M/S. Polosingh & Company vs Delhi Development Authority
2001 Latest Caselaw 411 Del

ORDER

A.K. Sikari, J.

1. Disputes having arisen between the parties, the same were referred to Shri H.P. Patel, as sole Arbitrator, for adjudication. The learned Arbitrator adjudicated upon the disputes and returned his award dated 26th December, 1993. The said award was challenged in this Court by the Delhi Development Authority by filing objections which were decided by judgment dated 30th May, 1997. While rejecting all other objections, as far as award on claim no. 5 is concerned, this Court remitted the matter back to the Arbitrator for fresh determination in the light of observations made in the said Order. That is how this claim was reconsidered by the learned Arbitrator who has made and published the award dated 4th March, 1998. By means of IA. 7010 of 1999, Delhi Development Authority has filed its objections under Section 30 and 33 of the Arbitration Act, 1940 in respect of claim no.5.

2. Claim no.5 was preferred by the petitioner claiming loss of profit for pre-mature and wrongful rescission of contract. Admittedly, the work was started by the petitioner, after the award of the contract, on 17th March, 1989 and stipulated date of completion was 16th June, 1990. Delhi Development Authority rescinded the contract by letter dated 21st August, 1989. This rescission was also challenged by the petitioner and in the earlier award dated 26th December, 1993 the Arbitrator had returned the findings that the said rescission was illegal. Finding to this effect were upheld by this Court vide aforesaid judgment dated 30th May, 1997 by dismissing the objections of the Delhi Development Authority on this aspect. The learned Arbitrator by impugned award has awarded a sum of Rs.12,35,752/- under this claim. Relevant para of the award giving reasons in support of this claim reads as under:-

"Under the circumstances when the rescission of the contract effected by the respondents was in disregard of the merits/facts, the claimants have been deprived of their legitimate right to earn profit out of a legal binding contract between the parties. The fact that the department at the time of preparing the estimates itself takes into consideration the element of profit to be 10% remains unrebutted. Besides this the said element of profit is according to the norms/practice prevailing in the trade and in recognized accordingly. Accordingly, I conclude that fair ends of justice would be met by granting damages under the head "Loss of Profit" worked out @ 10% of prime cost of work which is reasonable measure of profit. From my experience in the field I think that 10% profit in a work of this nature can be said to be a loss naturally arising out of termination of contract".

3. The only submission made by learned counsel for the Delhi Development Authority is that the claim of loss of profit was a claim of remote nature which was not permissible under Section 73 and 74 of the Contract Act. In support of this proposition learned counsel for the objector has relied upon the judgment of this Court in the case of M/s. R.B.Chy.Ruchi Ram Khattar and sons versus Delhi Development Authority 1997 (1) Arbitration Law Reporter p.372. It is also contended that such a claim should not have been awarded as it is not necessary that after undertaking the work contractor would always earn profits.

4. I do not find any merit in this objection. As already mentioned above, the rescission of the contract by the Delhi Development Authority has been held to be illegal and this finding has attained finality. Due to this recession, admittedly that is the petitioner was not allowed to complete the work as per the contract. It is for this reason the claim loss of profits was preferred, which it would have earned had he been allowed to complete the work. The learned Arbitrator has awarded 10% of the prime cost work as reasonable measure of profit. Arbitrator has given valid reasons in support of this claim. Grant of loss of profit @ 10% is reasonable which would be the legitimate expectation of a contractor undertaking the work. Mr. Rajesh Lakhanpal, learned counsel for the petitioner relied upon the following judgments in support of this proposition:-

1. Superintending Engineers T.N.U.D.P. Madras Circle and another versus A.V.Rangaraju and another 1994 Arbitration Law Reporter p.173.

2. State of Kerala versus Bhaskaran .

3. M/s. A.T.Brij Paul Singh and Brothers versus State of Gujarat .

5. In all these judgments award of claim @ 10% is held to be justified. Thus, award at this rate of profit bears judicial stamp of approval.

6. The judgment in the case of R.B.Chy.Ruchi Ram (supra) has no application in the instant case as that was a case where contract had unduly prolonged even after the stipulated date of completion and employer was held responsible for such prolongation. The Court held, on the facts of that case, that the claim for loss of profit because of prolongation of the contract was not permissible. It may also be pointed out that in that case the claim of the petitioner was not based on the ground that petitioner was unable to earn profits elsewhere since it was tied up with the contract in question. It was not a case where contractor was not allowed to complete the work. The claim for loss of profit due to prolongation of work beyond stipulated date of contract would be entirely different from the claim for loss of profits due to illegal deprivation from completing the work. Therefore, the said case has no application to the facts and circumstances of this case.

7. IA. 7010 of 1999 is accordingly dismissed.

8. Suit No. 673-A of 1998

9. In view of the dismissal of objections to the award dated 4th March, 1998, the judgment is pronounced in terms of the award. The petitioner shall be entitled to a sum of Rs.12,35,742/- Along with interest as awarded by the Arbitrator. The petitioner shall also be entitled to interest @15% per annum from the date of decree till payment thereof. Decree-sheet be prepared accordingly.

10. IA. 4204/98

11. This application is filed by the learned Arbitrator in which he has stated that Delhi Development Authority has not paid its share of arbitrators' fee which comes to Rs.8,673.50p. Let defendant-Delhi Development Authority pay the aforesaid fee to the Arbitrator within two weeks form today.

12. IA stands disposed of.