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2016 Supreme(Del) 4135
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, J.
B L KAPUR MEMORIAL HOSPITAL – Petitioner
Versus
KOTHARI ASSOCIATES PVT LTD. – Respondent
O.M.P. 1126 of 2013
Decided On : 24-11-2016
For the Petitioner: Mr. Amit Dubey, Mr. Chandan Gupta.
For the Respondents: Ms. Anusuya Salwan.
The main legal point established in the judgment is the importance of interpreting and applying the specific clauses of the Consultancy Agreement to determine entitlement to additional fees and the reasonableness of the arbitrator's decision.
Headnote:
Arbitration - Consultancy Agreement - Arbitration and Conciliation Act, 1996, Section 34 - 4, 22, 11 - The court discussed the Consultancy Agreement dated 8th December 2004 and the Structural Agreement of April 2005. The key legal provisions discussed were Clause 4.2 prohibiting escalation of rates and Clause 22 prohibiting variation of terms and conditions unless signed by the parties in writing. The court's decision was influenced by the interpretation of these clauses and their application to the claims and counter-claims.
Fact of the Case:
Disputes arose between the parties regarding a Consultancy Agreement for architectural and structural design services for a hospital. The Respondent claimed additional fees for changes in designs and extra work done, while the Petitioner filed counter-claims for wrong calculation and inadequate designing.
Finding of the Court:
The court found that the Respondent was entitled to enhanced fee for architectural consultancy work but not for changes in drawings. The Petitioner's counter-claims were rejected, and the Respondent was awarded a sum with interest and costs.
Issues: The issues included entitlement to additional fees, interest, costs, full payment, limitation, and verification of claim petition. The court analyzed the evidence and made determinations on each issue.
Ratio Decidendi: The court's decision was based on the interpretation of the relevant clauses in the Consultancy Agreement, the evidence presented, and the reasonableness of the arbitrator's findings.
Final Decision: The court dismissed the petition with no order as to costs.
1. The challenge in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act’) is to an Award dated 10th July 2013 passed by the sole Arbitrator in the disputes between the parties arising out of Consultancy Agreement dated 8th December 2004.
2. The Petitioner, which is stated to be a unit of Lahore Hospital Society, provides tertiary healthcare service. The Respondent company is engaged in the business of providing architectural and structural design consultancy services for turnkey projects. In terms of the above Consultancy Agreement, Respondent was to provide consultancy for architectural utilities for setting up a new state of the art super speciality hospital at New Delhi. The Petitioner was to pay the Respondent a lump sum consideration of Rs.1 crore. In terms of clauses 4.2, 4.3 and 22 of the Consultancy Agreement, there could be no escalation or extra payment.
3. In April 2005, another Consultancy Agreement for structural services hereinafter the ‘Structural Agreement’ was executed wherein the lump sum payment was specified as Rs.22 lakhs.
4. Disputes arose between the parties leading to the Respondent issuing a letter dated 18th August 2011 to the Petitioner invoking the arbitration clause. On 28th September 2011, Arbitration Petition No. 294 of 2011 was filed in this Court by the Respondent under Section 11 of the Act seeking reference of the disputes arising from the Consultancy Agreement dated 8th December 2004 to arbitration. On 8th February 2012, an ex parte order was passed by this Court appointing a sole Arbitrator to adjudicate the disputes.
5. Claim No.1 before the learned Arbitrator was for a sum of Rs.1,44,15,000. The basis for this claim was that originally a lump sum of Rs.1.22 crores was fixed on the basis of the total built up area including basement being around 4 lakhs sq.ft. However, subsequently the Petitioner had a plan prepared on FAR basis and the total area was increased to 6.60 lakhs sq. ft. This resulted in the designs having to be revised. According to the Respondent, it was agreed that the fee would be increased on proportionate basis and would Rs.1.65 crores for the architectural work and Rs.36 lakhs for the structural work.
6. The case of the Respondent is that during construction the Petitioner wanted a number of changes to be made in the design and assured that the Respondent would be compensated for the changes made. According to the Respondent it was agreed that an additional fee of Rs.50 lakhs would be paid in view of the change in designs. The Respondent’s case was that as against a sum of Rs.2.51 crores agreed to be paid, the Petitioner paid it only Rs.1.42 crores. Accordingly, the balance amount claimed was Rs.1,44,15,000, which included interest @ 15% per annum with effect from 2009 till the date of the claim. Claim No.2 was for pre-suit, pendente lite and future interest @ 24% per annum and Claim No.3 was for a sum of Rs.5 lakhs towards cost of the arbitration.
7. As far as the Petitioner was concerned, it preferred two counter-claims. Counter-Claim No.1 for a sum of Rs.1 crore was “for wrong calculation and application of double facade glazing”. Counter-Claim No.2 was for Rs.98 lakhs on account of inadequate designing by the Respondent.
8. The following issues were framed by the learned Arbitrator for consideration:
“1. Whether the claimant M/s Kothari Associates Pvt. Ltd. is entitled to receive a sum of Rs. 1,44,15,000/- as claimed in the claim no. 1 of its claim petition?- OPP
2. Whether claimant M/s Kothari Associates Pvt. Ltd. is entitled for any interest, if so, at what rate and for which period? - OPP
3. Whether the claimant M/s Kothari Associates Pvt. Ltd. is entitled for any cost as claimed in the claim No.3? - OPP
4. Whether the respondent has paid the entire amount to the claimant M/s Kothari Associates Pvt. Ltd. as agreed in terms of the agreement dated 08/12/2004 and of April 2005? – OPR
5. Whether the claim of the claimant M/s Kothari Associ
