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Tuesday, September 9, 2014

Arbitration disputes - only point for appeal is that The Division Bench, by the order under appeal dated 12.06.2013, allowed the appeal in part in respect of charges, namely, crane hire charges and interest. - Apex court held that we find that the learned Division Bench has not kept in mind the aforesaid provisions in the Work Order and the Tender Document. BHEL was neither required to issue any notice for exercising its right to recover crane hire charges for Unit III, nor was it required to deduct such charges from the running bills of the respondent. There is no dispute or issue as regards quantum of such charges claimed by the appellant but the Arbitral Tribunal allowed it only to the extent of Rs.8.25 lac although the Tribunal itself found that the respondent had failed to produce any material in support of its defence that because the crane was out of order for a number of days when Unit No.II was under erection/instalment and, therefore, the respondent became entitled to use the crane without hire charges for Unit No.III. In such circumstances, we find that the crane hire charges claimed by the appellant were wrongly disallowed by the order under appeal passed by the Division Bench. As a result, it is held that appellant is entitled for crane hire charges and, therefore, that amount needs to be deducted from the amount payable to the respondent under the Award on other heads. It is also held that the appellant is not liable to pay any pre-Award interest and the interest @ 10.5% p.a. shall be payable by the appellant only from the date of Award till the date of payment on the Award amount now found payable, if any. We order accordingly. The order under appeal is set aside to the aforesaid extent. The appeal is allowed accordingly. No costs.= CIVIL APPEAL NO. 8373 OF 2014 [Arising out of S.L.P.(C)No.35021 of 2013] Bharat Heavy Electricals Ltd. …..Appellant Versus Tata Projects Ltd. …..Respondent = 2014 - Sep. Part - http://judis.nic.in/supremecourt/filename=41858

   Arbitration disputes - only point for appeal is that The  Division Bench, by the order under appeal dated 12.06.2013,  allowed  the  appeal  in part in respect of charges, namely, crane hire  charges  and  interest.   - Apex court held that  we find that the  learned  Division Bench has not kept in mind the aforesaid provisions in the  Work  Order  and the Tender Document.  
BHEL was neither required  to  issue  any  notice  for exercising its right to recover crane hire charges for Unit III, nor was  it required to deduct such charges from the running bills  of  the  respondent. There is no dispute or issue as regards quantum of such charges  claimed  by
the appellant but the Arbitral Tribunal allowed it only  to  the  extent  of Rs.8.25 lac although the Tribunal  itself  found  that  the  respondent  had failed to produce any material in support of its defence  that  because  the crane was out of order for a number  of  days  when  Unit  No.II  was  under erection/instalment and, therefore, the respondent became  entitled  to  use
the crane without hire charges for Unit No.III.   In such  circumstances,  we find that the crane hire charges  claimed  by  the  appellant  were  wrongly disallowed by the order under appeal passed by the Division Bench. As a result, it is held that appellant is entitled for  crane  hire  charges and, therefore, that amount needs to be deducted from the amount payable  to
the respondent under the Award on other heads.   It is  also  held  that  the appellant is not liable to pay any pre-Award interest  and  the  interest  @  10.5% p.a. shall be payable by the appellant only from  the  date  of  Award till the date of payment on the Award amount now found payable, if any. We order accordingly.  The order under appeal is set  aside  to  the  aforesaid extent.  The appeal is allowed accordingly.  No costs.=

The  appellant  was  required  to
set up some plant or boiler units.
 For  completing  that  work,  appellant
issued a notice inviting tender for  engaging  a  sub-contractor  to  erect,
test and commission two 120 MW boilers (Unit II and Unit III) on  behalf  of
the appellant.
The  value  of  the  contract  awarded  in  favour  of  the
respondent was Rs.6,99,40,000/-.  Pursuant to disputes and  differences,  an
Arbitral Tribunal consisting of three arbitrators came  to  be  constituted.
The Arbitral Tribunal awarded Rs.69.22 lac on  various  heads  and  Rs.25.39
lac on account of interest.
The  appellant  instituted  proceedings  under
Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity,  ‘the
Act’).
That proceeding bearing A.P. No.213 of 2006 was finally  decided  by
a learned Single Judge of the High Court of  Calcutta  on  04.01.2013.   The
objections of the appellant were allowed in part in respect  of  only  three
counts relating to over-run charges, crane hire charges and interest.
The respondent filed an appeal being A.P.O. No.60  of  2013.
 The  Division
Bench, by the order under appeal dated 12.06.2013,  allowed  the  appeal  in
part in respect of charges, namely, crane hire  charges  and  interest.   
In
the present appeal only those two issues have been raised on behalf  of  the
appellant. =

  On going through the order under appeal, we find that the  learned  Division
Bench has not kept in mind the aforesaid provisions in the  Work  Order  and
the Tender Document.
BHEL was neither required  to  issue  any  notice  for
exercising its right to recover crane hire charges for Unit III, nor was  it
required to deduct such charges from the running bills  of  the  respondent.
There is no dispute or issue as regards quantum of such charges  claimed  by
the appellant but the Arbitral Tribunal allowed it only  to  the  extent  of
Rs.8.25 lac although the Tribunal  itself  found  that  the  respondent  had
failed to produce any material in support of its defence  that  because  the
crane was out of order for a number  of  days  when  Unit  No.II  was  under
erection/instalment and, therefore, the respondent became  entitled  to  use
the crane without hire charges for Unit No.III.
In such  circumstances,  we
find that the crane hire charges  claimed  by  the  appellant  were  wrongly
disallowed by the order under appeal passed by the Division Bench.
As a result, it is held that appellant is entitled for  crane  hire  charges
and, therefore, that amount needs to be deducted from the amount payable  to
the respondent under the Award on other heads.
It is  also  held  that  the
appellant is not liable to pay any pre-Award interest  and  the  interest  @
10.5% p.a. shall be payable by the appellant only from  the  date  of  Award
till the date of payment on the Award amount now found payable, if any.  
We
order accordingly.  The order under appeal is set  aside  to  the  aforesaid
extent.  The appeal is allowed accordingly.  No costs.

2014 - Sep. Part - http://judis.nic.in/supremecourt/filename=41858
                                                             REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 8373 OF 2014
                 [Arising out of S.L.P.(C)No.35021 of 2013]

Bharat Heavy Electricals Ltd.                            …..Appellant

      Versus

Tata Projects Ltd.                                       …..Respondent



                               J U D G M E N T



SHIVA KIRTI SINGH, J.

Leave granted.
Heard Mr. Gourab Banerji, Senior Advocate for the appellant  and  Mr.  Gopal
Jain, Senior Advocate for the respondent.  The  appellant  was  required  to
set up some plant or boiler units.   For  completing  that  work,  appellant
issued a notice inviting tender for  engaging  a  sub-contractor  to  erect,
test and commission two 120 MW boilers (Unit II and Unit III) on  behalf  of
the appellant.   The  value  of  the  contract  awarded  in  favour  of  the
respondent was Rs.6,99,40,000/-.  Pursuant to disputes and  differences,  an
Arbitral Tribunal consisting of three arbitrators came  to  be  constituted.
The Arbitral Tribunal awarded Rs.69.22 lac on  various  heads  and  Rs.25.39
lac on account of interest.   The  appellant  instituted  proceedings  under
Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity,  ‘the
Act’).  That proceeding bearing A.P. No.213 of 2006 was finally  decided  by
a learned Single Judge of the High Court of  Calcutta  on  04.01.2013.   The
objections of the appellant were allowed in part in respect  of  only  three
counts relating to over-run charges, crane hire charges and interest.
The respondent filed an appeal being A.P.O. No.60  of  2013.   The  Division
Bench, by the order under appeal dated 12.06.2013,  allowed  the  appeal  in
part in respect of charges, namely, crane hire  charges  and  interest.   In
the present appeal only those two issues have been raised on behalf  of  the
appellant.  According to learned  senior  counsel  for  the  appellant,  the
Division Bench has wrongly reversed the order of  learned  Single  Judge  on
the issue of crane hire charges inasmuch  as  the  claim  of  the  appellant
asking for payment of crane hire charges by the respondent for Unit III  was
based upon clause 12.2.2 of the Work Order read with clauses 2.8.11,  3.38.3
and 3.38.14 of the Agreement/Tender Document.  In respect  of  second  issue
relating to interest, learned senior counsel has confined the claim  of  the
appellant only against grant of pre-Award interest on the  basis  of  clause
1.15.5 of the Tender Document/Agreement.
On the other hand, learned senior counsel for the respondent  has  submitted
that the Award in respect of crane hire charges is based on an overall  view
of entire material available before the Arbitral  Tribunal  and,  therefore,
although the Tribunal finally concluded that “there is nothing on record  of
the Arbitral  Tribunal  to  substantiate  the  ‘understanding’  between  the
parties regarding swapping of crane usage days between Units II and  III  as
has been pleaded by the claimant”, it only allowed Rs.8.25 lac in favour  of
appellant’s claim for such charges.  According to him,  for  the  same  very
reason, taking a holistic view of the whole matter, the  Division  Bench  in
the impugned order took the same view.  On behalf of respondent,  the  grant
of pre-Award interest could not be successfully defended in view  of  clause
1.15.5 of the Agreement which provides that “no interest  shall  be  payable
by  BHEL  on  earnest  money/security  deposit  or  any  money  due  to  the
contractor by BHEL”.  The ambit and scope of aforesaid  clause  was  subject
matter in Civil Appeal No.7423 of 2005 between the appellant and M/s.  Globe
HI-Fabs Ltd. decided on 12.11.2009 wherein  this  Court  accepted  and  held
that in view of such a provision in the Agreement, interest is only  payable
from the date of the Award.  The aforesaid  legal  position  ought  to  have
been accepted by the Division Bench  of  the  High  Court  in  view  of  law
settled by judgments of this Court in the case of  Sayeed  Ahmed  &  Co.  v.
State of U.P. & Ors. (2009) 12 SCC 26 and several other cases including  the
case of Union of India  v. Concrete  Products  &  Construction  Co.  &  Ors.
(2014) 4 SCC 416.
On  the  issue  of  award  of  interest,  learned  senior  counsel  for  the
respondent tried to persuade us to enhance the post-Award  interest  granted
by the Arbitral Tribunal @ 10.5% to 18% p.a.  in the light of provisions  in
Section 31(7)(b) of the Act.   We  are  unable  to  accept  this  contention
because the Arbitral Tribunal has  already  granted  post-Award  interest  @
10.5%.  Only if the Award had not made such a direction, the statutory  rate
of interest @ 18% p.a. would have been payable from the date  of  the  Award
to the date of payment as per statutory provision noted above.
6.    In the light of aforesaid discussion, we are constrained to hold  that
the order under appeal ought not to have approved  grant  of  any  pre-Award
interest.
7.    So far as the issue relating  to  crane  hire  charges  is  concerned,
before expressing our views we think  it  proper  to  extract  the  relevant
clauses of the Work Order, i.e., clause 12, 12.2, 12.2.1 and 12.2.2 as  well
as the relevant clauses of the Tender Document/Agreement :
              “Relevant extract of Work Order dated 16.03.1999
                            Terms and conditions

12.0       TOOLS & PLANTS AND CONSUMABLES

You shall provide all necessary consumables and T &  Ps  (other  than  those
specified  below),  measuring  instruments,  handling  equipments   as   per
provision of contract  for  timely  completion  of  the  total  job  as  per
contract within the accepted rates.

12.2  Following T & Ps will be provided by BHEL to you  free  of  charge  as
per provision of contract on availability.

_______________________________________________________

Sl.   Description                       Capacity   Quantity
_______________________________________________________

01.   Electric winches              10 MT    2 nos.
02.   10 Sheave pulley block        100 MT   4 nos.
03.   Hydro test pump                        1 no.
04.   High Capacity crane (250 T)*                 1 no.

  The above T & Ps will be made available for the  project.   You  may  make
use of the T & Ps as per the provision of tender document.

* In case of  250  T  capacity  crane,  operator  and  consumable  shall  be
provided by BHEL.  However, the fuel for operation of this crane shall  have
to be arranged by you.  250 T Crane  shall  be  available  only  upto  ‘drum
lifting of Unit-2’.”

                    “RELEVANT EXTRACT OF TENDER DOCUMENT
                             NO.PSER:SCT:JBA:B2

2.8.11   It is not obligatory on the part of BHEL to supply  any  tools  and
tackles or other materials other than those specifically agreed to do so  by
BHEL, however, depending upon the availability, BHEL’s  customer’s  handling
equipment and other plants may  be  made  available  to  the  contractor  on
payment of the hire charge as fixed, subject to the conditions laid down  by
BHEL/ customer from  time  to  time.   Unless  paid  to  advance  such  hire
charges, if applicable shall be recovered from contractor’s  bill/  security
deposit in one instalment.

3.38.3   The operation of all BHEL equipment (except 250 T  Crane)  will  be
in the scope of the contractor.  BHEL will provide free of  cost  (including
operator and consumables) one number 250 T Crane only upto the Drum  Lifting
Milestone of Unit II only.  However the Fuel for operating this 250 T  Crane
shall have to be arranged by the contractor.

3.38.14 BHEL will  provide  free  of  cost  (including  operator,  fuel  and
consumables) 250 MT Crane only for the first unit (Unit-2).”

Clause 12 and other sub-clauses thereunder as extracted above  show  that  a
high capacity crane (250 T) is included in the Tools and Plants  which  will
be provided by BHEL to the respondent free of charge as  per  provisions  of
contract on availability  but  only  upto  “drum  lifting  of  Unit  II”  as
specified in clause 12.2.2.  There is no provision either in the Work  Order
or in the Agreement/Tender Document to entitle the respondent to claim  that
it was not obliged to pay the  higher  charges  as  fixed,  subject  to  the
conditions laid down by BHEL from time to time in respect of user  of  crane
for Unit No.III.  To the contrary, the extracts  from  the  Tender  Document
contain  a  clear  stipulation  for  recovery  of  such  charges  from   the
contractor’s bill/security deposit in one instalment.
On going through the order under appeal, we find that the  learned  Division
Bench has not kept in mind the aforesaid provisions in the  Work  Order  and
the Tender Document.  BHEL was neither required  to  issue  any  notice  for
exercising its right to recover crane hire charges for Unit III, nor was  it
required to deduct such charges from the running bills  of  the  respondent.
There is no dispute or issue as regards quantum of such charges  claimed  by
the appellant but the Arbitral Tribunal allowed it only  to  the  extent  of
Rs.8.25 lac although the Tribunal  itself  found  that  the  respondent  had
failed to produce any material in support of its defence  that  because  the
crane was out of order for a number  of  days  when  Unit  No.II  was  under
erection/instalment and, therefore, the respondent became  entitled  to  use
the crane without hire charges for Unit No.III.  In such  circumstances,  we
find that the crane hire charges  claimed  by  the  appellant  were  wrongly
disallowed by the order under appeal passed by the Division Bench.
As a result, it is held that appellant is entitled for  crane  hire  charges
and, therefore, that amount needs to be deducted from the amount payable  to
the respondent under the Award on other heads.  It is  also  held  that  the
appellant is not liable to pay any pre-Award interest  and  the  interest  @
10.5% p.a. shall be payable by the appellant only from  the  date  of  Award
till the date of payment on the Award amount now found payable, if any.   We
order accordingly.  The order under appeal is set  aside  to  the  aforesaid
extent.  The appeal is allowed accordingly.  No costs.


                 …………………………….............................…….J.
                 [FAKKIR MOHAMED IBRAHIM KALIFULLA]



                               …………………………….............................…….J.
      [SHIVA KIRTI SINGH]

New Delhi.
September 01, 2014.
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