National Highways Authority of India v. IJM Gayatri

1. The appellant - National Highways Authority of India (hereinafter referred to as'the NHAF)entered into a Contract with the respondent(hereinafter referred to as 'the claimant') pursuant to the latter's successful bid. The Contract dated 03.03.1999, was for widening of four lanes and strengthening of existing two lane road from 355 km to 380 km of Chitakaluripet- Vijayawada Section of NH-5 in Andhra Pradesh Contract Package-I. The Agreement estimated the contract price to be Rs.60,15,70,712/-. In terms ofthe Agreement,the parties agreed interalia that the time for performance i.e.completion ofwork was six months-the last being 30.03.2002. It is undisputed that extension oftime was granted upto 30.12.2002 and 2015:DHC:11925-DB V ' ultimately the DefectLiability Certificate was issued on 23.03.2004.

2. Disputes arose between the parties during the execution ofthe Project which were mandatorily referred in terms ofthe Agreementfor the decision ofan independent engineer.The claimant was dissatisfied by the Engineer's decision and invoked the arbitration clause. This led to the constitution ofaTribunal comprised ofthree Arbitrators. In thecourse ofthe Tribunal proceedings,the claimantsoughtan award in respect of19 Heads including cost and interest. The Tribunal rendered its award on 21.03.2012.

3. The NHAI felt aggrieved and approached this Court under Section 34 ofthe Arbitration and Conciliation Act(O.M.P.No.842of 2012).The learned Single Judge by his impugnedjudgment and order dated 07.09.2012 dismissed the objections. At the outset, it may be noticed that the impugned order recorded that though the findings in respectof9HeadsofClaim were initially challenged under Section 34, the challenge to two Claims 5 and 10 were given up as not pressed. The Single Judge therefore considered the objections so far as it pertained to the award on Claim Nos. 1,2,4,7,11,13 and 14. *

4. Mr. P.P. KJiurana, learned Senior Counsel for NHAI,confined the present appeal to issues concerning Claim Nos. 11,13 and 14 only and submitted firstly that the learned Single Judge failed to notice that the findings ofthe Arbitrators were beyond the terms ofthe Contract and consequently violated Section28(c)ofthe Act.Elaboratingon this, it was contended thatthe learned Single Judge in upholding the award with respectto Claim No.11 tothe extentofRs.13,27,576/-ignored the terms in respect ofClause 10.3. <■

5. It was next contended with respect to Claim 13 that the learned Single Judge over-looked the fact that the application of Hudson formula and consequent award of Rs.2,60,58,925/- towards loss of profit, was unwarranted.It is stressedhere that the respondent/claimant did not lead any evidence to show the potential loss in terms of the parties which could have entered into a Contract but did not do so. It was lastly urged that beyond rendering the finding that there was no over-lapping of issues and findings in the award in respect of Claim Nos. 13 and 14, the learned Single Judge didnot examine the merits of the amount awarded towards ClaimNo. 14 i.e. Rs. 2,04,95,455/-.

6. Mr. Arun Kathpalia, learned counsel for the respondents urged thatthis Court shouldbe cautiousinexercisingits appellatejurisdiction under Section 37. He relied upon the findings of the arbitral Tribunal and emphasised that it is an elaborate and reasoned award which discussed the contentions of the parties as well as the materials on record. Learned counsel submitted that the award of Rs. 13,27,576/givenunder Claim 11 was justified, considering that the Tribunal held that the extension oftime was necessitated due to theNHAI's conduct. In these circumstances, the insistence that the securities ought to be locked up for an extended period meant that the economic cost to comply with such directions had to be borne by the appellant-NHAI. It wasnext contended that so far as the findings withrespect to Claim Nos. 13 and14areconcerned,noinfirmity canbeurgedandthatgiven the applicable standard for consideringillegality ofawards {ONGCV[5] SawPipesLtd.(2003)5 SCC 705)unlesstheawarddiscloses apatent illegality or manifest unreasonableness in the examination of the He materialsortransversesthetermsofthe Agreement,the Courtswould not interfere with mere factual error or errors of even matters of interpretation ofthe contract orlaw.

7. ThisCourthasconsideredthesubmissions,asfarasClaim NO. 11 goes,the Courtnoticesthatthe originaldateforcompletion ofthe contract(36 months)was30.03.2002. However,it is an undisputed fact that extensions were necessitated and granted. Ultimately,the Contract was completed and Taking Over Certificate was issued on 30.05.2003.TheNo-DefectLiabilityCertificateinthiscasewasissuedI asamatteroffacton23.03.2004. Theclaimanthad soughtan award foramuchhigheramounthoweverconsideringthecircumstances,the Arbitral Tribunalreduced ittoRs.13,27,576/-.

8. This Court notices that the Tribunal held that the delay was attributable to the Claimant, given the facts not disputed in the proceedings in Court atleast in the appeal. In these circumstances, that the claimant was compelled to keep the securities alive till the completion ofthe defect liability period is not disputed. All that the claimantsaidwasthatgiventheoriginaldateofcompletion,thedefect ^ liability period would not have ended on 31.03.2003. The extension meant that it had to block the amounts required ofit to comply with Clause 10.3. This Court perceives no unreasonableness or patent illegality in the award nor sees it as contrary to any condition in the Contract when it directed the NHAI to pay Rs. 13,27,576/- to the claimant.

9. Asfar asthe question ofloss ofprofits i.e.the subject matter of Claim No.13 goes,the learned Single Judge noticed thatthe Hudson's my formula wasapplied in view ofthe Supreme CourtrulinginMcdermott InternationalInc vs. Burn Standard Co. Ltd & Ors(2006)11 SCC

181. Furthermore,the loss ofprofits awarded (Rs.2,04,95,455/-) was against a much higher claim ofover Rs 8 crores and in respect ofthe limited duration of264 days. This finding in our opinion is not any error oflaw much less a patent illegality, falling within the standard spelt out in Saw Pipes (supra). Likewise, so far as Claim No. 14 is concerned, whilst the NHAI does not dispute that the finding with respect to absence of over-lapping is for well founded reasons, this Court discerns no merit in the submission that the award was unwarranted. The claimant had sought an award ofsum in excess of Rs.12croresforthe lossofopportunityin the use ofits machinery and the resultant costs. The NHAI relied upon the observations of its engineers who conceded theoretically that the claimant could seek damages butrefused to actually grant whatwassoughtonthe basisthat no evidence was forthcoming. The award is based upon detailed reasoning that runs into about 10 pages. Having regard to all the circumstances, we are of the opinion that there is no reason for interference thatthe award in respectofClaim 14 has been made out.

10. PursuanttotheCourt'sorder,NHAIhaddepositedtheamountin Court.Onsomepreviousoccasions,byorders,theCourthadpermitted partial withdrawal ofthese amounts.It is hereby directed thatin view ofthe above findings,that amounts so deposited would be released to therespondent/claimantwithintwoweeksfromtoday. Consequently, the bank guarantee amountsfurnished in compliance withthe Court's ordersare also hereby orderedto be discharged.

11. In view of the foregoing discussion, there is no merit in this appeal. Itisconsequently dismissed withoutany order asto costs.

NOVEMBER 23,2015 sapna S.RAVINDRA BHAT,J ^ f ' DEEPA SHARMA,J V. < ' \OV 0!^ SCANNED RICOH > I u. it * h] $-22 to 24 IN THE HIGH COURT OF DELHI AT NEW DELHI + REV.PET.164/2016.C.M.APPL.12160/2016IN FAO(OS)9/2013

VERSUS

IJM GAYATRI Respondent + REV. PET.166/2016. C.M. APPL.12163/2016 IN FAOIOSt 10/2013