Delhi High Court
Sanyukt Nirmata vs Delhi Development Authority And Anr. on 29 November, 2005
Equivalent citations: 2005(3)ARBLR509(DELHI), 125(2005)DLT550
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
JUDGMENT Sanjay Kishan Kaul, J.
1. The petitioner was awarded the contract by the respondent for construction of MIG Houses in various sectors in Rohini in pursuance to Agreement No. 2/RPD-VI/A/84-85/DDA. Disputes arose between the parties and the petitioner invoked the arbitration clause No. 25 of the General Terms and Conditions of the Agreement. The Engineer-Member, DDA in terms of the letter dated 04.01.1990 appointed Shri A. Shankaran, Additional Director General (Works), CPWD (Retd.) as the Sole Arbitrator, who entered upon reference and made and published the Award dated 28.11.1990. The petitioner filed the present suit under Sections 14 and 17 of the Arbitration Act, 1940 (hereinafter to be referred to as, "the said Act") for directions to respondent No. 2 Arbitrator to file the Award in Court and for making the said Award Rule of the Court. The respondent/DDA filed objections vide IAs No. 9003/1991 under Sections 30 and 33 of the said Act.
2. Learned counsel for the respondent/DDA fairly stated that he would confine his submissions to only those claims which really fall within the purview of Section 30 of the said Act since the objections raised in respect of re-appraisement of facts and evidence on record would not be sustainable. In fact, the Apex Court has observed that in the absence of an award being absurd, reasonableness is not a matter to be considered by the Court as appraisement of evidence by an arbitrator is not ordinarily a matter for the court to re-examine. So long as the view taken by the arbitrator is plausible, though perhaps not the only correct view, the award cannot be examined by the Court. (Sudarsan Trading Co. v. Govt. of Kerala, ). It has been once again reiterated in State of U.P. v. Allied Constructions, that Section 30 of the said Act provides for setting aside an award only on the restrictive grounds provided in it and unless one of the conditions mentioned therein is satisfied, an award cannot be set aside. Thus, an error apparent on the face of the record would not imply closer scrutiny on the merits of the documents and material on record.
3. Learned counsel for the respondent, however, submitted that the award made in respect of claims No. 2 and 8 proceeds on an erroneous premise that the respondent would not be entitled to claim rebate by reason of delay in payments. Learned counsel submitted that the responsibility was on the petitioner to submit the bills in time and as per clause 7 of the Agreement, payment had to be made within one month of submission of the final bill. It was, thus, submitted that the final bill was never raised.
4. Learned counsel in this behalf referred to judgment of the Apex Court in Rajastan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and Anr., where it was observed in para 44(i) as under:-
"44. From the resume of the aforesaid decisions, it can be stated that:
...
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action."
5. Learned counsel for the petitioner, on the other hand, has pointed out that this very plea was raised in Delhi Development Authority, Through Its Vice-Chairman v. Saraswati Construction Co. and Anr., 2004 (3) Arb. LR 276 (Delhi) (DB) in para 2 as under:-
"2. Claim No. 13 is a claim by the respondent for Rs. 8,75,000/- on account of damages suffered due to non-release of Clause 10(CC) payment in due time, deviation from the index as applicable at the time of payment, late payment of running as well as final payment, release of security and withheld amount, idling of machinery as well as shuttering on account of late laying of conduit for casting of slabs, transportation and also deviation of quantities beyond agreement of various items. Mr. Anil Sapra, learned counsel for the appellant has contended that the Award of the Arbitrator on this claim was postulated that it was only on the submission of the final bill by the contractor within one month of the date fixed for completion of the work or of the date was to be made within three months, if the amount of the contract plus that of additional items was up to Rs. 2 lakhs and in six months, if the same exceeded Rs. 2 lakhs, of the submission of such bill. It was contended that no final bill was submitted by the contractor and, therefore, the Arbitrator has misconducted the proceedings in as much as he has awarded the claim beyond the terms of contract. In support of his submission learned counsel for the appellant has cited Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and Anr., , where the Supreme Court observed as under:-
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action."
6. The aforesaid plea was not accepted by the Division Bench, though there is no detailed discussion on this aspect available in the said judgment.
7. In view of the aforesaid position, I am of the considered view that the matter requires to be examined in greater depth.
8. In order to appreciate the said plea, it would be necessary to reproduce clauses 7 and 8 of the General Terms and Conditions of the Agreement, which are as under:-
"CLAUSE 7.
No payment shall be made for a work estimated to cost rupees five thousand or less till after the whole of the work shall have been completed and certificate of completion given. But in the case of work estimated to cost more than Rs. five thousand, the contractor shall, on submitting the bill be entitled to receive a monthly payment proportionate to the part thereof then executed to the satisfaction of the Engineer-in-Charge, whose certificate of the sum so payable shall be final and conclusive against the contractor. But all such intermediate payments shall be regarded as payment by way of advance against the final payment only and not as payments for work actually done and completed, and shall not preclude the requiring of bad, unsound and imperfect or unskilled work to be removed and taken away and reconstructed, or re-elected or be considered as an admission of the due performance of the contract, or any part thereof, in any respect or the occurring of any claims, nor shall it conclude, determine, or affect in any way the powers of the Engineer-in-Charge under these conditions or any of them as to the final settlement and adjustment of the accounts or otherwise or in any other way vary or affect the contract. The final bill shall be submitted by the contractor within one month of the date fixed for completion of the work or of the date of the certificate of completion furnished by the Engineer-in-Charge and Payment shall be made within three months if the amount of the contract plus that of additional items is up to Rs. 2 lakhs and in 6 months if the same exceeds Rs. 2 lakhs of the submission of such bill. If there shall be any dispute about any items of the work then the undisputed item or items only shall be paid within the said period of three months or six months or as the case may be. The contractor shall submit a list of the disputed items within thirty days from the disallowance thereof and if he fails to do this, his claim shall be deemed to have been fully waived and absolutely extinguished.
"Wherever there is likely to be delay in recording detailed measurements for making running payments in the case of residential building, advance payments without detailed measurements for works done (other than foundations and finishing items) up to (a) lintel level (including sun shade etc.) and (b) slab level, for each floor, worked out at 75% of the tendered rates may be made in running account bills by the Engineer-in-Charge in his discretion on the basis of certificate from the Assistant Engineer to the effect that the work has been completed up to the level in question.
The advance payments so allowed shall be adjusted in the subsequent running bill by taking detailed measurements thereof. Final payment shall be made only on the basis of detailed measurements.
CLAUSE 8.
A bill shall be submitted by the contractor each month on or before the date fixed by the Engineer-in-Charge shall take or cause to be taken the requisite measurements for the purpose of having the same verified, and the claim, as far as admissible, adjusted as far as possible before the expiry of ten days from the presentation of the bill. If the contractor does not submit the bill within the time fixed as aforesaid, the Engineer-in-Charge may depute within seven days of the date fixed as aforesaid, the Engineer-in-Charge may depute within seven days of the date fixed as aforesaid, as subordinate to measure up the said work in the presence of the contractor whose counter signature to the measurement list will be sufficient warrant, and the Engineer-in-Charge may prepare a bill from such list."
9. There is no doubt on a reading of clause 7 that the bills should be submitted by the contractor and the final bill should be submitted by the contractor within one month of the date fixed for completion of the work or the date of certificate of completion furnished by the Engineer In-charge. However, clause 7 has to be read with clause 8 which requires that the contractor shall submit each month the running bill "on or before the date fixed by the Engineer In-charge". Thus, the pre-requisite for submission of the bill is the date to be fixed by the Engineer In-charge.
10. Claim No. 2 relates to refund on account of rebate offered on the final bill payment and release of security, while claim No. 8 relates to refund on account of rebate for regular monthly payments wrongly deducted. The Arbitrator has relied, and rightly so, on clause 8 to indicate that in the event of failure of the contractor to submit the bill within the time fixed, DDA could have prepared the bills. Not only that there was no evidence produced to show that any date had been fixed by the designated Officer of the respondent for preparation of the bill as is required by clause No. 8. The actual date of completion of work is 01.08.1986 and, thus, no bill was verified for payment by the respondent in terms of clauses 7 and 8. This being the position, the judgment of the Apex Court in Rajasthan State Mines & Minerals Ltd.'s case (supra) would be not of much assistance to learned counsel for the respondent because the present case is not one where the arbitrator has made a departure or disregarded the contract, but has in fact considered the terms of the contract and has come to a right conclusion on the reading of both clauses 7 and 8 together.
11. The second line of submission of learned counsel for the respondent arises from the plea that no reasons have been recorded for reducing the amount while dealing with the claims and it is submitted that though detailed mathematical calculations need not be given by the arbitrator, there must be a rationale present and disclosed on basis of which the calculation has been arrived at. This is so since the amount is not as per what is claimed by the petitioner.
12. A Division Bench of this Court in Delhi Development Authority v. Bhagat Construction Co. (P) Ltd. and Anr., 2004 (3) Arb. LR 548 had observed that specially where a technical man like retired Chief Engineer of CPWD is called upon to act as an arbitrator, all that is required to be seen is that the arbitrator has applied his mind before awarding the claims and the arbitrator is not required to disclose the mathematical calculations in the award. Thus, until and unless the decision of the arbitrator is manifestly perverse or has been arrived at on the wrong application of law, the award would not call for any interference. The Division Bench referred to judgment of the Apex Court in State of U.P. v. Allied Constructions's case (supra) where it was observed as under:-
"6. On the other hand, Mr. Sandip Sharma, counsel appearing for the respondent No. 1, has contended that Arbitrator was a retired Chief Engineer of CPWD, he had full knowledge of the working of the department like the appellant, the Arbitrator was appointed by the appellant, therefore, it cannot be said that the Arbitrator was a novice and he had to assign the detailed reasons for coming to the conclusion as has been done by the Arbitrator. In support of his contentions, learned counsel for respondent No. 1 has cited M.C.D. v. Jagan Nath Ashok Kumar and Anr., AIR 1987 SC 2316: 1987 (2) Arb. LR 344 (SC). It was also contended by him that the Arbitrator has not to give detailed reasons if taking the Award in its totality, the mental process of the Arbitrator giving the Award can be deciphered. It was further contended that as the Arbitrator has held that the delay was caused on account of so many factors on the part of the appellant and he has considered all the relevant material, it cannot be contended that no reasons have been disclosed by Arbitrator. In support he has also cited DDA, New Delhi v. Alkaram, New Delhi, : 1983 Arb. Lr 1 (Del.) (DB) and Arosan Enterprises Ltd. v. Union of India and Anr., 1999 (3) Arb. LT 310 (SC). On the basis of the said authorities, it was contended by the learned counsel for the respondent No. 1 that the Court will not go into the sufficiency of the evidence nor it is necessary for the Arbitrator to set out the actual calculation of figures as worked out by him. It was also contended by Mr. Sharma that once the Award is a speaking Award cannot be nullified and same cannot be set aside on the ground that the details calculations have not been given by the Arbitrator. In support of his submission learned counsel for respondent No. 1 has relied upon State of U.P. v. Allied Constructions, 2003 (3) Arb. LR 106 (SC). In this case, the plea in regard to Clause 47 was taken which was a force majeure clause and it had been contended that loss was on account of unprecedented rain. The Arbitrator, however, recorded finding that flood was not due to unprecedented rain and the force majeure clause was not attracted. It was held that Arbitrator assigned sufficient and cogent reasons in support of his finding and Award was not set aside. It was observed by the Court:
"... The Arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for Arbitrator to determine [See: Sudarsan Trading Company v. The Government of Kerala, ]. Section 30 of the Arbitration Act, 1940 providing for setting aside an Award is restrictive i its operation. Unless one or the other condition contained in Section 30 is satisfied, an Award cannot be set aside. The Arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the Award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closure scrutiny of the merits of documents and materials on record. Once it is found that the view of the Arbitrator is a plausible one, the Court will refrain itself from interfering [See: U.P. State Electricity Board v. Searsole Chemicals Ltd., and Ispat Engineering and Foundry Works, B.S. City, Bokaro v. Steel Authority of India Limited, B.S. City, Bokaro, ]."
13. Learned counsel for the respondent, however, submitted that in view of judgment of the Division Bench of this Court in College of Vocational Studies v. S.S. Jaitley, AIR 1987 Delhi 134, there has to be reasons assigned. It was observed by the Division Bench that reasons are the links of the material, documentary or oral evidence, adduced before the arbitrator, on which certain inferences are drawn and conclusions are made. Thus, there must be some rational nexus between the two indicated in the award. The arbitrator is, thus, not required to set out every process of reasoning or may not deal with every point raised, but must tell the 'reason' why he came to a particular conclusion. In the absence of such reason, the award had been set aside.
14. In the present case, however, it has been pointed that the rational or reason is, in fact, disclosed by the arbitrator and flows from the fact that while rebates have been allowed in respect of certain bills, they have been declined in respect of the others. In consideration of claim No. 8, the arbitrator found that the rebate availed of is not available to the respondent for payments made in the 19th, 20th, 21st and 22nd bill and the deductions made are to be refunded. Thus, what the petitioner has claimed was not allowed, but the petitioner was allowed the amount which had been wrongly deducted as rebate in respect of some of the bills. The mind or thought process of the arbitrator is, thus, clearly available for which mathematical calculations are not required to be given.
15. The third issue raised by learned counsel for the respondent is in respect of claim No. 9 where the amount has been awarded for making groves in the cement plaster. Learned counsel submits that while a work is assigned in terms of the contract, each detail need not be given and the work has to be treated as a whole. In my considered view, this will depend on the term and condition of the relevant Agreement and the nature of work which has to be performed. There may be cases where there is a general description of the work and it can be held that it would include all incidental matters thereto. An example of this is the judgment of this Court in Narain Das R. Israni v. Delhi Development Authority, 2005 VIII (Delhi) AD 556 where the expression 'reinforcement for RCC work including bending, binding and placing in position complete' was held to be comprehensive to include all aspects and bending, binding and placing were illustrative and not exhaustive.
16. In the present case, in respect of the clause in question, the cement plastering work is not same as doing the said work with groves. In case such groves had to be made, the same had to be provided for since it cannot be presupposed that groves had to be made merely because cement plastering has to be done. The plea of the respondent in this regard cannot also, thus, be accepted.
17. Learned counsel next sought to challenge the award in respect of claim No. 14, which is on account of cost of watch and ward and other establishment maintained after completion. A finding has been arrived at that there was delay. Some defects had to be rectified which works the petitioner so did. However, the arbitrator found that the respondent was unable to take possession much after the completion of work. It is in these circumstances that the arbitration found that a party to the contract, who is injured due to the contractual lapses on the part of the other party, must be so compensated. The arbitrator found that the petitioner had made timely claims and on the basis of appraisement of the material on record, the petitioner was liable to be compensated in that behalf.
18. Learned counsel for the respondent also sought to challenge the award in claim No. 20 and claim No. 22 on account of additional overhead expenses during the prolongation of contract and on account of loss of profit. It has to be kept in mind that these two items fall under different heads. Once it is found that the delay is on the part of the respondent and the respondent has been unable to take over the site causing expenses on the part of the petitioner, the petitioner must be compensated for the same. The issue of loss of profit is separate as the same arises on account of inability of the petitioner to put those resources somewhere else for making a profit. In this behalf, the judgment of this Court in IA No. 8388/1989 & CS (OS) No. 1706A/1989 titled 'Prem Chand Sharma & Co. v. DDA and Anr.' decided on 08.11.2005 be referred to.
19. The last aspect sought to be impugned is the issue of the award of interest. The arbitrator has awarded interest @ 18% p.a. for the pre-suit period and pendente lite. In this behalf, calculations had been given at pages 24 and 25 of the award and the pre-suit interest has been quantified at Rs. 78,220/-. Learned counsel for the petitioner confines his relief to pre-suit and pendente lite interest of 12% p.a. In my considered view, this is also a fair rate of interest taking into consideration the prevailing rates of interest at the relevant time. The interest is, thus, accordingly liable to be varied for both the said periods.
20. The objections are accordingly dismissed except to the extent of reduction of interest for pre-suit and pendente lite interest from 18% p.a. to 12% p.a. CS (OS) No. 28A/1991
21. The objections having been dismissed and there being no other legal impediment to the award being made Rule of the Court, the Award dated 28.11.1990 of the Sole Arbitrator, Shri A. Shankaran is made Rule of the Court with the modification that the pre-suit and pendente lite interest shall be calculated @ 12% p.a. simple interest instead of 18% p.a. till the date of decree. The petitioner shall also be entitled to future interest from the date of decree till the date of realization at 9% p.a.
22. The plaintiff shall also be entitled to costs.
23. In case the defendant pays the decretal amount within 60 days from today, the defendant shall not be liable to pay future interest.
24. Decree-sheet be drawn up accordingly.