Delhi Jal Board vs Shubhas Pipes Ltd. And Ors.
2006 Latest Caselaw 1442 Del

JUDGMENT

Pradeep Nandrajog, J.

1. Petitioner prays that delay in filing OMP No. 315/05 be condoned.

2. Vide OMP No. 315/05, objections to the award dated 19th July, 2004 have been filed under Section 34 of the Arbitration and Conciliation Act, 1996.

3. Notwithstanding the fact that claims before the Arbitrator were much above Rs. 20 lacs, sum awarded under the award is less than Rs. 20 lacs.

4. Since pecuniary jurisdiction between Rs. 3 lacs and 20 lacs is that of the court of the District Judge, objections were filed before the District Judge and were assigned to a learned Additional District Judge who held that objections filed were not maintainable before the District Judge.

5. It is stated that time spent in prosecuting objections before a wrong forum i.e. a court of no pecuniary jurisdiction be condoned.

6. learned Counsel for the respondent objects pointing out that this aspect of the matter was pointed out to the petitioner when an application under Order 7 Rule 11 CPC was filed. Objector did not take remedial steps when told that the court of the learned Addl. District Judge had no jurisdiction. After an adverse finding was given against the petitioner, present petition was filed. Counsel states that no liberty was granted by the learned Addl. District Judge.

7. It is settled law that where a party is prosecuting its claim before a wrong forum, given the requisite circumstances, time spent before the said forum can be excluded while computing limitation as per mandate of Section 14 of the Limitation Act, 1963.

8. It is unfortunate that lawyer for the objector did not guide the client properly and remained negligent in not taking remedial action when non-objector pointed out that the objections were filed before a wrong court.

9. Delhi Jal Board is a statutory authority and relies upon advise of counsel in relation to court proceedings. For faults of the lawyer, I feel that the objector should not be penalised.

10. The application is accordingly allowed. Delay in filing objections are condoned.

1. Petitioner awarded a contract to the respondent requiring it to design 1500 mm diameter prestressed concrete pipes as per tender specifications and after supplying the same to execute work of laying the pipes.

2. Date of commencement of work was 13th August, 1995. Stipulated date of completion was 12th August, 1996.

3. Without levy of compensation, time for completion was extended till 30th April, 1997. It is not in dispute that works were completed on 29th April, 1997.

4. Contractor had the following claims:

i) Balance payment for work executed. Payment at contract stipulated rate.

ii) Escalation on account of material and labour.

iii) Refund of security deposits.

iv) Compensation due to prolongation of contract.

v) Compensation for re-transportation of pipes.

5. Respondent had a counter claim on account of modvat benefit. Each party has a residual claim towards interest.

6. Matter was referred to an arbitrator who has published the award impugned. Nothing has been awarded to the petitioner in respect of the counter claim.

7. Claim of the non-objector for compensation on account of re- transportation of pipes has been rejected in toto.

8. Non-objector has not filed any objections and, therefore, said part of the award has attained finality.

9. Award is dated 19th July, 2004

10. After appreciating evidence, five reasons have been culled out by the learned Arbitrator which resulted in delay.

11. First reason being delay in approval of design of the pipes, though not held in the award as attributable to the non-objector, it has to be held attributable to the non-objector for the reason, under the contract non-objector was obliged to obtain approval of M/s Tata Consulting Engineers and in said design approval, petitioner had no role to play.

12. From a perusal of the award, it is apparent that the design of the pipes was commented upon by M/s Tata Consulting Engineers. Design had to be re- worked out and re-submitted. Official approval came on 25th January, 1996.

13. Other delays are wholly attributable to the petitioner inasmuch as it delayed in giving the alignment for laying of pipes. There was delay in furnishing details of M.S. Specials as also delay in supply of M.S. Plates.

14. I would be dealing with this aspect a little later.

15. Dealing with the first claim, sum of Rs. 30,576.88 has been allowed. While allowing the said claim, learned Arbitrator has noted that security deposit in sum of Rs. One lakh stands refunded by the objector to the non- objector. He has further noted that during pendency of arbitration proceedings, a sum of Rs. 2,96,912/- has been paid to the non-objector.

16. The sum of Rs. 30,576.88 arrived at is by returning a finding that for work done and as per contract rates, payments in sum of Rs. 1,24,75,994.20 have already been made. Total amount payable was Rs. 1,28,03,483.08. Subtracting amount already paid from the amount due, Rs. 3,27,488.88 was held to be payable. Differential of Rs. 3,27,488.88 and Rs. 2,96,912.00 results in the sum awarded i.e. Rs. 30,576.88.

17. Muted objection to this part of the award appears from the objections filed, but I am of the opinion that being a matter of appreciation of evidence and calculations, finding as afore noted are immune to challenge in the facts and circumstances of the present case.

18. Dealing with the escalation component of the claim, learned Arbitrator noted that contract contain a clause for escalation. The clause is under the caption 'Escalation' and deals separately with labour escalation and escalation for material.

19. Claim was in sum of Rs. 6,32,504.65. It included claim for labour as well as escalation in material. Objector had paid Rs. 1,95,523/- towards labour escalation. Dispute pertained to the balance sum i.e. Rs. 4,36,981.68.

20. Learned Arbitrator has allowed the sum holding that the objection taken by the objector that in the absence of proof in terms of non-supply of supporting documents, claim could not be ascertained.

21. Learned Arbitrator has referred to the escalation bills where supporting documents have been submitted.

22. Though record of arbitration has not been summoned, from the record available with the learned Counsel for the parties, it has been shown to me that when bills towards escalation was submitted, relevant documents wherefrom price rise could be ascertained were supplied.

23. learned Counsel for the objector states that while computing escalation on account of increase in price of materials, excise duty and other taxes paid had to be excluded. The objection may be noted and rejected for the reason perusal of the escalation bills show that the price of raw material in respect whereto escalation has been claimed is less than the contract stipulated price as per the offer made by the contractor, meaning thereby, that since price quoted by the contractor included excise duty and taxes, it is obvious that while submitting bills on account of material escalation, same excluded duties inasmuch as the unit price is less than the contract quoted rate.

24. Objection to the award pertaining to the sum awarded under escalation is, therefore, without any merit.

25. On account of refund of security deposit, noting that contract was completed, learned Arbitrator has recorded that since security deposit was returned, nothing was payable. However, Rs. 34,952/- has been awarded on account of interest for the reason objector has been held as not entitled to retain the security deposit after work was completed.

26. In this connection, I may also note that while allowing balance payment for work done under claim No. 1 and escalation, interest has been awarded.

27. Interest awarded by the learned Arbitrator is @ 18% per annum.

28. Learned Arbitrator has held that the interest payable would be in view of the interest on delayed payments to Small Scale and Ancillary Industrial Undertaking Act, 1993 as amended by the Act of 1998 which permits interest 5 points the prime lending rates notified by the State Bank of India.

29. Rate of interest awarded is fairly reasonable.

30. Under claim No. 3 which was compensation for loss of overheads and loss of profit during extended period of contract, learned Arbitrator has held that since delay was attributable to the petitioner and factory of the non- objector remained idle from 13th August, 1996 to 29th April, 1997, non-objector would be entitled to be compensated. The amount awarded is Rs. 3,72,517/-. This has been determined on a guess work. Learned Arbitrator has held that in absence of evidence, 3% to 7% of the contract value could be attributable towards overhead expenses. Loss of profits could be assumed at 10%. So holding, under the head 15% of the contract amount has been held to be a reasonable yardstick.

31. Sum awarded is Rs. 3,72,517/-.

32. Though one facet of delay was attributable to the non- objector but since I am modifying the award, nothing turns thereon for the reason contractor has been compensated only for the period contract got prolonged and as I note before that period came into existence, the designs had already been got approved. Therefore, on account of design, the period in question does not get affected.

33. Loss of profits can be awarded under two circumstances. Firstly, if part of contract work is withdrawn. Alternatively where it is proved that due to a contract getting prolonged, the party could not take up works from third parties.

34. As noted in the award, there is no evidence to the fact that due to contract getting prolonged, non-objector could not pick up other work. Loss of profit under the first category cannot be allowed for the reason no part of the contract awarded work was withdrawn. On the contrary, extra work was got executed from the contractor.

35. Learned Arbitrator has awarded compensation @ 15% noting that loss of profit would be 10% and overhead would vary between 3% to 7%.

36. Loss of profit cannot be awarded. Therefore, 15% award under the circumstances cannot be upheld.

37. In my decision dated 15th February, 2005, in OMP No. 240/02 Delhi Jal Board v. Subhash Pipes Ltd., I had opined that 5% loss to recompense under head of factory overheads during contract prolonged period was fair and reasonable.

38. Award pertaining to claim No. 3 is accordingly modified by reducing the sum awarded from Rs. 3,72,517/- to Rs. 1,24,173/-.

39. On the sum awarded, interest has been paid @ 15% for a certain duration and @ 12% per annum for the rest.

40. The interest awarded is fair and reasonable as already held.

41. The petition stands disposed by holding the award, save and except claim No.3 is legal and valid. On claim No. 3, the award is modified by reducing the sum awarded from Rs. 3,72,517/- to Rs. 1,24,173/-.

42. No cost.