National Buildings Corporation Ltd. vs Joydeep Paul

Ashoke Kumar Dasadhikari, J.—The Petitioner National Buildings Construction Limited a Government of India enterprise, a company duly incorporated under the Indian Companies Act, 1956 has filed this application u/s 34 of the Arbitration and Conciliation Act, 1996 challenging the award passed by the learned Arbitrator on 3rd July, 2008.

It is contended by the Petitioner that a notice inviting tender for construction of 117 numbers of staff quarters, boundary wall (civil works only) for Employees'' Provident Fund Organisation at Jalpaiguri was issued and in the competitive tender the Respondent herein, Sri Joydeep Paul stood lowest tenderer. The Letter of Acceptance was issued to said Joydeep Paul, the Respondent herein vide memo dated 15th January, 1996. A contract in writing was executed by and between the Petitioner and the Respondent the said contract contains various rights and obligations of the parties. Some of such salient features of the said contract are noted hereunder:

I) Estimated amount put to tender.. Rs. 150 lacs. II) Earnest money.. Rs.50,000/-. III) Date of submission of tender.. 2.1.1996. IV) Date of opening of tender.. 2.1.1996 at 3-30 P.M. V) Time for completion.. 15 months. VI) Date of issuance of letter of acceptance.. 15.1.1996. VII) Tendered amount� Rs.1,47,76,090/- VII) Defect liability period: 6 calendar months from the date of handing over of the work to the owner.

There was an agreement in between the parties to appoint arbitrator to settle all disputes, differences or questions arising out of or in connection with the said contract. The clause relating to appoint arbitrator reads as follows:

All disputes, differences or questions arising out of or in connection with this contract between the contractor and the corporation except those disputes or differences or questions where the decision of the particular authority is stated to be final shall be referred to sole Arbitrator or an Engineer of the corporation ( not below the rank of the Project Manager ) to be appointed by the Chairman-Cum-Managing Director of the corporation where decision shall be final and binding on the parties. If the above mentioned arbitrator resigns, above mentioned appointing authority shall appoint another arbitrator.

It is alleged by the Petitioner that from the very beginning the Respondent herein committed flagrant breach to the terms of contract and the Respondent failed and neglected to perform their obligations under the contract which was recorded by the Petitioner by issuing a letter dated 25th March, 1996 and it was informed that the progress of the work is not as per the contract and the work may not be completed within time, etc.. The company issued several letters asking the Respondent to arrange adequate number of mason, labour and staff, but which was not cared by the Respondent and the Respondent was unable to perform his obligation. The Respondent despite having sufficient materials prays the Petitioner for supplying the building materials with oblique purpose and malafide intention. The Respondent instead of taking positive attributes to the work, committed various breaches to the terms of the contract despite having sufficient quantities of cement, etc. lying with his custody.

It was further contended that from time to time the Respondent herein raised fictitious bills such as 6th R.A. bill without executing the entire work itself. The Petitioners issued letter alleging that the Respondent has not executed such quantities of work for which they can raise the said bill. Thereafter 9th R.A. bill was also submitted along with 4th escalation bill. The Petitioners replied against that bill. It is alleged that the main motto of the Respondent was to get money from the Petitioner by manipulating such fictitious bills. The Respondent did not give in reply to that and the Respondent also did not pay Provident Fund dues and ultimately payment was stopped in a certificate proceeding by the Regional Provident Fund Commissioner, Siliguri. The Respondent by not completing the said work within the stipulated time and even within the extended time, as was allowed by the Petitioners caused various losses to be incurred by the Petitioner on various heads and counts. In such a situation the Petitioner was compelled to terminate the contract.

Thereafter, the Respondent moved an application u/s 9 of the Arbitration and Conciliation Act, 1996 and pursuant to the order of Hon''ble High Court joint measurement was also taken. The said Section 9 application was finally disposed of and thereafter the said Respondent Joydeep Paul filed an application u/s 11 of the Arbitration and Conciliation Act, 1996 and the Hon''ble Chief Justice upon hearing both sides has been pleased to appoint Hon''ble Justice Ashamukul Pal (Retired) as the Sole Arbitrator and after the demise of Justice Pal, the Hon''ble Chief Justice has been pleased to appoint Justice S. N. Mullick (Retired) as the Sole Arbitrator.

The learned Arbitrator held large number of sittings. When the arbitration proceedings is in progress both the Petitioner and the Respondent approached the learned Arbitrator for an amicable settlement and, in fact, a settlement was arrived at wherein the two competent officers of the Petitioner as well as the Respondent put their signature and the Respondent, Joydeep Paul filed the application before the learned Arbitrator to settle the dispute as per the terms of the settlement as agreed upon by and between the parties and also signed by both sides. However, the said application was rejected by the learned Arbitrator on the ground that the application was not made jointly, but made by Joydeep Paul, Respondent only.

After dismissal of the said compromise application filed by the Respondent the Respondent moved an application before this Hon''ble High Court for treating the said proceedings as concluded. However, the said application was dismissed by this Hon''ble Court.

The Respondent here in produced him as witness before the learned Arbitrator and his examination in chief was concluded whereafter his cross-examination commenced but before conclusion of cross-examination the Respondent stopped attending the arbitration proceedings and stopped making payment of remuneration to the learned Arbitrator. The learned Advocate for the Respondent also did not appear before the learned Arbitrator on the hearing dates since he has no instruction to appear to the matter.

The learned Counsel for the Petitioner submitted that the award is perverse and the tribunal had no jurisdiction to proceed with the said arbitration proceedings. He further submitted that the Respondent has claimed return of bank guarantee, but the learned Arbitrator awarded payment of cash amount against the bank guarantee. The claimant abandoned the proceedings before the learned Arbitrator and accordingly the learned Arbitrator ought to have dismissed the claim of the Petitioner instead the learned Arbitrator proceeded with the claim of the Respondent and further rejected the counter claim made by the Petitioner. It was further submitted that arbitrator has rejected settlement of the said claim as proposed by the parties but passed award on that basis which is totally illegally and arbitrary. The learned Arbitrator did not consider the vital documents and further awarded compound interest which is not permissible in law. It is also submitted that the learned Arbitrator should not have proceeded with the said proceedings u/s 25(c) of Arbitration and Conciliation Act of 1996. The learned Advocate for the Petitioner referred Sub-section (6) of Section 16 and submitted that the appointment of arbitrator is bad since he is not qualified to be appointed as arbitrator in terms of the arbitration clause and in view of lacking qualification as per the arbitration agreement, the learned Arbitrator had no jurisdiction to decide the matter. According to the learned Advocate for the Petitioner the learned Arbitrator should be an engineer as per arbitration Clause 24.01 but, in the instance case the learned Arbitrator did not have any qualification of an engineer and accordingly he had no jurisdiction to enter into the arbitration proceedings and to decide the same. He further submitted that under Clause 37.01 of contract, although no interest could be awarded, the learned Arbitrator awarded compound interest and thereby gone beyond the terms of the contract which is not at all permissible in law. The learned Counsel for the Petitioner cited the following decisions: K.V. George Vs. Secretary to Government, Water and Power Department, Trivandrum and Another, Paragraph 73. He also cited another decision reported in (2004) 10 S.C.C. 504 (National Building Construction Corporation Ltd. v. Joydeep Paul) and Associated Engineering Co. Vs. Government of Andhra Pradesh and another, Para 6 and Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., Paragraphs 13 to 15, 22, 30, 31, 41, 42, 54 and 74 and lastly he cited a decision reported in Sayeed Ahmed and Co. Vs. State of U.P. and Others, Para 14.

Mr. Mitra learned Counsel appearing for the Respondent submitted that the Petitioner threatened to terminate the contract and to assign the work to the other contractor for which the Respondent was compelled to file an application for appointing an arbitrator. He further submitted that the learned Arbitrator rejected the application for settlement but not the settlement arrived at by and between the parties and on behalf of the Petitioners two competent officers signed the said settlement. It was contended by him that mere rejection of an application for settlement by the learned Arbitrator on the ground that the Respondent alone signed the same do not make the settlement, being the annexure to the said application, void. Since the settlement is a genuine one and signed by the competent authorised officers of the Petitioner, the learned Arbitrator did not make any mistake and/or committed any illegality in considering the said settlement at the time passing the award and, therefore, there is no illegality whatsoever in passing such an award in favour of the Respondent. He also submitted that the Petitioner did not give evidence nor produce document in support of their counter claim nor wanted to proceed with the said counter claim for which the learned Arbitrator rightly rejected their counter claim which was specifically recorded by the learned Arbitrator. Mr. Mitra also submitted that upon contested hearing this Hon''ble Court appointed learned Arbitrator which was never objected nor any plea of competency was ever taken before this Hon''ble Court and, therefore, they cannot take this plea after the award was passed in favour of the Respondent. It was further submitted by Mr. Mitra that the Petitioner presented the bank guarantee for encashment and the Respondent moved this Hon''ble Court, when this Hon''ble Court directed to keep the said amount in a savings bank account of the Respondent with a specific direction that the Respondent will not be permitted withdraw the same. It was submitted that at the first instance the Hon''ble Mr. Justice Ashamukul Pal (Retired) was appointed by the learned Arbitrator and after his death the Hon''ble Mr. Justice S. N. Mullick (Retired) appointed by the sole arbitrator by this Hon''ble Court in presence of the Petitioners which was never objected and accordingly the Petitioners are estopped questioning for appointment on a frivolous plea. Mr. Mitra produced orders passed by this Hon''ble Court showing appointment of the learned Arbitrator one after another. He further submitted that the compromise signed by the two Petitioner''s authorised representative having competency which was never rejected by the learned Arbitrator but the application was rejected since it was not signed by both parties and, therefore, the learned Arbitrator had no occasion to transgress his power nor acted illegality in passing the said award. The award is a reasoned one and under no circumstances the said award could be said as perverse. He referred Sub-section (3) and Sub-section (4) of Section 19 of the Arbitration and Conciliation Act of 1996 and submitted that if the parties do not agree with the procedure then the tribunal to proceed in the manner it considers fit and in that view of that matter there is no illegality in passing the award which is questioned before this Hon''ble Court. He also referred Section 34 of CPC and submitted awarding of interest is the discretion of the learned Arbitrator and, therefore, the learned Arbitrator has rightly awarded interest. He referred the following decisions:

A.I.R. 1993 Sc 732 (National Building Construction Corporation Ltd. v. Joydeep Paul) Paragraph 42 and 43, The Board of Trustees for the Port of Calcutta Vs. Engineers-De-Space-Age, and S. Harcharan Singh Vs. Union of India, Paragraph 14, 15 and 16.

It appears from Clause 24.01 of the contract that there is arbitration clause and the said clause makes it clear that in case of disputes and differences or questions arising out of or in connection of this contract between the contractor and the Corporation, the disputes shall be referred to sole arbitrator or an engineer of the Corporation (not below the rank of project manager) the aforementioned arbitration clause reads as follows:

All disputes, differences or questions arising out of or in connection with this contract between the contractor and the corporation except those disputes or differences or questions where the decision of the particular authority is stated to be final shall be referred to sole Arbitrator or an Engineer of the corporation (not below the rank of the Project Manager) to be appointed by the Chairman-Cum-managing Director of the corporation where decision shall be final and binding on the parties. If the above mentioned arbitrator resigns, above mentioned appointing authority shall appoint another arbitrator.

It appears from records that the disputes arose in between the parties and the Respondent filed an application for appointment of an arbitrator before this Hon''ble Court and Justice Ashamukul Pal (Retired) was appointed as sole Arbitrator upon a contested hearing and after his death Justice S. N. Mullick (Retired) was appointed as arbitrator by an order of this Hon''ble Court which was never questioned by the Petitioner. It appears from the said arbitration clause that the disputes and differences shall be referred to the sole Arbitrator or an engineer of the Corporation, therefore, it cannot be said that the learned Arbitrator should be an engineer only not any other competent person. However, the plea as raised by the Petitioners before the learned Arbitrator was rejected and in my opinion the learned Arbitrator appointed by this Hon''ble Court have jurisdiction and authority to decide the disputes and differences arose in between the parties herein. In this regard Mr. Ghosh cited a decision reported in (2004) 10 S.C.C. 504 (Union of India and Anr. v. M.P. Gupta) which have no application in the facts and circumstances of this case.

So far the perversity of award is concerned I am of the view that simply because Respondent claimed return of bank guarantee, but the learned Arbitrator have passed an award to pay cash amount to the claimant or the claimant was absent for some period before the learned Arbitrator for some personal difficulty or awarding of compound interest cannot make the award perverse. It is evident that at the relevant time when the Respondent filed his claim before the learned Arbitrator with a prayer for return of bank guarantee, that time the bank guarantee was lying with the Petitioner, but subsequently pursuant to the direction of this Hon''ble Court the bank guarantee was encashed and the said amount was kept in a savings bank account in the name of the Respondent with a restriction that the said account cannot be operated. Under such circumstances the awarded amount can be realised by the Respondent if the Respondent is permitted to withdraw the said amount from the savings bank account. In that event the Petitioner would not be liable to pay the amount to the Respondent. The learned Arbitrator is authorised under the law to award interest and accordingly he has exercised his discretion thereby granting compound interest on the awarded sum at the rate of 9 per cent per annum from the date of filing the statement of claimed that is 3rd March, 2002 till the date of this award and statutory interest at the rate of 18 per cent per annum on the said amount from the date of the award till realisation.

Although it was argued on behalf of the Petitioner that in terms of Clause 37.01 of the contract the Respondent is not entitled to get any interest but in my opinion the said clause is not applicable in case of arbitration proceedings before the learned Arbitrator. In this regard I find substance in the submissions made by Mr. Mitra, the learned Counsel for the Respondent, referring a five Judges'' Bench decision of the Hon''ble Supreme Court reported in Secretary, Irrigation Department, Government of Orissa and others Vs. G.C. Roy, wherein it was held a person deprived of use of money to which he is legitimately entitled has a right to be compensated for deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the Arbitrator as it is for the period prior to Arbitrator entering upon the reference. This is the principle of Section 34, CPC and there is no reason or principle to hold otherwise in the case of Arbitrator and Arbitrator is an alternative forum for resolution of disputes arising between the parties. If so he must have the power to decide all the disputes or differences arising between the parties if the Arbitrator has no power to award interest pendentelite the party claiming it would have to approach the Court for that purpose even though he may have obtained satisfaction in respect of other claims from the Arbitrator. This would lead to multiplicity of proceedings. An Arbitration is the creature of an agreement. It is open to the parties to confer upon him such power and prescribe, such procedure for him to follow as they think fit but, so long as, they are not oppose to law. All the same, the agreement must be in conformity with law. The Arbitrator must also act and make his award in accordance with the general law of the land and the agreement.

In that view of the matter I am of the view that the Arbitrator is authorised under the law to award interest. These judgments cited by Mr. Ghosh in this regard are not at all relevant and/or applicable in the facts and circumstances of this case.

It appears from the award itself that the learned Arbitrator adjudicated the claim of the Respondent on the basis of materials available before him as per provisions of Section 25(c) of Arbitration and Conciliation Act, 1996 and have passed the award.

In this regard, I quote the relevant portion of award which would clearly indicate why the settlement was taken into consideration and award for a sum of Rs. 24,65,911 was passed by the learned Arbitrator:

Now, I come to a crucial juncture of the case of the parties, evidence and a material admitted document on record as per annexure X to the claimant''s application for recording compromise dated 22.06.04. The question arises whether any part of the claim of the claimant stands admitted on behalf of the Respondent as per the terms of settlement marked annexure X to the compromise application. It must be made clear, lest, I am misunderstood that this tribunal is reopening the question of reconsidering whether there was any compromise between the parties on the basis of it. That issue has already been decided in my order dated 11.11.06 dismissing the claimant''s application filed on 22.06.04 for recording compromise. The pertinent query, however, is whether the terms of settlement as per annexure X to the said application are of any help to the claimant to allow any part of its claim by way of admission on the part of the Respondent made therein. In the above quoted Affidavit of Competency it has been unequivocally clarified by the Delhi Authority of the Respondent that Mr. S.C. Barman and Mr. J.K. Saha two officers of the Respondent at Calcutta, who are signatories to the terms of settlement, "were authorized to negotiate as settlement and were further authorized to sign a proposal for terms of settlement but not to give effect to a compromise". The terms of settlement marked annexure X are contained in a 4-page typed document signed by the above two officers of the Respondent NBCC Ltd. and also by the claimant, Joydeep Paul. The genuineness of this document has not been challenged before this tribunal. In fact, this is an admitted document. The claimant''s application for recording compromise filed being barred by the provisions of Section 30(2) of the Act which has been elaborately discussed in my order dated 11.11.06 which need not be repeated here. The above terms did not lead to a compromise as prayed for by the claimant. In their Affidavit-in-Opposition filed against the claimant''s application for recording compromise it has been stated on behalf of the Respondent that the proposal for settlement on the terms of settlement was turned down by the competent authority in Delhi office as indicated in letter dated 02.07.04 as per annexure R4 to the same. No reason for such rejection has been shown there. It is also not the case of the Respondent that those terms as settled by and between the said two officers of the Respondent and the claimant were illegal, or outside the scope of authority of the above two officers of the Respondent. I may again note here that the last advocate for the Respondent Mr. Amitava Ghosh did not proceed with the case by giving any evidence on behalf of the Respondent in this regard. So, the terms as recorded there by both the parties have got to be looked into by the Tribunal on their own value. The terms of settlement begin with the words "Parties have agreed to settle the dispute in respect of the Contract No. for the work/job on construction of 117 Nos. staff quarters and boundary wall for EPFO at Jalpaiguri and negotiation talks to that effect have progressed much". Under Clause 2 of the same ( 2[1] and 2[a] ) the total amount admitted to be paid to the claimant by the Respondent has been arrived at a calculation at Rs. 17,27,106/-. It is also agreed in Clause 2(b) that the amount against 6th escalation bill (to be prepared) is payable to the claimant over and above the said amount of Rs. 17,27,106.00. The amounts have, however, not been ascertained there. In Clause 2(c) of the said terms at page 3 it is further agreed and admitted by the said two authorized agents that the performance guarantee of Rs. 7,38,805/- furnished by the claimant is to be returned to the latter. There are also other admissions in favour of the claimant in the said terms which this tribunal need not look into as no claim has been preferred on the same [vide Clause 2(d) of the terms of settlement]. There are also some concessions made in favour of the Respondent agreed to by the claimant which need not be considered here as the Respondent has refused to give any evidence or press their counter claim in spite of opportunities given by the tribunal in its directions as referred to earlier.

The legal position is that admissions as such are not conclusive proof but they may operate as an estoppel against the persons making them from challenging the same. The Respondent has not, however, challenged the above admissions made by their authorized officers in the terms of settlement signed by the claimant and the said tow officers of the NBCC, namely, S.C. Barman and J.K. Saha. The Affidavit of Competency filed on behalf of the Respondent shows beyond all doubts that the said two officers have all along lawfully acted as authorized agents of the Respondent in the matter of negotiate the settlement between the parties by fixing the terms to be binding upon the both, subject to the latter being approved by their highest authority at Delhi. While doing so, they have made by the Respondent. It is needless to say that for effecting compromise in final form the matter was reported to the Delhi Authority. That aspect of the matter has already been finally decided by the tribunal in its order dated 11.11.06. But, it is never the case of the Respondent that these admissions made by the above two agents are beyond the scope of their authority. So, these are lawful admissions made by the authorized agents and as such binding upon the Respondent NBCC Ltd. legally and contractually.

It is pertinent to mention here that Mr. Mitra produced a letter dated 23rd December, 2010, issued by the Petitioner to one Biswajit Gupta Chowdhury constituted attorney of M/s Jaydeep Paul, the Respondent herein, whereby and where under a proposed terms of settlement was sent to the Respondent for his perusal and on this occasion the Respondent was instructed to write a letter to the Petitioner on the following terms:

TERMS OF SETTLEMENT

The proceedings are pending before the High Court at Kolkata in respect of arbitral award dated 03.07.2008 pertaining to Work Order No. 011756 dated 08.02.1996 for construction of 117 Nos. staff quarters and boundary wall for EPFO at Jalpaiguri (WB) are settled on the following terms and conditions.

i) NBCC Limited agrees to pay Lum Sum amount of Rs. 12,61,848.00.00 (as per NBCC Books of Account) and the claimant agrees to accept to said amount in full and final settlement of all claims and dues in the above named arbitral award & court proceedings.

ii) The claimant will have no claims in respect of the said Work Order and the claimant will also not make and demand for any further arbitration/court case in respect of the said work order.

iii) NBCC Limited, the Respondent will not press for its counter claims as demanded in the proceedings pending before the High Court at Kolkata nor NBCC Limited will have claims against the claimant in respect of the said work order.

iv) The claimant will issue no claim certificate in respect of its dues.

v) Parties will bear of Rs. 10,000.00 each towards court fees of filing the joint petition of mutual settlement before the High Court at Kolkata.

vi) On payment of the Lum Sum amount received by the claimant, a joint petition will be made by the parties before the High Court at Kolkata recording the mutual settlement of disputes.

This clearly goes to show that claim of the Respondent towards the work done by him is admitted by the Petitioner. However, in terms of the settlement submitted before the learned Arbitrator, a high amount was agreed upon, than the present proposal. I find no illegality on the part of the learned Arbitrator in passing the said award.

So far the counter claim is concerned it is the finding of the learned Arbitrator that the Petitioner''s learned Advocate refused to give any evidence or press their counter claim in spite of the opportunity given by the tribunal in its discretion and on that basis the learned Arbitrator did not proceed with counter claim which under no circumstances would be called as perversity or illegality on the part of the learned Arbitrator. In this regard Mr. Ghosh cited a decision reported in K.V. George Vs. Secretary to Government, Water and Power Department, Trivandrum and Another, which, however, not applicable in the facts and circumstances of this case. The learned Arbitrator have duly considered the materials and/or records available before him and have also considered the submissions made by the learned Counsel for the parties and have passed this award strictly in accordance with law in favour of the Respondent for a sum of Rs. 24,65,911 (17,27,106+7,38,805 being the amount deposited in the savings bank account of the Respondent).

In view of the findings as recorded herein before, the petition u/s 34 of the Arbitration and Conciliation Act of 1996 is dismissed. The Respondent would be entitled to withdraw the said amount of Rs. 7,38,805 from the savings bank account and the balance amount Rs. 17,27,106 with interest and cost, etc. are to be paid by the Petitioners to the Respondent forthwith.