/- in this court has no merits and is liable to be rejected. Illegal withholding of plant and equipment (Claim No. 7)
24. As regards, illegal withholding of plant and equipment, Ld. Arbitrator has awarded the counter claim on surmises and conjectures and assumptions. It is submitted that claim is awarded on the basis on no evidence at all and hence, liable to be rejected. It is submitted that even the document placed on record is Annexure R-14, was denied by the Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 15 of 26 petitioner. This claim was towards illegal withholding by BHEL of tools and plant belonging to Delkon when the contract was terminated on 21.01.1997. It is submitted that by reason of termination, the Delkon was unable to enter the site and remove its tools and plant that it had brought into the site for the execution of work. It is submitted that the tools and plant could be finally removed only in December 1997, after an order had come to be passed by the Delhi High Court on 06.08.1997 on an application filed by the Respondent for removal. Since the tools and plant were stuck in the Petitioner's site and Delkon was unable to remove and unable to remove and unable to put them to use for any other work, therefore, it claimed withholding charges, being the charges it would have earned had these tools and plant been let out on hire to another person for this period. Delkon had submitted a list containing details of tools and plant that were deployed at the site for executing the works, having 353 items of tools and plant that were used.
25. Ld. counsel submitted that the award cannot be set aside merely because there is other method that may be available to make the computation. It is settled law that where there is more than one method of computation available, no award can be set aside merely because there is another method available. The indisputable fact remains that there is a loss; that this loss has been caused by the opposite party (the Petitioner); that the opposite party does not challenge the finding of the Arbitrator that it is he who has caused the loss; therefore, the opposite party admits that the party who suffers the loss must be compensated; in these circumstances, the opposite party (Petitioner) cannot question the manner in which the claim is awarded. It is submitted that for all the aforesaid reasons, the contention of the Petitioner that the award of the Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 16 of 26 Respondent's Counter-claim towards withholding charges is based on conjectures, surmises, and assumptions, and that it is based on no evidence, is totally without substance and ought therefore, to be dismissed and that the Respondent is entitled to have the award of Rs.5,75,342/- in its favour towards withholding charges of tools and plant upheld.
26. Ld. Arbitrator found that the Petitioner had a role to play in withholding of the plant and tools. This finding has not been challenged by the Petitioner in the Petition. Delkon suffered loss from the illegal withholding of its plant and tools, which means it requires to be compensated for the loss caused to it. Therefore, the question that remained to be answered was whether Ld. Arbitrator's quantification of this loss can be said to be patently illegal or baseless. Ld. Arbitrator observed that the Respondent had claimed withholding charges on the plea that the Respondent could have let out these tools and plant on hire to some other person during the period these were illegally withheld. Delkon had claimed a sum of Rs.69,00,000/- as such charges for a period of 345 days over which the tools and plant had been withheld, calculated at the rate of Rs.20,000/- per day as hiring charges in case the tools and plant had been let out to some other person. Ld. Arbitrator observed that Delkon placed an overall value of Rs.49,68,500/- on these tools and plants and based on these figures therefore, the Ld. Arbitrator concluded that as per the Delkon's calculation, the tools and plant would fetch a return of 139% of their total cost over a period of one year which was absurd. He accordingly rejected Delkon's basis of computation of withholding charges. Ld. Arbitrator then, arrived a method of computing the charges. He found that Delkon had placed a total value of Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 17 of 26 Rs.49,68,500/- on plant and tools and placed a rate of depreciation of 25% on these plant and tools. He found that Item Nos. 1 and 2 were not available in the list of tools and plant which Delkon had supplied to BHEL/petitioner. He further agreed with the submission made by the Petitioner that Delkon had removed some of the items from the site although there was no material on record to indicate that Delkon had actually made such removal, since it was the Petitioner, who had access to the site.
27. On the basis of these findings, the Ld. Arbitrator concluded that value of plant and tools could be taken as Rs.40,00,000/- instead of Rs.49,68,500/-. Taking the rate of 25% as depreciation, the Ld. Arbitrator came to the conclusion that withholding charges would work out to be Rs.10,00,000/- per year. Ld. Arbitrator however, further found that Delkon would not be entitled to claim withholding charges for 345 days and Delkon had actually taken 165 days to remove the plant and tools after the High Court passed the order directing removal. Ld. Arbitrator found the said period taken to remove these items far too long and unreasonable, in the circumstances. He therefore held that a period of 30 days from the date of the order would have been sufficient for the Respondent to remove the items and thus, found that the plant and tools had been withheld only for 210 days. On the basis of this period, therefore, the Ld. Arbitrator finally concluded that withholding charges would work out to only Rs.5,75,342/- (i.e. Rs.10,00,000 per year calculated for 210 days). It is apparent that Ld. Tribunal has judiciously applied his mind to the fact-in-issue, he has considered the contentions placed on record by both parties in respect of the claim and only on the basis of his thoughtful consideration, he has reasoned that a sum of Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 18 of 26 Rs.5,75,342/- would be payable to the Respondent as withholding charges. He has found that the basis of the computation of the claim made by Delkon was unreasonable, and therefore, devised a reasonable method of computing the loss sustained. Based on the arguments and material available on record, reasoning that Delkon would be required to be compensated for the loss since the Petitioner had illegally withheld the tools and plant was sound. Ld. Arbitrator even found that the number of days for which Delkon made the claim was unacceptable and accordingly limited the number of days for which the claim could be made to 210 days and award is only upon a method of computation that is scientific, practical, plausible, and reasonable in the circumstances and thus, it cannot be set aside on the argument that it is whimsical or without basis.
Cost of mobilization and demobilization of tools and plant, equipment and manpower (Claim Nos. 13 & 15)
28. As regards, cost of mobilization and demobilization of tools and plant, equipment and manpower, the contention of Ld. counsel for the petitioner is that Ld. Arbitrator awarded the counter claim on surmises and conjectures and assumptions and on the basis of no evidence at all and hence, liable to be rejected.
29. Towards cost of mobilization and demobilization of equipment, and manpower, Ld. counsel for Delkon submitted that it had incurred costs to mobilize its equipment, and manpower for the purpose of executing the work under the contract. Likewise, it incurred costs when it was forced to demobilize all of these when the contract was illegally terminated on 21.01.1997. It is submitted that costs of mobilization was expected to be recovered over a period of 29 months Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 19 of 26 during which the contract was to be performed, however, since the contract was illegally terminated suddenly on 21.01.1997, these costs, which were a one-time expenditure, proved to be a waste. It is submitted that it also meant that the Respondent was prevented from earning revenues/profits from the contract which it would have earned had the contract been allowed to be performed. It is submitted that these costs were a part of overheads incurred by the Respondent. Overheads constituted 5% of the unit rate under the contract. Total value of the contract was Rs.3,13,20,000/- and, therefore, 5% of Rs.3,13,20,000/- roughly works out to Rs.16 lakhs and the value of overheads with reference to the contract price was therefore Rs.16 lakhs and claim was made for 65% of the overheads consumed under the contract (59th Minutes of Meeting dated 21.07.2020), therefore, a sum of Rs.6,04,800/- was claimed towards mobilization costs and a sum of Rs.4,48,000/- was claimed towards demobilization costs and a total of Rs.10,52,800/- was therefore, claimed under this head.
30. Ld. counsel for respondent submitted that furthermore, in a claim of this sort, it is justifiable for a contractor to include in his price, which he quotes, an element of revenue or profit. He is therefore able to earn this revenue or profit if he is allowed to complete the contract and the element of revenue or profit is therefore inbuilt in the terms quoted. If the contract is therefore, illegally terminated, as in the instant case, he is deprived of that revenue or profit and a loss is therefore presumed as long as the contractor produces material showing that he has mobilized and demobilized resources. It is submitted that the contractor is therefore bound to be indemnified for the loss caused, all the more so in a case where the illegal termination is not challenged.
Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 20 of 2631. Perusal of record shows that from a consideration of the documents filed by Delkon, including Local Commissioner's report, Ld. Arbitrator found that Delkon had mobilized all major at the site. He found that Delkon mobilized manpower to the extent of 62/65 persons out of a total of 104 persons at the site. Ld. Arbitrator therefore, accepted the argument of Delkon that a considerable portion of the overheads had been consumed towards mobilization of resources. It is submitted that Ld. Arbitrator agreed with Delkon that overheads had been consumed towards demobilizing these resources when the contract had been terminated earlier than its normal course. Ld. Arbitrator agreed that costs of mobilization/demobilization were a one-time expenditure and rejected the contention of the Petitioner that adequate resources had not been mobilized. It correctly held that termination of the contract by the Petitioner for that reason was illegal and thus, found that this illegal termination of the contract had prevented Delkon from recovering these overheads and earning a revenue, which it would have done, if the contract had been allowed to be completed.
32. Based on the above findings, Ld. Arbitrator held that the Respondent/contractor had suffered a loss on the mobilization and demobilization of resources which required to be compensated. Taking into consideration the findings, Ld. Arbitrator accepted the Respondent's claim that 65% of the overheads had been consumed towards mobilizing and demobilizing equipment, and manpower. It is cannot be observed that the award of the amount of Rs.10,52,800/- towards mobilization and demobilization costs was without reasons, or material evidence on record. The criterion is that there must be a loss; and that this loss must be proved. The very act of mobilizing and demobilizing resources Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 21 of 26 implies that expenses were incurred on these activities Therefore, even if actual expenses incurred is not produced, as long as there is sufficient material or evidence available on the record on the basis of which an estimation of loss/expenses/costs incurred can be drawn, which is reasonable, an award of that estimate can be granted. This is exactly what the Ld. Arbitrator has done in awarding this claim. The award of this claim cannot therefore, be set aside merely because no document was produced by Delkon to show actual expenditure.
33. It is submitted that the award of a sum of Rs.10,52,800/- on this score is therefore, perfectly legal. This court is in agreement with the submission of respondent that a reading of the Petition would show that the Petitioner has, in fact, not challenged the finding rendered by the Arbitrator that the Respondent has suffered a loss from mobilizing and demobilizing resources and that what the Petitioner has challenged is only the award of the compensation amount for the claim, therefore, Petitioner case of dispute that the respondent has suffered a loss which needs to be compensated. Award is also based on reasons which have been set out in detail in Award. Reasons are found cogent, tenable and cannot be said to be based on conjectures, or without material or evidence. Therefore, contention of petitioner deserves to be rejected. Interest (Claim No. 22)
34. Now coming to last challenge of petitioner as regards interest. Delkon was awarded a sum of Rs.29,42,065/- under the Award in respect of its Counter Claims and awarded interest, on a sum of Rs.66,50,560/-, as pre-reference and pendente lite interest. The Respondent was awarded interest at the rate of 14.15% on the principal of Rs.29,42,065/- with effect from 01.07.2021.
Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 22 of 2635. As regards pre-reference and pendent-lite interest, Ld. counsel for the petitioner submitted that interest is expressly barred under the Contract as per Clause 17 of the General Conditions of Contract. It is submitted that power of arbitrator u/S 31(7)(a) to award interest is subject to an agreement in this regard between the parties and Ld. Arbitrator has given a complete go-by to the contractual bar and settled law. It is submitted that award is perverse and deserves to be set aside as the rate at which interest has been awarded is not based on any material at all, including that it does not correlate to the prevalent historical SBI data. In response, Ld. counsel for the respondent submitted that the Respondent/Counter Claimant had claimed interest at the rate of 24% per annum in the arbitration proceedings on all of its Counter Claims from the date of the cause of action till the date of realization of these claims. It is submitted that Ld. Arbitrator has allowed the claim for interest on Counter Claim Nos. 7, 8, 9, 10, 11, 13, 15 and 21, but rejected the claim for such interest on Counter Claim Nos. 1, 2, 3, 4, 5, 6, 12, 14, 16, 17, 18, 19 and 20. It is submitted that for all the aforesaid reasons, the Award passed by the Arbitrator is perfectly legal and justifiable and must be upheld.
36. Clause 17 of the General Conditions of Contract is extracted below:-
"17. No interest shall be payable by BHEL on Earnest Money Deposit, Security Deposit or on any moneys due to the contractor."
37. There is no dispute about the fact that interest is not payable on earnest money deposit, security deposit, however, so far as the third element in Clause 17 is concerned, i.e., "moneys due to the contractor", the phrase means monies, provisions for which are made in the contract Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 23 of 26 for work done by the contractor, and which, accordingly, are due and payable by the employer/Petitioner to the contractor. It is the contention of Delkon that while no interest is payable on monies due to the contractor under the contract, interest is payable on monies that are claimed by the contractor and awarded to the contractor otherwise than under the contract. In other words, interest is payable on amounts claimed and awarded (by the Arbitrator) as damages/compensation for breach of contract committed by the Petitioner. Thus, interest is payable on Counter Claims made and awarded for illegal termination of the contract resulting in loss. Some of the Counter Claims are therefore for loss/damage suffered by reason of the Petitioner's illegal termination of the contract, and these claims are therefore otherwise than under the contract. This contention of Delkon has been upheld by the Arbitrator. It is to be kept in mind that the Petitioner has not challenged the portion of the Award holding that the termination of the contract was illegal. Counter Claim Nos. 1, 2, 3, 4, 5, 6, 18, and 19 were claims that had been raised by Delkon in respect of monies due under the contract. Ld. Arbitrator has rejected the claim for interest on these Counter Claims on the ground that these Counter Claims were for monies due under the contract, however, Counter Claim Nos. 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 20, and 21 were in respect of monies claimed for damage/loss suffered by the Respondent by reason of the illegal termination of the contract by the Petitioner.
38. It is submitted that interest was not granted on Counter Claim Nos. 12, 14, 16, 17, and 20 because these claims had themselves not been allowed by the Ld. Arbitrator and thus, the award of sums as interest on Counter Claims that arose otherwise that is to say, on breach Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 24 of 26 of contract by the Petitioner was justifiable. Therefore, there is no merits in the contention of petitioner that the Ld. Arbitrator had given a complete go-by to the contractual bar or the settled legal position on this point. Contractual bar was only in respect of monies due under the contract and there is no bar on the award of interest on sums awarded otherwise.
39. It is submitted that the Petitioner has not challenged the award of Counter Claim Nos. 8, 9, 10, 11, and 21. Ld. Arbitrator has granted interest on these Counter Claims, however, in the absence of any challenge to these Counter Claims, there can be no challenge whatsoever to the grant of interest under Claim No. 22. It is submitted that the acceptance of the Award on Counter Claim Nos. 8, 9, 10, 11, and 21 is therefore a complete bar to challenging the award of interest under Claim No. 22 and Challenge to Counter Claim No. 22 could only be made if all the Counter Claims arising otherwise than under the contract are also challenged.
40. So far as the rate of interest of 14.28% awarded (for the pre- reference period and pendent lite period) and 14.15% awarded (for the post award period) is concerned, the same cannot be held to be patently illegal. The details of Prime Lending Rate (PLR) were available on the website of State Bank of India itself on the date the Award was pronounced. The addition of 2% to the PLR is equally reasonable, and justifiable. Therefore, there can be no question of an award of a rate which does not correlate with any data available on SBI's site. The Petitioner itself has not produced any data to show that the PLR rate was any different on the date the Award was pronounced. Delkon had claimed interest at 24% per annum. Ld. Arbitrator had rejected this rate outright to subsequently grant a rate on the basis of the PRL. The award of interest Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 25 of 26 at the rate of 14.28% and 14.15% is therefore appropriate and reasonable and cannot therefore be said to be perverse as contended by the Petitioner. The challenge to the interest awarded is therefore totally without merit and must be rejected as none of the judgments relied upon by the Petitioner to contend that the award of interest was barred, or that it was perverse, is applicable to the facts and circumstances of the instant case.
41. This court finds no merits in the petition. Award is well- reasoned and while allowing some of the Counter-claims of the Petitioner, the Ld. Arbitrator has rejected some of them. In respect of Counter Claims which have been allowed, the Respondent has furnished sufficient material and/or evidence on the basis of which Ld. Arbitrator is justified in allowing the claims, either in full or in part. No Counter Claim has therefore been allowed without reasons and material. The amounts awarded in respect of each of the Counter Claims dealt with above are reasonable and plausible. Thus, there can be therefore, no question of the Award being based on conjectures or surmises as argued or otherwise covered within Section 34 of the Act.
42. In view of the aforenoted discussions, this court finds no merits in the petition and no ground for interference is warranted in the award. Accordingly, this petition U/s 34 of A&C Act deserves to be dismissed. Order accordingly. No order as to costs. File be consigned to record room.
(Dictated and announced today i.e. on 09.02.2023).
(VINAY KUMAR KHANNA) District Judge (Commercial Court-02) South Distt., Saket, New Delhi Bharat Heavy Electricals Ltd. Vs. Delkon India Pvt. Ltd. - OMP (Comm) 63/21 Page 26 of 26