A contractor's claims for deductions, delay and additional costs in airport construction were held premature and the award beyond the contract. The Court dismissed the appeal and upheld the setting aside of the arbitral award under Section 34.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 20.10.2021 PRONOUNCED ON : 01.11.2021
CORAM:
THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE
C.M.A. No. 3012 of 2017
M/s. Ganon Dunkerley & Co. A company incorporated under the Companies Act IVV 1913, No.8-2-262/8, Road No.1, Banjara hills, Hyderabad – 500 034. ...Appellant/ Respondent No.1 Vs 1.The Airport Authority of India, (International Airport Division), Represented by Assistant General Manager, Engg. (c ), AAI, Chennai – 600 027. .. Respondent/ Petitioner Dr. J.Purushotham (Died) (*) H.No.8-3-1065, Plot No.12, Srinagar Colony, Hyderabad – 500873. ..Respondent / Respondent
Civil Miscellaneous Appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 against the Judgment and Order dated 23/05/2017 passed in Arbitration Original Petition No.3 of 2002, on the file of the Principal District Judge, Chengalpattu.
JUDGMENT
This appeal has been filed under Section 37 of the Arbitration and Conciliation Act challenging the order dated 23.05.2017 passed by the learned Principal District Judge, Kancheepuram District at Chengalpattu in Arbitration OP No.3 of 2002 under Section 34 of the Arbitration and Conciliation Act, under which the learned Principal District Judge has set aside the Arbitral Award dated 17.09.2001 passed in favour of the Appellant against the first respondent.
A contract dated 28.10.1999 was entered into between the Appellant and the first respondent and under the said contract, the Appellant agreed to execute extension work at Anna International Terminal, Chennai and the total value of the contract was Rs.10,47,42,194/-.
a) Delay in clearance for Sector – II & III due to movement of air support trolleys along the 29th grid and also occupation of the area along AA 30 to 33 by other agency. There was a change in design for the foundation AA30 to 33.
b) Increase in earth work and concrete quantity upto plinth level by more than 100% although the original planned work was done well within the time.
c) We have encountered hard rock in various foundations which was not envisaged in the tender. As blasting was not allowed we had to remove the stone by chiseling.
d) The depth of excavation in Sector II, III, IV & V has also increased from 2.50 mtr to 3.50 mtr. Leading to delay in concrete foundation.
| S. No. |
Description | Amount Rs. |
|---|---|---|
| 1. | Claim No.1 | |
| a. Amount wrongfully deducted in running bills for using lesser quantity of cement in M20 concrete: 5003.93 |
6,28,343 | |
| cu.m. @ Rs.125.57 cu.m. | ||
| b. Interest on the above amount @ 24% | ||
| per annum from the respective dates and | ||
| on the respective amounts as per the running bills |
| S. No. |
Description | Amount Rs. |
|---|---|---|
| a. Rs.29,477.56 from 31.01.2000 (RA Bill No.1) |
||
| b. Rs.1,65,134.59 from 29.02.2000 (RA Bill No.2) |
||
| c. Rs.73,555.14 from 25.03.2000 (RA Bill No.3) |
||
| d. Rs.1,61,364.99 from 29.04.2000 (RA Bill No.4) |
||
| e. Rs.1,25,060.00 from 31.05.2000 (RA Bill No.5) |
||
| f. Rs.37,453.76 from 30.06.2000 (RA Bill | No.6) | |
| g. Rs.14,209.50 from 31.07.2000 (RA Bill No.7) |
||
| h. Rs.21,699.76 from 31.08.2000 (RA Bill No.8) |
||
| c. M 25 concrete 1219.52 cu.m. @ Rs.28.91/cu.m |
35,256 | |
| d. Interest on this amount at 24% per annum from the respective dates and on the respective amounts as per the running bills |
||
| a. Rs.14,507.00 from 30.06.2000 (RA Bill No.6) |
||
| b. Rs.8,896.18 from 31.07.2000 (RA Bill No.7) |
||
| c. Rs.11,852.52 from (RA Bill No.8) | ||
| 2. | Claim No.2 | |
| a) The idle charge payable for delay of 270 days @ Rs.45,000/- day as per annexure 'D' |
1,21,50,000 | |
| b) Interest on the above amount @ 24% from due date to the actual date of payment |
||
| c) Declaration that the claimant is eligible for 9 months of extension from 13.05.2001 |
||
| 3. | Claim No.4 | |
| a) Profits and overheads on the loss of turnover during the extended period of nine months |
| S. No. |
Description | Amount Rs. |
|---|---|---|
| Turnover expected = Rs.55 lakhs per month |
||
| Turnover for nine months = Rs.495 lakhs | ||
| Expected profit on turnover including overheads @ 15% i.e., 0.15 X 495 |
74,25,000 | |
| b) Interest on above amount from due date to the date of payment @ 24% per annum |
||
| c) Interest @ 24% per annum for nine months on the amounts retained upto 13.05.2000 towards security deposit |
||
| 4. | Claim No.3 | |
| a) The additional cost for concrete payable @ Rs.295 per cu.m. as given in annexure 'F' |
||
| b) Declaration that the same price would be payable for the balance quantity of concrete |
||
| 5. | Claim No.5 | |
| The additional cost payable for concrete for using transit mixers as given in annexure 'F' |
||
| a) Total concrete works executed so far 7993 cu.m. @ Rs.527/ cum |
42,12,311 | |
| b) Declaration that same extra cost would be paid for all future quantities of concrete |
||
| c) Interest @ 24% per annum on the above amount from due date till the actual date of payment |
||
| 6. | Claim No.6 | |
| a. The additional cost payable for rebending and rehandling of steel as per Ex-C41. The steel quantity so far consumed 1400 mt. @ Rs.900/mt |
12,60,000 | |
| b. Declaration that the same extra cost would be provided in future bills |
||
| c. Interest on the above amount from due date @ 24% per annum till the actual date of payment |
| S. | Description | Amount |
|---|---|---|
| No. | Rs. | |
| 7. | Legal expenses and other incidental charges towards claim preparation |
3,00,000 (Tentative) |
| 8. | Fee payable to Honourable Arbitrator | as decided by the learned arbitrator |
a) Does the Arbitrator has the jurisdiction to adjudicate the claims?
b) Are the deductions made in the running bills towards less consumption of cement legal and as per the terms of the contract?
c) Is delay caused attributable exclusively to Claimants or Respondents or to both? If so in what proportion?
d) Whether there are any restrictions and constraints in space and approaches which caused additional costs for the Claimant? If so, is the Claimant eligible?
e) Is the Claimant eligible for extra payment for using transit mixers?
f) Is the Claimant eligible for extra cost incurred due to re-bending of steel?
a) Refund of wrongful deductions made by the first respondent under the running bills raised by the Appellant (claim No.1)
21.10 M 20 Concrete :
| Running | bills no. | Date of recovery | Amount |
|---|---|---|---|
| (RA Bill | No.1) | 31.01.2000 | 29,477.56 |
| (RA Bill | No.2) | 29.02.2000 | 1,65,134.59 |
| (RA Bill | No.3) | 25.03.2000 | 73,555.40 |
| (RA Bill | No.4) | 29.04.2000 | 1,61,364.99 |
| (RA Bill | No.5) | 31.05.2000 | 1,25,060.00 |
| Running | bills no. | Date of recovery | Amount |
|---|---|---|---|
| (RA Bill | No.6) | 30.06.2000 | 37,453.76 |
| (RA Bill | No.7) | 31.07.2000 | 14,209.50 |
| (RA Bill | No.8) | 31.08.2000 | 21,609.76 |
| Total | Rs.6,28,343.00 | ||
| 21.2 M 25 | Concrete | : | |
| Running b | ill No. | Date of recovery | Amount |
| (RA Bill | No.6) | 30.06.2000 | 14,507.00 |
| (RA Bill | No.7) | 31.07.2000 | 8,896.18 |
| (RA Bill | No.8) | 31.08.2000 | 11,852.52 |
| Total | Rs.35,256.00 |
b) Idling charges (claim No.2) at Rs.25,000/- per day for a period of 155 days totalling to Rs.38,75,000/-
c)Towards additional cost (claim No.3)incurred on account of approach and site restriction due to construction of compound walls at Rs.125/- per cu,m i.e. cubic metre for 2467.42 cu.m executed by the Appellant upto 8th running bill totalling amounting to Rs.3,08,427/-
d)Towards loss of turnover and overheads Rs.10,08,330/-, calculated on the basis that the Appellant would have earned 10% profit and the delay period was taken by the Arbitral Tribunal on the part of the first respondent at 55 days. (claim No.4).
e) Interest was awarded at 18% p.a. on the total Arbitral Award amount from the date of the Arbitral Award.
learned Principal District Judge, Kancheepuram District at Chenglepattu has set aside the Arbitral Award dated 17.09.2001 passed in favour of the Appellant against the first respondent by giving the following reasons :-
a) Clause 12 of the contract lays down the procedure for extension of time. Infact on reading of Clause 12, it has been specifically mentioned that the time for completion of work shall be extended in the proportion of altered, additional or substitution of work which bears to the original contract work and the certificate of the Engineer in charge shall be conclusive as to such proportion. Over and above the further period to the extent of 25% of the time of such extension shall be allowed to the Contractor. The cost for such additional, altered or substituted work under Clause 12 shall be worked out in accordance with the contract. The observations of the Arbitrator as if there is no procedure laid down in Clause 12 of the Contract was infact incorrect.
b) Clause 25 of the Contract though provides for referring disputes to the Arbitrator during the progress of construction of the work but raising dispute in half way appears to be unjustified.
c) As per Clauses 2 and 12 of the Contract, Engineer in charge has power to extend the period due to the additional, altered or substituted work in terms of the contract. Insofar as the time schedule is concerned depending upon the contingencies such as deviation from the original plans and additional constructions, the Engineer in charge is competent to vary or extend the time stipulated for completing the work. Such question can be opened only on completing the work not in the half way.
d) On reading of Clause 12, it has been specifically mentioned that the time for completion of work shall be extended in the proportion of altered, additional or substituted work which bears to the original contract work and the certificate of the Engineer in charge shall be conclusive as to such proportion. Over and above the further period to the extent of 25% of the time of such extension shall be allowed to the Contractor. The cost for such additional, altered or substituted work under this clause shall be worked out in accordance with the terms mentioned in clause 12.
e) In this case, when the work was in progress, there were some deductions made by the first respondent in the running bills of the Appellant. If really, the Appellant is aggrieved by the deductions made, they can receive the amount subject to the objections over deductions while receiving the final settlement. For each and every stage, an Arbitrator cannot be appointed. For a running bill for a particular month and after some time for another month, the services of the Arbitrator cannot be entertained.
f) The Appellant has committed a mistake in referring the matter to the Arbitrator before completion of the work and hence the claim made by the Appellant is a
premature one. The Appellant did not object earlier to the mix design evolved by Anna university and therefore, the suggested procedure to choose the agency need not be followed.
g) The recovery of running bills towards consumption of cement is correct as the design by Anna University is correct and there is no necessity to refer the same to some other agency.
h) The Appellant projected an overall delay of nine months in handing over the site. The reasons given are increase in quantities below ground level, lack of site clearances and opening required funds during the execution of work not releasing holds in drawings, site constraints due to other agencies not vacating the place and removal of working space by construction of compound wall at the edge of structure. With reference to the delay due to increase in quantities is concerned as already stated in Clause 12 of the Contract, the Engineer in charge is competent to extend the time. The extension of time allowable can be executed by the Engineer in charge only on completion of the work. When the Appellant is entitled to additional amount as well as extension of time seeking extension of time for the additional work is premature.
i) The Arbitral Tribunal has erroneously assessed 105 days as the delay period on the part of the first respondent. It is not known as to how he had assessed the delay to be 105 days on the part of the first respondent when the work is still in progress.
j) The Arbitrator cannot substitute his own ideas in the Award. Additional time can be decided only after completion of additional work involved.
k) The contract date is 28.10.1999. The date of commencement of the work by the Appellant was fixed at 25 days from the date of the contract. Even on 11.01.2000, the Appellant has not submitted Bank guarantees along with security deposit. Similarly, they have not given any labour licence from Regional Labour Commissioner and failed to establish field laboratory. Therefore, the delay is only on the part of the Appellant.
l) In the letter dated 15.04.2000 which is marked as Ex.P16, the Appellant has introduced a new clause as they are proposed to deploy concrete pump and the required rate shall be paid by the first respondent. Thereafter, it appears the Appellant is making so many claims as if the nature of work involves machinery due to non availability of space etc., when the contract is on item wise, unit wise rates.
m) The modus operandi of the Appellant appears that having obtained a huge contract by submitting least bid subsequently making so many demands under various pretexts to get enhanced amount. While obtaining huge civil contract in an operational Airport, the Appellant ought to have anticipated practical difficulties. Even if there is a delay
on the part of the respondent, it can be considered only at the final settlement not in the half way. The width of the building is about 90 metres, it requires deploying of power crane having a boom length of 50 metres. On the other hand, the Appellant deployed power crane having a boom length of 20 meters. For the said default, the first respondent cannot be held liable. The non availability of the area for deploying tower crane and other machineries near the construction site is not the responsibility of the first respondent. In the tender document, nothing has been specifically mentioned about the place on which the mixture, plan and other work site has to be provided to the Appellant. In clause 55(j), it has been specifically mentioned that the contractor has to adjust his work and progress of the work in coordination with other agencies working in the site. Knowing fully well about the existence of the Airport in operation, knowing the difficulties involved, the Appellant has bid and became successful. They have to anticipate such sort of difficulties in executing civil work in an Airport.
n) Though the Arbitrator in para 19.2.0. has come to the conclusion that the work site handed over to the Appellant is acceptable and the other claim is negatived, the Arbitrator has chosen to award cost to set up pump concrete mixture which is quite contrary to the terms and conditions of the Contract.
o)Though the Arbitrator has rejected the claim in issue No.V, he has erroneously passed Award towards idle charges for 270 days at the rate of Rs.45,000/- towards machineries idling due to the delay caused by the first respondent. In that connection, the Appellant claimed Rs.45,000/- per day towards idling charges for 270 days totalling Rs.1,21,50,000/-. However, the Arbitrator awarded Rs.38,75,000/- at the rate of Rs.25,000/- per day for 155 days. Though the Arbitrator has observed that it is not possible and practical to maintain such record in an ongoing project, how he guessed idling charges is not properly explained and is also not supported by reasons.
p) The Arbitrator has also erroneously awarded 15% for column No.IV, on the basis of loss, which is not supported by reasons.
q) The Arbitrator has exceeded the terms of contract and passed the Arbitral award which is not in accordance with the terms and conditions of the Contract between the parties. The Arbitral Award has been passed without giving reasons.
r) The learned Principal District Judge has also referred to various decisions of the Hon'ble Supreme Court as well as High Court in the impugned order while setting aside the Arbitral Award.
a) M/s. Arosan Enterprises Ltd. Vs. Union of India and another reported in 1999 (9) SCC 499;
b) M/s. A.T. Brij Paul Singh and others Vs. State of Gujarat reported in (1984) 4 SCC 59;
c) M/s. J.G. Engineers Pvt Ltd. Vs. Union of India and another reported in 2011-4- L.W.1;
d) Ravindra Kumar Gupta and Company Vs. Union of India reported in 2010 (1) SCC 409;
beyond the scope of the contract. According to him, the extension of time for a period of three months sought for by the Appellant during the progress of the work i.e. four months from the commencement of work was rightly rejected by the first respondent as it was premature. According to him, only as a pre-emptive action, the Appellant invoked the Arbitration clause, even during the progress of the work and continued with the work.
format, but the Appellant did not seek extension of time as per the specified format.
a. Mithra Guha Builders (India) Company vs. ONGC reported in 2020 3 CTC 330
b. Gammon India Ltd. Vs. National Highways Authority of India reported in 2020 0 Supreme (Del) 664
Discussion :
contract is dated 28.10.1999, whereas the request for extension even before full fledged commencement of work by the Appellant was made on 15.04.2000. This will clearly reveal that there was no proper progress of work by the Appellant in the initial stages after the contract date.
such proportion. It is clear from Clause 12 of the Contract, that Engineer in charge is a final authority to grant extension or not to the Appellant during the progress of the work. The first respondent having not terminated the contract, the rejection of the extension request made by the first respondent on 19.04.2000 is final and binding on the Appellant and there is no question of initiating arbitration during the progress of the work. The reasons given by the first respondent for rejecting the request for extension on 19.04.2000 cannot also be considered to be unreasonable as admittedly the work was not in full swing on that date. Further, the extension was sought by the Appellant at the beginning stages itself. The decision relied upon by the learned counsel for the first respondent in the case of M/s. Mithra Guha Builders (India Company) Vs. Oil and Natural Gas Corporation Ltd. reported in 2020 (3) SCC 322 squarely applies to the facts of this case also as even in that case the Hon'ble Supreme Court held that once parties have decided that certain matters are to be decided by Superintending Engineer and his decision would be final, the same cannot be the subject matter of Arbitration. In the case on hand also, the Superintending Engineer has given valid reasons for rejecting the request for extension by another period of three months on 19.04.2000 which reads as follows;
Your revised program showing the completion date for the above mentioned work extended by three months is not acceptable to Airports Authority of India. You are required to complete the work by 13/5/2001 as stipulated in the above agreement.
Regarding deployment of concrete pump, your request for extra payment is not admissible as per terms and conditions of contract. This aspect has already been made clear to you vide our following letters.
The revised program enclosed with your letter under reference may please be got modified for completion by 13/5/2000 and resubmitted at the earliest.
Arbitrator has passed the Arbitral Award beyond the scope of the contract. When admittedly, the Appellant after making the claim has continued with the work as per the contract and completed the same and handed over the same to the first respondent, the question of passing an Arbitral Award in favour of the Appellant will not arise.
a) Associate Builders V. Delhi Development Authority reported in (2015) 3 SCC 49
b) Ssangyong Engineering and Construction Company Limited vs. National Highways Authority Limited (NHAI) reported in (2019) 15 SCC 131.
the impugned order has rightly interfered with the Arbitral Award passed in favour of the Appellant by setting aside the same. The Judgments relied upon by the learned counsel for the Appellant referred to supra has no bearing to the facts of the instant case as those Judgments did not deal with the situation where an Arbitral claim has been made prematurely and even after the claim the Appellant has continued with the work and completed the same. After the completion of work also, the Appellant did not make any further claims against the first respondent. In all the Judgments relied upon by the learned counsel for the Appellant referred to supra were cases where there was termination of contract. But in the case on hand, there was no termination of contract by the first respondent and even after the Arbitral claim, the Appellant has chosen to complete the work without finding fault against the first respondent thereafter.
a) When there is a mandatory bar created by a statute which disables the plaintiff from filing the suit on or
before a particular date or the occurrence of a particular event;
b) when the institution of the suit before the lapse of a particular time or occurrence of a particular event would have the effect of defeating a public policy or public purpose;
c) if such premature institution renders the presentation itself patently void and the invalidity is incurable such as when it goes to the root of the Court's jurisdiction, and
d) where the lis is not confined to parties alone and affects and involves persons other than those arrayed as parties, such as in an election petition which affects and involves the entire constituency.
also incurable as the Appellant even after initiating the Arbitral claim during the period of the contract has chosen to go ahead with the contract by completing the same and handing over the project to the first respondent. Therefore, this Court is of the considered view that the Arbitral Tribunal has not applied its mind judiciously while entertaining the premature Arbitral claim made by the Appellant.
Sd/-
Assistant Registrar (CS-IX)
//True Copy//
Sub Assistant Registrar
vsi2
To
The Principal District Judge, Kancheepuram District at Chengalpattu.
Copy To: The Section Officer, V.R Section, High Court, Madras.
+1cc to M/s.Gupta & Ravi, Advocate, S.R.No.56391
C.M.A.No. 3012 of 2017
MG(CO) SB(25/11/2021)
3 issues framed by the court
Was the contractor's arbitral claim premature when initiated during early performance and followed by completion without further claims?
Could rejection of an extension request be arbitrated when the contract made the Engineer in charge's decision final?
Was setting aside the award under Section 34 justified because it exceeded the contract and was patently perverse?
Colour shows how this judgement treated each authority
M/s. Arosan Enterprises Ltd. Vs. Union of India and anotherDistinguished¶122
M/s. Arosan Enterprises Ltd. Vs. Union of India and another reported in 1999 (9) SCC 499 · Who else cites this
M/s. A.T. Brij Paul Singh and others Vs. State of GujaratDistinguished¶122
M/s. A.T. Brij Paul Singh and others Vs. State of Gujarat reported in (1984) 4 SCC 59 · Who else cites this
M/s. J.G. Engineers Pvt Ltd. Vs. Union of India and anotherDistinguished¶122
M/s. J.G. Engineers Pvt Ltd. Vs. Union of India and another reported in 2011-4- L.W.1
Ravindra Kumar Gupta and Company Vs. Union of IndiaDistinguished¶122
Ravindra Kumar Gupta and Company Vs. Union of India reported in 2010 (1) SCC 409 · Who else cites this
M/s. Mithra Guha Builders (India Company) Vs. Oil and Natural Gas Corporation Ltd.Applied¶106
M/s. Mithra Guha Builders (India Company) Vs. Oil and Natural Gas Corporation Ltd. reported in 2020 (3) SCC 322 · Who else cites this
Gammon India Ltd. Vs. National Highways Authority of IndiaReferred¶93
Gammon India Ltd. Vs. National Highways Authority of India reported in 2020 0 Supreme (Del) 664
Associate Builders V. Delhi Development AuthorityRelied on¶118
Associate Builders V. Delhi Development Authority reported in (2015) 3 SCC 49 · Who else cites this
Ssangyong Engineering and Construction Company Limited vs. National Highways Authority Limited (NHAI)Relied on¶119
Ssangyong Engineering and Construction Company Limited vs. National Highways Authority Limited (NHAI) reported in (2019) 15 SCC 131
VithalBhai Pvt. Ltd. Vs. Union Bank of IndiaApplied¶123
VithalBhai Pvt. Ltd. Vs. Union Bank of India reported in (2005) 4 SCC 315 · Who else cites this
2 provisions across 1 enactments
M/s. Ganon Dunkerley & Co.
The Airport Authority of India, (International Airport Division)
Dr. J.Purushotham
ABDUL QUDDHOSE
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
