Delhi District Court
Union Of India vs M/S Pnsc Infrastructure Pvt. Ltd on 24 January, 2025
IN THE COURT OF SH. AJAY KUMAR JAIN:
DISTRICT JUDGE COMMERCIAL COURT 03 - SOUTH EAST
DISTRICT SAKET COURTS, NEW DELHI.
OMP (COMM) 113/23
UNION OF INDIA
Through Executive Engineer ©
Metro Division-I, CCW, AIR. Soochna Bhawan,
New Delhi- 110003
..... Petitioner/respondent in Arbitral Proceeding
VERSUS
M/S PNSC, INFRASTRUCTURE PVT. LTD.
E-4/13, Ground Floor,
Sector- 7, Rohini, Delhi- 110085
.....Respondent/petitioner/ Claimant in Arbitral Proceeding
Date of Institution : 16.12.2023
Date of final arguments heard : 20.01.2025
Date of Judgment : 24.01.2025
JUDGMENT
1. Vide this judgment, I shall decide the petition under section 34 of Arbitration and Conciliation Act, challenging the impugned arbitral award dated 31.08.2023 passed by Ld. Sole Arbitrator.
2. Brief facts of the case are that on 01.12.2015, the petitioner by way of office Order No. EE(C)/MD-1/DB/W-9/2015-16/1882 published its notice inviting Tender for 'Vertical Extension/Construction of Earth Station Building at Todapur for 'DTH' expansion up to 250 Channel Phase-III under 12 th Plan' wherein the OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 1 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. estimated cost of tendor was fixed at Rs. 2,74,91,514/-. The petitioner through the said notice invited online tenders from the intending contractors for the said work. As per notice, the time is of the essence and fixed the period of completion within 12 months from the date of commencement of work. The bid of the respondent was accepted by the petitioner and accordingly the letter of acceptance dated 03.03.2016 followed by letter of award of work dated 16.03.2016 was issued by the petitioner. Thereafter, the contract agreement was signed and executed on 16.03.2016 for a total contract price of Rs. 2,35,49,231/-. The stipulated start date of work was 13.03.2016 and the project is to be completed in 12 months, however the project was finally completed by the respondent on 02.08.2018 with a delay of 509 days. After successful completion of the work, the respondent was granted extension of time under Clause 2 of the Contract without levy of compensation. Accordingly, the completion certificate was issued to the respondent on 02.08.2018. The respondent vide its letter dated 04.10.2018 submitted its final bill for electrical component of work amounting to Rs. 24,74,670/-. The respondent vide letter dated 29.03.2019 submitted its final bill for civil component of work amounting to Rs. 2,19,62,677/-. The petitioner had released the payment for final bill for civil works amount to Rs. 2,19,43,232/- as on 29.03.2019 and final bill for electrical works on 16.10.2018 for gross value of Rs. 24,64,670/-.
3. However, after about one year on 14.10.2019, the respondent vide its letter raised the dispute as per Clause 25 of the Contract by OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 2 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. submitting its claim before the Executive Engineer. The Executive Engineer responded on 23.12.2018. Pursuant to which, the respondent submitted its claim before the Superintending Engineer vide letter dated 04.01.2020 whereafter the Superintending Engineer rejected the claims of the respondent on 13.03.2020 but during the pendency of decision of the Superintending Engineer, the claims were also made before the Chief Engineer vide letter dated 19.02.2020. The respondent vide its letter dated 03.08.2021 sought for the appointment of Disputes Redressal Committee in terms of Clause 25 of the Contract. The said Committee due to adamant approach of the respondent, low quality of materials used and the sub-standard work executed by the respondent, rejected the claims of the respondent on 11.08.2021.
4. The respondent vide letter dated 03.08.2021 sent a notice for appointment of arbitrator and Sh. Anil Kumar Sharma, the Sole Arbitrator was appointed. The respondent/claimant filed its statement of claim on 05.10.202. The petitioner also filed statement of defense on 01.12.2021 wherein the petitioner had denied all the allegations and contentions raised by the respondent in its statement of claim. Ld. Sole Arbitrator vide impugned award perversely allowed claim no. 4, 7, 12, 14, 16 and claim no. 17 of the respondent/claimant and rejected all the counter-claims raised by the petitioner, therefore, the present petition is filed by the petitioner.
5. In reply/written statement, it is pleaded that the Ld. Arbitrator has discussed in depth the various document, materials, pleadings and submissions of parties and there is no perversity in passing the award.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 3 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. The petitioner has granted the extension of time under Clause 2 without levy of compensation, therefore the time is not essence in contract. The entire delay is caused attributed to the petitioner. Ld. Arbitrator also observed that no hindrance was attributable to claimant. It is stated that the impugned award do not suffered with any illegality or perversity. Submissions of the counsels.
6. Ld. counsel for the petitioner/UOI submitted that Ld. Arbitrator in claim no. 4 wrongly granted loss of profit and overhead beyond the terms of contract whereas the claimant had been duly compensated in terms of the provisions of the contract. Ld. Counsel submitted that the Ld. Arbitrator despite nothing that the claim of loss of profit was beyond the terms of contract and no calculation or documentary evidence like salary certificate of EPF, TDS and ESIC has been submitted by the claimant showing the validity of manpower but partly allowed the claim no. 4 arbitrarily. Ld. Arbitrator rejected the element of profit, however allowed element of overhead which was also beyond the contact.
7. The Ld. Arbitrator misinterpreted calculation provided by the claimant and observed that the stipulated period of completion was 26.03.2017 instead of actual date of completion is 12.03.2017. The Ld. Arbitrator by misinterpretation of calculation traveled beyond his jurisdiction, and not paid heed to the agreed terms and conditions of the contract. The Ld. Arbitrator baselessly added 14 days extra to the stipulated date of completion of contract. Ld. Arbitrator did not pay any heed to the fact that the petitioner has already made the payment under OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 4 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. Clause 10C, and in terms of the indices issued by CPWD after submission of the final bill by the claimant. The Arbitrator wrongly allowed the claim no. 7.
8. As far as claim no. 12 is concerned, the claimant sought estimated damages derived using clause 10 CC of the contract, focusing growing material prices other than material mentioned in Clause 10 CC. The claim is beyond the contract as clause 10 CC of the contract was not applicable but arbitrarily used by the Ld. arbitrator. The Ld. Arbitrator even denied the claim initially stating claim was beyond the provisions of the contract and even noted that the petitioner duly fulfilled its obligation of regular escalation payment and that there had been no dispute at all about method of escalation payment, and that the hypothetical claim did not even emerge during execution of work. Ld. Arbitrator, however accepted the procedure under Clause 10CC as a mechanism for assessing loss owing to price increase over extension of time.
9. Ld. Counsel for the petitioner submitted that as far as claim no. 14 & 16 regarding pre reference, pendent lite and future interest is concerned. Ld. Arbitrator noted that the Contract did not provide for pendente lite interest but still allowed the payment by awarding interest @ 7.5 % per annum, and the future interest @ 9.25% from the date of award till the date of realization. The Claim no. 17 regarding the cost of arbitration is also wrongly allowed. Ld. Arbitrator traveled beyond the terms of the contract which specifies that the fees of the arbitration would be borne by both the parties. Ld. Arbitrator even fixed the OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 5 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. liability of the entire cost of arbitration on the petitioner which is arbitrary and illegal. (relied upon 'Rajasthan State Mines & Minerals Ltd. Vs. Eastern Engineering Enterprises & Anr., (1999) 9 SCC 283', 'Delhi Metro Rail Corporation Ltd. Vs. Delhi Airport Metro Express Pvt. Ltd., C.A no. 5627-5628/2021 dt. 10.04.2024', 'Oil and Natural Gas Corporation Ltd. Vs. Western Geco International Ltd., (2014) 9 SCC 263', 'Union of India, Ministry of Railways, Railway Board & Anr. Vs. M/s Jindal Rail Infrastructure Ltd., OMP (COMM) 227/2019 dt. 23.05.2022', 'Associate Builders Vs. Delhi Development Authority, (2015) 3 SCC 49', 'Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd., (2003) 5 SCC 705' and 'Continental Construction Ltd. Vs. State of MP, (1988) 3 SCC 82').
10. Ld. Counsel for the respondent/claimant on the other hand submitted that claim no. 4 is for loss of profit & overhead includes expenses on technical & other staff, on-site & off-site office expenditure, watch & ward etc. Ld. Arbitrator had clearly observed that time was extended under Clause 2 of Contract without levy of compensation. Ld. Arbitrator observed that the petitioner is solely responsible for the delay in completion of work. The petitioner wrongly submitted that the Ld. Arbitrator failed to appreciate that as per contract escalation is payable to the respondent under Clause 10C & 10CA of the contract. The petitioner is misleading that the claim is for loss of profit & overhead due to prolongation of contract. It is evident from award that Ld. Arbitrator had rejected the element of profit claimed under this claim. Ld. counsel for the respondent further submitted that OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 6 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. Ld. Arbitrator had held that the petitioner is solely responsible for the delayed completion of work thus in terms of Section 55 of the Indian Contract Act, the respondent becomes entitled for compensation due to prolongation of contract due to petitioner's failure (relied upon 'McDermott International Inc. Vs. Burn Standard Co. Ltd & Ors., 2006 (11) SCC 181'). The respondent had placed on record the documentary evidence to show and proved assessment of actual and direct losses suffered on account of loss of profit and overhead due to such prolongation of contract. The claimed damages of loss are not covered by agreement drawn by the parties but get compensated as per Clause 73 of Indian Contract Act. Ld. Arbitrator correctly interpreted the provisions of Section 55 and Section 73 of the Indian Contract Act. Ld. Counsel further submitted that in case title 'McDormott International Inc. (supra)' the Hon'ble Supreme Court held that time does not remain essence if the agreement provides clauses related to grant of extension of time and subsequently recovery of liquidated damages in case of default of respondent, and in such cases the part 2 of section would become operative thus no requirement to give notice of intention to claim damages. Ld. Counsel submitted that as far as claim no. 7 is concerned, Ld. Arbitrator appreciated the factum of full and final payment made by the respondent under Clause 10C of the Contract after the submission of 8th and final bill. Ld. Arbitrator awarded under claim no. 7 as damages for increased wages of labour in extended period of contract giving cogent reason while upholding the contention of the respondent in terms of clause 73 of the Indian Contract Act for OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 7 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. the purpose of assessing the damages as it amounts to loss of profit as envisaged at the time of tendering.
11. Ld. counsel for the respondent further submitted that claim no. 12 is damages on account of price escalation of other material due to prolongation of contract. Ld. Arbitrator observed that the clause 10 CC procedure is an acceptable procedure which can be applied to determine damages under claim while rejecting the plea of clause 10CC not applicable under term of contract put forth by the petitioner. The Hon'ble Supreme Court in case title 'McDormott International Inc. (supra)' held that there is nothing in Indian law to show that any of the formulae adopted in other countries is prohibited in law or the same would be inconsistent with the law prevailing in India. The petitioner has failed to appreciate that the claim is towards damages of escalation in prices of other material than payable in clause 10 CA due to breach of contract. Ld. Arbitrator passed the award in terms of agreement with cogent reasons.
12. Ld. counsel for the respondent submitted that the claim no. 14 & 16 w.r.t. interest (pre-reference, pendente lite and future interest). Ld. Counsel for the respondent submitted that the Ld. Arbitrator have authority to award the interest under section 31 (7) of the Arbitration and Conciliation Act, however the respondent failed to point out any informative in adopting the said procedure in granting the interest. The claimant sought interest at the rate of @18 % per annum, however Ld. Arbitrator correctly interpreted the terms of t he contract and awarded interest @7.5 % per annum on outstanding and delayed payments, and OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 8 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. awarded future interest @ 9.25 % per annum. The interest awarded under Claim no. 14 does not pertains to claim of interest for delaying in payment of bills and it is evident from replies under claim 14 of statement of defense. However, the petitioner is raising the new pleas which is not permissible. The counter-claim has been dismissed which is the rejection of counter-claim no. 5 is in line with section 31 (7) of Arbitration and Conciliation Act. Ld. Counsel for respondent submitted that the Ld. Arbitrator has discretion to determine the cost as per Section 31 (A) of the A & C Act. The cost has been awarded to winning party following the general rule and there is nothing perverse in awarding the cost in favour of the respondent/claimant. The petitioner failed to bring out any informative and pervasive in the impugned award, therefore the present petition is liable to be dismissed. (relied upon 'M/s Dyna Technologies Pvt. Ltd. Vs. M/s Cromption Greaves Ltd., (2020) 1 SCALE 121', 'MMTC Vs. M/s Vedanta Ltd., 2019 (4) SCC 163', 'K. Sugumar Vs. Hindustan Petroleum Corporation Ltd, C.A No. 419/2018 dt. 16.01.2018', 'Arosan Enterprises Ltd Vs. Union of India & Anr., 1999 (9) SCC 449', 'Laxmi Mathur Vs. The Chief General Manager, MTNL, Mumbai, 2000 (4) BOMCR89', 'M/s Navodaya Mass Entertainment Ltd. Vs. M/s J. M. Combines, 2015 (5) SCC 698', 'Associate Builders Vs. Delhi Development Authority, 2015 (3) SCC 49' and 'Municipal Corporation of Delhi Vs. Jagan Nath Ashok Kumar & Anr, 1987 (4) SCC 497').
13. Both the counsels for parties also filed written submissions.
Arguments heard. Record perused.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 9 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
14. The petitioner has challenged the claim no. 4, 7, 12, 14, 16 and 17 primarily by way of present petition. Before adverting the appreciation of submissions of parties, the relevant portion of impunged award dated 31.08.2023 is reproduced as under :
".......4. AWARD CLAIM-WISE:
XXX Xxx XXX
xxx xxx xxx
4.4. CLAIM NO. 4: Claim of Rs.47,80,000/- (Revised from 47,90,488/-) on a/c of loss of profit & overhead due to prolongation of contract.
A. Contention of the Claimant in regard to Claim No. 4:
• That dispute under claim is for damages suffered on account of loss of profit and overhead during prolongation of contract. The time was the essence of the contract, but the work was completed in extended time of 508 days against stipulated period of 12 months for the hindrances not attributable to Claimant. The extension of time up to actual date of completion 02.08.2018 was granted by Respondent. It is well recognized fact that contractor quotes their rates in a tender keeping in mind the time allowed for execution of work and also upon the value of work to be executed to earn legitimate profit from the work.
• That upon issue of application of EOT as per request dated 04.09.2018, Claimant submitted the duly filled in part-I of application to Respondent vide letter dated 24.09.2018. Respondent filled in part-
II of application which was forwarded to the competent authority with recommendation dated 15.10.2018 who granted Extension of Time without levy of compensation under clause 2 of the contract. Perusal of Part-I & II shows that no hindrance was attributable to Claimant. The principle of natural justice demands equitable remedy for the breach by the other party. The quantum of 15% for contractor's over- head and profit is mentioned in the schedule "F" of the agreement on page 92. There was a substantial loss of profit and over-head due to prolongation of contract and as a result of this we sustained a wrongful loss as under which is calculated on prorate basis. Copy of letter dated 24.09.2018 and part-II of the application with recommendation of Respondent dated 15.10.2018 is annexed herewith and marked as Exhibit-C8 (Colly).
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 10 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
• That there was breach in contract committed by the Respondent, Claimant therefore, deserves rightful compensation of Rs.47,80,000/- for loss of CP & OH as per law of the land.
• The provision of clause 10C, clause 10CA and clause 12.6 (refer Annexure R-16 to R-20 and R-22) cited by the Respondent is irrelevant which in fact are applicable for stipulated period of contract. Annexure R-21 mentions about delay in payment of 5th RA & 8th RA bills while Claimant is not party to meeting 15.03.17 as per Annexure R-23. It is on record that Claimant's establishment remained at site throughout the prolonged period and it is common knowledge that this stay involves additional expenses. The Hon'ble Arbitral Tribunal is entitled to award damages on account of increase in Cost of Material or Extra Expenditure on Over Head and Establishment charges because these are damages which the contractor has suffered because breach of contract by Govt. due to which performance is lengthened beyond originally fixed in the contract.
• Moreover, the Contract Act does not laydown the mode and manner as to how and in what manner the computation of damage or compensation has to be made. There is nothing in Indian Law to show that any of the formulae adopted in other countries is prohibited in law or the same would be inconsistent with the law prevailing in India. The computation of damages is within the discretion of the Hon'ble Arbitral Tribunal.
• EOT proforma filled by Claimant also does not imply that escalation & other damages will not be claimed and Respondent at p-78 of SOD has recommended grant of EOT without levy of compensation which does not mentions that recommendation id based on any lenient view. As far as actual loss mentioned in Contract act and in various judgments, refers to two components i.e., legal Injury and quantum. • Documentary evidence of legal injury due to overstay is evident from grant of extension of time up to actual date of hindrance. If Claimant has overstayed at site due to default of Respondent than expenses over OH & loss of CP are inevitable. Nowhere respondent has denied the over-stay.
• The case laws relied upon by the Respondent are irrelevant for the reasons:
(i) AIR vs M/s Unibros & Anr.
Irrelevant since merit of claim no. 4 is distinguishable as case law is for award of profit only claimed due to unnecessary retention of men, machinery, material, overheads and so on at the site whereas claim is based on value mentioned in contract.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 11 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
(ii) GM Northern Railways & ors Vs Sarvesh Chopra Irrelevant since merit of claim no. 4 is distinguishable as case law is related to excepted matter u/c 63 and there is no such matter in present claim.
(iii) UOI vs Om Construction Irrelevant since merit of claim no. 4 is distinguishable as case law is for damages of idle labour, machinery and fixed establishment cost based on salaries, rental value etc. for prolonged period. Arbitrator relied on McDermott case but after applying mitigation of 50%, it further reduced award amount arbitrarily. It was on record that both the parties were at default.
(iv) Tarun Mahindru Vs H.P. Power Corpn. Ltd.
Irrelevant since merit of claim no. 4 is distinguishable, whereas case law relied relates to loss of profits and over heads on account of prolongation awarded merely on the basis of Hudson formula without the claimant leading any evidence, be it oral or documentary in respect of loss, damage. In present case Claimant has based its claim on value of CP&OH @ 15% mentioned in the contract.
(v) T. Raj Mohan Vs MK Kabir Irrelevant since Hudson formula was not found invalid but award disallowed because the Arbitrator has not given reason of its adoption.
(vi) UP State Bridge Corpn. Ltd. Vs DDA Irrelevant since price escalation under clause 10CC & OH based on Hudson were awarded even when Clause 1.27 of contract read with Clause 6.4.1(iii) stipulated that no extra amount was payable to the contractor on account of delay in handing over of the site or any unforeseen hindrance.
• Claimant relies on McDermott case which was decided in 2006, since than it has been cited in most of the cases involving loss of OH & Profit but the ruling of Apex Court given in McDermott case has never been overruled. It clearly lays down in para [refer page 24]:
(i) Section 55 and 73 of Indian Contract Act do not laydown the mode and manner as to how and in what manner the computation of damage or compensation has to be made.
(ii) There is nothing in Indian Law to show that any of the formulae adopted in other countries is prohibited in law or same would be inconsistent with the law prevailing in India.
(iii) The computation of damages is within the discretion of the Arbitrator depending upon facts & circumstances of a case.
• Further, it is settled proposition if prolongation is proved than award can be made for increase in prices of lab. & Material including OH etc. as held by the Hon'ble High Court of Delhi in the matter of OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 12 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
Puranchand Nangia v Delhi Development Authority 2006 (2) Arb LR 456 (Del) [refer para 12, 13 & 14.] • Whereas the quantum of 15% for contractor's over-head and profit is mentioned in the schedule "F" of the agreement on page 92 and CP&OH determination is based on Hudson formula applying this 15% value mentioned in contract which is an agreed term. Nowhere contract stipulates that it cannot be applied to work out compensation. • The Respondent has referred Annexure R1/p59/SOC, R16 to R22/p-58 to 65 which are irrelevant here since it pertains to payments made under clause 10C & clause 10CA of contract while the claim pertains to damages due to prolongation of contract as claimed by Claimant.
• Therefore, it is humbly prayed before Hon'ble Arbitral Tribunal for award of Rs.47,80,000/- in favour of Claimant and against Respondent under claim no. 4.
Therefore, Claimant is entitled to award under the claim. B. Contention of the Respondent in regard to Claim No. 4:
• The alleged claim for Rs. 47,80,000/- on a/c of loss of profit & overhead due to prolongation of contract beyond stipulated period of contract on account of breach of Contract committed by the Department is absolutely hypothetical and beyond terms of the contract and is totally incorrect and therefore vehemently denied.
• As per the contract agreement, escalation is available to the claimant under clause 10C & 10CA for the work executed in stipulated period as well as extended period of contract as per the indices issued by CPWD and provision under the said agreement clause which says that- "The amount of the contract shall accordingly be varied and provided further that any such increase shall be limited to the price/ wages prevailing at the time of updated stipulated date of completion considering effect of extra work". The above provision referred here ANNEXURE R-1. The escalation statement of due payment also annexed here which marked as ANNEXURE R-16 to R-21.
• A huge amount of Rs. 5,46,681/- (Rs. 3,26,475/- under clause 10C + Rs. 2,20,206/- under 10CA) was paid to the claimant as per statements attached with the bills prepared and submitted by claimant. Above letters Marked & Annexed as ANNEXURE - R-16 to R-22 • When the work was started by the claimant on 13.03.2016, the claimant knew very well that stipulated period of the contract would end on 12.03.2017. However, the work was completed on 02.08.2018. During the intervening period, he never made any correspondence about these alleged losses during execution of the work in extended OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 13 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
period of the work nor, he never requested the department for foreclosure of the agreement.
• By applying for EOT, after completion of the work, he had implied acceptance of continuing the work at the same rates and terms & conditions of the original agreement. When the claimant applied for extension of time vide his letter dated 01.10.2018, the same was sanctioned by the competent authority without levy of compensation taking a lenient view, but it does not authorize the claimant for any unjustified, illegal, imaginary and illusionary claims which are not supported by any documents.
• From the above submission, it is clear that both the claimant and respondent had agreed to execute the work in extended period as per terms of the contract. The respondent ensured payment of escalation under clause 10C & 10CA regularly with each RA bill. The respondent fulfilled their obligation of regular escalation payment in all earnestness, as, is clear from details given in- Annexure R-16 to R-21. • The respondent paid all R.A. bills timely as and when submitted by the claimant and escalation was paid with each R.A. bill as agreed by both the parties.
• The details of Bill submitted by claimant and payment done by respondent are tabulated and submitted here to understand the fact which confirmed from Computerized Measurements Books, prepared and submitted by the claimant. The said table marked & annexed ANNEXURE-R-21 • There was no dispute at all about method of escalation payment or by any other payment done to the Claimant.
• In none of his correspondences, he had ever mentioned that he was suffering loss of profit and overhead due to prolongation of the contract due to breach of contract committed by the respondent in the period between date of award and date of actual completion of work. The claimant had written hundreds of letters, but he was innocent enough not to claim alleged loss of Rs.47,80,000/- from the respondent at the time when such losses were actual occurring to him. This alleged claim is therefore purely an afterthought, non-existent and baseless to gain undue benefit out of circumstances accepted by him earlier.
• No documentary evidence has been attached with the SOF to assess actual and direct losses suffered by him on account of loss of profit and overhead due to prolongation of contract and breach of contract committed by the respondent. Only a hypothetical inference can be made out from his correspondences about these indirect & remote losses projected by the claimant. There is no provision in the agreement to compensate the claimant for such hypothetical, indirect OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 14 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
and remote losses. Remedy were available to the claimant for mitigating or getting rid of his alleged indirect losses by not seeking extension of the contract period which he did not opted because he was making huge windfall profits through escalation payment under clause 10C & 10CA accruing to him in the extended period of contract. The claimant is not entitled for any claim beyond the provisions of the agreement as it shall be deemed to be included in the rates quoted by the claimant in terms of agreement clause 12.6. Said clauses are marked & annexed as - ANNEXURE R-22 • Major works were already completed well before the extended period for which payment was already released. The defective left out minor works were rectified by the Claimant after issue of letter No. 40(11)/CCW/DTH/250Ch/2015-E-III/750 dt. 22.03.2017. The above mentioned letter is marked and annexed herewith as ANNEXURE- R-23 (2- Pages). Therefore the illusionary calculation is completely wrong and hence denied.
• Grant of EOT does not allow Claimant to claim unjustified, illegal, imaginary & illusionary claim. Moreover, the agreement provision does not allow for such claims. The Ld. Arbitrator is, therefore, requested to reject this claim for Rs. 47,80,000/-. C. Observations and Conclusions of the Arbitral Tribunal in regard to Claim No. 4:
1. Claimant had been preparing and submitting the running account and final bills and thus, receiving the payments from the respondents.
2. Apparently, loss of profit & overhead during the period of prolongation, as claimed, is beyond the terms of the subject contract.
Probably for this reason, the claimants had never made a claim in the bills, so submitted of the alleged loss.
3. The claimant has, however, already been compensated by the respondent in terms of contract provisions, not only for the stipulated period of contract but also for the prolongation period of contract due to the escalation in cost of a. Labour due to statutory increase in wages in terms of Clause 10C and b. Primary materials (e.g., cement & steel) constituting the major cost of project in terms of Clause 10CA.
Thus, the element of profit as envisaged by the claimant at the time of tendering has largely been received as per terms of the contract by the claimant due to escalation in prices of labour and materials without much erosion due to prolongation of contract.
4. In view of the foregoing, the element of profit claimed under this claim is hereby rejected. The element of overhead is, however dealt herewith in the deliberations in the subsequent paragraphs.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 15 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
5. These claimed damages of loss are not covered by the agreement drawn up between the parties but get emanated as per Clause 73 of the Indian Contract Act 1872, which calls upon the party, who is solely responsible for prolongation of contract, to compensate the other party for any loss or damage suffered due to such unwarranted prolongation of contract.
6. For claiming such losses, the emphasis has been laid by the claimant on grant of EOT without levy of compensation. Before we deliberate on this matter, we read the relevant provisions in the contract related to EOT covered in clauses 5.2, 5.3 and 5.4 reproduced as under:
"5.2If the work(s) be delayed by:
(i) Force majeure, or
(ii) Abnormally bad weather, or
(iii) Serious loss or damage by fire, or
(iv) Civil commotion, local commotion of workmen, strike or lockout, affecting any of the trades employed on the work, or
(v) Non-availability of stores, which are the responsibility of Government to supply or
(vi) Non-availability of breakdown of tools and plant to be supplied or supplied by Government or
(vii) Any other cause which, in the absolute discretion of the Engineer-
in-charge is beyond the Contractor's control. then upon happening of any such event causing delay, the contractor shall immediately give notice thereof in writing to the authority as indicated in Schedule 'F' but shall nevertheless use constantly his best endeavours to prevent or make good the delay and shall do all that may reasonably be required to the satisfaction of the Engineer-in-Charge to proceed with the works.
5.3 Request for rescheduling of milestones and extension of time, to be eligible for consideration, shall be made by the contractor in writing within 14 days of happening of the event causing delay on the prescribed form to the authority as indicated in Schedule 'F'. The contractor may also, if practicable, indicate in such a request the period for which extension is desired.
5.4 In any such case the authority as indicated in Schedule 'F' may give a fair and reasonable extension of time and reschedule the milestones for completion of work. Such extension or rescheduling of milestones shall be communicated to the contractor by the authority as indicated in Schedule 'F' in writing, within 3 months or 4 weeks of the date of receipt of such request respectively. Non application by the contractor for extension of time/ rescheduling of milestones shall not be a bar for giving a fair and reasonable extension of time/ OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 16 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
rescheduling of the milestones by the authority as indicated in Schedule 'F' and this shall be binding on the contractor."
7. If the work is delayed for the reasons covered by clause 5.2 as aforesaid, and claimant gets extension of time (EOT) without levy of compensation, the same cannot be termed as breach of contract.
8. On the contrary, it is observed on perusal of the proforma for EOT part-II that the reasons for extension of time are other than those covered by clause 5.2. The reasons for extension are on account of failure of respondent in timely making available the architectural & structural drawings, timely approval of design mix, the decisions related to false ceiling & final finishes, and/ or release of funds, etc, which all are due to the claimants.
9. In a contract of 12 months, which got prolonged by another 508 days, a. Neither a single day's delay had been held, as per proforma for EOT part- II, by the respondents as attributable to claimants nor any correspondence has been placed on record of the arbitral tribunal claiming slow progress or delay on part of the claimant, it is a case of prolongation of contract due to failure of respondents to fulfil their reciprocal commitments as per contract.
b. In view of the stated fact of grant of EOT without levy of compensation, it gets further established that the respondents had already held themselves responsible for prolongation of contract by 563 days but limited to actual being only 508 days with no blame of delay on the claimant. Hence, the respondents are held as solely responsible for this delayed completion of work.
10. In regard to aforesaid, subject to fulfilment of Section 55 of Indian Contract Act 1872, its Clause 73, permits loss or damage, which naturally arose in the usual course of things from such breach by the other party.
11. Despite the stipulated period or the extended period for execution, having been made as essence of the contract in terms of clause 5, it is observed that the contract definitely provides for extension of time also with levy of compensation in terms of clause 2 of the contract. In these circumstances, it is clear that the intention of the parties to the contract was that the contract does not become voidable by failure to execute the contract at or before the stipulated/ extended time. Hence, in terms of Clause 55 of the Indian Contract Act 1872, the claimant becomes entitled to be compensated for any loss occasioned due to prolongation of the contract due to the respondent's failure.
12. It is a common knowledge that this prolonged stay at site of claimant definitely involved additional expenses, which the claimant OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 17 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
had actually incurred for none of its fault due to prolonged period of stay at site beyond original period fixed for execution of the contract. The principle of natural justice demanded equitable remedy to the Claimant for the breach by the other party with rightful compensation.
13. This loss or damage could be on account of additional expenses incurred by the claimant on overheads and establishment charges for the period of prolongation, which the parties knew, when they made the contract. The details of such actual damages have, however, not been submitted by the claimants except based on a hypothetical and imaginary calculations placed before this arbitral tribunal. Moreover, the Contract Act does not laydown the mode and manner as to how and in what manner the computation of damage or compensation has to be made.
14. No documentary evidence has been placed by the claimant before the arbitral tribunal to assess actual and direct losses suffered by him on account of loss of overhead due to prolongation of contract. However, almost on the stipulated date of completion being 12-03- 2017, the minutes of meeting dated 15-03-2017 (R-23 dated 22-03- 2017) perused together with details of RA bills given in R-21 with 3rd RA bill apportioned appropriately, it makes the arbitral tribunal:
a. To assess that 73.34% of the completion cost of work was executed after the stipulated date of completion i.e., during the period of prolongation.
b. To have a clarity on the prevalent status of work, as on the stipulated date of completion.
In this meeting the specifications of flooring, door & windows, electrical wiring, paint, and false ceiling were finalised. In other words, as on 12-03-2017, the RCC structural work was partially completed with the flooring and finishing, also yet to be taken up.
15. While it is true that any of the formulae adopted in other countries to compute the damages, in terms of profits & overhead, is not prohibited in Indian law. But the application of formulae can be applied by the arbitral tribunal only looking into the facts and circumstances relating to character of the contracted work. The claimant has relied on Hudson's Formula, the specific observations on its use in this contract are as under:
a. The doctrine of using Hudson's formulae is based on assumption of fixed overheads and profit on a timescale of the contracted period and applied the same uniformly over the extended period. b. This could happen only in such construction works involving single item of work say involving only earth cutting and filling, or with very few items of work say in case of boundary walls with only brick OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 18 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
masonry, or in the case of a building with brick walls and roof comprised of girders with stone slabs, etc. c. Such aforesaid types of work are comprised of very few items of work necessitating deployment of only few categories of labour (viz:
mason, carpenter, bhishti, beldar, etc.) and not involving specialised labour, but with such ordinary T&P which the tradesman normally carry with them in order to carry out their trade. d. Only in such a situation of execution of work, as aforesaid, is with fixed overheads of maintaining the site, where Hudson's Formula becomes applicable to determine the loss of profit and overheads due to non- utilisation of resources already arranged at site in full- strength, but remaining unutilized due to hindrances, causing delayed completion of work.
e. These abovesaid types of works have no specialist items of work like reinforcement, concrete, electrification, plumbing, water supply, false ceiling, etc. Thus, singular nature of labour force (both skilled and unskilled) with ordinary T&P, could be engaged in almost full strength from start till completion of work. f. In the subject contracted work, there are multifarious specialized items of work, for each of which specialist/ distinct labour and specific T&P is the requirement. The deployment of the nature of labour, plant and machinery varies as per nature of item of work in progress and its pace. For example, while only flooring work is in progress, then labour, T&P related to other items of work, like false ceiling, electrical, water supply, etc., are not engaged by a contractor, which otherwise, would make them to sit idle. Rather, the practice is to get each of such specialized items of work executed by the specific specialized subcontracted agencies for execution e.g., false ceiling, electrical, plumbing & water supply, etc. Hence, it is held that the Hudson's formula cannot be applied for assessing the loss during the extended period in a contract of the kind, more so when works are executed in urban areas, where all such specialized labour and the subcontracting agencies are easily available on a call.
16. The fixed overheads can, however, be assessed accurately to a reasonable extent in such a well-defined works contract, wherein the deployment of technical staff has been delineated in its clause 36, with recovery rate upon their non- deployment, also defined in the contract itself.
17. Taking recovery rates defined in the contract for technical staff as base wages including the EPF & ESIC, the reasonable staff salaries have been assessed, also for the other corresponding essential staff [Namely: foreman cum supervisor 1.3 nos. for Civil/ Electrical, a OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 19 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
minimum of one security guard in each of the three shifts, accounts/ other support staff (2 nos)], who are understood to be minimum but essentially deployed on the work. 5% of their salaries so assessed is taken towards staff transport, etc and 10% towards head office expenses of the claimant. Thus, an assessed fixed overhead loss/ damage towards salary of regular staff + HQ expenses of claimant have been worked out @ Rs 1,47,461/- per month. Thus, for the prolongation period of 508 days, the cost of assessed overheads works out as Rs 24,62,803/-.
18. The facts and circumstances of the subject matter have all been discussed as above and appropriately provisioned in arriving at the loss of the claimant of overheads during the period of prolongation.
19. The citations relied on by the respondents, have different facts and circumstances than this matter, hence not deliberated specifically. However, these all have been denied appropriately by claimants in their written submissions.
Thus, against Claim No. 4 of Rs 47,80,000/-, an amount of Rs 24,62,803/- is allowed in favour of the claimant.
XXX xxx xxx 4.7. CLAIM NO. 7: Claim of Rs.15,41,308/- (Revised from Rs.19,21,948/-) on account of damage due to price escalation during prolongation of contract and unpaid escalation of electrical work. A. Contention of the Claimant regarding Claim No. 7:
• As already demonstrated & established that the reasons of delay in completion of work were not attributable to Claimant. EOT was granted without levy of compensation under clause- 2. So, prolongation of contract was due to reasons not attributable to Claimant as such price escalation are payable as damages under law of land. Claim is in two parts.
• Part-A:
◦ Unpaid escalation under cl-10C on elect work. Statement of Rs.2,43,305/- was submitted on 21.06.19/p-100 SOC. This was revised to Rs.2,02,282/- excluding GST /p-104 SOC. Respondent admits that Rs.36,805/- were paid as per p-59 SOD.
◦ Respondent calculations are based on limiting of price index LI= 374 existing as on 01.10.16 /p-109 SOC. While updated stipulated date of completion works out to 12.03.17+14 days =26.3.17 as per terms of cl-10C and the LI value was actually 523 as on 19.01.17/p-110 SOC.
◦ Claim is in line of contract provision R 2/p-39.
• Part-B OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 20 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
◦ Damages of Rs.13,38,026/- for price escalation of wages during prolongation of contract. It is term of contract to pay wages not less than fair wages defined in contract cl-19 B/p-186 and comply with Minimum Wages Act and rules framed there under as per cl-19 B (v) & cl-20/p- 196 agmt.
◦ There is no complaint pending or received by the Respondent regarding less or no payment to any labour.
◦ The case laws relied by the Respondent are irrelevant for the reasons discussed as under:
(i) AIR vs M/s Unibros & Anr.
(ii) GM Northern Railways & ors Vs Sarvesh Chopra
(iii) UOI vs Om Construction
(iv) Tarun Mahindru Vs H.P. Power Corpn. Ltd.
◦ Since merit of claim no. 7 is distinguishable which is for increase in wages of labourers calculated based on clause 10C whereas case law relied on are for loss of profits and over heads on account of prolongation.
◦ Further, it is settled proposition if prolongation is proved than award can be made for increase in prices of labour & Material including OH etc. as held by the Hon'ble High Court of Delhi in the matter of Puranchand Nangia v Delhi Development Authority 2006 (2) Arb LR 456 (Del) [refer para 12, 13 & 14.] Therefore, Claimant is entitled to award under the claim. B. Contention of the Respondent regarding Claim No. 7:
• The payment of 10C has been dealt as per provision of the Agreement. The Claim of Claimant is imaginary beyond the stipulated date of completion is beyond the scope of the agreement. It is the terms of the contract that the amount of the said contract "accordingly be varied and provided further the any such increase shall be limited to the price/ wages prevailing at the time of updated stipulated date of completion considering effect of extra work (extra time to be calculated on prorate basis only as cost of extra work see clause 10 C of the agreement stipulated period/ tendered amount)". Clause 10C is referred here vide ANNEXURE-R1 • It is also to bring here in the Claimant notice that, this office is paying the 10C after submission of bill with relevant documents by the Claimant. The 10C has been paid in 8th & Final Bill after submission of bill by the Claimant. This office has not received any bill from the Claimant side as per provision of the agreement after payment of 8th & Final bill. The Claimant is requested to submit the 10C bill (if any) as per provision of the agreement, so that it can be paid after doing the needful security.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 21 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
• The Claimant was also requested to submit the 10C bill (electrical item) as per provision of the agreement, so that it can be paid after doing the needful scrutiny. The Claimant has submitted 10C beyond the provision of the agreement.
• The alleged claim of Rs. 15,41,308/- on account of damage due to price escalation during prolongation of contract and unpaid escalation of electrical work is also denied. The above alleged claim for Rs.15,41,308/- has not been supported with any document and is without any proof of payment made to the labour during extended period of the contract. The sanction of the EOT without levy of compensation does not authorize the claimant for unjustified and vague claims.
Part A-(Unpaid price escalation of electrical work in civil work) ◦ The alleged claim of Rs. 2,02,282/- on account of unpaid price escalation of electrical work in civil work is incorrect and hypothetical. The claim of 10C for labour for electrical work has been paid to the contractor for Rs.36,805/ along with balance payment of 10C for civil work for Rs.8,546/- totaling to Rs.44,408/- has been paid vide cheque dated 28.09.2020 based on the procedure and approved indices issued by the CPWD. Above cheque marked ANNEXURE-R-30 ◦ As per the contract, escalation, under clause 10C is available to the payment for the work executed in stipulated period as well as extended period of contract as per the indices issued by CPWD and formulae stipulated therein. (Clause 10C is annexed here R-1 Accordingly Rs. 326475/- has been paid to the claimant as per statement attached with the final bill prepared and submitted by him. Above Clause is referred to - ANNEXURE-R-1.
Part B (damages of price escalation due to prolongation of contract).
◦ The above alleged claim on account of price escalation due to prolongation of contract is also not supported with any document and contract provision. The grant of extension of time without levy of compensation does not authorize the claimant for Arbitrary and vague claims. The agreement is governed by the terms and condition of the agreement. Any increase in the wages of labour etc. is governed by the indices issued by CPWD. Accordingly, payment has been made to the claimant as per terms and condition of the agreement.
◦ The provisions for escalation of prices are available only as per terms of Clause-10C in the agreement both during original as well as extended contract period. The price escalation under Clause-10C pertains to only what has been caused on account of increases in prices/ wages due to statutory orders. But the claimant has now submitted detailed wrong calculation for escalation in cost of work OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 22 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
executed in extended contract period which is beyond the provision of the agreement clause.
◦ This agreement has fixed terms and conditions, and these cannot be varied at any stage. No arbitration tribunal can alter the conditions of contract, nor it can be traversed beyond the agreement provision. Therefore, this claim and its calculation procedure are completely against the provision made in agreement for payment of escalation. Any escalation beyond provisions of Clause-10C is not admissible.
◦ Moreover, proof of loss occasioned due to prolongation of the contract with evidence of vouchers etc has not been provided by the claimant.
◦ It is requested to reject the claim of Rs.15,41,308/- which is beyond the provisions of the Agreement. Since, it is a false and fabricated claim hence denied.
C. Observations and Conclusions of the Arbitral Tribunal regarding Claim No. 7 Part-A of the Claim:
1. This part of the claim is the disputed payment as per Clause 10C of the contract agreement.
2. On the stipulated date of completion on 12/26-03-2017, the minimum wage considered by the respondent was Rs 374/- in R-17 dated 25-09-2020, the claimant has admitted having already received a payment of Rs 36,805/- on this account earlier on 28-09-2020 vide R-30.
3. Whereas the correct minimum wage of unskilled labour on the stipulated date of completion i.e., on 12/26-03-2017, was Rs 523/- per day in accordance with Chief Labour Commissioner notification no. 1/ 13(3)/ 2017-LS-ll dated 17-03-2017.
4. Upholding the corrected escalation in prices under clause 10C being Rs 2,02,282/- as worked out by the claimant at Page-104 of Statement of claim, an amount of Rs 1,65,478/- (i.e., Rs 2,02,282-
Rs 36,804) becomes payable by the respondent to the claimant in terms of clause 10C of the contract.
Part-B of the Claim:
1. This part of the claim is for damages due to the price escalation of labour prices during the period of prolongation of the contract.
2. This arbitral tribunal's observations & conclusions on Claim no. 4 at Sl. 1 to 12, herein above, be read mutatis mutandis with the appropriate substitution of 'profit &/or overheads during the period of prolongation' with 'wage escalation of labour during the period of prolongation of contract'.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 23 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
3. In this part of the claim, for the period of prolongation of contract, the claimant has protested to limit the minimum wages of labour as on the stipulated date of completion, in terms of clause 10C of the contract, due to which the element of profit of the claimant has been eroded for the work executed due to increased wages of labour during the period of prolongation of contract. It has been contended by the claimant to consider the increased wages of labour even during the period of prolongation of contract for loss of their profit. This contention of the claimant is upheld by the arbitral tribunal in terms of clause 73 of Indian Contract Act 1872, for the purpose of assessing the damages as it amounts to loss of profit, as envisaged at the time of tendering, for the value of work executed during the unwarranted prolongation period of contract.
4. Thus, an amount of Rs 13,78,279/- has been assessed by the arbitral tribunal as payable to the claimant as under:
a. Rs 1,65,478 is the balance of increased wages admissible as per Clause 10C of contract, b. Rs 12,02,360/- as the damages on account of increased wages in Civil component of contract during the extended period of contract, c. Rs 10,441/- as damages on account of increased wages in Electrical component of contract during the extended period. Thus, against Claim No. 7 of Rs 15,41,308/-, an amount of Rs 13,78,279/- is allowed in favour of the claimant.
Xxx xxx xxx 4.12. Claim No. 12: Claim of Rs.4,67,018/- (Revised from Rs.5,53,325/-) on account of damages due to price escalation of other material due to prolongation of contract.
A. Contention of the Claimant regarding Claim No. 12:
• The prolongation of contract is not at all attributable to Claimant and Respondent has extended the time up to actual date of completion without any action under clause 2 as established in claim no. 4.
• Amount of damage has been calculated on formula of cl-10CC at C15/p-147 to 151. Taking material component in civil as 45% (100
-25 for cement & - 30 for steel) which is fair way of calculation of damage. It is not the matter of invoking clause 10CC or payment received under cl-10C & 10CA as relied by the Respondent. The case laws relied by the Respondent are irrelevant for the reasons given as under:
i. GM Northern Railways & Ors Vs Sarvesh Chopra ii. UOI vs Om Construction OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 24 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
iii. EE (DR)-VI Vs Bhasin Associates iv. Tarun Mahindru Vs H.P. Power Corpn. Ltd.
v. T. Raj Mohan Vs MK Kabir vi. UP State Bridge Corpn. Ltd. Vs DDA • Since merit of claim no. 7 is distinguishable which is for increase in prices of other materials than specified in 10CA and which has been based on formula of clause 10CC being used in CPWD & other departments also while case law relied are for loss of profits and over heads on account of prolongation.
• Further, it is settled proposition if prolongation is proved than award can be made for increase in prices of lab. & Material including OH etc. as held by the Hon'ble High Court of Delhi in the matter of Puranchand Nangia v Delhi Development Authority 2006 (2) Arb LR 456 (Del) [refer para 12, 13 & 14.] Therefore Claimant is entitled to award under the claim.
B. Contention of the Respondent regarding Claim No. 12:
• It is very surprising to see this claim, which is beyond the provision of the agreement.
• There is no 10CC clause applicable in this agreement. The Claimant concealed the facts mentioned in schedule F for clause-10CC (Page No. 63) there it is written that Clause 10CC: Not applicable. This is referred as ANNEXURE-R-24 Observations of the arbitral tribunal:
While it is agreed by the arbitral tribunal that price escalation in terms of Clause 10CC is not applicable for the work executed during the stipulated period. Yet the Clause 10CC procedure is an acceptable procedure, which can be applied on the work executed during the period of unwarranted prolongation of contract, to determine impact on the claimant's profit due to escalation in prices of labour and/ or material during the period of only prolongation of contract. Hence objection of the respondent is set aside in context to the claim under consideration.
• The claim beyond the provision of the agreement is completely illegal, unjustified, hence denied here. The alleged claim of Rs. 4,67,018/- on account of damages due to price escalation of other material due to prolongation of contract beyond stipulated period of contract on account of price escalation of other material is totally incorrect and denied. This alleged claim for escalation in construction cost due to market inflation for the works executed beyond the stipulated period of contract on account of price escalation of other material during prolongation of the contract is absolutely hypothetical and beyond terms of the contract.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 25 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
• As per the contract, escalation is available to the claimant under clause 10C & 10CA for the work executed in stipulated period as well as extended period of contract as per the indices issued by CPWD and formulae stipulated therein. Accordingly, a handsome amount of Rs. 546681/- (Rs. 326475/-) under clause 10C and Rs. 220206/- under clause 10CA) was paid to the claimant as per statement attached with the final bill prepared and submitted by him. There is no provision of 10CC of the agreement under schedule F (Page no. 63 of the agreement).
• The respondent fulfilled their obligation of regular escalation payment. The respondent paid all R.A. bills timely as and when submitted by the claimant and escalation was paid with each R.A. bill as per provision of the agreement of duly agreed as per agreement provision. The date of abstract of each RA bill and date of its actual payment as given in the table. This is referred as ANNEXURE-R-21 • These two dates may also be confirmed from Computerized Measurements Book, prepared and submitted by the claimant. There was no dispute at all about method of escalation payment nor did this hypothetical claim emerge during execution of work. The provisions for escalation of prices are available only as per terms of Clause-10C and 10CA in the agreement both during original as well as extended contract period, which have been paid.
• This agreement has fixed terms and conditions and these cannot be varied at any stage. The clause 10CC cannot be added to the agreement after signing of contract by both parties. No arbitration tribunal can alter the conditions of contract nor can it traverse beyond contours of the existing conditions.
• Therefore, this claim and its calculation procedure are completely against the provision made in agreement for payment of escalation.
• Any escalation beyond provisions of Clause-10C and Clause-10CA is not admissible.
• The Ld. Arbitrator is, therefore, requested to reject this claim for Rs. 4,67,018/- out rightly. Because the submission of the claimant are totally misleading, wrong, illusionary, baseless, fabricated and afterthought.
C. Observations and Conclusions of the Arbitral Tribunal regarding Claim No. 12
1. It is agreed by the arbitral tribunal that clause 10C & 10CA for the work executed during the stipulated period as well as extended period compensates only for the escalation in prices of cement and steel.
2. This part of the claim is for damages due to the price escalation of other materials purchased other than cement and steel OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 26 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
for execution of work during the period of unwarranted prolongation of the contract solely on account of respondent.
3. This arbitral tribunal's observations & conclusions on Claim no. 4 at Sl. 1 to 12, herein above, be read mutatis mutandis with the appropriate substitution of 'profit &/or overheads during the period of prolongation' with 'price escalation of material other than cement and steel during the period of prolongation'.
4. In this part of the claim, for the period of unwarranted prolongation of contract solely due to respondent, the claimant contended to consider price escalation of other materials used in the work (other than cement and steel) only for the period of prolongation of contract, which led to loss in their profit resulting into consequential damages. This contention of the claimant is upheld by the arbitral tribunal in terms of clause 73 of Indian Contract Act 1872, for the purpose of assessing damage due to loss of profit as envisaged at the time of tendering for the value of work executed during the period of unwarranted prolongation of contract.
5. Clause 10CC is taken as an acceptable method prescribed in the contract for working out loss of profit on account of price escalation for work executed during the prolongation period of the contract beyond the stipulated date of completion.
6. After considering work executed for Civil and E&M as per respective respondent documents R-21 and R-17, and also determining the value of work executed beyond stipulated date of completion being 12-03-2017 by linear interpolation of work done during 3rd RA Bill, in the calculations of the claimant, an amount of Rs 4,10,540/- has been assessed by the arbitral tribunal as payable to the claimant towards the damages during the extended period of contract on account of price escalation of other materials, other than cement and steel.
Thus, against Claim No. 12 of Rs 5,53,325/-, an amount of Rs 4,10,540/- is allowed in favour of the claimant.
Xxx xxx xxxx 4.16. Claim No. 16: Claim of interest @18% per annum with annual rest on claim amount (pre-reference, pendente lite and future period).
This claim of the claimant is dealt with together with Claim Nos. 16, 17 and counterclaim No. 5 at the end under Sections 5.05 and 5.06. 4.17. CLAIM NO. 17: CLAIM OF Rs. 6,00,000/- ON ACCOUNT OF COST OF ARBITRATION.
This claim of the claimant is dealt with together with Claim Nos. 16, 17 and counterclaim No. 5 at the end under Sections 5.05 and 5.06.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 27 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
4.18. CLAIM NO. 18: Matter formed over applicability of GST on payments received after coming into force of GST. This claim being declaratory and related to GST applicability on payments received, if any after coming into force of GST, it has been dealt at end after deliberating all the claims and counterclaims related to this award.
5. AWARD COUNTERCLAIM-WISE:
5.1. COUNTERCLAIM NO. 1: On account of Repairing of water proofing work due to damages and heavy seepage reported within warranty period for Rs. 14,54,000/-
5.2. COUNTERCLAIM NO. 2: On account of execution cost to execute internal finishing work, due to non-attending seepage work within guarantee period by the Claimant in terms of the agreement- Rs. 7,72,200/-
5.3. COUNTERCLAIM NO. 3: The counter claim on account of repairing cost of cracks of grit plaster due to non-attending by the Claimant - Rs 2,08,300/-.
XXX xxx xxxx
2. Such counterclaims are neither specifically covered by the guarantee bond nor can these be allowed as per the observations made by the arbitration tribunal while deliberating counterclaim no. 1 herein above.
Thus, against Counterclaim No. 2 and 3 respectively amounting to Rs 7,72,200/- and Rs 2,08,300/-, an amount of Rs Nil is allowed in favour of the Respondent against each of the counterclaims 2 and 3. 5.4. COUNTER CLAIM NO. 4: The counter claim on account of refund of Rs. 9,23,235/- on account of difference of GST and Tax provisions in DSR before GST era.
A. Contention of the Respondent regarding counterclaim no. 4:
▪ The counter claim on account of refund of Rs. 9,23,235/- on account of difference of GST and Tax provisions in DSR before GST era. This counter claim is inter-alia with submission of counter affidavit of facts against claim no. 9 of the claimant. The GST has come into effect from 01.07.2017.
▪ As per the compliances under GST the claimant should have filed online GST returns, duly verified by the respondent with details of actual cost of the procurement of material, services etc. probable gain on account of profit as per Govt. rule. As per GST provision should have been credited to Prasar Bharati in the interest of justices. But on the contrary the claimant has concealed these facts willfully and has not refunded the gain to the respondent. This amount works OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 28 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
out to be Rs. 92,32,355/- as detailed under in respective bills [R-59 (8- Pages)]:
xxx xxx xxx ▪ Many exercises have been made by tax professionals and experts in the GST field and have made these in public and are available in public domain. The GST articulated as under [R- 34 (Pages-23)]:
WORK CONTRACT
1. DSR is inclusive of octroi, Royalty, excise duty, Sales Tax (Vat)
2. DSR is not inclusive of Service Tax, as such the claimant is required to pay service tax directly to tax authorities and the respondent has reimbursed the same to the claimant on submission of valid proof of submission.
3. Total taxes on works in Pre GST era were to the tune of 24-28%.
4. In GST era, the GST on works contract is 18% for Prasar Bharati, being business entity.
5. Since total taxes on works in pre GST era were to the tune of about 28%.
6. The agreement of the work was based on DSR (Delhi schedule of rates)
7. In the GST era, the taxes (GST) on the works contract is 18 % for Prasar Bharati.
8. The difference of rates of DSR comes to 10% comparing with pre GST era and after GST era.
▪ Thus, it is evident from the above that the financial gain to the claimant on execution of said DSR items is more than 10 % and it is unlawful gain to the claimant due to introduction of GST. This gain is the right of the respondents. The claimant should exercise the same and file the return, detailing actual cost of the procured materials duly verified by the respondent and gain of this difference should be refunded to the Prasar Bharati in interest of natural justice.
XXX xxx xxx Thus, against Counterclaim No. 4 of Rs 9,23,235/-, an amount of Rs Nil is allowed in favour of the Respondent.
6. AWARD ON INTEREST & COST OF ARBITRATION, ETC:
6.1. Claim No. 14, 16 and Counterclaim No. 5: Compensation by way of Interest (Pre- reference, Pendente lite and future) A. Contention of the Claimant xxx xxx xxx OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 29 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
• Respondent has pleaded that payments were made timely which is irrelevant since claim amount are not payments nor agreement bars expressly the payment of interest. Hon'ble Tribunal has power to award interest u/s-31(7) of A & C Act.
• Respondent has relied on case law DAMEPL vs DMRC in support of its submissions. The judgment is irrelevant since interest was disallowed in view of specific agreement between parties for not paying interest as per para 14. Agreement between parties does not expressly prohibits payment of tax.
• Interest rate of 18.75% has been claimed by the Respondent. • Therefore, it is humbly prayed before Hon'ble Arbitral Tribunal for award interest at a rate of 18% per annum from the date mentioned above till in date of actual payment in favour of Claimant and against Respondent under claim no.14.
Therefore, the Claimant is entitled to the award under this claim. b. Regarding Claim No. 16:
• That in view of Section. 31(7) of the Arbitration and Conciliation Act 1996, we hereby notify to prefer a claim as compensation by way of interest @ 18% per annum with annual rest for pre-reference, pendente lite and post reference on aggregate sum of money claimed above at s. no. 2,3,5,6 & 15 since the above-mentioned claims of payment have not been settled along-with final bill payment made to us.
c. Regarding Counterclaim No. 5:
• The counter claim of interest @18.75% compounded monthly for pendente lite and future period is fabricated, afterthought and as such denied. It is evident from the above submissions that all the counter claims by the Respondent are devoid of any merit and without any evidence of actual loss. The amount claimed by the Respondent is based on estimates. No notice was received by Claimant of this claim and it has been raised just to cause wrongful loss to Claimant. Therefore, counter claim no. 5 deserves outright rejection. B. Contention of the Respondent a. Regarding Claim No. 14:
• The alleged claim of interest @ 18% on claim amounts from their due date of payment to actual date of payment is fabricated, misleading, wrong, illusionary, baseless and afterthought.
Xxx xxx xxx The LD Arbitrator is, therefore, requested to reject this claim. b. Regarding Claim No. 16:
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• The alleged claim for interest @ 18% p.a. as per Arbitration & Conciliation Act for the amounts due for pre-reference, pendente lite and future till realization is incorrect and denied. As discussed in preceding paras, all claims of the claimant have been proved to be fictitious and not admissible in terms of the provisions of the contract. As such there is no question of interest when the claims itself are against agreement provisions, which is not admissible and concoction of his imagination. Since it is lusty aspect of the claimant and the claim are totally false and fabricated, the claim is therefore denied and Ld. Arbitrator is requested to reject this claim for pre-suit, pendent lite and future interest.
c. Regarding Counterclaim No. 5:
• As submitted in the preceding paras that claims of the claimant are totally incorrect fabricated and beyond the provision of agreement and are liable to be rejected whereas the claims of the respondent are genuine and based on the facts, supported with the calculation and within the provision of agreement.
• This counter claims have been supported with relevant evidences, provision of agreement and are supported with Govt. circulars which deserves to be allowed in the interest of natural justices to mitigate the losses meted to the Govt. revenue. In view of section 31 (7) of the Arbitration and conciliation Act 1996.
• I hereby prefer the counter claim as compensation by way of interest @ 18.75% compounded monthly pendent elite and post reference and future on aggregate sum of money which is requested to consider please.
• It is requested that counter claims related to said contract as stated above along with interest @ 18.75% compounded monthly may please be considered. The LD. Arbitrator is, therefore, requested to allow this claim in favour of the respondent.
C. Observations and Conclusions of the Arbitral Tribunal regarding Compensation by way of Interest (Pre-reference, Pendente lite and future):
1. The arbitral tribunal, in terms of Section 31(7)(a) of the Arbitration and Conciliation Act 1996 as amended date on sum directed to be paid, unless otherwise agreed by the parties, may include in the sum for which award is made interest at such rate as it deems reasonable, on the whole or any part of the money for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
2. The contract already provisions for payment of interest @ 7.5% on outstanding and delayed payments in terms of clauses 7 and 9 respectively on pages 144 and 148 of the contract agreement.
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3. There is no bar on pendent lite interest in the contract agreement. The claimant had invoked the arbitration on 14-10-2019.
xxx xxx xxx
5. The claim nos. 2, 3, 5, 6 & 15 are the claims related to claim of interest, hence, interest on the awarded interest is not justified as per law. Therefore, the Claim no. 16, which is a claim related to interest, is rejected.
6. Future interest @ 9.25% (Canara Bank/ PNB deposit rate plus 2%) w.e.f. from the date of award till the awarded amount is actually paid, if paid beyond 60 days from the date of Award. Thus, against Claim/ Counterclaim for interest:
a. Pre-reference and Pendent lite Interest amounting to Rs 13,46,335/- is allowed in favour of the Respondent. b. Future interest @9.25% on the gross amount of award, only if paid beyond 60 days from the date of publication of award till actual date of payment, is awarded.
6.2. Claim No. 17: Cost of Arbitration:
A. Contention of the Claimant:
▪ Cost of Arbitration Rs.6.0 lakh. The provision of S-31A of A & C Act empowers the Hon'ble Tribunal to award cost to successful party and Claimant is genuine and confident of its success. Therefore, Claimant is entitled to award under the claim.
B. Contention of the Respondent:
▪ The alleged claim for Rs.6,00,000/- on account of cost of Arbitration proceeding is incorrect and denied.
▪ All the claims submitted by the claimant have been proved to be fictitious and inadmissible in terms of agreement provisions. All RA bills have been paid timely after submission by the claimant. There is no major difference in the amount for any RA or final bill as submitted by the claimant and as paid by the respondent. All claims have been fabricated at later stage to extract undue benefit, afterthought from the Public Exchequer by exploiting process of arbitration. The final bill was submitted by the claimant for gross value of Rs. 2,21,94,787/- on 01.10.2018 and the same was paid for gross value of Rs. 2,19,43,233/-
by the Respondent on 29.03.2019 within 06 months and without any major correction. The claimant has unnecessarily dragged the respondent to the process of arbitration, as his illusionary claim afterthought & wrong fabrication. The Ld. Arbitrator is, therefore, requested not to award any cost to the claimant.
C. Observations and Conclusions on Cost of Arbitration:
1. It is held that the claimant, being the winning party, they are entitled to be reimbursed the cost of related to arbitration, which is OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 32 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
assessed as Rs 6,00,000/- and the same is payable by the respondent to the claimant. Thus, an amount of Rs 6,00,000/- is awarded against the cost of arbitration in favour of the claimant. 6.3. Declaratory Award - CLAIM NO. 18: Matter formed over applicability of GST on payments received after coming into force of GST.
XXX XXX xxx In the matter of arbitration between M/s PNSC Infrastructure Pvt Limited - the Claimants Vs Union of India (Through EE, Metro Division-1, CCW, AIR) - the Respondents for the work 'Vertical Extension of/ Construction of Earth Station Building at Todapur for "DTH" up to 250 Channel Phase-III under 12th Plan. SH: C/O FF of DTH Building RCC Framed Structure i/c Internal Water Supply, Sanitary Installation, Water Proofing & EI Complete - Agreement No.:
EE(C)-I/Agt/MD-I/2015-16/11', I, Anil Kumar Sharma, the Sole Arbitrator, on today, the 31st of August 2023 award a sum of ₹ 65,61,634/- (Rupees sixty-five lacs sixty-one thousand and six hundred-thirty-four only) payable by the Respondents to the Claimants within 60 days from today. In case of non-payment within this period as aforesaid, a further simple interest @9.25% shall be payable on the frozen awarded amount of ₹ 65,61,634/- (Rupees sixty-five lacs sixty- one thousand and six-hundred-thirty-four only) from today till the date of actual payment.
15. Claim no. 1 is alleged to be withheld in final bill on arbitrary grounds, however Ld. Arbitrator observed that claimant has not taken any temporary connection from any electrical distribution firm but the respondent has shared its connection on the basis of request of claimant, thus declined the claim no. 1. Claim No. 2 is on account of refund SD (electrical portion) and interest @18 % for delay in release of security against FDR, however Ld. Arbitrator allowed a sum of Rs.6,712/- out of Rs. 17,487/- in favour of the claimant. In claim no. 3, claimant claimed interest of Rs. 25,048/- from due date of refund till of actual date for belated refund of security deposit. In the said claim, Ld. Arbitrator allowed an amount of Rs. 5,686/-.
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16. Claim No. 4. As per this claim, the claimant claimed a sum of Rs. 47,80,000/- on account of loss of profit and overhead due to prolongation of contract. It is contended by the claimant that no delay or hindrance is attributable to the claimant and there were substantial loss of profit and overhead due to prolongation of contract due to petitioner. The clauses 10 C, 10 CA and Clause 12.6 are applicable for stipulated period of contract. Moreover, the contract act does not lay down the mode and manner as to how and what manner the computation of damages and compensation has to be made. The filling of EOT performa do not imply that escalation and other damages could not be claimed by the claimant. The respondent ('petitioner' herein), however contended that both the claimant and the respondent had agreed to execute the work in extended period as per the terms of the contract. The respondent ensures the payment of escalation under Clause 10C and 10CA regularly with each RA Bill. There was no dispute at all about the method of escalation payment or by any other payment done to the claimant. The grant of EOT do not allow the claimant to claim unjustified, illegal and imaginary claim.
17. Ld. Arbitrator in its findings to claim no. 4 observed that the respondent in terms of the contract compensated claimant not only for the stipulated period of contract but also for the prolongation period of the contract due to escalation of cost in labour and materials, therefore rejected the element of profit claimed under this claim. However, the claim for damages are not covered by the agreement but emanated from the Clause of 73 of Indian Contract Act. If the work is delayed by OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 34 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. reasons covered by Clause 5.2 and claimant gets extension of time without levy of compensation then same cannot be termed as breach of contract, however claimant entitled if the reasons are other than those covered by Clause 5.2, then subject to fulfillment of section 55 of the Indian Contract act, if clause 73 permits loss or damage which naturally arose in usual course of thing from such breach by other party.
18. The loss or damage could be on account of additional expenses incurred by the claimant on overheads and establishment charges for the period of prolongation. Ld. Arbitrator observed that claimant, however not submitted details of such actual damages and claimed hypothetical and imaginary calculations but found that the fixed overheads can be assessed accurately to a reasonable extent in such a well define contracts, wherein the deployment of technical staff has been delineated in its clause 36, with recovery date upon their non- deployment and also defined in contract itself, and on the basis of record assessed and fixed overhead loss/damage towards the salary of regular staff plus HQ expenses of the claimant at the rate of Rs. 1,47,461/- per month and thus for total period of 508, the cost of assessed overheads worked out as Rs. 24,62,803/-.
19. Ld. Counsel for the petitioner (UOI) submitted that this finding of the Ld. Arbitrator is perverse particularly when the Ld. Arbitrator himself observed that the claimant is not entitled for loss of profit, and also observed that details of actual damages placed, based on hypothetical and imaginary calculations before the Arbitral Tribunal. Ld. Arbitrator though rejected the claim on loss of profit, however OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 35 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. found that the claimant is entitled for damages of overhead expenses. Though, the calculations of the claimant on actual damages on overheads and establishment charges found to be hypothetical and imaginary, but the Ld. Arbitrator assessed the same by taking into consideration the clause 36 of the contract to the tune of Rs. 1,47,461/- per month. The said power cannot be held to be perverse merely because of fact that the claimant pleaded hypothetical and imaginary calculation. Ld. Arbitrator is within his power to decide the basis of calculation from the record. Ld. Counsel for claimant/respondent after arguments filed the sheet of calculation of Rs. 1,47,461/- arrived by Ld. Arbitrator as under :
Nature of staff Nos Rate/month Fixed Monthly
expenditure on
wages
Graduate Engineer (C) 1 25,000/- 25,000/-
Graduate/Diploma 2 15,000/- 30,000/-
Engineer (C/E)
Accounts Staff 2 12,000/- 24,000/-
Foreman (C) 1 15,000/- 15,000/-
Foreman (E) 0.3 15,000/- 4,500/-
Chowkidar 3 9,724/- 29,172/-
1,27,672.00 (A)
Add 5% towards local transport, etc on (A) 6,383.60 (B)
Add 10% towards HQ Expenses on (A+B) 13,405.56 (C)
Fixed Monthly expenses (D)=(A+B+C) 1,47,461.16 (D)
Fixed expenses for prolongation period of 508 24,62,803.37
days
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Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
Therefore, there is no perversity in passing of claim no. 4 by the Ld. Arbitrator.
20. As far as claim no. 5, is concerned, the Ld. Arbitrator allowed a sum of Rs. 29,033/- out of claim amount of Rs. 3,95,233/-. The Ld. Arbitrator for claim no. 6 allowed Rs. 14,775/-.
21. The claim no. 7 of Rs. 15,41,308/- is on account of damage due to price escalation during the prolongation of contract and unpaid escalation of electric work. This claim is in two parts i.e. Part A and Part B. Part A is unpaid escalation under clause 10C of electric work and Part B is the damages of price escalation of wages during prolongation of contract. The contention of the respondent (petitioner hererin) that this claim is imaginary beyond stipulated date of completion and beyond the scope of the agreement. The Ld. Arbitrator observed that Part A claim is the disputed payment as per clause 10C of the contract. The claimant has received the payment on the basis of minimum wages of Rs. 374/-, however the correct minimum wage is Rs. 523/-. Accordingly, the Ld. Arbitrator found an amount of Rs. 1,65,478/- (i.e. Rs. 2,02,282- RT.s 36,804/-) becomes payble by the respondent to the claimant in terms of clause 10 C of the contract. Part B of the claim, is due to the price escalation of labour prices which is upheld by the Ld. Arbitrator in terms of Clause 73 and awarded Rs. 12,02,360/- as damages on account of increased wages in civil component of the contract and Rs. 10,441/- as damages on account of increased wages in electrical component, therefore, allowed a total OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 37 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. amount of Rs. 13,78,279/- in this claim no. 7. There is nothing pervese in awarding claim no. 7.
22. Nothing is awarded by Ld. Arbitrator in claim no. 8 of Rs. 90,216/-.
23. The claim no. 9 is the claim of Rs. 7,17,839/- on account of difference of GST and Sales Tax. Ld. Arbitrator, however after considering the records and the submissions arrived at the conclusion that the claimant is not entitled to get any claim on account of implementation of GST except of reimbursement of service tax which was also reimburseable in terms of clause 38 of the Contract, therefore granted a total sum of Rs. 1,93,039/- under this claim. Claim no. 10 is on account of testing of charges of the building material. Out of claim amount of Rs. 1,39,974/-, an amount of Rs. 30,170/- is awarded in favour of the claimant. No amount is awarded for claim no. 11.
24. As far as claim no. 12 is concerned, the claimant claimed a sum of Rs. 4,67,018/- on account of damages due to price escalation of other material due to prolongation of contract. It is contended by the respondent (petitioner herein) that there is 10 CC clause not applicable in this agreement, and the claimant concealed the facts mentioned in Schedule F of clause 10 CC. The Ld. Arbitrator observed that the price escalation in terms of clause 10CC is not applicable for the work executed during the stipulated period, however the clause 10 CC is acceptable procedure which can be applied on the work executed during the period of unwarranted prolongation of contract, to determine the impact on the claimant profits due to price escalation of labour or OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 38 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. material during the period of only prolongation of contract. The Ld. Arbitrator therefore, granted an amount of Rs. 4,10,540/- out of claimed amount of Rs. 5,53,325/-. There is nothing perverse in granting the damages in price escalation of other material by adopting the procedure of clause 10 CC for the work executed during the unwarranted prolongation period.
25. Nothing is awarded for claim no. 13 by the Ld. Arbitrator. The claim no. 15 is also rejected.
26. The claim no. 14 is the claim of interest @ 18% per annum on claim amounts from their due dates of payment to the actual date of payment. Ld. Arbitrator deliberated together this claim with claim no. 16, 17 and counter-claim no. 5.
27. The claim no. 14, 16 and counter-claim no. 5 are compensation by way of interest. It is contended by the claimant that Tribunal has power to award interest U/Sec. 31 (7) of the Arbitration and Conciliation Act. Furthermore, there is no agreement between the parties which expressively prohibits payment of interest. The claim no. 16 is regarding the interest for pre-reference, pendent-lite and post- reference on the aggregate sum of money claimed. The respondent on the other hand contended that the claimant is not entitled for any interest as the RA bills were paid within reasonable time. The claimant is also not entitled for pre-reference, pendent-lite and future interest. Ld. Arbitrator observed that in term of Section 31 (7) (a) of the Arbitration and Conciliation Act unless otherwise agreed by the parties, the sum awarded may include interest at such rate deems reasonable.
OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 39 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. Ld. Arbitrator stated the contract already provided the provision of interest at the rate of 7.5 % on outstanding and delayed payment. There is no bar on pendent-lite interest, therefore awarded an interest @ 7.5 % per annum on the claim granted and future interest @ 9.25 % per annum only if paid beyond 60 days from the date of publication of award till actual date of payment. Ld. Arbitrator in terms of Section 31 (7) (a) of Arbitration and Conciliation Act has the power to award interest, therefore there is nothing perverse in awarding interest as claimed.
28. Claim no. 17 is regarding the cost of arbitration. Ld. Arbitrator observed that the claimant being the wining party entitled to be reimbursed the cost related to the arbitration which is assessed Rs. 6 Lakh. There is nothing perverse in awarding claim no. 17.
29. On overall appreciation of material on record, I do not found any patent illegality in the impugned award passed by Ld. Arbitrator. The present award is also not against to the public policy. The Ld. Arbitrator passed the award after proper appreciation of material on record, and this court also cannot re-appreciate the case on merits. No ground made out to interfere in the impugned award.
30. Scope of interference under section 34 of Arbitration and Conciliation Act with Arbitrator's award is very limited. The Court would not be justified in reappraising the material on record and substituting its own view in place of the view taken by Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 40 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. views are possible, the view taken by the Arbitrator would prevail as held by Hon'ble Supreme Court in the case of Navodaya Mass Entertainments Ltd. v. J.M. Combines reported in (2015) 5 SCC 698.
31. Hon'ble Supreme Court in the case of 'Sutlej Construction Ltd. v. State (UT of Chandigarh) reported in (2018) 1 SCC 718' has held that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the court and would not include what the court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice. Paragraph nos. 10 to 13 of the said judgment are extracted below:-
"10. We are not in agreement with the approach adopted by the learned Single Judge. The dispute in question had resulted in a reasoned award. It is not as if the arbitrator has not appreciated the evidence. The arbitrator has taken a plausible view and, an in our view, as per us the correct view, that the very nature of job to be performed would imply that there has to be an area for unloading and that too in the vicinity of 5 km as that is all that the appellant was to be paid for. The route was also determined. In such a situation to say that the respondent owed no obligation to make available the site cannot be accepted by any stretch of imagination. The unpreparedness of the respondent is also apparent from the fact that even post- termination it took couple of years for the work to be carried out, which was meant to be completed within 45 days. The ability of the appellant to comply with its obligations was interdependent on the respondent meeting its obligations in time to facilitate appropriate areas for unloading of the earth and for its compacting. At least it is certainly a plausible view.
11. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice".
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12. The approach adopted by the learned Additional District Judge, Chandigarh was, thus, correct in not getting into the act of re- appreciating the evidence as the first appellate court from a trial court decree. An arbitrator is a chosen Judge by the parties and it is on limited parameters can the award be interfered with. 13. The learned Single Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court. In fact, even in second appeals, only questions of law are to be determined while the first appellate court is the final court on facts. In the present case, the learned Single Judge has, thus, acted in the first appeal against objections dismissed as if it was the first appellate court against a decree passed by the trial court."
32. The scope of interference with an arbitral award under Section 34 of the Act has been considered and discussed by Hon'ble Supreme Court in a judgment rendered in the case of 'MMTC Ltd. v. Vedanta Ltd. reported in (2019) 4 SCC 163'. Paragraph nos. 11 to 14 of the said judgment are extracted below:
"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law"
would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 42 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD.
the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
33. In the case of 'Maharashtra State Electricity Distribution Company Ltd. v. Datar C.C.L. Ltd. reported in (2018) 3 SCC 133' it has been held by Hon'ble Supreme Court that "the proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of evidence on record are not to be scrutinised as if the Court was sitting in appeal now stands settled by catena of judgments pronounced by this Court without any exception thereto."
34. Ld. Arbitrator has passed the award upon consideration of material placed before him. There is nothing on record that the relevant OMP (COMM) 113/23 Dt. 24.01.2025 Page nos. 43 of 44 Union of India Vs. M/S PNSC, INFRASTRUCTURE PVT. LTD. material is not placed before the Ld. Arbitrator. There is nothing perverse or patent illegality in the findings of the Ld. Arbitrator.
35. The Ld. Sole Arbitrator has drawn inferences and conclusions after the factual appreciation in the light of the legal principles. The views of the Ld. Sole Arbitrator can not be found fault with only for the reason that some other views can emerge by appreciating the same set of facts and evidence, until and unless it is shown that such a view is totally obnoxious and unsupported by the sound legal principles.
36. This Court cannot substitute its own views or the views of the parties with the view taken by the Ld. Arbitral Tribunal, if the view taken by the Ld. Arbitrator is not in conflict with the settled legal position. There is nothing to suggest that the findings and conclusions rendered by the Ld. Arbitrator are per-se perverse, illegal or non- sustainable or against public policy.
37. Accordingly, the present petition under Section 34 of the Arbitration and Conciliation Act as pressed into service by the petitioner is therefore not sustainable within the scope and ambit of the provision, therefore, liable to be dismissed and accordingly dismissed and disposed of.
38. File be consigned to record room after necessary compliance. Announced in the open court on 24th January 2025 (Ajay Kumar Jain) Digitally District Judge(Commercial Courts- 03), signed by S.E.D/Saket Courts/Delhi AJAY AJAY KUMAR JAIN KUMAR Date:
JAIN 2025.01.24
16:20:15
+0530
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