Bangalore District Court
Abhiram Infra Projects Pvt. Ltd vs Bangalore Water Supply And on 27 July, 2022
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Com.A.P.No.47/2020
In the Court of LXXXIV Addl. City Civil and Sessions
Judge (CCH-85 Commercial Court) Bengaluru
Dated this the 27th day of July 2022
Present: Smt.H.R.Radha B.A.L., LL.M.
LXXXIV Addl. City Civil and Sessions Judge,
(CCH-85 - Commercial Court)
Bengaluru
Com.A.P.No.47/2020
Petitioner Abhiram Infra Projects Pvt. Ltd.,
Corporate office at C-81, Plot No.402,
Sri.Jyoti Nilayam, Madhura Nagar,
Hyderabad, Telangana, India-500 038,
represented by its Authorized
Representative Sunkara Venkata
Ramana Reddy
(Rep. by Sri.Jacob Alexandar, for
M/s Crest Law Partners, Advocates)
Vs
Respondents 1. Bangalore Water Supply and
Sewerage Board, a body corporate
under the Bangalore Water Supply ad
Sewerage Board Act, 1964 having
office at: Cauvery Bhavan, K.G.Road,
Bengaluru - 560 009, represented by
its Chairman
(Rep. by Smt.Anitha Sali, for
M/s BLS Legal, Advocates)
2. Justice Ashok B.Hinchigeri (Rtd.),
R/at Apartment No.1431, Embassy
Habitat, No.59, Palace Road,
Vasanthnagar, Bengaluru - 560 062
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Com.A.P.No.47/2020
Date of Institution 13.08.2020
U/s 34 of the Arbitration
Nature of the petition
and Conciliation Act, 1996
Date on which judgment
27.07.2022
pronounced
Total Duration Years Months Days
01 11 14
LXXXIV Addl. City Civil and Sessions Judge
(CCH-85 Commercial Court) Bengaluru
JUDGMENT
This petition U/s 34 of the Arbitration and Conciliation Act, 1996 ('the Act' for short) is filed by the claimant before the sole arbitrator and the 2 nd respondent herein (the 'Arbitral Tribunal' for short) for setting aside the arbitral award dated 24.03.2020 except the findings on refund of caution deposit with interest, in the matter of arbitration of disputes arising from Contract No. BWSSB-II/SD-1a/3/2012- 13 dated 08.03.2013 and for allowing the claim for refund of retention money, financial charges on delayed payment of retention money, caution deposit, encashed bank 3 Com.A.P.No.47/2020 guarantee, delayed payment of RA bills 2, 4, 6 and 7, additional unabsorbed overheads, loss of profits and pendete lite interest; and price escalation and refund of encashed bank guarantee as also cost of Rs.2,00,000/-.
2. This case was transferred from CCH-83 (Commercial Court) to this court by notification dated 07-08-2021.
3. The parties are referred as per their original rank before the Arbitral Tribunal for clarity.
4. Briefs facts leading to filing of this petition are that the respondent awarded the contract of implementation of water supply and sanitation facility to 21 slums in Bengaluru for a sum of Rs.14,17,64,105/- ('the Project' for short) to the claimant and entered into agreement dated 08.03.2013 (C-1). 12 months from the date of commencement i.e. 10.05.2013 to 09.05.2014 was the period stipulated for its completion. However, the project could not be completed within 12 months and the time was extended upto 37 by the respondent by granting four extensions; and no liquidated damages was levied on the claimant. After the claimant submitted the final RA bill on 29.06.2016, the respondent 4 Com.A.P.No.47/2020 demanded for rectification of the defect in bulk flow meters and also encashed performance guarantee of Rs.56,19,186/-. In this connection, the claimant raised the dispute by issuing notice dated 15.09.2018 invoking clause 20.3 of the contract seeking reference to Dispute Adjudication Board ('DAB' for short). As the DAB was not constituted, the claimant addressed a letter dated 16.11.2018 to the Institute of Engineers for constituting DAB. The institute of Engineers appointed sole adjudicator as DAB and in the meanwhile the 2 nd respondent herein was appointed as the Sole Arbitrator by mutual consent of the parties.
5. The claimant submitted the claim for Rs.3,20,03,328/- alleging delay, disruption, failure to make prompt payments on the part of the respondent resulted in additional expenditure and huge loss. Narrow roads, restrictions on supply of sand and quarry material, lorry strikes further affected the project implementation adversely. The respondent insisted for extension of bank guarantee upto 07.10.2017 and therefore it had incur additional charge of Rs.4,41,975/- for the same. The respondent could not have 5 Com.A.P.No.47/2020 extended the defect liability period for the failure of the third party contractors to establish Supervisory Control and Data Acquisition system ('SCADA' for short) within the stipulated period. Though its liability was confined only to the manufacturing defects in the bulk flow meters, the respondent demanded for rectification of the operational defects that too after the defect notification period and withheld 25% of the commissioning amount unauthorizedly. The demand for integration of bulk flow meters' data with SCADA is against the contract terms. No notice was issued for the same within the defect notification period. Assuming that it did not rectify the defect, the respondent ought to have promptly notified the same and got rectified the defects at its cost. The requirements of clauses 11.1, 11.2, 11.3 and 11.4 of International Federation of Consulting Engineers Contract ('FIDIC contract' for short) is not complied with and the respondent is liable to release the retention money, caution money, encashed bank guarantee amount and other deposits with interest, cost and compensation.
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6. The respondent filed the statement of defence with counter claim for Rs.1,89,40,000/- contending that the claimant should have sent detailed claim to the engineer within 40 days of occurrence of the event or circumstance giving rise to the claim. Since no dispute was raised till finalization of the work in 2016 the claim is not maintainable; dispute relating to encashment of bank guarantee is time barred. The construction part of the project was completed on 30.06.2016. Funding for the project ended in September 2016 and the claimant submitted the final bill on 16.11.2016 without claiming idling of men and machinery, loss of profit etc. The bank guarantee had to be renewed till the expiry of defect liability period i.e. from 01.07.2016 to 30.06.2017. During this period they called upon the claimant to rectify the defect in 35 bulk flow meters. The claimant sought for three months time, but failed to rectify the defect. As such, action was initiated to forfeit the caution deposit, retention money and also to enforce the bank guarantee.
6(a). Except the claimant, similarly placed other contractors have successfully commissioned the bulk flow 7 Com.A.P.No.47/2020 meters and got the data integrated to SCADA. There was no delay on their part in handing over the site, issuing the drawings or approving the variation. They did not instruct to delay the supply of bulk flow meters or deferred payments or made short payments. M/s ABB quoted Rs.1,89,40,000/- for replacing the faulty bulk flow meters and the steps for the same can be initiated only after recovering expenses from the claimant. After adjusting the retention money of Rs.63,27,920/-, encashed bank guarantee of Rs.56,19,186/- and caution deposit of Rs.12,00,000/- towards the cost quoted by M/s ABB, the claimant is liable to pay the difference amount of Rs.57,92,894/- with interest at 6% p.a. from 30.06.2017 till actual payment and cost of arbitration .
7. Based on the pleadings, the Arbitral Tribunal framed as many as fifteen issues. The parties did not choose to lead oral evidence and as agreed by them, the dispute was adjudicated on the basis of pleadings, documents, oral and the written arguments.
8. The Arbitral Tribunal after considering the material on record partly allowed the claim and rejected the counter 8 Com.A.P.No.47/2020 claim, vide the impugned award.
8(a). The respondent was directed to release caution deposit of Rs.12,00,000/- with interest at 6% p.a. from 16.11.2016 till the date of award and further interest at 10% p.a. upto the date of payment. The retention money and encashed bank guarantee amount was also ordered to be released to the claimant with interest at the said rate, subject to the cost incurred towards replacement of faulty bulk flow meters.
9. Aggrieved by the same, the claimant/petitioner has preferred this petition on the ground that the impugned award is contrary to the provisions of Arbitration and Conciliation Act, Limitation Act, terms of the contract, Public policy of India and suffers from patently illegality. The counter claim in respect of the bulk flow was not raised before DAB in terms of Clause 20 of the contract and the same was time barred. The adjudication on the counter claim is therefore, without jurisdiction. The impugned award does not assign any reasons to reject its contention in that behalf and the same is contrary to Sec.31(3) of the Act. The 9 Com.A.P.No.47/2020 Arbitral Tribunal not only ignored sub-clauses 2.5 r/w 11.3 of the contract, the documents at R51, C350, C353, C355 but also placed reliance on irrelevant material at Ex.R45 resulting in wrong conclusion with regard to the defect notice period and the cause of action. The findings on Issue No.4 directly relating to the counter claim, is beyond the scope of arbitration agreement and based on no evidence. 9(a). That the work was completed in all respects and taken over by the maintenance wing of the respondents w.e.f. 30.06.2016, but SCADA was not in existence even as on 15.11.2018 as per C390. By ignoring the vital evidence at C350, C353, C374 to C382 and C390 the Arbitral Tribunal has concluded that the bulk flow meters were not working and the data generated was not integrated to SCADA. Contrary to sub clause 11.2 of the contract and items 34 to 42 of Bill of Quantities ('BOQ' for short), the Arbitral Tribunal has given the findings that commissioning and integrating bulk flow meters with SCADA was within its scope of work. The Arbitral Tribunal's finding with regard to SCADA being in existence as on 04.04.2016 are based on some letters which are not a part of the record. None of the alleged 10 Com.A.P.No.47/2020 defects were notified during defect notification period and therefore it was not obligated to rectify the same. There was no evidence that the bulk flow meters were defective. 9(b). That the respondent ought to have refunded 50% of the retention money amounting to Rs.31,63,960/- at the time of take over and the balance, at the end of defect notification period, As per clause 14.9 of the contract. Though the estimation of purported defect rectification was not furnished, the Arbitral Tribunal granted the relief permitting the respondent to get the bulk flow meters replaced/rectified at its costs and to withhold the retention money until then. Thus there is no final adjudication of the disputes and the impugned award is incapable of being enforced. The same frustrates the rights of the parties as well as the object of arbitration.
9(c). That the finding with regard to the claimant contributing to delay is a result of ignoring C312, C313, C339, C341, C356, C372 and C390. The respondent neither pleaded nor proved the inability to provide the work front due to supervening circumstances, as such the finding in 11 Com.A.P.No.47/2020 that behalf is without evidence. The issue of overheads and claim for delayed payments is not even considered by the Arbitral Tribunal. The Arbitral Tribunal has invoked the principles of equity like Promissory Estoppel contrary to Sec.28 of the Act. The impugned award is contrary to the judgments of the superior courts that, computation of expected profits or quantification of loss of profit need not be calculated with mathematical precision but, it can be based on industrial practice. The Arbitral Tribunal has ignored the detailed computations regarding loss of profits based on regular account bills and tender documents. The same is contrary to public policy.
10. The respondent/1st respondent has not filed the statement of objections.
11. Heard arguments of Sri.Jacob Alexander for the claimant/petitioner and Smt.Anitha Sali for the respondent/1st respondent.
12. The claimant/petitioner has filed the written synopsis confining the challenge to arbitrability of the counter claim and the issue of Limitation.
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13. Perused the written synopsis and the judgments relied upon by the claimant/petitioner as also the arbitration records.
14. In the light of the rival contentions of the parties and the guidelines issued by the Division Bench of our Hon'ble High Court in Union of India Vs M/s Warsaw Engineers & Anr. [COMAP No.25/2021 dated 17.04.2021 (DB)] regarding the factors to be considered while dealing with a petition U/s 34 of the Act, the following points arise for my consideration in this petition:
1. Whether the claimant establishes that the counter claim was not arbitrable?
2. Whether the claimant establishes that the counter claim was time barred?
3. Whether the claimant establishes that the Arbitral Tribunal has ignored the vital evidence while rendering findings with regard to its obligation to rectify the defect in the bulk flow meters and to integrate the data with SCADA?
4. Whether the claimant has made out the grounds U/Ss.34(2)(a)(iv) and 34(2A) of the Act for setting aside the 13 Com.A.P.No.47/2020 impugned award, as prayed?
5. What order?
15. My findings on the above points are :
Point No.1: In the Negative Point No.2: In the Negative Point No.3: In the Negative Point No.4: In the Negative Point No.5: As per the final order for the following REASONS
16. Undisputed facts of the case are that:
(i) The respondent received ODA loan of 70335 million Yen in all from Japan Bank for International Cooperation ('JICA' for short), under two loan agreements dated 31.03.2005 and 31.03.2006 towards the cost of Bangalore Water Supply and Sewerage Project (II). To implement the Project, the respondent called tender and awarded the contract to the claimant in respect of 21 slums in Bengaluru under the contract agreement bearing No.BWSSB-II/SD1a/ 3/2012-13 dated 08.03.2003(C-1): Part I of the contract dealt with General Conditions as per FIDIC and Part II dealt with Particular 14 Com.A.P.No.47/2020 Conditions of the Contract.
(ii) The project comprised of water supply part and sanitation part; and
construction of 32.82 km pipeline work with house connections as also supply and commissioning of the bulk flow meters was within the scope of water supply part.
Though the original contract period was 12 months from the date of commencement i.e., 10.05.2013 to 09.05.2014, the time was extended upto 30.06.2016 without levying any liquidated damages on the claimant.
(iii) After completion of the contract work on 30.06.2016, the claimant submitted the final bill. The respondent made payment on 28.09.2016 by withholding the retention monies, caution deposits and the securities in their possession and required the claimant to rectify the defect in some bulk flow meters and to integrate the data of the bulk flow meters to SCADA claiming that the period from 01.07.2016 to 30.06.2017 to be the defect liability period.
(iv) On 15.09.2018 the claimant claimed various amounts from the respondent and sought for appointment of DAB. As the DAB was not constituted, the claimant 15 Com.A.P.No.47/2020 approached the Institute of Engineers (India) for the same. After sole adjudicator was appointed by the Institute of Engineers, the claimant submitted the claim on 16.03.2019. Once the Arbitral Tribunal was constituted by mutual consent, the claimant submitted its statement of claims on 03.08.2019 and the respondent too submitted the counter claim on 28.05.2019.
17. Point No.1: The learned counsel for the claimant argues that as per Clause 20.1 and 20.6 of the contract it was mandatory to refer the dispute to DAB and the counter claim was not arbitrable before the Arbitral Tribunal as the respondent had not raised any dispute with regard to the same before the DAB. He relies upon the following judgments in support of his arguments:
1. NHAI Vs PATI-BEL (JV), reported in 2019 SCC Online Del 6793 wherein the Hon'ble Delhi High Court has held that if approaching Dispute Resolution Board is the condition precedent to entertain the counter claim and if that is not resorted to, the counter claim will not be arbitrable.
2. Sobha Ltd. Vs Nava Vishwa Shashi Vijaya & Ors., reported in CMP 16 Com.A.P.No.47/2020 No.24/2022 dated 10.06.2022, a case where the agreement required the parties to initiate conciliation proceedings before going for arbitration, our Hon'ble High Court has held the same to be sacrosanct and a condition precedent to initiate the arbitration proceedings.
18. It is also argued that, the Arbitral Tribunal has failed to consider the claimant's contention with regard to arbitrability of the counter claim and entertaining the counter claim amounts to error of jurisdiction and a patent illegality. In support of this, the learned counsel relies upon the ratio in Ssangyong Engineering & Construction Co. Ltd. Vs NHAI reported in 2019 SCC Online SC 677 that -
"The arbitrator not giving reasons for an award amounts to contravention of Sec.31(4) of the Act and a patent illegality.
The arbitrator wandering outside the
contract and dealing with matters not
allotted to him is held to be error of
jurisdiction falling within the purview of Sec.34(2A).
19. Per contra, the learned counsel for the respondent argues that Sub clause 20.1 is applicable only to the 17 Com.A.P.No.47/2020 contractor and not the employer. Even otherwise the occasion to raise counter claim arose only after the claimant raised the dispute and not until then. The Arbitral Tribunal after relying on para 32 of the judgment in State of Goa Vs Praveen Enterprises reported in (2012) 12 SCC 581 has concluded that the counter claim is arbitrable; and the ratio in the judgments relied upon by the claimant are not for this case.
20. In reply, the learned counsel for the claimant/petitioner submits that the Arbitral Tribunal has wrongly placed reliance on the judgment in State of Goa Vs Praveen Enterprises cited supra, as it relates to a case where reference of all disputes to arbitration was provided under the agreement but, that is not so in their case; and the respondent, in the first instance, ought to have approached the DAB with their counter claim.
21. It is pertinent to note here that the Arbitral Tribunal while rejecting the counter claim of the respondent in too, permitted them to get the bulk flow meters repaired/replaced and adjust its cost against the retention 18 Com.A.P.No.47/2020 money of Rs.49,34,238/- and to release the balance if any to the claimant with interest at 6% from the date on which the amount fell due till the date of award, as per clause 14.9 of FIDIC and further interest 10% p.a. upto the date of realization.
22. A plain reading of the impugned award would make it clear that the Arbitral Tribunal has considered the contention of the claimant with regard to arbitrability of the counter claim. In para 98 page 60, it is concluded that the counter claim is a response to an existing claim and it could be raised only when the claim is made. Once claim is submitted to arbitration, filing of counter claim would be governed by the relevant rules of arbitration so that separate proceedings/new reference can be avoided relying on the observations in para 32 of the judgment in State of Goa Vs Praveen Enterprises where, as pointed out by the claimant's learned counsel the agreement provided for resolution of all disputes by arbitration.
23. Therefore, the question is, whether the findings of the Arbitral Tribunal on arbitrability of the counter claim 19 Com.A.P.No.47/2020 amounts to error of jurisdiction and if compliance of sub clause 20.1 of the contract is mandatory for raising the counter claim?
24. In NHAI Vs Pati Bel (JV) relied upon by the claimant, while dealing with a petition U/s 34 of the Act challenging the arbitral award declining to deal with the merits of NHAI's claim on the ground that they had failed to approach DRB, the Hon'ble High Court of Delhi held that when the agreement provides for referring the disputes between the employer and the contractor, in the first place to DRB, its compliance is a condition precedent for triggering the arbitration mechanism.
25. M/s Sobha Ltd. Vs Nava Vishwa Shashi Vijay Krishna Properties Pvt. Ltd. was a case where the work order provided that only if parties could not settle the dispute through conciliation, it could be referred to arbitration. Our Hon'ble High Court dealing with a petition U/s 11(6) of the Act considering the same held that following the agreed procedure of dispute resolution is a condition precedent for invoking the arbitration clause.
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26. The Arbitral Tribunal, as rightly argued by the learned counsel for the respondent is a creature of contract between the parties and therefore, cannot go beyond the terms thereof or rewrite the same in any manner. In this background it is pertinent to note that the sub clause 20.1 of the contract between the claimant and the respondent is not in pari materia with either clause 67.1 of COPA involved in NHAI case or clause 11 of the work order in M/s Sobha Ltd. case cited supra, but deals only with the contractor's claim. Therefore, in my opinion the ratio in NHAI or M/s Sobha Ltd's case is of no avail to the claimant.
27. Aggrieved by the withholding of certain amounts the claimant issued notice demanding for payment of the dues arising out of the contract and execution of work; and in terms of sub clause 20.4 of the contract reference of the dispute to DRB was sought. The contract provides for issuance of notice of dissatisfaction but there was neither an occasion for issuing the same nor a need to attempt amicable settlement in terms of sub clause 20.5, as the Arbitral Tribunal came to be constituted by mutual consent even before the adjudicator appointed by Indian Institute of 21 Com.A.P.No.47/2020 Engineers, entered into adjudication of the dispute.
28. Sub clause 20.2 of the agreement provides for expiry of DAB's appointment (including each member thereof) on the contractor submitting the final statement with written discharge confirming the total of the final statement representing full and final settlement of all monies due to him under or in connection with the contract as provided under sub clause 14.12, unless otherwise agreed by both parties.
29. There is no dispute that the claimant addressed the letter dated 14.09.2016 at C370 submitting its final bill for gross payment of Rs.1,08,81,505/- and to certify the invoice; and the respondent made payment towards the same on 16.11.2016. Long after the appointment of DAB expired, the claimant wrote on 15.09.2018 vide C371 for the first time questioning withholding of the amounts, claimed for additional amounts and called upon the respondent to cooperate in the resolution of dispute through DAB by constituting the same.
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30. Even at the cost of repetition, it is relevant to note that sub section 20.1 deals only with the contractor's claim; DAB was not in existence when the claimant issued notice in September 2018. The claim for payment of the amounts withheld by the respondent with interest and additional amounts gave rise to the counter claim.
31. The Arbitral Tribunal after considering the relevant clauses of the contract, facts and circumstances of the case and the ratio in State of Goa Vs Praveen Enterprises, has concluded that the question of rising a counter claim would arise only after a claim is made and until such time there cannot be a counter claim. Under the above circumstances, the Arbitral Tribunal cannot be said to have wandered outside the contract or committed any error of jurisdiction in concluding that the counter claim was very much arbitrable. Therefore, the point for consideration is answered in the negative.
32. Point No.2: It is argued for the claimant that the work was completed in 2015 itself as the bulk flow meters were supplied in May 2015 and completion certificate was sought 23 Com.A.P.No.47/2020 in July 2015, as per C315 and C320. If the Engineer fails to issue Taking Over Certificate or to reject the contractor's application within 28 days, Taking Over certificate is deemed to have been issued on the last day of the period by virtue of sub clause 10.1 of the contract.
33. Further the defect notification period of 365 days defined under clause 1.1.3.7 is to be calculated from the date on which works or section is completed under sub clause 10.1. No notice of defects was given to the claimant as contemplated clause 11 read with 2.5 of the agreement. Therefore the counter claim filed on 25.09.2019 was beyond three years from the expiry of defect notification period. Reliance on R54 is misplaced as it was not a notice extending the defect notification and contrary clause 11.3; placing reliance on the judgment in State of Goa Vs Praveen Enterprises is erroneous and reference to arbitration in that case was not subject to any limitation placed by the arbitration agreement.
34. The learned counsel for the respondent argues that the contract work was completed on 30.06.2016. Within the 24 Com.A.P.No.47/2020 defect notification period of one year the respondent made payment towards the final bill on 05.10.2016 withholding certain amounts as permitted under the agreement. The counter claim was raised within three years from the date of final bill payment.
35. Drawing the attention to para 11 and 20 to the judgment in State of Goa Vs Praveen Enterprises reported in (2012) 12 SCC 581, it is argued that the period of limitation for the counter claim has to be reckoned from the date of claim. The relevant paras read as under:
"11. Reference to arbitration can be in respect of all disputes between the parties or all disputes regarding a contract or in respect of specific enumerated disputes. Where "all disputes" are referred, the arbitrator has the jurisdiction to decide all disputes raised in the pleadings (both claims and counter claims) subject to any limitation placed by the arbitration agreement. Where the arbitration agreement provides that all disputes shall be settled by arbitration but excludes certain matters from arbitration, then the arbitrator will exclude the excepted matter and decide only those disputes which are 25 Com.A.P.No.47/2020 arbitrable. But where the reference to the arbitrator is to decide specific disputes enumerated by the parties / court / appointing authority, the arbitrator's jurisdiction is circumscribed by the specific reference and the arbitrator can decide only those specific disputes.
20. As far as counter claims are concerned there is no room for ambiguity in regard to the relevant date for determining the limitation. Sec.3(2)(b) of the Limitation Act 1963 provides that in regard to a counter claim in suits the date on which the counter claim is made in the court shall be deemed to be the date of institution of the counter claim. As the Limitation Act 1963 is made applicable to arbitration, in the case of a counter claim by a respondent in an arbitral proceedings, the date on which the counter claim is made before the arbitrator will be the date of institution in so far as counter claim is concerned. There is, therefore, no need to provide a date of "commencement" as in the case of claims of a claimant. Sec.21 of the Act is therefore not relevant for counter claims. There is however one exception. Where the respondent against whom a claim is made, had also made a claim against the claimant and sought arbitration by serving a notice 26 Com.A.P.No.47/2020 to the claimant but subsequently raises that claim as a counter claim in the arbitration proceedings initiated by the claimant, instead of filing a separate application U/s 11 of the Act the limitation for such counter claim should be computed as on the date of service of notice of such claim on the claimant and not on the date of filing the counter claim.
36. The Arbitral Tribunal has discussed the issue of limitation in paras 93 to 99 of the impugned award with reference to Sec.43(1) of the Act and interpreted the term "claim" appearing in Section 43(3) of the Act to include even the counter claim. It is not the claimant's case that such interpretation is unreasonable.
37. As stated in para 9 of the peitition U/s 34 of the Act, the claimant completed the sanitation and water supply work as envisaged under the contract on 29.06.2016. The Arbitral Tribunal, relying on R49, R50 and R54 has come to the conclusion that not replacing/repairing of the faulty bulk flow meters constitutes a continuing breach on the part of the claimant and the counter claim is in time, as a part of the cause of action arose on 07.10.2017.
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38. R49 dated 29.06.2017 speaks about the claimant seeking to extend the defect liability for three months from 01.07.2017 to 30.09.2017 after the same expired on 30.06.2016 and undertaking to extend the defect liability period from 01.07.2017 to bank guarantees for the extended period. R50 dated 29.06.2017 whereby the respondent extended the defect liability period requiring the claimant to extend the bank guarantee upto 30.07.2017, was sent to claimant by RPAD as evidence from R51.
39. From R54 dated 07.10.2017 it is seen that the claimant sought for further extension of time upto three months undertaking to extend the bank guarantees for such period stating that measures had been taken to rectify the defects as mentioned in its earlier letters. Therefore, the argument of the claimant that R49 is a concocted document cannot be accepted.
40. Forgoing reasons, I am of the opinion that there is no merit in the challenge to findings of the Arbitral Tribunal on the issue of limitation in relation to the counter claim. The said findings are based on appreciation of facts and 28 Com.A.P.No.47/2020 documentary evidence on record. The proviso to Sec.34(2A) of the Act prohibits interference by this court on the ground of an erroneous application of law or by reappreciation of evidence. Therefore the point for consideration is answered in the negative.
41. Point No.3: The learned counsel for the claimant vehemently argues that there was ample evidence to the effect that SCADA was not in place when the claimant completed the work in 2016 or even by the end of 2018; the claimant was not obligated to integrate the data of the bulk flow meters to SCADA. The Arbitral Tribunal has ignored the same and also the contract terms, while fastening the liability of rectifying/replacing the defective bulk flow meters on the claimant and ignoring vital evidence and contract terms is liable to be set aside on the ground of patent illegality.
42. On the other hand, the respondent's counsel justifies the findings and argues that this court cannot sit in appeal or substitute the Arbitral Tribunal's findings or reappreciate the facts and evidence or enter into merits of the matter in 29 Com.A.P.No.47/2020 in a summary proceeding U/s 34 of the Act; the findings of the Arbitral Tribunal are supported by reasons and the claimant has failed to make out any of the grounds U/s 34 of the Act.
43. Sec.34(2)(a) of the Act makes it clear that an arbitral award can be set aside only if the party making the application establishes the grounds under Sec.34 of the Act, on the basis of the records of the Arbitral Tribunal. From the perusal of arbitration records, it is seen that though the claimant claimed to have placed order for required material including 36 bulk meters by paying the supplier vide C300 on 29.01.2015, Panel GA drawing and Hookup drawing for bulk meter was submitted by way of C301 for approval of the respondent only on the next day stating that it could procure the bulk flow meters on approval of the drawing.
44. C304 to C308 are the respondent's letters dated 20.02.2015 reflect that 32 locations were identified for erection of EMF bulk meters by joint inspection. The letters at C309 and C310 dated 21.02.2015 amply demonstrate that the Central SCADA system was already available with 30 Com.A.P.No.47/2020 the respondent. It is interesting to note that though copy of the above letters was marked to the claimant, it never raised any objection disputing the existence of SCADA. Therefore, the argument that SCADA was not in place when the claimant completed the work cannot be accepted and there is no merit in the argument that the Arbitral Tribunal ignored vital evidence in this behalf.
45. The documents produced before the Arbitral Tribunal would show that claimant had completed only the laying of water supply network though the BOQ covered providing and fixing of bulk flow meters with arrangement of transferring the data to Central SCADA System to measure the flow of water to the individual slums. As seen from C311 dated 23.02.2015, the claimant sought extension of time upto 30.04.2015 for the same claiming that installation of bulk flow meters was in progress; and process of identifying the existing RR number and opening new RR number was consuming time.
46. It is relevant to note here that in none of the letters to the respondent the claimant denied or disputed the 31 Com.A.P.No.47/2020 obligation to commission the bulk flow meters and to integrate the data to SCADA. C315 speaks about the claimant completing the work of fixing the bulk flow meters and undertaking commissioning of the same. This letter amply demonstrates that the claimant was aware of the fact that it had to integrate the data to Central SCADA and sought extension by two months, upto 31.05.2015 without penalty.
47. C324 speaks to the effect that during inspection of the work executed by the claimant, NJS-MM-TCE (Nippon Jogesuido Sekkei Co. Ltd., Japan - Mott MacDonald Ltd, U.K. and Tata Consulting Engineers Ltd., India) observed that the totalizar reading was zero as the contractor after replacing the battery had reset the value, although it was required that the totalized flow value should never be reset at any point of time. The minimum battery back up period was three years as per the approved data sheet as well as contract document but the battery was replaced at short intervals and the same was not acceptable. 32
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48. C324 also goes to that despite the battery problem data logger was functioning and transmitting withheld/stored value continuously, instead of functioning only during wake up mode. Continuous working of the flow display units of flow trans meters was leading to draining of the battery quickly. The Arbitral Tribunal's finding that the claimant is responsible for repairing / replacing the faulty bulk flow meters therefore, cannot be said to be contrary to the vital documentary evidence on record.
49. Vide C325 the respondent brought the above observations to the notice of the claimant on 31.08.2015 and instructed to attend the same, to check all flow meters fixed under the project and see if the meters are working satisfactorily and the data transferred to Central SCADA and to report to them. As could be gathered from C328 the respondent once again wrote to the claimant on 09.11.2015 stating that the bulk flow meters installed in the 96 slums are correlated with Central SCADA system at Shimsha Bhavan.
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50. C328 also speaks about the respondent informing the claimant about some of the installed EMF bulk meters not giving proper readings; the maintenance Engineers were complaining about the error in readings and therefore the claimant was directed to rectify the defect immediately and to handover the bulk flow meters in working condition.
51. As seen from C331 once again on 20.11.2015 the respondent informed the claimant that the data from bulk flow meters, installed in the slums, was not being transferred UFW SCADA and this was delaying the accounting of water supply into the slums. The claimant sought approval for alternate vendor to complete the commission of bulk flow meters on the ground that the one who supplied and installed them was yet to commission the same vide its letter C335 dated 12.01.2016.
52. Therefore, I am unable to accept the contention that the Arbitral Tribunal has ignored the vital evidence as also the terms of contract, in concluding that it is for the claimant to repair/rectify the defects in the bulk flow meters installed under the project and also to integrate the data to 34 Com.A.P.No.47/2020 Central SCADA. The findings of the Arbitral Tribunal in this regard are based on appreciation of evidence and this court cannot set aside the impugned award on the ground of mere erroneous application of law or by reappreciation of evidence. The point for consideration is accordingly answered in the negative.
53. Point No.4: The claimant has sought for setting aside the impugned award, except the findings relating to refund of caution deposit and also claimed the following reliefs in this petition:
(i) Refund of retention money of Rs.63,27,920/- with interest;
(ii) Financial charges of Rs.33,09,228/- on delayed payment of retention money, caution deposit and encashed bank guarantee;
(iii) Financial charges of Rs.8,40,312/- on delayed payments of RA bills 2, 4, 6 and 7;
(iv) Additional unabsorbed overheads of Rs.20,83,327/- and loss of profit of Rs.43,00,498/- with pendete lite interest;
(v) Price escalation / adjustment of Rs.75,84,499/-,
(vi) Refund of encashed bank guarantee of Rs.56,19,189/- with 35 Com.A.P.No.47/2020 interest; and
(vii) Cost of Rs.2,00,000/- towards legal expenses.
But the Hon'ble Supreme Court has made it clear in The Project Director, NHAI Vs M.Hakeem & Anr. (SLP (Civil) No.13020/2020) this court can only set aside the award in entirety if the grounds U/s 34 are made out but cannot modify the Award. Therefore, there is no question of granting the above reliefs, as the same was rejected by the Arbitral Tribunal.
54. As observed in Ssangyong Engineering & Construction Co. Ltd. cited supra, scope of 'public policy' is limited to such cases where the award contravenes 'fundamental policy of Indian Law' and upholding or enforcing the arbitral award would "shock the conscience" of the court. Similarly, patent illegality must appear on the face of the award. A mere contravention of the substantive law of India or erroneous application of the law, by itself, will not fall within 'patent illegality' or 'fundamental policy of Indian law'. Even the construction of the terms of a contract is in the exclusive domain of the tribunal to decide. There cannot be 36 Com.A.P.No.47/2020 interference with the same U/s 34 of the Act unless the arbitrator has construed the contract in a manner that no fair-minded or reasonable person would do.
55. It is trite law that reappreciation of evidence is not permissible under the ground of 'patent illegality' and the Arbitral Tribunal need not be correct in its appreciation of evidence as long as the view taken is a 'possible view'. Sec.34 of the Act prohibits a review of merits of the dispute. In the guise of challenge to an arbitral award, the court cannot be asked to appreciate/reappreciate evidence or examine the merits of the dispute. (Delhi Airport Metro Express Pvt. Vs Delhi Metro Rail Corporation Ltd. reported in (2022) 1 SCC 131).
56. The Arbitral Tribunal after appreciation of facts and documentary evidence and the clauses in the contract has come to the conclusion that though SCADA was in existence, integration of data was not done due to defects in the bulk flow meters and the claimant was obligated to rectify the defects as per clause 11.1 of the contract, but failed. As such the respondent was held to be entitled to withhold the retention money until the time the claimant 37 Com.A.P.No.47/2020 rectified the defect and taking over certificate was issued in terms of clause 14.9 of the contract. The Arbitral Tribunal after considering clause 14.2 of the contract has come to the conclusion that the respondent was entitled to recover the advance amounts (mobilization advance amount) as provided thereunder.
57. From the above discussion it is clear that the grounds urged involve not only interpretation of the terms of contract and the BOQ, reappreciation of facts and evidence but also require this court to enter into merits of the dispute which is not permissible in a petition U/s 34 of the Act. More so, when the claimant has failed to establish that the interpretation of the contract terms by the Arbitral Tribunal is unreasonable or that the reasons are so perverse as to shock the conscience of the court or patently illegal. Therefore, the point for consideration is answered in the negative holding that the claimant has not made out any of the grounds U/s 34 of the Act for setting aside the the impugned award.
58. Point No.5: In the result, I pass the following: 38
Com.A.P.No.47/2020 ORDER The petition U/Sec.34 of the Arbitration and Conciliation Act is hereby dismissed.
Issue copy of the judgment to
the parties through e-mail as
provided U/o XX Rule 1 of CPC, if
email ID is furnished.
Send back the arbitration
records to the Arbitration Centre,
Bengaluru, after expiry of the
appeal period.
(Dictated to the stenographer, transcribed and typed by her, corrected and then pronounced by me in the open court on this the 27th day of July 2022) (H.R.Radha) LXXXIV Addl. City Civil and Sessions Judge, (CCH-85 Commercial Court) Bengaluru