Bangalore District Court
At Puttenahalli Was Required To Store ... vs Themselves Have Admitted That The Pipes ... on 23 November, 2018
1
IN THE COURT OF THE PRINCIPAL CITY CIVIL AND
SESSIONS JUDGE, AT BENGALURU
DATED THIS THE 23rd DAY OF NOVEMBER, 2018
PRESENT: SRI. SHIVASHANKAR B.AMARANNAVAR,
B.Com., LL.M.,
Principal City Civil and Sessions Judge,
Bengaluru.
A.S.No. 01/2008
BETWEEN:
M/s Krishil Capital Holdings
Private Limited
(Earlier M/s. Krishi Projects Pvt. Ltd.)
A Company incorporated under the
Provisions of Companies Act, 1956,
having its Registered Office at
No.21/83, 1st Floor
Ramachandra Arcade
South End Road
Basavanagudi,
Bangalore.
Rep. By its Director and
Authorized Signatory
Sri. K.R. Choudary. .. Plaintiff /Claimant
(By Sri.S.S. Advocate , Advocate)
AND
1. M/s. Telecommunications Consultants
India Limited
TCIL Bhavan
Greater Kailash-1
2
New Delhi - 110 048
Rep. By its Chairman and
Managing Director.
2. The Senior General Manager (SR)
M/s. Telecommunications
Consultants India Ltd.,
No.20, Potters Street
Saidapet
Chennai - 600 015.
3. Sri. P. Murali Mohan
Arbitrator
Deputy General Manager (MTCE)
Bharat Sanchar Nigam Limited
Southern Telecom Sub-Region
Vijayawada - 520 010.
.. Defendants / Respondents
(By Sri.V.B., Advocate for R1 & R2)
(Arbitrator - Respondent No.3)
JUDGMENT
The Plaintiff has filed this suit under Section 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'Act' for short) challenging the Arbitral Award passed by the 3rd Defendant in Case No.22/DGMM/ARB/05- 06/II/172 dated 29.8.2007.
2) For convenience, the parties would be referred to as Claimant and Respondents as they were referred to in the Arbitral Proceedings.
33) The Claimant has challenged the said Arbitral Award dated 29.8.2007 on the following grounds:
a) It is the specific case of the respondents that the pipes stored in the store yard are the pipes pertaining to project bearing No. BGT 1/2k and BGT 16/2k apart from the project bearing No. BGT 22/2k which the plaintiff has completed after February, 2001. It is the case of the respondents that the project bearing No. BGT 1/2k was completed on 13-08-2002 and the project bearing No. BGT 16/2k was completed on 15-02-2003. The learned arbitrator in his award has exceeded his jurisdiction in taking into consideration all the twelve projects carried out by the claimant in order to come to the conclusion that the pipes were stored only for a period of four months instead of 30 months as claimed by the claimant that too when the respondents themselves have claimed that even according to them only the pipes of BGT 1/2k and BGT 16/2k along with the pipes of the project bearing No. BGT 22/2k, which the claimant all along disputed and denied.
b) The learned arbitrator has erred in law in exceeding his jurisdiction while coming to the conclusion that the pipes were stored with respect to project bearing No. BGT 22/2k only for a period of four months that too after the admissions of the respondents that a rental of Rs.36,000/- per month with respect to the store yard was paid by the claimant continuously for a period of thirty 4 months only with respect to storing of pipes belonging to project bearing No.BGT 22/2k and the space hired by the claimant at Puttenahalli was required to store the pipes of project bearing No.22/2k only and the respondents did not object to the same as the said space was required for storing the pipes for project bearing No. BGT 22/2k. The learned arbitrator has failed to appreciate the fact that the respondents themselves have admitted that the pipes of all other projects except for the project bearing No. BGT 22/2k were stored in the respective project sites.
c) The learned arbitrator has erred in law in rejecting the interest after allowing the claim of the claimant. The learned arbitrator ought to have allowed interest as claimed by the claimant as the arbitrator had specifically reached the conclusion in his award that the plaintiff has made the payment as claimed and the respondents are liable to pay the same.
d) The learned arbitrator has exceeded his jurisdiction in holding that no business loss requires to be compensated to the claimant as he has awarded the storage and handling charges. In fact, the learned arbitrator has not even applied his mind to the case of the claimant as to the business loss and on that count alone the award requires to be set aside.5
e) The claimant submits that there is no rational basis for the award and the Hon'ble Arbitrator has partially rejected the claim of the claimant without even applying his mind to the facts and circumstances of the case. On that ground alone, the award requires to be set aside.
f) The award passed by the Hon'ble Arbitrator is bad in law and the same requires to be set aside.
4) On service of notice, the respondents 1 and 2 appeared through Counsel. The Respondent No.3 is the Arbitrator. This Court, after hearing the arguments of the counsel for the parties has passed the Judgment on 5.4.2014 allowing the suit of the Claimant and directing the Respondents to pay to the Claimant Rs.35,76,316/- with interest at the rate of 12% p.a. from 27.3.2001 till payment of the amount in full. The Respondents 1 and 2 have challenged the said judgment dated 5.4.2014 before the Hon'ble High Court of Karnataka in MFA No.5873/2014 (AA). The Hon'ble High Court of Karnataka has allowed the said Appeal filed by Respondents 1 and 2 and remanded the matter for re-hearing and disposal afresh and to take into consideration the contentions of the Respondents 1 and 2 with regard to limitation, the power of this court to interfere with the Award and estoppel of the fact of Claimant Contractor having received the award amount without protest. After remand, the Claimant and 6 Respondents 1 and 2 appeared through counsel and filed their respective written arguments with citations.
5) Heard the arguments of the learned counsel appearing for the Claimant and Respondents 1 and 2.
6) Taking into consideration the arguments advanced by both the parties, the following points arise for my consideration:
POINTS
1) Whether the Suit filed under Section 34 of the Arbitration and Conciliation Act, 1996 is in time?
2) Whether the Claimant received the Award amount without demur and without reserving right to challenge the award and therefore Claimant is precluded from challenging the Award passed by the Arbitrator?
3) Whether the Claimant has made out ground to set aside the Arbitration Award under Section 34 of Arbitration and Conciliation Act, 1996 and to allow his Claim made before the Arbitrator?
4) What Order?
77) My answer to the above points are as under:
Point No.1: In the Affirmative.
Point No.2: In the Negative.
Point No.3: In the Affirmative.
Point No.4: As per the the following:
REASONS
8) Point No.1: The present proceedings under
Section 34 of the Act, has been filed on 1.1.2008. The Arbitration Award has been passed by the 3 rd Respondent on 29.8.2007. It is the contention of the Claimant that they received the copy of the Award sent by the Arbitrator on 29.9.2007. It is further contention of the Claimant that the proceedings under Section 34 of the Act requires to be filed within three months from the date of receipt of the award and therefore the proceedings under Section 34 of the Act has to be filed on or before 28.12.2007 and as the courts were on vacation on 28.12.2007, thus Claimant filed the suit on the re-opening day i.e., on 1.1.2008. The Respondents 1 and 2 disputed that Claimant received the copy of the award sent by the Arbitrator on 29.9.2007, but they contended that the Claimant received the Award on 29.8.2007. As per Sub-Section (3) of Section 34 of the Act, an application for setting aside may not be made after three months having lapsed from the date on which the party making that application had received the Arbitral 8 Award. As per Sub-Section (5) of Section 31 of the Act, after the Arbitral Award is made and signed copy shall be delivered to each party. There is nothing in arbitration records to show that copy of the award sent by the Arbitrator has been delivered to the Claimant on 29.8.2007. The Director of Claimant Sri. K.R. Choudhary has been examined as PW.1 and he has stated in his evidence affidavit that Award was communicated to them on 29.9.2007. He has further stated that the date of signing of the Award was on 29.8.2007 and it is impractical to assume that the Award had reached them on the same day i.e., on 29.8.2007. PW-1 in his cross-examination has denied the suggestion that he has received the copy of the Award earlier to 29.9.2007. Therefore, from the evidence of PW-1, it is clear that copy of the signed Award was communicated to the Claimant on 29.9.2007. Ex.P1 is the copy of the letter dated 29.8.2007 and copy of Award dated 29.8.2007 is annexed to it. The mode of service of the said copy of the Award is not stated by the Respondents 1 and 2 or in the arbitration records. Therefore, there is only statement of PW.1 on oath that he has received the signed copy of the Award on 29.9.2007. Therefore, the limitation for filing proceedings under Section 34 of the Act has to be reckoned from 29.9.2007 and the last date for filing the suit under Section 34 of the Act is 28.12.2007 and the Civil Courts were closed for vacation and the suit came to be filed on the reopening day i.e., on 1.1.2008. Therefore, the suit filed by the Claimant under Section 34 of the Act, on 9 1.1.2008, is within the period of limitation. Accordingly, I answer Point No.1 in the Affirmative.
9) Point No.2: The Respondents 1 and 2 have contended that the Plaintiff has received and encashed the cheque for a sum of Rs.4,95,983/- sent by the Respondents 1 and 2 without demur and without reserving right to challenge the award and therefore plaintiff is precluded from challenging the award passed by the Arbitrator. The Plaintiff has admitted that the 1st and 2nd Respondents have sent cheque for a sum of Rs.4,95,993/- by their letter dated 28.9.2007 honoring the Award passed by the 3 rd Respondent. The learned Advocate appearing for the Respondents 1 and 2 has contended that the party, who has taken benefit under the award cannot say award is invalid. He placed reliance on the following decisions:
i) 1998 (1) Raj 529 (Delhi) Goel Associates vs. Din. Coop. Group Housing Society Ltd., wherein in paragraph 5, it is held as under:
"5. Sum and substance of the remaining four decisions referred to above is also that where a party to an award has taken benefit under it, it cannot turn round, and say that the award is invalid."
ii) AIR 1982 BOM 76 10 M/s. Govindji Jevat and Co., vs. Shree Saraswati Mills, Ltd., wherein in paragraph 8 it is held as under:
"8. The principle that emerges from the two decisions is that it is possible in an appeal against decree or order of Court to confirm the same partly and set aside the same partly even though two parts may not be severable. Another thing to be noted in such a case is that when an appellant challenges a decree against him, the result of the appeal can only be adverse to the appellant to the extent of his challenge in case his challenge fails and if he succeeds only that part is set aside while the part of the decree which is not challenged remains untouched; therefore, the appellant when he receives the money or some other benefit under the decree under challenge always retains the benefit whether he wins or loses the appeal. This is not the position in the case of an award. Whenever an award is challenged on whatever ground it may be, the award has to be set aside in toto or if made in parts, the entire part challenged and thereafter there will not exist any basis for the person challenging the award to retain the benefit received by him under the award or the part of the award which is challenged. In my view this is an important distinction between an award and a decree or order of the Court."
iii) AIR 1979 CAL 20 J. Thomas and Co. (Jute and Gunnie) Pvt. Ltd., vs. The Bengal Jute Baling Co. Ltd., wherein in paragraph 24, it is held as under:
11"24. J. Thomas, contends Mr. Tibrewal, having accepted the award and having made payments under the award cannot now challenge the award. It is nobody's case that the appellant made payment without prejudice to its rights to challenge the award. The last point of Mr. Tibrewal may immediately be dealt with. A person who gains a benefit by obtaining an advantage of money under an award accepts such award and cannot thereafter challenge it. But a person who suffers or incurs a detriment by paying a sum of money or otherwise under an award does not thereby preclude himself from challenging the award if it is otherwise open to challenge."
10) The learned Advocate appearing for the Claimant/Plaintiff has contended that they have encashed the cheque sent by the Respondents 1 and 2 without prejudice to their case and the same has been pleaded in Paragraph III, which reads as under:
"III. The plaintiff in the above suit has challenged the Arbitral Award passed by the third Respondent in Case No. 22/DGMM/ARB/05-06/II/172, dated 29.08.2007 at Document -1. The first and second respondent have sent a cheque for a sum of Rs.4,95,993/- vide their letter dated 28.09.2007 honouring the award passed by the third respondent and thereby the first and second respondent have acquiesced to the award. The claimant herein in this suit is questioning the 12 basis of the quantum arrived by the arbitrator.
As the cheque was becoming stale and the claimant is questioning the basis for quantification, the claimant has deposited the cheque issued by the first respondent for honour without prejudice to their case, in the above suit."
11) The aforesaid pleading of Claimant/Plaintiff clearly goes to show that the Plaintiff has encashed the cheque which was becoming stale and the Claimant is questioning the basis for quantification, and therefore the cheque has been encashed without prejudice to their case. As per the law laid down in the aforesaid decisions, a party, who is liable to make payment under the Award cannot challenge the award if it had made payment without prejudice to its rights. In the present case, there is no liability on the Plaintiff/Claimant for making payment under the award, but it is the plaintiff's right to receive the amount under the award. Even though the plaintiff has received the amount under the award, he can still challenge the award as his claim is more than the amount awarded. Therefore, the decisions referred to by the Counsel for Respondents 1 and 2 will not apply to the case on hand. The plaintiff has encashed the said cheque sent by the Respondents 1 and 2 without prejudice to the case of the plaintiff and therefore the Plaintiff can challenge the award and more so, the claimant is questioning the basis of 13 quantification arrived by the Arbitrator. Accordingly, I answer point No.2 in the Negative.
12) Point No.3: The learned Counsel appearing for Respondents 1 and 2 has argued that the parties by incorporating Arbitration Clause in the Contract consciously excluded the jurisdiction of the Civil Court. Having submitted to the jurisdiction of the Arbitrator, the parties are bound by the decision of the Arbitrator. The parties cannot be allowed to make a back door entry to the Civil Court under the guise of Section 34 of the Act, when the Award goes wrong. Ultimately, the decision of the Arbitrator is final and binding on both the parties. However, the Award can be set aside by the Civil Court only if the grounds mentioned in Section 34 of the Act are made out. The scope of interference by Civil Court in Arbitration Award is very limited. It is as good as supervisory jurisdiction, since scope of interference is further reduced under the Act. The Arbitration Award can be challenged only if the grounds under Section 34 of the Act, i.e., Sub- Section 2(a)(i) to (v) and (b) (i) and (ii). The learned Advocate appearing for the Claimant has argued that he has challenged the Arbitral Award on the ground that it is in conflict with the public policy of India.
13) The Hon'ble Apex Court in the case reported in 2003 (5) SCC 705 in the case of ONGC Limited vs. Saw Pipes Limited, wherein in para No.31, it is held as under:
14"31. Therefore, in our view, the phrase 'public policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award / judgment / decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar case, it is required to be held that the award could be set aside if it is patently illegal. The result would be - award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void."
14) The Hon'ble Apex Court has considered what would constitute "the fundamental policy of Indian law" in ONGC Limited vs. Western GECO International Limited, 15 reported in 2014 (9) SCC 263 - in paragraphs Nos.40 and 41, which reads thus:
"40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.
41. Inasmuch as the arbitrators clubbed the entire period between 16-10-2001 and 21-3- 2002 for the purposes of holding the appellant Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the contention urged on behalf of the respondent that the arbitral award should not despite the infirmities pointed out by us be disturbed."
15) As per the law laid down in the aforesaid decisions, the Arbitration Award can be challenged, if on facts proved the Arbitrator fails to draw an inference, which ought to have been drawn or if they have drawn an 16 inference, which is on the face of it untenable resulting in miscarriage of justice. The aforesaid decision of ONGC case has been referred to in the case of Associated Builders vs. Delhi Development Authority reported in 2015 (3) SCC 49, wherein in paragraph Nos.33 and 34, it is held as under:
"33. It must clearly be understood that when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd., v. B.H.H. Securities (P) Ltd., this Court held: (SCC pp. 601-02, para 21) "21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view 17 was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."
34. It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian Law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood."
Therefore, in view of the law laid down in the aforesaid decisions, it is to be ascertained whether the Arbitrator failed to draw an inference which ought to have been drawn, the inference, which is on the face of it untenable resulting in miscarriage of justice.
16) In this case, it is admitted that the claimant was awarded contract for construction of duct of about 925 Route Meter along Marathalli Road in Marathalli Exchange 18 Area in BGTD under TCIL Project No. BGT-22/2k. The work was awarded on 27.10.2000 and was supposed to be completed within three months. It is also not in dispute that Pipes were issued to the claimant between 13.01.2001 and 27.03.2001 as per Ex.C.3 to C.8.
17) Further, it is admitted that the land wherein the work has to be carried out by the claimant is a defence land. Respondent was not able to get necessary permissions from the Defence Authorities and hence on 22.07.2003 project was cancelled. Pipes were returned by the claimant to the respondent in the second week of Jyly 2003. In fact return of pipes has taken place between 7.7.2003 and 11.7.2003. It is also not in dispute that the claimant had stored these pipes by hiring store yard.
18) The claim made by the claimant is for Rs.22,12,502/- towards storing charges, as the contract was cancelled. Amount claimed by the claimant was towards storing and guarding of 110 mm and 50 mm PVC pipes for the project.
19) As against this, it is the contention of the respondent that the claimant was issued required quantities of PVC pipes in various lots during the course of execution of 12 projects awarded to the claimant including one in BGTD. 22/2k. Out of the 12 projects awarded, 11 projects were completed with varying delays. For these 19 completed projects there was no extra payment for pipes storage nor any payment claimed by the claimant for each project entrusted to the claimant against the above project. Pipes were issued in lots as and when received from the manufacturers / suppliers though BGTD and each lot covered one or more projects. Claimant was expected to stock the pipes meant for various projects which involve transfer of pipes from one project to another regulated through various store transfer notes approved by the respondent during the course of execution of the project.
20) As regard the cancelled Project BGT 22/2k, respondent submitted that at the time of issue of pipes initially 33,270 meters of 110 mm and 23040 meters of 50 mm were supplied in lot. Claimant was simultaneously having 9 projects of 1999 and 3 project of 2000 and for the purpose of convenience entire quantity supplied as above was shown as Project No. BGT. 22/2k. Through various store transfer notes and store return notes the quantities were regularized according to the actual utilization or provision in the estimations as the case may be in each projects.
21) While rejecting the claim of the claimant, learned Arbitrator has held that the storage time for the pipes were varying and they were ranging from 5 months to 30 months in respect of completed projects. It was not practicable to store the pipes for such long duration along 20 the road side in Bangalore. Store yard was used for storing all the pipes meant for various projects. It is further held by the Learned Arbitrator that as per Clause 54 of the Proposal, Contractor was not entitled for any handling / storage charges of materials, additional expenditure incurred by the claimant need to be reimbursed by the respondent.
22) If the Award of the learned Arbitrator is considered, it appears he was under the impression that in view of Clause 54 of the Contract, Claimant was not entitled for any handling / storage of charges of materials. Arbitrator has opined that the business means not merely profit and it means loss also. Because of the cancelled project, whatever expenditure incurred by the claimant towards the storage / handling charges will be sufficient to be recouped and no business loss needs to be paid by the respondent.
23) In my opinion, the observations made by the learned Arbitrator are contrary to the clause of the contract governing the parties.
24) Admittedly, Ex.C.2 is the Contract between the parties in respect of the project in question. Terms of this contract governs the contract between the parties. As can be seen from the terms of this contract namely Sub-Clause
(d) of Clause 3, the PVC pipes will not be stored under 21 direct sunlight. At site they will be neatly stacked along one trench in such a way that no damage occurs by the work, traffic, etc. The PVC pipes, bends, along with solvent cement will be issued at station of work. Other materials (if any) will be issued. The Contractor will arrange proper transportation and storage of material.
25) Clause 7 lays down that the Contractor shall provide without any extra charges site office in near vicinity for the whole duration of the work. It should have a properly covered accommodation not less than 50 Square Meters. In addition to the Contractor, the Employer's Engineer will also use this premises free of charges.
26) As can be seen from these clauses, once the PVC pipes are handed over to the Contractor, it is his responsibility to store the same in such a manner that pipes will not be stored under direct sunlight and necessary protection has to be provided. Apart from the same, the Contractor is also required to provide a covered accommodation as site office.
27) As per Clause 22 of the contract, the Contractor shall in connection with works provide and maintain at his cost all lights, guards, fencing and watching when and where necessary or required by the Engineer or the Engineer's representative, or by any duty constituted 22 authority, for the protection of the works, or for the safety and convenience of the public or others.
28) These are the some Clauses which indicate the extent and manner the Contractor has to arrange for storing and maintaining the pipes given to him for executing the work.
29) The learned Arbitrator has referred to Clause 56 while restricting the claim of the claimant only to the extent of the charges that are necessary for storing the pipes.
30) According to Sub-clause (2) of Clause 56, materials are to be supplied by Engineer. The materials were required to be delivered at Contractor store or any other godown / store / location, decided by the Engineer at the station of work. It shall be the responsibility of the Contractor to arrange for loading, unloading and transportation for use at work at his cost.
31) It means, even the place where the pipes were required to be stored has to be decided by the Engineer.
32) According to Sub-clause (3) of Clause 56, it will be the duty of the Contractor to inspect the material supplied to him prior to taking delivery thereof and to satisfy himself that they are in good conditions. After the 23 materials are delivered by the Engineer, it shall be the responsibility of the Contractor to keep them in good condition and under proper storage wherever necessary. If the materials are damaged or are lost at any time, they shall be required to be replaced by the Contractor at his own cost as per the directions of the Engineer.
33) This Clause indicates that even the safety of the pipes being supplied or stored is the responsibility of the Contractor. Any loss or damage to the pipes has to be made good by the Contractor.
34) For the purpose of this case, I feel it necessary to refer Sub-Clause (1) and (2) of Clause 43. These Clauses refer to suspension of work and suspension lasting more than 90 days. According to these clauses, the extra cost incurred by the Contractor in giving effect to the Engineer's instructions shall be borne and paid by the Engineer unless such suspension is otherwise provided for in the Contract, or necessary by reasons of some default on the part of the Contractor, or necessary by reason of climatic conditions on the site, or delayed supply of material by the Engineer, or necessary for the proper execution of the works. Further, if the progress of the works or any part thereof is suspended on the written order of the Engineer and if permission to resume work is not given by the Engineer within a period of ninety days from the date of suspension then, unless such suspension is 24 within the paragraph (a) to (d) of Sub-Clause (1) of Clause 43, the Contractor may serve a written notice on the Engineer requiring permission within twenty eight days from the receipt thereof to proceed with the works, or that part thereof in regard to which progress is suspended and, if such permission is not granted within that time, the Contractor by a further written notice so served may, but is not bound to, elect or treat the suspension where it affects part only of the works as an omission of such part under Clause 54 thereof, or, where it affects the whole works, as an abandonment of the Contractor by the Engineer.
35) If these clauses are taken into consideration, for any reason, on account of commission or omission on the part of the respondents, the work is not carried out then the same is deemed to have been abandoned of the Contract by the Engineer.
36) In the present case, admittedly, the Defence Authorities did not give permission to carry out the work. The responsibility of obtaining permission from the Defence Authorities was on respondents. The said responsibility was not discharged by the respondents. As a result, the claimant was not permitted to carry out the work. Ultimately, the contract was cancelled. It certainly indicates that it is abandonment of contract by Engineer. In fact, this position is not disputed by the respondents.
2537) Lastly, I wish to refer to Sub-clause (3) of Clause 73 of the Contract. According to this sub-clause, in the event of termination of the Contract, the Employer shall be under the same obligations to the Contractor in regard to payment as if the contract had been terminated under the provisions of Clause 69(8) thereof, the Engineer shall pay to the Contractor the amount of any loss or damage to the Contractor arising out of or in connection with or by consequence of such termination.
38) Further, as can be seen from Sub-clause (8) of Clause 69, if the contract is terminated, the Contractor shall be paid by the Engineer, insofar as such amount or items shall not have already been covered by payments on account made to the contractor for all works executed prior to the date of termination at the rates and prices provided in the contract and in addition -
(a) The amounts payable in respect of any preliminary items, so far as the work or service comprised therein has been carried out or performed, and a proper proportion as certified by the Engineer or any such items, the work or service comprised which has been partially carried out or performed.
(b) The cost of materials or goods reasonably ordered for the works which shall have been delivered to the contractor or of which the contractor is legally liable to accept delivery such materials or goods becoming the 26 property of the Employer upon such payments being made by him.
(c) A sum to be certified by the Engineer being the amount of any expenditure reasonably incurred by the contractor in the expectation of completing the whole of the works insofar as such expenditure shall not have been covered by the payments in this sub-clause before mentioned.
(d) Any additional sum payment under the provisions of Sub-Clause (1), (2) and (4) of Clause 69.
(e) The reasonable cost of removal of Constructional plant under Sub-Clause (7) of Clause 69 and, if required by the contractor, return thereof to the contractor's main plant yard in his country of registration or to other destination at no greater cost.
(f) The reasonable cost of repatriation of all the contractor's staff and workmen employed on or in connection with the works at the time of such termination.
Provided always that against any payments due from the Engineer under this sub-clause, the Engineer shall be entitled to be carried with any outstanding balances due from the Contractor for advances in respect of constructional plant and materials and any other sums which at the date of termination were recoverable by the Engineer from the Contractor under the terms of the contract.
2739) These clauses in the contract clearly indicate that in case of termination or abandonment of contract on account of commission or omission on the part of the respondents, the claimant is not only entitled for actual cost incurred by him, but he is also entitled for the damages. But, according to the Arbitrator, the Contractor is not entitled for any loss or damages. The above terms of contract have been totally ignored by the Arbitrator. Hence, the Award passed by the learned Arbitrator is in contravention of the terms of the contract and, in view of the law laid down by the Hon'ble Supreme Court of India in the above mentioned rulings, it is liable to be set aside.
40) As already pointed out by me, both the parties admit that the contract of project bearing No.BGT - 22/2k was given to the claimant. As per the contract, the claimant was required to complete the project within three months from the date of issue of award letter. Exs.C.9 and C.10 show that the work was not commenced. The respondents were requested to take immediate action to issue letter to KIADB for obtaining road cutting permission and to issue letter to the claimant to start the work without further delay. Ex.C.12 is a letter of the claimant to the respondents. It was pointed out to the respondents that as early as October 2000 the work order was issued, pipes for the project were supplied between January 2001 and March 2001, the work could not be commenced in spite of constant follow up with the respondents. The letter further 28 shows that the respondents were intimated by the claimant that the pipes were stored in a separate store yard at Puttenahalli, J.P. Nagar by incurring huge expenditures. It is further brought to the notice of the respondents that the claimant is paying huge interest to the bankers on overdraft and also incurring huge expenses. Hence, the respondents were requested to expedite the matter. Similar letters in Ex.C.15(a) and Ex.C.17 were written to the respondents by Claimant. Ultimately, as per Ex.C.17 letter dated 3.7.2003, the claimant was requested to return the pipes. Admittedly, the pipes were returned. Ex.C.18 is a letter dated 7.7.2003 along with enclosure claiming rent, watchman and security charges, interest on rent deposit of Rs.3.60 lakhs at 18% per annum, handling charges (electricity, water, torches, battery, etc.), and interest, totally amounting to Rs.22,12,502/-. The enclosure to the said letter further shows that the rent was paid for the storage yard at No.43/2, Puttenahalli, J.P. Nagar VII Phase, Bangalore. Since the claimant was required to give information to the landlord one month or thirty days prior to vacating the same, the rent is paid upto 7.8.2003. Payment for three Security Guards per day (24 hours) was claimed at the rate of Rs.4500/- per month per Security Guard.
41) There appears to be correspondence between the parties in this regard. The claim of the claimant was challenged by the respondents on the ground that the pipes 29 issued to the claimant are not only for the project bearing No.BGT-22/2K, it also included the other two projects bearing No.BGT-1/2K and 16/2K, which the claimant has completed after February, 2001.
42) It is further contended that the storage and handling of the pipes are the responsibility of the Contractor. Such being the case, the claimant has an obligation under the contract to store the pipes and the respondents are not liable for any payment towards the same. As per Clause 54(1) (b) of the general conditions of the Contract, the respondents have a right to require the Contractor to omit any work and the Contractor shall do the same on such requirement. Such being the case, the respondents are not liable to the claimant any expenses incurred by the claimant and the claimant has an obligation to return the pipes as and when required by the respondents. The respondents have given a notional calculation of a sum of Rs.1,97,684/-.
43) The claimant has produced the lease deed between the landlord and himself. The parties have adduced evidence before the Arbitrator. RW.2 Project Manager of the respondents at Bangalore was examined. He has admitted about receipt of Ex.C.10. A suggestion was made to RW.2 that there is no record to show that Ex.C10 was replied. RW.2 admitted the same. He further admits that by 6.10.2001 he was aware of increasing 30 financial burden on the claimant with respect to storage of pipes relating to project bearing No.22/2K. He further admits that by that time he was aware of the fact that the claimant is incurring a rental of Rs.36,000/- per month with respect to project bearing No.22/K. These admissions are very very specific.
44) RW.2 further admitted that he was aware of the fact that an extent of 10 guntas of land was hired by the claimant in Sy. No.43/2 of Puttenahalli Village as per Ex.C.29. There is no record to show that he has ever required the claimant to return the pipes of the project bearing No.22/K and surrender the lease during his tenure. Then it was suggested to him that the space available in Puttenahalli store yard was required for storing pipes of project bearing No.22/2K and therefore he has not raised any written objections. He replied saying that no written objections were raised. There are no records even minuiting his oral objections as to hiring of Puttenahalli store yard for storing the pipes relating to the said project.
45) RW.1 was also cross-examined by the claimant in this regard. He was asked whether he has ever enquired with the claimant as to what are the arrangements he had made for the storage of pipes. RW.1 replied saying that there was no need for enquiry as he was making regular inspection. He admits that during his inspection he was satisfied with the storage of pipes vis-a-vis the project 31 bearing No.22/2K and he replied saying that he did not find any irregularities. He has further admitted that during his inspection, he has never objected for the claimant as to the extent of area taken by him for storage of pipes. It is admitted that he did not object because he knew that so much area was required for storing the pipes supplied with respect to the said project. It is not in dispute that in the absence of project site being approved, the claimant should store pipes at a private place. It appears, after storage of pipes, there was regular inspection of the pipes by respondent No.1. He admits that he has inspected the project bearing No.BGT-22/2K.
46) These facts clearly show that the respondents were aware of the fact that the claimant had taken the land in question measuring to an extent of 10 guntas on monthly rental of Rs.36,000/- for storing the pipes. He had also paid deposit.
47) It is one of the contentions of the respondents that since the project was to be completed within a period of three months, there was no necessity for the claimant to take the land in question on lease for a period of eleven months. Hence, it is submitted that the document is a got up document.
48) As can be seen from the documents produced before the Arbitrator, the same indicates that the tenders 32 were called as if the project is going to commence immediately. The project award letter dated 27.10.2000 was issued. In the said letter, the respondents asked the claimant to commence the work immediately and should complete the work in all respect within three months from the date of issue of the said letter. The claimant was asked to deploy adequate men and machinery and ensure uniform and required progress every week.
49) Exs. C3 to C8 clearly show that the pipes were issued between January 2001 and march 2001 only for the project bearing No.BGT-22/2K.
50) RW.2 in his cross-examination has admitted that he was aware by 6.10.2001 that the claimant was storing the pipes by incurring huge expenditure. The work entrusted to the claimant appears to be with respect to Marathalli exchange area. Even when he was cross- examined, as on that day, he admits that there is no exchange in Marathalli area. A suggestion was made to him that as per Ex.P.C.-36 he is aware of the non- finalization of exchange at Marathalli exchange area as early as 9.5.2000. He admitted the said suggestion. He was asked whether at any point of time before awarding of contract enquired with BSNL whether the requisite permissions are obtained. He replied that he was informed that approval of defence authorities is awaited. He further admits that on 9.5.2000 itself he was aware of the fact that 33 exchange was not available at Marathalli. In spite of all these facts, tender was called, work was awarded to the claimant, pipes were delivered to him and he was made to store the pipes by investing huge amount, that too for long period of 30 months.
51) As per Dx.C.35 and R.13, RW.1 had informed the claimant to lay cable duct from manhole No.1 to 6 in Marathalli exchange area. Without obtaining the necessary permission for carrying out the work from the competent authorities including from the defence authorities, the contract work was entrusted to the claimant. As per the terms of the contract, the claimant was required to make all arrangements for storing pipes and other arrangements required for executing the contract work. IN the cross- examination, RW.1 was asked that except Clause 54(1) (b) in form of proposals, he does not have any objections for settling the claim of the claimant. He replied that provided the claim of claimant is justified as per CWC warehouse charges.
52) Ex.C37(1) (i) is a letter of Project Director of the respondent. In this letter, the Project Manager of respondents states that the project No.BGT-22/2K has been kept in abeyance for a period of thirty months by BGTD and the same was cancelled. He further states that though the claim appears to be justified, it is not practicable. So far in the history of respondent, no such payment has been made 34 to Contractors as storage and transportation charges whenever PVC pipes are handled by returning the same. He further states that if BSNL reimburse the said amount, the same can be paid to the Contractor. But, BSNL will never or ever pay the above mentioned charges. This letter reveals that in principle the Project Director had no objection to pay the amount claimed by the claimant.
53) Ex.C37 (1) (i) is the details regarding the stock of pipes made by the claimant. In Ex.C37(1c) the respondents have admitted that the claimant may claim the enhanced percentage over the approved percentage because of delay in the project. By this, the respondents have acknowledged that there was delay in the project, which was ultimately cancelled.
54) Ex.C41 is the copy of FIR regarding theft of pipes from Puttenahalli store yard of the claimant. This document reveals that 845 pipes of 110 MM and 1217 pipes of 50 MM were stolen. Admittedly, the pipes were stored for long time. Exs.C31 to C34 are the ledger extracts of the Bank. The claimant has claimed interest as paid by him to his bankers. These documents are not denied by the respondents. Hence, there is evidence on record to show that the claimant has incurred loan and paid interest to take the land for storing pipes.
3555) RW.2 was cross-examined and was asked that whenever he visited the said place, he did not object saying that there is no proper watch and ward to the store yard. To the said question, he says that he used to instruct them to keep all safety measures and stack according to guidelines. He admits that he did not give any complaint at any point of time about watch and ward of the store yard. He says that watch and ward, according to him, may be satisfactory. Evidence of this witness also shows that the length of each pipe is about six meters. The pipe will not be cut unless the same is required. He admits that the pipes will be stored across each other to look like a square. He says that three to four feet is required to move around each pipes lot. RW.1 while answering the questions put to him in the cross-examination has spelled out the various modes of quantification of damages. His answers show that while deciding the same CPWD guidelines are followed. It is admitted that the establishment charges and handling charges are taken into consideration while preparing the estimated cost and he has taken into consideration of the same while preparing the estimated cost for the project bearing No.22/2K. He has also admitted in his evidence that the time was essence of contract and generally the time fixed for completion of work is two or three months. Further, it is not in dispute that the claimant had hired store yard at the rate of Rs.38.4 per square meter, whereas according to CPWD rates it is 36 Rs.48/- per square meter. It appears while making payment the respondent pays according to CPWD rates.
56) No doubt, as pointed out by the Arbitrator, according to Clause 54 the responsibility of storing and handling the pipes is on the claimant. He has taken the said responsibility by investing huge amount. If the contract work was carried out, the claimant could have made good of the said expenditure in his profits. According to the contract, the claimant was required to complete the work in three months. He was made to wait for thirty long months and thereafter the contract is cancelled. Meanwhile, the pipes were delivered to him. He had taken store yard by investing huge amount and had stored the pipes. Because of long delay, it appears some pipes were also stolen regarding which a complaint was also filed. Having made the claimant to store the pipes for thirty long months, it is now not open to the respondents to say that it was the responsibility of the claimant to store the pipes and the respondents are not liable to pay anything to the claimant, except storing charges, that too notionally calculated. The contract was cancelled only due to inability of the concerned authorities and respondents to get necessary permission. There is no fault of claimant in cancellation of contract. The claimant is entitled for damages as per law. The Arbitrator has held that the claimant is not entitled for any damages. Hence, the 37 claimant is entitled to the amount claimed by him in his claim petition before the Arbitrator.
57) Clauses 69 and 73 of the Contract clearly indicate that in case of termination or abandonment of contract on account of commission or omission on the part of the respondents, the Claimant is not only entitled for actual cost incurred by him, but he is also entitled for the damages. The above terms of the contract have been totally ignored by the Arbitrator. On the facts proved, the Arbitrator failed to draw an inference, which ought to have been drawn and the inference drawn by the Arbitrator is on the face of it untenable resulting in miscarriage of justice. Therefore, the award passed by the Arbitrator requires to be modified. The Claimant has claimed damages of Rs. 35,76,317/- with interest. There is no contention of the respondents 1 and 2 that the amount of damages claimed by the Claimant is in excess. Therefore, the Claimant is entitled to damages of Rs.35,76,317/- with interest at the rate of 12% p.a. from 27.3.2001 till payment of the entire amount. Accordingly, I answer the point No.3 in the Affirmative.
3858) Point No.4: For the aforesaid reasons, I proceed to pass the following:
ORDER The suit of the Claimant/Plaintiff filed under Section 34 of the Arbitration and Conciliation Act, 1996, is hereby allowed .
The Award passed by the Arbitrator is modified holding that the Respondents 1 and 2 are liable to pay to the Claimant/Plaintiff a sum of Rs.35,76,317/- with interest @ 12% p.a. from 27-3-2001 till payment of the entire amount.
(Dictated to the Judgment Writer, transcribed and computerized by him, then corrected, signed and pronounced by me in the open Court on this the 23rd day of November, 2018).
(SHIVASHANKAR B. AMARANNAVAR) Principal City Civil & Sessions Judge, Bengaluru.
*sk/-
Digitally signed by SHIVASHANKAR BASAPPA AMARANNAVAR DN: cn=SHIVASHANKAR SHIVASHANKAR BASAPPA
BASAPPA AMARANNAVAR,ou=HIG
H COURT OF
AMARANNAVAR KARNATAKA,o=GOVERN
MENT OF
KARNATAKA,st=Karnatak
a,c=IN
Date: 2018.11.28 14:46:28
IST