Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 14.05.2018
+ O.M.P. (COMM) 201/2018 & IA No. 6331/2018
NATIONAL HIGHWAYS AUTHORITY OF INDIA ...Petitioner
Versus
PATEL – KNR (JV) ...Respondent
Advocates who appeared in this case:
For the Petitioner :Ms Pinky Anand, ASG with Dr Maurya
Vinay Chandra, Mr Sumit Tekriwal and Ms
Manisha Samanta.
For the Respondent :Dr Amit George, Mr Rishabh Dheer and Mr
Swaroop George.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioner (NHAI) has filed the present petition under
Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter
„the Act‟), inter alia , impugning the arbitral award dated 27.12.2017
(hereafter „the impugned award‟) to the extent that the respondent‟s
claims have been sustained (except an award of ₹5,05,465/- made
against a claim of painting of antiglare and pedestrian guard railing).
2. The impugned award was rendered in the context of disputes
that had arisen between the parties with respect to the „Contract
Agreement‟ dated 17.10.2001 (hereafter „the Agreement‟) and was
O.M.P. (COMM) 201/2018 Page 1 of 27
delivered by the Arbitral Tribunal comprising of three arbitrators,
namely, Sh S.C. Sharma (Presiding), Sh M.K. Aggarwal and Sh P.V.
Rama Raju (hereafter „the Arbitral Tribunal‟).
3. The Arbitral Tribunal has awarded an aggregate sum of
₹24,49,55,742/- in favour of the respondent (hereafter „Patel‟). The
said amount comprises of (i) ₹4,98,54,212/- on account of the balance
payment due as per the certification of the Engineer (Claim No.1); (ii)
₹5,05,465/- on account of payment due for painting of antiglare
coating on pedestrian guard railing (Claim No.3); (iii) ₹4,11,45,930/-
for payment on account of the idling of plant and machinery (Claim
No.8); (iv) ₹1,57,59,300/- on account of overhead expenses during the
extended period of the contract (Claim No.9); (v) ₹92,25,364/- as
escalation for mild steel (Claim No.12); and (vi) ₹12,84,65,471/- as
interest for the period 18.10.2008 to the date of the award computed at
the rate of 12% per annum and future interest at the rate of 10% per
annum (Claim No. 14). NHAI has contested the awards made against
each claim other than the award of ₹5,05,465/- against Claim No.3.
4. Briefly stated, the relevant facts necessary to address the
controversy are as under:-
4.1 NHAI is a statutory body constituted under Section 3 of the
National Highways Authority of India Act, 1988. Patel is a Joint
Venture formed between M/s Patel Engineering Ltd and M/s KNR
Constructions Ltd by Joint Venture Agreement dated 12.06.2001.
4.2 On 17.10.2001, NHAI invited bids for the work of widening to
O.M.P. (COMM) 201/2018 Page 2 of 27
four lanes and rehabilitation of existing two lane carriageway of
Krishnagiri – Vaniyambadi Section of National Highway-46 (NH-46)
from km 0.00 to km 49.00 (hereafter „the works‟).
4.3 On 18.06.2001, Patel submitted its bids pursuant to the
aforesaid invitation. Thereafter, on 20.09.2001, NHAI awarded the
contract and issued a Letter of Acceptance (LOA) accepting the bid at
the contract price of ₹163,49,53,505/- (after deducting a rebate of
16.70% offered by the respondent).
4.4 On 17.10.2001, NHAI and Patel entered into a Contract
Agreement („the Agreement‟) for execution of the works. The period
stipulated for completion of the works was thirty months from
commencement of the works – that is, thirty months from 21.11.2001
– and the works were to be completed by 20.05.2004.
4.5 The execution of the works was delayed and was finally
completed by 31.03.2005. In the meantime, NHAI extended the time
for completion of the works till 31.03.2005 pursuant to a letter dated
30.03.2004 sent by Patel. Thereafter, on 24.06.2005, the Engineer
issued the „Taking-Over Certificate‟.
4.6 On completion of the works, Patel – by a letter dated
23.06.2008 – submitted its final statement for an amount of
₹185,60,78,542/-.
4.7 On 21.06.2008 and 23.06.2008, meetings were held and the
Engineer certified the final statement in two parts: Final Statement I
O.M.P. (COMM) 201/2018 Page 3 of 27
for an amount of ₹6,01,08,801/- for all the works by letter dated
10.07.2008 and Final Statement II for an amount of ₹41,82,67,054/-
which contained disputed items. On 23.07.2008, the said disputed
items were referred to the Engineer in terms of Clause 67.1 of GCC
and by letter dated 17.10.2008, the claims against the said items were
rejected.
4.8 On 18.10.2008, Patel invoked the arbitration for the disputed
items in Final Statement II as per Clause 67.1 of GCC and appointed
Sh P.V. Rama Raju as its nominee arbitrator. On 02.02.2009, NHAI
released an amount of ₹1,00,08,054/- against Final Statement-I but
failed and neglected to make the balance payment of ₹5,01,00,747/-.
4.9 On 02.05.2012, NHAI appointed Sh Mahesh Chandra as its
nominee arbitrator for adjudication of disputes relating to non
payment of the balance amount covered under Final Statement I and
Final Statement II. Both the arbitrators appointed Sh S.C. Sharma as
the Presiding Arbitrator.
4.10 Patel filed its Statement of Claims before the Arbitral Tribunal
in respect of fifteen different claims including claims regarding the
delay in completion of the works due to failure on part of NHAI to
perform its reciprocal obligations.NHAI filed its Statement of Defence
contesting the claims made by the petitioner. NHAI, inter alia ,
claimed that the respondent failed to mobilize adequate machinery,
material and manpower and such failure compounded with
mismanagement that resulted in delay/completion of the works.
O.M.P. (COMM) 201/2018 Page 4 of 27
5. The Agreement was a unit rate contract. The bidding documents
contained detailed „Bill of Documents‟ (hereafter „BOQ‟) containing
the items of work with the estimated quantities of each item to be
executed by Patel. The parties adopted the terms and conditions of the
contract as contained in the General Conditions of Contract (GCC)
and Special Conditions of Contract (SCC). These terms are based on
th
FIDIC Contract 4 Edition in 1987 with certain Conditions of
Particular Application (COPA) amending the FIDIC and GCC.
Reasoning and Conclusion
6. Ms Pinky Anand, learned ASG had contested the impugned
award on several grounds. Dr Amit George countered the said
submissions. The rival contentions have been considered while
discussing the claims awarded in favour of Patel.
Re: Claim No.1, Release of payments against certification of the
Engineer.
7. The Engineer had certified a statement – Final Statement No-I
for a sum of ₹6,01,08,801/- as per Clause 60 of the GCC vide his letter
dated 10.07.2008. NHAI had released a sum of ₹1,00,08,054/- on
02.02.2009 but had withheld the balance amount. In this context, the
petitioner claimed that a sum of ₹5,01,00,747/- was payable as the
sum has been certified by the Engineer.
8. Ms Pinky Anand submitted that the aforesaid certified amount
also included an amount payable on account of the Seigniorage fee.
O.M.P. (COMM) 201/2018 Page 5 of 27
She submitted that NHAI had not provided any proof of having paid
the enhanced seigniorage fee and, thus, the said amount included in
the Final Statement No-I could not be awarded. She also referred to
the decision of the Division Bench of this Court in National
Highways Authority of India v. ITD Cementation India Ltd.: 2008
(100) DRJ 431 in support of her contention.
9. Dr Amit George, learned counsel appearing for Patel objected
to the said contention being advanced at this stage. He submitted that
NHAI had not contested the amount certified by the Engineer on any
such ground.
10. It is seen that the only contention advanced by NHAI in respect
of Claim No.1 was that it was beyond the scope of Clause 52.2 of
GCC as modified by COPA. NHAI contended that the rates as
prescribed under the BOQ have to be adopted unless the two
conditions as specified under Clause 52.2 of GCC have been met. The
first being that the item must account for more than 5% of the
Contract Price and the second is that the work executed under the item
exceeds or falls short of quantity specified in the BOQ by more than
25%. NHAI had claimed that for determining whether the item
accounted for more than 5% of the Contract Price, the rate and
quantity as specified in the BOQ were to be considered and not the
actual work done.
11. This contention was rejected by the Arbitral Tribunal. It is
relevant to state that no such contention has been advanced before this
O.M.P. (COMM) 201/2018 Page 6 of 27
Court to assail the conclusion of the Arbitral Tribunal in this regard.
NHAI has now raised a new issue that the certified amount includes
certain amounts on account of the seigniorage fee for which Patel was
required to produce proof of payments. Clearly, NHAI cannot be
permitted to raise fresh disputes at this stage. The learned counsel
appearing for NHAI was asked to point out whether this issue had
been raised in the Statement of Defence and she fairly conceded that
this defence had not been taken in the Statement of Defence. Plainly,
if NHAI had raised any such defence, Patel would have the
opportunity to produce the material to address such objections. Since
NHAI had chosen not to challenge the certification of the Engineer on
this ground, it cannot be permitted to raise such contention at this
stage. Thus, no interference with the impugned award is warranted in
regard to the award for the balance amount due against Final
Statement-I certified by the Engineer.
Re: Claim Nos. 8 and 9
Introduction
12. Patel had claimed a sum of ₹19,20,57,109/- on account of idling
of plant and machinery and a sum of ₹4,12,00,000/- on account of the
additional overhead expenses incurred during the extended period of
contract. As noticed above, the Agreement was entered into on
17.10.2001 and the date of commencement of the works was
stipulated to be 21.11.2001. The execution of the works was delayed
for various reasons, which Patel claimed were attributable to NHAI.
O.M.P. (COMM) 201/2018 Page 7 of 27
The works were finally completed on 31.03.2005. Although, NHAI
extended the time for completion of the works, it did not grant any
compensation for the same. Patel claimed that due to delay in the
contract, it had to retain its resources including plant and machinery at
site till the completion of the works and this resulted in Patel incurring
additional cost. It is in this context, Patel claimed that it was entitled
to costs for idling and under utilization of machinery and equipment.
Similarly, Patel had claimed additional cost due to overhead expenses
incurred during the extended period, which were quantified at
₹4,12,00,000/-.
13. The aforesaid claims were contested by NHAI on several
grounds including denying that there was any delay in handing over of
site. NHAI also claimed that in terms of the Agreement, Patel was
required to take all necessary steps so that the encumbrances and
hindrances on the existing stretches could be cleared and for this, the
BOQ included a specific item - BOQ Item No. 1.02, which was
required to be executed as per Clause 110 of the Technical
Specifications. NHAI claimed that Patel had failed to execute Item
No. 1.02 of the BOQ and had been unable to clear the site or any
encumbrances and, thus, any delay on that ground was attributable
solely to Patel and not to NHAI. NHAI also claimed that Patel had
adequate stretches of road to maintain the progress of work.
14. The Arbitral Tribunal found that there was a delay of 10 months
and 11 days in completion of the works inasmuch as the works were
completed on 31.03.2005, instead of the stipulated date of the
O.M.P. (COMM) 201/2018 Page 8 of 27
completion of 20.05.2004. The Arbitral Tribunal relied on the letter
dated 05.11.2004 of the Supervision Consultant, which indicated that
50.112 kms of unobstructed work was to be handed over within a
period of six months but only 20.28 kms stretch was handed over to
Patel. Further, this stretch was also divided into separate stretches over
the entire length and each section handed over ranged from 0.045 kms
to 2.2 kms instead of the minimum 5 kms. The Arbitral Tribunal had
concluded that the delay in handing over of the unobstructed site had
resulted in prolongation of the contract and, therefore, Patel was
entitled to cost towards deployment of additional resources over the
extended period of time in terms of Clause 42.2 of GCC.
Submissions
15. Ms Pinky Anand had assailed the impugned award, essentially,
on two grounds. First, she submitted that the Arbitral Tribunal had
erred in not appreciating that the delay in handing over the
unobstructed site could not be attributed to NHAI. She submitted that
the site had been handed over within the stipulated time and it was
Patel‟s obligation to remove all the hindrances, encroachments and to
shift the utilities and the same was also the part of the BOQ item
(BOQ Item No. 1.02). Further in terms of Clause 110 of the Tender
Specifications, no such claim could be made.
16. Second, she contended that the amount awarded was without
any sufficient evidence and, therefore, was unsustainable. She
contended that the Arbitral Tribunal had merely applied the analysis of
O.M.P. (COMM) 201/2018 Page 9 of 27
rates as per the Standard Data Book for Analysis of Rates (First
Revision) (hereafter „MOST Standard Data Book‟) without Patel
adducing any evidence of having incurred such expenditure or
suffering any such loss. She further stated that the MOST Standard
Data Book was a privileged document and could not be relied upon in
the arbitral proceedings. She referred to the decision of the Division
Bench of this Court in National Highways Authority of India v. ITD
Cementation India Ltd. ( supra ) and the decision of UK High Court in
Costain Limited v. Charles Haswell & Partners Limited: (2009)
EWHC 3140 (TCC) in support of her contention. She drew the
attention of this Court to the relevant extract of the said decision,
which is relied upon by her and is set out below:-
“184. But a claim for damages on account of delays to
construction work is rather different. There, in order to
recover substantial damages, the contractor needs to
show what losses he has incurred as a result of the
prolongation of the activity in question. Those losses will
include the increased and additional costs of carrying out
the delayed activity itself as well as the additional costs
caused to other site activities as a result of the delaying
event. But the contractor will not recover the general site
overheads of carrying out all the activities on site as a
matter of course unless he can establish that the delaying
event to one activity in fact impacted on all the other site
activities. Simply because the delaying event itself is on
the critical path does not mean that in point of fact it
impacted on any other site activity save for those
immediately following and dependent upon the activities
in question.”
17. Dr Amit George countered the aforesaid submissions. He
O.M.P. (COMM) 201/2018 Page 10 of 27
submitted that insofar as the BOQ Item No. 1.02 is concerned, the
same only relates to coordination with other agencies for removal of
hindrances. Admittedly, Patel was paid for the said works and,
therefore, there could be no dispute that Patel had performed its
obligation. He further relied upon Clause 5.2.2 of the Conditions of
Particular Application (COPA) and submitted that the order
precedence of the documents was specified in Clause 5.2.2 of COPA
and the provisions of GCC would take precedence over the provisions
of the Technical Specifications. He submitted that thus the provisions
of Clause 42.2 of GCC would override Clause 110.1 of the Technical
Specifications. He further stated that Clause 110.1 of the Technical
Specifications must be read with BOQ item no. 1.02, which only
requires Patel to coordinate with the concerned agencies.
18. He further submitted that the delay was not only on account of
cutting of trees and shifting of utilities but also for the reason that
NHAI had not completed the acquisition of the entire site. He
submitted that the payment for acquisition of land in certain stretches
had not been made to villagers and, therefore, they had obstructed any
activity on their land. He submitted that, on 01.08.2003, a total stretch
of 15.42 kms was not available as the compensation had not been paid.
The said land was made available during the period 01.11.2003 to
June, 2004. The acquisition regarding this stretch was also challenged
by the occupants of the said land. He referred to the decision of a
Coordinate Bench of this Court in National Highways Authority of
India v. Bridge & Roof Co. Ltd. : O.M.P. 1203/2013, decided on
O.M.P. (COMM) 201/2018 Page 11 of 27
18.04.2017 , wherein the Court had declined to interfere in an award
upholding the view that Clause 42.2 of GCC would override Clause
110 of the Technical Specifications and that mere notional handing
over of land on which it was not possible to execute any works, was
not envisaged by the contract. He also referred to the decision of the
Division Bench of this Court in NHAI v. Hindustan Construction Co.
Ltd. : 2017 (5) Arb. LR 258 (Delhi) (DB) , wherein the Court had held
that the responsibility of the contractor was limited to coordinating
with the service provider and not to ensure removal of encroachment.
He also referred to the decision of a Coordinate Bench of this Court in
National Highways Authority of India v. R.N. Shetty : 2014 (3)
ARBLR 46 (Delhi) in support of his aforesaid contentions.
19. Insofar as the quantification of damages is concerned, Dr
George referred to the written submissions. He submitted that Patel
provided extensive evidence as to the quantification of the claim. In
particular, Patel had provided details of the deployment of the
machinery. The same were part of the Monthly Progress Report
(MPR) submitted by the Engineer.
Reasoning & Conclusion regarding Claim nos. 8 and 9
20. The first and foremost question to be addressed is whether the
Arbitral Tribunal had erred in concluding that Patel was entitled to
damages for the delay in handing over the unobstructed site.
Undisputedly, the execution of the works was delayed for a period of
10 months and 11 days as found by the Arbitral Tribunal. It is also
O.M.P. (COMM) 201/2018 Page 12 of 27
relevant to note that the time for execution of the works was extended
without levy of any compensation. Although, NHAI had contended
before the Arbitral Tribunal that the delay was attributable to Patel,
this is not the contention, which was advanced on behalf of NHAI in
this Court. Ms Anand has contended that although the delay may have
been caused due to removal of obstructions or on account of
unobstructed site not being available to Patel; however, in terms of
Clause 110.1 of the Technical Specifications, no compensation for the
same was payable by NHAI and, therefore, the Arbitral Tribunal had
erred in awarding damages.
21. Before the Arbitral Tribunal, Patel had submitted that the delay
in completion of the works was on several counts including delay in
handing over of drawings; delay in handing over of site; delay in
removal of utilities (which work was entrusted to other agencies);
delay in frequent change of supervision consultant; additional work
and delay in taking decisions.
22. In terms of Schedule – III to the Agreement, the site was to be
handed over in a phased manner as set out below:-
“i) At Commencement Stretch of 5 Km.
ii) After 2 months from commencement Stretch of 10 Km.
iii) After 4 months from commencement Stretch of 10 Km.
iv) After 6 months from commencement Remaining stretches of
25.112 Km of the
project road.”
O.M.P. (COMM) 201/2018 Page 13 of 27
23. It is important to note that Patel‟s case is that although the site
was handed over on paper; however, in fact, the site was not available
for execution of the works for several reasons. First of all, the
acquisition of the entire stretch of land was not complete. Patel had
sent a letter dated 01.08.2003 pointing out that, as on 01.01.2003, only
11.285 kms in 26 bits along LHS and 9.555 kms in 22 bits along RHS
could not be worked out due to various reasons including non-
payment of compensation to the land owners and non-payment of
compensation for the buildings, wells, etc. NHAI was also informed
that villagers had obstructed the work at Barugur by-pass (4.5 kms)
and Natrampally by-pass (0.6 kms). Patel claimed that the temples and
other structures could not be shifted as NHAI had not located an
alternate site. Patel had also relied upon the reports of Engineer –
including a letter dated 10.06.2004 – indicating that only partial fronts
were available with it for execution of the works.
24. The Arbitral Tribunal had considered the extensive pleadings
and the evidence produced and had relied upon the letter dated
05.11.2004 of Supervision Consultant, which indicated that as on
June, 2002, only 20.28 kms of the site had been handed over instead of
50.112 kms. Further, the site that was handed over was divided into
several stretches over the entire land and the length of each section
ranged between 0.045 kms to 2.2 kms as against minimum of 5 kms.
The said report also indicated that 11.75 kms was obstructed at the
time of handing over of the complete stretch of 50.112 kms on
O.M.P. (COMM) 201/2018 Page 14 of 27
27.03.2002 and the phase clearance of the obstruction was done from
May, 2003 to June, 2004.
25. The fact, that the acquisition of the complete stretch of site was
not complete inasmuch as compensation for stretches of land had not
been disbursed, was not seriously disputed. Even before this Court,
Ms Anand had contended that the delay on this count had been
compensated by Patel by accelerating the progress of works.
26. Patel had also produced material to indicate that there were
other obstructions on the site including temples, building, wells and
other structures which had not been removed.
27. The Arbitral Tribunal had considered the material and rendered
an unequivocal finding that there was delay in handing over of the
unobstructed site and that had resulted in prolongation of the contract.
The relevant extract of the impugned award is set out below:-
“9.27 Having gone through the pleadings and documents
and considering the respective submissions of the parties
and judgments referred to by them, we find that:
(i) The Supervision Consultant had analyzed the
delay events in its letter dated 05-11-2004
(Exhibit RD-37) and stated that that the total
length of continuous unobstructed work fronts of
50.112 km was to be handed over within 6
months (June 2002) whereas only20.28 km was
handed over in divided stretches spread over the
entire length. As per the Supervision
Consultant‟s analysis the length in each section
handed over ranged from 0.045 km to 2.2km as
against minimum of 5 km. The total length of
O.M.P. (COMM) 201/2018 Page 15 of 27
50.089 km was handed over for construction
over a period 30 months. As per the
Respondent‟s admission, stretches aggregating to
11.75km were obstructed at the time of handing
over the complete stretch of 50.112 km on
27.03.2002. The phased clearance of
obstructions was done from May 2003 to June
2004 (Exhibit:RD-31)
(ii) Thus, the AT is of the view that there was delay
in handing over of the unobstructed site resulting
in prolongation of the Contract and therefore, the
Claimant is entitled to cost towards deployment
of the additional resources over the extended
period in terms of Clause 42.2 of the Contract.
As the handing over of unobstructed site was
spread over the 30 months period there was no
possibility of completing the work in 30 months.
The Respondent has granted extension of time
up to 31.03.2005. The Contract provides for any
extension of time only if there is no default or
breach of the Contract by the Contractor. Hence,
the Claimant‟s entitlement to cost towards
deployment of its resources and additional
overheads over the extended period up to
31.03.2005 is justified. The progress achieved
till May 2004 was 80.27% (p 438RD-31), hence
about 20% work remained to be completed in the
extended period. Considering the quantum of
balance work, additional cost of Rs.l9.20 crore
on account of deployment of the machinery in
the extended period appeared to be very high and
the claim requires to be modified as discussed
below.”
28. The finding that there was delay in handing over of the
unobstructed site resulting in prolongation of the Contract, is a finding
of fact, which is based on sufficient material and, therefore, is not
O.M.P. (COMM) 201/2018 Page 16 of 27
amenable to judicial review under Section 34 of the Act. The Supreme
Court of India, in the case of Associated Builders v. Delhi
Development Authority: (2015) 3 SCC 49 , has authoritatively held
that an arbitral tribunal is the final adjudicator of facts and unless the
conclusion is found to be perverse, it cannot be interfered with.
29. In view of the above, the Arbitral Tribunal had concluded that
Patel was entitled to cost towards deployment of the additional
resources over the extended period in terms of Clause 42.2 of the
GCC. Thus, the next question to be addressed is whether the Arbitral
Tribunal had erred in holding so.
30. Clauses 42.1 and 42.2 of the GCC are relevant and are set out
below:-
“GCC Clause 42.1: Possession of Site and Access
Thereto (GCC)
Save insofar as the Contract may prescribe:
(a) the extent of portions of the Site of which the
Contractor is to be given possession from time to time.
(b) the order in which such portions shall be made
available to the Contractor, and, subject to any
requirement in the Contract as to the order in which the
Works shall be executed, the Employer will, with the
Engineer's notice to commence the works, give to the
Contractor possession of
(c) so much of the Site, and
(d) such access as, in accordance with the Contract, is to
be provided by the Employer as may be required to enable
O.M.P. (COMM) 201/2018 Page 17 of 27
the contractor to commence and proceed with the
execution of the Works in accordance with the
programme referred to in Clause 14, if any, and otherwise
in accordance with such reasonable proposals as the
Contractor shall, by notice to the Engineer with a copy to
the Employer, make. The Employer will, from time to
time as the Works proceed, give to the Contractor
possession of such further portions of the Site as may be
required to enable the Contractor to proceed with the
execution of the Works with due dispatch in accordance
with such programme or proposals, as the case may be.
Clause 42.2: Failure to Give Possession (GCC)
If the Contractor suffers delay and/or incurs costs from
failure on the part of the Employer to give possession in
accordance with the terms of Sub-Cause 42.1, the
Engineer shall, after due consultation with the Employer
and the Contractor, determine:
(a) any extension of time to which the contractor entitled
Under Clause 44, and
(b) the amount of such costs, which shall be added to the
Contract Price, and shall notify the Contractor accordingly
with a copy to the Employer . ”
31. Thus, undisputedly, in terms of Clause 42.2 of the GCC, Patel
would be entitled to compensation for delay in handing over of the
site.
32. The contention that Patel was responsible for removal of
obstruction and was precluded from raising any claims by virtue of
Clause 110.1 of the Technical Specifications, is unpersuasive.
O.M.P. (COMM) 201/2018 Page 18 of 27
33. The BOQ item no. 1.02, which was relied upon on behalf of
NHAI, reads as under:-
“1.02 Co-ordinating with respective service
providers/Authorities for cutting trees, shifting of
utilities removal of all encroachments etc. as per
Technical Specification Clause 110.”
34. As is apparent from the above, Patel‟s responsibility was
limited to coordinating with the respective service providers for
cutting of trees, shifting of utilities and removal of encroachments as
per Clause 110 of the Technical Specifications; and not to execute the
work regarding cutting of trees or shifting of utilities. There is no
dispute that Patel had performed its obligations and had also been paid
for the same. NHAI had not found any fault with Patel in this regard.
Therefore, reference to BOQ item no. 1.02 is of little assistance to
NHAI.
35. Clause 110.1 of the Technical Specifications – which was relied
upon by NHAI to contend that no compensation was payable to Patel
– reads as under:-
“The Contractor shall be responsible to coordinate
with service provider/concerned authorities for for cutting
of trees, shifting of utilities and removal of encroachments
etc. and making the site unencumbered from the project
construction area required for completion of work. This
shall include initial and frequent follow up
meetings/discussions with each involved service
provider/concerned authorities. The contractor will not be
entitled to any additional compensation for the delay in
cutting of trees, shifting of utilities and removal of
O.M.P. (COMM) 201/2018 Page 19 of 27
encroachments by the service provider/concerned
authorities. The expenses incurred for cutting of trees and
shifting of utilities as required by the respective
departments shall be made by the Employer. The
information contained in the Bid Documents concerning
the public utility services such as water, sewer, power
transmission lines, telephone lines and oil/gas pipelines,
OFC cables etc may not be exhaustive and it shall be the
responsibility of the Contractor to ascertained the utilities
that are likely to be affected by works through site
investigations and collection of information from the
concerned utility owners.”
36. The contention, that Patel was not entitled to any compensation
for the delay in terms of Clause 110.1 of the Technical Specifications,
is unpersuasive for several reasons. First of all, the delay in
availability of the site to Patel included the delay on the part of NHAI
to complete the acquisition of the site. The delay in disbursal of
compensation to the land occupants/owners was clearly outside the
scope of Clause 110.1 of the Technical Specifications. Further, there
was also delay in shifting of the temples and other buildings and Patel
had alleged that the same was on failure of NHAI to provide an
alternate site. This is also not covered under Clause 110.1 of the
Technical Specifications. Secondly, the contention, that Clause 110.1
of the Technical Specifications must be read in the context of BOQ
item no. 1.02 and not for the delays that are not attributable to the
contractor in performance of the said BOQ item, is also persuasive.
37. More importantly, Clause 5.2.2 of COPA clearly provided that
GCC would take precedence over Technical Specifications. In the
present case, Clause 42.1 of GCC specifically provided that the
O.M.P. (COMM) 201/2018 Page 20 of 27
possession and access to the site would be provided to the contractor
for execution of the works. Clause 42.2 of GCC further provided that
any delay giving possession of the site in accordance with the terms of
sub-clause 42.1 of GCC would require the Engineer to grant extension
and determine the cost to be added to the contract price.
38. In the present case, the Arbitral Tribunal had relied upon Clause
42.2 of GCC to hold that Patel would be entitled to further damages.
This Court is of the view that no interference with this conclusion is
warranted.
39. Insofar as the contention that MOST Standard Data Book was a
privileged document is concerned, no such contention was raised
before the Arbitral Tribunal, therefore, NHAI cannot be permitted to
raise such disputes at this stage.
40. The next issue raised by NHAI was with regard to
quantification of the amounts awarded. It was contended on behalf of
the petitioner that such quantification is without any evidence and,
therefore, cannot be sustained. It was earnestly contended that the
Arbitral Tribunal had based his decisions solely on the MOST
Standard Data Book without Patel providing any evidence. It was
submitted that the MOST Standard Data Book is a privileged
document and proceeds on certain assumptions and it was incumbent
upon Patel to provide evidence to show that the said assumptions hold
good in its case.
41. The aforesaid contention is un-merited, as Patel had produced
O.M.P. (COMM) 201/2018 Page 21 of 27
sufficient evidence before the Arbitral Tribunal to establish the
quantification of the loss suffered by it. First of all, Patel had produced
the list of machinery that was available at site during the extended
period. This was also a part of the MPRs submitted by the Engineer.
Although, the hire charges for the said machinery were computed on
the basis of the MOST Standard Data Book, detailed analysis of the
same was submitted by Patel (submitted in CD No.8 and further
explained in CD No.10). Patel had computed the charges for the
machinery during the entire period of execution of the works at
₹66,19,66,611/-.This was on the basis of BOQ quantities. It had
reduced the hire charges computed as per BOQ quantities, which were
computed at ₹33,55,90,094/-, accordingly, it was claimed that
₹32,63,76,773/- was the actual loss suffered. However, Patel had
restricted its claim only to ₹19,20,57,109/-, which was the additional
cost incurred during the extended period and the additional cost
incurred during the original contract period was ignored.
42. The Arbitral Tribunal had further reduced the aforesaid amount
on the basis of the value of the work done. The Arbitral Tribunal
determined that about 20.75% of the total work was executed between
21.05.2004 to 31.03.2005 (the extended period), which worked out to
₹31,51,85,994/-. From the aforesaid sum, the Arbitral Tribunal had
reduced the additional work of ₹3,03,68,275/- and, thus, determined
that during the extended period, the work of the value of
₹31,51,85,994 of the BOQ quantities was executed. Since the hire
charges for BOQ quantities was computed at ₹33,55,90,094/- for the
O.M.P. (COMM) 201/2018 Page 22 of 27
entire contract value of ₹163,49,53,505/-, the Arbitral Tribunal applied
the same proportion to the works done during the extended period and,
accordingly, determined additional cost for the machinery during the
extended period at ₹6,46,95,000/-. From the aforesaid charges, the
charges for the particular machinery that demobilized (value of which
was computed to be ₹1,81,82,208/-) was reduced. Thus, the hire
charges for the machinery during the extended period was computed at
₹4,65,12,792/-. This was further adjusted downward for inflation at
the rate of 5% and a sum of ₹4,11,45,930/- was found payable.
43. It is apparent from the above that the said determination is
based on empirical data as to the machinery available at site and the
quantum of work done during the extended period. The value of cost
of such machinery has been applied on the standards as specified. This
Court finds no infirmity with the approach of the Arbitral Tribunal.
Standard formula for determination of damages can be adopted, as a
measure of damages provided that there is sufficient evidence to apply
those formulas. In the present case, the empirical data as to the
machinery available at site and the work done was available and,
therefore, the same has been used by the Arbitral Tribunal for
computing the additional cost incurred during the extended period.
The contention that the Arbitral Tribunal had erred in using MOST
Standard Data Book for assuming the hire charges as a measure of
cost of the said machinery is not persuasive. It is also admitted that
NHAI had not produced any material to show that the cost determined
on hire charges was an unreasonable measure in the facts of the
O.M.P. (COMM) 201/2018 Page 23 of 27
present case. Thus, this Court finds no ground to interfere with the
quantum of damages as awarded on account of idling of plant and
machinery.
44. Similarly, this Court also finds no ground to interfere with the
award of overhead charges. Patel had produced its balance sheet for
overheads at site showing that the sum of ₹7,43,86,684/- had been
spent during the period of 12 months. Since, the extended period was
only 284 days, the proportionate overhead expenditure was computed
at ₹5,78,79,094/-. Patel had submitted copies of the profit and loss
account and the balance sheet for the work during the entire period of
the contract that is, for the original period of the contract as well as the
extended period. The accounts indicated that the total overhead
charges incurred during the entire length of the contract was
₹17,07,14,045/- [Rs.42,58,589/- (2001-2002), ₹2,48,18,855/- (2002-
2003), ₹6,72,49,737/- (2003-2004) & ₹7,43,86,864/- (2004-2005)]. On
the aforesaid basis, Patel had contended that an amount of
₹19,71,74,721/- was incurred as overhead expenses after accounting
for head office overheads as 10% of the site expenses. Patel also
pointed out that as per the MOST Standard Data Book, 8% of the
contract value was considered as reasonable in respect of contracts,
which are above ₹50 crores and, thus, a sum of ₹13,07,96,280/- was
expected to be incurred as overhead expenses. Reducing the same
from the sum of ₹19,71,74,721/-, Patel contended that the sum of
₹6,63,78,441/- was reasonable but had restricted its claim to
₹4,12,00,000/-. The Arbitral Tribunal did not accept the aforesaid
O.M.P. (COMM) 201/2018 Page 24 of 27
quantification and restricted the amount to only 5% of the balance
works executed during the extended period (31,51,85,994 x 0.05 =
₹1,57,59,300/-).
45. This is not a case where Patel had not provided the necessary
data for substantiating its claim; however, the Arbitral Tribunal had
restricted the same only to 5% of the balance works executed. Thus,
NHAI‟s contention that Patel had not provided data for substantiating
its claim is erroneous and, thus, this Court finds it difficult to accept
that any interference with the impugned award is warranted.
Re: Claim No. 12
46. The Arbitral Tribunal has awarded a sum of ₹92,25,364/- on
account of payment in escalation of Mild Steel. Patel had claimed the
aforesaid amount in terms of Clause 70.5(ii)(b) of COPA, which
expressly provided that the contract price would be subject to account
of variation in cost of cement and steel based on the formula specified
therein. The formula was based on index price of iron and steel, as
shown in the index principles of whole sale prices in India released by
the Office of Economic Advisory, Ministry of Industry.
47. Sub-clause 70.5 of COPA specifically provided that variation in
price of specified materials would be payable as per the formulae
specified. The opening words of sub-clause 70.5 of COPA are set out
below:
“Sub-Clause 70.5: Increase or Decrease of Price of
Specified Materials
O.M.P. (COMM) 201/2018 Page 25 of 27
i) Increase or decrease of price of specified materials will
be adjusted by either an addition to or a deduction from the
Contract Prices. For the purpose of this
Sub-Clause:
“Specified materials” means the materials stated in
Schedule 2 of Section VII of the Bidding Documents and
required on the site for the execution and completion of the
Permanent Works.
“Basic Price” means the price for "Specified materials"
indicated in Schedule 2 of Section VII of the Bidding
Documents.”
48. There is no dispute that Mild Steel was a specified item in
Schedule 2 of Section VII and, thus, in terms of Clause 70.5(ii)(b) –
which provides for the formula for variation in price of steel – was
payable.
49. It is also relevant to note that NHAI had paid the escalation in
th
price of Mild Steel upto the 34 Interim Payment Certificate (IPC).
This amount aggregated to ₹17,04,061/-. Patel had claimed a further
amount of ₹75,21,303/-. There was no dispute as to the computation of
the escalation payable; however, instead of payment of the said
amount, NHAI had also recovered the escalation paid earlier.
50. NHAI had resisted this claim on the ground that escalation
formula could not be applied to items made of mild steel. The said
contention was rejected, as the Arbitral Tribunal found that mild steel
was brought at site and incorporated in the permanent works.
51. This Court finds no infirmity with the aforesaid view.
O.M.P. (COMM) 201/2018 Page 26 of 27
Re: Interest
52. The Arbitral Tribunal has awarded pre award interest at the rate
of 12% per annum. Ms Anand, learned ASG has contended that the
levy of such interest was unreasonable given the extraordinary pre
award period. This contention is bereft of any merit and the pre award
interest cannot be interfered with.
53. In view of the above, the petition is unmerited and is,
accordingly, dismissed. The pending application is also disposed of.
VIBHU BAKHRU, J
MAY 14, 2018
RK/ pkv
O.M.P. (COMM) 201/2018 Page 27 of 27