1 IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL ORIGINAL ORIGINAL CIVIL JURISDICTION CIVIL JURISDICTION CIVIL JURISDICTION ARBITRATION ARBITRATION ARBITRATION PETITION NO.494 OF 2004 PETITION NO.494 OF 2004 PETITION NO.494 OF 2004 The The The Board Board Board of Trustees of the of Trustees of the of Trustees of the Port Port Port of Mumbai of Mumbai of Mumbai ...... Petitioners Petitioners Petitioners vs vs vs M/s M/s M/s Mohinder Mohinder Mohinder Singh & Company .. Respondents Singh & Company .. Respondents Singh & Company .. Respondents Mr.E.P.Bharucha,Sr.Counsel Mr.E.P.Bharucha,Sr.Counsel Mr.E.P.Bharucha,Sr.Counsel a/w Mr.U.J.Makhija and a/w Mr.U.J.Makhija and a/w Mr.U.J.Makhija and Mr.S.Bottlewala Mr.S.Bottlewala Mr.S.Bottlewala i.b i.b i.b Mulla & Mulla for Plaintiff Mulla & Mulla for Plaintiff Mulla & Mulla for Plaintiff Mr.S.U.Kamdar, Mr.S.U.Kamdar, Mr.S.U.Kamdar, a/w Mr.M.D.Sihodia a/w Mr.M.D.Sihodia a/w Mr.M.D.Sihodia i/b i/b i/b D.S.Retiwala D.S.Retiwala D.S.Retiwala for Respondents for Respondents for Respondents CORAM CORAM CORAM : ANOOP V.MOHTA, J : ANOOP V.MOHTA, J : ANOOP V.MOHTA, J RESERVED RESERVED RESERVED ON ON ON : 13th April, 2007 : 13th April, 2007 : 13th April, 2007 PRONOUNCED PRONOUNCED PRONOUNCED ON ON ON :27th April, 2007 :27th April, 2007 :27th April, 2007 P.C. P.C. P.C. 1.1.1. The petitioners have challenged the impugned The petitioners have challenged the impugned The petitioners have challenged the impugned award award award dated 23rd January, 2004 which was corrected dated 23rd January, 2004 which was corrected dated 23rd January, 2004 which was corrected on on on 16th April, 2004 under section 34 of the 16th April, 2004 under section 34 of the 16th April, 2004 under section 34 of the Arbitration Arbitration Arbitration and Conciliation Act, 1996. (for short and Conciliation Act, 1996. (for short and Conciliation Act, 1996. (for short Arbitration Arbitration Arbitration Act, 1996) Act, 1996) Act, 1996) 2.2.2. The petitioners awarded a contract to the The petitioners awarded a contract to the The petitioners awarded a contract to the respondents respondents respondents for for for construction of a warehouse at Haji construction of a warehouse at Haji construction of a warehouse at Haji Bunder, Bunder, Bunder, Sewri, Mumbai on 1st September, 1987. As Sewri, Mumbai on 1st September, 1987. As Sewri, Mumbai on 1st September, 1987. As there there there were some disputes the matters were referred were some disputes the matters were referred were some disputes the matters were referred toto to the Arbitrator and there were two awards passed the Arbitrator and there were two awards passed the Arbitrator and there were two awards passed by by by the then learned Arbitrator. As the progress the then learned Arbitrator. As the progress the then learned Arbitrator. As the progress was was was slow, the petitioners termniated the contract slow, the petitioners termniated the contract slow, the petitioners termniated the contract on on on 23rd 23rd 23rd August, 1991. However, in a suit No.357 of August, 1991. However, in a suit No.357 of August, 1991. However, in a suit No.357 of 1992 1992 1992 filed by the respondents challenging the filed by the respondents challenging the filed by the respondents challenging the 2 aforesaid aforesaid aforesaid termination of the contract a consent termination of the contract a consent termination of the contract a consent term term term was was was filed dated 28th May, 1992. On 11th June, filed dated 28th May, 1992. On 11th June, filed dated 28th May, 1992. On 11th June, 1992 1992 1992 the suit was disposed of accordingly. From the suit was disposed of accordingly. From the suit was disposed of accordingly. From 30th 30th 30th May, 1992 the work was re-commenced by the May, 1992 the work was re-commenced by the May, 1992 the work was re-commenced by the respondents. respondents. respondents. Extention was granted to complete the Extention was granted to complete the Extention was granted to complete the work. work. work. There was a third reference and therefore on There was a third reference and therefore on There was a third reference and therefore on 1st 1st 1st January, 1993 third award came to be passed. January, 1993 third award came to be passed. January, 1993 third award came to be passed. The The The respondents respondents respondents substantially completed the work by substantially completed the work by substantially completed the work by 30th 30th 30th July, 1992. The warehouse was inaugurated. July, 1992. The warehouse was inaugurated. July, 1992. The warehouse was inaugurated. The The The maintainance period was also over on 13th maintainance period was also over on 13th maintainance period was also over on 13th January, January, January, 1994. Sometime in July, 1995 the 1994. Sometime in July, 1995 the 1994. Sometime in July, 1995 the respondents respondents respondents vacated the site. Consequently, F.D.R. vacated the site. Consequently, F.D.R. vacated the site. Consequently, F.D.R. held held held by the petitioners were also released. by the petitioners were also released. by the petitioners were also released. 3.3.3. As there were disputes and differences arising As there were disputes and differences arising As there were disputes and differences arising on on on 15th January, 1996 the respondents invoked 15th January, 1996 the respondents invoked 15th January, 1996 the respondents invoked arbitration arbitration arbitration clause of the agreement between the clause of the agreement between the clause of the agreement between the parties. parties. parties. 4. By an order dated 21st December, 1998 4. By an order dated 21st December, 1998 4. By an order dated 21st December, 1998 this this this Court in Arbitration Petition No.934 of 1988 Court in Arbitration Petition No.934 of 1988 Court in Arbitration Petition No.934 of 1988 filed filed filed by the respondents, appointed a sole by the respondents, appointed a sole by the respondents, appointed a sole Arbitrator. Arbitrator. Arbitrator. From 15th February, 1999 to 22nd July, From 15th February, 1999 to 22nd July, From 15th February, 1999 to 22nd July, 2003 2003 2003 various meetings and hearings took place various meetings and hearings took place various meetings and hearings took place before before before the Arbitrator. On 23rd January, 2004 the the Arbitrator. On 23rd January, 2004 the the Arbitrator. On 23rd January, 2004 the atrbitral atrbitral atrbitral award was passed by the Arbitrator which award was passed by the Arbitrator which award was passed by the Arbitrator which was was was subsequently corrected on 16th April, 2004. subsequently corrected on 16th April, 2004. subsequently corrected on 16th April, 2004. The The The petitioners therefore on 12th July, 2004 filed petitioners therefore on 12th July, 2004 filed petitioners therefore on 12th July, 2004 filed the the the present Arbitration Petition. present Arbitration Petition. present Arbitration Petition. 4. As the present Arbitration Petition was As the present Arbitration Petition was As the present Arbitration Petition was dismissed dismissed dismissed for for for want of prosecution by an order dated want of prosecution by an order dated want of prosecution by an order dated 3 30th 30th 30th September, 2006 by consent of the parties on September, 2006 by consent of the parties on September, 2006 by consent of the parties on certain certain certain conditions it was restored. As directed, conditions it was restored. As directed, conditions it was restored. As directed, an an an amount of Rs.31,17,000/- was paid to the amount of Rs.31,17,000/- was paid to the amount of Rs.31,17,000/- was paid to the respondents respondents respondents and Rs.1,17,52,000/- was deposited and and Rs.1,17,52,000/- was deposited and and Rs.1,17,52,000/- was deposited and the the the same has been invested by the Prothonotary and same has been invested by the Prothonotary and same has been invested by the Prothonotary and Senior Senior Senior Master in fixed deposit receipt in a Master in fixed deposit receipt in a Master in fixed deposit receipt in a nationalised nationalised nationalised bank. bank. bank. 5. Admittedly, the petitioners have challenged the Admittedly, the petitioners have challenged the Admittedly, the petitioners have challenged the award award award in in in part as to claim Nos. 3 and 6 and further part as to claim Nos. 3 and 6 and further part as to claim Nos. 3 and 6 and further 18 18 18 % rate of interest in respect of claim Nos. % rate of interest in respect of claim Nos. % rate of interest in respect of claim Nos. 4,7,8 4,7,8 4,7,8 and 11 from the dates of claims made by the and 11 from the dates of claims made by the and 11 from the dates of claims made by the respondents respondents respondents till 15th January, 1996 and thereafter till 15th January, 1996 and thereafter till 15th January, 1996 and thereafter atatat 12 % p.a. till payment. 12 % p.a. till payment. 12 % p.a. till payment. 6. The operative part of the award is as under : The operative part of the award is as under : The operative part of the award is as under : Accordingly Accordingly Accordingly I do make the Award as under : I do make the Award as under : I do make the Award as under : (a) (a) (a) Re: Claim No.1: This claim is Re: Claim No.1: This claim is Re: Claim No.1: This claim is rejected. rejected. rejected. (b) (b) (b) Re: Claim No.2: This claim is Re: Claim No.2: This claim is Re: Claim No.2: This claim is rejected. rejected. rejected. (c) (c) (c) Re: Claim No.3: Re: Claim No.3: Re: Claim No.3: I do award in favour of the do award in favour of the do award in favour of the Claimants Claimants Claimants as as as against the Respondents against the Respondents against the Respondents the the the sum of Rs.2,02,998/-(Rupees Two sum of Rs.2,02,998/-(Rupees Two sum of Rs.2,02,998/-(Rupees Two lacs lacs lacs two thousand nine hundred two thousand nine hundred two thousand nine hundred ninety ninety ninety eight only) payable by the eight only) payable by the eight only) payable by the respondents respondents respondents to the Claimants to the Claimants to the Claimants together together together with interest thereon @ 18 with interest thereon @ 18 with interest thereon @ 18 % p.a. p.a. p.a. from 17th Septmber 1993 till from 17th Septmber 1993 till from 17th Septmber 1993 till 15th 15th 15th January 1996 and thereafter @ January 1996 and thereafter @ January 1996 and thereafter @ 12 12 12 % p.a. till payment. % p.a. till payment. % p.a. till payment. (d) (d) (d) Re: Claim No.4: Re: Claim No.4: Re: Claim No.4: I do award in favour of the do award in favour of the do award in favour of the Claimants Claimants Claimants as as as against the Respondents against the Respondents against the Respondents 4 the the the sum of Rs.2,55,675.78 (Rupees sum of Rs.2,55,675.78 (Rupees sum of Rs.2,55,675.78 (Rupees two two two lacs fifty five thousand six lacs fifty five thousand six lacs fifty five thousand six hundred hundred hundred seventy five and seventy seventy five and seventy seventy five and seventy eight eight eight paise only) payable by the paise only) payable by the paise only) payable by the respondents respondents respondents to the Claimants to the Claimants to the Claimants together together together with interest thereon @18 with interest thereon @18 with interest thereon @18 %p.a. %p.a. %p.a. from 4th July 1995 till 15th from 4th July 1995 till 15th from 4th July 1995 till 15th January January January 1996 and thereafter @ 12 % 1996 and thereafter @ 12 % 1996 and thereafter @ 12 % p.a. p.a. p.a. till payment. till payment. till payment. (e) (e) (e) Re: Claim No.5 This claim is Re: Claim No.5 This claim is Re: Claim No.5 This claim is rejected rejected rejected (f) (f) (f) Re: Claim No.6: Re: Claim No.6: Re: Claim No.6: I do award in favour of the do award in favour of the do award in favour of the Claimants Claimants Claimants as against the respondents as against the respondents as against the respondents the the the sum of Rs.30,60,678.06 (Rupees sum of Rs.30,60,678.06 (Rupees sum of Rs.30,60,678.06 (Rupees thirty thirty thirty lakhs sixty thousand six lakhs sixty thousand six lakhs sixty thousand six hundred hundred hundred seventy eight and six paise seventy eight and six paise seventy eight and six paise only) only) only) payable by the respondents to payable by the respondents to payable by the respondents to the the the Claimants Claimants Claimants together with interest together with interest together with interest thereon thereon thereon @ 18 % p.a. from 17th @ 18 % p.a. from 17th @ 18 % p.a. from 17th September, September, September, 1993 till 15th January 1993 till 15th January 1993 till 15th January 1996 1996 1996 and thereafter @ 12 % p.a. and thereafter @ 12 % p.a. and thereafter @ 12 % p.a. till till till payment. payment. payment. g) g) g) Re: Claim No.7: Re: Claim No.7: Re: Claim No.7: I do award in favour of the do award in favour of the do award in favour of the Claimants Claimants Claimants as against the respondents as against the respondents as against the respondents the the the sum of Rs.10,18,375.78 (Rupees sum of Rs.10,18,375.78 (Rupees sum of Rs.10,18,375.78 (Rupees ten ten ten lakhs eighteen thousand three lakhs eighteen thousand three lakhs eighteen thousand three hundred hundred hundred seventy five and seventy seventy five and seventy seventy five and seventy eight eight eight paise only) payable by the paise only) payable by the paise only) payable by the respondents respondents respondents to the Claimants to the Claimants to the Claimants together together together with interest thereon @ 18 with interest thereon @ 18 with interest thereon @ 18 % p.a. p.a. p.a. from 9th September 1993 till from 9th September 1993 till from 9th September 1993 till 15th 15th 15th January 1996 and thereafter @ January 1996 and thereafter @ January 1996 and thereafter @ 12 12 12 % p.a. till payment. % p.a. till payment. % p.a. till payment. (h) (h) (h) Re: Claim No.8: Re: Claim No.8: Re: Claim No.8: I do award in favour of the do award in favour of the do award in favour of the Claimants Claimants Claimants as against the respondents as against the respondents as against the respondents the the the sum of Rs.3,23,312.93 (Rupees sum of Rs.3,23,312.93 (Rupees sum of Rs.3,23,312.93 (Rupees three three three lachs twenty three thousand lachs twenty three thousand lachs twenty three thousand three three three hundred twelve and ninety hundred twelve and ninety hundred twelve and ninety three three three paise only) payable by the paise only) payable by the paise only) payable by the respondents respondents respondents to the claimants to the claimants to the claimants together together together with with with interest thereon @ 15% interest thereon @ 15% interest thereon @ 15% p.a. p.a. p.a. from 15th July 1994 till 15th from 15th July 1994 till 15th from 15th July 1994 till 15th January January January 1996 and thereafter @ 12 % 1996 and thereafter @ 12 % 1996 and thereafter @ 12 % p.a. p.a. p.a. till payment. till payment. till payment. (i) (i) (i) Re: Claim No.9: Re: Claim No.9: Re: Claim No.9: This This This claim is rejected as stated claim is rejected as stated claim is rejected as stated above. above. above. 5 (j) (j) (j) Re: Claim No.10: Re: Claim No.10: Re: Claim No.10: This This This claim is not allowed as the claim is not allowed as the claim is not allowed as the items items items are included in the final are included in the final are included in the final bill. bill. bill. (k) (k) (k) Re: Claim No.11: Re: Claim No.11: Re: Claim No.11: I do award in favour of the do award in favour of the do award in favour of the Claimants Claimants Claimants as as as against the Respondents against the Respondents against the Respondents the the the sum of Rs.8,19,9,266 (Rupees sum of Rs.8,19,9,266 (Rupees sum of Rs.8,19,9,266 (Rupees eight eight eight lacs nineteen thousand two lacs nineteen thousand two lacs nineteen thousand two hundred hundred hundred ninety two sixty six paise ninety two sixty six paise ninety two sixty six paise only) only) only) payable by the respondents to payable by the respondents to payable by the respondents to the the the Claimants Claimants Claimants together with interest together with interest together with interest thereon thereon thereon @ 12 % pa. from 15th @ 12 % pa. from 15th @ 12 % pa. from 15th January January January 1996 till payment. 1996 till payment. 1996 till payment. (l) (l) (l) Re:Costs: Re:Costs: Re:Costs: Each Each Each party will bear its own party will bear its own party will bear its own costs. costs. costs. The observations on interest The observations on interest The observations on interest isisis as under : I have generaly as under : I have generaly as under : I have generaly allowed allowed allowed interest at the rate of 18% interest at the rate of 18% interest at the rate of 18% p.a. p.a. p.a. from the date each claim was from the date each claim was from the date each claim was due due due till 15th January 1996 when till 15th January 1996 when till 15th January 1996 when Arbitration Arbitration Arbitration was invoked and as from was invoked and as from was invoked and as from that that that date I have allowed a uniform date I have allowed a uniform date I have allowed a uniform rate rate rate of of of 12 % p.a. till payment. 12 % p.a. till payment. 12 % p.a. till payment. 7.7.7. Admittedly, the petitioner’s challenge is Admittedly, the petitioner’s challenge is Admittedly, the petitioner’s challenge is restricted restricted restricted to claim Nos.3 and 6 and the rate of to claim Nos.3 and 6 and the rate of to claim Nos.3 and 6 and the rate of interest interest interest as referred above. Mr.Bharucha, learned as referred above. Mr.Bharucha, learned as referred above. Mr.Bharucha, learned Senior Senior Senior counsel for the plaintiff submitted that counsel for the plaintiff submitted that counsel for the plaintiff submitted that under under under the contract and as provided in clause 7.18 the contract and as provided in clause 7.18 the contract and as provided in clause 7.18 and and and 7.5 as the clause 3.5 of specifications read 7.5 as the clause 3.5 of specifications read 7.5 as the clause 3.5 of specifications read with with with rule 6.2 of MCGM Sewerage and Waste Removal rule 6.2 of MCGM Sewerage and Waste Removal rule 6.2 of MCGM Sewerage and Waste Removal Rules, Rules, Rules, the the the respondents were bound and liable to pay respondents were bound and liable to pay respondents were bound and liable to pay sewerage sewerage sewerage charges levied by the Municipal charges levied by the Municipal charges levied by the Municipal Corporatiion Corporatiion Corporatiion of of of Greater Mumbai (MCGM) regardless of Greater Mumbai (MCGM) regardless of Greater Mumbai (MCGM) regardless of the the the fact that during the construction work whether fact that during the construction work whether fact that during the construction work whether the the the respondents used the water supplied by the respondents used the water supplied by the respondents used the water supplied by the Municipal Municipal Municipal Corporation Corporation Corporation of Greater Mumbai or not. He of Greater Mumbai or not. He of Greater Mumbai or not. He however, however, however, submitted that in reference to claim no. submitted that in reference to claim no. submitted that in reference to claim no. 6 6 and under clauses 5,7,23,7,.24 of General and under clauses 5,7,23,7,.24 of General and under clauses 5,7,23,7,.24 of General Conditions Conditions Conditions of contract and clause No.1 of Schedule of contract and clause No.1 of Schedule of contract and clause No.1 of Schedule B and clause 2 of Preamble of to Bill of quantity, and clause 2 of Preamble of to Bill of quantity, and clause 2 of Preamble of to Bill of quantity, save save save and except cement and supply of all the and except cement and supply of all the and except cement and supply of all the material material material required for execution of the contract required for execution of the contract required for execution of the contract required required required for execution of the contract was the for execution of the contract was the for execution of the contract was the responsibility responsibility responsibility of of of the respondents. However, during the respondents. However, during the respondents. However, during the the the execution of the work since the respondents execution of the work since the respondents execution of the work since the respondents faced faced faced difficulty in procuring steel, the difficulty in procuring steel, the difficulty in procuring steel, the petitioners petitioners petitioners on on on the condition of payment of price of the condition of payment of price of the condition of payment of price of the the the steel to be supplied by the petitioners to the steel to be supplied by the petitioners to the steel to be supplied by the petitioners to the respondents respondents respondents agreed to supply and did supply the agreed to supply and did supply the agreed to supply and did supply the steel steel steel required for the execution of the work from required for the execution of the work from required for the execution of the work from time time time to time. He further submitted that the rate to time. He further submitted that the rate to time. He further submitted that the rate of of of interest interest interest as charged is exorbitant. The grant of as charged is exorbitant. The grant of as charged is exorbitant. The grant of interest interest interest from the dates of claim prior to the date from the dates of claim prior to the date from the dates of claim prior to the date of of of invocation of arbitration proceedings till 15th invocation of arbitration proceedings till 15th invocation of arbitration proceedings till 15th January, January, January, 1996 and thereafter at 2 % p.a. till 1996 and thereafter at 2 % p.a. till 1996 and thereafter at 2 % p.a. till payment payment payment is unreasonable and exorbitant. He has is unreasonable and exorbitant. He has is unreasonable and exorbitant. He has also also also relied on the decision in the case of Oil and relied on the decision in the case of Oil and relied on the decision in the case of Oil and Natural Natural Natural Gas Corporation Ltd vs Saw Pipes Ltd Gas Corporation Ltd vs Saw Pipes Ltd Gas Corporation Ltd vs Saw Pipes Ltd reported reported reported in (2003) 5 Supreme Court Cases 705. in (2003) 5 Supreme Court Cases 705. in (2003) 5 Supreme Court Cases 705. 8.8.8. Learned counsel appearing for the respondents Learned counsel appearing for the respondents Learned counsel appearing for the respondents however, however, however, resisted all the above submissions. He resisted all the above submissions. He resisted all the above submissions. He has has has strongly relied on M/s Mannalal Prabhudayal vs strongly relied on M/s Mannalal Prabhudayal vs strongly relied on M/s Mannalal Prabhudayal vs Oriental Oriental Oriental Insurance Co Ltd reported in AIR 2006 S.C. Insurance Co Ltd reported in AIR 2006 S.C. Insurance Co Ltd reported in AIR 2006 S.C. 3026 3026 3026 and thereby contended that grant of interest and thereby contended that grant of interest and thereby contended that grant of interest by by by the Arbitrator in view of section 31 (7) and 37 the Arbitrator in view of section 31 (7) and 37 the Arbitrator in view of section 31 (7) and 37 need need need not be interfered with. not be interfered with. not be interfered