Union of India vs Associated Construction Co.

Dr. S. Muralidhar, J.

Caveat No. 477/2015

Since Mr. Amit George, learned counsel appears for the Respondent/ Caveator, no orders are called for.

The caveat is disposed of.

OMP 302/2015

The Petitioner, Union of India, has in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (''Act'') challenged the impugned Award dated 27th December 2014 passed by the learned sole Arbitrator in the disputes between the Petitioner and the Respondent, M/s. Associated Construction Co.

The Petitioner and the Respondent entered into a contract for construction of "Double Storey Building for Stores and Office at 505 ABW at Delhi Cantt-10". The date of the commencement of the work for Phase 1A and Phase 1B was 28th December 2006 and for Phase-II it was 28th December 2007. The period of completion was 12 months in respect of Phase-1A and six months for both Phases 1B and II. Accordingly, the corresponding dates of completion were 27th December 2007, 27th June 2007 and 27th June 2008. The actual dates of completion were 31st January 2012 for all the phases. According to the Petitioner, the Respondent failed to complete the work within the stipulated time of 18 months and that too in 2 phases even after the site for the work was handed over to Respondent on 5th June 2006. The details of the notices/letters sent to the Respondent asking it to expedite the work have been set out in a tabular form in para 8 of the petition.

It is stated that after the completion of work and submission of the final bill, the Respondent raised disputes which were referred to arbitration. There were 8 items of claims preferred by the Respondent.

In reply to the claims, the Petitioner had raised before the sole Arbitrator a preliminary objection as to the maintainability of the claims. It was submitted that claims were barred since the Respondent had signed the final bill (Ex.R-43) without protest and therefore there was ''accord and satisfaction'' of all claims. It was further submitted that the claims were also beyond what was claimed in the final bill which was for Rs. 8,22,887.55, which was corrected by the Petitioner to Rs. 6,99,920 after technical and audit checks. It was submitted that at the highest the Petitioner could have claimed the differential sum of Rs. 1,22,967.50. Reference was made to Clause 65 (IAFW-2249) of General Conditions of the Contract in terms of which there could be no further claims after the submission of the final bill. Reference was also made to the decision of the Supreme Court in P.K. Ramaiah and Company Vs. Chairman and Managing Director, National Thermal Power Corpn., (1994) 1 SCALE 1 : (1994) 3 SCC 126 Supp .

In addition to the filing the aforementioned reply the Petitioner also preferred 5 claims before the learned Arbitrator. By the impugned Award dated 27th December 2014 the learned Arbitrator referred to the Condition 65 of IAFE-2249 and concluded that the final bill had to be completed in all respects before criteria laid down in Condition 65 can be satisfied. The learned Arbitrator noted that in the final bill submitted by the Respondent on 26th March 2012 the Respondent had signed the printed ''no claim certificate'' on 26th March 2012. Even after that, it continued to raise various claims. Also a number of DOs were finalized by the Petitioner after the submission of the final bill. The learned Arbitrator accordingly concluded that the final bill was signed "simply to start the process of necessary checks, to avoid delay; otherwise numbers of DOs were yet to be finalised on the date of submission of final bill and as such the final bill cannot be treated as complete as required under Condition 65 of IAFW-2249." A reference was also made to the letter written by the Respondent to the Petitioner that he had suffered huge losses and that he had signed the final bill without reservation with positive intention that "everything will be settled amicably." However, he stated that his payments were getting delayed and he was facing financial hardship, and in case no worthwhile progress was made in finalization of final bill within two weeks, he would be constrained to approach the authority for adjudication of disputes. Thereafter, the Respondent waited for more than two months. As there was no progress on the final bill he submitted the claims to the Petitioner on 25th October 2012 (Ex.C-57) and served a notice on 12th December 2012 invoking the arbitration agreement. Another factor relevant to the issue of maintainability of the claims is that although the Respondent had submitted the final bill, no payment was made to the Respondent in respect thereof within the period stipulated under Condition 66 of IAFW 2249.Consequently, it could not be said that there was ''accord and satisfaction'' of the Respondent''s claims.

The conclusion of the learned Arbitrator that in the absence of payment of the final bill there could be no ''single accord and satisfaction'' suffers no illegal infirmity. In the circumstances, it cannot be said that the signing of the certificate appended to the final bill by the Respondent precluded the Respondent from raising any further claims. The facts in M/s. P.K. Ramaiah and Co. v. Chairman and Managing Director, NTPC (supra) were that the payments was received by the contractor pursuant to the certificate signed whereas in the present case no payment was made to the Respondent. Consequently, there was no need to further examine whether the certificate was given by the Respondent under duress or coercion.

Claim No. 5 was for Rs. 81,38,636 towards infructuous expenditure incurred in the prolonged period of the contract. The learned Arbitrator noted that this included (i) escalation for material in the prolonged period of the contract from 1st January 2008 to 31st January 2012 without freezing the material price indices; (ii) the cost of scaffolding material and shuttering deployed at site for a period of 720 days beyond the original period of work; and (iii) wages and salary for the Project Engineer, Senior Foreman, Supervisor, Storekeeper and Proprietor for the prolonged period from 1st January 2008 to 31st January 2012. The learned Arbitrator listed out at least nine instances where the delay was attributable as to the Petitioner. These included the initial delay in handing over the site even after amendment to the effect changes in the scope of work, delay in handing over the building for demolition which were in use, delay in handing over the site for stone sett, delay in cutting trees, delay in clearing obstructions, delay in planning and execution of work by the other agencies, delay in decisions/ordering DOs and interference by the third party/users. The learned Arbitrator came to the conclusion that the Petitioner had failed to fulfil its contractual obligations as a result of which the contract got prolonged to almost 67 months against the original period of 18 months. Consequently, the Conditions 11 and 11B would not apply. The Respondent was entitled to additional payments in the sum of Rs. 25,58,583 after accounting for the escalation already paid in the final bill. As regards the cost of scaffolding material and shuttering, the learned Arbitrator went by the ratio in K.N. Sathyapalan v. State of Kerala (2011) 5 SCC 758 and awarded Rs. 5 lakhs.

It is submitted by Mr. Manish Mohan, learned counsel for the Petitioner, that the failure by the learned Arbitrator to apply the law explained by the Supreme Court in Ramnath International Construction Pvt. Ltd. Vs. Union of India (UOI) and Another, AIR 2007 SC 509 : (2006) 14 SCALE 49 : (2007) 2 SCC 453 : (2006) 10 SCR 570 Supp rendered the impugned Award vulnerable to invalidation. He submitted that the decision in K.N. Sathyapalan v. State of Kerala (supra) is not applicable since in the present case the contractor had sought extension under Condition 11 of the (IAFW-2249).

Mr. Amit George, the learned counsel for the Respondent, replied that where the delay is entirely attributable to the Petitioner the ratio in Ramnath International Construction Pvt. Ltd. (supra) would not apply. He referred to the decision in Asian Techs Ltd. Vs. Union of India (UOI) and Others, (2009) 13 JT 265 : (2009) 12 SCALE 283 : (2009) 10 SCC 354 : (2009) 14 SCR 182 and Simplex Concrete Piles (India) Ltd. Vs. Union of India, (2010) 2 ILR Delhi 699 . He also referred to the recent decision of this Court in Union of India v. Ktech Engineers Builders Pvt. Ltd. (decision dated 11th May 2015 in OMP 331 of 2014).

The learned Arbitrator has, in the instant case after thoroughly analysing the evidence and documents on record, come to a categorical finding that the delay in completion of the work was entirely attributable to the Petitioner. This finding of fact has not been shown to be perverse or contrary to the record. Applying the law explained in Associate Builders Vs. Delhi Development Authority, (2015) 124 CLA 318 : (2015) 1 SCJ 42 , the Court is not expected to sit in appeal over such factual finding as regards the Petitioner being responsible for the delay in completion of the project. In the circumstances, the decision in Ramnath International Construction Pvt. Ltd. (supra) would not apply. Further, as noted in Asian Techs Limited v. Union of India (supra) Condition 11 C of the contract (IAFW 2249) barred the department and not the Arbitrator from considering the claim.

For the aforementioned reasons, the Court holds that no legal error has been committed by the learned Arbitrator in allowing the Claim No. 5.

The other items of claim allowed by the impugned Award turned purely on facts. Nothing has been shown to the Court which warrants interference with the impugned Award in respect of such claims. The rejection of the counter claims of the Petitioner has not been challenged in the petition.

No ground has been made out for interference with the impugned Award of the learned Arbitrator. The petition is dismissed.