Narain Das R. Israni vs Delhi Development Authority
2005 Latest Caselaw 1475 Del

JUDGMENT

Sanjay Kishan Kaul, J.

Page 2104

1. The petitioner was awarded the work of construction of MIG Houses in various sectors in Rohini and an Agreement was entered into bearing No. 2/RPD-IV/DDA/84-85. The work was completed on 04.02.1986 with the delay of about 5Â1/2 months. There were disputes between the parties about the claims of the petitioner and the petitioner invoked Clause 25 of the Agreement between the parties being the arbitration clause. In terms of the invocation, the Engineer Member, DDA under the cover of the letter dated 23.08.1991 appointed Shri S.C. Kapoor, Chief Engineer (Retd.) as the Sole Arbitrator. The Arbitrator made and published the Award on 30.12.1999.

2. The respondent DDA filed objections under Sections 30 and 33 of the Arbitration Act, 1940 to all the claims awarded.

3. Learned counsel for the parties were heard at length on the objections claim-wise and it would be appropriate to consider the same accordingly. It may be noticed that in respect of a large number of claims, though initially learned counsel for the respondent sought to canvass the objections, no basis could be pointed out for interfering with the Award of the Arbitrator. Allegations have been made of the Arbitrator not recording reasons, but it could not be disputed that reasons, in fact, have been recorded in respect of the claims. There was no misconduct or error in the Award. This Court is not to sit as an appellate authority over the Award and unless it is shown that there is denial of the principles of natural justice in respect of grant of hearing, Page 2105 the Arbitrator has misconducted himself in law or otherwise or has passed the Award contrary to the legal provisions, the Award would call for no interference. The view taken by the Arbitrator in respect of the interpretation of clauses and appreciation of evidence has to be respected and merely because a different view could be arrived at by this Court on the same material cannot be a ground to set aside the Award. It is really only claims No. 2, 10, 17, 22, 23 and 24 on which arguments have been addressed by learned counsel for the respondent.

CLAIM NO. 2 :-

4. Claim No. 2 is in respect of the alleged wrongful reductions and deductions in the bills. It was the submission of learned counsel for the respondent that the said claim fell outside the purview of the subject matter of arbitration in view of Clause 25(B) of the Agreement. The said Clause reads as under :-

"25(B) Â- The decision of the Superintending Engineer regarding the quantum of reduction as well as the justification thereof in respect of rates was sub-standard work which may be decided to be accepted, will be final and would not be open to arbitration."

5. Learned counsel relied upon the judgment of Division Bench of this Court in Delhi Development Authority v. Shri Prem Singh, 2002 III AD (Delhi) 1096 where a similar Clause 14 of the Agreement was considered. The Division Bench came to the conclusion that the Arbitrator derived his jurisdiction from the Agreement and, thus, there is a clear embargo on the power of the Arbitrator to deal with such matters, which are excluded from the purview of arbitration even if they are referred to. In that particular case, it was held that DDA had committed a blunder in referring counter claim to the Arbitrator. The Division Bench relied upon the judgment of the Supreme Court in Vishwanath Sood v. Union of India, .

6. Learned counsel for the respondent also relied upon the Division Bench judgment of this Court in Delhi Development Authority v. Sudhir Brothers, (DB) and Bhagat Construction Co. v. Delhi Development Authority, 2001 (Suppl.) Arb. LR 375 (Delhi) (DB). In Bhagat Construction Co.'s case (supra), the Division Bench held that while dealing with the scope and ambit of Clause 25 of the Agreement being the arbitration clause, in so far as the excepted matters are concerned, there is a lack of inherent jurisdiction in the Arbitrator to deal with the matter.

7. Learned senior counsel for the petitioner, on the other hand, submitted that before recourse could be taken to Clause 25(B) of the Agreement, the necessary ingredients of Clause 14 of the Agreement have to be met, which is as under :-

"14. If it shall appear to the Engineer-in-Charge or his authorised subordinate In-charge of the work or by the Chief Engineer / Technical Examiner / E.E. Quality Control or by an officer of the Vigilance Cell of the Page 2106 Authority that any work has been executed with unsound, imperfect or unskillful workmanship or with materials of any inferior description, or that any materials or articles provided by him for the execution of the work are unsound or of quality inferior to that contracted for or otherwise or not in accordance with the contract, the contractor shall on demand in writing which shall, be made within six months of the completion of the work from the Engineer-in-Charge specifying the work, materials or articles complained of notwithstanding that the same may have been passed, certified and paid for, forth with rectify or remove and reconstruct the work so specified in whole or in part, as the case may require or as the case may be, remove the materials or articles, so specified and provide other proper and suitable materials or articles at his own proper charge and cost, and in the event of his failing to do so within a period to be specified by the Engineer-in-Charge in his demand aforesaid then the contractor shall be liable to pay compensation at the rate of one per cent on the estimated amount put to tender for everyday not exceeding ten days while his failure to do so shall continue and in the case of any such failure, the Engineer-in-Charge may rectify or remove and re-execute the work or remove and replace with others, the materials or articles complained of as the case may be at the risk and expense in all respects of the contractor."

8. Learned counsel for the respondent submitted that the requirement of Clause 14 has not been complied with in the present case and without such compliance, no reference could be made to Clause 25(B) of the Agreement to make it excepted matter.

9. The Arbitrator has considered this aspect and found that no notice for rectification was issued by DDA. The two documents relied upon and sent by DDA were in order to obtain the agreement of the petitioner for acceptance of the reduced rate payment. The petitioner had not given their acceptance and they accepted the final bill under protest.

10. It may be noticed that in this behalf learned senior counsel for the petitioner has relied upon the judgment of learned Single Judge of this Court in Nav Bharat Construction Co. v. Delhi Development Authority, 1997 (1) Arb. LR 541. It was held that there is a prerequisite of a notice under Clause 14 of the Agreement for setting right the defect in work, if any, and unless such notice as envisaged under Clause 14 of the Agreement was issued calling upon the contractor to make good the defective work, there could not be unilateral deduction in the item statement. The obligation was on the Engineer In-charge to call upon the contractor in writing to rectify the defects, failing which the Engineer In-charge had the option to rectify the defects or to re-execute the work at the risk and expenses of the contractor.

11. In my considered view, the aforesaid judgment of Nav Bharat Construction Co.'s case (supra) fully covers the present case and once the Arbitrator has found that no notice as envisaged under Clause 14 of the Agreement had been sent, it could not be said that recourse would be had to Clause 25(B) of the Agreement.

Page 2107

12. I, thus, find no merit in the objections and the same is rejected.

CLAIM NO. 10 :-

13. This claim arises on account of the amount for cutting of reinforcement bars. In so far as the work required to be performed is concerned, Item No. 3.11 dealt with the same, which is as under :-

"Reinforcement for RCC work including bending, binding and placing in position complete."

14. It was the submission of learned counsel for the respondent that this item was a composite item and a separate claim could not be made for cutting. The work was of reinforcement for RCC work and the same was defined to include what had been stated therein. This inclusion need not be exhaustive and the work related to cutting of reinforcement bars would fall within the same. The submission of learned counsel for the respondent was that this issue was not even res integra in view of the judgment of learned Single Judge of this Court in M/s. Wee Aar Constructive Builders v. Delhi Development Authority & Anr., 2001 IV AD (Delhi) 65. The said judgment in turn relied upon a decision of learned Single Judge of this Court in Suit No. 181/1992 titled 'S.K. Mangla v. DDA' decided on 22.05.1995 wherein in respect of similar clause, it was observed as under :-

"8. The learned Judge then held :-

"In the very nature of the things reinforcement work involves cutting of steel in required size, bending the same and making in suitable shapes so as to be utilised in reinforcement. There is no question of making separate provision for cutting operation. It is true that a wrong interpretation of contract by the Arbitrator may not be a ground for interference by the court but when the contract means only one thing and still by ignoring the same the arbitrator arrives at a different finding then he commits a legal misconduct. In the fate of the phraseology used in clause 42(ix) of the contract, the claim could not have been allowed. the award on claim No. 6 is set aside."

15. Learned Single Judge in M/s. Wee Aar Constructive Builders's case (supra) came to the conclusion that the work of bending, binding and placing and position is not exhaustive and reinforcement of RCC work, but is only illustrative.

16. It is, however, relevant to note that two other earlier judgments also came to be considered in the case of Suit No.1985A/1984 titled 'K.C. Chibber v. DDA' decided on 18.01.1999 and Suit No. 570-A/1995 and Suit No. 656-A/1995 titled 'Anant Raj Agencies v. DDA' decided on 30.10.1998. In the said two cases, the contractor had notified DDA that the cutting of steel or straightening of steel bar was being treated as an extra item of work. This was not objected to by DDA. Learned Judge, however, found that in M/s. Wee Aar Constructive Builders's case (supra), no such letter or intimation had been sent and, thus, followed the decision in S.K. Mangla's case (supra).

17. Learned senior counsel for the petitioner, however, referred to another judgment in Wee Aar Constructive Builder v. Delhi Development Authority & Anr., 2001 (3) Arb. LR 468 (Delhi). Page 2108 The said judgment took note of all the earlier judgments including the earlier judgment in M/s. Wee Aar Constructive Builders's case (supra) and came to the conclusion that if the contractor informs DDA that he is going to charge extra for the work concerned and there is no response of DDA or any objection raised, the award in that behalf cannot be faulted. It would be relevant to reproduce the relevant paragraphs, which are as under :-

"17. However the decision of this Court in K.C. Chibber v. D.D.A., Suit No. 1985-A/1984 and IA No. 2290/1985, and Anant Raj Agencies v. D.D.A., Suit No. 570-A/1995 and 656/1995, were distinguished inasmuch as in both these cases the petitioner had notified the DDA that the cutting of steel or straightening of steel bars was being treated as an extra item and this was not objected to by the DDA and on this account the claim of the steel bars was upheld.

18. In S.K. Mangla's case as well as in Wee Aar Constructive Builder's case no such letter was sent by the contractor to the DDA. In the instant case, the petitioner had notified to the DDA that the cutting of steel or straightening of the steel bars has to be treated as an extra item of work.

19. Though on this short ground alone the award can be upheld but the very fact that both the parties tried to provide different construction to contentious clause shows that it was capable of two possible constructions.

20. According to the counsel for the petitioner had the process of cutting and straighten been inclusive of these processes for reinforcement of the steel bars the question of non-inclusion of straightening and cutting in the analysis of rate would not have arisen. In the analysis of rates item 15 does not include the element of straightening and cutting while in the current analysis of rates the process of straightening and cutting as per item 5.13 has been taken into consideration apart from bending and placing in position complete.

21. However, in M/s. Wee Aar Constructive Builders it was specifically observed that the DSR for 1997 now recognizes straightening and cutting of steel bars as a separate item of work provides for payment for it. However, in the instant case not only this material was before the Arbitrator but the petitioner had also notified and informed the DDA vide Exhibit C-9 that he would be charging extra for the straightening and cutting of the steel.

22. It is pertinent to mention here that a contrary view was taken by this very Court in Anant Raj Agencies v. D.D.A. in Suit No. 570-A/1995 and 656/1995 and in K.C. Chibber v. D.D.A. in Suit No. 1985-A/1984 which was to the effect that the process of straightening and cutting could not have been included in the item pertaining to 'reinforcement of RCC work including bending, binding and placing in position complete'. However without going into the correctness of the aforesaid two decisions the instant case being distinctive from this case inasmuch as the petitioner duly notified and informed the DDA that the charges for straightening and cutting of the steel would be extra and the DDA did not raise any objection, the award in this respect needs to be affirmed."

Page 2109

18. A reference has been made by learned senior counsel for the petitioner to various documents being exhibited C-35, C-44, C-55 and C-61, which were addressed during the currency of the contract itself. Thus, the submission is that once during the currency of the contract, these claims have been raised, the same cannot be rejected in view of the subsequent judgment in Wee Aar Constructive Builder's case (supra).

19. The position, which emerges from the aforesaid, is that the definition of reenforcement for RCC work is illustrative and not exhaustive. Thus, no extra amount can be recovered for the same in view of the earlier judgment in M/s. Wee Aar Constructive Builders's case (supra). However, simultaneous legal position, which emerges, is that in case the contractor puts DDA to notice during the currency of the contract and DDA does not raise any objection, then amounts can be recovered on this account. It may also be noticed that a correction slip No. 4 was issued in January, 1990 clarifying that cutting would be included. Thus, it appears that there were some doubt over this proposition and, thus, the clarification was issued. Once the contractor has put DDA to notice on this account, it cannot be said that the Award made in this behalf is erroneous. If reference is made to the earlier judgment of M/s. Wee Aar Constructive Builders's case (supra), it would be found that there is, in fact, no inconsistency in the judicial approach of various judgments. It was observed in paras 19 and 20 as under :-

"19. The two other decisions relied upon by learned counsel for the petitioner, that is, K.C. Chibbar and Anant Raj Agencies are clearly distinguishable. In both the cases, the petitioner therein had notified the DDA that the cutting of steel or the straightening of steel bars was being treated as an extra item of work. This was not objected to by the DDA. The claim of the petitioner in both the cases was upheld. In the present case, this situation did not arise. No letter or intimation was sent by the petitioner to the respondent. The claim of straightening and cutting the steel bars was made by the petitioner for the first time before the learned Arbitrator. The respondent had no occasion to react (or not to react) to the claim, prior to the arbitral proceedings.

20. In view of these facts, the decision rendered in S.K. Mangla has to be followed. Moreover, this decision also recognizes pragmatic and down-to-earth facts in building contracts."

20. The aforesaid discussion shows that the material aspect taken into consideration by the learned Judge was that while in case the contractor puts the DDA to notice, a different position would emerge; if no such notice is given, then the work of cutting would be included in the already assigned work.

21. Thus, the objection to the said claim is rejected.

CLAIM NO. 17 :-

22. Claim No. 17 is on account of deviation quantities. Learned counsel for the respondent advanced the plea that the Award made in this behalf was contrary to Clause 12-A of the Contract. The relevant portion of the Clause 12-A is as under :-

Page 2110

"Clause 12-A

In the case of contract substituted items or additional items which result in exceeding the limits laid down in sub-clause (vi) of clause 12 except the items relating to foundation work, which the contractor is required to do under Clause 12 above, the contractor shall, within 7 days from the receipt of order, claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit, notwithstanding the fact that the rates for such items exist in the tender for the main work or can be derived in accordance with the provisions of sub-clause (ii) of Clause 12 and the Engineer-in-Charge may revise their rates, having regard to the prevailing market rates and the contractor shall be paid in accordance with the rates so fixed...."

23.It was submitted by learned counsel for the respondent that the pre-condition was to intimate DDA within 7 days of the receipt of the order, which was not done. In this behalf, learned counsel relied upon the judgment of Division Bench of this Court in Delhi Development Authority v. Jagan Nath Ashok Kumar, 89 (2001) DLT 668 (DB). The Division Bench noticed the provisions of Clause 12-A and in respect thereof observed in paras 4 and 5 as under :-

"4.The aforesaid clause enumerates the procedure to be followed for making revision in rates in the following manner :-

(i)The Contractor is to claim revision of rates within seven days from the receipt of the order.

(ii)The said revision is to be supported by proper analysis in respect of such items for quantities in excess of deviation limit.

(iii)On receipt of such claim supported by analysis, Engineer-in-charge would consider the same and may revise the rates.

(iv)In revising the rates Engineer-in-charge shall have regard to prevailing market rates.

(v)The Contractor thereafter shall be paid in accordance with the rates fixed.

5. Alternatively, Engineer-in-charge may on receipt of such claim cancel the order to carry out increased quantity of work by giving notice in writing. Thus, in order to claim the revised rates it is incumbent upon the Contractor to make this claim for revision of rates duly supported by proper analysis in respect of such items for quantities in excess of deviation limit within seven days of the receipt of the order and on receipt thereof it would be for the Engineer-in-charge to either revise the rates having regard to the prevailing market rate and pay the Contractor accordingly or cancel the order and get the work done from some other Contractor in respect of such increased quantities of work."

24. The Division Bench concluded that the procedure contained in Clause 12-A is mandatory and, thus, the claim for deviation beyond the limits must be preferred in accordance with the stipulation in Clause 12-A.

Page 2111

25. Learned senior counsel for the petitioner, on the other hand, relied upon judgment of the Apex Court in Oil & Natural Gas Commission v. M.C. Clelland Engineers S.A., to contend that where a plea is raised of any claim being barred by the law of limitation, details as to how the claim is so barred must be set out. However, the same was in the context of the plea of limitation being raised despite the fact that there were running bills and payments. Learned senior counsel referred to the fact that the respondent was directed to submit the detailed comments on the quantities and the derivation of rates by 30.04.1998, but the same was not received. It was lastly contended that even if Claim No. 17 was disallowed, it would have no effect on the ultimate Award in view of the fact that the amount awarded under Claim No.17 had been deducted from the amount awarded under Claim No. 22. Thus, if Claim No. 17 was not awarded, the deduction would not be made from Claim No. 22.

26. In my considered view, in so far as the procedure to be followed for making such claims in respect of deviations is concerned, there is no manner of doubt that the procedure of Clause 12-A has to be followed as held by the Division Bench of this Court in Jagan Nath Ashok Kumar's case (supra). There is, in fact, no discussion in the Award in respect of this plea even though while recording submissions of the respondent, the plea of Clause 12-A is noticed.

27. I cannot accept the proposition as advanced by learned senior counsel for the petitioner that failure of the respondent to supply the details should result in adverse inference. The issue is not of quantification of the amount, which would be arrived at in the absence of the details to be submitted by the respondent, but that the petitioner failed to make the claim in terms of Clause 12-A and within the time stipulated therein.

28. In view of the aforesaid position, the award of Claim No. 17 cannot be sustained and is set aside.

29. I am also unable to accept the plea of learned senior counsel for the petitioner that if this claim is set aside on any account, there would be no net effect on the award as the deduction would not be made from Claim No. 22. If a particular mode of claiming the deviation is prescribed under Clause 12-A and that procedure is not followed, then no amount can be awarded on that account. That being the position, it cannot be said that this very amount can be claimed in any other manner. The amount was quantified on the basis of the data submitted by the petitioner, but is liable to be disallowed on account of the fact that the same was not filed within the time as prescribed in Clause 12-A. Thus, the deduction would still have to be made from Claim No. 22 as it was found that this claim could be overlapping.

CLAIM NO. 22 :-

30. Claim No. 22 deals with the award of damages for prolongation of contract. Learned counsel for the respondent submitted that the agreement Page 2112 contained clause being Clause 10CC under which the petitioner had been compensated and, thus, this amount could not be awarded. It is not disputed that Clause 10CC applies only for claims for damages in respect of increase in labour rates and material rates for period beyond the original stipulated time of the contract. I am unable to accept the plea that in view of the provisions of Clause 10CC, no other kind of escalation can be granted. In respect of the items provided for in Clause 10CC, the same would be governed by the said clause, but the other items would have to be considered on the principles of Section 73 of the Indian Contract Act, 1872. The Arbitrator has, in fact, taken note of this aspect and found that Clause 10CC cannot take care of factors other than materials, labour and POL when there is inordinate delay on account of non-fulfillment of contractual obligations of the respondent. The respondent was found at fault in violation of their contractual obligations.

31. In view of the aforesaid, no interference is called for on this account.

CLAIMS NO. 23 & 24 :-

32.The last dispute is in respect of Claims No. 23 and 24. These are for pre-suit interest and pendente lite and future interest. Learned counsel for the respondent stated that the rate of interest was on the higher side. Interest has been awarded @ 12% p.a. and has been awarded from 04.08.1996, i.e., six months after the date of completion of work. However, in so far as the future interest is concerned, the same has been held payable at 18% p.a. In so far as the pre-suit and pendente lite interest of 12% p.a. is concerned, I do not find any reason to interfere with the same. However, in so far as the future interest is concerned, the interest awarded is on the higher side. This is especially so taking into consideration the prevailing rates of interest which had fallen by that time when the Award had been made. I am of the considered view that future interest should be awarded at 9% p.a. and learned senior counsel for the petitioner has really no objection to the same.

33. In view of the aforesaid, the objection application is disposed of whereby the award in respect of Claim No. 17 is set aside and the future interest is reduced to 9% p.a.

34. The application stands disposed of.

+ CS (OS) No. 2488/2000

1. In view of the objection petition having been disposed of, the Award dated 30.12.1999 of Sole Arbitrator, Shri S.C. Kapoor, Chief Engineer (Retd.) is made Rule of the Court with the modification that the Award in respect of Claim No. 17 is set aside and the petitioner is held entitled to future interest @ 9% p.a. instead of 18% p.a.

2. The petitioner shall also be entitled to costs.

3. The decree sheet be drawn up accordingly.