M/S H.R. Builders vs Delhi State Industrial & Infrastructure Development Corporation Ltd

,,,,,

Vibhu Bakhru, J",,,,,

The petitioner (hereinafter “HRBâ€) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the",,,,,

“A&C Actâ€) impugning an arbitral award dated 13.04.2018 (hereinafter “the impugned awardâ€) rendered by an Arbitral Tribunal comprising,,,,,

of a Sole Arbitrator.,,,,,

The impugned award was rendered in the context of disputes that have arisen between the parties in connection with a contract awarded to HRB,,,,,

for refurbishment and upgradation of twenty-five government schools. The Arbitral Tribunal has rendered a net award of Rs. 3,04,91,623/- along with",,,,,

interest in favour of HRB.,,,,,

Briefly stated, the relevant facts that are necessary to address the controversy are as under:",,,,,

The Government of NCT of Delhi launched a project for refurbishment and upgradation of 198 schools run by the Government of NCT of Delhi.,,,,,

The respondent (hereinafter “DSIIDCâ€​) was entrusted with implementation of a part of the project covering twenty-five schools.,,,,,

On 08.07.2009, DSIIDC invited tenders for entire works (both civil and electrical) to be executed in respect of twenty-five schools being a part of",,,,,

the project entrusted to DSIIDC. HRB submitted its bid for executing the aforesaid works. After negotiations, DSIIDC accepted HRBâ€s offer to",,,,,

execute the said works for a total consideration of Rs. 35,46,00,174/-. On 18.08.2009, DSIIDC issued a Letter of Acceptance (LoA) awarding the",,,,,

work of “Integrated Infrastructure Development of Delhi Govt. Schools†under the sub-head “Improvement and Upgradation of 25,,,,,

Government Schools Buildings in North West ‘A’ District (Composite Work)â€​.,,,,,

The work was to commence on 28.09.2009 and it was stipulated that the work would be completed on or before 27.09.2010.,,,,,

Thereafter, on 30.09.2009, the parties entered into a formal agreement (hereinafter “the Agreementâ€​) for execution of the works.",,,,,

DSIIDC did not handover the work of twenty-five schools as agreed to under the Agreement but handed over work pertaining to only twenty-three,,,,,

schools. There were considerable delays in completion of the works contracted to HRB and, the same were finally completed on 18.01.2012; that is,",,,,,

after a delay of 478 days.,,,,,

DSIIDC withheld part payments of the Final Bill and also made certain recoveries from the amount payable to HRB. According to DSIIDC, HRB",,,,,

had defaulted in performance of its obligations under the Agreement within the stipulated time. HRB disputed the same. According to HRB, the delay",,,,,

in execution of the works was due to various reasons attributable to DSIIDC and it was not responsible for any delay.,,,,,

DSIIDC also claimed that the works executed were faulty and sought to recover damages from HRB. HRB, on the other hand, claimed that it",,,,,

was not only entitled to the payments withheld by DSIIDC but was also entitled to compensation on account of escalation and prolongation of works,,,,,

as well as profits for the works reduced from the scope of the Agreement (work relating to two schools which were not handed over to HRB).,,,,,

In view of the aforesaid disputes, HRB invoked the Arbitration Clause to refer the disputes to arbitration and requested that an Arbitral Tribunal",,,,,

be constituted to adjudicate the disputes. On 24.10.2016, the Chief Engineer of DSIIDC appointed Sh. O.P. Bhatia, Former Additional DG (Works",,,,,

Special), CPWD as the Sole Arbitrator to adjudicate the subject disputes.",,,,,

HRB filed its Statement of Claims before the Arbitral Tribunal. DSIIDC filed its Statement of Defence as well as counter claims amounting to Rs.,,,,,

20,05,00,000/-. One of the claims (Claim No.1) preferred by HRB was greater in value than as indicated by HRB in its request for arbitration, which",,,,,

was subsequently referred by Chief Engineer of DSIIDC to the Arbitral Tribunal. In its request for arbitration, HRB had, inter alia, claimed Rs.",,,,,

53,90,498/- as payment due under the Final Bill. However, in its Statement of Claims, HRB made a claim of Rs. 1,40,94,470/- as due and payable",,,,,

under the Final Bill.,,,,,

In addition, HRB also claimed Rs. 5,00,000/- as costs of arbitration (Claim No.9). The said claim was also not included in the claims that were",,,,,

initially made by HRB in its request for arbitration before the concerned Authorities of DSIIDC. Consequently, this claim was also not included in the",,,,,

disputes referred by the Chief Engineer, DSIIDC to the Arbitral Tribunal.",,,,,

In view of the above, on 29.03.2017, HRB sent a letter to the Chief Engineer, DSIIDC requesting it to modify the amount of Claim No.1 from Rs.",,,,,

53,90,498/- to Rs. 1,40,94,470/- and, to also refer the claim relating to costs of the arbitral proceedings quantified at Rs. 5,00,000/-, to the Arbitral",,,,,

Tribunal.,,,,,

In response to the aforesaid request, the Chief Engineer, DSIIDC sent a letter dated 27.06.2017 to the Arbitral Tribunal forwarding HRBâ€s",,,,,

communication requesting that its claim for the enhanced value and its claim for costs be referred to the Arbitral Tribunal, and requested the Arbitral",,,,,

Tribunal to peruse the same and give its “decision/observationsâ€​.,,,,,

The Arbitral Tribunal responded to the said communication by an e-mail dated 28.06.2017. The contents of the said e-mail are reproduced below:,,,,,

“Reference: Respondentâ€​s letter no. 1712 dtd. 27.6.2017,,,,,

With reference to the above, I am to mention here that either party can include its claim in the S.F./C.S.F. regarding cost of arbitration even if it has",,,,,

not been referred by the Chief Engineer as this claim can be awarded by the A.T. under section 31 A (1) of the A & C Act.,,,,,

Making a reference to modify amount of any claim is prerogative of the appointing authority for which cannot give any decision or observations.,,,,,

However, I am to make it clear that my award in respect of any claim will not exceed the amount of claim referred to me.â€​",,,,,

In view of the above, on 26.08.2017, HRB filed an application under Section 23(3) of the A&C Act praying that it may be permitted to amend",,,,,

Claim No.1 and also claim costs for the arbitration proceedings. On 05.09.2017, DSIIDC filed a reply to the said application opposing the same.",,,,,

The said application was disposed of by the Arbitral Tribunal by an order dated 27.09.2017 allowing HRB to pursue its claim for costs but denying,,,,,

its prayer for considering its Claim No.1 at the enhanced value.,,,,,

Aggrieved by the same, HRB preferred a petition before this Court under Article 227 of the Constitution of India [being CM(M) No.1458/2017",,,,,

Cla im

No.",Claim in brief,"Amount referred

by the C.E.","Amount as per

S.O.C.",Amount awarded,"Re m

ar ks

1.,"Payment  of

F/bill","53,90,498","1,40,94,470","42,87,422",

2.,"Release  of

withheld amounts and

amount  of illegal

recoveries","1,28, 71,710","1,27,96,042","1,12,37,900",

3.,"On a/c of D.VAT

(W.C.T.) and

labor cess","3,69,490","3,69,490","2,77,117",

4.,"On a/c of

escalations in the

extended period of

contract","5,10,02,733","3,04,86,958","91,38,560",

5.,"Damages due to

keeping staff,

estt;Â and

machinery in the

extended period","3,32,43,766","3,32,43,766","48,45,700",

6.,"Loss of profit due to

reduction

in scope of work","67,02,683","67,02,683",NIL,

7.,"Revalidation charges

 of

B.G.s due to

prolongation of

contract.","7,97,850","7,97,850",NIL,

8.,"Interest  on delayed

payments of RA &

 F/bills, withheld

amounts as well asÂ

above

amounts","Amount not

specified","Intt. Â On

withheld amounts

Rs.1,61,94,82

1 + intt. On other

claims @ 15%","(i) Intt. On delayed

payment of RA

bills=2,27,424

(ii) Intt. @ 8.5% p.a.

on amounts awarded

under claim

nos.1,2&3 as per

details",

9.,"Cost of

arbitration",,"5,00,000+A.

T.‟s fee","2,00,000+2,77,

500 (under section

38(2) of the A&C

Act-1996)",

,Total,"11,03,78,730

+ Intt.","11,51,86,080

+ intt.","Rs.3,04,91,623

+ intt. On amounts

awarded under claim

nos.1,2,&3 as per

details",

1.,Loss  of,"20,00,00,000/-","20,00,00,000/-",NIL,

,"name, reputation

of DSIIDC and

loss of work ofÂ

the

DSIIDC",,,,

2.,"Cost  of

arbitration","5,00,000/- + fee

and expenses","5,00,000/- + fee",NIL,

,Total,"20,05,00,000/-","20,05,00,000/-",NIL,

Brief Description of each part:- Part- a):-,,,,,

No amount can be recovered against item No .152 (a) to 242 because the nomenclature of these items starts with credit which means that the amount,,,,,

should be added. Further the special condition on page 169 of the contract stipulates that the Serviceable materials is the property of the respondents,",,,,,

hence also no recovery can be made. Instead credit is required to be given for cleaning and making it usable for the respondents which has been done,,,,,

the materials was stacked properly at a place so desired by the respondents. As a matter of fact Rs.20,00,074 is further required to be added as credit",,,,,

to claimants for the services rendered. Which has been added at (f),,,,,

Part-(b) & (c):- Since there is no notice under clause 12.3, therefore the quoted rates cannot be reduced and that there is no notice under clause 12.3.",,,,,

Part d):- As per S. No.7 on page 136 of the contract under the heading BIDDERS TO ENSURE THAT:-,,,,,

Security deposit @. 5% of the actual cost of work done for various specialized works under the sub-head such as water proofing works, water supply",,,,,

and sanitary installation etc. shall be retained in addition to guarantee bond at the time of release of security deposit, for 10 years & 5 years to be",,,,,

reckoned from the date after the expiry of maintenance period.,,,,,

Therefore from the above it is clear that the rate of deduction is 5% and on the item mentioned in the condition and not on tiles or stone work.,,,,,

Secondly the amount is to be retained from the amount of security deposit at the time of release and not from the bills. Therefore deduction from the,,,,,

bill itself is wrong.,,,,,

Apart from the above the respondents have deducted excess amount of security deposit which is matter of claim and for other amount deducted from,,,,,

the bills as well from the final bill, the interest will also be claimed.",,,,,

Part e):- The security deposit of civil work have been released and there is no reason for not refunding the same for electrical component because,,,,,

there is no notice of any defect during the maintenance period and that the maintenance period is over.,,,,,

Therefore the Ld. Arbitrator is requested to please award the amount in favour of the claimants.â€​,,,,,

It is apparent from the above that HRBâ€s claim not only included the amount of the Final Bill that remained unpaid (that is, Rs. 42,87,422/-) but",,,,,

also other claims, which according to HRB were due and payable and were required to be included in its final Bill. The same included a claim for a",,,,,

sum of Rs. 20,00,074/- for amounts recovered against certain items (detailed as set out in Annexure B-1 to the Statement of Claims); claim of Rs.",,,,,

3,54,719/- and Rs. 6,38,185/- on account of difference in the rates at which certain payments for work was calculated; excess security recovered for",,,,,

SI/WS/Water Proofing as detailed in Annexure-C, quantified at Rs. 31,53,423/-; refund of security deposit for the electrical component quantified at",,,,,

Rs. 16,65,573/-; and a credit for Rs. 20,00,074/-.",,,,,

Although HRB had sought to include the above claims as a part of its Claim No.1 (payment of Final Bill), it is apparent that the controversy was",,,,,

not limited to the payments which were admittedly due against the Final Bill and were withheld by DSIIDC.,,,,,

Having stated the above, it is also relevant to note that it is not disputed that the claims made by HRB arise from the Agreement and thus, clearly",,,,,

fall within the scope of Arbitration Clause. The concerned officials of DSIIDC could have addressed the said claims and in case of a dispute, referred",,,,,

the same to the Arbitral Tribunal. Considering that an Arbitral Tribunal had already been constituted and HRB had requested that its claim for the,,,,,

payment under the Final Bill not to be restricted to Rs. 53,90,498/- but be considered for the enhanced amount, there was no reason for CE, DSIIDC",,,,,

to have not considered the same or referred it to arbitration.,,,,,

However, the Arbitral Tribunal has taken a strict view and restricted HRBâ€s claim to an amount of Rs. 42,87,422/-, which was admittedly",,,,,

payable but had been withheld by DSIIDC. The Arbitral Tribunal did not consider the other disputes, which HRB had subsumed under its Claim No.1",,,,,

for an aggregate sum of Rs. 1,40,94,470/-",,,,,

Admittedly, the said disputes were not referred to the Arbitral Tribunal and its decision not to consider the same, cannot be faulted.",,,,,

HRBâ€s contention that it is left remediless is erroneous and it is not precluded from seeking reference of the said disputes/claims aggregating Rs.,,,,,

98,07,048/- ( Rs. 1,40,94,470/- minus Rs. 42,87,422/-), which were not considered by the Arbitral Tribunal. As noticed above, HRB has already raised",,,,,

the said claims and has also requested CE, DSIIDC to refer the same to arbitration.",,,,,

In view of the aforesaid clarification, no interference with the impugned award is warranted on the ground that the Arbitral Tribunal had confirmed",,,,,

itself to the claim referred to it.,,,,,

Insofar as the Arbitral Tribunalâ€s decision regarding HRBâ€s Claim Nos. 6 and 7 is concerned, this Court finds no infirmity with the said",,,,,

decision. The Arbitral Tribunal had noted that DSIIDC was within its right to vary the quantity as well as the schools and therefore, loss of profit in",,,,,

respect of the work relating to two schools that were not handed over to HRB could not be allowed. The said view is a plausible one and given the,,,,,

limited grounds on which the arbitral award can be interfered with, the impugned award warrants no interference by this Court.",,,,,

Similarly, this Court finds that the Arbitral Tribunal has not committed any patent error in rejecting HRBâ€s claim for bank charges for extending",,,,,

the Bank Guarantee on the ground that the same would be subsumed under Overhead Charges, which also include financial costs.",,,,,

The petition, is accordingly, dismissed.",,,,,