Polo Singh & Co. vs Delhi Development Authority
1997 Latest Caselaw 534 Del

JUDGMENT

Anil Dev Singh, J.

(1) The Arbitrator, Mr. H.P. Patel, made and published his award on the 26th of December, 1992, in respect of disputes and differences arising between the parties relating to the work of construction of 356, Sfs houses, category Ii, at Madipur, Pocket-III and Sh construction of 132 numbers Sfs houses category-II, at Madipur, Pocket-III, GR-II. While this award has been challenged by the respondent-UOI under Section 30 of the Arbitration Act by means of I.A.No. 2997 of 1994 (in Suit No. 473/93), the petitioner has filed an application, being Suit No. 212 of 1993, for making the award a rule of the court. The facts leading to the instant suit lie in a narrow campass. The word in question was awarded to the petitioner on the 7th of March, 1989. The estimated cost of the work was Rs. 1,23,06,150.00 and the tendered amount was Rs. 1,48,28,910.00 . The stipulated date for the commencement of the work was 17th of March, 1989, and the same was required to be completed within 15 months, that is to say on or before the 16th of June, 1990. The work, however, did not commence which led to recession of the contract by the respondent on 21st August, 1989. In this regard the stand of the petitioner was : (1)The respondent committed fundamental breach of contract in not handing over the site on the 7th of March, 1989, when the work was awarded to the petitioner; (2) on the date of the award of the work viz. 7th of March, 1989, the piling work, which was being executed by another contractor, was incomplete and this is borne out from the fact that after that date upto the 1st of May, 1989 more than one thousand bags of cement were consumed by the piling contractor; (3) the piling work was defective which prevented the petitioner from raising construction; (4) defects in the piling work were brought to the notice of the respondent through sketches and photographs but were not rectified; (5) It was keen to start the work which is reflected by the fact that it constructed a godown for the storage of cement at site, undertook the boring of a tube well, drew a water sample from the same and sent it to the Shriram Institute for Industrial Research for analysis, paid a sum of Rs. 1,810.00 to Desu on the 11th of April, 1989 for obtaining an electric connection collected cement, bricks and iron rods, etc. Due to the non availability of site and defective piling work the petitioner could not proceed with the work despite the fact that the petitioner had taken requisite steps for proceeding with the same; (6) The termination of the contract was illegal as the delay in the commencement of the work was attributable to the respondent;

(2) ON the other hand the stand of the respondent was that the petitioner had no intention to execute the work from the very beginning even though the site for 11.5 blocks was handed over on the stipulated date for the commencement of the work, viz., 17th March, 1989, followed by the handing over of 2.5 blocks on the 11th April, 1989, and the balance 2.5 blocks on the 25th of April, 1989. Thus substantial portion of the site was available to the petitioner for proceeding with the work but the petitioner committed breach of the agreement and did not commence the work. The piling foundation work carried out by the other contractor did not suffer from any major defects which is evident from the fact that minor rectifications were required for which purpose only 16 bags of cement were consumed as per the following details : ON the 4th of July, 1989 - 10 bags 5th of July, 1989 - 3 bags 6th of July, 1989 - 3 bags Since the petitioner failed to execute the work and was merely making excuses with a view to cover up its breaches of the agreement, the work was rescinded by the respondent on the 21st of August, 1989, after service of a notice to the petitioner dated 12th of July, 1989 and the same was got executed through another agency.

(3) THE Arbitrator by his award made and published on 26th December, 1992 resolved the disputes in favour of the petitioner. He found that the site was not made available to the petitioner on the 7th of March, 1989, the date on which the work was awarded to the petitioner or immediately thereafter. According to the Arbitrator the site was available on the 6th of July, 1989, the date on which the rectification of the piling foundation was completed. The Arbitrator also came to the conclusion that the respondent committed fundamental breach of the contract in not handing over the site to the petitioner in time. The Arbitrator expressed his surprise for the failure of the Executive Engineer and the Superintending Engineer to even write a letter to the earlier contractor, who carried out the piling work, detailing the defects. He also came to the conclusion that they failed to carry out a detailed checking of the piling work. Consequently, the Arbitrator found the recession of the contract by the Respondent to be illegal and bad in law. As a sequitur the Arbitrator under claim No. 5 awarded to the petitioner a sum of Rs. 13,48,083.00 as compensation on account of loss of profit. In this regard the Arbitrator stated as follows: "AS already detailed earlier, the recession of the contract being illegal and bad in law, the claimants are entitled to the loss of profit. The profit on a very conservative estimate would be to the tune of 10%. I, therefore, award Rs. 13,48,083.00 towards this claim in favour of the claimant."

(4) BESIDES the above amount awarded in favour of the petitioner, the Arbitrator awarded a sum of Rs. 24,368.00 in favour of the petitioner on account of refund of the earnest money under claim No. 1. Under claim No. 4 the Arbitrator awarded a sum of Rs. 10,000.00 in favour of the petitioner on account of collection of material at site. Under claim Nos. 2 & 7 the Arbitrator awarded simple interest 18 per cent per annum from the 28th of August, 1991, the date of entering upon reference to 26th of December, 1992, the date of making and publishing the award. In so far as claim No. 3 is concerned the Arbitrator rejected a part of the claim which was essentially in respect of security furnished to Desu for securing an electrical connection at site, electrical installation expenses, water testing charges, construction of a water tank. However, as regards the construction of godown for the storage of cement, boring of a tube well, construction of labour huts, site office etc., the Arbitrator awarded a lump sum amount of Rs. 5,000.00 in favour of the petitioner. Under claim No. 4 the Arbitrator awarded a sum of Rs. 10,000.00 in favour of the petitioner for collection of material at site. In regard to claim No. 6 which was for infructuous expenditure the Arbitrator did not award any amount in favour of the petitioner. As regards the cost of Arbitration the Arbitrator, under claim No. 8, directed the parties to bear their own costs. In so far as the counter claims of the respondent for higher cost of balance work, interest paid on deposits of the allottees and damages for defamation of the respondents, the Arbitrator rejected the same.

(5) THE grievance of the respondent against the award of the Arbitrator is that the Arbitrator without considering the material facts and the evidence on record came to the conclusion that the recession of the contract was illegal and bad in law, thereby allowing the claim of the petitioner for the loss of profit to the extent of Rs. 13,48,083.00 . The learned counsel for the respondent also submitted that the finding of the Arbitrator that the site was available only on the 6th of July, 1989, and not earlier thereto is based on no evidence. It was pointed out that a substantial area of the site was available to the petitioner on the 17th of March, 1989 for proceeding with the work. Besides it was submitted that there was no major defect in the piling work executed by another contractor. The learned counsel adverted to the fact that on the same pile foundation another agency has executed the work in place of the petitioner which clearly shows that there could not have been any technical reason for the failure of the petitioner to execute the same. Countering the arguments of learned counsel for the respondent, learned counsel for the petitioner vehemently contended that the piling work was defective and incomplete with the result the work could not be executed despite the fact that the petitioner was ready and willing to execute the same for which purpose material was brought on site and several steps were taken to perform the contract. Since the petitioner was not guilty of any breach of the contract, the respondent acted illegally in rescinding it. Learned counsel further contended that the petitioner, was entitled to payment of compensation for loss of profit to the extent of 10 per cent of the value of the contract and the Arbitrator was right in awarding the sum of Rs. 13,48,083.00 to the petitioner on this count. The learned counsel also submitted that the court has no jurisdiction to examine the material, on the basis of which the Arbitrator has made the Award, for arriving at a different conclusion than the one reached by the Arbitrator.

(6) I have considered the submissions of the learned counsel for the parties. At the outset it may be stated that the court while examining the award of the Arbitrator is not sitting in appeal over the findings of the Arbitrator. But at the same time, the court is not debarred from interfering with the award of the Arbitrator, in case it finds that the Arbitrator had not taken into consideration relevant material which was brought before it or where the award of the Arbitrator is based on no evidence. The award of the Arbitrator can also be set aside where it suffers from an error apparent on the fact of the award. It may be pointed out that the Arbitrator in para 8.0 of the award noticed the stand of the respondent to the effect that substantial part of the site was handed over to the petitioner on the 17th of March, 1989, the date on which the work was required to be commenced. In this regard the Arbitrator noted as follows :- "FROM the details furnished by the Respondents, it can be seen that the 11.5 blocks were handed over on 17.3.89, further 2-1/2 block on 11.4.89 and the balance 2-1/2 blocks on 25.4.89 (Exhibit R-1). The Respondents' contention is that adequate work-site was available to the Claimants to proceed with the work at the time of award."

(7) EVENthough the award does not reflect that the details given by the respondent were wrong, still the Arbitrator holds that the site was not made available to the petitioner on the 7th of March, 1989, or immediately thereafter (see para 9.0 of the award). It seems to me that the arbitrator failed to bestow thought to the fact that the date when the petitioner was required to commence the work under the contract, 11.5 blocks had already been handed over to the petitioner. Merely recording the fact brought out by the respondent is not enough. The arbitrator was required to deal with it. Again the Arbitrator noticed that for the purposes of rectification of piling work 16 bags of cement were consumed, yet the Arbitrator states that the defects in the piling work were quite serious. These contradictions are apparent on the face of the award. The Arbitrator found that the petitioner had brought material worth Rs. 10,000.00 on the site and had invested, Rs. 5.000.00 towards the construction of godown, boring of tube well and the construction of labour huts and the site office. Therefore, on the findings recorded by the arbitrator, the petitioner merely invested Rs. 15,000.00 in the work. The return on Rs. 15,000.00 can not by any stretch of imagination be Rs. 13,48,083.00 . It appears that his aspect of this matter escaped the notice of the arbitrator. The award of the arbitrator in respect of claim No. 5, therefore, is liable to be set aside on the ground that it exhibits non-application of mind by the arbitrator. Accordingly, the award on claim No. 5 is set aside. In so far as the rest of the award is concerned, the same is made a rule of the court as the respondent has not been successful in showing any error apparent on the face of the award. In the net result, the award with respect to claim No. 5 is remitted to the arbitrator for fresh determination in the light of the observations made hereinabove.