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2021 DIGILAW 586 (RAJ)

State of Rajasthan v. A. Muthuswamy

2021-03-09

VINIT KUMAR MATHUR

body2021
JUDGMENT 1. With the consent of counsel for the parties, the present appeal is being heard and decided finally. 2. The instant appeal has been preferred under section 37 of the Arbitration and Conciliation Act, 1996 against the order dated 03.01.2019 passed by learned Additional District Judge No.4, Udaipur in Civil Original Case No.3/2015 (CIS No.2354/2015). Vide judgment dated 03.01.2019, the application preferred by the appellants under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter shall be referred to as 'Act of 1996') has been rejected while affirming the findings recorded by the Arbitrator vide award dated 21.05.2015.Learned counsel for the appellants has vehemently argued that the learned court below has not properly appreciated the facts in the light of section 34 of the Act of 1996 as also the arguments raised therein. She submits that for a considerable period of time the contractor did not complete the work despite being given proper opportunity or extension to complete the work on the site. She fairly submits that on certain occasions, the work was stopped on account of 'A/o Objection Certificates' being not granted to the contractor as the same were not cleared from the Forest Department. She submits that apart from few occasions, the contractor was free to commence and complete the work on the site. She fairly submits that the contractor is not responsible for not performing the work on the site for the periods the department gave in writing to stop the work. It is further contended that it was on record that the contractor was issued letters from time to time to start the work at the site and complete the same in the extended period. She submits that the period of contract was from 01.01.1998 to 31.03.2000. Time was essence of the contract. The contractor was given all reasonable opportunities and extensions to complete the work but the same was not done. In the circumstances, department took recourse to resile the work from the contractor and face the consequences thereof. She further argues that the learned Arbitrator has not correctly recorded the findings on issue No.2 & 4. She submits that except the delay caused in completing the work, no other point was pressed into service in the present case. 3. In the circumstances, department took recourse to resile the work from the contractor and face the consequences thereof. She further argues that the learned Arbitrator has not correctly recorded the findings on issue No.2 & 4. She submits that except the delay caused in completing the work, no other point was pressed into service in the present case. 3. Per contra, learned Senior counsel for the respondent submits that in view of the fact that the contractor was not given due clearance for initiation of the work despite the fact that he time and again approached the department for the same. Solely because the appropriate clearances were not given, the project could not be completed. He further submits that there was no fault on the part of the contractor as the men and machinery remained located at the site but the department failed to issue necessary direction to the contractor to complete the work at the site. He further contends that the findings recorded by the Tribunal on issue Nos.2 & 4 are detailed and speaking and therefore, the application preferred under section 34 of the Act, 1996 was rightly rejected by learned court below. The counsel for the respondent further submits that the scope of adjudication under sections 34 & 37 of the Act is very limited and therefore, the courts should be slow while interfering with the findings of fact recorded by the Arbitrator as well as learned court below. In support of his contention, the counsel for the respondent relies upon the judgment of the Hon'ble Supreme court in the case of MMTC Ltd. V/s Vedanta Ltd. reported in (2019) 4 Supreme Court Cases, 163. 4. I have considered the submissions made at the bar, gone through the award dated 21.05.2015, order dated 03.01.2019 passed by Additional District Judge No.4, Udaipur as well as relevant record of the case. 5. The point of delay is the only issue of contention in the present case. It is noted that the dates are admitted more or less of the contractual period w.e.f. 01.01.1998 to 31.03.2000. In between the contractual period, there were certain hindrances on account of which the work was stopped by the contractor on account of non clearance by the department. It is noted that the dates are admitted more or less of the contractual period w.e.f. 01.01.1998 to 31.03.2000. In between the contractual period, there were certain hindrances on account of which the work was stopped by the contractor on account of non clearance by the department. It has come on record in averments made in the application preferred by the appellants under section 34 of the Act, 1996 that the department could not issue clearance to the contractor for performing the work on the site. It will be beneficial to reproduce the relevant paras of the application filed by the appellants under section 34 of the Act, 1996 as under:- 6. It is noted that when the department itself has admitted the fact of not giving appropriate directions to the contractor for performing the work at the site because of legal impediments involved, the contractor alone cannot be held responsible for not completing the project. It is also noted that the Tribunal has dealt with the issue No.2 in detail giving explanation for the dates on which delay and hindrances were caused during the execution of the work. For brevity, the findings of the Arbitrator on issue No.2 & 4 are reproduced as under:- "Issue No.2: Whether action taken by respondents under clause 2 & 3 of the agreement is illegal and unlawful and claimant is entitled for the refund of Performance Guarantee, Security Deposits and other deposits forfeited. It is an admitted fact that work was to be completed within 27 months, date of commencement and completion were 01.01.1998 to 31.03.2000 respectively. The case of the claimant is that due to several hindrances for which respondents were responsible work could not be completed within the stipulated period, and time was extended by respondents without compensation. The Hindrances caused during execution of work were as follows: 1. Objection raised by Forest Deptt. For quarrying stone etc. due to designated quarry situated in forest area. 2. In adequate allotment of budget for this period. 3. Execution of Extra work. 4. Miscellaneous reasons like cyclone, General Election, Lok Sabha Assembly and Panchayat Election etc. 5. Breach of contract due to stoppage of work as per Government order. Objection raised by Forest Deptt. For quarrying stone etc. due to designated quarry situated in forest area. 2. In adequate allotment of budget for this period. 3. Execution of Extra work. 4. Miscellaneous reasons like cyclone, General Election, Lok Sabha Assembly and Panchayat Election etc. 5. Breach of contract due to stoppage of work as per Government order. The claimant besides the affidavit of Shri M. Manickam, partner of M/S A Muthuswamy claimant, and ExC22, letter written by Add Chief Engineer to Chief Engineer Irrigation dated 08.09.2000 has placed on record in support of above mentioned hindrances caused during execution of work, and respondents extended the period for completion of work up to 28.02.2003 without compensation. But the respondents terminated the contract before it. It has been submitted by the claimant, that there was no fault of claimant contractor but in compliance of the order of Chief Engineer dated 24.02.2003, the Executive Engineer imposed penalty under clause 2 of the contract @ 10% on the tendered value of the contract Rs.24.597 lac, and fortified the- (I) Bank Guarantee (performance Guarantee) Rs.1230000.00 (ii) Security Deposit. Rs. 948455.00 (iii) S.D.V. Rs. 245564.00 (iv) From 27th incomplete final bill paid on 13.05.10. Rs. 35775.00 Total: Rs.2459794.00 The claimant has challenged the order imposing penalty and forfeiting the amount Rs.2459794.00 on the ground that before imposing penalty:- (i) Final notice was not given. (ii) Operation of clause 2 is illegal. (iii) compensation levied 10% on tender value under clause 2 is illegal. Therefore, the action of respondents imposing penalty is illegal and claimed is entitled for refund of amount forfeited by the respondents. On behalf of respondent it has been submitted that before taking action under clause 2 & 3 of the agreement a final notice Ann.R32 dated 14.02.03 was given therefore, the claimant has given wrong facts. As per agreement the claimant was required to complete the work up to 31.03.2000. But he failed to do so. On representation of claimant taking into consideration, hindrances caused during the execution of work, time was extended up to 31.12.2001 without compensation in terms of clause 5 of the contract by order ExCI0 dated 25.01.2001. But contractor could not complete the work. But he failed to do so. On representation of claimant taking into consideration, hindrances caused during the execution of work, time was extended up to 31.12.2001 without compensation in terms of clause 5 of the contract by order ExCI0 dated 25.01.2001. But contractor could not complete the work. There after again on request of claimant, and on the basis of two affidavits of Shri M Manickam dated 01.08.2002 and 09.08.2002 Excl6 and Annexure R14, provisional time extension was granted vide order no 8826 dated 21.12.2002(ExC18) up to 28.02.2003. But claimant could not complete the work and stopped execution of work willfully on 14.10.2002, therefore after serving final notice dated 14.02.03(Ann. R32) the contract was terminated and action under clause 2 & 3 of the contract was taken. I have heard learned counsel of both the parties and perused the record in this respect. As per agreement, the time was the essence of the contract, and contractor was required to complete the work up to 31.03.2000, visualizing that due to several hindrances work could not be completed before the stipulated date, contractor applied for extension of time by letter dated 12.07.99(ExC32) for 5 months. It is an admitted fact that, respondents did not take any action for extension of time before the expiry of contract agreement i.e. before 31.03.2000. The Dy. Secretary & T.A. to Chief Engineer vide letter bearing No.1212-14 dated 27.05.2000(ExC8) returned the time extension case for obtaining the consent of the contractor. It was also observed in the letter that as the contract period has already expired, no action under clause 2 & 3 of the contract can be taken." Thereafter time & again Contractor submitted applications for extension of time which was extended by various orders by the respondents up to 28.02.03. As the work could not be completed upto 28.02.03 the respondents vide letter dated 27.02.03(ExC21) imposed the penalty under clause 2 & 3 of the contract. Meanwhile two affidavits were also submitted by claimant regarding completion of work and abut escalation charges (ExC16) Ann.R14 dated 01.08.02 & 09.08.02 respectively. The allegation of claimant in this regard is that these affidavits were obtained under' Coercion'. Meanwhile two affidavits were also submitted by claimant regarding completion of work and abut escalation charges (ExC16) Ann.R14 dated 01.08.02 & 09.08.02 respectively. The allegation of claimant in this regard is that these affidavits were obtained under' Coercion'. It is proved by letters exchanged between the parties, the contractor visualizing that due to several hindrances, it was not possible to complete the work within the stipulated date for completion of work i.e. 31.03.2000, he applied for extension of time without compensation by his letter dated 12.07.1999 (ExC32) much before the stipulated date for completion of work. But no action was taken by the respondents on ex.C32 before 31.03.2000, within the result, the contract period expired on 31.03.2000. Thereafter Dy. Secretary & T.A. to Chief Engg. Vide letter dated 27.05.2000 (ExC8) returned the time extension case for obtaining the consent of the contractor, observing that as the contract period has already expired no action under clause 2 & 3 can be taken. In view once the contract expired, it cannot be revived in the way as pleaded by respondents. As such, action under clause 2 & 3 of the expired contract agreement respondents can not impose penalty and forfeit the security deposit, Bank Guarantee (Performance Guarantee) S.D.V. and Rs.35781/- from the incomplete final bill (R37) total amount Rs.2459794.00. Moreover imposing penalty @ 10% of tender value itself is illegal. Therefore, this issue is decided in favour of claimant and against the respondents, and claimant is entitled for refund of Rs.2459794.00". "Issue No.4 :- "Whether claimant is entitled for damages caused due to breach of contract committed by respondents." It is an admitted fact that execution of work was suspended by respondents, by letter dated 30.12.1999 (ExC5) therefore work was stopped on 15.01.2000 and again resumed on 17.05.2000. The claimant has alleged that the wrongful act of the respondents was a Breach of Contract in terms of conditions of contract, as such the claimant is entitled for loss or damages caused by breach of contract under S73 of the contract Act. As the work at that time was in full swing the machines and equipments which were on site remain idle for 120 days. The claimant has given details of machinery and equipments in his statement of claim and claimed Rs.3,17,460.00/- as loss or damages. The contention of the respondent is that the Govt. As the work at that time was in full swing the machines and equipments which were on site remain idle for 120 days. The claimant has given details of machinery and equipments in his statement of claim and claimed Rs.3,17,460.00/- as loss or damages. The contention of the respondent is that the Govt. In special circumstances decided to stop the work in all projects, and in terms of clause 5 of the contract that by any of the reasons the hindrance caused in execution of work on the part of the Government, time extension without any compensation be granted. As the time for execution was extended without compensation the contractor is not entitled for any compensation. But in my opinion, the ground mentioned by the respondents is not a valid ground to reject the claim of the contractor. It is an admitted position that government abruptly ordered to stop the work immediately without assigning any reason. Moreover contractor was also not informed for how many days, work will remain closed. The claimant has given complete details of machines, equipments etc which were employed at site when the work was stopped. By stopping the work in this way amounts to breach of condition of contract. The claimant can not be deprived from his due compensation. According to claimant work remain closed from 15.01.2000 to 17.05.2000 total 120 days. But as observed earlier that the contract expired on 31.03.2000 say about 75 days. Therefore I award compensation for only 75 days amounting to Rs.2,05000.00. Therefore the claimant is entitled for compensation amounting to Rs.2,05000.00 as claimed by him. This issue is decided in favour of claimant, and against the respondents". 7. On going through the above findings recorded by the Arbitrator on issue No.2 & 4, this court is of the view that the findings recorded by the Arbitrator do not suffer from any infirmity, therefore, the same were rightly affirmed by learned Additional District Judge No.4, Udaipur while deciding the application preferred under section 34 vide its order dated 03.01.2019. 8. The Hon'ble Supreme Court in the case of MMTC Ltd. (supra) has held as under:- "14. As far as interference with an order made under section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under section 34. 8. The Hon'ble Supreme Court in the case of MMTC Ltd. (supra) has held as under:- "14. As far as interference with an order made under section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under section 37, this court must extremely cautious and slow to disturb such concurrent findings. 15. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submissions to arbitration. However, this question has been addressed by the courts in terms of the construction of the contract between the parties, and as such it can be safely said that a review of such a construction cannot be made in terms of reassessment of the material on record but only in terms of the principles governing interference with an award as discussed above". 9. In the light of the observations made by the Hon'ble Supreme Court in the case of MMTC Ltd. V/s Vedanta Ltd., (supra) the scope of interference by this court on the concurrent findings recorded is very narrow. However, it is further held that the findings of fact recorded by the Arbitrator do not suffer from any infirmity as the same have been taken note of by the learned court below while rejecting the application preferred under section 34 of the Act, 1996. 10. In view of the discussions made hereinabove, the order dated 03.01.2019 passed by Additional District Judge No.4 is upheld and the appeal of the appellants is dismissed being devoid of any force.