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2019 Supreme(Mad) 1200
IN THE HIGH COURT OF JUDICATURE AT MADRAS
N. SATHISH KUMAR, J.
M/s. NAPC Limited, Royapettah & Another - Petitioners
Versus
The Superintending Engineer, National Highways, TNSCC Complex, Jai Nagar, Chennai & Others - Respondents
Original Petition Nos. 881 & 899 of 2018
Decided On : 10-07-2019
For the Petitioners:P.L. Narayanan, Advocate
For the Respondents:Vijay Narayanan, Advocate Assisted by Sricharan Rangarajan, Special Govt. Pleader (CS)
The main legal point established in the judgment is that the award was set aside due to being beyond the terms of the contract, being barred by limitation, and the lack of jurisdiction of the arbitrator. The judgment also emphasized the significance of contractual clauses in governing the arbitration process.
Headnote:
Arbitration - Construction Contract - Arbitration and Conciliation Act - Section 34
Fact of the Case:
The claimant filed two Original Petitions (O.P.) under section 34 of the Arbitration and Conciliation Act to set aside the award dated 23.05.2018 of the Arbitral Tribunal. O.P.No.881 of 2018 was filed by the Claimant to set aside the award passed in respect of Claim-B, and O.P.No.899 of 2018 was filed by the Respondent against the rejection of the entire claim. The subject matter of the arbitration pertained to the claim made in respect of the extended period of the contract. The total amount of the claim was Rs.10,85,72,753/-, out of which the Arbitrator awarded Rs.2,98,14,000/-, and in respect of claim-B, the Arbitrator rejected the claim. The claim was allowed for a sum of Rs.4,21,58,000/-, along with interest and costs.
Finding of the Court:
The court found that the entire award was challenged on the grounds of violation of public policy, invocation of arbitration beyond the statutory and contractual limitation period, lack of jurisdiction before arbitration, and the claim being barred by limitation. The court analyzed the contractual provisions, the rejection of claims, and the subsequent arbitration process. The court also considered the legal principles related to the jurisdiction of the arbitrator, the limitation period for invoking arbitration, and the effect of contractual clauses on the arbitration process.
Issues: The issues before the court included the validity of the award, the jurisdiction of the arbitrator, the limitation period for invoking arbitration, and the impact of contractual clauses on the arbitration process.
Ratio Decidendi: The court held that the award was beyond the terms of the contract and barred by limitation. The court also found that the arbitrator had no jurisdiction to decide the claims, and the specific clause in the contract stipulated that any amount more than Rs.2,00,000 should be referred only to the civil court. The court set aside the award and dismissed one of the Original Petitions while allowing the other.
Final Decision: O.P.No.899 of 2018 was allowed, and the award was set aside. O.P.No.881 of 2018 was dismissed. No costs were awarded.
(Prayer in O.P.No.881 of 2018:- This Original Petition has been filed under section 34 of the Arbitration and Conciliation Act to set aside the award dated 23.05.2018 of the Arbitral Tribunal with respect to Claim-B only.
Prayer in O.P.No.899 of 2018 :- This Original Petition has been filed under section 34 of the Arbitration and Conciliation Act to set aside the award dated 23.05.2018 passed by the learned Arbitrator and direct the registry to number the same for passing further order.)
O.P.No.881 of 2018 has been filed by the Claimant to set aside the award passed in respect of Claim-B and O.P.No.899 of 2018 has been filed by the Respondent against rejection of entire claim. Since both the Original Petitions are arising out of the same Award, this Court is inclined to dispose of the same in a common order.
2(a) The respondent invited bids for executing the road work of Construction of Two Lane Road including construction of Major Bridge at KM2/10-3/4. In response to the notice, the Claimant submitted its offer for Rs.46,82,59,435.89 on 29.10.2009. The Respondent vide its letter Ex.C-3 informed the claimant that the claimant has not given the consent letter reducing the quoted rates in the tender dated29.10.2009 as assured during the negotiation held on 09.12.2009. In response to that letter the claimant offered a rebate of 13.5% on each and every item quoted value of Rs.46,82,59,435.89, duly indicating that the claimant is not in a position to reduce their rates further due to following reasons:
* Kancheepuram town is located very near to Chennai city. Hence, the cost of labour is very high.
* Huge quantity of earthwork is involved in this work. The required earth is not available in and around. The earth has to be transported from a distant place and they have to pay royalty charges for the earth to the Government.
* The working season is only 9 months in one year and hence machineries have to remain idle for 3 months which leads to additional overhead charges.
* Further, the transportation of material coast is high.
The claimant reconfirmed their revised price as Rs.40,50,44,412.04 as a result of 13.5% rebater offered, vide letter dated 18.12.2009. Thereafter, the claimant agreed a total rebate of 15.22% vide their letter dated 11.1.2010and the same was accepted by the Government of Tamil Nadu on 21.01.2010 accepting the negotiated tender value of rs.39,69,90,350/- Finally, the claimant entered into contract agreement with the Respondent on 19.4.2010 and both the parties mutually agreed to complete the entire work in 18 months instead of 24 months.
2(b) The claimant had commenced the work by marking centerline for the entire road and bridge and sought the Respondent's approval on 10.5.2010. Further the claimant had requested the respondent to approve the design mix for concrete vide letter dated 15.5.2010. The contract was in the form of a work contract wherein the claimant was employed by the respondent to execute work corresponding to a pre-determined scope.
2(c) During the course of execution of the work, there were number of delay events occurred beyond the control of claimant which had severly affected the rate of progress, thereby resulting in delay in completion of works beyond the agreed date of completion of 18 months. It is a fact that on account of the inability of the respondent to meet its specific contractual obligations which were in the form of reciprocal promises/obligations, the claimant has been prevented from achieving contractual objectives on time. All the delay events were brought to the notice of the Engineer as well as the respondent at regular intervals by the claimant. The entire site to be made available to the Claimant by the Respondent free from any kind of encumbrances for execution of all works contemplated in the contract. Accordingly, the claimant had considered the time related costs to be incurred only over a period of 18 months. Any increase in the cost during the 18 months period would ha
