w w w . L a w y e r S e r v i c e s . i n



Tamil Nadu Electricity Board, rep. By its Chief Engineer/Projects, Chennai v/s M/s. Engineering Projects (India) Limited, (A Govt. of India Enterprise), New Delhi & Others


Company & Directors' Information:- ENGINEERING PROJECTS (INDIA) LIMITED [Active] CIN = U27109DL1970GOI117585

Company & Directors' Information:- N. S. ENGINEERING PROJECTS PRIVATE LIMITED [Active] CIN = U29120WB2007PTC112967

Company & Directors' Information:- ENGINEERING PROJECTS (INDIA) LIMITED [Under Liquidation] CIN = U27310JH1970GOI000860

Company & Directors' Information:- P C INDIA LIMITED [Strike Off] CIN = U33111TN1986PLC013401

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- B S ENGINEERING ENTERPRISE PVT LTD [Strike Off] CIN = U27101WB1986PTC041475

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- NEW INDIA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45209DL1987PTC028421

Company & Directors' Information:- M R K ENGINEERING PROJECTS PRIVATE LIMITED [Active] CIN = U29308TN2021PTC140735

Company & Directors' Information:- ENGINEERING PROJECTS PVT LTD [Active] CIN = U51109WB1948PTC017023

Company & Directors' Information:- M S A S ENGINEERING PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45207DL2005PTC143776

Company & Directors' Information:- G. S. PROJECTS AND ENGINEERING PRIVATE LIMITED [Strike Off] CIN = U29253TN2015PTC099198

Company & Directors' Information:- J C ENGINEERING & PROJECTS PRIVATE LIMITED [Active] CIN = U45400UP2013PTC059936

Company & Directors' Information:- R R S V ENGINEERING PROJECTS PRIVATE LIMITED [Active] CIN = U74999TN2014PTC097186

Company & Directors' Information:- D AND A ENGINEERING PROJECTS PRIVATE LIMITED [Strike Off] CIN = U32205DL2004PTC128548

Company & Directors' Information:- NEW DELHI ELECTRICITY PRIVATE LIMITED [Strike Off] CIN = U40102DL1997PTC086361

    Original Petition No.34 of 2007

    Decided On, 29 July 2010

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MRS. JUSTICE CHITRA VENKATARAMAN

    For the Petitioner: N.C. Ramesh Assisted by T. Sivaprakasam, Advocates. For the Respondents: Senthil Kumar Assisted by R1, Mrs. Pavithra Kabir, Advocates.



Judgment Text

(Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 24.8.2006.)


1. The Tamil Nadu Electricity Board/petitioner herein invited international competitive bids for the Asian Development Bank (ADB) aided External Coal Handling System (ECHS) Tuticorin Phase-II Power Plant Project at Tuticorin in Tamil Nadu in October, 1991. Tata Consulting Engineers, Bangalore were retained by the petitioner as Consulting Engineers for the project. Tamil Nadu Electricity Board, in short, TNEB, divided the entire execution into three packages i)Design and Supply of Mechanical/Electrical Equipment and the required steel for structures, ii)Erection of steel structures and erection, testing & commissioning of Mechanical/Electrical equipment and Fabrication and iii) Entire associated civil works.


2. The first respondent herein was awarded a contract with reference to packages (i) and (ii) and the third package, viz., associated civil works, was given to another agency. The cost of the two contracts were of a value of US$ 137,51,525 + Rs.10,00,000/- and Rs.12,37,59,000/- respectively. Both these contracts were to be completed within a period of twenty four months from the date of issuance of the Letter of Intent. The Letter of Intent for the supply contract as well as for the erection contract were issued on 12.8.1994. The execution was to be completed on or before 11.8.1996. The contract contemplated design, manufacture, supplying, including structural work, erection, commissioning and carrying out of the performance test at the site. The contract contained the terms of payment, payment of initial advance, supply of equipments, contract performance guarantee, liquidated damages and terms on resolution of disputes. Admittedly, the execution went beyond 24 months and there was a delay of further 16 months in the execution of the contract. The execution and the performance guarantee test were completed only on 25.11.1999. The one year further guarantee period from the date of performance guarantee test, expired on 24.11.2000. In the meantime, on account of the delay in the execution, the petitioner deducted the claims related to liquidated damages and interest on the advance amount from the running account bills. The petitioner states that the first respondent sought for time extension without levy of liquidated damages in its letter dated 29.3.2000 long after the execution of the contract and raised a dispute on the deduction of liquidated damages and interest on advance payment. The first respondent wrote a letter on 5.4.2000 and made a claim for Rs.2,72,43,910/- followed by a further letter dated 09.02.2001, making reference to the letter dated 29.3.2000 and laid a claim for compensation, alleging that the delay was on account of the petitioner only. After a series of exchange of letters thereon, the first respondent wrote a letter on 16.2.2001 and invoked Clause 27.1 of the General Conditions of Contract (hereinafter referred to as GCC) and called upon the petitioner and the Engineer, to resolve the difference to release the payment and bank guarantee on 12.4.2001. As there was no reaction to the demand by the first respondent, it invoked the arbitration clause in terms of Clause 27.6.1 of the General Conditions of Contract. Thus the disputes between the parties went before the Arbitral Tribunal for resolution.


3. The petitioner also made a counter claim. On a consideration of the rival claims of the parties, the Arbitral Tribunal passed the following award:


Summary of Net Amount Payable

Total (Principal + Interest)

in favour of EPI Rs.36,05,45,199.00


Total (Principal + Interest)

in favour of TNEB Rs.11,36,76,980.00


Net Amount payable by

TNEB to EPI as on date of

award i.e., 24.08.2006 Rs.24,68,68,219.00


(RUPEES TWENTY FOUR CRORES SIXTY EIGHT LAKHS SIXTY EIGHT THOUSND TWO HUNDRED AND NINETEEN ONLY)


4. Aggrieved by the award granted in favour of the first respondent and the rejection of the claim of the petitioner, the Tamil Nadu Electricity Board has filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), challenging the award passed by the Arbitral Tribunal dated 24.8.2006. As against the relief granted in the counter claim made by the petitioner as well as the rejection and reduction in respect of the first respondent's claims, admittedly, the first respondent has not filed any Original Petition and hence, this portion has attained finality as far as the parties are concerned.


5. It is seen from the proceedings of the Arbitral Tribunal that in terms of Clause 27.6.1 of the General Conditions of Contract, by consent of parties, the Arbitral Tribunal consisting of three Arbitrators were constituted to decide the disputes. The first respondent filed its claim statement raising 19 claims to the tune of 4125457 US$ and Rs.19,69,906.42 with interest on various heads viz., claim made on account of extension of time, additional bank charges, refund of liquidated damages, interest deducted on advance amount paid, claim on account of excise duty and other tax liabilities, apart from payment towards materials and additional works executed and interest on the money withheld and delay in releasing the payment. On the breach committed by the first respondent, the petitioner, on its part, claimed a sum of Rs.26,75,90,745/- with interest at 24% per annum towards compensation. During the course of the proceedings, the parties herein decided to terminate the mandate of the first respondent's nominee Arbitrator Shri.J.Nehru to be substituted by yet another Arbitrator. It is seen from the award that the members of the arbitral Tribunal visited the project site to appraise themselves of the nature of the project and the technical aspects of the claim/counter claim raised by the parties herein. Considering the magnitude and the volume of the materials pertaining to each of the claims of the respective parties to be gone into and some of the claims of the first respondent having its reflection on certain claims of the petitioner and by agreement of the parties, learned Arbitral Tribunal formulated the procedure. The Tribunal categorised the issues as Interlinked issues - Group AA, Claimant/1st respondent's issues - Group B and respondent/petitioner's issues - Group-C. As per this, the parties herein agreed to submit their advance submissions before and during the proceedings, reply to the advance submissions, additional documents, calculation sheets, legal resources and highlights of arguments during the proceedings.


6. The Tribunal recorded the agreed basis for consideration of the issues that both the supply and erection contracts shall be considered as if the contracts were on an overall supply-cum-erection basis. Apart from the various documents relied on, evidence adduced, oral submissions made, the reconciled statements of the parties, the project site visit by the Tribunal members, the contentions and arguments advanced during the hearing by the respective counsel for consideration of the disputes herein, it was agreed that the parties shall give the advance submissions and written submissions of highlights of oral pleadings included in the various arbitration orders issued from time to time. After recording its views on the respective claims, the Tribunal arrived at the net amount payable by the petitioner to the first respondent.


7. It is a matter of record that the petitioner filed a petition under Section 16(1), (2) and (3) of the Arbitration and Conciliation Act 1996, raising the issues of jurisdiction and limitation on certain claims, particularly with reference to the relief sought for by the first respondent on the aspect of delay in the execution of the contract and the deduction of liquidated damages by the petitioner. By order dated 10th August, 2002, the Tribunal considered the said plea and held that without going into the merits of each claim, a generalised decision on the issues of limitation and jurisdiction could not be given. Consequently, as a matter of procedure, the Arbitral Tribunal unanimously decided that the legal aspect of limitation and jurisdiction could be argued by both the parties, if so desired, along with the merits on the respective claims and counter claims. It was also agreed that the individual issues raised were within the jurisdiction of the Arbitral Tribunal to adjudicate upon.


8. Clause 9.1 of the award pointed out that as suggested by the Tribunal during the initial hearing and as agreed to by the parties, it was decided that the arbitrability of the preliminary issue on merits would be dealt with as a preliminary issue with reference to the identified specific issues and wherever the preliminary issue is so desired and raised by the parties, the same could be considered under each head.


9. After the conclusion of the arguments too, the Tribunal directed the parties to submit the information regarding revised claim against each issue of the claim and counter claim as argued, concluded and finalised along with the supporting calculations as regards the working of the amount arrived at, the date on which each of the claims and counter claims became due and the statement of cost of arbitration.


10. The Tribunal recorded the receipt of documents and ultimately arguments were concluded on 11.4.2006 and the award was passed. It is a matter of record that the parties have expressed their full satisfaction in the conduct of the arbitration proceedings. In the course of the proceedings, even at the stage of grouping of issues, parties agreed that the issues have to be formulated under three heads, namely, interlinked issues to be dealt with together under Group AA; Claimant, namely, first respondent?s issues under Group B and the petitioner's issues under Group C. The Tribunal passed the award on the individual and group claims as follows:


Group AA:- Interlinked Issues dealt with together or jointly


S.No



Issue


Amounts awarded to EPI


Amounts awarded to TNEB


No.


Description


Principal Amount Rs.



Interest Amount Rs.


Principal Amount Rs.


Interest Amount Rs.


1


8.C.1 & R.13



Extension of time & levy of liquidated damages


0.00


0.00


47,647,088.00


56,119,132.00


2


8.C. 17 & R.8


Claim for revision in Scope of work of DS/DW system


97,757.00


96,338.00


0.00


0.00


3


8.C.23 & R.16


Cost of Arbitration


Apportionment of cost of Arbitration given below in 10(c)


Sub-total in favour of EPI (AA)


97,757.00


96,338.00


N.A.


N.A.


Sub-total in favour of TNEB (AA)


N.A.


N.A.


47,647,088.00


56,119,132.00


Group B:- Claimant's Issues


S.No


Issue


Amounts awarded to EPI


Amounts awarded to TNEB


No.


Description


Principal Amount Rs.



Interest Amount Rs.


Principal Amount Rs.


Interest Amount Rs.


4


8.C.2



Claim of Overheads and Loss of Profit during extended period of contract


94401044.00


77395924.00


N.A.


N.A.


5


8.C.3


Claim for Bank charges for Contract Perf. Bank Guarantees


2223674.00


2846844.00


N.A.


N.A.



6


8.C.4


Claim for amounts withheld on A/c of Liquidated Damages by TNEB from EPI's bills & cost of providing B.G. For Rs.150 lac.



2072215.00


8576691.00


N.A.


N.A.


7


8.C.5


Claim towards amounts withheld on A/c of interest on unadjusted initial advance by TNEB from EPI's bills


12850255.00


17129320.00


N.A.


N.A.


8


8.C.6


Claim towards amount withheld on A/c of exchange variation by TNEB from EPI's bills



2411448.00


3114693.00


N.A.


N.A.


9


8.C.7


Financing Charges of excise duty


0.00


0.00


N.A.


N.A.


10


8.C.8


Re-imbursement of Additional Sales Tax



0.00



0.00



N.A.


N.A.


11


8.C.9



Claim for Reimbursement of Excise Duty- Could not be claimed from DGFT


448905.00



491459.00



N.A.


N.A.


12


8.C. 10


Claim towards outstanding payments of the Running Bills



6899760.00


6762419.00



N.A.


N.A.


13


8.C. 11


Claim for Release of Retention Money amount


52525930.00


51763225.00


N.A.


N.A.


14


8.C. 12


Surveying Charges


0.00


0.00


N.A.


N.A.


15


8.C. 13


Claim towards providing of Separate Idler Frames for Garland Type Idlers


2675323.00


2565012.00


N.A.


N.A.


16


8.C. 14


Claim for cast Iron Counter Weights in place of RCC Counter weights


756370.00


725183.00


N.A.


N.A.


17


8.C. 15


Claim for Rack & Pinion Gates


1011351.00


1414367.00


N.A.


N.A.


18


8.C. 16


Claim for Additional Welding of S.S.liners


0.00


0.00


N.A.


N.A.


19


8.C. 18



Claim for Modification of Discharge Chute


82955.00


78512.00


N.A.


N.A.


20


8.C. 19



Claim towards Extra Structural work


84806.00


81309.00


N.A.


N.A.


21


8.C. 20


Claim for Surplus material at site


3109472.00


3064321.00


N.A.


N.A.


22


8.C. 21



Claim for Interest on Delayed payments


2788317.00


0.00


N.A.


N.A.


23


8.C. 22



Interlinking of Settlement of Accounts of Tuticorin with North Chennai Project



0.00



0.00



N.A.


N.A.


Sub-total in favour of EPI (B)


184341825.00


176009297.00


N.A.


N.A.


Group C : - Respondent's Issues


24


8.R.1


Non-supply of 372 Nos.of couplings


N.A.


N.A.


0.00


0.00


25


8.R.2


Cost of balance work not completed


N.A.


N.A.


0.00


0.00


26


8.R.3


Counter Claim for not providing Belt Vulcanising Machine


N.A.


N.A.


800000.00


788384.00


27


8.R.4.



Supply of Pulleys without Inter-lock.



N.A.


N.A.


0.00


0.00


28


8.R.5


Counter Claim for non providing Aluminium Windows ? only steel windows provided by EPI in galleries


N.A.


N.A.


361772.00


356519.00


29


8.R.6


Counter Claim for not providing of AC sheets in certain areas of conveyor galleries 69, 70 and 71.


N.A.


N.A.


142240.00


140175.00


30


8.R.7


Refund of unadjusted advance


N.A.


N.A.


0.00


0.00


31


8.R.9


Counter Claim for reduction of pump capacity of DS System


N.A.


N.A.


31546.00


31088.00


32


8.R. 10


Counter Claim for Non-Erection of DS System Pipes, Values in Raw Coal Stock Pile Area.


N.A.


N.A.


106275.00


104732.00


33


8.R. 11


Counter Claim for refund on account of saving of cables due to location of LDB


N.A.


N.A.


1549787.00


1527283.00


34


8.R. 12


Re-imbursement of expenses incurred by Board


N.A.


N.A.


0.00


0.00


35


8.R. 14


Count Claim for not providing valid ILMS, which failed twice during guarantee period.


N.A.


N.A.


2000000.00


1970959.00


36


8.R. 15


Interest


N.A.


N.A.


Considered in respective issues



Sub-total in favour of TNEB (C)


N.A.


N.A.


1991620.00


4919140.00


Grand total in favour of EPI (AA+B)


184439582.00



176105617.00



N.A.



N.A.


Grand total in favour of TNEB (AA + C)



N.A.



N.A.


52638708.00


61038272.00


11. The award worked out the net amount payable by the petitioner and directed that the petitioner should pay the award amount within 30 days from the date of the award, in default of which, the petitioner should pay simple interest at 18% per annum from the date of the award till the date of actual payment.


12. The grievance of the petitioner herein is that having thus laid down the procedure as per Section 16(3) of the Act, the Tribunal failed to adhere to the said procedure of considering the question of arbitrability on the various issues raised from the point of jurisdiction as well as limitation; on the other hand, it considered and rendered its decision only on the merits of the claims and ignored in toto the legal issue of arbitrability raised by the petitioner with reference to the contract terms and the materials relating to the said issue.


13. Learned counsel further pointed out to the agreed procedure that the highlights submitted by the parties herein formed the primary basis for drawing the conclusion by the Tribunal. It was further agreed that if any of the points included in the highlights were not actually made during the hearing and thus any one of the parties did not have the opportunity to give their counter arguments or if either of the parties had any submission to be made, that the queries made by the Tribunal were not sufficiently clarified, they should be brought out immediately and thereafter the issue be considered; that the responsibility on this would primarily rest on the shoulders of the parties to the dispute.


14. Learned counsel also pointed out in the course of arguments that the first respondent's original claim as on 11.8.1996 of Rs.2,19,71,019/- was revised to Rs.1,01,00,000/- and TNEB's original claim was revised to Rs.34,00,000/-. This was pursuant to the directions from the Tribunal to the parties herein to mutually reconcile the differences relating to bills and payments and to arrive at a settlement. The Tribunal pointed out to the agreement between the parties that since overall accounts have been reconciled, the individual differences did not matter as far as the accounts were concerned. In the context of such detailed procedure laid down, learned counsel submitted that the Tribunal erred in not following the procedure and the award passed by the Tribunal in violation of the said procedure, hence, suffers from patent illegality and liable to be interfered with under Section 34 of the Arbitration and Conciliation Act, 1996.


15. Apart from this, the petitioner also questions the award in its failure to take note of the grounds raised by the petitioner in its written submissions as well as in the highlights submitted both before as well as on the conclusion of the hearing. The petitioner alleges that, having regard to the findings rendered therein with reference to the various documents relied on and the contractual terms, the award is writ with inconsistencies and hence, liable to be interfered with by this Court under Section 34 of the Arbitration and Conciliation Act, 1996.


16. As far as the jurisdictional aspect is concerned, learned counsel for the petitioner submits that when the contract provides for a mechanism for referring the disputes to the Arbitral Tribunal and the award fails to take note of the procedure laid down under the contract, the decision by the Tribunal thus going against the terms of the agreement, hence, is illegal and contrary to the terms of the agreement, particularly Clauses 27.3 and 27.5 of the General Conditions of Contract. Consequently, the same is liable to be set aside by this Court. When the Tribunal had agreed for considering these issues along with the merits of the individual claims, the failure to consider the same at the appropriate places as against the relevant claims, makes the entire award illegal. Referring to the findings on the inconsistencies with reference to the various documents, learned counsel submits that when the award ignores the various contract clauses and the materials; the findings are not drawn based on the materials, the award is writ with inconsistencies.


17. Learned counsel for the petitioner further pointed out to the inconsistencies in the award, particularly in the matter of working out the net amount payable. He made particular reference to the award granting interest at Paragraph 4.26, wherein the Tribunal pointed out to the recovery by TNEB from the first respondent, an amount of Rs.142.38 lakhs towards liquidated damages. Having regard to the grant of relief, the Tribunal directed the first respondent to pay simple interest at 15% per annum on the balance of the amount payable from 20th October, 1998, which is 50 days after the revised date of completion, till the date of award. The said amount worked out to Rs.5,61,19,132/-.


18. Learned counsel for the petitioner pointed out that while there is no reason for fixing the starting point for interest calculation from 20th October, 1998 as 50 days after the revised date of completion, the Tribunal also did not consider granting post-award interest to the petitioner as against the interest granted to the first respondent for the post-award period too. Learned counsel for the petitioner pointed out that in the matter of working out the amount awarded in favour of the first respondent and in favour of the petitioner, inconsistencies as regards the interest calculation had also entered into in the reckoning of the figure; that the net amount payable by the petitioner to the first respondent had been arrived at in such a manner that interest was granted to the first respondent for the post-award period and to the petitioner, it was restricted till the date of the award. Learned counsel took me through the grant of interest to the first respondent under various heads and pointed out that except for granting interest, the award does not contain any reasoning or details as to the actual working. The award does not disclose the reason as to why detailed submissions were not considered and reasons given in the matter of granting post-award interest. This, in effect, makes the award inconsistent. Apart from that, the award nowhere speaks about the adjustment details. In any event, there is no question of the Tribunal ordering adjustment without any indication as to the methodology adopted in arriving at this adjustment. He pointed out that the award contains no discussion as to the manner of adjustments. This is more so in the context of the apportionment of the delay period on the petitioner as well as on the first respondent and in the absence of any reasons and details in the award as to the date upto which interest granted has been worked out, the post-award interest on the amount worked out as payable by the petitioner has to be set aside.


19. In the circumstances, placing reliance on the decision reported in 2008-4-Law weekly 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi), learned counsel submitted that in the face of the illegality writ large on the face of the award and serious prejudice caused to the rights of the petitioner, the award being against the terms of the contract, this Court has every jurisdiction to interfere with the award. He made specific submission on each one of the points referred to above with particular reference to the delay aspect and the limitation on the claim as well as on the merits of each of the claims and counter claims, considered by the Tribunal.


20. Learned counsel made a detailed submission, particularly with reference to Clauses 27.4 and 27.5 as well as Clause 22.2 of the GCC, on the first of the issues, namely, whether the first respondent was entitled to extension of time upto September, 1999 for completion of the project. Interlinked to this issue is the counter claim of the petitioner, as to whether the petitioner was entitled to recover from the first respondent an amount of Rs.4,75,77,391/- towards levy of liquidated damages for both supply and erection contracts.


21. Countering the submissions of the learned counsel appearing for the petitioner, learned counsel appearing for the first respondent pointed out that the award could be interfered with by this Court only if and when the award goes against the terms of the contract and contrary to the substantive law. He submitted that a reading of the award shows that it does not, in any way, violate the terms of the contract or made in total disregard of the substantive law. He further pointed out that when the Tribunal is a chosen forum for resolution of the disputes and the award had been made on appreciation of evidence and documents, the decision of the Tribunal is binding on the parties concerned.


22. Referring to the reasons given in the award as indicative of application of its mind to the materials, vis-a-vis terms of the contract, learned counsel for the first respondent referred to the decisions reported in (2007) 6 MLJ 525 (Bharat Petroleum Corporation Ltd. Vs. Rajarajeswari Agency), 2007 (5) CTC 17 (Sree Kamatchi Amman Constructions Vs. The Divisional Railway Manager-Works, Palghat Division (DB), 2004 (4) RAJ 228 (Delhi Development Authority Vs. Bhagat Construction Co. Pvt. Ltd.) 2006 (1) RAJ 168 (Government of NCT Of Delhi Vs. Ved Prakash Mehta) that when the award stands on the consideration of documents and materials and in accordance with the procedures laid, and there are no violations of the procedure, this Court cannot substitute its view on the evidentiary value of the materials produced before the Tribunal. The award is not made on equity principles too, to contend that the award had gone against the terms of the agreement.


23. On the question of limitation, he pointed out that the contract provided for amicable settlement of the differences between the parties. Clause 26 of the contract deals with the same. Going by the dispute that had arisen between the parties, the first respondent herein approached the petitioner for an amicable settlement. The correspondence between the parties, in particular the MOM dated 31.12.1996 and 20.5.1997, thus reveal that on the assurance given by the petitioner that the Board would take a decision on the claims of the first respondent, rightly, the cause of action could not be said to have arisen prior to that date for invoking the arbitration clause. The cause of action, hence, was rightly taken by the Tribunal as having arisen on 9.3.2001 and going by the decision reported in (2007) 4 SCC 599 (Shree Ram Mills Ltd. Vs. Utility Premises (P) Ltd.), the Tribunal had rightly considered the claim as within the period of limitation. Learned counsel pointed out that the Tribunal took note of the claims and counter claims and passed the award granting relief to the petitioner and to the first respondent and ultimately after adjustment, worked out the net amount payable to the first respondent by the petitioner.


24. Learned counsel for the first respondent further referred to the grant of interest as well within the discretion of the Tribunal and one in accordance with the provisions of Section 31(7) of the Act. He placed reliance on the decision reported in AIR 2005 Bombay 257 paragraph 6 (Susaka Pvt. Ltd. Vs. Union of India (UOI) and others) as well as (1998) 1 SCC 418 (Executive Engineer (Irrigation) Balimelu and others Vs. Abhaduta Jena and others); (1992) 1 SCC 508 (Secretary, Irrigation Department, Government of Orissa and others Vs. G.C. Roy) and (2001) 2 SCC 721 at paragraph 44 (Executive Engineer, Dhenakanal, Minor Irrigation Division Vs. N.C.Budhraj). In short, learned counsel submitted that arbitration, being a chosen forum to decide on the disputes in a contract, interference under Section 34 of the Arbitration and Conciliation Act with the award passed by the Tribunal would arise only if and when the Tribunal ignored the provisions of the contract and went against the substantive provisions of law. Hence, the question herein would be as to whether the Tribunal acted against any of the provisions of the statute or the provisions of the contract or ignored the terms of the contract to decide the issue on equity. In the absence of any of these aspects specified, this Court may not interfere with the award. Replying to the allegations of the petitioner that the Tribunal had passed the award in violation of the procedure laid down by the Tribunal, he submitted that even though the Tribunal had not pointed out to the aspect of limitation under each and every head, yet, a reading of the award in entirety, would indicate that, satisfied of its jurisdiction and limitation, wherever the said issues had arisen, the Tribunal had considered the same fully. The Tribunal had dealt with at length, the cause of action arising as on 9.3.2001 in terms of Clauses 26 and 27.1 of the GCC and hence, rightly held that the claims are well within the jurisdiction of the Arbitrator to decide on this issue. In the above circumstances, learned counsel prays that the award be confirmed.


25. In reply to the said arguments, learned counsel appearing for the petitioner pointed out that the Tribunal had nowhere discussed the issue on jurisdiction and limitation, although the procedure agreed contemplated that while dealing with each claim, the issue on limitation and jurisdiction would receive proper consideration. He further pointed out that as per the procedure laid down, the petitioner filed its advance argument as well as the highlights. The award narrates only a portion of the objections of the petitioner and in considering the merits of the claims of the first respondent, the Tribunal had totally overlooked the materials produced as well as the objections of the petitioner. This is apparent in the award itself in the summary of the objections stated therein by the petitioner. Hence, with patent illegality writ on the face of the award in not considering the objection and materials fully, the prejudice that the petitioner had suffered certainly calls for interference by this Court as laid down in the decision reported in 2008-4-L.W. 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi). He further pointed out that no arguments were made at any point of time based on Clause 26.1 of the GCC. The first respondent never made any submission on the minutes of the meeting to save the claim from the aspect of limitation. The first respondent had made a claim based on Clauses 18.5, 21 and 22.1 of the GCC. Hence, the question of the first respondent now placing reliance on the MOM and that the first respondent waited for the decision to be taken by the Board are not of any relevance for the purpose of considering the limitation aspect and in invoking the arbitration clause viz., Clause 27.4 of the GCC. He pointed out that leaving aside the MOM referred to by the first respondent, pending decision by the Board, the first respondent had not reserved the right to agitate its claim on liquidated damages at any point of time. He pointed out that when the parties had raised a specific issue on jurisdiction and limitation, the Tribunal was bound to give its decision on the arbitrability of the issue. When the award is silent on this aspect, the rights of the petitioner are really prejudiced and the award, being in violation of Section 16 of the Act, has to be set aside in terms of the decision of the Apex Court reported in 2008-4-L.W. 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi).


26. Learned counsel further pointed out to the advance submissions made by the first respondent that there is no allegation therein as to the delay in the payment of running account bills, nor was there any dispute raised alleging delay in payment of running account bills. This is evident from the letter dated 29.3.2000. Referring to the decision reported in (2006) 11 SCC 181 (McDermott International Inc. v. Burn Standard Co. Ltd.) that the award must disclose the reason to support the conclusion, learned counsel submitted that when the award does not disclose any reason for allocating 24 months on the issue of delay as attributable to the petitioner to go to the credit of the first respondent, the award is liable to be set aside. Except for a mere general discussion for the first 10 months' period, nowhere the Tribunal discussed the reasoning for granting the relief thereon. Hence, when the award is not supported by reasons referable to the materials produced by the parties and particularly in the matter of working out the adjustment, the award, to that extent, is liable to be set aside.


27. The submissions on jurisdiction and limitation have relevance to the interlinked issues falling under Group AA namely, Issue 8(C)(1) and 8(R)(13), 8(C)(17) and 8(R)(23) and to the Issues falling under Group B relating to claimant's issues Nos.8(C)(2) to 8(C)(9). The claim of the first respondent under these issues are attacked by the petitioner on the ground of delay in the execution of the contract as attributable to the first respondent as well as on the ground of limitation in resolving the disputes before the Arbitrator. Broadly, the petitioner pointed out that the first respondent never raised any issue on the decision of the Engineer as regards the delay. Hence, once the first respondent had allowed the decision of the Engineer to attain finality, the question is no longer alive for the first respondent to invoke the arbitral Tribunal's jurisdiction. Hence, the plea of limitation and jurisdiction for the Tribunal to enter into these issues ought to have been considered at the appropriate places with reference to the relevant claim, as had been indicated by the Tribunal as a procedure to be adopted in deciding the issues.


28. Before going into the allegation of the petitioner as to the Tribunal's failure in not adhering to the procedure laid down by it while dealing with the claims and counter claims, particularly from the point of arbitrability and limitation, the view of the Tribunal as to the preliminary issue raised and the procedure laid by the Tribunal has to be seen.


29. Paragraph 8 of the award contains the Tribunal's decision on the preliminary issue as to the arbitrability of the issue in view of the plea of limitation as well as the maintainability of a dispute before the Tribunal in view of the various contract conditions and the procedure laid in terms of Section 16 of the Act. The Tribunal observed as follows:


"(a) The pleas of both the Parties that Claims and Counter Claims are time barred as per the Law of Limitation or by the Contractual Conditions cannot be decided upon without going into the merits of each Claim and Counter Claim. The Arbitral Tribunal therefore unanimously decided that the above legal aspects of each Claim and Counter Claim may be argued by the respective parties, if so desires, along with the merits of these Claims/counter claims, if desired by any of the parties.


(b) Both EPI and TNEB agreed to go ahead with their arguments on the merits of each individual Issue admitting that all the Issues listed were within the jurisdiction of the Arbitration Tribunal to adjudicate."


0. The said decision was, in particular, with reference to Issue Nos.8(C)(1) and 8(C)(2). On issue No.8(C)(3) as to whether the claim and the counter claim were within the jurisdiction of the Tribunal, the Tribunal pointed out as follows:


"As suggested by the Tribunal during the initial hearings, it was agreed by both the Parties that the Preliminary Issues as mentioned above will be dealt with on merits while arguing the identified specific Issues of both the Parties listed below. These Preliminary Issues were dealt with whenever, so desired and raised by the Parties, while deliberating on the various Issues. The Tribunal did not consider it necessary to make separate awards in this regards as both the Parties went ahead with the subject matter of the Issues in each case."


31. In the background of this, we need to have a quick glance of the facts pertaining to the contract and the contract clauses. The contract between the parties contemplated execution of the work within a period of 24 months from the date of issuance of the Letter of Intent, namely, 12.8.1994, both for supply contract as well as for the erection contract. The execution of the work took nearly 48 months and the contract was completed only on 25.11.1999.


32. Clause 4 of the contract gives the completion schedule as 24 months calculated from the date of receipt of the Letter of Intent, namely, 12.8.1994. Clause 17.0 of the Letter of Intent deals with liquidated damages at one-tenth percent (0.1%) of the "contract price" per day of delay subject to a maximum of ten percent (10%) of the "contract price". Clause 18 of the General Conditions of Contract deals with liquidated damages for delay in completion attributable to the contractor. Clause 18.1 states that the contractor had agreed that the work shall be commenced and carried on at such points and at such times in the order of precedence as may be directed by the owner/ Engineer in accordance with the schedule for the completion of the work as outlined in the contract. It also stipulates that the progress of the work shall be checked at regular monthly intervals and the percentage progress achieved shall be commensurate with the time stipulated in the contract. Clause 18.3 of the GCC states that in the event of any untoward or extraordinary circumstances arising beyond the control of the contractor, which, in the opinion of the petitioner or the Engineer, would entitle the contractor to a reasonable extension of time, such extension may be granted. This, however, would not relieve the contractor of any of its obligations under the contract. Hence, primarily, the contractor has to notify the employer, any event or condition, which might delay the completion of the erection work in accordance with the approved schedule and the steps taken to remedy such a situation (Clause 18.4 of the GCC). Clause 18.7 of the GCC declares that the time stipulated in the contract for the execution and completion of the works shall be deemed to be the essence of the contract. Where the Contractor fails to execute, complete and deliver the works within the time specified, the contractor is liable to pay to the owner, liquidated damages. Without prejudice to any method of recovery, the owner is entitled to deduct the amount for such damages from any amount due or which may become due to the contractor. In the event of extension of time granted by the owner or the Engineer for completion of the works on the grounds stated in Clause 18.3, 18.5 and 18.6, namely, the contractor seeking extension of time on account of extraordinary or untoward circumstances, or the delay caused by the owner or any other contractor engaged by the owner or by force majeure cause, the provision on liquidated damages would be applicable only after the expiry of such extension period. That means, barring cases of extension granted on account of the stated circumstances as provided for under the contract, any delay attributable to the contractor would result in levy of liquidated damages and the said amount would be deducted from the payment due to the contractor. Hence, the extension granted to the contractor has to be on justifiable grounds and not attributable to the contractor but to the employer alone.


33. The contract contemplated that the contractor shall furnish to the purchaser, namely, the petitioner, the monthly progress reports before the end of the first week of the succeeding month to enable satisfactory monitoring of the progress of the job. The progress report was to indicate the schedule for the month, items of work executed, actual progress, reasons for shortfall, if any, and steps taken to make up for the shortfall. The said contract term is found under Clause 3.6 of the Additional Instructions to Tender. The contract also provides that the work schedule shall duly take into account, the monsoon or inclement weather conditions and these should not be considered as a reason for any extension of the completion period. The contract further stipulated that the contractor has to commence the work at the site within three months from the date of receipt of the work order and the contractor has to make all arrangements at the site to mobilise labour, materials, operators and maintain sufficient number of machinery/ equipment to guarantee the agreed rate of progress of work as per the accepted schedule. Clause 3.9 of the Additional Instructions to Tender further stipulates that idle time charges, for any reason, would not be entertained by the owner.


34. In the context of the progress report to be submitted by the first respondent before the end of the first week of the succeeding month, the provisions for liquidated damages under Clause 18 of the GCC, hence, assumes significance. Clause 18.5 of the GCC states that if the work gets delayed on account of the owner/purchaser or its employees or by any other contractor under the principal purchaser or by force majeure, the first respondent would be entitled to get extension of time for the completion of the work. The contractor has to submit an application narrating special circumstances at the time of occurrence of such circumstances and not towards the end of the contract period. The contract reserves the right of the Engineer/owner to require discontinuance of work in whole or in part for such time as may be necessary. In the event of discontinuance of the work so required, extension of time would be granted to the contractor and the vendor/contractor would not claim any compensation or damage in relation thereto. Clause 18.7 of the GCC states that the time stipulated in the contract for the execution of the work and the completion of the work shall be deemed to be the essence of the contract. Where the contractor fails to execute, complete and deliver the works within the time specified, leading to a delay in the performance thus not attributable to the owner/purchaser, the contract provides for the consequences of such delay viz., that the contractor is liable to pay liquidated damages to the purchaser. The owner may deduct the amount on such claims for liquidated damages from any amount due or it may become due to the vendor without prejudice to any method of recovery. The imposition of liquidated damages is not by way of penalty.


35. Clause 19 of the GCC deals with the contractor's default leading to levy of liquidated damages. Clause 21.3 of the GCC deals with the delay caused by force majeure conditions for a period exceeding 120 days. Clause 22 of the GCC deals with delay by the owner/purchaser or his authorised agents. Clause 22.1 of the GCC lists out the grounds on which the contractor can seek extension of time. Clause 22.1 reads as follows:


"22.1 If in the opinion of the OWNER/PURCHASER or the ENGINEER, the work be delayed (a) by force majeure, or (b) by reason of proceedings taken or threatened by or disputes with adjoining or neighbouring owners or public authorities, or (c) by the works or delays of other constructors, or tradesmen engaged by the OWNER/PURCHASER, or (d) by reason of the ENGINEER's instructions, or (e) in consequence of the VENDOR/CONTRACTOR not having received in due time necessary instructions from the OWNER/ PURCHASER or the ENGINEER for which he shall have specifically applied in writing, or (f) by reason of non-payment of running bills within a reasonable time after issue of the certificate by the OWNER/ PURCHASER or the ENGINEER, the OWNER/ PURCHASER or the ENGINEER shall make a fair and reasonable extension of time for completion of the Contract 'Works'. In case of strike or lockout, the VENDOR/CONTRACTOR shall, as soon as possible, give written notice thereof to the OWNER/ PURCHASER or the ENGINEER, but the VENDOR/ CONTRACTOR shall, as soon as possible, give written notice thereof to the OWNER/PURCHASER or the ENGINEER, but the VENDOR/CONTRACTOR shall nevertheless constantly endeavor to prevent delay and shall do all that may reasonably be required to the satisfaction of the OWNER/PURCHASER or the ENGINEER to proceed with the work."


36. Clause 22.2 of the GCC, which has been the centre of argument on the question of levy of liquidated damages as well as on the claim of the contractor for excess rate, reads as follows:


"22.2. In addition, the VENDOR/ CONTRACTOR shall be entitled to claim demonstrable and reasonable compensation if such delays have resulted in any increase in the cost. The OWNER/PURCHASER shall examine the justification for such a request for claim, and if satisfied, the extent of compensation shall be mutually agreed depending upon the circumstances at the time of such an occurrence."


The sum and substance of these clauses is that where the work is delayed by force majeure or by disturbance or threat caused by public authorities or by the disputes with adjoining or neighbouring owners on account of the delay by other constructors engaged by the owner/ purchaser, by reason of the Engineer's instruction or the absence of necessary instruction from the owner or Engineer which the contractor has specifically asked for thus leading to the delay, by reason of non-payment of the running bills within the reasonable period after issue of the certificate by the owner or Engineer, the contractor is entitled to be compensated both by grant of extension of time for completion of the contract as well as monetarily. Clause 22.2 of the GCC specifically states that on the delay caused by the owner thus resulting in any increase in the cost, the contractor can claim "demonstrable and reasonable" compensation. On such claim made, the owner has to examine the justifiability of the claim and on the satisfaction reached as to the justifiability of the claim, the determination of compensation would be one mutually agreed upon between the parties and the extent of compensation shall be based upon the circumstances at the time of such an occurrence. Thus Clause 22.2 of the GCC contemplates demonstrable and reasonable compensation, which means, the onus is on the vendor/contractor to support its claim, that facts justified the claim for compensation; apart from being reasonable, it is a compensation, which would evidently demonstrate the loss suffered by the contractor. Thus the clause is very specific as to the manner of determination of a claim for compensation, apart from providing base for the claim that the determination has to rest on the justifiability of such a claim and that the extent of compensation claimed has to reflect the damage suffered. Hence, when once the petitioner/owner is satisfied of the justifiability of the claim, it being one falling under any of those clauses enumerated under Clause 22.1 of the GCC, satisfied of the grounds in the claim, the parties have to agree upon the quantum of compensation that would be placing the aggrieved party/contractor to a position in which the contractor would have been placed, had not the delay occurred. This involves the contractor substantiating his claim based on facts and figures as to the delay and that the execution on account of the delay had resulted in a demonstrable cost increase, which has to be compensated in a reasonable way. Clause 22.2 of the GCC, hence, contemplates determination of the compensation on a mutually agreed basis, it being supported by the circumstances prevailing as at the time of such occurrence, namely, the delay.


37. Clause 26 of the GCC deals with settlement of disputes amicably between the parties. Where such exercise for settlement fails, then Clause 27 of the GCC governs the manner of settlement of the dispute. Clause 27 of the GCC deals with arbitration. As per Clause 26.1, all disputes, differences, including those considered as a dispute or a difference by only one of the parties in connection with the contract, to the extent possible, shall be settled amicably between the parties. Clause 27.1 states that where a dispute arises of any kind whether during the progress of the work or after the completion or whether before or after the termination, abandonment or breach of the contract, it shall be referred to and settled by the owner/purchaser or the Engineer within a period of 30 days after a requisition in writing is made by the contractor. The owner/purchaser or the Engineer has to issue written notice of his decision to the vendor/contractor within a period of 30 days after receipt of the request. Thus Clause 27.1 of the GCC gives a time frame of 30 days from the date of request for the decision, for the Engineer to give his decision on the dispute or differences between the owner and the vendor, arising out of the contract. The said clause also contains different time frame on the decision to be given depending on the stages of the contract during which the request has been made for a decision. As far as supply, erection and commissioning including performance and testing is concerned, it gives 90 days from the date of completion of the performance test; 90 days from the date of expiry of the warranty period and 90 days for termination and abandonment of work from the date of occurrence of such acts. The decision of the Engineer is binding on the parties until the completion of the work and the contractor shall proceed with the execution of the work, irrespective of whether the owner/purchaser requires arbitration. On the decision thus indicated, the aggrieved party has to make his claim, communicate his decision to go for further arbitration within a period of 30 days from the date of receipt of the notice, failing which, the decision shall attain finality and hence binding on the parties (Clause 27.3 of the GCC). Where the Engineer or the owner/purchaser fails to notify his decision within 30 days or where the aggrieved party, namely, the vendor/contractor is dissatisfied with any decision, either party may require and make a claim within a further period of 30 days for reference of the disputes to arbitration. Clause 27.5 of the GCC states that disputes, which had not become final and binding, shall be settled by arbitration, as provided under the contract. The rest of the clauses under Clause 27 of the GCC deal with the procedure as to the conduct of the proceedings in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and the constitution of the Arbitral Tribunal. Clause 27.8 states that the Arbitrators shall have full powers to review and/or revise any decision, opinion, directions, certification or valuation of the Engineer in consonance with the contract and the parties are not restricted to place only such of those evidence and arguments put before the owner/purchaser or the Engineer for the purpose of obtaining the decision, but are at liberty to let in before the Tribunal, even fresh evidence or arguments, not placed before the Engineer/owner purchaser.


38. The reading of the said clause shows the unlimited authority of the Arbitrators to review or revise a decision or opinion, but at the same time, it stands to reason that invoking of the arbitration clause arises only after following the procedure on resolution of the disputes laid under the contract.


39. A reading of the clause thus reveals the ambit of authority of the Arbitrators to be read as conditioned by the other provisions falling under the head of arbitration, namely, Clause 27.4 of the GCC, which specifically speaks about the time frame within which one has to invoke the arbitration clause for the purposes of inviting a decision on the dispute. The fact that the Arbitrators have full powers, to review or revise the decision of the Engineer, does not mean that the Arbitrators can deal with those issues on which the decision by the Engineer has already attained finality in terms of Clause 27.3 and 27.4. Hence, the vendor/contractor must invoke the arbitration clause within 30 days after the expiry of the receipt of the decision from the Engineer and in a case, where in the event of the Engineer not passing his decision within 30 days of the receipt of the requisition, the vendor/contractor has to approach the Arbitrators within a further period of 30 days after the expiry of the first 30 days within which the Engineer has to give his decision. In the event of the vendor not invoking the arbitration clause within the said time as contemplated under Clause 27.3 and 27.4 of the GCC, the decision would be binding on the parties concerned. Hence, what would be the subject matter of arbitration is clearly laid down under Clause 27.5 of the GCC.


40. Clause 27.5 of the GCC reads as follows:


"All disputes or differences in respect of which the decision, if any of the OWNER/PURCHASER or the ENGINEER has not become final and binding as aforesaid, shall be settled by arbitration in the manner hereinafter provided."


41. Thus, in the background of Clause 27.3 and 27.4 of the GCC, if a party raises any dispute on a decision of the Engineer that had attained finality and hence binding on the parties, the jurisdiction of the Arbitral Tribunal rests with and restricted only to the extent of finding whether the decision of the Engineer has attained finality and hence binding on the parties. The jurisdiction, however, does not extend to give a decision on the merits of the decision of the Engineer. As stated in Clause 27.8, the review and revisional authority of the Tribunal has to be in tune with the other clauses in the contract which includes Clauses 27.3 and 27.4 of the GCC.


42. Once the contract provides for excepted matters taking out certain disputes or decisions from arbitrability, the authority of the Arbitrator extends only to the extent of finding out as to whether the issue is an excepted matter at all or not. The question of the Arbitrator assuming jurisdiction to decide on the merits of the excepted matter does not arise. Hence, the authority of the Tribunal, on issues that have attained finality, is restricted to the extent of finding out as to whether the particular issue is an excepted matter and hence outside the pale of the Tribunal for giving its decision. In the background of this aspect, the claim of the parties herein needs to be looked at.


43. The contract between the parties contemplated execution of the work within a period of 24 months from the date of issuance of the Letter of Intent on 12.8.1994. On 13.8.1996, the first respondent addressed a letter pointing out to the abnormal delay in handing over the civil front. The first respondent pointed out that the completion period had already expired on 12th August, 1996 and with all work forces assembled, even as on 13th August, 1996, the civil foundations were not handed over to the first respondent. Hence, the first respondent sought for the exact time schedule, so that the first respondent could prepare the correct time schedule to avoid incurring heavy additional expenses as well as to re-organise their labour strength. The first respondent called upon the petitioner to sympathetically consider the compensation payable to the first respondent for the delay in handing over structural foundations on time. The letter admitted the labour problem and assured that there would not be any delay in handing over the structural building for civil work especially for flooring as per the time frame already indicated. It is relevant to note herein that even prior to this, the first respondent had been referring to the delay in making payments for designing and engineering charges; hence, while seeking payment from the Tuticorin Thermal Project as per Clauses 6.2 of Letter of Intent, they also sought for waiver of bank charges against the unutilised portion of liquidated damages and interest charges on the unadjusted amount of advance.


44. This was replied to on 30.8.1996, wherein the Board admitted that 80% of the civil front (in conveyor length) had been handed over already and that only 25% of the work had been performed by the first respondent. They also gave the dates when the civil fronts were handed over and pointed out that the progress was far from satisfactory; hence, the contention as to keeping the labour idle on account of the delay would not arise. The petitioner also challenged the claim of the first respondent as to the extent of the fabrication work carried out by the first respondent. The petitioner alleged improper organisation, lack of availability of the handling equipments, lack of supervisors and payment problem from the first respondent to the workmen. Once again, the first respondent corresponded with the petitioner. In its letter dated 8th October, 1996, it brought to the attention of the petitioner, the various constraints faced by the first respondent from time to time and pointed out to the preliminary survey showing certain discrepancies. They also pointed out to the delay in Engineering input data, approval of design/engineering work, delay in issuance of project authority certificate, delay in approval of Quality Assurance Plan, delay due to non-availability of Letter of Credit from TNEB, delay due to non-availability of civil work, allotment of space for site office/fabrication yard, delay in release of advance payment and other day-to-day site hindrances.


45. Summing up all these, the first respondent pointed out that they prayed for extension of time by 16 to 18 months by making suitable amendment to the contract. They pointed out that they would take steps to execute plant erection within 8 months from the date of handing over of the last civil front. Admittedly, this letter was not replied to by the Board. Once again, on 11th January, 1997, the first respondent wrote a letter referring to the letter dated 23.12.1996, wherein they had requested deferment of levy of liquidated damages and refund of the amount already deducted from their bills towards liquidated damages and interest. The letter dated 11th January, 1997 once again called upon the petitioner to defer deduction of liquidated damages/interest and arrange for refund of the amount so far deducted from the bills at the earliest. The letter pointed out to the cash flow problem on account of deduction towards liquidated damages and interest and the difficulty in releasing payments to their suppliers, apart from getting further consignments from the suppliers.


46. On 13th January, 1997, the first respondent once again sought for extension of the contract period and pointed out to the delay on account of discrepancies in the survey report furnished to the first respondent leading to re-doing the whole survey for the project, delay in receipt of the Engineering input data and approval of design/ engineering work, delay in receipt of project authority certificate, delay in approval of quality assurance plan and in finalising the orders for various supplies, non-availability of Letters of Credit from TNEB in time leading to delay in supply, delay in availability of civil front/foundation from TNEB. The first respondent pointed out that the cumulative effect of the delay on account of the above-said constraints were of 16 to 18 months, which resulted in additional cost. They pointed out that they required a minimum of eight months to complete the erection work for the project from the date of availability of the last civil foundation. They referred to the letter dated 8th December, 1996, wherein they had sought for time extension. They objected to the deduction of the liquidated damages, apart from interest on the advance from the running account bills, which had caused serious cash crunch and would affect the completion schedule, since the first respondent would not be in a position to make payment to their suppliers. Hence, they sought for extension of time, apart from deferring liquidated damages and interest on advance. In its letter dated 6.2.1997, this letter was replied to by the petitioner that the release of work front could be done only after the release of load data details by the first respondent; that the civil contractor was to carry out the civil foundation work and thereafter release the front to the first respondent for carrying out the structural work. Thereafter, the front has to be released back to the civil contractor for flooring/roofing concrete works. They pointed out that the first respondent had not kept up any of their commitments taken during the review meeting in the site while releasing the civil front to the contractor for taking up their work.


47. As to the specific issues raised, the petitioner pointed out that the first respondent had undertaken to fix up the survey locations and elevations and that to that effect, they had signed the pre-bid discussion. On the delay in receipt of Engineering input data/approval of design/engineering work, the letter pointed out that the first respondent was furnished with various engineering input data required whenever requests were made; as to the approval of designing/ engineering, the first respondent changed their consultants after a period of four months, which had resulted in a sizeable delay in furnishing various engineering data for review and approval. As to the approval to be given by TCE, in most of the cases, drawings furnished by the first respondent were with defects and were referred for rectification and subsequent approval.


48. On the delay in receipt of the project authority certificate, the letter pointed out that the first respondent made their requests after five months of the award of the contract; there was protracted correspondences on the above issue because of discrepancies noticed and clarification sought for from the first respondent. All the details ultimately were furnished by the first respondent in a complete shape on 28.6.1995 and the project authority certificate was issued on 27.7.1995. Hence, thereafter for 14 months, the first respondent had requested for the authorisation certificate by the authority, who had issued the project authority certificate and the same was also given. Hence, there was no delay on the part of the petitioner on the quality assurance plan.


49. On the aspect of non-availability of Letters of Credit from TNEB, the petitioner admitted that there were delays in re-validating the Letters of Credit due to administrative reasons. Letters of Credit were extended for two months without any cost implication to the first respondent. It was pointed out that invariably, the first respondent could not exhaust the amount and each and every time the Letters of Credit were extended, a sizeable amount was left unutilised to be carried over to the subsequent extension. This was solely on account of poor planning of supply of materials. On the availability of civil work and foundations, the petitioner once again attributed the delay to the first respondent's failure to furnish the approved data on time. The site activity of the first respondent was also poor, since the required plant and machinery were not furnished by the first respondent and there was lack of required work force, poor extraction of the work from the sub-contractors and one of them had left without completing his portion of the work.


50. Summing up all these and contending that even 10% of the total erection work was not carried out for a period of about 29 months, they rejected the plea for extension of time and so too the claim for deferring the levy of liquidated damages and charging of interest on advance payment. Thus, in the letter dated 6.2.1997, the Board rejected the plea for deferring the liquidated damages as well as interest on advance payment being deducted from the running account bills.


51. The subsequent correspondence from the first respondent shows that apart from seeking release of the deducted liquidated damages and interest, deferring any fresh imposition, to avoid any setback in the execution of the balance work, they referred to the meeting held between the Chairman, TNEB and the first respondent on 26.2.1997 and pointed out that the delays were not attributable to the first respondent. The letter dated 29.3.2000 from the first respondent made a reference to the earlier letters dated 8.10.1996 and 26.4.1997 and the record of the discussions, and summarised the overall delay under 10 heads, which are as follows:


S.No


Reasons of Delay


Period of Delay


1


Survey Work


6 months


2



Delay in receipt of Engg. Input & approval of design/drawing work


12 months


3


Delay in Issue of Project Authority Certificate


6 months


4


Delay in Approval of Quality Assurance Plan (QAP)


6 months


5


Delay in opening of L/C


12 months


6



Delay in release of civil foundations


26 months


7


Delay in completion of civil works



12 months


8


Unjustifiable recovery withholding payments


Cannot be exactly quantified. However, of the order of about 36 months


9


Unprecedented rains (Oct-Dec.97) (Force -majeure)


3 to 4 months


10


Delay due to modification of discharge chutes in sonv. 48 A/B (PCH-2)


4 months


52. In the minutes of the meeting dated 20.5.1997, various issues were sorted out by the parties. However on the question of refund of liquidated damages and interest on advance, the petitioner informed the first respondent that as per the procedure, refund could not be ordered; however, it was agreed that the first respondent could give the proposal for deferment of liquidated damages and interest on advance from the prospective bills and the first respondent would not press for formal extension of time at that stage; that TNEB would take up for consideration, the said request at a later date subject to merits. The first respondent, however, pointed out that the progress of work would get affected if the deducted liquidated damages and interest were not refunded, and hence requested TNEB to re-consider their decision. In the background of this letter, learned counsel for the petitioner submits that even after the MOM dated 20.5.1997, when the petitioner had turned down the claim of the first respondent on the levy of liquidated damages and the corresponding deduction on that account as well as on the interest on the advance payment, the first respondent had not thought it fit to invoke the contract clauses on dispute resolution viz., Clauses 26 and 27. On the other hand, in MOM dated 20.5.1997, under Item 5, it was noted that M/s.EPI suggested that the Action Plan for Arbitration and panel for Arbitration need not be discussed at that time, as the prime and common goal is to complete the project.


53. The relevant issues framed by the Tribunal in this regard are as follows:


S.No.


Claims


Rs.


1


Supply and erection of separate idler frames for "Garland type idlers"



42,02,856/-


2


Additional welding of SS liners in MS chutes and skirt boards



2,67,600/-


3


Providing cast iron counter weights in place of concrete counter weights


33,13,719/-


4


Additional survey carried out by EPI for freezing GA plan drgs


1,32,000/-


5


Modification of discharge chute for Conveyor 48A/B in PCH-2


92,954/-


6



Additional structural works carried out in conveyor 69, JT24/23/22/21 due to discrepancy in civil works executed by civil agency of TNEB



43,920/-


7


Structural works in chute modification in JT-20


36,600/-


8


Additional structural works in skirt board modification in conveyor 64


Rs.20,160/-


9


Financing charges on payment of excise duty/blockage of funds


1,67,52,256/-


10


Reimbursement of additional sales tax on account of excise duty


19,31,940/-


11


Reimbursement/compensation of the excise duty amount that cannot be claimed by EPI from DGFT due to non-approval of revised billing schedule by TNEB.



4,49,905


Total


2,72,43,910/-


54. The letter sought for suitable time extension without levy of liquidated damages and interest on the advance amount adjusted by the petitioner after the original date of completion. Once again, the letter dated 9.2.2001 from the first respondent indicated the summary of the claim and the value and called upon the petitioner to release the payment. The total claim was to the tune of Rs.2,72,43,910/-. In the letter dated 9.2.2001, the petitioner once again sought for release of money under different heads, which included increased overheads and decreased profits, additional expenses for extension of Bank guarantees, the commission and bank charges suffered by the first respondent in calculating the increased overheads and decreased profits.


55. The first respondent followed Hudson's formula and computed its claim on the overhead expenses and profit for the extended period of 36 months at Rs.3,46,38,042/-. The claim made vide letter dated 9.2.2001 covers issue Nos.8(C)(1), 8(C)(2) and 8(C)(3). Once again, by letter dated 16.2.2001, the first respondent pointed out that as no amicable settlement was reached and that neither the petitioner nor the Engineer had notified the decision on the claims of the first respondent within the period prescribed under Clause 27.1 of the GCC, in terms of Clause 27.4 of the GCC, on 12.4.2001, the petitioner invoked the arbitration clause by giving notice for reference of the first respondent's claims, as enclosed in their letter dated 16.2.2001, to arbitration. The petitioner, on its part, also made a counter claim on the first respondent.


56. As already noted, in paragraph 8 of the award, the Tribunal passed its order on the preliminary issue, viz., (a) on the arbitrability of the issue that the legal aspects of the plea of limitation as well as the maintainability of a dispute before the Tribunal on each claim and counter claim could be argued by the respective parties, if so desired, along with the merits of these claims/counter claims, if desired, by any of the parties, in view of the various contract conditions. (b) Both EPI and TNEB agreed to go ahead with their arguments on the merits of each individual Issue, admitting that all the issues listed were within the jurisdiction of the Arbitration Tribunal to adjudicate."


57. Learned counsel appearing for the petitioner pointed out that ignoring the said procedure laid, the Tribunal had totally ignored the various correspondences wherein the first respondent had raised a dispute on the deduction of liquidated damages even as early as 1996 and if really the first respondent had any grievance on this, the moment the liquidated damages was deducted apart from the interest on advance payment from the running bills, the first respondent should have gone ahead with the contract terms under Clause 27 of the GCC on arbitration. Having failed to do so, the claim that the cause of action arose on 9.3.2001 runs totally against the contractual terms. Hence, the failure to consider the claim in the background of the contract clauses makes the award suffer from patent illegality.


58. The issues now raised by the petitioner as to the failure of the Tribunal to consider the issue raised on the arbitrability of the disputes on the plea of extension of time and the levy of damages and the question of limitation, hence, need to be looked at on the facts relating to the said claim and the decision rendered thereon.


59. The contention of the petitioner, as for Issue No.8(C)(1) is that, right from 13.8.1996, all that the first respondent had been seeking for was only an extension of time and there was no claim for compensation. Even assuming without admitting that there was a claim for compensation and that was not considered, then the first respondent should have taken steps in accordance with the contract terms, particularly, Clause 27.4 of the GCC, failing which, the first respondent shall be deemed to have accepted the stand of the petitioner. The decision of the petitioner thus reaching a finality, no dispute could be raised before the Arbitral Tribunal inviting its decision on the question of compensation.


60. In the background of these letters referred to above and the various materials read in detail, learned counsel appearing for the petitioner pointed out to the letter by the first respondent dated 13th January, 1997, wherein there was no reference at all to the earlier letters, particularly to the letter dated 13.8.1996, or to the reply by the petitioner that there was no reference to the claim made for compensation on account of delay. The letter sent by the petitioner dated 12.2.1997 considered the claim of delay on each and every aspect and rejected the prayer for extension of time. It was also pointed out that the request for deferring the liquidated damages and the charging of interest on advance payment could not be considered.


61. In the face of this specific communication, learned counsel pointed out that the delay is attributable, out and out only to the first respondent. In the communications starting from 13.8.1996 onwards, the first respondent had been seeking only extension of time and they were, at no point of time, making a claim for compensation. The performance test was completed on 25.11.1999. For the first time on 29.3.2000, the first respondent herein addressed a letter to the petitioner and pointing out to the various delays, once again sought for suitable time extension till the completion of the project without levy of liquidated damages and interest on the advance amount adjusted by TNEB after the original date of completion. The letter also admitted of the delay on their front. Learned counsel submitted that for the first time, in their letter dated 5.4.2000, the first respondent herein made a claim for a sum of Rs.2,72,43,910/- under 11 heads and called upon the petitioner to release the said amount, since they represented the value of the work executed over and above the scope of the contract and reimbursement of expenses incurred due to reasons not attributable to the first respondent. Once again, on 9.2.2001, the first respondent addressed a letter making a claim on the additional cost incurred to the tune of Rs.25,45,624/- on account of extension in the project completion period, attributed as a direct consequence of the petitioner's delays, defaults and disruptions. They also sought for additional expenses for extension of the bank guarantees and called upon the petitioner to settle it at the earliest. The first respondent wrote a letter on 16.2.2001 and pointed out to the petitioner that the petitioner had not released the amount in spite of repeated requests; hence, in terms of Clause 27.1 of the GCC, called upon the petitioner herein to look into the matter and arrange for the release of the payments within the time prescribed in Clause 27.1 of the GCC.


62. Learned counsel for the petitioner pointed out that going by Section 27 of the Indian Contract Act and the time frame fixed under Clause 27.1 of the GCC, the claim itself is not arbitrable, the dispute being not taken in the manner specified therein and hence, apart from the claim being time barred, the issues were beyond the jurisdiction of the Tribunal to give its decision thereon.


63. Touching on the jurisdiction of this Court under Section 34 of the Act to interfere with the award passed by the chosen forum, the petitioner contends that the failure of the Tribunal to deal with the legal issues with reference to the contract clauses makes the award illegal and erroneous on the face of the materials and hence, the award is liable to be interfered with by this Court.


64. Learned counsel appearing for the first respondent, however, pointed out that the Tribunal had, in fact, considered the aspect of limitation that the cause of action arose on 9.3.2001 in paragraph 3.21 at page 180 of the award. The Tribunal pointed out that though the first respondent had written letters to TNEB on 13.8.1996 and 12.6.1997 on the issue of overrun costs, the first respondent made their formal quantified claim in the letter dated 9.2.2001. The Tribunal took note of Clause 27.1 of the GCC and after allowing 30 days' time from the date of the formal claim made, fixed the cause of action as having arisen on 9.3.2001.


65. The first respondent contended that even though the first respondent had taken these grounds at the relevant point of time before the petitioner, there was no proper response for a considerable length of time and that the first respondent had to take up the matter to the level of the Member, TNEB. The first respondent pointed out that the delay in the initial stage in providing suitable input data and the delay in having the survey of the work done right from the beginning, had its impact in commencing their execution and in procuring materials from abroad, thus resulting in the first respondent seeking extension of time before the petitioner.


66. It is seen from the terms of the agreement that the parties herein agreed that the contract execution period was of 24 months. Admittedly, it took further 40 months for the completion of the project. The execution went for extension of time beyond 24 months from time to time upto September, 1999. The first respondent?s case is, as per the terms of the contract, they were entitled for extension of time for the reason that the delay was attributable solely to the petitioner. As regards the various allegations put forth by the petitioner on the delay which included the enhancement of the scope of work under the contract and occurrence of force majeure events, the first respondent took the plea that due to the wrong and inadequate input data furnished by TNEB, the survey details, even at the initial stage of the project, namely, the design and the engineering stage, were not given, that the work got delayed. There was also a delay in making the running bill payment on time, lack of co-ordination with the other agencies and other contractors of the TNEB; failure to give timely inputs like civil foundation for structural and steel erection and other associated civil work delay; delay in timely approval of the design by TNEB consultants; delay in providing adequate input facilities; delay in issue of Project Authority Certificate (PAC) to enable the first respondent to plan and procure the imported materials on time. The unprecedented rainfall in 1996 and 1997, transporters' strike and labour unrest also contributed to the delayed execution. The first respondent pointed out that the review by the petitioner from time to time at different levels on the programs executed, resulted in re-scheduling of the execution of work as well as the revised rates agreed to by the petitioner.


67. The Arbitral Tribunal considered the claim of the petitioner as well as the first respondent and came to the conclusion that the delay that had occurred in the execution could be classified into three major categories, namely, those attributable to the claimant/first respondent, those attributable to the petitioner and those due to force majeure reasons.


68. In considering Issue No.8(C)(1) as to whether the first respondent was entitled to extension of time upto September, 1999, and as to the delay attributable to the first respondent, the Tribunal considered the said claim along with the petitioner's recovery of the amount towards levy of liquidated damages for both supply and erection contract. The Tribunal held that of the 40 months' delay, the first respondent was responsible to an extent of 16 months and the balance 24 months was held as on account of the petitioner. In other words, of the total 40 months' delay, the Tribunal granted 16 months in favour of TNEB and 24 months in favour for the first respondent herein. In respect of 24 months granted to the first respondent's benefit, the Tribunal pointed out that the first respondent?s claim for monetary compensation on account of the extension of time could be considered under the following heads:


i) Due to re-survey work carried out for freezing GA plans 2


ii) Due to delay in input data and engineering approvals 2


iii) Due to delay in issue of PAC 2


iv) Due to delay in approval of QAP's 2


v) Due to delay in LC opening and operation 2


vi) Due to delay in decision on PCH-2 Chute 2


Total 12


69. Apart from this, a further 10 months' period to the advantage of the first respondent was granted by the Tribunal. The Tribunal also considered two other major reasons for delay, namely, delay in handing over of Civil fronts and delay in making payments against the running account bills other than those deducted or withheld against liquidated damages.


70. Apart from these 12 months and 10 months, the Tribunal added further 2 months as attributable due to the unprecedented rain during 1997. As far as force majeure reasons are concerned, the Tribunal pointed out to the delay due to the unprecedented rainfall in 1996 and 1997, due to local law & order disturbances, social unrest in Tuticorin area and transporters' strike during 1997 and held that no other delays qualified for extension of time in the force majuere reasons.


71. As to the first respondent's delay, the Tribunal pointed out that the first respondent had delayed the work especially at the site on many occasions, taking the petitioner to the stage of frustration. However, in a high value contract, taking into account the various factors, particularly, inept planning and scheduling, monitoring and lack of adequate resources mobilization, the Tribunal thought it fit to hold that 16 months out of the 40 months' delay had to be held in favour of the petitioner. The Tribunal pointed out that the first respondent had committed major defaults on their part leading to the delayed execution.


72. Learned counsel for the petitioner submits that having regard to the said findings and the further finding that the initial delay was on the part of the first respondent, the Tribunal went wrong, granting the benefit of the first 24 months in favour of the first respondent. He pointed out that the allegation, as to the delay in payment as a ground for granting the relief to the first respondent, was made for the first time before the Arbitrator. He pointed out to the letters right from the earliest of the letters seeking extension of time, that there was no allegation as to the delay in payment of contractual rates or the running bills as a cause for the delayed execution. Learned counsel for the petitioner pointed out that the Tribunal failed to take note that the first respondent sought for extension on more than one occasion and they had taken more than 31 months against the original programme of 14 months in relation to fabrication. He pointed out that the award ignores the submissions and the documents filed before the Tribunal, particularly in the context of the fact that the work was completed by the first respondent only on 31.12.1999. Learned counsel further pointed out that having regard to the finding of the Tribunal that the first respondent was to be blamed for the initial delay of 10 months, the reasoning of the Tribunal that the first 24 months was attributable to the petitioner is devoid of any merits and not supported by any materials.


73. Making his submission as regards the six reasons given for giving the benefit of delay of 12 months, learned counsel for the petitioner pointed out that the Tribunal committed an error in its view that the petitioner had not produced any documentary evidence as regards the delay attributable to the first respondent. He pointed out that when the petitioner had given all the materials and raised the issues in its highlights as well as the advance arguments, the Tribunal had not cared to either refer the same in its order or bestow its attention to consider the same.


74. As regards the delay due to re-survey work carried out for freezing GA plans, learned counsel pointed out to the minutes of the meeting dated 15.9.1994 and 27.10.1994, wherein the first respondent had agreed to do the survey work as within the scope of the first respondent's execution herein. He pointed out to the minutes of the meeting wherein the first respondent undertook to do the survey work by October, 1994 as well as in the minutes of the meeting dated 27.10.1994, assuring that they would undertake to do the survey work by 15.11.1994. He pointed out to the view of the Tribunal at page 110, wherein the Tribunal pointed out that if the first respondent had established its site office within three months, the survey could have been done during October, 1994. Hence, with the delay in establishing the site office by the first respondent thus established, the delay in execution right from the beginning has to be attributed only to the first respondent and not to the petitioner. He pointed out that the first respondent took a little over 7 months for opening their office for the project of 24 months' execution. He also pointed out that the contract stipulates that the contractor has to commence work at the site within three months from the date of receipt of the order and make arrangement for the mobilization of men and material. Referring to the individual heads, he further pointed out that the method of calculating 14 months' delay period, which included the two months for the monsoon, lacks any basis or material. In the context of the finding of the Tribunal at paragraphs 4.17 and 4.18 that the first respondent had committed major defaults; that the execution of the work, especially the site organisation had delayed the progress on many occasions and the first respondent continued the default, the Tribunal ought not to have granted the relief to the first respondent for 26 months.


75. As regards the delay due to issuance of Project Authority Certificate, learned counsel pointed out that the Tribunal failed to take note of the letter written on 18.5.1995 as well as the letter written on 16.2.1995, and the material documents, particularly the one written on 23.9.1996, wherein the first respondent had asked for a fresh certificate. The issue herein relates to the delay in issue of Project Authority Certificate (PAC). According to the petitioner herein, even though the Letter of Intent was given on 12th August, 1994, the first respondent asked for the revised certificate only on 23.9.1996. The proposal for issuance of PAC dated 6.1.1995 was scrutinized by TNEB and they sought for certain clarifications. Instead of furnishing the clarification, fresh proposals were sent by the first respondent on 18.5.1995 in a revised format without any reference whatsoever to the earlier letter. The certificate was issued on 27.7.1995. Hence, the delay stated to have occurred on account of the Project Authority Certificate has to be attributed only to the first respondent.


76. As regards the delay in the approval of quality assurance plan, the petitioner contended that the approval of quality assurance plan was submitted on 3rd May, 1995 with a delay of 8 months. Even though the first respondent had offered certain equipment as early as March, 1996 for approval, yet, they went ahead ordering certain equipments without the approval of quality assurance plan. Under this head, there was a delay of 8 months.


77. As regards the delay in establishing the Letter of Credit, the petitioner pointed out that the Letter of Credit was opened at the request of the first respondent for a period of 3 months initially for a value of Rs.50.00 lakhs. The request was considered and the Letter of Credit was opened on 18.3.1995. Again, the first respondent asked for Letter of Credit for an amount of Rs.150.00 lakhs and the Bank was asked to enhance the value and extend the validity by another quarter period beyond 18.6.1995. The petitioner further complied with the request of the first respondent to transfer the Letter of Credit to Syndicate Bank, New Delhi. It is stated that periodically, the Letter of Credit was revalidated and TNEB filed statements showing full details from the beginning to the end covering the extension period as well as the enhancement in the value, date of opening along with the transactions and the credit balance available at the end of each validity period to show that the first respondent had not utilised the Letter of Credit fully and hence, the question of delay and compensating on this front, does not arise. The petitioner contends that the Tribunal failed to appreciate the contractual conditions, which clearly provided that the Letter of Credit would be opened by the petitioner Board against dispatch of equipments from the manufacturing place. The petitioner further pointed out that the Tribunal had not adverted to the submissions presented before it, apart from the Tribunal's failure to take note of the material documents in a proper perspective. Consequently, the decision of the Tribunal as if no document was available to establish the request of the first respondent, is totally contrary to the documents filed, which show that the extension was done only at the request of the first respondent.


78. As regards the delay in input data and engineering approval, learned counsel for the petitioner referred to the supply contract, appointment of the consultant as well as to the meeting of the expert. The petitioner contended that the required data were furnished to the first respondent from time to time and it is the responsibility of the first respondent to furnish necessary approval from the Consultants as per the contract terms. In any event, the petitioner had played a lead role in co-ordinating between the first respondent and the consultant and there was no delay on the part of the petitioner on any account.


79. As regards the delay on account of payment of the bill amount, the petitioner pointed out that the view of the Tribunal as regards the lack of funds leading to the delay in payment, is totally without any basis. Learned counsel for the petitioner pointed out to the periodical release in payments, which were acknowledged by the first respondent too; consequently, the view of the Tribunal that there were no funds available during the period 23.11.1995 to 2.12.1995 is totally incorrect. The view of the Tribunal that there was delay of 38 months in releasing the contractual payment is totally unwarranted and not supported by any pleading. Referring to the funding by the Asian Development Bank, the petitioner contended that the first respondent was asked to furnish all its claims on or before 28.2.1998. Considering the fact that the Asian Development Bank had threatened to stop funding to the project, and with the first respondent not furnishing the details, delay cannot be attributed to the petitioner as due to lack of funds. On the contrary, the delay had to be attributed only to the first respondent. In fact, there was no reply to the letter written on 08.10.1997 by the first respondent and this was not raised as an issue at all in the petition. The petitioner pointed out to the inadequate mobilization of raw-material, the delay in the commencement and completion of the erection process, the delay in fabrication and erection of steel structure by the first respondent, to contend that the delay had to be attributed totally to the first respondent for their ineffective and defective management in the execution of the project. Hence, even going by the reasoning of the Tribunal, the award suffers a patent illegality. Learned counsel also referred to the inconsistency in the pleading of the first respondent as regards the delay attributable to the monsoon and submitted that the Tribunal, in short, failed to consider the facts, pointing out to the delay in entirety, to be attributable to the first respondent; that the Tribunal had not adverted to the arguments of the petitioner with reference to the documents furnished by the petitioner in countering the claim of the first respondent as to the delay; hence the award suffers a major illegality. He pointed out that when the Tribunal had failed to advert to the issues raised by the petitioner, particularly when the highlights dealt with every aspect of the delay in the execution of the work, the award causes prejudice to the rights of the parties, liable to be interfered with by this Court. Learned counsel appearing for the petitioner pointed out that when the Tribunal itself had held that the initial delay was on the part of the first respondent and when there are no reasoning as to the granting of ten months' delay to the benefit of the first respondent, the award causes great prejudice to the petitioner and hence, liable to be set aside.


80. As far as the first aspect on re-survey work is concerned, a reading of the Tribunal's view shows that it attributed the delay on the petitioner as well as to the first respondent. However, as to the initial delay, as rightly pointed out by the Arbitral Tribunal, when the primary responsibility as regards the survey to provide the contractor the accurate and adequate data of the extension facility was on the petitioner, it is difficult to accept the plea of the petitioner that the first respondent had to be held fully liable on this head. The Tribunal pointed out that there is nothing in the contract to specify whether the survey for locating the new facilities was included in the scope of the contract. Even though the first respondent undertook to do the survey, yet, the petitioner's consultant and the petitioner specifically stated that survey had already been carried out by CEM INDIA. This had given an opportunity to the first respondent to raise a plea of inaccuracy of the input data, which delayed the project. The Tribunal further pointed out that when the coordinates of the facilities were under serious dispute, the petitioner should have taken a lead role in getting the re-survey organised with the help of their own consultant. Going by the conduct of TNEB, the Tribunal expressed the view that TNEB should have acted with greater responsibility for the accuracy of the data furnished by them. Though the first respondent pleaded for extension of six months, taking into consideration the facts herein, the Tribunal granted two months' extension, accepting the case of the first respondent only to the extent of two months, as a delay attributable to the petitioner.


81. As regards the delay in receipt of Engineering Input data and the delay in approval of design and engineering work, the Tribunal pointed out that at the critical stage of the project, differences arose between the petitioner and its Consultant/TCE. Referring to the various communications between the petitioner and the first respondent on this, the Tribunal pointed out that the reaction of the petitioner in most of these occasions was only of diverting the issue. The Tribunal further pointed out that the presence of the Engineering personnel of TCE at the site would have mitigated the problem on various issues, requiring clarification and decision, which were not forthcoming in time and precise to the requirements. In the circumstances, here too, taking an overall view on the basis of the presentation made and evidence adduced, that the first respondent would be entitled to the benefit of two months.


82. As regards the delay in the issue of Project Authority Certificate, the Tribunal pointed out that normally it would take sometime for a contractor to identify the requirement and the source of imports for a project of such a large magnitude; that immediately on the issue of letter of intent, it would not be possible for the contractor to place his request for the equipments. The Arbitral Tribunal pointed out that in delaying the issue of certificate, the conduct of the petitioner only exhibited lack of pro-active approach. The Tribunal further pointed out that the Project Authority Certificate is meant for importing materials and components and it had nothing to do with placing orders. However, in the same breadth, the Tribunal pointed out that the first respondent had not established that the execution of the work was affected due to the delay as regards the issuance of the certificate nor the first respondent informed the petitioner as to the possibility of the delay on account of the Certificate not forthcoming on time. The Tribunal pointed out that on an overall picture that issuance of the Project Authority Certificate did not automatically entitle the first respondent to import materials and components and that they had to follow other permit procedures, a period of two months was considered as the time that would be granted to the credit of the first respondent by way of extension.


83. On the question of delay in the approval of quality assurance plan, the Tribunal pointed out that it was a joint responsibility of the petitioner and that of the first respondent, that the equipment satisfied the specifications fully. The Tribunal pointed out that even assuming that there was a delay on the part of the first respondent in the submission of quality assurance plan for approval, there was no justification for the delay in the approval of the same at the hands of TNEB. The Tribunal further pointed out that even without prior approval of quality assurance plan, the first respondent had gone ahead with the placement of orders on some equipment with their sub-vendors based on their confidence level without even prior approval of the quality. This, in fact, reduced the delay and there was no objection on the part of the petitioner to such course of action taken by the first respondent. In the circumstances, in the absence of any identified date or period of submission and approval process of QAP in the contract program, the Tribunal granted two months as an extension for the project completion, as against six months, required by the first respondent.


84. As regards the delay in establishing the Letters of Credit, the Tribunal pointed out to the specific cases which revealed that the Board made some misrepresentation of facts in their arguments. Going through the communications, the Tribunal came to the conclusion that the transfer of Letter of Credit of Tuticorin to Delhi came only from TNEB. However, it pointed out that the first respondent themselves could not establish clearly as to how time could be apportioned as reasonable and attributable on this head; at the same time, the delay in making available payment in a timely manner had affected the performance of the contract. It further pointed out that even though these delays are attributable to the first respondent and the monetary impact of the same are on the first respondent, inadequate coordination and delayed action were much more on the petitioner than on the first respondent. In the circumstances, even though the Tribunal did not fully agree with the first respondent's request for extension of 12 months, it granted two months' extension.


85. As regards the delay in handing over of civil foundations and civil fronts, the Tribunal pointed out that the contract programme worked out by the parties herein really showed the inadequacy from the point of view of time for completion and details for review and monitoring. In the course of the execution, each party had broken their promises to the other party, resulting in the cascading effect on the delay. There were delays on the part of the TNEB in giving the right input data of the extension facilities for causing re-survey. Delay in progressing the fabrication and erection of the structural steel works resulted in further delay and even after the intervention of the Chairman, the civil works were not completed on 15th June, 1998. There were delays in handing over of certain fronts; yet, the execution by the first respondent was far from satisfactory. After considering all these, the Tribunal viewed that there had been delays on both sides due to the poor co-ordination and monitoring of the work progress at the site. The promises made by each of the parties had been broken several times, making it impossible to fix the responsibility on either of them for the poor progress, particularly in respect of site activities, structural erection and civil work. The Tribunal recorded, as a matter of record, that during the hearing in AOS 15, TNEB agreed that there were delays in handing over the civil fronts to the first respondent in respect of conveyor gallery 48 A/B and TT7. The last civil foundation was handed over on 11th May 1998, while the first respondent had furnished load data on 26th November 1995. So too on the side of the first respondent. In the circumstances, taking note of all the facts, particularly the site activities that the first respondent had problems with their structural fabrication and the petitioner had with their civil contracting agency, the Tribunal viewed that the first respondent alone could not be penalised, nor the petitioner visited with substantive liability on this account. The Tribunal further pointed out that the efforts of TNEB had not been adequate in proper site co-ordination for resolving the conflicting interest to ensure smooth progress.


86. As regards the hindrance in the site activities, the Tribunal pointed out to the delay in handing over proper approach bridge and road to the first respondent. The Tribunal pointed out that the petitioner took the plea that they were not responsible for providing proper approach bridge. The Tribunal, however, held that the sketch showed the approach bridge as part of the tender document, which means, the petitioner had to provide the approach bridge, and rejected the contention of the petitioner.


87. As far as the claim relating to delay in PCH-2 Chute modification is concerned, the Tribunal held that the first respondent executed the work as envisaged in the relevant provisions of the contract. The drawings were approved by the consultant. The Tribunal pointed out to the enormous delay at the hands of the petitioner in taking a decision on time to the modified drawings submitted by the first respondent, that, when the project was running behind the schedule, the petitioner adopted a very relaxed attitude. The Tribunal further held that in a large value project, the petitioner should have taken a decision promptly instead of prolonging the issue.


88. A reading of the award shows that the Arbitrators, who are technically well conversant on execution, have reacted to the delay attributed in those fronts as referable to the petitioner. There are no contra materials to show that the view of the Tribunal is perverse. Consequently, I do not find any ground to disturb the finding of the Tribunal on this aspect.


89. On the delay in releasing the contractual payments, the Tribunal pointed out that the repeated requests of the first respondent to defer recoveries left unanswered. There was no specific provision in the contract to insist on the additional security from the first respondent. Commenting on the recovery of interest, the Tribunal pointed out that the petitioner was at fault in not releasing the running payments to the tune of Rs.2.04 crores due to the shortage of fund with TNEB. They pointed out to the violations and breach of contract by both the parties only to hold that the defaults on the part of the petitioner were more serious, since they related to contract payments, which have a direct impact in the progress of the work. The Tribunal worked out the number of days, for which payments were delayed, as 1134 days. Going by the statement of the petitioner themselves, that there were delays in payments varying between 2 days and 89 days in respect of 34 bills, of which, 25 bills were delayed due to want of funds while the rest for other reasons, the Tribunal pointed out that admittedly, as evident from the documents themselves, the petitioner had delayed the due payments to the first respondent for months together. As per Clause 22.1 of GCC, if there were delays on account of non-payment of the running bills on the due dates, delays in not passing the claims within the time stipulated, the Engineer shall grant reasonable extension of time for completion of the contract work. Referring to Clause 22.2 of GCC, the Tribunal pointed out that in the context of the delayed payment, the Engineer was bound to grant the extension of time. Going by the contractual terms, the first respondent was entitled to the extension of time.


90. As regards unprecedented rains during the months of November 1996/December 1996 and October 1997 to December 1997, the Tribunal pointed out that a simple look at the certificate produced by the first respondent showed that there was no unusual annual rainfall during 1996, except for the month September/October 1996. But as far as 1997 is concerned, it was as high as almost double the previous year's record. The Tribunal held that the first respondent deserved time extension of two months on account of excess rainfall during 1996 and 1997, which could not be reasonably foreseen by the first respondent.


91. As regards the delay due to local law and other disturbances, the Tribunal rejected the plea of the first respondent. Thus the final conclusion of the Tribunal was that the first respondent was entitled to 24 months by way of extension, the reasons for which were attributable to the petitioner.


92. The petitioner takes a serious objection to the view of the Arbitral Tribunal in holding the petitioner responsible for the delay and thereby granting the benefit of 24 months' delay to the credit of the first respondent. The petitioner states that the contract demands that the first respondent should file weekly report on its progress in the format given. However, there is no explanation from the first respondent as to the submission of the report and progress with any indication as to the reason for the delayed execution. Learned counsel for the petitioner submits that when the contract provides for disclosure of the particulars, remark column as to the delayed execution, the performance report submitted lacked material particulars on the delay and no explanation forthcoming from the first respondent, the Tribunal committed an error in granting the relief on the first 10 months' period to the credit of the first respondent without any basis and this runs contrary to the Tribunal's finding on the initial delay on the part of the first respondent in establishing even the site office.


93. Learned counsel appearing for the petitioner referred to a decision reported in (2009) 1 Arbitration Law Reporter 125 (P.Manohar Reddy & Bros. Vs. Maharashtra Krishna Valley Development Corporation and others) that when the contract provides for terms to be followed as regards keeping alive the dispute for the purpose of referring the same to the Arbitrator and Clause 27.1 to 27.4 of the GCC are specific on this aspect, the Tribunal erred in placing reliance partially to Clause 27.5 of GCC to grant the relief to the first respondent. Quite apart from that, learned counsel pointed out to the decision reported in (2003) 8 SCC 168 (Union of India Vs. V.Pundarikakshudu & sons and another) that in a contract execution, there is no such thing as both parties contributing to the breach or delay. He pointed out that right from the beginning, the first respondent alone had sought for extension. He further submitted that a reading of the letters written by the first respondent would reveal that it was the first respondent who sought for extension on grounds which would clearly show that the delay could not be attributed to the petitioner. In the face of the specific contract Clauses 19, 21, 22 and 27 of GCC, the Tribunal should have rejected the plea of the petitioner to hold that the delayed execution was wholly attributable to the first respondent and not to the petitioner. He also took serious objection as to the view of the Tribunal on the availability of funds to honour the bills of the first respondent and the learned counsel took me through the various documents and the written arguments and the highlights filed to point out that the Tribunal had failed even to extract its arguments in full, apart from considering the various documents relied on, only to emphasize the fact that apart from arriving at an arbitrary view on the aspect of delay, the Tribunal had failed to apply its mind to the various documents and the points raised. Hence learned counsel pleads that the award, in so far as it had gone against the petitioner, deserved to be set aside.


94. Learned counsel appearing for the first respondent, however, defended the award granting the benefit of the delay for 24 months and the relief granted under various heads and emphasized that going by the nature of the contract and the responsibilities cast on the parties to the contract on the materials relied on by the parties, the Tribunal had reached a conclusion, which does not call for any interference by this Court. Referring to the materials cited by the petitioner as regards the various heads under which the Tribunal had granted the relief, learned counsel pointed out to the jurisdiction of this Court as not akin to an appellate Court to scrutinise the findings of the Tribunal;that given the fact that the Tribunal had given valid reasons for its decision based on materials, it is not open to the Court to substitute its views, however good or reasonable they may be. In these circumstances, he prayed for rejection of the plea of the petitioner that the grant of 24 months to the first respondent was without material.


95. Learned counsel appearing for both sides made elaborate submissions on the merits of the delay, apportionment and to the extent of the jurisdiction of this Court to interfere with the award on this aspect.


96. A reading of the award shows that while there is a discussion for the grant of 14 months as a delay period attributable to the petitioner, the Tribunal considered the grant of further 10 months' period totalling to 24 months as attributable to the petitioner. After summarising the two major reasons for the delay in completion, the Tribunal concluded to hold that the first respondent is entitled to have the benefit of 24 months, as the delay was attributable to the petitioner.


97. Before going into the merits of the relief granted by the Tribunal apportioning of the 40 months' delay, it is but necessary to refer to the broad contours of this Court's jurisdiction under Section 34 of the Act as propounded in the various decisions of the Apex Court. It is well settled that where the parties have chosen the forum of arbitration as a venue for dispute resolution and Arbitrators of their choice to decide on the disputes, the decision given by the Arbitrators is binding on the parties. Necessarily, the Arbitrator, being a creature of the contract between the parties, has to act according to the specific terms of the contract and within the limits of the agreement. Since the jurisdiction of the Arbitrator to decide on the dispute between the parties is conditioned by the terms of reference, the authority that the parties intend to confer on him and the decision to follow the contract terms between the parties, any departure from the contract would amount to manifest disregard of the authority which is normally called as misconduct of the Arbitrator. Hence, the Arbitrator has to decide the issue as per the terms of the contract governing the relationship of the parties and pass an award - Refer (1999) 9 SCC 283 (Rajasthan State Mines & Minerals Ltd. Vs. Eastern Engineering Enterprises).


98. Section 19 of the Arbitration and Conciliation Act, 1996 gives the freedom to the parties to agree on the procedure to be followed by the arbitral Tribunal in conducting its proceedings. Sub Section (3) of Section 19 states, failing any agreement as referred to under sub section (2), the Arbitral Tribunal could conduct the proceedings in the manner it considers appropriate. This includes the power to determine the admissibility, relevance, materiality and weight of any evidence. Thus the Arbitral Tribunal is a judicial forum of the parties' choice and the Tribunal is the sole Judge of the relevancy, evidence, the quality of the evidence given for the purposes of assessing their weight in arriving at a conclusion. Hence, Courts have taken the view that the interference on a decision given by an Arbitrator has to be a minimal one.


99. Section 34 of the Arbitration and Conciliation Act, 1996 provides the remedy to a party aggrieved by an award passed by the Arbitral Tribunal to challenge the same before the High Court of competent jurisdiction. An award could be set aside only under stated circumstances as provided for under sub section (2) of Section 34 of the Act. While exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, the Court does not sit as a Court of appeal to reappraise the evidence in depth to find out the correctness of the conclusion drawn by the Arbitrator to find fault with the Arbitrator taking one particular view in preference to the other. Where two views are possible, the Court does not substitute its views, however reasonable it may look. Hence, an interpretation and a finding given by the Arbitrator is normally not interfered with by the Court. Thus while going through the award, the Court does not review the award and correct a mistake in the adjudication of the Arbitrator, unless the adjudication process itself is prejudicial to the rights of the parties. The essence of these decisions is that where the reasoning of the Arbitrator is without any basis, contrary to the agreement, or that no reasonable person could reach such a conclusion, then the award is liable to be interfered with by the Court. In the decision reported in (2006) 11 SCC 181 (McDermott International Inc. v. Burn Standard Co. Ltd.) the Apex Court, however, pointed out that the Court cannot correct errors of the Arbitrators. It can only quash the award, leaving the parties free to begin arbitration again, if it is desired. The Supreme Court pointed out that the scheme of the provisions of the Arbitration and Conciliation Act, 1996 aims at keeping the supervisory role of the Court at minimal level. Thus, the circumstances under which normally an award is interfered with are broadly classified under two distinct different grounds:


(1) an error apparent on the face of the record


(2) that the Arbitrator had exceeded his jurisdiction.


However, this does not mean that the jurisdiction is so restricted that the Courts cannot interfere with awards writ with perversity. In the decision reported in (2007) 4 ARBLR 65 (The Security Printing and Minting Corporation of India Limited and Anr. Vs. Gandhi Industrial Corporation), the Apex Court pointed out that where the award is perverse, Courts are not powerless to interfere with the matter. In the decision reported in 2007 (4) ARBLR 179 (ONGC Limited Vs. Garware Shipping Corporation Limited), the Apex Court emphasized that there is no proposition that the Courts should be slow to interfere with the Arbitrator's award, even if the conclusions are perverse, and even when the very basis of the Arbitrator's award is wrong.


100. Touching on the role of the Court under Section 34 of the Arbitration and Conciliation Act, 1996, following the decision reported in (2003) 5 SCC 705 (ONGC Ltd. Vs. Saw Pipes Ltd.), in the decision reported in (2006) 11 SCC 181 (McDermott International Inc. v. Burn Standard Co. Ltd.), the Apex Court held as follows:


"52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court?s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."


101. It further pointed out that an award could be set aside if it is contrary to:


(a) fundamental policy of Indian law; or


(b) the interest of India; or


(c) justice or morality; or


(d) in addition, if it is patently illegal.


Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the Court. Lastly, where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute, the award would come for interference within the purview of Section 34 of the Act.


102. Again, in the decision reported in 2008-4-L.W. 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi), the Apex Court pointed out the broad outline of the Court's jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 as follows:


"21. From the above decisions, the following principles emerge:


(a) An award, which is


(i) contrary to substantive provisions of law; or


(ii) the provisions of the Arbitration and Conciliation Act, 1996; or


(iii) against the terms of the respective contract; or


(iv) patently illegal; or


(v) prejudicial to the rights of the parties;


is open to interference by the court under Section 34(2) of the Act.


(b) The award could be set aside if it is contrary to:


(a) fundamental policy of Indian law; or


(b) the interest of India; or


(c) justice or morality.


(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.


(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.


103. Being a forum to be constituted at the will of the parties to decide on the disputes arising under a contract, Section 16 of the Arbitration and Conciliation Act, 1996 provides for necessary statutory guidelines to the chosen forum to lay down the rules of conduct of the proceedings. The Section confers vast jurisdiction upon the Arbitral Tribunal to rule on its own jurisdiction, including ruling on any objections as regards the extent or the validity of the arbitration agreement and the jurisdiction of the Tribunal to decide on the disputes. The Tribunal also has the authority to adjudicate upon the plea as to the extent of its authority and as to whether the issues before the Tribunal are within its scope for a decision making. Where any such decision is given by the Tribunal on an issue without jurisdiction or where in excess of jurisdiction an award is made, the same is liable to be set aside in terms of Section 34(2)(a)(iv) of the Act. Proviso to Section 34(2)(a)(iv) of the Act states that in a case where the Court finds that a part of the award made by the Arbitral Tribunal deals with a dispute not contemplated by or falling within the terms of the contract for submission to arbitration or contains decision on matters beyond the scope of submission to arbitration and a party to the agreement objects to the jurisdiction of the Tribunal under Section 16 of the Act and a decision is made by the Tribunal, the aggrieved party has to challenge the decision along with the award made under Section 34 of the Act. Hence, in so deciding a dispute on jurisdiction, the Arbitral Tribunal is duty bound to decide on its jurisdiction first before giving its verdict on the merits of the claim. Hence, when a challenge is made to an award on the jurisdiction issue, the Court has to necessarily look at the arbitration clause as well as the particular dispute raised before the Arbitrator to find out if it is within the scope of arbitration.


104. Thus, matters which are excepted by the parties from the scope of arbitration, falls outside the jurisdiction of the Arbitrator and any adjudication on the excepted issue would be in excess of jurisdiction, liable to be set aside by the Court.


105. In the background of the decisions of the Apex Court, when we look at the award, it is evident that having framed the procedures for considering the various issues including the one on its jurisdiction point, the Tribunal, however, had not adhered to the manner of dealing with the issues, particularly with reference to the jurisdiction, i.e, arbitrability as well as limitation in terms of Clauses 27.1, 27.3, 27.4 and 27.5 of GCC. As already seen from the facts narrated above, the contract period of 24 months got extended time and again, although without any formal letter on this. The contract clause on delay in completion, particularly Clause 18 of GCC, speaks about levy of liquidated damages on the delay caused by the contractor and Clause 22 of GCC speaks about the delay caused by the principal which entitles the contractor to claim "demonstrable and reasonable" compensation. On the issue of levy of liquidated damages, it is not denied by the first respondent that they had been objecting to the deduction by the petitioner right from the beginning even as early as 1996 in the letter dated 13th August, 1996. The first respondent pointed out that although by August, 1996, the completion period had come to an end, yet, they sought for extension of time for execution. Learned counsel for the petitioner pointed out that even by that time, the deduction towards liquidated damages on account of the delay had been made by the petitioner. The letter dated 8th October, 1996 specifically sought for extension of time on various grounds. In the letter dated 11th January 1997, the first respondent requested deferring of the deduction on liquidated damages and interest from the bills and sought for refund of the amount so far deducted from the bills. By letter dated 13th January, 1997, the first respondent sought for extension of the contract period, apart from seeking deferring of the levy of liquidated damages and interest on advance. The letter expressed displeasure on the deduction that had already been made on account of the liquidated damages and interest on advance from the running account bills.


106. In the context of the series of letters from the first respondent objecting to the levy of liquidated damages and hence seeking deferment on the levy of liquidated damages and refund of the amount deducted already on liquidated damages and the rejection of the request on the claim for refund of liquidated damages intimated to the first respondent by the petitioner in its letter dated 6.2.1997 and the MOM of the petitioner rejecting the prayer for extension of time and the contract clauses on the levy of liquidated damages on the aspect of delay and the settlement of disputes or differences, the petitioner raised the particular issue on the jurisdiction of the Tribunal to adjudicate on this issue on liquidated damages before the Arbitral Tribunal. Rightly, the Tribunal considered the need for considering the said objection and laid down the procedure for considering the same also to which the parties had expressed their agreement, the procedure laid down that the issue on jurisdiction could be considered at the appropriate places along with the merits of the claim.


107. Clause 27 of GCC lays down the procedure for resolution of a dispute where an amicable settlement fails between the parties as given under Clause 26 of GCC. The only clause available as remedy to an aggrieved party is Clause 27 of GCC. The contention of the first respondent is that the petitioner had, in its minutes of the meeting in May, 1997, assured that the claim of the first respondent on the levy of liquidated damages and interest on advance would be considered by the Board and hence the dispute had not arisen for the purposes of adopting the procedure under Clause 27 of GCC. The petitioner, however, contended that the petitioner had made its mind clear even as early as 6.2.1997 rejecting the claim of the first respondent both on the count of extension of time as well as on the levy of liquidated damages and charging of interest on advance payment. If really the first respondent had an issue to be raised as a dispute, they should have taken recourse to the provisions under Clause 27.1 of GCC. On the contrary, the first respondent laid its claim only on 29.3.2000. To this, the first respondent contended that only on the claim quantified, that the cause of action is really said to have arisen for invoking the contract clause on arbitration.


108. With the contention thus raised on the arbitrability of the dispute raised based on the materials placed before the Tribunal, in fairness to the claim of the petitioner as well as to the procedure laid down, the Tribunal should have decided the issues on the line of its decision on the procedure as agreed to between the parties too. I have referred to the various materials in the form of correspondence between the parties herein not for the purpose of deciding the question of the correctness of the first respondent approaching the Tribunal for a decision as to the levy of liquidated damages by the petitioner, but only to show that when the Tribunal had referred to the various correspondences to decide on the delay and the relief to be granted to the parties, it had miserably failed to deal with the issue on arbitrability and limitation wherever it had been raised and relevant to be considered by the Tribunal. Going by Section 16 of the Act and the procedure agreed upon, essentially, it is a question pertaining to the jurisdiction of the Tribunal to decide and give its decision on this aspect. The petitioner had filed a petition under Section 16 of the Act and called upon the Tribunal to decide first on the issue of arbitrability. Rightly, when the Tribunal had decided to give its decision as against the appropriate issues, and contrary to its ruling, the Tribunal had failed to consider the maintainability of the issues with reference to the jurisdiction of the Tribunal to give the decision on merits. Hence, the failure to decide the questions raised on the jurisdiction at the appropriate places, makes the award an illegal one, liable to be interfered with by this Court.


109. A reading of the award, particularly with reference to the arbitrability issue on the levy of liquidated damages, shows that the Tribunal had nowhere adverted to the issue, particularly with reference to the contract clauses on the dispute resolution.


110. According to the first respondent, the issue on the extension of time as a cause for dispute was raised only in the letter dated 29.3.2000. However, it is not denied by the first respondent that periodically, the first respondent had been making request for extension of time on various grounds, which were disputed by the petitioner. Hence, in the background of specific objection raised by the petitioner based on the correspondence between the parties, the Tribunal should have considered the issues on its jurisdiction with reference to the contract clauses pertaining to arbitration instead of merely giving its decision on the merits of the pleading on limitation aspect as well as on the merits of the claims. In these circumstances, it is difficult for this Court to accept the plea of the first respondent that even though they had not raised the issue as contemplated under Clause 27 of GCC, nevertheless, the jurisdiction of the Arbitrators being very wide, the claim on this head could be considered for a decision by the Tribunal. As rightly pointed out by the petitioner, the contract terms specifying the rights of the parties are sacrosanct and any decision on the maintainability as well as on the merits of a claim, hence, has to go only by the terms of the contract clause. Clause 27 of GCC contains exhaustive provisions as regards the rights of the parties to invoke the arbitration clause and as to when a dispute ripens as an issue for invoking the arbitration clause under Clause 27.5 of GCC.


111. Hence, going by the terms of the agreement, it is difficult to accept the plea of the first respondent that the Tribunal had adverted to this issue based on Clause 27.5 of the GCC and in assuming jurisdiction to adjudicate on these issues raised by the first respondent, particularly with reference to the issues on levy of liquidated damages without deciding the issue of very maintainability of the dispute before the Tribunal. Clause 27.8 of the GCC, giving powers to the Arbitral Tribunal to review or revise any decision, opinion or direction of the Engineer, has to be read in the context of the procedure given under the contract as contained in Clause 27.1 to 27.5 of GCC. Clause 27.8 reads that the Arbitrator's powers of revising or reviewing the decision directing clarification of the Engineer, is to be in consonance with the contract. This means that the decision of the Tribunal by way of review has to go by the other clauses being complied with by the party aggrieved and that the power of review, by its very nature, is dependent on a decision given by the authority concerned in terms of Clause 27.4 of GCC and is not independent of Clause 27.1 to 27.4 of GCC. The failure to consider the issue, raised thus in terms of Clause 27, hence, makes the award illegal. Although learned counsel for the first respondent would contend that the Tribunal had adverted to the said aspect, yet, one need to strain much to find out as to whether, in the light of the procedure laid by the Tribunal, at leastthere is any semblance of consideration on the issue raised by the petitioner considered along with the merits. As already pointed out, the Tribunal's jurisdiction to decide on the dispute is conditioned by the terms of the agreement between the parties and when the parties have agreed on certain procedure in the matter of resolution of the disputes under the contract, the question on the jurisdiction raised should have been considered in terms of the agreed procedure and failure to follow the same, certainly calls for interference at the hands of this Court under Section 34 (2) of the Act.


112. In the background of the law declared by the Apex Court and having regard to the fact that the Tribunal failed to advert to the jurisdiction issue raised before the Tribunal, I have no hesitation in holding that the Tribunal failed to advert to the issue on jurisdiction and limitation on the claims of the first respondent, and contrary to its own procedure laid, considered the claims of the first respondent to ultimately grant the relief. Hence, to the extent of the claim on liquidated damages deduction and on the interest imposed on the advance, the award cannot be sustained on any count. Consequently, the award has to be set aside on Issue 8(C)(1) as well as Issue Nos. 8(C)(2) and 8(C)(3).


113. On the aspect of jurisdiction, particularly with reference to Clause 27.4 and 27.5 as well as Clause 22.2 of the GCC, learned counsel made a detailed submission on the merits of the award on the first of the issues, under Issue 8(C)(1), namely, whether the first respondent was entitled to extension of time upto September, 1999 for completion of the project. Interlinked to this issue is the claim of the petitioner, namely, Issue No.8(R)(13) as to whether the petitioner is entitled to recover from the first respondent, an amount of Rs.4,75,77,391/- towards levy of liquidated damages for both supply and erection contracts.


114. The argument of the learned counsel for the petitioner is covered under two headings, namely, inconsistency in the award as to the basis of the relief granted; the patent illegality as regards the fixing of the duration of delay attributable to each of the parties and the relief on account of liquidated damages. He also referred to the award being arbitrary and prejudicial to the interest of the parties to the proceedings, particularly, in the working out of the net amount payable and that there are no reasons and working details furnished as regards this aspect. He made particular reference to the granting of interest on the liquidated damages, where the Tribunal directed the first respondent to pay simple interest at 15% per annum on the balance of the amount payable from 20th October, 1998, which is 50 days after the revised date of completion, till the date of award. The said amount worked out to Rs.5,61,19,132/-.


115. Learned counsel pointed out that while there is no reason for fixing the starting point from 20th October, 1998 as 50 days after the revised date of completion, the Tribunal also did not consider granting post-award interest to the petitioner in contrast to the Tribunal granting interest to the first respondent for the post-award period too. Learned counsel for the petitioner pointed out that in the matter of working out the amount awarded in favour of the first respondent and in favour of the petitioner, inconsistencies as regards the interest calculation thus introduce an element of arbitrariness; that the net amount payable by the petitioner to the first respondent had been arrived at in such a manner that while interest was granted to the first respondent for the post-award period as far as the petitioner is concerned, it was restricted till the date of the award. This, in effect, makes the reasoning inconsistent. Apart from that, the award nowhere speaks about the adjustment details. In any event, there is no question of the Tribunal ordering adjustment without any indication as to the methodology adopted in arriving at this adjustment. Learned counsel took me through the grant of interest to the first respondent under various heads and pointed out that except for this, the award does not contain any reasoning or the details as to the actual working. He pointed out that in the absence of any reason as to the date upto which interest granted has been worked out and as to why the post-award interest on the amount worked out as payable to the petitioner had not been considered, the award suffered a patent illegality and hence, liable to be set aside.


116. On the question of limitation on the claims made by the first respondent, learned counsel appearing for the first respondent placed reliance on the decision reported in (2007) 4 SCC 599 (Shree Ram Mills Ltd. Vs. Utility Premises (P) Ltd.) only to contend that when the parties had agreed to have the issue on the deduction of liquidated damages placed before the Board, till such time the settlement talks were over, no issue arose for resolution as a dispute and hence, the plea of limitation does not arise. Learned counsel for the petitioner, however, contended that the contract nowhere stated that consideration by the Board had any bearing on the dispute resolution procedure for Clause 27 to operate. As such, the first respondent must have gone along with the procedure laid down under the contract, if the first respondent intended to raise a dispute for resolution before the Arbitral Tribunal in accordance with Clause 27.5 of GCC.


117. A reading of the decision of the Apex Court shows that the said decision was rendered while considering the case of an order under Section 11(6) of the Act. The order under Section 11(6) of the Act appointing the Arbitrator was challenged before the Apex Court on the ground that there was no live issue as a dispute in existence between the parties for the appointment of an Arbitrator and that the High Court erred in holding that there was a live dispute. The appellant contended that the claim had become time barred for any dispute to be referred to arbitration; hence the reference itself was bad. In the wake of the said objection, the Apex Court considered the correctness of the order passed under Section 11(6) of the Act, appointing the Arbitrator.


118. The Apex Court held that while passing the order under Section 11(6) of the Act, all that the Chief Justice or his designate does, is to put the arbitration proceedings in motion and for the purpose of appointing the Arbitrator, a finding is given as to the existence of an arbitration clause, territorial jurisdiction, live issue and limitation. The Apex Court pointed out that the plea of limitation is a mixed question of law and fact. The Chief Justice has to record his satisfaction that prima facie, the issue is alive.


119. Explaining the decision reported in (2005) 8 SCC 618 (SBP & Co. V.Patel Engg. Ltd.), the Apex Court pointed out that on the facts of the case, the designated Judge had rightly recorded his satisfaction that the parties had not concluded their claims and there was no full and final settlement between the parties. Hence, till such time that the settlement talks were going on, directly or by way of correspondence, the limitation question did not start ticking and the question of limitation was left open to the Arbitral Tribunal to decide. The Apex Court referred to the decision reported in (2006) 4 SCC 658 (Hari Shankar Singhania and others Vs. Gaur Hari Singhania and others) to hold that when the correspondence between the parties bears out that every attempt was being made to comply with and carry out the reciprocal obligations given in the agreement between the parties and the negotiations were still on, there would be no question of starting of the limitation period. The Apex Court pointed out that even though, prima facie, limitation plea taken by the first respondent might not be upheld, yet, it would be for the Arbitral Tribunal to decide and at the stage of appeal as against the order under Section 11(6) of the Act, the claimant's plea cannot be said to have become time barred. The effect of the MOU and the claim has to be considered only by the Arbitral Tribunal, which is competent enough to go into the question of limitation. The Apex Court left the question of limitation open for the Arbitral Tribunal to decide.


120. As far as the present case is concerned, in paragraph 3.21, while passing its decision on Issue 8(C)(2), the Arbitral Tribunal considered when the cause of action arose, as follows:


"3.21. Regarding the effective date of this claim, the Tribunal noted that though EPI had written to TNEB vide their letters PI/DLIO/S/01/432 and DLI/PMD/2/217 dated 13.08.1996 and 12.06.1997 respectively on the Issue of overrun costs, they made their formal quantified claim vide their letter no.DLI/PMD/217/001 dated 09.02.2001. The Tribunal keeping the consistency of its approach, fixes the date of cause of action as 09.03.2001, allowing a period of 30 days from the date, DPI made their formal quantified claim. Accordingly the Tribunal awards that TNEB will pay to EPI, simple interest at 15% per annum from 09.03.2001 till the date of award. "


121. Thus the Tribunal fixed the date of cause of action as 9.3.2001 when the first respondent formally quantified their claim. The error committed by the Arbitral Tribunal herein is that, having observed that the first respondent had written letters to the petitioner as early as 13.8.1996 and 12.4.2007, yet, in considering the effect of the letter and the conduct of the parties, it overlooked the contract provisions, particularly Clause 27 of GCC, which specifies the manner of dealing with disputes or differences arising between the parties. Hence, the question as to whether the cause of action had arisen on 9.3.2001 when there was a formal quantification done or whether it arose as early as 1996, particularly as to limitation, is a matter which ought to have been tested in the face of the correspondence between the parties and when the petitioner had pointed out to the various materials on this aspect, in fairness to the claim of the petitioner, the Tribunal should have passed a reasoned award. As rightly pointed out by the learned counsel for the petitioner, it is one thing to say that the Tribunal considered the pleadings of the parties to reach a decision on the merits of the contentions, that this Court's jurisdiction to interfere with the award is limited; where the Tribunal failed to consider the pleading of the parties to give a reasoned award, the failure of the Tribunal to deal with the same, certainly renders the award illegal demanding interference at the hands of this Court. In a contract which is very specific as to the manner of dealing with the disputes and differences and the rights of the parties thereon, the Tribunal should have adverted to this issue raised on jurisdiction with refernce to the contract terms and considered the merits of various claims in terms of the contract provisions and not independent of the agreed terms of the contract. In the circumstances, the failure to decide the issue in terms of the contractual clause, makes the award unsustainable; that the Tribunal had failed to answer the issue in terms of the rights of the parties as specified in the contract. Even though counsel on either side dealt with the aspect of limitation and jurisdiction in a very extensive manner to contend that the claim is well within limitation, I do not think that this Court should assume jurisdiction under Section 34 of the Act to rule on this issue, more so when the contract contemplates the manner of dispute resolution and the limitation for taking an issue before the Arbitral Tribunal. I agree with the petitioner that the Tribunal had not considered the issue with reference to the contract terms. Consequently, I express my inability to uphold this view of the Tribunal on limitation, which should have been considered in terms of the binding contractual clause and the contentions taken by the petitioner. The decision of the Apex Court cited by the first respondent, does not, in any manner, assist the first respondent and it rests on different set of fact situation and hence, distinguishable.


122. With reference to the decision reported in 2008 (4) ARBLR 604 (Madras) (Tamil Nadu Water Supply and Drainage Board and Anr. Vs. V.N.V. Constructions and Ors.), relied on by the first respondent, I do not find that the said decision, in any manner, advances the case of the first respondent. The said decision deals with the scope of Section 37(3) of the Arbitration and Conciliation Act and not with reference to when the cause of action arose for the purpose of invoking the clause on arbitration. The question herein in this case is as to the jurisdiction of the Arbitral Tribunal on the issue of limitation in terms of Clause 27 of GCC.


123. As far as the reliance placed by the first respondent on the decision reported in (2009) 10 SCC 63 (Steel Authority of India Ltd. Vs. Gupta Brother Steel Tubes Ltd.) is concerned, on the interpretation of a contractual clause by the Arbitrators, it is no doubt true that while exercising jurisdiction under Section 34 of the Act, Courts would not prefer its interpretation to that of the Arbitrator to set aside an award, irrespective of the degree of logic in the view of the Court, unless the Court finds that the interpretation shocks the conscience of the Court. The Apex Court pointed out to the limitation and the scope of judicial review of an award as follows:


"(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a Court.


(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award.


(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.


(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.


(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.


(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.


(vii) It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings.


124. The said decision, does not, in any manner, help the first respondent in its contention, since a perusal of the award shows that there is hardly any discussion on the materials relied on by the petitioner with reference to the contract terms, particularly with reference to Clauses 26 and 27 and to the claim made by the first respondent on the point of limitation. If the Tribunal had considered the said issue in terms of the contract terms and given their interpretation thereon, while considering the merits of the first respondent's claim, certainly this Court's jurisdiction to interfere with the award would be very limited and narrow, unless it falls within the ruling of the Apex Court in the decisions reported in 2007 (4) ARBLR 179 (SC) (ONGC Limited Vs. Garware Shipping Corporation Ltd. and 2008-4-L.W. 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi). However, failure to consider the issue raised in the light of the pleadings of the parties, makes the award illegal and a case of legal misconduct on the part of the Arbitrators. Even going by the decision relied on by the first respondent, the award is liable to be interfered with by this Court.


125. In so far as the interlinked issues falling under Group AA (Issues 8(C)(1) and 8(R)(13)) is concerned, as already pointed out, the Tribunal granted the benefit of delay of 24 months in favour of the first respondent and 16 months in favour of TNEB. As already seen, the contract between the parties involved interaction of both the parties, apart from an expert consultant too, at different stages of execution.


126. Going through the various materials on the execution aspect as well as on the details and information gathered on the inspection of the site, the Tribunal pointed out, particularly with reference to the delay aspect, that there was poor coordination and monitoring of the execution by the parties. It also pointed out that both sides are to be blamed for the breach committed; that each party had broken their respective promises to the other, resulting in the cascading effect on the delay. It started right from handing over of the civil foundations by TNEB. The delay on the part of the first respondent in establishing the office at the site, delay in giving right input data by TNEB, delay in completion of civil work and handing over of certain assets, the delay in achieving milestones by the first respondent indicating poor progress even in respect of the site handed over, ultimately had a telling effect in the completion of the project within the time frame as agreed upon by the parties.


127. The inept planning, scheduling, monitoring and lack of adequate resource mobilisaton at the first respondent's end, while on one hand contributed the delay, the delay in making payment by the petitioner, the delay in handing over of the site, the delay in communicating the Engineer's decision, have, in great measure, contributed to the delay. The Arbitrators further pointed out that while recording the arguments, discussions and views of the Tribunal, except in those cases where it can, with reasonable certainty, be attributable to either party or termed as beyond the reasonable control of the particular party, most of the delays relating to site activities had occurred because of reasons attributable to both the parties. Hence, it was very difficult to precisely apportion the period of delay between the parties. The view of the Tribunal in paragraph 4.7, forming part of the final conclusion of the Tribunal, indicatesthe reason as to the basis of the Tribunal's decision in apportioning 40 months' delay among the parties.


128. Thus in the nature of the contract to be executed, unless and until there is a proper coordination and cooperation between the parties to the contract, achieving the target is almost a Herculean task that when there is a failure to meet the target, the mounting of allegations against each other is not a rare phenomenon. In such circumstances, given the nature of contract, with various aspects of execution thus inter-related and intertwined, and except for making allegations and counter allegations on each other with all suppositions as to the possibilities of execution on time, the parties themselves could not pinpoint with any amount of precision and exactitude and the responsibility for the delay on any single party. All that a dispute resolution body chosen by the parties like the Arbitral Tribunal, whose business is not strictly governed by rules of evidence could do, was to arrive at a conclusion by an approximation of what could be the possible extent of delay that one can fairly attribute to each side. I am satisfied that the view of the Tribunal on the aspect of delay is unexceptionable and in a given set of circumstances, could be the only possible inference one can draw from the materials placed before the Tribunal.


129. As already pointed out, the execution of the contract does not start immediately on the signing of the Letter of Intent. Considering the nature of the project to be executed, when on an assessment of the entire facts, the Tribunal reasons out on an overall picture that in spite of the initial delay on the part of the first respondent, it is entitled to have the benefit of 10 months, apart from giving the benefit of 14 months under different heads, thus totalling to 24 months, I do not find any justification in the plea of the petitioner that the award lacks any justification or reasonableness that this Court should interfere with the same. But then, learned counsel pointed out to the instances where the Tribunal had failed to advert to the issues raised by the petitioner and the materials placed under the individual heads on which relief was granted by the Tribunal. Hence, failure to consider the materials placed by the petitioner, makes the award illegal, suffering from apparent errors, calling for interference by this Court. He made particular objection to the observation of the Tribunal as to the paucity of funds at the hands of the petitioner, which had resulted in the delay in the release of the payment. Referring to the grounds raised therein and to the materials placed to show that the petitioner had been releasing payment to the first respondent, learned counsel for the petitioner pointed out that ignoring this evidence, the Tribunal had committed a grievous error in its conclusion on the availability of funds in releasing of the bills. He further submitted that the Arbitral Tribunal had not adverted to the written arguments filed and the materials relied on and hence, taking me through the various material evidence, pointed out that the award in favour of the first respondent is devoid of merits.


130. I have gone through the award and the highlights presented by the petitioner before the Tribunal. A reading of the award shows that it contains the extract of the highlights of the submissions and not a verbatim reproduction of the highlights of the arguments and submissions made by the parties herein. This, however, does not mean that the Tribunal had failed to consider the submissions and highlights submitted by the parties herein and one cannot judge the correctness of an award by the mere fact that condensation of the submission of the parties herein found in the award fails to reflect the highlights and submissions fully, amounting to a case of non-application of mind by the Tribunal. If on an overall reading of the award one finds justification in the conclusion, a misreading or an error in reading or a reasoning of the document does not make the conclusion erroneous or perverse, demanding interference by this Court. It is relevant to point out that as held in a catena of decisions, the jurisdiction of this Court under Section 34 of the Act is not that of an appellate forum to test the correctness of every finding microscopically with the materials produced by the parties. The distribution of delay under various heads in favour of the first respondent totalling to 24 months and 16 months in favour of the petitioner, hence, has to be viewed on the overall execution of the contract, the respective responsibilities of the parties and the performance of the parties in the respective areas. In the circumstances, in a petition under Section 34 of the Arbitration and Conciliation Act, 1996, it is difficult to weigh the evidentiary value of the materials to test the correctness of the conclusion, as would normally be done in an appeal against a judgment of a lower Court. Consequently, I do not find any ground to disturb the conclusion of the Arbitral Tribunal on the aspect of delay.


131. It must be remembered that arbitration proceedings is not governed by the strict rule of evidence. Section 19 of the Act states that the Arbitral Tribunal shall not be bound by the provisions or the procedures of the Indian Evidence Act. Thus the question as to whether a particular fact is relevant or admissible in evidence is entirely within the domain of the Tribunal to be decided by the Tribunal according to its good sense and not necessarily by referring to the provisions of the Indian Evidence Act. The Tribunal's proceedings are not fettered by technical rules and evidence, in the sense, that there must be concrete evidence of a nature to point out that the finding of the Tribunal on the issue, particularly of a nature that we have on hand, is supported fully by material evidence. As already pointed out, where every stage of execution depends on the active participation of both parties and delay in one front has its reflection on the further aspect of the execution, realising the difficulties therein, all that the Tribunal could possibly arrive at, is to weigh the materials on hand to arrive at a reasonable conclusion on the aspect of delay. In the circumstances, having regard to the peculiar circumstances and the facts of this case, I do not find that this Court should substitute its views to the reasoning of the Tribunal on the aspect of delay fixed by the Tribunal.


132. Although I confirm the award on the aspect of delay and the consequential relief thereon, yet, having regard to the decision that the Arbitral Tribunal had failed to consider the issue of limitation and jurisdiction, the award remains inexecutable.


133. Learned counsel appearing for the petitioner raised an important issue as regards the Tribunal fixing the net amount payable as without any basis; hence, there is arbitrariness and inconsistency in working out the relief. It is seen from the award that after fixing the amount payable to the first respondent as regards its claims and to the petitioner in its counter claims, after making the adjustments, the Tribunal ultimately found a sum of Rs.24 crores and odd as the net amount payable to the first respondent by TNEB, the petitioner herein. The amount payable was worked out by the Tribunal by working out the interest also on the principal amount. Learned counsel appearing for the petitioner made particular reference to the manner of working out the interest; that the Tribunal held that as the petitioner had already recovered from the first respondent, a total sum of Rs.142.38 lakhs towards liquidated damages and on the amount payable by the first respondent, simple interest at 15% per annum was liable to be paid from 20th October 1998, which is 50 days after the revised date of completion till the date of the award. The Tribunal arrived at the net amount payable after calculating the interest payable on the award granted to each of the parties. The Arbitral Tribunal granted extension of time to the first respondent without liquidated damages upto 31.8.1998, which means, the contract completion period stood extended to 31st August 1998 without levy of liquidated damages. The remaining delay of 16 months upto 31st December 1999 was attributed to the first respondent's account. The award pointed out that as the actual completion of the project was achieved by the first respondent with a delay of 16 months, the petitioner would be entitled to recover liquidated damages as per the provisions of the contract at 0.1% per day, subject to the ceiling of 10% of the contract price. Based on the submission by the petitioner working out its counter claim of liquidated damages on Rs.6,18,85,129/-, being 10% of the contract price, the Tribunal pointed out to the adjustment already made on the liquidated damages recoverable by the TNEB at Rs.6,18,85,129/-; that the petitioner had recovered Rs.142.38 lakhs; on the balance amount, the first respondent was directed to pay interest at 15% per annum from 20th October 1998 till the date of the award.


134. As far as this aspect of interest is concerned, there is no reasoning in the award fixing the starting point period for grant of interest from 20th October 1998 till 24th August 2006. Leaving aside the rate of interest, in a delayed execution, where the Tribunal had put the blame on either side, the logic of granting interest from a particular date by one party to another demands that the Tribunal must indicate the reasons for this, so that there is, to a certain amount, a rational basis for acceptance. Learned counsel appearing for the petitioner pointed out that the Tribunal had not considered the interest payable for the post-award period in terms of Section 31(7) of the Act. Quite apart from this, while considering the granting of interest to the first respondent under Issue No.8(C)(4), the Tribunal granted interest excluding 10% of the advance contract price, when the contract is otherwise. He further pointed out that when the Tribunal had attributed the delay of 16 months to the first respondent, the Tribunal should have deducted the benefit of 16 months in calculating the interest. Apart from this, ignoring its own reasoning on the delay attributed to the first respondent, the grant of interest in favour of the first respondent for the post-award period is an arbitrary exercise that makes the award irrational, arbitrary and prejudicial to the interest of the parties.


135. As far as the grant of interest is concerned, particularly in the context of the adjustment that has been granted in working out the net amount payable by the petitioner to the first respondent, I agree with the contention of the petitioner that in the context of the findings of the Arbitral Tribunal that both the parties have contributed to the delay, the working out of the relief in terms of grant of interest, makes the award a one-sided consideration, causing prejudice to the petitioner. If the Tribunal had passed an award without working out its observations as to the delay caused by both parties, may be, the merits of the grant of interest for the post-award period would go for different consideration. However, as already pointed out, in a contract of this nature, where the due performance of the contract rested on both the parties observing their responsibilities in terms of the agreement, with the blame for the delay attributed to both the parties, the consideration as to the grant of interest must go by the even scales, failing which, the award would suffer from arbitrariness, causing prejudice to the interest of the parties. Hence, going by the decision reported in 2008-4-Law weekly 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi), the award causing prejudice to the rights of the parties, is liable to be interfered with by this Court. In the circumstances, in the context of the findings of the Tribunal, it being a legal issue, I am constrained to accept the plea of the petitioner that the working out of the net amount payable is an issue which causes serious prejudice from the point of grant of interest for the post-award period in favour of the first respondent. This aspect is apart from the issue on the jurisdiction which I had already discussed above.


136. Issue No.8(C)(2) relates to overheads, loss of profit, additional site expenses and overheads incurred during the extended period of contract.


137. Learned counsel appearing for the petitioner made specific reference as regards the basis of working out the relief granted on the claim of the first respondent in Issue No.8(C)(2) towards loss of profit, additional site office expenses and overheads covered during the extended period of contract. The contention of the first respondent is that on account of delays by TNEB in the performance of their obligations and on account of the force majeure conditions, the schedule for the completion of the project was extended. The project was completed in December, 1999 including Performance Guarantee Tests. In this connection, the first respondent relied on Clauses 18.5, 21, 22.1 and 22.2 of GCC for claiming extension of time and for compensation. In the circumstances, the first respondent claimed loss of profit, additional site office expenses and head office overheads in Phase II project at Tuticorin from August, 1997 to December 2000, which is the actual date of completion together with the guarantee period. The first respondent pointed out that when the petitioner had caused the delay resulting in increase in cost and the contract provided for extension of time and reasonable compensation to the contractor, the Tribunal had rightly considered the claim to grant the relief.


138. The first respondent claimed compensation contending that if only the contract was to be completed as per the schedule, they could have shifted their entire infrastructure to other contracts and utilised the resources profitably thereon. In support of the claim, the first respondent submitted the balance sheets for 12 consecutive years from 1989-90 to substantiate the percentage on the site office expenses, head office expenses and the loss of profit for the extended period. In addition to that, it is stated that the details as to the wages paid to the staff involved in the execution of the project were also placed before the Tribunal. Referring to the letter dated 13.8.1996, the first respondent lodged their claim for payment on 9.2.2001.


139. The first respondent relied on Section 54 of the Indian Contract Act that when the petitioner had not performed their contractual obligations, they were liable to compensate the first respondent. They also referred to Section 73 of the Indian Contract Act and placed reliance on Hudson's formula for granting the relief.


140. The said claim was resisted by the petitioner contending that the claim of the first respondent was not arbitrable, apart from being violative of the contractual conditions under Clause 22.2 of GCC. The petitioner contended that when the first respondent had failed to forward the claim at the relevant time, but made the claim only after the completion of the contract, the same is in violation of Clause 22.2 of GCC and hence, the claim has to be rejected. The petitioner further pointed out that the claim of the first respondent dated 9.2.2001 was followed by letter dated 16.2.2001 invoking Clause 27.1 of GCC. The petitioner contended that considering Clause 22.2 as well as Clauses 6.1, 12.1, 12.2, 8.1 and 8.2 of GCC relating to the erection contract and Clauses 36.1, 36.2 and 3.9 of the supply contract, the first respondent could not place the claim under the particular head. The petitioner further pointed out that the claim for compensation was rejected as early as 30.8.1996. Going by Clause 27.4 of GCC, the present claim made, as though there was a subsisting claim, is not sustainable in terms of the contract clause under Clause 27 of GCC. Reiterating the contentions as in Issue No.8(C)(1), the petitioner contended that quite apart from the non-arbitrability of the issue, even on facts, the first respondent was not entitled to any relief. The petitioner countered the claim by referring to the decisions reported in AIR 1979 SC 720 (Hind Construction Contractors by its Sole Proprietor Bhikam Chand Mulchand Jain (Dead) by LRs. Vs. State of Maharashtra), (2001) 4 SCC 241 Ramachandra Reddy and Co. vs. State of Andhra Pradesh and Ors.) and 2001 (2) ARBLR 17 (Sikkim Subba Associates Vs. State of Sikkim) that though the contract provided time as the essence of the contract, the said clause has to be read along with other clauses providing for extension of time and liquidated damages, which would show that the parties did not intend time as the essence of the contract. The petitioner also pointed out that the loss of profit would never get reflected in the Books of Accounts. The first respondent had not produced the necessary materials to establish the demonstrable and reasonable compensation. In the absence of any materials or Books of Accounts produced to substantiate any fall in the business on account of the extended stay, the claim of the first respondent is totally unsustainable. The reliance placed on Section 73 of the Act is misconceived.


141. A reading of the award shows that the decision on this is based on the decision under Issue No.8(C)(1); that the delay of 24 months was taken to the benefit of the first respondent to grant the relief on the off-site overheads and the loss of profit.


142. After perusing the documents and contract Clause 22.2, the Arbitral Tribunal held that the first respondent was entitled to claim demonstrable and reasonable compensation at the end of completion of the contract, by considering the circumstances existing at the time of the occurrence. With reference to the reliance placed by the petitioner on Clause 36.1 of GCC, the Arbitral Tribunal held that since it related to suspension of work, the said clause had no relevance to the case on hand.


143. Having regard to the finding already given as regards the delay resulting in the extension of time, the Tribunal accepted the submission of the first respondent that the increased overheads and the inability to earn profit on account of the delay caused by the petitioner, at least to the extent of 24 months, justified the grant of reasonable compensation to be paid to the first respondent. The Tribunal also referred to Clause 27.5 of GCC, as per which, all disputes in respect of which decision of TNEB had not become final can be referred to arbitration; hence, the Tribunal had every jurisdiction to adjudicate on the issue. Following the directions of the Tribunal, the first respondent submitted the audited balance sheets for the consecutive 12 years starting from 1989-90 to substantiate the percentage of expenses as regards the site office expenses, head office overheads and loss of profit for the extended period of stay at the site.


144. The Tribunal further interpreted the clause to hold that by no stretch of imagination, one can say that a claim is to be made only at the time of such an occurrence and that the claim could not be made later on. The extent of compensation should be based on the circumstances prevailing at the time of such occurrence. The Tribunal rejected the reliance placed by the petitioner on Clauses 36.1, 36.2 and 3.9 of the supply contract, as not having any relevance to the issue. Having regard to its decision on the aspect of delay as proportionately attributable to the parties herein, the Tribunal agreed with the contention of the first respondent for granting the relief. It however made reference to Clause 27.5 to assume jurisdiction to adjudicate on this issue. The Tribunal also referred to Section 55 of the Indian Contract Act to hold that though the contract makes provisions for liquidated damages and extension of time, the intention of the parties is that time is not the essence of the contract, in which case, Section 55(2) of the Indian Contract Act wound stand attracted. Admittedly, the Tribunal rejected the reliance placed by the petitioner on the decision reported in (2002) 4 SCC 45 (General Manager Northern Railways and Anr. Vs. Sarvesh Chopra) and AIR 1990 AP 294 (State of Andhra Pradesh Vs. M/s. Associated Engineering Enterprises, Hyderabad) as not having relevance to this case. While answering the issue, the Tribunal referred to the Book GT Gajria's "Law Relating to Building and Engineering Contracts in India", wherein, the author had recommended Hudson's formula applying the percentage of overheads and profits prescribed in the Government of India, Ministry of Irrigation and Power, CWPC, at 10% on overheads and 10% on profit. The Tribunal pointed out that the published balance sheets duly certified by the Chartered Accountant for the period 1995-96 to 1999-2000 showed corporate overhead at 14.18%, average annual profit during the period at 9.57% of the annual turnover and that the first respondent had claimed a total of 20%, which constituted overheads at 14% and loss of profit at 6%. Apart from that, the details of site office expenses and salary/wages paid to the staff involved in the execution of the project, percentage of overheads and percentage of loss of profit for the extended period of contract, duly certified by the Government of India approved Chartered Accountant, were submitted to the Tribunal. The Tribunal applied the same on prime cost and not on the total contract value. The average off-site overheads and operational profit worked out to 10.33% and 14.49%. The Tribunal ignored the site office overheads worked out at 3% of the project volume. Thus the Tribunal adopted 8% towards overheads and 10% towards profit on prime cost as fair and reasonable for both parties. Thus the total claim granted to the first respondent worked out to Rs.9,44,01,044/-. The Tribunal granted simple interest at 15% per annum from 9.3.2001, taking it as the date of cause of action till the date of award and further interest at 18% per annum, by way of default clause that if the said sum was not paid in 30 days' time, interest would run from the date of the award to the date of payment.


145. The Arbitral Tribunal referred to the decisions of the Supreme Court reported in AIR 1973 SC 1481 (Mohammed Salamatullah Vs. Govt. of A.P.) and AIR 1984 SC 1703 (Brijpal Singh Vs. State of Gujarat) to support its view that in determining the question of damages, certain amount of arbitrariness and guess work is bound to creep in; that so long as there is a rational basis, the decision cannot be interfered.


146. Challenging the correctness of the decision and as to the reliance placed on the Hudson's formula, the petitioner pointed out that when the contract provides for the method of calculating the compensation, the relief should have been arrived by following the methodology given under the contract Clause 22.2. As the relief granted by the Tribunal runs against the specific contract terms in Clause 22.2, the award suffers a patent illegality and hence, liable to be interfered with by this Court. Learned counsel appearing for the petitioner pointed out that in working out the relief by taking the balance sheet as certified by the Chartered Accountants as the basis, the Tribunal had practically ignored the objections placed by the petitioner, particularly with reference to Clause 22.2. He pointed out that the balance sheet could never take the place of a concrete proof as regards the claim for demonstrable and reasonable compensation, since, as per Clause 22.2, the extent of compensation has to be one matching the circumstances that existed at the time of such occurrence. He pointed out that the balance sheet, at best, would give the details of state of affairs as regards the business of the first respondent in a condensed form. He further pointed out that it is not as though the project taken by the first respondent was the only one which the first respondent had undertaken, that this project delay had its reflection on the business activities of the petitioner to suffer a loss to be compensated.


147. Learned counsel pointed out that in the absence of any material, the fixing of compensation on the overheads and profit at 8% and 10% on prime cost on the mere pleading that the first respondent had other contracts too for its execution, is arbitrary and violative of the contract clause. When the onus is on the first respondent to substantiate its claim for a demonstrable and reasonable compensation, the balance sheet for the overall business activity cannot be the basis for working out the relief. He pointed out that the Tribunal, relied on the book GT Gajria's "Law Relating to Building And Engineering Contracts In India, which was never placed before the parties herein and going by Section 24(3) of the Act, if the Tribunal is to refer and rely upon any passage or material or document, it is duty bound to communicate the same. In the absence of any compliance of Section 24(3) of the Act, the award contravenes the provisions of the Act, apart from it being in violation of Clause 22.2 of GCC. He further pointed out that the only document produced before the Tribunal was the balance sheet and the Auditor's Report. Even in invoking Hudson's formula, Courts have held that the claimant must support the claim by necessary materials.


148. In this connection, learned counsel appearing for the petitioner drew my attention to the objections of the petitioner through their Chartered Accountant's remarks. The award fails to deal with the objection of the petitioner as well as the Chartered Accountant's report on the balance sheet and the Auditor's certificate produced by the first respondent. He pointed out that all that the Tribunal had done is only to make a reference to the statement of the petitioner and since it failed to consider the petitioner's objection in the proper perspective, the award suffers illegality and the view of the learned Arbitral Tribunal was a biased one. He submitted that if the award had been made after considering the objections taken, this may be a case of interpretation, over which, this Court may not have any jurisdiction under Section 34 of the Act. However, where the award fails to deal with the objections taken by a party and had not even been referred to in its award, the same suffers illegality and the Arbitrators are guilty of legal misconduct. He pointed out that the balance sheet does not substantiate what is required under Clause 22.2 of GCC. He pointed out that the Chartered Accountant, who certified the expenses, was not examined on this aspect. Thus apart from the lack of jurisdiction, even assuming that the Tribunal has a jurisdiction on this issue, it fails to satisfy Clause 22.2 of GCC, apart from the award not taking into consideration the objections raised by the petitioner. He further pointed out that even if the apportionment of delay is justified, yet, such course would not satisfy either Clause 22.1 of GCC or for that matter, Clause 22.2, since the facts required for working out the relief are not there for granting any relief under Clause 22.2.


149. In so far as the award places its reliance on the certificate by the Chartered Accountant, learned counsel placed reliance on the decision reported in 2001 (2) Arbitration Law Reporter 115 (P.C.Chandha & Co. V. Union of India) and contended that the certificate does not have the status of proof of a claim for the purpose of reaching a conclusion. Referring to the claim petition in extenso, on the question of impact of the delay on the machinery and overheads, thereby leading to loss of profit, learned counsel referred to the working done by the first respondent and to the counter filed by the petitioner and submitted that the computation given by the first respondent did not show the actual expenses said to have been incurred by the petitioner. If really the first respondent had incurred these expenses, then that would have been reflected in the Books of Accounts, which should have been produced before the Tribunal for substantiating such a claim. The first respondent made a claim for Rs.3,46,38,042/- under this head. Apart from that, they also made a claim of Rs.14,43,90,995/-. When the first respondent is able to specify the extent of expenditure on the maintenance of establishment, then the Books of Accounts relating to the expenses should have been produced. Learned counsel further pointed out that the claim made under this head by the first respondent vide its letters dated 8.10.1996, 13.1.1997, 13.2.1997 and 26.4.1997 were rejected by the Board vide its letters dated 12.2.1997, 17.2.1997 and 25.2.1997 as well as in the meeting held on 25.2.1997.


150. On the question of loss of profit estimated, learned counsel pointed out to the objections at paragraph 52 as regards the basis of the claim. In the background of this, learned counsel referred to the reference made to Hudson's formula as misconceived and contended that when the contract itself provides for a method, the working done by the Tribunal goes against the contractual terms. Referring to the highlights of the submission, learned counsel pointed out that the Letter of Acceptance speaks on payment to be made on the first respondent executing the work progressively upto particular stages and reporting the same in the manner contemplated under the contract. Having regard to the same, the petitioner contended that the first respondent should produce the Books of Accounts to substantiate their plea as to the loss suffered. In the absence of proof of claim, learned counsel referred to a decision reported in (2006) 11 SCC 181 (International Inc. v. Burn Standard Co. Ltd.) that the first respondent had not given any reason for the delay even as required under the format (Additional Instructions to Tender Form 3.6) required to be filed by the first respondent. In short, learned counsel submitted that the absence of evidence vitiates the claim and when the claim was not made in terms of Clause 22.2 of GCC and that the first respondent had made the claim for the first time on 9.2.2001, the Tribunal should have rejected the same.


151. In this connection, he placed reliance on the decisions reported in (2009) 3 Arbitration Law Reporter 140 (SC) (State of Rajasthan and another V. Ferro Concrete Construction Pvt. Ltd.); (2002) 3 RAJ 636 (All India Radio Vs. Unibros), (2004) 5 SCC 109 (Bharat Coking Coal Ltd. Vs. L.K.Ahuja) as well as (2007) 13 SCC 236 (Security Printing and Minting Corpn. Of India Ltd. Vs. Gandhi Industrial Corporation) and pointed out that in the absence of proper materials placed to substantiate their claim, the balance sheet is not a good piece of evidence to quantify the damages. Hence, in terms of the decision reported in 2001 (2) Arbitration Law Reporter 115 (P.C.Chandha & Co. V. Union of India), the award has to fail. Learned counsel pointed out that as per Clause 27.5 of GCC, only such of those disputes which have not become final, in the sense that the decision of the owner had not been accepted by the contractor in terms of Clause 27.4 of GCC, or that the decision has not been made in terms of Clause 27.3, that the said dispute shall go for a decision before the Arbitrator. Consequently, Clause 27.1 of the GCC relating to resolution of disputes through arbitration is qualified by Clauses 27.4 and 27.5 of GCC. The absence of any explanation from the first respondent to keep alive the dispute, hence, disables the Tribunal from adjudicating on the said issue. Learned counsel pointed out that the Tribunal failed to advert its attention to Clause 27.4 of the GCC and even after the extension granted as sought for in its letter dated 25.11.1999 and even after the completion of work, in the letter addressed by the first respondent on 29.3.2000, there was no claim made for compensation under this head. The Tribunal had made use of the CPWD guidelines in the award, thereby denying the petitioner an opportunity to know the contents.


152. Learned counsel appearing for the petitioner, placing reliance on the contractual terms as regards the right of the first respondent to claim compensation, reiterated the grounds already taken in this Original Petition as well as before the Tribunal as regards the delay aspect and the extension granted to the first respondent. Touching on the findings of the Arbitral Tribunal, particularly with reference to Clause 27.5 of GCC holding that the Tribunal has jurisdiction to adjudicate on this issue, learned counsel submitted that the view of the Tribunal placing reliance on the said clause is totally misplaced. He pointed out that if the first respondent herein has to make a dispute on any aspect of the contract, then as per Clause 27.4 of GCC, the claim should have been made and kept alive so that, in the event of the party deciding to go for an arbitration, the claim could rightly be placed for adjudication before the Arbitral Tribunal.


153. Referring to the letter dated 13.8.1996, learned counsel for the petitioner pointed out that all that the letter sought for was extension of time only and there was no claim at all made on the front of compensation. The first respondent wrote a letter on 30.8.1996, wherein there is a reference about the letter dated 13th August 1996. Even there, there is no reference about the claim made on the compensation on account of delay. In the reply made by the petitioner, the allegation on the aspect of delay as contained in the letter dated 13.8.1996 was denied. The petitioner directed the first respondent to expedite the erection equipments. On 8th October 1996, except for explaining the delay in execution, there was no claim for compensation for the extended period.


154. Learned counsel drew my attention to Clause 18.5 of GCC, which states that where the contractor delayed the execution of the work, except in a case of an act of the petitioner or any change ordered in the work by the petitioner or by force majeure, the contractor could seek extension of time by a reasonable period as may be mutually agreed upon. Under Clause 18.7 of GCC, it is stated that in the event of the contractor failing to execute the contract within the time specified, the contractor shall pay liquidated damages to the owner without prejudice to any method of recovery and deduct the amount for such damages from any amount due to the contractor. The Clause further states that in a case where the first respondent seeks time and the same is granted by the owner, the liquidated damages Clause would be applicable after the expiry of the extension period, which shall be subject to the maximum of 10% of the contract price. Clause 27.1 of GCC relates to reference of the dispute to arbitration within 30 days after being sought for on a notice from the party. Having regard to the said clauses relating to the claim for liquidated damages and reference of a dispute, the dispute resolution mechanism would apply to only such of those cases where the dispute is kept alive. In the absence of any material to show that after the rejection by the petitioner, the first respondent kept the dispute alive by reserving their right to canvass the same at a later date in accordance with the contract terms under Clause 27.5 of GCC or that the first respondent moved further to take the disputes for resolution before the Arbitrators by invoking the arbitration clause under Clause 27.5 , the claim would no longer be available as a dispute to be raised before the Arbitrator. Learned counsel pointed out that the letter seeking extension of time was rejected by the Board in its proceedings dated 12.2.1997. Although a rejoinder was sent on 26.4.1997, there was no claim for compensation therein. The first respondent did not invoke arbitration clause, as provided in Clause 27.4 of GCC. Even in the letter dated 29.3.2000, the first respondent only sought for extension of time and there was no claim for compensation. The letter dated 9.2.2001 alone contains the alleged claim for compensation. Thus when the first respondent had not complied with the contractual terms and the dispute was raised for the first time on 16.2.2001, on the admitted facts, the claim has to fail.


155. Referring to the Hudson's formula for grant of compensation, learned counsel referred again to Clause 22.2 of GCC that the claim could be considered only if and when there are materials to substantiate the claim and what is contemplated under Clause 22.2 of GCC was a compensation, which is demonstrable and reasonable on being arrived at, depending upon the circumstances existing at the time of such occurrence.


156. As far as Issue No.8(C)(2) is concerned, essentially, the grant of relief rests on Clause 22.2. The said clause requires that the claimant, namely, the contractor, has to bring his case under Clause 22.1 that the contractor is given extension of time for completion of the contract by the Engineer/owner-purchaser that the work is delayed by the stated circumstances of (a) force majeure, or (b) by reason of proceedings taken or threatened by or disputes with adjoining or neighbouring owners or public authorities, or (c) by the works or delays of other constructors, or tradesmen engaged by the Owner/Purchaser, or (d) by reason of the Engineer's instructions, or (e) in consequence of the Vendor/Contractor not having received in due time necessary instructions from the Owner/Purchaser or the Engineer for which he shall have specifically applied in writing, or (f) by reason of non-payment of running bills within a reasonable time after issue of the certificate by the Owner/Purchaser or the Engineer, or the delay caused on account of other contractors engaged by the owner. In such circumstances, the Engineer or the owner shall make a fair and reasonable extension of time for the execution of the contract. Apart from the extension of time for the execution of work to which the contractor is entitled to, under Clause 22.2, the contractor is entitled to claim compensation. The claim is further qualified that it has to be a demonstrable and reasonable compensation. Secondly, such compensation claim arises by reason of any increase in the cost resulting from the delay. The claim for compensation thus depending on the delay attributable to the petitioner, the contractor seeks extension of time for the execution of the contract and the extension granted thereon and secondly, the delay must have resulted in an increase in the cost. The contractor has to justify the claim and that on the satisfaction alone, the extent of compensation is arrived at on a mutually agreed basis, it being the circumstances existing at the time of such an occurrence. The petitioner contends that the contractor should have made the claim then and there and should not have waited for the completion of the execution. The Arbitral Tribunal rejected such view. I am in entire agreement with the said view of the Arbitral Tribunal. Clause 22.2 makes no such restriction on a claim of the contractor for a compensation. Hence, one has to necessarily agree with the view of the Tribunal on this aspect. As regards the manner of fixing the compensation, however, I agree with the submission of the petitioner both from the aspect of jurisdiction as well as the manner of quantifying the claim.


157. Learned counsel appearing for the petitioner pointed out that the claim for compensation was rejected by the Board in its letters dated 12.2.1997, 17.2.1997 and 25.2.1997, apart from the records in the meeting held on 25.2.1997, and that the first respondent made its claim thereafter only on 09.02.2001. In the background of the said aspect, the petitioner contends that the claim should have been considered in the background of the contract Clauses 26 and 27.


158. A reading of the award shows that the Tribunal passed its award based on its conclusion on Claim No.8(C)(1), that the first respondent is entitled to an extension of 24 months. The issue of jurisdiction and limitation raised by the petitioner, however, had not received any consideration at all at the hands of the Tribunal. Yet, having regard to the view that I have already taken that the Tribunal has not considered the claim in the context of the contract clauses, particularly arbitrability and limitation, I have no hesitation in agreeing with the submissions of the petitioner that the award suffers patent illegality and hence liable to be interfered with by this Court under Section 34 of the Act.


159. Quite apart from the legal issues not receiving consideration of the Tribunal, the relief granted fails to take note of Clause 22.2. Hence, on the merits of the claim granted, I hold that the relief granted also has to fail. As already seen in the preceding paragraphs, the claim of the contractor rested on their claim to seek extension of time. Under the contract, the authority to grant the same rested with the Engineer. Where the plea for extension is not granted, certainly it is open to the contractor to raise a dispute by taking recourse to the provisions of Clause 27 of GCC. Where the contractor is granted extension of time under Clause 22.1, the right of the contractor to seek compensation as per Clause 22.2 comes. Here too, where the claim is rejected or granted in part, the next course open to the contractor is to go by Clause 27. Hence, the first of the satisfaction to be recorded on the issue of extension and the consequential compensation on agreed basis, has to come from the Engineer only. The question therefore is, was there an extension sought for by the contractor and to what extent granted or rejected; that the claim under Clause 22.2 could be said to have received consideration in terms of Clause 22.2 and thereafter, under Clause 27 for a dispute to go for arbitration. In the background of the delay fixed by the Tribunal, on the totality of the circumstances and with no specific date assigned as to the delay caused by the petitioner leading to an extension, the working of the relief certainly introduces an element of arbitrariness, apart from lacking a basis for computation in terms of the contract Clause 22.2. It is no doubt true that as per the terms of the agreement, the delay caused by the petitioner entitles the first respondent to claim demonstrable and reasonable compensation. Yet, going by the decision of the Tribunal as to the delay of 40 months and the distribution of the delay period at 24 months to the benefit of the first respondent and 16 months to the petitioner herein, it is difficult to say with any amount of conviction that the Tribunal had justified its decision with any reasoning on the claim for compensation with reference to Clause 22.1 and 22.2. In any event, given the fact that the decision on the justification for the grant of compensation has to come from the Engineer alone, the contention of the petitioner as to the issue of jurisdiction assumes significance and cannot be brushed aside as one of interpretation of Clause 22.2. Hence, in all fairness to the claim of the petitioner on the aspect of delay and jurisdiction, the Tribunal should have adverted to the contention of the petitioner as to the relevancy of Clause 22.2, while deciding the issue on the claim for compensation.


160. As to the merits of the relief granted by the Tribunal, referring to the balance sheets, the Tribunal adopted 8% towards overheads and 10% towards profit on prime cost as fair and reasonable to both sides. It held that keeping in view the competitive tendering conditions and contracting business, proportionate to the delay and disruption attributable to the petitioner to the period of over-stay, loss of profit and increased cost towards overheads at 18% of prime cost was granted to the first respondent by applying the Hudson's Formula.


161. A reading of the award leaves no manner of doubt that it failed to deal with the claim even on the aspect of the extent of relief by the contract terms in Clause 22.2, which enjoins upon the contractor to establish its claim for a demonstrable and reasonable compensation. This depends on the contractor showing an increase in the cost by reason of the delay suffered on account of the petitioner. There is hardly anything that one could discern from the balance sheet that the first respondent suffered an increase in the cost by reason of over-stay. As to the issue of over-stay, it is no doubt true that normally, wherever the contract performance gets extended thus necessitating the contractor to extend its stay with all the administrative and other non-administrative forces to complete the performance, the extended presence of the work force included machinery and the administrative setup may result in further expenditure to be met by the contractor. Wherever a claim is made on that score, the contract often provides for protecting the claims of the contractor through remedial provisions providing for working out the compensation on account of extra cost. However, where the claim is for compensation and the contract provides for a particular mode of calculating the same and the parties have willingly accepted the procedure and the mode, the same must be followed. As far as the case on hand is concerned, we had already noted that the parties had agreed for demonstrable and reasonable compensation to be paid to the contractor, in the event the delay is caused by the owner and the burden is on the contractor to substantiate its claim for a reasonable and demonstrable compensation. Learned counsel for the petitioner pointed out that the Tribunal had failed in its exercise to adhere to the contract terms. I agree with the submission of the petitioner. In calculating the relief, all that the Tribunal did was an averaging of on-site overheads and operational profits, which does not, in any manner, justify the relief as "demonstrable and reasonable compensation" on account of the extended stay resulting in increased cost. Clause 22.2 insists that the compensation depends upon the circumstances at the time of such occurrence.


162. When the contract speaks about the manner of working out the relief, the Tribunal being a creature under the contract, is bound to act in conformity with the contract terms and it is not open to the Tribunal to act on any supposition by a mere look at the balance sheet. A balance sheet, at best, would only give a summary of the economic aspects of the business activity of a commercial concern during a given period of time. Unless there are specific notes appended to the balance sheet giving the details of the loss suffered in any particular project, a balance sheet, normally, will not reflect the loss suffered on any particular project, leave alone to make a reference to the factors as spoken to in Clause 22.2 of GCC.


163. It is not denied by the respondents that quite apart from the project of TNEB, the first respondent was having other projects too. In the absence of any material to touch on the economic status of other activities of the first respondent, it is difficult to go by the averaging method that the Tribunal had adopted in this case.


164. Learned counsel appearing for the petitioner placed reliance on the decision reported in 2009 (3) ARBLR 140 (SC) State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd.) in support of the proposition that the award granted merely on the basis of a claim statement without anything more, makes an award an invalid one. Dealing with the award on the claim of the contractor for damages on account of the loss suffered on breach of the contract, holding that the Court will not sit in appeal over the award in order to re-appreciate the evidence for the purpose of finding out as to whether, in the facts and circumstances, the award in question could have been made, the Apex Court pointed out that there was no evidence to show that the contractor was manufacturing, at any point of time, 15 pipes a day or that he would have made a profit at 15% on the cost thereof or that the contractor had other contracts where it was required to manufacture that number of pipes and that it could not do so for want of machinery or that the contractor had to incur further expenditure on fresh installation. The Apex Court further pointed out as follows:


"27. ... In a reasoned award if the claim of a contractor is equated to proof of the claim, then it is obviously a legal misconduct and an error apparent on the face of the award. While the quantum of evidence required to accept a claim, may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable. "


165. Dealing with the relevancy of the Hudson's Formula, in the decision reported in 2002 (3) RAJ 636 (Delhi) (All India Radio Vs. Unibros), relied on by the learned counsel, it was held that, in the absence of any evidence, the award is an improper one, liable to be set aside by the Court. The Court held that the said formula could be applied only when there is sufficient evidence on record of the nature required to justify the applicability of the formula. The Delhi High Court pointed out that in assessing the damage towards the loss of profit, even though the Hudson's Formula is followed, it assumes that the profit adjudged by the contractor was, in fact, capable of being earned by him elsewhere, had the contractor been free to leave the contract at the appropriate time. The Delhi High Court pointed out as follows:


"18. Although Hudson's Formula is followed for assessing the damages towards loss of profit but the same could be made applicable only on fulfillment of certain conditions. The aforesaid formula assumes that the profit adjudged for the contractor in his price was in fact capable of being earned by him elsewhere had the contractor been free to leave the contract at the proper time. The same itself involves two further assumptions, namely, that on average the contractor did not habitually underestimate his costs when pricing, so that the profit percentage was a realistic one at that time and secondly that there was thereafter no change in the market, so that the work of at least the same general level of profitability would have been available to him at the end of the contract period. "


166. Hence, satisfactory evidence is required and only on the basis of the same, the formula could be worked out. Thus the High Court pointed out that except for placing on record the Hudson's Formula and a passage from the Book "Building and Engineering Contracts", no evidence was placed on record by the contractor to show that the profit percentage claimed towards loss of profit was a realistic one to establish that at least the same level of profitability would have been available to the contractor at the end of the stipulated contract period, if some other work had been undertaken by him.


167. Touching on the onus of the party claiming damages to prove the claim, in the decision reported in (2004) 5 SCC 109 (Bharat Coking Coal Ltd. Vs. L.K.Ahuja), the Supreme Court held that wherever the contractor claimed damages arising on account of the delay in the execution of the work, the contractor is bound to establish in such a situation that had he received the amount due under the contract, he could have utilised such amount for some other business in which he would have earned profit.


168. Going by the above-said decisions and agreeing with the view expressed by the learned Judges of the Delhi High Court on the relevancy of the Hudson's Formula, except for a mere percentage worked out for granting the relief, the award under challenge contains no discussion to show that in terms of Clause 22.2 of GCC, the said percentage could be taken as a demonstrable and reasonable claim.


169. As rightly pointed out by the learned counsel appearing for the petitioner placing reliance on the decision reported in 2009 (3) ARBLR 140 (SC) State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd.), except for the reliance placed on the balance sheet figures, the Tribunal had not considered the claim in terms of Clause 22.2 and there is nothing on record to show that the first respondent had, in fact, substantiated its claim for compensation by proving the circumstances that existed at the time of the delay, necessitating the grant of extension of the contract. Thus while I agree with the view of the Tribunal on the aspect of the point of time at which the claim should have been made, that the contract does not insist on the contractor to make its claim immediately on the delay happening and the extension granted, I do not agree with the basis of fixing the compensation under this head, as it overlooks the very basis for fixing the compensation, as provided for under Clause 22.2.


170. As pointed out, even for working out the formula, the Tribunal has to have the support of material evidence to fix the compensation. Thus, as already pointed out, to sustain the claim, the twin conditions of Clause 22.2 have to be necessarily satisfied from the aspect of delay by the owner leading to an extension of time and secondly, thereby entitling the contractor to claim demonstrable and reasonable compensation on the sum to be mutually agreed upon, depending on the circumstances at the time of such an occurrence on any increase in the cost resulting from the delay.


171. As held in the catena of decisions of the Apex Court, where the Tribunal fails to advert to the contract clauses and further in the absence of the claim substantiated by material evidence by the first respondent, the award is liable to be set aside, it being contrary to the terms of the contract. A reading of the Tribunal's order further shows that it had nowhere considered the effect of Clause 27.4 in the background of the various correspondences between the parties.


172. Learned counsel appearing for the first respondent, however, pointed out, as in the earlier issue, that the first respondent made a claim in terms of Clause 27.1 for a decision before the Engineer on 16.2.2001. When the Engineer had failed to act as per the said terms, after waiting for 30 days, the first respondent had to move the Tribunal for necessary relief. He pointed out to the delay in the payment due from the petitioner and the delay caused under various circumstances in completing the project. Hence, considering the loss of profit in computing the period of delay and the necessity of maintaining the infrastructure to complete the project which resulted in increase in on-site expenditure, the escalation in the cost of raw materials leading to low productivity from labour, are all facts which had rightly gone into the decision making process of the Tribunal.


173. He pointed out that in respect of low productivity from labour and plant, unlike in the case of an increase in the on-site expenditure, there is always a difficulty in assessing the same. He pointed out that the Tribunal did not go either by the Hudson's Formula or as per the Central Government norms as given in the Book by GT Gajria. On the other hand, the Tribunal went by the facts available. He submitted that taking note of the balance sheet and the certificate issued by the Chartered Accountant, the Tribunal chose a middle path of arriving at a reasonable compensation; that there is no illegality in the award which calls for interference by this Court. He referred to the decision reported in (2006) 11 SCC 181 (McDermott International Inc. Vs. Burn Standard Co. Ltd.) at page 222, apart from the decision reported in 2007 (5) RAJ 93 (Mad) (Zonal General Manager, Ircon International Ltd. Vs. Vinay Heavy Equipments) and submitted that the Tribunal had directed the parties to make their objections on the certificate issued, and based on the materials supplied, rightly compensation was fixed. He pointed out that on account of the delay caused by the petitioner, the first respondent had to maintain the bank guarantee after the deferred liability period too. In the above circumstances, he pleads that the award be sustained.


174. As already pointed out, the Tribunal reached its conclusion based on a percentage drawn from the balance sheet. The said issue had not been adverted to by the Tribunal from the perspective of Clause 22.2, I do not accept the contention of the first respondent that by reading the balance sheet, it is possible to deduce the extent of loss that a concern will suffer on account of one project. I am afraid that a balance sheet could provide for such information, particularly when the purport of the balance sheet is to provide for an overall information as to the status of the finances of the company. Neither the balance sheet nor the certificate by the Chartered Accountant gives any clue as regards the operational profit and the overhead charges that the first respondent needs to be compensated upon. On the very admission by the first respondent that the Arbitrators have not fully accepted any particular method, it is clear that the Tribunal had nowhere adhered to the contract terms under Clause 22.2 to insist on the first respondent to sustain its claim in terms of Clause 22.2 to reach a decision on the issue. Apart from the fact that the award itself gets vitiated on this score, the absence of any material to reach the conclusion, makes the award an arbitrary one.


175. The first respondent's reliance on the decision reported in 2007 (5) RAJ 93 (Mad) (Zonal General Manager, Ircon International Ltd. Vs. Vinay Heavy Equipments) as to the relevancy of the Hudson's formula to the case on hand, does not, in any manner, help the first respondent's cause, as the same rested on the factual findings. After referring to the award, this Court held that the contractor had placed relevant materials to substantiate the prolongation of the contract as caused by the owner and the loss suffered and based on the Hudson's formula, it claimed compensation for the prolongation of the contract. This Court held that the Hudson's formula had been accepted by Courts as representing a logical method of calculating the loss of profit. The facts herein in this case, do not, in any manner, satisfy the requirements even to invoke the Hudson's formula. In any event, when the contract contemplates a particular method for calculating the compensation, an award which fails to take note of the same, hence, deserves to be interfered with.


176. The decision reported in 2007 (5) CTC 17 (Sree Kamatchi Amman Constructions Vs. The Divisional Railway Manager-Works, Pahghat Division) gives the broad outline as to the scope of interference under Section 34 of the Act as well as on the grant of interest. This decision also, however, does not advance the cause of the first respondent, since this Court, following a catena of decisions, held that where the Tribunal ignored the express terms of the agreement, then the award is liable to be set aside.


177. In the decision reported in (2006) 11 SCC 181 (McDermott International Inc. Vs. Burn Standard Co. Ltd.) in paragraph 106, the Apex Court pointed out that different formulae can be adopted under different circumstances. The question as to whether damages should be computed by taking recourse to one or other formula, would fall within the jurisdiction of the Arbitrator to consider the same in the context of the facts and materials. There is no dispute about this proposition. The only question is as to whether the Arbitrators had travelled on the contract terms in this case. The first respondent could not lay its fingers exactly as to how the Tribunal had considered the claim in terms of Clause 22.2, particularly in the context of the objections made by the petitioner, quite apart from the challenge it had made on the certificate issued by the Chartered Accountant on behalf of the first respondent.


178. The Tribunal had failed to advert to any of the objections from the petitioner both as to the Tribunal's jurisdiction as well as to the content of the claim of the first respondent on the aspect of compensation. In these circumstances, both on the issue of jurisdiction not being considered as well as on the failure to adhere to the contract clauses and the objections of the petitioner, I have no hesitation in setting aside the award under Claim No.8(C)(2).


179. As per Clause 22.2 of GCC, in addition to the extension, the contractor would be entitled to claim demonstrable and reasonable compensation, should the delay result in any increase in the cost. On such claim made by the contractor, the owner has to examine the justification for such a request for the claim and if satisfied, the extent of compensation shall be reached on a mutually agreed amount, depending on the circumstances at the time of such an occurrence. When the decision of the Tribunal had failed to go by the agreed procedure, the award suffers a serious legal infirmity, necessitating the exercise of jurisdiction to set aside the award.


180. Issue No.8(C)(3) relates to the first respondent seeking an amount of Rs.35,97,358/- as expenditure incurred on bank guarantee commission for keeping alive the same for the extended period of contract.


181. The decision of the Tribunal herein is based on the decision given under Issue Nos.8(C)(1) and 8(C)(2), namely, on the extension of time on account of the delay by the petitioner to an extent of 24 months and the consequential compensation granted under various heads. The Tribunal pointed out that the first respondent had to keep alive the bank guarantee till the completion of the contract. The bank guarantee furnished by the first respondent was valid till 11th February, 2001. In the circumstances, the expenses incurred by way of commission charges in keeping the guarantee valid from 12th August, 1997 till 31st August, 1999, being the revised contract completion date including the guarantee period, as adjudicated under Issue No.8(C)(1), was directed to be paid by the petitioner to the first respondent. This sum worked out to Rs.22,23,624/-. The Arbitral Tribunal directed the petitioner to pay simple interest on the amount of commission paid from the date they incurred, till the date of award at 15% per annum. Here too, the Tribunal held that if the amount is not paid within 30 days of the award, they shall pay on the above amount from the date of the award at 18% per annum, simple interest, till the date of actual payment.


182. Learned counsel appearing for the petitioner pointed out that as in the other claims, the claim under Issue No.8(C)(3) was also not arbitrable, it being not raised at any point of time. It was raised for the first time only in the letter of the first respondent dated 9.2.2001. Secondly, the Tribunal had not considered the plea of limitation. Learned counsel pointed out that as per the terms of the contract, the first respondent had furnished the performance bank guarantee with the validity originally upto 11.8.1997. Subsequently, the bank guarantees were extended upto 11.2.2001. The contention that the first respondent had to extend the same on the dictates of the petitioner is purely an after-thought, as the same was made for the first time only under the first respondent's letter dated 9.2.2001. Learned counsel pointed out to the correspondence between the parties to contend that at no point of time, the first respondent ever raised any protest. Referring to the letter written by the petitioner to the first respondent, the bank guarantee had to be extended by the first respondent, having regard to the extension granted at their request.


183. As regards the claim of limitation, learned counsel pointed out that the arbitration clause was invoked on 16.2.2001. The claim of compensation on account of the extension of bank guarantee was made only on 10.3.2004, which is admittedly beyond the period of limitation. Considering the fact that the provisions of the Limitation Act have application even to the claim herein and even though the petitioner raised an issue on this aspect and pointed it out even in their highlights, the Tribunal had not adverted to this aspect. He pointed out once again to the procedure laid down by the Tribunal that the plea of limitation could be considered as against the respective claim based on the merits projected by itself. When such procedure had been specifically made, the failure of the Tribunal to consider the claim made on this aspect, hence, calls for interference by this Court under Section 34 of the Act. On the grant of interest at 18% per annum, he pointed out that there was no claim at all at any point of time from the first respondent seeking interest. In the circumstances, he submitted that the claim has to be rejected. Supporting the reasoning contained in the award, learned counsel for the first respondent pointed out that the first respondent had to keep alive the bank guarantee till the defect liability period was over. Having regard to the delay attributable to the petitioner, no exception could be taken to the relief granted by the Tribunal under this head.


184. As in the earlier issue, the view of the Tribunal rests on the decision on the aspect of delay. The Tribunal noted that the bank guarantees were extended, the validity of which were extended upto 11.2.2001. The dispute itself surfaced only on 10.3.2004. Hence, when the petitioner had raised a specific issue on the aspect of limitation, the Tribunal should have considered the same and passed its decision thereon. The granting of a relief in favour of the first respondent does not mean that by implication, the Tribunal had considered the issue on limitation to reject the stand of the petitioner. In any event, when the Tribunal had not fixed with any precision, the delay attributable to the petitioner and the first respondent, and had viewed that both were to be blamed, on the mere fixing of a period of delay as 24 months and 16 months, the working out of a relief, including the grant of interest in favour of the first respondent, introduces an element of arbitrariness, causing prejudice to the petitioner concerned. In the circumstances, I have no hesitation in accepting the plea of the petitioner as to the grant of relief to the first respondent. Hence, apart from the issue of the Tribunal not considering the plea on limitation and on the determination of the issue of delay, the relief granted is arbitrary. Consequently, I set aside the award on this score.


185. As regards No.8(C)(4) relating to the release of a sum of Rs.1,42,38,035/- deducted towards liquidated damages from the running account bills and release of bank guarantee held on account of the liquidated damages as well as Issue No.8(C)(5) relating to deduction of Rs.1,30,80,039/- deducted from the running account bills towards interest on the unadjusted initial advance, learned counsel pointed out that the claim herein was made only on 16.2.2001. Referring to the letter dated 11th January, 1997 from the first respondent herein as well as to the letter dated 28.1.1997 from the petitioner to the first respondent rejecting the claim of the first respondent, the petitioner pointed out that although the petitioner had raised a plea of limitation on this, the Tribunal had failed to consider the same. Learned counsel pointed out that all that the first respondent sought for was to defer the deduction of liquidated damages and interest from the bills and also to arrange for refund of the amount so far deducted. He further invited my attention to the Board's reply and pointed out that going by Clause 27.5 of GCC, the issue is not an arbitrable one. The first respondent had not followed the procedure as laid down under the contract. Thus, on the ground of limitation as well as on the non-arbitrability of the issue, learned counsel submits that as in the issues falling under Issue 8(C)(1), the award is liable to be interfered with, it having failed to take note of the contract clauses and the plea of limitation. He also referred to the highlights of the submission made that in the absence of any claim made by the first respondent and steps taken to agitate the claims in accordance with the contract clauses, the issue is not an arbitrable one. Learned counsel took me through the letter dated 18.8.2004 pointing out to their objections as to the non-arbitrability of the claim. He also referred to the highlights submitted after the conclusion of the hearing by the Tribunal. In the above circumstances, learned counsel submitted that the award suffers a patent illegality.


186. In the background of the procedure laid down by the Tribunal, learned counsel pointed out that in fairness to the points raised both at the time of arguments before the Tribunal and thereafterwards, the Tribunal should have considered the maintainability of the claim before considering the merits of the claim. He further pointed out that in the award, there are hardly any details as regards the interest awarded under this head.


187. Learned counsel for the first respondent, in support of the award, pointed out that given the fact that the petitioner had agreed for the postponement of the recovery as recorded in the MOM dated 31.12.1996 and the proposal sent on 29.3.2002 to the Board in this regard, the first respondent is justified in making the claim before the Arbitral Tribunal based on Clause 27.5. Hence, he contended that rightly the Tribunal granted the relief. Reiterating the submissions on the delay caused by the petitioner that the first respondent was entitled to the extension and for the compensation payable on account of the delay caused by the petitioner, learned counsel for the first respondent submitted that apart from the deducted amount itself being beyond the maximum permissible under the contract, viz., 10% of the contract value, the action of the petitioner in deducting the liquidated damages from the running account bills is not as per the provisions of the contract.


188. The Tribunal held that on facts, it could not be held that the fault was on one side and not on the other. Further, there was no material to justify the deduction on account of liquidated damages from the contractually due payment. Pointing out to the petitioner assuring the first respondent to consider the prayer for time extension, it held that there was no rationale in withholding the payment, which only further delayed the project execution.


189. A reading of the Tribunal's view shows that while granting the relief to the first respondent, it fixed the period upto 31st August 1998 as the period of extension without any liability for the levy of liquidated damages in favour of the first respondent and liquidated damages recoverable by the petitioner, 100 days from the expiry of the revised completion period i.e., after 31st August, 1998. The money recovered as liquidated damages to an extent of Rs.1,42,38,035/- was directed to be adjusted against liquidated damages on 20th October, 1998 being the mid point from 1st September, 1998 till 9th December, 1998. As in other cases, the Tribunal fixed simple interest at 15% per annum on the quantum of recovery wrongly done by the petitioner till 31st August, 1998 and 15% simple interest per annum on the commission charges payable by the first respondent to the bankers for obtaining bank guarantee from 28th November, 1997 till the date of the award.


190. Learned counsel referred to the reasoning of the Tribunal at paragraph 3.12 under this head and submitted that there was no basis at all for fixing this 100 days for recovery of the liquidated damages in full.


191. As pointed out earlier, as in the case of the issues falling under Issue Nos.8(C)(1) and 8(R)(13), when specific issues were raised on the issue of limitation arising on account of the contract clause as well as under the law of limitation, apart from the arbitrability of the issue in terms of the contract clauses, the Tribunal should have considered the same and offered its decision thereon. As rightly pointed out by the petitioner, if the Tribunal had given its view on the scope of the arbitrability clause, the scope of interference would be totally governed by the decisions of the Apex Court under Section 34 of the Act. However, where the objections raised are not considered at all, this Court is bound to interfere with the award under Section 34 of the Act. In the above-said circumstances, even though on the aspect of the delay apportionment, I have not interfered with the award, yet, I am bound to set aside the award on the question of arbitrability of the issues. Apart from this, the dispute as regards the deduction on liquidated damages is to be considered principally from the contract Clause 18.7, which enables the petitioner to deduct the liquidated damages from any amount due or which may become due. In the absence of any consideration of the said clause with reference to the materials pleaded by the parties and the case of the petitioner as to the arbitrability of the same, I have no hesitation in setting aside this portion of the award, which is essentially a question of law.


192. As regards Issue No.8(C)(5), the petitioner pointed out that the claim under this head on the amounts withheld on account of interest on unadjusted initial advance by the petitioner from the first respondent's bill was made on 11.1.1997 and was rejected by the petitioner on 28.1.1997. The claim before the Tribunal was made on 16.2.2001. The petitioner contends that going by the above-said dates, based on Clause 27.4, the claim has to be rejected. Learned counsel pointed out to the duty of the Arbitral Tribunal to consider the specific plea made and that failure to consider the same, vitiates the award. The Tribunal herein granted a sum of Rs.1,28,50,255/- towards Principal claim and Rs.1,71,29,320/- towards interest with a default clause that failure to pay the same within 30 days from the date of the award would carry simple interest at 18% per annum from the date of the award till the date of payment. The Tribunal granted simple interest at 15% per annum in respect of the recoveries made, apart from 18% interest per annum upto 31st August, 1998 on the unadjusted initial advance from running bills till the date of the award. Learned counsel for the first respondent, in support of the award, reiterated the submissions on the arbitrability of the issue as in the claim made under Issue Nos.8(C)(1) and 8(R)(13).


193. As far as this portion of the award is concerned, as in the earlier claim under Issue Nos.8(C)(1) and 8(R)(13), I agree with the petitioner that failure to consider the arbitrability of the claim vitiates the award. A reading of the award leaves no manner of doubt that contrary to the procedure laid down, the Tribunal had granted the relief and hence, the award suffers a patent illegality, liable to be set aside by this Court. Apart from this even going by the time extension granted by the Tribunal, on merits of the relief, when the contract provides for interest chargeable on the initial mobilisation advance and the unadjusted advance amount, the relief granted cannot be sustained. Hence, the petitioner's submission on this aspect is allowed.


194. As regards Issue No.8(C)(6), which relates to a claim of Rs.24,10,120/- being the deduction made from running account bills towards exchange variation, the contention of the petitioner herein is that as per the terms of the contract, the petitioner has to make payments against US$ portion on the exchange rate as on the date of the request for such payment. There was an acknowledgment dated 23.4.1995, that the applicable rate of exchange for US dollar payments would be as on the date of lorry receipt and the date of bill of lading in respect of local and foreign supplies respectively. In terms of the agreement, the currency of payments would be equivalent to Indian Rupee at such rate between Indian Rupee and US Dollars as on the date of the first respondent's invoice or lorry receipt/bill of lading, as the case may be. The first respondent pointed out that even after the initial completion period dated 12th August 1996, the petitioner had recovered the differential amounts on the dispatch dates and on 12th August 1996. The petitioner restricted the portion of payment to the exchange rates as applicable on the original schedule date of completion, namely, 11th August 1996. The first respondent contended that they had made representation and had discussions on this; having regard to the restriction on the payment in violation of the agreement terms, the first respondent made the said claim. The petitioner filed its objection that there were delays in the execution of the project due to reasons attributable to the first respondent.


195. Learned counsel for the petitioner pointed out to the advance submissions that the claim for design engineering was raised on 8.4.1996, 7.8.1996 and 18.11.1996 and was rejected on 25.3.1997. Since the first respondent had not complied with the arbitral condition to keep alive the said issue, the claim was not arbitrable. The first respondent raised the claim for the first time in its letter dated 16.2.2001. Hence, apart from non-arbitrability, the claim is barred by limitation. He pointed out to the letter dated 25.3.1997 from the petitioner on this aspect that the advance payment would be made at the exchange rate ruling on the date of Letter of Intent and the progressive payment of supplies would be made at the exchange rate ruling on the date of dispatch and rejected the plea of the first respondent as to the interest rate ruling on the date of the bill. Learned counsel pointed out to the highlights of the submission made on this head that the contract conditions specifically required that the design and engineering have to be completed within 8 months from the date of Letter of Intent. The delay in completion was attributable to the first respondent herein and hence, the petitioner rightly restricted the payment on and from 11.8.1996. Apart from questioning the merits of the claim, the petitioner contended that as regards the equipments to be supplied, major items had not been supplied at all by the first respondent. Consequently, the claim made based on Clause 11.7.0 of the contract, cannot be sustained. The major equipments supply commenced only after expiry of the original period of contract except for the equipments supplied between 14.3.1996 and 21.9.1998. Apart from this, the claim made was rejected by the Board on 25.3.1997; hence, the claim has to be rejected as time barred and not arbitrable.


196. Learned counsel appearing for the petitioner pointed out that upto 12.8.1996, there is no grievance at all as regards the relevant exchange rate being granted. However, beyond the contract period, the relevancy of the exchange rate at the extended period cannot be invoked in this case; consequently, for the supplies made beyond the contract period, it is not open to the first respondent to claim an exchange rate contrary to what was agreed upon. In any event, going by the findings of the Tribunal on the duration of the delay attributable to the petitioner and to the first respondent, the question of payment for the period falling under 16 months to the benefit of the petitioner, did not arise, apart from the arbitrability of the issue on delay, as the same is not covered under any of the contract clauses; the relief suffers from inconsistency in the reasoning of the Tribunal.


197. Learned counsel appearing for the first respondent, while objecting to the stand of the petitioner on the issue of arbitrability, pointed out that the relief under this head was worked out by the Tribunal based on the procedure agreed to between the parties.


198. While considering the claim, the Arbitral Tribunal took the view that the currency of the contract was in US Dollars; since the first respondent is a resident company, they agreed to receive the contract payment in equivalent Indian Rupee. As per the provisions of the Letter of Intent and contract, Dollar payments are payable as and when they become due and payable as per the provisions of the terms of the contract. The Tribunal pointed out that the contract has to be understood and administered not influenced by the exchange variation due to market forces to one party's benefit by using unreasonable interpretation to reduce the contractual price. The Tribunal pointed out to the procedure adopted by the parties for claiming and making US Dollar, portion of payment for supplies. Apart from that, the Tribunal also referred to the reconciled statement of accounts prepared by the parties as directed by the Tribunal and based on the same, the Tribunal found that there was no reason for the petitioner to adopt different exchange rate as on 12th August, 1996 for making post-dispatch US Dollars portion of supply payments. Consequently, the Tribunal granted relief to the first respondent at Rs.24,11,448/- and interest at 15% per annum at Rs.31,14,693/- with a default clause that failure to make the payment in 30 days from the date of the award would carry simple interest at 18% per annum till the date of actual payment. Except as to the arbitrability aspect raised by the petitioner, accepted by this Court, I do not find any ground to accept the stand of the petitioner on the merits of the relief granted by the Tribunal.


199. A perusal of the award in paragraph 3.6 that Issue No.8(C)(6) shows that parties herein adopted the procedure for claiming and making US Dollar portion of payment for supplies, which is as follows:


"i) For 15% initial two instalments of advance payments ? against invoice of EPI based on exchange rate as on date of LOI.


ii) 60% payment against dispatch through L/C ? against invoice of EPI based on exchange rate as on date of lorry receipt/bill of lading.


iii) 15% on receipt at site based on exchange rate as on date of lorry receipt/bill of lading.


iv) Balance retention payments upon completion of PG test based on exchange rate as on date of lorry receipt/bill of lading.


v) The initial advance had been adjusted by TNEB at the time of equipment dispatch on proportionate basis.


vi) In other words, the Rupee equivalent to US $ portion of supply payments got determined on the basis of exchange rate as of date of lorry receipt/bill of lading. "


200. Apart from this, the Tribunal further pointed out that the reconciled statement of accounts prepared by the parties during arbitration proceedings at the directions of the Tribunal also observed the prepared statement of accounts as per the procedure agreed for invoicing and making or determining the due payment. In the circumstances, rightly the Tribunal held that there was no reason for TNEB to adopt different exchange rate as on 12th August, 1996 for making post-dispatch US Dollar for supply payments.


201. Consequently, the Tribunal awarded the claim of the first respondent that the withheld amount due to the exchange rate variation, as per the interpretation of the petitioner, would be refunded to EPI. Apart from that, the Tribunal ordered 15% simple interest per annum from the date the payments were withheld, till the date of the award.


202. As far as this portion of the award is concerned, I do not find any justification in the submission of the petitioner, since the claim granted by the Tribunal was based on the procedure adopted by the parties for claiming and making the US Dollar portion of payment for supplies. The relief thus worked out on the basis of the procedure, hence, does not invite any disturbance from this Court and I agree with the submissions of the first respondent. Consequently, the award under this headgranting the relief with the interest stands confirmed.


203. Issue No.8(C)(9) relates to the issue as regards excise duty reimbursement. The grievance of the petitioner herein is that the Tribunal made no reference to the arguments made by the petitioner, particularly with reference to limitation. In the circumstances, the award under the head of refund of excise duty suffers a patent illegality.


204. A reading of the award shows that the relief granted to the first respondent was for a sum of Rs.4,48,905.17 on the ground that the first respondent could not claim from DGFT, the said sum because of the failure of the petitioner to approve the price billing break-up schedule.


205. Learned counsel appearing for the petitioner pointed out that the request of the first respondent for approval of the revised billing break-up schedule was long after the supplies were made. When the petitioner had refused to approve the revised billing break-up schedule, the first respondent had accepted the payment as per their claim. In the circumstances, the revision of the break-up of the electrical items could not be entertained. In the context of the letter dated 4.3.1999 remaining undisputed, the petitioner submits that the contract clause on the jurisdiction of the Tribunal assumes significance and when the Tribunal had failed to advert to this in its award, the same suffers a patent illegality; hence, liable to be set aside.


206. I have perused the material documents including the highlights on this issue filed by the petitioner. As in the earlier issues, when the petitioner had raised the issue on limitation and arbitrability of the dispute, the Tribunal should have considered the same and passed its orders. A reading of the award under this issue shows that it had not adverted to the objections of the petitioner at all and if the Tribunal had really considered the objections and passed the award, certainly, the limitation on the jurisdiction of this Court, as pointed out by the first respondent, would arise. In the circumstances, I agree with the submission of the petitioner that as far as Issue No.8(C)(9) is concerned, the award has to fail.


207. As regards Issue No.8(C)(10) relating to the claim of the first respondent for a sum of Rs.74,84,502/- towards outstanding payment of the running bills with interest, learned counsel for the petitioner pointed out that the said claim consisted of outstanding payment at Rs.62,00,649/- and for unauthorised deductions from bills for the work done under the following Sub Headings:


(a) for deductions towards L.C. Extension charges at Rs.4,59,428/-;


(b) for electricity charges for power consumed at site for fabrication of items which envisaged to be shop manufactured at Rs.2,29,793/-;


(c) recovery towards foundations for lighting towers at Rs.1,58,482/-;


(d) recovery towards pending works at Rs.35,000/-;


(e) recovery towards paints transferred to NCTPP at Rs.2,62,078/-;


(f) for recovery towards Works Contract Tax ? WCT at Rs.53,670/-;


(g) for duplicate recovery towards electricity charges at Rs.4,282/-;


(h) recovery towards workmen compensation at Rs.1,78,950/- and


(i) miscellaneous recoveries at Rs.18,600/-.


208. On the said amount, the Tribunal rejected the prayer as regards duplicate recovery towards electricity charges at Rs.4,282/- under sub heading (g), recovery towards workmen compensation at Rs.1,78,950/- under sub heading (h) and miscellaneous recoveries at Rs.18,600/- under sub heading (i).


209. The claim by the first respondent was countered by the petitioner that, as all due payment for the bills were submitted by the first respondent and the required supporting documents were granted by the Tamil Nadu Electricity Board, the claim now made is not sustainable, since the same were not supported by necessary documents.


210. The petitioner further pointed out that as per the minutes of the meeting dated 20.4.2000, it was stated that the contracts with reference to Tuticorin Thermal project and the North Chennai Thermal Project were linked together and payment would be settled together. Learned counsel appearing for the petitioner took me through the highlights of the points made by the petitioner with reference to the various heads of the claim falling under Issue No.8(C)(10). The Tribunal considered the said issue and pointed out to the reconciliation of accounts done between the parties and held that after the execution had been completed by the first respondent and the project taken over by the Tamil Nadu Electricity Board, the final adjustment of payment due to the respondents was considered, except those items specifically agreed between the parties to be deleted from the scope of the work at a price reduction or rebate.


211. The Tribunal held, on going through the resolution, that the withdrawal of the amount by the TNEB was on unreasonable grounds and was not fair.


212. As regards the claim under the head of outstanding payment relating to payment accounting for the difference between the total amount as per the bills admitted for supply and erection contracts and the total lumpsum contract price, the Tribunal held that the amount being the difference between the contract lumpsum prices of both the works, the claim of Rs.61,95,681/-, as revised during the pleadings by the first respondent, merited to be granted in favour of the first respondent. The Tribunal held that the bill for this amount would be treated as due as on the 30th day from the date of submission of the bills, which was 31st March 2000.


213. As regards the unauthorised reduction on the bills for the work done, the Tribunal rejected the plea of the petitioner that the said amount was debited on account of non-utilisation of the Letter of Credit by the first respondent. The Tribunal pointed out that the petitioner as well as the first respondent were to be blamed, since the petitioner had not opened the Letter of Credit as requested by the first respondent and the first respondent also had not fully utilised the Letters of Credit opened, to the fullest extent. This resulted in the additional expenditure to the Tamil Nadu Electricity Board. The Tribunal further pointed out that as per the reconciled accounts between the parties, the claim was revised to Rs.4,59,697/- by the first respondent. Taking note of the claim that the blame is to be attributed to both the parties, the Tribunal thought it fit to grant 50%; that the petitioner was directed to refund Rs.2,29,849/- to the first respondent. It further granted 15% simple interest per annum from the due date till the date of the award and on failure of the payment within 30 days from the date of the award, the said amount would carry simple interest at 18% per annum from the date of the award till the date of actual payment.


214. As regards electricity charges for power consumed at site for fabrications of items which envisaged to be shop manufactured, the Tribunal rejected the plea of the first respondent.


215. As regards recovery towards foundations for lighting towers, the Tribunal pointed out to the contradictory stand taken by TNEB that it had clearly accepted the civil works to be out of the scope of the first respondent at one stage and insisting the first respondent's work to be as part of the scope, since the first respondent had provided the drawings for the pedestals.


216. The Tribunal pointed out that there was no ground for accepting the plea that merely because the drawings showed the pedestal for various technical reasons, the same could not be accepted as a work to be executed under the terms of the contract. Consequently, the Tribunal granted the relief for a sum of Rs.1,58,482/- with interest.


217. As regards the claim for paints transferred to North Chennai Thermal Power Project, the Tribunal pointed out that the petitioner did not object to the pleading of the first respondent that they transferred the paint to TNEB's own other project and that they had supplied much more than the quantity identified in the billing schedule. Accepting the plea of the first respondent, the Tribunal granted the relief with interest payable at 15% per annum from the date of recovery to the date of the award and at 18% per annum on the failure of the petitioner to make the payment within 30 days from the date of the award.


218. As to the recovery towards work contract tax, the Tribunal pointed out that the petitioner had not advanced any reasons to that contention that the works contract tax was payable by the first respondent and the petitioner had nothing to do with that. It further pointed out that no due notice was given by TNEB for effecting the recovery. Since the levy was a State Government levy and as per the terms of the contract, reimbursable to the first respondent by the petitioner, the Tribunal granted the relief to an extent of Rs.53,760/- with interest at 15% per annum from the date of recovery to the date of payment and at 18% per annum in the event of default in not making the payment within 30 days from the date of the award till the date of actual payment.


219. A reading of the Tribunal's order shows that the claim of the first respondent and the objections of the petitioner were considered on the basis of the materials placed before the Tribunal and it granted the relief to the first respondent. It may be noted that the Tribunal had not granted the relief on all heads by simply accepting the case of the first respondent. On the other hand, it adverted to the merits of the claim with reference to the documents and the contract terms and granted the relief wherever it was justified. Being pure questions of fact, I do not find any justification to accept the plea of the first respondent.


220. As regards Issue No.8(C)(11) relating to a claim of Rs.5,25,25,930/- towards retention money payable against supply and erection contracts, the petitioner took the plea that the first respondent had not completed their obligations under the contract with reference to Clause 26 and 26.1, and hence they were not entitled to any relief. It further pointed out that the amount is adjustable against recovery of liquidated damages and other claims made by TNEB. Hence, the first respondent was not entitled to the same. The Tribunal pointed out to the contention of the first respondent that the petitioner had taken over the equipment system and had been using the same for regular power plant operation for PG Test. The petitioner never informed the first respondent that the PG test was not conducted properly or the results were inconsistent with the requirement of the contract specified. The Tribunal further pointed out to the delay in the release of payment on flimsy grounds.


221. Pointing out to the inconsistent stand that the work was not completed and that the payments were to be adjusted as against the liquidated damages, the Tribunal held that the petitioner was deliberately causing the delay to stall the payment from November/ December, 1999 till April, 2000 when they had decided to interlink the contracts of North Chennai and Tuticorin, thereby stalling all issues. The Tribunal further pointed out that having regard to the unreasonableness of the stand taken, the Tribunal felt that there were grounds justifying the grant of relief to the first respondent for a sum of Rs.5,25,25,930/- due to the first respondent in both the contracts to be paid from the date of contractual eligibility i.e., 31st December 1999, when the PG tests were completed with a grace period of 30 days i.e., 31st January 2000. The first respondent raised their final bill for retention money payment on 1st January 2000. The Tribunal thought it fit to grant 15% interest per annum from 31st January 2000, i.e., the contractually due date till the date of the award i.e., 24th August 2006 and in the event of default within 30 days from the date of the award, to pay 18% interest per annum from the date of the award till the date of actual pa

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yment. I do not find any justifiable ground to disturb the award. 222. Issue No.8(C)(13) relates to the claim at Rs.42,02,856/- plus sales tax towards providing of separate idler frames for Garland type idlers. The Tribunal rejected the contention of the petitioner that providing independent support of garland idlers was on no extra cost. The Tribunal pointed out that the first respondent had revised their claim at Rs.24,40,707.03. It pointed out that the first respondent had included the cost of electricity in the revised claim with the differential tonnage for idler systems. Further, the Tribunal went into the technical details of this claim and ultimately found on the final deliberation that the claim had to be re-worked based on differential tonnage of 64.333 metric tonnes at Rs.16,500 MT plus fabrication, painting and erection charges based on agreed billing schedule. Thus a sum of Rs.26,75,323/- including electricity charges was awarded, apart from reimbursement of sales tax at 11% and the same was based on documentary proof for the first respondent paying the same to the authorities. The Tribunal allowed 12 months' time to the first respondent to produce the documentary proof as to the date of payment, failing which, the first respondent would forfeit the amount of sales tax reimbursement along with interest. The Tribunal fixed the date of claim as 5.4.2000 for the purpose of awarding interest at 15% per annum from 5.4.2000 to the date of the award and in the event of default within 30 days from the date of the award, to pay 18% interest per annum from the date of the award till the date of actual payment. It must be seen that the specific case of the petitioner was that the first respondent had agreed to supply the idler frames free of charge within the contract value. Thus the petitioner contends that when the parties had reached a settlement on this and the same was specifically pleaded that the Tribunal had no jurisdiction to decide the same, the Tribunal should have considered the claim in the light of the submission and passed a reasoned award. 223. I have perused the highlights of the submission made by the petitioner in this regard. As rightly pointed out by the petitioner, when a defence is taken as to the arbitrability of the dispute, in fairness to the claim of the petitioner, the Tribunal should have considered the same to pass its decision thereon. In the circumstances, I agree with the submission of the petitioner that the award having thus failed to deal with the issue on arbitrability, suffers from legal misconduct and hence, has to fail. 224. Issue No.8(C)(14) relating to a sum of Rs.39,76,463/- towards supply of cast iron counter weights instead of RCC counter weights, was granted for a sum of Rs.7,56,370/- towards overheads and profits at 15% on the award amount of Rs.61,64,073/-. The grievance of the petitioner herein is that, in granting the relief, the Tribunal took note of the rates based on Delhi rates as against the Tamil Nadu rates to be adopted. Learned counsel pointed out that the rates were not given either by the petitioner or by the first respondent but applied on its own. He pointed out that since no rate had been given by the petitioner or the first respondent, the Tribunal should have adopted the Tamil Nadu P.W.D. rate existing then. 225. As regards this claim, the petitioner argued that the first respondent made its claim on the plea that they had made a mistake in the submission in the drawings by showing Cast Iron counter weights. The Tribunal pointed out that the first respondent had made a request for substitution well in time to the petitioner and that the petitioner had not objected to this promptly so as to enable the first respondent to take a stand that they would provide concrete counter weights wherever technically it was feasible. In the circumstances, the Tribunal felt that the first respondent should be compensated only to the extent of differential cost for the cast iron counter weights. The Tribunal also granted relief on overheads and profits at 15% on costs amounting to Rs.7,56,370/-. 226. The petitioner further pointed out that the Tribunal had granted profit and overheads at 15%, for which there is no basis at all. The claim, not made by the first respondent, thus granted by the Tribunal without any material, hence, is liable to be rejected. 227. A reading of the Tribunal's order shows that as far as the grant of relief on the differential cost is concerned, going by the fact that the petitioner had not objected to the substitution of the drawings, the relief on the head was granted. As regards overheads and profits at 15% on the revised amount claimed, it is no doubt true that the contract does not provide for the same. Yet, the Tribunal being a chosen forum for the resolution of the disputes, thought it fit to grant the relief. In the circumstances, the grant of relief needs to be confirmed. 228. As regards Issue No.8(C)(15) as to whether the claimant was entitled to the amount of Rs.9,83,554/- plus sales tax towards providing of extra 2 Nos. rack and pinion gates, the petitioner claimed that based on the review meeting held on 5th May 1995, the first respondent finalised the order on the supply of the gates in October, 1995 and made a proposal for settlement of the claim for the extra item in November, 1996. The first respondent further pointed out that in the review meeting at the level of Members on 31st December 1996, the petitioner stated that the issue was under scrutiny. Even as on 24th February 2000, the petitioner had confirmed that they would look into the extra work done by the first respondent. Being an extra work done at the request of the petitioner, the first respondent was entitled to claim the same. The said claim was countered by the petitioner that the provision of flow divider was essential to make the system complete. Having regard to the tender terms that the contractor is bound to supply all such equipments considered essential and necessary and deemed to have been included in the scope of the work, the question of payment did not arise. The Tribunal pointed out, on going through the documents exchanged between the parties, that all along, TNEB had considered this item to be an extra one under the contract, on account of which, it called for further information and details from the first respondent. 229. The Tribunal held that the first respondent was entitled to an amount of Rs.10,11,351/- inclusive of sales tax and the element of overheads and profits was 15% only. Apart from that, it granted further 15% interest per annum under the head of overheads and profits. The Tribunal granted interest from 1st May 1997 till the date of award and thereafter at 18% per annum in the event of default in making the payment within 30 days from the date of the award. The petitioner contends that the grant of overheads and profits at 15% is contrary to the terms of the contract and that the supply was to be made as per the terms of the contract. Quite apart from that, the Tribunal erred in granting the interest from 1st May 1997, for which no basis was indicated. As far as the choice of the date for payment of interest is concerned, learned counsel pointed out that the Tribunal had not indicated the grounds on which interest was awarded from 1st May 1997. When the claim itself was made as a dispute only from the date of the claim petition, the payment of interest on and from 1st May 1997 does not arise. At the most, interest would run only from the date when the claim was made by the first respondent and hence, cannot date back to 1st May 1997. 230. On the grant of overheads and profits, the submission of the petitioner is that the ground on which the said relief was granted has not been indicated anywhere. The Tribunal held that the item under the head was to be treated as an extra claim and not forming part of the agreement, the claim of the first respondent had to be granted along with the overhead charges. Going by the very reasoning of the Tribunal and the contract terms, the grant of the relief under this head has to be sustained. However, as to the interest awarded from 1.5.1997, I agree with the submission of the petitioner that there are no reasons given in the award for the grant of interest from this date. Even for a discretion to be exercised, the Tribunal should have indicated the basis for granting the relief. Hence, barring the interest aspect, I confirm the award. 231. As regards Issue No.8(C)(18) as to whether the first respondent is entitled to the amount of Rs.86,562/- towards modification of discharge chute, the Tribunal granted the relief to the first respondent holding that the site co-ordination was highly inadequate. As per the terms of the contract, civil work was excluded from the scope of the work to be executed by the first respondent. The Tribunal further pointed out that TNEB had certain obligations under the contract with reference to the inputs to be provided by them to the first respondent. It further pointed out that the said clause in the agreement reads that since civil works were deleted from the contract, the same should have gone to the civil works contractor. The Tribunal made particular reference to the fact that the contract specification for the civil works contractor was also the same as in the case of the first respondent contractor. Consequently, the Tribunal thought it fit to grant the relief. Since the effective date for the claim was 5.5.2000, after adding a grace period of 30 days to the date when the first respondent made its claim, the Tribunal granted relief under the head of cost through the overheads and profits at 15% as against the claim at 20%. The award does not disclose the basis on which the overheads and profits at 15% was granted. In the absence of any reasons disclosed, I am constrained to set aside this portion of the award. However, as to the relief granted on the modification of discharge chute, along with interestat 15 % I confirm the award. 232. Issue No.8(C)(19) deals with the claim of the first respondent on extra structural work. The Tribunal granted the relief on the view that it was the responsibility of the petitioner to ensure that the civil construction agency did a proper job. As a matter of fact, the Tribunal viewed the inferences and the instances pointed out by the petitioner related to modification and extra work to rectify the discrepancies and mismatches in the work carried out by the civil construction contractors. Since the additional works were not within the scope of the contract, the claim was made. The Tribunal pointed out that the issues relating to mismatches were seen by the Tribunal with reference to the drawings and the documents to grant the relief to the first respondent. Being pure questions of fact based on the materials, I do not find any justification to interfere on this. Except to the extent of rejecting the relief granted by the Tribunal under the head of overheads and profit at 15% to the tune of Rs.11,061/-, which has no basis, the award, on other aspects, stands confirmed. 233. As regards Issue No.8(C)(20) relating to the claim based on non-release of surplus material, as against the claim of Rs.72,19,730/-, the Tribunal granted the relief to the first respondent for a sum of Rs.31,09,472/-. After considering the contract provisions, the Tribunal accepted the submission of the first respondent that the surplus materials shall be the property of the first respondent, there being no specific provision to the contrary. Hence, the Tribunal held that all the scrap and surplus materials would be the property of the first respondent. As to the quantification of the material and the compensation on money terms, the Tribunal pointed out that on the basis of maintainability agreed between the parties, on the material reconciliation done at their end and the rates derived from billing the break-up schedule, wherever it was possible, the ultimate decision was worked out. 234. A reading of the Tribunal's order shows that it is a matter of pure discretion exercised considering the nature of lumpsum contract. When the discretion exercised carries the basis, I do not find any justification to interfere with the view of the Tribunal in this regard and there is no patent illegality to interfere with the same; consequently, it stands confirmed. 235. As regards Issue No.8(C)(21) as to the entitlement of the first respondent to receive a sum of Rs.3,22,02,482/- towards interest due on deducted/withheld/delayed payments, the Tribunal held that the contract envisaged payment of interest for funds made available by TNEB to the first respondent by way of advances other than interest free advance. The petitioner had recovered from the running account bills, interest on unadjusted initial advance at 18% per annum after the expiry of the original contract completion period, i.e., after 11th August 1996. Hence, the contract had provided for the interest chargeable. In the context of the issues raised, particularly with reference to the delayed execution as well as the jurisdictional issues which were placed before the Tribunal for adjudication, the Tribunal felt that the award of interest at 15% would be fair to both the parties. The effective dates, the rate of interest, the quantum of delayed payments, hence, were considered under each head. Pointing out to the acceptance of the petitioner in their submissions that there were delays in making the payment to the first respondent for want of funds, the Tribunal held that as per Clause 22 of GCC, the first respondent would be eligible for compensation in addition to extension of time for completion. Hence, as per the directions of the Tribunal, the parties were directed to prepare the list of delayed bills and the due dates for payment as per the provisions of the contract. Based on the above, the interest payable to the first respondent by the petitioner was worked out at Rs.27,88,317/- with a default clause that in the event of the petitioner not making the payment within 30 days from the date of the award, then the petitioner shall pay simple interest at 18% per annum from the date of the award till the date of actual payment. Here too, the decision was given by the Tribunal based on the available materials as furnished by the parties, apart from the admission of the petitioner that there were delays in releasing due payments. The Tribunal also referred to contract Clause 22 that the first respondent would be entitled to payment on the delayed payment of the accepted bills. Hence, this does not call for any interference by this Court. 236. Learned counsel appearing for the petitioner pointed out that the interest claimed for the pre-award period as well as pendente lite period is possible only if and when the claim is made at the relevant time. The letters of the first respondent referred to in the award showed that there was no such claim by the first respondent. In the circumstances, the award of interest both for pre-award period as well as for the pendente lite period is totally unsustainable. The petitioner contends that if at all the first respondent is entitled to any interest, it can be granted only for the pendente lite period, that too as regards the issues which do not fall under the objections of the petitioner as to the arbitrability of the claims on account of absence of jurisdiction and limitation. 237. In this regard it must be pointed out that wherever relief is granted in terms of the contract terms, no exception could be taken as to the grant of pendente lite interest as a matter of discretion. As for example, the decision for payment on the pending bills resting on the contract terms and the materials indicating the delay in releasing payment (Issue No.8(C)(21)), or on the issue of amount withheld on account of exchange variation from the first respondent 's bills under Issue No.8(C)(6), I have no hesitation in confirming the pendente lite interest awarded on this aspect. It must, however, be noted that apart from the fact that the grant of pre-litigation interest depends on the claim for interest made on the dispute raised in accordance with the terms of the contract, the grant of interest whether pre, pendente or post litigation on the compensation claimed based on Clause 22.2 or on the delay aspect covered under Issue Nos.8(C)(1), 8(C)(2), 8(C)(3), 8(C)(4), 8(C)(5), 8(C)(9) and 8(C)(13) stands on a different footing. It must further be pointed out that except for the duration of apportionment of the delay, no specific period is pointed out in the award. In the circumstances, with the arbitrability of the issues seriously in dispute, the grant of pre-award interest introduces a degree of arbitrariness in the award, causing prejudice to the petitioner herein. Quite apart, the choice of date also lacks any convincing reason in the award. 238. In the light of the decision reached on the question of the jurisdiction and limitation, and the aspect of delay apportioned in terms of the months of delay and with no definite period or duration referable on this aspect of delay for awarding interest, the award granting interest on all counts has to fail, as the same causes serious prejudice to the parties concerned. Consequently award of interest on all counts under Issue Nos.8(C)(2), 8(C)(3), 8(C)(4), 8(C)(5), 8(C)(9) and 8(C)(13) stands cancelled. Apart from this, on Issue No. 8(C)(15) granting interests from 01.05.1997, on Issue Nos. 8(C)(18) and 8(C)(19) on the issue of overheads and profits, I do not find any justification in granting pre-award interest. As regards Issue No. 8(C)(6), grant of interest in respect of pendente lite period is confirmed. In respect of Issue Nos. 8(C)(10), 8(C)(11), 8(C)(14) and 8(C)(20), interest granted is confirmed in toto. As regards Issue Nos.8(C)(18) and 8(C)(19), to the extent of the relief granted, the interest awarded stands confirmed. 239. It must be again pointed out that while the Tribunal considered grant of interest for the post-award period to the first respondent, there is hardly any discussion as regards the Tribunal not considering the same treatment to the petitioner herein. The arbitrariness thus writ large on this aspect, compels me to hold that the award of interest to the first respondent on the same set of facts is without any basis or reasoning. Hence, I set aside the interest ordered in favour of the first respondent on the interlinked issues viz., 8(C)(17) and 8(R)(8). 240. Learned counsel for the petitioner made submissions on the counter claims made before the Tribunal. The challenge as regards the counter claim is covered under Issue Nos.8(R)(1), 8(R)(7), 8(R)(12) and 8(R)(14). 241. With respect to Issue No.8(R)(1), the petitioner raised the following issue: "Is the respondent/petitioner entitled to recover from the claimant/first respondent an amount of Rs.1,86,000/- (revised by TNEB to Rs.1,62,000/- during advance submissions) cost of non-supply of 372 numbers of quick couplings for service water system?" 242. The Tribunal held that when the petitioner had not furnished any justification in arriving at the cost of the bottom half of couplings at Rs.500/- each and had only mentioned it as a tentative cost and there was no evidence in the advance submissions, in a lumpsum contract, the petitioner is not entitled to any relief. This is apart from the fact that there was no evidence let in by the petitioner to claim any reduction from the first respondent. 243. The issues related under Claim Nos.8(R)(7), 8(R)(12) and 8(R)(14) are follows: "8.R.7. - Is the respondent/petitioner entitled to recover from the claimant/first respondent an amount of Rs.5,58,643/-(since revised to Rs.5,58,642/- in advance submissions dated 7.7.2005) towards refund of unadjusted advance relating to erection contract and interest? 8.R.12. - Is the respondent/petitioner entitled to recover from the claimant/first respondent an amount of Rs.18,73,96,820/- towards reimbursement of the expenses incurred by the Board consequent on the delay in execution of the project by the claimant/first respondent? 8.R.14 - Is the respondent/petitioner entitled to recover from the claimant/first respondent an amount of Rs.53,30,722/- towards recovery of non providing of valid ILMS which failed twice during the guarantee period?" 244. A reading of the award on the above issues shows that the decision rests purely on the statement of accounts and the materials produced. Being pure questions of fact and that the findings are supported by materials, I do not find any ground to disturb the award. Consequently, the issues raised in the counter claim and challenged before this Court are rejected and the award stands confirmed. 245. To conclude, in the light of the discussions as stated above, I hold that the decision of the Arbitral Tribunal in so far as the inter-linked issues viz., Issue Nos.8(C)(1) and 8(R)(13) are concerned, this Court accepts the plea of the petitioner that the Tribunal had failed to follow the procedure laid down by it to consider the question of arbitrability of the dispute and the limitation issue with reference to the contract clause 27.4 and 27.5 on the aspect of jurisdiction of the Tribunal and the limitation in not being considered in terms of Clause 27 of GCC. Even though this Court confirms the award on the aspect of delay attributed to both the parties and the relief granted thereon, since the ultimate relief as to the amount payable is worked out without any relevance to the delay attributed to both the parties with interest, the working out of the relief to the benefit of one party, causes serious prejudice to the other party. 246. In the circumstances, following the decision of the Apex Court in the decision reported in 2008-4-L.W. 401 (Delhi Development Authority Vs. M/s.R.S.Sharma & Co., New Delhi), the award being prejudicial, the quantification done by way of relief, hence, is liable to be set aside by this Court. I reiterate herein that while the Tribunal has every jurisdiction to decide on the issues arising on account of delay and on the aspect delay itself, yet, the decision has to go along with the contract terms. Equally so, the issue of apportionment of the delay between the parties is a matter well within the jurisdiction of the Tribunal and has been rightly done so having regard to the nature of execution and the mutual responsibilities of the parties concerned therein. The award amount granted under the head of delay apportioned to the benefit of the first respondent based on materials, hence, merits to be confirmed. However, for the reasons already given in the preceding paragraphs, given the nature of apportionment, I do not find any reason or justification in granting the interest to the first respondent on the relief granted on the interest issue on all the three segments, namely, pre-award, pendente lite and post award. Consequently I set aside the award on the aspect of interest granted to the first respondent. 247. As regards Issue No.8(C)(2), I agree with the petitioner's stand on the applicability of the Hudsons' formula and the working out of the relief, which, apart from the arbitrability of the issue, is contrary to Clause 22 of GCC; hence, liable to be set aside. 248. Issue Nos.8(C)(3), 8(C)(4), 8(C)(5), 8(C)(6) and 8(C)(9), 8(C)(13) also suffer the same issue on arbitrability and limitation. Even though this Court does not interfere with the quantum of relief awarded except on the interest aspect as stated in the preceding Paragraph No 238 and 239, the award fails on account of the Tribunal not considering the issues in terms of Clause 27 of GCC. 249. I confirm the award on Issue Nos.8(C)(10), 8(C)(11), 8(C)(14), 8(C)(20) and 8(C)(21). Except for cancelling the pendente lite interest under Issue No.8(C)(15), relief on overheads and profit under Issue Nos.8(C)(18) and 8(C)(19), I confirm the award on other aspects. 250. The issues raised on the award under the counter claim stand rejected. 251. Serious arguments were raised by the first respondent as to the scope of interference of the award by this Court, particularly to the award made by a team of technical experts. 252. As I had already pointed out, wherever the award fails to take note of the contract clauses, which are binding on the parties, the Arbitral Tribunal, being a creature of the contract, is bound to go by the terms of the agreement in the matter of assuming its jurisdiction to decide on the issues raised by the parties. When specific issues are raised on this aspect, on the Tribunal failing to offer its decision, a patent illegality creeps into the award, which requires interference at the hands of this Court. Hence, following the decisions of the Apex Court in this regard, I have no hesitation in holding that the award fails to take note of the arbitrability of the issue and rendered its decision on certain issues without reference to the jurisdiction and delay, as I had pointed out in the preceding paragraphs. In the circumstances, the award is set aside in part and the Original Petition is allowed in part. It is open to the parties to work out their remedies in accordance with the contract clauses. 253. I must also record at this juncture that as the award itself is a voluminous one and the documents relied on by both sides run into thousands of pages, in the course of hearing, considering the matter of this magnitude and the status of the parties, this Court felt that the parties should work out the possibility of settling the disputes amicably through mediation, or in the alternative, if the parties are not willing for settlement, to call for a supplemental award in terms of Section 34(7) of the Arbitration and Conciliation Act, 1996 so that the dispute may reach a stage of finality. However, the parties were not willing to go before the Tribunal for any supplemental award, as the Members of the Arbitral Tribunal are not readily available to constitute the Tribunal. I was also informed, after the case was finally heard, that one of the Arbitrators, who was sick, had also expired. The parties expressed their inability to settle the issues through mediation and the counsel expressed their desire to have an order on the merits of the issues pleaded. 254. I must place on record the good assistance that I received in hearing this matter which went on for over six months Mr.N.C.Ramesh, learned counsel appearing for the petitioner, assisted by Mr.T.Sivaprakasam, learned counsel appearing for the petitioner and Mr.Senthil Kumar, learned counsel appearing for the first respondent, assisted by Mrs.Pavithra Kabir, learned counsel appearing for the first respondent projected their respective case with precision and clarity taking me with ease through the voluminous award that runs to a few hundred pages, apart from the volumes of materials pertaining to the issues raised herein. I must also place on record the attention bestowed by the Tribunal in a dispute, which covers volumes of materials and I appreciate the excellent work done by the Tribunal in dealing with the various issues. But for the good narration by the Tribunal and the presentation by the respective counsel, it would have been too cumbersome an exercise for this Court to lay its hands on the various materials pertaining to these issues. In the light of the decision that I have taken on the various issues, the award stands set aside in part and the Original Petition is partly allowed. No costs.
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