Calcutta High Court
Union Of India vs M/S. Premier Piles Limited on 28 February, 2019
Equivalent citations: AIRONLINE 2019 CAL 1094
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
Present:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
A.P. 354 of 2009
Union of India, Represented through Executive Engineer CPWD
-vs-
M/S. Premier Piles Limited.
For Union of India : Mr. Nandalal Singhania. Adv.
Ms. Sayani Roy Chowdhury, Adv.
Ms. Sukanya Dutta, Adv.
For the respondent : Mr. Bijon Majumdar Adv.
Heard on : 24.11.2017, 08.12.2017, 12.01.2018,
11.05.2018, 21.06.2018, 28.06.2018,
05.07.2018, 19.07.2018, 02.08.2018,
16.08.2018, 13.09.2018, 27.09.2018,
04.10.2018, 06.12.2018, 20.12.2018,
17.01.2019.
Delivered on : 28.02.2019.
2
Moushumi Bhattacharya, J. :
This is an application for setting aside of an Award dated 25th March, 2009, by a Sole Arbitrator. The petitioner herein was the respondent before the learned Arbitrator.
2. The facts leading to the arbitration proceedings are these. The respondent (the claimant in the arbitration proceedings) is a piling contractor of Central Public Works Department (CPWD). A tender issued by the petitioner for construction of multi-storeyed quarters at Iron Side Road, Calcutta, was accepted by the respondent at a negotiated value of Rs.2,93,99,402/- on 10th June, 1996. After the respondent accepted the tender, the petitioner directed the respondent for taking over the site in consultation with the concerned engineer-in-charge. The representations made by the petitioner in the notice requesting tender indicated that the contract terms to be complied with by the contractor (the respondent herein and the claimant before the arbitrator) were to be found printed in the form of the tender. The terms stipulated that the work was to be completed with nineteen months and the extension of time for completion would be subject to the engineer-in-charge of the petitioner being satisfied as to the ground for such extension. The stipulated date of commencement of the work was 25th June, 1996 and 24th January, 1998 for completion. The time allocated for completion of the work was 1996. The actual date of completion of the work as recorded by the respondent was 26th January, 1998. The site was 3 handed over on 11th July, 1996 under cover of a letter issued by the respondent on 21st February, 1997. All the 496 piles were installed by the respondent by 16th July, 1997. The final bill was paid by the petitioner on 16th July, 1998 and the formal demands of payments by the respondent were made on 1st August, 1998.
3. The respondent in its statement of claim accordingly claimed under various heads, including for payment pursuant to boring of piles from original ground-level to cut-off level, execution of extra length of steel reinforcement and extra work of dismantling ROC bills, for dismantling concrete piles from site, hire charges of piling rigs and plant and machinery lying idle for a specified period and expenditure incurred on labourers, etc for delays and default on the part of the petitioner. Before the learned Arbitrator, the petitioner denied the contentions made by the respondent in the statement of claim disputing that there was delay on the part of the petitioner in facilitating the work and contended that since the work was completed within the nineteen months as stipulated by the tender, the respondent was not entitled to any claim.
4. During the course of the arbitration, the following issues were settled by the learned Arbitrator:
i) Did the respondent handover the site free from underground obstruction in time as per agreed terms of the contract?
ii) Did the respondent deliver the working drawings in time as per agreed terms of the contract?4
iii) Whether the progress of work was adversely affected for non-
availability of requisite decisions of respondent at the material time?
iv) Did the respondent make payment of interim bills in time as per the agreed terms of contract?
v) Whether the claimant is entitled to the amounts claimed or any other amount or at all, as per claim nos. 1,2,3,4,5,6,7,8,9,10 and 11?
vi) Whether the claimant is entitled to costs of arbitration and other reliefs, if any?
vii) Whether the respondent is entitled to costs?
5. Learned counsel appearing for the petitioner emphasised that an Arbitrator is under an obligation to consider the terms of the contract and second, that an Award which is in violation of statutory provisions is opposed to public policy. For the first, counsel relies on Steel Authority of India Ltd. Vs. J.C Budharaja, Government and Mining Contractor reported in (1999) 8 Supreme Court Cases 122 and on Mcdermott International INC Vs. Burn Standard Company Limited reported in (2006) 11 Supreme Court Cases 181, for the second. Counsel argues that both the points are inter-connected since acting beyond the contractual terms agreed by the parties would render the Award amenable to challenge as being contrary to public policy under Section 34(2)(b)(ii) of The Arbitration and Conciliation Act, 1996 (the Act). According to him, by refusing to consider the express terms of the tender conditions which disentitled the respondent contractor from making any additional claims in respect of the work done, the arbitrator failed to act 5 in compliance of Section 28(3) of the Act, thereby making the Award vulnerable to challenge. In Steel Authority of India, one of the issues was whether the Arbitrator had travelled beyond his jurisdiction and beyond the terms of the agreement, the specific clause (clauses 32-39) stipulated, inter alia, that no claim would be raised by the contractor for giving the site gradually by Steel Authority would be tenable.
6. With regard to the first issue, namely, whether the petitioner handed over the site free from encumbrances within the time stipulated under the contract, the learned Arbitrator was of the view that the petitioner failed to supply the piling rigs within the stipulated date as agreed between the parties which in turn hindered the schedule of the work. The learned Arbitrator was also of the view that simply because the work was completed within nineteen months, would not exonerate the petitioner from being liable for the loss of time and additional expenses incurred by the respondent in the execution of the work. In coming to the aforesaid conclusion, the learned Arbitrator took into account several documents/exhibits from which it appeared that the respondent sought for a sketch plan from the petitioner showing the lay-out of the test piles for expediting the work. He further took into account the fact that the parties had agreed to the petitioner making payment on a fortnightly-basis and that if such payments had been made within time, the respondent would have been in a position to effectively utilize its working capital for expediting the work. It was found from various exhibits that the respondent had repeatedly pointed out that the Running Amount (RA) bills were either paid late or were not paid at all. Several 6 reminders for release of payment by the petitioner, being part of exhibits, have also been referred to in detail in the Award. It seems that the respondent had also notified its intention of charging 18% interest for such delayed payment and the fact the RA bills amounting to Rs.30 lacs remained unpaid for a period of two months, resulted in the respondent being unable to make outstanding payments to the labourers, staff and suppliers. At least 17 reminders from the respondent's end have been mentioned in the Award and a final exhibit showing that the petitioner admitted that release of payments had indeed been delayed due to lack of funds. It was also found that the petitioner's dismantling contractor had not broken the foundation of previous buildings below the ground-level resulting in substantial loss to the respondent and delay in execution of the work. This fact was brought to the notice of the petitioner by the respondent while receiving the payment of the final bill by its letter dated 30th July, 1998.
7. Claim no.2 in relation to payment claimed by the respondent for execution of extra length of steel reinforcement, took into account the various exhibits in relation to the petitioner's absence of denial to the analysis of the respondent's claim in the counter statement filed by the petitioner. The only point taken in the petitioner's counter statement was that since the respondent accepted the measurements for the work without protest, it is not entitled to claim any further amounts. According to the learned Arbitrator, the petitioner's contention is incorrect since the respondent had specifically asked for payment for extra work for dismantling all the ROC piles from the original ground-level to the cut-off 7 level. The learned Arbitrator further took note of the fact that except for the usual denials to the respondent's claim, the petitioner did not point out any mistake in the computation of the claims. Issue nos. 1 to 4 (3rd and 4th issues being whether the petitioner made payment of interim bills in time as per the agreed terms of the contract, respectively), were answered in favour of the respondent with certain modifications. The modifications were that the respondent would be entitled to refund all rebates deducted by the petitioner from the RA bills which was in violation of the contract term amounting to Rs.17,335/- while on the other hand, the respondent's claim for loss of anticipatory profit for the work remaining unexecuted, was rejected. The reason for rejecting the respondent's claim was that the Chief Engineer of the petitioner was entitled, under the contract, to reduce the work and hence there was no scope for expected profit as held by the Hon'ble Supreme Court in Dwarka Das Vs. State of MP reported in (1999) 3 S.C.C 500. The respondent's claim for loss and expenditure incurred on preliminary arrangements for the total amount of work which could not be executed due to decrease of various scheduled item of works was, however, allowed as according to the learned Arbitrator, the respondent could not have anticipated decrease of the work and hence had to make arrangements for the total amount of work mentioned in the tender. The respondent's claim for payment pursuant to the mode of measurement was also allowed since in the Arbitrator's view, the respondent was able to fully substantiate its claim from the materials on record.
8
8. The respondent's claim for loss of hire charges of piling rigs and other plants and machinery remaining idle from 1st September, 1996 to 16th July, 1997 amounting to 478 rig-days was allowed on the ground that the respondent had incurred substantial losses and should be compensated for such. However, instead of the Rs. 9,50,000/- claimed, the respondent was awarded Rs.5,00,000/- which amount was considered proper by the learned Arbitrator. The respondent was also awarded a sum of Rs.10,500/- (instead of Rs.21,350/-) on account of delay on the part of the petitioner in giving approval of possession of eight initial test piles and the delay in issuing approval of the lay-out for the project.
{
9. Learned counsel appearing for the petitioner, Union of India, who has challenged the Award, submits that the amount awarded was passed without considering the terms and conditions of the contract which have been agreed to and accepted by the respondent (claimant before the Arbitrator). Counsel points two clauses 1, 3 and 4 of the additional conditions in the tender documents which provides, inter alia, that the schedule of quantities of rates tendered by the contractor (respondent) shall be all inclusive and no extra payment shall be made to him over and above the rates agreed upon. Counsel reiterates that no additional payments were to be made to the respondent as claimed by the respondent and awarded by the learned Arbitrator. Counsel also points to clause nos. 14-19, which provides that no extra claim was to be made beyond the payments mentioned as agreed rates in the tender documents and the rates would include cost of labour and materials, including cost of enforcement for which 9 no claim for extra payment would be entertained by the petitioner. Counsel submits that the learned Arbitrator was required to look into the terms of the contract under Section 28(3) of the Act for the purpose of considering the claims made by the respondent before the arbitrator. Counsel relies on Steel Authority of India Ltd. Vs. J.C. Budharaja, Government and Mining Contractor reported in (1999) 8 Supreme Court Cases 122 for the proposition that an Arbitrator cannot go beyond the terms of the contract and an Award passed in disregard of the express terms would be without jurisdiction. The Court held that the contract contained a specific bar to raising of certain claims by the contractor which could be seen as prohibited items and were not entertainable by the Arbitrator and that the Arbitrator had ignored the stipulations of the contract in obtaining suitable permission from the concerned Departments for executing the work. In Mcdermott, the Supreme Court, upon considering ONGC Limited Vs. Saw Pipes Limited reported in (2003) 5 SCC 705, construed the expression "public policy" to mean patent illegality which goes to the root of the matter. The Court relied on paragraph 31 of the ONGC decision to reiterate that an Award which is in patent violation of the statutory provisions cannot be said to be in public interest and could be set aside if it is contrary to the four conditions laid down in the ONGC decision, namely, i) fundamental policy of Indian law; ii) the interest of India iii) justice or morality and iv) patent illegality.
10. In the view of this court, the principles laid down in the two decisions form the backbone of any adjudication on whether an Award can be seen as being vulnerable to challenge. But whether these decisions are relevant will 10 have to be seen in the context of what the tender conditions (the contract) in this case had prohibited the parties to do. The conditions relied upon by counsel for the petitioner, (the clauses in the tender under the heading additional conditions) were concerned with the rates given by the contractor being all inclusive and that no extra payment would be payable to the contractor besides what has been provided in the schedule of quantities. The common ending to most of the clauses ".............nothing extra will be paid on this account". Unlike the specific prohibitory clauses in the Steel Authority case, the tender conditions in this case are general in scope and do not envisage a specific bar on the contractor respondent in making claims where the petitioner has itself not complied with the requirements of the tender document. Therefore, the entire argument that the learned Arbitrator acted beyond the terms of the contract thereby disregarding the obligation cast on him under Section 28(3) of the Act, and making the Award vulnerable to challenge under Section 34 cannot be accepted in the facts of this case.
11. A common defence taken by a party who wants to sustain an Award is that the Court cannot re-appraise the conclusions arrived at by an Arbitrator unless the reasons leading to such conclusions, as reflected in an Award, are such that the Court would be compelled to hold that the Arbitrator decided on matters beyond the scope of the submission; or the Award is in conflict with the public policy of India; or is in contravention of the fundamental policy of the Indian law; or in conflict with morality or justice. The addition of (2-A) to Section 34, namely, an Award being vitiated by patent illegality apparent on the face of the Award, was qualified by the 11 proviso that an Award shall not be set aside only for an erroneous application of the law or of re-appraisal of the evidence. The discouragement to a Court in engaging with the merits of the dispute is also to be found in the second explanation to the expression "public policy of India" which provides that an adjudication enquiring whether there has been a contravention of the fundamental policy of the Indian law shall not mean that a Court can review the merits of the dispute in question. The recent trend of cases, however, opens the gates to an enquiry into the merits if a Court finds that the Award reflects a reasoning which cannot be sustained either on facts or in law.
12. Without dwelling further on the conditions set forth under Section 34 as clarified by various judicial decisions, this Court finds that the learned Arbitrator, in the instant case, has passed an Award which is detailed and contains elaborate reasons. In deciding the individual claims made by the respondent upon hearing counsel appearing for the parties, the learned Arbitrator has not only referred to a large number of exhibits in support (or in rejection) of the claims but has relied on specific clauses of the Conditions of Contract. One instance would be the interpretation given to the expression "site" as defined in clause 2(ii) of the conditions of contract, which according to the arbitrator, did not mean a pin-pointed location where the actual execution was to be done but included all adjacent places and paths required for the execution of the work. There are numerous references of the conditions of the contract as well as the stipulations agreed by the parties, for example, stipulation no.5 in relation to making a site free of 12 surface/sub-surface obstruction which was modified by the respondent in relation to the number of days within such the site was to be made available to the respondent after issue of the work order. The Award reflects a painstaking effort on the part of the arbitrator to thoroughly consider the documents/exhibits as well as correspondence exchanged between the parties. The reasons for arriving at the conclusions under each head of claim are equally detailed. The conclusion, for example, that just because the tender work was completed within nineteen months would not exonerate the petitioner from the liability of loss of time and additional expenses incurred by the respondent in execution of work particularly when there were no laches on the part of the respondent, cannot be faulted as being either arbitrary or unreasonable. The learned Arbitrator, in fact, has exercised discretion and rightly, in deciding that although the respondent had put the petitioner on notice of charging 18% interest for delayed payment, such a rate of interest should not be allowed and that Rs.9,50,000/- claimed by the respondent for loss of hire charges of plants and machinery which remained idle for almost a year was a heavy amount which needed to be brought down to Rs.5,00,000/- in the interest of justice. The Arbitrator, in fact, reduced the quantum of some of the other claims of the respondent on similar basis. As opposed to the contentions of learned counsel for the petitioner, this Court does not find that the discretion exercised was on a whimsical or a capricious premise.
13. Having perused the Award and the justifications contained therein for arriving at the amounts awarded to the respondent, this Court sees no 13 reason to interfere with the conclusions arrived at by the learned Arbitrator on the grounds stipulated under Section 34 of the Act for allowing the challenge made to the Award.
14. For the above reasons, the Award dated 25th March, 2009 is sustained and A.P. No. 354 of 2009 is dismissed without any order as to costs.
Urgent Photostat certified copy of this judgement and order, if applied for, be supplied to the parties on a priority basis.
(MOUSHUMI BHATTACHARYA, J.)