Delhi High Court
Satya Prakash & Bros. vs Dda And Anr on 28 September, 2001
Author: A.K. Sikri
Bench: A.K. Sikri
JUDGMENT A.K. Sikri, J.
1. The petitioner was awarded the work of "Development of land for CGHS in Zone, E-S, Patpar Ganj, SH:Construction of SW Drains Vide agreement No. 7/EE/DD IX/DDA/85-86. However, certain disputes arose between the parties and at the request of the petitioner, the respondent No. 2 Sh. S.K. Ahuja, Chief Engineer, Telecom was appointed as sole arbitrator by the Engineer Member, DDA vide his letter dated 8th October, 1992. He entered upon reference and adjudicated the claims and counter-claims submitted before hi. It resulted in making and publishing award dated 11th August, 1995. On an application filed by the petitioner under Sections 14 and 17 of the Arbitration Act, 1940, the arbitrator was directed to file the award and proceedings in this court which he did. Notice of filing of the award was sent to both the parties. By means of IA No. 12034/96 the respondent DDA has filed objections to this award.
2. Although number of objections are taken at the time of arguments learned counsel for the respondent confined her challenge to the award in respect of claims 5 and 6 only.
3. Claim No. 5 is for Rs. 2 lacs on account of loss of profit for non-execution of the part of the work. It was the case of the petitioner that work amounting to Rs. 1,35,98,640/- was awarded with stipulated date of commencement as 1st June, 1985 and stipulated date of completion as 31st May, 1986. However, the petitioner was provided with part of site and accordingly the work to the extent of Rs. 1,14,22,387/- could be completed by him. Since the remaining site could not be handed over to the petitioner, the competent authority approved the case of closure of the contract. In this manner the petitioner could not execute the balance work for Rs.21,76,253/-. It was the case of the petitioner that had he been allowed to execute the balance work, he would have earned profit of Rs. 2 lacs thereon which was calculated at the rate of 10 per cent of the work. The arbitrator found the claim to be justified and awarded Rs.2 lacs in favor of the petitioner.
4. The objection of the DDA is that no such claim could be awarded in view of clause-1 of the general terms and conditions of contract between the parties. This clause reads as under:
"The contractor must get acquainted with the proposed site for the works and study specifications and conditions carefully before tendering. The work shall be executed as per programme approved by the Engineer-in-charge. If part of the site is not available for any reasons of these is some unavoidable delay in supply of materials stipulated by the Departments, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extras or compensation on this account."
5. It was submitted that in view of the aforesaid clause, the petitioner was to acquaint himself with the proposed site and if the part of site was not available for any reasons the programme of construction could be modified and contractor could not be entitled to any claim for extras or compensation on this account. It was also submitted that the arbitrator was bound by the provisions of the contract and acting contrary to the aforesaid provisions amount to misconduct. The arbitrator while awarding to the claim has noted the contention of the respondent/DDA that the petitioner was not entitled for any possession is the part of the site was not made available. He did not deal with this contention specifically and stating that admittedly as the part of site was not made available, operation of the work remained unexecuted, the claims was fully justified for ward of compensation towards loss of profit at the rate of 10 per cent of the value of the work remained unexecuted. The learned counsel for the respondent/DDA however, submitted that this very clause came up for interpretation in the case of M/s Aar Constructive Builders Vs. Delhi Development Authority & Anr. decided on 21st August, 1991 and relied upon the following observations of the court:
"The arbitrator has interpreted this clause to mean that there must exist some reason for not making available the site to the contractor before this clause could come to rescue of the DDA. He has recorded that no such reason has been furnished by the DDA and thus, this clause is not of any help to the DDA. The wording of this clause, however, immunises the DDA from any claim regarding compensation if a part of site is not made available to the contractor for any reason. In the present case, the sites have been made available to the petitioner but due to stay order being obtained some of the sites had to be changed so it is not the case where any party of the site has not been at all made available to the contractor. So, the case of the petitioner does not fall in this particular clause at all on the face of it. Even if there has been some reason for not making available some of this sites to the contractor even then this particular clause would not become available because the question was whether the sites which have ben made available to the contractor where the work had been carried out were made available in time or not? It is admitted case that as certain sites could not be made available on account of some reason by the DDA the alternate sites were given to the contractor which resulted in delay in execution of the work resulting in damages of various kinds enumerated above to the petitioner. It is also settled principle that if two interpretations of a particular clause are available then the interpretation given by the arbitrator is final in respect of the said particular clause. The words 'any reason' could mean that there must be some reason. The court may in its wisdom hold that interpretation of this clause is different and it would mean that even if there exists no reason for not making available a part of the sites still the interpretation of this clause would be that DDA is not liable for any compensation. AT any rate as I interpret the clause, I find that this clause would apply where a part of site is not made available to the contractor at all and in that situation the DDA would not be liable for compensation. In the present case the facts are different. Here certain sites were not made available and in lieu of them other sites were made available. In fact according to the contract, the construction of entire work relating to 32 blocks was to be given to the petitioner. Out of 32 blocks four blocks were made available to the contractor from April 4, 1983, eight blocks from June 4, 1983, four blocks from June 24, 1983 and twelve blocks from February 8, 1984. The compensation is being sought by the petitioner because of delay in handling over the remaining blocks which resulted in prolongation of the execution of the work. So clause 1 would not apply to such a case."
6. A closure scrutiny of the aforesaid case would show that this judgment on present facts goes against the petitioner and in favor of the DDA. That was a case where there was delay in handing over of the site and due to delay the contractor claimed compensation. It was given by the arbitrator holding that no reasons have been furnished by DDA for delay in handing over of the site, and therefore, the clause was of no help to DDA. The court recorded that if two interpretations of a particular clause were possible, the interpretation given by the arbitration was final in respect of a particular clause. The present case is not a case of delay in handing over the site but where part site is not handed over at all and it was resulted in non-execution of part contract. What would be the position in such a case in answered in the aforesaid judgment itself in the following words:
"At any rate as I interpret the clause, I find that this clause would apply where a part of site is not made available to the contractor at all and in that situation the DDA would not be liable for compensation."
7. When this is the situation in the present case, aforesaid interpretation given would apply and as per this interpretation DDA would not be liable for compensation. The arbitrator, therefore, awarded the claim against the provisions of clause 1 and without even discussing the effect of that clause. It is now well settled that if the arbitrator acts contrary to the specific provisions of the contract then he commits legal misconduct. (Refer : 1. 1991(2) ALR 180, Associated Engineering Co. Vs. Government of Andhra Pradesh and Anr. 2. 1999(3) ALR 335, Steel Authority of India Limited Vs. J.C. Budhiraja, Government and Mining Contractor 3. 1999(3) ALR 350, Rajasthan State Mines and Minerals Ltd. Vs. Eastern Engineering Enterprises and Anr. , Continental Construction Co. Ltd. Vs. State of Madhya Pradesh) . Learned counsel for the petitioner has also cited the judgment of this court in the case of Shri Sunder Lal Khatri Vs. DDA decided on 8th September, 1994. However, that was also a case for delay in handing over the site which resulted in prolongation of the contract and claiming compensation on that account. The Claim No. 5 awarded by the contractor is, therefore, set aside.
8. In so far as claim No. 6 is concerned, this claim is for Rs. 25 lacs on account of damages du to prolongation of the contract. The arbitrator has awarded this claim to the extent of Rs. 20,92,000/-. Calculations in support of the award of this claim are given in the award. It may be mentioned that admittedly the facts are that there have been delays on the part of the respondent/DDA in providing the site and clearing the encroachment so as to enable to petitioner to a smooth performance of the contract. The delay was for a period of three years and 10 months. The petitioner could prove on record that during this prolonged period, the claimant/petitioner had to maintain establishment and to bear the overhead expenses for the execution of work and as such he was fully justified in claiming compensation towards overheads and profits under provisions of Section 73 of the Indian Contract Act. In awarding the claim, the arbitrator also held that such claim was justifiable under Section 73 of the Indian Contract Act in view of the following judgments:
1. AIR 1877 Vol.II 748 Salwan Construction Co. Vs. UOI.
2. AIR 1980 Delhi 266, Metro Electric Co. Vs. Delhi Development Authority.
3. 1982 R.L.R. Rawla Construction Co. Vs. UOI.
4. ALR 1988 (1) Delhi 356 Tarapore & Company Vs. DDA.
5. , UOI Vs. Abhey Sarkar.
6. , P.M. Paul Vs. UOI.
9. The learned counsel for the respondent while objecting to the award of this claim again relied upon the aforesaid clause 1 extracted above and on that basis, it was submitted that such a claim was not admissible. Additionally it was argued that if there was a delay, the petitioner had already been compensated by giving escalated price for material and labour under clause 10 CC of the contract, and therefore, awarding the claim under this held, amounted to giving double benefit to the petitioner. It was also submitted that the arbitrator had not given any reasons in respect of clause-1 and such an approach was contrary to the law laid don by this court in the case of M.L. Mahajan Vs. DDA in Suit No. 2185/87 decided on 20th July, 1997 and in particular following observations were passed:
"It is true that the arbitrator has mentioned these two reasons for awarding the sum of Rs.2,21,600/- under this head but the award deals with both the reasons together and does not indicate as to the extent of the delay caused due to late giving of decisions and drawings and due to late issuance of the cement. It may be that the arbitrator would have been competent to award damages if there was a delay in completion of the contract, due to no fault of the contractor, and the contractor held suffered loss or damages only for the reason that there was delay in giving decisions and drawings to the contractor. But where, as in the present case, it is not discernible as to which of the reasons prevailed with the arbitrator, namely, delay on account of decisions and drawings or delay on account of issuance of cement and what was the extent of the delay and how is it co-related with the damages, I am afraid it is not possible to uphold the award of the arbitrator in this behalf. The delay could have been mostly due to non-supply of material and because of clause 10 of the contract no extra claim was entertainable by the arbitrator. From the award it is impossible to bifurcate the sum awarded as representing damages on account of delay of decisions etc. and delay on account of non-supply of cement. The objection with regard to this claim has, therefore, to be sustained."
10. Clause 1 of the General Conditions has already been reproduced above as per which if the part of the site is not available for any reasons, the programme of construction shall be modified and the contractor shall have no claim for any extras or compensation on this account. The perusal of the award shows that this contention was raised before the arbitrator and the arbitrator has noted it while recording the submissions of DDA. However, the arbitrator has not dealt with the effect of this clause at all. No doubt, the learned arbitrator has taken into consideration the provisions of Section 73 of the Indian Contract Act and held that the claim is justifiable in view of the law laid down in the judgments on Section 73 reference to which have already been made above. However, what would be the effect of Clause 1 of the General Conditions which stipulates that if there is a delay in handing over the site, no claim would be admissible, is not considered by the learned arbitrator. The perusal of the award further shows that delay has occurred in providing the site and clearing the encroachment. As already pointed out above, the learned arbitrator cannot act contrary to the specific provision of the contract. Therefore, it was incumbent upon the learned arbitrator to discuss the implications of Clause 1 of the General Conditions before awarding the contract. He having no done so, there is no option but to remit the case back to the learned arbitrator on this question. Similar approach adopted by Andhra Pradesh High Court was held to be justified by the Supreme Court in the case of Ramachandra Reddy & Co. Vs. State of A.P. and Others .
11. In view of this dicta laid down in the aforesaid judgment, the matter is remitted back to the learned arbitrator o decide afresh the admissibility of claim No. 6 after taking into consideration all the submissions of the DDA including in respect of Clause 1 of the General Conditions.
12. The result of the aforesaid discussion is that the award on Claims 5 and 6 is set aside. In so far as award on claim No. 6 is concerned, matter is remitted back to the learned arbitrator for fresh adjudication. Since the award is severable and is not a hybrid award, the rest of the award is made rule of the Court. Decree be drawn accordingly.
13. Suit and IAs. stand disposed of.