Bangalore District Court
Bengaluru Metro Rail Corporation Ltd vs Navayuga Engineering Company on 28 January, 2022
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 28th day of January 2022
COM.A.S.No.228/2018
Plaintiff Bengaluru Metro Rail Corporation ltd.,
BMTC Complex, 3rd Floor, K.H.Road,
Shantinagar, Bengaluru560027.
Represented by its Managing Director.
(By Sri.S.S, Advocate)
// versus //
Defendants 1. Navayuga Engineering Company,
having its office at:
plot No.379, Road No.10,
Jubilee Hills, Hyderabad500033
Represented by its
Authorized Signatory.
2. Sri L.V.Sreerangaraju,
No.537, 'Jyeshta', 3rd Main,
Hosakerehalli Cross,
Banashankari 3rd Stage,
Bengaluru560085.
3. Sri. R. Rajamani,
Flat No.3, 'Rampriya',
AE172, 11th Main Road,
Annanagar, Chennai600040.
4. Sri. T.D.Manamohan,
2
CT 1390_Com.A.S.2282018_Judgment .doc
No.10, "Kavery",
Tharalabalu Enclave,
Near Yelahanka Old Town,
Traffic police Station, Yelahanka,
Bengaluru560084.
(R.1 by Sri.A.V, Advocate,
R.2 to R.4 - Arbitrators)
Date of Institution of the : 16/11/2018
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 28/1/2022
Judgment was
pronounced.
: Year/s Month/s Day/s
Total duration
03 02 12
JUDGMENT
This Arbitration Suit is filed by the plaintiff praying to set aside the award dated 16/8/2018 passed by the learned Arbitral Tribunal constituting defendants No.2 to 4 and to grant costs.
2. The plaintiff was the respondent before the learned Arbitral Tribunal. Defendant No.1 was the claimant. Defendants No.2 to 4 are the learned Arbitrators. Defendant No.1 is hereafter referred as defendant.
3. The case of the plaintiff in brief is as under:
3CT 1390_Com.A.S.2282018_Judgment .doc The plaintiff, a joint venture of Government of India and Government of Karnataka, is a special purpose vehicle entrusted with the responsibility of implementation of Bengaluru Metro Rail Project named as 'Namma Metro'. The defendant No.1 was awarded contract for construction of elevated structure between CH11200m to CH 17600m excluding station portions from Byappanahalli to Cricket Stadium. Total cost of the project was Rs.138,55,02,871/. The letter of acceptance was issued and thereafter agreement dated 15/2/2007 was entered into between the plaintiff and defendant and the pre bid meeting was held before opening of the tender and replies were given by the plaintiff to the questions raised by the defendant and other prospective bidders. The plaintiff unequivocally clarified and confirmed that the tender conditions shall prevail for any delay in handing over of land issuing the GFCs. The parties have entered into contract with the clear understanding of the terms agreed between the parties. Though the plaintiff handed over vacant and encumbrance free work sites in a timely manner as stipulated under the contract, defendant displayed casual and lackadaisical attitude in effective utilization of the sites provided and the same led to the delay in completion of the works. On the request of the defendant several extension of time were granted, but the defendant has not adhered to the targets fixed. Due to several lapses of the defendant, work entrusted to the defendant had to be rescinded progressively and in view of continued failure to 4 CT 1390_Com.A.S.2282018_Judgment .doc show progress, partial rescission was carried out as provided under clause 60.1 of GCC after following the procedure. The rescission was affected on five occasions spanning over a year from 14/2/2009 to 12/3/2010. After duly notifying the defendant, defendant on 12/10/2010 issued notice of dispute to the plaintiff crystallizing its claim. Arbitral tribunal was constituted and defendant filed claim statement and plaintiff filed detailed objection and preferred counter claim. Defendant made 16 claims and claimed Rs.180,14,52,102/ including interest and costs. Plaintiff has made a counter claims amounting to Rs.384,28,91,058/. The tribunal has framed issues on the basis of pleading. Claimant/defendant has led evidence of Cws.1 to 3. The plaintiff/respondent has led evidence of RW.1. Documents were produced for both the sides. After hearing both the parties, learned Arbitral Tribunal has passed award on 16/8/2018 and awarded Rs.122,76,50,323/ to the defendant and rejected the counter claim.
4. Being aggrieved by this award, plaintiff has filed present arbitration suit and challenged the award mainly on following grounds:
i) It is contended that Arbitral Tribunal has passed the award by ignoring evidence and pleadings on record and has ignored the provisions of contract binding the parties and has erroneously ignored the provisions of law and the settled provision of law and has failed to appreciate the contention 5 CT 1390_Com.A.S.2282018_Judgment .doc raised by the plaintiff and has come to wrong conclusion that the plaintiff committed breach of all the material clauses of the contract and wrongly held that the plaintiff's obligations under the contract is condition precedent for the performance of the obligations by the defendant.
ii) It is contended that while dealing with delay pertaining to handing over of land, tribunal after coming to the conclusion that date on which land was required to be handed over can be only on the basis of the requirement of land as per the agreed programmeme under clause 53, has wrongly held that land was to be handed over between 20/1/2007 and 1/2/2007 and it has erroneously come to the conclusion that progressive handing over can only happen between these dates and on the basis of this finding, tribunal wrongly held that there was delay in handing over of the land and the tribunal has completely ignored the evidence placed on record by the plaintiff indicating that the defendant has not carried out the work in the stretches which were made available to it. It is also stated that the witness CW.1 has clearly admitted that even before handing over of the land the work at some place was already undertaken as mentioned by the witness. It is contended that if there is delay in providing land, contractor is entitle for extension of time, but not entitle for compensation as mentioned in clause 57.4 of GCC. It is stated that the contractor - defendant has availed the benefit of extension of time and the Tribunal, by ignoring clause 57.4 and by applying clause 54 of GCC has held that contractor is 6 CT 1390_Com.A.S.2282018_Judgment .doc entitle to compensation for delay in handing over the land and the tribunal has failed to note the phrase in clause 54 stating that contract can prescribe separate procedure.
iv) It is contended that while considering the aspect of delay in handing over of land for casting yard and batching plant, Tribunal has erroneously held that there is delay up to May 2007 and the tribunal has not appreciated the evidence on record in support of the contention of the plaintiff. It is stated that defendant failed to effectively utilize the land and due to disorganized manner of working by the defendant, land provided for casting yard was rendered insufficient and defendant needed additional land for stacking of segments which he was required to arrange and the defendant failed to arrange for the additional land needed. It is stated that the defendant had the obligation of setting up batching plant and he has committed delay and there was also delay in setting up of casting lines, erection of gantry, cranes, casting of mock up segments and this delay are attributable to the defendant and have greatly prejudiced the completion of the project and these delays are attributable to the defendant and the finding of the tribunal on this delay is erroneous and contrary to the facts, pleaded and documents produced.
v) It is contended that Tribunal has erroneously held that the good for construction (GFC) drawings should have been issued to defendant even without initial testing of pile results and the Tribunal has wrongly held that under the facts and circumstances of the case regarding pile load test, it 7 CT 1390_Com.A.S.2282018_Judgment .doc became more a formality than the requirement of GFC drawings which was issued. It is stated that massive delays committed by the defendant in casting test piles and conducting pile load tests and submitting test results had direct bearing on furnishing of GFC drawings and the tribunal has erred in holding that the GFC should have been issued without PLT results and the award suffers from ignoring the clinching evidence available before it to pass the impugned award.
vi) It is also contended that the tribunal has erroneously held that the delay in shifting of utilities is not attributable to the defendant, though as per the contract the defendant is required to liaise with the agency for carrying out the work expeditiously wherever required so that works at particular locations are not delayed.
vii) It is contended that from the commencement of the project defendant failed to carry out the work in a time bound manner and executing the works in the method prescribed by the contract. Defendant resorted to direct excavation method which resulted in damage being caused to underlying utilities on several occasions and this hampered the progress of project work and affected the free flow of traffic causing great public fury against the plaintiff. As a result of non availability of a utility expert, trenching work and identification of utilities suffered immensely and the tribunal instead of appreciating the contention of the plaintiff and clauses of the contract has held that diversion of unchartered utilities which the 8 CT 1390_Com.A.S.2282018_Judgment .doc contractor comes across is also not the responsibility of the defendant, but he has to liaise with the agency employed by the plaintiff and Tribunal has also awarded money in contravention of the clauses of the contract.
viii) It is also contended that the tribunal has erroneously held that traffic diversion will be required to be executed in accordance with the land availability, drawings and time of execution which are also dynamic in the whole process and wrongly held that non approval of traffic plan is not attributable to the defendant.
ix) It is contended that the tribunal has erroneously held that no delay can be attributed to the defendant with regard to submission of drawings, designs, review of the same by the plaintiff. It is also contended that the tribunal has erroneously held that the time lost due to third party inspection of launching girder deserves to be considered and defendant is not liable for any such delay. It is also contended that the tribunal has erroneously held that there was delay in casting of segment due to non availability of land for stocking the segment which were to be cast due to piling up of segments. The defendant failed to arrange for land to stock up the cast segments and the plaintiff had to arrange for additional land though it was the responsibility of the defendant under the contract. It is also contended that the tribunal has erroneously held that the delay caused by the change in decision as to provision of shear key bars had an adverse impact on the execution time of the contract and 9 CT 1390_Com.A.S.2282018_Judgment .doc same is not attributable to the defendant, though provision for shear key bars was removed on the request of the defendant and defendant specifically stated in the letter that they will not claim any additional cost for removal of the same. It is stated that the tribunal has erroneously held that the delay in issue of drawings with respect to parapet and cable troughs cannot be attributed to the defendant.
x) It is contended that Tribunal has wrongly held that five terminations are wrongful, unjust and legally not sustainable and tribunal has wrongly held that rescissions made is not in conformity with the agreed provisions under the contract and the conditions precedent having not been met, such rescission is wrongful and illegal.
xi) The plaintiff has also contended that in respect of first rescission Tribunal has erroneously held that when delays are attributable to the plaintiff, action of rescission is an action which would benefit the defaulting party is not correct. It is stated that first rescission of works was affected on 2/1/2009 as the defendant from the date of awarding the work had carried a casual and negligent attitude and was reminded repeatedly by the plaintiff and the general consultants to mobilize sufficient resources and to carry out works in prompt, punctual and timely manner. It is also stated that even with the piling works pending, defendant in an unprofessional and unethical manner shifted one Hydraulic rig to one of its site at Nelamangala and on giving warning and fearing penalty the defendant redeployed the 10 CT 1390_Com.A.S.2282018_Judgment .doc hydraulic rig at the site. It is also contended that the defendant was also notified that it failed to mobilize adequate resource, employ competent key personnel or additional staff and labour entailing rescission.
xii) Regarding second rescission, it is contended that the Tribunal has erroneously held that 7 days notice suffers from deficiency and is not sustainable and also that 48 hours notice is also not sustainable. Plaintiff has also given details of the lapses on the part of the defendant which led to the second rescission in detail. It is also stated that clause 60.1 of GCC makes it clear that, requirement of GC is to serve a notice on the defendant in writing indicating the defaults and obligation of defendant to make good the default within 7 days as the said period is a term of the contract. It is stated that in view of the same, following engineer's notice dated 13/6/2009, the plaintiff partially rescinded the contract under clause 60.1 of the GCC, by informing the defendant that it will recover the risk and cost amount. It is stated that as the defendant expressed its inability to execute the work in its letter, plaintiff was constrained to rescind portion of work from defendant's scope of work.
xiii) Regarding third rescission, it is contended that the tribunal has erroneously held that 7 days notice cannot be considered by any stretch of imagination as a bonafide notice under the contract and the tribunal has further held that rescission order dated 18/7/2009 suffers from clear absence of the condition precedent necessary for rescinding the 11 CT 1390_Com.A.S.2282018_Judgment .doc contract. It is stated that the tribunal without appreciating the factual contention has held that when launching of segments in the stretch of P7188 cannot be commenced till March 2010, question of ascribing default in casting of segments and parapets appears to be clearly without application of mind.
xiv) With regard to fourth rescission, plaintiff contended that the tribunal has erroneously held that casting of segments by the defendant was technically not possible unless certain modifications were made. It is stated that the tribunal has erred in holding that even if clause 60.1.i(h) is to be invoked other necessary condition precedent such as 7 days notice, 48 hours notice are totally absent and the rescission is not legally sustainable. It is stated that the finding that the rescission was not affected contractually is not based on relevant provisions of the contract.
xv) Regarding fifth rescission, it is contended that the Tribunal has wrongly adopted its findings or observations with regard to issue No.1 and 2 which dealt with rescission Nos.1 to 4 to be applicable to rescission No.5. It is stated that the tribunal has found fault with the contractual clause not mentioned in the rescission notices. It is stated that GC directed defendant No.1 to complete the work which were within their stipulated time and rescinded the other parts of the work and in view of the expiry of the contractual period the GC was constrained to intimate the defendant to casting 2175rm of cable troughs and the balance work which was 12 CT 1390_Com.A.S.2282018_Judgment .doc beyond the stipulated period was off loaded from the scope of work of the defendant. It is stated that clause 60.1 of GCC permits partial rescission.
xvi) It is stated that the tribunal has held that defendant is entitle for claims, claimed by it under various heads by ignoring the facts and documentary evidence on record. It is stated that the defendant has hopelessly failed to mobilize the resources as per the baseline programmeme and has also failed to mobilize requisite number of hydraulic piling rigs but also illegally removed the rigs available at the site. It is stated that the tribunal has erroneously held that the defendant is entitle for Rs.3,78,00,000/ on claim No.1 and Rs.1,74,12,634/ towards principal amount of claim No.2.
xvii) It is contended that the awarding of Rs.3,51,82,688/ towards loss of profit is also not justified. It is contended that for the purpose of determining the loss of profit, tribunal has adopted its own formula and arrived at a figure of Rs.3,51,82,688/ and the plaintiff was given no opportunity to see the correctness or otherwise of the formula being adopted and the award is violative of principles of natural justice and contrary to settled principle of law.
xviii) It is also contended that the tribunal has erroneously held that the defendant is entitle for Rs.1,02,71,394/ towards unrecovered cost of casting yard and casting bed preparation and Rs.28,35,243/ towards unrecovered cost of EOT gantries and Rs.33,32,418/ towards underutilization of form work for segments and the tribunal 13 CT 1390_Com.A.S.2282018_Judgment .doc has wrongly held that the form works are project specific for the segment casting and as such, reuse of the same is not possible. It is also contended that the tribunal has erroneously awarded Rs.24,40,57,561/ towards extra costs incurred in executing the works in extended period and there is no provision in the contract for payment during the extended period with the rates awarded for other contract packages. It is stated that the defendant failed to adhere to its own programmeme, the extension of time was granted to facilitate the defendant for making good the backlogs.
xix) It is also stated that the tribunal has erroneously awarded Rs.47,17,921/ towards cost for providing traffic marshals/ home guards and Rs.30,19,467/ towards providing and maintaining furnished site office and other facilities to the Engineer during the extended period. It is stated that the period of contract as per revised BOQ Section A includes the extended period of contract and therefore there is no basis for the claim which is based on a wrong premise that the plaintiff has to pay towards maintenance of office.
xx) It is stated that the work entrusted to the third party were the works which were rescinded by five rescissions and they were rescinded at the risk and cost of the defendant as per clause 60 of GCC. It is stated that the defendant was not discharged of its liability as contended and the invocation and part encashment of the bank guarantees for mobilization advance and plant and machinery advance was on account of 14 CT 1390_Com.A.S.2282018_Judgment .doc the breaches committed by the defendant and same is not considered by the Tribunal.
xxi) It is also contended that the defendant was made clear that time was essence of the contract and defendant has committed various defaults in execution of works under the contract and failed to fulfill its contractual obligations. It is stated that the injunction restraining the plaintiff from receiving the amounts under the performance bank guarantees would defeat the very purpose of obtaining the bank guarantee. It is stated that the plaintiff had made five counter claims, but the learned Arbitrator has summarily rejected the counter claim made by the plaintiff and while rejecting the counter claim, the arbitrator has only refers to findings on issues No.1 to 7 and there is no independent finding of the tribunal with regard to the counter claim.
xxii) It is stated that by way of impugned award, plaintiff is directed to pay Rs.122,76,50,323/ with interest @12% per annum from the date of award till date of payment and this award is erroneous, illegal, perverse and opposed to public policy. It is stated that the learned Arbitral Tribunal has neither considered the substantive law nor the provisions of the agreement between the parties while passing impugned award. It is stated that the tribunal has misdirected itself in not taking into consideration several material documents such as letters and correspondence between the parties. It is stated that the award is passed in blatant violation of 15 CT 1390_Com.A.S.2282018_Judgment .doc provisions of the Indian Contract Act, the Interest Act and the Arbitration & Conciliation Act.
xxiii) It is contended that the Tribunal awarded finance charges on the sums claimed by the defendant and has erroneously failed to appreciate the contention raised by the plaintiff and ignored clauses of the contract. It is stated that the claiming of interest and costs are barred by contractual provisions and claim ought to have been rejected in view of clause 85.7 of GCC. As parties are bound by provisions of contract and Tribunal being a creature of contract cannot award any sums beyond terms of the contract or in violation of express terms of contract, but the tribunal has awarded Rs.66,53,43,685/ towards finance charges and in view of specific provisions in the contract, clauses in the Interest Act was not applicable and the arbitral Tribunal without framing any issues with regard to bar of interest being contrary to provisions of Interest Act, has considered this point which is in violation of principles of natural justice. It is contended that tribunal after considering that by virtue of clause 85.7 no interest could be awarded till passing of award,has gone out of its way to invent contentions which were never raised and by changing the nomenclature as finance charges has awarded the interest by creating a formula and therefore, entire award suffers from such illegality and is liable to be dismissed. It is contended that interest of 12% per annum is also unreasonable.16
CT 1390_Com.A.S.2282018_Judgment .doc On all these grounds Plaintiff, who was respondent before learned Arbitral Tribunal has prayed to set aside the award.
5. The defendant who was claimant before the learned Arbitral Tribunal has filed statement of objection and has stated that the arbitration suit is misconceived, untenable and suffers from gross disparity with the Arbitration & Conciliation Act and is liable to be rejected. The defendant has stated that under the award, the amount of Rs.122,76,50,323/ along with 12% simple interest per annum is required to be paid by the plaintiff to the 1 st defendant. It is stated that the Arbitral Tribunal has addressed each of the issues by setting out the case addressed by the parties in detail and assigning detailed reasons by referring to the provisions of the contract, evaluating the documentary and oral evidence on record and assessing the relevant judgments. It is stated that the tribunal has addressed each of the claims and counter claims and has judiciously awarded or rejected the claim and counter claim. It is stated that the assertion putforth in the instant suit are factually incorrect and based on erroneous reading, understanding and interpretation of the award. It is stated that the Arbitral Tribunal has dealt in detail with the concerned contract provisions, provisions of law and applicable status. It is stated that the tribunal has given detailed cogent reasons in the award for awarding the award 17 CT 1390_Com.A.S.2282018_Judgment .doc amount to the 1st defendant and rejecting the counterclaims of the plaintiff, merely because the award is not in favour of the plaintiff, it cannot be said that there is an infirmity in the award. It is stated that the contention of the plaintiff that the tribunal has failed to appreciate evidence placed before the tribunal and has erred in interpretation of the terms of the contract are not acceptable. It is stated that the plaintiff is reagitating the very same issues which were raised in the arbitration proceedings and is seeking a review on merits of the same issues which were heard and decided. It is stated that no reappreciation of evidence, or review on merits is permissible under the provisions of Section 34 of the Act. It is stated that the interpretation of contract by the learned Arbitral Tribunal is correct and is the only logical interpretation of the terms. It is also stated that the terms of the contract is within the domain of the Arbitral Tribunal. Even if the tribunal has committed error in the construction of the contract, it is an error within its jurisdiction and cannot be a ground for setting aside an award. It is also stated that the court do not sit in appeal over the decision and findings of an Arbitral Tribunal. It is stated that as long as the view taken by the Arbitral Tribunal is a plausible one, the award cannot be set aside. It is stated that any illegality alleged by a party seeking to set aside an award has to go to the root of the matter and cannot be trivial in nature. The defendant has contended that after considering the submissions of both parties Tribunal has rightly construed 18 CT 1390_Com.A.S.2282018_Judgment .doc the terms of contract. It is stated that the plaintiff has failed to make out any case requiring interference by the court on the ground of patent illegality or otherwise. It is stated that the plaintiff has failed to show any ground for setting aside the award and the suit is filed only to circumvent payment of monies under the award by protracting the litigation. It is stated that the plaintiff is deliberately misinterpreting the findings of the Arbitral Tribunal under the award and omitting crucial portions of the conclusions. Defendant has stated that the plaintiff represented in the prebid meeting and agreed that schedule for handing over of land will be incorporated under the contract, but the same was not done. The defendant has denied that the plaintiff had handed over vacant and encumbrance free work sites in a timely manner as stipulated and also denied that defendant has displayed casual and lackadaisical attitude in effective utilization of the sites provided. The defendant has denied that the work entrusted to defendant had to be rescinded progressively and that the defendant continuously failed to show progress. It is stated that the interpretation of the contract is correct and is the only logical interpretation of the terms. It is denied that the tribunal has gone out of its way to invent contentions to grant interest under the grab of finance charges. It is stated that the sums awarded by the Arbitral Tribunal is not towards claim for interest simpliciter but for actual costs incurred by the defendant, which is not barred. It is stated that the claims are not for interest but the actual finance 19 CT 1390_Com.A.S.2282018_Judgment .doc charges paid by the defendant to the bank for the purpose of obtaining finance and this finance charge that the defendant paid to the bank is the actual loss the defendant suffered and the finance charges is completely different from interest. It is stated that the finance charge are part of the cost that a party incurs which cost is what a party has to bear owing to the illegalities committed by the other party. It is also stated that the tribunal has rightly awarded finance charges to the defendant after examining relevant provisions of the contract, evidence and submissions and by giving cogent reasons and the contention of the parties have been considered by the tribunal. The defendant has also denied that the defendant has failed to complete the works in line with the baseline programme on account of various defaults committed by it and that had neglected to concentrate on subsequent activities by mobilizing sufficient resources. It is stated that the tribunal has judiciously explained the reasoning for the conclusion with regard to monetary compensation for extension of time, after considering the evidence of both the parties. It is stated that the tribunal has given a finding that there was delay in handing over of the lands and the said delay is attributable to the plaintiff and this finding is given after considering the entire material before the learned Arbitrator and the plaintiff cannot seek review on merits and on reappreciation of evidence. It is stated that the plaintiff is seeking to reagitate the very same issues which is not permissible. It is stated that the location for pile load test 20 CT 1390_Com.A.S.2282018_Judgment .doc were not given in time and plaintiff had allowed the execution of works by defendant after obtaining an undertaking to bear liability, in lieu of the pile load test results. It is stated that once such an undertaking is furnished by the defendant as required by the plaintiff and when the same has been accepted, the plaintiff ought to have issued the GFC drawings and could not have contended that the GFC drawings were not issued due to the delay in pile load test and cannot shift its wrong doing on to the defendant and the same has been considered by the tribunal. The defendant has also denied that payment for diverting unchartered utilities encountered during excavation was made through miscellaneous provision made in the priced bill of quantities. It is denied that no claim shall be entertained on stoppage of work due to unchartered utilities. The defendant has also denied that there was delay in carrying out diagonal trenching by the defendant and also denied that it has failed to carry out the work in time bound and organized manner leading to piling up of work. The defendant has stated that it has provided all necessary equipments of road furniture required, much beyond the BOQ estimates, for the smooth management and diversion of the traffic by the traffic police. The defendant has stated that the contract provisions provide for conducting full scale load traveler test before the start of segment launching, but due to the fatal accident at DMRC involving launching girder, full scale load traveler test was insisted by the plaintiff to be conducted even before the launcher was 21 CT 1390_Com.A.S.2282018_Judgment .doc erected on the piers. Therefore defendant had to assemble the launcher to its full working condition. As a result the defendant incurred additional cost and the defendant was made to bear exorbitant cost of additional testing done by the plaintiff through third party. The defendant has stated that construction of contract is within the domain of the aribitral tribunal and cannot be a ground for setting aside an award. It is stated that the interpretation set out by the Arbitral Tribunal under the Award is a plausible interpretation and the award cannot be set aside. The defendant has stated that he had to face severe space constraints and could not undertake segment casting at an increased pace due to severe constraints of space as the existing segments that had been cast were not being launched due to the various delays attributable to the plaintiff. It is stated that the defendant was required to shift the segments to a far off location at its own cost in order to continue casting of segments. It is stated that due to this delay defendant was constrained to undertake segment casting at a reduced rate. It is stated that the unreasonable decision taken by the plaintiff have also affected the work. It is stated that the cable trench drawings were finalized by the plaintiff and conveyed to the defendant in the month of February 2010, leaving just two months for the defendant to cast and launch cable toughs.
6. In the objection the defendant has also denied various contentions of the plaintiff with regard to rescission 22 CT 1390_Com.A.S.2282018_Judgment .doc No.1 to 5 as mentioned in the arbitration suit. The defendant has stated that entire delay was attributable to the plaintiff and the same has been considered by the tribunal by looking to the documents. The defendant has also denied that due to non availability of adequate resources, work was being carried out at a very slow pace and denied that there was no considerable progress in the works and the pending works continued to pile up. It is denied that the defendant never demonstrated any capability to achieve production schedule of the segments. It is stated that termination is completely illegal and opposed to the terms of the contract and the contents of the notices issued as well as the time lines mandatorily prescribed in the contract were not followed. It is stated that the breach is in the terms makes the termination illegal. It is stated that the tribunal has comprehensively analyzed the issue of rescissionI and has considered and recorded every contention of the parties. Regarding the second rescission the defendant has denied the contention of the plaintiff and denied that the tribunal has wrongly held that the 7 days notice suffers from deficiency and not maintainable. It is stated that the second rescission of the contract is illegal on the point of view of the reasons described in the letter of rescission as well as on the point of view of not following the provisions of contract and the second rescission was highly illegal for the various reasons mentioned in the objection which is considered by the tribunal and the same issue cannot be reagitated.
23CT 1390_Com.A.S.2282018_Judgment .doc Defendant, with regard to third rescission, has also denied the contention of the plaintiff and denied that it was the responsibility of defendant to arrange any additional land if necessary and also denied that the drawings were issued well in advance. It is stated that in the case of first and second rescission no 48 hours notice was issued and the rescission was not based on any ground. It is stated that the hidden agenda for rescinding the casting of segments was the inability to utilize the segments to be cast by defendant due to incompatibility with the prestressing system adopted by new contractor for launching the spans. It is stated that all the points which are raised by the plaintiff with regard to the third rescission in the arbitration suit are all considered by the tribunal. Regarding fourth and fifth rescission ground of challenge raised by the plaintiff in the petition are all denied and it is stated that the point raised were all raised before the tribunal and were considered and cannot be reagitated. The defendant denied that it did not achieve the programme of work or reasons attributable to it. It is also denied that the plaintiff has rescinded parts of works after considering all the issues raised by the defendant. The defendant also stated that the plaintiff has issued GFC drawings for cable ducts with the reinforcement details on 24/3/2010 i.e. after a period of 3 years post the issuance of LOA and 11 months after completion of the original contract period. It is stated that plaintiff was not conforming to the contract BOQ and also contained errors and hence were not suitable for 24 CT 1390_Com.A.S.2282018_Judgment .doc execution. It is stated that the engineer was notified of the same to obtain the necessary instructions. The defendant has stated that the GC had instructed the defendant not to carry out work of casting of segments, pier caps, shear key pedestal etc and this was causing huge loss to the defendant and on 8/3/2010 Engineer stated that it would cast the work of cable duct through another agency without any cost implication. Contention that the defendant has failed to mobilize the resources is also denied. Defendant denied that Arbitral Tribunal has travelled beyond its jurisdiction and awarded amount. The defendant has also stated that in terms of baseline programme, piling activities were to be completed by December 2007 for the entire stretch of work and the same was not completed although, two hydraulic rigs were duly mobilized for rescission which are on record and the piling could only be completed in July and August 2009 for each of the rigs. It is stated that if the work had completed within the time prescribed in the baseline programme, defendant could have utilized the rig elsewhere and earned out of the use of the rigs and therefore the defendant was entitled to the finance charges that it has lost owing to the lack of use of the said hydraulic rigs and associated equipment. It is stated that the handover of sites was completely haphazard and it was not only resulted in serious delays in carrying out the work, but defendant was also forced to shift the entire piling set up from one location to another far away location for about 54 times due to non 25 CT 1390_Com.A.S.2282018_Judgment .doc availability of front in the immediate vicinity. It is stated that defendant on most occasions had to shift the said equipments beyond 300 meters from its working location due to non availability of the nearby work front and it incurred additional expenses for shifting as a consequence of the haphazard handing over of site. It is stated that the rescission of the contract has been held illegal by the Arbitral Tribunal vide detailed reasoned findings and the defendant is entitled to loss of profit on account of the illegal rescission of the contract. It is stated that the defendant planned its resources for the entire value of work and if portions of the contract are terminated during the period of contract, overheads of the contractor does not reduce and the defendant had to continue to bear the overheads with a reduced turnover. Therefore defendant is entitle to the claim as rightly awarded by the Tribunal. Defendant has also stated that interest awarded is also reasonable interest from the date of award. On all these grounds, defendant supported the award and prayed to dismiss the Arbitration suit.
7. Heard arguments for both the sides at length. Heard learned Senior Counsel Sri. S. Nagananda for plaintiff. Heard learned Senior Counsel Sri. Sudipto Sarkar for Defendant. Both the counsels have filed even written arguments and relied on several judgments. Perused records.
26CT 1390_Com.A.S.2282018_Judgment .doc
8. Now the points that arise for consideration of this court are:
1) Whether the Plaintiff has made out any grounds to set aside the award passed by the learned Arbitral tribunal dated 16/08/2018 in respect of disputes under contract Agreement No:BMRCL/VIA/EW/R1/1/ Dated 15.02.2007, under Section 34 of the Arbitration & Conciliation Act?
2) What order?
9. My answer to the above points are :
POINT No.1 : Partly in the affirmative.
POINT No.2 : As per final order for the following:
REASONS
10. POINT No.1: The admitted facts of the case are that the defendant has called for tender and plaintiff became successful and letter of acceptance dated 20/1/2007 was issued by the plaintiff and parties entered into contract dated 15/2/2007. Work entrusted to the defendant was Construction of Elevated Structures (Viaduct) of Bengaluru Metro. Period fixed for completion of the project was 27 months and date of scheduled completion was 19/04/2009 and total cost as agreed was Rs.138,55,02,871/. After commencement of work, due to delay time was extended for completion of work. For different reasons, plaintiff rescinded part of the work by way of 5 rescissions. Several differences arose between the parties and defendant/Contractor raised arbitration dispute and also filed CMP No.119/2013 before 27 CT 1390_Com.A.S.2282018_Judgment .doc the Hon'ble High Court. As per the joint memo filed in CMP, Arbitral Tribunal 3 arbitrators was constituted. 3 Members of the Tribunal are retired General Manager of KPCL, retired Chief Engineer of PWD and retired Chief Commissioner of Railway Safety. Before the Arbitral Tribunal, defendant/claimant filed claim petition with 17 claims. Plaintiff who was respondent before the Arbitral Tribunal has submitted objection and made 5 counter claims. Arbitral Tribunal framed 9 issues and recorded evidence and marked voluminous documents. After considering rival contention, Arbitral Tribunal passed award on 6/8/2018 and allowed 10 claims out of 17. Counter claims made by the plaintiff are rejected. The Arbitral Tribunal has awarded Rs.122,76,50,323/ to the defendant and directed that the said amount shall be paid with interest @12% per annum from the date of award. Being aggrieved by this award, plaintiff who was the respondent before the learned Arbitrator has filed present petition under Section 34 of the Arbitration & Conciliation Act on various grounds as mentioned in the petition. Defendant who was claimant before the learned Arbitral Tribunal has filed statement of objection to this petition.
11. 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. Grounds on which the award of the Tribunal can be set aside by this court is clearly 28 CT 1390_Com.A.S.2282018_Judgment .doc 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. 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 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 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. 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. In the presence of these basic principles, grounds urged by the plaintiff and the award of the learned Arbitral Tribunal are to be looked into.
12. Learned senior counsel for the plaintiff-BMRCL Sri. S. Nagananda has vehemently argued that the award passed by the learned Arbitral Tribunal is against the public policy and is patently illegal. The learned Senior counsel has 29 CT 1390_Com.A.S.2282018_Judgment .doc submitted that the project was not completed within time stipulated due to the fault of the contractor - claimant and as the time was essence of the contract and it was one of the important project the plaintiff was constrained to rescind part of contract and work entrusted to the defendant was rescinded in parts on various occasions and the work so off loaded had to be executed by a third party agency at the risk and cost of the defendant. The learned counsel has argued that the parties are bound by the contract and the general conditions of the contract, special conditions of contract, instruction to tenderers, notice inviting tenders etc are all part of the contract between the parties and the parties are bound to follow conditions and acts of the defendant in violation of these conditions would give right to the plaintiff to rescind the contract and the acts of the plaintiff was well justified in the circumstances of the case. It is argued that even several milestones were fixed in the minutes of the meeting, but defendant has failed to carry out the work and to achieve milestone which was necessary to be reached to complete the project within the schedule, which was revised and further revised. The learned senior counsel has argued that contractor defendant was not able to mobilize men and machinery required for achieving required progress. On each heads of delay, learned Senior counsel, by referring to connected exhibited documents has submitted arguments and made an effort to show that the delays were attributable to defendant. It is argued that delay caused in applying for 30 CT 1390_Com.A.S.2282018_Judgment .doc labour license and insurance clearly show that the defendant had not made proper preparations to carryout the work. Learned senior counsel has argued, by referring to different documents, that due to several lapses of the defendant, several works entrusted to defendant were progressively rescinded as per clause 60.1 of GCC after following the procedure on five occasions. By refering to various delay alleged by either party, learned senior counsel has argued that the delay in progress of the work is caused due to the lapses on the part of the defendant contractor which led to rescission of part of the work. The learned senior counsel has argued that the Arbitral Tribunal without considering the material placed before it and also without considering the binding clauses of contract has held that the lapses are on the part of the employer BMRCL and the Arbitral Tribunal has wrongly held that the various delay caused in completion of the project are attributable to the employer BMRCL and has wrongly held that 5 rescissions are illegal and arbitrary. The learned senior counsel has also argued that the Tribunal has wrongly held that imposing risk and cost on the contractor and invoking bank guarantee and forfeiture of retention money are arbitrary and illegal. The learned senior counsel has vehemently argued and raised serious objection for granting finance charges on claim No.8, 9, 10, 12, 13 and
14. The learned senior counsel has also argued that even in awarding cost for executing the work in the extended period of contract and also cost for providing traffic marshals and 31 CT 1390_Com.A.S.2282018_Judgment .doc providing cost for site office during the extended period the award of the Arbitral Tribunal is not justified. With regard to finance charges even separate written arguments are also filed for the plaintiff. The learned senior counsel has submitted that when awarding of interest upto the date of award is barred as per clause 85.7 of SCC, awarding of interest by naming it as finance charges is illegal and the learned Arbitral Tribunal has even went beyond the scope of reference and also committed illegality. It is also argued that the Arbitral Tribunal without framing any issues with regard to finance charges and applicability of interest Act has considered those points which is illegal and is against the principles of natural justice. Mainly on these grounds, learned senior counsel has argued that the award of the Tribunal is against public policy and is against the terms of the contract and is patently illegal and even shocking the conscience of the court and is liable to be set aside.
13. Sri. Sudipto Sarkar, senior counsel for the defendant has argued in support of the arbitration award. The learned senior counsel has argued that the Arbitral Tribunal was constituted by appointing qualified Engineers as Arbitrators and they are chosen from panel of arbitrators provided by the BMRCL. The learned senior counsel has also argued that the plaintiff, under Section 34 of the Act is effectively rearguing its entire case and seeking re appreciation of evidence based on bare and baseless 32 CT 1390_Com.A.S.2282018_Judgment .doc allegations. It is argued that the learned Arbitral Tribunal after considering the evidence on record has held that various delays were attributable to the PlaintiffBMRCL and not to deferndantNavayuga and the factual finding that the extension was granted to the defendant under clause 54 of GCC and therefore cost of additional work can be granted cannot be interfered by this court. It is also argued that the plaintiff is seeking readjudication of the well reasoned factual findings, holding that the rescissions are wrongful and that the defendant is entitle for money compensation under various heads. It is also argued that award is based on careful consideration of submissions, arguments and documents on crucial findings of facts by the tribunal. The learned senior counsel has argued that scope of interference under Section 34 of the Act is extremely limited and court cannot go for reappreciation of facts and law and court cannot sit in appeal on the award and the tribunal is final judge of both quality and quantity of evidence produced before it as held in various decisions of Hon'ble Supreme Court. It is also argued that the Arbitral Tribunal consisting of technically qualified arbitrator is of a different standard and such award of the technically qualified arbitrators cannot be interfered lightly. It is also argued that the construction of terms of contract is in arbitrator's domain and unless contract is constructed in such a manner that no fair minded or reasonable person would do such construction, award cannot be reconsiderd. The learned senior counsel has 33 CT 1390_Com.A.S.2282018_Judgment .doc referred to the discussion made by the learned Arbitral Tribunal by referring to the documents produced and the evidence led in respect of each grounds of delay and argued that, the tribunal after careful deliberation and appreciation of evidence concluded that delay in completion of project is attributable to plaintiff. The learned senior counsel has also argued that by considering the lapses and delays on the part of the plaintiff, extension of time was given under clause 54 upto 31/7/2010 and before revised dates of KD1 and KD2, plaintiff has rescinded part of the contract illegally . Learned senior counsel argued that Tribunal by considering all these facts established through evidence, came to the conclusion that five rescissions are illegal and unjust. The learned senior counsel has argued that said decision cannot be reconsidered by the court under Section 34 of the Arbitration & Conciliation Act. The learned senior counsel has also argued that the tribunal in its exhaustive award has considered each point of controversy and has made detailed discussion and considered the submission of both the sides and also evidence placed before it and then came to the conclusion and gave finding and has given well reasoned award and the same cannot be interfered with. It is argued that the plaintiff is seeking reappreciation of evidence which is not permitted. It is argued that none of the grounds urged by the plaintiff, even if established tobe correct, do not make the award as against public policy of India or patently illegal and as such the petition under Section 34 of the Arbitration & Conciliation Act 34 CT 1390_Com.A.S.2282018_Judgment .doc deserved to be dismissed. The learned senior counsel has also argued that the tribunal after careful deliberation and appreciation of evidence concluded that invocation of bank guarantee and revocation of bank and revocation of retention money is arbitrary, illegal and has considered the money claim made by the claimant before the tribunal. It is also argued that the Arbitral Tribunal has rejected some of the claims of the claimant and allowed some of the claims and has rejected the counter claim made by the respondent and the award is well balanced and meticulous in assessment of money claims of the claimant. The learned senior counsel has also argued that in view of binding clause in the contract Tribunal has not awarded any interest. The learned senior counsel has argued that the finance charges are awarded by the tribunal by considering the actual finance charges incurred by the claimant by paying to bankers, due to wrongful encashment of the BGs and finance charges incurred during extended period. The learned senior counsel has also argued that, the Tribunal has critically analysed each and every claim based on evidence on record and arrived at plausible view and award do not suffer from any infirmities and no grounds under Section 34 of the Act are made out. On all these grounds the learned senior counsel has prayed to dismiss the arbitration suit.
14. On looking to the impugned award and the pleadings in the present case and hearing arguments of 35 CT 1390_Com.A.S.2282018_Judgment .doc learned senior counsel for the plaintiff and defendant, there is no dispute that though contract work was to be completed within 27 months, i.e., within 19/4/2009, same was revised by Ex.C.6.3 dated 17/4/2008, wherein KD1 was fixed as 7/7/2009 KD2 was fixed as 7/1/2010. Documents produced before the learned Arbitral Tribunal also show that by Ex.C.32 dated 5/12/2008 the plaintiff has approved revised programme placed before by the contractor defendant, as per which final completion of work KD2 was revised as 31/7/2010. As per the terms of contract, whether the delay is caused for the reasons attributable to the employer or attributable to the contractor, it is the contractor who have to seek extension of time. The claimant contractor sought EOT by Ex.C28 on 4/11/2008. In Ex.C.28 the defendant contractor has listed various delays, constraints and hindrance which led to the delay in completion of the project and has submitted revised programme. By Ex.C32 the plaintiff has approved this revised programme. The Arbitral Tribunal has considered this Ex.C32 and also the letter seeking EOT Ex.C28 and observed that as the revised programme submitted by the contractor was accepted without any reservation by the empolyer, the plaintiff has conceeded that the delays are not attributable to the defendant. Though the claimant had sought extension of time under clause 57.1(ii) of GCC, the extension of time granted by the plaintiff was held to be under clause 54 of GCC, as in Ex.C82.2, Ex.C82.3 and Ex.C82.6 it is specifically stated by the plaintiff 36 CT 1390_Com.A.S.2282018_Judgment .doc BMRCL that EOT was sanctioned upto July 2010 as per the contract agreement para 54.0 of GCC. By considering these letters that were sent by the plaintiff to the defendant, Arbitral Tribunal has held that the extension of time granted was under clause 54.0 of GCC and not under clause 57.4. As per clause 57.1(ii) the contractor have to seek extension of time whether the delay is attributable to the contractor and such application have to reach the Engineer atleast 30 days before the stipulated or extended date of completion. The Arbitral Tribunal by considering the original time schedule and the revised time schedule and the clause of the contract stating that KD1 is 6 months before KD2 has considered that the application for EOT was given in time as mentioned in clause 57.1(ii) of the GCC. The Tribunal has noted clause 57.4 as per which the contractor may be granted extension of time to complete the work by the Engineer if there is delay by employer or Engineer to handover the possession of site or to provide necessary drawings. As per clause 57.4 for such delay only extension of time can be granted and contractor is not entitle for damages or compensation. On the contrary, in clause 54 which is reproduced in the award at page No.92 it is mentioned that if delay is caused for failure on the part of the employer to give possession, Engineer can grant extension of time for completion of the work and or certify such sum to cover extra cost incurred and such sum shall be paid by the employer to the contractor. Therefore, as per clause 54 if there is delay in handing over of possession by the employer 37 CT 1390_Com.A.S.2282018_Judgment .doc and contractor suffers delay or incurred extra cost then the Engineer can grant extension of time and may also grant extra cost. Therefore, as against clause 57.4 in which no compensation is payable, clause 54 permits the Engineer to pay extra cost that is incurred by the contractor along with extension of time. The Tribunal has considered this clause and also the correspondence exchanged between the parties which clearly show that extension of time was granted as per clause 54 of GCC, under which even extra cost incurred can be ordered to be paid to the contractor. The Tribunal has even referred to several decisions and held that when there is conflict between two clauses, clause 54 which is earlier clause will prevail over clause 57.4 which is subsequent clause. In clause 54 there is no bar for payment of cost. By considering these aspects the tribunal has held that the extension of time was granted under clause 54 of GCC. Even to hold that the delay is not attributable to the claimant, but attributable to respondent, Tribunal has relied on clause 54 which clearly provides that if possession is not given the contractor is entitle for extension of time and as extension of time is given under clause 54, Tribunal considered that employer has admitted that the possession was not given of the site for carrying out the project.
15. The learned Arbitral Tribunal has framed totally 9 issues. Issues No.1 and 2 are with regard to cause for various delays and delay is attributable to whom. The Arbitral 38 CT 1390_Com.A.S.2282018_Judgment .doc Tribunal has considered the nature of work that was to be carried out by the contractor and also considered technical, commercial and contractual requirements for completion of the work. The Arbitral Tribunal has noted that providing design of the permanent works and responsibility of giving the GFC drawings for execution of the work lies with the Employer. The scope of work under the contract includes construction of number of piles for each of the piers as per the drawings supplied by the employer in accordance with drawings as defined in the GCC. In the contract key date (KD) were provided and KD1 was shown as 21 months and KD2 was shown as 27 months and the project was to be completed on 19/4/2009. As stated above this KD was subsequently revised and again revised by which final KD2 was fixed as 31/7/2010. The defendant, who was claimant before the learned Arbitral Tribunal contended that various delays which resulted in delay in completion of the project are not attributable to claimant and claimant was prevented from completing the work within the contract period. The plaintiff has contended that defendant was not ready with resources for completion of the project.
16. The defendant has listed several delays like delay in appointment of Engineer, delay in handing over of site for execution of work, delay in handing over of land for casting yard and batching plant, delay in issuance of drawings, delay due to utility shifting and other miscellaneous activities, delay 39 CT 1390_Com.A.S.2282018_Judgment .doc on account of non approval of traffic plan, delay in pile and open foundations due to incorrect/nonexistent geotechnical investigations, delay in establishing initial load test for piles, delay due to non approval of casting of piles, delay due to change in decision of load testing for launching girder, delay due to non availability of space and reduced rate and segment casting, change in decision as to provision of the shear key bar and delay in approval of expansion joints and delay in finalization of parapet drawings and cable trench drawings. On the other hand, plaintiff contended that contract itself provides for handing over of work fronts in a phased manner depending upon the requirements and other contributing factors. Plaintiff contended that delays are attributable to defendant. Learned Arbitral tribunal has considered each of the delays which are alleged by either party and considered the documents produced and also the evidence led by both the parties on their respective contentions.
17. The Arbitral Tribunal has considered that the allegation of delay in appointment of Engineer/GC by the defendant is not attributable to the plaintiff as there is no date set under the contract for appointment of GC and even officer of the plaintiff would be coming within the definition of Engineer. The Arbitral Tribunal considered the allegation of delay in handing over of the site for execution of the work which was the main contention and main hindrance for progress of the work according to the defendant. According to 40 CT 1390_Com.A.S.2282018_Judgment .doc the plaintiff, site for work is to be handed over in phased manner and at all the time defendant was having available work front to continue the work, but the defendant has not mobilized resources for the work. The defendant has contended that the non handing over of the possession of the work site was a main hindrance in progress of the work and at some time the work site was given at different places which made the defendant to shift equipment here and there, where work front are available and this has not only caused delay in the work but also made the defendant to suffer extra cost. The learned Arbitral Tribunal apart from considering necessary applicable clause of the conditions of contract has considered several documents and correspondence that are exchanged between the parties and has considered all these materials exhaustively in para 37 to 52 and held that delay in handing over of the site for execution of the work is for reasons not attributable to the claimant that is the defendant, but attributable to the plaintiff. The Arbitral Tribunal has noted that in between P1 to P69 total number of piers which were to be fixed and land was available for only 41 piers and in respect of 29 piers land was not available and for 40.57% of the pier location, land was not available. Similarly in the stretches between P72 to P209 for 79 piers land was not available and the percentage was 57.24% piers for which land was not available. By considering the documents placed before the Arbitral Tribunal, Tribunal has noted that in stretch between P1 to P69 for 75.63% of the piles to be 41 CT 1390_Com.A.S.2282018_Judgment .doc executed land was not available and in P72 to P209 for 90.83% of the piles to be executed land was not available. By exhaustively considering all these, tribunal has held that the delay in handing over of the site is attributable to the Employer i.e the plaintiff.
18. The Tribunal has then considered the delay in handing over of land for casting yard and batching plant and by considering the evidence placed before it has held that delay was there, as land was to be taken temporarily by BMRCL from the Defence Department and the land taken was not sufficient. The Arbitral Tribunal has noted that the defendant has sent a letter as per Ex.C.25 on 15/6/2007 stating that MEG Officers have ordered them to stop all the work at the casting yard at Indiranagar on 13/6/2007 and they were asked to construct compound wall around the area and this clearly show that there was objection from the MEG Center to vacate the premises and even upto June 2007 hindrances continued in the casting yard and batching plant area. By considering these materials placed before the Arbitral Tribunal, it is noted that upto May 2007 there is delay for commencing the construction of casting yard, construction depot and installation of batching plant etc which has obstructed the starting of the activities of the actual casting and the delay is held to be attributable to the employer.
42CT 1390_Com.A.S.2282018_Judgment .doc
19. The Arbitral Tribunal has considered the delay in issuance of drawing and the contention of the defendant that there was delay in furnishing GFC drawing has been considered and the contention of the plaintiff that the GAD drawing was given on 4/4/2007 itself and segment drawing were furnished on 28/5/2007 are also considered by the Arbitral Tribunal. Plaintiff had contended that GAD for piles and pile foundations were already given and only upon the outcome of pile load test the employer would issue GFC drawing to the contractor. These contentions and the counter allegations of both the parties are considered by the learned Arbitral Tribunal in the award at para 61 to 76. Arbitral Tribunal by even noting the delay in handing over of the site and by considering the documents produced has observed that GFC drawing were necessary for execution of the work and in respect of location of the piles it was given on 15/3/2008. Tribunal has also noted that the casting of segment on 2/6/2008 was not possible as BBS for the segment was approved only on 26/5/2008. The Tribunal has also noted letter dated 24/3/2010 conveying GFC drawing for cable duct and advising the claimant to replace the earlier drawing which shows that the GFC drawings for the cable duct were issued after 19/4/2009. Tribunal has also noted that the piles were to be socketed in hard rock as they were end bearing piles. Tribunal observed that even after defendant giving undertaking that it would bear all expenses in the event of any redesign of the structure, as per MOM 43 CT 1390_Com.A.S.2282018_Judgment .doc dated 16/11/2007, GFC drawing was not issued. By considering all these facts, Arbitral Tribunal has observed that the delay in issue of GFC drawing for want of pile load test result cannot be held against the claimant and held that the delay in issue of drawing cannot be attributed to the defendant contractor.
20. Regarding delay caused due to utility shifting and other miscellaneous activities, Arbitral Tribunal has considered the records produced before it in length from para 77 to 91 and observed that many of the charted utilities like cable of the BESCOM were not identified and the contractor defendant was made to face difficulty in executing the work. The Arbitral Tribunal has noted that as per the relevant clause of NIT, plaintiff had undertaken the identification of utility in advance and diversion of all charted utilities was to be done prior to handing over of site. The work site was to be made available to the claimant after shifting all charted utilities and it is contended by the claimant that the employer has given a statement in the NIT that all advance utilities identification and diversion has been done though it was found that even several charted utilities were not identified and diverted. As per provisions of the contract the uncharted utilities was to be diverted and it was the responsibility of the claimant to liaise with the agency for such diversion. The responsibility of each of the party has been clearly mentioned in NIT and the tribunal has considered the same and found 44 CT 1390_Com.A.S.2282018_Judgment .doc that as per clause 4.4.2 necessary permanent diversion of utility services and traffic as mandated is undertaken by plaintiff through separate agency. The tribunal has noted that though in Ex.R.27 respondent had stated that the process of utility identification had commenced as early as in the year 2004 much prior to the execution of the contract, but Minutes of meeting produced as Ex.R.28 show that even on 21/8/2008 utility shifting was in progress by the agency employed by the employer. The tribunal has also noted that in pier P105 to P136 in the records it is mentioned that demolition and shifting utilities is in progress. By considering the documents available, Tribunal has noted that no delay can be attributed to the claimant with regard to shifting of utilities. Tribunal has noted that on 4/10/2007 joint inspection was carried out with the BESCOM and the contractor with regard to identifying the utilities. It also noted that BSNL cables were also found during the inspection at the pier location. By considering all these the tribunal has noted that the shifting of utilities whether charted or uncharted cannot be burdened on the contractor.
21. Contention of plaintiff that there was delay in submission of traffic plan by the contractor is also considered by the Tribunal. By considering the evidence and documents and the letter exchanged between the parties Tribunal has found that the traffic diversion scheme was submitted by the contractor, but the employer had sought for revised traffic 45 CT 1390_Com.A.S.2282018_Judgment .doc scheme and found that on 26/2/2007 the contractor had submitted the baseline programme along with traffic diversion plan and after submitting such plan R2 after taking the suggestion on 3/3/2007, comment of the employer were not received till 7/3/2007 and the tribunal has also considered Ex.C91.3 by which traffic diversion plan revision 4 was submitted and the tribunal has noted that between 9/2/2007 to 13/3/2007 the discussions and finalization happened with regard to traffic diversion plan. By considering all these the tribunal has noted that the contention of the employer that there was delay in submission of traffic plan by the contractor is not sustainable.
22. Contention of the defendant about delay in pile and open foundations due to incorrect/nonexistent geotechnical investigations is also considered by the Arbitral Tribunal. This Arbitral Tribunal consisting of 3 technically qualified arbitrators having knowledge of such work have considered this delay as alleged by the claimant and by considering the evidence available have held that there is no lapse on the part of the employer. Similarly, for delay in establishing initial load test for piles, tribunal held that the delay in PLT cannot be attributed to the claimant.
23. Delay due to non approval of casting of piers is also considered on the contention of the claimant and Tribunal observed that there is delay in approval of form work 46 CT 1390_Com.A.S.2282018_Judgment .doc for piers construction and delay is due to delay in issuance of GFC drawing for piers. The Arbitral Tribunal has also considered the contention of the claimant contractor that due to change in decision of load testing for launching girder there is delay. The tribunal has noted that due to one accident at Delhi Metro, where one of the similar launching girder was involved, BMRCL and GC had instructed the contractor to stop the erection and conduct load test on this LG on lower levels and BMRCL had also ordered for third party inspection for satisfaction as an abundant precaution. This third party inspection was conducted by Civil Aid. Tribunal, by looking to the fact that third party inspection took time, has held that additional time spent in this process is to be considered as the time lost in the contract period.
24. For the delay due to non availability of sufficient space for segment casting it was found that there was no place in the casting yard to stock segment and as a consequence of which casting of segments was adversely affected. Arbitral Tribunal by looking to the evidence before it has held that three is delay in casting of segment caused due to non availability of additional land for stocking the segments which were to be cast due to piling up of segments in the casting yard.
25. Contention of defendant that change in the decision as to provision of shear key bar is also cause for 47 CT 1390_Com.A.S.2282018_Judgment .doc delay has been considered by the learned Arbitral Tribunal in detail. The exchange of correspondence between the parties and the change of plan by the employer subsequently are all considered by the Arbitral Tribunal and found from the record that employer had provided for shear key bar in the contract and on 3/4/2008 employer had approved the proposal given by the contractor for shear key bar from Destra. On 2/6/2008 employer agreed to delete the shear key bar on the basis of Ex.R.46 letter. Subsequently on 2/7/2018 the employer informed to the contractor that decision given to dispense with the shear key stands canceled and shear key devices shall be provided. This change of stand by the employer is said to have caused delay and on the basis of the correspondence relied by the parties, learned Arbitral Tribunal has held that delay caused by this change in decision had an adverse impact on the execution time of the contract.
26. Delay in approval of expansion joints and delay in finalization of parapet drawings and cable trench drawings as alleged are also considered and Arbitral Tribunal held that there was no delay in approval of expansion joints. With regard to finalization of parapet drawings and cable trench drawings by considering the oral evidence and also the documents the Arbitral Tribunal found that there is delay in the issue of drawings with respect to parapet and cable 48 CT 1390_Com.A.S.2282018_Judgment .doc trench and has also noted that even there was delay in giving GFC drawings as noted earlier.
27. The Arbitral Tribunal has also noted the contention of the respondent that the contractor was required to conduct site inspection and collect all the relevant data and figures pertaining to site with respect to approach roads, time restrictions etc. The contention of the respondent that contractor has failed to mobilize resources has been considered by the Arbitral Tribunal. The Arbitral Tribunal has noted the letter seeking extension of time sent by the claimant on 4/11/2008 wherein the contractor has sought EOT by explaining various delays numbering as 1 to 9 and stating that those delays are not attributable to the contractor and had sought extension of time for final completion of the schedule by July 2010. As discussed above by letter dated 5/12/2008 as per Ex.C.32 extension was given upto 31/7/2010. The tribunal has noted that there is no fault that could be attributed to the contractor for the failure to mobilize resources and achieving the key date in the extended time. Arbitral Tribunal has noted that the employer has given extension of time by considering the letter of the contractor in which all the delays which are attributable to the employer have been stated and by giving extension of time, employer has, in fact, admitted those delays.
49CT 1390_Com.A.S.2282018_Judgment .doc
28. Main contention of the employer i.e. the plaintiff that the contractor has failed to utilize the work front made available progressively is also considered and the Arbitral Tribunal by considering its observation with regard to delay in handing over of the site has held that the contention of the employer cannot be accepted. The employer has also raised objection stating that there is delay in obtaining labour license and insurance by the contractor and the tribunal has found that the insurance policy was taken on 4/5/2007, but period of policy was from 20/1/2007 and the tribunal has noted that application for labour license was given on 16/4/2007 and statutory requirement has been complied. Arbitral Tribunal by considering these materials has found that this delay stated by the employer has no bearing on the progress of the work.
29. Plaintiff has even contended in the arbitration proceedings about delay caused by Defendant due to unauthorized removal of machinery and contended about shifting of one piling rig by the contractor from the work site which was found to have been located at the contractor's NHAI work site on Tumkur Road. The Tribunal has noted that work front were not made available to the contractor in time and found that employer had failed to provide sufficient work front for functioning of two rigs at a time and rig was kept idle. By considering the documentary evidence and the contention of the contractor that SANY piling rig was shifted 50 CT 1390_Com.A.S.2282018_Judgment .doc to Nelamangala for emergency repairs and requirements after duly getting the permission of the deputy Chief Engineer BMRCL and by observing that as work front was not available, second piling rig was even not required at the relevant time, tribunal held that contention of the employer that hydrolic rig was shifted without information and it affected the work is not established.
30. Contention of the plaintiffemployer about failure of the contractor to carry out restoration work after completion of the work is also considered by the Arbitral Tribunal. The Tribunal has noted that both the parties have failed to produce document in respect of respective rival contentions about restoration the area in which required work were carried out to its original condition and hence same is not established.
31. By considering each of the delay that are alleged by either party, the Arbitral Tribunal has held that the contractor has proved that various delays in completion of the project was caused by the employer i.e. the plaintiff and are attributable to the plaintiff. Contention of the employer that the delay was attributable to the contractor is not accpted. Accordingly, tribunal has answered issues No.1 and 2.
32. Plaintiff employer has rescinded part of the work covered by the contract with the defendant by way of five rescissions under clause 60 of GCC. On 14/2/2009, 51 CT 1390_Com.A.S.2282018_Judgment .doc 29/6/2009, 18/7/2009, 1/2/2010 and 12/3/2010 five rescissions have taken place and part of the work of the contractor defendant was rescinded by the plaintiff. The defendant has challenged these rescissions before the Tribunal. Defendant has also contended that the work rescinded from the scope of work of defendant were fraudulently awarded to another contractor. Regarding these contentions which is a major dispute between the parties, on validity of five rescissions, Issue No.3 was framed and regarding fraudulently awarding rescinded work to another contractor, issue No.4 was framed. Learned Arbitral tribunal has held that question of considering as to whether rescinded work was fraudulently entrusted to another contractor is beyond the scope of arbitration proceedings and observed that this issue has no relevancy in adjudication of the dispute between the parties. On issue No.3, Tribunal has exhaustively considered the evidence, documents and also the arguments addressed in detail in para 199 to 399. Each of the five rescissions have been considered in detail by the Arbitral Tribunal. Arbitral Tribunal has noted that work could not be completed within 27 months and extension of time for completion of work in accordance with revised programme was submitted by defendant and accordingly the extension of time was given. Tribunal has noted that in the letter sent seeking extension of time, claimant had stated 10 reasons for seeking extension and all these reasons given are the delay and hindrance that are caused due to the acts of 52 CT 1390_Com.A.S.2282018_Judgment .doc the employer and GC has accepted the same and granted extension of time finally upto 31/07/2010. Tribunal has also noted that the original time given for KD1 and KD2 was revised as per Ex.C.6.3 as 7/7/2009 and 7/1/2010 respectively and subsequently further revised by Ex.C.32 dated 5/12/2008 to 31/7/2010 and thereby KD1 was fixed as 31/1/2010 and KD2 was fixed as 31/7/2010. Tribunal has noted that all the five rescissions have taken place from 14/2/2009 to 12/3/2010 i.e. before completion of revised extended period of completion which is 31/7/2010.
33. Before the learned Arbitral Tribunal, both the parties have produced several documents and those documents are considered by the Arbitral Tribunal. While granting extension of time, in the MOM dated 25/11/2008 as per Ex.C.30, BMRCL and GC have proposed to fix 7 milestones based on programme submitted on 18/10/2008 and proposed to levy penalty as per the agreement in case revised milestones are not achieved. It is noted that the defendant contractor had informed in the meeting that it had to consult their Head Quarter. In Ex.C.31 defendant has stated that it is understood that BMRCL intends to initiate punitive action in case of any default on the part of the contractor in achieving the target as per the latest revised programme. Tribunal has noted that there is a responsibility of employer to give land and other input for achieving the target that are fixed and for failure to achieve the target as 53 CT 1390_Com.A.S.2282018_Judgment .doc per the milestones fixed, levy of penalty was proposed and Ttribunal has noted that levy of penalty is dependent upon the employer and the contractor fulfilling the respective obligations and after determining to whose account the delay is. Arbitral Tribunal has considered that as answered on issue No.1, delays are caused and attributable to the employer and held that due to the fault of the employer completion could not be achieved within the time. The tribunal has noted that as per the MOM, for not achieving milestone penalty could be imposed. However, employer has rescinded part of the contract, alleging either that the contractor has abandoned work or has persistently not followed the instructions of the Engineer or contravened provision of the contract or that contractor has failed to adhere to the agreed programme of work or that the contractor has failed to take step to mobilize adequate resources, employ competent key personnel and concerned additional staff and labour or that the contractor has failed to comply with statutory provisions. All these grounds on which rescissions are permitted as per clause 60 of GCC are considered by the learned Arbitral Tribunal in detail. It is noted that all these five rescissions have taken place before expiry of the completion period of 31/7/2010. As per the MOM though several milestones were fixed, for failure to achieve the milestones there was proposal to impose penalty and MOM do not say that for not achieving the milestones rescission is the consequence. Tribunal has also noted that 54 CT 1390_Com.A.S.2282018_Judgment .doc extension of time was given under clause 54 of the GCC and not under clause 57. By referring to letters dated 7/9/2009, 10/9/2009 and 14/9/2009, Tribunal has noted that by granting time under clause 54, employer has infact accepted the delay caused for the reasons not attributable to the contractor. Tribunal has considered this delay in giving possession and work front continuously though progressively in issues No.1 and 2 also.
34. Among the five rescissions, rescission No.1 dated 14/2/2009 is of casting and launching of segments, casting and erection of parapets and cable trough from P1 to P26 and P117 to P154. In para 225 to 228, Tribunal has considered rival contentions with regard to rescission No.1 and considered several documents and gave finding that this rescission No.1 is wrongful, unjust and legally not sustainable. The Tribunal apart from referring to its finding on issues No.1 and 2 wherein various delays are held to be attribuatable to plaintiff, has also noted that in the rescission notice it is mentioned that contractor is unlikely to complete the work, though revised completion date was 31/7/2010 and even KD1 was on 31/1/2010 and rescission No.1 has taken place on 14/2/2009. Tribunal has also noted that on 21/12/2008 notice was given by the employer claiming for the backlog of works and on 2/1/2009 as per Ex.C.38 employer plaintiff has issued notice under clause 60.1 stating that the claimant has failed to adhere to the agreed 55 CT 1390_Com.A.S.2282018_Judgment .doc programme of work within 21 days and that the claimant is unlikely to complete the whole of work or part thereof within time. Defendant on 8/1/2009 gave reply. On 13/2/2009 contractor by letter has agreed to deploy additional resources, but on 14/2/2009 these works are rescinded by the employer plaintiff. The Tribunal has considered all these aspects and has also considered that as per Ex.C.30 penalty was proposed to be imposed for not achieving the milestones and completion time was also extended on 5/12/2008 to 31/7/2010 and the delays were not attributable to the contractor, but were attributable to the employer. Arbitral Tribunal has also noted several decisions of the Hon'ble Supreme Court wherein it is held that when levy of penalty for delay is provided and there is also provision for extension of time, then time cannot be construed as essence of contract. Tribunal has also noted that as per clause 60.1 after giving notice to the contractor if contractor do not within 7 days make good his default, which is capable of being made good, then the employer is entitle after giving 48 hours notice to rescind the contract in whole or in part. Tribunal has noted that as per the contract issuing of 48 hours notice is mandatory and even this requirement of contract is not complied and the rescission took place on 14/2/2009 is, without giving 48 hours notice and as such it is even against the contract.
56CT 1390_Com.A.S.2282018_Judgment .doc
35. By rescission No.2 dated 29/6/2009 work relating to launching of segments and erection of parapets and cable trough from P71 to P103 was rescinded. This rescission is regarding launching work in the CMH road section and the claimant contractor had stated that sufficient steps requires for various associated activities like trailer movement, movement and position of crane, stacking of structural steel, movement of crane for erection of LD etc and it was stated by the contractor that minimum width of road of 14m was not available for the gantry and the discussions were held and contractor was asked to submit the methodology for segment launching. Contractor has contended that though the employer was aware of the practical difficulties, employer gave notice on 13/6/2009 which was reconfirmed on 18/6/2009 under clause 60 of GCC and launching of segment were rescinded from contractor's scope of work on 29/6/2009. Though the work of segment launching in this part was taken out from the scope of contract, work of casting of segments for this part continued to remain with the contractor. The contention of the employer is that contractor was required to visit site and make himself acquainted with ground realities, but, contractor had not made any preparation for doing the work that was undertaken. Tribunal has considered 7 days notice given by the employer by alleging various default and noted that, clause 60.1(f)abandoning the work and clause 60.1(g) disregarding the instructions of the Engineer, clause 60.1(k) fails to offer Engineer or its representative proper 57 CT 1390_Com.A.S.2282018_Judgment .doc facilities for inspection of the work and clause 60.1.(i)(n) unauthorized stoppage of the work were alleged. The Tribunal by considering the evidence placed before it and the respective contentions has held that aswork was in progress, there is no evidence of abandoning of the work and there was no stoppage of the work as contended and has also noted that the delay are caused by the employer and the contractor disregarding the instructions of the Engineer is also not forthcoming by the evidence and held that reference to clause 60.1(g) is without proper application of mind and without any reference to the actual situation at site and this clause referred in 7 days notice like 60.1(k) and 60.1(n) are regarding concreting of pier and pier cap and these defects were cured by 14/6/2009 and they are not relevant. The Tribunal has also noted that in the MOM dated 4/6/2009, it is stated that if the claimant failed to confirm items No.1 and 2 of the MOM by 12/6/2009 then same stands confirmed and found that, whether confirmation is given by 12/6/2009 or not, items No.1 and 2 get confirmed. By considering this, tribunal has noted that even prior to issuance of 7 days notice and much more prior to 48 hours notice, parties had already agreed that it is confirmed based on MOM dated 4/6/2009. Therefore, Tribunal found that lapses in confirming this part mentioned in minutes of meeting for launching the segment is not sustainable. Even failure to comply with statutory provisions alleging in the notice is stated to be dehors the contract and no statutory provisions are proved to have been violated. By 58 CT 1390_Com.A.S.2282018_Judgment .doc considering all these, tribunal held that the rescission No.2 is also not in conformity with agreed provisions under the contract and violate principles of natural justice and is without application of mind.
36. By rescission No.3 dated 18/7/2009 casting of segments, parapets and cable trough from P71 to P88 was rescinded. Notice of of rescission No.3 was given on the next day of second rescission and same was replied on 6/7/2009 stating that there is no shortfall of casting of segment. Plaintiff employer reputed the of defendant and stated that as against total number of 1099 segments to be cast by 29/6/2009, claimant achieved only 623 segments and out of 1540 parapets to be cast till 29/6/2009 only 235 parapets were cast and there were shortfall of 242 segments and 837 parapets and there was no possibility of contractor improving the progress and as such the employer was constrained to rescind part of the work in stretch between P71 to P88. The Tribunal has considered the correspondence exchanged between the parties and noted that, extension of time for completion of the project was given upto 31/7/2010 and the delay which was caused were attributable to the employer and 7 days notice was issued under clause 60.1.i(h) and clause 60.1.i(j) and contractor was asked to make good the default within 7 days was impossible. As per clause 60.1 contractor can be asked to make good in so far as the same is capable of make good and the tribunal has held that the 59 CT 1390_Com.A.S.2282018_Judgment .doc approach of the employer was not right and fair. The Tribunal has also noted that after rescission No.1 and 2, without proper application of mind and without examining all aspects by finding one more default another rescission is made, but factually all these alleged defaults did not spring up after the first and second rescission and the same was not considered by the employer. The Tribunal has also noted that this third rescission is in the absence of 48 hours notice and therefore like rescission No.1, this rescission No.3 which has not proceeded with 48 hours notice is not in conformity with the contract term and is also illegal.
37. Regarding rescission No.4 dated 1/2/2010 with regard to casting of segments from P88 to P103, tribunal has considered in para 351 to 372. The employer had alleged failure of the contractor in submitting programme for casting of segment between P88 to P117 before 5/9/2009 and in the letter dated 2/9/2009 it was stated that in the absence of such programme it would be confirmed that contractor was unlikely to complete the part of work and would be treated as abandoning of the work. The Tribunal has noted that the contractor has replied on 12/10/2009 and informed that the employer while rescinded the work in a piece meal manner had completely disregarded the unity and integration involved in the total scope of work of casting, transporting and launching of segments which all form a part of the superstructure work. The evidence given by CW.2 is also 60 CT 1390_Com.A.S.2282018_Judgment .doc considered by the tribunal. Tribunal has noted that upto 12/1/2010 discussions were held regarding modifications of bulk head and the position of the lifting hole of segments and the drawings were issued only on 12/1/2010. The Arbitral Tribunal has noted that without proper bulk head as per the design requirement, question of casting of segments compatible with the system does not arise. Arbitrators have also noted that in the MOM, minor modifications to bulk head to accommodate stressing jack to be carried was also suggested, but tribunal has noted that the details of drawing of modification required in the present bulk head of the segment were not received and found that fourth rescission is wholly arbitrary and it did not even refer to contract clause under which employer is entitled to relieve the contractor from executing the contracted work and also the circumstances and reasons under which such relieving of the execution of the work was done. Arbitral Tribunal has found that part rescinded in rescission No.2, 3 and 4 were not independent of other structural member and method adopted.
38. Rescission No.5 dated 8/3/2010 is of the casting of cable troughs. Before the Arbitral Tribunal, defendant contractor had contended that drawings for the casting of the precast cable trough was issued on 22/3/2010 nearly three years after the date of award and the respondent has accepted programme for providing cable trough by letter dated 8/3/2010 and contractor was prevented from casting 61 CT 1390_Com.A.S.2282018_Judgment .doc the cable trough and also due to the rescinding of the contract this work was limited to the reaches P64 to P70, P103 to P116 and P190 to P209. The employer had denied the contention of the contractor and stated that the contractor had submitted programme for casting of cable trough by 30/6/2010 and remaining quantity by 30/11/2010, whereas, extension of time as per revised programme was upto 31/7/2010 and it was contended by the employer that there was no other alternative but to get the balance work executed from another agency. After going through the contention of the parties, Arbitral Tribunal has considered the delay in finalization of parapet drawings and cable trench drawings and observed that regarding cable trough with the length of 1.5m and subsequently this was modified and GFC drawing was issued with the length of 0.5m. The Arbitral Tribunal has noted that issuing of cable drawing, GFC drawing was responsibility of the employer and this modified drawing was issued only on 24/3/2010. The Tribunal has noted that delay is caused by the employer even with regard to work rescinded in rescission No.5. Tribunal after considering several correspondences has found that this rescission is also not in conformity with the agreed provisions in the contract and the rescission is illegal and wrongful.
39. Learned Arbitral Tribunal, after considering that, all five rescission No.1 to 5 are illegal and not in conformity 62 CT 1390_Com.A.S.2282018_Judgment .doc with provisions of contract, rejected the contention of employer that contractor did not have enough launching capacity to complete the work in time. Learned Tribunal has noted that after rescission, only in respect of the work which was rescinded by rescission No.1, NIT was issued to M/s. Gammon India Private Limited and remaining work of rescission No.2 to 5 were though got done by M/s. Gammon India Private Limited no NIT was issued. Tribunal has also noted the lapses on the part of the employer with regard to getting of work of rescission No.2 to 5 done through another agency without NIT.
40. Regarding imposing of risk and cost on the contractor and also invoking bank guarantee furnished by the contractor and also forfeiture of retention money, issues No.5 and 7 were framed. Arbitral tribunal by considering its finding on other issues like cause for delay and illegality of five rescissions and also the fact that performance bank guarantee was to be canceled after completion of the purpose and retention money was required to be paid to the contractor, when it became due has held that invoking of the same is illegal. The learned Arbitral Tribunal has considered the entitlement of the employer to get the work completed at the risk and cost of the contractor after affecting five rescissions. Tribunal has noted that except work rescinded by first rescission, for other works rescinded by rescissions No.2 to 5 no NIT was issued and the procedure required was 63 CT 1390_Com.A.S.2282018_Judgment .doc not followed. The Arbitral Tribunal has also noted that as rescissions are found to be illegal, employer is not entitle to claim risk and cost. It is held that when each rescission under clause 60.1.(i) are held to be wrongful, unjust and legally not sustainable, clause 60.1.(ii) which is consequence of the rightful rescission cannot be looked into.
41. The Arbitral Tribunal with regard to retention money and bank guarantee has considered the issue in para 404 to 435. The Arbitral Tribunal has considered that as per clause 15.4 employer is entitle to retain 5% of approved amount payable under each bill as retention money and same shall be paid to contractor without any interest within 30 days after issue by the employer of the certification of completion of work as setforth in SCC. By considering R 70, dated 6.12.2011, Tribunal noted that Engineer has certified that all the works, after partial rescinding of the work have been completed satisfactorily. Tribunal has also noted from the documents, that date of completion of all the activities of work except partial rescinded work was considered as 27/6/2010 and maintenance period for 12 months is stated to start from 28/6/2010. Therefore, Arbitrator held that certificate of completion of work under contract was issued on 6/12/2011 stating that the work was completed on 27/6/2010 and held that within 30 days from 6.12.2011, retention money was to be refunded and the same was not paid by the employer. The Tribunal has also noted the 64 CT 1390_Com.A.S.2282018_Judgment .doc contention of employer that, as per Clause 88 of GCC employer shall have lien over all the money that may become due and payable to the contractor and held that this contention cannot be accepted as rescissions are found to be not valid and no amount is decided to be payable to the employer. The Arbitral Tribunal has also noted that clause 82(i) & (ii) are wholly misplaced for the reason that lien under clause 82(i) is only with respect to debt or sum that may become due or payable and retention money is not such amount.
42. Learned Arbitral Tribunal has noted that as per the GCC mobilization advance under clause 75.2 and plant and machinery advance under clause 75.3 of GCC were given to contractor and same was to be recovered in the Bills. For these advances received, Bank guarantees were given by Contractor and same were to be kept valid till recovery of these advance received. Performance security in the form of bank guarantee was also given by contractor as per Clause 15.1 and same was to be kept valid till 3 months beyond maintenance period. The tribunal has noted that entire mobilization advance and plan and machinery advance were recovered in the 31st IPC in the month of January 2010 as mentioned in Ex.C.69 and the same is not disputed by plaintiff employer.Even after recovery advance amount from the Bils, Bank Guarantee which was valid till 31/7/2010 were not cancelled and returned to contractor, but, were 65 CT 1390_Com.A.S.2282018_Judgment .doc invoked on 20/7/2010. As appearing in Ex.C.71, office order of the employer, bank guarantees to an extent of Rs.14,67,54,516/ were encashed by stating that the rescinded works were got done from third party at the risk and cost of the contractor and this amount is payable by the contractor. As rescission is held to be illegal and even getting the work done through the third party agency was found not acceptable, Tribunal found that invoking of Bank Guarantees are illegal. Tribunal has also considered that after recovery of advance amount for Mobilization and plant and machinery in January 2010, for recovery of some other amount, invoking of four bank guarantees given as security for advance is illegal. The learned Arbitral tribunal has also held that bank guarantee should be encashed only for the purpose for which it was issued and after recovering of entire amount of advance, there was no occasion for the employer to invoke the bank guarantee and recover the same as the purpose of the bank guarantee was already served. With regard to another bank guarantee given for performance security, Tribunal has noted that by order dated 20/7/2010 bank guarantee amount was partially invoked and noted that after issuing of completion certificate stating that the work was completed except rescinded work on 27/6/2010 the performance bank guarantee could not have been encashed.
43. Learned arbitral tribunal, then considered the claims and counter claims made by the parties before it. By 66 CT 1390_Com.A.S.2282018_Judgment .doc considering that entire fault for the slow progress of the work is of the employer, Tribunal has rejected all the counter claims prayed by the plaintiff employer. The plaintiff had claimed five counter claims towards expenses incurred for completion of the work rescinded, loss of profit, loss of interest, administrative expenses and litigation expenses. All these counter claims are rejected by the tribunal.
44. With regard to claims No.1 to 17 that are made by the claimant, Tribunal has considered each of the claims and rejected claims No.3,4,7,11,15,16,17. With regard to the claims which are rejected by the Arbitral Tribunal, employer plaintiff has not raised any dispute in the present arbitration suit. Therefore, finding of the Triubunal on these rejected claims need not be considered.
45. In respect of the claims which are allowed by the Tribunal, finance charges claimed on principal claim amount is separately considered by the Tribunal at the end. Claim No.1 is for loss due to idling and under utilization of piling rigs. After exclusion of finance charges, which is considered separately, modified claim amount on claim No.1 was Rs.5,59,35,166/. Tribunal considered that the delay was caused by the employer in providing land for the purpose of carrying out the work due to which piling rigs became idle and there was underutilization of resources. Tribunal has noted that the land was not available to an extent of 75.63% 67 CT 1390_Com.A.S.2282018_Judgment .doc of the number of piles which were to be executed in P1 to P69 and 90.83% for P72 to P209 and even there are other delays which have made the contractor suffer due to idling of the resources and under utilization and by considering the hire charges for the hydraulic rig, tripod and piling winches the Tribunal has awarded Rs.3,78,00,000/ as against the modified claim of Rs.5,59,35,166/.
46. In claim No.2, loss due to shifting of piling equipment the claim was made for Rs.5,52,83,923/ and the contractor has alleged that, as work front was not provided continuously, piling equipment was to be shifted to different work front and the contractor has suffered loss due to this. The tribunal by considering the contention of rival parties and also quantifying the loss and then deducting 10% profit out of such quantified amount has awarded Rs.1,74,12,634.18 as against the claim of Rs.5,52,83,923/.
47. In claim No.5, for over head charges and loss of profit Rs.23,31,55,469/ was claimed by the contractor. Arbitral Tribunal rejected claim for over head charges. Tribunal by considering the loss of profit and by considering diminished value of work due to five rescissions has considered that profit at 10% is justifiable claim and has considered value of rescinded work as Rs.38,70,09,578/ and by taking 10% of it and deducting 10%, as loss of profit would 68 CT 1390_Com.A.S.2282018_Judgment .doc be included in it, has quantified the loss of profit as Rs.3,51,82,688/.
48. In claim No.6, towards idling and underutilization of segment casting yard and its accessories, as discussed on claim No.1, the tribunal has considered the claim and found that the casting yard and its accessories remaining idle or under utilized due to several lapses on the part of the employer in providing the work fronts. Tribunal has considered compensation under different heads as under
utilization of segment, casting bed, under utilization of gantries, underutilization of form work for segments and held that as against the claim for Rs.3,81,69,087/ contractor is entitle for Rs.1,64,39,055/.
49. Claim No.8, 9 and 10 are all pertaining to extra cost incurred in executing the work, extra cost incurred for providing traffic marshals and home guards and for providing and furnishing site office and other facilities to the Engineer during the extended period. In these claims 8, 9 and 10, learned Arbitrator has considered that the extension of time was given for the fault of the employer and delay and hindrances are attributable to the employer and during this extended period, the contractor for doing the work incurred extra cost. The Tribunal has noted that as per clause 54 of the GCC when extension of time is given for not giving possession of the work site, contractor is entitle for extra cost 69 CT 1390_Com.A.S.2282018_Judgment .doc incurred. The Tribunal has considered the contention of the employer that as per clause 57.4 compensation is not payable and only Extension is permissible. Tribunal, by referring to correspondence between the parties, has considered that extension of time was given under clause 54, which permits grant of time for completion of the work and or cost to cover extra cost incurred. Tribunal has also considered that after rescinding of the work, work was got completed by the employer by paying premium over the par rate. By considering the same, Tribunal has awarded Rs.24,40,57,561 as against claim for Rs.51,46,32,173/ towards cost incurred for executing the work in the extended period. Similarly, by considering cost incurred for providing traffic marshals/ Home Guards during the extended period of contract Rs.47,17,921/ is awarded as against claim for Rs.1,14,94,015/. Similarly in claim No.10, for providing and maintaining furnished site office and other facilities to the Engineer during the extended period, by holding that even after completion period, due to extension of time for the reasons attributable to the employer the site office was required to be maintained and other facilities were required to be furnished, as against claim for Rs. 72,20790/, Tribunal has awarded Rs.30,19,467/ by even deducting 20% towards over head and 10% towards profit.
50. In claim No.12, 13 and 14 the Tribunal has ordered for refund of amount realized by encashment of Bank 70 CT 1390_Com.A.S.2282018_Judgment .doc Guarantees given for mobilization and plant and machinery advance and also ordered to refund Amount realized by invoking part of performance Bank Guarantee and also ordered to return Bank Guarantee of remaining part. Retention money which was payable within 30 days of certificate of completion of work and was illegally forfeited by Plaintiff is also ordered to be refunded to defendant.
51. The Tribunal after answering each of the claims and the counter claims has awarded amount to the contractor plaintiff in claims No.1,2,5,6,8,9,10,12,13 and 14. Total amount which the tribunal awarded by mentioning it as principal amount is Rs.56,23,06,638/.
52. In the claim petition filed before the learned Arbitrator, claimant i.e. the contractor had not only claimed principal amount, but also had claimed finance charges on the said amount by stating that he has incurred finance charges and he has paid interest by availing loan etc. Tribunal has separately dealt with the issue of finance charges. Tribunal has noted Clause 85.7 of GCC which states that "where the Arbitral award is for payment of money no interest shall be payable on the whole or any part of the money for any period till the date on which the award is made". On clause 85.7 of the GCC, Tribunal has elaborately discussed and has considered the decisions cited before it and by considering this clause 85.7 has rejected the claim for 71 CT 1390_Com.A.S.2282018_Judgment .doc finance charges in claim No.1,2,5 and 6. In respect of claim No.8, 9 and 10 which are pertaining to extra cost incurred in executing the work during extended period and providing traffic marshals and maintaining site and providing other facilities to the Engineer during the extended period, Tribunal has awarded finance charges. Tribunal has held that for the various delays and defaults that were not attributable to the contractor and as a consequence of contract being extended, Tribunal has held that finance charges are payable on these claims till the date of award and held that finance charges are based on corresponding interest rates charged by the bank and paid by the contractor as per the calculation sheet produced with written synopsis. The Tribunal has considered 1.589 times of principal amount awarded as finance charges. In respect of claim No.8, Tribunal awarded Rs.38,78,07,464/ as finance charges and in respect of claim No.9 awarded Rs.74,96,776/ and in respect of claim No.10 awarded Rs.47,97,933/ as finance charges.
53. In respect of claim No.12, 13 and 14 which are refund of amounts of forfeited retention money, encashed performance bank guarantee and also encashed Bank guarantees given for plant and machinery and mobilization advance bank guarantees, Tribunal has allowed finance charges. Learned Arbitral tribunal in para 610 has observed that there is prohibition for grant of interest when award is for payment of money and observed that admittedly contract 72 CT 1390_Com.A.S.2282018_Judgment .doc between the parties prohibits payment of interest on the whole or any part of the money till passing of award. Tribunal has also considered Section 31(7)(a) of Arbitration & Conciliation Act which permits the Arbitrator to award interest only if there is no contrary agreement entered between the parties. Tribunal has even considered the decision on the point and made elaborate discussion and held that clause 85.7 prohibits payment of interest on any amount awarded by Arbitral Tribunal. Tribunal has also considered Section 3 and 4 of the Interest Act and held that as per section 4, interest shall be payable in all cases in which it is payable by virtue of any enactment and as per Section 4(2), court shall allow interest till the date of institution of the proceedings in the case where money or other property has been deposited as security for the purpose of an obligation etc. By considering this provision, Tribunal held that though interest cannot be awarded in view of specific bar in clause 85.7, for the finance charges incurred, contractor is entitle for finance charges in respect of claim No.12 and 14 which are all determined amount. On claim No.13 which is with regard to forfeited retention money, as forfeiture of retention money was found to be illegal, contractor is held to be entitle for interest by way of damages on this amount, not withstanding clause 85.7 of the contract as Section 4(2)(a) Interest Act makes it mandatory to award such interest and therefore in claim No.13 which is with regard to forfeiture of retention money. The Tribunal has found that it is appropriate to award 73 CT 1390_Com.A.S.2282018_Judgment .doc damages for the unlawful withholding of legitimate amount of retention money that were to be returned to the contractor on 6/1/2012 and awarded Rs.3,19,99,968/ as damages by considering the rate of interest as 8.5%. In claim No.12 and 14, which are the invocation of bank guarantees which are also held to be illegally invoked, the tribunal by considering the actual finance charges incurred by the contractor due to invocation of bank guarantee by way of interest paid to the bank has awarded finance charges. Tribunal has noted that interest charged by the banker is of 14% to 16% compounded monthly and has found that the details of the finance charges paid to the bank upto 30/12/2017 is furnished by the contractor and calculated these finance charges and found that finace charges upto the date of award would come to 1.589 times of principal amount. Tribunal has awarded Rs.13,09,94,274/ on Claim No.12 and Rs.10,22,47,270/ on claim No.14 as finance charges. In total, by adding principal amount allowed and finance charges or damages that are awarded, Arbitral tribunal has held that Defendant contractor is entitle for Rs.122,76,50,323/ with interest @12% p.a. from the date of award.
54. On going through the entire award which is running into 311 pages, gist of which is noted above, and also on looking to the petition and statement of objection filed by the parties in the present arbitration suit and the submissions of both sides, plaintiff is challenging the award 74 CT 1390_Com.A.S.2282018_Judgment .doc mainly on the ground that the Arbitral Tribunal has passed award by ignoring evidence and pleadings on record and has even ignored the provisions of contract binding on the parties and it is contended that even the provisions of law are not followed and the tribunal has wrongly held that obligation on the plaintiff under the contract is condition precedent for the performance of the obligation by the defendant. It is also contended that in dealing with the delay pertaining to handing over of land and other delays, tribunal has come to erroneous conclusion and has not considered the documents placed before it which are mainly correspondence which show that contractor was not ready with resources and which justified rescissions. In nutshell, challenge to award is on the ground that award is based on no evidence and non appreciation of evidence that was placed before the Arbitral Tribunal and against terms of contract and statute and by exceeding jurisdiction and is thereby, against fundamental policy of Indian law and is against public policy of India and is even patently illegal.
55. The learned senior counsel for the plaintiff has relied on the decision of Hon'ble Supreme Court reported in (2009) 12 SCC 1 (State of Rajasthan v. Ferro Concrete Construction (P) Ltd)., in which in para 55 the Hon'ble Supreme Court has held as under:
"While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of 75 CT 1390_Com.A.S.2282018_Judgment .doc the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly unsustainable."
56. Plaintiff has also relied on another decision of the Hon'ble Delhi High Court reported in 2007 SCC Online Delhi 86 (Government of NCT of Delhi v. Ved Prakash Mehta) in which in para 12 the Hon'ble High Court has, having regard to the facts of the case and the award that was passed by the learned Arbitrator has come to the conclusion that the award is passed merely on surmises and conjectures. Hon'ble High Court has noted that though evidence adduced by the respondent was not accepted still claims were partly allowed on the basis of the practical experience and knowledge of the Arbitrator and the tribunal after holding that there was no material evidence to prove and establish the claims, Arbitrator by using his personal knowledge allowed the claim partly and such award is held to be not sustainable.
57. On looking to entire award, Learned Arbitral tribunal has considered all the documents and correspondence exchanged between the parties and considered the provisions of the contract and also referred to 76 CT 1390_Com.A.S.2282018_Judgment .doc oral evidence wherever necessary and has given finding on each issues as discussed above. On looking to the entire award, it cannot be held that this award is without any evidence or that it is only based on surmises and conjectures as contended.
58. The learned senior counsel for the plaintiff has also contended that the evidence that was placed by way of documentary evidence by the employer was not appreciated by the learned Arbitral Tribunal. The learned senior counsel has taken through each of the rescission notices and also the correspondence that are exchanged between the parties to show that every time the contractor was informed about the delay caused and that contractor was never ready with resources to execute the work. It is also contended that availabilty of work fronts for executing the work is ignored by the Tribunal. On going through the award, it is clearly seen that tribunal has considered all these documents and has made elaborate discussion and has come to the specific finding.
59. Learned counsel for the plaintiff has relied on the decision of the Hon'ble Supreme Court reported in (2003) 12 SCC 144 (Seth Mohanlal Hirala v. State of M.P) in which the Hon'ble Supreme Court has held that if the arbitrator on the face of the award, arrives at an inconsistent 77 CT 1390_Com.A.S.2282018_Judgment .doc conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help to reach to a just and fair decision, then it become a legal misconduct on the part of the Arbitrator.
60. In another decision reported in 2009 SCC Online Delhi 100 (AVI Coach Builders v. Union of India) the Hon'ble High Court has held in para 13 that the tribunal obliged to give reasons for its award and if the award is without reasons it is not sustainable. As observed above, on each of the points of claim and on each of the delays, which run into big number, Arbitral Tribunal has considered each delay as alleged by either party and then referred to the correspondence and the contention of both the parties and then came to the conclusion that many of the delays are attributable to the employer. While holding so the Arbitral Tribunal on some of the delays has even given finding against the contractor. On looking to the award it is clear that all the points urged by the contractor were not accepted and for some of the delays, employer is not held liable and the award as passed by the Arbitral Tribunal is full of reasons and it has minutely considered each and every point that is urged before it and discussed the same by referring to the documents and this award cannot be considered as without reasons or that it is without appreciation of evidence.
78CT 1390_Com.A.S.2282018_Judgment .doc
61. As stated above, the scope for interference in the award passed by the Arbitral Tribunal is very limited. The learned senior counsel for the plaintiff has argued that present award fits within this limited scope for challenge. On the scope of challenge to the award under section 34 of the Act, plaintiff has relied on many decisions. In the decision reported in 2021 SCC Online 508 (PSA Sical Terminals Pct Ltd v. Board of Trustees of VO, Chidambanar Port), Hon'ble Supreme Court has held that role of the Arbitrator is to arbitrate within the terms of the contract and he has no power apart from what the parties have given him under the contract. It is held that if he has traveled beyond the contract, he would be acting without jurisdiction. It is also held that the jurisdiction of the Arbitrator being confined to the four corners of the agreement, he can only pass such order which may be the subject matter of reference and if the Arbitrator travel beyond the petition, then such an award would be patent illegality which requires to be set aside.
62. Learned senior counsel for the plaintiff has submitted that the learned Arbitral Tribunal has not considered the provisions of the contract like clause 57, 60, 85 of GCC and even other clauses of the contract. However, on looking to the award, Tribunal has considered each and every relevant clause of the contract and other applicable 79 CT 1390_Com.A.S.2282018_Judgment .doc agreements, correspondences between the parties. Even clause 60 which was the main clause under which five rescissions have taken place has been referred and considered by the tribunal. Whether interpretation of the particular provisions of the contract as made by Tribunal is proper or not cannot be considered by the court under Section 34 of the Act. As the interpretation of particular clause of the contract is left to the Arbitral Tribunal as held in the decision of Associate Builders case. Similarly court cannot reappreciate the evidence. Only if there is no appreciation or award is not based on any evidence or award is without reasons, then such an award may come under Section 34, challenge may hold good. However, in the present case, learned Arbitral Tribunal consisting of Arbitrators having special qualification in the field of Engineering and construction have considered the contract between parties, work entrusted and progress made, in the presence of evidence before it and also considered the applicable provisions of law.
63. In the decision reported in (2020) 7 SCC 167 (Patel Engineering Limited v. North Eastern Electric Power Corporation Limited) relied by the plaintiff, it is held that, if, while interpreting the terms of contract, no reasonable person could have arrived at such conclusion and if the award passed by the Arbitrator suffers from 80 CT 1390_Com.A.S.2282018_Judgment .doc vice of irregularity or perversity, then such an award can be said to be patently illegal. In this decision, the Hon'ble Supreme Court has reiterated that ground of patent illegality is a ground available under statute for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or, so irrational that no reasonable person would have arrived at the same or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view, then such an award could be set aside under Section 34.
64. In another decision reported in (2020) 5 SCC 164 (SEAMEC Limited v. Oil India Limited) it is held that the court can set aside the award on the ground provided in the arbitration Act and it is also held in para 13 that, where two views are possible court cannot interfere in the possible view taken by the Arbitrator supported by reasoning. The Hon'ble Supreme Court on the facts of the said case has considered whether interpretation provided to the contract in the award is reasonable and fair and same pass the muster under Section 34 of the Act. On considering the facts and the award, Hon'ble Supreme Court upheld the order of the Hon'ble High Court which set aside the award.
65. In the decision reported in (2019) 15 SC 131 (Ssangyong Engineering & Construction Company Limited 81 CT 1390_Com.A.S.2282018_Judgment .doc v. National Highway Authority of India), cited by the learned counsel for the plaintiff, Hon'ble Supreme Court has considered various grounds under which the award could be set aside and held that when the Arbitrator has not adopted judicial approach and award is in breach of principal of natural justice and the contravention of statute and is against specific notion of justice, the award can be set aside. Plaintiff has even referred to the judgment reported in (2003) 8 SCC 154 (Bharat Coking Coal Limited v. Annapurna Construction) in which, Hon'ble Supreme Court has held that the tribunal is bound by the provisions of the contract.
66. The learned senior counsel for the plaintiff has even referred to the famous decision reported in (2015) 3 SCC 49 (Associate Builders v. Delhi Development Authority). In this decision, in para 17 to 19, Hon'ble Supreme Court has considered that an award which is in conflict with the public policy of India could be set aside and it would be against the public policy if it is against the statute and is disregarding the order passed by the superior court as it would be against the fundamental policy of Indian Law. This finding in this decision is even relied by Learned senior counsel for Defendant.
67. Learned learned senior counsel for the defendant has also relied on some decisions. It is argued for the 82 CT 1390_Com.A.S.2282018_Judgment .doc defendant that, court cannot reassess the facts and in this connection, decision of Hon'ble Supreme Court reported in 2021 SCC Online SC 695 (Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited) is rerlied, in which, Hon'ble Supreme Court has held in para 25 as under:
"This court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the wellestablished principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorizing them as perverse or patently illegal without appreciating the counters of the said expressions."
68. This judgment of the Hon'ble Supreme Court clearly states that reassessing the factual aspects by the court under Section 34 is not permissible. In the present case, as noted above, Arbitral Tribunal has considered the 83 CT 1390_Com.A.S.2282018_Judgment .doc factual aspects in detail and this court u/s 34, cannot reassess the same as held in various judgments and reiterated in this latest judgment. In this decision, Hon'ble Supreme Court has even referred to the decision in Associate Builders wherein it is held that mere controvention of the substantive law of India by itself is no longer a ground available to set aside the Arbitral Award. This decision prescribes limits of the court under Section 34 of the Act and the ground on which the court can set aside the award. On going through this decision it is clear that the Arbitral Tribunal is a final authority to decide on facts and the court cannot reappreciate the evidence or reassess the facts. In this decision the Hon'ble Supreme Court has also held in para 26 that patent illegality should be illegality which goes to the root of the matter and stated, "In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality' and erroneous application of law cannot categorize as patent illegality".
69. The learned senior counsel for defendant has also relied on the decision of the Hon'ble Supreme Court reported in (2021) 3 SCC 308 (Anglo American Metallurgical Coal Pty Ltd. v. MMTC Limited). In this decision in para 42 the Hon'ble Supreme Court has clearly held that "...It is well established that the Arbitral Tribunal is the final judge of the quality, as well as the quantity of evidence before it".
84CT 1390_Com.A.S.2282018_Judgment .doc In this decision the Hon'ble Supreme Court has clearly held that how much evidence is required and what is the quality of evidence that is led before the learned Arbitral Tribunal etc are left to the Arbitral Tribunal and it is the final judge of the quality and quantity of evidence. As Arbitral tribunal of the present case has considered the evidence that was led before it, this is not a case of no evidence and non appreciation of evidence or an award without reasons. Whether the evidence was sufficient to come to a particular conclusion is left to the Arbitral Tribunal. In fact, in this case as noted in the gist of award above, there was sufficient evidence available before the Arbitral Tribunal and same has been exhaustively considered.
70. In the decision in Associate Builders referred above, in para 33, Hon'ble Supreme Court has held that, "... It must clearly be understood that when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious; then he is the last word on facts".
85CT 1390_Com.A.S.2282018_Judgment .doc
71. In the decision in Delhi Airport Metro Express referred above, Hon'ble Supreme Court has in para 35 has observed that, members of the Arbitral Tribunal nominated in accordance with the agreed procedure between the parties are engineers and their award is not meant to be scrutinized in the same manner as one prepared by the legally trained minds. In the present case Arbitral Tribunal is consisting of 3 learned Arbitrators who are retired General Manager of KPC, retired Chief Engineer of PWD and retired Chief Commissioner of Railways Safety. All these arbitrators are technically qualified Arbitrators who knows the procedure, practical implications and complications in execution of such contract work and their award cannot be taken lightly. In the present case at many places apart from referring to the evidence and considering the provisions of contract, engineering experience of the learned Arbitrators are also added to the findings. Such an award which is exhaustive on factual aspects as noted above cannot be considered lightly.
72. On considering all these decisions, relied by either side, it is very clear that the scope of interference in the Award under section 34 is very limited. On the facts of the present case, in which exhaustive discussion of the fact, law, contractual terms and evidence has been made by the tribunal, on each of the issues that are framed, on validity of rescissions, on delay and hindrance caused in progress of the work for the reasons attributable to particular party, on 86 CT 1390_Com.A.S.2282018_Judgment .doc legality of forfeiture of amount due to the defendant and on encashment of Bank Guarantee given for particular purpose, there is no scope for interference and there is no arbitrary approach of the Arbitral Tribunal which is a qualified Arbitral Tribunal. After giving finding that the delay in completion of the work is caused and are attributable to the employer and by considering each of the rescissions of the part of the contract work by the employer, Learned Arbitral tribunal held that these rescissions are illegal and not acceptable as at every point the delay is found to be that of the employer and there was no such lapse on the part of the contractor defendant. The tribunal after considering the evidence and the facts before it and the contractual provisions has found that extension of time dated 5/12/2008 was given up to 31/7/2010 and even in the MOM it was only decided that the penalty is to be imposed for not achieving the milestone fixed. Tribunal has noted that before expiry of this extended period which is on 31/7/2010 the employer has rescinded part of the contract in clause 60.1(i) of the general conditions of contract, but the presence of such situation requiring termination or rescission was not present. Tribunal also noted that in 2 rescissions, out of five rescissions even requirement of 48 hours notice was not followed. Tribunal has noted that these rescissions which are done before revised completion date are not valid and for the lapses of the employer the contractor was penalized by making rescissions. These findings of the Arbitral Tribunal are well founded and 87 CT 1390_Com.A.S.2282018_Judgment .doc are based on the evidence before it and by appreciation of the facts. As held by Hon'ble Supreme Court such finding of the tribunal on facts cannot be interfered. Evidence was placed before Tribunal and same was considered and appreciated and then Tribunal came to conclusion and it has considered applicable provisions of the contract including clause 54 under which extension of time was given and considered applicability of clause 60 and also considered several decisions relied and then gave the finding. After giving finding on the lapses of the employer the tribunal quantified the claim that was made before it. On each claims there is elaborate discussion made and then the tribunal allowed claims No.1,2,5,6,8,9,10,12,13 and quantified amount payable to the contractor by the employer. Therefore the award with regard to awarding of these principal amount is based on facts and evidence placed before the Arbitral Tribunal. On considering all these aspects, none of the grounds to challenge these findings in the award is established and finding of the Tribunal on these issues is not established to be against public policy of India or is patently illegal. As such, award of the tribunal on these issues cannot be interfered.
73. In every claim made by the defendant before the learned Arbitral Tribunal, defendant had included finance charges by contending that the defendant has incurred finance charges by borrowing loan from the bank and paying 88 CT 1390_Com.A.S.2282018_Judgment .doc interest and other charges etc. The Arbitral Tribunal has separately considered these finance charges claimed. After discussion, Tribunal rejected claim for finance charges on claim No.1, 2, 5 and 6. The Arbitral Tribunal has allowed finance charges in respect of claim No.8, 9 and 10 which are the claims in respect of extra cost incurred in executing the work during the extended period. The Arbitral Tribunal has also allowed the finance charges for claim No.12 and 14 and allowed damages on claim No.13, which are pertaining to illegally invoked mobilization and plant and machinery advance bank guarantee and performance bank guarantee and forfeiture of retention money. The award of finance charges on claim No.8, 9, 10, 12, 13 and 14 totally comes to Rs.66,53,43,685/.
74. Awarding of these finance charges is seriously disputed by the plaintiff. Plaintiff contends that in the name of finance charges Tribunal has awarded interest, which is not permissible. As per clause 85.7 of GCC, where Arbitral Award is for payment of money no interest shall be payable on the whole or any part of the money for any period till the date on which the award is made. This clause makes it very clear that interest cannot be awarded when the award is for payment of money. Even Tribunal has considered this point and has also considered decisions which uphold such clause in the contract as bar to the power of Arbitrator to award interest u/s 31(7)(a) of the Act. Arbitral Tribunal has also 89 CT 1390_Com.A.S.2282018_Judgment .doc noted that even under Section 31(7)(a) of the Act, if contract otherwise provides and states that no interest is payable then the interest cannot be awarded. Tribunal has even considered section 3 and 4 of Interest Act. As per Section 3 of the Interest Act court can allow interest on debt or damages. However, as per Section 3(3), section 3 shall not apply in relation to debt or damage upon which payment of interest is barred by virtue of an express agreement. Therefore since there is bar in the contract, for payment of interest when award is for payment of money, section 3 do not permit awarding of interest. the interest cannot be awarded. However in Section 4(1) of the Interest Act it is stated that no withstanding anything contained in Section 3 interest shall be payable in cases in which interest is payable by virtue of any enactment or other law. As per Section 4(2)(a) where money or other property has been deposited as security for the purpose of an obligation imposed by law or contract, interest is payable from the date of deposit, unless court is satisfied that there are special reasons for not awarding interest. Therefore, Section 4(2)(a) is an exception to Section 3 and even if there is any contract, in case of any deposit given as security for performance of an obligation under law or contract, interest shall be awarded by court. Court includes Arbitral Tribunal.
75. The learned senior counsel for the plaintiff vehemently argued that no issue regarding finance charges 90 CT 1390_Com.A.S.2282018_Judgment .doc and application of Interest Act and the conflict between the contract and interest Act was not framed and were not argued before the Arbitral Tribunal and therefore, arbitral tribunal exceeded its jurisdiction. The learned counsel has also argued that when the contract makes it very clear that the interest is not payable, awarding of interest in the name of finance charges is not permitted. The learned counsel has relied on the decision reported in (2010) 13 SCC 377 (ONGC v. WIG Bros. Builders & Engineers (P) Ltd,). In this decision, when there was clause 5A of contract, which bars any claim for damages on extension of time for completion of work, Hon'ble Supreme Court in para 7 has held that, " In view of the above, in the event of work being delayed for whatsoever reason, that is, even delay which is attributable to ONGC, the contractor will only be entitled to extension of time for completion of work, but will not be entitled to any compensation or damages...."
76. In another decision of Hon'ble Supreme Court reported in (2007) 2 SCC 453 (Ramnath International Construction (P) Limited v. Union of India) where general conditions of contract clause 11(c) was clear bar to any claim for compensation for delay in respect of which, extension have been sought and obtained, it is held that this claim amount to specific consent by the contractor to accept extension of time alone in satisfaction of his claim for delay and not claim any 91 CT 1390_Com.A.S.2282018_Judgment .doc compensation. It is held, "In view of clear bar against award of damages on account of delay, the Arbitrator clearly exceeded his jurisdiction in granting damages ignoring clause 11(c)".
77. The learned counsel for the plaintiff has also submitted that the Tribunal has awarded in excess of the claim, which is not permitted. In the decision reported in (2008) 2 SCC 444 (J.C.Budhraja v. Chairman, Orissa Mining Corporation Limited), wherein, it is held that making an award in excess of the claim itself is a clear act of exceeding the jurisdiction and amounts to legal misconduct.
78. On the issue of contract not providing interest, plaintiff has relied on the decision of the Hon'ble Supreme Court in Civil Appeal No.6592/2021 dated 18/11/2021 (Union of India v. Manraj Enterprises). In this decision when clause 16(2) of the GCC provided that no interest shall be payable upon Earnest money or Security deposit or amount payable to the contractor under the contract, Hon'ble Supreme Court held that learned Arbitrator has erred in awarding pendentelite and future interest on amount due to the contractor under the contract and stated in para 14 that, "It is held that in view of specific bar contained in clause 16(2) of the GCC, contractor shall not be entitled to any 92 CT 1390_Com.A.S.2282018_Judgment .doc interest pending or future interest on the amount due and payable to it under the contract".
79. In another decision reported in 2021 SCC Online SC 855 (Garg Builders v. Bharat Heavy Electricals Limited) when clause 17 of contract has stated that no interest shall be payable by BHEL on EMD, SD or any money due to the contractor, Hon'ble Supreme Court held that Hon'ble High Court was justified in rejecting the claim for pendentelite interest on the award amount. The Hon'ble Supreme Court held that Section 31(7)(a) allows parties to waive any claim to interest including pendentelite and the power of the Arbitrator to grant interest is subject to the agreement of the parties. In para 21 Hon'ble Supreme Court has held that interest payment are governed in general by the Interest Act 1978 in addition to the specific statutes that govern an impugned matter. It is held that, "... Section 3(3)
(a)(ii) do states that the Interest Act will not apply to situations where the payment of interest is "barred by virtue of an express agreement".
80. In another decision cited by the plaintiff reported in (1999) 4 SCC 423 (Superintending Engineer v. B. Subba Reddy), it is held that interest prior to date of reference can be awarded only if there is an agreement to that effect or is allowable under the Interest Act 1978. In para 7 it is held 93 CT 1390_Com.A.S.2282018_Judgment .doc that, "There is nothing on the record to show as to how respondent could claim interest whether under the agreement or under the Interest Act. By giving the name of damages, when, in fact it is a claim of interest it cannot be permitted". Hon'ble Supreme Court has set aside the award granting damages by way of interest. This decision makes it very clear that when interest cannot be awarded, tribunal cannot award interest in the name of damages. It is contended by the plaintiff that by the nomenclature of finance charges, Arbitral Tribunal has awarded interest which is not permissible and is barred by clause 85.7.
81. In another decision reported in (2018) 9 SCC 36 (Reliance Cellulose Products Limited v. ONGC Limited), Hon'ble Supreme Court upheld the awarding of interest and held that clause in the contract merely saying that no interest will be payable upon amount payable to the contractor under the contract would not be sufficient to bar an Arbitrator from awarding interest under Arbitration Act 1940. In para 24 it is held that by considering Arbitration & Conciliation Act 1996 that "... We hasten to add that the position as has been explained in some of the judgments above under Section 31(7) of the 1996 Act, is wholly different, in as much as Section 31(7) of the 1996 Act sanctifies agreements between the parties and states that the moment the agreement says otherwise, no interest becomes payable 94 CT 1390_Com.A.S.2282018_Judgment .doc right from the date of the cause of action until the award is delivered".
82. Even in another judgment reported in (2016) 6 SCC 36 (Union of India v. Ambica Construction) Hon'ble Supreme Court by referring to decision in the Irrigation Department, State of Orissa v. G.C.Roy, has held in para 14 that ".... The Constitution Bench of this Court has laid down that where the agreement between the parties does not prohibit grant of interest and where the party claims interest and that dispute is referred to the arbitrator, he shall have the power to award interest pendent lite...."
These decisions make it very clear that when contract prohibits grant of interest, arbitrator cannot award interest till passing of award.
83. In another judgment reported in (2015) 9 SCC 695 (Union of India v. Bright Power Projects (India) Private Limited) in para 11 the Hon'ble Supreme Court has held that, "when parties to the contract had agreed to the fact that interest would not be awarded on the amount payable to the contractor under the contract, in our opinion, they were bound by their understanding. Having once agreed that the contractor would not claim any 95 CT 1390_Com.A.S.2282018_Judgment .doc interest on the amount to be paid under the contract, he could not have claimed interest either before a civil court or before an Arbitral Tribunal".
84. In another judgment reported in (2009) 16 SCC 504 (Union of India v. Saraswat Trading Agency and others), Hon'ble Supreme Court in para 33 has held, "33. In the case in hand clause 31 of the agreement is materially different. It bars payment of any interest or damage to the contractor for any reason whatsoever. We are, therefore, clearly of the view that no prereference or pendente lite interest was payable to the respondent on the amount under item 3 and the arbitrator's award allowing prereference and pendente lite interest on that amount was plainly in breach of the express terms of the agreement".
85. Regarding awarding of interest in the name of finance charges the learned counsel for the plaintiff has contended that what cannot be done directly cannot be done indirectly and has relied on the decision of the Hon'ble Supreme Court reported in (2013) 16 SCC 797 (Ranjit Singh v. State of Madhya Pradesh and others). In this decision the Hon'ble Supreme Court in para 27 referred to the decision in Rashmi Rekha Thatoi's case in which the Hon'ble Supreme Court has held that, "... It is to be borne in mind that a court of law has to act within the statutory command and not deviate from it. It is a well settled proposition of law 96 CT 1390_Com.A.S.2282018_Judgment .doc what cannot be done directly, cannot be done indirectly. While exercising a statutory power a court is bound to act within the four corners thereof...." In (2007) 8 SCC 600 (Shivkumar Sharma v. Santosh Kumari)in para 22 the Hon'ble Supreme Court has held "... Law in this behalf is absolutely clear. What cannot be done directly cannot be done indirectly...." In another decision reported in (2003) 2 SCC 593 (Dayal Singh and others v. Union of India and others) it is held that when parties entered into agreements, parties thereto would ordinarily be bound thereby unless the same is vitiated by fraud, misrepresentation etc.
86. As against these contentions of the plaintiff, learned senior counsel for the defendant has referred to the decision of Calcutta High Court reported in AIR 1963 Calcutta 163 (Gambhirmull Mahabirprasad v. The Indian Bank Limited and another). In this decision the Hon'ble High Court in para 56 has held, "The fact that damages are difficult to estimate and cannot be assessed with certainty or precision does not relieve the wrongdoer of the necessity of paying damages for his breach of duty, and is no ground for awarding only nominal damages".
87. In another decision reported in 2021 SCC Online SC 572 (Gemini Bay Transcription Private Limited v.
97CT 1390_Com.A.S.2282018_Judgment .doc Integrated Sales Services Limited and another), Hon'ble Supreme Court in para 77 has held that "The arbitrator correctly held that as nothing was forthcoming from any of the appellants, he would have to make a best judgment assessment for damages..." It is held that such 'guesstimates' are not a stranger to the law of damages.
88. On going through all these decisions and also the provisions of clause 85.7 of GCC and also the provision of Interest Act sections 3 and 4 and even section 31(7)(a) of Arbitration and conciliation Act, it is clear that when contract specifically provides that the interest is not payable till the date of award, Arbitral Tribunal which passed an award for payment of money cannot order for payment of interest. In the present case, admittedly no interest is awarded by the Arbitral Tribunal and admittedly awarding interest in award for payment of money is barred by contract. However, the learned Arbitral Tribunal has awarded finance charges. As held in the decision in Ranjit Singh and also in Shivakumar Sharma, referred above, what cannot be done directly cannot be done indirectly. Therefore, in the name of Finance charges, interest cannot be awarded as there is specific bar in clause 85.7 of the GCC. When there is such bar in the contract for payment of interest, section 31(7)(a) do not permit arbitrator to award interest. Same is even held in catena of decisions referred by Plaintiff as referred above. Arbitral 98 CT 1390_Com.A.S.2282018_Judgment .doc Tribunal also has stated that it cannot award interest. Tribunal has stated that this finance charges which is awarded are actual expenses that are incurred for payment of interest by the contractor to the bank.
89. In respect of claim No.12 and 14 which are the encashment of bank guarantee from the date of the encashment the tribunal has awarded finance charges. In awarding finance charges on encashed Bank guarantees of claim No.12 and 14, Tribunal is stated to have considered actual interest that is paid by the contractor to the bank for availing such facility and continuing bank guarantee. The Arbitral Tribunal has stated in para 634 that, consequent upon the wrongful, unjust and legally not sustainable invocation and encashment of bank guarantees, the employer has been benefited with the amount of encashment that was not due to him and held that in view of this act of the Employer, contractor has incurred finance charges for the very same of some of money by paying interest to the banker. The tribunal has held that if such wrong was not committed by the plaintiff, it is clear that these finance charges in the form of interest being paid to the banker would never have been incurred by the claimant. The tribunal has held that finance charges paid by the claimant to the banker on the very same amount that was wrongly encashed by the plaintiff deserves to be considered and accordingly awarded it. The tribunal has considered the documents and the statement of 99 CT 1390_Com.A.S.2282018_Judgment .doc account attached to the CA Certificate and found that the claimant has actually suffered damages in the form of finance charges paid to the bank. By considering that these finance charges in claim No.12 and 14 are actually paid by the claimant to the banker, Tribunal has awarded the amount as finance charges. In respect of claim No.13, which is retention money which is illegally forfeited by the plaintiff, on the same analogy, as this amount was required to be paid to contractor within 30 days of certificate of completion and contractor has lost interest on the same, Arbitral Tribunal by considering the interest of 2% above the current interest, calculated 8.5% interest on the awarded principal amount from 6/1/2012 till date of award and awarded the same as damages.
90. The tribunal has even considered Section 3 and 4 of the Interest Act. As per Section 4(2)(a) where money has been deposited as security for the performance of an obligation imposed by the contract from the date of deposit, interest shall be paid not withstanding anything mentioned in Section 3. Therefore, even if there is a contract to the contrary, under Section 4(2)(a), interest is payable where it is money deposited as security for performance of an obligation. In the present case, retention money of Rs.5,69,22,796/ which was to be refunded within 30 days of certificate of completion of work, was not refunded even after Engineer giving letter on 6/12/2011 stating that work has been completed satisfactorily. As such from 6/1/2012 this 100 CT 1390_Com.A.S.2282018_Judgment .doc amount was illegally withheld. Though later, this amount is claimed to have been forfeited for the dues of contractor, same is held as illegal by the tribunal and same is ordered to be refunded. Since this is a definite amount of retention money which was illegally withheld from 6.1.2012 and was later illegally forfeited by the employer, this forfeited retention money could be considered as deposit as appearing in Section 4(2)(a) of Interest Act, for which from 6/1/2012, even interest could be awarded. Hence, awarding of interest in the name of damages on retention money by the Tribunal cannot be said to be against the provisions of law.
91. In respect of claim No.12 and 14, which are in respect of invoking and encashment of bank guarantees given for performance guarantee and as guarantee for mobilization and plant and machinery advance, these Bank guarantees were also required to be cancelled or returned after work got completed and purpose of the same is achieved. As discussed on claim No.12, Tribunal has noted that moblization and plant and machinery advance which was paid to the contractor was already recovered by the plaintiff and after recovery of the said amount, plaintiff was required to return the bank guarantee which was given for mobilization of plant and machinery advance. Therefore, Plaintiff had no right to invoke these bank guarantees after recovery of advance and therefore, invoking bank guarantee is held to be illegal. Similarly in respect of claim No.14, performance security 101 CT 1390_Com.A.S.2282018_Judgment .doc bank guarantee was also encashed illegally as held by the tribunal. From the date of such invoking and encashing Bank guarantees, even under Section 4(2)(a) of Interest Act, interest is to be awarded as it becomes deposit given to secure performance of an obligation. These amounts of bank guarantees illegally encashed and retention money illegally forfeited are the definite amount and were amount belonging to contractor and are illegally taken by the plaintiff are liable to be refunded with interest as they become a debt repayable to the defendant or would be a deposit of the defendant with the plaintiff. Therefore, these definite amounts of the defendant, which are illegally forfeited or encashed by the plaintiff are to be returned with interest as per Interest Act, inspite of definite clause in the contract.
92. Apart from this, in some of the decisions like, Manraj Enterprises and in Garg Builders, referred above, there was specific clause barring interest on Earnest money, Security deposit or EMD. In the present case, clause 85.7 states that if the award is for payment of money no interest shall be payable on whole or any part of the money. Therefore, money referred in clause 85.7 is the adjudicated amount which is held to be payable. The retention money which was forfeited, bank guarantee given for mobilization and plant and machinery advance and bank guarantee given for performance guarantee which are encashed are not adjudicated amounts but are the amounts which are taken by 102 CT 1390_Com.A.S.2282018_Judgment .doc Plaintiff and are to be refunded. Therefore, these amounts of retention money and Bank guarantees cannot be considered as part of award for payment of money within clause 85.7. Retention money is the actual amount which was with the plaintiff and was belonging to the defendant and same was to be paid to the defendant. After recovery of advance payment in respect of mobilization and plant and machinery advance and after completion of the contract work, Bank Guarantees were required to be returned to defendant and were not to be invoked and encashed by plaintiff. Contention of plaintiff that it is entitle to forfeit any amount due to the contractor for recovery of amount due to plaintiff, falls to the ground as no amount is found to be due to plaintiff and in fact, plaintiff is liable to pay amount to the defendant. For these reasons, plaintiff have to return these principal amounts of claim No.12, 13 and 14 to the defendant with interest, whether it is as finance charges, interest or damages. Even clause 85.7 of GCC do not come in the way of awarding interest or finance charge or damages on these 3 claims. Therefore, award of damages in respect of claim No.13 and finance charges in claim No.12 and 14 cannot be said to be against terms of contract and law. Once awarding of finance charges on claim No.12, 13 and 14 is found to be justified and legal, correctness of calculation and method followed for arriving at the figures cannot be gone into under section 34 of the Act. As such, awarding of finance charges of Rs.13,09,94,274/ and Rs.10,22,47,270/ on principal award amount of claim 103 CT 1390_Com.A.S.2282018_Judgment .doc No.12 and 14, respectively and awarding damages of Rs.3,19,99,968/ on principal award amount of claim No.13 cannot be said to be by exceeding the power of the Arbitral Tribunal or is illegal or is against the fundamental policy of Indian Law or is patently illegal as contended by the plaintiff.
93. Learned Arbitral Tribunal, even on principal award amount on claim No. 8, 9 and 10, which are for the work done in extended period has also awarded finance charges. Finance charges prayed in respect of claim No.1, 2, 5 and 6 which were extra cost incurred during the contract period are rejected by the Tribunal. Since, cost incurred for work done, cost of providing traffic marshals and maintaining furnished site office during extended period are the adjudicated amount in this award, justification which is available for awarding finance charges on claim No.12 to 14 is not available for claim No.8, 9 and 10. In the decision reported in AIR 1974 SC 1265 (Union of India v. Raman Iron Foundry), Hon'ble Supreme Court has held that, a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated upon and damages assessed by an adjudicatory authority and only after it is determined, it becomes debt due on which interest is payable. Therefore, interest cannot be ordered on unquantified claim amount. Clause 54 of GCC permits payment of extra cost incurred when extension of time is given. In claim No.8, 9 and 10 104 CT 1390_Com.A.S.2282018_Judgment .doc which are the claim for extra cost incurred in executing the work in the extended period and for providing Traffic Marshall/House Guard and for providing site office and other facilities to the Engineer during the extended period, entitlement of these claims are adjudicated by the Arbitral Tribunal in the present Arbitration Award. Only after such adjudication and the cost is assessed by adjudicating authority, amount becomes payable and such amount is already awarded as principal amount. As such it is not a debt due as on the date of the initiation of arbitration. Only in the arbitration proceedings this liability is adjudicated.
94. Principal award amount in claim No.8, 9 and 10 which are awarded towards extra cost incurred during extended period of contract would be a clear award for payment of money coming under clause 85.7 of the GCC. As per this clause, where Arbitral Award is for payment of money no interest is payable till passing of award. This principal amount is the adjudicated amount by the Arbitral Tribunal for payment to the defendant for the extra cost incurred by the defendant for doing the work during extended period. On such amount interest is not payable. In respect of claim No.8, 9 and 10, benefit of section 4 of Interest Act is also not available as unless the liability of the employer to pay this amount is adjudicated by the Arbitral Tribunal, this amount under claim No.8, 9 and 10 cannot be considered as deposited amount or a debt. Though Tribunal has rightly 105 CT 1390_Com.A.S.2282018_Judgment .doc held on claim No.12, 13 and 14 with elaborate discussion about finance charges, in respect of claim No.8, 9 and 10 Tribunal in para 647 to 651 has abruptly come to the conclusion that finance charges are to be paid. When the tribunal on claim No.1, 2, 5 and 6 has not awarded finance charges by considering clause 85.7, how it could order payment of finance charges on claim No.8, 9 and 10 is not clear. Claim No. 1, 2, 5 and 6 are for costs during work for various reasons, though during original contract period. Claim No.8, 9 and 10 are claims for cost incurred during extended period. Extension is given as per terms of contract. Therefore, terms of contract would be equally applicable, even for work done during extended period. Tribunal cannot ignore clause 85.7 which bars awarding of interest. Arbitral Tribunal cannot exceed its jurisdiction and award such interest in the name of damages or even in the name of finance charges as awarded in the present case. Contract do not permit awarding any finance charges on adjudicated amount. Therefore, though award is made as finance charges, in fact, what is awarded is interest. As noted above, what cannot be done directly cannot be done indirectly. Absolutely there is no justification for awarding finance charges on claim No.8, 9 and 10.
95. Though it is mentioned that this finance charge are based on interest charged by the bank and paid by the claimant as per the calculation sheet which are submitted 106 CT 1390_Com.A.S.2282018_Judgment .doc with the written synopsis, such actual cost incurred as finance charges by the defendant were not produced in evidence before the Arbitral Tribunal. The Arbitral Tribunal has applied the formula for determining finance charges, as applied in respect of illegally encashed bank guarantee. As claim No.8, 9 and 10 were not yet adjudicated and are not a debt, clause 85.7 would clearly come in the way of awarding of any interest, even though it is mentioned as finance charges. For the cost incurred by the contractor during extended period, Tribunal has already awarded amount as principal award amount by even considering price variation and by considering the present cost that is paid by the employer for getting the rescinded work done. For such adjudicated amount, interest cannot be awarded as per clause 85.7 upto the date of award. So this portion of the award is not justified. Though the tribunal has rightly decided the entitlement of defendant for the extra cost incurred during the extended period, tribunal has committed patent illegality in awarding finance charges on claim No.8, 9 and 10. Same is even against fundamental policy of indian law, being against binding terms of contract and statute. On looking to the discussion made in 647 to 651, no justifiable reasons given for coming to the conclusion that the contractor is entitle for finance charges on the cost awarded for the work done during extended period. Looking from any angle, awarding of finance charges on principal award amount in claim No.8, 9 and 10 is not justified and is clearly 107 CT 1390_Com.A.S.2282018_Judgment .doc against the contract terms and thereby it is against the fundamental policy of Indian law. Section 31(7)(a) of the Arbitration & Conciliation Act also do not permit awarding of such interest, when there is specific bar for payment of such interest.
96. Award for payment of such finance charges cannot be even considered as trivial one. The principal amount that has been awarded by the tribunal on different claim is Rs.56,23,06,638/. Total finance charges awarded by the tribunal is Rs.66,53,43,685/. As discussed above the awarding of finance charges on claim No.12, 13 and 14 is justified and permissible. This amount comes to Rs.26,52,41,512/. The finance charges awarded on claim No.8, 9 and 10 comes in total to Rs.40,01,02,173/. Therefore, this huge amount of Rs.40,01,02,173/ is awarded as finance charge in addition to cost incurred for doing work during the extended period. In fact the principal amount of cost itself is much less than this finance charges which is ordered. In view of clause 85.7 and section 31(7)(a) of the Arbitration & Conciliation Act, awarding of finance charges is not justified and is illegal and is not even a trivial point which can be ignored, as huge amount of Rs.40,01,02,173/ has been awarded as finance charges on claim No.8, 9 and 10. Therefore, though award of the Arbitral Tribunal is well justified in awarding principal amount as decided and even awarding finance charges on claim No.12, 13 and 14, 108 CT 1390_Com.A.S.2282018_Judgment .doc awarding Rs.40,01,02,173/ as finance charges on the principal award amount on claim No.8, 9 and 10 is found to be against fundamental policy of Indian law and is patently illegal.
97. In the decision in McDermott International Inc, Hon'ble Supreme Court, has held that, "The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired". So if the award is found to be against public policy of India, court under Section 34 has no power to modify the award or has no power to remand the matter to the Arbitral Tribunal and only recourse left to the court is to set aside the award.
98. In the present case, parties have appeared before the Arbitral Tribunal with 17 claims placed by the defendant/contractor and 5 counter claims of Plaintiff/Employer. Learned Arbitral tribunal has decided on each claim and counter claim and allowed some claims and rejected some claims and all counter claims. Arbitral Award, awarding principal amount on different claims is found to be justified and not coming under any of the grounds of challenge under section 34 of the Act. In the Award, Tribunal has separately considered each claim by excluding finance charges prayed on it. Tribunal has awarded finance charges 109 CT 1390_Com.A.S.2282018_Judgment .doc on principal award amount of 5 claims and damages on principal award amount of claim No.13. As discussed above, awarding of finance charges or damges on principal award amount on claim No. 12, 13 and 14 is found to be well justified. However, awarding of finance charges on principal award amount of claim No. 8, 9 and 10 is found to be against terms of clause 85.7 of GCC and even against section 31(7)(a) of Arbitration and conciliation Act and also against Interest Act and is also against various decisions of Hon'ble supreme Court referred above. Awarding of amount as principal amount which comes to Rs.56,23,06,638/ on claim No1, 2, 5, 6, 8, 9, 10, 12, 13 and 14 is found to be justified and award in respect of these principal amount is found to be not against public policy or is not patently illegal and cannot be set aside. Similarly, awarding of Finance charges of Rs. 13,09,94,274/ on principal award amount on claim No.12, awarding of Finance charges of Rs.10,22,47,220/ on principal award amount on claim No.14 and awarding of damages of Rs. 3,19,99,968/on principal award amount on claim No.13 is also found to be justified and is not against contract or any statute.
99. However, awarding of Finance charges of Rs.38,78,07,464/, Rs.74,96,776/ and Rs.47,97,333/on principal award amount on claim No.8, 9 and 10, respectively, is found to be against clause 85.7 of GCC and also against Section 31(7)(a) of Arbitration and conciliation 110 CT 1390_Com.A.S.2282018_Judgment .doc Act and section 4 of Interest Act and is there by, against fundamental policy of Indian law and is patently illegal and cannot be sustained. Total of Financial charges that is allowed on principal award amount on Claim No. 8, 9 and 10 comes to Rs.40,01,02,173/ and awarding of this amount is found to be not justified and is by exceeding jurisdiction and against terms of contract and illegal. The Tribunal has separately considered each claim and also separately considered finance charges on Principal award amount on these claims. Therefore, each claim is a separate dispute resulting in separate finding and claim for finance charges on these claims is also separate dispute. After considering each claim and claim for finance charges on these claims separately, Learned arbitral Tribunal arrived at particular amount on each claim and also particular amount as finance charges on claims and then arrived at Total amount as appearing in para 652 of the Award. Therefore, when finding of the learned Arbitral Tribunal in respect of finance charges on principal award amount on claim No.8, 9 and 10 only are held to be against the public policy of India, if, award of these amounts as finance charges amounting to Rs.40,01,02,173/ are independent of other claims and findings could be separated, finding on other claims and finding on allowing of finance charges in Claim No.12, 13 and 14. which are not hit by grounds mentioned in Section 34(2) need not be set aside. At the same time, awarding of Rs.40,01,02,173/ as finance charges in claim No.8, 9 and 10, which are found to be not 111 CT 1390_Com.A.S.2282018_Judgment .doc justified, cannot be ignored as trivial in nature. In the total award amount of Rs.122,76,50,323/, this part of finance charges which are not justified comes to Rs.40,01,02,173/, that is more than 30%. Similarly, when awarding finance charges on claim No. 8, 9 and 10 alone is found to be bad in law, if the entire award is quashed and parties are left to begin arbitration again, both the parties would suffer injury and would lead to further delay and will defeat the purpose.
100. In a decision reported in 2011(2) Arb.LR 84 (SC) (J G Engineers Pvt Ltd Vs Union Of India and another) Hon'ble Supreme Court has held in para 18 as under;
"18. The arbitrator has considered and dealt with claim Nos. (1), (2, 4 and 5), (6),(7 and 8),(9) and (11) separately and distinctly. The High Court found that the award in regard to item Nos.1,3,5 and 11 were liable to be set aside. The High Court did not find any error in regard to the awards on claim Nos.2,4,6,7,8 and 9, but nevertheless chose to set aside the award in regard to these six items, only on the ground that in the event of counterclaim Nos.1 to 4 were to be allowed by the arbitrator on reconsideration, the respondents would have been entitled to adjust the amounts awarded in regard to Claim Nos. 2,4,6,7,8 and 9 towards the amounts that may be awarded in respect of counterclaim Nos.1 to 4; and that as the award on Counterclaim Nos.1 to 4 was set aside by it and remanded for fresh decision, the awards in regard to Claim Nos,2,4,6,7,8 and 9 were also liable to be set aside. It is now well settled that if an award deals with and decides several claims separately and 112 CT 1390_Com.A.S.2282018_Judgment .doc distinctly, even if the court finds that the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent. As the award on item Nos.2, 4,6,7,8 and 9 were upheld by the civil court and as the High court in appeal did not find any infirmity in regard to the awards on those claims, the judgment of the High court setting aside the award in regard to Claim Nos. 2,4,6,7,8 and 9 of the appellant, cannot be sustained. The judgment to that extent is liable to be set aside and the award has to be upheld in regard to Claim Nos. 2,4,6,7,8,and 9."
(Underlined by me)
101. With the support of this decision and in the peculiar circumstances of the present case, only awarding of finance charges on principal award amount on claim No.8, 9 and 10 which are found to be against the public policy of India could be set aside and the findings on other claims and awarding of finance charges in other claims which cannot be challenged and set aside under Section 34(2) of the Act can be kept as it is and need not be disturbed. Since each claim is practically a separate dispute, finding on awarding finance charges on claim No.8, 9 and 10 which are to be set aside as are against terms of contract and statute and thereby, against public policy of India, will not affect well justified and reasoned finding on other claims. Therefore, in the peculiar circumstances of the case, it is proper to allow the petition partly and to set aside the finding of the award only in respect of awarding finance charges in claim No.8, 9 and 10 113 CT 1390_Com.A.S.2282018_Judgment .doc amounting to Rs.40,01,02,173/ and to keep the award regarding principal award amount on all claims and finance charges on claim No.12, 13 and 14 intact. On setting aside the finding on these finance charges on claim 8, 9 and 10, awarded amount covered in these claims are to be deducted from the final calculated amount and award with regard to other claims need not be interfered.
102. On deduction of finance charges awarded on principal award amount in these three claims which are set aside and on considering the amount awarded on the claims by the Arbitral Tribunal, amount to which defendant is entitle would be as under:
Claim Principal amounts Finance charges/ Amount of Claim No. awarded by Arbitral damages awarded upheld by this Tribunal. Court Claim Rs. 3,78,00,000/- ---- Rs. 3,78,00,000/-No. 1
Claim Rs. 1,74,12,634/- ---- Rs. 1,74,12,634/-No. 2
Claim Rs. 3,51,82 ,688/- ---- Rs. 3,51,82 ,688/-No. 5
Claim Rs. 1,64,39,055/- ---- Rs. 1,64,39,055/-No. 6
Claim Rs. 24,40,57,561/- *Rs. 38,78,07,464/- Rs. 24,40,57,561/-No. 8
Claim Rs. 47,17,921/- *Rs. 74,96,776/- Rs. 47,17,921/-No. 9
Claim Rs. 30,19,467/- *Rs. 47,97,933/- Rs. 30,19,467/-No. 10
Claim Rs. 8,24,21,000/- Rs. 13,09,94,274/- Rs. 21,34,15,274/-No. 12
Claim Rs. 5,69,22,796/- Rs. 3,19,99,968/- Rs. 8,89,22,764/-No. 13
Claim Rs. 6,43,33,516/- Rs. 10,22,47,270/- Rs.16,65,80,786/-No. 14 114
CT 1390_Com.A.S.2282018_Judgment .doc Total 56,23,06,638/ 66,53,43,685/- 82,75,48,150/ Rs.
(* Amounts awarded is set aside).
*
103. The total of these awarded amount covered by claims which are set aside comes to Rs.40,01,02,173/. After deducting this amount remaining amount to which claimant/defendant would be entitle is Rs.82,75,48,150/. Therefore, award could be restricted to recovery of Rs.82,75,48,150/ with interest @12% per annum as awarded and on the same conditions. Therefore, amount to which the claimant is entitle is to be modified as Rs.82,75,48,150/ in place of Rs.122,76,50,323/ mentioned in the award. Accordingly, point No.1 is answered partly in the affirmative.
104. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER This petition filed U/S.34 of the Arbitration & Conciliation Act 1996 to set aside award of the learned Arbitral Tribunal dated 16/08/2018 in respect of disputes under contract Agreement No:BMRCL/VIA/EW/R1/1/ Dated 15.02.2007, is partly allowed.115
CT 1390_Com.A.S.2282018_Judgment .doc Award of the learned Arbitral tribunal in respect of finance charges on principal award amount, on claim No.8, 9 and 10 are set aside.
On setting aside the finding on finance charges on these claims, amount to which the claimant/defendant is entitle from respondent/ plaintiff is reduced to Rs.82,75,48,150/ in place of Rs.122,76,50,323/.
The claimant/ defendant is entitle to recover Rs.82,75,48,150/ from the plaintiff on the same terms as appearing in the award.
In the circumstances of the case, parties to bear their own costs.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 28th day of January 2022] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
***