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2017 DIGILAW 392 (GAU)

Dhanoa Builders (M/S) v. Union of India

2017-03-28

PRASANTA KUMAR DEKA

body2017
JUDGMENT : Prasanta Kumar Deka, J. Heard Mr. P. Mahanta, learned counsel, appearing on behalf of the appellant/petitioner and Mr. S.P. Choudhury, learned counsel, appearing for the respondents, the Union of India. 2. This is an appeal under Section 37(1) (c) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") against the judgment and Order dated 7.7.2006, passed in Misc. (Arbitration) Case No. 16/2004 by the learned District Judge, Sonitpur, Tezpur partly allowing an application under Section 34 of the Act of 1996 arising out of arbitral award pertaining to C.A. No. CEW/TEZ/06 of 1990-91 signed by the Sole Arbitrator on 25.10.2003. 3. The present appellant entered into an agreement No. CEW/TEZ/06 of 1990-91 relating to provision of RCC Overhead Reservoir of 25000 gallons capacity on 18 M Staging and Sedimentation Tank under Garrison Engineer, Tezpur and the said agreement was executed between the appellant and the Union of India represented by the respondent No. 2. 4. As per the contract agreement, the respondents were required to make RAR payments from time to time as per progress of the work with the release of Schedule "B" Stores to the contractor to enable him to carry on the works. The particulars of the contract as mentioned in paragraph 3.2 of the award are as follows: (i) CA No. CWE/TEZ/06 OF 90-91 (ii) Name of the Work Provision of RCC Over Head Reservoir of 25000 gallons Capacity on 18 M Staging and Sedimentation Tank under GE, Tezpur. (iii) Date of issue of Tender 16 May, 1990 (iv) Date of receipt of Tender 07/20/90 (v) Date of acceptance of Tender 07/20/90 (vi) Accepted amount Rs. 14,10,561.33/- (vii) Date of Commencement 08/10/90 (viii) Period of Completion 12 Months (ix) Date of Completion 08/09/91 (x) Extended date of Completion 30 Jun 1995 (final extension) (xi) Extended date of Completion 06/30/95 (xii) Date of Cancellation 22 Feb 1996 (w.e.f. 25 Feb 1996) 5. As per the terms and conditions of the agreement, the work was required to be completed on or before 9.8.1991. The work was accepted by extending the date of completion till 30.6.1995, terming the said as the final date of completion. However, Schedule "B" Stores was issued till 21.12.1995 i.e. beyond the extended date of completion. 6. As per the terms and conditions of the agreement, the work was required to be completed on or before 9.8.1991. The work was accepted by extending the date of completion till 30.6.1995, terming the said as the final date of completion. However, Schedule "B" Stores was issued till 21.12.1995 i.e. beyond the extended date of completion. 6. Referring the dispute to an Arbitral Forum as per the contract agreement by the appellant, to which the respondent No. 2 also requested for referring the matter to the Arbitrator, the Chief Engineer, Shillong Zone, Spread Eagle Falls, Shillong appointed the Sole Arbitrator on 10.10.2000 enclosing therewith the claims of the parties. 7. While referring the matter to the Arbitrator vide letter dated 10.10.2000, the following claims/disputes were referred to for adjudication:- "List Of Claims/Disputes Description of the claims/items Approx. Amount in Rupees. A. Contractor's Claim Claim No. 1 Amount against Work done not paid 501067.53 Claim No. 2 Interest 2,00,000.00 Claim No. 3 Loss of Profit 10,50,000.00 B Government's Claims Claim No.1 Tentative amount of minus final bill on account of cancellation of contract and conclusion of risk & cost contract 4,26,434.00 Claim No.2 Cost of reference 30000 Claim No.3 Interest past pendent- elite and future @ 22% p.a. (amount to be intimated later 8. The Arbitrator took up the following claims raised by the appellant/contractor: 1. Claim No.1 (Amount against work done not paid) Amount claimed :- Rs. 5,00,000.00 2. Claim No.2 (Loss of profit) Amount claimed :- Rs. 10,00,000.00 3. Claim No.3 (Cost of storage shed taken over by the Union of India) Amount claimed :- Rs. 30,000.00 4. Claim No.4 (Interest) Interest claimed :- Rs.18% from due date till Payment. 5. Claim No.5 (Cost of reference) Amount claimed:- Rs. 20,000.00 9. On the basis of the claims an amount of Rs. 1,72,911.04 was awarded against the Claim No. 1. No award was granted against the Claim No. 2. No comment was made in respect of the Claim No. 3 as the same was not referred for adjudication. Against Claim No. 4, simple interest @ Rs. 10% from the date of cancellation i.e. 22.6.1996 over Rs. 1,72,911.04 was granted. No award was made against Claim No. 5. 10. Similarly, the respondents made the following claims: "Claim No. 1. (Non return of schedule 'B' Stores). Claim No. 2. (Non return of classified documents). Claim No. 3. (Non rectification of defects). 10% from the date of cancellation i.e. 22.6.1996 over Rs. 1,72,911.04 was granted. No award was made against Claim No. 5. 10. Similarly, the respondents made the following claims: "Claim No. 1. (Non return of schedule 'B' Stores). Claim No. 2. (Non return of classified documents). Claim No. 3. (Non rectification of defects). Claim No. 4. (Non production of purchase vouchers) Claim No. 5. (Site recovery). 6. Claim No. 6 (Risk and Cost amount) Amount claimed: Rs. 6,26,638.31 7. Claim No. 7 (Compensation for the delay). Amount claimed: Rs. 1, 41, 056.00 8. Claim No. 8 (Cost of reference) Amount Claimed: Rs. 50,000.00 9. Claim No. 9 (Interest) Interest claimed at the rate of Rs. 18%." 11. The Sole Arbitrator with respect to the claim of the respondents, Claim Nos. 1 to 5 were not considered as the same were not referred to for adjudication. Against Claim No. 6, an amount of Rs. 2, 45, 749.99 was granted as extra expenditure for getting balance work done under risk and cost contract due to contractor's default. Against Claim No. 7, an amount of Rs. 1,41,056.00 was granted in favour of the respondents as compensation for delay. However, no award was granted against Claim No. 8. Against Claim No. 9, simple interest @ Rs. 10% was awarded in favour of the respondents from 15th January, 1999 till payment of the awarded amount. The award was signed on 25.10.2003. 12. Being aggrieved by the said amount, the appellant/contractor preferred an application under Section 34 of the said Act of 1996 before the court of the learned District Judge, Sonitpur at Tezpur, which was registered as Misc. (Arb.) Case No. 16/2004. The learned District Judge, Sonitpur, Tezpur vide judgment and order dated 7.7.2006 partly allowed the said petition under Section 34 of the said Act of 1996. The award with regard to the Claim No. 7 against compensation for delay was set aside by holding that the said claim was not referred to the Arbitral Tribunal. However, with respect to the Claim No. 6, the learned court below held that the Arbitrator passed the award against Claim No. 6 by exercising his lawful jurisdiction and as such the court of the learned District Judge refused to interfere with the said award. 13. Being aggrieved, the present appellant has preferred this appeal against the judgment and order passed by the learned court below. 14. Mr. 13. Being aggrieved, the present appellant has preferred this appeal against the judgment and order passed by the learned court below. 14. Mr. Mahanta, learned counsel, appearing for the appellant submits that the court below failed to Act according to the law in not setting aside the award against Claim No. 6 of the respondents, the same being contrary to Section 75 of the Indian Contract Act. Mr. Mahanta confined his argument with respect to the award against Claim No. 6 by the Arbitrator in favour of the respondents. It is submitted that the Arbitrator while discussing with regard to the said Claim No. 6 of the respondents came to the finding that the respondents-the Union of India took a lot of time to conclude risk and cost contract and to complete the balance work. Noting the date of cancellation as 22.2.1996, it was the finding of the Arbitrator that the same ought to have concluded within June 1996 and from there within 6 months the balance work should have been completed as the period of completion in the risk and cost of contract was given as 6 months. Thus as per the finding of the Arbitrator extra expenditure to some extent could have been avoided. It is further submitted by Mr. Mahanta that even on such finding the Arbitrator allowed the claim to the extent of Rs. 2,45,749.99/- only to the respondent-the Union of India against its claim of Rs. 6,26,638.31/-. So, Mr. Mahanta submits that there is an error apparent on the face of the award while granting the said claim and a duty was cast upon the court below to interfere and set aside the same. Having not done so, this court has the ample power and scope to interfere with the finding of the court below. 15. Mr. S.P. Choudhury, learned counsel for the respondents submits that there is no error apparent on the award on the basis of the findings of the Arbitrator. Considering the laches and negligence on the part of the respondents after pointing out the same accordingly passed the award against the said Claim No. 6 on the basis of the formula evolved by the said Arbitrator which has taken care of the interest of the appellant. Considering the laches and negligence on the part of the respondents after pointing out the same accordingly passed the award against the said Claim No. 6 on the basis of the formula evolved by the said Arbitrator which has taken care of the interest of the appellant. Under such circumstances, this court has got no jurisdiction to interfere with regards to the findings of the Arbitrator, more so, when the same are based on reasoning on the basis of the facts and circumstances of the case. So, he prays for dismissal of the appeal. 16. Keeping in view the submission of the learned counsel, the award passed by the Arbitrator with regard to the Claim No. 6 of the respondents is reproduced herein below: "4.6.2. The total cost of works under Schedule A Part I and II works out to Rs. 13,50,675.00 as per the original contract. Out of Rs. 13,50,675/- the contractor has carried out a work of a sum of Rs. 11,98,210.87 (except DOs) till the date of cancellation as brought out above. Therefore, the balance amount left over was Rs. 1,52,464.13 on Schedule A Parts I and II. The risk and cost contract has been concluded for Rs. 5,08,673.50 against the left over work of Rs. 1,52,464.13 which works out to 233.63% on the lump sum/rates quoted by the original contractor. Had the risk and cost contract been concluded soon after cancellation of the original contract as stated above, the above 233.63% could have been reduced to a great extent as the market variation of 233,63% is for a period from 20 Jul 1990 (Date of acceptance of first Contract) to 30 Jun 1998 (Date of acceptance of risk & cost contract) i.e. 07 years 11 months 10 days- Say 08 years. This risk and cost contract concluded after 02 years 04 months from the date of cancellation of contract. Therefore, proportionately the market variation works out to 29.20% (02 years 04 months/08 years) for delay in concluding the risk & cost contract. Therefore, extra amount incurred due to contractor's default is as under:- Total work done on risk & Cost Rs. 4,99,395.31 Left over works as per original Contract Rs. 1,52,454.13 Extra expenditure incurred Rs. 3,46,941.18 Variation in Cost in 08 years Rs. Therefore, extra amount incurred due to contractor's default is as under:- Total work done on risk & Cost Rs. 4,99,395.31 Left over works as per original Contract Rs. 1,52,454.13 Extra expenditure incurred Rs. 3,46,941.18 Variation in Cost in 08 years Rs. 3,46,941.18 Variation in cost due to Contractor's default (up to date of cancellation) 346941.18/8 x 17/3 8 years 0 month (-) 2 years 4 months 5 years 8/12 months 5 12/8 = 17/3 years Rs. 2,45,749.99 Therefore considering the proportionate market variation Rs. 2,45,749.99 extra expenditure was incurred due to the work having got done under risk & cost contract. Therefore, I award a sum of Rs. 2,45,749.99 only to Union of India towards extra expenditure incurred for getting the balance work done under risk and cost contract due to contractor default." 17. In Mcdermot International Inc v. Burn Standard Co. Ltd. And Others, reported in (2006) 11 SCC 181 , the Hon'ble Apex Court held as follows:- "108. A contention had been raised both before the learned arbitrator as also before us that MII could not prove the actual loss suffered by it as is required under the Indian law viz. Sections 55 and 73 of the Indian Contract Act as Mr. D.J. Parson had no personal knowledge in regard to the quantum of actual loss suffered by MII. D.J. Parson indisputably at one point of time or the other was associated with MII. He applied the Emden Formula while calculating the amount of damages having regard to the books of accounts and other documents maintained by MII. The learned arbitrator did insist that sufferance of actual damages must be proved by bringing on record books of accounts and other relevant documents. 109. Sections 55 and 73 of the Indian Contract Act do not lay down the mode and manner as to how and in what manner the computation of damages or compensation has to be made. There is nothing in Indian law to show that any of the formulae adopted in other countries is prohibited in law or the same would be inconsistent with the law prevailing in India. 110. As computation depends on circumstances and methods to compute damages, how the quantum thereof should be determined is a matter which would fall for the decision of the arbitrator. 110. As computation depends on circumstances and methods to compute damages, how the quantum thereof should be determined is a matter which would fall for the decision of the arbitrator. We, however, see no reason to interfere with that part of the award in view of the fact that the aforementioned formula evolved over the years, is accepted internationally and, therefore, cannot be said to be wholly contrary to the provisions of the Indian law." 18. From the ratio of the said decision, it can be concluded that if no method of measurement with regard to damages/compensation is mention in the contract, under such circumstances, the manner in which the quantum thereof should be determined is a matter which would be within the of the Arbitrator to give a decision. Keeping in view the ratio laid down by the Hon'ble Apex Court, this court cannot enter into the calculation made and the method used thereof by the Arbitrator inasmuch as before entering into the said calculation, the Arbitrator took into consideration the laches and negligence on the part of the respondents- the Union of India by giving his reasoning as follows: "The Union of India has claimed Rs. 6,26,638.31 towards extra expenditure incurred in completing the left over works through other agencies. However, the above claimed amount includes the cost incurred under six job orders also which I do not agree for the reasons stated in para 3.7 (vi) above. The risk and cost contract has been concluded by the Union of India vide CA No. CWE/TEZ/02 of 1998/99 for a sum of Rs. 5,08,673.50 on 30 Jun' 98. From the final bill of the risk and cost contract the work done is shown as Rs. 4,99,395.31. Also the Union of India has claimed for Rs. 4,99,395.31 towards the extra expenditure incurred under the risk and cost contract. Therefore a sum of Rs. 4,99,395.31 is due to the Union of India for the extra expenditure incurred under the risk and contract. But the Union of India took a lot of time to conclude risk and contract/and to complete balance work. It may please be noted that the subject contract was cancelled on 22 Feb 96. Therefore a sum of Rs. 4,99,395.31 is due to the Union of India for the extra expenditure incurred under the risk and contract. But the Union of India took a lot of time to conclude risk and contract/and to complete balance work. It may please be noted that the subject contract was cancelled on 22 Feb 96. Therefore, the risk and cost contract should have been concluded immediately latest by say June, 96 and from there within six month the balance works should have been completed (the period of completion in the risk and cost contract was given as SIX months). Thus extra expenditure to some extent could have been avoided." 19. In such a situation, it cannot be held that the award against Claim No. 6 of the Union of India falls within the submission of Mr. Mahanta, learned counsel, appearing on behalf of the appellant. This court finds that the award against Claim No. 6 of the respondents is a reasoned award inasmuch as while calculating the said award on his own, the Arbitrator has expressed his mind with regard to the basis on which the said award has been arrived at and awarded in view of the laches and negligence on the part of the respondent- the Union of India. As such this appeal has no merit and the same is dismissed. 20. Send back the LCR.