*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 206A/1989 & CS(OS) 387A/1989
% Date of decision: 02.07.2009
SHRI SHERPAL SINGH ....... Petitioner
Through: Mr. D. Moitra, Mr. S.K. Jain and Mr.
N.K. Kantawala, Advocates
Versus
DELHI TRANSPORT CORPORATION ...... Respondent
Through: Mr. Vibhu Shankar, Advocate
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may
be allowed to see the judgment? No
2. To be referred to the reporter or not? No
3. Whether the judgment should be reported
in the Digest? No
RAJIV SAHAI ENDLAW, J.
1. Both suits were filed under Section 14 & 17 of the Arbitration Act, 1940 with respect to the same arbitral award. Upon the arbitral award being filed in CS(OS) No.206A/1989, objections under Sections 30&33 of the 1940 Act have been preferred by the DTC to the arbitral award. The said objections are for consideration.
2. An agreement dated 7th March, 1984 was entered into between M/s Rajora Builders with the DTC pursuant to the acceptance of the bid of the said M/s Rajora Builders, for the work of construction of Bodella Depot of the DTC. Disputes and differences having arisen out of the said contract, M/s Rajora Builders applied for reference thereof to arbitration. Upon failure of the DTC to appoint an arbitrator, this court was approached under Section 20 of the 1940 CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 1 of 15 Act. However, the DTC thereafter on 1st May, 1986 appointed Mr. N.L. Kakkar, District Judge (Retd.) as the arbitrator.
3. M/s Rajora Builders preferred seven claims for a total sum of approximately over Rs.25/- lacs besides interest against the DTC. The DTC admitted a sum of Rs.68,978.39 to be due to the said M/s Rajora Builders but claimed Rs.3,25,803/- to be due to it by way of penalty from the said M/s Rajora Builders and after adjusting Rs.68,978.39 therefrom claimed a sum of Rs.2,56,824/- to be due to it from the said M/s Rajora Builders. DTC besides the said claim, during the course of proceedings filed counter claim for a total sum of Rs.21,80,103.58 inclusive of the aforesaid sum of Rs.3,25,803/- besides interest, against M/s Rajora Builders.
4. The arbitrator vide award dated 31st December, 1988 awarded a sum of Rs.14,20,970.57 to M/s Rajora Builders with simple interest at 15% per annum thereon from 1st October, 1985 to the date of reference and pendente lite and future interest also at 15% per annum on the said amount from the date of reference till the date of actual payment or decree whichever is earlier. The counter claims of the DTC were dismissed.
5. CS(OS) No.206A/1989 was filed by Shri Sherpal Singh as proprietor of M/s Rajora Builders. Upon the award being filed in the court IA No.4230/1989 in CS(OS) No.206A/1989 was filed by the DTC under Sections 30/33 of the 1940 Act objecting to the award. On completion of pleadings therein the usual issues were framed on 24th November, 1989 and parties directed to file evidence by affidavits. No objections have been preferred by M/s Rajora Builders/Mr. CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 2 of 15 Sherpal Singh. Neither party applied for cross examination on the affidavits of the others. IA No.9350/1998 was preferred by one Shri Sanjeev Kumar under Order 1 Rule 10 r/w Order 6 Rule 17 of the CPC averring that though at the time of the award of the work M/s Rajora Builders was a sole proprietorship of Shri Sherpal Singh, it was subsequently converted into a partnership firm vide deed of partnership dated 7th June, 1989 and whereunder all the assets and liabilities of the sole proprietorship concern were taken over by the partnership. Besides the said Shri Sherpal Singh and Shri Sanjeev Kumar another Mr. Rajiv Kumar was also stated to be a partner. It was further averred that Shri Sherpal Singh retired from the partnership firm vide deed of retirement dated 31st August, 1989 and his accounts were settled; that M/s Rajora Builders thereafter continued as a partnership of said Mr. Sanjeev Kumar and Mr. Rajiv Kumar. Shri Sherpal Singh contested the said application. However, thereafter the objections preferred by the DTC to the award were dismissed in default on 1st June, 2001 and consequently the arbitral award made rule of the court and decree in terms thereof passed. Execution was applied of the said decree and an amount of approximately Rs.48 lacs was attached in execution and received in this court. Thereupon DTC applied for setting aside of the ex-parte decree and for restoration of its objections and which were allowed on 7th August, 2002 and the amount of Rs.48 lacs received in this court ordered to be kept in a fixed deposit. DTC subsequently applied for release of the said sum of Rs.48 lacs deposited in this court and ordered to be kept in FDR and the said amount was ordered to be released to the DTC on 15th May, 2006. The application aforesaid of Mr. Sanjeev Kumar was allowed on 22nd March, 2001. Thus the suit was ordered to be treated as by M/s Rajora Builders, a CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 3 of 15 partnership firm instead of by Mr. Sherpal Singh as sole proprietor of M/s Rajora Builders. IA No.10209/2003 was filed for recalling of the order dated 22nd March, 2001 and on which vide order dated 13th February, 2008 the order dated 22nd March, 2001 recalled and the proceedings ordered to be continued in the name of Sherpal Singh. It was however clarified that the said order was not detriminative of the inter se rights of the said Shri Sherpal Singh on the one hand and M/s Sanjeev Kumar & Rajiv Kumar on the other. FAO(OS) No.162/2008 was preferred by the said M/s Sanjeev Kumar & Rajiv Kumar against the said order and which was disposed of vide order dated 30th September, 2008 by permitting the advocates of both Mr. Sherpal Singh as well as M/s Sanjeev Kumar & Rajiv Kumar to address this court. The counsels have accordingly been heard.
6. At the outset, it may be stated that DTC has not challenged the arbitral award in so far as dismissing its counter claims save its counter claim for Rs.3,25,803/-. The objections by the DTC are confined to the award of Rs.14,20,970.57 to the plaintiff and to the dismissal of its counter claim for Rs.3,25,803/-.
7. The objections are hereafter taken in the order in the application under Sections 30/33 of the 1940 ACT.
8. Objections qua dismissal of counter claim of DTC of Rs.3,25,803/-.
A. This claim was made under Clause 14 on account of compensation levied for non rectification of defects and deficiencies. The amount claimed represents 10% of the contract value.
CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 4 of 15 B. The arbitrator negatived this claim for the reasons:
i) The claim having not been preferred prior to the reference and having been raised for the first time before the arbitrator. It was held that the existence of a dispute is an essential condition for the jurisdiction of the arbitrator and DTC having made no claim prior to reference the question of the same being disputed did not arise and hence the claim was not maintainable before the arbitrator.
ii) The claim being not maintainable for the reason of DTC having issued the letter dated 1st May, 1986 expressing satisfaction of the work and commending the said work. It was held that the counter claim had been made as a counter blast to the claim of the plaintiff and to put pressure on the plaintiff.
iii) That the six months for defect/liability period ceased on 30th September, 1985
iv) No notice in this regard having been issued by DTC to the plaintiff.
C. The objections of the DTC are:-
i) That the certificate dated 1st May, 1986 has been
wrongly interpreted. It was issued in terms of the agreement and was not meant to be in discharge of the defect/liability of the plaintiff.
ii) That the arbitrator erred in holding that the defect/liability period came to an end on 30th June, 1985, having himself held the works to have been completed on 31st March, 1985.
CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 5 of 15
iii) That the liability for the defects in bitumen work (road work) in fact was for one year and for other works was for a period of six months. Thus the defect/liability period ended on 30th September, 1985 and 31st March, 1986.
iv) That no notice of defect/liability was required to be issued in terms of the agreement, however letters calling upon the plaintiff to rectify the defects had been issued and had been ignored by the arbitrator.
D. As far as the objection regarding date of termination of defect/liability period concerned, I may record that though at one place the award mentions the defect/liability to have come to an end on 30th June, 1985 but at another place the liability is stated to have come to an end on 30th September, 1985. It thus cannot be said that the arbitrator has wrongly noted the date or the award can be faulted for the said reason. 30th June, 1985 appears to be a typographical mistake.
E. Though several objections as aforesaid have been taken but in my view, if the award on the above aspect cannot be faulted with for anyone reason given by the arbitrator, the other reasons even if having an error apparent on their face, would not call for setting aside of the award on this aspect. I find the reason given by the arbitrator of the issuance of the letter dated 1st January, 1986 to be one such reason. The letter dated 1st January, 1986 issued by the DTC and reproduced in para 8 of the award records completion of the works on 31st March, 1985 and CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 6 of 15 the performance of the plaintiff to be quite satisfactory. The said letter is admittedly issued after defect/liability period of six months with respect to all other works except the road work. The arbitrator has on the basis of the said document accepted the plea of the claimant of the defects earlier pointed out by DTC having been satisfactorily removed and the letter having been issued thereafter only. The arbitrator has also held the subsequent letters dated 10 February, 1986 and 18th March, 1986 of DTC levying penalty to be malafide for the reason of having been issued after the plaintiff had made his demands. The arbitrator has also noted that the claim for the said amount was first by way of penalty and thereafter only expressed to be by way of compensation.
F. I find the aforesaid reasoning of the arbitrator to be such which cannot be interfered with under Sections 30/33 of the 1940 Act. The same pertains to a factual controversy and/or interpretation of documents the jurisdiction of this court under Sections 30/33 is neither appellate nor supervisory. The court is only to satisfy itself that the approach of the arbitrator conforms to the law and that the award does not suffer from any patent or manifest illegality in the findings or in the applications of law. The counsel for the plaintiff has in this regard rightly relied upon Vijay Power Generators Ltd. Vs. Union of India 2008 (1) Arbitration Law Reporter 475 (Delhi) and Shree Krishna Woolen Mills (P) Ltd. Vs. Union of India 2008 (3) Arbitration Law Reporter 477 (Delhi). CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 7 of 15 Reliance was also placed on State of Rajasthan Vs. Puri Construction Co. Ltd. 1995 1 Arbitration Law Reporter 1 (SC) & Sudersan Trading Co. Vs. Govt. of Kerala 1989 2 Arbitration Law Reporter 6 (SC) laying down that whether any particular amount was liable to be paid lay within the competence of the arbitrator and the court cannot take upon itself the burden of saying that what was actually found was contrary to the contract and as such beyond the jurisdiction of the arbitrator. The correctness of reasonableness of the reasons was held to be not subject to the scrutiny of the court.
9. The next challenge by the DTC is to the finding of the arbitrator of the delay in completion of works being attributable to the DTC and consequences thereof.
A. The contract period was six months commencing from 11th February, 1984 i.e. till 10th August, 1984. Actual date of completion is 31st March, 1985. The arbitrator has found that the prolongation of the contract was on account of non fulfillment of reciprocal promises and contractual obligations by the DTC. The award refers to Exhibit C-23,C-24,C-27,C- 30,C-33 & C-34 pointing to delay in making the site available and inadequate payments by the DTC. Though the award refers to the argument of the DTC of there being no delay on its part and of the payments being timely and commensurate to the work and of the letters/notices of DTC to the petitioner for expediting the work, the arbitrator has held the delay to be attributable to the DTC. As a consequence of the said delay the CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 8 of 15 arbitrator under claim No.5 has awarded Rs.3,30,000/- to the petitioner @55,000/- per month for about six months delay. The sum of Rs.55,000/- has been computed at 10% of profits that would have accrued to the petitioner for maintenance of rollers, trucks, employees etc. B. The objection of the DTC is :-
That on a reading of the documents filed as R-4,R-16, R-17, R-19,R-22,R-24,R-25&R-27, the delay could not have been attributed to the DTC. Even though, the said objection does not constitute a ground under Sections 30 and 33. I have looked into the said documents. The said documents are of the time when the time for completion of the work had already expired. In the said documents, DTC is denying the plea of the petitioner of the delay being attributable to it. However on perusal thereof I am unable to decipher therefrom any error in the finding of the arbitrator of the delay being attributed to DTC. There is no such document which can show the finding of the arbitrator attributing delay to the DTC to be erroneous on the face of it. I thus decline the said objection of the DTC.
C. I am however unable to sustain the award of Rs.55,000/- per month under claim No.5. Just like it has been held that DTC was not entitled to levy penalty of 10% of the contract value for non rectification of the defects, on the petitioner, in the absence of any proof thereof on the same parity of reasoning I find that the arbitrator could not have awarded damages of CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 9 of 15 Rs.55,000/- per month total amounting to Rs.3,30,000/- to the petitioner for delay. The award to that extent neither has any basis nor logic in that regard and the award to that extent is liable to be set aside. Though in accordance with the law laid down in Tarapore & Co. Vs. Cochin Shipyard Ltd. (1984) 2 SCC 680 even without any agreement in that regard, the petitioner would be entitled to compensation for delay attributable to DTC but the said compensation can be awarded only on furnishing proof of the loss suffered by the petitioner in that regard. Here though @10% a sum of Rs.55,000/- has been arrived at but the award does not state as to on what basis figure of which Rs.55,000/- is 10% has been arrived at. The award also does not disclose whether the compensation for delay is calculated at 10% per annum in which case the figure would not be Rs.55,000/- per month. If it is to be 10% per mensem, then that is not so stated in the award.
D. Moreover, the impact of delay on the rates applicable to the work done beyond the stipulated date of completion has been taken into consideration by the arbitrator. For this reason also I find that the arbitrator having already compensated the petitioner for delay by awarding higher rates than agreed, for the work done beyond the stipulated date, could not have separately under issue No.5 awarded damages for prolongation of contract.
10. The next challenge by the DTC is to the award of Rs.8,58,847.52 under claim No.1 for non- payment of the final bill and of refund of security deposit of Rs.1 lac. The challenge by the CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 10 of 15 DTC thereto is manifold. It is pleaded that the findings under this head of extra work having been awarded are erroneous in as much as under Clause 12 the Engineer in charge was competent to add to alter or substitute the work and if any additional work was awarded, side by side certain other works were curtailed thus keeping the cost of the executed work same. The award in this regard is also challenged on the ground of the arbitrator having exceeded the measurements from time to time on the basis whereof payments of the running bills were made. Bias and favourtism is also imputed to the arbitrator and it is alleged that records of the petitioner which were not filed appear to have been seen by the Arbitrator. The arbitrator is pleaded to have ignored the relevant documents produced before him by DTC in this regard. It is further pleaded that the arbitrator inspite of contention of the DTC did not have the site which was existing as it is, re-measured to resolve the controversy regarding measurements. It is further urged that the arbitrator erred in accepting the measurements pleaded by the petitioner, without the same being substantiated. The findings of the arbitrator, of the petitioner being not bound by the measurements which he had signed at the time of receiving running payments, is also challenged.
11. However, in my view if this court enters into all the aforesaid challenges, the jurisdiction then exercised by this court would not be different from the jurisdiction in an appeal and which is not permissible under Sections 30&33. I thus dismiss the objections of the DTC to this part of the award.
12. The remaining award is on the claims of the petitioner under Clause 10 that of the agreement i.e. owing to increase in prices CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 11 of 15 during the implementation of the contract. The objection of DTC is that neither was there any increase nor was there any evidence before the arbitrator for granting such increase of Rs.66,509/- on account of labour escalation and Rs.35,614/- on account of escalation of costs of material, under claims No.2&4 respectively. The arbitrator has held that during the execution of the work, w.e.f. 1st June, 1984 the labour wages were increased under the orders of the Delhi Administration, Exhibit C-13. The arbitrator has under the said claims also taken into consideration the delay in completion of the works being attributable to the DTC. Similarly, the arbitrator for the purposes of granting escalation on account of increase in cost of material has relied upon the photocopies of Joint Plan Committee filed by the petitioner. No error on the face of the award can be found against the said award also.
13. The arbitrator has also awarded another Rs.15,000/- to the petitioner against its claim of Rs.30,000/- for water and electricity charges for three months. Reference thereto is made at the end of para 2 of the award. However, there is no reference thereto in para 13 wherein claims of petitioner are listed. However under claim No.7 (cost of arbitration), though recording that no documents have been filed by the petitioner to substantiate the said claim, the arbitrator has awarded Rs.15,000/- for DTC having "availed the facility of water and electricity which was the property of the claimant". Though I do not find any objection having been preferred by DTC to this part of the award, but I do not find any basis for award of this amount; in fact the same is incomprehensible. The award of this Rs.15,000/- is set aside.
CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 12 of 15
14. The arbitrator has also awarded to the petitioner interest, pre reference, pendente lite and future at 15% per annum. In my view, the award of the arbitrator of pre reference interest in the circumstances of the case is not justified. It is not as if the claims of the petitioner have been accepted in toto by the arbitrator. The claims have been considerably reduced by the arbitrator himself and against which no objections have been filed by the petitioner. A party which makes exaggerated claims leading to non settlement thereof, and leading to protracted arbitration/litigation runs the risk of being found disentitled to any interest even on the lesser amount found due, unless shown that the claim for exaggerated amounts was bonafide. I do not find any bonafides in the present case. For arriving at the amounts due, a detailed inquiry was held by the arbitrator. No fault can be found with the respondent not making the payments demanded by the petitioner since all the said payments have not been found due, by the arbitrator also, to the petitioner. Thus till the said amounts were determined, in the facts of the case the award of interest is not found to be justified. The award of interest pre reference and pendente lite is set aside. The petitioner is thus found entitled to interest from the date of the award only. I find the rate of interest applied by the arbitrator also to be excessive. It is common knowledge that the interest rates have been falling and in fact the courts in such arbitral matters have been awarding interest only at 9% per annum. I find the petitioner in the present case also to be not entitled to interest at a rate higher than that. Further I may notice that while going through the records, the findings of the arbitrator though not found interferable in exercise of jurisdiction under Sections 30&33, are not found to be such, which if had been rendered by the court would not have been interfered in appeal. In CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 13 of 15 my view, the equities will be balanced by, while upholding the award to the aforesaid extent, by reducing the rate of interest. I thus find the petitioner entitled to interest from date of award at 6% per annum only.
15. I therefore sum up my findings as under:-
i) The award in favour of the petitioner under Claim No.1 of Rs.9,58,847.52 is upheld.
ii) The award in favour of the petitioner under Claim No.2 of Rs.66,509/- is upheld.
iii) The award in favour of the petitioner under Claim No.4 for Rs.35,614/- is upheld.
iv) The award in favour of the petitioner under Claim No.5 of Rs.3,30,000/- is set aside.
v) The award under Claims No.3&6 of interest is modified.
The petitioner shall be entitled only to interest on the awarded amount upheld @6% per annum from the date of the award and till the date of this decree. The petitioner shall also be entitled to future interest under Section 29 of the Arbitration Act, 1940 on the principal amount only @9% per annum from the date of the decree till the date of payment.
vi) The award in favour of the petitioner of costs of arbitration of Rs.15,000/- under claim No.7 is upheld.
vii) The award of Rs.15,000/- towards water and electricity charges is set aside.
viii) The award dismissing all the counter claims of the respondent DTC is upheld.
CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 14 of 15
16. Accordingly, judgment is pronounced in terms of the award as modified above. Decree sheet be drawn up. No costs.
RAJIV SAHAI ENDLAW (JUDGE) July 2, 2009 PP CS(OS) 206A/1989 & CS(OS) 387A/1989 Page 15 of 15