VIBHU BAKHRU, J

1. The petitioner (hereinafter ‘Chintels’) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the A&C Act’) impugning an arbitral award dated 03.05.2019 (hereinafter ‘the impugned award’) delivered by the Arbitral Tribunal comprising of Mr. J.D. Pahuja, Mr. N.N. Chakraborty and Mr. Sant Bhushan Lal as the Presiding Arbitrator (hereinafter the ‘Arbitral Tribunal’). The impugned award was delivered by majority with Mr. J.D. Pahuja rendering a partially dissenting opinion.

2. The impugned award was rendered in the context of disputes that have arisen between the parties in connection with a contract dated 14.03.2011 (hereinafter the ‘Contract’).

Factual Context

3. Tenders were invited by Chintels for the works relating to Civil, Structure, Electrical Conduiting and Finishing Work for a real estate development known as Chintels Paradiso, Sector-109, Gurgaon (hereinafter the ‘Project’) comprising of nine state-of-the-art modern towers with 542 apartments, which were to be constructed in two phases. Phase-I included construction of Towers D, E, F, G and H (hereinafter ‘Phase-I’) and Phase-II included construction of towers A, B, C and J (hereinafter ‘Phase-II’).

4. The respondent (hereinafter ‘BBPL’) submitted its bid for the Project and by a Work Order dated 01.03.2011, was awarded the works for Phase-I of the Project for a contract price of Rs.41,55,82,200/-. In the terms of the Work Order, the stipulated time for completion of Phase- I of the Project was twenty-four months; that is, the works were to be completed on or before 01.03.2013.

5. Thereafter, on 14.03.2011, the parties formally entered into the Contract.

6. The impugned award was rendered in the context of disputes that have arisen between the parties in connection with the construction of Phase-I of the Project. (Work Order dated 01.03.2011).

7. On 22.03.2011, the Contract was amended to a limited extent and Chintels undertook to provide reinforcement steel to BBPL free of cost. Thus, the contract price was increased to Rs.48,02,84,152/-.

8. During the years 2011-2012, Chintels claimed that the progress with respect to Phase-I of the Project was slow and this was attributable to BBPL. Further, till April 2012, BBPL had managed to pour concrete for only 2 out of the 40 required slabs for Phase-I of the Project.

9. On 22.01.2013, Chintels complained regarding slow pace of Phase–I of the Project and sought for rectification of certain items.

10. Phase-I of the Project could not be completed within the stipulated period. On 18.03.2013, BBPL sought for an extension of time from 01.03.2013 till 22.08.2014 for completing Phase-1.

11. By a letter dated 15.04.2013, Chintels agreed to grant an extension of time upto 13.11.2013 without the imposition of any liquidated damages. However, Phase-I of the Project could not be completed within the extended time period as well.

12. Apparently, the parties attempted to resolve the disputes pertaining to the Project and exchanged a draft agreement titled “ADDENDUM TO THE CONSTRUCTION DATED 14th MARCH 2011.” However, the said draft agreement was not executed.

13. By an e-mail dated 23.04.2014, all the remaining works apart from concreting in Phase-I of the Project was removed from the scope of work of BBPL and awarded to a third-party.

14. Chintels, thereafter, noticed certain cracks in balconies, beams, and staircases of towers D and E of Phase-I of the Project and it claimed that a report by an independent laboratory dated 09.05.2016, showed that the cracks had occurred due to excessive chlorination of the water that was used by BBPL for mixing the concrete. BBPL disputes that the defects had developed due to bad workmanship or reasons attributable to it.

15. During the years 2013 to 2016, rectification work was conducted by BBPL. In February 2017, the bank guarantees, furnished by BBPL, were encashed by Chintels as it claimed that BBPL had failed in its contractual obligations.

16. Being aggrieved by the disputes pertaining to Phase-I of the Project, BBPL by a notice dated 24.03.2017, invoked the Arbitration Clause as included in the Contract and sought to refer the disputes to arbitration. The Arbitral Tribunal was thereafter constituted and on 30.12.2017, the Arbitral Tribunal entered into reference to adjudicate the disputes between the parties.

Arbitral Proceedings

17. Before the Arbitral Tribunal, BBPL filed its Statement of Claims and raised a total of seventeen claims. A tabular statement of the claims made by BBPL is set out below:

18. Chintels filed its Statement of Defence and raised certain counter-claims. A tabular statement of the counter-claims sought by Chintels is set out below:

19. By the impugned award, the Arbitral Tribunal partly allowed the claims of BBPL. The Arbitral Tribunal awarded a sum of Rs.21,37,535/- along with interest at the rate of 9% per annum from 01.07.2017 till realization in regards to the non-payment of final bill (Claim No.1); a sum of Rs.1,49,97,779/- along with interest at the rate of 9% per annum (Claim No.2); a sum of Rs.10,07,545/- against Claim No.3; a sum of Rs.1,64,17,628/- for loss of overhead and profit due to delay in decisions due to under production beyond the contract period along with interest at the rate of 9% per annum (Claim No.4;) a sum of Rs.2,00,14,900/- along with interest at the rate of 9% per annum with effect from 18.06.2017 (date on which 41st running bill should have been paid) till its realization for Claim No.5; a sum of Rs.2,25,00,000/- along with interest at the rate of 9% per annum from 02.02.2017 till its realization in respect of Claim No.13. The Arbitral Tribunal further awarded interest at the rate of 9% per annum to BBPL till realization if Chintels failed to pay the awarded amount within a period of ninety days.

20. All the counter-claims raised by Chintels were rejected by the Arbitral Tribunal.

21. Aggrieved by the impugned award, Chintels has filed the present petition.

Submissions

22. Mr Raj Shekhar Rao, learned senior counsel appearing on behalf of Chintels, has assailed the impugned award, essentially, on three fronts. First, he submitted that the decision of the Arbitral Tribunal to award loss of profits on the quantum of work that was removed from the scope of works awarded to BBPL, is contrary to the terms of Clause 2.6 of the Contract. He submitted that Chintels was entitled to alter the scope of works and it was expressly agreed that BBPL would not be entitled to claim any amount in respect thereof. He submitted that the impugned award being contrary to the terms of the Contract was liable to be set aside. Second, he submitted that the decision of the Arbitral Tribunal to award a sum of Rs.10,07,545/- on account of water charges was contrary to the Contract. He pointed out that in terms of Clause 16 of the Contract, BBPL was required to bear the cost of water. He submitted that Chintels had advanced a sum of Rs.30,00,000/- to BBPL, however, that could not be construed as an acknowledgement of any liability to pay the water charges. He submitted that the Arbitral Tribunal had erred in proceeding that Chintels had agreed to provide water charges based on an unsigned minutes of meeting. Third, he submitted that the Arbitral Tribunal had erred in awarding a sum of Rs.1,64,17,628/- as loss of profits and overheads for prolongation of the Contract. He submitted that Chintels was not responsible for the delay and in any event, the question as to which party was responsible for the delay was highly contested. The Arbitral Tribunal had not returned any findings on this issue and yet had awarded loss of profits and overheads to BBPL. He submitted that although the Arbitral Tribunal had recorded the submissions advanced on the question, it had not returned any specific finding as to how Chintels was responsible for the delay but had merely proceeded on that basis. Further, BBPL had not led any evidence to establish any loss on overheads. Although the Arbitral Tribunal had referred to the Hudson formula and Emden formula in the impugned award, neither of them were used for computing the loss of profits/overheads. He also submitted that there was an error in calculation as the delay has been calculated from 01.03.2013 instead of 13.11.2013.

23. In addition to the above, Mr Rao also sought to contest the amounts awarded against Claim No.1 (non-payment of final bill) and Claim No.5 (non-payment of RA Bills). He submitted that the said claims had been awarded by not properly appreciating the evidence on record and ignoring vital evidence.

24. Mr Saurabh Kirpal, learned senior counsel appearing for BBPL countered the aforesaid submissions. He submitted that the Arbitral Tribunal had construed Clause 2.6 of the Contract and had found that the said Clause would be applicable if Chintels had decided to reduce the size of the Project. However, if the reduction was based only to assign the work to a third party, it was impermissible to do so. He also submitted that there was no requirement for BBPL to establish any loss of profits as it was obvious that BBPL would have incurred the same. He submitted that the Arbitral Tribunal had followed the decision of the Supreme Court in A.T. Brij Paul Singh and Ors. v. State of Gujarat: (1984) 4 SCC 59 [LQ/SC/1984/182] and accepted that it was reasonable to assume 15% profit margin. He stoutly emphasised that the decision of the Supreme Court in A.T. Brij Paul Singh and Ors. (supra) was binding on this Court.

25. He also referred to the decision of this Court in Shanti Devi and Ors. v. Delhi Development Authority and Ors.: 2007 (93) DRJ 772 [LQ/DelHC/2006/2774] ; and Madhok Construction Co. (P.) Ltd. v. Union of India 1998 (44) DRJ 528 and on the strength of the said decisions contended that the decision of the Arbitral Tribunal to interpret Clause 2.6 of the Contract to apply only in cases where, for certain exigencies, the size of the project was curtailed, could not be faulted.

26. He also referred to the decisions of the Supreme Court in Associate Builders v. Delhi Development Authority: (2015) 3 SCC 49 [LQ/SC/2014/1247] ; Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India: 2019 SCC OnLine SC 677; and Dyna Technologies Pvt. Ltd. v. Crompton Greaves Limited: (2019) 20 SCC 1 [LQ/SC/2019/1917 ;] ">(2019) 20 SCC 1 [LQ/SC/2019/1917 ;] [LQ/SC/2019/1917 ;] ">(2019) 20 SCC 1 [LQ/SC/2019/1917 ;] ">(2019) 20 SCC 1 [LQ/SC/2019/1917 ;] [LQ/SC/2019/1917 ;] [LQ/SC/2019/1917 ;] in support of his contention that the scope of interference with the arbitral award was limited and it was not permissible for the court to reappreciate the evidence and re-adjudicate the disputes.

Reasons and Conclusion

27. The first and foremost question to be addressed is whether the decision of the Arbitral Tribunal to render an award for loss of profits on account of reduction in the scope of work is contrary to the terms of the Contract. The Arbitral Tribunal is required to make an award having regard to the terms of the agreement between the parties. There is no dispute that an arbitral award which is contrary to the material terms of the contract would be liable to be set aside under Section 34 of the A&C Act. In the present case, Chintels had reduced the scope of work under the Contract on the ground that the execution of the works had been inordinately delayed. BBPL had contested the same and claimed that Chintels was not justified in reducing the scope of its works by removing certain items and engaging another contractor to execute the same. BBPL had also relied upon a draft of an addendum to the contract which contemplated deletion of certain items from the scope of work. However, as noted earlier, the said addendum was not entered into between the parties. The Arbitral Tribunal referred to the said draft addendum to the contract and, inter alia, concluded that the same implied that Chintels was obliged to secure BBPL’s consent for deletion of items from the scope of works.

28. The Arbitral Tribunal also concluded that Clause 2.6 of the Contract did not entitle Chintels to completely delete any item of work under the Contract. Such reduction was possible only if reduction in the scope of work was need based. According to the Arbitral Tribunal, if Chintels was required to reduce the scope of the Project, it could seek recourse to Clause 2.6 of the Contract. However, it was not permissible to do so if reduction in the scope of work was not required. The relevant extract of the impugned award, which indicates the aforesaid reasoning, is set out below:

“The clause 2.6 of the contract stipulates that the owner reserves the right to increase or decrease the scope of work in any or all the items or to change the nature of work involved in any or allitemsor to completely delete any item of the work under the contract. The contractor shall not be entitled to claim for loss of anticipated profit loss due to loading on indirect cost on no operable items or for mobilization of additional resources, or for any such reasons on account of these change orders.

The provision under this clause for reduction in scope of work is understandable if such reduction is need based of the Respondents. For example if Respondents need to build four towers instead of five towers, the provision under this clause permits them to do so without any liability. But in this case the reduction in scope of work is not need based but for assigning the part of work under the Claimants contract unilaterally without any justification to a third party. This act becomes questionable on following grounds.”

29. The Arbitral Tribunal found that the reduction in the scope of the work was not justified because (i) BBPL was fully mobilised at the site; (ii) BBPL had opposed deletion of items from the scope of works; and (iii) there is no provision in the Contract for deputing a third party to carry out BBPL’s scope of work. The Arbitral Tribunal had found that the work amounting to Rs.9,99,85,197/- had been withdrawn from the scope of works and awarded 15% of the said amount as loss of profits in favour of BBPL.

30. At this stage, it is relevant to refer to Clause 2.6 of the Contract. The same reads as under:

“2.6 INCREASES/ DECREASES TO SCOPE OF WORK:

The Owner reserves the right to increase or decrease the scope of the Work on any or all items or to change the nature of the Work involved in any or all items or to completely delete any items of the Work under the Contract. The Contractor shall not be entitled to claim for loss of anticipated profits, loss due to loading on indirect costs on non openable items for mobilisation of additional resources, or for any other such reason on account of these change orders.”

31. It is clear from the plain language of Clause 2.6 of the Contract that Chintels reserved the right to increase or decrease the scope of works on any or all items or to change the nature of the work involved. It also reserved the right to delete any item or work under the Contract. The clause specifically provides that BBPL would not be entitled to claim any loss of anticipated profits in respect of any such change. There is nothing in the said clause which indicates that its applicability is contingent on change in the scope of the Project. There is clearly no ground to assume that Clause 2.6 of the Contract would be applicable only if Chintels did not require the said work to be executed at all. Chintels had reserved its right to increase or decrease the scope of work awarded to BBPL without any such qualification. There is no other clause or contract which would indicate any such qualification as well. Concededly, if Chintels right to reduce the scope of work was unqualified, BBPL’s claim for loss of profits on the items of work removed from its scope of works, would be unsustainable.

32. Mr Kirpal had referred to Clause 32 of the Contract and had submitted that change orders had not been issued by the Project Management Committee (PMC) or Chintels, who had taken over the role of the PMC. He submitted that in terms of Clause 32 of the Contract, such change orders would necessarily have to include a suitable adjustment to the contract price. Clause 32 of the Contract is set out below:

“32. CHANGE ORDERS

The Owner reserves the right to alter the Scope of Work (See Clause.2.6) and consequently the Contract Price shall be suitably adjusted for such changes by reference to the rates in the Schedule of Rates. All change orders shall be issued by the PMC only after obtaining the prior written consent of the Owner's Representative. The onus shall be on the Contractor to obtain such prior written consent of the Owner’s Representative.

If the rates for the additional, altered or substituted work are not specifically provided in the Schedule of Rates then such rates shall be derived from the rates that are specified for a similar class of work in the Contract. The PMC’s interpretation as to what is a similar class of work and his decision on the method in which the rate is to be derived shall be final and binding on the Contractor.

If the rates for the additional, altered or substituted work cannot be determined in the manner specified above, then the rates for such work shall be determined on the basis of actual consumption of materials, and actual use of labour and plant and machinery, as detailed below:

a. Cost of materials supplied by the Contractor, at no more than prevailing market rates, actually incorporated in the Work.

b. Cost of labour actually used at the Site on the Work at prevailing rates of labour.

c. Cost allocation toward the Work for the use of any plant and machinery at the Site, on actual basis.

d. 2% (Two percent only) towards cost of water and electricity.

e. 15% (Fifteen percent) of the actual costs in respect of (a), (b), (c) and (d) above, towards Contractor’s establishment and all other costs and overhead and profit.

f. For specialized work from nominated contractor’s scope of work, only 5% shall apply in place of 15% on overhead and profit components.

A schedule of plant rates shall be provided by the Contractor. If the Contractor and the PMC cannot agree on a rate as determined in accordance with this sub-clause, then the PMC may determine a reasonable rate which shall be final and binding on the Contractor or, at the Owner’s option, may order and direct the work to be carried out by such other persons or agencies as it may think fit, and such other persons or agencies shall not, in any manner be prevented or obstructed in their work or from entering upon the work by the Contractor for the purpose of carrying out such work. The Contractor shall not be entitled to any payment whatsoever in connection with such work carried out by such other persons or agencies.

Before any extra work is undertaken by the Contractor, he shall ensure that he has received a specific Change Order, signed by the Owner’s representative and from the PMC. No additional payments shall be made to the Contractor without prior agreement and receipt of the necessary signed Change Order. Each Change Order shall clearly state the value of the additional work agreed to and signed for by the Owner.

The Contractor shall at monthly intervals submit to the PMC an account giving particulars, as full and detailed as possible, of additional work ordered in writing by the Owner and which the Contractor has executed during the preceding month. If any Change Order instructed by the Owner causes a delay in the completion of the Work causing the Contractor to overrun the time fixed for completion of the Work, the Owner shall agree, following joint review of the circumstances with the PMC as to the extent of the delay, to postpone the time for completion of the Work by the period of delay, provided the Contractor has notified the Owner in writing, of such expected delay before such change order is actually issued by the Owner.”

33. The opening sentence of Clause 32 of the Contract expressly provides that Chintels had reserved the right to alter the scope of the works and the contract price would be suitably adjusted by reference to the reduced rates as mentioned in the schedule of rates. The Contract was essentially an item rate contract where the rate for each item of work had been agreed. The opening sentence of Clause 32 of the Contract also made it amply clear that the change in the contract price as a result of alteration in the scope of work would be by reference to the rates mentioned in the schedule of rates. Therefore, in the event of removal of any items of work, the contract price would require to be adjusted for such change “by reference to the rates in the Schedule of Rates”. Neither of the parties had challenged the finding of the Arbitral Tribunal that the items of the contract value of Rs.9,99,85,197/- were reduced from the scope of work. There is also no dispute that Chintels had issued communications for reducing the scope of work. The fact that there was no PMC or that it had not issued the change order, would not dilute Chintels’ right to reduce the scope of works, which as stated earlier is not qualified. It is relevant to note that Clause 32 of the Contract expressly provided that no additional work would be undertaken by BBPL, unless, it had received a specific change order signed by Chintels’ representatives. No payment for extra work would be claimed by BBPL without securing a specific change order. The onus for obtaining Chintels’ prior written consent also rested on BBPL.

34. In the aforesaid view, reference to Clause 32 of the Contract is of no assistance to BBPL in claiming loss of profits on the reduced scope of works. A plain reading of the impugned award also indicates that the decision of the Arbitral Tribunal to enter an award of loss of profits in favour of BBPL is not based on Clause 32 of the Contract. The Arbitral Tribunal has also not specifically held that the right of Chintels to reduce the scope of work was contingent upon issuance of any change order.

35. The decision of the Arbitral Tribunal to restrict the applicability of Clause 2.6 of the Contract to only those circumstances where Chintels was required to reduce the scope of the Project is neither supported by the plain language of the Contract nor can be inferred by necessary implication. The impugned award against Claim No.2 (loss of profits for withdrawal of finishing items from the scope of the works) is, thus, unsustainable.

36. Mr Kirpal had referred to the decisions in Shanti Devi and Ors. v. Delhi Development Authority and Ors (supra) and Madhok Construction Co. (P.) Ltd. v. Union of India (supra) in support of his contention that the Arbitral Tribunal’s decision regarding interpretation of Clause 2.6 of the Contract was a plausible one. There is no cavil with the proposition that the question regarding interpretation of a contract falls within the jurisdiction of an arbitral tribunal. And, it is not open for the court to supplant its opinion over that of the arbitral tribunal unless such an interpretation is, ex facie, erroneous and not a plausible one. However, there is clear distinction between interpreting the terms of a contract and entering an award contrary to those terms. As stated above, the decision of the Arbitral Tribunal to qualify Clause 2.6 of the Contract and read the same in a restricted manner is contrary to its plain language. There is no clause in the Contract which restricts the import of Clause 2.6 of the Contract. Therefore, the impugned award is, plainly, contrary to the express terms of the Contract. The decision in Shanti Devi and Ors. (supra) and Madhok Construction Co. (P.) Ltd. (supra) is not applicable in the facts of the present case. In that case, the relevant clause (Clause 13 of the relevant contract), which fell for consideration of the Court was materially different from the clause in the present case. The relevant extract of the said clause reads as under:

“CLAUSE 13

If at any time after the commencement of the work the Authority shall for any reason whatsoever not require the whole thereof as specified in the tender to be carried out, the Engineer-in-Charge shall give notice in writing of the fact to the contractor who shall have no claim to any payment of compensation whatsoever an account of any profit or advantage which he might have derived from the execution of the work in full, but he did not derive in consequence of the full amount of the work not having been carried out, neither shall he have any claim for compensation by reason of any alterations having been made in the original specifications, drawings, designs and instructions which shall involve any curtailment of the work as originally contemplated."

37. The first line of the aforesaid clause indicates that the clause would be applicable only once the authority ‘does not require’ the whole work as specified in the tender to be carried out. Clearly, this clause was open to the interpretation by the arbitral tribunal in the manner as interpreted. However, in the present case, there is no ambiguity in the language of Clause 2.6 of the Contract. There is no sentence that would even remotely indicate that Chintels’ right to curtail the scope of works was contingent upon its need for getting such work executed.

38. The decision of the Arbitral Tribunal to award a sum of Rs.1,49,97,779/- as loss of profits cannot be sustained for yet another reason. Admittedly, there is no material brought on record to establish that BBPL would have possibly earned a profit of 15% on the items of work excluded from the scope of works. The Arbitral Tribunal had accepted BBPL’s quantification of claim by solely relying on the decision of the Supreme Court in A.T. Brij Paul Singh and Ors. (supra). Thus, the Arbitral Tribunal’s award of loss of profit is based on no material whatsoever.

39. Mr Kirpal had earnestly contended that it was not necessary for BBPL to establish any loss of profits. He submitted that once the Arbitral Tribunal had accepted that Chintels had breached the Contract by removing certain items from its scope of works, it would follow that BBPL was entitled to claim loss of profits.

40. There is merit in Mr Kirpal’s contention that once it is accepted that Chintels had breached the Contract by reducing the scope of work, BBPL would be entitled to claim loss of profits on items of work as excluded from its scope of work. However, that did not absolve BBPL from establishing the quantum of damages. The claims for loss of profits on the unexecuted works is in the nature of damages. In order to secure an award for such damages, it is essential for a party to establish both the incidence of the damage as well as the measure of such damage. If it is accepted that Chintels had breached the Contract by removing certain items of work from the scope of works awarded to BBPL, the right to claim damages would stand established. However, BBPL was also required to establish the measure of such damages. BBPL has not established the quantum of damages incurred. In any view, as is apparent from the impugned award, the Arbitral Tribunal has not considered any such measure. It had simply awarded 15% of the contract value as damages by referring to the decision of the Supreme Court in A.T. Brij Paul Singh and Ors. (supra). This Court is unable to accept the same.

41. The question as to what are reasonable damages in each case is to be considered by evaluating the available material in the facts of each case. The decision in A.T. Brij Paul Singh and Ors. (supra) is not an authority for the proposition that in all contracts where the claim for loss of profits as damages is available, the aggrieved party would be entitled to 15% of the entire contract value as loss of profits. In A.T. Brij Paul Singh and Ors. (supra), the High Court had found that the respondent had breached the contract between the parties and the appellant had established that it was entitled to claim damages for loss of profits. The appellant had relied upon the decision of the same High Court in another connected proceedings where the court had accepted the claim for loss of profits computed at the rate of 15% of the value of the unexecuted works. Notwithstanding the decision in the connected matter, the High Court had not accepted the appellant’s case on the ground that it had not produced the relevant documents or material to establish its claim. It is in this context, the Supreme Court faulted the High Court in not accepting the measure of damages. The relevant paragraph of the said decision is set out below:

“11. Now if it is well-established that the respondent was guilty of breach of contract inasmuch as the rescission of contract by the respondent is held to be unjustified, and the plaintiff-contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15 per cent of the value of the remaining parts of the work contract, the damages for loss of profit can be measured.”

42. This Court is unable to accept that the aforesaid decision is an authority for the proposition that a party claiming damages in respect of the construction contract is absolved from establishing the quantum of damages suffered. And, in all cases, a profit margin of 15% is a reasonable measure.

43. Mr Kirpal had sought to sustain the aforesaid measure of damages by referring to Clause 32 of the Contract. He submitted that Clause 32 of the Contract had also contemplated a mark-up of 15% of actual cost as profits. This contention is unpersuasive for two reasons. First, that the Arbitral Tribunal had not referred to Clause 32 of the Contract to evaluate the anticipated profit margin on the works that were deleted from the scope of works awarded to BBPL. Second, Clause 32 of the Contract also does not provide 15% mark-up of the value of the works as profits. Clause 32 of the Contract provides for a method of determining the rate for an item not specifically provided in the Schedule of Rates. Such rates also include 15% of actual cost towards ‘establishment and all other costs and overhead and profit’. Therefore, the rate for a particular item would include 15% mark-up towards such costs and profits. This would mean that if the cost of material, labour, plant and machinery, water and electricity is Rs.100, the rate for the item would be Rs.115. This would translate to markup of 13.04% (Rs.15/115 x 100) of the item rate. The mark up of 15% is not on the rate of the item but on the aggregate cost of labour, material, plant and machinery, water and electricity. It is also material to note that the said mark up of 13.04% on the item value is not only on account of profits but also on account of (i) contractor’s establishment; (ii) overheads; (iii) all other costs; and (iv) profits.

44. If the rate analysis as provided under Clause 32 of the Contract was to be applied, as is contended by Mr Kirpal, the award on account of loss of profits would be significantly lower than as awarded by the Arbitral Tribunal.

45. In view of the above, the impugned award to the extent that the Arbitral Tribunal had awarded loss of profits on the unexecuted works in favour of BBPL is, ex facie, erroneous and is liable to be set aside.

46. Next question to be examined is whether the Arbitral Tribunal had erred in awarding a sum of Rs.10,07,545/- as reimbursement of the charges incurred by BBPL for purchasing water. Indisputably, in terms of Clause 16 of the Contract, BBPL was obliged to incur the necessary expenses for purchase of water. In the initial stages, the water was drawn from a borewell at site. However, subsequently drawing ground water was proscribed by the Government of Haryana. The Arbitral Tribunal found that in the circumstances, Chintels had agreed to reimburse the payment of water charges. This was recorded in the minutes of the meeting held on 24.02.2015. Although Chintels disputed the said minutes, it is apparent that the Arbitral Tribunal has not accepted Chintels’ contention. BBPL had incurred an expenditure of Rs.40,07,545/- for purchasing of water for construction. Admittedly, Chintels had paid a sum of Rs.30,00,000/-. In the circumstances, the Arbitral Tribunal held that Chintels was liable to pay the remaining amount of Rs.10,07,545/-.

47. It is clear from the above that the decision of the Arbitral Tribunal is based on the appreciation of material produced (minutes of the meeting dated 24.02.2015 as well as the conduct of the parties). It is not open for this Court to re-evaluate the said evidence in these proceedings. In this case, the Arbitral Tribunal found that the parties had arrived at a subsequent understanding whereby Chintels had agreed to bear the water charges. Chintels’ challenge in this regard is unmerited and accordingly, rejected.

48. The next question to be examined is whether the award of compensation on account of overheads during prolongation (Claim No.4) of the Contract is sustainable. The Arbitral Tribunal has awarded a sum of Rs.1,64,17,628/- on account of loss of overheads during the extended period of the Contract. It is contended on behalf of Chintels that there is no finding that delay in execution of the works is attributable to Chintels and award of damages on account of such delay is not sustainable. Chintels also challenges the award of the aforesaid amount on the ground that it is not based on any material or evidence.

49. The reading of the impugned award in respect of Claim No.4 indicates that there is no specific finding that the delay in execution of the works was attributable to Chintels. But, it is discernible from the impugned award that the Arbitral Tribunal (majority) had so decided. The Arbitral Tribunal had noted that there were several communications on record with regard to delay in supply of (a) drawings; (b) required decisions; (c) in releasing payments; and (d) indicating various hindrances. After noting the above, the Arbitral Tribunal had proceeded to compute the damages payable on account of overheads due to prolongation of the Contract. It, therefore, follows that the Arbitral Tribunal had accepted that the delay was on the aforesaid grounds.

50. Chintels had disputed that the delay in execution of the works was on its account. It had claimed that the delay was, inter alia, on account of defective work. Insofar as the question of defective work is concerned, the Arbitral Tribunal had given a finding that cracks and various defects were not attributable to BBPL but on account of fault in design. In view of the aforesaid finding, it is apparent that the Arbitral Tribunal had accepted that the delay in execution of the work was attributable to Chintels. Indisputably, there is ample material on record to indicate that there were certain delays on the part of Chintels. The aforesaid decision is based on appreciation of evidence and material placed on record.

51. In Dyna Technologies Pvt. Ltd. (supra), the Supreme Court had observed that “even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the court needs to have regard to the documents submitted by the parties and the contention raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner”. The Supreme Court had further observed that “the courts were required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards”. Tested on the anvil of the aforesaid principle, this Court is unable to accept that the impugned award is vitiated on the ground that there is no finding that Chintels was responsible for the delay.

52. The next aspect to be examined is whether the damages as quantified by the Arbitral Tribunal are based on any evidence or material. The Statement of Claims does not indicate the basis for quantification of loss on account of overheads. BBPL in its Statement of Claims had referred to various communications to establish that the delay in the execution of the works was attributable to Chintels. After pleading the same, BBPL had articulated its claim as under:

“85. In view of the above, the Claimant is entitled to claim on account of loss of overhead and profit due to delay in decisions under production for the contract period of Rs. 3,88,46,330/- and beyond contract period of Rs. 5,24,40,577/- [Pg. No. 123, Vol. 1].”

53. BBPL had claimed a sum of Rs.3,38,46,330/- on account of loss of overheads due to under production during the contract period of twenty four months. The Arbitral Tribunal had found that BBPL was not entitled to any such claim during the contract period as the same was included in the contract value. However, it held that BBPL was entitled for loss on account of overheads in respect of the period beyond the Contract. It computed the said loss as under:-

“The Claimants in their claim in their claim No.2 have claimed loss of profit for withdrawing value of work of Rs.9,99,85,197 from their scope of work. The contract value after this with drawl would be Rs.48,02,84,152 – Rs.9,99,85,197 = Rs.38,02,98,955

Production per day as per revised value= Rs. 38,02,98,955/2x365=Rs. 5,20,957.

Value of work done beyond contract period i.e. 01.03.2013 to completion of work on 01.05.2015 (792 days) = Rs. 17,14,71,111.

Value of work done per day = 17,14,71,111/792=Rs.2,16,504

Loss of production per day= Rs.5,20,957.-Rs.2,16,504 = Rs.3,04,453.

In support of their contention, Claimants cited the judgement of the Apex Court having citation SCC in the case of mcdormatt.

We consider 7.5% towards loss of overhead instead of 15% as claimed by the Claimants because the Claimants overhead is expected to be 7.5%, as the remaining 7.5% is supposed to be the profit of the Claimants.

Out of 792 days claimed, we consider that every contractor considers and keeps provision for at least 10% of the contract time for extension and therefore, the total delay would be 792 days (-) 73 days being 10% of the total contract time of two years namely 730 days = 719 days.

Therefore the amount works out to 7.5% of 3,04,453 x 719 works out to Rs.1,64,17,628.00.”

54. It is apparent from the above that the Arbitral Tribunal had concluded that BBPL could have executed the works of an average value of Rs.3,04,453/- per day. The Arbitral Tribunal appears to have proceeded on the basis that BBPL had incurred costs of overheads for executing work to the aforesaid extent and the overheads would be expected to be 7.5% of the value of the work. The Arbitral Tribunal further held that the Contract had been prolonged for the period of 719 days after accounting for 10% cushion over and above the contract period. Accordingly, the Arbitral Tribunal computed the loss of overheads at 7.5% of the additional work that Chintels could have performed during the extended period but did not. It is at once clear that the aforesaid calculations are based solely on surmises. The Arbitral Tribunal has not relied on any material placed on record to ascertain the expenditure on overheads purportedly incurred by BBPL. A plain reading of the Statement of Claims indicates that no averments were made in regard to expenditure factually incurred on account of overheads attributable to the Contract. Although the Arbitral Tribunal has mentioned Emden formula and Hudson formula, the Arbitral Tribunal has neither noted the said formulae nor applied the said formulae by determining the variables on the basis of materials available on record, necessary to apply the formulae. In view of the above, it is clear that the determination of overheads is not based on any material on record.

55. It was contended on behalf of BBPL that the Arbitral Tribunal is an expert body and therefore, had evaluated the loss on the basis of their experience. There is merit in the contention that this Court would not normally interfere with the opinion of experts, however, the expert opinion must be based on material facts available on record. As noted above, BBPL had not specifically pleaded the quantum of expenditure incurred on overheads in its Statement of Claim. It had merely computed the loss on normative basis.

56. Mr Kirpal had referred to Clause 32 of the Contract and had contended that the Contract provided for 15% mark up on account of profits and overheads. The reliance placed on Clause 32 of the Contract is misplaced. The Arbitral Tribunal has not alluded to the said clause for computing the loss on account of overheads. As noted above, the assumption that Clause 32 of the Contract provides for profits and overheads of 15% of the contract value (item rate) is also erroneous. It provides for a mark up of 15% on cost for determining the rate of a particular item and not 15% of the item rate. It was necessary for BBPL to have established the actual costs incurred on account of overheads or at least the basis for computing the same along with some empirical data.

57. In view of the above, the impugned award to the extent it awards a sum of Rs. 1,64,17,628/- as loss on account of overheads, is liable to be set aside.

58. Mr. Rao also contended that the Arbitral Tribunal had awarded a sum of Rs.21,37,535/- on account of non-payment of the final bill (Claim No.1) as well as the sum of Rs.2,00,14,900/- on account of non-payment of running bills (Claim No.5) on the ground that the Arbitral Tribunal had failed to appreciate the material on record and had ignored vital evidence. This Court finds the aforesaid contention unmerited. Indisputably, there is sufficient material on record to support the aforesaid claims. And, a plain reading of the impugned award indicates that the Arbitral Tribunal had considered the material on record. Therefore, this Court finds no ground to interfere with the award entered against Claim Nos.1 and 5. It is well settled that this Court does not sit as the court of first appeal to re-appreciate and re-adjudicate the disputes. Once it is seen that there is sufficient material on record to support the claim and the same has been accepted by the Arbitral Tribunal, no interference with the Arbitral Tribunal’s decision would be warranted in proceedings under Section 34 of the A&C Act.

59. In view of the above, the impugned award to the extent that the Arbitral Tribunal has awarded loss of profits for illegal withdrawal on finishing items from the scope of work (Claim No.2) and loss on account of overheads during the extended period of the Contract (Claim No.4) is set aside.

60. The petition is disposed of in the aforesaid terms. The parties are left to bear their own costs.