2017 (3) TMI 1568 - HC - Indian Laws

Court rejects challenge to over run charges in Award, upholds reduced sum. Pendente lite interest set aside.

The challenge to the Award regarding over run charges was rejected by the Court, which upheld the Arbitrator's decision to award the respondent a reduced ... Arbitration and Conciliation proceedings - challenge to the impugned Award as regards over run charges - Held that:- The Court finds that in the impugned Award the learned Arbitrator has discussed Clause 9 pertaining to over run charges. He has also adverted to email dated 30th June 2009 written by BHEL to the Respondent stating that while escalation would not be payable, over run charges would in fact be paid. The learned Arbitrator has then noted that at the time of submission of the tender, the Respondent had filled up the analysis of unit rate as per the format provided in the tender documents itself. Out of the various items listed at Serial No.5 Establishment and Administrative Expenses of site (5%) as well as depreciation and maintenance of tools and plants (2%), were relevant for over run charges as a result of extended maintenance and running of site. Since the Respondent had asked only for 5% of the contract value as over run charges, the Arbitrator awarded only that amount and that too only up to 27th May 2009 i.e. for a period of three months beyond the original completion date. The amount of over run per month charges was calculated @5% of the contract value divided by the original contract period and thus worked out as ₹ 1,59,731 per month. This was then multiplied by the period of over run i.e. 10 months. This worked out to ₹ 15,97,310. Since, however, Respondent had claimed only ₹ 14,79,615, only ₹ 14,79,730 was allowed. However, the amount of escalation claimed was disallowed and, therefore, the total over run charges actually allowed was ₹ 10,76,084. The Court finds that there is no legal infirmity whatsoever in the impugned Award insofar as the above allowing of the claim for over run charges is concerned. No ground has been made out under Section 34(2)(b)(ii) of the Act in this regard. However, as regards the award of pendente lite interest, learned counsel for the Petitioner is right in his contention that under Clause 5.7 no pendente lite interest could be granted. The Award to the extent that it has awarded pendente lite interest is contrary to the express terms of the contract and is hit by Section 28(3) of the Act. The Award to this extent is opposed to the fundamental policy of Indian law and is hereby set aside. Only the postAward interest in the manner awarded in the impugned Award is upheld. Issues:Challenge to the impugned Award regarding over run charges and interest.Analysis:The petitioner, Bharat Heavy Electricals Limited (BHEL), filed a petition challenging an Award dated 30th April 2015 by a sole Arbitrator in disputes with Teknow Consultants & Engineers Pvt. Ltd. The disputes arose from a work order for civil works at a substation in Rajasthan. The work order contained clauses related to contract price, payment based on measurement, interest, extension of time (EOT), penalty for delay, and idle labor charges. The original completion date was 27th March 2008, with multiple EOTs granted subsequently without financial implications for BHEL until 31st July 2009. The disputes were referred to Arbitration, focusing on over run charges and interest claims.Regarding over run charges, the Arbitrator awarded the respondent a sum of &8377;10,76,084 out of the claimed &8377;48,72,435. The Arbitrator discussed Clause 9 on over run charges, noting the respondent's claim for 5% of the contract value for extended maintenance and site running. The calculation resulted in the awarded amount, considering the original contract period and the period of over run. The Court found no legal infirmity in this award, upholding the decision.Regarding interest claims, the Arbitrator awarded interest at 13% per annum from 1st July 2009 till the Award date and at 18% per annum if payment exceeded 90 days post-Award. The petitioner challenged the pendente lite interest award, citing Clause 5.7 prohibiting such interest. The Court agreed, setting aside the pendente lite interest award as it contradicted the contract terms. However, the post-Award interest was upheld as directed in the Award.In conclusion, the challenge to the Award concerning over run charges was rejected, finding no legal issue. The Award was only set aside for the pendente lite interest award, upholding the post-Award interest. The petition was disposed of accordingly, with no costs imposed.