Delhi High Court
Municipal Corporation Of Delhi vs Rakesh Brothers on 28 April, 2005
Equivalent citations: 2005(2)ARBLR257(DELHI), 120(2005)DLT186, 2005(82)DRJ147
Author: Pradeep Nandrajog
Bench: Pradeep Nandrajog
JUDGMENT Pradeep Nandrajog, J.
1. By way of the present objection petition, Municipal Corporation of Delhi has challenged the award dated 3.8.2004 published by Sh. Amarpal Singh, the sole arbitrator appointed by the Commissioner, MCD to decide the disputes raised by the respondent/claimant.
2. Vide his award dated 3.8.2004, learned arbitrator has allowed in favor of the claimant the following:-
a) Claim No.1 - Rs. 12,381/- b) Claim No.2 - Rs. 1,68,000/- c) Claim No.4 - Rs. 1,34,729/- d) Claim No.5 - Rs. 1,18,235/- e) Claim No.6 - Rs. 1,00,000/-
Interest has been allowed @ 9% per annum on the sum awarded with effect from 28.5.2001. Counter claim of MCD has been rejected.
3. Claimant was awarded the work for construction of 100 dwelling units for Safai Karamcharies in E-Block, Nand Nagari, JJ Colony, Phase-1, Delhi vide award No. D/EE-X/93-94/TC/43 dated 12.11.1993. Completion period was 15 months reckoned from 10 days after issuance of work order. Relevant date of commencement of the work was 19.11.1993. Scheduled date of completion was 18.2.1995. The work got delayed. MCD extended time for completion up to 31.8.2000 (Refer para 4 of the OMP). Claimant who had stopped the work somewhere around 1996 had problem on the amounts being received by him as also escalation in price of raw material which had taken place. It did not carry on with the work. MCD served a show cause notice on 5.5.2000 as to why compensation be not levied. On 5.6.2000, claimant invoked the arbitration clause. MCD levied compensation in sum of Rs. 4,11,465/-. On 17.4.2001, arbitrator was appointed. While appointing the arbitrator, Commissioner of the Municipal Corporation of Delhi referred the counter claims of the MCD. Counter claim No. 1 was the claim of the MCD in sum of Rs. 4,11,465/- levied as compensation.
4. As noted above, counter claims have been rejected. Claims 1, 2, 4 to 6 as noted above have been allowed.
5. At the hearing held on 26.4.2005 neither party cited any decision. I would have expected the young counsel for the petitioner to have come prepared with the case law applicable, for indeed, fire power in a court of law is precedents. Counsel left it on the court to research on case law.
6. Since MCD is happy with the findings under the award rejecting claim No. 3, 7, 8 and 9 and since the claimant has not challenged the award, issue pertaining to said claims has attained finality and I need not deal with the issue at all. (I may incidently note that as per objections filed to the award, challenge has been raised to the very arbitrability of claim No. 2, 3, 7, 8 and 9).
7. Laying a challenge to the award, Sh. Sunil Goel urged that the claims were barred by limitation and notwithstanding that the Municipal Corporation of Delhi had raised the issue in the pleadings learned Arbitrator has not dealt with the same and accordingly counsel urged that the award is liable to be set aside for the reason the learned arbitrator had no jurisdiction to entertain a time barred claim.
8. A perusal of the award shows that the learned arbitrator has not dealt with the issue of limitation at all. Record of the arbitrator reveals that in the written statement filed by the MCD to the statement of claim filed by the claimant, preliminary objection was raised as under:-
1. That the claimant miserably failed to observe the mandatory and statutory provisions of clause 8 of the agreement, while non-submitting the bills within the stipulated time, as such the claims are barred by limitation and till date there is no bill submitted by the claimant and after waiting a sufficient time, the respondent measured the work and entered the same in the measurement book from time to time .......
9. The objection is very unhappily worded, as was conceded by the counsel for the MCD. Objection is that the contractor was not submitting the bills within the stipulated time. So stating, MCD has gone on to aver that the claims are barred by limitation without specifying how. However, record of the learned arbitrator would reveal that the parties filed written submissions. Written submissions filed by the MCD were received by the learned arbitrator on 10.12.2003. The said written submissions do not show any point being urged on limitation.
10. At the stage of arguments parties are free to give up issues raised in the pleadings. It is apparent that the Municipal Corporation of Delhi has abandoned the plea of limitation raised.
11. Be that as it may, I fail to understand as to how the claims were barred by limitation. Pleadings of the MCD show that it kept the contract alive till 31.8.2000 (refer para 4 of the OMP). If that be so, it does not matter whether the claimant did not press for the claim earlier thereto. Admittedly, MCD chose to issue a show cause notice as to why compensation be not levied on 5.5.2000. Claimant invoked arbitration clause on 5.6.2000. Limitation commences when cause of action accrues. Cause of action accrues when a right is infringed or threatened to be infringed (see AIR 1985 Delhi 358 Shah Construction Company v. MCD).
12. Claim No. 1 in sum of Rs. 20,000/- has been allowed in sum of Rs. 12,381/-. Claim of the claimant was predicated on the ground that rebate was conditional on timely payment under the running bills. Noting that the payments were not made in compliance with the rebate clause, learned arbitrator had directed refund of Rs. 12,381/-, being the sum deducted by way of rebate.
13. It is trite that if a right is conditional, till the condition is fulfillled, right cannot be enforced. Award pertaining to claim No. 1 suffers from no jurisdictional infirmity and is accordingly upheld.
14. Claim No. 2 in sum of Rs. 2,16,000/- has been allowed in sum of Rs. 1,68,000/-. Claim was on account of alleged expenditure incurred on watch and ward for a period of 3 years. Learned arbitrator has held that the work was executed up to October, 1995. In September, 1996, claimant requested MCD to take charge of the site. MCD did not do so. Holding that the claimant deployed watch and ward up to 1.1.1999, learned arbitrator has awarded salary for 3 Chowkidars @ Rs. 6,000/- p.m. for 28 months i.e. Rs. 1,68,000/-.
15. Challenging the award, learned counsel for the MCD urged that there is no evidence on record led by the claimant to establish that the claimant had kept 3 Chowkidars and had paid wages @ 6,000/- p.m. Counsel urged that no evidence whatsoever was led. Neither was any salary register produced nor was any bill, receipt or voucher filed.
16. By virtue of sub-Section 3 of Section 31 of the Arbitration & Conciliation Act, 1996, unless otherwise agreed, an arbitral award is required to state the reason upon which it is based. Reasons would mean justification for the conclusions arrived at.
17. Learned counsel for the claimant failed to point out any material placed before the arbitrator by the claimant to establish that the claimant had kept 3 Chowkidars for 28 months and had paid them wages of Rs. 6,000/- per month. Counsel for the claimant urged that the claimant would be entitled to a presumption that it kept the site protected by deploying watch and ward and therefore the award has to be upheld.
18. Indeed, an award has to be rendered on the basis of evidence led by the parties. A finding which is based on no evidence is a perverse finding. In a contractual dispute, parties are entitled to the benefit of every reasonable presumption but no more. Considering that no work was done after 1996, it would be difficult to start with a presumption in favor of the claimant that it kept on protecting the site for nearly three years. Since there is no material referred to in the award and indeed, none exists in the record of the learned arbitrator that the claimant had employed 3 Chowkidars much less paid wages @ Rs. 6,000/- per month, award pertaining to claim No. 2 is set aside. I was not shown even a letter written contemporaneously by the contractor informing MCD that it had deployed watch and ward at the risk and cost of the MCD. Since I have set aside the award pertaining to claim No. 2 on the first plea of the MCD, I need not therefore decide the alternative submission raised that the claim was non-arbitrable.
19. Claim No. 4 in sum of Rs. 2.75 lacs. has been allowed in sum of Rs. 1,34,729/-. Claim was on account of balance due after adjusting amounts paid under the running bill for the works executed at site. Learned arbitrator has awarded the sum on the basis of the measurements recorded in the measurement book of the MCD. Learned counsel for the MCD could not make any meaningful submissions as to how and why the claim as awarded suffers from any kind of infirmity.
20. Claim No. 5 in sum of Rs. 1.35 lacs. was based on clause 10CC of the contract provided for escalation as per formula provided therein. Clause 10CC has been incorporated in the contract at serial No. 26 of the General Conditions of the contract. Submission of the MCD before the learned arbitrator was that compensation under clause 10 CC had to be paid on the basis of actual occurrence of the escalation with return proof. Learned arbitrator has rejected the same by holding that this would defeat the mandatory provision of the agreement.
21. Two Division Benches of this court in the decisions reported as 1998 (VII) AD Delhi 300 DDA v. U. Kashyap and 2001 (II) AD Delhi 116 DDA v. K.C. Goyal have held that where a clause in a contract provides for a formula to give escalation, award of escalation on the basis of actual increase in price of material would be impermissible. Opposition before the learned arbitrator to claim No. 5 is based on a wrong notion of law and the learned arbitrator has rightly held that escalation has to be as per statutory formula. Decision of the learned arbitrator is in complete harmony with decisions of this court. Learned arbitrator has awarded a Lesser sum on the basis of the final calculations as per formula provided. I accordingly uphold the award pertaining to claim No. 5.
22. Claim No. 6 in sum of Rs. 1,00,000/- has been awarded in toto. Claim was for refund of security deposit in sum of Rs. 1,00,000/- held by the MCD. Learned arbitrator has held that the forfeiture of the security deposit was pursuant to the order dated 20.7.2000 levying compensation and since he held that compensation levied was illegal, in that, time was not the essence of the contract, ordered refund of security deposit.
23. Reasoning of the learned arbitrator pertaining to claim No. 6 is as under:-
The respondent has pleaded that security deposit is already forfeited in compliance of order dated 20.7.2000. The orders/action taken by the respondent at the time when contract was not in force is of no consequence. The claimant had already executed the work more than the contractual cost and the same is certified by the certificate issued by the respondent Executive Engineer vide C-15 and C-16 indicating the amount of work done. Thereafter the work could not be done for 5 years pertaining to giving final touches to the quarters due to non-availability of funds as admitted by respondent in history sheet of estimate for incomplete items. The remaining small work no longer remained responsibility of the claimant who had already executed the work more than assigned to him. The claimant had already requested for taking over possession of site on 2.9.96 and the same was taken over on 1.1.99 without any reservation or action. Thus, I allow the claim of Rs. 1 lakh in favor of claimant.
24. As noted above, counter claim No. 1 was raised by MCD for recovery of the compensation levied. Rejecting counter claim No. 1, learned arbitrator held as under:-
Rs. 4,11,465/- are claimed as penalty imposed under clause 2 of the contract. There was no occasion for the respondent to resort to this after about 5 years of virtual completion of the contract by the claimant.......
25. Issues being linked up pertaining to claim No. 6 and counter claim No. 1, having noted the reasoning of the learned arbitrator as above, I deal with the two together.
26. Clause No. 2 is the usual penalty clause for delay occasioned by the contractor in proceeding with the work as per time schedule rendering him liable for levy of a penalty at the hands of the employer. I need not reproduce the entire clause save and except note that the clause specifically mentions that compensation may be levied by the engineer-in-charge whose decision in writing shall be final. Arbitration clause contained in the contract between the parties being clause No. 25 clearly states except where otherwise provided in the contract, all questions.......... shall be referred to the sole arbitration......... It is thus obvious that issue of levy of penalty is treated as an excepted matter under the contract and is non-arbitrable.
27. Learned counsel for the claimant urged that having itself referred said dispute for arbitration, MCD cannot question the decision of the learned arbitrator on the point of jurisdiction.
28. Precisely this had happened when DDA had likewise laid a claim before the arbitrator for the penalty levied by it under an identically worded clause 2. Arbitrator held against the DDA. Challenging the award, DDA urged that the dispute pertaining to levy of compensation was non-arbitrable and therefore sought quashing of the award. Learned single Judge held against the DDA by holding that DDA itself referred claim under penalty for arbitration and could therefore not resile from the same. Division Bench of this court in the decision reported as 1995 (2) ALR 306 DDA v. Sudhir Brothers held :-
5. We, therefore, find that the entire procedure adopted by both the parties was totally unwarranted. If the D.D.A. considered that it was entitled to the recovery of Rs. 5,69,473 outside the arbitration, it could have taken such steps as it thought necessary instead of asking the Arbitrator to include the said amount in the award. The contractor was also wrong in taking advantage of the same and asking the Arbitrator to give a finding on the merits of the claim. The Arbitrator acted totally without jurisdiction in going into the said question and deleting the said item of counter claim for Rs. 5,69,473 and holding that the contractor not liable for payment of compensation. That was not within the power of the Arbitrator. In view of the said unfortunate events, we have no option but to set aside that part of the award of the Arbitrator wherein he has gone into the merits of the decision of the Superintending Engineer and had come to the conclusion that the sum of Rs. 4,69,743 was not payable by the contract. The validity of the levy of compensation is therefore taken out from the award.
29. Holdings as aforenoted, learned Division Bench left it for DDA to seek to recover the said amount in whatever manner it is open to it and in case such proceedings were taken, it was held that it would be open to the contractor to raise all defenses that may be open to him as per law.
30. Another Division Bench of this court in the decision reported as 2001 (Suppl.) ALR 375 Bhagat Construction Co. v. DDA, taking note of various decisions of the Hon'ble Supreme Court on the issue of the validity of a decree passed by a court without jurisdiction held that every question of lack of inherent jurisdiction of the court is a matter relating to the very foundation of the order and goes to the root of the matter. Jurisdiction of the arbitrator was likewise held to be subject to the arbitrability of a claim. Notwithstanding the fact that DDA had referred for arbitration the claim qua penalty levied, learned Division Bench held that award pertaining to excepted matters lacked inherent jurisdiction and was therefore a nullity.
31. I am respectfully bound by the decisions of the two Division Benches of this court noted above. Since the respondent/MCD levied penalty and sought to adjust the security deposit towards part satisfaction of the penalty levied and since penalty levied is an excepted matter, the inevitable consequences must follow. The award pertaining to claim No. 6 and counter claim No. 1 has to be set aside for want of jurisdiction of the learned arbitrator. It would be free for the MCD to take recourse to such proceedings as are open for recovery of the balance penalty amount and it would be open to the contractor to raise such defenses as are permissible. It would also be open to the contractor to file a suit for recovery of the security deposit and needless to state in such a suit, the penalty levied would have to be questioned. In such a suit, it will be open to the contractor to raise all such contentions as it may deem fit. These directions are in conformity with the directions issued by the learned Division Bench in the decision in Sudhir Brothers' case (Supra).
32. No other issue pertaining to any other counter claim which was rejected by the learned arbitrator was raised at the hearing.
33. OMP is accordingly disposed of modifying the award dated 3.8.2004 published by Sh. Amar Pal Singh as under:-
(i) Award pertaining to claim No. 2 is set aside.
(ii) Award pertaining to claim No. 6 and counter claim No. 1 is set aside but subject to the directions contained in para 31 above.
No costs.