M/S.JV Engineering Associat Civil Engineering Contractors vs General Manager

Senthilkumar Ramamoorthy, J

An arbitral award dated 07.11.2018 pertaining to a contract for the construction of control room for Traction Sub Station (TSS), including earth filling and retaining wall at Uppala and Thokur and construction of OHE depot and tower wagon shed at Mangalore junction in Palakkad Division of Southern Railway is the subject of challenge in this petition.

The present challenge is the second round. In the first round, the petitioner assailed the award on the ground that the arbitrator was disqualified. Learned single Judge accepted the ground of challenge and set aside the award. On appeal, a Division Bench of this Court, by judgment dated 11.08.2021 in O.S.A.No.119 of 2021, concluded that the petitioner had waived/consented in terms of Section 12(5) of the Arbitration and Conciliation Act, 1996 (A & C Act) to the appointment of the arbitrator. Therefore, the order of the learned single Judge was set aside and the award was restored. The Supreme Court rejected the special leave petition against said judgment. Matters were however remanded to this Court for consideration on merits.

Learned counsel for the petitioner assails the arbitration award on the following grounds:

2.1 Price variation was granted in respect of the first three extensions of time. As regards the fourth extension, in spite of the petitioner submitting rider agreement dated 12.12.2017 pertaining to another contract with the Railways, wherein price variation was granted partly, the Arbitral Tribunal disregarded such evidence;

2.2 The award is inadequately and improperly reasoned. In Dyna Technologies Private Limited vs. Crompton Greaves Limited [(2019) 20 SCC 1], the Supreme Court interfered with an arbitral award on the ground that provision of reasons is mandatory under Section 31(3) of A & C Act unless parties agree otherwise. Applying said principle to this case, learned counsel contends that the award is vitiated by inadequate or improper reasoning.

In response, learned standing counsel for the Railways submits that the petitioner signed rider agreement dated 29.06.2017 for extension of the agreement from 01.04.2017 to 31.07.2017 under Clause 17-A(ii) of the General Conditions of Contract without applicability of price variation. He referred to the counter statement before the Arbitral Tribunal in support of his contention. Referring to the arbitral award, learned counsel pointed out that the Arbitral Tribunal took note of the fact that the rider agreement was executed in relation to the fourth extension without price variation. As regards the reference to the submission of the rider agreement pertaining to an unconnected contract, learned counsel contends that price variation cannot be granted merely because it was agreed to in another contract.

The claims made by the petitioner before the Arbitral Tribunal are as under:

S.No.

Details of Claims

Claim Amount in Rs

1.

The PVC calculations have been made upto CC VII. For further bills and final bill, clear instructions with regard to RBI indices are awaited from Railway Board

3,26,470/-

2.

Legal cost

1,00,000/- (lumpsum)

3.

Compensation for mental agony, unnecessarily making me to run pillar to post just to establish the genuineness of my claim

5,00,000/- (lumpsum)

4.

Interest for the delay in making the payment of PVC (Unspecified, depending on the period of delay)

19,588/- From 24.08.2017 @ 12% simple interest

Total

9,46, 058/-

Out of the above claims, the claims for legal cost and interest are contingent on the petitioner succeeding in relation to the primary claims for price variation and compensation for mental agony. A claim for compensation for mental agony cannot be made in relation to a commercial contract between parties. In any event, no evidence has been adduced in support of the claim for mental agony. Therefore, no case is made out to interfere with the rejection of said claim.

As regards the claim for price variation, learned counsel for the petitioner contended that price variation was granted in respect of the first three extensions of time. She also submitted that price variation was granted in relation to an unconnected contract with the Railways with price variation notwithstanding the rider agreement. The agreed position is that the rider agreement was executed in the case at hand in relation to the fourth extension without price variation. As a creature of contract, the Arbitral Tribunal is bound by the terms of such rider agreement unless the petitioner were to establish that such rider agreement is either void or voidable. There was neither pleading nor evidence to support and establish that rider agreement was void or voidable. In those circumstances, the Arbitral Tribunal examined the claim for price variation and held as follows:

Reasons for the award:

On going through the relevant records, it is noticed that the initial currency of this work was upto 18.04.2016. Claimant had asked for 4 extensions and all 3 currency extension were given with PVC and 4th extension was given without PVC and accordingly rider agreement was also executed.

The respondent made it clear in his submission that the PVC amount for the period upto 31.07.2017 for which the extension was granted with PVC, the claimant is eligible for PVC amount. However, the claimant not yet submitted the claim for PVC amount. The 4th extension was granted without PVC by the competent authority. Hence, not eligible for any PVC amount. Moreover, claimant's claim of considering the PVC is mandatory if the extension is granted under 17(A) or 17(B) as similarly done in some other Railways, sufficient time was given to submit the record of similar cases with other Railways, but claimant could not submit any proof to substantiate his claim. In view of the above, claimant's claim is not valid.

The Arbitral Tribunal has taken note of the fact that the fourth extension was given without price variation and that the rider agreement was executed in that regard. For reasons discussed above, the Arbitral Tribunal was bound to take note of the contractual clauses accepted by the parties. Therefore, I find no infirmity warranting interference under Section 34 of the A & C Act. Hence the challenge to the arbitral award fails and the original petition is dismissed without any order as to costs.