Uttarakhand High Court
Superintending Engineer N. H. Circle ... vs Ms Madhva Hytech Engineers Pvt. Ltd. on 17 March, 2016
Author: Servesh Kumar Gupta
Bench: Servesh Kumar Gupta
Reserved Judgment
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Appeal from Order No.143 of 2015
Superintending Engineer NH Circle 10,
Uttarakhand PWD, Chakrate Road,
Yamuna Colony, Dehradun-248001
....... Appellant
Versus
M/s Madhva Hytech Engineers Pvt. Ltd.,
501, Panaroma Mansion, Renuka Enclave,
Rajbhavan Road, Somajiguda, Hyderabad-500082
........ Respondent
Mr. A.S. Rawat, Addl. Advocate General with Ms. Anjali Bhargava, Brief Holder for the State/appellant
Mr. Amit George with Mr. S.K. Shandilya, Advocates for the respondent.
Hon'ble Servesh Kumar Gupta, J.
This appeal has been filed u/s 37 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred as 'the Act') seeking to set aside the judgment and order passed by learned District Judge, Haridwar rendered on 15.12.2014 in Misc. Case No.111 of 2013, whereby the court below refused to interfere u/s 34 of the Act and affirmed the Award dated 8.2.2013 passed by the Committee of Arbitrators pertaining to the controversy, between the parties.
In brief, the facts of the case are that for the work of 'Construction of Bridge Across River/Stream Rawason, replacing the Existing Causeway (as it then was) in Km 19 on NH-74 (Haridwar-Bareilly Road) in the State of Uttaranchal', an agreement was entered into between the parties on 11.3.2003. The original duration of the whole project was for 15 months and the scheduled date of completion was 10.06.2004. Realizing the genuineness of 2 the grounds/defects, as the Contractor apprised to the authorities, this date of completion was further extended on the application moved by the Contractor up to 30.06.2005. It appears that the work could finally be completed only on 28.02.2006 and then the project was commissioned for service of the public, at large. The value of the whole project, initially, was for an amount of Rs.9,89,30,910.10.
As per the terms of the Agreement, the dispute had to be referred to the Arbitration and Clause 25.3(b) of the Special Condition of the Contract which provided that the Arbitral Tribunal (hereinafter called as 'AT') shall consist of Three Arbitrators, one each to be appointed by the Employer and the Contractor while third one was to be chosen by the Two Arbitrators, so appointed by the parties. It was provided that this third Arbitrator shall act as Presiding one. This clause further provided that in case of failure of two Arbitrators appointed by the parties to reach consensus within a period of 30 days from the date of their appointment, the Presiding Arbitrator shall be appointed by the Council of the Indian Roads Congress (hereinafter to be referred as "IRC'). It was also provided that if one of the parties failed to appoint their nominee arbitrators within the stipulated time, then the appointment of such arbitrator was also to be made by the IRC. Pursuant to such clause of agreement, the contractor/respondent herein, appointed Mr. Madan Mohan Sangal, Chief Engineer (Retd.), PWD, U.P., as his Arbitrator while the appellant failed to appoint its Arbitrator within the prescribed time limit. So, the Council of IRC was approached and only thereafter, Sri A.K. Banerjee, former Chief Engineer, Ministry of Road Transport & Highways 3 (MORTH), Govt. of India, was appointed as Arbitrator on behalf of the appellant/ employer. Sri R.S. Sharma, former Chief Engineer, MORTH, was appointed as the Presiding Arbitrator, in the manner, as indicated above.
After hearing both the parties nay considering their pleadings, the A.T. passed its Award on 8.2.2013, whereby the Claim Nos.3, 4, 7, 8, 11, 12, 13 and 14 were partially allowed by it whereas Claim Nos.1, 2, 5, 6, 9 and 10 were rejected. This was the majority decision but at the same time, the minority award was passed by Mr. Madan Mohan Sangal, the Appointee Arbitrator by the Contractor. In such minority award, some of the claims of the respondent were also partly allowed but the minority award was never been the subject matter of challenge either before the District Judge or before this Court.
Appellant filed the petition u/s 34 of the Act before the District Judge, Haridwar, which was dismissed by learned Judge by way of passing the impugned elaborate judgment running in as many as 31 pages. So, the present appeal has been filed by the appellant invoking the powers of this Court under Section 37 of the Act.
Before considering and adverting my findings on the grounds of appeal, it would be in the fitness of things to have some idea about the limited scope of Sections 34 and 37 of the Act. Prior to placing reliance on the catena of judgments of the Apex Court, it would be relevant to have a look upon Section 34(2) of the Act, which contemplates the grounds for setting aside arbitral award. These grounds have been quoted by learned District Judge as well in the impugned judgment. So, this Court does not want to burden its judgment any further by reproducing what has 4 been enacted under Section 34(2) of the Act, and feels that any of the grounds, which have been entailed in the memo of appeal, do not cover what has been envisaged under the said provision even the least. The grounds, so stated in the appeal, are, by and large, bald in nature without any specification and I would like to express my view only on those which have some specific allegation. But before doing so, it would not be out of place to keep ourselves aware about the scope of Section 37 of the Act, as enunciated by the Hon'ble Apex Court from time to time in a vast number of cases.
In the case of Navodaya Navodaya Mass Entertainment Ltd. vs. JM Combines 2014 (3) Arb. LR 460 (SC), the Hon'ble Apex Court, in paragraph 5, held as under:
"5. In our opinion, the scope of interference of the court is very limited. Court would not be justified in re-appraising the material on record and substituting its own view on place of the arbitrator's view. Where there is an error apparent on the face of the record or the arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the arbitrator. Once the arbitrator has applied his mind to the matter before him, the court cannot re- appraise the matter as if it were an appeal and even if two views are possible, the view taken by the arbitrator would prevail."
Likewise, in the case of P.R. Shah, Shares and Stock Brokers Private Limited vs. B.H.H. Securities Private Limited [(2012) 1 SCC 594], it was held by the Apex Court, in paragraph 21 of the said judgment, as under: -
5"21. A court does not sit in appeal over the award of an arbitral tribunal by re-assessing or re- appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."
Again, the Hon'ble Supreme Court has expounded on the principle as to the sanctity of decision of the Arbitrator in the case of Markfed Vanaspati and Allied Industries vs. Union of India [(2007) 7 SCC 679]. In paragraph 17 of the said judgment, it was observed as under:
'"17. Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties. The parties agree to be bound by the decision rendered by a chosen arbitrator after giving hearing. The endeavour of the court should be to honour and support the award as far as possible."
Similarly, in so many cases, it has been settled that in exercise of powers under Sections 34 and 37 of the Act, the District Judge and the High Court can interfere in the Award if there is an apparent illegality on the face of the record or such award goes against the public policy.
On a perusal of the grounds and hearing the arguments of learned Additional Advocate General appearing on behalf of the State/appellant/employer, I find that the Award is being agitated mainly on the ground that the Project was commissioned even after the lapse of 1 year 6 and 8 months from the scheduled date 10.6.2004. So, the Contractor is not entitled for claiming the difference of price on account of escalation of market rates, mostly of steel, which is especially used for construction of bridges in addition to other construction material nay the increase of rates of other things including the human labour. This argument is wholly untenable because it was the prime condition of the contract that possession of the site shall be given by the Employer to the Contractor. It would be relevant to reproduce the concerned clause in this regard which is as under: -
"Possession of the Site :-
The Employer shall give possession of all parts of the site to the Contractor. If possession of a part is not given by the date stated in the contract data, the Employer is deemed to have delayed the start of the relevant activities and this will be compensation event."
It has been discussed by the majority of Arbitrators that the possession of such site was not free of all hassles so that to facilitate the contractor to do the work. Many a times, he was needed to run from pillar to post in the Forest and other concerning Departments, for cutting the trees and at times, for other required permissions and even in the office of Employer for getting approval of the forest designs and drawings and finalization of diversion roads. To render every assistance quickly in this regard was the prime responsibility of the Department because the work could not have been completed without their assistance and direction. Therefore, it would be quite unjustifiable to attribute the responsibility upon the 7 Contractor on all these scores and that is why, when the appellant/employer was approached for extension of time by moving an application, all the engineers, ranking from Junior to Superintending, recommended for such extension without any fine as the reasons given by the contractor for not completing the work. within the stipulated time, were found true and genuine under the signatures of all the Engineers indicated above. When the employer and all its officers, who were none other but its own engineers, were convinced that there was no fault of the contractor while seeking extension of time and the reasons given by him were quite plausible, then it is difficult to understand that still the Employer is agitating to compensate against the award which has been passed after having the note of arguments for and against, and highlighting its reasons for passing such award. All the Members of the Arbitration and even the Presiding Officer of such A.T. are highly experienced senior officers inasmuch as they reached in their service career up to the rank of Chief Engineers.
It has vehemently been pressed by learned Additional Advocate General that in the time extension application, the Contractor put his signature after giving an undertaking that he shall not claim any compensation whatsoever due to grant of extension and shall not claim any increase in the rates entered in his contract for the works done in the extended period. This clause in Part-1 Application Proforma has extensively been challenged by learned State Counsel but at the same time, it is difficult to overlook that the Contractor has put his signature only after putting a note to the effect, in his own handwriting, 'without prejudice to our claims'. Primarily, I feel that such pro-forma application, having already been got typed by the 8 employer, was put for signatures before the Contractor, so he had no option to refuse but to sign because after heavy investments worth crores, he could not take the risk to leave the project and waiving the money which he had already invested to be recovered from the employer by undergoing the hard red tapism. Even then, he took precaution and wrote this rider in the words 'without prejudice to our claims' and such eventuality has been discussed by the Hon'ble Apex Court in the case of R.L. Kalathia & Company vs. State of Gujarat (2011) 2 SCC
400. It was held in paragraph no.9 as under: -
"On going through the entire materials including the oral and documentary evidence led in by both the parties and the judgment and decree of the trial Judge, we are unable to accept the only reasoning of the High Court in non-suiting the plaintiff. It is true that when the final bill was submitted, the plaintiff had accepted the amount as mentioned in the final bill but "under protest". It is also the specific claim of the plaintiff that on the direction of the Department, it has performed additional work and hence entitled for additional amount/damages as per the terms of agreement. Merely because the plaintiff has accepted the final bill, it cannot be deprived of its right to claim damages if it has incurred additional amount and is able to prove the same by acceptable materials."
Further, in the case of 'State of Orissa and others Vs. Larsen & Tourbo' AIR 2006 Orissa 45, the arbitration award was passed compensating the contractor for the extended period; then it was agitated on the ground that the contractor had given an undertaking not to claim 9 damages during the extended period; in such eventuality, the Orissa High Court opined that such an undertaking (if any) remains always under duress because the contractor had to complete the project and to receive the final bill from the employer. So, if he receives any bill under protest and without prejudice to his rights, then the escalation benefits given to the claimant contractor for the period of his overstay on the site was justified.
It has further been argued by learned Additional Advocate General that the Contractor has been paid few lakhs more than the original amount wherefor the work was granted, nonetheless, it was commissioned at least after granting eight months' extension. The question here does not pertain to the payment of few lakhs more but it relates to the actual payment, which the contractor is entitled to get, as discussed by the Committee of Arbitrators. Further, the said Committee was constituted as per the terms of the Agreement.
All the more, even after the extension of period of almost one-year initially, the project could not be commissioned on account of so many other works which the Contractor was asked to do on the spot and surprisingly, the Engineers of the appellant got all those additional works completed from the contractor without taking permission from the Ministry of Road Transport & Highways. Simply, writing a letter to the Ministry was not enough but it was the responsibility of the employer to procure the required permission from the concerned Ministry but it failed to do so on that score, thus, the Contractor cannot be made liable for the default on the part of the appellant. It would be quite unjustified in refusing to pay the cost of such additional work on the 10 ground that the concerned Ministry of the Union of India had not permitted such additional work. Even so, the A.T. has granted the extra overhead expenses to the claimant/ contractor only for the extended period of contract from 11.6.2004 to 30.6.2005, wherefor the Engineers of the appellant themselves have admitted the genuine and true cause for the delay on the part of the contractor.
However, this Court finds that in some heads, the interest has been awarded by the A.T. @ 18 percent by its majority judgment whereas the minority judgment grants such interest @ 12 percent. Learned counsel for the respondent, herein, has drawn the attention of the Court towards the provision of Section 31(7)(b) of the Act which contemplates that a sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of award to the date of payment.
This provision, of course, envisages interest at the rate of eighteen percent per annum unless the arbitral award has granted lesser rate of interest.
In totality of the facts and circumstances, I find that awarding of interest, at the rate of 18 percent, seems to be quite excessive and in the present set of facts, it should not be more than 12 percent. So, it is hereby directed that wherever the majority verdict of A.T. has granted the interest at the rate of 18 percent per annum, it shall be reduced and the interest, on the whole amount payable, shall be calculated at the rate of 12 percent per annum instead of 18 percent.
In the last, however, I would like to say that this Court u/s 37 of the Act, of course, can interfere but only 11 when there is an illegality apparent on the face of the record or in the award passed by the Arbitrator or when, it is against the public policy. In my considered view, none of the grounds, as adumberated in Section 34(2) of the Act, is present in any of the pleas raised by the appellant, herein. So, this appeal has no force and it is hereby dismissed subject to the interest part, as discussed hereinabove.
(Servesh Kumar Gupta, J.) 17.03.2016 Rdang