OMP No. 355 of 2009. Case: Power Grid Corporation of India Ltd. Vs Siemens Limited. High Court of Delhi (India)
| Case Number | OMP No. 355 of 2009 |
| Counsel | For Appellant: Mr. S. B. Upadhyay, Senior Advocate with Mr. Sujeet Keshari, Advocate and For Respondents: Mr. C. Mukund with Mr. P. V. Saravanaraja and Mr. Ravi Kumar, Advocates |
| Judges | S. Muralidhar, J. |
| Issue | Arbitration and Conciliation Act, 1996 - Section 34; Indian Contract Act, 1872 - Sections 45, 203 |
| Judgement Date | February 28, 2013 |
| Court | High Court of Delhi (India) |
Judgment:
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The Petitioner, Power Grid Corporation of India Limited (''PGCIL''), has in this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (''Act'') challenged the Award dated 20th February 2009 passed by the arbitral Tribunal (''Tribunal'') awarding the Respondent, Siemens Limited (''Siemens'') Rs.1,96,07,224 towards cost of pile foundation along with interest thereto at 10% per annum from 11th April 2005 to 10th February 2009 and cost of arbitration in the sum of Rs.12,50,000. Siemens was also awarded post- Award interest @ 10% p.a. till the date of payment in the event the awarded sum was not paid within two months.
Background Facts
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PGCIL floated a tender inviting bids for two contracts for its sub-station at Gorakhpur. One was a work supplies contract and the other a services contract. As part of the bidding requirement, a joint venture (''JV'') was entered into between Siemens and Transformers and Electricals Kerala Ltd. (''TEKL'') in a proforma prescribed by PGCIL. A power of attorney (''PoA'') was also executed by TEKL in favour of Siemens in the proforma stipulated by PGCIL on 10th December 2003, simultaneous with the execution of the JV agreement whereby TEKL constituted Siemens as the lawful attorney/ authorised representative/partner-in-charge "to exercise all or any of the power for and on behalf of the JV" in respect of the contracts for which bids had been invited by the PGCIL.
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The dispute between the parties is in relation to the services contract executed on 29th March 2004 between PGCIL and the JV of Siemens and TEKL. The services contract agreement (''SCA'') was executed by PGCIL and the JV, with Siemens acting on behalf of the JV as lead partner. The SCA was for a total value of Rs.8,24,41,262. Civil works covered under the services contract were of two categories: (i) for control room and administrative building and (ii) for switch yard area covering tower foundation. For the control room building, PGCIL provided Bill of Quantities (''BOQ'') and prices were on unit rate basis. There is no dispute between the parties in relation to the work done for the control room and the administrative building. While for the control room PGCIL supplied foundation drawings, it did not do so for the 400 KV sub-station tower foundation. The foundation drawings for the control room foundation envisaged a spread foot foundation. The tower foundation was to come up within a distance of about 100 meters from the control room. According to Siemens, on the reasonable presumption that the soil condition at the location where the tower foundation was to be erected, i.e. within 100 meters from the control room would be no different, Siemens gave a bid for spread foot foundation for the tower foundation as well.
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After the contract was awarded to Siemens, it got soil investigation done in terms of the contract between May and August 2004. On 30th September 2004, Siemens informed PGCIL that given the soil condition in the area where the tower foundation had to be erected, it would be necessary to lay a pile foundation and not a spread foot foundation. This meant that the cost of the project would substantially increase. With no response to the letter, Siemens wrote a further letter on 4th October 2004 to PGCIL seeking confirmation of Siemens incurring extra cost towards pile foundation. On 29th November 2004, PGCIL wrote to Siemens rejecting the claim for pile foundation work by stating that it was covered under the scope of the contract. PGCIL asked for rate analysis and justification for the control room foundation works so that the claim could be processed. On its part Siemens wrote another letter on 3rd December 2004 stating that PGCIL''s rejection for its claim for pile work for the tower foundation was unacceptable to it and should be reconsidered.
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The case of Siemens is that there was delay in handing over of the leveled site for construction work for even the control room and reactor block. After nearly three and a half months by a letter dated 10th/13th January 2005 PGCIL agreed for amendment to the contract as far as the control room buildingcum- administrative building was concerned. Consequently the total contract price for that portion stood revised from Rs.8,24,41,262 to Rs.8,57,69,171. As against a rate of Rs.2,950 per meter per pile PGCIL conveyed its acceptance to a rate of Rs.1348 per meter per pile as claimed by Siemens although, this was much lower than what was claimed. However PGCIL refused to accord sanction for revision of payment as far as the tower foundation was concerned. Nevertheless Siemens commenced work on entire foundation using pile foundation and completed the work, with prior intimation to PGCIL on 10th April 2005. On 11th April 2005, Siemens wrote to PGCIL relying on Clauses 35.1, 35.2 and 35.3 of the General Conditions of Contract (''GCC'') which referred to unforeseen conditions and the entitlement of the contractor for reimbursement of the additional cost incurred by it.
Proceedings before the Adjudicator
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By a letter dated 8th June 2005, Siemens informed PGCIL that if no response was received to its request, it would invoke the GCC Clause 6 under which the disputes were to be referred initially to the named Adjudicator Mr. Adarsh Kumar, Chief Engineer (Retd.), PSEB. On 8th July 2005 when no response was received from PGCIL, Siemens referred the matter to Mr. Adarsh Kumar, the named Adjudicator. On 30th August 2005, PGCIL put forth its defence before the Adjudicator justifying its refusal to reimburse the extra cost incurred on the pile foundation for the tower foundation. On 30th November 2005, the Adjudicator held in favour of Siemens. By a letter dated 28th/29th December 2005 PGCIL informed Siemens that the decision of the Adjudicator was not acceptable to it and, therefore, in terms of Clause 6.1.2 of the GCC they notified their intention to commence arbitration. It was stated that it would be communicating Siemens the name of the Arbitrator separately. According to Siemens when no further communication was received from PGCIL, by a letter dated 31st January 2006 Siemens requested PGCIL to evaluate the pile foundation work and release payment along with interest @ 15% p.a. This request was reiterated by the letters dated 27th June 2006 and 20th July 2006. It enclosed an invoice for Rs.1,96,07,224 for the amount payable by the PGCIL for the pile foundation work for the tower foundation @ Rs.1,348.97 per meter, per pile which was the rate paid for the control room foundation.
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By a letter dated 2nd August 2006, PGCIL informed Siemens that it did intend to go for arbitration and, therefore, could not consider the claim for extra work. By letters dated 8th August and 18th December 2006, Siemens again requested PGCIL to either commence arbitration or to release payment for the pile foundation in terms of the invoices raised by Siemens.
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On 21st February 2007, PGCIL issued a completion certificate certifying successful completion of the work in all respects. On 6th June 2007, Siemens sent a legal notice nominating one of the Arbitrators and calling upon PGCIL to nominate its Arbitrator. On 22nd June 2007, the PGCIL nominated its Arbitrator. The two nominated Arbitrators then named the third Arbitrator and the Tribunal came to be constituted.
Arbitration proceedings
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Upon the pleadings of the parties, the following issues were framed by the Tribunal for determination:
(1) Whether the Arbitral Tribunal has no jurisdiction to arbitrate the disputes between the parties in the absence of M/s. Transformers and Electricals Kerala Ltd. with which the claimant entered into joint venture?
(2) Whether the concept of Pile Foundation adopted by the claimant for 400 KV Tower Foundation is justified (issue suggested by Mr. Mukund).
(3) Whether the work of Pile Foundation executed by the claimant is covered within the scope of the contract which amounts to extra work (issue suggested by Mr. Upadhyay)?
(4) In view of the aforesaid issues, whether the claimant is entitled to Piling Charges amounting to Rs.1,96,07,224/- as per invoice dated 29.3.2004?
(5) Whether the claimant is entitled to any interest and, if so, on what amount, at what rate and for what period?
(6) Whether Mr. H.K. Mallick is authorized to file and verify the statement of defence on behalf of the respondent?
(7) Relief, if any.
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Siemens examined Mr. J.P. Singh, its Senior Project Manager and Mr. Amresh Kakar, Senior Manager as witnesses. PGCIL examined four witnesses Mr. Prabhat Rastogi, Chief Engineer of PGCIL, Mr. R.N. Prasad, Additional General Manager, Mr. C.S. Gupta, Manager (Contract Services) and Mr. H.K. Mallick, General Manager.
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Before the Tribunal for the first time PGCIL raised an objection that the arbitral proceedings were not maintainable. It is stated that only the JV could invoke the arbitration clause and there was no privity of contract with Siemens as such.
Award of the Tribunal
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The Tribunal rejected the above plea by pointing out that for the work carried out as regards the control room building with pile foundation it was Siemens which raised an invoice for extra work. PGCIL made payment against the said invoice without any objection. When notices were issued by Siemens claiming the amounts its locus to raise such a claim was never objected to by PGCIL. Even when it demanded arbitration, PGCIL did not raise any objection that only the JV could do so. Further PGCIL itself invoked the arbitration clause...
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