Bangalore District Court
The State Project Director vs M/S Bsr Infratech India Ltd on 18 September, 2024
KABC170006422024
IN THE COURT OF LXXXIV ADDL. CITY CIVIL AND
SESSIONS JUDGE (CCH-85) (COMMERCIAL COURT),
BENGALURU
DATED THIS THE 18th DAY OF SEPTEMBER 2024
PRESENT
SRI.RAMAKANT CHAVAN,
B.Com., LL.B.(Spl)
LXXXIV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.48/2024
PETITIONER:
The State Project Director,
Rashtriya Madhyamika Shikshana Abhiyana
New Public Annex Building,
N.T.Road, K.R.Circle,
Bengaluru - 560 001
(By Sri.G.B.Sharath Kumar, Adv.)
AND
RESPONDENTS:
1. M/s BSR Infratech India Ltd.,
No.851, D Block,
15th Cross, Sahakaranagar,
Bengaluru - 560 092
Rep. by its Director
Sri. J. Jagapathi Choudhary
(By Sri.Zulfikir Kumar Shafi, Adv.)
2 Com.A.P.No.48/2024
2. Sri. Justice K. N. Keshavanarayana
Sole Arbitrator,
Arbitration and Conciliation Centre,
Bengaluru (Domestic & International)
Kanija Bhavana, Race Course Road,
Bengaluru - 560 001
Date of Institution 01.03.2024
Nature of the Petition For recovery of money
Date on which judgment 18.09.2024
pronounced
Total Duration Years Months Days
00 06 17
LXXXIV Addl. City Civil & Sessions Judge
(CCH-85) Commercial Court, Bengaluru
JUDGMENT
This petition is filed U/Sec.34 of the Arbitration and Conciliation Act for the following reliefs:
(a) Call for record in A.C.No.103/2021 on the file of Arbitral Tribunal comprising of Sole Arbitrator Sri. Justice K.N.Keshavanarayana, Arbitration and Conciliation Centre, Bengaluru;
(b) Set aside the award dated 10.11.2023 passed in A.C.No.103/2022 on the file of Arbitral Tribunal comprising of Sole Arbitrator;
(c) To grant cost of the proceedings.3 Com.A.P.No.48/2024
2. The brief facts leading to the case are as follows:-
That the petitioner is Rashtriya Madhyamika Shikshana Adhiyana is centrally sponsored scheme started in the year 2009-10 under the Department of School Education. Under this RMSA scheme in the year 2024 civil works under 77 packages were taken up in Karnataka between 2009 and 2015 for construction of the New Govt. School Buildings, upgradation and strengthening works, construction of Adharsha Vidyalayas (Model Schools), Girls Hostel at the cost of Rs.1645.7 Crores.
In this regard the State Govt. invited tenders on 24.09.2012 for construction of model schools and upgrading and strengthening Govt. High Schools in 30 Districts of Karnataka State. This tender was invited on package basis for total number of 52 packages through e-procurement portal. The respondent No.1 was the successful bidder for construction of Adarsh Vidyalayas at various places of Chamarajanagara, Chikkaballapura, Kolar and Bellary District under the package A-02.
It is further pleaded that the petitioner and the respondent entered into Construction Agreement on 04.06.2013 consisting of General Conditions of Contract and also special conditions. The respondent commenced the work and completed the same with certain delay and defects, while raising the bills towards the said works, the respondent raised bill for the amounts under the head of Price Adjustment Clause and the same came to be cleared. After receiving the entire payments, the respondent alleged that, the 4 Com.A.P.No.48/2024 petitioner caused delay at various stages of the execution of work and it resulted in the loss to him, he raised a dispute in A.C.No.103/2021 before the learned Arbitrator claiming a sum of Rs.80,03,19,726/- under various heads. The petitioner appeared in the said proceedings and filed its statement of objections. Evidence has been recorded and documents have been produced before the learned Arbitrator.
It is further pleaded that, the learned Arbitrator being misled by the innuendos of the respondent, failing to appreciate the facts and circumstances of the case, pleadings as well as established principles of law erroneously allowed the claim petition in part and thereby directed the petitioner herein to pay a sum of Rs.2,32,55,404/- towards unproductive overhead charges and a sum of Rs.1,31,78,060/- towards loss of expected profit and a sum of Rs.2.00 lakhs cost of litigation along with future interest at the rate of 9% p.a..
3. Being aggrieved by the same, the applicant has filed this petition on the following grounds:
The learned Arbitrator has erred in passing the award, he has not looked into the pleadings and the evidence of the parties on record. He has also erred in awarding a sum of Rs.2,32,55,404/- towards unproductive overhead charges and the respondent had claimed the said amount. The learned Arbitrator has also erred in awarding an amount of Rs.56,37,903/- towards additional overhead charges. He has strayed into arena of assumption and presumption and awarded the said amount.5 Com.A.P.No.48/2024
The learned Arbitrator erred in coming to the conclusion that the delay in completion of work was entirely attributable to the petitioner. The respondent claimed that there was a delay in completion of the work was on account of various reasons. Some of the reasons narrated by the respondent are that, there was non availability of water, no power source, scarcity of sand, increase in material costs etc. These instances cannot be attributed to the petitioner. Even as per general conditions of contract, the respondent who had to arrange water, power, sand and other materials. The learned Arbitrator has ignored these facts and passed the award.
The learned Arbitrator has erred in awarding a sum of Rs.1,31,78,060/- towards loss of expected profit. The respondent had claimed a sum of Rs.2,32,55,404/- towards loss of expected profit. The Arbitrator having awarded the amount towards overhead charges could not have awarded any money towards loss of profit. The Arbitrator while appreciating the materials on record has come to a clear conclusion that the respondent had made averments in the claim statement in support of these claims.
It is further stated that the learned Arbitrator had erred in coming to the conclusion that the delay in completion of the work was entirely attributable to the petitioner. The respondent claimed that there was delay in completion of the work was on account of various reasons which are resulted in loss or profit. Hence, prays for setting aside the impugned award passed by the learned Arbitrator.6 Com.A.P.No.48/2024
4. After issuance of the notice, the respondent No.1 has made its appearance through its counsel. It has filed its objections and denied most of the allegations made against it. The petition filed by the petitioner seeking to setting aside the award passed by the learned Arbitrator is not maintainable. He has not made out any grounds to set aside the award. The grounds urged by the petitioner does not attract any provision of Sec.34 of the Arbitration and Conciliation Act.
It is further stated that the respondent No.1 is a reputed contractor engaged in the business of construction throughout India. The respondent No.1 is an ISO certified Construction and Infrastructure Company and successfully performed numerous works under the various prestigious projects of the Govt. of Karnataka. The petitioner is State Project Director (RMSA) to achieve the objects of the scheme, called for tenders on package basis for a total number of 52 packages through e-Procurement Portal of Govt. of Karnataka. The respondent No.1 was awarded works under 5 packages comprising of 406 number of works sites. This petition pertains to One such pacakage namely Package-A2 - Construction of Adarsha Vidyalaya at Chamarajanagar, Chikkaballapura, Chitradurga, Kolar, Bellary, Ramanagar as well as Koppal districts. After negotiations, the petitioner has issued letter of acceptance dated 15.05.2013 for the contract price of Rs.5322 lakhs in respect of package A-2 and the respondent was directed to furnish the security deposit in terms of the Contract Agreement.
7 Com.A.P.No.48/2024It is further stated that, the respondent No.1 entered into separate agreements for execution of the Nine individual packages. Each package under an individual agreement was a consolidated work contract involving numerous sites under such individual package. Each package irrespective of number of works under such package is a single comprehensive contract. The parties have entered into an agreement on 04.06.2013 for execution of the work under the Package A-2. As per the Clause No.4 of the Agreement, the documents are deemed and construed as part of the Agreement i.e. Letter of Acceptance, notice to proceed with the works, Contractors Tender, Contract Data, conditions of contract and special conditions of contract, specifications, drawing, Bill of Quantities, list of locations and any other document listed in the contract data.
It is further stated that the respondent No.1 brought to the notice of the petitioner at the earliest point of time, even at the stage of negotiation, certain issues which had a direct bearing on the bid pricing and the consequent negotiations, he has also brought to the attention of the petitioner that the sites are situated in remote villages and are scattered. The project costs of the most sites, if considered individually, are very less, it is upon the respondent No.1 to deploy separate teams consisting of executing groups, monitoring group from head office and regional offices, bill processing group etc., for each site location. The respondent No.1 ought to deploy qualified staff for effective interaction with the Petitioner's Department and for monitoring purposes. The respondent No.1 at the earliest point of time through its 8 Com.A.P.No.48/2024 communications brought to the notice of the petitioner that due to the ban of mining by the Govt. of Karnataka, there is a scarcity of quality material which includes sand, bricks, aggregates, blocks and other construction materials. It has through its communication even at the stage of negotiation notified the petitioner that the numerous scattered site areas are totally dry areas and that the availability of ground water is insufficient for construction activities at these places. Water had to be provided through tankers and moreover sufficient storage facility with DG sets for pumping had to be provided. The respondent No.1 had further expressed its reservation and concern on the labour rates for skilled labourers in SR-2012-13 which is mentioned Rs.176.58 and for semi-skilled labourers as Rs.171.58 when the actual prevailing labour rates in the market were at Rs.500/- for skilled labourers and Rs.350/- for semi-skilled labourers. It was not practical to rotate or move same labour from one site to the other as the sites are scattered at great distance.
It is further stated that the nature of the work involves individual and scattered work sites under each package. It was also brought to the notice during negotiations, that after submission of bids, substantial time was consumed for finalization of the tender. It was canvassed by this respondent No.1 that as the project completion period under different packages, varies from 16 to 20 months, the delay in finalizing the tender and awarding the work order will result in the period of performance overlapping with Two monsoon seasons. During the rainy season, the labourers will be idle and to avoid desertion by the labourers and to facilitate 9 Com.A.P.No.48/2024 re-mobilization substantial amount is spent towards retaining the labour. It was also brought to the notice of the petitioner herein. Despite forewarning and highlighting the impediments and practical issues, on the assurance given by the petitioner, this respondent submitted the discounted revised rates. This respondent offered for negotiated rates, at the pre-award stage, as a result of having factored in the provision for price escalation and on the economies of scale which would have enabled this respondent to perform the works within the tender amount. To achieve this, it was most important that the petitioner handover all the clear sites without any delay. The petitioner failed to handover the complete site in all aspects.
It is further stated that the nature of work involves in individual and scattered work sites under each package. It requires establishment of separate site office including staff, supervisors, Engineers and specific agencies for every single work site, however, small or remote the site may be. It was also brought to the notice of the other side.
It is further stated that, because of these impediments and issues were beyond the control of the contractor and on the contrary many of impediments were a direct result of the omissions and commissions of this respondent which form compensation events, thereby resulting in delay in execution of the project and substantial cost over run. Despite the set backs and impediments this respondent overcome the issues so as to successfully complete the works entrusted by the petitioner herein. In addition 10 Com.A.P.No.48/2024 unfortunately, the petitioner / department also precipitated a major problem in the form of inflicting severe cash flow constraints. During the execution of the work, for reasons solely attributable to the petitioner, the period of execution of the contract works got prolonged which was beyond the control of this respondent. Under such circumstances, the petitioner granted extension of time to this respondent without levying any penalty under Clause No.38 of the Contract.
It is further stated that, this respondent has suffered huge losses and thus is entitled for legitimate amounts from the petitioner as per the terms of the contract under various heads. Since, the petitioner failed to honour the reasonable demands of this respondent and by letter dated 11.03.2019 this respondent called upon the petitioner to consider the legitimate claims of this respondent as per the terms of the contract. But, the petitioner failed to take any decision, therefore, this respondent issued legal notice dated 08.05.2019 invoking the Arbitration Clause as per Clause No.24 of the General Conditions of Contract r/w Clause No.4 of the Special Conditions of Contract seeking consent of the petitioner for appointment of Sole Arbitrator to adjudicate the dispute between the parties. But, the petitioner has failed to consent for appointment of Sole Arbitrator. Thereafter, this respondent filed CMP No.259/2019 before the Hon'ble High Court of Karnataka, Bengaluru for adjudication of the dispute between the parties. The Hon'ble High Court allowed the said CMP by order dated 05.11.2020 and referred the dispute to the Sole Arbitrator.
11 Com.A.P.No.48/2024It is further stated that this respondent No.1 filed detailed claim statement and sought for an award under Claim Nos.1 to 11 towards payment of price adjustment/escalation bill, payment of equitable enhanced rates executed beyond tender completion period and for extra items as also for quantities more than 125%, payment towards idle labour charges, payment for unproductive overhead charges, additional overhead charges, loss of expected profit due to non receipt of profit by actual completion period, payment towards interest on claim amount calculated upto 31.12.2020 at the rate of 24%, additional bank guarantee charges beyond original agreement period and payment of Rs.12.00 lakhs towards cost of litigation.
It is further stated that the petitioner entered appearance and filed its statement of defense. After completion of pleadings and after hearing both the parties, the Arbitrator has framed as many as Nine Issues and thereafter both the parties have led their oral and documentary evidence. The respondent/claimant's Project Manager was examined as CW1 and got marked Ex.C1 to C46. The petitioner/respondent's Assistant Executive Engineer was examined as RW1 and got marked Ex.R1 to R9 and the parties have also filed their respective written arguments. Thereafter, the Sole Arbitrator after considering the entire material facts and documents on record vide award dated 10.11.2023 in AC No.103/2021 partly allowed the claims of this respondent No.1.
It is further stated that the award passed by the Arbitrator was within the purview of the Arbitral Tribunal while interpreting the 12 Com.A.P.No.48/2024 contractual obligations entered between the parties and there is no illegality committed by the Arbitral Tribunal. It is a well settled position of law and catena of judgments passed by the Hon'ble Supreme Court time and again that the award can be challenged U/Sec.34 of the Arbitration and Conciliation Act, only on the grounds provided therein and further held that Sec.34 is different in its approach and cannot be equated with the normal appellate jurisdiction. The petitioner has not made out any grounds provided U/Sec.34 of the A&C Act warranting any interference with the Arbitral award passed by the Sole Arbitrator in the present petition.
It is further stated that the respondent being the Contractor has already suffered huge loss in execution of the present subject work and other works with the petitioner. The respondent left with no other option invoked Arbitration Clause. The Arbitrator, though the respondent had raised several claims before the Arbitrator, passed the award partly allowing the claims of the respondent. The petitioner, instead of paying the legitimate claims of the respondent / Contractor as per the award passed by the Sole Arbitrator, has now filed the present petition only to harass this respondent. Hence, on these grounds and other grounds prays for dismissal of the application.
5. The learned counsel for the parties have submitted written synopsis. Perused the records.
6. Based on the pleadings of the parties, the following Points arise for my consideration:-
13 Com.A.P.No.48/20241. Whether there are grounds to set aside the award passed by the learned Arbitrator?
2. What Order?
7. My findings on the above points are :
Point No.1: In the negative Point No.2: As per the final Order for the following reasons.
REASONS
8. Point No.1: The learned counsel for the petitioner has submitted his arguments basing on the content of the application and also statement of objections by the other side. He has drawn my attention towards the award passed by the learned Arbitrator. The petitioner herein had issued Tender for construction of Model schools and upgrading, strengthening of existing Government High Schools in 30 districts of Karnataka on 24.09.2012. There were 52 packages. The said Tender was called through e-procurement portal. The respondent herein was the successful bidder for the construction of Adarsha Vidyalas in various places at Chamarajanagar, Chikkaballapura, Kolar and Ballari districts. This was under package No.A-2. He has further submitted that there was an Agreement between the parties on 04.06.2013 consisting General Conditions of Contract - GCC and also special conditions of contract. The respondent herein commenced the work and completed the same with certain delay and some defects. While 14 Com.A.P.No.48/2024 raising the bills towards the work completed, the respondent raised bill for the amounts under the Head of Price Adjustment Clause and it came to be cleared. He has further submitted that after receiving the entire amount, the respondent raised a dispute before the Arbitrator claiming an amount of Rs.80,03,19,726/-. The respondent herein had made some allegations regarding delay - delay in supply of agreement copies and signing of condition of contract, delay in handing over site, delay in performance of pooja, delay in supply of drawings, non availability of water and power source, scarcity of sand, increase in quantity and delay in payment, delay in approval of work slips / EIRL, increase in cost of material due to shortage, posting of technical staff by the respondent / petitioner herein, loss of working season and extension of BGs. The petitioner herein appeared in the proceedings and filed its statement of objections and opposed the claim made by the other side.
9. The respondent herein has made 12 claims under different Heads - Payment of price adjustment/escalation bill, payment of equitable enhanced rates executed beyond tender completion period and for extra items as also for quantities more than 125%, payment towards idle labour charges, payment for unproductive overhead charges, additional overhead charges, loss of expected profit due to non receipt of profit by actual completion period, payment towards interest on claim amount calculated upto 31.12.2020 at the rate of 24%, additional bank guarantee charges beyond original agreement period and payment of Rs.12.00 lakhs 15 Com.A.P.No.48/2024 towards cost of litigation. An official of petitioner is examined as RW1 and produced some documents at Ex.R1 to R9 and on behalf of the respondent herein, PW1 is examined and some documents have been marked at Ex.C1 to C46. The learned Arbitrator has allowed the claim petition in part. He has allowed the claim No.7(a) for Rs.2,32,55,404/- and claim No.8 allowed in part for a sum of Rs.1,31,78,060/- only as against the claim of Rs.2,32,55,404/- and also directed the petitioner herein to pay a total sum of Rs.3,64,33,464/-. Claim No.12 is allowed in part and a sum of Rs.2.00 lakhs as against Rs.12.00 Lakhs and respondent / petitioner herein is directed to pay the said amount within three months from the date of award, failing which it shall carry interest at the rate of 9% p.a. from the date of award.
10. The learned Arbitrator after hearing both sides and after going through the evidence of PW1 and RW1 as well as documents, the learned Arbitrator passed the impugned award on 10.11.2023. Now, the petitioner herein has challenged the award on the aforesaid grounds. The reasons and findings given by the respondent No.2 / the learned Arbitrator are not proper and correct. He has not considered the evidence of the parties on record and materials. Though the learned Arbitrator has rejected the other claims made by the respondent No.1 herein. He ought not to grant the reliefs at claim No.7(a) i.e. payment of unproductive overhead charges and claim No.8 and also litigation expenses. He has pointed out towards the cross examination of PW1 wherein he has admitted that, "It is true that the Tender price / contract value includes 10% 16 Com.A.P.No.48/2024 of overhead charges. The said suggestion cannot be construed as evidence and the same will not amount to admission that 10% of the contract value for overhead charge was incurred by the claimants. The learned Arbitrator could not have come to the conclusion that the claimant / respondent No.1 is entitled to overhead charges based on this suggestions. The petitioner herein is not solely responsible for the delay caused. It is not in dispute that the claimant / respondent No.1 has completed the project at the agreed contract price. It is also undisputed fact that, the said amount has also been received by the respondent No.1 along with the payment for the additional work executed during the extension period. The claimant / respondent No.1 has received the profit margin as well as the overhead charges on the completion of the project.
11. It is further stated that claimant / respondent No.1 having received the entire contract price on the completion of the project, is not entitled to claim for damages under the head of loss of expected profits on balance work. When the completion of contract is delayed and the contractor claims to have suffered a loss of profit, the burden lies on him and he has to prove by producing cogent evidence, which has not been done by the claimant / respondent No.1 in the case on hand. It is pertinent to note that in the case on hand, the claimant / respondent No.1 has also failed to lead any evidence with respect to capital employed so as to claim interest on the delay in receiving the contract price. In the absence of the claimant / respondent No.1 having produced any material to 17 Com.A.P.No.48/2024 substantiate the capital employed. But, the learned Arbitrator could not have awarded any amount under the head of loss of expected profit on balance work.
12. During his arguments, he has relied. upon the decisions held in (2024) 6 SCC 552 in Delhi Metro Rail Corporation Ltd. V/s Delhi Airport Metro Express Pvt. Ltd., 2023 SCC Online SC 1366 in Unibors V/s AIR, (2024) 2 SCC 375 in Batliboi Environmental Engineers Ltd. V/s HPCL & Anr., (2009) 12 SCC 1 in State of Rajasthan & Anr. V/s Ferro Concrete Construction Pvt. Ltd., (2015) 4 SCC 136 in Kailash Nath Associates V/s Delhi Development Authority & Anr., 2020 SCC Online Del 2497 in Guru Gobind Singh Indraprashta University V/s Engineers India Ltd., AIR 1969 Guj 69 in Koli Trikam Jivraj & Anr. V/s The State of Gujarat and 2013 SCC Online Del 2530 in Sher Mohammad V/s Mohan Magotra.
13. Per contra, the learned counsel for the respondent No.1 / claimant submitted his written arguments and pointed out towards grounds made out in the petition and also statement of objections. The learned Arbitrator has considered all the materials on record and also evidence of PW1 and RW1 as well as the documents marked at Ex.C1 to P45 and Ex.R1 to R9, he has passed the award and by allowing the claim petition in part.
14. It is further stated that, the petitioner herein to achieve the objects of RMSA scheme, called for tenders on package basis for 52 packages through e-Procurement portal of Govt. of Karnataka. The respondent No.1 is a reputed contractor and he is 18 Com.A.P.No.48/2024 the successful bidder, the petitioner herein awarded works under five packages to the respondent No.1. The nature of work entrusted is construction of Model Schools and upgrading and strengthening the Govt. High Schools. Each package consists several schools in each district. After successive negotiation meetings held with negotiation Committee of the petitioner herein, despite so many practical hindrances, was persuaded to reduce the bid prices considerably and consequent to which the petitioner herein awarded, the works under five packages to the respondent No.1 herein.
15. It is further stated that, as per clause No.4 of the Agreement some documents are deemed and construed as part of Agreement i.e. letter of acceptance, notice to proceed with the works, contractors tender, contract data, commissions of contract and special conditions of contract, specifications, drawings, BOQ, list of locations - schools under the package, any other document listed in the contract data as also forming part of the contract. The respondent No.1 herein / claimant brought to the notice to the petitioner herein at the earliest point of time, even at the stage of negotiation, certain issues which had direct bearing on the bid pricing and the consequent negotiation, he has also brought to the notice that the sites of each packages are situated in remote villages and are scattered. Though the project costs of most sites, if considered individually, are very less and it is upon the claimant / respondent No.1 to deploy separate teams consisting of execution group, monitoring group from Head Office and from Regional 19 Com.A.P.No.48/2024 Offices, bill processing group etc. for each site location. Also deployed qualified staff for effective interaction with the Department and for monitoring purpose.
16. It is further stated that, there was sufficient delay from the side of the petitioner herein. Since the petitioner herein has not sought out the delays like - delay in supply of agreement copies and signing of condition of contract, delay in handing over site, delay in performance of pooja, delay in supply of drawings, non availability of water and power source, scarcity of sand, increase in quantity and delay in payment, delay in approval of work slips / EIRL, increase in cost of material due to shortage, posting of technical staff by the respondent / petitioner herein, loss of working season and extension of BGs. These are the impediments and issues were beyond the control of the contractor and on the contrary many of the impediments were a direct result of the omissions and commissions of the petitioner herein which constitutes "Compensation event" thereby resulting in delay in execution of the project and substantial cost overrun. Despite the set backs and impediments, the claimant / respondent No.1 herein overcome the issues so as to successfully complete the works entrusted by the petitioner herein. Unfortunately, the Department also participated a major problem in the form of inflicting severe cash flow constraints due to non payment and delayed payment. During the execution of the works, for reasons solely attributable to the petitioner herein, the period of execution of contract works got prolonged which was beyond the control of the claimant / 20 Com.A.P.No.48/2024 respondent No.1 herein. The petitioner herein granted extension of time to the respondent No.1 / claimant without levying any penalty under clause No.38 of the contract. The claimant has suffered huge loss and he is entitled for legitimate amounts from the petitioner herein as per the terms of contract under various Heads. The petitioner herein has failed to take any decisions in accordance with the terms of the contract and also failed to honour the reasonable demands made by the respondent No.1 / claimant. Legal notices were issued by the claimant invoking the arbitration clause as per Clause No.24 of GCC and also clause No.4 of Special Conditions of Contract seeking consent of the respondent / petitioner herein for appointment of Sole Arbitrator to adjudicate the dispute between the parties. Later, the respondent No.2 was appointed as an Arbitrator by the Hon'ble High Court of Karnataka.
17. He has pointed out towards the findings and reasons given by the respondent No.2 / the learned Arbitrator. He has framed the issues and after considering the evidence of RW1 and PW1 and documents referred above passed the award. He has allowed claim No.7(a) and claim No.8 of the claims. The respondent No.1 / claimant has made 12 claims under different Heads. He has pointed out towards the suggestion during cross examination that "It is true that the tender price / contract value includes 10% of the overhead charges" has allowed the above said claim. The say of the petitioner herein is that, the claimant / respondent No.1 is not entitled for these claims. It is further say of the petitioner herein that the award passed in respect of Claim No.7(a) and 8 of the 21 Com.A.P.No.48/2024 Claim Petition by the learned Arbitrator is called for interference. The learned Arbitrator has considered the materials on record and passed this award under challenge.
18. He has pointed out towards the provisions of Sec.34 of A & C Act. This court does not sit in appeal over the award. The award passed by the Arbitrator shall not be interfered with lightly. The court can neither sit in appeal nor reassess or re-appreciate the evidence and the arbitral award can only be interfered under very limited scope of the grounds stipulated under the provisions of Sec.34 (2) of the Act. The learned Arbitrator has answered the Issue Nos.1 and 2 in the affirmative and answered the Issue Nos.3, 4 and 6 in the negative and thereby, partly allowed Claim No.7(a) and 8 and answered the Issue No.5 partly in the affirmative. He has answered the Issue Nos.7 and 8 partly in the affirmative and held that the claimant / respondent No.1 is entitled only for future interest at the rate of 9% p.a on the amounts awarded under Claim No.7(a) and 8 and also held that the claimant / respondent No.1 is entitled for Rs.2.00 Lakhs only towards costs.
19. He has pointed out the findings given by the learned Arbitrator while discussing the Issue Nos.1 and 2. The reasons assigned by him are proper and correct. These cannot be interfered. The award passed by him clearly demonstrates that he has considered all the relevant documents produced / marked by the parties, applying terms and conditions of the contract and also oral evidence adduced by both the parties. The award could be set aside only on the grounds as provided under Sec.34 of A & C Act, 22 Com.A.P.No.48/2024 1996. The learned Arbitrator has dealt with each and every claim separately and recorded reasoning for allowing or disallowing the claims made by the claimant / respondent No.1.
20. During arguments, he has relied upon the following decisions reported in (1988) 3 SCC 36 in IOC V/s Indian Carbon Ltd., (1989) 1 SCC 532 in Gujarat Water Supply and Sewerage Board V/s Unique Erectors (Gujarat) (P) Ltd. & Anr., (1991) 4 SCC 293 in Goa Daman & Diu Housing Board V/s Ramakant V.P. Darvotkar, 2015 (3) SCC 49 in Associate Builders V/s DDA, LAWS (SC)-2019-11-94 in Hindustan Construction Company Ltd. V/s UOI & Ors., (2020) 5 SCC 164 in South East Asia Marine Engineering Construction Ltd. V/s Oil India Ltd., (2024) 3 SCC 623 in SV Samudram V/s State of Karnataka & Anr., (2006) 11 SCC 181 in McDermott International INC V/s Burn Standard Company Ltd. & Ors.. (2019) 4 SCC 163 in MMTC Ltd. V/s Vedanta Ltd., (2020) 7 SCC 167 in Patel Engineering Ltd. V/s North Eastern Electric Power Corporation Ltd. and (2022) 4 SCC 116 in UHL Power Company Ltd. V/s State of Himachal Pradesh.
21. After going through the written submissions by the learned counsel for the parties, I have also perused the contents of the application as well as objections filed by the other side. Some admitted facts are, the respondent No.1 herein is the contractor and he is a successful bidder. The petitioner herein has issued tender notifications for construction of model school buildings under Rashtriya Madhyamika Shikshana Abhiyan - RMSA which is a scheme launched by the Ministry of Human Resources and 23 Com.A.P.No.48/2024 Development, Govt. of India. It had taken up construction and upgradation of High Schools in various districts in the state. The main object of the RMSA scheme is, invite tenders on package basis for a total number of 52 packages through e-procurement portal of Govt. of Karnataka. The petitioner herein invited tenders and respondent No.1 was a successful bidder. The respondent No.1 had been allotted Five packages, including the package covered under this claim petition.
22. The main grievance of the respondent No.1 has stated in its statement of objections that there was delay in supply of Agreement copies and signing of condition of contract, delay in handing over the site, delay in performance of Pooja, delay in supply of drawings, non availability of water and power source, scarcity of sand, increase in quantity, delay in approval of work slips/EILR, increase in cost of material due to shortage, posting technical staff by the petitioner herein/ respondent, loss of working season and extension of BGs. These are the reasons shown and mentioned by the respondent No.1 herein and hence, there was a delay in completion of the project as agreed under the Agreement. The claim was made by the claimant / respondent No.1 is for Rs.80,03,19,726/- with interest at 24% p.a. Admittedly, the tender was accepted on 13.05.2013. The Agreement between the parties is dated 04.06.2023. The total claims sought by the claimant / respondent No.1 are, 12 claims. Admittedly, the learned Arbitrator has allowed the Claim No.7(a) and Claim No.8. He has not allowed the other claims i.e. Claim Nos.1 to 6, 7(b), 9(a), 9(b), 10 to 12.
24 Com.A.P.No.48/202423. The learned Arbitrator after considering the claim petition and statement of objections, has framed Nine Issues. He has answered the Issue Nos.1 and 2 in the affirmative, Issue Nos.5, 7 and 8 partly in the affirmative. He has answered the Issue Nos.3, 4 and 6 in the negative. The burden of proving the Issue Nos.1, 2, 5 to 7 is on the claimant / respondent No.1 herein. The burden of proving Issue Nos.3, 4 is on the respondent / petitioner herein.
24. I have gone through the findings given by the learned Arbitrator. He has pointed out towards the cross examination of PW1 at para Nos.2 and 3 -
"2. xxxxxx It is true that the tender document floated in E-portal contained details such as nature of the work, place of work and the time line relating to the work / project in question. Xxxxxxx
3. Before submitting the bid, representatives of Claimant including me had visited the various work sites. It is true that only after understanding the terms and conditions of the tender as also on satisfying the nature of the work, work sites and the challenges in execution of the work, Claimant submitted its bid."
25. By going through these answers it is clear that before submitting the bid, the claimant/respondent No.1 visited all the work sites and he knew the practical challenges in executing the work and it was only after knowing all the practical difficulties/challenges in executing the works, the respondent No.1 herein/claimant submitted the bid. Hence, he has inferred that 25 Com.A.P.No.48/2024 while quoting the prices for the work, he ought to have taken into account the prevailing SRs for skilled and semi-skilled labourers. Hence, he has opined that it is not open to the respondent No.1 herein / claimant to state that the rates fixed under SRs in the year 2012-13 for these labourers was abysmally disproportionate compared to the existing market rates. Though the claimant has produced number of documents, the learned Arbitrator has also opined that no documents or evidence have been produced before him to substantiate the contention that rates fixed under the relevant SRs for these kind of labourers abysmally disproportionate to the existing market rates. PW1 has admitted during his cross examination that "it is true that there was no compulsion or pressure from the respondent for submission of tender and that claimant voluntarily on its own free will and violation submitted its bids". He has also admitted that "I agree that even in the negotiation meetings, offer for revised price was also given voluntarily without any kind of pressure from the respondent." The PW1 has shown his ignorance that "I do not know if it is suggested that mining ban imposed in the Karnataka State by the Hon'ble Supreme Court was in the year 2011. It is not correct to suggest that claimant submitted its bid in respect of the project in question taking into consideration all the relevant factors including the mining ban in force."
26. The PW1 in his cross examination, in respect of procurement of resources, he has deposed that " it is true that as per the term and conditions of the Agreement, the responsibility of 26 Com.A.P.No.48/2024 procuring all men and materials required for the project and its utilization was on the claimant. I agree that as per the terms and conditions of the Agreement, the respondent was not under any obligation to give assistance or to facility claimant in procurement of men and materials and its utilization. It is true that the terms and conditions of the Agreement do not stipulate any obligation on the respondent to pay compensation to the claimant, if in the event claimant suffering loss on account of the delay due to the scarcity of any materials in the market." In regard to the adequacy of revised price quoted and intervening Monsoon seasons during the completion period, after going through the evidence of PW1, it is forthcoming that, "it is true that the revised offer made in negotiation meeting held prior to signing of the Agreement was with the understanding that the work could be completed with the said amount by keeping the profit margin and that the work could be completed within the timeline". He has also admitted that at the time of submission of bids, the claimant was very well aware about the works to be executed at different locations and also admitted that, the claimant had knowledge of weather conditions in all the working locations. While fixing the time for completion of the project, the period covered by the Monsoon was also taken into consideration and included therein. There was no delay in completion of the project on account of rain and that the claimant has not made any claim on that ground. The admissions of PW1 as referred above, it is clear that all the practical challenges / difficulties put-forth in SOC were very much within the knowledge of the claimant / respondent No.1 herein before submission of bids 27 Com.A.P.No.48/2024 and it was taking all these factors into consideration. The respondent No.1 herein / claimant submitted bids and later agreed for revised prices.
27. The learned Arbitrator has also observed in his award that all the works involved in the packages were not completed within the completion period stipulated under the contract, the claimant / respondent No.1 has set out various issues which according to him affected the timely execution of the work. The delay in completion of all the works under the package in question was due to the causes solely attributable by the respondent / petitioner herein and that the claimant was not in any way responsible for the delay. The notice to proceed with the work was issued and there is no dispute in this regard, as per the contract, the site possession date is immediately after issue of work order. The dates set out in the contract are also to be achieved within the periods mentioned therein commencing from the date of issue of notice to proceed with the work. After going through the contract, the Clause No.21.1 reads that "The Employer shall give possession of all parts of the site to the contractor. If possession of a part is not given by the date stated in the contract data, the Employer is deemed to have delayed the start of relevant activities and this will be Compensation Event." It is also stated by the petitioner herein in his statement of objections that, the petitioner and the respondent entered into Construction Agreement consisting of GCC and also special conditions of contract. The aforesaid works witnessed many hurdles in the initial period such as delay in handing over the 28 Com.A.P.No.48/2024 construction sites, delay in finalization of design, drawing etc. on account of variations, there was escalation in cost of the project. Therefore, on account of delay and variations approval was submitted to the Govt. of Karnataka for obtaining approval for revised cost of the project, extension of time and price adjustment clause. It is clearly admitted by the petitioner / respondent therein that there was delay in handing over of the construction sites, issuance of designs and drawings, obtaining approval with regard to variations in additional works. These causes the delay cannot be in anyway attributed to the claimant / respondent No.1 herein. The delay in handing over the construction sites, design and drawings has resulted in breach of the contract on the part of the petitioner herein and these events are compensation events as per the Clause No.38.1(a) and (b) of the GCC.
28. The respondent / petitioner herein also stated in its statement of objections regarding, to consider the recommendation submitted by the Technical Committee of RMSA Society instead of the report of KIPA on the aspects of delay and resultant penalty. For ascertaining the extension of time and resultant penalty, each work site shall be considered individually, instead of considering the package consisting of several work sites, to hold the administration responsible for the delay caused on account of any reason which was beyond the control of the contractor. The learned Arbitrator has also pointed out towards the GO issued by the Govt. of Karnataka and the same is produced by the petitioner herein. It is in regard to extension of time for completion of the work project.
29 Com.A.P.No.48/202429. I have also gone through the said GO. It clearly goes to show regarding extension of time for completion of the work project as agreed between the parties. There is a delay of 33 days to 421 days clearly mentioned in Column No.7 of the GO which is reproduced by the learned Arbitrator in his award at page Nos.32 and 33. After perusing the Column No.8 of the table of the said GO, the entire delay in respect of all the 12 locations has been shown as, for the reasons for which the contractor was not responsible. It is also mentioned in Column No.9, no part of the delay in respect of all the 12 locations have been attributed to the claimant as contractor / respondent No.1 herein. After perusing the column No.10 of the said table, time for completion has been extended without imposition of LD upto the respective dates on which the works in each of 12 locations came to be completed as shown in column No.6 of the table of the said GO referred above. The proceedings of the GO dated 30.09.2020 and GO dated 13.01.2021 are very clear that the respondent / petitioner has admitted that the claimant was not in anyway responsible for the delay in completion of the works. Hence, the learned Arbitrator by going through these documents referred above, including GO and Govt. proceedings, opined that the reasons set out in SOC which were beyond the control of the claimant / respondent No.1, he was prevented from completing the entire scope of works within the time fixed under the contract. He has also opined that in view of the admissions made by the respondent / petitioner herein, in its statement of objections as well as the aforesaid GO and Govt. proceedings, he has held that the petitioner herein has failed to 30 Com.A.P.No.48/2024 prove that the delay in completion of the works under the project within the stipulated time under the contract was solely attributable to the claimant / respondent No.1 herein. Therefore, the learned Arbitrator has answered the Issue Nos.1 and 2 in the affirmative.
30. I have also gone through the decisions relied upon by the learned counsel for the respondent No.1. The principles laid down in these decisions are well founded. The decisions come to the aid of the respondent No.1. By considering all these materials on record produced by the parties and also after going through the evidence of PW1 and suggestions put to the witness as well as the statement of objections filed on behalf of the petitioner as respondent before the learned Arbitrator, there are no reasons to interfere in the findings given by the learned Arbitrator / respondent No.2 on these issues.
31. In regard to Issue Nos.3 and 4, regarding which the burden lies on the respondent therein / petitioner herein. The learned Arbitrator has answered these Two issues in the negative. These are in respect of delay in completion of the works under the contract within the stipulated period under the contract was solely attributable to the claimant / respondent No.1 herein and the requirements of Clause No.38.4 of GCC have not been completed by the claimant, non of the claims put forth in SOC is enable. The answer is no as held by the learned Arbitrator.
32. After perusing the Clause No.38 of the contract, it indicates that the clause requires the contractor to provide his 31 Com.A.P.No.48/2024 forecast cost to the Employer with regard occurrence of each compensation event in the event of contractor's failure to provide his forecast cost. The said clause does not bars a contractor from seeking compensation. The clause No.38.4 shows that if the Employer's interest are adversely affected on account of contractor having failed to give early warning or not having co-operated with the Employer. In the case on hand, though the claimant / respondent No.1 has not placed any documents to show that it had given early warning to the Employer with regard to the compensation events. The respondent / petitioner herein not placed any evidence to show that on account of the failure on the part of the claimant to give early warning, its interest has been adversely affected nor to show that the claimant has not co-operated with the Employer. The Clause No.38.3 shows, as soon as information demonstrating the effect of each compensation event upon the contractor's forecast cost has been provided by the contractor, the Employer is required to access the same and contract price shall be existed accordingly. It also gives power on the employer to exist the contract price based on its own forecast if the contractor's forecast is deemed unreasonable. Clause No.38.4 provides that the Contractor shall not be entitled to the compensation to the extent that, the Employer's interest are adversely affected by the contractor not having given early warning or not having co- operated with the Employer. Therefore, looking into the facts and materials on record, I am of the opinion that the respondent No.2 / the learned Arbitrator has rightly come to the conclusion that the delay is not attributable solely on the respondent No.1 / claimant 32 Com.A.P.No.48/2024 and answered these Issues in the negative. I am also of the opinion that the learned Arbitrator has rightly come to the conclusion. Hence, no question of interference.
33. As stated supra, the respondent No.1 / claimant has sought for 12 claims before the learned Arbitrator worth of Rs.80,03,19,726/-. But, the learned Arbitrator has allowed the claim petition in part. In regard to payment of unproductive overhead charges of Rs.2,32,55,404/- has been awarded along with Claim No.8 regarding payment towards loss of expected profit on the balance work as on original tender completion date of Rs.2,32,55,404/-. But, it is allowed in part only towards Rs.1,31,78,060/- as against the said amount. The learned Arbitrator also awarded Rs.2.00 lakhs as cost of litigation as against Rs.12.00 lakhs. He has also awarded future interest at 9% p.a. on the total amount of Rs.3,64,33,464/-.
34. The findings given on Issue No.5 by the learned arbitrator which is in respect of the claimant is whether entitled for payment of the amounts claimed under various heads under Clause Nos.1 to 10. It is answered partly in the affirmative. The findings in respect of Claim Nos.1 to 4 and 5 are proper. He has also gone through all the materials and also the documents produced on behalf of the respondent No.1 / claimant. The findings given by the learned Arbitrator while allowing the Claim No.7(a), he has given his findings that the unproductive additional overhead charges and payment of Rs.56,37,913/-. The total amount claimed in claim No.7(a) is Rs.2,32,55,404/-. He has held that there was a delay on 33 Com.A.P.No.48/2024 the part of the respondent / petitioner herein in handing over the sites in several locations comprised in the said package under dispute as also delay in issuing drawings and revised drawings, as a result of which the claimant / respondent No.1 herein could not complete the entire works within the period stipulated under the contract. Also held that, the respondent / petitioner herein has committed breach of terms of the contract, because of this, the respondent No.1 / claimant has suffered loss / damages which could be recovered from the respondent / petitioner herein. He has also relied upon a decision reported in McDermott International Inc. Vs Burn Standard Ltd. and Ors. reported in (2006) 11 SCC 181, it is held that -
"A claim for overhead costs resulting in decrease in profit or additional management costs is a claim for damages.
An invoice is drawn only in respect of a claim made in terms of the contract. For raising a claim based on breach of contract, no invoice is required to be drawn.
It is furthermore not in dispute that the claim for damages had been made prior to invocation of arbitration. Once such a claim was made prior to invocation, it became a dispute within the meaning of the provisions of the 1996 Act. It is not disputed that the same claim was specifically referred to arbitration by MII in terms of its notice dated 10th April, 1989.xxxxx"
"xxxxx While claiming damages, the amount therefor was not required to be quantified. Quantification of a claim is merely a matter of proof.
Xxxxx 34 Com.A.P.No.48/2024 METHOD FOR COMPUTATION OF DAMAGES What should, however, be the method of computation of damages is a question which now arises for consideration. Before we advert to the rival contentions of the parties in this behalf, we may notice that in M.N. Gangappa v. Atmakur Nagabhushanam Setty & Co. and Another [(1973) 3 SCC 406], this Court held:
"In the assessment of damages, the court must consider only strict legal obligations, and not 'the expectations, however reasonable, of one contractor that the other will do something that he has assumed no legal obligation to do.
[See also Lavarack v. Woods of Colchester Ltd (1967) 1 QB 278] The arbitrator quantified the claim by taking recourse to the Emden formula. The learned arbitrator also referred to other formulae, but, as noticed hereinbefore, opined that the Emden Formula is a widely accepted one. Xxxxxx We may at this juncture notice the different formulas applicable in this behalf.
(a) Hudson Formula: In Hudson's Building and Engineering Contracts, Hudson formula is stated in the following terms:
"Contract head office overhead & x contract sum x period of delay"
Profit percentage contract period In the Hudson formula, the head office overhead percentage is taken from the contract. Although the Hudson formula has received judicial support in many cases, it has been criticized principally because it adopts the head office overhead percentage from the contract as the factor for calculating the costs, and this may bear little or no relation to the actual head office costs of the contractor.
35 Com.A.P.No.48/2024b) Emden Formula: In Emden's Building Contracts and Practice, the Emden formula is stated in the following terms:
"Head office overhead & profit = Contract sum x period of delay / 100 x contract period. Using the Emden formula, the head office overhead percentage is arrived at by dividing the total overhead cost and profit of the contractor's organization as a whole by the total turnover. This formula has the advantage of using the contractors actual head office and profit percentage rather than those contained in the contract. This formula has been widely applied and has received judicial support in a number of cases including Norwest Holst Construction Ltd. v. Cooperative Wholesale Society Ltd., decided on 17 February, 1998, Beechwood Development Company (Scotland) Ltd. v. Mitchell, decided on 21 February, 2001 and Harvey Shoplifters Ltd. v. Adi Ltd., decided on 6 March, 2003.
(c) Eichley Formula: The Eichleay formula was evolved in America and derives its name from a case heard by Armed Services Board of Contract Appeals, Eichleay Corp. It is applied in the following manner:
Step 1 Contract Billings Total overhead for Overhead allocable Total Billings for contract x contract period = to the contract period Step 2 Allocable overhead Total days of contract = Daily Overhead rate Step 3 Daily Contract Overhead Number of Days Amount of Unabsorbed Rate x of delay = overhead"
This formula is used where it is not possible to prove loss of opportunity and the claim is based on actual cost. It can be seen from the formula that the total head office overheads during the contract period is first determined by comparing the value of work carried out in the contract period for the project with the value of work carried out by the contractor as a whole for the contract period. A share of head office overheads for the contractor is allocated in the same ratio and expressed as a lump sum to the particular 36 Com.A.P.No.48/2024 contract. The amount of head office overhead allocated to the particular contract is then expressed as a weekly amount by dividing it by the contract period. The period of delay is then multiplied by the weekly amount to give the total sum claimed. The Eichleay formula is regarded by the Federal Circuit Courts of America as the exclusive means for compensating a contractor for overhead expenses.
Before us several American decisions have been referred to by Mr. Dipankar Gupta in aid of his submission that the Emden formula has since been widely accepted by the American courts being Nicon Inc.v. United States, decided on 10 June, 2003 (USCA Fed. Cir.), Gladwynne Construction Company v. Balmimore, decided on 25 September, 2002 and Charles G. William Construction Inc. v. White, 271 F.3d 1055.
We do not intend to delve deep into the matter as it is an accepted position that different formulas can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the Arbitrator.
If the learned Arbitrator, therefore, applied the Emden Formula in assessing the amount of damages, he cannot be said to have committed an error warranting interference by this Court.
ACTUAL LOSS : DETERMINATION OF A contention has been raised both before the learned Arbitrator as also before us that MII could not prove the actual loss suffered by it as is required under the Indian law, viz., Sections 55 and 73 of the Indian Contract Act as Mr. D.J. Parson had no personal knowledge in regard to the quantum of actual loss suffered by the MII. D.J. Parson indisputably at one point of time or the other was associated with MII. He applied the Emden Formula while calculating the amount of damages having 37 Com.A.P.No.48/2024 regard to the books of account and other documents maintained by MII. The learned Arbitrator did insist that sufferance of actual damages must be proved by bringing on record books of account and other relevant documents.
Sections 55 and 73 of the Indian Contract Act do not lay down the mode and manner as to how and in what manner the computation of damages or compensation has to be made. There is nothing in Indian law to show that any of the formulae adopted in other countries is prohibited in law or the same would be inconsistent with the law prevailing in India.
As computation depends on circumstances and methods to compute damage, how the quantum thereof should be determined is a matter which would fall for the decision of the arbitrator. We, however, see no reason to interfere with that part of the award in view of the fact that the aforementioned formula evolved over the years, is accepted internationally and, therefore, cannot be said to be wholly contrary to the provisions of the Indian law.
A court of law or an arbitrator may insist on some proof of actual damages, and may not allow the parties to take recourse to one formula or the other. In a given case, the court of law or an arbitrator may even prefer one formula as against another. But, only because the learned arbitrator in the facts and circumstances of the case has allowed MII to prove its claim relying on or on the basis of Emden Formula, the same by itself, in our opinion, would not lead to the conclusion that it was in breach of Sections 55 or Section 73 of the Indian Contract Act."
35. Once again after perusing the cross examination of PW1, wherein he has admitted the suggestion that the tender price / contract value includes 10% of the overhead charges and he has admitted that the tender price was 19% over and above the SR 38 Com.A.P.No.48/2024 rates prevailing as on the date of the contract. He has denied that since the tender price over and above the SR rate by 19%, claimant has not suffered any loss. The learned Arbitrator has also perused the spread sheet submitted, the claimant has claimed overhead and establishment charges at 10% of the contract price. In these spread sheets, the methodology for working out the quantum has been shown as UPOH Value = 10% of BOQ Value X percentage of overhead and establishment charges. With regard to unproductive overhead and establishment charges, the methodology indicated in the spread sheets is Value of Extra and additional overhead = (Value of revised estimate minus amount paid upto tender completion) X 10%.
36. By considering all these documents and materials on record, it is also held that, there is no basis either in law on facts to award any amount towards additional overhead charges as sought by the claimant / respondent No.1 herein in the claim petition under claim No.7(b). Therefore, the learned Arbitrator has held that, the respondent No.1 herein / claimant is not entitled for payment of any amount under the said head. The claim No.7(b) is rejected entirely.
37. I have also gone through the Ex.C45. The total BOQ amount in respect of all these 12 locations referred above is Rs.53,22,04,000/- equalent to the original contract price. The financial achievement at the end of the stipulated completion period of 20 months as mentioned in Column No.8 of the said Ex.C45 is Rs.29,96,49,960. The value of the balance work as on the expiry of 39 Com.A.P.No.48/2024 stipulated completion period was Rs.23,25,54,040/- (Rs.53,22,04,000 - Rs.29,96,49,960 = Rs.23,25,24,040/-). The learned Arbitrator has also relied upon a decision reported in (1984) 4 SCC 59 and 2011 (10) SCC 573, there is no difficulty in accepting the percentage of loss of expected profit of 10% of the value of the balance work as at the end of stipulated completion period. On the basis of this, the loss expected profit suffered by the respondent No.1 herein / claimant works out Rs.2,32,55,404/-.
38. The learned Arbitrator has valued the claim No.8 as referred above allowed in part for a sum of Rs.1,31,78,060/- and awarded interest at the rate of 9% p.a. As per the contract data, the completion date for whole of the works was 20 months, it is an admitted fact. It starts from the date and the start date was the date of issue of notice to proceed with the work. Admittedly, in the case on hand, the notice has been issued on 08.05.2019. The completion of period of 20 months expired on 03.02.2015. The Arbitrator has held that, the entire payment if had been made immediately after GO referred above dated 30.09.2020, the delayed period works out to 68 months. Hence, the total compensation works out Rs.23,25,540 ÷ 12 X 68 = 1,31,78,060/-.
39. He has sought payment of Rs.45,08,47,944/- towards past interest on the claims made in claim Nos.1 to 10 till 31.12.2020 at the rate of 24%. The Arbitrator has not allowed this claim and other claims. I have also gone through the findings and reasoning for disallowing these other claims. The claimant / respondent No.1 sought payment towards past interest on the 40 Com.A.P.No.48/2024 amounts claimed upto 31.12.2020 at the rate of 24% p.a. By considering the reasons given by the learned Arbitrator as well as after perusing the materials on record, the findings are proper and reasonable. Accordingly, he has answered the Issue No.6 in the negative.
40. As already stated supra, the respondent / claimant has sought several reliefs in the claim petition as stated supra. The learned Arbitrator has allowed only some claims i.e. 7(a) and Claim Nos.8 and 12 in part. The learned Arbitrator has rejected the claim Nos.1 to 6, 7(b), 9 (a), 9(b), 10 and 11.
41. As discussed supra, I have gone through the findings given by the learned Arbitrator while deciding these claims. In respect of claim No.9(a) and (b) i.e. an amount of Rs.11,62,77,020/- under the head of loss of expected profit due to non receipt of profit by tender completion period and Rs.2,73,72,950/- under the head of loss of expected profit due to non receipt of profit by actual completion period. As per the learned Arbitrator, in SOC, there is no averments made in support of these claims to indicate the basis and the methodology under which the amounts have been arrived at, even PW1 has not stated in his affidavit. The say of the respondent / petitioner herein, in its SO has contended that both these claims are beyond the scope of the Agreement and condition of the contract, and that as per PWD SRs the finished items of work are inclusive of 10% contractor's profit and that the contract has been awarded at a premium of 20% over and above PWD SRs at the time of tender and, therefore, these 41 Com.A.P.No.48/2024 claims are false and misconceived, the respondent / petitioner herein is not liable to pay the said amount. By considering the documents and evidence on record, the learned Arbitrator has come to the conclusion that the basis on which the said claims are made, it appears to be speculative claims. As discussed while considering the claim No.8 as on the stipulated completion period, the value of the balance work in relation to all the locations was Rs.23,25,54,040/- and on that amount the expected profit at 10% was Rs.2,32,55,404/-. On account of default committed by the respondent / petitioner herein, since the claimant / respondent herein could not complete the entire works. He was deprived of expected profit of Rs.2,32,55,404/- by the date of expiry of completion period. Taking into consideration of the said fact that, had claimant / respondent herein received the expected profit of Rs.2,32,55,404/- on the value of balance work, he could have earned reasonable benefit by investing the said amount. Hence, the learned Arbitrator opined that he has partly allowed Claim No.8 and awarded payment of Rs.1,31,78,606/-, as compensation for the delayed payment of expected profit on the value of the balance work as on the date of completion date upto the date of actual payment. Therefore, the learned Arbitrator has held that the claimant / respondent herein is not entitled for payment of any amount under Claim No.9(a) and (b). The findings and the reasons given by the learned Arbitrator while deciding this claim is proper in my opinion also.
42 Com.A.P.No.48/202442. In respect of Claim No.10, the respondent / claimant sought Rs.5,98,370/- under the head of payment towards additional bank Guarantee charges beyond original agreement period. The learned Arbitrator by considering the evidence of PW1 and Clause No.43.1 of GCC regarding security deposit including additional security shall be provided to the Employer, no later than the date specified in the LOA and the security deposit shall be valid until a date 30 days from the date of expiry of DLP. He has also gone through the Clause No.1 of Conditions of Contract. As per the terms contained in LOA also DLP is 12 months which will run concurrently from the date of physical completion of the project and on issuance of completion certificate by the competent authority. After verifying the documents, the learned Arbitrator has come to a concrete conclusion that, the claimant / respondent herein has not placed any acceptable evidence to establish that he was made to extent the BGs even beyond the expiry period of DLP and thereby has incurred additional expenses and he has not produced any evidence to show that the dates on which the BGs were extended beyond the required dated and the amount he has paid bank charges towards renewal of such BGs. The learned Arbitrator has rejected this claim also.
43. In regard to Claim No.11 is concerned, the claimant / respondent herein has sought an amount of Rs.45,08,47,944/- under the head of payment towards interest on claim amount calculated upto 31.12.2020 at the rate of 24% p.a. To this claim, the findings given by the learned Arbitrator is, the statements 43 Com.A.P.No.48/2024 produced on behalf of the claimant / respondent herein regarding the total claim of Rs.80,93,81,265/- towards interest for - delay of RA and PA bill payments, on recovery of additional royalty from bills, delay in certification and release of payment of 35% of works-slip and EIRL items, on bank guarantee for delayed duration as well as delay in certification of claims. As per the observation by the learned Arbitrator, the detailed statement was not produced along with SOC, nor it was produced during the course of evidence. These statements are also not marked in evidence. Therefore, the petitioner herein / respondent has no opportunity to test the correctness of these statements. Under law, these statements cannot be looked into, no sustenance can be drawn from these statements. Hence, he has declined to grant this claim also.
44. Therefore, I am also of the opinion that the findings given by the learned Arbitrator on these claims, is proper and correct. There are no grounds to interfere in these findings.
45. I have also gone through the decisions relied upon by the learned counsel for the petitioner herein. The principles laid down in these decisions are well founded. These are not come to the aid of the petitioner herein / respondent.
46. In regard to claim No.12 is concerned, that is in respect of cost of litigation sought by the claimant / respondent No.1, the learned Arbitrator has relied upon Clause No.4.1(c) of SCC and held that, the cost and expenses of Arbitration proceedings will be paid as determined by the Arbitrator, but, however, the expenses 44 Com.A.P.No.48/2024 incurred by each party in connection with the preparation, presentation etc. shall be borne by each party itself. Even as per the clause No.4.1(c) of SCC, the cost and expenses of arbitration proceedings has to be paid as determined by the Arbitrator. He has also relied upon provisions of Sec.31(A) of the Act, the Arbitral Tribunal has discretion to determine whether costs are payable by the one party to another, the amount of such cost and when such costs are to be paid. Cost means reasonable cost relating to fees and expenses of the Arbitrators, courts and witnesses, legal fees and expenses, any administration fees of the Institution supervising the Arbitration and any other expenses incurred in connection with the Arbitral or court proceedings as well as the arbitral award. He has also considered the provisions of Sec.31(A)(2)(3) of the Act. The learned Arbitrator has awarded Rs.2.00 lakhs as against Rs.12.00 lakhs as cost of the litigation and answered the Issue No.8 partly in the affirmative.
47. The respondent No.1 herein / claimant has not challenged the award passed by the learned Arbitrator. This petition is filed by the respondent / petitioner for setting aside the award which was allowed in part on the aforesaid grounds. By looking into the facts and circumstances of the case, the reliefs sought by the claimant before the Arbitrator referred above, the learned Arbitrator has allowed the same in part. By looking into the facts and circumstances of the case, I am of the opinion that the learned Arbitrator has not exceeded his jurisdiction and come to the conclusion properly by considering all the materials produced by the 45 Com.A.P.No.48/2024 parties and after considering the evidence of PW1 and RW1. I have also gone through the provisions of Sec.34 of the Arbitration and Conciliation Act. Very limited scope is available to this court. Since, there are no reasons to interfere in the award passed by the learned Arbitrator. The petitioner has not made out grounds to set aside award. Therefore, in the light of discussions made supra, I answer the Point No.1 in the negative.
48. Point No.2: In the result, I pass the following:
ORDER The petition U/Sec.34 of the Arbitration and Conciliation Act is hereby dismissed.
Issue copy of the judgment to the parties through e-mail as provided U/Or XX Rule 1 of CPC, if email ID is furnished.
(Dictated to the stenographer, typed by her directly on the computer system, corrected and then pronounced by me in the open court on this the 18th day of September 2024) \ (RAMAKANT CHAVAN) LXXXIV Addl. City Civil & Sessions Judge, (CCH-85) Commercial Court, Bengaluru.