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TMI Blog2009 (4) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Arbitral Tribunal was precluded from adjudicating and deciding the dispute in respect of the bank guarantees. Since, the bank guarantees were given under the contract, which contained an arbitration agreement that applied, even as per the petitioner, to the bank guarantees, there is no error of jurisdiction in adjudication of disputes in respect of the Bank Guarantees by the Arbitral Tribunal. The Arbitral Tribunal has rightly held that once it stood admitted by the petitioner that the material issued by it was used for its project and that there was no theft or pilferage, the petitioner could not make any claim against the respondent for excess consumption or deny the claim of the respondent for additional works which were necessitated due to site conditions and the, change in design. Arbitral Tribunal in the present case comprised of Engineers, two of whom were appointed by the President, Institution of Engineers. Their decision to apply the Hudson Formula for calculating the damages and expenses cannot be faulted merely because they choose to apply the said formula. This objection of the petitioner thus has no merit and is therefore, rejected. The Arbitral Tribunal d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mal attributes of the Cooling Towers, for supply of cement and steel free of cost by NTPC, for variation in the quantity of such cement and steel on certain prescribed consideration and for recovery from the contractor for excess consumption of cement and steel, for price adjustment of materials, labour and fuel linked with price indices, for foreign exchange rate protection and other usual conditions found in building and engineering contracts. 4. A completion schedule was stipulated for making ready the cooling towers. A schedule was also fixed for carrying out the trial operation within a specific period fixed separately for each tower and completion of miscellaneous works was fixed after two weeks thereafter. A Performance Guarantee (hereinafter referred to as the 'PG') test was also one of such terms. A provision was made in the contract for Bank Guarantee for 10% of the contract sum for non-recoverable initial advance and 5% progressive payment for the stages of trial run and commissioning. The validity period for the various guarantees was stipulated in the contract. The performance guarantee was to be valid till the expiry of the guarantee period of one year afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 1996 was a decision of the Engineer appointed under the Contract and since more than 30 days had lapsed from such date the decision of the Engineer had become final and binding and there was no dispute which could be referred for arbitration in terms of the Contract. The petitioner thus declined to appoint its nominee arbitrator. e. The respondent by its letter dated 9th January, 1998 disputed the stand taken by the petitioner and once again called upon the petitioner to appoint the arbitrator. By a separate letter dated 9th January, 1998 the respondent appointed Shri A.P. Paracer, Additional Director General (Retd.), CPWD as its nominee arbitrator and once again requested the petitioner and the President, Institution of Engineers to appoint their nominee arbitrators. f. The President, Institution of Engineers appointed Shri P.P. Dharwadker, Former Chairman and Managing Director, NBCC as the third arbitrator. Since, the petitioner had not appointed its nominee arbitrator, even after the expiry of 150 days, the respondent by its letter dated 31st March, 1998 requested the President of the Institution of Engineers to nominate an arbitrator on behalf of the Petitioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal are the same as those pending before the Court. The matter was, therefore, sub-judice and the Tribunal had no authority to proceed with the same. 7. By its order dated 13th September, 1999 the Arbitral Tribunal rejected the said objections. 8. On 25th June, 2002 the Arbitral Tribunal rendered a unanimous Award awarding the Respondent a sum of Rs.4,75,41,411/-. The Arbitral Tribunal observed that in case the net amount awarded is paid within 30 days of the Award no future interest would be payable but if the petitioner failed to do so, the net amount awarded shall carry an interest of 18% per annum up to the date of actual payment by the petitioner. The Arbitral Tribunal awarded a sum of Rs.6,36,450/- in favour of the Petitioner. However, having regard to the fact that the Petitioner had already taken a credit of Rs.3,76,950/- in the final bill and the fact that the Arbitral Tribunal reduced the final bill by a sum of Rs.2,00,000/- only a sum of Rs.59,500/- was awarded to the petitioner. 9. The petitioner questioned the said award under Section 34 of the Act on several grounds. The award has been challenged separately under Sections 12, 13, 16, 18, 28(3) and 31 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) DLT 902 - [DDA vs. Sahdev Brothers Anr.]; (iii) 2006 (1) AD Delhi 431 - [Union of India vs. Suchita Steels (India); (iv) 2004 (8) AD Delhi 1 - [Devika Mehra vs. Ameeta Mehra]. 11. It is true that an Arbitral Award that is opposed to the public policy of India will be liable to be set aside as held by the Hon'ble Supreme Court in the case of Oil Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. 2003(5) SCC 705. Relying upon the said judgment of the Supreme Court, a Division Bench of this Court has in the case of Gian Chand Totu vs. Subhash Chand Kathuria delivered in FAO(OS) No. 1 of 2004 held that: In our view, the pivotal principle laid down by the Hon'ble Supreme Court -------- while defining the scope for interference with awards on the grounds of public policy is that the award can be set aside if it is patently illegal but the illegality must go to the root of the matter and if the illegalities are of trivial nature it cannot be held that the award is against public policy. It was further held the award can also be set aside if it was so unfair and unreasonable so as to shock the conscience of the Court. (emphasis supplied) 12. This Court, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act in the first instance shall be decided by the engineer, whose decision shall be final to the parties hereto. 26.2 Any dispute or difference including those considered as such by only one of the parties arising out of or in connection with the Contract shall be to the extent possible settled amicably between the parties. 26.3 If amicable settlement cannot be reached then all disputed issues shall be settled by arbitration as provided in clause 27 below. 27. ARBITRATION 27.1 If any dispute or difference of any kind whatsoever shall arise between the Owner and the contractor, arising out of the contract for the performance of the Works whether during the progress of the works or after its completion or whether before or after the termination, abandonment or breach of the Contract, it shall, in the first place, be referred to and settled by the engineer, who, within a period of thirty (30) days after being requested by either party to do so, shall given written note of his decision to the owner and the contractor. 27.2 Save as hereinafter provided such decision in respect of every matter so referred shall be final and binding upon the parties until the completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be limited in the proceedings before such arbitrators to the evidence or arguments put before the Engineer for the purposes of obtaining the said decision. iv. In the alternative the petitioner further submitted that, if, as per the case set up by the respondent, the petitioner had not appointed an Engineer in terms of clause 3 of the contract, it was incumbent upon them to first call upon the petitioner to appoint the Engineer and thereafter refer the dispute to him. That in the absence of the respondent having followed that procedure, the dispute could not be referred to arbitration directly. 14. In response to this plea, counsel for the respondent firstly submitted that the contention of the petitioner that the respondent had made a claim before the engineer is factually incorrect because the petitioner had never appointed an Engineer in accordance with the contract and no such contractual entity existed in fact. According to the respondent, it had submitted its pre-final bill to the petitioner (and not to the Engineer) on 25th July, 1996 and it was that pre-final bill that was rejected by the petitioner by its letter of 9th August, 1996 as also by the letter of 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gust, 1996 being his decision cannot be accepted. e. That in fact even the petitioner had admitted that the letters dated 9th August, 1996 and 16th August, 1996 were really the decisions of the petitioner and not of the Engineer. In this connection the respondent placed reliance on the petitioner's letter dated 9th January, 1998 wherein the petitioner had stated, Regarding your pre-final bill amounting the same had already been examined/checked by us. On our scrutiny it was found that the bill in question is not tenable and the same was to be conveyed to M/s Wig Bros vide our letter ref. no. 08/NCPP/TW/853 dt.9.8.96 and 08/NCPP/INF/10761 dt. 16.8.96. 18. The counsel for the respondent further contended that since no Engineer had ever been appointed by the Petitioner, the respondent had no option but to initiate arbitration directly. The respondent submitted that in these circumstances the limitation of 30 days provided by clause 27 of the contract was of no consequence inasmuch as there being no decision of the Engineer, there was no starting point for such a limitation. In the alternative, the learned counsel further contended that limitations such as the one provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 29th December, 2007 averring for the first time that the letter dated 16th August, 1996 was, in fact, an Engineer's letter as per clauses 26 and 27. Significantly, this was well after the invocation of arbitration by the respondent on 11th November, 2007 and thus, is of no avail to the petitioner. 21. The Arbitral Tribunal was further of the view that even assuming that the letter dated 16th August 1996 constituted a decision of the Engineer, the limitation of 30 days imposed by clause 27 of the contract was void in view of Section 28 of the Contract Act. 22. In my opinion the petitioner's challenge to the award under Sections 11 and 16 of the Act must fail. I find no infirmity with the reasoning of the Arbitral Tribunal on this account. In my opinion, in view of the clear finding of fact that the petitioner never appointed any Engineer in terms of clause 3.4 of the Contract, the question of the letter dated 16th August, 1996 being regarded as a decision of the Engineer under clause 26 of the Contract cannot and does not arise. The fact that there was no Engineer also supports the respondent's contention that no dispute was ever referred to the Engineer for h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the respondents that the matter had to be first referred to the Engineer for decision, it was obligatory on their part to have such a person continue to be appointed so as to have the matter referred to him for decision. That having not been done, there was no need of the matter being first referred to a person who was not even in existence at the relevant time for his decision. ...because there was no Engineer-in-charge or Engineer available at site to whom the matter could be referred for decision, the disputes are required to be referred to an arbitrator... 26. I am in respectful agreement with the view expressed in the said case. This case also supports the further proposition that it was not the duty or the obligation of the respondent to have written to the petitioner to appoint an Engineer. If, as the respondents contend, that the dispute had to be first referred to an Engineer, it was obligatory on the petitioner's part to have appointed such a person. The petitioner was also required to, but did not, communicate any such appointment to the respondent prior to 29th December, 2007. That not having been done there was no need for the dispute to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually not appointed an Engineer in terms of clause 3 of the Contract, the Petitioner, as an after thought, came up with the plea that if such was the case then, the Respondent ought to have requested for the appointment of an Engineer. The issue as to whether an Engineer had been appointed or not is a question of fact and not one of law. The Arbitral Tribunal has given a categorical finding of fact that no Engineer had been appointed. It is not open to this Court to reappreciate that finding of fact. I, therefore, reiterate my finding that in such circumstances, reference of the dispute directly to arbitration was perfectly valid and legal and I am in complete agreement with the findings of the Arbitral Tribunal on this issue. 28. In response to the contention of the Petitioner that since it had taken a stand before the Institution of Engineers that there was no arbitrable dispute, they had no authority to appoint any arbitrator, leave alone two (one as the presiding arbitrator and the other as the Petitioner's nominee arbitrator), learned counsel for the respondent contended as follows: a. The arbitration agreement contained the entire mechanism for the appointment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors, fail to reach an agreement expected of them under that procedure; or c. A person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 30. In the present case, the arbitration agreement provided that in the event of either party, i.e. the Petitioner or the Respondent, failing to appoint its nominee arbitrator within 60 days from being called upon to do so, by the other party, the nominee arbitrator on behalf of such party shall be appointed by the President, Institution of Engineers. The Petitioner also admits this. The Petitioner, in its letter dated 11/13th April, 1998 admits that the President, Institution of Engineers could appoint the arbitrator as requested by the Respondent, in its letter dated 31st March 1998 but it could not do so as there were no disputes. The Petitioner thus did not object to the power but only objected to the exercise thereof. The Respondent could have approached this Court under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties. 33. The learned senior counsel Mr. R.P. Bhat on behalf of the petitioner, has contended that in terms of Section 12 of the Arbitration Act when the Arbitrators were approached for their appointment, they were required to disclose in writing that no circumstances existed that were likely to give rise to justifiable doubts as to their independence or impartiality. That since, the arbitrators did not make any such declaration, the Award deserves to be set-aside under Sections 12 and 13 of the Arbitration Act. He further submits that the Arbitrators acted with a bias against the petitioner as it had challenged the constitution of the Arbitral Tribunal. It is submitted by Mr. Bhat that the Arbitral Tribunal, since it directed the release of the Bank Guarantees, acted with malice towards the petitioner and the proceedings, if perused, would show that the Arbitral Tribunal acted with bias against the petitioner and the petitioner was not given a fair hearing and treatment. According to the petitioner it was meted out unjust, and improper treatment and that the bias of the Arbitral Tribunal against it can be inferred from the fact that as against the claims of the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims which were the subject matter of Part-I, it wanted that the claims in Part-I, should be adjudicated first and therefore the same were submitted in two parts. The Arbitral Tribunal, however, did not pass separate awards but it passed a composite award in respect of both Part-I and Part-II claims. 36. The respondent had by its letter dated 31st August, 1998 submitted the statement of facts in respect of Part I of its claims and on 26th October, 1998 the respondent submitted the statement of facts in respect of Part II of its claim. Reply was filed by the petitioner on 30th December, 1998, separately to Part I and Part II. Therefore, when the petitioner filed its reply both Part I and Part II of the statement of facts had already been filed by the respondent. 37. Mr. P.V. Kapur, the learned counsel for the respondent further submitted as under: - a. That there was/is no prohibition in law in submitting the statement of claim in two parts and none has been averred by the petitioner. Furthermore, in terms of Section 19(3) of the Arbitration Act, the Arbitral Tribunal was at liberty to conduct the proceedings in such manner as it deemed appropriate, without being bound by st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrary to the plain language of Section 12 of the Arbitration Act. According to him, a disclosure is required to be made or given by the Arbitral Tribunal only when there exist grounds, which can give rise to justifiable doubts about the independence or impartiality of the arbitrators. In other words, if no such grounds exist no disclosure is required. d. That a challenge under Section 12 of the Arbitration Act can be made only on the grounds mentioned in the said section and on no other grounds. This is clear from the language of Section 12(3) of the Arbitration Act. The petitioner, according to him, in its belated and time barred application under Section 12 of the Arbitration Act, raised the following grounds: - a. The manner that the Arbitral Tribunal has been constituted gives rise to justifiable doubts about its impartiality; b. None of the arbitrators had disclosed in writing the requisite circumstances as to their independence and impartiality. c. The composition of the Arbitral Tribunal and the procedure followed in its composition is not in accordance with the terms of the agreement between the parties. That these are not grounds on which the composition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub- section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34. (6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. 39. In my view, the petitioner became aware of the constitution of the arbitral tribunal on 6th May 1998 or soon thereafter, but in any event before 19th May 1998 when the Petitioner wrote to the President, Institution of Engineers stating that the appointment of all the three arbitrtaors was illegal and incorrect. The petitioner sent a letter dated 10th June 1998 to the Arbitral Tribunal, which the petitioner has stated were the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner in its application under Sections 12 and 13 of the Arbitration Act, were permissible in view of the phraseology of Section 12 (3) of the Arbitration Act and the said application was therefore, rightly rejected by the Arbitral Tribunal. 42. It was further submitted on behalf of the respondent that the grounds of challenge raised by the petitioner in the present petition, under Sections 12 and 13, were not raised by the petitioner before the Arbitral Tribunal and the same cannot therefore, be entertained by this Court. I am of the view that the petitioner had to first raise its objections before the Arbitral Tribunal in a timely fashion and if the Arbitral Tribunal rejects its submissions, the petitioner at the stage of challenging the Arbitral Award, if it so chooses, could also raise the grounds that it had raised before the Arbitral Tribunal under Section 12 of the Arbitration Act. However, if the petitioner did not or failed to raise an objection before the Arbitral Tribunal, then in view of Section 4 of the Arbitration Act, the petitioner is deemed to have waived such objection and it cannot, at the time of filing a petition under Section 34 of the Arbitration Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of bias is therefore, rejected. 44. As to the submission of Mr. Bhat regarding the award being vitiated on the ground of submission of statement of claim in two parts, my view is that the said contention also has no merit and deserves to be rejected for the reasons stated hereinafter. 45. Section 19 of the Arbitration Act, provides, thus: - 19. Determination of rules of procedure.--(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (V of 1908) or the Indian Evidence Act, 1872 (1 of 1872). (2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. (3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. (4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. 46. A reading of sub-section (3) of Section 19 shows that the legislature has left it to the Arbitral Tribunal to conduct the proceedings in the manner it considers appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d proceeded to pass the award in respect of the same as it was undisputed and admitted by the petitioner. Therefore, this objection of the petitioner does not merit any interference in the award. 49. I, therefore, have no hesitation in rejecting the grounds raised by the petitioner under Sections 12 and 13 of the Arbitration Act and uphold the decision of the Arbitral Tribunal dismissing the petitioner's application under Section 12 and 13 of the Arbitration Act. 50. The grounds raised by the petitioner under Section 16 of the Arbitration Act are a rehash of those raised by it under Section 11 of the Arbitration Act namely, that the decision of the Engineer had become final and binding as the respondent had not invoked arbitration with 30 days from the date of such decision and therefore, there was no question or the appointment of the arbitrators or the constitution of the Arbitral Tribunal; and if no Engineer was appointed the arbitration proceedings could not have been initiated, the decision of the Engineer being condition precedent to the invocation of arbitration. I have already held that the arbitration proceedings had been correctly invoked and the appointme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question the award by raising such sweeping allegations without furnishing particulars and then leave it to this court to investigate the same. An arbitral award can be questioned only on the grounds mentioned in the Arbitration Act. These grounds have to be specifically set out and pleaded. Merely making a general statement like 'documents were not considered by the arbitral tribunal' is not a ground on which an arbitral award should be set aside by the court. A party making such allegations has to show, from the records, that what was the document, when was it filed, what was its relevance, what would be the impact of the document had it been considered and how the non-consideration of the said document has rendered the award patently illegal. This not having been done, the objection raised by the petitioner under Section 18 of the Act is accordingly bereft of any merit and is accordingly, rejected. 53. Mr. Bhat, learned Sr. counsel further urged on behalf of the petitioner citing S.28(3) of the Act that an arbitral tribunal, being the creature of the contract, cannot declare any of the provisions of the contract as null and void and they have to act as per the terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion of the Arbitral Tribunal that an adjustment of Rs.6,00,000/- is to be given for non-conductance of the PG Test is without any basis. Even the price adjustment for not conducting the PG tests was done without asking anything from the petitioner and on the basis of the rebate given by the respondent, which was never agreed to by the petitioner. The price adjustment of Rs.6,00,000/- given by the respondent was erroneous and without any basis. It had never been agreed to by the Petitioner and even then the Arbitral Tribunal accepted the said price adjustment as correct, even though the contract provided that 5% of the contract value i.e. Rs.65,00,000/- was to be deducted from the payments to be made to the respondent for the non-conductance of the PG tests. This deduction being contractual could not have been denied to the petitioner but the Arbitral Tribunal did not consider this aspect at all. According to him, the Arbitral Tribunal was obsessed with the fact that the trial operations had been completed and the cooling towers were commissioned and were functioning. The fact that the cooling tower had been commissioned and were functioning would not exonerate the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r two cooling towers. However, subsequently, the petitioner directed that the respondent should procure PVC fill manufactured by an Indian company i.e. M/s. Munters India Ltd. Since, the PVC fill was being procured from India, M/s. Balcke Durr, refused to come for and perform the PG Tests. The petitioner then approved M/s. Stup Consultants for carrying out the PG tests. However, when the engineers and scientists of M/s. Stup Consultants reached the site to conduct the PG Tests, the petitioner did not permit them to perform the PG tests on the ground that the thermometers were not calibrated. The petitioner was requested by the representatives of the respondent and M/s. Stup Consultants (who had come all the way from Bombay) that they should be permitted to carry out the tests and note the results, subject to the calibration of the thermometers by the petitioner, which could be done later. However, the petitioner did not permit them to conduct the tests, though in terms of clause 14.3.3 of the General Conditions of contract, the tests were to be conducted with the instrumentation and equipment available subject to them being calibrated by the Engineer. Thus, the petitioner acted con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner was never serious about getting the PG tests done, the non-conducting of the PG tests was being used by the petitioner as a ploy to delay making payments to respondents. Though clause 19.00 of the General Conditions of Contract provides that in case, the respondent failed to complete any part of the work then, the petitioner was free to get the same completed by engaging the services of any other contractor and the expenses incurred by the petitioner towards the same would be deducted from the amount payable by the petitioner to the respondent, under the contract, the petitioner did not get the said tests conducted by any other agency also. This he submits clearly, shows that the petitioner itself was not serious about and did not want the PG tests to be conducted, as it would entail the shutting down of the plaint which was in full commercial use. That the petitioner had by its letter dated 26th August, 1996 requested M/s. Fluid Control Research Institute, to do the PG tests and had also informed them that the cooling towers had been operating at a plant load factor of 95.25% and that all four cooling towers were in continuous operations. However, the petitioner had not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank guarantees. The dispute in respect of bank guarantees was rightly and legally referred to arbitration by the respondent. The respondent had given the bank guarantees to the petitioner in terms of the contract between the parties. The petitioner by its letter dated 20th June 1996, called upon the bank, which had given the said guarantees to either extend the same or to encash the same. Due to this conditional invocation, the respondent filed a suit bearing no.1736 of 1996 before this Court, praying therein, inter-alia for declaration and injunction that the petitioner could not invoke the said bank guarantees. In the said suit the petitioner had filed its written statement, taking a preliminary objection, as under: - 10. It is respectfully, submitted that the plaintiff itself has admitted in paragraph 12 of the plaint that the contract between the parties in terms of clause 27 of the general Terms and Conditions of the Contract provides for the settlement of the disputes by arbitration and since the subject matter of the present suit, as admitted by the plaintiff in paragraph 9 is the bank guarantee, the plaintiff cannot seek the adjudication of disputes and difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitral tribunal in the pending arbitration proceedings. This Court by its order dated 23.7.2001 noted that the Arbitral Tribunal had already been constituted and the proceedings before it had started and gave liberty to the respondent to initiate any action available under the Act, and with these observations and liberty dismissed the said application. The suit was withdrawn on the passing of the Awards. There was, thus, no restriction on or order of the court by which the Arbitral Tribunal was precluded from adjudicating and deciding the dispute in respect of the bank guarantees. Since, the bank guarantees were given under the contract, which contained an arbitration agreement that applied, even as per the petitioner, to the bank guarantees, there is no error of jurisdiction in adjudication of disputes in respect of the Bank Guarantees by the Arbitral Tribunal. 59. Mr. Kapur also submitted as under: - (a) To buttress the plea that the PG tests were not mandatory the respondent relied upon the minutes of meetings dated 10th September, 1993, 13th September, 1993 and 28th September, 1993, wherein the petitioner had agreed that in case of non-conductance of PG tests, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cooling towers, commissioned them for commercial operations, has been using the same for commercial operations for the past 12-15 years, without carrying out the PG tests; shows that the said tests were not mandatory, because if the PG Tests were mandatory then the petitioner would not have put the cooling towers to commercial use for the past 12-15 years. (d) That the finding of the Arbitral Tribunal that P G tests cannot be performed and therefore the petitioner was entitled to price adjustment for the same is unexceptionable. The Arbitral Tribunal has rightly held that the matter cannot be kept pending indeterminably and the only resolution would be price adjustment. The petitioner cannot be permitted to benefit from its own wrong by on the one hand preventing the respondent from performing its part of the contract and on the other hand refusing to make payments of the amount due to the respondent on the ground of such alleged non- performance. The petitioner could not have demanded performance by the respondent of an obligation, which the petitioner had itself prevented the respondent from performing and/or which the petitioner had because of its breach rendered incapable of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been taken specifically. NTPC vs. SAG 2005 (6) AD Delhi 256 14. ...He submitted that the parties are bound by their own pleadings which are to be read as a whole and at a later stage of the proceedings, the parties cannot be allowed to travel beyond what was pleaded by them. In support of his submission, he has sought support from a number of decisions of the Apex Court in the case of Udhav Singh vs. Madhav Rao Scindia (1997) 1 SCC 511; Ram Sarup Gupta vs. Bishun Narain Inter College and Ors. (1987) 2 SCC 555 and the Constitution Bench judgment in the case of Bhagwati Prasad vs. Chandrumal laying down a general principle of law that no party should be permitted to travel beyond its pleadings and that all necessary and material facts should be pleaded by the party in support of the case set up by it and that the object and the purpose of pleading is to enable the adversary to know the case it has to meet. It has been further held that pleadings has to be construed as it stands without addition or subtraction of words/or change of its apparent grammatical senses. The intention of the party concerned is to be gathered, primarily, from the tenor and terms of his pleadings taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thirty three lakhs and forty nine thousand only) to be paid by the petitioner to the respondent towards Civil and Structural portion, 5% (five per cent) of the said amount was to be paid after the completion of the PG tests. The petitioner had no right, contractual or otherwise, to deduct 5% of the total contract value towards the cost of non-conductance of PG tests. In the meetings that had taken place between the representatives of the petitioner and the respondent on 10th September, 1993, 13th September, 1993 and 28th September, 1993 it had been clearly agreed that for non-conductance of PG tests for 3 cooling towers the petitioner would accept a rebate of Rs.4,45,500/-. Had the tests been mandatory, then the petitioner would not have agreed to the non-conductance of the PG tests for 3 cooling towers. Since, it was the petitioner, who had prevented the respondent from conducting the PG tests, the only way to resolve the issue was price adjustment which was done as per the agreement arrived at between the parties and recorded in the minutes of meetings dated 10th September, 1993, 13th September, 1993 and 28th September, 1993. Since the PG test for all four towers could not be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his claim before the Arbitral Tribunal it cannot raise it now for the first time before this court in its challenge to the Arbitral Award. The Hon'ble Supreme Court in the case of B.S.N. Joshi Sons Ltd. vs. Nair Coal Services Ltd. Ors. and this Court in the case of Delhi Jal Board vs. Vijay Kumar Goel and in the case of NTPC vs. SAG have taken the same view. However, de hors the above plea even on merits I do not agree with the submission of the petitioner. 63. The cooling towers were taken over by the petitioner on the following dates: Cooling tower No.1 22.04.1992 Cooling tower No.2 26.12.1993 Cooling tower No.3 20.10.1994 Cooling tower No.4 10.07.1995 64. It is also not in dispute that the petitioner has been using the cooling towers continuously and has not got the PG Tests carried out by itself or through any other entity. The petitioner has been using the cooling towers continuously and without any complaint. Neither before the Arbitral Tribunal nor before this Court, the petitioner has been able to point out any deficiency in performance of the Cooling Towers. During the course of arguments a question was put to the counsel for the petitioner that if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was for PG Tests only. 66. It is an admitted case of the parties that the only thing that remained was the conductance of the PG Test and all other obligations had been performed. Thus, can it be said that because the PG Tests had not been performed the respondent would not be made payment for other works done by it merely because payment of such work was linked with the completion of the PG Tests. I do not think so. This is not a part of the contract. The petitioner could not have refused to make payments in respect of work that was done by the respondent and accepted by the petitioner on the ground of non- conductance of PG Tests. The only rebate/deduction the petitioner was entitled to was the price/cost of conductance of PG Test. The petitioner has not brought to the notice of this Court any evidence filed by the petitioner before the Arbitral Tribunal as to actual conduct or the cost of PG Test. In the minutes of the meetings dated 10.09.1993, 1309.1993 and 28.09.1993, the petitioner had accepted a rebate of Rs.4,45,000/- for non- conductance of PG Tests for 3 cooling towers. The Respondent at the same calculation of approximately Rs.1,50,000/- per cooling towers, gave a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s case that under the contract ERV was not permissible or contemplated and has yet been granted by the Arbitral Tribunal. It is admitted by the petitioner that ERV shall be payable to the respondent only when the respondent actually makes the payment to the foreign collaborator. This is what the Arbitral Tribunal has directed. The objection of the petitioner is thus misconceived and does not warrant any interference in the Awards. 70. It is then submitted by Mr. R.P. Bhat, learned senior counsel, that the Arbitral Tribunal has awarded interest @ 18% on delayed payment and future interest @ 18% on the awarded amounts, from the date of the award till the date of its implementation. His objection to the grant of interest is three fold (a) the awarded amount is huge and therefore no interest should have been granted (b) there was no stipulation in the contract for grant of interest and therefore the Arbitral Tribunal could not have awarded any amount of interest and (c) for the period prior to the date when the findings are rendered that the claimant is entitled to the amounts awarded, no interest is payable. 71. Mr. Kapur, the learned senior counsel for the respondent relies u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly apply in respect of all awards. Since the current rate of interest is lower, I am of the view that Mr. Bhat's plea is justified and the interest granted by the Arbitrators should be reduced from 18% to 12%. 74. Mr. Bhat, learned senior counsel for the petitioner has next submitted that while the arbitration proceedings were going on the respondent submitted a final bill. The effect of submission of final bill was that the pre-final bill and all claims made thereunder stood abandoned and therefore, the Arbitral Tribunal could not have adjudicated upon them. The Arbitral Tribunal according to him has acted illegally and without jurisdiction by adjudicating claims that formed part of the pre-final bill. 75. Mr. P.V. Kapur, learned senior counsel appearing for the respondent has submitted that this objection has been raised for the first time during arguments. He further submits that the petitioner has sought to create confusion and that two bills were never propounded. According to him this objection is contrary to the pleadings of the petitioner in the petition inasmuch as in paragraph No. 3 of the petition the petitioner had admitted that all the disputes arose from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit as it is evident that the bill dated 25th July, 1996 was split into two only for the sake of convenience and can in no manner said to be two distinct pre- final and final bills. 78. The petitioner has also assailed the awards on the ground that the Arbitral Tribunal has awarded claims in favour of the respondent which had been settled in the meetings held between the parties on 10.09.1993, 13.09.1993 and 28.09.1993. Since the claims had been settled, there was no dispute between the parties in respect of the same and they could not have been a subject matter of arbitration. 79. It is only a dispute that can be referred to arbitration, and if a claim has been fully and finally settled it certainly cannot be a dispute so as to be referred to arbitration. The petitioner has been unable to demonstrate to this Court any claim which was settled in the said meetings but was yet decided by the Arbitral Tribunal. In fact, the Arbitral Tribunal has already held in the Awards that the Extras and additional works claimed by the respondent were not raised during the said meetings. The claims which were not settled in the said meetings were not precluded from being referred to arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase of Rs.30,000/- only per valve which was eminently reasonable had to be added to the price of Rs.3,15,000/- for the purchase of one butterfly valve to be accounted for by the respondent. 83. The Petitioner has assailed the Awards on the ground that petitioner's claims for excess consumption of cement and steel by the Respondent was wrongly rejected whereas the claim of the respondent for extra item was wrongly allowed by the Arbitral tribunal, the petitioners claim for liquidated damages was wrongly rejected while that of the respondent was allowed, the claims of the petitioner for advances paid to the respondent ought to have been considered and allowed but was wrongly rejected and more generally that the claims of the petitioner were wrongly rejected and those of the respondent wrongly allowed. 84. It is submitted by the respondent that the contract did not include the structural designs and drawings at the time it was concluded. The tender quantities of cement and steel were on the basis of the design of a foreign collaborator based on international standards. He submits that after the tender had been submitted a meeting took place on 03.11.1988 in which the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been dismissed, and they should not have awarded compensation quantum merit which was not claimed. It was urged that the respondent must succeed or fail on the case pleaded by him, and not on a cause of action not pleaded. In our view, there is no substance in this contention. As we have already observed, in respect of the additional work done by the respondent, both the parties set up conflicting oral agreements. These were not accepted by the High Court. If a party to a contract has rendered service to the other not intending to do so gratuitously and the other person has obtained some benefit, the former is entitled to compensation for the value of the services rendered by him. Evidently, the respondent made additional constructions to the building and they were not done gratuitously. He was therefore entitled to receive compensation for the work done which was not covered by the agreement. The respondent claimed under an oral agreement compensation at prevailing market rates for work done by him : even if he failed to prove an express agreement in that behalf, the court may still award him compensation under s. 70 of the Contract Act. By awarding a decree for compensation und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petition and the respondent has therefore, had not opportunity to deal with the same. This is a good reason by itself to reject this objection. However, since I have heard both the senior counsel on this plea I am dealing with the issue on merits as well. 92. In the case of Mc.Dermott International Inc. Vs. Burn Standard Co. Ltd. And Ors. - (2006) 11 SCC 181 cited by the respondent, the Hon'ble Supreme Court after taking note of the various formulae available for calculating damages, including the Hudson formula, has held as under: 106. We do not intend to delve deep into the matter as it is an accepted position that different formulae can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the arbitrator. 107. If the learned arbitrator, therefore applied the Emden Formula in assessing the amount of damages, he cannot be said to have committed an error warranting interference by this Court 93. The Arbitral Tribunal in the present case comprised of Engineers, two o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout merit. 97. The Arbitral Tribunal has declined the petitioner's claim for liquidated damages inter alia, for the following reasons: a. Failure on the part of the petitioner to give notice to the respondent, of its (petitioner's) intention to claim compensation for delay when possession of cooling towers was taken by the petitioner, which disentitled the petitioner to claim compensation in terms of Section 55 of the Indian Contract Act, 1872; b. Refusal by the petitioner to furnish any details in respect of its claim for liquidated damages; c. Non-production of any evidence by the petitioner to show any damage suffered by it on account of alleged delay on the part of the respondent; and d. Cooling Tower no. 1 even though it was completed in April 1992 was not commissioned till November/December 1992, showed that no loss or damage was suffered by the petitioner. 98. I have considered the reasons given by the Arbitral Tribunal for rejecting the petitioner's claim for liquidated damages, which are germane and relevant, and I do not find any illegality or infirmity in the same. The Arbitral Tribunal, has rightly rejected the petitioner's claim for liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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