K.C. Goyal & Co. vs Delhi Development Authority And ...
1994 Latest Caselaw 381 Del

JUDGMENT

Vijender Jain, J.

1. This is a petition filed by the petitioner under Section 14 of the Arbitration Act for making the award a rule of the court.

2. Objections under Sections 30 and 33 of the Arbitration Act were filed by the respondent. The Arbitrator allowed Claim No. 1 which was for Rs. 3,15,000/- towards final bill and work done but not measured. Out of the said claim the Arbitrator has awarded a sum of Rs. 1,53,390/-. Ms. Salwan learned counsel for the respondent has argued that no reason whatsoever has been given by the Arbitrator in allowing a sum of Rs. 1,53,390/-. She specifically laid emphasis on the word used in the award by the arbitrator that "The award is worked on the assumption that quantity of cement was consumed in the work and hence the quantities of concerned items had been proportionately increased". According to learned counsel for the respondent the award cannot be based on assumption for the use of cement. According to her, Clause 25 of the Arbitration Agreement postulates reasons to be given by the Arbitrator and as the award is without reasons on that account alone the award is liable to be set aside. She in her support cited College of Vocational Studies v. S. S. Jaitley (AIR 1987 Delhi 134) in which this court held :

"A bare reading of the finding against these two claims B and B-1, will show that the arbitrator has merely given his conclusions and verdict without giving any reasons. Reasons are the links on the material, documentary or oral evidence, adduced before the arbitrator, on which certain inferences are drawn and conclusions are made. There must be some rational nexus between the two indicated in the awards. The arbitrator may not set out every process of reasoning or may not deal with every point raised but must, when he is called upon to give reasons, to tell the 'reason' why be came to the particular conclusions ......"

3. She has cited another case M/s. Bharat Furnishing Co. v. Delhi Development Authority and another (1991 (4) Delhi Lawyer 355) which reads as under :

"Where reason is required to be given, it becomes the very life of the award, for when the reasons ceases, the award itself ceases. What then, is meant by reasons ? The Kantian use of reason (See VERNUNFT & VERSTAND) need not be looked into and so also the technical distinctions of reason. For our purposes, it would mean a rational ground or motive. It is any sufficient ground of explanation, Coleridge calls it 'rationalized understanding'. The emphasis necessary is thus on the ground or motive or understanding being rational or sufficient. And if that be so, who will examine the rationality or sufficiency ? The court, of course. And while examining this, the court will insist not on a detailed judgment but 'short intelligible indication of the grounds .... to find out the mind of the arbitrator for his action'."

4. Mr. G. N. Aggarwal learned counsel for the petitioner on the other hand has argued that the Arbitrator has awarded the claim amounting to Rs. 1,53,390/- on the basis of the documents on record and the word 'assumption' used in the award is in relation to the quantity of cement which actually consumed by the contractor. He has submitted that the quantity of consumed cement was before the Arbitrator as the register from where the cement is issued was produced before him. He has cited Salwan Construction Co. v. U.O.I. and others wherein it was held that the arbitrator has rightly held that in the absence of loss, having been suffered, or the proof of actual loss, if suffered, respondent No. 1 was entitled, having already recovered the issue rate, to recover double the issue rate of cement consumed by the claimants in excess of the theoretical Calculations and no legal misconduct on the part of the arbitrator was established. Mr. Aggarwal has cited another authority in his support Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar and another , it was held :

"...... Furthermore, subsequent to the expiry of the stipulated period of completion, the Corporation did not make time the essence of the contract by directing claimant to complete the work within a specified period but instead rescinded the contract. In those circumstances it was held by the arbitrator that the decision of rescission of the contract was bad, wrongful and hence the claim of Rs. 23,820/- was considered to be just. We do not find any lack of reason in the reasons given by the arbitrator appear to be reasonable and have rational nexus with the conclusion arrived by him. It was stated that it was admitted on behalf of the Corporation that there was initial delay of four months. This was controverter by the Corporation. They say that there was no admission. This in our opinion was a significant factor that there was some delay and in spite of the delay the Corporation gave letters to the contractor to complete the work and in the contract itself there was provision for extension of time. In our opinion, where reasons germane and relevant for the arbitrator to hold in the manner he did have been indicated, it cannot be said that it was unreasonable ...."

"In this case, there was no violation of any principles of natural justice. It is not a case where the arbitrator has refused cogent and material factors to be taken into consideration. The award cannot be said to be vitiated by non-reception of material or non-consideration of the relevant aspects of the matter. Appraisement of evidence by the arbitrator is ordinarily never a matter which the court questions and considers. The parties have selected their own forum and the deciding forum must be conceded the power of appraisement of the evidence. In the instant case, there was no evidence of violation of any principle of natural justice. The Arbitrator in our opinion is the sole judge of the quality as well as quantity of evidence before the arbitrator. It may be possible that on the same evidence the court might have arrived at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground in our view for setting aside the award of an arbitrator."

5. Following the law laid down by the Supreme Court in Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and another (supra) it cannot be said that in the instant case award is without reasons. In deciding the claim No. 1 the arbitrator has given cogent reasons and the award has been made after taking into consideration the documents and evidence on record. I allow the claim No. 1 and dismiss the objections of the respondent in this regard.

6. Claim No. 2 pertains to refund of Rs. 1 lac towards Security deposit deducted from the payment. The arbitrator awarded the claim of Rs. 1 lac towards return of bank guarantee. The arbitrator awarded this claim in favor of the petitioner. After carefully considering the matter he came to the conclusion that with the increase in cost of work as admitted in claims 1, 3, 4 and 7 extension till the date of actual completion will be justified and no compensation is payable under clause (2) by the petitioner.

7. However, Ms. Salwan has argued that 424 days extension was granted to the petitioner for completing the project without levy of compensation and 444 days extension was granted under Clause 2 of the agreement, i.e. with the levy of compensation under the said clause. In her support she has cited Vishwanath Sood v. Union of India and another (1989 (1) Arb LR 357) and R. S. Rana v. Delhi Development Authority and another (1993 (2) Arb LR 165). There cannot be any dispute with the proposition of law laid down by the Supreme Court in Vishwanath Sood's case (supra) that it will not be open for the contractor once the Superintending Engineer confirms that there has been a delay for which compensation should be charged, to challenge the conclusion before the Arbitrator. However, in this case the arbitrator has held that time was no longer the essence of the contract in view of the extension granted by the respondent itself and in view of the fact that the respondent had not put any counter-claim for levy of compensation under Clause (2) of the Contract. The arbitrator has allowed the refund of security deposit which amount was deducted from the payment of the contractor. I see no infirmity in the reasoning of the arbitrator. In Vishwa Nath Sood's case Supreme Court held that it will not be open for the contractor once the Superintending Engineer confirms that delay has occured and compensation should be charged. However, in this case the arbitrator has also recorded that the Executive Engineer had also confirmed that no notice of any defect was ever issued to the claimant. There being no confirmation of delay in term of Clause (2) I hold that Claim No. 2 has been rightly decided by the Arbitrator and there is no legal misconduct so as to warrant interference by this court.

8. Claim No. 3 is claimant's claim for Rs. 1,32,034/- on account of refund of the recovery of rebate made in excess beyond the scope of the agreement. The arbitrator has awarded a sum of Rs. 1,32,000/- under this head. Mr. Anusuiya Salwan has vehemently opposed the award of Rs. 1,32,000/- on the ground that the petitioner at the time of tendering had offered excess rebate of 4% on the estimated cost and for using the bitumen which is supplied by the respondent and as the estimated costs of the work at the time of tender was Rs. 12,07,850/- with a percentage of 42% above the estimated cost. However, the quantity of several items increased during the actual execution of work and the total work done was for Rs. 64,51,273.00, according to Ms. Salwan the rebate had to be on the total amount of work and not on estimated cost. The learned counsel for the petitioner Mr. G. N. Aggarwal, on the other hand, has submitted that the award of the arbitrator is based on the documents on record and he relied in this regard on Exhibit C-1 which is a letter of award which talks about the estimated cost of the work and according to his submission the estimated cost does not change and as per document Exhibit C-1 the respondent has mentioned in the said letter dated 29.9.1984 that a rebate of 4% remained on estimated cost for using road roller and bitumen which will be availed by the respondent. As discussed earlier under claim No. 1 as per own letter of respondent Exhibit C-1 estimated cost for the work and the rebate offered by the contractor was only on the estimated, cost as stipulated in the said letter. Therefore, I hold that arbitrator has correctly awarded the claim on the basis of estimated cost of the work. Even otherwise this court will not sit as a court of appeal over the award of the arbitrator both in question of fact and law unless and until the same are within the parameters of limitation and scope of Ss. 30 and 33 of the Arbitration Act. Therefore, I do not interfere with the award of the Arbitrator under claim No. 3 in favor of the petitioner and against the respondent.

9. There is no serious objection to the award in relation to Claims No. 4 and 5. Therefore, I allow the award in relation to claims No. 4 and 5 as per the award of the arbitrator.

10. Under Claim No. 6 the claimant claimed Rs. 33,65,000/- for the quantities of items executed beyond the deviation limit. The Arbitrator under this claim has awarded a sum of Rs. 7,93,600/- to the claimant against the respondent. Ms. Salwan has argued that finding of the learned arbitrator with regard to claim No. 6 is clearly contrary to the conditions of the contract. She has stated that the arbitrator has given his award contrary to the provisions of Clause 12A of the Agreement. Clause 12A of the agreement provides that in case of items stipulated in the contract exceed the deviation limit the contractor can claim revision of the rates. According to the learned counsel for the respondent Clause 12A completely bars items relating to foundation work. On these premises she has submitted that the arbitrator has ignored this fact and made this award allowing deviation on foundation work. She has also argued that the arbitrator has given no reasonable basis or nexus for arriving at a sum of Rs. 7,93,000/- and on these grounds the award under this head deserves to be set aside.

11. On the other hand, learned counsel for the petitioner has stated that the bar provided under Clauses 12 and 12A does not effect the award of the arbitrator. Relevant clause which requires consideration is Clause 12(vi) which reads as under :

"Except in case of items relating to foundations provisions contained in sub-clauses (i) to (v) above shall not apply to contract or substituted items as individually exceed the percentage set out in the tender documents (referred to herein below as deviation limit) subject to the following restrictions :

(a) The deviation limit referred to above is the not effect (algebraic sum) of all additions and deductions ordered.

(b) In no case shall the additions/deductions (arithmetical sum) exceed twice the deviation limit.

(c) The deviation ordered on items of any individual trade included in the contract shall not exceed plus/minus 50% of the value of that trade if the contract as a whole or half the deviation limit whichever is less.

(d) The value of additions of items of any individual trade not already included in the contact shall not exceed 10% of the deviation limit.

For the purpose of operation of Clause 12(vi) the following work shall be treated as work relating to foundations :

(a) .....................

(b) .....................

(c) .....................

(d) For roads all items of excavations and filing including treatment of sub base and soiling work.

(e) For water supply lines, sewer lines, under ground storm water drains and similar works, all items of work below level except items of pipe work and masonary work.

(f) ....................

....................

....................

The rates of any such work except the items relating to foundations which is in excess of the deviation limit shall be determined in accordance with the provisions contained in clause 12A.

12. Mr. Aggarwal has stated that the claim which has been filed would fall in the 'exception clauses (d), (e), (f) of sub-clause (v) of Clause 12 and he says that even otherwise there were sufficient reasons before the arbitrator because the deviation has to be for reasonable limit and the arbitrator has found that the total contract had deviated by over 27%. The arbitrator has further recorded that such increase is on the ground that the increase in quantities being due to increase in the scope of work and not due to change in soil conditions. He has also stated that the variation has to be in reasonable limit. Mr. Aggarwal has cited Harcharan Singh v. Union of India (1990 (2) Arb LR 243) in support of his contention, wherein the Supreme Court held that :

"The Executive Engineer, the Superintending Engineer and the Additional Chief Engineer had expressed the view that the additional work under the terms of the contract may be confined to 20% and the remaining work be paid at enhance rate. It was permissible for the arbitrator to consider whether contract enables the Engineer-in-Charge to require the appellant to execute additional work without any limit or a reasonable limit should be placed on the quantity of the additional work. The arbitrator did not exceed his jurisdiction in giving the award. The order of the Division Bench is set aside and the order of the learned Single Judge is restored."

The Supreme Court further held :

"Here also the question has often arisen whether the contractor under the variation clause is liable to execute the extra or additional quantities of the tendered items at the tendered rates to an unlimited extent. In some awards given by the arbitrators in the Central Public Works Department of the Government of India the variation of the tendered quantities under the variation clause in the contract has been restricted to 10% beyond which the contractor was entitled to claim as extras and these awards have been accepted and implemented by the Government. It appears that the standard form of contract of the Central Public Works Department has been amended and now it specifically permits for a limit of variation called "deviation limit" up to a maximum of 20% and up to such limit the contractor has to carry out the work at the rates stipulated in the contract and for the work in excess of the limit at the rates to be determined in accordance with clause 12-A under which the Engineer-in-Charge can revise the rates having regard to the prevailing market rates."

13. In view of the observations by the arbitrator that total contract had deviated by over 27% and in view of specific finding of arbitrator that such increase was not on account of soil conditions but on account of increase in scope of work the argument of learned counsel for the respondent that the increase related to foundation work cannot be sustained. I will not go into the sufficiency or insufficiency of evidence on this claim. The arbitrator has given his award on the basis of material before him and even if I come to a different opinion. I will not substitute my opinion for that of the arbitrator. In view of this observation I do not like to interfere with the award of claim No. 6 given by the arbitrator.

14. Claim No. 7 is for Rs. 6,00,000/- on account of extra amount spent on materials done by manual labour in narrow lanes where cartage of material by mechanical means was not possible. The arbitrator has justified this claim to the extent of Rs. 5,23,675/- on the ground that it was not possible for a truck to operate in the narrow lanes and lanes were narrow had been substantiated by the respondent's own data. However, learned counsel for the Objector has stated that as per the terms and conditions of the NIT, particularly Condition No. 2, the tender document containing plans, complete specifications, schedule of quantities was to be purchased by the petitioner and petitioner had all the notice and complete details as well as exact details of the site. Therefore, the arbitrator has misconducted the proceedings and has awarded something contrary to what has been provided in the agreement. She has further invited the attention of this court to the additional specifications and conditions attached to NIT which is reproduced below :

"1. The contractor must get acquainted with the proposed site for the works and study specifications and conditions carefully before tendering. The work shall be executed as per programme approved by the Engineer-in-charge. If part of site is not available for any reason or there is some unavoidable delay in supply of materials stipulated by the Department, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extras or compensation on this account.

2. Works area shall be the area shown is the lay out plan of the scheme."

15. Therefore, the learned counsel for the petitioner has said that the arbitrator has misconducted the proceedings while awarding a sum for manual operations as the trucks could not go inside the narrow lanes. She emphasised that at the time of submission of tender as well as in view of the additional specifications and conditions as reproduced hereinabove the award of the arbitrator under claim No. 7 is without jurisdiction. On the other hand, Mr. G. N. Aggarwal, learned counsel for the petitioner has argued that the arbitrator has taken into consideration various letters written by the petitioner to the respondent, inter alia, emphasising that sites for carrying out of the work were frequently shifted and sometimes on account of interference of local leaders and, in fact, no reply to these letters were given by the respondent. He argued that even otherwise the arbitrator is an experienced and technical person and this court cannot set aside the award of the arbitrator. In his support be has cited Jagdish Chander v. Hindustan Vegetable Oils Corporation (1989 (2) Arb LR 189). In the said authority the Supreme Court while noticing the observation made in Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar (supra), that when the arbitrator was the sole judge for the quality and quantity of evidence even though on the same evidence the court might have arrived at different conclusion, the court will not set aside the award, in the instant case the court cannot interfere with the award of the arbitrator. Mr. Aggarwal on the basis of judgment of this court in Jagdish Chander's case (supra) which followed Jagdish Chander's (case) and Municipal Corporation of Delhi's case (supra) held that the arbitrator who was a person who was presumably, an expert or well-versed in civil engineering was an expert in the line and the award made by such a person should not, therefore, be lightly interfered with. He also cited Madan Lal v. Union of India and others (1990 (1) Arb LR 159) and M/s. Hind Builders v. Union of India (1990 SC 1340), in support of his arguments, wherein it was held :

".... In a matter on which the contract is open to two equally plausible interpretations, it is legitimate for the arbitrators to accept one or the other of the available interpretations and, even if the court may think that the other view is preferable, the court will not and should not interfere ...."

16. He also cited Delhi Development Authority, New Delhi v. M/s. Alkaram, New Delhi and J.D. Constructions v. N.D.M.C. and another , in support of his arguments. There cannot be two opinions on the view expressed by the various authorities cited by the learned counsel for the petitioner and the law laid down that the court will not substitute its own opinion with that of the arbitrator. The court will be further slow to interfere or set aside or modify the award if the award is by an expert in the line. However, if there is an error apparent on the face of the award, court is to set aside the finding of the arbitrator. In the instant case, the arbitrator has returned a finding on a matter which was in the specific domain of the conditions of the contract. As mentioned above additional specifications and conditions No. 1 and 2 specifically lay down that the contractor must get acquainted with the proposed site for the works and study specifications. Condition No. 2 lays down that works area shall be the area shown in the lay out plan of the scheme. In view of the specific condition after the award of the contract the claimant cannot turn round and say that on account of lanes being narrow be should be given additional amount on account of manual charges as truck could not go to the narrow lanes. In my opinion, the arbitrator has committed an error which is apparent on the face of the record in awarding a sum of Rs. 5,23,675/- to the claimant. In view of the specific stipulation in the contract regarding the condition of site and work area to be shown in the lay out plan of the scheme. The award by the arbitrator under this claim is also without jurisdiction. The award of Rs. 5,23,675.00 under this head is set aside.

17. Under claim No. 8 claimant had claimed pendente lite interest. Under this head the arbitrator has awarded interest for a period for 6 months from the date of actual completion to the date of entering into reference by the arbitrator for Rs. 1 lac at 12 per cent per annum. According to the learned counsel for the respondent the arbitrator has misconducted the proceedings by awarding interest of Rs. 1 lac at 12 per cent per annum. Ms. Salwan says that the reference and claim was limited to pendent lite interest but as a matter of fact the arbitrator has awarded pre-suit interest which was not even claimed by the petitioner. She has argued that there is no justification for the arbitrator to award pre-suit interest. Ms. Salwan has also cited M/s. International Engineering Consultancy v. Himachal Pradesh Mineral and Industrial Development Corporation Ltd (1992 (2) Delhi Lawyer 336), in support of her contention.

18. On the other hand, Mr. Aggarwal learned counsel for the petitioner has argued that the award of interest for a period of 6 months from the date of actual completion to the date of entering into reference for Rs. 1 lac at the rate of 12 per cent per annum is within the competence and jurisdiction of the arbitrator. He says that it is implied term of reference. Mr. Aggarwal has further argued that unless and until there is a specific prohibition in the agreement for awarding of such interest only then arbitrator will be without jurisdiction. He further contended that the petitioner had, as a matter of fact, claimed interest at the rate of 18 per cent per annum and also claimed interest vide his letters Exhibits C-13, C-14, C-17 and C-19. Mr. Aggarwal has contended that has a matter of fact arbitrator ought to have followed future interest under Section 29 of the Arbitration Act from the date of award till realisation and the award should be modified to that extent Mr. Aggarwal has also placed reliance in support of his arguments on 1977 (ii) ALR 748 and 1987 (1) Arbitration Law Reporter 264.

19. In my opinion the arbitrator while awarding interest for a period of 6 months from the date of actual completion to the date of entering into the reference by the arbitrator of Rs. 1 lac at the rate of 12 per cent per annum has not misconducted the proceedings. The Supreme Court in Secretary, irrigation Department, Govt. of Orissa and others v. G. C. Roy (Rep. in JT 1991 (6) SC 348) held :

"Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred.

Having regard to the above considerations, we think that the following is the correct principle which should be followed in this behalf :

Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (Along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view.

For the reason aforesaid we must hold that the decision in Jena, in so far as it runs counter to the above proposition, did not lay down correct law.

20. For doing complete justice between the parties such power has been inherently with the arbitrator. The principles laid down in the case of Secretary, Irrigation Department, Government of Orissa (supra) is that where the agreement between the parties does not prohibit grant of interest and where a party claims interest and the dispute is referred to the arbitrator he shall have the power to grant interest pendente lite. The argument of learned counsel for the Objector that the award of interest is a pre-suit interest and arbitrator had no jurisdiction is devoid of any force. Keeping in view the facts and circumstances of the case, the arbitrator was the best judge to award interest taking into consideration the period of completion and the extension granted for execution of the work and other relevant considerations objectively taken before awarding the interest. In V.P. Hotels etc. v. U.P.S.E.B. (Rep. in JT 1988 (4) 478). Supreme Court held that award may not be intefered even though court may come to the conclusion that it is the best possible view and may not be the correct view and if that was the position then such a view even if wrong cannot be corrected by this court.

21. In view of the discussion made above I make the award a rule of the court excluding Claim No. 7 which I set aside for the reasons stated above. A decree in terms of the award be drawn up. Interest from the date of decree till realisation at the rate of 12 per cent per annum is awarded to the petitioner. In the circumstances of the case, there is no order as to cost.