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Delhi Development Authority vs Udai Constructions on 28 October, 2016

IN THE COURT OF SHRI KULDEEP NARAYAN : ADDITIONAL
  DISTRICT JUDGE-05 (WEST) TIS HAZARI COURTS, DELHI

 Arbitration No.65/2015 (New No. 60833/16)

 Delhi Development Authority
 Through its Vice Chairman
 Vikas Sadan, INA,
 New Delhi.                                          .... Petitioner

        V.

 1. Udai Constructions
 153-A, Pocket-F,
 Mayur Vihar-II,
 Delhi-110091

 2. Sh. S.K. Jain, S.E (Arbitration)
 B-2B, Near Choti Subzi Mandi
 Janak Puri,
 New Delhi                                                  ... Respondents


        Date of Institution                     : 18.02.2015
        Date of reserving Judgment              : 12.08.2016
        Date of pronouncement                   : 28.10.2016

 JUDGMENT

This objection petition under Section 34 of the Arbitration and Conciliation Act,1996 ("the Act"), is filed by the petitioner against the award dated 20.11.2013 passed by the Sole Arbitrator Shri S.K. Jain, S.E. (Arbitration) in S.E (Arbn.)/DDA/300, in the matter titled as "M/s Udai Construction V. DDA " (for short "the impugned award").

2 After filing of the petition, notice was issued to the respondents. Respondent no.1 appeared and filed reply to objection Arbitration No. 65/15 ( New No.60833/16) Page 1/12 petition. The entire proceedings of the impugned award were also filed by the Ld. Arbitrator.

3 I heard the arguments on both sides and perused the material available on record.

4 Briefly stated, the facts of the case are that the petitioner is a body corporate created by the Delhi Development Act, 1957 and has sought quashing and setting aside claims No.1-3 and 5-6 awarded through the impugned award. It is, inter alia, stated that the work C/o repairing and providing bitumastic treatment at round about and U-turn on Metro corridor near Sector 12-13 Xing and Sector 13-14 Xing in Dwarka Zone under the project of maintenance of various colonies under Nazul A/C-II, in DWK Zone, was awarded to respondent firm vide award letter dated 15.4.2013, whereupon an agreement dated 20.04.2013 (for short "the Agreement") was executed between the petitioner and the respondent. The stipulated period for completion of the work was three months till 24.07.2013. It is alleged that the respondent despite specific terms of the Agreement, submitted a report for the tests done for the job-mix formula from Bharat Test House which was neither the Government approved lab nor had been approved by the Engineer-in-Charge. Therefore, letter dated 21.6.2013 was issued to the respondent with request to provide the material for getting tests done from a Govt approved lab.

5 It is also stated that as per the drawing and specifications about 55.25 MT bitumen was to be used for doing the Schedule work and a total amount of 56 MT bitumen was issued/released to the respondent. Pursuant to the completion of the work, measurement were carried out and recorded jointly on 25.8.2013 which were duly accepted by the respondent/claimant.

The samples of the work done were taken by the A.E-3 of WD-3 at regular intervals and were handed over to the respondent which sent the same to Bharat Test House for testing. However, the same was not a Government approved lab. The A.E (QC), Dwarka inspected the site on 22.7.2013 and found various deficiencies in the work which were reported by him to EE, WD-3, vide his inspection report dated 1st August,2013. Accordingly, the work was deficient in nature which were recorded even by S.E CC-17 in the completion certificate dated 7.8.2013 and therefore, a sum of Rs.50,000/- was withheld from the running bill which was never objected or protested by the respondent/claimant. The respondent did not remove the defects and started raising false and frivolous claims and vide its letter dated 5.10.2014 addressed to S.E C.C/17, invoked the arbitration clause. It is alleged that despite several letters and requests, the respondent did not attend to the defects. The last letter dated 18.12.2013 was issued by E.E/WD-3 which was replied by the respondent on 21.1.2014. Hence, the respondent filed the following claims before the Arbitration :

Claim no.1- The respondent/claimant claimed a sum of Rs.19,00,000/-, which was later on modified to Rs.17,08,859/- on account of balance payment for the work executed under the contract including extra work and extra involvements, clause 10CA etc Claim No.2- A sum of Rs.50,000/- towards refund withheld on account of quality control and inspection. Claim No.3- A sum of Rs. 1,50,000/- on account of reimbursement of testing charges.

Claim No.4- A sum of Rs.2,78,329/- towards release of security deposit including EMD lying with the department.

Claim No.5- Interest @ 18% per annum on account of non-payment/delay in payment of admitted amount for the work already executed.

Claim No. 6- Interest @ 18% per annum for the amounts due for re-reference, pendente lite and future. Claim no.7- A sum of Rs.2 lacs on account of arbitration proceedings.

6 In a nutshell, the grounds taken in the objection petition are that The award was passed without appreciating the admitted facts and correspondence exchanged between the parties. The award is unsubstantiated by any document or evidence. The respondent could not have done any extra work as the total quantity of bitumen released was about 56 MT, whereas the total quantity required to complete the work was about 55.25 MT. The Arbitrator wrongly relied on inspection report as thickness at one point was recorded as 27 mm and not for the entire work. The respondent alleged 30 mm thickness, however, the Arbitrator awarded a sum of Rs.6,50,046/-

holding that the respondent had done extra work of 3 mm. The Arbitrator did not consider that the measurement of the work were taken jointly. The Arbitrator failed to appreciate that the respondent refused joint inspection to check the thickness. The Arbitrator also failed to consider that the measurements were proved to have been admittedly recorded jointly which were never objected by the respondent which proves that no extra work was ever done by it.

Further, the respondent was never asked by the Engineeer-in-Incharge to do the alleged extra work. As per clause- 6A of the agreement, the respondent was about to record the measurement of the items and to get the same checked from the Arbitration No. 65/15 ( New No.60833/16) Page 4/12 Engineeer-in-Incharge at regular intervals which were never submitted by respondent which proves that no extra work was ever done by it. The Arbitrator failed to appreciate that as per clause-9 of the Agreement, the respondent never submitted the final bill and accordingly no amount against claim no.1 for allegedly doing the extra work could have been awarded.

The Arbitrator failed to appreciate that the respondent firm had not cured the defects pointed out by the Quality Control Cell and the Engineeer-in-Incharge accordingly was entitled to withhold Rs.50,000/- on account of quality.

The Arbitrator wrongly observed that the petitioner has not issued any notice under clause-16 of the Agreement, whereas vide letter dated 18.9.2013 and 21.1.2014, Engineeer-in-Incharge asked the respondent to cure the defects and the respondent vide its letter dated 30.9.2013 ensured that the defects were being attended. Since before the maturity period of one year which ended on 23.7.2014, the respondent invoked arbitration clause and the arbitration proceedings commenced on 6.6.2014, there was no scope for issuing the notice under Section 16 of the Agreement.

The Arbitrator also failed to appreciate that the respondent had not attended the defects, final bill could not been prepared. Hence, no interest on the admitted payment could have been awarded.

The Arbitrator has also done the wrong calculations whereby a sum of Rs.35,419/- has been awarded. The interest awarded by the Arbitrator is @ 10% per annum for delayed payment of Rs.4,14,642/- w.e.f 24.1.2014 to 1.9.2014 which comes to Rs.24,879/-. Therefore, the award has been passed without application of mind.

The Arbitrator failed to appreciate that the claims were raised by the respondent which were against public policy and natural justice. The Arbitrator failed to consider various violations made by the respondent for non-start/non-execution of the work. The award is unjust and unfair as it deals with a dispute not contemplated or falling within the terms of the arbitration. The award is apparently one-sided and is in conflict with public policy. The petitioner has already made payment against claim no.3 and 4 regarding charges for the test and released the earnest money and security deposited as awarded by the Arbitrator. 7 The respondent contested the objection petition by filing reply stating inter alia, that the petition under Section 34 of the Act is not maintainable as the petitioner has not brought out any of the grounds as contemplated under Section 34 of the Act. It is challenged by the Vice Chairman and the supporting affidavit is signed by the Superintending Engineer, although the Executive Engineer, WD-III was the party before the Arbitrator. Further, the Arbitrator had relied upon the inspection report/measurement book of the petitioner and while deciding the claim no.1 has categorically mentioned R-8 dated 1.8.2013 (inspection report of Quality Control), whereby there was extra thickness i.e 27 mm to 30 mm against 25 mm thickness as per the Agreement item no.5 was found mentioned and therefore, the Arbitrator concluded the extra thickness at least for 3 mm can be claimed. It is further stated that the Arbitrator is empowered to award interest under Section 31 of the Act which has already been laid down in Mannalal Prabhudayal V. Oriental Insurance Company, 2006 (3) ALR, 364. The Arbitrator published a reasoned and speaking award as per the law of the land and within four corners of the Agreement after perusal of the terms and Arbitration No. 65/15 ( New No.60833/16) Page 6/12 conditions of the Agreement, interpretation of Scheduled completion time, pleadings, evidence placed on record and documents relied upon were referred. As per the settled propositions of law, the Court cannot sit in appeal over the view of the Arbitrator by re-examining and re-assessing the material as was held in FCI V. Jogender Pal & Ors, 1989 (2) SCC, 347.

8 Having heard the submissions on both sides and perused the impugned award as well as the entire material available on record of the Learned Arbitrator, I do not find any merits in the contentions of Ld. Counsel for the petitioner.

9 As per the settled propositions of law, the jurisdiction of the court to set aside an arbitral award is limited to the ground set out in Section 34 of the Act. It is also now settled that while deciding the application under Section 34 of the Act, the court cannot sit in appeal over the findings of the Arbitrator. Though no specific ground under Section 34 of the Act has been mentioned by the petitioner, the perusal of the entire grounds made in the petition shows that the ground for setting aside the award, as pleaded, are covered under Section 34 (2) (a) (iv) and (b) (ii). As far as the ground that the impugned award deals with a dispute not contemplated or not falling within the terms of the submissions to arbitration is concerned, it appears that this ground has been mentioned for the sake of it as this ground has not been substantiated by any material placed on record nor any argument was made in this regard.

10 The main ground for setting aside the impugned award as pleaded by the petitioner is the award being in conflict with public policy of India as stipulated under Section 34 (2) (b) (ii) of the Act. In support of his contentions, Ld. Counsel for the petitioner relied on ONGC Ltd V. Western Geco International Ltd., 2014 ( 9) SCC Arbitration No. 65/15 ( New No.60833/16) Page 7/12 263, wherein three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian Law were elaborated. They are : (i) in every determination whether by court or other authority that affect the life of citizen or leads to any civil consequence, the court or authority concerned is bound to adopt "judicial approach", (ii) the court or such authority must do so in accordance with principles of natural justice i.e the court or authority must apply its mind to the attended facts and circumstances while taking the view and (iii) that the decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law.

It was also laid down that if on facts proved before them the arbitrators failed to draw an inference which ought to have been drawn or if they have drawn an inference, which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Aribtral Tribunal that enjoys considerable latitude and play at the joints in making aware will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.

11 During the course of arguments, Ld. Counsel for the petitioner did not raise objection to claim no.3 and 4. The remaining claims i.e claim no.1,2, 5, 6 and 7 were challanged by the petitioner which are taken up one-by-one:

Claim No.1

12 Under claim no.1, a sum of Rs.19,00,000/- was claimed on account of balance payment for the extra work executed by the respondent, which was subsequently modified to Rs.17,08,859/-.

It was pleaded by the petitioner that the Arbitrator failed to Arbitration No. 65/15 ( New No.60833/16) Page 8/12 appreciate that no extra work was done by the respondent as the same was not explained or detailed while submitting statement of claims before the Arbitrator nor was there any increase in rates nor any such increase was ever claimed by the respondent. It was also stated that respondent never communicated any such extra work with the petitioner though he claimed about such extra work pertaining to extra thickness in terms of Agreement's item no.5 and therefore, the Arbitrator wrongly considered the material placed before him while deciding claim no.1.

13 A perusal of the impugned award goes to indicate that the claim regarding extra/additional work raised by the respondent and the objections of the petitioner in this regard were duly considered by the Arbitrator while adjudicating claim no.1. The Arbitrator had categorically referred to material placed on record i.e R-8 dated 1.8.2013 which is an inspection note of Quality Control filed by the petitioner in its statement of facts. The Arbitrator also came to a just conclusion that there were extra thickness ranging from 27 mm to 30 mm as against 25 mm as per agreement item no.5. On consideration of the pleadings and material placed before him, the Arbitrator held the respondent entitled to payment for extra thickness of at least 3 mm as against 5 mm thickness and therefore, out of the claimed amount of Rs.17,08,859/-, the Arbitrator awarded a sum of Rs.6,50,046/- in favour of the respondent under claim no.1. Furthermore, as per the inspection report annexure P-9 filed by the petitioner before this court, the M.A.S. Register for bitumen was found maintained and quantities of industrial bitumen grade 85/25 received were noted to be 59.010 MT, bitumen grade VG-30 were 90.30 MT and bitumen VG-10 were and 36 drums. There is no merit, therefore, in the contention of the petitioner that the Arbitration No. 65/15 ( New No.60833/16) Page 9/12 respondent could not have done any extra work as the total quantity of bitumen released was 56 MT whereas the total quantity required was 55.25 MT. The contentions of the petitioner in this regard are accordingly contrary to its own record. In the same inspection report on total assessment, the quality of work was assessed as 'Good'. Further, as per the completion certificate annexure P-10, it was observed that the entire work has been carried out generally to the specifications and has been physically completed satisfactorily subject to some minor defects/discrepancies which again indicate that on the whole, the work was completed by the respondent to the satisfaction of the petitioner. Therefore, no fault can be found with findings returned by the Arbitrator regarding claim no.1. Claim No.2 14 This claim pertains to refund of Rs.50,000/- which was withheld by the petitioner on account of defects in the work done by the respondent. It was contended by the petitioner that the same could not be released until the respondent rectified all the defects as stated in Q.A.C observation memo dated 02.09.2013. 15 Admittedly, as per record, the work was completed on 24.7.2013.. It was also certified by the petitioner that work was carried out as per CPWD Specification MORTH Specification and as per direction of the Engineer-in-Charge as was evident from Ist R/A bill paid on 26.09.2013. The petitioner neither gave any notice under the relevant provision of the Agreement nor filed on record any document to show that it incurred any expenses on getting the alleged defects/deficiencies rectified Thus, the Arbitrator having considered the pleas of both side, held the respondent to be entitled for refund of Rs.50,000- withheld by petitioner and gave his findings after considering the material placed on record as the Arbitration No. 65/15 ( New No.60833/16) Page 10/12 petitioner failed to exercise the option available in the Agreement and remained contented with withholding of Rs.50,000/-. It shows that the Arbitrator had applied his mind on the material available on record. Thus, no fault can be found with the findings under claim no.2.

16 Under the claim no. 5 & 6, the Arbitrator awarded simple interest @ 10% p.a for the delay in payment of Rs.4,14,642/- from 24.1.2014 to 1.9.2014 which comes to Rs.35,419/-. The petitioner challenged the claim on the ground that the final bill could not be prepared because of inaction on the part of the respondent. Further, the calculation on the delay period was wrong and correct amount on account of interest was Rs.24,879/- for the relevant period.

17 Admittedly, the work was completed on 24.07.2013 and the payment was to be released within six months after completion of the work. However, the amount of Rs.4,14,642/- was released by the petitioner on 2.9.2014 after a delay of 7 months and 7 days. The Arbitrator awarded simple interest @ 10% per annum for the delayed payment of Rs.4,14,642/-. As far as the rate of interest granted by the Arbitrator under claim no.6 is concerned, the same was within his power under Section 31 of the Act. However, on calculation simple interest @ 10% per annum on a sum of Rs.4,14,642/- for the delayed period comes to Rs.24,983/- which indicates that even the calculation put by the petitioner as Rs. 24,879/- is not correct. Thus, this could be termed as merely clerical error which cannot be construed as non-application of mind. The simple interest @ 10% per annum awarded on the delayed payment is rectified to Rs.24,983/-.

Claim no.7 was also rightfully declined by the Arbitrator. The petitioner already made the payment as awarded under claim no. 3 and 4. In my considered opinion, the impugned award is in consonance with the fundamental principles as laid down in ONGC Ltd. (Supra) case.

18 In the entire facts and circumstances, in my considered opinion, the impugned award does not suffer from any infirmity and illegality or non-application of mind. The Arbitrator followed the principles of natural justice while passing the impugned award, which is not against the public policy. Therefore, the objection petition filed by the petitioner is dismissed with costs being devoid of merits and the award dated 20.11.2013 passed by the Sole Arbitrator Shri S.K. Jain, S.E. (Arbitration) in S.E (Arbn.)/DDA/300, in the matter titled as "M/s Udai Construction V. DDA " is upheld.

File be consigned to Record Room.

Announced in the open Court                    (KULDEEP NARAYAN)
on 28.10.2016                                Additional District Judge-05
                                           West District. Tis Hazari Courts,
                                                       Delhi.




     Arbitration No. 65/15 ( New No.60833/16)                Page 12/12