International Airport Authority of India vs M.L. Dalmiya and Co. Ltd.

S. Muralidhar, J.—This appeal is directed against the impugned order dated 7th October 1994 passed by the learned Single Judge in Suit No. 1465 of 1991 and IA Nos. 8060 of 1991 and 296 of 1992.

The facts leading to the present appeal are that in December 1977, a global tender was invited by the Republic of Maldives to upgrade the existing airport of Hulule Island. The Appellant, International Airport Authority of India ("IAAI''), submitted its tender to the Government of Maldives on 12th December 1977. On 28th February 1978 the Government of Maldives decided to award the tender to the IAAI for a sum of US $1,07,43,881.92. The site was handed over to the IAAI on 22nd March 1978. In terms of the contract the site installation including mobilization of plant, machinery and material, tools etc. and also construction of temporary structures had to be completed by 21st July 1978 so that the entire work could commence on the very next date i.e. 22nd July 1978. In terms of the agreed time schedule the work had to be completed by 21st December 1979.

On 8th March 1978 a back to back agreement was entered into between IAAI and the Respondent M/s. M.L. Dalmiya & Co. Limited (MLD) whereunder MLD was to be the "Construction Associate" to IAAI and had to execute the whole work for a total sum of US $ 96,82,931.92. On 2nd May 1979 a sum of US $ 13,43,367.39 was paid by the Appellant IAAI to MLD as mobilization advance. A sum of US $ 1,79,500 was paid to MLD as bridging finance. It is the case of MLD that the fact that it was to execute the whole work on behalf of IAAI was not disclosed by IAAI to the Government of Maldives. In terms of the contract MLD was to receive 93.11% of each running bill and final bill raised by IAAI to the Government of Maldives. The work of construction of the terminal building was also awarded to MLD on 21st August 1998. This had to commence within 30 days of the delivery of the site and be completed within 24 months. The site was delivered on 22nd March 1978 and the work had to therefore be completed by 21st April 1980.

According to MLD out of the mobilisation advance of US $ 16,11,559 received by IAAI from the Government of Maldives, US $ 11,92,801 was given by IAAI to MLD on 2nd June 1978 and US $1,37,000 on 6th September 1978. The bridging finance of US $ 8,00,000 received by IAAI from the Government of Maldives was not released to MLD. However, admittedly IAAI incurred an expenditure of US $ 1,99,956 on behalf of MLD. The site mobilisation, barring a few pieces of machinery, could be completed by MLD only on 31st October 1978. According to IAAI the delay in releasing the mobilisation advance to MLD was on account of MLD''s failure to obtain ECGC cover. On the other hand the case of MLD was that IAAI had to obtain ECGC cover in a manner that advantage of the same could be taken by MLD. Further according to MLD although it supplied the sample of the concrete work to the IAAI in April 1978, six weeks before the starting of the work, the approval of IAAI was conveyed to it only on 11th October 1978. The approval for the Bitumen was not given even up to 10th January 1979, the date on which the contract was terminated by IAAI. The causeway for facilitating off loading of machinery brought by ships was not provided by the Government of Maldives even till the termination of the contract. As a result ships carrying machinery for the project had to be anchored five miles away from the shore and the cargo had to be loaded on to smaller crafts to be brought ashore. This severely affected the progress of the work. IAAI had to arrange, at the instance of MLD, to airlift some of the machinery for fear of the contract being terminated by the Government of Maldives on account of the time overrun. Work on the runway to be completed in three phases made little progress. The resident engineer furnished to MLD the revised design of the first phase of the runway only on 16th August 1978.

On account of the above disputes between the parties, the agreement was terminated by the IAAI on 10th January 1979. The project was thereafter completed by the IAAI on 30th September 1981 at the risk and cost of the Respondent. Contending that it had incurred a loss of Rs. 63,14,541.02 the IAAI raised a claim in that sum against the Respondent. IAAI further claimed an amount of US $ 8,55,903.80 being the balance of the sum advanced to MLD for purchase of plant and machinery. IAAI filed an application being Suit No. 122-A of 1979 in this Court u/s 20 of the Arbitration Act 1940 ("Act''). By an order dated 18th March 1982, this Court directed IAAI and MLD to appoint one Arbitrator each. IAAI appointed Sri V.R Vaish and MLD appointed Shri M.S.Iyengar as Arbitrator. The said Arbitrators appointed Shri K.B.Asthana, a retired Chief Justice of the High Court of Allahabad as Umpire. While IAAI made 8 heads of claims, MLD made 16 heads of claims before the Arbitrators. The Arbitrators could not reach an agreement between themselves in respect of the Award and the matter was referred by them to the Umpire. An Award was given by the Umpire on 15th April 1991. MLD''s claims were accepted in part whereas those of the IAAI were rejected.

MLD then filed a Suit No. 1465 of 1991 in this Court u/s 14 of the Act in which pursuant to the notice issued the learned Umpire filed the Award in Court. Both parties filed their objections to the Award and the following issues were framed by the learned Single Judge:

(i) Whether the Award is liable to be set aside or modified in view of the objections filed by the parties.

(ii) Relief.

By the impugned order dated 7th October 1994 the learned Single Judge dismissed the objections filed by the IAAI and directed the Award to be made rule of the Court. Aggrieved by the impugned order of the learned Single Judge the IAAI has filed the present appeal.

We have heard submissions of Mr. J.P. Sengh, learned Senior counsel appearing for the Appellant and Mr. R.K. Watel, learned Counsel appearing for the Respondent.

One of the objections raised by IAAI is that the reasons given by MLD for the delay, which were accepted by the Umpire, were unsustainable as these were not supported by the documents on record. According to the Appellant, the finding in this regard is either based on no evidence or is an error apparent on the face of the Award.

The above submissions have been considered by this Court. It is noticed that the dredging channel that had to be provided by the Government of Maldives was in fact provided only in April 1980, after the termination of the contract. The delay in this regard was not due to the fault of MLD but that of the Government of Maldives. Therefore, it is not possible to take the view that the Umpire had committed an illegality in coming into conclusion that the delay was not on account of MLD. The finding of the Umpire is based on a correct appreciation of the documents on record. This Court concurs with the learned Single Judge that there is no provision in the contract which indicates that time is the essence of the contract. This Court further agrees that even if there was any delay attributable to MLD in the execution of the contract, that was not a justifiable ground for the IAAI to terminate the contract.

The next ground urged by the IAAI concerned the release of the mobilization advance obtained by MLD without obtaining ECGC cover. The learned Single Judge held that the Umpire has dealt with this aspect in detail by referring to the relevant documents and held that there was no ground made to interfere with the said finding. We are also unable to find any perversity in the impugned order of the learned Single Judge on this aspect that calls for interference.

Mr. Sengh advanced extensive arguments as regards MLD''s Claims 2, 4, 6 and 7. Claim No. 2 was for a sum of US $ 58,255 being the cost of furniture, jeeps, equipments etc., which was purchased by MLD as per the orders of IAAI for which no payment was made by the latter to MLD. It was urged by IAAI that some of the items of claim covered by Claim No. 2 are already covered in Claim No. 1. This was disputed by Mr. R. K. Watel, learned Counsel for the Respondent MLD who pointed out that such a contention was never raised by IAAI before the Arbitrators. According to him factually also this contention is untenable since Claim No. 1 was restricted to works executed and materials supplied for construction whereas Claim No. 2 covers 15 items directed by IAAI to be purchased by MLD towards building a lab and an office. He referred to the original purchase vouchers in support of the 15 items of furniture which MLD placed in support of its Claim No. 2 before the Arbitrators and for which no evidence in rebuttal was led by IAAI.

There appears to be merit in the submission of the learned Counsel for the Respondent MLD. This Court finds that in their reply to MLD''s Claim No. 2, the IAAI took the following stand before the learned Arbitrators and Umpire:

The claimant further submits that in so far as Respondent''s Claim No. 2 is concerned, the same relates to the payment of certain items alleged to have been ordered by the Claimant for purchase on their behalf. The Respondents have furnished details of this claim at Pages 91 and 92 - Annexure "B'' of the statement of facts. The Claimants do not dispute the same in so far as all the 15 items and the quantity of each item as considered by the Respondents in the said Annexure ''B''. The dispute is only regarding the valuation for which the Claimants will make separate submissions.

(emphasis supplied)

Clearly therefore the issue was not in respect of "duplication'' of claims but their valuation. The learned Umpire has at internal page 44 of the Award held that MLD''s Claims 2,5,6 and 7 "stand independently on their own merits as decided hereafter." The Single Judge has dealt with this contention in a great detail and has concurred with the view taken by the Umpire. Having considered the documents on record, we are not inclined to interfere with the concurrent findings of the learned Umpire and the learned Single Judge.

Arguments were next addressed in respect of MLD''s Claim No. 4 in the sum of US $ 85,29,300 being the alleged loss/ damage suffered by MLD with regard to the non-return of the MLD''s machinery, tools, plant etc. which were owned by and brought to the site by MLD. Claim No. 4 was later limited by MLD to US $ 62,45,1000 by restricting the hire charges (for 24 of the 47 items) from 28th April 1980, which was the stipulated date of completion, till 10th January 1984. Under Claim No. 7, MLD had claimed US $25 lakhs being the depreciated value of the 47 items of plant and machinery owned by it and brought to the site but not returned by the IAAI inclusive of interest @18% per annum from 22nd April 1980 till 21st October 1988. The learned Umpire allowed Claim No. 4 to the extent of awarding hire charges for 24 items for the period 1st October 1981 till 1st January 1984 treating the same as non-operational period and at 50% of the contract rates, in the sum of US $4,78,467. As regards Claim No. 7, he awarded MLD a sum of US $5,94,162. The contention of the learned Senior counsel for the IAAI was that the Umpire had allowed hire charges as well as full cost for the same items under Claim No. 7 and therefore MLD was being paid much more than what it is entitled to. Learned Counsel for the Respondent on the other hand submitted that IAAI never informed MLD that it was appropriating the machinery and this was why MLD asked for damages in the form of hire charges and return of machinery. In the alternative it claimed damages and the depreciated cost of the machinery on the date of filing its claims.

To this Court it appears that the reasons given by the Umpire for partly allowing the Claims 4 and 7 are cogent. During the period the contract was in force, and till its subsequent completion by the IAAI, the machinery was under IAAI''s possession and not in control of MLD although admittedly they belonged to MLD. Award of the 50% of the contractual hire charges for 24 of the 47 items and that too restricted to the non-operational period as damages cannot be said to be illegal or unreasonable. Likewise the award of the depreciated value of the said machinery and plant under Claim 7 cannot be said to be a duplication as they pertain to the fact of non-return of the machinery even after the completion of the contract period. The conclusion of the learned Single Judge accepting the award in this regard cannot therefore be faulted.

MLD''s Claim No. 6 was for the depreciated value of the temporary structures raised by it for various site offices, quarters etc. and for the depreciated value of the furniture used therein. The claim was reduced by MLD from US $ 2,20,687 to US $ 1,76,814. The umpire awarded only the salvage value of the structure and the depreciated value of the furniture used therein. The Umpire has appreciated the evidence produced by MLD in the form of documents and arrived at the said conclusions. Nothing has been shown by the learned Senior counsel for the Appellant to persuade this Court to hold that the said conclusion is erroneous or perverse or contrary to the record.

For the aforementioned reasons, this Court is unable to find any perversity as regards the concurrent findings of both the learned Umpire as well as the learned Single Judge. The appeal is, accordingly, dismissed. The pending applications also stand dismissed.