Allowed

N.T.P.C.Ltd v. M/S.Reshmi Constructions

Kerala HC24 Jul 2017Arb.A/65/2013

Case brief

AI extract

What is this about?

Construction arbitration concerned delay, extra work and disputed final settlement. The court applied the Arbitration Act, 1940, modified the award by confining compensation to the compromise bill with 12% interest, and held that conditional withdrawal against security did not stop interest. Both appeals were allowed, with expedited disbursement directed.

What did the court decide?

Award modified to compensation under the compromise bill with 12% interest until payment; immediate partial disbursement and payment of the balance within two weeks directed.

N.T.P.C.Ltd Vs M/S.Reshmi Constructions — Execution and Attachment | Kerala HC (2017)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE V.CHITAMBARESH &

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THE HONOURABLE MR. JUSTICE SATHISH NINAN

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MONDAY, THE 24TH DAY OF JULY 2017/2ND SRAVANA, 1939

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Arb.A.No. 65 of 2013 (A)

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AGAINST THE ORDER IN O.P.(ARBITRATION) NO. 43/2009 OF ADDL.DISTRICT COURT-I, MAVELIKKARA DATED 24-06-2013

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APPELLANTS (PETITIONERS IN THE LOWER COURT):

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N.T.P.C.LTD., NEW DELHI, REPRESENTED BY CHAIRMAN AND MANAGING DIRECTOR.

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N.T.P.C. LTD., CHOOLATHERUVU, KAYAMKULAM - 690 506 REPRESENTED BY GENERAL MANAGER.

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BY ADVS.SRI.S.VINOD BHAT

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SRI.LEGITH T.KOTTAKKAL

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RESPONDENT (RESPONDENT IN THE LOWER COURT):

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M/S.RESHMI CONSTRUCTIONS, KARINGOZHAKKAL HOUSE, K.P.VII/992, KODAI PARK, MNRA 837(1), M.L.A. ROAD, KUDAPPANAKUNNU, THIRUVANANTHAPURAM-695 043.

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BY ADV. SRI.K.L.VARGHESE (SR.) ADV. SRI.VIVEK VARGHESE P.J. ADV. SRI.VARUGHESE M EASO ADV. SRI.K.A.MOHAMED HARIS ADV. SRI.RAHUL VARGHESE ADV. SRI.RANJITH VARGHESE

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THIS ARBITRATION APPEAL HAVING BEEN FINALLY HEARD ON 19.07.2017, ALONG WITH ARBITRATION APPEAL NO. 66/2013, THE COURT ON 24.07.2017 DELIVERED THE FOLLOWING:

Arb.A65/2013

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APPENDIX

ANNEXURES TO I.A.NO.NO.3278/2013 FILED BY THE RESPONDENTS:

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ANNEXURE R1(A) - TRUE COPY OF TREATMENT DOCUMENTS (APPOINTMENT SLIP) ISSUED BY RCC, TRIVANDRUM.

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ANNEXURE R1(B) - REVENUE RECOVERY NOTICE DT.28/01/2013 ISSUED BY THE KERALA STATE FINANCIAL ENTERPRISES TO THE RESPONDENT AND ITS PARTNERS.

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ANNEXURE TO I.A.NO.NO.3311/2013 FILED BY THE RESPONDENTS:

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ANNEXURE R1(C) - TRUE COPY OF CERTIFICATE REF.NO.275 DT.4.12.2013 ISSUED BY THE KERALA STATE FINANCIAL ENTERPRISES LTD.

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ANNEXURES TO I.A.NO.NO.3219/2014 FILED BY THE RESPONDENTS:

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ANNEXURE R1(D) - TRUE COPY OF ENCUMBRANCE CERTIFICATE NO.349/2009 DT.15.1.2009 ISSUED BY SRO, PATTOM.

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ANNEXURE R1(E) - TRUE COPY OF ENCUMBRANCE CERTIFICATE NO.1382 DT.9.2.2010 ISSUED BY SRO, PATTOM.

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ANNEXURE R1(F) - TRUE COPY OF ENCUMBRANCE CERTIFICATE NO.12240/13 DT.18.12.2013 ISSUED BY SRO, PATTOM.

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ANNEXURE R1(G) - TRUE COPY OF ENCUMBRANCE CERTIFICATE NO.12241/13 DT.18.12.2013 ISSUED BY SRO, PATTOM.

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ANNEXURE R1(H) - TRUE COPY OF CERTIFICATE NO.157/14 DT.10.1.2014 BY THE VILLAGE OFFICER, CHERUVAIKAL.

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ANNEXURE R1(I) - TRUE COPY OF STATEMENT OF ACCOUNT AS ON 15.01.2014 PREPARED BY THE RESPONDENTS.

-TRUE COPY-

PS TO JUDGE

“CR”

V. CHITAMBARESH & SATHISH NINAN, JJ.

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= = = = = = = = = = = = = = = = = = = = = = = =

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Arb. Appeal Nos.65 & 66 of 2013

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= = = = = = = = = = = = = = = = = = = = = = = =

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Dated this the 24^th day of July, 2017

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JUDGMENT

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Chitambaresh, J.

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“For an arbitrator goes by equity of a case, a judge by the law, and arbitration was invented with the express purpose of securing full power for equity”

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said Aristotle the ancient Greek philosopher and scientist.

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The parties are referred to as 'the claimant' and 'the

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respondents' as they figure in the proceedings before the Sole Arbitrator Justice K. John Mathew who has passed an

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award dated 1.7.2009 in the dispute. The arbitral proceedings commenced when the claimant issued a letter dated 20.12.1991 (marked Ext.P61 in the proceedings) requesting that the dispute be referred to arbitration. A doubt arose as to whether the Arbitration Act, 1940 ('the old Act' for short) or the Arbitration and Conciliation Act, 1996 ('the new Act' for short) would apply. The respondents accordingly filed O.P.(Arb) No.7/2008 on the file of the Court of the Subordinate Judge of Mavelikkara under Section 33 of the old Act. The respondents sought a declaration that the dispute needs to be resolved by recourse to the old Act and that the new Act cannot be called in aid by the claimant as is attempted to be done. The Court of the Subordinate Judge of Mavelikkara dismissed O.P.(Arb) No.7/2008 by order dated 21.8.2008 as not maintainable nevertheless observing that it is for the Arbitrator to decide.

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-: 3 :-

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The applicability of the old Act or the new Act was additional issue No.8 before the Arbitrator who answered the same along with other issues in the award that the new Act would apply to the proceedings. The respondents thereupon filed O.P.(Arb) No.43/2009 on the file of the Court of the Additional District Judge of Mavelikkara on 19.9.2009 under Section 34(2) of the new Act. The respondents sought to set aside the arbitral award contending that the same is in conflict with the public policy of India wherein the applicability of the old Act was not raised. The respondents thereafter filed I.A.No.409/2011 seeking to amend O.P.(Arb)No.43/2009 by incorporating an additional ground that the old Act is applicable to the dispute. I.A.No.409/2011 was dismissed on 23.12.2011 and O.P.(Arb) No.43/2009 was disposed of by order dated 24.6.2013 which is impugned in these appeals by the respondents and claimant.

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-: 4 :-

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We heard Mr.S.Vinod Bhat, Advocate on behalf of the respondents/appellants and Mr.K.L.Varghese, Senior Advocate on behalf of the claimant/appellant.

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The Arbitrator was prompted to hold that the new Act is applicable to the proceedings in view of Clause 56 of the General Conditions of Contract for Civil Works and the relevant part of the same is extracted below:

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“Subject as aforesaid the provision of the Arbitration Act, 1940, or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause”. (emphasis supplied)

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-: 5 :-

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But the Supreme Court despite the existence of a similar clause in the arbitration agreement held in Milkfood Ltd. v. GMC Ice Cream (P) Ltd. [AIR 2004 SC 3145] that commencement of arbitral proceedings alone matters. It was concluded as follows:

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“73. Keeping in view the fact that in all the decisions, referred to hereinbefore, this Court has applied the meaning given to the expression 'commencement of the arbitral proceeding' as contained in Section 21 of the 1996 Act for the purpose of applicability of the 1940 Act having regard to Section 85(2)(a) thereof, we have no hesitation in holding that in this case also, service of a notice for appointment of an arbitrator would be the relevant date for the purpose of commencement of the arbitration proceeding.”

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Thyssen Stahlunion's case [AIR 1999 SC 3923] was adverted

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-: 6 :-

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to in the above decision clarifying that the parties have the option of changing the procedure by agreement in an arbitral proceeding pending.

¶64

Milkfood Ltd.'s case (supra) was quoted with approval in Parwani Builders v. Western Coalfields Limited and others [(2010) 15 SCC 729] reiterating that the Act applicable when the arbitral proceedings commence governs. The arbitral proceedings in respect of a particular dispute commence on the date on which a request for the dispute to be referred to arbitration is received by the respondents. This is evident from Section 21 of the new Act which is to the following effect:

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“21.Commencement of arbitral proceedings.Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular

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-: 7 :-

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dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.”

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The claimant had issued a letter dated 20.12.1991requesting the dispute to be referred to arbitration which would have been received by the respondents much before the coming into force of the new Act on 16.8.1996. There is therefore no warrant for the new Act to be applied in the resolution of the dispute since the arbitral proceedings have commenced when the old Act was very much in force. The parties are governed by the Act in force on the date on which the arbitral proceedings commence by the receipt of the request for reference to arbitration.

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Neither the dismissal of O.P.(Arb) No.7/2008 as not

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-: 8 :-

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maintainable under Section 33 of the old Act nor the dismissal of I.A.No.409/2011 for amendment of O.P.(Arb) No.43/2009 has any impact. No court shall be prestige conscious to disallow an application for amendment of an application filed under Section 30 of the old Act or Section 34 of the new Act if there are justifiable grounds. An application of that nature is a single issue proceeding where the very fact that the application has been instituted under that particular provision declares the issue involved. It was held in Fiza Developers and Inter-trade Private Limited v. AMCI (India) Private Limited and another [(2009) 17 SCC 796] in this regard as follows:

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“In other words, an application under Section 34 of the Act is a single issue proceeding, where the very fact that the application has been instituted under that particular provision declares the issue involved. Any further

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exercise to frame issues will only delay the proceedings.”

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The Supreme Court reiterated this position again in State of Maharashtra v. Hindustan Construction Company Limited [(2010) 4 SCC 518] as follows:

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“29. There is no doubt that the application for setting aside an arbitral award under Section 34 of the 1996 Act has to be made within the time prescribed under sub-section (3) i.e. within three months and a further period of thirty days on sufficient cause being shown and not thereafter. Whether incorporation of additional grounds by way of amendment in the application under Section 34 tantamounts to filing a fresh application in all situations and circumstances. If that were to be treated so, it would follow that no amendment in the application for setting aside the award however

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material or relevant it may be for consideration by the court can be added nor existing ground amended after the prescribed period of limitation has expired although the application for setting aside the arbitral award has been made in time. This is not and could not have been the intention of the legislature while enacting Section 34.”

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The irresistible conclusion therefore is that amendment of an application filed under Section 30 of the old Act or Section 34 of the new Act is not altogether a taboo notwithstanding the period of limitation.

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It must be noticed that the scope of an application under Section 30 of the old Act and Section 34 of the new Act vastly differs particularly in view of Explanation 1 and Explanation 2 to Section 34(2) of the new Act. Explanation 1 and Explanation 2 were substituted by virtue of Section 18

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of the Arbitration and Conciliation (Amendment) Act, 2015 with an avowed object. The expression - 'the arbitral award is in conflict with the public policy of India' - occurring in Section 34(2)(b)(ii) of the new Act as a ground available to set aside the arbitral award was being widely construed. Such wide construction could be found in ONGC Ltd. v. Saw Pipes Ltd. [(2003) 5 SCC 705], ONGC Ltd. v. Western Geco International Ltd. [(2014) 9 SCC 263] and a few other decisions of the Supreme Court. It is precisely to bring clarity for the statutory terms and for the avoidance of doubt to Section 34(2(b)(ii) of the new Act have Explanations 1 and 2 been substituted by the Amending Act. Craies on Statute Law, 7th Edition, stated the law thus:

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“If a doubt is felt as to what the common law is on some particular subject, and an Act is passed to explain and declare the common

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law, such an Act is called a declaratory Act.”

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G.P.Singh on Principles of Statutory Interpretation quoting

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Craies stated thus:

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“If a new Act is to explain an earlier Act, it would be without object unless construed retrospective. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. (emphasis supplied)

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A Constitution Bench of the Supreme Court after referring to the above illuminating passages held in Shyam Sunder and others v. Ram Kumar and another [(2001) 8 SCC 24] as follows:

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“44. From the aforesaid decisions, the legal

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principle that emerges is that the function of a declaratory or explanatory Act is to supply an obvious omission or to clear up doubts as to meaning of the previous Act and such an Act comes into effect from the date of passing of the previous Act.” (emphasis supplied)

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The above decision was followed in Purbanchal Cables and Conductors Private Limited v. Assam State Electricity Board and another [(2012) 7 SCC 462].

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True that mere use of the words - 'for the avoidance of doubt' - found in Explanation 1 and Explanation 2 to Section 34(2)(b) of the new Act is not by itself conclusive that the same is declaratory in nature. A reference to Union of India and others v. Martin Lottery Agencies Limited [(2009) 12 SCC 209] is apposite:

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-: 14 :-

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“34. No doubt, the Explanation begins with the words 'for removal of doubts'. Does it mean that it is conclusive in nature? In law, it is not. It is not a case where by reason of a judgment of a court, the law was found to be vague or ambiguous. There is also nothing to show that it was found to be vague or ambiguous by the executive.” (emphasis supplied)

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But Section 34(2)(b) of the new Act was found to be vague or ambiguous by reason of judgments of the Apex Court in Saw Pipes Ltd's case (supra) and Western Geco International Ltd's case (supra). That this was the purpose of the amendment by the Arbitration and Conciliation (Amendment) Act, 2015 is evident from Report No.246 of the Law Commission of India. We have no hesitation to hold that Explanation 1 and Explanation 2 are declaratory in nature and retrospective with effect from 23.10.2015 as specified in Section 26 of the Amending Act.

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-: 15 :-

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Explanation 1 and Explanation 2 of Section 34(2)(b)

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of the new Act are extracted below:

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“Explanation 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-

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i. the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

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ii.it is in contravention with the fundamental policy of Indian law; or

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iii. it is in conflict with the most basic notions of morality or justice.

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Explanation 2.- For the avoidance of doubt, the test as to whether there is a

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contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.” (emphasis supplied)

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Explanation 1 was substituted for the avoidance of any doubt as regards the expression - 'conflict with the public policy of India' - found in Section 34(2)(b)(ii) of the new Act and contains clarification. Explanation 2 was substituted for the avoidance of any doubt as regards the expression - 'contravention with the fundamental policy of Indian law' - found in Explanation 1(ii). It has however been emphasised in Explanation 2 that there shall not be a review on the merits of the dispute to test whether there is a contravention with the fundamental policy of Indian law. The net result by virtue of Explanation 1 and Explanation 2 to Section 34(2)(b) of the new Act is that the jurisdiction of the court to set aside an arbitral award is circumscribed.

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-: 17 :-

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The heads of 'public policy of India' such as (i) fundamental policy of Indian law, (ii) interest of India, (iii) justice or morality and (iv) patent illegality have been elaborated time and again by the Supreme Court. The recent decision in Associate Builders v. Delhi Development Authority [(2015) 3 SCC 49] is an authority on the point wherein it has inter alia been stated as follows:

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“33. It must clearly be understood that when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on

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little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts.” (emphasis supplied)

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The question whether the Arbitrator has misconducted himself in the proceedings looms large in an application under Section 30 of the old Act unlike in an application under Section 34 of the new Act.

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We would have normally remitted the matter to the Court of the Subordinate Judge of Mavelikkara for de novo consideration of O.P.(Arb) No.43/2009 to be dealt with under Section 30 of the old Act. But 26 years have rolled by since the commencement of the arbitral proceedings and it

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is reported that the partners of the claimant (husband and wife) are in advanced stage of cancer. We therefore deem it fit to exercise the jurisdiction under Section 30 read with Section 39 of the old Act and dispose of the appeals finally in the interest of justice.

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Sathish Ninan, J.

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The agony and resentment of a contractor ailing with cancer having not been able to secure a final verdict over a dispute relating to a contract work since 26 years of the commencement of legal proceedings, resounds in the court hall. My learned brother has indicated the circumstance that compelled us to treat the appeal as a proceeding under Sections 30 and 39 of the Arbitration Act, 1940 though we are conscious that the procedural requirements would be best served by remanding the matter.

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Before we enter into the sustainability or otherwise of the grounds of challenge against the arbitral award, we remind ourselves of the contours laid down by the Apex Court as to the limited scope of interference against the award of arbitral Tribunals even under the earlier Arbitration Act of 1940. Within the delineated limits we are to probe if any ground for interference with the award as provided under Section 30 of the old Act has been made out.

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The work relating to 'Earth Filling in Temporary Township Part II, at KAYMSTTP' of the respondents was awarded to the claimant pursuant to a tender wherein the claimant was the lowest tenderer. As per the contract though the work was to be completed before 15.06.1990, it was completed only on 15.12.1990. The claimant attributed the reasons for the delay at the hands of the respondents which

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contention found favour with the Arbitrator. The rates were re-fixed taking note of the escalation in costs. For the additional work necessitated consequent to the delay the claimant was sought to be compensated. The contention urged by the opposite parties is that in view of Ext R3 bill, which according to them is the final bill, payment of which has been effected in terms thereof, the claimant is not entitled to raise any further claim. In an earlier round of proceedings which arose on the contention of the respondents regarding the sustainability of arbitration proceedings on the ground that there cannot be any claim after due settlement of Ext R3 final bill and issuance of 'no demand certificate', the Apex Court after considering the challenge by the claimant on the ground of undue influence and coercion, held in Chairman and MD, NTPC Ltd. v. Reshmi Constructions [(2004) 2 SCC 663] thus:

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“We may, however, hasten to add that such a case has to be made out and proved before the arbitrator for obtaining an award.”

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Therefore, the Apex Court left open the issue to be decided by the Arbitrator on evidence. It is pursuant thereto that the impugned award was passed holding against the validity of Ext R3 final bill.

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Before we dwell into the merits of the challenge against the award, as held by my learned brother, of which I am in respectful agreement with, the parties were governed by the old Act of 1940. However, the Arbitrator held the proceedings under the new Act of 1996. Here it would be relevant to refer to the decision of the Apex Court cited by the learned counsel for the respondents reported in Associated Engineering Co. v. Government of Andhra

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Pradesh (AIR 1992 SC 232), wherein at paragraph 27 it was

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held thus:

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“...A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.”

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The learned counsel would contend that there has been disregard of the law that is applicable, which by itself vitiates the award. The Arbitrator in the award has observed that the counsel for both sides agreed before the Arbitrator that the procedure for enquiry to be adopted in the arbitration proceedings both under the old and new Act are substantially the same and that the main difference is only regarding the scope of challenge to the award. Accordingly, the Arbitrator proceeded treating the proceedings to be one under the 1996 Act.

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-: 24 :-

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Now coming to the factual issues, the respondents invited tender for the work above referred to. The last date for submission of tender was 12.01.1990. The tender was opened on the same day. On 19.03.1990, a letter of award was issued to the claimant. The said letter refers to a telegram dated 08.03.1990 by which the fact of awarding the work to the claimant is said to have been notified but disputed by the claimant. In terms of the contract, the date of completion of work was 15.06.1990. The time was extended and the work was finally completed on 15.12.1990. Just before the completion of the work the claimant submitted Ext P53 'pre-final bill' for over Rs.1.53 crores which was rejected by the respondents. Thereafter on 19.12.1990, Ext R3 stated to be the final bill prepared by the respondents, is claimed to have been accepted by the claimant and payment received thereunder. The respondents

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banked upon Ext R3 final bill and the 'no demand certificate' issued by the claimant to contend that there has been final adjustment of the claims and therefore the subsequent claims sought to be raised are not sustainable. Three months later, on 23.03.1991, Ext R4 bill was submitted by the claimant for an amount of Rs.33,71,900/-. The bill is said to have been submitted by the claimant after negotiations with the opposite parties and was in the nature of a 'compromise bill'. However, as per Ext P119, the respondents rejected Ext R4. The Arbitrator was required to decide upon the validity of Exts R3 and R4. The Arbitrator held against the same and passed an award in favour of the claimant substantially, after finding that the respondents were responsible for the delay caused in the performance of the contract and that consequent to the delay there has been hike in prices and necessitated various additional works.

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-: 26 :-

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Coming to Ext R3 final bill, admittedly, the payment thereunder has been received by the claimant. According to the respondents, after receiving payment under Ext R3, the claimant is not entitled to stake any further claim. The claimant as noted supra, challenged the validity of Ext R3. It is the case of the claimant that immediately on receiving the payment under Ext R3, Ext P56 letter dated 20.12.1990 was sent by the claimant raising protest against Ext R3. The contention is that Ext R3 was caused to be accepted by the claimant under coercion. Huge amounts were outstanding from the claimant to financial institutions and there was dire necessity for funds to wipe off the debts. The claimant had no other option but to accept payment under Ext R3 since it was put across under threat of withholding payments. According to the claimant there was no free consent for the issuance of the 'no demand certificate'. Taking note of the

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entire facts and circumstances, the Arbitrator found that Ext R3 could not be considered as the final bill and that the payment thereunder did not amount to the complete discharge of the claims under the contract. The said factual finding entered into by the Arbitrator with reference to the circumstances cannot be said to be unfounded. The said finding is not liable to be interfered with.

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Once Ext R3 bill is discarded, Ext R4 bill dated 23.03.1991 submitted by the claimant assumes significance. Under Ext R4 the claim is raised for a total amount of Rs.33,71,900/- on various heads. Exhibit P106 is the covering letter forwarding Ext R4 bill (same as Ext P107). A subsequent letter by the claimant marked as Ext P100 indicates that the said bill was submitted as a compromise. In Ext P106 it is stated that Ext R4 bill is raised incorporating all the claims. However, it is noticed that as per Ext P119

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communication, the respondents rejected Ext R4. Thereafter, the claimant also withdrew therefrom and has raised the present claim before the Arbitrator for a much higher amount.

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Coming to the claims raised before the Arbitrator, in

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a nutshell the various claims are:

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(a)Loss sustained by the claimant under various heads consequent to the delay at the hands of the respondents in awarding the work, in acquiring and handing over of the site.

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(b)Loss suffered on temporary stoppage of work

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consequent to agitation by land owners, trade unions, etc.

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-: 29 :-

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(c)Claims relating to the extra work done.

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(d)Compensation for carrying out the work by manual

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methods instead of mechanical method.

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(e)Compensation for idling of machinery, etc.

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Coming to the claims made, it is seen that most of

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the claims stem out of the alleged delay on the part of the respondents to award the work and the delay caused in handing over of the site. The contention is that consequent to the delay, the work had to be extended upto and beyond the monsoon period consequent to which because of the nature of the land and flooding, high expenditure had to be incurred for the work. The claims for extra work also mostly flow out of the said alleged delay. The other cause for the claims is labour issues. These have been dealt with by the

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Arbitrator. Coming to the delay in awarding the work, as noticed supra, though the tender was opened on 12.01.1990, the work was awarded only on 19.03.1990 as per letter of award issued to the claimant. Even prior to that the claimant had sent letters to the respondents pointing out the delay, the ensuing monsoon, etc. The only explanation offered by the respondents for the delay in awarding the contract is that, in terms of the tender conditions the offer was to be valid for a period 180 days. The Arbitrator has found that there has been delay in awarding the work.

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Coming to the allegation regarding delay on the part of the respondents in acquiring and handing over of site, the Arbitrator found that there has been delay in the acquisition proceedings and that as is evident from Ext P12 to P15 notices, it is evident that acquisition proceedings were yet to

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be completed even as on 01.08.1990. However, it is to be noticed that from Exts P10 and P11 it is evident that the acquisition proceedings relied on by the claimant by referring to Exts P10 to P15 documents relate to acquisition for “temporary staff quarters” whereas, the contract in question relate to “temporary township” which is a different project. So also, Exts P7 and P16 letters issued by the claimant in March, 1990 do not voice any grievance regarding non-completion of land acquisition proceedings. These letters rather refer to disputes with trade unions. There is no complaint that land acquisition proceedings in respect of the properties covered under the contract had not been completed. Therefore, it appears that as regards the finding by the Arbitrator that there was delay in acquisition of the land in respect of the properties covered under the contract there is an error which is apparent from the documents. The said finding of the learned Arbitrator is

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-: 32 :-

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liable to be interfered with.

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Yet another ground for delay is the agitation by trade unions, which also resulted in preventing the use of machinery and consequent resorting to manual labour instead of mechanical process. Exhibit P94, the general conditions of contract would indicate that labour issues and settling claims with unions, etc. are within the realm of the claimant's liability. At any rate, the respondents could not be found fault with for those issues. At the same time, as is borne out by records, it is a fact that there had been various issues with the trade unions which caused delay and also the complete dispensing of mechanised method of execution of work and the claimant was compelled by circumstances to resort to manual methods. This necessarily resulted in incurring of additional expenditure and also idling of machinery. Compensation was claimed for having the works

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done by manual methods instead of mechanical process which incurred higher expenditure. Exhibit P17 tender notice specifically contained a condition and the tenderer should own or mobilise the machinery specified therein to complete the work within the time scheduled. The Arbitrator found that in the said circumstances it is only probable that the necessary machineries were arranged by the claimant and consequent to the dispute with the trade unions, the claimant had to do the work by manual methods. Linked to the said claim is the claim for compensation for idling the machinery. That there was suspension in the work consequent to the dispute with the trade unions and that the mechanisation work was substituted with manual works are not disputed by the respondents. Though the respondents cannot be found fault with for the above incidents, so also, as viewed by the Arbitrator, the claimant needs to be compensated.

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-: 34 :-

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As regards the claim for extra work, the Arbitrator found that it was mainly the delay in handing over of the site by the respondents which resulted in the extra works. On account of delay in handing over of the site the monsoon ensued and the task of filling up of the paddy and marshy land during rains necessitated incurring of other allied works resulting in extra expenditure.

¶184

Yet another ground of claim was additional expenditure incurred consequent to seepage, percolation, rising ground water, etc. As noted supra this claim is also related to the delay attributed by the claimant to the respondents as regards awarding of tender and handing over of site, the latter of which was found against. Similar is the claim relating to extra rates for work carried in 'difficult and foul conditions' and 'in or underwater conditions'. The

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-: 35 :-

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Arbitrator has awarded amounts under the said heads also.

¶188

Yet another main head of claim raised is on account

¶189

of escalation in price of petroleum products resulting in hike in cost of materials. The Arbitrator found that there was considerable increase in the price of petroleum products and

¶190

that there was rationing of petroleum products at the relevant time. The Arbitrator has found that the same was notified by the claimant and awarded damages.

¶191

As regards the claim for interest, the Arbitrator awarded interest at the rate of 18% per annum which was interfered with by the court below.

¶192

As noticed above, the claims raised are mainly referable to the alleged delay in awarding the contract and the delay in completing the land acquisition proceedings. We

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have already noticed that the finding of the Arbitrator regarding the delay in land acquisition proceedings suffers from an error apparent. As regards the delay in awarding the contract, the reason put forward by the respondents does not appear to be sound. At any rate, as found by the Arbitrator, amounts are due to the claimant. However, as noticed, all the heads of claims as awarded by the learned Arbitrator and the quantum could not be sustained as such. Exhibit R3 bill as found above cannot be taken as the final bill. Under normal circumstances we would have sent back the matter for de novo consideration, but in the backdrop of the case as indicated earlier we refrain from doing so and attempt to give a quietus here.

¶195

The question that remains is regarding the quantum of damages. While we come to the issue regarding quantum, we are faced with Ext R4 bill submitted by the claimant on

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-: 37 :-

¶198

23.03.1991 for an amount of Rs.33,71,900/-. The same had been submitted by the claimant three months after Ext R3 final bill and Ext P56 letter of protest given by the claimant as against Ext R3 bill. The covering letter to Ext P106 refers to Ext R4 bill as a compromise bill. A perusal of the heads of claim under Ext R4 bill shows that they are practically in tune with the heads of claims raised before the Arbitrator. In Ext R4 the claimant had arrived at a figure which he considered as reasonable and accordingly requested the respondents to make payments therein forthwith. Since the respondents did not accept Ext R4, the claimant also withdrew from it and approached the Arbitrator. These Arbitration Appeals were heard for quite a few days. During the course of arguments the court suggested to the claimant as to whether the amount shown in Ext R4 bill with reasonable interest thereon would not be a reasonable and proper award which would satisfy the claims. Counsel on

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either sides were asked to calculate interest on the said amount at 12% per annum. It was reported by both sides that as on 24.07.2017 the interest on the amount from 20.12.1991 which is the date of Ext P61 notice of appointment of Arbitrator would be Rs.1,03,61,802/- thus making the total award at Rs.1,37,33,702/-. The learned Senior Counsel appearing for the claimant fairly submitted before the court that claimant's only interest is in receiving a reasonable amount in settlement of the claims rather than fighting over a penny for years further. According to the learned Counsel, award for the amount covered under Ext R4 with 12% interest which comes to Rs.1,37,33,702/- is reasonable and it could be accepted in final settlement of the claims if the said amount is paid without delay.

¶201

In so far as the respondents are concerned once it is found that Ext R3 bill cannot be accepted as final bill and

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-: 39 :-

¶204

that there is no discharge of the contract pursuant thereto, the claims as raised by the claimant survive. Before the Arbitrator the respondents contended that the claimant should be pinned down to the claim raised as per Ext R4. The Arbitrator had referred to paragraph 3 of the statement of defence of the respondents wherein they referred to Ext R4 and contended that it was given by the claimant with free consent and that no further claims shall be made after submission of Ext R4. Once Ext R3 is ignored then the claims set up by the claimant need to be considered. As noticed supra, the claims urged before the Arbitrator is more or less similar to the claims in Ext R4. Exhibit R4 coupled with Ext P100 letter dated 18.06.1991 issued by the claimant indicates that Ext.R4 was a compromise bill. Before the Arbitrator the contention of the opposite parties was that the claim raised by the claimant is to be confined to Ext R4. Considering the similarity in the heads of claim in the

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-: 40 :-

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claim petition and Ext.R4 and in view of the submissions of the learned Senior Counsel for the claimant, we deem it just and proper that the claim be confined to the quantum as raised in Ext R4 bill. Interest at a reasonable rate is to be awarded on the said amount. Adopting the view taken by the Apex Court in Assam State Electricity Board and Others v. Buildworth Pvt. Ltd. (2017 [7] Scale 297), we fix the rate of interest at 12% per annum, from the date of notice of arbitration (Ext P61 dated 20.12.1991) till date of payment.

¶208

Subsequent to the order dated 24.06.2013 in O.P (Arb.) No.43 of 2009 of the Additional District Court, Mavelikkara, and pending execution proceedings, the respondents have deposited the amounts as directed therein before the execution court. Part of the amount was permitted to be withdrawn by the claimant on furnishing security. The question arises as to whether the claimant

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would be entitled to interest on the amount under deposit and also on the part of the amount withdrawn by the claimant on furnishing security. The Apex Court in P.S.L. Ramanathan Chettiar and others v. O. R. M. P. R. M. Ramanathan Chettiar (AIR 1968 SC 1047) held that if the permission granted to the decree holder to withdraw the amount under deposit is subject to a rider of furnishing security, the title over the amount in deposit does not pass to the decree holder. That the decree holder can withdraw the amount only on furnishing security means that the payment is not in satisfaction of the decree and as such the deposit would not amount to discharge of the decree. The said principle was followed by this Court in Sales and Agencies v. Plantation Corporation of Kerala (1996 [1] KLT 509) and held that since the decree holder under such circumstances is not entitled to withdraw the amount in satisfaction of the decree, the decree holder is entitled to

¶211

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interest on the said amount. It is seen that when the claimant/decree holder filed execution petition, the respondents deposited the decree amount. Thereafter, they sought for stay of the execution proceedings whereupon the claimant submitted that he has not sought for withdrawal of the amount under deposit. The said submission was recorded by this Court. The said order dated 19.12.2013 reads as under:

¶213

“When the learned counsel for the appellant pressed for stay of the execution proceedings, learned Senior Counsel for the respondent submits that they have not filed any application for withdrawal of the amount which has been deposited in the Execution Court. We record the same.”

¶214

This would show that the deposit made by the opposite

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parties was not one in discharge of the decree. It is thereafter that the permission to withdraw a portion of the amount was granted on condition that the claimant furnishes security. The payment is not in satisfaction of the decree. Therefore, it admits of no doubt that the claimant is entitled to interest for the entire amount notwithstanding the deposit and withdrawal of a portion of the same.

¶217

Accordingly, modifying the award dated 01.07.2009, we direct the respondents to pay an amount of Rs.33,71,900/- with interest at the rate of 12% per annum from 20.12.1991 till date of payment.

¶218

It is brought to our notice that in E.P. No.83 of 2013 in O.P(Arb.) No.43 of 2009, of the 1^st Additional District Court, Mavelikkara an amount Rs.1,32,77,771/- was deposited by the respondents on 27.11.2013 out of which

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an amount of Rs.58,00,000/- has been withdrawn by the claimant on furnishing security. The balance amount in deposit is Rs.74,77,771/-. Deducting the withdrawn amount of Rs.58,00,000/- from the total amount payable to the claimant as on 24.07.2017, namely Rs.1,37,33,702/-, the balance amount due to the claimant under the modified award is Rs.79,33,702/-. The learned counsel for the respondents points out that the deposit was made after deducting TDS and hence the balance amount payable would necessarily be arrived at after deducting the TDS amount credited to the account of the claimant. Necessary calculations regarding the balance amounts payable taking into account the TDS, shall be made by the court below. The learned counsel for the claimant and the respondents have graciously offered to render all necessary assistance to the execution court in the said regard. However we direct the execution court that in the meantime an amount of

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Rs.60,00,000/- shall be disbursed to the claimant forthwith on production of a certified copy of this judgment, and the balance amount payable shall be disbursed to the claimant as expeditiously as possible and at any rate within a period of two weeks thereafter.

¶223

We place on record our appreciation to Advocate Shri Vinod Bhat and Senior Advocate Shri K.L.Varghese for the enlightening arguments and the earnest efforts and cooperation rendered to this Court for the equitable culmination of a long drawn litigation.

¶224

The Arbitration Appeals are allowed as above. No costs.

¶225

V. CHITAMBARESH, JUDGE

¶226

SATHISH NINAN, JUDGE

¶227

Sha-vsv/190717

N.T.P.C.Ltd v. M/S.Reshmi Constructions

Case brief

What is this about?

What did the court decide?

N.T.P.C.Ltd v. M/S.Reshmi Constructions

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

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