Full Judgment Text
$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 663/2012
th
Date of Decision : 4 February, 2019
U.P. STATE BRIDGE CORPORATION LTD
..... Petitioner
Through: Mr.S.K.Chandwani, Mr.Sameer
Chandwani, Advs.
versus
DDA & ANR ..... Respondents
Through: Mr.Vaibhav Agnihotri, Mr.Bhrigu
Dhami, Mr.Rudresh Jagdala, Mr.Vinayak
Harshwardhan, Advs. for DDA.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) has
been filed by the petitioner challenging the Arbitral Award
dated 09.04.2012 passed by the Sole Arbitrator adjudicating the
disputes that had arisen between the parties in relation to the
following work that had been awarded in favour of the
petitioner by respondent no.1 vide its letter dated 24.02.2003:-
“(i) Construction of one clover leaf to Sarita Vihar
flyover at intersection of NH-2 – Road No.13-A,
OMP No.663/2012 Page 1
(ii) Construction of one clover leaf to Noida More
flyover (under construction) at intersection of NH-24 –
Noida More on Delhi side.
(iii) Construction of Culvert on slip road on Delhi side
of Noida More Flyover.
(iv) Widening of existing culvert of NH-24 near Noida
More Flyover.”
2. Disputes having arisen between the parties, the same
were adjudicated by the Sole Arbitrator vide his Award dated
04.03.2009. By the said Award, the Arbitrator rejected Claim
no.2 of the petitioner, which was for ‘loss suffered and
additional expenses incurred on account of escalation in cost of
labour and materials due to delays, defaults and prolongation of
the contractual period for Rs.1,41,58,175.00’, holding as under:
“After going through the submissions made by the parties
and conditions of the contract, I find that this claim has
no merit as there is no escalation clause provided in the
agreement. Hence, I reject this claim.”
3. The petitioner challenged the said Award before this
Court by way of a petition under Section 34 of the Act, being
OMP 406/2009. This Court by its order dated 20.01.2011 held
as under:
“5. I find no merit in this submission of the respondent.
Merely because clause 10CC was not inserted in the
contract in question, it does not take away the right of the
contractor to raise a claim for losses and damages
suffered by it due to prolongation of the contract.
Pertinently, there is no clause in the contract which limits
OMP No.663/2012 Page 2
the right of the petitioner to make such a claim. This is a
patent illegality in the award. The award made on claim
no.2, therefore, cannot be sustained. The same is
accordingly, set aside. I may make it clear that I have
not gone into the merits of the said claim, and the same
shall have to be adjudicated by the learned arbitrator on
its own merits.”
4. The Court remanded the dispute with respect to, inter
alia, Claim no.2 back to the Arbitrator for re-adjudication ‘on
the basis of the record before him’.
5. The Arbitrator by the Impugned Award has rejected
Claim no.2 of the petitioner holding as under:
“After going through the record, arguments advanced
before me, I found that the Respondents rejected the
request of the claimants for escalation in price of steel
vide letter dated 02.07.2004 in response to claimants
letter 30.06.2004.
The respondents further rejected the request of the
claimants for the payment under clause 10-CC of the
arguments vide letter dated 18.09.2004 in response to
claimants letter dated 13.09.2004.
The claimants vide letter 15.06.2004 requested the
respondents for the payment under clause 10-CC of the
agreement without reference to any previous letter which
is fifteen days before the actual completion of work.
The demand raised by the claimants for the price
escalation in steel without submitting the detailed
analysis of rates and bill or voucher has no meaning and
in the agreement also their is no provision for
reimbursement of any increment in rates for steel. The
claimants vide their letter dated 13.09.2004 claimed the
payment under clause 10-CC of the agreement which was
OMP No.663/2012 Page 3
rejected by the respondents as the clause 10-CC was
deleted in the agreement. The claim of the claimants to
claim the compensation under clause 10-CC of the
agreement vide letter dated 15.06.2005 just fifteen days
before the actual completion of work is after thought and
against the terms of the agreement.
I found that there is no provision in the agreement for
reimbursement of price increase in steel and also there is
no provision for escalation in agreement either under
clause 10-CC or any other clause.
The claimants submitted 24th R.A. Bill on 30.06.2005 i.e.
on the date of actual completion of the work and in the
said bill, no demand for escalation in cost of labour and
materials due to delays, defaults and prolongation of the
contractual period was included. The claim raised by the
claimants at a bleated stage i.e. at the time of submission
of final bill on 25.09.2005 has no relevance as the work
was completed on 30.06.2005.
The parties were entered into the agreement with the
clear understanding that no escalation is payable, as
such the clause 10-CC was deleted and hence, claim of
the claimants under claim no.2 is not tenable.
The contention of the claimants that they are entitled
under Section 73 of the Contract Act, 1872 has no force
as the claimants failed to produce any notice for claiming
the escalation in cost of labour and materials due to
delays, defaults and prolongation of contractual period.
Further, the judgments relied by the claimants are not
applicable in the present case. Hence, I reject this claim
and nothing is payable against Claim No.2.”
6. Counsel for the petitioner submits that the Arbitrator, in
the Impugned Award has again placed reliance on the absence
of Clause 10CC in the Agreement between the parties. He
further submits that the Arbitrator has not considered the merit
OMP No.663/2012 Page 4
of the claim of the petitioner only on the ground that the
petitioner had raised this claim at a belated stage and not
th
alongwith its 24 RA Bill that was submitted on the completion
of the work. He submits that on both the counts, the Impugned
Award is liable to be set aside. Relying upon the earlier order
dated 20.01.2011 passed by this Court as also on the judgment
of this Court in Anurodh Constructions vs. Delhi Development
Authority and Anr. 2005 (Suppl.) Arb. LR 258 (Delhi) and
Paragon Constructions (India) Pvt. Ltd. vs. Union of India &
Anr . 2008(1) Arb. LR 358 (Delhi), he submits that even in the
absence of Clause 10CC in the Agreement, such a claim is
maintainable under Section 73 of the Indian Contract Act, 1872.
Further relying upon the judgment of the Supreme Court in
McDermott International INC. vs. Burn Standard Co. Ltd. &
Ors . (2006) 11 SCC 181, he submits that the claim of the
petitioner could not have been rejected merely on the ground of
delay in raising the same as long as such demand had been
raised prior to the invocation of the arbitration.
7. On the other hand, counsel for the respondents submits
that the claim filed by the petitioner was not supported by any
evidence on record. Merely relying upon the formula contained
in Clause 10CC of the Agreement, the petitioner had not filed
any other document on record to prove such claim. Even
otherwise, the claim for escalation for the contractual period
could not have been granted. He further submits that in terms
OMP No.663/2012 Page 5
of Clause 1.27 in the tender document read with Clause
6.4.1(iii) of the Instructions to Tenderers, no extra amount was
payable to the contractor on account of delay in handing over of
the site or any unforeseen hindrance being faced by the
contractor during execution of the work. Counsel further relied
upon Clauses 1.2.1 and 1.17 in the tender document and 6.4.1
(i) and 6.4.1 (ii) to contend that it had been agreed that the
possession of the site shall be given in stages and the contractor
was advised to visit the site in order to inspect and take into
account all relevant factors pertaining to the site in the
preparation and submission of the tender. The petitioner was
therefore, well-aware of the hindrance that it may face during
the execution of the work and therefore, was not entitled to
claim escalation on account of such hindrances.
8. I have considered the submissions made by the counsels
for the parties. A reading of the Impugned Award would show
that apart from the fact that Clause 10CC is missing from the
Contract, the Arbitrator has further placed reliance on the
absence of detailed analysis of rates, bills or vouchers
supporting claim of the petitioner for price escalation in steel.
The Arbitrator has further held that this demand was at a
belated stage and in absence of any notice claiming escalation
in cost of ‘labour and materials’ due to delays, defaults and
prolongation of the contractual period, the petitioner was not
entitled to this claim.
OMP No.663/2012 Page 6
9. Counsel for the petitioner has been unable to show any
document filed before the Arbitrator which would have
supported the claim raised by the petitioner. The claim of the
petitioner was based solely on Clause 10CC, which admittedly
was not present in the Contract between the parties. It is true
that such a claim, even in absence of Clause 10CC could have
been maintained under Section 73 of the Contract Act, however,
at the same time, it was for the petitioner to have proved the
said claim. It could not have simply relied upon the formula as
an evidence in support of such a claim. This being a matter of
appreciation of evidence by the Arbitrator, in any case, cannot
be interfered with by this Court while exercising its powers
under Section 34 of the Act.
10. The next challenge of the petitioner is to the rejection of
Claim no.7, which was for ‘loss of head office expenses and
reduced profitability / loss of profit due to prolongation of the
contract for a period of 15 months as per Hudson formula for
Rs.1,24,06,800/-.’
11. This claim had also been rejected by the Arbitrator in his
earlier Award dated 04.03.2009, albeit along with Claim no.6
raised by the petitioner.
12. This Court in its order dated 20.01.2011 passed on the
petition filed by the petitioner challenging the said Award held
as under:
OMP No.663/2012 Page 7
“ 17. A perusal of the impugned award shows that
the learned arbitrator dealt with claim nos.6 and 7
simultaneously. However, the learned arbitrator
has not specifically dealt with claim no.7. The
entire discussion pertains to claim no.6 alone.
There is merit in the submission of learned counsel
for the petitioner that so far as reduced
profitability/loss of profit is concerned, as it
pertains to events which have actually not taken
place, and the claim is founded upon projections
for the future, there can be no documentary proof
of the said loss actually having been suffered. This
aspect of the matter has been missed by the learned
arbitrator. In my view, this is a patent error in the
award. Accordingly, the award made on claim no.7
cannot be sustained and is set aside.
18. It is made clear that this Court has not
examined claim no.7 on its merits and it shall be
for the learned arbitrator to examine the same on
its own merits.”
13. The Arbitrator while rejecting Claim no.7 of the
petitioner, has held as under:
“After going through the records, arguments
advanced before me, I found that the Claimants are
responsible for delay in completion of work and
also failed to produce any notice/demand made by
them during the execution of work. The claimants
also failed the produce any proof for the loss of
head office expenses & reduce profitability loss of
profit due to prolongation of the contract.
The claimants submitted 24th R.A. Bill on
30.06.2005 i.e. on the date of actual completion of
work and in the said bill also no such demand was
included. The claim raised by the claimants at a
OMP No.663/2012 Page 8
bleated stage i.e. at the time of final bill on
25.09.2005 is after thought and has no relevance
as the work had already been completed on
30.06.2005.
The Contention of the claimants that they are
entitled for the payment under Section-73 of the
Contract Act, 1872 has no force as the claimants
failed to produce any notice for demanding the loss
of Head Office expenses & reduce profitability /
loss of profit due to prolongation of the contract.
The letters/demand made by the claimants after the
actual completion of work i.e. on 30.06.2005 is in
vacuum. The judgment relied by the claimants are
not applicable in the present case. Hence, I reject
this claim and nothing is payable against Claim
No.7.”
14. Counsel for the petitioner fairly admits that before the
Arbitrator, apart from relying upon the Hudson formula in
support of such claim, no other evidence had been filed. He,
however, submits that after the Arbitrator had concluded
hearing of the arguments from both sides, the petitioner had
filed an application on 19.03.2012, that is prior to the making of
the Award, placing on record a profit & loss statement from a
Chartered Accountant in support of this claim. The Arbitrator,
however, did not consider the said application or the document
while passing the Impugned Award.
15. On the other hand, counsel for the respondents submits
that the question whether the petitioner or the respondents were
guilty of causing the delay in execution of the work was no
OMP No.663/2012 Page 9
longer open to be adjudicated by the Arbitrator. This issue was
also a part of claim nos.4 and 6 in earlier Award wherein the
Arbitrator had held that the delay was caused for reasons
attributable to the petitioner and in any case, it was an excepted
matter. He further submits that even assuming that the delay is
attributable to the respondents, in absence of any proof in
support of this claim, the Arbitrator has rightly rejected the
same.
16. I have considered the submissions made by the counsels
for the parties. While the petitioner is placing reliance on the
written submissions filed by the petitioner before the Arbitrator
showing the reasons for the delay in execution of the work and
especially the Part-2 proforma (Application for Extension of
Time) prepared by the respondents itself, to contend that the
question of the delay being caused by the petitioner is incorrect,
the respondents have relied upon various letters written to the
petitioner during the course of the work as also to the Site Order
Book. I need not go into this question in detail as, in my
opinion, the petitioner has been unable to prove this claim by
filing any supporting document/evidence. This is also a ground
taken by the Arbitrator in the Award. While it is open to an
Arbitral Tribunal to rely upon the Hudson formula for awarding
a claim of damages, the claimant has to file atleast some iota of
evidence before the Arbitrator in support of such a claim. The
claim cannot be based merely on formulas.
OMP No.663/2012 Page 10
17. As far as the submission regarding filing of the certificate
from Chartered Accountant is concerned, this Court while
remanding the disputes back to the Arbitrator had clearly stated
that the Arbitrator shall decide Claim no.7 on the basis of the
record already filed before him. Apart from this prohibition,
the petitioner did not choose to file this document while the
Arbitrator was hearing the arguments on the said claim. It was
only after arguments had been concluded that the petitioner
suddenly woke up and wished to place the said document on
record, however, even if one is to consider the application
which was filed by the petitioner before the Arbitrator, it only
sought another opportunity of oral hearing and did not plead
any ground why the document should be taken on record or
why the said document had not been filed earlier before the
Arbitrator.
18. In absence of any proof in support of this claim, the
Arbitrator has rightly rejected the same.
19. I therefore, find no merit in the present petition and the
same is dismissed, with no order as to costs.
NAVIN CHAWLA, J
FEBRUARY 04, 2019
RN
OMP No.663/2012 Page 11