Delhi High Court
W.S. Construction Co. vs Dda And Anr. on 19 September, 2001
JUDGMENT V.S. Aggarwal, J.
1. This was a petition filed by M/s W S Construction Company (hereinafter described as the petitioner) for making the award of respondent No. 2 a rule of the court and for a decree to be passed in terms of the award.
2. In pursuance of the notices having been issued objections have been filed by respondent/Delhi Development Authority. It had been asserted that the arbitrator has misconducted himself and different reasons have been given asserting the claims of the applicant/petitioner besides recording that the arbitrator has not recorded his reasons and therefore it should be set aside. The details of the objections need not be reproduced because they have to be considered hereinafter and therefore, it would avoid repetition. In the reply to the objections the petitioner asserted that disputes had arisen between the parties. The matter was referred to the arbitrator that was to be appointed by the Engineer Member. The petitioner had submitted the claims and the objector/respondent No. 2 had filed the counter claim. The arbitrator has given a reasoned award and therefore, there is no question of setting aside of the same. Reply has also been filed to the objections in consortium justifying the award.
3. The short question that comes up for consideration is as to whether on basis of the assertions of the objectors the award is liable to be set aside or not.
4. Under the provisions of the Arbitration Act, 1940 which governs the present controversy the scope for interference by the court is limited. This is a decision given by a domestic tribunal that has been agreed to by the parties. Therefore, the court will not sit as a court of appeal or re-appraise the evidence. The principles as to under what circumstances an award can be set aside are well settled and reference can well be made to some of the precedents on the subject.
5. This court in the case of R S Avtar Singh & Co. v. NPCC Ltd. while examining the said principle stated emphatically:-
"It is a well settled principle of law that the award of the arbitrator who is a chosen Judge of facts and of law, between the parties, cannot be set aside unless the error is apparent on the face of the award or from the award it can be inferred that the arbitrator has misconducted himself or the proceedings or that he has not applied his mind to the material facts. The court is not sitting in appeal on the award of the arbitrator nor can re-assess and re-examine the material which was adduced before the arbitrator. The Court cannot examine the correctness of the award on merits nor it is obligatory for the arbitrator to give detailed reasons. The Court unless comes to the conclusion that the award is preposterous or absurd cannot set it aside nor can substitute its own decision in place of the arbitrator. It will be for the arbitrator to interpret the contract between the parties. If the arbitrator takes a reasonable view on the construction of a clause, the Court will not interfere unless the view is perverse ....."
6. The Supreme Court also has considered this aspect and in case of Trustees of the Port of Madras v. Engineering Constructions Corporation Ltd. in almost identical terms concluded that the award can only be set aside if the umpire or the arbitrator has misconducted himself. The error must appear from the award and in the case it is a reasoned award one can see the reasoning and if the award is based on a proposition of law which is unsound in law interference may be called form. But there has to be an erroneous proposition of law established before the court can interfere. In paragraph 23 the Supreme Court held:-
"The proposition that emerges from the above decisions is this: in the case of a reasoned award, the Court can interfere if the award is based upon a proposition of law which is unsound in law. The erroneous proposition of law must be established to have vitiated the decision. The error of law must appear from the award itself of from any document or not incorporated in it or appended to it. It is not permissible to travel beyond and consider material not incorporated in or appended to the award....."
7. This court once again in the case of Vaish Brothers & Co. v. Union of India and Anr. concluded that it is not open to the court to speculate where no reasons are given by the arbitrator as to what impelled the arbitrator to arrive at his conclusions. It is the arbitrator who is the final arbiter of the disputes between the parties. It is not for the court even to see if the conclusion is right or wrong and in this regard the findings of this court reads:-
"..... The Court cannot substitute its own evaluation of conclusions of law or fact to come to the conclusions that the arbitrator has acted contrary to the stand taken between the parties. Whether a particular amount was liable to be paid is a decision within the competence of the arbitrator. By purporting to consider the contract the Court cannot take upon itself the burden of seeing that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be set aside by the Court. The Court, in my view, has no jurisdiction to examine the different items awarded clause by clause by the arbitrator and to held that under the contract this was not sustainable on the facts before the arbitrator."
8. The Supreme Court in the case of Arosan Enterprises Ltd. v. Union of India and Anr. in almost identical terms provided the following guide-lines and laid the law in following words:-
"36. Be it noted that by reason for a long catena of cases, it is now a well-settled principle 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 30 of the Arbitration Act. In the event to 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, the interference would still be not available within the jurisdiction of the court unless of course, there exist 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.
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."
9. More recently the Supreme Court in the case of Ispat Engineering & Foundry works, B S City, Bokaro v. Steel Authority of India Ltd., B S City, Bokaro, relied upon the decision in the case of Arosan Enterprises (supra) and other precedents to once again reiterate that in the absence of evidence on record that the empire or the arbitrator overstepped his jurisdiction or travelled beyond the agreement, the High Court would be in error in setting aside of the award.
10. In the face of the aforesaid without being exhaustive because it is not possible to law the precise guide-lines to be applicable in each and every case one can conveniently state that the court is not to set as a court of appeal and re-appraise the evidence. If the arbitrator has not followed the principles of natural justice which manifestly causes injustice to the parties, the award can be set aside. If the arbitrator travels beyond the agreement for making the award which is patently perverse or erroneous and no other conclusion can be arrived at, the court on the facts of a particular case would interfere. Even on question law if the findings is totally perverse would prompt the court to interfere.
11. It is with this backdrop that one can refer to the objections raised against specific claims and counter claims but so far as contention that the arbitrator has failed to record its reasons concerned it is totally meritless and must be rejected at the threshold. Perusal of the award itself reveals that each of the claim and counter claim has been considered separately and the arbitrator has recorded his reasons. Consequently the said plea is totally without merit.
12. The objector respondent asserts that claim Nos. 1 and 6 and the findings thereto must be set aside because there is error apparent on the face of the record. The arbitrator has ignored the report of the Chief Engineer according to which the work was found to the defective. As per Clause 14 of the agreement it is the responsibility of the petitioner to remove the defects and therefore petitioner has no right to claim for the work done for the said defects.
13. Perusal of the award reveals that petitioner had claimed Rs. 9,65,000/- towards the balance payment of the work done and Rs. 1,30,000/- towards balance payment on account of part rates. The plea that the work was defective has been considered and the arbitrator found that the arbitrator was entitled to Rs. 52,794/- as the amount payable for the work done as per respondent's own calculation. Rs. 1,81,716 was allowed with respect to item No. 6 holding that full rates of the same cannot be restored but keeping in view the various components the said amount referred to above has been permitted. It goes without saying that it is a finding of fact so arrived at which requires no re-appraisal and it cannot be termed that it is erroneous. It is based on the evidence and material on the record.
14. The respondent further assails that with respect to claim Nos. 2 and 3 the findings are erroneous. Claims 2 and 3 are on basis of Clause 10 (C) of the agreement that is escalation of the price of material and labour. The petitioner was required to maintain the proper records and to submit the documentary proof in support of escalation and the statutory rights in the wages of the labour. The petitioner had not maintained any record nor submitted any documentary proof in support of their claim and therefore the same should have been disallowed. The arbitrator has gone into this controversy and the findings in this regard reads:-
"The obligation under Clause 10(C) that has been put on the claimants is that they would maintain such books of account as were necessary to show the amount of any increase claimed and should allow inspection of the same by a representative of the Engineer-in-Charge, if required. The respondents did not desire the claimants to furnish any records for escalation payments when the work was running though the labour wages and undergone revision just before the commencement of the work. In view of the fact that respondents did not ask the claimants to produce record when work was in progress or even at the time in 1986 when claimants went to the Court for appointment of Arbitrator and where the disputes concerning 10(C) payment were released, an objection at this stage that records were not produced is not tenable. Further, respondents have not brought out anywhere that they had received complaints at any time that minimum wages, as fixed by Government, were not paid on this work.
I, therefore, find that 10(C) payments are due to the contractor based on the hike in wages announced by the Government.
The tenders for this work were received by respondents on 18-11-81 and work was awarded with date of start as 21.3.1982. The wage revision was announced by Government with effect from 1.3.1982 i.e. after the submission of the tender but before the actual start of work. The claimants are, therefore, entitled to receive escalation over the entire period work was in progress. Exhibit C-100 gives the details of escalation as furnished by claimants. These have not been challenged by respondents I find that the calculations are in order except that for item No. 6.2 and 10.1 which had been only partly executed escalation cannot be considered for payment. Contractors enhancement also is not admissible. The claims 2 and 3 put together are considered and this sum is awarded to claimants."
15. These finding clearly show that respondent themselves did not ask the claimants to furnish any record. It did not ask the claimant to produce the record when the work was in progress. The tender had been received on 18.11.1981. The wage revision was allowed from 1.3.1982 and the work had been awarded with date of starting as 1.3.1982 i.e. after the submission of the tenders or before the start of the work there was a wage revision. It is in this backdrop that the claim had been allowed. It must be stated that it is not the case of the objector/respondent that the arbitrator has travelled beyond the agreement and in that view of the matter once again it only required a reiteration that the findings cannot be described to be erroneous and are based on the material placed before the arbitrator which would not justify interference by the court.
16. The identical terms with respect to claim No. 5 and counter claim of respondent/objector No. 1 it is asserted that the payment of the secured advance is regulated by the agreement and according to which only 75% of the estimated value of non-perishable material is to be incorporated in the work. The material against which secured advance is granted has to be consumed in the work within six months. The arbitrator has ignored the condition and released 25% against the material which was not incorporated in the work. The arbitrator has considered the same and had come to the conclusion that though the petitioner had projected that secured advance on 11 lakhs bricks and 9.54 tonnes of flat iron was outstanding at the time 7th bill was processed by the respondent. He had considered further that this material was available at site in the month of February 1983. As per the objector/respondent the material on which secured advance was given remained in custody of the claimants and they are responsible for complete security and safety. It was concluded that respondent on physical verification on 4th March, 1989 had taken other steel material like T-section and rolled steel section and thereupon the arbitrator has returned a finding that the claimants were entitled to receive balance amount of the cost of 6,20,000 bricks. The amount worked to Rs. 58,925/-. It is obvious from aforesaid that the said finding cannot be described to the erroneous because out of the said amount Rs. 35,300/- had been deleted for the net recovery admissible to the respondent. The findings ex facie appears to be reasonable and this court in any event keeping in view the aforesaid will not incorporate its own finding or view even if it was to be contrary.
17. As regards claim No. 7 the petitioner had laid the claim of Rs. 1,50,000/- towards payment of the extra and substituted items. The arbitrator has allowed Rs. 1,19,420/-. The objection against the said finding is that the extra item under this claim was raft foundation which was found to be sub-standard by the quality control cell of the respondent. The thickness and the reinforcement of the raft Foundation as found much less that what was contemplated in the agreement and therefore the said extra item in this regard was not justified. The arbitrator has found that both is 6th and 7th bill it has been found that there was 100% check for RCC and hidden items by AE and the work has been carried out as per specifications. Once evidence it requires no interference.
18. The finding on claim No. 9 has also been assailed. Petitioner claimed release/discharge of the bank guarantee of Rs. 1 lakh. The arbitrator has found that the rescission if the contract was not legal and valid and therefore, the said amount could not be forfeited. Mere assertion by the objector/respondent that rescission of the contract in fact was valid will not suffice as is to be noted hereinafter. The rescission of the contract was invalid and findings thereto was proper and therefore there is no scope for interference in accordance with law of the said of the arbitrator.
19. So far as the award of pendente lite interest in concerned, the said fact was not disputed before the court because the arbitrator has right to award the interest during the pendency of the proceedings.
20. Coming to the counter claims laid by the respondent, the 1st counter claim was for Rs. 26,23,698/- on account of sub-standard work executed by the petitioner. The arbitrator recorded that the execution of the work was started in March/April 1982 and continued up to February 1983. These bills were running bills and were paid. In the 6th and 7th bill there is a noting that the work has been carried out as per specifications. In other words, the findings were that the respondents were fully satisfied with the nature of the work that has been done and consequently the claim as such did not find favor with the arbitrator. The assertions of the objector/respondent that the work executed by the arbitrator was defective or sub-standard, therefore, does not find support from the material on the record. If subsequently they had to dismantle the blocks that by itself does not put an end to the findings of the arbitrator which as already recorded above are based on the evidence because 6th/7th bill had the endorsement that work had been carried as per specification. It cannot in these circumstances be permitted that the arbitrator has come to an erroneous finding or misconducted himself to permit the court's interference.
21. So far as counter claim No. 2 is concerned, it was for Rs. 15,16,920/- as cost of material purported to have been wasted by the petitioner by doing sub-standard work. The arbitrator found that theoretical consumption statement of the cement attached to the 6th bill and signed by Engineer in Charge also does not mention anything about the misuse of the cement. Therefore, the claim was totally to be rejected and was rightly so done.
22. Courter claim No. 3 was for Rs. 10,53,178/- on account of rectification of the defects by other agencies at the risk and cost of the petitioner. The findings of the arbitrator reveal that it has been found that work under the contract was mostly carried during the period March 1982 to February 1983. Respondents during this period and up to January 1983 had not written a single letter to the petitioner indicating that the work was sub standard. The assertion of the petitioner that field test on CC cubes had given desired strength, has not been rebutted. 30 days time was given to the contractor for effecting repairs and no action was taken after 33 months from the date of the issue of the notice. The other evidence had also been considered and the findings of the arbitrator are:-
"In view of the respondents' decision taken now that all blocks required dismantling, any work of rectification carried out by them becomes infructuous and was not required to be carried out. The fact that the contract of M/s R.C. Gupta, who was doing the rectification work, was closed at the request of the contractor on 8-7-91 and that no rectification work has been carried out thereafter also goes to show that the respondents did not consider the rectification work contracted for essential. Above all, the show cause notice (Exh. R-27) issued under the Clause 14 does not talk of dismantling and reconstruction at all, considering all these important facts on record. I find that the claimants cannot be held liable to bear the cost of rectification of defects as projected by respondents. I also find that the amount of Rs. 2,38,797.38 awarded to M/s R.C. Gupta by Shri S.C. Kaushal, learned Arbitrator, in the case of Ramesh Chandra Gupta v. D.D.A. for the work of c/o 320 M.I.G. houses at Jahangirpuri, S.H. Rectification of defects and paid by respondents to M/s R.C. Gupta is not recoverable from the present claimants as all the claims in that contract had arisen on account of disputes between respondents and M/s R.C. Gupta in that contract and have no relation to this contact. The claim is not justified and 'nil' amount is awarded to respondents."
These are again findings of fact and therefore does not leave any scope for interference.
23. As regards counter claim No. 4 it is on account of probable cost of balance work to be executed, the arbitrator noted that there were initial delays in executing the work as complete site was not available for doing the said work. The foundation drawing were supplied to the claimants/petitioner only on 27th March, 1982 and some structural drawings were given on 30th July, 1982 i.e. nearly four months after the foundation drawings were given. There was no evidence to show that delay were there on the part of the petitioner. Taking stock of these material facts, the claim for the balance work remaining to be executed was rejected.
24. In addition to that counter claim No. 5 has been laid for Rs. 6,84,214/- on account of levy of compensation under Clause 14 of the contract. The plea of the respondent/objector was that as per Clause 14 of the contract they were entitled to receive compensation at the rate of 1% of the estimated cost put to tender for each day's delay. The arbitrator had recorded finding that show cause notice under Clause 14 prescribed 30 days time to the claimants to take up the rectification work. This period expired on 27th September, 1985 and no action was taken thereafter. The time allowed in the tender for doing work was four months. The contract was closed on 8th July, 1991 i.e. after about 37 months of getting the work to the tune of Rs. 1,74,000/-. On appreciation of fact therefore it was concluded that the respondent was never serious about rectification of the work and therefore the claim had to be disallowed. It needs no repetition that it is a finding of fact on appreciation of material on the record. This court would not interfere in such a finding.
25. Similar is the position with respect to counter claim No. 7 whereby Rs. 15894/- is claimed on account of non-submission of 15894 number of empty cement bags and Rs. 1 lakh on account of forfeiture of the deposit because recission of the contract. Both these claims necessarily were rightly rejected and in any case as referred to above the findings have been arrived at which are of fact and based on evidence.
26. The last claim was counter claim No. 10. The objector claimed Rs. 30 lakhs on account of damages suffered by the department. The arbitrator noted that so far as defect in the work is concerned the respondent/objector is more responsible for accepting the same by certifying each bill that the work has been carried as per specification. The work was in progress for 11 months and not a single defect was appointed and therefore, this claim was rejected.
27. Conclusions from the aforesaid are obvious and that in fact is the net result. This is fir reason that all material has been considered and findings of fact arrived at. On the principles already enumerated above this court will not sit as a court of appeal and re-appraise the evidence. The arbitrator has not travelled beyond the scope of reference nor the findings are erroneous. Therefore, the objections must fail and are dismissed.
28. For these reasons the award is made a rule of the court and decree in terms of the award is passed.