Shri Madan Lal vs Union Of India & Others
2001 Latest Caselaw 303 Del

ORDER

J.D. Kapoor, J.

1. The award dated 26th May, 1989 is sought through this Suit to be made a rule of the Court. The respondent has filed objections to the effect that the award is liable to be set aside as it is neither based on evidence nor any material on the record and is contrary to the terms of the agreement.

2. The perusal of the award shows that the petitioner has been awarded the compensation for failure of the respondent to make the site available for the awarded job. The site was a Supplementary Drain which as per the original scheme was off taking from down-stream of the Kahraula Regulator and was aligned along Mungeshpur Drain and Madanpur Drain by reversing their flows up to village Madanpur and then through the land of villages Puth Kalan, Ghewra, madanpur etc. up to the Rohini complex and thereafter through Rohini complex G.T.Road near village Jhalswa. However below G.T. Road the drain had already been constructed while providing the alternative alignment to Bawana Escape up to its out fall into river Yamuna down-stream of Wazirabad Barrage.

3. The explanation for not providing the site well in time is that the people of the above said villages and the local elected leaders like MCD councillor, Metropolitan Councillor and the area M.P. protested to this alignment as it involved acquisition of their most fertile lands and as a result of stiff opposition construction of the above Supplementary Drain could not be taken up.

4. The date of commencement of the contract was 5th October, 1981. However it was on 1st October, 1981 that the petitioner wrote to the respondent asking the latter to hand over the site so that he could make preliminary arrangements for starting the work. The respondents informed that the site was not available with them on account of the administrative reasons and requested the petitioner to keep the project in abeyance in terms of clause 2-A of the Notice Inviting Tender. Clause 2-A provides that if the site is not available in time then the contractor will have to arrange his working programme accordingly and no claim whatsoever for not giving the full site on award of work and for giving the site gradually in parts will be tenable. Ultimately the petitioner was informed by letter dated 27th March, 1983 that it was not possible to execute the work on account of change in the alignment of the Supplementary Drainage and the above Agreement was terminated finally on 23rd September, 1993. Feeling aggrieved the petitioner aproached the Court for referring the disputes to the Arbitrator. On 3rd November, 1988 Mr.S.S.Iyer, Director CWC was appointed as Sole Arbitrator pursuant to the directions of the Court and he entered into the reference on 16th November, 1988. The Arbitrator awarded Rs.30,000/- on account of loss of profit, Rs.35,000/- for advance procurement of labour and Rs.5,000/- for preliminary arrangement.

5. It is contended that since the respondent had informed the petitioner that it was not possible for it to make the site available and asked the petitioner to keep the project tin abeyance the question of incurring any loss of profit did not arise. It is further contended that the reason for not making the site available in time was an unforseen event and as such the respondent was not liable to pay any damages on account of the delay in providing the site.

6. Learned Counsel has taken resort to Section 56 of the Indian Arbitration Act that provides that when performance of the contract becomes impossible or unlawful by intervention of a subsequent event then doctrine of frustration comes into operation. The counsel has relied upon Satyabrata Ghose Vs. (SIC)Mugneeram Bangur and Co. wherein it was held that if and when there is frustration the dissolution of the contract occurs automatically. It does not depend, as does rescission of a contract on the ground of repudiation or breach or on the choice or election of either party. It depends on the effect of what has actually happened on the possibility of performing the contract. What happens generally in such cases is that none party claims that the contract has been frustrated while the other party denies it. The issue has got to be decided by the Court ex post facto on the actual circumstances of the case.

7. In the above referred case the defendant company was the owner of a larger tract of land situated in the vicinity of the Dhakuria Lakes within Greater Calcutta and it started a scheme for development of the said land for residential purposes which was described as Lake Colony Scheme No.1 and in furtherance of the scheme the entire area was divided into a large number of plots for the sale of which offers were invited from intending purchasers. The company's plan of work seemed to be to enter into agreements with different purchasers for sale of these plots of land and accept from them only a small portion of the consideration money by way of earnest at the time of the agreement. The company undertook to construct the roads and drains necessary for making the lands suitable for building and residential purposes and as soon as they were completed the purchaser would be called upon to complete the conveyance by payment of the balance of the consideration money. The conveyance was to be completed within one month from the date of completion of roads on payment of the balance of the consideration money, time being deemed as the essence of the contract. In case of default this agreement was to be considered as cancelled with forfeiture of earnest money. However some time before the date of purchase there was an order passed by the Collector 24-Pargana under Rule 79 of the defense of India Rules on the strength of which a portion of the land covered by the scheme was requisitioned for military purposes. Another part of the land was requisitioned by the Government while a third order of requisition which related to the balance of the and comprised in the scheme was passed some time later.

8. The defendant company addressed a letter to the plaintiff informing him of the requisitioning of the lands by the Government and stating inter alia that a considerable portion of the land appertaining to the scheme was taken possession of by the Government and there was no knowing how long the Government would retain possession of the same. The construction of the proposed roads and drains therefore could not be taken up during the continuance of the war and possibly for many years after its termination.

9. It was only in such an eventually over which the defendant company had no control whatsoever that the doctrine of frustration was invoked. In the instant case no such eventuality has taken place. Merely because there was a resistance by some political leaders is not an eventuality which was beyond the control of the respondent. It is other way round. The land in question was acquisitioned by the Government. Thus the respondent was equipped with legal authority to hand over the land to the contractor for awarded job. Once the land was acquisitioned for the aforesaid purpose it was easier for the respondent to see that the site is handed over to the petitioner well in time. Even if there was law and order problem or political pressure it was for the respondent to summon the help of the law enforcing authorities. It appears that the respondent wants to take advantage of its own acts of commission and omission. Even otherwise no such plea was raised before the Arbitrator and as such the award cannot be subjected to scrutiny or scanning by way of appeal.

10. The work was to commence from 5th October, 1981 and was to be completed within four months i.e. by February, 1982 but it was for the first time on 31st December, 1981 that the respondent informed the petitioner about his inability to hand over the site because of the political resistance and wanted the contractor to keep in abeyance till the site was made available. However it was only on 27th June, 1983 i.e. almost after 1 1/2 years that a decision not to do the work was conveyed to the petitioner. Thus the site was not made available for inordinately long period and the petitioner remained in suspended animation from december, 1981 to June, 1983 without termination of the contract.

11. In case Municipal Corporation of Delhi Vs. M/s Jagan nath Ashok Kumar and another it was held that 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. It was further held that the Arbitrator is the sole judge of the quality as well as quantity of evidence and it will not be for the 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 arrive at t different conclusion than the one arrived at by the arbitrator but that itself is no ground for setting aside the award of an Arbitrator. It was further observed that the reasonableness of the reasons given by the Arbitrator in making the award cannot be challenged in a Special Leave Petition.

12. However reliance has been placed by the respondent on Union of India Vs. The Steel Stock Holders Syndicate, Poona wherein it was held that the loss of profit or loss of a particular market has been held by a number of decisions to be a remote damage and can be awarded only if it is proved that the party which is aware or had knowledge that such a loss would be caused. In the instant case not only the difference in facts is that of mist and mast but also the nature of contract was altogether different. In the above referred case the interpretation of Section 78 and 73 of the Carriers Act was involved as it was a case where there was delay in the delivery of the goods and inquiries made by the plaintiff revealed that the goods had not been delivered by the Railways.

13. However in the instant case it is difficult to imagine that the contractor once having been awarded work for construction and to complete the construction within four months would not visit the site or would not engage any labourers or procure any material therefore. It is well settled that even if the findings of the Arbitrator are erroneous on the basis of the material and evidence produced before him still such findings should not be interfered with. I do not find any merit in this objection and dismiss the same.

14. The next question that arises for determination is whether the petitioner can be awarded pendente lite interest from the date of the award till the date of the payment or not. The Arbitrator while dealing with the claim of interest observed that since that was not part of the reference made by the Department and the Department has contended that no award can be given with regard to the interest he has no implied power to arbitrate on the claim and hence no award is made. As is apparent from the observations of the Arbitrator he did not award the interest under the conception that he has no power to arbitrate on this claim and not on the premise that the petitioner's claim as to interest was not admissible on justified.

15. There is a difference and distinction between rejection of the claim of a party being groundless ad non-awarding of the claim because of the assumed non-jurisdiction of the Arbitrator. In the instant case the Arbitrator declined to make any award in this regard for the reasons that he has no power to arbitrate on this claim. The contention that once the Arbitrator has declined to award interest the Court has no jurisdiction to grant pendente lite interest is completely devoid of merit as it is only where the claim of interest is rejected on merits that the Court has no power to grant pendente lite interest.

16. The reliance placed by the counsel on Union of India Vs. Jain Associates is misplaced as in the said case the Arbitrator had declined to award the interest and it was observed that Section 29 of the Arbitration Act carries with it the embargo that it shall not be permissible for the Court to award the pendente lite interest prior to the date of the passing of the decree. It was held that Section 34 empowers the Court to grant interest pendente lite and future interest till the date of the realisation. However the ratio of the above authority is not applicable in a case where the Arbitrator has considered the claim to the award of interest and rejected the same but where the Arbitrator declines to return any finding in this regard because non-reference or because of assumed non-jurisdiction, interest can be awarded.

17. Almost similar proposition of law cropped up for decision before this Court in S.375/91 entitled Shri Madan Lal Vs. Union of India where incidentally the parties were the same as are in the instant case and the finding of the Arbitrator was the same as is in the instant case.

18. Since there is unanimity in the view that the Arbitrator has the power to award the interest from the date of reference and if the Arbitrator has failed to return any finding and has not awarded interest on the presumption that he has no jurisdiction to award the interest, the Court does have the power to award the interest.

19. In the result the objections prove damp squib and are hereby dismissed. The award is made a rule of the Court. The suit is decreed in terms of the awarded amount Along with pendent lite and future interest @ 12% per annum till the date of realisation.