Delhi High Court
M/S. Narain Das R. Israni vs Delhi Development Authority on 20 October, 1995
JUDGMENT Devinder Gupta, J.
1. These objections by respondent under Section 30 of the Arbitration Act are against the Award made by Shri Shyam Narayan, the sole Arbitrator, who was appointed as such by Engineer member of the Delhi Development Authority (for short "DDA") for adjudicating upon the disputes which had arisen amongst claimant and respondent for the work of construction of 1296 DUS at Trilok puri (SH : Construction of 80 wide R/W from NH 24 to side of MIG/LIG at Trilokpuri).
2. The arbitrator made and published his award on 7th April, 1994. The same was filed in the court. Objections were filed within the period of limitation. The objections are two fold. The first objection is that there is an error apparent committed by the arbitrator in making the award as regards claim No. 14, which was preferred by the claimant under Clause 10CC of the agreement. It is the case of the objector that claimant has been awarded a sum of Rs. 58,007/- against claim No. 14, due to rise in cost for the work executed beyond stipulated period. Clause 10CC was not at all applicable since the contracted period for completion of work was only six months. The arbitrator had disallowed claim No. 6 on the ground that since reference was under clause 10-C, and there has been no statutory increase, therefore, claim was not tenable. In view of findings under claim No. 6, the award under claim No. 14 is vitiated. The other objection is as regards award of interest against claim No. 16. Award of interest against item No. 15 in favor of the claimant is without any rational basis. The arbitrator had not been specifically empowered to award pendente lite interest in favor of the claimant.
3. The claimant's case is that clause 10-C of the agreement relate only to increase in wages of labour as a result of any notification issued by the Delhi Administration under Minimum Wages Act, whereas clause 10CC relate to escalation not only for labour but also due to the increase in prices of building material as also of P.O.L. Clause 10CC takes into its ambit the increase in cost of construction which is worked out on the basis of price indices issued from time to time. The arbitrator has assigned valid reasons that period of contract was prolonged by 30 days which was necessitated on account of extra item given under clause 12 of the contract, which also stipulates extension of time in proportion of the extra work plus 25% Since it is a finding of fact which has been recorded by the arbitrator that had the respondents included the extra work while inviting tenders at the initial stage, the period of contract would have been fixed at seven months and not six months and thus the claimant would have automatically been entitled to increase in the cost of construction as a result of escalation worked out on the basis of price indices, as given in the Contract and clause 10CC would have automatically been applicable. It is also contended that the arbitrator has taken note of the fact that this clause 14 was a claim for damages under Section 73 of the contract Act, irrespective of non-applicability of clause 10CC. In case the arbitrator came to the conclusion that there has been tremendous increase in the cost of construction and period for construction work was extended due to the extra items of work, which the claimant was required to do under clause 12, the claimant would be entitled to damages also under Section 73 of the Contract Act. The arbitrator merely took help of clause 10CC in working out the amount damages and it is contended that there is no error apparent on the face of the record since plausible reason has been assigned by the arbitrator in making an award of damages. In so far as interest is concerned, it is argued that interest has been awarded on the withheld amount which was payable legally but not paid @ 14% p.a. from the date of reference till award, the arbitrator rightly applied the ratio of decision in Secretary Irrigation, Orissa v. G. C. Roy . The arbitrator was competent and it was within his jurisdiction to have made an award of interest pendente lite. In addition to this, it is contended that the award on this count also deserves to be modified by allowing interest from the date of award till date of decree and also from the date of decree till date of payments. The claim for future interest was specifically referred to the arbitrator, who though took note of the decision of the Supreme Court but disallowed it on wholly erroneous ground that the arbitrator neither enjoins the power nor was the case referred to him.
4. Claim No. 14 was for a sum of Rs. 97,500/- due to rise in cost for work executed beyond stipulated period. It is not in dispute that the period of contract was only for six months. The period of work was from 1st September, 1985 to 28th February, 1986, but it was actually completed on 27th March, 1986. It is also not in dispute that under Clause 12 of the agreement claimant was required to do the additional work. Claimant's case is that delay of 30 days was solely attributable to the respondent, who had called upon the claimant to execute extra items of work given under clause 12, which required 62 days more to complete the work. The arbitrator on consideration of the respective case of parties found that this prolongation of 30 days from the original date, as stipulated, was mainly on account of extra items given under clause 12 of the contract, which clause also stipulates automatic extension of time in proportion of extra work plus 25% Arbitrator also held that it is very - difficult to actually quantify how much extra work was done during 30 days of prolongation period but found that this extension of time prolonged the contract period, but because of stipulation of 6 months, as period for completion, the claimants were deprived of escalation under clause 10CC, which they could have easily availed of had the period as originally stipulated been 7 months, after considering the quantities of extra work. After recording these findings the arbitrator took note of the fact that though the claim was for Rs. 97,500/- but the claimant had worked out the same as per the formula of escalation contained in clause 10CC at Rs. 69,246/-, which had been modified by the respondent to Rs. 58.007/- only. After accepting the respondent calculations, the arbitrator considered this amount to be the reasonable amount of compensation payable to the claimant since claimant had also made a claim under Section 73 of the Contract Act to which claimant was held entitled. Due to these reasons which are cogent and relevant and taken note of by the arbitrator in making the award, no interference is called for in the award made by the arbitrator.
5. On the point of interest also, I do not find any force in the submissions made by learned counsel for the respondent in view of the ratio of the decision of the Supreme Court in Secretary Irrigation, Orissa (supra). There is now no manner of doubt that arbitrator is competent to award interest for the period commencing with the date of award till the date of decree or till realisation, whichever is earlier. The award of interest for the period prior to arbitrator entering upon reference is a matter of substantive law and accordingly the interest for the post award period is a matter of procedure. Section 34 of the Code of Civil Procedure Provides awarding of interest pendente lite as well as post decree period. Section 34 of the Code had been held applicable to proceedings before the arbitrator. The arbitrator made award of interest only from the date of reference till the date of award but did not allow future interest on the assumption that there is no such power to award interest beyond the date of award till date of decree or date of payment, whichever is earlier though this matter was specifically referred to him. In view of the ratio of decision in the aforementioned case, the award is liable to be modified to the extent that in addition to the interest, which the arbitrator has allowed, claimant will also be entitled to interest at the rate of 14% p.a. on Rs. 94,694/- from the date of award till date of decree. Objections filed by the respondent accordingly are dismissed and award stands modified as aforesaid.
6. Since objections by the respondent have been dismissed, I proceed to make the award of the arbitrator rule of the court with the aforementioned modification and pass a decree in terms of the modified award for the sum of Rs. 2,81,058/- in favor of claimant against the respondent with pendente lite interest at the rate of 14% p.a. on Rs. 94,694/- from the date of reference till award and future interest at the same rate from the date of award till decree and from the date of decree till payment. Modified award shall form part of the decree. Decree be drawn in accordance with law.