1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.347 OF 2005 IRCON International Ltd. ..Petitioner. Vs. M/s. R. S. Jiwani ..Respondent. Mr. P. K. Samdani, Senior Counsel with Mrs. Sowmya Srikrishna and Mr. Arun Siwach i/b. M/s. Amarchand Mangaldas for the Petitioner. Mr. N. G. Thakkar, Senior Counsel with Mr. Gaurav Joshi and Mr. Kapil Moye with Mr. Satyan Vora i/b. Markand Gandhi & Co. for the Respondent. CORAM : S.J. VAZIFDAR, J. DATE OF RESERVING THE JUDGMENT : 11TH SEPTEMBER, 2008 DATE OF PRONOUNCING THE JUDGMENT : 11TH NOVEMBER, 2008 ORAL JUDGMENT : This is a petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an award dated 5.5.2005 passed by a learned sole arbitrator. 2. The Petitioner had been issued a contract by the 2 Maharashtra State Road Development Corporation Ltd. (MSRDC) inter-alia for constructing a rail over bridge (ROB). The Petitioner in turn floated a tender for the construction of foundations sub- structure and approach road for the ROB. The Respondent was awarded the contract by a letter of acceptance dated 19.1.1999. A contract dated 29.1.1999 was executed by the parties which incorporated several other documents. The work under the contract was of the value of about Rs.5,00,00,000/-. The stipulated date for completion was 18.11.1999. The work was completed after considerable delay on 27.1.2002. 3. Disputes and differences arose between the parties. One of the main questions was as to which of the parties was responsible for the delay. The Respondent by a letter dated 2.8.2002 made a claim in the sum of Rs.6,15,87,131 with interest and called upon the Petitioner to treat the same as a notice under condition 67.1 of the conditions of contract and requested the Petitioner for an amicable settlement under condition 67.2 of the General Conditions of Contract. The Petitioner by its letter dated 9.9.2002 rejected the claims. In the circumstances, the Respondent invoked Clause 29 of the Special Conditions of Contract. Disputes and differences having arisen between the 3 parties, the Respondent by a letter dated 4.10.2002 invoked the arbitration clause. In accordance with the provisions of the contract, the Petitioner's Managing Director by his letter dated 20.12.2002 appointed the learned arbitrator. 4. The Respondent filed a statement of claim raising 32 claims. The Petitioner filed its statement of defence and raised a counter-claim. 5. By the said award, the learned arbitrator allowed in part fifteen claims and the claim for interest thereon to a limited extent and rejected the remaining claims and the Petitioner's counter- claim. I have upheld the award in respect of ten claims, the claim for interest and in so far as it rejects the Petitioners counter- claim. I have set aside the award in respect of five claims. I would however have exercised powers under Section 34 in respect of the award in respect of three of these five claims. But for the reason that the award is liable to be set aside as a whole in view of the judgments of this Court I will refer to at the end. 6. Mrs. Srikrishna, the learned counsel appearing on behalf of the Petitioner challenged the entire award on various grounds. The challenge to two aspects of the award have an effect on the 4 award in respect of several though not all the claims awarded. The first pertains to the finding inter-alia in paragraph 4 of the award to the effect that the delay in completion of the work was due to reasons attributable to the Petitioner and not the Respondent. The next is that even if this finding is sustained, the award in respect of some of the claims viz. claim nos. 7.2, 7.3, 10, 11 and 12 must be set aside as under the contract the reasons or grounds on which the finding is based do not permit the Respondent to any claim or compensation. In this regard, she referred to Clauses 23.1.1 and 23.3.1 of the Special Conditions of Contract which read as under :- “23.0.0 ACCOMMODATION WORKS 23.1.1 For the accommodation works such as Electrical/Telephone lines, roads, canals water courses if crossing the alignment, the contractor should plan the execution of works in such a way, with the permission of the concerned authorities, that these facilities do not get disturbed during the execution. Non-shifting of these utilities or delay in getting the permission for execution, shall not entitle the contractor for any claim or compensation whatsoever. The owner shall, however assist the contractor in obtaining the 5 permission from the owning Departments as far as possible.” 23.3.1 Land : The contractor should note that land for the execution of work shall be made available to him in full or part as and when the same is taken over by the client and handed over to the IRCON. The contractor should plan his works to commensurate with the handing over of the land. No claim compensation on account of the delay in handing over of land in parts shall be paid.” 7. If the challenge to these two aspects of the award are upheld, the award in respect of some though not all the claims would have to be set aside. It is convenient therefore to deal with them before considering the challenge to the award in respect of each claim awarded separately. 8. I will first deal with the finding that the delay caused to the work was on account of breaches on the Petitioner's part. The letter of intent was issued on 19.1.1999 and the work was expected to be completed within ten months by 18.11.1999. The work however was actually completed only on 27.1.2002. 9. Twenty six meetings were held by the learned arbitrator. The arbitrator also inspected the site in the presence of both the 6 parties. The arbitrator has after considering the voluminous record, the submissions of both sides and on the basis of the site visit, come to the conclusion that the Petitioner was responsible for the delay in the completion of the work. 10(A)(i). The arbitrator held that the ROB and its approaches were to be built on the existing highway and the existing level crossing. The scheme of working as contemplated in the contract envisaged construction of diversion roads on both sides of the approaches of the ROB on both sides of the railway lines. The diversion roads were to converge and meet on the existing road before the ROB on each side of the railway lines. The traffic was expected to use the diversion roads and the existing level crossing during the period of construction. The arbitrator however held that the diversion roads could not be constructed at one go due to the existence of hindrances viz. “trees, poles, wires, availability of land on one side, etc.”. The work had to be done piece meal for nearly 14 months after the issuance of the Letter of Intent. The diversion roads could not be completed and the work had to be done as much as possible with traffic plying on the same road or only on one side. The overhead wire had not been removed till as late as 23 months after the work order and there were other obstructions 7 such as the existence of telephone poles. All this, it was held, prevented the unhindered execution of the work. (ii). These breaches, it was contended by Mrs.Srikrishna, would not entitle the Respondent to claim compensation in view of clause 23 of the Special Conditions of Contract. (B)(i). It is vital however to note that the arbitrator also found other breaches on the Petitioner's part the existence of which do not bar a claim for compensation under clause 23 of the Special Conditions of Contract. (ii). The Arbitrator held that hard rock was also found at a much shallower depth than envisaged in the tender document; that the span length in the approach viaduct was reduced to 10.5 mtrs. from 20 mtrs. as provided in the tender documents which lead to a revision of drawings. The same also resulted in delay in the supply of drawings and revising the initial drawings. Though the hard rock was found at a much higher level, the founding level was kept the same as provided in the tender which entailed greater depth of boring through hard rock involving longer working period. The Petitioner did not produce the report of the consultants in this regard though called upon to do so. The arbitrator also further held that there were several extra items the combined value whereof 8 was 12.4% of the contract sum. The sanction to the rates of extra items came much later. The extra items, it was held, required extra time for the execution of the work. 11. The arbitrator concluded that in view of all these facts, the delay in completion of the work was due to reasons attributable to the Petitioner and not the Respondents. 12. The above findings of fact warrant no interference. The arbitrator has analysed the evidence in considerable detail. He heard the parties at length and even visited the site. There is nothing to suggest that the arbitrator did not consider the relevant evidence or that the arbitrator considered any irrelevant evidence. 13. Mrs. Srikrishna next submitted that of the above reasons, there were some which even if established as a question of fact, dis-entitled the Respondent to any claim or compensation. These grounds included the hindrances on account of poles, wires, availability of land on one side and obstructions like telephone poles. Mrs. Srikrishna submitted that any claim on these grounds would be barred. 14. The submission based on clause 23 of the Special Conditions of Contract is well founded only to a certain extent but does not affect the award. 9 Clause 23.1.1 bars any claim or compensation whatsoever on the ground of the Petitioner not shifting electrical/telephone lines. Whether this is so or not would not, in the facts of this case, make a difference as I will indicate later. Clause 23.3.1 bars any compensation on account of delay in handing over of land in parts. It is however important to note that under Clause 23.3.1 the Petitioner was to make available the land in full or in part "as and when the same is taken over by the client and handed over to the IRCON (Petitioner)". The Respondent was required to plan the work commensurate to the handing over of the land. The last sentence of Clause 23.3.1 bars any claim for compensation on account of delay in handing over of land in parts. The bar however would not operate in a situation where the Petitioner's client had in fact handed over the land to the Petitioner but there was a delay on the part of the Petitioner in handing over the same in turn to the Respondent. The onus was obviously on the Petitioner to establish that the land was not handed over to it by its client and it was for that reason that the Petitioner in turn, did not hand over the same to the Respondent. It was not even contended before me that any attempt was made to discharge this burden. 10 15. Mr. Thakkar however submitted that clause 42.2 of the General Conditions of Contract provides that if the contractor i.e. the Respondent suffers delay and/or increased costs for failure of the Petitioner to give possession in accordance with the terms of sub-clause 42.1, the engineer shall after due consultation with the employer and the contractor/Respondent determine the extension of time to be granted to the contractor and the amount of such costs which would be added to the contract price and would notify the contractor accordingly. 16. Clause 42.2 however cannot come to the Respondent's aid. It is obviously in conflict with clauses 23.1.1 and 23.3.1. The contract itself specifies the manner in which such conflicts are to be resolved. The parent contract dated 29.1.1999 which incorporates various other documents is relevant. Clause 2 thereof states that the eleven documents listed thereunder at serial nos. (i) to (xi) shall be deemed to form and be read and construed as an integrated part of the agreement. Clause 3 reads as under :- 11 “3) The aforesaid documents shall be taken as complementary and mutually explanatory to one another, but in the case of ambiguities or discrepancies subject to the provisions of special Conditions of contract take precedence in the order set out above.” (emphasis supplied) Clause 23 is a part of the Special Conditions of Contract which is at serial no. (vi) of clause 2, whereas, clause 42.2 is a part of the General Conditions of Contract of IRCON (Petitioner), which is at serial no. (vii) of clause 2. Thus, Clause 23 of the Special Conditions of Contract, takes precedence over Clause 42.2 of the General Conditions of Contract. 17. This brings me back to Mrs. Srikrishna's submission that the award of claim nos. 7.2, 7.3, 10, 11 and 12 was based on the findings of the above breaches together ; that there is nothing in the award that bifurcates the extent of these claims qua the breaches ; that the claims were therefore also awarded on the basis of those breaches the existence of which did not permit any compensation in view of clause 23 of the Special Conditions of Contract. She therefore submitted that the award with respect to these claims is liable to be set aside. 18. The above observations of the arbitrator regarding the 12 Petitioner's breaches are in paragraph 4 of the award. Paragraph 4 of the award, it is important to note, is not related to any specific claim. It contains in general the findings and the decision of the arbitrator on the question as to which of the parties was responsible for the delay. I will assume that the arbitrator considered all the reasons stated in paragraph 4 to be the basis not merely for the finding regarding the Petitioner being responsible for the delay in the completion of the work but that he also considered them as constituting the basis for awarding the claims. 19. While it is true that factors such as the existence of poles, wires and the non-availability of land in time were some of the factors referred to in paragraph 4, and while dealing with some of the claims, they were by no means the only factors on the basis whereof the claims were awarded in the facts of this case, that by itself, would not warrant the award being set aside. 20. Where a claim is awarded on the ground that there were several breaches but no claims are maintainable with respect to some of the breaches the award is not necessarily bad. The validity of such an award would depend on the facts of the case. If the conclusion is that even if the breaches which do not permit a claim for compensation, are not considered and the 13 other breaches would by themselves have resulted in loss, the award must be upheld. 21. For instance, the breaches which do not permit a claim for compensation may be minimal or insignificant whereas the other breaches may be significant, leading to a conclusion that they would by themselves sustain a claim for compensation even in the absence or irrespective of the breaches which do not permit a claim for compensation or damages. Or where, as in the present case, the claim is awarded on account of the delay in the execution of the work caused by several breaches some of which do not permit a claim, the award of the claim would be upheld if it is found that the other breaches span the period of the delay and are significant enough by themselves to sustain a claim for compensation even in the absence or irrespective of the breaches which do not permit a claim for compensation or damages. 22. In the present case, although paragraph 4 of the award refers to certain breaches on the part of the Petitioner in respect whereof a claim for compensation is not permissible, it also refers to various breaches which would entitle the Respondent to claim compensation. For instance, the arbitrator has found the existence 14 of trees at site which hindered the work. The arbitrator has also found that hard rock was found at a much higher level i.e. at a shallower depth, than indicated in the plans which also form a part of the contract. Mrs. Srikrishna submitted in respect of claim no.4.1 that a different rate cannot be awarded for the work of chiselling in the rock as it was an item covered by the BOQ. That is an altogether different aspect which I will deal with while considering the award in respect of claim no.4.1. What is important to note is that the same does not bar a claim for compensation or damages on that account. The arbitrator also found that the span length in the approach viaduct was reduced, leading to a revision of drawings and a consequent delay in the supply of drawings and revision of initial drawings. Further, the arbitrator found that the combined value of the extra items was 12.4% of the contract sum, the sanction for which came much later and that the extra items required extra time for the execution of the work. 23. I have held earlier that the handing over of the land in parts cannot be discounted under clause 23.3.1 as the Petitioner has not discharged its burden of establishing that this was due to delay on the part of its client. Thus in fact only two minor items were barred from 15 consideration under clause 23. Even assuming that the hindrance caused on account of the existence of the poles and wires as well as on account of the non-availability of the land, is to be ignored, the existence of the other breaches would by itself entitle the Respondent to make a claim for damages. These breaches themselves are significant enough to sustain a claim for damages even in the absence of the other breaches and they clearly spanned the length of the period by which the contract was delayed. Re : Petitioner' s counter-claim 24. Before dealing with the claims which have been awarded, it would be convenient to deal with the challenge to the award in so far as it rejects the counter-claim made by the Petitioner. The award in this respect cannot be faulted at all. Even assuming that the Respondent could not found a claim on the basis of the Petitioner's breaches in view of clause 23, the same would not be of any assistance to the Petitioner so far as its counter-claim is concerned. If the Petitioner was responsible for the breaches even in respect of such items, the Petitioner obviously would not be entitled to damages from the Respondent. 16 In other words, a defence on this basis could always be maintained. The findings regarding the breaches on the Petitioner's part are based essentially on facts. There is nothing in the award which even remotely suggests that the arbitrator did not consider the record or any other fact. Thus, the award in so far as it rejects the Petitioner's counter-claim is upheld. 25. This brings me to the challenge to the various claims awarded in favour of the Respondent. The Respondent has not challenged the award rejecting some of the claims. Re : Claim No.4.1 26. As against the Respondent's claim for Rs.27,40,000/- the arbitrator awarded a sum of Rs.7,55,272/- for extra expenditure involved due to chiselling the rock. 27. The Respondent contended that the drawing attached to the tender documents showed that hard rock at the site of work lay between 5.1 to 8.0 mtrs. below the ground level under a much softer overburden whereas actually it was met at a depth of 2 mtrs.; that despite the advice of the consultant the Petitioner insisted on resting the pile foundation at the same level as was 17 shown in the drawings. The same necessitated boring through much greater depth of hard rock than contemplated when quoting for the work. 28. The arbitrator held that the work of chiselling was included in the following item in the BOQ :- “1.03 Making bore hole of 1200mm diameter for bored case in situ Rmt. 560 1350 Rs.756000 RCC piles in all type of strata with all labour, materials, tools & tackles, all leads & lifts complete in all respects” The arbitrator came to the conclusion that the work of chiselling was included in the above item in the BOQ. He however went on to hold that the reference to all types of strata is to be understood in the light of information about subsoil strata given on the drawing, give or take some reasonable variation. Otherwise, he held that the contract would be vague and theoretically a contractor can be forced to drill only in hard rock for an indefinite depth and held that the Respondent is entitled to extra payment for chiselling in hard rock for depths in excess of the depth contemplated in the tender + 25% variation. 29. The arbitrator has clearly re-written the contract between the parties. The item in the BOQ is clear. It required no interpretation. It required merely to be applied. Having come to 18 the conclusion that chiselling work was included in the above item, it was not open to the arbitrator to change/vary the rate agreed to between the parties. 30. Added to this is the fact that Clause 34 of the Special Conditions of Contract makes it abundantly clear that the rates quoted in the BOQ will form the basis of payment and that the rates embraced all operations necessary for the satisfactory completion of the work to finish and include all charges and expenses. (Clause 34.2.1). It is important to note that Clause 34.4.1 prescribes the mode and the method of determining payment in any item of work not included in the BOQ. The arbitrator however came to the conclusion that the work of chiselling to which the claim pertains was included in the above item in the BOQ. Having come to that conclusion, it was not open to the arbitrator to vary or fix the rate contrary to the provisions of the contract. 31. In the circumstances, the challenge to the award in respect of Claim No. 4.1 is upheld. Re : Claim No.4.5 and 4.6 32. The arbitrator dealt with these two claims together. 19 Claim No.4.5 was for Rs.1,47,150/- against which the arbitrator awarded a sum of Rs.1,45,768/-. Claim No.4.6 was for Rs.39,453/- which was awarded in full. Claim No.4.5 was for payment of liner for ground level and Claim No.4.6 was for payment from ground level. 33. The Respondent's case was that the road was not diverted entirely as a result whereof the work space was restricted in the portion near the railway crossing. Consequently, excavation upto the cut-off level before starting the pile boring was not allowed in this portion and the Respondent was asked to start the boring from the ground level. The Respondent further contended that the Petitioner had agreed to pay for the entire depth of boring. In fact, the Petitioner paid for the 22 piles close to the railway track but did not pay for the remaining 18 piles. 34. The arbitrator found that the item in the BOQ provided a 4mm thick MS liner which was not operated by the Petitioner and instead the work executed was of 6 mm depth liner which was an extra item. It is further held that there is no dispute about the Respondent having carried out the work as contended. Nor was there any dispute about the reasons stated by the Respondent for the same. This was also established during the arbitrator's site 20 visit. The claim was quantified on the basis of the rates paid