Delhi High Court
Steel Auto Industries vs National Building Construction ... on 9 November, 2005
Equivalent citations: 2006(3)ARBLR194(DELHI), II(2006)BC296, 128(2006)DLT128
Author: O.P. Dwivedi
Bench: O.P. Dwivedi
JUDGMENT O.P. Dwivedi, J.
1. Respondent-National Building Construction Corporation (in short 'NBCC'), a Central Government Public Sector Undertaking was awarded the work of construction of bridge over river Yamuna, opposite ISBT, Delhi in the year 1985 by Public Works Department, Government of India. The stipulated date of completion of 'he bridge was 28th June, 1987. Respondent-NBCC invited tenders for supply of cast steel roller/rocker bearing (mechanical component for construction of the bridge). As per the terms and conditions of the supply order, time was the essence of the contract. Supplier was required to supply three sets of roller on or before 4th September 1986 and ten sets of roller in each succeeding month i.e., starting from September, 1986 to March, 1987. The entire supply was to be completed within seven months expiring in March, 1987. As per Clauses 5 and 7 of the Notice Inviting Tender (NIT) which forms part of the supply order, NBCC has the authority to cancel the order for unsupplied quantities in case there is a delay in supply beyond the stipulated delivery period. On acceptance of petitioner's tender, respondent-NBCC placed an order dated 11th July, 1986 for supply of 72 sets of roller/rocker at the rate of Rs. 63,500/- each total amounting to Rs. 45.72 lakh. NBCC furnished all required drawings to the petitioner-Steel Auto Industries Limited as per the supply order in August, 1986 but the petitioner failed to supply three sets by 4th September, 1986. Petitioner also failed to supply any roller in the month of September, 1986 and October, 1986. Respondent-NBCC issued various letters dated 25th, 26th and 29th August, 1986 calling upon the petitioner to improve their performance for supply of the roller but the petitioner continuously failed to supply any single roller till 1st November, 1986. Respondent-NBCC also issued show-cause notices dated 5th September and 8th October, 1986 calling upon the petitioner to adhere to the time stipulation and complete the supply within the stipulated delivery period failing which the order can be cancelled for unsupplied quantities. Since the petitioner failed in performance of the contract, the overall progress of the construction of the bridge was adversely affected. Vide letter dated 23rd October 1986 NBCC cancelled 50% of the work as per Clause 7 of the NIT and terms and conditions of the supply order. Petitioner made first supply of three sets in the north of November, 1986. In December, 1986, January, 1987 and February, 1987 no supply was made at all as against the stipulated supply of 30 sets during this period. In March, 1987 only four sets were supplied. The petitioner supplied 36 sets of roller/rocker as per the following table:
__________________________________________________________________________________________ Date of supply No. of sets Date of No. of sets as per contract to be supplied actual actually as per contract supply supplied __________________________________________________________________________________________ As on 4.9.86 3 sets .... Nil As on 30.9.86 10 sets .... Nil As on 4.10.86 10 sets .... Nil 23.10.86 Cancelled 50% As on 4.11.86 10 sets 28.11.86 3 sets As on 4.1.87 10 sets .... Nil As on 4.2.87 10 sets .... Nil As on March, 87 10 sets 23.3.87 4 sets _________ __________ Total 7 sets After the stipulated date of supply 18.6.87 7 sets 25.7.87 8 sets 14.9.87 5 sets 12.11.87 5 sets 17.11.87 4 sets _________ __________ Total 36 sets __________________________________________________________________________________________
2. Respondent forfeited the earnest money deposit (EMD) and also withheld an amount of Rs. 1,68,635/- for the breaches on the part of the petitioner. Petitioner invoked the arbitration clause. Shri S.N. Singh, an officer of the NBCC was appointed as Arbitrator for adjudication of the disputes between the parties. Out of the six claims raised by the petitioner-M/s. Steel Auto Industries Limited, learned Arbitrator allowed four claims vide award dated 30th April, 1997.
3. As against petitioner's claim No. 3 for Rs. 6,12,000/- towards loss of profits due to cancellation of 50% of the supply order, learned Arbitrator awarded a sum of Rs. 2,28,600/- to the petitioner-M/s. Steel Auto Industries Limited, being 10% of the value of remaining 36% sets of rollers/rockers. A sum of Rs. 1,68,635/- was awarded against claim No. 5 being the balance price of 36 sets supplied by the petitioner to the respondent. Learned Arbitrator also awarded the interest @ besides a sum of Rs. 2,07,555/- towards cost of arbitration claimed by the petitioner.
4. On award dated 30th April, 1997 being filed, the suit was registered as CS (OS) 936-A/1997 whereupon NBCC-respondent has filed objections under Sections 30 and 33 of the Arbitration Act, 1940 read with Section 151, CPC which were registered as IA No. 5618/1997.
5. Vide order dated 15th December, 1997 this Court had framed the following issues:
(1) Whether the award dated 30th April, 1997 is liable to be set aside on the grounds taken in the objection petition being IA No. 5618/97?
(2) Relief.
6. The main objection to the award raised by the NBCC is that the finding of the Arbitrator as to validity of termination of 50% of the contract is self-contradictory. The claim for loss of profits due to cancellation of 50% of supply order could not have been granted without giving a specific finding that termination of the contract was illegal. The petitioner failed to supply the roller/rockers as per the agreed schedule and no improvement was noticed despite repeated reminders. Therefore, in view of Section 25 of the Contract Act, 1872 as well as Clause 7 of the supply order, NBCC was fully competent to cancel the supply order as no extension of time was granted to the petitioner.
7. It is by now a settled preposition of law that award made by the Arbitrator cannot be interfered with on the ground that the conclusions of facts arrived at by the Arbitrator are wrong or just because another view is reasonably possible but where finding has been arrived on the basis of no evidence at all or by ignoring documents or are contrary to the settled principles of law, award could be set aside. Reference in this connection may be had to Hindustan Tea Co. v. K. Sashikant and Co. and Ors. ; Coimbatore District Podu, Thozillar Samgam v. Bala Subramania Foundry and Ors. ; Trustees of the Port of Madras v. Engineering Constructions Corporation Limited and Sudarsan Trading Co. v. The Government of Kerala and Anr. .
8. It is also a settled proposition of law that if the termination of the contract is illegal, the erring party shall compensate the other party and the contractor in such a case will be entitled to claim damages for the loss of profits with interest thereon. Reference in this connection may be had to A.T. Brij Paul Singh and Bros. v. State of Gujarat ; Dwaraka Das v. State of Madhya Pradesh and Anr. JT (99) 1 SC 327; Delhi Development Authority v. Polo Singh and Co. ; Secretary, Irrigation Department, Government of Orissa and Ors. v. Raghunath Mohapatra and Executive Engineer, Dhenkanal Minor Irrigation Division Orissa etc. v. N.C. Budharaj (dead) by LRs etc. .
9. Under Section 30(a) of the Arbitration Act, 1940, an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Learned Counsel for the respondent relied upon a decision of the Supreme Court in the case of K.P. Poulose v. State of Kerala and Anr. , wherein it was observed that:
Under Section 30(a) of the Arbitration Act, an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Misconduct under Section 30(a) has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring a very material documents which throw abundant light on the controversy to help a just and fair decision. It is in this sense that the Arbitrator has misconducted the proceedings in this case. We have, therefore, no hesitation in setting aside such an award. In the result the judgment of the High Court is set aside and that of the Subordinate Judge is restored. The award of the Arbitrator thus stands quashed. The Arbitrator will complete the proceedings after considering all the relevant documents including Ext. P11 and Ext. P16 after giving opportunity to the parties. The appeal is allowed with costs.
10. Viewed in this legal perspective, I think the impugned Award cannot said to be in violation of any settled proposition of law or based on no evidence at all. While considering the question whether withdrawal of 50% of the supply order vide letter dated 23rd October, 1986 was wrongful or illegal, learned Arbitrator took note of the fact that there was delay in supplying the drawings by the respondent. On the representation of the claimant/petitioner herein, a senior officer of the NBCC/ respondent herein was appointed for re-inspection on 7th October, 1986. The said officer issued certain directions to both the parties on 9th October, 1986 thereby the Project Manager, NBCC Limited was called upon to clarify all the technical points to the claimants without any delay. Such clarification in the matter was furnished by the respondent vide letter dated 14th/15th October, 1986 which the claimants received on 18th October, 1986. When the technical points are being clarified in the third week of October, 1986, petitioner/supplier could not have made supplies as per the schedule i.e. three sets of roller on or before 4th September, 1986 and ten sets of roller in each succeeding month i.e. starting from September, 1986 to March, 1987.50% of the supply order was rescinded on 23rd October, 1986 i.e. within five days of claimant's receiving technical clarifications. Under the circumstances, conclusion arrived at by the learned Arbitrator that cancellation of 50% of the supply order was wrongful and illegal cannot be said to be without substance, illogical, absurd or patently perverse.
11. Learned Counsel for the respondent/NBCC has placed great emphasis on the fact that on page 11 of the Award, Arbitrator has made observations that "claimants completed the work beyond the cut-off dates with the blessings of the respondent" which is factually incorrect. According to learned Counsel for the respondent, the entire supply was never made by the claimant. Learned Counsel for the objector/NBCC also assailed the observation made by the learned Arbitrator at page 11 of the Award to the following effect:
The question as to whether there was delay in supply of drawings, clarification, etc. by the respondents or whether the claimants alone can be made responsible for the non-execution of the work within the stipulated period, in my view are unnecessary to be considered in the circumstances.
12. No doubt this observation of learned Arbitrator appears to be uncalled for. Question as to whether the cancellation of 50% of the supply order was wrongful or illegal could not have been decided without first ascertaining whether there was delay on the part of the NBCC in supplying all drawings/clarifications or claimant could be held solely responsible for non-execution of the work within the stipulated period. This is the main question to be considered for deciding as to whether the cancellation of 50% of the supply order was wrongful or illegal. In fact, learned Arbitrator has taken into consideration delayed clarification of technical points by the NBCC in coming to the conclusion that cancellation of 50% of the work was wrongful. Despite some inappropriate, inaccurate observations reproduced above made at page 11 of the award, ultimate conclusions arrived at by the learned Arbitrator cannot be said to be in violation of any settled principle of law or based on no evidence at all. Even if the Arbitrator has reached a wrong conclusion by misinterpreting some provisions of the contract, that will be no ground to set aside the award.
13. While considering the objections under Sections 30 and 33 of the Arbitration Act, 1940 to the Award dated 30th April, 1996, the Court does not partake the character of an Appellate Court. It will not be open to this Court to set aside the award just because it is inclined to take a different view on disputed question of fact or Jaw. The findings recorded by the learned Arbitrator under Claims 3,4,5,6 and 7 as also on NBCC's counter-claims are basically findings of fact which cannot be said to be perverse or suffering from any mistake apparent on the face of record or contrary of law. Such findings cannot be interfered with under the provisions of Sections 30 and 33 of the Arbitration Act, 1940 in view of settled proposition of law enumerated in various authorities referred to earlier.
14. In the result, objections under Sections 30 and 33 of the Arbitration Act, '940 filed by the NBCC/respondent being IA No. 5618/1997 are rejected. Award dated 30th April, 1997 is hereby made Rule of the Court. Let the decree sheet be drawn accordingly.
15. Suit and application stand disposed of.