2013 (4) TMI 507 - HC - Companies Law

Due to various breaches on the part of the petitioner the work could be completed after a delay of 1435 days - Held that - While deciding the claim(s) the learned Arbitrator has given reasons for his finding and adjudication. As time was not the essence of the contract, as it was set at large through unilateral extensions, as per law if time is not the essence of the contract, notice under Section 55 of Contract Act, 1872 is not required. This fact is clear from the second para of Section 55 of the Contract Act, 1872. M/s. Hind Construction Contractors by its sole proprietor Bhikamchand Mulchand Jain (Dead) by L.R. s Vs. State of Maharashtra, AIR 1979 Supreme Court 720. Relevant para 9 reads as under - Having regard to the aforesaid material on record, particularly the clause in the agreement pertaining to imposition of penalty and extension of time it seems to us clear that time (12 months period) was never intended by the parties to be of the essence of the contract. Further from the correspondence on the record particularly, the letter (Ex. 78) by which the contract was rescinded it does appear that the stipulation of 12 months period was waived, the contractor having been allowed to do some more work after the expiry of the period, albeit at his risk, by making the recision effective from August 16, 1956. It is evident that the arbitrator has rightly awarded 12% interest as even the Nationalized banks are charging more than 12% on clean loans for commercial activities - Reference to invocation of clause 3-A is irrelevant - The learned Arbitrator has rightly awarded the cost of arbitration in favour of the respondent - Under these circumstances the objection filed by the petitioner are liable to be dismissed.

Issues Involved:
1. Validity of the award under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Delay in completion of work and attribution of responsibility.
3. Legality of levying compensation under clause 2 of the agreement.
4. Claims for compensation and damages.
5. Award of interest and costs by the Arbitrator.

Detailed Analysis:

1. Validity of the Award under Section 34 of the Arbitration and Conciliation Act, 1996:
The petitioner challenged the award dated 20th November 2009, under Section 34 of the Arbitration and Conciliation Act, 1996. The court upheld the award, finding no grounds for interference as it was passed after considering the facts and evidence presented by both parties.

2. Delay in Completion of Work and Attribution of Responsibility:
The respondent was awarded the work of constructing a link road underpass with a completion deadline of 23rd May 1996. However, due to breaches by the petitioner, the work was completed on 28th March 2000, resulting in a delay of 1435 days. The Arbitrator found that 1309 days of delay were attributable to the petitioner, and the remaining 126 days were unjustly penalized.

3. Legality of Levying Compensation under Clause 2 of the Agreement:
The Arbitrator concluded that the compensation levied by the Superintending Engineer for 126 days was unjustified. The Arbitrator cited multiple judgments to support the decision that the levy of compensation under clause 2 was inequitable and redundant since the time was not the essence of the contract. The Arbitrator emphasized that the entitlement to compensation should be decided by the Arbitrator, while the quantum could be determined by the Superintending Engineer.

4. Claims for Compensation and Damages:
- Claim No.1: Partially allowed, awarding Rs.1,80,516/- for the undisputed quantity of I-Section.
- Claim No.6: Partially allowed, awarding Rs.57,847/- for the steel struts embedded in the raft portion.
- Claim No.7: The Arbitrator found the levy of compensation under clause 2 to be invalid.
- Claim No.8: Allowed, awarding Rs.5,00,000/- under clause 10(cc) for work executed during the last four months.
- Claim No.10: Allowed, awarding Rs.5,07,500/- for damages.
- Claim No.16: Allowed, awarding Rs.50,000/- for the cost of arbitration proceedings.

5. Award of Interest and Costs by the Arbitrator:
The Arbitrator awarded interest at 12% per annum from 3rd May 2002 until the date of the award and until realization. The court found this rate to be reasonable, considering that nationalized banks charge more than 12% on clean loans for commercial activities. The award of Rs.50,000/- as the cost of arbitration proceedings was also upheld.

Conclusion:
The court dismissed the objections filed by the petitioner, finding no merit in them. The award passed by the Arbitrator was upheld, and the petitioner was held responsible for the delays. The compensation levied under clause 2 was deemed invalid, and the claims for damages and costs were justified. The interest rate awarded by the Arbitrator was considered appropriate. No costs were imposed on the petitioner for the objections filed.

← Previous Next →