* IN THE HIGH COURT OF DELHI AT NEW DELH
+ CS(OS) No.1581A/1998
18th November, 2009.
SH. S. KUMAR
...Petitioner
Through: Mr. S.K. Jain, Advocate.
VERSUS
DELHI DEVELOPMENT AUTHORITY ....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)
VALIMIKI J. MEHTA, J.
I.A.No.5256/1999 in CS(OS) No.1581A/1998
1. These are objections filed under Sections 30 and 33 of the Arbitration Act, 1940 against the Award dated 13.7.1998 passed by the sole Arbitrator. Ms. Salwan, on behalf of the objector, has pressed her challenge only to claim Nos. 2,3,4,5,7,13,14 and 16 as awarded by the Arbitrator.
CS(OS) 1581A/1998 Page 1 2. Claim No.2 is on account of work done but not paid. The
Arbitrator has given detailed reasons as to how the contractor wrote various letters showing extra work done and which were not responded to by the objector. The only objection of the respondent was that the letters were not received by the proper officer and were obtained by the Assistant Engineer only. Not accepting this stand the Arbitrator has therefore held that the contractor is entitled to the amount of the work done. I do not find any fault with this reasoning of the Arbitrator. Even if I was of a different view since the view taken by the Arbitrator is not a view which is a perverse view, sitting and hearing objections under Sections 30 and 33 I would not like to interfere with the findings in the Award.
3. Claim No.3 was on account of claim for escalation for higher payment for work done during the extended period of work. It is not disputed that the work period was in fact extended and the Arbitrator has relied upon the notifications showing the enhanced charges payable to the labour. Accordingly, the reasons of the Arbitrator are sound and this Court cannot go into the reasonableness of the reasons as given by the Arbitrator.
4. Claim No.4 before the Arbitrator pertains to claim on account of damages and loss of profitability. I find that the objection in this regard of the CS(OS) 1581A/1998 Page 2 objector is justified because this claim is towards enhanced charges and for the same subject and for the same period, escalation has already been paid to the contractor under clause 10C. Therefore, payment under this head amounts to duplication of payment which is impermissible in law. The Arbitrator, I note, has not given any sufficient legal reasons for allowing this claim. In fact, the Arbitrator notes under this head that the claim on account of damages and loss of profitability was not established. Once the Arbitrator so holds that the said claim is not established there cannot arise any reason for allowing of the same claim by the Arbitrator. Objection in this regard is therefore justified and the Award of the Arbitrator with respect to claim No.4 is set aside.
5. The claim No.5 before the Arbitrator pertained to increase in rates beyond the stipulated date of completion beyond what has already been allowed under clause 10C. The Arbitrator has arrived at a finding of fact that there was a breach committed by the respondent. Such a finding of fact is final and it cannot be challenged by the objector, more so because the same has not been shown to be perverse. The claim for escalation therefore allowed by the Arbitrator once it is found that the objector was guilty of breach is justified and no fault therefore can be found with this part of the Award.
6. Claim No.7 of the contractor was its claim for payment because a lesser amount was paid for the extra items. The condition in the contract was CS(OS) 1581A/1998 Page 3 that if the extra items were sanctioned within a period of three months then the respondent shall be entitled to a rebate of 1% of gross amount of all extra/substituted items. However, it is an admitted fact that the sanction of extra items was beyond the period of three months and therefore, the objector was not entitled to rebate. Therefore, no objection can validly be sustained with respect to claim no.7.
7. Claim No.13 though is of small amount of Rs.3556/-, I find that the same is not justified. This amount of Rs.3556/- was recovered by the objector because the contractor had to do certain painting works and such work was found not to have been done. The Arbitrator has simply awarded the amount merely because the objector had not issued any notice during the period of the contract. I do not think that this is a justified reason because this is a claim for work done and if work is not done then no payment can be claimed. Since the work has not been done and the reasons of the Arbitrator are not justified, this amount awarded under this claim, though of a small amount of Rs.3556/- , the same is set aside and this claim of the contractor is rejected.
8. Claim No.14 is the claim of the contractor towards interest for delayed payment. The Arbitrator has found as a matter of fact that there is a delay in the payment of the amounts to the contractor. Since there is a delay in the payment, the claimant is entitled to interest. It has been held by the CS(OS) 1581A/1998 Page 4 Supreme Court in the case of South Eastern Coalfields Ltd. Vs. State of M.P. (2003) 8SCC 648 that in certain cases interest can be granted in equity though not provided for either in the agreement or in custom. Interest is therefore basically compensation for the amount of monies illegally retained by a person who ought to have made payment in time. I do not therefore find any merit with the objection with regard to claim no.14.
9. That takes me to the last claim being claim No.16 with respect to the interest granted by the Arbitrator. I note that the Arbitrator has awarded interest at the rate of 18% per annum. The Supreme Court in the recent line of 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 and State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd (2009) 3 Arb. LR 140 (SC) has held that on account of consistent fall in the rate of interest the courts must reduce the rate of interest as granted by the Arbitrator, more so when the Arbitration proceedings are of a long period. I note in this case, the Award is more than 11 years old having been passed on 13.7.98. Therefore, in accordance with the mandate in the aforesaid Supreme Court judgments in the CS(OS) 1581A/1998 Page 5 facts and circumstances of the case, I feel interest at the rate of 9% per annum simple ought to be awarded to the contractor. The counsel for the non-objector has very strenuously relied upon the decision of the Supreme Court in the case of Sayeed Ahmed Vs.State of UP (2009) 3 ARb. L.R 29. I find that the said judgment will not apply in the facts and circumstances of the present case because in that case, the Supreme Court found that the High Court did not assign any reasons for reducing rate of interest. As already stated above, this court is giving reasons in law inasmuch as the Supreme Court itself in the chain of judgments reproduced above has specifically brought to the notice of the courts that they should be alive to the changed economic scenario and grant a lower rate of interest accordingly, I am therefore unable to agree with the contention of the non-objector in this regard. Accordingly, objection petition is partly allowed to the extent that the claims which are awarded under claimNo.4 and 13 as awarded by the Arbitrator are set aside. Further there is a modification with respect to claim No.16 for the rate of interest to be 9% per annum simple meaning thereby where the Arbitrator has awarded interest @ 18% per annum or otherwise the rate of interest shall be read as 9% per annum simple.
10. With the aforesaid modification, the objection petition and the suit stands disposed of. The Award is made rule of the Court subject to the CS(OS) 1581A/1998 Page 6 modifications. In case the objector makes the payment of the amount as per this judgment within 90 days from today then the rate of interest from the date of the today's judgment till the date of payment shall be 9%. However, in case of payment after 90 days the rate of interest from the date of this judgment till payment shall be 11% in terms of Section 29 of the Arbitration Act, 1940. No order as to costs.
November 18, 2009 VALMIKI J.MEHTA, J Ne/ib CS(OS) 1581A/1998 Page 7