JUDGMENT Sanjay Kishan Kaul, J.
IA 4091/2003 ( Under Section 30 & 33 of the Arbitration Act, 1940)
1. The petitioner-contractor was awarded the contract for construction of local shopping centre at Mukherji Nagar on 08.03.1984. The work was to commence on 18.03.1984 and the stipulated date for completion was 17.03.1985. The work was delayed beyond the stipulated time and was ultimately recended by the respondents on 28.03.88. Both the parties sought to put blame on each other which resulted in disputes being referred to arbitration in terms of Clause 25 of the terms and conditions of the agreement between the parties and the engineer-member DDA vide letter dated 05.01.1990 appointed Sh.V.D.Tiwari (retd) Chief Engineer, CPWD as the sole arbitrator. The sole arbitrator made and published the award on 08.04.2002 and the respondents aggrieved by the same have filed the present objections.
2. Learned counsel for the petitioner referred to the various grounds set out in the petition-objection, but could not dispute the fact that all the grounds could not be pressed in view of the fact that the scope of enquiry u/s 30 & 33 of the Arbitration Act ( hereinafter referred to as 'said Act') does not permit this court to sit as a court of appeal. It is not a function of this court to re-appreciate evidence and in the absence of an award being absurd, reasonableness is not a matter to be considered by the court. The Judgment of the apex court in Food Corporation of India v. Joginderpal Mohinderpal and Anr. & Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and Anr., may be referred. The apex court took the view in Sudarsan Trading Co. v. Govt of Kerala that the court is not to substitute its own mind with that of the arbitrator and so long as the view taken by the arbitrator is plausible, though perhaps not the only correct view, the award cannot be examined by the court.
3. Learned counsel for the respondent also urged that award of the arbitrator is not a reasoned award. This plea is only stated to be rejected if the award is perused as the reasoning is found in respect of all the claims. An arbitrator need not disclose the mathematical calculations of an award so long as the award shows application of mind as held by the Division Bench in DDA v. Bhagat Construction Co.(P) Ltd. and Anr. 2004 (3) Arb.LR 548. The division bench took note of the fact that the arbitrator was a retired Chief Engineer of CPWD who was well conversant with the matters in dispute on which he was adjudicating and the position is same in the present case.
4. Learned counsel for the respondent faced with the aforesaid position of law rightly confined the submissions only to some claims and counter claims discussed hereinafter.
5. The first claim seriously challenged by the learned counsel for the respondent is claim no.6 which is an award in respect of variation in foundation items.
6. Learned counsel for the respondent submits that such amount could not have been awarded as it was contrary to the terms of the contract as contained in clause 12A. Clause 12A is as under:
In the case of contract or substituted items which individually exceed the quantity stipulated in the contract by more than the deviation limit, except the items relating to foundation work, which the contract is required to do under Clause 12 above, the contractor shall, within 7 days from the receipt of order, claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit, notwithstanding the fact that the rates for such items exist in the tender of the main work or can be derived in accordance with the provisions of sub clause (ii) of clause 12 and the Engineer in Charge may revise their rates, having regard to the prevailing market rates and the contractor shall be paid in accordance with the rates fixed. The Engineer in Charge shall, however be at liberty to cancel his order to carry out such increased quantities of work by giving notice in writing to the contractor and arrange to carry it out in such a manner as he may consider advisable, but under no circumstances the contractor shall suspend the work on the plea of non settlement of rates of items falling under this Clause.
All the provisions of the preceding paragraph shall equally apply to the increase in the rates of items or quantities in excess of the deviation limit, notwithstanding the fact that the rates for such item exist in the tender for the main work or can be derived in accordance with the provisions of sub clause (ii) of the preceding clause 12, and the Engineer in Charge may revise such rates having regard to the prevailing market rates.
7. The submission of learned counsel for the respondent is that variations/alterations and specifications in designs can give rise to a claim by the arbitrator only if the parameters of clause 12A are fulfillled and foundation work is specifically excluded from the same. It is thus submitted that in view of clear stipulation in contract, the award cannot be sustained.
8. In respect of the aforesaid plea, the judgment of the apex court in S.Harcharan Singh. v. Union of India is required to be considered. The Supreme Court observed that the terms of the agreement cannot be literally construed so as to compel the contractor to execute the extra quantities of tendered work for unlimited period at tendered rate without making any extra payment and thus the arbitrator was held to have jurisdiction in this behalf. However learned counsel for the respondent submits that in the given facts of that case, there was no exclusion clause while in the present case there is such an exclusion clause.
9. Learned counsel for the petitioner on the other hand has referred to the factual findings arrived at by the arbitrator to substantiate the plea that what has been awarded is not something which is excluded by clause 12A. Learned counsel submits that what has been done at site is not really a deviation but totally a different work affecting the work by nearly 25 times. Initially when the tender was invited, the provision was for strip or isolated footings for columns, but on actual execution of work, the foundation was changed to raft. This was so as the foundation had been initially designed based on wrong soil parameters. The findings of the learned arbitrator in this behalf are as under:
This is a contract on form 7 which is for percentage rate tenders. When tenders are invited on form 7, the quantities included in the tender are sacrosanct as a bidder has to quote a single percentage above or below the rates already laid down in the tender papers as a package deal. The prospective bidder works out the total value of his offer based on the quantities of each item included in the tender papers and his rates as worked out by him and then quotes his percentage above or below the rates indicated in the tender documents. Reasonable variations in the quantities do not effect in the tender are made to fluctuate to large extent, the valuation of the tender as done by a contractor gets effected considerably. In the instance case, I find that very wide fluctuations have occurred in the quantities incorporated in the tender. Initially when tenders were invited the provision was for strip or isolated footings for columns but while actual execution of work was taken up, the foundation was changed to raft. This change goes to show that the foundations had been initially designed based on wrong soil parameters in which the claimants had no part to play. The change of raft foundations resulted in the foundation work going up in certain items by as much as nearly 25 times (item 3.1) and total work in foundation going up approximately 7 times to what was contemplated in the agreement. This much variation can in no way be considered a reasonable variation. Moreover, in a percentage rate tender on form 7 variations to such a huge extent completely upset the valuations of the tender. the claimants cannot be blamed for these variations at all. The deviation limit as set out in the agreement is 50 per cent which in itself is quite high but since specified in the contract can be considered as reasonable variation. Considering these special circumstances, I find that the items which have deviated beyond 50 per cent and claimed by claimants should be paid at reasonable market rates. The claim is partially justified and a sum of Rs 1,89,019/- is awarded to the claimants for the claim.
10. A reading of the aforesaid thus show that it is a case of change of work awarded rather than a mere deviation. The object of clause 12A is possibly to take care of a situation where normal variations in foundation used to occur frequently and that was supposed to be taken into consideration by a contractor who bid for the contract. This would not imply that where there is total change in the nature of work and the work increases by 25 times on account thereof, the contractor cannot be compensated for the same.
11. Learned counsel for the petitioner has rightly supported this aforesaid plea with a judgment of the learned Single Judge of this court in Manohar Singh Sahny & Co. v. DDA and Anr. 2001 VII AD (Delhi) 698 where it was observed in para 12 as under:
Coming to claim no. 16, learned counsel for the respondent says that this was a claim for Rs 15 lakhs towards variation/substituted by ordering raft foundation in place of originally prescribed brick foundation. The arbitrator has given a finding that this was not a case of variation in the quantities of the items provided for foundation, therefore there is no applicability of clause 12A of the Contract. The Arbitrator held that it was a complete change in the design for laying of foundation and therefore Clause 12A which deals with the increase of rates and variations in quantities was not to be applied as the instant case was not the case of variation but a case of complete change. The Arbitrator has discussed in detail as to how award of Rs 1,76,000/- under this head was justified. In view of the reasoning given by the Arbitrator that it was on account of change in the design whereby the claimant had to put raft foundation instead of brick foundation and the difference in the price of the steel has to be paid to the Claimant, I do not see any infirmity with the award under claim no. 16.
12. In view of the aforesaid position, the challenge to claim no.6 cannot be sustained.
13. Learned counsel for the respondent next sought to impugn the award made in claim no.7. Learned counsel submitted that clause 10CC provided in the contract for the methodology for compensating for increase in material and labour rates. It is thus submitted that the arbitrator could not have relied upon CPWD rates for the period after the term of the contract. It is not disputed that there is no overlapping in the award made in claim no 3 & 7 inasmuch as claim no.3 deals with the period of the contract while claim no.7 deals with period beyond the contract. In claim 3, computation is as per clause 10 CC while in claim no.7 it has been made as per CPWD rates. The said clause is as under:
Clause-10CC: If the prices of materials (not being materials supplied or services rendered at fixed prices by the department in accordance with clauses 10 & 34 hereof) and/or wages of labour required for execution of the work increases, the contractor shall be compensated for such increase as per provisions detailed below and the amount of the contract shall accordingly be varied, subject to the condition that such compensation for escalation in prices shall be available only for the work done during the stipulated period of the contract including such period for which the contract validly is extended under the provisions of clause 5 of the contract without any action under clause 2 and also subject to the condition that no such compensation shall be payable for a work for which the stipulated period of completion is 6 months or less. Such compensation for escalation in the prices of material and labour, when due shall be worked out based on the following provisions.
14. Learned counsel in this behalf has referred to the judgment of this court in CS(OS) 2822/1994 decided on 10.11.2005 titled M/s Bedi Construction Company which took note of the judgment of the division bench and of the apex court in this behalf to come to the conclusion that once a formula is provided by clause 10CC, no other methodology should be adopted. It was observed in para 9 as under:
9. Insofar as claim no. 30 is concerned, the objection of the respondent is based on the fact that under claim no.3 escalation has already been granted under clause 10CC dealing with aspects of escalation of material and labour. In this behalf learned counsel has referred to the Division Bench Judgments in DDA v. U.Kashyap 1998 VII AD(Delhi) 300 and DDA v. K.C.Goyal & Co. 2001 II AD(Delhi) 116. It was held by the Division Bench that the arbitrator had exceeded the jurisdiction in making an award by adopting a formula different from one set out in clause 10CC of the agreement. This was based on the judgment of the Supreme Court in Associated Engineering Company v. Government of Andhra Pradesh and Anr. 1991(2) Arbitration Law Reporter 180. It was held that once the formula of 10CC forms part of the contract and which is agreed upon, no other methodology should be adopted for the said purpose. To this extent, learned counsel for the petitioner does not even dispute the legal proposition but submits that it is the figures of the respondent which have been taken into account while arriving at a figure in claim no.30 and what has been awarded under different claims has been deducted from the said amount.
15. In view of the aforesaid position, learned counsel for petitioner fairly states that the petitioner is willing to accept the amount in terms of the calculations made in terms of clause 10CC and the respondent may make the payment in terms thereof and not in terms of the CPWD rates. The result is that the award is modified to the extent that claim no.7 is directed to be re-worked out by the respondent based on formula of clause 10CC and not as awarded by the learned arbitrator as per the CPWD rates.
16. Learned counsel for the respondent referred to claim no.8 dealing with the issue of grant of interest. The arbitrator awarded 15 per cent interest up to the date of decree or payment whichever is earlier. In this behalf learned counsel for the petitioner himself confines the claim of interest at the rate of 12 per cent per annum which, in my considered view, is a fair market rate of interest at the relevant time. The award is thus modified to this extent.
17. Learned counsel for the respondent also urged that the counter claim no. 3 of the respondent has been wrongly rejected and the plea advanced is that this claim in fact was not arbitrable by the arbitrator even though wrongly claimed by the respondent. The claim falls under clause 2 of the agreement and the decision of the Superintending Engineer was final in this behalf. It was held in DDA v. Sudhir Brothers (DB) that such claims cannot be arbitrated upon. Learned counsel for the petitioner does not dispute the legal position. In view of the aforesaid, the award made in respect of this counter claim is set aside as not arbitrable.
18. Lastly learned counsel for the respondent sought to impugn the counter claim no.6 of Rs 5 lakhs on account of amounts spent on rectification. In this behalf respondent had relied upon the report of IIT in this behalf. The arbitrator found that the material which formed the basis of the findings of the IIT was not placed before the arbitrator and taking into consideration all the aspects of the matter came to the conclusion that the blame had to be shared both by the contractor as well as the respondent for the defects appearing in the work. The arbitrator also took note of the report of the IIT to the effect that it was possible to rehabilitate the structure and the foundations of the work could be utilised. The liability for rectification of such defect was thus found to be of the value of Rs 75,000/. The aforesaid is a finding arrived at on appreciation of the evidence before the arbitrator and does not call for interference with under section 30 the said Act as noticed above on the basis of various legal pronouncements and a technical arbitrator having adjudicated upon it.
19. The objection-petition is accordingly disposed of.
CS(OS) 1646/1992
1. The award dated 08.04.2002 of the sole arbitrator Sh.V.D.Tiwari (retd) Chief Engineer, CPWD is made rule of the court with the modification that claim no.7 has to be re-computed and paid by the respondent in terms of clause 10CC of the contract and not on the basis of CPWD rates as awarded and the interest awarded is at the rate of 12 per cent per annum till the date of decree and not at the 15 per cent per annum as awarded. Further the award in respect of counter claim no. 3 is set aside has not arbitrable. The petitioner shall also be entitled to future interest at the rate of 9 per cent per annum. Parties are left to bear their own costs.
2. In case the respondent pays the decreetal amount to the petitioner within 90 days from today (the extra time is being granted on account of re-computation required to be done), the respondent would not be required to pay future interest.
3. Decree sheet be drawn up accordingly.