GAIL (INDIA) LIMITED v. M/S STERLING AND WILSON PRIVATE LIMITED

Switchyard Extension Work for GAIL's Petrochemical Complex II project at Pata, Uttar Pradesh' [hereinafter, "Agreement"], SWL emerged as the successful bidder. A Fax of Acceptance dated 14^th

December, 2011 was issued conveying acceptance of the bid. The project was to be completed within 18 months from the date of issuance of Fax of Acceptance, i.e., by 13^th

June,

2013.

3. On 24^th

January, 2012, a Detailed Letter of Acceptance [hereinafter,

"DLoA"] was issued to SWL. The DLoA, along with the Fax of Acceptance, the Agreement, the Special Conditions of Contract [hereinafter, "SCC"], the General Conditions of Contract [hereinafter, "GCC"] and the Bidding Documents, governed the terms of the contract between the parties.

4. As per Clause 16 of DLoA, the Resident Construction Manager/ Site- in-charge of Engineers India Limited, was appointed as the Engineer-in- Charge [hereinafter, "EIC"].

5. The work under the Agreement was not completed within the scheduled period of completion. It was only on 16^th

February, 2016 that a Completion Certificate was issued by Engineers India Limited. On 13^th

February, 2016, SWL submitted its final bill under the Agreement - which was disputed by GAIL. The 'Site-Clearance' Certificate was issued by SWL on 16^th

February, 2016 after finishing the project. Thereafter, SWL invoked arbitration vide notice dated 16^th

April, 2018, and disputes were referred to arbitration.

6. SWL raised claims worth Rs. 2,42,22,993/- under following heads:

2

7. The learned Arbitrator framed issues, which are noted in paragraph 22 of the impugned Award, and on that basis, the afore-noted claims were allowed in totality by way of the impugned Award.

CLAIMS AND ANALYSIS

8. The submissions of counsel for both parties are separately dealt hereinafter as per the heads of claims, which are as under:

9. CLAIM NO. 1: RELEASE OF RETENTION MONEY WITHHELD ON

ACCOUNT OF PRICE REDUCTION SCHEME

9.1. The learned Arbitrator has dealt with this Claim in Issues No. (i) & (ii) of the Award under paragraphs no. 26 to 30.

9.2. On this point, Ms. Manmeet Arora, counsel for GAIL, states as follows:

(i) that the Award erroneously holds GAIL responsible for the delay in the execution of the project - contrary to the documents placed on record by both parties.

(ii) The Arbitrator has erroneously and selectively relied upon the letter of

3

EIC dated 29^th

December, 2015 to hold that the delay was attributable to GAIL, even though the letter stated that delay was not "solely attributable" to SWL.

(iii) The learned Arbitrator has also failed to take into account the documents and communications put forth by GAIL - which were issued by the EIC/Engineers India Limited contemporaneously.

(iv) Placing sole reliance on the afore-said letter, while disregarding all other letters and e-mails issued by the same entity, raise serious doubts on the findings arrived at in the Award.

9.3. On the above issue, the learned Arbitrator has given his findings as contained in paragraphs no. 26 to 30, while deciding Issue No. (i) and (ii), which are extracted hereinbelow:

"ISSUE NO.(i): To whom is the delay, if any in completion of 220 KV Outdoor Switchyard Extention works attributable?

26. To begin with, admittedly the period for completion of the project under the FOA dated 14.12.2011 was eighteen months. It was stated in the FOA that extended stay compensation shall be applicable@ Rs.3,00,000/- per month as per provisions of the tender document. This was followed by the DLOA dated 24.01.2012 issued by GAIL. The time schedule for completion of project was 18 months from the date of FOA i.e. latest by 13.06.2013. Under the DLOA the RCM/EIL was appointed as the engineer in charge (EIC) for the project and was given absolute authority to decide the requirement for site organisation/ deployment of construction manpower. Under Clause 12, both FOA and DLOA constituted the contract documents. Under Clause 1.1.3 of Section 1 of the GCC the EIC was designated and expressly authorised by GAIL to act on its behalf for the operation of the project. Under Clause 21.1 section IV of the GCC, the GCC and sec shall prevail over any other document forming part of the contract. In case of any ambiguity the EIC was given the authority to issue instructions to clarify. To reiterate, the GCC further gave absolute power to the EIC and its representative RCM/EIL with regard to every aspect under the project be it mechanical completion, site manpower, maintaining time schedule for completion of the project, recommending extention of time for completion of the project, power supply, PRS, execution of work, alterations therein, extra works, passing of running account bills and final bill submitted by SWL, issuance of completion certificate, to give final

4

certificate to SWL etc. Finality was attached to every decision taken by the EIC under the GCC which binds SWL.

27. The approval for energisation of the electrical apparatus associated with the project was issued on 11.10.2013 by the CEA (CD-6) and the commissioning certificate was issued on 25.11.2014 (CD7). It states that:

"A. the following equipments have been installed in accordance with the drawings, specifications and manufacturer's instruction manual and are ready for energisation and no load run. All the pre-commissioning checks and tests in line with the EIL format have been completed and test results are satisfactory.

B. CEA approval for above Electrical apparatus has been obtained and the equipment has been commissioned on 15.10.2013 and put on No-Load Trial Run."

This document is signed by the representative of SWL, EIL and GAIL and cannot be questioned. The recommendatory letter dated 29.12.2015 of the EIL (CD 10) for final time extention to SWL clearly mentions that since approval for energisation of the 220 KV switchyard was obtained from the statutory body i.e. CEA on 11.10.2013 the "mechanical completion" of the unit was agreed mutually by GAIL, EIL & SWL on 15.10.2013 after the unit was energised. Mrs. Archana Chaturvedi-RW1 in response to Q.No.14 went to the extent of denying even the mechanical completion of the unit on 15.10. 2013 and despite being an expert in technical matters (Q. No. 3 & 4) evaded answering on the excuse that there is no technical completion term in the contract. Her testimony is evasive, does not inspire confidence as it belies even documents executed by the EIL and GAIL representative and does not help GAIL in any manner ( Q. 15 to 18 ). She had the audacity to even deny that final time extention was granted till 15.10.2013 by the RCM/EIL to SWL. (Q. No. 20).

28. The letter dated 29.12.2015 (CD-11) by the EIL to GAIL clearly shows that not only changes in the transformer location were made by GAIL at a later date, several additional works carried out by SWL were beyond the limits of the Schedule of Work (SOW) and had thus become extra item of work under the contract assigned by GAIL to SWL. During cross- examination in reply to Q.No.31 Mrs. Archana Chaturvedi denied this and stated a blatant lie that change in location of the control building was as per initial contract. The letter dated 29.12.2015 by EIL to GAIL establishes that no fault could be found with SWL on site mobilisation as it was found commensurate with the release of work front as well as progress requirement. On relocation of control building no fault was pointed out with SWL yet while opining the RCM needlessly used the word "solely" while opining that the delay in starting execution of control building by 174 days is not solely attributable to the contractor. The use of "solely" is thus a complete misnomer. I hold that the delay of 174 days is solely attributable to

GAIL.

29. As regards the delay of 227 days in clearance of main cable trench from transformer to control room the EIL report by the RCM/EIL categorically

5

admits in its letter dated 29.12.2015 that the delay was at GAIL's end and not of SWL. In its concluding comments it further states that "It is worthwhile to note that inspite of releasing main cable trenches on 11.01.2013(by GAIL) after elapsed 227 days, M/ s SWL has completed all works like cable trench, pulling of all HT cables, control cables & termination of cables etc by 11.10.2013 i.e. overall delay of only 124 days. Also be noted that extention of switchyard was energised before the power requirement was sought by other agencies." Relying upon the recommendation of the RCM/EIL I have therefore no hesitation in holding that the delay in completion of the project is solely attributable to GAIL and not to SWL. Issue number (i) is answered accordingly.

ISSUE NO.(ii): Whether the delay in completion of 220 KV outdoor switchyard extention Works attracts the application of Price Reduction Schedule as stipulated under clause 27 of the General Conditions of Contract (GCC) and entitles the respondent to reduce the total contract price accordingly?

30. Clause 27 of the GCC attracts the PRS. It categorically provides that in a situation where the contactor has failed to complete the work within the stipulated period except where such failure is due to defaults by GAIL, GAIL would have the right to reduce the total contract price by ½% of the total contract price per complete week of delay or part thereof subject to a maximum of 5% of the total contract price by way of reduction in price for delay and not as penalty. It further provides that the decision of the ENGINEER IN CHARGE in regard to applicability of the Price Reduction Schedule shall be final and binding on the CONTRACTOR. A perusal of the recommendation of the EIL vide letter dated 29.12.2015 leaves no room for any doubt that the RCM/ EIL had recommended that since the delay of 227 days in the project was solely at GAIL's end, final time extention sought by SWL till 15.10.2013 be granted without imposition of PRS as per GCC Clause 27.1. Therefore in view of my finding on Issue No.(i), I unhesitatingly hold that imposition of the PRS under Clause 27.1 of GCC by GAIL was unwarranted, arbitrary and GAIL was not entitled to do so. Issue No. (ii) is answered accordingly." [Emphasis supplied]

9.4. The afore-noted extracted portion of the Award reveals that the learned Arbitrator has essentially relied upon EIC's letter dated 29^th

December, 2015. A perusal of the said communication would show that EIC, after analysing several factors, recommended that a final extension of upto 15^th

October, 2013 should be granted, without any financial implication(s) on either side, with respect to price reduction scheme as well as extended stay compensation.

6

9.5. GAIL's contention that EIC has not considered certain aspects that would attribute delay to SWL is without substance. This role of EIC, as agreed between the parties, can be discerned from several clauses contained in the Contract. EIC is the final authority for overseeing the project. The learned Arbitrator has also noted that every communication on record to SWL, after the commencement of the project, is only by Engineer India Limited and not by GAIL. Further, all periodical reports on the project - be it in relation to grant of time extension for completion of the project, grant of various approvals, site mobilisation, imposition of PRS etc. were all sent by Engineer India Limited to GAIL. Thus, considering the role assigned to EIC, the Court finds no cogent reason or ground to find fault with learned Arbitrator placing reliance on the letters issued by the said authority. Besides, the learned Arbitrator has also referred to the oral evidence which he did not find to be sufficient to discredit the recommendations of Engineer India Limited. In such circumstances, the finding on delay, being purely fact-based and rendered on appreciation of evidence and material placed before the learned Arbitrator, calls for no interference. Further, the limited scope of jurisdiction under Section 34 of the Act constrains the Court from reappreciating such findings. That apart, the view taken by the learned Arbitrator is not unreasonable to warrant interference.

9.6. Accordingly, the ground of challenge in respect of this claim is rejected.

10. CLAIM NO. 2: REFUND OF RECOVERIES FROM THE FINAL BILL

10.1. The learned Arbitrator in paragraph 22 sets out this claim in Issues No.

7

(iv) and (vi) of the Award. However, Ms. Arora avers that while deciding Issues No. (iii)(a) and (b) relating to the Claim 3 qua 'Extra/ Additional Works' in favour of SWL, the learned Arbitrator also erroneously held that SWL is entitled to Claim No. 2 without any discussion or reasoning whatsoever.

10.2. She explains that GAIL made deductions in the final bill dated 13^th February, 2016 on account of incomplete works and non-supply of materials. She refers to the findings with respect to the afore-noted claim, which, for quick reference are reproduced hereunder:

"31. The additional works carried out by SWL in the project were beyond doubt at the behest of GAIL or its representative RCM/EIL. GAIL cannot be heard to say that no change order was issued. Given the magnitude of the project and the authority and size of GAIL organisation the SWL would mutely have to comply with directions during the project issued by RCM/EIL. In its letter dated 29.12.2015 the RCM/EIL has clarified that due to changes of transformer location at a later date by GAIL several additional works were carried out under the contract by SWL. In its letter dated 29.12.2015 EX.CD- 10 the RCM/EIL has explained the relocation of control building in details as under.

"The location of the control building was shown in drawing no.M2011EP008A-012 was revisited by GAIL ED I/C along with electrical operation and maintenance team on 25-05-2012 and suggested to change the location of proposed control building near to the existing switchgear control building (refer page no.14). It was further discussed at EIL & GAIL corporate level and advised M/ s SWL to change the location as desired by ED II C on 26.05.2012 (refer page no.15). Requirement of cable cellar is cropped up on 04.07.2012 after reviewing the architectural plan drawing submitted by the contractor in line with section 4.2.3 of the contract (refer page 16). Revised architectural drawing showing plan & elevation was released on code-2 on 13.07.2012. Even after release of drawing, site work could not be taken up for want of foundation detail drawing which SWL could not develop for want of soil data due to increase buildin9 height after inclusion of cable cellar. On 3.09.2012 clearance for execution of building raft foundation received from EIL HQ Engineering (refer page no. 17-20). Hence the delay in starting execution of control building by 174 days not solely attributable to the contactor."

32. There is not an iota of suggestion in the above text which would justify raising a blaming finger on SWL. The word "solely "as already held by me is

8

a complete misnomer and must be excluded from consideration. Actually all such reports, recommendations and enclosures ought to have been produced by GAIL and they ought to have examined the RCM/EIL to buttress their defence failing which it must be held that GAIL has suppressed material documents and evidence with the result that the defence of GAIL deserves outright rejection. The next report by RCM/EIL in its letter dated 29.12.2015 relates to the clearance of main cable trench from transformer to control room and states as under. "After extensive discussion on this issue, cable trench from field transformers to main switch gear hall I control room was released on 11.01.2013 (refer page no.34-36). There is a delay of 227 days at our end. Resulting all subsequent activities like cable pulling, dressing & termination was got delayed by 227 days.

33. As regards availability of materials the report dated 29.12.2015 exonerates SWL for the delay in supplying mandatory spares, tools & tackles and spare feeders required as per contract provision on the ground that supply of these by SWL up to 4.08.2015 did in no manner impact the commissioning of switchyard extension for these materials. All major items under the scope of work were supplied within the contractual completion period. The letter dated 30.10.2015 fully gives the justification for extra claims by SWL while recommending such claims.

34. I therefore decide Issue No.(iii) (a) & (b) in the affirmative and hold that SWL is entitled to its claim for the extra work executed by it. Consequently, I also decide Issues No.(iv) & (vi) against the respondent while holding that GAIL was not justified in seeking deductions from the final bill dated 13.02.2016 submitted by GAIL and the deductions made by GAIL are arbitrary and bad in law." [Emphasis Supplied]

10.3. Ms. Arora emphasises that in paragraphs no. 31 to 33 referred above, the entire discussion is qua issues no. (iii)(a) and (b) - which deal with a distinct issue of the execution of extra/ additional works allegedly carried out by SWL. There is no independent reasoning denying deductions, which were the subject-matter of Issues No. (iv) and (vi). She submits that since there is no reasoning in the Award, the same amounts to perversity and patent illegality. The learned Arbitrator was required to at the very least, consider and deal with the contentions of GAIL on this issue. The Tribunal's mandate under Section 31(3) of the Act is to provide reasoning which is intelligible and adequate, and that, it is a well-settled position of law that merely restating contentions of the parties amounts to inadequate reasoning, which renders the

9

Award to be unintelligible and unsustainable under Section 31(3) of the Act. Thus, she claims that the Award is in the teeth of Sections 28(3) and 31(3) of the Act for neither taking into consideration terms of the contract, nor stating any reasons for awarding certain claims. To this effect, she also places reliance upon the judgment in Dyna Technologies Pvt. Ltd. (S) v. Crompton Greaves Ltd. (S)., she argues that the Terms of Payment set-out in Annexure- V of the SCC enumerated the documents that were mandatorily required to be submitted by SWL, for enabling GAIL to release payment against the indigenous supply of material. No such documents were furnished by SWL or placed on record to substantiate the supply of the material, yet, the learned Arbitrator failed to uphold the deductions in complete defiance of the terms of the Agreement.

1

10.5. The Court has considered the submissions of the parties. The reasoning qua Issues No. (iv) and (vi) is interlinked with the findings and reasoning qua Issues No. (iii)(a) and (b) - which have been dealt collectively in paragraphs no. 31 to 34. No doubt, the entire discussion and analysis centres around the Claim pertaining to 'additional/ extra work(s)', however, it also becomes evident that the reasoning of the learned Arbitrator in rejecting the contentions of GAIL qua deductions on account of alleged non-supply is essentially the same. The learned Arbitrator holds that for verification of bills, EIC is the final authority; and therefore, once such verification has been done, no claims contrary thereto could be entertained. In this regard, the observations made by the learned Arbitrator in paragraph no. 23 also become relevant, wherein, before dealing with the respective claims, the learned Arbitrator went through the entire scheme contemplated under GCC and held that EIC is the final authority for overseeing every aspect of the project.

10.6. Therefore, it cannot be held that reasoning given by the learned Arbitrator is absent. Though one could say that the independent reasoning specifically for Issues No. (iv) and (vi), is minimal, yet it is adequate and cogent. The reasoning does reflect the thought process leading to this conclusion, and therefore, the Court does not find it to be case of "no reasoning" as contended by Ms. Arora. Nevertheless, the Court has also examined the correspondences exchanged between the parties to understand the basis for GAIL to have made the deductions. It appears that deductions by GAIL are in respect of two items which can be described as - (i) 'ECS Interface Panel facility' and (ii) 'SCAP Panel facility'. In this regard, an

11

officer of GAIL - Ms. Archana Chaturvedi, had raised a query vide e-mail communication dated 25^th

October, 2016, which reads as under:

"To: EIL Pata - RCM Cc: P. Murugesan; 'sanjeev.momin@eil.co.in' Subject: RE: M/S SWL final bill (Electrical) 220KV switchyard

1. Is this confirmed from EIL engineering that ECS interface panel facility is further added inside data concentrator (fulfilling all technical requirements of data concentrator also as per contract and there is no overlapping and no reduction in supplied material as Data concentrator + ECS interface panel) in billing breakup?

Please also confirm that there is no financial implication on final bill of M/s SWL with respect to this?

2. SCAP panel which is to be supplied by M/s SWL is not clarified. If CMS panel is SCAP panel and supplied by M/s Schneider then M/s SWL has not supplied any SCAP panel as per DLOA supplied item list. Please confirm the financial implication for this.

3. CRP panel is already given with control, protection and annunciation as a separate item in DLOA. Hence the two Le SCAP panel and CRP panel and their control and annunciations should not be mixed. CRP panel annunciation is given in MMI as per job specific electrical requirement as attached with mail dated 24.10 2016(attached below).

4. If CMS panel is the ECS-RTU panel and installed outside switchyard then approved deviation is requested for this.

Regards,

Archana Chaturvedi

CM(PE)" [Emphasis Supplied]

10.7. This was answered by one Mr. Ashok Verma of SWL. The trail of communications read as hereunder:

"From: ASHOK VERMA […] Sent: 01 December 2016 18:13 To: NIRMAL SAAKAR

Cc: EIL Pata - RCM; Rupesh Singh; abhishekprasoon@yahoo.com; JANAK KISHORE; VAIBHAV SETH; NEERAJ KUMAR; Kallas Lohar; SAMIRAN DAS Subject. RE. FW. FW. FW. M/s SWL final bill (Electrical) 220 KV switchyard. Dear Sir,

Further to below mail, we would like to submit our replies as under:

12

1. ECS interface panel facility is included in data concentrator panel, which is fulfilling all technical requirements of data concentrator and ECS interface panel as per contract agreement.

2. SCAP Panel facility is included in CRP Panel as per compliance sheet A-096- 3841, which is fulfilling all the technical requirement of SCAP and CRP Panel as per contract agreement.

We hope that you will find the above is in line with your requirement. Regards

Ashok Verma"

10.8. Thereafter, GAIL controverted the stance of SWL, which is reflected in the communication from Ms. Archana Chaturvedi, as follows:

"From: Archana Chaturvedi Sent: 03 December 2016 15:09 To: EIL Pata - RCM

Cc: P. Murugesan;

Subject: RE: FW: FW: FW: M/s SWL final bill (Electrical) 220KV switchyard

Points are not covered in this mail and attachment file. This is for your information. Regards,

Archana Chaturvedi

CM(PE)"

10.9. From the correspondence replicated above, it appears that GAIL does not explicitly refute the non-delivery of the afore-mentioned two items, and instead seeks clarification viz. financial implication(s) on the afore-noted items. There is no specific assertion of non-supply of items in the aforenoted correspondence. In response, SWL explains that (i) 'ECS Interface Panel' was included in 'Data Concentrator Panel', and (ii) 'SCAP Panel' was included in the 'CRP Panel'. Therefore, the exchange of correspondences do not suggest non-supply of item(s) or any incomplete work(s). During the course of arguments Ms. Arora lays considerable stress on the non-furnishing of documents relating to supply. It therefore emerges that GAIL's deductions were actually on account of lack of requisite documents ('IMIRs' or

13

'Deviation Permits'). However, in light of verification done by EIC, this ground for deduction is not justified. In light of the above, reasoning of the learned Arbitrator stands forfeited from the material placed on record.

10.10. No case is made out to interfere in this regard.

11. CLAIM NO. 3: EXTRA / ADDITIONAL WORKS

11.1. The learned Arbitrator has dealt with this Claim qua extra/ additional works in Issues No. (iii)(a) and (b) of the Award under paragraphs no. 31 to

34.

11.2. Ms. Arora argues that the learned Arbitrator has failed to appreciate and apply the terms of the contract regarding the Additional Claims, and therefore, the Award falls foul of Section 28(3) of the Act and is liable to be set aside. Ms. Arora states apropos Annexure-I to DLoA [Schedule of Rates/ Prices], Clause 3 of the 'Preamble to Schedule of Prices' clearly stipulates that

"contract Price is a lumpsum price on turnkey basis. Unless the basic parameter changes or additional/ extra requirements are made, total payments to be made to the contractor shall be limited to lumpsum price indicated". Further, she submits that Clause 5 of the Preamble states that

"contract Price is inclusive of any other supplies/ work(s) not specifically mentioned in the Bidding Document but necessary for the efficient, trouble free operation of the Plant."

11.3. Further, she also relies upon (a) Clause 91 of GCC [Notice of claims

14

for additional payments] which sets-out the procedure for claims for additional payment; (b) Clause 87.1(vii) of GCC [Schedule of rates & prices] which stipulates that payment for any additional work which is not covered in the 'Schedule of Rates/ Prices' and can only be released on the issuance of a change order; (c) Clause 17 of SCC [Change Orders] which provides that a change order had to be initiated in case the employer directs the contractor to include additional scope of work not covered under the Contract Agreement and a joint memorandum had to be prepared to confirm a change order - the procedure for which has been set-out in Clause 17.7 of SCC.

11.4. On the basis of the afore-noted clauses, Mr. Arora argues that admittedly, no change order was issued by GAIL regarding these extra/ additional works, so as to entitle SWL to payments over and above the contract price. The afore-said Clauses have been completely disregarded by the learned Arbitrator. Since no notice for the said additional claims was issued by SWL, the said Claim was deemed to have been waived by SWL in line with Clause 91.1 of GCC. Yet, the same have been awarded in complete disregard to the terms of the contract, which, Ms. Arora states is patently illegal. Reliance is placed on the judgements in Satyanarayan Construction Co. v. Union of India,²

and PSA SICAL Terminals Pvt. Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin.³

11.5. The Court has considered the contentions advance by Ms. Arora. In paragraphs no. 3 1 and 33 of the Award, extracted above, the learned

2

(2011) 15 SCC 101.

2021 SCC Online SC 508.

3

Arbitrator has given a finding of fact that additional works were carried out at the behest GAIL or its Resident Construction Manager/ Engineer India Limited. The work has indeed has been carried out by SWL, and therefore, the only question to be considered is whether it was within the scope of the Contract or additional work. The parties have conferred a pivotal role on the designated EIC. He has been conferred the power to consider all questions and disputes relating to additional incorporation of work, extra payment for additional work and extended stay on the site. This role of EIC as agreed between the parties can be easily discerned from several clauses contained in the Agreement, including but not limited to Clause 1.1.3 [Definition of EIC], Clause 1.1.14 [Change order], Clause 1.1.15 [Completion certificate], Clause 1.1.16 [Final certificate], Clause 27.1 [PRS and power of EIC], Clause 60.2 [Power of EIC qua addition and alteration], Clause 71 [Power of EIC in cases of discrepancies], Clause 74 [EIC's Test for Quality], Clause 76 [Action and compensation in case of bad work], Clause 87 [Decision of EIC final on rates and payments], Clause 90 [Power of EIC on final bill and measurement binding all parties]. The relevant clauses are culled out hereinbelow:

"1.1.3. "THE ENGINEER/ ENGINEER-IN-CHARGE" shall mean the person designated from time to time by the GAIL and shall include those who are expressly authorized by him to act for and on his behalf for operation of this

CONTRACT") and 1.1.14 (The "CHANGE ORDER" means an order given in writing by the ENGINEER-IN-CHARGE to effect additions to or deletion from and alteration in the works).

[…]

"60.2: The ENGINEER-IN-CHARGE shall have to make any alterations in, omission from, additions to or substitutions for, the Schedule of Rates. the original specifications, drawings, designs and instructions that may appear to him to be necessary or advisable during the progress of the WORK and the CONTRACTOR shall be bound to carry out the such altered/ extra/ new items of WORK in accordance with any instructions which may be given to him in writing signed by the ENGINEER-IN- CHARGE, and such alterations, omissions, additions or substitutions shall not invalidate the CONTRACT and

16

any altered, additional or substituted work which the CONTRACTOR may be directed to do in the manner above specified as part of the WORK shall be carried out by the CONTRACTOR on the same conditions in all respects on which he agreed to do the main WORK. The time of completion of WORK may be extended for the part of the particular job at the discretion of the ENGINEER-IN-CHARGE, for only such alterations, additions or substitutions of the WORK, as he may consider as just and reasonable. The rates for such additional, altered or substituted WORK under this clause shall be worked out in accordance with the following provisions:-

I. For Item Rate Contract […]

II. For lumpsum Contracts"

11.6. Under Clause 60.2. of GCC [Alterations in specifications, design and extra works] EIC has also been given the power to determine whether the work was extra/ additional, and if any alteration(s) needed to be undertaken. EIC has considered the question of extra items, and after due verification, has sanctioned the same - which is evident form the documents placed on record i.e., Letter dated 30^th

October, 2015 bearing Ref. No. A096/SWL-02/19- 42/GAIL/13961 and Letter dated 29^th

December, 2015 bearing Ref. No. 096/SWL-01/19-42/GAIL/14259, the latter of which reads as follows:

"Ref No. A096/SWL-01/19-42/GAIL/14259 Dated: 29-12-2015 M/s GAIL India Limited

GAIL Petrochemical Complex-II

Pata District Auraiya U.P.

Kind Attention : Shri P Murugesan-GM (Construction) Subject: 220 KV Outdoor switchyard extension works for GAIL Pata Petrochemical Complex-II by M/s SWL-Approval of extra item statement no-

02.

Ref. FAO No. GAIL/ND/PC/C&P/2011/069 Dated:14-12-2011 Dear Sir,

Please find enclosed herewith Extra item statement no. 2 for the subject work for an amount of Rs.12,45.272.00 (Rupees twelve lakhs forty-five thousand two hundred seventy two only) duly reviewed by us and recommended for approval at your end.

17

While recommending the extra item statement no-02, the following salient points have been considered at our end.

-Due to changes of transformer location at a later date, several additional works were carried out in this contract which were beyond the limit of SOW enclosed with contract document. Therefore it has become extra item of work of this contract.

-The rate analysis submitted by M/s SWL has been checked with our in house rate analysis and minimum rate among the two analysis has been recommended for approval.

-Extra item derived in line with GCC Clause no-60.2.C of this contract. You are hereby requested to peruse the above and approved the same in line with our recommendation enclosed with this letter.

Thanking you and assuring you our best services at all time. Very truly yours

(R K Singh)

Resident Construction Manager"

11.7. The afore-noted communications, establish that EIC has approved the claims for extra/ additional work done by SWL for electric and civil work.

11.8. In the opinion of the Court, the approach taken by the learned Arbitrator by placing reliance upon the afore-noted communications, which were certified by EIC, cannot be faulted with. The claim of extra work could not be refuted by alleging non-compliance of contractual provisions when the work was done at the behest of GAIL and with due approval of EIC.

12. CLAIM NO. 4: COMPENSATION FOR EXTENDED STAY

12.1. The learned Arbitrator has dealt with this Claim in Issue No. (v) of the Award under paragraphs no. 44 to 46.

12.2. Ms. Arora has impugned the findings of the learned Arbitrator qua the above-captioned claim on the ground that the date of completion of the

18

Contract as per SWL is 15^th

October, 2013, and the one-year defect liability period under the Contract was completed on 26^th

April, 2016. SWL subsequently issued a No-Claims Certificate confirming that it had no further claims in addition to the sum raised in the final bill. The final bill dated 13^th February, 2016 raises no claim(s) for compensation for the extended stay. All balance payments against the final bill were, however, released by GAIL. On 4^th

February, 2016, SWL raised a No-Claims Certificate for an extended stay for the period from 1^st

December, 2014 to 31^st

January, 2016. On 5^th

June, 2017, claims towards compensation for extended stay were raised by SWL for the first time vide their demand letter for the period between October, 2016 to May, 2017 only. In these circumstances, it is contended that the learned Arbitrator has erroneously relied upon EIC's letter dated 29^th

December, 2015 to hold that SWL was entitled to compensation - even though the said Letter categorically stated that neither the 'price reduction scheme' nor the 'extended stay compensation' is payable. She further argues that no evidence has been led by SWL to justify such delay.

12.3. On the other hand, Mr. Tyagi argues that the compensation awarded is per the terms of the contract, and besides, there is a finding of delay against GAIL. The No-Claims Certificate was a stipulated pre-condition of the Contract for the release of the amount and cannot be read against SWL.

12.4. The Court has considered the contentions of the parties. Since the learned Arbitrator has already held in paragraph no. 35 of the Award that the delay in completion of the project was attributable to GAIL, the necessary consequence was that SWL was entitled to be compensated for such delay. In

19

this regard, the learned Arbitrator has, therefore, rightly relied upon the letter of EIC to hold that SWL is entitled to be compensated. The compensation of Rs. 3,00,000/- per month has been awarded in accordance with Clause 8.0 of DLoA, which reads as under:

"8.0 Compensation for Extended Stay The Extended Stay Compensation @ ₹3,00,000 (Rupees Three Lakh Only) per month shall be payable to the Contractor as per the provisions of tender documents."

12.5. This is a finding of fact and is based on the construction of the terms of the Contract, which is reasonable, and calls for no interference. Therefore, the award of compensation for delay of 124 days, is justified.

12.6 However, the Court finds no reasoning whatsoever mentioned in the award concerning compensation granted for the extended stay for the period from 1^st

December, 2014 to 31^st

January, 2016.

12.7. In this regard, Mr. Tyagi relies upon the Site Clearance Certificate dated 14^th

December, 2016 - which also finds mention in the Award. This Site Clearance Certificate is on a letterhead of SWL and has also been accepted by Engineers India Limited. In fact, for the afore-noted period, the learned Arbitrator has solely relied upon EIC's letter dated 29^th

December, 2015 - which does not deal with the delay beyond 15^th

October, 2013. Thus, ex facie the learned Arbitrator has erroneously relied on this letter to award compensation for this period. This certificate is only indicative of the fact that the site had been cleared. However, for the award of compensation, the learned Arbitrator had to first conclude that for the period from 1^st

December, 2014 to 31^st

January, 2016 - the delay was attributable to GAIL. The claim

20

for extended stay compensation is in the nature of 'damages' for which SWL should have necessarily made out a case in the pleadings and also proved loss. No pleadings or evidence qua loss/ damages suffered by SWL on account of the alleged delay for the above period of 14 months is found in the award. There is also no finding whatsoever apropos delay being attributable to GAIL for this period. In absence of such evidence, grant of compensation/ damages for this period, therefore, cannot sustain.

12.8. Accordingly, the Award, to the extent of granting compensation for the extended stay for the period from 1^st

December, 2014 to 31^st

January, 2015, is accordingly, set aside.

13. CLAIM NO. 5: INTEREST AND COSTS

13.1. The learned Arbitrator has dealt with this Claim in Issue No. (vii) of the Award under paragraph no. 37.

13.2. Mr. Arora has argued that the learned Arbitrator has awarded an exorbitant amount towards interest i.e., 15% p.a. for the period from 1^st March, 2016 (i.e., date of submission of the final bill) till 30^th

September, 2018 (i.e., date of filing of statement of claim towards pre-arbitration interest). Further, the Award directs payment of the awarded amount within 30 days, failing which, pendente lite interest has been levied at the same rate from 1^st October, 2018 till the date of payment. She submits that the rate of interest is exorbitant, and the direction to pay within 30 days curtails GAIL's statutory right to approach the Court within the stipulated period of 120 days, and

21

therefore, is patently illegal. In support, reliance is placed upon the judgement of the Supreme Court in Vedanta Limited v. Shenzhen Shandong Nuclear Power Construction Company Ltd.⁴

13.3. Further, it is argued that an exorbitant rate of interest has been awarded without any reasoning and in incomplete ignorance of the current market scenario. The said rate is highly excessive and is virtually concomitant to a penal rate of interest, when considered in the light of prevailing rates. Ms. Arora places reliance upon the judgements of this Court in V4 Infrastructure Pvt. Ltd. v. Jindal Biochem Pvt. Ltd.⁵

and SAIL v. Primetals Technologies India Pvt. Ltd.⁶

13.4 Qua costs, Ms. Arora argues that costs have been directed to be paid as self-claimed/ assessed by SWL. Section 31(8) read with Section 31A of the Act mandates the Arbitral Tribunal to quantify costs before awarding them to a party. The learned Arbitrator has not even considered or adjudicated upon quantum of costs, as the same were not filed during the arbitral proceedings. No such quantification of costs was done before the Tribunal and the matter was merely delegated to SWL and no verification of its computation has been conducted by the learned Arbitrator. Despite a direction by the Arbitral Tribunal to share the statement of costs within 7 days from the Award, SWL, vide letter dated 11^th

August, 2021, for the first time, shared an uncertified statement of costs claiming an exorbitant amount of Rs. 7,00,000/- as "Legal

4

2018 SCC OnLine SC 1922.

5

MANU/DE/1011/2020.

2020 SCC OnLine Del 1392.

6

Fees" - without any breakup or substantiation of the same. GAIL vehemently disputes the said statement of costs and further denies its liability to pay the entirety of the said costs as claimed by SWL as awarded by the learned Arbitrator.

13.5. Per contra, Mr. Tyagi defends the interest awarded and submits that the same is justified and reasonable. Since GAIL has admittedly retained the amounts which they were liable to pay and have also not compensated SWL, the learned Arbitrator was justified in awarding such reasonable rate of interest - which cannot be interfered by this Court under Section 34 of the Act.

13.6. The Court has considered the submissions of counsel for both parties. The condition imposed by the Tribunal, for levying interest, reads as under:

"37. […] In case GAIL fails to pay the aforesaid amount to SWL within 30 days it shall also be liable to pay interest@ 15% P.A. on the above amount to SWL from 01.10.2018 till such amount is paid."

13.7. In terms of the aforesaid direction 15% p.a. rate of interest has been awarded to SWL on amounts specified in the table extracted in the impugned Award preceding the above direction, which reads as under:

23

13.8 Although pendente lite interest has not been awarded, as per the direction contained in paragraph no. 37 of the Award, the same gets attracted in case of non-compliance of the Award within the period specified. Besides, the afore-said direction makes it abundantly clear that the rate of interest payable at 15% p.a. has been awarded on both the principal amount as well as the interest component of Rs. 52,57,207/- for the period from 1^st

March, 2016 to 30^th

September, 2018 i.e., date of filing of claim.

13.9. The Court finds merit in the contention of Ms. Arora that the direction awarding interest amounts to imposition of penalty. The Award directs GAIL to pay entire awarded amount within 30 days, failing which interest at 15% p.a. is levied for the pendente lite period i.e., 1^st

October, 2018 onwards till the date of actual payment on the entire awarded amount (even on the extended stay compensation and interest). This award of pendente lite interest, thus, becomes penal, which is patently illegal as it curtails GAIL's statutory right to approach this Court within the statutory period of 120 days as provided in the Act. Therefore, the direction of the Arbitral Tribunal imposing interest at 15% p.a. w.e.f. 1^st

October, 2018, is accordingly, set aside for the pendent lite period.

13.10. Considering that the banking rate of interest at all relevant times and

24

Accordingly, considering the banking rate of interest at the relevant time, the same is reduced to 9% p.a. for the same period i.e., from 1^st

March, 2016 to 30^th

September, 2018. The said rate of interest would also apply as future interest.

13.11. With respect to the award of other costs, Mr. Tyagi very fairly states that he has no objection in case costs awarded towards legal fees as per table below is reduced from Rs. 7,00,000/- to Rs. 3,50,000/-. The other heads of costs as claimed by SWL in terms of the letter dated 11^th

August, 2018 are towards (i) arbitral fees and (ii) secretarial and other charges - which the Court deems to be just and reasonable and on actuals. The same has been reproduced below:

13.12. Accordingly, award of cost towards legal fee, which in excess of Rs. 3,50,000/-, is set aside. The remaining costs as awarded are not disturbed.

14. The present petition is disposed of with the above terms.

SANJEEV NARULA, J

NOVEMBER 24, 2021

as/hd/nd/ps

(corrected and released on 7^th

January, 2022)

25