Bangalore District Court
In Com. As. Sri. B.K.Gangadhar S/O ... vs In Com. 1.Bruhat Bengaluru Mahanagara ... on 31 October, 2019
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS JUDGE,
BANGALORE CITY. (CCH.NO.83)
Dated: This the 31st day of October 2019.
PRESENT : Sri. Jagadeeswara.M.,B.Com,LL.B.,
LXXXII Addl.City Civil & Sessions Judge, Bangalore.
Com.AS No.144/2015 & 146/2015
Plaintiff in Com. AS. Sri. B.K.Gangadhar S/o B.K.Kempegowda,
No.144/2015 No.13, "Sampatha Giri" Nr (KPTCL),
Kuvempunagar, Mysore - 570 023.
(By H.S.Dwarakanath- Advocate)
Versus -
Defendants in Com. 1.Bruhat Bengaluru mahanagara Palik, (Rep.
AS. No.144/2015 By its Commissioner), N.R.Square,
Bangalore-560 001.
2. The Chief Engineer, SWD Bommanahalli
Zone, BBMP, Jayanagar Compex, 9th floor,
4th block, Bangalore -560 011.
3.The Executive Engineer, SWD
Bommanahalli Zone, BBMP, Jayanagar
Complex, 9th floor, 4th block, Bangalore-11.
4. Sri. Perisami, Chief Engineer (Retd.), Sole
Arbitrator, No.391, 12th cross, BEL Layout,
3rd block, Vidyaranyapura, Bangalore - 97.
( By Sri. S.N.P.Chandra-Advocate)
Plaintiff in Com.AS. Bruhat Bengaluru mahanagara Palik, (Rep.
No.146/2015 By its Commissioner), N.R.Square,
Bangalore-560 001.
VS
Defendant in Com.AS. Sri. B.K.Gangadhar, major, No.13,
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
No.146/2015 "Sampatha Giri" Nr (KPTCL),
Kuvempunagar, Mysore - 570 023.
Respondent in Com. Sri. Periasami, Chief Engineer (Retd.) and
As.No.145/2015 Arbitrator, No.391, 12th cross, BEL Layout,
3rd block, Vidyaranyapura, Bangalore - 97.
COMMON JUDGMENT
These two suits have been registered on the basis of petitions filed
filed U/Sec.34 of Arbitration and Conciliation Act 1996 against the award
dated 9.6.2015 passed by Sole Arbitrator who is defendant No.4 in
Com.AS No.144/2015 and defendant No.2 in Com.AS No.146/2015.
2. One Mr.B.K.Gangadhar (Contractor) was claimant and the Bruhat
Bengaluru Mahanagara Palike (in short BBMP) was respondent in the
Arbitral proceeding.
2(a). Parties in these suits would be referred to as Contractor and
BBMP.
3. Brief facts of the cases are as under:
BBMP had invited tenders from the qualified contractors/agencies
for execution of construction of Re-modelling of Secondary Storm Water
Drain K-209 from Sanjay Shah Apartment to Madiwala Tank in
Koramangala Valley Package-III. The bid submitted by Mr.
B.K.Gangadhar was lowest one and same was accepted and work order
was issued to him by the BBMP on 14.3.2011. Agreement was also
entered into between the parties on the same day i.e., on 14.3.2011 for a
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
contract value of Rs.6,40,98,000/- to be completed within the period of 5
months including the monsoon period from the date of issue of work
order. The site was handed over to the Contractor on 14.3.2011. Since
disputes arose between the parties, Contractor invoked Arbitration Clause
of the Contract Agreement and as such, learned Sole Arbitrator was
appointed. Contractor filed his claim statement in which 14 claims and 2
additional claims i.e., in all 16 claims were made by him in his claim
statement filed before the Arbitral Tribunal. BBMP filed statement of
objections in the Arbitral Tribunal. Both side parties placed records before
the Arbitral Tribunal along with memo stating 'no oral evidence'. Learned
Arbitral Tribunal passed award dated 9.6.2015 rejecting claim
Nos.2,7,8,12,14 and additional claims No.1 & 2 and further has refused to
award interest with respect to claims No.4, 6, 10, & 11 and has further
reduced the amount with respect to claims No.1,3,4,6,10 & 11. Being
aggrieved by the refusals, reductions and interest being not awarded, the
Contractor has filed petition of Com.AS No.144/2015 under Sec.34(2) of
the Arbitration & Conciliation Act 1996 (in short the Act 1996). BBMP
has also filed petition of Com.AS No.146/2015 under Sec.34(2) of the said
Act challenging the Award.
4. The grounds urged by the Contractor in his Com. AS
No.144/2015 may be summarised as under:
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
(a). With respect to Claim Nos.4,6,10 & 11, there is one sentence
stating that no interest is payable. It is cryptic and no reasons are
assigned why interest is not payable and it is not a speaking order
which is violation of requirements of Sec.31(3) of the Act 1996 and
as such, it is opposed to the Public Policy and therefore, it is
necessary to set aside this portion of Award in not awarding interest
and in its place to award interest at 18% per annum payable from
the date of completion of the work till realisation of the amount.
(b). Rejection of claim No.2 is illegal and arbitrary since it is
undisputed fact that contractor submitted offer for execution of
subject work on 30.8.2009 and the period of completion itself was
only five months and tender was opened on 1.9.2009 and stipulated
period for finalisation of tender was 90 days. But the work order
was issued on 14.3.2011 with substantial delay of about 19 months
from the date of opening of the tender. In the absence of evidence
on record, learned Arbitrator has wrongly observed that Contractor
had agreed to execute the work at the same rates and conditions and
Clause-38 would apply only after the work order is issued. This
type of rejection of Claim No.2 is illegal on the face of record and
opposed to public policy and therefore, it is necessary to set aside
this portion of the Award rejecting Claim No.2 and in turn to award
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
the amount as per Claim No.2.
(c). Rejection of Claim No.7 is illegal and arbitrary. In fact
Claim No.3 is entirely different than Claim No.7. Exs.C.65 to C.69
placed in the Arbitral Proceeding clearly show machineries were
available in the place. But learned Arbitrator has failed to consider
the materials placed .
(d). Rejection of Claim No.8 on the ground that Claim Nos.2 &
7 are already been rejected, is illegal and arbitrary and it is not with
speaking order and hence it is violation of Sec.31(3) of the Act 1996
and same is liable to be set aside.
(e). Rejection of Claim No.12 is concerned, this claim has been
rejected on the ground that Contractor has not produced any
documentary evidence nor the conditions of the contract nor
produced any judgment from the court. This is illegal and opposed
to public policy since Claim No.12 is relating to Loss of Business
Development and law does not require to produce documentary
evidence or conditions of contract. Though Contractor had placed
several judgments of Hon'ble Apex Court and various High Courts,
but learned Arbitrator has failed to follow the proposition of those
judgments.
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
(f) Rejection of Claim No.14 to award litigation expenses is
liable to be set aside.
(g) Rejection of Additional Claim No.1 is against to the records
produced and it is illegal since contractor has produced Exs.C.6,16,
21, 22, 26 & 53 relating to ready mix plant and learned arbitrator
has rejected this claim without considering the records produced.
(h) Rejection of Additional Claim No.2 is concerned this claim
is wrongly rejected by observing that this claim is included in Claim
No.6. But, Claim No.6 is entirely different than additional claim
No.2. Additional Claim No.2 relates to idle charges for ready mix
plant and machineries during the extended period of contract. In the
absence of such plant and machinery, it was not possible to
complete the work. BOQ includes concrete mix and it is the choice
of the Contractor to use such concrete mix as he thinks.
Observation of the learned Arbitrator that there was no direction of
the BBMP to install ready mix plant, is illegal. In the Certification
to the bills, installation of ready mix plant and machinery has been
noted. Contractor has produced various agreements entered into
with various suppliers of the plant and machinery. But learned
Arbitrator has wrongly rejected this claim without considering the
materials on record properly.
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
(i) So far Claim Nos.1,3,4,6,10 & 11 are concerned, the amount
awarded is less than what should have been awarded and the
reduction is not sustainable.
(J) So far Claim No.1 is concerned which relates to delay in
release of R.A.Bill Nos.1 & 2. RA Bill No.1 was submitted on
13.7.2011, RA Bill No.2 was submitted on 10.10.2012. Each RA
bill was to be settled within 60 days from the date of its submission.
But, RA bills were settled on 28.6.2012 and 27.3.2013 resulting in a
delay of 186 days, 167 days respectively and for the said delay
period the interest is payable. Though RA bill No.1 was submitted
on 13.7.2011, but learned Arbitrator has wrongly considered the
date of submission as 14.3.2012. Thus there is wrong calculation
relating to number of days of delay in releasing the RA bills amount
and in not awarding interest for the delay in releasing the RA bills
amount.
(k) So far claim No.4 is concerned, learned Arbitrator has
awarded Rs.1,47,141/- only as against claim for Rs.95,22,444/-.
Reduction of claim is against to the terms of contract and admitted
facts since BBMP has not given any figure contrary to the figure
given by the Contractor relating to the quantity variation and there
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
was more than 25% increase leading quantity variation and
therefore, Contractor is entitled for the increase in market rate for
the varied quantity of the work done. Learned Arbitrator has refused
to award interest on this claim without assigning any reasons.
(l) So far Claim No.6 is concerned, learned Arbitrator has
reduced this claim without considering undisputed records produced
by the parties. Learned Arbitrator has refused to award interest on
this claim without assigning any reasons.
(m) So far Claim No.10 is concerned, learned Arbitrator has
reduced this claim without considering the records properly. It is
not stated as to why interest has not been awarded on this claim.
Though it is observed in the Award that Contractor has justified in
adoption of 25% towards loss of overhead and profit margin against
its normal adoption of 15% towards overhead and 15% towards
profit, but learned Arbitrator has wrongly awarded 10% only against
to the materials on record and it is illegal on the face of record.
Refusal of interest on this claim is cryptic order.
(n) So far as Claim No.11 is concerned learned Arbitrator has
awarded Rs.8,25,987/- only as against the claim for
Rs.1,40,47,790/-. This type of reduction of claim is against to the
admitted facts and materials on record. It is not explained why
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
interest is not awarded on this claim.
5. With the above grounds plaintiff/Contractor of
Com.AS.No.144/2015 has requested to set aside the Arbitral award
dated 9.6.2015 in so far as claim Nos.2,7,8,12,14 & additional claim
Nos.1 & 2 which have been rejected and rejection of interest
regarding claim Nos.4,6,10 & 11 and reduction of amount relating
to Claim Nos.1,4,6,10 & 11 and to modify the impugned Award by
granting the claims as sought for in the claim petition along with
interest.
6. The grounds urged by the BBMP in Com. AS No.146/2015
may be summed up as under:
(a). The Award dated 9.6.2015 passed by the Sole Arbitrator is
illegal, opposed to public policy and contrary to the terms and
conditions of the contract.
(b). The learned Arbitrator ought to have negatived the
contention of the Contractor and all his claims at the threshold of
the arbitration hearing itself. Therefore, the award in toto is liable
to be set aside as not maintainable and the impugned award is
opposed to pubic policy of India.
(c). Learned arbitrator has failed to appreciate the principle laid
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
out by the Hon'ble Supreme Court in U.O.I Versus Master
Construction Company reported in (2011)12 Supreme Court Cases
349. The learned Arbitrator ought to have rejected the claim of the
contractor as not maintainable.
(d). In so far as claim No.3 is concerned, the learned Arbitrator
allowed the claim for a sum of Rs.87,16,118/- giving unwarranted
discussion and reasonings for allowing the claim.
(e). In so far as claim No.6, the learned Arbitrator has awarded a
sum of Rs.28,30,320/- which is seriously disputed by the BBMP.
The percentage arrived by the learned Arbitrator is not based on any
decided law, scientific formula or norms under any clause of the
contract.
(f). As regards claim No.10, the learned Arbitrator has failed to
see that it is a repetitive claim and the claimant has claimed the loss
under different head.
(g). The learned Arbitrator exceeded its jurisdiction in all aspect,
contract and the law of the land. The interest awarded at 18% is
again high and more than the bank lending interest.
Accordingly, BBMP, who is the plaintiff of Com.A.S.No.146/2015,
has requested to set aside the impugned award dated 9.6.2015.
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
7. From the above, the following points have arisen for my
consideration:
1) Whether Arbitral Award dated 9.6.2015 rejecting
Claim Nos.2,7,8,12,14 and additional Claim Nos.1 &
2 is apparent illegal on the face of record and against
to the admitted materials on record and opposed to
public policy ?
2) Whether Arbitral Award dated 9.6.2015 reducing
the amount with respect to Claim Nos.1,3,4,6,10 & 11
is apparent illegal on the face of record and against
to the admitted materials on record and opposed to
public policy ?
3) Whether Arbitral Award dated 9.6.2015 refusing to
award interest to Claim Nos.4,6,10 & 11 is apparent
illegal and opposed to public policy ?
4) Whether Bruhat Bengaluru Mahanagara Palike who
is plaintiff of Com.AS.No.146/2015 has made out
grounds under Sec.34(2) of the Arbitration &
Conciliation Act 1996 to set aside Arbitral Award
dated 9.6.2015 ?
5) What order ?
8. Heard the arguments of both sides
9. My findings on the above points are as under:
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
Issue Nos. 1 & 2 : Partly in the affirmative
Issue No. 3 : Affirmative
Issue No.4 : Negative
Issue No.5 : As per final Order
for the following :
REASONS
10. Issue Nos. 1 to 4 : As all these issues are interlinked with each
other, I have taken up all these together for consideration.
11. At this stage itself it is important to note the date of events which
are as under:
a) Date of submission of tender ....................30.8.2009
b) Date of Opening of tender.........................1.09.2009
c) Contract Awarded on ...................................14.3.2011
d) Agreement executed on ............................ 14.03.2011
e) Employer handed over site to the Contractor on ..... 14.3.2011
f) Contractor commenced work on ........................ 14.3.2011
g) Contractual period to complete work................... 5 months
h) Work completed on ........................................31.3.2012
i) Time was extended to complete work till..................31.3.2012
with extended period....................................... 7.6 months
j) Contract Value............................................................ Rs.6,40,98,000/-
After going through the materials placed by the parties, learned Arbitrator
has observed that Contractor submitted tender on 30.8.2009 and same was
opened by the Employer/BBMP on 1.9.2009. The validity period to
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
finalize the tender was 90 days from the date of opening of the tender. But
Employer/BBMP issued Work Order on 14.3.2011 with delay of about 19
months from the date of opening of the tender. It was short term tender to
be completed within 5 months including the monsoon period. For such
type of short term tender, Employer took nearly 19 months from the date of
opening of the tender to issue Work Order. There was delay to handover
work site to the Contractor. There was delay in supplying the drawings.
There was delay in releasing RA Bills and release of price adjustment bill.
Accordingly it is the observation of the learned Arbitrator that the delay
was caused due to breaches committed by the Employer/BBMP resulting
prolongation of the contract period for 7.6 months as against original
contract period of 5 months. Learned advocate for BBMP has not shown
materials to hold that BBMP did not commit breaches of the contract
resulting in delay and prolongation of the contract work.
12. Contractor filed his claim petition before the Arbitral Tribunal in
which he made 14 claims and two additional claims in all he made 16
claims on the ground that the Contract was a reciprocal promise and the
BBMP was required to discharge its various contractual obligations. It was
required to issue work order within 90 days from the date of opening of the
tender. But BBMP took more than 19 months time to issue work order
from the date of opening of tender during which period the price of various
materials, POL, labour came to be increased. BBMP failed to provide
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
hindrance free site along with alignment and caused considerable delay in
execution. Further it delayed the issue of good for construction drawings
and issued drawings in piece meal even after completion of the original
contract period. BBMP delayed the release of RA bills beyond the
contractual due dates causing financial loss to the contractor. BBMP
delayed the approval and payment of price adjustment bill submitted to it.
Thus, BBMP failed and neglected to discharge its contractual obligations
in the required time due to which the contractor was prevented from
completing the work in time and sustained various losses and injuries and
therefore contractor is entitled for compensation from BBMP. The BBMP
was respondent before the Arbitral Tribunal and it filed its objection
statement denying the claims of the contractor and it requested to dismiss
the claim of the contractor.
13. Claims made by the Contractor in his claim petition filed before
the Arbitral Tribunal are as under:
Claim No. Name of Claims Claimed amount Interest % Total claimed
in Rs. amount (Rs.)
1. Claim for 18% & 24% 31,98,360.00
compensation for 31,98,360/-
delay in release of RA
Bill payment
2. Claim for 1,21,24,762.00 18% p.a. 1,32,36,918.00
compensation for 11,12,156.00
increase in contract
price due to delay in
issue of work order
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
3. Claim for price 20,02,483.00 18% & 24% 1,09,07,152.00
escalation 89,04,669.00
4. Claim for quantity 77,02,877.00 18,19,567.00 95,22,444.00
variation
5. Claim for extension of 1,84,975.00 1,45,856.00 3,30,813.00
performance Bank
Guarantee
6. Claim for plant and 37,37,760.00 37,37,760.00
machinery, manpower
rendered idle
7. Claim for new rates for 2,11,00,000.00 1,09,00,000.00 2,12,09,000.00
the period beyond 5
months
8. Claim for escalation 31,96,000.00 31,96,000.00
already claimed by
another 20% due to
prolongation of
contract period
9. Claim for refund of 9,74,500.00 9,74,500.00
Earnest Money
Deposit
10. Claim for loss of 2,17,37,697.00 2,17,37,697.00
overhead and profit
margin
11. Claim of overall 1,40,47,790.00 1,40,47,790.00
variation of contract
12. Claim for loss of 64,09,000.00 64,09,000.00
business development
13. Claim for Presuit,
pendentalite and future
interest @ 18% pa .
14. Claim for litigation as
per actual
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
Additional Claims filed by the claimants
Addl.Cl. Claim for extra rates 81,02,030.00 81,02,030.00
No.1 for executing M35,
M15 & M10 ready mix
concrete beyond its
original period of
contract
2. Claim for ready mix 96,15,610.00 96,15,610.00
plant and machinery
idle for the extended
period of contract
Total 11,09,35,484.00 1,52,89,608.00 12,62,25,092.00
claimed
amount
14. After holding enquiry and after hearing, claims awarded, reduced,
refused etc., by the learned Arbitrator in the Award dated 9.6.2015 are as
under:
Sl.No. Claim Total Claimed Awarded amount Remarks (if any)
Number amount including including interest
interest
01 01 31,98,360.00 13,84,050.00 Interest at 15% is allowed
02 02 1,32,36,918.00 Claim rejected
03 03 1,09,07,122.00 87,16,118.00 Interest at 15% is allowed
04 04 95,22,444.00 1,47,141.00 Interest is not allowed
05 05 3,30,831.00 1,36,349.00 Interest at 15% is allowed
06 06 37,37,760.00 28,03,320.00 Interest is not allowed
07 07 2,12,09,000.00 Claim rejected
08 08 31,96,000.00 Claim rejected
09 09 9,74,500.00 2,04,219.00 Interest at 15% is allowed
10 10 2,17,37,697.00 86,95,079.00 No interest is allowed
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
11. 11 1,40,47,790.00 8,25,987.00 No interest is allowed
12. 12 64,09,000.00 Claim rejected
13. 13 18% interest is Indicated against
claimed individual claims
14. 14 As per actual Claim rejected.
Arbitration
proceedings
expenses if any
shall be shared
equally.
Additional Claim filed by the Claimants
15. AC.1 81,02,030.00 Claim rejected
16. AC.2 96,15,610.00 Claim rejected
Total 12,62,85,122.00 2,29,12,263.00
15. So far as claim No.1 is concerned, it is relevant to note that
Contractor made his claim for Rs.31,98,360/- for compensation for the
delay in release of RA bill payment, on the ground that as per Clause-37.1
of the conditions of Contract, he was entitled for payment of RA bill within
60 days from the date of submission of RA bill, but there was considerable
delay in making payment of RA Bills by the BBMP which resulted in
borrowing money from the banks and financial institutions by paying
interest at 16% per annum. Contractor placed Exs.C.2 to 6, C.9, C.10,
C.15, C.16 & C.34 before the Arbitral Tribunal to show correspondence
made by him with BBMP requesting to release RA Bill payment. Learned
Arbitrator relied upon the proposition of Law of Constitution Bench of
Hon'ble Apex Court in AIR 2001 SC 626 (Executive Engineer,
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Com.A.S.No.146/2015
Dhenkanal Minor Irrigation Division, Orissa etc. Vs. N.C.Budharaj
(D) by LRs etc.) to award interest for the delay in releasing payments of
RA Bill. Learned Arbitrator has observed that First RA Bill was submitted
on 14.3.2012 and its payment was released on 28.6.2012 and thereby there
was total delay of 103 days and net delay of 43 days beyond 60 days and
accordingly learned Arbitrator awarded interest at 15% amounting to
Rs.7,14,197.25 for net delay of 43 days in releasing first RA bill amount of
Rs.4,04,15,814/-. Further, Learned Arbitrator has observed that 2 nd and
final RA Bill was submitted on 10.10.2012 and its payment was released
on 27.3.2013 and thereby there was total delay of 167 days and net delay
of 77 days beyond 60 days and accordingly learned Arbitrator awarded
interest at 15% amounting to Rs.6,69,852.53 for net delay of 77 days in
releasing 2nd and final RA bill amount of Rs.2,11,68,500/-. Learned
Arbitrator has calculated the delay and awarded interest at 15% on the
delay as under:
Sl. Name of Gross Amount of Date of Date of Total No. Total 15% interest
No. the RA the Bill Submission release of of days delays allowed.
Bil payments delayed beyond 60
days for
RA Bill &
90 days
for Final
Bill
1 RA Bill 4,04,15,814.00 14.3.2012 28.6.2012 103 43 7,14,197.25
No.1
2. RA Bill 2,11,68,500.00 10.10.2012 27.3.2013 167 77 6,69,852.53
No.2 &
Final
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Com.A.S.No.146/2015
bill
Total Interest allowed Rs.13,84,050.00
16. This type of calculation of the days relating to the delay in
release of RA bill amount, calculated by the learned Arbitrator is
apparently illegal and against the materials on record for the reasons that
learned advocate for BBMP in these cases on hand before this court has not
disputed the delay caused in releasing payments of RA Bills. However, it
is submitted in his notes of arguments that as per Clause-31(7)(b) interest
at the rate of 2% higher than the current rate of interest prevalent is
permissible. Xerox copy of the first RA Bill, which was marked as Ex.C.68
in the Arbitral proceedings, is produced. Copies of all the records which
were produced and marked in the arbitral proceedings are also produced I
these cases. Date of submission of first RA bill is not clearly appearing in
Ex.C.68. Even then learned Arbitrator has wrongly considered the date
14.3.2012 as the date of submission of first RA bill. There are no materials
placed by the parties in the Arbitral proceedings to show that first RA bill
was submitted on 14.3.2012. In fact, in Annexure-I of the Claim petition
filed by the Contractor before the date of submission of the first RA bill is
wrongly shown as 13.7.2013. Factually, first RA bill was not submitted
in the year 2013. Therefore, the date 13.7.2013 shown in Annexure-I of the
claim petition, was wrongly shown. It is undisputed fact that Contractor
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made several correspondence with the BBMP/Employer requesting to
release first RA bill amount. Therefore, it is necessary to go through those
correspondence to ascertain the date of submission of first RA bill. Ex.C.5
is the letter dated 1.8.2011 sent by the Contractor to the BBMP/Employer
requesting to release first RA bill amount of Rs.4.03 Crores which was
officially prepared on 18.5.2011. In the said letter it was stated that
Contractor was forced to stop the work from 28.6.2011 due to financial
problem and due to not releasing first RA bill amount. This Ex.C.5 which
is the letter sent on 1.8.2011 itself shows that first RA bill was submitted
by the Contractor to the Employer/BBMP much prior to 1.8.2011. Ex.C.9
is the letter dated 29.9.2011 sent by the Contractor to the BBMP/Employer
again requesting to release first RA bill amount. In the said letter it is stated
as "in the above context we once again request your goodself for payment of the
first RA bill immediately along with interest at 24% per annum from the date of
due to the date of payment in order to over come financial difficulties and to
complete the balance work early." Ex.C.2 is another letter dated 2.11.2011
sent by the Contractor to the Employer/BBMP requesting to release first
RA bill amount of Rs.4.33 Crores. In the said letter it is stated that first RA
bill was officially prepared on 18.5.2011 and it was submitted on 19.7.2011
to the Executive Engineer, SWD (BZ) BBMP, Bangalore and Contractor
was forced to stop the work from 28.6.2011 for not releasing first RA Bill.
It is also stated in the said letter as under:
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"Payments: As per agreement para 37-1 payment shall be made within
60 days of submission of bill by the employer after adjusting any
advance payment and other recoveries due on the work. In the present
case the bill was submitted on dated: 19.7.2011 and the stipulated
period for payment of bill has been expired on 19.09.2011."
17. Ex.C.15 is another letter dated 5.3.2012 which was sent by the
Contractor to the Employer requesting for early release of first RA bill
amount. From these undisputed correspondence at Exs.C.2,C.5, C.9 &
C.15, it is undoubtedly clear that the first RA bill was submitted by the
Contractor to the Employer much prior to 1.8.2011. Therefore, the date of
submission shown as 28.6.2012 in page No.15 of the claim petition and the
date of submission shown as 24.12.2011 shown in page No.76 in Paper
book of Vol.No.I, relating to submission of first RA bill, is nothing but
wrong dates shown. There are no materials available to support the date
14.3.2012 as the date of submission of first RA bill, which was considered
by the learned Arbitrator. Due to these materials, it is necessary to consider
the date of submission as 19.7.2011, as shown in Ex.C.2 as the date of
submission of first RA bill. Thus, submission of first RA bill was on
19.7.2011 and the date of release of its payment was on 28.6.2012 and total
number of delay is 352 days and net delay beyond 60 days is 292 days.
Contractor is entitled for the interest at 15% per annum on the first RA bill
amount of Rs.4,04,15,814/- for the delay of 292 days in releasing the first
RA bill amount, which comes to Rs.49,17,257/- (4,04,15,814 x 15/100/12
22
Com.AS No.144/2015 &
Com.A.S.No.146/2015
months/ 292 days = 49,17,257/-.
18. Relating 2nd RA bill is concerned, learned Arbitrator has
considered the correct date of submission as 10.10.2012 and the date of
release of its payments on 27.3.2013 and total number of delay of 167
days. Beyond 60 days for 2nd RA bill, there was delay of 107 days, but
learned Arbitrator has wrongly considered delay of 77 days beyond 60
days for 2nd RA bill.
19. Contractor is entitled for the interest at 15% per annum on the 2 nd
& final RA bill amount of Rs.2,11,68,500/- for the delay of 107 days in
releasing the 2nd & final RA bill amount, which comes to Rs.9,43,762/-
(2,11,68,500 x 15/100/12 months/ 107 days = 9,43,762/-). . Thus,
Contractor is entitled for Claim No.1 as under:
Sl. Name of Gross Amount of Date of Date of Total No. Total 15% interest
No. the RA the Bill Submission release of of days delays allowed.
Bil payments delayed beyond 60
days for
RA Bill &
90 days
for Final
Bill
1 RA Bill 4,04,15,814.00 19.7.2011 28.6.2012 352 292 49,17,257.00
No.1
2. RA Bill 2,11,68,500.00 10.10.2012 27.3.2013 167 107 9,43,762.00
No.2 &
Final
bill
Total Interest allowed Rs. 58,61,019.00
Accordingly, it is necessary to modify the amount awarded towards Claim
23
Com.AS No.144/2015 &
Com.A.S.No.146/2015
No.1 in the Arbitral Award. To this extent, there are grounds to interfere in
the Arbitral Award.
20. So far as Claim No.2 is concerned, Contractor has made this
claim for Rs.1,21,24,762/- for compensation for increase in the contract
rates on account of prolongation of issue of Work Order to commence the
work o the ground that he had submitted tender on 30.8.2009 for short term
tender of the work to be completed within 5 months and the stipulated
period to issue work order is 90 days from the date of opening of the
tender. Tender was opened on 1.9.2009. But Work Order was issued on
14.3.2011 i.e., after about 19 months from the date of opening of tender.
During this period there was increase in the rates and as such, Contractor
made representation to the employer/BBMP to increase its quoted rates.
But same was not considered. BBMP in its objection statement denied this
claim of the Contractor on the ground that Clause-34 of the Contract,
which is relied upon by the Contractor cannot be invoked for compensation
for increase due to prolongation of the issue of Work Order.
21. After considering the materials placed by the parties and also
submissions made by them, learned Arbitrator has rightly rejected this
claim No.2 with the observation that as per the Department's procedure it is
required to extend the validity of the tender till the department obtains
approval for awarding the work to the lowest tender and till the Work
Order is issued. Normally the Department will ask the Contractor to
24
Com.AS No.144/2015 &
Com.A.S.No.146/2015
extend the validity of the tender periodically till the tender is accepted from
the competent authorities and Work Order is issued. Department of BBMP
was required to follow this procedure. Therefore the Contractor's quoted
rates shall be valid inspite of the extended period of time from the date of
opening of the tender till the issuance of the Work Order. Contractor
received the Work Order and continued to execute it. After going through
the materials on record and the reasonings of the learned Arbitrator in
rejecting Claim No.2 I am of the considered opinion that there are no
grounds to interfere and to set aside this Award of learned Arbitrator in
respect of this Claim No.2 is concerned.
22. So far as Claim No.3 made by the Contractor is concerned,
Contractor made claim for price escalation of Rs.20,02,483/- and interest
thereon at 18% per annum and 24% per annum amounting to
Rs.89,04,669/- and in all Contractor claimed Rs.1,09,07,152/- under this
head.
23. It was contended by the Contractor that price escalation is on
account of prolongation of the contract not attributable to the Contractor
since Contractor submitted tender on 31.8.2009 and it was opened by the
employer on 1.9.2009 and work order was issued on 14.3.2011 i.e., after
lapse of 19 months from the date of opening of the tender. BBMP handed
over work site on 14.3.2011 and on that day work was commenced. In
fact, contract completion period to be ended on 14.8.2011 but same was
25
Com.AS No.144/2015 &
Com.A.S.No.146/2015
extended for more than 7.6 months. The details of the various delay
caused by the BBMP were shown in the claim petition along with the delay
analysis. Accordingly Contractor claimed escalation under the condition of
Contract Clause-40 and 40.1(a),(b) & (c).
24. BBMP raised objection to the claim No.3 of the Contractor
disputing the delay analysis chart and the claim under different heads
shows exaggerated claim escalation. The delay in release of RA bills, in
issuance of approved drawings for different section cannot be
compensation event, as drawings are same and similar and therefore cannot
be a ground for compensation. The awarding of the contract, issue of work
order by the BBMP is subject to approval by the State Government and its
authorities and as such, the delay if any cannot be attributable to the
BBMP. The delay depends upon various other authorities, agencies and
utility services before issue o the work. The price adjustment Clause-
40.1(a)(b)(c) is not applicable as the parties have not agreed the same.
25. After going through the nature of claim No.3 made by the
Contractor and the nature of objection taken by the BBMP and the
materials placed by the parties, learned Arbitrator awarded Rs.87,16,118/-
with interest at 15% per annum as against the claim for Rs.1,09,07,122/-
towards Claim No.3 made by the Contractor with the reasonings that
Arbitral Tribunal accepted the certified true copies of the Agreement filed
by the BBMP since condition of the contract filed by the Contractor was
26
Com.AS No.144/2015 &
Com.A.S.No.146/2015
not tallying with the certified copy of the contract documents filed by the
BBMP. Even if condition Clause-40.1 is not accepted, Contractor is
entitled for escalation as the contract period is extended beyond 12 months
from the date of commencement of the contract and if the contract period
is extended beyond 12 months and the contract value exceeds Rs.1.00
Crore, the Contractor is entitled for escalation as per the Government
order. The contract period of completion of five months extended for a
period of 7.6 months totaling to 12.6 months and thereby the contract
period of completion had exceeded the minimum requirement of 12
months and above and the value of the contract exceeding Rs.1.00 Crore,
for eligibility of escalation as per the Government Order. BBMP has
considered the original contract period of five months and stated that the
contract period is less than 12 months and therefore, the Contractor is not
entitled for escalation. This type of interpretation of the contract condition
by the BBMP is not correct. The period of completion including original
contract period + extended period of contract as issued by the BBMP had
exceeded 12 months and therefore, Contractor is entitled for escalation as
the contract period is extended for more than 12 months and exceeding the
value of Rs.1.00 Crore. During the course of hearing, learned Arbitrator
directed both the parties on 16.5.2015 to jointly work out the escalation.
Though Executive Engineer of BBMP did not agree for escalation, but he
worked out the escalation of Rs.53,53,408/- taking into account the
27
Com.AS No.144/2015 &
Com.A.S.No.146/2015
percentage of components adopted for the various materials. Learned
Arbitrator found that the method adopted by the BBMP to work out
calculation for escalation was not correct and accordingly again directed
the BBMP to file fresh calculation of escalation. But, BBMP did not file it.
Contractor filed escalation as per the direction of the learned Arbitrator for
an amount of Rs.79,57,436/- based on the norms of the Government
Departments such as PWD, BWSSB and KPCL. The norms of KPCL
followed by the Contractors in it escalation calculation came to be
accepted by the learned Arbitrator. Accordingly learned Arbitrator has
held that Contractor is entitled for escalation for an amount of
Rs.79,57,436/- and interest thereon at 15% p.a., from the date of passing of
final bill till 22.11.2013 is accepted for Rs.7,58,682/- and accordingly
learned Arbitrator has awarded amount of Rs.38,29,767/- under Claim
No.3. After going through the materials on record, observation and award
made by the learned Arbitrator relating to Claim No.3 of the contract, there
are no grounds to interfere in the said amount awarded by the learned
Arbitrator so far as Claim No.3 is concerned.
26. So far as Claim No.4 is concerned, it is relevant to note that the
Contractor has made this Claim No.4 for Rs.95,22,444/- for quantity
variation on the ground that he is entitled for quantity variation given in the
BOQ more than 125% at new rates as the quoted rates are not applicable
for variation beyond 125%. Variations in the rates have taken place
28
Com.AS No.144/2015 &
Com.A.S.No.146/2015
beyond the original period of contract and hence he is entitled for actual
market rates which works out to an average of 25% on the BOQ rates and
accordingly he claimed these rates on account of extra financial investment
made for execution of the work. Contractor has also claimed
compensation for reduction in the BOQ quantities actually executed less
than 25% variation limit, by enclosing the details in Annexure-IV.
Accordingly it was claim of the Contractor that he is entitled for
compensation for not allowing to execute certain BOQ for which he had
quoted his rates apart from his entitlement for quantities variation given in
the BOQ more than 125%. BBMP in its objection statement has accepted
in case of increase in the quantities of item in the BOQ beyond 25% as per
Clause-34 of the conditions of contract. In case the quantity executed is
less than 25% and BOQ items not executed, the Contractor is not entitled
for any compensation towards loss of profit.
27. After going through the materials placed by the parties and by
considering the submissions made by them, the learned Arbitrator has
awarded Rs.1,47,141/- as against claim for Rs.95,22,444/- under this Claim
No.4 with the reasonings that the contract provides for the variation above
125% i.e., BOQ quantities exceeding 25% of individual items. Contractor
claimed for the quantities executed above 25% as most of the items were
executed beyond the original period of contract and therefore the
deviations of the rates on the basis of BOQ, Schedule of Rates are not
29
Com.AS No.144/2015 &
Com.A.S.No.146/2015
applicable and Contractor is entitled based on the market rates for the items
of work executed beyond the original contract period. The claim of the
Contractor appears to be reasonable on the basis of Clause-31.4 of the
Contract Conditions. However, it is observation of the learned Arbitrator
that the claim of 25% of the Contractor is in the higher side when
Contractor has already claimed escalation under Claim No.3. Accordingly
learned Arbitrator has calculated the amount by taking into consideration
the variation quantity25% beyond 25% claimed at 25% BOQ rates against
which 15% BOQ rates allowed and therefore learned Arbitrator has
awarded Rs.1,47,141/-. It is stated by the Arbitrator that no interest is
payable on this amount. So far refusal to grant interest on this amount is
concerned, it will be discussed separately under Item No.13. So far
amount of Rs.1,47,141/- awarded under Claim No.4 is concerned, after
going through the materials on record and calculations made by the learned
Arbitrator, there are no grounds to interfere in this portion of the Award
relating to amount of Rs.1,47,141/- awarded under this Claim No.4.
28. So far as Claim No.5 is concerned, Contractor made claim for
compensation of Rs.3,30,831/- for extension of bank guarantee. It was
contended by the Contractor in his claim petition filed before the Arbitral
Tribunal that as per Clause-43.1 of the contract and Clause-25.5 of IFT, he
was required to submit the security deposit to the BBMP which should be
valid until a date of 30 days from the date of expiry of defects liability.
30
Com.AS No.144/2015 &
Com.A.S.No.146/2015
Original bank guarantee was submitted on 22.3.2011 which was kept valid
till 31.3.2013 for Rs.32,05,000/-. The contract work was required to be
completed within 5 months from the date of commencement of the contract
which started on 14.3.2011 and the contract period ended on 13.8.2011.
Contractor was directed to renew or keep alive the bank guarantee on
account of prolongation of contract for reasons not attributable to him. The
delay is attributable to the BBMP. Therefore, Contractor had to incur
additional expenditure on account of extension of bank guarantee such as
bank guarantee commission charges and interest on margin money
deposited and also blockage of fund invested in the bank for obtaining
Bank guarantee. BBMP raised objection stating that Contractor was
required to keep the Bank Guarantee alive till the completion of the defects
liability period and 30 days beyond after. Therefore, Contractor is not
entitled for Claim No.5.
29. After going through the materials on record and by considering
the claim of the Contractor and objection raised by the BBMP, learned
Arbitrator has awarded Rs.1,36,349/- towards Claim No.5 by allowing
interest at 15% with the reasonings that the contract has been extended due
to various breaches of the contract committed by the BBMP and due to
prolongation of the contract period, the Bank Guarantee was required to be
kept alive beyond the stipulated period for which Contractor had also
incurred additional expenditure, on account of the delay caused by the
31
Com.AS No.144/2015 &
Com.A.S.No.146/2015
BBMP in completing the work within the stipulated period. Therefore,
Contractor is entitled for compensation for the extra expenditure incurred
towards commission charges, interest for extending the margin money
deposited in the bank. The Contractor produced letter issued by the Bank
charging interest for over draft amount drawn and it proved the contractor
had incurred additional expenditure on Bank Guarantee
submission/extension. After going through the nature of Claim No.5 made
by the Contractor and nature of the objection raised by the BBMP and the
amount awarded by the learned Arbitrator with the reasonings, there are no
grounds to interfere with the Award of learned Arbitrator relating to Claim
No.5 is concerned.
30. Relating to Claim No.6 is concerned, Contractor has made this
claim No.6 for Rs.37,37,760/- for compensation for manpower and Plant
and Machinery rendered idle during the extended period of contract on the
ground that due to various hindrances encountered by him, he had to keep
idle manpower, plant and machinery for longer period which caused
substantial loss to him. Though he brought this fact to the
employer/BBMP in the monthly progress review meetings and also
through various correspondence, but BBMP has failed to consider it.
Contract was extended on account of various breaches of the contract
committed by BBMP and as such, Contractor had kept his manpower, plant
and machinery mobilized for more than 7.6 months beyond the contract
32
Com.AS No.144/2015 &
Com.A.S.No.146/2015
period for which his quoted rates were not taken into consideration. He
started the work on 14.3.2011 and was supposed to have completed the
work by 13.8.2011 as five months period of contract had ended. He had to
stay for 7.6 months over and above the period of contract and his
manpower, plant and machinery were kept idle for most of the time and
thereby he had to incur huge amount in this regard. In support of this
claim Contractor placed hire charges agreement, labour charges agreement
and other various equipment engaged by them etc., as Exs.C.31 to C.45.
BBMP in its objection statement has denied this claim No.6 of the
Contractor and requested to reject the claim.
31. After going through the materials placed by the parties and after
hearing submissions, learned Arbitrator has awarded Rs.28,03,320/-
towards this Claim No.6 as against the claim of Rs.37,37,760/- with the
observation that the Contractor claimed plant and machinery idle for the
extended period of contract of 7.6 months along with the statement
enclosed as Annexure-VI and claimed only 60% of the plant and
machineries and manpower engaged during the extended period of contract
accepting 40% utilised in the works. Contractor submitted various exhibits
for the hire of machineries and agreement entered into with suppliers and
also documents for engaging manpower. Though the BBMP has denied the
engagement of entire plant and machinery and manpower throughout the
period of extended period of contract, but no documentary proof is placed
33
Com.AS No.144/2015 &
Com.A.S.No.146/2015
by the BBMP to support its stand. Normally in the Government
Departments, the officials of the Department are required to maintain a
register of plant and machinery and manpower engaged in the works,
daily/monthly. Therefore, it is the responsibility of the BBMP to ensure
availability of the manpower and machinery available in the project site till
the work is completed. BBMP cannot say many machineries are not
required at the site as they have the authority to direct the Contractor to
remove the unwanted machineries and manpower provided in the project
site. BBMP has failed to provide any documentary proof for their
statement that entire manpower and plant and machineries not required at
the site. Contractor had written many letters at Exs.C.5, C.7, C.10, C.22,
C.23, C.26,C.30, C.31,C.34 and C.50 to the BBMP stating that manpower
and machineries were idle on account of many hindrances caused by the
BBMP. Contractor has claimed towards loss of manpower and
machineries during the extended period of contract to the extent of 60% for
the purpose of idle wages and hire charges with the Annexure-VI of Claim
Statement. Claims made by the Contractor appears to be reasonable on
account of engaging the plant and machinery and manpower for the
extended period of contract for which he had incurred additional cost not
envisaged in his quoted rates in the contract. Though it is observation in
the Award that claim of the Contractor appears to be reasonable, but
learned Arbitrator has restricted the amount to Rs.28,03,320/- as against
34
Com.AS No.144/2015 &
Com.A.S.No.146/2015
the claim of Rs.37,37,760/- by accepting the claim of the Contractor to the
extent of 60% idle period. After going through the nature of materials on
record and the observation made by the learned Arbitrator, there are no
grounds to interfere in the Award made by the learned Arbitrator so far as
Claim No.6 is concerned. Further learned Arbitrator has refused to award
interest on the awarded amount of Claim No.6 and this refusal of interest
will be considered separately under Point No.13.
32. So far claim No.7 is concerned, Contractor made this claim for
Rs.2,12,09,000/- towards new rates for the extended period of contract
beyond five months on the ground that contract has been extended due to
various breaches committed by the BBMP for a period of 7.6 months
beyond the original period of contract of five months. Contractor had
quoted his rates taking into account the likely period of 90 days to issue
work order. But the work order was issued after more than 19 months
from the date of opening of the tender. Therefore quoted rates were
increased during the extended period of contract. Therefore to compensate
this, it is reasonable to increase the rates to the extent of 30% of BOQ rates
during the extended period. Accordingly Contractor claimed 30%
increased rates of BOQ. BBMP raised objection relating to this Claim
No.7 stating that this claim is not permissible. After going through the
materials on record, the learned Arbitrator has rejected this Claim No.7
with the observation that the Contractor had already claimed escalation
35
Com.AS No.144/2015 &
Com.A.S.No.146/2015
under Claim No.3 on account of the extended period of contract beyond 5
months and total of more than 12 months of contract period. The
escalation amount claimed takes care of the entire period of contract as the
indices are calculated from the date of previous quarter from the date of
opening of tender till the period of completion which has been claimed
under Claim No.3. Therefore, the claim of extra rates over and above the
BOA rates is not reasonable.
33. I have carefully gone through the nature of claim No.3 of the
Contractor. As rightly observed by the learned Arbitrator, since claimant
had already claimed escalation on account of the the extended period of
contract, claimant is not entitled to make same claim for extra rates over
and above BOQ rates for the extended period of contract. Therefore,
learned Arbitrator has rightly rejected this claim No.7 of the Contractor.
There are no grounds to interfere or to set aside the Award of the learned
Arbitrator in rejecting Claim No.7 of the Contract.
34. So far as Claim No.8 is concerned, Contractor has made this
claim for Rs.31,96,000/- for escalation amount already submitted to be
enhanced on account of BOQ rates by 30% due to delay in issue of work
order to commence the work and due to delay in view of prolongation of
the contract beyond the original period of completion. As rightly observed
by the learned Arbitrator the original escalation claim under Claim No.(3)
shall take into consideration the original BOQ rates and also the increased
36
Com.AS No.144/2015 &
Com.A.S.No.146/2015
rates during the extended period. Therefore, this claim came to be rejected
rightly. There are no grounds to interfere and to set aside the Arbitral
Award in rejecting the Claim No.8 of the Contract.
35. So far as Claim No.9 is concerned, Claim No.9 made by the
Contractor is for compensation relating to delay in refund of Earnest
Money Deposit. Contractor claimed Rs.9,74,500/- towards this claim
No.9. Contractor has claimed interest at 18% for the delayed period in
returning EMD amount. Learned Arbitrator noted 761 days delay in
returning EMD amount and thus awarded 15% interest for the delayed
period. Accordingly learned Arbitrator has awarded Rs.2,04,219/- towards
claim No.9. After going through the materials on record, reasonings of
learned Arbitrtor and admitted delay in returning EMD amount, there are
no grounds to set aside the award of learned Arbitrator relating to Claim
No.9 is concerned.
36. So far Claim No.10 is concerned it is relevant to note that
Contractor made this claim for Rs.2,17,37,697/- for loss of over head and
profit margin during the extended period of contract on the ground that he
had suffered injuries and loss of expenditure on account of Idle Plant and
Machinery and manpower mobilized immediately after opening of the
tender by expecting that Work Order would be issued immediately since it
was a short term tender with the Contract period of 5 months including
monsoon period. But the Work Order was issued on 14.3.2011 with the
37
Com.AS No.144/2015 &
Com.A.S.No.146/2015
delay of about 19 months though validity period to issue Work Order was
90 days from the date of opening tender. Work site was haded over on
14.3.2011. There was delay in handing over work site. Immediately he
commenced the work and completed about more than 60% of the contract
work within the original period of contract. Thus due to the breaches of
Contract committed by the Employer/BBMP, he was prevented from
completing the work within the original period of contract. While quoting
the rates he had taken into consideration the small period of time to get the
Work Order to complete the work with the period of 5 months. His quoted
rates are not valid due to breaches committed by the BBMP resulting to
extend contract period for 7.6 months which was extended without
imposing penalty on him. Since the delay is not attributable to him, he is
entitled for necessary compensation for the extended period of the contract.
While quoting the rates Contractor considered the Head Office Over Head
of 15% and Profit Margin of 15% due to prolongation of Contract which
are not attributable to him, had resulted in the increased Head Office Over
Head and loss of Profit Margin as the Head Office increased the
expenditure during the extended period of contract. Contractor placed
annual statement of the Head Office Over head expenditure duly certified
by the Chartered Accountant in support of his claim, at Exs.C.47 and C.48.
Accordingly Contractor claimed 25% towards the loss of Head Office Over
Head and Profit Margin during the extended period of Contract.
38
Com.AS No.144/2015 &
Com.A.S.No.146/2015
37. BBMP in its objection statement filed before the Arbitral
Tribunal denied this claim of the Contractor on the ground that project was
delayed on account of the factors not attributable to it.
38. In support of his claim, Contractor placed Hudson Formula
which is approved by the Hon'ble Apex Court and also decision of Hon'ble
High Court reported in MANU/KA/0345/199 and MANU/AP/0644/2008
and MANU/AP/0071/1995.
39. After going through the materials placed by the parties it is held
by the learned Arbitrator in para No.44.8 of the Award that though BBMP
has denied the delay attributable to it, but it has not placed evidence to
support its contention that delay is not attributable to it. Extension of time
was granted without imposition of any penalty which indicated there is no
failure on the part of Contractor. Various factors caused for the
prolongation of the contract such as delay in issuing work order, delay in
R.A.Bills payment, delay in approval of drawings, delay in finalisation of
extra item etc., had caused the prolongation of the contract which are not
attributable to the Contractor.
40. The Award made relating to this claim No.10 in para No.44.16 of
the Award is as under:
"44.16. After considering the pleadings of the Claimant and the
Respondent and their arguments made and the documents and
case laws produced and I am inclined to agree with the claim of the
Claimant and restricting his claim towards Head Office Over Head
and Profit Margin 10% against 25% claimed. I am awarding a
39
Com.AS No.144/2015 &
Com.A.S.No.146/2015
sum of Rs.86,95,079.00 (Rupees Eighty Six Lakhs Ninety Five
thousand and Seventy Nine only). No Interest payable."
This type of award made restricting the claim of the Contractor to 10%
against 25% claimed is illegal and it is apparently against to the materials
on records and also contrary to the settled proposition of law for the
reasons that in para No.44.14 of the award itself it is observed that due to
prolongation of the contract to the extent of 7.6 months against the original
period of 5 months, the Head Office Over Head and Profit Margin had also
been lost. There was delay of about 19 months in issuing Work Order. In
Para No.44.8 of the Award, it is observed as "Therefore I accept the
claim of the claimant as the delay is not attributable to the claimant as
the respondent had failed to produce any evidence of delay
attributable to the claimant for the prolongation of the Contract." The
Contractor had incurred substantial expenditure towards his Head Office
Over Head and Profit Margin. BBMP placed the percentage of
Government Departments followed in the Rate Analysis adopting
Overhead and Profit Margin of 20%. Inspite of all these materials and
though Contractor restricted his claim under these two heads to 25% and
though he calculated claim for loss of Over head at 15% and loss of Profit
margin at 15% in all 30%, and though BBMP placed the percentage of
Government Departments followed in the Rate Analysis adopting Over
head and Profit margin of 20%, but learned Arbitrator without any reasons
40
Com.AS No.144/2015 &
Com.A.S.No.146/2015
has restricted the claim to 10%. This type of restriction of claim without
reasons is against to Section 31(3) of the Arbitration & Conciliation Act,
1996.
41. It is held by the Hon'ble Apex Court in AIR 1984 SC 1703
(A.T.Brij Paul Singh & Ors. Vs. State of Gujarat) that where in a works
contract, the party entrusting the work commits breach of the Contract, the
Contractor would be entitled to claim damages for loss of profit which he
expected to earn by undertaking the works contract. Hon'ble Apex Court
in AIR 1977 SC 1481 (Mohd. Salamatulla & Ors. Vs. Government of
Andhra Pradesh) has confirmed the awarding of damages to the tune of
15% towards loss of profit due to breach of contract committed by the
employer. Further Hon'ble Apex Court has held in 2010(2) ALT 655
(G.V.Mall Reddy & Co. Vs. A.P. State Trading Corporation Ltd.) that
the loss of profit can be validly claimed by the Contractor as and when
there is breach of contract by the employer and as per the Hudson Formula
award of amount of 15% towards loss of profit or towards quantum of
damages would be justified. It is held by the Hon'ble High Court of
Karnataka in ILR 1992 KAR 3276 (Government of Karnataka Vs. K.
Sudhakar Reddy ) in Para No.11 as under:
"11. So far as the second contention is concerned it appears to us that
the same has to be just mentioned to be rejected because no such
plea has been taken before either the arbitrator or the lower Court
that the extra quantity of work turned out by the contractor was
identical with the type of work undertaken by him pursuant to his
41
Com.AS No.144/2015 &
Com.A.S.No.146/2015
letter dt. 10.9.86 and therefore, no rate in excess of the rate awarded
to the said work could have been given. If there is no such plea and
much less evidence in that regard before the arbitrator, there could
have been absolutely no scope for the arbitrator to have recorded a
finding in that regard, nor could it be said that the finding granting
rates higher than the rate in respect of that work amounts to a
misconduct as to warrant interference at the hands of the Civil
Court."
As noted above, though Contractor calculated loss of Over Head at 15%
and loss of Profit Margin at 15%, in all 30%, but he restricted his claim to
25% in the arbitral proceeding, due to breaches committed by the
employer resulting in prolongation of contract period to 7.6 months as
against original contract period of 5 months. It is undisputed fact that
project was short term contract to be completed within 5 months including
monsoon period. Contractor submitted bid on 30.8.2009. It was opened
by the BBMP on 1.9.2009. Stipulation period to finalize tender was 90
days from 1.9.2009. But Work Order was issued on 14.3.2011 i.e., after
about 19 months. Possession of work site was handed over on 14.3.2011.
Thus, BBMP caused huge delay in issuing Work Order, in handing over
work site and releasing RA Bills payment etc., which resulted in
prolongation of contract period to 7.6 months as against original contract
period of 5 months. Due to this reason, BBMP extended the time to the
Contractor to complete the work without imposing penalty on the
Contractor. During this prolonged period of contract of 7.6 months
Contractor has incurred more towards Over Head for machineries and
42
Com.AS No.144/2015 &
Com.A.S.No.146/2015
labour etc. Therefore, his claim for Over head cannot be rejected. Apart
from that during this prolonged period of contract of 7.6 months Contractor
was prevented from taking up some other work to earn profit and thereby
he suffered loss. It is settled proposition that awarding of amount towards
loss of profit is reasonable. Even after going through the materials placed
by the Contractor, learned Arbitrator has observed in para No.44.12 of the
Award as under:
"Therefore they have justified in adoption of 25% against their
normal adoption of 15% towards Over Head and 15% towards Profit
while quoting the rates for the contract works. However, they limited
the claim only to 25%."
Therefore, it is just and necessary to allow Claim No.10 in full for
Rs.2,17,37,697/- being Head Office Over Head and Profit Margin at 25%
as claimed instead of 10% restricted by the learned Arbitrator by
modifying the Award. Accordingly Claim No.10 stands allowed in full as
claimed by the Contractor and Award stands modified.
42. So far Claim No.11 is concerned, it is relevant to note that
Contractor has made this Claim No.11 for Rs.1,40,47,790/- for overall
variation of the contract amount, on the ground that he had signed the
agreement for contract value of Rs.6,40,98,000/- to be executed within a
period of 5 months from the date of commencement of work. The contract
provides for variation of individual quantities to the extent of 125% of the
tender quantities and an increase in the variation beyond 25% the contract.
43
Com.AS No.144/2015 &
Com.A.S.No.146/2015
As per the direction of the BBMP he executed work which had increased
the contract value including the contractually due claims. He is entitled for
the actual work executed and certified by BBMP and also contractually
due claims submitted to the BBMP which also forms part of the contract
value. The total contract value executed by him works out to Rs.13.43
Crores. The abnormal increase in the contract value is Rs.7.23 Crores. For
additional work he had arranged finance from open markets and financial
institutions at higher rate of interest. Since the contract value exceeded, he
is entitled for compensation by way of increase in the BOQ rates to the
extent of 20% of the difference in actual contract value executed including
the contractually due claims. Accordingly Contractor claimed
Rs.1,40,47,790/-. BBMP in its objection statement has denied this Claim
No.11 of the Contractor and requested to reject this claim.
43. After considering the materials placed by the parties and also
their submissions, learned Arbitrator has awarded Rs.8,25,987/- only
towards this claim No.11 as against claim for Rs.1,4047,790/- with the
reasonings that Contractor's claim for the Overall variation of the contract
is based on the contract value executed including his contractual claims
filed before the Arbitral Tribunal which exceeded the contract value.
There is no clause in the contract providing for exceeding the contract
value. BBMP should not have power to order for executing the work
beyond the contract value without the consent of the Contractor and
44
Com.AS No.144/2015 &
Com.A.S.No.146/2015
making a supplementary agreement for exceeding the contract value and
negotiated with the Contractor for an amicable rates to be decided between
the parties before commencement of work exceeding the contract value.
The contract value was Rs.640 Lakhs and the final bill value as certified by
the BBMP was Rs.610 Lakhs which is within the original contract value.
After considering the claim of the contract and the materials placed,
learned Arbitrator has calculated this claim as under:
Sl.No. Description Amount in Rs.
1) Contract Value as per the agreement 6,40,98,000.00
2) Actual Contract Value executed 6,15,00,000.00
Actual Contract value executed including contractually allowed claims
by Arbitral Tribunal
i. Certified Contract value by Respondents in the 6,15,00,000.00
Final Bill
ii. Escalation claim allowed by the Arbitral Tribunal 79,57,436.00
under Claim No.3
iii. Individual Quantity variation allowed by the 1,47,141.00
Arbitral Tribunal
iv. Total Contractual amount considered including 6,96,04,577.00
claims allowed by the Arbitral Tribunal
v. Less Agreement Contract value 6,40,98,000.00 55,06,577.00
3) Compensation allowed for exceeding the Overall 8,25,987.00
Variation 15% against the 20% claimed by the
Claimant
Compensation payable on account of Overall Variation - Rs. 8,25,987.00
Accordingly learned Arbitrator has awarded Rs.8,25,987/- only towards
this claim No.11 as against Claim for Rs.1,40,47,790/-. After going
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Com.A.S.No.146/2015
through the materials on record and observation made by the learned
Arbitrator, there are no grounds to interfere in the Award made relating to
Claim No.11 is concerned. However, learned Arbitrator has refused to
award interest on this amount awarded towards Claim No.11 and the
refusal of interest will be considered separately under Claim No.13.
44. So far as Claim No.12 is concerned, the Contractor has made
this Claim No.12 for Rs.64,09,000/- for loss of business development on
account of prolongation of the contract for more than 7.6 months in the
project and during this period he has lost the business development and
utilisation of man power, machinery and takeover of new business. This
claim came to be rejected with the observation that Contractor has not
produced any documentary evidence to support this claim. During the
course of argument of these cases before this court, learned Counsel for the
Contractor is not able to show any evidence supporting this claim.
Therefore, this Claim No.12 was rightly rejected by the learned Arbitrator.
45. So far as Claim No.14 is concerned, this claim is made for
litigation. This claim has been rejected by the learned Arbitrator on the
ground that there is no delay on the part of the BBMP in appointing the
Arbitrator and therefore both the parties are required to defend their case to
establish their point of view in the Arbitration and therefore both the
parties are required to bear the litigation cost. There are no grounds to
interfere in the Award of the learned Arbitrator in rejecting this Claim
46
Com.AS No.144/2015 &
Com.A.S.No.146/2015
No.14.
46. So far as Additional Claim No.1 of the Contractor is
concerned, the claim of the Contractor is for Rs.81,02,030/- with interest
at 18% p.a., for increase in rates for ready mix cement. This claim was
made by the Contractor on the ground that he had provided RMC to be
used in the work and considered at the time of quoting the rates. But the
work could not be completed in time due to breaches committed by the
BBMP. Thus contract was extended upto 31.3.2012. Therefore, he is
entitled for equitable rates for the period beyond the original stipulated
period of contract. However, average rate of the Schedule of Rates of
2009-2012 for claiming the equitable rates for all the work were taken.
The basic rate considered in the estimate of M-35 RMC works out to
Rs.4,137/- per cubic meter and after adding the laying charges, area
weightage, 10% profit and the quoted rates above percentage of 11.25%,
the equitable rate per cubic meter works out to Rs.7,671/- per cubic meter
whereas the quoted rate for finished item is Rs.5,626/- per cubic meter.
Accordingly Contractor is entitled for additional amount of Rs.2,015/- per
cubic meter for M-35 RMC work. Contractor had executed 2730.803
cubic meter under this item and accordingly he is entitled for 2730.803 x
1996 = Rs.55,84,486/- under M-35 RMC. Further Contractor has also
claimed a sum of Rs.18,59,284/- under M-15 RMC and Rs.6,58,260/--
under M-10 RMC. Thus, total amount claimed was Rs.81,02,030/-.
47
Com.AS No.144/2015 &
Com.A.S.No.146/2015
BBMP raised objection and denied this additional Claim No.1 of the
Contractor. After going through the materials on record and by considering
the submissions of the parties, learned Arbitrator has rejected this
Additional Claim No.1 with the observation that during the hearing,
Contractor agreed that claim is for BOQ only and not extra items. The
Contractor already claimed under Claim No.2 the increase in rate of 20%
due to delay in issue of work order and also claimed under Claim No.7,
claim for new rates of 20% on BOQ rates during the extended period of
contract which includes this additional claim No.1 also. Apart from that,
Contractor had also claimed escalation under Claim No.3 due to
prolongation of period of more than 12 months against the contract period
of five months. Therefore, Contractor is not entitled for the Additional
Claim No.1.
47. After going through the materials on record, nature of Additional
Claim No.1 and the reasons in the Arbitral Award for rejecting this
Additional Claim No.1, there are no grounds to interfere in the Arbitral
Award in rejecting Additional Claim No.1 of the Contractor.
48. So far as Additional Claim No.2 is concerned, Contractor has
made this claim for Rs.95,15,610/- towards ready mix concrete plant
rendered idle for the extended period of contract. Contractor had given
details of the plant and machinery, manpower and number of days idle etc.,
in his claim petition under this claim. He claimed the hire charges for plant
48
Com.AS No.144/2015 &
Com.A.S.No.146/2015
and machinery and the idle charges to be paid for Rs.29,940/- per day,
Rs.11,867/- per day and claimed for idle period of 230 days in all
Rs.06,15,610/- as per the details enclosed. He claimed interest on the said
amount also He produced various agreements at Exs.C.50, C.51, & C.52
which were entered into by him with various suppliers of plant and
machinery. It was contention of Contractor that he had entered into an
agreement with a ready mix plant supplier who had erected the plant with
their own machineries and supplied RMC as per the agreed contract
condition between him and the Suppliers. He has also produced various
agreements entered into with the suppliers and also Supplier of manpower
for the plant operations. Contractor had claimed the idle plant and
machinery and man power for the extended period of contract of 7.6
months. BBMP in its objection statement has denied this claim of the
Contractor and requested to reject this claim. Learned Arbitrator has
rejected this claim of the Contractor by observing that Contractor had
already claimed under Claim No.6 for the loss of man-power and plant and
machinery rendered idle during the extended period of contract. The BOQ
item provide for using M-35, M-15 and M-10 concrete mixing and hire
charges of machinery etc. The quoted rates are valid for the entire item of
work including the hire charges for machinery. For the extended period of
contract, the Contractor has already claimed escalation and also the idle
charges of plant and machinery. Though Contractor has not included the
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
RMC plant and machinery under Claim No.6, the item indicates the
execution of item of RMC M-35, M-15 and M-10. Normally, the RMC
Suppliers supply the machinery at their own transport cost and the ready
mix rates as fixed by the agency shall be payable. There was no direction
from the employer/BBMP to install the ready mix plant within the site. In
the absence of any such direction from the employer/BBMP, the
arrangement made by the Contractor with the suppliers should be dealt
with by him only.
49. This type of rejection of Additional Claim No.2 is concerned, it is
relevant to note that the Award rejecting this Additional Claim No.2 is
vitiated by patent illegality apparent on the face of record and it requires to
be set aside for the reasons that there is no acceptable reasons as
contemplated under Sec.31(3) of the Arbitration & Conciliation Act 1996
for rejecting this claim. Secondly learned Arbitrator has made out a new
case which was not pleaded by either of the parties, by observing that the
RMC Suppliers would bring the machineries to the site at their own cost.
The only two reasons given by the learned Arbitrator for rejecting this
Additional Claim No.2 is that Contractor had already claimed under Claim
No.6 for the loss of man-power and plant and machinery rendered idle
during the extended period of contract and there was no direction from the
employer/BBMP to install ready mix plant within the site. In fact, learned
Arbitrator has failed to consider his own observation in para-50.8 of the
50
Com.AS No.144/2015 &
Com.A.S.No.146/2015
Award that Contractor has made his additional Claim No.2 on the ground
that this claim relating to RMC plant and machinery, was left out in Claim
No.6 and therefore subsequently Additional Claim No.2 has been made in
this regard. As could be seen from the terms of the contract and also as
observed in para No.50.7 of the Award, the BOQ item provide for using M-
35, M-15 and M-10 ready mix concrete plant and hire charges of
machinery. Undisputedly Exs.C.68 & C.69 are two running bills submitted
by the Contractor and certified by the Supervising Engineer and payments
were already made. In the end of R.A.Bill at Ex.C.68 certificate is given
as "Contractor has used ready made concrete for all concrete works
including M-10". Similarly, in the end of RA Bill at Ex.C.69 it is certified
as "Contractor has used ready made concrete for all concrete works
including M-10". Contractor has placed several records such as Ex.C.36
to C.41, C.51, C.52, C.53, C.64B, C.70A to C70C, C.71(a), C71(b),
C.71(c), C.72(a), C.72(b), C.84(a) to C.84(c), C.84(d) etc., to show the
concrete ready mix plant installed by him to complete the work.
Contractor produced hire purchase agreement Exs.C.51 to C.52, C.71(a),
C71(b), C.71(c), regarding tipper documents to show vehicles taken on
hire and Ex.C.64(c) to C.64(g) regarding crane and Ex.C.64(h) to C.64(n)
regarding roller and Volvo Excavator, These documents have not been
disputed by the employer/BBMP. There was memo filed in the Arbitral
proceeding stating to accept the documents to be true. Therefore, records
51
Com.AS No.144/2015 &
Com.A.S.No.146/2015
produced by the Contractor relating to the plant and machineries and ready
mix concrete plant installed, could not be disputed. In the absence of such
plant and machineries and installation of ready mix concrete plant, work
could not have been completed. Claim of the Contractor was relating to
ready mix plant rendered idle during the extended period of contract. It is
undisputed fact that contract was prolonged for 7.6 months as against the
short term completion within 5 months. During this prolonged period,
Contractor had to keep the plant and machineries and ready mix concrete
plant idle. This ready mix concrete plant has not been claimed under Claim
No.6 by the Contractor. Contractor has made this claim on the ground that
due to various breaches committed by the BBMP, contract was prolonged
for nearly more than 7.6 months which is more than 466% from the date of
opening of the tender and 360% from the actual date of completion of the
work. The various hindrances encountered by him is on account of various
factors dealt with in detail in the claim petition. Contract provided for
using ready mix concrete for all type of work and particularly for M-35
grade, M-15 grade and M-10 grade. The work could not be completed
within the agreed time due to the breach on the part of the employer/BBMP
and thereby work got spilled over upto 31.3.2012. Contractor has to bear
the idle charges upto the date of completion. Since the employer has failed
to issue Work Order and drawings in time and also defaulted in performing
its obligations under the Contract, Contractor was forced to work in the site
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
upto 31.3.2012. He kept plant and machineries along with the staff for
extended period of contract upto 31.3.2012 for a period of 230 days. He
has furnished details of plant and machinery kept in the work site and they
are one batching plant and Silo with DG, one concrete pump, 4 transit
mixers, 2 persons to operate plant, one person as plant mechanic and
electrician, 4 persons as plant helpers, 2 persons as plant co-ordinators, one
person as lab technician, 2 persons as lab helpers, 8 persons as transit
mixer drivers, 4 persons as transit mixer helpers, 3 persons as pump
operators, one person as pump mechanic, 2 persons as pump helpers and 2
persons as site supervisors. He produced hire charges agreement relating
to plant and machineries to show hire charges and idle charges to be paid
by him to the owners of the plant and machineries at the rate of Rs.29,940/-
per day and salary of Rs.11,867/- per day for all the persons required for
running of ready mix concrete plant work. He calculated this amount to
contract period of 230 days and claimed Rs.96,15,610/- under this head.
a. Plant & Machinery idle charges per day Rs.29,940/-
b. Salary to the persons employed for the plant rendered
Rs.11,867/-
idle
Total idle charges per day Rs.29,940/- + Rs.11,867 Rs.41,807/-
c. Number days rendered idle 230 days
d. Total claim towards idle charges of Ready Mix Plant
Rs.96,15,610/-
Rs.41,807 per day x 230 days
50. It is material to note that this type of claim made by the contractor
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
appears to be excessive. Undisputedly total contract value was
Rs.6,40,98,000/-. Stipulated contract period was 5 months. Work order
was issued to the contractor on 14.3.2011. Stipulated completion period of
5 months of the contract expired on 14.8.2011. Undisputedly
employer/BBMP extended time to complete the work till 31.3.2012
without invoking clause of liquidated damages and without imposing
penalty to the contractor. Work was completed on 31.3.2012. Thus,
prolonged period is from 14.8.2011 till 31.3.2012 i.e., in all 230 days for
which he is entitled for Plant & Machineries idle charges. As could be
seen from the materials on records, this additional claim No.2 is different
than claim No.6. Contractor claimed Plant & Machineries idle charges per
day Rs.29,940/- and salary to the persons employed for the plant rendered
idle Rs.11,867/- per day i.e., in all Rs.29,940/- + Rs.11,867/- = Rs.41,807/-
per day. Though contractor has placed hire charges agreements and labour
supply agreements etc., to support this claim, but by considering the total
contract value was Rs.6,40,98,000/- it is just and reasonable to consider
50% of the charges for the prolonged period of 230 days only. 50% of
charge of Rs.41,807/- comes to Rs.20,903.5/- per day x 230 days =
Rs.48,07,805/-. Contractor is entitled for Rs.48,07,805/- towards this
additional Claim No.2. Accordingly Award of learned Arbitrator in
rejecting additional claim No.2 stands set aside. Additional Claim No.2
stands allowed in part awarding Rs.48,07,905/- with interest at 15% per
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
annum from the date of completion of work till the date of Award.
51. So far claim No.13 is concerned it is relevant to note that
contractor has made this claim for pendenti lite and future interest at 18%
per annum. Relating to this claim learned Arbitrator has stated only one
sentence as under:-
"The Arbitrator has given the interest payable to the
claimant under each claim award".
52. Except this sentence nothing is stated by the Arbitrator under this
claim as to whether contractor is entitled or not for interest from the date of
completion of work till the date of Award. So far claim No.4 is concerned
learned Arbitrator awarded Rs.1,47,141/-. Relating to claim of interest it is
stated in cryptic as "No interest is payable". So far claim No.6 is
concerned learned Arbitrator awarded Rs.28,03,320/- and interest is
concerned, it is stated in cryptic as "No interest is payable". So far claim
No.9 is concerned learned Arbitrator awarded Rs.2,04,219/- being interest
at 15% per annum for the delay period in releasing EMD and there is no
need to award interest on it from the date of completion of award till the
date of contract. So far claim No.10 concerned learned Arbitrator awarded
Rs.86,95,079/-. Relating to claim of interest on this amount it is stated in
cryptic as "No interest is payable". So far claim No.11 concerned learned
Arbitrator awarded Rs.8,25,987/-. Relating to claim of interest on this
amount it is stated in cryptic as "No interest is payable".
55
Com.AS No.144/2015 &
Com.A.S.No.146/2015
53. It is argument of learned advocate for contractor that the award in
not awarding interest to claim Nos.4, 6, 10 and 11 is cryptic and without
any reasons which is contrary to Sec.31(3) of the Arbitration and
Conciliation Act 1996 and it comes U/Sec.34(2) (b) (ii) and (iii) and
Sec.34(2A) of said Act and same is to be set aside and to award interest at
18% per annum from the date of completion of work till the date of award.
On the other hand it is submission of learned advocate for BBMP that since
there is no clause in the contract to claim interest pendenti lite and
therefore learned Arbitrator has no jurisdiction to award interest pendenti
lite and by considering the nature of award, learned Arbitrator has rightly
declined to exercise his discretion to award interest to claim Nos.4, 6, 10
and 11 and therefore there are no grounds set aside award on that ground.
54. It is held by the Hon'ble Apex Court in 2009 (12) SCALE 648
(Som Datt Buolderc Limited V/s State of Kerala) that the requirement of
reasons in support of the award under Sec.31(3) of the Arbitration &
Conciliation Act, 1996 is not an empty formality. It guarantees fair and
legitimate consideration of the controversy by the arbitral Tribunal. It is
true that arbitral Tribunal is not expected to write judgment like a Court
nor it is expected to give elaborate and detailed reasons in support of its
finding/s but mere noticing the submissions of the parties or reference to
documents is no substitute for reasons which the arbitral Tribunal is
obliged to give. Howsoever, brief these may be, reasons must be indicated
56
Com.AS No.144/2015 &
Com.A.S.No.146/2015
in the award as that would reflect though process leading to a particular
conclusion. To satisfy the requirement of Section 31(3), the reasons must
be stated by the arbitral Tribunal upon which the award is based; want of
reasons would make such award legally flawed.
55. It is held by the Hon'ble Apex Court in 2010 (2) ALT 655
(G.V.Malla Reddy & Co., Vs. A.P.State Trading Corporation Ltd.)
relating to grant of pendente lite interest that a person deprived of the use
of the money to which he is legitimately entitled has a right to be
compensated for the deprivation, call it by any name. It may be called
interest, compensation or damages. This basic consideration is as valid for
the period the dispute is pending before the arbitrator as it is for the period
prior to the arbitrator entering upon the reference. This is the principle of
Sec.34 Civil Procedure Code and there is no reason or principle to hold
otherwise in the case of arbitrator. Further it is also held by Hon'ble Apex
Court that where the agreement does not prohibit and a party to the
reference makes a claim for interest, the arbitrator must have the power to
award interest pendenti lite. Further it is also held in it that interest
pendenti lite is not a matter of substantive law, like interest for the period
anterior to reference (pre-reference period). For doing complete justice
between the parties, such power has always been inferred. Further it is
also held by Hon'ble Apex Court that it where the agreement between the
parties does not prohibit grant of interest and where a party claims interest
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Com.AS No.144/2015 &
Com.A.S.No.146/2015
and that dispute (along with the claim for principal amount or
independently) is referred to the arbitrator, he shall have the power to
award interest pendente lite. This is for the reason that in such a case it
must be presumed that interest was an implied term of the agreement
between the parties and therefore when the parties refer all their disputes
or refer the dispute as to interest as such to the arbitrator, he shall have the
power to award interest.
56.It is held by Hon'ble Apex Court in AIR 2000 SC 2003
(Ghaziabab Development Authority V/s Union of India and another)
as under:
"There was no contract between the parties regarding payment of
interest on delayed deposit or on account of delay on the part of the
opposite party to render the services. Interest cannot be claimed
under Sec.34 of the Civil Procedure Code as its provisions have
not been specifically made applicable to the proceedings under the
Act. We, however, find that the general provisions of Sec.34 being
based upon justice, equity and good conscience would authorise
the Redressal Forums and Commissions to also grant interest
appropriately under the circumstances of each case. Interest may
also be awarded in lieu of compensation or damages in appropriate
cases. The interest can also be awarded on equitable grounds."
57. It is held by the Constitution Bench of Hon'ble Apex Court in
AIR 2001 626 (Executive Engineer, Dhenkanal Minor Irrigation
Division, Orissa, etc. etc., Vs. N.C.Budharaj(D) by Lrs. Etc. etc.), as
under:
"As long as there is nothing in the arbitration agreement to exclude
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the jurisdiction of the Arbitrator to entertain a claim for interest on
the amounts due under the contract, or any prohibition to claim
interest on the amounts due and become payable under the contract,
the jurisdiction of the Arbitrator to consider and award interest in
respect of all periods subject only to Section 29 of the Arbitration
Act, 1940 and that too the powers of the Court thereunder, has to be
upheld. The submission that the Arbitrator cannot have jurisdiction to
award interest for the period prior to the date of his appointment or
entering into reference which alone confers him power is too stale
and technical to be countenanced in our hands, for the simple reason
that in every case the appointment of an Arbitrator or even resort to
Court to vindicate rights could be only after disputes have cropped
up between the parties and continue to subsist unresolved and that if
the Arbitrator has the power to deal with and decide disputes which
cropped up at a point of time and for the period prior to the
appointment of an Arbitrator, it is beyond comprehension as to why
and for what reason and with what justification the Arbitrator should
be denied only the power to award interest for the pre-reference
period when such interest becomes payable and has to be awarded as
an accessory or incidental to the sum awarded as due and payable,
taking into account the deprivation of the use of such sum to the
person lawfully entitled to the same. For all the reasons stated above,
we answer the reference by holding that the Arbitrator appointed with
or without the intervention of the court, has jurisdiction to award
interest, on the sums found due and payable, for the pre- reference
period, in the absence of any specific stipulation or prohibition in the
contract to claim or grant any such interest."
58. In the case on hand there is no prohibition in the contract relating
to interest component is concerned. As noted above the award refusing to
grant interest is cryptic and it is contrary to Sec.31(3) of the Act 1996.
After taking into consideration of the nature of contract entered into
between the parties and the various breaches committed by the
employer/BBMP resulting prolongation of contract work for 7.6 months as
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Com.A.S.No.146/2015
against contract period of 5 months to which he is legitimately entitle has a
right to be compensated for the deprivation during the period from the date
of completion of work till the date of award, it is just and necessary to
award interest at 15% per annum on the amount awarded under claim
Nos.4, 6, 10, 11 and additional claim No.2 from the date of completion of
the work till the date of Award. Therefore, there are grounds to set aside
this portion of the award refusing to award interest on those claim Nos.4, 6,
10, 11 and additional claim No.2. For these reasons these Issue Nos.1 & 2
are answered partly affirmative, Issue No.3 is answered in the Affirmative
and Issue No.4 is answered in the Negative.
59. Issue No.5 : For the reasons stated above, I proceed to pass the
following:
ORDER
Petition filed U/Sec.34(2) of Arbitration and Conciliation Act 1996 in Com.A.S.No.146/2015 is dismissed.
Petition filed U/Sec.34(2) of Arbitration and Conciliation Act 1996 in Com.A.S.No.144/2015 is partly allowed as under:-
1. Award relating to claim No.1 stands modified by awarding Rs.58,61,019/- in the place of Rs.13,84,050/- awarded by the Arbitrator.
2. Award relating to claim No.10 stands modified by awarding Rs.2,17,037,697/- in the place of Rs.86,95,079/- awarded by the Arbitrator.
60 Com.AS No.144/2015 & Com.A.S.No.146/2015
3. Award of the Arbitrator rejecting additional claim No.2 is set aside. Contractor who is plaintiff of Com.A.S.No.144/2015 is entitled for Rs.48,07,805/- for additional claim No.2.
4. Awarded amounts un der claim Nos.4, 6, 10, 11 and additional claim No.2 shall carry interest payable at the rate of 15% per annum from the date of completion of work till the date of award.
5. Rest of the part of Arbitral Award stands unaltered.
6. Under the circumstances of their case both parties shall bear their own cost.
Draw decree accordingly.
Keep the Original of this Judgment in Com.AS.144/2015 and its copy in Com.AS.146/2015.
(Dictated to the JW, typed by her, corrected and then pronounced by me in Open Court, on this the 31st day of October, 2019.) (JAGADEESWARA.M.) LXXXII Addl. City Civil & Sessions Judge, Bangalore.
61 Com.AS No.144/2015 & Com.A.S.No.146/2015