Aneja Constructions (India) Ltd. vs Grim-Tech Projects (I) Pvt. Ltd.

S. No.,CLAIMS,AMOUNT (Rs.)

1.,(A) Principal Outstanding Dues,"1,00,07,985

,"(B) Damages/Compensa(cid:42)on for extended

deployment of assets","4,09,41,540

2.,Interest,

,"Pre Reference and Pendente Lite On Claim (A) [18%

from 04.10.2014]

On Claim (B) [March, 2015]","49,62,803

69,60,062

,Future Interest,Not Determined

3.,Costs,"5,00,000

,Total,"6,33,72,390

contended that GTPL had claimed simple interest at the rate of 10.5% per annum but was awarded compound interest at the rate of 12% per annum.,,

Thus, the impugned award being beyond of the claim made by GTPL, is vitiated by patent illegality.",,

Mr. Shamshad, learned counsel appearing for GTPL countered the aforesaid submissions. He submitted that ACIL had not raised any plea of",,

fraud to oppose GTPL’s petition under Section 11 of the A&C Act. Further, ACIL had also preferred a Special Leave Petition (SLP) before the",,

Supreme Court impugning the order dated 10.04.2017 passed by this Court allowing the GTPL’s petition under Section 11 of the A&C Act.,,

However, even at that stage, GTPL had not raised any issue of fraud.",,

Next, he submitted that award of damages was a reasonable estimate of the damages incurred by GTPL on account of idle machinery and",,

withholding of gate passes by ACIL. He submitted that GTPL had produced evidence and material on record to justify its claim for damages and the,,

Arbitral Tribunal had also noted the same. Nonetheless, the Arbitral Tribunal had awarded damages of a reduced amount based on its estimate of",,

reasonable damages. He referred to the decision of the Supreme Court in Mcdermott International Inc. v. Burn Standard Co. Ltd.: (2006) 11 SCC 181,,

in support of his contention that it was open for the Arbitral Tribunal to award damages, which it considers reasonable, without any specific evidence",,

as to the quantification of the said damages.,,

Reasons & Submissions,,

The first and foremost question to be addressed is whether the impugned award is liable to be set aside as being without jurisdiction. The answer,,

to this issue is dependent on the question whether an arbitration agreement exists between the parties. There is no dispute that ACIL had issued the,,

Principal Work Order. The subject of the said Work Order indicated that it was for “carrying out pile foundation work for CHP at Muzaffarpur,,

Thermal Power Plan of Kanti Bijlee Utpadan Nigam Ltd. (Dist. Muzaffarpur â€" Bihar)â€​. The first page of the Work Order indicated that the Terms,,

and Conditions were specified in Annexure-1 to the said Work Order. Clause 27 of the said Terms and Conditions reads as under:,,

“27. Arbitration: Any dispute in relation of this contract shall be subject to the final decision of M.D. â€" ACIL.â€​,,

The fact that ACIL had issued the Principal Work Order is not in dispute. ACIL now claims that the said Work Order was not signed and,,

therefore, the arbitration agreement, which is included as Clause 27 of the Terms and Conditions never came into existence. In the alternative, ACIL",,

also claims that the Principal Work Order had expired by efflux of time since it was valid only for a period of four months.,,

It is relevant to note that it is not disputed that GTPL had executed piling work for CHP at Kanti Bijlee Utpadan Nigam Ltd. at Muzaffarpur. It,,

had raised Running Bills for the work done. The Arbitral Tribunal had also accepted that certain payments had been made in respect of the work done,,

by GTPL. The invoices raised by GTPL specifically referred to “Work Order No:ACIL/Grim-Tech/1060313/2013 Dated 07/03/2013â€. The,,

Arbitral Tribunal did not accept the contention that GTPL had executed the works on an ad-hoc basis [referred to as “Give and Take basisâ€] and,,

not in accordance with the terms of the Principal Work Order as amended. GTPL further contended that ACIL had issued an amendment to the,,

Work Order dated 07.03.2013 (Principal Work Order), on 24.07.2013 (being the Amended Work Order). The bills had been raised as per the rates",,

specified in the said Amended Work Order. In this regard, it is contended on behalf of ACIL that the Amended Work Order did not include an",,

arbitration clause and therefore, there was no agreement between the parties for referring any dispute pertaining to the said amendment to arbitration.",,

The Arbitral Tribunal had rejected the aforesaid contention and had found that the Amended Work Order dated 24.07.2013 was an amendment to,,

the Principal Work Order dated 07.03.2013 and therefore, an agreement existed to refer the subject disputes to arbitration. Further the Amended",,

Work Order dated 24.07.2013 also expressly mentions that “Terms and Conditions remains same as per earlier orderâ€. Thus, the Arbitral Tribunal",,

held that the arbitration agreement as included in the Terms and Conditions appended to the Work order dated 07.03.2013 would also be applicable to,,

the Amended Work Order dated 24.07.2013. The relevant extract of said finding of the Arbitral Tribunal is set out below:,,

“62. As against the contention of the Respondent qua the Work Orders dated 07.03.2013 (Ex.CW-1/3) and 24.07.2013 (Ex.CW-1/4), case of the",,

Claimant as per their statement of claim and as deposed by Sh. R.K. Singh (CW-1) is that the Respondent had issued the Work Order dated,,

07.03.2013 and thereafter issued Work Order dated 24.07.2013 as amendment to the earlier work order and the latter Work Order dated 24.07.2013,,

comprising one page only mentioning that “Terms and conditions remain the same as per earlier orderâ€. The Claimant started to work as per the,,

said Work orders and raised 12 Running Bills totaling to Rs.2,94,55,392/- and the Net Outstanding was Rs.1,00,07,985/- which was confirmed by the",,

Respondent being payable to the Complainant.,,

It is submitted on behalf of the Claimant that the Work Order dated 07.03.2013 was subsequently amended by Work order dated 24.07.2013,,

which has to be read in continuation of the Work Order dated 07.03.2013 while the Respondent had sought an amendment in Work Order dated,,

07.03.2013 qua retention money as per Ex.RW-1/2, which is dated 18.03.2013 in reply to email dated 11.03.2013 sent by the Claimant to the",,

Respondent and subsequently, the Respondent issued Work Order dated 24.07.2013. It is contended by the learned counsel for the Respondent that",,

since March 2013 to December 2014, Respondent had not taken any stand that either of the Work Orders had expired or stood terminated, nor it was",,

pleaded in this case that the parties had abandoned the contract or started relationship on “GIVE AND TAKE†basis or verbal basis. For the first,,

time RW-1 in his affidavit, Ex. RW -1/A stated that the Claimant never accepted the Work Order or the Claimant failed to convey their acceptance to",,

the Work Order dated 24.07.2013. Only in his cross examination PW-1 came out with the plea that work was executed by the Claimant on “Give,,

& Take†basis or verbal basis and continued till December 2013, admitting that Respondent continuing making payment to the Claimant till",,

18.02.2015. He submitted that there was no termination of Work Order till 2014 and receipt of Bills is not denied and the Respondent admitted,,

continuously making payment till 18.02.2015, which lead to the only inference that the Work Order dated 07.03.2013 did not expire due to efflux of",,

time but was amended vide Work Order dated 24.07.2013 and the contract remained open-ended till the date of issuance of last RA/Bill. According to,,

the learned counsel, for the Claimant since the Work Order dated 24.07.2013 (Ex. RW-1/3) categorically mentions that terms and conditions of earlier",,

Work Order would be the same, these have to be treated as part and parcel of the amended Work Order i.e. Work Order dated 24.07.2013.",,

It is also submitted by the learned counsel for the Claimant that whatever is contrary to pleading or is not pleaded in the counter statement but has,,

been stated in written arguments by the learned counsel for the Respondent cannot be considered because it is well settled law that no party can put,,

forth a case or defence beyond pleadings. He pointed out that non-acceptance of Work Order dated 24.07.2013 was never insisted upon rather,,

admitted that the Claimant continued working on the basis of Work Order dated 24.07.2013, as is evident from para 6 on page 11 of the counter",,

statement, where it is stated by the Respondent that ""the Claimant executed the work on the basis of Work Order dated 24.07.2013.",,

xxxx xxxx xxxx,,

… Claimant's case is that pursuant to the terms being arrived at a meeting, Work Order Ex. CW-1/3 was issued on 07.03.2013 which was",,

amended on 18.03.2018 agreeing upon reducing retention money @ 5% instead of 7%, but later on another Work Order Ex. CW-1/4 was issued on",,

24.07.2013 on the terms and conditions earlier settled among the parties, while issuing Work Order Ex. CW-1/3, and relying upon those terms and",,

conditions, Claimants executed the work as per Work Order Ex. CW-1/4 for which they had been raising: RA Bills of which six are admittedly",,

received by the Respondent, against which the Claimant was even made the payment allegedly more than what was due. Admittedly received .RA",,

Bills are Ex. CW- 1/6, Ex. CW- 1/7, Ex. CW- 1/9, Ex. CW-1/ 10, Ex. CW-1/ 11 & Ex. CW-1/ 12. Other RA Bills are mask A', 'B', 'C', 'D', 'E', 'F'",,

and ‘G’. All the RA Bills have been issued in reference to Work Order dated 07.03.2013 including the last admitted, RA Bill Ex. CW- 1/12 for",,

the period from 01.04.2013 to 31.12.2013, implying that the Respondent continued paying against those bills in reference to Work Order Ex. CW-1/3,",,

which according to the Claimant stood amended on 24.07.2013. In such circumstances, the contention of the Respondent that the two Work Orders",,

were different and independent of each other is fallacious and cannot hold ground. Parties continued acting on the Work Order dated 07.03.2013 (Ex.,,

CW- 1/3), Claimant executing the work as per Work Order dated 24.07.2013 (Ex. CW-1/4) treating it only as an amendment, as had happened in case",,

of amendment dated 18.03.2013 and the Respondent making payment admittedly for the period from 01.04.2013 to 31.12.2013.â€​,,

This Court concurs with the aforesaid conclusion. It is clear that the Amended Work Order dated 24.07.2013 was an amendment to the Principal,,

Work Order dated 07.03.2013. The Amended Work Order dated 24.07.2013 bears a reference which reads as, “ACIL/Grim-",,

Tech/1060313/2013/Amend-1â€​.,,

It is clear that the Principal Work Order for executing the work of pile foundation was issued on 07.03.2013 and was subsequently amended by,,

the Amended Work Order dated 24.07.2013, in respect of the quantities and rates for the works in question.",,

GTPL had invoked arbitration in respect of the Amended Work Order dated 24.07.2013. It also suggested the names of three former Judges of,,

this Court out of which one of whom could be appointed as the learned Arbitrator. ACIL did not concur on any such appointment. Consequently,",,

GTPL filed a petition under Section 11 of the A&C Act [ARB.P. No.98/2017 captioned Grim Tech Projects (I) Pvt. Ltd. v. Aneja Constructions,,

(India) Ltd.]. The said petition was allowed by an order dated 10.04.2017. This Court noted that GTPL had invoked the arbitration clause in respect of,,

the disputes that had arisen between the parties in respect of the Work Order dated 24.07.2013. At that stage, GTPL had relied on Clause 27 of the",,

Terms and Conditions as appended to the Principal Work Order dated 07.03.2013. It is material to note that ACIL did not raise any objection to the,,

effect that the Terms and Conditions as applicable to the Amended Work Order dated 24.07.2013 did not include Clause 27 as quoted above. The only,,

objection raised on behalf of ACIL was that the said clause was not an arbitration agreement and it merely stipulated that any dispute would be,,

subject to the final decision of the Managing Director of ACIL.,,

The said contention was rejected. This Court held that Clause 27 constituted an arbitration agreement. The Court further found that the Managing,,

Director of ACIL was ineligible to act as an Arbitrator in terms of Section 12(5) of the A&C Act and accordingly, directed appointment of an",,

Arbitrator under the rules of Delhi International Arbitrator Centre (DIAC).,,

ACIL did not accept the said decision and challenged the same in the Supreme Court by filing a Special Leave Petition (SLP(C) No.15819/2017),,

which was dismissed by the Supreme Court by an order dated 18.08.2017. It is conceded that even before the Supreme Court, ACIL did not raise any",,

objection that the Work Orders in question as issued by ACIL were not signed by GTPL and therefore, there was no agreement in terms of Section",,

7(4) of the A&C Act.,,

It is material to note that in its Statement of Claims filed before the Arbitral Tribunal, GTPL had asserted that the parties had negotiated a contract",,

at a meeting held on 06.03.2013 and pursuant to the said meeting, ACIL had issued the Work Order dated 07.03.2013 which was amended by the",,

Work Order dated 24.07.2013. Paragraphs 5 and 6 of the Statement of Claims are set out below:,,

“5. That the contract to be entered into was negotiated by both the Parties in meeting dated 06.03.2013. Pursuant to terms being arrived at, the",,

Respondent awarded the Work Order dated 07.03.2013 to the Claimant herein, in terms of the Work Order bearing Reference No.ACIL/Grim-",,

Tech/1060313/2013 the work of carrying out pile foundation work for CHP, at Muzaffarpur Thermal Power Plant of Kanti Bijlee Utpadan Nigam",,

(Ltd.) located in Muzaffarpur, Bihar valued at Rs.10,73,94,000 (Ten Crores Seventy Three Lacs Ninety Four Thousand) was awarded to the",,

Claimant.,,

That in terms of Work order dated 24.07.2013, bearing Reference No.ACIL/Grim-Tech/1060313/2013/Amend-1, the earlier Work Order dated",,

07.03.2013 was amended. In terms of the amended Work Order dated 24.07.2013, the total value of work to be done, being boring of pile foundation",,

and fabrication of reinforcement steel including cutting, bending, binding, placing, welding etc. was valued at Rs.4,72,50,000.â€​",,

ACIL filed its Statement of Defence. It raised a preliminary objection stating that GTPL had invoked the arbitration clause on the basis of the,,

Amended Work Order dated 24.07.2013, however, it had filed its claims on the basis of the Principal Work Order dated 07.03.2013. Thus, adjudication",,

of GTPL’s claims was outside the scope of reference to arbitration.,,

In respect of the contents of paragraph 5 of the Statement of Claims filed by GTPL, ACIL stated that the same is a matter of record and needed",,

no comments. In respect of the contents of paragraph 6 of the Statement of Claims, ACIL had traversed the same by responding as under:",,

“6. That the contents of para no.6 under reply are denied and disputed. It is specifically denied that the work order dated 07.03.2013 was amended,,

by work order dated 24.07.2013. The time allowed for execution of work as per work order dated 07.03.2013 had expired due to efflux of time as,,

there was no provision in work order for extension of time. Despite of rates more than market rates for the work under work order dated 07.03.2013,",,

no substantial work was executed by the Claimant. The respondent on 24.07.2013 offered fresh rates to the Claimant for execution of work,,

considering the market rates. The rates offered by the Respondent were then accepted by the Claimant. Accordingly the Respondent issued the work,,

order dated 24.07.2013. Hence the work order dated 24.07.2013 is a fresh work order which has no relation to the earlier work order.â€​,,

It is clear from the above that there was no dispute that the Principal Work Order dated 07.03.2013 (which was mentioned at paragraph 3 of the,,

Statement of Claims) was issued by ACIL and was accepted by GTPL. It is also clear from paragraph 6 of the Statement of Defence that ACIL had,,

also agreed that it had issued the Amended Work Order dated 24.07.2013, which was accepted by GTPL.",,

ACIL did not contest that the arbitration agreement as included under Clause 27 of the Terms and Conditions appended to the Principal Work,,

Order dated 07.03.2013, did not exist as it was not signed by GTPL. In terms of Section 7(4) of the A&C Act, an assertion of an arbitration",,

agreement in a Statement of Claim, which is not denied in the Statement of Defence would be an arbitration agreement within the meaning of Section",,

7(4)(c) of the A&C Act. In the present case, as noted above, ACIL had not disputed the existence of an arbitration agreement on the ground that the",,

Work Orders were not singed by GTPL.,,

The aforesaid contention is also an afterthought as it was not raised by ACIL in its Statement of Defence.,,

The contention that an arbitration agreement did not exist between the parties is thus, unmerited and accordingly rejected.",,

The next question to be addressed is whether there is any material before the Arbitral Tribunal to render an award of Rs. 2,15,00,000/- (Rupees",,

Two Crores Fifteen Lakhs only) on account of damages / compensation for extended deployment of assets at site.,,

It was GTPL’s case that the works were required to be completed within a period of four months, however, the same was stretched on",,

account of non-availability of material and other factors which were solely attributable to ACIL. GTPL’s assets (two Piling Rigs, two Cranes, one",,

Hydra and one JCB) along with the requisite support staff remained deployed at the site for an extended period of time from December, 2013 to",,

March, 2015. GTPL claimed that it could let out its machinery and equipment or could have deployed the same at other sites. GTPL had also led",,

evidence to show that the rental that could be fetched by hiring out the said machinery and equipment. In addition, GTPL had also produced evidence",,

for showing the monthly summary of indirect expenses incurred by it.,,

GTPL’s witness (CW1) had testified that GTPL had raised additional Running Account Bills for idle deployment of assets at work sites. The,,

said bills were exhibited (Ex.CW1/43 to Ex.CW1/47). The aggregate value of the said bills was approximately Rs. 1,24,07,942.54/-. ACIL disputed the",,

receipt of these bills/invoices. On 07.09.2016, GTPL had issued a legal notice quantifying its claim on account of idle assets for the period from",,

December, 2013 to March, 2015 at Rs. 2,98,94,835/-. In its Statement of Claims, GTPL claimed a sum of Rs. 4,09,41,540/- on that count for the period",,

of fifteen months.,,

Although, the Arbitral Tribunal had mentioned the material brought on record however, it found that there was “no cogent and convincing",,

evidence†for calculating the compensation for the loss suffered by the claimant. However, the Arbitral Tribunal awarded a sum of Rs. 2,15,00,000/-",,

on the basis of the average of additional Running Account Bills (Ex.CW1/43 to Ex.CW1/47) aggregating Rs. 1,24,07,942.54/- and the sum of Rs.",,

2,98,94,854/- as claimed by GTPL in its notice dated 07.09.2016. The relevant extract of the impugned award in respect of the said award of Rs.",,

2,15,00,000/- is set out below:",,

 “90. Above documents proved on record by the Claimant include RA Bills issued during the period from 01.11.2013 to 31.03.2014 which are,,

Exs.CW-1/43 to Ex.CW-47 and these total approximately Rs.1,24,07,942.54 (approx.). Receipt of these invoices is not admitted by the Respondent.",,

This amount of idling charges of machinery and equipment is upto 31st March 2014. When the legal notice Ex.CW-1/52 was issued on 07.09.2016 it,,

was claimed that if the said assets had been deployed else where it would have generated Rs.2,98,94,854/- from December, 2013 to March, 2015.",,

However, when the statement of claim was filed Claimant prayed for payment of Rs.4,09,41,540/- @ Rs.27,29,436/- per month for 15 months. There",,

being no cogent and convincing evidence for calculating compensation for the loss suffered by Complainant to demobilize their machinery due to non-,,

issue of exit gate pass on account of dispute ensued between the Respondent and their principals, it shall be reasonable to calculate the loss at an",,

average of the amount shown in RA Bills E-1 to E-51 Ex.CW-1/43 to Ex.CW-1/47 and what had been asked for by the Claimant vide their legal,,

notice dated 07.09.2016 (Ex.CW-1/52) receipt of which cannot be disputed by the Respondent who had even replied it by their letter dated 13.10.2016,,

(Ex.CW-1/53), vaguely denying that the Respondent had not kept deployed at site, the machinery, labour and staff from December, 2013 to March,",,

2015, whereas it is an admitted and proven fact that the machinery was mobilized at site at the cost of the Respondent, who could not arrange to get",,

the Exist gate pass issued till March, 2015. I am, therefore, of the considered view that inability (or demobilization of assets from the site by the",,

Claimant is attributable to the Respondent who shall have to compensate the Claimant at least to the extent of lumpsum Rs.2,15,00,000/- in this case",,

for all the expenses incurred on machinery, equipment and staff etc. etc.â€​",,

[Underlined for emphasis],,

It is clear from the above that there is no real basis for quantifying the damages at Rs. 2,15,00,000/-. The Arbitral Tribunal had noted that receipt",,

of Ex.CW-1/43 to Ex.CW-1/47 was disputed by ACIL. The Arbitral Tribunal had also held that there was “no cogent and convincing evidence for,,

calculating compensation for the loss suffered by Complainant to demobilize their machinery due to non-issue of exit gate passâ€​.,,

In view of the finding of lack of cogent and convincing evidence regarding quantification of the damages, the award of Rs. 2,15,00,000/- on an ad-",,

hoc basis cannot be sustained. There is no basis for computing the said amount of damages. There is merit in the contention that there was material,,

before the Arbitral Tribunal for quantification of the claims and, the Arbitral Tribunal had also noted that GTPL had proved additional Running",,

Account Bills aggregating approximately Rs. 1,24,07,942.54/-. However, the basis on which the Arbitral Tribunal had ascertained the amount of Rs.",,

2,15,00,000/- as the loss suffered by GTPL being average of the invoices and the amount claimed, is patently erroneous.",,

It is not permissible for this Court to re-appreciate the evidence to calculate the damages as established by GTPL and modify the award of,,

damages. It is not open for this Court in this proceeding to modify the arbitral award. In view of the above, the impugned award to the extent that it",,

awards damages in the sum of Rs. 2,15,00,000/- is liable to be set aside.",,

The last question to be examined is whether the award of 12% compounded interest on the awarded amount of Rs. 1,00,07,985/- is beyond the",,

claim made by GTPL.,,

GTPL had sought pre-reference and pendente lite interest at the rate of 18% per annum on the aforesaid claim. It had further sought pre-,,

reference and pendente lite interest at the rate of 10.5% (2% above the prevalent rate of interest of 8.5%) in respect of its claim of compensation for,,

extended deployment of assets and reimbursement of expenditure. The Arbitral Tribunal had awarded interest at the rate of 12% per annum on the,,

amount of Rs. 1,00,07,985/- which is less than GTPL’s claim for interest at the rate of 18% per annum. Thus, the contention that the Arbitral",,

Tribunal had awarded interest at a rate higher than as claimed by GTPL is erroneous. GTPL’s claim for interest at the rate of 10.5% per annum,,

was in respect of claim for compensation for deployment of machinery and not for the outstanding dues (Claim-A).,,

Having stated the above, there is merit in the contention that the Arbitral Tribunal could not have awarded any compound interest. The Arbitral",,

Tribunal had awarded 12% simple interest on the amount of Rs. 1,00,07,985/-. However, it further held that if the aforesaid amount is not paid within",,

the period of thirty days of the award, interest shall be compounded at the rate of 12% till the date of realization. No such claim for compound interest",,

was made by GTPL. The said award for compound interest on failure on the part of ACIL to pay the awarded amount within a period of thirty days,",,

is clearly in terrorem and, therefore not sustainable.",,

In view of the above, the impugned award is set aside to the extent that the Arbitral Tribunal had awarded a sum of Rs. 2,15,00,000/- as",,

damages/compensation along with interest at the rate of 6% per annum. The award to the extent that it directs payment of compound interest if the,,

amount of Rs. 1,00,07,985/- is not paid within a period of thirty days is also set aside.",,

To make it abundantly clear, the impugned award of a sum of Rs. 1,00,07,985/- along with simple interest at the rate of 12% per annum with",,

effect from 21.07.2016 till the date of payment is not interfered with.,,

The petition is disposed of in the aforesaid terms. All pending applications are also disposed of.,,