Delhi District Court
M/S Jcl Infra Limited vs Union Of India (Ministry Of Railways And ... on 22 March, 2024
IN THE COURT OF MS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
OMP (Comm) No. 131 of 2019
CNR No. DLND01-012307-2019
In the matter of:
M/s JCL Infra Limited,
(Formally known as M/s J. Sons Company Ltd.)
J. Sons House Garh Road, Meerut-250002
Also at: E-341, Mayur Vihar Phase 2,
New Delhi- 110091 ........ Petitioner
Versus
1. Union of India (Ministry of Railways)
Through General Manager,
Northern Railway,
Baroda House, New Delhi -01
2. Chief Engineer (TSP),
Northern Railway,
New Delhi.
3. Deputy Chief Engineer Construction,
Northern Railway, Baroda House,
New Delhi ...... Respondent (s)
Date of institution of suit : 19.07.2019
Judgment reserved on : 20.02.2024
Date of Judgment : 22.03.2024
Appearance : Sh. Faiyaz Hasan, Ld. Counsel for plaintiff.
Sh. V. K. Rai & Ms. Chetna Rai, Ld. Counsel for
defendant.
OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 1 of 34
JUDGMENT
1. This is a petition under Section 34 of Arbitration & Conciliation Act, 1996 (hereinafter referred as "the Act") filed by the petitioner challenging the award dated 02.04.2019 passed by Ld. Sole Arbitrator in matter of arbitration between (claimant) M/s JCL Infra Limited and (respondent) Union of India, representing through Northern Railway Administration by Deputy Chief Engineer / TS and / or Track Supply Officer.
2. Brief facts as averred in the petition are that petitioner is a Limited Company duly incorporated under the provisions of the Companies Act, 1956. The petitioner was previously known as J. Sons Company Limited but pursuant to a change of name under Section 23 of the Companies Act, 1956, it has come to be known as JCL Infra Limited. Sh. Vijay Rajvanshi, Managing Marketing is competent and authorized to file the present petition on behalf of petitioner.
2.1. According to the petitioner, the respondent invited tender for fabrication and supply of fan shaped switches with stock rails and all parts including check rails excluding groover rubber sole plates, insulating liners, elastic rail clips, plates screws, fish plates and fish bolts. The petitioner submitted its offer and it was accepted by the respondent vide Letter of Acceptance No. 211-2308-2012-13 dated 20.08.2013. Purchase Order (PO) No. 50-12-2038-1-50963-36 dated 25.02.2014 was awarded to the OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 2 of 34 petitioner for the supply of the items mentioned in the said Purchase Order (PO) as follows:-
a. Item (i) 10125 mm O/R (Curved) fan Shaped Switches for 1 in 12 T/Out for BG 60 Kg. (UIC) on PSC sleepers to RDSO Drg. o. T-4219 Alt5. As amended up to date complete with stock and all parts including check rails as listed in the drawing but excluding Groover Rubber Sole Plates, Insulating liners, Elastic Rails Clip, Plate Screws, Fish Plates and Fish Bolts 385 sets.
b. Item (ii) 11200 mm O/R (Curved) fan Shaped Switches for 1 in 12 T/Out for BG 60 Kg. (UIC) on PSC sleepers to RDSO Drg. No. T- 5692 Alt1. As amended up to date complete with stock and all parts including check rails as listed in the drawing but excluding Groover Rubber Sole Plates, Insulating Liners, Elastic Rails Clip, Plate Screws, Fish Plates and Fish Bolts 10 sets.
The original delivery period for completing the supply of material against the subject contract for Item No. (i) in the said PO was 10 months and for Item No. (ii) in the said PO was 06 months. The petitioner started work after receiving the said purchase order.
2.2. The petitioner averred that it requested respondent for release of rails and due to delay and unavailability of rails with the respondent, the petitioner also requested to start the work on its own rails on replenishment basis and the provisions for the same was granted by the Concerned Authority. It is averred that after receiving the PO dated 25.02.2014, the petitioner requested to the Railway for releasing RO of rails, however, the Railways consumed 294 days for issuing rails and thereafter, the RITES consumed 51 days for inspection and the Railways also issued the rails from Flash Butt Welding Plant, Meerut Cant. after delay of 151 days. According to the petitioner, the petitioner sent requests OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 3 of 34 to the respondent and RITES from time to time for inspection, however, both delayed the inspection / approval and the total delay on account of RITES for inspection were 496 days and additional 140 days were consumed by Railways in releasing payment after submission of bills. The petitioner further averred that due to this delay, it directly affected the progress of work because the material purchased, labour payment and all over head expenses are dealt by payments only.
2.3. The petitioner further averred that it has while requesting for extension of Delivery Period (DP) vide letter dated 12.12.2015 specifically pointed out that there is a delay on respondent's part and requested respondent to extend the DP without Liquidated Damages (LD) and without denied clause and with PVC as per the original terms and conditions. The petitioner has alleged that there were several circumstances for not supplying the material continuously as per the desired schedule which were duly informed to the respondent and for which,respondent was fully responsible and even otherwise, fully aware of said delays in supply the material continuously is attributable to the respondent only. The petitioner has completed the supply despite delay on the part of respondent. The petitioner has done the work as per the inspection and approvals when the cost of material and labour increased manifold over the said period.OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 4 of 34
2.4. The petitioner averred that there are no reasons of delay, attributable to the petitioner and same is clear from the facts that the time period was being extended by the respondent only and therefore, the action of the respondent of imposing LD is completely unjustifiable and unreasonable. Further, the action of respondent in extending delivery period with full LD is arbitrary and illegal and imposition of liquidated damages of Rs.
4,40,18,417/- is illegal. Thereafter, the petitioner approached to respondent to waive LD imposed pointing out the detailed reason for the delay which were not attributable to the petitioner. As such, the petitioner requested respondent to waive of LD and the respondent has already refunded an amount of Rs. 17,14,390/- accepting that there was a delay on their part. However, the balance amount of Rs. 23,04,027/- is still outstanding as the same has been illegally obtained by the respondent. The respondent has further made short payment towards price variation of claim of the petitioner out of total PVC claim of Rs. 27,59,689/- against the bill, which only amounts to Rs. 24,47,974/- has been paid to the petitioner, therefore, an amount of Rs. 3,11,715/- has been wrongly and illegally withheld by the respondent, which the petitioner is entitled to receive. Aggrieved by this, the petitioner invoked arbitration clause and raised the following claims:
Claim No. 1: Towards balance amount against imposition of arbitrarily and illegal penalty i.e. liquidated damages Rs. 23,04,027/-.
Claim No. 2: Towards short payment of price variation claim against bills of Rs. 3,11,711/-.
Claim No. 3: Towards cost of litigation Rs. 3,00,000/-.OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 5 of 34
Claim No. 4: Interest @ 24% from the date of short payment.
2.5. The Ld. Arbitrator after perusing the pleadings of parties and material on record, passed impugned award dated 02.04.2019 rejecting all the claims of the petitioner.
2.6. Assailing the impugned award, the Ld. Counsel for the petitioner contended that the impugned award is against law, illegal, perverse and against public policy, therefore, liable to be set aside. In the impugned award, the Ld. Arbitrator had mentioned one of the reason for denial of refund of liquidated damages to the petitioner that imposition of liquidated damages was governed as per IRS Conditions as per the PO. It was further observed by Ld. Arbitrator that time and the date is the essence of the contract. It is contended that it is not understood from the record that from where, Ld. Arbitrator has found that time and date of delivery is essence of contract and the liquidated damages is not by way of penalty but the same is recovering as per the agreed liquidated damages and the Ld. Arbitrator held that petitioner cannot claim contrary to the terms of contract. It is contended that Ld. Arbitrator ignored the fact that delay was caused due to non availability of rails and thereafter, delay in the inspection by the RITES. It is next contended that the Ld. Arbitrator merely mentioned that petitioner taken eight extensions for completing the work but extension does not bear any conditions of penalty, therefore, reached to the conclusion that OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 6 of 34 imposition of LD is justified, which is perverse. The Ld. Arbitrator has not given any finding with regard to delay in supply of items as well as delay in payment. He merely observed that petitioner has not furnished the bank guarantee of Rs. 1.35 crores as security and due to that, work was delay. No reason or any evidence for holding the same has been discussed. The impugned award passed by Ld. Arbitrator is not a reasoned award. It is next contended that time was not essence of contract as the respondent themselves caused huge delay in providing rails and later carrying out inspection by RITES, Ld. Counsel pressed that Ld. Arbitrator has committed patent illegality in not considering that no liquidated damages could have been imposed in the present case. The facts of the present case makes it evident that time was not the essence of contract. In case of Welspun Specialty Solutions Limited Vs. Oil & Natural Gas Limited, (2022) 2 SCC 382, the Hon'ble Supreme Court held that in order to examine whether delayed execution of contract entitled to other party to compensation, reliance on contractual condition and conduct of the parties to conclude that existence of extension clause dilutes time being the essence of contract, was in accordance with the rules of contractual interpretation.
2.7. It was further contended that Ld. Arbitrator has completely ignored the well settled law that damages must be proved and proof thereof cannot be dispensed with. It is well settled that a person, who had not suffered any loss or damage OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 7 of 34 cannot be compensated. A party claiming compensation / damages must prove the loss suffered by it. Further, the Ld. Arbitrator committed patent illegality in not considering the ratio decidendi of judgment of Hon'ble Apex Court in M/s Kailash Nath Associates Vs. Delhi Development Authority, (2015) 4 SCC 136, where, Hon'ble Apex Court interpreted the expression "whether or not actual damage or loss is proved to have been caused thereby"
to mean that where it is possible to prove actual damage or loss, such proof is not dispensed with and only in cases, where, damage or loss is difficult or impossible to prove the liquidated amount named in the contract, as a genuine pre-estimate of damage or loss, can be awarded. It is further contended that it is the petitioner, who is aggrieved due to delay on the part of respondent. If there is no loss caused to the party, there is no question of restoration or compensation arrived. The existence of legal injury i.e. sustenance of loss or damage on account of breach is essential for a party to claim compensation. Ld. Counsel argued that even in the case of Fateh Chand v/s Bal Krishan Das (1963 AIR 1405), the Hon'ble Court clarified that aim of awarding compensation is to make good the law for damage that naturally arose in usual course of things or which was so contemplated by the parties at the time of making of contract. It was further contended that the impugned award deserves to be set aside being patent illegality in as much as Ld. Arbitrator rejected the claim of the petitioner without considering that loss was a pre requisite for an award for damages.OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 8 of 34
2.8. It is next contended that the Ld. Arbitrator wrongly and illegally rejected the claim no. 2 of the petitioner and ignored that delay was caused by the respondent and it is because of delay, petitioner is entitled to increase of price as per calculations given before Ld. Arbitrator with Statement of claim. In case of Ssangyong Engineering & Construction Co. Ltd Vs. National Highway Authority of India, (2019) 15 SCC 131, the Hon'ble Apex Court held that a finding based on no evidence at all or an award, which ignores vital evidence in arriving at a decision would be perverse and liable to be set aside on the ground of patent illegality.
3. Per contra, Ld. Counsel for the respondent urged that the subject contract is governed by Northern Railway General Condition of Contract, IRS Condition of Contract as well as terms & conditions therein. Time was the essence of contract. However, the petitioner deliberately did not supply the material within original delivery period and sought various extensions in respect of supply of aforesaid items no. (i) and (ii), which were granted from time to time subject to levy of liquidated damages as per the agreed terms & conditions of the contract, to which, the petitioner never approached during the entire period up to completion of contract and chose to supply the material without any protest. It is argued that entire delay in supply of material is on the part of petitioner, as the PO was placed in respect of item no. (i) on OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 9 of 34 25.02.2014 and the original delivery period was 24.12.2014, but the last lot of material was supplied on 11.06.2016. It is submitted that in this manner, the supply of material was deliberately delayed by one year, five months and eighteen days. Further, original delivery period in respect of Item no. (ii) on 24.08.2014 and the last supply was made on 12.11.2014, in this manner, there was delay of two months and eighteen days. The liquidated damages for an amount of Rs. 34,28,780/- was deducted at the time of passing of bill as per agreed terms and conditions of the contract. The petitioner has represented the respondent vide letter dated 16.06.2016 and requested for waiver of liquidated damages. The respondent, after considering the representation and certain delay on the part of the respondent, refunded 50% of liquidated damage to the tune of Rs. 17,14,390/- to the petitioner. There was actual delay of 269 days and not 496 days as alleged by the petitioner on the part of respondent, which was duly considered at the time of refunding 50% of liquidated damages, deducted by the respondent from the bill of petitioner. It is next submitted that petitioner had claimed Rs. 25,45,760/- on account of PVC, out of which, Rs. 24,47,974/- have been paid after deducting LD of Rs. 97,785/- and there is no infirmity in the impugned award.
3.1. It is further submitted that Clause 3.0 (E) of Tender Document provides that petitioner was supposed to submit bank guarantee for cost of free supply of rails within 14 days from the date of purchase order, which was not submitted by the petitioner OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 10 of 34 as per schedule. The petitioner itself is responsible for delay because the respondent was supposed to issue the rails only against the bank guarantee submitted by the petitioner, which was not submitted in time for appropriate amount.
3.2. Ld. Counsel for respondent argued that Section 74 of Indian Contract Act, 1872 deals with liquidated damages for breach of contract. According to that, when a contract has been broken, if a sum is named in the contract, as amount to be paid, in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party, who has broken the contract, reasonable compensation not exceeding the amount so named, as the case may be, the penalty stipulated for. He further submitted that it is a case of breach of the contract and the respondent is not supposed to do as to whether it has suffered any loss or not, although, it has suffered the same. It is wrong for the petitioner to contend that respondent did not suffer any loss due to non supply of material to the respondent. Ld. Counsel submit that as per Clause 19 of the Contract Agreement, the respondent is within its right to deduct the agreed liquidated damages. Clause 19 of the Contract provided 'Penalty for Delays and Quality'. In the event of contractor's failure to deliver or dispatch the stores within prescribed period / s the purchaser shall be entitled to withhold any payment until the whole of the store has been supplied and to OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 11 of 34 deduct, or recover from the contractor as liquidated damages. It was stipulated in the clause relating to liquidated damages that upper limit for recovery of liquidated damages in supply contract will be 10% of value of delayed supplies irrespective of delays, unless otherwise provided, specifically in the contract. It also provided that Railway shall recover from the contractor as agreed liquidated damages and not by way of penalty, a sum equivalent to 2% of the price of any stores, which the contractor has failed to delivery within the fixed period for delivery in the contract or as extended for each month of part of a month during which the delivery of such stores may be in arrears where delivery thereof is accepted after the expiry of aforesaid period, subject to a maximum of ten percent of value of delays supplied. Reliance is placed upon judgment passed by the Hon'ble Apex Court in Oil & Natural Corporation Limited Vs. Saw Pipes Limited, AIR 2003 SC 2629 to contend that Section 74 of the Indian Contract Act, 1872 is to be read with Section 73 and therefore, in every case of breach of contract, person aggrieved by breach is not required to prove actual loss or damage suffered by him before his claim decreed. Ld. Counsel relied on the judgment ONGC (supra), more particular the following paragraph 73 B (i):
(i) there is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 12 of 34 liquidated damages were genuine pre-estimate of damages;
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vi) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.
(vii) In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract.
3.3. Applying the above principle to the present case, it is contended by Ld. Counsel for the respondent that liquidated damages were deducted by the respondent as per the agreed terms & conditions of the contract cannot be refunded to the petitioner as it is not possible for Indian Railway to prove the loss. The respondent was within its right to deduct LD which is named in the contract. Accordingly, it was deducted which was never opposed by the petitioner during execution of work. It is next contended that there is no infirmity in the impugned award passed by Ld. Arbitrator with regard to the claim of PVC, the petitioner is in the habit of taking contradictory stand because on 05.01.2017, the petitioner submitted the PVC bill of 25,47,707/-, so, it cannot be alleged to the tune of Rs. 27,59,689/- as alleged.
3.4. Ld. Counsel for respondent submitted that it is not a part OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 13 of 34 of jurisdiction of this court under Section 34 of the Act to re- appreciate the evidence. In other words, according to the counsel, the Ld. Arbitrator was sole judge of both quality and quantity of evidence and therefore, this court while exercising jurisdiction under Section 34 of the Act should not interfere with the award because Ld. Arbitrator has come to contrary view had the same evidence been placed before it. Ld. Counsel emphasized that impugned award was a well reasoned award, therefore, no interference was called for by this court.
4. I have heard the arguments advanced by Ld. Counsels for the parties and examined the record as well as arbitral record
5. Present contract relates to supply of material as discussed in preceding paragraphs for a total sum of Rs. 4,38,10,244.15. The original delivery period for completing the supply of the material against the subject contract for item no. (i) and for item no. (ii) was six months. It is a matter of record that petitioner wrote various letters to the respondent time to time for extension of delivery period for the material without liquidated damages without denial clause and with PVC as per original terms & conditions of purchase order (PO). The stand of the petitioner was that time was never the essence of contract; that the respondent has not placed on record anything to suggest that it has suffered any losses and that compensation, if any, would only be given for actual damages or loss suffered. If it has been OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 14 of 34 vehemently argued that proof of actual damages or loss was sine qua non and since, it is not even the case of the respondent that they had suffered any losses due to alleged delay of delivery of material, the Ld. Arbitrator erred in observing that no loss indicated by depot (Railway) has no relevance. On the other hand, it is the case of the respondent that delay in delivery of material was attributable to the petitioner. The extension of delivery period was granted subject to liquidated damages, which were never approached during currency of contract upto completion of work on 11.06.2016. For the very first time on 16.06.2016, the petitioner requested for waiver of liquidated damages alleging therein that the delay in execution of supply was attributable to the respondent on account of issuing the rails and inspection of Rites as well as according approval for extension of delivery period, but this objection was never raised. Further, at the time when petitioner sought extension of time for supply of items, time was extended with levy of LD which would indicate that even at that stage, petitioner was acceptable to pre-liquidated damages. However, on 26.12.2016, 50% of liquidated damage was deducted out of liquidated damages of Rs. 34,28,780/-. It was claimed that extension in delivery period was granted to the petitioner with liquidated damages and knowing well about the consequence thereof, the petitioner proceeded to supply the material without any protest and therefore, the claim has no substance. It is argued that Section 74 of Contract Act, 1872 is to be read along with Section 73 and therefore, in every breach of contract, the person OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 15 of 34 aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The respondent justified reasoning given by the Ld. Arbitrator urging that that the scope of objection under Section 34 of the Act was very limited and confined only to the grounds as specifically stated in Section 34 of the Act and the petitioner has failed to make out any ground either the award was bad or any of the grounds as stipulated under Section 34 of the Act.
6. Perusal of the impugned award reveals that the Ld. Arbitrator in para 3 observed that material should be supplied within 10 months from the date of issuance of purchase order. The progress of supply will be monitored for each drawing as per Clause 13 of Annexure A of Purchase order as under:-
Item (i) 1 + 5 (60%) + 4 (40%) = 10 months Item (ii) 1 + 3 (50%) + 2 (50%) = 6 months Clause 8.0 at page 10 of 53 of tender documents stipulates:
Item (i) 1 + 5 (50%) i.e. upto 24-08-2014 + 4 (50%) i.e. upto 24-12-2014 Item (ii) 1 +3 (50%) i.e. upto 24-06-2014 + 2 (50%) i.e. upto 24-08-2014 Ld. Arbitrator further observed that immediately, on the receipt of purchase order, as per page 31 of 53 of tender condition, contractor should draw and publish schedule of his production programme within ceiling of quantities estimated in the Contract.OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 16 of 34
This was not done and observed that it is one of the main reasons for lack of proper planning, causing delays at various levels. Ld. Arbitrator further with regard to deduction of liquidated, returned its findings in para no. 6 of the impugned award and relied upon Clause 19 (b) of 53 of Tender Conditions i.e. Railway is entitled to withhold / recover agreed liquidated damages, not by way of penalty, a sum equivalent to 2% per month subject to maximum of 10% of value of the delay supplied. The Ld. Arbitrator further observed that this would become leviable for delay of five month and more. No loss indicated by depot has no relevance. The Ld. Arbitrator after calculating the delay, rejected the claim of the petitioner for waiver of entire LD and observed that no further LD waiver is justified. The relevant extract of award is reproduced as under:
As per clause no.19 (b) of 53 of tender conditions, railway is entitled to withhold/recover agreed liquidated damages, not by way of penalty, a sum equivalent to @ 2% per month subject to maximum of ten percent of value of the delayed supplies.
This would become leviable for delay of FIVE (5) months and more. No loss indicated by depot has no relevance. 6.1 Railway statement does not bring out delay in PAYMENTS. Firm's statement of delays also, has no mention for any delay in payment.
Firm has enclosed RITES/RDSO copies of their inspection certificates. There is delay beyond 14 days by : 2 days for lot no: 2, 8 days for lot no:3, 1 day for lot no: , 5 days for lot no:
10. Total =16 days only. Delay in inspection of first four lots of 85 sets supplied within DP= 10 days only.
Lot No. 2 needed two visits, Lot No. 3 also needed two visits. Lot NO. 10 (RITES instalment no. 9) needed three visits. Delay in issue of Rails: Lot No. 1= 11/04/204 -01/04/2014 (request for replenishment)= 10-7= 3 Days.
Lot No. 2 delay= 03/05/2014 - 23/04/2014 =10-7= 3 days. Lot No. 3 delay= 02/04/2014 - 19/06/2014=13-7= 6 days.
OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 17 of 34Lot No. 4 delay= 06/08/2014 - 29/07/2014= 8-7= 1 days. Lot No. 5 delay= 22/11/2014 - 11/11/2014= 11-7=4 days (cumulative= 17 days).
Total on Railway account for supply within DP = 16+17= 33 days Only.
Railway delays are processing time for considering Firm's 4 different requests for DP extensions on 19/09/2014 & 16/12/2017 & 09/11/2015 & 08/03/2016, accepting BG's, considering each request for use of rails on replenishment basis, issue of release letter for issue of rails, issue of rails by BWP, inspection by RITES / RDSO, acceptance / receipt note by Depot and finally payment by accounts Department for each lot / Bill. Claimant has not adjusted these times in their statements. This is not acceptable. Even without these adjustments, claimant in their rejoinder, have stated delay of two months & eighteen days on their part.
Firm failed to supply before 24/12/2014 against rails issued in 5th lot on 11/11/2014. Firm completed full supply on 09- 10/06/2016 after a delay of over 17 months. Railway vide letter dt 26-12-2016 waived 50% LD. Railway has leavied only 5% LD for period for only 75 days.
In view of forgoing, no further LD waival is justified.
7. One of the main challenge to the impugned award by the petitioner is that it is vitiated by patent illegality in as much as the Ld. Arbitrator observed that no further liquidated damage is justified in favour of the petitioner herein, without recording a finding that respondent herein has not suffered any loss or injury as a result of and observing that no loss indicated by depot has no relevance.
8. An arbitral record can be set aside on the ground set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act and if an application for setting aside such award is made by party not later than three months from the date from which the party making such application had received the signed copy of OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 18 of 34 arbitral award or if the request has been under Section 33 of the Act, from the date on which the request has been disposed off by the Arbitral Tribunal. If the court is satisfied that petitioner was prevented by sufficient cause for making the application within the time period of three months, it may entertain the application within further period of 30 days but not thereafter.
9. Section 34 of the Act read as under:-
"34.Application for setting aside arbitral award-
(1)Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2)An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 19 of 34 arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation-II- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
[2 (A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-
appreciation of evidence.
10. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclusion on the same facts. The court cannot reappraise the evidence and it OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 20 of 34 is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. Where the arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in the exercise of the power vested in it.
11. In the case of Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
12. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India but would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 21 of 34 evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse.
13. At this juncture, it is relevant to discuss legal proposition pertaining to liquidated damages. Section 73 and 74 of the Indian Contract Act, reproduced herein:-
73. Compensation for loss or damage caused by breach of contract.-- When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
Compensation for failure to discharge obligation resembling those created by contract.--When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.
Explanation.--In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.
74. Compensation for breach of contract where penalty stipulated for.- When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.
Explanation.--A stipulation for increased interest from the date of default may be a stipulation by way of penalty.
OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 22 of 34Exception.--When any person enters into any bail-bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under the orders of the Central Government or of any State Government, gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
Explanation.--A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.
14. For better understanding of concept of LD, it would be useful to refer that definition of 'Liquidated Damages in the Black's Law Dictionary' and the same is as under:
"An amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party breaches; also If the parties to a contract have agreed on liquidated damages for a breach, whether, it exceeds or falls short of actual damages.
15. The above reflects that LD is nothing but a pre- estimated damage which the parties agreed while making the contract, as likely to arise in case of breach. Section 73 of the Act, 1872 emphasizes award of damages for loss suffered by one party due to breach of contract by other party to the contract. Section 74 of the Act stipulates that in case of breach of a contract, if a sum is made in the contract as the amount to be paid in the case of breach, whether or not actual damage or loss is proved to have been caused, the aggrieved party is entitled to receive from the OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 23 of 34 opposite party, breaches the terms of a Contract, reasonable compensation but not exceeding the amount mentioned in the Contract. The damages are awarded to recompense the aggrieved party. As a necessary corollary, it means that damages are to be compensate the aggrieved party for consequences directly and naturally arising from breach, however, a party cannot be allowed to unjust enrichment under the garb of claiming compensation of breach.
16. The Hon'ble Apex Court in Fateh Chand v/s Balkishan Das, 1963 SCC Online SC 49 observed that Court is empower to award compensation in case of breach to the maximum amount stipulated, so long as the compensation is reasonable. However, vide provisions of Section 74, dispense with proof of actual loss or damage but they do not justify award of compensation when as a consequence of breach, no legal injury results. It was thus held that petitioner has to prove that it has suffered a loss.
17. In case of Kailash Nath Associates v/s Delhi Development Authority & Anr, MANU/SC/0019/2015: (2015) 4 SCC 136, the Supreme Court has referred to Section 74 of the Indian Contract Act, 1872 and has held as under:-
43. On a conspectus of the above authorities, the law on compensation for breach of contract under Section 74 can be stated to be as follows:-
43.1 Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 24 of 34 can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
43.2 Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
43.3 Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
43.4 The Section applies whether a person is a plaintiff or a defendant in a suit.
43.5 The sum spoken of may already be paid or be payable in future.
43.6 The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
43.7 Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.
18. Hon'ble Apex Court in case of Vishal Engineering and Builders v/s Indian Oil Corporation Limited, 2011 SCC Online DEL 5124 observed that if there was absence of any loss OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 25 of 34 whatsoever, an aggrieved party cannot claim that it is entitled to liquidated damages without at least proving a semblance of loss. The relevant paragraphs are reproduced as under:-
13. The question which, thus, arises is whether in view of such a stipulated amount damage are liable to be paid ipso facto without any further proof qua the issue of sufferance of damages or qualification thereof or something more is required to be done.
14. We would begin with a seminal judgment in Fateh Chand Vs. Balkishan Das (1964) 1 SCR 515, where it was held that the jurisdiction of the Court to award compensation in case of breach is unqualified except as to the maximum amount stipulated so long as the compensation is reasonable. This imposes a duty upon the court to award compensation according to the settled principles. The phraseology of Section 74 was held to dispense with the proof of actual loss or damages but it did not justify the award of compensation when in consequence of the breach no legal injury at all has resulted. It was, thus, clearly held that a plaintiff has to prove a loss suffered by him in consequence of the breach of contract committed by the defendant. This legal position laid down by the Constitution Bench of the Supreme Court is good law till date and, thus, any judgment of the Supreme Court of a Bench constituted of lesser number of Judges would, thus, have to be read in the context of the seminal pronouncement.
15. The duty of the court not to enforce the penalty clause but only to award reasonable compensation has been held to be statutorily imposed upon courts by Section 74 of the Contract Act. The court just has to adjudge in every case, reasonable compensation for breach of contract having regard to the conditions which existed on the date of the breach [ref : Fateh Chand case (supra)].
16. In Maula Bux V. Union of India (1969) 2 SCC 554, the forfeiture of security was upheld by the High Court, the amount forfeited being held as not unreasonable under Section 74 of the Contract Act. The Supreme Court set aside the order of the High Court accepting the plea that the loss suffered by the respondent therein was capable of being measured and they could not seek protection under the garb of Section 74 of the Contract Act.
Since the respondent had led no evidence that it had suffered loss, it was held that the amount could not be forfeited.
OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 26 of 3417. The claim for liquidated damages for all practical purposes were held to stand on the same footing as the unliquidated damages in Union of India Vs. Raman Iron Foundry (1974) 2 SCC 231. The claim of unliquidated damages was, thus, held not to give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a court or other adjudicatory authority. The appellant was held not to have any right or authority to appropriate amounts of other pending bills of the respondent towards satisfaction of claim for damages against the respondent. The breach of contract does not go instanti incur any pecuniary obligations, nor does the party complaining of the breach become entitled to a debt due from the other party. The only right which accrues at that moment is that the party aggrieved by the breach of contract has a right to sue for damages. Thus, when damages are assessed, the court in the first place must decide that the defendant is liable and then it proceeds to assess as to what is the damage.
18. It is in the aforesaid context that there are observations in State of Karnataka Vs. Shree Rameshwara Rice Mills (1987) 2 SCC 160, that there has to be an admission of the breach of condition and thereafter only the issue of quantification of damages would arise.
19. Having set out the aforesaid judgements, we consider it appropriate at this stage to refer to the Privy Council pronouncement in Bhai Panna Sing & Ors. Vs. Firm Bhai Arjan Singh - Bhajan Singh - Surjan Singh & Anr. 117 Indian Cases 485 PC, where while dealing with the issue of damages, Atkin, J. observed that the effect of Section 74 of the Contract Act is to disentitle the plaintiffs to recover simpliciter a sum by way of liquidated damages and that the plaintiff must first prove the damages they have suffered.
20. In Indian Oil Corporation Vs. Lloyds Steel Industries Ltd. 2007 (4) Arb. LR 84 (Delhi), the Indian Oil Corporation (for short 'IOC') invoked a clause in the GCC for liquidated damages and recovered the maximum damages possible even though the work was completed to the satisfaction of the IOC but there was delay in the execution of the work. This recovery was resisted by the contractor on the ground that there was no damage payable. The dispute was resolved in the arbitration by an award which held that there was absence of justification in invoking the clause of damages. It is at the stage of consideration of objections that the learned Single Judge, A.K. Sikri, J. (as he OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 27 of 34 then was) of this Court held that it would be preposterous on the part of the petitioner to submit that it should get the liquidated damages stipulated in the contract even when no loss is suffered. Time was essence of the contract providing for 16 months for completion of the work. This period was fixed keeping in view that the terminal at Jodhpur would be ready by that time and the pipeline would reache the said terminal. Thus, while granting extensions, IOC realized that the terminal was not complete and, thus, it could not be put to any use. The period of six (6) months was, thus, held to have lost its significance inasmuch as setting up of Jodhpur Terminal was part of an integrated project and the Terminal could not be put to commercial use before August, 1996, while the contractor had successfully completed the work well before that date. It would be useful to reproduce the observations made in paragraphs 41 & 42, which read as under:
―41. It is clear from the above that Section 74 does not confer a special benefit upon any party, like the petitioner in this case. In a particular case where there is a clause of liquidated damages the Court will award to the party aggrieved only reasonable compensation which would not exceed an amount of liquidated damages stipulated in the contract. It would not, however, follow there from that even when no loss is suffered, the amount stipulated as liquidated damages is to be awarded. Such a clause would operate when loss is suffered but it may normally be difficult to estimate the damages and, therefore, the genesis of providing such a clause is that the damages are pre- estimated. Thus, discretion of the Court in the matter of reducing the amount of damages agreed upon is left unqualified by any specific limitation. The guiding principle is 'reasonable compensation'. In order to see what would be the reasonable compensation in a given case, the Court can adjudge the said compensation in that case. For this purpose, as held in Fateh Chand (supra) it is the duty of the Court to award compensation according to settled principles. Settled principles warrant not to award a compensation where no loss is suffered, as one cannot compensate a person who has not suffered any loss or damage. There may be cases where the actual loss or damage is incapable of proof; facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damage. Section 74 exempts him from such responsibility and enables him to claim compensation inspire of his failure to prove the actual extent of the loss or damage, provided the basic requirement for award of 'compensation', viz. the fact that he has suffered some loss or damage is established. The proof of this basic requirement is not dispensed with by Section 74. That the party complaining of breach of contract and claiming compensation is entitled to OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 28 of 34 succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from Sections 73 and 74. Section 74 is only supplementary to Section 73, and it does not make any departure from the principle behind Section 73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of Section 73. The words in Section 74 'Whether or not actual damage or loss is proved to have been caused thereby' have been employed to underscore the departure deliberately made by Indian legislature from the complicated principles of English Common Law, and also to emphasize that reasonable compensation can be granted even in a case where extent of actual loss or damage is incapable of proof or not proved. That is why Section 74 deliberately states that what is to be awarded is reasonable compensation. In a case when the party complaining of breach of the contract has not suffered legal injury in the sense of sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy, or make amends. Therefore, he will not be entitled to compensation See State of Kerala v. United Shippers and Dredgers Ltd. AIR1982Ker281 . Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal injury has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed.
42. It is too preposterous on the part of the petitioner to submit that it should get the liquidated damages stipulated in the contract even when no loss is suffered. (emphasis supplied)
21. The aforesaid judgement, thus, if read in letter and spirit follows the principles laid down in Fateh Chand case (supra).
22. Now turning to some of the latter judgements of the Supreme Court including the judgement in ONGC Vs. Saw Pipes Ltd. case (supra) relied upon by the learned single Judge. All that was said was that the court was competent to award a reasonable compensation in case of breach even if no actual OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 29 of 34 damage is proved to have suffered in consequence of the breach of contract as in some contracts it would be impossible for the court to assess compensation arising from the breach. If the compensation contemplated is not by way of penalty or unreasonable the court can award the sum if it is a genuine pre- estimate of the loss to be suffered by a party as a measurement of reasonable compensation.
23. In our view these observations have to be read in the context of the pronouncement of the Constitution Bench pronouncement in Fateh Chand case (supra). If it is so, all that it implies is that where it is impossible to assess the compensation arising from breach and that factor is coupled with the parties having agreed to a pre-determined compensation amount not by way of penalty or unreasonable compensation then that amount can be awarded as a genuine pre- estimate of the loss suffered by a party. It cannot be read to mean that even if no loss whatsoever is caused to party it can still recover amounts merely by reason of the opposite party being in breach.
24. The importance of the aforesaid principles has also been emphasized in BSNL & Anr. Vs. Motorola India Pvt. Ltd. (2009) 2 SCC 337, while dealing with the two clauses in the contract - clause 15 which held that the supplier was liable to pay liquidated damages and clause 16 dealing with quantification of damages. The quantification of limited damages came in the category of excepted matters but it was held that for levy of liquidated damages under Clause 16 there has to be a delay in the first place. Once there was a dispute about this fact, the appointment of the arbitrator was held not unwarranted.
25. In the end we may refer to the judgement of the Supreme Court in Bharat Sanchar Nigam Limited Vs. Reliance Communication Limited (2011) 1 SCC 394. It was held that whether a provision is to be treated as a penalty in matter of construction is to be resolved by asking whether at the time the contract was entered into the predominant contractual function was to deter a party from breaking a contract or to compensate the innocent party for the breach. Thus, the question to be asked is whether the alleged penalty clause can pass muster as a genuine pre-estimate of loss. Liquidated damages were observed to serve the usual purpose of avoiding litigation and permitting commercial certainty. Thus, liquidated damages should not be categorized as penalties.
26. We have, thus, no hesitation in concluding that if there was absence of any loss whatsoever, an aggrieved party cannot claim OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 30 of 34 that it is still entitled to liquidated damages without, at least, proving a semblance of loss.
19. In a recent judgment of Welspun Specialty Solutions Limited & Ors v/s Oil and Natural Gas Corporation Ltd & Ors, MANU/SC/1059/2021, Hon'ble Apex Court considered the issue of interface between liquidated damages and time as essence stipulated i.e. Section 55 with Section 73 and 74 of the Contact Act, 1872. Hon'ble Apex Court observed that it was undisputed that ONGC had waived liquidated damages on numerous earlier occasions while granting extension or completion of obligations and observed in para 35 as under:-
35. This Court cannot interfere with this award, as the award is a plausible view for the following reasons:
a. The Arbitral Tribunal's interpretation of contractual clauses having extension procedure and imposition of liquidated damages, are good indicators that 'time was not the essence of the contract.
b. The Arbitral Tribunal's view to impose damages accrued on actual loss basis could be sustained in view of the waiver of liquidated damages and absence of precise language which allows for reimposition of liquidated damages. Such imposition is in line with the 2nd para of Section 55 of the Indian Contract Act.
c. The Arbitral Tribunal was correct in distinguishing the dictum of this Court in Saw Pipes (supra), which validated imposition of liquidated damages in a similar contract.
d. The High Court and District Court strayed beyond the limitation Under Section 34 and 37 of the Arbitration Act.
e. Other aspects of the award also do not require interference of this Court, in view of the law laid down in the Project Director, OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 31 of 34 National Highways No. 45E and 220, National Highways Authority of India v. M. Hakeem.
20. Now, coming to the factual matrix in so far as the present case is concerned, applying the principle elucidated in the aforesaid judgment, the findings recorded by the Ld. Arbitrator that no loss indicated by depot is no relevance is not sustainable. There is no finding given by Ld. Arbitrator that respondent suffered any loss/damage rather, as mentioned above, has merely stated that any loss indicated by depot has no relevance. Infact, it is an admitted position that parties led no evidence before Arbitral Tribunal or any proceedings and further, there is absence of pleadings that railways had suffered damages or incurred loss on account of delay in delivery of items. There is no evidence or material on record to show that any loss has been suffered by the respondent due to delayed supply of material. Since the elicited clause 19 in the Contract contain provisions for 'Penalty for Delay and Quality' that itself dilute the time being essence and render the time-conditioned stipulated as nugatory. The damages or loss caused to the respondent is sine qua non / pre-requisite for the award of reasonable compensation for damage or loss caused due to breach of contract. The impugned award of Ld. Arbitrator in assuming that relevancy of loss is of no significance suffers with patent illegality and thus, liable to be set aside.
21. To evaluate second issue, it is to be seen whether Ld. OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 32 of 34 Arbitrator while returning the finding on this issue passed in well reasoned order. Section 31 (3) of the Act provides that one of the essential requirements to be met while making an award impugns that reason for passing of award must be stated. The recording of reasons and findings thereto is also a testament to the fact that concerned Arbitrator has applied his mind while passing the award and deciding claims in favour of either or both the parties. The relevant portion of award whereby the claim of short payment of price variation was decided in favour of respondent is reproduced here under:-
8. Short payment of price variation claim : Firm has stated that out of total PVC claim of Rs. 27,59,689/-, they have ben paid Rs. 24,47,974/- and have not been paid Rs. 3,11,715/-.
Railway has stated that claimant has claimed Rs. 25,45,760/- on PVC account, on 05/01/2017 and paid Rs. 24,47,974/- after deducting LD of Rs. 97,785/-.
Firm has submitted copies of their Bills of Escalation dated 28/02/2017 against original invoices dt 21/04/2014 for 25 sets, dt. 15/06/14 for 25 sets, dt 17/07/2014 for 25 sets, dt 09/11/2014 for 10 sets and dt 08/05/2015 to dt 10/06/2016 for 310 sets.
Firm has considered indices of January 2014 (25 sets), February 2014 (25 sets), March 2014 (25 sets), July 2014 (10 sets) and December 2014 for 310 sets.
For supply of 193 sets - Item-i, indices for months upto May 2014 should have been considered and for 192 sets indices upto September 2014.
For Item-ii, 5 sets upto March 2014 and for balance 5 sets upto May 2014.
Railway has protested against revision of Bills, when payment against Bills dt 05/01/2014 has been paid and stated that this claim for short payment is not maintainable. Firm has not worked out price variation claim amounts considering indices for correct months and does not exclude difference of excise duty, difference of sales tax and leaviable LD.
As such, claim against short payment of price variation amount can not be allowed.
OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 33 of 3422. A perusal of above reveals that the above observation is mere reiterating the claim of the parties and making the aforesaid summary findings while accepting the contention of the respondent. The above finding does not reveal appreciation of evidence or material on record. It is no doubt that Ld. Arbitrator need not have given elaborate, comprehensive or extensive award/finding on the claim but the mere recording of reasons for the findings made was an indispensable requirement/action. Accordingly, this court finds that no sufficient reason has been given by the Ld. Arbitrator for declining this claim of petitioner.
23. In the light of facts and the circumstances and the judgment cited above, in considered opinion of this court, the impugned award suffers from patent illegality and not reasoned award.
24. Accordingly, in view of the discussions, as adumbrated above, the petition under Section 34 of the Arbitration and Conciliation Act is hereby allowed. The impugned award dated 02.04.2019 is hereby set aside.
25. Parties are left to bear their own costs.
26. File be consigned to record room.
Pronounced in the open Court (VINEETA GOYAL) on 22nd March, 2024. District Judge (Commercial-03) Patiala House, New Delhi OMP (Comm) No. 131/19 JCL Infra Ltd Vs. Union of India Page 34 of 34