Dismissed

Muniucipal Corporation of Greater Mumbai v. Hindustan Construction Company Limited

Bombay HC2 Jul 2014ARBP/867/2013

Case brief

AI extract

What is this about?

This arbitration petition challenged a majority arbitral award granting the respondent additional costs for unforeseen geological conditions and water ingress due to tunnel realignment. The High Court upheld the award, finding the claimant entitled to costs under the contract and dismissing the petition.

What did the court decide?

The arbitration petition was dismissed, upholding the majority award.

Muniucipal Corporation of Greater Mumbai Vs Hindustan… — Arbitration | Bombay HC (2014)

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ARBP No.867_2013

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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ARBITRATION PETITION NO.867 OF 2013

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Municipal Corporation of Greater Mumbai

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… Petitioner

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Vs.

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Hindustan Construction Company … Respondent

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Mr. S.S. Pakle, Adv. a/w. Mr. R.Y. Sirsikar, Adv. i/b. U.H. Khedekar, Adv. for the petitioner.

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Mr. Aspi Chinoy, Sr. Adv., a/w. Mr. Sarosh Bharucha, Adv. a/w. Rakesh Mandavkar, Adv. i/b. Harish Joshi & Co. for respondent.

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CORAM : MRS. ROSHAN DALVI, J. DATE : 2nd July, 2014.

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O R D E R

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The parties contracted for construction of a tunnel from Bhandup complex to Malad hill reservoir and further up to Charkop. The contract was to be completed within 72 months from the receipt of the order of commencement. The work was to be performed inter-alia using two Tunnel Boring Machines (TBMs).

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The respondent / claimant encountered watering of the tunnel during the boring operation. The respondent claimed certain amounts for the work of dewatering which has been the part of another award under the same contract between the parties. 3. The tunnel was required to be realigned during the course of the work in the latter phase of the contract. This realignment was

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ARBP No.867_2013

made at a place 1.6 km away from the alignment agreed under the contract. It is the claimant's case that because of the realignment the claimant encountered geological conditions which were not anticipated or foreseen at the time of the contract. The result of those geological conditions consequent upon the realignment of the tunnel was ingress of excessive saline water. The ingress of water upto 6000 (cm) per day was provided for in the contract. It has been the case of the claimants that it reached more than double of its expected ingress. The claimants work was stopped for 168 days when the tunnel was submerged. The TBMs were also submerged as such the massive inflow of water could not be controlled by excavation. The claimant made a claim for the additional cost incurred because of such unforeseen geological condition which was in turn because of the realignment of the tunnel. The claimant made 7 claims, 6 of which have been disallowed. The claim for cost of permanent damage (s) to the TBM has been granted per majority of the Arbitral tribunal. The claimant's entire claim has been rejected per the minority award. The petitioner has challenged the part claim granted under the award dated 2^nd March, 2013.

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It is the petitioner's claim that the damages suffered by the claimant do not fall within the specific contract of the parties with regard to the damages incurred due to unforeseen geological conditions under which the claim is made. 5. The contract between the parties in that regard must, therefore, be first seen. It has been considered in paragraph 24 of the award. Clause 12.2 of the General Conditions of the Contract (CC) deals with this aspect, the relevant part of which runs thus :

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ARBP No.867_2013

Clause 12.2

If, however, during the execution of the Works the Contractor encounters physical obstructions or physical conditions, other than climatic conditions on the site, which obstructions or conditions were, in his opinion, not foreseeable by an experienced contractor, the contractor shall forthwith give notice thereof to the Engineer, with a copy to the Employer. On receipt of such notice, the Engineer shall, if in his opinion such obstructions or conditions could not have been reasonably foreseen by an experienced contractor, after due consultation with the Employer and the Contractor, determine :

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a) any extension of time to which the Contractor is entitled under Clause 44, and

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b) the amount of any costs which may have been incurred by the Contractor by reason of such obstructions or conditions having been encountered, which shall be added to the Contract Price.

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The claimant has claimed that during the execution of the work of construction of the tunnel it encountered the physical condition of excessive amount of ingress water which could not have been foreseen by it, as an experienced contractor. It is its case that it is only because of the change in alignment which was 1.6 kms away from the alignment which was specified in the contract.

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It is the case of the respondent that the claimant as the bidder had to take inspection of the entire site of the work of construction and to ascertain the conditions including geological conditions at the site. True that it is, such inspection and ascertainment would be for what was the considered site of the project work. If, therefore, there was realignment of the tunnel within that site or within reasonable distance therefrom, the geological conditions were expected to have been anticipated. The case of the claimant has been that when the realignment was a mile away from

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ARBP No.867_2013

the site which was inspected and ascertained as the construction site, the claimant as the experienced contractor could not have anticipated or foreseen the physical condition that would emerge at such new site. The claimant's case that because of realignment of the tunnel was changed, it encountered bad geology and adverse hostile unforeseen conditions came to be considered in Arbitration and came to be accepted.

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The learned Arbitrators in the majority award have considered in paragraph 14 that consequent upon such change in the alignment of the tunnel the contract became redundant as the physical conditions during the boring of the tunnel in the shifted alignment were found adverse and hostile beyond what was foreseen. The learned Arbitrators have rejected the argument of the respondent / petitioner herein that the claimant was required to visit the site and obtain all information necessary upon inspection of the site and examination of the conditions at site and could not complain about the same. This would hold good if the site remained the same upon the shifting location considered by the learned Arbitrators. The basis of the information obtained by the claimant upon the examination of the site would not hold good. Consequently even the geological investigation required to be done by the claimant could not have procured the physical information at the actual site of construction realigned by the petitioner herein. The learned Arbitrators have observed this in paragraph 14, the relevant part runs thus :

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The shifted shaft and the shifted alignment were then not even contemplated or visualised.

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ARBP No.867_2013

The reasoning of the learned Arbitrators in the majority award in this regard is a very possible view that they could have taken and hence calls for no interference.

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Consequently the claimant would be entitled to either of the reliefs under clause 12.2 (a) or (b). The claimant has claimed under 12.2 (b) of the contract.

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It has been the case of the petitioner that the claimant was called upon undertake certain grouting work and to put up certain steel bars for strengthening the tunnel which could have collapsed. The claimant did not heed the petitioner's instructions and advise and hence there was excessive ingress of water for which damages cannot be claimed by the claimant. This case has also been considered in the Arbitration.

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The learned Arbitrators in the paragraph 12 of the majority judgment have observed that the claimant had resorted to grouting as envisaged in the contract as advised by the engineer from time to time under the letters addressed in that behalf. The evidence with regard to such advise is, therefore, considered by the learned Arbitrators to arrive at the conclusion that the advise was heeded by the claimant. In fact in paragraph 15 of the award the Arbitrators have further considered that because of excessive quantum of the water flowing into the tunnel the dewatering of the tunnel became unsuccessful and the tunnel could have collapsed if excessive grouting as required was not done. The learned Arbitrators have also considered the excessive permanent steel supports put in the back filling, that was done by the claimant.

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The intrinsic evidence contained in clause 14.1 of the CC considered by the learned Arbitrators go to show the lack of fault in

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ARBP No.867_2013

taking measures for the protection of the construction of the tunnel and the dewatering as was required under the contract work done by the claimant.

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Under clause 14.1 (a) the claimant was to submit a general programme for completion of the work in the form of a bar chart. This related to the part of the tunnel which was then to be constructed. The programme showed the basis to prepare a detailed programme and provided description of temporary works, locations, installations and infrastructural features. The claimant was to indicate a committed period of activities relating to TBMs and was to start the tunnel boring activity at both the ends of shafts. The claimant gave a programe of 275 days. Due to excessive ingress of water because of the physical condition encountered the contract work took an additional 229 days that part of the contract was completed in 504 days. The upper limit of 72 months for the entire contract to be completed was yet not crossed. Out of all these days the work was completely stopped for 168 days. The claimant's claim the additional cost incurred thereby. 15. Under clause 14.1 (b) the claimant was to be made a monthly payment as per clause 60 after the work was finally approved by the engineer. The monthly progress reports were to be submitted by the claimant. The engineer of the petitioner herein was entitled to withhold Rs.5 lacs at the time of the next interim payment of each milestone in the programme to be achieved. The engineer has not withheld any amount at any time. This would show the quality of the work being undertaken by the claimant. The Arbitrators have observed that despite all, the work continued and was completed within time without any complaint from the petitioner herein. This

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ARBP No.867_2013

additional factor would support the claimant's claim. Consequently the conclusion of the learned Arbitrators in paragraph 31 that the disruption was due to no fault of the claimant entitling the claim anticipated additional cost in respect of “shaft portion and shifted alignment portion at the Charkop tunnel” is the observation made upon the material on record and in terms of the contract between the parties.

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It is contended on behalf of the claimant that under clause 12.2 the claimant was to forthwith give notice of the unforeseen physical condition that was encountered to the engineer of the petitioner. It is contended on behalf of the claimant upon the correspondence that ensued, and that was considered in Arbitration, that the first notice came to be given only about two months after the conditions were encountered. It is an admitted position that this portion of the construction work commenced in November, 2002. It was only in March, 2003 that ingress of water has been encountered. The first letter of the claimant relied upon by the petitioner herein is dated 5^th May, 2003 notifying that the claimant would claim the subsequent cost arising from the physical geological condition which was encountered under clause 12.2 of the contract. This letter is followed by the letter dated 26^th September, 2003 also specifically notifying said clause and yet followed by another letter dated 20^th December, 2003.

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The ingress of water up to a point was not only anticipated but provided for in clause 4.9.3 and 4.9.4 of the contract. It would only be if the ingress of water is far in excess of what was contemplated by the parties that could be unforeseen entitling the claimant to claim the additional cost incurred upon such conditions

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ARBP No.867_2013

being encountered under clause 12.2 (b) for which notice was to be given. Had there been a physical condition which never took place earlier and which was encountered upon the tunnel boring operation in the rock surface which was being borne, the notice required to be given forthwith would be expected to be given immediately upon such encounter in about a week or so. For an encounter which was partly anticipated but which exceeded expectations of the parties, the excess amount encountered would materialize over a period of time. The claimant would be expected to arrest the physical condition encountered even if it was reasonably more than what was expected. Under those circumstances, time of one or two months to notify the liability under clause 12.2 cannot be taken to be outside such terms of the contract as would disentitle the claimant to either of the reliefs under clause 12.2.

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The learned Arbitrator in the minority award has considered the entire correspondence being the letters written by the claimant notifying the claim to be made upon the physical conditions encountered in clause 12.2 to reject the claim of the claimant as not falling under the clause altogether. Though that view may also be possible view, it cannot be taken to be only view that could be accepted under clause 12.2 of the contract. 19. The learned Arbitrators have considered the entire evidence and have considered the claimant's claim within the parameters of the contract between the parties. They have neither exceeded their jurisdiction nor failed to exercise the jurisdiction under the entire contract. Once it is seen that the claimant's claim would fall under clause 12.2 because of realignment of the tunnel a mile away from the contracted site causing unforeseen physical conditions

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ARBP No.867_2013

resulting in additional costs, the grant of such costs as has been made in the majority award cannot be reconsidered in a petition under Section 34 of the Arbitration and Conciliation Act, 1996 with regard to either the grant or the refusal of the claim.

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Consequently the Arbitration Petition is dismissed.

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( ROSHAN DALVI, J. )

Muniucipal Corporation of Greater Mumbai v. Hindustan Construction Company Limited

Case brief

What is this about?

What did the court decide?

Muniucipal Corporation of Greater Mumbai v. Hindustan Construction Company Limited

Case brief

What is this about?

What did the court decide?

What the court decided

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