2016 Supreme(Cal) 505

IN THE HIGH COURT AT CALCUTTA
SOUMEN SEN, J.
State Of West Bengal - Petitioner
Vs.
Pam Developments Pvt. Ltd. - Respondent
A.P. No. 736 of 2011
Decided On : 03-11-2016

Headnote:

[KEYWORD] - Arbitration - Subject - Act Section Referred - Summary

Fact of the Case:

The contract was awarded on 26th November, 2012. The estimated value of the work was Rs.2,34,88,891 out of which half of the work amounting to Rs.1,17,44,464 was awarded to the petitioner. The time for completion of the work was 12 months with effect from 2nd December, 2002 and expiring on 1st December, 2003. The project was overrun by five months. The claim in the arbitration proceeding is essentially for this period of delay. The basis of the claim of the petitioner before the arbitrator appears to be that in view of non-adherence to the payment schedule, the respondent could not complete the work within the contractual period and have thereby suffered loss and damage. A claim on account of loss of business, idle charges and price escalation was made. The respondent by its letter no. PDPL/PWD/DUTTAPUKUR/W -9/97 dated December 23, 2003, intimated the Executive Engineer that the execution of bituminous work would involve Rs.50.00 Lacs (approx) and fund need to be released for works successfully executed so far. The authority was required to consider that prior to laying of B.M. disintegrated W.B.M. surface need to be set right and the cost thereof had to be paid by the department. The authority was informed that the Hot Mix Plant was lying idle costing per day a sum of Rs.82,000/-which became chargeable as the Assistant Engineer had consistently demanded installation of Hot Mixed Plant although it was not required at that stage. The respondent through its letter no. PDPL/PWD/DUTTAPUKUR/W-14/97 dated March 05, 2004 requested the Executive Engineer for making payment of all the R/A bills for work executed up to W.B.M. stage. The authority was once again reminded that the work was suffering for want of cash flow causing delay in taking up bituminous work in spite of the fact that Hot Mix Plant and other equipments were installed in the month of September 2003. Due to non-execution of bituminous work in time W.B.M. surface deteriorated. The respondent through its letter no. PDPL/PWD/DUTTAPUKUR/W-16/97 dated June 10, 2004 informed the Executive Engineer that though the work was completed during the 1st week of April, 2004 and till the date of the letter no complaint was received from the department about poor or unsatisfactory performance of the work but that against the bill amount of Rs.34.17 lacs only a part payment of Rs.14.50 lacs was made in the month of March, 2004 and the balance amount had not been paid till date. Moreover, the Final Bill amounting to Rs.18 lacs was also due and required to be verified and released. The Executive Engineer on August 13, 2004 issued completion certificate in respect of the work completed in April, 2004. Despite issuance of the completion certificate, payments were withheld and the lawful dues of the claimant were not released.

Finding of the Court:

The arbitrator disallowed the claim on account of loss of business due to irregular payments/cash flow from the department, hire charges of private land (arranged by the claimant for installation of H.M.P. and allied machineries] beyond the initial contract period, reimbursement of cost for preparing the job mix formulae from B.E. College (Deemed University), cost of account of repair and rectification work on executed W.B.M. work, losses due to idle charges: hot mix plant and other machineries, the crews of the plant and machineries, idle labour and idle on site establishment, losses due to price escalation on the work executed beyond the initial contractual period, payment due against the 5th R/A & Final Bill, refund of security deposit and interest due from the department for delayed payment. During the pendency of this proceeding in terms of an order dated April 24, 2015, the claimant has paid a sum of Rs.13,27,342/- representing the sum awarded under Claim Nos.8 and 9 of the Statement of Claim. The said amount was paid on or before July 10, 2015. Accordingly, the matter for consideration is in respect of Claim Nos.1, 4, 5 and 6.

Issues: Whether the arbitrator has given any reason for arriving at his finding that the value of the work done within the originally stipulated contractual period was Rs.65,12,394/- or that work done beyond the contractual period was Rs.42,45,342/-. Whether the arbitrator has given any reason for arriving at his finding that loss of business due to irregular payment/cash flow would be 10% of value of work done beyond the contractual period and in the absence of reasons being assigned by the Arbitrator for arriving at the aforesaid finding the award under this head of claim is liable to be set aside. Whether the arbitrator has not given any reason for arriving at his finding that repair and rectification in full. Whether having regard to the fact that the claimant has already made claims under separate heads on account of escalation; compensation for delay on account of idle labour, machinery; site expenses; hire charges for land (beyond contractual period) an additional claim on account of loss of profit is unsustainable. Even if it is contended that loss of profit arose out of diminution in turnover on account of delay in completion, the contract is, in such a situation, required to establish that had it received the amount due under the contract within time it could have utilized the same for other business in which it could have earned profit. Unless such a plea is raised and established, the claim for loss of profit could not be granted. In this case, no such material is available on record and in the absence thereof the claim under this head cannot be granted.

Ratio Decidendi: The arbitrator has completely misdirected its mind in allowing such claim which is expressly barred under Clause 16 as alluded to above. The damage is a compensation for the injury sustained that some of money to be given for reparation of damages suffered should be, as nearly as possible be the sum which will put to injured party in the same position as he would have been if he had not sustained the wrong for which he is getting the damages. Compensation claimed for the delay in the completion of the work in a contract will not be allowed in the absence of evidence to show that any loss was suffered by the claimant on account of delay. In succeeding a claim based on breach of contract, no notice is required to be issued. Where the work was completed beyond the stipulated date of completion on account of delay caused by the Department, consequential effects of delay have to be to the account of the Department. The arbitrator awarded the claim on account of loss of profitability due to the prolongation of the contract period. The profits as commonly understood in commercial parlance consist of a sum arrived at by adding up the receipts of a business and by deducting all the expenses and losses including depreciation and the like incurred in carrying on the business. When it is not possible to calculate accurately or in a reasonable manner, the actual amount of loss incurred or when the claimant has not been proved the loss suffered, he would be nonetheless entitled to recover nominal damages for the breach of contract. The court has to assess damages as best as it could on the materials available and would not decline to assume that merely because the claimant could not adduce the best evidence. Even in a case where nominal damages are only to be awarded, the extent of the sum should be assumed with reference to the facts and circumstances involved. The general principle to be borne in mind that the injured may be put in the same position as the he would have been if he had not sustained the wrong.

Final Decision: The application being A.P.No.736 of 2011 is partly allowed. The modified award shall carry interest @12% p.a. from April, 2004 till the date of payment excepting on the sum of Rs.13,27,342 which sum shall carry interest @ 10% p.a. from the date of the award till March, 2015.