Madhya Pradesh High Court
M/S Nandsons Construction Company vs M.P. State Tourism Development Corp on 16 July, 2013
Author: A. K. Sharma
Bench: A. K. Sharma
1
HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT
AT JABALPUR
C.R. No.823/1998
M/s Nandsons Construction Company
Vs.
M.P. State Tourism Development & another
Present: Hon'ble Shri Rajendra Menon, J. &
Hon'ble Shri A. K. Sharma, J.
______________________________________________________
Shri V. R. Rao, learned Senior Counsel with Shri Kapil
Jain, for the petitioner.
Shri Mrigendra Singh, learned counsel with Shri Amit
Khatri, for the respondents.
__________________________________________________
ORDER
( 1672013 ) Challenge in this revision petition under Section 19 of the M.P. Madhyastham Adhikaran Adhiniyam, 1983 is made to an award dated 30 th December 1997 passed by the M.P. Arbitration Tribunal, Bhopal in Reference Case No.51/1992. Against a claim made by the applicant for payment of a sum of Rs.17,50,545/- along with cost and interest only a sum of Rs.49,499/- and interest to the tune of Rs.1,07,541/- has been awarded and therefore, this revision petition seeking enhancement of the award.
2. Facts in brief goes to show that the petitioner 2 Company was awarded a contract by the M.P. State Tourism Development Corporation. Originally the contract was for construction of Tourist Reception Centre building, near Youth Hostel, Bhopal but later on, during the pendency of the work the work was converted for constructing a hotel now known as "Hotel Palash", Bhopal. The notice inviting tender for the work in question was issued on 21.1.1984. The tenders were received on 21.2.1984 and after due scrutiny tender of the petitioner was accepted and the work was to commence on 14.3.84. The period for completion of work was 12 months including rainy season and accordingly, the work should have been completed on 14.3.85, however, the work was not completed within the stipulated period. It was completed after a delay of more than 3 1/2 years and actual date of completion of work was 13.9.1988. The total value of the contract was 37,12,500/-. It is an admitted position that as there was change with regard to the nature of the work, substantial changes were brought about with regard to the concept of work itself during the period the construction was in progress. Due to all these, it was the case of the petitioner that the delay of more than 42 months in conclusion of the contract was occasioned as the following reasons were indicated :-
a) Delay in planning the lay out. b) Delay in shifting of the existing sewage line/ pipe line
by the Municipal Corporation/ P.H.E. Department at the site of the work.
c) Non supply of drawings in time through out the period of construction.
3d) Delay in payment of running bills and
e) Increase in the quantum of work and the extra items ordered to be executed.
3. In view of these the petitioner claimed various amounts mainly on three counts. The first claim was for a sum of Rs.13,69,743/- towards infructuous overheads and loss of profits on account of delay in completion of the work. The second claim made was for a sum of Rs.2,79,228/- being the escalation cost due to delay of 42 months and the third was claim for ante-light interest amounting to Rs.1,01,574/-. As indicated herein above, based on the evidence and material that came on record, the entire claim pertaining to escalation was rejected but with regard to claim No.1 a sum of Rs.49,499/- has been awarded and with regard to claim No.3 pertaining to interest on this amount of Rs.49,499/- interest of Rs.58,042/-, ante-light interest at the rate of 12% w.e.f. 29.5.1992 i.e. the date of filing of the application before the Tribunal till date of the award and future interest have been awarded at the rate of 18%.
4. Challenging the award and seeking enhancement of the compensation granted, Shri V. R. Rao, learned Senior Counsel invited our attention to the findings recorded in the award dated 30 th December 1997 and canvassed his contention mainly on three counts.
5. His first contention was that claim for infructuous overheads and loss of profits has been assessed in a totally perverse and arbitrary manner, in as much as even though there was a delay of 42 months in conclusion of the contract 4 and as this delay was occasioned due to fault of the department only in the matter of changing the entire concept of building i.e. from Reception Centre to hotel and delay in giving lay out, shifting existing sewage line etc. and supplying of drawing but the Tribunal in an arbitrary manner, while discussing the delay has held the delay as attributable to the department to be only of month and the amount of infructuous overheads and loss of profits is calculated for this period of one month only. It is said that the delay of one month calculated by the Tribunal is totally arbitrary, uncalled for and based on consideration which cannot be approved. He invited our attention to the findings recorded by the Tribunal in para 2 and 3 of the award, the documents available from exhibit P/43 to P/63 to say that the delay of one month calculated is arbitrary and it needs to be proportionately enhanced. His second ground of contention was that in denying the escalation cost, the Tribunal has committed grave error and therefore, the entire amount of escalation claimed by the petitioner should have been granted. In support of his contention that if delay is occasioned by the department, a Contractor is entitled to escalation, he invites our attention to a judgment of the Supreme Court in the case of P. M Paul Vs. Union of India - 1989 Supp(1) SCC 368, K. N. Sathyapalan (Dead) by L.Rs. Vs. State of Kerala and another - 2007 Arb. W.L.J. 1 (SC) and a Division Bench of this Court in the case of State of M.P. Vs. Bharat Construction Co. - 2008(2) MPLJ 295. He submits that as delay is attributed to the department, the entire claim for escalation should have been allowed. Finally it was argued by 5 him that as there is delay on the part of the department, interest claimed should be granted for the loss caused to the petitioner as the money was not available with the petitioner. Accordingly, emphasizing that an arbitrary and perverse finding has been recorded by the Tribunal, Shri V. R. Rao, learned Senior Counsel prays for enhancement of the award.
6. Shri Mrigendra Singh, learned counsel for the respondents assisted by Shri Amit Khatri, refuted the aforesaid contention and submitted that even though the originally contemplated Tourist Reception Centre was changed to a Hotel but there was not much change in the concept in its totality. Only 6 rooms and certain additions were to be made and the petitioner having willingly accepted the same without any objection and as the petitioner has been adequately compensated by payment for extra items at appropriate rate to its satisfaction, there is no cause for loss to the petitioner on this count. It was emphasized by learned counsel for the respondents that the drawings were already available. There was no delay in supplying the drawings or the lay out plan. As far as shifting of the existing sewage line/ pipe line was concerned, even though it did take some time as held by the Tribunal in the award but as during the said period petitioner could perform work below the plinth and as there is no period of idleness on this count no claim is sustainable now. As far as escalation is concerned, it is argued by the learned counsel that in the absence of any agreement or clause being available for payment of escalation, no escalation can be awarded as the agreement does not contemplate for any escalation to be paid. Finally, it was 6 argued by learned counsel for the respondents that once an award is passed in a proceeding held by the M.P. State Arbitration Tribunal under the M.P. Madhyastham Adhikaran Adhiniyam, 1983, the scope of interference by this Court in a revision petition under Section 19 is very limited and until and unless patent illegality is found to be in existence, interference cannot be made. Accordingly, learned counsel for the respondents pray for dismissal of this application.
7. We have heard learned counsel for the parties at length and perused the record. It is a fact that initially the contract was awarded for the purpose of constructing a Tourist Reception Centre and subsequently it was converted into a hotel. However, the Tribunal has dealt with this aspect of the matter and it has been found that petitioner willingly accepted the change and the work and he did not make any objection and carried out the work as per these changes. However, the Tribunal did find that there was a delay of 42 months in completion of the work and while adjudicating the claim for infructuous overheads and loss of profits on this count it is held that the delay on the part of the department on this count is fixed at only one month and the compensation calculated. In doing so, we are of the considered view that a perverse and illegal finding has been recorded by the Tribunal, this finding attributing only one month's delay on the part of the department is based on ipse dixit of the Tribunal. It is not supported by any cogent evidence and material and as it is without analyzing the evidence available on record properly we find it to be unacceptable and therefore, proceed to assess the evidence available on this count and find out as to how the 7 delay has occasioned and to whom it is attributable and to what extent.
8. Admittedly, the contract was awarded on 14.3.1984 and the period of 12 months was fixed for completion of the contract. This period came to an end on 14.3.1985 and in fact, the contract was concluded on 13.9.88. There is a delay of 3 1/2 years (42 months). The question is as to how and why this delay arose and who is attributable for this delay? If the documents and material available on record particularly, the deposition statement of petitioner's witness P.W.1 and respondents' witness D.W.1 are taken note of and if the documents available are scanned meticulously, it would be seen that the delay had occasioned for the following reasons :-
a) Due to change of the entire concept of the contract from construction of Tourist Reception Centre to a Hotel.
b) There was delay in preparation of the drawings and map.
c) Delay in shifting of the existing sewage line and pipe line, and
d) Increase in the quantum of work due to change of the contract requiring special type of skill and expertise.
From the statements of the witnesses available on the record and the documents, it is seen that certain drawings and maps were produced. Even though in the award these drawings and maps are marked as Exhibit P/43 to P/63 and it is indicated that the drawings were available in the year 1984 but in para 2 of the award itself after analyzing the statements of witnesses the Tribunal has found that the drawings Exhibit P/43 to P/63 8 bears the dates 18.9.84 to 23.7.86. Thereafter, it is a fact that for the purpose of shifting of the existing sewage line and the pipe lines about 8 to 9 months time took which is indicated by the Tribunal. Inspite of the fact that the maps were made finally available on 23.7.1986 as noted by the Tribunal, in a very casual manner without any basis the Tribunal assesses the delay attributable to the department as only one month. We see no justification or logic behind the same. Even if it is assumed that some part of the delay is attributable to the Contractor himself but the department cannot be exonerated of its liability for the delay that has occasioned in conclusion of the work. As indicated herein above, we are unable to approve the delay of one month assessed by the Tribunal. We, therefore, propose to assess the actual period of delay even though not accurate but as far as possible based on material evidence that came on record. We have gone through the material available in the original records and if the findings recorded by the Tribunal in its totality is accepted, it is clear that the work was completed on 13.9.88 instead of on 14.3.85 and the delay is of 42 months. Admittedly, the evidence available on record and the findings recorded by the Tribunal in para 2 of the award goes to show that the drawings and the evidence produced before the Tribunal from Exhibit P/43 to P/ 63 goes to show that they are dated from 18.9.84 to 23.7.86. That being so, a conclusion can be drawn that the last drawing was supplied by the department only on 23.7.86 and if that be so, there is a delay of more than 17 months on the part of the department in as much as against the completion date of 14.3.85 the last drawing having a bearing on the work is given 9 only on 23.7.86. That being so, this delay of 17 months is established from the evidence available on record. That apart, even though D.W.1 in his statement says that the drawings were available in the year 1984, the Tribunal itself in para 2 of the award submits and hold that deposition of D.W.1 in this regard is contradicted by the drawings available on record escpecially Exhibit P/53 to P/58 and this drawing shows that they are from 18.9.84 to 23.7.86. That being so, we have to take a reasonable decision based on the evidence available and if the drawing is shown to have supplied after delay of 17 months, after attributing some delay on the part of the Contractor, we can safely say that there was a delay of more than at least one year in supplying the drawing to the department. A reasonable finding to that effect can be recorded based on the evidence that has came on record. Even though there is not much evidence available on record to exactly assess the delay of 42 months but apart from the aforesaid delay of 17 months a delay of 8 months is attributable towards the period spent by Public Health Engineering Department in shifting the existing sewage line and water supply line. Accordingly, we can safely arrive at a conclusion that there has been a delay of about one year if not more in all on the part of the department on various counts as indicated herein above and therefore, the calculation of delay attributable to the department as one month by the Tribunal is held to be a perverse finding and we arrive at a conclusion that the delay attributable to the department has to be fixed as 12 months instead of one month and this conclusion is derived by us by giving due weightage to the documents and evidence 10 available on record which we have discussed herein above. Accordingly, if the delay is assessed at 12 months and if for a delay of one month towards infructuous overheads and loss of profits, a sum of Rs.49,499/- is awarded then for the delay of 12 months it would come as Rs.49,499 x 12 = Rs.5,93,988/- and therefore, on this count the award of compensation has to be enhanced from Rs.49,499/- to (Rs.5,93,988/- - Rs.49,499/-)= Rs.5,44,489/-. To that extent the claim made by the petitioner on ground No.1 has to be allowed.
9. As far as escalation cost is concerned, even though in the judgment rendered in the case of K. N. Sathyapalan (supra) relied upon by Shri V. R. Rao, learned Senior Counsel, it is held by the Supreme Court that if there is delay on the part of the department in conclusion of the Contract then escalation can be allowed and the same principle is followed in the case of Bharat Construction Co. (supra) by this Court but the law on the question has been discussed by the Supreme Court in the case of State of Orissa Vs. Sudhakar Das (Dead ) by L.Rs. - (2000)3 SCC page 27. The judgment rendered in the case of K. N. Sathyapalan (supra) is by a Division Bench of two Judges wherein the judgment in the case of Sudhakar Das (supra) is by a larger Bench consisting of three Judges and in the subsequent judgment in the case of K. N. Sathyapalan (supra) the decision of larger Bench in the case of Sudhakar Das (supra) has not been considered. Once that is the legal position and in view of law precedent and the principle laid down by the Full Bench of this Court in the case of Jabalpur Bus Operators Association Vs. State of M.P. - 2003(1) 11 MPHT 226 the judgment of a larger Bench has to be followed and therefore, as held by the Supreme Court in the case of Sudhakar Das (supra) when the arbitration agreement does not contain an escalation clause, no escalation can be granted. In this regard a perusal of the judgment rendered in the case of Sudhakar Das (supra) would go to show that three questions were framed by the Supreme Court for consideration and question No.1 framed was "Whether the arbitrator could have granted an award for escalation in favour of the Contractor"? The question is answered in para 2 in following manner :-
"2. It is not disputed that the arbitration agreement contained no escalation clause. In the absence of any escalation clause, an Arbitrator cannot assume any Jurisdiction to award any amount towards escalation. That part of the Award which grants escalation charges is clearly not sustainable and suffers from a patent error. The decree, insofar, as the award of escalation charges is concerned, cannot, therefore, be sustained."
10. Once a larger Bench of the Supreme Court has laid down the aforesaid principle, we see no reason or error in the order passed by the Tribunal rejecting the claim for escalation as it is an admitted position that in the agreement in question, there is no escalation clause and therefore, the judgment relied upon by Shri V. R. Rao, learned Senior Counsel cannot be applied in the present case. That apart, in the case of P. M. Paul (supra) which is again by two Hon'ble 12 Judges of the Supreme Court except for saying that escalation can be granted if there is delay on the part of the department, no legal principle is discussed or laid down and as already held when a Larger Bench consisting of three Judges Bench has laid down the principle in the case of Sudhakar Das (supra), we see no reason to deviate from the said principle. Accordingly, as far as ground No.2 with regard to denial for escalation cost is concerned, we see no reason to interfere into the award.
11. Finally, as far as award of interest is concerned, the Tribunal has found that there has been a delay of about two years in settlement of the final bills and after giving a period of six months as a period required for settlement of the final bill, 12 % interest for delay of 18 months has been granted. This is a reasonable award for grant of interest and we see no reason to interfere into the same.
12. Accordingly, this revision petition is allowed in part. The claim of the petitioner towards infructuous overheads and loss of profits which is assessed at Rs.49,499/- is enhanced to Rs.5,93,988/- and the difference amounting to Rs.5,44,489/- be paid. The enhanced amount of compensation awarded by this order shall carry interest at the rate of 12% per annum from the date of filing of application before the Tribunal i.e. 29.5.92 till today i.e. the date of the order and if not paid within a period of three months from the date of receipt of certified copy of this order, the enhanced amount shall carry further interest of 12% after the period of three months till actual payment. That apart, cost as directed by the 13 Tribunal shall also be paid by the respondents. Counsel fee of Rs.7500/- if certified.
13. With the aforesaid modification to the award passed by the Tribunal, this Civil Revision stands allowed in part and is disposed of.
(Rajendra Menon) (A. K. Sharma)
Judge Judge
mrs.mishra