M/S VISHAL ENGINEERS & BUILDERS v. M/S INDIAN OIL CORP. LTD.

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in the Digest? % JUDGMENT (ORAL) VALMIKI J.MEHTA, J

1. By this petition under Section 34 of the Arbitration and Conciliation Act, 1996 the petitioner challenges the Award dated 29.6.2002 passed by the sole Arbitrator. The challenge is laid by the objector only to Claim Nos.[1] and 5 as dealt with by the Arbitrator.

2. The disputes which arose between the parties was with regard to a contract which was awarded to the respondent no.1 (hereinafter referred to as 2010:DHC:371 OMP 314/2002 Page 2 the respondent) for construction of internal roads, earth filling drains and pipe culverts at L.P.G. Bottling plant, Farrukhabad, U.P.

3. Claim No.1 as awarded by the Arbitrator is with respect to an indemnity given by the petitioner for any loss which the respondent may suffer on account of any claim being laid against it by any employee of the petitioner. An employee of the petitioner on account of an accident happening at site filed a claim both against the petitioner and the respondent and as a result of which, the respondent had retained with it an amount of Rs.25,000/- pending the conclusion of the litigation. In fact, the Arbitrator has awarded that the amount would be returned to the petitioner in case no liability is fastened on to the respondent at the conclusion of the legal proceedings filed by the employee of the petitioner. On a query by the Court to the counsel for the petitioner as to the present stage of legal proceedings filed by the employee, the counsel for the petitioner had no answer. The counsel for the respondent states that in case, in the legal proceedings as filed by the employee of the petitioner no liability is fastened on to the respondent, it shall return the amount withheld to the petitioner. The Award also says this. No fault can be found with this part of the Award and objection to this claim is therefore rejected. At this stage, I may take on record the statement of the counsel for the respondent that respondent shall put an amount of Rs.25,000/- in a fixed deposit within a period of one week from today and if the amount has to be returned to the petitioner the same OMP 314/2002 Page 3 will be returned alongwith interest which is earned thereon from the fixed deposit.

4. The second claim, is Claim No.5 pertaining to the issue of liquidated damages. The respondent had recovered an amount of Rs.4,59,873/from the bills of the petitioner towards liquidated damages in terms of the clause of liquidated damages under the contract. The facts as found while dealing with Claim No.5 by the Arbitrator are that there has been a delay of 37 weeks in execution of the work. As per the clause of liquidated damages, damages are payable at the rate of 1% per week delay subject to the maximum of 10% of the contract value. Meaning thereby, once if 10 weeks are reached the maximum penalty of liquidated damages can be imposed. In this case, delay is of 37 weeks. The arbitrator therefore awarded damages for delays caused by the petitioner. Counsel for the petitioner sought to urge that the finding in this behalf is faulty and needs to be set aside by this Court. I may note that the jurisdiction of this Court while hearing objections under Section 34 is indeed limited. An Arbitrator is entitled to weigh the evidence filed by both the parties for coming to a conclusion. The Arbitrator has after weighing the respective evidence of the parties arrived at a conclusion with regard to the delay being caused by the petitioner. In any case, even a delay of 10 weeks was good enough for imposing damages which in this case is of 37 weeks and, the Arbitrator has given findings of fact that the petitioner was guilty of delay in OMP 314/2002 Page 4 performance of the work, which findings are not shown to this Court to be in any manner perverse.

5. Mr.J.P. Gupta, counsel for the objector has endeavoured to take me through various documents to show that the petitioner is not guilty of delay in performance of the work. Reference in this behalf was made more particularly to an internal note dated 8.3.1996 of the respondent and the decision given thereon dated 25.3.97 that penalty should not be levied. Firstly, I am not entitled to look into those documents which are the internal records of the respondents and which have not been communicated to the present petitioner. This has been the consistent view of the Supreme Court right from the case of Bachhittar Singh Vs. State of Punjab AIR 1963 SC 395 and followed recently in Sethi Auto Services Vs. DDA 2009(1) SCC 180. Admittedly, this note has not been communicated to the petitioner, and nor is it so the case of the petitioner. On the contrary, the learned counsel for the respondent has drawn my attention to the fact that the counsel for the petitioner is only stating half facts because ultimately this very note, when it was put up before the final authority,the same note and the recommendation of extension of time was rejected. This rejection of recommendation as made in the note dated 25.3.1997 appears at running page 648 of the Arbitration record. In my opinion, firstly the internal documents cannot be looked into, and in any case if it is looked into, shows that there is no recommendation for extension of time period without levy of liquidated damages. OMP 314/2002 Page 5

6. Once again, I reiterate that this Court does not sit as an Appellate Court over the findings of the Arbitrator. Merely, because two views are possible, this Court cannot interfere with the findings in the Award merely because it is of another view, and the Arbitrator has held another plausible view. As already stated, Arbitrator has held one plausible view from reading of the various documents filed before him of the petitioner being guilty of delay in execution of the works. This aspect as I have already stated is further strengthened because the maximum liquidated damages becomes payable after 10 weeks of delay and here the delay is admittedly of 37 weeks.

7. Mr. Gupta also sought to contend that the damages under Section 74 of the Contract Act, 1872 i.e. the liquidated damages imposed could not have been levied before issuing any notice to the petitioner i.e. the requirement of Article 14 of compliance of principles of natural justice. Firstly, I do not find in the arbitration record that any such objection was taken. Even assuming, if such objection is taken, this objection is misconceived because parties are governed in their affairs by the Contract Act and the elements of public law field cannot be brought in the disputes of a private contractual nature. This has been held by the Supreme Court in the judgment of Assistant Excise Commissioner Vs. Issac Peters (1994)4 SCC 104 and which has been recently followed by the Supreme Court in S.K. Jain Vs. State of Haryana (2009)4 SCC

357. This contention of Mr. Gupta is therefore rejected because public law elements cannot be brought into private law field. OMP 314/2002 Page 6

8. It was lastly contended by Mr. Gupta that the note dated 25.3.1997 and preceded by the note dated 8.3.1996 say that no loss has been caused to the respondent. I have already dealt with the issue that these are internal notes of the respondents and which were not communicated to the petitioner and hence cannot be relied upon by the petitioner. Additionally, as already noted above, recommendation in the note was ultimately rejected. In any case, in my opinion, the issue is covered by the recent decision of the Supreme Court in ONGC Vs. Saw Pipes (2003) 5 SCC 705 that in certain contracts loss actually need not to be proved because loss is not capable of being proved. The Supreme Court in the case of Saw Pipes’s (supra) in paragraphs 46, 66 and 67 has held that in certain contracts such as construction of road or making of an refinery, actual losses can never be calculated. Accordingly, the Supreme Court has said that the liquidated damages automatically become payable. If that be so, in a case of this type which is for construction of the nature already mentioned, in my opinion, it is not necessary that actually losses have to be proved by the respondents before enforcing the clause of liquidated damages.

9. In view of the above, the objections are dismissed with costs of Rs.25,000/-. VALMIKI J.MEHTA, J January 21, 2010 Ne