Dismissed

Union of India through the General Manager v. M/S Anandi Lal Lalpuria, Proprietorship Firm

Rajasthan HC13 Feb 2020CMA/1711/2019

Case brief

AI extract

What is this about?

In this civil appeal, the appellants (Union of India) challenged an order denying their claim to forfeit a performance guarantee and reject interest awarded to a contractor. The High Court upheld the lower court's decision, finding the railways at fault for payment delays and thus allowing the refund and interest.

What did the court decide?

The appeals were dismissed; the order passed by the Court below was upheld; the Stay Application was disposed.

Union of India through the General Manager Vs M/S Anandi Lal… — Arbitration | Rajasthan HC (2020)

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HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR

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D.B. Civil Miscellaneous Appeal No. 1711/2019

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Union Of India Through The General Manager, NorthWestern Railway, Nwr Head Quarter, Near Jawahar Circle, Malviya Nagar, Jaipur

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General Manager (Egg.) Nwr Head Quarters, Rail Bhawan, Near Jawahar Circle, Jagatpura, Malviya Nagar, Jaipur

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Divisional Railway Manager (W), North Western Railway, Drm Office, Power House Road, Jaipur

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----Appellants

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Versus

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M/s Anandi Lal Lalpuria, Proprietorship Firm, Through Prop. Anandi Lal Lalpuria, S.o. Late Shri Nagarmalji, 5 Raj Bhawan Road, Civil Lines, Jaipur-302006

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----Respondent

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Connected With

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D.B. Civil Miscellaneous Appeal No. 866/2019

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M/s Anandi Lal Lalpuria Proprietorship Firm Through, Proprietor Shri Anandilal Lalpuria S/o Shri Nagarmal Aged 74 Years R/o 5, Raj Bhawan Road Civil Lines Jaipur

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----Appellant

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Versus

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Union Of India Through Its General Manager North West Railway, Nwr Headquarter Near Jawahar Circle Jagatpura Malviya Nagar Jaipur

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General Manager (Eg), Nwr Headquarter Rail Bhawan Near Jawahar Circle Jagatpura Malviya Nagar Jaipur

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Divisional Railway Manager North West Railway, Drm Office Power House Road Jaipur

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----Respondents

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For Appellant(s) : Mr.P.C.Sharma in Civil Misc.Appeal No.1711/2019 (Respondent in Civil Misc.Appeal No.866/2010)

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For Respondent(s) : Mr.Devi Dutt Sharma (Appellant in Civil Misc.Appeal No.866/2019)

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(2 of 5)

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[CMA-1711/2019]

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HON'BLE MR. JUSTICE PRAKASH GUPTA HON'BLE MR. JUSTICE PANKAJ BHANDARI

Judgment

DATE OF JUDGMENT

13/02/2020

BY THE COURT: (Per Hon’ble Pankaj Bhandari,J)

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Appellants have preferred separate Miscellaneous Appeals aggrieved by order dated 05.12.2018 passed by Commercial Court No.1, Jaipur whereby objections filed by the objector-Union of India was partly allowed.

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Objectors have preferred the Miscellaneous appeal seeking quashing of the entire arbitral award dated 22.06.2017 whereby claimant has preferred appeal claiming interest awarded by the arbitrator.

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It is contended by the counsel for Union of India that the arbitrator has erred in passing the award as a whole as it was contrary to the General Conditions of Contract (hereinafter to be referred to as “GCC”) which has a statutory backing as envisaged under Article 311 of the Constitution of India. It is contended that as per clause 16 (3) of GCC, no interest is payable on the Earnest Money and Security Deposit or amounts payable to the Contractor under the Contract. It is also contended that as per clause 64 (5) of the GCC “where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made”.

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Counsel for Union of India has also referred to clause 16 (4)

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(h) of the GCC. The relevant portion of which reads as under: “Whenever the contract is rescinded, the Security Deposit shall be forfeited and the Performance Guarantee shall be encashed……….”

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Clause 16 (4) (g) (iii) reads as under: “The Contract being determined or rescinded under provision of the GCC, the Performance Guarantee shall

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(3 of 5)

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[CMA-1711/2019]

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be forfeited in full and shall be absolutely at the disposal of the President of India.”

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It is contended that as claimant did not perform the contract the same was rescinded and the performance guarantee was forfeited which was as per the GCC.

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Learned Arbitrator as well as the Court below have failed to pass the award inspite of there being specific provisions in the GCC

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Learned counsel for the claimant contends that the claimant was performing his part of the contract but the Railways did not release his payment for a pretty long time and that he had executed work worth about Rs. 2.44 crore and Rs. 44 lacs was not released for want of availability of funds with the Railways, which resulted into delay in execution of the work. It is contended by the counsel for the claimant that as per provisions in the agreement monthly payment was required to be released to the contractor but Railways failed to adhere to the agreed terms and conditions of the agreement. It is also contended that there was delay in execution as drawings, designs and lay-out plan were not timely supplied to the claimant. The claimant requested vide letters for providing drawing and design. Claimant has also requested time and again to the respondents to remove the hurdles. Claimant has also issued letters for release of payment of the work executed. It is contended that the DRM issued letter dated 16.03.2012 wherein he admitted that work of Hospital was held up for want of funds and assured that funds have been allotted soon. Claimant requested that excess amount to be paid as excess quantity of steel was used, actual market rate should be paid, to which the respondents did not pay any heed. It is contended that the contract was not concluded due to fault of the Union, hence, there

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(4 of 5)

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[CMA-1711/2019]

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was no justification in encashing the performance guarantee of the claimant. The Arbitrator has not committed any error in awarding the amount with interest and the learned Court below has erred in rejecting the claim of interest on the performance guarantee. Learned Court below has further erred in not awarding litigation charges.

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We have considered the contentions.

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From perusal of the record as well as the documents produced, it is evident that the claimant was performing his part of the contract and it was only on account of delay on part of the Railways in making the payment, that the contractor could not perform the contract on time. The contention of the counsel for the Union of India that the contract has been rescinded, hence, forfeiture of bank guarantee made as per clause 16 (4) (g) (iii) of GCC does not appeal to this Court for the very reason that in the present case the reason for non- performance of the contract is on account of delay and latches on the part of the Railway administration in releasing the money for the work performed by the contractor. Hence, Railway has erred in encashing the performance guarantee of the contractor. Learned Arbitrator as well as the Court below have clearly held that non-performance of the contract on account of fault of the Railways, hence, award of refund of the performance guarantee and security deposit is justifiable and calls for no interference by this Court.

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As far as award of interest on the performance guarantee and security deposit is concerned, the Arbitrator has awarded interest on the same, but the Court below as per the terms and conditions of the GCC has rejected the claim of interest, which also does not calls for any interference.

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(5 of 5)

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[CMA-1711/2019]

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Learned Court below has awarded interest on the pending bills as ordered by the Arbitrator, which also does not call for any interference as the amount was retained by the Railways without any authority and the amount was not paid even after the work was performed. Claimant has been deprived of his money for no fault of his, hence, award of interest on the said amount is justifiable.

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We find no merit for the reasons stated above in both these appeals. Hence, the same are dismissed. The order passed by the Court below is upheld. Stay Application in Civil Misc.Appeal No.1711/2019 also stands disposed.

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(PANKAJ BHANDARI),J

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(PRAKASH GUPTA),J

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Reserved judgment/teekam

Union of India through the General Manager v. M/S Anandi Lal Lalpuria, Proprietorship Firm

Case brief

What is this about?

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Union of India through the General Manager v. M/S Anandi Lal Lalpuria, Proprietorship Firm

Case brief

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What did the court decide?

What the court decided

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