UNION OF INDIA v. M/S VARINDERA CONSTRUCTIONS LTD

..... Petitioner Mr. llaldev Malik and Mr. Arjun Malik, Advocates. vcrsus. M/S VARINDERA CONSTI{UCTIONS I-'fD ..... Respondent Through: Mr. Akhil Sibal, Mr. Pradeep Chhindra, Ms. Manmeet Katr and Ms. nditi. Advocates. CORAM: JUSTICE S.MURAI,IDHAR V" ORD ER 16.03.2012

1. OMP 890 of 20i1 is by the llnion of India through the Dilectorate (icncral of Married Accomrnodation Projcct ('MAP'), lingineer in Chief s Ilranch, Integrated Ileadquarter of Ministry of Defence (Arrny), challenging an Awarcl dated 24n August ZOi i by thc lcarned solc Albitrator adjudicating o.*1.P.890-89 tn01 I PrycI0JS Signature Not Verified Digitally Signed By:AMULYA the disputes between the Petitioner and the Respondent, IWs. Varindera Construction Limited arising out of contract datcd 2nd February 2007 awarded to the Respondent for the construction of married accommodation 132 dwelling units ('DUs') for JCOs and 366 DUs for ORs including Allied Internal and Bxternal Services at Hissar (Package-Ill).

2. OMP 891 of 201 I is in respect of a separate Award by the same leamed Arbitrator dated 23'd August 20l l in the disputes between thc parties arising out of another contract of the same date for the construction of married accommodation for ORs 534 DUs including Allied Internal and Extemal Serryices at Hissar (Package-Il). While Package-Ill was for a luntp sum of Its.39.09 lakhs, Package-Il was for a lump sam of Rs.35.21 laldls.

3. I'he disputcs in each of the contracts \4'ere lefen'ed to the arbitration after the Respondent invoked the arbitration clause. 'flre Engineer-in-Chief appointed the sole Arbitrator as provided in the contract. ln relation to Package-Ill, the Respondent filed 12 claims. In thc impugned Award dated 24'n August 2011 the leamed Arbitrator rejected two of the clairns. One claim was withdrawn in part by the Respondcnt and thc remaining claims wcre decided in its favour. 'l'he countcr claims of the Respondent were rejected. As regards the Package-Il, the Rcspondent prefered 12 claims. o.x(.P.890-891/201 I In tlre Award dated23'd August 2011, the icamed Arbitrator rejected two of Lz the claims. One claim was withdrawn in part and the remaining claims were decided in favour ofthe Respondent.

4. Mr. Baldev Malik, learned counsel appearing on behalf of the Union of India, first submitted that the learned sole Arbitrator in the irnpugned Awards dealt with the disputes/claims which were not contemplated by the contract and were not arbitrable. In other words, according to him, the irnpugned Awards were on matters beyond the scope of the disputes that could be referred to arbitration, and wcre therefore in tenns of Section 34 (2)(a)(iv) of the Act liable to be set aside.

5. As regards Clairn No.l(a) for reimbursement of payment on account of surface excavation, Mr. Malik referred to Clause 60 (the arbitration clause) whereby only those disputes, other than those lor which the decision of the DG MAP/CCts MAP or any other person is by the contract expressed to be final and binding, can be tefered for arbitration. Referring to Ciause 9 (c) of Schedule A notcs in the contract agrecment, it is submitted that decision of the Accepting Officer as to whethcr a certain itern of work was minor etc' was to be {inal, conclusive and binding. By a decision dated 13'n March 2008, the Accepting Otficer held that site clearance was not payablc. o.M.P.890-891/201 I l\rye 3 of 8

6. Mr. Akhil Sibal, Iearned counsel for the Respondent, on the other hand, referred to Clauses 9(a) and 9(b) and stated that the disputes under Clause 9(c) also perlained only to minor details whereas the clairns pertained to a major work. He also pointed out that this objection was not urged before the leamed Arbitrator.

7. A perusal of Clause 9 ofthe Schedule A notes appended to the contract agreement shows that under Clause 9(a), a luntp sarr quoted by the tenderer would include any "minor details of works and/or constructional details". Under Clause 9(c), in the event of difference of opinion between the contractor and the Petitioner as to whethcr a ceflain itern of work was minor or extra, the decision of the Accepting Officer shall be conclusive and binding. Obviously, the said Clauses were intended to deal with only such minor items of work. There is melit in the contention of the Respondent that Claim No.l(a) was for a sum of Rs.l6,11,330/- for surface excavation which was by no mcans a rninol itcm of work. 'l'he Petitioner's case in this regard has been set out in para 14.1.2 of the Award. Ihere is no reference therein to the Petitioner having urged that such claim was inadmissible in tenns of Clause 9(a) of the notes to Schedulc 'A'. o.ILP.890-891/201I

8. I'he above objection is, therefore, rejected. I

9. It was next contended by Mr. Malik that reimbursement on account of increase labour wages under Claim No.7 was not admissible. Reference is made to Clause 19 of the Special Conditions of Contract ('SCC') which provides that: "No escalation, reimbursement whatsoever shall made to the contractor for increase in prices of rnatcrials and fuel and wages of labour which the contractor may have to incttr during execution of the work on any account. fhe contractors shall quole their rates accordingly."

10. Mr. Malik referred to the judgment of this Courr dated 4'h F'ebruary 2009 in Writ Petition (Civil) No.2953 of 2008 Uarindera Constructions Lttl, v. Union of India, through Director General Married Accomnndulion Project) where the Petitioner's plea in this regard was rejccted. Mr. Malik submitted that although the said judgrnent had bccn set aside by the Division Ilench by its order dated i7'h April 2009 in LPA No.l58 of 2009, the said order of the Division Bench was challenged by the Petitioner in a Special Leave Petition ('SLP') in the Supreme Conrt and the SLP was pcnding. IIe, therefore, submitted that this Court shoulcl follow the decision dated 4th February 2009 of the learned Single Judge in WP(C) No.2953 of 2008. o.|V.P.890-891/20 t I PryeSoft q 11. Mr. Sibal, on the other hand, pointed out that order ofthe learned I Single Judge did not survive in light of the order dated 17'n April 2009 of the Division Bench. He submitted that the said order of the Division Bench held good as on date and, therefore, no reliance can be placed on the judgment of the Single Judge.

12. As far as the above submission is concemed, this Court is inclined to accept the submission of Mr. Sibal that the Union of India cannot possibly rely upon the order ofa lcarned Single Judge which has been set aside by the Division Bench by the order dated l Tth April 2009. Moreover, this was at a stage prior to the arbitral proceedings. in the arbitral proceedings,. at no stage this specific plea appears to have been taken.

13. On mcrits, Mr. Malik placed reliancc on the decisions in RQastlton Stote Mines & Mineruls Limited v. Eostern Engineering Enterprises AIR 1999 SC 3627, Steel Authority of India v. J.C. Btrdharoia, AIR 1999 SC 3275, Alopi Psrshsd & Sons v. flttion of India, AIR 1960 'SC 588 and Vishwanoth Sood v. (Inion of India, AIR 1989 SC 952 and submitted that the contract provisions had to be strictly interpreted and no escalation was oermissible. o.nLP.890-891/2011 Prye 6 of I

14. A perusal of the irnpugned Award shows that the leamed tubitrator lO allowed the above claims after noticing that the increase in the labour rates announced by the Government of Haryana was to an extent of 37 '46Yo i-e. from Rs.98.21 to Rs. 135. This substantial increase could not have been anticipated by the contractor at the time of bidding. Flowever, the leamed Arbitrator accepted the claim only in part to the extent of a 20Yo increase. The leamed Arbitrator concluded as under: "In view of above I conclude that the contractor's claim is sustained and I have recalculated the amount of the award. I find that the labour element adopted by the contractor as 25oZ is highel and I consider as 20%o reasonable. I also consider that thc contractor was well aware of the provision of the contract that no escalation was well aware of the provision of the contract that no escalation is payable to them while quoting the tender, hence they would have considcred the certain element towards this escalation in their quotation for the anticipated increase in the labour rates. 'l'hc average increase has been abott3-5Yo during the past, and the pcriod of completion of the work was about 2 years. I{encc I assurne that the contractor would have considered the increase of labour of 5oZ per annum considering the past trend hence over all increase of 10% would have been considered by the contractor in his quotation. Hence, I have recalculaled the escalation amount and, I award o.it[P.890-891/201I I\tge 7 of I i -. ,r Rs.2,51,73,803.00 in favour of the contractor under this claim." II

15. the view taken by the lcarncd Arbitrator is a plausible one given the circumstance where there was an extraordinary increase in the statutory wages. Consequently, this Courl does not find any ground having been made out for interference with the impugned Award and, in particular, with the Award in respect of the Claim No.7.

16. The petitions are dismissed but, in the circumstances, with no orders as tocosts. MARCH 16,2012 s.pal V ?0 \____/" S. MUITALIDHAR. J. o.tv.P.89u89t/20r I Page I of E