Bombay High Court
Union Of India vs M/S Bright Power Projects (I) Pvt. Ltd on 7 April, 2015
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.933 OF 2013
Union of India, Acting through )
Chief Electrical Engineer (Construction) )
Central Railway, Mumbai CST, )
Mumbai ) .. Petitioner
Vs.
M/s.Bright Power Project (I) Pvt. Ltd. )
305, Creative Industrial Estate, )
Sunder Nagar, Road No.2, Kalina
ig )
Santacruz (E), Mumbai- 400 098. ) .. Respondent
---
Mr.Suresh Kumar a/w Ms. Sangita Yadav for the petitioner/UOI.
Mr.A.M. Vernekar a/w Mr.Samarth Pai for the respondent.
---
CORAM : R.D. DHANUKA, J.
DATE : 7th April 2015
Judgment :-
. By this petition filed under Section 34 of the Arbitration
and Conciliation Act, 1996 (for short "the said Arbitration Act), the petitioner has impugned the arbitral award dated 1 st July 2008 allowing some of the claims made by the respondent. Some of the relevant facts for the purpose of deciding this petition are as under :
2. The petitioner was the original respondent in the arbitral proceedings whereas the respondent was the original claimant.
3. On 15th July 1997, the petitioner awarded a contract to the respondent for design/supply and erection of OHE in Koparkhairane
-Turbhe-Vashi-Nerul vide letter of acceptance dated 15th July 1997 at a ::: Downloaded on - 11/04/2015 00:00:26 ::: ppn 2 11.arbp-933.13(j).doc total cost of Rs.2,32,28,205/- inclusive of all taxes, duties and incidental charges. It is not in dispute that the original contractual period was of 18 months i.e. upto 14th January 1999.
4. Due to various reasons, the work could not be completed within the original stipulated period of 18 months i.e. on or before 14 th January 1999. The work was treated as completed in the month of August 2004.
5. It is not in dispute that the respondent vide various letters applied for extension of contractual period from time to time to the petitioner. The petitioner granted extension of time by various letters i.e. 21st January 2000, 29th June 2000, 20th October 2000, 10th May 2001, 19th March 2002, 29th July 2002, 24th February 2003 and 31st August 2004.
The last extension was granted till 30th September 2004.
6. On 14th July 2004, the respondent invoked the arbitration agreement and applied for an appointment of arbitrator by addressing a letter to the General Manager of the petitioner. The matter was thus referred to the arbitral tribunal. On 24 th July 2006, the respondent filed a statement of claim making various claims. The petitioner filed written statement resisting those claims. No oral evidence was led before the learned arbitrator. By an award dated 1st July 2008, the learned arbitrator awarded the claim nos.1, 2, 3, 5, 8, 10, 11, 12 and 14 and rejected the claim nos.4, 6, 7, 9 and 13 made by the respondent.
7. Mr.Suresh Kumar, learned counsel appearing for the petitioner invited my attention to the letters addressed by the petitioner ::: Downloaded on - 11/04/2015 00:00:26 ::: ppn 3 11.arbp-933.13(j).doc in response to various letters addressed by the respondent seeking extension of contractual period and would submit that in each of those letters while granting extension of contractual period, the petitioner had made it clear that all the terms and conditions of the contract already entered into between the parties shall remain unaltered during the extended period and no increase in rate or additional rates and claims of recoveries which had not been envisaged in the terms of the conditions of the contract shall be leviable either by the petitioner or by the respondent in respect of the extended period. He submits that there was no objection to such condition imposed by the petitioner in those letters while granting extension of contractual period. He submits that in view of such condition imposed by the petitioner, it is clear that no compensation could be claimed by either party. Learned arbitrator could not have awarded any claim for compensation in favour of the respondent.
8. In support of his submission, learned counsel placed reliance on the judgment of the Supreme Court in the case of General Manager, Northern Railway and Anr. Vs. Sarvesh Chopra, reported in (2002) 4 SCC 45 and in particular paragraphs 15 and it is submitted that since the respondent did not make any claim for compensation and accepted delayed performance on the part of the petitioner, no claim under Section 73 read with Section 55 of the Contract Act could be awarded by the learned arbitrator. Paragraph 15 of the said judgment in the case of General Manager, Northern Railway and Anr. (supra) reads thus :
"15. In our country question of delay in performance of contract is governed by Sections 55 and 56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it may frustrate the contract and then the ::: Downloaded on - 11/04/2015 00:00:26 ::: ppn 4 11.arbp-933.13(j).doc innocent party need not perform the contract. So also, if time is of the essence of the contract, failure of the employer to perform a mutual obligation would enable the contractor to avoid the contract as the contract becomes voidable at his option. Where time is "of the essence" of an obligation, Chitty on Contracts (28th Edition, 1999, at p.1106, para 22-015) states "a failure to perform by the stipulated time will entitle the innocent party to (a) terminate performance of the contract and thereby put an end to all the primary obligations of both parties remaining unperformed; and
(b) claim damages from the contract- breaker on the basis that he has committed a fundamental breach of the contract ("a breach going to the root of the contract") depriving the innocent party of the benefit of the contract ("damages for loss of the whole transaction")."
If, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party, i.e. the contractor, cannot claim compensation for any loss occasioned by the non- performance of the reciprocal promise by the employer at the time agreed, "unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so". Thus, it appears that under the Indian law, in spite of there being a contract between the parties whereunder the contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of the employer, still a claim would be entertainable in one of the following situations: (i) if the contractor repudiates the contract exercising his right to do so under Section 55 of the Contract Act, (ii) the employer gives an extension of time either by entering into supplemental agreement or by making it clear that escalation of rates or compensation for delay would be permissible, (iii) if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the employer and the employer accepts performance by the contractor in spite of delay and such notice by the contractor putting the employer on terms."
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9. Learned counsel also placed reliance on the judgment of the Supreme Court in the case of State of Kerala and Anr. Vs. M.A. Mathai, reported in (2007) 10 SCC 195 and in particular paragraph 7 thereof in which the Supreme Court has followed its earlier judgment in the case of General Manager, Northern Railway and Anr. (supra).
10. Learned counsel for the petitioner also placed reliance on the judgment of the Supreme Court in the case of Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd., reported in (2003) 5 SCC 705 and in particular paragraph 22 thereof and it is submitted that since there was a prohibition from payment of any compensation imposed in the letters of the petitioner, while granting extension in the teeth of such prohibition, learned arbitrator could not have granted any claim of compensation for the work carried out in the prolonged period.
11. Mr.Vernekar, learned counsel appearing for the respondent, on the other hand, invited my attention to various grounds of challenge raised by the petitioner under Section 34 of the Arbitration Act in the arbitration petition. It is submitted that the entire petition has been filed on the premise that the claims awarded by the learned arbitrator in favour of the respondent were contrary to and in violation of various provisions of the General Conditions of Contract. He submits that admittedly, the said General Conditions of Contract relied upon by the petitioner in the arbitration petition were not even applicable to the contract in hand. He submits that thus, the petitioner cannot be allowed to agitate any other grounds across the bar based on Sections 55 and 73 of the Contract Act.
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12. Learned counsel for the respondent invited my attention to various correspondence exchanged between the parties and in particular, the letters addressed by the respondent for seeking extension of time and also replies given by the petitioner thereto. He submits that the original contractual period for 18 months expired in the month of January 1999. He submits that though the petitioner was solely responsible for gross delay in performing its part of the obligation, the respondent did not make any claim for compensation for the period of 36 months. My attention is invited to the letter dated 27 th September 2000 in which the respondent sought compensation for the first time while seeking extension of contractual period. Various reasons are rendered by the respondent in the said letter and in the subsequent letters for asking extension of time. He submits that in the reply of the petitioner while granting extension of the original contractual period, the petitioner did not dispute the reasons recorded by the respondent while seeking extension of time for completion of the work.
13. Learned counsel also invited my attention to clause 1.2.55 of the contract entered into between the parties and would submit that even if there was any dispute between the parties including during the period when the arbitration proceedings were pending, the respondent could not have stopped the work unless the petitioner would have directed the respondent to stop the work. He submits that in the correspondence exchanged by the respondent with the petitioner, the respondent had asked the petitioner to foreclose the contract and to pay the compensation. Despite such letters, the petitioner did not foreclose the contract and got the work done from the respondent. Learned counsel also invited my attention to the Minutes of Meeting held between the ::: Downloaded on - 11/04/2015 00:00:26 ::: ppn 7 11.arbp-933.13(j).doc parties on 18th June 2004 in which the parties had discussed the payment of compensation and in particular price variation. It was decided that the price variation as per standard RE contracts on erection/labour portion would be explored.
14. Learned counsel for the respondent distinguished the judgments relied upon by the petitioner on the ground that in this case, the respondent had raised a demand for compensation from time to time. He submits that the Supreme Court in the case of General Manager, Northern Railway and Anr. (supra) ig had considered the situation where no compensation was claimed by the contractor for delayed performance on the part of the owner. He submits that it is not in dispute that there is no prohibition in the contract entered into between the parties for payment of any compensation. Merely because the petitioner imposed such conditions while granting extension of time, those conditions would not become a part of the contract as the petitioner had never accepted such conditions as forming part of the contract.
15. A perusal of the record indicates that the original contractual period expired on 14th January 1999. The petitioner neither took any action against the respondent nor terminated the contract. It is not in dispute that under the provisions of the contract entered into between the parties, the contractor only could ask for extension of the contractual period. A perusal of the letters addressed by the respondent from time to time, while seeking extension of contractual period, clearly indicates that the respondent had categorically alleged various delays attributable on the part of the petitioner. A perusal of the letters addressed by the petitioner, while granting extension of time, clearly indicates that the ::: Downloaded on - 11/04/2015 00:00:26 ::: ppn 8 11.arbp-933.13(j).doc petitioner never disputed the reasons given by the respondent for seeking extension of contractual period sought by the respondent. It is thus clear that the petitioner had accepted the delay and, therefore, prolongation of the contract was due to the reasons attributable to the petitioner and not the respondent.
16. Question that arises for consideration by this Court is whether the respondent could have refused to work, even if the petitioner had imposed conditions for not granting any compensation while granting extension of original contractual period. A perusal of clause 1.2.55 read with clause 1.2.54 makes it clear that the contractor was bound to carry out work even during the period when the dispute has arisen between the parties unless the petitioner would have otherwise directed the contractor to stop the work. The record indicates that the petitioner never directed the respondent to stop the work. On the contrary, the petitioner neither paid any compensation nor took any steps to stop the contractor from carrying out the work nor terminated the contract. The contractual period which was for 18 months, it took about 7 years to complete the work. A perusal of the record indicates that the respondent was not responsible for such termination of the contract. The petitioner did not address this Court on the issue whether the respondent was responsible for such prolongation of the contract.
17. In so far as the judgments relied upon by Mr.Suresh Kumar, learned counsel for the petitioner are concerned, on perusal of the judgment of the Supreme Court in the case of General Manager, Northern Railway and Anr. (supra), it is clear that while considering the case of disputes covered by the 'excepted' category, the Supreme Court in ::: Downloaded on - 11/04/2015 00:00:26 ::: ppn 9 11.arbp-933.13(j).doc paragraph 15 has held that if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the owner while accepting the delayed performance on the part of the owner and inspite of such claim, the employer accepts performance of the contractor, the contractor would be entitled to make his claim for compensation. In this case, the respondent had demanded the compensation from time to time from the petitioner before and after petitioner granted extension on terms and conditions. In my view, the judgment of the of the Supreme Court in the case of General Manager, Northern Railway and Anr. (supra) does not assist the case of the petitioner but assist the case of the respondent. Similarly, the judgment of the Supreme Court in the case of State of Kerala and Anr. (supra) also assist the case of the respondent.
18. In so far as the judgment of the Supreme Court in the case of Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (supra) is concerned, the Supreme Court has held that if the contract provides for prohibition from making any claim, the claim awarded by learned arbitrator would be contrary to such prohibition and it would be in conflict with the public policy under Section 34(2)(b) read with Section 28 of the Arbitration Act. It is not in dispute that in the contract entered into between the parties, there was no such prohibition.
19. In my view, the learned arbitrator has interpreted the terms of the contract and has dealt with the evidence produced by the parties and has rightly awarded the compensation in favour of the respondent during the prolongation period.
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20. A perusal of the grounds raised in this petition by the petitioner clearly indicates that the entire basis of the challenge to the award in the petition is on the premise that the claims awarded by the learned arbitrator in favour of the respondent were contrary to the provisions of the General Conditions of Contract which conditions are admittedly not applicable to the parties to the petition. The grounds urged by the petitioner across the bar are not raised in the petition and thus, cannot be allowed to be urged. Learned arbitrator has allowed claims which are reasonable. Learned counsel for the petitioner has not urged any submission on merits of the claims awarded by the learned arbitrator.
21. Petition is devoid of merits. Learned arbitrator while rendering the reasons and dealing with the claim, has rightly allowed the claims which, in my view, are fair and reasonable and thus, no interference is called for under Section 34 of the Arbitration Act.
Petition is accordingly dismissed. No order as to costs.
R.D. DHANUKA, J.
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