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Himachal Pradesh High Court · body

2014 DIGILAW 400 (HP)

V. K. Mangla v. State of Himachal Pradesh

2014-04-17

RAJIV SHARMA

body2014
JUDGMENT Per Rajiv Sharma, Judge. 1. Since common questions of law and facts are involved in both the petitions, the same were taken up together for hearing and are being disposed of by a common judgment. However, in order to maintain clarity, facts of Arb. Case No.34 of 2011 have been taken into consideration. 2. The work of “construction of road from Bhojnagar to Banasar Km. 0/0 to 12/720” was awarded by the Executive Engineer, Kasauli Division, HP PWD (hereinafter referred to as the “respondent” for the sake of convenience) vide letter No.6280-83, dated 6.1.2006 in favour of the petitioner/contractor (hereinafter referred to as the “petitioner” for the sake of convenience). The work was to be completed within a period of twelve months. The estimated cost of the work was Rs.1,95,18,442/-. Since the work was not completed by the petitioner by 20.1.2007, the agreement was rescinded vide letter No.8449-55 dated 22.11.2007. 3. The dispute arose between the parties. The Arbitral Tribunal was constituted by the Chief Engineer (South) HPPWD Shimla vide letter dated 6.7.2008 under clause 25 of the general conditions of the contract agreement entered into between the parties. The Arbitral Tribunal entered upon reference on 11.7.2008 vide letter No.733-36 dated 11.7.2008. The respondent filed counter claim before the Arbitral Tribunal. The petitioner preferred six claims before the Arbitral Tribunal. The Arbitral Tribunal passed the award on 31.1.2011. According to the Award, petitioner was awarded nil amount against claim No.1, Rs.2,88,194/-against claim No.2, Rs.69,722/- against claim No.3, nil amount against claim No.4, simple interest at the rate of 7.5% on the amount of Rs.3,57,916/- for a period of three years, i.e. upto the date of award against claim No.5 and nil amount against claim No.6. Counter claim filed by the respondent for imposition of liquidated damages was disallowed. 4. Mr. Sumeet Raj Sharma, learned Advocate, has vehemently argued that as per condition No.21.1 of general conditions of the contract agreement, 75% of the site was required to be handed over to his client at the start of the work. His client has executed work worth Rs.64,06,300/- out of total awarded work of Rs.1,95,18,442/-. Balance work amounting to Rs.1,31,12,142/- could not be executed as the respondent failed to get the land, on which the work was to be executed, cleared from the Forest Department and settle the dispute with private land owners. His client has executed work worth Rs.64,06,300/- out of total awarded work of Rs.1,95,18,442/-. Balance work amounting to Rs.1,31,12,142/- could not be executed as the respondent failed to get the land, on which the work was to be executed, cleared from the Forest Department and settle the dispute with private land owners. According to him, no work was executed in a length of 6.650 Kms, which was more than 50% of the total length of the road. His client could not earn profit, which he had anticipated on completion of the work, i.e. Rs.23,60,186/-. He supported the compensation awarded by the Arbitral Tribunal against all claims, except claim No.1. 5. Mr. Parmod Thakur, learned Additional Advocate General, has vehemently argued that the petitioner has failed to execute the work on major portion of the land. He further argued that the work was awarded for removal of formation deficiencies, cross drainage, earth retaining structures, soiling etc.. According to him, clear site was made available to the petitioner, except for small portion of land, where formation deficiency work amounting to Rs.10,00,000/- was to be done. He also argued that the impugned award is against the public policy. 6. I have heard learned counsel for the parties and have also gone through the impugned award and record carefully. 7. Now, the Court will advert to the evidence whether 75% of the site was made available to the petitioner at the start of the work or not. 8. The petitioner vide letter dated 4.8.2006 brought to the notice of the respondent about the objection raised by Ram Partap and Bhagwan Dass Sharma, whose land came in the alignment of the road from RD 8/825 to 8/875 and from 8/875 to 9/960. However, when the petitioner submitted working programme of balance work on 4.12.2006, he only mentioned about the hindrance in the execution of the work due to forest land involved. The working programme of balance work is as under:- Name of work: C/o road Bhojnagar to Banasar Km 0/0 to 12/720 Sr. Item Tentative date of completion No. 1 Cutting work. F/D F/D complete except forest land 15 Jan 2007. 2 C/D work. Balance C.D. work complete 28 Feb.07 over 18 Nos H.P. culverts 3 Parapets 8 km Completion 31 January 2007 4 Retaining structure 100 Metre length upto 28 Feb 2007. Item Tentative date of completion No. 1 Cutting work. F/D F/D complete except forest land 15 Jan 2007. 2 C/D work. Balance C.D. work complete 28 Feb.07 over 18 Nos H.P. culverts 3 Parapets 8 km Completion 31 January 2007 4 Retaining structure 100 Metre length upto 28 Feb 2007. The respondent did not deny the dispute on private land as per letter dated 14.11.2006. 9 Now, the Court will advert to the obstructions caused to the work due to the involvement of the forest land. According to lineal chart, in a length of 5.475 km out of total length of 12.720 km of the road, forest trees were involved. After receipt of necessary approval from the Conservator of Forests (Central), Ministry of Environment and Forests, Northern Regional Office Chandigarh vide letter dated 30.3.2007, work of felling of forest trees was completed during the month of March 2009. Total area of forest land diverted from the road was 0.99 hectare as per letter dated 30.3.2007. The work was to be completed by 20.1.2007 and the letter from Ministry of Environment and Forests, Northern Regional Office, Chandigarh was received only on 30.3.2007, though the agreement was rescinded on 22.11.2007. The total kacha road available was 12.720 kms. Private land involved was only 1.135 km before 4.12.2006. However, it was made available after 4.12.2006. The forest land was involved to the extent of 0.99 hectares. The Arbitral Tribunal has rightly come to the conclusion that the total area under the private land came to 6810 sq. mts. and the forest land was only 0.99 hectares. The total area which was not made available to the petitioner at the start of the work was 16710 sq. mts., i.e. 21.89%, which was less than 25%. Thus, 75% of the site was available with the petitioner as per clause 21.1 of the general conditions of the contract. The petitioner had already completed CD work, which was involved in the forest land. Total work, which the petitioner could have executed upto the contract period came to Rs.1,64,68,433/-. However, the petitioner only executed work of Rs.64,06,300/- by 22.11.2007. The Arbitral Tribunal has given correct findings that it can not be said that if the entire site was made available to the contractor, he would have completed the work and earned profit on balance work during the contract period and even till the rescission of the contract. However, the petitioner only executed work of Rs.64,06,300/- by 22.11.2007. The Arbitral Tribunal has given correct findings that it can not be said that if the entire site was made available to the contractor, he would have completed the work and earned profit on balance work during the contract period and even till the rescission of the contract. Thus, the petitioner is not entitled to compensation for loss of anticipated profit on balance work. 10. The petitioner has been awarded a sum of Rs.2,88,194/- against claim No.2. The petitioner received a sum of Rs.29.26 lac in advance for purchase of machinery and mobilization. Only an amount of Rs.16,63,294/-was recovered/adjusted in the bills of the petitioner. The respondent recovered balance amount of Rs.12,62,706/- from the security deposit and by enchasing performance bank guarantee. The petitioner has been awarded a sum of Rs.2,88,194/- under this head. Mr. Parmod Thakur, learned Additional Advocate General, has failed to point out any provision in the contract agreement, which provides for forfeiture of security deposit for non completion of the work. Against claim No.3, the petitioner has claimed a sum of Rs.39,75,000/-, however he has been awarded a sum of Rs.69,722/-. The Arbitral Tribunal has rightly construed clause No.53.1 of the general conditions of the contract agreement while determining this issue. Though the petitioner has claimed interest at the rate of 18% per annum, simple interest at the rate of 7.5% on an amount of Rs.3,57,916/-awarded by the Arbitral Tribunal is just and reasonable, since he has not led any tangible evidence that he had actually paid any interest at the rate of 18% on any amount borrowed by him. 11. It is true that the respondent has served several notices on the petitioner as per Annexures A-4 to A-11 and A-13 to accelerate the work, however, as discussed hereinabove, forest land measuring 0.99 hectares was not made available to the petitioner at the time of rescission of the contract, though the permission was accorded by the Conservator of Forests (Central), Ministry of Environment and Forests, Northern Regional Office Chandigarh vide letter dated 30.3.2007, and work of felling of forest trees was completed during the month of March 2009. It cannot be said that the there was any breach of contract by the petitioner. It is in these circumstances, the work could not be completed by 20.11.2007. It cannot be said that the there was any breach of contract by the petitioner. It is in these circumstances, the work could not be completed by 20.11.2007. There is fault on the part of the respondent also by not providing the entire stretch of land to the petitioner. In view of this imposition of liquidated damages at the rate of 3% amounting to Rs.5,85,552/- was illegal and rightly set aside by the Arbitral Tribunal. Similarly, compensation claimed by the respondent at the rate of 20% amounting to Rs.26,22,428/- for non-completion of the work was not in accordance with law. When the work could not have been completed due to the fault of the respondent, imposition of 20% compensation for non-completion of the work under clause 53.1 of the general conditions of contract agreement read with item No.25 thereof was not justified. Thus, the Arbitral Tribunal has rightly rejected the counter claim filed by the respondent. 12. Their Lordships of Hon’ble Supreme Court in J.G. Engineers Private Limited vs. Union of India and another, (2011) 5 Supreme Court Cases 758 have explained when the award can be set aside by the Court as under:- “27. Interpreting the said provisions, this court in Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. [ 2003 (5) SCC 705 ] held that a court can set aside an award under section 34(2)(b)(ii) of the Act, as being in conflict with the public policy of India, if it is (a) contrary to the fundamental policy of Indian Law; or (b) contrary to the interests of India; or (c) contrary to justice or morality; or (d) patently illegal. This Court explained that to hold an award to be opposed to public policy, the patent illegality should go to the very root of the matter and not a trivial illegality. This Court explained that to hold an award to be opposed to public policy, the patent illegality should go to the very root of the matter and not a trivial illegality. It is also observed that an award could be set aside if it is so unfair and unreasonable that it shocks the conscience of the court, as then it would be opposed to public policy.” 13 Their Lordships of Hon’ble Supreme Court in P.R. Shah, Shares and Stock Brokers Private Limited vs. B.H.H. Securities Private Limited and others, (2012) 1 Supreme Court Cases 594 have held that the court cannot sit in appeal over award by reassessing or re-appreciating evidence to find out whether different decision could be arrived at against findings of arbitral tribunal in absence of grounds under Section 34. Their Lordships have held as under:- “21. A court does not sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in section 34(2) of the Act. The arbitral tribunal has examined the facts and held that both second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye Law 248, in a claim against a non- member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.” 14. Accordingly, in view of the observations and analysis, made hereinabove, there is no merit in the petitions and the same are dismissed. Pending application(s), if any, also stand disposed of.