Delhi High Court
Union Of India (Uoi) Through The ... vs Associated Builders, Engineers And ... on 6 April, 2005
Author: J.P. Singh
Bench: J.P. Singh
JUDGMENT Vijender Jain, J.
1. This appeal has been filed impugning the order passed by learned Single Judge who has missed the objections under Section 14 and 31 under the Old Arbitration Act. Pursuant to some disputes between the parties, the Chief Engineer of the appellant, Shri Jai Pal was appointed as Arbitrator and he gave his award on 27.1.1994. Pursuant to the said award, the appellant was to pay to the respondent a sum of Rs.1,50,464/- and simple interest @ 18% per annum on the total awarded amount from 27.4.1994 tile the payment under the award was made or the award was made a Rule of the Court.
2. Appellant aggrieved by the said award filed its objections, inter alia, pleading that the Arbitrator could not have granted relief for loss of profit to the respondent and the grant of 10% profit on the estimated cost was also improper. Mr. Shakdhar, learned counsel appearing for the appellant, has contended before us that even if the award of 10% on account of loss of profit was awarded by the Arbitrator, the Arbitrator ought not have included in the said cost of contract the amount which was to be pent on cement and steel because these items were to be supplied by the appellant to the respondent. Before the learned Single Judge this point was canvassed vehemently and the same has been canvassed vehemently before us also by Mr. Shakdhar.
3. We have perused the order passed by the learned Single Judge. Learned Single Judge has relied upon Dwarka Das v. State of Madhya Pradesh and Anr. [1999(3) Arb L.R.291 (SC)] and has reproduced in extensio the said judgment in the impugned order. The law on this point is well settled. When there is a breach of contract by one party, the other party has to be compensated for the loss of profit which the other party would have earned had the contract been executed completely. In the case before hand the Arbitrator has determined in the award that the breach of contract was on the part of the appellant. Therefore, in our opinion, the Arbitrator was justified in awarding the reasonable loss of profit to the respondent.
4. Now coming to the contention of Mr. Shakhdhar, learned counsel appearing for the appellant, that amount of steel and cement ought to have been deducted from the total computation of the estimated cost of contract, we may say that the Arbitrator has granted only 10% of profit after deducting 5% overhead component from the said cost of the contract. Since the contract cost was Rs.17,11,340.33/-, the Arbitrator in the award has stated that the reasonable profit and overhead for such type of work is considered as 15% i.e. 10% profit and 5% overhead. In the award he has deducted 5% of Rs.17,11,340.33/- and has awarded 10% on Rs.14,54,639/- which comes to Rs.1,45,464/-. We are of the opinion that contract as a whole would include not only the supply of material like cement, steel, bricks or material for shuttering, scaffolding or any other plant and machinery but the basic component of the contract would also normally include overhead charges for salaries to engineers, chowkidars and others who would see that the contract is executed as per the drawings and as per the specifications. Needless to say that the Arbitrator was an expert in his field and was the chief Engineer of the appellant. He has already given some relief rather to the appellant by deducting 5% (supra). The appellant now cannot turn around and say that the price of cement and steel which the appellant would have supplied should also have been deducted from the total cost of contract. This argument is totally fallacious. More often then not the actual cost of contract increases due to extra work and other factors. Consequently, the profit also increases. The law is well settled that the Court will not go into the process, findings and opinion of the Arbitrator who has made the award, unless it is shown that the award is for extraneous considerations or is malafide. We do not find any merit in this appeal.
5. The amount deposited under the award by the appellant be released in favor of the respondent.
6. Interim stay stands vacated.
7. Appeal is dismissed.