Delhi Development Authority vs Bhagat Construction Co. (P) Ltd. ...
2004 Latest Caselaw 1011 Del

JUDGMENT

Vijender Jain, J.

1. This appeal has been directed against the impugned order passed by the learned Single Judge dated 02.08.1991. Pursuant to disputes, which arose between the appellant and the respondent No. 1, matter was referred to the sole Arbitration of Shri O.P. Mittal, respondent No. 2 herein, a retired Chief Engineer of CPWD. The Arbitrator gave his Award on 18.05.1988. The claims were filed by the respondent No. 1 Briefly narrating the claims are, Claim No. 1 is a claim for a sum of Rs. 12 lacs outstanding against the final bill; Claim No. 2 is for reimbursement of Rs. 3,50,000 due as a result of increase in price of bricks ; Claim No. 3 is a claim for a sum of Rs. 2,50,000 on account of difference in actual and theoretical weight of steel; Claim No. 4 is a claim for Rs. 90,000 deducted by the appellant towards rebate, which was rejected by the Arbitrator; Claim No. 5 is for Rs. 30 lacs on account of increase in market rates for material and labour after the stipulated date of completion; Claim No. 7 is for Rs. 3 lacs for cost of establishment and over heads salary to staff wages of labour kept in the maintenance period, which was rejected by the Arbitrator and Claim No. 8 is for pendente lite interest till the date of decree or payment whichever is earlier. In view of the law then prevailing, Claim No. 8 for pendente lite interest was rejected. There was no Claim No. 6 in the Award. The appellant has also filed the counter-claims. Counterclaims were rejected by the Arbitrator.

2. Mr. Anil Sapra, learned counsel appearing for the appellant, has fairly contended that he is aggrieved by the impugned Award, as no reasons for arriving at various figures have been given by the Arbitrator. Learned counsel for the appellant has invited our attention to Claim No. 2 which was a claim for reimbursement of Rs. 3,50,000 as a result of increase in price of bricks. Mr. Sapra has contended that after discussing Claim No. 2, the Arbitrator has come to the conclusion that the claim is admissible to the extent of Rs. 2,25,734. According to Mr. Sapra as to on what basis this figure has been arrived at, ought to have been given in the Award otherwise it would amount to an adjudication which is based on non-application of mind and Award is perverse. Learned counsel for the appellant has relied upon a Division Bench judgment of this Court reported as College of Vocational Studies v. S.S. Jaitely, AIR 1987 Delhi 134=1987(1) Arb. LR 315 (Del.) (DB), in which it is held :

"A bare reading of the finding against these two Claims B and B-1 will show that the Arbitrator has merely given his conclusions and verdict without giving any reasons. Reasons are the links on the material, documentary or oral evidence. Adduced before the Arbitrator, on which certain inferences are drawn and conclusions are made. There must be some rational nexus between the two indicated in the Award. The Arbitrator may not set out every process of reasoning or may not deal with every point raised but must, when he is called upon to give reasons, tell the 'reason' why he came to the particular conclusion. It is not possible for us to find out as to how and why the Arbitrator has arrived at the said figure of Rs. 2,91,518.63. During the course of arguments, we asked Mr. Watel to tell us even now, as to how this amount of Rs. 2,91,518.63 had been worked out. Even he could not tell us how this amount had been worked out by the Arbitrator. There is no indication of the mind of the Arbitrator in arriving at such a conclusion in awarding this amount of Rs. 2,91,518.63. We are of the view that these findings against Claims B and B-l are without any reasons, whatsoever, and as such the Arbitrator has not only misconducted the Arbitration proceedings but has exceeded the terms of reference under which he was required to give reasons for his findings. As we have already held that the finding of the Arbitrator to the effect that the contractor was justified in cancelling the agreement, are perverse and the Arbitrator has misconducted himself and the Arbitration proceedings, so the Award of the Arbitrator against other claims of the contractor and counter-claims of the appellant are also liable to be set aside."

3. On the basis of the aforesaid authority, it has been contended by Mr. Sapra that if there are missing links and Arbitrator has not culled out his inferences and his decision on the basis of certain materials, such an Award would be without any reasons and, therefore, the Award will be liable to be set aside. In support of his submissions learned counsel has also relied upon Claim No. 2 with regard to claim of differences in actual and theoretical weight of steel. Learned counsel for the appellant has contended that the finding of the Arbitrator that the actual weight of steel reinforcement is always more than the weight given in the standard tables due to steel rolling defects, is without any reason and based on his own assumption and no reason can be deciphered from the Award.

4. It was next contended before us that pursuant to Clause 2 of the contract, Superintending Engineer had adjudicated that the delay was caused by the respondent No. 1. Once the Superintending Engineer has attributed delay to the respondent No. 1, the Arbitrator could not have decided that delay was attributable to the appellant. In support of his contention, learned counsel for the appellant has relied upon Vishwanath Sood v. Union of India and Anr., in which it is held by the Supreme Court :

"...............As we see, it, Clause 2 contains a complete machinery for determination of the compensation which can be claimed by the Government on the ground of delay on the part of the contractor in completing the contract as per the time schedule agreed to between the parties. The decision of the Superintending Engineer, it seems to us, is in the nature of a considered decision which he has to arrive at after considering the various mitigating circumstances that may be pleaded by the contractor or his plea that he is not liable to pay compensation at all under this clause. In our opinion the question regarding the amount of compensation leviable under Clause 2 has to be decided only by the Superintending Engineer and no one else."

5. Next contention of the learned counsel for the appellant was that in view of delay having been attributed in terms of Clause 2 on the respondent No. 1, the counter-claims particularly counter Claim No. 8 which was a claim for Rs. 87,98,670 towards losses in the shape of interest on account of delay on the part of the claimants for a period of two and a half years ought to have been determined in favor of the appellant.

6. On the other hand, Mr. Sandip Sharma, counsel appearing for the respondent No. 1, has contended that Arbitrator was a retired Chief Engineer of CPWD, he had full knowledge of the working of the department like the appellant, the Arbitrator was appointed by the appellant, therefore, it cannot be said that the Arbitrator was a novice and he had to assign the detailed reasons for coming to the conclusion as has been done by the Arbitrator. In support of his contentions, learned counsel for respondent No. 1 has cited M.C.D. v. Jagan Nath Ashok Kumar and Anr., . It was also contended by him that the Arbitrator has not to give detailed reasons if taking the Award in its totality, the mental process of the Arbitrator giving the Award can be deciphered. It was further contended that as the Arbitrator has held that the delay was caused on account of so many factors on the part of the appellant and he has considered all the relevant material, it cannot be contended that no reasons have been disclosed by Arbitrator. In support he has also cited DDA, New Delhi v. . Alkaram, New Delhi, and Arosan Enterprises Ltd. v. Union of India and Anr., 1999(3) Arb. LR 310 (SC). On the basis of the said authorities, it was contended by the learned counsel for the respondent No. 1 that the Court will not go into the sufficiency of the evidence nor it is necessary for the Arbitrator to set out the actual calculation of figures as worked out by him. It was also contended by Mr. Sharma that once the Award is a speaking Award and Arbitrator has assigned sufficient reasons in support thereof the effect of the Award cannot be nullified and same cannot be set aside on the ground that the detailed calculations have not been given by the Arbitrator. In support of his submission learned counsel for respondent No. 1 has relied on upon State of U.P. v. Allied Constructions, 2003(4) CTC 173. In this case, the plea in regard to Clause 47 was taken which was a force majeure clause and it had been contended that loss was on account of unprecedented rain. The Arbitrator, however, recorded finding that flood was not due to unprecedented rain and the force majeure clause was not attracted. It was held that Arbitrator assigned sufficient and cogent reasons in support of his finding and Award was not set aside. It was observed by the Court:

"..........The Arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for Arbitrator to determine [See : Sudarsan Trading Company v. The Government of Kerala, ]. Section 30 of the Arbitration Act, 1940 providing for setting aside an Award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an Award cannot be set aside. The Arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the Award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on _ the face of the records would not imply closure scrutiny of the merits of documents and materials on record. Once it is found that the view of the Arbitrator is a plausible one, the Court will refrain itself from interfering [See : U.P. State Electricity Board v. Searsole Chemicals Ltd., and Ispat Engineering and Foundry Works, B.S. City, Bokaro v. Steel Authority of India Limited, B.S. City, Bokaro, ]."

7. Rebutting the argument of the counsel for the appellant it was contended before us by the learned counsel for the respondent No. 1 that V3 delay could have been decided, what could not have been decided pursuant to Clause 2 was the delay in terms of said clause of the agreement. Matters } which are outside the purview of Clause 2 in a generic sense can be decided for attributing delay by the Arbitrator. In support of his contentions, learned counsel for respondent No. 1 has cited R.S. Avtar Singh and Co. v. Indian Tourism Development Corporation Ltd., , in which relying on Bachhittar Singh v. State of Punjab and Anr. , the Court observed :

".....the Constitution Bench of the Supreme Court while considering the requirement of communication of an order for it to become legally effective observed as under :

'thus it is of essence that the order had to be communicated to the person who would be affected by that order before the State and that person can be bound by that order. For until the order is communicated to the person affected by it, it would be open to the Council of Ministers to consider the matter over and over again and, therefore, till its communication the order cannot be regarded as anything more than provisional in character.'

In view of the aforesaid dictum, as laid down by the Constitution Bench of the Supreme Court it is clear that the order of appointment of the Arbitrator would be taken to have been made when communicated and received by the Arbitrator and the concerned party i.e. by the order dated 5th October, 2001.

The next question arising for consideration is that whether the respondent could appoint an Arbitrator after the Court has been seized of the request for appointment of an Arbitrator, made through a petition Under Section 11(6) of the Arbitration and Conciliation Act, 1996. Mr. Sharma submits that the decision of appointment was taken on 30th August, 2001 and as such the Court should take cognizance of the same and a new Arbitrator need not be appointed. Reference in this connection is invited to Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr., 2000(3) Arb. LR 447 (SC). In the cited case, Court considered as to when a party forfeits its right to appoint an Arbitrator, if it fails to comply with the demand made for appointment of the Arbitrator. The appointment of the Arbitrator was made, but it was not within the 30 days period. It was held that the appointment of the Arbitrator by the respondent was valid as it cannot be said that the right was forfeited after expiry of 30 days from the date of demand In other words, the ratio decidendi appears to be that there is no automatic forfeiture of the right to appoint an Arbitrator upon expiry of 30 days. However, the Court held that in case, before an Arbitrator is appointed if the opposite party files an application Under Section 11 seeking the appointment of an Arbitrator then the right of the party to appoint an Arbitrator ceases."

8. We have given our careful consideration to the arguments advanced by the learned counsel for both the parties. In order to appreciate the contentions of the parties, it is important and relevant to see as to how the Arbitrator has dealt with the matter. It is now well established principle of law that the Court will not substitute its own opinion for that of the arbitrator. In the instant case, the Arbitrator was a retired Chief Engineer of the CPWD, he was very well conversant with the kind of disputes on which he was adjudicating. It is also well settled that for the opinion taken and the decision rendered by the Arbitrator, this Court will not substitute its own view, even if this Court comes to a different conclusion, until and unless the decision of the Arbitrator is manifestly perverse or has been arrived at on the basis of wrong application of law. In this backdrop of the matter, once we take into consideration the Award, which is running into 25 pages, Arbitrator in first five pages had dealt with the reasons for arriving at a finding that delay was attributable to appellant. He has stated that supply of cement, supply of steel, shortage of funds, design for development work, which were major factors, which have contributed to the non-performance of agreement within the stipulated time and has resulted in prolongation of the contract were attributable to the appellant. It is in this background the Arbitrator has dealt with all the claims of the appellant.

9. Let us deal with the argument of the counsel for the appellant that no reasons have been given with respect to Claim Nos. 2 and 3 by the Arbitrator. This is how the Arbitrator has dealt with Claim No. 2, which is a claim for reimbursement of Rs. 3,50,000 due as a result of increase in price of bricks :

"The respondents have argued that the increase in price of bricks became effective after the stipulated date of completion. The department has considered that the claimant was responsible for delay in execution of work and, therefore, he was not entitled for reimbursement of the escalation in the price of bricks. In Para (4) I have already decided that the claimant was not responsible for delayed completion of work. I assess and decide the claim is admissible to the extent of Rs. 2,25,734 and respondents should pay Rs. 2,25,734 (Rupees two lacs twenty five thousand seven hundred and thirty four only) to the claimants."

10. Similarly, the claim on account of steel has been dealt with in Claim No. 3 which we need not to reproduce. From the catena of cases decided by this Court as well as by the Apex Court what has to be seen by the Court is whether the reasons given by the Arbitrator are perverse or no reasonable person could have come to that view. Arbitrators are not Judges, they have not to write judgments as Judges do. If from the Award, it can be inferred that the Arbitrator has applied his mind, taken into consideration the relevant material for arriving at the finding the Award cannot be interfered with. In the instant case, from reasoning of the Arbitrator which we have referred to above, and para 4 in which the Arbitrator has mentioned in the claim under question, the finding of the Arbitrator was that the appellant had no money to start the project. The Arbitrator relied on the advise of Chief Engineer which is as follows :

"In view of the current financial stringency in the DDA, it has been decided that 1st priority is to be given to such of the housing schemes which can be completed in all respects for allotment purposes within 3 to 4 months in the matter of release of funds issue of cement and steel, etc."

11. Therefore, it cannot be said that any missing link was there or the claim of Rs. 3,50,000 on account of increase in price of bricks, which was given to Rs. 2,25,734 was without any basis.

12. The well settled principle of law is that the Arbitrator need not to disclose the mathematical calculations in the Award. If the Award shows the application of mind and a view which is plausible by the Arbitrator, it can be taken as correct.

13. The argument of Mr. Sapra regarding Clause 2 of the agreement and the power of Superintending Engineer to fasten liability of delay on the respondent No. 1 cannot be accepted though there cannot be any dispute with the proposition of law as enunciated in Vishwanath Sood v. Union of India and Anr.'s case (supra), however, that power of the Superintending Engineer is in relation to levy of damages on account of the power given to the appellant under Clause 2 of the agreement. To say that after such determination by the Superintending Engineer in terms of Clause 2 of the agreement, then the Arbitrator cannot decide the question of delay cannot be inferred either from the facts of present case or under law. Once in the agreement a specific clause is mentioned, which is excepted matter like Clause 2 and liquidated damages in terms thereof have been adjudicated by the Superintending Engineer, the Arbitrator will not have any power to adjudicate with regard to said liquidated damages as awarded by the Superintending Engineer that attains finality but whether in terms of general contract and its breaches thereof, parties have chosen the forum of Arbitration, referred the disputes in relation to performance or non-performance of either party as to who is responsible for delay. Clause 2 will not come in operation, nor will negate the power of Arbitrator except for the matters under Clause 2 only. Even otherwise is this case the appellant has taken no such objection either before the Arbitrator or before the learned Single Judge. Supreme Court in J.G. Engineer's Pvt. Ltd. v. Calcutta Improvement Trust and Anr., , has held that:

"The issue of termination of the contract in question, on the facts under consideration before us does not relate to the jurisdiction of the Arbitrator. Without going into the scope of Clause 1.9 of the Information and Instructions to Tenders or that of Clause 15 of the contract and assuming that issue of termination of contract can be brought within the scope of the said clauses and thus made an excepted matter but that would depend upon the fact whether Engineer's certificate under Clause 1.9 has been issued or not. Therefore, specific plea had to be taken that such a certificate was issued and, therefore, the aspect of termination was not arbitrable. As already noticed no such fact was pleaded or contention urged in the counter statement of facts. In this view, it is not necessary to decide whether the issue of termination of the contract could be brought within the ambit of the excepted matter or not or that the Engineer's certificate could be conclusive only as to the quality or measurement of the work done.

The Division Bench was, thus, not correct in coming to the conclusion that the fundamental terms of the agreement between the parties prohibited the arbitrability of the excepted matters. The first ground on the basis of which the judgment of the learned Single Judge was reversed is, thus, not sustainable."

14. We also find no force in the arguments of the learned counsel for the appellant that in view of Clause 2, the counter-claims of the appellant ought not to have been rejected by the Arbitrator and Claim No. 1 ought not have been adjudicated by the Arbitrator as this was an excepted matter. However, that will not make any difference to the Award as that part of the Award can be separated from the rest of the Award and we order accordingly.

15. The respondent No. 1 has filed cross objections as pendente lite interest was not awarded by the Arbitrator in view of the decision of the Supreme Court in Executive Engineer, Irrigation, Galimala and Ors. v. Abhaduta Jena and Ors., . However, in view of the later decision of the Supreme Court in Secretary, Irrigation Department, Govt. of Orissa and Ors. v. G.C. Roy, , overruling the ratio of Executive Engineer, Irrigation, Galimala and Ors. v. Abhaduta Jena and Ors. case (supra), the respondent No. 1 will be entitled to pendente lite interest during the Arbitration proceeding @ 10% per annum simple interest on the amounts awarded by the Arbitrator and to that extent the cross-objection of the respondent No. 1 is allowed. The appeal will be liable to be dismissed and the cross-objection of the respondent No. 1 are to be allowed indicated hereinabove. Respondent No. 1 shall also be entitled for costs of appeal in the facts and circumstances.

16. Bank guarantee, if any, furnished be released in favor of the respondent No. 1.

17. It has been contended before us that for furnishing Bank guarantee the respondent No. 1 has paid charges to the Bank to keep the Bank guarantee alive. As a matter of fact, the public authorities and corporations where public money is involved, they go on filing appeal after appeal not being satisfied by the Award passed by the Arbitrator, who had been appointed by them, thereafter the matter having been raised in objection petition. Though the amount has been released in favor of the respondent No. 1 but respondent No. 1 has to suffer on account of Bank charges, i.e. interest which has to be paid for keeping the Bank guarantee alive. The appellant will pay 50% of the said charges to the respondent No. 1 within four weeks after the same is intimated by the respondent No. 1 to the appellant. That will constitute the cost of these proceedings.

18. Appeal and cross-objections stand disposed of accordingly.