Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 20/2017
K.S.S. PETRON PVT. LTD. ..... Petitioner
Through: Mr K.K. Sharma, Senior Advocate
with Mr Vinod Wadhwa, Advocate.
versus
GYPSUM STRUCTURAL INDIA PVT. LTD. ..... Respondent
Through: Dr. Anurag Kumar Agarwal and Mr.
Umesh Mishra, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
O R D E R
% 18.01.2017
VIBHU BAKHRU, J
IA.No. 685/2017
1. Allowed, subject to all just exceptions.
O.M.P. (COMM) 20/2017 & IA No. 684/2017
2. K.S.S. Petron Private Limited (hereafter „KPPL‟) has filed the present
petition under Section 34 of the Arbitration and Conciliation Act, 1996
(hereafter „the Act‟) impugning the arbitral award (hereafter „the impugned
award‟) dated 08.10.2016 passed by the sole arbitrator.
Factual Context
3. M/s Gas Authority of India Limited (hereafter „GAIL‟) awarded
certain works relating to the project, “Dhabol Bangalore Pipe Line (DBPL)
O.M.P. (COMM) 20/2017 Page 1 of 11
for Pipeline Laying and Terminal Works (Spread-D)” to KPPL. The said
works included the work of design, engineering and execution of Horizontal
Directional Drilling (HDD) for laying main line of OD 24”and 6” CS
conduit pipe for OFC duct at Quellosium Area crossing (near Zuari Bund).
KPPL in turn awarded the sub-contract for part of the aforesaid works to
Gypsum Structural India Private Limited (hereafter „GSIPL‟) and issued the
Work Order No. 24003003 dated 10.01.2013 (hereafter „the work order‟) on
GSIPL.
4. Admittedly, GSIPL completed the HDD works under the work order
and raised an invoice dated 29.01.2013 for ` 2,60,38,755/-. Since the amount
due was not paid, GSIPL approached GAIL as well as KPPL for settlement
of its dues and repeatedly requested that the amounts due be paid.
5. KPPL, by its E-mail dated 22.04.2013, sent a reconciliation statement
in respect of the work done. The said statement indicated the total amount of
work done as ` 3,60,35,333/-. KPPL had deducted the entire bill of
` 1,13,05,633/- towards works relating to NH-17 - works unconnected with
the work order and stated to be in connection with LOI dated 14.08.2012 -
and ` 5,20,775/- was towards TDS. After accounting for the payment of
` 70,00,000/- the balance sum of ` 1,72,08,895/- was shown as due and
payable to GSIPL. KPPL also indicated that the above sum was without
accounting for an adjustment of 1,40,469/-, towards certain recoveries.
`
6. According to GSIPL, the payments due were not made; consequently
it invoked the arbitration clause and the disputes were referred to the sole
arbitrator. Before the arbitrator, GSIPL claimed a sum of ` 1,72,08,895/-
O.M.P. (COMM) 20/2017 Page 2 of 11
along with interest at the rate of 18% per annum with effect from 29.01.2013
and further, a sum of ` 5 lacs as costs.
7. KPPL disputed the aforesaid claims and asserted that GSIPL had
abandoned the site during the execution of the project. It claimed that GSIPL
had failed to dispose of Bentonite - which is a hazardous substance - despite
various reminders from KPPL and GAIL. KPPL alleged that the works
awarded to GSIPL also included excavation of Bentonite containment pits,
which GSIPL had failed to perform. In addition, KPPL also raised certain
counter-claims before the arbitrator.
Impugned Award
8. The arbitrator examined the relevant material and evidence produced
by the parties and observed that were no disputes with regard to the
following facts:-
“i. The parties had in a meeting held on 03.12.2012
agreed on the broad terms for carrying out the work in
question;
ii. that broad agreement is also reflected in the Work
Order;
iii. Claimant raised an invoice dated 29.01.2013 for
Rs.2,60,38,755/- inclusive of taxes;
iv. the Certificate dated 22.02.2013 was issued by
Respondent confirming completion of the work and
GAIL issued a similar Certificate dated 27.02.2013;
v. by email dated 22.04.2013 Respondent sent a
reconciliation of statement of account which was a
consolidated statement of three works including the
O.M.P. (COMM) 20/2017 Page 3 of 11
Work Order in question and in which the amount
payable by Respondent to Claimant was reflected;
vi. Claimant sent to Respondent letter dated 26.06.2013 to
which Respondent replied by its letter dated
08.07.2013 in response to which Claimant sent its
letter dated 10.07.2013 but there was no response to
the same.”
9. KPPL‟s contention that the certificates issued for successful
completion of the works, could not be considered as they were not issued for
purposes of the contract in question and contained the necessary disclaimer,
was rejected as the arbitrator found that the said certificates had not been
challenged or disputed earlier. The arbitrator further observed that it was not
KPPL‟s case that the said certificates did not reflect the correct factual
position.
10. The arbitrator considered the statement of reconciliation of accounts
dated 22.04.2013 sent by KPPL and concluded that there was no dispute that
a sum of ` 1,72,08,895/- was payable to GSIPL for the work performed after
adjusting an amount of 1,13,05,663/- on account of invoice relating to NH-
`
17 contract and after deducting a sum of ` 5,20,775/- on account of TDS.
11. In the circumstances, the only dispute that remained to be considered
was whether GSIPL had breached the contract by not removing Bentonite,
which had spilled over during the process of HDD.
12. The arbitrator did not accept KPPL‟s contention that GSIPL had
breached the contract, principally for two reasons. First of all, for the reason
that the said contention was never raised by KPPL after completion of the
O.M.P. (COMM) 20/2017 Page 4 of 11
works including at the time of issuance of the statement of reconciliation of
accounts. Secondly, the correspondence between the parties indicated that
GSIPL had performed its obligations.
13. The Arbitrator noted that the issue relating to Bentonite was first
mentioned in GSIPL‟s letter dated 26.06.2013, which was much after the
completion of the HDD works. The said letter also indicated that GSIPL had
collected the spilled Bentonite in bags manually over a period of three
months, on the advice of KPPL, but was having problems in removing the
said bags due to obstruction created by the farmers. The said letter also
indicated that GSIPL had sought assistance from KPPL. The arbitrator
noted that in its response, KPPL did not controvert any of the contents of the
letter dated 26.06.2013, however, mentioned that GSIPL should have closed
the works on spillage of Bentonite. GSIPL immediately responded to the
KPPL's said letter dated 08.07.2013 by clarifying that spillage of Bentonite
was natural and although it was to be removed by mechanical means,
GSIPL, at the instance of KPPL, had manually collected the same and stored
it in bags. However, the bags could not be removed due to the attitude of the
farmers and lack of support from KPPL.
14. The arbitrator noted that there was no response to GSIPL‟s letter
dated 10.07.2013 or any denial of the contents of the said letter at the
material time. The arbitrator also observed that it appears that in HDD work,
Bentonite does spread and for that reason excavation of pits was included in
the scope of the works. The arbitrator accepted that the spilled Bentonite had
been collected manually on the advice of KPPL and put in bags but could
not be removed for want of access to the site, which was the responsibility
O.M.P. (COMM) 20/2017 Page 5 of 11
of KPPL.
15. Accordingly, the arbitrator awarded a sum of ` 1,72,08,895/- along
with interest at the rate of 9% p.a. from the date of the reconciliation
statement, 22.04.2013, till the date of payment. KPPL's counter claims were
rejected for the reason that they were neither pressed nor substantiated from
the material on record.
Submissions
16. Mr K.K. Sharma, the learned senior counsel appearing for KPPL has
sought to assail the award on the solitary contention that the arbitrator‟s
finding that GSIPL had not breached the contract, was patently erroneous.
He referred to the Annexure to the work order titled “SPLIT OF
RESPONSIBILITIES - Quellosium Crossing” and referred to item at Serial
No. 12 which indicated that the provision of land outside ROW for
excavation of Bentonite Containment pits was the responsibility of GSIPL.
However, he fairly stated that there was no infirmity in the facts as recorded
by the arbitrator.
Reasons and Conclusion
17. In view of the aforesaid, there is no palpable error in arbitrator's
finding that GSIPL had completed the contract satisfactorily and there was
no objection raised by KPPL at the material time. Further, there was no
dispute as to the amount owed by KPPL to GSIPL except to the extent of
` 5,20,775/- on account of TDS - which was subsequently accepted by
GSIPL - and ` 1,40,469/- being the adjustment sought by KPPL on account
O.M.P. (COMM) 20/2017 Page 6 of 11
of recoveries.
18. The recovery of ` 1,40,469/- as claimed by KPPL is not substantiated
by any material and therefore, was rejected by the arbitrator. Further, the
arbitrator had considered the correspondence between the parties and after
appreciating the material on record, had found that GSIPL had removed the
Bentonite from the site and put it in bags on the advice of KPPL, however,
its efforts to remove the same were frustrated by agitation of farmers and by
lack of assistance on the part of KSS to ensure access to the sites.
19. Thus, the only question to be considered is whether the arbitrator's
decision to reject KPPL's contention that GSIPL had breached the contact, is
sustainable.
20. As indicated above, the arbitrator had reached its conclusion by
appreciating the correspondence between the parties as well as the terms of
the work order. Undisputedly, there is no correspondence on record other
than the three letters referred to by the arbitrator, that are: letter dated
26.06.2013 by GSIPL; letter dated 08.07.2013 by KPPL; and letter dated
10.07.2013 by GSIPL.
21. The relevant extracts of the letter dated 26.06.2013 sent by GSIPL
reads as under:-
“As you know, we have long back completed HDD
work at Quallisum area. The Bentonite used for such a
long crossing got spread over in nearby land. As usual,
this Bentonite was supposed to be removed by
mechanical means which hardly take 3-5 days time but
due to farmers‟ adamant attitude and local political
O.M.P. (COMM) 20/2017 Page 7 of 11
factors, we – based on your advice – collected the
spread Bentonite in bags manually which took more
st
than 3 months time & much cost. In the 1 week of
June, we were removing these bags from farmers‟ land,
suddenly some farmers came and they forcibly stopped
loading of bags for removal. On our persistent request,
the farmers finally told us that with GAIL official‟s
intervention only, they would allow us to go to their
land.
Sir, now we have an apprehension that consequent upon
heavy rains, the left out filled gunny bags in the field
may get torn out and the said Bentonite may get spread
again over the land. As we are the sub-contractor there,
we alone cannot liaise with the farmers. Therefore, we
request you to please take immediate necessary action at
least to remove these bags from their field/land before
the bags are torn to pieces and Bentonite spread in the
field/land again followed by required NoC.”
22. KPPL responded by its letter dated 08.07.2013 by stating as under:
“We have noted the content of your letter Dt. 26.06.13
and would like to recall that our site team have had been
giving consistent support on Bentonite removal matter
and shall continue to give same for obtaining the NOC.
It may be noted that vide Tele communication, mails,
etc. we have been intimating you and your site officials
for the timely action for the management of Bentonite
slippage. It was also suggest that during the HDD
operation when Bentonite slippage occurred, M/s
Gypsum should have closed at the time only but no
action was taken by M/s Gypsum, resulting to villager‟s
grievances and for the situation as of now.
Further in line to your request, we have advised our Site
In charge Mr. Mahesh Garg to provide continued
O.M.P. (COMM) 20/2017 Page 8 of 11
assistance to resolve the matter.”
23. GSIPL responded to the above-mentioned letter by another letter
dated 10.07.2013 by stating as follows:
th
“Apropos your reply dated 8 July in response to
th
our letter dated 26 June, 13 on the subject, we would
like to bring to your kind notice that while doing
HDD, main focus remains on HDD
operation/execution due to apprehension of shot
failure; and during HDD operation, slippage of
Bentonite on the ground is but natural – especially in
such a long crossing. However, immediately after the
crossing was over, we, as per your advice, manually
collected the Bentonite in bags, resulting in time and
cost overruns though but our efforts to remove these
bags from farmers‟ land were stymied due to their
uncompromising and unrelenting attitude and no
support from your side.
As a matter of fact, had your support been extended to
us, the problem might have been resolved long back.
Factually, due to your support not forthcoming for all
these months, our team assigned with the task to
remove filled in Bentonite bags from the site has been
idling there for so many month and would now be
constrained to leave the site after a week in case no
support is given to us in the matter. The attached
photographs are testimony to the fact that consequent
upon successful completion of HDD work the spread
over Bentonite has been filled in bags and could not
be removed due to farmers‟ adamant attitude and no
support from your side.
Therefore, we request you to kindly extend your
support by way of taking up the matter with the
O.M.P. (COMM) 20/2017 Page 9 of 11
concerned GAIL official to personally intervene in
the matter of convincing the farmers to allow our
idling team to remove filled in Bentonite bags in the
presence of your authorized representative, failing
which the onus of responsibility for non-removal of
filled in Bentonite bags from the farmers‟ land will be
squarely on you.”
24. The contents of GSIPL‟s letter dated 10.07.2013 remained
uncontroverted. It is clear from the same that GSIPL had done the needful
by collecting the Bentonite in bags. The land owners/farmers were
obstructing the removal of the bags and consequently GSIPL had sought
assistance of KPPL for the necessary access to remove the same. GSIPL had
also mentioned that its team was idling at the site since many months and
would be constrained to leave the site, in case no support was given in the
matter.
25. The item at serial No. 10 of the Split of Responsibilities clearly
indicated that KPPL was responsible for liasoning with the farmers or land
owners for land access. The said item is set out below:-
“All general statutory permissions required for performing the
horizontal directional drilling works like access, road
clearance, permissions from various authorities etc. Local
liasoning with Govt. agencies, farmers or land owners, land
compensation for land/access/approach road/Bentonite pits.”
26. It is apparent from the above that the impugned award is supported by
material on record and is informed by reason.
27. The scope of interference with the arbitral award is restricted and this
court cannot interfere with an award except on the grounds as set out under
Section 34 (2) of the Act.
O.M.P. (COMM) 20/2017 Page 10 of 11
28. In the facts of the present case, this Court is unable to accept that the
impugned award is either without jurisdiction or is opposed to the public
policy of India.
29. Accordingly, the petition and pending application are dismissed. No
orders as to costs.
VIBHU BAKHRU, J
JANUARY 18, 2017
pkv
O.M.P. (COMM) 20/2017 Page 11 of 11