Delhi District Court
M/S Mahanagar Telephone Nigam Limited vs M/S Vichitra Constructions (P) Ltd on 9 October, 2019
IN THE COURT OF SH HARGURVARINDER SINGH JAGGI,
ADDL. DISTRICT JUDGE - 02, SOUTH WEST DISTRICT,
DWARKA COURTS, DELHI
OMP (COMM) No. 51/2019
CNR No. DLSW010025212017
IN THE MATTER OF:
1. M/s Mahanagar Telephone Nigam Limited
The General Manager (Rohini)
MTNL, Sanchar Parisar, Sec.III, Rohini
New Delhi -110085 ... Petitioner
v.
1. M/s Vichitra Constructions (P) Ltd.
A-1/31, Janakpuri, New Delhi - 110058 ... Respondent
Date of filing of petition: 14.03.2017
Date of judgment reserved: 28.08.2019
Date of pronouncement of judgment: 09.10.2019
JUDGMENT
1. A petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter "the Act") has been preferred by the petitioner, Page No. 1/15 namely, Mahanagar Telephone Nigam Limited (hereinafter "MTNL") assailing the arbitral award dated 15.12.2016 (hereinafter "arbitral award") passed by the sole arbitrator, namely, Sh. Ashok Sharma, Former CGM (Law), MMTC, New Delhi (hereinafter "arbitrator") in favour of the respondent, namely, Vichitra Constructions (P) Ltd. (hereinafter "respondent").
2. At the outset it is observed that though the petition under Section 34 of the Act was preferred by MTNL on 14.03.2017 but the arbitral record could be requisitioned not before 14.08.2019.1
3. The arbitral award emanates from a dispute between MTNL and the respondent in respect of the agreement entered into for laying of cables through trench-less technology, which has its genesis to the bids submitted by the respondent in response to the notice inviting tender (NIT) dated 25.11.2002.
4. The arbitral award has been passed by the arbitrator on the claim raised by the respondent in respect of the work done in performance of the agreement for rehabilitation of outdoor plant of GM (N-II) Area dated 25.02.2003 entered into between MTNL and the respondent (hereafter "agreement").
5. The dispute between the parties relates to the price payable by MTNL for the work of laying of cables through trench-less technology. The respondent claims that MTNL was liable to pay for the said work at the rate of ₹412/- per meter, as agreed under the 1 See Order dated 14.08.2019 Page No. 2/15 agreement, and whereas the said claim has been contended by the MTNL.
6. According to MTNL, the agreement stood novated in so far as the rates payable for the work is concerned and MTNL was only liable to pay for the same at the rate of ₹230/- per meter. By the arbitral award, the arbitrator has accepted the respondent's claim that the Agreement was not novated and the respondent would be entitled to recover the differential amount (being the difference between the amount paid at the rate of ₹230/- per meter and as computed on the basis of ₹412/- per meter).
7. Accordingly, the arbitrator awarded a sum of ₹19,24,252/- (Rupees Nineteen lakhs twenty four thousand and two hundred fifty two only). The arbitrator also awarded a sum of ₹18,60,988.92/- (Rupees Eighteen lakhs sixty thousand nine hundred eighty eight and ninety two paise only) to the respondent as pendente lite simple interest at the rate of 10% per annum from 17.04.2007 till the date of the arbitral award. The arbitrator has also awarded post award interest at the rate of 12% per annum on the awarded amount from the date of the award till the payment.
8. The underlying controversy involved in the present petition relates to the respondent's claim for the balance differential amount in respect of the downward revised rates from ₹412/- to ₹230/- per meter for the work of laying of cables through trench-less technology.
Page No. 3/159. The relevant facts necessary to address the aforesaid controversy are as under:
(a) MTNL issued a Notice Inviting Tender (NIT) on 25.11.2002 for "rehabilitation of outdoor plant at Saraswati Vihar, Rohini, Badli and Narela, Delhi which included the work of laying of cables through trench-less technology". The NIT specifically provided that MTNL reserved its right to award the work to three contracts in the specified ratio of 50:30:20.
(b) The respondent submitted its bid pursuant to the aforesaid NIT. The said bid was not the lowest bid. The lowest bid was submitted by M/s Carrycon India Ltd. (hereafter "Carryconˮ). However, as per the MTNL's policy, the respondent was also provided the option to carry out portion of the works albeit at the rate fixed in the case of the L-1 bidder (Carrycon).
(c) On 25.02.2003, the respondent agreed to undertake the work awarded to him at the rate of ₹412/- per meter, which was the rate agreed between MTNL and the L-1 Bidder (Carrycon). The parties entered into an agreement dated 25.02.2003. The respondent also furnished a Performance Security of ₹1,00,000/- (Rupees One lakh only). The agreement was valid for a period of one year from the date of signing the same.
Page No. 4/15(d) Material Management Cell (MM Cell), a division of MTNL issued another notice inviting tender (NIT) on 30.12.2002 for new network creation through trench-less technology for the same work of laying of cables through trench-less technology. The rates for the said work were discovered to be lower than the rates for the work awarded pursuant to the NIT dated 25.11.2002.
(e) On 13.05.2003, a meeting was held between MTNL and Carrycon - the L1 bidder - regarding reduction of rates in the new tender for similar work of laying of cables through trench-less technology.
(f) MTNL, by a letter dated 03.07.2003, informed Carrycon that the base rate of ₹230/- per meter was approved by the Competent Authority for the work of laying of cables through trench-less technology and the said rate would also be applicable for the agreement with Carrycon. A copy of the said letter was also sent to all the contractors. However, the respondent disputes the receipt of the said letter.
(g) The respondent submitted its first bill for execution of the part of the work contracted at the agreed rate of ₹412/- per meter. However, MTNL cleared the said bill by unilaterally reducing the rate to ₹230/- per meter.
Page No. 5/15(h) The respondent sent representation lodging its protest against the conduct of MTNL in not adhering to the terms of the agreement and effective payments for the work done at the reduced rate of ₹230/per meter.
(i) MTNL extended the validity of the contract for further one year and the work continued upto 2005. On 26.07.2004, the work awarded to the respondent was completed.
(j) The respondent issued a notice dated 12.10.2006 demanding payment in addition to the security amount and also requested for appointment of an arbitrator with regard to the disputes on the rates for laying the cable.
10. By then, a similar dispute had already knocked the doors of the Hon'ble High Court of Delhi in legal proceedings titled as M/s Vichitra Constructions Pvt. Ltd. v. Mahanagar Telephone Nigam Limited.2 The Hon'ble High Court by an order dated 25.08.2004, held that MTNL cannot unilaterally deduct the amount and was directed to release the differential amount of ₹182/- per meter on submission of bank guarantee. The respondent sought to rely on the said order.
11. Before the arbitrator, the respondent filed the statement of claim, inter alia, claiming ₹22,91,552/- (Rupees Twenty two lakhs ninety one thousand five hundred fifty two only). The claims made by the respondent in its statement of claim are set out below:
2 OMP No. 268/2003 Page No. 6/15 (a) Principal Amount ₹17,74,252/-
(b) Interest on the above amount @18%p.a. ₹1,59,300/-
from 01.10.2006 to 31.03.2007
(c) Security Amount ₹1,50,000/-
(d) Interest on the security amount from ₹1,08,000/-
01.01.2003 to 31.12.2006
(e) Litigation expenses ₹1,00,000/-
₹22,91,552/-
12. The arbitrator framed the following issues:
i. Whether the Claimant is entitled to the amounts claimed in para 11 of the Claim Petition dated 17.03.07.
ii. Whether the payments made by the Respondent at the re-negotiated rate of Rs.230/- per meter were accepted by the Claimant and therefore binding on it.
iii. Whether the re-negotiation of the rate of Rs.230/-
per meter done with L-1 party M/s Carrycon is ispso facto binding the Claimant.
iv. Whether the agreement dated 25.02.03 between the parties made with validity period of one year can be altered unilaterally, without the consent of the Claimant, by the Respondent MTNL."
13. The Division Bench of our Hon'ble High Court in NHAI v. Progress Construction3 has stressed on the settled position in law that in proceedings under Section 34 of the Act, the Court does not sit in appeal over the award. Thus, an arbitral award passed by an arbitrator 3 240 (2017) DLT 253 (DB) Page No. 7/15 shall not be interfered with lightly. The Court can neither sit in appeal nor reassess or re-appreciate the evidence and the arbitral award can only be interfered with grounds stipulated in Section 34(2) of the Act.
14. Similarly, in MCD v. M/s Harcharan Dass Gupta Construction4 on the proposition that this Court does not sit as a Court of appeal over the findings of fact recorded by the sole arbitrator and also there are no valid grounds flagged by the petitioner to challenge the arbitral award under the realm of Section 34 of the Act.
15. The Apex Court in the landmark judgment of Associate Builders v. Delhi Development Authority5 while setting aside the judgment passed by the Division Bench of Hon'ble High Court of Delhi culled out the legal principles after traversing the judicial pronouncements passed by the various High Courts and the Apex Court.
16. The Apex Court in Associate Builders6 observed that it is important to note that the 1996 Act i.e. the Act, was enacted to replace the Arbitration Act, 1940 in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration and also to provide that the tribunal gives reasons for an arbitral award; to ensure that the arbitral tribunal remains within the limits of its jurisdiction and to minimize the supervisory role of courts in the arbitral process.
4 253 (2018) DLT 721 5 (2015) 3 SCC 49 6 ibid.
Page No. 8/1517. At this stage, I would deem appropriate to observe that MTNL had challenged the separate arbitral awards dated 15.12.2006 passed by the arbitrator with regard to the similar dispute arising from the similar agreement before the Hon'ble High Court of Delhi in legal proceedings titled as Mahanagar Telephone Nigam Limited v. M/s Gaurav Enterprise,7 Mahanagar Telephone Nigam Limited v. M/s H S Construction Co.8 and Mahanagar Telephone Nigam Limited v. M/s H S Construction Co.9 under Section 34 of the Act and the same were disposed of by judgment dated 09.04.2018.
18. This court observes that not only MTNL challenged the judgment dated 09.04.2018 by preferring appeal(s) under Section 37 of the Act before the Division Bench of the Hon'ble High Court of Delhi in batch appeals titled as Mahanagar Telephone Nigam Limited v. M/s Gaurav Enterprise,10 Mahanagar Telephone Nigam Limited v. M/s H S Construction Co. 11 and Mahanagar Telephone Nigam Limited v. M/s H S Construction Co. 12 but also challenged the judgment dated 25.09.2018 passed by the Division Bench of the Hon'ble High Court before the Hon'ble Supreme Court. The Division Bench of the Hon'ble High Court of Delhi by judgment dated 25.09.2018 dismissed the appeals and held that no ground is made out 7 OMP (COMM) No. 286/2016 and IA No. 6836/2016 date of decision 09.04.2018 8 OMP (COMM) No. 181/2017 and IA Nos. 4244/2017 & 7724/2017 date of decision 09.04.2018 9 OMP (COMM) No. 182/2017 and IA Nos. 4245/2017 & 7726/2017 date of decision 09.04.2018 10 FAO(OS) (COMM) No. 175/2018 and CM No. 32193/2018 date of decision 25.09.2018 11 FAO(OS) (COMM) No. 180/2018 and CM No. 32639/2018 date of decision 25.09.2018 12 FAO(OS) (COMM) No. 181/2018 and CM No. 32645/2018 date of decision 25.09.2018 Page No. 9/15 to interfere in the impugned judgment passed by the Ld. Single Judge of the Hon'ble High Court of Delhi.
19. Interestingly, MTNL's challenge to the judgment dated 25.09.2018 passed by the Division Bench of the Hon'ble High Court of Delhi before the Apex Court in a special leave petition titled as Mahanagar Telephone Nigam Limited v. M/s H.S. Construction Co.13 was a damp squib, as the same was dismissed by order dated 16.04.2019.
20. On careful perusal of the paper-book, arbitral record and the judgment dated 09.04.201814 passed by the Hon'ble High Court of Delhi and the judgment and order of the Superior Courts, I am of no different view than taken by the Hon'ble High Court in the challenge to the arbitral award under Section 34 of the Act. The relevant extract of the judgment dated 09.04.201815 is reproduced verbatim, as under:
"Reasons and Conclusion
19. The Agreement between the parties clearly specifies that the work for laying of cables through trenchless method would be paid at ₹412/- per meter. It is also important to note that it is the stated position that MTNL did not enter into any negotiations with the respondent for reducing the rates as set out in the Agreement. MTNL rested its case on Clause 17 of the 13 SLP(C) No. 7891/2019 dismissed by order dated 16.04.2019 14 (a) Mahanagar Telephone Nigam Limited v. M/s Gaurav Enterprise - OMP (COMM) No. 286/2016 and IA No. 6836/2016 date of decision 09.04.2018;
(b) Mahanagar Telephone Nigam Limited v. M/s H S Construction Co. - OMP (COMM) No. 181/2017 and IA Nos. 4244/2017 & 7724/2017 date of decision 09.04.2018, and
(c) Mahanagar Telephone Nigam Limited v. M/s H S Construction Co. - OMP (COMM) No. 182/2017 and IA Nos. 4245/2017 & 7726/2017 date of decision 09.04.2018 15 ibid.Page No. 10/15
NIT, which expressly provides that "post tender negotiations are restricted to L-1 bidder only".
20. This Court is of the view that the said clause would be of little assistance to MTNL, as the same must be read in the context of the NIT. The import of Clause 17 of the NIT is to restrict post tender negotiations with the L-1 bidder for firming up the prices and terms at which the offers are to be accepted. The said clause exhausts itself when the parties entered into a definite agreement. The NIT does not contemplate any negotiations after the Agreement is entered into. The NIT by its very nature is an invitation to submit offers. The bids submitted by the various bidders would result in a binding contract. Since, it is contemplated that after the offers are tendered there may be some negotiations with the respective parties, the NIT expressly provides that the negotiations after receipt of offers would be entered into only with the L-1 bidder. The said negotiations are clearly towards entering into a binding agreement. Once the negotiations crystallize into final terms, all other specified bidders (L-2 and L- 3 bidders) may also be awarded works at those rates/terms. Such award would clearly amount to a counter offer, which if accepted, results in a binding contract.
21. In the aforesaid circumstances, once MTNL had quoted the negotiations and made a counter offer to the respondent and other bidders, a binding contract would come into existence with the said counter offers being accepted. The contention, that the bidders would be also bound by any novation of the contract, if any, that may be agreed thereafter between MTNL and L-1 bidder, is unmerited. The arbitrator had rejected the said contention and in the opinion of this Court, is rightly so. Clearly, no interference is called for with the decision of the arbitrator in this regard. Thus, as far as the work executed during the term of the Page No. 11/15 contract is concerned, MTNL would be liable to pay for the work done at the rates as agreed under the Agreement.
22. Having stated the above, this Court is also of the view that the arbitrator had erred in ignoring the effect of the letter dated 30.03.2004. The said letter reads as under:-
"The General Manager (N-II) MTNL, Sector-3, Rohini, Delhi-110085 SUB: REQUEST FOR EXTENSION OF CONTRACT FOR REHABILITATION WORKS IN NORTH - II AREA.
Dear Sir, This is with reference to the above- mentioned Contract for Rehabilitation works in North-II Area. We request you to kindly extend the contract again for a further period of 6 months.
We hereby give our consent to carry out the works at the same rates, terms and conditions of the existing agreement and also carry out trenchless digging works at the prevailing MM rates without any enhancement for all the work orders issued during the extended period.
Thanking you, Yours faithfully, For Gaurav Enterprises.ˮ Page No. 12/15
23. As noticed above, it was readily accepted that the expression "prevailing MM rates" as referred to by the respondent in the aforesaid letter referred to the rate of ₹230/- per meter. Thus, the respondent had requested for an extension in the term of the Agreement and had consented to carry out the trenchless bidding work at ₹230/- per meter during the extended period. Concededly, this request was acceded to by MTNL and MTNL had extended the term of the contract. In this view, it was not open for the respondent to now claim that it is entitled to be paid at ₹412/- per meter for the work executed pursuant to the work order issued during the extended period (that is, from 30.03.2004 to 26.07.2004).
24. Accordingly, the arbitral award, to the extent that it holds that the respondent is entitled to be paid at the rate of ₹412/- per meter for the work done during the extended period, that is, from 30.03.2004 to 26.07.2006, is unsustainable and set aside.
25. The amount and the interest awarded to the respondent, consequently, be reduced to the aforesaid extent.
26. It is not disputed that the other contractors (respondent in OMP 181/2017 and 182/2017) had also sent similar letters conveying their consent to execute the works during the extended period at prevailing MM rates, that is, ₹230/- per meter. Thus, the arbitral awards in the said cases are also set aside to the extent that the same entitles the said contractors to receive consideration at a higher rate of ₹412/- per meter due in the extended period.
27. The petitions are disposed of in the above terms. All the pending applications are also disposed of. The parties are left to bear their own costs."
Page No. 13/1521. The expression "prevailing MM rates" as referred to by the respondent in the aforesaid letter referred to the rate of ₹230/- per meter. Thus, the respondent had requested for an extension in the term of the agreement and had consented to carry out the trench-less bidding work at ₹230/- per meter during the extended period. It is observed that the request was accepted by MTNL and MTNL had extended the term of the contract. Thus, it was not open for the respondent to now claim that it is entitled to be paid at ₹412/- per meter for the work executed pursuant to the work order issued during the extended period i.e. 26.04.2004 to 26.07.200416.
22. Accordingly, the arbitral award to the extent where it holds that the respondent herein is entitled to be paid at the rate of ₹412/- per meter for the work done during the extended period i.e. 26.04.2004 to 26.07.200417 is unsustainable and bound to be set aside. Consequentially, the amount and interest awarded to the respondent shall stand reduced. The respondent is granted liberty to seek release of the FDR deposited by MTNL, if any, in terms of order dated 09.08.2017, 29.11.2018 and 27.02.2019 in accordance with law.
23. During the course of hearing on 28.08.2019, learned counsel for the petitioner submitted that the interest awarded by the arbitrator in the arbitral award may be waived off for the period 2010 to 2013 on 16 See para 7 of the statement of claim/claim petition at p. 92 and para 7 of the para-wise reply of MTNL's reply to the statement of claim/claim petition at p. 193. 17 ibid.
Page No. 14/15the ground that the counsel for the claimant was ill and sadly died, particularly, when the matter was at the stage of the PE.
24. I have considered the submissions advanced by the counsel for petitioner, seeking waiver of interest for three years. It is observed that there is no averment to the above extent in the petition and further this court cannot lose sight of the fact that the dispute between the parties is a commercial dispute, and the petitioner herein has hotly contested the legal proceedings be it before the sole arbitrator and all the way upto the Apex Court. I find no merit to consider and waive off the interest.
25. The petition is disposed of in the above terms. All pending applications are also disposed of. Parties to bear their own costs.
26. File be consigned to record room only after due compliance, necessary action and as per Rules.
Digitally signed by HARGURVARINDER HARGURVARINDER SINGH JAGGI
SINGH JAGGI
Date: 2019.10.09
15:45:04 +0530
Pronounced in the open Court (Hargurvarinder Singh Jaggi)
on October 09, 2019 Addl. District Judge-02
South West District
Dwarka Courts Complex, Delhi
Page No. 15/15