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Arora Construction Company Pvt. Ltd. v/s Government of NCT of Delhi

    O.M.P. (COMM). No. 340 of 2020

    Decided On, 21 February 2022

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE VIBHU BAKHRU

    For the Petitioner: Anusuya Salwan, Nikita Salwan, Abhishek Pundir, Bankim Garg, Advocates. For the Respondent: Anuj Aggarwal, Ayushi Bansal, Aishwarya Sharma, Sanyam, Suri, Advocates.



Judgment Text

1. The petitioner – Arora Construction Company Pvt. Ltd. (hereafter ‘ARC’) has filed the present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereafter the ‘A&C Act’) impugning the Arbitral Award dated 10.07.2015 (hereafter the ‘impugned award’) passed by the Arbitral Tribunal comprising of a Sole Arbitrator (hereafter the ‘Arbitral Tribunal’).

2. ARC is a Private Limited Company and is engaged in the business of civil construction. ARC had tendered for and was awarded the work of development of Wrestling Training Venue for Commonwealth Games-2010 at Ludlow Castle School-2, New Delhi. Thereafter, the parties had entered into an Agreement bearing number, 03EE/CW-131/PWD/GNCTD/2008-09 (hereafter the ‘Agreement’) whereby, ARC had agreed to execute the works as per the terms and conditions stipulated therein.

3. In terms of the said Agreement, the works were to commence on 19.01.2009 and was stipulated to be completed within a period of eight months that is, on or before 18.09.2009. The completion of the works was delayed and the same was finally completed on 25.01.2010. ARC claims that the delay was solely for the reasons attributable to the respondent – Government of NCT of Delhi (hereafter ‘GNCTD’).

4. GNCTD extended the time for completion of the works under the Agreement upto 25.01.2010 without levy of any compensation.

5. GNCTD paid the Final Bill on 25.07.2011, which according to ARC was less than the amount due to it. ARC accepted the said payment under protest and invoked the arbitration agreement by a letter dated 04.11.2011.

6. GNCTD appointed the Arbitral Tribunal by a letter dated 20.05.2013. ARC had raised six, claims which were referred to arbitration. In addition, GNCTD had also raised a Counter-Claim which was also referred for adjudication. The impugned award indicates that subsequently the ARC had revised the amount claimed in respect of one of the claims (Claim No.3) and in addition seven other claims were raised. These claims were also referred to arbitration.

7. The gross value of works (civil and electrical) executed by ARC as quantified in the Final Bill was Rs.10,09,06,326/-. In addition, ARC claimed an amount of Rs.1,11,87,026/-.

8. The Arbitral Tribunal awarded an aggregate amount of Rs.2,95,000/- along with interest at the rate of 10% per annum from 20.05.2013 (the date of appointment of the Arbitrator) till the date of the award. In addition, the Arbitral Tribunal awarded future interest at the rate of 12% per annum if the awarded amount was not paid within three months from the date of the award.

9. Ms. Salwan, learned counsel appearing for ARC has assailed the award to the extent the Arbitral Tribunal had rejected ARC’s Claim Nos.1,3,4 and Additional Claim Nos.2,5,6 and 6A.

10. The grievances raised by ARC in respect of the impugned award pertaining to the said claims are considered hereunder.

Re: Claim No. 1

11. ARC’s Claim No.1 was in respect of increase in the cost of labour consequent to increase in the minimum wages as notified. ARC had claimed a sum of Rs.12,61,148/- on account of increase in cost of labour engaged in civil works and Rs.7,42,614/- in respect of electrical component of the works. ARC claimed that it was entitled to the aforesaid amounts in terms of Clause 10C of the General Conditions of Contract (hereafter the ‘GCC’) as applicable to the Agreement.

12. There is no dispute that ARC was entitled to escalation in terms of Clause 10C of the GCC. On the last date for submission of tenders, the minimum wages for an unskilled labour was notified at Rs.141/- per day. ARC claimed that the minimum wages of unskilled labour were revised with effect from 01.02.2009 to Rs.151/- per day; and to Rs.152/- per day with effect from 01.08.2009. Thereafter, it was once again revised to Rs.203/- per day with effect from 01.02.2010.

13. GNCTD had accepted that ARC was entitled to escalation under Clause 10C of the GCC and had paid a sum of Rs.4,04,892/- in respect of the civil component and Rs.5,20,383/- in respect of the electrical component of the works in question. Thus, according to ARC, it was entitled to a further amount of Rs.8,56,256/- (Rs.12,61,148/- less Rs.4,04,892/-) for the civil component and Rs.2,22,231/- (Rs.7,42,614/- less Rs.5,20,383/-) for the electrical component. The Arbitral Tribunal found that GNCTD had paid the amounts due and there was no surviving dispute regarding payment of escalation under Clause 10C of the GCC. In view of the said finding, the Arbitral Tribunal rejected the claim.

14. A plain reading of the impugned award indicates that at the 9th hearing held on 02.02.2015, the Arbitral Tribunal had noted that the representative of ARC had admitted that the amount payable under Clause 10C of the GCC had been correctly computed by GNCTD and had been duly paid. However, the record of proceedings held on 21.03.2015 indicates that the Arbitral Tribunal had noted that ARC had sought to canvass its claim afresh and was permitted to do so.

15. The Arbitral Tribunal has noted that ARC had simply reiterated its submissions made in the Statement of Claim and was unable to point out any discrepancy in the amounts as computed by GNCTD. The Arbitral Tribunal observed that ARC had not advanced any submission to substantiate its claim. In the impugned order, the Arbitral Tribunal has held that since ARC had during the course of the hearing held on 02.02.2015 (9th hearing) admitted that the amounts due under Clause 10C of the GCC had been paid, it was not entitled to any further amount towards escalation under Clause 10C of the GCC.

16. It is seen that in the Statement of Claim, ARC had explained the basis of its claim for escalation under Clause 10C of the GCC. It had also produced the relevant notification to establish that there was increase in the cost of minimum wages. Clause 10C of the GCC as applicable to the Agreement is set out below:

“CLAUSE 10C:

PAYMENT ON ACCOUNT OF INCREASE IN PRICES/WAGES DUE TO STATUTORY ORDER

If after submission of the tender, the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge’s stores in accordance with Clause 10 thereof) and/or wages of labour increase as a direct result of the coming into force of any fresh law, or statutory rule or order (but not due to any changes in sales tax/VAT) and such increase in the price and/or wages prevailing at the time of the last stipulated date for receipt of the tenders including extensions if any for the work, and the contractor thereupon necessarily and properly pays in respect of that material (incorporated in the works) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied and provided further that any such increase shall not be payable if such increase has become operative after the stipulated date of completion of the work in question.

If after submission of the tender, the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge’s stores in accordance with clause 10 thereof) and/or wages of labour is decreased as a direct result of the coming into force of any fresh law, or statutory rules or order (but not due to any changes in sales tax/VAT) and such decrease in the prices and/or wages prevailing at the time of receipt of the tender for the work. MCD shall in respect of materials incorporated in the works (not being materials supplied from the Engineer-in- Charge’s stores in accordance with Clause-10 hereof) and/or labour engaged on the execution of the work after the date of coming into force of such law statutory rule or order be entitled to deduct from the dues of the contractor, such amount as shall be equivalent to the difference between the prices of the materials and/or wages as prevailed at the time of the last stipulated date for receipt of tenders including extensions if any for the work and the prices of materials and/or wages of labour on the coming into force of such law, statutory rule or order.

The contractor shall, for the purpose of this condition. Keep such books of account and other documents as are necessary to show the amount of any increase claimed or reduction available and shall allow inspection of the same by a duly authorized representative of the Government, and further shall, at the request of the Engineer-in-charge may require any documents so kept and such other information as the Engineer-in-Charge may require.

The contractor shall, within a reasonable time of his becoming aware of any alteration in the price of any such materials and/or wages of labour, give notice thereof to the Engineer-in-Charge stating that the same is given pursuant to this condition together with all information relating thereto which he may be in position to supply.”

17. The record of the proceedings of the 10th hearing held before the Arbitral Tribunal on 21.03.2015 indicates that GNCTD had filed a copy of a hand receipt relating to its calculation of the amount payable under Clause 10C of GCC. However, the Arbitral Tribunal had noted that the said hand receipt was unreadable. ARC had provided a calculation of its claims.

18. It is apparent from the above that the controversy as to the amount payable to ARC under Clause 10C of the GCC has not been addressed. The impugned award does not indicate any basis of calculation of the amount payable to ARC under Clause 10C of the GCC, therefore, it is difficult to accept that the entire amount due to ARC under Clause 10C of the GCC was paid to it. Mr. Aggarwal, learned counsel appearing for GNCTD is also unable to point out as to how the amount payable to ARC under Clause 10C of the GCC was computed. Thus, this Court finds merit in Ms. Salwan’s contention that ARC’s claim in respect of the amounts due under Clause 10C of the GCC remain unaddressed.

Re: Claim No.3

19. ARC had claimed an amount of Rs.5,93,867/- payable to it. According to ARC, GNCTD had incorrectly fixed the rates for extra or substituted items. The amount of the said claim was subsequently revised to Rs.9,38,853/-.

20. ARC’s claim was premised on the basis that the rates fixed by GNCTD in respect of certain extra items (24 in number) were less than the market rate. The Arbitral Tribunal considered the aforesaid claim of ARC and rejected the same as it found that ARC had not submitted its claim for enhanced rates supported by a proper analysis as required in terms of Clause 12.2 of the Agreement.

21. ARC claimed that it had submitted the analysis of rates under the cover of its letter dated 05.09.2014, which was received by a person named ‘Ram’ on behalf of GNCTD.

22. The Arbitral Tribunal had examined the evidence on record and disbelieved ARC’s claim that it had in fact submitted a letter dated 05.09.2014.

23. The impugned award indicates that the Arbitral Tribunal had not accepted the ARC’s claim for three reasons. First, that the letter dated 05.09.2014 was not on record of GNCTD. Second, that the said letter referred to extra items as El-1 to El-15 which was the same nomenclature as used by ARC in its Statement of Claim. The Arbitral Tribunal found that this indicated that the letter dated 05.09.2014 had been created after the Statement of Claim had been filed and therefore, it had followed the same nomenclature as used in the Statement of Claim. Thirdly, that although ARC had produced a letter dated 05.09.2014, it was not accompanied by the analysis of rates at the material time, which was stated to have been filed along with the said letter.

24. It is at once clear that the Arbitral Tribunal’s decision is based on evaluation of the material on record and it is not permissible for this Court to re-appreciate or re-evaluate the evidence and supplant the opinion of the Arbitral Tribunal.

25. Ms. Salwan had earnestly contended that the evidence on record clearly established that the letter dated 05.09.2014 was submitted at the office of GNCTD and was acknowledged by a person named ‘Ram’ who had also acknowledged other letters the receipt of which were not disputed. As stated above, the question whether the letter dated 05.09.2014 was submitted at the material time at the office of GNCTD and was accompanied by the analysis of rates for extra items is a question of fact. The decision of the Arbitral Tribunal cannot be stated to be perverse or one that no reasonable person could have accepted. Accordingly, the conclusion of the Arbitral Tribunal does not warrant any interference in this proceeding.

Re: Claim No.4

26. ARC had claimed an aggregate sum of Rs.22,72,400/- towards cost over-run due to prolongation of the Agreement. The Arbitral Tribunal found that ARC had failed to produce any documentary evidence to substantiate additional payments as claimed by it. Ms. Salwan could not point out any documentary evidence placed before the Arbitral Tribunal, which would substantiate the said claim. This Court finds no reason to interfere with the decision of the Arbitral Tribunal to reject ARC’s claim for cost over-run (Claim No.4).

Re: Additional Claim No.2

27. ARC had claimed pre-suit, pendente lite and future interest at the rate of 18% per annum. The Arbitral Tribunal had rejected ARC’s claim for pre-reference interest as the Arbitral Tribunal found that ARC had not filed any details in respect of the said interest. However, the Arbitral Tribunal had accepted ARC’s claim for pendente lite interest. The relevant extract of the impugned award is as under:

“8.2 The date on which the claimant invoked arbitration is not on record. I, therefore, award pendente-lite interest from the date of appointment of arbitrator i.e. from 20.05.2013. Accordingly, I award simple interest @ 10% per annum on the total amount of award of Rs 2,95,000 from 20.05.2013 upto the date of award.”

28. Ms. Salwan has contended that interest at the rate of 10% is on a lower side and does not adequately compensate ARC. She had also contended that pendente lite interest was required to be computed from 04.11.2011 (being the date on which the ARC had invoked the arbitration agreement as pleaded in the Statement of Claims).

29. Insofar as the contention that the rate of interest as awarded is on the lower side is concerned, this Court finds the same unmerited. It is well settled that the Arbitral Tribunal has wide discretion in awarding interest and no interference with the impugned award in this regard is warranted.

30. However, the decision of the Arbitral Tribunal to award pendente lite interest from 20.05.2013 (the date on which GNCTD had appointed the Sole Arbitrator) and not from the date on which the arbitration was invoked is patently erroneous. In terms of Section 21 of the A&C Act, the arbitral proceedings commence on the date of receipt of notice invoking the arbitration agreement. In the present case, ARC had stated in its Statement of Claim that it had invoked the arbitration agreement on 04.04.2011. GNCTD had not contested the said averment in the Statement of Defence.

31. On a pointed query of this Court, Mr. Aggarwal, appearing for GNCTD fairly stated that there was no dispute that ARC had invoked the arbitration on 04.04.2011. The pendente lite interest is required to run from 04.04.2011 and not from the date on which the Arbitrator was appointed. Thus the impugned award, to the extent it denies ARC pendente lite interest from 04.04.2011 to 20.05.2013, is liable to be set aside.

Re: Additional Claim No.5

32. ARC had raised a claim for Rs.5,62,000/- which was withheld from the sixth RA Bill (Technical). GNCTD had withheld 5% of HVAC component on the ground that the major seasonal test had not been conducted as per the contractual provisions. The Arbitral Tribunal accepted GNCTD’s contention that in terms of CPWD General Specifications, the last stage payment of 5% was required to be made “on completion of major seasonal test”. Since the said test was not completed, GNCTD was entitled to withhold the

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said payment. 33. Ms. Salwan had contended that GNCTD had accepted HVAC equipment and used the same and therefore, it was not open for GNCTD to now claim that it was not functioning properly. There is no dispute that the last stage payment of 5% of the value of HVAC components was required to be paid on completion of major seasonal test and the same was not completed. Thus, this Court finds no ground to fault the decision of the Arbitral Tribunal in this regard. Re: Additional Claim Nos.6 and 6A 34. ARC had claimed a sum of Rs.17,44,500/- towards loss of profit due to reduction in the scope of civil and electrical works (Claim No.6). It also claimed an additional amount of Rs.15,00,000/- towards loss of profit (Claim No.6A) as according to it, one of the profitable items was removed from the scope of works of ARC and was executed by another agency. The Arbitral Tribunal observed that minor variations in the value of works did not warrant award of any amount towards loss of profit. It observed that minor variations to the extent of 10% in the quantities were required to be anticipated. In addition, the Arbitral Tribunal found that ARC had not produced any evidence to substantiate its claim. 35. Concededly, ARC had not produced any independent evidence to establish its claim for loss of profits. Thus, the decision of the Arbitral Tribunal in this regard cannot be faulted. 36. In view of the above, the impugned award to the extent it rejects ARC’s Claim No.1 for escalation under Clause 10C of the GCC and to the extent it denies award of pendente lite interest from 04.04.2011 to 20.05.2013, is set aside. ARC is at liberty to agitate these disputes by seeking a fresh reference to arbitration. 37. The petition is disposed of in the aforesaid terms.
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