Arbitration Petition No.186 of 2009

17th February, 2010

Petitioner Counsel: Mr. C. P. DEOGIRIKAR
Respondent Counsel: Ms. MALAN MANOHARAN i/by Ms. REKHA RAJGOPAL

Cases Cited:
Anupam Engineers Vs. Indian Oil Corporation, Arbitration Petition No.31 of 2009, dt.10/12/2009 [Para 2]
Tata Hydro-Electric Power Supply Co. Ltd. Vs. Union of India, 2003(2) ALL MR 343 (S.C.) =2003(4) S.C.C. 172 [Para 2]
Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation, (2006)4 S.C.C. 445 [Para 2]
Mcdermott International Inc. Vs. Burns Standard Co. Ltd., (2006)11 S.C.C. 181 [Para 2]
Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy, 2007(2) ALL MR 423 (S.C.) =2007 AIR SCW 527 [Para 2]
Numaligarh Refinery Ltd. Vs. Daelim Industrial Co. Ltd., 2008 ALL SCR 580 =(2007)8 S.C.C. 466 [Para 2]
Delhi Development Authority Vs. R. S. Sharma & Co., New Delhi, 2008 ALL SCR 2360 =(2008)13 S.C.C. 80 [Para 2]
Royal Education Society Vs. Lis (India) Construction Co. Pvt. Ltd., 2009 ALL SCR 34 =(2009)2 S.C.C. 261 [Para 2]
Union of India Vs. Arctic India, 2007(6) Bom.C.R. 384 [Para 3]
Sai Enterprises Vs. Mahanagar Telephone Nigam Ltd., 2007(6) Bom.C.R. 390 [Para 3]
Executive Engineer, D.M. I. Divn., Orissa Vs. N. C. Budharaj, AIR 2001 SC 626 [Para 5]
Madnani Construction Corporation Pvt. Ltd. Vs. Union of India, (2010)1 S.C.C. 549 [Para 11]

JUDGMENT

JUDGMENT :- The original claimant the Petitioner, has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) and thereby, challenged the award partially, mainly on the ground of interest and claiming interest @ 18% p.a. from the date of payment that i.e. from 18/04/2006 till 12/01/2009, and also service tax and levies liabilities.

2. I have already taken a view in Arbitration Petition No.31 of 2009, M/s. Anupam Engineers Vs. Indian Oil Corporation, dated 10/12/2009 by referring to the following Supreme Court Judgments of Section 34 of the Arbitration Act, that the award can be modified or the award can be challenged partly.

1. Tata Hydro-Electric Power Supply Co. Ltd. Vs. Union of India, 2003(4) S.C.C. 172 : [2003(2) ALL MR 343 (S.C.)].

2. Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation, (2006)4 S.C.C. 445.

3. Mcdermott International Inc. Vs. Burns Standard Co. Ltd. & Ors., (2006)11 S.C.C. 181.

4. Krishna Bhagya Jala Nigam Ltd. Vs. G. Harischandra Reddy & Anr., 2007 AIR SCW 527 : [2007(2) ALL MR 423 (S.C.)].

5. Numaligarh Refinery Ltd. Vs. Daelim Industrial Co. Ltd., (2007)8 S.C.C. 466 : [2008 ALL SCR 580].

6. Delhi Development Authority Vs. R.S. Sharma & Co., New Delhi, (2008)13 S.C.C. 80 : [2008 ALL SCR 2360].

7. Royal Education Society Vs. Lis (India) Construction Co. Pvt. Ltd., (2009)2 S.C.C. 261 : [2009 ALL SCR 34].

3. I have already modified the awards in the following cases, based upon the Supreme Court's Judgments. Some are as under:

(a) Union of India Vs. Arctic India, 2007(6) Bom.C.R. 384; (b) Sai Enterprises Vs. Mahanagar Telephone Nigam Ltd. & Anr., 2007(6) Bom.C.R. 390, (c) Arbitration Petition No.494 of 2004 in The Board of Trustees of the Port of Mumbai Vs. M/s. Mohinder Singh & Company.

4. The preliminary object is rejected. Therefore, heard the parties finally.

5. The learned counsel appearing for the Petitioner has strongly relied on AIR 2001 SC 626, Executive Engineer, D.M. I. Divn., Orissa Vs. N. C. Budharaj, and thereby contended that in absence of any contra agreement the Arbitrator is empowered to grant interest under Section 31(7) of the Arbitration Act, as well as, as per the provisions of Interest Act, 1978.

6. The learned Arbitrator after considering the material, as well as, the concerned terms and conditions between the parties has granted award in favour of the Petitioner but not granted interest as claimed @ 18% p.a., basically from 21/06/2005. The Petitioner was awarded contract by the Respondent for replacement of existing 2 Nos.166 KVA DG Sets at Airport Mumbai. The agreement was executed accordingly. As there was dispute, the Arbitration clause was invoked on 26/07/2007. The statement of claim was submitted before the Arbitrator on 31/01/2008. The parties have filed their written submissions on 20/09/2008. The sole Arbitrator therefore, passed the impugned award and partly awarded the claim on 27/11/2008.

7. Clause 10(F)(1), as relevant is as under :-

"Tendered rates are inclusive of all taxes and levies payable under the respective State. However, pursuant to the Constitution (Forth Sixth Amendment) Act, 1982 if any further tax or levy is imposed by State, after the date of receipt of tenders, and the contractors thereupon necessarily and properly pays such taxes/levies the contractor shall be reimbursed the amount so paid, provided such payment, if any, is not, in the opinion of Executive Director Engineering/General Manager Engineering (whose decision shall be final and binding) attributable to delay in execution of work within the control of the contractor."

8. The Respondent, considering above and in view of the award paid the amount of Rs.4,33,470/- vide letter dated 13th January, 2009, though resisted by reply dated 18th August, 2009 as under :-

"I further say that the Petitioners are not entitled to interest of Rs.97,022/- on the VAT at the rate of 4% awarded in favour of the Petitioners as per Clause 25 of Agreement."

9. The Petitioner has accepted the said amount but still filed this Petition on 24/02/2009 and challenged the award itself.

10. The time was the essence of the contract. The provisional extension was given to the Petitioner, that was without prejudice to the rights of the authority to liquidate damages. The notice for imposing the penalty on the Petitioner was served on 14/07/2006, and ultimately imposed the penalty of Rs.22,140/- and the same was within the framework of law and specifically Clause 2 of the Agreement and was imposed after giving opportunity to the Petitioner. Even as per the clause 25 of the Agreement read with the clauses referred, no interest was payable on the claims, as approval was necessary from the Regional Inspectorial Organization, Central Electricity Authority, Government of India. The same was received on 03/07/2006, that was essential condition in view of the terms of the Agreement. Even otherwise, the RA Bill was of Rs.70,59,200/- out of which sum of Rs.50 lacs was paid on 13/12/2005. The remaining Rs.20,59,200/- was cleared on 27/12/2005. The second RA Bill of Rs.19,86,000/- was cleared on 15/02/2006. The amount was released after all receipts/installments of material submitted along with final bills as required in terms of Agreement. There is no intention or delay on part of the Respondent.

11. Therefore, in view of the agreed clauses specially 25, between the parties, which provides that no interest is payable in such circumstances on disputed claim the submission relying upon the above Supreme Court Judgments, are of no assistance. In the present facts and circumstances and as there are specific agreed clauses of providing no interest on such payment, in my view, the Petitioners case for the claim of interest is impermissible. It is a commercial contract with specific clause which debars the arbitrator to grant interest, should prevail over general submission of entitlement of interest. The Supreme Court Judgment so relied, they are of no assistance to the Petitioner, in view of specific clauses itself. On the contrary it supports the award. ((2010)1 S.C.C. 549, Madnani Construction Corporation Pvt. Ltd. Vs. Union of India & Ors.).

12. Considering the scope and purpose of Section 34 of the Arbitration Act and the award so challenged, I see the award cannot be stated to be beyond the agreed terms and conditions and/or the law. It is well within the framework of law and the record. There is no perversity.

13. Resultantly, the Petition is dismissed with no order as to costs.

Petition dismissed.