* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 2614A /1998 & I.A. 7969/2001
M/S. ANANT RAJ AGENCIES ..... Petitioner
Through: Mr. Harish Malhotra, Senior
Advocate with Mr. Rajender
Agarwal, Advocate
versus
D.D.A & ANR. ....Respondents
Through: Mr. Arjun Pant, Advocate.
% Date of Decision : December 04, 2009
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not? No.
3. Whether the judgment should be reported in the Digest? No.
JUDGMENT
MANMOHAN, J: (Oral)
1. Present petition has been filed under Sections 30 and 33 of Arbitration Act, 1940 (hereinafter referred to as "Act, 1940") raising objections to the Award dated 13th November, 1998 made and published by Mr. L.R. Pahwa, sole Arbitrator. By way of this petition, objector-respondent has challenged the said Arbitrator‟s Award in respect to the rejection of the following deductions in the final bill i.e.:-
i) Rs.1,08,179.06 on account of reduction items;
ii) Rs.30,000/- for not providing fittings;
iii) Recovery of Rs. 53,305/- for non-provision of door-shutters; C.S. (OS) No.2614A/1998 Page 1 of 9
2. The petitioner has also challenged items No. 3.5(a) and 3.5(c) relating to sanctioning and shuttering of suspended floors. The petitioner has also challenged item 3.6 for omitting RCC work, item 3.7(a) and (b) for reinforcement of RCC work, item 6.1 for providing and fixing T-iron frames for doors and windows and item 6.2 for providing and fixing MS grill in steel windows. It has challenged extra and substituted items to the tune of Rs. 10,944.26/-, items 23 for making grooves and plaster, item 24 for chequers in the trades of the staircase and item 25 for cutting holes upto 15 cms x 15 cms.
3. The challenge has also been made in respect to Item No. 30 under the head of Extra and Substituted Items of the final bill wherein the Arbitrator had awarded an amount of Rs. 1,85,370/- on account of the expenses incurred for straightening and cutting. The challenge has also been made in respect to Item No. 2 under the Sub-Head III „other payments due‟ of Claim No. 1 wherein the Arbitrator had awarded a sum of Rs. 19,91,978/- on account of increase in prices of building materials and other expenses. The petitioner has also challenged Item no. 3 on infructuous expenditure on account of labour watch and ward staff and staff maintenance. The challenge has also been made in regard to the grant of interest for pre-reference, pendent elite and future periods @ 18% per annum.
C.S. (OS) No.2614A/1998 Page 2 of 9
4. Though the petition records many more challenges to the Award, subsequent to the recommendations of the arbitration scrutiny board held on 04.11.2009, it is only these items which are impugned.
5. Mr. Arjun Pant, learned counsel for respondent-DDA stated that the learned Arbitrator had erroneously dis-allowed the deduction of Rs.1,08,179.06 on account of reduction item and stated that it was against Clause 25(b) of the agreement as the decision of the Superintendent Engineer treating the rates of reduction item was final and not open to arbitration.
6. On the contrary, it was contended by Mr. Harish Malhotra, learned senior counsel for the petitioner that the said recovery was totally illegal as there was no item which could be treated as reduction item. It was also contended that recovery had been made for the first time in the bills submitted by the respondent during the course of arbitration, whereas in earlier running bills the respondent had categorically recorded that the work had been executed as per the specification and as per the nomenclature of the item and, as such, when the respondent itself had recorded while releasing the payments of running bills that the work had been done as per the specification contained in the agreement, there was no reason for the respondent to treat the said items as reduction item at a later stage particularly when the respondent had miserably failed to place on record any notice showing the deficiency in the execution of the particular items for C.S. (OS) No.2614A/1998 Page 3 of 9 which the reduction item statement had been prepared. Thus, the said items could not be treated as reduction items.
7. The Arbitrator had gone into the said issue and has categorically held that Clause 25(b) of the agreement will come into operation only when there exists circumstances for treating any item as reduction item. It would not have any operation when the items are executed in terms of specifications contained in the agreement as none of the items executed as per specifications can be treated as reduction items. Even otherwise, before treating any item as reduction item, the respondent has to first give an opportunity to the contractor to rectify the defect by giving a notice under clause 14 of the contract and if the contractor fails to remove the defects so pointed out and requests the department to treat that item as reduction item, then any such item may be treated as reduction item by the respondent and not otherwise. The Arbitrator has further recorded a finding that the respondent has not followed the provisions of Clause 14 before resorting to prepare reduction item statement and, therefore, the respondent has no authority whatsoever to treat the aforesaid item as reduction item and to make any recovery thereof. There is also a finding of fact by the Arbitrator that no notice under Clause 14 was ever given and no defect was ever pointed out in the execution of the work. Therefore, I do not find any reason to interfere with the said finding and the objection in this regard is accordingly rejected.
C.S. (OS) No.2614A/1998 Page 4 of 9
8. Since, in my opinion, the Arbitrator‟s reasoning is a plausible one, it requires no interference in Sections 30 and 33 proceedings under the Act, 1940. Accordingly, the said objection is rejected.
9. Now coming to the objection in regard to Item No.30 wherein the Arbitrator has awarded an amount of Rs.1,85,370/- on account of claim of the petitioner for straightening and cutting of the steel bars. In this regard, Mr. Arjun Pant submitted that the award of Rs.1,85,370/- on account of straightening of bent up steel bars was contrary to the provisions of the contract. In this context, he referred to a judgment rendered in an earlier case between the present parties titled as Anant Raj Agencies Vs. D.D.A. and Anr. reported in 2005 IV AD (Delhi) 197 which contained an identical schedule of quantities. The relevant portion of the said judgment is reproduced hereinbelow :-
"39. Claim No. 4 in sum of Rs.5,53,506/- was for straightening bent up steel bars issued in coils and bent up bundles and, thereforee, contractor claimed to be compensated for said work.
40. Learned arbitrator has treated the work of straightening bent up steel bars as an extra work.
41. Item 3.10 of the schedule of quantities required the contractor to quote for the following work:-
"3.10 Re-enforcement for RCC work including bending, binding and placing in possession complete."
42. Offer submitted by the contractor shows that the contractor had quoted for aforesaid work. Issue which arises for consideration is whether the work of straightening bent up steel bars would be included under specification 3.10 aforesaid.C.S. (OS) No.2614A/1998 Page 5 of 9
43. Learned arbitrator has relied upon a decision of a learned Single Judge of this court in Suit No. 1985-A/1984 K.C.Chibber v. DDA. Said decision which was filed before the learned arbitrator as Ex.C-70 shows that a learned Single Judge of this court, while considering a similar descriptive clause in the schedule of quantities requiring the contractor to execute the work of reinforcement for RCC works included bending, binding and placing in position held that the clause would exclude straightening of bent up steel bars for which extra was payable. Accordingly, learned arbitrator partly allowed claim No. 4 by treating the claim as an admissible claim.
44. Decision in Weer Aar Constructive Builders relied upon by counsel for DDA noted decision in K.C.Chibber's case. Decision in K.C. Chibber's case was distinguished on the ground that in K.C.Chibber's case, petitioner had notified DDA that straightening of steel was to be treated as an extra item of work and this was not objected to by DDA.
45. In Weer Aar Constructive Builder's case, learned Single Judge held that since bending, binding and placing in position steel for RCC works was included in the contract, said work necessarily required the process of straightening before cutting and, therefore it was held that no claim for extra was maintainable on said account.
46. Learned counsel for the respondent could not point out any evidence that contractor had written to DDA when work was on that he would be having a claim as an extra item for straightening of bent up steel bars issued in coils.
10. In the present case also the learned counsel for the respondent has not been able to point out any evidence showing that the petitioner- contractor had ever written to the DDA during the time the contract was being executed that he would be raising a claim of an extra item for straightening of bent up steel bars issued in coils. Thus, in accordance C.S. (OS) No.2614A/1998 Page 6 of 9 with the decision in Weer Aar Constructive Builder Vs. D.D.A. reported in 2001 (IV) AD Delhi, I set aside the impugned Award of the Arbitrator with regard to Item No. 30.
11. Now coming to the objection against Item No.2 where the Arbitrator has awarded a sum of Rs.19,91,978/- on account of loss suffered due to increase in prices of building material and other expenses. In view of the fact that under Clause 10 CC payment had already been made, the Arbitrator was not justified in allowing the aforesaid amount as damages. The Division Bench of this Court in the case of Delhi Development Authority Vs. K.C. Goel reported in 2001 (II) AD Delhi 116 and DDA Vs. U. Kashyap reported in 1998 (VII) AD Delhi 300 has held that once a particular formula is provided in the contract, applying some other formula and awarding the claim would amount to legal misconduct. The ratio of the two judgments, i.e., DDA Vs. K.C. Goel (Supra) and DDA Vs. U. Kashyap (Supra) held that the Arbitrator has committed legal misconduct in awarding a sum of Rs.19,91,978/- on account of escalation of cost of material and labour. Accordingly, I set aside the impugned Award with regard to Item No.2.
12. With regard to other objections, the same are general in nature and are not within the ambit and scope of Sections 30 and 33 of the Act, 1940 and, thus, are not worth consideration. The said objections are factual in nature and this Court in exercise of jurisdiction under Sections 30 and 33 of the Act, 1940 cannot reappraise the evidence and sit in appeal on the arbitrator‟s decision. Finding of facts of Arbitrator C.S. (OS) No.2614A/1998 Page 7 of 9 is not interferable. These objections are devoid of merit and hence rejected.
13. So far as the issue of rate of interest for pre-reference period is concerned, I find from the Award that the petitioner has, in fact, given notice to respondent under Interest Act, 1978. In this connection I may refer to the Award wherein the learned Arbitrator has recorded a finding that the petitioner had been demanding payment of interest from the respondent from time to time and had also placed on record bank certificates as well as the Gazette of India, published by Government of India (Exhibit C-92) which provides grant of interest in the event of with-holding the payment @ 5% over and above the highest of the minimum lending bank rates. The aforesaid finding that interest has been claimed has not been challenged in the objection petition filed before me.
14. As far as pendent elite and future interest is concerned, I deem it appropriate to reduce the rate of interest from 17.50% p.a. to 9% p.a. simple interest. In this connection, I may refer to observations of Supreme Court made in State of Rajasthan & Anr. Vs. M/s. Ferro Concrete Construction Pvt. Ltd. reported in 2009 (8) SCALE 753 wherein it has been held as under :-
"36. In regard to the rate of interest, we are of the view that the award of interest at 18% per annum, in an award governed by the old Act (Arbitration Act, 1940), was an error apparent on the face of the award. In regard to award of interest governed by the Interest Act, 1978, the rate of interest could not exceed the current rate of C.S. (OS) No.2614A/1998 Page 8 of 9 interest which means the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act. Therefore, we are of the view that pre-reference interest should be only at the rate of 9% per annum. It is appropriate to award the same rate of interest even by way of pendent lite interest and future interest upto date of payment."
15. Consequently, keeping in view the aforesaid judgment and the current rate of interest, the impugned Award is modified to the extent that Item No.30 of Claim No.1 and Item No.2 of Sub-Head III of Claim No.1 are disallowed and rate of interest for pre-reference, pendent lite and future periods is reduced to 9% p.a. simple interest. However, it is made clear that in case aforesaid payment is not made by respondent within a period of 90 days from today, the post-decretal rate of interest would stand increased to 11% p.a. simple interest.
16. With the aforesaid modifications, Award is made rule of the Court and Registry is directed to prepare a decree in terms thereof. Accordingly, present petition and pending application stand disposed of.
MANMOHAN, J.
DECEMBER 04, 2009 rn C.S. (OS) No.2614A/1998 Page 9 of 9