Case No: Civil Petition for Leave to Appeal Nos. 2263 and 2211-2212 of 2008
Judge: Md. Abdul Matin,
Court: Appellate Division ,,
Advocate: Mr. Rafique-ul-Huq,Abdur Razzak,,
Citation: VI ADC (2009) 952
Case Year: 2009
Appellant: Bangladesh Power Development Board and others
Respondent: M/s. Arab Contractor (BD) Ltd and others
Delivery Date: 2009-03-25
Supreme Court of Bangladesh
MM Ruhul Amin, CJ.
Md. Abdul Matin, J.
Md. Abdul Aziz, J.
Bangladesh Power Development Board and others
........Petitioners (In all cases)
M/s. Arab Contractor, (BD) Limited and others
…...Respondents (In all cases)
March 25, 2009.
The Arbitration Act, 2001
Section 42 (2)
The Contract Act
It appears that this Court can interfere with the arbitration award only on limited ground where the arbitrators decided the matter on inadmissible evidence or on the principles of construction which the law does not countenance. No such case has been made out before us that the arbitrators relied on inadmissible evidence or misconducted themselves. …….. (30)
Cases Referred To-
M/s Amin Jute Mills Ltd. Vs. M/s. A.R.G. Ltd. 28 DLR (AD) 76; K.M. Shafi Limited. Vs. Government of Bangladesh 1983 BLD (AD) 109; Sonali Bank Vs. Karnaphuli works Ltd.46 DLR (AD) 55.
Abdur Razzaq, Senior Advocate instructed by A. K. M. Shahidul Huq, Advocate-on- Record-For the Petitioners (In all cases)
Rafique-ul Huq, Senior Advocate instructed by Mvi. Md. Wahidullah, Advocate-on- Record-For Respondent No.1 (In all cases)
Not represented-Respondent Nos. 2-4 (In all cases)
Civil Petition for Leave to Appeal Nos. 2263 and 2211-2212 of 2008
(From the judgment and order dated 22.07.2008 and 23.07.2008 passed by the High Court Division in First Miscellaneous Appeal Nos. 8, 9 and 10 of 2007)
These petitions for leave to appeal are directed against the judgment and order dated 22.07.2008 and 23.07.2008 passed by the High Court Division in First Miscellaneous Appeal Nos. 8, 9 and 10 of 2007 dismissing the appeal and upholding the order No.9 dated 23.08.2006 passed by the Court of learned District Judge, Dhaka in Arbitration Miscellaneous Case Nos. 791,792 and 790 of 2006 rejecting the application filed by the petitioners under section 42(1) of the Arbitration Act, 2001.
2. The facts, in short, are that the petitioner No.1 entered into an Agreement being No.3.17/Lot-1/2000/310 dated 30.03.2000 with M/s Arab Contractors-Shah Islam Joint Venture for the construction of the main building with some auxiliary structures of the 210 MW Siddhirganj Power Station situated at Siddhirganj, Narayanganj. The said Joint Venture was a consortium of a local firm (i.e. Shah Islam) and a United Arab Emirates based firm (i.e. Arab Contractors LLC, Dubai). The agreed price for completion of the contractual work was fixed at Tk. 33, 61, 46, 298.00/- (Taka Thirty-Three Crores, Sixty-One Lacs, Forty-Six Thousand, Two Hundred and Ninety-Eight). This amount was offered by the said Joint Venture in its bid during a competitive tender process. The said Joint Venture having been adjudged the lowest bidder, the price was offered by it was accepted by the petitioner No.1. The said Joint Venture later sub-contracted the work to the respondent No.1 by a power of Attorney dated 15.05.2001.
3. Clause 41 of the Special Conditions Contract (Which was incorporated into the said agreement dated 30.03.2000) provided for arbitration between the petitioner No.1 and the said Joint Venture in the event of dispute. The arbitration clause stated as follows:-
4. "The Employer and contractor should amicably settle all kinds of disputes arising in respect of the work & related matters through mutual communication/discussion. Any dispute that cannot be amicable settled shall be decided by the Arbitration Act, 1940 as prevailing in Bangladesh."
5. The term "contractor" in the above mentioned clause refers to the Arab Contractor-Shah Islam Joint Venture and not the respondent No.1, who initiated the arbitration proceedings. The term "employer" refers to the petitioner No.1.
6. The Construction was completed on 30.06.2004 and the respondent No.1 was paid the contractually agreed amount of Tk. 33,61,46,298.00.
7. After accepting the full payment of Tk. 33,61,46,298.00 in accordance with the said agreement date 30.03.2000, the respondent No.1 served a Notice of Arbitration dated 30.05.2005 on the petitioner No. 1, pursuant to such notice, arbitration proceeding commenced between the parties.
8. The respondent No.1 as claimant filed a statement of claim, claiming Tk. 202,47,32,385.00/-, over and above the agreed contract price of Tk. 33,61,46,298.00/-. As such the respondent No.1 was claiming over 6 (six) times the original agreed contract price. In the statement of claim the respondent No.1 claimed, inter-alia, that the petitioners had delayed in handing over the site to respondent No.1 and as such the machinery and staff had lay idle at considerable expense. It was also alleged that the petitioner (i.e. Bangladesh power Development Board) was paying a Russian firm (i.e. Technopromexport) at a higher rate for the same works.
9. As such although the contractually agreed amount was Tk. 33,61,46,298.00, the respondent No.1 claimed Tk. 202,47,32,385.00 (six times the agreed amount). This is an exorbitant amount without any justification or basis. On 10.03.2005 the respondent No.1 had made a claim of Tk. 119,39,87,247.05. However, this amount was almost doubled in the statement of claim to Tk. 202,47,32,385.00.
10. Further prior to the1 initiation of arbitration proceedings the petitioner by way of a good will gesture on 10.03.2005 offered an enhancement of amount payable by over 20%. The petitioner offered Tk. 7,90,51,487.00/- over and above the contractually agreed. However, the enhanced price was rejected and the respondent No.1 commenced arbitration proceedings.
11. The petitioners opposed the claim of the respondent No. 1 by filing a statement of defence. In the statement of defence, the petitioner objected to the maintainability of the arbitration proceedings on the ground that the same filed by a person who was not a party to the arbitration agreement. It was also stated that the claim of the respondent No.1 was exaggerated and was not in accordance with law. It was further stated that the respondent having a quoted a price of Tk. 33, 61, 46, 298.00/-, in a competitive tender process could not now claim 6 (six) times the amount merely because another contractor was being paid more.
12. The hearing of the arbitration proceedings took place on 11.03.2006, 18.03.2006, 25.03.2006, 08.04.2006, 15.04.2006, 22.04.2006, 29.04.2006 and 20.05.2006. It was argued on behalf of the respondent No.1 (as claimant) that it had suffered loss due to the delay in handing over the site and necessary drawings. It was alleged that there was a delay of 1553 days, from the date of signing the said agreement on 30.03.2000. Machinery and labour having been kept idle for 1553 days, the respondent No.1 was required to pay for such idle machinery and labour and consequently it had suffered loss. It was also claimed that a Russian company having been paid at a higher rate, the respondent No.1 was only entitled to payment at a higher rate.
13. It was argued on behalf of the petitioners that the amount claimed by the respondent No.1 was excessive. The respondent No.1 had deliberately caused the loss by keeping the machinery and labour lying idle for 1553 days. It was argued that the respondent No.1 without having been given the site or handed over necessary drawing had deliberately caused a loss by nevertheless employing machinery and labour. The respondent No.1 had knowledge of the delay and yet it chose to cause loss by renting machinery and employing labour for which there was no work. The respondent No.1 knew that the machinery and goods would be lying idle and hence, the loss was caused by its own actions. The respondent No.1 made no attempt to mitigate the loss. In fact the loss was directly caused by the respondent No.1.
14. The Arbitral Tribunal comprising of the pro-forma respondents vide their Arbitral Award dated 03.06.2006 passed an award of Tk. 70,09, 33,243.31/- together with interest at the rate of 15% per annum in respect of four heads of claim. The 5th head of claim in relation to loss of goodwill was rejected. In relation to first head of claim (i.e. Increase of Contract price) the Tribunal awarded Tk. 46,26,89,946.31/-. The Arbitral Tribunal awarded the damages to the respondent No.1 on the basis of the rate at which a Russian firm (i.e. Technopromexport) was being paid.
15. The Arbitral Tribunal also increased the contract price on the ground that the respondent No.1 (Arab Contractors (BD Limited) was performing similar works at a higher rate for the petitioner No.1 (Power Development Board) under a different contract on another portion of the project.
16. Further the Arbitral Tribunal also increased the contract price of 41 items by 198%. This Arbitral Tribunal in enhancing the price, did not consider that the contract price was in fact offered by the respondent No.1 itself in its bid. The said Joint Venture has deliberately made a low bid in order to offer a competitive price which would be accepted. In fact the respondent No.1 deliberately bid 7.86% than the estimated cost of the petitioner No.1 (i.e. Power Development Board) in order to be adjudged successful in the Tender. The bid of the said Joint Venture being lower than the estimated cost of the petitioner No.1 the same was accepted and the said Joint Venture was declared the successful bidders. However having been declared successful they are now attempting to increase the tender price. This is malafide.
17. The Arbitral Tribunal also awarded the respondent No.1 rent for idle machinery. It was claimed by the respondent No.1 that due to a delay in handing over the site and necessary drawings, the machinery lay idle for 1553 days (i.e. 4 Years, 3 months and 3 days). The Arbitral tribunal calculated that the respondent No.1 suffered a loss of Tk. 1,96,400.00/- per day. However, rent was only awarded for 953 days (1553-600 days). The period of 600 days was deducted from the total of 1553 days because 600 days was stipulated in the contract as the period within which the work was required to be completed.
18. Similarly the Arbitral Tribunal also awarded damages to the respondent No. 1 in relation to wages paid to idle labour. It was argued by the respondent No. 1 that due to the actions of the petitioners their staffs were idle for 1553 days (i.e. 4 years 3 months and 3 days). This loss arose out of a deliberate and malafide act of the respondent No.1 in employing staff (for whom it had no use) for over 4 years. The staffs were employed although allegedly the site had not been handed over of the drawing provided. The loss, if any arose from the deliberate and intentional actions of the respondents and hence cannot be claimed in accordance with section 73 of the Contract Act.
19. The petitioners being aggrieved by the Arbitral Award passed against it filed an application under section 42(1) of the Arbitration Act, 2001, being Arbitration Miscellaneous case No.792 of 2007 for setting aside the Arbitral Award dated 03.06.2006. The said application was filed on the grounds that the Arbitral Award was excessive and without any basis. It was also stated that the losses alleged by the respondent No.1 did not arise naturally from the alleged breaches of the petitioners. As such it was stated that the Arbitral Award had been passed in contravention of section 73 of the Contract Act. The award was prima facie opposed to the law of Bangladesh and as such liable to be set aside. It was also argued that the Award was against public policy.
20. The learned District Judge after hearing both the parties rejected the application for setting aside the award and thereafter the petitioner moved the High Court Division by filing miscellaneous appeal and by the impugned order the High Court Division dismissed the appeal and affirmed the judgment and order of the learned District Judge.
21. As against the judgment and order of the High Court Division the petitioners moved the petition for leave to appeal.
22. Heard the learned Counsel appearing for the petitioners and perused the petition and the impugned judgment and order of the High Court Division and other papers on record.
23. The learned Counsel appearing for the petitioners submits that the High Court Division committed error of law in failing to consider that the respondent No.1 having rented idle machinery for over 4 years without having received any drawing or having been handed over the site or given any drawing, had by its deliberate, unreasonable and intentional act caused unnecessary expense and as such the compensation for idle machinery was contrary to section 73 of the Contract Act and the Arbitral Award was liable to be set aside.
24. He further submits that the High Court Division committed error of law in failing to consider that the respondent No.1 having employed idle staff for over 4 years without having received any drawing or having been handed over the site, had by its deliberate, unreasonable and intentional act caused unnecessary expense and as such the compensation for idle machinery was contrary to section 73 of the Contract Act and the Arbitral Award was liable to be set aside.
25. Mr. Rafique-ul Huq, the learned Counsel for the respondents refuted the argument of Mr. Abdur Razzaque and submitted that the party guilty of the breach of contract is liable to pay compensation and interest and he relied upon the case of M/s Amin Jute Mills Ltd. Vs. M/s. A.R.G. Ltd. reported in 28 DLR (AD) 76. In that case this court held as under:-
26. "An analysis of section shows that, when it is found that a party to a contract is in breach, he must pay compensation for the loss or damages caused by the breach to the other contracting party. That is the principal consideration. Then comes the measure of damages. The section says that the loss or damage towards compensation may be claimed in the event of breach must be either, one which arises naturally in the usual course of things from the breach, or one which the parties knew at the time of contract to be likely to result from the breach. The liability of a defaulting party arises from the breach of contract on his part. A breach occurs where a party repudiates or fails to perform one or more obligations imposed upon him by the contract. Once liability arises, then comes the question of measure of damages as contemplated in the section. In estimating the measure or damages, the question of sustaining actual loss comes into consideration. The loss may occur in various ways: the injured party may suffer loss in his capital or in profit, or in both. These are illustrative and not exhaustive, because loss may occur in various other ways depending upon the facts, circumstances and the nature of each transaction. The governing idea is that the party in breach must equalise the injured party for the loss, and the measure of equalisation is to put the injured party in the position had the contract been performed. While compensating the injured party, it should not be remote, or indirect, and in all cases the means available for remedying he inconveniences occasioned by the breach must be taken into account.
27. The section therefore contemplates that a plaintiff may recover for the breach of contract, compensation for only such loss or damage as flows in consequence of the breach in the usual course of events, or the parties knew to be likely to flow from breach. Consequence must be proximate and natural. Natural in this connection means usual. Remoteness in space and time and the number of intervening events have obvious bearing on forseability, but neither any particular degree of remoteness, nor any maximum number of events can be established to set a limit in the law of contract. In other words these factors are governing circumstances but not absolute rulings.
28. We can now revert to the submission of Mr. Sharif. In view of our analysis of Section 73, Contract Act, the contention of Mr. Sharif that in the case of breach of contract unless actual damage is proved the plaintiff cannot recover compensation and is entitled nominal damages only from the defaulting party, is unsound. Illustration (a) to section 73 applies on all fours to the facts of the present case. The illustrations to the section are but general rules. The principle is that the defaulting party must pay the difference between contract price and the market price on the date of breach."
29. Mr. Huq further relied upon the case of K. M. Shafi Limited. Vs. Government of Bangladesh reported in 1983 BLD (AD) 109 and submitted that arbitrators are the sole judges to decide the compensation and interest and all matters referred to the arbitration and court will not interfere even though it may take a different view of interpretation of the particular terms of the contract.
30. It appears that this court can interfere with the arbitration award only on limited ground where the arbitrators decided the matter on inadmissible evidence or on the principles of construction which the law does not countenance. No such case has been made out before us that the arbitrators relied on inadmissible evidence or misconducted themselves.
31. Mr. Huq also referred to the case of Sonali Bank Vs. Karnaphuli Works Ltd. reported in 46 DLR (AD) 55 in support of his contention that interest may be granted along with compensation under Section 70 of the Contract Act.
32. Admittedly the petitioners are at fault in delaying the matter and the respondents did not cause any delay in completing project. Therefore the petitioners who are responsible for the delay must pay for the compensation. Interest has also to be given complying with the provision of Arbitration Act, 2001 on the basis of bank papers.
33. We find no substance in these petitions which are accordingly dismissed.