Delhi District Court
M/S W.S. Construction Co vs Delhi Development Authority on 22 June, 2020
IN THE COURT OF SH. VIPIN KUMAR RAI, ADDITIONAL
DISTRICT JUDGE06, SOUTHEAST DISTRICT, SAKET
COURTS, NEW DELHI
ARBTN No. 187/18
M/s W.S. Construction Co.,
65/57, New Rohtak Road,
New Delhi110005
..... Petitioners
Versus
Delhi Development Authority,
Through its ViceChairman,
Vikas Sadan, INA Office Complex,
New Delhi.
II. Sh. Pramod Kumar
Superintending Engineer (ArbitrationII),
Delhi Development Authority,
B2B, Janakpuri,
New Delhi.
..... Respondents
Date of institution of Arbitration : 10.03.2008
Date of judgment reserved : 16.06.2020
Date of pronouncement of judgment : 22.06.2020
APPLICATION UNDER SECTION 14, 17 AND READ WITH
SECTION 31 OF THE ARBITRATION ACT 1940 AND
OBJECTIONS U/S 30 & 33 OF THE ARBITRATION ACT
JUDGMENT
1. The objections u/s 30 and 33 of Arbitration and Conciliation Act 1940 filed by respondent/DDA was filed on filing of ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 1 of 32 application under section 14, 17 r/w 31 of Arbitration and Conciliation Act 1940 in respect of award dated 29.01.2008. Directions was sought by the petitioner to the Ld. Arbitrator for filing the award and depositions made by the parties.
2. The Ld. Arbitrator had filed the Arbitral Award and the proceedings and respondent/DDA had filed the objections. Reply was filed by the petitioner to the said objections and thereafter rejoinder was filed by the respondent/DDA.
3. As per the impugned award claim no. 3, 4, 6 and 8 were declined and nil award was passed whereas claim no. 1, 2, 5, 7 and 9 were partly granted.
4. Grounds for challenging the award and the procedure for challenging it under the old Act of 1940 are Section 30 and 33 respectively. These are reproduced as under : "30. Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:
(a) that an arbitrator or umpire has misconducted himself or the proceedings
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is other wise invalid.
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33. Arbitration agreement or award to be contested by application Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:
Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit."
Under the old Act there is requirement of passing judgment and decree u/s 17 of the Act in terms of the award for which an application u/s 14 of the Act used to be filed. Power of the court to modify the award is u/s 15 of the Arbitration and Conciliation Act 1940.
5. Counsel for respondent/DDA argued that the Arbitral Award is unilateral in as much as contentions and argument of respondent/DDA has not at all been referred to and dealt with by the learned Arbitrator. On the contrary counsel for petitioner supported the Arbitral Award as a reasoned award. I have carefully gone through the record with the assistance of counsel for the parties and heard the arguments.
6. Claim no. 1 related to the claim of Rs. 12,12,457/ as per the bill submitted by the claimant vide letter dated 16.09.1986. This bill ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 3 of 32 was after payment of 8th bill on 30.04.1985.
7. Respondent/DDA had also prepared in this regard bill referred as 9th bill for Rs. 10,10,376/. This payment admittedly was not made. It appears that work continued even after this 9th bill but no details were submitted. Claimant submitted a breakup of 9th bill as per the bill prepared by the respondent and restricted its claim to Rs.
5,89,392/. The arbitration proceedings dated 15.10.2007 reflects that both the parties agreed to the entries made in the 9th bill before recovery part of the bill.
8. Claimant disputed consumption of Cement and Steel taken by the respondents. Claimant stated on 31.10.2007 that the Cement Consumption as per work measured upto 9th RA Bill works out to 2001 MT against the recovery made for 2285 MT and consumption of steel similarly is 5.96 MT against recovery of 6.66 MT and in respect of Tor Steel 234.56 MT against recovery of 268 MT. Respondent pointed to certain discrepancies in the Cement Statement as per 9th RA Bill filed by the claimants as is mentioned in arbitration proceedings dated 20.11.2007. Claimant had argued that the work was executed even after 9th RA Bill and same was also measured after rescission of contract on 18.10.1986 and the said work needs to be added in the amount of 9th RA Bill and the part rates of items may be released. On the contrary, respondent submitted that quantity of stipulated material issued upto the ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 4 of 32 date of rescission has to be recovered from the claimants and the recovery statement had been prepared in 10th Bill. (R62, Page 217, Vol.3) and the part rates have been released in 10th bill but the stipulated material was not returned to the respondent. Claimant disputed this contention and submitted that quantity of material was consumed in the work only to the extent, work was executed after 9th RA Bill and was accepted but the rest of material remained at site on which claimant had no control after rescission of the contract.
9. Claimants also claim Rs. 86,457/ being short in the payments in respect of EI/ SI. It was as per Annexure B of the said bill i.e. 9th bill.
10. The background leading to rescission of the contract is briefly stated. Work was awarded on 31st March 1982 to the petitioner by the respondent. Date of commencement of work was 10.04.1982 and work was to be completed within one year i.e. by 9.04.1983. Claimant worked till 01.07.1985 i.e. more than 2 years beyond the stipulated date of completion. Petitioner/claimant vide letter dated 16.09.1986 undertook to complete the work within 5 months if the payment of 9th bill was released but respondent disputed on account of delay and asked petitioner to deposit Rs. 20 lakh to commence the work vide letter dated 08.10.1986 (Ex. R24).
ARBTN No. 187/18M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 5 of 32
11. Petitioner vide letter dated 16.10.1986 Ex. C86 objected to the said illegal demand and reiterated its stand to complete the work within 5 months if payment is released in respect of the bill sent along with the letter dated 16.09.1986. It is in this background that respondent/DDA rescinded the contract vide letter dated 18.10.1986 Ex. R26. Objections and counter objections were there in respect of the delay. Petitioner attributed it on the part of respondent/DDA by stating that the site was partly under stay of the court (Ex. C1) and therefore respondent made available alternative site vide letter dated 22.04.82 Ex C2. The said alternative site was on low lying area therefore, respondent deployed earthfilling agency to raise its level(Ex C31 and Ex. C53) and that the layout plan for the first time was given vide letter dated 25.06.82 (Ex. C11) of DDA and foundation drawing was made available only in October 1982 (Ex. C22) DDA Letter. It further states that there was flooding of the entire site due to breach of Shalimar Drain thereafter.
12. Civil work also stopped due to non development of electrical agencies. There was further delay in supply of drawing of first and second floor (Ex. C39) and supply of drawing of third floor (Ex. C45 and Ex. C52) resulting in abnormal delay. Delay due to shifting of HP Line (Ex. C16) was also urged along with delay in supply of Cement and Steel.
ARBTN No. 187/18M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 6 of 32
13. Respondent on the contrary referred to condition 1 of the Specifications and conditions of the agreement to argue that delay in supply of material or the site being not available for any reason will result in modification of program of constructions and the contractor shall have no claim for any extra compensation on this account and that claimant was only entitled to seek extension of time. Respondent/DDA further argued that there was breach on the part of the claimant in completing the work and abandoning it resulting in rescission.
14. The Arbitration Tribunal held change of site vide respondent letter dated 22.04. 82(Ex. C2) making the condition no. 1 of the agreement inoperative. It further refers to delay of 6 months i.e. half of the stipulated period for completion in supply of foundation drawings. It further noted that work was executed for more than two years after the stipulated period of contract and that there was uncontractual/illegal demand by the respondent for depositing Rs. 20 lakhs vide its letter dated 08.10.1986 when the claimants offered to complete the balance work within 5 months.
15. As already noted in respect of claim of Rs. 12,12,457/ under claim no. 1, it was restricted to Rs. 5,89,392/. The Arbitral Tribunal further noted that both parties agreed to 9th bill prepared by the respondent (before recovery part of the bill) i.e. for Rs. 10,10,376/ (page 126 to 144 Vol. 3). It further noted that as regards the secured ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 7 of 32 advance, claimant submitted that material remained with the respondent and at no point of time, respondent stated that the claimant had removed the secured advance material and that after termination of the contract on 18.10.1986, the material remained at site and no recovery had been effected by the respondent. Respondent/DDA disputed this aspect but claimant contended that no details of shortage of material was furnished by the respondent at any point of time and the recovery have been effected in the 9th bill on account of secured advance for the material consumed in execution of the work and the respondent was satisfied with the material lying at site before termination of the contract. As per claimant, respondent had paid 75 % of the secured advance material and as 25% was lying with the respondents and therefore claimant was entitled for balance 25%.
16. The Arbitral Tribunal noted that work continued even after 9th bill prepared by the respondent but no authenticated details were submitted, therefore, it cannot considered for payment. It further held the 9th bill prepared as final bill for the payment purpose because both parties had agreed to this bill during the arbitration proceedings as referred above and as recoverable amount claimed by respondent as per two draft 10th bill(Ex. R51 and R62) fluctuated and no cogent evidence of exact quantity of amount recoverable from claimant was established by respondent. It also held that the material remained at site after rescission of contract as no detail of shortage of material was ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 8 of 32 placed on record by the respondent and respondent DDA was entitled to recover the secured advance material only to the extent it was consumed in execution of the work and accordingly held that respondent is entitled to recover 2285 MT of Cement as per 9th Bill (Ex. R49) against the recovery of 2201 MT stated by claimant and similarly respondent /DDA is entitled for recovery of 5.96 of mild steel/ 5% wastage as per provisions of Clause 42 of the Agreement totaling to 6.26 MT and 234.56 MT + 5% wastage= 246.29 MT of Tor steel as per quantity taken for measurement against the agreement items in the 9th bill. It held that respondents are entitled for recoveries after deducting the amount already recovered from the claimant in 8th RA Bill. Short payment of EI/ SI for Rs. 86,457/ was not denied by the respondent and claimant was held to be entitled for the same and thus a total recoverable amount has been held to be Rs. 4,45,578/ including recovery of secured advance. It is important to note that claim no. 5 was in respect of secured advance to the tune of 1.5 lakh. This claim appears to have been declined in view of respondent/DDA having been held to be entitled to make recoveries in respect of materials supplied by respondent as per the consumption statement and recovery was accordingly made from the 9th bill of Rs. 10,10,376/ along with recovery of secured advance for material used in execution of the work as is clear from the tabulation at page 7 of the Arbitral Award. It has been meticulously reasoned award on these claims. There has been absolutely no merit in assailing the finding under claim no. 1 and ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 9 of 32 claim no. 5.
17. Claim no. 2 related to Rs. 2 lakhs under Clause 10 (C) of the contract for statutory hike. Claim no. 7 related to Rs. 8 lakhs as damages on account on alleged breach of contract and it was in two parts, one was due to maintenance of establishments and overhead beyond the stipulated period of contract and another was towards increase in the cost of material to be incorporated in the work due to prolongation of the contract.
18. Counsel for the respondent argued that Claim No. 7 is duplication of Claim 2 because Clause 10C of the agreement relates to increase of cost of material as well as cost of labour and therefore there was no occasion for this separate claim.
19. The Arbitral Tribunal granted a sum of Rs. 1, 28,151/ under claim no. 2 on the basis of Clause 10 C and granted a sum of Rs. 2,34,000/ under claim No. 7.
20. Claim 9 related to pendentelite and interest which was granted @ 10 % per annum from 25.10.1988 i.e. date of reference till the date of award and @ 8 % per annum from the date of award till the date of payment. Counsel for the respondent submitted that the interest was granted at much higher rate than reasonable rate.
ARBTN No. 187/18M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 10 of 32
21. There was two counter claim of respondent/DDA and both was dismissed as time barred. One claim related to forfeiture of Rs. 1 lakh as security deposit under Clause 3 of the agreement and another related to Rs. 20,40,626/ on account of balance work at the time of rescission of the contract being executed from another contractor.
22. Both these claims were dismissed as barred by time as it was referred on 27.02.1990 whereas the contract was rescinded on 18.10.1986.
23. Counsel for the respondent/DDA argued that work was awarded to another contractor only in November, 1987 and final bill was raised much later during the pendency of the Arbitration proceedings and therefore there was no occasion for arising of cause of action before November, 1987. Counsel for the respondent on the other hand argued that cause of action for counterclaim if any arose on 18.10.1986 and there was no question of filing the counterclaim beyond 18.10.1989.
24. On inquiry, it was submitted that petition under Section 20 of Arbitration and Conciliation Act 1940 was filed by claimant and pursuant thereto arbitrator was appointed and respondent /DDA had not raised any counterclaim either in reply to petition under Section 20 of ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 11 of 32 Arbitration and Conciliation Act or at any other time before 27.02.1990 and the same was accordingly time barred.
25. Counsel for respondent/DDA relied upon the judgment of Hon'ble Apex Court in 'Indian Oil Corporation Limited Vs. Amritsar Gas Servicec and Ors (1991) 1SCC 533' in support of her contention of counterclaim being within limitation . Counsel for petitioner / claimant on the other hand referred to the judgment of Hon'ble High Court of Delhi in "DDA Vs. Maj. Ret. IS Rekhi and sons 1995 (2) Arbitration Law Reporter page 35. The said judgment referred to Division Bench Judgment of Hon'ble High Court of Delhi in "Union of India and Ors Vs. M/s Vijay Constructions Company AIR 1981 Delhi 193"
26. Counsel for petitioner referred to the document Ex. C11 dated 25.06.1996 and Ex. C34 dated 18.04.1983 by plaintiff to the defendant and it claimed that 15% above quoted rate will be claimed. Similarly reference to the letter Ex. C42 dated 19.07.1983 by plaintiff to respondent and Ex. C44 dated 21.07.1983 by plaintiff to respondent was given. Counsel for respondent/DDA submitted that this letter was replied vide reply dated 25.08.1983 Ex. R2. Counsel for petitioner also referred to Ex. C54 dated 02.01.1984, C55 and C56 regarding claim for 40% extra and Ex. C10 making reference to letter upto 11.06.1982. Counsel for respondent/DDA submitted that letter dated 18.12.1986 Ex. R26 and letter Ex. R27 were written by DDA for joint measurement ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 12 of 32 but petitioner did not turn up. Reference to letter dated 13.01.1987 Ex. R28 and letter dated 18.11.1987 Ex. R38 are also made. Reference to letter Ex. R19 is also made to the effect that petitioner will be having no option but to get it done at the cost of petitioner. Reference to R23 dated 29.09.1986 and R24 dated 08.10.1986 are also made. Reference to continuous letter regarding deficiency is made by the counsel for respondent/DDA which are R4 dated 12.10.1983, R5 dated 22.12.1983, R6 dated 05.04.1984, R7 dated 19.11.1984 and then to the show cause notice R8 dated 21.12.1984. Reference is also to R9 dated 16.01.1985, R10 dated 07.06.1985, R11 dated 05.07.1985 R12 dated 02.09.1985, R13 dated 13.09.1985. There is reference to the letter dated R15 dated 31.10.1985 that test report received has failed and R16 dated 12.07.1985 refers to only 60% progress in work. Then there is reference to the letter R17 dated 19.12.1985.
27. Order by the court for appointment of the Arbitrator is dated 19.07.1988 and accordingly Engineer Member DDA vide order dated 25.10.1988 appointed sole arbitrator for making his award regarding the claims/disputes of the contractor as per the statement enclosed. It also referred as to the counter claim of the department to follow subject to its admissibility under Clause 25 of the Agreement. This reference dated 25.10.1988 by engineer member DDA enclosed the statement of disputes under the signature of the Member Engineer DDA giving details of petitioner W.S. Construction in respect of work ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 13 of 32 of 656 LIC Houses at Jahangirpuri from claim no. 1 to claim no. 9. During the course of argument counsel for the parties were inquired as to any counter claim being part of the order dated 19.07.1988 of the Hon'ble High Court pursuant to which Engineer Member appointed the Arbitrator vide letter dated 25.10.1988, it was submitted that to the best of their knowledge there was no such counter claim referred in the order dated 19.07.1988. The fact therefore remains that except in the letters referred by counsel for respondent/DDA regarding work to be completed at the cost of petitioner from some other contractor alleging breach on the part of petitioner, no claim was ever raised till 25.10.1988 when claim was referred to the Arbitral Tribunal. Counsel for respondent/DDA argued that such a counter claim could not have been raised without quantification and the same could be done only when it was finally awarded in November 1987 to some other contractor; and as the counter claim was filed and referred vide order dated 27.02.1990 for arbitration, the suit was within time as the cause of action will arise in November 1987 when necessary quantification was complete for raising the counter claim.
28. It is important to note that award of work in November 1987 was in respect of certain work of which balance work pertaining to the contract of petitioner/DDA was only a part. It is true that actual quantification of the cost of balance work will depend upon the work finally awarded but there was no occasion for not doing tentative ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 14 of 32 quantification earlier, taking into the consideration prevailing rate at the existing time; DDA could very well have tentatively quantified the cost of the balance work in case DDA had to go for getting it executed by floating fresh tender in November 1986 or early 1987 or thereafter. After termination of the contract by the respondent/DDA with petitioner vide letter dated 18.10.1986, cause of action for counter claim immediately arises, there is no occasion for deferring initiation of cause of action and once it arises, there is continuous running of limitation as per Section 9 of Limitation Act. Any extension of the period of limitation can only be by any acknowledgment in terms of Section 18 and Section 19 of Limitation Act. Respondent/DDA never sought reference of any dispute to the arbitration by approaching court of law. It is petitioner who approached the court of law for appointment of Arbitrator in terms of the agreement for reference of its claim for adjudication and it is this claim alone which was referred by the Engineer Member DDA vide letter dated 25.10.1988 pursuant to the court order dated 19.07.1988. As soon as petitioner W.S. Construction sought appointment of Arbitrator for reference of its claim by approaching the court, its claim is deemed to have been instituted but the same is not applicable for the counter claim unless there was a counter claim raised by respondent/DDA and the reference of the same was also sought. Had the counter claim been raised and reference thereof was also sought for arbitration, the counter claim will also be deemed to have been instituted on the said date. If it is not so then also, ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 15 of 32 counter claim can be filed and reference thereof may be sought in terms of the agreement/contract between the parties but the institution of counter claim in that situation will be on the date when it is so referred without cause of action stopping at any point of time and running continuously in respect of counter claim.
29. Voltas Ltd. Vs. Rolta India Ltd. (2014) 4 SCC 415 of Hon'ble Supreme Court may be referred in this regard. Arbitration and Conciliation Act 1996 refers to initiation of the arbitration proceedings from the date of notice under Section 21 of Arbitration and Conciliation Act 1996. If petitioner gives notice under Section 21 of Arbitration and Conciliation Act 1996 for reference of the dispute to the arbitration, his claim for the purpose of limitation is deemed to haver been instituted on the said date itself. Notwithstanding the date of appointment of Arbitrator and the date of actual filing of the claim petition before learned Arbitrator. Once the dispute had been referred under the new act for arbitration, defendant can file written statement and along with it can also file counter claim just like in the suit. But the limitation for the counter claim will be seen on the date of filing of counter claim and there is no deemed institution of counter claim on any earlier date with only exception where like claimant/petitioner, respondent had also sent a notice as contemplated under Section 21 of Arbitration and Conciliation Act in which case it will be the date of sending of the said notice by the respondent which will be date of ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 16 of 32 institution of arbitration proceeding vis a vis claim of respondent.
30. The provision pertaining to commencement of the arbitration under the old Act of 1940 is u/s 37 (3) of Arbitration and Conciliation Act 1940. The provision in respect of the same under the new Act i.e. Arbitration and Conciliation Act 1996 is Section 21 but the principle remains the same regarding date of commencement of the arbitration and same is when one party served the other party with notice raising claim and dispute by the other and requiring appointment of the Arbitrator. The judgment referring to Section 37(3) of the 1940 in this regard is the judgment of our own High Court in the classic judgment of Alupro Building System Private Limited Vs. Ozone Overseas Private Limited decided on 28.02.2017 where reference to the judgment of Bombay Gas Company Limited Vs. Parmeshwar Mittal AIR 1998 Bombay 118, was made and it was discussed that Hon'ble High Court of Mumbai while discussing Section 37 (3) of 1940 Act negatived the plea that filing of application u/s 34 under the Act of 1940, which pertained to the notice of motion for stay of the suit under the Act of 1940, cannot amount to commencement of Arbitral proceeding. Reference to para 31.1, 31.2 and 31.3 of the said judgment is made in this regard.
31. In view of the same there is nothing on record placed by the respondent/DDA to show commencement of the arbitration as ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 17 of 32 contemplated u/s 37 (3) of the old Act which is in the nature of the Section 21 of Arbitration and Conciliation Act 1996 so as to treat commencement of the Arbitration vis a vis counter claim on any date prior to 27.02.1990.
32. The present case was under old Act and no notice given by respondent at any time prior to 27.02.1990 can be treated as a notice for reference of the counter claim for adjudication by way of arbitration. In fact, none of the letters of respondent can be referred as raising any counter claim at any point of time. Raising a contention that there is a breach on the part of petitioner and balance work will be done by another contractor at the cost and risk of petitioner can in no way be treated as raising of the counter claim. As already discussed cause of action for claim as well as counter claim arises on the date of alleged breach and accordingly termination of the contract vide letter dated 18.10.1986 by respondent/DDA. Institution of counter claim in law is rightly held to be only on 27.02.1990 and beyond limitation which expired on 16.10.1989 itself. Counter claim has accordingly been rightly held as barred by limitation.
33. Now the point that remain for appreciation relates to claim no. 2 and claim no.7 basically, as claim no. 9 is pertaining to the interest. Claim no. 2 relates to Clause 10C of the Contract pertaining to the statutory hike. There has been discussion in the Award as to raising ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 18 of 32 of first bill on the increased rate as per the notification dated 23.08.1982. There was no occasion for non application of the said increased rate for subsequent bills. Statutory increase is definitely to be paid in respect of the bills pertaining to labour and there is no merit in non grant of the same particularly in the background that at the same rate payment was made upto the quantities executed in the 1st bill of 10C prepared by respondent as noted in award under claim no. 2. Counsel for respondent/DDA did not dispute the said aspect of payment of the bills as per rate in the notification dated 23.08.1982 upto quantity executed the 1st bill of 10C. Therefore, there is no merit in assailing the claim granted in favour of petitioner under claim no. 2 to the tune of Rs. 1,28,151/.
34. Coming to claim no. 7, the contention raised on behalf of respondent/DDA was that there is duplication also in claim no. 7 as the increase sought was covered under Clause 10C of the Contract. Counsel for petitioner submitted that claim under Clause 10C of the Contract related only to increase the wages of labour as per notification dated 23.08.1982 and claim raised under claim no. 7 is completely distinct from the same. Though clause 10C covered hike of labour as well as hike in cost of material but claim no. 2 was limited only to notified hike in labour wages. It was submitted that claim no. 7 was two fold. One related to maintenance of establishment and one beyond stipulated period of contract and other related to cost due to rise in cost of the ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 19 of 32 material incorporated in the work during prolongation of the contract. On account of maintenance of establishment and overheads it was noted while discussing under claim no. 7 of the Arbitral Award that 5% of the contract value comes to Rs. 6,90,000/ for one year whereas the work prolonged for two years and to mitigate the losses claimant had claimed for establishment as under :
(i) One Engineer @ Rs. 2500/ PM for 2 years
(ii) Supervisor @ Rs. 2000/ PM for 2 years
(iii) Mechanic @ Rs. 1200/ PM for 2 years
(iv) Two Chowkidars @ Rs. 500/ PM each for 2 years.
Total : Rs. 1,60,800/ The claimants submitted the details of overheads and establishment cost by filing Annexure B2 on 16.09.1994 for the first time.
As regards the increase in cost of material, the Arbitral Tribunal noted that the claimant submitted that they had claimed 15% extra over the contract rate during the prolongation period because of steep rise in cost of material communicated to the respondents vide letters dated 18.04.83 (Exhibit C34), 19.7.83 (Exhibit C42) and 21.7.83 (Exhibit C44). All the said letters of the claimants were not replied by the respondents. The claimants had claimed an amount of Rs. 6.0 lacs as per Annexure B2. The aspect of these letters being not replied as noted by the Arbitral Tribunal was challenged by counsel for respondent by referring to letter of DDA dated 25.08.1983 Ex. R2 ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 20 of 32
35. Regarding maintenance of establishment, learned Arbitrator held that respondent had not denied about engagement of an engineer being a requirement as per Clause 36 of the Agreement and claimant therefore being entitled for the same during prolongation of the contract for two years and also being entitled to one Chowkidar each in two shift for this period and accordingly being entitled for Rs. 24000/ on the said account. On account of escalation of cost of material, a sum of Rs. 1.5 lakh was granted. Contentions regarding breach of contract was discussed and thereafter the aforesaid amount was granted. The relevant discussion in the award is as under : "The respondents stated that the claim was contrary to the expressed terms of the agreement. The respondents also stated that the claimants had failed to adduce any evidence in support of the claim. The respondents further stated that there was no provision for payment of staff engaged by the claimants. The respondents also relied on condition 1 of the Specifications and Conditions of the agreement wherein it had been stated "the contractor most get acquainted with the proposed site of the work......... If part site is not available for any reason or if there is some unavoidable delay in supply of the materials stipulated by the department, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extra or compensation on this account." The claimants were only entitled to seek extension of time and no compensation during prolongation of the contract. The respondents ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 21 of 32 further stated that the time was essence of the contract. The respondents further stated that the claimants were not entitled to any damages as there was no provision in the agreement and as such the claim was without jurisdiction. The respondents also stated that the claimants had breached the provision of the agreement and failed to complete the work and the abandonment thereof by the claimants resulted in rescission of the contract.
On consideration of submissions, pleadings of both the parties, I find that there were various delays and hindrance on the part of the respondents including that of change of site as per respondents letter dated 22.4.1982 (Exhibit C2) and thus the condition no. 1 of the specifications and conditions of the agreement becomes inoperative. The foundation drawings could be made available to the claimants only after six months from the date of start of the work i.e. when half the stipulated period of completion was already over. The work was executed for more than 2 years after the stipulated period of contract. There was also uncontractual/illegal demand by the respondents for depositing Rs. 20 lacs vide their letter dated 8.10.1986 (Exhibit R24) when the claimants offered to complete the balance work within 5 months. The claimants could not deposit Rs. 20 lacs and the work was ultimately illegally rescinded by the respondents on 18.10.1986 (Exhibit R25).
The claimants had claimed extra 15% over the contracted rates for rise in cost of material for the work during prolongation of the ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 22 of 32 contract vide their letter dated 18.4.1983 (Exhibit ;C34) 19.7.193 (Exhibit C42) and 21.7.1983 (Exhibit C44). All these letters of the claimants remained unreplied by the respondents. The claimants have raised a claim of Rs. 6.0 lakh as per Annexure B2. In the interest of justice, the claim is admissible for reasonable compensation for avoidable delays on the part of the respondents. However, I restrict the claim for rise in cost of material for the work to Rs. 1.5 lakh and the claimants are entitled for the same. Regarding maintenance of establishment, since the respondents have not denied having engaged an engineer which is a requirement as per clause 36 of the agreement. I hold that the claimants are entitled for the same during prolongation of the contract for 2 years. The claimant are also entitled to one chowkidar each in two shifts for this period. The claimants are therefore entitled to Rs. 84,000/ on this account."
36. Counsel for respondent /DDA had stated that there was no reference at all as to quantification of claim no. 7 in the statement of claim. Nothing was there in the statement of claim as to how the quantification of Rs. 8 lakh was done. I have perused claim no. 7 in the statement of claim. There is reference to the said claim being twofold, partly due to maintenance of establishment and partly on account of increase in cost of material which was incorporated in work and is based on the cost index which the government announces from time to time and which effected the price of material which was incorporated in ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 23 of 32 the work after the stipulated completion and that both these expenditure was unproductive and uncontemplated and would not had been spent, had the work been completed in time and as the reason for delay is on respondent therefore, claimant is entitled for recover of damages. There is nothing more stated in the statement of claim as to how quantification of Rs. 8 lakh has been done. The statement of claim is dated 20.04.1989. Respondent for the first time made a quantification by way of a letter dated 16.09.1994 addressed to the Arbitrator. Annexure B2 of this letter relates to claim no. 7 and is reproduced as under : Claim No. 7 :
Dated 10.4.83 to 18.10.86
1. Establishment charges a. 1 No Engineer 10.4.83 to 18.10.86 41 Month @ 2500 102500.00 b. 1 No Supervisor (Forman) 41 month @ 2000.00 82000.00 c. 1 No Mechanic @ 1200.00 49200.00 d. 2 No Chowkidars @ 500.00 41000.00 As per cost index 12% 874200.00 ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 24 of 32
37. Claimant had argued that as per practice and judgment 5% is payable for the overheads and establishment charges of contract value and that the work was executed till 01.07.85 whereas the stipulated date of completion was 09.04.83. Claimant also argued that by virtue of clause 36 of the Agreement, an engineer was deployed throughout the currency of the work and respondent also certified in the bills that the claimant had deployed and engineer on the work. 5% of the contract value comes to Rs. 6,90,000/. During course of argument before the Arbitral Tribunal on 04.12.2007 claimants referred to the judgment of M/s Jagat Ram Trihant Vs. DDA 2003 (2) ALR 110 (Delhi) for overhead charges at the rate 5%. It was further noted in the said order sheet that claimants have reduced the amount of claim as per judgment and only 5% of the contract value i.e. Rs. 6,90,925/ is claimed to mitigate damages and value of the contract was Rs. 1,38.18,706/. On 14.12.2007, respondent argued that claimant claimed 5% as loss of profit which they had not pleaded in the statement of fact and referred to the judgment of Bharat Coking Company Limited Vs. L.K. Ahuja, 2004(5) SCC 109 where in para 24 it was held that raising of the claim on percentage basis is not payable as no documentary evidence was given to prove the claim and plaintiff has to prove the actual loss or has to show that they had balance work with them for proving the loss of profits as per the said judgment. The judgment of M/s R.V. Ruchi Ram Khattar & Sons Vs. DDA, 1997(1) ALR 372 was referred by respondent/DDA on the point that remote or indirect ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 25 of 32 loss or damages sustained by reason of breach will not entitle the party to receive any compensation on that score. It was argued by respondent/DDA that as per Clause 10 of the Agreement, claimant is not entitled to any damages or any compensation or any amount. This argument was refuted by the counsel for claimant by stating that they were not claiming any loss or profits on account of non execution of the work on the ground that had they deployed their service at other contract, they could have earned, which was declined by the court being indirect loss in R.V. Ruchi Ram Khattar (supra) and stated that the claim of claimant is on account of expenditure incurred in establishment watch and ward, tools and plant and machinery and referred to the judgment of Delhi High Court being entitled to infructuous expenditure of establishment, tools plant and machinery and therefore, claimant claimed 5% loss of infructuous expenditure and overhead charges for one year only and then there was reference made to 10C for statutory increase and filing of muster roll of payment to the labour before learned Arbitrator and for engagement of labour for execution of work excide was not denied and there was no labour complaint against claimant either by the respondent or any other department and therefore, claim of 10C cannot be treated as indirect as alleged by the respondent. It is important to note that contention regarding statutory increase pertaining to labour under clause 10C is very much part of claim no. 2 and was argued under the said head on 03.12.2007. Letter referred by counsel for claimant Ex. C34 dated 18.04.1983, Ex. C42 ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 26 of 32 dated 19.07.1983, Ex. C44 dated 21.07.1983 are referring to execution of any further work subject to payment of enhance rate i.e. 15% over and above the rates in the agreement. Reference to Clause 10C of the Agreement is there in this regard in the letter Ex. C42 and C44.
Counsel for respondent submitted during argument that it has been wrongly noted in the award that these letters were not replied by the respondent. Attention was drawn to document R2 dated 25.08.1983 whereby the letter dated 21.07.1983 Ex. C44 was replied. I have perused the said letter R2. It states that even after issuing necessary drawing as required at present, progress of work is not being expedited. It further states that the work will be got executed further strictly accordingly to various clause of the agreement and no other enhancement will be payable and payment as and when due will be made without any difficulty and there was further request to expedite the progress of the work so that work is complete in the shortest period. Reference was made to R3 dated 06.09.1983 stating about inspection of the work on that date i.e. 06.09.1983. It also makes reference to inspection note of SE dated 26.08.1983 and noted that rectification of the defects have not been carried out upto the required satisfaction and unless the defects are rectified, the work can not proceed further and that claimant himself will be responsible for such delays and details of the defect was further mentioned in said letter. R4 is the letter dated 12.10.1983. This letter was with reference to the letter dated 28.09.1983 of the claimant and records that inspection of the site reflected wide ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 27 of 32 scope for expediting progress of the work at site. It further refers to leaving aside the portion where the water is still standing which may be drained out at the end of claimant and that the work can be started at many places. It further notes engagement of insufficiency of workmanship by the claimant. Letter dated 22.12.1983 is referring to the letter dated 31.10.1983 of claimant. The said letter of claimant is for not receiving of roof slab drawing for the second and third floor and that they are not getting the monthly payment regularly and they are using stair folding system for which extra amount will be charged as it was not in the agreement. In response, R5 states that drawing are being supplied as and when required at site and slow progress of the work was on account of claimant and there is no hindrance from department and it further noted that it is not very clear what is actually, 'using by the system of stair folding' mentioned in the letter. R6 is the letter dated 05.04.1984. It refers to service deficiency and asked claimant not to repeat. R7 is letter dated 19.11.1984 stating that respondent/DDA has nothing to do with the alleged theft of construction material kept by the claimant at site. R8 is letter dated 21.12.1984 to show cause as to why action under Clause 3(a), (b) and (c) of the Agreement be not taken against claimant on account of breach of contract due to non completion within the stipulated period, wrongful delay, suspension of the work and slow progress. From the aforesaid, it is clear that there was water logging on the site as per respondent/DDA also as mentioned in the letter dated R4 dated 12.10.1983.
ARBTN No. 187/18M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 28 of 32
38. There has been no letter placed on record by the claimant before Arbitral Tribunal to show increase in cost of the material which was used by the claimant. As cement, mild and tor steel were being supplied by respondent/DDA, there is no occasion for claimant on account of any increase in cost of the same. What was other material used and what was the increase in cost of those material after the stipulated date of 09.04.1983 is not given. Even the quantification placed by the Annexure B2 on 16.09.1994 does not state anything on account of the same. There cannot be any payment on presumption of increase beyond the stipulated date without any evidence as to increase. There has been no clause in the agreement which stated about grant of increase at certain rate beyond stipulated date irrespective of actual increase. It is incumbent upon claimant to come forward with the quantum of increase. Present is a case where there is absolutely no plea of evidence on that account i.e. quantum of increase. Counsel for respondent was specifically asked to point out any document or detail in Arbitral record, in this regard. Claim of claimant under claim no. 7 is not on account of damages or loss of profits but is on account of alleged increase of cost of material and maintenance of establishment beyond stipulated date as mentioned in the statement of claim and argued by counsel for claimant himself during arbitration proceeding as noted in detail above. Grant of any compensation therefore on the score of alleged escalation of the cost of material without any evidence of same is not proper. Grant of sum of Rs. 1.5 lakh by learned Arbitrator is ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 29 of 32 therefore not supported by the evidence on record. It is important to note that claimant himself is not clear as to how quantification in respect of escalation of cost of material is to be claimed. In the letters, he is claiming it at the rate of 15% above agreed rate, in the Annexure 2, he is basing his claim as per cost index of 12% quantified at 6 lakh. It is not clear as to how this quantification of 6 lakh comes. Annexure B2 in respect of claim no. 7 is totalling Rs. 8,74,200/ including Rs. 6 lakh whereas claim no. 7 in the statement of claimant is mentioned as Rs. 8 lakh without any detail breakup. During course of argument before Arbitral Tribunal on 04.12.2007, counsel for claimant reduced the claim to 5% only of the contract value i.e. Rs. 6,90,925/ as value of contract was Rs. 1,38,18,706/. Thus claimant itself/himself is not sure as to what amount he is to claim under the said head. Be it as it may, there is absolutely no evidence as to increase in the cost of material placed on record by the claimant and therefore, grant of claim of Rs. 1.5 lakh on the said score is not proper. So far maintenance of establishment is concerned, Clause 36 stipulates keeping one Engineer and as there was no complaint at any point of time that no Engineer was employed by the claimant, grant of amount for the same including grant of wages for one Chowkidar for the period of two years between stipulated date 09.04.1983 cannot be faulted. Award against Claim no. 7 in the Arbitral award accordingly stands modified by limiting it only to Rs. 84,000/ as remuneration of Engineer and one Chowkidar at the rate of Rs. 2500/ per month and Rs. 500/ per month respectively ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 30 of 32 and award of Rs. 1.5 lakh in respect of rise in cost of material is set aside for want of any evidence.
39. Coming to the point of interest under claim no. 9, learned Arbitrator awarded it at the rate of 10% per annum simple interest from date of reference i.e. 25.10.1988 and at the rate of 8% from the date of award. I do not see anything illegal or arbitrary in grant of interest from the date of reference at the rate of 10% per annum and from the date of award at the rate of 8% per annum.
40. I have been conscious of the fact that I am not sitting in Appeal against the award and interference with the award is to be limited on the grounds mentioned under Section 30 of Arbitration and Conciliation Act 1940. It was perfectly reasoned award and the points raised by both the parties were duly noted. Even the contention of both parties were noted in detail in proceedings immediately before passing the award as already discussed and noted in detail above. Modification under claim no. 7 and declining award of Rs.1.5 lakh for alleged increase in cost of material is on account of there being absolutely no evidence as discussed in detail above.
41. The objections accordingly stands disposed by upholding award except modifying it in respect of claim no. 7 and granting the claim under said head to Rs. 84,000/ only instead of Rs. 2,34,000/ as ARBTN No. 187/18 M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 31 of 32 awarded by learned Arbitrator. Objection of respondent/DDA stands disposed accordingly.
42. With the aforesaid modification of award, it is made rule of the Court and judgment is passed in terms of the modified award holding petitioner claimant entitled to Rs. 4,45,578/ under claim no. 1 and 5, Rs. 1,28,151/ under claim no. 2, Rs. 84,000/ only under claim no. 7 with interest on the aforesaid amount under claim no. 9 at the rate of 10% per annum from 25.10.1988 being the date of reference till the date of award and at the rate of 8% per annum from the date of award till the date of payment. Other claims are declined/dismissed. Counter claim is also dismissed as barred by limitation. Decreesheet be prepared accordingly.
File be consigned to record room.
Announced on 22.06.2020 (Vipin Kumar Rai)
by way of Video Conferencing ADJ06 (South East)
through Cisco Webex. Saket Courts, New Delhi
ARBTN No. 187/18
M/s W.S. Construction Co. Vs. Delhi Development Authority Page No. 32 of 32