National Thermal Power Corpn. Ltd. v. Gammon India Limited
2008-05-26
SHIV NARAYAN DHINGRA
body2008
DigiLaw.ai
JUDGMENT Shiv Narayan Dhingra, J. The award of the Arbitral Tribunal has been challenged by the petitioner on the grounds (a) the Tribunal concluded hearing of the proceedings in January, 2003 and passed an award after a gap of more than 21 months allowing the claim of the respondent No.1 to the above extent giving pre-reference, pendent lite and future interest @ 12% (b) The Tribunal wrongfully rejected the counter claims of the petitioner on the basis of Ex. C-117, (c) the findings of the Tribunal were contrary to the material available on record and contrary to evidence (d) the finding of the Tribunal that the inadequate data was supplied by the petitioner about soil condition was also not only contrary to the pleadings but without any basis and was also contrary to the tender documents and the contract entered into between the parties. It is stated that the provision contained in the tender documents which formed part of the contract between the parties casted a contractual duty on the claimant/GIL to carry out all necessary tests and investigations before submitting their bids. It was specifically mentioned in clause 13.2 of the special condition of contract that the contractor was to inspect and examine the site before submitting the bid as to the nature of ground and sub soil and collect all relevant data in respect thereof and the owner (NTPC) shall not entertain any claim under any circumstances arising out of the variation in site/soil data whether such data is indicated in the bid document or not, (e) The award was contrary to the terms of the contract since the claimant/GIL could not have claimed and nor awarded any escalation for spending more time because of its own fault in completing the project, (f) That the award of the Tribunal was intrinsically inconsistent. Once the Tribunal categorically held that there was no delay on the part of the respondent/NTPC while there were factors attributable to the claimant/GIL still the Tribunal awarded claim in respect of escalation to the claimant, contrary to the contract. That Annexure-III provided for a ceiling of 20% escalation on total civil work price of Rs. 5, 17,45,354/- and nothing beyond the ceiling was payable and a sum of Rs. 69,28,997/- had already been paid by the petitioner to the respondent during the period of contract, the award of Rs.
That Annexure-III provided for a ceiling of 20% escalation on total civil work price of Rs. 5, 17,45,354/- and nothing beyond the ceiling was payable and a sum of Rs. 69,28,997/- had already been paid by the petitioner to the respondent during the period of contract, the award of Rs. 78,64, 197/- amounted to grant of more than 28% of the price variation component of the contract price adjustment, which was contrary to the terms and conditions of the contract, stipulating maximum ceiling of 20%. The petitioner claimed that the rejection of the counter claims of the petitioner was without any reasons and the reasons given by the Tribunal were not maintainable. The Counter claims could not be rejected merely on the ground that it was not discussed during the meeting of 15th/16th October, 1993. I have considered the arguments advanced by the Counsel for both the parties. The key question in this case is whether the challenge to the award satisfies the provisions of Section 34 of the Arbitration and Conciliation Act. The Counsel for the respondent/GIL argued that the award was a consent award and the amount awarded was in fact modified and calculated by the petitioner itself and then awarded therefore, no challenge lies to the award. It is also submitted that none of the grounds of challenge made out by the petitioner in the petition is covered by Section 34 of the Arbitration and Conciliation Act, 1996. On the other hand, the Counsel for the petitioner argued that there was no consent and it is apparent from the award that the petitioner had opposed and resisted the claims of the respondent. The calculation of the amount of claim No.1 was ordered by the Arbitrators and this calculation was done only on the basis of the directions of the Arbitrators. There was no agreement about awarding this amount to the claimant. A perusal of award clearly shows that it is not a consent award but it is an award based on merits awarding claim of the petitioner of item No. 1 regarding escalation of price and award has to be considered on its merits.
There was no agreement about awarding this amount to the claimant. A perusal of award clearly shows that it is not a consent award but it is an award based on merits awarding claim of the petitioner of item No. 1 regarding escalation of price and award has to be considered on its merits. The Courts during the course of interpretation of the provision of Section 34 of the Arbitration and Conciliation Act had come to hold that Section 34 read conjointly with other provisions of the Act indicates that the legislative intent could not be that if the award is in contravention of the provisions of Act, still however, it could not be set aside by the Court. Therefore, if the Arbitral Tribunal had acted beyond its jurisdiction and had awarded an amount contrary to the contract between the parties, the award would be held to suffer from patent illegality and can be set aside under Section 34 of the Act. The Courts have held that if the award is contrary to substantive provisions of law or against the terms of contract, it would be a patently illegal award. However, such failure of procedure should be patent affecting the rights of the party. It is also held in ONGC Ltd. v. Saw Pipes Ltd. (2003)5 SCC 705 that the award must not be contrary to Public Policy of India and an award can be set aside if it is contrary to a) fundamental policy of Indian Law, b) interest of India, c) Justice or morality and d) if it is patently illegal. Supreme Court observed that illegality must go to the root of the matter and if illegality is of a trivial nature the award must be upheld. In the present case, the contract between the parties categorically provided that it was the obligation of the contractor to inspect and examine the site and its hindrances and satisfy itself before submitting the bid as to the nature of ground and sub soil, the form and nature of site, the quantities and nature of work and material necessary for completion of the work and means of access to the site, the accommodation he may require in general and after acquainting himself with all these and other circumstances, which may influence its bid, the contractor shall give bid for the contract.
Clause 13.2 reads as under: 13.2 The Contractor shall inspect and examine the site and its surroundings and shall satisfy himself before submitting his bid as to the nature of the ground and sub soil the form and nature of the site/the quantities and nature of work and material necessary for the completion of the works and the means of access to the site, the accommodation he may require and in general shall himself obtain all necessary information as to risks, contingencies and other circumstances which may influence or affect his bid. Owner shall not entertain any claim under any circumstances, arising out of variation in site/soil data, whether such data is indicated in the bid documents or not, as the contractor is expected to ascertain in all such data himself to his entire satisfaction. In addition to this as per clause No. 8.0.0 of Technical Specification Section c(o), the respondent/GIL was to carry out soil investigation itself. It was specified that information like soil characteristics given by the petitioner/NTPC in the tender were only indicative for guidance. Bidder was to fully satisfy himself about the nature of soil strata, its bearing capacity and other characteristics to be encountered at the site of cooling tower prior to submission of the bid. It was specifically stated by the petitioner that owner (NTPC) does not take any responsibility for actual soil data or for variation between the actual soil data and the indicative data. In view of this specific provisions in the contract and in view of the fact that the tenders were invited on 3rd October, 1986 and tenders were to be submitted in December 1986 and there was a gap of more than 2 months between invitation and submission of the bids, there was sufficient time with every tenderer to do the soil investigation, find out the data and then submit his bid. Despite this specific provision in the contract, the observation of the Tribunal regarding soil condition and that the delay was due to inaccurate soil data supplied by the petitioner is contrary to the contract and does not stand the scrutiny of law. It was not the obligation of the petitioner to give a data to the claimant/respondent in respect of sub soil, water conditions or about soil pressure to be encountered.
It was not the obligation of the petitioner to give a data to the claimant/respondent in respect of sub soil, water conditions or about soil pressure to be encountered. The tenderer who was to give bid, was at liberty to conduct sub soil testing before giving bid. The bid was being given for a work, which ran into several crores of rupees and every tenderer knew that the work involved below ground construction and sub soil structure for which proper soil testing and knowing the nature of soil was necessary. If the tenderer gives bid despite warning in the tender documents, without doing the actual soil testing only relying on the indicative data, no blame can be put on the owner (petitioner) and no compensation could be awarded on this ground. It is settled law that the Arbitrator is bound by the contract between the parties. The Arbitral Tribunal cannot re-write the contract and award claims. It can interpret the contract and arrive at a conclusion about meaning of a particular clause. Such an interpretation would be binding on the parties and Courts would not find faults with interpretation unless it shocks the conscience of the Court. But the Arbitral Tribunal cannot altogether ignore the terms of contract governing relationship of parties and make an award contrary to the contract. In this case the Arbitral Tribunal at the very outset came to the conclusion that delay in completion of work by GIL was due to inadequate supply of soil data by NTPC. These observations are contrary to express terms of the contract. The Tribunal has not even bothered to look into those terms and conditions of contract which deal with this aspect what to talk of interpreting the contract. The award of amount against claim No. 1 is liable to be set aside on the ground of being contrary to contract itself.
These observations are contrary to express terms of the contract. The Tribunal has not even bothered to look into those terms and conditions of contract which deal with this aspect what to talk of interpreting the contract. The award of amount against claim No. 1 is liable to be set aside on the ground of being contrary to contract itself. Moreover, in this case there was delay of 36 months and 22 months in construction of two cooling towers respectively and finding of the Tribunal shows that the site was handed over to the claimant after 8 days of sending telex i.e. on 28th October, 1987 itself, while the actual contract was signed on 17th February, 1988, which shows that the petitioner was quite eager to see that the site was available to the claimant much before the signing of actual contract, so that the claimant can proceed immediately with actual soil testing etc. The observation of the Tribunal itself shows that the claimant got conducted soil testing very delayed and obtained soil testing report after about 06 months of the handing over of the site sometime in March 1988. Had the soil testing got done by the claimant in time and had it obtained soil testing analysis report in time, there would have been no reason for the claimant to make any grievance about inadequate data. Secondly, even as per Tribunal the soil testing report was available with the claimant on 16th March, 1988, which gave all the data to the claimant but the claimant did not submit its work schedule L2 in time as per para 17 of the award. However, there was only 08 days difference between obtaining of soil testing report and submitting of work schedule, while there was actual delay of 22 months in execution of the construction of first cooling tower and 36 months delay in construction of second cooling tower. The entire award speaks about the delays on the part of GIL. GIL, who was supposed to employ 1000 workmen employed only 400 workmen. If a work requires deployment of 1, 000 men workforce and only 400 men workforce is employed, the time required is automatically 2 times more than the normal time. The Tribunal could not have closed its eyes to this very evidence discussed by it in the award and still held NTPC responsible for delay.
If a work requires deployment of 1, 000 men workforce and only 400 men workforce is employed, the time required is automatically 2 times more than the normal time. The Tribunal could not have closed its eyes to this very evidence discussed by it in the award and still held NTPC responsible for delay. It is also recorded by the Tribunal that GIL did not bring proper equipment and machines on the site to facilitate work at required speed. The personnel hoisting lift was not brought in time, lower crane for concreting the outer shell of 30 meters high cooling towers was not provided in time, pile testing was carried beyond the period of 06 weeks, all these reasons are writ large on the face of the award. In fact, the basic reason for delay in execution of the work is deployment of only 400 men workforce while actually 1, 000 men workforce should have been deployed. By awarding compensation for delay in the work to a contractor, who deliberately deploys only 400 workmen against 1000 workmen required does not deploy equipment necessary, in fact, amounts to rewarding him for his own wrongs and is contrary to Public Policy. No person can be rewarded for his own wrongs. A contractor in this manner not only makes illegal gains but in facts kills competition. Any contractor at the time of giving tenders bids would deliberately quote low prices with the intention of making it up later on during arbitration. Such claims would actually make his price more profitable than what he has quoted at the time of giving tender. It is possible that a person may quote such a low price at the time of bidding in which doing work is not feasible, only with the intention to keep out the other contractors and later on deliberately delay the execution of the work by under deploying the proper workforce and not bringing the necessary equipment on the site in time, delaying the work and claiming additional amount on the grounds of escalation, labour rates, administrative costs etc. as has been done in this case.
as has been done in this case. By this device, the competition is killed and this is actually what is happening in many of the contracts of the Government, where invariably the arbitration clause is invoked for escalation or for other reasons and normally contractor is awarded a substantial part of the contract by arbitration awards resulting into killing of the competition at the initial stage and benefitting and rewarding the contractor for his wrongs. The conduct of GIL in this case as reflected from the discussion of the arbitrators was totally contrary to the contract and despite that, if the contractor is awarded compensation for delay/escalation in execution of the work, it would actually amount to rewarding it for its wrongs and would be contrary to the Public Policy of India. There is another reason for setting aside this award i.e. once the analysis of the entire evidence done by the Arbitral Tribunal shows that there was no delay on the part of the petitioner and the delay was on the part of GIL and when contract shows that it was not the responsibility of the petitioner to supply accurate soil analysis data and it was the responsibility of the contractor to first ensure the soil analysis and then give bid, no escalation could be awarded to the contractor for delaying the project in terms of the contract reproduced in para 13 above. The award passed by the Arbitral Tribunal in respect of claim No.1 in favour of GIL is hereby set aside, however, the award for balance payment of Rs. 18, 51, 102.29 along with 12% interest over this amount as awarded by the Arbitral Tribunal is sustained;