* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ C.S. (OS) No.884A/1996
9th November, 2009
M/s Anant Raj Agencies ..Petitioner
Through: Mr. Harish Malhotra, Sr. Advocate
with Mr.N.K.Kantawala, Advocate.
VERSUS
Delhi Development Authority & Anr. ...Respondent
Through: Ms. Anusuya Salwan, Advocate.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be allowed to see
the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
%
JUDGMENT (ORAL)
I.A. No.8362/1994 in CS(OS) No. 884A/1996
1. These are objections under Sections 30 and 33 of the Arbitration Act, 1940 against the award dated 26.3.1996 passed by the sole Arbitrator.
C.S(OS)No.884A/1996 Page 1
2. The Award has been passed on account of disputes which arose between the parties for the work of construction of 8314 Houses in Sector-15, Rohini, Delhi and also construction of 352 EWS houses.
3. Though the award deals with various claims as made by the claimant/non-objector/petitioner before the Arbitrator, in this court, the objector/DDA has basically opposed two claims being Item Nos. 24 and 27 of claim No.1.
4. Item No. 24 pertains to the claim which was made by the contractor for straightening and cutting of steel bars. This claim has been awarded by the Arbitrator for a sum of Rs.1,53,119/-. The Agreement clause with respect to this item is Clause No. 3.7. This issue with regard to claims for straightening and cutting of steel bars is no longer res integra and it has been held by various judgments of this court including the judgment of Narain Das R.Israni VS. DDA 2005 (3) Arb.LR.455(Delhi) that such a claim made by the contractor cannot be allowed unless at the time of execution of work, a notice is given for such a claim. Admittedly, in the present case no such notice has been given. I may note that the view of the learned Single Judge C.S(OS)No.884A/1996 Page 2 in the case of Narain Das R. Israni (Supra) has been upheld by a Division Bench of the Court in the judgment reported as M/s Anant Raj Agencies Vs. DDA (2009) 2 Arb.LR 325.
Accordingly, this claim as awarded by the Arbitrator is clearly illegal and in view of the judgments stated above, the objection in this regard is sustained and the Award under Item No.24 of claim No.1 is set aside.
5. The second main argument of the objector pertains to Item No. 27 of claim No.1. Under this item, the contractor had claimed escalation charges towards the extended period of the contract. The Arbitrator has allowed this item for a sum of Rs.20,62,840/-. In the contract between the parties there is a clause namely Clause 10CC and as per which the contractor can claim and is entitled to escalation during the period of performance of the contract. It is not seriously disputed by the counsel for the non-objector that the claimant has in fact got escalation in terms of Clause 10CC for the extended period of the contract. That being the position, an additional claim for escalation being allowed for the same period would amount to C.S(OS)No.884A/1996 Page 3 duplication of the claim awarded and the same is clearly not sustainable. Therefore, this claim with respect to Item No. 27 since it amounts to duplication with respect to the escalation which has already been granted under Clause 10CC is clearly illegal and is liable to fail. This part of the objection also succeeds and award under this item is set aside. I may note that the counsel for the objector in this regard has referred to the decision of the DDA Vs. K.C.Goyal 2001(II) AD (Delhi) 116 and DDA Vs. U.Kashyap 1998 (7) AD( Delhi) 300 which supports this proposition. In accordance with these judgments, the contention of the objector is correct and deserves acceptance. This part of the Award which pertains to Item 27 of claim 1 is set aside.
6. There were also various other objections which were raised by the objector in a general manner, almost in a consolidated fashion so to say, and which objections pertain to different sub-heads of claim no.1 except items 24 and 27 discussed above. A reading of the Award, however, in this behalf shows that the Arbitrator has gone into great depth and detail with respect to each of these claims, and has arrived at detailed finding of facts after taking note of various C.S(OS)No.884A/1996 Page 4 evidences and other documents as filed before him. Each of these finding of facts is duly supported by reasons. It is settled law that this court cannot go into the reasonableness of the reasons as given by the Arbitrator under Sections 30 and 33. In the present case the reasons are not in any manner perverse for this court to interfere with the same. In this view of the matter, the counsel for the DDA could not very seriously dispute the detailed finding of facts that have been actually arrived at and the detailed reasoning which has been given and thus the objections could not be seriously pressed. Accordingly, these objections with respect to these sub items of claim no.1 are misconceived and are, therefore, dismissed.
7. That leaves me with the issue with regard to the rate of interest to be awarded to the non-objector. The Award, I may note, has given interest @ 18% and that too compounded quarterly. The interest aspect is seen in three stages viz pre-arbitration proceedings period, during the arbitration proceedings/pendente lite and till the passing of the decree by this court and finally from the date of decree till actual payment.
C.S(OS)No.884A/1996 Page 5
8. The rate of interest so awarded by the Arbitrator is indeed a very high rate considering today's scenario. On the aspect of pre- reference interest, Ms. Salwan has referred to a recent Supreme Court Judgment reported as State of Rajasthan and Anr. Vs. Ferro Concrete Constructions Pvt. Ltd., 2009(3) Arb.L.R. 140(SC) to canvass the proposition that even if a notice is given under the Interest Act, 1978 yet in such cases the maximum rate of interest which a person is entitled to would be the current rate of interest as per Section 3 and the definition clause in the Interest Act. The Supreme Court referring to the relevant provisions of the Interest Act has granted interest @ 9% per annum simple in the facts of that case. Considering however the facts and circumstances of the present case and since at the relevant point of time when these arbitration proceedings were going on rates charged by nationalized bank varied from 18% to 24% per annum and that too with quarterly rests and to which sometimes penal interest was added, I think the interest of justice will be well served if the pre-reference rate of interest is allowed @ 11% per annum simple.
C.S(OS)No.884A/1996 Page 6 So far as pendent lite and future interest is concerned, it has been recently held by the Supreme Court in the judgments reported as Rajendra Construction Co. Vs. Maharashtra Housing & Area Development Authority & ors.2005 (6) 678, McDermott International Inc. Vs. Burn Standard Co. Ltd.& ors 2006 (11) SCC 181, Rajasthan State Road Transport Corpn. Vs. Indag Rubber Ltd. (2006) 7 SCC 700 and Krishna Bhagya Jala Nigam Ltd. Vs. G.Harischandra, 2007 (2) SCC 720 that the court must take note of the falling interest rates and the court should reduce the rate of interest as granted under the Award, more so if the interest which is to be granted is for a very long period. I note in this case that the Award has been made way back in 1996 and today we are in 2009 when the objections are coming up for disposal. Accordingly, in terms of mandate of the aforesaid judgments of the Supreme Court, I am of the view that in the facts and circumstances of the case, it will be just and proper that instead of the 18% rate of interest which is given by the Award, wherever interest is awarded under the award towards pendent lite and future interest, the same should be read to be 9% per annum simple. Accordingly, the award dated 26.3.1996 so far as the same deals with grant of C.S(OS)No.884A/1996 Page 7 pendente lite interest, after the award till the passing of the decree would now be taken at an interest at simple rate of 9% per annum. In terms of Section 29 of the Arbitration Act, 1940, I further award interest at 9% per annum till payment. In case, the respondent makes the payment of the awarded amount and as modified by the present judgment within 90 days from today then the rate of interest of 9% simple will be applicable, however, in case payment is made after a period of 90 days from the date of this judgment, the rate of interest shall be at 11% per annum simple throughout.
9. In view of the above, the Award dated 26.3.1996 is made Rule of the Court subject to reduction therefrom of the claims of items 24 and 27 of claim no.1. The rate of interest shall also be 9% per annum simple except if the payment is not made within 90 days from today's date the same shall be 11% pers annum simple. With these observations, objections and the suit stand disposed of.
10. Parties to bear their own costs.
VALMIKI J.MEHTA, J
November 09, 2009/dkg/ib
C.S(OS)No.884A/1996 Page 8