India Tourism Development Corporation v. CP Associates Pvt Ltd

6. The respondent no.1 bid for the tender which was declared successful and the respondent no.1 was awarded the abovementioned Work Order. Before issuance of the Work Order, Letter of Intent dated 12.02.2010 was also issued to the respondent no.1. Some of the relevant terms of the Work Order are reproduced hereinunder: OMP (Comm.) Nos.39 & 40/2019 Page 7 “Completion: The supply is to be completed within 3 to 5 months but delivery should commence after third month. The commencement date of order will be reckoned from the 7th day after the day on which the Project Engineer issues the written order i.e dated 12/02/2010 to commence the work which includes supply of Furniture and installation in individual flats of DDA in respective tower and floors/ flats/ in Common Wealth Games village near Akshardham, Delhi. xxx Phasing of work: The Corporation may require the work to be executed in phases as may be indicated nothing extra shall be payable for supply/execution the work in phased as required and should the exigencies of business demand temporary stoppage of work, the supplier would not be allowed any increase in cost thereof. The site may be handed over in phases. Nothing extra shall be payable on this account. The completion period of work will remain the same. The contractor/supplier shall be solely responsible for complying with all provisions of EPF and mise provision Act, ESI Act other extent labour laws including obtaining requisite labour licenses, related to manpower engaged for this contract and in event of any Liability on ITDC by virtue of its being principal employer due to failure of the contractor/ supplier to comply with the said Acts, the contractor shall indemnify and reimburse the amount payable by ITDC on this account. xxx Compensation for delay: Compensation for delay shall be 2% of the value of Furniture delayed for the first week and 3% for the subsequent week subject to maximum of 15% of the total value of work.”

7. It is the case of the petitioner that as the respondent no.1 failed to supply the furniture in time, it was allowed to sub-contract the work in OMP (Comm.) Nos.39 & 40/2019 Page 8 favour of respondent no.2 and a MoU dated 07.07.2010 was executed between the respondent no.1 and respondent no.2 for the said purpose. Though it was witnessed by one of the officers of the petitioner, the fact remains that it was an Agreement only between respondent no.1 and respondent no.2. This gives rise to the first submission of the counsel for the petitioner that there was no Arbitration Agreement between the petitioner and respondent no.2 and therefore, the Award passed in favour of respondent no.2 is without jurisdiction and is liable to be declared null and void. In this regard, he places reliance on the judgment of the Supreme Court in Balkrishna S. Dalwale (dead) By LRS vs. Vithabai C.Rathod (dead) By LRS, (2010) 13 SCC 291, to contend that merely because an officer of the petitioner has signed the MoU as a witness, it would not make the petitioner a party to the MoU. He further places reliance on the judgment of this Court in Royale India Rail Tours Ltd. vs. Cox and Kings India Ltd. & Anr., 257 (2019) DLT 132, wherein this Court has held that merely by conduct or otherwise, a party cannot be made bound to the Arbitration Agreement.

8. I have considered the submissions made by the counsel for the petitioner, however, find no force in the same.

9. While there can be no quarrel or doubt raised to the legal proposition expounded by the counsel for the petitioner, however, the same can have no application on the facts of the present case.

10. The Arbitrator in the Impugned Award has noted that it was the petitioner alone who vide letter dated 28.12.2012 informed the Arbitrator that as respondent no.2 is a party to the MoU, therefore, all the decisions OMP (Comm.) Nos.39 & 40/2019 Page 9 taken in respect of the Arbitration case between the petitioner and respondent no.1 will have a bearing on the outstanding payments from the petitioner to respondent no.2, therefore, respondent no.2 was asked to file an application before the Arbitrator for joint hearings as co-claimant. Infact, thereafter, respondent no.2 filed its claims before the Arbitrator on 24.10.2013. The petitioner filed its reply thereto, however, it is not shown if any objection to the jurisdiction of the Arbitrator was taken in the said reply.

11. It was only on 28.01.2016 that the petitioner, infact, took an objection that the claims of the respondent no.1 and respondent no.2 cannot be adjudicated separately. After hearing the parties, respondent no.2 was directed to file a joint Statement of Claim with respondent no.1.

12. Respondent nos.[1] and 2 thereafter filed a joint consent letter dated 16.07.2016 whereby they agreed that respondent no.2 would independently plead its case for the supply of furniture made by it to the petitioner. However, subsequently, in the hearing held on 05.05.2017, respondent no.1 was directed to file an amended Statement of Claim containing the claims of respondent no.1 and respondent no.2 as well. Again, in the hearing held on 16.06.2017, it was decided that as the pleadings were already complete, the respondent no.1 and respondent no.2 would file the joint Statement of their Claims in tabular form only without any supporting documents.

13. It is not the case of the petitioner that at any stage of the arbitration proceedings, the petitioner raised an objection with respect to the jurisdiction of the Arbitrator and the lack of an Arbitration Agreement OMP (Comm.) Nos.39 & 40/2019 Page 10 between the petitioner and respondent no.2. On the other hand, as noted above, respondent no.2 joined the arbitration proceedings only at the calling of the petitioner.

14. Section 7 of the Act is reproduced hereinbelow:

15. The present case would squarely fall within the ambit of Section 7(4)(b) and (c) of the Act. OMP (Comm.) Nos.39 & 40/2019 Page 11

16. The counsel for the petitioner also places reliance on the judgment of the Supreme Court in Kerala State Electricity Board & Anr. vs. Kurien E. Kalathil & Anr., AIR 2018 SC 1351 to contend that a mere oral consent given by a counsel for a party in reference of disputes to arbitration would not suffice and meet the pre-conditions stipulated under Section 7 of the Act. Again, the said judgment has no application to the facts of the present case. It is not a case of any oral consent being given by the counsel for reference of disputes to arbitration, but, the Competent Authority of the petitioner had requested the Arbitrator to allow the respondent no.2 to become party to the arbitration proceedings, which the respondent no.2 agreed to by filing its Statement of Claim.

17. I may at this stage also deal with the submission of the counsel for the petitioner that as the furniture was being purchased for the DDA, DDA was also a necessary party in the arbitration proceedings and should have been impleaded in such proceedings. He has placed reliance on the judgment of the Madhya Pradesh High Court in Nahar Allied Agencies vs. Hindustan Petroleum Corporation Ltd. & Ors. MANU/MP/0531/2004.

18. I again find no merit in the said submission. The MoU between the petitioner and DDA specifically records as under: “11. Any dispute between ITDC, suppliers/contractors shall be resolved by ITDC by employing a resilient mechanism, if same is not resolved, this can be referred to arbitrator for arbitration. ITDC shall defend the dispute properly before the arbitrator.” OMP (Comm.) Nos.39 & 40/2019 Page 12

19. Further, all correspondences in relation to the Work Order(s) were only between the petitioner and the respondents. There is also an independent Arbitration Agreement between the petitioner and respondent no.1 in form of Clause 23 of the NIT, which is reproduced hereinbelow:

20. In view of the above Clause, the arbitration between the petitioner and the respondents cannot be challenged for non-impleadment of DDA in the same. The dispute between the petitioner and DDA regarding their inter se liability to honour the Award cannot be made a ground to challenge the Arbitral Award itself.

21. On merits of the dispute, the counsel for the petitioner, relying upon Clauses 2 and 18 of the NIT, which have been reproduced hereinabove, submits that the Arbitrator has erred in disallowing the claim of liquidated damages to the petitioner. He submits that one of the grounds on the basis of which the Arbitrator has declined the claim of the petitioner is that the petitioner was unable to show any losses suffered by it due to delay in supply of furniture by the respondent no.1. He further submits that the Arbitrator has erred in not appreciating that the MoU dated 07.07.2010 was executed between the respondent no.1 and 2 only because respondent no.1 had expressed its inability to make the supplies of furniture within the time stipulated in the NIT/Work Order. Therefore, he submits that there was no doubt that the respondent no.1 was in breach of adhering to the timelines provided in the NIT/Work OMP (Comm.) Nos.39 & 40/2019 Page 14 Order entitling the petitioner to levy liquidated damages on respondent no.1 for such delay.

22. I have considered the submissions made by the counsel for the petitioner, however, find no merit in the same.

23. On the question of delay, the Arbitrator has opined as under: “33. Coming to the facts of the case I find that the construction contracts are the contracts of reciprocal obligations. Unless one party fulfils its obligation under the contract, the other party cannot be expected to fulfil its obligation under the contract. Similarly in this contract also in order to ensure that the Claimant completed its work of supply & installation of furniture in various flats of towers / floors of Akshardham Village Delhi by stipulated date of completion i.e. 18.07.2016, the Respondent had some obligations under the contract like timely handing over of site i.e. flats for storage and installation of furniture, timely approval of samples of raw materials & samples of furniture to be arranged by the Claimant, timely inspections & approvals by the Respondent. But it is observed that the Respondent miserably failed in handing over of the site i.e. flats in Akshardham Village where the furniture was to be stored & installed. In fact the Respondent started handing over the flats in piecemeal in the last week of July 2010 whereas the stipulated date of completion expired on 18.07.2010. The Respondent had fixed the cut off date as 03.09.2010 for supply of furniture at site but all the flats could not be handed over to the Claimant even by the said date also. However the Claimant completed the supply and installation of furniture by 31.08.2010 as confirmed by the Respondent also. xxxxx

35. My above mentioned contention is further substantiated by the fact that after the expiry of the scheduled date of completion i.e. 18.07.2010, the Engineer-In-Charge of the Respondent prepared a detailed note dated 06.08.2010 to decide the extension of time case for all the contractors I vendors to whom the work of OMP (Comm.) Nos.39 & 40/2019 Page 15 supply & installation of furniture in Akshardham Village flats and Vasant Kunj DDA flats was awarded. In this note the detailed analysis of delays which took place in the various contracts was done and it was concluded that before calling the tenders for supply of furniture, DDA had promised to hand over 9 towers of Akshardham (AKD) Village in January 2010, 12 towers in February 2010 & balance in March 2010. But DDA miserably failed to adhere to this target dates. According to the condition prevailing at that time i.e. 06.08.2010 the DDA was still carrying out the work in Akshardham Games Village flats and Vasant Kunj Flats. DDA had hardly handed over the towers from 1 to 19 and the civil work was going on in towers from 20 to 34 at Akshardham Village flats. In view of the fact that ITDC had not been able to hand over the site to the vendors timely & it was proposed to grant extension upto 31.08.2010 without levy of liquidated damages. This note was signed by various officers of ITDC and finally approved by C&MD ITDC on 10.08.2010. This note was filed by the Respondent itself in the CSF............

36. Further I find that while sending the reply dated 26.05.2011 to CTE's observations (contained in CTE's Report) the Respondent i.e. ITDC conveyed the same stand on EOT that it has already been decided to grant EOT without levy of compensation upto 31.08.2010. However compensation due to the delay beyond 31.08.2010, if any, is being worked out and the same will be imposed on vendors accordingly. The report of CTE and the reply sent by ITDC to CTE have been annexed by the Respondent itself as Exh. R-51 (page 110 on words of CSF Vol II). The relevant comments of the Respondent is on page 122-123 of CSF VoL II and the same is reproduced as under:- "As far as Akshardham is concerned, the flats were supposed to be handed over by DDA from April 2010 to IT DC, but flats were handed in phases which started from June 2010. All the 34 nos. towers were completed in all respects and handed over one by one to OC/DDA upto 8-9- 2010 by ITDC. It is evident that Akshardham flats were also not made available in the stipulated period / time as assured by DDA. Further there was collision of oil vessel near OMP (Comm.) Nos.39 & 40/2019 Page 16 Mumbai Port on 1-8-2010 which created hindrance to the supply. Keeping in view on the above facts, it was decided to grant E.O.T. upto 31-8-2010 without any levy of penalty. Compensation due to the delay beyond 31-8-2010 if any is being worked out and same shall be imposed on vendors accordingly. In view of this it is requested that para may please be dropped".

37. Therefore from the two exhibits i.e. R-50-A & R-51 annexed by Respondent with CSF, it is an admitted position of the Respondent itself that the Respondent was responsible for the delay in the execution work and extension upto 31.08.2010 was granted without levy of compensation by the competent authority. This admitted position of the Respondent does not require any additional proof to justify that compensation levied by the Respondent was unjustified.”

24. The Arbitrator has therefore, considered the evidence led by the parties on the question of delay before him and has arrived at the conclusion that it was the petitioner who was responsible for such delay due to failure of handing over of the flats on time to the respondents. This being a finding of fact, which can in no manner be said to be unreasonable or perverse, cannot be interfered with by this Court in exercise of its powers under Section 34 of the Act.

25. Counsel for the petitioner has submitted that the Arbitrator has wrongly relied upon the office note dated 06.08.2010 and the report of Chief Technical Examiner (CTE) as also the reply sent by the petitioner to the CTE. He submits that these documents being internal notings and opinions of the officers, do not constitute a decision taken by the petitioner so as to be binding on the petitioner. He places reliance on the OMP (Comm.) Nos.39 & 40/2019 Page 17 judgment of the Supreme Court in Bachhittar Singh vs. State of Punjab, AIR 1963 SC 395 to submit that unless such decisions are communicated to the respondents, the same have no effect.

26. I do not find any force in the above submission of the counsel for the petitioner. While it is true that a decision or an office note not communicated to the concerned party cannot bind the Authority as these are merely opinions or steps taken in aid of the final decision, at the same time, the facts that have been stated in the note dated 06.08.2010 have not been challenged by the petitioner before the Arbitrator or before this Court. The facts stated in the note dated 06.08.2010 leave no manner of doubt that it was the petitioner who was in default of handing over the flats to the respondents for supply and installation of the furniture and therefore, was not justified in levying liquidated damages on the respondents.

27. As far as the submission of the counsel for the petitioner that the Arbitrator has disallowed the levy of liquidated damages on the ground that the petitioner was unable to prove any loss suffered by it is concerned, in my opinion, this is only one of the grounds taken by the Arbitrator in support of its conclusion that such liquidated damages cannot be levied. This submission alone would not be sufficient to interfere with the Award, as the very foundation of levy of such liquidated damages, namely default on part of respondents, has not been established by the petitioner.

28. Counsel for the petitioner has further challenged the finding of the Arbitrator in so far as it disallows the deductions made by the petitioner OMP (Comm.) Nos.39 & 40/2019 Page 18 on account of defective material being supplied. Connected with this submission is the submission of the petitioner that in terms of Clause 31 of the Special Terms and Conditions of the Agreement, the respondents were to pay for the testing charges.

29. He submits that the petitioner got the furniture supplied by the respondents tested through Shriram Institute for Industrial Research (SRI) and debited the amount spent on testing charges from the amount payable to the respondents, however, the Arbitrator disallowed the same. Further, SRI in its report had stated that the furniture supplied by the respondents was sub-standard and therefore, the petitioner had also made deductions on account of physical and quality parameters, which again has been wrongly denied by the Arbitrator.

30. I have considered the submissions made by the counsel for the petitioner, however, find no merit in the same.

31. The Arbitrator in the Impugned Award has held as under: “After hearing both the parties in detail, I find that if some furniture was found damaged after installation in flats at Akshardham (AKD) by the Respondent then in that case the Respondent should have issued a notice or intimated that Claimant / Co-claimant in this regard. In fact the Claimant / Co-claimant should have been asked to lift the damaged furniture. But the Respondent did not do so. The Claimant / Co-claimant were unaware about this proposed recovery till the Respondent filed Counter Statement of Facts in the case. As the Respondent did not follow the due procedure as per the established norms & principles of transparency, fairplay & equity and kept the Claimant I Co-claimant unaware, uninformed regarding this recovery till the submission of OMP (Comm.) Nos.39 & 40/2019 Page 19 CSF; I therefore find that the recovery is unjustified, untenable and against the basic principles of natural justice, transparency, equity & fairplay. I accordingly consider & decide that the recovery of alleged damaged furniture amounting to Rs.15,46,017/- by Respondent is unjustified and cannot be allowed in the final bill.”

32. On the issue of the testing charges, the Arbitrator inter alia observed as under: “113. Further the Respondent got the testing of random samples done from SRI (Sriram Institute for Industrial Research). The comments of Respondent sent to Sriram Institute for Industrial Research in the last letter dated 07.07.2011 in the last lines 8 lines of para 2 (page 81 of CSF Vol.-11) after detailed correspondences are given as under:- „It means that all the testes carried out are wrong which brought the ITDC into embarrassing position and thus the dispute between ITDC & Vendors. In such circumstances we may say that all tests carried out by SRI were fake bogus and thus institute is not entitled for any payment on account of tests carried out and therefore we request institute to refund the payment made to them. It may also be noticed that in such condition cost of furniture sent for testing shall be borne by the Institute and damages shall be paid to ITDC‟. In view of the above mentioned facts I find that in the random sampling done by the Respondent, the Claimant / Co-claimant were absent and the due procedure as well as well established engineering practices were not followed and therefore the alleged testing done by the Respondent was non-contractual, unjustified & illegal. In such an eventuality the proposed action of the Respondent to recover the cost of testing charges from the Claimant / Co-claimant is also unjustified, non-contractual & illegal. Further the Respondent has not enclosed any proof of OMP (Comm.) Nos.39 & 40/2019 Page 20 payment of any charges to SRI (Sriram Institute for Industrial Research). Therefore it is also not established whether any testing charges were paid to Sriram Institute for Industrial Research or not. I, accordingly, consider and decide that the Respondent cannot recover the testing charges amounting to Rs.18,54,778/from the Claimant and the same is denied to the Respondent.”

33. I do not find any reason to interfere with the above findings of the Arbitrator.

34. In view of the above, I find no merit in the present petitions. The petitions as well as the other pending applications are dismissed with no order as to costs.

NAVIN CHAWLA, J MARCH 13, 2019 RN