Delhi District Court
Through Its ChairmanCumManaging ... vs M/S Yadav Construction Company on 23 September, 2014
Page No. 1/49
IN THE COURT OF MS. SUJATA KOHLI:ADDITIONAL DISTRICT JUDGE:
WEST DISTRICT:TIS HAZARI COURTS:DELHI
ARBT. No. 119/14/05
NATIONAL BUILDINGS CONSTRUCTION
CORPORATION LIMITED,
NBCC BHAVAN, LODI ROAD,
NEW DELHI110003.
THROUGH ITS CHAIRMANcumMANAGING DIRECTOR
.......PETITIONER
VERSUS
M/s YADAV CONSTRUCTION COMPANY,
591, SNEH NAGAR,
JABALPUR, MADHYA PRADESH.
....RESPONDENT
DATE OF FILING OF THE PETITION : 01.10.2005
DATE OF RESERVATION OF ORDER/JUDGMENT : 16.09.2014
DATE OF DECISION/JUDGMENT : 23.09.2014
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD.
Page No. 2/49
ORDER: Vide the impugned Award, Ld. Arbitrator has allowed the claim under different heads filed by the claimant/respondent alongwith interest and rejected the counter claim filed by the petitioner/objector. Now the respondent therein has come up by way of an objection petition u/s 34 of Arbitration and Conciliation Act against the Award.
2 The main grievance of the petitioner/objector is that time was of the essence of the contract for completion of the entire work which as per clause 22 of general conditions of the contract was 12 months for the completion of the entire th work starting from 15 day of issue of Letter of Intent i.e. 16.08.1994 and the stipulated date of completion was 26.08.1995.
3 It has been the case of the petitioner/objector throughout that the respondent/claimant had been negligent and failed to perform his contractual obligations. There were defaults and failures on the part of the respondent/claimant during execution of the work.
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 3/49 4 The petitioner/objector is aggrieved that the Ld. Arbitrator awarded some of the claims in favour of the respondent/claimant in contravention of the terms and conditions of the contract and which were even grossly time barred. According to them, Ld. Arbitrator wrongly ignored the specific terms and conditions of the contract and the material documents filed on record by the petitioner/objector, while considering their counter claim. According to the petitioner/objector, the impugned Award suffers from errors apparent on the face of the record. 5 As per petitioner/objector, Ld. Arbitrator himself had given a categorical finding in the Award itself to the effect that the delay in completion of the project was solely attributable to the respondent/claimant, but at the same time rejected the counter claim of the petitioner/objector in respect of imposition of penalty of Rs. 1,94,67,625/. Ld. Arbitrator wrongly came to the conclusion that the total extension of only 119 days was justified i.e. the work should have been completed by 31.12.1995.
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 4/49 6 Further grievance is also relating to the interest as awarded for different periods wrongly and on the claims of all other heads like escalation of costs. According to the petitioner/objector, the Award is self contradictory. 7 Brief facts giving rise to the dispute between the parties were regarding the performance of the contract for construction of Navodaya Vidyalaya, PhaseII, Khurai.
8 The work was awarded by the petitioner/objector to the claimant on 16.08.94 and the agreement was executed on 02.09.94.
9 PhaseII of the construction work consisted of school building and dormitory building at Khurai. The date of start of the work was 26.08.1994 and the date of completion as per agreement was to be 25.08.1995. 10 The value of the work awarded was Rs.38,93,525.98p. Due to various delays, the work could not be completed on time and on 01.01.2000, it was taken over by Navodaya Vidyalaya. According to the claimant, during this period, he ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 5/49 completed the work worth of Rs.30,35,000/ against the contracted cost of Rs.40 lacs.
11 Due to the closure of the work, claimant submitted his claims to the respondent which were rejected and ultimately the dispute was referred to arbitration.
12 Respondents therein in their reply to the claim raised preliminary objections referring to clause 25 of the contract stating that claimant had to submit the claims within 90 days of the intimation that the final bill was ready for payment. 13 It was further submitted that the final bills were bearing signatures of the claimant, which showed that intimation regarding final bills had been seen by the claimant, whereas the claims were filed after the expiry of 90 days therefrom. The respondent therein further submitted that claims no.5, 8 and 9 were beyond the jurisdiction of the Ld. Arbitrator.
14 As per the claimant's submissions, final bill had never been passed ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 6/49 and no intimation had been sent by the respondent to the claimant about the final bill being ready and therefore, the contention regarding the claims no.5, 8 and 9 being beyond jurisdiction of the Ld. Arbitrator was wrong.
15 Going by the admission of the respondent and his submissions to the effect that the final bill was only signed by AE (Assistant Engineer) and has not been signed by CPM, signing of the final bill by the claimant did not amount to an intimation by the respondent that the final bill was ready for payment. Further, respondent also raised questions of additional recoveries from final bills i.e. water, electricity and testing of materials, hire charges of accommodation which again was taken to imply that final bill was never finalized by the respondent and therefore, the contention of the respondent that claims no.5, 8 and 9 were beyond the jurisdiction of the Ld. Arbitrator was rejected.
Claim No.1: Payment of 12th and final bill of Rs.1,84,000/ 16 The bill was signed by the AE, bill amount being Rs.1,84,395.33p. ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 7/49 Income tax amounting to Rs.3368/ and Vanijaya tax each Rs.3368/ had been deducted and balance amount payable was Rs.1,77,019../ . The said bill was lying unchecked with the petitioner/objector/respondent.
17 It was observed by Ld. Arbitrator that the said bill had been signed by the contractor on 17.01.2000. In all the running bills, no recovery of this amount had been made. The contractor had made his own arrangements for water and electricity. There was no letter from Navodaya Vidyalaya authorities for covering water and electricity charges from the claim nor any recovery from the hire charges of accommodation and there was no demand from the Navodaya Vidyalaya about the same. Hence no recovery of water and electricity charges, testing of material and hire charges were justified.
18 Ld. Arbitrator came to the conclusion that mere signing of the final bill by the claimant/respondent, did not amount to an intimation from the site of the petitioner/objector that the final bill was ready for payment. Even otherwise, the ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 8/49 petitioner/objector had even subsequently raised question of additional recoveries from final bill towards water, electricity, testing of merits, and hire charges of accommodation, and which shows that the 'so called' final bill had actually never been finalized by the petitioner/objector, and as such, the clause referred to by the petitioner/objector would not even be applicable for this reason as well. 19 The submission of the petitioner/objector herein that claim nos. 5, 8 and 9 were beyond the jurisdiction, were also rejected.
20 It has further been discussed by the Ld. Arbitrator that as per the extract of the final bill, the payment of Rs. 1,77,019.33/ paise, was due to the claimant, and that this bill had been signed by the Assistant Engineer, the total amount was Rs. 1,84,395.33/ from which income tax amounting to Rs. 3688/ and 'Vanijya Tax' amounting to Rs. 3688/, had been deducted and the balance amount payable, was Rs. 1,77,019.33/ paise. This bill was lying unchecked with the petitioner/objector, and this was the amount claimed by the claimant. ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 9/49 21 It had even been submitted on behalf of the claimant that the bill, though, signed by the contractor on 17.01.2010, as per 'C26' dated 12.05.2000, the Assistant Engineer sent the bill to the accounts branch at Delhi for the needful, and in the counter claim filed by the petitioner/objector herein, there was no objection about the final bill, except that the counter claims have to be considered against the amount due for the final bill.
22 The recoveries raised before the Ld. Arbitrator by the petitioner/objector for water, electricity charges and testing of materials, were observed by the Ld. Arbitrator to be new recoveries, which had never been indicated in any letter, nor the recoveries made in the final bill prepared by the Assistant Engineer.
23 It was further observed that in all the running bills, no recovery of this account had been made. It was further found that the contractor had made his own arrangement of water and electricity, and there was no letter from Navodya ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 10/49 Vidyalaya authorities for recovery of water and electricity charges from the claimant. Also, no recovery for hire charges for accommodation as raised before the Ld. Arbitrator in the final hearing, had previously been intimated as there was no demand whatsoever from Navodya Vidyalya about the same. 24 In the findings as regards claim no. 1, Ld. Arbitrator was of the view that the final bill as prepared by the Assistant Engineer was for Rs. 1,84,395.33/ paise, and even after deduction of the necessary taxes (above referred), the bill of the claimant had not been passed by the petitioner/objector, and these recoveries had actually not been made nor debited to the claimant's account nor deposited with the relevant authorities.
25 Vide letter dated 14.12.1995, the petitioner/objector herein had informed the claimant that the Navodya Vidyalaya authorities had been using their water and electricity. The claimant was asked to report, so that a reply could be given, but thereafter, there was no letter of the petitioner/objector, and even no intimation was ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 11/49 given to the claimant that any recovery would be made for water and electricity. There was no letter from Navodya Vidyalaya authorities intimating the amount to be recovered towards electricity and water charges.
26 Ld. Arbitrator after appreciating the material on record has come to the conclusion that there was no justification for water and electricity charges and testing of material and hire charges for accommodation by the respondent and the recoveries were rejected.
27 Since the amounts deducted on account of Vanijya Tax, though, had been included by the claimant in his claim no. 2, the amount stated to have been deducted towards TDS from the final bill, was found to have not been actually deposited with the concerned authorities, and as such, Ld. Arbitrator directed the petitioner/objector to pay to the claimant a sum of Rs. 1,80,707/ on account of final bill.
28 As regards the amounts withheld from the previous RA Bills i.e. of Rs. ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 12/49 1,20,000/, Ld. Arbitrator was of the view that since the petitioner/objector had not produced any letter from the EPF Authorities regarding the alleged failure of the claimant to register under the EPF Act, and to make necessary deposits under the said Act, the amount that was recovered by the petitioner/objector from the claimant had not been deposited by the petitioner/objector with the EPF Authorities, and as such, he was of the view that there was no justification for the petitioner/objector to keep the said amount with them, and therefore, Ld. Arbitrator awarded Rs. 77,176/ to be refunded to the claimant.
29 As regards the commercial tax, the claimant's version was that the said tax was introduced after the award. The petitioner/objector could not refer to any provision in the agreement, under which, the commercial tax was payable by the claimant. Furthermore, the amount recovered by the petitioner/objector, had not been deposited with the concerned Sales Tax Department, and as such, this recovery of Rs. 52,921/ also was held not justified to be retained by the ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 13/49 petitioner/objector.
30 As regards claim no. 3 regarding the payment for work done, on the basis of the extract of 11th R.A. Bill filed by the petitioner/objector alongwith his letter dated 29.03.2004, it was found to have been signed by the A.E. (Assistant Engineer) on 19.01.2000, as the petitioner/objector had already admitted that this amount was payable, the said amount was also awarded in favour of the claimant. 31 Regarding the claim based on escalation of costs during the stipulated period of the contract, Ld. Arbitrator has found on the basis of material on record that the petitioner/objector had been asked a number of times during the hearings to check the bills submitted by the claimant for the escalation from the agreement period, but no action was taken by the petitioner/objector. In fact, the petitioner/objector even failed to produce the measurement book, in which, the escalation bills had been prepared and entered by the A.E. of the petitioner/objector. Ld. Arbitrator has even checked these escalation bills, and come to the conclusion ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 14/49 that claimant had separately claimed escalation price of steel. That escalation was held to be not admissible as per the contract, and has been disallowed, but a sum of Rs. 43,141/ has been allowed for escalation.
32 As regards the claim for escalation bills for the work done during the extended period, Ld. Arbitrator referred to Clause 21.1 of the agreement, which provide as under: "Escalation Adjustment for labour, POL & other materials: If the prices of the materials other than cement and steel and or wages of labour required for execution of the work increase, the Contractor shall be compensated for such increase as per provisions detailed below and the amount of the contract shall accordingly be varied, subject to the condition that such compensation for escalation in prices shall be available only for the work done during the stipulated period of the contract including such period for which the contract is validly extended on account of reasons not attributable to the Contractor."
33 In the present case, upon going through the different letters for ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 15/49 extension of time, Ld. Arbitrator has come to the conclusion that no extension of time had been sanctioned by the petitioner/objector i.e. after expiry of the original period, as per the agreement, and further that it had been reported by the petitioner/objector that the case regarding extension of time, was still under consideration of the higher authorities, and that is that the claimant asked in arbitration. As the claimant/contractor had asked for the arbitration, the sanction of the extension of time, is admitted to have not been accorded.
34 According to the submissions of the claimant before the Ld. Arbitrator, the work was delayed due to various reasons, for which, it is the petitioner/objector who was responsible, and the main reason of delay brought out by the claimant, was the irregular supply of the material i.e. cement and also the delay in payments. 35 The stand taken by the petitioner/objector was that the delay was because of poor management by the claimant i.e. he did not employ adequate labour and did not make the arrangement for the required material. Reference has ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 16/49 been made to various letters written by the petitioner/objector recording their observations about the slow or very slow progress of the work, and cement godown not having been completed or that it was of insufficient capacity. 36 The roof was defective and could have caused leakage throughout in the numerous letters i.e. remarks from the petitioner/objector were similar. However, after going through the entire material on record, Ld. Arbitrator arrived at to the findings that firstly the work order to commence the work had not been issued and delivered by the petitioner/objector to the claimant on time, and this had led to an extension of 36 days up to 08.10.1994.
37 Further, the drawings had not been supplied, and due to heavy rain, the area surrounding the site, was having standing water, and no transportation of the material could be done. The drawings were received by the claimant on 09.10.1994, but delay in supply of the drawings was on the part of the petitioner/objector i.e. of 44 days, in all.
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 17/49 38 Other reason for delay was heavy rainfall during 1994. Though, about this factor, Ld. Arbitrator has not been in agreement, and has been of the view that rains being a normal feature, have to be accounted for by the claimant, while escalating his work. But there were several other factors in 1994, as above referred, which lead to the delay, as well, like nonavailability of sand in the river owing to non opening of 'Ghats' on account of heavy rains and 30 days. The extension of time of 30 days on this count was held justified.
39 Extension of time from 13.10.1996 (Dussehra) till 03.11.1996 (Deewali), and also in November, 1995, the 40 days extension sought on account of labour scarcity, has been held not justified on the reasoning that Contractor had to make his arrangements accordingly in advance.
40 The case with the extension of time sought by the claimant on account of brickkilns, not being open prior to February, 1995, on the same reasoning that the petitioner/objector should have make prior arrangements in advance. ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 18/49 41 Extension was not held justified also on ground of inadequate availability of cement on the reasoning that the actual reason for shortage of cement, was that construction of a small godown with defective roof for storage of cement, and therefore, the said claim of extension had also been rejected. 42 The extension of water scarcity also stood rejected on the reason that the Contractor/Claimant was having the responsibility to make arrangement for water, and thus, no extension of time on this ground was held justified. 43 As regards the delayed payments, on accounts of running account bills, the total extension of 45 days was held justified on that account being the maximum delay.
44 The extension of time on account of fault of the petitioner/objector in all, was taken to be 89 days, and on other accounts beyond the control of the claimant, were taken as 30 days, and thus, on the basis of total extension of 119 days, the work should have been completed by 31.12.1995. From the letter of R95, ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 19/49 it was seen that the work had been stopped in September 1997, and this action was held to be highly objectionable as the main reasons for delay in that period of time had been on account of the claimant himself.
45 As such, the claimant has been held entitled to escalation only up to December, 1995, and thereafter, the escalation has been held to have been paid on basis of index applicable for the quarter ending December 1995. No separate escalation for steel was held admissible as its value included in the gross amount of the work done. Accordingly, Ld. Arbitrator allowed only Rs. 1,67,212/ as payable to the claimant with respect to claim no. 5.
46 As regards the security deposit, the petitioner/objector failed to produce any letter for fitting the security. During the liability period, no notice regarding any defect had been issued to the claimant regarding the defects prior to checking over of the work from the claimant. The same was dealt with in counter claim no. 3, and as part rates had been paid for the defective work in the final bill, no ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 20/49 recovery was held to be justified.
47 Since the refund of security deposit was already awarded, the amount of earnest money which forms part of the security, was also held refundable, and therefore, decided in favour of the claimant.
48 As on the point of interest, the claimant vide his letter had claimed 24% interest from the due date, but later on, in the claim statement, the claimed interest from 01.01.2000. The 10% interest was held in the amount awarded i.e. pendente lite and future interest till date of payment.
49 The dates of commencement of interest have been differently laid down on the basis of the material on record. As per the findings of claim no. 5, main delay had been found to be on the part of the claimant as he had stopped the work in September 1997, the delay on account of the petitioner/objector was held to be only for 89 days, and as the claimant was observed to have been doing the work very slowly, no justification was found for any payment for the infructuous overhead ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 21/49 charges and the said claim was rejected.
50 The preliminary objection raised by the petitioner/objector regarding limitation has been rejected on the reasoning that as the final bill for the work had not been passed and intimation had not been given to the claimant to the effect that the final bill was ready for payment, the limitation regarding the additional claims, was held not to start running.
51 As regards the counter claim no. 1 as filed by the petitioner/objector, Ld. Arbitrator has been of the view that if the claimant was employing an Engineer at site, the petitioner/objector should have given him a final notice and decided the amount to be recovered and to have recovered from the running bills, but there was no such letter from the petitioner/objector informing the claimant about any liability to pay under Clause 36. Even it was not proved that petitioner/objector had employed two Engineers at the site on account of failure of the claimant to provide an Engineer.
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 22/49 52 It was a view taken by the Ld. Arbitrator that for this work, Engineers were not required, and moreover, as per the agreement, the amount could be recovered at rates specified for the period. Graduate Engineer was not employed as certified by Engineers InCharge.
53 The counter claim no. 2 was for recovery of liquidated damages to the tune of Rs. 1,94,676.25/. Ld. Arbitrator in view of findings about the delay, in execution of the work, and in view of the fact that major delay was on the part of the claimant, but also considering that as admitted in letter R9, dated 19.10.2000, even the petitioner/objector had not taken a decision regarding extension of time, nor taken any decision to levy liquidated damages, as no extension of time was given after expiry of agreement period, time was set at large. To levy liquidated damages, it was essential for the petitioner/objector to have first decided on the application of the claimant for extension of time, and to have issued a Show Cause Notice to that effect. Since this was required to be done by the competent authority vide Clause ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 23/49 No. 2 of the agreement, and same had not been done, there was no justification for levy of any liquidated damages.
54 Counter claim no. 3 was regarding the recovery on account of alleged defective work. The said counter claim has been rejected by the Ld. Arbitrator, mainly on the ground that there has been no written intimation as required giving the final list of defects, which had not been rectified by the claimant. The work was closed on 31.12.1999, and there being no letter from the petitioner/objector giving final list of defects, reference was also had to Clause 14 of the agreement, this counter claim was rejected.
55 As regards the claim for damages for loss of reputation and business, same has also been rejected by the Ld. Arbitrator, who has held that petitioner/objector had failed to prove the breach of contract by the claimant and to show any document to prove as to what were the reasons for NVS to withdraw the work from the petitioner/objector. Accordingly, there was also no question of any ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 24/49 interest.
56 During the course of arguments, ld. counsel for petitioner/objector firstly relied upon landmark case of ONGC Vs. Saw Pipes Ltd. reported in 2003 (5) SCC 705 wherein, the scope of Section 34 of Arbitration and Conciliation Act 1996 was much widened and enlarged and it has mainly been held that "the Award can also be set aside if it was contrary to the public policy besides the other circumstances like if it is patently illegal".
57 Regarding as to what would qualify as a decision being against public policy, reliance was placed in the case of Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation, reported in 2006 (4) SCC 445, wherein a reference has been made to the earlier decision in the ONGC's case and held that "an Award which is contrary to substantive provisions of law or the provisions of Arbitration and Conciliation Act, 1996 or otherwise against the terms of the contract, would be considered as a patently illegal decision and if it affects the rights of the parties, same would be open ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 25/49 to interference by the court U/S 34 (2) of the Act."
58 In the light of the decision as settled by ONGC's case and further elaborated in the case of Hindustan Zinc Ltd., though ld. counsel for claimant has placed on record certain decisions of Hon'ble Supreme Court to the contrary, but they all being earlier in point of time, this point was not even seriously opposed by the ld. counsel for the respondent during the course of arguments. 59 The main point agitated before me during the course of arguments on behalf of the petitioner/objector was that the claim itself was barred by limitation and as such, the Award of the arbitrator is contrary to the substantive law i.e. Limitation Act and in violation of the provisions of the said Act. At the same time, what has been argued is that it is as per clause 25 of the Contract that the contractor was to make demand for arbitration in respect of any claims, not later than 90 days from the payment of the bill/intimation that the bill was ready for payment and if no such claim was made within the said period, the claims would be deemed to have been waived ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 26/49 and absolutely barred.
60 It was further contended that since the claimant/respondent had accepted the bill vide No. C26 dated 12.05.2000 and admittedly he did not raise any claim within 90 days therefrom as per the above noted clause 25 of the Contract and instead he invoked arbitration only on 08.02.2003, same was hopelessly time barred. 61 It was also contended on behalf of the petitioner/objector that the view taken by the arbitrator that the signing of the final bill by the claimant did not amount to intimation by the respondent (petitioner/objector herein) that the final bill was ready for payment was erroneous. Same is the contention regarding additional claims no.1 and 2 and in this respect reliance has been placed upon the decision of our own Hon'ble High Court in the case of Ram Ditta Mal Vs. Food Corporation of India reported in 1987 Arb. LR (2) Del 73 and also another judgment from the apex court i.e. K.V. George Vs. Secretary to Government, Water & Power Department, Trivandrum reported in AIR 1990 SC 53, wherein it was held that "in ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 27/49 the facts of that particular case, the contract had been terminated by the respondents therein on 26.04.1980 and as such, all issues had arisen out of termination of the contract and they could have been raised in the first claim petition filed before the Arbitrator by the appellant therein and that having not been done, the second claim petition before the Arbitrator raising the remaining disputes was clearly barred."
62 It had been observed in the said case of Ram Ditta Mal Vs. FCI above referred by our own Hon'ble High Court while giving the decision "that the time began to run from 10.02.1956 (in that case) i.e. when the plaintiff signed the final bill and that the suit was barred by limitation by three days after allowing two months time for notice u/S 80 CPC."
63 Further reliance placed on Wild Life Institute of India, Dehradun Vs. Vijay Kumar Gard reported in (1997) 10 SCC 528, wherein it has been held that "there was an arbitration clause that if contractor fails to make demand for arbitration ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 28/49 in respect of any claim within a period of 90 days of receiving the intimation that the bill was ready, the claim of the contractor would be deemed to have been waived and absolutely barred."
64 Further reliance was also placed in the case of P. Manohar Reddy Vs. Maharashtra Krishna Valley Dev. Corp. reported in 2008 (TSL) 47843 = 2009 (2) SCC 494 - Earlier judgment in Wild Life Institute of India, Dehradun Vs. Vijay Kumar Gard reported in (1997) 10 SCC 528 referred and followed. 65 However, ld. counsel for claimant/respondent on the other hand has forcefully contended otherwise and relying on the decision of our own Hon'ble High Court rendered in the case of Explore Computers Pvt. Ltd. Vs. CALS Ltd. & Anr. reported in 131 (2006) DLT 477, wherein our own Hon'ble High Court has been of the view "that any clause extinguishing right of party or discharging any party from liability in respect of any contract on expiry of specified period so as to restrict the time period would be void." Reference has been made to clauses (a) and (b) of ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 29/49 Section 28 of the Contract Act, 1872(as amended in 1996), "the clause (a) dealing with the position prior to the amendment alone and clause (b) being in addition defendant in that case was held not entitled to contend that if any suit or claim was not filed within one month of the expiry of bank guarantee, right of the plaintiff to institute any legal proceedings itself was extinguished and the said defendant could not be discharged from liability nor could the rights of the plaintiff be held to be extinguished by inclusion of clause providing so."
66 Further a reliance has also been placed on another decision of apex court in the case of Indu Engineering & Textiles Ltd. Vs. Delhi Development Authority reported in 2001 (2) RAJ 469 SC.
SCOPE OF SECTION 34:
67 In ONGC Vs. Saw Pipes' case, wherein it has been held by their Lordships that an Arbitrator is a Judge appointed by the parties and the Award passed by him cannot be lightly interfered by the Court.
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 30/49
Uttam Singh Duggal & Co. Ltd. Vs. Union of India & Ors. reported in 1998 RAJ 125 Delhi.
68 Tehri Hydro Development Corporation Ltd. Vs. M/s Lanco Construction Ltd. reported in 2007 (3) RAJ 542 (Del) - held : illegality that is necessary to enable the setting aside of an award must be such that it goes to the root of the matter - If the illegality is of a trivial nature, it cannot be held that the award is against the public policy. Ratio laid down in ONGC's case was referred and discussed in this judgment mainly on the meaning of term "Public Policy of India" as used therein and thereafter their lordships came to the conclusion that the illegality that is necessary to enable the setting aside of the Award must be such that it goes to the root of the matter. The award could be set aside if it is so unfair and unreasonable that it shocks the conscience of the court and on the facts of that case, their Lordships put the question that "as to whether the Arbitrator had committed such an illegality or whether the Award was so unfair and unreasonable that it shocked the conscience ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 31/49 of the court?" In the case at hand on the given facts, their Lordships were of the view that it was not possible to deduce from the material on record and that the Arbitrator had misdirected himself to such an extent that it would entitle the court to set aside the Award.
69 In the present set of facts, the Arbitrator has well applied his mind to the material at hand after carefully analyzing each and every document on record and by any stretch of imagination, it cannot be termed as an Award in the category of one which has any error apparent on the face of the record or an Award which would shock the conscience of the court and thus following the judgment of our own Hon'ble High Court rendered in the year 2007, wherein after having discussed the principles laid down in the judgment of Hon'ble Supreme Court in the ONGCs Vs. Saw Pipes's case, I am of the view that the present impugned Award is certainly not one which should be interfered with by the Court.
70 The objection petition itself is beyond the scope of Section 34 of the ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 32/49 Act as per all the principles and guidelines laid down in the Saw Pipes's case and further also highlighted in the case of Tehri Hydro's case by our own Hon'ble High Court in the light of Saw Pipes's judgment. On this ground alone, the objection petition in fact did not deserve to be entertained at all.
LIMITATION 71 In view of the judgment of our own Hon'ble High Court in Explore Computers's case above referred, this court is also of the view that the rights of the claimant could not have been treated as extinguished just because of a clause in the contract.
72 Even otherwise, Ld. Arbitrator has rightly come to the conclusion that it could not be said that the final bills had been ready and this fact had been intimated by the petitioner/objector to the claimant/respondent at any point of time. Therefore, the limitation even otherwise as per the said clause in this given case did not even begin to run for the reasons recorded by Ld. Arbitrator in detail above referred. The ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 33/49 citation in Ram Ditta Mal's case on the given facts even otherwise would not even be applicable to the given set of facts in the present case at all.
ESCALATION 73 The grievance of the petitioner/objector regarding the Award of claim beyond the stipulated date, the grievance regarding nonagreeing of liquidated damages to the petitioner/objector and the grievance against the Award of interest are misconceived.
74 The citations relied on by the petitioner/objector on the point of escalation are as under:
1. ONGC Vs. Saw Pipes Ltd. 2003 (5) SCC 705
2. Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation 2006 (4) SCC 445
3. Union of India Vs. Sanghu Chakra Hotels Pvt. Ltd. DLT 2008 (152) 651 LIQUIDATED DAMAGES 75 The citations relied on by the petitioner/objector on the point of ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 34/49 liquidated damages are as under:
1. KP Poulose Vs. State of Kerala - 1975 (2) SCC 236
2. ONGC Vs. Saw Pipes Ltd. 2003 (5) SCC 706
3. Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation 2006 (4) SCC 445
4. Union of India Vs. Sanghu Chakra Hotels Pvt. Ltd. DLT 2008 (152) 651 - (Scope of Section 34 Discussed and ONGC referred) The said judgment was on the given set of facts of that case and is not applicable herein.
INTEREST 76 The citations relied on by the petitioner/objector on the point of interest are as under:
1. Union of India Vs. Saraswati Trading Agency - JT 2009 (9) 648 Para 15 ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 35/49
2. Sayeed Ahmed & Co. Vs. State of UP JT 2009 (9) SC 429 para 10 SCOPE OF SECTION 34:
77 The citations relied on by the respondent/claimant on the point of scope of Section 34 are as under:
1. New Delhi Apartment Group Housing Society Vs. J.S. Mittal 2007 (4) ArbLR 565 para 5 - (After discussing ONGC's case, their Lordships have further held as under: "That the decision of Supreme Court in ONGC Vs. Saw Pipes has no doubt interpreted the expression "public policy of India" to include cases of patent illegality but that is far from saying that a court exercising powers under Section 34 can sit in appeal over the findings of fact recorded by the Arbitrator or interpretation placed upon the provisions of the agreement, particularly when such interpretation is a possible interpretation, initiated in no way by any perversity of any kind. It is true ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 36/49
that extreme situation where a finding of fact or interpretation recorded by arbitrator may be found to be perverse may, a times, call for interference, but that does not mean that the court should be ever so ready to substitute its own interpretation for that of the arbitrator just because the alternative interpretation appeals to the court, more than the one, placed by the arbitrator. The court would, in our view, be well advised to exercise restraint int eh matter and resist the temptation of interfering unless such an interference is found to be absolutely necessary to correct a patent illegality or error of jurisdiction."
78 A careful reading of this petition filed by the petitioner NBCC under Section 34 of the Arbitration & Conciliation Act, 1996 disclose that the petitioner is basically aggrieved from:
(i) award against claim no.2, 5 and claim for interest
(ii) rejection of counter claims no.2 and 3
(iii) rejection of plea that claims are barred by limitation as ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 37/49
arbitration not invoked within 90 days.
(iv) rejection of plea that additional claims no.1 and 2 are barred by limitation LIMITATION:
79 The citations relied on by the respondent/claimant on the point of limitation are as under:
1. Pandit Construction Company Vs. DDA - 2007 (3) Arb.LR 205 Thus, the limitation period provided under Limitation Act, 1963 will apply. As per Article 113 of Limitation Act, the limitation period of 3 years runs from the date, when the right to sue accrues. The right to sue accrued when the dispute arose. The petitioner made last payment on 05.03.2002 and thereafter did not make any further payment and also did not finalise the bill despite requests by claimant. If 05.03.2002 is taken as starting point of limitation, then limitation expired on 05.03.2005 . However, before this date, the claimant admittedly invoked the clause ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 38/49 and appointed arbitrator by letter dated 08.06.2004. Thus, invocation of arbitration as well as claims are within limitation.
80 Even if it is assumed for the sake of arguments that such a clause would apply, then also the said clause does not make the claims as time barred because it is an admitted fact that the bill was not finalized by the petitioner till the end. The bill dated 12.05.2000 referred to by the petitioner is not final bill but only a running bill. The intimation by the petitioner to the contractor, that final bill is ready for payment, is sine qua non for application of this clause. The petitioner never intimated the claimant that final bill is ready for payment and thus, the period of 90 days also never started.
81 The claimant referred to 4 judgments which lays down that limitation starts from the date intimation is sent by the department that final bill is ready for payment. These judgments are mentioned at page 14 of the Award. 82 After the petitioner failed to clarify the situation and failed to finalize the ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 39/49 bill, the claimant invoked arbitration on 20.10.2003. The petitioner's competent authority itself appointed the arbitrator on 08.06.2004 and referred these claims to the arbitrator. In view thereof, the petitioner now cannot take a stand that claims were time barred once it itself referred the claims to the arbitrator. 83 The petitioner has argued that additional claims no.1 and 2 are also time barred. In making of this argument, the petitioner again relies upon the condition of 90 days in the agreement. This agreement is also unsustainable for the same reasons. The Ld. Arbitrator has dealt with this aspect at pages 1314 of the Award and has given cogent reasons to hold that these additional claims are not time barred. In fact, the Hon'ble Supreme Court in State of Orissa Vs. Asis Ranjan Mohanty (1999) 9 SCC 249, even went to the extent of saying that additional claims can be raised by a claimant before the arbitrator and the arbitrator is competent to examine the merits of such additional claims and give a suitable award. 84 The judgments relied upon by the petitioner are inapplicable to the ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 40/49 facts of this case. In the said cases, the final bill was prepared and was signed by the contractor. However, in present case, it is admitted that final bill was never prepared by the petitioner department. Also, no second claim petition has been filed in present case and thus, reliance on AIR 1990 SC 53 by petitioner is misplaced.
Claim No.5 : (Grounds B, D, G, L, M) 85 This claim was for escalation for the work done during the extended period.
86 This claim is dealt with by the Ld. Arbitrator at pages 6 to 11 of the Award, which may kindly be perused.
87 As can be seen, the ld. arbitrator has given cogent and valid reasons for awarding this claim. It may also be appreciated that the ld. arbitrator took into consideration the concerns of the NBCC also and against a claim of Rs.3,15,000/ under this claim, he awarded only Rs.1,67,212/.
88 The stipulated completion date was 25.08.1995. The value of the work ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 41/49 awarded was Rs.38,93,525/. Due to various factors, work could not be completed in time and on 01.01.2000, it was taken over by Navodya Vidyalaya who had entrusted this work of construction of school building and dormitory at Khurai (MP), apart from other works to NBCC. There is a categorical finding by the ld. arbitrator at page 10 of the Award that against extension of 540 days claimed by the claimant, the extension of only 119 days is justified. He has given detailed justification for the delay for 119 days being not attributable to the claimant. On this basis, he came to the conclusion that the work should have been completed by 31.12.1995 (25.08.95 + 119 days). It is settled law that the arbitrator is the master of facts and the court deciding a petition under Section 34 of the Act does not sit as a court of appeal. The finding of fact arrived at by the arbitrator, unless the same is shown to be contrary to material on record, cannot be upset by a court in a proceeding u/S 34 of the Act. The power of the court in a proceeding u/S 34 is very limited. The Ld. arbitrator granted escalation for the work done till 31.12.1995 only. He has not granted any escalation ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 42/49 beyond 31.12.1995. Also, he has not granted any separate escalation for steel. The Award is equitable and justified.
89 There is no finding by the ld. arbitrator that the delay is "solely" attributable to the claimant, as alleged by petitioner in Ground B. The petitioner has mentioning certain lines from the Award out of the context and only those lines which suited him. The petitioner has deliberately not mentioned the relevant observations and findings of the ld. arbitrator and has mentioned the facts in twisted manner. It may be noticed that claim no5 has been partly allowed and not fully. The petitioner has not mentioned the same. The petitioner has heavily relying upon observation of arbitrator that major delay was on the part of the claimant and he had stopped work in September 1997. It may be noted that for this fact, the arbitrator has sufficiently penalized the claimant by rejecting his claim no.10 (for infructuous overhead expenses on account of prolongation of contract) in toto. It is absurd for the petitioner to argue that grant of extension of time by petitioner is precondition for ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 43/49 grant of escalation by arbitrator. There is neither any such clause in the agreement nor there is any law like this.
90 The grant of escalation by the arbitrator for the period beyond stipulated period flows not from any clause of the contract but from the substantive law contained in Section 73 of Indian Contract Act, 1872 which provides for compensation to a party aggrieved from the breach of contract by the other party. Since there was a breach on the part of the respondent as far as delay of 119 days is concerned, the arbitrator has reasonably compensated claimant for that period only. 91 There is nothing wrong in the arbitrator computing the days of delay on the basis of documents produced before him by both the parties. 92 The clause 21.1 referred by the petitioner applies to the grant of escalation by the department. The same has no application to the grant of escalation by the arbitrator. The arbitrator is competent to interpret the terms of the contract. The judgments referred and relied upon by petitioner are clearly distinguishable on ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 44/49 facts.
93 In KN Sathyapalan Vs. State of Kerala - 2006 (4) ArbLR 275, the Hon'ble Supreme Court held that claim for escalation cost can be granted even in the absence of any price escalation clause in the agreement and despite specific prohibition to contrary in the agreement.
COUNTER CLAIM No.2 : (Ground B, H, P) 94 This counter claim raised by petitioner was for liquidated damages. The arbitrator has rejected this counter claim on valid rounds and has given cogent reasons for the same. The arbitrator dealt with this counter claim at pages 1820 of the Award. Under the terms of the contract, the petitioner could levy the LD if the reasons for levying the same existed. It is an admitted case that no LD was levied by the competent authority of petitioner under the contract. Simply writing letters that they reserve the right to levy LD (Liquidated Damages) is not sufficient. The LD has to be levied. If no LD is levied, it amounted to waiver on the part of the petitioner. ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 45/49 Time was set at large by the conduct of the parties and hence the petitioner department lost its right to levy any LD.
95 Apart from that, the department failed to give the requisite notice as contemplated in Section 55 of the Contract Act and on this account also, the petitioner was not entitled to claim any compensation in the form of LD. 96 Moreover, it is settled law that if levy of compensation is in the nature of penalty, the same cannot be levied/recovered from the contractor. In present case, it is amply borne out from the record that the demand of compensation by petitioner at this belated stage is clearly penal in nature and is in terrorem. 97 It is also settled law (Maula Bux Vs. Union of India AIR 1970 SC 1955), Fateh Chand Vs. Balkishan Das AIR 1963 SC 1405), that to be entitled to any liquidated damages, the department has to prove that the delay is on the part of the contractor and that the department has suffered a loss due to delay on the part of the contractor and then the department has to prove the extent of delay and ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 46/49 quantum of loss suffered. There is absolutely no material on record nor it is case of the petitioner department that it has suffered any loss on account of any delay in this work. Thus, the demand of any compensation in the form of LD by the petitioner is totally bad in law.
98 The petitioner has to first establish that it has suffered such damages and then it has to establish that such damages are attributable to the claimant. No such claim is envisaged under the terms of the contract. This frivolous counter claim was rightly rejected by Ld. arbitrator.
99 The judgments referred to and relied upon by petitioner are distinguishable on facts. Our own Hon'ble High Court distinguished the judgment in ONGC Vs. Saw Pipes and held in Indian Oil Corporation Vs. Llyods Steel 2007 (4) ArbLR 84 that LD clause would operate only when actual loss is suffered. In the present case, the petitioner has placed no material to even prima facie show that it has suffered any loss due to delay in work. In the said case, the counter claims of ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 47/49 department were dismissed on the ground that it failed to establish that is suffered any loss due to delay.
INTEREST 100 The argument of petitioner is that clause 29(1) of agreement prohibits grant of interest. However, a reading of said clause shows that it has no application to grant of interest by the arbitrator. The said clause does not and cannot limit the right of arbitrator to grant interest of he finds that legitimate claims and dues of the contractor have been unreasonably withheld by the department as has been held by our own Hon'ble High Court recently. A closer reading of said clause shows that the said clause applies in case of retention of money in this contract against department's claims in some other contract. That is not the case here. Also, the said clause require the department to notify to contractor about retention of money. That is also not the case here.
101 The courts have held that interest is forbearance for money and must ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 48/49 be awarded. See: Executive Engineer Dhenkenal Vs. N.C. Buddhiraj AIR 2001 SC 626 and UOI Vs. Siel Ltd. 2006 (86) DRJ 456 DB.
102 The service of specific notice under Section 3 of Interest Act is not a precondition for award of interest by the arbitrator. In any case, without prejudice to the above, the claimant vide letter dated 20.10.2003 put the respondent to notice that the respondent is liable to pay interest @ 18% p.a. on all delayed payments. The rate of 10% warded by arbitrator is not all exorbitant and courts have upheld this rate in several judgments. It is matter of common knowledge that contractors have to pay to borrow funds at heavy interest for undertaking any work. Rather 10% interest is on the lower side. But claimant did not challenge the same in the hope of getting his payments under the Award early.
103 In Anurodh Construction Vs. DDA 2005 (84) DRJ 314, it was held by the Hon'ble High Court that it was not proper for the court to modify the rate of interest which the arbitrator granted in exercise of discretion vested in him. ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD. Page No. 49/49 104 In view of the settled legal position particularly on the limited scope of Section 34 of the Arbitration and Conciliation Act, this objection petition which has been pending for the last 9 years and because of which the claimant/respondent has been deprived of his original amount for almost 9 years, this objection petition stands dismissed with costs of Rs.50,000/ payable to/recoverable by the claimant/respondent alongwith the original awarded amount with the interest.
File be consigned to Record Room.
ANNOUNCED IN THE OEPN COURT (SUJATA KOHLI)
TODAY i.e. ON 23 SEPTEMBER, 2014
rd
Additional District Judge (West)
THC/Delhi:23.09.2014
ARBT. No. 119/14/05 NBCC Vs. M/s YADAV CONSTRUCTION COMPANY LTD.