Acro Engineering Pvt. Ltd. vs Delhi Development Authority
1997 Latest Caselaw 960 Del

JUDGMENT

K.S. Gupta, J.

1. M/s. Acro Engineering Pvt. Ltd. filed petition under Section 14 of the Arbitration Act inter alia alleging that it had entered into a contract with DDA, respondent No. 1 for execution of work of "Construction of Higher Secondary School for 960 students at Bodella, Vikaspuri and an agreement bearing No. 48/EE/ DDIV/DDA/81-82 containing arbitration clause was executed between the parties. On disputes having arisen, arbitration clause was invoked. V. R. Vaish, respondent No. 2 was appointed as arbitrator and he made the award on 7-1-1990. It was prayed that the arbitrator be directed to file the original award and the arbitration proceedings in Court.

2. In response to the notice of filing of award in Court, respondent No. 1 filed objections under Sections 30 & 33 of the Act being I.A. No. 8673/91 for setting aside the award in question with respect to Claims No. 1, 2 & 7 and counter Claims No. 2, 3 & 5. Petitioner has contested the objections by filing reply.

3. On 18-5-1993, following issues were framed :

(1) Is the award dated 7-1-1990 liable to be set aside in respect of Claims No. 1, 2 & 7 and counter Claim No. 2, 3 & 5 on the grounds taken in the objection petition ?

(2) Relief.

4. On Claims No. 2 & 7 and counter Claim No. 2, the submission advanced by Ms. Anusuya Salwan appearing for respondent No. 1/objector was that under Clause 3 of the Conditions of Contract it was within the powers of the concerned Engineer-in-charge to repudiate the contract forfeit the amount of security deposit and get the balance work executed at the risk and cost of the petitioner. Thus, the arbitrator misconducted himself in recording the findings that the Engineer-in-Charge should have treated the contract closed instead of rescinding it by the letter dated 13-7-1984 and that he (Engineer-in-charge) was not entitled to forfeit the security deposit nor get the balance work done at the risk and cost of the petitioner.

5. To appreciate the aforesaid submission I may reproduce above Claim No. 7 and the finding recorded thereon from the award :

Claim for setting aside of alleged illegal rescission.

AWARD

The date of start of this work was 14-7-1981 and date of completion as per agreement was 13-2-1982. It is seen from the register maintained at site that some drawings for the foundation were given on 28-8-1981 and the balance foundation drawings were given only on 10-9-1981. Advance copy of the details of beams etc., was, however, given only on 6-2-1982 and the final copy of the these drawings was given on 7-8-1982. It however, appears that based on the drawings given on 6-2-1982 the work had been done and as such there was delay in issue of the initial foundation drawings upto 10-9-1981 and all the structural drawing till 6-2-1982. This amounts to delay of 6 months and 23 days. This was a major delay. It is seen from the cement register that there was a shortage of cement only during the months of October, November and December, 1982 which has also been admitted by the Ex. Engineer in his letters dated 9-11-1982 (C-4) and 16-12-1982 (C-7). The claimant in his letter dated 16-12-1982 (C). The claimant in his letter dated 6-2-1983, wrote to the respondent about this delay in the issue of drawings and also about the irregular supplies of cement. He had also complained that there was delay in the payment of the bills as no bill was paid after November 1982 till February 1983. In this letter the claimant gave a notice that due to the increase in cost, he is entitled to 35% increase over and above the rates already quoted.

This request of the claimant for increase in rates was rejected by the respondent vide his letter dated 8-3-1983. From the records it is seen that the claimant had abandoned the work from January 83 which is also clear from the cement register as no cement had been issued after 20-1-1983. Also in the site order book as per entry dated 27-1-1983 no work was being done by the claimant.

As the work had been delayed due to the delay in supply of drawings by the respondent, the claimant would have been entitled to increase the rates beyond the date of completion as per the agreement. The claimant in his letter dated 6-3-1983 had demanded a revision in the rates and the same had been turned down by the respondent in his letter dated 8-3-1983. The respondent then gave the show cause notice vide his letter dated 18-4-1983 and the same was replied by the claimant vide his letter dated 21-4-1983.

Under the circumstances the respondent should have closed the contract as the claimant was not responsible for the initial delay and as the respondent was not willing to pay the increased rates after the stipulated date of completion as per the agreement.

Under these circumstances the rescission of the contract was unjustified. However, the contract should be treated as having been closed vide letter dated 13-7-1984 of the respondent.

Due to the above position the respondent is not entitled to forfeiture of the security deposit; nor get the work done at the risk and cost of the claimant.

6. In view of said finding on Claim No. 7, Claim No. 2 for refund of security deposit of Rs. 50,000/- while counter Claim No. 2 for Rs. 12.33 lacs on account of execution of balance work through other agency at the risk and cost of the petitioner was rejected by the arbitrator.

7. Date of start of work was 14-7-1981 and the work was to be completed within 15 months period. It was not disputed before me that some of the drawings for foundation were given on 28-8-1881 while the balance on 10-9-1981. Advance copy of the details of beams etc. were given on 6-2-1982 while the final copy of the drawings was made available to the petitioner on 7-8-1982 as noticed by the arbitrator. It was further not disputed that the petitioner sent letter dated 6-2-1983 beyond the date of completion of work seeking increase in rates which was rejected by the Engineer-in-Charge by the letter dated 8-3-1983. Considering the initial major delays in supplying the drawings and refusal to pay increased rates beyond the completion period, no fault can be found with the finding on said Claim No. 7 recorded by the arbitrator who was the sole Judge of the quality as well as quantity of evidence, that proper exercise of powers by the Engineer-in-Charge should have been to treat the contract closed instead of rescinding it by the letter dated 8-3-1983. No fault can be further be found with the findings on Claim No. 2 and counter Claim No. 2 which are based on finding on Claim No. 7 as recorded by the arbitrator. Submission referred to above advanced on behalf of the objector is thus repelled begin without merit.

8. Counter Claim No. 5 for Rs. 2,42,557.64 under Clause 42 of the agreement is based on penal recovery for the material issued to the petitioner. Admittedly, under counter Claim No. 4, a sum of Rs. 4,94,396.42 has been awarded to the objector towards the amount recoverable for the costs of material, cement, steel and pipes issued to the petitioner. Reasoning adopted by the arbitrator while disallowing counter claim under the aforesaid head that since the objector had failed to prove any loss for non-return of material there was no justification for penal recovery, is plausible and needs no interference by the court.

9. Yet another counter Claim No. 3 relates to levy of compensation under Clause 2 of the agreement. Relying on the decisions in Vishwanath Sood v. Union of India and D.D.A. v. Sudhir Bros (1995(2) Arb. LR 306), submission advanced by M/s. Anusuya Salwan was that the levy of compensation under the said clause being an excluded item, it was not within the domain of arbitrator to have gone into the merits of that counter claim for Rs. 2,22,224.40. There is considerable merit in the submission. In Vishwanath Sood's case (supra), it was held by the Supreme Court that the question determining penalty under Clause 2 of the agreement was outside the purview of the arbitrator nor could it be referred to arbitration. Following the ratio in Vishwanath Sood's case, similar view was taken by a Division Bench of this Court in Sudhir Bros's case (supra). Taking note of the ratio in both these decisions, the part of the award dealing with counter Claim No. 3 deserves to be set aside.

10. As regards Claim No. 1 petitioner filed final bill according to which gross amount of work done was Rs. 30,49,470.10. Respondent No. 1 also filed final bill according to which the gross amount of work done was Rs. 26,92,276/-. After allowing adjustment for the deduction items and the rebate which were the subject matters of counter claims and claims, the arbitrator came to the conclusion that a sum of Rs. 5,40,336.80 was payable to the petitioner subject to the adjustment of the counter claims against this amount. In view of my findings on the claims/counter claims referred to above, petitioner is entitled to the recovery of the aforesaid amount from the objector.

11. Issue No. 1 is answered accordingly.

12. For the foregoing discussion, objections are accepted in part and the award dated 7-1-1990 excluding counter Claim No. 3 is made the rule of the court. Decree be drawn accordingly. Respondent No. 1 is allowed two months time to pay the decretal amount failing which the petitioner will be entitled to interest @ 12% per annum thereon.

13. Respondent No. 1 is at liberty to recover Rs. 2,22,224.40 levied by way of compensation under Clause 2 of the agreement in whatever manner it is open to it from the petitioner. No order as to costs.

14. Objections partly allowed.