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HIGH COURT OF DELHI
JUDGMENT
M/S WAPCOS LIMITED ..... Appellant
Advocates who appeared in this case:
For the Appellant : Mr. Varun Sharma, Advocate.
For the Respondent : Mr. Arshdeep Singh Khurana and Ms. Tannavi Sharma, Advocates.
HON'BLE MR JUSTICE AMIT MAHAJAN
1. M/s Wapcos Limited (hereinafter ‘Wapcos’) has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act (hereinafter ‘the A&C Act’) impugning a common judgement dated 31.07.2020 (hereinafter ‘the impugned judgement’) passed by the learned Commercial Court, whereby it had rejected the applications filed by Wapcos and M/s C & C Energy Private Limited (hereinafter ‘C&C’) under Section 34 of the A&C Act. The parties had preferred their respective applications, impugning the award dated 13.06.2019 (hereinafter ‘the impugned award’) to the extent that they were aggrieved. Wapcos assails the impugned judgement to the limited extent that it rejects its application under Section 34 of the A&C Act [being OMP(Comm) No. 167/2009 captioned M/s WAPCOS Limited vs C & C Energy Private Limited]. Factual Background
2. On 18.09.2012, the Energy Water and Sanitation Authority of Rwanda (EWSA, Rwanda) awarded a contract to Wapcos for “supervision of engineering-procurement-construction of 15 MW peatto-power plant in Rwanda” (hereinafter ‘the Project’).
3. Thereafter, on 21.01.2013, Wapcos and C&C entered into an agreement (hereinafter ‘the Agreement’), whereby C&C agreed to assist in the supervision of the Project. The Agreement was for a term of fifteen months from the date of execution of the Agreement, that is, until 20.04.2014. In terms of Article 9 of the Agreement, the remuneration and payment for the services was fixed at ₹1,64,43,000/-, excluding all taxes against the provision of manpower for carrying out the tasks.
4. The scope of work to be performed by Wapcos and C&C was contingent upon the work executed by the Engineering Procurement Construction (EPC) Contractor engaged by EWSA, Rwanda. The EPC Contractor delayed in completing its work, rendering Wapcos and C&C unable to complete their work within the stipulated period of time. The parties were only able to complete 50% of the work within the stipulated period of fifteen months.
5. C&C contends that on account of failure of the EPC Contractor to complete its work in time, it sent a letter dated 17.03.2014, requesting for an extension of time for a period of six months or until the completion of the erection of plant by the EPC Contractor. C&C also stated that the financial remuneration for this would be agreed mutually. C&C states that it continued to work and provided seventy-six (76) additional man-days for the work. Thereafter, it withdrew its manpower.
6. C&C raised invoices amounting to ₹1,86,44,882/-. Against the said invoices, Wapcos only paid an amount of ₹1,16,57,067/-. The remuneration for the additional man-days provided by C&C amounted to ₹13,68,684/-, against which Wapcos did not make any payment.
7. Thereafter, disputes arose between Wapcos and C&C regarding the payment of the balance amount. After no result came from trying to resolve the disputes amicably, C&C invoked the agreement to refer the disputes to arbitration, in terms of Article 11.[5] of the Agreement. However, the parties failed to agree on the appointment of an arbitrator. Thereafter, C&C, by way of a petition under Section 11 of the A&C Act, approached this Court for appointment of an arbitrator. By an order dated 30.05.2017, this Court referred the parties to the Delhi International Arbitration Centre (DIAC). The Arbitral Tribunal was constituted under the Rules of the DIAC. Arbitration
8. Before the Arbitral Tribunal, C&C filed its Statement of Claims. The claims made by C&C in the Statement of Claims are tabulated below: Claim No. Particulars Amount
1. Recovery towards services/man-days provided under the contract ₹69,87,815/-
2. Recovery towards the additional man-days provided ₹13,68,684/-
3. Interest on Claim nos. 1 and 2 at the rate of 18% per annum up to 15.08.2017 ₹15,87,900/-
4. Pendente lite interest at the rate of 18% per annum
5. Preventive injunction/Preservation of assets
6. Costs
9. Wapcos filed its Statement of Defence and contested the claims raised by C&C. Additionally, it filed counter-claims, which are tabulated below: Counter Claim No. Particulars Amount
1. Return of advance payment along with interest ₹16,44,300/-
2. Claim towards performance bond at the rate of 10% of ₹16,44,300/the contract value along with interest
3. Pendente lite interest
4. Legal costs
10. By the impugned award, the Arbitral Tribunal partially allowed the claims of C&C and awarded an amount of ₹82,98,030/- along with pendente lite and future interest at the rate of 18% per annum from the date of filing of the Statement of Claims till realisation of the award. Additionally, C&C was also awarded proportionate arbitration fee, which was paid by it as its share on the said amount. Further, the counter-claims raised by Wapcos were rejected.
11. The Arbitral Tribunal found that C&C had performed its obligations under the Agreement inasmuch as it had provided the manpower as agreed during the term of the Agreement. Accordingly, the Arbitral Tribunal held that C&C was entitled to the agreed consideration. Wapcos had remained on site after the expiry of the term of the Agreement and continued to render services as the work was delayed beyond the term of the Agreement. The Arbitral Tribunal rejected the contention that C&C was not entitled to the agreed consideration as the work remained incomplete and in view of its finding, C&C had duly performed the services as agreed by providing the necessary manpower during the term of the Agreement. Section 34 of the A&C Act
12. According to Wapcos, the impugned award is vitiated by patent illegality as the Arbitral Tribunal had awarded the entire consideration to C&C even though 50% of the work was completed after C&C had removed its manpower from the site. Wapcos contended that obligations of C&C were not limited to providing manpower as it was also required to assist Wapcos in providing supervision services. It also contended that the Arbitral Tribunal had erred in not appreciating that the payments were dependent on the milestones relating to the work executed and were contingent upon receipt of the payments from EWSA, Rwanda.
13. Wapcos contended that the Agreement with C&C was on a ‘backto-back’ basis with its agreement with EWSA, Rwanda and the Arbitral Tribunal had failed to appreciate the same.
14. C&C had also assailed the impugned award on the ground that it had not been awarded payments for providing manpower after the expiry of the term of the Agreement. C&C claimed that the manpower provided by it remained on site till the month of August, 2014 and therefore, it was entitled to payment for additional man-days at the same rate agreed under the Agreement. The Arbitral Tribunal did not accept C&C’s claims for additional man-days, after the expiry of the term of the Agreement, on the ground that the parties had not extended the Agreement and therefore, no further consideration was payable to C&C under the Agreement. C&C is aggrieved to the limited extent that its claim was denied.
15. C&C contended that the Arbitral Tribunal had failed to appreciate that notwithstanding that the Agreement was terminated by efflux of time, it was entitled for the services provided beyond the term of the Agreement on the principle of quantum meruit.
16. The learned Commercial Court found that none of the grounds as urged by the parties fell within the limited scope of grounds under Section 34 of the A&C Act and, accordingly, rejected the applications filed under Section 34 of the A&C Act Reasons & Conclusions
17. The learned counsel appearing for Wapcos has assailed the impugned award and the impugned judgment, essentially, on two fronts. First, he submitted that the Arbitral Tribunal as well as the learned Commercial Court failed to consider the terms of the Agreement. He contended that in terms of the Agreement, the obligations of C&C were not limited to providing manpower; C&C had also agreed to assist Wapcos in rendering supervision services. He submitted that although the Arbitral Tribunal had referred to Article 2.[2] of the Agreement, it had ignored Article 2.[1] of the Agreement, which expressly provided that C&C would assist in supervision of engineering-procurementconstruction of the plant. He also contended that in terms of Article 10.[2] of the Agreement, payments to C&C were to be made on completion of the specified milestones. Further, in terms of Article 10.[3] of the Agreement, it was agreed that all payments would be made to C&C after receipt of corresponding payments from the client (EWSA, Rwanda) on back-to-back basis. He submitted that only 50% of the work was completed during the period when C&C’s manpower was on site. Therefore, C&C was entitled only to a proportionate payment commensurate with the work done.
18. Second, he contended that the decision of the Arbitral Tribunal to award interest at the rate of 18% per annum is exorbitant and patently illegal.
19. The principal question to be addressed is whether the finding of the Arbitral Tribunal that C&C had performed its obligations under the Agreement and therefore, was entitled to the agreed consideration, is vitiated by patent illegality.
20. Article 2 of the Agreement set out the scope of services to be performed by C&C. The said article is relevant and reproduced below:- “ARTICLE 2: SCOPE OF SERVICES 2.[1] C & C Energy Pvt. Ltd. shall assist in supervision of engineering-procurement-construction of 15 MW peat-topower plant in Rwanda including all the tasks mentioned under Article-1. 2.[2] C & C Energy Pvt. Ltd. shall provide services of one no. Project Director, one no. Mechanical Engigneer, one no. Civil Expert, one no. Site Engineer and one no. Engineer as per the following staffing schedule at TABLE-A to assist WAPCOS in carrying out works under Tasks mentioned at Article-1. TABLE-A SI. NO. Man-power Man-months
1. Project Director Field: 3 months Home: 2 months
2. Mechanical Engineer Field: 6 months Home: 2 months
3. Civil Expert Field:6 months Home:4 months
4. Site Engineer Field:8 months
5. Engineer Home: 3 months
21. There is no cavil that in terms of Article 2.[1] of Agreement, C&C had agreed to assist in supervision of the Project. However, the key question is whether the same entailed any task other than providing the necessary manpower to Wapcos for assistance in supervision of the contract in question. The Arbitral Tribunal found that C&C was required to provide the requisite manpower as specified in Article 2.[2] of the Agreement for rendering the supervision assistance in terms of the Agreement; it was not required to render any other services.
22. It is relevant to refer to Article 9.[1] of the Agreement and Table-I of Annexure-I to the Agreement. The said clause and the tabular statement are set out below- “ARTICLE 9: REMUNERATION AND PAYMENT 9.[1] The cost of M/s C & C Energy Pvt. Ltd. services for the tasks mentioned under Article-I are summarised below. C & C Energy Pvt. Ltd. shall be paid an amount of INR 1,64,43,000/- (Indian Rupees One Crore Sixty Four Lacs Forty-three Thousand only) excluding all taxes against provision of man-power for carrying out the tasks mentioned under Article-I. The breakdown of this cost is mentioned at Table-I, Annexure-1. Annexure-I TABLE-I Manmonths Rate (INR) 90% of Actual Monthly Rate in INR Total (INR) I. Field Office
1. Project Director 3 6,48,000 5,83,200 17,49,600
2. Mechanical Engineer 6 5, 40, 000 4,86,000 29,16,000
3. Civil Expert 6 5,40,000 4,86,000 29,16,000
4. Site Engineer 8 4,32,000 3,88,800 31,10,400 Sub-Total (A) 1,06,92,00 II Man- Day Rate (INR) TOTAL (INR)
1. Subsistence Allowance 690 2700 18,63,000 Sub-Total 18,63,000
II. Home
1. Project Director 2 5,40,000 4,86,000 9,72,000
2. Mechanical Engineer 2 4,32,000 3,88,800 7,77,600
3. Civil Expert 4 4,32,000 3,88,800 15,55,200
4. Engineer 3 2,16,000 1,94,400 5,83,200 Sub-Total (B) 38,88,000 Grand Total 1,64,43,000”
23. It is apparent from a plain reading of Article 9.[1] of the Agreement along with Table-I of Annexure-I to the Agreement that the entire consideration payable to C&C under the Agreement was structured on the rates payable for providing different categories of manpower, as contemplated under the Agreement. C&C was to be remunerated for the provision of manpower at the rate specified in Table-I of Annexure-I to the Agreement and nothing more.
24. A meaningful reading of the Agreement indicates that C&C was required to provide assistance in supervision by providing the manpower as agreed. C&C was required to assist in supervision solely by providing manpower; it had no other deliverables. Its association with Wapcos for providing the services was limited to employing the requisite manpower as agreed between the parties. The Arbitral Tribunal’s view to the aforesaid effect is certainly a plausible view.
25. There is no dispute that C&C had provided the manpower as agreed for the entire duration of the Agreement. Therefore, C&C was entitled to the consideration as agreed.
26. The contention that the payments due to C&C were contingent on achievements of milestones, as specified in Article 10.[2] of the Agreement, is not disputed. Article 10.[3] of the Agreement also provided that all payments would be made to C&C after receipt of corresponding payments from EWSA, Rwanda (client). However, there is no dispute that all milestones were achieved and Wapcos has received the payments from EWSA, Rwanda.
27. Wapcos interprets Articles 10.[2] and 10.[3] of the Agreement to mean that C&C would not be entitled to full payment unless it was instrumental in meeting the milestones. The Arbitral Tribunal did not accept the said interpretation and held that C&C would be entitled to full remuneration on performance of its obligations under the Agreement. Since the manpower provided by C&C had remained on site for the full term of the Agreement as agreed, C&C would be entitled to the entire consideration notwithstanding that only a part of the contract had been completed during the period its employees were on site.
28. This Court is unable to accept that this view is patently illegal. Although the Project had been delayed, C&C was not responsible for the same. Insofar as C&C is concerned, it had performed its obligations under the Agreement as it had provided the requisite manpower. In view of the above and considering that the amounts payable to C&C under the Agreement were based on the agreed rates for various officials to be deputed by C&C, the conclusion of the Arbitral Tribunal that C&C was entitled to the entire consideration, as agreed in terms of the Agreement, cannot be faulted. In any view of the matter, the said decision cannot be held as patently illegal or one that falls foul of the public policy of India.
29. Insofar as the award of interest is concerned, it is now well settled that the Arbitral Tribunal has wide discretion in awarding interest (See: Punjab State Civil Supplies Corporation Limited (PUNSUP) and Anr. v. Ganpati Rice Mills: SLP (C) 36655 of 2016, decided on 20.10.2021). In the present case, Wapcos had also claimed interest at the rate of 18% per annum and therefore, it is not open for Wapcos now to contend that the said rate is exorbitant and onerous. This Court also finds no fault with the learned Commercial Court in declining to interfere with the impugned award.
30. Before concluding, it is relevant to state that C&C has not appealed the decision of the learned Commercial Court to not accept its challenge to the impugned award. Thus, it is not necessary in this appeal to examine the decision of the Arbitral Tribunal to reject C&C’s claim for the period beyond the term of the Agreement.
31. This Court is of the view that the learned Commercial Court had rightly rejected Wapcos’ application under Section 34 of the A&C Act.
32. The appeal is unmerited and, accordingly dismissed. Pending applications, if any, are disposed of.
VIBHU BAKHRU, J AMIT MAHAJAN, J OCTOBER 20, 2022