Full Judgment Text
IN THE HIGH COURT OF DELHI
CIVIL SUIT (OS) NO. 826A/1998 &
th
IA No.(Unnumbered) ........../1998 (filed on 9 July,
1998) and IA No. 5761/2002
Date of decision : March 20, 2008
Sh. N.D.R.Israni ... Petitioner
through: Mr. P.C. Markanda, Sr. Adv. with
Mr. Naresh Markanda, Adv.
VERSUS
Delhi Development Authority .... Respondent
through: Ms. Anusuya Salwan, Adv.
CORAM:
HON'BLE MS. JUSTICE GITA MITTAL.
1. Whether reporters of local papers may be allowed
to see the Judgment? No
2. To be referred to the Reporter or not? No
3. Whether the judgment should be reported in
the Digest? No
GITA MITTAL, J.
1. By this judgment, I propose to dispose of the objections under
th
Sections 30 and 33 of the Arbitration Act, 1940 filed on 9 July, 1998 by
the Delhi Development Authority to the Award dated 6th February, 1998
made and published by Shri V.D. Tiwari, Sole Arbitrator.
The petitioner had been awarded the work of construction of 1296
MIG Houses at Trilokpuri, SH; c/o 352 MIG Houses including internal
development in Group IV, Trilokpuri. The parties entered into an
agreement bearing no.4/DD-VII-82-83. The stipulated date of completion
of the work was 4th June, 1983. The contractor was granted six months
extension of time to complete the contract under Clause 10C of the contract
between the parties and thus was required to complete the work by 4th
CS(OS) No. 826A/1998 1
December, 1983. The admitted date of actual completion of the work was
29th November, 1984 that is after a delay of 17 1/2 months. Disputes arose
between the parties and the petitioner invoked the provisions of the
arbitration clause between them. Pursuant thereto, Shri V.D. Tiwari, Chief
Engineer (Retired) was appointed the sole arbitrator. The arbitrator made
and published his award on 6th February, 1998 which has been assailed by
the Delhi Development Authority by way of the objections under Sections
30 and 33 of the Arbitration Act, 1940.
Before considering the issues raised by the parties, it would be
appropriate to consider the parameters within which this court would
exercise jurisdiction under Sections 30 and 33 of the Arbitration Act, 1940.
The parameters are well defined by a series of judicial pronouncements on
the subject. It has been repeatedly held by the Apex Court that the
arbitrator is a creation of the contract between the parties and must operate
within the four corners. Interpretation of a particular condition in the
agreement is squarely within the jurisdiction of the arbitrator. However in
cases where there is no question of interpretation of any term of the
contract, but solely reading the same as it is, yet it is found that the
arbitrator has ignored such term and awarded an amount despite the
prohibition in the agreement, it would have to be held that such award was
without jurisdiction. The arbitrator may have jurisdiction to entertain the
claim yet he may not have jurisdiction to pass an award for particular items
in view of the prohibition contained in the contract. In case of such an
award, the same would amount to a jurisdictional error [1999 (3) Arb.LR.
335 (S.C.) Steel Authority of India Limited vs. J.C. Budharaja, Government
and Mining Contractor (para 17); JT 1997 2 SC 633 : 1997 (1) Arb. LR. 292
CS(OS) No. 826A/1998 2
(SC) New India Civil Erectors Pvt. Ltd. vs. Oil & Natural Gas; JT 1991 3 SC 123
Associated Engineering Company vs. Government of Andhra Pradesh & Anr.].
2. In 1999 (3) Arb.LR 350 Rajasthan State Mines & Minerals
Limited vs. Eastern Engineering Enterprises & Anr ., it was held
that if the arbitrator decides a dispute which is beyond the scope of his
reference or beyond the subject matter of the reference or makes an award,
this regarding the terms of reference or the arbitration agreement or terms
of the contract, it would be a jurisdictional error beyond the scope of
reference and that the arbitrator cannot throw themselves to decide
conclusively that dispute as it is an error of jurisdiction.
3. In JT 1999 (3) SC 15 H.P. State Electricity Board vs. R.J.
Shah & Company , the court laid down the principal that in order to
determine whether the arbitrator has acted in exercise of jurisdiction, what
has to be seen is whether the claimant could raise a particular dispute or
claim before the arbitrator. If the answer is in the affirmative, then it is
clear that the arbitrator would have the jurisdiction to deal with such a
claim. On the other hand if the arbitration clause or a specific term in the
contract or the law does not permit or give the arbitrator the power to
decide or to adjudicate on a dispute raised by a claim or there is a specific
bar to reference of a particular claim or dispute, then any decision given by
the arbitrator in respect thereof would clearly be in excess of jurisdiction.
4. For the purposes of adjudicating upon the present objections, the
same are taken up claim wise.
Claim No. 1
The first claim raised by the contractor related to the idle centering
and shuttering during the period when the same could not be fully and
CS(OS) No. 826A/1998 3
gainfully utilised due to the required quantity of cement not being
available. It is an admitted position that cement was to be supplied by the
Delhi Development Authority. It is also not disputed that the allocated
cement was not made available to the contractor to complete the work on
time. DDA has submitted that the contractor was not entitled to any
amount for this reason in view of condition no. 1 of the contract and clause
10 of the General Conditions of the Contract. In order to appreciate the
rival contentions, it becomes necessary to consider the condition 1 of the
specifications and conditions in the contract which reads as under :-
“The contractor must get acquainted with the proposed
site for the work and study specifications and conditions
thereto before tendering. The work shall be executed as
per programme approved by the Engineer-in-charge. If
part of site is not available for any reason or there is some
un-avoidable delay in supply of materials stipulated by the
department, the programme of construction shall be
modified accordingly and the contractor shall have no
claim for any extras or compensation on this account.”
Inasmuch as the Delhi Development Authority is also placing strong
reliance on clause 10 of the General Conditions of contract, the same also
deserves to be considered in extenso and reads thus :-
“......Provided that the contractor shall in no case be
entitled to any compensation or damages on account of any
such materials and stores. Provided further that the
contractor shall be bound to execute the entire work if the
materials are supplied by the DDA within the scheduled
time for completion of the work plus 50% thereof (Schedule
time plus 6 months if the time of completion of the work
exceeds 12 months) but if a part only of the materials has
been supplied within the aforesaid period then the
contractor shall be bound to do so much of the work as
may be possible with the materials and stores supplied in
the aforesaid period. For the completion of the rest of the
work, the contractor shall be entitled to such extension of
time as may be determined by the Engineer-in-Charge
whose decision in this regard shall be final.”
The arbitrator arrived at a conclusion that only such delay as was for
CS(OS) No. 826A/1998 4
unavoidable reason would have enabled the Delhi Development Authority
to avoid its liability for delay which has occurred and that in the instant
case, the Delhi Development Authority had failed to establish that there
was any unavoidable delay. On a close reading of the documents placed by
the parties before him, the arbitrator came to a conclusion that nearly
39,200 bags of cement were issued only by the end of June, 1983, when the
stipulated date of completion of the work was over. For the purposes of
arriving at this conclusion, the learned arbitrator placed reliance on the
cement register maintained by the Delhi Development Authority itself. It
has also been noticed, that there is an admitted delay on account of short
supply of the cement and that such delay would have resulted in holding up
of casting of roof slabs. The arbitrator has not accepted the period of delay
as alleged by the claimant before him and has held that delay of only 20
days has occurred for this reason. On this basis, the arbitrator made an
award of Rs.22,437/- only.
It is well settled that this court cannot substitute the reasoning given
by the arbitrator for making an award for the particular item. In this
behalf, reference can be made appropriately to the pronouncement of the
Apex Court in (2003) 7 SCC 396 State of U.P. vs. Allied
Constructions wherein the Apex Court held that it was not permissible
for the court to sit as a court of appeal over the verdict of the arbitrator.
5. In this behalf, the observations of the Apex Court in (1999) 9 SCC
449 Arosan Enterprises Pvt. Ltd. vs. UOI & Anr . wherein the court
reiterated the well settled principal of law that reappraisal of evidence by
the court is not permissible and as a matter of fact, exercise of power by the
court to reappraise the evidence is unknown to proceedings under Section
CS(OS) No. 826A/1998 5
30 of the Arbitration Act. It was further observed that in the event of there
being no reasons in the award, question of interference of the court would
not arise at all. In the event, however, there are reasons, interference
would still not be available within the jurisdiction of the court unless of
course there exist total perversity in the award or the judgment is based on
a wrong proposition of law. However in the event that two views are
possible, for a question of law as well, the court would not be justified in
interferring with the award.
In this landmark pronouncement, the court also clearly laid down the
parameters of scrutiny by the court into an arbitration award and the scope
of judicial review. In para 37 of the pronouncement the court held thus :-
“37. The common phraseology 'error apparent on the face of
the record' does not itself, however, mean and imply closer
scrutiny of the merits of documents and materials on record:
The court as a matter of fact, cannot substitute its evaluation
and come to the conclusion that the arbitrator had acted
contrary to the bargain between the parties. If the view of the
arbitrator is a possible view the award or the reasoning
contained therein cannot be examined. In this context,
reference may be made to one of the recent decision of this
Court in the case of State of Rajasthan v. Puri Construction
Co. Ltd MANU/SC/0865/1994 wherein this Court relying
upon the decision of Sudarsan Trading Co.'s case Sudarsan
Trading Co. v. Government of Kerala and Anr.
MANU/SC/0361/1989 , observed in paragraph 31 of the
Report as below:
A court of competent jurisdiction has both right and duty to
decide the lis presented before it for adjudication according
to the best understanding of law and facts involved in the lis
by the judge presiding over the court. Such decision even if
erroneous either in factual determination or application of
law correctly, is a valid one and binding inter partes. It does
not, therefore, stand to reason that the arbitrator's award
will be per se invalid and inoperative for the simple reason
that the arbitrator has failed to appreciate the facts and has
committed error in appreciating correct legal principle in
basing the award. An erroneous decision of a court of law is
open to judicial review by way of appeal or revision in
accordance with the provisions of law. Similarly, an award
CS(OS) No. 826A/1998 6
rendered by an arbitrator is open to challenge within the
parameters of several provisions of the Arbitration Act. Since
the arbitrator is a judge by choice of the parties and more
often than not a person with little or no legal background,
the adjudication of disputes by an arbitration by way of an
award can be challenged only within the limited scope of
several provisions of the Arbitration Act and the legislature
in its wisdom has limited the scope and ambit of challenge to
an award in the Arbitration Act. Over the decades, judicial
decisions have indicated the parameters of such challenge
consistent with the provisions of the Arbitration Act. By and
large the Courts have disfavoured interference with
arbitration award on account of error of law and fact on the
score of misappreciation and misreading of the materials on
record and have shown definite inclination to preserve the
award as far as possible. As reference to arbitration of
disputes in commercial and other transactions involving
substantial amount has increased in recent times, the Courts
were impelled to have fresh look on the ambit of challenge to
an award by the arbitrator so that the award does not get
undesirable immunity. In recent times, error in law and fact
in basing an award has not been given the wide immunity as
enjoyed earlier, by expanding the import and implication of
"legal misconduct" of an arbitrator so that award by the
arbitrator does not perpetrate gross miscarriage of justice
and the same is not reduced to mockery of a fair decision of
the lis between the parties to arbitration. Precisely for the
aforesaid reasons, the erroneous application of law
constituting the very basis of the award and improper and
incorrect findings of fact, which without closer and intrinsic
scrutiny, are demonstrable on the face of the materials on
record, have been held, very rightly, as legal misconduct
rendering the award as invalid. It is necessary, however, to
put a note of caution that in the anxiety to render justice to
the party to arbitration, the court should not reappraise the
evidences intrinsically with a close scrutiny for finding out
that the conclusion drawn from some facts, by the arbitrator
is, according to the understanding of the court, erroneous.
Such exercise of power which can be exercised by an
appellate Court with power to reverse the finding of fact, is
alien to the scope and ambit of challenge of an award under
the Arbitration Act. Where the error of finding of facts
having a bearing on the award is patent and is easily
demonstrable without the necessity of carefully weighing the
various possible viewpoints, the interference with award
based on erroneous finding of fact is permissible. Similarly,
if an award is based by applying a principle of law which is
patently erroneous, and but for such erroneous application
of legal principle, the award could not have been made, such
award is liable to be set aside by holding that there has been
a legal misconduct on the part of the arbitrator. In ultimate
CS(OS) No. 826A/1998 7
analysis it is a question of delicate balancing between the
permissible limit of error of law and fact and patently
erroneous finding easily demonstrable from the materials on
record and application of principle of law forming the basis
of the award which is patently erroneous. It may be
indicated here that however objectively the problem may be
viewed, the subjective element inherent in the judge
deciding the problem, is bound to creep in and influence the
decision. By long training in the art of dispassionate
analysis, such subjective element is, however, reduced to
minimum. Keeping the aforesaid principle in mind, the
challenge to the validity of the impugned award is to be
considered with reference to judicial decisions on the
subject.”
In any event, the issues raised by the DDA/objector in the matter on
merits relating to default, extension of time, quantum of damages etc are all
questions of fact which the arbitrator was within his jurisdiction to decide
as deemed fit. This court has no writ jurisdiction or authority to intradict
an award on such factual issues in view of the principles laid down by the
Apex Court.
The DDA has been unable to point out any error of law on the face of
the award.
6. In JT 1999 (3) SC 15 H.P. State Electricity Board vs. R.J.
Shah & Company , the court laid down the principal that it is
impermissible for the court to set aside an arbitration award merely
because another view was possible.
7. In (2001) 3 SCC 397 U.P. State Electricity Board vs.
Searsole Chemicals Limited , the court held that of the arbitrators have
applied their mind to the pleadings, the evidence adduced and the terms of
the contract, there is no scope for the court, including the Supreme Court to
reappraise the matter as if this were an appeal court and it is clear that
CS(OS) No. 826A/1998 8
where two views are possible, the view taken by the arbitrators would
prevail.
8. In the instant case, the arbitrator has given reason and has closely
examined the claims made by the contractor and the stand of the Delhi
Development Authority. The same have been analysed as is clearly
reflected from the award. The arbitrator was nominated by the DDA and
was an expert engineer with a technical background. The DDA has been
unable to point out that the interpretation of the contract and the
documents or the reasoning adopted by the arbitrator was not a plausible
one. A Division Bench of this court in its pronouncement reported at AIR
2003 Delhi 128 Em and Em Associates vs. Delhi Development
Authority & Anr. has in such circumstances held that the setting aside of
the award was speculative.
9. I find that in the instant case, the contractor made the claim towards
the payment for idle shuttering and centering on the ground that the same
could not be utilised because the DDA could not supply the cement. It is an
admitted case of the respondent that there was shortage of the cement and
it was therefore not possible for the contractor to lay the roof slabs. The
arbitrator has returned a finding on consideration of the entire material
that the requisite quantity i.e. 39,200 bags of cement could not be issued by
the DDA within the stipulated period.
10. The arbitrator has further held that the DDA was required to make
out a case that the delay which occurred was for reasons which were
unavoidable. It has been held that the DDA failed to establish that the
delay had occurred on account of any reasons which were unavoidable. On
an analysis of the material led before him, the arbitrator has awarded all
CS(OS) No. 826A/1998 9
such idle charges only for a period of 20 days. In my view the challenge to
the award made on claim no. 1 by the arbitrator is therefore only
misconceived and legally not tenable. The same is accordingly rejected.
Claim no.4
The petitioner made a claim for damages due to prolongation of the
contract period beyond the stipulated date of completion of the work due to an
increase in the price of materials and other overheads. The DDA has assailed
the award on this claim of Rs.11,38,438/- on the ground that the arbitrator has
ignored the relevant specifications and additional condition no. 1 of the
agreement which, according to the DDA stated that no damages could be
awarded in case there was unavoidable delay in handing over of the site or in
supply of material in any circumstances. The DDA has also objected that any
increase in material and labour that is to be paid is taken care of under clause
10c of the contract and nothing extra is payable to the contractor.
11. I find that the learned arbitrator has again closely discussed the
evidence on record and given findings which have been drawn on the
documents as well as conditions of the contract. The arbitrator arrived at a
conclusion that the DDA was in breach of the contract on account of : non-
th nd
availability of drawings from 4 June, 1982 to 22 July, 1982; belated
th st
decision of mosaic flooring from 4 June, 1982 to 1 November, 1983 and
th st
presentation of high tension line from 4 June, 1982 to 1 December, 1983,
th th
belated decision of flush door shutters from 4 June, 1982 to 5 January,
1984 and the time required for doing the extra work. The stipulated date of
th
the completion of contract was 4 June, 1983. After an extension of six
th
months under clause 10(c) the contract was to be completed by 4
December, 1983. It is an admitted position that on account of the
CS(OS) No. 826A/1998 10
abovenoticed reasons for delay, the contract could actually be completed
th
only on the 29 November, 1984. The DDA has objected to the award on
the above claim on the ground that in terms of additional condition no. 1, in
case the site was handed over belatedly or in parts, the contractor was not
entitled to any damages or compensation. The arbitrator has received that
such condition could not apply as it cannot be stretched to mean that the
site could be handed over even during the extended period of the contract
and that the additional condition no. 1 did not envisage such a condition.
The additional condition no. 1 only postulated a situation that the site could
be handed over belatedly and in parts. Certainly a contractor could not be
deprived of his dues and their profits if the site was handed over beyond the
period of contract. The DDA is unable to point out any contractual
provision under which it was authorised to hand over the part of the site
beyond the stipulated date of completion of the contract that is during the
extended period.
12. So far as the reliefs on clause 10 is concerned, the arbitrator has given
an interpretation of the term in the contract and held that the same does
not apply as the delay envisaged in clause 10 was only a delay of six months
whereas the delay which has occurred on the part of the DDA in supplying
the stores was to the tune of 581 days.
13. In view of the above, reference can usefully be made to the
pronouncements of this court reported at 1994 2 Arb.LR 479 (para 7 at
page 483) Shri Sunder Lal Khatri vs. DDA and 2004 (3) RAJ 540 (DB)
(para 5 and 6) DDA vs. Wee Aar Constructive Builders and 1998 (2) RAJ
336 (para 24) P.C. Sharma & Company vs. DDA wherein the impact of
CS(OS) No. 826A/1998 11
additional condition no. 1 has been clearly considered.
14. In FAO (OS) No. 252/1994 Delhi Development Authority v.
Sunder Lal Khetri & Sons the court held thus :-
“The plea raised by learned counsel for the
appellant in regard to claim no. 3 is that the Arbitrator
had no powers to award any amount under clause 10(c)
and only the Superintending Engineer of Delhi
Development Authority could determine the amount
payable in terms of clause 2 of the agreement. This
contention cannot be sustained for the reason that the
powers of Superintending Engineer were confined to
fixing the compensation when the Contractor failed to
complete the work within the stipulated period. The
Superintending Engineer was not the final authority to
determine compensation claimed by the contractor on
account of delay by DDA under clause 10(c) of the
agreement. Further plea that the arbitrator had awarded
the sum of Rs.70,548.45 p. in favour of the claimant
without any basis whatsoever is also devoid of any
substance for the reason that the arbitrator had awarded
this amount on the basis of details worked out by
appellant's officers vide Exhibit R-30 and a letter exhibit
C-50 addressed by Executive Engineer of the appellant to
his superintending engineer admitting that the delay was
not on account of any default of the contractor.
Therefore, learned Single Judge was fully justified in
upholding this claim against the appellant. The judgment
in “M/s. Oriental Structural Engineers Vs. DDA”
reported in 49(1993) DELHI LAW TIMES 514 relied
upon by learned counsel for the appellant was under
entirely different facts and circumstances in as much as
in the said case the superintending engineer exercising
his powers under clause 2 of the agreement had held that
the delay was on the part of the contractor and had then
levied a compensation which was payable by the
contractor to DDA. The award in respect of claim no. 4
was under clause 10(c) and the arbitrator had relied upon
Exhibit R-31 prepared by the officers of the appellant.
Learned Single Judge had rightly declined to interfere
with this claim. The challenge to claim no. 7 on the
ground that there was no agreement between the parties
for payment of damages to the respondent/claimant and
the damages ought to have been calculated on the basis of
accruals was rightly negated by the learned Single Judge.
In “Dwarka Das v. State of Madhya Pradesh reported in
AIR 1999 SC 1031 their Lordships of the Supreme Court
CS(OS) No. 826A/1998 12
clearly held that a contractor was entitled to claim
damages for loss of profit which he was expected to earn
by undertaking the contract and claim of expected profits
was legally admissible on proof of the breach of contract
by the erring party. A Division Bench of this court in M/s
Metro Electric Company, New Delhi v. Delhi
Development Authority reported in AIR 1980 Delhi 266
had upheld the award of damages against DDA
recognising the contractor's right to damages for breach
of the contract. Mere extension of time cannot be taken
as a substitute for claim of damages. The award of
damages in this case was on account of the loss incurred
by the contractor due to increase in the prices of material
because of delay on the part of the appellant/DDA. The
arbitrator had taken the help of Cost Index published by
the Government and had awarded damages. The learned
Single Judge dealt with this submission in detail and we
do not find any good grounds for taking a different view.
The amount of damages was calculated by taking into
consideration the quantum of work executed by the
Contractor and then applying percentage increase on the
basis of Index Number after deducting the cost of
material issued by the appellant. There are thus no
grounds at all for interfering with the view taken by
learned Single Judge on this issue.”
15. I find that so far as the objection of the respondents that clause 10C
shall not be applicable in view of the judgments of the Division Bench of
this court reported at AIR 1980 Delhi 266 (page 90) Metro Electric
Company Limited vs. DDA. In this judgment the Division Bench held that
clause 10 C presumed that the contract was completed during the agreed
period of the contract and was applicable only during the progress of the
work within that period. In the instant case, the DDA failed in providing
the materials and not even handing over the site and consequently the DDA
cannot take the shelter of the clause 10C which presumed that the contract
is completed during the agreed period of contract. Reference can also be
usefully made to the pronouncement of this court reported as Delhi
Development Authority vs. S.S. Jetley 2001 (1) Arb.LR 289 (Del)
(DB) (para 8 on page 294); Prem Chand Sharma vs. DDA 2005 (3)
CS(OS) No. 826A/1998 13
RAJ 641 (Del) (para 12 at page 645) and Pt. Munshi Ram &
Associates (P) Ltd. vs. Delhi Development Authority 2006(1)
RAJ 86 (para 16 on page 94) in this regard.
16. The last objection to the award made on claim no. 4 is based on the
plea of the DDA that the learned arbitrator could not have awarded any
amount on the basis of the cost index. My attention is drawn by Mr.
Markanda, learned senior counsel appearing for the respondent to judicial
pronouncements on this very plea which are reported at 1994 (2) Arb.LR.
479 Shri Sunder Lal Khatri vs. DDA wherein the court has upheld the
award based on a cost index published by the State periodically based on
scientific data. Similarly in 1997 (1) Arb.LR 541 Nav Bharat
Construction Company vs. DDA , the court approved an award where
the arbitrator found that it was fair and reasonable to work out the increase
on the basis of the cost index applying the CPWD manual. It was held that
no fault could be found in the arbitrator doing so to arrive at a judicious
and reasonable decision. Again in 2005 (3) RAJ 641 Prem Chand
Sharma & Company vs. DDA it was held that the approach of the
arbitrator in finding that the building cost index calculated by the CPWD is
the rightly recognised method or working out the cost escalation could not
be faulted. The court had found that the CPWD rates are not profit rates
but are rates of escalation computed by statutory authorities which have
been relied upon for the purposes of arriving at the escalation figure. Just
as in the present case, the respondent had not produced any other material
to enable the arbitrator to come to a different conclusion.
17. Even otherwise, the learned arbitrator has found that as per the cost
index the amount due to the petitioner worked out to Rs.16,45,977/- but he
CS(OS) No. 826A/1998 14
has only made a conservative award of Rs.11,38,438/- equivalent to 10% of
the work done in the extended period of contract.
Perusal of the award shows that the arbitrator has drawn a clear
distinction between acts completed within the stipulated date of
completion of the contract and done thereafter. The arbitrator has also
displayed the calculations reflected that the cost of material supplied within
the stipulated period has been deducted from the amount awarded.
As noticed above, it is not permissible to set aside an award only on
the ground that another interpretation may be possible.
18. In this view of the matter, certainly the challenge to the award made
on claim 4 is wholly misconceived and is hereby rejected.
Claim no.6
The claimant had made a claim of Rs.1,10,640/- on account of extra
payment for straightening and cutting of steel bars which were issued by it
in coils and bent up bundles. The arbitrator has awarded a sum of
Rs.67,950/- on this claim.
Mr. P.C. Markanda, learned senior counsel appearing for the
claimant before this court submits that this issue stands decided by judicial
pronouncements of this court reported in (2005) 3 Arbitration Law
Reporter 455 (Delhi) Naraindas R. Israni vs. DDA (paras 13, 14 and 127);
2005 (3) RAJ 641 (para 7) M/s Prem Chand Sharma & Co. vs. DDA & Ors.
wherein it was held by the court that unless such a claim was made by the
contractor during the currency of the contract when he was required to
perform this work, such a claim raised before the arbitrator for the first
time would not be maintainable. There is no dispute that no such claim
was made by the claimant to the respondent at any time before raising the
CS(OS) No. 826A/1998 15
claim before the arbitrator. In view of the principles laid down in these two
judgments, such claim would not be maintainable.
Learned senior counsel appearing for the claimant/respondent
submits that he does not press this claim.
Accordingly, the objections of the DDA so far as this claim is
concerned are sustained and the Award made on claim no. 6 shall stand set
aside and quashed.
Claim no. 8
The DDA has objected to the award made by the arbitrator on claim
8. The claimant had claimed an amount of Rs.25,89,560/- on account of
interest on the withheld amount of the claim from the due date of the final
bill to the anticipated date of appointment of arbitrator by the Engineer
member within the period specified in the Arbitration Act. I find that the
arbitrator has effected detailed calculations with regard to the interest
which he has held awardable on the amounts due to the contractor for the
delay in the payment of the final bill. The arbitrator has held the contractor
entitled to interest at the rate of 13% per annum for the pre-suit period of 7
st th
½ years from 1 August, 1985 to 28 February, 1993 and hence has
calculated an amount of Rs.5,87,189/- as due and payable to the contractor
on the amounts which have been awarded on the different claims.
It is well settled that so far as award of interest is concerned, the
court shall not normally interfere in the award rendered by the arbitrator.
In this behalf, learned senior counsel for the claimant has drawn my
attention to the principles laid down by the Apex Court in 1997 (9) SCC
252 (para 22) Steeman Ltd. vs. State of H.P. In view of the
principles laid down by the Apex Court and upon consideration of the
CS(OS) No. 826A/1998 16
reasons given by the arbitrator, in my view, the award of interest at the rate
of 13% for the period in question cannot be interfered with in the present
matter.
Claim nos. 10, 11 and 13
Learned counsel appearing for the DDA has assailed the award made
by the arbitrator on these claims of the contractor. I find that claim no. 10
is a claim made by the contractor of Rs.30,740/- on account of providing
grooves in the ceiling. Such a claim and award thereon was upheld by this
court in (1997) 1 Arb.LR 541 Nav Bharat Construction Co. vs.
DDA.
Claim no. 11 is the amount which has been claimed by the contractor
on account of expenses of maintaining watch and ward at the site during
the period for which the work was delayed.
The arbitrator has noted that even though the work done completed
in November, 1984, but the same was handed over to the allottees only
from 1987 onwards and during the intervening period the contractor had to
maintain watch and ward at site. Payment vouchers were placed on record
in support of the claim.
19. Mr. Markanda, learned senior counsel for the contractor has pointed
out that the payment vouchers placed on record were justify an award for a
much larger amount however the arbitrator has allowed only an amount of
Rs.1,71,200/-
There is no real challenge to the award made on this claim which is
based on factual findings premises on the evidence on record.
By claim no. 13 the contractor has claimed an amount of Rs.22,776/-
on account of refund of deductions made for the rebate for monthly
CS(OS) No. 826A/1998 17
payments on the ground that the DDA failed to make the payments as it
was required to do so under the contract.
My attention has been drawn to the detailed reasons recorded by the
learned arbitrator for holding that the claimant was entitled to the amounts
claimed. It is not disputed that a view taken by the arbitrator on a detailed
reasoning with regard to the merits of the matter is not to be interfered
with by the court. The award of the arbitrator on these aspects on claim 10,
11 and 13 is detailed and I see no reason to interfere with the same.
Claim No. 15
The contractor has raised the claim of Rs.6,35,600/- on account of
th
the balance amount of the final bill which was required to be paid on 27
May, 1985.
The objections of the DDA were limited to the final rate of
recovery and incorrect rate of flush door shutters having been awarded.
After a detailed consideration, the arbitrator made an award against this
claim of only Rs.2,09,059/- No objection has been raised by the DDA
therefore in respect of the award to the extent of Rs.1,14,420.67. I find that
in detailed discussion, the arbitrator has relied on clause 42 of the
agreement between the parties in respect of the penal rate recovery. Mr.
Markanda, learned senior counsel for the petitioner has drawn my
attention to the judicial pronouncements reported at AIR 1995 Delhi 87
M/s Jagan Nath Ashok Kumar vs. Delhi Development Authority and 1998
(2) RAJ 336 P.C. Sharma & Co. vs. Delhi Development Authority.
So far as the amount awarded on the flood door shutters is
concerned, the arbitrator has recorded detailed reasons for the award
CS(OS) No. 826A/1998 18
which has been made. No error which was apparent on the face of the
record has been pointed out.
Claim No. 19
The DDA has contested the award of the arbitrator on claim no. 19
allowing hiding charges of J&P etc due to belated issuance of drawings and
designs etc again I find that the arbitrator has recorded findings and
reasons based on a consideration of the evidence laid before him. The
arbitrator has also allowed rates based as per DSR 1977 which was
admittedly applicable to the instant case. The additional condition no. 1
and clause 10 are not applicable inasmuch as the hiding was extended
beyond the contractual period. For this reason the award on claim 19
cannot be faulted on any legally tenable ground.
Claim no. 21
The DDA has assailed the award made by the arbitrator on claim no.
21 whereby the claimant had claimed pendente lite and future interest at
the rate of 24%. The arbitrator has awarded pendente lite and future
interest at the rate of 18% per annum. Mr. P.C. Markanda, learned senior
counsel for the petitioner on instructions submits that the claimant would
have no objection if the claimant is awarded pendente lite and future
interest at the rate of 13%.
20. Accordingly, the objection of the DDA so far as pendente lite and
future interest are concerned is accepted. The claimant would be entitled
pendente lite and future interest at the rate of 13% per annum.
CS(OS) No. 826A/1998 19
21. In (2003) 7 SCC 396 State of U.P. Vs Allied Constructions
(para 4) the Hon'ble Apex Court laid down parameters within which the
award can be scrutinised and a perusal thereof reveals, it is not permissible
for the court to sit as a court of appeal over the verdict of the arbitrator.
22. Such a view was also taken in (1999) 9 SCC 449 Arosan
Enterprises Pvt. Ltd. vs. UOI & Anr (paras 34-37) where it was
observed that even in the event that there were persons in the award, courts
would still not interfere with it unless of course there exists a total
perversity in the award or the judgment is based on a wrong proposition of
law. In the event, however, two views are possible on a question of law as
well, the court would not be justified in interfering with the award.
th
In view of the above discussion, the award dated 6 February, 1998
to the extent of claim no. 6 is hereby set aside and quashed . Furthermore,
the award on claim no. 21 shall stand modified and the claimant petitioner
would be entitled to pendente lite and future interest at the rate of 13% per
annum.
23. The award when filed in this court has been registered as suit no.
826A/1998.
24. In view of the order passed on the unnumbered application filed on
th
9 July, 1998 under Section 30 & 33 of the Arbitration Act, 1940 it is
directed that subject to the above modifications, the award is directed to be
made rule of the court.
th
Suit No. 826A/1998 and IA No. (unnumbered) filed on 9 July, 1998
is disposed of in the above terms.
The Registry to draw up a decree sheet accordingly.
CS(OS) No. 826A/1998 20
IA No. 5761/2002
This application was not pressed before this court and accordingly is
dismissed.
(GITA MITTAL)
JUDGE
March 20, 2008
kr
CS(OS) No. 826A/1998 21
CIVIL SUIT (OS) NO. 826A/1998 &
th
IA No.(Unnumbered) ........../1998 (filed on 9 July,
1998) and IA No. 5761/2002
Date of decision : March 20, 2008
Sh. N.D.R.Israni ... Petitioner
through: Mr. P.C. Markanda, Sr. Adv. with
Mr. Naresh Markanda, Adv.
VERSUS
Delhi Development Authority .... Respondent
through: Ms. Anusuya Salwan, Adv.
CORAM:
HON'BLE MS. JUSTICE GITA MITTAL.
1. Whether reporters of local papers may be allowed
to see the Judgment? No
2. To be referred to the Reporter or not? No
3. Whether the judgment should be reported in
the Digest? No
GITA MITTAL, J.
1. By this judgment, I propose to dispose of the objections under
th
Sections 30 and 33 of the Arbitration Act, 1940 filed on 9 July, 1998 by
the Delhi Development Authority to the Award dated 6th February, 1998
made and published by Shri V.D. Tiwari, Sole Arbitrator.
The petitioner had been awarded the work of construction of 1296
MIG Houses at Trilokpuri, SH; c/o 352 MIG Houses including internal
development in Group IV, Trilokpuri. The parties entered into an
agreement bearing no.4/DD-VII-82-83. The stipulated date of completion
of the work was 4th June, 1983. The contractor was granted six months
extension of time to complete the contract under Clause 10C of the contract
between the parties and thus was required to complete the work by 4th
CS(OS) No. 826A/1998 1
December, 1983. The admitted date of actual completion of the work was
29th November, 1984 that is after a delay of 17 1/2 months. Disputes arose
between the parties and the petitioner invoked the provisions of the
arbitration clause between them. Pursuant thereto, Shri V.D. Tiwari, Chief
Engineer (Retired) was appointed the sole arbitrator. The arbitrator made
and published his award on 6th February, 1998 which has been assailed by
the Delhi Development Authority by way of the objections under Sections
30 and 33 of the Arbitration Act, 1940.
Before considering the issues raised by the parties, it would be
appropriate to consider the parameters within which this court would
exercise jurisdiction under Sections 30 and 33 of the Arbitration Act, 1940.
The parameters are well defined by a series of judicial pronouncements on
the subject. It has been repeatedly held by the Apex Court that the
arbitrator is a creation of the contract between the parties and must operate
within the four corners. Interpretation of a particular condition in the
agreement is squarely within the jurisdiction of the arbitrator. However in
cases where there is no question of interpretation of any term of the
contract, but solely reading the same as it is, yet it is found that the
arbitrator has ignored such term and awarded an amount despite the
prohibition in the agreement, it would have to be held that such award was
without jurisdiction. The arbitrator may have jurisdiction to entertain the
claim yet he may not have jurisdiction to pass an award for particular items
in view of the prohibition contained in the contract. In case of such an
award, the same would amount to a jurisdictional error [1999 (3) Arb.LR.
335 (S.C.) Steel Authority of India Limited vs. J.C. Budharaja, Government
and Mining Contractor (para 17); JT 1997 2 SC 633 : 1997 (1) Arb. LR. 292
CS(OS) No. 826A/1998 2
(SC) New India Civil Erectors Pvt. Ltd. vs. Oil & Natural Gas; JT 1991 3 SC 123
Associated Engineering Company vs. Government of Andhra Pradesh & Anr.].
2. In 1999 (3) Arb.LR 350 Rajasthan State Mines & Minerals
Limited vs. Eastern Engineering Enterprises & Anr ., it was held
that if the arbitrator decides a dispute which is beyond the scope of his
reference or beyond the subject matter of the reference or makes an award,
this regarding the terms of reference or the arbitration agreement or terms
of the contract, it would be a jurisdictional error beyond the scope of
reference and that the arbitrator cannot throw themselves to decide
conclusively that dispute as it is an error of jurisdiction.
3. In JT 1999 (3) SC 15 H.P. State Electricity Board vs. R.J.
Shah & Company , the court laid down the principal that in order to
determine whether the arbitrator has acted in exercise of jurisdiction, what
has to be seen is whether the claimant could raise a particular dispute or
claim before the arbitrator. If the answer is in the affirmative, then it is
clear that the arbitrator would have the jurisdiction to deal with such a
claim. On the other hand if the arbitration clause or a specific term in the
contract or the law does not permit or give the arbitrator the power to
decide or to adjudicate on a dispute raised by a claim or there is a specific
bar to reference of a particular claim or dispute, then any decision given by
the arbitrator in respect thereof would clearly be in excess of jurisdiction.
4. For the purposes of adjudicating upon the present objections, the
same are taken up claim wise.
Claim No. 1
The first claim raised by the contractor related to the idle centering
and shuttering during the period when the same could not be fully and
CS(OS) No. 826A/1998 3
gainfully utilised due to the required quantity of cement not being
available. It is an admitted position that cement was to be supplied by the
Delhi Development Authority. It is also not disputed that the allocated
cement was not made available to the contractor to complete the work on
time. DDA has submitted that the contractor was not entitled to any
amount for this reason in view of condition no. 1 of the contract and clause
10 of the General Conditions of the Contract. In order to appreciate the
rival contentions, it becomes necessary to consider the condition 1 of the
specifications and conditions in the contract which reads as under :-
“The contractor must get acquainted with the proposed
site for the work and study specifications and conditions
thereto before tendering. The work shall be executed as
per programme approved by the Engineer-in-charge. If
part of site is not available for any reason or there is some
un-avoidable delay in supply of materials stipulated by the
department, the programme of construction shall be
modified accordingly and the contractor shall have no
claim for any extras or compensation on this account.”
Inasmuch as the Delhi Development Authority is also placing strong
reliance on clause 10 of the General Conditions of contract, the same also
deserves to be considered in extenso and reads thus :-
“......Provided that the contractor shall in no case be
entitled to any compensation or damages on account of any
such materials and stores. Provided further that the
contractor shall be bound to execute the entire work if the
materials are supplied by the DDA within the scheduled
time for completion of the work plus 50% thereof (Schedule
time plus 6 months if the time of completion of the work
exceeds 12 months) but if a part only of the materials has
been supplied within the aforesaid period then the
contractor shall be bound to do so much of the work as
may be possible with the materials and stores supplied in
the aforesaid period. For the completion of the rest of the
work, the contractor shall be entitled to such extension of
time as may be determined by the Engineer-in-Charge
whose decision in this regard shall be final.”
The arbitrator arrived at a conclusion that only such delay as was for
CS(OS) No. 826A/1998 4
unavoidable reason would have enabled the Delhi Development Authority
to avoid its liability for delay which has occurred and that in the instant
case, the Delhi Development Authority had failed to establish that there
was any unavoidable delay. On a close reading of the documents placed by
the parties before him, the arbitrator came to a conclusion that nearly
39,200 bags of cement were issued only by the end of June, 1983, when the
stipulated date of completion of the work was over. For the purposes of
arriving at this conclusion, the learned arbitrator placed reliance on the
cement register maintained by the Delhi Development Authority itself. It
has also been noticed, that there is an admitted delay on account of short
supply of the cement and that such delay would have resulted in holding up
of casting of roof slabs. The arbitrator has not accepted the period of delay
as alleged by the claimant before him and has held that delay of only 20
days has occurred for this reason. On this basis, the arbitrator made an
award of Rs.22,437/- only.
It is well settled that this court cannot substitute the reasoning given
by the arbitrator for making an award for the particular item. In this
behalf, reference can be made appropriately to the pronouncement of the
Apex Court in (2003) 7 SCC 396 State of U.P. vs. Allied
Constructions wherein the Apex Court held that it was not permissible
for the court to sit as a court of appeal over the verdict of the arbitrator.
5. In this behalf, the observations of the Apex Court in (1999) 9 SCC
449 Arosan Enterprises Pvt. Ltd. vs. UOI & Anr . wherein the court
reiterated the well settled principal of law that reappraisal of evidence by
the court is not permissible and as a matter of fact, exercise of power by the
court to reappraise the evidence is unknown to proceedings under Section
CS(OS) No. 826A/1998 5
30 of the Arbitration Act. It was further observed that in the event of there
being no reasons in the award, question of interference of the court would
not arise at all. In the event, however, there are reasons, interference
would still not be available within the jurisdiction of the court unless of
course there exist total perversity in the award or the judgment is based on
a wrong proposition of law. However in the event that two views are
possible, for a question of law as well, the court would not be justified in
interferring with the award.
In this landmark pronouncement, the court also clearly laid down the
parameters of scrutiny by the court into an arbitration award and the scope
of judicial review. In para 37 of the pronouncement the court held thus :-
“37. The common phraseology 'error apparent on the face of
the record' does not itself, however, mean and imply closer
scrutiny of the merits of documents and materials on record:
The court as a matter of fact, cannot substitute its evaluation
and come to the conclusion that the arbitrator had acted
contrary to the bargain between the parties. If the view of the
arbitrator is a possible view the award or the reasoning
contained therein cannot be examined. In this context,
reference may be made to one of the recent decision of this
Court in the case of State of Rajasthan v. Puri Construction
Co. Ltd MANU/SC/0865/1994 wherein this Court relying
upon the decision of Sudarsan Trading Co.'s case Sudarsan
Trading Co. v. Government of Kerala and Anr.
MANU/SC/0361/1989 , observed in paragraph 31 of the
Report as below:
A court of competent jurisdiction has both right and duty to
decide the lis presented before it for adjudication according
to the best understanding of law and facts involved in the lis
by the judge presiding over the court. Such decision even if
erroneous either in factual determination or application of
law correctly, is a valid one and binding inter partes. It does
not, therefore, stand to reason that the arbitrator's award
will be per se invalid and inoperative for the simple reason
that the arbitrator has failed to appreciate the facts and has
committed error in appreciating correct legal principle in
basing the award. An erroneous decision of a court of law is
open to judicial review by way of appeal or revision in
accordance with the provisions of law. Similarly, an award
CS(OS) No. 826A/1998 6
rendered by an arbitrator is open to challenge within the
parameters of several provisions of the Arbitration Act. Since
the arbitrator is a judge by choice of the parties and more
often than not a person with little or no legal background,
the adjudication of disputes by an arbitration by way of an
award can be challenged only within the limited scope of
several provisions of the Arbitration Act and the legislature
in its wisdom has limited the scope and ambit of challenge to
an award in the Arbitration Act. Over the decades, judicial
decisions have indicated the parameters of such challenge
consistent with the provisions of the Arbitration Act. By and
large the Courts have disfavoured interference with
arbitration award on account of error of law and fact on the
score of misappreciation and misreading of the materials on
record and have shown definite inclination to preserve the
award as far as possible. As reference to arbitration of
disputes in commercial and other transactions involving
substantial amount has increased in recent times, the Courts
were impelled to have fresh look on the ambit of challenge to
an award by the arbitrator so that the award does not get
undesirable immunity. In recent times, error in law and fact
in basing an award has not been given the wide immunity as
enjoyed earlier, by expanding the import and implication of
"legal misconduct" of an arbitrator so that award by the
arbitrator does not perpetrate gross miscarriage of justice
and the same is not reduced to mockery of a fair decision of
the lis between the parties to arbitration. Precisely for the
aforesaid reasons, the erroneous application of law
constituting the very basis of the award and improper and
incorrect findings of fact, which without closer and intrinsic
scrutiny, are demonstrable on the face of the materials on
record, have been held, very rightly, as legal misconduct
rendering the award as invalid. It is necessary, however, to
put a note of caution that in the anxiety to render justice to
the party to arbitration, the court should not reappraise the
evidences intrinsically with a close scrutiny for finding out
that the conclusion drawn from some facts, by the arbitrator
is, according to the understanding of the court, erroneous.
Such exercise of power which can be exercised by an
appellate Court with power to reverse the finding of fact, is
alien to the scope and ambit of challenge of an award under
the Arbitration Act. Where the error of finding of facts
having a bearing on the award is patent and is easily
demonstrable without the necessity of carefully weighing the
various possible viewpoints, the interference with award
based on erroneous finding of fact is permissible. Similarly,
if an award is based by applying a principle of law which is
patently erroneous, and but for such erroneous application
of legal principle, the award could not have been made, such
award is liable to be set aside by holding that there has been
a legal misconduct on the part of the arbitrator. In ultimate
CS(OS) No. 826A/1998 7
analysis it is a question of delicate balancing between the
permissible limit of error of law and fact and patently
erroneous finding easily demonstrable from the materials on
record and application of principle of law forming the basis
of the award which is patently erroneous. It may be
indicated here that however objectively the problem may be
viewed, the subjective element inherent in the judge
deciding the problem, is bound to creep in and influence the
decision. By long training in the art of dispassionate
analysis, such subjective element is, however, reduced to
minimum. Keeping the aforesaid principle in mind, the
challenge to the validity of the impugned award is to be
considered with reference to judicial decisions on the
subject.”
In any event, the issues raised by the DDA/objector in the matter on
merits relating to default, extension of time, quantum of damages etc are all
questions of fact which the arbitrator was within his jurisdiction to decide
as deemed fit. This court has no writ jurisdiction or authority to intradict
an award on such factual issues in view of the principles laid down by the
Apex Court.
The DDA has been unable to point out any error of law on the face of
the award.
6. In JT 1999 (3) SC 15 H.P. State Electricity Board vs. R.J.
Shah & Company , the court laid down the principal that it is
impermissible for the court to set aside an arbitration award merely
because another view was possible.
7. In (2001) 3 SCC 397 U.P. State Electricity Board vs.
Searsole Chemicals Limited , the court held that of the arbitrators have
applied their mind to the pleadings, the evidence adduced and the terms of
the contract, there is no scope for the court, including the Supreme Court to
reappraise the matter as if this were an appeal court and it is clear that
CS(OS) No. 826A/1998 8
where two views are possible, the view taken by the arbitrators would
prevail.
8. In the instant case, the arbitrator has given reason and has closely
examined the claims made by the contractor and the stand of the Delhi
Development Authority. The same have been analysed as is clearly
reflected from the award. The arbitrator was nominated by the DDA and
was an expert engineer with a technical background. The DDA has been
unable to point out that the interpretation of the contract and the
documents or the reasoning adopted by the arbitrator was not a plausible
one. A Division Bench of this court in its pronouncement reported at AIR
2003 Delhi 128 Em and Em Associates vs. Delhi Development
Authority & Anr. has in such circumstances held that the setting aside of
the award was speculative.
9. I find that in the instant case, the contractor made the claim towards
the payment for idle shuttering and centering on the ground that the same
could not be utilised because the DDA could not supply the cement. It is an
admitted case of the respondent that there was shortage of the cement and
it was therefore not possible for the contractor to lay the roof slabs. The
arbitrator has returned a finding on consideration of the entire material
that the requisite quantity i.e. 39,200 bags of cement could not be issued by
the DDA within the stipulated period.
10. The arbitrator has further held that the DDA was required to make
out a case that the delay which occurred was for reasons which were
unavoidable. It has been held that the DDA failed to establish that the
delay had occurred on account of any reasons which were unavoidable. On
an analysis of the material led before him, the arbitrator has awarded all
CS(OS) No. 826A/1998 9
such idle charges only for a period of 20 days. In my view the challenge to
the award made on claim no. 1 by the arbitrator is therefore only
misconceived and legally not tenable. The same is accordingly rejected.
Claim no.4
The petitioner made a claim for damages due to prolongation of the
contract period beyond the stipulated date of completion of the work due to an
increase in the price of materials and other overheads. The DDA has assailed
the award on this claim of Rs.11,38,438/- on the ground that the arbitrator has
ignored the relevant specifications and additional condition no. 1 of the
agreement which, according to the DDA stated that no damages could be
awarded in case there was unavoidable delay in handing over of the site or in
supply of material in any circumstances. The DDA has also objected that any
increase in material and labour that is to be paid is taken care of under clause
10c of the contract and nothing extra is payable to the contractor.
11. I find that the learned arbitrator has again closely discussed the
evidence on record and given findings which have been drawn on the
documents as well as conditions of the contract. The arbitrator arrived at a
conclusion that the DDA was in breach of the contract on account of : non-
th nd
availability of drawings from 4 June, 1982 to 22 July, 1982; belated
th st
decision of mosaic flooring from 4 June, 1982 to 1 November, 1983 and
th st
presentation of high tension line from 4 June, 1982 to 1 December, 1983,
th th
belated decision of flush door shutters from 4 June, 1982 to 5 January,
1984 and the time required for doing the extra work. The stipulated date of
th
the completion of contract was 4 June, 1983. After an extension of six
th
months under clause 10(c) the contract was to be completed by 4
December, 1983. It is an admitted position that on account of the
CS(OS) No. 826A/1998 10
abovenoticed reasons for delay, the contract could actually be completed
th
only on the 29 November, 1984. The DDA has objected to the award on
the above claim on the ground that in terms of additional condition no. 1, in
case the site was handed over belatedly or in parts, the contractor was not
entitled to any damages or compensation. The arbitrator has received that
such condition could not apply as it cannot be stretched to mean that the
site could be handed over even during the extended period of the contract
and that the additional condition no. 1 did not envisage such a condition.
The additional condition no. 1 only postulated a situation that the site could
be handed over belatedly and in parts. Certainly a contractor could not be
deprived of his dues and their profits if the site was handed over beyond the
period of contract. The DDA is unable to point out any contractual
provision under which it was authorised to hand over the part of the site
beyond the stipulated date of completion of the contract that is during the
extended period.
12. So far as the reliefs on clause 10 is concerned, the arbitrator has given
an interpretation of the term in the contract and held that the same does
not apply as the delay envisaged in clause 10 was only a delay of six months
whereas the delay which has occurred on the part of the DDA in supplying
the stores was to the tune of 581 days.
13. In view of the above, reference can usefully be made to the
pronouncements of this court reported at 1994 2 Arb.LR 479 (para 7 at
page 483) Shri Sunder Lal Khatri vs. DDA and 2004 (3) RAJ 540 (DB)
(para 5 and 6) DDA vs. Wee Aar Constructive Builders and 1998 (2) RAJ
336 (para 24) P.C. Sharma & Company vs. DDA wherein the impact of
CS(OS) No. 826A/1998 11
additional condition no. 1 has been clearly considered.
14. In FAO (OS) No. 252/1994 Delhi Development Authority v.
Sunder Lal Khetri & Sons the court held thus :-
“The plea raised by learned counsel for the
appellant in regard to claim no. 3 is that the Arbitrator
had no powers to award any amount under clause 10(c)
and only the Superintending Engineer of Delhi
Development Authority could determine the amount
payable in terms of clause 2 of the agreement. This
contention cannot be sustained for the reason that the
powers of Superintending Engineer were confined to
fixing the compensation when the Contractor failed to
complete the work within the stipulated period. The
Superintending Engineer was not the final authority to
determine compensation claimed by the contractor on
account of delay by DDA under clause 10(c) of the
agreement. Further plea that the arbitrator had awarded
the sum of Rs.70,548.45 p. in favour of the claimant
without any basis whatsoever is also devoid of any
substance for the reason that the arbitrator had awarded
this amount on the basis of details worked out by
appellant's officers vide Exhibit R-30 and a letter exhibit
C-50 addressed by Executive Engineer of the appellant to
his superintending engineer admitting that the delay was
not on account of any default of the contractor.
Therefore, learned Single Judge was fully justified in
upholding this claim against the appellant. The judgment
in “M/s. Oriental Structural Engineers Vs. DDA”
reported in 49(1993) DELHI LAW TIMES 514 relied
upon by learned counsel for the appellant was under
entirely different facts and circumstances in as much as
in the said case the superintending engineer exercising
his powers under clause 2 of the agreement had held that
the delay was on the part of the contractor and had then
levied a compensation which was payable by the
contractor to DDA. The award in respect of claim no. 4
was under clause 10(c) and the arbitrator had relied upon
Exhibit R-31 prepared by the officers of the appellant.
Learned Single Judge had rightly declined to interfere
with this claim. The challenge to claim no. 7 on the
ground that there was no agreement between the parties
for payment of damages to the respondent/claimant and
the damages ought to have been calculated on the basis of
accruals was rightly negated by the learned Single Judge.
In “Dwarka Das v. State of Madhya Pradesh reported in
AIR 1999 SC 1031 their Lordships of the Supreme Court
CS(OS) No. 826A/1998 12
clearly held that a contractor was entitled to claim
damages for loss of profit which he was expected to earn
by undertaking the contract and claim of expected profits
was legally admissible on proof of the breach of contract
by the erring party. A Division Bench of this court in M/s
Metro Electric Company, New Delhi v. Delhi
Development Authority reported in AIR 1980 Delhi 266
had upheld the award of damages against DDA
recognising the contractor's right to damages for breach
of the contract. Mere extension of time cannot be taken
as a substitute for claim of damages. The award of
damages in this case was on account of the loss incurred
by the contractor due to increase in the prices of material
because of delay on the part of the appellant/DDA. The
arbitrator had taken the help of Cost Index published by
the Government and had awarded damages. The learned
Single Judge dealt with this submission in detail and we
do not find any good grounds for taking a different view.
The amount of damages was calculated by taking into
consideration the quantum of work executed by the
Contractor and then applying percentage increase on the
basis of Index Number after deducting the cost of
material issued by the appellant. There are thus no
grounds at all for interfering with the view taken by
learned Single Judge on this issue.”
15. I find that so far as the objection of the respondents that clause 10C
shall not be applicable in view of the judgments of the Division Bench of
this court reported at AIR 1980 Delhi 266 (page 90) Metro Electric
Company Limited vs. DDA. In this judgment the Division Bench held that
clause 10 C presumed that the contract was completed during the agreed
period of the contract and was applicable only during the progress of the
work within that period. In the instant case, the DDA failed in providing
the materials and not even handing over the site and consequently the DDA
cannot take the shelter of the clause 10C which presumed that the contract
is completed during the agreed period of contract. Reference can also be
usefully made to the pronouncement of this court reported as Delhi
Development Authority vs. S.S. Jetley 2001 (1) Arb.LR 289 (Del)
(DB) (para 8 on page 294); Prem Chand Sharma vs. DDA 2005 (3)
CS(OS) No. 826A/1998 13
RAJ 641 (Del) (para 12 at page 645) and Pt. Munshi Ram &
Associates (P) Ltd. vs. Delhi Development Authority 2006(1)
RAJ 86 (para 16 on page 94) in this regard.
16. The last objection to the award made on claim no. 4 is based on the
plea of the DDA that the learned arbitrator could not have awarded any
amount on the basis of the cost index. My attention is drawn by Mr.
Markanda, learned senior counsel appearing for the respondent to judicial
pronouncements on this very plea which are reported at 1994 (2) Arb.LR.
479 Shri Sunder Lal Khatri vs. DDA wherein the court has upheld the
award based on a cost index published by the State periodically based on
scientific data. Similarly in 1997 (1) Arb.LR 541 Nav Bharat
Construction Company vs. DDA , the court approved an award where
the arbitrator found that it was fair and reasonable to work out the increase
on the basis of the cost index applying the CPWD manual. It was held that
no fault could be found in the arbitrator doing so to arrive at a judicious
and reasonable decision. Again in 2005 (3) RAJ 641 Prem Chand
Sharma & Company vs. DDA it was held that the approach of the
arbitrator in finding that the building cost index calculated by the CPWD is
the rightly recognised method or working out the cost escalation could not
be faulted. The court had found that the CPWD rates are not profit rates
but are rates of escalation computed by statutory authorities which have
been relied upon for the purposes of arriving at the escalation figure. Just
as in the present case, the respondent had not produced any other material
to enable the arbitrator to come to a different conclusion.
17. Even otherwise, the learned arbitrator has found that as per the cost
index the amount due to the petitioner worked out to Rs.16,45,977/- but he
CS(OS) No. 826A/1998 14
has only made a conservative award of Rs.11,38,438/- equivalent to 10% of
the work done in the extended period of contract.
Perusal of the award shows that the arbitrator has drawn a clear
distinction between acts completed within the stipulated date of
completion of the contract and done thereafter. The arbitrator has also
displayed the calculations reflected that the cost of material supplied within
the stipulated period has been deducted from the amount awarded.
As noticed above, it is not permissible to set aside an award only on
the ground that another interpretation may be possible.
18. In this view of the matter, certainly the challenge to the award made
on claim 4 is wholly misconceived and is hereby rejected.
Claim no.6
The claimant had made a claim of Rs.1,10,640/- on account of extra
payment for straightening and cutting of steel bars which were issued by it
in coils and bent up bundles. The arbitrator has awarded a sum of
Rs.67,950/- on this claim.
Mr. P.C. Markanda, learned senior counsel appearing for the
claimant before this court submits that this issue stands decided by judicial
pronouncements of this court reported in (2005) 3 Arbitration Law
Reporter 455 (Delhi) Naraindas R. Israni vs. DDA (paras 13, 14 and 127);
2005 (3) RAJ 641 (para 7) M/s Prem Chand Sharma & Co. vs. DDA & Ors.
wherein it was held by the court that unless such a claim was made by the
contractor during the currency of the contract when he was required to
perform this work, such a claim raised before the arbitrator for the first
time would not be maintainable. There is no dispute that no such claim
was made by the claimant to the respondent at any time before raising the
CS(OS) No. 826A/1998 15
claim before the arbitrator. In view of the principles laid down in these two
judgments, such claim would not be maintainable.
Learned senior counsel appearing for the claimant/respondent
submits that he does not press this claim.
Accordingly, the objections of the DDA so far as this claim is
concerned are sustained and the Award made on claim no. 6 shall stand set
aside and quashed.
Claim no. 8
The DDA has objected to the award made by the arbitrator on claim
8. The claimant had claimed an amount of Rs.25,89,560/- on account of
interest on the withheld amount of the claim from the due date of the final
bill to the anticipated date of appointment of arbitrator by the Engineer
member within the period specified in the Arbitration Act. I find that the
arbitrator has effected detailed calculations with regard to the interest
which he has held awardable on the amounts due to the contractor for the
delay in the payment of the final bill. The arbitrator has held the contractor
entitled to interest at the rate of 13% per annum for the pre-suit period of 7
st th
½ years from 1 August, 1985 to 28 February, 1993 and hence has
calculated an amount of Rs.5,87,189/- as due and payable to the contractor
on the amounts which have been awarded on the different claims.
It is well settled that so far as award of interest is concerned, the
court shall not normally interfere in the award rendered by the arbitrator.
In this behalf, learned senior counsel for the claimant has drawn my
attention to the principles laid down by the Apex Court in 1997 (9) SCC
252 (para 22) Steeman Ltd. vs. State of H.P. In view of the
principles laid down by the Apex Court and upon consideration of the
CS(OS) No. 826A/1998 16
reasons given by the arbitrator, in my view, the award of interest at the rate
of 13% for the period in question cannot be interfered with in the present
matter.
Claim nos. 10, 11 and 13
Learned counsel appearing for the DDA has assailed the award made
by the arbitrator on these claims of the contractor. I find that claim no. 10
is a claim made by the contractor of Rs.30,740/- on account of providing
grooves in the ceiling. Such a claim and award thereon was upheld by this
court in (1997) 1 Arb.LR 541 Nav Bharat Construction Co. vs.
DDA.
Claim no. 11 is the amount which has been claimed by the contractor
on account of expenses of maintaining watch and ward at the site during
the period for which the work was delayed.
The arbitrator has noted that even though the work done completed
in November, 1984, but the same was handed over to the allottees only
from 1987 onwards and during the intervening period the contractor had to
maintain watch and ward at site. Payment vouchers were placed on record
in support of the claim.
19. Mr. Markanda, learned senior counsel for the contractor has pointed
out that the payment vouchers placed on record were justify an award for a
much larger amount however the arbitrator has allowed only an amount of
Rs.1,71,200/-
There is no real challenge to the award made on this claim which is
based on factual findings premises on the evidence on record.
By claim no. 13 the contractor has claimed an amount of Rs.22,776/-
on account of refund of deductions made for the rebate for monthly
CS(OS) No. 826A/1998 17
payments on the ground that the DDA failed to make the payments as it
was required to do so under the contract.
My attention has been drawn to the detailed reasons recorded by the
learned arbitrator for holding that the claimant was entitled to the amounts
claimed. It is not disputed that a view taken by the arbitrator on a detailed
reasoning with regard to the merits of the matter is not to be interfered
with by the court. The award of the arbitrator on these aspects on claim 10,
11 and 13 is detailed and I see no reason to interfere with the same.
Claim No. 15
The contractor has raised the claim of Rs.6,35,600/- on account of
th
the balance amount of the final bill which was required to be paid on 27
May, 1985.
The objections of the DDA were limited to the final rate of
recovery and incorrect rate of flush door shutters having been awarded.
After a detailed consideration, the arbitrator made an award against this
claim of only Rs.2,09,059/- No objection has been raised by the DDA
therefore in respect of the award to the extent of Rs.1,14,420.67. I find that
in detailed discussion, the arbitrator has relied on clause 42 of the
agreement between the parties in respect of the penal rate recovery. Mr.
Markanda, learned senior counsel for the petitioner has drawn my
attention to the judicial pronouncements reported at AIR 1995 Delhi 87
M/s Jagan Nath Ashok Kumar vs. Delhi Development Authority and 1998
(2) RAJ 336 P.C. Sharma & Co. vs. Delhi Development Authority.
So far as the amount awarded on the flood door shutters is
concerned, the arbitrator has recorded detailed reasons for the award
CS(OS) No. 826A/1998 18
which has been made. No error which was apparent on the face of the
record has been pointed out.
Claim No. 19
The DDA has contested the award of the arbitrator on claim no. 19
allowing hiding charges of J&P etc due to belated issuance of drawings and
designs etc again I find that the arbitrator has recorded findings and
reasons based on a consideration of the evidence laid before him. The
arbitrator has also allowed rates based as per DSR 1977 which was
admittedly applicable to the instant case. The additional condition no. 1
and clause 10 are not applicable inasmuch as the hiding was extended
beyond the contractual period. For this reason the award on claim 19
cannot be faulted on any legally tenable ground.
Claim no. 21
The DDA has assailed the award made by the arbitrator on claim no.
21 whereby the claimant had claimed pendente lite and future interest at
the rate of 24%. The arbitrator has awarded pendente lite and future
interest at the rate of 18% per annum. Mr. P.C. Markanda, learned senior
counsel for the petitioner on instructions submits that the claimant would
have no objection if the claimant is awarded pendente lite and future
interest at the rate of 13%.
20. Accordingly, the objection of the DDA so far as pendente lite and
future interest are concerned is accepted. The claimant would be entitled
pendente lite and future interest at the rate of 13% per annum.
CS(OS) No. 826A/1998 19
21. In (2003) 7 SCC 396 State of U.P. Vs Allied Constructions
(para 4) the Hon'ble Apex Court laid down parameters within which the
award can be scrutinised and a perusal thereof reveals, it is not permissible
for the court to sit as a court of appeal over the verdict of the arbitrator.
22. Such a view was also taken in (1999) 9 SCC 449 Arosan
Enterprises Pvt. Ltd. vs. UOI & Anr (paras 34-37) where it was
observed that even in the event that there were persons in the award, courts
would still not interfere with it unless of course there exists a total
perversity in the award or the judgment is based on a wrong proposition of
law. In the event, however, two views are possible on a question of law as
well, the court would not be justified in interfering with the award.
th
In view of the above discussion, the award dated 6 February, 1998
to the extent of claim no. 6 is hereby set aside and quashed . Furthermore,
the award on claim no. 21 shall stand modified and the claimant petitioner
would be entitled to pendente lite and future interest at the rate of 13% per
annum.
23. The award when filed in this court has been registered as suit no.
826A/1998.
24. In view of the order passed on the unnumbered application filed on
th
9 July, 1998 under Section 30 & 33 of the Arbitration Act, 1940 it is
directed that subject to the above modifications, the award is directed to be
made rule of the court.
th
Suit No. 826A/1998 and IA No. (unnumbered) filed on 9 July, 1998
is disposed of in the above terms.
The Registry to draw up a decree sheet accordingly.
CS(OS) No. 826A/1998 20
IA No. 5761/2002
This application was not pressed before this court and accordingly is
dismissed.
(GITA MITTAL)
JUDGE
March 20, 2008
kr
CS(OS) No. 826A/1998 21