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2022 DIGILAW 3046 (MAD)

Union of India, represented by Chief Engineer, Chennai, further rep rep. by Garrison Engineer, Wellington, The Nilgiris v. Dhirubhai D. Thumber & Co. , "Patel Chambers", Secunderabad

2022-09-01

P.T.ASHA

body2022
JUDGMENT (Prayer : This Civil Miscellaneous Appeal is filed under Section 37 of the Arbitration Act 1940 r/w the Arbitration & Conciliation Act,1996, against the award passed by the 2nd respondent dated 27-12-2002 in PAP/7069/3/E8 to pay a sum of Rs.15,29,200/- with interest in favour of the 1st respondent and confirmed by the Learned District Judge Nilgiris at Udhagamandalam in A.R.O.P.No.21 of 2005 dated 24-03-2007 and to set aside the same and direct the 1st respondent to pay a sum of Rs.6,48,015/- to the Appellant with interest at 18% p.a. from the certified date of completion i.e. 23-10-1997 till the date of payment to the appellant herein as the claim in the Arbitration Proceedings.) The Union of India which is the respondent before the Arbitrator is the appellant before this court. They seek to challenge the order passed by the Subordinate Judge, Udhagamandalam in A.R.O.P.No.21 of 2005. 2. The facts briefly set out in the petition filed under Section 30 read with Section 33 of the Arbitration Act, 1940 read with section 34 of the Arbitration and Conciliation Act, 1996( hereinafter called the “Act“) are as follows:- 3. The appellant would contend that they had entered into a contract with the first respondent on 10.10.1994 for the construction of accommodation for the guest room and building in the existing Officers Mess (DSSC) and connected external services at Wellington. As per the agreement, the work was to commence on 24.10.1994 and the same was to be completed by 23.04.1996. The IAFW 2249. (General conditions of contracts) forms part of the contract dated 10.10 1994. 4. It is the case of the appellant that during the currency of the contract, Deviation orders (DOs) were issued by them to the respondent. Thereafter, since the respondent did not come forward to submit their final bill of the contract, the appellant had prepared a final bill for the contract. Meanwhile, disputes arose between the appellant and the first respondent with regard to the period of completion, DOs Unreturned surplus material, interest and due to the various breaches of the contract. 5. The parties had referred the dispute to the Arbitrator appointed as per the terms of the agreement dated 10.10.1994. Meanwhile, disputes arose between the appellant and the first respondent with regard to the period of completion, DOs Unreturned surplus material, interest and due to the various breaches of the contract. 5. The parties had referred the dispute to the Arbitrator appointed as per the terms of the agreement dated 10.10.1994. Originally one P.Tulasiram was appointed as the Arbitrator who resigned on 26.12.2001, thereafter the 2nd respondent was appointed as an Arbitrator in his place by orders of the Engineer in Chief, Army Headquarter (Army HQ), New Delhi, dated 20.02.2002. The Arbitrator after hearing the parties and perusing the records passed an award dated 27.12.2002, directing the appellant to pay a sum of Rs.15,29,200/- together, with interest from out of the total claim of Rs.2,47,19,367/- to the 1st respondent and also awarded a sum of Rs.81,225/- in favour of the appellant as against their original claim of Rs.5,86,000/-. Aggrieved by the award, the appellant had filed the impugned petition. Their grievance was that the Arbitrator had not referred to the evidence given by the appellant in the Arbitral Proceedings and in fact, the same has been concealed. They had further stated that the Arbitrator had exceeded his jurisdiction and decided beyond the scope of the reference. 6. It is the grievance of the appellant that the Arbitrator has totally overlooked the fact that the first respondent had not handed over the building within the stipulated time and had been taking extensions. The extensions have been granted only at the request of the 1st respondent and for five times it was with a Nil financial obligation. In all, 83 DOs were issued to the 1st respondent. The first respondent had accepted the deviations and signed it without any protest up to deviation number 69. Thereafter, for DOs Nos.70 to 83, they had signed the same under protest with remarks that the “letter will follow“ on 23.10.1998. However, no letter has been received from the 1st respondent till the finalization of the final bill dated 01.10.1998. The appellant would contend that the Arbitrator has erroneously awarded the first respondent’s claim contending that there has been a breach of the terms of the contract listed hereinbelow:- (i)  Delay in handing over full site. (ii)  Deviations exceeding beyond 10%. (iii) Cement issued by the petitioner was cake baked quality. The appellant would contend that the Arbitrator has erroneously awarded the first respondent’s claim contending that there has been a breach of the terms of the contract listed hereinbelow:- (i)  Delay in handing over full site. (ii)  Deviations exceeding beyond 10%. (iii) Cement issued by the petitioner was cake baked quality. (iv) Under payment both in assessment and fixing of yardstick, (v) Drastic change in scope of works particularly internal electrification, flooring and carpentering work. (vi) Actual cost of material not accounted for in the Deviation and delay in approval of samples. 7. The appellant had filed a counter claim seeking damages for the over issued stores relating to cement and steel. The appellant had contended that the extra works order had been considered and accounted for through various DOs. Therefore, the 1st respondent/contractor cannot dispute the recovery which is based on the estimates prepared by the department. The defense of the contractor is that condition 10(B) of the IAFW 2249 is the one governing the issue of surplus materials which has to be read in conjunction with Section 49 of the General condition of the contract. They would therefore submit that appellant is not entitled to any amount under this head. The grievance of the appellant appears to be that they have not been given an opportunity of hearing by the learned Arbitrator. 8. The 1st respondent had submitted their counter to the Section 34 petition inter alia contending that the application to set aside the award is not maintainable under the provisions of Section 34 of the “Act“. That apart, the Arbitrator was no third party but a serving officer of the appellant. They had submitted that the issue of the maintainability of Section 34 petition and other technical objections should be taken up as the preliminary issue. They had also questioned the impleading of the Arbitrator as a party to the above proceedings. They would further contend that the 2nd respondent/Sole Arbitrator has considered the evidence on record and the arguments of the parties to pass the award and that cannot be found fault with. 9. The learned District Judge, Udhagamandalam by his judgement dated 24.03.2007 dismissed the petition filed by the appellant herein and it is aggrieved by this order that the appellant is before this court. 10. The Court below considered five claims. 9. The learned District Judge, Udhagamandalam by his judgement dated 24.03.2007 dismissed the petition filed by the appellant herein and it is aggrieved by this order that the appellant is before this court. 10. The Court below considered five claims. The 1st claim is related to the work done after the expiry of the original date of completion having come to an end. Under this head, the 1st respondent claimed a total sum of Rs.65,04,320/-, but, however, the Arbitrator has awarded only a sum of Rs.4,26,500/-. The Arbitrator has held that the completion period has been extended by the appellant herein and such an extension was not under conditions No.11(a) and 11(b) of the IAFW 2249 (GCC). The 12 month period for the extensions was only on account of delay on the part of the appellant herein. The learned Judge rejected the appellant-s contention that though they had adduced evidence before the Arbitral Tribunal, the Arbitral Tribunal deliberately concealed this fact and made it appear that no evidence had been tendered by the appellant herein. The learned Judge observed that the appellant has not been able to point out the evidence that they had considered which was concealed/ignored by the Arbitrator. The learned Judge ultimately took into account the fact that 83 deviation orders had been admitted of which only 33 had been issued before the completion of the final extension and 50 were issued after the actual date of completion. The learned Arbitrator had held that the appellant to be partly responsible for the delay. The learned Judge, therefore held that the contention that the contractor is not entitled to any claim, cannot be accepted since the delay is on the side of the appellant herein. 11. The second claim was under the head of damages due to various breaches of the contract. The learned District Judge had held that there is no bar in claiming the damages since the 80 deviation orders were issued after the date of completion and of this DO Nos.70 to 83 has been signed under protest by the respondent. 12. As regards the third claim which dealt with the delay in holding the Bank Guarantee Bond-s (BGB) beyond the original period plus 3 months, the Court below had held that amounts were to be reimbursed to the contractor since the default was only on the part of the appellant. 13. 12. As regards the third claim which dealt with the delay in holding the Bank Guarantee Bond-s (BGB) beyond the original period plus 3 months, the Court below had held that amounts were to be reimbursed to the contractor since the default was only on the part of the appellant. 13. The learned Judge refused to interfere with the fourth claim stating that the Hon’ble Supreme Court in the judgement reported in 2004 1 LW 111 - M/s Continental Construction Ltd Vs. State of U.P. had held that the Court cannot interfere with the award simply because it is a non-speaking one. 14. The fifth and the sixth claim were also held against the appellant and the 7th and 8th claims were held in favor of the contractor namely the first respondent herein. The District Judge also upheld the amount awarded by the learned Arbitrator towards the claim of the appellant. Challenging the said order the appellant is before this Court. 15. Mr.A.R.Sakthivel, learned counsel for the appellant would argue that the contract had commenced on 24.10.1994 and as per the terms of the Contract, the construction and handing over had to be completed by 23.04.1996. The first respondent has completed the construction only on 23.10.1997 and even that was not in a complete state. He would state that the first respondent had periodically got the contract extended as that they were unable to meet the deadlines. Though default was at their end they have come forward with the above arbitration proceedings in which they have raised the claim under 15 heads. 16. The learned counsel for the appellant would state that the learned Arbitrator has failed to appreciate the fact that as per the general conditions of the Contract, where DOs were issued and the Contractor had an objection to the same, his objection had to be notified in writing to the Garrison Engineer (GE) within fifteen days from the date of receipt of the deviation order (Clause 7 of the Contract). In the instant there has been no protest/objection by the respondent and on the contrary they have proceeded on the basis of the DOs. Further, he would submit that as per Clause 11(A) of the Contract, time was essence of the Contract. In the instant there has been no protest/objection by the respondent and on the contrary they have proceeded on the basis of the DOs. Further, he would submit that as per Clause 11(A) of the Contract, time was essence of the Contract. The Contractor was obligated to prepare a forecast of the dates for commencement and completion of the various trade processes or sections of the work, which could thereafter be amended on agreement between the GE and the Contractor. The contract further provided that works if delayed on account of the contingencies mentioned therein, then in such cases, the GE shall make a fair and reasonable extension to the completion dates and separate periods of completion should be mentioned therein. In case, any one of the contingencies as referred in Clause 11(A) had occurred, then the Contractor was bound to immediately intimate the GE in writing about the happening of the event not later than 30 days and he should continue to endeavour to prevent the delay. The clauses contemplated that the contractor seeks an extension of time which was to be granted as under: (a) by GE for all Term Contracts; (b) by Accepting Officer of the contract for all other contracts. If such a notification seeking extension is not given within the stipulated period of 30 days, then the Contractor shall forfeit his right to claim extension of time for the delay caused due to such event(s). He would lay emphasis on Clause 11(C) of the contract to state that where extensions have been granted as contemplated under Conditions (A) and (B) then the Contractor is not entitled to claim compensation. It is the argument of the learned counsel for the appellant that after the extensions had been accepted and admitted and the respondents were not entitled to compensation for such extensions. He would rely upon the correspondence between the parties in this regard. 17. The learned counsel would also draw the attention of the Court to the judgment of the Hon’ble Supreme Court reported in CDJ 2006 SC 1146 [Ramnath International Construction Pvt.Ltd Vs. Union of India]. The core issue involved in the said appeal before the Hon’ble Supreme Court was whether the claim for compensation was unsustainable as it was in derogation of Clause 11(C) of the contract, which prohibits any compensation as a result of extension of time granted by the Department. Union of India]. The core issue involved in the said appeal before the Hon’ble Supreme Court was whether the claim for compensation was unsustainable as it was in derogation of Clause 11(C) of the contract, which prohibits any compensation as a result of extension of time granted by the Department. Clause 11(C) of the contract referred in that case is identical to Clause 11(C) of the general conditions of the Contract in the instant case. The learned Judges of the Hon’ble Supreme Court while considering the above, had held that the Contractor would not be entitled to the compensation for the extension of time, which had been granted to the contract. He would therefore submit that the facts of that case would squarely apply to the facts of the instant case and therefore, the amounts granted under the first claim and on the ground of delay is totally mis-conceived. He would state that claims 2, 4 and 5, which are the compensation for deviations, cannot be sustained, since the Contractor has completed the contract subject to these deviations and further there has been no objections whatsoever on the side of the Contractor. He would therefore submit that the learned Arbitrator had erred in awarding compensation under the above heads. The learned District Judge, Udhagamandalam, who has considered the petition for setting aside the Award, has not applied his mind and has simply confirmed the Award of the Arbitrator stating that under Section 34 of the “Act“, the Court cannot re-appreciate the evidence. He would therefore pray that the appeal be allowed and the Award be set aside on the ground that the Tribunal has exceeded its jurisdiction and not confirmed to the terms of the Contract. 18. Per contra, Mr.N.S.Amogh Simha learned counsel, who appeared on the side of the first respondent/Contractor would submit that the delay was only on account of the fact that the right from the beginning, the appellant has not adhered to the time schedule. Although the Work Order was issued on 24.10.1994, the site was handed over to them only in the month of February 1995. Thereafter, 83 deviations were ordered by the appellant, 13 of them were issued within the original date of completion and 33 of them were issued before the final extension date of completion and the remaining 50 deviations were issued after the date of completion. Thereafter, 83 deviations were ordered by the appellant, 13 of them were issued within the original date of completion and 33 of them were issued before the final extension date of completion and the remaining 50 deviations were issued after the date of completion. He would submit that since the site was handed over with a considerable delay followed by the periodic DOs, the 1st respondent was unable to hand over he site within the stipulated time. He would submit that the 1st respondent had been requesting for extension of time even before the original completion date vide their letter dated 22.04.1996 for a period of 9 months and a reminder on 21.06.1996 was also sent, to which, they were granted an extension only upto 23.01.1997, vide their letter of GE dated 26.11.1996. 19. It is the further argument of the learned counsel for the first respondent that while the contract was still on-going, the appellant kept making several changes, all of which contributed to the delay. On account of the delay, the first respondent had suffered damages, for which, they had to be compensated. Therefore, the learned Arbitrator, who is the Serving Officer of the first respondent, has considered the evidence before him to come to the conclusion that the first respondent is entitled to receive the compensation and consequently passed the Award. 20. The learned counsel for the first respondent would submit that the scope of interference under Section 34 of the “Act“ is within a narrow campus and the facts in the instant case does not give rise to any ground to set aside the Award. He would also rely upon the judgment of the Division Bench of this Court reported in CDJ 2022 MHC 255 [Roman Tarmat Ltd, Rep by its General Manager, Chennai Vs. M/s.I.T.Expressway Limited, Chennai], where the scope of interference under Section 37 of the “Act“, which provides for the appeal against an order passed under Section 34 of the “Act“ has been discussed. The Bench after traversing through the facts of the case and the terms of the contract had ultimately observed that the scope of jurisdiction under Section 37 is very limited and unless the challenge to the order is on the grounds specified therein, the Court would find no reason to interfere with the concurred finding of fact. 21. The Bench after traversing through the facts of the case and the terms of the contract had ultimately observed that the scope of jurisdiction under Section 37 is very limited and unless the challenge to the order is on the grounds specified therein, the Court would find no reason to interfere with the concurred finding of fact. 21. Heard the learned counsels on either side and perused the materials available on records. 22. The first respondent/claimant has made the following claims before the learned Arbitrator: Claim No.1 Extra on Schedule - A Part I to Schedule A Part X on work done after the original period of completion /bursting of deviation. Claim No.2i Damages due to various breaches of the Contract Claim No.3 Delay in holding the BGBs beyond the original PDC + 3 months (Final Bill) i.e, claim from July 96 onwards Claim N.4 Due to umpteen changes / DO-s prepared without considering the actual cost incurred piece meal clearances, idle labour, delay of work, not allowing the progress, extra works not considered through during the execution he was assured of the same, demolition of a part of existing officer mess carried out under the orders or GE/CWE which has not been considered in the final bill. Claim No.5 Due to changes of specification in flooring from Terrazo tiles to ceramic tiles / Eurocon Tiles Claim No.6 Damages due to ordering slab shuttering to be carried out at one time for : 8000 sq.ft. Clam Nos.7 and 8 Loss of reputation of firm due to non issue of other new tenders due to slow progress of this work. Almost 2 years he could not take up any other works and delay in finalizing the star rates / Do-s delay in revising the yard stick, not giving timely extensions. Claim No.9 Cost of Arbitration Claim No.10 Increase of rate of materials due to the ban quarrying in Nilgiris Claim No.11 Damages due to supply of poor quality of cement Claim No.12 Interest on all payments withheld and on all claims from the date of original completion till date of decree of payment @ 18% pa. Claim No.13 Damages due to prevention of work during the execution of work Claim No.14 Damages due to prevention of work during the execution of work Claim No.15 Damages due to harassment 23. Claim No.13 Damages due to prevention of work during the execution of work Claim No.14 Damages due to prevention of work during the execution of work Claim No.15 Damages due to harassment 23. The Award passed by the learned Arbitrator would indicate that the Arbitrator has considered each of these claims independently alongside the objections to the claim, the documents relevant for the same and ultimately given detailed reasons for granting the Award under these heads. Each of the claim had been dealt with in this fashion. Therefore, by no stretch of imagination can it be stated that the Award suffers from any of the grounds stated under Section 34 (1) and 34 (2) of the “Act“. The records would indicate that the right from the commencement of the contract, parties were having issues. The site has been handed over to the respondent/contractor with a great deal of delay, as a result of which, the first respondent was not able to commence and execute the work entrusted under the Contract. Further, even after taking the site, they had to face the problem of underground pipes, cables etc., which had to be set right by third party contractors which was also delayed. Adding to the woes, the appellant kept making changes to the plan. All of this contributed to the delay. It is also seen from the evidence and it has been dealt with by the learned Arbitrator that the delay was primarily on account of the appellant. As stated by the First Bench of this Court in the judgment of Roman Tarmat Ltd-s case cited supra, the scope of interference under Section 37 of the “Act” is also circumscribed to the provisions of Section 34 and therefore, this Court cannot undertake an independent assessment on the merits of the Award and can only exercise the limited powers under Section 37. In Roman Tarmat Ltd-s case cited supra, the Bench had relied upon the judgments of the Hon’ble Supreme Court to come to the conclusion that the Courts power while exercising jurisdiction under Section 37 of the Act was limited. In the instant case also, the appellant-s challenge to the order under Section 34 of the Act is beyond the Scope of Section 37 of the Act. Therefore, I see no reason to interfere with the concurrent orders of the Courts below. Accordingly, the Civil Miscellaneous Appeal is dismissed. No costs.