Delhi High Court
Delhi Development Authority & Another vs M/S. Bharat Furnishing Company & V.K. ... on 15 July, 2009
Equivalent citations: AIR 2010 DELHI 59, 2010 (3) AKAR (NOC) 231 (DEL), 2010 (3) AKAR (NOC) 231 (DEL.)(FULL BENCH), 2010 A I H C 1652
Author: Sanjiv Khanna
Bench: Ajit Prakash Shah, Sanjiv Khanna, G.S. Sistani
LPA Nos. 142/2003, 280/2003, 308/2003 1
1181/2007 & 1182/2007
REPORTABLE
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ LETTERS PATENT APPEAL NOS. 142/2003, 280/2003,
308/2003, 1181/2007 & 1182/2007
% Date of decision: July 15th , 2009
DELHI DEVELOPMENT AUTHORITY & ANR. .....Appellants in LPA Nos.
142/2003, 280/2003 &
308/2003.
Through Mr. Ajay Verma & Ms. Anusuya Salwan, Advocates.
Versus
M/S BHARAT FURNISHING COMPANY .....Respondent in LPA
No. 142/2003.
V.K. MITTAL .....Respondents in LPA
Nos. 280/2003 &
308/2003.
Through Mr. Girish Aggarwal &Ms.Mugdha Pandey, Advocates.
AND
BHAGAT CONSTRUCTION CO. PVT. LTD.......Appellant in LPA No.
1181/2007.
HARINDER ANAND ......Appellant in LPA No.
1182/2007.
Through Mr. Sandeep Sharma, Advocate.
Versus
DELHI DEVELOPMENT AUTHORITY & ANR.....Respondents in LPA
Nos. 1181/2007 &
1182/2007.
Through Mr. Ajay Verma & Ms. Anusuya Salwan, Advocates.
CORAM:
HON'BLE MR. JUSTICE AJIT PRAKASH SHAH, CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE G.S. SISTANI
1. Whether Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported
in the Digest ?
SANJIV KHANNA, J.:
LPA Nos. 142/2003, 280/2003, 308/2003 2
1181/2007 & 1182/2007
1. By order dated 2nd April, 2008, the following two questions of law were referred to a larger Bench:-
―1. Whether on interpretation of Clauses 2, 29 and 30 of the agreement, the amount determined by the Superintending Engineer under Clause 2 can be recovered by DDA as arrears of land revenue without adjudication and a decree of a civil court?
2. Whether DDA can recover its claims due under Clause 2 of the agreement with the contractors under Section 40A of the DDA Act?‖
2. The said reference was made in view of observations made by a Division Bench of this Court in DDA versus Sudhir Brothers, 1995 (2) ALR 306 (DB), which were relied upon by a learned single Judge of this Court in his decision dated 2nd August, 2007 in Writ Petition (Civil) No. 5073/2003, Harinder Anand versus DDA and Others and Writ Petition (Civil) No. 11878/2006, Bharat Construction Company Private Limited versus DDA and Others. Another single Judge of this Court in Writ Petition (Civil) No. 3738/2002, V.K. Mittal versus Assistant Collector, Grade-I, DDA and Others, 2003 (104) DLT (Delhi) 349 had taken a contradictory view.
3. Delhi Development Authority (DDA) had entered into construction agreements with third party building contractors. DDA claims and wants to recover amounts under Clause 2 of the agreements as arrears of land revenue under Section 68 of the Punjab Land Revenue Act, 1887. DDA claims that they are entitled to do so by invoking provisions of Section 40A of the Delhi Development Act, 1957 (hereinafter referred to as the DD Act, LPA Nos. 142/2003, 280/2003, 308/2003 3 1181/2007 & 1182/2007 for short) even if DDA has not filed any civil suit and does not have any decree.
4. Clause 2 of the agreement reads :-
―Clause-2: The time allowed for carrying out the work as entered in the tender shall be strictly observed by the contractor and shall be deemed to be of the essence of the contract on the part of the contractor and shall be reckoned from the Tenth Day after the date on which the order to commence the work is issued to contractor. The work shall throughout the stipulated period of the contract be proceeded with all due diligence and the contractor shall pay as Compensation an amount equal to one percent, or such smaller amount as the Superintending Engineer Delhi Development Authority (whose decision in writing shall be final may decide on the amount of the estimated cost of the whole work as shown in the tender, for every day that the work remains uncommenced or unfinished, after the proper dates. And further, the ensure good progress during the execution of the work, the contractor shall be bound in all cases in which the time allowed for any work exceeds, one month (save for special jobs) to complete one-eighth of the whole of the work before one-fourth of the whole time allowed under the contract has elapsed, three-eights of the work, before one half of such time has elapsed, and three-fourth of the work, before three-fourth of such time has elapsed. However, for special jobs if a time-schedule has been submitted by the Contractor and the sasme has been accepted by the Engineer-in-charge, the contractor shall comply with the said time schedule. In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one percent or such smaller amount as the Superintending Engineer Delhi Development Authority (whose decision in writing shall be final) may decide on the said estimated cost of the whole work for every day that the due quantity of work remains incomplete; provided always that the entire amount of compensation to be paid LPA Nos. 142/2003, 280/2003, 308/2003 4 1181/2007 & 1182/2007 under the provisions of this Clause shall not exceed ten percent, on the estimated cost of the work as shown in the tender.‖ Claim under Clause 2 of the agreement is for damages/compensation for delay in construction. While interpreting a similar contractual clause in the case of Vishwanath Sood versus Union of India and Another, AIR 1989 SC 952, the Supreme Court came to the conclusion that levy/penalty under Clause 2 is not automatic but based upon number of days and delay estimated, amount of work, causes for delay, determination as to party responsible for the delay, etc. The Supreme Court observed that the said clause gives discretion to the designated authority to determine the claim of compensation, which cannot exceed 10% of the contractual amount. Amount that can be claimed and recovered depends upon whether the default could be attributed to the contractor, the nature of fault, period of fault, degree of negligence and default which could be attributed to the contractor. It was observed:-
―Clause 2 of the contract makes the time specified for the performance of the contract a matter of essence and emphasises the need on the part of the contractor to scrupulously adhere to the time schedule approved by the Engineer- in-charge. With a view to compel the contractor to adhere to this time schedule, this clause provides a kind of penalty in the form of a compensation to the Department for default in adhering to the time schedule. The clause envisages an amount of compensation calculated as 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 to the prescribed extent on the relevant dates. We do not agree with the counsel LPA Nos. 142/2003, 280/2003, 308/2003 5 1181/2007 & 1182/2007 for the respondent that this is in the nature of an automatic levy to be made by the Engineer-in- charge based on the number of days of delay and the estimated amount of work. Firstly, the reference in clause to the requirement that the work shall throughout the stipulated period of the contract be proceeded with due diligence and the reference in the latter part of the clause that the compensation has to be paid 'in the event of the contractor failing to comply with' the prescribed time schedule make it clear that the levy of compensation is conditioned on some default or negligence on the part of the contractor. Secondly, while the clause fixes the rate of compensation at one per cent for every day of default it takes care to prescribe the maximum compensation of 10 per cent on this ground and it also provides for a discretion to the Superintending Engineer to reduce the rate of penalty from one per cent. Though the clause does not specifically say so, it is clear that any moderation that may be done by the Superintending Engineer would depend upon the circumstances, the nature and periods of default and the degree of negligence or default that could be attributed to the contractor. This means that the Superintending Engineer, in determining the rate of compensation chargeable, will have to go into all the aspects and determine whether there is any negligence on the part of the contractor or not. Where there has been no negligence on the part of the contractor or where on account of various extraneous circumstances referred to by the Division Bench such as vis major or default on the part of the Government or some other unexpected circumstance which does not justify penalising the contractor, the Superintending Engineer will be entitled and bound to reduce or even waive the compensation.‖ (emphasis supplied)
5. It may be noted that claims under Clause 2 of the agreement are non-arbitrable or excepted matters as held by the Supreme Court in the case of Vishwanath Sood (supra) (Also see observations of the LPA Nos. 142/2003, 280/2003, 308/2003 6 1181/2007 & 1182/2007 Supreme Court in the case of General Manager, Northern Railway and Another versus Sarvesh Chopra, (2002) 4 SCC 45).
6. The principal question, which arises for consideration in the present reference, is whether DDA can invoke Section 40A of the DD Act and recover amounts claimed as due and payable under Clause 2 of the agreement. For deciding this question, we have to examine and interpret Section 40A of the DD Act, which reads as under:-
―40-A. Mode of recovery of moneys due to Authority-- Any money due to the Authority on account of fees or charges, or from the disposal of lands, buildings or other properties, movable, or immovable, or by way of rents and profits may, if the recovery thereof is not expressly provided for in any other provision of this Act, be recovered by the Authority as arrears of land revenue.‖
7. The said section provides a special mode for recovery of dues payable to DDA on account of fee or charges, on disposal of land, building and other properties, movable or immovable or by way of rent and profits, as arrears of land revenue, if any other mode of recovery is not expressly provided for under the provisions of the DD Act. The legislature has used the words fee, charges or money due from disposal of lands, buildings or other properties, movable or immovable or recoveries to be made by DDA towards rents and profits. Only the specified enumerated dues can be recovered by DDA as arrears of land revenue. All other claims of DDA against third parties other than the specified enumerated dues are not LPA Nos. 142/2003, 280/2003, 308/2003 7 1181/2007 & 1182/2007 covered by Section 40A of the DD Act and cannot be recovered as arrears of land revenue.
8. Amount claimed by DDA under Clause 2 is not rent, profit or an amount payable on account of disposal of any property. Can a claim under clause 2 of the agreement be regarded as fees or charges payable to DDA under section 40A of the DD Act?
9. The term ―fee‖ does not have a rigid meaning and is generally understood and regarded as a sort of return or consideration for services rendered. It is relatable to services rendered or accepted from Government in general, though arithmetical exactitude is not required. Fee should be reasonable and should have relation to services rendered or advantage conferred, but the connection need not be direct, a mere casual relation is enough. The test is whether the primary and essential purpose of the levy in form of fee is for services to a specified area or class. Whether a person is ultimately and indirectly benefitted by it, is of no consequence (refer, Indian Mica Micanite Industries versus State of Bihar, (1971) 2 SCC 236 and State of H.P. versus Shivalik Agro Poly Products, (2004) 8 SCC 556). Amounts claimed under Clause 2 of the agreement are not ―fee‖.
10. Learned counsel for the DDA laid considerable emphasis on the term/word ―charges‖ used in Section 40A and our attention was also drawn to Black's Law Dictionary (6th Edition 1990) in which the word ―charge‖ has been defined as under:-
LPA Nos. 142/2003, 280/2003, 308/2003 8
1181/2007 & 1182/2007 ―Charge, n. An incumbrance, lien, or claim; a burden or load; an obligation or duty; a liability; an accusation. A person or thing committed to the care of another. The price of, or rate for, something. See also Charged; Charges; Floating charge; Rate; Surcharge.‖
11. The said argument fails to notice that the term used in Section 40A is not ―charge‖ but ―charges‖. The word ―charges‖ as defined in Black's Law Dictionary means expenses which are being incurred or disbursement made in connection with a contract, suit or business transaction. In normal parlance, the term ―charges‖ means an amount of price payable for rendering some service or price of goods. In Shri Gajan Motor Transport Company Limited versus State of Karnataka, (1997) 1 SCC 37, the Supreme Court interpreted the word ―charge‖ in its ordinary dictionary meaning and had observed as under:-
―The term ―charge‖ is a broad one. As used here, it is not a technical term and has not been denied by the Act. It has, therefore, its ordinary dictionary meaning. It means any amount which may be demanded as a price for the rendering of some service or as price of some goods. The argument of the learned Counsel for the appellant that the Act uses the term ―freight‖ to indicate the charge made on carriage of goods, whereas the term ―fare‖ is used for the charge made for carrying passengers, itself rests on the assumption that the term charge is a wide one. It includes both freights and fares. It is true that the term ―fare‖ is used in relation to charges made for carriage of passengers and the term freight is used for charges made for the carriage of goods. Nevertheless, both are charges.‖ LPA Nos. 142/2003, 280/2003, 308/2003 9 1181/2007 & 1182/2007
12. As per the aforesaid decision, the word ―charges‖ means an amount which is demanded towards price for rendering some service or for selling some goods. ―Charges‖ in this sense should be at least a claim made by DDA for rendering some service or supply of goods. Amount claimed by DDA under clause 2 of the agreement are not charges payable for services rendered or for goods supplied.
13. Even if the word ―charges‖ is capable of wider and different interpretation, we prefer the above interpretation. While constructing a statute or words used in an enactment, we take into consideration the intendment and the consequences, which flow from their construction. When words are clear and cannot have two possible interpretations, full effect should be given to the said words. However, when two interpretations are possible, courts have tendency to interpret words in the manner in which importance is given to the form and not to the substance. Meaning to be given to a word in an enactment depends upon the context in which the word is used. The word takes its colour depending upon the context. This requires examining the scope and purpose of the provision. Way back in 1986, the Supreme Court in Girdhari Lal and Sons versus Balbir Nath Mathur and Others, (1986)2 SCC 237, had observed as under:-
―The primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the Court must then strive to so interpret the statute as to promote and advance the object and purpose of the enactment. For this purpose, where necessary LPA Nos. 142/2003, 280/2003, 308/2003 10 1181/2007 & 1182/2007 the court may even depart from the rule that plain words should be interpreted according to their plan meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be well justified in departing from the so called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing, the written word if necessary.‖
14. A careful reading Section 40A of the DD Act would reveal the intention and the object behind the said provision. DDA is a statutory authority under the DD Act with the object and purpose of development of land and its disposal, to carry out building, engineering, mining and other operations, to execute work in connection with supply of water, electricity and other services and amenities in Delhi. Development and disposal of land or buildings to general public are the primary objects of DDA. This is done under the rules and regulations framed under the DD Act. Fee and charges are fixed and provided in terms of the rules and regulations so enacted. Fee, lease money, rents and charges due and payable to DDA on account of transfer of land, buildings etc. have to be recovered from the public. Section 40A of the DD Act has been enacted for recovery of these dues in form of fee, charges or other amounts payable on disposal of land or buildings or rents and profits as arrears of land revenue. These are statutory dues payable in terms of the rules/regulations and the legislature in its wisdom has enacted section 40A of DD Act to recover the said dues as arrears of land revenue. Recovery of the said amounts by filing civil suits would be arduous and cumbersome. LPA Nos. 142/2003, 280/2003, 308/2003 11 1181/2007 & 1182/2007 In most cases of such nature, there would not be any dispute about the amount payable to the DDA by the allottees and others, towards fee, rent, charges etc. and, therefore, the said amounts can be directly recovered as arrears of land revenue.
15. Under Section 40A of the DD Act; dues in form of fee or charges or from disposal from land, building and/or by way of rent and profits have been clubbed together. These words are susceptible of analogous meaning and are connected and complement each other. The words are used in a cognate sense and take colour from each other in a way that meaning of a more general word is restricted to a sense analogous to a less general. Doctrine of Noscitur A Sociis, i.e. meaning of a word clubbed together is known from the accompanying or associating words has relevance in understanding the import of a word in a statutory provision when the meaning is doubtful or ambiguous. Meaning of doubtful words is to be ascertained by reference to meaning of words associated with it. The said doctrine is broader than the doctrine of ejusdem generis and has been applied in a number of cases (refer, CBI versus Braj Bhushan Prasad,(2001) 9 SCC 432).
16. Words must be interpreted in a manner and given meaning to render the provision workable in a fair manner. There is a presumption that the legislature would not enact a section, which produces unjust or inconvenient results. Rule of law presumes and enforces minimum standard of fairness both substantive and procedural. In Chanchal Goel (Dr.) versus State of Rajasthan, (2003) 3 SCC 485, the Supreme Court LPA Nos. 142/2003, 280/2003, 308/2003 12 1181/2007 & 1182/2007 referred to D. Smith's Administrative Law and approved observations in Pierson versus Secretary of State for Home Department, 1997 3 All England Reporter 577 while discussing the plea of legitimate expectation. In Pierson's case (supra), Lord Steyn referred to Cross on Statutory Interpretation (Third Edition, 1995), and observed:-
―Statutes often go into considerable detail, but even so allowance must be made for the fact that they are not enacted in a vacuum. A great deal inevitably remains unsaid. Legislators and drafters assume that the courts will continue to act in accordance with well-recognised rules... Long-standing principles of constitutional and administrative law are likewise taken for granted, or assumed by the courts to have been taken for granted, by Parliament. Examples are the principles that discretionary powers conferred in apparently absolute terms must be exercised reasonably, and that administrative tribunals and other such bodies must act in accordance with the principles of natural justice. One function of the word ―presumption‖ in the context of statutory interpretation is to state the result of this legislative reliance (real or assumed) on firmly established legal principles. There is a ―presumption‖ that mens rea is required in the case of statutory crimes, and a ―presumption‖ that statutory powers must be exercised reasonably. These presumptions apply although there is no question of linguistic ambiguity in the statutory wording under construction, and they may be described as ―presumptions of general application‖... These presumptions of general application not only supplement the text, they also operate at a higher level as expressions of fundamental principles governing both civil liberties and the relations between Parliament, the executive and the courts. They operate here as constitutional principles which are not easily displaced by a statutory text...‖ LPA Nos. 142/2003, 280/2003, 308/2003 13 1181/2007 & 1182/2007
17. Interpretation as propounded by DDA if accepted would mean that a contractual claim under Clause 2 of an agreement would become payable even if the claim has not been adjudicated by a civil court. A contractor to contest the claim must first make the entire payment and then file a civil suit for recovery or face civil imprisonment and other penal consequences.
18. Looking at the nature of Section 40A and the language used therein, it is difficult to accept the contention of the DDA that disputed claims under Clause 2 can be recovered without there being any adjudication by a civil court. This will be contrary to the principle of legality and fairness. The Supreme Court in State of Karnataka versus Shree Rameshwara Rice Mills (1987) 2 SCC 160 examined rights of the statutory authority to directly recover the charges for breach of contract under the applicable Land Revenue Act. A contractual clause permitted and entitled the State Government to determine and assess quantum of damages and thereafter recover the claimed amount as arrears of land revenue. The Supreme Court rejected the argument of the State Government that power to quantify damages includes power and authority to determine whether there was a breach. The Supreme Court observed that assuming that the contract had given such adjudicating power to the officer of the State Government, the Clause cannot be sustained under law as a party cannot be an adjudicator of its own cause. It was observed:-
―Even assuming for argument's sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think LPA Nos. 142/2003, 280/2003, 308/2003 14 1181/2007 & 1182/2007 that adjudication by the officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the officer party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of clause
12.‖
19. In view of the decision in Vishwanath Sood (supra), we do not think the claim made by the DDA under Clause 2 can be regarded as a fee or charges payable under Section 40A of the DD Act keeping in view the object and purpose behind the said Clause.
20. Learned counsel for the DDA had placed reliance on the following observations in the case of Sudhir Brothers (supra):-
―6. It will, therefore, be for the DDA to seek to recover the said amount of Rs.5,69,743/- in whatever manner it is open to it and in case any such proceedings are taken, it will be open to the contractor to raise all defences that may be open to him in law to contend that the levy is bad. In case the DDA seeks to recover the said amount of compensation from the contractor, it will be open to the contractor to file a suit and raise all such contentions as he may deem fit. We make it clear that the question of limitation will not be raised by either of the parties, in view of the above unfortunate procedure adopted by both the parties.‖ LPA Nos. 142/2003, 280/2003, 308/2003 15 1181/2007 & 1182/2007
21. Section 40A of the DD Act has not been referred to and considered by the Division bench in the said judgment. The said decision is not a binding precedent on effect and scope of section 40A of the DD Act. The Division Bench held that demand for compensation under clause 2 is an excepted matter and could not form subject matter of arbitration. To this extent the award was set aside. The question whether DDA could directly recover their claims as arrears of land revenue or is required to file a civil suit was neither examined nor decided. It is well settled that judgments given by courts are not to be read as statutes. It is only the ratio decidendi of the judgment which is a binding precedent, other observations and what logically flows from the judgment is not a binding precedent. In Sudhir Brothers (supra) the applicability of Section 40A and manner and mode in which DDA can recover the amount claimed under clause 2 of the agreement was not examined and adjudicated. It did not arise for consideration. The limited question was whether a claim under clause 2 is arbitrable under the arbitration clause. The question how a claim under clause 2 can be recovered was not the subject matter of appeal, which was limited to challenge to the award on the question of jurisdiction of the arbitrator. This decision does not decide the issue which is raised and argued in this reference and is not relevant for determining the questions in controversy i.e. scope and ambit of section 40A of the DD Act and whether DDA can directly recover a claim under clause 2 as arrears of land revenue. In State of Haryana Versus Ranbir,(2006) 5 SCC 167, the Supreme Court has lucidly explained the distinction between dicta and obiter. Obiter dictum is more or less presumably unnecessary to a decision and is an expression of view points and sentiments. They do not constitute and are not part of the ratio decidendi and are not authoritative. In Girnar Enterprises Versus State of Maharastra (2007) 7 SCC 555, the Supreme Court considered the previous case law and discussed this aspect and has observed as under:-
LPA Nos. 142/2003, 280/2003, 308/2003 16
1181/2007 & 1182/2007 ―.........if the court thinks that an issue does not arise, then any observation made with regard to such an issue would be purely obiter dictum. It is a well-settled proposition that the ratio decidendi of a case is the principle of law that decided the dispute in the facts of the case and, therefore, a decision cannot be relied upon in support of a proposition that it did not decide.‖
22. A careful reading of the paragraph in Sudhir Brother's case (supra) would indicate that the Division Bench felt that it was open to the DDA to seek recovery of the amount claimed in whatever manner it is open and when such demand is raised, it will be open to the contractor to raise all defences available to them under the law. The Division Bench has not held that the amount can be recovered under Section 40A of the DD Act or as arrears of land revenue only on the basis of a claim. The Division Bench further observed that in case DDA seeks to recover any amount as compensation, it is open to a contractor to file a civil suit and raise all contentions. The above observations of the Division Bench do not indicate that the contractor must file a civil suit and the DDA is competent and entitled to recover the amount claimed as arrears of land revenue directly and without adjudication. This is not indicated and stated in the said paragraph.
23. The reason why Division Bench in Sudhir Brothers' case (supra) has referred to ―suit filed by the contractor‖ is discernible if one refers to Clauses 2, 29 and 30 of the Agreement executed by DDA. Clause 2 of the agreement has been quoted above. Clauses 29 and 30 of the Agreement read as under:
―Clause-29: (1) Whenever any claim or claims for payment of a sum of money arise out of or under the contract against the contractor, the Engineer-in-Charge or the DDA shall be entitled to withhold and also have lien to retain such sum or sums in whole or in part from the security, if any deposited by the contractor and for the purpose aforesaid the Engineer-in-Charge or the DDA shall be LPA Nos. 142/2003, 280/2003, 308/2003 17 1181/2007 & 1182/2007 entitled to with-hold the security deposit, if any, furnished as the case may be; and also have a lien over the same pending finalisation for adjustment of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the contractor, the Engineer-in-Charge or the DDA shall be entitled to withhold and have a lien to retain to the extent of such claimed amount or amounts referred to above, from any sum or sums found payable or which at any time thereafter may become payable to the contractor under the same contract or any other contract with the Engineer-in-Charge or the DDA or any contracting person through the Engineer-in-Charge pending finalisation or adjudication of any such claim.
It is an agreed term of the contract that the sum or sums of money so withheld or retained under the lien referred to above, by the Engineer-in-Charge or DDA will be kept withheld or retained as such by the Engineer- in-Charge or DDA till the claim arising out of or under the contract is determined by the Arbitrator (if the contract is governed by the Arbitration clause) or by the competent court , as the case may be and that the contractor will have no claim for interest or damages whatsoever on any account in respect of such withholding or retention under the lien referred to above and duly notified as such to the contractor. For the purpose of this clause, where the contractor is a partnership firm or a limited company, the Engineer-in-Charge or the DDA shall be entitled to withhold and also have a lien to retain towards such claimed amount or amounts in whole or in part from any sum found payable to any partner/Limited company as the case may be; whether in his individual capacity or otherwise.LPA Nos. 142/2003, 280/2003, 308/2003 18
1181/2007 & 1182/2007 (2) Delhi Development Authority shall have right to cause an audit and technical examination of the works and the finals bills of the contractor including all supporting vouchers, abstract etc to be made after payment of the final bill and if as a result of such audit and technical examination any sum is found to have been overpaid in respect of any work done by the contractor under the contract or any work claimed by him to have been done by him under the contract and found not to have been executed, the contractor shall be liable to refund the amount of over payment and it shall be lawful for Delhi Development Authority to recover the same from him in the manner prescribed in sub-
clause (1) of this clause or in any other manner legally permissible and if it is found that the contractor was paid less than what was due to him under the contract in respect of any work executed by him under it, the amount of such underpayment shall be duly paid by Delhi Development Authority to the contractor.
Provided that Delhi Development Authority shall not be entitled to recover any sum overpaid nor the contractor shall be entitled to payment of any sum paid short where such payment has been agreed to upon between the Chief Engineer or Executive Engineer on the one hand and the contractor on the other under any term of the contract permitting payment for work after assessment by the Chief Engineer or the Executive Engineer.‖ Clause-30: Any sum of money due and payable to the contractor (including the security deposit returnable to him) under the contract may be withheld or retained by way of lien by the Engineer-in-Charge or DDA or any other contracting person or DDA or such LPA Nos. 142/2003, 280/2003, 308/2003 19 1181/2007 & 1182/2007 other person or persons in respect of payment of a sum of money arising out of or under any other contract made by the contractor with the Engineer-in-Charge or the DDA or with such other person or persons.
It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Engineer-in-Charge or the DDA will be kept withheld or retained as such by Engineer-in-Charge or the DDA till his claim arising out of the same contract or any other contract is either mutually settled or determined by the Arbitrator (if the contract is governed by the Arbitration clause) or by the competent court, as the case may be, and that the contractor shall have no claim for interest or damages whatsoever on this account or any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the contractor.‖
24. Clause 29 specifically refers to adjudication by an arbitrator or the court of all claims including claims of DDA or Engineer- in- charge. Clause 30 similarly states that DDA will be entitled to withhold payments to a contractor till adjudication of DDA's claims in another contract by an arbitrator or by a Court, as the case may be. A harmonious or conjoint reading of the arbitration clause with Clauses 2, 29 and 30 would indicate that the DDA or Engineer-in-charge are entitled to withhold and not make payments in respect of their claims till the claims of DDA or Engineer-in- charge are decided by the arbitrator, if covered by an arbitration clause or otherwise by a Court of law. DDA, therefore, can refuse to make payment of amounts due and payable to the contractor to the extent they have decided to withhold payments in respect of their claims under clause 2 but only till their claims are adjudicated by an arbitrator or the civil court. Adjudication of the claims of DDA is required and not done away with. What is empowered and authorized is the right to withhold payments till adjudication of claims of DDA, either before an arbitrator or before a court LPA Nos. 142/2003, 280/2003, 308/2003 20 1181/2007 & 1182/2007 of law. Jurisdiction of an arbitrator can be restricted by terms of an arbitration clause but jurisdiction of a civil court cannot be ousted or curtailed by a contract but only by a statutory provision. Under Section 9 of the Code of Civil Procedure, a court can decide all suits of civil nature except those which are expressly or impliedly barred by any law. Contractual term without a statutory provision to back cannot oust jurisdiction of a civil court under section 9 of the Code of Civil Procedure, 1908 (See, Ram Swarup Versus Shikarchand AIR 1966 SC 893; Dhulabhai Versus State AIR 1969 SC 78; Dhruv Green Field Ltd. Versus Hukam Singh (2002) 6 SCC 416). Therefore, if Section 40A of the DDA Act is not applicable to claims under clause-2 of the agreements, by a contractual clause jurisdiction of the Civil Courts cannot be ousted.
25. Counsel for the DDA relied upon Food Corporation of India Versus Shrikant Transport (1999) 4 SCC 491 and submitted that as per the contractual terms, parties have agreed to adjudication of Engineer in-charge and, therefore, there is no need for civil adjudication. The issue and question before the Supreme Court in the Food Corporation of India (Supra) pertained to effect of the excepted clause vis-à-vis the arbitration clause. In that context, the Supreme Court has observed that arbitrator's right flows from the agreement and an arbitrator cannot adjudicate upon excepted matters. The question whether a civil suit is maintainable under Section 9 of the Code of Civil Procedure, 1908 in excepted matters was not an issue before the Supreme Court. In the said case the contractor had instituted a petition under Section 20 of Arbitration Act, 1940 for reference of claims to arbitration including claims falling in the category of excepted matters. Food Corporation of India had also instituted a civil suit for recovery of loss, damages and expenses suffered by them. In that context, the Supreme Court held that the Food Corporation of India had abandoned their rights and the matter should be referred to arbitration in view of the peculiar facts and circumstances of the case. In paragraph-10 of the judgment, the Supreme Court has observed as under:-
LPA Nos. 142/2003, 280/2003, 308/2003 21
1181/2007 & 1182/2007 ― 10. Learned advocate appearing in support of these appeals very strongly contended that as a matter of fact, the Corporation has had no other alternative but to initiate a civil suit by reason of the order of injunction and in any event it has been contended that initiation of a civil suit in the civil court does not and cannot be identified to be acceptance of the arbitration agreement in the matter - whether it does or it does not amount to acceptation of arbitration or not, we are not expressing any opinion in that regard but the fact remains that in fact, there was an abandonment of the right of adjudication by one of the Corporation's officers so far as the wharfage claim is concerned and it is on this perspective that the Appellate Bench of the High Court was pleased to direct that all the issues in dispute in suit SC No.304 of 1982 shall be referred to L.R. Kohli, Arbitrator. The High Court as a matter of fact came to a conclusion that the dispute in Civil Suit No. 368 of 1986 has an intrinsic connection with the fourth claim of the respondent herein in Suit No. 304 of 1982. The Appellate Bench observed:
―Since three of the four items of the disputes between the parties in CS No. 304 of 1982 have been referred to arbitration, it is indeed improper to exclude one item in respect of damage connected with the other matter which is before the arbitrator for the Court's adjudication. There can be in a situation like this conflict in the pronouncements; all connected facts and the arbitrator may take one view and the Court another depending upon evidence brought before the Court and the arbitrator respectively by the parties. There can be no finality to the adjudication in this behalf until all proceedings in the Court independent of the proceedings under the Arbitration Act are concluded. In such a situation just and proper order, in our opinion, is that the dispute in CS No. 368 of 1986 which is nothing but a subject connected with CS No. 304 of 1986 shall be included in the reference to the arbitrator and is accordingly referred to the same arbitrator before whom the reference is pending adjudication.‖ (emphasis supplied) LPA Nos. 142/2003, 280/2003, 308/2003 22 1181/2007 & 1182/2007
26. Accordingly, the two questions mentioned in para 1 above are answered in negative and against the DDA. It is held that the unadjudicated claims of the DDA under Clause 2 of the Agreement are not recoverable under Section 40A of the DD Act.
(SANJIV KHANNA) JUDGE (AJIT PRAKASH SHAH) CHIEF JUSTICE (G.S. SISTANI) JUDGE JULY 15, 2009 VKR/P