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Coxswain Projects & Estates Pvt. Ltd., Represented by its Managing Director & Another v/s M/s. NJ Constructions, Proprietor N. Justin & Another

    ARB.A No. 27 of 2020 & Cross Objection No. 26 of 2022
    Decided On, 11 February 2022
    At, High Court of Kerala
    For the Appearing Parties: Rajiv Abraham George, Eapen Abraham George, Arun Krishna Dhan, T.K. Sandeep, Arjun Sreedhar, Alex Abraham, Veena Harikumar, Advocates.

Judgment Text
C.S. Sudha, J.

1. Is a Cross Objection maintainable in a proceeding under Section 37 of the Arbitration and Conciliation Act, 1996 (the Act), is one among the points we are called upon to answer in this appeal. This appeal filed under Section 37 of the Act is against the order dated 11.02.2020 in O.P.(Arb)No.27/2017 of the Additional District Judge-V, District Court, Kozhikode. The appellant herein is the claimant in the arbitral proceedings and the respondent before the court below. The respondent herein is the respondent in the arbitral proceedings and the petitioner before the court below. The parties in this appeal will be referred to as described in the arbitral proceedings.

2. The brief facts –

A contract for civil works for residential-cum-commercial complex, namely, “COXSWAIN-23” at Kozhikode was awarded to the respondent vide Letter Of Acceptance and Work Order dated 16.04.2012. The total contract value was Rs. 5,57,00,000/-. The date of commencement of the work was 16.04.2012. The time period stipulated for completion of the work was 18 months, that is, by 31.10.2013. The work as per the contract was not completed by the respondent, who in the meeting held between the parties on 27.07.2012, requested for a full and final settlement of his account. In the said meeting it was agreed to initiate the process of termination of the contract. Accordingly, the respondent submitted Ext.C15 final bill dated 30.07.2012. The claimant then issued Ext.C16 notice dated 31.07.2012 calling upon the respondent to restart the work or to show cause as to why the contract shall not be terminated. The respondent vide Ext.C17 dated 06.08.2012 replied stating that he was not willing to continue with the work as he was unable to meet the time-line and specifications in the contract. The claimant then terminated the contract by way of Ext.C18 letter dated 13.08.2012. The respondent sent Ext.C20 letter dated 13.10.2012 demanding the amounts due to him for the work done by him. This was denied by the claimant who in turn sent Ext.C21 letter dated 02.11.2012 claiming the amounts due to them. As disputes arose, the claimant by way of Ext.C23 letter dated 15.11.2012 invoked the arbitration clause and appointed Sri. P.Somasundaran, an Engineer, as the sole Arbitrator.

3. Before the learned Arbitrator, both sides filed their respective claim statements. After affording an opportunity to both sides to adduce oral and documentary evidence and after hearing them, the learned Arbitrator passed an Award dated 29.09.2016. All of the several claims made by the claimant except claim no.6 regarding Liquidated Damages (LD) was rejected by the learned Arbitrator. The counter claim filed by the respondent was also rejected. Aggrieved by the Award, the respondent Contractor, moved the District Court under Section 34 of the Act. The court below set aside the Award relating to LD and counter claim no.1 of the respondent Contractor was allowed. Aggrieved, the claimant, who is the respondent before the court below is before us.

4. Heard Sri. Rajiv Abraham George, the learned counsel for the appellant and Sri. Arun Krishna Dhan, the learned counsel for the respondent.

5. In the appeal memorandum it is alleged that the court below without any justification interfered into the findings of the learned Arbitrator and travelled beyond its jurisdiction contemplated under Section 34 of the Act. The court below misinterpreted the law laid down in the matter by the Hon'ble Supreme Court and hence the order of the court below is liable to be set aside. On the date on which the present appeal was taken up for hearing, it was submitted by the learned counsel for the respondent that a cross objection has been filed by the respondent challenging the findings of the court below to the extent the court failed to appreciate the pleas put forward by the respondent and incorrectly confirmed the findings of the learned Arbitrator. We will first deal with the appeal and thereafter with the cross objection.

6. The claimant before the learned Arbitrator contended that, as per the terms of the contract, the respondent was to complete the work by 31.10.2013. However, the respondent delayed the construction of the raft foundation and ultimately completed the same after much persuasion on 02.07.2012. Thereafter, the respondent abandoned the work and refused to carry out further work at the site without any justifiable reasons. The claimant contended that the attempt of the respondent was to pressurise the claimant into buying Ready Made Concrete (RMC) from the former at exorbitant rates, failing which he threatened that he would not proceed with any further work. Even after the meeting on 02.07.2012, where the respondent expressed his inability to continue with the work, the claimant had requested him to recommence and complete the work. However, the respondent failed to do so and hence the claimant was compelled to terminate the contract and re-tender the work, due to which considerable loss was caused to them.

7. The respondent on the other hand denied the allegations of the claimant that he had without any justifiable reason(s) withdrawn from the contract and had refused to continue and complete the work. The respondent took up a case that he had been fraudulently induced into entering into a bogus labour contract by the claimant with the sole intention of making him undertake the complicated and risk-laden part of the work, namely, excavation and raft foundation work. The intention of the claimant right from the beginning was to expel him from the work after he completed the aforesaid difficult task and then to award the work to a sham entity by name M/s.AURA Structure. There was no delay on the part of the respondent in carrying out the raft foundation work as alleged by the claimant. According to him, the breach was committed by the claimant who deliberately withheld the supply of RMC at the site after the completion of the raft foundation work with the aforesaid intention in mind. After the parties had entered into the contract, the respondent had made all arrangements at the site relating to manpower and machinery for the smooth and time bound execution of the work. The claimant had engaged M/s.TOM GLOBAL HOLDING (TGH), as their consultant for planning, monitoring, execution and supervision of the work. The respondent tried to implement the technical plan given by TGH for dewatering the wells. However, as soon as this work started, the ground water from the neighbouring wells started flowing into the dewatering wells resulting in acute water shortage in the locality, leading to unrest and protest by the residents of the locality. This was caused due to the faulty plan prepared by TGH. Due to the agitation and unrest, the respondent had to slow down the work and had to amicably settle the matter. The respondent by spending a considerable sum, had to supply drinking water in the neighbourhood through water tanks. In spite of this, he completed the work of raft foundation well within time. He was ready to proceed with the work also. However, the claimant committed breach of the contract by deliberately not supplying RMC. Hence the reason why the respondent was forced to withdraw from the contract. He was forced to give a final bill as per the directions of the claimant. He had to comply with their demand as he was told that otherwise they would not clear the amounts due to him. The claimant denied the case of the respondent and contended that they were forced to terminate the contract as the respondent unilaterally withdrew from the contract expressing his inability to complete the work.

8. On an appreciation of the oral and documentary evidence let in by the parties, the allegation that fraud had been committed by the claimant in inducing the respondent to enter into the contract, was rejected by the learned Arbitrator. Both sides had accused each other for the problem relating to dewatering of the wells. However, they were not successful in establishing their respective contentions and hence the learned Arbitrator held that neither party can be held responsible for the same. On the question of any delay on the part of the respondent in completing the raft foundation work, the learned Arbitrator found that in the absence of the ‘Work Programme’, which was not produced by the respondent, it was not possible for him to fix the exact quantum of delay. Further, the learned Arbitrator refused to believe the story of the respondent that he could not carry out the work because of the deliberate failure by the claimant to supply RMC. As per the contract executed between the parties, it was seen that the terms of the contract stipulated the respondent to give indent for RMC required for the work. This was not seen done by the respondent. The records revealed that the respondent had submitted a quote for the supply of RMC. The claimant in reply requested him to reduce the rates. The respondent never responded to this communication from the claimant. On the other hand, he backed out of the contract as per Ext.C14 by which he informed the claimant of his inability to continue with the work. After considering all the oral and documentary evidence, the learned Arbitrator concluded that it is the respondent who is responsible for the breach of the contract. It was found that the respondent was more interested in settling his final bills and withdrawing from the contract. In such circumstances, the Arbitrator concluded that the claimant was justified in terminating the contract.

9. After having found breach of Ext.C1 contract by the respondent, the learned Arbitrator relying on clause 18.6(b) of the contract, held the respondent contractor liable to pay LD for the period from 02.07.2012, the day on which further work was stopped by the respondent, till the date of the termination of the contract on 13.08.2012. The period fixed for computing LD is seriously opposed by the learned counsel for the respondent contractor. It was submitted that even assuming that the case of the claimant is true, the Arbitrator went wrong and was not justified in taking 02.07.2012 as the starting point for computation of LD. A meeting admittedly was held on 27.07.2012 between the parties, during which meeting, the respondent informed the claimant of his inability to continue with the work as the latter was refusing the supply of RMC. After the said meeting, the claimant took time to take a decision on the matter and terminated the contract on 13.08.2012. In such circumstances, the period ought not to have been computed from 02.07.2012. If at all the respondent had to be mulcted with the liability (not admitted), the same should have been limited to the period from 27.07.2012, goes the argument. Further, the interpretation given by the learned Arbitrator to clause 18.6(b) of the contract is also disputed by the respondent. The said finding, according to the respondent, is against the terms of the contract and so the court below was justified in interfering with the same.

10. The court below did not agree with the learned Arbitrator in his interpretation of clause 18.6(b) of Ext. C1 contract and held thus - the question of LD arises in the event of delay in completion of work on account of delay in execution of work and commencement of work. The term used in between the words “execution of work and commencement of work” is "and" and not “or”. The usage of the term "and" between execution and completion itself would show that in order to attract the consequences under the clause, both shall occur simultaneously. As per the Letter of Acceptance and Work Order, the last date for completion of work is on or before 31.10.2013. However, the contract was terminated as early as on 13.08.2012, at the instance of claimant. Clause 18.6(b) of the contract speaks about a contract which has been fulfilled or yet to be fulfilled, but completion of it was delayed beyond the agreed time. In this case the contract has been terminated prematurely. But the learned Arbitrator without any proper reasoning or sufficient explanation concluded that the claimant is entitled to liquidated damages not only for delay in completion but also for delay in execution. Clause 18.6(b) does not speak about any damages to be paid by a party on account of termination of the contract due to his default. Further, the claimant had sought Rs. 55,70,000/- towards compensation onaccount of default of the respondent. The said claim was rejected by the learned Arbitrator. However, no steps have been taken against the Award by the claimant. Taking into account these aspects and relying on the dictum in Associate Builders vs. Delhi Development Authority, 2014 KHC 4742, the court below held that the Award is not in terms of the contract and that a patent illegality has been committed, which is apparent on the face of the Award. In the opinion of the court below, the interpretation given by the Arbitrator to the aforesaid clause in the contract is “blatantly contrary to the comprehension of a reasonable and prudent man. No reasonable person could make such observations”. The court below did not stop with that. It went further and held that from Clause 18.2 of the contract it is clear that the completion of work was not agreed to be done in a phase-to-phase manner, but the entire work was agreed to be completed by a particular date. Therefore, the finding that a breach had been committed by the respondent contractor by not submitting the ‘Work Programme’ is perverse and patently illegal. It was further held that the parameter adopted by the Arbitrator in deciding the period for which the respondent has been held liable to pay LD, has no nexus with Clause 18.6(b). This was again found to be a patent error on the face of the Award, being contrary to the terms of the contract. According to the court below, the learned Arbitrator had travelled beyond his jurisdiction in dealing with the said aspects. On the aforesaid grounds, the court concluded that the learned Arbitrator had committed a patent illegality, which is apparent on the face of the Award.

11. This interference made by the court below into the findings of the learned Arbitrator, is seriously assailed by the claimant/respondent/appellant, on whose behalf it was submitted that the court has travelled well beyond its jurisdiction under Section 34 of the Act and has literally rewritten the Award, which is impermissible and against the settled law on the subject.

12. Clause 18.6 (b) of Ext. C1 contract reads:-

“In the event of delay in execution and completion of the work under the contract for any reason whatsoever, other than those specified in Clause18.5(b) herein above, the Contractor shall be liable to pay to the employer, as compensation an amount equal to 1% of the initial contract price specified in the Letter of Acceptance and Work Order per week of delay subject to the maximum percentage of 10% of the initial contract price as specified in the Letter of Acceptance and Work Order.”

The stipulated date for completion of work was 31.10.2013. The contract between the parties was terminated on 13.08.2012. The respondent contended that the claimant becomes entitled to LD, if only the work was not completed within the stipulated date or in other words, if the work is completed beyond the stipulated date of completion. Here there has been a premature termination of the contract and so the aforesaid clause does not come into play. This case put forward by the respondent did not find favour with the learned Arbitrator. According to the learned Arbitrator, as per clause 18.6(b), the claimant is entitled to LD not only for the delay in completion of the work but also for the delay in execution. The learned Arbitrator held that the exact delay in execution of the work could have been computed if the progress of work is compared with the ‘Work Programme’. The claimant contended that the respondent had delayed the completion of the work of the raft foundation. The target date for completion of the raft foundation was 25.05.2012, which had been conveyed to the respondent by Ext.C7 e-mail dated 19.05.2012. As per the initial work programme submitted by the respondent, it was indicated that the work of raft foundation would be completed by 31.05.2012. However, as on 02.06.2012, the respondent had not even completed 30% of the work. According to the claimant, they, then had asked the respondent to re-submit the Work Programme with necessary changes, which the respondent failed to do. The claimant also contended that the delay in completion of the work of raft foundation could have been avoided, had the respondent submitted a proper Work Programme and undertaken the work as per the schedule. The failure to submit the Work Programme by the respondent was pointed out by the claimant as a breach committed by the respondent, because had there been a proper Work Programme, the delay caused could have been properly and accurately assessed. The respondent on the other hand contended that the day-to-day work at the site was not done as per any Work Programme, but on the basis of instructions received from TGH. He also took up a contention that the Work Programme submitted by him was prior to the occurrence of the issue relating to draining of water, which was never anticipated or expected and therefore the noncompliance with the schedule was not due to his default. The learned Arbitrator found from the contents of Ext.C3 e-mail dated 28.04.2012, that the respondent was in possession of the original Work Programme, which had been initially submitted by him. It was also found that the Work Programme had been returned to the respondent with some comments made by TGH and the respondent had been asked to return the Programme after making necessary changes. By way of Ext.C5 e-mail dated 14.05.2012, the respondent was again asked to submit the Work Programme. However, there was no response from the respondent. Before the learned Arbitrator, the respondent, to justify his non submission of the Work Programme, contended that the format of the same had not been provided by the claimant. The learned Arbitrator held that if such a format was actually required by the respondent, then he ought to have informed the claimant about the same, which had never been done. There was no material(s) before the learned Arbitrator to find that the respondent had ever asked TGH or the claimant for any format of the Work Programme. Hence the contention of the respondent that he had not submitted the Work Programme as the claimant had not provided the format, was found to be incorrect and so was rejected. The learned Arbitrator therefore found that the respondent had not complied with Clause 18.3 of Ext.C1, which sets out the requirement of the Work Programme. The Work Programme, according to the learned Arbitrator, is a very important document in the construction field, as it enables the employer and the contractor to monitor the progress of the work. Had the work programme been submitted, it would have been possible to state with certainty as to when the various works were required to be completed. The learned Arbitrator held that the respondent ought to have produced the original Work Programme initially submitted by him, which was returned to him for clarifications, which would have clearly shown if there was any delay on his part in completing the work of the raft foundation. However, he failed to produce the same. In spite of this, the learned Arbitrator did not throw up his hands and say that it was impossible for him to decide the issue of LD. On the other hand, the said issue was decided on the basis of the admissions made by the parties.

13. A perusal of the Award in this case would show that the learned Arbitrator, has considered all the communications between the parties and also the oral evidence let in. The learned Arbitrator found that the stoppage of the work was due to the same being abandoned by the respondent without any justifiable cause. The reasons put forward by the respondent for stoppage of work were disbelieved and rejected. The learned Arbitrator has given cogent reasons for concluding that it was the respondent contractor who was responsible for the breach. Admittedly no work was done by the respondent after 02.07.2012. The fact that the respondent was not ready to proceed with the work was intimated by him to the claimant on 27.07.2012. The learned Arbitrator therefore found that nearly four weeks, that is, from 02.07.2012 to 27.07.2012, which period ought to have been used for executing the work, had been wasted without any work being done. As the respondent abandoned the work, the claimant had to take steps for termination of the contract as per the terms of the contract, which terms were also seen to have been complied with by the latter. The period from 27.07.2012 to 13.08.2012 was found to be a reasonable time taken by the claimant to comply with the formalities relating to the termination of the contract. On the basis of the aforesaid aspects, the period for payment of LD was fixed. The ‘Work Programme’ to be submitted by the respondent as per the terms of the contract, was held to be an important document in the construction field as it enables both sides to monitor the progress of the work. Had the said programme been submitted, it would have been easy and possible to say with certainty or precision as to the time within which the various works were required to be completed.

14. We fail to understand how the aforesaid reasonings given by the learned Arbitrator, relating to the need or value of the ‘Work Programme’ in construction activities and the basis on which the period has been fixed for LD, are in any way perverse or a patent illegality apparent on the face of the record, as held by the court below. The learned Arbitrator, admittedly an Engineer, apparently an expert in this field, appears to be better equipped to assess the importance and necessity of documents in this field. As held in Associate Builders (supra) in a proceeding under Section 37, this Court is not sitting as an Appellate court over the Arbitrator's decision. This Court cannot reappraise or reexamine the evidence. The view taken by the learned Arbitrator is a plausible view. It may not be the only correct view but it is a possible view. The learned Arbitrator had dealt with all the points which were raised by both sides. A different view may be possible. But even then, no interference is possible. This is not a case where there is patent illegality apparent on the face of the record. It is also not a finding which no reasonable man would arrive at in the facts and circumstances of the case.

15. Admittedly it is the amended provisions of Sections 28 and 34(2) of the Act that are applicable in this case. The Hon'ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (NHAI), AIR 2019 SC 5041, after referring to paragraphs 42.3 to 45 in Associate Builders (supra) held that in the light of the amendment brought to Section 28(3) of the Act by Amendment Act, 2015, it would undoubtedly show that the construction of the terms of a contract is primarily for an Arbitrator to decide, unless the Arbitrator construes the contract in a manner that no fair-minded or reasonable person would do. Court's intervention with the construction is absolutely uncalled for. In such circumstances, it can only be said that it would not be available for construction of the court if the view is a plausible one. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2- A). What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), is no longer a ground for challenge under “public policy of India”, but would certainly amount to a patent illegality appearing on the face of the Award. Thus, a finding based on no evidence at all or an Award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.

16. Further, the Hon’ble Supreme Court in Associate Builders (supra) has held that a possible view by the Arbitrator on facts is necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers the arbitral award. Thus, an Award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the Arbitrator's approach is not arbitrary or capricious, then he is the last word on facts.

17. That being the position, we find that the court below was not justified in interfering with the Award. The LD was awarded after adjusting the amount due to the respondent. This is not in dispute.

18. Now coming to the cross objection filed by the respondent contractor in this case. The question to be first considered is whether the cross objection is maintainable. In ITI Ltd. vs. Siemens Public Communications Network Ltd. [(2002)5 SCC 510] the Hon'ble Supreme Court held that though the application of CPC in the Act is not specifically provided for, there is no express prohibition against the application of the same in a proceeding arising out of the Act and so there cannot be any inference that CPC is not applicable. However, in Mahanagar Telephone Nigam Ltd. vs. Applied Electronics Ltd. [(2017)2 SCC 37], a co-equal bench of the Hon'ble Supreme Court doubted the said dictum and holding that CPC is not applicable to proceedings under the Act, held that a cross objection i

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s not maintainable in a proceeding under the Act. However, finding that the dictum in ITI Ltd. (supra) is a binding precedent, referred the matter to a larger Bench. Now even assuming that the cross objection is maintainable, the same has not been filed within the period stipulated in Rule 22 of Order 41. As per Rule 22, the cross objection has to be filed within one month from the date of service on the respondent or his pleader of notice of the day fixed for hearing the appeal or within such further time as the Appellate Court may see fit to allow. Here even according to the respondent, the notice of hearing was served on him on 10.08.2020. Therefore, going by Rule 22, the cross objection ought to have been filed by 10.09.2020. However, the cross objection is seen filed only on 04.02.2022. It is true that the Code does not provide for any consequence if the cross objection is not filed within the period of one month stipulated in Rule 22. This would show that the same is directory and that the Appellate Court has got the power to extend the time for enabling the respondent to file his cross objection. However, in this case, there is no application for condonation of delay. Therefore, unless sufficient reasons are shown by the respondent for condonation of delay, the cross objection filed is not maintainable (See Mahadev Govind Gharge vs. Special Land Acquisition Officer, Upper Krishna Project, Karnataka, 2011 KHC 4485). That being the position, the cross objection even if found admissible in a proceeding under the Act, is liable to be dismissed on the ground of delay. 19. As per the Award, the claimant has been held entitled to Rs. 25,09,316/- towards LD. Interest @6% per annum has been granted from 15.11.2012 till the date of Award. If this amount is not paid within 90 days from the date of the Award, the claimant has been held entitled to interest @ 18% per annum from the date of Award till payment. This rate of interest granted for the post Award period is exorbitant. We have dealt with the issue of interest for the post Award period in our judgment dated 17.01.2022 in Arb.Appeal No.36/2020, after taking into consideration the decisions of the Hon’ble Supreme Court in Vedanta Ltd. vs. Shenzhen Shandong Nuclear Power Construction Co. Ltd. (2019) 11 SCC 465, State of Haryana vs. S.L. Arora & Co. (2010) 3 SCC 690 and NHAI v. M.Hakeem (2021)9 SCC 1. Applying the same principle, we are of the view that the appropriate rate of interest to be awarded in this case for the post-award period is 6% per annum. In the result, the appeal is allowed. The Cross Objection is dismissed. The order of the court below is set aside and the Award of the Arbitrator is restored subject to the modification that interest for the post-award period will be 6% per annum. All interlocutory applications, if any pending, shall stand disposed of.