Union of India, Rep. by Executive Engineer, Hubli, Central Division, CPWD V. Shri T.G. Shet, Class I Contractor, Guru Krupa and Shri Rajeev Kumar, Arbitrator, Ministry of Urban Development

MFA/102504/2015

AI Insights

The case involves an appeal by the Union of India against the judgment and order of the Prl. District and Sessions Judge, Dharwad, which had dismissed the Union's challenge to an arbitral award. The award directed the Union to pay the respondent contractor Rs.30,22,033 for the construction of dormitories at Navodaya Vidyalaya, Shimogga, which was only partially completed. The Union contested the award, leading to the present appeal. The High Court examined the contributions of both parties to the delays and the appropriateness of the awarded amounts under various heads, ultimately modifying the award but upholding the majority of the arbitral decision.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 798951 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 08-06-2021
• Assessment Year: misc
• Other Referred Cases: M/s. Harish Chandra and Company V. State of Uttar Pradesh, 2016 AIAR (Civil) 67
• Laws Referred To: Arbitration and Conciliation Act, 1996
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: IRAPPA UPPIN
• Assessee Lawyers: M B KANAVI
• Keywords: Appeal; Arbitration; Award; Construction; Contract
• Section: 34

Judgement Text

"IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 8TH DAY OF JUNE 2021 PRESENT THE HON’BLE MR. JUSTICE KRISHNA S.DIXIT AND THE HON’BLE MR.JUSTICE PRADEEP SINGH YERUR MFA NO.102504 OF 2015 (AA) BETWEEN: The Union of India, Rep. by Executive Engineer, Hubli, Central Division, CPWD, Shivasheel Multiplex Complex, Opp: New Bus Stand, Gokul Road, Hubli. … Appellant (By Shri M.B. Kanavi, Advocate) A N D : 1. Shri T.G. Shet, Class I Contractor, Guru Krupa, II Cross, Old Income Tax Office Road, Vidya Nagar, Hubli. 2. Shri Rajeev Kumar, Arbitrator, Ministry of Urban Development, 4th Floor, Old CGO Building, 101, M.K. Road, Mumbai. ... Respondents (By Shri Irappa S. Uppin, Advocate for R1; Notice to respondent No.2 is dispensed with) - - - - - - - - - : 2 : This MFA is filed under Section (1)(b) of the Arbitration and Conciliation Act, 1996, against the Judgment & Order dated 21.07.2015, passed in Arbitration Suit No.2/2014 on the file of the Prl. District and Sessions Judge, Dharwad, dismissing the plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996. This MFA coming on for orders, this day, Krishna S.Dixit, J, delivered the following: J U D G M E N T 1. This appeal by the Union of India seeks to lay a challenge to the Judgment & Order dated 21.07.2015 whereby its challenge to the award mounted in Arbitration and Conciliation No. 2 of 2014 has been negatived by the learned Prl. District Judge, Dharwad. 2. After service of notice, the first respondent contractor having entered appearance through his counsel resists the appeal making submission in justification of impugned Judgment & Order; notice to second respondent arbitrator is dispensed with by a Co- ordinate Bench of this Court, his arraignment as party to the appeal being unnecessary. : 3 : 3. BRIEF FACTS: i) The appellant had called for tender from the experienced contractors for the construction of dormitories/hostels for boys and girls studying in Navodaya Vidyalaya at Shimogga; respondent being the lowest tenderer, his bid came to be accepted and contract was awarded to him on 02.02.2008, the estimated cost of the work being Rs.95,05,864/- . ii) As per the tender documents the work was to start on 14.02.2008 and needed to be accomplished within 210 days i.e., seven (7) months; on the request of the respondent - contractor an extension of two months was accorded without prejudice to recovery of damages in terms of Clause – II of the agreement; the work having not been accomplished even within the extended period, the contract was rescinded on : 4 : 16.11.2009 and the security deposit was forfeited. iii) About 25% of the project was accomplished and there was some dispute between the parties which ultimately was taken to Arbitration; the official Arbitrator having adjudicated the dispute made the Award on 07.02.2014 directing the appellant herein to pay to the respondent contractor a sum of Rs.30,22,033/- with interest at the rate of 10%. The award was put in challege by the appellant in Arbitration Suit No. 2/2014 which came to be dismissed by the impugned Judgment & Order; aggrieved thereby, the Union of India has preferred this appeal. 4. Having heard the learned counsel for the parties and having perused the papers, we are inclined to grant marginal indulgence in the matter as under and for the following reasons: : 5 : a) At the out set we are in agreement with the contention of the learned counsel for the respondent Contractor that in view of the decision of the Apex Court in M/s. Harish Chandra and Company V. State of Uttar Pradesh, 2016 AIAR (Civil) 67, the scope of this appeal some what is limited. It is also true that Section 34 read conjointly with other provisions of the Arbitration and Conciliation Act, 1998 provide for setting aside an arbitral award if it is made in contravention of the provisions of the Act or against the terms of the contract or repugnant to the public policy; keeping this in view, we have approached the matter. b) As already mentioned above, the approximate project cost was Rs.95,05,864/-; this work was to be accomplished within a period of seven (7) months and that an extension of two (2) months on the request of the contractor, is not in dispute; the : 6 : evidentiary material treated by the learned Arbitrator, and later by the learned District Judge goes to show that about 25% of the construction work was accomplished and what was left unaccomplished was 75%; what has been awarded by the Arbitrator for the accomplished part of the work is Rs.30,22,033/-; this is a bit more than the cost of the accomplished job is apparent; in such matters one cannot go by arithmetical precisions because of a host of factors involved in determining the value of the work done, cannot be lost sight of. c) Both the learned Arbitrator and the learned Judge of the Court below in their wisdom have recorded a finding that the officials of the Government have also contributed to the prolongation of the work and this has cost the respondent by way of overhead charges quantified at Rs.4,95,000/-; in our considered view this is : 7 : a bit on the higher side and therefore needs to be scaled down to Rs.3,75,000/-; in fact the learned Arbitrator rejected the counter claim of the appellant Union of India on the ground that its officials too had greatly contributed to the delay brooked in the execution of the construction work; this is adverted to by the learned Judge of the Court below at para 50 of the impugned Judgment & Order. d) There is some force in the vehement contention of the learned CGC appearing for the appellant – Union of India that the contractor has been awarded higher rates for the extra work; the Arbitrator has quantified this amount at Rs.4,46,019/- is true; had he adverted to Clause – 12 of the agreement, arguably rates higher than what are prescribed therein would not have been adopted for valuation; there is also some force in the contention of the learned counsel : 8 : for the contractor that when delay in the execution of work is considerably attributable to the officials of the Government, Clause – 12 cannot be invoked in its strict sense; regard being had to all the attending factors the amount awarded under this head needs to trimmed down to Rs.4,29,000/- from Rs.4,46,019/-. e) There is a lot of force in the vehement submission of the learned CGC, Mr. Kanavi that no interest would have awarded for the withheld amount; under Clause – II of Contract, the Department was entitled to withhold 1% of the amount free of interest; it is a matter of common knowledge that in contracts of the kind Government Departments usually withhold some amount for obvious reasons namely to ensure the speedy and quality accomplishment of the contract; both the Arbitrator and the learned Judge of the court below appear to have lost : 9 : sight of this; therefore the interest amount of Rs.13,688/- needs to be set at naught. f) The contention of learned CGC for the appellant Union of India that no amount could have been awarded under other heads is bit difficult to countenance; the named Arbitrator is himself is an expert in the field; having considered all aspects of the matter he has made the award giving some reason in support thereof; the learned Judge of the Court below has also considered the same in his own wisdom and did not choose to disturb the findings recorded by the Arbitrator and their fall out; we too are broadly in agreement with the same; the reasons assigned by the learned Arbitrator and the learned Judge of the Court below arguably fall short of the ideal requirement, is beside the point; one has to have a realistic approach regard being had to nature of the dispute : 10 : involved. Therefore, we do not agree to disturb rest of the award. In the above circumstances, this appeal succeeds in part. The impugned Judgment & Order having been modified. The award of amount is downwardly revised from Rs.30,22,033/- to Rs.28,00,274/- (Rupees twenty eight lakhs two hundred & seventy four) only; all other terms and conditions are left intact. The appellant shall pay the above amount minus what has already been deposited in the Registry, within three months failing which the delay shall carry an additional interest of 8% p.a. which may be recovered from the erring Officials concerned, personally; the learned Judge of the Executing Court shall accomplish first respondent’s E.P. No.127 of 2014 within an outer limit of six months and report compliance to the Additional Registrar General of this Court. The Registry is directed to release the amount in deposit immediately in favour of the first respondent – Contractor Shri T.G. Shet and that delay in releasing the : 11 : same may entail the concerned officials with disciplinary proceedings. Cost made easy. SD/- JUDGE SD/- JUDGE Vnp* "