Shri Sunder Lal Khatri vs Delhi Development Authority
1994 Latest Caselaw 603 Del

JUDGMENT

Vijender Jain, J.

1. This is an objection application filed on behalf of the respondent under Sections 30 and 33 of the Indian Arbitration Act, 1940. The award is in relation to an Agreement entered into between the petitioner and the respondent-DDA for construction of 88 L.I.G. and 144 M.I.G. houses at Shalimar Bagh, New Delhi. The estimated cost of work was Rs. 1,01,84,875/-. Pursuant to Clause 25 of the Agreement Arbitration was appointed, the award is dated 11.10.1991. Ms. Ansuya Salwan, learned counsel for the respondent-DDA, has argued that the award is a non-reasoned award and the Arbitrator has not given reasons for allowing certain claims of the petitioner, in alternative, she has argued that if this court comes to a conclusion that reasons are given, the same are perverse. Assailing the award under claims No. 3 and 4, Ms. Salwan has argued that the Arbitrator cannot in law award any claim under Clause 10C of the Agreement as that would be squarely hit by Clause 2 of the Agreement. In the objections filed by the respondent the finding of the Arbitrator on this claim has been assailed stating inter alia that the bulk of flats had been completed during 1986 and the rectification of the defects was done up to January 1985 and the Arbitrator has failed to appreciate that if the defects had been got rectified by the respondent, respondent was entitled to claim for the amount spent by it for carrying out of the rectification of the defects and the Arbitrator has failed to consider the said materials and documents and therefore, the award is vitiated. However, in 'Ground-J' of the objections application, the stand of the respondent on claim under Clause 10C of the Agreement is as under -

"The award in any case is contrary to Clause 3 whereunder the decision of the Engineer in Charge that the petitioner failed to execute the work within the stipulated time is final and binding".

2. Learned counsel for the respondent has argued that the Superintending Engineer has determined compensation in terms of Clause 2 of the Agreement on account of work not done in the stipulated period of contract, the adjudication of compensation by Superintending Engineer, whose decision is final and binding, therefore. Arbitrator had on jurisdiction to award any claim under Clause 10C of the Agreement. In support of her arguments, she has cited the case of R. S. Rana v. DDA (1993 (2) ALR 165), and M/s. Bharat Furnishing Co. v. DDA and another (1991 (4) Delhi Lawyer 35). The submission urged before me by the learned counsel for the respondent on the face of it is devoid of any force. Clause 10C specifically provides that if during the progress of work the price of any material incorporated in the works, and/or wages of labour increases as direct result of law coming into force of any fresh law, or statutory rule or order shall accordingly be veried. The only exception is that if in the opinion of Superintending Engineer (whose decision shall be final and binding) delay in the execution of the contract is attributable to the contractor or within the control of the contractor. Whereas, Clause 2 provides that the time allowed for carrying out the work shall be strictly observed by the contractor and shall be deemed to be essence of the contract and if the same is not done with due diligence the contractor shall be entitled to pay compensation as fixed by Superintending Engineer. DDA.

3. In the matter before me 25.5.1979 was the starting date of the work and the stipulated date of completion was 24.5.1980. No notice of rescission of the contract was given after stipulated date of completion of work nor any compensation on account of delay attributable to the contractor was levied during the period in which work was stipulated to be completed. The contract was rescinded by the respondent only on 1.9.1984. Therefore, in the absence of anything on record, the Arbitrator was right in holding that the respondent is under obligation in terms of Clause 10C of the Agreement to pay a sum of Rs. 70,548.45 paise to the petitioner towards rise in wages of labour which has come into force by virtue of a statutory notification. The claim by the petitioner in this regard was for 1.5 lakhs and the Arbitrator has awarded a sum of Rs. 70,548.45 paise on the basis of evidence, material and record before him as it reflected in the paragraph of the award under challenge. The learned Arbitrator has awarded the said sum as the respondent DDA itself had stated that the amount, which would be payable to the contractor, would work out to Rs. 70,548.45 paise as per details given in 'Ex. R-30'. Further more the Arbitrator relying upon 'Ex. C-50' dated 24.2.1983 addressed by the Executive Engineer of the respondent to the Superintending Engineer of the respondent in which it had been stated that delay was not on account of the contractor and had further recommended for payment of increase rate in terms of Clause 10C of the Agreement. In view of the admission of the respondent, I see no infirmity with the award in relation to Claim No. 3 in favor of the petitioner. The authorities cited before me by learned counsel for the respondent are not applicable to the facts and circumstances of this case.

4. On the basis of above reasoning the Arbitrator awarded a sum of Rs. 9,287/- under Claim No. 4 which was a claim for an amount of Rs. 25,000/- under Clause 10C of the Agreement on account of rise in price of bricks which has come into force from time to time by virtue of statutory notification. For the reasons stated above the award of a sum of Rs. 9,287/- by the Arbitrator is valid and there is no reason to interfere with the findings of the Arbitrator regarding this claim.

5. The main thrust of the argument advanced by Mr. Salwan is against award of Claim No. 7 by the Arbitrator in favor of the petitioner. Learned counsel for the respondent has assailed the award of the Arbitrator on the ground that in terms of Clause-25 of the Agreement, the award is an unreasoned award. Another arguments advanced by the learned counsel is that in view of the provisions of Clause-1 of General Clause under specifications and conditions, the Arbitrator had misconducted the proceedings by awarding claim on account of damages and thereby the Arbitrator has misconducted the proceedings. The next contention raised by the learned counsel for the respondent is that the Arbitrator has ignored the clauses of the Agreement and relied on the exhibits which according to learned counsel for the respondent constitute misconduct. Let us deal with the arguments pertaining to specifications and conditions. General Clause-1 of the Agreement is as follows :

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

6. The argument of the learned counsel for the respondent is that if the site was not available or there was some delay in supply of materials stipulated by the Department the contractor shall have no claim for extras or compensation on this account. She has argued that most of the damages which has been awarded by the Arbitrator is in relation to delay in handing over the site or delay in supply of the materials and in view of the General Clause 1, Arbitrator had given the award which is not in consonance with the terms of the Agreement. She has cited in support of this argument a decision of this court in Ishwar Singh and Sons v. DDA (Rep. in 1994 II Apex decision (Delhi) 477). This Court while interpreting Clause 1 of the General Clauses of specifications and conditions was dealing with a matter where materials, admittedly, were to be supplied by the respondent whereas in the present case before me the Arbitrator has not awarded any sum on account of materials not supplied by the respondent. The Arbitrator has awarded damages on account of damages suffered by the petitioner on account of non-compensation of the project as the delay was attributed to the respondent. What has been observed in Ishwar Singh's case (supra) is that once the parties have agreed to a specific clause in the contract that they will not claim any damages and if damages are awarded by the Arbitrator then the Arbitrator would be misconducting the proceedings and award made, if any, would be without jurisdiction. The sum awarded under this head is on account of the fact that duration of the work was prolonged because of non-fulfilment of the obligation on the part of the respondent. The learned Arbitrator has taken into account 'Ex. C-50' which is a letter written by the Executive Engineer of the respondent to its Superintending Engineer inter alia mentioning the reasons for delay not attributable to the contractor rather the admitted reasons of delay were non-availability of site, non-laving of conduit pipes in RCC roofs by the electrical division, short supply of materials, short/ non-release of payment when due, timely decisions not given, certain decisions pending with Municipal Authorities etc. and after holding that the adequate evidence has been placed on record that the delay is most attributable to the respondent the Arbitrator awarded compensation/damages as permissible under Section 73 of the Contract Act.

7. Learned counsel for the respondent has also cited the case of Associated Engineering Co. v. Govt. of Madhya Pradesh (1991 (2) ALR 180). I do not see that this authority is of any help to the case of the respondent. Reverting back to Clause 1 of the General Clauses of specifications and conditions, it would be seen that the contractor is precluded to have any claim for extras or compensation if part of the site is not available and there is some unavoidable delay in supply of materials. To come within the purview of Clause 1 of General Clauses of specifications and conditions two things have to be specified. First, part of the site is not available that is to say that some part of the site could not be made available on account of certain factors. But can this stipulation be stretched in a case where Agreement is executed, work awarded, but the site where the work has to be executed is not made available and in view of the aforesaid clause latter in the day respondent can turn round taking recourse to aforesaid Clause 1, and say that the contractor cannot be awarded any compensation even though he might have incurred expenditure on mobilisation of man materials and resources. Court cannot give a loose interpretation which is not intended by the terms of the Agreement between the parties. Secondly, with regard to non-supply of materials the words occurring in the Clause is not delay in supply of materials' but 'unavoidable delay'. The use of word 'unavoidable' before 'delay' is not without meaning. However, in this case the damages which have been awarded by the learned Arbitrator is not in relation to the materials which was to be supplied by the respondent but with regard to the materials which the contractor had to purchase at a higher rate on account of escalation in prices because of extension of stipulated period of contract on account on non-performance of the obligation on the part of the respondent. The Arbitrator has specifically dealt with this aspect of the matter in the following manner.

"The amount has been worked out in this method by taking into consideration the quantum of work executed in a particular period interval and applying percentage increase on the basis of index number after deducting the cost of material issued by the respondent".

8. Another argument which was advanced by learned counsel for the respondent, that there was no sufficient evidence before the Arbitrator to show that the petitioner has suffered actual damages and Arbitrator has based his award only on the basis of cost index. According to the learned counsel for the respondent this was a case of complete lack of evidence and insufficiency of evidence and therefore, the Arbitrator has erred in awarding damages to the petitioner which is apparent on the record of the case. In support of this argument Ms. Salwan has cited the case of Kochar Constructions Co. v. UOI (1994 (1) ALR 269). I am afraid that this authority is not of much help to the respondent. I am in respectful agreement with the law laid down by the Division Bench in Kochar Construction Co's case (supra). The Court held that there was no evidence led by the claimant except filing of the chart containing cost of analysis and on that basis the court held that there was no sufficient evidence before the Arbitrator for awarding any compensation on account of cost analysis. There is marked difference in cost analysis given by a party and cost index published by State periodically basing on scientific data. The Cost index. Even otherwise, I would like to mention what Lord Denning said about evaluating of evidence by the Arbitrator.

"The weight of evidence and the inferences from it are essentially matters for the arbitrator. I do not think that the award of arbitrators should be challenged or upset on the ground that there was not sufficient evidence or that it was too tenuous or the like. One of the very reasons for going to arbitration is to get rid of technical rules of evidence and so forth ...... Questions of evidence are essentially matters for the arbitrator and not matters for the court."

(G. K. N. Centrax Gears Ltd. v. Matbro Ltd. (1976) 2 Lloyod's Rep. 555 (575))

9. The respondent also relied on the case of Continental Construction Co. v. State of Madhya Pradesh . While interpreting Clause 3.3.15 specifically in the case of Continental Construction Co. (supra) which prohibited any compensation to the contractor in the absence of contractor having submitted the claim in writing to the Engineer-in-Charge within one month of the cause of such claim occurring. The Supreme Court held that Arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. In the case before me there is no such clause of the Agreement which prohibits the award of compensation on account of delay attributable on the part of the respondent.

10. Mr. O. N. Vohra, learned counsel for the petitioner had argued that the normal rule for computing damages for breach of contract is the difference between the contract price and market price of goods at the time when the contract is broken. To make good his proposition, he relied upon the case of M/s. Salwan Construction Co. v. UOI (2nd 1977 (2) Delhi 748), in which it was held :

"The builders' claim was that the Government was in breach of the contract. They were entitled to stop the work. Instead they went on with the work and did not treat it as a repudiation of the contract. The measure of damages is that loss of profit arising out of the reduced profitability or added expenses of the work carried out and completed by the builders. Where the contractor treats the breach as partial and continues the work, the most usual circumstances which give rise to claims are delay in giving the contractor possession of the site or in the supply of drawings, or suspension of the work caused by some act or omission of the employer and a consequent increase of expenses in the performance of the works; and the contractor may be able to recover damages for delay caused by the employer, notwithstanding that an extension of time for completion has been granted in respect of such delay."

11. The contention raised by the respondent regarding sufficiency or insufficiency of the evidence, therefore cannot hold good. The Arbitrator in his award has given detailed reasons. The Arbitrator was a former Additional Director-General (Works) of the C.P.W.D. and an engineer himself. He has also taken into consideration the quantification of the claim which has been given by the claimant in 'Ex. C-30 to C-36' and 'C-53 and C-54' and after taking into consideration the three alternative methods adopted for working out the price increase, method adopted in 'Ex. C-53' based upon index numbers of whole-sale prices published by the Ministry of Industry, Udyog Mantrayala, Government of India was considered to be reasonable by the respondent during the proceedings and the damages were worked out on the basis of quantum of work executed after the expiry of stipulated period of contract only. Whatever materials which were issued by the respondent due credit for the same was given, proper indexes were made for arriving at damages. Supreme Court in the case of Municipal Corporation of Delhi v. M/s. Jagan Nath Ashok Kumar and another , held :

"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 and it will not be for this Court to take upon itself the task of being a judge of the 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 on an arbitrator."

12. In the present case, the Arbitrator, who was chosen a person who, was presumably, an expert or well-versed in civil engineering. The Arbitrator was selected by the agreement of the parties and the selection of a Chief Engineer shows that the parties wanted to appoint a person who was an expert in the line. An award made by such a person should not, therefore, be lightly interfered with. I am also supported in my view by M/s. Hind Builders v. UOI , in which Supreme Court held as under.

"This may be right or wrong but this is also a plausible view. Unfortunately, this was an aspect not urged before, or considered by the arbitrators. There was no evidence before the arbitrators or material adduced before the court as to the nature of these operations. It is difficult to say, by merely reading the terms of contract that the arbitrators have erroneously interpreted the terms of the contract. It is not without significance that the departmental officers did not dispute the rate of the claim. Equally, the arbitrators were experienced engineers and would not have passed, what is now said to be, an astounding claim without thought. It is difficult to assume that all these persons have overlooked that the contractor had already been paid at Rs. 18 under item 4., 09(a) especially when it is so stated on the face of the claim. This, therefore, is not a case where the arbitrators can be said to have ignored or overlooked a term of the contract; on the contrary, they have acted upon a particular interpretation of certain clauses of the contract on which two views are possible. This case certainly cannot be brought under the principle that the arbitrators have ex facie exceeded the authority or jurisdiction conferred on them by the contract. At worst, what can be said is that they may have committed an error in deciding the issue referred to them but the error is not apparent on the face of the award even if the contract is read as part of it both because the arbitrators have not given their reasoning and because the view taken by them of the relevant terms of the contract cannot be said to be clearly erroneous. 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."

13. In the case before me under the same Claim No. 7, the Arbitrator has awarded damages as the overhead expenses incurred on account of establishment for the execution of work during the prolonged period of execution amount to Rs. 9,27,750/-. The award of a sum of Rs. 9,27,750/- on this account was also assailed by the respondent. The finding of the Arbitrator on this count is as follows :

"The record of Establishment employed by the contractor during this period which has been duly verified by the site staff of the respondents is considered as adequate evidence in support of the expenses incurred by the claimants. The total amount spent on establishment as per records works out to Rs. 9,27,750/- which was not objected to by the respondent at any stage during the execution of the work."

14. Ms. Salwan has argued that the respondent has given notice under Clause-2 of the Agreement to the petitioner on 7.1.1985 and once Clause 2 of the Agreement had been invoked, the Arbitrator was not competent to grant damages. I must at the threshold repel the contention of the learned counsel for the respondent. Letter dated 7.1.1985 is of no significance. As has been observed by me earlier that the stipulated date of completion of work was 24.5.1980. That petitioner was allowed to work up to 1.9.1984 when the respondent rescinded the contract, therefore, any letter issued after the stipulated period of work is of no consequence, Even otherwise it has been urged before me by Mr. Vohra that apart from the cost index filed by the petitioner before the Arbitrator, there were other materials before the Arbitrator, two other contractors were awarded the work by the respondent during the relevant period at the rate of 68% and 66% higher rate on the estimated cost of tender whereas in the case of the petitioner, he was only awarded 30% higher rate at the estimated cost of tender. Therefore, the Arbitrator had sufficient materials and evidence before him to arrive at a finding to award damages under Clause-7 of the Agreement in favor of the petitioner.

15. In view of discussions above, the objection of the respondent regarding Claim No. 7 is devoid of any force and the same is dismissed.

16. Next objection raised by the respondent is in relation to Claim No. 8. It has been urged before me that grant of pre-suit interest by the Arbitrator is not in accordance with the mandatory provisions of the Interest Act, 1978. However, in 'Ground-G' of the objections application filed by the respondent, this objection has not been taken. The objection taken is that the Arbitrator has not given any basis or reasons as to why interest is being awarded much less at the rate at which the Arbitrator has allowed the sum and the award in respect thereto is without jurisdiction. Learned counsel for the respondent has argued that no notice in terms of Section 3 of the Interest Act was given by the petitioner and in alternative she has argued that 'Ex. C-1' dated 2.1.1983 is no notice in terms of the Interest Act. She had also relied upon the case of M/s. International Engineering Consultancy v. Himachal Pradesh Mineral and Industrial Development Corpn. Ltd. (1992 (2) Delhi Lawyer 336). I am afraid that the authority cited before me is not of much help to the respondent as while interpreting the letter dated 13.11.1979 the learned Single Judge of this court, which according to the claimant was one of demand of interest, held that it was not a letter demanding interest as no demand of interest was made in the said letter. In the case before me there is clear finding of the fact recorded by the Arbitrator regarding 'Ex. C-1' dated 21.1.1983, 'Ex. C-9 and C-44' both dated 30.3.1982 treating these letters as notices to the respondent demanding interest. On the basis of materials, documents, records and evidence before the Arbitrator, he held that simple interest @ 12% p.a. payable to the claimant with effect from 22.10.1983 up to the date of first hearing of arbitration proceedings i.e., 26.10.1988. The Arbitrator did not allow the pendente lite interest as he has stated in the award that it was outside the jurisdiction of the Arbitrator under the then prevalent law. However, Mr. Vohra prayed that at the time of arguments in view of the letter decision of the Supreme Court, Arbitrator had the power to award pendente lite interest, this court may award pendente lite interest in favor of the petitioner. As the Arbitrator has not awarded the pendente lite interest may be on account of the law prevalent at the time, I am not inclined to award pendente lite interest in favor of the petitioner.

17. No other argument has been raised by the learned counsel for the respondent regarding other claims and counter-claims. Even otherwise, as I have stated earlier the award is a reasoned award and the reasons given by the Arbitrator are cogent and based on the materials on record. In Stroud's Judicial Dictionary, 4th Edition, page 2258 states that it would be unreasonable to expect an exact definition of the work "reasonable".

"Reason varies in its conclusions according to the idiosyncrasy of the individual, and the times and circumstances in which he thinks."

18. In Municipal Corporation of Delhi's case (supra) the Supreme Court held :

"But mankind must be satisfied with the reasonableness within reach : and in cases not covered by authority, the verdict of a jury or the decision of a judge sitting as a jury usually determines what is "reasonable" in each particular case. The word "reasonable" has in law the prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably, knows or ought to know".

19. In view of the above discussions. I dismiss the objections application of the respondent.

S. 3470 of 1991

20. The objections application of the respondent has been dismissed vide my above order. Therefore, the award is made rule of the court. A decree in terms of the award is passed. Petitioner will be entitled to interest @ 12% p.a. from the date of decree till its realisation.

21. Suit stands disposed of according.