IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 20.10.2010
CORAM:
THE HONOURABLE MR.JUSTICE P.JYOTHIMANI
O.P.Nos.387 and 596 of 2009
M/s.Chandragiri Construction Company
3/402A, Backer Chamber
V Karat Road, West Nadakavu
Kozhikode 673 011, Kerala
rep. by its Partner, K.M.Moideenkunhi
2-H, 3rd Floor, Rani Mayammayi Towers
Near Ayyappa Temple, MRC Nagar
Chennai 600 028. .. Petitioner in OP:387/2009
and 1st respondent in
OP:596/2009
Vs.
1. State of Tamil Nadu
rep. by the Secretary to Government
Highways Department, Secretariat
Fort St.George, Chennai 600 009.
2. The Project Director
Tamil Nadu Road Sector Project
TNHB Complex, 2nd Floor, 48
Dr.Muthulakshmi Salai, Adayar
Chennai 600 020.
3. The Superintending Engineer (Highways)
Highways Circle, Salem 636 302.
4. The Divisional Engineer (Highways)
Krishnagiri Division, Krishnagiri. .. Respondents 1 to 4
in OP:387/2009 and
petitioners in OP:596/2009
5. The Hon'ble Mr.Justice Kumar Rajaratnam (Retd.)
Sole Arbitrator, Parvathi House
No.7, Moors Road, Greams Road .. 5th respondent in
Post Office, Chennai 600 006. OP:387/2009 and
2nd respondent in OP:596/09
Prayer in OP:387/2009: Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 28.7.2008 passed by the fifth respondent to the extent of declining the payment of the amount due to the petitioner.
Prayer in OP:596/2009: Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 28.7.2008 passed by the second respondent
For Petitioner : Mr.Arvind P. Datar,
in OP:387/2009 and Senior Counsel
1st respondent in for Mr.S.Srinivasan
OP:596/2009
For Respondents 1 to 4 : Mrs.Bhavani Subbarayan
in OP:387/2009 and Special Government Pleader
petitioners in
OP:596/2009
COMMON ORDER
While the claimant before the Sole Arbitrator has filed O.P.No.387 of 2009 challenging the award in respect of the claims which were declined by the learned Arbitrator, O.P.No.596 of 2009 has been filed by the respondents (State Government) before Arbitrator challenging the award.
2. For the sake of convenience, the claimant before the Arbitrator is referred to as "the Contractor" and the respondents before the Arbitrator are referred to as "the Employer ".
3.1. The matter relates to a road construction at Krishnagiri Division, Salem Tiruppathur Vaniyambadi Road km 33/200 to km 53/200 and km 60/400 to km 77/800 km Package MC-8. While the Contractor has claimed completion of 30% of contract within the stipulated period, the Employer claims completion of 20%. The Contractor has made a total claim of ` 12 Crores with interest. The Employer has made a counter claim of ` 8,23,60,542/-.
3.2. The tender submitted by the Contractor for ` 17.24 Lakhs on 19.2.2004 in respect of the said work was accepted on 30.7.2004 and the agreement was entered between the parties on 1.9.2004 for one year from 1.9.2004 to 31.8.2005 and the same was extended on 25.8.2005 up to 30.9.2005. Subsequently, it was further extended as per the clause in the agreement (Ex.C86) from 30.9.2005 to 31.1.2006, for four months. Further extension was granted on 27.1.2006 up to 31.3.2006, for two months, and in spite of such extension, only 25% of the work was completed and three days before the expiry of the period of contract as extended, the Employer cancelled the contract on 29.3.2006 for certain fundamental breach.
3.3. The Contractor claimed compensation for breach on various grounds:
(i)in respect of agreement No.15/2004-2005, dated 1.9.2004, it was alleged that the Contractor was prevented from completing the work before the intended completion period, viz., 31.8.2005 and in spite of the contract having been extended up to 31.3.2006, without giving time up to the last date, the Employer has terminated the contract on 29.3.2006 and the said act of the Employer is illegal, unauthorized and unjustified;
(ii)claimed an amount of ` 30,35,894/- in respect of unpaid price adjustment at 5% per annum for late acceptance of the tender submitted on 9.2.2004 along with future interest at the rate of 14% per annum;
(iii)claimed an amount of ` 63,76,197/- towards unpaid value of filling of potholes carried out under Item 503 of the Bill of Quantities at ` 200/- per sq.m. for 27775 sq.m. or ` 2,500/- for ` 2226.715 cu.m.;
(iv)claimed an amount of ` 1,73,61,776/- towards unpaid value of works carried out, included in part bills II to VI;
(v)claimed an amount of ` 90,57,627/- towards extra cost incurred in procurement of bitumen, bitumen emulsion, cement and diesel due to delay caused/denial of excise duty exemption certificate and increase in cost;
(vi)claimed an amount of ` 1,50,304/- towards unpaid cost of transportation charges regarding the procurement of sand;
(vii)claimed an amount of ` 1,03,57,231/- towards unpaid value of works carried out as on 29.3.2006, beyond items/quantities included in CCVI and part bill submitted on 22.12.2005;
(viii)claimed an amount of ` 22,81,960/- towards value of materials collected and stocked at site by the Contractor stated to have been taken over by the Employer ;
(ix)claimed an amount of ` 22,45,573/- towards retention amount recovered by the Employer from the part bills paid at the rate of 5% of the bill amount of ` 3,74,78,280/-;
(x)claimed an amount of ` 1,01,32,024/- towards performance guarantee of ` 86,23,000/- stated to have been illegally encased by the Employer on 12.4.2006, after termination of the contract on 29.3.2006;
(xi)claimed an amount of ` 2,40,000/- towards rental of 3.25 Acres of land leased out by the Contractor for installation of Hot Mix Plant/Stockyard of materials required for carrying out bituminous construction from 29.3.2006 onwards at ` 15,000/- per month;
(xii)claimed an amount of ` 4,55,000/- towards hire/idling charges of Hot Mix Plant stated to have been illegally retained by the Employer from 29.3.2006 to 17.6.2006 at the site of the plant installed at Nambiampatty, pursuant to the wrongful termination of contract;
(xiii)claimed an amount of ` 66,89,760/- towards hire/ idling charges of construction plant/equipment and machinery items valued at ` 4,72,96,000/- for 181 days at 77% of 50% of the hire charges of ` 96,000/- per day, at ` 36,960/- per day during the period between 1.10.2004 and 31.8.2005;
(xiv)claimed an amount of ` 47,23,200/- towards hire/ idling charges of construction plant/equipment and machinery items valued ` 4,72,96,000/- for the period from 1.9.2005 to 29.3.2006 at 80% of 50% of the hire charges of ` 96,000/- per day at ` 38,400/- per day for 123 days;
(xv)claimed an amount of ` 15,83,890/- towards personnel idled/infructuous sales/wages paid to the key project technical personnel, engineering and supervisory personnel at 77% of ` 1,87,000/- per month between 1.10.2004 and 31.8.2005 at ` 1,43,990/- per month;
(xvi)claimed an amount of ` 9,81,750/- towards personnel idled/infructuous salaries/wages of paid to the key project technical personnel, engineering and supervisory personnel at 75% of ` 1,87,000/- per month between 1.9.2005 and 29.3.2006 at ` 1,40,250/- per month;
(xvii)claimed an amount of ` 74,05,561/- towards increase in contract price required to have been made in accordance with the agreement on account of variation/compensation events for works valued at ` 2,96,22,247/- carried out beyond the intended completion period expired on 31.8.2005 at 25% thereof;
(xviii)claimed write off of the mobilization advance of ` 86,22,000/- paid and ` 4,60,459/- being the balance in the account of equipment advance of ` 23,72,760/- paid by the Employer , together work out to ` 16,26,404/- and exonerate the Contractor of obligation for accounting or refund of any portion of the same;
(xix)claimed ` 1,98,91,542/- towards gains deprived on illegal termination of contract on 29.3.2006 at 15% of the value of works of ` 13,26,10,283/- remained to be carried out;
(xx)claimed future interest at 14% per annum on the entire unpaid amount due to the Contractor; and
(xxi)claimed the award costs.
In all the Contractor claimed a sum of ` 12 Crores.
3.4. As found by the learned Arbitrator, the crux of the matter appears to be that as per the contract entered on 1.9.2004, which was stated to have been given to the Contractor on 30.7.2004 and signed by the parties on 1.9.2004, the period of contract for completion of the entire work was 12 months, namely on or before 31.8.2005. The first milestone covering the length of 17.40 km was to be completed before 28.2.2005 and the second one covering 20 km was to be completed before 31.8.2005. The Contractor has not completed the same and therefore, the Employer has extended the time up to 31.3.2006, namely for a period of 7 months beyond the contract date, and totally a period of 19 months was granted and even then it was the case of the Employer that the Contractor has completed only 20% of the work and therefore, show cause notice was issued and contract was terminated on 29.3.2006, three days prior to the date of expiry of contract, viz., 31.3.2006, being the extended contract period.
3.5. The case of the Contractor was that they had to incur heavy loss due to the negligence on the part of the Employer in not acting in conformity to the terms of the contract and the Contractor has sent a show cause notice on 14.3.2006 demanding the unpaid value of the work carried out, apart from various notices given on various days, till, of course, the contract was terminated on 29.3.2006 by the Employer .
3.6. The reasons given by the Contractor for non completion of work in time are the extra cost on purchase of bitumen, emulsion, cement and diesel; unpaid cost in additional leads; unpaid last bill; unpaid value of materials taken possession; release of retention amount recovered from the bills paid; refund of amount realized by invocations of performance security; unpaid rental of 3.25 Acres of land for Hot Mix Plant; unpaid hire charges of Hot Mix Plant from 29.2.2006 to 17.6.2006, unpaid hire/idling charges of machinery items; etc., as stated above.
3.7. It was the case of the Employer before the learned Arbitrator that the Contractor has committed fundamental breach and after the recission of contract, the Employer has given the contract to two other Contractors, viz., (i) M/s.Gurumurthy Engineering Enterprises, and (ii) M/s.Sasi Road Finisher and Engineering Contractors, and for completing the balance work the Employer had to incur an expenditure of ` 21,00,804/-, with actual loss incurred by the department to the tune of ` 5,45,26,079/- due to the complete negligence of the Contractor and therefore, as per the terms of Clause 60.1 of the Conditions of Contract, the Employer was entitled to the total compensation of ` 8,23,60,542/- and the said amount was claimed as a counter claim. It was the further case of the Employer that due to the non completion of the work by the Contractor, the Government had to face a turbulent situation from among the public, since the road was an important public road.
3.8. On the basis of the above pleadings, the learned Arbitrator has categorized the claims by framing various issues. The following were the 17 issues framed by the learned Arbitrator relating to the claims of the Contractor:
(1)Whether the Contractor is entitled to the price adjustment payment under Clause 15.3 of the Instructions to Bidders (ITB) in the circumstances when his contract was terminated under Clause 59.2 of the General Conditions of Contract for the non-completion of 80% of the work in respect of extension of time (EOT) granted for 7 more months than the contract period?
(2)Whether the Contractor is entitled to the value of ` 63,76,197/- towards the alleged unpaid value of repairs to potholes using bituminous macadam, when he has quoted the rate of ` 200/- per square meter instead of cubic meter?
(3)Whether the Contractor is eligible for the alleged unpaid value of works included in part bill Nos.II to VI till 20.12.2005?
(4)Whether the Contractor is entitled to the alleged claim of ` 1,73,61,776/- towards the unpaid value for the work which he has not done?
(5)Whether the Contractor is entitled to the extra cost for purchase of bitumen emulsion cement and diesel for an alleged sum of ` 90,57,627/- when as per Clause 13.4 of ITB and Clause 4.2 of the contract the price of firm and any rise and fall in price should be borne in mind by the Contractor?
(6)Whether the Contractor is entitled to the alleged unpaid cost in the additional leads involved in procurement of materials when as per Clause 13.4 of ITB rate and price quoted by the bidder shall be fixed for the duration of the contract and shall not be subject to adjustment on any account?
(7)Whether the Contractor is entitled to the alleged unpaid last bill to the extent of the alleged amount of ` 1,03,57,231/- when the contract was terminated for not completing the work as per Clause 59.2 of the contract?
(8)Whether the Contractor is entitled to the alleged sum of ` 22,81,960/- for the unpaid value of materials taken possession of when the materials were substandard as per the review of the Technical Review Consultant?
(9)Whether the Contractor is entitled to the alleged sum of ` 22,45,573/- towards the retention amount recovered from the bills when he has not completed the work as per the contract?
(10)Whether the Contractor is entitled to the alleged sum of ` 1,01,32,024/- towards the refund of the amount realized by invocation of performance security by means of bank guarantee?
(11)Whether the Contractor is eligible for the alleged sum of ` 2,40,000/- for rental of 3.25 Acres of land hot mixed plant as per Clause 61.1 of the contract?
(12)Whether the Contractor is eligible for the alleged sum of ` 4,55,000/- towards the alleged unpaid hire charges for hot mixed plant from 29.2.2006 to 17.6.2006?
(13)Whether the Contractor is eligible for the alleged sum of ` 47,23,000/- when the delay is attributable only to the Contractor?
(14)Whether the Contractor is eligible for the alleged sum of ` 9,81,750/- towards the alleged unpaid pay and salaries of the personnel idled when the delay is attributable only to the Contractor?
(15)Whether the Contractor is eligible for the alleged sum of ` 74,05,555/- towards the unpaid increase in the contract price when he has not completed the work as per the contract?
(16)Whether the Contractor is eligible for the alleged sum of ` 16,26,404/- towards the right of plants in mobilization and equipment advance when he has not completed the work? and
(17)Whether the Contractor is eligible for the alleged sum of ` 1,98,91,542/- under the alleged claim of gains deprived due to termination of contract when the termination was done by the Employer is perfectly within clause 59.1 of the contract for not completing the work?
That apart, the 18th issue, which is as follows, relates to the entitlement of the Contractor for interest:
(18)Whether the Contractor is entitled to interest when he is not eligible for any of the claim?
The learned Arbitrator has framed issue Nos.19 and 20, which are as follows, which relate to the counter claim of the Employer:
(19)Is not the Employer entitled to the alleged sum of ` 2,78,34,463/- as per Clause 60.1 of the Conditions of Contract towards 80% of the left out value of the contract work? and
(20)Is not the Employer entitled to ` 5,45,26,079/- towards the alleged loss incurred to them due to the non completion of the work and in engaging the fresh Contractors for completion of work?
3.9. The learned Arbitrator, while referring to the termination of contract by the Employer under Ex.C133, dated 29.3.2006, has considered five reasons adduced by the Contractor for the fundamental breach alleged by the parties. They are:
(i) The stoppage of work by the Contractor from 6.1.2006, stated to have been not authorized by the Engineer and a fundamental breach as per Clause 59.2A of the Conditions of Contract.
The learned Arbitrator, on the basis of the construction of the letter produced by the Contractor dated 24.1.2006 (Ex.C117) of the Project Director, Tamil Nadu Road Sector Project, Adayar, Chennai addressed to the Contractor, wherein it has been admitted on behalf of the Employer that even as on 24.1.2006, the project was an ongoing work, held that the claim of the Employer as if the Contractor has stopped work on 6.1.2006 may not be correct.
The learned Arbitrator has also referred to a letter dated 27.1.2006 (Ex.C118) of the Superintending Engineer, Highways Circle, Salem addressed to the Contractor, wherein a reference has been made about the work being done by the Contractor even as on 27.1.2006. By letter dated 27.1.2006 (Ex.C119) of the Superintending Engineer, Highways, Salem Circle, Salem has given extension of time to the Contractor to complete the contract package by 31.3.2006.
The learned Arbitrator, in this regard, has also relied upon Ex.C122, which is again a letter of the Superintending Engineer, Highways, Salem dated 10.2.2006, directing the Contractor to complete the work on or before 31.3.2006; and the proceedings of the Project Director, Tamil Nadu Road Sector Project, dated 3.3.2006 (Ex.C125), which is a show cause notice for the slow progress of work.
On a combined reading of the said documents, the learned Arbitrator has come to a conclusion that there was no stoppage of work by the Contractor on 6.1.2006 and therefore, held that the same cannot be held to be a fundamental breach on the part of the Contractor.
(ii) Considering the second ground raised by the parties regarding certain defective works, by referring to Clause 35.2 of the contract, which contemplates that in cases where there are certain defects found the Engineer has to assess the cost of the defect, for which the Contractor must be directed to pay the amount, and having found that at no point of time the Employer or the Engineers of the Employer have ever raised such defects, and the Employer has never called upon the Contractor to pay any amount, the learned Arbitrator held that the second ground of defect was also unsustainable.
(iii) About the performance security which was not extended and stated to be a fundamental breach under clause 59.2F, it was found by the Arbitrator that, in fact, the performance guarantee was renewed on 24.3.2006, as admitted by the Divisional Engineer, Highways, Krishnagiri in his letter dated 28.3.2006 (Ex.C132) addressed to the Federal Bank Limited, Kesargod, wherein it is explicitly stated that the bank guarantee given by the Contractor has been renewed on 24.3.2006, and held that this allegation is also on total non application of mind.
(iv) The next ground alleged for cancellation of contract was that the Contractor has not carried out the instructions of the Employer . The learned Arbitrator has observed that if the instructions were not followed, it is not known as to why the contract period was extended till 31.3.2006. In that regard, the learned Arbitrator has referred to Ex.C110, which is the minutes of the management meeting held on 21.12.2005, wherein a review was made about the work done regarding the contract package MC-8.
(v) The last ground raised related to non carrying out of the instructions given by the Engineer by the Contractor. The learned Arbitrator has taken note of the fact that the Contractor was allowed to carry out the work to the value of ` 604 Lakhs, out of the initial contract price of ` 17,23,53,204/-. The learned Arbitrator found that the show cause notice issued by the Employer on 3.3.2006 is in total contradiction to the order dated 29.3.2006 (Ex.C133) cancelling the contract. While the show cause notice has chosen to speak about the non completion of the quality control laboratory; non deployment of key personnel; non adherence to work; failure of the Contractor to take satisfactory remedial action in accordance with the decision in the management meetings; non carrying out of instructions of Engineers, under Ex.C133, the order dated 29.3.2006 terminating the contract, no one of the said grounds were ever raised and no reason has been adduced as to why time has been extended up to 31.3.2006 and as to why the contract was cancelled on 29.3.2006, even before the contract period.
For the above said reasons, the learned Arbitrator has come to a conclusion that the show cause notice does not correlate with the termination of contract
Thus, the learned Arbitrator has held that the allegation of fundamental breach by the Contractor is not substantiated. The learned Arbitrator has also held that in that regard the exorbitant claim of the Contractor cannot also be accepted and it was with that preliminary finding, the learned Arbitrator has chosen to consider each and every one of the issues, which are dealt with in detail hereunder.
ISSUE No.(1)
4.1. Issue No.(1): Whether the Contractor is entitled to the price adjustment payment under Clause 15.3 of the Instructions to Bidders (ITB) in the circumstances when his contract was terminated under Clause 59.2 of the General Conditions of Contract for the non-completion of 80% of the work in respect of extension of time (EOT) granted for 7 more months than the contract period?
4.2. According to the Contractor, the validity period of the tender submitted by it on 9.2.2004 was 90 days for acceptance as per Clause 15.1 of the ITB. As per Clause 15.2. of the ITB, the Employer may request for extension of the period of validity for an additional period and accordingly, extension was sought as per the letter of the Employer dated 26.4.2004 and 6.7.2004, for which the Contractor was agreeable and accordingly, extended the validity period of the bid. Thereafter, the tender came to be accepted on 30.7.2004, after 171 days of submission of the same, which is beyond 90 days of the period as required under Clause 15.1 of the ITB and therefore, as per Clause 15.3 of the ITB, which is as follows:
"15.3. In the case of contracts in which the Contract Price is fixed (not subject to price adjustment), in the event that the purchaser requests and the Bidder agrees to an extension of the validity period, the contract price, if the Bidder is selected for award shall be the bid price corrected as follows:
The price shall be increased by the factor 5% per annum proportionately for each week or part of a week that has elapsed from the expiration of the initial bid validity to the date of issue of letter of acceptance to the successful Bidder."
the Contractor is entitled to the increased price of 5% per annum proportionately and the proportionate amount based on the total contract price of ` 17,24,53,204/- was arrived at ` 21,55,665/-. According to the Contractor, the said amount should have been paid by the Employer on the date of signing of the contract, namely on 1.9.2004 and in spite of the demand made by the Contractor for the said payment on 21.10.2004 and 6.12.2004, the claim has been rejected. Therefore, based on the said Clause 15.3 of the ITB, the Contractor claims a sum of ` 21,55,665/- along with interest at the rate of 14% per annum from 1.9.2004 till the date of payment, viz., from 1.9.2004 to 1.8.2007, which works out to ` 8,80,229/-. Thus, the Contractor in all claimed a sum of ` 30,35,894/- with future interest at the rate of 14% per annum till the date of payment.
4.3. As against the said claim regarding Issue No.(1), it was the case of the Employer that the contract was terminated under Clause 59.2 of the Conditions of the Contract for non completion of 80% of the work in spite of the extension of time by seven months.
4.4. Taking into consideration the rival submissions made by both the parties, the learned Arbitrator having found that the Contractor has completed the work worth ` 3,74,78,280/-, for the said delay of 82 days in granting letter of acceptance calculated the increased price at the rate of 5% per annum and arrived at unpaid price adjustment of ` 4,20,899/- and with interest at the rate of 8% per annum based on Clause 43 of the Conditions of contract regarding payments, which contemplates in Clause 43.1 as follows:
"43.1. Payments shall be adjusted for deductions for advance payments, retention, other recoveries in terms of the contract and taxes, at source, as applicable under the law. The Employer shall pay the Contractor the amounts certified by the Engineer within 28 days of the date of each certificate. If the Employer makes a late payment, the Contractor shall be paid interest on the late payment in the next payment. Interest shall be calculated from the date by which the payment should have been made up to the date when the late payment is made at 8% per annum."
has arrived at an amount of ` 4,79,837/- in respect of issue No.(1), which, in my considered opinion, cannot be said to be either arbitrary or illegal, even if the contract is a fixed price one.
ISSUE No. (2)
5.1. Issue No.(2): Whether the Contractor is entitled to the value of ` 63,76,197/- towards the alleged unpaid value of repairs to potholes using bituminous macadam, when he has quoted the rate of ` 200/- per square meter instead of cubic meter?
5.2. As per the Bill of Quantities (BOQ) in the bid documents supplied to the Contractor on 26.12.2003 (Ex.C1), regarding the enhanced periodic maintenance of government roads in Krishnagiri Division, Bill No.5 Bituminous Construction in Serial No.503, which is relating to "Providing and repairs to pot holes on existing road, before profile corrective course is laid, in accordance with clause 3004.2 of MORT&H Specification etc. complete including cleaning all leads, lifts and labour as per the technical specifications and as directed by the Engineer", the unit has been stated as "Sqm" as against the quantity of 3430.00.
5.3. The Contractor has, admittedly, quoted ` 200/- per sq.m. for item 503 on 26.12.2003. It has been the case of the Employer that a pre bid meeting was held on 2.1.2004, approving an addendum and corrigendum stating that the last date for sale of bids is 6.2.2004 instead of 22.1.2004 originally proposed in the document and bids will be received up to 2 p.m. on 9.2.2004 and will be opened at 2.15 p.m. on the same day. On behalf of the Employer , the Superintending Engineer, Tamil Nadu Road Sector Project, Chennai 600 025 has addressed a letter to the Contractor on 19.1.2004 (Ex.R7) along with the annexure therein which contains corrigendum and addendum, wherein it shows that in respect of S.No.503, Bill No.5, Section 7 (Bill of Quantity) of Contract MC 8 in Unit Column for "Sqm" it was directed to be read as "Cum".
5.4. The case of the Contractor was that the Employer has not supplied any amended Bill of Quantities converting the unit as "Cu.m." instead of "Sq.m.". The Contractor has submitted tender on 9.2.2004 based on the original Bill of Quantities. It was the case of the Contractor that even after the amendment, the pre bid papers communicated along with letter dated 19.1.2004 have been sent without altering the "Sq.m." as "Cu.m." and the Contractor having not participated in the pre bid meeting held on 2.1.2004, based on the bid papers, has quoted the amount on "Sq.m." basis at ` 200/- per sq.m. It is the case of the Contractor that if it is on the "Cu.m." basis, the cost of one cu.m. of aggregates that prevailed was ` 750/- and for one cu.m. of bituminous macadam 77 kg of bitumen was required, which would cost ` 1236.70 and the total amount if it is calculated as per cu.m. would have been at the rate of ` 1,986.70 and after taking into consideration the cost of mixing the aggregates with bitumen in hot mix plant, handling, transportation to the site, laying, spreading, compacting, etc., the Contractor quoted ` 2,500/- per cu.m. in respect of S.No.503, immediately after noticing the alteration effected. However, the Contractor admits having received the letter dated 19.1.2004 (Ex.R7), which contains the corrigendum and addendum clearly stating that in respect of S.No.503, the quotation should be on "cu.m." basis instead of "sq.m." and it was only thereafter, on 9.2.2004, he has submitted his tender.
5.5. The case of the Contractor, as it is seen in the letter dated 18.12.2004 (Ex.R12), is that even though information regarding the amendment was received by the Contractor along with letter dated 19.1.2004 before submitting the tender, the Employer should have issued a revised Bill of Quantities schedule and therefore, in spite of receiving such letter dated 19.1.2004, the Contractor is not bound by the contents of the addendum. This stand of the Contractor is crystal clear, as it is seen in its letter dated 18.12.2004 (Ex.R12) addressed to the Employer in paragraph (3), which is as follows:
"3. The amendments stated to have been made in the pre bid meeting are only information to the bidders and cannot be taken as valid documents for consideration. It is the bounden duty of the department to issue revised BOQ schedule or to issue direction to effect necessary correction for the unit. This aspect is also not considered by the department."
5.6. However, in the letter dated 30.10.2004 (Ex.R10), the Contractor having quoted ` 200/- per sq.m. in spite of receiving such amendment, has chosen to state that he has been under the impression that it was at sq.m. rate as per the original Bill of Quantities, for which the Employer in the letter dated 23.11.2004 (Ex.R11) has stated that the Employer is entitled to make such amendment as per Clause 10.1 and 10.20 of ITB. It was thereafter, as per the letter dated 18.12.2004 (Ex.R12) addressed to the Employer, the Contractor has quoted the corresponding rate in respect of S.No.503 as ` 2,500/- per cu.m. Therefore, it is the case of the Contractor that the quotation made by treating the unit as sq.m. is much less, if it has to be made in the form of cu.m. and in that regard, the Contractor claimed an amount of ` 63,76,197/-.
5.7. The Employer has rejected the said claim on the basis that the quotation given by the Contractor as on 9.2.2004 alone should be taken into consideration and also on the basis that the contract is a fixed price one and the Contractor cannot alter at his own desire and therefore, according to the Employer, the Contractor is not entitled to additional compensation claimed.
5.8. The learned Arbitrator, while dealing with the said issue No.(2) has taken the original specification given in the Bill of Quantities only as "sq.m." and considering the letter dated 18.12.2004 of the Contractor (Ex.R12=Ex.C27), calculated that the Contractor has carried out work to the extent of 2226.76 cu.m. and arrived at the equivalent quantum of work in sq.m. as 27833.87 sq.m. and by multiplying the same with ` 200/- per sq.m., as quoted by the Contractor, held that the Contractor would be eligible for ` 53,09,032/- and after deducting the amount already paid, viz., ` 4,14,643/-, an award has been issued in respect of Issue No.(2) in favour of the Contractor for ` 48,94,389/- with interest at the rate of 8% per annum for the period of 16 months, totalling to ` 54,16,457/-.
5.9. It is the case of the Employer that while the amount quoted by the Contractor was ` 200/- per cu.m. even after receiving the addendum and corrigendum which the employer is empowered to issue as per Clause 10 of the ITB, the learned Arbitrator cannot unilaterally fix the same by converting 2226.76 cu.m. as 27833.87 sq.m. to calculate at the rate of ` 200/- per sq.m. and according to the learned Special Government Pleader, the said calculation has no rational basis and is opposed to the terms of the contract and liable to be set aside under Section 34(2) of the Arbitration and Conciliation Act, 1996 (for brevity, "the Act").
5.10. As rightly submitted by the learned Special Government Pleader, the Employer is entitled to make amendment to the bidding documents as per Clause 10 of the ITB, which is as follows:
"10. Amendment of Bidding Documents
10.1. Before the deadline for submission of bids, the Employer may modify the bidding documents by issuing addenda.
10.2. Any addendum thus issued shall be part of the bidding documents and shall be communicated in writing or by cable to all the purchasers of the bidding documents. Prospective bidders shall acknowledge receipt of each addendum by cable to the Employer .
10.3. To give prospective bidders reasonable time in which to take an addendum into account in preparing their bids, the Employer shall extend as necessary the deadline for submission of bids in accordance with Sub-Clause 20.2 below."
5.11. It is not in dispute that the amendment carried out in the pre bid meeting was communicated to the Contractor on 19.1.2004, viz., before the date when he has submitted his tender, which was on 9.2.2004, and the letter also contained the amendment clearly stating that the quotation shall be for cu.m. instead of sq.m. In spite of it, the Contractor has quoted for sq.m. and his deliberate stand, as it is seen in the letter dated 18.12.2004, (Ex.R12=Ex.C27), is that unless a revised Bill of Quantities schedule or direction is issued, the communication of amendment itself is not sufficient.
5.12. A combined reading of Clause No.10.3 of the ITB, referred to above, and Clause 20.2, which is as follows:
"20.2. The Employer may extend the deadline for submission of bids by issuing an amendment in accordance with Clause 10, in which case all rights and obligations of the Employer and the bidders previously subject to the original deadline will then be subject to the new deadline."
makes it clear that when such amendment is made, there is no duty cast on the Employer to issue a revised Bill of Quantities schedule or to effect necessary correction for the unit. What is contemplated under Clause 20.2. of the ITB is to enable the Employer to extend the deadline for submission of bids and that can never be read as issuance of a revised Bill of Quantities schedule or direction to effect necessary correction for the unit. This aspect of the issue has certainly been ignored by the learned Arbitrator, who has converted the work of 2226.76 cu.m. done by the Contractor into 27833.87 sq.m. and applied the agreed rate of ` 200/- per sq.m. to arrive at the amount of ` 54,16,457/-. The same can never be considered valid as per the terms of the contract, including the ITB and the Bill of Quantities.
5.12. In my considered view, by applying the law laid down by the Hon'ble Apex Court in Oil and Natual Gas Corporation Limited v. Saw Pipes Limited, [2003] 5 SCC 705, wherein it has been held that the award has to be in terms of the contract, and by virtue of the specific provisions in the terms of the contract, elicited above, it is unfair, unreasonable and shocking to the conscience of the Court that the learned Arbitrator has converted the work done in cu.m. as that of sq.m. for the purpose of calculating the value which was quoted by the contract at ` 200/- per cu.m.
5.13. In that view of the matter, the decision arrived at by the learned Arbitrator regarding Issue No.(2) is unsustainable and therefore, the contractor is not entitled to the amount of ` 54,16,457/-.
ISSUE Nos.(3) and (4)
6.1. Issue No.(3): Whether the Contractor is eligible for the alleged unpaid value of works included in part bill Nos.II to VI till 20.12.2005?
6.2. Issue No.(4): Whether the Contractor is entitled to the alleged claim of ` 1,73,61,776/- towards the unpaid value for the work which he has not done?
6.3. These two issues have been taken up together by the learned Arbitrator and have been rejected. Aggrieved by the same, the Contractor has raised objection stating that the unpaid value of works carried out as on 20.12.2005 and included in part bill Nos.II to VI amounts to ` 1,42,11,713/- and with interest at the rate of 14% per annum, which works out to ` 31,50,263/-, the total amount payable by the Employer is ` 1,73,61,776/-.
6.4. It has been the case of the Contractor that the Employer has withheld ` 82,00,000/- from part bill No.III submitted on 12.5.2004 for payment of ` 1,90,54,524/-, by reducing the bill amount to ` 1,08,21,664/- and the Employer has issued a cheque for ` 74,47,634/- out of the bill amount of ` 1,90,54,524/-. Again in respect of part bill No.IV submitted on 22.6.2005 for payment of ` 1,48,88,602/-, it was reduced by the Employer to ` 71,09,590/- and kept pending from 22.6.2005 to 30.9.2005 for three months which is a fundamental breach and issued a cheque for ` 18,71,412/-. Again in respect of part bill No.V submitted on 25.10.2005 for payment of ` 90,46,017/-, the same was retained unpaid and a cheque for ` 44,69,015/- was issued. Similarly, in respect of part bill No.VI submitted on 22.12.2005 for ` 1,32,77,985/-, the amount was retained unpaid till 10.3.2006 and a cheque for ` 17 Lakhs was issued. The whole balance amount due to the Contractor has been retained illegally by the Employer and in that regard the calculation given by the Contractor is as follows:
Sl.No.
Date of submission of bill
Bill No.
Valud of works `
Date of payment
Paid by cheque for `
1
10/2/2005
LS I & Part
28,25,878/-
2/2005
17,04,773/-
2
31/3/2005
LS II & Part
86,08,859/-
3/2005
75,86,315/-
3
12/5/2005
LS III & Part
1,90,54,524/-
5/2005
74,47,634/-
4
22/6/2005
LS IV & Part
1,48,88,602/-
9/2005
18,71,412/-
5
25/10/2005
LS V & Part
90,46,017/-
11/2005
44,69,015/-
6
22/12/2005
LS VI & Part
1,32,77,985/-
10/3/2006
17,00,000/-
Recoveries effected / permitted.
1
Towards mobilization advance
=
` 74,56,055/-
2
Equipment advance
=
` 19,12,301/-
3
Retention amount
=
` 18,73,914/-
4
Income tax/SC 2.2%
=
` 8,24,5202/-
5
Labour Welfare Fund 0.3%
=
` 1,12,434/-
Total
=
` 1,21,79,226/-
Total payment made as certified by the 2nd respondent on 19.5.2006
=
` 3,74,78,280/-
Total value of work carried out and included in part bills I to VI
=
` 5,16,89,993/-
Unpaid value of works carried out and included in part bills I to VI = ` 5,16,89,993/- (-) ` 3,74,78,280/-
=
` 1,42,11,713/-
Unpaid value of works = ` 1,42,11,713/-
6.5. According to the Contractor, an amount of ` 1,42,11,713/- has been retained and as per the terms of the contract, the bills ought to have been paid within 14 days of certification and the tactics of the Employer in non payment is on flimsy grounds like non completion of diversion roads, back filling, levelling earth excavated, etc., ignoring the progress of work made and therefore, it is the case of the Contractor that by withholding the amount for more than 56 days, the Employer has committed fundamental breach of Clause 59 of the agreement and for the said amount of ` 1,42,11,713/- withheld by the Employer, interest at the rate of 14% has been claimed, as stated above.
6.6. On the other hand, it is the case of the Employer in respect of these issues that the Contractor has accepted the measurements taken and signed in M Books and it was based on the actual work done by the Contractor, the amount has been paid and therefore, the question of payment of further amount does not arise and it is their categoric case that for the work done, the Contractor has been paid.
6.7. As per Clause 42.2 of the Conditions of Contract, which is as follows:
“42.2. The Engineer shall check the Contractor’s monthly statement and within 14 days certify the amount to be paid to the Contractor after taking into account any credit or debit for the month in question in respect of materials for the works in the relevant amounts and under conditions set forth in sub-clause 51(3) of the Contract Date (Secured Advance).”
the Engineer certifies the monthly statement of the Contractor within fourteen days and thereafter, the amounts are paid.
6.8. The case of the Contractor, as contended by Mr.Arvind P.Datar, learned Senior Counsel, is that the award in this regard is non speaking and therefore, it is hit by Section 31(3) of the Act, which is as follows:
“Section 31.Form and contents of arbitral award.-
(1) and (2) ……..
(3) The arbitral award shall state the reasons upon which it is based, unless-
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under section 30.”
6.9. On a reference to the award it is clear that when the bill was submitted by the Contractor for ` 1,90,00,000/-, the same was returned by reducing the same to ` 1 Crore based on the certificate issued by the Engineer on the quantum of work performed and there is a finding by the learned Arbitrator that the said reduced bill has been accepted by the Contractor and in spite of it, he has chosen to make an excess claim and that was found to be an unjust enrichment.
6.10. On the above said factual position and taking note of the conduct of the Contractor, it is not possible to interfere with the said aspect of the arbitral award regarding issue Nos.(3) and (4) and hence, the objections raised in respect of the said issues by the Contractor are rejected and the award in respect thereof is upheld.
ISSUE No.(5)
7.1. Issue No.(5): Whether the Contractor is entitled to the extra cost for purchase of bitumen emulsion cement and diesel for an alleged sum of ` 90,57,627/- when as per Clause 13.4 of ITB and Clause 4.2 of the contract the price of firm and any rise and fall in price should be borne in mind by the Contractor?
7.2. This issue relates to extra cost for purchase of bitumen, emulsion, cement and diesel and the amount claimed is ` 90,57,627/-. The question was as to whether the Contractor was entitled to extra amount due to rise of price, when the contract is a fixed priced one.
7.3. The fact that the contract is a fixed price one is not in much dispute. The claim of the Contractor was that the agreement provides for exemption of excise duty for purchase of bitumen, bitumen emulsion, cement and diesel required for carrying out the work. It is the case of the Contractor that while the claim submitted by the Contractor for the purpose of exemption was on 28.10.2004, 4.12.2004 and 6.12.2004, the excise duty exemption certificate (EDEC) for procurement of the said commodities was issued only on 17.1.2005. It is stated that even thereafter there was no supply at Chennai point of BPCL and therefore, the certificate was returned on 17.1.2005 so as to address to IOC Limited and it was on 11.3.2005, the Project Director, Tamil Nadu Road Sector Project required the Contractor to produce the letter from BPCL expressing their inability to supply bitumen and there has been inordinate delay.
7.4. It is stated that EDEC required by the Contractor on 23.9.2004 was for 13 items of equipment, which were required for carrying out work, and after two months, viz., on 25.11.2004, the said Project Director has issued EDEC for purchase of 7 items of equipment out of 13 items and on 9.3.2005 and 10.3.2005, EDECs were issued for purchase of asphalt compactor and vibratory roller, essentially required for carrying out the works. The Contractor is stated to have submitted a request on 11.9.2005 for EDEC with full particulars of quantity of bitumen, bitumen emulsion, cement and diesel used in works and the EDEC required for the balance work, which was delayed up to 23.2.2006. The Contractor made series of requests for EDEC on 9.9.2005, 30.9.2005, 7.10.2005, 18.2.2006, etc., for which certain replies were issued by the Employer directing to furnish particulars, which were already furnished and to surrender original EDECs, which were handed over to the suppliers concerned for purchase of respective items and it was only due to the belated obtaining of particulars by the Employer from the Excise Department, the extension of EDEC was issued.
7.5. It is the further case of the Contractor that manufacturers have increased the price of bitumen, bitumen emulsion, etc. subsequent to the submission of the tender on 9.2.2004 and the same is a compensation event within the contract, for which the Contractor is eligible for reimbursement of the increased cost incurred in purchase of those items. The Contractor has calculated the excess cost as follows:
i.
Extra cost of bitumen
=
` 46,95,420.00
ii.
Extra cost of emulsion
=
` 96,180.00
iii.
Extra cost of cement
=
` 11,85,992.00
iv.
Extra cost of diesel
=
` 14,39,193.00
v.
Extra cost due to denial of EDC
=
` 9,97,371.00
=
` 84,14,156.00
vi.
Add interest at 14% per annum from 30.12.2005 19 months
=
` 18,65,137.00
` 16,43,471.00
Total unpaid cost
=
` 1,02,79,293.00
and claimed a total amount of ` 1,02,79,293.00.
7.6. On the other hand, it has been the case of the Employer that as per Clause 13.4 of the ITB, which is as follows:
“13.4. The rates and prices quoted by the bidder shall be fixed for the duration of the Contract and shall not be subject to adjustment on any account.”
the rates and prices quoted by the bidder shall be fixed for the duration of the contract and shall not be subjected to adjustment on any account and contract, being a fixed price one, is not subject to any change. It is stated that the excise duty exemption was issued in December, 2004, but the Contractor has not used the full quantity even after a period of one year and he applied for extension and in spite of it, the progress was only 20%, viz., while the contract was to the value ` 17.24 Crores, the financial progress made by the Contractor was only for ` 2.48 Crores.
7.7. As against the above said claim of ` 1,02,79,293/-, the learned Arbitrator has granted an amount of ` 26,36,285/- and for arriving at the said amount, the learned Arbitrator has taken note of the fact that the original period of contract was 12 months and therefore, any increase in cost of materials within the contract period cannot be granted, but however has considered that beyond the period of 12 months, viz., during the extended period of 7 months, viz., from 1.9.2005 to 29.3.2006, the Contractor has to be compensated by the Employer .
7.8. The learned Arbitrator has, in fact, found that during the extended period, the Contractor has purchased bitumen, cement, diesel to the extent of 395.40 MT, 12380 bags and 71623 Litres respectively and considering the average increase in price of the above said materials at ` 2906.60 per MT, ` 40/- per bag, and ` 10.30 per litre respectively, has arrived at the total amount for bitumen, cement and diesel at ` 23,82,185/- and adding interest of ` 2,54,100/-, the total sum was fixed at ` 26,36,285/-. Thus, the learned Arbitrator by construing Clause 13.4 of the ITB has held that the rates and prices quoted will be for the original period of contract and for the extended period, if the same has been done, the fixed price concept cannot be taken note of.
7.9. The contention of the learned Special Government Pleader in this regard is that when the agreement was entered on 1.9.2004, the Contractor has applied on 23.9.2004 to the Employer for EDEC for the construction equipment and therefore, from 1.9.2004 to 23.9.2004, the Contractor has not utilized the equipment which were categorized in the said letter numbering more than 13, viz., Motor Grader, Wheel Loader, Drum Mix Asphalt Plant, Mechanical Asphalt Paver Finisher, Vibratory Asphalt Compactor, Pneumatic Tyre Roller, Vibratory Soil Compactor, Hydrostatic Paver Finisher, Hydraulic Excavator, Hydraulic Excavator, Excavator Loader, Road Roller and Tandem Vibratory Roller.
7.10. On 25.11.2004 (Ex.19), the Employer has issued original certificates in respect of 8 instruments, namely Motor Grader, Wheel Loader, Drum Mix Asphalt, Pneumatic Tyre Roller, Vibratory Soil Compactor, Hydrostatic Paver Finisher, Hydraulic Excavator 58 PS and Hydraulic Excavator 125 PS, thereby giving exemption in respect of 8 machines on 25.11.2004, while the Contractor has applied on 23.9.2004.
7.11. It is the case of the learned Special Government Pleader that in the letter dated 28.10.2004 (Ex.R20) addressed by the Contractor to the Divisional Engineer and also the Employer, even though the Contractor has stated that they have enclosed a declaration regarding Excise/Customs Duty Exemptions for construction equipment, the enclosure only contains particulars of bitumen, bitumen emulsion, cement, diesel, etc., and not about the equipment, and the employer has also given a reply on 30.12.2004 (Ex.R22).
7.12. According to the learned Special Government Pleader, when once the Contractor is aware of the nature of the work to be done, the Contractor should have given declaration in respect of the machines at a time and the conduct of the Contractor in giving declaration piecemeal, viz., one for machinery and another for materials, cannot be a ground for the purpose of variation.
7.13. Even though it is not in much dispute that the contract is a fixed price contract, as found by the learned Arbitrator, the compensation fixed for the extended period cannot be said to be either illegal or perverse and it cannot be also said that such amount has been awarded without any basis, as the learned Arbitrator has clearly specified the manner in which he has arrived at such amount, which, in my considered view, does not require any reconsideration, for such re-appreciation of evidence by this Court by exercising its jurisdiction under Section 34(2) of the Act would amount to this Court sitting on appeal over the decision of the Arbitrator, which is not permissible. Therefore, there is no reason to interfere with the finding of the learned Arbitrator regarding issue No.(5).
ISSUE No.(6)
8.1. Issue No.(6): Whether the Contractor is entitled to the alleged unpaid cost in the additional leads involved in procurement of materials when as per Clause 13.4 of ITB rate and price quoted by the bidder shall be fixed for the duration of the contract and shall not be subject to adjustment on any account?
8.2. This claim relates to unpaid cost in the additional leads involved in procurement of materials and the amount claimed by the Contractor to the extent of ` 1,50,63,304/- is on the basis that the Contractor quoted rates based on the site investigation reports, bidding documents, etc. with leads specified in procurement of sand and as per the bidding document, the source of supply of sand is within 10 Kms. of the site and the cost of transportation was also reckoned accordingly and it was stated that source of supply of 40 mm, 20 mm, 12 mm and 6 mm metal is within 10 kms of the site.
8.3. The materials are to be obtained only from licensed quarries, which requires the consent of Forest, Mines and Geology Departments. However, permits were issued by the PWD for obtaining sand from Pavakkal, which is 30 kms away and therefore, in respect of the transportation of sand from such a long distance, it is stated that the Contractor has incurred huge expenditure. Further, it is due to the non availability of 40 mm, 20 mm, 12 mm and 6 mm metal within 10 Kms of the site, the Contractor had to procure the same from a very long distance of 135 Kms. from the site and the leads involved in procurement of aggregates ranged between 70 Kms. to 135 Kms. It is stated that the Contractor procured 8029 cu.m. of 40 mm metal with additional leads of 15 Kms., 1263 cu.m. with additional lead of 65 Km and 18,251 cu.m. for 20 mm, 12mm and 6 mm aggregates with leads ranging between 70 Kms. to 135 Kms. According to the Contractor, the extra cost worked out ` 1,23,29,914/- and with interest at the rate of 14% per annum, the total amount claimed from the Employer by the Contractor was arrived at ` 1,50,63,304/-.
8.4. It is stated that the Contractor has notified the non availability of sand and metal from the source of supply specified, intimating procurement of sand from Pavakkal and aggregates from Vellore, Thiruvannamalai, Salem, etc. with additional leads and the reimbursement of cost incurred in procurement of materials required for carrying out the work has been refused by the Employer on the ground that the contract is a fixed price one.
8.5. According to the Employer, the Contractor has not produced any certificate from any of the quarry owners to show that the 40 mm, 20 mm and 6 mm aggregates were not available in Dharmapuri District and in the absence of any concrete proof, such amount cannot be claimed.
8.6. The learned Arbitrator has rejected the claim of the Contractor on the basis of Clause 13.4 of the ITB. The learned Arbitrator has also concluded that in the absence of any concrete material to show that the quarries in Dharmapuri District did not have sufficient yield of 40 mm, 20 mm and 6 mm aggregates, it was not possible to accept the case of the Contractor. The learned Arbitrator has also found that the other contractors have purchased materials within Dharmapuri District and the bills produced by the Contractor may relate to some other contract also and in the absence of such distinction, the claim of compensation was rejected. The learned Arbitrator, by relying upon the judgment in K.Ramasamy v. State of Tamil Nadu and others, JT 2002 (5) SC 479, has also held that it is only in extraordinary circumstances compensation can be granted and in the absence of any clinching proof or certificate, it cannot be treated as an extraordinary circumstance.
8.7. It is the contention of Mr.Arvind P.Datar, learned senior counsel appearing for the Contractor that the learned Arbitrator has failed to take into consideration Clause 44.2 of the Conditions of Contract, which is as follows:
“44.2. If a Compensation Event would cause additional cost or would prevent the work being completed before the intended Completion Date, the Contract Price shall be increased and/or the Intended Completion Date is extended. The Engineer shall decided whether and by how much the Contract Price shall be increased and whether and by how much the Intended Completion Date shall be extended.”
and which enables the additional cost to be raised, based on the decision of the Engineer.
8.8. The learned senior counsel would also rely upon Clause 14.1 of the Conditions of Contract, which is as follows:
“14.1. The Contractor, in preparing the Bid, shall rely on any site Investigation Reports referred to in the Contract Data, supplemented by any information available to the Bidder.”
and which mandates that the Contractor should rely upon the investigation reports referred to in the contract data and submits that in the absence of the any materials available as per the site investigation report, one has to take into consideration the commercial reality and the Contractor is entitled to find out the nearest place where the materials are available in order to act as per the terms of the contract. It is his submission that the Contractor cannot be directed to get a non availability certificate in respect of the sand and other materials.
8.9. In respect of this objection raised by the Contractor, in the letter of the Contractor dated Nil (Ex.C58), it is stated that “the procurement of metal such as 6 mm, 12 mm, 20 mm and 40 mm from the lead anticipated while tendering is very difficult now. As such we are conveying materials from Vellore, Thiruvannamalai and Salem with higher lead. This aspect also affected the program of work. The reasons aforesaid are attributable to the Department. As such the extension of time is quite obvious. We therefore request a further period of 6 months from August 2005 is quite inevitable and we request that the extension of time may kindly be granted and oblige please.”
8.10. The same was also reiterated in the letter of the Contractor dated 30.7.2005 (Ex.C69) addressed to the Adjudicator, Engineer-in-Chief (Retired) and ultimately, as it is seen in the minutes of the Management Meeting held on 21.12.2005 (Ex.C110), it was resolved that “Contractor’s claim of extra lead is not complied with. The lead stipulated in the agreement has to be followed. Any problem relating to quarry may be taken to the notice of the District Collector, Dharmapuri, for clearance.”
8.11. After contacting the District Collector, Dharmapuri in the letter dated 4.3.2006 (Ex.C126), the Contractor has raised a dispute for adjudication as per the terms of contract before the Engineer-in-Chief (Retired), PWD on 10.3.2006 (Ex.C127). The recommendations of the Adjudicator, as seen in his proceedings in 13.3.2006 (Ex.C128), are as follows:
“1. The claim is not substantiated with details by the Contractor and the Department also has to examine the claim and provide suitable reply to the contractor referring to clauses of agreement.
2. The certificate can be arranged to be issued, with out further delay. The Department has to look in to the validity of the statement by the contractor that the contract is in extended intended period of completion.
3. It is understood that there is some movement between both the parties towards the settlement of the dispute raised. This may be expedited and consolidated to avoid further dispute on this issue.”
8.12. Therefore, according to the learned senior counsel, in spite of the efforts taken by the Contractor in approaching the District Collector and raising the adjudicatory mechanism, the raw materials were not made available and hence, the rejection of the claim in this regard is opposed to the Contract Act and one cannot be compelled to perform an impossible act and this aspect has not been considered by the learned Arbitrator.
8.13. It is his submission by placing reliance on Section 28(3) of the Act, which is as follows:
“Section 28. Rules applicable to substance of dispute.
(1) and (2) ……
(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.”
that the usage of the trade applicable to transaction has to be taken into consideration.
8.14. I do not agree with the said contention of the learned senior counsel for the simple reason that the law is well settled that the Arbitrator has to go only as per the terms of the contract. Even as per the terms of the contract, if an implied term is to be construed, there must be an extraordinary circumstance with clinching evidence, as found by the learned Arbitrator. The learned Arbitrator has, in fact, analyzed the entire issue crisply. Even otherwise, as stated above, on an analysis of the various exhibits marked before the learned Arbitrator, which were brought to the notice of this Court, there is absolutely nothing to presume the existence of an extraordinary circumstance to enable the Contractor to get compensation in this regard. In the absence of any evidence to show about the non availability of the required quantity of sand as per the terms of the contract within the vicinity as alleged, certainly it is not possible for the Arbitrator to grant compensation and if the Arbitrator has gone beyond the same and granted compensation, the same would have been only on surmises.
8.15. The contention that the usage of trade must be taken into consideration has absolutely no meaning on the facts and circumstances of the case. If the claim of the Contractor is impossibility of performance because of non availability of materials as per the terms of the contract, it was his duty to prove before the Arbitrator the non availability of the materials. The non availability must be proved to be an extraordinary circumstance so as to enable the Arbitrator to infer certain terms in the contents of the contract for payment of compensation. In the absence of that, I am of the considered view that there is absolutely nothing to interfere with the award of the learned Arbitrator in this regard.
8.16. Accordingly, the finding of the learned Arbitrator rejecting the claim in respect of issue No.(6) is upheld.
ISSUE No.(7)
9.1. Issue No.(7): Whether the Contractor is entitled to the alleged unpaid last bill to the extent of the alleged amount of ` 1,03,57,231/- when the contract was terminated for not completing the work as per Clause 59.2 of the contract?
9.2. This claim relates to the unpaid amount in respect of the part bills I to VI submitted on 22.12.2005 by the Contractor, for which the Employer has paid value of ` 3,74,78,280/-, retaining the balance amount. According to the Contractor, the amount not paid as on 29.3.2006, viz., the date of termination of the contract, was ` 1,03,57,231/- with future interest.
9.3. As per the submission of the Employer, when the claim of the Contractor itself in that regard was ` 1 Crore and he has reduced it to ` 83.50 Lakhs, it was found on verification that the work done by the Contractor was only about ` 59 Lakhs and after deduction of the mobilization and equipment advance recoveries, the net amount of ` 17 Lakhs was already paid to the Contractor and therefore, there was no further amount due to the Contractor.
9.4. The learned Arbitrator, on referring to the invoices submitted by the Contractor, having concluded on fact that the Contractor has procured materials only up to December, 2005, had quantified the value of work done thereafter up to the date of termination as ` 21,13,910/- and by granting interest at the rate of 8%, the total amount was arrived at ` 23,39,394/- and by rounding off the same, the learned Arbitrator allowed an amount of ` 23 Lakhs.
9.5. It was found by the learned Arbitrator that originally the Contractor in respect of the VI part bill dated 22.12.2005 has submitted a claim of ` 1,32,77,985/-, which was returned on 18.1.2006 and thereafter, he has re-submitted the bill on 30.1.2006 for the reduced amount of ` 83,65,523/- and that bill was again returned based on certain discrepancy in calculation of quantities. It was found that the Superintending Engineer (H), Salem, on 3.3.2006, has verified and certified only an amount of ` 59,48,527/- and that was paid on 4.3.2006. After deducting the mobilization and equipment advances recoveries of ` 37,87,131/-, it is stated that a further amount of ` 17,12,640/- was paid to the Contractor and when a protest was made by the Contractor, the Superintending Engineer (H), Salem, in his letter dated 13.3.2006, has made it very clear that the amount paid was in respect of the actual work done and therefore, taking note of the discrepant stand taken by the Contractor, the learned Arbitrator has rejected the exorbitant claim after referring to the letter of the Superintending Engineer dated 13.3.2006, wherein it is stated that the departmental and contractor’s Engineers joined together and verified the level of work done and bills prepared and found that there was no disparity and whatever work done has been paid, and the learned Arbitrator, in my view, on appreciation of the evidence has quantified the amount due to the Contractor as ` 23 Lakhs, which does not require any interference.
9.6. The finding of the learned Arbitrator in respect of claim in respect of issue No.(7) is upheld.
ISSUE No.(8)
10.1. Issue No.(8): Whether the Contractor is entitled to the alleged sum of ` 22,81,960/- for the unpaid value of materials taken possession of when the materials were substandard as per the review of the Technical Review Consultant?
10.2. This issue relates to the unpaid value of the materials taken possession by the Employer after the recission of contract on 29.3.2006. The Contractor claimed the plant and equipment brought to the site has its property. The claim is made on the basis that the Contractor has made some stock at the site of installation of Hot Mix Plant at Nambiampatty and after termination of the contract, the Employer has taken possession of those stocks which value ` 19,23,000/- and with interest at the rate of 14% per annum from 29.3.2006, the Contractor claimed an amount of ` 22,81,960/-.
10.3. The complaint of the Contractor is that the Employer has avoided measurement of 40 mm metal stocked at site by directing the Contractor to bring weighing balance, which, according to the Contractor, is only to avoid measurement by all means.
10.4. It has been the contention of the Employer that the Technical Review Committee has itself found that the metal available at site were not as per the specification and therefore, the Contractor was not entitled to any compensation.
10.5. On the basis of the said view of the Technical Review Committee, the learned Arbitrator has rejected the claim, which again was found to be an extraordinary claim by the Contractor. The learned Arbitrator has relied upon Clause 61.1 of the Conditions of Contract, which makes it clear that when once the contract is terminated the Employer is deemed to be the owner of the materials, and the Technical Review Committee having found that the metal at site was unfit for usage, the learned Arbitrator has, on fact, again rejected the claim of the Contractor, which, in my considered opinion, does not require any interference.
ISSUE No.(9)
11.1. Issue No.(9): Whether the Contractor is entitled to the alleged sum of ` 22,45,573/- towards the retention amount recovered from the bills when he has not completed the work as per the contract?
11.2. The recovery of of ` 18,73,914/- made by the Employer as retention amount is alleged to be incorrect on the basis that there has been a fundamental breach committed by the Employer by terminating the contract on 29.3.2006 and on the said amount interest at the rate of 14% is claimed, totalling to an amount of ` 22,45,573/-.
11.3. The said claim is objected to by the Employer on the basis that as per the terms of the contract, the Contractor is not entitled to claim retention amount when the work was not completed as per the terms of the contract and the breach is on the part of the Contractor.
11.4. The learned Arbitrator, since has already found that certain amounts were not recoverable due to illegal termination of contract, has decided that the retention money retained by the Employer to the extent of ` 18,73,641/- has to be released to the Contractor after termination of the contract. The learned Arbitrator, having rejected the counter claim made by the Employer in this regard, has granted 8% interest for 16 months on the retention amount and granted an amount of ` 20,73,496/-, as against the claim of ` 22,45,573/-.
11.5. The contention in this regard by the learned Special Government Pleader that the learned Arbitrator has not given any reason for grant of the said amount is unsustainable. In fact, the learned Arbitrator has clearly stated that after completion of the work, the retention amount should have been released and the correctness of the said finding cannot be gone into by this Court while exercising the jurisdiction under Section 34(2) of the Act.
11.6. Hence, the finding by the learned Arbitrator in respect of the said claim does not require any interference.
ISSUE Nos.(10), (19) and (20)
12.1. Issue No.(10): Whether the Contractor is entitled to the alleged sum of ` 1,01,32,024/- towards the refund of the amount realized by invocation of performance security by means of bank guarantee?
12.2. This claim has been made by the Contractor on the basis that he has furnished performance security of 5% of the contract price of ` 17,24,53,204/- on 26.8.2004 by bank guarantee issued by the Federal Bank Ltd., Kasargod for ` 86,23,000/-. Claiming that the non completion of the work was due to the conduct of the Employer and the fundamental breach of contract committed by them and that the Employer has illegally encashed the bank guarantee furnished by the Contractor on 12.4.2006, the Contractor has demanded ` 86,23,000/- with interest at the rate of 14%, totalling to ` 1,01,32,024/- with future interest.
12.3. The said claim has been contested by the Employer on the basis that a counter claim has been made to the extent of ` 2.23 Crores.
12.4. Again, this claim has been allowed by the learned Arbitrator on his finding that the cancellation of contract was improper. It was consequential to the finding of the learned Arbitrator that the cancellation of contract was strictly not in accordance with law and after finding that the encashment of the bank guarantee was also not as per law. The learned Arbitrator has directed the release of the bank guarantee amount given in the form of a performance security to the extent of ` 86,23,000/- with interest at the rate of 8%, in all an amount of ` 95,42,787/-, as against the claim of ` 1,01,32,024/-.
12.5. In view of the categoric finding by the learned Arbitrator that the termination of the contract by the Employer is not proper, which finding does not require any interference by this Court, I am of the view that the grant of the said amount in respect of this issue in favour of the Contractor is only consequential and cannot be said to be either perverse or against law and accordingly, the finding in that regard is upheld.
12.6. Consequently, the claim of the Employer raised in the following issues:
“Issue No.(19): Is not the Employer entitled to the alleged sum of ` 2,78,34,463/- as per Clause 60.1 of the Conditions of Contract towards 80% of the left out value of the contract work?” and
“Issue No.(20): Is not the Employer entitled to ` 5,45,26,079/- towards the alleged loss incurred to them due to the non completion of the work and in engaging the fresh Contractors for completion of work?,”
by which the Employer has claimed an amount of ` 2,78,34,463/- towards the value of 80% of the left out work by the Contractor and an amount of ` 5,45,26,079/- towards the alleged loss incurred by non completion of the work by the Contractor, was rejected by the learned Arbitrator and the same, in my considered view, is not liable to be interfered, for the reason that the learned Arbitrator, on merits and appreciation of the entire evidence, has found that the termination of the contract was not proper.
ISSUE No.(11)
13.1. Issue No.(11): Whether the Contractor is eligible for the alleged sum of ` 2,40,000/- for rental of 3.25 Acres of land hot mix plant as per Clause 61.1 of the contract?
13.2. The relevant clause for the purpose of dealing this issue is Clause 61.1. of the Conditions of Contract, which is as follows:
“61.1. All materials on the Site, Plant, Equipment, Temporary Works and Works are deemed to be the property of the Employer, if the Contract is terminated because of a Contractor’s default.”
A reading of the said clause makes it clear that on termination of the contract, the materials on the site are deemed to be the properties of the Employer.
13.3. Even though the learned Arbitrator has held that the termination of the contract is not proper, it was found that in the absence of any specific or positive clause in the contract for payment of rent in respect of the installation of hot mix plant on the erected land, the said claim of the Contractor cannot be entertained and therefore, the same was rejected.
13.4. When it is admitted that on termination of contract on 29.3.2006 the Employer has directed the Contractor to remove all the materials forthwith, it was the duty of the Contractor to remove the same and even if it is found that the termination of the contract by the Employer was not proper, in the absence of any specific clause in the contract for payment of rent after termination, certainly the Contractor is not entitled to claim such amount. Due to the wrongful termination of the contract, the Contractor is entitled only to various amounts of compensation and damages which were claimed, of which some were granted by the learned Arbitrator, and there is absolutely no illegality in the finding of the learned Arbitrator in rejecting the claim of the Contractor for payment of rent, especially when there is no clause in the contract. Therefore, the finding of the learned Arbitrator in this regard can never be said to be perverse or illegal.
13.5. Accordingly, the finding of the learned Arbitrator in respect of this issue needs no interference.
ISSUE No.(12)
14.1. Issue No.(12): Whether the Contractor is eligible for the alleged sum of ` 4,55,000/- towards the alleged unpaid hire charges for hot mixed plant from 29.2.2006 to 17.6.2006?
14.2. Again, it is the admitted case that when the contract was terminated on 29.3.2006, as per the Conditions of Contract, especially Clause 61.1, as elicited above, the Employer takes possession. After termination of the contract, when the Contractor took time to shift the Hot Mix Plant up to 17.6.2006, of course as per the order of this Court, there is no question of entitlement of the Contractor for the hire charges and the same can only be said to be a frivolous one and in fact, the learned Arbitrator has, in my view, correctly found that the payment of rent in respect of the said Hot Mix Plant is only a contract between the Contractor and the owner of the plant and that has nothing to do with the Employer.
14.3. The learned Arbitrator has also found that as per the order of this Court, the Contractor was given liberty to remove the articles which were kept in the premises and in spite of such opportunity having been given the Contractor has not made use of it and therefore, the claim is frivolous and accordingly, rejected the claim, which, in my considered view, does not require any interference by this Court.
ISSUE No.(13)
15.1. Issue No.(13): Whether the Contractor is eligible for the alleged sum of ` 47,23,000/- when the delay is attributable only to the Contractor?
15.2. The next claim relates to unpaid hire/idling charges of machinery items. The claimant for keeping the machinery idle by 77% for the period between 1.10.2004 and 31.8.2005 had claimed an amount of ` 66,89,760/- and for the period from 31.8.2005 to 29.3.2006, for keeping the machinery idle, the amount was quantified as ` 47,23,200/- and the said amount has been claimed by the Contractor on the basis of payment of hire charges to third parties during the said period and the claim is particularly with reference to period from 31.8.2005 to 29.3.2006, as stated above. In fact, the said claim of non utilization of the machines was based on the delay on the part of the Employer in issuing EDEC, as stated above, and obtaining clearance from various departments and removal of obstruction.
15.3. That was contested by the Employer on the ground, as elicited above, that the Contractor has taken two months time from the date of the original contract for the purpose of claiming of EDEC and thereafter, the Employer has done its work and there was no delay on the part of the Employer. It was also the case of the Employer that the EDEC was only for maintenance work, for which the encumbrance free site was made available to the Contractor to carry out the work and therefore, if there is any delay on the part of the Contractor in carrying out the work, the fault is only on the part of the Contractor and the Employer has never prevented the Contractor from using the machinery and starting the work and hence, the delay is attributable to the Contractor in not planning the work properly.
15.4. The learned Arbitrator having found that on receipt of the Contractor’s request for exemption certificate on 27.9.2004, the certificate was issued on 25.11.2004, which was valid up to 31.8.2005 and again for another certificate the Contractor applied on 6.12.2004 and the certificate was issued on 30.12.2004 valid up to 31.8.2005 and on further request by the Contractor on 10.12.2004, a certificate was issued on 10.3.2005 valid up to 31.8.2005, held that it was only on the request made by the Contractor, the Employer has obtained necessary certificates and therefore, there was no delay attributable to the Employer. The learned Arbitrator, thus, has rejected the claim made by the Contractor in this regard.
15.5. Even though the learned Arbitrator has not given any elaborate reason, inasmuch as the reason has already been assigned in all other grounds, mere non repetition of the same in respect of this issue cannot be said to vitiate the finding arrived at by the learned Arbitrator in this regard. In any event, it is not for this Court to substitute its reason when once the Arbitrator has assigned a reason for passing such an award, for in these cases it is not the decision, but it is the decision making process which is the eminent domain of this Court by exercising the jurisdiction under Section 34(2) of the Act.
ISSUE No.(14)
16.1. Issue No.(14): Whether the Contractor is eligible for the alleged sum of ` 9,81,750/- towards the alleged unpaid pay and salaries of the personnel idled when the delay is attributable only to the Contractor?
16.2. This claim is akin to Issue No.(13). The claim made by the Contractor for payment of salaries for four graduate engineers, three diploma engineers and twelve supervisors is on the basis that the Employer is bound to reimburse the Contractor, as the said idling of the staff was due to non issuance of EDEC and other reasons attributable to the Employer.
16.3. The said claim was rejected by the learned Arbitrator based on the earlier finding in respect of issue Nos.(12) and (13) and therefore, there is absolutely no reason to interfere with the said finding of the learned Arbitrator.
ISSUE No.(15)
17.1. Issue No.(15): Whether the Contractor is eligible for the alleged sum of ` 74,05,555/- towards the unpaid increase in the contract price when he has not completed the work as per the contract?
17.2. As against the claim of the Contractor for an amount of ` 74,05,561/-, the learned Arbitrator in the award has granted an amount of ` 6,95,740/- by taking note of the increase in the cost of the inputs like machinery, labour, overheads beyond the contract period will be around 5% and also considering that the value of the work done by the Contractor beyond the original period as ` 1,25,73,610/-, the increase in contract price calculated at 5% has been arrived by the learned Arbitrator at ` 6,28,681/- and by granting an interest of 8%, a total amount of ` 6,95,740/- came to be awarded by the learned Arbitrator and this has been questioned by both the Contractor as well as the Employer.
17.3. The claim has been made by the Contractor on the basis of Clause 40 of the Conditions of Contract relating to payments for variations, which is as follows:
“40. Payments for Variations:
40.1. The Contractor shall provide the Engineer with a quotation (with breakdown of unit rates) for carrying out the Variation when requested to do so by the Engineer. The Engineer shall assess the quotation, which shall be given within seven days of the request or within any longer period stated by the Engineer and before the Variation is ordered.
40.2. If the work in the Variation corresponds with an item description in the Bill of Quantities and if, in the opinion of the Engineer, the quantity of work above the limit stated in Sub Clause 38.1 or the timing of its execution do not cause the cost per unit of quantity to change, the rate in the bill of Quantities shall be used to calculate the value of the Variation. If the cost per unit of quantity changes, or if the nature or timing of the work in the Variation does not correspond with items in the Bill of Quantities, the quotation by the Contractor shall be in form of new rates for the relevant items of work.
40.3. If the Contractor’s quotation is unreasonable, (or if the contractor fails to provide the Engineer with a quotation within a reasonable time specified by the Engineer in accordance with clause 40.1) the Engineer may order the Variation and make a change to the Contract Price which shall be based on Engineer’s own forecast of the effects of the Variation on the Contractor’s costs.
40.4. If the Engineer decides that the urgency of varying the work would prevent a quotation being given and considered without delaying the work, no quotation shall be given and the Variation shall be treated as a Compensation Event.
40.5. The Contractor shall not be entitled to additional payment for costs that could have been avoided by giving early warning.”
17.4. The variation was claimed based on the Compensation Events under Clause 44.2 of the Conditions of Contract, which is as follows:
“44.2. If a Compensation Event would cause additional cost or would prevent the work being completed before the Intended Completion Date, the Contract Price shall be increased and/or the Intended Completion Date is extended. The Engineer shall decide whether and by how much the Contract Price shall be increased and whether and by how much the Intended Completion Date shall be extended.”
17.5. A combined reading of those clauses makes it clear that on the basis of the request made by the Contractor, the Engineer has to decide about the increase of contract price either based on compensation events under Clause 44 of the Conditions of Contract or for payments for variations under Clause 40 of the Conditions of Contract. In the context of the original contract, namely that the contract is on fixed price rate, certainly the said clauses are exemptions to the same, permissible strictly as per the calculations made by the Engineer.
17.6. Even though in the claim made by the Contractor, the Contractor has given various particulars, including the alleged failure on the part of the Employer in handing over possession of the site, there is nothing on record to show that such claim has ever been made to the Engineer, who has been made to give a finding. That was contested by the Employer on the ground that the claim is frivolous for the reason that in spite of many extensions granted, the Contractor was able to complete the work only to the extent of 20%. However, the learned Arbitrator has found that the Contractor was not eligible for such increase in contract price during the period of contract, viz., for the first twelve months, and calculated the amount, as narrated above, only for the period beyond the original contract period at the rate of 5% increase.
17.7. The contention of the learned senior counsel for the Contractor that there has been a confusion by the learned Arbitrator in respect of the claim made earlier due to the delay in procurement of EDEC and approving the variations granting forest clearance, etc., along with the claim made under this issue which is relating to the increase in contract price due to various reasons, including the increase of the cost of materials which are necessary for the purpose of completion of the contract work, like the rate of diesel which was prevailing on 9.2.2004, which was increased drastically, and the rate of bitumen which was ` 10,660/- MT on 9.2.2004 and increased to ` 17,780/- per MT and the rate of cement which was ` 105/- per bag and increased to ` 150/- per bag, which shows that the increase comes to 25% by way of passage of time.
17.8. A reading of the claim made in respect of the increase of cost of materials, as it is seen in Issue No.(5), shows that an analogy has been applied by the learned Arbitrator in this issue No.(15) in respect of the work done beyond the original date of contract at increase of 5% and it does not require any interference by this Court and accordingly, the contentions raised by the learned senior counsel for the Contractor as well as the learned Special Government Pleader for the Employer against the said finding of the learned Arbitrator are rejected and the finding of the learned Arbitrator in this regard stands confirmed.
ISSUE No.(16)
18.1. Issue No.(16): Whether the Contractor is eligible for the alleged sum of ` 16,26,404/- towards the right of plants in mobilization and equipment advance when he has not completed the work?
18.2. The Employer has paid mobilization advance of ` 86,22,000/- as per Clause 51 of the Conditions of Contract on furnishing of unconditional bank guarantee by the Contractor and that was to meet the cost of preliminary expenses by the Contractor. Clause 51.1 reads as follows:
“51.1. The Employer shall make advance payment to the Contractor of the amounts stated in the Contact Data by the date stated in the Contract Data, against provision by the Contractor of an Unconditional Bank Guarantee in a form and by a bank acceptable to the Employer in amounts and currencies equal to the advance payment. The guarantee shall remain effective until the advance payment has been repaid, but the amount of guarantee shall be progressively reduced by the amounts repaid by the Contractor. Interest will not be charged on the advance payment. The bank guarantee of a joint venture shall be in the name of the joint venture.”
18.3. The Employer has again paid an amount of ` 23,72,760/- on 10.2.2005 towards equipment advance and the advance amounts are to be repaid by recovery at the rate of 25% of the interim payments made by the Employer for the value of works carried out, after the value of works reached 15% of the total value, on three months of payment of advance, whichever is earlier. Accordingly, the Employer has recovered an amount ` 74,56,055/- towards mobilization advance and the balance amount was ` 11,65,945/-. Again towards equipment advance, the Employer has recovered ` 19,12,301/- and the balance amount was ` 4,60,459/-. Both of them put together comes to ` 16,26,404/-.
18.4. The Contractor sought to retain the said amount on the ground that only on the completion of the work the Contractor should recoup the mobilization expenditure incurred and inasmuch as the non completion of the work was due to the fundamental breach of contract committed by the Employer in illegally terminating the contract on 29.3.2006, the Employer loses the right of recovery of the said balance amount by Contractor writing off the said demand by the Employer.
18.5. That was again resisted by the Employer on the ground that when the Contractor has not completed the work in spite of the extension of time, the Contractor cannot make such a claim for retention.
18.6. The said claim was rejected by the learned Arbitrator on the ground that the retention of the mobilization and equipment advance is possible only on completion of the entire work. The learned Arbitrator, having found that the Contractor has completed only 20 to 25% of work in spite of three extensions, has rejected the claim. Therefore, the contention of the learned senior counsel for the Contractor that the Contractor is entitled to retain the said amount as a matter of legitimate right, especially when the learned Arbitrator has come to a conclusion that the breach of contract is not proper, is not tenable.
18.7. The very purpose of mobilization and equipment advance is for the performance of the contract in full and in the event of non performance of the contract in full whether it is due to the fault on the part of the Contractor or on the part of the Employer, which factor is immaterial, I am of the considered view that the finding of the learned Arbitrator in this regard that the Contractor as a matter of right cannot claim to retain mobilization and equipment advance is based on sound principles and the terms of the contract, which does not require any interference.
18.8. Accordingly, the finding of the learned Arbitrator in this regard is upheld.
ISSUE No.(17)
19.1. Issue No.(17): Whether the Contractor is eligible for the alleged sum of ` 1,98,91,542/- under the alleged claim of gains deprived due to termination of contract when the termination was done by the Employer is perfectly within clause 59.1 of the contract for not completing the work?
19.2. The said claim was again made on the basis that the Contractor has made all arrangements for installing the plant, equipment, machinery, etc. with the hope that the contract will be completed within the prescribed period, viz., 31.8.2005 and due to the fundamental breach on the part of the Employer the same could not be completed and ultimately the contract came to be revoked even before the period granted and therefore, the claim is made at 15% of the value of the work stating that if that work was carried out elsewhere during the time, the Contractor would have earned profit and the loss of profit is to be compensated by the Employer and that is stated to be deprivation of the right of the Contractor.
19.3. The said claim was resisted by the Employer on the ground that as per the terms of the contract, the Contractor should have completed 100% of work on or before 31.8.2005 and it was only considering the practical approach the Employer has granted 7 months time and in spite of extension of time the Contractor has completed only 20% of the work and therefore, the request of the Contractor that if only two months time is granted, he would complete 80% of the work is illusory. It is the case of the Employer that by non performance of the contract by the Contractor, the public is affected to a large extent.
19.4. The learned Arbitrator, by reasonable construction of the entire issue, having found that the Employer has not cancelled the contract on the basis that in spite of extension of time the Contractor has completed only hardly 25% of the work, which could be a fundamental breach of contract, but has taken a different stand for termination of contract and that the termination is not proper and the terms of termination of the contract and the terms of the show cause notice are divergent and it was only due to that reason he was made to allow some of the amounts, has rejected the claim under this issue as exaggerated, whimsical and the reason assigned by the learned Arbitrator cannot be said to be either arbitrary or illegal or perverse for this Court to exercise its jurisdiction to interfere.
19.5. Accordingly, the contention of the learned senior counsel in this regard is liable to be rejected and consequently, the finding of the learned Arbitrator in respect of this issue does not require any interference.
ISSUE No.(18)
20.1. Issue No.(18): Whether the Contractor is entitled to interest when he is not eligible for any of the claim?
20.2. According to the Contractor, he has paid interest at the rate of 14% per annum to Federal Bank Limited and other banks and therefore, the Employer is bound to pay the said interest.
20.3. The said claim was resisted by the Employer stating that since the delay was on the part of the Contractor, the Contractor was not entitled to any interest.
20.4. The learned Arbitrator by relying upon Clause 15.3 of the ITB, which contemplates interest at the rate of 8% per annum on the unpaid bills, which was referred to while deciding Issue No.(1), and by also relying on Clause 43.1 of the Conditions of Contract, which also contemplates interest at the rate of 8% per annum, has granted 8% interest in respect of various claims allowed by him in favour of the Contractor and therefore, the award of interest at 8% per annum is certainly based on the terms of the contract, which again does not require any interference by this Court.
21. Therefore, on the overall view of the award of the learned Arbitrator, except in respect of Issue No.(2) relating to unpaid value of repairs to potholes using bituminous macadam, in respect of which I have rejected the award made by the learned Arbitrator to the extent of ` 54,16,457/-, I do not see any illegality or perversity in the award passed by the learned Arbitrator.
22. In respect of issue No.(2), this Court had to interfere and set aside the finding on the ground that in spite of the communication of the addendum and corrigendum, the Contractor has chosen to submit his tender stating as ` 200/- sq.m., knowing that the unit of measurement is cu.m. and therefore, I have found that there is absolutely no reason for converting cu.m. as that of sq.m. so as to give the larger benefit to the Contractor, since grant of such relief would be against the provisions of the written contract, which also empowers the Employer to make modification and amendment by informing the same, as it is seen in Clause 10 of the ITB, elicited above.
23. On the circumstance that the addendum, corrigendum and amendment has been communicated, the Contractor has only taken a flimsy ground that such communication itself is not sufficient unless the offer or contract has been modified, which, in my considered view, cannot be countenanced, since such construction will be going against the various terms of the contract. Certainly, the Arbitrator is expected to strictly act as per the terms of the contract. It is not the right and jurisdiction of the Arbitrator to substitute some of his views in the terms of the contract and when such terms of the contract are substituted by the Arbitrator, the same has to be termed as perverse and it was on that ground, this Court had to interfere only in that regard under Section 34(2) of the Act, as the law is well settled in hierarchy of judgments that when the award is a speaking one, it cannot be termed as arbitrary.
24. On an overall view, certainly the reasonableness of reason given by the Arbitrator cannot be decided by this Court by exercising its powers under Section 34(2) of the Act, for this Court is not sitting as an Appellate Authority against the factual finding given by the Arbitrator on various issues. Moreover, this Court is not entitled to substitute its own view, which may even be a better view, for the view of the Arbitrator, as long as the Arbitrator’s decision is not perverse or biased or cannot be termed as a legal misconduct. That has been the view of the Hon’ble Apex Court throughout, as it is affirmed in its latest judgment in Ravindra Kumar Gupta and Company v. Union of India, [2010] 1 SCC 409, wherein, of course by referring to both the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996, with reference to the Government contracts, by analyzing various judgments on the topic, including the judgments rendered in Sudarsan Trading Co. v. Government of Kerala, [1989] 2 SCC 38, MCD v. Jagan Nath Ashok Kumar, [1987] 4 SCC 497, ONGC Ltd. v. SAW Pipes Limited, [2003] 5 SCC 705, Kwality Manufacturing Corporation v. Central Warehousing Corporation, [2009] 5 SCC 142, M.P.Housing Board v. Progressive Writers and Publishers, [2009] 5 SCC 678 and Ispat Engineering and Foundary Works v. SAIL, [2001] 6 SCC 347, the Hon’ble Apex Court has held that the High Court while exercising its jurisdiction under Section 34 of the Act cannot re-appreciate the evidence let in by the parties before the Arbitrator, especially when the same is duly scrutinized and evaluated by the Arbitrator.
25. In K.V.Mohammed Zakir v. Regional Sports Centre, [2009] 9 SCC 357, it was reiterated that the reasonableness of the reasons given by the Arbitrator is not for the scrutiny of this Court exercising the jurisdiction under Section 34 of the Act. The relevant portion of the said order is as follows:
“6. It is equally well settled, where the arbitrator acts within jurisdiction, “the reasonableness of the reasons” given by the arbitrator is not open to scrutiny by Courts. However, if the reasons are such as no person of ordinary prudence can ever approve of them or if the reasons are so “outrageous in their defiance of logic” that they shock the conscience of the Court, then it is a different situation. And in an appropriate case the Court may interfere. However, the degree of such unreasonableness must be greater than the standard in a certiorari proceeding.”
26. While referring to the Arbitration Act, 1940, it was held that even if an erroneous decision has been taken by the Arbitrator, the same cannot be construed as a misconduct of the Arbitrator, even though in cases of errors apparent on the face of the award, such award can be set aside. It was also held that if the award is a speaking one, unless it is demonstrated to the Court that the reasons given by the Arbitrator are erroneous as per the proposition of law and the view of the Arbitrator could not be supported, the challenge to the arbitrator’s award cannot be sustained. Again, while construing the Arbitration Act, 1940, by referring to the traditional arbitrations decided by way of panchayat which resulted in certain sanction like ex-communication, ostracism and exclusion from all religious and social functions of the community and referring to the later development in the concept of arbitration, wherein the arbitration was referred to for quickness in decision and simplicity in procedure, by holding however that such proceedings followed in the arbitration must adhere to the principles of justice, equity, law and fair play, the Hon’ble Apex Court, while dealing with the powers of the Court under Sections 30 and 33 of the Arbitration Act, 1940 to set aside the award, has held in Food Corporation of India v. Joginderpal Mohinderpal and another, [1989] 2 SCC 347 as follows:
“It is, therefore, the function of courts of law to oversee that the arbitrators act within the norms of justice. Once they do so and the award is clear, just and fair, the courts should, as far as possible, give effect to the award of the parties and make the parties compel to adhere to and obey the decision of their chosen adjudicator. It is in this perspective that one should view the scope and limit of correction by the court of an award made by the arbitrator. We should make the law of arbitration simple, less technical and more responsible to the actual realities of the situation, but must be responsive to the cannons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties, but by creating a sense that justice appears to have been done.”
27. In Puri Construction Pvt. Ltd. v. Union of India, [1989] 1 SCC 411, the Hon’ble Apex Court has held as follows:
“14. ….The Court cannot sit in appeal over the views of the arbitrator by re-examining and re-assessing the materials. The scope for setting aside an award is limited to the grounds available under the Arbitration Act, which have been well defined by a long line of decided cases, and none of them is available here.”
28. The principle that while setting aside the arbitration award the Court cannot substitute its view was reiterated by the Hon’ble Apex Court in B.V.Radha Krishna v. Sponge Iron India Ltd., [1997] 4 SCC 693, by following the earlier decision in Puri Construction Pvt. Ltd. case, supra.
29. The principle that the award passed by the Arbitrator must be in accordance with the terms of the contract and for construing the provisions of the contract the intention of the parties has to be gathered from various words used in the agreement as per Section 28(3) of the Act, elicited above, was reiterated by the Apex Court in Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd., [2003] 5 SCC 705 in the following paragraphs:
“13. The question, therefore, which requires consideration is – whether the award could be set aside, if the arbitral tribunal has not followed the mandatory procedure prescribed under Sections 24, 28 or 31(3), which affects the rights of the parties? Under sub-section (1)(a) of Section 28 there is a mandate to the arbitral tribunal to decide the dispute in accordance with the substantive law for the time being in force in India. Admittedly, substantive law would include the Indian Contract Act, the Transfer of Property Act and other such laws in force. Suppose, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, the question would be – whether such award could be set aside? Similarly, under sub-section (3), arbitral tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If arbitral tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered? Similarly, if the award is non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn’t be set aside by the Court. If it is held that such award could not be interfered, it would be contrary to basic concept of justice. If the arbitral tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34.
14. The aforesaid interpretation of the clause (v) would be in conformity with the settled principle of law that the procedural law cannot fail to provide relief when substantive law gives the right. Principle is – there cannot be any wrong without a remedy. In M.V. Elisabeth and others v. Harwan Investment & Trading Pvt. Ltd. [1993 Supp. (2) SCC 433] this Court observed that where substantive law demands justice for the party aggrieved and the statute has not provided the remedy, it is the duty of the Court to devise procedure by drawing analogy from other systems of law and practice. Similarly, in Dhanna Lal v. Kalawatibai and others [(2002) 6 SCC 16] this Court observed that wrong must not be left unredeemed and right not left unenforced.
15. The result is – if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under Section 34. However, such failure of procedure should be patent affecting the rights of the parties.”
30. By applying the established legal principles, as confirmed by the Hon’ble Apex Court throughout, the following order is passed:
(i)O.P.No.387 of 2009 filed by the Contractor stands dismissed;
(ii)O.P.No.596 of 2008 filed by the Employer stands partly allowed by setting aside the award of the learned Arbitrator only insofar as it relates to Issue No.(2) relating to the claim of the Contractor towards unpaid value of repairs to potholes using bituminous macadam, wherein he has quoted ` 200/- per sq.m. instead of per cu.m; and
(iii)the finding of the learned Arbitrator in all other respects as per the award stands confirmed. No costs.
sasi