Delhi High Court
M/S Malibu Estate Pvt. Ltd. vs M/S Kiri Associates Pvt.Ltd. on 4 May, 2022
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 4th May, 2022
+ O.M.P. (COMM) 391/2019
M/S MALIBU ESTATE PVT. LTD. ..... Petitioner
Through: Mr Sanjeev Anand, Senior
Advocate with Mr Sonam Anand, Mr
Deepshikha, Advocates
versus
M/S KIRI ASSOCIATES PVT.LTD. ..... Respondent
Through:
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
VIBHU BAKHRU, J. (ORAL)
1. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the A&C Act') impugning an arbitral awarded dated 10.05.2019 passed by an Arbitral Tribunal comprising of three members (hereafter 'the Arbitral Tribunal').
2. The impugned award was rendered in the context of the disputes that have arisen between the parties in connection with a contract for construction of a shopping arcade named 'Malibu Shopping Arcade'.
3. In the month of October, 2004, the petitioner had issued a Notice Inviting Tender (NIT) for construction of the said shopping arcade. The respondent had submitted its bid pursuant to the said NIT.
4. On 12.02.2005, the petitioner issued a Letter of Intent (LoI), in Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 1 of 7 favour of the respondent, for the execution of the works at a lumpsum value of ₹4.59 crores. It is stated that thereafter, the parties entered into negotiations and the value of the work was reduced to ₹3.60 crores. However, the petitioner agreed to provide steel and cement free of cost.
5. On 21.02.2005, the respondent furnished an undertaking, whereby it agreed that the petitioner would supply cement and steel at an aggregate value of ₹98 lakhs, free of cost.
6. Thereafter, the petitioner issued a Letter of Award dated 21.02.2005 (LoA), which according to the respondent was backdated.
7. Certain disputes had arisen between the parties in connection with the said contract. The disputes were referred to arbitration. Before the Arbitral Tribunal, the respondent raised various claims. The summary of the claims made and the amounts awarded by the Arbitral Tribunal against the said claims, is set out below: -
Summary Claim Claim Amount Amount No. Claimed Rs. Awarded Rs.
1. Balance payment of work 49,08,076 ---
done (final bill) refund to security deposit etc. Sub Balance payment of work 47,09,865 (-)40,97,804 Claim-1 done (final bill) Sub Security deposit not 10,00,000 10,00,000 Claim-2 refunded by the Respondents Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 2 of 7 Sub Cost of items of store 58,835 58,835 Claim- physically handed over 3 Sub Cost of aluminum sample 50,000 20,000 Claim-4 arising out of withdrawal of aluminum work Sub Extra financial burden 40,006 40,006 Claim-5 due to post award altering of basic terms and conditions of the Contract and drawings and wrong/excess deductions of Work-Contract Tax (WCT) 2 Loss of profit due to the 2,63,448 78,816 reduction in scope of work 3 Cost of cement not 15,59,301 15,59,301 supplied by the Respondents 4 Cost of cement for RMC 18,25,663 18,25,663 not supplied by the Respondents 5 Balance payment of 74,11,708 additions/variations in the work. This claim consists of 13 Sub-claims Sub Cost of PVC pipe in place 1,50,000 55,831 Claim-1 of L.A. Class C.I. pipes rendered redundant due to specifications and incompatibility with structural drawings.
Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 3 of 7Sub Balance payment of 6,22,962 Nil Claim-2 variation bills 1 & 2 Sub Variation Bill No. 3 for 3,17,000 1,71,0159 Claim-3 fire-fighting works due to change in specifications and capacities Sub Extra work relating to 60,000 35,169 Claim-4 revised cable route from LT panel to new finalized location of Generators Sub Variation Bill No. 4 due 1,20,157 1,20,157 Claim-5 to change in specifications, capacities of Control Panels Sub Variation Bill No. 6 due 10,63,429 1,25,994 Claim-6 to change in the scope of work and site condition due to delay caused by design change Sub Variation Bill No. 7 20,47,459 1,28,244 Claim-7 Sub Payment of hardware 50,594 50,594 Claim-8 fittings Sub Additional fire fighting 10,28,197 10,28,197 Claim-9 works in tower and Restaurant area Sub Variation Bill No.8 due to 2,15,977 2,15,977 Claim- change in specifications 10 of work Sub Repair of approach to 3,163 3,163 Claim- entrance 11 Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 4 of 7 Sub Variation Bill No.9 due to 2,35,888 2,35,888 Claim- change in specification 12 and scope of work of electrical items Sub Variation Bill No.11 due 14,96,880 13,68,680 Claim- to change in the scope of 13 work and site conditions due to delay caused by design change 6 Loss of overhead and 99,90,000 13,87,500 profit due to prolongation of the Contract 7 Idling/underutilization of 56,73,704 4,00,000 labour, T & P and equipment due to prolongation of the contract 8 Interest @ 24% p.a. due to 14,94,407 Nil delay in payments of bills 9 Balance amount of 1136,338 1,29,211 Service Tax Total 4,75,33,057 59,40,491 10 Interest @ 24% p.a. on all Interest @ Interest at the above claims from due 24% p.a. 10% p.a date to date of payment Amount Rs.66,47,40 9/-
11 Cost of arbitration 10,00,000 Nil Grand Total 4,85,33,057 1,25,87,900
8. The petitioner has challenged the impugned award primarily on two fronts. First, it is stated that the decision of the Arbitral Tribunal to accept the respondent's Claim nos. 3 and 4, being additional amounts Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 5 of 7 for cement and steel, is contrary to the undertaking furnished by the respondent. The Arbitral Tribunal held that the said undertaking did not form a part of the contract between the parties and was not made use of. The petitioner claims that the said finding is ex facie erroneous and without considering the rival contentions.
9. Second, it is contended on behalf of the petitioner that the award of compensation for loss of overheads and underutilisation of resources (Claim nos. 6 and 7), is arbitrary. The Arbitral Tribunal awarded a sum of ₹75,000/- per month as compensation for loss of profits (Claim no.
6) and ₹25,000/- per month as compensation for underutilisation of labour (Claim no. 7), against the aforesaid claims. And, the same without any material or basis.
10. After some arguments, the learned counsels for the parties agree that the impugned award to the aforesaid extent be set aside. The question of interest on the said claims be also left open. They also agree that the disputes in relation to the aforementioned claims be decided afresh by an Arbitral Tribunal comprising of a Sole Arbitrator. The parties further request that a Sole Arbitrator be appointed in these proceedings to avoid any further pleadings.
11. Although, the scope of proceedings under Section 34 of the A&C Act does not extend to appointment of an arbitrator, however, considering that the parties have been agitating their claims since several years, this Court considers it apposite to accede the said request.
12. In view of the above, the impugned award to the extent of the amount awarded against Claim nos. 3, 4, 6 and 7, is set aside.
Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 6 of 713. With the consent of the parties, this Court appoints Justice (Retired) V.K. Jain, a former Judge of this High Court as the Sole Arbitrator to adjudicate the disputes between the parties. This is subject to the learned Arbitrator making the necessary disclosure as required under Section 12(1) of the A&C Act and not being ineligible under Section 12(5) of the A&C Act.
14. The aforesaid claims are referred to the Arbitral Tribunal for adjudication afresh. The Arbitral Tribunal shall also decide the claim for interest on the said claims.
15. It is further clarified that except to the extent as stated aforesaid, the impugned award is not interfered with.
16. This order is passed with the consent of the parties.
17. The petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J MAY 4, 2022 pkv Click here to check corrigendum, if any Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.05.2022 OMP(COMM) No.391/2019 Page 7 of 7