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C.A.@SLP(C)No.35021/13

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8373 OF 2014 [Arising out of S.L.P.(C)No.35021 of 2013]

Bharat Heavy Electricals Ltd. …..Appellant

Versus

Tata Projects Ltd. …..Respondent

J U D G M E N T

SHIVA KIRTI SINGH, J.

1. Leave granted.  

2. Heard Mr. Gourab Banerji, Senior Advocate for the appellant and Mr.  

Gopal Jain, Senior Advocate for the respondent.  The appellant was required to  

set up some plant or boiler units.  For completing that work, appellant issued a  

notice  inviting  tender  for  engaging  a  sub-contractor  to  erect,  test  and  

commission  two  120  MW  boilers  (Unit  II  and  Unit  III)  on  behalf  of  the  

appellant.  The value of the contract awarded in favour of the respondent was  

Rs.6,99,40,000/-.   Pursuant to disputes and differences, an Arbitral Tribunal  

consisting of three arbitrators came to be constituted.  The Arbitral Tribunal  

awarded Rs.69.22 lac on various heads and Rs.25.39 lac on account of interest.  

The appellant instituted proceedings under Section 34 of the Arbitration and  

Conciliation Act, 1996 (for brevity, ‘the Act’).  That proceeding bearing A.P.  

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No.213 of 2006 was finally decided by a learned Single Judge of the High  

Court of Calcutta on 04.01.2013.  The objections of the appellant were allowed  

in part in respect of only three counts relating to over-run charges, crane hire  

charges and interest.

3. The  respondent  filed  an  appeal  being  A.P.O.  No.60  of  2013.   The  

Division  Bench,  by  the  order  under  appeal  dated  12.06.2013,  allowed  the  

appeal in part in respect of charges, namely, crane hire charges and interest.  In  

the present appeal only those two issues have been raised on behalf of the  

appellant.  According to learned senior counsel for the appellant, the Division  

Bench has wrongly reversed the order of learned Single Judge on the issue of  

crane hire charges inasmuch as the claim of the appellant asking for payment of  

crane hire charges by the respondent for Unit III was based upon clause 12.2.2  

of  the  Work  Order  read  with  clauses  2.8.11,  3.38.3  and  3.38.14  of  the  

Agreement/Tender Document.  In respect of second issue relating to interest,  

learned senior  counsel  has confined the  claim of  the appellant  only against  

grant  of  pre-Award  interest  on  the  basis  of  clause  1.15.5  of  the  Tender  

Document/Agreement.

4. On  the  other  hand,  learned  senior  counsel  for  the  respondent  has  

submitted that the Award in respect of crane hire charges is based on an overall  

view of entire material available before the Arbitral Tribunal and, therefore,  

although the Tribunal finally concluded that “there is nothing on record of the  

Arbitral  Tribunal  to  substantiate  the  ‘understanding’  between  the  parties  

regarding swapping of crane usage days between Units II and III as has been  

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pleaded by the claimant”, it only allowed Rs.8.25 lac in favour of appellant’s  

claim for such charges.  According to him, for the same very reason, taking a  

holistic view of the whole matter, the Division Bench in the impugned order  

took the same view.  On behalf of respondent, the grant of pre-Award interest  

could not be successfully defended in view of clause 1.15.5 of the Agreement  

which  provides  that  “no  interest  shall  be  payable  by  BHEL  on  earnest  

money/security deposit or any money due to the contractor by BHEL”.  The  

ambit  and  scope  of  aforesaid  clause  was  subject  matter  in  Civil  Appeal  

No.7423 of 2005 between the appellant and M/s. Globe HI-Fabs Ltd. decided  

on 12.11.2009 wherein this Court  accepted and held that  in view of such a  

provision  in  the  Agreement,  interest  is  only  payable  from  the  date  of  the  

Award.   The  aforesaid  legal  position  ought  to  have  been  accepted  by  the  

Division Bench of the High Court in view of law settled by judgments of this  

Court in the case of Sayeed Ahmed & Co. v. State of U.P. & Ors. (2009) 12  

SCC 26 and several  other  cases  including the  case  of  Union of  India   v.  

Concrete Products & Construction Co. & Ors. (2014) 4 SCC 416.

5. On  the  issue  of  award  of  interest,  learned  senior  counsel  for  the  

respondent tried to persuade us to enhance the post-Award interest granted by  

the Arbitral Tribunal @ 10.5% to 18% p.a.  in the light of provisions in Section  

31(7)(b)  of  the  Act.   We  are  unable  to  accept  this  contention  because  the  

Arbitral Tribunal has already granted post-Award interest @ 10.5%.  Only if  

the Award had not made such a direction, the statutory rate of interest @ 18%  

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p.a.  would  have  been  payable  from the  date  of  the  Award  to  the  date  of  

payment as per statutory provision noted above.  

6. In the light of aforesaid discussion, we are constrained to hold that the  

order under appeal ought not to have approved grant of any pre-Award interest.  

7. So far as the issue relating to crane hire charges is concerned, before  

expressing our views we think it proper to extract the relevant clauses of the  

Work Order,  i.e.,  clause 12,  12.2,  12.2.1 and 12.2.2 as well  as the relevant  

clauses of the Tender Document/Agreement :

“Relevant extract of Work Order dated 16.03.1999 Terms and conditions

12.0       TOOLS & PLANTS AND CONSUMABLES

You shall provide all  necessary consumables and T & Ps  (other than those specified below), measuring instruments,  handling equipments as per provision of contract for timely  completion  of  the  total  job  as  per  contract  within  the  accepted rates.

12.2 Following T & Ps will be provided by BHEL to you free of  charge as per provision of contract on availability.

_______________________________________________________

Sl.   Description Capacity Quantity _______________________________________________________  

01.   Electric winches   10 MT 2 nos.

02.   10 Sheave pulley block   100 MT 4 nos.

03.   Hydro test pump 1 no.

04.   High Capacity crane (250 T)* 1 no.

12.2.1   The above T & Ps will be made available for the project.  You may make use of the T & Ps as per the provision of  tender document.

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12.2.2 * In case of 250 T capacity crane, operator and consumable  shall  be  provided  by  BHEL.   However,  the  fuel  for  operation of this crane shall have to be arranged by you.  250 T Crane shall be available only upto ‘drum lifting of  Unit-2’.”

“RELEVANT EXTRACT OF TENDER DOCUMENT NO.PSER:SCT:JBA:B2

2.8.11   It is not obligatory on the part of BHEL to supply any tools  and tackles or other materials other than those specifically  agreed to do so by BHEL, however,  depending upon the  availability,  BHEL’s  customer’s  handling  equipment  and  other  plants  may be  made  available  to  the  contractor  on  payment  of  the  hire  charge  as  fixed,  subject  to  the  conditions laid down by BHEL/ customer from time to time.  Unless paid to advance such hire charges, if applicable shall  be recovered from contractor’s bill/ security deposit in one  instalment.

3.38.3   The operation of all BHEL equipment (except 250 T Crane)  will be in the scope of the contractor.  BHEL will provide  free  of  cost  (including  operator  and  consumables)  one  number 250 T Crane only upto the Drum Lifting Milestone  of Unit II only.  However the Fuel for operating this 250 T  Crane shall have to be arranged by the contractor.

3.38.14 BHEL will provide free of cost (including operator, fuel and  consumables) 250 MT Crane only for the first unit (Unit- 2).”

8. Clause 12 and other sub-clauses thereunder as extracted above show  

that a high capacity crane (250 T) is included in the Tools and Plants which  

will be provided by BHEL to the respondent free of charge as per provisions of  

contract on availability but only upto “drum lifting of Unit II” as specified in  

clause  12.2.2.   There  is  no  provision  either  in  the  Work  Order  or  in  the  

Agreement/Tender Document to entitle the respondent to claim that it was not  

obliged to pay the higher charges as fixed, subject to the conditions laid down  

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by BHEL from time to time in respect of user of crane for Unit No.III.  To the   

contrary, the extracts from the Tender Document contain a clear stipulation for  

recovery  of  such  charges  from  the  contractor’s  bill/security  deposit  in  one  

instalment.

9. On going through the order under appeal, we find that the learned  

Division Bench has  not  kept  in  mind the  aforesaid  provisions  in  the  Work  

Order and the Tender Document.   BHEL was neither required to issue any  

notice for exercising its right to recover crane hire charges for Unit III, nor was  

it  required to deduct such charges from the running bills of the respondent.  

There is no dispute or issue as regards quantum of such charges claimed by the  

appellant but the Arbitral Tribunal allowed it only to the extent of Rs.8.25 lac  

although the Tribunal itself found that the respondent had failed to produce any  

material in support of its defence that because the crane was out of order for a  

number of days when Unit No.II was under erection/instalment and, therefore,  

the respondent became entitled to use the crane without hire charges for Unit  

No.III.  In such circumstances, we find that the crane hire charges claimed by  

the appellant were wrongly disallowed by the order under appeal passed by the  

Division Bench.

10. As a result, it is held that appellant is entitled for crane hire charges  

and, therefore, that amount needs to be deducted from the amount payable to  

the  respondent  under  the  Award  on  other  heads.   It  is  also  held  that  the  

appellant is not liable to pay any pre-Award interest and the interest @ 10.5%  

p.a. shall be payable by the appellant only from the date of Award till the date  

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of  payment  on  the  Award  amount  now found  payable,  if  any.   We  order  

accordingly.  The order under appeal is set aside to the aforesaid extent.  The  

appeal is allowed accordingly.  No costs.

…………………………….............................…….J. [FAKKIR MOHAMED IBRAHIM KALIFULLA]

…………………………….............................…….J. [SHIVA KIRTI SINGH]

New Delhi. September 01, 2014.

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