Bangalore District Court
Bengaluru Water Supply And vs M/S. Larson & Turbo Limited on 27 August, 2021
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 27th day of August 2021
COM.A.S.No.125/2006
Plaintiff Bengaluru Water Supply and
Sewerage Board, Cauvery Division
by Chief Engineer (K)
5th Floor, Cauvery Bhavan,
K.G.Road, Bengaluru560009.
(By Sri.B.A.L, Advocate)
// versus //
Defendants 1. M/s. Larson & Turbo Limited,
Engineer, Construction and
Contracts Division,
19, Kumarakrupa Road,
I & II Floor, Bengaluru560001
By its Sector Projects Manager.
2. Sri.S.M.Panchagatti,
Presiding Arbitrator,
Samanth Consultancy,
No.11, 14th Cross,
Sampige Road, Malleshwaram,
Bengaluru560003.
3. Mr. Justice B.K.Somashekar,
Arbitrator, Former Judge,
High Court of Karnataka,
Andhra Pradesh, No.175,
2
CT 1390_Com.A.S.1252006_Judgment .doc
Brindavana, 3rd 'E' Cross,
II Block, III Stage,
Basaveshwaranagar,
Bengaluru560079.
4. Mr.B.N.Ramadas, I.A.S Retired
GNG House, K.48,
Anna Nagar (East)
Chennai600102.
(R.1 by Sri.B.S.R, Advocate,
R.2 to 4- Learned Arbitrators)
Date of Institution of the : 20/11/2006
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 27/08/2021
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
14 09 08
JUDGMENT
This petition U/S.34 of the Arbitration & Conciliation Act 1996 is filed by the plaintiff, praying to set aside the award dated 6/8/2006 in Arbitration Case No.Arb(L&T)/BWSSB) No.1/2004 passed by the Arbitral Tribunal comprising defendants No.2, 3 and 4 and to dismiss the claim of the 1st defendant.
2. 1st defendant was the claimant and Plaintiff was the respondent before the learned Arbitral Tribunal.
3CT 1390_Com.A.S.1252006_Judgment .doc Defendants No.2 to 4 are the members of the Arbitral Tribunal.
3. The brief facts of the case which lead to the arbitration dispute is as under:
The plaintiff - BWSSB had issued an invitation to tender for execution of the work of Cauvery Water Supply Scheme StageIV, Phase - I to Bengaluru City comprising abstraction treatment and transmission works to run parallel with the existing StageI, II and III of the water supply schemes. The major components of the work under stage IV included raw water transfer from Shiva Anikut to T.K.Halli, water treatment plant of 270 MLD capacity at T.K.Halli and transfer of treated water to city reservoirs in three stages pumping system. The contract was awarded to 1st defendant by letter dated 24/8/1998 in respect of civil works. The 1 st defendant submitted its technical and price offer letter dated 2/9/1998 and the plaintiff accepted the said offer and issued letter of acceptance on 30/11/1998. As per the letter of acceptance several works were awarded to the 1st defendant for sum of Rs.18,04,10,468/ or such other sum that may be determined in accordance with the conditions of the contract and agreement was also signed between the parties on 14/12/1998. The work was to be commenced from 2/1/1999 and the period of completion was fixed as 749 days. Due to different reasons, there was delay caused in handing over of the sites and work was completed on 4 CT 1390_Com.A.S.1252006_Judgment .doc 31/7/2002 and the plaintiff issued taking over certificate on 16/10/2002. Even though plaintiff has allowed necessary extension of time to enable the 1st defendant to complete the work, 1st defendant alleged that the cost implications arising out of such delays remained unsettled. The 1 st defendant wrote a letter dated 4/10/2000 to the Executive Engineer stating the delay that occurred during the execution of the work and also the cost incurred by them due to the delays and 1st defendant listed the delays that occurred under 9 headings and also computed the financial implication of such delay. The plaintiff replied to this letter by letter dated 26/2/2001. Thereafter, contending that no response is received from the plaintiff to the subsequent letters seeking settlement of the issues, 1st defendant by letter dated 22/9/2003 expressed its intention to invoke arbitration as per clause 67.3 of the contract and the letter was also sent by invoking clause 67.2 of the contract on 13/11/2003 asking the plaintiff to settle the dispute amicably within 56 days. Thereafter the plaintiff by letter dated 15/12/2003 informed that the claims are under review. Thereafter, 1st defendant invoked the arbitration process under clause 67.3 of the agreement by letter of reference dated 24/2/2004 naming a sole Arbitrator and seeking concurrence of the plaintiff and the plaintiff vide letter dated 14/7/2004 named a person of its choice as an Arbitrator and both the arbitrators requested the institution of Engineers to appoint the third Arbitrator and thereby Arbitral Tribunal consisting of three learned 5 CT 1390_Com.A.S.1252006_Judgment .doc arbitrators is constituted. Before the learned Arbitral Tribunal the 1st defendant submitted its claim statement dated 16/11/2004 making 13 claims against the plaintiff. The plaintiff filed statement of defence and 1st defendant filed rejoinder and plaintiff filed additional counter and additional rejoinder was also filed by the 1 st defendant. Thereafter the Arbitral Tribunal of the defendants No.2 to 4 framed issues and marked the documents produced by the parties and after hearing the arguments passed award by allowing the claim of the 1st defendant to an extent of Rs.3,63,97,641/.
4. Being aggrieved by this award, plaintiff who was respondent before the learned Arbitral Tribunal has filed the present petition under Section 34 of the Arbitration & Conciliation Act and prayed to set aside the award on various grounds. Plaintiff has stated that against the total cost of the contract of Rs.18,04,10,468/, more than Rs.26 crores has been paid by the plaintiff to compensate the delay etc. It is stated that impugned award in respect of claims 10 to 13 depend on claim No. 1 to 9. Different grounds urged by the plaintiff can be summerised as under;
i) Plaintiff contends that the award lacks in material facts and is in ignorance of binding precedents and claim No.2 and 3 have not been dealt with separately and single page has been given page Nos.44 and 45 and paragraph 64 is not forthcoming in the award.
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ii) It is contended that 1st defendant made a claim 4/10/2000 to the Executive Engineer for reimbursement of expenses incurred on account of underutilized resources and delayed release of payments in respect of 9 items amounting to Rs.2,88,78,822/ and further claim was made by another letter dated 4/12/2000 regarding expenditure incurred due to idle and under utilization of the resources and after examining the same, claims were rejected as per Ex.C.19 on 26/2/2001 and this was challenged by 1st defendant by invoking clause 67.1 of the contract by letter dated 5/3/2001. It is stated that thereafter, as per clause 67.1, when decision is not given within 84 days, within 70 days claimant/defendant was entitle to initiate arbitration i.e. before 7/8/2001. It is contended that as such notice is not given, 1st defendant forfeited its right to seek arbitration on 7/8/2001 and arbitration subsequently initiated by notice dated 22/9/2003 is not valid and as on that date,no dispute capable of referring to arbitration, was subsisting and therefore, award made by the Arbitral Tribunal is patently illegal. It is also contended that plaintiff nominating its arbitrator, do not operate as waiver of the right of plaintiff to object the initiation of arbitration and jurisdiction of Tribunal. It is also contended that clause 67.4 of the contract cannot be invoked for the present arbitration as the said clause deals with a situation of enforcing unchallenged decision of the Engineer.
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iii) It is contended that by considering the possibility of delay on the part of the employer, clause 70.1 has been incorporated in the contract to protect the interest of the contractor and the benefit under the said clause is already given to the contractor and therefore the claimant/ 1 st defendant was not entitled to claim the compensation again on the ground of delay. It is stated that the cost of the execution of the work as provided in clause 70.1 includes in rates of materials, cost of labour or unnecessary expenses on account of idling of the equipment or materials or under utilization and on the same subject again awarding compensation by the Arbitral Tribunal do not arise and since the compensation for the delay is already given by invoking clause 70.1 of the contract, there is no subsisting arbitration dispute.
iv) It is also contended that the arbitration proceeding are vitiated as the Arbitral Tribunal has denied full opportunity to the plaintiff to present its case on and denied equal opportunity and it has violated the statutory mandate of Section 18 of the Act and also the principles of natural justice. It is stated that though both the parties have not lead evidence and agreed to submit on the basis of records, Arbitral Tribunal has repeatedly observed that the plaintiff has not tendered its Executive Engineer for cross examination to rebut the case of the 1st defendant. It is stated that the Arbitral Tribunal has ignored the provisions of Section 18 of 8 CT 1390_Com.A.S.1252006_Judgment .doc the Act and the principles of natural justice, equity and good conscience.
v) Plaintiff contended that awarding of interest in the award is patently illegal, perverse and opposed to public policy. It is stated that the provision for payment of interest on delayed payments of running bills and escalation bills is not provided in the contract and in Section 73 of the contract Act.
vi) It is contended that in Claim No.1, 1 st defendant made claim for expenditure incurred on the alleged idling of plant and machinery, stock, workmen and doka, for 30 days and though claim is not supported by any documents like muster roll, acquittance and the accounts, on the basis of five daily reports produced by plaintiff in Ex.R.12 to Ex.R.16, untenable claim was calculated for 23 days even without production of remaining daily reports for 18 days and the finding is without evidence.
vii) It is contended that in claim No.2 regarding expenses incurred due to delay in handing over of land in Tataguni site, award of Rs.27,95,030/ is without any basis and for delay of 128 days, extension of time was given as per clause 44 of the contract. It is stated that there was no necessity to mobilize the equipment, machinery and labour from day one and 1st defendant would have anticipated delay in handing over the site as there has been a delay of more than 4 months. It is also stated that T.K.Halli site was handed over on 2/1/1999 and only few machineries were 9 CT 1390_Com.A.S.1252006_Judgment .doc sent at that place, but at Tataguni site number of machineries are claimed to have been kept which was not necessary. It is stated that the Arbitral Tribunal without ascertaining actual expenditure incurred has awarded the compensation, which is against the terms of contract and is also against public policy.
viii) It is contended that claim No.3, contains two parts one for interest for delayed payment of running account bills and other for payment of under utilized resources. It is stated that regarding running account bills, as RA bills are said to be advance bills, interest on the same cannot be awarded and even contract do not provide for interest. It is stated that regarding claim for under utilized resources, 1 st defendant has not produced any evidence in support of the tabulated figures furnished in Ex.C.15.
ix) It is also contended that regarding claim No.4 which relates to only interest for the delay in payment of running account bills and escalation bills, the same is not admissible and the finding is against the public policy of India.
x) It is also contended that regarding claim No.5 which relates to cost of resources for miscellaneous structure, the claim comprises the hire charges of plant and machinery, salary of staff, wages of workmen, infrastructure, farm work materials and notional interest on working capital and the learned Arbitral Tribunal, without there being any document and though no vouchers or any reliable documents are 10 CT 1390_Com.A.S.1252006_Judgment .doc produced by the 1st defendant, has awarded Rs.1,08,07,243/ without any basis and this award is without any evidence and is against the principles of natural justice, equity and good conscience.
xi) Plaintiff contended that regarding claim No.6 for compensation for the alleged hiring of plant and machinery, staff, workmen, farm work materials and notional interest on working capital, the tribunal awarded Rs.14,77,686/ without there being any documents. It is stated that how the claimant is entitled to 50% of the amount as stated in the award and how it is calculated is also not clear and the award is passed without any evidence in support of the tabulated figure.
xii) It is also stated that with regard to claim No.7 which is regarding compensation for under utilization of resources mobilized for pumping station and additional cost incurred for timber due to repetition, the tribunal has awarded Rs.27,14,142/ on hypothetical data without there being any document in support of the claim and the award is bad for want of proof in support of the claim preferred.
xiii) It is also contended that regarding claim No.8 which relates to claim of 50% of the cost of alleged mobilization of resources for pumping station in respect of the site at T.K.Halli for the alleged delay due to hold in drawings for ground floor slab at the said site, there is no basis to claim 11 CT 1390_Com.A.S.1252006_Judgment .doc 50% of the alleged cost of resources mobilized and there are no supporting documents for this claim.
xiv) It is also contended that in claim 9 which relates to resources under utilized at Tataguni due to hold in drawings for reservoir PCC at Tataguni also without considering the documents, the tribunal has awarded the amount and this portion of the award is opposed to principles of natural justice, equity and good conscience.
xv) It is contended that claim 10 to 13 which relates to interest on unpaid claims, unpaid escalation charges, for extension of bank guarantee and interest on unpaid retention money, these claims are not justified and as claim No.1 to 9 are not justified interest thereon also cannot be claimed. It is contended that on account of delays, escalation as per clause 70.1 of the contract 32% enhancement in the rates of all items of work executed beyond the agreed date of completion was paid to the 1st defendant as per the amended contract dated 30/8/2001 and the plaintiff has paid more than Rs.26 crores as against contract amount of Rs.18 crores. It is stated that Arbitral Tribunal has not considered these payments. The plaintiff also contends that the interest is not at all payable on the delayed payment on the running bills and interest cannot be awarded for damages and section 73 of the Indian Contract Act also do not provide for such payment and arbitral tribunal awarding of interest is not acceptable. It is also contended that Tribunal has no authority to award interest for the period before cause of action. It is also 12 CT 1390_Com.A.S.1252006_Judgment .doc contended that the Arbitral Tribunal has awarded interest of Rs.1,36,49,115/ which is again further subjected to payment of interest.
On all the above grounds, it is contended that the award is against the public policy of India and is liable to be set aside.
5. 1st defendant has filed statement of objection and stated that the petition filed under Section 34 of the Arbitration & Conciliation Act is not maintainable in law or on facts and is liable to be dismissed and no case is made out for setting aside the award and award is neither in conflict nor opposed to the public policy. It is also stated that as held by the Hon'ble Supreme Court in ONGC Limited v/s Saw Pipes Limited, the arbitral award could be set aside under Section 34 of the Act, if it is contrary to fundamental policy of Indian law, the interest of India, justice or morality or if it is patently illegal. It is also stated that the impugned award is fair, reasonable and legal and cannot be said to be opposed to public policy. It is also stated that findings of facts by the arbitrator cannot be reappreciated or reevaluated to substitute the same and the tribunal is a final court to record the findings of fact. It is also stated that by amending the petition the plaintiff has inserted certain grounds and those grounds are also not sustainable. The 1 st defendant has narrated the fact of the case which lead to initiating arbitration and the passing of award by the Arbitral Tribunal.
13CT 1390_Com.A.S.1252006_Judgment .doc It is stated that due to delay caused by the plaintiff, the 1 st defendant has suffered loss due to non utilization or under utilization of the resources, for which 1st defendant is entitle for compensation and which is rightly ordered by the Arbitral Tribunal. It is stated that totally 13 claims were made before the Arbitral Tribunal and after considering the objection and the documents produced, the arbitrator has passed the award which is just and proper and the award is completely justified and cannot be said to be opposed to public policy. The 1st defendant has also stated that the payment of Rs.26 crores as against the contract amount of Rs.18 crores was made towards escalation under clause 70.1 of the contract and claims made subsequently on various other grounds are totally different. It is stated that the letter dated 26/2/2001 of the Executive Engineer was not an order rejecting the claim of the 1st defendant and the Executive Engineer has only sought clarifications and 1st defendant forwarded the clarification, but no reply was received. It is stated that when inspite of waiting for long time when claims were not settled, the arbitrator invoked the arbitral process under clause 67.3 of the agreement vide letter dated 23/2/2004 naming a sole Arbitrator and subsequently arbitral tribunal is constituted. The correspondence between the plaintiff and 1 st defendant prior to constitution of Arbitral Tribunal are all stated by the 1st defendant and it is denied that there was no arbitral dispute and denied that the arbitration initiated is against the terms of contract and also denied that clause 67.4 cannot be 14 CT 1390_Com.A.S.1252006_Judgment .doc invoked for the present arbitration. The 1 st defendant also denied that principles of natural justice are not followed. It is stated that the plaintiff proposed to lead oral evidence of its engineer Mr.Sridhar and it was not pursued and also though insisted he was not produced for cross examination and the same has been recorded by the Arbitral Tribunal. It is stated that the finding given by the Arbitrator while allowing the claim of the 1st defendant is based on the conentions of both the parties and the admitted documents and the award is just and fair, legal and not opposed to public policy and does not suffer from any infirmity and there is no alleged violation of any of the provisions of the Arbitration & Conciliation Act and all the required procedures have been followed by the Arbitral Tribunal. 1St defendant denied that under Section 73 of Contract Act, interest cannot be awarded and it is stated that as per illustration (n) to Section 73 of the Indian Contract Act, amount payable to 1st defendant by the plaintiff would be a debt for which interest is to be paid. The 1 st defendant also contended that the calculation made for arriving at the amounts awarded on account of delay under claim No.1 and 2 are based on and well supported by the bilateral documents. It is stated that the admission of the plaintiff that there was delay in handing over the land and the details of resources kept in idle having been recorded in the admitted documents of the plaintiff, it was always within the knowledge of the plaintiff that the resources were kept ready on the spot during the entire period of delay and even as per the contract 15 CT 1390_Com.A.S.1252006_Judgment .doc terms, all the resources were required to be kept ready at the work spot. It is also stated that the grounds urged regarding claim No.3 by the plaintiff is also devoid of merits and the finding is given based on the documents and the interest awarded on the delayed payment cannot be disputed. It is stated by the 1st defendant that as delayed payment due would be like a debt for which the interest is payable even as per Section 73 of the Contract Act awarding of the same is correct. The objection of the plaintiff with regard to decision of the tribunal on claim No.4 and claim No.5 are also stated to be devoid of merits. It is stated that the plaintiff has failed to establish that the running bills are in the nature of advance and it is stated that the RA bills are submitted for completed work covered by each bills. It is also stated that the claim No.5,6,7,8,9 are also properly decided by the tribunal by considering the documents and the delay caused by the plaintiff in approving the samples of reinforcement bars and test certificates which was necessary. It is stated that the amount awarded in the award for delay under the different claims are based on daily report which are documents admitted by both the parties. It is also stated that in claim No.8 and 9 the delay caused due to holding the drawings at Harohalli, T.K.Halli and also at Tataguni were considered based on the documents and then those claims are partly allowed. It is stated that claim No.10 to 13 which deals with interest on unpaid claim amounting to Rs.1,70,06,001/ and interest on unpaid escalation amounting to Rs.12,41,802/ 16 CT 1390_Com.A.S.1252006_Judgment .doc and charges due to extension of Bank Guarantee Rs.24,855/ and interest on unpaid retention amount Rs.6,21,150/are considered in detail by the arbitral Tribunal, by considering provisions of the Arbitration & Conciliation Act and also the Interest Act. It is stated that the contention that award of interest is not based on agreement of the parties is devoid of merits and untenable. It is stated that on reading clause 70.1 it is clear that escalation of the earlier contract amount by more than Rs.8 crores had nothing to do with the claim No.1 to 9 made by the 1st defendant and the enhancement allowed under clause 70.1 and the claim of the present case are independent of each other. It is stated that when the escalation under clause 70.1 is independent of the present claims the plaintiff cannot challenge the same now. It is also stated that in view of the contractual obligation between the parties, legal position as to damages, compensation and the interest payable thereon, award of the Tribunal is proper. It is stated that the interest is awarded for the specific purpose and the interest awarded are all different and distinct stages and the same cannot be said to be as award of interest on interest. It is also stated that the arbitrator is fully empowered to award interest for prereference period, pendentlite interest and the future interest from the date of the award until the date of payment. It is stated that the plaintiff has not made out any case for setting aside the award. On these grounds the petition is prayed to be dismissed with exemplary costs.
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6. Now the points that arise for consideration of this court are:
1) Whether the plaintiff ( Respondent before the Arbitral Tribunal) proves that the award passed by the Arbitral Tribunal consisting of defendants No.2 to 4 in the dispute between plaintiff and 1st defendant in Arbitration Case No.Arb(L&T)/BWSSB) No.1/2004 dated 8/8/2006 is against public policy of India and is to be set aside under Section 34 (2)of the Arbitration & Conciliation Act?
2) What order?
7. Heard the learned counsel for plaintiff and learned senior counsel for 1st defendant. Both the counsels have filed written arguments also. Perused the records.
8. My answer to the above points are :
POINT No.1 : Partly in the affirmative.
POINT No.2 : As per final order for the following:
REASONS
9. POINT No.1: Present Arbitration Suit is filed by the plaintiff who was the respondent before the learned Arbitral Tribunal, challenging the different findings of the Arbitral Tribunal and holding that 1st defendant is entitle to recover totally Rs.3,63,97,641/ with interest from the plaintiff towards claim No.1 to 13. The plaintiff's challenge to award is on various grounds. Plaintiff even contended that there was no arbitrable dispute in view of different clauses of the contract entered by the parties. The plaintiff has also contended that the award of compensation under claim No.1 18 CT 1390_Com.A.S.1252006_Judgment .doc to 9 by the learned Arbitral Tribunal is against the public policy of India and is against the contract terms and is without any evidence and is illegal. Awarding interest on claim No.10 to 13 is also challenged as against the terms of contract. The 1st defendant has denied all these allegations and contentions of the plaintiff.
10. The admitted facts of the case are that the plaintiff and 1st defendant have entered into contract on 14/12/1998 and the work was to be completed within 749 days and the work did not complete within the stipulated period and time was extended by the plaintiff beyond the fixed period and work was practically completed on 31/7/2002 and project was completed by 1/10/2002 and it was acknowledged by the plaintiff by taking over certificate on 16/10/2002. The cost of the work executed by the claimant/1st defendant was also paid by the plaintiff for the work done by providing escalation as per the contract. It is also admitted fact that though the amount was of Rs.18 crores plus, by considering the delay and price escalation the plaintiff has paid Rs.26 crores plus to the 1st defendant. The claim petition before the Arbitral Tribunal was with regard to extra cost incurred due to keeping the men, material and machinery idle during period of delay and non utilization or under utilization of resources and for interest on these claims and interest on some delayed payments.
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11. The jurisdiction of the court to set aside an arbitral award is limited to the ground set out in Section 34 of the Arbitration & Conciliation Act 1996. Even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitral Tribunal, as if, it is sitting in appeal over the award of the Tribunal. Grounds on which the award of the Tribunal can be set aside by this court is clearly mentioned in Section 34(2) of the Arbitration & Conciliation Act and these grounds are also elaborated by the Hon'ble Supreme Court in various decisions including. Since any of the grounds mentioned in Section 34(2)(a) and 34(2)(b)(i) of the Act are not urged and section 34(2A) cannot be applied as, on the date of this arbitration suit, said subsection was not in the Act, challenge to the present award of the Arbitral Tribunal would be under Section 34(2)(b)(ii) of the Act. Award could be set aside if it is against public policy of India. Under the head of Public Policy of India, Fundamental Policy of Indian Law, Interest of India, justice or morality are included. As per the decision in ONGC Vs Saw Pipes, an award which is patently illegal can also be challenged as against Public Policy of India. It is also well established principle that the court sitting U/S.34 of the Act is not supposed to go for reappreciation of evidence or impose its view as against the view of learned Arbitral Tribunal and the power of the court is only to set aside the award, if it is coming under one of the grounds mentioned in 20 CT 1390_Com.A.S.1252006_Judgment .doc the said section. In the presence of these basic principles, grounds urged by the plaintiff and the award of the learned Arbitral Tribunal are to be looked into.
12. Sri Venkatesh Arabatti, learned counsel for the plaintiff has vehemently argued that the finding of the learned Arbitral Tribunal is in conflict with the fundamental policy of Indian law and thereby against public policy of India. It is argued that the learned Arbitral Tribunal has not considered the binding clauses of the contract and Section 18 of the Arbitration & Conciliation Act and Section 73 of the Contract Act and it is also argued that the Arbitral Tribunal has not followed the principles of natural justice. The learned counsel has argued that the Tribunal has made much comments for not keeping witness of Plaintiff for cross examination, though 1st defendant has also not lead evidence. It is argued that the claim of the 1st defendant was for compensation for the loss suffered due to delay in handing over site, drawing etc. It is argued that the compensation was already given for the delay and nearly about Rs.8 crore were given in excess of the contract amount to the 1st defendant as per the terms of the contract. The learned counsel has argued that while in its correspondence with the plaintiff, 1st defendant had put up 9 claims, but before the learned Arbitrator the claim was raised to 13 from 9, for which notice was not given. It is argued that there was no arbitrable dispute as per clause 67.1 of the conditions of contract. It is also argued that when within the 21 CT 1390_Com.A.S.1252006_Judgment .doc time prescribed the action is not taken to initiate arbitration, 1st defendant loses its right to seek arbitration and there would be no arbitral dispute. It is also argued that when escalation is already considered and payment is already made there was no arbitral dispute and appointment of arbitrator do not mean that plaintiff accepted the presence of arbitration dispute. The learned counsel has argued that the delay in the work is already compensated under clause 70 of the contract and claim No.1 to 9 hit by Section 73 of the Indian Contract Act and claim No.10 to 13 are hit by the contract which do not provide any interest. The learned counsel has also argued that all the three arbitrators have not participated in the proceedings on all the dates on which effective hearing was done. (This ground is not taken in the petition). The learned counsel has argued that requirements as mentioned in clause 67.1 of contract are not followed and that Tribunal has wrongly held that clause 67.4 is applicable. It is also argued that in support of its claim, 1st defendant has not produced any contemporary records but has relied on Ex.C.15 which contain only correspondence between the parties. The learned counsel has argued on each claim and argued that without there being any such documents establishing the claim of the 1st defendant, the tribunal has allowed the claims. It is also argued that even there are arithmetical mistakes and even there are mistakes like end of claim No.2 and beginning of the reasons for claim No.3 are not appearing and a single page is given number as 44 and 22 CT 1390_Com.A.S.1252006_Judgment .doc 45 and para 64 is not seen in the award. The learned counsel has also argued that as the contents of the document relied upon by the claimant were denied and not admitted by the plaintiff, it was for the 1st defendant to prove the correctness of the claim. It is argued that the procedure followed is unfair and arbitrary. It is also argued that the direction in the award regarding awarding of interest are patently illegal and opposed to public policy, as provision for payment of interest was deleted from the contract.
13. The learned senior counsel for the 1st defendant Sri.R.V.S.Naik has argued that specific clause of Section 34 is not mentioned to challenge the award and the averments in the petition are vague. The learned senior counsel has argued that not leading evidence by the claimant cannot be objected as parties had agreed not lead any oral evidence and the Arbitral Tribunal has followed the procedure. Learned counsel has submitted that the claim pertains to the delay, idling of men, materials and delay in making payment of running bills and there is no scope for reappreciation of evidence. It is argued that plaintiff had taken the burden to prove the issue, but has not discharged the burden before the learned Arbitral Tribunal. He has argued that on the basis of the documents the learned Arbitral Tribunal has considered the claims and then passed the award and there are no grounds to challenge such award. Learned counsel has argued that the letters exchanged between the parties formed 23 CT 1390_Com.A.S.1252006_Judgment .doc separate agreement and clause 67 do not apply. The learned counsel has also argued that the contention of the plaintiff that in the mandate of the arbitration all the arbitrators have not signed on all the dates is not an issue which vitiate the arbitration proceedings and this ground was not even taken in the petition challenging the award. The learned counsel has also argued that as amount payable for the delay caused, is in the form of debt, awarding of interest is proper. It is also argued that minor mistakes found in the calculation, page numbers, missing paragraph etc, have not caused any injustice to the plaintiff or has not vitiated the entire proceedings and on this ground award cannot be set aside. The learned counsel for the 1st defendant has also argued that while adjudicating application under Section 34, court does not sit in appeal over the award and consequently even error of fact if any cannot be corrected. It is also argued that finding of facts by an arbitrator cannot be reappreciated or reevaluated to substitute the same and in this regard the arbitrator is final authority. It is also argued that with regard to awarding of interest, the tribunal has exhaustively discussed by looking to various provisions and has allowed the claim and the award allowing the interest is not against the public policy of India and there are no grounds to interfere with such award.
14. On looking to the contentions raised by the plaintiff to dispute the award passed by the learned Arbitral Tribunal, 24 CT 1390_Com.A.S.1252006_Judgment .doc the first contention that has been raised is that there was no arbitrable dispute. By way of preliminary objection, this contention was even raised by the plaintiff before the Arbitral Tribunal. After filing of the statement of objection, the Arbitral Tribunal has framed issue regarding arbitrability of the dispute and finally held against the plaintiff. Among the 12 Issues framed, Issue No.1 is with regard to subsistence of an arbitrable dispute to be referred to the arbitration. Issue No.2 is again on the contention of plaintiff that claim No.1 to 13 are not admissible. Issue No.3 is with regard to non following the procedure in clause 60.10 of the contract. Issue No.4 is with regard to violating of sub clause 60.4 of the contract. All these issues are with regard to technical objections raised be the plaintiff (Respondent before Tribunal) with regard to non compliance of different terms of the contract. Plaintiff has contended that for the delay caused in completion of the project, escalation amount is already paid and as against original contract price of Rs.18,07,10,382/, amount of Rs.21,59,85,139/ is paid by the plaintiff and revised contract agreement is also entered on 30/8/2001. Admittedly work is already completed and even taking over certificate is issued on 16/10/2002.
15. The present claim put forth before the learned Arbitratal Tribunal was towards the extra cost incurred due to delay which are highlighted in the letter Ex.C.15 dated 4/10/2000 by the 1st defendant. After this letter, claimant 25 CT 1390_Com.A.S.1252006_Judgment .doc issued reminder as per Ex.C.16 on 4/12/2000 and plaintiff has replied on 26/2/2000 as per Ex.C.19 seeking clarification from the Engineer. Thereafter on 5/3/2001, plaintiff has sent a letter and gave clarifications sought and then finally stated in this letter that this letter be treated as their written reference to engineer pursuant to FIDIC clause No.67.1 for further proceedings for 'settlement of disputes'. As per the agreement entered into between the parties on 14/12/1998 as per Ex.C.11, conditions of contract part I, part II, are also part of the contract and binding on the parties. The Arbitrator who is the creation of the contract cannot go beyond the contract. The contract between the parties, trade and usage are to be given due consideration while deciding the disputes as per section 28(3) of the Arbitration and conciliation Act. As per clause 60.10 in Ex.C.3, within 84 days of issuing taking over certificate, contractor shall submit statement with supporting documents showing the final value of all works done in accordance with the contract and stating any further sum which the contractor consider to be due to him. On submission of the same, the Engineer shall certify the payment within 60 days from the date of receipt and after defect liability certificate, a draft final statement shall be submitted. As per clause 60.14, employer shall not be liable to the contractor for any outstanding amount, arising out of or in connection with the contract or execution of work unless contractor included a claim in respect of it in his final statement and in the statement at completion referred in 26 CT 1390_Com.A.S.1252006_Judgment .doc clause 60.1. Plaintiff has contended that this clause 60.10 and 60.14 are not followed and the amount cannot be claimed by the claimant without complying those provisions and as such there was no arbitrable dispute in terms of contract.**
16. Plaintiff also contended that settlement of dispute is governed by clause 67.1 to 67.4 of FIDIC condition part 1, marked as Ex.C.2 and without satisfying these clauses, arbitration cannot be initiated. Plaintiff contended that defendant contractor has not complied with these clauses of contract and without such compliance there could be no arbitrable dispute. As per clause 67.1, when any dispute arise between the employer and the contractor in connection with contract or execution of the work, same shall be referred in writing to the Engineer with a copy to the other party and such reference shall state that it is made pursuant to this clause. After so referring the dispute to the Engineer, within 84 days Engineer shall give notice of his decision to the employer and the contractor and such decision shall state that it is made pursuant to this clause. If the employer or contractor is dissatisfied with any decision of Engineer or if the engineer failed to give notice of his decision on or before 84th day, then employer or contractor before 70 th day of receiving the decision or 70th day after expiry of 84 days if decision is not given, give notice to the other party with copy to the Engineer of his intention to commence arbitration. Subject to sub clause 67.4, no arbitration in respect thereof 27 CT 1390_Com.A.S.1252006_Judgment .doc may be commenced unless such notice is given. As per clause 67.2, after giving notice of intention to commence arbitration, parties shall attempt to settle the dispute amicably and if they do not settle within 56 days, then arbitration may commence. As per clause 67.4, where employer or contractor have not given any notice of intention to commence arbitration of the dispute after the decision of Engineer, within the period stated in sub clause 67.1, the decision becomes final and if a party fails to comply with such decision such failure can be referred to arbitration. On clear reading of clause 67.1 and 67.4 it is clear that they deal with different situations in which matter can be referred to arbitration.
17. In the present case by Ex.C.16, on 5/3/2001, the 1st defendant gave a letter to Executive Engineer making claim for the delay caused and the cost incurred due to the delays and totally 9 claims were made. Before this Ex.C15, was sent to the Executive Engineer of Plaintiff by claiming particuler amount on these claims. These claims are identical with claim No.1 to 9 made before learned arbitratal Tribunal. In closing paragraph of Ex.C.20, it is stated that since inspite of letters dispute is not resolved, it is requested to consider the claim for Rs.13,54,083/ with regard to filling of PCC and delay due to holding drawing for reservoir of PCC at Tataguni, as reference of dispute to Engineer pursuant to FIDIC clause No.67.1. Therefore, with regard to claim for Rs.13,54,083/ 28 CT 1390_Com.A.S.1252006_Judgment .doc mentioned in item No.9 the notice as required under Section 67.1 was given by the 1st defendant on 5/3/2001. As stated above when 67.1 is invoked there is a specific time schedule for further acts. When on 5/3/2001 this notice is given and it is served on 6/3/2001, within 84 days Engineer is required to decide, that would be within 29/5/2001. If the Engineer decides then the aggrieved party can challenge the same within 70 days that is before 7/8/2001 by giving notice to commence arbitration. If the decision is not given within 84 days, then also notice to commence arbitration could be given and thereafter within 56 days the matter could be mutually settled or else arbitration have to commence. In this case even according to claimant, Engineer has not given decision within 84 days i.e 29/5/2001. Even notice to commence arbitration is not given within 70 days from 29/05/2021. Therefore, time schedule in clause 67.1 are apparently not followed.
18. Learned Arbitral Tribunal while deciding issue No.1 has considered clause 67.1, 67.2 and 67.4 and held that contention that there is no arbitrable dispute cannot be accepted. The Arbitral Tribunal has held that on the face of it, even if the contention of the plaintiff is accepted, this reference of dispute under clause 67.1 would be only in respect of 9th claim of Rs.13,54,083/ towards drawing for reservoir PCC at Tataguni, as in the last paragraph of this letter, only that claim amount has been mentioned, and it has 29 CT 1390_Com.A.S.1252006_Judgment .doc nothing to do with other claims. In this letter though all the 9 claims are mentioned, in the last paragraph only 9 th claim is shown and the dispute is shown to be pursuant to clause 67.1. Though, generally while making claim, contractor cannot make claim in bits and pieces, interpretation of the contract is left to the arbitratal Tribunal. Since, no decision is given by Engineer, failure to comply with the decision as appearing in clause 67.4 do not arise. As such, primafacie clause 67.4 cannot be applied to the present case. However, it is well established principle that even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitrtor u/s 34 of the Act.
19. Learned Arbitral Tribunal has relied on subsequent correspondence between the parties to negative the contention of the Plaintiff that there was no arbitable dispute. It has noted that subsequent correspondence at Ex.C.27 to 37 show that the disputes were pending and were not resolved by the Engineer or by the employer and for this reason even the employer i.e the plaintiff agreed for reference of dispute No.1 to 9 to the arbitration, in reply to the claim inviting arbitration clause 67.3 in Ex.C.27 and Ex.C.30. Since in Ex.C.16, clause no.67.1 is not invoked specifically on all the 9 claims as observed by the Arbitral tribunal and there are subsequent correspondence between the parties on the same issues by which existence of arbitrable dispute can be 30 CT 1390_Com.A.S.1252006_Judgment .doc inferred, the Tribunal has not accepted the contention of the plaintiff that there is no arbitrable dispute. This finding of the learned Arbitral tribunal, being one based on facts and interpretation of terms of contract and appreciation of documentary evidence placed before it, cannot be interfered with under section 34 of Arbitration and conciliation Act.
20. Learned counsel for the plaintiff has vehemently argued that the Arbitral Tribunal cannot go against the terms of the contract as it is created by the agreement between the parties. He has relied on section 28(3) of the Arbitration & Conciliation Act, as per which, Arbitral Tribunal shall in all cases take into account the term of the contract and trade usage applicable to the transaction. It is argued that on applying such terms of the contract, in view of specific clause 67.1, as the requirements are not complied arbitration cannot be commenced. The arbitral Tribunal has considered these clauses in the contract and interpreted it and also has considered subsequent notices given as per Ex.C.26 on 22/9/2003 and Ex.C.27 to Ex.C.37, including Ex.C.31 dated 23/1/2004 nominating arbitrator by 1st defendant and appointment of its Arbitrator by the plaintiff. It is also contended that as take over certificate is given on 16/10/2002 within 84 days of that date, statement at completion narrating further sum due to the contractor is to be placed and without placing such statement, employer will not be liable to the contractor as per clause 60.14. Since, 31 CT 1390_Com.A.S.1252006_Judgment .doc Ex.C.26 on 22/9/2003 or of the subsequent correspondences are subsequent to 84 days appearing in clause 60.10, even on this ground plaintiff contends that there was no arbitrable dispute which could be referred to arbitration.
21. The Arbitral Tribunal has considered that on receiving Ex.C.31, the plaintiff disagreeing for the nomination of Sri.Ramdas as sole Arbitrator has proposed another name as sole Arbitrator to settle the dispute No.1 to 9 by Ex.C.33 and thereby respondent has agreed for referring the dispute to arbitration under Ex.C.31 and waived all other contentions now raised before the Tribunal. Plaintiff contends that appointing of Arbitrator or consenting for appointment of Arbitrator would not affect the right of the plaintiff to dispute the arbitrability of the dispute, in view of section 16 and objection with regard to jurisdiction of arbitrtor can be raised before the Tribunal and it is raised. As per Section 16(2) of the Act a party who has appointed the Arbitrator can still dispute the jurisdiction of the Arbitrator to decide the matter and therefore, observation of the tribunal that the plaintiff has waived its right by giving Ex.C.33 reply by agreeing for referring the dispute for arbitration may not be correct, in view of statutory provision in Section 16(2). Therefore, Plaintiff may be justified in raising the dispute regarding jurisdiction, whether he succeeds is different aspect.
22. Learned counsel for plaintiff and also 1 st defendant, have cited the decision of Hon'ble Supreme Court 32 CT 1390_Com.A.S.1252006_Judgment .doc reported in (2006) 11 SCC 181 (McDermott International Inc. v. Burn Standard Company Limited) in support of their respective contentions. In this decision, in para 58, Hon'ble Supreme Court has held that under Section 16 of the Arbitration & Conciliation Act, the party questioning the jurisdiction of the Arbitrator has an obligation to raise the said question before the Arbitrator and jurisdiction question is required to be determined as a preliminary ground and a decision taken thereupon by the arbitrator would be the subject matter of challenge under section 34 of the Act. It is also held that in the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal is provided for under Section 37 of the Act. In the present case contention taken by the plaintiff regarding non existence of an arbitral dispute is different than jurisdiction of the Arbitral Tribunal. Moreover as discussed above, the finding of the tribunal ragarding its jurisdiction and presence of arbitrable dispute is justified on the facts of the case.
23. The learned counsel for the plaintiff has relied on the decision reported in AIR 2003 SC 2629 (Oil and National Gas Corporation Limited v/s Saw Pipes). In this decision the Hon'ble Supreme Court considered various grounds under which arbitral award could be set aside. It is held that the terms of the contract is to be given effect to by the arbitrator. In this decision in para 73 the Hon'ble Supreme Court has held as under:
33CT 1390_Com.A.S.1252006_Judgment .doc "It is to be reiterated that it is the primary duty of the arbitrators to enforce a promise which the parties have made to uphold the sanctity of the contract which forms the basis of the civilized society and also the jurisdiction of the arbitrators. Hence, this part of the award passed by the Arbitral Tribunal granting interest on the amount deducted by the appellant from the bills payable to the respondent is against the terms of the contract and is, therefore, violative of Section 28(3) of the Act."
24. The learned counsel for the plaintiff has also relied on the decision reported in AIR 2019 SC 5041 (Ssangyong Engineering & Construction Company Limited v. National Highways Authority of India), in which Hon'ble Supreme Court has held that the contract entered into between the parties is to be given affect to and new contract cannot be permitted to be created for the parties and unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party.
25. The learned senior counsel for the 1st defendant has relied on the decision reported in (1998) 9 SCC 407 (P.V.Subba Naidu and others v. Government of A.P and others). In this decision Hon'ble Supreme Court referred to the decision of K.R.Raveendranathan v. State of Kerala, in which observation in the decision in Hindustan 34 CT 1390_Com.A.S.1252006_Judgment .doc Construction Company Limited v. State of Jammu & Kashmir is referred to the effect that court by purporting to construe the contract cannot take upon itself the burden of saying that it was contrary to the contract and as such beyond jurisdiction. It is held that it is not open to the court to probe the mental processes of the arbitrator or speculate on what impelled an arbitrator to arrive at his conclusion.
26. The learned senior counsel has also relied on the decision of the Hon'ble Supreme Court in Associate Builders v. Delhi Development Authority reported in (2015) 3 SCC
49. In this decision the Hon'ble Supreme Court has considered Section 34 in detail and the grounds on which the court can set aside the Arbitral Award. In para 42.3 which is relied by the counsel for the defendant it is held that "An Arbitral Tribunal must decide in accordance with the terms of the contract, but if the Arbitrator construes a term of contract in a reasonable manner it will not mean that the award can be set aside on this ground. Construction of terms of contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no reasonable person could do". As per this decision, construction of the terms of contract is primarily for an arbitrator to decide and only if construction 35 CT 1390_Com.A.S.1252006_Judgment .doc made by the Arbitrator is unreasonable and not acceptable by any fair minded person, then only it could be patently illegal. The learned counsel has argued that therefore how the contract is interpreted by the Arbitrator is not relevant as it is the Arbitrator who have to decide and the court cannot lightly interfere with the same.
27. In McDermott International Inc referred above, in para 112 it is held that "It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties".
28. On considering all these decisions and on considering the facts of the present case and the specific provisions in the contract and the conduct of the parties, it cannot be said that the Arbitral Tribunal has failed to give effect to the terms of binding contract between the parties. Award of the learned Arbitral Tribunal cannot be said to be in ignorance of the conditions of contract and against Section 28(3) of the Arbitration & Conciliation Act. As held in various decisions of Hon'ble Supreme Court, scope of 36 CT 1390_Com.A.S.1252006_Judgment .doc interference by the court in the award of the Arbitral Tribunal is very limited. Since the learned arbitral Tribunal has considered various provisions of the contract and also correspondences between the parties which finally lead to the constitution of this Arbitral Tribunal, this finding of the Tribunal holding that there is arbitrable dispute cannot be interfered with, only on the ground that different interpretation is also possible. Moreover, the plaintiff by various correspondence even conceded the presence of Arbitrable dispute. If according to plaintiff, not initiating arbitration as per claue 67.1 after sending letter as per Ex.C.16 in 2001, barred the 1st defendant from initiating arbitration at a later date, same should have been contended in subsequent correspondences. Though the plaintiff is entitle to raise the dispute about arbitrability of the dispute, even after appointing arbitrator, the different correspondences relied by the 1st defendant show that the parties have traveled long distance by keeping these disputes alive. By considering the same, tribunal has held that there is arbitrable dispute and proceeded to decide the claims and the same is justified and cannot be said to be against the public policy of India or is against fundamental policy of Indian law or is patently illegal.
29. The learned counsel for the plaintiff in the course of his arguments has raised an additional ground of challenge by stating that the Arbitral Tribunal is consisting of three 37 CT 1390_Com.A.S.1252006_Judgment .doc Arbitrators, but all the three arbitrators were not present on all the dates on which effective hearing was done. In this connection, the learned counsel has referred to Mandate sheet showing that on many days all the Arbitrators were not present and one of the Arbitrator Sri C.N.Ramadas was absent on most of the dates on which the proceedings have taken place. Though the mandate sheet show that on all the adjourned dates all the members of the Tribunal have not signed the mandate sheet and even to the issues there is no signature of the second Arbitrator Sri C.N.Ramadas, this point is not raised in the petition under Section 34 of the Arbitration & Conciliation Act. Since there is a time limit to challenge the Arbitral Award and as the award is of the year 2006 and the petition was filed in the year 2006 and now after more than 1015 years this point is raised, that too in the course of arguments, as rightly argued by the learned senior counsel for defendant No.1, this point cannot be now agitated and considered as a ground of challenge in the present petition.
30. The learned counsel for the plaintiff has relied on the decision reported in AIR 2005 KAR 313 (Rudramuni Devaru vs Shrimad Maharaj Niranjan Jagadguru) in which our Hon'ble High Court has held that, when all the Arbitrators have not participated in the arbitration proceedings due to vacancy, resignation etc, award is liable to be set aside and it is also held in this decision 38 CT 1390_Com.A.S.1252006_Judgment .doc that minimum requirement of hearing should be given to the party and party should be given equal opportunity to be present throughout the hearing and present, statement, document, evidence, arguments etc.
31. The learned counsel for the plaintiff has also relied on the decision reported in 11 MYS LJ 300/39 MYS HCR 61 (Hayat Sab v. Mahomed Sadik) and AIR 1934 BOM 476 (Fasalally v. Khimji) on the same ground of non participation of all the arbitrators in the deliberations affecting the validity of the award. As stated above this point regarding Arbitral Tribunal not sitting in full quorum on all the effective dates of hearing was not urged in the petition and this ground cannot be now raised. Even in the arbitral proceedings, this point appears to have not been raised. As rightly argued by the learned senior counsel for the 1st defendant, signing of mandate sheet is merely a formality and not signing mandate sheet do not establish that learned Arbitrator was absent and omission to sign the same, would be only mere irregularity and will not vitiate the proceedings. Moreover, parties in the case were given all opportunity and have participated and argued the matter before learned Arbitral Tribunal and this point was not raised earlier.
32. The plaintiff has also contended that equal opportunity was not given by the arbitral Tribunal. On this point, plaintiff contends that after framing of issues, when 39 CT 1390_Com.A.S.1252006_Judgment .doc case was posted for evidence, claimant has stated that it will not lead any evidence and depends only on documents. It is stated that though respondent had filed an affidavit of its witness, subsequently, as claimant has not led the evidence, Plaintiff also decided not to proceed with affidavit evidence which was already filed and therefore, has not offered the witness for cross examination. According to the plaintiff, in the award, Arbitral Tribunal has time and again commented about Plaintiff not offering witness for cross examination. On looking to the award, no doubt, at 34 places, the tribunal has noted that the plaintiff who had filed affidavit of Sri. Sridhar as its witness, has not presented the said witness for cross examination. The learned counsel has referred to Section 18 of the Arbitration & Conciliation Act which deals with equal treatment of parties. On looking to the mandate sheet, on 16/3/2005 parties were directed to file affidavit of parties or witness. On 11/4/2005, it is noted that claimant has not proposed to lead evidence and decided to rely on documents only. On the same day, respondent who is the present plaintiff has filed an affidavit of his witness Sri. Sridhar. Subsequently as claimant has not lead evidence and the request of the plaintiff/employer for calling the witness of the claimant for cross examination was not accepted, the plaintiff has decided to drop his witness also and accordingly there was no oral evidence lead before the Arbitral Tribunal. Though in the award, at many places Plaintiff not presenting the witness for cross examination is high lighted, this has not 40 CT 1390_Com.A.S.1252006_Judgment .doc affected the merits of the case or influenced the Arbitral Tribunal in deciding the matter. Therefore, the contention of the plaintiff that the Arbitral Tribunal has not given equal opportunity and has not treated the parties equally is not established and this ground also cannot be accepted to challenge the award.
33. After considering and overcoming the technical objections on the award as above, challenge to the Award on merits is necessary to be considered. The dispute raised before the Arbitral Tribunal by the 1 st defendantcontractor is regarding extra cost incurred due to delay caused at various stages by the plaintiff in this contract work. Under 9 headings, the claimant has putforward its claim in the letter submitted to the plaintiff as per Ex.C.15 on 4/10/2000. Subsequently before the learned Arbitral Tribunal another four claims are also added, thereby 13 claims are made before the Arbitral Tribunal. In issue No.8 and 9, Arbitral Tribunal has discussed on these issues. Tribunal has stated in the award that, "In the nature of the evidence before the Tribunal, the appreciation cannot be like any other case where both the parties produced evidence and counter evidence. With the positive evidence of the claimant the failure of the respondents to produce any evidence either documentary or oral is the initial basis to appreciate the evidence". It is also observed by the Tribunal that basic principles of evidence is to be applied "with fundamental 41 CT 1390_Com.A.S.1252006_Judgment .doc settled principle that who ever desirous to any court or authority to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist and when a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person". The tribunal held that the person who is desirous of getting a judgment have to prove his case and the burden lies on him. It is also observed that as the claimant has sought for the relief burden is on the claimant to establish the same. This is the gist of the finding in para 58 to 60 of the tribunal.
34. However, in this case, claimant on whom burden to prove issue No.8 and 9 rests, as held by the Tribunal, has not lead any oral evidence. As observed earlier, employer i.e. the plaintiff has also not lead oral evidence and though affidavit was filed subsequently it was withdrawn. As held by the tribunal itself, burden is on the claimant i.e. 1 st defendantcontractor who is seeking the relief to prove its case. The burden on the plaintiff i.e. the employer is only to defend its action and only when claimant make out its case, the onus shifts on plaintiff/Employer. Even issues No.8 and 9 are on the claimant to establish and the tribunal has also noted the same. Under these circumstances, not producing the witness by the employer/plaintiff before the Tribunal for cross examination cannot be made much off, as claimant/contractor has decided to proceed with the case 42 CT 1390_Com.A.S.1252006_Judgment .doc based on the documents produced. Therefore, not offering Witness Sri Sridhar for cross examination will not have much relevance and that cannot affect the decision of the case. For not examining the said witness, adverse inference cannot be drawn, unless claimant who has burden to prove its case discharges its burden. Though both the parties have not lead oral evidence and have relied on only documents like, contract documents, correspondence and daily reports, learned Arbitral tribunal has held that there is positive evidence of the claimant and there is failure of the respondent to produce any evidence. Be that as it may.
35. As stated above, there are totally 13 claims. Arbitral tribunal has given findings on each of the claim No.1, 2, 3, 5, 6, 7, 8 and 9 separately and has given finding on claim No.1st part of claim No.3, claim No.4 and 10 to 13 together. Findings of the tribunal on each claim is disputed.
36. In a decision relied by the 1st defendant, reported in 2012(1) SCC 594 (P.R.Shah, Shares and Stock Brokers Private Limited v. B.H.Hsecurities Private Limited and others) it is held in para 21 that 'court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act". In this decision the Hon'ble Supreme Court has held that court cannot reassess, re 43 CT 1390_Com.A.S.1252006_Judgment .doc appreciate the evidence. In another decision reported in (2018) 1 SCC 718 (Sutlej Construction Limited v. Union Territory of Chandigarh) in para 11 it is held that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case, seeking to substitute its view for that of the arbitrator to do what it considers to be 'justice'.
37. In another decision reported in (2009) 17 SCC 796 (Fiza Developers and InterTrade Private Limited v. AMCI (I) Pvt. Ltd. And another) it is held in para 22 that the scope of enquiry in a proceeding under Section 34 is restricted to consideration whether any one of the grounds mentioned in subsection (2) of Section 34 exists for setting aside the award.
38. In the decision in Associate Builders, referred above, Hon'ble Supreme Court, in para 28 has referred to the judgment in ONGC Limited Vs Western Geco in which what is fundamental policy of Indian Law has been discussed. It is held that 'judicial approach', 'principals of natural justice' and not being 'perverse or irrational' would constitute fundamental policy of Indian law. In para 31, it is held that where a 'finding is based on no evidence or Arbitral 44 CT 1390_Com.A.S.1252006_Judgment .doc Tribunal takes into account something irrelevant to the decision which it arrives or ignores vital evidence in arriving at its decision, such decision would necessarily be perverse'.
39. In another decision relied by plaintiff in Ssangyong Engineering & Construction Company, referred above, necessity of giving opportunity to the parties by the Arbitrator is stated and it is held that "finding based on no evidence at all or an award which ignore vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality". Thus a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
40. In the decision in ONGC v/s Saw Pipes, referred above, Hon'ble Supreme Court has considered various grounds on which the arbitral award could be set aside and held in para 74(A)(3) that the award could be set aside if it is against the public policy of India, that is to say, if it is contrary to fundamental policy of Indian law or the interest of India or justice or morality or if it is patently illegal. Therefore, though present Award cannot be challenged under Section 34(2A) of the Act, as this section is inserted in 2015 and award is of 2006, in view of this 45 CT 1390_Com.A.S.1252006_Judgment .doc decision, award could be set aside u/s 34(2)(b), if it is patently illegal.
41. Plaintiff also relies on the finding in the decision in McDermott International Inc, referred above, in which in para 102A the Hon'ble Supreme Court has held that 'In the assessment of damages, the court must consider only strict legal obligations, and not the expectations, however reasonable, of one contractor that the other will do something that he has assumed no legal obligation to do'.
42. On looking to all these decisions, it is clear that an award could be set aside as held in ONGC Limited v. Saw Pipes if it is against public policy being contrary to fundamental policy of Indian law, justice or morality or if it is patently illegal. As held in the Associate Builders case and also in Ssangyong Engineering, if finding is based on no evidence or by ignoring vital evidence such an award would be perverse and would be patently illegal coming under public policy of India. It is also clear as held in the Fiza Developers, award could be set aside only on the grounds under Section 34(2) and grounds are to be clearly stated in the petition challenging such award. As held in P.R.Shah Shares and Stock Brokers, court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or re appreciating the evidence. In the presence of all these decisions, the finding given by learned Arbitral Tribunal on 46 CT 1390_Com.A.S.1252006_Judgment .doc different claims putforward by the 1st defendant is to be considered.
43. As stated above, there is no oral evidence lead before the Arbitral tribunal. In this arbitration suit both the parties have filed affidavits in support of their respective case. Before the Arbitral tribunal, 1st defendantclaimant has produced several documents as Ex.C.1 to Ex.C.50 and plaintiffrespondent has produced the documents which are marked as Ex.R.1 to Ex.R.1336. The documents produced by the claimant are mainly tender documents at Ex.C.1 to C.5. Most of the remaining documents are correspondence between claimant and the respondent i.e. the contractor and the employer. Among the documents produced by the Plaintiffemployer, documents upto Ex.R.11 are few correspondence, contract certificate, refund vouchers etc. Ex.R.12 to Ex.R.1329 are different daily reports submitted by the claimant. Ex.R.1333 is the amendment to the contract and Ex.R.1334 to Ex.R.1336 are the escalation bills. As found in the award, on issue No.7, contract amount was enhanced vide Ex.R.1333 on 30/8/2001. Therefore by Ex.R.1333 there was subsequent agreement for enhancement of the contract price between the parties and the work is also completed and this enhanced contract price is also received by the contractor. Therefore, the delay caused in handing over the site, drawing and other delays in execuition of the project are all not disputed. The claim in this claim petition 47 CT 1390_Com.A.S.1252006_Judgment .doc before the learned Arbitral Tribunal is restricted to cost incurred due to non utilisation and under utilisation of resources during delayed period and for keeping equipment, employees and staff idle, during delayed period and interest on these claims and also on delayed payment of running bills and escalation bills. In the back drop of these facts and observations the challenge to the decision of the tribunal on each claim is to be considered.
44. Claim No.1 and 2: In claim No.1, as against the claim of Rs.7,06,274/, Rs.3,72,330/ is awarded by the Tribunal. In claim No.2, as against Rs.31,87,581/ claimed Rs.27,95,030/ is awarded by the Tribunal. Claim No.1 and 2 are with regard to loss suffered by the claimant due to delay and the cost incurred for the equipment, staff and manpower kept idle. Claim No.1 is with regard to such loss suffered due to delay in confirmation of coordinates at Harohalli and as against claim for 30 days, tribunal held that the delay was only 23 days. Claim No.2 is with regard to delay of 128 days in handing over of land for construction purposes at Tataguni. For the loss suffered by keeping equipment, staff and manpower idle in respect of these claims for 23 days and 128 days respectively, the tribunal has decided to award compensation. As stated above there was delay and for delayed period, extension has been given and work is completed and even escalation price has been given by amended agreement as per Ex.R.1333. In claim No.1 and 2, 48 CT 1390_Com.A.S.1252006_Judgment .doc claim that was before the tribunal was to decide as to what is the loss suffered by the claimant for keeping the resources like equipment, staff and manpower idle or unutilised at the site due to the delay caused by the employer. Since claimant contended that resources were kept idle during this period of delay, burden is on the claimant to show that the men, and machinery were kept at the spot. As stated in the Award, claimant who has approached the tribunal have to establish its claim.
45. The Arbitral tribunal by considering 5 daily reports in respect of claim No.1 and 20 daily reports with regard to claim No.2, which are, in fact, produced by the respondent has held that claimant had suffered loss as equipment, manpower and staff remained idle. Claimant has not produced copies of daily reports showing that on a particular date, particular number of staff, man power and equipment were at the spot in which the work was to be done. The claimant has produced Ex.C.15 dated 4/10/2000 which is only correspondence made with the employer making a claim. In Ex.C.15 or any other document produced by the claimant, it is not shown that on particular date during which this delay is caused as stated in claim No.1 and 2, particular number of equipment, staff and manpower was present at the site. Among the daily reports produced by Respondent Ex.R.12 to 16 are 5 daily reports connected to delay mentioned in claim No.1 and Ex.R.442 to 461, 20 daily 49 CT 1390_Com.A.S.1252006_Judgment .doc reports are of the period mentioned in claim No.2. These daily reports only show that on those days particular number of machinery, man power and staff were present at the spot. The claimant who has approached the tribunal has not lead oral evidence, not produced any such daily reports showing the availability of such machinery, man power and staff at the plant during this entire period covered in claim No.1 and 2. The daily reports which are bilateral documents should have been produced by the claimant, if exists, for having incurred the expenditure.
46. For all these 23 days and 128 days appearing in claim No.1 and 2, Learned arbitral tribunal by considering that in respect of claim No.1, five daily reports are available showing the equipment, staff and manpower available at the spot and in respect of claim No.2, 20 such daily reports are available, has considered and applied average of the same for 23 days in respect of claim No.1 and 128 days in respect of claim No.2. Tribunal has accepted that all such men and material on the spot were there on all the 23 and 128 days. Unless there is a specific evidence showing that for 23 days and 128 days the equipment, staff, manpower were present at the spot, it cannot be held that these resources were present and were kept idle on these days. There was no evidence before the tribunal to award compensation for the alleged loss suffered due to keeping the equipment, staff and manpower 50 CT 1390_Com.A.S.1252006_Judgment .doc idle during this entire period of 23 days and 128 days. For Price Escalation due to delay payment is already provided.
47. Therefore, claimant have to establish actual loss suffered due to keeping of resources idle during this delay period. On the basis of five daily reports, it cannot be held that for 23 days equipment, staff and manpower were kept ready at the site and remained idle. Similarly on the basis of 20 such daily reports, it cannot be assumed that for 128 days the same number of manpower, staff and equipment was present at the site. Claimant has not produced any documents showing that on all the 23 days and 128 days, these resources were available at the site and were kept idle and there by claimant suffered loss. Therefore finding of the tribunal on claim No.1 and 2 to the effect that the resources were kept idle for 23 days and 128 days respectively, based on sample daily reports of few days, that too, produced by employer, is without evidence. When award is based on no evidence, such an award is perverse and is patently illegal as held in the case of Associate Builders and also ONGC vs Saw Pipes. Apart from this, contract entered into between the parties do not contain any specific clause providing for compensation for equipment, staff and manpower being kept idle at the site even after granting price escalation. Therefore the finding of the tribunal of claim No.1 and 2 is not based on any evidence or is not in terms of contract. Though the Arbitral Tribunal is empowered to decide an issue on the 51 CT 1390_Com.A.S.1252006_Judgment .doc basis of evidence available before it and the court under Section 34 cannot reappreciate evidence, when there is no evidence at all, the award of the tribunal would be patently illegal. Therefore, on claim No.1 and 2, decision of the tribunal is patently illegal. If at all the compensation was to be awarded for the loss due to keeping of equipment, staff and manpower and idle that could be only for 5 days in respect of claim No.1 on the basis of Ex.R.12 to Ex.R.16 and 20 days in respect of claim No.2 as evidenced in Ex.R.442 to Ex.R.461. Therefore, the award of the tribunal on claim No.1 and 2 is not acceptable and is patently illegal and is thereby against public policy of India.
48. Claim No.3 (B): This claim No.3 as mentioned in the claim petition filed before the Tribunal is for Rs.53,36,096/ and it is stated that the same is towards interest on delayed payments. However, in the annexure refered in claim petition and in Ex.C.15, which is mainly relied by the Tribunal, this claim is divided into two parts. Part (A) is shown as Payment of interest for the delayed period for running account bills and escalation bills for Rs.7,81,506/. Part (B) is shown as Payment for under utilised resources and claim is for Rs.45,54,590/. It is stated that interim bills in the month of August - September 1999 were released by the respondent beyond due date and payment of escalation bills were also delayed. It is stated that as per clause 60.8 all interim payments certified by the Engineer have to be paid within 42 days and non payment of 52 CT 1390_Com.A.S.1252006_Judgment .doc the same amounts to breach of contractual obligation and for delay payment it is contended that interest is to be paid. It is stated in Ex.C.15 with regard to claim No.3 that due to delay, work has got affected and they could not achieve the progress resulting in underutilization of resources to the extent of 50% and it comes to Rs.45,54,590/ is shown. The tribunal in claim No.3 though appears to have discussed in page 45 and in para 64 the said page is not found in the award and that is one of the ground urged by the petitioner. Regarding arithmetical mistakes and page number mistake and not having one page number and paragraph etc, the learned senior counsel for the 1st defendant has relied on the decision reported in 2012 SCC Online Delhi 3995 (NTPC Limited v. Marathon Electric Motors India Limited) in which it is held that the computational, clerical or mathematical errors can only be corrected by means of an application under Section 33 of the Arbitration & Conciliation Act. Be that as it may.
49. In page 46 and 47 of the award, tribunal has held that for the delay in payment of RA bills, interest is to be paid and it comes to Rs.6,53,003/. This interest part in claim No.3 is considered as part(A). It has considered the second part of the claim No.3 as claim No.3(B) and held that there is under utilisation of plant and machinery, staff, workmen and doka to the extent of 50% as claimed by claimant. It has has considered R.34 to 215 and Ex.R.462 to 421 and Ex.R.1043 53 CT 1390_Com.A.S.1252006_Judgment .doc to 1274 which show that show that for the month of December 1999 Rs.33,05,411/ and for the month of January 2000, Rs.33,21,264/ expense is incurred and its total comes to Rs.66,27,675/. Considering the loss due to under utilisation and non utilisation at 50%, Rs.33,13,338/ is held to be payable by the Employer. However, 50% of Rs.66,27,675/. Comes to Rs.33,13,838/. On adding interest of Rs,6,53,003/on delayed payment as determined in Claim No.3(A), Tribunal awarded Rs.39,66,890/, but total comes to Rs.39,66,841/. Finding regarding interest on Claim 3(A) towards interest is separately decided by Tribunal with claim No.10 to 13 and same can be considered there. As regards finding on Claim No.3(B), towards underutilization and non utilisation award is based on evidence available before it at exhibit 'R' series produced by the employer/plaintiff. This finding of the Tribunal cannot be considered as without any evidence. As such, the finding of the tribunal regarding underutilization or non utilisation of resources which is evidenced by the document produced by the respondents, which comes to Rs.33,13,838/. cannot be said to be not based on any evidence. Though it was the duty of the claimant to establish it, the tribunal by considering the evidence of the respondent has allowed this claim and the said finding cannot be said to be illegal or is against the public policy.
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50. Claim No.5: Claim No.5 for Rs.1,24,66,170/ and tribunal has awarded Rs.1,08,07,243/. Claimant has stated that due to delay in issuing details for miscellaneous structures there was underutilization of mobilized resources which was kept on the site till 30/11/2000 and it is stated that the respondent had even admitted the same. Time schedule fixed for the work and details as to when work is done are also shown in the claim petition. It is stated that due to this delay claimant suffered loss on account of underutilization of resources mobilized during this period. The tribunal by considering the daily reports produced by the respondent at Ex.R.34 to Ex.R.215, Ex.R.462 to Ex.R.771 and Ex.R.1043 to Ex.R.1274 showing detail of hire charges of plaint and machinery, salary of the staff and doka materials and by considering the same in detail in annexure 3 to the award, has awarded Rs.1,08,07,243/. The finding of the tribunal is based on documents produced by the Rspondent and therefore, finding is based on evidence. These daily reports show hire charges of plant and machinery, staff, workmen etc engaged during this period and Tribunal has considered in detail about these reports in annexure 3 of the award. Therefore, it cannot be said that this finding of the tribunal is based on no evidence. Sufficiency of evidence cannot be gone into in the present petition u/s 34 of Arbitration and conciliation Act. Hence, finding of the tribunal on claim No.5 cannot be said to be without any evidence and 55 CT 1390_Com.A.S.1252006_Judgment .doc cannot be said to be patently illegal or is against the public policy.
51. Claim No.6: The claim No.6 which is with regard to delay in approval of the materials and claim is for Rs.41,36,624/. The claimant had to keep the material underutilized to the extent of 50% during the delay period from 18/5/1999 to 23/7/1999. In Ex.C.15 correspondence made by the claimant with the respondent are referred. Reply of the Employer plaintiff is also referred. Since due to delay in giving approval by the employer-plaintiff the materials kept by the claimant could not be used, the tribunal has awarded part of the amount claimed by the claimant. Since such claim was made by the claimant before the respondent and respondent has not disputed that such materials were not kept and as this claim relates to underutilization and finding on which is based on subjective satisfaction of the Arbitral Tribunal, finding of the tribunal awarding Rs.14,77,686/ cannot be interfered with u/s 34 of the Act.
52. Claim No.7: As against this claim for Rs.35,77,910/, Tribunal awarded 27,14,143/. It is stated in the claim petition that the delay is caused due to restriction in casting of pumping station, raft and walls in the panel. The Tribunal has referred to the correspondence and also points raised in the meeting between the parties. The Tribunal has considered the details and noted and calculated the details in annexure 5 and has held that claim is 56 CT 1390_Com.A.S.1252006_Judgment .doc established to the extent of Rs.27,14,143. In respect of this claim No.7, about loss sustained by the claimant due to the delay in casting of pumping station, though no evidence was furnished before the tribunal except correspondence had with the employer in Ex.C.15. The Tribunal in Annexure IX, IXA an IXB, has worked out statement of amount month wise in respect of all the three sites. On the basis of daily labour reports submitted for July 1999 to December 1999 as per Ex.R.61 to 180, 1114 to 1179, 546 to 721, has worked out site wise and structure wise financial details. The Tribunal by using its expertise, has calculated aditional cost incurred for Raft and walls. Since awarding of Rs.27,14,143/ calculation made on the basis of documents produced the finding of the Tribunal cannot be interfered with.
53. Claim No.8: For delay due to holding the drawings for ground floor for the pumping station at Harohalli and T.K.Halli, this claim is made for Rs.10,36,406/. Before the Tribunal, by letter dated 10.11.2005, claimant modified the claim amount to Rs.2,69,567/. As against this modified claim, tribunal awarded Rs.2,47,108/. This claim when made before the Engineer was rejected as mentioned in the claim petition. Even before the Tribunal Plaintiff/emlpoyer opposed this claim on the ground that there was no notice of claim supported with contemporary records and daily reports do not support the claim. Inspite of such contention being taken claimant has not produced any documents in support 57 CT 1390_Com.A.S.1252006_Judgment .doc of the claim. Tribunal has noticed that in Ex.C.20 this claim was made before employer and Tribunal has worked out the details of the claim in Annexure X of the award. On looking to claim petition, towards cost of underutilization of mobilized resources to the extent of 50% during the delayed period due to holding in drawings the claimant has incurred expense and this claim is made. Since this claim is with regard to underutilization of the resources during the delayed period and as existence of delay is an admitted fact and as under
utilisation of resources is subjective satisfaction of the Arbitral Tribunal, award of Arbitral Tribunal on this claim, cannot be set aside u/s 34 of the Act and this finding of the tribunal on claim No.8 cannot be interfered.
54. Claim No.9: This claim is with regard to delay due to holding in drawing for reservoir PCC at Tataguni and claim made is for Rs.13,54,083. Tribunal has awarded Rs.2,82,364/. While making final calculation amount s shown as Rs.2,82,469/. This claim also appears to be based on underutilization of resources due to the delay in holding the drawings for reservoir PCC at Tataguni. The Tribunal by considering the documents, which are correspondence exchanged between the parties referred in Ex.C.15 has held that laying of PCC was put on hold as the condition of the soil in some area appeared to be having less bearing capacity than the designed value. The tribunal has even considered Ex.R.565 indicating that the Superintending Engineer instructed the contractor to complete the PCC filling in 58 CT 1390_Com.A.S.1252006_Judgment .doc reservoir area as early as possible. By considering this correspondence and the documents the tribunal has considered the claim and finding of the tribunal cannot be said to be without any evidence.
55. Claim No. 4 and 10 to 13 and also Claim No.3(A): Claim No.4 is for recovery of Rs.1,28,440/ as interest on outstanding and Tribunal awarded Rs.85,627/. Claim No.10 is for Rs.1,70,06,001/ with regard to interest on unpaid claim amount of Rs.3,02,32,905/ by calculating interest @18% from 18/11/2000 to 31/12/2003. In claim No.11 Rs.12,41,802/ is claimed as interest on unpaid escalation amount of Rs.36,43,103/. In claim No.12 charges due to extension of bank guarantee is claimed as Rs.24,855/. Interest on unpaid retention amount, amounting to Rs.6,21,150/ is claimed in claim No.13. On all these claims No.10 to 13 tribunal has totally awarded Rs.1,36,49,115/. First part of claim No.3, mentioned in Ex.C.15 as 3(a) is also towards interest on the unpaid bills and Tribunal has granted Rs.6,53,003/ as appearing in page 47 of award and this amount is added with claim 3(B) and final amount is arrived. All these claims are in the nature of claim for interest on delayed payments of due amount and are taken for consideration together. Even the tribunal has considered all these claims together in the award. On looking to the claim for interest made by the claimant before 59 CT 1390_Com.A.S.1252006_Judgment .doc the Arbitral Tribunal in these claims, this interest claimed is for the period prior to the date of initiating the arbitration.
56. Section 31(7)(a) of the Arbitration & Conciliation Act empowers the tribunal to award interest from the date of cause of action till date of award. Section 31(7)(b) also permits awarding of interest from date of award. The Arbitral tribunal has granted interest @ 12% on the awarded amount from date of award till date of payment and that is in confirmity with the provision and cannot interfered.
57. However, the dispute is with regard to awarding of interest for the period prior to initiating arbitration. In claim No.10 interest is prayed for the period from 18/11/2000 to 31/12/2003. In claim No.3(A) and in claim No.4, interest claimed is for the period prior to raising of dispute. Therefore interest claimed in these claims are till arising of the cause of action. The claimant had calculated the interest @18% per annum and arbitral tribunal has stated that they consider 12% as appropriate interest that can be awarded. Regarding interest, Tribunal has noted that there is no agreement between the parties. The tribunal by considering the provisions of Interest Act, by considering that the amount outstanding which is determined by this award would be a debt, has decided to award the interest.
58. In General conditions of contract (GCC)Ex.C.2, clause 60.10 provides that amount due to the contractor 60 CT 1390_Com.A.S.1252006_Judgment .doc under any interim payment certificate issued by the Engineer is to be paid within 28 days and in case of final payment certificate, within 56 days, payment is to be made and on failure, interest at the rate stated in the appendix to tender, is to be paid. Therefore, GCC clause 60.10 provided for payment of interest on delayed payment. However, this clause 60.10 of GCC is not made applicable to present contract. As rightly considered by the Tribunal and even argued by the learned counsel for the plaintiff, in Ex.C.3 which is Special condition of contract, applicable to present contract, clause 60.10 of GCC is not included. By deleting entire clause 60 of GCC, new clause 60.1 to 60.14 are substituted. In substituted clause 60.1 to 60.14 there is no provision for payment of any interest. When GCC provided for interest and Special condition of contract deletes the said clause, it is clear that contract did not provide for interest and interest is not payable. Special conditions of contract prevail over GCC. If really payment of any interest for the delayed payment was agreed, clause 60.10 of GCC would not have been deleted by substituting some other clause in its place. In view of this conspicuous deletion of Clause providing interest in GCC by Special conditions of contract, it is clear that there was no agreement for payment of interest on the delayed payment.
59. Moreover, in claim No.3(A), for delay in payment of escalation bills and interim bills, interest is said to have 61 CT 1390_Com.A.S.1252006_Judgment .doc been calculated. Even in claim No.4 for the delay in making payment interest is claimed. In claim NO.4 it is mentioned that the payment is still outstanding in respect of Harohalli compound wall and item of supply, fabrication and fixing of inserts and even item M 10 PCC filling under Tataguni reservoir is still pending. If any payment was pending on the submitted bill, that might have been settled while making payment of the contract price and enhanced contract price. Payment on the pending bill is not claimed in the claim petition. In the arbitration dispute loss incurred due to the delay is mainly claimed. The parties have entered into contract and amended contract is also executed and contract price also is stated to have been satisfied. As such in respect of payment which is alleged to be outstanding interest cannot be claimed. Since entire project is over and work is completed subsequent to Ex.C.15 and even amendment to contract is made by considering escalation, all the claims appearing in Ex.C.15 might not have survived and it was necessary for the claimant to state as to whether pending bills are cleared and when cleared. If the claimant has received payment of pending bills after completing the work and executing amended contract and satisfied with such payment, claimant cannot claim interest on such late payment in present arbitration proceedings. Added to this, contract did not provide for payment of interest.
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60. In (2000) 6 SCC 113 (Ghaziabad Development Authority v. Union of India and another) relied by the 1st defendant it is held that, interest on equitable ground can be awarded in appropriate cases. In 2018 SCC online Delhi 7643 (Union of India v. City Promoter and Buildwell Pvt. Ltd.), interest awarded on the delay and short payment on the running account bills was upheld.
61. Regarding interest on the amount claimed in claim No.1 to 9, which finds place in claim No.10, though the interest of 18% is claimed and interest is calculated as Rs.1,70,06,001/, the entitlement of the claimant for this amount was not decided as on the date of filing of the claim petition. Unless particular amount is decided to be owed by employer to claimant, it cannot be considered as debt. Unless these claims which are in the nature of compensation for the cost incurred by the claimant due to the delay caused by the plaintiff, are quantified plaintiff/employer do not become liable to pay. Only when entitlement of plaintiff for these claims are decided and amount to which claimant/defendant is entitle is decided, plaintiffemployer would be liable to pay the same. Therefore, till entitlement for these amounts is decided before the arbitral tribunal, interest cannot be calculated, unless there is specific agreement for payment of interest between the parties. On looking to all these aspects, it is clear that when contract do not provide for payment of interest on the pending bills, delayed payments, 63 CT 1390_Com.A.S.1252006_Judgment .doc on claims for loss suffered due to keeping the resources idle, due to under utilisation/non utilisation of resources for the reason of delay caused by the employer, Arbitral tribunal has no power to award interest till arising of cause of action or initiation of arbitration.
62. Apart from this, in the present case the claim put forward in the claim petition in claim No. 1 to 9 is totally for Rs.3,19,29,584/. Interest of Rs.1,70,06,001/ is claimed on Rs.3,02,32,905/ @ 18% p.a. for the period from 18/11/2000 to 31/12/2003 as mentioned in claim petition. On claim No.1 to 9, Tribunal has awarded only Rs.2,27,48,526/. Therefore, the claim made by the claimant in claim No.1 to 9 was not an ascertained amount and finally the tribunal has fixed it and ascertained it as Rs.2,27,48,526/. Only after such ascertaining of the amount, interest can be awarded from the date of cause of action as specifically provided in Section 31(7) of Arbitration & Conciliation Act. The contract between the parties do not provide for any interest and a clause providing interest on delayed payment of bills in clause 60.10 of GCC is made non applicable by SCC. If really the parties were interested in providing interest for the loss suffered due to the delay in executing the work that would have been mentioned in the contract. Even when the contract was amended and contract price was increased as appearing in Ex.R.1333 no such interest is awarded. This show that the parties had never agreed for payment of any interest.
64CT 1390_Com.A.S.1252006_Judgment .doc Arbitral Tribunal cannot go beyond the terms of contract and cannot award interest on unascertained claims for the period before arising of cause of action and initiating arbitration.
63. Learned Arbitral Tribunal, though rightly considered that the contract did not provide for interest and considered that Arbitration Act also do not empower the Arbitral tribunal to award such interest which is not provided in the contract, still by interpreting definition of debt in the Interest Act has proceeded to award interest. Even in the Interest Act, there is no such mandatory provision directing the court to award interest it only say that the court may if thinks fit award interest. As such, there is no scope to apply Section 3(1) of Interest Act to the case on hand. Even in the definition of 'debt' it is mentioned as any liability for an ascertained sum of money. Therefore, unless the money payable is ascertained it would not become debt and interest cannot be levied. Arbitral tribunal which is creature of contract has no discretion to award interest, when contract do not provide for it and even Arbitration and conciliation Act do not empower it. For these reasons, awarding of interest by the tribunal in claim No.10 to 13, 3(A) and 4, which is for the period prior to the raising of arbitral dispute is not proper, beyond its jurisdiction, against the contract and the provisions of Arbitration and conciliation Act.
64. Regarding awarding of interest on interest, which is one of the ground urged by the plaintiff, decision in Hyder 65 CT 1390_Com.A.S.1252006_Judgment .doc Consulting Limited v. State of Orissa reported in (2015) 2 SCC 189 is cited, in which, it is held that awarding post award interest under Section 31(7) of the Arbitration & Conciliation Act do not amount to awarding of interest and interest. It is held that the Arbitral Tribunal has power to include pre award interest and once so awarded, pre award interest looses its character of interest and become part and parcel of claim on which it has power to award interest.
65. Apart from this, Arbitral Tribunal has awarded total Rs.1,36,49,115/ on claim No.10 to 13. In the entire award, how the amount of Rs.1,36,49,115/ is arrived by the tribunal is not stated. If amount awarded on claim No.1 to 9 is calculated total comes to Rs.2,27,48,526/, If interest on this amount is calculated @12% for the period from 18/11/2000 to 31/12/2003, as mentioned in the claim petition it will come to about Rs.82,00,000/. In claim No.11 Rs.12,41,802/ towards unpaid escalation amount, in claim No.12, Rs.24,855/ towards extension of bank guarantee and in claim No.13, Rs.6,21,150/ towards unpaid retention amount are claimed. Even if entire claim amount in claim No.11 to 13 is added to this interest of Rs.82,00,000/, it would come to about 1,00,00,000/. Therefore, what is the basis for awarding Rs.1,36,49,115/ cannot be made out. This difference of more than 36 lakhs cannot be considered as trivial one and cannot be ignored. Looking from any angle, awarding of Rs.1,36,49,115/ by the Tribunal in respect of 66 CT 1390_Com.A.S.1252006_Judgment .doc clam No.10 to 13 is without any evidence, against the contract and statute and is perverse and is thereby patently illegal. Similarly the awarding of Rs.85,627/ as interest on unpaid bills on claim No.4 and awarding Rs.6,53,003/ as interest on delayed payment of RA Bills and escalation Bills on first part of claim No.3 now considered as Claim No.3(A) are patently illegal. Therefore, finding in the award on the interest in Claim No.3(A), and finding on claim No.4 and 10 to 13 is against contract and without reasons and on improper calculations and is therefore, patently illegal and is thereby against the public policy of India.
66. For all the discussion made above on each claim, awarding of Rs.3,72,330 in claim No.1, Rs.27,95,030/ in claim No.2 are without any evidence and are patently illegal. Awarding portion of the amount towards interest at Rs.6,53,003/ in 1st Part of claim No.3 (discussed as Claim No.3(A)), awarding interest of Rs.85,627/ on claim No.4 and awarding of Rs.1,36,49,115/ on claim No.10 to 13 are against terms of contract and provisions of Arbitration and conciliation Act and not supported by reasons and is thereby against the public policy of India and is also against the fundamental principles of Indian Law and is in violation of Section 28(3) of the Arbitration & Conciliation Act. The award of the tribunal with regard to second portion of claim No.3 amounting to Rs.33,13,338/, Rs.1,08,07,243/ in claim No.5, Rs.14,77,686/ in claim No.6, Rs.27,14,143/ on claim 67 CT 1390_Com.A.S.1252006_Judgment .doc No.7, Rs.2,47,108/ in claim No.8, Rs.2,82,364/ in claim No.9 are with reasons and by relying on documentary evidence and cannot be said to be patently illegal or is against the fundamental principles of Indian Law and therefore, cannot be said to be against the public policy of India.
67. For these reasons the part of the claim No.3 and claim No.5,6,7,8 and 9 require no interference. With regard to claim No.1,2 and part of claim No.3 and claim No.4 and 10 to 13, award is found to be against the public policy of India, and is necessary to be set aside. In the decision in McDermott International Inc, referred above, the Hon'ble Supreme Court has held that, "The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired". So if the award is found to be against the public policy of India the court under Section 34(2) has no power to modify the award or has no power to remand the matter to the Arbitral Tribunal and only recourse left to the court is to set aside the award.
68. However, in the present case the parties have appeared before the Arbitral Tribunal with 13 claims placed by the claimant/contractor. Learned Arbitral tribunal has separately decided on each claim. Since there are 13 claims, each claim is a separate dispute resulting in separate finding. In claim No.3, there are two parts and each part is considered 68 CT 1390_Com.A.S.1252006_Judgment .doc separately and then total amount is mentioned on this claim. Therefore, when finding of the learned Arbitral Tribunal in respect of some of the claims, out of 13 claims, are held to be against the public policy of India, if, those claims which are independent of the other claims could be separated, finding on other claims which are not hit by grounds mentioned in Section 34(2) need not be set aside.
69. In a decision reported in 2011(2) Arb.LR 84 (SC) (J G Engineers Pvt Ltd Vs Union Of India and another) Hon'ble Supreme Court has held in para 18 as under;
"18. The arbitrator has considered and dealt with claim Nos. (1), (2, 4 and 5), (6),(7 and 8),(9) and (11) separately and distinctly. The High Court found that the award in regard to item Nos.1,3,5 and 11 were liable to be set aside. The High Court did not find any error in regard to the awards on claim Nos.2,4,6,7,8 and 9, but nevertheless chose to set aside the award in regard to these six items, only on the ground that in the event of counterclaim Nos.1 to 4 were to be allowed by the arbitrator on reconsideration, the respondents would have been entitled to adjust the amounts awarded in regard to Claim Nos. 2,4,6,7,8 and 9 towards the amounts that may be awarded in respect of counterclaim Nos.1 to 4; and that as the award on Counterclaim Nos.1 to 4 was set aside by it and remanded for fresh decision, the awards in regard to Claim Nos,2,4,6,7,8 and 9 were also liable to be set aside. It is now well settled that if an award deals with and decides several claims separately and distinctly, even if the court finds that the award in regard to some items is bad, the court will 69 CT 1390_Com.A.S.1252006_Judgment .doc segregate the award on items which did not suffer from any infirmity and uphold the award to that extent. As the award on item Nos.2, 4,6,7,8 and 9 were upheld by the civil court and as the High court in appeal did not find any infirmity in regard to the awards on those claims, the judgment of the High court setting aside the award in regard to Claim Nos. 2,4,6,7,8 and 9 of the appellant, cannot be sustained. The judgment to that extent is liable to be set aside and the award has to be upheld in regard to Claim Nos. 2,4,6,7,8,and 9."
70. With the support of this decision and in the peculiar circumstances of the present case, only those claims which are found to be against the public policy of India could be set aside and the findings on the claims which cannot be challenged and set aside under Section 34(2) of the Act can be kept as it is. Since each claim is practically a separate dispute, there are 13 plus one dispute as claim No.3 contains two parts. Out of which, finding of claims No.1, 2, 1 st part of claim No.3 and claim No. 4, and 10 to 13 are to be set aside as are without evidence, against terms of contract or statute and thereby, against public policy of India being patently illegal. This do not affect the finding on other claims. Therefore, in the peculiar circumstances of the case, it is proper to allow the petition partly and to set aside the finding of the award only in respect of claim No.1,2, first part of claim No.3, claim No.4, and 10 to 13 and to keep the award regarding remaining claims intact. On setting aside the finding on these claims No.1,2,4,10 to 13 and 1st part of 70 CT 1390_Com.A.S.1252006_Judgment .doc claim 3, awarded amount covered under these claims are to be deducted from the final calculated amount and award with regard to other claims need not be interfered.
71. Though, final award amount is shown as Rs.3,63,97,641/ in the award in page 66, total of the amount awarded by the Tribunal on claims to Rs.3,63,96,987/. On deduction of awarded amount on certain claims which are set aside and on considering the amount awarded on each claim by the Arbitral Tribunal, amount to which 1 st defendant is entitle would be as under:
Claim No. Amount awarded by Amount of Claim upheld Arbitral Tribunal. by this Court Claim No. 1 Rs. 3,72,330-00 ----
Claim No. 2 Rs. 27,95,030-00 ----
Claim No. 3 (A) Rs. 6,53,003-00 ----
3(B) Rs. 33,13,338-00 Rs. 33,13,338-00
Claim No. 4 Rs. 85,627-00 ----
Claim No. 5 Rs.1,08,07,243-00 Rs.1,08,07,243-00
Claim No. 6 Rs. 14,77,686-00 Rs. 14,77,686-00
Claim No. 7 Rs. 27,14,143-00 Rs. 27,14,143-00
Claim No. 8 Rs. 2,47,108-00 Rs. 2,47,108-00
Claim No. 9 Rs. 2,82,364-00 Rs. 2,82,364-00
Claim No. 10 to 13 Rs. 1,36,49,115-00 ----
Total Rs. 3,63,96,987-00 Rs. 1,88,41,882-00
72. The total of these awarded amount covered by
claims which are set aside comes to Rs.1,75,55,105/. After deducting this amount remaining amount to which claimant/1st defendant would be entitle is Rs.1,88,41,882/. Therefore, award could be restricted to recovery of Rs.1,88,41,882/ with interest @12% per annum as awarded 71 CT 1390_Com.A.S.1252006_Judgment .doc and on the same conditions. Therefore, amount to which the claimant is entitle is to be modified as Rs.1,88,41,882/ in place of Rs.3,63,97,641/ mentioned in the award. Accordingly, point No.1 is answered partly in the affirmative.
73. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER This petition filed U/S.34 of the Arbitration & Conciliation Act 1996 to set aside award of the learned Arbitrator in AC No.Arb(L&T)/BWSSB) No.1/2004 dated 06/08/2006, by the plaintiff is partly allowed.
Award of the learned Arbitral tribunal in respect of claim No.1, 2, 4, 10 to 13 and claim No.3(A) are set aside.
On setting aside the finding on these claims, the amount to which the claimant/1st defendant is entitle from respondent/plaintiff is reduced to Rs.1,88,41,882/ in place of Rs.3,63,97,641/.
The claimant/1st defendant is entitle to recover Rs.1,88,41,882/ from the plaintiff on the same terms as appearing in the award.72
CT 1390_Com.A.S.1252006_Judgment .doc In the circumstances of the case, parties to bear their own costs.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 27th day of August 2021] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
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