Full Text
HIGH COURT OF DELHI
Date of Decision: 13.11.2019
KHAZANA PROJECTS & INDUSTRIES ..... Petitioner
Through: Mr. Rajshekhar Rao, Mr. Siddharth Joshi & Mr. Akshay Ringe, Advocates
Through: Mr. Raman Kapoor, Sr. Advocate with Ms. Tannishtha Singh & Mr. Abinash Agarwal, Advocates.
Exemption allowed, subject to all just exceptions.
Application stands disposed of.
JUDGMENT
1. This application has been filed seeking condonation of 24 days delay in re-filing the petition.
2. For the reasons stated in the application, the same is allowed and the delay of 24 days in re-filing the petition is condoned.
3. Application stands disposed of. 2019:DHC:5933
1. This is a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) seeking to set aside the award dated 28.08.2012 passed by the learned Sole Arbitrator.
2. The petitioner and the respondent entered into a contract dated 11.06.1996 for carrying out the work of ‘area development work in tank farm and pump station premises at Haldia’.
3. Petitioner is a Company incorporated under the Companies Act and the respondent is the Indian Oil Corporation Limited. Disputes having arisen between the parties, Arbitrator was appointed by an order dated 20.02.2001 in AA No. 376/1998. In the statement of claim filed by the petitioner, the following claims were made:-
┌─────────────────────────────────────────────────────────────────────────────────────┐ │ SL. NO. DESCRIPTION OF CLAIM CLAIM │ │ AMOUNT │ │ (in Rs.) │ ├─────────────────────────────────────────────────────────────────────────────────────┤ │ 1. Claims on account of delay in 1,09,96,500.00 │ │ handing over the clear sites of │ │ work to the Petitioner by the │ │ Respondent. │ │ 2. Claims for reimbursement of 3,13,675.00 │ │ royalty. │ │ 3. Claims for reimbursement of 59,84,857.00 │ │ rates. │ │ 4. Claim towards outstanding 14,96,214.00 │ │ accepted dues of the fourth R. A. │ │ Bill. │ │ 5. Claim towards partly executed 11,10,435.56 │ │ quantity under Item 2. │ │ 6. Claim towards refund of 19,83,063.00 │ │ Security Deposit/Retention │ │ Money. │ │ 7. Claim towards losses and 60,00,000.00 │ │ O.M.P. (COMM) 469/2019 Page 2 of 20 │ │ 2019:DHC:5933 │ │ damages suffered due to illegal │ │ and wrongful termination of the │ │ Contract. │ │ 8. Claim towards loss of profit. 15,75,008.00 │ │ 9. Claim on interest. As Accrued │ │ 4. The respondent had raised certain counterclaims which are as under:- │ │ a) Respondent claimed a sum of Rs. 88.63,068.03/- towards │ │ the difference between the total cost of the work executed and │ │ the value of the work if the petitioner would have completed │ │ the work; │ │ b) The respondent sought Rs. 35,10.699.36/- towards │ │ respondent’s supervision charges for getting the work done at │ │ the risk and cost of the petitioner; │ │ c) The respondent sought Liquidated Damages @10% │ │ according to Clause 4.4.0.0 of the GCC, which amounted to │ │ Rs. 38,36,680.96/-; │ │ d) The respondent adjusted an amount of Rs. 14,96,214.96/- │ │ due towards the 4th RA Bill of the petitioner; │ │ e) The respondent claimed interest @14% from 04.12.1999 │ │ till institution of the counter claims; │ │ f) The respondent claimed pendente lite interest @ 21% per │ │ annum; │ │ g) The respondent claimed interest on the amount awarded │ │ @ 21% per annum from the date of the Award till the date of │ │ payment in full; │ │ h) Further, cost of the arbitration proceedings was also │ │ claimed by the respondent. │ └─────────────────────────────────────────────────────────────────────────────────────┘
26. Thus, in my view there is no merit in this contention of the petitioner.
27. In so far as the contention of the petitioner that the stipulated period of completion should have been 10 months and not 8 months is concerned, the same only deserves to be rejected. No doubt in the bid documents, the period of completion was referred to as 10 months and in the Letter of Acceptance the time stipulated was 8 months but there cannot be any doubt on the proposition that once the bids are invited and any negotiations between the parties result into an issue of Letter of Acceptance with certain conditions, the conditions in the Letter of Acceptance cannot be given a go by. The petitioner can hardly argue that the stipulations in the Letter of Acceptance which came after the bid documents would be meaningless. In any case, the Arbitrator has analysed the question of what was the time period for completion of the work. The finding and observations of the Arbitrator on this aspect is as under:- “And what was the time period for completion of the work? The letter of Acceptance dated May 31, 1996 stated that it wold be 8 months including monsoon and mobilization and was to be reckoned from the date of issue of specific notice of commencement of work by the Engineer-in-charge". However by letter Exhibit C- dated May 31, 1996 the Claimant took the position that the contracted work will be completed within 8 months from the date of handing over clear site to us for earth filling". Obviously. The stand so taken in the letter was at variance with what was stated in the above referred Letter of Acceptance of May 31, 1996. This is not all, if we look at the Special Condition of Contract in Clause 6.1.0 makes it amply clear that: "Time for completion of works shall be thus 10 (Ten) calendar months. This time schedule shall be inclusive of any monsoon falling in between and to be reckoned from the date of issue of fax/telegram/letter of acceptance of tender"
28. The Arbitrator concluded that the petitioner had himself assured that he would complete the work in 8 months from the date of handing over the site. This Court finds no reason to interfere with this finding of the Arbitrator in the present petition.
29. On the issue raised by the petitioner with regard to the delay and hinderances in handing over the site, the learned Arbitrator has in great details analysed the contention and based on the documents and evidence on record has held as under:- It appears that meetings at site has also taken place between the parties but to no effect and that is why on January 27,1997 the Respondent Corporation felt convinced that Claimant commitment into practice". This is what is borne out from the letter of the Respondent Corporation dated January 27, 1997. Through that letter the Claimant was asked to spell out its action plan on the following:-
(i) Mobilization of equipment, manpower.
(ii) Identification of borrow pit. Schedule of filling and all other activities with minute break-ups.
(iii) Testing of soil and getting approval of EIC.
It appears that thereafter work did start but the claimant was told that it was lagging behing the schedule and therefore was called upon to step up the progress by engaging a fleet of 43 Dumpers with a further addition of equal number of trucks within 4 or 5 days. On march 13,
1997. The Respondent Corporation once again requested the Claimant to increase rate of earth filling preferably before the onse of monsoon and pointed out that any delay in completion of the work would in turn affect the activities of different agencies in the station area. On 29th and 31th of March. 1997 the Respondent Corporation brought it to the notice of the Claimant that as on March 31, 1997 only 35000 M[3] (Approximately) of earth could be brought as against targeted earth and that the short fall was 26% thereby shooting up the asking rate to 5400 M[3] day to complete the work by May 1997 as promised and that the Claimant had also failed to deploy 3 Nos. Of excavators by February 15, 1997 "as promised" and that under the circumstances it was quite "virtually impossible" for the Claimant to complete the work within the contractual time. The Respondent Corporation thus gave "last opportunity" to show cause in writing within seven days of the receipt of the communication as to why the contract be not terminated and the balance unfinished work be not awarded to another agency at Claimant's risk and cost. It is not that the Claimant gave no reply. It did and it was on April 10,
1997. It claimed that by march, 1997 it had completed earth work in excess of 1,03,000 cubic meters and took the plea that the date of commencement of the contract could be only from end of December, 1996. What is further important to note is that through that reply to the show cause notice the Claimant took the stand that the monthly output would be increased to 85000 cubic meters subject to land from C.T. being made available. This reply was followed by further mutual discussions which took place on May 22, 1997. As is borne out from the letter of the Respondent Corporation of June I 0,
1997. Two things clearly emerge out from the said letter. First, the claimant had agreed to handover filled-in portion of a road and so also a portion of an adjacent road by the end of May. 1997 and that the parties had agreed to chalk out a revised work plan at a subsequent meeting. However significantly what is further borne out from that letter is that the Claimant had still not resumed work. Subsequent to the said letter a meeting took place between the parties on June 13, 1997. The position at the time of the said meeting is clearly spelled out by the letter of June 18, 1997 written the by the Respondent Corporation. It shows that the work was at a stand still and that although the Claimant had committed to comclude the sork by may 31,1997 but till date the Claimant had worked upto only 1,65,000 cubic meters against the target of 3,12,000. The Claimant came up with its won reasons and those are spelled out in its letter of July 9,1997. It speaks of demand of upward revision of tender rates. It also speaks of how refusal by Calcutta Port trust to release their land for obtaining earth had escalated the cost and how the claimant had also been effected by all round increase in the wages of labours. P.O.I. etc" it also spoke of delay in commencement of the work on account of standing crops and approach road to the work being still under construction. The Claimant also pointed out that it had reached a situation when it is no longer possible to support the job site costs. It thus asked for enhancement by 40% in the rates for the item no. 2.
XXX XXX XXX I have referred to above in some detail what transpired before the letter of termination of contract. What emerges out from the evidence on the record and more so from the contemporaneous record is that the Claimant had failed repeatedly to honour its commitments not only under the contract but made during mutual discussions to commence the work in right earnest and to complete the same. Even if it be taken that there were some impediments before December 17, 1996. The Claimant had agreed to commence the work and complete the same by May 31, 1997 but then instead of fulfilling its commitment the Claimant Corporation stopped work on May 23, 1997 and demobilized the site in the first week of june. 1997 and thereafter did no remobilize despite repeated reminders by the Respondent corporation. What further emerges out is that by letter of July 9, 1997. (C-
14) the Claimant demanded a "minimum increase" of tender rates for item No. 2 by 40 % and that this was a sine-qua-non to enable us to complete balance work" thereby making it further clear that the work would be commenced only on receipt of sanction of those rates. This may be taken as repudiation of the contract.
30. This Court finds no reason to interfere and deviate from the said finding. The Supreme Court in the case of McDermott International Inc. vs. Burn Standard Co. Ltd. and Ors. (2006) 11 SCC 181 and Associate Builders vs. Delhi Development Authority (2015) 3 SCC 49 has clearly laid down the parameters for judicial review under Section 34 of the Act. This Court in judicial review cannot upset the detailed findings of the Arbitrator in the award impugned herein.
31. The next contention of the petitioner that requires to be dealt with is that the respondent illegally awarded the contract for the balance unfinished work. The Arbitrator has analysed the entire correspondence between the parties for carrying out the work that was to be initially executed by the petitioner, including the various meetings that the parties had in which the petitioner assured that the work would be completed. In particular, reliance is placed on a letter dated 04.08.1997 in which the representative of the petitioner assured that a commitment in writing would be given for the balance work failing which the respondent was at liberty to get the job done at the risk and cost of the petitioner. The Arbitrator has come to a finding from a perusal of the record that in fact no such commitment was received in writing from the petitioner and therefore the respondent was justified in taking the view that the petitioner was no longer interested and therefore rightly took action to award the balance work at the cost of the petitioner. Relevant part of the award is as under:- It appears from the record that the Claimant had sent a letter to the Respondent Corporation on June 27, 1997 making an effort at justifying the failure to adhere to its commitment. It was responded to by Respondent Corporation through its letter of July 17, 1997, it is a detailed reply showing how the Claimant had failed to fulfil its contractual obligations and commitments made. Through the said letter the Respondent Corporation gave the Claimant "last and final chance" to mobilize and commence the work within seven days of the receipt of the letter failing which the Respondent Corporation would have no option but to execute the balance unfinished work by awarding to other agencies at the risk and cost of the Claimant. The said letter was followed by yet another letter of 19/26 July, 1997. The said letter again detailed the failure on the part of the Claimant to adhere to its contractual obligations and commitments made from time to time. The letter shows that there was a mutual discussion once again on August 4, 1997 in which the representative of the Claimant had assured that a commitment in writing would be given for filling of 50,000 cubic meters during the month of August, 1997 failing which Respondent Corporation would be at liberty to get the job done at the risk and cost of the Claimant but no such commitment had been received in writing and that under the circumstances the Respondent Corporation was of the view that the Claimant was no longer interested in commencing the work and that the Respondent Corporation was at liberty to take a appropriate action as deemed fit in the interest of work. The Respondent Corporation wrote yet another letter and it is of August 14, 1997. The letter again deals with all the issues and failure of the Claimant to honour its commitments made from time to time including the last one of August 4, 1997 relating to filling of 67,000 cubic meters in August, 1997. It appears that though on August 4, 1997 this commitment was made but no work was started. The Respondent Corporation again offered to hold a meeting on August 16, 1997. The Respondent wrote back on August 22,1997 asserting again that full site had never been handed over of Phase - II or Phase - III and that as far as Phase - I was concerned work had been "substantially completed". It also spoke of water logging and flooding in the coastal areas of Midnapore District, thus making it clear that it was impracticable to proceed with the earth filling works. It once again made complaint that its request for upward revision of the rates had been declined and invoked arbitration clause. The record shows that even thereafter some discussion had taken place on August 6, 1997 as is borne out from the letter of the Respondent Corporation dated August 28, (illegible). What is borne out form the said letter is that the Claimant was once again requested to remobilize and start with immediately which the Claimant had agreed to confirm by fax latest by 3:30P.M. on August 28, 1997 leading the Respondent corporation to believe that the Claimant was no longer interested resuming the work. On August 30, 1997 followed the letter of termination by the Respondent Corporation.
32. The finding of the Arbitrator is not only a possible but a plausible finding. If the petitioner failed to fulfil its commitments despite several assurances, this Court does not feel the need to interfere with the finding of the Arbitrator which is even otherwise justified in the facts of the case and under the realm of contract law.
33. Lastly, this Court is required to deal with the contention that the Arbitrator has wrongly allowed the counterclaim of the respondent on account of Liquidated Damages and the same is against Sections 73 & 74 of the Contract Act. The contract between the parties incorporated Clause 4.4.0.0 which enabled the respondent to levy a pre-estimated sum of damages to the extent of 10 % of account of delay on the part of the petitioner. The said Clause reads as under:- “4.4.0.0 If there is any delay in the final completion of the work at any job site or specific works in respect of which a separate Progress Schedule has been established, beyond the date for the final completion or the work or works aforesaid at the job site as stipulated in the Progress schedule, the Owner shall (without prejudice to any other right of Owner in this behalf) be entitled to reduction in price 1/2% {one-half percent) of the total contract value for each week of delay or part thereof limited to a maximum of 10% (Ten percent) of the total contract value.”
34. The arbitrator has come to a finding that the petitioner has failed to complete the work awarded within the stipulated period. The Arbitrator also analysed the affidavit filed by the respondent, which indicated the total executed value of the contract as Rs. 3,83,66,805.64/-. The respondent had claimed 10 % of the said value in terms of the provisions of the GCC. Having held that the petitioner was responsible for the delay in execution, the Arbitrator has nevertheless reduced the damages claimed from 10% to 5% taking into account that there was rainfall at the site and this reduction would meet the ends of justice and balance the level playing field between the parties. Relevant para of the award reads as under:- “As already found above the Claimant Company failed to complete the awarded contract within the stipulated period. This invited clause 7.0.9.0 GCC which entitled the Respondent Corporation to compensation in terms of provisions of Clause 4.4.0.0. keeping of course. The total contract value as defined in Clause 4.4.1.0 the Respondent Corporation is entitled to reduction in price (of the total contract value) for each week of delay or part thereof limited to a maximum of 10% of the total contract value. The record shows and this finds support from the affidavit of Shri S. Das Deputy General Manager of the Respondent Corporation that the total executed value of the contract was Rs. 3,83,66,805.64. The Respondent Corporation has claimed a sum of Rs. 38,36,680.96 as 10% of the said total executed value of the contract. This ofcourse is in terms of the provisions of the GCC as noted above. However, keeping in view the totality of the circumstances as already noticed above and keeping in view that the Claimant Corporation was, undoubtedly faced with certain teething problems including impediments like rainfall and inability to get earth from the earlier considered site I do feel that the claim for maximum of 10% needs to be toned down (illegible) so because the Respondent Corporation has been amply compensated on account of having got the work completed from other sources. I may however hasten to add that though rainfall did not provide any justification as far as delay in completion of the work is concerned but it does invite consideration as far as awarding of compensation in terms of 4.4.0.0 is concerned. Keeping all these factors in view I hope that reducing the limit from the maximum of 10% to 5% in the present case would rather meet the ends of justice I therefore direct accordingly. “
35. This contention of the petitioner also therefore merits rejection.
36. In view of the above I find no merit in the present petition and the same is hereby dismissed.
JYOTI SINGH, J NOVEMBER 13, 2019/yo /