Full Text
Date of Decision: 4th May, 2022
M/S MALIBU ESTATE PVT. LTD. ..... Petitioner
Through: Mr Sanjeev Anand, Senior Advocate with Mr Sonam Anand, Mr
Deepshikha, Advocates
Through:
JUDGMENT
1. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the A&C Act’) impugning an arbitral awarded dated 10.05.2019 passed by an Arbitral Tribunal comprising of three members (hereafter ‘the Arbitral Tribunal’).
2. The impugned award was rendered in the context of the disputes that have arisen between the parties in connection with a contract for construction of a shopping arcade named ‘Malibu Shopping Arcade’.
3. In the month of October, 2004, the petitioner had issued a Notice Inviting Tender (NIT) for construction of the said shopping arcade. The respondent had submitted its bid pursuant to the said NIT.
4. On 12.02.2005, the petitioner issued a Letter of Intent (LoI), in 2022:DHC:1752 favour of the respondent, for the execution of the works at a lumpsum value of ₹4.59 crores. It is stated that thereafter, the parties entered into negotiations and the value of the work was reduced to ₹3.60 crores. However, the petitioner agreed to provide steel and cement free of cost.
5. On 21.02.2005, the respondent furnished an undertaking, whereby it agreed that the petitioner would supply cement and steel at an aggregate value of ₹98 lakhs, free of cost.
6. Thereafter, the petitioner issued a Letter of Award dated 21.02.2005 (LoA), which according to the respondent was backdated.
7. Certain disputes had arisen between the parties in connection with the said contract. The disputes were referred to arbitration. Before the Arbitral Tribunal, the respondent raised various claims. The summary of the claims made and the amounts awarded by the Arbitral Tribunal against the said claims, is set out below: - Summary Claim No. Claim Amount Claimed Rs. Amount Awarded Rs.
1. Balance payment of work done (final bill) refund to security deposit etc. 49,08,076 --- Sub Claim-1 Balance payment of work done (final bill) 47,09,865 (-)40,97,804 Sub Claim-2 Security deposit not refunded by the Respondents 10,00,000 10,00,000 Sub Claim- Cost of items of store physically handed over 58,835 58,835 Sub Claim-4 Cost of aluminum sample arising out of withdrawal of aluminum work 50,000 20,000 Sub Claim-5 Extra financial burden due to post award altering of basic terms and conditions of the Contract and drawings and wrong/excess deductions of Work-Contract Tax (WCT) 40,006 40,006
3 Cost of cement not supplied by the 15,59,301 15,59,301 4 Cost of cement for RMC not supplied by the 18,25,663 18,25,663
5 Balance payment of additions/variations in the work. This claim consists of 13 Sub-claims 74,11,708 Sub Claim-1 Cost of PVC pipe in place of L.A. Class C.I. pipes rendered redundant due to specifications and incompatibility with structural drawings. 1,50,000 55,831 Sub Claim-2 Balance payment of variation bills 1 & 2 6,22,962 Nil Sub Claim-3 Variation Bill No. 3 for fire-fighting works due to change in specifications and capacities 3,17,000 1,71,0159 Sub Claim-4 Extra work relating to revised cable route from LT panel to new finalized location of Generators 60,000 35,169 Sub Claim-5 Variation Bill No. 4 due to change in specifications, capacities of Control Panels 1,20,157 1,20,157 Sub Claim-6 Variation Bill No. 6 due to change in the scope of work and site condition due to delay caused by design change 10,63,429 1,25,994 Sub Claim-7 Variation Bill No. 7 20,47,459 1,28,244 Sub Claim-8 Payment of hardware fittings 50,594 50,594 Sub Claim-9 Additional fire fighting works in tower and Restaurant area 10,28,197 10,28,197 Sub Claim- Variation Bill No.8 due to change in specifications of work 2,15,977 2,15,977 Sub Claim- Repair of approach to entrance 3,163 3,163 Sub Claim- Variation Bill No.9 due to change in specification and scope of work of electrical items 2,35,888 2,35,888 Sub Claim- Variation Bill No.11 due to change in the scope of work and site conditions due to delay caused by design change 14,96,880 13,68,680
9 Balance amount of Service Tax 1136,338 1,29,211 Total 4,75,33,057 59,40,491 10 Interest @ 24% p.a. on all the above claims from due date to date of payment Interest @ 24% p.a. Interest at 10% p.a Amount Rs.66,47,40 9/-
8. The petitioner has challenged the impugned award primarily on two fronts. First, it is stated that the decision of the Arbitral Tribunal to accept the respondent’s Claim nos. 3 and 4, being additional amounts for cement and steel, is contrary to the undertaking furnished by the respondent. The Arbitral Tribunal held that the said undertaking did not form a part of the contract between the parties and was not made use of. The petitioner claims that the said finding is ex facie erroneous and without considering the rival contentions.
9. Second, it is contended on behalf of the petitioner that the award of compensation for loss of overheads and underutilisation of resources (Claim nos. 6 and 7), is arbitrary. The Arbitral Tribunal awarded a sum of ₹75,000/- per month as compensation for loss of profits (Claim NO. 6) and ₹25,000/- per month as compensation for underutilisation of labour (Claim no. 7), against the aforesaid claims. And, the same without any material or basis.
10. After some arguments, the learned counsels for the parties agree that the impugned award to the aforesaid extent be set aside. The question of interest on the said claims be also left open. They also agree that the disputes in relation to the aforementioned claims be decided afresh by an Arbitral Tribunal comprising of a Sole Arbitrator. The parties further request that a Sole Arbitrator be appointed in these proceedings to avoid any further pleadings.
11. Although, the scope of proceedings under Section 34 of the A&C Act does not extend to appointment of an arbitrator, however, considering that the parties have been agitating their claims since several years, this Court considers it apposite to accede the said request.
12. In view of the above, the impugned award to the extent of the amount awarded against Claim nos. 3, 4, 6 and 7, is set aside.
13. With the consent of the parties, this Court appoints Justice (Retired) V.K. Jain, a former Judge of this High Court as the Sole Arbitrator to adjudicate the disputes between the parties. This is subject to the learned Arbitrator making the necessary disclosure as required under Section 12(1) of the A&C Act and not being ineligible under Section 12(5) of the A&C Act.
14. The aforesaid claims are referred to the Arbitral Tribunal for adjudication afresh. The Arbitral Tribunal shall also decide the claim for interest on the said claims.
15. It is further clarified that except to the extent as stated aforesaid, the impugned award is not interfered with.
16. This order is passed with the consent of the parties.
17. The petition is disposed of in the aforesaid terms.