Delhi Development Authority vs M/S. S.S. Jetley
2000 Latest Caselaw 806 Del

ORDER

Arun Kumar, J.

1. As disputes had arisen between the parties, Shri Suresh Mehta, Superintending Engineer was appointed as Arbitrator and the disputes were referred to him. After adjudication learned Arbitrator gave award dated 21st August, 1996 which was filed in this Court. Certain claims were awarded to the respondent herein. Objections to this award were filed by the appellant Delhi Development Authority (hereinafter referred to as DDA, for short). These objections were dismissed with costs by the learned Single Judge vide impugned order dated September 14, 1999 and award dated August 21, 1996 was made rule of the Court and decree was passed in terms thereof. However, as far as award of interest for presuit period is concerned, the award was modified to the extent that in respect of claim nos. 2 to 4, instead of awarding interest from March 31, 1990 to March 7, 1995, it was held that respondent would be entitled to interest w.e.f. October 1, 1991 to March 7, 1995. The present appeal has been filed by the DDA against the aforesaid order dated September 14, 1999.

2. In the rounds of appeal, the challenge was confined to the award in respect of claims 7,14,17 and 20 to 22. However before us, learned counsel for the appellant, during the argument, advanced contention only in respect of claims 14 and 17, and in respect of award of rate of interest in so far as claims 20 to 22 are concerned.

3. Under claim No. 14, the respondent had claimed a sum of Rs. 1,55,855/- (Rupees one lakh fifty five thousand eight hundred fiftyfive only) in terms of Clause 12 A of the Agreement for the deviation in Item No. 10.2 of the Agreement. The claim was based on the analysis of rates submitted by the respondent to the appellant. It was contended that this claim has wrongly been awarded relying upon the analysis of rates submitted by the respondent to the appellant inasmuch as mere filing of the analysis was no evidence and therefore award was based on no evidence. Reliance was placed on the Division Bench judgment of this Court in the case of Kochar Construction Company Vs. Union of India and another reported in 1994 (1) Arbitration Law Reporter 269. The judgment was rendered by the Bench of which one of us (Arun Kumar, J) was a member. A perusal of the judgment would show that there was a dispute regarding claim no. 3 which pertained to extra payment due to escalation of rates for the work performed after the due date for completion of works. The Arbitrator held that respondent/Department had been in default and had committed breach of contract inasmuch as delay in commencement of work was on their account and it was further held that Contractor had executed work of gross value of Rs. 4,78,159/- after the stipulated date of completion of work and was entitled to increase @ 60% on the said amount which worked out to Rs. 2,86,895/-. When the said award was filed in this Court respondent Department had filed objection to the award. The learned Single Judge agreed with the Arbitrator that Department was responsible for prolongation of work and rescission of contract by respondent was illegal and unjustified. However, on merit, the award of the Arbitrator on claim no.3 was not sustained and was set aside. The Contractor filed appeal and the Division Bench of this Court in the aforesaid judgment upheld the conclusion of the learned Single Judge on the ground that there was no material on record to sustain the claim of the Contractor and the Contractor/appellant had mainly relied on cost analysis which could not be accepted as evidence of expenditure on account of increased cost of construction even if the cost analysis was not traversed by the respondent and that there was no independent evidence led in support of the claim.

4. In the instant case, the Arbitrator has given reasoned award. Claim no.14 is dealt with as per clause 12-A of the Agreement entered into between the parties. This clause deals with deviation in the quantum of work. It was found that as per the award, respondent had to lay C.C. Path measurIng 689.6 sq mts. However, the actual quantity executed was 424.89 sq. mts. Thus, deviation limit of 20% was exceeded and as per clause 12(a) of the Agreement the respondent became entitled to the higher rate. Clause 12-A reads as under:-

Clause 12A:-

"In the case of contract or substituted items which individually exceed the quantity stipulated in the contract by more than the deviation limit, except the items relating to foundation work which the contractor is required to do under Clause 12 above, the Contractor shall, within 7 days from the receipt of order, claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit, notwithstanding the fact that the rates for such items exist in the tender for the main work or can be derived in accordance with the provisions of subclause (ii) of Clause 12 and the Engineerin Charge may revise their rates, having regard to the prevailing market rates and the Contractor shall be paid in accordance with the rates fixed. The Engineerin Charge shall, however be at liberty to cancel his order to carry out such increased quantities of work by giving notice in writing to the contract and arrange to carry it out, in such a manner as he may consider advisable, but under no circumstances the contractors shall suspend the work on the plea of nonsettlement of rates of items failing under this Clause".

5. Thus unlike the case of Kochhar Construction Company (supra) this case has to be dealt with as per Clause 12-A. There is no dispute that the respondent complied with the procedure laid down in Clause 12-A and during the period of contract itself submitted its claim supported by analysis of rates.

6. While awarding the amount, learned Arbitrator computed the rates in the following manner:-

The main emphasis of the claimants was that stipulated rate of issue of cement was Rs. 1370 per ton against the basic rate of Rs. 500/- per ton. As basic rate in DSR 1981 comes to 174% against the rate quoted of 51%. The amount was demanded by the claimants as per clause 12-A within the notified period from the respondents, vide their exhibit C-36 and annexure IX enclosed in admoir. Also making an offer to the deptt. that in case their rate is not acceptable the deptt. may get the work done through some other agency. The analysis of rates were also enclosed and as per the analysis submitted by the claimants, the rate works out to Rs. 108.42 against a rate of Rs. 40.27 + 51% which works out to Rs. 60.80 thereby leaving a difference of Rs. 47.62 per sq.m. total Rs. 1,60,830.35. The consumption of cement in both the layers is 88 kg. + 262 kg. = 360 kg. for 10 sq.m. hence in one sq.mt. it will be 36 kg. The difference in rate of cement as per basic rate DSR 1981 i.e. Rs. 500/- + 51% = Rs. 755/- and stipulated rate of Rs. 1370/- comes to Rs. 615/- per ton for 36 kgs. to be consumed per sq.m. comes to 615 x 86/1000 = 22.14 per sq.m. In my opinion, this rate may be allowed for the quantity executed without water charges and contractors enhancement because for rise in prices of other material and wages, the claimants is being compensated by clause 10CC. Therefore, I award for an area as under:-

      TOTAL QUANTITY EXECUTED -          4204.89 sq.m.
     Quantity required as per 
     agreement 10 blocks                689.60 sq.m.
     Deviation 20%                      137.92 sq.m.
                                   -------------
                                   827.52 sq.m.
                                   -------------
     Difference: 4202.89 - 827.52 =     3377.37 sq.m.
     @ Rs. 22.14 = 74,774.97.

   

7. While dismissing the objection learned Single Judge in the impugned order has observed that Arbitrator has given very cogent reasons for arriving at this conclusion and there was no reason to differ from the same. In our opinion, the observation of the learned Single Judge are correct. It is not a case of "no evidence". Here the claim was entertained in view of the specific provision of Clause 12-A of the Agreement between the parties and Arbitrator relied upon the DSR-1981 in arriving at the rates. The case of Kochar Construction Company (supra) is therefore, not applicable to the facts of this case.

8. Claim no. 17 is in respect of damages for prolongation of the contract. Respondent/Contractor had claimed a sum of Rs. 1017727 on this account. Learned Arbitrator awarded a sum of Rs. 2,20,000/- in favour of the respondent. The basic contention advanced in challenging the award of claim is that no such claim could have been awarded inasmuch as if there was any delay on the part of the appellant, the respondent was entitled to the amounts as per Clause 10CC of the Agreement. In fact respondent had made the claim under Clause 10CC by preferring claim no.19 which was awarded by the learned Arbitrator. Respondent was not entitled to any amount of the award under claim no.19 as there was no provision under the Contract for awarding damages for prolongation of the Contract. It was accordingly, argued that such a claim being not permissible under the provisions of Contract, Arbitrator had exceeded his jurisdiction in awarding the same. Reliance was placed on the Division Bench judgment of this Court in the case of Delhi Development Authority Vs. U. Kashyap reported in 1999 (1) Arbitration Law Reporter 88. In that case the Contractor/respondent had claimed, under claim no.11, Rs. 1,59,000/- towards increase in prices of material,, etc. for the work done after the stipulated date of completion. The Arbitrator held that clause 10CC of the Agreement in question was based on various parameters and did not truly reflect the increase in market prices of the building material, labour etc and accordingly, the claim was awarded by not applying the formula contained in Clause 10CC of the Agreement but by adopting his own formula. This approach was denounced by this Court in the aforesaid judgment on the ground that without Clause 10CC of the Agreement specifically which provided the formula for working out the escalation in prices of material and labour, it was not permitted for the Arbitrator to adopt some other formula and while doing so reliance was placed on a Supreme Court judgment in the case of Associated Engineering Company Vs. Government of Andhra Pradesh and another reported in 1991 (2) Arbitration Law Reporter 180. There is no quarrel with the proposition laid down in the aforesaid judgment cited by the appellant. However, this case is clearly not applicable inasmuch as it is not a case of the appellant that instead of resorting to Clause 10CC of the Agreement, Arbitrator has applied some other formula. In fact as noticed above, claim No. 17 is not based on Clause 10CC of the Agreement. The respondent had preferred separate claim namely, claim no.19 under Clause 10CC of the Agreement and there is no dispute that the said claim was entertained and adjudicated upon, keeping in view the provision of Clause 10CC of the Agreement between the parties. The claim no. 17 is in fact founded on different premise altogether. It was the case of the respondent that because of prolongation of the Contract due to the fault on the part of the appellant, the respondent was made to incur the expenditure on idle labour, staff, machinery, centering, shuttering and other ancillary requirements like electricity, water, petroLeum, etc. It was the case of the respondent that it was necessary for the respondent to keep regular establishment including graduate engineer at site till the work is completed as required under Clause 36 of the Agreement. The Arbitrator found that the respondent had in fact incurred expenditure on the aforesaid grounds and awarded the claim @ Rs. 5000/- per month for the period of delay which was 44 months and on this basis a sum of Rs. 2,20,000/- was awarded. It was clear, therefore, that claim no. 17 was for damages on account of prolongation of Contract inasmuch as respondent was made to incur unnecessary expenditure due to the fault of the appellant in prolonging the Contract. This claim is, therefore, maintainable as per Sections 73 and 74 of the Contract Act which gave entitlement to the respondent to claim damages/loss suffered due to breach of contract by the appellant. The award of claim no.17 was, therefore, justified and we see no merit in the aforesaid contention raised by the appellant.

9. In so far as award of interest is concerned, learned Arbitrator awarded interest @ 12% for the presuit period as well as period pendente lite and awarded 16% interest from the date of the award. The learned Single Judge has modified the presuit period as noticed above, while maintaining the rate of interest awarded by the arbitrator. It was argued by the learned counsel for the appellant that the respondent was entitled to interest at the current rate defined in Section 2 of the Interest Act which meant highest rate at which the interest may be paid on different classes of deposits by the rescheduled banks in accordance with the directions of the Reserve Bank of India under the Banking Regulations Act, 1949. Relying upon another Division Bench judgment of this Court in Yogesh Kant Bhageria Vs. Deepak Jain reported in 1999 V AD (Delhi) 860 it was argued that interest @ 6% p.a. only could be awarded. Even, this argument of the appellant is without any substance. In the instant case the governing section would be Section 3 of the Interest Act and not Section 2 of the Interest Act, 1978. Section 3(1) of the Interest Act, 1978 reads as under:-

"In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it things fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say

(a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then from the date when the debt is payable to the date of institution of the proceedings:

     (b) if the proceedings do not relate to any such debt, then, from        the  date mentioned in this regard in a written notice  given  by        the person entitled or the person making the claim to the  person        liable that interest will be claimed, to the date of  institution        of the proceedings:    

     Provided  that where the amount of the debt or damages  has  been        repaid  before the institution of the proceedings interest  shall        not  be  allowed  under this Section for the  period  after  such        repayment."     
 

10. Clause (a) of Section 3(1) of the Interest Act is clearly applicable as the proceedings relate to a debt payable by virtue of a written instruent i.e. written contract between the parties. In the case quoted by the appellant, it was found, on the facts of that case that Section 3 was not applicable and the said case was covered by Section 2 of the Interest Act. Morevoer, it may be observed that even after relying on Clause (b) of Section 2 of the Interest Act, the Court had awarded interest @ 12% p.a. from the date of demand till the date of filing of the suit and till the date of decree. It is only future interest from the date of decree till realisation which was awarded @ 6% p.a. by exercising discretion under Section 34 of the Code of Civil procedure, 1908. As already pointed out above, even in the instant case the presuit and pendente lite interest awarded by the Arbitrator was @ 12% and it is only future interest which is awarded @ 16% p.a. Thus, this contention also is without any force.

11. No other point was pressed for argument.

12. In the result we find no merit in this appeal which is accordingly dismissed.

13. There shall, however, be no order as to costs.