1

BEFORE THE SOLE ARBITRATOR HON’BLE Mr. ANIL R DAVE

(FORMER JUDGE, SUPREME COURT OF INDIA)

CLAIM PETITION NO. ___2017

IN THE MATTER OF:

AN ARBITRATION BETWEEN:

Predominant Engineers and Contractors Pvt. Ltd

…CLAIMANT
AND
Trimula Industries Ltd
…RESPONDENT
TABLE OF CONTENTS

S. No. Particulars Page No.

1. Synopsis of Submissions 3-12

2. Written Submission 12-25

2.1 Respondent willfully defaulted/delayed to 12

discharge the payments as per the Contract.
2.2 The Respondent had agreed to source Second 18
hand turbines along with air cooled condensers
and all the vendors were chosen and approved
by the Respondent themselves.
2.3 The Communication made by the claimant was 20
on the correct E- mail address.
2.4 The Respondent arbitrarily stopped the entry of 21
the Claimant into project site without and any
prior notice and without notice of termination of
contract.
3. CLAIMS 25-37

3.1 Balance contract payment to a tune of 16.52 Cr 25

3.2 Project overrun charges to a tune of 5.40 Cr 27

3.3 O&M manpower charges to a tune of 00.22 Cr 35

3.4 Pending taxes and dues to a tune of 1.50 Cr 36

3.4 Interest and cost 37

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Claimant/ Predominant Engineers and Contractors Pvt. Ltd

THROUGH

ACTUS LEGAL ASSOCIATES AND ADVOCATES

1ST FLOOR, M-161/1, G. L. HOUSE NEAR GULMOHAR COMMERCIAL COMPLEX,
GAUTAM NAGAR, NEW DELHI-49, M: 9810230791
(O) 011-40567643,
E: CONTACT@ACTUSLEGAL.IN
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BEFORE THE SOLE ARBITRATOR HON’BLE Mr. ANIL R DAVE

(FORMER JUDGE, SUPREME COURT OF INDIA)

CLAIM PETITION NO. ___2017

IN THE MATTER OF:

AN ARBITRATION BETWEEN:

Predominant Engineers and Contractors Pvt. Ltd

…CLAIMANT

AND

Trimula Industries Ltd

…RESPONDENT

SYNOPSIS OF SUBMISSIONS

1. The Claimant, Predominant Engineers and Contractors Pvt. Ltd, was

approached by the Respondent Company to engage its services for

implementing an Engineering, Procurement and Construction Contract

(EPC) for implementation of 38.5 MW Power Plant at Village Godwani,

District Singrauli, M.P. on a turnkey basis. The Respondent Company after

seeing the good records of the Claimant who had earlier successfully

completed the 350 TPD DR Plant for the Respondent and their goodwill in

the market and their satisfactory past performances approached the

Claimant and signed the EPC Contract on 12.08.2009 (Ex. CW 1/2

Claimant Document Page 2).

2. The Contract was entered by the parties as a part in three

agreements, The Engineering Agreement, The Supply Agreement and the

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Erection Agreement. The present Contract was not the first project

between the parties and infact the prior agreement was entered on the

nominal rates by the Claimant on the assurances of the Respondent that

the loss would be compensated by the present contract.

3. Pursuant to grant of the aforesaid Project the Claimant started to

discharge its obligations as per the contract even before the formal

contract was signed but there was a gross delay in payments and the

Respondent miserably failed to stick to the timelines of the payment

schedule of the contract. As per the contracts signed between the parties

the Respondent had to release first installment of 15% down payment at

the time of signing of the agreement. This payment was necessary so that

the Claimant can place orders and make payments to the

vendors/suppliers. However, the Respondent defaulted in doing the same

andtook almost one year to release the advance payment. Despite the

defaults of payment, the Claimant continued to execute the contract in

good faith and even had to use their own manpower, train their own

people for the work to be done, pay the third parties from their own

resources so as to ensure that there is continuity of work and there is no

delay on their part.

4. The Claimant has also sent several reminders to the Respondent

about the overdue payments with respect to work done as per progress

bills & service tax which was to be reimbursed to the claimant. A

communication dated 24thFebruary, 2010 (Ex. CW 1/3 Claimant

Document Page 22), was addressed by the Claimant Company, stating

that amounts were not being remittedthereby resulting in difficulties in

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paying to the materials/equipments suppliers. Acommunication dated 29th

March, 2010 (Ex. CW 1/4 Claimant Document Page 24) by the

Claimant Company stating about the payments made to the third parties in

terms of the agreement before the Respondent started making payments

directly. In fact on 05.02.2010(Annexure C-5 Documents with

Counter Claim Page 24) at the insistence of the respondent the

agreement to transfer of order for erection &assistance during

commissioning with Thermax was assigned to it.The Claimant Company

also communicated to the Respondents on 24th December 2010(Ex. CW

1/6 Claimant Document Page 31) that payments have not been

released by the Respondent despite delivery of the items from the vendors

of steel, cement etc. Further similar reminders were also sent on 21st

March 2011(Ex. CW 1/7 Claimant Document Page 34), 28th March

2011 (Ex. CW 1/8 Claimant Document Page 35) and 7th April 2011

(Ex. CW 1/9(Colly) Claimant Document Page 38)addressing the

hardships being faced by the non release of the payments. The Claimant

Company on 21 June, 2011(Ex. CW 1/10 Claimant Document Page

41), submitted a detailed communication along with annexure,

representing the amounts received by the Claimant Company from the

Respondent Company towards the commencement and pendency of work

of the said Project. The communication also highlighted the Overrun

burden being borne by the Claimant Company that the Respondent

Company would have to bear in the event of continuing delay.

5. The entire civil and structural work for the Power Plant was completed

by 29.03.2011 and duly invoiced to the respondent. The respondent was

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again reminded on 20.10.2011(Ex. CW 1/12 Claimant Document Page

58) that the late placement of orders on vendors on account of non

availability of funds was delaying the supply of electrical goods and other

inputs. The Claimant had even deputed extra 25-30 operation staff for

commissioning of 12 MW unit which was targeted to be commissioned on

15.11.2011 and 40-45 persons for continuing operations. The Respondent

was also called upon to enter into a proper agreement for continuous

operations and maintenance of the plant with the claimant which was later

declined and M/s Ensol was preferred over the Claimant by the

Respondent.

6. On 03.11.2011(Ex. CW 1/13 Claimant Document Page 61) an

email was sent to the respondent stating that the work was heading for

completion and no settlement of the bills and taxeshad been done.

On08.11.2011(Ex. CW 1/14 Claimant Documents Page 59) a further

Email to Respondent was sent stating that the Claimant had submitted

invoices withprogress billsupto Rs.33.27 Crores as on 30th September

2011. Even though there were so many reminders, no payment was

received in accordance with the progress at site.

7. On 15.11.2011(Ex. CW 1/15(Colly) Claimant Document Page 62)

it was impressed upon the respondent to make necessary arrangements for

the commissioning and make available funds for expenses of the staff and

payment of vendors. A Progressive Bill was also sent 12.01.2012(Ex. CW

1/16(Colly) Claimant Document Page 64) for the month of December

2011 and requesting the Respondent to release the payments. Details sent

from time to time of progress achieved were never denied by the

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respondent.In fact all the invoices raised by the claimant for the work done

were got verified by the respondent from its senior employees from time to

time. Funds requirement was again urgently impressed upon the

respondent on 17.01.2012(Ex. CW 1/16(Colly) Claimant Document

Page 68). A detailed communication was also addressed on

17.02.2012(Ex. CW 1/17 Claimant Document Page 69) highlighting

the defaults committed by the respondent with details of progress achieved

by the Claimant and the respondent was requested to smoothen the cash

flow and give schedule of release of pending payments. Another

Progressive Bill was sent on 18.05.2012(Ex. CW 1/16(Colly) Claimant

Document Page 64)highlighting the progress achieved and also

requesting the respondent to release the payments made towards taxes.

8. Another progressive work completion statement as on 30.06.2012 was

sent to the respondent on 12.07.2012(Ex. CW 1/18(Colly) Claimant

Documents Page 85). This was followed by mail sent on 22.08.2012(Ex.

CW 1/19 Claimant Document Page 97) highlighting the preparedness

of the Claimant to commission 12 MW Power Plant and calling upon the

respondent to comply with its obligations. This was followed by a mail on

31.08.2012(Ex. CW 1/20 Claimant Document Page 98).

9. A progressive work completion statement as on 31.08.2012 was also

sent to the respondent on 20.09.2012(Ex. CW 1/21 Claimant

Document Page 100). Problems existing on the site were highlighted

and the respondent was also requested to release pending payments on

11.10.2012(Ex. CW 1/22 Claimant Document Page 104). In fact the

claimant employed and maintained manpower for operations and

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maintenance. The work was however, awarded by the respondent to M/s

Ensol who in fact did not have the expertise nor manpower to perform the

required task. The Claimant had infact forewarned the respondent about

the same. This was later realized by the respondent. Due to the

Respondents financial constraints, the sub contractors were sitting idle as

inspite of investing its own funds by the claimant their dues were not being

cleared. The contractors were sitting idle because of lack of funds. Inspite

of assurance given nothing was done by the respondent. Kindly see mail

dated 13.12.2012(Ex. CW 1/23 Claimant Document Page 106).

The 12 MW Captive Power Plant was successfully commissioned as

communicated by the Claimant on 25.12.2012(Ex. CW 1/24 Claimant

Document Page 107) which was followed by mail dated 16.01.2013(Ex.

CW 1/25(Colly) Claimant Document Page 108). For the first time on

30.01.2013(Ex. CW 1/25(Colly) Claimant Document Page 110) some

minor jobs were requested by the respondent to be attended to which

required improvements and repairs which were attended to by the

claimant, without getting into the allegations made by the respondent

which were incorrect and dehors the agreements and subsequent conduct

of the respondent.

(Realizing that the respondent had been a defaulter throughout, some

minor disputes were sought to be raised by the respondent after

September, 2013. They were responded to and refuted by the claimant.)

Similar mails were also sent on 16.06.2012(Ex. CW 1/18(Colly)

Claimant Document Page 85), stating the service tax of Rs.97.86 Lakhs

of which the Respondent Company has already availed CENVAT was not
 9

reimbursed to the Claimant. Apart from the aforementioned amount,other

taxes aggregating to Rs.52.48 Lakhs for the period of FY 2010-11, 2011-

12, 2012-13, 2013-14, 2014-15 (collectively) are also payable to the

Claimant company, which makes total pending taxes & duties of Rs.1.50

Crwhichis to be reimbursed to the claimant company. Additionally, GST @

18%, payable against balance payment of Rs.16.52 Crores is calculated at

Rs.2.97 Crores, which is also the liability of the respondent.

10. As per the negotiations between the parties the Respondent had

agreed to source second hand turbines along with the Air cooled

condensers to cut down the cost of the project and the same has been

accepted by both the parties in interest of cost cutting of the project. The

project cost was reduced to Rs.2.8 Crores per MW by cutting the down the

costs,whereas a standard plant with the given specifications and a new

Turbine along with Air Cooled Condensers would have cost around Rs. 5.5

Cr. per MW. Sourcing of second hand Turbines helped in making the

project more cost efficient.

11. As per the terms of the Contract, it was the Claimant who had to

purchase the materials from well reputed third party vendors and was

required to make payments to all their vendors but this all was subject to

the timely payments and clearing of invoices on time which was already

mutually decide by the parties. But the Respondent deliberately, willfully

and with animus malus avoided in making timely payments as agreed

between the parties because of which there was a delay which was

occasioned by delayed payments/ non-payment/ faults on the part of the

Respondent.
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12. In fact the respondent even started to identify the vendor/suppliers,

placed orders directly and settled all terms of supply with them. The

claimant was left with no say in the matter. It was precisely because of this

reason the respondent did not insist on the claimant furnishing any

performance guarantee regarding the quality of the goods purchased from

various vendors/suppliers.

13. There is no clause in the Agreements dated 12.08.2009 (Ex. CW 1/2

Claimant Document Pages 2-21) which empowers the Respondents to

make any direct payment to any third party vendor. As per the clear terms

of the agreements the Claimant was responsible for making payments to

the vendors and the same had to be reimbursed by the Respondent. The

direct payments made by the Respondent later to the Third Party vendors

had resulted in loss of control of the Claimant over the vendors thus losing

the essence of the nature of the turnkey contract. Also the payments made

by the Respondent directly to the third party vendors of the Claimant

created a lot of confusion and wastage of time in coordination and

unnecessary interference in the smooth functioning of the Claimant along

with its vendors thereby causing delay.

14. Claimant soon discovered that the Respondent wasdeliberately

violating the terms of the agreements. One of the main reasons for the

Respondent Company of using dilatory tactics was that the Respondent

company neither had the Steel Melt Shop ready, which would consume

power generated nor an agreement with the State Grid to export power in

the absence of proper power evacuating system as power cannot be

stored.Further, the respondent company had no financial arrangements

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with their bank to clear the payments expeditiously in terms of the

agreements. The delay in payments by the Respondent has resulted in

increase in cost of the project for the Claimant and the claimant has

incurred additional liability and losses because of the prolongation of the

contract.

15. The Respondent arbitrarily stopped the entry of the Claimant into

project site in May-2015 without any prior notice and without terminating

the contract.The Claimant Company has been associated with this Project

in the most professional manner right from inception and hasmaintained its

manpower at site with accommodation and vehicles for such a long time

despite the non-payment from the Respondent Company.But despite that

the Respondent has made some arrangement with the M/S Gulf Ispat for

taking over the project without the Claimant’s consent and barred the

Claimant from entering into the project site. All these facts were

highlighted by the Claimant in its communication dated 02.06.2015(Ex.

CW 1/34 Claimant Document Page 145) and 20.04.2016(Ex. CW

1/35 Claimant Document Page 147) and thereafter in the notices

issued to the respondent which were never replied to or controverted.

16. Because of such a casual and unprofessional behavior of the

Respondent Company, the Claimant was left with no other option but to

invoke the Arbitration vide Notice dated 10.06.2016(Ex. CW 1/36(Colly)

Claimant Document Page 164) and 08.03.2017(Ex. CW 1/37(Colly)

Claimant Document Page 177) and thereafter approach the courts.

After constitution of the Tribunal the claimant has filed the Claim petition
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before the Hon'ble Tribunal on 25.08.2017 which contains the amounts

which the claimant is entitled to from the respondent.

SUBMISSIONS

I. Respondent willfully defaulted/delayed to discharge the

payments as per the Contract.

a) As per the terms of payment of the Contract, Respondent

had to release first 15% of the installment of down payment

at the time of signing of the agreement. This was necessary

for the claimant to expedite the procurement of material,

supplies and equipment’s to expedite the setting up of the

Project. The Respondent took almost one year time to

discharge the same amount. It was only by 19.06.2010 that

the amount equipment to 15% of value of EPC contract was

paid to the claimant. (Refer to Q. No. 40 and 41 of cross

of RW-1).

{Q.40 of cross of RW1 dated 01.10.2019 - How much

payment was made on 13.08.2009?

Ans. Rs. 3 Crore.}

{Q.41 of cross of RW1 dated 01.10.2019 -I put it to

you that on 12.08.2009 the respondent was required to

make a payment of Rs. 60 Lakh under the Engineering

Agreement, Rs. 11,06,70,000 under the Supply Agreement

and Rs. 4,53,30,000 under the Erection Agreement. Has the

respondent made the payment?

Ans. I do not know.}

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b) It is submitted that a total amount of Rs. 3,57,93,603/- was

made directly to the vendors which should have been

credited to the accounts of the Claimant. (Refer to Ex. CW

1 / 4 Claimant Document Page 24). (Letter dated

29.03.2010).

c) As per the clear terms of the agreements the Claimant was

responsible for making payments to the vendors and the

same had to be reimbursed by the Respondent but the

Respondent has made payment directly to the third parties

without the consent of the Claimant. (Refer to Q. No. 81

and Q. No. 86 of cross of RW-1).

{Q.81 of cross of RW1 dated 14.12.2019 -Can you

answer this question today? r/w Q. 19of cross of RW1

dated 23.12.2019 -Is it correct that the third-party

vendors in terms of the Contract were to be directly under

the control of the Claimant till the entire Project was

completed?

Ans. to Q. 81- Yes, the Third Party Vendors in terms of the

Contract were to be directly under the control of the

Claimant till the entire project was completed.}

d) It is submitted that the payments made by the Respondent

directly to the third party vendors of the Claimant, without

the consent of the Claimant resulted in loss of control of the

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Claimant over the vendors thus losing the essence of the

nature of the turnkey contract, creating a lot of confusion

and wastage of time in coordination and unnecessary

interference in the smooth functioning of the Claimant along

with its vendors.

e) It is submitted that the payments were not released despite

the timely delivery of the materials to the Respondent and

thus the Claimant was unable to make further payments to

the Third party vendors causing delay and huge

inconvenience in fulfilling the obligations of the project. The

Claimant was regularly reminding the respondent for

payments. Some of these communications are dated

24.02.2010(Ex. CW 1/3 Claimant Document Page

22),29.03.2010(Ex. CW 1/4 Claimant Document Page

24), 24.12.2010(Ex. CW 1/6 Claimant Document Page

31), 21.03.2011(Ex. CW 1/7 Claimant Document Page

34), 28.03.2011(Ex. CW 1/8 Claimant Documents Page

35), 07.04.2011(Ex. CW 1/9(Colly) Claimant

Documents Page 38), 03.11.2011(Ex. CW 1/13

Claimant Documents Page 61), and 08.11.2011(Ex. CW

1/14 Claimant Documents Page 59),but to no avail.

The Claimant has also informed the Respondent that the

project has been delayed by more than one year for no fault

of the Claimant and the Respondent have also failed to

discharge the payments for the vendors at the site. Thermax

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was paid after 2 years for the boilers supplied by them in

2009-10. (Refer to Ex. CW 1 / 7Claimant Document

Page 34). (Letter dated 21.03.2011). Some amounts was

released even upto 2013 to complete the payment.

f) As per the Contract, it is clear that all taxes are to be

reimbursed by the Respondent. (Clause 2 of the

Engineering Agreement, Clause 3 of the Supply

Agreement and Clause 4 of the Erection Agreement).

It is submitted that a service tax of Rs.97.86 Lakhs of which

the Respondent has already availed CENVAT was not

reimbursed to the Claimant. (Refer to Ex. CW 1 / 13

Claimant Document Page 61 and Q. No. 105 of cross

of RW-1). (Letter 03.11.2011)

g) The Claimant regularly communicated the progress reports

to the Respondent stating the outstanding balance payable

by them to the Claimant so as to avoid any confusion

regarding the progress of the project. The Claimant with the

regular reminders including that of dated28.03.2011(Ex. CW

1/8 Claimant Document Page 35), 21.06.2011(Ex. CW

1/10 Claimant Document Page 41), 12.01.2012(Ex. CW

1/16 (Colly) Claimant Document Page 64),

18.05.2012(Ex. CW 1/16 (Colly) Claimant Document

Page 64), , 20.09.2012(Ex. CW 1/21 Claimant

Document Page 100), 21.05.2015(Ex. CW 1/32(Colly)

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Claimant Documents Page 134)along with Progressive

Report dated 21.08.2014 reminded the respondent to clear

the outstanding payment of Rs. 16.27 Cr, but to no

avail.Reminders for release of payments were made as set

out in sub para (e) above.(Refer to Exh. CW 1 / 32 and

Q. No. 102 and Q. No. 103 of cross of RW-1). (Letter

dated 21.05.15(Ex. CW 1/32(Colly) Claimant

Document Page134) with Progress Report dated

21.08.14)

h) The Claimant vide letter dated 25.12.2012(Ex. CW 1/24

Claimant Document Page 107)have informed the

Respondent that WHRB No. 2 had commissioned along with

12MW TG Set & the turbine was loaded satisfactorily.

Further,Claimant vide letter dated02.06.2015have informed

the Respondent that 98% of the work has been completed

and the only work left was the formal commissioning of the

26.5MW Turbine,after which all the responsibilities and

obligations of the Claimant Company shall stand

completed.(Refer to Ex. CW 1 / 34 Claimant Document

Page 145). (Letter dated 02.06.2015)

i) It is submitted that the reason behind the Respondent

Company using dilatory tactics, is that the Respondent

company neither had the Steel Melt Shop ready, which

would consume power generated and nor an agreement

 17

with the State Grid to export power in the absence of proper

power evacuating system as power cannot be stored.

The delay in payments by the Respondent has resulted in

increase in cost of the project for the Claimant and they

have incurred additional liability and losses because of the

reasons mentioned above. Since the project is delayed with

no fault of the claimant, the Respondent is liable to pay LD

@ 2% subject to max @ 5% of the contract value after the

grace period of 1 month.The Claimant vide mail dated

21.03.2011 have informed the Respondent that Project has

been delayed more than 12 months from its original

schedule due to no fault of PECL and it is likely that Overrun

cost shall be around @30% on balance work and shall be

having direct impact on project commissioning programme.

(Refer to Communication dated 21.03.2011 Ex. CW 1

/ 7 Claimant Document Page 34 & 28.03.2011 Ex.

1/8 Claimant Document Page 35).

Claimant never retrenched manpower during fund crises &

maintained complete strength (Ex. CW

1/9(Colly)Claimant Document Page 38) Emails 7.04.11

& 23.04.11). The Claimants were burdened with salary and

other expenditure of maintaining the establishment during

the period the performance of the contract was extended

due to defaults of the respondent.

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II. The Respondent had agreed to source Second hand turbines

along with air cooled condensers and all the vendors were

chosen and approved by the Respondent themselves.

a) As per the scope of the supply under Clause 1 of the Supply

Agreement it is already accepted by both the parties to

source second hand turbines of good quality so as to reduce

the time period and the cost of execution of the Project.

b) The Respondent had done the inspection of the turbines and

it was only after being convinced with the well- functioning

conditions of turbines the consent for its procurement was

provided by the Respondent Company.

{Q. 25of cross of RW1 dated 23.09.2019 - Is it correct

that the Respondent was all along aware of the Equipment

and the sources from which they were purchased for the

purposes of the Power Plant?

Ans.Yes}

The Respondent witness 2 i.eMr.Rattan Singh has admitted

in his affidavit dated 15.10.2020 that:-

“I say that the severalmeetings were held between

representatives of the claimant and respondent companies.

I was part of said negotiations and the claimant was mostly

represented by Mr.K.C. Sood. I had also accompanied

representatives of the claimant to Italy to inspect the

turbines to be purchased for the project.

I say that the understanding was clear between us that

the turbines to be purchased ask for recommendation of the

 19

claimant word to be second had however the remaining

parts and accessoriesthereof were required to be new. “

There were no parts of the Turbines which were to be

sourced separately. The agreement and the order placed by

the respondent for purchase of the same are clear on this

aspect.

c) It is submitted that the all supply was made by the claimant

and procurement was doneas per the Supply agreement. 2 X

38 TPH WHRB and 1X 84 TPH AFBC boilers were new

equipments directly paid by the Respondent and supplied by

Thermax.

{Q. 67 of cross of RW1 dated 21.10.2019 - Is it correct

that 2 Nos. X 38 TPH WHRB and 1 x 84 TPH AFBC Boilers

were new equipments directly paid for by the Respondent

and supplied by Thermax at the factory premises of the

Respondent?

Ans.Yes}

{Q. 75 of cross of RW1 dated 21.10.2019 Is it correct

that unloading at site, storage, site fabrication, erection and

commissioning of the Boilers was to be done by Thermax?

Ans. It is correct that only two Boilers namely WHRB had

been unloaded, stored and completed commissioned by

Thermax. So far as third is concerned, it was not

commissioned.}
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III. The Communication made by the claimant was on the correct

E- mail address.

a) The Claimant has made regular communication of the

progressive bills and also sent several reminders to

Respondent for discharging the outstanding payments, but

the same fell on deaf ears.

b) The Respondent’s claim that the above correspondence was

done on the wrong address and thus was never received by

them is totally false. It is humbly submitted that the initial

some of the communications from the Respondent were

through the said Email IDs i.e. trimula.industries@gmail.com

and trimula.industries@hotmail.com and it was not the

Claimant who out of their own choice were sending emails

on the above mentioned email ids. An Email dated

27.05.2010 was which was sent by the procurement

department of the Respondent to theClaimant from the

above mentioned ids.(Refer to Ex. 1/39(Colly) Written

Statement to Counter Claim (Mail dated 27.05.2010

from TIL to PECL) (Mail dated 19.09.2011 from

Siemens and 28.12.2011 from Thermax)

c) It is submitted that there was never an objection raised by

the Respondent or its agents employees regarding the non-

functionality of the said emails and now the Respondent is

with the intention to mislead the Hon’ble Tribunal knowingly

 21

making false and concocted claims. It is humbly submitted

that there are several occasions where other parties like

Siemens (TWO Emails dated 19.09.2011(Ex. 1/39(Colly)

Written Statement to Counter Claim) and Thermax

(Email dated 28.12.2011Ex. 1/39(Colly) Written

Statement to Counter Claim) have also sent email to the

Respondent on the trimula.industries@gmail.com and

trimula.industries @hotmail.com and it was not just the

Claimant who was contacting the Respondent on the above

mentioned ids. Thus, this was not a fictional Email ID but

has been used by the Respondent for the purpose of

communication. It is further submitted that the Emails were

also copied to the othersenior employees of the Respondent,

the authenticity of their email ids has not been disputed. It

is not that theEmails were only sent to the above mentioned

EmailIDs.(Refer to Q. No. 125 of cross of RW-1).

IV. The Respondent arbitrarily stopped the entry of the Claimant

into project site without and any prior notice and without

notice of termination of contract.

a) The Claimant Company has been associated with this Project

in the most professional manner right from inception and

hasmaintained its manpower at site with accommodation

and vehicles for such a long time despite the non-payment

from the Respondent Company.

 22

b) But despite that the Respondent has made some

arrangement with the M/S Gulf Ispat for taking over the

project without the Claimant’s consent. This is a clear and

blatant attempt to bypass the Claimant Company, so that

the dues pending towards it are not settled by the

Respondent Company.(Refer to Q. No. 112 and Q. No.

114 of cross of RW-1).

{Q. 112 of cross of RW1 dated 14.12.2019- I put it to

you that Mr. Rohit Mittal from Gulf Ispat Power was handling

all the affairs of the Power Plant from the side of the

Respondent after the partnership which you have mentioned

was executed between the Respondent and M/s Gulf Ispat

Power. What do you have to say?

Ans. It is not Gulf Ispat Power but it was Gulf Petro Chem.

Yes, Mr. Rohit Mittal was looking after all affairs of the entire

power plant on behalf of the Respondent.}

{Q. 114 of cross of RW1 dated 14.12.2019- Please tell

whether any information or communication was sent to the

Claimant about the so called partnership between the

Respondent and M/s Gulf Petro Chem?

Ans. I do not know}

c) The Claimant Company in these circumstances, was

dismayed to note that the Respondent Company in

connivance with a third party had taken over the completed

work, just the formal commissioning of the 26.5 MW

 23

Turbinewas left. Rest of the work had been duly and

satisfactorily completed by the Claimant.

d) The Claimant vide letter dated 25.12.2012 have informed

the Respondent that WHRB No. 2 had commissioned along

with 12MW TG Set & the turbine was loaded satisfactorily.

(Refer to Exh. CW 1 / 24).Further, Claimant vide letter

dated 02.06.2015 have informed the Respondent that 98%

of the work has been completed and the only work left was

the formal commissioning of the 26.5MW Turbine, after

which all the responsibilities and obligations of the Claimant

Company shall stand completed. (Refer to Ex. CW 1 / 34

Claimant Document Page 145 and Ex. CW 1/35

Claimant Document Page 147). (Letter dated

02.06.2015 and 20.04.2016).

“PECL vide their numerous letters from time to time brought

out the issue of non-receipt of payments commensurate with

site progress and apprised TIL of the consequent effect on

the project. However, our pleas had no effect on TIL so

much so that due to continued non receipt of funds from

TIL the balance work almost came to a standstill after May

2015. In any case, despite this all the three bollers were

completed and even both WHRB’s commissioned alongwith

12MW TG Set in December, 2012.

 24

Around that time we came to know that TIL had come to

some arrangement with Gulf Ispat to tide over their fund

crisis and complete the project. We were contacted by

Mr.Rohit Mittal, who took charge on behalf of Gulf Ispat and

was very critical of the decisions taken by TIL management

as well as PECL without any proper justification. Although

even 26.5 MW was erected and only few supplies viz.

Instrumentation Governor were balance. Further he even

stopped the entry of our staff and engineers into the plant

premises in May’2015. Our contract was with TIL and there

had be no Intimation to PECL regarding TIL’s arrangement

with Gulf Ispat except for Mr. Rohit Mittal’s verbal

communication.”

e) The Respondent arbitrarily stopped the Claimant to enter

into the Project site, without any prior written notice neither

any notice for termination of the Contract was served.

(Refer to Q. No. 98, 113and Q. No. 120 of cross of

RW-1).The fact that the claimant had never abandoned the

project is evident from the admission of the respondent’s

witness.

Q.98Did respondent even after May 2015 write to the

claimant to send its engineers and workforce to commission

the 26.5MW Turbine for the Power Plant?

Ans. No such Letter was written. (This belies the case of the

respondent that the claimant abandoned the project)

 25

{Q. 120 of cross of RW1 dated 14.12.2019- Is it a fact

that no notice of termination of the EPC Contract was ever

served on the Claimant after May 2015 till date?

Ans. I do not know}

{Q. 113 of cross of RW1 dated 14.12.2019 – Iput it to

you that Mr. Rohit Mittal did not permit any employee of the

Claimant from entering the power plant after May 2015.

What do you have to say?

Ans. I do not know}

CLAIMS

CLAIM 1: BALANCE CONTRACT PAYMENT TO A TUNE OF 16.52 Cr

Various communications were made by the claimant to the Respondent

regarding release of the payments due to the claimant. Vide

communication dated 21.05.2015 along with the progressive report dated

21.08.2014 Exhibit CW 1/32 (Colly) Claimant Document Page 134

the claimant has raised its demand for the outstanding balance payment of

16.27 Cr. This email is sent on the admitted email ID of the Respondent.

Even as per the Respondent it made an on account payment of about Rs.

31 Crores to the claimant and about Rs. 59 Crores to the suppliers/third

party directly against the total value of EPC Contract being Rs. 108 Crores

exclusive of all taxes.

Claimant is even otherwise entitled to expected profit from the work

awarded to it on

account of breach of contract by the Respondent.

 26

The Hon’ble Supreme Court has held in Brij Paul & Bros. Vs. State of

Gujarat: (1984) 4 SCC 59

that in works contract, where the

contractor suffers a loss on account of breach by the employer, he is

entitled to claim compensation for the expected profit of the balance of

work.

Also in Himachal Joint Venture Vs. Panilpina World Transport:

AIR2009Delhi 88. In this case, it was stated by the ld. arbitrator that the

law is well settled that if a breach has been committed by a party then the

injured party should be

compensated for the deprivation of his profit. The breach in this case was

committed by the respondent by illegally terminating the contract. It was

the respondent who did not allow the claimant to perform his part

of the contract, while the claimant had been ready and willing to

carry out and to execute the contract. Therefore, the claimant was

held entitled to expect profit which he would have earned had the

respondent allowed the contract to be executed. The percentage allowed

for the compensation was 10% and the reasoning was approved and

upheld by the Hon’ble Division bench of Delhi High Court.

It is submitted that it is not disputed that the Claimant is entitled for

loss of profit because there is any delay attributable to the Respondent.

Reliance for computation is placed on

McDermott International Ltd Vs. Burn Standard Co. Ltd.:

(2006)11SCC181

In this case, the Hon’ble Supreme Court discussed three popular formulae
 27

which calculate loss of profit along with loss of overhead. They are the

Hudson formula, the Emden formula and the Eichleay formula. It was

further held that different formulas can be applied in different

circumstances and the arbitrator cannot be said to have committed an

error if he applied a particular formula in asserting the amount of damages.

Para 69 of the said judgment is reproduced below

"...it is an accepted position that different formulas can be applied in

different circumstances and the question as to whether damages should be

computed by taking recourse to one or the other formula, having regard to

the facts and circumstances of a particular case, would eminently fall within

the domain of the Arbitrator. If the learned

Arbitrator, therefore, applied the Emden Formula in assessing the amount

of damages, he cannot be said to have committed an error warranting

interference by this Court."

M.N. Gangappa Vs. Atmakur Nagabhushanam Setty & Co.: AIR

1972 SC 696

In this case, the Hon’ble Supreme Court held that the method used for

computation of damages will depend upon the facts and circumstances of

each case. The court held so following the landmark English judgement

in Lavarack v. Woods of Colchester Ltd.: 8 (1967) 1 QB 278.

CLAIM 2: PROJECT OVERRUN CHARGES TO A TUNE OF 5.40 Cr

In the email dated 21.03.2011 Ex. CW 1/7the Claimant has specifically

mentioned that the project has been delayed with no fault of the Claimant

and that the overrun cost shall be 30% on the balance work.
 28

The Respondent are also liable to pay liquidated damages for the loss

suffered due to the breach committed by the Respondent as per Clause 8

of the Supply agreement provides for over run charges:-

“By any reason the project gets delayed more than one month due to no

fault of PECL, TIL shall pay liquidated damages to PECL at the rate 2%

monthly of the contract value subject to maximum of 5% of contract value

with a grace period of one month”

Hon’ble Supreme Court in MTNL v. Tata Communications Ltd.

AIR2019SC1233 relying upon on KailashNath Associates v. DDA has held

that:-

“11. In KailashNath Associates v. DDA (2015) 4 SCC 136, after

considering the case law on Section 74, this Court held:

43. On a conspectus of the above authorities, the law on compensation for

breach of contract Under Section 74 can be stated to be as follows:

43.1. Where a sum is named in a contract as a liquidated amount payable

by way of damages, the party complaining of a breach can receive as

reasonable compensation such liquidated amount only if it is a genuine

pre-estimate of damages fixed by both parties and found to be such by the

court. In other cases, where a sum is named in a contract as a liquidated

amount payable by way of damages, only reasonable compensation can be

awarded not exceeding the amount so stated. Similarly, in cases where the

amount fixed is in the nature of penalty, only reasonable compensation can

be awarded not exceeding the penalty so stated. In both cases, the

 29

liquidated amount or penalty is the upper limit beyond which the court

cannot grant reasonable compensation.

43.2. Reasonable compensation will be fixed on well-known principles that

are applicable to the law of contract, which are to be found inter alia in

Section 73 of the Contract Act.

43.3. Since Section 74 awards reasonable compensation for damage or loss

caused by a breach of contract, damage or loss caused is a sine qua non

for the applicability of the section.

43.4. The Section applies whether a person is a Plaintiff or a Defendant in

a suit.

43.5. The sum spoken of may already be paid or be payable in future.

43.6. The expression "whether or not actual damage or loss is proved to

have been caused thereby" means that where it is possible to prove actual

damage or loss, such proof is not dispensed with. It is only in cases where

damage or loss is difficult or impossible to prove that the liquidated amount

named in the contract, if a genuine pre-estimate of damage or loss, can be

awarded.”

Claimant never retrenched manpower during fund crises & maintained

complete strength Ex. CW 1/9(Colly) Claimant Document Page 38

(Emails 7.04.11 & 23.04.11). The Claimants were burdened with salary and

other expenditure of maintaining the establishment during the period the

performance of the contract was extended due to defaults of the

respondent.
 30

TIME CEASED TO BE THE ESSENCE OF THE CONTRACT

Section 55 of the Contract Act stipulates that in a contract where time is of

essence, breach by the promisor to perform its obligation at the fixed time

entitles the innocent party to consider such breach as a repudiation of the

contract. However, it further states that where the intention of the parties

is that time should not be of the essence of the contract, the contract does

not become voidable by non-performance at the fixed time. Section 55 of

the Contract Act has been reproduced below:

“55. Effect of failure to perform a fixed time, in contract in which time is

essential

When a party to a contract promises to do a certain thing at or before a

specified time, or certain thing at or before a specified time and fails to do

such thing at or before a specified time, and fails to do such thing at or

before a specified time, the contract or so much of it as has not been

performed, becomes voidable at the option of the promisee, if the intention

of the parties was that time should be of essence of the contract.

Effect of such failure when time is not essential: If it was not the intention

of the parties that time should be of the essence of the contract, the

contract does not become voidable by the failure to do such thing at or

before the specified time; but the promisee is entitled to compensation

from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than agreed upon: If, in

case of a contract voidable on account of the promisor’s failure to perform

his promise at the time agreed, the promisee accepts performance of such
 31

promise at any time other than agree, the promisee cannot claim

compensation of any loss occasioned by the non-performance of the

promise at the time agreed, unless, at the time of acceptance, he gives

notice to the promisor of his intention to do so.”

Hon’ble Supreme Court in Hind Construction Contractors by its Sole

Proprietor Bhikamchand Mulchand Jain (Dead) by Lrs vs. State of

Maharashtra AIR 1979 SC 720 has held that the question whether or

not time was of the essence of the contract would essentially be a question

of the intention of the parties to be gathered from the terms of the

contract. It was further held that even where the contract provides that

time will be of essence of the contract, if there is a provision entitling a

contractor to extension of time or for levy of liquidated damages, time will

not be of essence of the contract. This was so because the parties

themselves contemplated that the completion of work may take place on a

date later than that originally stipulated. Therefore, it could never have

been the intention of the parties that completion of the contract work by a

stipulated time was an essential / vital or non-derogable condition of the

contract. Relevant Para:-

“8. It will be clear from the aforesaid statement of law that even where the

parties have expressly provided that time is of the essence of the contract

such a stipulation will have to be read along with other provisions of the

contract and such other provisions may, on construction of the contract,

exclude the inference that the completion of the work by a particular date

was intended to be fundamental, for instance, if the contract were to

include causes providing for extension of time in certain contingencies or

 32

for payment of fine or penalty for every day or week the work undertaken

remains unfinished on the expiry of the time provided in the contract such

clauses would be construed as rendering ineffective the express provision

relating to the time being of the essence of contract……….

9.Having regard to the aforesaid material on record, particularly the

clauses in the agreement pertaining to imposition of penalty and extension

of time it seems to us clear that time (12 months period) was never

intended by the parties to be of the essence of the contract”

The principle of law laid down in the Hind Construction Judgment was

followed in the judgment in Arosan Enterprises Ltd. v. Union of India:

(1999) 9 SCC 449, where the Hon’ble Supreme Court held as follows:

“14. Incidentally the law is well settled on this score on which no further

dilation is required in this judgment to the effect that when the contract

itself provides for extension of time, the same cannot be termed to be the

essence of the contract and default however, in such a case does not make

the contract voidable either. It becomes voidable provided the matter in

issue can be brought within the ambit of the first para of Section 55 and it

is only in that event that the Government would be entitled to claim

damages and not otherwise.

24. … The contract itself provides reciprocal obligations and in the event

of non-fulfilment of some such obligations and which have a direct bearing

on to them — strict adherence of the time schedule or question of

 33

continuing with the notion of the time being the essence of the contract

would not arise. …”

Therefore, applying the ratio of the abovementioned judgments, it is clear

that time was not treated as of essence in the present Contract by the

Respondent.

In this regard, reliance may be placed on the Delhi High Court's decision

in National Highway Authority of India v. Progressive

Constructions Limited,where an award was challenged on the premise

that the Arbitral Tribunal had proceeded on equity and surmises in

calculating the "approximate cost" for overhead charges and therefore,

committed a patent illegality. The Court, while upholding the award, held

that as the claim was owing to delay and the delay in handing over the

construction site had been established, the threshold of evidence for the

purposes of application of the formula for calculation of damages had been

reached.The Court observed:

"The AT referred to the Standard Data Book for Analysis of Rates (First

Revision) 2003 of MORTH in calculating the overhead charges for 12

months' delay. It also referred to the Hudson formula. This was on the

basis of the basic foundational facts having been established by the

Respondent regarding the delay in the construction activity as far as

handing over of the site to it by the Petitioner was concerned. The failure

to hand over the required site to the Respondent by the Petitioner is a

finding of fact. The view taken by the AT was reasonable in the

circumstances."
 34

In a similar case,National Highways Authority of India v. SomDutt

Builders-NCC(JV), 2018 SCC Online Del 1078,an arbitral award was

challenged on the ground that no overhead expenditure, (calculated on the

basis of analysis of rates provided in the Standard Data Book by applying

the Hudson's formula), could be allowed by the arbitral tribunal as there

was no record proving the same. The Tribunal noted that the monthly

progress reports filed by the petitioner showing details of monthly

deployment of manpower is enough to establish that the petitioner

suffered a loss during the extended period of contract due to overheads.

No error was found in the methodology adopted by the learned arbitral

tribunal to compute the overhead charges and the award of compensation

to the respondent.

23. “Claim No. 3 pertained to loss due to overheads incurred/suffered

during the extended period of contract. The Tribunal noted the plea of the

petitioner that there are no records proving actual expenditure on

overheads which have been proved by the respondent. The learned

Tribunal held that the said submissions of the petitioner are erroneous as

calculations based on Standard Data Book are accepted guidelines and are

being followed by the petitioner and its engineers extensively. Even the

rate analysis of various items is being worked out based on the format

given in the Standard Data Book. The Tribunal noted that the monthly

progress reports filed by the petitioner show details of monthly deployment

of manpower which negate the argument of the petitioner that the

respondent did not suffer any loss during the extended period of contract

due to overheads. Adopting the Hudson's Formula, the Arbitral Tribunal

 35

awarded an amount of Rs. 5,10,17,227/- for claim No.3. No error can be

found in the methodology adopted by the learned arbitral tribunal to

compute the overhead charges and the award of compensation to the

respondent under claim No.3.”

24. It may be noted that there can be no quarrel with the Arbitral Tribunal

using the Standard Data Book or the Hudson's formula to compute

damages. The Supreme Court in McDermott International Inc. vs. Burn

Standard Co.Ltd.andOrs. (2006) 11 SCC 181 held as follows:-

"104. ........We may at this juncture notice the different formulas applicable

in this behalf.

(a) Hudson Formula: In Hudson's Building and Engineering Contracts,

Hudson Formula is stated in the following terms:

"Contract head × Contract sum × Period

office overhead Contract period of

and profit delay"

CLAIM 3: O&M MANPOWER CHARGES TO A TUNE OF 00.22 Cr

Claimant never retrenched manpower even during fund crises& maintained

complete strength.The Claimants have communicated to the Respondent

interaliaabout the manpower deployed for the Operations and Management

and the cost incurred Exhibit CW 1/22 (Colly) Claimant Document

Page 104 admitted email dated 11.10.2012 alongwith email dated

23.10.2012.

In National Highways Authority of India vs. Hindustan

Construction Company:2016 (2) ARBLR 1 (Delhi), the Hon’ble

 36

Division bench of Delhi

High Court held observed that a claim for loss of earning capacity and

profit is entirely different.

It means that the manpower, plant and machinery used at the site by the

contractor during extended period of contract disabled the contractor to

use the same for another contract and it is loss of profit of that other

contract which has to be recompensed and an extracted quote from

Hudson's Building and Engineering Contracts is as under:

"When delay in completion of the whole project results, a contractor will

usually suffer a loss of the profit earning capacity of the particular contract

organization affected, due to its being retained longer on the contract in

question without any corresponding increase in the monetary benefit

earned and without being free to move elsewhere to earn the profit which

it otherwise might do."

CLAIM 4: PENDING TAXES AND DUES TO A TUNE OF 1.50Cr

The Claimant has communicated to the Respondent vide Ex. CW 1/13

Claimant Document Page 61 email dated 03.11.2011 that the

respondent has defaulted in payment of taxes and that the same will have

serious legal consequences which shall include heavy penalties.

Additionally, GST @ 18%, is payable against balance payment of Rs.16.52

Crores is calculated at Rs.2.97 Crores, which is also the liability of the

respondent.

As mentioned in the EX. CW1/18(Colly) Claimant Document Page 85

admitted email dated 16.06.2012, the service tax of Rs.97.86 Lakhs of

which the Respondent Company has already availed CENVAT was not
 37

reimbursed to the Claimant. Apart from the aforementioned amount, other

taxes aggregating to Rs.52.48 Lakhs for the period of FY 2010-11, 2011-

12, 2012-13, 2013-14, 2014-15 (collectively) are also payable to the

Claimant company, which makes total pending taxes & duties of Rs.1.50 Cr

which is to be reimbursed to the claimant company.

CLAIM 5: INTEREST AND COST

That the transactions between the parties is a commercial transaction, the

claimant is entitled to claim and recover interest @ 18% on the amounts

claimed from the dates they were due till realization.

The Claimant is also entitled to Cost amounting to Rs.2 Crores.

In view of the above submissions, the Claimant is entitled to the relief(s) as

claimed and Hon’ble Tribunal mayaward any other or further relief as the

Hon’ble Tribunal deems fit and proper in the facts and circumstances of the

case.

Claimant/ Predominant Engineers and Contractors Pvt. Ltd

THROUGH

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