Bangalore District Court
In Com. As. Sri. B.K.Gangadhar S/O ... vs In Com. 1.Bruhat Bengaluru Mahanagara ... on 25 October, 2019
Com.AS.No.143/2015 &
1 Com.AS.No.145/2015
IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS
JUDGE, BANGALORE CITY. (CCH.NO.83)
Dated: This the 25th day of October 2019.
PRESENT : Sri. Jagadeeswara.M.,B.Com,LL.B.,
LXXXII Addl.City Civil & Sessions Judge, Bangalore.
Com.AS No.143/2015 & 145/2015
Plaintiff in Com. AS. Sri. B.K.Gangadhar S/o B.K.Kempegowda,
No.13, "Sampatha Giri" Nr (KPTCL),
No.143/2015 Kuvempunagar, Mysore - 570 023.
(By H.S.Dwarakanath- Advocate)
- Versus -
Defendants in Com. 1.Bruhat Bengaluru mahanagara Palik, (Rep. By
its Commissioner), N.R.Square, Bangalore-560
AS. No.143/2015 001.
2. The Chief Engineer, SWD Bommanahalli
Zone, BBMP, Jayanagar Compex, 9th floor, 4th
block, Bangalore -560 011.
3.The Executive Engineer, SWD Bommanahalli
Zone, BBMP, Jayanagar Complex, 9th floor, 4th
block, Bangalore-11.
4. Sri. Perisami, Chief Engineer (Retd.), Sole
Arbitrator, No.391, 12th cross, BEL Layout, 3rd
block, Vidyaranyapura, Bangalore - 97.
(by S.N.P.Chandra- Advocate)
Plaintiff in Com.AS. Bruhat Bengaluru mahanagara Palik, (Rep. By
its Commissioner), N.R.Square, Bangalore-560
No.145/2015 001.
(by S.N.P.Chandra- Advocate)
VS
Com.AS.No.143/2015 &
2 Com.AS.No.145/2015
Defendants in Sri. B.K.Gangadhar, major, No.13, "Sampatha
Giri" Nr (KPTCL), Kuvempunagar, Mysore -
Com.AS. 570 023.
No.145/2015 (By H.S.Dwarakanath- Advocate)
Respondent in Com. Sri. Periasami, Chiefth Engineer (Retd.) andrd
Arbitrator, No.391, 12 cross, BEL Layout, 3
As.No.145/2015 block, Vidyaranyapura, Bangalore - 97.
COMMON JUDGMENT
These two suits have been registered on the basis of petitions filed
filed U/Sec.34 of Arbitration and Conciliation Act 1996 against the award
dated 9.6.2015 passed by Sole Arbitrator who is defendant No.4 in
Com.AS No.143/2015 and defendant No.2 in Com.AS No.145/2015.
2. One Mr.B.K.Gangadhar (Contractor) was claimant and the Bruhat
Bengaluru Mahanagara Palike (in short BBMP) was respondent in the
Arbitral proceeding.
2(a). Parties in these suits would be referred to as Contractor and
BBMP.
3. Brief facts of the cases are as under:
BBMP had invited tenders from the qualified contractors/agencies
for execution of construction of Re-modelling of Storm Water Drain K-209
from Bannerghatta road upto Ranka Colony in Koramangala Valley
Package-III. (Balance work). The bid submitted by Mr. B.K.Gangadhar
was lowest one and same was accepted and work order was issued to him
Com.AS.No.143/2015 &
3 Com.AS.No.145/2015
by the BBMP on 5.3.2010. Agreement was also entered into between the
parties on the same day i.e., on 5.3.2010 for a contract value of
Rs.3,76,88,555/- to be completed within the period of 5 months including
the monsoon period from the date of issue of work order . The site was
handed over to the Contractor on 14.4.2010. Since disputes arose between
the parties, Contractor invoked Arbitration Clause of the Contract
Agreement and as such, learned Sole Arbitrator was appointed. Contractor
filed his claim statement in which 14 claims and 2 additional claims i.e., in
all 16 claims were made by him in his claim statement filed before the
Arbitral Tribunal. BBMP filed statement of objections in the Arbitral
Tribunal. Both side parties placed records before the Arbitral Tribunal
along with memo stating 'no oral evidence'. Learned Arbitral Tribunal
passed award dated 9.6.2015 rejecting claim Nos.2,7,8,12,14 and
additional claims No.1 & 2 and further has refused to award interest with
respect to claims No.4, 6, 10, & 11 and has further reduced the amount
with respect to claims No.1,3,4,6,10 & 11. Being aggrieved by the
refusals, reductions and interest being not awarded, the Contractor has filed
petition of Com.AS No.143/2015 under Sec.34(2) of the Arbitration &
Conciliation Act 1996 (in short the Act 1996). BBMP has also filed
petition of Com.AS No.145/2015 under Sec.34(2) of the said Act
challenging the Award.
4. The grounds urged by the Contractor in his Com. AS
Com.AS.No.143/2015 &
4 Com.AS.No.145/2015
No.143/2015 may be summarised as under:
(a). With respect to Claim Nos.4,6,10 & 11, there is one sentence
stating that no interest is payable. It is cryptic and no reasons are
assigned why interest is not payable and it is not a speaking order
which is violation of requirements of Sec.31(3) of the Act 1996 and
as such, it is apparent illegal on the face of record and it is opposed
to the Public Policy and therefore, it is necessary to set aside this
portion of Award in not awarding interest and in its place to award
interest at 18% per annum payable from the date of completion of
the work till realisation of the amount.
(b). Rejection of claim No.2 is illegal and arbitrary since it is
undisputed fact that contractor submitted offer for execution of
subject work on 30.8.2009 and the period of completion itself was
only five months and tender was opened on 1.9.2009 and stipulated
period for finalisation of tender was 90 days. But the work order
was issued on 5.3.2010 with substantial delay of about 6 months
from the date of opening of the tender. In the absence of evidence
on record, learned Arbitrator has wrongly observed that Contractor
had agreed to execute the work at the same rates and conditions and
Clause-38 would apply only after the work order is issued. This
type of rejection of Claim No.2 is illegal on the face of record and
Com.AS.No.143/2015 &
5 Com.AS.No.145/2015
opposed to public policy and therefore, it is necessary to set aside
this portion of the Award rejecting Claim No.2 and in turn to award
the amount as per Claim No.2.
(c). Rejection of Claim No.7 is illegal and arbitrary This Claim
No.7 came to be rejected on the ground that Claim No.3 covers
Claim No.7. In fact Claim No.3 is entirely different than Claim
No.7. Exs.C.74 to C.77 placed in the Arbitral Proceeding clearly
show machineries were available in the place. But learned
Arbitrator has failed to consider the materials placed .
(d). Rejection of Claim No.8 on the ground that Claim Nos.2 & 7
are already been rejected, is illegal and arbitrary and it is not with
speaking order and hence it is violation of Sec.31(3) of the Act 1996
and same is liable to be set aside.
(e). Rejection of Claim No.12 is concerned, this claim has been
rejected on the ground that Contractor has not produced any
documentary evidence nor the conditions of the contract nor
produced any judgment from the court. This is illegal and opposed
to public policy since Claim No.12 is relating to Loss of Business
Development and law does not require to produce documentary
evidence or conditions of contract. Though Contractor had placed
several judgments of Hon'ble Apex Court and various High Courts,
Com.AS.No.143/2015 &
6 Com.AS.No.145/2015
but learned Arbitrator has failed to follow the proposition of those
judgments.
(f) Rejection of Claim No.14 to award litigation expenses is liable
to be set aside.
(g) Rejection of Additional Claim No.1 is against to the records
produced and it is illegal since contractor has produced Exs.C.1 to
15 and 50 to 53 relating to ready mix plant and learned arbitrator
has rejected this claim without considering the records produced.
(h) Rejection of Additional Claim No.2 is concerned this claim is
wrongly rejected by observing that this claim is included in Claim
No.6. But, Claim No.6 is entirely different than additional claim
No.2. Additional Claim No.2 relates to idle charges for ready mix
plant and machineries during the extended period of contract. In the
absence of such plant and machinery, it was not possible to
complete the work. BOQ includes concrete mix and it is the choice
of the Contractor to use such concrete mix as he thinks.
Observation of the learned Arbitrator that there was no direction of
the BBMP to install ready mix plant, is illegal. In the Certification
to the bills, installation of ready mix plant and machinery has been
noted. Contractor has produced various agreements entered into
with various suppliers of the plant and machinery, at Exs.C.51 to
Com.AS.No.143/2015 &
7 Com.AS.No.145/2015
C.53. But learned Arbitrator has wrongly rejected this claim
without considering the materials on record properly.
(i) So far Claim Nos.1,3,4,6,10 & 11 are concerned, the amount
awarded is less than what should have been awarded and the
reduction is not sustainable.
(J) So far Claim No.1 is concerned which relates to delay in release
of R.A.Bill Nos.1 to 3, RA Bill No.1 was submitted on 11.10.2010,
RA Bill No.2 was submitted on 20.11.2011 and 3rd and final RA bill
was submitted on 10.10.2012. Each RA bill was to be settled within
60 days from the date of its submission. But, RA bills were settled
on 6.1.2011, 19.6.2012 and 3.5.2013 resulting in a delay of 88 days,
179 days and 206 days and for the said delay period the interest is
payable. Though RA bill No.2 was submitted on 24.12.2011, but
learned Arbitrator has wrongly considered the date of submission as
14.3.2012. Thus there is wrong calculation relating to number of
days of delay in releasing the RA bills amount and in not awarding
interest for the delay in releasing the RA bills amount.
(k) So far claim No.4 is concerned, learned Arbitrator has awarded
Rs.91,070/- only as against claim for Rs.12,54,796/-. Reduction of
claim is against to the terms of contract and admitted facts since
BBMP has not given any figure contrary to the figure given by the
Com.AS.No.143/2015 &
8 Com.AS.No.145/2015
Contractor relating to the quantity variation and there was more
than 25% increase leading quantity variation and therefore,
Contractor is entitled for the increase in market rate for the varied
quantity of the work done. Learned Arbitrator has refused to award
interest on this claim without assigning any reasons.
(l) So far Claim No.6 is concerned, learned Arbitrator has reduced
this claim without considering undisputed records produced by the
parties. Learned Arbitrator has refused to award interest on this
claim without assigning any reasons.
(m) So far Claim No.10 is concerned, learned Arbitrator has
reduced this claim without considering the records properly. It is
not stated as to why interest has not been awarded on this claim.
Though it is observed in the Award that Contractor has justified in
adoption of 25% towards loss of overhead and profit margin against
its normal adoption of 15% towards overhead and 15% towards
profit, but learned Arbitrator has wrongly awarded 10% only against
to the materials on record and it is illegal on the face of record.
Refusal of interest on this claim is cryptic order.
(n) So far as Claim No.11 is concerned learned Arbitrator has
awarded Rs.3,06,043/- only as against the claim for
Rs.1,33,09,852/-. This type of reduction of claim is against to the
Com.AS.No.143/2015 &
9 Com.AS.No.145/2015
admitted facts and materials on record. It is not explained why
interest is not awarded on this claim.
5. With the above grounds plaintiff/Contractor of
Com.AS.No.143/2015 has requested to set aside the Arbitral award
dated 9.6.2015 in so far as claim Nos.2,7,8,12,14 & additional claim
Nos.1 & 2 which have been rejected and rejection of interest
regarding claim Nos.4,6,10 & 11 and reduction of amount relating
to Claim Nos.1,4,6,10 & 11 and to modify the impugned Award by
granting the claims as sought for in the claim petition along with
interest.
6. The grounds urged by the BBMP in Com. AS No.145/2015 may
be summed up as under:
(a). The Award dated 9.6.2015 passed by the Sole Arbitrator is
illegal, opposed to public policy and contrary to the terms and
conditions of the contract.
(b). The learned Arbitrator ought to have negatived the contention
of the Contractor and all his claims at the threshold of the
arbitration hearing itself. Therefore, the award in toto is liable to be
set aside as not maintainable and the impugned award is opposed to
pubic policy of India.
Com.AS.No.143/2015 &
10 Com.AS.No.145/2015
(c). Learned arbitrator has failed to appreciate the principle laid out
by the Hon'ble Supreme Court in U.O.I Versus Master Construction
Company reported in (2011)12 Supreme Court Cases 349. The
learned Arbitrator ought to have rejected the claim of the contractor
as not maintainable.
(d). In so far as claim No.3 is concerned, the learned Arbitrator has
given unwarranted discussion and reasonings for allowing the
claim.
(e). In so far as claim No.6, the learned Arbitrator has awarded a
sum of Rs.68,71,770/- which is seriously disputed by the BBMP.
The percentage arrived by the learned Arbitrator is not based on any
decided law, scientific formula or norms under any clause of the
contract.
(f). As regards claim No.10, the learned Arbitrator has failed to see
that it is a repetitive claim and the claimant has claimed the loss
under different head.
(g). The learned Arbitrator exceeded its jurisdiction in all aspect,
contract and the law of the land. The interest awarded at 18% is
again high and more than the bank lending interest.
Accordingly, BBMP, who is the plaintiff of Com.A.S.No.145/2015,
Com.AS.No.143/2015 &
11 Com.AS.No.145/2015
has requested to set aside the impugned award dated 9.6.2015.
7. From the above, the following points have arisen for my
consideration:
1) Whether Arbitral Award dated 9.6.2015 rejecting Claim
Nos.2,7,8,12,14 and additional Claim Nos.1 & 2 is apparent
illegal on the face of record and against to the admitted
materials on record and opposed to public policy ?
2) Whether Arbitral Award dated 9.6.2015 reducing the
amount with respect to Claim Nos.1,3,4,6,10 & 11 is
apparent illegal on the face of record and against to the
admitted materials on record and opposed to public policy ?
3) Whether Arbitral Award dated 9.6.2015 refusing to award
interest to Claim Nos.4,6,10 & 11 is apparent illegal and
opposed to public policy ?
4) Whether Bruhat Bengaluru Mahanagara Palike who is
plaintiff of Com.AS.No.145/2015 has made out grounds under
Sec.34(2) of the Arbitration & Conciliation Act 1996 to set
aside Arbitral Award dated 9.6.2015 ?
5) What order ?
8. Heard the arguments of both sides
9. My findings on the above points are as under:
Issue Nos.1 & 2 : Partly in the affirmative
Issue No.3 : Affirmative
Issue No.4 : Negative
Issue No.5 : As per final order
Com.AS.No.143/2015 &
12 Com.AS.No.145/2015
for the following :
REASONS
10. Issue Nos. 1 to 4 : As all these issues are interlinked with each
other, I have taken up all these together for consideration.
11. At this stage itself it is important to note the date of events which
are as under:
a) Date of submission of tender ....................30.8.2009
b) Date of Opening of tender.........................1.09.2009
c) Contract Awarded on ...................................5.03.2010
d) Agreement executed on ............................ 5.03.2010
e) Employer handed over site to the Contractor on ..... 14.4.2010
f) Contractor commenced work on ........................ 14.4.2010
g) Contractual period to complete work................... 5 months
h) Work completed on ........................................31.3.2012
i) Time was extended to complete work till..................31.3.2012
with extended period....................................... 18.6 months
After going through the materials placed by the parties, learned Arbitrator
has observed that Contractor submitted tender on 30.8.2009 and same was
opened by the Employer/BBMP on 1.9.2009. The validity period to
finalize the tender was 90 days from the date of opening of the tender. But
Employer/BBMP issued Work Order on 5.3.2010 with delay of more than
6 months from the date of opening of the tender. It was short term tender
Com.AS.No.143/2015 &
13 Com.AS.No.145/2015
to be completed within 5 months including the monsoon period. For such
type of short term tender, Employer took nearly 6 months from the date of
opening of the tender to issue Work Order. There was delay to handover
work site to the Contractor. There was delay in supplying the drawings.
There was delay in releasing RA Bills and release of price adjustment bill.
Accordingly it is the observation of the learned Arbitrator that the delay
was caused due to breaches committed by the Employer/BBMP resulting
prolongation of the contract period for 18.6 months as against original
contract period of 5 months. Learned advocate for BBMP has not shown
materials to hold that BBMP did not commit breaches of the contract
resulting in delay and prolongation of the contract work.
12. Contractor filed his claim petition before the Arbitral Tribunal in
which he made 14 claims and two additional claims in all he made 16
claims on the ground that the Contract was a reciprocal promise and the
BBMP was required to discharge its various contractual obligations. It was
required to issue work order within 90 days from the date of opening of the
tender. But BBMP took more than 6 months time to issue work order from
the date of opening of tender during which period the price of various
materials, POL, labour came to be increased. BBMP failed to provide
hindrance free site along with alignment and caused considerable delay in
execution. Further it delayed the issue of good for construction drawings
and issued drawings in piece meal even after completion of the original
Com.AS.No.143/2015 &
14 Com.AS.No.145/2015
contract period. BBMP delayed the release of RA bills beyond the
contractual due dates causing financial loss to the contractor. BBMP
delayed the approval and payment of price adjustment bill submitted to it.
Thus, BBMP failed and neglected to discharge its contractual obligations
in the required time due to which the contractor was prevented from
completing the work in time and sustained various losses and injuries and
therefore contractor is entitled for compensation from BBMP. The BBMP
was respondent before the Arbitral Tribunal and it filed its objection
statement denying the claims of the contractor and it requested to dismiss
the claim of the contractor.
13. Claims made by the Contractor in his claim petition filed before
the Arbitral Tribunal are as under:
Claim Name of Claims Claimed amount Interest % Total claimed
No. in Rs. amount (Rs.)
1. Claim for compensation 18% & 24% 14,01,547.00
for delay in release of 14,01,547.00
RA Bill payment
2. Claim for compensation 39,45,726.00 18% p.a. 40,15,369.00
for increase in contract 70,043.00
price due to delay in
issue of work order
3. Claim for price 36,71,604.00 18% & 24% 44,91,171.00
escalation 8,20,106.00
4. Claim for quantity 9,90,914.00 2,63,882.00 12,54,769.00
variation
5. Claim for extension of 1,00,415.00 78,935.00 1,79,350.00
performance Bank
Guarantee
Com.AS.No.143/2015 &
15 Com.AS.No.145/2015
6. Claim for plant and 91,62,360.00 91,62,360.00
machinery, manpower
rendered idle
7. Claim for new rates for 92,00,000.00 92,00,000.00
the period beyond 5
months
8. Claim for escalation 13,16,000.00 3,03,000.00 16,19,000.00
already claimed by
another 20% due to
prolongation of contract
period
9. Claim for refund of 3,80,000.00 2,54,485.00 6,34,485.00
Earnest Money Deposit
10. Claim for loss of 3,11,28,154.00 3,11,28,154.00
overhead and profit
margin
11. Claim of overall 1,33,09,852.00 1,33,09,852.00
variation of contract
12. Claim for loss of 37,60,000.00 37,60,000.00
business development
13. Claim for Presuit,
pendente lite and future
interest @ 18% pa .
14. Claim for litigation as
per actual
Additional Claims filed by the claimants
Addl.Cl. Claim for extra rates for 35,36,904.00 18% per annum 35,36,904.00
No.1 executing M35, M15 &
M10 ready mix concrete
beyond its original
period of contract
2. Claim for ready mix 2,53,86,849.00 18% p.a. 2,53,76,849.00
plant and machinery idle
for the extended period
of contract
Com.AS.No.143/2015 &
16 Com.AS.No.145/2015
Total 10,58,778.00 31,91,998.00 10,90,70,776.00
claimed
amount
14. After holding enquiry and after hearing, claims awarded,
reduced, refused etc., by the learned Arbitrator in the Award dated 9.6.2015
are as under:
Sl.No. Claim Total Claimed Awarded amount Remarks (if any)
Number amount including interest
including
interest
01 01 14,01,547.00 7,88,976.00 Interest at 15% is allowed
02 02 40,15,369.00 Claim rejected
03 03 44,91,171.00 38,29,767.00 Interest 15% is allowed
(subsequently as per direction of the
Arbitrator, the Claimant had
submitted their escalation, amounts
to Rs.35,33,531/-)
04 04 12,54,796.00 91,070.00 Interest is not allowed
05 05 1,79,350.00 1,35,900.00 Interest at 15% is allowed
06 06 91,62,360.00 68,71,770.00 Interest is not allowed
07 07 92,00,000.00 Claim rejected
08 08 16,19,000.00 Claim rejected
09 09 6,34,485.00 5,93,615.00 Interest at 15% is allowed
10 10 3,11,28,154.00 1,24,51,262.00 No interest is allowed
11. 11 1,33,09,852.00 3,06,043.00 No interest is allowed
12. 12 37,68,855.00 Claim rejected
13. 13 18% interest is Indicated against
claimed individual claims
14. 14 As per actual Claim rejected.
Arbitration
Com.AS.No.143/2015 &
17 Com.AS.No.145/2015
proceedings
expenses if any
shall be shared
equally.
Additional Claim filed by the Claimants
15. AC.1 35,36,904.00 Claim rejected
16. AC.2 2,53,76,849.00 Claim rejected
Total 10,85,08,692.00 2,50,68,403.00
15. So far as claim No.1 is concerned, it is relevant to note that
Contractor made his claim for Rs.14,01,547/- for compensation for the
delay in release of RA bill payment, on the ground that as per Clause-33.1
of the conditions of Contract, he was entitled for payment of RA bill within
60 days from the date of submission, but there was considerable delay in
making payment of RA Bill by the BBMP which resulted in borrowing
money from the banks and financial institutions by paying interest at 16%
per annum. Contractor placed Exs.C.2 to C.6, C.8, C.11, C.15 and C.16
before the Arbitral Tribunal to show correspondence made by him with
BBMP requesting to release RA Bill payment. Learned Arbitrator relied
upon the proposition of Law of Constitution Bench of Hon'ble Apex Court
in AIR 2001 SC 626 (Executive Engineer, Dhenkanal Minor Irrigation Division,
Orissa etc. Vs. N.C.Budharaj (D) by LRs etc.) to award interest for the delay
in releasing payments of RA Bill. Learned Arbitrator accepted the certified
true copy of the condition of the contract placed by the BBMP to
Com.AS.No.143/2015 &
18 Com.AS.No.145/2015
adjudicate claims. Learned Arbitrator has observed that First, Second and
Third RA Bills were submitted on 11.10.2010, 14.3.2012 and 10.10.2012
respectively and date of release of payments of these bills was on 6.1.2011,
19.6.2012 and 2.5.2013 respectively and there by there was total delay of
86 days and net delay of 26 days in releasing payment of First RA Bill and
there was total delay of 96 days and net delay of 36 days in releasing the
2nd RA Bill and total delay of 203 days and net delay of 113 days in
releasing the 3rd RA Bill. Learned advocate for BBMP in these cases on
hand before this court has not disputed the delay caused in releasing
payments of RA Bills. However, it is submitted in his notes of arguments
that as per Clause-31(7)(b) interest at the rate of 2% higher than the current
rate of interest prevalent is permissible. Learned Arbitrator has calculated
the delay and awarded interest at 15% on the delay as under:
Sl. Name of Gross Amount Date of Date of Total Total 15% interest
No. the RA of the Bill Submission release of No. of delays allowed.
Bil payments days beyond
delayed 60 days
for RA
Bill & 90
days for
Final
Bill
1 RA Bill 1,97,26,632.00 11.10.2010 6.1.2011 86 26 2,10,778.00
No.1
2. RA Bill 57,62,609.00 14.3.2012 19.6.2012 96 36 85,255.00
No.2
3 RA Bill 1,06,15,000.00 10.10.2012 02.05.2013 203 113 4,92,943.00
No.3
Com.AS.No.143/2015 &
19 Com.AS.No.145/2015
and
Final
Bill
Total Interest allowed Rs.7,88,976.00
16. True Copies of 1st, 2nd and 3rd RA Bills were placed and marked
as Exs.C.75 to C.77 respectively in the arbitral proceedings. I have
carefully gone through these Exs.C.75 to C.77 relating to dates of
submission and dates of release of payments. Learned Arbitrator has
wrongly considered date of submission of 2 nd RA Bill as 14.3.2012.
Factually 2nd RA Bill was submitted on 24.12.2011 and not on 14.3.2012.
Since the correct date of submission of 2nd RA Bill is 24.12.2011, the total
delay is 175 days and net delay is 115 days ( 175 days minus 60 days = 115
days) in releasing the payment of 2nd RA Bill. Contractor is entitled for
interest at 15 % per annum amounting to Rs.2,48,512/- for the net delay of
115 days in releasing the 2nd RA Bill amount of Rs.57,62,609/-. So far as
award of interest for the delay in release of payments of 1 st and 3rd R.A.Bill
is correct. Thus, Contractor is entitled for Claim No.1 as under:
1St R.A. Bill Rs. 2,10,778.00
2nd R.A. Bill Rs. 2,48,512.00
3rd R.A. Bill Rs.4,92,943.00
Total Rs. 9,52,233.00
It is necessary to modify the amount awarded towards Claim No.1 in the
Arbitral Award. To this extent, there are grounds to interfere in the Arbitral
Com.AS.No.143/2015 &
20 Com.AS.No.145/2015
Award so far as amount awarded towards claim No.1 is concerned.
17. So far as Claim No.2 is concerned, Contractor has made this claim
for Rs.40,15,369/- for compensation for increase in the contract rates on
account of prolongation of issue of Work Order to commence the work on
the ground that he had submitted tender on 30.8.2009 for short term tender
of the work to be completed within 5 months and the stipulated period to
issue work order is 90 days from the date of opening of the tender. Tender
was opened on 1.9.2009. But Work Order was issued on 5.3.2010 i.e., after
about six months from the date of opening of tender. During this period
there was increase in the rates and as such, Contractor made representation
to the employer/BBMP to increase its quoted rates. But same was not
considered. BBMP in its objection statement denied this claim of the
Contractor on the ground that Clause-34 of the Contract, which is relied
upon by the Contractor cannot be invoked for compensation for increase
due to prolongation of the issue of Work Order.
18. After considering the materials placed by the parties and also
submissions made by them, learned Arbitrator has rightly rejected this
claim No.2 with the observation that as per the Department's procedure it is
required to extend the validity of the tender till the department obtains
approval for awarding the work to the lowest tender and till the Work
Order is issued. Normally the Department will ask the Contractor to
extend the validity of the tender periodically till the tender is accepted from
Com.AS.No.143/2015 &
21 Com.AS.No.145/2015
the competent authorities and Work Order is issued. Department of BBMP
was required to follow this procedure. Therefore the Contractor's quoted
rates shall be valid inspite of the extended period of time from the date of
opening of the tender till the issuance of the Work Order. Contractor
received the Work Order and continued to execute it. After going through
the materials on record and the reasonings of the learned Arbitrator in
rejecting Claim No.2 I am of the considered opinion that there are no
grounds to interfere and to set aside this Award of learned Arbitrator in
respect of this Claim No.2 is concerned.
19. So far as Claim No.3 made by the Contractor is concerned , Contractor
made claim for price escalation of Rs.36,71,604/- and interest thereon at
18% per annum and 24% per annum amounting to Rs.8,20,106/- and in all
Contractor claimed Rs.44,91,171/- under this head.
20. It was contended by the Contractor that price escalation is on
account of prolongation of the contract not attributable to the Contractor
since Contractor submitted tender on 31.8.2009 and it was opened by the
employer on 1.9.2009 and work order was issued on 5.3.2010 i.e., after
lapse of six months from the date of opening of the tender. BBMP handed
over work site on 14.4.2010 and on that day work was commenced. In
fact, contract completion period to be ended on 13.9.2010 but same was
extended for more than 18.6 month. The details of the various delay
caused by the BBMP were shown in the claim petition along with the delay
Com.AS.No.143/2015 &
22 Com.AS.No.145/2015
analysis. Accordingly Contractor claimed escalation under the condition of
Contract Clause-40 and 40.1(a),(b) & (c).
21. BBMP raised objection to the claim No.3 of the Contractor
disputing the delay analysis chart and the claim under different heads
shows exaggerated claim escalation. The delay in release of RA bills, in
issuance of approved drawings for different section cannot be
compensation event, as drawings are same and similar and therefore cannot
be a ground for compensation. The awarding of the contract, issue of work
order by the BBMP is subject to approval by the State Government and its
authorities and as such, the delay if any cannot be attributable to the
BBMP. The delay depends upon various other authorities, agencies and
utility services before issue o the work. The price adjustment Clause-
40.1(a)(b)(c) is not applicable as the parties have not agreed the same.
22. After going through the nature of claim No.3 made by the
Contractor and the nature of objection taken by the BBMP and the
materials placed by the parties, learned Arbitrator awarded Rs.38,29,767/-
with interest at 15% per annum as against the claim for Rs.44,91,171/-
towards Claim No.3 made by the Contractor with the reasonings that
Arbitral Tribunal accepted the certified true copies of the Agreement filed
by the BBMP since condition of the contract filed by the Contractor was
not tallying with the certified copy of the contract documents filed by the
BBMP. Even if condition Clause-40.1 is not accepted, Contractor is
Com.AS.No.143/2015 &
23 Com.AS.No.145/2015
entitled for escalation as the contract period is extended beyond 12 months
from the date of commencement of the contract and if the contract period
is extended beyond 12 months and the contract value exceeds Rs.1.00
Crore, the Contractor is entitled for escalation as per the Government
order. The contract period of completion of five months extended for a
period of 18.6 months totaling to 23.6 months and thereby the contract
period of completion had exceeded the minimum requirement of 12
months and above and the value of the contract exceeding Rs.1.00 Crore,
for eligibility of escalation as per the Government Order. BBMP has
considered the original contract period of five months and stated that the
contract period is less than 12 months and therefore, the Contractor is not
entitled for escalation. This type of interpretation of the contract condition
by the BBMP is not correct. The period of completion including original
contract period + extended period of contract as issued by the BBMP had
exceeded 12 months and therefore, Contractor is entitled for escalation as
the contract period is extended for more than 12 months and exceeding the
value of Rs.1.00 Crore. During the course of hearing, learned Arbitrator
directed both the parties on 16.5.2015 to jointly work out the escalation.
Though Executive Engineer of BBMP did not agree for escalation, but he
worked out the escalation taking into account the percentage of
components adopted for the various materials. Learned Arbitrator found
that the method adopted by the BBMP to work out calculation for
Com.AS.No.143/2015 &
24 Com.AS.No.145/2015
escalation was not correct and accordingly again directed the BBMP to file
fresh calculation of escalation. But, BBMP did not file it. Contractor filed
escalation as per the direction of the learned Arbitrator for an amount of
Rs.35,33,531/- based on the norms of the Government Departments such
as PWD, BWSSB and KPCL. The norms of KPCL followed by the
Contractors in it escalation calculation came to be accepted by the learned
Arbitrator. Accordingly learned Arbitrator has held that Contractor is
entitled for escalation for an amount of Rs.35,33,531/- and interest thereon
at 15% p.a., from the date of passing of final bill till 22.11.2013 is accepted
for Rs.2,96,236/- and accordingly learned Arbitrator has awarded amount
of Rs.38,29,767/- under Claim No.3. After going through the materials on
record, observation and award made by the learned Arbitrator relating to
Claim No.3 of the contract, there are no grounds to interfere in the said
amount awarded by the learned Arbitrator so far as Claim No.3 is
concerned.
23. So far as Claim No.4 is concerned, it is relevant to note that the
Contractor has made this Claim No.4 for Rs.12,54,796/- for quantity
variation on the ground that he is entitled for quantity variation given in the
BOQ more than 125% at new rates as the quoted rates are not applicable
for variation beyond 125%. Variations in the rates have taken place
beyond the original period of contract and hence he is entitled for actual
market rates which works out to an average of 25% on the BOQ rates and
Com.AS.No.143/2015 &
25 Com.AS.No.145/2015
accordingly he claimed these rates on account of extra financial investment
made for execution of the work. Contractor has also claimed
compensation for reduction in the BOQ quantities actually executed less
than 25% variation limit, by enclosing the details in Annexure-IV.
Accordingly it was claim of the Contractor that he is entitled for
compensation for not allowing to execute certain BOQ for which he had
quoted his rates apart from his entitlement for quantities variation given in
the BOQ more than 125%. BBMP in its objection statement has accepted
in case of increase in the quantities of item in the BOQ beyond 25% as per
Clause-34 of the conditions of contract. In case the quantity executed is
less than 25% and BOQ items not executed, the Contractor is not entitled
for any compensation towards loss of profit.
24. After going through the materials placed by the parties and by
considering the submissions made by them, the learned Arbitrator has
awarded Rs.91,070/- as against claim for Rs.12,54,796/- under this Claim
No.4 with the reasonings that the contract provides for the variation above
125% i.e., BOQ quantities exceeding 25% of individual items. Contractor
claimed for the quantities executed above 25% as most of the items were
executed beyond the original period of contract and therefore the
deviations of the rates on the basis of BOQ, Schedule of Rates are not
applicable and Contractor is entitled based on the market rates for the items
of work executed beyond the original contract period. The claim of the
Com.AS.No.143/2015 &
26 Com.AS.No.145/2015
Contractor appears to be reasonable on the basis of Clause-31.4 of the
Contract Conditions. However, it is observation of the learned Arbitrator
that the claim of 25% of the Contractor is in the higher side when
Contractor has already claimed escalation under Claim No.3. Accordingly
learned Arbitrator has calculated the amount by taking into consideration
the variation quantity25% beyond 25% claimed at 25% BOQ rates against
which 15% BOQ rates allowed and therefore learned Arbitrator has
awarded Rs.91,070/-. It is stated by the Arbitrator that no interest is
payable on this amount. So far refusal to grant interest on this amount is
concerned, it will be discussed separately under Item No.13. So far
amount of Rs.91,070/- awarded under Claim No.4 is concerned, after going
through the materials on record and calculations made by the learned
Arbitrator, there are no grounds to interfere in this portion of the Award
relating to amount of Rs.91,070/- awarded under this Claim No.4.
25. So far as Claim No.5 is concerned, Contractor made claim for
compensation of Rs.1,79,350/- for extension of bank guarantee. It was
contended by the Contractor in his claim petition filed before the Arbitral
Tribunal that as per Clause-43.1 of the contract and Clause-24.1 of IFT, he
was required to submit the security deposit to the BBMP which should be
valid until a date of 30 days from the date of expiry of defects liability.
Original bank guarantee was submitted on 5.3.2010 which was kept valid
till 31.3.2013 for Rs.32,05,000/-. The contract work was required to be
Com.AS.No.143/2015 &
27 Com.AS.No.145/2015
completed within 5 months from the date of commencement of the contract
which started on 5.3.2010 and the contract period ended on 4.8.2010.
Contractor was directed to renew or keep alive the bank guarantee on
account of prolongation of contract for reasons not attributable to him. The
delay is attributable to the BBMP. Therefore, Contractor had to incur
additional expenditure on account of extension of bank guarantee such as
bank guarantee commission charges and interest on margin money
deposited and also blockage of fund invested in the bank for obtaining
Bank guarantee. BBMP raised objection stating that Contractor was
required to keep the Bank Guarantee alive till the completion of the defects
liability period and 30 days beyond after. Therefore, Contractor is not
entitled for Claim No.5.
26. After going through the materials on record and by considering
the claim of the Contractor and objection raised by the BBMP, learned
Arbitrator has awarded Rs.1,35,900/- towards Claim No.5 by allowing
interest at 15% with the reasonings that the contract has been extended due
to various breaches of the contract committed by the BBMP and due to
prolongation of the contract period, the Bank Guarantee was required to be
kept alive beyond the stipulated period for which Contractor had also
incurred additional expenditure, on account of the delay caused by the
BBMP in completing the work within the stipulated period. Therefore,
Contractor is entitled for compensation for the extra expenditure incurred
Com.AS.No.143/2015 &
28 Com.AS.No.145/2015
towards commission charges, interest for extending the margin money
deposited in the bank. The Contractor produced letter issued by the Bank
charging interest for over draft amount drawn and it proved the contractor
had incurred additional expenditure on Bank Guarantee
submission/extension. After going through the nature of Claim No.5 made
by the Contractor and nature of the objection raised by the BBMP and the
amount awarded by the learned Arbitrator with the reasonings, there are no
grounds to interfere with the Award of learned Arbitrator relating to Claim
No.5 is concerned.
27. Relating to Claim No.6 is concerned, Contractor has made this
claim No.6 for Rs.91,62,360/- for compensation for manpower and
Plant and Machinery rendered idle during the extended period of
contract on the ground that due to various hindrances encountered by
him, he had to keep idle manpower, plant and machinery for longer
period which caused substantial loss to him. Though he brought this
fact to the employer/BBMP in the monthly progress review meetings
and also through various correspondence, but BBMP has failed to
consider it. Contract was extended on account of various breaches of
the contract committed by BBMP and as such, Contractor had kept his
manpower, plant and machinery mobilized for more than 18.6 months
beyond the contract period for which his quoted rates were not taken
Com.AS.No.143/2015 &
29 Com.AS.No.145/2015
into consideration. He started the work on 5.3.2010 and was supposed
to have completed the work by 13.9.2010 as five months period of
contract had ended. But the possession of the site was given only on
14.4.2010. He had to stay till 31.3.2012 which means he had to stay
for 18.6 months over and above the period of contract and his
manpower, plant and machinery were kept idle for most of the time
and thereby he had to incur huge amount in this regard. In support of
this claim Contractor placed hire charges agreement, labour charges
agreement and other various equipment engaged by them etc., as
Exs.C.51 & C.52. BBMP in its objection statement has denied this
claim No.6 of the Contractor and requested to reject the claim.
28. After going through the materials placed by the parties and
after hearing submissions, learned Arbitrator has awarded
Rs.68,71,770/- towards this Claim No.6 as against the claim of
Rs.91,62,360/- with the observation that the Contractor claimed plant
and machinery idle for the extended period of contract of 18.6 months
along with the statement enclosed as Annexure-VI and claimed only
60% of the plant and machineries and manpower engaged during the
extended period of contract accepting 40% utilised in the works.
Contractor submitted various exhibits for the hire of machineries and
Com.AS.No.143/2015 &
30 Com.AS.No.145/2015
agreement entered into with suppliers and also documents for
engaging manpower. Though the BBMP has denied the engagement
of entire plant and machinery and manpower throughout the period of
extended period of contract, but no documentary proof is placed by
the BBMP to support its stand. Normally in the Government
Departments, the officials of the Department are required to maintain
a register of plant and machinery and manpower engaged in the
works, daily/monthly. Therefore, it is the responsibility of the BBMP
to ensure availability of the manpower and machinery available in the
project site till the work is completed. BBMP cannot say many
machineries are not required at the site as they have the authority to
direct the Contractor to remove the unwanted machineries and
manpower provided in the project site. BBMP has failed to provide
any documentary proof for their statement that entire manpower and
plant and machineries not required at the site. Contractor had written
many letters at Exs.C.17, C.23, C.24, C.29 and C.30 to the BBMP
stating that manpower and machineries were idle on account of many
hindrances caused by the BBMP. Contractor has claimed towards loss
of manpower and machineries during the extended period of contract
to the extent of 60% for the purpose of idle wages and hire charges
Com.AS.No.143/2015 &
31 Com.AS.No.145/2015
which he had claimed as Rs.91,62,360/- with the Annexure-VI of
Claim Statement. Claims made by the Contractor appears to be
reasonable on account of engaging the plant and machinery and
manpower for the extended period of contract for which he had
incurred additional cost not envisaged in his quoted rates in the
contract. Though it is observation in the Award that claim of the
Contractor appears to be reasonable, but learned Arbitrator has
restricted the amount to Rs.68,71,770/- as against the claim of
Rs.91,62,360/- by accepting the claim of the Contractor to the extent
of 75% of 60% idle period. After going through the nature of
materials on record and the observation made by the learned
Arbitrator, there are no grounds to interfere in the Award made by the
learned Arbitrator so far as Claim No.6 is concerned. Further learned
Arbitrator has refused to award interest on the awarded amount of
Claim No.6 and this refusal of interest will be considered separately
under Point No.13.
29. So far claim No.7 is concerned, Contractor made this claim for
Rs.92,00,000/- towards new rates for the extended period of contract
beyond five months on the ground that contract has been extended
due to various breaches committed by the BBMP for a period of 18.6
Com.AS.No.143/2015 &
32 Com.AS.No.145/2015
months beyond the original period of contract of five months.
Contractor had quoted his rates taking into account the likely period of
90 days to issue work order. But the work order was issued after more
than six months from the date of opening of the tender. Therefore
quoted rates were increased during the extended period of contract.
Therefore to compensate this, it is reasonable to increase the rates to
the extent of 20% of BOQ rates during the extended period.
Accordingly Contractor claimed 20% increased rates of BOQ. BBMP
raised objection relating to this Claim No.7 stating that this claim is
not permissible. After going through the materials on record, the
learned Arbitrator has rejected this Claim No.7 with the observation that
the Contractor had already claimed escalation under Claim No.3 on
account of the extended period of contract beyond 5 months and total of
more than 12 months of contract period. The escalation amount claimed
takes care of the entire period of contract as the indices are calculated from
the date of previous quarter from the date of opening of tender till the
period of completion which has been claimed under Claim No.3.
Therefore, the claim of extra rates over and above the BOA rates is not
reasonable.
30. I have carefully gone through the nature of claim No.3 of the
Contractor. As rightly observed by the learned Arbitrator, since claimant
Com.AS.No.143/2015 &
33 Com.AS.No.145/2015
had already claimed escalation on account of the the extended period of
contract, claimant is not entitled to make same claim for extra rates over
and above BOQ rates for the extended period of contract. Therefore,
learned Arbitrator has rightly rejected this claim No.7 of the Contractor.
There are no grounds to interfere or to set aside the Award of the learned
Arbitrator in rejecting Claim No.7 of the Contract.
31. So far as Claim No.8 is concerned, Contractor has made this claim
for Rs.16,19,000/- for escalation amount already submitted to be enhanced
on account of BOQ rates by 20% due to delay in issue of work order to
commence the work and due to delay in view of prolongation of the
contract beyond the original period of completion. As rightly observed by
the learned Arbitrator the original escalation claim under Claim No.(3)
shall take into consideration the original BOQ rates and also the increased
rates during the extended period. Therefore, this claim came to be rejected
rightly. There are no grounds to interfere and to set aside the Arbitral
Award in rejecting the Claim No.8 of the Contract.
32. So far as Claim No.9 is concerned, Claim No.9 made by the
Contractor is for refund of earnest money deposit of Rs.3,80,000/-.
Contractor claimed interest on it amounting to Rs.2,54,485/-. Thus Claim
No.9 was for recovery of Rs.6,34,485/- in all. This claim was made by the
Contractor on the ground that he had submitted Rs.3,78,000/- on 29.8.2009
by DD as Earnest Money Deposit which was refundable immediately after
Com.AS.No.143/2015 &
34 Com.AS.No.145/2015
signing the agreement and furnishing required performance security.
Agreement was signed on 5.3.2010 and performance guarantee was also
submitted on 5.3.2010. Contractor has completed the work on 31.3.2012
and the maintenance period of one year had ended on 30.3.2013. Though
Contractor had fulfilled all the contractual obligations and requested the
BBMP to release EMD amount, but BBMP had not responded positively to
release EMD.
33. BBMP in its objection statement denied this claim No.9 on the
ground that there is no provision in the agreement for payment of interest
on the EMD amount. By awarding interest at 15% p.a., for the delay in
release of EMD from 21.3.2010 till 22.11.2003, learned Arbitrator has
awarded Rs.5,93,615/- in all towards this Claim No.9 with the observation
that as per the contract EMD amount was refundable immediately after
signing the agreement which was signed on 5.3.2010. However, since
BBMP is a public agency, it required time to get the clearance from various
Officials of the Department and get the competent authorities' clearance
before releasing the payment. Therefore, allowing of another 15 days from
the date of release as per contract was considered. The delay from
21.3.2010 to 22.11.2013 in all 976 days was considered by the learned
Arbitrator. Contract does not prohibit payment of interest and therefore,
claim of the Contractor is reasonable for the delay. However, learned
Arbitrator has awarded interest at 15% p.a., to the delayed period by
Com.AS.No.143/2015 &
35 Com.AS.No.145/2015
reducing the interest from 18% and by reducing the delayed period from
985 days to 976 days in view of allowing extra 15 days time to the BBMP
from the date of releasing the payment. Thus, learned Arbitrator has
considered the submissions of both sides properly and has rightly awarded
interest at 15% to the claim of the Contractor and thus, the award relating
to Claim No.9 holds good and there are no grounds to interfere in it.
34. So far Claim No.10 is concerned it is relevant to note that Contractor
made this claim for Rs.3,11,28,154/- for loss of over head and profit
margin during the extended period of contract on the ground that he had
suffered injuries and loss of expenditure on account of Idle Plant and
Machinery and manpower mobilized immediately after opening of the
tender by expecting that Work Order would be issued immediately since it
was a short term tender with the Contract period of 5 months including
monsoon period. But the Work Order was issued on 5.3.2010 with the
delay more than 6 months though validity period to issue Work Order was
90 days from the date of opening tender. Work site was haded over on
14.4.2010. There was delay in handing over work site. Immediately he
commenced the work and completed about 50% of the contract work
within the original period of contract. Thus due to the breaches of Contract
committed by the Employer/BBMP, he was prevented from completing the
work within the original period of contract. While quoting the rates he had
taken into consideration the small period of time to get the Work Order to
Com.AS.No.143/2015 &
36 Com.AS.No.145/2015
complete the work with the period of 5 months. His quoted rates are not
valid due to breaches committed by the BBMP resulting to extend contract
period for 18.6 months which was extended without imposing penalty on
him. Since the delay is not attributable to him, he is entitled for necessary
compensation for the extended period of the contract. While quoting the
rates Contractor considered the Head Office Over Head of 15% and Profit
Margin of 15% due to prolongation of Contract which are not attributable
to him, had resulted in the increased Head Office Over Head and loss of
Profit Margin as the Head Office increased the expenditure during the
extended period of contract. Contractor placed annual statement of the
Head Office Over head expenditure duly certified by the Chartered
Accountant in support of his claim, at Exs.C.47 and C.48. Accordingly
Contractor claimed 25% towards the loss of Head Office Over Head and
Profit Margin during the extended period of Contract.
35. BBMP in its objection statement filed before the Arbitral
Tribunal denied this claim of the Contractor on the ground that project was
delayed on account of the factors not attributable to it.
36. In support of his claim, Contractor placed Hudson Formula
which is approved by the Hon'ble Apex Court and also decision of Hon'ble
High Court reported in MANU/KA/0345/199 and MANU/AP/0644/2008
and MANU/AP/0071/1995.
37. After going through the materials placed by the parties it is held
Com.AS.No.143/2015 &
37 Com.AS.No.145/2015
by the learned Arbitrator in para No.44.9 of the Award that though BBMP
has denied the delay attributable to it, but it has not placed evidence to
support its contention that delay is not attributable to it. Extension of time
was granted without imposition of any penalty which indicated there is no
failure on the part of Contractor. Various factors caused for the
prolongation of the contract such as delay in R.A.Bills payment, delay in
approval of drawings, delay in finalisation of extra item etc., had caused
the prolongation of the contract which are not attributable to the
Contractor.
38. The Award made relating to this claim No.10 in para No.44.12 of
the Award is as under:
"44.12. After considering the pleadings of the Claimant and the
Respondent and their arguments made and the documents and
case laws produced and I am inclined to agree with the claim of the
Claimant and restricting his claim towards Head Office Over Head
and Profit Margin 10% against 25% claimed. I am awarding a
sum of Rs.1,24,51,262.00 (Rupees One Crore Twenty Four lakhs
fifty one thousand two hundred and sixty two only). No Interest
payable."
This type of award made restricting the claim of the Contractor to 10%
against 25% claimed is illegal and it is apparently against to the materials
on records and also contrary to the settled proposition of law for the
reasons that in para No.44.10 of the award itself it is observed that due to
prolongation of the contract to the extent of 18.6 months against the
Com.AS.No.143/2015 &
38 Com.AS.No.145/2015
original period of 5 months, the Head Office Over Head and Profit Margin
had also been lost. The Contractor had incurred substantial expenditure
towards his Head Office Over Head and Profit Margin. BBMP placed the
percentage of Government Departments followed in the Rate Analysis
adopting Overhead and Profit Margin of 20%. Inspite of all these materials
and though Contractor restricted his claim under these two heads to 25%
and though he calculated claim for loss of Over head at 15% and loss of
Profit margin at 15% in all 30%, and though BBMP placed the percentage
of Government Departments followed in the Rate Analysis adopting Over
head and Profit margin of 20%, but learned Arbitrator without any reasons
has restricted the claim to 10%. This type of restriction of claim without
reasons is against to Section 31(3) of the Arbitration & Conciliation Act,
1996.
39. It is held by the Hon'ble Apex Court in AIR 1984 SC 1703 (A.T.Brij
Paul Singh & Ors. Vs. State of Gujarat) that where in a works contract, the
party entrusting the work commits breach of the Contract, the Contractor
would be entitled to claim damages for loss of profit which he expected to
earn by undertaking the works contract. Hon'ble Apex Court in AIR 1977
SC 1481 (Mohd. Salamatulla & Ors. Vs. Government of Andhra Pradesh) has
confirmed the awarding of damages to the tune of 15% towards loss of
profit due to breach of contract committed by the employer. Further
Hon'ble Apex Court has held in 2010(2) ALT 655 (G.V.Mall Reddy & Co. Vs.
Com.AS.No.143/2015 &
39 Com.AS.No.145/2015
A.P. State Trading Corporation Ltd.) that the loss of profit can be validly
claimed by the Contractor as and when there is breach of contract by the
employer and as per the Hudson Formula award of amount of 15% towards
loss of profit or towards quantum of damages would be justified. It is held
by the Hon'ble High Court of Karnataka in ILR 1992 KAR 3276 (Government
of Karnataka Vs. K. Sudhakar Reddy ) in Para No.11 as under:
"11. So far as the second contention is concerned it appears to us that
the same has to be just mentioned to be rejected because no such
plea has been taken before either the arbitrator or the lower Court
that the extra quantity of work turned out by the contractor was
identical with the type of work undertaken by him pursuant to his
letter dt. 10.9.86 and therefore, no rate in excess of the rate awarded
to the said work could have been given. If there is no such plea and
much less evidence in that regard before the arbitrator, there could
have been absolutely no scope for the arbitrator to have recorded a
finding in that regard, nor could it be said that the finding granting
rates higher than the rate in respect of that work amounts to a
misconduct as to warrant interference at the hands of the Civil
Court."
As noted above, though Contractor calculated loss of Over Head at 15%
and loss of Profit Margin at 15%, in all 30%, but he restricted his claim to
25% in the arbitral proceeding, due to breaches committed by the
employer resulting in prolongation of contract period to 18.6 months as
against original contract period of 5 months. It is undisputed fact that
project was short term contract to be completed within 5 months including
monsoon period. Contractor submitted bid on 30.8.2009. It was opened
by the BBMP on 1.9.2009. Stipulation period to finalize tender was 90
Com.AS.No.143/2015 &
40 Com.AS.No.145/2015
days from 1.9.2009. But Work Order was issued on 5.3.2010 i.e., after six
months. Possession of work site was handed over on 14.4.2010. Thus,
BBMP caused delay in issuing Work Order, in handing over work site and
releasing RA Bills payment etc., which resulted in prolongation of contract
period to 18.6 months as against original contract period of 5 months.
Due to this reason, BBMP extended the time to the Contractor to complete
the work without imposing penalty on the Contractor. During this
prolonged period of contract of 18.6 months Contractor has incurred more
towards Over Head for machineries and labour etc. Therefore, his claim
for Over head cannot be rejected. Apart from that during this prolonged
period of contract of 18.6 months Contractor was prevented from taking up
some other work to earn profit and thereby he suffered loss. It is settled
proposition that awarding of amount towards loss of profit is reasonable.
Even after going through the materials placed by the Contractor, learned
Arbitrator has observed in para No.44.7 of the Award as under:
"Therefore they have justified in adoption of 25% against their
normal adoption of 15% towards Over Head and 15% towards Profit
while quoting the rates for the contract works. However, they limited
the claim only to 25%."
Therefore, it is just and necessary to allow Claim No.10 in full for
Rs.3,11,28,154/- being Head Office Over Head and Profit Margin at 25%
as claimed instead of 10% restricted by the learned Arbitrator by
modifying the Award. Accordingly Claim No.10 stands allowed in full as
Com.AS.No.143/2015 &
41 Com.AS.No.145/2015
claimed by the Contractor and Award stands modified.
40. So far Claim No.11 is concerned, it is relevant to note that
Contractor has made this Claim No.11 for Rs.1,33,09,852/- for overall
variation of the contract amount, on the ground that he had signed the
agreement for contract value of Rs.3,76,88,555/- to be executed within a
period of 5 months from the date of commencement of work. The contract
provides for variation of individual quantities to the extent of 125% of the
tender quantities and an increase in the variation beyond 25% the contract.
As per the direction of the BBMP he executed work which had increased
the contract value including the contractually due claims. He is entitled for
the actual work executed and certified by BBMP and also contractually
due claims submitted to the BBMP which also forms part of the contract
value. The total contract value executed by him works out to Rs.10.42
Crores. The abnormal increase in the contract value is Rs.6.65 Crores. For
additional work he had arranged finance from open markets and financial
institutions at higher rate of interest. Since the contract value exceeded, he
is entitled for compensation by way of increase in the BOQ rates to the
extent of 20% of the difference in actual contract value executed including
the contractually due claims. Accordingly Contractor claimed
Rs.1,40,47,790/-. BBMP in its objection statement has denied this Claim
No.11 of the Contractor and requested to reject this claim.
41. After considering the materials placed by the parties and also
Com.AS.No.143/2015 &
42 Com.AS.No.145/2015
their submissions, learned Arbitrator has awarded Rs.3,06,043/- only
towards this claim No.11 as against claim for Rs.1,33,09,852/- with the
reasonings that Contractor's claim for the Overall variation of the contract
is based on the contract value executed including his contractual claims
filed before the Arbitral Tribunal which exceeded the contract value.
There is no clause in the contract providing for exceeding the contract
value. BBMP should not have power to order for executing the work
beyond the contract value without the consent of the Contractor and
making a supplementary agreement for exceeding the contract value and
negotiated with the Contractor for an amicable rates to be decided between
the parties before commencement of work exceeding the contract value.
The contract value was Rs.376.88 Lakhs and the final bill value as certified
by the BBMP was Rs.361.04 Lakhs which is within the original contract
value. After considering the claim of the contract and the materials
placed, learned Arbitrator has calculated this claim as under:
Sl.No. Description Amount in Rs.
1) Contract Value as per the agreement 3,76,88,555.00
2) Actual Contract Value executed 3,61,04,241.00
Actual Contract value executed including contractually allowed claims
by Arbitral Tribunal
i. Certified Contract value by Respondents in the 3,61,04,241.00
Final Bill
ii. Escalation claim allowed by the Arbitral Tribunal 35,33,531.00
under Claim No.3
iii. Individual Quantity variation allowed by the 91,070.00
Com.AS.No.143/2015 &
43 Com.AS.No.145/2015
Arbitral Tribunal
iv. Total Contractual amount considered including 3,97,28,842.00
claims allowed by the Arbitral Tribunal
v. Less Agreement Contract value 3,76,88,555.00 20,40,287.00
3) Compensation allowed for exceeding the Overall 3,06,043.00
Variation 15% against the 20% claimed by the
Claimant
Compensation payable on account of Overall Variation - Rs. 3,06,043.00
Accordingly learned Arbitrator has awarded Rs.3,06,043/- only towards
this claim No.11 as against Claim for Rs.1,33,09,852/-. After going
through the materials on record and observation made by the learned
Arbitrator, there are no grounds to interfere in the Award made relating to
Claim No.11 is concerned. However, learned Arbitrator has refused to
award interest on this amount awarded towards Claim No.11 and the
refusal of interest will be considered separately under Claim No.13.
42. So far as Claim No.12 is concerned, the Contractor has made this
Claim No.12 for Rs.37,60,000/- for loss of business development on
account of prolongation of the contract for more than 18.6 months in the
project and during this period he has lost the business development and
utilisation of man power, machinery and takeover of new business. This
claim came to be rejected with the observation that Contractor has not
produced any documentary evidence to support this claim. During the
course of argument of these cases before this court, learned Counsel for the
Contractor is not able to show any evidence supporting this claim.
Com.AS.No.143/2015 &
44 Com.AS.No.145/2015
Therefore, this Claim No.12 was rightly rejected by the learned Arbitrator.
43. So far as Claim No.14 is concerned, this claim is made for litigation.
This claim has been rejected by the learned Arbitrator on the ground that
there is no delay on the part of the BBMP in appointing the Arbitrator and
therefore both the parties are required to defend their case to establish their
point of view in the Arbitration and therefore both the parties are required
to bear the litigation cost. There are no grounds to interfere in the Award
of the learned Arbitrator in rejecting this Claim No.14.
44. So far as Additional Claim No.1 of the Contractor is concerned, the
claim of the Contractor is for Rs.32,36,904/- with interest at 18% p.a., for
increase in rates for ready mix cement. This claim was made by the
Contractor on the ground that he had provided RMC to be used in the work
and considered at the time of quoting the rates. But the work could not be
completed in time due to breaches committed by the BBMP. Thus contract
was extended upto 31.3.2012. Therefore, he is entitled for equitable rates
for the period beyond the original stipulated period of contract. However,
average rate of the Schedule of Rates of 2009-2012 for claiming the
equitable rates for all the work were taken. The basic rate considered in
the estimate of M-35 RMC works out to Rs.4,137/- per cubic meter and
after adding the laying charges, area weightage, 10% profit and the quoted
rates above percentage of 11.25%, the equitable rate per cubic meter works
out to Rs.7,671/- per cubic meter whereas the quoted rate for finished item
Com.AS.No.143/2015 &
45 Com.AS.No.145/2015
is Rs.5,626/- per cubic meter. Accordingly Contractor is entitled for
additional amount of Rs.2,015/- per cubic meter for M-35 RMC work.
Contractor had executed 1433 cubic meter under this item and accordingly
he is entitled for 1433 x 1996 = Rs.28,60,268/- under M-35 RMC. Further
Contractor has also claimed a sum of Rs.3,41,224/- under M-15 RMC and
Rs.3,35,412/- under M-10 RMC. Thus, total amount claimed was
Rs.35,36,904/-. BBMP raised objection and denied this additional Claim
No.1 of the Contractor. After going through the materials on record and by
considering the submissions of the parties, learned Arbitrator has rejected
this Additional Claim Nod.1 with the observation that during the hearing,
Contractor agreed that claim is for BOQ only and not extra items. The
Contractor already claimed under Claim No.2 the increase in rate of 20%
due to delay in issue of work order and also claimed under Claim No.7,
claim for new rates of 20% on BOQ rates during the extended period of
contract which includes this additional claim No.1 also. Apart from that,
Contractor had also claimed escalation under Claim No.3 due to
prolongation of period of more than 12 months against the contract period
of five months. Therefore, Contractor is not entitled for the Additional
Claim No.1.
45. After going through the materials on record, nature of Additional
Claim No.1 and the reasons in the Arbitral Award for rejecting this
Additional Claim No.1, there are no grounds to interfere in the Arbitral
Com.AS.No.143/2015 &
46 Com.AS.No.145/2015
Award in rejecting Additional Claim No.1 of the Contractor.
46. So far as Additional Claim No.2 is concerned, Contractor has made
this claim for Rs.2,53,76,849.99 towards ready mix concrete plant rendered
idle for the extended period of contract. Contractor had given details of the
plant and machinery, manpower and number of days idle etc., in his claim
petition under this claim. He claimed the hire charges for plant and
machinery and the idle charges to be paid for Rs.29,940/- per day,
Rs.11,867/- per day and claimed for idle period of 607 days in all
Rs.2,53,73,849/- as per the details enclosed. He claimed interest on the
said amount also He produced various agreements at Exs.C.51, C.52 &
C.53 which were entered into by him with various suppliers of plant and
machinery. BBMP in its objection statement has denied this claim of the
Contractor and requested to reject this claim. Learned Arbitrator has
rejected this claim of the Contractor by observing that Contractor had
already claimed under Claim No.6 for the loss of man-power and plant and
machinery rendered idle during the extended period of contract. The BOQ
item provide for using M-35, M-15 and M-10 concrete mixing and hire
charges of machinery etc. The quoted rates are valid for the entire item of
work including the hire charges for machinery. For the extended period of
contract, the Contractor has already claimed escalation and also the idle
charges of plant and machinery. Though Contractor has not included the
RMC plant and machinery under Claim No.6, the item indicates the
Com.AS.No.143/2015 &
47 Com.AS.No.145/2015
execution of item of RMC M-35, M-15 and M-10. Normally, the RMC
Suppliers supply the machinery at their own transport cost and the ready
mix rates as fixed by the agency shall be payable. There was no direction
from the employer/BBMP to install the ready mix plant within the site. In
the absence of any such direction from the employer/BBMP, the
arrangement made by the Contractor with the suppliers should be dealt
with by him only.
47. This type of rejection of Additional Claim No.2 is concerned, it is
relevant to note that the Award rejecting this Additional Claim No.2 is
vitiated by patent illegality apparent on the face of record and it requires to
be set aside for the reasons that there is no acceptable reasons as
contemplated under Sec.31(3) of the Arbitration & Conciliation Act 1996
for rejecting this claim. Secondly learned Arbitrator has made out a new
case which was not pleaded by either of the parties, by observing that the
RMC Suppliers would bring the machineries to the site at their own cost.
The only two reasons given by the learned Arbitrator for rejecting this
Additional Claim No.2 is that Contractor had already claimed under Claim
No.6 for the loss of man-power and plant and machinery rendered idle
during the extended period of contract and there was no direction from the
employer/BBMP to install ready mix plant within the site. In fact, learned
Arbitrator has failed to consider his own observation in para-50.8 of the
Award that Contractor has made his additional Claim No.2 on the ground
Com.AS.No.143/2015 &
48 Com.AS.No.145/2015
that this claim relating to RMC plant and machinery was left out in Claim
No.6 and therefore subsequently Additional Claim No.2 has been made in
this regard. As could be seen from the terms of the contract and also as
observed in para No.50.7 of the Award, the BOQ item provide for using M-
35, M-15 and M-10 ready mix concrete plant and hire charges of
machinery. Undisputedly Exs.C.75 to C.77 are three running bills
submitted by the Contractor and certified by the Supervising Engineer and
payments were already made. In the end of R.A.Bill at Ex.C.75 certificate
is given as "(v) Contractor has used ready made concrete for all concrete
works". Similarly, in the end of RA Bill at Ex.C.76 it is certified as
"Contractor has used ready made concrete for all concrete works including
M-10". In the same way in the end of RA Bill at Ex.C.77 which is
certified copy as "Contractor has used ready made concrete for all concrete
works including M-10". Contractor has placed several records such as
Ex.C.62, C.62A, C.63, C.64, C.64A, C.65, C.72, C.73, C.74, C.74(a) to
(h), C.75 to C.77, C.81, C.82 etc., to show the concrete ready mix plant
installed by him to complete the work. Contractor produced hire purchase
agreement Exs.C.36 to C.41 regarding tipper documents to show vehicles
taken on hire and Ex.C.43 regarding crane and Ex.C.44 & C.45 regarding
roller and Volvo Excavator, Ex.C.55 regarding vibrator. He produced
Ex.C.50 to C.52 showing the rate. These documents have not been
disputed by the employer/BBMP. There was memo filed in the Arbitral
Com.AS.No.143/2015 &
49 Com.AS.No.145/2015
proceeding stating to accept the documents to be true. Therefore, records
produced by the Contractor relating to the plant and machineries and ready
mix concrete plant installed, could not be disputed. In the absence of such
plant and machineries and installation of ready mix concrete plant, work
could not have been completed. Claim of the Contractor was relating to
ready mix plant rendered idle during the extended period of contract. It is
undisputed fact that contract was prolonged for 18.6 months as against the
short term completion within 5 months. During this prolonged period,
Contractor had to keep the plant and machineries and ready mix concrete
plant idle. This ready mix concrete plant has not been claimed under Claim
No.6 by the Contractor. Contractor has made this claim on the ground that
due to various breaches committed by the BBMP, contract was prolonged
for nearly more than 18 months which is more than 466% from the date of
opening of the tender and 360% from the actual date of completion of the
work. The various hindrances encountered by him is on account of various
factors dealt with in detail in the claim petition. Contract provided for
using ready mix concrete for all type of work and particularly for M-35
grade, M-15 grade and M-10 grade. The work could not be completed
within the agreed time due to the breach on the part of the employer/BBMP
and thereby work got spilled over upto 31.3.2012. Contractor has to bear
the idle charges upto the date of completion. Since the employer has failed
to issue Work Order and drawings in time and also defaulted in performing
Com.AS.No.143/2015 &
50 Com.AS.No.145/2015
its obligations under the Contract, Contractor was forced to work in the site
upto 31.3.2012. He kept plant and machineries along with the staff for
extended period of contract upto 31.3.2012 for a period of 607 days. He
has furnished details of plant and machinery kept in the work site and they
are one batching plant and Silo with DG, one concrete pump, 4 transit
mixers, 2 persons to operate plant, one person as plant mechanic and
electrician, 4 persons as plant helpers, 2 persons as plant co-ordinators, one
person as lab technician, 2 persons as lab helpers, 8 persons as transit
mixer drivers, 4 persons as transit mixer helpers, 3 persons as pump
operators, one person as pump mechanic, 2 persons as pump helpers and 2
persons as site supervisors. He produced hire charges agreement relating
to plant and machineries to show hire charges and idle charges to be paid
by him to the owners of the plant and machineries at the rate of Rs.29,940/-
per day and salary of Rs.11,867/- per day for all the persons required for
running of ready mix concrete plant work. He calculated this amount to
contract period of 607 days and claimed Rs.2,53,76,849/- under this head.
His calculation is as under:-
a. Plant & Machinery idle charges per day Rs.29,940/-
b. Salary to the persons employed for the plant
Rs.11,867/-
rendered idle
Total idle charges per day Rs.29,940/- +
Rs.41,807/-
Rs.11,867
Com.AS.No.143/2015 &
51 Com.AS.No.145/2015
c. Number days rendered idle 607 days
d. Total claim towards idle charges of Ready Mix
Rs.2,53,76,849/-
Plant Rs.41,807 per day x 607 days
48. It is material to note that this type of claim made by the
contractor appears to be excessive. Undisputedly total contract value was
Rs.3,76,88,555/-. Stipulated contract period was 5 months. Work order
was issued to the contractor on 14.4.2010. Stipulated completion period of
5 months of the contract expired on 14.9.2010. Undisputedly
employer/BBMP extended time to complete the work till 31.3.2012
without invoking clause of liquidated damages and without imposing
penalty to the contractor. Work was completed on 31.3.2012. Thus,
prolonged period is from 14.9.2010 till 31.3.2012 i.e., in all 560 days and
not 607 days as claimed by the contractor, for which he is entitled for Plant
& Machineries idle charges. As could be seen from the materials on
records, this additional claim No.2 is different than claim No.6. Contractor
claimed Plant & Machineries idle charges per day Rs.29,940/- and salary
to the persons employed for the plant rendered idle Rs.11,867/- per day i.e.,
in all Rs.29,940/- + Rs.11,867/- = Rs.41,807/- per day. Though contractor
has placed hire charges agreements and labour supply agreements etc., to
support this claim, but by considering the total contract value was
Rs.3,76,88,555/- it is just and reasonable to consider 50% of the charges
for the prolonged period of 560 days only. 50% of charge of Rs.41,807/-
Com.AS.No.143/2015 &
52 Com.AS.No.145/2015
comes to Rs.20,903.5/- per day x 560 days = Rs.1,17,05,960/-. Contractor
is entitled for Rs.1,17,05,960/- towards this additional claim No.2.
Accordingly Award of learned Arbitrator in rejecting additional claim No.2
stands set aside. Additional Claim No.2 stands allowed in part awarding
Rs.1,17,05,960/- with interest at 15% per annum from the date of
completion of work till the date of Award.
49. So far claim No.13 is concerned it is relevant to note that
contractor has made this claim for pendenti lite and future interest at 18%
per annum. Relating to this claim learned Arbitrator has stated only one
sentence as under:-
"The Arbitrator has given the interest payable to the claimant
under each claim award".
50. Except this sentence nothing is stated by the Arbitrator under this
claim as to whether contractor is entitled or not for interest from the date of
completion of work till the date of Award. So far claim No.1 made by the
contractor for compensation for delay in release of RA Bill payment is
concerned learned arbitrator awarded Rs.7,88,976/-. So far claim No.3
made by the contractor for price escalation on account of prolongation of
contract, learned Arbitrator awarded Rs.38,29,767/-. Nothing is stated as
to whether these amounts shall carry interest or not from the date of
completion of the work till the date of award. So far claim No.4 is
concerned learned Arbitrator awarded Rs.91,070/-. Relating to claim of
Com.AS.No.143/2015 &
53 Com.AS.No.145/2015
interest it is stated in cryptic as "No interest is payable". So far claim
No.5 is concerned learned Arbitrator awarded Rs.1,35,900/-. Nothing is
stated as to whether this amount shall carry interest or not from the date of
completion of work till the date of award. So far claim No.6 is concerned
learned Arbitrator awarded Rs.68,71,770/- and interest is concerned it is
stated in cryptic as "No interest is payable". So far claim No.9 is
concerned learned Arbitrator awarded Rs.5,93,615/- being interest at 15%
per annum for the delay period in releasing EMD and there is no need to
award interest on it from the date of completion of award till the date of
contract. So far claim No.10 concerned learned Arbitrator awarded
Rs.1,24,51,262/-. Relating to claim of interest on this amount it is stated in
cryptic as "No interest is payable". So far claim No.11 concerned learned
Arbitrator awarded Rs.3,06,043/-. Relating to claim of interest on this
amount it is stated in cryptic as "No interest is payable".
51. It is argument of learned advocate for contractor that the award in
not awarding interest to claim Nos.4, 6, 10 and 11 is cryptic and without
any reasons which is contrary to Sec.31(3) of the Arbitration and
Conciliation Act 1996 and it comes U/Sec.34(2) (b) (ii) and (iii) and
Sec.34(2A) of said Act and same is to be set aside and to award interest at
18% per annum from the date of completion of work till the date of award.
On the other hand it is submission of learned advocate for BBMP that since
there is no clause in the contract to claim interest pendenti lite and
Com.AS.No.143/2015 &
54 Com.AS.No.145/2015
therefore learned Arbitrator has no jurisdiction to award interest pendenti
lite and by considering the nature of award, learned Arbitrator has rightly
declined to exercise his discretion to award interest to claim Nos.4, 6, 10
and 11 and therefore there are no grounds set aside award on that ground.
52. It is held by the Hon'ble Apex Court in 2009 (12) SCALE 648
(Som Datt Buolderc Limited V/s State of Kerala) that the requirement of
reasons in support of the award under Sec.31(3) of the Arbitration &
Conciliation Act, 1996 is not an empty formality. It guarantees fair and
legitimate consideration of the controversy by the arbitral Tribunal. It is
true that arbitral Tribunal is not expected to write judgment like a Court
nor it is expected to give elaborate and detailed reasons in support of its
finding/s but mere noticing the submissions of the parties or reference to
documents is no substitute for reasons which the arbitral Tribunal is
obliged to give. Howsoever, brief these may be, reasons must be indicated
in the award as that would reflect though process leading to a particular
conclusion. To satisfy the requirement of Section 31(3), the reasons must
be stated by the arbitral Tribunal upon which the award is based; want of
reasons would make such award legally flawed.
53. It is held by the Hon'ble Apex Court in 2010 (2) ALT 655
(G.V.Malla Reddy & Co., Vs. A.P.State Trading Corporation Ltd.) relating
to grant of pendente lite interest that a person deprived of the use of the
money to which he is legitimately entitled has a right to be compensated
Com.AS.No.143/2015 &
55 Com.AS.No.145/2015
for the deprivation, call it by any name. It may be called interest,
compensation or damages. This basic consideration is as valid for the
period the dispute is pending before the arbitrator as it is for the period
prior to the arbitrator entering upon the reference. This is the principle of
Sec.34 Civil Procedure Code and there is no reason or principle to hold
otherwise in the case of arbitrator. Further it is also held by Hon'ble Apex
Court that where the agreement does not prohibit and a party to the
reference makes a claim for interest, the arbitrator must have the power to
award interest pendenti lite. Further it is also held in it that interest
pendenti lite is not a matter of substantive law, like interest for the period
anterior to reference (pre-reference period). For doing complete justice
between the parties, such power has always been inferred. Further it is
also held by Hon'ble Apex Court that it where the agreement between the
parties does not prohibit grant of interest and where a party claims interest
and that dispute (along with the claim for principal amount or
independently) is referred to the arbitrator, he shall have the power to
award interest pendente lite. This is for the reason that in such a case it
must be presumed that interest was an implied term of the agreement
between the parties and therefore when the parties refer all their disputes
or refer the dispute as to interest as such to the arbitrator, he shall have the
power to award interest.
54. It is held by Hon'ble Apex Court in AIR 2000 SC 2003 (Ghaziabab
Com.AS.No.143/2015 &
56 Com.AS.No.145/2015
Development Authority V/s Union of India and another) as under:
"There was no contract between the parties regarding
payment of interest on delayed deposit or on account of delay
on the part of the opposite party to render the services.
Interest cannot be claimed under Sec.34 of the Civil
Procedure Code as its provisions have not been specifically
made applicable to the proceedings under the Act. We,
however, find that the general provisions of Sec.34 being
based upon justice, equity and good conscience would
authorise the Redressal Forums and Commissions to also
grant interest appropriately under the circumstances of each
case. Interest may also be awarded in lieu of compensation or
damages in appropriate cases. The interest can also be
awarded on equitable grounds."
55. It is held by the Constitution Bench of Hon'ble Apex Court in
AIR 2001 626 (Executive Engineer, Dhenkanal Minor Irrigation Division,
Orissa, etc. etc., Vs. N.C.Budharaj(D) by Lrs. Etc. etc.), as under:
"As long as there is nothing in the arbitration agreement to exclude
the jurisdiction of the Arbitrator to entertain a claim for interest on
the amounts due under the contract, or any prohibition to claim
interest on the amounts due and become payable under the contract,
the jurisdiction of the Arbitrator to consider and award interest in
respect of all periods subject only to Section 29 of the Arbitration
Act, 1940 and that too the powers of the Court thereunder, has to be
upheld. The submission that the Arbitrator cannot have jurisdiction to
award interest for the period prior to the date of his appointment or
entering into reference which alone confers him power is too stale
and technical to be countenanced in our hands, for the simple reason
that in every case the appointment of an Arbitrator or even resort to
Court to vindicate rights could be only after disputes have cropped
up between the parties and continue to subsist unresolved and that if
the Arbitrator has the power to deal with and decide disputes which
cropped up at a point of time and for the period prior to the
Com.AS.No.143/2015 &
57 Com.AS.No.145/2015
appointment of an Arbitrator, it is beyond comprehension as to why
and for what reason and with what justification the Arbitrator should
be denied only the power to award interest for the pre-reference
period when such interest becomes payable and has to be awarded as
an accessory or incidental to the sum awarded as due and payable,
taking into account the deprivation of the use of such sum to the
person lawfully entitled to the same. For all the reasons stated above,
we answer the reference by holding that the Arbitrator appointed with
or without the intervention of the court, has jurisdiction to award
interest, on the sums found due and payable, for the pre- reference
period, in the absence of any specific stipulation or prohibition in the
contract to claim or grant any such interest."
56. In the case on hand there is no prohibition in the contract relating
to interest component is concerned. As noted above the award refusing to
grant interest is cryptic and it is contrary to Sec.31(3) of the Act 1996.
After taking into consideration of the nature of contract entered into
between the parties and the various breaches committed by the
employer/BBMP resulting prolongation of contract work for 18.6 months
as against contract period of 5 months to which he is legitimately entitle
has a right to be compensated for the deprivation during the period from
the date of completion of work till the date of award, it is just and
necessary to award interest at 15% per annum on the amount awarded
under claim Nos.4, 6, 10, 11 and additional claim No.2 from the date of
completion of the work till the date of Award. Therefore, there are grounds
to set aside this portion of the award refusing to award interest on those
claim Nos.4, 6, 10, 11 and additional claim No.2. For these reasons these
Com.AS.No.143/2015 &
58 Com.AS.No.145/2015
Issue Nos.1 to 4 are answered partly affirmative in favour of contractor.
57. Issue No.5 : For the reasons stated above, I proceed to pass the
following:
ORDER
Petition filed U/Sec.34(2) of Arbitration and Conciliation Act 1996 in Com.A.S.No.145/2015 is dismissed.
Petition filed U/Sec.34(2) of Arbitration and Conciliation Act 1996 in Com.A.S.No.143/2015 is partly allowed as under:-
1. Award relating to claim No.1 stands modified by awarding Rs.9,52,233/- in the place of Rs.7,88,976/- awarded by the Arbitrator.
2. Award relating to claim No.10 stands modified by awarding Rs.3,11,28,154/- in the place of Rs.1,24,51,262/- awarded by the Arbitrator.
3. Award of the Arbitrator rejecting additional claim No.2 is set aside. Contractor who is plaintiff of Com.A.S.No.143/2015 is entitled for Rs.1,17,05,960/- for additional claim No.2.
4. Awarded amounts under claim Nos.4, 6, 10, 11 and additional claim No.2 shall carry interest payable at the rate of 15% per annum from the date of completion of work till the date of award.
5. Rest of the part of Arbitral Award stands unaltered.
6. Under the circumstances of their case both parties shall bear their own cost.
Com.AS.No.143/2015 & 59 Com.AS.No.145/2015 Draw decree accordingly.
Keep the original of this Judgment in Com.AS.143/2015 and its copy in Com.AS.145/2015.
(Dictated to the JW, typed by her, corrected and then pronounced by me in Open Court, on this the 25th day of October, 2019.) (JAGADEESHWARA.M.) LXXXII Addl. City Civil & Sessions Judge, Bangalore.