Vishal Engineers & Builders vs Delhi Development Authority
1998 Latest Caselaw 508 Del

JUDGMENT

S.N. Kapoor, J.

1. The claimant-petitioner was awarded the work of development of land at Rohini Phase II, SH: C/o.13.5 mtr. and 9.0 mtr. road in 2nd Phase treatment in Sector 13, Pocket A to F in Rohini vide agreement No. 50/EE/RPD-3/90-91. The work was scheduled to start on 5th April, 1991 and was to be completed by 4th July, 1991. A dispute arose on the claims. On the request of the petitioner Engineer-Member of the respondent appointed Shri S.C. Kaushal as sole arbitrator vide letter dated 16.6.1993. Shri S.C. Kaushal, S.E. (Arbitration II), the sole arbitrator filed his award dated 25.4.1994. Notices of filing of award were issued to the parties. Both the par ties have filed their objections. I.A.2032/95 and the petitioner has filed objections vide IA No.2705/95.

2. One of the objections of the respondent/DDA relates to the extra claim for brick flooring in herring bone bond. This item of extra work was initiated by the Engineering Incharge of the work with the plea that the same would be executed at site but the bond followed for brick work on edge flooring by the petitioner Was zig zag bond. These facts were brought to the notice of the learned arbitrator vide Ex. R-1. The learned arbitrator committed misconduct by ignoring the same. The learned arbitrator further commuted misconduct in awarding interest under Claim 5(b) and (c) at the rate of 12%, per annum.

3. In response to the said objections, it is contended by the opposite side that the objections of the respondents are not tenable in law. The learned arbitrator ought to have allowed the claim at the rate of Rs.2.61 per sq. mtr. as against the rate of Rs. 2.16 per sq. mtr. allowed in the award for the market rate for this item was Rs. 3.18 per sq. mtr. It is submitted that the arbitrator has not ignored Ex. R-1 and therefore, the arbitrator has not committed any misconduct in awarding Rs. 16,707/-. The claimant is entitled to a sum of Rs. 26,000/- at the rate of Rs. 3.18 per sq. mtr. at market rate. It is denied that the arbitrator has committed misconduct in awarding the interest.

4. According to the claimants objection IA No. 2705/95 part of the site was not made available and the respondent did not have necessary material for completion of work; Naturally, the work could not be completed within the stipulated period. The petitioner completed it on 6th July, 1992 by incurring extra expenditure. The respondent forced the petitioner to accept the meagre payment and to sign the relevant papers by saying that otherwise the claimant would not gel even that meagre payment. The respondent has withheld even the part of the security deposit. It is further contended that the learned arbitrator wrongly rejected claim No. 2 for Rs. 1,38,000/- the amount claimed on account of damages and losses suffered due to the prolongation of the contract. Ex. R-6 clearly established that the petitioner was required to incur extra expenditure on chowkidars, site engineer, conveyance, infructuous expenditure like loss of time and constant keeping a vigil on the material at site, on a rough estimate of the expenditure of Rs. 6,000/- per month. It was supported by various documents in the shape of Ex. C-20 and other documents. The learned arbitrator has misconducted the proceedings by ignoring the evidence on record in this respect. The arbitrator has also misconducted by rejecting the claim under Clause 10(C) for statutory increase for labour and material and the learned arbitrator has committed gross misconduct in accepting the final settlement certificate recorded in the final bill. In regard to claim No. 3 the learned arbitrator committed gross misconduct in rejecting claim No. 3. The learned arbitrator failed to appreciate that the tender was placed keeping in view the rates applicable at the time of tender and the petitioner is entitled to statutory increase during the stipulated period of the contract and thereafter market rate after the stipulated date of contract. In this regard Clause 10(C) applies and not Clause 10(CC). The intention of not giving the benefit of Clause 10(CC) is that in a short duration contract the party is required to take into consideration the prevailing market rate during that period. Applying such a rule to a prolonged and extended period of contract, as in the present case, is patently erroneous. In absence of the reason for rejecting the claim No. 4 the award has to be set aside in that respect also. The reason of not giving seven days prior notice for market rate without analysis was insufficient to reject the claim for the non giving of the analysis has not prejudiced the respondent. The learned arbitrator failed to give any reason for rejecting the claim of the petitioner under claim 5(a) and failed to grant interest at the commercial rate on the awarded amount from 1991, the bank rate being 20% As such award is required to be set aside.

5 The DDA in its reply disputed the assertions made by the claimant-petitioner. It is denied that delay occurred due to lapses on the part of the DDA. It is further denied that the respondent forced the petitioner to accept meagre payment then due and threatened the petitioner to sign the papers. The claimant-petitioner was not entitled to the entire amount claimed under claim No. 1. The claim of amount of Rs. 1,38,000/- on account of damages and losses suffered due to prolongation of the contract has been denied for there was no error on the face of the record. It is also denied that the petitioner has succeeded in establishing the losses suffered by the petitioner for a sum of Rs.2,46,000/-. It was for the learned arbitrator to decide whether the full and final settlement certificate has been given by free will or under coercion. The learned arbitrator was satisfied that the petitioner had accepted the bill of measurement for full and final settlement. The arbitrator had not committed any misconduct in rejecting claim No. 3 regarding the alleged statutory increases during the stipulated period of contract, on the analogy of Clause 10 (CC) for under the agreement only Clause 10(C) was applicable and Clause 10 (CC) was inapplicable. Short intelligible reasons are good reasons and the learned arbitrator in fact has given detailed reasons for rejecting the said claim. As per mandatory provision of Clause 12-A of the agreement the petitioner was required to give analysis of market rates. The claimant failed to give the analysis of rates and therefore the claim was rightly rejected. In regard to interest under claim 5(a) it was mandatory on the part of the petitioner to serve a notice as required under Section 3(i)(b) of the Interest Act. The petitioner having failed to serve the said notice was not entitled to any pre-reference interest. The petitioner was not entitled to any interest much less 12% as granted by the learned arbitrator in respect of claim No. 5(b) and 5(c).

6. The claimant filed rejoinder to the reply reiterating their own case.

7. In view of the respective contentions of the parties following points require consideration:

(a) Whether the award is liable to be set aside for any reason taken in the objections by either of the parties?

(b) Relief.

Under this issue various points relating to different claims shall be considered claimwise.

This claim of Rs. 26,000/- relates to non-release of payment for laying brick edge flooring in herring bone bond pattern. The claim was partly accepted by the learned arbitrator on the ground that the claimants were assured of extra payment after completion of work on 6.7.1992. The case for extra payment was initialled on 9.7.1992 but not made. The learned arbitrator considering the rate of DSR 1989 and seeing that the respondents have not disputed the quantity in final bill allowed the claim for extra payment on 7734.72 sq. mtr. of dry brick edge flooring at the rate of Rs. 2.16 paise per Sqm. amounting to Rs. 16,707/-. The claimants claim that they should have been awarded at the rate of Rs. 2.61 per Sqm. Market rate for the above said item was Rs. 3.18 per sqm. for as per DSR 1989 rate for extra item was Rs. 1.85 per sqm. The rate of extra item with contractor's enhancement of 41% of DSR 1989 would be Rs. 2.61 per Sqm. It is well settled that, the learned arbitrator being final arbiter of the dispute, neither reasonableness of the reasons can be a matter for considerations in objections nor Court can reappraise the matter on record for coming to a conclusion other than that arrived at by the arbitrator. This is not an area in which this Court could or should interfere. Alter all the arbitrator having the expertise in that particular field has formed a view on material available before him and that view does not appear to be unjustified. Consequently the contention of the claimant in this regard is rejected.

Claim of Rs. 1,38,000/- relates to damages and losses allegedly suffered and claimed due to prolongation of contract. In this regard it is not disputed that the claimants had undertaken some other work during that period. By their own letter Exhibit C-9/1 the claimants had reduced their own claim to Rs. 69,000/-. According to the details submitted in statement of facts it worked out to Rs. 2,46,000/- and according to "Hudson's" Formula the amount of claim had been pegged up at Rs. 5,87,146/-. The arbitrator appears to be satisfied in view of this shifting stand of the claimants that they failed to establish the actual losses suffered on this account even objections filed. R-6 is the photocopy of the application for extension of time on 9.7.1992. While it indicates delay of 404 days on account of numerous items mentioned and seeks extension of time, it also mentioned as under:

"We will not claim liquidated and unliquidated damages if extension of time is granted without levy of compensation.

Signed 8.7.1992"

This does not indicate that by that dale any extra expenditure had already been incurred. Therefore, this is of no help. C-20 is the letter of the claimants himself. His own claim was raised on 17th March, 1994. The claimant did not claim any other document and fail to substantiate their own claim of extra and additional actual expenditure. If in these circumstances the learned arbitrator rejected the claim about extra expenditure he cannot be said to be unjustified. Consequently, neither I find any force in this kind of objection nor do I think that the arbitrator has misconducted himself by ignoring any document.

Claim No. " 3 relates to escalation during the execution of the work beyond the stipulated period of the agreement. According to the claimant the petitioner is entitled to claim escalation under Clause 10 (CC) while the learned arbitrator has taken the stand that claimant-petitioner is not entitled to invoke Clause 10 (CC).

11.1 There is no dispute that the contract was for a short period of three months for completion of the work. That period was to be reckoned "from the 10th after the date of issue of the letter to commence the work". The letter is dated 26.3.1991 and the agreement in this connection was executed on 1.4.1991. When the application of Clause 10(CC) is prohibited specifically in matters relating to short duration contracts then it has to be presumed that both the parties were expecting delay in certain respects which have been provided for and taken into consideration while entering into the agreement. From that point of view, further compensation for such delays would amount to paying twice for such rights would be included in the tender amount and as well as the amount of the compensation payable in such circumstances. The arbitrator, obviously in view of the said condition would be acting beyond his jurisdiction under the contract, (see Mohan Construction Company v. DDA and Anr. ). It is apparent that Clause 10(CC) did not apply to such a contract for under Clause 10(CC) "no such compensation shall be payable for a work for which the stipulated period of completion is six months or less". The claimant seeks escalation on the analogy of this Clause 10 (CC) for the work was prolonged for one year. But as has been mentioned earlier the extension was sought by the claimant. Supposing for the sake of arguments this Court feels that on the analogy of Clause 10(CC) the escalation might have been allowed, but even in that case this Court is not supposed to substitute its own view. It may be mentioned that the analogy of Clause 10(CC) will not be applicable to such type of contracts for which the stipulated period of completion is less than six months or less. Clause 10 specifically debars its application to any contract which is for a period of six months or less and extension is sought and granted for the phrase is 'stipulated period of completion' and not unqualified period of completion,

11.2 The next contention of the claimant-petitioner is that the learned arbitrator should not have rejected the claim under Clause 10(C) for the statutory increase for labour and material. According to Clause 10(C) that escalation has to exceed 10% of the price of the material/wages. It must not be attributable to delay in execution of the contract within the period of contract in the opinion of the Superintending Engineer whose decision shall be final and binding. And, no increase shall be payable if such increase has become due on account of extended date of completion of work in question. The learned arbitrator has taken the view that in terms of agreement Clause 10(C) is only applicable and the compensation for rising cost of labour and material is permissible provided the conditions laid down therein are fully complied with. According to the learned arbitrator the claimant-petitioner has not produced sufficient evidence to the effect that during the progress of work any such claim has been raised. For claiming any such increase the claimant-petitioner was supposed to place certain documents: firstly a reference to the concerned notification on one hand; secondly bills thereof and thirdly a certificate of the concerned Engineer that it was not attributable to delay in the execution of the contract. In absence of satisfaction of these conditions it cannot be said that the claimant-petitioner was entitled to claim any amount in this respect.

11.3. The contention that no claim certificate was arbitrable and the learned arbitrator misconducted by accepting the final settlement certificate recorded in final bill Exhibit R-9 appears to be slightly misconceived. If he would have acted solely on the no claim certificate the question of awarding any claim in respect of claim No. l might not have arisen. The learned arbitrator was not supposed to wander "outside the contract and deal with matters not allotted to him". If he does so "he commits a jurisdictional error". Such error going to his jurisdiction can be established by looking into material outside the award, (see Associated Engineering Co. v. Government of A.P., ), Consequently I do not find any force in the contention of the learned counsel for the claimant. 12. CLAIM NO. 4

The petitioners claim Rs. 64,000/- on account of less payment. For considering this claim it is essential to refer to Clause 12A. Clause 12A provides that in case of substituted or additional items exceeding the limits laid down in Sub-clause (vi) of Clause 12, the contractor was supposed within seven days from the receipt of order to claim revision of the rates supported by proper analysis in respect of such items for quantities in excess. It is not the case of the petitioner that they complied with the provision of Clause 12A and supplied proper analysis in respect of rates of such items for quantities in excess of the limit. It is further notable that Engineer In-charge did not revise the rates. It is not being contended before this Court that such revision of rates was claimed from Engineer Incharge and he rejected the same. The learned arbitrator could not travel beyond the provision of Clause 12A. As such I do not find any force in this objection of the claimant-petitioner and feel that the learned arbitrator has rightly rejected the claim of Rs. 64,000/-

This claim relates to interest at the rate of 20% per annum (a) for the period from the due date of payment till the date of reference, (b) claim of interest pendent elite and (c) future. The learned arbitrator, in so far as interest from the due date of payment to the date of reference to arbitration is concerned, appears to have rejected on the ground that no notice was given under Section 3(1)(b) of the Interest Act. Obviously in absence of any notice the petitioner was not legally entitled to claim interest in respect of period from the due date of payment till the date of reference to arbitration. In view of the provision of Section 3(1)(b) of the Interest Act the learned arbitrator is justified, though otherwise the arbitrator could have granted even pre reference interest relating to pre reference period (see Surinder Kumar Gupta v. DDA, ).

13.1 In regard to claim of pendente lite interest the learned arbitrator has awarded simple interest on the awarded amount at the rate of 12% per annum w.e.f. 11.11.1993 till 24.4.1994 i.e. date of award. The rate of interest is such a matter on which there could possibly different views. Under Section 34 interest could be awarded at the rate of 6% and in commercial transaction it could be either at the settled rate of interest or the prevailing market rate of interest. The arbitrator has awarded interest at the rate of 12% which is the rate of interest awarded on fixed deposits. This appears to be an area where this Court is not supposed to interfere in the discretion used by the learned arbitrator.

13.2 However it appears that while the learned arbitrator thought it appropriate to award interest from 11.11.1993 till the date of award he has not awarded any interest in between the date of award and till the date of payment or the decree whichever "is earlier. It appears incongruous to accept such a position. Therefore accepting the rate of interest of 12% the award is modified to this limited extent and to the effect that the claimant-petitioner would be entitled to get 12% interest on the awarded amount from 26.4.1994 that is the date of award till today as well as till payment.

14. The parties are left to bear their own costs in the peculiar circumstances of the matter.