M/S Shivalaya Construction Company Pvt. Ltd. v. Delhi Development Authority

15. DDA filed its Statement of Defence, however, it did not raise any counter-claims.

16. By the impugned award, the Arbitral Tribunal accepted the claims of SCCPL to a limited extent. The Arbitral Tribunal accepted Claim no. 3 of SCCPL and accordingly, awarded ₹8,00,000/- along with interest at the rate of 10% per annum from the date of final payment till realisation. All the other claims of SCCPL were rejected by the Arbitral Tribunal.

17. Aggrieved by the impugned award, SCCPL has filed the present petition. Submissions, Reasons and Conclusion

18.

SCCPL has impugned the arbitral award to the limited extent that its claims for additional bonus (Claim No. 1); for reimbursement of Works Contract Taxes (WCT) and Cess tax amounting to ₹26,89,428/- (Claim No. 2); and for compensation due to prolongation of works (Claim Nos. 4 to 6), were rejected.

19.

SCCPL had claimed a sum of ₹73,04,676/- as bonus for completing the works before the stipulated period in terms of Clause 2A of the Agreement. The said clause reads as under: “Incentive for early completion In case, the contractor completes the work ahead of scheduled completion time, a bonus @ 1% (one percent) of the tendered value per month completed on per day basis, shall be payable to the contractor, subject to a maximum limit of 5% (five percent) of the tendered value. The amount of bonus, if payable, shall be paid along with the final bill after completion of work. Provided always that provision of the Clause 2A shall be applicable only when so provided in Schedule F.”

20. In terms of Clause 3 of the NIT read with Schedule ‘F’ and Clause 5 of the Agreement, the date of commencement of works was stipulated as the 15th day from the date of issuance of the LOA or from handing over of the site. The parties had fixed 16.05.2014 as the scheduled date for commencement of the works. The Project was to be completed within a period of twelve months, that is, by 15.05.2015. According to SCCPL, DDA had concluded that the period of two-hundred and fifty days extension was justified on account of various hindrances.

SCCPL claims that DDA had granted extension of time till 08.12.2015 during the continuation of the Agreement. However, SCCPL had completed the works on 16.11.2015, which was sixty-five days prior to the date for completion of the Agreement. According to SCCPL, it was thus entitled to bonus in terms of Clause 2A of the Agreement for a period of sixtyfive days.

21. DDA contested the aforesaid claims, essentially, on three fronts. First, it contended that SCCPL was required to raise the claim along with its Final Bill but had not done so and therefore, it was barred from raising any such claim. DDA contended that on the principle of waiver, acquiescence and estoppel, no such amount was payable by it. Second, it contended that SCCPL’s plea that the Agreement was extended for a period of two hundred and fifty days was misconceived as the extension was granted only till 16.11.2015. Lastly, it contended that SCCPL had not completed the work within a period of twelve months from the date of commencement (that is, by 15.05.2015) and therefore, Clause 2A of the Contract was not applicable.

22. The Arbitral Tribunal found that there were delays on account of various hindrances and, in addition, SCCPL was also called upon to do the additional work for a sum of ₹6,72,35,720/- for which further ninety-one days were considered to be sufficient. It noted that DDA, in one of its internal documents, justified the extension of two hundred and fifty days and DDA’s Assistant Engineer had recommended such extension of time for completion of the works. However, the work was completed within a period of one hundred and eighty-five additional days. The final extension of time for completion of work was granted up to the date of completion of the Agreement.

23. SCCPL’s claim that the extension of time by a further period of two hundred and fifty days was premised on the recommendations of DDA’s Assistant Engineer. The Arbitral Tribunal found that the said period of two hundred and fifty days was computed by considering a delay of one hundred and fifty-nine days caused due to hindrances and, a further period of ninety-one days allowed for the execution of extra works. The Arbitral Tribunal found that the said calculation was erroneous as it did not take into account adjustment for any time in respect of certain works that were reduced from the quantity of work to be done by SCCPL. The Arbitral Tribunal also observed that during the execution of the Agreement, extension of time to complete the works was not granted.

24. The observation of the Arbitral Tribunal that during the course of the Agreement, DDA had not extended the time for completion of Agreement, is erroneous. Admittedly, DDA had issued a letter dated 12.06.2015 extending the time for completion of the work till 08.12.2015. DDA claims that this was only provisional as such extension was granted without prejudice to the rights of DDA to recover compensation in accordance with the Agreement. Clearly, this contention is unmerited. Whilst, DDA had reserved its rights to recover compensation, the extension of time granted was firm and not provisional. Further, it is not DDA’s case that it is entitled to any compensation for the extension of time granted to SCCPL

25. Having stated the above, this Court finds no ground to interfere with the impugned award on the aforesaid ground. This is because the Arbitral Tribunal had computed the period for which the extension was required to be granted. Whilst, the Arbitral Tribunal accepted that the extension for a period of one hundred and fifty-nine days and ninetyone days were available to SCCPL on account of delays caused due to hindrances and time allowed for additional works respectively; the Arbitral Tribunal also found that the time allocated for execution of quantities that were reduced, was required to be reduced from the period constituted above. This was on the same principle that additional time was granted for additional work. Accordingly, the Arbitral Tribunal reworked that the additional time available to SCCPL for completion of the works was one hundred and eighty-three days.

26.

SCCPL claims that DDA had not set up any such defence and therefore, the impugned award is without jurisdiction. It also claims that it had no opportunity to deal with this contention.

27. This Court finds little merit in the aforesaid contention. DDA had clearly denied that SCCPL was entitled to extension beyond the date of actual completion. It had claimed that SCCPL was granted extension of time only till completion, solely for the reason that the delays were not attributable to SCCPL.

28. SCCPL’s case was premised on the basis that it was entitled to two hundred and fifty days extension as the same was found to be justified. The onus to establish that it was entitled to such extension rested on SCCPL.

SCCPL had relied upon the recommendation made by the DDA’s Assistant Engineer. Plainly, the Arbitral Tribunal was required to examine the same before accepting SCCPL’s contention.

29. The next question to be examined is whether the impugned award is vitiated for the reason that the Arbitral Tribunal had not accepted SCCPL’s claim for reimbursement of WCT and Cess Tax. During the course of the Agreement, SCCPL had executed certain additional items for a value of ₹6,72,35,720/- on the instructions of the Executive Engineer of DDA. The rates for such extra items were computed by DDA without accounting for WCT at the rate of 4% and Labour Cess at the rate of 1%. SCCPL claims that DDA was required to also consider the said taxes in the computation of the rates for additional items. Notwithstanding the same, DDA had deducted the said taxes from SCCPL’s bill for extra items.

30. DDA claims that SCCPL had accepted the rates for extra items without any objection. A statement of the approved extra items of ₹7,91,57,448/- was issued on 08.05.2015 (out of which extra items for a value of ₹6,72,35,719/- were executed at site) and, SCCPL had submitted Running Bills on the basis of the rates of extra items as approved.

31. The Arbitral Tribunal had accepted the aforesaid contention. The Tribunal found that insofar as the taxes were concerned, it was agreed in terms of the Agreement that the contractor would bear the same. Thus, SCCPL was required to bear the taxes and DDA could not be faulted for deducting the same from the payments made to SCCPL for extra items. Insofar as the question whether DDA had incorrectly determined the rates for additional items, the Arbitral Tribunal held that the Engineer-in-charge was required to fix the rates on the basis of the market rates. It was for SCCPL to agree with the aforesaid rates or refuse to agree to the same. However, in this case, SCCPL had agreed to the rates as it had submitted bills on the said basis. The Arbitral Tribunal also noted that SCCPL had demanded reimbursement of WCT in its letters but had not disputed the rates. The question whether SCCPL had disputed the rates or not is a question of fact.

32. A plain reading of the letter dated 29.06.2015 indicates that SCCPL had sought reimbursement of deductions towards WCT at the rate of 4% and Labour Cess at the rate of 1%. It had not disputed the analysis of rates for extra items.

33. In view of the above, this Court finds it difficult to accept that the impugned award is vitiated by patent illegality or falls foul of public policy of India.

34. The last aspect to be examined is whether the impugned award is vitiated as the Arbitral Tribunal had rejected Claim nos. 4 to 6 preferred by SCCPL.

SCCPL claimed loss of profit and compensation for overheads due to prolongation of the Project (Claim no. 4); it had, in addition, claimed loss of turnover due to prolongation of the Project (Claim no.5); and loss due to underutilization of machinery, tools and plant due to prolongation of Project (Claim no.6).

35. The Arbitral Tribunal found that there was a substantial delay for reasons not attributable to DDA. It noticed that a third party had obtained a stay order dated 19.09.2015 from the Delhi High Court [in Rajvir Singh Atal v. Union of India: W.P.(C) No.6297/2014]. Consequently, the work was suspended indefinitely. However, DDA took steps for vacation of the stay order, which was modified on 19.12.2014 and thereafter, the work could commence but it remained suspended due to agitation by the villagers of Sannoth Village. The Arbitral Tribunal noticed that on 08.01.2015, DDA had to request for police assistance for preventing sabotage of the work by the villagers.

36. The Arbitral Tribunal observed that in terms of Clause 15 of the Agreement, SCCPL was entitled to raise a bill for wages, if force majeure events continued beyond the stipulated period. However, SCCPL had not done so.

37. It is important to note that the Arbitral Tribunal also noted that the work had been prolonged on account of additional works for which ninety-one days were allowed.

SCCPL contends that the Arbitral Tribunal had not examined the chart setting out the hindrances and the reasons for prolongation of the Agreement.

SCCPL states that while only twenty-three days were lost on account of the stay order granted by this Court, the remaining delay was for reasons attributable to DDA.

SCCPL also submits that the Arbitral Tribunal’s reference to Clause 15 of the Agreement is, ex facie, erroneous as it was not the case of any of the parties that that said clause was applicable.

38. This Court is unable to accept SCCPL’s aforesaid submission as it will be wholly inapposite to re-examine and reappreciate the evidence led before the Arbitral Tribunal. Whilst, the tabular statement indicating the delays does indicate that the some of the delays are attributable to DDA, however, the tabular statement was not the only material available before the Arbitral Tribunal. The scope of proceedings under Section 34 of the A&C Act does not entail readjudication of the disputes by re-evaluation of the evidence and material before this Court.

39. Having stated the above, this Court is also of the view that no interference with the impugned award is called for on account of the Arbitral Tribunal rejecting the claims made by SCCPL based on prolongation of the period for completing the works. This is because the Arbitral Tribunal had also premised its decision on the finding that SCCPL had not placed any evidence to substantiate its claims.

SCCPL had claimed a sum of ₹2,67,01,878/- by computing the loss of profit at the rate of 15% of the Contract Value and overheads at the rate of 50% of the Contract Value. It claimed that there was a delay of six months and therefore, it was entitled to loss of profits and compensation for overheads on that basis. It also claimed loss of profit on turnover quantified at ₹1,68,56,944/- on the ground that it was entitled to profit of 10% on 50% of the Contract Value. In addition, it sought a further amount of ₹54,63,870/- for under-utilization of machinery and tools.

40. It is apparent that the said claims were made on a notional basis. The Arbitral Tribunal rightly rejected the said claims on the ground that SCCPL was unable to substantiate the same. SCCPL’s loss of profit was based on an assumption that it would have earned a profit of 10% and would have incurred overheads of 50%, however, there was no material to substantiate the same. Similarly, SCCPL’s claim for underutilization of machinery and tools was based on rates provided in the Ministry of Road Transport and Highways (MORTH) Standard Data Book and not on the basis of any actual evidence as to the opportunity cost incurred by it.

41. The petition is unmerited and, is accordingly, dismissed. All pending applications are also disposed of.

VIBHU BAKHRU, J DECEMBER 13, 2021 ‘gsr’/v