DELHI JAL BOARD vs. V.K. DEWAN & CO.

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ Date of Decision: 08.10.2010
% O.M.P. 50/2002

DELHI JAL BOARD ..... Petitioner
Through: Ms. Kanika Agnihotri, Advocate

versus

V.K. DEWAN & CO. ..... Respondent
Through: Mr. Sandeep Sharma, Advocate

CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI

1. Whether the Reporters of local papers may
be allowed to see the judgment? : No
2. To be referred to Reporter or not? : Yes
3. Whether the judgment should be reported
in the Digest? : Yes

VIPIN SANGHI, J. (Oral)
1. The petitioner has preferred the present petition under
Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) to
seek the setting aside of the award made by the learned arbitrator
dated 01.11.2001 in relation to the claims preferred by the
respondent/contractor arising out of the work order/supply order
No.DJB/EE (C)/Dr-IX/99-2000/1877 dated 06.12.1999 at a total cost of
Rs.1,93,26,399.75, for which Contract Agreement No.28 (1999-2000)
was duly executed between the parties.

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2. The works under the contract awarded to the
respondent/contractor were not completed. According to the
respondent/contractor, the petitioner department was in breach of the
agreement and, consequently, the works could not be completed. The
respondent/contractor, therefore, invoked the arbitration agreement
and laid its claims before the arbitrator, which have partially been
awarded by the learned arbitrator.
3. These objections have been preferred in respect of claim
nos.4, 5, 6, 7, 8 and the award rejecting the counter claims preferred
by the petitioner herein.
The Award
4. A perusal of the award shows that the Executive Engineer (C)
DR/IX of the Delhi Jal Board invited percentage rate tenders for the
balance work of construction of 12.4 Mad sewage pumping station at
Ghonda-I, Shahdara, Delhi on 11.10.1999. On the basic estimate of
Rs.1,71,79,022/- based on CPWD DSR 1995, the respondent had
quoted 25% above the estimate.
5. Claim no.4 raised by the contractor was on account of open
pumping done by the respondent, which had not been paid. According
to the respondent, there was rain on the night of 16.07.2000. The
pump operators who were operating the pumps in peripheral drain
running along with the work site stopped pumping the drain water and
the entire pit/pond got filled due to the overflow of the drain.
According to the respondent, on 09.12.2000, the Superintending

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Engineer decided that the overflown water shall be pumped out and
the same shall be paid as work contract item. The respondent claims
that though the said water was pumped out, the payment was not
made and even record entries were not made.
6. The defence of the petitioner herein was that under general
condition no.1 and special condition no.3.2, the respondent/contractor
was solely responsible for combating/disposal of water stagnated due
to rain/surface run off during the execution of the work. The case of
the petitioner herein was that the work had been completely stopped
on 11.07.2000 and remained suspended till 22.09.2000 on account of
the rainy season.

7. On the other hand, the stand of the respondent/claimant was
that the general conditions were not attracted as the overflow of the
peripheral drain was a post tender development, which was not
existing at the time of tendering. According to the contractor, special
condition no.3.2 was not applicable as the same covers only
contractual risks which are of the contractors making. The
accumulation of water, due to the failure of the respondent, could not
be covered by any contract conditions.
8. According to the respondent/claimant, the department had
not rebutted the said claim of the contractor and the defence was
raised only during the arbitral proceedings. The claimant also sought
to place reliance on a Canadian decision contained in Hudson’s book.

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The tribunal, after noticing the aforesaid aspects, made the following
award:
“ Taking all facts and circumstances into account, I am
inclined to agree with the contentions of the Claimants
and hold this claim to be justified. I, therefore, award an
amount of Rs.2,01,832/- under this claim in favour of the
Claimants .”

9. Claim no.5 was made by the respondent/contractor for
Rs.99,832/-. This claim was made under clause 10CC. The tribunal
records that the said claim had been accepted by the respondent. I
may note that there is a typographical error in the award inasmuch, as,
instead of recording that the claim had been accepted by the
respondent, it is recorded that the claim has been accepted by the
claimant. It is, therefore, clear that the award made on claim no.5 was
based on an admission of the said claim by the petitioner herein.
10. Claim no.6 was made for Rs.5 lacs for refund of security
deposit made by the respondent/contractor. A sum of Rs.1 lac had
been tendered as earnest money and a further sum of Rs.4 lacs had
been deducted from the contractor’s bills. The contractor had claimed
that the contract work was suspended w.e.f. 01.12.2000 and thereafter
abrogated for various reasons, due to difficulties experienced during
the execution of the works. These were the closing of the only
approach road to the site of work - a narrow overcrowded street closed
due to laying of sewer line; shortage of supply of cement by Jal Board;
flooding of the area of sewage pumping station; site being located in a
big pond; stoppage of pumping of sewage and rain water caused by

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erratic electric supply; inadequate prechecking of the parts of the
substructure to be completed and, delay in payments for work done.
11. According to the respondent, on account of payment not
being made and the non-availability of cement and reinforcement
steel, the work came to a stop on 01.12.2000 and the contract period
expired on 05.12.2000.
12. The claimant further stated that they were left with no other
option but to abandon the work and seek redressal through arbitration.
The learned arbitrator allowed the claim by observing as follows:-
“ I have carefully examined the contentions of both the
parties. While the stand of the Respondents is
undoubtedly correct in normal circumstances, the case of
the Claimants lies only if the work was delayed due to
circumstances beyond their control and due to the defaults
and latches on the part of the Respondents. After
examining the contentions of both the parties in their
pleadings, documents, arguments, I hold that Claimants
could not carry on and complete the work due to
circumstances for which they were not responsible. I,
therefore, hold that the Claimants could not be held guilty
of breach of contract for stopping the work before its
completion. As a consequence I hold that refund of
security deposit of Rs.5,00,000 /- including Rs.1,00,000/- of
earnest money is justified. I, therefore, award an amount
of Rs.5,00,000/- in favour of the Claimants under this
claim .”

13. Claim No.7 was made by the claimant for Rs.12,78,504.66.
This claim had been made towards anticipated profits on the left
out/unexecuted portion of the work at the rate of 10% of the balance
work. The basis for this claim made by the claimant was that the

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claimant was not able to complete the work due to the defaults of the
petitioner department and circumstances beyond their control, without
any default on their own part. As per the award, the amount of claim
covers infructuous expenditure also incurred for the execution of the
entire work including mobilization of tools, plant and machinery and
construction of stores, site office, labour camp, steel yard and cement
stores etc. and idle maintenance of site staff and site telephone. The
balance estimate of work was worked out at Rs.1,02,28,037.30. Since
the award of the tender was 25% above the estimate, the said figure
was revised to Rs.1,27,85,046.60.

14. The stand of the petitioner department was that the said
claim is not maintainable as the contractor had abandoned the site and
stopped the work without any rhyme or reason and so he was not
entitled to any amount. While allowing the aforesaid claim, the
arbitrator observed as follows:
“ After careful consideration and examination of the
contentions of both the parties I am inclined to agree with
the contentions of the Claimants to the effect that they
could not compete the work due to Respondents’ defaults
and circumstances beyond their control, without any
defaults on their side. In view of all the facts and
circumstances of the case I do hold that there was breach
of contract on the side of the Respondents in the matter of
providing approach to the site, adequate supply of cement
for the execution of work, timely instructions and checking
of the work of sub-structure, non-payment for the work of
pumping out of overflown water, delay in payments. In
addition there was flooding of the big pond where the
sewage pump was located, due to rains and non-pumping
of electric pumps due to erratic electric supply which was
beyond the control of the Claimants. The stipulated period

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of contract came to an end on account of the difficulties
mentioned above and the Claimants were forced to
abandon the work due to the circumstances beyond their
control. In the totality of the circumstances I do hold that
the claimants are justified to claim loss of anticipated
profits. I do not however agree that the quantification
given by the Claimants .”

15. Though the claimant had claimed 10% profit on the aforesaid
amount, the learned arbitrator awarded the said claim @ 7.5% and not
10%. Consequently, the learned arbitrator awarded a sum of
Rs.8,71,708/- in favour of the respondent/claimant for loss of
anticipated profits of unexecuted part of the work.
16. Claim no.8 was made by the respondent/claimant towards
interest @ 18% p.a. The learned arbitrator awarded interest @ 18%
p.a. on the total amount of award under claim nos.3 to 6 w.e.f.
14.05.2001 and on claim no.7 from the date of the award till payment.
17. The learned arbitrator dealt with the counter claim no.1
made by the petitioner and rejected the same, which was made
towards anticipated escalation for the ancillary work amounting to
Rs.45,994/- by observing as follows:
“ The Claimants state that there is not an iota of evidence
on damages suffered. They added that this tender is three
years earlier and the work should have been completed
much earlier.
After considering the facts of the counter claim and the
contentions of the Claimants this counter claim is not
admissible. My award against this counter claim is
therefore Nil .”

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18. Counter claim no.2 was made towards anticipatory
escalation of ancillary work for Rs.86,264/-. The arbitrator rejected the
same by observing as follows:
“ The Claimants stated that stone masonary wall could be
completed as only shifting was involved. The Claimants
added that the work could not be done due to local
pressures.
After considering the facts and weighing the contentions of
both the parties I do not hold this claim to be justified. My
award against this counter claim is therefore Nil ”.

19. Counter claim no.3 was made towards anticipatory pumping
of water flooded in pond due to stoppage/abandoning of work by the
contractor to be done at the time of starting of execution of this
balance work by the new agency amounting to Rs.2,01,832/- was
rejected by observing as follows:
“ The Claimants stated that this is not rainy water or water,
it is sub-soil water for which the Claimants are not
responsible.
After considering the facts and weighing the contentions of
both the parties this claim is not held admissible. My
award against this counter-claim is therefore Nil .”

20. Counter claim no.4 made towards anticipatory additional
costs due to increase of tendered rate for the balance work by the new
agency amounting to Rs.12,78,505/- was rejected by observing as
follows:
“ After considering the facts and the contentions of the
Claimants mentioned earlier I do not hold this claim to be

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admissible. My award against this counter-claim is
therefore Nil .”

21. Counter claim no.5 was made towards additional
consultancy charges of consultant TCE Limited amounting to
Rs.22,374/-. This was also rejected by observing that both parties shall
bear their own costs.
Submissions of the Parties
22. The submission of learned counsel for the petitioner, Ms.
Agnihotri is that the impugned award is patently illegal. She submits
that the learned arbitrator has made the award contrary to the
contractual terms and by completely disregarding the same. In
relation to the award made under claim no.4, learned counsel for the
petitioner has placed reliance on the following contractual clauses:
General Conditions
“1. The contractor before tendering should visit
the site and acquaint himself with the nature of the
work, the accessibility of site and all other details
connected with the work. The contract document
consisting of detailed plans, specifications, schedule of
various class of work to be done, can be seen and any
other information required in this connection can be had
from the office of EE (C) DR- … DWS & SDU, Municipal
Corporation of Delhi, Varunalaya PH-I, Jhandewalan,
New Delhi-110 005 ”.
“21. The contractor before tendering must
satisfy himself as to the natural features of the
ground, the quantity of work and material
necessary for the entire completion of the
contract and the means of access to the work or
other accommodation as may be required and no
claim on the ground of ignorance of any such

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detail shall be entertained at any time ”. (emphasis
supplied).
“ 41. In the event of any damage occurring of any
work included in the contract through settlement of
ground, slips, flooding, or any other cause whatever due
to negligence on the part of the contractor or not, the
contractor will be solely responsible and must re-
construct, repair and make good any such damaged
work at his own expenses ”.
“ 43. The cement will be supplied by the department
at the rate of Rs.137/- each bag for PPC/OPC inclusive of
the cost of bags. The department will be free to supply
cement from its own stores or from any store of other
department in Delhi or from the railway sidings and the
contractor shall make his own arrangement for carting
the same to the site of work and store the same
properly. No payment on this account shall be made.
The recovery of cement shall be made from the running
bills of the contractor at the above specified rate. The
tentative quantity of cement is 927.40 MT ”.

Special Conditions
“ 3.1 The Contractor shall keep the works well
drained until the Engineer-in-charge certifies that the
whole of the works is substantially complete and shall
ensure all work is carried out under dry conditions.
Excavated areas shall be kept well drained and free
from standing water”.
3.2 The Contractor shall construct, operate and
maintain all temporary dams, water courses and other
works of all kinds including pumping and well-point
dewatering that may be necessary to exclude water
from the works while they are in progress and till they
are handed over to the DWS & SD Undertaking. This
refers to surface water that may enter into the
excavated construction work. No separate payment will
be made for such dewatering works/measures.
Percentage rates quoted by Tenderer will be deemed to
have covered expenses for such dewatering
works/measures. Such temporary works shall not be
removed without the approval of the Engineer-in-
charge. It shall be further noted that disposal of
surface/sub-soil water away from the site into some
existing drain/nallah shall be done by Contractor at his
own cost. No claim in this regard shall be entertained.

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3.3 Notwithstanding any approval by the Engineer-
in-charge of the Contractor’s arrangements for the
exclusion of water, the Contractor shall be responsible
for the sufficiency thereof and for keeping the works
safe at all times, particularly during any floods and for
making good at his own expense any damage to the
works including any that may be attributable to floods.
Any loss of production or additional costs of any kind
that my result from floods shall be at the Contractor’s
own risk.
4.1 Contractor shall have to arrange electric
connection from DESU. EE, DWS & SD Undertaking shall
only sign the application for getting electricity
connection in his name. Contactor shall bear all the
charges to be deposited with DESU for installation of
electric connection including energy consumption and
other charges as demanded by DESU from time to time,
failing which the DWS & SDU shall deduct the amount
so demanded by DESU, from the running bills of the
contractor. Nothing shall be paid by DWS & SD
Undertaking on this account.
4.3 If for any reason of feasibility or whatsoever,
DESU is not in a position to sanction the electric
connection, the contractor shall make his own
arrangements. No claim shall be entertained either on
account of delay in sanction of the connection by DESU
or refusal of connection by DESU .”
“ 15.0. Sub Soil Water
15.1 Where sub-soil water is met during execution,
in to electric pump sets of adequate capacity the
contractor shall also arrange at his cost Diesel
Generator Sets/Diesel pumps as a sufficient standby
arrangement in good running condition. Pumping of
subsoil water shall be continued upto the safe stage of
work as directed by Engineer-in-charge so as to avoid
floatation of the structure and working under dry
conditions.
15.2 Payment of the items of work carried out under
subsoil water shall be made as per the actual execution
only for the excavation concreting, RCC and brick
masonry as per the items in the schedule of quantities.
Level of ground water table shall be jointly recorded and
the level so ascertained shall be taken for execution of
works during that particular period. Tenderer shall note
that nothing extra on account of execution of any other

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item under subsoilwater conditions or for dewatering
required for safety of structure against floatation shall
be payable. The Contractor shall carry out the works
under dry conditions.”

23. By reference to the aforesaid clauses, it is argued that it was
the sole obligation of the contractor to acquaint himself with the
conditions prevailing at the work site before bidding in the tender
process, and therefore, the contractor could not subsequently raise
grievances founded upon his ignorance or difficulties faced at the work
site due to the peculiar geographical conditions of the work site.
24. It is, therefore, submitted by learned counsel for the petitioner
that in the face of the aforesaid specific clauses of the contract
agreement, the award of the learned arbitrator on claim no.4 cannot
be sustained.
25. In response, Mr. Sharma, learned counsel for the respondent
submits that claim no.4 had been made only for an amount of
Rs.2,01,832/-. This was the expenditure incurred by the contractor for
pumping out the flood water which had entered into the work site on
account of the overflow of the peripheral drain due to rain on the night
of 16.07.2000. Mr. Sharma submits that from the peripheral drain, the
water had to be pumped into the storm water drain. However, the
pumping stations which were being operated by the petitioners were
non-functional, inter alia, due to erratic supply of electricity. Due to
the said pumps not being operated, in the peripheral drain there was

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built up of water and this resulted in back flow of water into the
contractors work site.
26. He submits that this situation was not contemplated under the
contract agreement and, therefore, it was agreed by the
Superintending Engineer on 09.12.2000 that the water which had
come into the work site may be pumped out by the contractor and that
the payment for the same would be made to the contractor. In this
respect, he refers to the pleadings made in the statement of claim and
also to the correspondences addressed by the claimant/contractor to
the respondent. In particular, reference is made to letters dated
10.08.2000 and 15.09.2000 sent by the claimant to the department.

27. Mr. Sharma further submits that the contractor had been
made payment for dewatering of the water which had overflown and
this is reflected in the first running bill. He submits that there was no
justification for making payment of the said item, if the respondent did
nto consider the claim of the petitioner legitimate. It is not explained
by the petitioner as to why the said payment had been made.
28. In her rejoinder, learned counsel for the petitioner has pointed
out that, firstly, there was no obligation under the contract undertaken
by the petitioner to maintain the peripheral drain. It was not the
obligation of the petitioner to ensure that the water level in the said
drain did not rise, such that it does not overflow back into the work
site. Secondly, she submits that a perusal of the contract document

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shows that the maintenance of the peripheral drain itself was also
within the scope of work allotted to the respondent/contractor.
29. In this respect, she relies on page 46 of the tender document,
wherein the “background and work involved in the scheme” has been
set out. She submits that earlier the work of construction of 12.4 MGD
SPS was awarded to U.P. Jal Nigam at a total cost of Rs.186.81 lacs in
the year 1996. At that time, the site was unapproachable. For making
the said site approachable, the U.P. Jal Nigam had decided to construct
a peripheral drain along the periphery of the pond and a storm water
sump was installed to take care of discharge coming into the pond.
The work of construction of peripheral drain, RCC sump, coffer dam
and disilting of pond etc. were not envisaged in the original estimate.
To provide for the said ancillary works and extra items, an estimate of
Rs.60 lacs was fixed.

30. The U.P. Jal Nigam completed the ancillary work upto
26.12.1997 and thereafter the main work under the contract, i.e.
construction of 12.4 MGD SPS was started. It appears that thereafter
some disputes arose between the petitioner and the U.P. Jal Nigam.
Consequently, the work in question was awarded at the risk and cost of
U.P. Jal Nigam to complete the balance work. The revised estimate
had been worked out to Rs.2,78,87,064/-, out of which the work of
Rs.1,07,08,041/- had already been completed by U.P. Jal Nigam. The
balance work of Rs.1,71,79,022/- was left to be completed. The reason
for the revision of estimate was primarily due to ancillary work of

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peripheral drain, sump, desilting of pond, revision of structural
design/drawings as per soil bearing capacity. The work involved in the
contract between the parties herein was to complete the balance work
of construction of wet sump, dry sump annexed DG set room etc.
31. On this basis, it is argued that the maintenance of the
peripheral drain was also an aspect covered under the scope of the
contract and the contractor was obliged to do the same. She further
submits that even in its statement of claim, the contractor admits that
the work involved construction of a “ sewage pumping station about
8.50 metres below ground and about 6.00 metres below water table,
sitted in a big pond, which needed round the clock pumping and, at the
time of tender, a peripherial U-Type RCC open drain was running
around the site of work which was the only out-let to drainout pumped
water. This existing drain was also taking the discharge of sewage and
rain water of the adjoining colony. At the down stream end of the
drain, a sump was existing along with a temporary pump room fitted
with non-clog electric pumps with a stand-by generating set and was
manned by the conservancy wing of Delhi Jal Board .”
32. She submits that the obligation to supply electricity to the
pumps fitted in the peripheral drain and to operate the same was not
that of the petitioner. She further points that in para-E of the statement
of claim, the averment of the respondent as, that on the night of
16.07.2000 there was a light rain. The pump operators stopped
pumping the drain water. As a result, the entire pit/pond filled up due

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to overflow of the drain and continued to be so. It is, therefore, argued
that the petitioner could not be attributed with any breach of the
contract on account of the aforesaid development, even if the same
accepted to have taken place. She further submits that though it has
been averred by the petitioner that the Superintending Engineer had
agreed that the respondent/contractor would be paid for pumping out
the water which had collected at the work site in his decision taken on
12.09.2000, apart from the said averment and communication issued
by the respondent, there is nothing on record to support the decision
allegedly taken by the Superintending Engineer. She submits that
such a decision would have been contrary to the contractual terms,
whereunder the contractor was obliged to maintain the work site free
from all sub-soil and overflown water. She submits that in its
communication dated 10.08.2000, the respondent/contractor had
recorded the fact that the only outlet of water was the peripheral drain,
which was taking the discharge of sewage of the colony and the rain
water.
33. In response to the aforesaid submission, learned counsel for
the respondent has submitted that none of these submissions were
raised before the arbitral tribunal, and therefore cannot be raised at
this stage.
34. So far as claim no.5 is concerned, the submission of learned
counsel for the petitioner is that before the arbitral tribunal, the
petitioner had merely stated that the computation of the claim under

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clause 10CC was underway. The said statement could not be taken as
an admission by the learned arbitrator. On the other hand, learned
counsel for the respondent submits that the said claim was never
specifically denied and during the arbitral proceedings, the petitioner
did not came forward to state, at any stage, that the computation
made by the contractor was incorrect. Moreover, the learned
arbitrator had recorded that the said claim was accepted before him.
This position has not been controverted in the objections preferred
before this Court.
35. In relation to claim no.6, learned counsel for the petitioner
submits that the arbitral tribunal while granting refund of the security
amount of Rs.5 lacs, has gone against the contractual terms. In this
respect, she has drawn my attention to clause 53 of the General
Conditions, which provides that the refund of security deposit shall be
made after satisfactory completion of defect liability period of six
months or commissioning of pumping station, whichever is later. In
this case, the work had been abandoned by the respondent/contractor.
Consequently, there was no question of the defect liability period of six
months getting completed as there was no commissioning of the
pumping station.
36. She further submits that while allowing the said claim, the
arbitral tribunal had accepted, as correct, the averments of the
respondent/contractor without any basis or evidence whatsoever. The
respondent/claimant had contended that earlier the work was

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suspended w.e.f. 01.12.2000 and thereafter it was abrogated for
various reasons. The reasons were based on difficulties experienced
during execution of the work. The contractor had claimed that the only
approach road to the work site had been closed;
a narrow overcrowded street closed due to laying of sewer line; there
was shortage of supply of cement by Jal Board; there was flooding of
the area of sewage pumping station; the site was located in a big
pond; stoppage of pumping of sewage and rain water was caused by
erratic electric supply; there was inadequate prechecking of the parts
of the substructure to be completed and, there was delay in payments
for work done.

37. By referring to the extract from the award contained in the
award on claim no.6, which I have already set out herein above, it is
argued that the learned arbitrator has merely held that the contractor
could not carry on, or complete the work due to circumstances for
which the contractor was not responsible. She submits that the finding
of the arbitral tribunal is in the teeth of the various contractual clauses
which have been referred to earlier, namely, clause no.1, which require
the contractor to visit and acquaint himself with the site conditions
before tendering. The contractor could not have later on raised a
grievance that the approach to the site was not clear. It was not the
obligation of the petitioner to provide a clear access to the contractor.
Moreover, she has submitted that before the arbitral tribunal, the
petitioner had placed a site plan of the work site which clearly showed
that there were four different approach roads available to access the

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work site. The finding of the arbitral tribunal, that there was only one
approach road to the work site, and that too was closed is unfounded,
as there was no material placed on record to support the same. She
also refers to clause 21 of the General Conditions which states that:
“ The contractor before tendering must satisfy himself as
to the natural features of the ground, the quantity of
work and material necessary for the entire completion
of the contract and the means of access to the work or
other accommodation as may be required and no claim
on the ground of ignorance of any such detail shall be
entertained at any time ”.

38. She refers to clause 1 of the Special Conditions of contract,
which states that the contractor should visit the site and get
acquainted himself about the site conditions and nature of soil likely to
be met during excavation, position of ground water etc. and the
contractor is deemed to have satisfied himself with regard to the
conditions likely to be encountered during excavation. She submits
that in its reply before the arbitral tribunal, the petitioner had stated in
para 9(a) that there was no difficulty for passage/approach road to the
site, as alternative route/approach were available.
39. Reference had also been made to the General Conditions of
contract which obliged the contractor to acquaint himself with the
nature of work, accessibility of site and all details connected to the
work before tendering. She submits that the learned arbitrator has not
even taken into account the submissions of the petitioner before
making the award with respect to claim no.6.

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40. In relation to the finding that there was shortage of supply of
cement by the petitioner, learned counsel for the petitioner has
referred to clauses 30 and 43 of the General Conditions, which read as
follows:
“ 30. Any delay in supply of materials stipulated to
be issued by the department will be no excuse for
enhancing or affecting the rates once tendered. The
contractor should in such cases apply in time for
extension of time and such applications will be disposed
off on their merits ”.
“ 43. The cement will be supplied by the department
at the rate of Rs.137/- each bag for PPC/OPC inclusive of
the cost of bags. The department will be free to supply
cement from its own stores or from any store of other
department in Delhi or from the railway sidings and the
contractor shall make his own arrangement for carting
the same to the site of work and store the same
properly. No payment on this account shall be made.
The recovery of cement shall be made from the running
bills of the contractor at the above specified rate. The
tentative quantity of cement is 927.40 MT ”.

41. On the basis of the aforesaid clauses, she states that delay in
supply of materials by Delhi Jal Board did not given an excuse to the
contractor to default in its obligation and only entitled the contractor to
grant of extension of time for completion of the work. She submits
that in para 9(b) of its reply, the petitioner had stated that except for a
short period from 01.12.2000 to 16.02.2001, there was shortage of
supply of cement. However, the respondent/contractor stopped the
work on 01.12.2000, i.e. within the period of contract and did not
resume the same. The contractor also failed to carry out various other
works which could be done without the use of cement.

OMP No.50/2002 Page 20 of 44

42. In this respect, she places reliance on Exhibit R-6, the letter
dated 10.01.2001 issued by Delhi Jal Board; Exhibit R-7, the letter
dated 23.02.2001 issued by the petitioner to Delhi Jal Board informing
the respondent that cement was available and the work should be
expedited and completed; Exhibit R-8, the letter dated 26.03.2001
issued by the petitioner to Delhi Jal Board informing that the work had
not been resumed and that the same should be expedited and
completed.
43. She submits that so far as the excuse given by the contractor
with regard to the flooding of the work site is concerned, the said
aspect has already been dealt with while challenging the award made
on claim no.4. She submits that it was the liability of the contractor to
dewater the work site at his own costs. It was his obligation to keep
the work site well during floods and make good any damage caused to
the work.

44. She submits that the purpose of providing for the security
deposit was to enable the Delhi Jal Board to deduct all sums or
compensation payable by the contractor due for delay (clause 2 of the
contract conditions, which provides for compensation of delay) and
under clause 3 of the contract conditions, which provides for various
contingencies, and the security deposit could be completely forfeited.
Similarly, the security deposit was liable to be forfeited under clauses
14, 17 and 33, which deal with compensation payable by the
contractor in case of deficiency/bad work; liability for damages

OMP No.50/2002 Page 21 of 44

suffered due to imperfect work done within three months after the
issuance of certificate; and for any defective work during defect
liability period of six months. She submits that under clause 53, the
refund of security deposit could be granted only after satisfactory
completion of defect liability period.
45. In reply, Mr. Sharma, learned counsel for the respondent
submits that the arbitral tribunal is the sole judge of all facts and it is
not within the scope and jurisdiction of this Court, while hearing
objections to the award to re-appreciate the facts, as this Court is not
hearing an appeal from the said decision. Mr. Sharma submits that the
arbitral tribunal has returned a finding while dealing with claim no.7
that the breach was on the part of the petitioner. Since the breach
was on the part of the petitioner, the logical conclusion was that the
respondent/contractor was entitled to refund of the security deposit.

46. In relation to the award on claim no.7, the submission of
learned counsel for the petitioner is that the said claim has been
allowed on an unfounded finding that the breach of the contract was
on the part of the petitioner “ in the matter of providing approach to
the site, adequate supply of cement for the execution of work, timely
instructions and checking of the work of sub-structure, non-payment
for the work of pumping out of overflown water, delay in payments. In
addition there was flooding of the big pond where the sewage pump
was located, due to rains and non-pumping of electric pumps due to
erratic electric supply which was beyond the control of the Claimants ”.

OMP No.50/2002 Page 22 of 44

47. She submits that while dealing with claim no.4, the petitioner
has already demonstrated that there was no basis or foundation for
returning a finding that the approach had not been provided to the
work site or that there was inadequate supply of cement for execution
of the work or that timely instructions and checking of work sub
structure was not being done. She submits that the petitioner has
demonstrated that the petitioner was not obliged to make any
payment for pumping out of overflown water. She further submits that
there is no basis for the learned arbitrator enhancing the value of the
balance outstanding work from Rs.1,02,28,037.30 to Rs.1,27,85,046.60
by marking up the value by 25%. She further submits that the
arbitrator has not given any justification for computing the rate of
profit at 7.5% of the marked up balance value of the work, which had
not been carried out by the respondent/contractor.

48. She submits that since the respondent had itself abandoned
the work, there was no question of the arbitrator making the award
under claim no.7 towards anticipated profits on the left out/unexecuted
portions of the work. She also submits that a perusal of the impugned
award shows that under claim no.7, the respondent/contractor had
claimed, apart from anticipated profits, infructuous expenditure also
done for the execution of the entire work including mobilization of
tools, plant and machinery and construction of stores, site office,
labour camp, steel yard and cement stores etc. and idle maintenance
of site staff and site telephone. However, no material or evidence in
respect of the so-called infructuous expenditure allegedly already

OMP No.50/2002 Page 23 of 44

incurred by the contractor had been furnished before the arbitral
tribunal. She submits that, therefore, the award on claim no.7 is
founded on no evidence at all. By reference to the extract from the
award made on claim no.7, which I have already quoted, she submits
that the learned arbitrator has merely accepted the assertion of the
claimant and that itself forms the basis of the award. She submits that
the same constitutes misconduct on the part of the arbitrator, and in
this respect, she places reliance on the decision of the Supreme Court
in State of Rajasthan vs. Ferro Concrete Construction Pvt. Ltd .,
2009 (12) SCC 1, and in particular, paras 54 and 55 of the said
decision.

49. In his response, Mr. Sharma has reiterated the submissions
made in respect of the earlier claims. Mr. Sharma further submits that
the contractual clauses relied upon by the petitioner have to be
interpreted in a reasonable manner, else they would fall foul of section
23 of the Contract Act. In this respect, he places reliance on the
judgment of this Court in Delhi Jal Board v. Rajora Builders & Anr .
in OMP No.540/2007 decided on 10.10.2007; Paragon Constructions
(India) Ltd. v. Union of India & Anr ., 2008 (1) ARB LR 358 Del; and
Simplex Concrete Piles (India) Ltd. v. Union of India in C.S. (OS)
No.614A/2002 decided on 23.02.2010.
50. Mr. Sharma further submits that the justification for marking
up cost of the balance work by 25% is given in the award itself. Under
the heading, brief background of the case, the learned arbitrator has

OMP No.50/2002 Page 24 of 44

noted that on the basic estimate of Rs.1,71,79,022/- based on CPWD-
DSR-1995, the quotation of the respondent/contractor which was 25%
above the estimate had been accepted. It is for this reason that the
mark up of 25% had been made in the cost of the balance work. He
further submits that the arbitrator being an expert, it was not required
of the respondent to lead any evidence, when the claim was for
anticipated loss of profit. In this respect, he relies on the decision in
Dwarkadass v. State of Madhya Pradesh , 1999 (3) SCC 500, which
has been followed by this Court in Delhi Development Authority vs.
Polo Singh , 101 (2002) DLT 401 DB (paras 18 to 21).

51. So far as the claim No.8 is concerned, the submission of
learned counsel for the petitioner is that the award of interest @ 18%
is high, considering the prevalent rates of interest. On the other hand,
learned counsel for the respondent has left it to the Court to determine
the reasonable rate of interest that should be awarded to the
respondent.
52. In relation to the rejection of the counter claims, learned
counsel for the petitioner submits that the same had been rejected by
adopting a completely different yardstick by the arbitrator, namely,
that no evidence has been produced by the petitioner. However, while
considering claim No.7, which was towards loss of anticipatory profits
the need for leading any evidence was completely dispensed with. She
submits that since the said counter claims had been made towards the
anticipatory escalation and additional costs that the petitioner would

OMP No.50/2002 Page 25 of 44

suffer on account of the abandonment of the work by the contractor
midway, no evidence could possibly have been led. She submits that
there is no reasoning to be found in the arbitral award in relation to the
discussion on the counter claims.
53. On the other hand, Mr. Sharma submits that once the arbitral
tribunal had come to the conclusion that the breach of the contract
was on the part of the petitioner which led to the respondent
contractor abandoning the works, there was no question of any of the
counter claims of the petitioner being allowed.
54. Learned counsel for the petitioner submits that the decision of
this Court in Polo Singh (supra) is not applicable in the facts of this
case, inasmuch, as the challenge in that case was not on the ground of
patent illegality of the award.

55. Mr. Sharma submits that no ground has been raised by the
petitioner to challenge the award on the ground of lack of reasons.
Discussion
Having considered the rival submissions of the parties and perused the
impugned award, I am of the view that the impugned award made on
claim nos. 4, 6, 7 and 8 and the counter claims preferred by the
petitioner is patently illegal, contrary to the terms of the contract
between the parties and wholly unreasoned and, therefore, without
jurisdiction and is, therefore, liable to be set aside. The Supreme Court
has repeatedly held that an arbitrator who acts in manifest disregard

OMP No.50/2002 Page 26 of 44

of the contract acts without jurisdiction. A deliberate departure from
the contract amounts to not only manifest disregard of his authority or
a misconduct on his part, but it may tantamount to a malafide action.
A conscious disregard of the law or the provisions of the contract from
which he has derived his authority vitiates the award [see Associated
Engg. Co. v. Govt. of A.P. (1991) 4 SCC 93; Steel Authority of
India Ltd. v. J.C. Budharaja, Government and Mining Contractor
(1999) 8 SCC 122; Rajasthan State Mines & Minerals Limited v.
Eastern Engineering Enterprises & Anr. (1999) 9 SCC 283, Bharat
Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 154,
Food Corporation of India v. Chandu Construction (2007) 4 SCC
697 & M.D. Army Welfare Housing Organisation v. Sumangal

Services Pvt. Ltd . AIR 2004 SC 1344.

56. An arbitrator cannot go beyond the terms of the contract
between the parties. In the guise of doing justice he cannot award
contrary to the terms of the contract. If he does so, he will have
misconducted himself. Of course if an interpretation of a term of the
contract is involved then the interpretation of the arbitrator must be
accepted unless it is one which could not be reasonably possible.
However, where the term of the contract is clear and unambiguous the
arbitrator cannot ignore it (see State of Rajasthan v. M/s Nav
Bharat Construction Co . AIR 2005 SC 4430).
57. A perusal of the impugned award shows that the learned
arbitrator has not only ignored, but has gone completely contrary to

OMP No.50/2002 Page 27 of 44

the express contractual terms between the parties. The contractor
was obliged to satisfy himself as to the nature of the work, the
accessibility of the site and all details connected with the work. He
had to satisfy himself as to the natural features on the ground, the
quantity of work and material necessary for the entire completion of
the work, and the means and access to the work or other
accommodation as may be required. The petitioner had made it clear
that “ no claim on the ground of ignorance of such details shall be
entertained at any time . (see clause 1 and 21 of General Conditions).
58. Under clause 41 of the general conditions, it was clearly
provided that in the event of any damage occurring to any work
included in the contract, inter alia, through flooding, or any other cause
whatever, due to negligence on the part of the contractor, or even
otherwise, the contractor would be solely responsible “ and must
reconstruct, repair and make good any such damaged work at his own
expenses.”
59. Under clause 3.1 of the special conditions, it was the
obligation of the contractor to keep the works well drained until the
Engineer in Charge certifies that the whole of the works is substantially
complete and shall ensure all work is carried out under dry conditions.
Excavated areas were required to be kept well drained and free from
standing water.
60. Clause 3.2 of the special conditions is very pertinent. Under
this clause, it was the obligation of the contractor to construct and

OMP No.50/2002 Page 28 of 44

operate and maintain “ all temporary dams, water courses and other
works of all kinds including pumping and well point dewatering that
were necessary to exclude water from the works while they are in
progress and till they are handed over to the DWS and SD Undertaking.
This refers to surface water that may enter into the excavated
construction work .” It was stated that no separate payment would
be made for such dewatering works/measures. The percentage rates
quoted by the tenderer were deemed to cover expenses for such
dewatering works/measures. It was further provided that disposal of
surface/sub soil water away from the site into some existing
drain/nallah was to be done by the contractor at his own costs. No
claim in this regard could be entertained.

61. Clause 3.3 of the special conditions provides that
notwithstanding any approval by the Engineer in charge of the
contractors arrangement for the exclusion of water, the contractor was
responsible for the sufficiency thereof and for keeping the works safe
at all times, particularly during any floods and for making good, at his
own expense, any damage to the work including that may be
attributable to floods. Any loss of production or additional costs of any
kind that may result from floods were at the contractors own risk.
62. Under clause 15 of Special Conditions, it was the obligation of
the contractor to remove the sub soil water and nothing extra was
payable to the contractor for carrying out the operation of dewatering.

OMP No.50/2002 Page 29 of 44

It was the obligation of the contractor to maintain safety of the
structure against floatation.
63. In the face of the aforesaid clauses of the contract between
the parties It cannot be appreciated as to how the learned arbitrator
came to the conclusion that the general conditions were not attracted
merely because the flooding of the work site due to rain/surface run
was a post tender development. The tender/contract conditions show
that the parties were well aware of the possibility that such like
developments may arise. It is for this reason that the contract
specifically provided that in the event of any damage occurring to any
work included in the contract, inter alia, due to flooding or due to
negligence on the part of the contract, or otherwise, the contractor
shall be solely responsible and must reconstruct, repair and make good
any such damage to the work at his own expense. The logic advanced
by the respondent and accepted by the learned arbitrator defies
common sense. Obviously, the contract was not awarded after the
event of flooding had already taken place. It was a post tender/post
contract development. However, the parties had expressly agreed that
if such an eventuality arises, it shall be the obligation of the contractor
to deal with the same and that no extra amount shall be payable by
the petitioner for dealing with the situation or remedying the damage
that may result to the work in question. This aspect was repeatedly
emphasized in more ways than one as is evident from the contractual
clauses, presumably for the reason that the work was to be done at a
subsoil level.

OMP No.50/2002 Page 30 of 44

64. The award made by the learned arbitrator on claim No.4 is
unreasoned. While observing that “ accumulation of water caused by
the failure of the respondents cannot be covered by any contract
conditions ”, the learned arbitrator has not pointed out even a single
clause in the contract which obliged the petitioner herein to keep the
work site clear of flooding due to rain or from the peripheral drain. On
the contrary, the clauses of the agreement extracted above clearly fix
the responsibility to keep the work site free from flooding upon the
respondent/contractor. Even before me learned counsel for the
respondent/contractor has not pointed out a single clause of the
contract which put the obligation to keep the storm water or the
peripheral drain water out of work site upon the petitioner.

65. When the contract is entered into, all contingencies are not
existing. However, the parties foresee the same and delineate their
respective rights and obligations to deal with the contingencies as they
arise. In this case, the parties clearly provided that in case of flooding,
it shall be the responsibility of the respondent/contractor to deal with
the situation and that no extra amount shall be payable on that
account.
66. I do not find any force in the submission of Mr. Sharma that
merely because the respondent/contractor had made payment for
dewatering the water, which had flown into the work site, in the
running bills that, by itself, created a vested right in the

OMP No.50/2002 Page 31 of 44

respondent/contractor to seek compensation for dewatering the work
site upon its flooding.
67. The rights of the parties are governed by the contractual
terms. Even if it were to be assumed that some payment had been
made while clearing the running bills of the respondent/contractor, that
by itself cannot provide a justification for a further claim made by the
contractor. Two wrongs do not make a right. Reliance placed on the
letters dated 10.08.2000 and 15.09.2000 to fasten liability on the
petitioner department is also of no avail. These are self-serving letters
issued by the respondent/contractor and cannot override the
contractual terms between the parties. The respondent/contractor did
not produce any evidence to even remotely suggest that the petitioner
had consciously agreed to reimburse the amount claimed by the
respondent/contractor for dewatering the work site after its flooding.
Even if such a decision were to be taken by the petitioner, the same
would have had to be supported by the relevant contractual clauses,
which is not the case.
68. The respondent has also not been able to controvert the
submission of the petitioner that the work of maintenance of the
peripheral drain also fell within the scope of the work awarded to the
respondent/contractor. To include the said work the estimate of the
work had been upwardly revised to ` 2,78,87,064/-, out of which the
earlier contractor, namely, U.P. Jal Nigam had done the work
amounting to ` 1,07,08,041/-. The reason for the revision of the

OMP No.50/2002 Page 32 of 44

estimate was primarily due to the ancillary work of peripheral drain,
sump, desilting of pond, revision of structuring design and drawings as
per soil bearing capacity.
69. The arbitrator has given no clue whatsoever to justify the
award of a sum of ` 2,01,832/- in favour of the respondent/contractor
under clause No.4. A Division Bench of this Court to which I was a
party in DDA v. Sunder Lal Khatri & Sons 157 (2009) DLT 555 (DB)
while dealing with a similar situation set aside an award of damages by
observing as follows:
“37. The reason given by the Arbitrator that
the delay was attributable to the appellant and
not to the respondent would undoubtedly give
the Arbitrator the justification to examine claim
No. 4 on its merits. However, in our view, that
cannot be said to be a sufficient reason to
arrive at the computation of the amount
awarded as damages. The obligation to
make a reasoned award, in our view,
would also include the obligation to give
at least some reason in the award for
arriving at the awarded amount. It should
be discernible from a speaking award as
to on what basis the Arbitrator has
arrived at the quantification of the
amount. No doubt, the Arbitrator is not
expected to give detailed reasons or
disclose the mathematical calculations in
the award to demonstrate how the exact
amount awarded has been worked out.
Nevertheless, that would not relieve the
Arbitrator of his obligation to, at least,
indicate in the award the aspects,
evidence and material taken by him into
consideration while awarding any
particular amount against any claim. It is
not disclosed as to how the arbitrator has
travelled the last mile-from the point he
came to the conclusion that the
respondent/ claimant was entitled to

OMP No.50/2002 Page 33 of 44

claim damages on account of the delays
and defaults of the appellant/DDA, to the
point he arrived at the awarded amount
of Rs. 12.50 lakh .” (emphasis supplied)

70. The submission of the respondent that the petitioner had not
raised these aspects before the arbitral tribunal and that, therefore,
they cannot be raised before this Court, in my view, would not save the
award which, on the face of it, is patently laconic. The arbitral tribunal
is obliged to acquaint himself with the contractual terms between the
parties before making the award. He cannot ignore the contractual
terms, which he is bound to enforce. The arbitral tribunal cannot
ignore the contractual terms and go contrary thereto. Moreover, the
tribunal cannot shirk its responsibility of making a reasoned award to
justify the award made by it. Accordingly, the award made on claim
No.4 is set aside.

71. So far as claim No.5 is concerned, the said claim was made
under clause 10CC of the contract. The stand of the petitioner before
the arbitral tribunal was that it was in the process of computing the
amount due under Clause 10CC to the respondent/contractor.
Pertinently, the petitioner did not come forward with any other
computation to controvert the claim made by the
respondent/contractor under this head. Moreover, the learned
arbitrator has recorded that the petitioner consented to its liability
under Clause 10CC as claimed by the respondent/contractor. The
petitioner in its objections had not specifically taken the plea that its

OMP No.50/2002 Page 34 of 44

consent before the arbitral tribunal has wrongly been recorded. In
view of the aforesaid position, in my view, the award made on claim
No.5 cannot be assailed and there is no illegality, much less a patent
illegality, in the award made on claim No.5. The objections to claim
No.5 is, accordingly, rejected.
72. Claim no.6 has been allowed by the learned Arbitrator towards
refund of security deposit of Rs. five lakhs made by the respondent-
contractor. I have set out in paragraph 12 above, the basis for
allowing this claim of the respondent-contractor. In my view the
learned Arbitrator has given no reasons for directing refund of the
security deposit of Rs. five lakhs to the respondent-contractor. It is
observed in the award that the stand of the petitioner herein “ is
undoubtedly correct in normal circumstances…. ”, however, it is not
explained as to what was the abnormal circumstances in the facts of
this case. It is further observed that “ the case of the claimant lies only
if the work was delayed due to circumstances beyond their control and
due to the defaults and laches on the part of the respondents ”. It is
neither stated as to which circumstance was beyond the control of the
respondent-contractor, nor is it stated as to what were the defaults and
laches on the part of the petitioner herein. No doubt, the allegation of
the respondent-contractor is recorded that:-
(i) The only approach road to the work site was closed;
a narrow over crowded street was closed due to laying of
sewer line;
(ii) there was shortage of supply of cement by Jal Board;

OMP No.50/2002 Page 35 of 44

(iii) there was flooding of the area of sewage pumping station;
(iv) the site was located in a big pond;
(v) there was stoppage of pumping of sewerage and rain water
caused by erratic electric supply;
(vi) there was inadequate pre-checking and parts of
substructure to be completed;
(vii) there was delay in payment for work done.
However, there is no specific finding with regard to the
correctness or otherwise of the allegations. As to how these
allegations, or any of them, have been assumed to be correct, and on
what basis, is not stated in the award. The only basis for allowing this
claim is that the “ claimants could not carry on and complete the work
due to circumstances for which they were not responsible. I, therefore,
hold that the claimants could not be held guilty of breach of contract
for stopping the work before its completion .”

73. Learned counsel for the petitioner has taken great pains to
demonstrate that none of these allegations were made out and there
was evidence placed on record to rebut each of them. However the
said evidence has been completely ignored and not considered by the
learned Arbitrator. For instance, it is pointed out that the respondent
had placed on record Ex. E-9 i.e. a map depicting that there were three
different approach roads to the site from Wazirabad-Mauzpur,
Brahmapuri and Pushta. The learned Arbitrator has ignored the said
plan and the fact that there were three approaches available to the
site. He has even considered the submission of the petitioner and the
document Ex.E-9 relied upon by the petitioner. Reference may also be

OMP No.50/2002 Page 36 of 44

made to para 9(a) of the reply filed by the petitioner before the learned
Arbitrator wherein it had specifically been pleaded that there were
different approach roads to the site and as per the terms of the
contract, the contractor was presumed to have acquainted himself with
the site.
74. I have already set out hereinabove clauses 1 and 21 of the
General Conditions and clause 1 of the Special Conditions.
75. The learned Arbitrator has also ignored clause 53 of the General
Conditions of Contract which stipulated that the refund of security
deposit shall be made after satisfactory completion of the defect
liability period of six months or on commissioning of pumping station,
whichever is later. Admittedly, the work was never completed and
abandoned mid-way.

76. Clause 30 of the General Conditions stipulates that any delay in
supply of materials stipulated to be issued by the department will be
no excuse for enhancing or affecting the rates once tendered. The
contractor, in such cases, should apply in time for extension of time
and such an application will be disposed of on merits. It is, therefore
argued that even if there were some delay in supply of cement, that
did not provide an excuse to the respondent-contractor to abandon the
work. At best, it entitled the Contractor for extension of time for
completion of the work.

OMP No.50/2002 Page 37 of 44

77. Clause 43 of the General Conditions is also relied upon by the
petitioner to suggest that the supply of cement was at the discretion of
the department. However, on a reading of clause 43, I do not agree
with the submission of learned for the petitioner. The petitioner had
also denied the shortage of cement for the period from 01.12.2000 to
16.02.2001 in para 9(b) of its reply before the Arbitrator. It is,
therefore, seen that the non-availability of cement was within the
contractual period for a period of about 2-1/2 months.
78. The respondent-contractor had stopped the work on 01.12.2000
and did not resume the same thereafter. The learned arbitrator has not
even considered the aforesaid aspects in the impugned award. The
annexures of the petitioner, Ex. R-6, R-7 and R-8 dated 10.01.2001,
23.02.2001 and 26.03.2001, respectively, which are relevant on the
issue of non-supply of cement during the aforesaid period and the
availability thereof after 16.02.2001 have not been dealt with. In Ex.R-
6, the petitioner DJB had informed the respondent-contractor that he
had stopped the work due to non-availability of cement but other
works could still be carried on by him. In Ex.R-7, the respondent was
informed about the availability of cement and he was asked to
expedite and complete the work. Reminder was sent by way of Ex.R-8.
79. In Simplex Concrete Piles (supra), this Court has observed that
parties cannot contract out of sections 55 and 73 of the Contract Act
by providing that a party in breach would not be liable to pay
damages. Therefore, the non supply of cement during the contractual

OMP No.50/2002 Page 38 of 44

period would make the petitioner liable for the resulting damages and
to that extent the clause of the contract which provides that the
respondent/contractor would not claim damages for the said breach
would not protect the petitioner from the claim of damages. However,
in view of the contractual clauses, the respondent/contractor was not
entitled to abandon the contractual work.
80. The issue before me is not as to what rights and obligations
arose due to non-availability of cement during the aforesaid period.
The only issue is whether the arbitral tribunal has even applied his
mind to the relevant contractual clauses and the materials/evidence
brought on record by the parties. On a plain reading of the award, it
cannot be said that he has even remotely applied his mind either to
the contractual clauses or to the documents/evidence placed on
record.

81. The aspect of flooding of the area of the sewage pumping
station and of it being located in a big pond as also the aspect of
stoppage of sewage and rain water have been dealt with while dealing
with the award made on claim no.4 and need not be repeated once
again. I am, therefore, of the view that the award on claim no.6 for
refund of security deposit had been made in ignorance of the
contractual terms and the evidence/materials placed on record, and
therefore cannot be sustained as it is patently illegal.
82. Claim no.7 had been made on account of, inter alia,
anticipated profits that the respondent/contractor could not earn on

OMP No.50/2002 Page 39 of 44

the left out/unexecuted portion of work @ 10% of the balance work.
Here again, I find that the learned arbitrator has returned his findings
without any basis or reason. I have set out hereinabove, in para-14,
the reasoning given by learned arbitrator for allowing the said claim to
the extent of Rs.8,71,708/-. While arriving at the finding that the
respondent/contractor could not complete the works due to the
defaults of the petitioner herein and for circumstances beyond their
control, and also the finding that the breach of the contract was on the
side of the petitioner herein, there is no basis given in the impugned
award for the said finding. The finding returned is that there was
breach of the contract on the side of the petitioner due to:

i) non provision of approach to the site,

ii) failure to make adequate supply of cement for execution of
the work,

iii) failure to issue timely instructions and checking of the work
of substructure,
iv) non payment for the work of pumping out of overflown
water, delay in payments.

83. These findings appear to be contrary to the contractual terms
inasmuch, as, there was no obligation cast on the petitioner to provide
approach to the site as aforesaid. The site had three different access
and the respondent/contractor was obliged to examine and acquaint
himself with the site conditions including the approaches before

OMP No.50/2002 Page 40 of 44

tendering for the work. The arbitrator has ignored Exhibit E-9 and the
averments made by the petitioner in its reply in para-9A.
84. It has already been discussed hereinabove that there was
shortage in supply of cement for a period of 2 ½ months and it appears
from Exhibit R-6, R-7 and R-8 that this shortage was overcome by the
middle of February 2001. The respondent, however, did not resume
the work despite being required to do so.
85. The arbitrator does not give any basis for concluding that the
petitioner did not give timely instructions and did not do checking of
the work of sub structure. The non payment for the work of pumping
out overflown water has been taken to be a breach by the learned
arbitrator. I have already discussed hereinabove that the petitioner
was not obliged under the contractual terms to pay to the
respondent/contractor any amount for pumping out the overflown
water. Consequently, it cannot be said that there was breach of the
contract on the part of the petitioner due to non payment for the work
of pumping of overflown water, and this finding is patently contrary to
the contractual terms. The award does not disclose as to on what
basis the arbitrator has concluded that there was delay in payments.
The finding that the flooding of the big pond was beyond the control of
the respondent also does not appear to be in accord with the contract
which provides that it shall be the complete responsibility of the
contractor to ensure that there is no flooding of the work site from any
source. It was the obligation of the contractor to maintain the

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peripheral drain. The learned arbitrator has also awarded amounts
towards infructuous expenditure including mobilization of tools, plant
and machinery and construction stores, site office, labour camp, steel
yard, cement stores etc. and idle maintenance of site staff and site
telephone. However, it appears that no evidence was led on these
aspects and no basis for awarding any amount on these accounts has
been disclosed in the award. The award is completely unreasoned in
this respect, and is based on no evidence. In State of Rajasthan v.
Ferro Concrete Construction Pvt. Ltd. (2009) 12 SCC 1 the
Supreme Court has held:
“55. While the quantum of evidence required
to accept a claim may be a matter within the
exclusive jurisdiction of the arbitrator to
decide, if there was no evidence at all and if
the arbitrator makes an award of the amount
claimed in the claim statement, merely on the
basis of the claim statement without anything
more, it has to be held that the award on that
account would be invalid. Suffice it to say that
the entire award under this head is wholly
illegal and beyond the jurisdiction of the
arbitrator, and wholly unsustainable.”

86. No doubt, an arbitrator who is an expert in the relevant field
may resort to some amount of guess work on the aspect of
computation of damages. This is so held in Polo Singh (supra).
However, this decision does not come to the aid of the respondent
because the very foundation for concluding that the respondent was
entitled to damages appears to be non-existent and the finding of the
learned arbitrator is contrary to the contractual terms and the

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evidence brought on record. For the same reason, the decision in
Paragon Construction (supra) is of no relevance in the facts of this
case.
87. From the facts and events, it is seen that the flooding of the
work site had taken place on 16.07.2000. The petitioner thereafter did
not take steps to dewater the work site. The non availability of cement
arose only on 01.12.2000, when the contractual period was about to
expire. It would appear that the non availability of cement was used
as an excuse by the respondent/contractor to abandon the work.
Without dewatering of the work site, it is difficult to even appreciate as
to how the respondent could have carried out any work at the site
even if there was no shortage of cement from 01.12.2000 onwards.

88. I, therefore, set aside the award made on claim no.7.

89. So far as rate of interest is concerned, I am of the view that
considering the fall in the inflationary rates and rate of interest, the
award of interest @ 18% p.a. from the date of the award till date of
actual payment is on the higher side. The same is accordingly reduced
to 12% p.a. on the principal liability, if any, of the petitioner.
90. A perusal of the award made on the counter claims shows
that the same is totally without any reason or justification, particularly
in relation to the award made on counter claim nos.2 to 5. It is for this
reason that I have set out hereinabove in paragraphs 18 to 21 the
award made on these counter claims.

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91. So far as the award made on counter claim no.1 is concerned,
the learned arbitrator records the submission of the claimants that no
evidence has been furnished on the damages suffered. However, the
learned arbitrator does not, in terms, accept that submission, and
merely states that after considering the facts of the counter claim and
contentions of the claimant, this counter claim is not admissible.
92. As the learned arbitrator returned a finding that breach was
on the part of the petitioner, which finding appears to be contrary to
the contractual terms and the evidence brought on record, in my view,
the award made on the counter claims cannot be sustained. This is so
because no counter claim could have been made by party which has
itself been in breach. As the said finding with regard to the breach of
the petitioner has been set aside, the award made on counter claims
also deserves to be set aside. Accordingly, the award made on counter
claims is set aside.

93. Accordingly, this petition is allowed and the objections of the
petitioner succeeded in respect of claim nos.4, 6, 7 and 8 as also in
respect of the counter claims made before the arbitral tribunal.


VIPIN SANGHI, J.
OCTOBER 08, 2010
sr


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