IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision : 29.09.2011 Arb. Case No.109 of 2009 M/s Rakesh Kumar & Co. ...Petitioner Versus Northern Railway through General Manager etc. ...Respondents CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA Present : Mr. N.C.Kinra, Advocate, for the petitioner. Mr. Jagdish Marwaha, Advocate, for the respondents. HEMANT GUPTA, J. Present is a petition under Section 11 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) for appointment of an Arbitrator and for reference of remaining claims/disputes to Arbitrator in terms of Arbitration Clause in the Agreement dated 13.10.2005. The petitioner was awarded contract of “balance work of construction of 10 Nos. Major Bridges on Broad Gauge Railway Line across rivers of spans 9.15 metre, 12.20 metre and 30.50 metre of PSC girders on well foundations/Open foundations with RCC abutments, Piers and other allied works like protection work from Kms 72.400 to 113.750 in between Chakki Bank and Mukerian (including yards) in connection with doubling on Jalandhar Cantt. – Pathankot – Jammu Section” of Northern Railways. The work was awarded on 12.07.2005 with stipulated period of completion of 15 months. The parties enter into agreement on 13.10.2005. All bridges except bridge No.232 were completed within the extended period, but the Arb. Case No.109 of 2009 drawing of well cap and abutment in respect of bridge No.232 are stated to have been received on 23.04.2007 i.e. after a gap of 30 months from the date of commencement of work. The petitioner sought extension of time to complete works pointing out increase in the cost of cement, steel, stone chips, labour etc. The request for the completion of the work was accepted without imposing any penalty. After the said extension, a corrigendum (Annexure P-4) was issued with the increase of Rs.1,35,72,742.95 over the existing cost i.e. Rs.7,77,71,969.53. The revised contract cost was Rs.9,13,44,712.48. The time for completion was extended up to 20.04.2008 without penalty vide letter dated 22.04.208. The relevant part of letter dated 22.04.2008 reads as under: “The Chief Engineer/Construction/NW, Northern Railway, Kashmere Gate, Delhi has accorded sanction to the date of completion relating to the subject work under execution by you being extended upto 20.04.2008 without penalty and without PVC under clause 17-A (iii) of GCC-1999.” It was, thereafter, the petitioner submitted a demand claiming Rs.275 lacs on account of the price variation w.e.f. date of negotiation i.e. 04.07.2005 to 20.04.2008. Since the said claim was not accepted, the petitioner requested for appointment of an Arbitrator. On 06.01.2009, the claim of the petitioner to the extent of Rs.73 lacs, as mentioned in Annexure-A of the said communication, was referred for arbitration i.e. claim Nos.3, 7, 8 & 9. In response to another communication, the petitioner was informed on 19.05.2009 that claim Nos.1, 2, 4(i), 4(ii), 10 & 6 fall within the “Excepted Matter” and not referable to arbitration. It is, thereafter, the petitioner has invoked the jurisdiction of this Court for appointment of an Arbitrator in respect of such claims of the petitioner. It is argued that the respondents cannot be the Judge of its own cause and decline adjudication of the claims of the petitioner. It is argued 2 Arb. Case No.109 of 2009 that in terms of the Agreement, it is the quantification of the claims on the admitted fact that whether the Contractor or the employer is the defaulter, which falls within the “Excepted Matter” and not the question that who is the defaulting party. Therefore, the claims of the petitioner are required to be referred to the Arbitral Tribunal. Reliance is placed upon M/s J.G.Engineers Pvt. Ltd. Vs. Union of India AIR 2011 SC 2477 and Anil Kumar Vs. B.S.Neelkanta & others (2010) 5 SCC 407. As per the respondents, in terms of the tender conditions, the petitioner is not entitled to price variation or wage escalation on any account whatsoever including claim for ideal labour or machinery and that the rates quoted by the tenderer and accepted by the Railway will hold good till the completion of the work. The extension in time to complete the works was granted without any penalty, meaning thereby the petitioner was to carry the work with the same conditions as was originally incorporated without any additional liability on the petitioner or on the respondent. In Anil Kumar’s case (supra), the Hon’ble Supreme Court found that there are disputes between the parties on the issues/claim raised by the petitioner and countered by the respondent including whether the claim still subsists or stands extinguished as alleged by the respondents. Such claims cannot be resolved without evidence and in view of such finding, referred the disputes to an Arbitrator. In J.G.Engineers Pvt. Ltd. case (supra), considering the Clauses (2) & (3) of the Agreement, which gave finality to the decision of Superintending Engineer, the Hon’ble Supreme Court found that the finality is in respect of quantification and not that, who has committed breach. It was held to the following effect: “14. Thus what is made final and conclusive by clauses (2) and (3) of the agreement, is not the decision of any authority on the issue whether the 3 Arb. Case No.109 of 2009 contractor was responsible for the delay or the department was responsible for the delay or on the question whether termination/rescission is valid or illegal. What is made final, is the decisions on consequential issues relating to quantification, if there is no dispute as to who committed breach. That is, if the contractor admits that he is in breach, or if the Arbitrator finds that the contractor is in breach by being responsible for the delay, the decision of the Superintending Engineer will be final in regard to two issues. The first is the percentage (whether it should be 1% or less) of the value of the work that is to be levied as liquidated damages per day. The second is the determination of the actual excess cost in getting the work completed through an alternative agency. The decision as to who is responsible for the delay in execution and who committed breach is not made subject to any decision of the respondents or its officers, nor excepted from arbitration under any provision of the contract.” It was further held that the question that which of the party has considered breach cannot be decided by a party to an agreement. The question whether the other party committed breach cannot be decided by the party alleging breach. The contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum. But in the present case, the claims of the petitioner i.e. claim Nos.1, 2 4(i), 4(ii), 5, 6 & 10 pertains to price escalation or the fact that there is loss of profit. Such claims are specifically prohibited in the agreement executed between the parties as per the clauses 5.1, 9.2, 11.3, 16 (3), 21.5, 49.1 & 63. The reasons communicated that such dispute falls within excepted matters, as contained in Annexure P-9 are as under: Claim No. Description of claims Reasons 4 Arb. Case No.109 of 2009 1. 2. 4(i) 4(ii) Increase in rates on the cost of 232 bridge @ 20% which would be around 400 lac = 80.00 lacs. Rate difference in cutting edge plates = 20.00 lacs Difference in the rates of steel @ 11000/- for 200MT = 32.00 lacs Difference in the rates of cement @ 90/- per bag 60000 bags It is an Excepted Matter in terms of Clause 9.2, 21.5 & 49 of Contract Agreement read with Clause 63 of GCC, which are reproduced below: Clause 9.2: No material price variation or wages escalation on any account whatsoever the compensation or ‘Force Majure’ etc. shall be payable under this contract except price escalation clause payable as per price escalation clause, if any, provided separately in the tender documents. Clause 21.5: No claim or idle labour and or idle machinery etc. on any account will be entertained. Similarly no claim shall be entertained for business loss or any such loss. Clause 49.1 (PVC Clause): the rate quoted by the tenderer and accepted by the Railway will hold good till the completion of the work and no additional individual claim will be admissible on account of fluctuation in the market rates increase except that payment of increase/decrease shall be made as per price variation clause. Clause 63: Matters finally determined by the Railway – All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whenever during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the GM and the GM shall within 120 days after receipt of contractor’s representation make notify decisions on all matters referred to by the contractor in writing provided that matter for which provision has been made in clause 8, 18, 22, (5) 39, 43(2), 45(a), 55, 55-A(5), 57, 57- A, 61(1), 61(2) and 62(1) to (xiii) (B) of General Conditions of Contract or in any contact shall deemed as Excepted Matters (matter not arbitrable) and decisions of railway authority, thereon shall be final and binding on the contractor, provided further that “excepted matters” shall stand specifically excluded from the purview of the arbitration clause. Since the payment of PVC has been made as per PVC clause exist in the contract agreement, as such these claims are not referable to Arbitration. 5 Arb. Case No.109 of 2009 5. 10. Continuations of over head Expenses for extended period of 18 months @ 150000/- p.m. = 27.00 lacs Loss of profit: The work was scheduled to be completed within 15 months but it took 19 months extra due to Non-availability of design drawing of bridge No.232 & protection work. 8.00 crore @ 10% = 80.00 lacs It is an Excepted Matter in terms of Clause 11.3 & 21.5 of Contract Agreement read with clause 63 of GCC which are reproduced below: Clause 11.3: No claim whatsoever will be entertained by the Railway on account of any delay or hold up of the work/s arising out delay in approval of drawings, changes, modifications, alterations additions, omission and the site layout plans or details drawings and design and or late supply of such material as are required to be arranged by the Railway or due to any other factor on Railway Accounts. Clause 21.5: reproduced under the reply of claim Nos.1, 2, 4(i) & 4(ii). Clause 63: reproduced under the reply of claim Nos.1, 2, 4(i) & 4(ii). Payment as per PVC clause No.49 available in Contract Agreement has already been made, as such these claims are not referable to Arbitration. 6. Releasing of security deposit delayed by 18 months i.e. Rs.50.00 lacs @ 18% = 9.00 lacs It is an Excepted Matter in terms of Clause 5.1 of Contract Agreement with clause 16(3) & 63 of GCC-1999 which are reproduced below: Extract of Clause 5.1: The security deposit unless forfeited in the whole or in part according to the terms and conditions will be refunded on receipt of certificate from the Engineer concerned to the effect that the work has been completed in all respect within stipulated period and maintained for a period of 12 months from the certified date of completion and that no defects have been noticed. Clause 16(3): No interest will be payable upon the earnest money and security deposit or amount payable to the contractor under the contract, but government securities deposited in terms of sub clause (1) of this clause will be payable with interest accrued thereon. Clause 63: reproduced under the reply of claim Nos.1, 2, 4(i) & 4(ii). As no delay have been made to release the security deposit by Railway. As such this claim is not referable to Arbitration. 6 Arb. Case No.109 of 2009 There is specific bar in the agreement that the petitioner shall not be entitled to increased wages or price variations and the rates, the petitioner cannot raise any dispute in terms of the agreement. All the claim of the petitioner except claim No.6, fall within the prohibited terms of the agreement i.e. petitioner cannot claim any increase as claimed except in the matter of release of security falling within claim No.6, which is dependent upon the successful completion of the project. Present is the case, where there it is not asserted by one party or denied by the other party or that there is dispute in respect of the breach of conditions of the agreement. The petitioner was granted extension of period of completion of contract without any penalty meaning thereby that for delayed completion, the petitioner was not penalized. The non-imposition of penalty signifies that the period of completion of work was extended without any consequence falling on the parties. Therefore, the petitioner cannot claim wages or escalation in cost for the reason that the work could not be completed within the period originally specified. As per the petitioner, the time period of bridge No.232 was extended and corrigendum issued. Such corrigendum has taken into consideration the increase in cost as well. Therefore, in terms of Clauses 5.1, 9.2, 11.3, 16(3), 21.5, 49.1 & 63, as reproduced above, of the agreement, the petitioner cannot be permitted to raise disputes, as such disputes are prohibited to be raised by the contractor. However, I find that claim No.6 i.e. Release of security deposit with delay, is a dispute, which is required to be referred to an Arbitrator. It is the assertion of the respondents that no delay has been made by the Railway for release of the security. Such communication is, in fact, 7 Arb. Case No.109 of 2009 decision by the Railway, which cannot be made by the Railways in terms of the judgment of Hon’ble Supreme Court in J.G.Engineers Pvt. Ltd. case (supra). Consequently, the present petition is partly allowed. The Arbitral Tribunal appointed by the respondents shall also consider claim No.6 of the petitioner. 29 .09.2011 (HEMANT GUPTA) Vimal JUDGE 8