2023 (10) TMI 417 - HC - Indian Laws

Court Upholds Arbitral Tribunal Award: Partial Compensation for Contract Prolongation, GST Burden; Other Claims Rejected

The court dismissed the petition, upholding the Arbitral Tribunal's (AT) award. The AT partially granted compensation for the contractor's claim of extra ... Seeking partial setting aside of award - patent illegality - extra Cost on increased Establishment Cost including Overheads, Salary of Regular and Contractual Staff, Inspection Vehicle hire Charges, etc. due to prolongation of contract - extra cost due to extension of CAR and WC Insurance Policy - Loss of Profit because of prolongation of contract - Extra cost due to depreciation due to prolongation of contract period - additional cost due to use of 04 bolt fastening system for radius beyond 700 mt - abnormal increase in quantity of track fastenings - Additional GST burden - HELD THAT:- AT rejected the claims by observing that the BOQ specified in the Contract was not based on number of bolts to be used but on the radius of the curve. AT also observed that the Contractor was unable to convince that the increase in number of bolts was due to the new design that the DMRC required the Contractor to follow. According to the AT, the DMRC’s insistence on following ETAG001 (European Guideline) was never objected to by the Contractor at the time of design change suggested by the DMRC or that the same was not required. AT has further observed that even before the AT, the Contractor was unable to link the design change to the requirement of conformity with the European standard and the increase in the number of bolts. Even otherwise, it is seen that in terms of Clause 5.1 of the Contract, the Contractor was responsible for submitting the design in accordance with Clause 6.3.2 of the Contract, which was subject to DMRC’s approval. Design was submitted by the Contractor on 03.06.2015 and the same was found to be deficient by DMRC which was conveyed to the Contractor vide its letter dated 08.06.2015. It is observed by AT in the award that the Contractor did not challenge DMRC’s comments on the design submitted by it and on its own re-submitted a new bolt calculation on 19.09.2015 - the rates quoted in Item 8 of the BOQ are for quantities that are measured in metre length of the track of various radii. The quantities of individual items of the track fitting system was neither sought for by DMRC in the BOQ nor quoted by the Contractor when they submitted their rates. It would not have been possible for the AT to order variation in quantities on account of increase in the number of bolts installed, due to the design change, as was claimed by the Contractor, since, the same may have been contrary to the BOQ. In any case, the AT has dealt with the claim in a judicial manner, referring to the contract provisions and the evidence produced by the parties. Reimbursement of increased GST - HELD THAT:- AT allowed claim to the extent of 1.40% on account of the concession initially agreed to by DMRC. In the considered opinion of this Court, the AT had rightly relied upon the aforesaid clause which restricted the Contractor from seeking any adjustment in the Contract price either on the increase or decrease in cost as a consequence of change in tax duties/levies. In this regard, it is pertinent to note that AT also noted that the Contractor failed to provide any substantiation on the amount of input credit availed by it. This contention is rejected accordingly. Petition dismissed. Issues Involved:1. Claim No. 2: Extra cost due to prolongation of the contract.2. Claim No. 3: Additional cost due to the use of a 4-bolt fastening system.3. Claim No. 4: Abnormal increase in the quantity of track fastenings.4. Claim No. 12: Additional GST burden.Summary:Claim No. 2: Extra Cost Due to Prolongation of the ContractThe Contractor sought compensation for extra costs incurred due to the 18-month delay in project completion, attributing the delay to DMRC. The Arbitral Tribunal (AT) partially allowed sub-claims 2(a), (b), and (c) but rejected sub-claims 2(d) and (e), citing lack of cogent evidence. The AT relied on Clause 8.3 of the General Conditions of Contract (GCC) and noted that the Contractor had reserved the right to seek compensation only during the third extension of time (EOT). Therefore, compensation was awarded only for the six-month period from 01.01.2018 to 30.06.2018.Claim No. 3: Additional Cost Due to Use of 4-Bolt Fastening SystemThe Contractor claimed additional costs due to a change in design, which required the use of a 4-bolt fastening system. The AT rejected this claim, stating that the Bill of Quantities (BOQ) was based on the radius of the curve rather than the number of bolts. The AT observed that the Contractor did not object to the design changes at the time and failed to link the design change to the increased number of bolts.Claim No. 4: Abnormal Increase in Quantity of Track FasteningsSimilar to Claim No. 3, the Contractor claimed costs due to an abnormal increase in the quantity of track fastenings. The AT rejected this claim, noting that the BOQ specified quantities based on the radius of the curve and not on the number of bolts. The AT found no evidence that the increase in bolts was due to design changes required by DMRC.Claim No. 12: Additional GST BurdenThe Contractor claimed compensation for the additional GST burden. The AT partially allowed this claim, awarding Rs. 26,44,277/- towards the additional GST burden at 1.40%, as initially agreed by DMRC. The AT noted that the Contractor failed to substantiate the amount of input credit availed and relied on Clause 27(v) of the Special Conditions of Contract (SCC), which restricted adjustments in contract price due to changes in taxes.Conclusion:The court dismissed the petition, finding no 'patent illegality' in the AT's award. The court emphasized that it is not within its jurisdiction to reappreciate evidence or correct legal errors made by the AT. The AT's interpretations and findings were deemed plausible and judicially appropriate.