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2022 DIGILAW 1423 (CAL)

Executive Engineer v. Uttam Kumar Saha

2022-09-30

ARINDAM MUKHERJEE, KAUSIK CHANDA

body2022
JUDGMENT : 1. This an appeal under the provision of Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter refer to as the said Act) assailing an order of dismissal dated 16th March, 2022 of the appellant’s application under section 34 of the said Act challenging an arbitral award dated 30th July, 2017 and an additional award dated 26th October, 2017. 2. The facts of the case are as follows:- 3. The appellant pursuant to a Notice Inviting Tender (in short NIT) entered into an agreement with the respondent, the successful bidder on 11th June, 2014. The date of starting the work was 15th May, 2014 and the date of completion as originally fixed was 14th January, 2015. The work under the contract was construction of sea wall between Km 187.20 to 187.40, km 190.00 to 190.20, km 192.40 to 192.65 and km 193.40 to 193.50 the aggregate of which was 750 meters (hereinafter refer to as the said work). The work could not be commenced despite the petitioner providing performance guarantee and making other necessary arrangements to start the work as the respondent failed to provide the work site. The respondent had applied for foreclosure of the contract on 3rd October, 2014 but the same was allowed only on 29th April, 2015. As disputes and differences arose between the parties, the arbitration agreement contained as a clause in the said agreement was invoked. The learned Arbitrator was appointed by an order dated 27th November, 2015. 4. Before the learned Arbitrator, the respondent submitted in total nine claims including costs. The learned Arbitrator has allowed claim No. 1 to the extent of Rs. 1,99,566/-as principle sum along with interest @12% from 4th October, 2013 till realization of the said amount. The Arbitrator has allowed claim No. II to the extent of interest @ 12% of an amount of Rs. 10,65,930 from 13th May, 2014 till 3rd August, 2015 and claim No. III for a principle of sum of Rs. 46,048/-and a sum of Rs. 1,50,000/-on account cost by an under the award dated 13th July, 2017. 5. The additional award was passed on 26th October, 2017. By the said additional award 12% of interest was allowed on Rs. 2,66,483/-from 13th May, 2014 till 03rd August, 2015. 46,048/-and a sum of Rs. 1,50,000/-on account cost by an under the award dated 13th July, 2017. 5. The additional award was passed on 26th October, 2017. By the said additional award 12% of interest was allowed on Rs. 2,66,483/-from 13th May, 2014 till 03rd August, 2015. The learned Arbitrator has disallowed the other claims and in fact had reduced the rate of interest from 18% as claimed by the respondent to 12 %. Submission of the Appellant : 6. The appellant says that the award suffers from patent illegality. The learned Arbitrator has relied upon clause 3(A) of the agreement which specifically prohibits interest on performance guarantee, damages and loss of profit if the work is foreclosed at the instance of any of the parties for failure to commence the work due to any reason beyond the control of the contractor. The learned Arbitrator therefore could not have allowed interest on any of the claims once the contract was foreclosed and the performance guarantee was returned. 7. The appellant also says that the learned Court below while deciding the application under Section 34 of the said Act erred in not considering this prohibition in agreement and as such the order passed in the application under Section 34 of the said Act should be set aside. The award and the additional award should also be set aside as Clause 3 (A) does not permit payment on account of interest, loss of profit and damages. The appellant has relied upon a judgment reported in 2022 SCC Online SC 864 (National Highways Authority of India vs. P.Nagaraju alias Cheluvaiah and Another) in support of his contention. Submission of respondent: 8. The respondent on the other hand submits that there is no patent illegality or perversity in the award for which it is required to be interfered with. 9. Admittedly, the appellant could not give the site and as such the work could not be started. This was not a fault on the part of the contract or the respondent had made all arrangement and had obtained the performance guarantee by investing money which was timely submitted with the appellant. The money invested for obtaining the performance guarantee remained blocked for no fault of the respondent and as such is entitled to the principal sum so spent along with interest. The learned Arbitrator has not allowed any loss of profit or damages. The money invested for obtaining the performance guarantee remained blocked for no fault of the respondent and as such is entitled to the principal sum so spent along with interest. The learned Arbitrator has not allowed any loss of profit or damages. Despite expressing readiness and willingness to commence the work, the same could not be done for the reasons attributable to appellant. The appellant cannot take benefit of their own wrong. The respondent had much prior to the expiry of the original completion date, finding that the work could not be commenced has prayed for foreclosure of the contract under the provisions of Clause 3 A. The said request was not adhered to by the appellant within the completion date but was allowed only on 29th April, 2015 after expiry of the tenure of the contract. The respondent, therefore, is entitled to receive the money as awarded by the learned Arbitrator in terms of the award dated 30th July, 2017 and the additional award dated 26th October, 2017. The respondent has relied upon the judgment reported in 2015 (3) SCC 49 (Associate Builders vs. Delhi Development Authority) and the judgment of the Hon’ble Supreme Court delivered on 1st February 2022 in Civil Appeal Nos. 837 – 838 of 2022 (Indian Oil Corporation Ltd. vs. M/s Shree Ganesh Petroleum Rajgurunagar) in support of his contention. Decision with reasons: 10. After considering the respective submissions and the materials on record we find that although the order under appeal is not happily warded but we agree with the end conclusion arrived thereunder. The challenge to an arbitral award after the amendment to the said Act in 2016 has been in details considered in the judgment reported in (2022) 1 SCC 131 (Delhi Airport Metro Express Pvt. Limited. vs Delhi Metro Rail Corporation Ltd). In the said report after taking into account all the judgments pre amendment including Associate Builders (supra) and the position post amendment the Hon’ble Supreme Court has summarized the grounds on which an award can be challenged. The ground of challenge sought to be made out by the appellant is patent illegality. Going by the discussion as to patent illegalities in the said judgment we do not find any substances in the submission made by the appellant. The judgment in NHIA (supra) cited by the appellant takes into consideration Delhi Metro (supra) and applies the same principles. The ground of challenge sought to be made out by the appellant is patent illegality. Going by the discussion as to patent illegalities in the said judgment we do not find any substances in the submission made by the appellant. The judgment in NHIA (supra) cited by the appellant takes into consideration Delhi Metro (supra) and applies the same principles. The said judgment is also in the same line as in Delhi Metro (supra). The appellant could not provide the worksite though they received the performance guarantee from the respondent. The performance guarantee has been admittedly obtained by spending money which has been proved to the satisfaction of the learned Arbitrator. We at this stage is precluded from re-appreciation of evidence. We also don’t find that the learned Arbitrator erred in applying the provisions of law. The foreclosure was admittedly not allowed when applied for by the respondent. Having failed to give the work site and not adhering to the request for foreclosure made by the respondent in time, the appellant cannot challenge the award citing Clause 3A. a Moreover we do not find any ground as enumerated under Section 34 to exist in favour of the appellant for which the award is required to be interfered. 11. The appeal being FMA/5/2022 along with connected application, if any, accordingly is dismissed, however, without any order as to costs.