Delhi High Court
Kishan Chand, Engineers And ... vs Union Of India (Uoi) And Anr. on 1 September, 1998
Equivalent citations: 1998(47)DRJ391
JUDGMENT M.K. Sharma, J.
1. The petitioner was awarded a contract by the respondent No.1 for "Construction of bridge at Trunk Drain No.1 at RD 3890 M". In respect of the aforesaid work contract, disputes arose between the parties and accordingly the appropriate authority under the contract appointed the respondent No.2 as the sole arbitrator to adjudicate upon and decide the disputes.
2. Parties filed their respective claims and documents in support of their claims and counter claims and the arbitrator made and published his award on 28.8.1985. In pursuance of an application filed in this Court under Section 14 and 17 of the Arbitration Act, the arbitrator has filed the award in this Court as against which an objection was filed by the respondent No.1 namely, LA. No. 7908/1987. The petitioner filed a reply to the aforesaid objection and on the pleadings of the parties, the following issues were framed:
1. Whether the award dated 19.1.1985 rendered by the sole arbitrator, respondent No.2, is liable to be set aside in view of the objections filed by respondent No. 1?
2. What order?
3. Respondent was allowed to file affidavit by way of evidence which stands filed. Subsequent thereto, the petitioner defaulted in appearing and also did not file any affidavit in spite of several opportunities granted and accordingly its right to file affidavit by way of evidence was closed and the case was taken up for arguments.
4. I have heard Ms Anupama Chandna, counsel appearing for respondent No/1/Ob-jector, but, none appeared on behalf of the petitioner.
5. I have perused the award passed by the arbitrator as also the records appearing in the arbitration proceedings. On careful scrutiny of the records in the light of the objections filed, I propose to dispose of the case and deal with the objections claim wise.
Claim No.1:
6. This claim arose on claimant/petitioner claiming Rs.80,249.70 towards payment of his final bill.
The arbitrator has held that the claim is justified to an extent of Rs.53,040/- only.
The disputes were to be decided through arbitration proceedings as laid down under Clause 25 of the agreement. There was no compulsion on the part of the arbitrator to give a reasoned award. Ex facie, the award given by the arbitrator in respect of this claim is a non-speaking award. Claim of the petitioner was to the extent of Rs.80,249.70 towards payment of his final bill in respect of which only Rs,53,040/- was allowed by the arbitrator. It is thus apparent that the arbitrator considered the records and on the basis thereof came to the conclusion that Rs.53,040/- is only due to the petitioner towards his final bill. I find no error in respect of the said findings and the same stands upheld.
Claim No.2:
7. This is a claim preferred by the petitioner seeking for refund of security deposit of Rs.49,720/-.
The arbitrator has held that the work was completed' in April, 1981 and that the performance part of the contract including the defect liability period is over long back and as such the claim for Rs.49,720/- on account of refund of security deposit is allowed and accordingly he passed an award allowing the aforesaid claim.
An objection has been filed as against the aforesaid award passed by the arbitrator on the ground that the aforesaid amount is not admissible and payable to the petitioner. It is stated that the security money is payable to the contractor only when all formalities are over, namely, recoveries of the material issued to the contractor for the work by the department are made good by the petitioner. My attention was also drawn to Clause 45 of the agreement which was amended by Correction Slip No.8. The said Clause provides that the security deposit would not be refunded till the clearance certificate from the labour officer is obtained by the contractor.
The arbitrator while dealing with the aforesaid award has not considered the aforesaid aspect altogether as is disclosed from the award itself. The award in respect of this claim is a speaking award and the said reasons do not disclose that the aforesaid clause of the contract was considered by the arbitrator. If the arbitrator fails to consider material documents and/or ignores material clause of the contract, the same is definitely an error apparent on the face of the record on which an award could be set aside. Reference in this connection may be made to a decision in College of Vocational Studies Vs. S.S. Jaitely; reported in A.I.R. 1987 Delhi 134. In paragraph 19 of the said judgment, it was held that an error of law on the face of the award means what the Court can find in the award or a document, actually incorporated or annexed thereto. As delineated hereinabove, the arbitrator has ignored the aforesaid relevant clause which is applicable in respect of claim No.2 for refund of the security deposit. Thus, this part of the award of the arbitrator is required to be set aside and remitted back to the arbitrator for fresh consideration in the light of the aforesaid observations and on the basis on the records.
Claim No3:
8. The petitioner claimed refund of the amount of Rs.18,133/- which was levied and deducted by the respondent No.1 from the accounts of the petitioner.
The arbitrator passed an award allowing the entire claim holding that it is established that prolongation of the contract after the stipulated date of completion was not due to the fault of the claimant and, therefore, the compensation levied is not justified.
Counsel appearing for the respondent No.1/Objector vehemently objected to the aforesaid award passed by the arbitrator in respect of claim No.3. She drew my attention to Clause 2 of the agreement which, inter alia, provides that the work would throughout the stipulated period of the contract be proceeded with all due and diligence and the contractor would pay as compensation an amount equal of one per cent or such smaller amount as the Superintending Engineer (whose decision in writing would be final) might decide on the amount of the estimated cost of the work as shown in the tender. Counsel submitted that in terms of the aforesaid clause of the contract, the Superintending Engineer was empowered to levy compensation for any delay caused in completion of the contract work and his decision with regard to the levy of compensation in that regard is stipulated to be final. Thus, according to the learned counsel, imposition and levy of compensation by the Superintending Engineer is an excepted matter. In support of her contention, the learned counsel placed reliance upon the decision of the Supreme Court in Vishwanath Sood Vs. Union of India and another, and also a Division Bench decision of this Court in Delhi Development Authority Vs. Sudhir Brothers; .
I have carefully perused the aforesaid Clause 2 relied upon by the learned counsel appearing for the respondent No.1/Objector and the said two decisions. The contractor undertook to do the construction work by an agreement entered into between it and the respondent No. 1. A clause in the contract made the time specified for the performance of the contract a matter of essence as is reflected from Clause 2. The said clause also emphasised the need on the part of the contractor to scrupulously adhere to the time schedule approved by the respondent No.1. In order to make the contractor slick to the aforesaid time schedule the clause provided a kind of penalty in the form of compensation to the Government for default in adhering to the time schedule. The said clause also envisaged a fixed amount of compensation calculated at a percentage of the estimated cost of the whole work on the basis of the number of days for which the work remains uncommenced or unfinished. The decision of the Superintending Engineer in respect of levy of the aforesaid compensation payable by the contractor was also made final. The agreement also contained the arbitration clause being Clause 25. The said arbitration clause in the agreement started with an opening phrase excluding from arbitration certain matters and disputes, provision in respect of which has been made elsewhere or otherwise in the Contract. The said opening words of the arbitration clause, namely "except where otherwise provided in the contract" placed the question of awarding compensation outside the purview of the arbitrator. The compensation of the Superintending Engineer was final and was not capable of being called in question before the arbitrator. Thus, the decision of the Superintending Engineer which is made final under the clause, is in the nature of a considered decision which he has to arrive at after considering the various mitigating circumstances that might be pleaded by the contractor or his plea that he is not liable to pay compensation at all under this clause and the said question regarding the compensation leviable has therefore to be decided only by the Superintending Engineer and no one else.
Thus, the aforesaid claim of the petitioner was outside the purview of the arbitration proceeding being an excepted matter and, therefore, the arbitrator could not have given the award in respect of the said claim. In Sudhir Brothers (supra), almost a similar clause came to be interpreted by the Division Bench of this Court. Following the ratio of the decision of the Supreme Court in Vishwanath Sood (supra), the Supreme Court held that the findings of the arbitrator holding the Contractor was not liable for payment of compensation was not within the power of the arbitrator, the same being an excepted matter.
In the light of the aforesaid decisions of the Supreme Court as also of the Division Bench of this Court, I am of the firm opinion, that the arbitrator acted totally without jurisdiction in going to the aforesaid question which was not within the power of the arbitrator. The aforesaid award passed by the arbitrator in respect of the claim No.3, therefore, stands set aside.
Claim No.5:
9. The petitioner had claimed an amount of Rs.55,000/- on account of establishment charges and overhead charges due to prolongation of the contract.
The arbitrator partly allowed the aforesaid claim by ordering for payment of Rs.44,400/- on that account holding that it is established that after the stipulated date of completion of the work, the contract was prolonged with the mutual consent of both the parties.
The contract was time bound and time specified for performance of the contract was a matter of essence. The petitioner failed to complete the work within the stipulated period for which he was made liable to pay compensation in terms of Clause 2 of the agreement. Subsequently, the parties to the contract agreed to extend the time for completion of the contract. During the prolongation of the contract, the contractor incurred certain additional expenses in the nature of establishment charges and overhead charges. On consideration of the records, the arbitrator found the same to be justified.
Counsel for respondent No.1/Objector drew my attention to a decision of the Supreme Court in Continental Construction Co. Ltd. Vs. The State of Madhya Pradesh; , in support of her contention that the petitioner was not legally entitled to claim for the aforesaid extra cost incurred by it due to prolongation of the Contract. In the said case of the Supreme Court three clauses, namely, Clause Nos.2, 16 and 24 stipulated that the contractor had to complete the work in spite of rise in prices of materials and also rise in labour charges it the rates stipulated in the contract. Placing reliance on the aforesaid clauses and also on the findings of the arbitrator that the contract was not rendered ineffective in terms of Section 56 of the Act due to abnormal rise in prices of material and labour, the Supreme Court held that the contractor having completed the work, it was not open to him to claim extra cost towards rise in prices of material and labour. In my considered opinion, the facts of the said case are distinctly different and distinguishable from the facts of the present case. No such clause in the present contract was brought to my notice which stipulates that the contractor had to complete the work in spite of rise in prices of material and also rise in labour charges at the rates stipulated in the contract.
The arbitrator has given his reasons for coming to the aforesaid conclusions. The petitioner had incurred certain expenses towards establishment and overhead charges and, therefore, the said expenses have to be reimbursed unless there is a specific clause denying him such benefits. The aforesaid part of the award is accordingly upheld.
Claim No.7:
10. An objection was also taken in respect of Claim No.7 by respondent No.1/Objec-tor in respect of which an award was passed for payment of Rs.1,500/- towards cost of arbitration proceedings.
The discretion to award cost is vested on the arbitrator and no interference is called for to such exercise of discretion by the arbitrator. The objection in respect of this claim, therefore, stands rejected.
11. Objections have also been taken to the award passed by the arbitrator in respect of counter claims.
12. The respondent No.1 has claimed for an amount of Rs.18,133/- under counter claim No.2 on account of compensation under Clause 2 of the agreement.
By my decision on Claim No.3, 1 have held that the award passed by the arbitration allowing the claim for the aforesaid amount of Rs.18,133/- is an excepted matter Thus, this counter claim No.2 of the respondent No.1 stands allowed to the aforesaid extent.
13. Objection has also been filed by the respondent No.1 in respect of counter claim No.4 in which the arbitrator has awarded only an amount of Rs.9,011.25 as against the claim of Rs.32,276.40 towards claim for balance cost of steel issued for the work. The aforesaid award passed by the arbitrator in the said claim is a non-speaking award. However, the aforesaid award has been passed by the arbitrator after scrutiny into the records of the case as is apparent from the fact that he has awarded an amount of only Rs.9,011.25 in respect of the aforesaid claim which is much lower than the claim. I find no error apparent on the face of the records and, therefore, this award cannot be interfered with and the same stands upheld.
14. An objection has been taken by respondent No.1/Objector with regard to rejection of the counter claim No.5 of the respondent claiming Rs.58,467/- for non-employment of a Graduate Engineer by the petitioner.
The aforesaid claim was found to be not justified by the arbitrator in the light of the documentary evidence produced by the petitioner. Since the arbitrator has come to the aforesaid conclusion on perusal of the records, the award cannot be set aside as no error apparent on the face of the records could be pointed out and the same stands upheld.
15. In respect of counter claim No.6, an objection has been taken by respondent No.1/Objector for not allowing the aforesaid claim of the respondent by the arbitrator.
On perusal of the award, I find that the aforesaid claim of the respondent was also rejected by the arbitrator on the ground shall he said claim was not found to be justified in view of the documentary evidence and arguments advanced by the petitioner. 1 cannot re-appreciate the evidence on record and come to a contrary finding as the jurisdiction of this Court to interfere with the award of an arbitrator is limited and restricted. This part of the award is accordingly upheld.
16. In respect of counter claim No.7 although an objection has been taken, on perusal of the records of the arbitration proceedings, I find that the aforesaid claim of the respondent for payment of an amount of Rs.2,556/- on account of non-disposal of balance empty cement bags was allowed to an extent of Rs.22/-. The arbitrator has partly allowed the claim after consulting the records and, therefore, I cannot hold that the said part of the award is required to be interfered with.
17. Counter Claim No.8 relates to claim of the respondent No. 1 for an amount of Rs.3,105/- on account of balance amount of security deposit under Clause 17 of the agreement.
In my decision as against Claim No.2 for refund of security deposit, I have set aside and remitted back the claim for fresh consideration by the arbitrator and on the same count, the award passed by the arbitrator in respect of this claim also stands set aside and remitted back to the arbitrator for fresh consideration and disposal.
No effective objection is taken as against the remaining counter claims and, therefore, they are not interfered with.
18. In the result, the objection stands partly allowed. The award passed by the arbitrator in respect of claims No.2 and 3 and counter claims No.2 and 8 stand set aside out of which claim No.2 and counter claim No.2 and 8 are remitted back to the arbitrator for fresh consideration. The award in respect of claims No.1 and 5 and counter claims No.4, 5 and 6 passed by the arbitrator are made a Rule of the Court. Let a decree be drawn up in terms of the award. In addition, the petitioner shall be entitled to interest at the rate of 12% per annum from the date of decree till the date of realisation in terms of Section 29 of the Arbitration Act.