Delhi District Court
Smt. R.D. Makhija vs M.C.D on 23 September, 2011
IN THE COURT OF REETESH SINGH,
ADDITIONAL DISTRICT JUDGE-01 (NORTH-EAST),
KARKARDOOMA COURTS, DELHI.
CS No.-220/09
Date of institution of the case : 06.09.2004
Date on which Judgment was reserved : 23.09.2011
Date on which Judgment was pronounced : 23.09.2011
Unique ID No. 02402C0126542004
IN THE MATTER OF :-
SMT. R.D. MAKHIJA
THROUGH ATTORNEY
SHRI RAMESH LAL
R/O C-14, ARJUN NAGAR,
GALI NO.-4,
DELHI-110051
............PETITIONER
Versus
1. M.C.D.
THROUGH ITS
COMMISSIONER,
TOWN HALL, DELHI.
2. SHIR P.K. JAIN
(ARBITRATOR)
SUPERINTENDING ENGINEER
PROJECT (SOUTH),
BHISHAM PITMAH FLYOVER,
SEWA NAGAR, NEW DELHI-3.
................RESPONDENTS
CS No.-220/09 Page No. 1/14
JUDGMENT
1. This petition has been filed under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) challenging the arbitral award dated 03.06.2004 passed by the Ld. Arbitrator.
2. Brief facts leading to the filing of the present petition as culled out from the statement of claim filed by the petitioner before the Ld. Arbitrator are that petitioner/claimant is a contractor who has been executing various types of works for which tenders have been floated by the respondent. The respondent Municipal Corporation of Delhi (hereinafter referred to as the MCD) invited tenders for execution of work under the name and style "Improvement of side lane connecting GT Road, Gali No. 8, Friends Colony, C-82, Shahdara South Zone". In response to the said invitation of tender, petitioner submitted its bid which was accepted and the respondent awarded the contract to the petitioner vide work order no.EE (XI)177/99 dated 07.08.1998, (C-1) of EE-XI, MCD for and on behalf of respondent. As per the terms work was to be completed within two months w.e.f. 10th day from the date of acceptance of the work. Stipulated date of commencement of work was 04.09.2004 and date of completion was 03.11.1998. It was claimed by the petitioner that the contract between the parties was governed by general conditions of contract of the CS No.-220/09 Page No. 2/14 MCD, clause 25 of which stipulated that disputes would be referred to arbitration under the provisions of the Act.
3. It is further stated in the statement of claim that immediately after the award of work claimant made arrangements for all necessary equipment and raw material as well as labour and staff with the endeavor to complete the work within the time frame. It is submitted that due to best efforts, the work could not be completed within time since the respondent did not make a clear workable site available to the petitioner/claimant. It is submitted that the work could be completed only by 30.03.1999 after a delay of time five months. It is submitted that claimant raised a final fill for payment of Rs.93,325/- after effected all permissible recoveries and deductions which was passed by the respondent on 31.03.1999. Security amount of Rs.8,853/- deposited at the time of the contract also became due and payable on 01.10.1999. However, respondent did not pay the final bill or refund the security amount. Claimant vide letter dated 23.02.2000 called upon the respondent to remit the said payments with 24% interest per annum but the respondent failed to comply. Claimant thereafter vide letter dated 04.04.2000 invoked the arbitration clause and requested the competent authority for appointing an arbitrator. The petitioner sent memorandum dated 09.05.2000 to the respondent for this purpose.
CS No.-220/09 Page No. 3/14
4. Since the respondent failed to appoint an arbitrator the petitioner filed Arbitration Application no. 24/00 before the Ld. District Judge, Delhi under Section 11 (6) of the Act. During the pendency of the said petition, respondent MCD paid Rs.93,325/- towards the final bill vide cheque dated 28.07.2000 and Rs.8,853/- towards refund of security deposited vide cheque dated 10.08.2000. However, no interest on the delayed payments was given by the respondent. By order dated 08.09.2000, arbitration application of the petitioner was allowed and direction was passed to Commissioner, MCD to appoint an arbitrator. In compliance of the said order Commissioner, MCD vide letter dated 06.12.2000 appointed an arbitrator.
5. Before the arbitrator the petitioner/claimant filed statement of claim in which the petitioner raised the following claims:-
Claim No. 1- for payment of final bill Rs.93,325/-.
Claim No. 2- Refund of Earnest Money/Security Deposit Rs. 8,853/-
Claim No. 3- Interest on the above amounts i.e. Delayed Payment of Final Bill and Security @ 24% till the Date of Payments.
Claim No. 4- Infructuous Expenses incurred and Losses Suffered on account of Increased Rates, Staff, Establishment and Overheads Expenses and Loss of Profit and Business Loss because of the Contractual Failures on the Department Rs.2,01,800/-CS No.-220/09 Page No. 4/14
Claim No.5- Pre-suit, Pendentelite and Future Interest on the Amounts Claimed Under Claim No. 3 and 4.
Claim No. 6- Cost of Arbitration Proceedings Rs.20,000/-
6. The respondent MCD filed its reply to the statement of claim filed by the petitioner denying the claim contended that the same was after thought as the claimant had not raised any such claims at the time of the final bill and that it had agreed to execute the works on the same terms and conditions at the time of letter of extension of completion of the work was granted to it.
7. Rejoinder to the reply to the MCD was filed by the petitioner. After considering the material placed on record, the Ld. Arbitrator delivered the impugned award on 03.06.2004. With respect to claim no. 1 for payment of final bill of Rs.93,325/-, Ld. Arbitrator held that since the payment was released on 28.04.2000 to the claimant, the said claim except interest on this amount did not survive. With respect to claim no. 2 i.e. refund of earnest / security deposit of Rs.8,853/-, Ld. Arbitrator similarly observed that since the same was released to the claimant on 10.08.2000, said claim except interest due did not survive.
8. With respect to claim no. 3 i.e. interest on delayed payment of final bill and security, the Ld. Arbitrator has awarded simple interest at the rate of 9% on the final bill for Rs.93,325/- w.e.f. 23.02.2000 till 28.07.2000. Similarly, Ld. CS No.-220/09 Page No. 5/14 Arbitrator has awarded interest at the rate of 9% on the security deposit on Rs. 8,853/- w.e.f. 23.02.2000 to 10.08.2000. Ld. Arbitrator had rejected the claim of the claimant for interest at the rate of 24% p.a. w.e.f. 31.03.1999 till date of payment for the reason that claimant had raised claim for interest only vide letter dated 23.03.2000 and not prior to the same and that in the letter dated 23.02.2000, claimant specifically stated the same to be a notice under the Interest Act. Hence, interest was granted only w.e.f. 23.03.2000. As regards, the rate of interest claim of 24%, Ld. Arbitrator has observed that lending rates had come down, rate of interest at 9% was sufficient.
9. Under claim no. 4, Ld. Arbitrator has rejected claim no. 4 (i) to Claim no. 4(vi). Ld. Arbitrator has observed that in response to the questionnaire of the MCD, the claimant had admitted that they did not lodge any protest at the time of signing of the final bill and no claim has made under claim no. 4 and no claim had been raised by the claimant in the final bill. Since claim towards claim no. 4 (i) to claim no. 4(vi) were not made at any time during the pendency of the contract or at the stage of final bill, said claims being an afterthought were not admissible.
10. With regard to claim no. 4 (vii), i.e. payment at the rate of increased rates on the value of the work executed after 04.11.1998, Ld. Arbitrator has awarded 2.3% increase in the prices on the work done beyond 04.11.1998. In coming to this finding, Ld. Arbitrator has relied on CPWD Cost CS No.-220/09 Page No. 6/14 Index, 1992 and stated that on 01.06.1998 plinth was rate of interest was 148 which was revised to 158 on 1st September, 1999 by CPWD which amended to an increase of 7% in compliance of 15 months. Hence between the period 04.11.1998 to 30.03.1999, the said increase, proportionately would come to 2.3%.
11. With respect to claim no. 4 (viii), Ld. Arbitrator rejected the claim for Rs.75,000/- for blocking of resources. Ld. Arbitrator has observed that the same was a hypothetical assumption without any factual basis and rejected the same.
12. As regards claim no. 5 i.e. claim for pendentelite and future interest on the amounts under claim no. 3 and claim no. 4, the same were rejected. Claim no. 6 for Rs.20,000/- towards cost of arbitration proceedings was also rejected.
13. Ld. Counsel for the appellant before this Court has argued that award of interest at the rate of 9% under claim no.3 was much less compared to rate of interest at 24% as claimed. With respect to rejection of claim no. 4, Ld. Counsel for the petitioner argued that admittedly delay in execution of the contract was not caused due to the petitioner/contractor. Hence, petitioner was duly entitled to compensation for having incurred expenses and loses due to overhead expenses and loss of profit as claimed in claim no. 4. Ld. Counsel for the appellant further argued that since admittedly the project was delayed and CS No.-220/09 Page No. 7/14 which was not due to the fault of the petitioner, petitioner was entitled to Rs. 75,000/- towards the blockage of resources.
14. Ld. Counsel for the respondent MCD on the other hand argued that final bill of the petitioner was submitted by him on 31.03.1999. The said bill was for Rs.93,325/- only and did not contain any claim as made under claim no. 4 made in the statement of claim. He further submitted that during the pendency of the arbitral proceedings a questionnaire was framed by the respondent for the petitioner. In para 3 of the questionnaire, it was specifically put to the claimant / petitioner as to why final bill was raised without registering any further claim or protest. He submitted that in response to the para 3 petitioner has admitted that no protest was made on the stage of raising final bill. Reason given in the same is that at the time of payment of final bill it could not be anticipated that the payment of the final bill would be delayed. Counsel for the respondent therefore submitted that it is clearly admitted by the petitioner that the claims made in the statement of claim were not an afterthought.
15. I have heard the Ld. Counsel for the parties and perused the record.
16. Before adverting to the merits of the submissions of the Ld. Counsel for the petitioner, I may be delve upon the jurisdiction of this Court under Section CS No.-220/09 Page No. 8/14 34 of the Act. In the case of Satna Stone & Lime Co. Ltd. v. Union of India, (2008) 14 SCC 785 the Hon'ble Supreme Court was pleased to hold as under:-
"11. There is no quarrel with the proposition canvassed by the learned counsel for the appellants. This scope of interference by the court is limited and the court would not be justified in reappreciating the material on record and substituting its own view in place of the arbitrator's view. This exercise is not permissible by the court in view of the settled legal position."
17. With regard to jurisdiction of this Court under Section 34 of the Act, Hon'ble Supreme Court in the case of K.V. Mohammed Zakir v. Regional Sports Centre reported in (2009) 9 SCC 357, the Hon'ble Supreme Court was pleased to hold as under:-
"6. It is equally well settled, where the arbitrator acts within jurisdiction, "the reasonableness of the reasons" given by the arbitrator is not open to scrutiny by courts. However, if the reasons are such as no person of ordinary prudence can ever approve of them or if the reasons are so "outrageous in their defiance of logic"
that they shock the conscience of the court, then it is a different situation. And in an appropriate case the court may interfere. However, the degree of such unreasonableness must be greater than the standard in a certiorari proceeding."
18. In the case of Ravindra & Associates v. Union of India,(2010) 1 SCC 80 the Hon'ble Supreme Court was pleased to hold as under:- CS No.-220/09 Page No. 9/14
"5. In our opinion, the High Court wrongly interfered with the arbitration award and practically acted as a court of appeal, which it could not do (see State of Rajasthan v. Puri Construction Co.
Ltd.1; Port of Madras v. Engg. Constructions Corpn. Ltd.2; BOC India Ltd. v. Bhagwati Oxygen Ltd.3; and G. Ramchandra Reddy v.
Union of India4)."
19. In view of the ratio of the said cases, this Court under Section 34 of the Act is precluded from going into the sufficiency of the evidence led before the Ld. Arbitrator or to review the award as an appellate Court. The court cannot re-appreciate the evidence that was led by the parties and cannot substitute its views with the view taken by the Arbitrator. If the findings of the Arbitrator are based on evidence then the same could not be interfered with merely because the Court can have a different view of the evidence. When the Arbitrator has been found to have acted within jurisdiction, the Court is not entitled to re-appreciate the reasonableness of the reasons recorded by the arbitrator unless reasons are such as no person of ordinary prudence can ever approve of them.
20. With respect to claim no. 1 and claim no. 2, Ld. Arbitrator has held that the payment of the final bill and security amount have already been CS No.-220/09 Page No. 10/14 released in favour of the petitioner and thus the same did not survive. As regards claim no. 3 on the interest amount, Ld. Arbitrator has declined grant of interest on the final bill from 31.03.1999 and on the security amount from 01.07.1999 and has granted interest on both the said amounts from 23.02.2000. Basis of finding of the Ld. Arbitrator is that claimant/petitioner vide letter dated 23.02.2000 had specifically claimed interest on the said amounts in that letter and had stated that the same was a notice under the Interest Act. Having specifically claimed in its notice dt.23.2.2000 that the same would operate as a notice under the Interest Act, findings of the Ld. Arbitrator on the same do not call for any interference.
21. As regards denial of interest at the rate of 24%, Ld. Arbitrator has granted interest at the rate of 9% on the said amounts with the reasoning that lending rates no longer are very high. The said findings are reasonable and are upheld.
22. Claims no. 4(i) to Claim no. 4 (vi) were denied by the Ld. Arbitrator on the ground that the said claims were made in the final bill raised by the claimant and the same being in the nature of afterthought were not admissible. Ld. Arbitrator has relied on the questionnaire framed by the respondent before the Ld. Arbitrator and the reply to the same by the claimant. Para-3 of the questionnaire reads as under:-
CS No.-220/09 Page No. 11/14
"3. Whether the claimant or his attorney accepted the payment of final bill without registering any protest at the time of acceptance of correctness of the Final Bill's each and every entry and measurement book? (if answer No, then please annex herewith supporting documentary proof of their specifical denial."
23. Answer of the claimant to Para 3 of the questionnaire reads as under:-
"3. There is no question of lodging any protest at the time of signing final bill as there is no dispute with regard to final measurements. Regarding payment of final bill, it could not be anticipated or comprehended that the payment of final bill will not be made by the respondent in terms of contractual provisions."
24. On the basis of the reply to para 3 of the questionnaire, Ld. Arbitrator has held that since no protest was lodged by the claimant at the time of signing final bill, it was not upon to the claimant to make any claims in respect of the same. Reason mentioned in reply to the questionnaire that claims under the head claim no.4 were not raised at the time of final bill because it could not be anticipated that payment of final bill would be delayed itself belies the genuineness of the claims of the claimant. Presumption would necessarily be inferred that at the time of raising of final bill, no other claim of CS No.-220/09 Page No. 12/14 the petitioner was pending. The view taken by the Ld. Arbitrator is a possible view as claimant not having claimed the said amounts at the time of raising of final bill is estopped from turning around and making a claim at a later stage.
25. Claim no. 4(viii) i.e. increased payment on account of increased rates has been allowed by the Ld. Arbitrator and he has granted increase at the rate of 2.3% on the value of the work executed after 04.11.1998. This finding of the Ld. Arbitrator is based on the CPWD cost index as on 01.06.1998 when the area rate was 148 and as on 01.09.1999 when the area rate was revised to
158. Proportionate increase in the cost for period between the 04.11.1998 to 31.03.1999 has been granted by Ld. Arbitrator. Findings are based on evidence. Ld. Arbitrator who was appointed was an Engineer having knowledge of rate escalation and working of such contracts. Hence these findings cannot be called into question under section 34 of the Act.
26. Claim no. 4(viii) was for Rs.75,000/- for blocking of resources. Ld. Counsel for the petitioner had argued that since he had to maintain staff and materials and labour at the site for five extra months, he incurred loss of Rs. 75,000/- due to blockage of his resources. No material was placed on record by the claimant before the Ld. Arbitrator to the effected that during the period 04.11.1998 to 30.03.1999, claimant was awarded any other work by any department which he could not execute due to delay of carrying out work in the present matter. There is therefore no material basis to support this claim. Ld. CS No.-220/09 Page No. 13/14 Arbitrator rightly declined this claim. Claim no. 5 and 6 i.e. pendentelite and future interest on amount claimed in claim no. 3 and claim no. 4 were declined by the Ld. Arbitrator. Cost of the proceedings were also declined. Interest under Claim No.3 has already been granted. Since claim no. 4 was declined, there is no question of grant of interest on the same. Ld. Arbitrator has declined to grant cost of arbitration proceedings. This court is not inclined in the same.
27. For the reasons recorded above, this petition has no merit and is dismissed.
28. File be consigned to the Record Room.
Dictated to the Steno and announced in the Open Court today i.e. 23.09.2011.
(REETESH SINGH) Addl. Distt. Judge-01 (NE) Karkardooma Courts, Delhi CS No.-220/09 Page No. 14/14