M/S NCC-VEE (JV) vs. NATIONAL HIGHWAYS AUTHORITY OF INDIA

$~40.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ EFA(OS) (COMM) No. 5/2017
th
Date of decision: 18 April, 2017
M/S NCC-VEE (JV) ..... Appellant
Through Mr. Krishna Vijay Singh & Mr.
Nachiketa Goyal, Advocates.

versus

NATIONAL HIGHWAYS AUTHORITY OF INDIA.... Respondent
Through Ms. Gunjan Sinha, Advocate.

CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE ANIL KUMAR CHAWLA

SANJIV KHANNA, J. (ORAL):

Having heard counsel for the appellant, we are not inclined to
st
interfere with the impugned order dated 21 February, 2017, whereby,
OMP (Enf.) (Comm) No. 71/2016 has been disposed of.
2. Disputes with regard to computation of the base price became
th
subject matter of Arbitration Award dated 30 September, 2012. The
majority award accepting the plea of the appellant had ultimately issued the
following directions:-
“93. We now proceed to deal with the Claims and
Counter-Claims as enumerated in the submissions
made by the parties and pronounce our findings-

1) The Respondent/Engineer is not authorised to
recover payments made by it earlier on account of the
price adjustment.
2) The Respondent/Engineer is not justified in applying
the new altered price adjustment procedure proposed
by the Respondent.
3) The Respondent shall continue to follow the same
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procedure in finalizing the bills which was being
followed in issuing the IPCs till IPC 18.
4) The Respondent shall return the Bank Guarantees of
Rs.25.46 crore to the Claimant.
5) Respondent‟s Counter-Claim of Rs.12,81,94,646.00
against the Claimant is disallowed along with any
interest on the said amount.
6) Cost of arbitration to the extent provided for in the
Contract shall be borne by each party itself. All the
balance cost of Arbitration shall be shared equally by
the parties.

94. The Tribunal having carefully considered the
documentary evidence, the oral evidence and the
submissions of the Parties and giving due weight
thereto and rejecting all submissions to the contrary,
hereby makes this majority Award and for the reasons
set out above FINDS, AWARDS, ORDERS and
DIRECTS as follows:-

1) That the Respondent shall interpret the Sub-Clause
70.3 (xi) of the Contract in the same manner it has been
interpreting the sub-clause while paying IPC 1 to IPC
18 to the Claimant. No recovery of the payment
already made shall be affected.
2) That the Respondent shall continue to interpret Sub-
Clause 70.3 (xi) in the same manner it has been
interpreting the sub-clause while paying IPC 1 to IPC
18 from IPC 19 onwards till completion of the Work
and pay the Claimant accordingly.
3) The Respondent shall return the Bank Guarantees of
Rs. 25.46 crores to the Claimant immediately.
4) The costs of Arbitration over and above the costs
covered under Sub-Clause 67.3 (vii) of COPA shall be
shared equally by the parties.
5) All other claims and requests are rejected.”

The said award has attained finality and the challenge made by the
respondent has been dismissed.
3. The aforesaid Award decides the question relating to interpretation
of sub-clause (xi) to clause 70.3 and upholds the appellant‟s contention that
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the actual/current cost of bitumen, cement and steel should be used for
calculation and rejects the respondent‟s contention that the cost/rate
prevailing 28 days prior to the closing of the submission of the bids should
be used for calculation.

4. The appellant had filed the aforesaid OMP for execution of the
th th
Award in view of circulars dated 29 May, 2012 and 15 February, 2013
issued by the respondent-National Highways Authority of India. For the
sake of convenience, we would like to reproduce the two circulars, which
are as under:-

th
“ 29 May, 2012

POLICY MATTERS-TECHNICAL (103/2012)
[Decision taken on File No. 11014/12/2001/Tech/GM
(WB)]
Sub: Payment of Escalation on Material Advance.

Reference has been received regarding payment of
Escalation on Material Advance whether to be made on
value material in escalation formulae “R” for which material
advance paid to be considered 75% (actual advance paid to
the Contractor) or 100% of material value.

2. Generally Clause 70.3 (C) of the contracts deals with
price adjustment formulae. Typically as an illustration the
“R” is defined as under:-

“R= Total value of work done during the month.
It would include the value of materials on which
secured advance has been granted, if any, during
the month, less the value of materials in respect of
which the secured advance has been recovered if
any, during the month. This will exclude cost of
work on items for which rates were fixed under
variations clause (51 and 52) for which the
escalation will be regulated as mutually agreed at
the time of fixation of rate.”

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3. The issue has been deliberated and it is found that for
calculation of the value of R prescribes the value of
materials (and not value of secured advance against the
material) on which secured advance has been
granted/recovered, if any, for that month should be
included/deducted for that month.

4. Also all PIUs/Field Units should ensure that, while
calculating the payment on account of price adjustment,
correct indices (i.e. the source of publication of such
indices) as mentioned in the Civil Works Contracts should
be used. Any other indices (i.e. published from a different
source) not mentioned in the Civil Works Contracts should
not be used.

5. The above may also be brought to the notice of all the
„Engineers‟ under various contracts with such provision.

6. This applies for all contracts where such provision exists
and will supersede the Policy Circular no. 66/2003 dated
15/12/2003 or any such interpretation.

7. All Divisions/Field Units are required to comply with this
and payment in contracts with such provision should be
made accordingly.

8. This issues with the approval of Chairman.”

XXXXX

“Dated: 15.02.2013
CIRCULAR

Sub: Price adjustment due to change of base year of WPI
from 1993-94 to 2004-05-Procedure for payment-reg.

Due to change of base year of Wholesale Price Index
(WPI) from year 1993-94 to 2004-05 references have been
received from various field units of NHAI (from ROs &
PIUs) for mechanism for adoption of WPI series 2004-05
for payment of price escalation in the contacts with base
year of WPI as 1993-94 because the old series is not
published since August, 2010. Some of the items of the old
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series have been dropped and some new items have been
included in the new series. List of items dropped or revised
from WPI Series (1993-94) and list of items added or
revised in WPI Series (2004-05) are available on the website
http://caindustry.nic.in of the Ministry of Commerce &
Industry, Govt. of India. In fact, nomenclatures of many
items of old series have changed in the new series and need
to be correlated. In view of this, field units are required to
follow following guidelines/instructions for payment of
price adjustment which are based on WPI.

(i) The items in the new series should be chosen based on its
technical analogy and practical use. As such, replacement
of items in new series corresponding to items in old series
should be Grey Cement for Cement, Rebars for Bars &
Rods and Construction Machinery for Heavy Machinery &
Parts. In case of any other item, field units may recommend
similar replacement to headquarter in consultation with
Engineer of the project.

(ii) There is no problem in price adjustment for contracts based
on 1993-94 series up to August, 2010; so, payment of price
adjustment for them up to August, 2010 should be made as
per the contractual provisions.


(iii) For payment of price adjustment after August, 2010 for
contracts based on 1993-94 series, average linking factor for
individual items may be derived instead of using linking
factor for broad groups provided on the website. This
average linking factor for an individual item may be derived
by taking average of the month-wise linking factor of the
item obtained by dividing its index of old series of a month
by index of its new series for that month for the year 2009-
10 (April, 2009 to March, 2010), when both the series are
available. The method of derivation of this average linking
factor for 3 sample items is annexed at Annexure-I and
average linking factors so obtained for them are tabulated
below:

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The index for any item for any month in 1993-94 series
beyond August, 2010 (when 1993-94 series is not available)
may be worked out on the basis of available index of the
item for the month in 2004-05 series by multiplying the
same by the average linking factor for the item so obtained.
Thus, payment on account of price adjustment may be made
by adopting the above process subject to the condition that
the contractors furnish undertaking affirming that this price
adjustment is acceptable to them and they will not make any
claim, whatsoever, on this account in future after this
payment.

This issue with the approval of the Competent
Authroity.”

5. We do not think the appellant could have filed an execution
application on the basis of the said circulars. The single Judge in the
th
impugned order has noticed that the second circular dated 15 February,
th
2013 was issued after the Award dated 30 September, 2012, was
pronounced. The second circular issued by the respondent pertains to price
adjustment due to change of the base year of the Wholesale Price Index
from 1993-94 and 2004-05. The subject matter of the Award and the
dispute raised, which was adjudicated in the Award, was different, as it
related to the question of base price of bitumen, cement and steel and
decided whether the same should be based upon indices or price prevailing
on the day 28 days prior to the closing of subject matter of bids or as per
interim payment certificate for the month.
6. In these circumstances, the findings of the single Judge that the
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Award does not make any reference to the circulars and, therefore, the
circulars themselves was not the subject matter of the Award, is correct.
7. Learned counsel for the appellant has submitted that ultimately the
payment quantified and also the manner in which it has to be calculated
was examined and decided. We have already noticed the dispute, which
th
was subject matter of the Arbitration Award dated 30 September, 2012. It
is open to the appellant to rely upon the majority Award in support of his
submissions, and it is equally open to the respondent to justify the
adjustments and submit that the dispute subject matter of the arbitration
th
Award dated 30 September, 2012 was relating to a restricted element of
computation i.e. cost of bitumen, cement and steel and not the aspects and
issues covered by the circulars and adjustments now made.
8. This dispute or question cannot be raised by filing an execution
petition in the factual matrix, but appropriately in separate and distinct
proceedings.
9. For the aforesaid reasoning, we are not inclined to interfere with the
impugned order. Counsel for the respondent has raised preliminary
objection as to the maintainability of the appeal, but has not pressed for the
same in view of the fact that the appeal has been dismissed on merits.



SANJIV KHANNA, J.


ANIL KUMAR CHAWLA, J.
APRIL 18, 2017
VKR/NA
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