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IN THE HIGH COURT AT CALCUTTA
I.P. MUKERJI, BISWAROOP CHOWDHURY, JJ.
State of West Bengal - Appellant
Versus
M/s. Chowdhury Construction - Respondent
FMA No. 212 of 2023, CAN No. 1 of 2022
Decided On : 19-10-2023
Arbitration and Conciliation Act - Works Contract - Section 34 - Summary of Acts and Sections: The court discussed Section 34 of the Arbitration and Conciliation Act, 1996 and the Conditions of Contract including Clauses 2 and 3. The key legal provisions interpreted were related to the imposition of liquidated damages, termination of the contract, and forfeiture of security deposit. The court's decision was influenced by the interpretation of these provisions and their application to the facts of the case.
Fact of the Case:
The case involved an appeal challenging an arbitral award in a works contract dispute between a contractor and the Government of West Bengal. The government terminated the contract and forfeited the security deposit, leading to arbitration and subsequent legal challenges.
Finding of the Court:
The court found that the arbitrator's award, upholding the contractor's claims for refund of security deposit and delayed release of payment, was reasonable and not illegal. The court rejected the government's challenge to the award and dismissed the appeal.
Issues: The issues included the validity of the termination of the contract, imposition of liquidated damages, and forfeiture of the security deposit. The court also addressed the sufficiency of reasons provided in the arbitral award and the interpretation of the Conditions of Contract.
Ratio Decidendi: The court held that the arbitrator's findings, based on the interpretation of the Conditions of Contract and the contractor's performance, were reasonable and not illegal. The court emphasized the arbitrator's duty to provide reasons and the limited grounds for setting aside an arbitral award.
Final Decision: The appeal was dismissed, and the court upheld the part of the arbitral award allowing the contractor's claims for refund of security deposit and delayed release of payment.
JUDGMENT :
I.P. Mukerji, J.
1. This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996. It is from a judgment and order dated 24th February, 2020 made by the learned Judge, Commercial Court at Asansol in an application under Section 34 of the said Act challenging an arbitral award dated 29th July, 2015.
2. The claim in arbitration arose out of a works contract between the respondent contractor and the Government of West Bengal dating back to 2007. It involved the widening and strengthening of the Memarichakdighi and Tarakeswar Road in the then district of Burdwan, West Bengal spanning 30.16 km. It was executed on 8th August, 2007 costing the government Rs.11,63,76,445/-. The time stipulated for completion of the work was 18 months from the date of commencement on 8th February, 2008 i.e. on 7th August, 2009.
3. Eventually, as it happens in most of these works contracts, there was delay in progress of the work. The respondent contractor attributed this delay to the government whereas the government accused the contractor of breach of contract by delayed and poor performance of the work. Eventually the contract was rescinded by the government on 18th October, 2012. At the time of rescission of the contract by the government the security deposit of Rs.33,70,452/-which the respondent contractor had made in terms of the contract with the government at the time of its execution, as a kind of performance guarantee was forfeited.
4. As is usual in these matters, the matter went to arbitration. The respondent contractor made no less than 25 heads of claims of the following description:-
| Sl. No. | Particulars | Amount |
| 1. | Amount payable on account of works executed but not paid despite repeated requests and/or reminders made for the same. | Rs.49,66,996/- |
| 2. | Amount payable on account of extra and/or additional items of works executed on instruction and direction from the department despite repeated requests made for the said payment. | Rs.27,94,000/- |
| 3. | Compensation on account of prolongation of the job beyond the agreed period of 18 months for reasons attributable to the department:- |
|
| (i) Towards on-site expenses incurred in the enlarged/overrun period. | Rs.48,00,000/- | |
| (ii) Towards off-site expenses incurred in the enlarged/overrun period. | Rs.7,85,000/- | |
| 4. | Compensation on account of depreciation of tools and plants, machinery owned by the Claimant/Contractor and deployed at the instant site of work for reasons attributable to the department. | Rs.92,19,000/- |
| 5. | Compensation towards business loss for being retained longer in the contract in question for an additional period of 39 months without any corresponding monetary benefit and without being free to move elsewhere with the blocked resources during the extended stay to earn the profit which the Claimant could have otherwise made. | Rs.1,37,88,000/- |
| 6. | Compensation on account of additional cost of execution and/or added expenses in respect of works executed till unlawful termination of the contract due to rise in price of materials, labour, fuel etc. (Except towards increment in the price of bitumen, which has been preferred separately in Sl. No. 7). | Rs.2,25,55,122/- |
| 7. | Compensation on account of unusual increment in the price of bitumen and fuel consumed in the work. | Rs.1,38,57,500/- |
| 8. | Compensation on account of hire charges of machinery (Hot Mix Plant, Paver Finisher etc.) installed/deployed at the site of work for the period during which the said machinery had remained idle for reasons attributable to the department. | Rs.1,88,00,000/- |
| 9. | Amount payable to the Claimant/Contractor on account of release of the amou | |
The main legal point established in the judgment is that claims under a works contract must be made within the prescribed period of limitation, and an award based on no evidence and being perverse ca....
The main legal point established in the judgment is the interpretation of contract terms, breach of contract, and the limited scope of interference with the arbitrator's award based on the violation ....
An arbitrator's award may be upheld if it conforms to contract terms, despite challenges regarding procedural compliance or interpretation, provided it does not contravene public policy.
The court reinforced that under the Arbitration and Conciliation Act, 1996, the scope for judicial interference with arbitral awards is limited, particularly regarding factual findings.
The main legal point established in the judgment is the importance of compliance with the notice of claim provision in the FIDIC Contract and the requirement for the contractor to raise disputes or c....
Setting aside arbitral award – Courts, while adjudging whether an arbitration award calls for interference has to be conscious that Arbitrator is sole Judge of facts – Unless an error of law is shown....
Under the Arbitration and Conciliation Act, the court can only interfere with an arbitral award on limited grounds; the contractor's claim for security deposit was valid, as the limitation period com....
The court upheld the Arbitrator's findings that the rescission of the contract was unjust and delays were primarily attributable to the petitioner, affirming the award under Section 34 of the Arbitra....
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