Bombay High Court
Municipal Corporation Of Greater ... vs Hindustan Construciton Company Ltd on 3 December, 2010
Author: D.Y. Chandrachud
Bench: D.Y. Chandrachud
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O. O.C. J.
ARBITRATION PETITION NO.65 OF 2008
Municipal Corporation of Greater Mumbai. ...Petitioner.
Versus
Hindustan Construciton Company Ltd. ...Respondent.
.......
Mr.R.D.Dhanuka with Mr.H.C.Pimple and Mr.R.Y.Sirsekar i/b.
S.H.Ujjainwala & Co. for the Petitioner.
Mr.Aspi Chinoy, Sr.Advocate with Mr.Kevic Setalwad i/b. M/s.Harish
Joshi & Co. for the Respondent.
......
CORAM : DR. D.Y. CHANDRACHUD, J.
December 3, 2010.
ORAL JUDGMENT :
The challenge in these proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, is to an arbitral award of 24 September 2007 of an arbitral Tribunal consisting of three Arbitrators.
2. In April 1995, the Petitioner invited tenders for the ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 2 arbp65.08-8.12 construction and completion of civil work of aerated lagoons at Bhandup and Ghatkopar on Contracts 10AA and 11AA. The contract was awarded to the Respondent on 5 January 1996 and a formal agreement was entered into between the parties on 30 April 1996.
After the work was completed, the Respondent issued a taking over certificate on 14 March 2001 for the civil work of the aerated lagoons at Bhandup and for the work at Ghatkopar. The certificate recorded that the Respondent had substantially completed the entirety of the work in accordance with specifications and drawings and had agreed to complete the pending items of work within two months; during the defects liability period. The defects liability period commenced from 4 March 2001 and ended on 3 March 2002. On 14 March 2002, there was a general inspection of the work executed by the Respondent and the Respondent was called upon to rectify certain defects in terms of clause 49.2 of the Conditions of Contract. On 16 April 2002, the Chief Engineer (MSDP) of the Petitioner addressed a letter to the Respondent recording that the balance of the work had been carried out and that the defects had been rectified. Accordingly, defects ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 3 arbp65.08-8.12 liability certificates for the work under the contract came to be issued by the Petitioner to the Respondent under Clause 62.1 of the Conditions of Contract. These certificates were forwarded by the Petitioner to the Respondent on 16 April 2002.
3. After the defects liability period had ended, some defects were noted in June/July 2003 nearly two years after the work was taken over by the Petitioner. On 15 September 2004, a meeting took place between the parties. What transpired at the meeting is a matter of dispute. During the course of the arbitral proceedings, the Petitioner relied on Minutes of the Meeting. These were disputed by the Respondent. What was produced before the arbitral Tribunal, was a photocopy of Minutes which were not signed by the Respondent.
The original document was not produced. The Petitioner retained an amount of Rs.66,51,987.69 which was otherwise due and payable to the Respondent on the ground that the work which had been rendered was defective. The arbitration agreement contained in the contract was invoked and a three member Arbitral Tribunal presided ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 4 arbp65.08-8.12 over by a former Judge of this Court, and consisting of a retired Chief Engineer of the Mumbai Port Trust and a former Chief Secretary of the State Government was constituted.
4. The arbitral Tribunal found in its award that the Respondent had duly carried out work under the contract and that the Petitioner had issued a taking over certificate on 14 March 2001 both for the work at Bhandup as well as that at Ghatkopar. The balance of the work which remained as provided in the list annexed to the taking over certificate was found to have been executed. The defects liability period ended on 3 March 2002. Defects liability certificates were issued by the Petitioner to the Respondent. A joint inspection had taken place on 14 March 2002. The Petitioner was found to have satisfactorily attended to the minor defects noticed in the work and it was only thereafter that the defects liability certificates were issued by the Petitioner to the Respondent. The Tribunal noted that the defects liability certificates were unconditional. If the Respondent as a contractor had failed to carry out remedial work within reasonable ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 5 arbp65.08-8.12 time, the Petitioner as an employer would have, in the normal course, taken on an alternative agency to execute the work for remedying the alleged defects. The Tribunal noted that no record was produced by the Petitioner to show that it engaged any agency to remedy any alleged defect even during the period of liability or even thereafter. In these circumstances, the Tribunal held that the documents on record would show that there was no defect in the work executed by the Contractor. The alleged leakage was noted in June/July 2003 much after a lapse of two years of the taking over of the work by the Petitioner. On these grounds, the Tribunal allowed the claim of the Respondent for the balance due of Rs. 66.51 lakhs. Interest was allowed on the aforesaid amount and on a payment which had been delayed at the rate of 10% per annum; compounded monthly in terms of clause 60.8 of the applicable General Conditions of Contract.
5. The Petitioner had made a counter claim which was dismissed. The Tribunal noted that the work executed by the Respondent was not defective and in any event, the Petitioner had not ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 6 arbp65.08-8.12 carried out any work of rectification at the risk and cost of the Respondent in respect of any alleged defective work. The counter claim was not based on any loss, or damage actually caused to or suffered by the Petitioner and was in these circumstances rejected.
6. The award of the Tribunal has been assailed on two grounds at the hearing of the Petition. Counsel appearing on behalf of the Petitioner submitted that the Tribunal has relied on an unproved document which was not taken on record by the Tribunal in the course of the evidence. This document is a report of Dr.Katti. As a matter of fact, there are two reports of Dr.Katti: an interim report forwarded along with a letter dated 1 November 2004 and a final report of 8 November 2004. The second submission is that the Tribunal has without justification come to the conclusion that the Minutes of the Meeting held on 15 September 2004 had not been proved by the Petitioner. These Minutes, according to the Petitioner, are relevant because the Respondent had agreed at that meeting to rectify defects that had arisen at its cost. The Tribunal held that the ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 7 arbp65.08-8.12 original was not produced and, therefore, was not proved. The submission is that the Petitioner led oral evidence in support of the document and answers were elicited from the witness for the Petitioner in the course of the cross-examination. For these reasons, it is the submission that the minutes of the meeting held on 15 September 2004 were duly proved. The Tribunal has been inconsistent, when it relied on one of the reports of Dr.Katti and on the other hand refused to accept the minutes of the meeting of 15 September 2004. This, it is submitted, is in violation of the principles of natural justice.
7. On the other hand, it has been urged on behalf of the Respondent by Learned Senior Counsel that the Tribunal was entirely justified in holding that the minutes of the meeting dated 15 September 2004 were not proved. The fact that the meeting was held on 15 September 2004 is not in dispute. Almost contemporaneously with the holding of the meeting the Respondent had addressed a letter dated 1 November 2004 to the Petitioner placing on record its ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 8 arbp65.08-8.12 version of what transpired at the meeting. The Petitioner did not produce the original signed minutes and had no explanation to offer as to why the signed copy of the minutes was not available. In these circumstances, the document was not proved and the reasoning of the Tribunal does not suffer from any perversity or illegality. The second submission which has been urged on behalf of the Respondent is that the report of Dr.Katti finds mention in the award only with reference to what transpired at the alleged meeting of 15 September 2004. At a meeting of the arbitral Tribunal on 6 March 2006, a statement was made on behalf of the Petitioner that the Petitioner admits documents, copies whereof were filed in the arbitral proceedings and it was on that basis that the Respondent stated that it was not leading any oral evidence. In any event, as a matter of fact, the contents of the report of Dr.Katti are not the basis of the award.
The basis of the award of the Tribunal is that the Petitioner having issued a taking over certificate and defects liability certificates and all the work of rectification having been carried out by the Respondent, the work was satisfactorily performed and no defect had remained.
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8. In assessing the merits of the rival submissions, it must be noted at the outset, that the basis of the award of the arbitral Tribunal is that the Petitioner had duly certified that the work which was executed by the Respondent was in accordance with the specifications of the contract. This, according to the Tribunal, was evidenced by the taking over certificates issued by the Petitioner to the Respondent both in respect of the work of the aerated lagoons at Bhandup and Ghatkopar. The work which had remained to be carried out was duly completed and such defects which were pointed out were found to have been rectified. Thereupon, the Petitioner had issued defects liability certificates. This is the foundation and basis of the award of the arbitral Tribunal. The Petitioner sought to rely on minutes of the meeting which was held on 15 September 2004 in support of its submission that at that meeting the Respondent had agreed to rectify certain defects upon the payment of an amount of Rs.62 lakhs. The fact that the meeting was held is not in dispute. What transpired at the meeting is the bone of contention. Now it is an admitted position ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 10 arbp65.08-8.12 before the Court that the Petitioner did not produce the original signed minutes of the meeting. The Petitioner had no justification to offer, when its witness deposed in evidence as to why a signed copy of the minutes or for that matter, the original of the minutes was not produced. Admittedly, what is produced in an evidence was a photo copy of the alleged minutes which was only signed by the Deputy Municipal Commissioner. The witness, who deposed on behalf of the Municipal Corporation admitted, in response to Question 47, that a copy of the minutes was required to be sent to the Respondent, the contractor. The witness stated that he was unaware as to whether the office of the Deputy Municipal Commissioner had issued a copy of the minutes to the contractor. The witness was asked as to whether he would produce the original of the minutes of the meeting of 15 September 2004 (R-20) to which he answered by stating that he would try to trace out the original document and would produce it as early as possible. Thereafter, neither was the original produced, nor was any justification for leading secondary evidence given. In these circumstances, on this state of the record, the Tribunal was entirely ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 11 arbp65.08-8.12 justified in coming to the conclusion that the alleged minutes upon which reliance has been placed by the Petitioner were not duly proved. Before concluding this aspect of the matter, it must be noted that there was an exchange of correspondence between the parties soon after the meeting of 15 September 2004. On 1 November 2004, the Petitioner had addressed a letter to the Respondent stating that at that meeting, the Deputy Municipal Commissioner had promised that the payment would be effected by the Petitioner to the Respondent.
According to the Respondent, though it was not obliged to obtain a technical report from Dr.Katti, it had agreed to obtain that report provided the payment of the final bill was released immediately. By its letter dated 1 November 2004, the Respondent forwarded a copy of the interim report of Dr.Katti dated 26 October 2004. The Respondent's version of what transpired is that it had never agreed to undertake the work of repair. On this state of the record, and particularly having regard to the contemporaneous material in the form of correspondence between the parties exchanged soon after the meeting, it was not possible for the Tribunal to come to the ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 12 arbp65.08-8.12 conclusion that the minutes on which reliance was placed by the Petitioner constitute an authentic record of what transpired at the meeting. For these reasons, the award of the Tribunal on this ground cannot be held to be arbitrary, perverse or being illegal.
9. Now it is no doubt well settled that an arbitral Tribunal is not bound by the strict rules of evidence which govern civil trial. But, equally ever since the judgment of the Supreme Court in Bareilly Electricity Supply Co.Ltd. Vs. The Workmen,1 it is well settled that the principles of natural justice must be observed even if an adjudicating body is not governed by the strict rules of evidence or procedure. The Supreme Court observed that the application of the principles of natural justice does not imply that what is not evidence can be acted upon. The judgment of the Supreme Court would also buttress the contention of the Respondent that the minutes of the meeting of 15 September 2004 could not have been relied upon when neither the original was produced nor was any justification put fourth for the absence of the signed copy of the original.
1 AIR 1972 SC 330
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10. Now, in so far as the report of Dr.Katti is concerned, Counsel appearing on behalf of the Respondent drew the attention of the Court to the minutes of the meeting before the arbitral Tribunal on 6 March 2006. During the course of the hearing before the Tribunal, the representative of the Petitioner stated that the Petitioner was admitting documents, copies of which were filed in the arbitral proceedings. The minutes of the meeting also record that the Respondent was not leading any oral evidence. The submission which has been urged on behalf of the Petitioner is that when the representative of the Petitioner stated that he was admitting the documents, it only meant that the existence of the documents was being admitted and not the contents for, if the contents were to be admitted, there would be nothing that would remain to be tried in the arbitral proceedings. Be that as it may, and even assuming that the submission which has been urged on behalf of the Petitioner is correct, on a reading of the award of the arbitral Tribunal it is clear that the report of Dr.Katti is not the basis or the foundation of the award. The report of Dr.Katti is initially referred to in the arbitral ::: Downloaded on - 09/06/2013 16:40:16 ::: vbc 14 arbp65.08-8.12 award while adverting to the case of the claimant. The reference to the report in the course of the arbitral award is only to be found in the context of the meeting which took place on 15 September 2004. It is in the context of that meeting, that the arbitral Tribunal noted that though there was no contractual obligation on the part of the Respondent, the Respondent agreed to have a report of Dr.Katti in the matter without any commitment on its part to bear the costs thereof.
The Tribunal has thereafter observed that even the minutes which were relied upon by the Petitioner do not record that the Respondent had agreed to carry out the work of repair as sought to be suggested by the Petitioner and that no agreement to carry out repairs to the alleged defective or damaged work on the part of the Respondent was arrived at during the meeting of 15 September 2004. In these circumstances, I am of the view that the question as to whether Dr.Katti's report could have been relied upon as substantive evidence is of no significance because the arbitral award as a matter of fact is not based on the report of Dr.Katti.
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11. Besides this, it has been submitted on behalf of the Respondent by the Learned Counsel that at no stage during the course of the arbitral proceedings had the Petitioner ever contended that the report of Dr.Katti was not proved or could not be referred to.
12. For all these reasons, I am of the view that the arbitral award does not suffer from any illegality or perversity.
13. The Petition is accordingly dismissed. No costs.
( Dr.D.Y.Chandrachud ) ::: Downloaded on - 09/06/2013 16:40:17 :::