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Section 9 in The Arbitration Act, 1940
Section 41 in The Arbitration Act, 1940
Global Company vs M/S. National Fertilizers Ltd. on 7 May, 1999
The Arbitration Act, 1940
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Delhi High Court
Mala Kumar Engineers Pvt. Ltd. ... vs B. Seenaiah And Co. (Projects) ... on 13 January, 2005
Equivalent citations: 2005 (1) ARBLR 264 Delhi, II (2005) BC 501, 117 (2005) DLT 183
Author: P Nandrajog
Bench: P Nandrajog

JUDGMENT Pradeep Nandrajog, J.

1. Respondent No. 3, National Highways Authority of India (NHAI) awarded works of construction of 4 laning and strengthening of the existing 2 lane of the NH-79 from KM 120.00 to KM 183.00 to respondent No. 1, B. Seenaiah & Co.(Projects) Limited (BSCPL). To execute the contract, BSCPL engaged the services of M/s. Ganesh Engineering Company (GEC) for quarrying rock boulders. BSCPL engaged the services of the petitioner (MKE) for moving the rock boulders after extraction by GEC from the point of extraction to the crusher site.

2. Terms of payment as per agreement dated 15.7.2002 required BSCPL to pay to the petitioner as under:-

"6.0. In consideration for the services provided by MKE, the BSCPL shall pay NKE Rs. 27/- (Indian rupees 27/- only) for every metric tonne up to 2 km lead from quarry to crusher."

3. It may be noted that there is another clause being clause No. 7 whereunder petitioner was to be paid for similar services at the rate of Rs. 20/- per tonne, but this relates to transportation of rock boulders from another site. Dispute between the parties is admittedly for services rendered by the petitioner for transporting the rock quarried by GEC.

4. Agreement between the petitioner and BSCPL is silent as to what would be the method employed to weigh the weight of the rock boulders. However, agreement between the BSCPL & GEC stipulates the manner in which weight would be determined. It has to be noted that GEC was to be entitled for payment per metric tonne of quantity quarried. Clause 9 of the agreement dated 20.2.2002 stipulates as under:-

"9.0. Measurement will be made by taking levels before and after quarrying a particular area and the volume thus obtained shall be converted into tonnes by the appropriate specific gravity of the material quarried."

5. As per the petitioner, 5,88,081.32 cubic mts of rock boulders were quarried by GEC. This quantity was measured and certified by Sh. B.R. Reddy, surveyor of BSCPL. Specific gravity test was conducted by BSCPL from the National Test House, Jaipur. It certified the specific gravity to be 2.81. Thus, total quantity of rock boulders quarried comes to 16,52,508.50 MT. Claiming to have transported the aforesaid quantity of rock boulders as per the agreement, at the contract stipulated rate of Rs. 27/- per metric tonne, petitioner claims that a sum of Rs. 4,46,17,729.74 became payable to the petitioner. Petitioner states that it received a sum of Rs. 3,57,20,956.00 inclusive of adjustment towards hire charges for some equipment supplied by BSCPL. Accordingly, petitioner states that a sum of Rs. 88,96,773.74 remains as the amount payable to it.

6. It is pleaded by the petitioner that since the work was over, respondent No. 1 turned dishonest. Attempts to reconcile the matter having failed, petitioner had no option but to proceed under arbitration. It is stated in the petition that the petitioner would be invoking the arbitration clause. During arguments, Ms. Anusuya Salwan, counsel for the petitioner states that the petitioner has invoked the arbitration clause and sought reference of the dispute to arbitration as per the arbitration clause contained in the agreement between the parties.

7. Prayer made in the application is to direct respondent No. 1 to deposit an amount of Rs. 88,96,773.74 in this Court to secure the amount in dispute between the parties, alternatively to direct NHAI to withhold a sum of Rs. 88,96,773.74 from the bills of respondent No. 1 towards the contract in question.

8. Reply by respondent No. 1 is that the petition is motivated to harass the respondent. As per respondent No. 1, petitioner had to be paid upon payment being certified by the Project Manager. Petitioner did not mobilise the site, in that, did not transport the minimum required material to be transported each day. Respondent had to lend machinery to the petitioner. It was entitled to adjustment towards hire charges for said machinery in the sum of Rs. 8,42,585/-. It is stated by the respondent that only 5,43.612.18 cubic mts of quarried material was extracted. Average specific gravity was 2.69. Total quantity would therefore come to 14,62,316.72 mt. tonne. It is stated that out of this quantity petitioner transported only 12,60,831.76 cubic meters of rock boulders. Petitioner was thus entitled to Rs. 3,40,42,458/. According to respondent No. 1, petitioner was paid a sum of Rs. 3,58,12,410/-. As per respondent No. 1, petitioner had been paid an excess amount.

9. It has to be noted that petitioner had admitted receipt of payment in the sum of Rs. 3,57,20,956/-, which sum includes the adjustment for machinery supplied by BSCPL i.e. hire charges.

10. Petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996. Petitioner has invoked clause b of sub-section (ii) of Section 9. Said clause entitles a party, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced, to apply to a court for securing the amount in dispute in the arbitration.

11. Documents relied upon by the petitioner for specific gravity of the rock boulders are 2 test certificates issued by the Nation Test House. The certificates are dated 3.4.2003 and 3.6.2003. Certificate dated 3.4.2003 would show that one piece was tested. Specific gravity was 2.81. Certificate dated 3.6.2003 would show that 4 samples were tested. Sample 1 was a 40 mm stone. Sample 2 was a boulder. Sample 3 was dust and sample 4 was aggregate mixed soil. The test certificate shows that for samples 1 and 2, specific gravity observed was 2.81 each. For sample 3, specific gravity observed was 2.74. For sample 4, specific gravity observed was 2.67.

12. defense of the respondents shows that it has arrived at the weight of the quarried material taking specific gravity at 2.69. This specific gravity has been worked out on the basis of 92.5% of the quarried material being of specific gravity 2.81 i.e rock. Balance 7.5% of the material is being treated as having specific gravity 1.8. Average specific gravity thus has been taken at 2.69.

13. Ms. Anusuya Salwan, learned counsel for the petitioner conceded that quantity of 5.88,081.32 cubic meters of quarried material was taken by the petitioner from a certificate dated 23.6.2004.

14. This certificate would reveal that combined specific gravity of the quarried material has been determined at 2.635. This certificate further reveals that 2,01,485 MT of material was transported.

15. Ms. Anusuya Salwan, counsel for the petitioner further conceded that as a result of quarrying, apart from stone, rocks & boulders; dust, soil etc. is also excavated. When questioned, whether cleaning was doing at the site of quarring or at the crushing site, on instructions from her client, Mrs. Anusuya Salwan stated that cleaning was done at the site of quarring.

16. If this be the position, petitioner, prima facie cannot claim to have transported 5,88,081.32 cum of rocks & boulders. This is the total quantity of material quarried by GEC. It is this apparent that petitioner cannot lay claim on the basis of 5,88,081.32 cum of quarried material. Assuming that petitioner transported the entire quarried material, it has to include the soil and dust. If that be so, petitioner cannot work out the tonnage on the basis of specific gravity being 2.81.

17. Weight of material transported by the petitioner has obviously to be less than 16,52,508.50 MT. Prima facie, claim of the petitioner that it is entitled to a sum of Rs. 4,46,17,729.74 is not justified on the basis of the record.

18. Petitioner has relied upon the certificate dated 23.6.2004. As noted, the said certificate shows that even respondent No. 1 has transported certain material by arranging its own vehicles. As per this certificate, the quantity of rock boulders transported by the petitioner has to be further reduced.

19. I need not go into the issue pertaining to the quantity of boulders transported in greater depth less prejudice is caused to either party. In proceedings under Section 9 of the Arbitration and Conciliation Act, 1996, I am to form only a prima facie opinion.

20. Though language of Section 9 of the Arbitration and Conciliation Act, 1996 does not expressly state that as a condition precedent for passing an order under Section 9, it has to be established that there is a danger of the respondent defeating, delaying or obstructing the execution of the award, the issue is no longer res integra.

21. In the decision , M/s Global Company v. M/s National Fertilizers Ltd., learned Single Judge of this Court held that the intention of the defendant is sine qua non for invoking Section 9 where claim is to secure the amount in dispute in the arbitration. It was held that guidance could be taken from Order 38 Rule 5 of CPC and Sections 18 and 41 of the Arbitration Act, 1940. In para 11, it was observed as under :-

"11. It is true that the said Arbitration Act, 1940 stands repealed by the Act of 1996 and the provisions contained in the Code of Civil Procedure are not applicable to the proceedings under the Act, still, in my opinion, in the absence of guidelines how the power for grant of relief under Section 9(ii)(b) is to be exercised by the Court, the principles underlying the aforesaid sections are to be applied. It is only on adequate material being supplied by the petitioner that the Court can form opinion that unless the jurisdiction is exercised under the said Section 9(ii) there is real danger of the respondent defeating, delaying or obstructing the execution of the award made against it. On the basis of the only ground of protection of financial interest of the petitioner taken in para 6 of the petition, the respondent, a Govt. of India Undertaking cannot be legally directed to furnish security for the amount of US$ 88,250 together with interest @ 9% p.a. Petition thus deserved to be dismissed."

22. Petitioner has not averred that the respondent is a bankrupt or a near bankrupt company. Petitioner has nowhere alleged that if the amount is not secured, it would not be possible for the petitioner to recover the amount, if awarded during arbitration. There is no averment that respondent No. 1 has taken resort to an action which could be indicative of an intention to deprive the petitioner the benefit of the award, if in favor of the petitioner.

23. I find no merits in the petition. The same is accordingly dismissed. It may, however, be recorded that nothing stated or observed in the present order would be construed as an expression on the merits of the controversy between the parties. The arbitrator/arbitral tribunal shall decide the issue between the parties on the basis of evidence and material before the arbitrator/arbitral tribunal.

24. No costs.