Bangalore District Court
Mysore Urban Development Authority vs Kmc Constructions Limited on 4 August, 2021
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 4th day of August 2021
COM.A.S.No.95/2014 to 98/2014
Petitioner Mysore Urban Development Authority,
J.L.B Road, Mysore,
Represented by its Commissioner.
(By Sri. M.V.V, Advocate)
// versus //
Respondents 1. KMC Constructions Limited,
3423, III Cross, 10th Main Road,
HAL II Stage, Indiranagar,
Bengaluru560038.
2. Hon'ble justice Shri R.V.Raveendran,
Former Judge,
Hon'ble Supreme Court of India &
Sole Arbitrator,
No.8/2, Krishan Road,
Basavanagudi,
Bengaluru560004.
(By Sri.K.R.M, Advocate)
34
CT 1390_Com.A.S.95to982014_Common Judgment .doc
Date of Institution of the : 17/09/2014
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 04/08/2021
Judgment was pronounced.
: Years Months Days
Total duration
06 10 18
JUDGMENT
All these four arbitration suits are filed by the plaintiff - Mysore Urban Development Authority under Section 34 of the Arbitration & Conciliation Act praying to set aside portion of the common award dated 17/6/2014 passed by the learned Arbitrator in respect of contract work in packages 1 to 4, so far as it relates to awarding price adjustment upto 31.1.2013 in respect of package No.1 to 3 and till date of completion of work in package No.4 and awarding interest @12% and directing payment of 50% of the cost of the respondent.
2. The plaintiff - Mysore Urban Development Authority (MUDA) was the respondent and Defendant No.1-KMC Constructions Limited was the claimant before the Hon'ble Arbitrator. 2Nd defendant is the Hon'ble Arbitrator. The parties are referred to by their respective ranks as appeared before the learned Arbitrator for the sake of convenience.
34CT 1390_Com.A.S.95to982014_Common Judgment .doc
3. Four claim petitions were filed before the learned Arbitrator by the claimant with regard to four separate contracts entered into between the claimant and the respondent as packages 1,2,3 and 4. The learned Arbitrator on 17/6/2014 has passed common award in respect of the dispute raised in connection with all these four contracts. The respondent before the learned Arbitrator, has filed these four arbitration suits in respect of each packages which are decided by common award. As in all the four arbitration suits, same common award is challenged and the parties are same and award is challenged on the same grounds, for the sake of convenience, all the four arbitration suits are clubbed and are taken together for passing common judgement.
4. The case of the respondent, who is the plaintiff in these arbitration suits are as under:
The respondent had formed an Outer Ring Road for Mysore with two lanes. Since this was inadequate due to increase in traffic, it was decided to upgrade this two lane Outer Ring Road to six lane Outer Ring Road with service road. This project was under the financial assistance of Central Government under Jawaharlal Nehru Urban Development Mission. The project was divided in four packages and each package was treated as a separate contract for all the purposes. After following the formalities of awarding the contract, the contract of all the 4 packages was awarded to the claimant - KMC Constructions Limited on 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc 12/4/2010. The respondent - MUDA and the claimant entered into agreement in the prescribed form for each of the package separately on 12/4/2010. The agreement entered into between the parties in respect of all the four packages are identical in nature. As per the agreement, the claimant was required to start the work on 12/4/2010 and it was to be completed within 10 months that is by 11/2/2011. As per the contract agreement, the letter of acceptance, notice to proceed with the work, contractors tender, contract data, conditions of the contract including special conditions, bill of quantities, good for construction drawing and proceedings of the meeting regarding queries and clarifications sought for by the intended tenderers, constituted part of the agreement. As per the agreement, the claimant was required to demonstrate the availability by owning at least 50% of the required key and critical equipment for this work and remaining 50% could be deployed by him by lease or hire basis, but the claimant had failed to comply with these conditions. The work under all the four packages was not completed within the scheduled time as agreed by the parties for various reasons. The respondent two times gave extension of time (EOT) without imposing any liquidated damages. In respect of package No.1 to 3, EOT 3 and 4 were given by imposing liquidated damages and for package No.4 one time EOT was granted by imposing liquidated damages. Though the contract period was 10 months, since the claimant did not employ the requisite 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc number of men and machinery, it could not carry out the work and complete the work within time and the claimant sought extension of time as per clause 26 of the contract and the respondent extended the time. As per clause 38.2 of contract, if compensation event would cause additional cost or would prevent the work being completed before the intended completion date, the contract price shall be increased and the intended completion date is extended. It is the respondent who have to decide whether and by how much the contract price shall be increased and whether and by how much the intended completion date shall be extended. As per clause 38.4 the claimant is not entitle to compensation to the extent that the respondent's interest are adversely affected by the Claimant not having given early warning or not having cooperated with the respondent. By exercising power under clause 26, the intended completion date was extended with conditions not to claim for additional rates. The claimant accepted the extension of intended date of completion and did not seek for additional cost and thereby claimant was estopped from claiming additional cost on the ground of occurring of compensation event. No claim for increase in the contract price was sought by the claimant. For the delay in execution of the work beyond the extension of time accorded as per clause 26, the claimant was liable to pay liquidated damages. The work to be completed was divided into three mile stones and in every mile stone, there was delay and 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc amount of liquidated damages for the delay is also specified in the contract. The entire site was handed over to the claimant on 12/4/2010 and first mile stone should have been reached on 11/5/2010, but on non completion of the said mile stone time was extended upto 27/5/2010. Even in the other two mile stones there was no much progress made by the claimant. The percentage of work done by the claimant in each mile stone within particular time is stated in the petition. The EOT was granted by considering excessive rain fall for 44 days, strike by lorry owners for 14 days and time required for shifting of the utilities for 58 days etc. Even after grant of EOT, the work was not completed within the extended time and required progress was also not achieved. As per clause 14 of the conditions of contract, as the contract period was more than 6 months and less than 12 months and the cost of work was more than Rs.50 lakhs, the claimant was entitle to claim star rates in respect of specified materials they are cement, steel and bitumen only to compensate for the increase in the cost of these three materials. The completion of the work within stipulated period is a condition precedent for claiming price adjustment under clause 40 and if the work is not completed as per the approved program of works, then the claimant would not be entitled to claim for any price adjustment. The claimant did not complete the work as per the approved program and sought extension of time which was granted twice without levy of liquidated damages and was 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc further extended on two occasions by levying of liquidated damages and therefore clause 40 of the conditions of contract was inoperative. The contractor/claimant contended that the site was not handed over and there were many obstructions and the delay is attributable to the respondent employer. The claimant claiming that the reasons for the delay is attributable to the respondent has claimed occurrence of compensation event and claimed price adjustment till 31/1/2013.
5. According to Respondent, before commencement of the arbitration proceedings, the respondent terminated the contract with effect from 30/6/2013 and claimant had stopped the work from October 2012. Even before the decision of the Engineer regarding the claim for enhanced rate for 7 items is communicated to the claimant, the claimant had sought for appointment of Arbitrator before the Indian Council of Arbitration and Arbitrator was appointed. This dispute was referred to the Hon'ble sole Arbitrator by Indian Council of Arbitration by its resolution. Before the learned sole Arbitrator the claimant filed claim petition and the respondent filed objection. Before the learned Arbitrator, evidence was lead and all the four disputes covered by four agreements in respect of each package were clubbed and common award is passed. The learned Arbitrator has held that the claimant is entitle to price variation only in regard to cement, steel and bitumen and not in respect of other four 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc items. The learned Arbitrator further held that the formula for price adjustment is, as per the formula contended in government circular dated 30/9/2010. The learned Arbitrator has also held that the delay in execution of the work beyond the original stipulated period was partly attributable to the respondent and therefore price adjustment clause operates not up to 31/3/2012 as claimed by the respondent, but it operates till 31/1/2013 and beyond till completion of the contract in respect of package No.1 to 3 and till date of completion of work in package No.4. Learned arbitrator has also held that the claimant is entitle for interest @12% pa. and for cost of Rs.5,00,000. Being aggrieved by the finding providing price adjustment upto 31/1/2013 and beyond and awarding interest and cost, the respondent has filed arbitration suit in respect of each of the 4 contracts, praying to set aside only these findings of the learned Arbitrator.
6. The respondent, who is the plaintiff in these 4 arbitration suits has contended that the award of the learned Arbitrator is opposed to public policy and is liable to be set aside. It is stated that public policy regarding payment of price adjustment in respect of steel, cement and bitumen is permitted only if delay is not on account of the claimant. It is stated that the learned Arbitrator has not noticed that for the delay in the work done, the competent authority had imposed penal damages while granting EOT3 and EOT4 and the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc same was not objected and not challenged by initiating arbitration within 30 days from the date of decision as permitted. It is stated that the learned Arbitrator has not noticed that the claimant has not raised any such dispute against levy of penal damages within 30 days and therefore is not entitle to contend the same in the present arbitration proceedings. It is also stated that in view of the specific agreement contained in condition No.40 of the contract document, if the delay is not on account of employer i.e. the respondent, the claimant is not entitle for compensation. It is also contended that the evidence clearly discloses that contrary to the contract document and several clauses, the claimant has not actually undertaken the work and some other agency has carried out the work and the learned Arbitrator has failed to note that the claimant has failed to produce necessary documents to show the purchase of steel, cement and bitumen and the learned Arbitrator has erroneously held that in view of the delay in shifting of the utilities, the delay is caused by the respondent and the claimant is entitle for price adjustment. It is contnded that the learned Arbitrator has failed to note that as per clause 110.1 of the General Conditions of Contract, contractor will not be entitled to any compensation for any delay in shifting of the utilities, cutting of trees or removal of encroachments by the service providers. It is stated that the learned Arbitrator has erred in not noticing clause 41.1. It is also 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc stated that the respondent was entitle for recovery of liquidated damages from out of the amounts payable to the claimant, if any at the time of passing of final bill on completion of work or sooner on termination of the work. It is stated that the learned Arbitrator has failed to note that the contract agreement do not stipulate the payment of interest in respect of any delayed payment and still the learned Arbitrator has awarded interest of 12% on the dues due to price adjustment which is against the contract and is opposed to the public policy. It is stated that in the absence of any stipulation for payment of interest for delayed payment, it is the public policy that no interest is payable. It is also contended that if the site for working had not been handed over as claimed by the claimant, it was open to the claimant to terminate the contract and claim damages and this aspect is not considered by the learned Arbitrator. The learned Arbitrator has also failed to note that no work was carried on by the claimant beyond 31/3/2012 and therefore question of utilizing steel, cement and bitumen beyond that period did not arise. Therefore, the learned Arbitrator has erred in awarding price adjustment upto 31/1/2013 and even beyond that. On all these grounds, portion of common award with regard to the finding of awarding price adjustment on steel, cement and bitumen upto 31/1/2013 in respect of package No.1 to 3 and till date of completion of work in package No.4 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc and awarding 12% interest and 50% cost is prayed to be set aside.
7. The claimant, who is the defendant in all these 4 cases, has filed its statement of objection stating that the petition is not maintainable and the facts narrated in the petition are not wholly true and does not throw proper light on the case. The claimant has denied the allegations that it could not process and deploy the required equipment and the key personnel as per the contract agreement and failed to produce documents for having deployed the same. It is stated that because of the lapses on the part of the respondent, claimant sought for extension of intended completion date and EOT was even given by the respondent and even the evidence before the learned Arbitrator the claimant had established that there were serious lapses on the part of the respondent and due to serious lapses, the work could not be completed within the initial intended completion date and even on extended date. It is also stated that, at no point of time the claimant accepted any condition of not claiming additional rates as stated by the respondent and has not entered into any supplementary agreement to that effect. The respondent by accepting the reasons given for extending the time has extended completion date. It is also stated that as the lapses were on the part of the respondent, the claimant was not liable for any liquidated damages. It is also stated that the percentage of the progress of the work shown in the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc petition are due to lapses on the part of the respondent and not on the part of the claimant. It is also stated that the respondent has not given the extension of time within 21 days of request made by the contractor. The claimant has also denied that it is not entitle for price adjustment in respect of 7 components and stated that due to extension of time, the period of completion of the contract work also automatically extended and thereby in view of the government notification, the claimant is entitle for price adjustment for 7 components. It is also stated that levying of liquidated damages by the respondent was not accepted by the claimant. It is stated that due to incompetency of the administrative wing of the respondent, inefficiency of the engineers of the respondent and due to lack of technical knowledge of the respondent, the work was hampered and the various percentage of progresses of the work is not due to reasons attributable to the contractor, but attributable to the respondent itself. It is also stated that the delay in execution of the work beyond the originally stipulated period was attributable to the respondent and there are no grounds made out to challenge the award under Section 34 of the Arbitration & Conciliation Act. It is also stated that the payment of price adjustment and awarding interest on the delayed payment do not come under public policy of India. The claimant has also denied that the work was done by some other person and not by claimant. It is also stated that at no point of time the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc respondent has raised such dispute before the learned Arbitrator. The contention of the respondent that the contractor would have terminated the contract as and when he came to know that the respondent is unable to handover the site and should have claimed damages is baseless and holds no water. On all these grounds the petition filed by the respondent challenging the portion of the award is prayed to be dismissed with cost.
8. Now the points that arise for consideration of this court are:
1) Whether the plaintiff (Respondent before the Learned Arbitrator) proves that the portion of Common arbitral award dated 17/6/2014 passed by the defendant No.2, so far as it relates to allowing price adjustment on 3 items upto 31.1.2013 in respect of package No.1 to 3 and till date of completion of work in package No.4 and directing the respondent to pay interest of 12% and 50% cost of the claimant, is against public policy of India or is patently illegal and is to be set aside under Section 34 of the Arbitration & Conciliation Act ?
2) What order?
9. Heard both counsels. Perused the records. Both the counsels have filed written submission also.
10. My answer to the above points are :
POINT No.1 : In the Negative.
POINT No.2 : As per final order for the following:
REASONS
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CT 1390_Com.A.S.95to982014_Common Judgment .doc
11. POINT No.1 : Present petition under Section 34 of the Arbitration & Conciliation Act is filed by the plaintiff praying to set aside the common award dated 17/6/2014 passed by the learned Arbitrator as it relates to dispute No.3 of packages 1,2,3 and 4 and also directing the respondent to pay interest and 50% of the cost of the claimant of the arbitral proceedings. The jurisdiction of the court to set aside an arbitral award is limited to the ground set out in Section 34 of the Arbitration & Conciliation Act 1996. Even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitral Tribunal, as if, it is sitting in appeal over the award of the Tribunal. Grounds on which the award of the Tribunal can be set aside by this court is clearly mentioned in Section 34(2) and 34(2A) of the Arbitration & Conciliation Act and these grounds are also elaborated by the Hon'ble Supreme Court in various decisions including Associate Builders v/s Delhi Development Authority. Since any of the grounds mentioned in Section 34(2)(a) and 34(2)(b)(i) of the Act are not urged, challenge to the present common award of the Arbitral Tribunal would be under Section 34(2)(b)(ii) and 34(2A) of the Act. Award could be set aside if it is against public policy of India or is patently illegal. Under the head of Public Policy of India, Fundamental Policy of Indian Law, Interest of India, justice or morality are included. It is also well established 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc principle that the court sitting U/S.34 of the Act is not supposed to go for reappreciation of evidence or impose its view as against the view of learned Arbitral Tribunal and the power of the court is only to set aside the award, if it is coming under one of the grounds mentioned in the said section. In the presence of these basic principles, grounds urged by the petitioner and the award of the learned Arbitral Tribunal are to be looked into.
12. The learned counsel for the plaintiff who is the respondent before the learned Arbitrator has vehemently argued that EOT 1 & 2 were granted on the request of the claimant contractor by considering the documents placed before it and EOT 3 & 4 were granted by imposing liquidated damages and as such for the period subsequent to 31/3/2012 the claimant is not entitle for price adjustment as the work was delayed due to the fault of the claimant. The learned counsel has also argued that as mentioned in the petition, the work has never progressed as expected and even men, material and machinery were never arranged by the claimant as expected and as mentioned in the contract at any time. The learned counsel has argued that the finding of the learned Arbitrator that price adjustment is to be given upto 31/1/2013 and beyond is against the terms of the contract and is against the public policy. The learned counsel has argued that subsequent to 31/3/2012, EOT was given by imposing liquidated damages and extension given is not for 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc the fault of the employer, but as the work is not done for the fault of the contractor and the delay is attributable to the contractor and for such delay the employer/respondent cannot held responsible. The learned counsel has also argued that the arbitration initiated by the claimant is pre mature. It is also argued that awarding of interest @12% by the learned Arbitrator is against the terms of the contract. The learned counsel has argued that the contract entered into between the parties do not provide for any interest and as such the learned Arbitrator has travelled beyond the contract and therefore this part of the award, awarding interest is patently illegal and is against the terms of the contract. The learned counsel has also argued that awarding cost of Rs.5 lakhs to the claimant is also not acceptable.
13. The learned counsel for the claimant who is the defendant in these cases, has argued that extension of time was granted for the reason that the delay is caused in completion of the project by the acts of the respondent employer, which is discussed by the learned Arbitrator in the award. The learned counsel has argued that the claimant was entitle for price adjustment in respect of 7 items in view of the government order and for not granting price adjustment for 7 items the claimant also has filed the arbitration suit. It is argued that the price adjustment allowed by the learned Arbitrator upto 31/1/2013 is justified as the evidence lead before the learned Arbitrator has clearly 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc demonstrated that the delay in progress of the work is attributable to the employer/respondent. The learned counsel has argued that the awarding of interest and the cost is also justified and in fact claimant was entitle for interest @24% and even entire cost of the claimant was required to be awarded. The learned counsel has argued that the awarding of liquidated damages in EOT 3 and 4 was not accepted by the claimant and even the liquidated damages is not deducted by the respondent and no steps are taken for recovery of the same and even before the learned Arbitrator no counter claim is made and the work is also continued which show that the claimant is entitle for price escalation till EOT. The learned counsel has also argued that not exercising right to terminate the contract by the claimant-contractor cannot be questioned by the employer.
14. On looking to all these four petitions and statement of objections and arguments addressed for both sides, portion of the common award of the learned Arbitrator passed in respect of four contracts shown as four packages is challenged by the Employer/Respondent. The respondent who was the employer has given contract in four packages by separate agreements to the claimant on 12/4/2010 and the work was to be completed within 10 months, but for different reasons the work is not completed. Though there are allegations made against each other for the delay in progress of the work and as to delay attributable to which of the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc parties, with regard to extension of time upto 31/3/2012, there is no dispute as EOT 1 and 2 were granted by the respondent in all the four packages without imposing any liquidated damages. It appears that in the first EOT liquidated damages was imposed for 2 days and later it was not considered. Upto 31/3/2012 the EOT was granted for the reasons attributable to employer/respondent. Even as per the conditions of contract, extension of time for completion of the work can be given if delay is attributable to the contractor or if there is variation. Since upto 31/3/2012 EOT 1 and 2 are given, there is no dispute about the delay caused due to the fault of the respondent in providing workable site and providing drawing etc. The respondent has no dispute for granting price adjustment on 3 items at star rates upto 31.3.2012.
15. As regards EOT 3 and 4 in respect of package No.1 to 3 and EOT 3 in respect of package No.4, EOT was given by imposing liquidated damages. According to the respondent, who is the plaintiff of this case, when extension of time is given for the fault of the contractor and when the delay is attributable to the contractor/claimant and not to the employer/respondent, the claimant is not entitle for price adjustment which was allowed by the learned Arbitrator. The respondent/Employer has not challenged the entire award. Giving of star rate by following the formula provided in Circular of 2010 in respect of cement, steel and bitumen is 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc acceptable to the respondent. The respondent is disputing only point No.3 in which it is held that the claimant is entitle to price adjustment upto 31/1/2013 and beyond in respect of package No.1 to 3 and till date of completion of work in package No.4 , till completion of the work. According to the respondent, the claimant is entitle to price adjustment only upto 31/3/2012 as EOT 1 and 2 were given upto 31/3/2012 and beyond that, the EOT given is with liquidated damages and this delay is attributable to the contractor and for this delay caused by the contractor, the respondent-employer cannot be held responsible to make payment by way of price adjustment.
16. Hence, Common award of the learned Arbitrator is partly challenged in these petitions and the challenge is restricted to awarding of price adjustment till 31/1/2013 and beyond in respect of package No.1 to 3 and till date of completion of work in package No.4. Another ground on which respondent is disputing the award is awarding of interest @12% per annum. According to the respondent no interest is payable and there is no clause in the contract providing interest. One more ground of challenge to the award is awarding of cost of Rs.5 lakhs. In nutshell, respondent-employer is praying to set aside only portion of the award which relates to awarding price adjustment on 3 items upto 31/1/2013 in respect of package No.1 to 3 and till 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc date of completion of work in package No.4 and awarding interest and also awarding cost.
17. The learned Arbitrator has gone through the evidence lead by the parties in detail and found that even during the extended period of completion of the contract i.e. 31/3/2012, the site was not clearly available for the work and there were variation in the plan and there was no clarity regarding service road and even the obstacles were not cleared and therefore the delay was attributable to the employer/respondent even for the period beyond 31/3/2012. Accordingly, learned Arbitrator has held that the delay is attributable to the employer and therefore even during EOT 3 and 4 the price adjustment is to be given to the contractor. The learned Arbitrator has also held that even beyond 31/1/2013 which is the expiry date of final extension of time, in respect of package 1 to 3, claimant contractor is entitle for price adjustment. This finding is seriously disputed by the respondent in the present 4 arbitration suits.
18. In the petition, respondent has given the details of progress of the work achieved by the claimant which is apparently negligible. It is shown that within 10 months of original contract period in respect of package No.1 only 13.80% progress was achieved and in respect of package No.2 21%, in respect of package No.3 13.30% and in respect of package No.4, 40% was achieved. It is also mentioned that the claimant has failed to reach milestones as provided in the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc contract. As per the contract in the first mile stone, within one month of the contract, the claimant was required to mobilize men, equipments and materials and also required to complete lab and preparation of ground. Thereafter within 5 months construction of drains, culverts, service road was to be completed in all respects as mile stone No.2. Further, within four months construction of main carriage way was to be completed in all respects, as mile stone No.3. According to respondent, at every stage work has not progressed as required men, material and machinery are not mobilzed by the contractor. It is also stated by the respondent that for causing delay in the performance of the contract, at every mile stone different amount of liquidated damages can be imposed as agreed. The respondent has also mentioned the progress of work made by the claimant in EOT1,2,3 and 4 in respect of 3 packages and EOT No.1 to 3 in respect of package No.4 which show that sufficient progress was not made and mile stones are not reached as agreed. On the basis of these calculations and progress made, respondent contended that the delay in the work is attributable to the contractor and therefore price adjustment cannot be given beyond the period of EOT i.e. 31/3/2012. This is opposed by the claimants by contending that the obstacles at the site were not cleared and due to several latches on the part of the respondent, the work could not progress and the delay was totally attributable to the respondent-employer.
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19. Before the learned Arbitrator, the parties have lead evidence on the question as to, upto what date price adjustment should be given, whether it is upto 31/3/2012 or upto 31/1/2013 and beyond. The learned Arbitrator from page 28 of the award has considered the contention and the evidence. As per Clause 17 of the conditions of the contract, the contractor to commence execution of the works on the start date which is 12.4.2010. As per clause 26 of conditions of contract in Section 5, the contractor is entitle for extension of intended completion date if a compensation event occurs or a variation is issued and the contractor asking the employer for a decision upon the effect of a compensation event or variation and submitting full supporting information. As per this clause, within 21 days the Employer have to decide whether and how much extension could be given. In all the 4 contracts, upto 31/3/2012, extension was given by EOT 1 and 2. Even while giving EOT 1 and 2, according to contractor, decision is not given within 21 days as required by the contract. Even in respect of EOT 3 and 4 it is contended that the decision was not taken by the respondent within 21 days as required. Number of days delay in communicating such decision of extension of time is stated in the claim petition by the claimant. Clause 34 of section 5 of the contract provides for variation which is one of the ground on which extension can be sought apart from compensation event. Clause 38 provides for compensation event. As per 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc this, employer not giving access to any part of site and the employer failing to issue drawings/specifications or instructions or the employer obstructing the carriage etc. would be compensation event, for which contractor would be entitle for extension of intended completion date. If the contractor delays the project, for each day's delay the contractor will have to pay liquidated damages.
20. In the present case, according to the respondent/employer, for EOT 1 and 2 without levying liquidated damages extension of time was given. Therefore, it is clear that for EOT 1 and 2 there was compensation event or variation as mentioned in the conditions of contract. The grounds on which extension of time was sought by the contractor for EOT3 is similar to that of seeking extension in EOT 2. Non handing over of possession of the part of the site, unseasonal rain, unavailability of transport due to strike, delay in decision for service road, delay in issuance of drawing, variation and delay in payment are the ground on which EOT 3 was sought. For EOT 4, non furnishing of obstruction free site and not taking decision as to whether the work of service road should be continued or not are stated to be the main reasons. Since the reasons sought for EOT 2 and 3 are similar, whether after giving EOT 2, the hindrances highlighted in seeking EOT 2 are corrected by the employer is required to be established. According to the employer, when third extension beyond 31/3/2012 was sought, employer 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc found the progress of the work to be minimal and work was not completed due to negligence, improper planning, mobilization and execution on the part of the contractor and therefore on the recommendation of project management consultant, EOT 3 and 4 were given subject to levy of liquidated damages and by denying benefit of price adjustment.
21. The learned Arbitrator has considered the entire evidence that was placed before him. For the claimant, Cws.1 and 2 were examined and for the respondent Rws.1 and 2 were examined. The important answers given by the witnesses in their cross examination have been highlighted in the award. It is well established principle that while deciding the petition under Section 34 of the Arbitration & Conciliation Act, the scope of interference is very limited and the court is not supposed to venture into reappreciation of evidence. However, it will be relevant to consider the finding given based on evidence given by the parties. The main ground on which the claimant has sought EOT is failure to deliver entire site free from obstruction. As per clause 21 of the conditions of contract, the employer is obliged to give possession of all the part of site to the contractor and if a part of the site is not given, employer is deemed to have delayed the start of the activities and that would be compensation event as provided in the conditions of contract. The claimant has alleged that entire site, free from obstruction was never given to the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc claimant. Though work was to start on 12/4/2010, the date on which the contract was entered, obstruction free site was not given as stated by the witnesses in their evidence. Evidence before the learned Arbitrator unequivocally state about such non handing over of possession of sites due to obstruction and hindrance. It is also stated by the witnesses that though MUDA was regularly informed regarding obstruction the same were not attended.
22. The shifting of the utilities, cutting of trees and removal of encroachment by service providers were also stated to be the obstructions. The evidence is also lead before the learned Arbitrator along with the documentary evidence to show that MUDA i.e the respondent has given tender for shifting electric pole, underground drainage and removal of trees only after expiry of the contract period specified for execution of the work. The learned Arbitrator has even referred to several documents showing that even upto 30/8/2012 work orders were issued for electric lines and till March 2011 work orders were being issued for underground lines and till November 2011 work orders were being issued for increasing the manhole height etc. These documentary and oral evidence rightly prompted, the learned Arbitrator to hold that the respondent/employer has failed to deliver entire site free from obstruction. Shifting of the electric pole, electric lines, increasing manhole height, providing underground line etc were all required to be completed for 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc execution of the work. Since there was delay in giving work orders by the employer to different agencies, the claimant rightly contended that there is failure to deliver entire site free from obstruction. Even the witnesses of the Employer examined as Rws.1 and 2 have admitted some of the hindrances. As quoted in the Award, RW.1 has stated that the obstruction was in very small and short area and was only on one side of the road and even admitted that even as on 20/6/2010 some part of the work of shifting of electrical poles was not done. It is even stated by the witness of the respondent that except one hightension tower all other obstruction stated by the claimant were removed. Though witnesses of the Respondent denied existence of obstruction, existence of land acquisition problem is admitted. These answers makes it clear that all the obstructions are not cleared. RW.2 though stated that there is no obligation on the part of the employer to give obstruction free site to the contractor, same is contrary to clause 21 of the conditions of contract which require that possession of all parts of the site to be given to the contractor and if it is not given employer is deemed to have delayed the start of the relevant activities.
23. In all the letters seeking extension of time, the claimant has clearly stated and given details about non delivery of the complete site and non removal of obstruction in various parts of the site. The learned Arbitrator has also noted that even while giving extension of EOT 3 and 4, the 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc respondent employer has not denied the allegations in the letter seeking EOT, like not giving obstruction free site etc but only stated that work was not satisfactory and therefore, EOT would be by way of liquidated damages. It was the duty of the employer to arrange for the shifting and removal of primary obstruction for which contractor is required to cooperate. Therefore, it is the employer who is responsible for any delay in shifting or removing the obstructions which are not only on the ground, but also include underground at the site of work, like electric poles, pylons with high tension electric lines, trees, underground pipes, railway bridges, private properties etc. When these obstructions, whether on the ground or underground are existing, the contractor would not be in a position to carry the work and that would be compensation event entitling the contractor for extension of time. The learned Arbitrator has also noted that the evidence given clearly show that all the obstructions are not cleared till now. The contention of the respondent is that, though small obstructions are still there, contractor could have done the work in other parts. The respondent employer has produced the documents before the learned Arbitrator to show that the claimant has not achieved progress in the work even where site was available for execution of the work without any obstruction or hindrance. Even in the petition the same has been highlighted. The percentage of work achieved by the claimant at the particular term has been stated by referring to 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc different four packages separately and the respondent also contended that inspite of reminders the work is not completed which lead to the claimant seeking 3rd and 4th extensions for which liquidated damages are imposed by denying price adjustment.
24. The learned Arbitrator has considered this contention of the respondent and has held that, even assuming that the contractor did not maintain adequate progress in some stretches where there were no obstructions, the contractor cannot be denied the benefit of the consequences of employer's failure to make available obstruction free site in other stretches. The learned Arbitrator has held that when there are obstructions in several stretches which makes it not feasible, if not impossible, to complete the work in time, the fact that several other stretches were available for execution and adequate progress was not shown in those stretches, will not be relevant. Learned Arbitrator has held that when there is obstruction in several stretches, the effect of not being able to carry out work in the areas subjected to obstruction, will not be restricted to those areas only, but its repercussions will be reflected on the overall smooth progress in other stretches either on account of men/material/machinery being locked up in the obstructed stretches or the need to remobilize the men, material and machinery, or on account of unnecessary to and fro movement of men/material/machinery etc. 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc
25. The learned Arbitrator by considering the evidence has also found that even there were variations and there was direction to stop the work or slow down the work for different reasons. The claimant has contended that one of the reason for the delay is the uncertainty and vacillation in taking a decision with regard to the service roads. As per the schedule, construction of carriage way was to be taken up after completing the construction of drains, culverts and service roads. The claimant contended that in January 2011, MUDA decided to drop the construction of service roads and use the fund for construction of a link road and it asked the claimant to stop the service road work pending decision as to whether the service road work should be executed from MUDA funds or JnNURM funds, but did not issue written instructions and in December 2011 it decided to continue the service road work utilizing JnNURM funds and again in 2012 claimant was asked as to whether it would execute missing link road under variation clause, instead of service road and this change of stand by the respondent is said to have put enormous impact on the progress of the work. Even as per the contract clause 27, the employer is entitle to instruct the contractors to delay the start or progress of any activity and such direction would be compensation event. The witnesses also admitted that there was some confusion regarding service road or missing link road. RW.2 has admitted that higher authorities had decided to execute service road out of 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc MUDA fund, so that whatever amount that will be available in JnNURM funds could be used for Ring road. On considering all these, the learned Arbitrator has observed that there was uncertainty in respect of construction of service road as the respondent wanted to delete the service road and use the JnNURM funds saved by such deletion for taking up the construction of missing link road. The learned Arbitrator has also held that the work of service road has to be carried out under milestone 2, before carrying out the main carriage way under milestone 3 and any delay caused on account of indecisiveness of the respondent with reference to service roads, would have a direct effect even on the construction of the main carriage way.
26. By considering oral evidence and documents, learned Arbitrator has held that even EOT 3 and 4 are, as a result of presence of compensation event of not giving site free from obstruction and also the direction to stop or slow down the part of the work for which the contractor cannot be held liable. The learned Arbitrator has also held that even if the obstruction is only at some place, contractor cannot be found fault with for not completing the work at other parts, as the contract is for entire project and the completion period is for the entire project. The learned Arbitrator has held that when the obstructions are existing at some stretch, the employer cannot take benefit of contractor not achieving milestone 2 and 3 and not mobilizing men, material and machinery and 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc not showing the required progress of the work. By considering so, the learned Arbitrator has held that even till 31/1/2013 the EOT given would be in the presence of compensation event and variation and as such the contractor is entitle for price adjustment upto 31/1/2013 and even beyond, in respect of package No.1 to 3 as prayed in the claim petition. However, same is restricted to 31.1.2013 as claim subsequent to this date is beyond the scope of this claim petition. In respect of package No.4, EOT 1 to 3 was given and work is said to have been completed. Therefore, the contractor is held to be entitle for price adjustment upto completion of the work in case of Package No.4.
27. On going through the entire award, the award of the learned Arbitrator, allowing price adjustment upto 31.1.2013, in respect of package No.1 to 3 and till date of completion of work in package No.4, is apt and appropriate and is correct on the facts and circumstances of the case. The compensation events which entitle the contractor for extension of time are clearly present in the present cases as rightly held by the learned Arbitrator. Therefore the finding of the learned Arbitrator on point No.3 that the claimant is entitle for price adjustment till 31/1/2013 in respect of package No.1 to 3 and till date of completion of work in package No.4 is just and proper. As stated above, only in case of being opposed to public policy, as is against morality or justice or is against the well established principles of 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc Indian law or is patently illegal, the award could be set aside under Section 34(2) and 34(2A) of the Arbitration & Conciliation Act. As discussed above the respondent employer has utterly failed to prove that this finding of the learned Arbitrator holding that the claimant is entitle for price adjustment of steel, cement and bitumen upto 31/1/2013 in respect of package No.1 to 3 and till date of completion of work in package No.4 is opposed to public policy or is patently illegal and is to be set aside.
28. The respondent/employer is even disputing the awarding of 12% interest and also directing the respondent to pay portion of the cost of the claimant by calculating it as Rs.5 lakhs. It is contended by the respondent that the contract between the parties do not provide for payment of any interest. However, in the award it is held that the respondent has wrongly withheld the price adjustment due to the claimant from 31/3/2012 and therefore it will be just and proper to award interest @12% per annum, on the dues by way of price adjustment from the date of claim statement to date of award and date of award to date of payment under Section 31(7) & (8) of Arbitration & Conciliation Act.
29. Section 31(7)(a) empowers the arbitrator to award interest from the date of claim statement. As per Section 31(7)
(b) unless the award otherwise state, the sum directed to be paid by an arbitral award shall carry interest at the rate of 2% higher than the current rate of interest and cost of arbitration 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc shall be fixed by the Arbitrator. As per Section 31(8) cost of arbitration is to be fixed by Arbitral Tribunal. Therefore Section 31(7) provides for awarding of interest by the Arbitral Tribunal on the adjudged sum of money. In the present case the entitlement of the claimant for price adjustment is decided by the Arbitral Tribunal and accordingly it is having right to award interest. The interest of 12% awarded by the Tribunal from the date of claim statement till final payment is very reasonable. Though contract do not contain any clause towards payment of interest there is no specific bar in the contract for payment of interest and even section 31(7) provides for it. Awarding of interest is a natural consequence of holding that the claimant is entitle for certain amount from the respondent. Therefore, awarding of interest and even direction to pay cost to the claimant as decided by the tribunal cannot be said to be improper.
30. For all these reasons, the respondent/employer who has filed these arbitration suits challenging portion of the award, has failed to establish any ground for interference by this court in the common award passed by the learned Arbitrator. There are no grounds to set aside the portion of the Common award as prayed in these Arbitration suits. Accordingly, this point is answered in the negative.
31. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER 34 CT 1390_Com.A.S.95to982014_Common Judgment .doc These four Arbitration suits in COM.AS No.95/2014, 96/2014, 97/2014 and 98/2014 filed under section 34 of the Arbitration & Conciliation Act 1996 to set aside the portion of common award of the learned Arbitrator, dated 17/6/2014, are dismissed.
In the circumstances of the case, parties to bear their own costs.
Original judgment be kept in COM.AS
NO.95/2014 and copies be kept in COM.As
No.96/2014 to 98/2014.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 4th day of August 2021] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
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