Delhi High Court
J.S. Construction vs Delhi Development Authority on 1 November, 1996
Equivalent citations: 1997(1)ARBLR149(DELHI), 65(1997)DLT759
JUDGMENT M.K. Sharma, J.
(1) The present suit has been registered after the Arbitrator filed his award in this Court alongwith the records of the arbitration proceedings. After registration of the suit notice was issued to the parties intimating them about the filing of the award and to file objections, if any, within the statutory time limit.
(2) On service of notice on the parties the respondents filed their objections under Sections 30 & 33 of the Arbitration Act against the award passed by the Arbitrator on 20.10.1994. The petitioner however, did not file any objection against the award.
(3) It is admitted position that the Arbitrator who dealt with the arbitration proceedings was the named Arbitrator and a technical person. Although the respondents have filed their objection as against almost all the claims decided by the Arbitrator yet during the course of hearing the main thrust of argument advanced by learned Counsel for the respondents was directed against the decision of the Arbitrator as against claims No. 2,3,5 & 6. However, sinus the learned Counsel appearing for the respondents also made his submissions in respect of the other claims as decided by the Arbitrator as well, I propose to deal with the arguments advanced by the learned Counsel for the respondents as against all the objections raised in the objection petition filed by the respondents. None appeared on behalf of the petitioner at the time of arguments. However, since the objection is of the respondents, I proceed to decide the same.
CLAIMNo. 1:
(4) The petitioner claimed Rs. 18.494.00 as refund of rebate as contingent Conditions governing rebates were not fulfillled by the respondent in respect of the following issues- (a) for regular monthly payments: Rs. 9,245.00; (b) for final bill payment : Rs. 6,163.00; (e) for refund of security deposit: Rs. 3,082.00 and (d) for timely sanction of EI/SI: Rs. 4.00. As against the aforesaid claims the Arbitrator has awarded Rs. 15,096.00 in favour of the petitioner. The Arbitrator, while giving his decision as against the aforesaid claim and awarding Rs. 15,906.00 has given reasons and the learned Counsel appearing for the respondents could not make out any case for interference with the said decision of the Arbitrator. No mistake or error apparent on the face of the record could be shown and established by the respondents and, therefore, the decision of the Arbitrator against claim No. 1 is upheld.
CLAIMNo. 2:
(5) In respect of claim No. 2 the petitioner claimed Rs. l,51,892.00 on account of final bill and the Arbitrator ha? accepted the claim in full and awarded Rs. 1,51,892.00 against the aforesaid claim in favour of the petitioner. I have been taken through the award passed by the Arbitrator against the aforesaid claim and on perusal of the same I find that the said amount was claimed as an extra amount for extra item of work. According to the Arbitrator the extra amount against main disputed items is payable for the agreement item No. 5.1 - Stone veneering, which according to the Arbitrator is an extra item payable at rate under Clause 12(v) of the agreement. The Arbitrator has held that the rate paid in R.A.bills is Rs. 154.85 for quantity of 454.77 Sq. Mtrs. as against correct rate of Rs. 324.00 per sq. mt. and that the final quantity of work done is 519.19 sq. mtrs. and thus extra amount payable works out to Rs. 97,796.00 payable on that account.
(6) The other extra amount awarded by the Arbitrator is in respect of quantities of other main agreement items viz.item amounting to Rs. 8,224.80. Learned Counsel appearing for the respondent submitted that the Arbitrator was required to give a reasoned award. According to the learned Counsel while giving his decision on the aforesaid claim the Arbitrator has failed to give reasons and to indicate is thought process which is sufficient ground for setting aside the award.
(7) On a perusal of the award of the Arbitrator as against the aforesaid claim it is not clear as to how the Arbitrator has arrived at his conclusion that the extra amount payable works out to Rs. 97,796.00. I find that the Arbitrator has only given his conclusion which is not substantiated by any reason. It needs no reiteration to hold that when the parties agree that the Arbitrator would give a reasoned award, it is imperative on the part of the Arbitrator to give reasons for his conclusion and that if he does not do so the same amounts to an error on the face of the record, which would call for setting aside of the award. A bare perusal of the award of the Arbitrator would show that the Arbitrator has failed to indicate his thought process in arriving at the conclusion that the extra amount payable works out to Rs. 97,796.00. The thought process of the Arbitrator in arriving at a conclusion that correct rate applicable would be Rs. 324.00 per sq. mtr. is also not indicated. I, therefore, set aside the findings of the Arbitrator on the aforesaid claim No. 2.
CLAIMNo. 3:
(8) Under claim No. 3 the petitioner claimed Rs. 2,31,088.00, as against which the Arbitrator has awarded Rs. 1,48,375.00. While awarding the aforesaid amount the Arbitrator has held that the cost index for works in Delhi rose from Rs. 421.00 to Rs. 564.00 with an average of 492.5 during the extended period, resulting in increase in price of materials and labour by 16.86% and that after adjusting the cost of site, extra expenditure during the extended period is assessed at Rs. 1,28,375 .00.
Therefore, aforesaid award apparently is based on increase in price of the material and labour. The Arbitrator has failed to give any reason for arriving at the amount of Rs. 1,48,375.00. He has also not indicated any reason as to what was the cost of site establishment and how and in what manner the same is calculated and what was the actual figure for the same which has been adjusted. Apparently, therefore, the Arbitrator has failed to indicate his thought process and give reasons in arriving at the aforesaid amount towards extra expenditure.
IT is also to be noted that claim of the petitioner on account of escalation in the prices of materials and wages of labour in Clause I0CC was rejected by the Arbitrator as Clause Iocc stood deleted in the copy of the contract agreement. The award given by the Arbitrator as against the aforesaid claim also appears to be assessment of an amount on the basis of Clause IOCC. Therefore, there appears to be an error apparent on the face of the record and therefore, this award also cannot be sustained.
CLAIMNo. 5:
(9) Claimants had claimed Rs. 26,000.00 on account of refund of illegal holding which was awarded in toto by the Arbitrator. On perusal of the award passed by the Arbitrator as against the aforesaid claim, I find that the Arbitrator had given reasons for arriving at the aforesaid finding. The Court cannot sit in appeal against the award made by the Arbitrator. Re-appreciation of evidence is beyond the purview of the Courts on an application under Sections 30 & 33 of the Arbitration Act. The respondents have failed to prove and establish any mistake or error apparent on the face of the record and, therefore, this award is upheld.
CLAIMNo. 6:
(10) So far as claim No. 6 is concerned the same relates to claim of Rs. 3,00,000.00 on account of reimbursement of losses by way of unutilized/under utilized services of Engineer, Staff, plant, machinery, shuttering and overheads due to prolongation of contract. It is not disputed that there was prolongation of work beyond the stipulated date of completion. The amount arrived at by the Arbitrator to the extent of Rs. 1,74,500.00 is based on evidence adduced by the petitioner. On the basis thereof the Arbitrator held that on arithmetical calculations and valid reasons the amount arrived at as bare minimum and unavoidable. I, therefore, do not find any error apparent on the face of the record in respect of the aforesaid award and accordingly I uphold the said award.
CLAIMNo. 7:
(11) The petitioner has claimed Rs. 2,50,000.00 on account of loss of profit/ profitability due to prolongation of contract under Claim No. 7, as against which the Arbitrator has awarded Rs. 66.277.00 in favour of the petitioners. The aforesaid amount has been arrived at calculating the claim of profits @ 8% which in my opinion, , reasonable and justified. It has been held by the Arbitrator that the rescission of the contract was neither justified nor legal and therefore,the petitioner is entitled to profits which they could be expected to earn on completion of the entire work as per contract. This Court cannot sit on appeal on the aforesaid findings recorded by the Arbitrator and reappreciate the same. Accordingly, when it is found that the recission of the contract was not legal and justified the contractor becomes entitled to claim for loss of profit. In such circumstances the Courts have held that even 15% of the total value of the contract would be reasonable and justified. The Arbitrator in the present case on consideration of the facts held that the contractor is entitled to 8% which cannot be said to be unjustified. The Arbitrator having decided to reimburse as damages to the tune of Rs. 66,277.00 and having given reasons for his decision, which are found to be valid and justified, there is no reasonable ground to interfere with the aforesaid award of the Arbitrator.
CLAIMNo. 8:
(12) Claim No. 8 relates to payment of interest @ 24% per annum as against which the Arbitrator has awarded simple interest(c) 16% per annum w.e.f. 28.4.1993 to the date of decree or payment i.e. pendente lite interest and also future interest. In the case of Secretary, Irrigation Department v. G.C. Roy; reported in 1991(6) Jt 349 the Supreme Court had occasion to deal with the power of the Arbitrator to award interest pendente lite. In the said decision it was held that the Arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or the date of realisation whichever is earlier. In Hindustan Construction Co. Ltd. v. The State off & K; reported in 1992(2) Arbitration Law Reporter the Supreme Court while referring to the decision in the case of Secretary Irrigation Department (supra) held that the award of interest by the Arbitrator for the period commencing with the date of award to the date of decree or the date of realisation whichever is earlier is logical for, while award of interest for the period prior to an Arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter of procedure. It is further held that Section 34 of the Code of Civil Procedure provides both for award of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before the Arbitrator though the section as such might not apply. In view of the aforesaid decisions of the Supreme Court the award of interest @ 16% per annum by the Arbitrator in respect of pendente lite and future interest has to be upheld.
(13) Accordingly, therefore, I set aside that part of the award of the Arbitrator as against Claims No. 2 & 3 and remit it to the Arbitrator to decide these claims afresh on merits.
(14) I, therefore, allow the objections to the extent indicated above and remit the matter to the Arbitrator for deciding Claims No. 2 & 3 afresh in accordance with law. The objections of the respondents in respect of the remaining claims are dismissed. The award is made a Rule of the Court as far as Claims No. 1,4,5,6,7 & 8 and counter claims 1 to 4 are concerned. The Arbitrator is directed to give his decision afresh in respect of claims No. 2 & 3 within 4 months from the date of receipt of a copy of this order. Let a decree be drawn in terms of the aforesaid part of the award, which this Court has hereby upheld. It is ordered that the petitioners shall be entitled to interest @ 16% per annum in respect of the aforesaid award from the date of the decree till the date of realisation.