Delhi High Court
M.N. Arora vs Dda on 14 July, 2005
Author: R Jain
Bench: R Jain
ORDER
R.C. Jain, J.
1. The petitioner was awarded the work of construction of 590 dwelling units under Self Financing Scheme in Sector-C, Pocket-5, Vasant Kunj, New Delhi vide Agreement No. 19/HD-II/84-85. The work was not completed within the time-frame provided in the agreement and spilled over to a much later period. Disputes and differences arose between the parties, which were referred to arbitration in terms of the Arbitration Agreement and Mr. O.P. Goyal was appointed as the sole Arbitrator to resolve the disputes between the parties. The parties filed the following claims and counter claims before the Arbitrator:
Claims filed by the Contractor--
Claim No. 1 : Rs. 17.70 lacs on account of loss of profitability as a result of illegal determination of contract. Claim No. 2: Rs. 9.50 lacs on account of work done prior to illegally determining the contract.
Claim No. 3 : Rs. 1.00 lac on account of release/refund of security deposit.
Claim No. 4 : Rs. 5.65 lacs on account of ancillary services provided at site before and during execution of work.
Claim No. 5 : An amount of Rs. 23,450/- per month on account idle permanent establishment.
Claim No. 6 : An amount of Rs. 1.75 lacs per month on account of forcible idleness due to non-release of articles such as materials, T and P, centering and shuttering from 18.10.86 till date of payment or decree whichever is early.
Claim No. 7 : An amount of Rs. 23,450/- per month on account of establishment charges for the extended period of contract viz. F18.12.85 to 18.10.86 due to various breaches, lapses and defaults of the department.
Claim No. 8 : Claimants claim pendente lite interest at 20% per month. Counter-claims filed by the DDA--
1. Rs. 14,07,221 on account of extra expenditure incurred/being incurred to complete the work at the risk and cost of the claimants under provisions of Clause 3(a), (b) and (c).
2. Rs. 10,94,492 towards levy of compensation on account of non-completion of work under Clause 2.
3. Rs. 1.00 lac on account of forfeiture of security deposit under Clause 3(a).
4. Rs. 51,72,551 on account of interest payable to the allottees on account of delay in handing over possession of flats.
2. The Arbitrator entered the reference and after hearings, made and published his Award dated 14.5.1995 thereby upholding only two claims of the petitioner-contractor, i.e., claim No, 2 of the petitioner-contractor for a sum of Rs. 4,98,045/- as against the claim of Rs. 9,50,000/- and claim towards refund of security amount of Rs. 1 lac in favor of the Contractor. The Arbitrator, however, rejected the counter-claims. Aggrieved by the Award of the claims to the above extent in favor of the petitioner-contractor, DDA has filed objections under Sections 30 and 33 of the Arbitration Act, 1940, mainly on the grounds that the Arbitrator has misconducted himself and the proceedings by ignoring important documents, more particularly, terms and conditions of the contract in awarding a sum of Rs. 2,88,000/- towards escalation costs in terms of Clause 10(c) and by disallowing the counter-claims of the objector, DDA.
3. I have heard learned Counsel for the parties and given my thoughtful consideration to their respective submissions. Mrs. Salwan on the strength of certain observations made and finding given by the Arbitrator himself in the opening part of the Award has strongly urged that after taking such an overall view of the matter in regard to the delay in completion of the work being attributable to both sides, the Arbitrator was not justified in granting the cost of escalation towards increase in wages of the labour to the contractor. It is true that the Arbitrator has observed in the Award that the delay in execution of the work within the time frame was attributable to both sides and DDA but as did not take any coercive steps against the contractor for its failure to complete the work within the stipulated time, the Contractor was entitled to escalation towards labour and wages. This explains the award of the amount in favor of the contractor and, therefore, the Award cannot be said to be inconsistent with the earlier observations/findings of the Arbitrator. In any case, it is not open to this Court to examine this question as a Court would do while sitting in an appeal against an order or findings because an Arbitrator is the sole Judge of facts and law. In the opinion of this Court, no fault can be found with this finding and therefore the award is not liable to be set aside on this ground. Similarly, the Award in regard to the refund of security is to be upheld based on the overall general view taken by the Arbitrator as to how the two sides have conducted themselves during the course of execution of the work.
4. So far as the counter-claims raised by the respondent before the Sole Arbitrator and its rejection is concerned, Ms. Anusuya Salwan, learned Counsel representing the DDA has vehemently urged that the counter-claim in the sum of Rs. 10,94,492 towards levy of compensation on account of non-completion of work under Clause 2 was an excepted matter and beyond the pale of Arbitration Agreement inasmuch as the decision of the Engineer-in-charge i.e. Superintending Engineer in this case on this issue was final and not open to any challenge, much less through the arbitral procedure. Her contention is based on two Division Bench decisions of this Court. The earlier one being in the case of Delhi Development Authority v. Sudhir Brothers, (DB) and the other in the case of Bhagat Construction Co. v. Delhi Development Authority, 2001 (Suppl.) Arb. LR 375 (Delhi) (DB). In these cases, the Court has the occasion to morefully deal with a similar situation where counter claims which fall within the connotation "Excepted Matters" and beyond the pale of Arbitrators were raised before the Arbitrator and adjudicated upon by him. The Court on a consideration of the matter and more particularly about the incapacity of the Arbitral Tribunal to entertain such counter claims and answer the same held that since the Arbitral Tribunal had no jurisdiction to entertain and adjudicate upon such counter-claims, the Award was a nullity. The Court invoked the principle of nullity of a decree passed by a Court lacking jurisdiction to pass such a decree. The facts and circumstances of the case in hand are no different inasmuch as here also counter-claim raised by the respondent in the sum of Rs. 10,94,492/- towards levy of compensation on account of non-compliance of work was and excepted matter within the meaning of Contract, the decision of the Engineer-in-charge being final on that question and, therefore, it would follow that the Arbitrator was not competent to adjudicate on the counterclaim of the respondent. Consequently the Award of the Arbitrator so far as it has unsuited the DDA on its counter-claim of Rs. 10,94,492/- has to be set aside leaving the parties to work out their remedies in accordance with law.
5. In the result, the Award of the Arbitrator so far as it has allowed the claim Nos. 2 and 3 of the Contractor is hereby made a Rule of the Court while that part of the Award which disallowed the counter-claim of the DDA to the tune of Rs. 10,94,492/- towards levy of compensation on account of non-completion of work under Clause 2 is hereby set aside. Let a decree sheet be drawn accordingly.
The suits and all pending IAs stand disposed of accordingly.
