Indian Kanoon - Search engine for Indian Law

Delhi High Court - Orders

Gail Gas Limited vs Ms Gokul Projects on 6 July, 2022

Author: Prateek Jalan

Bench: Prateek Jalan

                          $~12
                          *    IN THE HIGH COURT OF DELHI AT NEW DELHI

                          +        O.M.P. (COMM) 264/2022

                                   GAIL GAS LIMITED                                  ..... Petitioner
                                                 Through:          Mr. Deepayan Mandal, Mr. Naman
                                                                   Verma, Advocates.

                                                              versus

                                   MS GOKUL PROJECTS                                    ..... Respondent
                                                Through:           None.

                          CORAM:
                          HON'BLE MR. JUSTICE PRATEEK JALAN

                                                  ORDER

% 06.07.2022 I.A. 10140/2022 (for exemption) Exemption allowed, subject to all just exceptions. The application stands disposed of.

O.M.P. (COMM) 264/2022 & I.A. 10139/2022 (for stay of impugned order)

1. The petitioner-Gail Gas Limited ["GGL"] has filed this petition under Section 34 of the Arbitration and Conciliation Act 1996 ["the Act"], challenging an award dated 06.11.2021, rendered by a Sole Arbitrator. By the impugned award, the learned arbitrator has decided several disputes between the parties under a contract for laying a Medium-Density Polyethylene gas pipeline, awarded to the respondent- MS Gokul Projects ["Gokul"] by GGL vide letter of award dated 28.06.2010.

2. Gokul invoked the arbitration as GGL did not release the amount of ₹69,67,266.56/- claimed by Gokul in its final bill dated 14.10.2014. Gokul also claimed release of the Bank Guarantee furnished by it to GGL.

3. In the arbitration proceedings, GGL raised various counter claims including inter alia a claim for ₹59,51,950/- on account of loss of business occasioned by Gokul's failure to complete the work of laying the pipeline.

4. By way of the impugned award, the learned arbitrator has awarded the final bill of ₹69,67,266.56/- along with interest @ 12% per annum to Gokul, after adjustment of an amount of ₹8,62,505/- towards the cost of material supplied by GGL to Gokul. Other than the aforesaid sum of ₹8,62,505/-, GGL's counter claims have been rejected. The learned arbitrator has also awarded a sum of ₹25,00,000/- to Gokul towards "loss of business and mental harassment".

5. Mr. Deepayan Mandal, learned counsel for GGL has raised the following contentions in support of this petition:-

a. He submits that GGL's counter claim for loss of business has not been adjudicated in the impugned order.

b. He submits that the award of ₹25,00,000/- towards mental harassment is contrary to the decision of the Supreme Court in Ghaziabad Development Authority vs. Union of India (2000) 6 SCC 113.

c. He submits that the rate of interest awarded by the learned arbitrator is excessive.

6. With regard to the first ground urged by Mr. Mandal to the effect Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 2 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22 that GGL's counter claim arising out of loss of business has not been adjudicated by the learned arbitrator, I am unable to accept this contention for the following reasons: -

a) The learned arbitrator has, in paragraph 8 of the award, laid down the reasons for his findings. It has been noted that GGL has sought to justify its action of withholding the claimant's final bill on account of breach of several clauses of the contract by the claimant.

GGL's counter claims (issue no. 6 framed by the learned arbitrator) have, in fact, been dealt with first in this section of the award. The learned arbitrator has interpreted clause 29 of the General Conditions of the Contract ["GCC"] to come to the conclusion that GGL had the option of determining the contract in the event of the claimed breach and taking over the unfinished work or to permit Gokul to complete the work, and claim damages. GGL having opted not to exercise the option of determining the contract, the learned arbitrator has come to the conclusion that Gokul did, in fact, complete the work and was entitled to release of the amount in the final bill. In reaching this conclusion, the learned arbitrator has considered the documentary and oral evidence adduced by the parties. In a petition under Section 34 of the Act, an arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. It is generally not open to the Court to reinterpret contractual clauses or reappraise the evidence except to the extent that an interpretation or appraisal of the evidence is perverse in the sense that the conclusion could not have been reached by any reasonable person. Reference in this connection Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 3 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22 may be made to the judgments of the Supreme Court in MMTC Ltd. vs. Vedanta Ltd. (2019) 4 SCC 163 (paragraphs 11 and 12), and Dyna Technologies Pvt. Ltd. vs. Crompton Greaves Ltd. (2019) 20 SCC 1 (paragraphs 23 and 24). I do not find the reasoning of the learned arbitrator to suffer from a vice of this nature.

b) The learned arbitrator has also considered the various subsidiary points raised by GGL in support of its contention that Gokul was not entitled to release of the final bill amount- for example, regarding reconstitution of Gokul, subletting of work, etc. On these grounds also, the conclusions of the learned arbitrator are based upon the documentary and oral evidence and do not justify interference of this Court under Section 34 of the Act.

c) Mr. Mandal emphasises that Gokul had not completed the work of "sand padding" as required under the contract. This has been dealt with in paragraph 8(viii) of the impugned award. The learned arbitrator has recorded that there was no contemporaneous correspondence prior to a consultant's report dated 03.11.2014 in support of this contention. The consideration of the evidence by the learned arbitrator is in the following terms:-

"(viii) As regards the amount claimed by the respondent on account of sand padding not having been done by the claimant suffice it to say that there is no correspondence on record prior to the WGK final report dated 03.11.2014 to suggest that during regular inspections by WGK and during the currency of the contract the claimant was ever apprised of the fact that sand padding had not been done while laying the gas pipe line. Not only this even WGK in its letter dated 03.11.2014 did not even make a whisper about it. This letter was not even Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 4 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22 marked to the claimant. For the first time the issue of recovery on account of absence of sand padding cropped up in an inter-office memo dated 14.10.2014 (before WGK letter dated 03.11.2014). I am of the considered view that since WGK was supervising the work it would not have failed to mention absence of sand padding by the claimant while laying the MDPE gas pipe line in Dewas, in its letter dated 03.11.2014 . The evidence led by the respondent fails to inspire confidence. The testimony of Mr. Bimal Toppo (RW1) in answer to questions 30 to 33 shows that the witness is completely unaware of material facts and has avoided to answer vital questions. The witness was unaware of the Dewas project as he was posted in Sonepat at the relevant time.

Apparently his testimony being on dotted lines is unacceptable. At page 69 of the SOD an account of recoveries on account of lack of sand padding is given for Meerut, Dewas, Kota and Sonepat projects. At the end there is a note saying "Sand padding in only one inspection pit out of the four inspection pits for M/s M.V. Omni. Due to operational constraints, excavation could not be done in built up surface for 32 mm dia, therefore 25% of length of built up surface is considered as length with sand padding. Hence out of total length of 20.088 kms length of built up surface 15.066 kms (75% of 20.088 km total lengths) is taken as length without sand padding." It is obvious that the claim on this count by the respondent is based on sheer guess work and is not founded on any cogent evidence. Besides, I have not been able to find any such requirement of sand padding in the detailed letter of award dated 28.06.2010 in particular clause 6.2 to 6.8. Even at Annexure 1, Schedule of rates (SOR) all corresponding columns with reference to sand padding have been left blank. Sand padding is not essentially universal for all types of earth surfaces. Mr Bimal Toppo admitted in reply to question number 44 that the respondent never raised the question of sand padding with the claimant while clearing all RA bills. No Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 5 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22 evidence has been led to show in what type of surface was the claimant required to lay gas pipeline. Most importantly the absence of any communication to the claimant during contract period on this count renders the counterclaim on this count liable to rejection. Therefore the claim on this account is rejected."

I do not find any perversity in this conclusion.

d) Mr. Mandal submits that the recording of the learned arbitrator in paragraph 2(vi) of the award, to the effect that there is no specific denial by the GGL in paragraph 11 of Statement of Defense that final works under the work order were completed by the claimant in December 2013, is based upon an erroneous reading of the Statement of Defense. Mr. Mandal refers me to paragraph 11 of the Statement of Claims which reads as follows: -

"The Claimant submits that the claims of the Petitioner are within limitation inasmuch as the tender document with respect to the work was issued by the respondent to the petitioner on 28.06.2010 and the work came to be awarded to the Petitioner on the said date. The final works were completed in the month of December, 2013. Technical formalities were undertaken after completion of the project and thereafter on 14th October, 2014, the petitioner raised its final bill. The Petitioner thereafter addressed many correspondences to the respondent seeking payment and lastly the cause of action further arose on 27.1.2015 when the Petitioner, left with no alternative invoked arbitration."

In the Statement of Defense, the above paragraph has been dealt with as follows (at page 154 of GGL's documents):-

"Contents of Para 11 of SOC are denied. The issue of limitation does not arise in the present case."

As far as the reply to paragraph 11 of the Statement of Claims is concerned, the learned arbitrator cannot be faulted for the conclusion that the specific averment of Gokul-claimant that the work was completed in December 2013 has not been denied. However, Mr. Mandal submitted that, upon a holistic reading of the Statement of Defense, it would be clear that GGL's case was that Gokul did not complete the work within the scheduled time. In this connection, Mr. Mandal drew my attention to paragraph VI of "Facts of the case", Para 2(i) of the "Reply on Merits" and Para VIII of the "Counter Claims" which read as follows:-

"VI. The Claimant also could not complete the work within the scheduled period and made number of applications for extension of time which was allowed by the Respondent in the interest of the work. Though they have completed major portion of the work the balance work is still left out and without completing the contract closure formalities the Claimant submitted its final bill which is pending with the Respondent. The final bill submitted by the claimant could not be processed for the reasons which are set out hereinbelow. In fact there are number of items which have to be accounted for finalizing the final bill which has been indicated hereinbelow.

xxxx xxxx xxxx

i) Due to failure to complete the MDPE pipeline laying work by the Claimant, the Respondent was unable to provide gas connectivity to the customers of domestic piped natural gas and commercial piped natural gas in the network which has resulted in loss of business opportunity for the Respondent.

xxxx xxxx xxxx Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 7 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22 VIII Due to failure on the part of the Claimant to complete the MDPE pipeline laying work the Respondent was unable to provide gas connectivity to the customers of domestic, industrial and commercial piped natural gas consumers in the network which has resulted in loss of business to the Respondent. The Claimant has worked out the losses caused to due to the delay and failure to complete the work which is set out in the enclosed sheet.

The Claimant is liable to pay the said amount to the Respondent and the Respondent is entitled to an award of Rs 59.51.950/-."

Upon a comprehensive reading of the Statement of Defense also, as urged by Mr. Mandal, it is clear that GGL admitted that the "major portion of the work" was completed by Gokul albeit after extension of time was granted by GGL. The consideration of the pleadings and evidence, are matters well within the remit of the learned arbitrator, and not liable to interference by this Court, except on the narrow grounds mentioned above.

7. For the aforesaid reasons, I am unable to agree with Mr. Mandal that the learned arbitrator has not given reasons for rejection of the counter claim with regard to loss of business. The said counter claim is predicated on the basis that Gokul had not completed the required work. This contention has been rejected by the learned arbitrator on a consideration of the pleadings and evidence, which do not warrant interference by this Court.

8. Mr. Mandal secondly urged that Gokul has erroneously been awarded a sum of ₹25,00,000/- towards "loss of business and mental harassment". He submitted, relying upon the decision of the Supreme Court in Ghaziabad Development Authority (supra) that, a claim for Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 8 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22 mental harassment in a commercial contract is not liable to be granted. Mr. Mandal also urged that in paragraph 9(ii) of the award, the rationale for this award is based upon the delay in release of money by GGL. To this extent, Mr. Mandal submits that it overlaps with the award of interest which has also been allowed by the learned arbitrator. Mr. Mandal also urges that the rate of interest awarded by the learned arbitrator is excessive.

9. Notice be served upon Gokul by all permissible modes, email in addition, limited to the issues mentioned in paragraph 8 above.

10. List on 11.10.2022.

PRATEEK JALAN, J JULY 6, 2022/„Bhupi‟/ Click here to check corrigendum, if any Signature Not Verified Digitally signed O.M.P. (COMM) 264/2022 Page 9 of 9 By:SHITU NAGPAL Signing Date:08.07.2022 12:05:22