Delhi High Court
D.K. Jain vs Delhi Development Authority And Anr. on 11 September, 1990
Equivalent citations: 43(1991)DLT234
Author: Arun Kumar
Bench: Arun Kumar
JUDGMENT Arun Kumar, J.
(1) This order will dispose of I.A. No. 7407/84 which contains objections on behalf of the respondent Dda under Sections 32 and 33 of the Arbitration Act against the award dated 16th June, 1984.
(2) The facts leading to the filing of objections are as under :- The work relating to development of land for Pitampura Residential Scheme H-5 (Pt.) Sh : Sewerage (Pt. I) was awarded to the petitioner/contractor by the respondent vide agreement No. 81/EE/DD11/75-76. The disputes arose between the parties in relation to the said contract. The contract contained an arbitration clause. The contractor invoked the said arbitration clause vide his letter dt. 21st October 1981. Shri G. Subramanyam, Superintending Engineer (Arbitration), D.D.A. was appointed as an arbitrator to adjudicate upon the disputes raised by the contractor and the counter claims of the department. The arbitrator made his award on 16th June, 1984 whereby certain claims of the petitioner/contractor were allowed while the counter claims of the respondent were rejected except for a counter claim for Rs. 397.00 on account of Income Tax. The petitioner/contractor filed a petition under Sec. 14 of the Arbitration Act which was registered as S. No. 1045A/84. Notice of the said petition was issued to the arbitrator requiring him to file the award and the proceedings in Court. In persuance of the said notice, arbitrator filed the award and the proceedings in Court and notice of the award was issued to the parties. Only the respondent DDA. filed objections to the award were registered as LA. No. 7407/84. The petitioner filed reply to the said objections and the following issue was framed on 10th April 1985:- "(1) Is the award liable to be set aside for the reasons mentioned in the objection petition of the respondent ?"
Parties counsel agreed to file affidavits by way of evidence. After the affidavits were filed, the matter has come up for final hearing and disposal of the objections.
(3) It is an admitted case of the parties that the arbitrator was required to give a reasoned award. As a matter of fact the arbitrator has appended a separate sheet to the award as Annexure 'A' which contains the reasons for the award according to the arbitrator. The main contention of the counsel for the objector is that even though the award was required to be a reasoned award and the arbitrator has purportedly given certain reasons in support of his award, in fact and in reality the award in the present case amounts to a non-speaking award which is contrary to the very terms of the arbitration and as such the award is liable to be set aside. According to the counsel for the objector, this amounts to mis-conduct on the part of the arbitrator. In support of his said contention, the counsel for the objector has taken me through various claims and the manner in which the arbitrator has dealt with the same in his award and the reasons in support of the award. Claim NO. 1 Under this claim, the claimant claimed a sum of Rs 61,577.49 paise towards the balance payment of the work done. Admittedly the said claim comprises of three heads. The details, of this claim are given in Annexure 'A' at page 80 of the arbitration file which are as under :- (A) Deductions in the final bill on account of unsatisfactory work . ...Rs. 19,867.14 (B) Payment under Clause 12(a) on account of work executed beyond deviation limit ...Rs. 9,710.35 (C) Increase in rates as per clause 10(c) of the agreement ...Rs. 32,000.00 Total ...Rs. 61.577.49 Counsel for the objector submitted that claim No. 1 consisted of the aforesaid three components and the total amount claimed by the contractor was Rs. 61,577.49. The arbitrator has awarded a sum of Rs. 36,867.00 under this claim. This shows that the arbitrator has not accepted the claim of the claimant in full and the amount awarded is a little above 50% of the claim. According to the counsel for the objector, it is impossible to find out even with reference to the reasons given by the arbitrator regarding the said claim, as to what amount has been awarded under what head. Counsel submitted that had the arbitrator awarded the full amount under this claim, one could say that the arbitrator has accepted the basis or the calculations made by the contractor as correct and maybe one could not challenge the decision of the arbitrator in that behalf. But, the reduction in the amount claimed by the arbitrator shows that the arbitrator has not accepted the claim as laid before him by the claimant. This leads to the question as to on what basis and to what extent deductions have been made under each component of claim No. 1. Therefore, it becomes incumbent upon the arbitrator specially when he is required to give a reasoned award that some basis should be available to find out at least what amount has been awarded under which head. Failure to give any such indication in the award or in the reasons shows that the arbitrator has acted arbitrarily i.e., without any basis. In short, the argument of counsel for the objector is that when there is reduction in the claim, the same has to be on some basis and the basis should be available or decipherable if not from the award, at least from the reasons in support of the award.
(4) Apart from this counsel for the objector has canvassed in relation to each component of claim No. 1 that the award or the reasons appended to the award show that either the so called reasons are no reasons in the eye of law or that the reasons are absolutely faulty and suggest that the arbitrator has committed such grave mistakes in his reasoning as vitiate the award.
(5) Regarding the first component under claim No. 1, which relates to deductions on account of extra payment during the course of work, counsel for the objector submits that the award is contrary to the very terms of the agreement between the parties. My attention has been drawn to the clause 7 of the agreement under which the employer can continue to make payments of running bills during the progress of the work and the employer is given a power to make the adjustment regarding over-payment at the stage of final bill. Therefore, it is submitted that the reasons given by the arbitrator that since full rates were paid during the pre-final bill stage and the work was got executed, no deductions could be made from the final bill, are contrary to the terms of clause 7 of the agreement. According to the counsel when the arbitrator ignores the terms of the agreement or decides contrary to the very terms of the agreement such an award is liable to be set aside. According to the counsel for the objector, the full rates are paid during the progress of the work by way of advance payments and that it does not mean that the employer has accepted the work as satisfactory and no deductions can be made from the final bill. The advances are liable to be adjusted in the final bill which the employer sought to do.
(6) Regarding second component under claim No. 1, i.e. deviations, it is submitted by counsel for the objector that this claim has been allowed without any material or evidence on record and merely on the basis of contentions of the claimant. According to the counsel there is nothing on the record to support this claim.
(7) Coming to the third objection under claim No. 1, i.e. escalation on account of increase in rates under clause 10(c) of the agreement, it is submitted by counsel for the objector that the claimant had to prove the exact hike in the rates specially in view of the fact that as per clause 10(c) hike over and above 10% alone could be taken into consideration for payment on this account. Apart from this it is also submitted that proof of actual payment at higher rate is also to be adduced before such a claim could be made or reimbursement on that account could be sought by the contractor from the employer. Neither the contractor supplied any details so as to meet the requirements under clause 10(c) of the agreement nor the arbitrator has given any finding as to whether there was an increase above 10% of the specified rates and if so, to what extent, and if the contractor bad been out of pocket on account of such an increase, and if so, to what extent. Counsel submitted that in the very nature of things this requires certain findings to be given by the arbitrator before the award can be made on this account. Thus according to the counsel for the objector, the entire claim No. I is not justified at all even on merits and the arbitrator has failed to satisfy the requirements for a reasoned award to be sustained so far as the said claim is concerned.
(8) The three components under claim No. 1 are totally independent of each other. Without indicating as to what was being awarded against a particular component, the arbitrator has given a lump sum award which in effect amounts to a non-speaking award which in the present case will be contrary to the terms of arbitration.
(9) Counsel for the contractor has submitted that the break up regarding various claims under claim No. 1 is given in Annexure 'A' to which reference has already been made above. Counsel submits that the arbitrator is not required to give any detailed reasons and the award under this claim is correct and justified. Regarding argument of counsel for the objector based on clause 7 of the agreement, the reply on behalf of the contractor is that the payments during the course of execution of the work are made only when the Executive Engineer responsible for the conduct of the work is satisfied and therefore, the matter cannot be re-opened at the stage of final bill and no deductions can be made at that stage. It is, however, submitted that there is nothing on record to show that the work of the contractor was unsatisfactory and therefore the award under claim No. 1 is Fully justified Counsel further submitted that no notice was given to the contractor by the employer that the work was unsatisfactory and deductions will be made on that account. Therefore, the employer was not entitled to make any deductions and the claim on account of deductions was fully, justified. Nothing has been said by counsel for the contractor regarding the second component of claim No. 1.
(10) Counsel for the contractor has drawn my attention to some details regarding the claim on account of increase in labour rates/material under clause 10(c) of the agreement. These details are contained on page 116 of the arbitration file. However, this document does not meet the argument of counsel for the objector regarding this component under claim No. 1. The total of details contained on the said page comes to Rs. 29,013.00 whereas as per Annexure 'A' (page 80 of the arbitration file) claim under clause 10(c) is for Rs. 32,000.00. Secondly, the figures under the so called details to my mind do not satisfy the requirements for a claim under clause 10(c) of the agreement. Therefore, reference to this document does not improve matters so far as the claimant is concerned.
(11) I am not at all satisfied that the award of the arbitrator regarding claim No. 1 meets the requirements under the law, specially when the award was required to be a reasoned award. The tests in this connection are well set out in various decisions of this Court and the Hon'ble Supreme Court. I am afraid that the award on claim No. 1 does not meet those tests and, therefore, it is liable to be set aside. "Even if I do not go into the question of merits of the claim under each component of claim No. 1, the fact that each component is independent of the other and the arbitrator does not even give any clue in the award or his reasoning appended to the award, as to how much he is awarding against each component, is alone sufficient to hold that the award is totally arbitrary and amounts to a non-speaking award which is contrary to the terms of arbitration and is, therefore, liable to be set aside." "At least this much was absolutely essential that the arbitrator should indicate as to how much he was awarding under each head. One does not know which component of claim No. 1 has been accepted and if so, to what extent. Secondly, it seems that the nature of the claim under each component (at least under components 1 and 2) is such that either it his to be rejected or accepted in full. There can be no half way." I could understand if the entire claim in Annexure 'A' had been allowed because that would mean that the arbitrator has accepted the claims to be fully justified. However, the entire claim has not been awarded and one is left totally in dark as to which component is being accepted and to what extent and which is being rejected. This is total arbitrariness and cannot be sustained. In view of this, 1 need not go into the merits of each component under claim No. 1. Even otherwise, I am of the view that the Court is not required to go into merits of each claim. In this behalf, I rely on the following observation in Delhi Development Authority v. M/s Alkaram, :- "Under Section 30, Arbitration Act the Court exercises a limited jurisdiction and can only deal with matters within a limited scope. When the arbitrator gives reasons for his award this does not open the door to the Court to see what the contention of each party was and what was the evidence given by the parties on it, and then examine the evidence to see whether the disputed findings of fact are sufficiently supported by the evidence. The theory propounded before us that the Court can see the 'reasonableness of the reasons' if accepted. "Would cut at the root of the whole purpose of arbitration, the basic idea of which is that the arbitrator's decision shall be final". (per Wilmer L.J. in Tersons Ltd. v. Stevenage Development Corporation, (1963) 3 All Er 863, 867)."
(12) Claim NO. Ii This claim is regarding refund of security deposit amounting to Rs. 48,791.00. The arbitrator has awarded a sum of Rs. 48,796.00, against this claim. In the reasons for the award given by the Arbitrator, this claim has been dealt with as under :- "After going through the written arguments of both the parties and the circumstances explained in the hearing as well as in the statement of facts, counter statement, of facts, written arguments, etc. it is found that there was no breach of contract on the part of the claimant. The claim is justified for refund of security deposit amount. The amount of security deposit is not in dispute. The claim is justified to the extent of Rs. 48,796.00."
(13) It will be seen that this claim related to refund of security deposit. There were rival contentions of trie parties regarding performance of the agreement. According to the respondent, the contractor had abandoned the work and therefore had committed breach of the agreement and as such was not entitled to refund of the security deposit. Whereas according to the claimant, the respondent was instrumental in delay in the completion of the work and the claimant had never abandoned the same. The Arbitrator has held that there was no breach of contract on the part of the claimant. However, no reasons at all have been given in support of this finding, even though there was a serious contest between the parties on this point. Just saying that after going through the written arguments of both the parties, the submissions at the time of hearing and the statement of facts and counter statement of facts and then giving the conclusion, cannot be called a reasoned award. If this is a reasoned award, 1 do not not know what would be the difference between a speaking award and a non-speaking award. I feel that breach of contract is a question of fact which required a finding with reference to the material on record. Therefore, I find that the award so far as it related to claim No. Ii also is not sustainable and is liable to be set aside.
(14) Apart from the question of giving finding about breach of contract, a lot of stress was laid by counsel for the respondent on the fact that the claim under this head was for a sum of Rs. 48,791.00, whereas the award is for a sum of Rs. 48,796.00. According to the respondent, the arbitrator could not award more than what was claimed before him. In reply to this, the counsel for claimant has explained that there was no dispute about the amount of security deposit. The said figures has been taken by the arbitrator from a bill filed on the record on 20th September, 1983 by the respondent, showing recovery of a like amount. Therefore, it is apparent that the arbitrator has proceeded on the basis of figures supplied by the respondent itself. In view of this, I do not find any force in the argument of counsel for the respondent that the award under Claim No. Ii is liable to be set aside on this ground alone.
(15) Claim NO. V There is no difference of opinion between the parties so far as the question of award of interest pendente lite is concerned. The award in the present case was made on 16th June, 1984 when obviously the decision of the Hon'ble Supreme Court in 1988 Sc 1520 was not available. The law laid down in this judgment would be deemed to be the law of the land. Therefore, today when this question is being dealt with, I have to apply the law as laid down in the said judgment. The award of the arbitrator on claim No. V allowing pendente lite interest in favor of the claimant therefore is set aside. Counter Claims (16) Coming to the counter claims of the respondent, the arbitrator has rejected all of them except the claim for Rs. 397.00, on account of income tax. For reasons for rejecting the counter claims No. I, Ii, Iv & V, the arbitrator has invited reference to Annexure 'A' to the award where claim No. Ii has been dealt with. I have already held that the so called reasons under claim No. Ii are in fact no reasons. The way claim No. Ii of the claimant has been dealt with amounts to mere conclusions. Therefore, the award regarding counter claims I, Ii, Iv & V is also liable to be set aside.
(17) Similarly, the reason given for rejecting counter claim No. Vi is also total arbitrary. The matter of employment of a graduate engineer is a question of fact which ought to have been established on the basis of proof of employment rather than to be found through a negative a process of reasoning. It was submitted by counsel for the respondent that there is no proof on record about the employment of graduate engineer by the contractor and the mere fact that no deductions have been made on this account from the running bills of the contractor does not mean that the graduate engineer who was required to be employed in terms of the agreement between parties, was actually employed. It is further submitted by counsel for the respondent that under counter claim No. I, apart from the question of employment of a graduate engineer, there were two other questions involved, i.e. non-return of material and non-submission of labour reports. There is nothing in the so called reasons appended to the award regarding these two items. Thus the award and the so called reasons appended thereto show total non- application of mind on the part of the arbitrator. There is error apparent on the face of the record.
(18) Counsel for the parties have referred to various decisions of this Court as well as of the Hon'ble Supreme Court in support of their respective arguments. Some of the authorities cited are :- Juwar singh v. State of M.P., Air 1981 Sc 374; College of Vocational Studies v. S.S. Jaitley, Air 1987 Delhi 134; Delhi Development Authority v.. M/s Alkaram, ; Delhi Development Authority v. M/s Uppal Engg. Construction Co., ; M/s Hindustan Tea Co. v. M/s K. Sashikant & Co. ; Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar, 1987 Rlr 652; and Rajinder Prasad v. Food Corporation of India, Air 1986 Delhi 436.
(19) The legal principles for dealing with the awards made by the arbitrators are well settled. 1 he ultimate exercise is to see how far these principles are attracted to the facts and circumstances of the given case; and to what extent they effect the final outcome of the case. In this context, I rely on the following observations from a Division Bench Judgment of this Court reported as Air 1987 Delhi 134 :- "Where under an agreement the arbitrator is required to give reason's for his award, he is not required to give a detailed judgment or detailed reasons. By reasons it means that the award should be speaking one. In the reasoned award what is expected from the arbitrator is that he should indicate his mind whereby it can be ascertained as to how he has arrived at a particular conclusion. In case of reasoned award, the arbitrator is required to indicate the trend of his thought process but not his mental meanderings, the purpose of commercial arbitration, being speedy certainly and a cheaper remedy. When the finding of the arbitrator is based on no evidence, then certainly the Court can go into such finding and set aside such an award as being perverse. The arbitrator is entitled to decide rightly or wrongly but if an error of law appears on the face of the award, then the Court can interfere and set aside the award,"
(20) I have already dealt with the manner in which the arbitrator has made the award and his reasons in support of his award. I find that the so called reasons in support of the award are no reasons in the eye of law and the award has in fact remained a non-speaking award which is contrary to the terms of arbitration in the present case. The award is perverse and is. therefore, liable to be set aside. I allow I.A. No. 7407/84 and set aside the award. There will be no order as to costs.
(21) S.NO. 1045-A/84 In view of the decision on I.A.No. 7407/84, the suit stands disposed of. Order accordingly.