Municipal Corporation Of Delhi vs Patliputra Construction
2005 Latest Caselaw 69 Del

JUDGMENT

Pradeep Nandrajog, J.

1. Challenge is to the award dated 1.1.2002 published by Sh. J.L. Dhingra, Sole Arbitrator appointed to decide the dispute between the petitioner and the respondent arising out of the contract being W.O No. D/EE(XXVI)/91-92 W/O/33 dated 20.12.91.

2. Respondent was the claimant before the Arbitrator and petitioner MCD was the respondent before the Arbitrator.

3. Claim No. 1, 2 and 3 of the claimant have been allowed in full or in part. Claim No. 4 & 5 have been rejected. Claim No. 6 for pre suit, pendente lite and future interest has been allowed @ 12% per annum on the awarded sum. Claim No. 7 for cost has been rejected.

4. MCD had 3 counter claims, all of which have been rejected.

5. Claimant has not challenged the award. MCD has filed objections to the award.

6. It is stated in the objections that the learned Arbitrator has ignored the written statement and counter claim filed by the MCD. Award is challenged that sufficient reasons have not been stated by the Arbitrator. It is stated that Clause 2 and 3 of the agreement vested a right in the MCD to get the work completed at the risk and cost of the contractor. It is further the objection of the MCD that appointment of the Arbitrator was bad in law inasmuch as a petition under Section 11 of the Arbitration & Conciliation Act, 1966 was pending when Arbitrator was appointed.

7. Learned counsel for the MCD did not dispute that the Commissioner of the Corporation had appointed Sh. J.L. Dhingra as the Sole Arbitrator. Objection of the MCD that the appointment of the Arbitrator was bad in the eyes of the law is wholly frivolous.

8. The claimant had filed a petition under Section 11 of the Arbitration & Conciliation Act, 1996 since the Commissioner of the Corporation, the authority named in the contract was not appointing an Arbitrator. During pendency of the said petition, Commissioner of the Corporation appointed Sh. J.L. Dhingra as the sole arbitrator.

9. A perusal of the award would reveal that the contractor was to construct certain residential units as per contract between the parties. Work was to be completed within 15 months of issuance of the work order being 20.12.1991. In other words, contract had to be completed by 20.3.1993.

10. Work could not be completed. Contractor was not receiving payments. He abandoned the site.

11. Contractor laid a claim under various heads which were refuted by the MCD. MCD alleged recovery against the contractor.

12. First claim of the contractor was in sum of Rs. 3,00,000/- being the unpaid sum for work done under the contract.

13. Award of the Arbitrator would reveal that during discussions, claimant was directed to bifurcate the claim into three parts. Claimant bifurcated the claim into three parts vide its letter dated 24.4.1999. Bifurcation was as under:-

a) Work done and measurements recorded in M.B........ Amount claimed Rs. 20,766.49.

b) Work done but measurements not recorded. Amount claimed Rs. 44,564/-. Further amount claimed for plastering etc. Rs. 20,000/-.

c) Part rate amount claimed Rs. 2,35,388.12.

14. Arbitrator has awarded a sum of Rs. 2,51,900/- against this claim.

15. Award records as under:-

"Both the parties were asked to have joint measurement and discuss the details and come to a common plat form, if possible. After efforts being done by both the parties the following figures were agreed.

a) Net payable amount = Rs. 7,375

b) Net payable amount = Rs. 14,551, the claim of Rs. 20,000/- was subsequently not contested by the claimants.

c) Part Rates- Net payable amount=2,29,974

Total amount payable = Rs. 7,375+Rs. 14,551

+Rs. 2,29,974 = Rs. 2,51,900 only.

(Copy of letter of claimant dated 24.04.1999 on which both the parties endorsed regarding Net amount payable is attached as Annexure-A).

16. Adequate reasoning is to be found in the award pertaining to claim No. 1. Reasoning is the consent of the parties. Learned counsel for the MCD argued that only the figures were agreed and not the volume of work. She stated that what was consented before the Arbitrator was that if the works were proved to be done, amount would be payable. It has to be noted that the learned Arbitrator has clearly recorded that both parties were asked to have joint measurements and discuss the details and come to a common platform, if possible. It is recorded immediately thereafter that after efforts being done by both the parties, the following figures were agreed. Thereafter, the agreed figures have been set out.

17. It has to be further noted in this context that "Annexure A" to the Award as noted by the learned Arbitrator while partially allowing claim No. 1 contains the total break-up of part A, B and C of the claim. On the same, Arbitrator has recorded the agreed amounts payable by expressly recording that the same were acceptable to both parties. At the place, Arbitrator has recorded consent on Annexure-A, claimant as well as representative of MCD have signed the document.

18. Objection to the award in sum of Rs. 2,51,900/- pertaining to claim No. 1 is accordingly rejected.

19. Claim No. 2 in sum of Rs. 1,00,000/- has been awarded by the Arbitrator. Said claim was for the refund of security deposit lying with the MCD. Award records that MCD admitted having deducted a sum of Rs. 1,00,000/- towards security deposit.

20. Ms. Saroj Bidawat, learned counsel for the MCD urged that security deposit was refundable on the contractor successfully completing construction of the work.

21. Sh. B.M. Sehgal, counsel for the contractor urged that admittedly contract stood determined and representative of the MCD had stated before the Arbitrator that amount payable to the contractor be worked out independently and counter claim be worked out independently. In other words, counsel for the claimant contended that if amounts were held awarded in favor of MCD, security deposit could have been ordered to be adjusted.

22. In my opinion, since counter claims failed before Arbitrator, Arbitrator was fully justified in awarding a sum of Rs. 1,00,000/- being the security deposit held by the MCD.

23. Claim No. 3 in sum of Rs. 9,20,000/- was on account of escalation under Clause 10 (cc) of the contract.

24. Learned Arbitrator has recorded, while allowing the said claim that the representative of the MCD agreed that the said sum was payable and noting to this effect have been recorded in Annexure A.

25. Perusal of Annexure A to the Award would reveal that the learned Arbitrator, on 22.8.1999 recorded pertaining to claim No. 3 on Annexure A as under:-

"Amount of claim as per 10(cc) agreeable also by respondent."

26. Under the aforesaid note of the Arbitrator, representative of the MCD as also the claimant have put their signatures.

27. Objection by the MCD on this count is wholly frivolous.

28. Contention of MCD that the Arbitrator has ignored the pleadings and the evidence on record while awarding the claims of the claimant as afore-noted is wholly frivolous for the reason that the learned Arbitrator worked upon the claim in the context of Annexure A. Agreement of the parties pertaining to the amounts payable was recorded in Annexure A.

29. Claim No. 4 and 5 of the contract have been rejected. Contractor has not filed any objections.

30. Claim No. 6 was for interest, pre-suit, pendente lite and future. Arbitrator has refused pre-suit and pendente lite interest. Simple interest @ 12% per annum has been awarded from the date of award till date of payment. The amount of interest is fair and reasonable. Learned counsel for the MCD did not join issues with the same.

31. Claim No. 7 was towards cost of arbitration. Contrator had claimed Rs. 50,000/-. Claim has been rejected.

32. Turning to the counter claim of the MCD, counter claim No. 1 was for recovery of steel and cement supplied under the contract by the MCD, quantity not being consumed in the works and not returned. Recovery was at penal rate.

33. Learned Arbitrator rejected the counter claim by holding that the MCD could not substantiate the claim with supporting evidence.

34. During arguments, Ms. Saroj Bidawat, counsel for the MCD was repeatedly asked as to what evidence was led before the Arbitrator by the MCD to show what quantity of steel and cement was supplied. As per theoretical calculations under the contract, what quantity had to be consumed considering the work done. From the aforesaid two primary data could alone, it be determined as to what was the quantity for which MCD could raise a counter claim. Learned counsel for the MCD could not point out any document. Indeed, the finding of the Arbitrator that MCD could not substantiate this claim is fully justified.

35. Counter claim No. 2 was for alleged damages suffered by the MCD due to shoddy work.

36. While rejecting the claim, learned Arbitrator has held that MCD did not take any steps to protect the works which were executed by the contractor till the stage when dispute arose. Learned Arbitrator held that neither the contractor nor the MCD took steps to prevent encroachment.

37. Ms. Saroj Bidawat, learned counsel appearing for the MCD urged that the learned Arbitrator held both parties liable and, therefore, some damages should have been awarded.

38. Site admittedly belonged to MCD. Status of the contractor was that of a licensee to enter upon the land and effect constructions.

39. When dispute surfaced between the parties and the contractor did not receive payments, he withdrew from the site. It was, in my opinion, the responsibility of MCD to have protected the works. Be that as it may, learned counsel for the MCD could not draw attention of this court to any document from which it could be ascertained as to what was the damage caused. To succeed, if at all, MCD had to prove not only damage caused but the money value thereof.

40. Counter claim 3 of MCD in sum of Rs. 8,00,000/- was on account of the term of the contract which empowered MCD to get completed the balance work at the risk and cost of the contractor.

41. While rejecting the claim, learned Arbitrator has held that the MCD has not awarded the balance works to any third party and, therefore, nothing could be awarded under this head.

42. Learned Arbitrator has recorded that the claim was the estimated approximate amount, which as per MCD would be spent on getting the balance work completed.

43. To succeed under counter claim No. 3, MCD had to first prove breach of contract by the contractor. Thereafter, MCD had to establish damages suffered. Measure of damage had to be the cost on which balance works were tendered minus the amount on which balance works ought to have been completed as per contract price between the parties. This, admittedly was not done by the MCD. Learned counsel for the MCD could not point out any evidence led by the MCD before the Arbitrator to show as to what amount was likely to be spent over and above the contract stipulated rate if the work was re-tendered.

44. The Arbitrator was accordingly fully justified in rejecting the counter claim No. 3.

45. I find no merit in the objections filed by the MCD. OMP 114/2000 filed by MCD under Section 34 of the Arbitration & Conciliation Act, 1996 is accordingly dismissed.

46. No costs.