Back
2019 Supreme(Megh) 21
IN THE HIGH COURT OF MEGHALAYA
Mohammad Yaqoob Mir, H.S. Thangkhiew, JJ.
North Eastern Electric Power Corporation Ltd. (Neepco) – Appellant
Versus
Patel Engineering Ltd. Unity Infra Projects (JV) – Respondent
Arbitration Appeal Nos. 3, 4 and 5 of 2018
Decided On : 26-02-2019
For the Appellant :Mr. H.A. Ahmadi, Sr. Adv., Mr. V.K. Jindal, Sr. Adv. with Mr. K. Laheri, Adv., Ms. P. Biswakarma, Advocate
For the Respondent:Mr. A. Bhan, Sr. Adv. with Mr. A. Bhan, Advocate
Headnote:
The court set aside the arbitral awards and the order of the lower court upholding them, finding that the awards were perverse and contrary to the fundamental policy of Indian law. The court found that the work of "extra lead for transportation of sand and boulder from Government approved quarries to work sites" was not the same as the work of "handling excavated materials for extra lead beyond initial lead of 3.0 km" provided for in the contract, and therefore the rates for the former work could not be determined under the same clause as the latter. The court also found that the potential effect of the awards on the public exchequer was unjust enrichment, which is contrary to the fundamental policy of Indian law.
Fact of the Case:
The appellant, NEEPCO, entered into three separate contracts with the respondents for the construction of three packages of the Kameng HE Project. The contracts included provisions for payment of extra lead for transportation of sand and boulders from government approved quarries to the work site. A dispute arose between the parties regarding the rates to be paid for such extra lead, and the matter was referred to arbitration. The learned Arbitrator held that the rates for extra lead were to be determined in terms of Clause 33(ii)(a) of the Conditions of Contract, which provides for payment of rates already provided in the Bill of Quantities for the same items of work to be executed due to variations. NEEPCO challenged the arbitral awards before the learned Additional Deputy Commissioner (Judicial), Shillong, who upheld the awards. NEEPCO then filed appeals before the High Court under Sec. 37 of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court found that the work of "extra lead for transportation of sand and boulder from Government approved quarries to work sites" was not the same as the work of "handling excavated materials for extra lead beyond initial lead of 3.0 km" provided for in the contract. The court also found that the potential effect of the awards on the public exchequer was unjust enrichment, which is contrary to the fundamental policy of Indian law.
Issues: 1. Whether the work of "extra lead for transportation of sand and boulder from Government approved quarries to work sites" was the same as the work of "handling excavated materials for extra lead beyond initial lead of 3.0 km" provided for in the contract? 2. Whether the potential effect of the awards on the public exchequer was unjust enrichment, which is contrary to the fundamental policy of Indian law?
Ratio Decidendi: 1. The court found that the work of "extra lead for transportation of sand and boulder from Government approved quarries to work sites" was not the same as the work of "handling excavated materials for extra lead beyond initial lead of 3.0 km" provided for in the contract, because: a. The former work involved the transportation of construction materials from government approved quarries to the work site, while the latter work involved the disposal of excavated materials from the work site. b. The former work was not provided for in the Bill of Quantities, while the latter work was provided for in the Bill of Quantities. c. The former work was not part of the sequence of activities contemplated under the contract documents for surface excavation and underground excavation, while the latter work was part of the sequence of activities contemplated under the contract documents for surface excavation and underground excavation. 2. The court found that the potential effect of the awards on the public exchequer was unjust enrichment, which is contrary to the fundamental policy of Indian law, because: a. The awards would have resulted in NEEPCO paying a sum of about Rs. 3.56 Lakh for every truckload of 10 cubic metre of sand or boulder (travelling for 100 km), and the total potential effect would be about Rs. 1,000 Crore. b. Such payment would have been unjust enrichment of the respondents at the cost of public funds.
Final Decision: The court set aside the arbitral awards and the order of the lower court upholding them, and declared that the rates for "extra lead for transportation of sand and boulders from Government approved quarries to the work site" shall be determined by the Engineer-in- Charge in accordance with Clause 33(iii) of the Conditions of contract in the manner as provided therein.
JUDGMENT :
1. These three Arbitration Appeals have been filed by the appellant North Eastern Electric Power Corporation (for short "NEEPCO") under Sec. 37 of the Arbitration and Conciliation Act, 1996, challenging the common order dated 27.04.2018 passed by the Court of the learned Additional Deputy Commissioner (Judicial), Shillong on applications under Sec. 34 of the Arbitration and Conciliation Act, 1996 filed by NEEPCO which were registered as Arbitration Case No. 5 (T) 2016, Arbitration Case No. 6 (T) 2016 and Arbitration Case No. 7 (T) 2016. The learned Additional Deputy Commissioner (Judicial), Shillong vide the aforesaid common order dated 27.04.2018 has dismissed the aforesaid Sec. 34 applications filed by NEEPCO and upheld the 3 (three) Arbitral Awards dated 29.03.2016.
2. The facts leading to filing of the batch of these three Arbitration Appeals are that in the year 2000, NEEPCO had acquired 710 hectares of land in Kameng, Arunachal Pradesh had also obtained clearances from the Ministry of Environment and Forests for setting up Kameng Hydro Electric Project (for short "KaHEP").
3. On 23.04.2003, NEEPCO issued Invitation for Bids for civil work of the said project under three separate Packages as follows:
Package-I: Contract for civil works for Bichom Dam, River Diversion, Bichom Intake and Head Race Tunnel from RD 0 m to 4400m (+/- 500m) on either side (i.e. 1st half of the Bichom-Tenga Portion).
Package-II: Contract for civil works for Bichom Dam, River Diversion, Bichom Intake and Head Race Tunnel from RD 4400 m to 11600m (+/- 500m) on either side (i.e. 2nd half of the Bichom-Tenga Portion and 1st half of Tenga-Kimi portion).
Package-III: Contract for civil works for Head Race Tunnel from RD 11600m (+/- 500m) up to surge shaft (i.e. 2nd half of Tenga-Kimi portion), surge shaft, Pressure Tunnels, Power House and Tail Race Tunnel.
4. On 8.12.2003 a corrigendum was issued by NEEPCO to the Bid Documents and a location map was issued showing the distance of the designated quarries for sand and boulders for Package-I at a distance of 500 Mtrs from the dam axis of Bichom Dam, for Package-II at a distance of 1200/1300 Mtrs from the dam axis of Tenga Dam, and for Package-III at a very short distance from Kimi Power House.
5. On 03.12.2004 the bids of the respondents were accepted by NEEPCO and Letters of Intent were issued to them as follows:
Package-I: Contract Amount Rs. 1,43,81,03,498/-
Contract awarded to Patel Engineering Ltd.-Unity Infra Projects JV
Package-II: Contract Amount Rs. 1,16,39,65,649/-
Contract awarded to Patel Engineering Ltd.
Package-III: Contract Amount Rs. 1,31,65,12,797/-
Contract awarded to Patel Engineering Ltd.
This was followed by issuance of detailed Work Order by NEEPCO on 08.12.2004 in favour of Patel Engineering Ltd.-Unity Infra Projects JV, Patel Engineering Ltd. and Patel Engineering Ltd. in respect of Packages-I, II and III respectively and signing of formal Contract Agreements on 17.12.2004. The documents which would form part of the Contract are mentioned in the said Contract Agreement dated 17.12.2004.
6. On 29.03.2007, the Deputy Commissioner, West Kameng District issued letter to NEEPCO informing that the designated stone/boulder quarries as indicated in the project location map had been leased by the local people in favour of a third party for a period of 15 years and hence there was objection to acquisition of the said quarry land. Thereafter, in the year 2010, NEEPCO acquired additional 42 hectares of land at a cost of Rs. 3.20 Crores for the purpose of quarrying of sand and boulders. However, the Chief Conservator of Forests, by his letter dated 01.09.2011 declined permission for operation of stone quarry in the said 42 Hectares of land. The said letter stated as follows:
"The construction activities of Kameng HEP has already caused serious interference to the pristine and serene environmen
