Document Fragment View

Matching Fragments

(a) Use of gravel in tank bed; and
(b) Use of sand in tank surround/filling between tanks.
OMP 120/2003 Page 2 According to GAIL, instead of these materials, GR used murram, which was not agreed upon; it (GAIL) was therefore, entitled to deduct the amounts withheld.

3. GR invoked the arbitration clause and the dispute centered mainly around the issue of non-payment of the said amounts, on account of use of murram in place of gravel/sand. GAIL demanded cost benefit to be passed on to it by GR for using a cheaper material, namely `murram' in place of more expensive contract stipulated material, namely `gravel' and `sand'. GAIL claimed that by using such cheaper material, than the contract stipulated material, GR unjustly enriched itself.

OMP 120/2003 Page 5 "They have already excavated the required level and we have to start filling up murram material as per the clarifications given by us in Ex. AK. We will be filling with the best quality murram. This is in line with Vol. III of IV under Section 10. Kindly approve the above as per return fax".

7. GAIL, declined GR'S request, stating that the deviations in Exh.AK of GR's offer regarding alternative material for tank mound were withdrawn by its letter dated 07.01.1997. It (GAIL), requested GR to proceed with the work strictly in accordance with the specifications in the bid document. GR, however, disagreed with this interpretation of its letter dated 07.01.1997 stating that "we would like to clarify that Serial No. S 7 and 8 of Ex. AK were not withdrawn by us vide S-20 of our letter of 07.01.1997 but it was only compliance statement towards accepting specifications of various materials as and when they are used. In other words, the clarifications given by us in our letter Ex. AK is the basis of our quotation and we are going ahead with filling up of murram as mentioned in our earlier letter dated 09.05.1997. You would appreciate that the work of re-filling cannot be stopped at this stage as the monsoon is fast approaching".

(2) Rs.35,85,185 against the use of murram in place of sand for tank surround and filling between. 
OMP 120/2003                                                         Page 12
                (3)  Rs.36,90,000 being the       cost   of   murram
               excavated from GAIL's site.
(4) Rs.3,52,026 towadrs royalty paid for murram excavated from GAIL's site.

23. GR, in its reply of 07.03.2000, while reiterating its non-liability to pay any cost benefit, also controverted the figures given above by GAIL. It stated that (1) that the colume of excavated portion filled with murram was only 9,600 cu.m. and not 23,371 cu.m. (2) that use of murram in place of sand filling for tank surround and filling between tanks was permitted.

22. The law, as explained in the preceding paragraph, should be applied to the facts of this case. Here, the arbitrator examined the materials in great detailed and returned his findings. The core of the reasoning is to be found in Paras 24 and 25 of the award. The arbitrator held that according to EIL, a total quantity of 18,100 cu. Metres of murram was used, instead of gravel. The cost of gravel was also a matter of record; it was Rs. 380/- (per cu. metre). The award reasoned that applying a ratio (of 19900: 18100) on the basis of figures supplied by GAIL, approximately half the murram used was in place of gravel, and the other half instead of sand. This ratio was deduced from the total actual consumption of murram, i.e 38,000 cu. m. The cost analysis for use of murram for gravel was worked out to Rs. 22, 80, 000/- (i.e Rs. 380 X 6000 cu. m ). As regards the balance, the arbitrator relied on the OMP 120/2003 Page 22 fact that 12,100 cu. m was procured from GAIL's site; the differential cost of this was fixed at Rs. 280/-. The court can discern no infirmity with this reasoning, or approach, as it is completely supported by materials on the record. The possibility of a different approach by the court cannot impel it to conclude "patent illegalities" in the award, or say that it is contrary to the contract. The parties here agreed that murram could be used, and also that GAIL was entitled to cost benefit. The arbitrator's formula is neither unfeasible nor implausible; on the contrary it appears to be sound and reasonable. Therefore, the conclusions on the first and third claims of GAIL cannot be disturbed.