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IN THE HIGH COURT OF DELHI
V. Kameswar Rao, J.
National Highways Authority of India - Appellant
Versus
Suncon Soma (JV) - Respondent
O.M.P. (COMM) 471 of 2022 & I.A. 19352 of 2022
Decided On : 28-11-2022
The court ruled that the arbitral tribunal rightly exceeded DRB recommendations by considering unforeseen project delays and applying appropriate compensation methodologies.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to arbitral award - Petitioner contested the award grants under Claim No.4 and part of Claim No.5, asserting the Arbitral Tribunal erred in ignoring the Dispute Revenue Board recommendations and exceeding the rightful claim amounts. The Tribunal granted Rs.8,12,44,684/- under Claim No.4, which exceeded the DRB's Rs.6,87,33,000/-, and Rs.4,24,03,868/- for plant and machinery under Claim No.5 - Tribunal determined compensation based on unforeseen delays in granting NOC - Issues considered included the binding nature of DRB recommendations and the parameters for adjudicating claims - Award upheld as it did not suffer from errors warranting interference by the court. (Paras 1-33)
Facts of the case:
Petitioner is the National Highways Authority of India challenging entitlements under arbitration, disputing amounts awarded exceeding those recommended by the DRB related to compensation for prolonged project delays and associated costs.
Findings of Court:
The Tribunal lawfully granted amounts based on proper evaluation despite DRB recommendations and applying mitigation factors appropriately, maintaining validity of claims sourced through comprehensive calculations.
Issues: Whether the Arbitral Tribunal was justified in granting amounts exceeding the DRB's recommendations by ignoring procedural stipulations.
Ratio Decidendi: The recommendations of the DRB are persuasive, and the Tribunal's findings were based on adequate evidence and adherence to contractual clauses allowing for revisions of earlier recommendations.
Result: Petition dismissed.
JUDGMENT
V. Kameswar Rao, J. (Oral)--This petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the arbitral award dated July 15, 2022, passed by the Arbitral Tribunal adjudicating the disputes between the parties herein.
2. At the outset, Mr. Ramesh Kumar, learned counsel for the petitioner, NHAI, would submit that the petitioner is challenging the award to the extent of Claim No.4 and part of Claim No.5. He state that the challenge to Claim No.4 which is under the head "Compensation consequent to the abnormal time in grant of NOC for Crusher and quarry and undue restrictions imposed during quarry" is primarily against an excess amount of Rs.1,25,11,684/-, granted by the Tribunal over and above Rs.6,87,00,000/-, i.e., the amount granted by the Dispute Revenue Board (`DRB', for short). According to Mr. Kumar, the entitlement of the respondent against this claim is Rs.6,87,33,000/- and not Rs.8,12,44,684/- as has been granted by the Arbitral Tribunal.
3. Insofar as the Claim No.5 is concerned, the challenge is against a part of claim being Rs.4,24,03,868/- granted by the Arbitral Tribunal under the heading "Compensation for plant and machinery" and also an amount of Rs.2,44,94,525/- granted under the heading "Cost towards deployment of manpower & fixed expenses".
4. With regard to challenge to the Claim No.4 is concerned, the submission of Mr. Kumar primarily is that the Arbitral Tribunal has completely overlooked Clause 67.1 of the Concession Agreement (`CA', for short) which is with regard to the proceedings and recommendations of the DRB. He states that Arbitral Tribunal has committed an error in law overlooking the said clause, which clearly states that, "....Whether or not, DRB recommendations has become final and binding upon the employer and the contractor recommendation shall be admissible as evidence in subsequent dispute resolution procedure including any arbitration or litigation having any relation to the dispute to which the recommendation relates...."
5. According to him, in view of the stipulation, the DRB recommendation is an important document and is admissible in evidence. Therefore, the Arbitral Tribunal could not have ignored the same without giving reasons for not accepting the same. He states that the DRB having recommended an amount of
Rs.6,87,33,000/-, the Arbitral Tribunal could not have granted a higher amount of Rs.8,12,44,684/- i.e., an excess amount of Rs.1,25,11,684/-. In this regard he has drawn my attention to recommendation of DRB in paragraph 5 of recommendation under Claim No. 4 in the following manner:
".....The Contractor (the Respondent herein) has submitted the details of breakup of the rate on 05.10.2016 and the rate of aggregates as produced from the plant as Rs.371.00 per MT in 2008, Rs.371.00 per MT in 2009, Rs.371.5 per MT in 2010, Rs.366.6.00 per MT in 2011, Rs.424.30 per MT in 2012, Rs.421.7 per MT in 2013, and Rs.580.8 per MT in 2014. The rise in the Contractor lowest rate in 2010 compared to the highest in 2014 comes to 113% in 6 years i.e. 18.9% per year. Correspondingly market rate is 149% i.e. 24.83% per year in respect of outsourced suppliers. There is difference of 5.93% on higher side in respect of market procurements. The owner produced material also could suffer the market fluctuations. The owner produced material cost needs to be adjusted by higher cost of 5.930/0. The claimed amount thus will be 0.9407 say 0.94 i.e. Rs.0.94 x 8,12,44,684 i.e. Rs.763,70,000/-. The Cost shall not include profit. The reduction of 10% is applied. The amount works out as Rs.6,87,33,000/..."
6. He also states that the amount recommended by the DRB becomes all the more important in view of the fact that the respondent did not issue any notice of dissatisfaction to such recommendation at any point of time before the commencement of arbitration. Hence, the grant of the excess amount of Rs.1,25,11,684/- by the Arbitral Tribunal need to be set aside.
