Bombay High Court
Plr Hc Rbr Jv vs Union Of India on 24 June, 2025
2025:BHC-OS:9305
CARBP.51.2024.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO.51 OF 2024
Union of India Through The
General Manager Central Railway ...Petitioner
Versus
PLR HC RBR JV ...Respondent
WITH
INTERIM APPLICATION (L) NO.20681 OF 2024
IN
COMMERCIAL ARBITRATION PETITION NO.51 OF 2024
PLR HC RBR JV ....Applicant
IN THE MATTER BETWEEN
Union of India Through The
General Manager Central Railway ...Petitioner
Versus
PLR HC RBR JV ...Respondent
Mr. R.V. Govilkar, Senior Advocate for the Petitioner.
Mr. Vishwajit P. Sawant, Senior Advocate a/w. Vasudeva Naidu i/b.
Prabhakar M. Jadhav, Advocates for Respondent.
CORAM : SOMASEKHAR SUNDARESAN, J.
RESERVED ON : FEBRUARY 28, 2025.
PRONOUNCED ON : JUNE 24, 2025.
JUDGEMENT:
Context and Factual Background:
1. This is a Petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (“the Act”) challenging an arbitral award dated
Digitally
signed by
AARTI
AARTI GAJANAN
GAJANAN
PALKAR
PALKAR
Date:
May 31, 2023 (“Impugned Award”) in connection with disputes and
2025.06.24
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CARBP.51.2024.docdifferences relating to an agreement dated September 24, 2018
(“Agreement”). The Agreement relates to work connected with the
railway line between Wardha and Nanded and related to embankment,
cutting including bridge approaches, trolley refuges, construction of
side drains, minor bridges etc.
2. The Agreement was preceded by a tender notice dated October
25, 2017, issued by the Petitioners (collectively, ” Railways”). The offer
made by the Respondent, a joint venture (” Contractor”) had been
accepted by a letter of acceptance dated May 24, 2018, indicating the
approximate value of contract at Rs. ~124.96 crores. The completion
deadline was 24 months from the date of the letter of acceptance i.e.
May 23, 2020. The Agreement entailed submission of a performance
bank guarantee by the Contractor in the sum of Rs. ~6.24 crores to be
kept valid until July 23, 2020 – two months after the deadline. The
Contractor also had to provide a security deposit of Rs. ~6.24 crores.
3. Running Account Bills (“RA Bills”) were to be raised by the
Contractor from time to time. The Contractor completed works as
assigned from time to time by the Railways officials to the extent of Rs.
~108.73 crores which was covered by the RA Bills up to the sixth RA
Bill. Until this point, all bills were cleared by the Railways.
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4. On April 29, 2020, the Contractor sought extension of time. The
delay was attributed to the failure of the Railways to acquire forest
land, revenue land and farmer land, and restrictions arising out of the
lockdown imposed on account of the Covid-19 Pandemic. The request
for such extension was made under Clause 17-A(ii) and Clause 17-A(iii)
of the General Conditions of Contract (“GCC”) governing the
Agreement. The former sub-clause applies where the extension is
sought citing reasons for delay that are not attributable to either party,
while the latter applies where the reasons for delay are attributable to
the Railways. An application for a second extension was made on May
8, 2020, asking for the deadline to be shifted to January 17, 2021. The
reasons set out were the same – again under Clause 17-A(ii) and Clause
17-A(iii) of the GCC and the Covid-19 lockdown, and there was no
quarrel on the reasons attributed.
5. The Railways did not object to the reasoning, and by a letter
dated June 29, 2020, granted extension until December 31, 2020,
without imposing any penalty and accepting price variation arising due
to the delay.
6. The Contractor continued to work under the extended time. A
joint measurement of further work was effected on June 22, 2020, and
the seventh RA Bill was prepared on July 13, 2020, based on such
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measurement. The cumulative value of the work done by this RA Bill
stood at Rs. ~138.78 crores. However, despite joint measurement, the
Railways did not pay this bill on the premise that the excess work
carried out by the Contractor fell within the ambit of restricted
quantities.
7. Joint measurement was then carried out on March 16, 2021, for
preparation of the eighth RA Bill, and the work that would be covered
by this bill was to be valued at Rs.~8.22 crores. The eighth RA Bill was
neither prepared nor approved by the Railways.
8. Thus, according to the RA Bills raised, the total value of the work
carried out by the Contractor was Rs.~147 crores while what was paid
by the Railways was Rs.~124.95 crores. This lies at the heart of the
disputes between the parties.
9. The Railways had a change of personnel handling the project in
its interaction with the Contractor, with a new Deputy Chief Engineer
being appointed at Wardha in January 2021. According to the
Contractor, everything changed after this, and past decisions were
second-guessed. The newly appointed Deputy Chief Engineer has also
been examined in the arbitral proceedings as a witness.
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10. Meanwhile, the deadline was extended from time to time and the
new deadline was May 31, 2021, on which date, a fresh extension was
sought, again citing the same provisions of the GCC, requesting for a
new deadline of December 31, 2021. The reasons cited were continued
delay in land acquisition, the strict lockdown restrictions due to the
Covid-19 Pandemic, approval for pending railway bridges not having
been granted by the Railways, and the refusal of the Railways to
prepare the eighth RA Bill despite joint measurement having been
made.
11. This time, the Railways did grant an extension on July 22, 2021,
but imposed a token penalty of Rs.1,000 and also refused to accept a
price variation. The grant of the extension was provided in reliance
upon Clause 17-B of the GCC, which governs extension of time due to
delay for reasons attributable to the Contractor. Under Clause 17-B, if
the delay is due to reasons not falling under Clause 17 ( force majeure)
or Clause 17-A (extension due to modification, or for reasons
attributable to neither party, or attributable to the Railways) , an
extension may be granted provided the Railways is satisfied that the
work can be completed within a reasonably short time. A penalty or
liquidated damages in the sum of 0.5% to 1% of the contract value for
each week of delay is envisaged subject to a cap of 10% on the first Rs. 2
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lakh and 5% on the balance value. The provision also envisages
imposition of a token penalty.
12. This led to a breakdown in the relationship between the parties –
the Contractor contended that the refusal to release the eighth RA Bill
despite joint measurement, the refusal to pay the approved seventh RA
Bill, and the imposition of a denial of price variation made it impossible
to continue to work. The Railways called for a fresh measurement
despite the joint measurement having been effected in March 2021.
This was protested by the Contractor, although he claims to have
showed up for the measurement, which was not carried out. The
Contractor pointed out that he was hard-pressed due to the severe
lockdown restrictions while the Railways contended that inadequate
manpower and machinery was deployed, and therefore the delay was
attributable to the Contractor. The Railways wrote to the Contractor
asking it to complete the work while the Contractor wrote to the
Railways that the work could not be carried out under the conditions
imposed by the Railways. This stand-off led to the arbitration
proceedings, which led to the Impugned Award.
Core Elements of the Arbitral Claims and Proceedings:
13. In the arbitral proceedings, the Railways contended that there
was no option but to grant extension from June 1, 2021 to December
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31, 2021, but necessarily under Clause 17-B of the GCC. The Contractor
could have well carried out work in respect of minor bridges, drain,
trolley refuges and other works, the Railways contended. Deficiencies
in the work were also complained of and pointed out to the Contractor,
but he failed to deploy adequate manpower and machinery to have the
deficiencies addressed. It was sated that the Railways, in fact, had to
effect certain recoveries from the Contractor and this process was
initiated on September 27, 2021. According to the Railways, the
Contractor had abandoned work in November 2020. The eighth RA
Bill was not prepared by the Railways because of deficiencies found in
the joint measurement. The Railways contended that it would suffer
losses due to the deficiencies in the work done and also due to the costs
and losses, having to issue a fresh tender to complete the work left
incomplete by the Contractor.
14. The Learned Arbitral Tribunal considered the evidence presented
by the parties, examined the record, and has returned factual findings
analysing the evidence to rule as follows:
a) The Contractor was entitled to the value of the restricted
quantities to the tune of Rs. 13,82,78,075;
b) The Contractor had proved that he was entitled to the value of
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CARBP.51.2024.docthe joint measurement made on March 16, 2021 to the tune of
Rs. 8,22,68,293.35;
c) The Contractor was entitled to the price variation claim to the
extent of Rs. 2.87 crores as claimed;
d) The Contractor was entitled to receipt of the work completion
certificate in respect of the work carried out and measured
jointly and recorded on March 16, 2021;
e) The security deposit of Rs. 6,24,78,130 ought to be refunded
to the Contractor;
f) Costs of the arbitration were fixed at Rs. 30 lakh; and
g) Pre-award interest was fixed at 8% and post-award interest
was fixed at 10% if the amounts declared as payable were not
paid within three months from the date of the Impugned
Award.
Analysis and Findings:
Additional Work and Delay:
15. The Learned Arbitral Tribunal considered the itemised heads of
quantities referred to in the material on record and examined the
measurement book. The actual quantity of work done as compared
with the quantity of work paid for has been compared. It was found
that as a matter of record, the actual work carried out had to be more
than what was envisaged, and the excess work was not being paid for.
The work actually done was tested, checked and confirmed by the
Railways officials who had overseen and directed the execution of the
work. It was seen that the Executive Engineer had certified that
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necessary tests had been carried out and the results were within
acceptable limits. Conformity with the Railway Standard Specification
Drawings and Plans was also seen. The measurements were tested
entirely and with 100% testing, they were shown as being true and
correct to evidence the work carried out under the directions of the
Railways’ officials.
16. The Learned Arbitral Tribunal noted that the defence of the
Railways was that such additional work constituted modification of the
Agreement, and that the modifications ought to be in writing. Reliance
was placed on Clause 41 of the GCC, to contend that unless such
modifications are incorporated into a formal instrument gained by the
Railways and the Contractor, the Railways would have a right to
repudiate the arrangement. The Learned Arbitral Tribunal, on
scrutiny of the record and the conduct of the parties and the
documentary support for the work done, has noted that the extra work
was indeed carried out under the instructions of the Railways’ officials.
The work is recorded in the measurement book, and it was the Railways
that prepared the seventh RA Bill. The Railways has acknowledged the
excess work done.
17. There was nothing to show that the Railways questioned why
additional work was being done beyond the original stipulation. The
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seventh RA Bill, prepared by none other than the Railways, did not
disown the work done and instead included it. They were only awaiting
internal approval under Clause 41 of the GCC, and permitting the
Railways to repudiate the obligation to pay in the teeth of the
demonstrated direction to carry out the work and confirmation of the
work actually done, would lead to unjust enrichment of the Railways,
the Learned Arbitral Tribunal concluded. The work was in conformity
with the drawings and plans and indeed entirely under the oversight of
the Railways and confirmed by them. The Learned Arbitral Tribunal
noted that the Railways had not even pleaded that unnecessary extra
work that had not been approved by the Railways had been carried out.
Payments under the past RA Bills had even been made for components
of the extra work. The Learned Arbitral Tribunal was convinced that in
the peculiar facts of the case, the claim for the excess work must be
honoured since such work had actually been carried out, measured and
approved, and indeed not protested contemporaneously.
Modification and Article 299:
18. In this Petition, the Railways’ contention is that unless and until
there is a formal instrument confirming that the excess work may be
carried out, in view of Clause 41 of the GCC, the Learned Arbitral
Tribunal was necessarily wrong to allow the claim and has gone beyond
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the binding terms of the contract. Learned Senior Counsel on behalf of
the Railways would go so far as to say that the Impugned Award is
contrary to Article 299 of the Constitution of India. In terms of Article
299(1), all contracts made in exercise of executive power of the State
shall be expressed to be made in the name of the President of India or
the Governor of the respective State. All assurances of property made
in exercise of such executive power shall be executed on behalf of the
President or the Governor or by persons so directed or authorised.
Article 299(2) confers protection from personal liability on the
individual occupying the office of the President and the Governor in
relation to such contracts. In support of this proposition, the Railways
seek to rely on the judgements rendered in Bhikraj Jaipuria1; KP
Chowdhry2; Om Prakash3; and PSA Sical4.
19. Upon an examination of the record considered by the Learned
Arbitral Tribunal and the analysis in the Impugned Award, in my
opinion, no case is made out by the Railways warranting any
interference by this Court. One must not forget the scope of review in
the jurisdiction under Section 34 of the Act. The findings are based on
specific documentary evidence, which in turn is a cogent and clear
record of empirical evidence. The parties had executed the Agreement.
1
Bhikraj Jaipuria vs. Union of India – AIR 1962 SC 113
2
KP Chowdhry vs. State of MP – AIR 1967 SC 203
3
State of Punjab vs. Om Prakash – AIR 1988 SC 2149
4
PSA Sical vs. Board of Trustees – AIR 2021 SC 4661
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The work carried out was in line with the Agreement. The Railways’
officials were actively involved in the oversight of the execution of the
work. The Railways granted extensions based on the factual
parameters on the ground. The finding of the Learned Arbitral
Tribunal is eminently logical and plausible, and one must not forget
that the work in dispute was carried out in the height of the Covid-19
Pandemic and the resultant lockdown. The contention before the
Learned Arbitral Tribunal that adequate manpower and machinery was
not deployed to correct deficiencies and that in fact, the Contractor
ought to refund monies to the Railways rings hollow when it is seen
that despite such assertions, the Railways did not make any counter-
claim in the arbitral proceedings. The measurements in the
measurement book were jointly taken and a pattern of oversight of
additional work, its approval, and paying for excess work done, was
already established by the conduct of the parties. That apart, the
measurement book and the drafting of the RA Bill, which is but in the
control of the Railways, also goes to show written confirmations of
facts from the Railways.
20. The Learned Arbitral Tribunal is the best judge and master of the
evidence before it. The view of the Learned Arbitral Tribunal that the
conduct indicates consensual and well-documented expansion of scale
of work and that the Railways would be unjustly enriched having
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confirmed that it has indeed gotten the work done, cannot be faulted
with. The Learned Arbitral Tribunal has decided that the Railways
could not hide behind the defence that the Agreement ought to have
been amended by a formal instrument when the measurement book
and the RA Bills prepared, approved and cleared, all point to written
confirmations. The absence of any confrontation as to why anything
extra was being performed is also taken into account by the Learned
Arbitral Tribunal. Taking a holistic view of the evidence, the Learned
Arbitral Tribunal has returned a reasonable, defensible and plausible
view, which cannot be faulted.
21. I am not impressed by the attempt to show that the findings are
in conflict with the very contract of the parties and that Article 299 of
the Constitution of India would come to the aid of upsetting the
Impugned Award. Article 299 requires contracts with the State to be in
writing, and stated to be with the constitutional heads of the respective
units of the State – the President of India for the Centre, and the
Governor for the States. Indeed, the parties executed the Agreement in
the instant case. None of the grounds in the Petition make any allusion
to this facet. Indeed, it is open to Learned Senior Counsel to pitch a
challenge on a point of law and that too a constitutional point, but in
my opinion, this is a very high-pitched argument that does not turn the
needle in the Railways’ favour.
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22. The matter at hand does not involve a question of either the State
agency forcing a bidder to perform the requirements in a tender
without executing a contract or a private party forcing the State agency
to respect a purported agreement without its execution. In the case at
hand, the parties indeed executed the Agreement and have been
implementing it. In the course of implementation, they have arrived at
a clear functioning framework and the work was done in that
framework. One would need to take judicial notice of the implications
of the hard lock-down during the Covid-19 Pandemic and the
repercussions for labour that migrated in large numbers. For the
Railways to suddenly change its earlier contemporaneous stance and
allege that adequate manpower was not deployed and therefore the
delay should be attributed to the Contractor, and that too when under
the close supervision and approval right up to the level of the Executive
Engineer the work was approved, confirmed and jointly measured, the
Learned Arbitral Tribunal is eminently justified in taking the view
adopted in the Impugned Award.
Case Law Distinguished:
23. The facts in Bhikraj Jaipuria related to transactions in
commodities in the pre-Independence era. A five-judge bench of the
Supreme Court was interpreting Section 175(3) of the Government of
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India Act, 1935, which was a provision akin to Article 299 of the
Constitution of India. The contract in dispute was an exchange of
letters between the Divisional Superintendent and a private individual
for supply of foodgrains to supply them to employees of the East Indian
Railways during the famine of 1943. The trial court held in favour of
the supplier and the High Court held in favour of the railway
administration stating that the contract was not in the prescribed form.
That apart, assuming it to be valid, the High Court ruled that, on
evidence, there was no basis made out, with evidence being led, to
prove damages suffered by the supplier when the supply was not made
within the deadline stipulated to him. The Supreme Court argreed with
the High Court. In the course of dealing with that framework,
essentially ruling upon the implications of Section 175(3) of the
Government of India Act, 1935, the Supreme Court made observations
about Article 299.
24. This case is completely distinguishable. In the matter at hand, it
is nobody’s case that there had been no execution of a contract at all.
There was a validly tendered and accepted transaction that led to
formal execution of the Agreement. That Agreement is subjected to the
GCC, which contains Clause 41, which is the provision on modification.
Clause 41 requires modification of agreed terms to be in writing in a
formal instrument and signed by the Railways and the Contractor,
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without which the Railways would have a right to repudiate the
arrangement. On facts, there is a joint measurement that reduces to
writing in the measurement book, the assessment of the work carried
out. That joint measurement led to preparation of the seventh RA Bill
which is actually drafted by the Railways. There are multiple
extensions of time citing Clause 17-A(ii) and Clause 17-A(iii) which are
also accepted in writing by the Railways. The cause for the delay is
therefore clearly documented and accepted between the parties. The
Learned Arbitral Tribunal has examined the record and also seen the
witness statement and cross-examination of the the new officer of the
Railways. The Railways claimed to have overpaid the Contractor in the
past and that it was entitled to a refund, but strangely filed no counter-
claim.
25. Taking all these facets together, the view of the Learned Arbitral
Tribunal that there had been a clear understanding and that the
Railways would benefit from unjust enrichment is an eminently
plausible view. In my opinion, it would not be a view that is in conflict
with Clause 41 of the GCC. Whether it is in conflict is a mixed question
of fact and law that the Learned Arbitral Tribunal has answered in its
wisdom and assessment of the evidence in a reasonable and plausible
manner. In my opinion, there is nothing in the finding that is contrary
to the fundamental policy of law in India, even if the Railways has
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chosen to pitch the matter across the bar, as high as being in conflict
with requirements under the Constitution of India.
26. KP Chowdhry is a case of a bidder seeking to raise a contractual
dispute even before the contract post-tender could be signed by the
Government – therefore, it is not relevant to this case. Om Prakash is a
case where the winning bidder withdrew his bid and the Executive
Engineer who had approved the lowest bid sought to enforce a
purported agreement that was not even entered into. In fact, the
Government called the contractor to attend the office within ten days to
sign an agreement, but such event never took place. The Executive
Engineer sought to impose a penalty in the name of the Governor.
Such action was held to be untenable by the Supreme Court. Therefore,
this case too is of no relevance to the matter at hand.
27. PSA Sical too is distinguishable. This was a case where a private
port operator and a Port Trust had executed a license agreement. The
tariff that could be charged by the port operator to shipping lines and
customers was regulated by the Tariff Authority for Major Ports. The
port operator sought to include the royalties payable to the Port Trust
as a cost in the computation of tariff on a cost-plus basis. The tariff
regulator disallowed it. This was sought to be treated as a change in
law. The arbitral award held that it was indeed a change in law and
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directed that the license agreement be modified from a royalty model to
a revenue sharing model. The Section 34 Court upheld the award and
the Section 37 Court set aside the award. The Supreme Court agreed
that the arbitral award could not thrust a new contract on the parties. It
had to confine itself to the contract between the parties.
28. Such an analysis has no bearing at all on the facts of the instant
case. The Learned Arbitral Tribunal has done no such thing. The
Learned Arbitral Tribunal has examined the evidence, including
documentary and oral evidence of the parties, and returned a plausible
view that the parties consented through their exchange of written
communication as to the causes for the delay and that work under the
instructions of the Railways had actually been carried out and now the
Railways could not back out of paying for it. The Learned Arbitral
Tribunal has ruled that the Railways would be unjustly enriched. The
Learned Arbitral Tribunal has noted that despite arbitration having
commenced, the Railways did not walk the talk about payments for any
extra work having been unauthorised. The Railways chose not to test its
own proposition by making a counter-claim for a refund, and leading
evidence on the strength of the same principle that was sought to be
relied upon. The Learned Arbitral Tribunal was eminently justified in
taking the view it has taken. I see no basis for this Court to interfere
with the Impugned Award.
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29. As regards the work covered by the eighth RA Bill, the Learned
Arbitral Tribunal has appreciated evidence contained in the
measurement book, the RA Bills, and come to its view that the work
had been done and ought to be paid for. This is purely a matter of
evidence. The Learned Arbitral Tribunal has also examined the record
to point out that the Contractor indeed reported for a joint
measurement on September 9, 2021, subject to the protest that the
measurement taken on March 16, 2021 was complete and did not
warrant another measurement. However, measurements were not
taken. Taking note of Clause 45 of the GCC, the Learned Arbitral
Tribunal had found that the earlier measurement had been taken in
compliance with the requirements of that provision. The Learned
Arbitral Tribunal has pointed out that under Clause 45, if a
measurement is scheduled by the Railways and the Contractor does not
show up, the Railways is entitled to measure it on its own. However,
despite the Railways’ claim that the Contractor did not show up for a
second measurement, no fresh measurement was carried out by the
Railways on its own in reliance upon Clause 45 of the GCC (even in the
absence of the Contractor, as it was entitled to).
30. The Learned Arbitral Tribunal rejected the request of the
Railways to conduct a fresh measurement under the guidance of the
Learned Arbitral Tribunal when the arbitration proceedings were
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underway, with plausible reasons. It is seen that after mid-2021 others
had been deployed on the site and two years later, any exercise to effect
a measurement would be unreliable – there could be wear and tear as
also additional work carried out by other contractors. That the
Railways chose not to record even a unilateral re-measurement if their
case that the Contractor was resisting participating in it, has weighed
with the Learned Arbitral Tribunal. In that backdrop, when the joint
measurement book is taken by both sides, and indeed the internal
draft of the eighth RA Bill is in conformity with it, the Learned Arbitral
Tribunal has found it unnecessary to doubt the empirical evidence
forming part of the record.
31. Learned Counsel for the Railways in the arbitration had
indicated a Rs.20-crore refund claim as being capable of pursuit
against the Contractor, but the Railways chose not to actually file a
counter-claim in the arbitration. There was nothing on the record to
show what precise amount was to be recovered and in what manner it
was said to be liable to be refunded. The ground of challenge in the
Petition in this regard reiterates the pleadings that the overpayment of
Rs. ~20.52 crores has been made to the Contractor, but is silent on why
no counter-claim was filed in the arbitration. The Learned Arbitral
Tribunal had found that the claim of overpayment was made for the
first time in September 2021 more than one year after the last RA Bill
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was cleared and paid. The Learned Arbitral Tribunal’s assessment that
this is an afterthought, which too has not been backed up with a
counter-claim cannot be faulted.
32. The Petition purports that the Railways asserted with the
contractor time and again about the deficiencies. However, in the
absence of a measurement, even unilaterally, this facet of the matter
has remained hanging. The standard for testing an arbitral award
under Section 34 of the Act is not to create doubt about it but to
demonstrate that the award has patently ignored vital evidence to come
within the ambit of patent illegality.
33. For all the aforesaid reasons, in my opinion, the Petition falls
short of the standard required under Section 34 of the Act to set aside
the Impugned Award.
Price Variation:
34. As regards price variation, the Learned Arbitral Tribunal had
examined the record to find that the Railways had granted extension
without penalty and allowing price variation until it changed its
approach in July 22, 2021. The amount already received by the
Contractor under the head of price variation until the change in stance
of the Railways was Rs. ~10.03 crores. The price variation component
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in the seventh and eighth RA Bills was Rs. ~2.87 crores and this has
been allowed in the Impugned Award. The Learned Arbitral Tribunal
had observed that the price variation component was not seriously
disputed by the Railways, which was primarily disputing that the extra
work amounted to a modification, which was not in conformity with
Clause 41 of the GCC.
35. The only ground of challenge in the Petition is that since the
eighth RA Bill was under dispute, the price variation, as an interlinked
element is deemed to be in dispute. On an examination of the
Impugned Award, in my view, the Learned Arbitral Tribunal has not
stated that the price variation is not in dispute at all. It is the Learned
Arbitral Tribunal’s assessment that the core issue disputed by the
Railways was not the price variation. For example, there does not
appear to be any issue about evidence about the quantum of the price
variation being questionable, with competing claims on what the size of
the variation ought to be. Evidently, this is what the Learned Arbitral
Tribunal has noticed.
36. As regards the validity of the extensions and the denial of the last
extension sought (without penalty and rejection of price variation), the
Learned Arbitral Tribunal has noted the onset of the Covid-19
Pandemic and that the Railways did not supply certain drawings and
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plans it had to provide. The five reasons cited by the Contractor were
noticed – failure to process and approve the price variation; failure to
complete land acquisition; strict lockdown restrictions; approval for
remaining bridges being pending; and the eighth RA Bill not having
been processed since March 16, 2021. Although these reasons had been
accepted by the Railways in the past, agreeing that the Contractor was
not at fault, the Railways now chose to grant extension invoking Clause
17-B (delay being attributable to the Contractor). The Contractor
refused to carry out work at rates that had prevailed over two years ago,
when in the intermittent two years, the Railways had already allowed
variation. The Learned Arbitral Tribunal had come to the view that
such conditions could not be imposed when the Railways had already
accepted that the reasons for extension cited earlier were valid. The
Learned Arbitral Tribunal has held that the Railways were not justified
in imposing penalty and denying price variation without clearing dues
of Rs. 22 crores that had already been accepted.
37. The Learned Arbitral Tribunal has disbelieved the contention
that the Contractor had abandoned work in November 2020 – in fact,
the joint measurement for the eighth RA Bill was conducted on March
16, 2021. Therefore, the Learned Arbitral Tribunal had held that the
imposition of penalty and denial of price variation was completely
wrong. The grounds of challenge of this facet of the Impugned Award
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does not fall anywhere in the scope of Section 34 of the Act. The
Petition alleges that the Contractor was lax and had failed to complete
the work despite getting two extensions. There is not even a whisper
about how the Railways’ deviation from the track record of two
extensions without penalty and with price variation is justifiable. There
is no basis to accept the challenge of the Railways in this regard.
Completion Certificate:
38. Finally, as regards the work completion certificate, the Learned
Arbitral Tribunal has directed such certificate to be issued for all the
work measured as of March 16, 2025. The Learned Arbitral Tribunal
had noted that the Contractor has indeed been paid for the work done
to the extent of Rs. ~124.95 crores, and the price variation of Rs.
~10.03 crores. More than 20% extra work has been carried out with
the approval of the Railways and measured and confirmed that it has
been carried out. Noting and interpreting Clause 48 of the GCC, the
Learned Arbitral Tribunal has noted that work completion certificate
can also be given in respect of any part of the work done even before
full completion of the work. There was no dispute until the payment of
the seventh RA Bill over two years since the commencement of the
relationship under the Agreement. Disputes only began after January
2021 when there was a change of guard at the Railways’ end. Only a
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portion of the original work covered by the Agreement remained and
was stalled due to the complete change of face by the Railways. The
Contractor could not have been expected to continue work in such
circumstances – illegally invoking Clause 17-B when it had already
agreed twice to Clause 17-A being applicable. I am of the view that this
finding is appropriate, logical and plausible.
39. Who was responsible for the delay is a question of fact. That
cannot change lightly without reason. . A sudden change on the facet
of cause for the delay has to be borne out by strong evidence and
material on the record. The Learned Arbitral Tribunal was right in
holding that the Contractor was not at fault for refusing to continue the
work in such circumstances. Since the certificate of completion may be
granted for a part of the work and in view of the findings agreed with
above, there is no basis to disagree with the declaration that the
Contractor is entitled to the completion certificate for work recorded as
of March 16, 2021.
40. The contention in the Petition that Senior Engineer has to be
satisfied with the work for such a certificate to be issued, is answered by
the fact that this is a declaratory relief that is dependent on the reliefs
referred to above. There is no real reason to object to this relief – it is
merely a corollary of the finding that the Contractor had validly
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completed the work as evidenced in the measurement book. The
Railways not having succeeded in convincing the Learned Arbitral
Tribunal on the facets discussed above, there is no merit in the
challenge to the ruling that the completion certificate ought to be issued
for the portion of work evidenced until the joint measurement of March
16, 2021.
Release of Security Deposit:
41. The next facet further inter-twines the logic of all that is held by
the Learned Arbitral Tribunal and dealt with above. It is common
ground that on March 10, 2021, the Railways also released the
performance bank guarantee which was valid until July 23, 2020. The
performance bank guarantee was meant to be released upon
completion of the work as certified. That the Railways released the
performance bank guarantee also underlines its satisfaction with the
work done and measured as of March 2021. The security deposit was
liable to be released one year after completion of the work. In view of
the findings in the Impugned Award, the Learned Arbitral Tribunal has
held that the security deposit was to be released by March 16, 2022.
The performance bank guarantee having been released, there is no
reason, according to the Learned Arbitral Tribunal to withhold the
security deposit any further.
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42. I am unable to disagree with the Learned Arbitral Tribunal.
What weighs with me is the fact that the Railways chose not to even file
a counter-claim in the proceedings when it was asserting that it had a
right to claim the funds back. If the Railways truly believed monies
were due to it, it would have filed a counter-claim. Not having found
the basis to file a counter-claim and having lost in satisfying the
Learned Arbitral Tribunal about the merits of its stance, there is no
basis to hold on the security deposit. Even in the grounds of challenge
in the Petition, the Railways have simply repeated a right to recover
the alleged excessive payment. I am afraid this assertion is of no value
to the Railways. Having lost the basis on which it changed its stance
under the Agreement and having forced the Contractor out of the
project, and having given up its right to have its stance tested with a
counter-claim, there is no basis left for the Railways to hold on the
security deposit. The Learned Arbitral Tribunal cannot be found fault
with in returning its finding in this regard.
Costs Imposed:
43. The challenge to costs of merely Rs. 30 lakh is untenable. This is
a commercial dispute and costs need to follow the event. There is
nothing in the grounds of challenge in the Petition that delve into why
the costs are inappropriate. The ground on this facet reiterates that the
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Contractor did not show up for a repeat of a joint measurement, but
does not explain why the Railways did not carry out a measurement on
its own as it was entitled to under the GCC. I see no basis for
interference with the facet of costs imposed.
Pre- and Post-Award Interest:
44. The challenge to interest simply states that the Railways had not
wrongfully denied the Contractor’s claims and therefore no interest is
payable. For the reasons set out above, the Railways’ contentions have
been dismissed. Therefore, interest must follow for the period for
which funds due to the Contractor were enjoyed by the Railways. The
interest rates applied by the Contractor are reasonable – 8% pre-award,
further leeway of three months to honour the award, and 10% after the
said three-month period. I am not satisfied that any case for
interference on this count is made out.
Evidence Procedure:
45. Before parting, I must take note of one other ground verbally
canvassed by Learned Senior Counsel on behalf of Railways. It was
urged that the Learned Arbitral Tribunal dispensed with the process of
proof of documents which were not admitted. Learned Senior Counsel
contended that the measurement book, which was disputed on
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Railways’ behalf has been accepted and proven documents were not
segregated from unproven documents, and that the Impugned Award
stands vitiated. The Impugned Award is also challenged on the
premise that it does not disclose application of mind as regards the
consideration of documents which were not admitted and denied, and
documents whose existence was admitted but contents were denied,
and documents where neither existence nor contents were admitted.
46. There is not a whisper of this element in the Petition. This
appears to be an improvisation across the bar.. That apart, Learned
Senior Counsel pointed to the opening paragraph in the record of
proceedings when witnesses were examined, to insinuate that the
Learned Arbitral Tribunal had no clue which document was admitted
and which one denied, and that the outcome is completely perverse.
47. I have given careful thought to this element of the attack on the
Impugned Award. I note that the Impugned Award indeed makes
specific reference to specific exhibits by number and to arguments
based on them. That apart, the Learned Arbitral Tribunal had chosen
to write a generic opening paragraph on each date of examination of
witnesses so as to not iterate at every hearing, the precise list of
documents that are admitted or denied and the nature and extent of
admission or denial. Such an opening paragraph would not even be
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necessary on every occasion. That would not mean that the Learned
Arbitral Tribunal had no regard to any basic notion of fairness and
clarity on what is being considered in the course of adjudication.
48. It is trite law to state that strict rules of evidence and procedure
are not applicable to arbitration. The key question is to see if the
Learned Arbitral Tribunal has returned a totally perverse and palpably
irrational and illogical decision. For the reasons set out above, I agree
with the entire outcome in the Impugned Award and find no infirmity
warranting interference under Section 34 of the Act.
Conclusion:
49. For all the aforesaid reasons, the Petition is dismissed as being
devoid of merit. Since this is a commercial dispute, costs would need to
follow the event. Taking into account the fact that the Learned Arbitral
Tribunal has already imposed costs for the arbitration round, costs in
this round are restricted to a token sum of Rs. 2.5 lakhs, which would
be a reasonable and discounted estimate of costs that would be
incurred in a matter of this nature, bearing in mind market rates for
lawyer fees and related litigation expenses.
50. The Petition is finally disposed of in the aforesaid terms.
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51. The Interim Application is taken out by the Contractor for
withdrawal of amounts deposited by the Railways. Any amounts
deposited in this Court along with accruals shall be released to
Contractor forthwith, and in any event within a period of four weeks
from today. With this direction, the captioned Interim Application
stands disposed of.
52. Learned Counsel for the Respondent, upon pronouncement
requests for a stay of this Judgment for a period of eight weeks. Since
the deadline for release of the amounts deposited in this Court is
already fixed at four weeks, there would be no reason to grant such
request.
53. All actions required to be taken pursuant to this order, shall be
taken upon receipt of a downloaded copy as available on this Court’s
website.
[SOMASEKHAR SUNDARESAN J.]
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