Delhi Development Authority, ... vs Saraswati Construction Co. ...
2004 Latest Caselaw 1038 Del

JUDGMENT

Vijender Jain, J.

1. This appeal impugns the order of the learned Single Judge whereby the objections of the appellant under Sections 30 and 33 of the Arbitration Act, 1940 were dismissed. Mr.Anil Sapra, learned counsel for the appellant, at the outset, has contended that payment in respect of the claims in the award has been made except under Claim Nos.13 and 18 and he restricts his arguments to the award made by the Arbitrator in respect of claim Nos. 13 and 18 and objections rejected by the learned Single Judge on that account.

2. Claim No.13 is a claim by the respondent for Rs.8,75,000/- on account of damages suffered due to non-release of clause 10 CC payment in due time, deviation from the index as applicable at the time of payment, late payment of running as well as final payment, release of security and withheld amount, idling of machinery as well as shuttering on account of late laying of conduit for casting of slabs, transportation and also deviation of quantities beyond agreement of various items. Mr.Anil Sapra, learned counsel for the appellant has contended that the award of the Arbitrator on this claim was against the term of reference and has contended that clause (7) of the agreement postulated that it was only on the submission of the final bill by the contractor within one month of the date fixed for completion of the work or of the date of the certificate of completion furnished by the Engineer-in-charge, payment was to be made within three months, if the amount of the contract plus that of additional items was up to Rs.2 lakhs and in six months, if the same exceeded Rs.2 lakhs, of the submission of such bill. It was contended that no final bill was submitted by the contractor and, therefore, the arbitrator has misconducted the proceedings in as much as he has awarded the claim beyond the terms of contract. In support of his submission learned counsel for the appellant has cited Rajasthan State Mines & Minerals Ltd. Eastern Engineering Enterprises and anr. where the Supreme Court observed as under:

"(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action.".

3. With regard to the claim No.18, Mr.Sapra has contended the said claim was filed by the claimant/respondent no.1 for Rs.7,50,000/- on account of expenditure incurred for employing technical and other staff for the period beyond stipulated date of completion. It was contended that while granting extension of time the respondent no.1 had given a letter that he had not suffered any liquidated damage and will not claim anything except payment under Clause 10 CC and, therefore, the learned Arbitrator ought not to have allowed the said claim. It was also contended that in terms of award of claim under claim 13, the arbitrator has allowed interest over interest, if one considers the entire award. The Arbitrator has awarded pendenlite interest at 15% per annum from the date of reference to the date of award i.e w.e.f 18.12.1991 to 10.08.1993 on the awarded amount of Rs.14,54,868 against claims no.1 to 20 and interest at 15% per annum on the total amount of the award, Rs.18,13,128/- from the date of award till the date of payment or decree whichever will be earlier. His submission is that thus the Arbitrator has allowed interest over interest which includes interest awarded under claim no.13.

4. On the other hand, Mr.Sandeep Sharma, learned counsel for the respondent has contended that in regard to claim no.18, the argument of the appellant that while granting extension of time the respondent no.1 had given a letter that he had not suffered any liquidated damage and will not claim anything except payment under Clause 10 CC, does not hold good as respondent no.1 had withdrawn the said letter on 2nd July,1991. The fact that the said letter not claiming anything except payment under clause 10CC was withdrawn by the respondent no.1 on 2nd July,1991 has also been admitted by the appellant in their appeal in ground R on page 11 of the appeal. It was further contended that interest on interest could be awarded if the interest awarded under claim no.13 was as a matter of fact and in the nature of damages. The learned counsel for the respondent no.1 has relied upon Oil & Natural Gas Commission Vs. M.C. Clelland Engineers S.A. .

5. We have perused the pleadings of the parties, award and the order of Learned Single Judge. We would first deal with claim no.18. Claim No.18 was for payment of Rs.7,50,000/- on account of expenditure incurred for employing technical and other staff for the period beyond stipulated date of completion. We have seen that the arbitrator discussed in detail and arrived at a figure that the respondent no.1 is entitled for a sum of Rs.5,68,421/- against this claim. The argument advanced by learned counsel for the appellant that a letter was given by the respondent no.1 that they will not claim any excess payment except whatever was due under clause 10 CC has also been considered by the arbitrator. From the appeal of the appellant it is apparent that the appellant themselves have admitted that the said letter/undertaking was withdrawn by the respondent on 2nd July, 1991. If the letter/undertaking was withdrawn, the same cannot be relied upon by the appellant. Once the letters of the respondent no.1 representing that he will not claim any excess of payment except whatever was due under Clause 10 CC and the subsequent letter withdrawing earlier letter has been considered by the Arbitrator, this Court would be reluctant to substitute its own findings with the findings of the Learned Arbitrator which has been validly and reasonably recorded by the arbitrator.

6. Coming to the next ground of appeal with regard to claim no.13, the said claim was for a sum of Rs.8,75,000/- on account of damages suffered on account of so many heads as has been recorded above. The arbitrator has taken into consideration Appendix C/19 and C/22 and on the basis of the material before the arbitrator, The arbitrator has come to the conclusion that there was an overall delay in payment of pre-final and final bills, refund of security deposit which constituted abnormal delay. Therefore, the respondent no.1 had to be compensated and the Arbitrator has awarded a sum of Rs.3,00,623/- against this claim. From the reasoning of the arbitrator, it is apparent that the arbitrator has compensated the respondent for the inordinate delay committed by the appellant because of which the respondent no.1 had suffered damages. In the matter of contract and its performance parties have to be dealt equally. To finance a project, interest has to be paid by the claimant either in terms of bank interest or for locking out the capital for execution of contract and for that locking of the capital for execution of the contract, if there is a delay on the part of the other party, the party which suffers on account of delay is to be compensated and that compensation has to be just and proper. Therefore, we do not find any substance in the argument of learned counsel for the appellant that as arbitrator has awarded interest he could not have awarded further interest on the interest which was awarded as damages. As a matter of fact, the interest awarded in lieu of compensation or damages becomes principal amount for which a party would be entitled for interest on account of it being withheld by the opposite party. We find support from a decision of the Supreme Court in Oil & Natural Gas Commission's case (supra), where Supreme Court observed as under :-

"There cannot be any doubt that the arbitrators have powers to grant interest akin to Section 34 of the CPC which is the power of the Court in view of Section 29 of the Arbitration Act, 1940. It is clear that interest is not granted upon interest awarded but upon the claim made. The claim made in the proceedings is under two heads -- one is the balance of amount claimed under invoices and letter dated 10.2.1981 and the amount certified and paid by the appellant and the second is the interest on delayed payment. That is how the claim for interest on delayed payment stood crystallised by the time the claim was filed before the arbitrators. Therefore, the power of the arbitrators to grant interest on the amount of interest which may, in other words, be termed as interest on damages or compensation for delayed payment which would also become part of the principal. If that is the correct position in law, we do not think that Section 3 of the Interest Act has any relevance in the context of the matter which we are dealing with in the present case. Therefore, the first contention raised by Shri Dutta, though interesting, deserves to be and is rejected."

7. We have given our careful consideration to the arguments advanced by learned counsel for both the parties. The arbitrator was a retired Director General of the CPWD. He was the former Engineer Member of the DDA. He was very well conversant with the working of these kinds of contracts in the appellant's organization. When the parties have chosen a forum to refer their disputes to be adjudicated not under a common law forum or under a statute by filing a suit, this court while exercising appellate power will not substitute its opinion with than that of the arbitrator. If the clauses in the contract are open to two plausible interpretations, it is legitimate for the arbitrator to accept one or the other available interpretation and even if the Court may think that the other view is preferable, the Court will not or should not interfere with interpretation of the Arbitrator. Reliance can be placed on Food Corporation of India Vs Joginderpal Mohinderpal & Another , Puri Construction Pvt. Ltd Vs Union of India , Gujarat Water Supply & Sewerage Board Vs Unique Erectors (Gujrat) P. Ltd & Another and Hind Builders Vs Union of India in this regard that this court while exercising appellate power should not substitute its opinion with that of the arbitrator.

8. With regard to prolongation of contract, a Division Bench of this Court in Delhi Development Authority Vs. S.S. Jetley 2001 (1) Arb. L. R. 289 held :

. "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 instrument, 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. Moreover, 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 pre-suit 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.".

9. We do not find any infirmity with the impugned award and the order of Learned Single Judge. There is no merit in the appeal and the same is dismissed. The respondent no.1 shall be entitled for the amounts awarded to him which have not been already paid to respondent no.1. Considering the facts and circumstances of the appeal the parties are left to bear the cost of the appeal.