* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Reserve: 13.5.2009
Date of Order: 22nd May, 2009
CS(OS) No. 2189/1994
% 22.5.2009
M/s S.Bedi Construction Co. ... Plaintiff/petitioner
Through: Mr.D.Moitra, Advocate
Versus
Delhi Development Authority ... Defendant/Respondent
Through: Ms.Geeta Mehrotra, Advocate
IA No. 1055/1995 in CS(OS) No. 2593/1994
%
M/s S.Bedi Construction Co. ... Plaintiff/petitioner
Through: Mr.D.Moitra, Advocate
Versus
Delhi Development Authority ... Defendant/Respondent
Through: Ms.Geeta Mehrotra, Advocate
JUSTICE SHIV NARAYAN DHINGRA
1. Whether reporters of local papers may be allowed to see the judgment? Yes.
2. To be referred to the reporter or not? Yes.
3. Whether judgment should be reported in Digest? Yes.
JUDGMENT
By this order I shall dispose of petition/suit filed by the petitioner for making the award dated 26.9.1994 rule of Court and objections filed by the respondent CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 1 of 8 assailing the award whereby the learned Arbitrator had allowed the claims of the petitioner.
2. The claimant raised 21 claims before the Arbitrator. Claim no.1 was in respect of unpaid bills. The Arbitrator allowed this claim to the tune of Rs.1,59,881/-. The respondent has not objected to this claim. Claim No.2 was for sum of Rs.6,550/- on account of recovery of rebate. This rebate was claimed by the respondent on account of timely payment of the running bills in terms of the contract. Against this claim, the learned Arbitrator allowed a sum of Rs.3,374/-. The objection of respondent is that the amount has been awarded without discussing as to why the rebate claimed was not admissible. Similarly, claim no.3 was made by the petitioner for sum of Rs.4 lac on account of increase in labour rates and prices of material like bricks, brick tiles, badarpur and other building materials under Clause 10C. The claimant then modified its claim to Rs.2,61,725/-. The learned Arbitrator observed that the claim of the petitioner was justified to the extent of 50% and allowed him Rs.1,30,860/- Similarly, claim no.4 was made by the claimant for Rs.81,300/- against overweight of steel issued by the respondent. The learned Arbitrator observed that claim was justified to the extent of 50% and allowed Rs.40,650/-. Claim No.8 was made by the claimant on account of disposal of surplus earth by mechanical transport as per direction of the respondent. The learned Arbitrator observed that he considered the claim of the claimant justified to the extent of 50% and allowed Rs.20,875/-. Claim no.12 was for on account of providing Jamuna Sand under floors for Rs.16,000/-, which the claimant had modified to Rs.15,698/-. The learned Arbitrator upheld the claim of the petitioner to the extent of 50% and awarded Rs.7850/-. Claim No.13 was for Rs.1 lac on account of unjust CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 2 of 8 recoveries made by the respondent for repairs to flats, reduction or penal recoveries after the maintenance period. The learned Arbitrator held that he considered the amount of Rs.54,470/- as the justified claim. Claim no.14 was made by the claimant alleging short payment for marble chips, flooring. He initially made this claim for Rs.42,000/- and then modified it to Rs.40,400/-. The learned Arbitrator upheld the claim to the extent of 50% and awarded an amount of Rs.20,200/- towards this claim. Claim No.16 was for Rs.1,20,000/- on account of expenses on watch and ward. The learned Arbitrator allowed almost 50% of this claim and awarded Rs.58,650/- Claim No.17 was made by the claimant for Rs.4,00,000/- on account of additional expenditure incurred on staff conveyance etc. due to delay in execution of the work. The learned Arbitrator allowed 25% of this and held that the petitioner/claimant was entitled to Rs.1 lac. Claim No.18 was on account of damages for rise in prices due to prolongation of the contract period. The Claimant had made a claim of Rs. 15,00,000/- The learned Arbitrator considered that the earlier claim made by the petitioner under Clause 10Cwas only for labour, bricks etc., whereas building work included a number of other materials, the rate of which had also increased. He held that the claimant was not entitled to 15,00,000/- and was entitled to Rs.3 lac. In Claim no. 5, the claimant had claimed additional amount of Rs.6,000/- for plastering the exterior walls above 10 m height alleging that he had to put extra labour above 10 m height. The learned Arbitrator allowed the claim to the tune of Rs.5734/-.
3. The counsel for the respondent (DDA) has assailed the award on the ground of it being whimsical, illogical and totally arbitrary. She submitted that the CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 3 of 8 learned Arbitrator cannot deal with the claims in respect of contractual quantities in a fashion that he gives different percentage of amount claimed, to the claimant.
4. It is settled law that the Arbitrator is bound by the contract between the parties and he cannot act in a whimsical manner. All claims which are made by the contractor before the Arbitrator are to be decided in terms of the contract and not according to the whims and fancies of the parties or of the Arbitrator. Where price escalation clause is provided in the contact, the price escalation can be granted only in accordance with that clause and not otherwise. Where the prices are quoted for the different items and the contract is entered into at the prices as mentioned by the contractor, there is no ground for giving any benefit to the contractor for fluctuation in price except as provided in the contract and this fluctuation of the price in terms of contract can only be granted in terms of the contract. Clause 10C under which the petitioner had made claim no.3 reads as under:
If during the progress of the works, the price of any material incorporated in the works, (not being a material supplied from the Engineer-in-Charge's store accordance with Clause 10 hereof) and/or wages of labour increases as a direct result of the coming into force of any fresh law, or statutory rule or order (but not due to any changes in sales tax) and such increase exceed ten percent of the price and/or wages prevailing at the time of receipt of the tender for the work, and contractor thereupon necessarily and properly pays in respect of the material (incorporated in the work) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied provided always that any increase so payable is not, in the opinion of the Superintending Engineer [whose decision shall be final and binding] attributable to delay in the execution of the contract within the control of the contractor. Provided, however, no reimbursements shall be made if the increase is not more than 10% of the said prices/wages and if so the reimbursements shall be made only on the excess over 10% and provided further that any such increase shall not be CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 4 of 8 payable if such increase has become operative after the contract or extended date of completion of the work in question.
If during the progress of the works, the price of any material incorporated in the works [not being a material supplied from the Engineer-in-Charge's stores in accordance with Clause 10 hereof] and/or wages of labour is decreased as a direct result of the coming into force of any fresh law or statutory rule or order [but not due to any changes in sales tax] and such decrease exceeds ten percent of the prices and/or wages prevailing at the time of receipt of the tender for the works. Delhi Development Authority shall in respect of materials incorporated in the works (not being materials supplied from the Engineer-in-Charge's stores in accordance with Clause 10 hereof) and/or labour engaged on the execution of the work after the date of coming into force of such law, statutory rule or order be entitled to deduct from the dues of the contractor such amount as shall be equivalent to difference between the prices of materials and/or wages as they prevailed at the time fo receipt of tender for the work minus ten percent thereof and the prices of materials and/or wages of labour on the coming into force of such law, statutory rule or order.
The contractor shall for the purpose of this condition keep such books of account and other documents as are necessary to show the amount of any increase claimed or reduction available and shall allow inspection of the same by a duly authorized representative of Delhi Development Authority and further shall, at the request of the Engineer-in-Charge furnish, verified in such a manner as the Engineer-in-Charge may require any document so kept and such other information as Engineer-in-Charge may require.
The contractor shall, within a reasonable time of his becoming aware of any alteration in the prices of any such materials and/or wages of labour, give notice thereof to the Engineer-in-Charge stating that the same is given in pursuant to this condition together with all information relating thereto which he may be in a position to supply.
5. It is apparent from the reading of this clause that if the increase in prices of material purchased by contractor or the labour rate is more than 10% of the value of the contract, then only the contractor can make a claim in respect of increase in prices that also only for the amount which is beyond 10%. The Arbitrator while granting amount under Clause 10C has necessarily to grant the claim in terms of the contract. CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 5 of 8 The learned Arbitrator had no power to say 'I grant 50% or 60% or 30% of the amount claimed'. In the present case, the learned Arbitrator acted in a very strange manner. In most of the claims of the claimant he granted claims on the basis of his imagination and whims & fancies without resorting to specific clauses of the contract governing the item. He could not have allowed the claims without considering the clauses of the contract. Regarding filling of plinth with Jamuna sand under floors, item 1.3 reads as under:
1.3 Filling in plinth with Jamuna Sand under floors including watering, ramming consolidating and dressing complete.
Quantity - 15.80 Cum.
Unit - Cum.
Rate - 25.45
Amount - Rs.402/-
6. It is obvious that the filling of Jamuna Sand under floors was part of the contract and no separate amount could have been awarded to the petitioner but the learned Arbitrator without referring to the clause of the contract allowed an amount claimed vide claim no. 12 to the extent of 50%. Similarly, disposal of loose earth/excavated soil in accordance with the directions of the engineer was covered under Clause 1.1. Whether this disposal is done through mechanical method or through manual method would not make the difference. The Arbitrator without referring to clause 1.1 awarded 50% amount claimed to the petitioner. In the same manner, the clause regarding marble flooring is specifically given in item no. 7.2. The learned Arbitrator despite the petitioner having received rates in accordance with the quantities executed by him in terms of clause 7.2, awarded additional amount on the ground that the top layer of marble chips was more than 6 mm thick and it was 9 mm thick. There was no evidence before him (the Arbitrator) that the marble chips, layer was 9 mm thick, the learned Arbitrator stated that since the floor laid could not be broken and the CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 6 of 8 evidence could not be seen so, he allowed 50% of the claim. The plastering of the walls beyond 10 feet high was part of the contract and it was specifically provided in the contract that no extra amount shall be paid for height above 10 feet however, without referring to the contract, the learned Arbitrator allowed claim of this amount as well.
7. It is argued by the learned Counsel for the petitioner that the Arbitrator was an expert and was retired CPWD Engineer. He had given his award after considering the averments of both the sides and the evidence so, the award cannot be set aside on this ground. He submitted that insufficiency of reasons is no ground for setting aside the award.
8. I consider that even an expert cannot be allowed to give an award in a mechanical manner by saying that he allows 50% of the each claim. There is no manner of measuring that 50% of the claim of the claimant was right. If the awards are given in this manner every claimant would make claims in an exorbitant manner and ask the Arbitrator to give 50% or 40% of it without any necessity for the arbitrator of recording reasons why he was allowing 50%, 40% or 30%. Every claim has to be considered in accordance with the contract and the Arbitrator cannot travel beyond the contract and cannot allow claims in a fanciful manner. In Union of India v. Banwari Lal & Sons (P) Ltd. (2004) 5 SCC 304 Supreme Court had observed that an Arbitrator cannot clothe himself with such jurisdiction so as to act arbitrarily, irrationally, capriciously or independent of contract. The determination of quantum of damages has to be dependent upon the facts and terms of the contract. Where the Arbitrator does not apply the terms of the contract for determining damages and gives damages on the basis of his experience, such an award cannot be upheld.
CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 7 of 8
9. I consider that the present award, except for claim no. 1, is liable to be set aside. I, therefore set aside the award in respect of all other claims except claim no.1. The award in respect of claim no. 1 is hereby upheld and made rule of Court. Decree sheet in terms of in claim no. 1 of the award be prepared. The petitioner would be entitled to simple interest at the rate of 9% p.a. on the amount of claim no.1 from the date of final bill till realization.
With these directions, both the suits/petitions as well as objections to the award stand disposed of.
May 22, 2009 SHIV NARAYAN DHINGRA, J.
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CS(OS) No. 2189/1994 & IA No. 1055/1995 in CS(OS) No. 2593/1994 Page 8 of 8