Madras High Court
Board Of Trustees Of Chennai Port Trust vs Ennore Port Limited on 30 November, 2016
Author: P.Kalaiyarasan
Bench: A.Selvam, P.Kalaiyarasan
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 30.11.2016
CORAM:
THE HONOURABLE MR.JUSTICE A.SELVAM
and
THE HONOURABLE MR.JUSTICE P.KALAIYARASAN
O.S.A.Nos.210 and 222 of 2016
and C.M.P.Nos.16666 and 16770 of 2016
O.S.A.No.210 of 2016
Board of Trustees of Chennai Port Trust
Rep. by its Chairman
Rajaji Salai, Chennai - 1. .. Appellant
vs.
1. Ennore Port Limited
P.T.Lee Chengalvaraya Naicker
Maaligai, 1st Floor,
No.23, Rajaji Salai, Chennai - 600 001.
2. HCC VAN OORD JOINT VENTURE
Hincon House, LBS Marg,
Vikhroli (West), Mumbai - 400 083.
3. M.C.Bhide
4. O.P.Goel
5. M.Velu ..Respondents
Original Side Appeal under Order XXXVI Rule 1 of Original Side Rules read with Clause 15 of the Letters Patent Act r/w Section 37 of Arbitration and Conciliation Act, 1996, to set aside the order, dated 25.04.2016 passed by this Court in O.P.No.694 of 2007.
O.S.A.No.222 of 2016
Kamarajar Port Limited
(Formerly known as Ennore Port Ltd.,)
4th Floor,
Super Speciality Diabetic Centre
(erstwhile DLB Building)
Near Clive Batter Bus stop,
Rajaji Salai, Chennai - 600 001. .. Appellant
vs.
1. HCC VAN OORD JOINT VENTURE
Hincon House, LBS Marg,
Vikhroli (West), Mumbai - 400 083.
2. M.C.Bhide
3. O.P.Goel
4. M.Velu
5. The Board of Trustees of Chennai Port Trust
Rep. by its Chairman,
Rajaji Salai, Chennai - 600 001. ...Respondents
(Cause title accepted vide
order of Court, dated 09.10.2016
made in C.M.P.No.1604 of 2016
in OSA SR.No.72910 of 2016)
Original Side Appeal under Order 37 of Arbitration and Conciliation Act, 1996 read with Order XXXVI Rule 1 of Original Side Rules and Clause 15 of the Amended Letters Patent Act to set aside the Judgment and Decree, dated 25.04.2016 passed by this Court in O.P.No.694 of 2007 dismissing the said Original Petition and consequently, set aside the Arbitral Award dated 12.12.2006 passed by the 2nd to 4th respondents.
For appellant : Mr.G.Rajagopalan,
Additional Solicitor General
assisted by
Mr.R.Karthikeyan for
Appellant in O.S.A.No.210 / 2016
and for R5 in O.S.A.No.222 / 2016
Mr.K.Manoj Menon for
Mr.Menon Karthik for
Appellant in O.S.A.No.222 / 2016
and for R1 in O.S.A.No.210 / 2016
For respondents : Mr.P.S.Raman, Senior counsel
for Mr.T.K.Baskar for R2
in O.S.A.No.210 of 2016
and for R1 in O.S.A.No.222/2016
R3 to R5 - Arbitrators in O.S.A.No.210 of 2016
R2 to R4 - Arbitrators in O.S.A.No.222 of 2016
COMMON JUDGMENT
(Judgment of the Court was delivered by P.KALAIYARASAN, J) These two Original Side Appeals, one by Board of Trustees of Chennai Port Trust and another by Kamarajar Port Limited are directed against the order of the learned single Judge of this Court, dated 24.04.2016 in O.P.No.694 of 2007, dismissing the Original Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, thereby confirming the Award dated 12.12.2006 passed by the learned Arbitrators.
2. As these two appeals have arisen out of the orders in O.P.No.694 of 2007, common Judgment is passed.
3. The Chennai Port Trust had entered into an agreement with the first respondent / claimant Joint Venture for construction of breakwaters at the Ennore Port. The scope of the work was to dredge and remove the fine sand from the sea bed, replace / backfill the area with coarser sand and compact the sand so backfilled with Vibro-compaction equipments. The process of compaction was to use a vibrator installed on a ship / vessel on the replaced sand to make it firm and dense. Thereafter the rocks were to be placed. The breakwaters so constructed would ensure that the Port basin is tranquil and safe for berthing of the operation of the ships berthed in the Port. After the entrustment of the contract, the Port authorities decided to delete the work of compaction. As suggested by the Engineer / consultant, a Pilot Compaction Test (PCT) was conducted and thereafter the deletion of the work of the compaction was recommended.
4. The claimant raised a claim for abortive costs on the ground of late omission of compaction and disruption to rock dumping operations before the Engineer on 22.02.1999. The claimant also issued notice of dispute on the employer claiming mobilisation and demobilisation charges and costs of Pilot Compaction Test. The Engineer rejected all the claims.
5. The claimant made a claim before the Dispute Review Board in terms of Clause 67.1 of the Contract. The Dispute Review Board recommended (a) Rs.2.15 crores towards mobilisation and demobilisation charges; (b) Rs.3 crores towards abortive costs; and (c) Rs.1.6 crores towards carrying out Pilot Compaction Test. However, the Dispute Review Board rejected the claim for disruption of rock dumping operations and primary compaction. Both the claimant and the Port Trust rejected the recommendation of the Dispute Review Board and the dispute was referred to the Arbitral Tribunal under Clause 67.3 of the Contract.
6. The respondents 2 to 4 herein as Arbitrators passed the Award, dated 12.12.2006 awarding (a) 2.15 crores towards Mobilisation / Demobilisation; (b) Rs.4.03 crores towards abortive costs; and (c) 0.967 crores towards Pilot Compaction Test.
7. During the pendency of the Arbitration, the Chennai Port Trust as statutory authority constituted under the Major Port Trusts Act, 1963 entered into a Memorandum of Understanding, dated 30.03.2002 with Ennore Port Limited, whereby all the assets and liabilities relating to Ennore Port have devolved upon Ennore Port Ltd. Pursuant to the above Memorandum of Understanding, Chennai Port Trust filed an application before the Arbitral Tribunal for impleadment of Ennore Port Ltd., as it became the successor in interest. Thus, Ennore Port Ltd., became party as the successor in interest in the place of Chennai Port Trust.
8. Challenging the Award, Ennore Port Ltd., filed the Original Petition under Section 34 of the Arbitration and Conciliation Act, 1996 mainly on the ground that the learned Arbitrators travelled beyond their jurisdiction and the Award is not in terms of the contract. The claimant contended before the learned single Judge about the locus standi of the petitioner in filing the petition as the petitioner was not party to the contract and further contended that the Award was passed in terms of the contract and interference under Section 34 of the Act is not required.
9. The learned single Judge after analysing the various clauses of the contract, provisions of contract Act and divergent contentions, dismissed the O.P by confirming the Award. Aggrieved by the order of the learned single Judge, the original contractor, Chennai Port Trust as well as the successor in interest, Ennore Port Ltd., filed these two appeals.
10. The learned Additional Solicitor General appearing for the appellant in O.S.A.No.210 of 2016 mainly contends that as per Clause 11 of the Memorandum of Understanding, the Ennore Port Ltd., shall be the successor of the Chennai Port Trust for the agreements entered into between the Chennai Port Trust and other agencies for executing the coal project and the Ennore Port shall be the successor to the Chennai Port Trust for the disputes pending in the DRB / Arbitration / Courts relating to the Ennore Coal Port project and the Ennore Port Ltd., shall take over all the disputes relating to the Ennore Coal Port project and therefore, the appellant / Chennai Port Trust is not liable.
11. The learned counsel appearing for the appellant in O.S.A.No.222 of 2016 contends that the impugned Judgment of the learned single Judge was delivered after inordinate delay of almost 7 years is against public policy and is liable to be set aside. It is further contended that the Award is contrary to the terms of the contract dealing with matters outside the scope of reference, evidence, facts and law and it is in conflict with the fundamental Public Policy of India. There was no provision in the contract for claiming abortive costs and yet the learned single Judge upheld the Award for abortive costs passed by the learned Arbitrators. As far as mobilisation / demobilisation charges, the Arbitrators awarded the amount based on rates mentioned in a deleted clause in the contract, which is not in accordance with the contract. Further, the learned Arbitrators ignored the material facts and awarded compensation under various heads and therefore, the Award of the learned Arbitrators is to be set aside.
12. The learned Senior counsel appearing for the claimant (HCC VAN OORD JOINT VENTURE) per contra contends that as per Clause 52.1 of the contract, the first respondent is entitled to claim charges on variation of the contract and due to delay on the part of the Port Trust, the equipments hired by the first respondent were kept idle and therefore, the Award passed by the learned Arbitrators is well within the terms of the contract. The learned single Judge after considering the entire facts has rightly dismissed the O.P and the appeals are to be dismissed.
13. The claimant argued that the appellant in O.S.A.No.222 of 2016 has no locus standi in filing the appeal. The appellant, Ennore Port Ltd., has got every locus standi as the successor in interest. No doubt, Kamarajar Port Ltd., (Formerly known as Ennore Port Ltd.,) was not a party to the contract at the time of execution of contract. Chennai Port Trust constituted under the Major Port Trusts Act, 1963 entered into Memorandum of Understanding with Ennore Port Ltd. and under Clause 11, it was named as successor in interest to the Chennai Port Trust for the disputes pending in the DRB / Arbitration / Courts relating to the Ennore Coal Port Project. As per the Memorandum of Understanding, dated 30.03.2002, Ennore Port Ltd., took over the port and became successor in interest. Even the definition clauses for employer and contractor in the contract include legal successor in title to such person. Therefore, Kamarajar Port Ltd., (Formerly known as Ennore Port Ltd., ) has locus standi to file the appeal and the Chennai Port Trust (appellant in O.S.A.No.210 of 2016) is no more responsible or liable under the contract.
14. The learned counsel appearing for the appellant in O.S.A.No.222 of 2016 argued that the learned single Judge pronounced the orders about 7 years after hearing the argument and reserving for orders and therefore, on that ground alone the orders is liable to be set aside as it is against public policy.
15. The learned counsel cited the Judgment of Hon'ble Supreme Court in Anil Rai v. State of Bihar reported in (2001) 7 SCC 318. In the Judgment, the Hon'ble Supreme Court held that (i) If the judgment is not pronounced within three months from the date of reserving it, any of the parties in the case is permitted to file an application in the High Court with a prayer for early Judgment and such application shall be listed before the Bench concerned within two days and (ii) If the Judgment for any reason is not pronounced within a period of six months, any of the parties of the said lis shall be entitled to move an application before the Chief Justice of the High Court with a prayer to withdraw the said case and to make it over to any other Bench for fresh arguments.
16. Here in this case, though the appellant alleges that the Judgment was pronounced 7 years after reserving for orders, he has neither filed any application before the concerned Judge or moved the Chief Justice with a prayer to withdraw the case and make over to any other Bench for fresh arguments. In the absence of any such move on the side of the appellant, the above argument of the learned counsel appearing for the appellant is sans merit.
17. The main argument of the appellant is that the learned Arbitrators went beyond their jurisdiction and the Award has not been passed in terms of the contract. Further, it is contended that the decision of the learned Arbitrators is not on the basis of the material placed before them. Thus, according to the appellant the Award is against the public policy and the same is not in terms of the contract.
18. The learned counsel appearing for the appellant cited the following Judgments :
1. ONGC Ltd., v. Western GECO International Ltd., (2014) 9 SCC 263
2. Continental Construction Co., Ltd., v. State of M.P, (1988) 3 SCC 82
3. Associated Engineering Co., v. Govt. of A.P, (1991) 4SCC 93
4. ONGC Ltd., v Saw Pipes Ltd., (2003) 5 SCC 705
5. ONGC Ltd., v. Garware Shipping Corpn., Ltd., (2007) 13 SCC 434
19. The Hon'ble Supreme Court in the above Judgments held the following principles of law :
"(i) The award could be set aside if it is contrary to
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal."
"(ii) As per Section 34 (2) (b) (ii) of the Arbitration and Conciliation Act, 1996, an Arbitral Award may be set aside by the Court if the arbitral award is in conflict with the public policy of India. It is trite law that fundamental policy of Indian Law consists three distinct and fundamental juristic principles namely (1) Judicial approach; (2) Audi Alteram partem and (3) perversity."
"(iii) The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it."
"(iv) The result is - if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under Section 34. However, such failure of procedure should be patent affecting the rights of the parties."
20. Bearing the above principles in mind, let this Court analyse the contention of the appellant.
21. There is no dispute that the Chennai Port Trust entrusted the contract of construction of two breakwaters at Ennore Port to the claimant. The contract provided for the replacement of the sand over the area on which the breakwaters has to be constructed. The claimant was to dredge the sand / soil and replace / backfill with coarser sand and thereafter compact the backfilled area by vibro-compaction method. The approximate cost of the work entrusted was about Rs.233 crores. In the course of execution of the contract, the Chennai Port Trust decided to delete the work of compaction of backfill from the contract and it issued variation order. The claimant made a claim towards abortive costs, Pilot Compaction Test already conducted and for mobilisation and demobilisation of equipments etc.
22. The relevant clause under the contract is as follows :
"Alterations, Additions and Omissions 51.1 - Variations - The Engineer shall make any variation of the form, quality or quantity of the works or any part there of that may, in his opinion, be necessary and for that purpose, or if for any other reason it shall, in his opinion, be appropriate, he shall have the authority to instruct the Contractor to do and the Contractor shall do any of the following :
(a) increase or decrease the quantity of any work included in the Contract.
(b) Omit any such work (but not if the omitted work is to be carried out by the Employer or by another Contractor),
(c) change the character or quality or kind of any such work,
(d) change the levels, lines, position and dimensions of any part of the works,
(e) execute additional work of any kind necessary for the completion of the works,
(f) change any specified sequence or timing of construction of any part of the works."
Thus as per Clause 51, the Port Trust have the authority to instruct the contractor to delete certain work or to add certain work or even to change the character or quality or any kind of any such work.
23. The Contract was entered into on 22.08.1997. Variation order under Clause 51 is dated 24.11.1998. The claimant also accepted the variation order. Therefore, on issuance of variation order, the earlier contract has been altered by deletion and addition of certain work items and it falls under Section 62 of the Contract Act, 1872. The deleted work items as per variation order are (i) Mobilisation of equipment and vessels required for compaction of fill in dredged trenches (ii) De-mobilisation of equipment and vessels required for compaction of fill in dredged trenches and other two compaction of placed sand fill.
24. The claimant made a claim for the work already done and the actual loss the claimant sustained due to mobilisation and demobilisation of equipments and idling the equipments and vessels till the variation of the contract. Here the claimant has not made the claim based on damages for breach of contract.
25. As rightly pointed out by the learned counsel appearing for the appellant, there is no clause in the contract to claim abortive costs. However, in common law, a person who has done some work pursuant to the agreement has to be reimbursed for that work. As per the Trade usage, actual expenses or cost incurred by a person towards a work as per contract is to be reimbursed.
26. As far as mobilisation and demobilisation of compaction vessel, plant and equipment, the learned Arbitrators after analysing the materials found that two items of equipments were included in the monthly statement for the work carried out up to end of August 1998. They also found that the Engineer certified for full payment for those items and the same was deleted after 10 months. Further, it is stated in the Award that Engineer during the DRB proceedings confirmed that the vessel and compaction equipment conformed in all respects with information contained in the Method Statement of the claimant. The Arbitral Tribunal also studied the relevant specifications and drawings of the vessel Jan-Steen showing the major dimensions and displacements etc. After getting satisfied with the materials, the learned Arbitrators awarded for mobilisation and for demobilisation. They also found that the amount agreed by the parties was deleted by the Engineer from interim certificate. They also found that the vessel John Steen was a much larger vessel compared to one proposed in the contract. The Pilot Compaction Test carried out by the John Steen was found to be satisfactory by the Engineer. It is also observed that due to sudden deletion of compaction after the equipment and vessel were mobilised at site, the claimant had to demobilise the vessel and equipments and had to keep them idle. Though the claimant made a claim toward idle time costs for 116 days for John Steen, the Tribunal considering the fact that the vessel belongs to the sister concern, the fact that though they placed on record the Charter Party Agreement and the invoices towards the same they have not produced for payment to the owners, awarded only 60% at the charter rates. Similarly, for vibro-core equipment, claim was restricted to 50%, for crane only for 5 days idleness and 60% for the purchased equipment.
Towards Pilot Compaction Test, the learned Arbitrators found that the claimant carried out the Pilot Compaction Test to check the performance of the compaction equipment as instructed by the Engineer, vide letter dated 20.07.1998 and taking the valuation of the Engineer and the claim of the claimant, awarded Rs.96,73,511/-.
27. The Tribunal after considering the rival submissions, came to the conclusion that payment of escalation is admissible as per the contract. It is well settled that contractors claim towards excess expenditure incurred due to the price rise could not be turned down on the ground of absence of price escalation clause in that regard in the contract.
28. Towards the rate of interest also, the Tribunal awarded 9% considering the fact that most of the expenditure has been incurred abroad, where the interest rates are quite low.
29. Thus for the work already done and for mobilisation and demobilisation of the equipments and idling the equipments, the claimant made a claim and the learned Arbitrators awarded the claim after analysing the materials as aforesaid.
30. As rightly pointed out by the learned single Judge, there is no breach of contract and the claimant is not entitled to any compensation under Section 73 or 74 of the Contract Act. As pointed out earlier with regard to work done by way of spending amount, the claimant is entitled to get reimbursement of the same from the Ennore Port Ltd. It is also pertinent to note that such entitlement is also supported by the latin maxim : Ex qua persona quis lucrum capit - ejus factum prestare debet - He who derives advantage from any one should bear that person's obligations, or make good his deeds. There is also another latin maxim : Nemo debet ex alieno damno lucrari - No one should be enriched out of the loss or damage sustained by another. Under Section 28(3) of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal while making an award take into account the terms of the contract and trade usages applicable to the transaction. Thus as per the trade usages applicable to the transaction, the claimant is entitled to claim the amount spent towards execution of the contract till the issuance of the variation order. Thus, the Arbitral Tribunal has rightly passed the award as per the trade usages applicable to the transaction and there is no patent illegality and the Award is also not contrary to the public policy of India.
31. For the aforesaid reasons, the learned single Judge has rightly dismissed the Original Petition. It is suffice to observe that the appellant in O.S.A.No.210 of 2016 is not liable under the contract and the appellant in O.S.A.No.222 of 2016 as successor in interest is only liable.
With the above observations, both the Original Side Appeals are dismissed. No costs. Consequently, connected miscellaneous petitions are also dismissed.
(A.S.,J.) (P.K.,J) 30-11-2016 Index : Yes tsvn A.SELVAM,J.
AND P.KALAIYARASAN,J.
tsvn
Pre-Delivery Judgment in
O.S.A.Nos.210 and 222 of 2016
30-11-2016
http://www.judis.nic.in