Full Judgment Text
SINDHU KRISHNAKUMAR
16.10.2018 17:24
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
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Reserved on : 28 September, 2018
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Date of decision:16 October, 2018
+ O.M.P. 639/2008, I.As. 8293/2018 & 8294/2018
GOVT OF N.C.T OF DELHI ..... Petitioner
Through: Ms. Jyoti Taneja, Advocate.
(M:9999500069)
versus
M/S YASIKAN ENTERPRISES PVT. LTD ..... Respondent
Through: Mr. Sanjeev Narang, Advocate.
(M:9810064624)
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
Prathiba M. Singh, J.
I.A. No. 8294/2018 (delay of 21 days in filing restoration application)
1. This is an application seeking condonation of delay of 21 days in
filing the restoration application being I.A. No.8293/2018. For the reasons
stated in the application, the same is condoned. I.A. is disposed of.
I.A. No. 8293/2018 (restoration of OMP 639/2008)
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2. This is an application seeking recall of order dated 2 December,
2016, whereby OMP 639/2008 was dismissed for non-prosecution. For the
reasons stated in the application, the same is allowed, and OMP 639/2008 is
restored. I.A. is disposed of.
O.M.P. 639/2008
3. The present appeal has been filed by the Government of NCT of Delhi
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( hereinafter ‘Government’ ) challenging the award dated 1 September, 2008
passed by the Sole Arbitrator. The brief facts are that the Government called
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a tender on 10 August, 2000 for providing sanitation and scavenger
services inside and outside the building including reception services from
O.M.P. 639/2008 Page 1 of 12
designated places for the Delhi Sachivalaya/Secretariat, I.P. Estate, New
Delhi.
4. The tender proforma contained various terms and conditions. One
M/s Yasikan Enterprises - a sole proprietary concern of Shri Jagdish Kumar
with its address at 6504/8, Navi Karim, Pahar Ganj, New Delhi-110055
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submitted his offer on 16 August, 2000. On 4 January, 2001, the contract
for sanitation services was entered into with M/s Yasikan Enterprises. A
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clarification was issued on 13 December, 2000. The contractor started
raising bills. It was the Government’s case that the contractor was entitled to
only a sum of Rs.73,652/- per month as per the calculation submitted, based
on measurements provided by Public Works Department (hereinafter
“PWD”). The contractor claimed that he is entitled to Rs.2,63,982/- per
month. The disputes between the parties were referred to arbitration in terms
of the following arbitration clause: -
“23. In case of any dispute or difference, the
award of the Arbitrator appointed by the Lt. Governor
of GNCT of Delhi will be final and binding on the
parties to the contract and the court at Delhi/New
Delhi shall only have the jurisdiction over the same.”
5. The arbitration clause was invoked by M/s Yasikan Enterprises Pvt.
Ltd. which is a company registered under the Companies Act, 1956. A
representation was made to the Lieutenant Governor invoking arbitration
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and vide letter dated 24 September, 2004, the Arbitrator was appointed.
The total claims raised by the contractor are as under: -
S.
no
Particulars Amount (in Rs.)
1. Payment due from January, 2001
to September 2004 i.e.,
@Rs.2,63,982/- per month for 45
1,18,79,190.00
O.M.P. 639/2008 Page 2 of 12
months.
(Rs.2,63,982/-x45)
2. Payment received from January
2001 to February 2002 i.e.
@Rs.2,06,619/- per month as
earlier passed for 14 months
Rs.2,06,619/-x14
28,55,838.00
3. Balance Amount Due upto
September 2004
90,23,352.00
4. Loss of other business/Tenders 20,00,000.00
5. Mental Agony/grave harassment 5,00,000.00
6. Litigation Expenses 1,11,000.00
Total Amount of claim
(Total of S.No.3 to 6)
1,16,34,352.00
Add Interest @24% Per
Annum
6. The Arbitrator’s award in respect of each of the claims is as under: -
Rs.26,39,82/- per month of the
bill as claimed by claimants .
“CLAIM No. (a):
AND
CLAIM No. (b):
Rs.90,23,352/- outstanding bills
(i.e. upto September, 2004.)”
On this claim the arbitrator awarded a sum of Rs.34,98,912/-.
Rs.20,00,000/- on account of
loss of other business/tender.
“CLAIM NO. (c) :
AND
CLAIM NO. (d) :
Rs.5,00,000/- for mental agony
and the harassment.
2.1 Finding of Arbitrator and Award:
The claimants failed to establish claim No. (c) & (d)
with documentary evidence. Further, these claims are
of very indirect nature, which are not at all payable
under 1... contract act except the loss of interest which
O.M.P. 639/2008 Page 3 of 12
is being dealt separately in Claim No. (1.... As such I
hold that claimants are not entitled for these claims
and I award ‘Nil’ amount claimants against Claim No.
(c) & Claim No. (d).”
NIL award.
“ CLAIM NO. (e):
Rs.1,11,000/- on account of
litigation expenses .
3.1
Finding of Arbitrator & Award:
Keeping in view over all circumstances, I
consider reasonable and award of Rs.5,000/-
to claimants against this claim.”
Litigation expenses Rs.5,000/- was awarded.
7. Claim 1(e) and 1(f) – interest was claimed @ 24%. However, the
arbitrator awarded interest in the following terms: -
“CLAIM NO.(1.e)
: Interest @ 24% per annum
on the above said amount .
AND
CLAIM NO.(f)
: Any other order/directions as
the Ld. Arbitrator deems fit a
proper in the interest of
justice .”
4.1 Finding of Arbitrator and Award:
In view of overall circumstances, I consider
reasonable and award simple interest @ 10% per
annum on Rs.2100867/- [39x127095 (from January
2001 till March 2004 2855838 => 4956705-2855838
=2100867] i.e. the balance outstanding upto 31.3.20...
awarded to claimants against claim No.1, w.e.f.
23.4.2004 (date of invocation arbitration ) till date of
payment.
I also award simple interest @ 10% per annum on
the each set amounting Rs.127095 totaling 1398045
(11x 127095) becoming due at the end of each more
O.M.P. 639/2008 Page 4 of 12
beginning from payment of April 2004 w.e.f. 1.5.2004
and ending for payment February 2005 w.e.f. 1.3.2005
till the date of payment.”
8. In conclusion, the arbitrator held as under: -
“ 5.1 NOW, THEREFORE, in view of above, I
award Rs.35,03,912/- to the claimants, M/s Yasikan
Enterprises (P) Ltd. against all, their claims and
simple interest on Rs.34,98,912/- as awarded under
para 4.1 of Claim No.(i) & (f) above. This is in full and
final settlement of all the above claims of the
claimants.”
9. The first submission of Ms. Jyoti Taneja, Ld counsel appearing for the
Petitioner is that there was no arbitration clause with the company M/s
Yasikan Enterprises Pvt. Ltd. The contract was awarded to the firm M/s
Yasikan Enterprises, which was a sole proprietary concern. Accordingly in
the absence of an arbitration agreement, the arbitration proceedings are void
ab initio and the award is liable to be set aside. She relies on Delhi Iron and
Steel Company Limited v. U.P. Electricity Board & Another (2002) 61
DRJ 280 .
10. Learned counsel for Respondent, on this issue, submits that the
reference having been made by the Lieutenant Governor on the request of
M/s Yasikan Enterprises Pvt. Ltd., the same does not deserve to be set aside.
11. As per Section 7 of the Act, every arbitration agreement has to be in
writing between the parties. It also has to be signed by the parties. In the
present case, there is no arbitration agreement signed between the Petitioner
and M/s Yasikan Enterprises Pvt. Ltd. The company was not awarded the
contract. The offer was submitted by M/s Yasikan Enterprises as a sole
proprietary firm. It was signed by Mr. Jagdish Kumar as the sole proprietor.
O.M.P. 639/2008 Page 5 of 12
The company being a distinct legal entity from the sole proprietorship, the
arbitration clause, does not apply devolve upon the company. Moreover, the
arbitration clause is an independent clause which is not assignable. This is
clear from a reading of Delhi Iron and Steel Company Limited (Supra) .
“ 17. So far as the arbitration clause is concerned it was
held that this contract is personal in its character and
incapable of assignment on that ground. However it is a
settled law that an arbitration clause does not take away
the right of a party of a contract to assign it if it is
otherwise assignable.
18. While distinguishing between two clauses of
assignment the Supreme Court observed that a right of
obligations under a contract cannot be assigned except
with the consent of the promisee, and when such consent
is given, it is really a novation resulting in substitution of
liabilities. In other words, rights under a contract are
assignable unless the contract is personal in its nature or
the rights are incapable of assignment either under the
law or under an agreement between the parties.
19. As observed above the petitioner had the liability to
perform all contracts of Victor Cables and all benefits
arising therefrom and liabilities thereunder in all or in
any form. It does not mean that he had also the
obligation to get the dispute settled by way of arbitration
as agreed by Victor Cables. These are two different and
distinguished liabilities. The former is assignable where
the latter is not. Thus the undertaking by the petitioner
that “all contracts of Victor Cables Corporation and all
benefits arising therefrom and liabilities thereunder in
all or in any form shall be of the petitioner” was in the
form of discharging all the liabilities of the Victor Cables
and there was nothing personal about such contracts
whereas clause of arbitration was personal in its
character and was even otherwise incapable of
assignment.
20. In view of the foregoing reasons the unilateral
O.M.P. 639/2008 Page 6 of 12
reference of the alleged disputes to the respondent No.2
and unilateral appointment of respondent No.2 as
arbitrator are hereby held illegal and inoperative and set
aside. Petition is allowed. ”
12. Thus, the reference to arbitration was contrary to law. The award is
liable to be set aside on this sole ground. However, this Court is also
examining the matter on merits.
13. The second grievance of the Government is that the arbitrator has
mis-conducted himself by going beyond the contract. The claim of the
Respondent is that cleaning of furniture was not contemplated in the tender
document and cleaning of glazing and inside cladding was also not
mentioned in the tender document. Thus, the claim was raised and awarded
on the basis of these two items which were extra items. On the basis that
they were extra items, the contractor claimed that it was liable to be
compensated for the work carried out.
14. The further submission of learned counsel for the Petitioner is that the
contractor had not mentioned in the claim petition, truthfully, all the
amounts already paid by the Petitioner. Even if the entire claim as awarded
by the arbitrator is to be granted to the contractor, a further adjustment of
Rs.9,00,412/- has to be added to the amounts already paid i.e. Rs.28,55,838/.
Thus, the total paid amount would be Rs.37,56,250/- and not Rs.28,55,838/-.
The credit of Rs.9,00,412/- needs to be given to the Government. In order to
support this plea, she has placed on record the sanctions issued by the
Government as also a chart showing the encashment of the cheques for these
payments.
15. It is further contended by the Ld. Counsel for the Government, that
the arbitrator has wrongly awarded Rs.1,27,094/- by applying the highest
O.M.P. 639/2008 Page 7 of 12
rate i.e. Rs.2.75 per sq. mtr. which is also incorrect. According to learned
counsel, the calculation chart relied upon by her would show that only
Rs.47,924/- is due.
16. As against this, the Respondent claims that the extra items were not
part of the tender document, the work qua the extra items was in fact carried
out but no amount was mentioned in the tender proforma. Thus the
contractor is entitled to claim compensation for the same. The Respondent’s
counsel also initially denied the additional payments having been received.
Thereafter, however, learned counsel simply contended that if the proof of
payment is shown then it may be considered as paid.
17. A perusal of the records of this case and the documents as also the
conduct of the contractor reveals a completely sorry state of affairs. The
contractor was well aware of the nature of work which it undertook. Para 20
of the tender proforma clearly provided for the following items of work to
be carried out by the contractor:
“20. Duties of the Sanitary Supervisors and Safai
Kamarcharies be as under:-
Sanitary Supervisor will be responsible to
supervise the work of the Safai Karamcharies
or any other duty as assigned by the
Department.
Safai Karamcharies:-
a) Sweeping office rooms including 275
rooms approx (mention as per the
allocation of the Department).
b) Sweeping, Washing, Scrubbing and
Swabbing etc. of the verandas vestibules
and staircases and cleaning the articles
lying therein such as spittoons, fire
O.M.P. 639/2008 Page 8 of 12
fighting equipments etc.
c) Sweeping open spaces like roads,
courtyards, garages etc.
d) Cleaning open spaces like lawns etc.
swept extensively which but which are
kept clean by picking paper bits etc and by
partial sweeping, wherever necessary.
e) Cleaning latrines, bathrooms, urinals etc.
f) Dusting cleaning the office furniture,
windows, etc.
g) Clearance of garbage.”
18. In response to this, the contractor simply quoted as under: -
Job Unit Job wise rates
Without With
Material Material
1. 2. 3. 4.
a. Sweeping in covered area Per sq.
Rs.2.30 Rs.2.75
mtr.
b. Sweeping, Washing,
Scrubbing, swabbing etc.
and cleaning of articles
lying their in
-do- Rs.0.90 Rs.1.40
c. Sweeping open space like
-do- Rs.1.10 Rs.1.10
roads, courtyards, garage
etc.
d. Cleaning open space like
-do- Rs.0.45 Rs.0.45
lawn, playground etc.
swept extensively but
which are kept clean by
picking papers-bits etc.
and by partial sweeping,
where necessary.
e. Cleaning latrines,
bathrooms, urinals etc.
including the dressing
rooms, passages etc.
attached thereto and
mirrors, dressing tables,
Per 100
items
Rs.0.90 Rs.1.75 per
itms
O.M.P. 639/2008 Page 9 of 12
and other articles
contained therein
f. Collection, Segregation
and disposal of garbage
Per Qtl. Free of Cost
19. Thus, no separate quote was given in respect of items (f) i.e. dusting,
cleaning office furniture and windows. Clearly the contractor understood the
nature of work as mentioned in the tender proforma item No.(a) to include
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item No.(f). Thus when the contractor entered into the contract on 4
January, 2001, he was well aware of the nature of the work that is to be
undertaken by him. The claims raised by the contractor on the ground that
there are two extra items are as under; -
Scope of
work as per
tender
document
Area as
per
Award of
the
Arbitrato
r – (A)
Rate as per
tender
document
(Rs.) – (B)
Amount
awarded by
arbitrator
(Rs. ) – (A)
X (B)
Comments Amount
to be
paid by
Departm
ent (Rs.)
12387.49
Sqm
Not
mentioned
in the
tender
document
34065.60
(Rs.2.75 x
12387.49)
Not agreed.
[Note- This
item was not a
part of tender
document. It
has been
added by
Hon’ble
Arbitrator.
There is no
such extra
items for
cleaning etc.
mentioned
either in the
scope of work
or in the
schedule of
rates of the
Nil
Extra Item-1
Cleaning of
furniture,
wall
panelling &
doors etc.
O.M.P. 639/2008 Page 10 of 12
tender
document.
These items
are covered
under Item (a)
cleaning in
covered
areas.]
Extra Item-2
Cleaning of
glazing &
inside
cladding etc.
5946.47
Sqm
Not
mentioned
in the
tender
document
8325.06 Not agreed.
[Note- [This
item was not a
part of tender
document. It
has been
added by
arbitrator
There is no
such extra
items for
cleaning etc.
mentioned
either in the
scope of work
or in the
schedule of
rates of the
tender
document.]
Nil
20. Extra item No.2 is not made out. The tender proforma is clear that it is
a comprehensive tender for keeping the Delhi Sachivalaya/Secretariat in a
clean condition. The proforma clearly mentions the duties which the
cleaning personnel have to undertake. While submitting the tender the
highest rate given of Rs.2.30 per sq.mtr. is given for sweeping in the covered
areas. This obviously included the furniture and windows and cleaning of
the same. The high rate awarded itself shows that item No.(f) is covered in
item No.(a). No separate claim for dusting was contemplated in the tender
O.M.P. 639/2008 Page 11 of 12
nor was submitted by the contractor. Thus dusting was included in the scope
of work. The contractor initially submitted a bill of Rs.3,18,625/- and due to
errors of computation some higher payments were made to the contractor.
As against Rs.73,625/- per month, the contractor finally claimed
Rs.2,63,982/-. The only basis was due to the alleged extra items. Indoor
cleaning was fully covered under item No.(a) of the tender proforma and
thus any extra charges for any extra items was not liable to be awarded.
There was no rate fixed in the contract for these extra items and the
arbitrator could not, on his own, apply an arbitrary rate. The arbitrator has to
strictly go by the contract between the parties. The award being contrary to
the contract is thus liable to be set aside.
21. The OMP is allowed on both grounds i.e., that there is no arbitration
agreement between the Respondent and the Petitioner and secondly the sums
claimed for extra items were included in the scope of work and no additional
moneys were payable. OMP is allowed. The Contractor, during the hearing
in the present case, even failed to admit to the actual payments received
which reflects completely improper conduct. Under these circumstances the
OMP is allowed with costs of Rs.50,000/- to be deposited by the Respondent
with the Petitioner within four weeks.
PRATHIBA M. SINGH
Judge
OCTOBER 16, 2018
Rekha
O.M.P. 639/2008 Page 12 of 12