Document Fragment View

Matching Fragments

3. Pursuant to a notice inviting tender for the aforesaid work AAI opened the bids on 06.08.2007 and accepted the bid of the appellant in the sum of ₹18,53,20,401.33. An acceptance letter was issued on 20.09.2007 and the contract signed on 04.10.2007. The work was to commence from 30.09.2007 and be completed by 29.09.2008. There was an admitted delay of four months in handing over of the site to the appellant and time for completion of the work was extended until 19.09.2009. In the meanwhile, AAI had sent revised drawings/plan/BOQ to the appellant on 04.01.2008 which contemplated a significant reduction in the scope of the work. The appellant protested and quantified the reduction at approximately 31% of the original scope of work. By a further communication dated 20.04.2009, AAI informed the appellant about the deviation in cost and stated that the project would be valued at approximately ₹13 crores. The appellant raised a final bill which was paid on 16.09.2010, but not in full.

5. The Arbitrator awarded ₹64,65,828/- in respect of claim no. 3 on the finding that the delay in completion of the contract was attributable to AAI. The extension of time granted by AAI for completion of the contract without any compensation, was held to be indicative of the fact that the appellant would also be entitled to the compensation sought in claim No.4 and consequently, a sum of ₹33,05,706/- was awarded on this ground.

6. In the impugned judgment, on the question of overheads, the learned Single Judge has found that the Arbitral Tribunal calculated the sum due to the appellant on the basis of the original contract value, rather than the reduced value. Although the Arbitrator had found AAI to be in breach of its contractual obligations, and thus liable to compensate the appellant for the overheads incurred by it during the extended period of contract, the learned Single Judge set aside the award on the aforesaid ground. As far as the award of loss of profit is concerned, the Award was set aside on the ground that it is contrary to clause 39 of the General Conditions of the Contract (hereinafter, "GCC"), which reads as follows:-

Submissions

7. Mr. Vaibhav Dang, learned advocate for the appellant submitted, on the question of overheads, that the issue was a computational error, which ought to have been raised by AAI before the Arbitrator under Section 33 (1) of the Act. In the absence of such an application being made before the Arbitrator, he contended that the award was not liable to be set aside under Section 34 of the Act. With regard to the award on account of loss of profits, Mr. Dang argued that Clause 39 of the GCC would apply only in the event of notice of the reduction in the scope of work being given by the Engineer-in-Charge of the project. He drew our attention to various letters of protest addressed by the appellant to AAI in response to its intimation regarding the reduced scope of work.

Discussion

9. Both the disputed claims require an appreciation of the facts surrounding the reduction in the scope of the contract. It is undisputed that the contractually stipulated date for starting work under the contract was 30.09.2007 but AAI had delayed handing over the site by four months i.e. at least until the end of January, 2008. Even prior thereto, AAI had issued revised drawings and plans under cover of a communication dated 04.01.2008. The appellant had understood therefrom that the value of the work had been reduced by approximately 31% and lodged its protest with AAI. AAI, by a letter dated 20.04.2009, stated that the total cost of the project will be reduced to approximately ₹13 crores (as opposed to the original value of approximately ₹18.5 crores). In response, the appellant addressed a letter dated 27.04.2009 requesting AAI to reduce the amount of the performance bank guarantee and security required under the contract. By another communication of the same day, this request was reiterated and it was also stated as follows:-