MUMBAI METROPOLITION REGION DEVELOPMENT Vs. UNITY INFARAPOJECT LTD

JUDGEMENT

(1.) On 20th July 2003, the Petitioner invited tenders for the construction of 1648 tenements for the rehabilitation of project affected households at Kanjur Marg. This was a World Bank Project. The work was to be carried out in two phases. Phase I envisaged the completion of 384 tenements. Phase II involved the completion of the balance. The area where residential premises were to be constructed was densely populated and was congested with dwelling units of an informal nature. The two phase programme of work was to be in accordance with the availability of vacant space for the construction of buildings. The contractor was to initially complete three or four buildings and upon the shifting of project affected families in the space which would be vacated, other buildings were to be constructed. The contractor was on notice that he would have to coordinate the work in such a manner as would avoid any hindrance in progress of the work "for which he would not be paid any additional sum". The contention of the Petitioner is that offers were invited on a lump sum basis for the entire work without adjustments.

(2.) The offer submitted by the Respondent was the lowest responsive offer and a letter of acceptance was issued on 3rd November 2003. During the course of the work, the Respondent raised claims inter alia towards loss of overheads, increases in costs, underutilization of machinery, refund of excise duties, increase in steel and cement prices and compound interest. The Engineer appointed under the contract refused to certify the claims of the Respondent by a letter dated 13th July 2004. Clause 24 of the agreement stipulated that in the event that a decision taken by the Engineer was outside the authority conferred by the contract or was wrong, the decision was to be referred to an adjudicator. In the meantime, the Respondent continued to raise bills including claims for the aforesaid amount, a practice which was followed from R.A. Bill 3 which was submitted on 24th August 2004 upto R.A. Bill 9 submitted on 24th February 2005. The Adjudicator was required to take a decision within 28 days. The Respondent referred the dispute to the Adjudicator on 3rd September 2004. On 27th October 2004, the Respondent invoked arbitration under the arbitral provisions contained in clause 25.2 of the contract, principally on the basis that the Adjudicator had failed to render a decision within the stipulated period. The Adjudicator was thereupon informed in a meeting held on 16th March 2005 that the Respondent did not desire to continue with adjudication for those claims which were referred to arbitration. Subsequent claims were referred by the Respondent to the Adjudicator on 7th March 2005. The Adjudicator held that the Respondent was entitled to an extension of time without levy of liquidated damages until 26th April 2005. The Engineer had by a letter dated 27th December 2004 imposed liquidated damages on the Respondent on account of delay in the completion of work under Phase I and declined to grant an extension of time. On 10th January 2005, the Respondent addressed a communication to the Petitioner recording therein that the Petitioner was not responsible for the delay in the completion of work under what was described as Mile StoneI and sought an extension of time for completion without levy of liquidated damages. The Respondent undertook that on account of a revision of the date for the first milestone until 31st March 2005, the Respondent "shall not stake any extra claim whatsoever on any of the above account" against the Petitioner and the Petitioner is not responsible in respect thereof. By a letter dated 25th January 2005, the Petitioner agreed to waive liquidated damages.

(3.) The contention of the Respondent in a letter dated 7th March 2005 and in a subsequent letter dated 18th March 2005 was that while it had waived all its claims by its letter dated 10th January 2005, that letter was written under duress. The Petitioner declined to nominate an Arbitrator, the submission being that this was on the basis that there was no arbitrable dispute. The contention of the Petitioner in a letter dated 2nd November 2004 was that since no decision of the Adjudicator had been received, there was no occasion for a reference to the arbitral Tribunal. The Institution of Engineers appointed an Arbitrator under clause 25.3 of the contract and the Arbitral Tribunal was constituted. The Petitioner raised an objection under Section 16 of the Arbitration and Conciliation Act, 1996, to challenge the jurisdiction of the Arbitral Tribunal. The application was rejected by an order dated 22nd October 2005. Eventually, by its award dated 17th April 2007, the arbitral Tribunal awarded an aggregate sum of Rs.1,65,03,119/together with interest at the rate of 10% per annum from 3rd May 2005 till the date of the publication of the award and future interest at the rate of 12% per annum from the date of the award till payment. The award has been questioned in these proceedings.