Delhi District Court
The Union Of India vs M/S N.P.A. Engineers And Contractors on 11 March, 2024
DLND010052872017
IN THE COURT OF ADDITIONAL DISTRICT JUDGE- 01,
NEW DELHI DISTRICT, PATIALA HOUSE COURTS,
NEW DELHI
Presided over by :- MS. VIJETA SINGH RAWAT (DHJS)
Arbitration petition No. 3000/2017
1. Union of India
Through the Secretary
Ministry of Urban Development
& Poverty Alleviation,
Nirmal Bhawan, New Delhi
2. The Chief Engineer
(ODZ) CPWD, First Floor,
Sewa Bhawan, R.K. Puram,
New Delhi
3. The Executive Engineer
NOIDA Central Division,
CPWD, I.P. Bhawan,
New Delhi
......... Petitioners
Versus
M/S N.P.A. Engineers & Contractors
Through its Managing Director
Sh. Ravinder Kumar Sharma
60, Engineers Estate,
Patparganj, Delhi-110092
........ Respondent
Arbitration petition no. 3000/2017
Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.1of 22
Petition presented On : 04.08.2008
Judgment Pronounced On : 11.03.2024
JUDGMENT
1. By way of this judgment, this Court proposes to decide the petition under Section 34 of The Arbitration and Conciliation Act, 1996 (hereinafter, referred to as 'The A & C Act') vide which award dated 22.02.2008 in Arbitration Case no. 12/2004 before Indian Council of Arbitration has been challenged.
2. In the nutshell, the factual background of the dispute between the petitioner and the respondent is that (a) the petitioner was awarded development works of CISF Campus, Indira Puram, Ghaziabad vide letter dated 14.01.2000. (b) The scope of work was road works, water supply, sewer lines and drainage. (c) Parties entered into a formal agreement no.35/EE/SCD/99-2000 and the work was to be completed within 8 months w.e.f. 24.01.2000. (d) However, as per the respondent/ claimant, due to hindrances created by the petitioner, the work was only completed on 20.11.2001, after a delay of 14 months causing dispute to arise between the parties. (e) Clause 25 of the agreement provided for settlement of disputes and arbitration. (f) The respondent/ claimant on 09.09.2003 wrote a letter to the Executive Engineer with list of claims but to no avail. (g) Thereafter, a letter dated 20.10.2003, the Superintending Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.2of 22 Engineer was called upon to settle the claims contained in letter dated 10.09.2003 written to the Executive Engineer. (h) However, as no action was taken, the respondent/ claimant on 02.12.2003, wrote to the Chief Engineer for settlement of claims or appointment of sole-arbitrator but as action was again not taken within the prescribed period of 30 days, Arb. P.No. 36/2004 titled as M/s N.P.A. Engineers & Contractors vs. Union of India & Ors. was filed before the Delhi High Court and vide order dated 24.03.2004, Ld. Sole Arbitrator was appointed. (i) After conducting the proceedings, Ld. Sole Arbitrator passed the impugned award holding as under:
'....In view of the above discussion, in my opinion, the above counter claim, preferred by the respondents, is devoid of any substance and, therefore, deserves to be rejected. Accordingly, the same is hereby rejected. As regards Issue No. (i) the position is that in view of the above discussion, the petitioner/ claimant, in respect of the claims preferred by it, is entitled to recover a sum of Rs. 19,42,923/- (Rupees nineteen lakhs forty two thousand nine hundred twenty three only) from the respondents together with simple interest @ 12% per annum from the date the above amount has become due and payable to the petitioner/claimant from the respondents till actual payment. The petitioner/ claimant is also entitled to recover Rs.1,00,000/- (Rupees one lakh only) as cost of these proceedings from the respondents. Issue No. (i), therefore is decided in above terms in favour of the petitioner/claimant and against the respondents. Issue No. (ii) framed by this arbitral tribunal relates to relief. In view of my decision in respect of issue no (iii) and issue no (1) this arbitral tribunal makes the following award:
(i) that the respondents shall jointly and severally pay to the petitioner/claimant a sum of Rs. 19,42,923/- (Rupees nineteen lakhs forty two thousand nine hundred twenty Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.3of 22 three only) together with simple interest on the above amount @ 12% per annum from the date the above amount became due and payable to the petitioner/claimant till actual payment ;
and
(ii) that in addition to respondents shall also (i) above the pay to the petitioner/claimant a sum of Rs.1,00,000/-
(Rupees one lakh only) towards the cost of the present proceedings.
Before concluding, I would like to place on record my appreciation of the valuable assistance rendered by the Learned counsel for parties to this arbitral tribunal. hesitation no I have in acknowledging that but for the valuable assistance given by the Learned Counsel for both the parties and the pains taken by them it would not have been possible for this arbitral tribunal to conclude this matter with expedition.'
3. Being aggrieved by the impugned award, the present petition came to be filed alleging that the award is cryptic and does not clarify on interest. Further, it is stated that vide order dated 01.05.2008, on an application under Section 33 of The Act, the Ld. Arbitrator clarified interest to be @12%. The petition as drafted is narrating factual events and has been most carelessly presented as can be gathered that direction has also been sought for stay on West-Bengal Judicial Service Examination, 2008. Be that as it may, the Court has tediously perused the petition where grounds of objection are not specifically mentioned. It can be culled out that according to the petitioner, it is aggrieved that the award is against the public policy as grant of claim is without any proof of loss suffered by the respondent / claimant. Further, as regards claim no.2 for refund of deduction of Rs.50,754.95/- made by the Superintending Engineer at the time of preparation Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.4of 22 final bill for not executing the work with Paver, it is stated that the same was not subject matter of arbitration and the decision of Superintending Engineer was binding. Reliance has been placed upon Vishwnath Sood vs. U.O.I1. Further, it is stated that the deduction is justified in clause 12 of the contract. Also, it is stated that the respondent/ claimant never prepared the final bill which was ultimately done by the respondent and in application for extension of time, the respondent/claimant had certified that it had not suffered any loss and therefore, was estopped from claiming from any damages for loss suffered. It is also stated that the claims are barred under Clause 25(ii) of the Contract as the same was to be raised within 120 days of receiving intimation from the Engineer in Chief regarding final bill being prepared. Also, it is stated that the interest was never claimed by the respondent/ claimant before Ld. Arbitrator and no notice of it was served upon the petitioner for seeking interest. Therefore, it is stated that the pre-suit interest could not have been granted. Also, it is averred that the petitioner was dragged into unnecessary arbitration and so the arbitration cost of Rs.1,00,000/- should have been awarded in favour of the petitioner.
4. Reply to the same has also been filed which is also 1 Equivalent citations: 1989 AIR 952, 1989 SCR (1) 288, AIR 1989 SUPREME COURT 952, 1989 (1) SCC 657, (1990) 3 CURCC 361, (1989) 1 JT 585 (SC), (1989) 1 ARBI L.R. 357, (1989) 1 CIVLJ 540 decided by Supreme Court of India on 24.01.1989 Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.5of 22 reiterating the claims.
5. Written submissions were called for and have been filed. As per the written submissions filed by the plaintiff, now the impugned award is challenged on following grounds:
a) Non-compliance of Section 21 of The Act stating that list of claims was not brought to the notice of the petitioner while invoking arbitration. Reliance has been placed upon Rahul Jain & Ors. vs. Atul Jain & Ors2
b) The fixation of cost of arbitration is arbitrary.
6. In response written submission has been filed on behalf of the respondent/ claimant, it is stated that the objection of notice under Section 21 of the Act not being served was never taken before the Ld. Arbitrator and cannot be raised at the belated stage. Reliance has been placed upon the following judgments:
a) Union of India (UOI) vs. Susaka Pvt. Ltd and Ors.3;
b) New Delhi Municipal Council vs. Decor India Pvt. Ltd.4;
c) Union of India vs. M/s. Pam Development Pvt. Ltd.5;
d) West Bengal Housing Board vs. Abhishek Construction6;
e) D.P. Construction vs. Vishvaraj Environment Pvt. Ltd.7;
f) Malvika Rajnikant Mehta & Ors. vs. JESS Construction8.
2 ARB.P. 539/2017 ARBTN No.539/2017 decided by High Court of Delhi on 17.11.2022 3 Civil Appeal No. 8530 of 2009 decided by Supreme Court of India on 08.12.2017 4 O.M.P. (Comm) 502/2020, I.A. 9272/2020 and I.A. 15949/2021 decided by High Court of Delhi on 16.02.2023 5 Civil Appeal No. 5618 of 2006 decided by Supreme Court of India on 18.02.2014 6 AP 189 of 2019, decided by High Court of Calcutta on 11.04.2023 7 Misc. Civil Appl. (Arbtn.) No.31 of 2021 decided by High Court of Bombay (Nagpur Bench) on 06.07.2022 8 Arbitration application no.425 of 2019 decided by High Court of Judicature at Bombay on 28.04.2022 Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.6of 22
7. Also, it is stated that letter dated 20.11.2023 bearing no.127/N.P.A in compliance with Section 25(ii) was served upon the petitioner which is not denied but as no action was taken, petition under Section 11 of the Act had to be filed. It is stated that the notice was duly accompanied with list of claims and was a sufficient compliance of Section 21 of the Act. Reliance has been placed upon D.P. Construction vs. Vishvaraj Environment Pvt. Ltd. (Supra), Malvika Rajnikant Mehta & Ors. vs. JESS Construction (Supra) and Smt. Veena W. vs. Seth Industries Ltd.9 REASONING AND APPRECIATION OF MATERIAL ON RECORD
8. The Court has considered the submissions and material on record.
9. In Konkan Railway Corporation Ltd. vs. Chinab Bridge Project Undertaking10 it has been held as under:
"24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral 9 Arbitration Petition no.180 of 2017 decided by Bombay High Court on 29.10.2010 10 Civil Appeal no.2903 of 2023 (arising out of S.L.P. (C) No. 5640/23 pronounced on 17.08.2023) Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.7of 22 award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.
25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
10. Therefore, challenge to the Award would lie if it is opposed to public policy of India. 'Public Policy of India' has been defined in ONGC vs. Saw Pipes11 which is as under:
'...Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to: - (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go
11 Appeal (Civil) 7419 (2001) decided by Supreme Court of India on 17.04.2003 Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.8of 22 to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.'
11. In Mcdermott International Inc vs. Burn Standard Co. Ltd. & Ors.12 It has held as under:
'...The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the Arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merit of the matter.
What would constitute public policy is a matter dependant upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular government. [See State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77].'
12. Further in Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd.13, it has been held as under :
"...22. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, courts are mandated to strictly act in accordance with and 12 Appeal (Civil) 4492 of 1998 decided by Supreme Court of India on 12.05.2006 13 Civil Appeal no. 5627 of 2021, Arising out of SLP (C) no. 4115 of 2019 decided on 09.09.2021 Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.9of 22 within the confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law. (See: Uttarakhand Purv Sainik Kalyan Nigam Limited. v. Northern Coal Field Limited.14, Bhaven Construction Through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Another15 and Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran16 ).
23. For a better understanding of the role ascribed to courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI)17 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong (supra) are noted as under:-
"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar"
understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the 14 (2020) 2 SCC 455 SLP No.11476/2018 decided by Supreme Court of India on 27.11.2019 15 2021 SCC OnLine SC 8 SLP No.11665/2015 decide by Supreme Court of India on 06.01.2021 16 (2012) 5 SCC 306 Appeal No.188/2006 decided by Bombay High Court on 25.02.2008 17 (2019) 15 SCC 131 Civil Appeal no.4779/2019 decided by Supreme Court of India on 08.05.2019 Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.10of 22 arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .
13. Reverting to the ground of objection herein, the grounds are dealt with as under:
a) The decision of Superintending Engineering on claim no.2 was final and binding. Therefore, non-abitrable.
13.1 Relying upon Vishwanath Sood vs. DDA (Supra), the thrust of the argument has been that the decision of the Superintending Engineer. on deduction for sub-standard work (for not employing paver), was final and binding by virtue of the contract and was an exception to Clause 25 of the Contract. Therefore, the Ld. Arbitrator could not have entered into reference in that regard.
13.2 In response thereof, the respondent/ claimant had defended it stating that the judgments are not applicable to the present case as the extension was granted by the Superintending Engineer without levy of any compensation and owned the responsibility for the delay. On facts, as per the claim, it has been stated that the nomenclature of the item 7.7 was unambiguously clear that the item was to be pre-mixed carpet and not of semi-dense carpet Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.11of 22 to be done with the help of paver provided the thickness of the bitumen was not less than 30mm and so, the respondent/ claimant had quoted his rate for pre-mix carpet to be spread manually. Hence, the deduction was not justified.
13.3 Clause 2 of the contract provides as under:
'....If the contractor fails to maintain the required progress in terms of clause 5 or to complete the work and clear the site on or before the contract or extended date of completion, he shall, without prejudice to any other right or remedy available under the law to the Government on account of such breach, pay as agreed compensation the amount calculated at the rates stipulated below or such smaller amount as the Superintending Engineer (whose decision in writing shall be final and binding) may decide on the amount of tendered value of the work for every completed day/week (as applicable) that the progress remains below that specified in Clause 5 or that the work remains incomplete.
This will also apply to items or group of items for which a separate period of completion has been specified.
i) Completion, period (as originally stipulated) not exceeding 3 months : @1% per day.
ii) Completion period (as originally stipulated) exceeding 3 months: @1% per week Provided always that the total amount of compensation for delay to be paid under condition shall not exceed 10% of the Tendered Value of work or of the Tendered Value the item or group of items of work for which a separate period of completion is original given.
The amount of compensation may be adjusted or set- off against any sum payable to Contractor under this or any other contract with the Government.
13.4 Section 25 of the contract provides as under:
'...Except where otherwise provided in the contract all questions and disputes relating to th meaning of the specifications, design, drawings and instructions here-in Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.12of 22 before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or thes conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination completion or abandonment thereof shall be dealt with as mentioned hereinafter:
i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 15 days request the Superintending Engineer in writing for written instruction or decision Thereupon, the Superintending Engineer shall give his written instructions within a period of one month from the receipt of the contractor's letter.
If the Superintending Engineer fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions of decision of the Superintending Engineer, the contractor may, within 15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Chief Engineer for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.
ii) Except where the decision has become final, binding and conclusive in terms of Sub Para (1) above disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Engineer, CPWD, in charge of the work or if there be no Chief Engineer, the administrative head of the said CPWD. If the arbitrator so appointed is unable or Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.13of 22 unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute alongwith the notice for appointment of arbitrator and giving reference to the rejection by the Chiel Engineer of the appeal. It is also a term of this contract that no person other than a person appointed by such Chief Engineer CPWD or the administrative head of the CPWD, as aforesaid should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitration at all. It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claims in writing as aforesaid within 120 days of receiving the intimation from the Engineer-in- Charge that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.
The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliatory Act, 1996 (26 of 1996) or any statutory modifications or re- enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause.
It is also a term of this contract that the arbitrator shall adjudicate on only such disputes as are referred to him by the appointing authority and give separate award against each dispute and claim referred to him and in all cases where the total amount of the claims by any party exceeds Rs. 1,00,000/- the arbitrator shall give reasons for the award.
It is also a term of the contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties.
It is also a terms of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims.
Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.14of 22 The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any by whom and in what manner, such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid.' 13.5 It has been canvased on behalf of the petitioner that the deduction was therefore, an exception under Clause 25 of the contract. However, the deduction is premised upon inferior work. The same has been provided for in clause 3 of the contract. Be that as it may, it would be relevant to refer to the findings of the Delhi High Court in Winner Constructions Pvt. Ltd. vs. Union of India18 where the Delhi High Court while referring to Vishwanath Sood vs. DDA (Supra) and J.G. Engineers Pvt. Ltd (Supra) held as under:
20. From the reading of the aforesaid paragraph19 of the judgment, it is clear that the Supreme Court has clearly held, the issue of non arbitrability is only on the question of any compensation, which the Government might claim in terms of clause 2 of the Contract. In other words, the issue whether the contractor had delayed the project would still be arbitrable. 21. The judgment of the Supreme Court, on which the learned counsel for the petitioner relied J.G. Engineers Pvt. Ltd. (supra), is also on similar lines. The Supreme Court in paras 17, 18 and 19 has held as under:-
"17. Clauses (2) and (3) of the contract relied upon by the respondents, no doubt make certain decisions by the Superintending Engineer and Engineer-in-Charge 18 ARB.P. 78 of 2016 decided on 28.04.2016 19 Para 10 of Vishwanath Sood vs. DDA Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.15of 22 final/final and binding/final and conclusive, in regard to certain matters. But the question is whether clauses (2) and (3) of the agreement stipulate that the decision of any authority is final in regard to the responsibility for the delay in execution and consequential breach and therefore exclude those issues from being the subject matter of arbitration. We will refer to and analyse each of the `excepted matters' in clauses (2) and (3) of the agreement to find their true scope and ambit : (i) Clause (2) provides that if the work remains uncommenced or unfinished after proper dates, the contractor shall pay as compensation for everyday's delay an amount equal to 1% or such small amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the estimated cost of the whole work as shown in the tender. What is made final is only the decision of the Superintending Engineer in regard to the percentage of compensation payable by the contractor for everyday's delay that is whether it should be 1% or lesser. His decision is not made final in regard to the question as to why the work was not commenced on the due date or remained unfinished by the due date of completion and who was responsible for such delay. (ii) Clause (2) also provides that if the contractor fails to ensure progress as per the time schedule submitted by the contractor, he shall be liable to pay as compensation an amount equal to 1% or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the estimated cost of the whole work for everyday the due quantity of the work remains incomplete, subject to a ceiling of ten percent. This provision makes the decision of the Superintending Engineer final only in regard to the percentage of compensation (that is, the quantum) to be levied and not on the question as to whether the contractor had failed to complete the work or the portion of the work within the agreed time schedule, whether the contractor was prevented by any reasons beyond its control or by the acts or omissions of the respondents, and who is responsible for the delay. (iii) The first part of clause (3) provides that if the contractor delays or suspends the execution of the work so that either in the judgment of the Engineer-in-Charge (which shall be final and binding), he will be unable to secure the completion of the work by the date of completion or he has already failed to complete the work by that date, certain consequences as stated therein, will follow. What is Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.16of 22 made final by this provision is the decision of the Engineer-
in-Charge as to whether the contractor will be able to secure the completion of the work by the due date of completion, which could lead to the termination of the contract or other consequences The question whether such failure to complete the work was due to reasons for which the contractor was responsible or the department was responsible, or the question whether the contractor was justified in suspending the execution of the work, are not matters in regard to which the decision of Engineer-in- Charge is made final. (iv) The second part of clause (3) of the agreement provides that where the contractor had made himself liable for action as stated in the first part of that clause the Engineer-in-Charge shall have powers to determine or rescind the contract and the notice in writing to the contractor under the hand of the Engineer-in-Charge shall be conclusive evidence of such termination or rescission. This does not make the decision of the Engineer- in-Charge as to the validity of determination or rescission, valid or final. In fact it does not make any decision of Engineer-in-Charge final at all. It only provides that if a notice of termination or rescission is issued by the Engineer-in-Charge under his signature, it shall be conclusive evidence of the fact that the contract has been rescinded or determined. (v) After determination or rescission of the contract, if the Engineer-in- Charge entrusts the unexecuted part of the work to another contractor, for completion, and any expense is incurred in excess of the sum which would have been paid to the original contractor if the whole work had been executed by him, the decision in writing of the Engineer-in-Charge in regard to such excess shall be final and conclusive, shall be borne and paid by the original contractor. What is made final is the actual calculation of the difference or the excess, that is if the value of the unexecuted work as per the contract with the original contractor was Rs.1 lakh and the cost of getting it executed by an alternative contractor was Rs.1,50,000/- what is made final is the certificate in writing issued by the Engineer-in-Charge that Rs.50,000 is the excess cost. The question whether the determination or rescission of the contractor by the Engineer-in-Charge is valid and legal and whether it was due to any breach on the part of the contractor, or whether the contractor could be made liable to pay such excess, are not issues on which the Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.17of 22 decision of Engineer-in-Charge is made final.
18. Thus what is made final and conclusive by clauses (2) and (3) of the agreement, is not the decision of any authority on the issue whether the contractor was responsible for the delay or the department was responsible for the delay or on the question whether termination/rescission is valid or illegal. What is made final, is the decisions on consequential issues relating to quantification, if there is no dispute as to who committed breach. That is, if the contractor admits that he is in breach, or if the Arbitrator finds that the contractor is in breach by being responsible for the delay, the decision of the Superintending Engineer will be final in regard to two issues. The first is the percentage (whether it should be 1% or less) of the value of the work that is to be levied as liquidated damages per day. The second is the determination of the actual excess cost in getting the work completed through an alternative agency. The decision as to who is responsible for the delay in execution and who committed breach is not made subject to any decision of the respondents or its officers, nor excepted from arbitration under any provision of the contract.
19. In fact the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is, a court or an Arbitral Tribunal."
13.6 Thus, quantification of liquidation of damages may be an excepted matter but the dispute whether there was sub-standard work by not employing the paver is arbitrable.
b) No loss suffered and proved by the respondent/ claimant
14. It has been stated in the petition (though not argued) that the Ld. Arbitrator has awarded claim no.1 in favour of the respondent/ claimant without any proof of loss. Under this Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.18of 22 claim, the respondent/ claimant had sought Rs.8,53,928/- for loss suffered for in-ordinate delay of 14 months attributable to the petitioner.
14.1 Ld. Arbitrator has evaluated the evidence brought on record on arriving at a finding that delay of 14 months in completing the project was not attributable to the respondent/ claimant and it was required to be duly compensated. Thereafter, it has held as under:
'....In view of the above discussion, in my opinion, the above counter claim, preferred by the respondents, is devoid of any substance and, therefore, deserves to be rejected. Accordingly, the same is hereby rejected. As regards Issue No. (i) the position is that in view of the above discussion, the petitioner/claimant, in respect of the claims preferred by it, is entitled to recover a sum of Rs. 19.42.923/- (Rupees nineteen lakhs forty two thousand nine hundred twenty three only) from the respondents together with simple interest @ 12% per annum from the date the above amount has become due and payable to the petitioner/claimant from the respondents till actual payment. The petitioner/claimant is also entitled to recover Rs. 1,00,000/- (Rupees one lakh only) as cost of these proceedings from the respondents. Issue No. (1), therefore is decided in above terms in favour of the petitioner/claimant and against the respondents.
Issue No. (ii) framed by this arbitral tribunal relates to relief. In view of my decision in respect of issue no (iii) and issue no (1) this arbitral tribunal makes the following award:-
that the respondents shall jointly and severally pay to the petitioner/claimant a sum of Rs. 19.42.923/- (Rupees nineteen lakhs forty two thousand nine hundred twenty three only) together with simple interest on the above amount @ 12% per annum from the date the above amount became due and payable to the petitioner/claimant till actual payment; and Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.19of 22
(ii) that in addition to (i) above the respondents shall also pay to the petitioner/claimant a sum of Rs. 1,00,000/-
(Rupees one lakh only) towards the cost of the present proceedings.
Before concluding, I would like to place on record my appreciation of the valuable assistance rendered by the Learned Counsel for parties to this arbitral tribunal. I have no hesitation in acknowledging that but for the valuable assistance given by the Learned Counsel for both the parties and the pains taken by them it would not have been possible for this arbitral tribunal to conclude this matter with expedition.
The Award is made, signed and pronounced at Delhi on this 22nd day of February, 2008 and has been prepared on a stamp paper of Rs.2,300/- (Rupees two thousand & three hundred only).
14.2 When on the basis of evidence led, the Ld. Arbitrator arrived at a plausible conclusion, the petitioner has been unable to demonstrate as to why, the Court should re-appreciate the evidence and interfere with the finding of the Ld. Arbitrator.
c) Grant of interest
15. An objection has been raised that the Ld. Arbitrator has awarded per-adjudication interest despite respondent/ claimant never claiming the same before appointment of the arbitrator and was also responsible for delay in approaching the arbitrator. Thus, dis-entitling it to the interest.
15.1 To counter the objection, it is stated that the Ld. Arbitrator has decided the claim of interest is as per law, the objection is not tenable.
Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.20of 22 15.2 The Ld. Arbitrator is empowered by virtue of Section 31(7) of the Act to award interest. In M/s/ Hyder Consultant (UK) Ltd vs. Governer, State of Orissa Through Chief Engineer 20, it has been clarified that aforementioned Section does not differentiate between pre-reference period and pendente lite period. Therefore, the Court is not inclined to interfere with the award on this ground.
d) Non-service of notice under Section 21 of the Act
16. This objection was raised belatedly at the time of filing of written submissions. Service of notice dated 02.12.2003 to the Chief Engineer is not disputed. The enclosures to it were (a) photocopy of letter dated 10.09.2003 to the Executive Engineer with list of claims and (b) photocopy of letter dated 20.10.2003 to Superintending Engineer, Central Circle CPWD, Ghaziabad, U.P. Thus, it was a question of fact whether the claims had been sent alongwith letter dated 02.12.2003 which is notice for settlement of claims or appointment of the sole-arbitrator. Even at the stage of hearing on petition under Section 11(2) & 6 of the Arbitration and Conciliation Act, 1996 in ARB.P. No.36 of 2004 before the Delhi High Court, no such objection was taken. Hence, this Court is persuaded by Union of India (Railways) vs. Suska (P) Ltd. to hold that the petitioner abandoned the plea at 20 Civil Appeal No.3148 of 2012 decided by Suprepe Court of India on 25.11.2014 Arbitration petition no. 3000/2017 Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.21of 22 the initial stage itself. Therefore, the objection is not of much relevance.
e) Limitation
17. As per the petition, it is stated that since the respondent/ claimant raised the disputes vide letter dated 10.09.2003 after lapse of 11 months, the claim was barred by limitation as per clause 25(ii) of the contract. However, the Ld. Arbitrator has relied upon Panchu Gopal Bose vs Board of Trustees for Port of Calcutta (1993) 4 SCC 338 that the Limitation Act would prevail over the clause of contract. The reasoning therefore, requires no interference.
18. Accordingly, the arbitration petition is dismissed.
19. Arbitral record be sent back.
20. File be consigned to records.
Pronounced in open Court
on 11.03.2024 (Vijeta Singh Rawat)
Additional District Judge-01,
New Delhi District,
Patiala House Courts,
New Delhi
Arbitration petition no. 3000/2017
Union of India vs. M/s. N.P.A. Engineers & Contractors Page no.22of 22