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TMI Blog2023 (3) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Arbitral Tribunal was not justified in rejecting Claim Nos.33 and 34 which were with respect to forfeiture of security deposits, which could have been under Clause 17.4. However, it is required to be noted that as such the finding recorded by the Arbitral Tribunal on applicability of Clause 17.4 and/or rescinding of the contract under Clause 17.4 has not been set aside either by the learned Single Judge or by the Division Bench of the High Court and therefore, the findings recorded by the learned Arbitral Tribunal on applicability of Clause 17.4 has attained the finality. The learned Arbitral Tribunal as such was absolutely justified in considering whether IRCON was justified in rescinding the contract, may be either under Clause 60.1 or under Clause 17.4. Even otherwise, from the material on record and even the notice dated 21.02.1994 and the subsequent notice dated 07.03.1994, we are satisfied that the IRCON was satisfied that the work could not be completed by the contractor even within further extension of time. Both, under Clause 17.4 and 60.1, on failure of the contractor to complete the work, the IRCON is justified in rescinding the contract and forfeit the secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JUDGMENT M. R. Shah , J. 1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 14.08.2018 passed by the High Court of Delhi at New Delhi in FAO(OS) No.112 of 2018 by which the High Court has partly allowed the said appeal, the Indian Railway Construction Company Limited (hereinafter referred to as IRCON ) has preferred the present appeal. 2. The brief facts leading to filing of the present appeal in nutshell are as under: 2.1 That, an Agreement was entered into between IRCON and the respondent M/s. National Buildings Construction Corporation Limited (hereinafter referred to as NBCC ), whereby the respondent was awarded the work of construction of Railway Station cum Commercial Complex at Vashi, Navi Mumbai at a cost of Rs.3042.91 lakh, to be constructed within a period of 30 months from 05.04.1990. NBCC failed to complete the work in time. Thereafter, the supplementary agreements were entered into between the parties. As the provision for grant of advances had exhausted, NBCC approached IRCON with modified programme for completion of works and sought for additional financial aid on certain terms and conditions. IRCON in consultation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of security deposit amounts i.e. Rs.5,57,486/+ Rs.60,85,840/by observing and concluding that once the Arbitral Tribunal found that the termination with regard to Clause 60.1 was not justified, it was not open for the Arbitral Tribunal thereafter to consider the termination under Clause 17.4 justifying forfeiture of the security deposits. The learned Single Judge of the High Court also set aside the award passed by the learned Arbitral Tribunal on Counter Claim No.3 by observing that there is no clause in the contract in particular awarding 18% interest per annum on special advance. 2.5 The judgment and order passed by the learned Single Judge was the subject matter of appeal under Section 37 of the Arbitration Act before the Division Bench of the High Court. 2.6 By the impugned judgment and order, the Division Bench of the High Court has partly allowed the said appeal under Section 37 of the Arbitration Act to the extent upholding the award passed by the learned Arbitral Tribunal insofar as awarding the interest on special advance is concerned. The rest of the judgment and order passed by the learned Single Judge has been affirmed / confirmed by the Division Bench of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no such provision of award of interest in the contract / supplementary Agreements. It is submitted that however, the Division Bench of the High Court has not properly appreciated the fact that there is no bar to award interest on the amount advanced. It is submitted that the Arbitrator has power to award interest pendente lite unless specifically barred from awarding it. Reliance is placed on the decision of this Court in the case of Raveechee and Company Vs. Union of India reported in (2018) 7 SCC 664. Making above submissions, it is prayed to allow the present appeal and restore the award passed by the Arbitral Tribunal. 5. Learned senior counsel, Mr. Minocha appearing on behalf of the respondent NBCC while supporting the impugned judgment and order passed by the High Court has vehemently submitted that in the present case admittedly the IRCON invoked Clause 60.1 and rescinded the contract. It is submitted that even the learned Arbitral Tribunal also observed and held that the IRCON was not justified in rescinding the contract under Clause 60.1. It is submitted that however, thereafter the Arbitral Tribunal justified the termination of the contract under Clause 17.4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e required to be referred to, which are as under: TIME TO BE OR THE ESSENCE OF THE CONTRACT: 17.4 The time for completion of the works by the date or extended date fixed for completion shall be deemed to be the essence of the contract and if the contractor shall fail to complete the works within the time prescribe the Company IRCON shall, if satisfied that the works can be completed by the contractor within a reasonably short time thereafter be entitled without prejudice to any other right or remedy available on that behalf to recover by way of ascertained liquidated damages a sum equivalent to one per cent of the contract value of the works for each week or part of week the contractor is in default and allow the contractor such further extension of time as the Project Manager may decide. If the Company (IRCON) is not satisfied that the works can be completed by the contractor and in the event of failure on the part of the contractor to complete the works within the further extension of time allowed as aforesaid the Company (IRCON) shall be entitled, without prejudice to any other right or remedy available in that behalf, to appropriate the contractor s security deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Then and in any of the said cases, the Project Manager on behalf of the Company (IRCON) may serve the contractor with a notice in writing to that effect and if the contractor does not within 7 days after the delivery to him of such notice proceed to make good his default in so far as the same is capable of being made and carry on the work or comply with such directions as aforesaid to the entire satisfaction of the Project Manager the Company (IRCON) shall be entitled after giving 48 hours notice in writing under the hand of the Project Manager (to remove the contractor from the whole or any portion or portions as may be specified in such notice) of the works without thereby avoiding the contract or releasing the contractor from any of his obligations or liabilities under the contract and adopt any or several of the following courses. a) to rescind the contract, of which rescission notice in writing to the contractor under the hand of the Project Manager shall be conclusive evidence, in which case the security deposit of the contractor shall stand forfeited to the Company IRCON without prejudice to the Company s (IRCON) right to recover from the contractor any amount by wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Nos.33 and 34 inter alia on the ground that once the Arbitral Tribunal gave the finding that the IRCON was not justified in invoking Clause 60.1, thereafter it was not open for the Arbitral Tribunal to take the help of Clause 17.4 and therefore, the learned Arbitral Tribunal was not justified in rejecting Claim Nos.33 and 34 which were with respect to forfeiture of security deposits, which could have been under Clause 17.4. However, it is required to be noted that as such the finding recorded by the Arbitral Tribunal on applicability of Clause 17.4 and/or rescinding of the contract under Clause 17.4 has not been set aside either by the learned Single Judge or by the Division Bench of the High Court and therefore, the findings recorded by the learned Arbitral Tribunal on applicability of Clause 17.4 has attained the finality. The learned Arbitral Tribunal as such was absolutely justified in considering whether IRCON was justified in rescinding the contract, may be either under Clause 60.1 or under Clause 17.4. Even otherwise, from the material on record and even the notice dated 21.02.1994 and the subsequent notice dated 07.03.1994, we are satisfied that the IRCON was satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the work and therefore, the IRCON was justified in rescinding the contract. The said finding as observed hereinabove has attained finality. Therefore, the IRCON was absolutely justified in forfeiting the security deposits and therefore, the learned Arbitral Tribunal was absolutely justified in rejecting Claim Nos.33 and 34, which were with respect to forfeiture of security deposits by the IRCON. Both, the learned Single Judge as well as Division Bench of the High Court have seriously erred in setting aside the award passed by the learned Arbitral Tribunal rejecting Claim Nos.33 and 34. We are of the opinion that the learned Single Judge, therefore, exceeded in its jurisdiction under Section 34 of the Arbitration Act quashing and setting aside the wellreasoned award passed by the learned Arbitral Tribunal on rejecting Claim Nos.33 and 34, which the Division Bench of the High Court has wrongly affirmed. 7.4 Under the circumstances, the impugned judgment and order passed by the learned Single Judge as well as the Division Bench of the High Court quashing and setting aside the award passed by the learned Arbitral Tribunal rejecting Claim Nos.33 and 34 deserve to be quashed and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the powers under Section 37 of the Arbitration Act. However, at the same time to award the interest @ 18% can be said to be on a higher side. In the facts and circumstances of the case, if the interest is awarded @ 12% on advance for the hypothecation of equipment, the same can be said to be reasonable interest. 8. In view of the above and for the reasons stated above, present appeal succeeds. The impugned judgment and order passed by the learned Single Judge as well as the Division Bench of the High Court quashing and setting aside the award passed by the Arbitral Tribunal rejecting Claim Nos. 33 and 34 are hereby quashed and set aside and the award passed by the Arbitral Tribunal rejecting the claim Nos. 33 and 34 is hereby restored. The impugned judgment and order passed by the Division Bench of the High Court in confirming the judgment and order passed by the learned Single Judge insofar as quashing and setting aside the award passed by the Arbitral Tribunal awarding the interest @ 18% on the advance for hypothecation of equipment is concerned, the same is hereby quashed and set aside and the award passed by the Arbitral Tribunal awarding the interest on advance for hyp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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