Full Text
Through : Mr.S.K.Maniktala and Mr.Tushar Chawla, Advocates with Mr.S.P.
Shrivastava and Mr.R.C.Taneja from respondent in person.
JUDGMENT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as ‘the Act’) has been filed by the petitioner for quashing of the impugned arbitral award dated 11.10.2012.
2. The brief facts as alleged by the petitioner/objector are as follows:a) the petitioner - Mahanagar Telephone Nigam Limited (MTNL) awarded a work to the respondent for construction of telephone exchange at 9, CGO Complex, New Delhi, vide an Agreement dated 04.09.1992; 2018:DHC:3038 b) certain disputes arose between the parties and learned arbitrator was appointed on 12.03.1997, who entered the reference on 30.04.1997 and gave an award on 28.1.2000; c) MTNL filed a petition O.M.P 91/2000 under Section 34 of the Act challenging the Award in this Court, decided vide judgment dated 23.11.2009 wherein it was observed:- “Claim #4 contains many sub-heads and where different items of Claim for extra expenditure due to prolongation of work done beyond the stipulated date of completion which was 09.09.1994. The Arbitrator has duly noticed that the contract instead of being completed in Sept. 1994 was ultimately completed in December 1998. The Arbitrator has also given a finding of fact that it is the objector who was guilty of causing delays in the performance of the contract and details of such subjects have been given while pronouncing upon these claims. I may note that it is also an admitted fact that for the extended period, no liquidated damages/compensation have been imposed upon the contractor in as much as the objector being guilty of delay itself it bad no option but to extend the contract without any consequential levy on-the contractor for any loss/damages. The issue however remains that once the Arbitrator has held the objector guilty of delay can the losses as awarded to the contractor by the Award necessarily follow. To this I agree with the counsel for the objector that with respect to Claim #4(b) which is-granted for huge amount of Rs.46,80,000 as also the Claim towards insurance of workman compensation for Rs.11,29,603 and for bank guarantees charges of Rs.17,66,460, the Arbitrator has given absolutely no basis for arriving at these figures nor has he referred to either any calculation or any evidence as to how these amounts have been awarded. Same is the position with respect to Claim #5 under which escalation has been granted to the Contractor. The Award on these aspects can thus be said to be an unreasoned Award."
3. The learned senior counsel for the petitioner submit as per judgment dated 23.11.2009 the learned arbitrator was directed to give reasons for amounts so awarded in his award dated 28.01.2000, but the learned arbitrator went ahead and so far as claims No.4b and 4d are concerned he did not give sufficient reasons for awarding such sums yet again and qua claim No.5 he without any cogent reason gave the award for an extended period viz. till December, 1998.
4. Claim No.4b pertains to the Establishment Expenses during the extended period; claim No.4d pertains to bank guarantee charges, insurance charges etc. during such extended period; whereas the claim No.5 relate to Escalation Charges for the extended period.
5. It is the case of the learned senior counsel for the petitioner that though the petitioner had filed a table Annexure X to its Rejoinder showing different amounts claimed by the respondent and the amount actually due and recoverable as per the documents filed by the claimant had a huge difference of `7,57,406/- qua the administrative expenses viz salaries etc for the extended period, yet the learned arbitrator ignored the same. It is the case of the petitioner though some vouchers were filed by the respondent qua permanent staff, but the learned arbitrator wrongly awarded such expenditure on average basis till December, 1998. Further, he argued even no proper reasons were given for awarding insurance charges and Bank Guarantee charges for the extended period despite the respondent having failed to file entire bills of insurance and receipts of the bank for extending the bank guarantees.
6. It is argued the respondent failed to file entire vouchers of salaries paid to the permanent staff - the entire bills/record of payments made to the insurance company, charges to Bank for extending Bank Guarantee till December, 1998. Further it is argued the learned arbitrator exceeded his jurisdiction by awarding the escalation charges till December 1998 when he himself has awarded such charges only till November 1997 in his earlier award dated 28.01.2000.
7. However I may refer to order dated 23.11.2009 passed by this Court in OMP No.91/2000 wherein the Court inter alia recorded:-
8. Let me now see how the learned arbitrator has dealt with the claims No.4b and 4d in his impugned award dated 11.10.2012:-
9. On perusing the award it cannot be said no evidence was ever produced before the learned arbitrator. For permanent employees, the respondent had filed various vouchers of their salaries. Those vouchers were considered to find the average expenses incurred by the respondent every month. Not only the learned arbitrator considered the salaries of employees but also took other components in determining such average viz, site allowance, food allowance, special allowance, city allowance, deductions for the income tax, loans, PF etc. Rather the Ld. Arbitrator was considerate to reduce the award to `46,80,000/- under claim No.4b despite the amount being calculated was `60,30,500/-, for he gave such concession to account for any inaccuracies that may have occurred due to the process of picking out certain months for working out average etc.
10. Similarly, qua claim No.4d viz. insurance charges, the receipts of premium for six months period from 08.09.1997 to 01.03.1998 of `l,70,973/- was taken into account by the learned arbitrator to calculate premium paid by the respondent till December, 1998. It is not the case of the petitioner the insurance company changed its premium every month or that no payment was made at all.
11. Similarly, it is an admitted case the bank guarantee was discharged only in the year 2000, hence the charges paid to keep it alive for the extended period was certainly the liability of the petitioner herein and hence was awarded. Thus there is no illegality in the impugned award so far as the claims No.4b and 4d are concerned.
12. Upon a bare perusal of the award, I may say certainly it is not a case of no evidence. What weightage needs to be given to the evidence led before him has to be seen by the learned arbitrator, per Section 19 (4) of the Act, which notes:- “19. Determination of rules of procedure.— (1) to (3) xxx xxx (4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.”
13. Qua claim No.5, viz., it was argued the extension of time was never granted by the petitioner herein as the respondent did not file any application in this regard and hence could not have claimed escalation charges per clause No.66.[2] and clause 22 of Agreement entered into between the parties. The clauses read as under:- "66.[2] "............ such compensation for escalation in prices shall be available only for the work done during the stipulated period of contract including such period for which the contract is validly extended under the provisions of relevant clause of the contract without any action under the relevant clauses and also subject to the condition that not such compensation shall be payable for a work for which the stipulated period of completion is six months or less....... ".
22.
EXTENSION OF TIME If the contractor shall desire an extension of time for completion of the work due to the works having been unavoidably hindered in the execution or on any I other grounds, he shall apply in writing to the Engineer-in-Charge who shall in his opinion (which shall be final) be convinced of the reasonable grounds, then he may authorize extension of time as in his opinion be necessary and communicate in writing. Whenever, such extension is granted by the Engineerin- Charge, "this would be without prejudice to the Owner's rights under this contract".
14. It is thus argued the agreement was never validly extended and the effect of above clauses was never seen and considered by the ld. Arbitrator, but however the arbitrator granted Escalation charges till December, 1998 despite in his earlier award he has granted such charges only till November 1997.
15. However a bare perusal of the arbitral record would reveal three applications were moved for Extension of Time by the respondent viz. Ex.C32 dated 10.08.1994; Ex.C360 dated 02.02.1996[3] and Ex.C428 dated 05.02.1997, hence, the learned senior counsel for the petitioner cannot allege no application was ever moved by the petitioner for extension of time, per clause 22 of the Agreement.
16. Now, if the Engineer in Chief did not take decision on such applications, the respondent cannot be faulted with. Admittedly the work was completed only in December 1998 and there is no denial to this fact by the petitioner herein. Moreso, in its objections against claim No.5, the petitioner never allege the extension was not validly granted or it was never applied. The only objection the petitioner took was the indices for the extended period were wrongly taken in award dated 28.01.2000 which indices were now corrected by the learned arbitrator in its award dated 11.10.2012.
17. Let me now see how the learned arbitrator dealt with claim No.5 in his impugned award:-
15. Claim #5: Clause 66.2.a provides for compensation for Escalation in the prices of materials, labour, and POL. Clause 66.2.a.[5] provides-for compensation for the Escalation in Steel Prices. Formulae have been given which specify how these escalations will be calculated. They are based on variation in material cost, variation in labour cost, all-India whole sale index for all commodities, consumer price index for industrial labour (all India) declared by Labour Bureau, Govt. of India, variation in the cost of fuel, oil and lubricant, average index of wholesale price for group (fuel power. light and lubricant as published weekly by the economic advisor to the Govt. of India). Principles to be followed while working out the indices mentioned in detail.
16. Compensation for Escalation in Steel Prices are to be worked out with reference to variation in steel cost, the value of the reinforcement steel, and the rates as circulated by the Joint Plant Committee. Hon'ble Court has clubbed this claim with Claims 4(b) and 4(d)
17. Since the beginning of the Contract, these Escalations were calculated by the Contractor every three months and checked and paid by MTNL. 'Payments were made regularly till December 1995. Subsequently, the payments were withheld on the ground that the extension of time for the Contract had not been issued by MTNL. During hearings, MTNL stated that the Escalations according to the Contract will be paid as soon as the extension of time is granted for completion of the Contract without levy of any penalty. The final bill has been paid by MTNL in Dec 99 without levying any compensation. The Escalation bas accordingly become due. It has not been contested by MTNL at any point of time. xxx
20.
REVIEW OF AWARD FOR CLAIM 5. Principles of evaluation Since the award was remitted to me, and the original award against Claim 5-was not final, I decided to give an award for the total escalation. I directed the Claimant to submit details of claim no.5 till the work was completed so that the total amount of escalation can be calculated for award. Claimant UNITECH supplied detailed calculations of Claim No.5 on 6.7.2010.
21. In the 5th meeting held on 24.2.2011, it was recorded "the detail of Escalation during this period has now been given. The Arbitrator bas already asked the Respondents MTNL to check these calculations and to intimate if there are any modifications or corrections that are needed according to them. Shri Malhotra promised that "the verification of calculations for Claim #5 shall be completed within 15 days and the report submitted to the Arbitrator".
22. An Order was issued' on April 18th 2011 stating "the directions have not yet been complied with. Parties shall report compliance within 10 days of the date of issue of this letter." xxx
26. I have considered the provision in the agreement as well as the pleadings carefully. The provision in the agreement that "(MI and M10)... are for the period under consideration and that valid at the time-of receipt of tenders, respectively" leaves no doubt about the interpretation given by MTNL. Subpara 4 merely confirms this interpretation. Same is the situation for LI/LIo and FI/FIo. This is also supported by the fact that UNITECH never raised any objection during 1992- 1995 when they received 14 payments on this basis.
27. Accordingly I hold that the base indices are as in December 1999[1]; i.e. MIo, LIo and FIo are 213.20,225 and
202.20 respectively. xxx
29. In calculating escalation, the following principles shall be observed:
1. Base indices for materials, labour and fuel are to be taken as the indices in December 1991 when the tenders were called. The base indices, therefore, are, 213.20, 225 and
202.20 for material and labour and fuel respectively.
2. Escalations are not payable on extra items. xxx
31. For the period Jan 96 to Dec 98, calculation of escalation is shown in the tables on the following pages. MTNL has taken escalations calculated by UNITECH and corrected it by multiplying by a suitable factor to arrive at the escalation according to correct indices. xxx
33. The net claim payable for escalation is as follows: Escalation in Materials for period 19.12.95 to 31.12.98 Rs.1,03,31,208.63 Escalation for labour for period
19. 12.95 to 31.12.98 Rs.37,48,219.99 Escalation for POL for period 19.12.95 to 31.12.98 Rs.9,58,876.22 Escalation for steel claimed by both parties for the period is Rs.3,49,884.00 Total Rs.1,53,88,188.00.”
18. Here I would also like to refer to an additional affidavit filed on behalf of the petitioner towards objections to claim No.5 of the claimant. The said affidavit is annexure P12. A document viz. annexure I to the affidavit Annexure P12 notes:- “Statement of Claim of agency vs. calculation of MTNL for claim No.5. Escalation for the work Construction of TE Bldg. CGO Complex, Lodhi Road, New Delhi.
(i) For the period 19.12.95 to 30.11.97.
(c) Steel. 3,49,884.00