Bangalore District Court
Bharath Heavy Electricals Limited vs M/S Eara Infra Engineering Ltd on 4 March, 2022
1 Com.A.S.No.247/2018
IN THE COURT OF THE LXXXVIII ADDL. CITY CIVIL &
SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT):
BENGALURU CITY. (CCH-89)
Present: Sri. P.J. SOMASHEKARA, B.A., LL.M,
LXXXVIII Addl. City Civil & Sessions Judge
Bengaluru City.
Dated this the 4th day of March 2022
Com.A.S.No.247/2018
Petitioners/: Bharath Heavy Electricals Limited.
Plaintiffs Industrial Systems Group,
Having its office at P.B. No.1249,
Opp: Indian Institute of Science,
Malleshwaram, Bengaluru - 12.
Rep. by its Addl. General Manager(HR),
Mr. H.V.M. Murthy.
(By Sri. Y.M.S./M.B.A, Advocate)
-vs-
Respondent/: 1. M/s Eara Infra Engineering Ltd.,
Defendant Formerly known as M/s Era Construction
(India) Limited., Having its head office
at C-56/41, Sector 62, Noida,
Uttar Pradesh - 201 303, Rep. by its
Interim Resolution Professional
Mr. Rajiv Chakraborthy, having office
at No.12, Sukhdev Vihar, 1st Floor,
New Delhi - 110 025.
2. Hon'ble Mr. Justice R. Gururajan (Retd.),
Sole Arbitrator, # 504, Chitrapur
Apartments, 15th Cross, Malleshwaram,
Bengaluru - 560 055.
(By Sri. M.P., Advocate)
2 Com.A.S.No.247/2018
JUDGMENT
This is a suit filed by the plaintiff against the defendants under Sec.34 of the Arbitration and Conciliation Act and sought for to set aside the arbitral award dated 28.07.2018 as modified the order dated 08.09.2018 passed by the arbitrator. Allow its claim as per the statement of defence and counter claim filed before the arbitrator.
2. Nutshell of the plaint are as under:
The Plaintiff in its plaint has alleged that who is a Government of India undertaking which was incorporated on 30.11.1964 and he is an integrated power plant equipment manufacturer and largest company of its kind in India engaged in design engineering, manufacture, construction, testing, commissioning and servicing of a wide range of products and services for core sectors of the economy such as power, transmission, industry, transportation, renewable energy, oil and gas and defence etc., and awarded the work for setting up a power plant with a capacity of 1x500 MW Ukai thermal power plant - extension unit 6 by the Gujarat State Electricity Corporation Ltd., design and engineering of various systems, manufacture, fabricate, assemble, shop testing, packing and forwarding equipments/ systems for projects on EPC basis and 3 Com.A.S.No.247/2018 transportation of materials form manufacturer's works/ place of dispatch to UKAI site, the receipt, unloading and safe storage of materials at site, preservation, material handling, MCE Insurance, site fabrication/ assembly, erection, testing, commissioning, reliability run, conducting PG tests and project management for various equipments/ systems included for supply on EPC basis and civil works which includes collection of site related date, conducting site investigation, design and engineering, preparation of all design, construction and fabrication drawings, supply and storage of structural steel, reinforcement steel, cement etc., construction of all foundations, construction of plant and buildings, fabrication, erection and alignment of structural work and testing where necessary on EPC basis and the total order value of the project was Rs.1950.00 crores. The total duration of the contract was 40 months from zero date i.e. 06.10.2007. So had issued a open tender through newspaper, inviting tenders for sub-contracting a portion of work awarded by GSECL vide enquiry No.88/08/6024/AKS dated 24.10.2008 inviting offers from the prospective bidders for civil, architectural and structural steel works for coal handling plant and ash handling plants. In respect of the said tender, the 1st defendant emerged as the successful bidder and the final negotiated price of the 1 st 4 Com.A.S.No.247/2018 defendant was Rs.49,50,65,466.46/-. The final price was inclusive of all taxes like works contract tax under VAT Act, duties, charges etc., and service tax extra on actual basis.
3. The plaintiff in its plaint has further alleged that the contract price was firm during the entire period of the project and was on a unit rate basis and agreed by the parties in terms of clause No.2 of Annexure-I of commercial terms and conditions. The contract between them consisting of the work order dated 27.12.2008. In terms of the agreement in between them final scope of work which was entrusted to the 1st defendant includes civil architectural works and structural steel works as detailed in the tender. The offer which submitted by the 1 st defendant had released the work order bearing No.88/8/0026/AKS dated 27.12.2008 with the contract duration being 20 months from the date of the work order with a contract value of Rs.49,50,65,466.46/-. The 1st defendant was found wanting in the performance of its obligations and never deployed the requisite man power that was required to complete its obligation within the time frame agreed upon the work order. The 1 st defendant failed to deploy the required manpower and machinery and was lagging behind the agreed time schedule for completion of the works and the 1st defendant had approached for issue of Form V for 5 Com.A.S.No.247/2018 obtaining a labour license and obtained a labour license for deploying 300 contract labourers. However, the 1 st defendant in its letter dated 02.05.2009 requested for permission to issue gate passes to nearly 74 labourers and submitted a workmen's compensation policy vide its letter dated 19.05.2009 and obtained insurance for nearly 100 workmen and the 1 st defendant failed to deploy the required manpower for timely completion of the work. Even after lapse of 2 years from the date on which the work was awarded failed to deploy adequate manpower at the site for which the letter dated 20.02.2010, 20.08.2010, 12.01.2011 and 17.05.2011 has been sent to the 1st defendant, requesting the 1st defendant to deploy adequate manpower at the site and once again calling upon the defendant to deploy the required manpower to ensure completion of the project, despite the slow progress of the work owning to inadequate man power deployment issued amendment No.1 dated 09.10.2010 to the work order dated 27.12.2008 at the request of the 1st defendant and extended the schedule date of completion of work from 26.08.2010 to 20.06.2011 and despite of the said extension did not improve the progress of the work at the site, thereby letter has been issued on 25.11.2010 and 12.01.2011 and pointed out the delay in progress of the work, because of insufficient man 6 Com.A.S.No.247/2018 power on the site and the letters have been acknowledged by the representative of the 1st defendant and extended the contract schedule 3 times at the request of the 1st defendant, even though reasons for delay in execution of the work was solely attributable to the 1st defendant and the contract schedule was extended vide amendment No.1 to 4 dated 09.10.2010, 28.09.2011, 28.05.2012 and 10.06.2013 and the last amendment number dated 10.06.2013. The contract duration was extended up to 30.06.2013.
4. The plaintiff in its plaint has further alleged the work which was supposed to be completed by the 1st defendant on or before 26.08.2010 in terms of the work order dated 27.12.2008 extended as last as 30.06.2013, but in spite of the extension, the 1st defendant did not evince any interest in completion of the work which entrusted. Thereby once again brought to the notice of the 1st defendant for the delay of execution of the work during the meeting which held in between on 23.12.2011 and 24.12.2011 and calling upon the 1st defendant to complete the civil works by increasing manpower and delay in execution of the work was solely attributable to the 1st defendant and the 1st defendant has never demonstrated the required seriousness in the execution of the project and whole project has led to several 7 Com.A.S.No.247/2018 labour problems at site and 43 labourers of the 1st defendant had even approached the labour court at Surat for non payment of wages, for which to engage an advocate to defend its position and non payment of wages by the 1st defendant to its labourers was in fact a major issue which led to delay in completion of the work and the 1st defendant was also in financial crisis, that is also one of the reason for the delay in completion of the work and the defendant No.1 has failed to perform its obligations and the 1st defendant in its letter dated 06.11.2012 expressed difficulty in arranging the finance for paying its sub-vendors and requested to make payment of Rs.5 lakhs to M/s Gayathri Hardware and Plywood Centre and extended the duration of the contract but the 1st defendant was not able to fulfill its obligation, thereby issued a warning letter dated 20.09.2012 to complete certain critical work within 7 days from the date of receipt of the letter, despite repeated extension and opportunities, the 1st defendant did not complete the project within a stipulated time and failed to fulfill its obligation even during extended period of 54 months as against the original contract period of 20 months and the 1st defendant was facing financial crisis resulting in non payment of statutory wages of labours, non payment of dues of its sub- vendors and the 1st defendant had defaulted in payment of 8 Com.A.S.No.247/2018 wages to its labours and 43 labours of the 1st defendant had instituted a proceedings before the labour commissioner for seeking immediate payment of their wages and received the notice on 20.08.2018 under Sec.91 of the criminal procedure to appear before the CBI and to produce the documents relating to the contract which is the subject matter of the application.
5. The plaintiff in its plaint has further alleged that he has expand significant amount of time and recourse to tackle the notice which was sent by the CBI owning to the shortcoming of 1 st defendant and several cases have financial mishandling, the 1st defendant is now facing insolvency proceedings wherein interim resolution of professional has been appointed in respect of the 1 st defendant, thereby invoked the risk and cost clause of the contract between them and issued a letter dated 22.01.2014 informing the 1st defendant that the additional cost incurred in getting the balance work done through alternative supplier/ contractor and the departmental charges therein liquidated damages and other legal expenses arising out of the closure of the contract will be charged to the account of the 1 st defendant and the 1st defendant is liable to pay the same when demanded and as on the date of expiry of the contract, that is on 30.06.2013 the 1st defendant had completed the works amounting to 9 Com.A.S.No.247/2018 Rs.26,62,20,890.50/- against the contract value of Rs.49,50,65,466.46/- and estimated the balance work to be awarded alternative vendors as Rs.5,30,25,000/- which was within the scope of the work of the 1st defendant, accordingly notice inviting the tender was released wherein M/s Choudhary Infra Engineering Projects Pvt. Ltd., has emerged as L1 bidder on whom the work order dated 20.06.2014 was relied with the contract vide of Rs.8,84,16,225/- and the 1 st defendant fully aware about invoking of arbitration for recovery of all amounts due to it. The 1st defendant instead of invoking the arbitration making a frivolous claims in terms of the notice dated 06.09.2016 and the invocation of arbitration by the 1 st defendant was with an intention to delay the adjudication of its claims and the 1 st defendant resorted to making imaginary claims with a view to overcome the genuine claims and issued a notice dated 13.10.2016 and appointed the sole arbitrator for adjudication of the disputes between them and the 1st defendant had in all made a total 13 claims its against in its statement of claim and shifted entire blame contending and he has failure to fulfill its obligation and sought for declaration to that effect on the ground who has breached the work order and illegally terminated the work order and amended claim has been filed by the 1 st defendant and filed 10 Com.A.S.No.247/2018 the amendment statement of defence and counter claim, rejoinder filed by the 1st defendant and reply to the rejoinder and filed the written statement before the sole arbitrator and the sole arbitrator has held that he was not in breach of the work order, in fact it was the 1st defendant that was in breach of the work order and failed to fulfill its obligations and rejected all the baseless monetary claim of the 1st defendant and the monetary claim of the 1st defendant which were allowed by the sole arbitrator where those for which had itself given a suitable deduction in its statement of defence and counter claim and the 1st defendant had frivolously and without basis initiated the arbitration proceedings and it was its specific case in the statement of defence and the counter claim that the arbitration in between them is one for recovery of the amount illegally due from the 1 st defendant and the dispute must devolve solely its counter claim and its counter claim has been allowed in part and rejected the large part of the counter claim on erroneous and illegal reasons without giving due weightage to the facts and documents on record and arbitrator erroneously awarded excessive amount to the 1st defendant as regards its claim of non payment of running account bills and the sole arbitrator has failed to appreciate the facts on hand and delivered an erroneous award which is not 11 Com.A.S.No.247/2018 sustainable and is liable to be set aside to the extent which it is challenged, thereby filed the instant suit for the following;
GROUNDS a. The award in so for as it relates to the finding as regard to the payment sum of Rs.48,180 lakhs towards alleged unrealized amount of various certified RA bills, a sum of Rs.133.41 lakhs towards release of retention money at 5% from RA bills, a sum of Rs.2,47,03,241/- towards the claim of bank guarantee, a sum of Rs.2 lakhs towards refund of earnest money deposit, payment of interest @ 10% p.a. and upon failure to pay amounts within 2 months, payment of interest @ 12% p.a. to the 1 st defendant are not sustainable and liable to be set aside in the light of the principles emerging from Sec.34 of the Arbitration and Conciliation Act. b. The award which passed by the arbitrator rejecting its total counter claim of Rs.8,84,16,225/- out of its total claim amounting to Rs.10,67,32,119.93/- is not sustainable and liable to be set aside.
c. The sole arbitrator has not taken into consideration not only oral and documentary evidence which on record, but the arbitrator without considering the same passed the award which is not sustainable and the sole arbitrator has not taken into consideration for non-payment of RA bills nor taken into admission of the R.W.1 since the R.W.1 clearly stated that the bills did not have the required supporting documents and therefore the same were returned to the 1 st defendant for being submitted along with required supporting documents, which was not taken into consideration by the sole arbitrator.
12 Com.A.S.No.247/2018d. The sole arbitrator has not taken into consideration that the 1st defendant in failing to submit RA bills with the supporting documents required in terms of the contract in between them and if at all the 1 st defendant had executed the work, the same would have been entered in the measurement book and would have obtained the certification by the engineer in charge at site which was not forthcoming before the sole arbitrator, but it was not taken into consideration at the time of passing the award. e. The sole arbitrator instead of recognizing and giving effect to the terms of the contract between the parties proceeded to allow the 1 st defendant's claim on the sole basis that the R.W.1 has admitted his signatures on Ex.C.51, 52 and 53, but the sole arbitrator had not even ventured into enquiring whether the RA bills were in conformity with the terms of the contract between the parties and has not given any finding on the RA bills and ignored the terms of the contract between the parties and failed to take note of the principles that once of proving the claim lies with the person who makes it.
f. The sole arbitrator failed to appreciate the evidence on record that the defendant had not made any attempt to demonstrate that the RA bills are in conformity with the terms of the contract between the parties and the entire claim which adjudicated based on the photocopies of the document which were not at all proved in evidence and the sole arbitrator had approached the claim as led to a complete disregard of the terms of the contract which is totally illegal claim which awarded in favour of the 1st defendant.
g. The sole arbitrator has failed to recognize the clear its defence and never received the RA bills and the 13 Com.A.S.No.247/2018 1st defendant had never executed the work which alleged to be covered by the RA bills No.54 and 55, but the arbitrator failed to notice of the said fact and in the absence of certification, the defendant No.1 is not entitled the amount of the RA bills and the same was not taken into consideration by the sole arbitrator.
h. The sole arbitrator has not taken into consideration about the RA bills which submitted by the 1 st defendant to know whether the RA bills are supporting the documents required in terms of the contract between the parties, but the sole arbitrator has not taken into consideration, the award which passed is contrary to the terms of the contract in between the parties and the award a sum of Rs.48.180 lakhs towards unpaid RA bills No.53, 54, and 55 is unreasonable, illegal, against the terms of the contract.
I. The sole arbitrator awarded the interest on the claim @ 10%, if the amount is paid within 2 months and at 12% if the amount is paid thereafter is unreasonable, illegal and cannot be sustained. j. The sole arbitrator has not taken into consideration about the letters which are written to the 1 st defendant to deploy the required manpower and complete the work at the earliest stage. Even though the 1st defendant has failed to complete the work at the earlier stage which was not taken into consideration by the arbitrator.
k. The sole arbitrator has not taken into consideration about the obligation of the 1st defendant to complete the project nor consider about non completion of the work on the site nor consider that the defendant failed to complete the work under the contract. 14 Com.A.S.No.247/2018 l. The sole arbitrator has not taken into its claim in spite of materials placed on record nor taken into consideration about the payment which paid to the 1st defendant, though the defendant had not taken up any defence that the amount shown against each of the alternate vendors were not actually paid to them. m. The sole arbitrator has committed grave error in holding that no acceptable evidence has been placed to show payment of amounts to M/s Choudary Infra and when the sole arbitrator categorically held that the defendant No.1 had breached the contract has to award the liquidity damages, therefore the award which passed is illegal and same is liable to be set aside.
n. The sole arbitrator failed to appreciate in its statement of defence to the counter claim, since the defendant has nowhere alleged that he has not paid any payment and failed to draw the conclusions which are necessitated by the material available on record and drawn the conclusions which are highly unreasonable which is contrary to the public policy, patently illegal suffers from want of judicial approach. o. The sole arbitrator has not taken into consideration about the frivolous claim which raised and failed to draw the conclusions which are warranted by the facts and circumstances of the case.
p. The sole arbitrator while dealing the claim has held that the claim as regards to liquidity damages does not find a mention in the notice dated 13.10.2016 and 06.09.2016 knowing fully well that as per the contract between the parties, no prior notice is required and on erroneous reasoning and ignoring the aspects on record, the claim as regards to the 15 Com.A.S.No.247/2018 liquidity damages would not be arbitral for the want of notice in writing prior to intimation of arbitration and the finding which given by the sole arbitrator is erroneous both on facts and in law liable to be set aside.
q. The sole arbitrator has failed to appreciate the position that actual loss has been caused as a result of the delay in execution of the work and failure to complete the work by the 1st defendant and failed to take notice of the fact that several letters and communications were addressed to the 1st defendant and the findings as regards to want of prior notice is contrary to the record of the case and cannot be sustained.
r. The sole arbitrator has not taken into consideration about the period of work and non completion of the work by the 1st defendant which awarded.
s. The award which passed by the sole arbitrator itself recognizes its right to adjust the amount towards its counter claim and failed to recognize the actual position as regards its claim and erred in awarding the amount towards retention money and failed to draw the conclusion that absolutely no amounts were payable to the 1st defendant.
t. The sole arbitrator has failed to take note of the account, the factual position and the principles emerging from Sec.31(a) of the Arbitration and Conciliation Act and erred in directing the parties to bear their own costs.
6. The cause of action for the instant suit was arose on 28.07.2018 when the award passed by the sole arbitrator and on 08.09.2018 when the order was passed by the sole arbitrator 16 Com.A.S.No.247/2018 under Sec.33 of the Arbitration and Conciliation Act making certain corrections to the award dated 28.07.2018. The arbitration agreement between them specifies the place of arbitration is Bengaluru and prays for allow the suit.
7. In response of the notice, the respondent No.1 has been appeared through its counsel and the respondent No.2 being the sole arbitrator, the respondent No.1 in its objection statement has alleged the application which filed is not maintainable in law or on facts and the plaintiff has filed the instant suit under Sec.34 of the Arbitration and Conciliation Act which is not maintainable for non-compliance of Sec.34(5) of the Arbitration and Conciliation Act. The scope of Sec.34 is very limited and the court can only set aside an award if it is contrary to its provisions and the court while exercising the powers under Sec.34 of the Arbitration and Conciliation Act is not sitting in appeal over the impugned award, but he is trying to assess if there are any grounds as set out under Sec.34 of the Arbitration and Conciliation Act, that warrants any interference of the court in setting aside the award and the plaintiff in the instant suit has sought for re-appreciate and reassess the evidence on record which is not permissible under law, application under Sec.34 of the Arbitration and Conciliation Act can only be entertained if the award is deficient as per Sec.34 17 Com.A.S.No.247/2018 of the Arbitration and Conciliation Act and not otherwise. So question of re-appreciation nor reassess as sought by the plaintiff does not arise which are not the grounds to interference of this court to set aside the award and the plaintiff has categorically failed to raise the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act and all the grounds which are raised by the plaintiff are one a pure question of fact that does not indicate any action by the arbitrator having acted contrary to Sec.34(2)(a)(i to iv) or under Sec.34(2)(b)(i)(ii) of the Arbitration and Conciliation Act 1996 and he has already filed the Commercial A.S.No.250/2018 which is pending on this court to set aside the award on the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act. On 24.10.2008 floated a tender vide enquiry order reference No.88/08/6024/AKS for contractors fulfilling requirements for civil structural and architectural and steel works as detailed in the tender documents. In furtherance of the said enquiry, order has submitted a bid on 24.11.2008 vide its letter dated EIIEL/HO/CONT/BHEL/2008/13350/14496 which was accepted by the plaintiff. The plaintiff accordingly upon accepting the bid, issued a work order on 27.12.2008 and the entire work had to be completed within 20 months from the date of the work order and 18 Com.A.S.No.247/2018 the total value of work order was of Rs.49,50,65,466.46/- on the site unit rate basis and with an intention to complete the project within the stipulated period has mobilized entire men and machinery in time, however due to the reasons solely attributed to the plaintiff, the work could not be completed within the stipulated period of 20 months.
8. The defendant in its objection statement has alleged the plaintiff was very well aware that the delay in completion of the work was due to its fault and on account of the constraints faced in completing the work and being not a breach, the plaintiff went head to allow its request to extend the time to complete the works as per the order dated 30.06.2013 and it was made through various amendments, the 1st amendment dated 09.10.2010 from 26.08.2010 to 30.06.2011, the 2nd amendment dated 28.09.2011 from 30.06.2011 to 31.03.2012, the 3 rd amendment dated 28.05.2012 from 31.03.2012 to 31.12.2012 and the 4th amendment dated 10.06.2013 from 31.12.2012 to 30.06.2013 and its vide letter bearing No.EIEIL/TAPI/1311-13- 14/56 dated 14.12.2013 applied for further extension of time and same has never been replied by the plaintiff, since the initial phase of the commencement of the project work faced various hindrances and constraints due to non compliance of the work 19 Com.A.S.No.247/2018 order terms by the plaintiff. The plaintiff allotted the project areas part wise and had to face constraints to work due to heavy traffic on the road due to the existing plant, scrap materials etc. The plaintiff who was bound to supply structural reinforced steel in straight bars supplied coiled bars which was not sustainable. So had put into its effort to straighten the steel coils into straight reinforcement bars in order to make use of the same and the plaintiff failed to appreciate its fault and did not adequate extend the time which was lost in straightening, on numerous occasions communicated the same to the plaintiff through various letter correspondences, but the plaintiff did not make any step on this regard.
9. The defendant in its objection statement has further alleged that as per clause 3.0 of the work order was eligible to pay monthly running account bills known as RA bills to a maximum of 95% of the value of the work actually executed on site on the total civil architectural and structural fabrication and erection works, price package as per the payment stages mutually agreed, still failed to clear the 53rd, 54th and 55th RA bills and has been kept pending payment since 20.08.2013, 08.09.2013 and 08.10.2013 respectively. The balance 5% of the final contract value upon the certification by the engineer the 20 Com.A.S.No.247/2018 plaintiff is liable to pay a sum of Rs.133.41 lakhs along with interest. As per sub clause (4) of clause 1 of annexure-1 of the work order dated 27.12.2008, the plaintiff oblige to make payments of the RA bills normally within a period of 30 days of its submission with the measurement book, accordingly submitted 54th and 55th RA bills to the plaintiff on 20.08.2013, 08.09.2013 and 08.10.2013. So the plaintiff was liable to clear the same within a period of 30 days but the plaintiff failed to clear the said dues and to cover up its failure of obligation under the contract and its default went to illegally and arbitrarily without any reason terminated the work order vide its letter dated 22.01.2014, during the execution of the work faced various hindrances like space allotment which were congested during the excavation, leakage of water and bitumen oil from the earth. The material and machinery were damaged and there was a delay in supply of free issue material like structural and reinforcement steel supply of coiled steel, non availability of working fronts and goods for construction drawings on time. The delay due to narrow and heavy traffic approach road and delay in release of due payments and the said delay was solely due to the fault of the plaintiff. The plaintiff on most occasions delayed the payment of RA bills which created a huge financial crunch, despite of the same almost 21 Com.A.S.No.247/2018 completed the project by September 2013 by deploying additional work force and machinery, due to continuous financial crunch on account of the failure of the plaintiff in fulfilling its contractual obligations was put to hardship and was unable to pay the suppliers and vendors. He had completed the execution of most of the project work in compliance with the provisions of the work order and the complete satisfaction of the plaintiff and the plaintiff was also satisfied with the work as he is clearly evident from the letter dated 05.06.2010 bearing No.ISI-07-20-21/ OPS. The detailed drawings and specifications available with the plaintiff engineers ought to have been made available during the execution of the work on site and despite several request and reminders no drawings were made available at its end to pursue or commence the excavation work and the plaintiff failed to deliver the requisite drawings within the time frame enabling the defendant to carry in its work. The drawings produced earlier were unreadable and in the absence of drawing required for excavation could not be initiated. The drawings pertain to the foundation work of the coil handling plant and ash handling plant of the main power house, building layout plan for Unit No.6. The drawings were only received on 16.03.2009, thereby the delay has been caused in commencing the foundation work as a result 22 Com.A.S.No.247/2018 the other works being dependent on the completion of the foundation work were also delayed, thereby again informed to the plaintiff on multiple occasions through various letters and some of them dated 09.08.2010 and 09.07.2011 and the plaintiff taking into consideration of all the aspects admitted the same and extended the period of completion of the project.
10. The defendant No.1 in its objection statement has further alleged that as per the work order has diligently carried out the works right from the commencement to achieve various activities, the 1st excavation work in the area would only be started on 17th March 2009, due to the consequential delay of 80 days on account of the pending decisions by the plaintiff and the plaintiff was not supplied the drawings to commence the work in time, due to the absence of proper drainage system, there was a water lagging the site area and heavy rain also causes further delay in the work as a result the work could not be taken up with full piece. As per the work order, the obligation on the plaintiff to provide GFC drawings as per the agreed schedule as stated in the work order and also to be made available the fronts to carry out the excavation work, but the plaintiff miserably failed in its obligation. On 09.09.2010 issued a letter stating that the GFC drawings and cleared prints for the work execution had not been 23 Com.A.S.No.247/2018 provided and discrepancies were clearly informed to the plaintiff, even after 20 months from the date of work order various fronts and drawings which JNT-3, JNT-1, WTMCC-1, coal stock pile, bottom ash hopper, clinker, grinder, bottom ash conveyor gallery, transfer foundation, pipe rack foundation, ash water pump house, compressor house, grade slab around soils, drive house, pent house, ventilation system, trestles and covered coal conveyor galleries and connecting road were available for execution of the work, thereby apart from the other factors which led in delay in completion of the project works. The water logging caused due to extensive raid made to approach the road unsustainable for the vehicles to reach the work site and draining of the site even though not a part of scope of work agreed carried out the same, despite due to poor drainage facility, some water re-entered the area and had to pump it all out which caused considerable delay and put to hardship while transporting the materials due to bad condition of the approach roads in various areas leading to the work site and effected due to continuous from fire fighting and water pipeline and also faced major troubles due to frequent power cuts without prior intimation.
11. The defendant in its objection statement has further stated that the plaintiff until 2010 had only released drawings for 24 Com.A.S.No.247/2018 the main power houses for sticker, reclaimer were released on 20.04.2009 and further drawings for emergency reclaim hopper were submitted on 09.01.2010, drawings for wagon triflers after revision were submitted on 27.02.2010, drawings for soil foundation were released on 08.05.2011, drawings for junction tower - 5 and junction tower - 5(a)(f) were released on 14.04.2010 and 12.12.2009, drawings pertaining to crusher house released on 09.01.2010 and drawings of bottom ash silo were released on 22.10.2010. The drawings for the entire work under scope had not been issued by the plaintiff on time or in a progressive manner which made it difficult for properly plan the execution of the work, time and again requested the plaintiff to release the drawings of the entire project work and its scope, so that the execution can be planned, but there was no aware and the delayed issuance of GFC drawings in peace men work hampered at site and carried out the work diligently right from the commencement of the project and delays that were caused in completion due to the plaintiff. The plaintiff due to the unilateral and termination of the work order and non settlement of other consequential aspects having no other alternative was forced to invoke the arbitral clause in the work order and seek for settlement of the dispute through the arbitration, thereby 25 Com.A.S.No.247/2018 initiated the arbitral proceedings before the sole arbitrator and has filed the claim petition for which the plaintiff has been appeared and filed its defence along with counter claim and he has filed the rejoinder and the plaintiff has also sought various reliefs and claim and who sought for counter claim and the sole arbitrator passed the award and also passed a modified order of award on 08.09.2018, feeling aggrieved by the said award has filed the instant suit by making false facts in the entire plaint which are faraway from the truth and raised the other objection which are alleged in the objection statement and prays for reject the suit.
12. Heard the arguments on both sides.
13. The points that arise for consideration of this court are as under:
1) Whether the plaintiff has made out the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award?
2) What order?
14. My answer to the above points are as under:
Point No.1: In the Negative;
Point No.2: As per final order, on the following; 26 Com.A.S.No.247/2018
REASONS
15. POINT NO.1: The plaintiff being the respondent and defendant being the claimant before the sole Arbitrator, feeling aggrieved by the award has filed the instant suit on the ground that open tender has been issued through newspapers, inviting tenders for sub-contracting a portion of work awarded by GSECL in its favour dated 24.10.2008. In respect of the open tender, the first defendant being the successful bidder and accepted the same and issued the work order dated 27.12.2008, and the price of the work is of Rs.49,50,65,466.46/- and the said work required to complete on or before 26.08.2010. But the defendant No.1 did not complete the work which was entrusted, thereby at the request of the 1st defendant the work order has been amended in four times for extension of time in spite of the same did not complete the work which entrusted. Thereby, terminated the work which entrusted to the first defendant, since the defendant has breached the work order and failed to fulfill its obligations. Thereby, sole arbitrator has been appointed who passed the award feeling aggrieved by the said award the plaintiff has filed instant suit.
27 Com.A.S.No.247/2018
16. The learned counsel for the plaintiff in his arguments has submitted that the plaintiff is a government of India undertaking which was incorporated on 13.11.1964 and plaintiff was awarded the work for setting up a power plant with a capacity of 1x500 MW Ukai Thermal Power Plant. The plaintiff issued open tender through newspapers inviting tenders for sub-contracting a portion of work awarded by the GSECL to the plaintiff. The first defendant emerged as the successful bidder and the final negotiated price of the first defendant was of Rs.49,50,65,466.46/- and work order has been issued on 27.12.2008 and the work which was entrusted to the first defendant required to complete the work entrusted on or before 26.08.2010 and the obligations on the first defendant to deployed the requisite man power that was required to complete its obligations within the time frame agreed upon under the work order. But the first defendant failed to deploy the required man power and machinery and defendant No.1 has obtained labour license for deploying 300 contract labourers there by the first defendant wrote a letter dated 02.05.2009 to the plaintiff requesting to accord permission to issue gate pass to merely 74 labourers and obtained insurance for merely 100 workmen and failed to deploy the required man power for timely completion of 28 Com.A.S.No.247/2018 the work, even after lapse of 2 years from the date of work order failed to adequate man power at the site, thus, the plaintiff had sent letters to the first defendant to deploy adequate man-power at the site. But, the defendant has deployed only additional 35 labours and despite of the letters and meeting the work which entrusted was slow in progress and the defendant No.1 has requested for extension of time due to some reasons which he was explained in the letters in four times. Accordingly, time has been extended for completion of the work. But, the first defendant did not complete the civil work which entrusted. Thereby, there is no other go except for termination of the work order. Accordingly, work order has been terminated, being left with no other option invoked the risk and cost clause of the contract between the plaintiff and the first defendant and accordingly, issued a letter informing the first defendant that the additional cost which was incurred by the plaintiff in getting the balance work done through alternative contractor and the department charges thereon. The first defendant had completed works amounting to Rs.26,62,20,819.50/- as against the contract value of Rs.49,50,65,466.46/- and estimated the value of the balance work to be awarded to alternate vendor of Rs.5,30,25,000/- which was within the scope of the work of the 29 Com.A.S.No.247/2018 first defendant and inviting the tender and issued a work order dated 20.06.2014 to M/s. Choudari Infra engineering projects Pvt. Ltd., and released with a contract value of Rs.8,84,16,225/-. The defendant well aware that the plaintiff would invoke arbitration against the first defendant for recovery of all amounts due to it, the first defendant invoked the arbitration against the plaintiff and sole arbitrator has been appointed who passed the award though held that the plaintiff was not in breach of the work order and the first defendant was in breach of the work order and failed to fulfill its obligations and rejected large part of the counter claim on erroneous and illegal reasons without considering the materials which placed by the plaintiff. The sole arbitrator has not taken in to consideration about the R.A. bills in terms of the work order dated 27.12.2008 and not taken into consideration about non discharging of the obligation by the first defendant even not taken into consideration that the first defendant had not completed with the contractual conditions and sole arbitrator instead of recognizing and giving effect to the terms of the contract allowed the first defendant claim on the sole basis of the R.A. bills and not recorded any finding regarding the work which alleged to have been completed by the first defendant and the sole arbitrator has not taken into consideration about non 30 Com.A.S.No.247/2018 supporting of certificate along with R.A. bills and the sole arbitrator has committed grave error holding that no acceptable evidence has been produced by the plaintiff to show the work which was entrusted to the another contractor nor the payments and the sole arbitrator has failed to draw the conclusions based on the materials placed on record and the award which passed is against to the public policy, patently illegal and suffers from the want of judicial approach and prays for allow the counter claim of the plaintiff entirety and to reject the claim of the first defendant by setting aside the award which passed by the sole arbitrator and prays for allow the suit.
17. Per contra, the learned counsel for the first defendant in his arguments has not disputed about the work which was entrusted to the first defendant nor its value or for limitation for the work to be completed within 20 months from the date of the work order and total value of the work order of Rs.49,50,65,466.46/- and submitted that the plaintiff was very well aware that the delay in complete of the work was due to its fault and on account of the constrains faced by the first defendant in completing the work and being not a breach and at the request of the first defendant the time was extended through various amendments and the first defendant faced various 31 Com.A.S.No.247/2018 hindrances and constraints due to non compliance of the work order by the plaintiff and the plaintiff was allotted the project areas part wise and the first defendant has faced the problems for the delay of work due to heavy traffic on the road and the plaintiff in terms of the work order has not supplied coiled bars which was suitable because of coiled bars which was not suitable much of the time has been consumed to make use of the same in a proper manner and the first defendant has not released the R.A. bill amount. Though the first defendant has submitted the R.A. bills to the plaintiff and the plaintiff has not cleared the R.A. bill within a period of 30 days and the plaintiff failed to clear the dues and to cover up its failure obligation under the contracts has terminated the work order which is illegal and the first defendant has brought to the notice of the plaintiff about the cause for delay of the work which was accepted by the plaintiff and time to time has been extended and the delay was caused on the part of the plaintiff not on the defendant and the first defendant had completed the execution of most of the project work in terms of the work order and the plaintiff was also satisfied with the work as per the letter dated 05.06.2010 and the plaintiff engineers were not issued a drawings and specifications to the first defendant during the execution of the work on site despite of 32 Com.A.S.No.247/2018 several request and reminders and the plaintiff failed to deliver the requisite drawings within the time frame and the first defendant has diligently carried out the work right from the commencement to achieve various activities. But because of non co-operation from the plaintiff the work has not been completed since the plaintiff miserably failed in its obligation and the plaintiff without considering its obligation in order to overcome for settlement dues has terminated the work order. That is the reason why the first defendant invoked the arbitration clause the award which passed by the sole arbitrator is clear that the plaintiff has avoided payment of R.A. bills illegally realized the bank guarantee amount of Rs.2,47,03,274/- and rejected the claim of the plaintiff. However, has erred in holding that the first defendant is liable to pay sum of Rs.1,83,15,894.93/- to the plaintiff and also erred in holding that the first defendant is liable to pay interest and the first defendant has challenged the award which passed against the plaintiff and rejection of its part claims and prays for dismiss the suit.
18. It is an admitted fact the plaintiff has filed the instant suit challenging the award which passed by the sole arbitrator and also challenged for non considering entirety of its counter claim on the ground that the sole arbitrator has not taken into 33 Com.A.S.No.247/2018 consideration about the oral and documentary evidence placed before the sole arbitrator and granted the majority of the claim of the 1st defendant by allowing its part of the claim. So, before considering the arguments which advanced by the both the counsels and the materials on record, let me know the legal aspects first for the proper appreciation.
1. What is arbitration?
2. When court can interfere with arbitral award?
3. What is the scope of Court's power to interfere with the arbitral award?
4. What are the grounds are required to set aside the award?
5. Setting aside of arbitral award when permissible?
Let me decide one by one for proper appreciation of the materials on record. Thus this court drawn its attention on Sec.2(1)(a) of the Arbitration and Conciliation Act, 1996 which reads like this:
2(1)(a). The definition arbitration means any arbitration whether or not administered by permanent arbitral institution.
Arbitration is a private dispute resolution mechanism agreed upon by the parties. Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties.
Arbitration is a process of settlement extra curses curiae and the parties are at liberty to choose their judge. "The esse visa nce of arbitration without assistance or intervention of the court is settlement of dispute by a 34 Com.A.S.No.247/2018 tribunal of the own choosing of the parties." Law of arbitration aids in implementation of arbitration agreement contract between the parties which remains a private adjudication by a forum consequently chosen by the parties and made on consequential reference. Now let me know when court can interfere with the arbitral award. Thus this court drawn its attention on Sec.34(43) of the Arbitration and Conciliation Act, 1996 which reads like this:
43. Principles of interference with arbitral award:-
The principles of interference with an arbitral award under Sec.34(2) of the Act are as follows:
(1) An award, which is -
(i) contrary to substantive provisions of law; or
(ii) The provisions of Arbitration and Conciliation Act, 1996, or
(ii) against the terms of the respective contract; or
(iv) Patently illegal or
(v) Prejudicial to the rights of the parties; is open to interference by the court under Sec.34(2) of the Act.
(2) 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.35 Com.A.S.No.247/2018
(3) The award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
(4) It is open to the court to consider whether the award is against the speci visa fic terms of the contract and if so interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
So by virtue of the provision which stated above, the court can interfere with the arbitral award in the grounds which mentioned above.
Now let me know what is the scope of Court's power to interfere with the arbitral award? Thus this court drawn its attention on Sec.34(34) of the Arbitration and Conciliation Act which reads like this;
Scope of Court's power to interfere with the arbitral award:
The scope of the interference by the court's in regard to arbitral award is limited. Courts do not sit in appeal over the findings and decision of the arbitrator, nor can it reassess or re- appreciate evidence or examine the sufficiency or otherwise of the evidence.
So by virtue of the provision which stated supra, the scope of interference by the court in regard to the arbitral award is limited scope. The scope of interference under Sec.34 of the Act is limited in view of the judgment of the Hon'ble Supreme Court of 36 Com.A.S.No.247/2018 India which reported in AIR 2003 SC 2629 in between Oil and Natural Gas Corporation Ltd., V/s Shah Pipes Ltd., and in the said judgment, their Lordship held that;
'an award can be set aside if it is contrary to fundamental policy of Indian Law, the interest of India, justice or morality, if it is patently illegal and unfair and unreasonable it shocks the conscience of the court'.
Now let me know what are the grounds are required to set aside the award which passed. Thus this court drawn its attention on Sec.34(18) of the Arbitration and Conciliation Act which reads like this:
18. Grounds to set aside award:- Under the new Act, 1996 misconduct of arbitrator is no ground to set aside an award but court may set aside an award in the following grounds:
(1) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(2) falling such agreement, the composition of arbitral tribunal was not in accordance with the part I of the Act.
(3) if the arbitral proceeding was not in accordance with -
(a) the agreement of the parties.
(b) failing such agreement - the arbitral procedure was not in accordance with part I of the Act. However exception for setting aside 37 Com.A.S.No.247/2018 the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of part I of the Act from which parties cannot derogate;
(c) if the award passed by the arbitral tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
An award can be set aside, if it is against the public policy of India that is to so it is contrary to:
(1) fundamental policy of Indian law, (2) the interest of India, or (3) justice or morality , or (4) if it is patently illegal.
It could be challenged -
(a) as provided under Sec.13(5); and
(b) Sec. 16(6) of the Arbitration and conciliation Act. So the court can set aside the award, if the grounds found which stated supra.
So, if the petitioner is made out the grounds which stated supra, court can set aside the award. Now let me know about the setting aside of arbitral award when permissible. Thus this court drawn its attention on Sec.34(4) of the Arbitration and Conciliation Act, 1996
4. Setting aside of arbitral award when permissible:-
38 Com.A.S.No.247/2018
That the court can set aside the arbitral award under Sec.34(2) of the Arbitration and Conciliation Act if the party making the application furnishes the proof that:
(i) a party was under some incapacity
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for time being in force.
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or otherwise unable to present his case.
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitrator or it contains visa decisions on matters behind the scope of the submission to arbitration.
(2) The court may set aside the award: (I) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(b) falling such agreement, the composition of the arbitral tribunal was not in accordance with part-1 of the Act.
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with part-1 of the Act.39 Com.A.S.No.247/2018
However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict within the provisions of part-1 of the Act from which the parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. (3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian Law;
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged-
(a) as provided under Sec.13(5); and
(b) Section 16(6) of the Act."
"B. Further held as follows in this case: (1) The impugned award requires to be set aside mainly on the grounds:
(I) There is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-
estimate of damages;
40 Com.A.S.No.247/2018
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vii) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.
(viii) in certain contracts, it is impossible to asses the damages or prove the same. Such situation is taken care by section 73 and 74 of the Contract Act and in the present case by specific terms of the contract" - Oil and Natural Gas Corporation V Shah Pipes Ltd. (2003)5 SCC 705 : AIR 2003 SC 2629; see also Moona Abousher V M/s. Cholamandalam DBS Finance Ltd. AIR 2019 Mad 233.
The above provisions which referred above are very much clear when court can interfere with the arbitral award and what is the scope of court's power to interfere with the arbitral award and what are the grounds are required to be set aside the award as well as setting aside of arbitral award when permissible.
19. Now let me know the admitted facts which admitted by both the parties to minimize the dispute which on record. It is an admitted fact the plaintiff has been engaged in the design manufacture, construction, testing, commissioning and servicing 41 Com.A.S.No.247/2018 of a wide range of products and services for core sectors of the economy i.e., power transmission industry, transportation (Railways renewable energy) oil and gas, water and defence. The GSECL had awarded the work for setting up of its power plant with a capacity of 1x500 MW Ukei, thermal power plant and the estimated value of Rs.1332.25 crores and duration of the contract was for a period of 40 months from 06.10.2007, the plaintiff has issued a open tender through newspaper for exercising the work of civil architectural and structural steel works for coal handling plant and ash handling plant. The defendant submitted its bid on 24.11.2008 for the project work and who has been declared as successful bidder and the negotiated price was of Rs.49,50,65,464.46/- and the project work should be completed within 20 months from the date of work order on or before 27.08.2010 and the work order provides for scope of work. It is an admitted fact, after the work order, the defendant No.1 did not completed the work which entrusted, thereby sought for extension of time which was granted by the plaintiff time to time as per amendment for four times and the plaintiff has terminated the work order which was entrusted to the 1st defendant, thereby the 1st defendant has initiated arbitral proceedings. 42 Com.A.S.No.247/2018
20. Thus, keeping the provisions and the admitted facts which referred above in mind now let me know whether the facts which pleaded in the plaint falls within the purview of Sec.34 of Arbitration and Conciliation Act, as the learned counsel for the plaintiff while canvasing his arguments has submitted as per clause 3 of the work order dated 27.12.2008 is very much clear the construction works shall only be made after the issuance of certificate by the engineer one for the quantum of work completed and the other by the engineers field quality surveillance representative for the successful completion of quantity check points involved in the quantum of work billed, though the 1st defendant had contended that the plaintiff has not released the payments to the 1 st defendant in respect of RA bills 53, 54 and 55 which are pending from 20.08.2013, 08.09.2013 and 08.10.2013 for Rs.48.180 lakhs, but the 1 st defendant had never submitted the said RA bills to the plaintiff as the work allegedly done by the 1st defendant relating to the said bills, since the 1st defendant had not executed the said work, question of payment of the said bills does not arise. Even the defendant has not produced any documentary evidence to substantiate the same nor produced any certificate along with those bills, but the sole arbitrator without considering the same, awarded Rs.48.180 43 Com.A.S.No.247/2018 lakhs in respect of claim No.2 of summary of claims towards unreleased amount of various certified RA bills.
21. It is an admitted fact Ex.C.1 is the work order which was issued by the plaintiff in favour of the defendant No.1 and clause 3 of the work order reflects that there is a risk purchase in case of default and the defendant No.1 in the objection statement has stated that the RA bills amount has not been paid, still the plaintiff is due to pay the said amount of Rs.82.40 lakhs, but whereas the RA bills submitted by the defendant No.1 for the months July 2013 for Rs.22.630 lakhs, August 2013 for Rs.16.570 lakhs and September 2013 for Rs.8,980 lakhs, in total of Rs.48.80 lakhs. Though the plaintiff has taken up the contention that the defendant No.1 has not executed the work in connection of the said bills, which are marked as Ex.C.51 to C.53 and the materials on record reflects the plaintiff has received 3 bills and the arbitrator has taken into consideration about the admission of the plaintiff during his cross-examination and also taken into consideration about the materials which corroborate the RA bills, though the plaintiff has seriously contending that the defendant No.1 not submitted any proof about execution of the work in support of the RA bills, but the materials on record reflects the defendant No.1 has executed the work for which RA bills have 44 Com.A.S.No.247/2018 been submitted to the plaintiff which are marked as Ex.C.51 to C.53. If the amount which mentioned in the RA bills marked as Ex.C.51 to C.53 are taken into consideration, it comes to Rs.48.180 lakhs. Therefore, the arbitrator not only taken into consideration of Ex.C.51 to 53 but also admission of the R.W.1 during his cross-examination and held the claimant i.e. defendant No.1 is entitled a sum of Rs.48.180 lakhs relating to pending RA bills. Though the learned counsel for the plaintiff has much argued on RA bills on the ground that the sole arbitrator has not properly appreciated the oral and documentary evidence on record, it is an settled law that this court cannot sit as a appellate court for re-appreciation of the oral and documentary evidence on record nor placed its view in the place of arbitral finding and the plaintiff has utterly failed to bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act. Therefore, the arguments which advanced by the learned counsel for the plaintiff on this aspect holds no water.
22. The learned counsel for the plaintiff while canvassing his arguments has submitted that the 1st defendant had not executed the work as per the work order, question of awarding Rs.133.41 lakhs towards release of retain money at 5% does not arise. When the 1st defendant had not discharged its obligation in 45 Com.A.S.No.247/2018 terms of the work order, question of releasing the retain money at 5% does not arise, but the sole arbitrator without considering the said aspect awarded Rs.133.41 lakhs towards release of retain money at 5%.
23. It is an admitted fact the learned counsel for the defendant No.1 while canvassing his arguments has submitted that the plaintiff without prior notice has terminated the work order. So, as per clause 3 of the work order, retention money has to be released to the 1st defendant after termination, but the plaintiff has not released the said amount, but whereas the learned counsel for the plaintiff has seriously opposed for non completion of the work which was entrusted, question of retention nor release does not arise. It is an admitted fact as per Ex.C.1 being the work order provides for various terms and conditions and clause No.3 of the said work order the defendant No.1 is entitle for 5% of the total contract value and the plaintiff cannot withhold the said amount after termination of the work order, since the work which was entrusted to the defendant No.1 was not completed because of termination of the work order by the plaintiff and the contract is silent with regard to repayment of the amount in the event of invocation of risk and cost in terms of the contract conditions and withholding of the said amount after 46 Com.A.S.No.247/2018 termination on the ground of defect liability which is against to the contract which taken place in between the plaintiff and the defendant No.1. Even the contract is not empowers the plaintiff to withhold the said amount. If that is so, the matter would have been different. Therefore, in the absence of specific clause for either forfeiting of the amount nor withholding of the amount, the defendant No.1 is entitle for refund of the said amount, since the plaintiff has retained the said amount even after termination. So, the sole arbitrator after considering the materials on record has held that the plaintiff is liable to refund of the said amount to the defendant No.1 and the plaintiff has utterly failed to bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act to set aside the award. Therefore the arguments which advanced by the learned counsel for the plaintiff on this aspect holds no water.
24. The learned counsel for the plaintiff while canvasing his arguments has submitted that the sole arbitrator without considering the oral and documentary evidence has awarded for refund of Rs.2,47,03,274/- towards claim of bank guarantee. It is an admitted fact in terms of the work order, marked as Ex.C.1, the defendant No.1 has provided the bank guarantee for a total sum of Rs.2,47,93,274/- and the bank guarantee was enhanced 47 Com.A.S.No.247/2018 on 03.10.2016 and as per clause 8 of the commercial terms provides for 10% of total order value shall be furnished by the successful tender before the start of the work in any of the form mentioned in sub clause (i) to (vi) of clause 8 of Ex.C.1. The Ex.C.1 clause 8 provides deposit shall be refunded to the contractor after successful completion of defect liability period and defect liability period would provide responsibility on the contract for any defect in civil, architectural and structural works performed for a period of 15 months commencing immediately upon satisfactory completion of trial operation of the plant.
25. It is an admitted fact the security is for proper performance of the work, bank guarantees are provided at Ex.R.32 for Rs.2,47,93,274/- towards performance of the work and Ex.R.32 is very much clear that the contractor has agreed to provide a contract performance guarantee for the faithful performance of the entire contract equivalent to 5% of the total value of the contract and in the claim statement has mentioned about the work which was entrusted and completed. Admittedly the contract which is to be performed within 20 months has been prolonged for various reasons and the plaintiff has invoked the risk and cost clause for the purpose of completion of the project and the bank guarantee is an independent contract and court can 48 Com.A.S.No.247/2018 restrain encashment of bank guarantee in case of fraud and in the absence of any proof of fraud, the bank guarantee can be encashed in terms of the guarantee provided with regard to the performance of the contract. The plaintiff has encashed the bank guarantee and has adjusted towards the counter claim and Ex.C.1 do not provide any interest on the said security in terms of the contractual conditions and the plaintiff has withdrawn the bank guarantee pending of the arbitral proceedings. Therefore, the plaintiff is liable to refund the said amount to the 1 st defendant towards the claim of bank guarantee and the plaintiff has not placed any materials on record nor established through the work order that the work order empowers to forfeit the bank guarantee which furnished by the 1st defendant, in the absence of a specific contract regarding the bank guarantee, question of withholding nor forfeiting by the plaintiff does not arise and the plaintiff had terminated the work order which was entrusted to the 1 st defendant, therefore the sole arbitrator after considering all these aspects which are on record and directed for refund of the said amount towards the claim of the bank guarantee. Thus the arguments which advanced by the learned counsel for the plaintiff on this aspect holds no water.
49 Com.A.S.No.247/2018
26. The learned counsel for the plaintiff while canvassing his arguments has submitted that the sole arbitrator without considering the materials on record has directed for refund of the earnest money deposit of Rs.2 lakhs to the 1 st defendant. It is an admitted fact the 1st defendant has provided EDM amount of Rs.2 lakhs in terms of clause 6 of the notice inviting tender and the said amount can be forfeited in the event of revocation of the tender within the validity period or increase of the earlier quoted rates within tender period and forfeiture of the said amount is available to the plaintiff only in the event of revocation of the tender within the validity period or in the event of non commencement of the work within 15 days after the award of contract work, but the plaintiff has not placed any materials on record to show that the tender was revoked within the validity period nor non-commencement of the work within 15 days after the award of the contract work which committed by the 1 st defendant, if that is so the said EMD amount can be forfeited by the plaintiff. When the plaintiff has not established the said facts and who terminated the contract, question of withholding the said amount nor forfeiting the said amount by the plaintiff does not arise and the plaintiff is liable to refund the said EMD amount of Rs.2 lakhs to the 1st defendant. So, the sole arbitrator after taking 50 Com.A.S.No.247/2018 into consideration of the oral and documentary evidence has directed the plaintiff for refund of the said EMD of Rs.2 lakhs to the 1st defendant and the plaintiff has failed to bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act to set aside the award. Therefore, the arguments which advanced by the learned counsel for the plaintiff on this aspect holds no water.
27. The learned counsel for the plaintiff while canvassing his arguments has much argued that the sole arbitrator without considering the plaintiff counter claim has allowed in partly instead of entirety, but where as the learned counsel for the defendant No.1 while canvassing his arguments has submitted the counter claim which sought by the plaintiff was not maintainable even then the sole arbitrator has taken into consideration of the counter claim in partly which is not permissible under law. Ex.C.1 in clause 11 provides an express notice by either of the party to other party for the purpose of arbitration and the 1st defendant in para 7 of the claim statement has stated that the notice of the appointment of the arbitrator was sent on 10.08.2016, for which the plaintiff has rejected its claims and intimated by its letter dated 13.10.2016 on the ground the plaintiff has invoked the risk and cost clause. Now the 51 Com.A.S.No.247/2018 question arises whether Sec.23 of the Arbitration and Conciliation Act empowers the plaintiff to sought for counter claim.
23. Statement of claim and defence.--
(1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements. (2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. (3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.
The above provision empowers the plaintiff to sought for counter claim. That is the reason why the plaintiff has sought for counter claim along with interest on the ground the defendant No.1 in spite of extension of time for completion of the work did not complete the same, that is the reason why the balance work was entrusted to someone and to complete the same, therefore, is entitled to the entire sum of Rs.10,67,32,119.93/- towards completion of the balance work and sum of Rs.8,66,36,456.63/- towards liquidated damages and the award which passed by the sole arbitrator itself recognizes the its right to adjust the amount towards its counter claim, but failed to recognize the actual possession as regards to its claim and erred in awarding the 52 Com.A.S.No.247/2018 amount towards retention money i.e. EMD and bank guarantee to the 1st defendant. Therefore, the sole arbitrator has failed to draw conclusion that absolutely no amount payable to the 1 st defendant and entitled the interest as prayed in the counter claim but it was not taken into consideration by the sole arbitrator.
28. It is an admitted fact either the plaintiff nor the defendant No.1 were not disputed about the work order which was issued in favour of the defendant No.1 and non completion of the work within the time initially fixed on the work order. Thereby, 4 amendments was taken place for extension of time and time to time at the request of the defendant No.1 the plaintiff has extended the time and later on terminated the work order and the defendant No.1 has not disputed these facts, either in the objection statement nor in the evidence, whereas the plaintiff has sought for Rs.10,67,32,119.93/- towards the completion of the balance work which he was spent by the plaintiff and for Rs.8,66,36,456.63/- towards liquidated damages, for which the sole arbitrator has not only taken into consideration about the oral evidence but also the documentary evidence on record. 53 Com.A.S.No.247/2018
29. It is an admitted fact the plaintiff has terminated the work order pending of the work and the contract work was not completed within a period of 20 months as per the work order nor extension of time as per amended orders for extension of time and the materials on record reflects the time has been extended at the request of the 1st defendant and the letters which are placed on record reflects the plaintiff was compelled the 1 st defendant to get the work done through alternative vendors at the risk and cost. Ex.R.34 to 57 are with regard to POQS of various work orders issued on several parties. Ex.R.58 is the State Bank of India passbook for the period from 13.05.2011 to 25.06.2017 and the sole arbitrator before coming to the conclusion has held that the plaintiff has not placed any convincing evidence nor the proof for payment of Rs.8,84,16,225/- made to M/s Choudhary Infra held the plaintiff is entitled only Rs.1,83,15,894.93/- and the plaintiff has not placed any materials on record nor bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act to set aside the award which passed by the sole arbitrator. So, the plaintiff has failed to bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act to set aside the award. Thus, the 54 Com.A.S.No.247/2018 arguments which advanced by the learned counsel for the plaintiff on this aspect holds no water.
30. The learned counsel for the plaintiff while canvassing his arguments has much argued that the facts which pleaded in the plaint falls within the purview of Sec.34 of the Arbitration and Conciliation Act and drawn the court attention on the following judgments:
1. (2020) 7 SCC 167 in between Patel Engineering Vs North Eastern Electric Power Corporation Limited.
2. (2019) 7 SCC 236 in between Parsa Kente Collieries Ltd Vs Rajastan Rajya Vidyut Utpadan Nigam Ltd.
3. (2003) 5 SCC 705 in between Oil and Natural Gas Corp. Ltd. Vs Saw Pipes.
4. (2012) 12 SCC 581 in between State of Goa Vs Praveen Enterprises.55 Com.A.S.No.247/2018
On careful perusal of the above said judgments, in the said judgments their lordship held that the ground of patent illegality is a ground available under the statute for setting aside domestic award, if the decision of the arbitrator is found to be perverse or irrational that no reasonable person would have arrived at the same or the construction of the contract is such that no fair or reasonable person would take and a finding of fact was recorded by the arbitrator after considering all the documents and after giving full opportunity to both parties, when such findings are not perverse no interference can be made by the High Court in the proceedings under Sec.34 of the Arbitration and Conciliation Act and if the award contrary to substantive precedents of law or the provisions of the Arbitration and Conciliation Act or against the terms of the contract would be patently illegal and prior notice or reply is not required when all disputes are referred to the arbitrator by a arbitration clause and the arbitrator is empower to decide all disputes raised in the pleadings. So, in the instant case, the plaintiff has not bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act, mere relying of the decisions which referred above it does not mean that the facts which pleaded comes within the purview of Sec.34 of the Arbitration and Conciliation Act. When the person approached the court and 56 Com.A.S.No.247/2018 sought for to set aside the award which passed by the sole arbitrator on the ground that the facts which pleaded in the plaint falls within the purview of Sec.34 of the Arbitration and Conciliation Act, but in the instant case the plaintiff has failed to establish that the facts and the grounds which mentioned in the plaint falls within the purview of Sec.34 of the Arbitration and Conciliation Act. Therefore, I do respect to the judgments which relied by the plaintiff, but the facts and circumstances of the present case and the judgments which relied are different.
31. The learned counsel for the defendant No.1 while canvassing his arguments has rightly submitted if the facts which pleaded in the plaint do not fall within the ambit of Sec.34 of the Arbitration and Conciliation Act question of interference of this court does not arise and this court cannot sit as a appellate court either re-appreciation of the materials on record nor substitute its view in the place of the finding of the sole arbitrator. So, looking from any angle the plaintiff has not bring the case within the ambit of Sec.34 of Arbitration and Conciliation Act, nor made out any of the grounds which are enumerated U/Sec.34 of Arbitration and Conciliation Act to set aside the award as sought for. Hence, I am of the opinion that the point No.1 is answered as Negative. 57 Com.A.S.No.247/2018
32. POINT NO.2: In view of my answer to point No.1 as stated above, I proceed to pass the following;
ORDER The petition under Sec.34 of the Arbitration and Conciliation Act filed by the petitioner is hereby dismissed.
No order as to costs.
(Dictated to the Stenographer, transcript thereof corrected by me and then pronounced in the open court on this the 4th day of March, 2022) (P.J. Somashekara) LXXXVIII Addl. City Civil & Sessions Judge, (Exclusive Commercial Court), Bengaluru City