Full Text
HIGH COURT OF DELHI
UNION OF INDIA THROUGH GENERAL MANAGER..... Petitioner
Through: Ms.Uma Prasuna Bachu, Adv.
Through: Mr. Ramesh Singh, Sr. Adv.
Khailau, Mr.Shubham Jindal &Mr.Aditya Ghadge, Advs.
JUDGMENT
1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) seeks to assail the arbitral award dated 23.05.2018 passed by the learned Arbitrator. Under the impugned award, the learned Arbitrator has allowed claim nos.[1] to 3, 5, 7, 9 and 11 to 13 in favour of the respondent along with interest @ 14% w.e.f. 30.01.2014 till the date of final payment.
2. Before dealing with the rival submissions of the parties, the brief factual matrix as emerging from the record may be noted.
3. Upon the petitioner/Union of India inviting tenders for execution of the work of ‘Construction of Road under Bridge by cast in the SITU method near Sarita Vihar on TKJ-TKD Section, the respondent submitted its bid on 22.10.2009. The same was accepted and consequently, a work order was issued in favour of the respondent on 16.12.2009. As per the subsequent agreement entered into between the parties on 28.01.2010, the work was required to be completed within 11 months from the date of the acceptance letter and consequently, the stipulated date of completion of work was fixed as 15.11.2010. It was agreed between the parties that the contract would be governed by Northern Railways General Conditions of Contract, which contained an arbitration clause. The actual work, however, commenced only on 10.05.2010, which as per the respondent’s case, was on account of various delays on the part of the petitioner such as the non-availability of workable site, non-finalization of designs and drawings etc. Resultantly, the work under the contract could not be completed within the stipulated period of 11 months and came to be completed only on 13.04.2014, i.e. almost after a delay of three and a half years.
4. Seeking compensation for the extra expenditure incurred on account of the delay in completing the work, the respondent invoked arbitration and on 20.07.2015, approached this Court seeking appointment of an arbitrator. As per the agreement between the parties, a sole arbitrator was appointed by this Court on 26.05.2016 for adjudication of disputes between them. Before the learned Arbitrator, the respondent claimed that since the delay in completion of the work stipulated under the contract was attributable solely to the petitioner, the respondent was entitled to seek compensation with interest from it towards reimbursement of the additional expenses incurred for completion of the project. The petitioner, however, contended that in accordance with the terms and conditions of the contract, the respondent was estopped from claiming any amount towards compensation on account of any delay on the part of the petitioner including the delay in providing designs and/or drawings. In its statement of claim filed before the learned Arbitrator, while the respondent raised 15 claims, the petitioner in its statement of defense, raised 3 counter claims.
5. In support of their respective stands, both parties led evidence before the learned Arbitrator, who, after considering the pleadings, evidence and submissions of the parties, passed the impugned award. The learned Arbitrator, while allowing claim nos. 1 to 3, 5, 7, 9, 11 to 13 in favour of the respondent by awarding a sum of Rs. 7,96,58,328/- along with interest @14% p.a, has rejected the counter-claims filed by the petitioner.
6. Being aggrieved, the petitioner has approached this Court by way of the present petition.
7. In support of the petition, Ms. Uma Prasad Bachu, learned counsel for the petitioner has made three submissions. The first and foremost being that the impugned award is patently illegal as the learned Arbitrator, while allowing claim nos.[1] to 3, 5,7, 12 and 13, has failed to take into account that the said claims fell within the ambit of excepted matters and were, therefore, clearly non-arbitrable. By drawing my attention to clauses 11.3, 7.1, 7.2, 9, 43, 45 and 63, she contends that the said clauses made it abundantly clear that the petitioner would not be liable to compensate the respondent in the event of any delay arising due to the non-approval of drawings, changes, modifications, alterations etc. The said clauses further stipulated that the petitioner would neither be responsible for any loss or damage to the contractor’s material, equipment, etc. for any reasons whatsoever nor would it be liable to compensate the respondent for costs incurred towards price variation or wage escalation except for those agreed between the parties. She submits that the said clauses were covered under the Special Conditions of Contract and were deemed to be excepted matters, thus making it clear that any claims raised under these clauses could not be referred to arbitration. Once the claims under these clauses were non-arbitrable, the learned Arbitrator, while adjudicating these claims, travelled beyond the terms of the contract. In support of her plea, she seeks to place reliance on the decision of the Apex Court in General Manager, Northern Railways vs. Sarvesh Chopra (2022) 4 SCC 45.
8. Ms. Bachu next submits that while allowing claim nos. 11 to 13, the learned Arbitrator has failed to appreciate that as per the terms of the contract, the amount towards these claims was not payable unless the respondent signed the supplementary agreement, which it refused to do. She, therefore, contends that since the learned Arbitrator has allowed these claims by ignoring the specific conditions of the contract, the impugned award is liable to be set aside.
9. The third and final submission of Ms. Bachu is that the learned Arbitrator has failed to appreciate that as the contract did not include any provision for interest on delayed payments, it was evident that the parties had agreed that no interest would be payable. She contends that the learned Arbitrator has exceeded his jurisdiction in awarding interest despite there being no provision for the same in the contract. She, therefore, prays that the impugned award being patently illegal, be set aside.
10. Per contra, Mr. Ramesh Singh, learned senior counsel for the respondent begins by contending that there is no infirmity with the impugned award. He submits that the petitioner’s plea that no claim for compensation would be maintainable towards the expenditure incurred/losses suffered by the respondent on account of the delay in execution of the contract despite the reasons for delay being solely attributable to the petitioner, is wholly misconceived. In a case like the present, where it was found that the respondent had to incur extra expenditure on account of the lapses on the part of the petitioner, the learned Arbitrator was justified in allowing the respondent’s claims for compensation/reimbursement with interest.
11. He further submits that the petitioner’ reliance on the decision in Sarvesh Chopra (supra) is also wholly misplaced as in the said case itself, the Apex Court explained the exception to the applicability of the clauses governing excepted matters. He contends that in cases of extreme delay and exercise of bad faith, the claims raised by a party cannot be simply rejected on the ground of being covered under excepted matters and can in appropriate cases, referred to arbitration. In the present case, the stipulated time for completion of work under the contract was 11 months which was required to be completed on or before 15.11.2010. The said work could, however, be completed only on 30.04.2014, i.e., after a delay of 41 months. This delay, he submits, the learned Arbitrator found attributable solely to the petitioner as despite repeated communications/correspondences by the respondent for expediting the performance of the contract, the petitioner did not provide the requisite designs, drawings on time and rather kept on making frequent modifications in the planning and manner of executing the work under the contract. He, therefore, submits that in a case like the present, where the work under the contract was completed with an extreme delay of 41 months, the learned Arbitrator was justified in holding that it was a fit case where the respondent’s claim could not be rejected as being covered under excepted matters.
12. By referring to the decision of a Co-ordinate Bench in MBL Infrastructure Limited vs. Delhi Metro Rail Corporation, OMP (COMM) 311/2021, he submits that any such clause which restricts the rights of parties in claiming damages is against the spirit of Section 55 and 73 of the Indian Contract Act, which entitles the aggrieved party to claim damages and is, therefore, void. He further submits that even otherwise, the question regarding the interpretation of a clause falls within the exclusive jurisdiction of the learned Arbitrator and the same ought not to be interfered with unless it is found to be patently illegal or in conflict with the public policy of India. He, therefore, contends that once the learned Arbitrator, after appreciation of facts and evidence has arrived to a categoric conclusion that the delay in completion of the work was attributable to the extreme delay on the part of the petitioner, entitling the respondent to seek damages, the view taken by the learned Arbitrator being a plausible one, ought not to be interfered with by this Court. In support of his plea, he seeks to place reliance on a decision of this Court in Ircon International Limited vs. GPT-Rahee JV, 2022 SCC Online Del 839 as also a decision of the Calcutta High Court in State of West Bengal vs. Pam Developers Pvt. Ltd. (2017) SCC Online Cal 13272.
13. Finally he submits that even if these restrictive clauses are read to imply that the petitioner was not obliged to consider the respondent’s claims covered by these clauses, the same would not create any embargo on the learned Arbitrator from entertaining such claims. By referring to the decisions of the Apex Court in Asian Tech Limited vs. Union of India, (2009) 10 SCC 354 and Assam State Electricity Board and Others vs. Buildworth Private Limited, (2017) 8 SCC 146, he submits that these restrictive clauses constituted a bar only on the Department from entertaining claims covered by these clauses but did not preclude the learned Arbitrator from adjudicating these claims. He, therefore, prays that the petition be dismissed.
14. Having considered the submissions of learned counsel for the parties and perused the record, what emerges is that the petitioner has raised three grounds to assail the award. The primary contention being that the learned Arbitrator has allowed claim nos. 1 to 3, 5 and 7 which fell within the ambit of excepted matters. The petitioner has next urged that claim nos. 9, 11 to 13 and 17 have been erroneously allowed by the learned Arbitrator by failing to appreciate that the respondent had refused to sign the supplementary agreement prescribed under the contract as a pre-condition for release of the amounts under these claims. The third and final submission of the petitioner is that in the absence of any clause in the contract providing for payment of interest, the learned Arbitrator could not have awarded any interest.
15. Before I begin to deal with these submissions in detail, it would be appropriate to note the contours of the limited jurisdiction which this Court exercises under Section 34 of the Act. In this regard, reference may be made to Dyna Technologies (P) Ltd. vs. Crompton Greaves Ltd. (2019) 20 SCC 1, wherein the Apex Court has reiterated that the scope of interference with an arbitral award under section 34 of the Act is extremely narrow. The Court does not act as an appellate authority and, therefore, cannot re-assess or reappreciate the evidence led before the Arbitral Tribunal. When the Court finds that the conclusions arrived at by the Arbitral Tribunal are based on a possible view of the matter, no interference is called for. The relevant observations of the Apex Court as contained in para nos. 24 and 25 read as under:
16. I may also refer to the decision of this Court in Ircon International Limited (Supra), wherein this Court has held that the interpretation of a clause of a contract falls within the exclusive domain of the learned Arbitrator and therefore, if a view taken by the Tribunal is not an implausible one, the Court should not interfere with the same. The relevant extracts of the said decision read as under:
17. In the light of these guiding principles for exercise of the limited jurisdiction of this Court under Section 34 of the Act, I may, in the first instance, deal with the submissions of the parties in respect of the claims which the petitioner has vehemently urged fell within the ambit of excepted matters, either because no claim itself was maintainable as per the contract or it was agreed between the parties that the decision of the petitioner/employer in respect of the said claim was final. On the other hand, it is the respondent’s case that merely because some of the clauses use restrictive language and provide that no claim would be maintainable under certain heads, the same cannot be construed as curtailing the power of the learned Arbitrator from adjudicating the claims for reimbursement of expenses incurred due to reasons attributable to the employer. It has, therefore, been further urged by the respondent that in cases of extreme delay, like the present one, the learned Arbitrator was justified in allowing the respondent’s prayer for compensation towards the expenses incurred in completing the project on account of this delay.
18. In order to appreciate these pleas of the parties, it would be apposite at this stage to note those claims, along with the relevant clauses of the GCC, which it is urged, fell within the ambit of excepted matters and were therefore not arbitrable: (I) (i) CLAIM NO.1 Whether the claimants are entitled to additional expenses of Rs. 9,93, 193/-incurred and as such losses suffered on engagement of permanent labour deployed at work.
(ii) CLAIM NO.2
Whether the Claimants are entitled to a sum of Rs. 1,60,99,892/- on account of additional expenses incurred in the nature of salary of permanent technical, supervision as also watch and war staff during the period from 15th Nov, 2010 to 30th April, 2014?
(iii) CLAIM NO.3
Whether the. Claimants are entitled to a sum of Rs. 10,55,017/- on account of additional expenses incurred in relation to site overhead expenses during the period from 15th Nov, 2010 to 30th April, 2014? CLAUSE 11.[3] (PERTAINING TO CLAIM NOS. 1 TO 3) 11.[3] No claim whatsoever will be entertained by the Railway on account of any delay or hold up of the work/s arising out of delay in approval of drawings, changes, modifications, alteration, additions, omission and the site layout plans or details, drawings and designs and/or late supply of such material as are required to be arranged by Railway or due to any other factor on railway accounts.
CLAIM NO.5
Whether the claimants are entitled to extra cost due to re-handling of barricades due to allotment of work site in phased manner: Rs.6,00,000/ - 1150 meter (Area of Barricade) x 4 times x Rs.1,000/meter- Rs.6,00,000/- as per details given in Annexure-E with the Claim petition.
CLAUSE 9 (PERTAINING TO CLAIM NO.5)
9.0 RATES FOR PAYMENT 9.[1] The rates given in the attached schedule of rates tendered by the contractor and as accepted by the Railways will form the basis of payment for such items under this contract. 9.[2] No material price variation or wages escalation on any account whatsoever the compensation for Force majure etc. shall be payable under the contract except payable as per price escalation clause if any provided separately in the tender documents. 9.[3] The rates for any item work not included in the (Schedule of times, Rates and quantities) and which the contractor may be called upon to do by Railway Administration shall be fixed by the supplementary written the contractor and the Railway before the particular item or items of work is/are executed in the event of such agreement not being entered into and executed the Railway may execute these works by making alterative arrangements. Railway will not be responsible for any loss or damages on this account. Non Scheduled Items- Providing temporary Steel barricading 2.0 m high and making arrangements for traffic diversion such as traffic plant during construction period at site for day andnight as per requirement and as per DMRC type drawing. This item will be payable only once during the entire construction period. Till the completion of work, the arrangement of barricading and traffic diversion has to be kept continuously. This shall include repositioning or repainting of barricading and provision of suitable reflectors and red lamps in night. The dimensions of barricades as given in the drawing, with all labour and material as a complete job. Nothing extra shall be paid for fixing and any other arrangements. (The release barricades will be the property of the contractor)
CLAIM NO.7
Whether the claimants are entitled to payment on account of damage to tools and plant (Pumps, Welding Machine, Jack Hammer & Vibrators, etc.] and removal of slush/muck accumulated due to flooding of boxes on dated 20.07.2013 Rs.2,76,254/as per details given in Annexure G with the Claim Petition.
CLAUSE 7.1, 7.[2] & 43 (PERTAINING TO CLAIM NO.7) 7.[1] The drawings for the works can be seen in the office of the Chief Administrative Officer/ Construction, Northern Railway, Kashmere Gate, Delhi and in the office of Dy. Chief Engineer/Const. II, Northern Railway, Shivaji Bridge, New Delhi. It should be noted by tenderer/ s that these drawings are meant for general guidance only and the railway may suitably modify them during the execution of the work according to the circumstances without making the Railway liable for any claims on account of such changes 7.[2] The tenderer/s is/are advised to visit the site of work and investigate actual conditions regarding nature and conditions of soil, difficulties involved due to inadequate stacking space, due to build up area around the site, availability of materials, water and labour, probable sites for labour camps, stores, godowns etc. They should also satisfy themselves as to the sources of supply and adequacy for their respective purpose of different materials referred in the specifications and indicated in the drawings. The extent of lead and lift involved in the execution of work and any difficulties involved in the execution of work should also be examined before formulating the rates for complete items of works described in the schedule.
43.0 MISCELLANEOUS: The Railway shall not be responsible for any loss or damage to contractor/s men, material, equipments, tools and plants etc, from any cause whatsoever. No claim for idle labour, idle machinery/plant etc on any account will be entertained. Similarly, no claim shall be entertained for business loss or any such loss.
(i) CLAIM NO. 12 Unpaid PVC bill for want of final bill clearance: Rs.53,07,050/-.
(ii) CLAIM NO. 13
Final bill pending for want of final Addendum &Corrigendum: Rs.10,00,000/- CLAUSE 45 AND 63 (PERTAINING TO CLAIM NOS. 12&13)
45. It shall be open to contractor to take objection to any recorded of measurements on any ground within 7 days of the date of such measurements. Any recorded measurement taken by the Engineer in the presence of the Contractor or in his absence after due notice has been given to him in consequence of objection made by the Contractor shall be final and binding on the Contractor and no claim whatsoever shall thereafter be entertained regarding the accuracy and classification of the measurements.
63. All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the GM and the GM shall, within 120 days after receipt of the contractor's representation, make and notify decisions on all matters referred by the contractor in writing, provided that matters for which provision has. been made in Clauses 8, 18, 22(5), 39, 43(2), 45(a), 55, 55 A(5) 57, 57A, 61(1), 61(2), and 62(1) to (xiii)(J[3]) of Standard. General Conditions of Contract or in any clause of the Special Conditions of the contract shall be deemed as 'excepted matters' (matters not arbitrable) and decisions of the Railway Authority, thereon shall be final and. binding on the Contractor; provided further that 'excepted matters' shall stand specifically excluded from the purview of the Arbitration Clause.
19. From the aforesaid, what clearly emerges is that these seven claims, raised by the respondent are in the nature of seeking reimbursement of the extra expenditure incurred by it, on account of the prolongation of the project due to reasons attributable solely to the petitioner. From the submissions made at the bar, I find that the petitioner has not seriously disputed the respondent’s claim that these additional expenses were incurred but have only contended that as per the terms of the contract, no amount under these heads was payable as the petitioner’s decision in this regard was final and consequently, these claims were not at all maintainable. In support of this plea, the petitioner has relied solely on the decision in Sarvesh Chopra (supra). The respondent, on the other hand, has besides urging that Sarvesh Chopra (supra) itself provides for exceptions where excepted matters can also be considered by the learned Arbitrator, also relied on Asian Tech (supra) and Buildworth Limited (supra), Since both sides have relied on the decision in Sarvesh Chopra (supra), it may be useful at this stage, to refer to this decision, wherein the Apex Court has summarized the principles governing excepted matters. Para nos. 14 and 15 thereof read as under:
15. In our country question of delay in performance of the contract is governed by Sections 55 and 56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it may frustrate the contract and then the innocent party need not perform the contract. So also, if time is of the essence of the contract, failure of the employer to perform a mutual obligation would enable the contractor to avoid the contract as the contract becomes voidable at his option. Where time is “of the essence” of an obligation, Chitty on Contracts (28th Edn., 1999, at p. 1106, para 22-015) states: “a failure to perform by the stipulated time will entitle the innocent party to (a) terminate performance of the contract and thereby put an end to all the primary obligations of both parties remaining unperformed; and (b) claim damages from the contract-breaker on the basis that he has committed a fundamental breach of the contract („a breach going to the root of the contract‟) depriving the innocent party of the benefit of the contract („damages for loss of the whole transaction‟)”. If, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party i.e. the contractor, cannot claim compensation for any loss occasioned by the non-performance of the reciprocal promise by the employer at the time agreed, “unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so”. Thus, it appears that under the Indian law, in spite of there being a contract between the parties whereunder the contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of the employer, still a claim would be entertainable in one of the following situations: (i) if the contractor repudiates the contract exercising his right to do so under Section 55 of the Contract Act, (ii) the employer gives an extension of time either by entering into supplemental agreement or by making it clear that escalation of rates or compensation for delay would be permissible, (iii) if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the employer and the employer accepts performance by the contractor in spite of delay and such notice by the contractor putting the employer on terms.”
20. In the light of the aforesaid, it is clear that the general rule is that once the contractor has agreed that no claim would be entertainable in respect of certain heads, he will be precluded from raising any claim qua the same. This general rule is, however, subject to exceptions, which have been explained in a number of decisions, both by the American Courts as well as the Indian Courts. In fact, I find that in Sarvesh Chopra (supra) itself, which has been heavily relied upon by the petitioner, the Apex Court has taken note of these exceptions to this general rule that no claim would be entertainable in cases of excepted matters. I am, therefore, of the view that the learned senior counsel for the respondent is correct in urging that merely because some of the claims fell within the ambit of excepted matters, the same could not preclude the contractor from raising a justifiable claim in respect thereof. However, the exceptional circumstances, where such claims would be entertainable, have to be decided on a case to case basis and cannot be put in a straight jacket formula. These exceptional circumstances may include a situation where the contractor had made his position clear regarding the additional claim during the performance of the contract itself as also a situation where there is an extreme delay, for which the employer is solely responsible.
21. I have also considered the decisions in Asian Tech (supra) and MBL Infrastructure (supra), wherein it has been held that this bar on raising claims qua excepted matters of this nature where the claimant is seeking compensation for the expenses incurred, does not take away the power of the learned Arbitrator to allow such claims. In Asian Tech (supra), the Apex Court held as under: “Apart from the above, it has been held by this Court in Board of Trustees, Port of Calcutta vs. Engineers- De-Space-Age (1996) 1 SCC 516, that a clause like clause 11 only prohibits the department from entertaining the claim, but it did not prohibit the arbitrator from entertaining it. This view has been followed by another Bench of this Court in Bharat Drilling & Treatment Pvt. Ltd. vs. State of Jharkhand & others in Civil Appeal No. 10216 of 2003 decided on 20th August, 2009. For the reasons given above we are not in agreement with the view taken by the High Court that the award of the arbitrator was without jurisdiction. In the facts and circumstances of the case, we allow these appeals and set aside the impugned order of the High Court and restore the award of the arbitrator. No costs.”
22. Similarly, in MBL Infrastructure (supra), a Co-ordinate Bench, while dealing with a similar clause, held as under:
23. From the aforesaid decisions of the Apex Court and of this Court, it is evident that the Courts have consistently held that such prohibitory clauses which totally restrict the right of the claimant to seek rightful compensation under Sections 55 and 73 of the Indian Contract Act are against public policy and are, therefore, hit by Section 23 of the Contract Act. This view has also been followed by a Co-ordinate Bench in its recent decision in Delhi Metro Rail Cooperation (Supra) by holding as under:
32. The Arbitral Tribunal examined the said clauses and found that the same were violative of Section 23 of the Contract Act. The Arbitral Tribunal had also relied upon the following passage from the decision dated 23.02.2010 of this Court in Simplex Concrete Piles v. Union of India, (2010) 115 DRJ 616: “Provisions of the contract which will set at naught the legislative intendment of the Contract Act, I would hold the same to be void being against public• interest and public policy. Such clauses are also void because it would defeat the provisions of law which is surely not in public interest to ensure Smooth operation of commercial relations. I therefore hold that the contractual clauses such as Clauses 11A to 11C, on their interpretation to disentitle the aggrieved party to the benefits of Sections 55 and 73, would be void being violative of Section 23 of the Contract Act.”
33. The Arbitral Tribunal found that DMRC was in breach of its obligation. It had the option to order suspension of work as per the Contract clause at Ashram Station, however, it had failed to do so. In the circumstances, DMRC was required to compensate CRTG for its breaches. In the circumstances, the Arbitral Tribunal held that Clauses 2.[2] and 8.[3] of GCC would not absolve DMRC of its liability to pay compensation.
34. The Arbitral Tribunal has jurisdiction to decide the question of fact as well as of law. Clearly, the decision of the Arbitral Tribunal that by virtue of Section 23 of the Contract Act, Clauses 2.[2] and 8.[3] of GCC which proscribe CRTG from claiming compensation due under Sections 55 and 73 of the Contract Act are unenforceable, is a plausible view [See: Simplex Concrete Piles v. Union of India (Supra)]”
24. From the aforesaid, what emerges is that such restrictive clauses as Clause 11.3, 7.1, 7.2, 9 and 43 cannot curtail the power of an arbitrator to entertain bonafide claims of a contractor, even though they may, as per the contract, fall within excepted matters. It may, therefore, be apposite to now examine herein below, the manner in which the learned Tribunal has dealt with claims 1 to 3 in para nos. 9-12 and 43 to 46 of the impugned award.
25. Now I may turn to para 76 of the impugned award, whereunder the learned Arbitrator has allowed claim no.5, which as per the petitioner, was non-arbitrable. The same reads as under:
26. I may now also refer hereinbelow para nos. 89 to 91 vide which, the learned Arbitrator has allowed claim no. 7, which also as per the petitioner fell within excepted matters:
27. Finally, I may refer to the findings qua claim nos. 12 and 13, which again as per the petitioner, fell within the ambit of excepted matters:
28. From the aforesaid it is evident that the learned Arbitrator has, after examining in detail the factual matrix as also the relevant clauses of the GCC, arrived at a categoric conclusion that the delay in completing the project was attributable to the petitioner, due to which the respondent had to incur extra expenditure at every stage. The learned Arbitrator has observed that the claimants had brought to the notice of the petitioner the circumstances preventing the timely completion of the project, but the petitioner failed to address/resolve the same, thereby delaying the completion of the same. Furthermore, it was found that the petitioner failed to provide to the claimants the workable site at one go and instead provided the same in phases, as a consequence whereof the claimants had to incur costs towards extra barricading and were, therefore, liable to be compensated for the actual expenditure. The learned Arbitrator has also awarded damages caused to plant and machinery, which, in its view, was caused due to the negligence of the respondents.
29. From the aforesaid findings qua claim nos. 12 and 13, it transpires that after examining the factual matrix, the learned Arbitrator has specifically rejected the petitioner’s plea that on account of clause 45, no further claim for price variation was maintainable as he was of the opinion that the petitioner’ insistence on the respondent signing a ‘No-Claim certificate’, to seek release of the admitted amount, was wholly illegal. The learned Arbitrator was, therefore, of the considered view that the petitioner could not be permitted to take a plea that unless the respondent agreed to sign a supplementary certificate, undertaking therein that there was no dispute regarding the due amount or the measurements, even the admitted amount towards price variation would not be released.
30. From the aforesaid findings under the impugned award, it is clear that the learned Arbitrator has, after interpreting the relevant clauses of the contract, taken a view that this extreme delay in completing the project was a different kind of delay than the one envisaged by the parties while entering into contract and therefore, a claim for reimbursement of these expenses could not fall within the ambit of excepted matters as contemplated by the parties. This view, in my considered opinion, is a reasonable view and can, by no stretch of imagination, be said to be an implausible view so as to warrant interference by this Court under Section 34 of the Act. It is trite law that interpretation of a clause of a contract falls within the exclusive domain of the learned Arbitrator and a view taken by them in this regard should not, in the normal course, be interfered with unless the same is patently illegal or against the public policy of India. I am, therefore, of the considered opinion that there is no ground made out to interfere with the aforesaid detailed findings of the learned Arbitrator
31. I may now deal with the petitioner’s plea regarding claim nos. 9 and 11, having been erroneously allowed by the learned Arbitrator despite the respondent not having executed the necessary documents prescribed under the contract. It may, therefore, be apposite to note hereinbelow, these claims along with the relevant clauses:
“V. CLAIM NO. 9 Whether the claimant is entitled to release of Security Bank Guarantee: Rs.1, 12,33,060/- CLAUSE 9.8(PERTAINING TO CLAIM NO. 9) After the works completed and taken over by the Railway as per terms and conditions of the contract agreement or otherwise concluded by the parties with mutual consent and full and final payment is made by the Railway to the contractor for work done under the contract, the parties shall execute the Supplementary agreement annexed hereto as Annexure B.
CLAIM NO.11
32. I may now note the relevant findings of the learned Arbitrator in respect of these two claims, which were interconnected.
36. From the aforesaid, it is evident that unlike the position under the Arbitration Act, 1940, Section 31(7) of the 1996 Act incorporates a specific provision empowering an arbitrator to grant interest on the awarded amount. This power includes the discretion to award interest for pre-award, pendente lite and post-award period at such a rate and for such a period as is deemed reasonable in the facts of the case. Award of interest would, therefore, depend on the peculiar facts of each case including the nature of claims, the nature of disputes referred to arbitration, the items on which interest would be payable as also the period for which interest should be granted. The interest should, however, be reasonable and not punitive or unconscionable. This clause, which vests the Arbitrator with the discretion to award interest is, however, subject to party autonomy and therefore in case the parties have agreed at a particular rate of interest or have agreed that no interest at all would be payable, the learned Arbitrator would be bound by such a clause.
37. Having noted the statutory provision dealing with the award of interest, I may now note the relevant findings of the learned Arbitrator in this regard. The same read as under:
38. In the present case, once there was no clause which either prohibited grant of interest or specified the rate of interest, the learned Arbitrator was undoubtedly justified in awarding interest. The learned Arbitrator, having found that the petitioner was responsible for the delay in execution of the contract, was correct in holding that the respondent was entitled to be compensated for the delay in payment of the amount spent to execute the contract. I may also note that the respondent is a private limited company registered under the Micro, Small and Medium Enterprises Act (MSME Act), which in order to complete the project, had to make huge borrowings from various financial institutions by paying interest. Infact, I find that the petitioner has not seriously disputed that in order to complete the contractual work, the respondent had availed of loans from various financial institutions, which amount was required to be returned with interest.
39. From the aforesaid findings of the learned Arbitrator, it is also clear that while awarding interest @ 14% p.a., the learned Arbitrator has taken into account the rate of interest at which the respondent had availed credit facilities to generate the funds required for completion of the contractual work. Even though under Section 16 of the MSME Act, which is applicable to the respondent being an MSME, it was entitled to claim interest at three times the bank rate of interest. The respondent has, however, been awarded interest only @ 14% p.a., which in the facts of the present case, cannot be said to be excessive. I, therefore, find no infirmity with the grant of interest @ 14% p.a., by the learned Arbitrator.
40. For the aforesaid reasons, I find no merit in the petition, which is accordingly, dismissed with no orders as to costs.
JUDGE FEBRUARY 28, 2024 ac/acm