Delhi District Court
Delhi Development Authority vs M/S Kp Rana on 4 November, 2023
IN THE COURT OF RAJESH KUMAR SINGH
DISTRICT JUDGE (COMMERCIAL) (DIGITAL)-07
SOUTH-EAST, SAKET COURT, DELHI
OMP (Comm.) No. 21/2022
CNR No.DLSE01-004491-2022
DELHI DEVELOPMENT AUTHORITY
Through its Vice Chairman
Vikas Sadan, INA,
New Delhi
[email protected]
Mob. No. 9717413994 ......Petitioner
Vs.
M/S K P RANA
NP-132, Maurya Enclave,
Pitampura,
New Delhi-110034
[email protected]
Mob. No. 9810118893 ...... Respondent
Date of E-filing (institution) of suit : 17.05.2022
Date of of final argument : 20.10.2023
Date of Judgment : 04.11.2023
Counsel for Petitioner : Sh. Vaibhav Agnihotri
and Sh. Shaurya Punj
Counsel for Respondent : Sh. Rahul Malhotra
and Ms. Tanya Kumari
Digitally
signed by
RAJESH
RAJESH KUMAR
OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.1 OF 41 KUMAR SINGH
SINGH Date:
2023.11.04
15:02:12
+0530
PETITION U/S 34 OF THE ARBITRATION &
CONCILIATION ACT, 1996, ON BEHALF OF THE DELHI
DEVELOPMENT AUTHORITY, AGAINST THE AWARD
DT. 14.02.2022 PASSED BY LD. ARBITRAL TRIBUNAL
JUDGMENT
(1). The petition has been filed by DDA u/S 34 A & C Act, 1996 to challenge the award dt. 14.02.2022 passed by Mr. Brij Mohan Kohli, Ld. Sole Arbitrator in award number BMK/ARB/KPR vs. DDA/2020-21/55 titled M/s K.P. Rana Vs. DDA. The petitioner was respondent before the Ld. Arbitrator and the respondent herein was the claimant. Hereafter, DDA shall be referred to as the petitioner/DDA and KPR will be referred to as the respondent/claimant.
(2). Brief facts are that the work of construction of community hall at Block G, Sector-11, Rohini was awarded by the petitioner to the respondent. The estimated cost of the project was ₹1,80,82,008/-. The respondent quoted an amount of ₹1,55,35,863/- which was 14.08% below the estimated cost. Agreement dt. 15.01.2014 was executed by the parties. The stipulated date of start of work was 20.01.2014. The stipulated date for completion of the work was 19.01.2015. There were hindrances. Due to deviations and extra items, the scope of the work also increased. The work was completed on 22.05.2017. (3). The respondent submitted the application for extension of time (EOT) up to the date of completion. The case was processed and it was found that justified period as per the Hindrance register was 936 days but an extension of 872 days only up to the Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.2 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:02:23 +0530 date of completion was required. Accordingly, EOT for 872 days up to the date of completion was granted without levy of compensation. The approval of EOT was conveyed to the respondent by the petitioner vide letter dt. 06.09.2017. Finalization of the 9th Bill which was also the final bill, remained pending on account of sanction of the extra item statement 2 and deviation item statement no. 1 & 2. The petitioner sanctioned the rates vide letter dt. 08.04.2019 and finalized the 9 th Bill on 06.06.2019 for ₹2,34,544/-. It was further held that the respondent was to be paid ₹2,22,818.00/- only.
(4). It was alleged by the respondent that there were delays in release of payment of 7th and 8th Bills. It was also alleged by him that the rates sanctioned by the petitioner were not in accordance with Clause 12 of the Agreement. He submitted his own 9 th Bill on 09.08.2019 in which he calculated the market rates on the basis of DSR 2014. He also wrote letter dt. 11.12.2019 to the petitioner in which he stated that in the application for EOT he had been coerced to give the undertaking that he would not claim anything beyond the agreement towards the delay. (5). Vide letter dt. 02.09.2019 the petitioner informed the respondent that the final bill was ready for payment and the respondent should furnish the guarantee bond for ₹ 9 lac. The respondent wrote letter dt. 05.09.2019 that due to financial constraints he was not in a position to submit the bond. The petitioner again wrote letter dt. 21.09.2019 demanding the guarantee bond. The respondent wrote letter dt. 26.09.2019 stating that towards the guarantee bond, a sum of ₹9 lacs could be withheld from his claims. Vide letter dt. 03.10.2019 the Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.3 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:02:32 +0530 respondent informed the petitioner that he had accepted the final bill and measurement subject to further dispute. (6). Vide letter dt. 08.07.2020 the respondent invoked the arbitration clause and requested the petitioner to appoint an arbitrator. Vide letter dt. 20.10.2020, the petitioner appointed the Ld. Arbitrator to adjudicate the disputes raised by the respondent.
It was mentioned in the letter that the disputes were being referred for arbitration subject to their admissibility under Clause 25 of the Agreement.
(7). The respondent filed the statement of claim before the Ld. Arbitrator laying 13 claims which are mentioned in the chart at page 5 of the award. The petitioner filed the statement of defense and the respondent filed rejoinder. Ld. Arbitrator has mentioned the authorities cited by the respondent in the chart at page 10 to 13 of the award. Summary of the allowed claims is provided in the chart at page 96 to 98 of the award. Perusal of the chart shows that claims no. 1, 2, 4, 8, 9, 11 & 12 were allowed. The petitioner has challenged the decision of the Ld. Arbitrator on claims no. 1, 2 ,4, 9, 11 & 12. The decision on claim no 8 has not been challenged. The details of the claims and the relief granted by the Ld. Arbitrator will be mentioned while individually examining the validity of the award in respect of each claim under challenge.
(8). The petitioner has challenged the award on the ground that it is patently illegal and opposed to the public policy of India. The grounds run into 13 pages and there are repetitions. In nutshell the grievance of the petitioner is that the Ld. Arbitrator ignored the terms of the agreement and allowed the claims without Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.4 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:02:41 +0530 evidence. Ld. Counsel for the petitioner also argued that the petitioner had filed the affidavit of its officer before the Ld. Arbitral Tribunal but the respondent did not file his affidavit and no opportunity was given to DDA to cross examine the claimant. On being asked, Ld. Counsel for DDA stated that he did not request the Ld. Arbitral Tribunal to ask the respondent to lead evidence and for opportunity to cross examine him. (9). Ld. Counsel for the respondent has opposed the petition primarily on the ground that the view taken by the Ld. Arbitrator is a possible view. This court is not sitting in appeal against the award and therefore, there is no scope for interference with the award u/S 34 of A & C Act, 1996. Ld. Counsel for the parties cited authorities in support of their submission. It would be appropriate to briefly note the citations with the relevance and distinguishing factors pointed out by the Ld. Counsel for the parties.
(10).
Authorities cited at Bar by Ld. Counsel for DDA/petitioner Sr. Citations Relevance and distinguishing No. factors 1 Delhi Integrated Multi Modal Transit (i) The plea that no claim System Ltd. Vs. M/s R S Sharma certificate was given under Contractors Pvt. Ltd. 2018 SCC duress and coercion cannot be OnLine Del. 9386 accepted without any material.
(ii) Loss of profit cannot be awarded on mere assumptions and without evidence.
(iii) Hon'ble High Court relied
upon judgment by DB, Hon'ble
Bombay High Court in Edifice
Developers & Projects
Engineers Ltd. Vs. Essar
Projects (India) Ltd. Hon'ble
Bombay High Court had relied
upon judgment by Hon'ble
Digitally
signed by
RAJESH
OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.5 OF 41 RAJESH KUMAR
KUMAR SINGH
SINGH Date:
2023.11.04
15:02:54
+0530
Supreme Court in A.T. Brij Paul
Singh & Bros. Vs. State of
Gujrat wherein it was held that
Hudson's Formula cannot be
applied despite absence of
evidence. It was also held that
u/S 28 (2) the arbitral tribunal
can act as amiable compositeur
and can decide ex aequo et
bono only if the parties have
expressly authorized it to do
so. Relevant paragraphs are
para 33, 35, 36.
2 DDA Vs. Sukumar Chand Jain 2012 There should be evidence to
SCC OnLine Del. 3445 support the contention that the
undertaking was given under
coercion.
3 State of Rajasthan & Anr. Vs. Ferro While the quantum of evidence
Concrete Construction Pvt. Ltd. required to accept a claim may
2009 SCC OnLine SC 868 be a matter within the exclusive
jurisdiction of the Arbitrator to
decide, if there was no
eveidence at all and if the
Arbitrator makes an award of
the amount claimed in the claim
statement, merely on the basis
of the claim statement without
anything more, it has to be held
that the award on the account
would be invalid. Relevant para
55.
4 UP State Bridge Corporation Ltd. Hudson Formula cannot be
Vs. DDA & Anr. 2019 SCC OnLine applied without evidence.
Del. 7168 Relevant para 60.
5 Edifice Developers & Project Hudson Formula is not
Engineers Ltd. Vs. M/s Essar universally applied. Different
Projects (India) Ltd. 2013 SCC formula may be required for
OnLine Bom. 5 different situations. Further,
Loss of profit cannot be
awarded without evidence.
Relevant para 11 & 12.
6 Ahluwalia Contract (India) Ltd. Vs. Damages cannot be awarded
Union of India 2017 SCC OnLine without proof of injury and the
Del. 11042 claimant should show that it
exercised some diligence.
Relevant para 11. Digitally
signed by
RAJESH
RAJESH KUMAR
OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.6 OF 41 KUMAR SINGH
SINGH Date:
2023.11.04
15:03:06
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7. Attar Singh & Brothers Vs. DDA Limitation for filing the claim
2018 SCC OnLine Del. 13032 will start on the time fixed for
submitting the final bill and not
from the date of issue of
completion certificate by the
EIC.
8. Pradyuman Kumar Sharma & Ors. Though, Arbitrator is not bound
Vs. Jaysagar M. Sancheti & Ors. by the provisions of CPC or
MANU/MH/0244/2013 Evidence Act, Principles of
Evidence Act and CPC are
applicable even to arbitration
proceedings. A document which
is disputed by a party and if not
proved, cannot be considered
even by the Arbitrator to be on
record as a piece of evidence.
Relevant para 32.
9. PSA SICAL Terminals Pvt. Ltd. Vs. Arbitrator cannot create a new Board of Trustees of V.O. contract for the parties. Chidambranar Port Trust Tuticorin & Relevant para 86. Ors. 2021 SCC OnLine SC 508
10. State of Chhatisgarh & Anr. Vs. Sal (i)Decision which is perverse, Udyog Pvt. Ltd. 2021 SCC OnLine as understood in para 31 & 32 SC 1027 of Associate Builders Vs.DDA (2015) 3 SCC 49, while no longer being a ground for challenge under "Public Policy of India" would certainly amount to patent illegality appearing on the face of the award.
(ii) The change made in Section 28 (3) by the Amendment Act really follows what is stated in para 42.3 to 45 in Associate Builders Vs. DDA (2015) 3 SCC 49, namely that the construction of the terms of a contract is primarily for an Arbitrator to decide, unless the Arbitrator construes the contract in a manner that no fair minded or reasonable person would; in short, that the Arbitrator's view is not even a possible view to take. Also, if the Arbitrator wanders outside the contract and deals with the Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.7 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:03:19 +0530 matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added u/S 34 (2-A).
(iii) The conclusions of the Arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality.
11. Garg Builders Vs. Bharat Heavy If parties have agreed that no Electricals Ltd. Civil Appeal No. interest will be paid, Ld. 6216/2021 arising out of SLP (C) Arbitrator cannot grant pre No. 16320 of 2018, judgment dt. reference and pendentelite 04.10.2021 interest.
12. Hindustan Construction Corporation Under Clause 10 (c) to be able Vs. Delhi Development Authority to sustain a claim, it is essential and Ors. 2009 SCC OnLine Del 913 for the contractor not only to (2009) 2 Arb. LR 321(Delhi) (DB) establish that there was a statutory increase as a result of coming into force of any fresh law or statutory rule or order which exceeds 10% of the wages prevailing at the time of the receipt of the tender for the work, but also to establish that the contractor "thereupon necessarily and properly pays in respect of labour engaged in the execution of the work such increased wages". Relevant para 6.
(11).
Authorities cited at Bar by Ld. Counsel for KPR/respondent Sr. Citations Relevance and No. distinguishing factors 1 K. N. Sathyapalan (Dead) by LRs. Vs. (i) Ordinarily, parties State of Kerala and Ors. would be bound by terms MANU/SC/5270/2006 agreed upon in contract, but in event one of parties to contract is unable to Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.8 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:03:28 +0530 fulfil its obligations under contract which has direct bearing on work to be executed by other party, arbitrator is vested with authority to compensate second party for extra costs incurred by him as a result of failure of first party to live up to its obligations.
(ii) This judgment was in respect of Section 17 & 30 of Arbitration Act 1940.
There was no price escalation clause in the original agreement and there was no prohibition also.
(iii) Ld. Counsel has drawn the attention of the court to para 3 and 19 of the judgment.
2 R. L. Kalathia and Co. Vs. State of (i) Merely because the Gujarat MANU/SC/0050/2011 contractor has issued "No due certificate", the court cannot reject the claim on this ground if the contractor has an acceptable claim. (ii) Ld. Counsel has drawn the attention of the court to para 5 and 9 of the judgment. 3 UHL Power Company Ltd. Vs. State of (i) The court cannot
Himachal Pradesh MANU/SC/0019/2022 interfere with the award if the view taken by ld.
Arbitrator is a possible or plausible view.
(ii) Ld. Counsel has drawn the attention of the court to para 15 to 19 and 20 to 21 of the judgment.
4 Delhi Airport Metro Express Pvt. Ltd Vs. (i) If the view taken by the Delhi Metro Rail Corporation Ltd. Arbitral Tribunal is a MANU/SC/0623/2021 possible view, the court cannot substitute its own Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.9 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:03:36 +0530 construction of the contract u/S 28 (3) of the Act.
5 National Highway Authority of India Vs. (i) This judgment has GVK Jaipur Expressway Pvt. Ltd. been cited in support of MANU/DE/4172/2023:2023/DHC/004401 the submission that the award cannot be set aside on the ground that the Ld. Arbitrator did not consider any particular clause of the agreement. Attention of the court was drawn to paragraphs 3, 10, 14, 23 and 27 of the judgment.
(ii) In this judgment, the respondent claimed that non-consideration of clause 18.4 of the agreement vitiated the award. The objection was upheld under Section 34 of A&C Act, 1996. In the appeal u/S 37, Hon'ble Division Bench held that clause 18.4 was not applicable to the dispute and therefore, non-
consideration of the clause was not material.
6 Batliboi Environmental Engineer Ltd. Vs. Ld. counsel for the Hindustan Petroleum Corporation Limited respondent has cited this and Ors. MANU/SC/1043/2023. judgment in support of his submission that the arbitral tribunal is the ultimate master of quality and quantity of the evidence. An award based on little evidence or no evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Ld. Counsel drew the attention of the court to paragraphs 20, 21 and 43 of the judgment.
7 Dyna Technologies Pvt. Ltd Vs. Crompton This decision has been Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.10 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:03:45 +0530 Greaves Ltd. MANU/SC/1765/2019 relied upon in support of the submission that the court should not interfere with the award if the view taken by the Ld. Arbitrator is a possible view. The court does not sit in appeal against the award while deciding the objections under Section 34 of A&C Act 1996. The Ld. Arbitrator is not expected to write a lengthy judgment like a court of law. If the court feels that there is any clarification required, power under Section 34(4) of A&C Act, 1996 should be used. Ld. Counsel drew my attention to paragraphs 14, 15, 24, 26, 29, 30, 34, 35 and 36 to 39.
8 Govt. Of NCT of Delhi Vs. R.S. Sharma This judgment has been Contractors Pvt. Ltd. 2023:DHC:5861 cited to explain the scope of interference under Section 34 of the Act and the issue of No Claim Certificate given by the contractor. In paragraph 17 of the judgment, Hon'ble High Court observed that issuance of NOC by itself does not dis-entitle the party having a claim from explaining the circumstances in which the NOC is issued.
Hon'ble High Court further observed that the reverse is equally true.
There is no absolute rule which out rightly negates the evidentiary value of the no claim certificate.
9 Nraian Das R. Israni Vs. DDA 2005 (85) Ld. counsel for the DRJ 476 respondent submitted that Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.11 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:04:06 +0530 this judgment is being cited for academic purpose and Ld. Counsel drew my attention to para
30. In this paragraph, it is held that the damages due to prolongation of contract which are not covered by clause 10CC can be awarded under Section 73 of the Indian Contract Act.
10 Delhi State Industrial Infrastructure Vs. Ld. counsel referred to Sukumar Chand Jain paragraphs 9, 13, 19, 20 MANU/DE/0212/2023 and 21. This judgment had been cited in support of the submission that contractor issues no claim certificate under duress.
Ld. Counsel for the
petitioner distinguished
the judgment by stating
that in this case, the
contractor had laid the
claims before issuing the
NCC.
11 Judgment dated 06.12.2022 by Hon'ble Ld. counsel for the Bombay High Court in Arb.P. No. respondent referred to 245/2002 titled The State of Maharasthra paragraphs 16 onwards.
Vs. Bharat Constructions This judgment has been cited in respect of the claim for overhead expenses and losses due to prolongation of contract.
Ld. Counsel for the petitioner distinguished the judgment by submitting that these are factual observations in the context of a case having different facts.
12. Ircon International Ltd. Vs. GPT-Rahee JV This judgment has also MANU/DE/0938/2022 been cited on the scope of interference by the court under Section 34 of the Act. Ld. Counsel referred to paragraph 34, 37 and 38 of the judgment. Ld. Counsel for the petitioner Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.12 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:04:15 +0530 distinguished the judgment by submitting that the observations were made in the facts of the particular case.
(12). The observations made by Hon'ble Supreme Court in Batliboi (supra) cover most of the issues involved in the present petition. It would be appropriate to briefly note the observations.
In paragraph 7 of the judgment Hon'ble Supreme Court observed that a conclusion without any discussion and reasons, is non- compliant and violates the mandate of sub-Section (3) of Section 31 of A & C Act. In paragraph 14 of the judgment, Hon'ble Supreme Court discussed various formulae for computation of damages. Following formulae were considered namely (i) Hudson's Formula, (ii) Emden's Formula, (iii) Eichleay's Formula. In respect of Hudson's Formula it was observed that the head office overhead percentage is taken from the contract. Although the Hudson's Formula has received judicial support in many cases, it has been criticized principally because it adopts the head office overhead percentage from the contract as the factor for calculating the costs, and this may bear little or no relation to the actual head office costs of the contractor. (13). In para 15 of the judgment, Hon'ble Supreme Court observed the computation of damages depends upon attendant facts and circumstances and methods to compute damages, how the quantum thereof should be determined is a matter which would fall within the domain and decision of the Arbitrator. However, in para 16 Hon'ble Supreme Court further held "this is without doubt, a sound legal and correct proposition. However, RAJESH KUMAR SINGH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.13 OF 41 Digitally signed by RAJESH KUMAR SINGH Date: 2023.11.04 15:04:27 +0530 the computation of damages should not be whimsical and absurd resulting in a windfall and bounty for one party at the expenses of the other. The computation of damages should not be disingenuous. The damages should commensurate with the loss sustained. In a claim for loss on account of delay in work attributable to the employer, the contractor is entitled to the loss sustained by the breach of contract to the extent and so far as money can compensate. The party should to be placed in the same situation, with the damages, as if the contract had been performed. The principle is that the sum of money awarded to the party who has suffered the injury, should be the same quantum as s/he would have earned or made, if s/he had not sustained the wrong for which s/he is getting compensated". (14). In para 22 of the judgment, Hon'ble Supreme Court observed that there are some assumptions while using Hudson's Formula. Satisfaction of these assumptions should be ascertained when we apply Hudson's Formula for computing the damages. Material should be furnished by the claimant to justify and demonstrate that the assumptions for applying Hudson's Formula are met. In para 23 of the judgment it was observed that the builder/contractor has to prove that there was other work available that he would have secured if not for the delay, by producing invitations to tender which was declined due to insufficient capacity to undertake other work. The same may also be proven from the Books of Accounts to demonstrate a drop in turnover and establish that this result is from the particular delay rather than from extraneous causes. If loss of turnover from delay is not established, it is merely a delay in receipt of money, and as Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.14 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:04:47 +0530 such, the builder/contractor is only entitled to interest on the capital employed and not the profit, which should be paid. In the same paragraph Hon'ble Supreme Court also observed that it must also be established that the contractor was unable to deploy resources elsewhere and had no possibility of recovery of the cost of overheads from other sources, e.g. from an increased volume of the work.
(15). In paragraph 25 it was observed that Hudson's Formula might result in double recovery as the profit to be added to the profit is already subsumed with the 'contract sum'. From para 31 onwards Hon'ble Supreme Court discussed the observations made in the other judgments to examine the scope of Section 34 of A & C Act, 1996. Ld. Counsel for the respondent has drawn my attention to para 41 wherein Hon'ble Supreme Court mentioned the observations in Associate Builders case. In the same paragraph, Hon'ble Supreme Court also mentioned the third principal enunciated in ONGC Ltd. vs. Western Geco International Ltd. MANU/SC/0772/2014. It was observed "referring to the third principle in Western Geco, it was explained that the decision would be irrational and perverse if
(a) it is based on no evidence; (b) if the arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or (c) ignores vital evidence in arriving at its decision." (16). Having noted the brief facts, grounds of challenge, the submission and the authorities cited at Bar, I proceed to examine the objections in respect of the individual claims. Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH Date:
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OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.15 OF 41
(17). Claim No. 1:
Under this claim, the respondent claimed ₹25,85,325/-
towards payment of the final bill. As per clause 9 of the agreement, the payment was to be made within 6 months. The work was completed on 22.05.2017. According to the respondent, the payment became due from 22.11.2017. In addition to the amount mentioned above, he also prayed for interest at the rate of 15% per annum w.e.f. 21.11.2017. (18). Ld. Arbitrator dealt with claim no. 1 & 2 in para 10 of the award. Under the claim no. 1, Ld. Arbitrator allowed the claim for ₹25,85,325/-. However, pre-reference interest was not awarded on the ground that the claimant was equally responsible for not submitting the revision of rates along with the analysis as per clause 12.2.
(19). It would be pertinent to mention the ground taken by the respondent to make the claim no. 1. Justification is provided by him in para 6(a) of the statement of claim. The respondent stated that the rates of the extra/substituted/deviated items had not been calculated as per the provisions of clause 12 of the agreement. The sanctioned rate of all extra/substitute/deviated items has been drawn without any systematic procedure. Basically all items should be analyzed based on market rate circulated by the office of Chief Engineer (South Zone) vide letter no. F.8(9)/EE(P)- II/SE(P)-1/SZ/09/DDA/316 dated 16.12.2014 for justification and applicable with effect from 01.11.2014 or adopt rate as per DSR-2016. It was further stated that the main work in question was executed after 01.11.2014, hence the claimant has considered the market rates of deviation/extra items as per DSR-2014. Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.16 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:05:04 +0530 (20). It is also stated in para 5(b) of the statement of claim filed before the Ld. Arbitrator that vide letter dated 21.04.2015 C-19, the respondent had informed the Executive Engineer, RPD-6 that for the work executed beyond 19.01.2015, he would charge the market rates.
(21). There is no dispute on the point that the rates for the deviation and extra items were to be determined under clause 12 of the agreement. It is also an admitted fact that the respondent had not submitted his own analysis of rates regarding the deviation and the extra items. Deviation items are those agreement items which exceed the limit provided under Schedule-F. Since the deviation items are the agreement items, there is are agreement rates in respect of those items. Extra items are completely new items and there cannot be any agreement rate for the same.
(22). For the extra items it is provided under clause 12.2 that the contractor may within 15 days of receipt of order or occurrence of the item(s) supported by proper analysis, for the work and the Engineer in-Charge shall within one month of the receipt of the claims supported by analysis, after giving consideration to the analysis of the rates submitted by the contractor, determine the rates on the basis of market rates and the contractor shall be paid in accordance with the rates so determined. (23). Ld. Counsel for the petitioner submitted that the contractor is not to be paid the market rates but at the rates determined by the Engineer in-Charge which he determines taking into consideration the market rates and the analysis, if any, submitted by the contractor. The interpretation of Ld. Counsel for the Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.17 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:05:13 +0530 petitioner is supported by the wording of clause 12.2. It is also to be noted that for the work with stipulated date of commencement as 20.01.2014, the respondent had not claimed DSR rates of 2012 with the applicable cost index. The tender submitted by him was 14.08% below the estimated cost. This also shows that the DSR rates are not essentially the market rates. (24). Regarding the deviation items it is provided under Clause 12.2 of the agreement that in case the quantities exceed the limits laid down in Schedule-F, the contractor may within 15 days of the receipt of order or occurrence of excess, claim revision of rates, supported by proper analysis, for the work in excess of the above mentioned limits, provided that if the rates so claimed are in excess of the rates specified in the Schedule of quantities, the Engineer-in-Charge shall within one month of the receipt of the claims supported by analysis, after giving consideration to the analysis of the rates submitted by the contractor determine the rates on the basis of the market rates and the contractor shall be paid in accordance with the rates so determined.
(25). The provision of clause 12.2 mentioned above shows that in case of deviation items also the contractor is to be paid according to the rates determined by the Engineer-in-Charge. The respondent did not submit his own analysis of rates. Vide letter dated 24.01.2015, he had informed the Executive Engineer RPD- 6 that for the work executed beyond 19.01.2015, he would charge market rates. However, he wrote letter dated 05.12.2015 C-25 stating that he was ready to execute the additional work under deviation as per agreement. By writing this letter he changed his stand that for the work executed beyond 19.01.2015 he would be Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.18 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:05:23 +0530 charging market rates. The letter dated 05.12.2015 written by the respondent was followed by the letter dated 07.04.2016 written by S.E. (P), Rohini to the Superintending Engineer, DDA, Civil Circle 14, Rohini. Copy of the letter was sent to E.E./RPD-6 for compliance and a copy of the letter was also supplied to the respondent. The said letter was filed by him before the Ld. Arbitral Tribunal as C-28. By this letter the petitioner communicated the principal approval of deviations. It was mentioned in the letter that for the deviations the contractor would be paid on agreement rates or market rates (as applicable) whichever is lower. For the extra/substitute items it was to be ensured that the rates were reasonable and no undue benefit was given to the contractor.
(26). The respondent knew that for the deviation items he was to be given the agreement rates or the market rates whichever was lower. He was also aware that he would get reasonable rates for the extra/substituted items. He was paid up to 8 th RA Bill. The 9th Bill which is the final bill is a consolidation and adjustment of the running accounts bill. On being asked as to how the payment for the extra/deviation/substituted items was being made in the RA Bills, Ld. Counsel for the petitioner submitted that payments were being made on part rates. Ld. Counsel for the respondent was asked whether the respondent had lodged any protest about the part rates. Ld. Counsel for the respondent submitted that the rates being given in the RA bills were acceptable to the respondent and therefore he did not lodge any protest. It is to be noted that in the statement of claim filed before the Ld. Arbitral Tribunal, the respondent did not say that he should be given the Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.19 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:05:35 +0530 rates which were already given to him under the R.A. Bills and acceptable to him. He made a new claim based on DSR 2014. (27). Now let us see how the rates for deviation and extra items were granted by the petitioner. The deviation statement no. 2 was filed before Ld. Arbitrator as C-46 and this document is at page 386 of the compilation filed before this court. The document shows that the petitioner calculated the market rates and the justified rates. For the quantities up to 30% above the agreed quantities, the agreement rates were given. For the excess quantities beyond 30%, the market rate or the agreement rate whichever was lower, was given.
(28). The extra item statement no. 2 and deviation statement no.
1 and 2 dated 08.04.2019 was filed before Ld. Arbitrator as C-47 and this document starts from page no. 414 of the compilation filed before this court. For the deviated quantities within 30% as well as above 30%, the agreement rate or the market rate whichever was lower, was given.
(29). The manner of determination for the extra items was explained before the Ld. Arbitral Tribunal by the petitioner in a chart which is at page 649 of the compilation. DDA adopted DSR 2012. Cost index of 14% was applied. Thereafter deduction of 14.08% was made and the rate so arrived was given. Ld. Counsel for the respondent submitted that adoption of DSR 2012 was not correct and there was no rational for deduction of 14.08% on the ground that the tender submitted by the respondent for the original work was 14.08% below the estimated cost. Ld. Counsel for the respondent further submitted that the situation at the time of execution of extra work was not same as at the time of Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.20 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:05:45 +0530 submitting the tender for the original work. Be that as it may, it is evident that rates were determined by the petitioner for the deviation items as well as for the extra items. (30). Now let us see how the Ld. Arbitrator dealt with the claim. In para (ii) at page 46 of the award, Ld. Arbitrator observed that "likewise, in line with the prevailing practice the analysis of rates for DIs is also could have prepared by the respondent in order to determine market rates for the deviated quantities, which were not determined. The respondent has paid only agreement rates for the deviated quantities. It is seen from the approval of extra items (C-47), the respondent has worked out market rates but approved only agreement rates". The observation made by the Ld. Arbitrator is against the record. The petitioner had determined the rates for the deviation items and also for the extra items. Payment for the deviation items was made as mentioned above. There could not be agreement rates for extra items and therefore the observation of Ld. Arbitrator that agreement rates were given for extra items is also incorrect. (31). The respondent had not explained the illegality in the rates determined by the petitioner. He simply stated that major work was done after 2014 and therefore DSR 2014 should be applied.
It has been seen above that the DSR rates are not the market rates. It was the duty of the respondent to point out the illegality and it was the duty of the Ld. Arbitral Tribunal to decide whether the rates determined by the petitioner were not proper. No such effort was made. Ld. Arbitral Tribunal did not consider the effect of the letters dated 05.12.2015 and 07.04.2016. To allow the claim, he observed that "the contract of the subject work was Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.21 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:05:53 +0530 awarded to the claimant on 10.01,2014 with the competitive rates 14.08% below the Estimated cost put to tender. However, due to various hindrances like non-availability of drawings, non- availability of site etc. and drastic increase of scope of the work, the work was delayed for 872 days and was finally completed on 22.05.17. Under the circumstances, the claimant was not expected to execute the deviated quantities without any limit at his low quoted rates and that too at much belated stage. As per the aforesaid provisions of the agreement, the claimant was entitled to be paid market rates for the quantities of the items deviated beyond the deviation limits. It is a matter of record that the claimant had represented and submitted his Final Bill prepared with deviation item rates (C-49). The claimant has based his rates on DSR-2014. The entire work was executed after 2014. Therefore, in the absence of any analysis of rates submitted by the claimant or prepared by the respondent, it would be very fair and reasonable to allow DSR-2014 rates. INR 25,85,325/- claimed by the claimant against final bill is therefore justified". At the cost of repetition, it may be pointed out that the finding of Ld. Arbitrator that no analysis of rates had been prepared by the petitioner is against the record. He could not have allowed the claim because the claim of the respondent appeared to be just. There was provision Clause 10 C of the agreement to take care of the increase in the labour /material cost even during the period of delay. There was also clause 15 to compensate the contractor for extra expenses incurred on account of suspension of work. Beside these he could also claim damages under Sec 73 of The Contract Act. The respondent was getting Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.22 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:06:02 +0530 certain rates under the RA Bills which were acceptable to him. He did not submit his own analysis of rates. It has been seen above that he was not to be paid according to the market rates and that DSR rates are not the market rates. The respondent could not start asking for payment on "rates based on DSR 2014" and it could not have been allowed because the Ld Arbitrator felt that it was just. He could not have decided the claim on equity unless the parties had agreed to get the claim decided on equity. The Ld Arbitrator went beyond the contract and the material before him. This is patently illegal.
(32). Ld. Counsel for the respondent drew the attention of the court to para 41 of the judgment in Batliboi (Supra) wherein Hon'ble Supreme Court has mentioned the observations in Associate Builders case that at times, decisions are taken acting on equity. Such decisions can be just and fair and they should not be over turned under Section 34 of the A&C Act on the ground that the Arbitrator's approach was arbitrary or capricious. These observations have to be applied along with the other observations made by the Hon'ble Supreme Court in the same judgment. An award which is based on no evidence and rendered by ignoring vital evidence is patently illegal. It has also been observed by Hon'ble Supreme Court in para 41 of the judgment that fidelity to judicial approach entails that the court or authority should not act in an arbitrary, capricious or whimsical manner. (33). The discussion above shows that the Ld. Arbitral Tribunal did not examine the record properly and made observations contrary to the record. He misconstrued Clause 12.2 and wrongly accepted that the respondent was to be paid at the market rate/ Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.23 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:06:17 +0530 DSR 2014. He did not examine the effect of the letters exchanged by the parties regarding the rates to be paid for the deviation and the extra items. He did not decide as to how the rates determined the petitioner were not correct and went on to allow the claim on the ground that it was fair to do so. The decision of the Ld. Arbitral Tribunal on claim no. 1 is patently illegal and it cannot be sustained.
(34). Claim No. 2:
Claim no. 2 was for interest towards the delay in payment of 7th and 8th RA Bills. It was stated by the respondent/claimant that there was delay of 137 days in the payment of the 7th RA Bill and a delay of 229 days in payment of the 8 th RA Bill. He claimed an interest of ₹2, 54,616/- against the 7 th RA Bill and a sum of ₹3,25,099/- against the 8th RA Bill. The total amount claimed under claim no. 2 was ₹5,79,715/-. He also claimed future interest @ 15% per annum.
(35). Ld. Arbitral Tribunal granted interest @ 8% per annum for 127 days against the 7th RA Bills and for 219 days against the 8th RA Bill. No future interest was granted. Interest has been granted by the Ld. Arbitral Tribunal under Section 73 of the Contract Act.
The petitioner had given consolidated reply to claim no. 1 and 2. Clause 7, 9, 12 & 25 of the conditions of contract were cited to oppose the claim. Clause 9 is not relevant as it deals with the final bill. Clause 7 provides that in case the Engineer-in-Charge gets the bill prepared on failure of the contractor to submit the bill, no interest would be paid. The Ld. Arbitral Tribunal noted that it was the practice that the contractor would upload the measurements on the software. The petitioner/DDA had the Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.24 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:06:44 +0530 password and the control to generate the extract. After generation of the extract, it was got signed from the contractor. It is also held by the Ld. Arbitral Tribunal that the delay in payment of the 7 th and the 8th RA Bill was due to delay in approval of AA&ES and non-availability of funds. These are findings of fact which cannot be said to be perverse.
(36). During the arguments before this court, Ld. Counsel for the petitioner submitted that the respondent admitted the amount and the measurement on the bills. No dispute was raised as required under clause 12.4 of the agreement and no demand for appointment of Arbitrator was made under clause 25 regarding the interest part when the bills were paid. Ld. Counsel further submitted that arbitration clause could have been invoked even in respect of individual claims such as the claim for interest on alleged delayed payment of RA Bills. It is also stated in the petition under Section 34 A & C Act filed by the petitioner that the Ld. Arbitrator did not appreciate that the last entry in respect of 8th RA Bill was made by the contractor/respondent on 27.12.2017 and the bill was promptly paid on 29.12.2017.
(37). It appears that the argument regarding clause 12.4 and 25 was not specifically pressed before the Ld. Arbitral Tribunal in respect of claim No. 2. Vide letter dated 21.11.2017 C-38 at page 361 of the compilation, the respondent had informed the petitioner that he would charge interest for the delay in payment of the 8th RA Bill. In the said letter, the date of uploading the measurements with respect to the 8th RA Bill is mentioned as July, 2017. Ld. Counsel for the respondent submitted that there is typographical error in the letter regarding the date of uploading RAJESH KUMAR SINGH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.25 OF 41 Digitally signed by RAJESH KUMAR SINGH Date: 2023.11.04 15:06:55 +0530 the measurements. The date of uploading of the measurements is a question of fact and the finding of the Ld. Arbitrator is to be accepted. However, it is also to be noted that as per Section 28 (1) (a) A & C Act, 1996 the Arbitral Tribunal has to decide the dispute in accordance with the substantive law in force in India. Section 43 (1) of the Act provides that Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in court. Section 3 (1) of the Limitation Act provides that the question of limitation has to be considered even if it has not been set up as a defense. Therefore, it was the duty of the Ld. Arbitrator to consider the limitation before allowing the claim. (38). As mentioned at page 47 of the award the 7th RA Bill was paid on 09.08.2016 and the 8th RA Bill was paid on 29.12.2017. Article 25 of the Limitation Act provides that in respect of claim for money payable for interest upon money due from the defendant to the plaintiff, the limitation would be three years from the date when the interest becomes due. In respect of the 7 th RA Bill the interest had become due on 09.08.2016 when the bill was paid. The claim for interest against the 7th RA bill had to be made on or before 09.08.19. In respect of the 8 th RA Bill the interest became due on 29.12.2017 when the 8th RA Bill was paid. The claim for interest against the 8 th RA bill had to be made on or before 29.12.2020.
(39). Section 43 (2) of A & C Act, 1996 provides that for the purposes of Section 43 and the Limitation Act, an arbitration shall be deemed to have commenced on the date referred in Section 21. Section 21 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.26 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:07:04 +0530 dispute commences on the date on which a request for that dispute to be referred to Arbitration is received by the respondent.
(40). In the present case, the respondent invoked the arbitration clause vide letter dt. 08.07.2020 C-58 at page 215 of the compilation. Therefore, we have to see whether the claim for interest in respect of 7th RA and 8th RA Bill was within limitation as on 08.07.2020. The limitation for the claim for interest in respect of 7th RA Bill started on 09.08.2016 and it expired on 09.08.2019. The limitation for the claim of interest in respect of 8th RA Bill started from 29.12.2017 and it expired on 29.12.2020.
This shows that the claim for interest is respect of 7 th RA Bill had become time barred when the arbitration clause was invoked by by the respondent. The Ld. Arbitral Tribunal could not have allowed the claim for interest in respect of the 7 th RA Bill as it was barred by limitation. The objection of the petitioner has to be upheld in respect of the grant of interest against the 7th RA Bill. It is held that the respondent is entitled only for the sum of ₹1,28,689/- granted to him by the Ld. Arbitral Tribunal towards interest against the 8th RA Bill.
(41). Claim No. 4:
Claim no. 4 was for ₹3,91,978/- under clause 10 C towards escalation for labour component. The respondent also prayed for interest @ 15% per annum w.e.f. 30.11.2017 till the date of payment. It was stated that DDA had allowed the escalation for labour component upto 8th RA Bill. The escalation bill captioned as the first R.A. Bill under clause 10 C for labour escalation was submitted on 15.01.2018 vide letter Ex C-40 at page 368 of the Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.27 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:07:13 +0530 compilation. The letter was accompanied by the chart at page 369 in which the respondent provided the calculation towards labour escalation under Clause 10 C for the RA Bills 1 to 8. It is stated in para 5(h) of the statement of claim that the payment was made on 31.03.18. The respondent claimed that due to non-release of Escalation for Labour component of 9th cum Final Bill he had suffered the financial loss of the amount claimed. To justify the claim he mentioned Clause 10 C as well as section 73 of the Contract Act. He relied upon judgments by Hon'ble Supreme Court in P.M. Paul Vs. Union of India, AIR 1989 SC 1034 and K.N.Sathyapalan (Dead) by LRs Vs. State of Kerala & Anr. (2007) 13 SCC 43.
(42). The petitioner opposed the claim by stating that allowing the claim would amount to unjust enrichment to the respondent.
Ld Counsel for the petitioner also submitted that the judgments cited by the respondent before the Ld. Arbitral Tribunal were not applicable. In the rejoinder the respondent/claimant submitted that the amount had been claimed using the same formula which had been adopted by DDA to calculate the escalation upto the 8 th RA Bill.
(43). The Ld. Arbitral Tribunal observed that in Schedule-F, the labour component was 25%. DDA had given escalation up to the 8th RA Bill and therefore the escalation should also be given in the final bill. Ld Arbitrator also observed that working of the amount had not been challenged by the respondent. Ld. Arbitrator allowed the claim. Regarding the interest, Ld. Arbitrator held that the claim for interest was included in claim no. 13. RAJESH KUMAR SINGH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.28 OF 41 Digitally signed by RAJESH KUMAR SINGH Date: 2023.11.04 15:07:22 +0530 (44). Ld Counsel for the petitioner argued before this court that under clause 10 C the contractor has to submit the claim within reasonable time of his becoming aware of any alteration in the price of any material and/or wages of labour. The Engineer-in- Charge may call books of account and the other relevant documents from the contractor. The escalation has to be limited to the price/wages prevailing at the stipulated date of completion or as prevailing for the period under consideration, whichever is earlier. Learned Counsel further submitted that the labour rate of ₹ 522 adopted by the contractor cannot be allowed as it is for a period beyond the stipulated date of completion. Learned counsel for DDA also submitted that to rely upon section 73 of the Contract Act, the contractor has to prove the actual loss and he also needs to prove the steps taken to mitigate the losses. (45). This court asked Learned counsel for the respondent to explain how the claim had been made. Learned counsel submitted that some work had been done after submission of the 8th RA Bill and therefore the escalation under clause 10 C had to be paid by DDA in the 9th Bill towards escalation in the labour wages in respect of such work. Learned counsel also submitted that by substantially reducing the rates for the deviation and the extra items in the 9th Bill, DDA also reduced the labour component which was payable to the respondent. Learned Counsel also submitted that the argument of Learned Counsel for the petitioner about the rate does not hold as DDA had itself paid the escalation under the 8th RA Bill taking the labour rate as ₹ 522.
Digitally
signed by
RAJESH
RAJESH KUMAR
KUMAR SINGH
Date:
OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.29 OF 41
SINGH 2023.11.04
15:07:34
+0530
(46). During the arguments on earlier dates, Learned Counsel for the respondent had submitted that no work was done under the 8 th RA Bill and under the 9th RA Bill. The argument that some work had been done even after submission of the 8 th RA Bill is beyond the pleading and it is also contrary to the earlier argument. The submission that reduction in the rates in the final bill led to reduction of the labour component in the 9th Bill and therefore the claim was justified, is also beyond pleading. The respondent did not advance these arguments and did not make these pleadings before the Learned Arbitral Tribunal to justify the claim. (47). To claim the escalation up to the 8 th RA Bill, the respondent had submitted the Bill dated 15.01.1018 with the calculation. The calculation shows that the gross value of work done since the previous RA Bill was used to calculate the labour component. Thereafter, the labour component was divided by the base price/old labour rate in the tender. The result was multiplied with the difference in the labour rate to calculate the escalation under each R.A. Bill. If the claimant wanted escalation towards Labour Cost under Clause 10 C for the 9th Bill, he had to show the gross value of work done after the 8 th RA Bill. This was not done. It is not disclosed as to why the Bill was not submitted by him if he had the claim against the 9th Bill. The claimant got the Labour escalation upto the 8th RA Bill. He submitted the RA Bill for escalation on 15.01.18. The work was completed on 22.05.2017. There is no explanation as to why the claim for labour escalation towards the 9th Bill was not included in the Bill dated 15.01.2018 if he had such claim. The argument of his Ld. Counsel that the decision of the deviation and extra item rates in the 9 th Bill led to Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.30 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:07:45 +0530 reduction of the labour component also appears to be untenable for the reason that the escalation is a separately calculated. The claimant had already received the payment on 31.03.2018 and it is not his case the amount claimed under claim no 4 was recovered from him in the 9th Bill.
(48). It is true that the petitioner did not question the working of the amount and it generally denied the claim by stating that it would amount to undue benefit to the claimant. However, any fair minded person would ask the claimant to explain how the amount was calculated and why the notice under clause 10 C had not been given to DDA to claim the escalation. No such endeavour was made by the Learned Arbitrator. Learned arbitrator also did not decide whether the claim was being allowed under clause 10 C or under section 73 Of the Contract Act. The decision of the Learned Arbitral Tribunal suffers with absence of reasoning and it is patently illegal. (49). Claim No. 9:
Claim no. 9 was for compensation for loss suffered due to prolongation of the contract beyond stipulated date of completion till actual date of completion on account of on-site and head office overhead expenses. The respondent claimed a sum of ₹27,64,412/- under this head and also claimed interest @ 15% per annum w.e.f. 19.01.2015 till the date of payment. It was stated that the respondent incurred expenses on "site office staff, director salary, bank charges, interest charges on borrowed capital, legal and advocate fee, stationary charge, cost incurred for various compliances like sales tax, income tax, service tax, ROC charges, ESI, EPF etc, periodical, books and stationary, Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.31 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:07:53 +0530 tender fee, expenditure for office maintenance, office furniture, electricity, water, travel, conference, employee benefits in terms of bonuses, insurances, furniture, vehicle maintenance and repair etc". It was also stated by the respondent that it was not possible to bifurcate the cost impact on each and every project separately. The respondent calculated the compensation under this head on the basis of Hudson formula.
(50). The petitioner contested the claim. It was stated in the statement of defense that the respondent was responsible for delay on many counts as detailed in the statement of defense. (51). Ld. Arbitrator observed that the claimant admitted that it is not possible to bifurcate the cost impact on each and every project separately. Ld. Counsel for the petitioner submitted that the Ld. Arbitrator could not have used the admission of the claimant to justify his claim. The observation of the Learned Arbitral Tribunal appears to be incongruent. However, we can leave this aspect and see whether the decision of Ld. Arbitrator on this claim can be sustained or it is against the public policy/patently illegal.
(52). Ld. Arbitrator observed that delay of 290 days was due to enlargement of the scope of the work. Ld. Arbitrator reduced this period from the total EOT of 872 days and held that the respondent was entitled for the compensation for 582 days. Ld. Arbitrator also observed that the percentage on cost of material and labour to cover all over heads and profit was 15% in Schedule-F. Therefore, the overhead percentage could be taken as 7.5%. Ld. Arbitrator allowed the overhead expenses by taking 5% as the reasonable percentage. Applying the Hudson formula, Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.32 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:08:02 +0530 Ld. Arbitrator granted a sum of ₹12,38,612.00/- to the respondent.
(53). It has been held by Hon'ble Supreme Court in para 16 of Batliboi (Supra) that the computation of damages should not be whimsical and absurd resulting in a windfall and bounty for one party at the expense of the other. In the same judgment, Hon'ble Supreme Court mentioned the shortcomings of Hudson formula.
It was also observed that application of Hudson formula pre- supposes three assumptions mentioned in para 22 of the judgment. In the present case, the Ld. Arbitrator did not examine whether those assumptions could be made. (54). Question also arises whether the agreement does not provide any mode for calculation of compensation in case of prolongation of the contract. Clause 15 of the agreement deals with the issue of suspension of work and grant of compensation to the contractor. The clause provides that the contractor may be given reasonable compensation to cover the salaries and/or wages paid by him to his employees and labour at site, remaining idle in consequence and adding to the total thereof 2% to cover indirect expenses of the contractor. The contractor has to submit the claims supported by details within the time prescribed under the clause. Though, work suspension orders were not issued by the petitioner, the mechanism under clause 15 provides guidance for computation of the compensation. 2% extra is given to cover the expenses which cannot be calculated separately. Clause 12.4 also requires the contractor to submit the additional claims every three months. It is to be noted that if the contractor prefers the claim during the currency of the contract, he has to support the Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.33 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:08:15 +0530 claim with documents. It is convenient for the contractor to raise the claims after long period of the completion of the work and to say that the amount cannot be separately calculated. (55). The agreement contains various clauses requiring the contractor to maintain the records regarding the expenses, labour/technical staff deployed at the site etc. and to make such record available to the Engineer-in-Charge for inspection.
Question arises whether the contractor is absolved from leading evidence to claim overhead expenses on the ground that it is difficult to calculate the expenses separately for each project. In this regard, we may profitably refer to the observation made by Hon'ble Division Bench, M.P. High Court in M/s Saluja Construction Company Vs. State (2001) ILR 1394. (56). In Saluja Construction Company (Supra), it was held thus:
"as we have already mentioned above, claim for loss of profit may arise in different eventualities such as where there is a partial or total prevention of contract due to breach on the part of the department and the third contingency is where the contractor is allowed to complete the work but during an extended period for delay solely occasioned due to the breach on the part of the department. The quantum of loss of profit in all three eventualities cannot be the same. It would differ from case to case depending upon the nature of the contractor, progress of work of the contractor and other factors relevant in work contract. What we find from the decision of Dwarka Das (Supra) is that where the claim is made on loss of profit there can naturally be no insistent on proof of 'actual loss suffered' by the contractor. The nature of claim is such that no Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.34 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:08:24 +0530 contractor can prove actual loss of profit suffered by him. The contractor, however, can and should place material and evidence to base his claim for anticipate loss towards profit. We do not find that the case of Dwarka Das (Supra) of the Supreme Court is an authority to accept the contention on behalf of the contractor that the contractor is totally absolved from his burden of leading any evidence to substantiate his claim towards loss of profit. We had occasion to deal with a similar argument concerning a claim of similar nature in the case of another works contract in State of M.P. and Ors Vs. Smt. Gyan Kaur (1). We have in detail discussed the nature of claim towards overhead expenses and loss of profit. So far as overhead expenses are concerned, they have been described to mean 'of site' or 'head office expenses' such as for establishing an office, supervisory staff, power bills, stationary, journeys performed, telephone bills and several other similar expenses required to fulfill the contract. So far as the overhead expenses are concerned, the contractor can certainly lead evidence oral and documentary to prove the actual expenditure towards overheads."
(57). In the light of the clauses of the contract and the observations made by Hon'ble Division Bench, M.P. High Court in M/s Saluja Construction Company (Supra), the claim could not have been allowed without evidence by simply relying upon Hudson formula. In a recent judgment Unibros vs All India Radio 2023 SCC Online SC 1366, Hon'ble Supreme Court has held that Hudson Formula cannot be applied without evidence.
Digitally signed by RAJESH RAJESH KUMAR KUMAR SINGH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.35 OF 41 SINGH Date:
2023.11.04 15:08:33 +0530 (58). The respondent had pleaded before the Ld. Arbitrator that while grant of EOT, he had given the undertaking that he will not claim anything extra beyond the agreement for the delay. The undertaking is at page 355 of the compilation and it is part of C35. Ld. Arbitrator held that the undertaking was not acceptable.
There was no format for giving such undertaking by the contractor for EOT and no contractor would give such undertaking with free will. Ld. Arbitrator further observed that it is a common practice for the department to obtain such undertaking before granting EOT. Ld. Arbitrator also observed that it has been held by various courts that such undertakings given by the contractors at the time of EOT or payment of bills cannot extinguish their right to the claims which otherwise are found justified.
(59). The observation of Ld. Arbitrator regarding decision of the courts in respect of such undertakings is a general observation without reference to any particular judgment and without reference to the facts of this case. In DDA vs. Sukumar Jain which is relied upon by the petitioner, it has been held that without evidence it cannot be held that the undertaking was given under duress. In the present case, the undertaking was given on 28.08.2017 and it was withdrawn vide letter 11.12.2019 C56 at page 466 of the compilation. The Ld. Arbitrator did not consider that the undertaking was withdrawn after more than two years and he did not mention any compelling reason for the respondent to remain silent on this issue for such long period. (60). In view of the above discussion, it is held that the decision of claim no. 9 has been made without evidence and against the Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.36 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:08:41 +0530 law laid down by Hon'ble Supreme Court and by the Hon'ble High Courts. The decision has resulted into windfall and bounty to the respondent. The decision shocks the conscience of the court. Accordingly it is held that the decision of Ld. Arbitrator on claim no. 9 also cannot be sustained. (61). Claim No. 11:
Claim no. 11 was on account of loss of profit/running capacity due to prolongation of project beyond the stipulated date of completion. The respondent made a claim of ₹16,10,798/- under this head and the claim was made u/S 73 of the Contract Act. Ld. Arbitrator took the percentage of profit as 7.5%, however, loss of profit was allowed at the rate of 2.5% which was considered reasonable by the Ld. Arbitrator. Ld. Arbitrator calculated the loss of profit at page 89 of the award and granted a sum of ₹5,36,933.00/- to the respondent. (62). Ld. Counsel for the petitioner submitted that the claim has been allowed for the entire period and it has been allowed without evidence. Ld. Counsel for the respondent supported the decision by submitting that percentage of profit is contemplated under Schedule F. Learned Counsel also submitted that the Learned Arbitrator took a lower percentage and he considered the entire period to grant the relief as the loss was spread throughout the entire period and it was not confined to the period of only the delay caused by the petitioner.
(63). The observations of Hon'ble Division Bench, M. P. High Court in M/s Saluja Construction Company (supra) have already been mentioned above. The claim for loss of profit cannot be allowed without evidence. Same view has been taken by Hon'ble Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.37 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:08:58 +0530 Delhi High Court in Delhi Integrated Multi Modal Transit System Ltd. Vs. M/s R S Sharma Contractors Pvt. Ltd. 2018 SCC OnLinde Del. 9386 which is relied upon by the petitioner. In para 23 of Batliboi (supra) Hon'ble Supreme Court also observed that to claim loss of profit the builder/contractor has to prove that there was other work available that he would have secured it if not for the delay, by producing invitations to tender which are declined due to insufficient capacity to undertake other work. The same may also be proven from Books of Accounts to demonstrate a drop in turnover and establish that this result is from the particular delay rather than from extraneous causes. (64). Law is settled that a decision by Ld. Arbitral Tribunal ignoring the judicial pronouncements would be patently illegal. A decision based on no evidence also is patently illegal. The respondent did not produce any evidence to support the claim and it was allowed mechanically. Therefore the decision on claim no. 11 also cannot be sustained.
(65). Claim No. 12:
Claim no. 12 was for post award interest @ 15% from the date of award till the date of actual payment. Ld. Arbitrator granted 8.5% per annum interest from the date of invocation of the arbitration i.e. 01.01.2020 till the date of publication of the award. The interest was awarded on the sum of ₹25,85,325/- and ₹3,91,978.00/-. It is pertinent to note that the amount of ₹25,85,325/- is the amount of claim no. 1 which was allowed by the Ld. Arbitrator and the amount of ₹3,91,978.00/- is the amount of claim no. 4 which was also allowed by the Ld. Arbitrator. Ld. Arbitrator also held that no future interest would Digitally signed by RAJESH OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.38 OF 41 RAJESH KUMAR KUMAR SINGH SINGH Date:
2023.11.04 15:09:07 +0530 be payable if the payment is made by the petitioner within 90 days of the publication of the award. In case of failure to make the payment within 90 days of the publication of the award, DDA was directed to pay simple interest @ 10% per annum. (66). The court has set-aside the decision of Ld. Arbitrator in entirety on claim no. 1 & 4. As a natural corollary, the decision of Ld. Arbitrator on claim no. 12 also goes. (67). It has been held above that the decision of the Ld. Arbitral Tribunal in respect of the claims no. 1, 4, 9, 11 & 12 is patently illegal/against the public policy. The decision of Ld. Arbitral Tribunal has been partly upheld only in respect of claim no. 2.
The award can be set-aside in respect of the claims which have been rejected by this court. Partial setting aside of the award is permissible in view of the judgment by Hon'ble Supreme Court in J.G. Engineers Pvt. Ltd. Vs. Union of India & Anr. (2011) 5 SCC 758.
(68). The question of award of cost to DDA is also to be considered. In the prayer clause (c) the petitioner has prayed for the cost of the present proceedings. It is stated in the prayer clause (d) that the court may pass any other order to do complete justice between the parties.
(69). It is pertinent to note that the petitioner has prayed for the cost of the present proceedings only. Ld. Arbitral Tribunal dealt with the claim of the respondent for cost under claim no. 13. The petitioner opposed the claim. It was stated by the petitioner that the respondent dragged it into speculative legal proceedings and therefore, exemplary cost should be imposed on the respondent. Ld. Arbitrator declined to grant the cost of the arbitral Digitally signed by RAJESH RAJESH KUMAR OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.39 OF 41 KUMAR SINGH SINGH Date:
2023.11.04 15:09:17 +0530 proceedings to the respondent. The respondent had made the claim for ₹1,30,64,063.00/- before the Ld. Arbitral Tribunal and the award was passed for ₹49,65,428/-. Ld. Arbitrator could have granted proportionate cost to the respondent/claimant as provided u/S 31-A A & C, 1996. The respondent was partially successful and therefore, Ld. Arbitrator could have granted cost to the petitioner also. However, Ld. Arbitrator held that the parties shall bear their own cost of the arbitral proceedings. Ld. Arbitrator also held that the parties shall pay the fee of the Ld. Arbitrator equally. This decision has not been challenged by the petitioner in the present proceedings. Therefore, the grant of cost to the petitioner has to be confined to the cost of the present proceedings.
(70). It is also to be kept in mind that the petitioner did not challenge the award on claim no. 8 and its objection in respect of claim no. 2 has been partly upheld. The issue of grant of cost to the petitioner has to be considered in light of the above facts u/S 31-A A & C Act, 1996 r/w the amended Section 35 CPC applicable to CCA, 2015. Under these provisions, the court has discretion to determine the quantum of cost. It is evident that the respondent made exaggerated and unsubstantiated claims. The petitioner had to spend time and money to defend itself. There were 24 appearances of the Ld. Counsel for the petitioner in the present proceedings. Under Claim no. 2, the respondent has to take ₹ 1,28,689/ from the petitioner. The same amount can be granted to the petitioner as cost. Considering the facts mentioned Digitally above, this would be a reasonable cost. signed by RAJESH RAJESH KUMAR KUMAR SINGH Date:
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Order:
(71). The petition is allowed and the impugned award is set aside in respect of the Claims 1, 4, 9, 11, 12. The award is partially set aside in respect of Claim no 2 as far as it relates to the interest against R.A. Bill 7. The award is upheld in respect of grant of interest to the respondent under Claim no 2 against the 8 th R.A. Bill. However, the amount payable by the petitioner to the respondent under partly upheld Claim no 2, is awarded to the petitioner as Cost. Consequently, nothing shall be paid by the Digitally signed by petitioner to the respondent. RAJESH RAJESH KUMAR KUMAR SINGH Date: 2023.11.04 SINGH 15:09:36 +0530 (Rajesh Kumar Singh) District Judge (Comm.) Digital-07 South East, Saket, Delhi 04.11.2023 OMP(COMM) 21/22 DDA VS. K P RANA PAGE NO.41 OF 41