IN THE COURT OF THE PRINCIPAL DISTRICT JUDGE, KRISHNA,
MACHILIPATNAM.
PRESENT: SRI B. RAVEENDRA BABU,
PRINCIPAL DISTRICT JUDGE,
KRISHNA, MACHILIPATNAM.
THURSDAY, THIS THE 02 ND DAY OF JUNE, 2016
A.O.P.NO. 23/2015
Between:
The Government of Andhra Pradesh represented by Superintending Engineer S. Chandra Sekhara Rao, S/o. S. Kotaiah, aged 53 years, Pulichinthala Project Circle, Jaggaiahpet, Krishna District Works with Government of Andhra Pradesh.
:: Applicant.
And
1. M/s SCL-CR 18 G Joint Venture, 8-2-502/1/A, 1st floor, Jivi Towers, Road No.7, Banjara Hills, Hyderabad-500034, Represented by the Authorised signatory and power of attorney holder Sri D. Srinivas, S/o. D.V. Naidu aged about 47 years, Executive Director, M/s SCL- CR 17 G Joint Venture 8-2-502-1/A, 1st floor, Jivi Towers, Road No.7, Banjara Hills, Hyderabad.
2. Hon’ble Justice J. Eswara Prasad, Plot No. 1189, Road No. 60, Jublee Hills, Hyderabad.
3. Hon’ble Justice Motilal B Naik, Dr.No.11-13-571/A, Haripuram Colony, SR Nagar, Hyderabad.
4. Hon’ble Justice Vamana Rao, Plot Nos. 202 and 203, Mahasiva Apartments, Hyderabad.
:: Respondents.
This petition is coming on 27.04.2016 for final hearing
before me in the presence of Sri U.V. Subrabhmanyeswara Rao,
Government Pleader for applicant and of Sri K. Sai Mohan Rao, Advocate
for respondent No.1, notices against Respondent Nos.2 to 4 are not
necessary as per orders dated 11-07-2014, upon hearing both sides, upon perusing the entire material on record and having stood over for consideration to this day, this court made the following:- 2
:: O R D E R ::
Government of Andhra Pradesh preferred this petition under
Sec. 34 (2) of Arbitration and Conciliation Act, 1996 to set-aside the award dated. 03-10-2013 passed by the Arbitral Tribunal.
2.) First respondent herein is claimant before Arbitral Tribunal.
Petitioner herein is respondent before Arbitral Tribunal.
3.) The parties in this order are referred to as they are arrayed
before Arbitral Tribunal as claimant and respondent.
4.) Arbitral Tribunal consists of three learned Arbitrators viz., 1.) Hon’ble Sri Justice J.Eswara Prasad, 2.) Hon’ble Dr. Justice Motilal
B.Naik and 3.) Hon’ble Sri Justice Vaman Rao.
5.) Arbitration relate to the disputes in connection with the work of “Construction of Pulichintala Project Balancing Reservoir Head Works by construction of Dam from 0 to 1289 M., N.O.F left and right side, spill way with radial gates arrangements and Ferrules for Power House Work,
River sluices across river Krishna, Near Pulichintala Village on E.P.C.
Turnkey System” vide agreement No.1 SE/2004-2005, dated.
30-09-2004.
6.) The award dated. 03-10-2013 passed by the Hon’ble Sri
Justice J.Eswara Prasad, learned Presiding Arbitrator and Hon’ble
Dr.Justice Motilal B.Naik, learned Arbitrator is under challenge in this petition. Hon’ble Sri Justice Vaman Rao, learned Arbitrator descended from the award made by Hon’ble Sri Justice J.Eswara Prasad, Hon’ble
Dr.Justice Motilal B.Naikand passed a separate award.
7.) BRIEF HISTORY OF THE CASE:
Bids for “Construction of Pulichintala Project balancing
Reservoir Head works by construction of Dam from 0 to 1289 M., N.O.F.
left and right side, Spillway with radial gates arrangements and Ferrules 3 for Power House work, River sluices across river Krishna, Near
Pulichintala Village on E.P.C. Turnkey system hereinafter called as
Pulichintala Project were invited on 30-01-2004 by the Project
Administrator and Superintending Engineer, Pulichintala Circle,
Vijayawada. The final date of receipt of tenders was 28-06-2004. The estimated value of the Technical sanctioned estimate is Rs.339.83 Crores adopting S.S.R.2003-2004. Out of six bidders eligible and qualified, three bidders were considered technically qualified. The price bids wre opened on 20-08-2004. The lowest tender of M/s. SCL-CR 18 G JV was accepted by the Government vide Memo No.20548/Irr.VI-1/2004, dated. 11-09-2004 and communicated vide Superintending Engineer’s letter No. SE/PPC/J”peta/F.No.H1/D1/16c, dated.11-09-2004 for
Rs.268,86,61,948/-.
8.) It is necessary to state the facts in brief that led to the
Arbitration, Arbitration Award and this application by the State seeking set-aside of the Arbitral Award.
a.) Government decided Pulichintala project work shall be executed on EPC (Engineering, Procurement and Construction) turnkey system as developed by FIDIC (French acronym for FEDRATION
INTERNATIONAL DES INGENIEURS-COUNSELLS meaning International
Federation of Consulting Engineers). Therefore, it is FIDIC principles of contract that govern the implementation of the contract of Pulichintala
Project. If, during the course of execution of the work, disputes arise between the parties, the contract provides for the mode and method of adjudication of such disputes. Clause 19 of the Contract (Page Nos.148 to 152 of Ex.C.1) envisages for constitution of Dispute Adjudication
Board herein after called as “DAB”, which shall consist of three members to be constituted jointly by the Contractor and Employer. During the 4 progress of the work, certain disputes arose and they were referred to
DAB constituted by the parties. DAB after hearing both sides and after considering entire material had given their decision on 31-01-2007.
There is no dissatisfaction expressed by the parties and the decisions of the first DAB were implemented. First DAB is ceased to exist.
b.) Subsequently, during the course of execution of works, certain other claims were made by the claimant which were not accepted by the respondent. Thereupon, the claimant had requested the respondent to constitute a DAB for resolution of the said claims in terms of the contract. Accordingly, respondent vide its proceedings No.
SE/PPC/J’pet/DB/D1F.DAB2/332M, dated. 13-05-2011 had constituted a Dispute Adjudication Board hereinafter called as “Second
DAB”. The claimant made 27 claims before Second DAB. Respondent opposed those claims. Second DAB gave its decision on 09-10-2012.
Respondent (Government) had communicated their dissatisfaction on 03-02-2012. Therefore, the claimant is constrained to invoke the arbitration clause, resulting in constitution of the Hon’ble Arbitral
Tribunal.
c.) The following are the claims made by claimant before
Arbitral Tribunal:- 1.) Compensation for delayed payment fo the amounts awarded by the first DAB; 2.) Compensation for the delay in payments consequent to initial incorrect implementation of decisions of First DAB, effecting the cash flow; 3.) Amount due for delayed payment of escalation charges; 5 4.) Amount due towards delay in payment of escalation charges for labour, other material and oils for the gate works resulting in financial crunch; 5.) Claim towards escalation of cost of steel utilized on work by way of overlaps and wastage resulting in locking up of finances; 6.) Compensation due to delay in payment of bills; 7.) Compensation for damages sustained due to fundamental breach of contract by the department during the entire contract period; 8.) Extra expenditure incurred in the extended period of contract due to prolongation of work; 9.) Amount payable towards idle charges of machinery for reduced progress of work for reasons beyond the control of the contractor; 10.) Claim as regards site expenses, overheads and loss of profit; 11.) Payment due towards banking charges, consequent to borrowings from banks to meet the adverse financial position forced on the claimant; 12.) Amount due to extra steel provided in the design of gates and other Hydro-Mechanical works over and above National Standards; 13.) Amount due to extra enforcement steel insisted over that actually required as per National Standards; 14.) Amount due to installation of additional instruments in Dam than those specified in the agreement; 15.) Amount due to changes insisted in drawings over and above the National Standards involving extra quantity of concreting; 16.) Payment of extra cost due to change of Penstock dia 5880
MM to 6500 MM; 6 17.) Amount due towards non-payment in time for steel placed in the concrete; 18.) Amount towards extra quantity of concrete due to insistence by the Department to excavate and do concrete beyond the approved levels in stilling basin Blocks 29 to 33; 19.) Unauthorized recovery of Geo-technical services obtained by the Department; 20.) Amount to be compensated for the damages under the category “Force Majeure”; 21.) Issue of providing upstream training wall; 22.) Compensation for inadequate payment for structural steel contrary to the agreement provision; 23.) Amount due towards payment of steel according to bill of quantities based on the approved drawing as per IS 9401; 24.) Reimbursement of bank charges incurred for extension of performance guarantee beyond the original date of completion of work; 25.) Additional expenditure forced due to insistence of Bank
Guarantee for advance payment of steel; 26.) Irregular recovery of labour cess at 1% from bills; 27.) Reimbursement of interest on unauthorized amount recovered by way of interest on mobilization advance beyond extended period of contract; 28.) Expenditure incurred by claimant for second DAB’s meetings as per Annexures-28 and 28.1.
d.) All the above said claims were referred to Second DAB. But
Second DAB rejected claim Nos. 1, 3, 4, 6, 10, 13, 14, 20, 22, 23, 27.
Claim No.16 was withdrawn by the agency since payment was allowed by the Department. The other claims are allowed by the Second DAB.
7 9.) In the counter before Arbitral Tribunal, respondent stated that the contract was entered on 30-09-2004. The agreement in between parties i.e., the Irrigation and Command Area Development Department,
Government of Andhra Pradesh and M/s. SCL-CR 18G JV consist of the following documents.
i.) Volume I:- Part A – Instructions to bidders
Part B – Qualifying and eligibility requirements
Part C- Technical Bid ii.) Volume II:- Conditions of Contract
Part A – General Conditions of Contract
Part B – Special Conditions of Contract
Part C – Project Profile iii.) Volume III:- Technical Specifications (Civil and Hydro Mechanical Works) iv.) Volume IV:- Financial bid.
It is the plea of respondent that in view of clause 5 of Instructions to bidders and in clause 8.4.1 of the General Conditions of Contract, time is essence of the contract. Respondent stated that that the averment of the claimant that Government decided to have Pulichintala Project executed through EPC Turnkey System as developed by FIDIC is incorrect. The
General Conditions of the Contract make it amply clear that FIDIC is to be referred to only to compare its provisions with GCC. Respondent pleaded that the “Guide” published by FIDIC averted to except to the limited extent. It is stated that as per the Clause 4.2.1 of Special
Conditions of Contract, the Contractor may modify or change preliminary design of civil and Hydro-Mechanical works of the project for reasons of safety, cost, time and effectiveness, only with the approval of the 8 employer. Clause 7 of Section-I (Appendix P1) of Special Conditions of
Contract also make it clear that the designs/drawings as proposed by the contractor will have to be approved by the employer. Respondent pleaded that Clause 8 of Appendix PI makes it clear that no separate payment shall be made for any of the design and engineering works indicated therein and needed for the completion of the project and shall be deemed to be included in the contract price. Respondent pleaded that the burden lies on the claimant to demonstrate that he had furnished the designs/drawings complying with the national/international standards
before alleging that the employer does not give for review. It is further
stated in the counter that if the employer insists that further documents, modified as per instructions, are necessary for carrying on the works, the contractor shall prepare such documents and it shall not be considered as variation under clause 13 of General Conditions of Contract.
Government accepted the first DAB decision because there are no merits, but because the Government felt it necessary to have the project completed as early as possible. Therefore, reliance cannot be placed on the decision of first DAB is the plea of the respondent. Respondent denied the averment that the machinery and property of the claimant was damaged due to arson and looting on 15-10-2004. The claims put forth before the first DAB pertains to the period upto October, 2006.
Therefore, they cannot be reiterated in the present proceedings.
Respondent pleaded that the claims made by the claimant are not in accordance with clause 19.1 of GCC. Claimant never gave notice to the respondent within 28 days after it became aware of the alleged events or circumstances. No detailed claim was made within 42 days after contractor became aware of the alleged event as mandates under Clause 19.1 of GCC. Claimant was unable to substantiate that any amount is 9 due to him under the provisions of the contract. Claimant did not submit statements at the end of each month showing the amounts as claimed in the present proceedings as mandated under Clause 14.3 of
GCC. No monthly progress reports were submitted to the respondent as mandated under Clause 4.21 of GCC. Clause 14.3 of GCC specifically mentions that the monthly statements for payments shall be accompanied by detailed report on the progress. Mere addressing letters to the employer making certain remarks and allegations would not constitute notice under Clause 19.1. The contractor cannot make claims months/years after the alleged actual date and seek interest thereupon.
Since none of the claims were made within the time prescribed under the contract, respondent rejected the claims made in the letter dated.
15-12-2010 of the contractor vide Ex.R.1, on 05-1-2011 vide Ex.R.2 letter. Claimant if aggrieved ought to express dissatisfaction within 14 days of receiving it. The second DAB has no power to adjudicate on the claims beyond what is mentioned in Ex.R.1. Respondent made an application dated. 09-08-2011 to the second DAB to adjudicate as a preliminary issue. Second DAB did not adjudicate on the important preliminary issue even in its order dated. 09-01-2012. Second DAB mis- conducted itself in deciding the claims that are over and abov what was claimed in the letter of claimant dated. 15-12-2010 vide Ex.R.1. Second
DAB exceeded its jurisdiction. The entire decision of the second DAB is liable to be set-aside. Claimant did not express any dissatisfaction on the decision of second DAB. Arbitral Tribunal any amount beyond what is mentioned in Ex.R.1. Claimant was granted extension of time number of times. Interest is not payable to the claimant as mentioned in PS to
APDSS. Claimant ought to have completed the work on time. The allegation that the work could not be executed on time owing to delayed 10 payments is entirely unfounded. Claims are barred by limitation. In the counter detailed replies are given claim wise. Therefore, those replies will be considered as and when the claims are considered. Therefore, the details reply given to the claims is not being reiterated here.
10.) Claimant filed detailed rejoinder which runs into 110 pages.
Among them main pleas of claimant are as follows:- a.) No Government would make illegitimate and illicit payments to the contractor, to avoid delay in completion of the work.
Government has taken 10 months time in implementing first DAB decision. Government after examining the decision of first DAB critically and finally came to the conclusion to accept the decision. Government never stated that they are accepted the decisions of first DAB without considering the merits of the decisions.
b.) All the clauses provided in the agreement are subject to the laws of the land. If any clause is in violation of the established legal position, the clause is void to that extent. All the issues giving rise to claims were promptly made known to the respondent, sufficiently in advance, which were capable of verification at the time. The time limit of 28 days mentioned do not in any way barred the claims. Mention of time frame in the agreement is only to facilitate the respondent to verify the claims and failure to raise a claim within stipulated time do not extinguish the right to claim. It is further pleaded that Sec.28 (b) of
Indian Contract Act, 1972 as amended is very clear on the subject.
Conditions in agreement providing the claimant to make a detailed claim within a time frame and exercising right by the employer to reject it, if not done likewise are void. Under the circumstances the claimant is not bound by any restrictions of time for making a claim and quantifying it, if 11 it is otherwise within time prescribed by law and is susceptible to verification.
c.) Respondent was regularly informed the claims and respondent consistently rejected. They were not rejected on the ground of limitation but on merits.
d.) No allegation of mis-conduct was made against second
DAB before decisions are communicated. It is the respondent that avoided second DAB meetings and voluntarily absented. The claim of the respondent that entire decision of DAB should be set-aside is ridiculous.
e.) The alleged bias and wild allegations do not constitute the “reason” for rejecting all the decisions “en bloc”.
f.) Respondent failed to place on record single paper or single clause or single statutory provision which respondent has claimed to have made not considered by the second DAB.
g.) Claimant pleaded that the undertakings were obtained from the claimant by the respondent under undue influence and coercion and the same is upheld by the second DAB.
h.) Having no other alternative for the claimant to submit the undertaking in the form insisted, he made such undertaking, as otherwise the work would come to a stop and all payments due would be heldup. This was extensively dealt by Second DAB in Ex.C.3.
i.) Claimant furnished certificate from the banks for
Rs.82.50 Crores to the respondent at the time of bid and there is no departure from them. Therefore, it should be understood that the revolving line of credit is maintained.
j.) The decision of second DAB is admittedly evidence
before the Arbitrator.
12 m.) The DAB’s decision is of interim binding effect and must be complied with pending further steps in the dispute resolution mechanism.
n.) The implementation of decision of DAB is nothing to do with the expression of dissatisfaction or consequent course to amicable settlement or arbitration. Claimant had been requesting for implementation of the decision of the DAB, while expressing its willingness for extension of time to express dissatisfaction videExs.C.9 to
C.14 and C.17.
o.) Payments are due to the claimant from the date of communication of decision of DAB and not from the date, when it was decided to implement the decision, which was done after a delay of 10 long months.
p.) Mere absence of mention of legitimate payment of compensation does not disable the claimant to claim the sum in accordance with the terms of the agreement and the law.
The detailed rejoinder is filed claim wise and it will be narrated as and when necessary while discussing relevant claims.
11.) Before the Arbitral Tribunal, both parties did not adduce oral evidence. On behalf of claimant, Exs.C.1 to C.294 are marked.
12.) On behalf of respondent/Government, Exs.R.1 to R.100 are marked.
13.) Basing on the claims, disputes and pleas, Arbitral Tribunal framed the following issues for consideration.
1.) Whether any reference to FIDIC model contract can be made for the purpose of deciding the present dispute?
2.) Whether claims not made before the respondent can be made before the DAB or the Arbitral Tribunal?
13 3.) Whether claims not made before the DAB can be put forth before the Arbitral Tribunal?
4.) Whether the claims are barred in terms of the contract?
5.) Whether the claims are barred by limitation?
6.) Whether claims which are disallowed by the DAB can be made before the Arbitral Tribunal and in regard to which of those claims?
7.) Whether the decision of the 02nd DAB is liable to be set-aside?
8.) Whether any reference to the decision of the 02nd DAB can be made before the Arbitral Tribunal?
9.) Whether the time specified in the contract by which the decision of the DAB becomes final and binding can be extended with mutual consent?
10.) Whether claimant is entitled for any of the claims?
11.) To what relief?
14.) The above said issues are answered separately by both majority of learned arbitrators and as well as descending learned
Arbitrator.
15.) Respondent recourse to this court against an arbitral award passed by the majority of the Arbitrators to set-aside the same.
16.) In this petition, applicant/respondent stated the grounds issue wise and claim wise. Therefore, the details of the grounds taken by the respondent will be narrated to the extent required while answering respective issue and respective claim.
17.) Respondent/claimant field detailed counter supporting the award passed by the majority of the Arbitrators stating the facts issue 14 wise and claim wise. Therefore, pleas of the respondent/claimant in the counter filed in this petition will be narrated while discussing the respective issue and respective claim.
18.) Point for consideration is:- “Whether Arbitral Award dated. 03-10-2013 passed by
the learned majority Arbitrators is liable to be set-aside in
accordance with sub-section (2) and sub-section (3) of Sec.34 of
Arbitration and Conciliation Act, 1996?” 19.) POINT:
The award passed by the Arbitral Tribunal can be set-aside by this court only in accordance with sub-section (2) and sub-section (3) of Arbitration and Conciliation Act, 1996.
20.) It is not even the case of respondent/government that it was under some incapacity or it is the case of Government that arbitration agreement is not valid under law. It is not even the case of respondent/Government that no proper notice of the appointment of an arbitrator or of the arbitral proceedings was given to it. It is not even the case of respondent/Government that composition of Arbitral Tribunal or the arbitral procedure is not in accordance with the agreement of the parties.
21.) In the grounds narrated in the petition filed before this court, it is not even pleaded that subject matter of the dispute is not capable of settlement by arbitration under law for the time being in force or that the award is in conflict with the public policy in India, that the award was patently illegal appearing on the face of the award. But as can be seen from the written arguments, case law submitted by the respondent and oral submissions, it appears that respondent/Government wants to attack the award on the ground that 15 learned Arbitrators acted outside the scope of terms of the contract and they have acted beyond their jurisdiction and the award on the fact of it patently illegal and it is in conflict with the public policy of India.
22.) SCOPE AND JURISDICTION OF THE COURT UNDER SEC.
34 OF ARBTIRTION AND CONCILIATION ACT, 1996:
This court before considering the decision of the Arbitral
Tribunal on various issues and claims, it is pertinent to discuss about the scope and jurisdiction of the court while dealing with applications for setting-aside the award under Sec.34 of Arbitration and Conciliation Act, 1996.
23.) Learned counsel for the respondent/Government in the written arguments relying upon the decision in RENUSAGAR POWER
CO.LTD., VS. GENERAL ELECTRIC CO., reported in 1994 Supp 1
SCC 644 contended that arbitral award can be set-aside if it is contract to a.) fundamental policy of Indian law, b.) the interest of India and c.) justice and morality. It is further contended that in ONGC v. Saw Pipes
Ltd., reported in 2003 (5) SCC 705 referring to earlier decision in
Central Inland Water Transport Corpn., Ltd., v. Brojo Nath Ganguly
reported in 1986(3) SCC 156 added another ground for exercise of court’s jurisdiction in setting aside the award if it is patently arbitrary. It is also contended that those grounds have been re-iterated in Steel
Authority of India Ltd., vs. Gupta Brother Steel Tubes Ltd.,
reported in 2009 (10) SCC 63. It is further contended that the award is against clause 19.1 of General Conditions of Contract and therefore, award is patently illegal. It is contended that the award passed by the arbitral tribunal is against public policy as laid down in Ramnath
International Construction Pvt. Ltd., vs. Union of India reported in
(2007) 2 SCC 453. It is contended that learned Arbitrators travelled 16 beyond the terms of the contract. It is also contended that since Arbitral
Tribunal is against Law of limitation and procedure contemplated under clause 19.1 of the agreement and Sec.28 of Indian Contract Act and therefore it is against provisions of law. It is also contended that learned
Arbitral Tribunal travelled beyond the terms of contract.
24.) Learned counsel appearing for claimant mainly relying upon the decision of Hon’ble Supreme Court in DELHI DEVELOPMENT
AUTHORITY VS. R.S. SHARMA AND COMPNAY reported in 2008(13)
SCC 80 and the decision of Hon’ble Supreme Court in ASSOCIATE
BUILDERS VS. DELHI DEVELOPMENT AUTHORITY REPORTED IN
2015 (3) SCC 49 and contended that the scope and jurisdiction of the court to interfere with the award passed under Sec.34 of Arbitration and
Conciliation Act, 1996 has been summarized in the above said two decisions, wherein decisions relied upon by the learned counsel for the respondent/Government have also been referred to.
25.) The following decisions relied upon by the learned counsel
for the respondent/Government in;
1.) RAMNATH INTERNATIONAL CONSTRUCTION (P) LTD.,
VS. UNION OF INDIA REPORTED IN (2007) 2 SUPREME COURT
CASES 453; 2.) GENERAL MANAGER, NORTHERN RAILWAY AND
ANOTHER VS. SARVESH CHOPRA REPORTED IN (2002) 4 SUREPME
COURT CASES 45; 3.) P.MANOHAR REDDY & BROS., VS. MAHARASHTRA
KRISHNA VALLEY DEVELOPMENT CORPORATION AND OTHERS;
4.) STEEL AUTHORITY OF INDIA LTD., VS. GUPTA
BROTHER STEEL TUBES LTD., REPORTED IN 2009 (10) SUPREME
COURT CASES 63; 17 5.) M/S.AOPLPI PARSHAD AND SONS LTD.,
APPELLANTS VS. UNION OF INDIA REPORTED IN AIR 1960 SCC 588;
6.) CH.RAMALINGA REDDY VS. SUPERINTENDING
ENGINEER AND ANOTHER REPORTED IN (1999) SCC 610; 7.) ASSOCIATED ENGINEERING COMPNAY VS.
GOVERNMENT OF A.P AND ANOTHER REPORTED IN AIR 1992 SC
232; 8.) CONTINENTAL CONSTRUCTION CO.LTD., VS.
STATE OF MADYA PRADESH REPORTED IN (1988) 3 SCC 82;
The above said decisions deal with circumstances in which court can interfere with the award of the Arbitrator. A perusal of above said decisions show that all those cases were decided under the Arbitration
Act, 1940, wherein Hon’ble Supreme Court considered as to what constitute the grounds under the Arbitration Act, 1940 to set-aside the award. But under Sec.34 of Arbitration and Conciliation Act, 1996, it is clearly laid down on what grounds award passed by the Arbitral Tribunal can be set-aside.
26.) Moreover, in the latest decisions of Hon’ble Supreme Court relied upon by the learned counsel for the claimant reported in 2008 (13)
SCC 80 in Delhi Development Authority vs. R.S.Sharma and
Company and 2015 (3) SCC 49 in Associate Builders vs. Delhi
Development Authority after referring to all the earlier decisions on the scope and jurisdiction of the court while dealing with the applications for setting aside the award passed under Sec.34 of Arbitration and
Conciliation Act, 1996 summarized the law.
27.) In the decision reported in 2008 (13) SCC 80 in Delhi
Development Authority vs. R.S.Sharma and Company, in para No.12, it is held as follows:- 18 “From the above decisions, the following principles emerge:
(a) An Award, which is
(i) contrary to substantive provisions of law; or
(ii) the provisions of the Arbitration and Conciliation Act, 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal, or
(v) prejudicial to the rights of the parties, is open to interference by the Court under Sec.34 (2) of the Act.
(b) Award could be set aside if it is contrary to:
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality;
(c) The Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.
(d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
These principles laid down in the above said decision have also been re-iterated in the judgment of the Hon’ble Supreme Court in 2015 (3)
SCC 49 in Associate Builders vs. Delhi Development Authority.
28.) Now, coming to the amended Sec.34 of Arbitration
Conciliation Act, Explanation-1 of Sec.34 (2) (b)(ii) says “arbitral award is in conflict with the public policy of India”.
Explanation 1: -- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- 19
(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2:-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
Sec.34 (2A) of Arbitration and Conciliation Act, 1996 says “An arbitral award arising out of arbitration other than international commercial arbitrations may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award.”
Proviso to sub-section (2A) says “that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.” 29.) Therefore, in order to ascertain whether there are any grounds within the meaning of sub-section (2) & (3) of Section 34 of
Arbitration and Conciliation Act, 1996 to set-aside the award by this court, it is necessary to consider whether findings given by the Arbitral
Tribunal are in accordance with the terms of the contract and whether they are in conflict with the public policy and whether findings are patently illegal.
30.) Therefore, this court proceed to consider the findings of the learned Arbitral Tribunal on issues settled before the Arbitral Tribunal without shouldering the job of re-appreciation of evidence.
20 31.) ISSUE NO.1: Whether any reference to FIDIC model
contract can be made for the purpose of deciding the present
dispute?
The contention of the claimant is the contract entered into between claimant and respondent is FIDIC model contract. It is the contention of the respondent although FIDIC model of contract has been adopted, there were several deletions, additions and modifications which amply prove that the contract is no longer FIDIC contract. It is also the contention of respondent as per Clause 9.6 of Vol.III of Technical
Specifications, all preliminary specifications to A.P. Detailed Standard
Specifications hereinafter referred to as APDSS apply to the contract and incorporation of terms and conditions of Preliminary Specifications (PS) to APDSS also amply prove that the contract agreement is no longer
FIDIC model contract.
32.) Arbitral Tribunal in its majority opinion held as follows:- “Thus, whether it is a FIDIC contract or otherwise makes no difference. The contract would be interpreted based on the language, settings, objects ought to be achieved by the terms of the individual clauses in the agreement and it is their interpretation/meaning, that should be binding on the parties. Hence, it is our considered opinion that contract will have to be interpreted based on its clauses and no reference to any other model contract can be made for the purpose of deciding the present dispute.”
It is further held by the majority of the Arbitral Tribunal that “one can look into FIDIC guide, just like the opinion of the author of the book.” 21 33.) Learned Arbitrator Hon’ble Sri Justice Vaman Rao in his descending award held as follows:- “Thus, it cannot be interpreted as a FIDIC model of contract and no reference can be made to FIDIC guidelines in aid of interpretation of the agreement. The agreement has to be interpreted on the basis of terms and conditions actually incorporated in it.” 34.) A perusal of preface of the contract, the conditions incorporated in General Conditions of Contract in Vol.II clearly goes to show that FIDIC model contract was borrowed and several modifications, settings were made to it. Therefore, there is nothing wrong in FIDIC model contract is taken as guide for interpretation of the terms in the contract in this case, though it is not FIDIC contract. In effect what is held by the majority of learned Arbitrators and the learned descending
Arbitrator and the plea of the respondent/Government is that the contract has to be interpreted based on its clauses. Therefore, in fact there is no controversy regarding finding given by the learned Arbitrators on this issue. But it appears respondent choose to raise the controversy at the threshold itself and thereby give a colour that the entire award was based upon the interpretation of the terms of the contract by referring
FIDIC model contract, but not to terms of the contract and the APDSS.
Therefore, there are no grounds to interfere with the finding passed by the majority members of the Arbitral Tribunal.
35.) ISSUE NOS. 2 & 3: (2) Whether claims not made before
the respondent can be made before the DAB or the Arbitral
Tribunal?
and
(3) Whether claims not made before the DAB can be put forth before
the Arbitral Tribunal?
22
The finding of the majority members of the Arbitral Tribunal on issue No.2 is as follows:- “Suffice to state a dispute can be adjudicated by the DAB and Arbitral Tribunal without raising such a dispute before the respondent. Therefore, we decide the issue accordingly.” 36.) In this context, it is necessary to refer clauses 19.1, 19.2 and 19.4 of the agreement. Clause 19 of the contract deals with claims, disputes and reference to arbitration. Under Clause 19.1 the contract is obligated to notify the claims to the respondent, who is obligated to investigate the claim and he is entitled to determine the said claim.
Under Clause 19.2 of the contract, the dispute shall be adjudicated by
DAB in accordance with clause 19.4. Clause 19.4 of General Conditions of Contract Vol.II part-A (at page 159 of Ex.C.1) provides that if a dispute arises between parties in connection with or arising out of the contract either party may refer the dispute to DAB. Clause 19.1 prescribed time limit to give notice. But it is only directory but not mandatory. There is nothing in clause 19.4 that states that a claim not notified to the respondent cannot be brought before DAB. There is no bar for the
Arbitral Tribunal to examine a claim not raised before the respondent.
The procedure contemplated to notify the disputes or claims to the respondent and thereafter to DAB are with a view to give opportunity to the employer/respondent to find out exact situation after making proper investigation. But it is not the intention to waive the right or remedy of the claimant. The majority members of the Arbitral Tribunal answered the above issues in favour of the claimant. There is nothing which warrants this court to interfere with the said finding in accordance with 23 sub-sections (2) and (2-A) of Sec.34 of Arbitration and Conciliation Act.
Moreover, the interpretation reached by the Arbitral Tribunal is correct.
37.) ISSUE NOS. 4 & 5: (4) Whether the claims are barred in terms of the contract?
and
(5) Whether the claims are barred by limitation?
These two issues relate to question of limitation. The contention of respondent is that Clause 19.1 of the contract obligates the claimant to make a claim whenever he considers himself entitled to any
additional payment, describing the event or circumstance, giving rise to
the claim, not later than 28 days after the contractor became aware or should have became aware of the event or circumstance and if the contract fails to give notice of a claim within a period of 28 days, the contractor shall not be entitled to additional payment and the employer shall be discharged from all liability in connection with the claim. Sub- clause 5 of clause 19.1 says that the contractor shall send to the employer a fully detailed claim with supporting particulars of the basis of claim within 42 days and then the employer shall respond with approval or disapproval with detailed comments or may call for further particulars.
38.) It is the contention of respondent that since claimant has not made claims within the period of either 28 days or 42 days as contemplated, respondent is discharged of the liability in connection with the claim.
39.) As against this contention, it is the contention of the claimant that the period of 28 days or 42 days as contemplated in clause 19.1 is only to enable the employer/respondent for the purpose of 24 investigation of the claim and so long as the claim can be investigated, it is not barred. It is also the plea of the claimant that the period prescribed in the contract i.e., 28 days or 42 days under sub-clause 2 of clause 19.1 which discharges the employer/respondent of the obligation of the claim, is contrary to Sec.28 of Indian Contract Act. Learned counsel for respondent/government relying upon the decisions in
NATIONAL INSURANCE CO.LTD., versus SUJIR GANESH NAYAK &
CO. AND ANOTHER reported in (1997) 4 Supreme Court Cases 366
and in P.MANOHAR REDDY & BROS Versus MAHARASHTRA
KRISHNA VALLEY DEVELOPMENT CORPORATION AND OTHERS
reported in (2009) 2 Supreme Court Cases 494, contended that
Hon’ble Supreme Court held that the clauses prescribing period of
limitation which is less than the period the provided by the Limitation
Act is not hit by Sec.28 of the Indian Contract Act.
40.) On the other hand, learned counsel appearing for claimant contended that the cause of action in the above said two decisions arose prior to 1997 amendment of Sec.28 of Indian Contract Act. Learned counsel appearing for claimant contended that in view of amendment to
Sec.28 of the Indian Contract Act in the year 1997, the correct legal position is “not only the curtailment of limitation period is impermissible, but also the extinction of right, if sought to be brought by the agreement within a specified period, which period is less than the period of limitation prescribed for the suit, the contract in question is also rendered void.” In support of the contention of learned counsel for the claimant, he relied upon the decision of Madras High Court in
ORIENTAL INSURANCE COMPNAY LIMITED, UNITED INDIA BUILDING
4 TH FLOOR, ESPLANADE, MADRAS -108 V/S. KARUR VYSYA BANK
LIMITED KARUR reported in 2001 AIR (Mad) 489 and the decision in
25
SUNIL GOYAL V/S. HARYANA STATE AGRICULTURE MARKETING
BOARD AND ORS reported in 2011 Law Suit (P&H) 2182 decided on
06-04-2011.
41.) The finding of the Arbitral Tribunal that the prescribing period for submission of the claim within 28 or 42 days is only for the purpose of investigation of the claim and so long as the claim can be investigated, the claim is not barred. The finding of the Arbitral Tribunal is that in view of amended Sec.28 of the Indian Contract Act in 1997, the clauses in the contract prescribed period of 28 days or 42 days are void.
Even in the descending award also learned Arbitrator took the same view on this aspect.
42.) In this context, it is pertinent to refer Sec.28 of Indian
Contract Act after 1997 amendment. It reads as follows:-
28. Agreements in restrain of legal proceedings, void:-
Every agreement,--
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void that extent.
26
Exception 1:- Saving of contract to refer to arbitration dispute that may arise:-- This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between hem in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.
(***)
Exception 2:- Saving of contract to refer questions that have already arisen:-- Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.
A perusal of decisions relied upon by the learned counsel for respondent/employer goes to show that the cause of action in those two decisions arose before amendment of Sec.28 of Indian Contract Act in 1997. Hon’ble Apex Court interpreted Sec.28 of Indian Contract Act in the above said two decisions as it stood prior to amendment of Sec.28 of
Indian Contract Act.
43.) In the decisions relied upon by the learned counsel for the claimant referred to above, it is clearly held that “the law as it now stands after the amendment, not only the curtailment of limitation period is impermissible, but also the extinction of right, if sought to be brought by the agreement within a specified period, which period is less than the period of limitation prescribed for the suit, the contract in question is also rendered void.” Therefore, the view of the Arbitral Tribunal that the period prescribed in clause 19.1 of the contract is hit by Sec.28 of Indian
Contract Act and therefore, such periods prescribed are impermissible.
27
Therefore, there are no grounds to interfere with the finding of the
Arbitral Tribunal. The finding of the Arbitral Tribunal cannot be said to be erroneous or patentently illegal on the face of it. The finding of the
Arbitral Tribunal cannot be said to be a finding which is opposed to public policy as described in the decision in Oil and Natural Gas
Corporation Ltd., v. Saw Pipes Limited decided on 17-04-2003
reported in (2003) 5 SCC 705 and as per the explanations 1 and 2 to sub-clause (b)(ii) of sub-section (2) of Section. 34 of Arbitration and
Conciliation Act, 1996. (Sec.34 (2) (b) (ii) explanations 1 and 2 of the Act).
44.) The next contention of the respondent is that the contractor has given undertaking vide Ex.R.5 , not to claim any further sum, on extension of time proposals for being taken up and as such, the undertaking bars the contractor from raising any claim, other than that were allowed by the first DAB and accepted by the Government. Learned counsel for the claimant contended that the material on record clearly establish that the said undertakings were obtained from the claimant by the respondent by exercising undue influence and coercion. In this connection, Arbitral Tribunal referred a letter dated. 13-04-2009 written by Executive Engineer to the claimant, wherein it is stated that the contract is not in force and it is not possible to pay the bills until the extension of time sanctioned by the Government. The said letter clearly goes to show that unless the extension of time is granted, the bills will not be paid. Learned Arbitral Tribunal also referred minutes of the review meeting held on 20-11-2009 in the Chambers of the Principal
Secretary to Government to the effect that the contractor shall have to given an undertaking that the agency shall not make any further claims on the work other than the claims allowed by DAB and accepted by the
Government. Arbitral Tribunal held that such decision was imposed 28 upon the agency but not mutual acceptance. The Government by letter dated. 29-12-2009 addressed to the respondent, directed the respondent that respondent should obtain the necessary undertaking of the agency, as instructed in the minutes of the meeting held on 20-11-2009.
Thereupon, Superintendent Engineer by letter dated. 30-12-2009 addressed to the claimant, requested to furnish the undertaking immediately for proceeding further course of action. Not only the above said material but basing on the some other material referred to by the
Arbitral Tribunal in the award came to a right conclusion that claimant was forced to give such an undertaking and it is result of undue influence and coercion. The same view as taken even by the descending learned Arbitrator. Arbitral Tribunal after referring the judgments of
Hon’ble Apex Court reported in Chairman and M.D., NTPC Ltd., Vs.
M/s. Reshmi Constructions, Builders & Contractors (2004 (1)
Decisions Today (SC) 167), wherein it was held that submission of ‘No
Demand Certificate’ would not prevent a party to the contract, from seeking arbitration. Learned Arbitral Tribunal also relying upon the judgment of Hon’ble Supreme Court in Ambica Construction Vs. Union of India (UOI) (2007 (1) ALT 29 (SC)), wherein signing of ‘No Claim
Certificate’ would not absolutely bar a contractor raising the claims, which are genuine even after the submission of such ‘No Claim
Certificate’. Learned Arbitral Tribunal also relying upon another decision of Hon’ble Supreme Court in R.L.Kalathia & Company Vs. State of
Gujarat (2011 (2) SCC 400) and held that merely because the contractor has issued ‘No Due Certificate’, if there is an acceptable claim, the court cannot reject the same on the ground of issuance of ‘No due
Certificate’. Even in the judgment relied upon by the learned counsel for respondent in Union of India Vs. Master Constructions Company 29 reported in (2011) 12 SCC 349, it is only held that it must prima facie establish fraud, coercion, duress or undue influence in order to the refer the matter to arbitration after giving ‘No Claim Certificate’. Learned
Arbitral Tribunal after appreciating the material on record came to correct conclusion viz., undertakings were obtained under undue influence and coercion. Such finding of the learned Arbitral Tribunal cannot be interfered by this court. Moreover, the finding of the fact arrived at by the Arbitral Tribunal appreciating the material on record cannot be interfered by this court under sub-sections (2)and (3) of
Sec.34 of Arbitration and Conciliation Act.
45.) Third contention of the respondent is that the claimant/contractor did not follow clause 14.3 of the General Conditions of the Contract by submitting bills by the end of every month showing the amount to which he is entitled including disputed claims and therefore, respondent/employer is discharged from payment said amounts.
46.) Learned Arbitral Tribunal gave a finding on this aspect stating that clause 14.3 is not in respect of the amount in which claim is being raised and it is only for the purpose of interim payments to be made during the period of execution of the contract and in respect of any other additions or deductions which may have become due in accordance with the contract. Learned majority of the Arbitrators held that clause 14.3 of General Conditions of Contract does not bar the claimant from claiming those amounts that are not included in monthly bills. Learned
Arbitrators correctly interpreted clause 14.3 of General Conditions of the
Contract and there is no need for interference by this court. Moreover, the interpretation of clause 14.3 of General Conditions of the Contract by 30 the Arbitral Tribunal is based on the appreciation of the material available on record and it cannot be re-appreciated by this court.
47.) Fourth contention of the learned counsel for respondent is that the preliminary specifications to APDSS are applicable to the contract in question and therefore, claimant is not entitled for compensation for the delay in payments when extension of time is sought for.
48.) On this aspect, learned counsel appearing for claimant contended that clause 19 of Volume-II (Part-A) General Conditions of
Contract deals with claims, disputes and arbitrations which provides a detailed procedure for the purpose of making claims and adjudication thereof. It is contended that there is nothing in clause 19 that bars any of the claims. It is also contended that clause 59 of PS to APDSS is totally contrary to clause 19 and hence, clause 59 has no application. It is also contended that there is nothing in General Conditions of Contract as regards applicability of the PS to APDSS for contract in question. It is also contended that clause 4.5 of Volume-II (Part-A) General Conditions of Contract deals with the priority of the documents forming part of the contract. For the purpose of interpretation, the priority of the documents shall be in accordance with the priorities mentioned therein and since
General Conditions of Contract which contains clause 19 of Volume-II (Part-A) General Conditions of Contract is prior to technical specifications of Volume-III which falls within clause (g) of clause 1.5 and thus, General Conditions of Contract are to be preferred to the technical specifications mentioned therein. It is also contended that respondent having knowledge that PS to APDSS has no application did not raise such contention before first DAB or before second DAB. Therefore, respondent is estopped from raising such plea.
31 49.) Learned Arbitral Tribunal after interpreting clause 19 of
General Conditions of the Contract and as well as sub clauses 9.6 and 9.8 of Technical Specifications to Section 9 came to conclusion that clause 59 of APDSS has no application to the contract in question and claims have to be examined with reference to clause 19 only and hence, rejected the contention of respondent that clause 59 of APDSS bars the claims. Arbitral Tribunal also held that for the purpose of interpretation, the priority will be given to the General Conditions of Contract and even in that context clause 19 of the General Conditions of Contract would prevail over clause 9.6 and 9.8 of technical specifications contained in
Volume-III. Learned Arbitrators elaborately discussed about various inconsistent clauses in General Conditions of Contract and APDSS and ultimately came to the conclusion that the contract is governed by
General Conditions of Contract. This interpretation of learned
Arbitrators cannot be interfered by this court within the meaning of sub- sections (2) and (3) of Sec.34 of Arbitration and Conciliation Act, 1996 since it is based on appreciation of material on record and interpretation of clauses in the contract and it is not beyond the jurisdiction of the
Arbitral Tribunal.
50.) ISSUE NO.6: Whether claims which are disallowed by the
DAB can be made before the Arbitral Tribunal and in regard to which
of those claims?
It is the contention of the learned counsel for respondent that claims which were disallowed by DAB and the claims which were partly allowed by the DAB cannot be decided by Arbitral Tribunal. On the other hand, learned counsel for claimant contended that respondent has expressed dissatisfaction en-bloc on the entire decision of second
DAB and that led to the appointment of Arbitral Tribunal and as such, 32 there is no need for the claimant to express dissatisfaction. It is also contended that as per clause 19.6 of the agreement, any dispute in respect of which DAB’s decision has not become final, shall be finally settled by the arbitration. Learned Arbitral Tribunal gave a finding that respondent having expressed dissatisfaction over the entire procedure adopted by the second DAB is now cannot contend that claimant has not expressed his dissatisfaction. DAB rendered its decision on 09-01-2012 and the expression of dissatisfaction was on 03-02-2012. Clause 19.4 says that if either party has dissatisfaction with the DAB’s decision, then other party may within 28 days after receiving the decision, give notice to the other party to its dissatisfaction. Therefore, there is no requirement in terms of contract that each party is required to express their dissatisfaction. Learned Arbitral Tribunal also referred to clause 19.6 of
Volume-III (Part-A) of General Conditions of Contract and came to the conclusion that the Arbitral Tribunal has got power to open up, review and revise any decision of the DAB relevant to the dispute. Therefore, learned Arbitral Tribunal rightly found this issue in favour of claimant and against respondent. Even otherwise, this court cannot interfere with the finding of the Tribunal on this issue within the meaning of sub- sections (2) and (3) of Sec.34 of Arbitration and Conciliation Act.
51.) ISSUE NO.7: Whether the decision of the 2 nd DAB is liable to be set-aside?
Respondent expressed dissatisfaction over the entire decision of 2nd DAB. Arbitral Tribunal is not bound by the decision of
DAB and it is entitled to open up any decision of the DAB in terms of clause 19.6 of GCC. Arbitral Tribunal is not an appellate authority over the decision of DAB. Arbitral Tribunal held that there is no need to set aside the decision of the DAB. Even descending learned Arbitrator also 33 took the same view. Therefore, the finding on this issue need not be interfered with.
52.) ISSUE NO.8: Whether any reference to the decision of the 2 nd DAB can be made before the Arbitral Tribunal?
The question is whether the decision of DAB can be looked into as a piece of evidence in Arbitral proceedings in view of para 4 of clause 19.6 of General Conditions of Contract Volume-II Part-A of the agreement. Learned Arbitral Tribunal held that it is an admissible piece of evidence in arbitral proceedings. The same view is expressed by the learned descending Arbitrator also. Therefore, there is no need to interfere with the decision of Arbitral Tribunal on this issue.
53.) ISSUE NO.9: Whether the time specified in the contract
by which the decision of the DAB becomes final and binding can be
extended with mutual consent?
On this issue, the finding of learned Arbitral Tribunal is DAB decision becomes binding from the date it was made and the postponement of expression of dissatisfaction, though with the consent of the other party, would not make the decision less efficacious or not implementable during the aforesaid period. Learned Arbitral Tribunal held that the use of expression “promptly give effect to it” goes to show that the decision of DAB should be immediately implemented and it has no relation with either expression of satisfaction or dissatisfaction.
Learned Arbitral Tribunal rejected the contention of respondent on this issue. The finding of Arbitral Tribunal need not interfered with.
54.) ISSUE NO.10: Whether claimant is entitled for any of the claims?
There are 27 claims that are in variance between claimant and respondent. In view of the decision of the Arbitral Tribunal on issue 34
Nos. 1 to 9, Arbitral Tribunal is proceed to consider and decide the various claims raised by the claimant basing on material available on record.
55.) In the light of principles laid down in the decisions reported in 2008 (13) SCC 80 and 2015 (3) SCC 49 and statutory provisions of law under Sec.34 (2) of Arbitration and Conciliation act, 1996, this court shall proceed to consider whether Arbitrators were justified in granting award in respect of claims 1 to 27 or the petitioner has made out the case for setting aside the award in respect of those claims with reference to the terms of the agreement duly executed by both parties.
56.) Before going to the claim wise discussion and decision, it is necessary to remember that this court already gave findings on issues 1 to 10 which guide this court in deciding the claims. In fact learned
Arbitral Tribunal basing on the findings on issues 1 to 10 only decided the claims in favour of the claimant and against the respondent/Government.
57.) CLAIM NO.1: Compensation for delayed payment of the amounts awarded by the first DAB:
It is the contention of respondent/Government that when the claimant sought for extension of time for expressing dissatisfaction, he is not entitled for compensation for the delayed payment of the amounts awarded by the first DAB. The claim under this head is amounts covered by first DAB decision. First DAB decision was given on 31-01-2007. Therefore, amounts are due for payment by 01-03-2007.
As per Ex.C.8 respondent/Government agreed to abide by the decision of
DAB. The delay in making payments as per the decision of the first DAB was on account of administrative delays on the part of the Government in making payments and it cannot be attributed to the extension of time 35 sought by the claimant for expressing dissatisfaction. In the award by the Arbitral Tribunal, there is extensive discussion on this aspect with reference to issue No.9, clause 14 of General Conditions of Contract and held that claimant is entitled for the claim. Learned Arbitral Tribunal also held that clause 69 of PS to APDSS is not applicable in view of findings on issue Nos. 4 and 5. These findings of learned Arbitral
Tribunal are based on various clauses in the agreement and therefore, the said decision made by the Arbitral Tribunal cannot be interfered by this court as per the principles enunciated by the above said two recent judgments of Hon’ble Supreme Court and Sec.34 (2) and (2A) of
Arbitration and Conciliation Act, 1996.
58.) CLAIM NO.2: Compensation for the delay in payments
consequent to initial incorrect implementation of decisions of First
DAB, effecting the cash flow:
It is contended in the written arguments filed by the respondent/Government that Arbitral Tribunal erred in accepting this claim based on the mis-understanding of the Government Memo
No.18372, dated.21-04-2010. It is also contended that Arbitral Tribunal erred in awarding interest based on G.O.Ms.No.94, dated.16-04-2008 vide Ex.R.10 and G.O.Ms.No.252, dated. 28-08-2008 vide Ex.R.11. It is contended that G.O.Ms.No.35, dated. 28-02-2006 and G.O.Ms.No.73, dated. 24-04-2006 are applicable at the point of time. It is also contended that this claim is against PS 69 of APDSS which bars interest. It is also contended that Arbitral Tribunal awarded costs of the insurance policy against Government memo dated. 19-05-2009 vide
Ex.R.13 and Government Memo dated. 23-01-2010 vide Ex.R.14.
Learned Arbitral Tribunal referring to clause 17.2 held that the contractor shall ensure insurance for working and also for contractor’s 36 equipment during the period of construction. Arbitral Tribunal finding is when the contractor is obliged to obtain insurance during the period of execution of contract. It is held that when the Government decided to extend the time for extension of the contract, it is obligatory on the part of the contractor to obtain insurance. When contractor obtained insurance covering extended period of contract, the question is whether respondent/Government is liable to reimburse the same or not. Arbitral
Tribunal held that extension of time was necessitated not because of the delay attributed to the contractor adhering to the terms of the agreement.
Arbitral Tribunal held that as per the finding of first DAB, the department is responsible for the delays. The material on record goes to show that there is delay on the part of the department from the beginning at every stage. Learned Arbitral Tribunal held that when the department is liable for reimbursement of the insurance amount and when the Government admittedly did not reimburse it, it is liable to pay interest on it. Learned Arbitral Tribunal held that PS 69 to APDSS is not applicable. Learned Arbitral Tribunal referred to the decision of A.P.
High Court in APSRTC rep.by its General Manager Vs.P.Ramanareddi 1989 (1) ALT 195 held that clause 69 is not bar from claiming interest and it operates as a bar for a stipulated period, during which the monies are retained with a view to observe the work executed, which is six months. Therefore, the decision of the Arbitral Tribunal on this claim is based upon facts and correct legal position. Therefore, there are no grounds to interfere with the decision of the Arbitral Tribunal on the above said claim.
37 59.) CLAIM NOS. 3 & 4: (3) Amount due for delayed payment of escalation charges
(4) Amount due towards delay in payment of escalation charges
for labour, other material and oils for the gate works resulting in
financial crunch:
In claim No.3, the amount due for the delayed payment of escalation charges is to the extent of Rs.89.95 lakhs. According to the claimant, the payment of escalation charges started in December, 2008 and continued upto June, 2009 on monthly basis and thereafter department started paying the escalation charges on quarterly basis.
First DAB held that escalating charges for labour and other materials are to be paid quarterly and in respect of others, they have to be paid monthly, but respondent/Government started payments only on quarterly basis even in respect of steel, cement and oils and therefore, claimant sustained loss of reduction in cash flow and interest component on the above delayed payment comes to Rs.89.95 lakhs as per Annexure-
3. It is the contention of the respondent/Government that in the first
DAB decision there is no mention that the payment of escalation charges for cement, steel and oils is to be made on a monthly or quarterly basis.
Admittedly, respondent/Government initially paid escalation charges monthly upto June, 2009, thereafter respondent/Government basing on the memo dated. 19-05-2009 started payment escalation charges during the extended period only after achieving the progress in each mile stone program and hence, respondent started paying escalation charges quarterly. Learned Arbitral after referring to clause 14 of General
Conditions of Contract which deals with payments on monthly basis for work completed, during the course of the month shall have to be paid on submission of bills. When first DAB directed that escalation charges 38 shall be paid monthly, but the Government waited till mile stone progress for the quarter is completed without paying amounts on the monthly basis basing on the Government memo. Admittedly escalation is given to cover the increased cost. The Government while granting extension cannot impose conditions contrary to the terms of the agreement and contrary to the directions of the first DAB. Moreover, the decision of first DAB was accepted by the respondent/Government which mandate payment of monthly charges for the work done. Therefore, claimant/contractor is entitled for monthly payment even in respect of escalation. The decision of Arbitral Tribunal on this claim cannot be interfered by this court. Whether Government memo prevails or whether terms of the contract and decision of first DAB prevails is within the scope of Arbitral Tribunal. Arbitral Tribunal correctly interpreted the decision of first DAB and terms of the contract and arrived at correct conclusion. Even if any other view or interpretation is possible, this court cannot interfere with the decision of the Arbitral Tribunal on the ground another interpretation is also possible.
60.) CLAIM NO.5: Claim towards escalation of cost of steel
utilized on work by way of overlaps and wastage resulting in locking
up of finances:
This claim relates to non-implementation of the decision of the first DAB in respect of escalation of cost of steel utilized on work.
According to the claimant, first DAB while considering claims 4 and 13 held that claimant be paid escalation charges for the entire period of contract as there is a breach of contract on the part of the respondent/Government. According to the claimant, the said decision of first DAB was accepted by the respondent. According to the claimant when first DAB was accepted by the respondent/Government escalation 39 charges are to be paid duly following procedure, though there is nothing in the agreement. According to the claimant when escalation is admitted, it is required to be paid for the entire quantity used on the work and the labour involved. It is the contention of the respondent/Government there is nothing in the agreement which provides payment of escalation charges of steel utilized on work, claimant is not entitled for the claim. It is also the contention of the respondent, as per clause 7.9-A (iii) of Volume-III technical specifications of the agreement, the wastage, overlaps, couplings, Welded joints, space bars, dowels and annealed steel for binding will not be measured because all these items shall be deemed to have been included in the rates of reinforcement and thus, according to the respondent payment cannot be made for wastage, overlaps etc., and as such escalation is not payable on wastage and overlaps.
61.) Arbitral Tribunal referring to clause 14 of Volume-II of
General Conditions of Contract held that contract price shall comprise of the total value of the work and the total value of the work for operation and maintenance of the project period of two years. Clause 14.1 states that the employer will pay to the contractor a firm contract price for completion of all works as specified under the scope of work/head works.
Clause 14.1 (b) says that the payment of the works shall be made on a fixed monthly basis. Arbitral Tribunal held that payment to the
Contractor is not based on either measurement or quantity. It is held by the Arbitral Tribunal that under clause 14.3 in order to claim a proportionate amount for the work done measurements were taken. But ultimately while making final payment under clause 14.9, the interim payment will be deducted from out of the total contract price and balance price will be paid to the contractor. Learned Arbitral Tribunal 40 referring clauses (a) and (b) of clause 7.9 says a procedure was prescribed for measuring steel that goes into concrete and payment thereof is provide for. Actual dispute is not with regard to the payment of price for steel but it is for the payment of escalation to the steel used as per the decision of first DAB. To decide this issue, it is relevant to note what is the quantity of steel used. It is held by the Arbitral Tribunal escalation is a new item admitted by the first DAB who had also laid down the procedure. The decision of first DAB was accepted by the
Government. It is only to be adopted. The entire steel used in the work including the overlaps etc., is limited to the lumpsum amount quoted. .
What claimant is claiming is not steel covered by the overlaps. Arbitral
Tribunal held that all the steel including overlaps, wastage etc., comes under escalation payments. 2nd DAB rightly upheld the claim. In the award passed by the Arbitral Tribunal, it is mentioned that claimant requested the respondent/Government to arrive at actual quantity ot the steel used, but respondent/Government did not agree for the same.
Hence, the claimant approached the JNTUH college of Engineering,
Industrial Consultancy Services and requested for verification of the actual steel used for overlaps, dowels, chairs, tie bars etc., The said
Industrial Consultancy Services, submitted a report dated. 15-05-2013 to the claimant stating that 24.46% of additional steel was used. The said report is not accepted by the respondent/Government. The claimant also relied upon IS 456 -2000. The aforesaid IS provides for computation of overlaps required. IN the said IS the steel for overlaps comes to 22.625%. The claim is only for 22.17% which is less than 22.625% as admissible as per IS and 24.46% actually observed by
JNTUH report. Therefore, Arbitral Tribunal held that claimant is entitled for payment of escalation by addition 22.17% to the total quantity of steel 41 in addition to the measurement. Arbitral Tribunal awarded interest on it at the rate of 13.5%. No valid ground is stated in the petition before this court to take a different view by this court. The decision of first DAB was accepted by the Government. Second DAB also upheld the claim.
Therefore, there are no grounds to interfere with the finding of the
Arbitral Tribunal on claim No.5.
62.) CLAIM NO.6: Compensation due to delay in payment of bills:
It is the claim of claimant that in view of clause 14.1 of
General Conditions of Contract, payment of bills is on monthly basis and if they are not paid, claimant is entitled for interest under general principles of law. It is also the plea of claimant that first DAB directed payment of interest on the outstanding sums and respondent accepted the same. It is the contention of claimant that the acceptance of first
DAB decision to pay interest on the delayed payments operate as estoppels. Claimant placed on record Exs.C.27 to C.40. Claimant also placed on record Annexure-6 relating to this claim. Respondent opposed the claim on the ground there is no provision in the agreement to pay interest on delayed payments. Respondent referred to clause 32.2.3 of
Volume-I and contended that the bidder shall always maintain financial status of Rs.82.5 crores as a line of credit and till that limit is crossed, claimant is not entitled for interest. It is also the contention of respondent that Government accepted the first DAB decision only with a view to complete the project in time, but not allow the interest on delayed payments. The finding of the learned Arbitral Tribunal is as per clause 14.3 respondent is obliged to pay the monthly bills to enable the contractor to complete the work in accordance with the mile stoned fixed.
Arbitral Tribunal held that the bid capacity and the revolving line of 42 credit which the bidder should possess have absolutely no relevance.
Arbitral Tribunal on facts held that there is no dispute about the fact that claimant had raised monthly bills in terms of the contract and there is no denying of the fact that the bills were delayed for unduly long periods. Arbitral Tribunal further held that claimant had allowed for a period of 30 days to pay the amount in terms of the Government orders, though they are not applicable to the terms of the contract. Arbitral
Tribunal relying upon the decision cited by the claimant in Secretary,
Irrigation Department, Government of Orissa and Others Vs.
G.C.Roy reported in AIR 1992 SC 732 held that the person deprived of the use of amount to which he is legitimately entitled, has a right to be compensated for the deprivation, call it in any name. It may be called interest, compensation or damages. Learned Arbitral Tribunal referring to that decision further stated that Hon’ble Supreme Court held that where the agreement between the parties does not prohibit grant of interest and where a party claims interest and the Arbitrator shall have the power to award interest. The finding of the Arbitral Tribunal is that
PS 69 is not applicable as already held. This view of the learned
Arbitrators is based on the interpretation of clauses 14.1, 14.3, about non-application clause 32.2.3 and basing on the material on record and legal position. Such finding arrived at by the learned Arbitral Tribunal cannot be interfered with by this court. In fact finding of the learned
Arbitral Tribunal is based on facts and correct legal position.
63.) CLAIM NO.7: Compensation for damages sustained due
to fundamental breach of contract by the department during the
contract period:
Arbitral Tribunal held that first DAB while considering various claims raised by the claimant had concluded that the department 43 is responsible for the delays that have occurred. Therefore, upto the decision of first DAB that is till the end of the milestone period ending with December, 2006, there is no dispute that department is responsible for the delays. It is also the case of claimant that for the period subsequent thereto also, department is responsible for the delays and in respect of each milestone period’s delay and the same is given in detail in paragraphs 7.8 to 7.11 of the claim statement. Learned Arbitral
Tribunal after appreciating the evidence in the form of documents and the decision of first DAB came to the conclusion that the delay is on the part of the department but not on the part of claimant. Arbitral Tribunal also gave a finding that there was delay on the part of the Government in implementing the decision of the first DAB. Arbitral Tribunal gave a finding based on the material on record that there is a delay on the part of the Government in approving designs which consequently resulted delay in execution of other works. Learned Arbitral Tribunal also gave a finding that the contractor has been granting extension of time without levying delay damages. Therefore, prima facie it shows that there is no fault on the part of the contract in fulfilling the contractual obligations and responsibilities. In the written arguments filed by the Government, it is stated that Arbitral Tribunal erred in giving finding that there was delay on the part of the Government right from the approval of designs procuring additional machinery etc., But the respondent never stated that findings of the Arbitral Tribunal are patently illegal or against terms of the contract. Therefore, the finding of the learned Arbitral Tribunal in allowing the said claim is on the appreciation of the material available on record and it cannot be interfered with by this court. Moreover, the said finding of the Arbitral Tribunal is based on the material available on record.
44 64.) CLAIM NO.8: Extra expenditure incurred in the extended period of contract due to prolongation of work:
This claim relates to formation of cofferdam in every season, due to prolongation of the work beyond three working seasons. Claimant claimed a sum of Rs.7,31,52,440/- with interest at 18% p.a., in respect of four working seasons from November, 2007 to 2011.
Respondent/Government opposed the said claim stating that claimant executed cofferdam with excavated soils, instead of concrete for underwater portion and instead of that RR for the above water level and hence, claimant is not entitled for any amount for forming the cofferdams. Respondent is admitting that the cofferdams are washed away. It is contending that claimant is not properly constructing the cofferdams. Similar is the defence is taken in dewatering charges.
Arbitral Tribunal held that the work is to be completed in three seasons and it is extended beyond 7 seasons. The cofferdam would be erected to prevent flow of water into the work areas. Thus, construction of cofferdam is essential requirement. Cofferdam will have to be removed, after completion of work in each season. Arbitral Tribunal held that referring to clause 1.6 that cofferdam is proposed to be formed with excavated soil from diversion channel and if sufficient quantity of earth is not available from the excavation of the diversion of channel, required soil for casing and clotting zones, it is proposed to obtain from the borrow areas, where suitable soils are available. Basing on the said clause, learned Arbitral Tribunal held that there is no basis for the contention that the claimant shall have to execute the cofferdam with concrete for underwater portion and RR for the above water level.
Learned Arbitral Tribunal rejected the contention of the respondent that cofferdam was not laid as per the agreement conditions. Arbitral Tribunal 45 also held that delay in execution of the work was attributable to the department only and the claimant/contractor cannot be blamed.
Claimant claimed that he has incurred a sum of Rs.521.06 lakhs, the
DAB allowed only a sum of Rs.343.05 lakhs. But the Arbitral Tribunal coming to the conclusion that cofferdam has to be maintained for the years 2007-2008, 2008-2009 and 2010-2011 and having consideration of the increased cost and taking into consideration the provision for bid held that contractor is entitled for a sum of Rs.377.35lakhs. Arbitral
Tribunal also held that contractor is entitled for pathways in the work areas and maintenance of electrical power lines, in all Arbitral Tribunal awarded a sum of Rs.377.35 lakhs + Rs.90.459 lakhs = Rs.467.814 lakhs . Arbitral Tribunal also gave reasons for awarding interest in it.
This kind of finding of the Arbitral Tribunal which is based on clauses in the agreement, material on record and the calculations cannot be interfered with by this court under Sec.34 of the Arbitration and
Conciliation Act, 1996.
65.) CLAIM NO.9: Amount payable towards idle charges of
machinery for reduced progress of work for reasons beyond the
control of the contractor:
Claimant claimed an amount of Rs.87.34 lakhs towards idle charges for keeping the machinery in the work spot without utilization.
Respondent utilized the said claim stating that the claimant failed to adhere to the bar chart and claimant failed to submit the progress reports as required by clause 4.2.1 and did not include it in monthly bills. It is also the contention of respondent that this claim was for the first time made in 2010 disabling them from verifying the machinery at site. Arbitral Tribunal referring to Ex.C.2 decision of the first DAB came to the conclusion that machinery was deployed by the contractor at the 46 work spot. Arbitral Tribunal also gave a finding that machinery was under-utilized because the work was suspended and it went to 100 months, whereas it has to be completed within 36 months. Learned
Arbitral Tribunal held that 2nd DAB awarded a sum of Rs.87.27 lakhs.
Arbitral Tribunal agreed with the conclusions of the 2nd DAB and allowed interest in it at 13.5%. This finding of the Arbitral Tribunal is also based on the finding of the 1st DAB and 2nd DAB and it cannot be said that the findings are perverse and without any basis. Therefore, this court cannot interfere with such findings of the Arbitral Tribunal.
66.) CLAIM NO.10: Claim as regards site expenses, overheads and loss of profit:
This claim relates to site expenses, overheads due to prolongation of the work period. The finding of the Arbitral Tribunal is since respondent is responsible for prolongation of the agreement period, claimant is entitled to be compensated for the expenses figured by it at the site for the extended period of contract. The details are furnished by the claimant in Annexure-10. Arbitral Tribunal held that 2nd DAB overlooked the heads relating to salaries and wages, mess expenses,
C.C.charage. According to the Arbitral Tribunal, the said expenses shall also be included in the site overheads. Arbitral Tribunal also did not allow the profit element. Arbitral Tribunal held that loss of profit cannot be compensated on the basis of the extended period of contract. Arbitral
Tribunal held that claimant is not entitled under the head of loss of profit included in claim No.10 and the same is rejected. Learned Arbitral
Tribunal allowed the claim only to the extent of Rs.23,88,66,433/- and 10% towards overheads with interest at 13.5% for the period from 01-04-2013 till the actual date of completion of the work. The said finding of the Arbitral Tribunal is no doubt challenged before this court 47 but no valid grounds are stated to reverse those findings. In the written arguments it is stated by the Government that findings of the Arbtiral
Tribunal is against clause 59 of APDSS and this claim is consequent to claim No.7. Arbitral Tribunal already held that PS to 59 of APDSS is not applicable. Arbitral Tribunal already held that claim No.7 in favour of the claimant. Those findings of Arbitral Tribunal are not disturbed by this court. Therefore, there is no force in the said argument of the respondent/Government. Moreover, this court cannot sit in appeal over the finding of the Arbitral Tribunal when those findings are based on the findings that the delay attributable to the Government and there was overhead charges and site expenses. The said findings of the Arbitral
Tribunal are based on material placed on record by both parties and therefore, this court cannot interfere with.
67.) CLAIM NO.11: Payment due towards banking charges,
consequent to borrowings from banks to meet the adverse financial
position forced on the Claimant:
This claim relates to banking charges consequent to borrowings from banks to meet the funds due to undue delay in completion of project on the part of the respondent/Government. It is the contention of the claimant that there was undue delay in implementation of the decision of the first DAB. It is also the contention of the claimant that there was delay in payment of monthly bills and escalation charges. It is the contention of the claimant that he procured
additional machinery and for that purpose he borrowed money from the
banks and he has paid huge amounts towards interest during the extended period of contract. Claimant filed Ex.C.90 in support of his claim. Ex.C.90 show that loans were obtained in the name of SCL
Infratech Limited but not in the name of M/s.SCL-CR 18 G Joint Venture 48 i.e., claimant. But the finding of Arbitral Tribunal is SCL Infratech is the lead partner in the joint venture and the other joint venture partner is a foreign company. It is the finding of the Arbitral Tribunal loans will have to be obtained only by the Indian company of the joint venture.
Arbitral Tribunal gave a finding that huge sums are outstanding at the end of each financial year, therefore, the borrowing cannot be disputed.
Arbitral Tribunal giving several reasons relied upon Ex.C.90 bank certifications. Arbitral Tribunal also referred to Ex.R.65 which is reply given by Andhra bank stating that the loan is availed by SCL Infratech
Limited. Arbitral Tribunal allowed only principal amount of this claim, but not interest. This finding of the Arbitral Tribunal is also based on interpretation of the terms of the contract, appreciation and acceptance of Ex.C.90. The descending Arbitrator did not rely upon Ex.C.90 for the reasons given by him. Therefore, descending Arbitrator held that in view of applicability of preliminary specifications to APDSS, claimant is not entitled interest. In the written arguments it is the contention of the respondent/Government that Arbitral Tribunal erred in not concluding that respondent did not produce any contemporaneous evidence to show that he had taken various loans exclusively for this work. This argument itself show that it relates to appreciation of evidence or insufficiency of evidence. In the foregoing discussion, it is clearly held that Arbitral
Tribunal gave sufficient reasons to rely upon Ex.C.90 and Ex.R.65.
Therefore, findings based on appreciation of evidence and sufficiency of evidence arrived at by the Arbitral Tribunal cannot be interfered with.
When two views are possible on this point. Majority view is that claimant is entitled for principal amount basing on Ex.C.90. This kind of finding can only be interfered while sitting in appeal by a court of law but not in a petition under Sec.34 of the Arbitration and Conciliation Act, 1996.
49 68.) CLAIM NO.12: Amount due to extra steel provided in the
design of gates and other Hydro-Mechanical works over and above
National Standards:
This claim relates to whether designs submitted by the
Contractor are in accordance with the National Standards or not, in respect of extra steel provided in the design of gates and installing 50 HP motor instead of 40 HP motor proposed. Learned Arbitral Tribunal referring to clauses 1, 2, 3 of Annexure-6 of Volume-II stated that they only indicative design and construction basic parameters. The design parameters, concrete mixes, specifications should be should be according to bureau of Indian Standard quotes. It is observed by the
Arbitral Tribunal that unlike traditional contract, in this contract designs have to be prepared by the contractor as per Indian Standards and must be placed before Chief Engineer for approval. What is mentioned in the bid document is only indicative parameters and based on the said indicative parameters, the contractor is required to prepare the detailed designs and the said designs should confirm to the bureau of Indian
Standard Quotes. Arbitral Tribunal referring to clause 5.1 stated that the contractor shall be responsible for the designs of the works and for accuracy of such employer’s requirements. In view of clause 5.2 the contractor shall prepare all the documents and submit the same to the employer for review. The review period is fixed as 21 days. Once the contractor prepares the design in accordance with the bureau of Indian
Standards, then such design is liable for acceptance. The contractor’s document can be rejected if it is not in accordance with the National or
International Standards. In the case on hand, when the issue came up
before 2nd DAB. 2nd DAB referred the matter to Sri M.Somasundaram
who was a former Senior Manager, Retired, Thungabhadra Steel projects 50
Limited. He examined the designs prepared by the contractor and gave report stating that they are in accordance with the National or
International Standards. The credence of the said report is not disputed by the learned Arbitral Tribunal. It is contended by the respondent that expert did not take into consideration the documents filed by the employer/Government and therefore, report cannot be taken into consideration. It appears that no such objection is taken before the
Arbitral Tribunal by the employer/Government. Learned Arbitral
Tribunal relying upon the report of the expert came to the conclusion that designs prepared by the contractor are in accordance with National
Standards and variations/modifications suggested by the Chief Engineer,
CDO, Hyderabad and it amounts to variation within the meaning of clause 13.3. of Volume-II. Arbitral Tribunal held that the contractor is entitled and eligible for the payment of the extra amount for extra quantity of steel and accordingly the contract price shall have to be modified. In the written arguments respondent/Government stated that
Arbitral Tribunal erred in relying on the opinion of Sri M.Sudarsanam,
Thungabadra Steels. The said ground itself relates to appreciation of evidence, which cannot be interfered by this court under Sec.34 of
Arbitration and Conciliation Act, 1996.
69.) Coming to the installation of 50 HP motor also there is no dispute by the respondent/Government about this claim on factual side.
The Government opposed the said claim only on the ground that it was not referred to DAB. Arbitral Tribunal referring to Ex.C.106 held that claim of the claimant of the respondent on this count was rejected without giving any reasons on 23-05-2012. Therefore, Arbitral Tribunal allowed the said claim in respect of 50 HP motor also. As can be seen from the award, learned Arbitral Tribunal basing on the report of expert, 51 basing upon Ex.C.106 and by interpreting clause 13, clauses 1, 2, 3 of
Annexure-6 of Volume-II, clause 5.2 and clause 4.2.1 gave findings.
Such findings cannot be interfered by this court while exercising jurisdiction under Sec.34 of the Arbitration and Conciliation Act.
70.) CLAIM NO.13: Amount due to extra enforcement steel insisted over that actually required as per National Standards.
According to the claimant number of designs and drawings relating to project were prepared based on national drawings and forwarded to the respondent under Exs.C.108 to C.118 and the reinforcement provided in all these designs are as per national standards. But the department has unilaterally increased the reinforcement by way of Exc.C.21 to C.24, it was rejected to. The department did not inform the claimant as to why reinforcement was changed. Claimant proceeded with the work as instructed and it resulted in variation resulting in additional use of 395.20 M.Ts. 2nd DAB while considering the issue referred all the designs to JNTUH College of
Engineering for their opinion in the matter as regards the conformity of the designs submitted by the claimant with national standards.
Ex.C.128 is the expert opinion. It says that designs prepared by the claimant satisfy the requirements of national standards and based on the said opinion and on the basis of its reasoning, 2nd DAB directed to adjust the contract price accommodating the cost of additional steel of 394.20
M.Ts. Arbitral Tribunal held that no other opinion is possible. The designs prepared by the claimant are in conformity with the national standards. The additional reinforcement insisted by the Chief Engineer.
Therefore, it has to be treated as variation within the meaning of clause 13 of General Conditions of the Contract of Volume-II. Accordingly,
Arbitral Tribunal allowed this claim. The above said discussion made by 52 the Arbitral Tribunal is based on material on record and based on the expert opinion and Exs.C.108 to C.118, Exs.C.21 to C.24, Ex.C.128 and by invoking clause 13 of General Conditions of the Contract. Therefore, the said decision of Arbitral Tribunal is not beyond the terms of the contract and it is only in accordance with the terms of the contract and well within the scope of arbitration and it is only a fact finding by the
Arbitral Tribunal appreciating the material available on record.
Respondent/Government in the written arguments stated that Arbitral
Tribunal erred in admitting the claim based on JNTU (H) opinion instead of obtaining opinion from the Government Organization. This also relates to appreciation of evidence and sufficiency of evidence, which is not within the scope of this court under Sec.34 of Arbitration and
Conciliation Act, 1996. Such findings shall not come within the jurisdiction of this court while dealing with the application under Sec.34 (2) of Arbitration and Conciliation Act.
71.) CLAIM NO.14: Amount due to installation of additional instruments in Dam than those specified in the agreement:
It is the claim of the claimant that department had insisted for prosecution of more number of instruments than what they contemplated at the time of bid. According to the contractor he has provided and same amounts to variation within the meaning of clause 13 and hence, they are entitled for a sum of Rs.11,86,060/-. Respondent opposed the said claim. The contractor has to provide designs as per indicative parameters and thus what is indicated in respect of the instruments is also treated as indicative. It is the version of the respondent that when detailed lists were submitted and approved, the contractor should also provide instruments in accordance with the approved designs which are mentioned in the IS Code. It is also the 53 contention of the respondent that as per clause 5.8 of General
Conditions of the Contract, the modifications suggested were in accordance with the IS Codes. It is contended by the claimant that respondent has purposefully chosen and specified certain number of instruments of certain clause in deviation of IS. Arbitral Tribunal held that the deviation suggested by Chief Engineer, CDO are not deviation to
IS. Arbitral Tribunal held that instruments shall have to be provided based on IS Codes. Arbitral Tribunal rejected this claim. As against rejection of this claim, nothing is mentioned in this O.P. The rejection of claim by the Arbitral Tribunal is in accordance with clause 5.8 of the
General Conditions of the Contract and therefore, it need not be interfered.
72.) CLAIM NO.15: Amount due to changes insisted in
drawings over and above the National Standards involving extra
quantity of concreting:
This claim of the claimant that it has prepared designs as per National Standards, but the department changed the designs unilaterally without furnishing any reasons. According to the claimant, he is entitled for payment of extra cost in terms of clause 13 of General
Conditions of Contract under Exs.C.21 and C.132 to 134. According to the claimant, he had incur additional amount of Rs.2,19,16,008/-. The said claim was opposed by the respondent. The Chief Engineer suggested certain remarks on the drawings which were communicated to the claimant and accordingly claimant modified the designs and therefore, claimant is not entitled for any sum. The said claim was discussed by before 2nd DAB. 2nd DAB sought for expert opinion, JNTUH
College of Engineering. JNTUH gave Ex.C.128 report. In the report it is stated that designs submitted by the claimant conforms the national 54 standards. Respondent disputed the said opinion because no details about foundation were given. Arbitral Tribunal considered Ex.C.128 report and found no reason for rejecting the opinion of the expert.
Arbitral Tribunal basing on the expert opinion allowed the claim treating it as variation of the contract under clause 13.3 Volume-II of General
Conditions of Contract. The acceptance of Ex.C.128 report by the
Arbitral Tribunal is nothing but appreciation of evidence. Even assuming that Ex.C.128 is not reliable, it is not within the scope of this court to reverse the finding of the Arbitral Tribunal which is made with reference to Ex.C.128 and other material available on record. Therefore, there are no grounds to interfere with the finding of the Arbitral Tribunal on this claim.
73.) CLAIM NO.16: Payment of Extra cost due to change of
Penstock dia 5880 MM to 6500 MM.
This claim was given up by the claimant. Therefore, there is no need to discuss. Arbitral Tribunal also mentioned the same.
74.) CLAIM NO.17: Amount due towards non-payment in time for steel placed in the concrete:
Claimant claimed 162.89 lakhs with interest making a total of Rs.280.05 lakhs as per clause 7.9A of volume-III of the Technical
Specifications of the agreement in respect of reinforcement of steel placed in concrete. According to the claimant, respondent is not paying for the quantity of steel placed in concrete and has limited only to that portion which buried in the concrete and this has resulted in delayed payment of amounts. Respondent opposed the said claim stating that the term reinforced steel is self-explanatory and therefore, steel in concrete is also reinforced steel and the agreement envisages the payment of steel projecting beyond the concrete. Arbitral Tribunal accepted the 55 contention of the respondent and disallowed the claim on the ground that respondent has paid for the steel as and when such portion is buried in concrete even there is delay in payment as regards steel placed in concrete that does not enable the claimant to claim extra payment.
75.) CLAIM NO.18: Amount towards extra quantity of
concrete due to insistence by the Department to excavate and do
concrete beyond the approved levels in stilling basin Blocks 29 to
33:
It is the contention of the claimant that as per Ex.C.143, dated. 07-07-2008 the foundation concrete could be placed at levels varying between +20 M and +21 M, but the department insisted the foundation levels at about +16 level at the deepest portions. According to the claimant it unnecessarily increased the quantity of concrete to be placed in the foundations. According to the claimant foundation concrete could have been placed at levels varying between +20 meters and +21 meters is incorrect and that the depth of excavation depends only on level at which hard rock is found. Further, according to the respondent, as per the approved drawings the concrete levels in foundation level of stilling basin are from +16.00 M to +21 and hence, sought for rejection of the clam. 2nd DAB basing on the report of
Geologist vide Ex.C.143 came to the conclusion that variation in quantities for excavation and concrete in blocks 29, 30 and 31 of the foundation level of stilling basin upto +21meters level from the levels decided by the Geologist shall have to be treated as variation under clause 13 of the General Conditions of the Contract. The claimant is claiming variation in respect of blocks 29 to 33. 2nd DAB directed variation only in respect of blocks 29 to 31. Respondent in the letter of dissatisfaction did not state anything in respect of the said claim.
56
Arbitral Tribunal held that there is nothing on record to show that findings arrived by the DAB are incorrect. Arbitral Tribunal further held that the conclusions reached by the Technical persons which constitute 2nd DAB cannot be overlooked on such technical issue and they endorsed the view of 2nd DAB and held that claimant is entitled variation in respect of blocks 29 to 31 as decided by the 2nd DAB. A perusal of the said finding recorded by the Arbitral Tribunal goes to show it is based on the finding 2nd DAB and 2nd DAB finding is based on Geological report
Ex.C.143. This kind of finding cannot be upheld by re-appreciating the evidence.
76.) CLAIM NO.19: Unauthorized recovery of Geo-technical services obtained by the Department:
This claim relates to recovery of Rs.10,42,000/- by the department towards consultancy charges from the claimant. According to the respondent as per clause 4.2.2 of Special Conditions of the
Contract, all additional investigation and testing data and any other data relevant to design shall be collected by the contractor without any financial burden to the employer and respondent is entitled to recover for the services rendered by the Geo Technical Services of Department of
Geologist. Arbitral Tribunal referring to clause 4.2.2. of Special
Conditions of Contract started that if contractor intends to carry out anything mentioned in the said clause, the same shall have to be collected by the contractor without any financial burden to the employer.
Arbitral Tribunal further held that if the contractor has made the foundations ready for concreting, it is the department that had obtained opinion of the Geologist. Arbitral Tribunal held that clause 4.2.2 has no application. It is further held by the Arbitral Tribunal when the department permitted survey and investigation conducted by the 57 contractor and wanted confirmation from their own departmental
Geologist, they are entitled to do so, but they are not entitled to charge the claimant for the services of the departmental Geologist. Arbitral
Tribunal held that claimant is entitled for refund of Rs.10.42 lakhs with interest from 25-08-2009 till the date of payment. A reading of the said finding goes to show that in view of arbitration clause 4.2.2 is not applicable when the employer wants investigation to be made to counter check the investigation made by the contractor. This interpretation of the clause made by the Arbitral Tribunal cannot be deviated by this court while exercising jurisdiction under Sec.34 of Arbitration and Conciliation
Act.
77.) CLAIM NO.20: Amount to be compensated for the damages under the category “Force Majeure”:
This claim is based on the basis of loss said to have been caused on account of unprecedented floods on 06-10-2009. It is the contention of respondent that there were floods on 06-10-2009 but it is not unprecedented and the contractor failed to take steps to reduce the damage. Arbitral Tribunal after taking into consideration the figures given by the claimant which were not disputed by the respondent show that flood received on 06-10-2009 was highest when compared to the flood recorded in 1903. Arbitral Tribunal based on the material gave a finding that flood received certainly unprecedented and falls within the definition of Force Majeure in terms of clause 18 of the contract.
78.) It is contended by the claimant that thought the project was insured in terms of clause 17 of Ex.C.1, the compensation paid by the insurer is less than the actual damage suffered and consequently the department is liable to compensate the actual damage, less the compensation received from the insurance company. The details of the 58 damage were mentioned in Annexure-20. According to the claimant, total loss comes to Rs.16.08 Crores, out of which insurance company compensated Rs.5.07 Crores. Claimant claimed Rs.11.01 Crores from the respondent.
79.) Respondent contended that clause 17 of the contract, the contractor failed to incorporate relevant clauses in insurance policy obtained by him. It is also contended by the respondent that the contractor could have pursued the remedies against the insurance company and having not availed the same, the claimant cannot make a claim against the respondent.
80.) Learned Arbitral Tribunal gave a finding that department is not liable because contractor did not take any steps for recovery of actual loss against the insurance company. Arbitral Tribunal also held that there is nothing in clause 18 Force Majeure conditions, which provide for indemnifying the loss caused to the contractor by virtue of such Force
Majeure events. However, Arbitral Tribunal taking into consideration that the loss sustained due to the cofferdam for the year 2009 which is not included in claim No.8 granted an amount of Rs.3,46,36561/- with interest at 13.5%. It is observed by the Arbitral Tribunal the contractor choose to include the claim as regards the cofferdam for the year 2009 only in this claim but claim No.8 which was allowed. Therefore, Arbitral
Tribunal in this claim allowed that the damage to the cofferdam which comes to Rs.4,63,23,539/- vide Annexure 20.4. It is observed by the
Arbitral Tribunal that insurance company paid Rs.1,16,86,978/- out of
Rs.4,63,23,539/- and therefore of balance amount of Rs.3,46,36,561/- was awarded by the Arbitral Tribunal. This exercise undertaken by the
Arbitral Tribunal is nothing but appreciation of evidence and taking one view of the matter. The fact remain that the damage caused to the 59 cofferdam for the year 2009 has not been included in claim No.8. Claim
No.8 has also been upheld by this court. Therefore, there is no point in interfering with the finding of the Arbitral Tribunal in this claim to the extent it allowed the claim. It is stated in the written arguments that claim under Force Majeure is grossly irregular and prohibited. In fact claim for Force Majeure is negatived by the Arbitral Tribunal. What is allowed by the Arbitral Tribunal relates to damage to cofferdam for the year 2009 which is not included in claim No.8.
81.) CLAIM NO.21: Issue of providing upstream training wall:
According to the claimant, the requirement of upstream training wall is not basic parameter and as such, the necessity of the same is therefore required to be considered based on technical requirements. Accordingly, claimant in general lay out plan submitted by it, the training wall is not shown. But the respondent insisted for providing of training wall, since it is mentioned in the scope of services and unilaterally corrected the plan. Claimant objected for the same by a letter dated. 28-08-2007 vide Ex.C.163. Respondent vide its letter dated.
25-03-2011 vide Ex.C.165 stated that if it is decided that the upstream guide walls is not essential, then the savings cost of the same is approved by the Government and respondent has deleted this amount from the contract amount.
82.) It is contended by the claimant that one of the dams in
Andhra Pradesh have upstream training walls and to exhibit the same, claimant placed on record the drawings of Nagarjunasagar Project and
Srisilam Project vide Exs.C.166 and C.167. Respondent contended that claimant is required to review and incorporate modifications by improvements only, whenever required with the approval of the 60 department in terms of clause 4.2.1 of Volume-II and the contractor cannot delete an entire item unilaterally and claim for the entire amount.
83.) The matter came up for discussion before 2nd DAB. 2nd DAB referred the matter to Sri M.S.Reddy, the former Secretary, Ministry of
Water Resources, Government of India and former Chairman of Central
Water Commission for expert opinion on the matter that upstream training wall for Pulichinthala Project is essential. On consideration of technical aspects and code/IS provisions, expert in his opinion informed that there is no earth dam on either side of the spill way in Pulichinthala dam and hence, the question of “full, partial or no wrap around” does not arise at all. Basing on the said opinion of the expert, the 2nd DAB has concluded that the upstream training all is not necessary. 2nd DAB also found that the deletion of the said work does not affect the contract value, as additions or deductions in contract value arises only when variations as per clause 13 of the General Conditions of the Contract.
Arbitral Tribunal after taking into consideration of the contentions of the claimant and the Government by referring to 3D studies conducted by the A.P. Engineering Research Laboratories, Hyderabad and the report of expert came to the conclusion that there is no need of upstream training wall. Arbitral Tribunal interpreted clause 4.2.1 of Special Conditions of
Contract came to the conclusion that contractor can change designs so long as the same do not change the basic parameters. Arbitral Tribunal came to the conclusion that the reduction of the contract value resorted by the respondent is unjust and held that contractor is entitled for the contract value without deducting any sum for not providing the upstream training wall. The descending Arbitrator also took the view that upstream training wall is not essential for the Government. Learned descending Arbitrator also held that respondent/government shall not 61 insist for its construction and obviously no reduction in the contract price shall be affected on account of omission to construct upstream training wall. The descending Arbitrator decided the claim in favour of the claimant.
84.) It is contention of the Government in the written arguments that Arbitral Tribunal not considered full version of the expert. It again relates to appreciation of evidence by the Arbitral Tribunal and this court cannot re-appreciate the evidence when the finding is based on the expert opinion according to learned Arbitrators choose by the both parties. In view of the above discussion and for the above reasons, there is no need to disturb the findings of Arbitral Tribunal on this claim.
85.) CLAIM NO.22: Compensation for inadequate payment for structural steel contrary to the agreement provision:
This claim is made by the claimant based on clause 14.35 of
General Conditions of Contract which provides for payment of structural steel as per which 70% shall have to be paid on receipt of brought out items, 90% on the erection and 100% on commission. It is the contention of the claimant that brought out item includes cost of steel procured . It is the contention of the respondent that clause 14.3 is applicable only for the items that are “brought out” but not fabricated at site and the steel is not a brought out item, but a product manufactured by the suppliers and hence, they are entitled to fix a different schedule.
As can be seen from Exs.C.170 and C.171, C.175 there was correspondence between claimant and respondent regarding manner in which payment has to be made for steel and the percentage at which the payment has to be made. Ultimately, Government relaxed the mode of payment by issuing memo Ex.C.92, dated. 27-05-2008 and Ex.R.93, dated. 16-06-2009. Arbitral Tribunal considering the documents 62 referred to above and the submissions made by both sides came to the conclusion that when steel is brought to the site which constitutes the major component of the radial gates, the same becomes a brought out item and the distinction sought to be made by the Government cannot be accepted. Arbitral Tribunal also held that when agreement itself provides for the percentages in respect of the brought out items, excluding the steel from its purview and fixing the different schedule is contrary to clause 14.3.3 of the General Conditions of Contract. Arbitral
Tribunal held that the calculations made in Ex.R.22 cannot be disputed by the respondent. Arbitral Tribunal allowed the claim. Learned descending Arbitrator took a view that transporting steel to the site do not amount to brought out item and he also made distinction between ‘brought out material’ and ‘brought out item’. If one goes through technical specifications page 336 of Ex.C.1, it provides for payment of 75% on completion of fabrication, 90% on completion of erection and 100% on trial run. But the respondent/Government issued Exs.C.92 and R.93 fixing different schedule of payment which is different from clause 14.3.3 of General Conditions of Contract. Even in the written arguments filed by the Government, it is not stated Arbitral Tribunal misinterpreted the terms of the agreement. Therefore, regarding this claim more than one view and more than one interpretation is possible.
Majority of Arbitrators took a view in favour of the claimant based on the material available on record and interpretation of relevant clauses in the agreement. Therefore, it is not within the scope and jurisdiction of this court to interfere with the finding of the learned Arbitral Tribunal which is based on interpretation of terms of the contract and based on the material on record.
63 86.) CLAIM NO.23: Amount due towards payment of steel
according to bill of quantities based on the approved drawings as per
IS 9401:
This claim relates to interpretation of IS 9401. According to the claimant as per IS 9401 the quantity of steel is to be paid as per schedule contained in the approved drawings. According to the claimant, respondent paid for the steel as shaped and with the result it was not paid for the quantity of steel utilized. Claimant complained the same to the department under Exs.C.177 to 183. Respondent opposed the said claim contending that the contractor is misinterpreting the IS code. The claim was brought before 2nd DAB. 2nd DAB which consists of technical persons deliberated this aspect and found that claimant’s interpretation of IS is correct. Arbitral Tribunal after referring to clause 5.5 of IS 9401 held that the theoretical weight of components of material incorporated in the approved drawings are to be considered for payment. But respondent had been paying the weight of the finished item. Arbitral
Tribunal after going through the approved drawings which contain drawings of theoretical weight of yoke girder and anchor girder came to the conclusion that to comply with the designs, certain shapes needs to be done resulting loss of material. Arbitral Tribunal held that when the drawings itself contains the total weight, there is no need to resort payment by taking weight of finished items.
87.) It is contended in the written arguments filed before this court that Arbitral Tribunal failed to understand the different between the mill of materials and bill of quantifies. It is also contended that IS
Code 9401 specifies the measurements for the purpose of payment, which is only for the finished product and not for the materials shown in the drawing. This contention of respondent/Government is not in 64 accordance with clause 5.5 of IS 9401. Therefore, the finding of Arbitral
Tribunal in allowing the claim cannot be interfered with.
88.) CLAIM NO.24: Reimbursement of bank charges incurred
for extension of performance guarantee beyond the original date of
completion of work:
As per the terms of the contract the due date for completion of contract is 30-09-2007. But admittedly, there was extension to the contract period. Therefore, the contractor has extended the bank guarantee. In the 1st DAB, it is held hat claimant is entitled for bank charges. The said finding of the 1st DAB was accepted by the
Government and payments were made accordingly. This claim relates to subsequent period of extension of contract. The finding of the Arbitral
Tribunal is delay was not attributable to the contractor and it is attributable to the Government only. Majority of Arbitrators held that PS 59 of APDSS is not applicable. Arbitral Tribunal in its majority award held that respondent is liable to pay reimbursement of bank charges incurred for the extension of performance of guarantee beyond the original date of completion of work. Accordingly, the said claim was allowed by the majority of Arbitrators. The said finding is based upon the finding on the delay and based on the decision of 1st DAB and material on record. Therefore, it need not be interfered with.
89.) On this claim, it is contended in the written arguments
Arbitral Tribunal erred in coming to the conclusion that there is a breach on the part of the Government without considering evidence and pleadings. It is within the jurisdiction of the Arbitral Tribunal to conclude on whose part the breach is there. Arbitral Tribunal based on the evidence and interpretation of several clauses came to the conclusion that delay in performance of the contract was on account of the 65
Government but not contract. Therefore, the version of the respondent/Government that claimant is not entitled for this claim is not correct.
90.) CLAIM NO.25: Additional expenditure forced due to insistence of Bank Guarantee for advance payment of steel:
By way of this claim, claimant seeks for reimbursement of expenses incurred by it by way of bank charges and interest on margin money to the extent bank guarantees furnished for receiving advance amounts for the steel brought to the site.
91.) It is the contention of the claimant that as per clause 14.3.3 of General Conditions of Contract, 70% of the cost of the brought out items are to be paid when they are received at site without insisting for bank guarantee. It is the contention of the claimant that Government insisted for furnishing adequate bank guarantee and the contractor having no other go for furnishing bank guarantee and therefore it is making this claim. This claim opposed by the respondent on the basis of the Government memo dated. 07-03-2008 vide Ex.R.96. When Arbitral
Tribunal having perused Ex.R.96 said that payment of of advance is deviation ot he contract provision and therefore, it can be paid subject to furnishing for the bank guarantee, till such time amendment to the contract is made. Arbitral Tribunal having gone through clause 14.3.3 of the contract 70% of the cost fo the brought out item, shall be paid when the material arrives on site and the steel brought for fabrication is also a brought out item. According to the Arbitral Tribunal the view of the
Government that it requires amendment to the contract is not correct.
According to the Arbitral Tribunal agreement itself provides for payment of 70% of the cost of the brought out item on its arrival at the site. In the written arguments, it is mentioned that Arbitral Tribunal erred in not 66 considering the necessity to Amendment to clause 14.3.3 through supplementary agreement dated. 09-07-2009 which facilitated payment to the claimant to the material, brought to the site against agreement clause 14.3.3 of General Conditions of the Contract, Volume-II. This contention of the respondent/Government is nothing but misinterpretation of clause 14.3.3 which provides payment of 70% of the cost of brought out item. The finding of the Arbitral Tribunal is steel brought to the site for payment is brought out item. As already said that this finding was given based on material available on record. Such finding of the Arbitral Tribunal cannot be substituted with the argument of the respondent before this court and it is not within the scope of this court under Sec.34 (2) of Arbitration and Conciliation Act, 1996.
92.) CLAIM NO.26: Irregular recovery of labour cess at 1% from bills:
This claim relates to deduction of 2% labour cess in 15th and 16th running bills of the claimant. It appears that 1% deducted towards labour cess. It was protected by the claimant vide Exs.C.192 and 194.
Respondent by a letter dated. 05-01-2011 informed vide Ex.C.142 that amount will be paid after sanction of work slip. Government also gave a clarification vide Ex.C.196, dated. 08-06-2011 directing that the department shall not deduct any amount towards cess, unless the corresponding amount is included in the estimate. It is contended by the claimant inspite of said directions by the Government, respondent has not refunded the said amount. It is the contention of the respondent that as per clause 6.4 of General Conditions of Contract the claimant shall company all the relevant labour laws applicable and as per the
Building and other Constructions Workers Welfare Act, 1996, 2% labour cess shall have to be collected. Accordingly, Arbitral Tribunal held that 67 respondent is liable to refund 2% cess deducted from 15th and 16th running bills. Arbitral Tribunal also observed that Government did not choose to recover 2% cess in other bills. Learned descending Arbitrator also allowed this claim awarding interest at 12%. Majority of Arbitrators allowed this claim with interest at 18% p.a., There is contention by the
Government before this court regarding awarding 18% interest on claim
No.26. Therefore, this court cannot interfere with the rate of interest awarded on this claim.
93.) CLAIM NO.27: Reimbursement of interest on
unauthorized amount recovered by way of interest on mobilization
advance beyond extended period of contract:
This claim relates to reimbursement of interest. The department resorted to collect interest on the mobilization of advance beyond extended period of contract. Contractor complained to the
Government by letter dated. 05-12-2007 vide Ex.C.200 against collection of interest on mobilization advance beyond the extended period of contract. Then Government issued memo dated. 21-07-2010 vide
Ex.C.201 waived the interest beyond the agreement period. Government also refunded the amount. This claim relates to interest on the portion from the date of recovery till the date of refund. Claimant sought for waiver of payment of interest as regards the number of spill way gates as the delay in exhibiting the number of gates is attributable to the
Government. Government agreed for the same and waived payment of interest treating the aforesaid delayed payments attributable to them.
For that period also initially interest was collected by the Government from the Contractor. Claimant calculated interest on that amount also in this claim vide Annexure-27.
68 94.) It is the contention of the respondent that as per the terms of the contract, they have collected interest. It is the further contention of the Government that consideration given to the contractor beyond the conditions of the contract is gracious act on the part of the Government and taking advantage of it, contract is claiming interest on it. Arbitral
Tribunal held that once Government waives the payment of interest then the initial recovery becomes illegal and in that view of the matter, contractor is entitled for payment of interest as claimed. This claim needs a perusal of Exs.C.200, 201 and 202. It is also necessary to consider finding of the Arbitral Tribunal on claim No.7 which is upheld by this court. This claim is based on claim No.7. It is clearly mentioned in Ex.C.202 about the reasons for delay in execution of the work. The finding is that the delay is attributable to the Government. Government issued Ex.C.201 exempting collection of interest beyond the agreement period. Therefore, it is clear that Government is not entitled to collect interest beyond the agreement period though it is not illegal. When the
Government is not entitled to collect interest on mobilization advance beyond extended period of contract, the claimant is entitled for interest on the amount already collected from him. Therefore, for the initial recovery the contractor is entitled for payment of interest. Majority view of the Arbitrators is also the same. Moreover, it relates to a view taken by the Arbitral Tribunal and it cannot be interfered with by this court while exercising jurisdiction under Sec.34 (2) of Arbitration and Conciliation
Act, 19965.
95.) CLAIM NO.28:
This claim relates to reimbursement of fees paid to the members of 2nd DAB. The share that is payable by the respondent was also paid by the claimant amounting to Rs.4,02,500/-. As per the 69 decision of 2nd DAB the expenses for holding the DAB’s meetings are to be shared by the parties equally. Therefore, respondent is liable to pay
Rs.54,500/- but it was paid by the claimant. It is the version of the respondent that they addressed the Government requesting orders for payment to be made and as soon as orders are received, they would pay the same. Arbitral Tribunal in view of the admissions of the respondent held that respondent is liable to pay a sum of Rs.4,57,000/- with interest at 12%. Learned descending Arbitrator also took the same view. There are no grounds to interfere with the findings of the Arbitral Tribunal.
96.) ISSUE NO.1l: To what relief?
In view of the findings of this court on issues 1 to 10 and claims 1 to 28, this petition is liable to be dismissed.
97.) In this issue, it is pertinent to refer to I.A.No.840/15 filed by the contractor under Sec.151 C.P.C., requesting the court to pass orders rejecting this O.P on the basis of the memo
No.20815/M&MI/CA.III/2014, dated. 18-02-2014 marked as Ex.P.1 in the said petition. The memo reads as follows:- “In the Government Memo 1 st cited above, orders were
issued entrusting the construction of work of Pulichintala Project
and its ancillary works to M/s.SCL-CR18G Joint Venture,
Hyderabad. During the course of execution of the Agency has
requested to refer their disputes and claims to the Second Dispute
Adjudication Board (DAB) in terms of the agreement conditions.
Accordingly, the Second Dispute Adjudication Board (AB-II) was
constituted under sub-clauses 19.2 & 19.4 of Vol.II (Part-A) GCC of
the Agreement No.1 SE/2004-2005, Dt.30-09-2004.
70
2. In the reference 2 nd cited the Department has expressed
dissatisfaction on the decision of Second DAB, as provided in
Clause 19.4 of Volume-II (Part-A) General Conditions of Contract of
the agreement.
3. Consequent on the above decision, the Arbitration Tribunal
was constituted with the three members Tribunal i.e., Justice Sri
Eswar Prasad (Presiding Arbitrator), Justice Sri Motilal B.Naik
(Arbitrator) and Justice Sri Vaman Rao (Arbitrator) on the decisions
of the DAB.
4. In the reference 3 rd cited the Chief Engineer, Krishna
Delta System has submitted that the Arbitral Tribunal has passed
the Arbitration Award in respect of K.L.Rao Sagar Pulichintala
Project and furnished the majority award report to the Government
for taking a decision.
5. On the advise of the Law Department, the Chief
Engineer, Krishna Delta System has been requested to negotiate
with the agency bout the payments along with Engineer-in-Chief
(Irrigation), Hyderabad and Advisor (Andhra) who are the members
of the Committee. The Chief Engineer, Krishna Delta System,
Vijayawada has furnished the report of the Committee to
Government vide ref.4 th cited.
6. In the reference 5 th cited the agency has accepted for a
reduction of Rs.10.00 crores on the total Arbitral award subject to
the payments are made before 20-03-2014.
7. Government after careful examination, hereby permit
the Chief Engineer, Krishna Delta System, Vijayawada to
implement the Majority award passed by Arbitral Tribunal in
71
respect of Dr.K.L.Rao Sagar Pulichintala Project with a reduction
of an amount of Rs.10 crores as accepted by the agency.
8. The Chief Engineer, Krishna Delta System, Vijayawada is requested to take necessary action accordingly.
9. This memo issues with the concurrence of Finance (W&P)
Department vide their U.O.No.4137/F2(A1)/13-1, Dt.23-01-2014.
ADITYA NATH DAS
PRINCIPAL SECRETARY TO GOVERNMENT (FAC)
To The Chief Engineer, Krishna Delta System, Vijayawada.
Copy to the Superintending Engineer, Pulichintala Project Circle,
Jaggaiahpet (with a request to inform the Civil Court.
//FORWARDED :: BY ORDER //
SECTION OFFICER” 98.) A reading of the above said memo clearly asserts that there was understanding between the Government and contractor and as per the understanding the contractor has accepted for a reduction of
Rs.10.00 crores on the total Arbitral award subject to the payments are made on or before 20-03-2014. The said memo also assert and request
Chief Engineer, Krishna Delta System, Vijayawada to take necessary action. It is clearly mentioned in the above said memo, it was issued in concurrence of the Finance Department. A copy of the said memo has also been marked to Superintending Engineer, Pulichintala Project
Circle, Jaggaiahpet with a request to inform the Civil Court. On the basis of the above said memo contractor filed this petition under Sec.151
C.P.C. It is stated in the courter that Principal Secretary did not advice or suggest the respondent to withdraw the case filed by the Government.
It is also stated in the counter that award passed by the Arbitrators are 72 not on proper and sound reasons and the Government is having every right to approach the proper court of law for proper adjudication of findings given by the Arbitrators in the award. Further, it is stated that
Principal Secretary to the Chief Engineer is no way related to the present
proceedings in so far as it relates to cause of action. It is further stated in the counter that the memo is only internal correspondence between
Department and Department and petitioner has no right to request the court to reject the O.P.
99.) A perusal of the above said memo show that the Government in unequivocal terms decided to withdraw this O.P., though it is not stated expressly. The whole reading of the memo impliedly show that
Government has decided to withdraw this petition and make payment of award amount as per arrangement/understanding reached between
Government and Contractor. This agreement between parties which was reduced in the form of Government memo and communicated to the respondent/Superintending Engineer certainly operates as estoppel against Government. Moreover, Government cannot unilaterally repudiate the agreement reached between it and contractor. Therefore,
Government is not entitled again to pursue the matter by raising several grounds which they have taken in this O.P. Therefore, on the principle of estoppel Government is estopped from going back on the understanding reached between it and contractor. Even, on that ground this O.P is liable to be dismissed.
73 100.) Government accepted the decision of 1st DAB, but not implement the same. Government took lot of time to implement the decision of 1st DAB. Government expressed dissatisfaction on the decision of 2nd DAB. Government choose to prefer petition under Sec.34 of the Arbitration and Conciliation Act, 1996. Government choose to go for the understanding with the contractor after filing of the petition to set-aside the award. Government reached understanding with the contractor and as per the said understanding Government issued a memo asking the Superintending Engineer impliedly to withdraw the case. But again respondent/Government choose to challenge the award on various grounds. The above said conduct on the part of the
Government justify the grant of costs and interest by the Arbitral
Tribunal and therefore, the same need not be interfered with.
101.) IN THE RESULT, this petition is dismissed with costs throughout.
Dictated to the Stenographer Grade-I, transcribed by him
corrected and pronounced by me in the open court this the 02nd day of June, 2016.
Sd/- B. Raveendra Babu
PRINCIPAL DISTRICT JUDGE,
KRISHNA, MACHILIPATNAM.
74
IN THE COURT OF THE PRINCIPAL DISTRICT JUDGE, KRISHNA,
MACHILIPATNAM.
PRESENT: SRI B. RAVEENDRA BABU,
PRINCIPAL DISTRICT JUDGE,
KRISHNA, MACHILIPATNAM.
THURSDAY, THIS THE 02 ND DAY OF JUNE, 2016
A.O.P.NO. 23/2015
Between:
The Government of Andhra Pradesh represented by Superintending Engineer S. Chandra Sekhara Rao, S/o. S. Kotaiah, aged 53 years, Pulichinthala Project Circle, Jaggaiahpet, Krishna District Works with Government of Andhra Pradesh.
:: Applicant.
And
1. M/s SCL-CR 18 G Joint Venture, 8-2-502/1/A, 1st floor, Jivi Towers, Road No.7, Banjara Hills, Hyderabad-500034, Represented by the Authorised signatory and power of attorney holder Sri D. Srinivas, S/o. D.V. Naidu aged about 47 years, Executive Director, M/s SCL- CR 17 G Joint Venture 8-2-502-1/A, 1st floor, Jivi Towers, Road No.7, Banjara Hills, Hyderabad.
2. Hon’ble Justice J. Eswara Prasad, Plot No. 1189, Road No. 60, Jublee Hills, Hyderabad.
3. Hon’ble Justice Motilal B Naik, Dr.No.11-13-571/A, Haripuram Colony, SR Nagar, Hyderabad.
4. Hon’ble Justice Vamana Rao, Plot Nos. 202 and 203, Mahasiva Apartments, Hyderabad.
:: Respondents.
Government of Andhra Pradesh preferred this petition under Sec. 34 (2) of Arbitration and Conciliation Act, 1996 to set-aside the award dated. 03-10-2013 passed by the Arbitral Tribunal.
A court fee of Rs.2,500/- is payable, but exempted under Sec. 67 of A.P.C.F. and S.V. act.
Petition presented on: 27-12-2013.
75
This petition is coming on before me in the presence of Sri U.V. Subrabhmanyeswara Rao, Government Pleader for applicant and of Sri K. Sai Mohan Rao, Advocate for respondent No.1, notices against Respondent Nos.2 to 4 are not necessary as per orders dated 11-07-2014 after perusing the material on record, this court DOTH ORDER AND DECREE:
i.) that the petition be and the same is hereby dismissed with costs throughout; ii.) that the petitioner do pay to the respondent No.1 a sum of Rs.25,202-00 and do bear its own costs of Rs.20,902-00 .
Given under my hand and seal of this Court, this the 2nd day of June, 2016.
Sd/- B. Raveendra Babu
PRINCIPAL DISTRICT JUDGE,
KRISHNA, MACHILIPATNAM.
MEMO OF COSTS
For petitioner For respondent No.1
(Rs)
Stamp on vakalat 2-00 2-00 Stamp on main petition -- -- Stamp on petitions 100-00 -- Stamp on documents 100-00 -- Commissioner’s fee -- -- Stamp on Process Memo 500-00 -- Witness batta -- -- Court fees affixing on the -- -- documents Advocate Fee 20,000-00 25,000-00 Publication charges -- -- Type & Writing charges 200-00 200-00 20,902-00 25,202-00
Sd/- B. Raveendra Babu
PRINCIPAL DISTRICT JUDGE,
KRISHNA, MACHILIPATNAM.