Puran Chand Nangia vs Dda
2006 Latest Caselaw 317 Del

JUDGMENT

Sanjay Kishan Kaul, J.

Page 1004

IA 2557/2002

Learned counsel for the petitioner/applicant does not press this application in view of subsequent development of law and states that the objections of the respondent are liable to be considered under the Indian Arbitration Act, 1940.

Dismissed as withdrawn.

+ IA No. 5029/2003 & IA 4014/1999

Dismissed as infructuous.

+ IA No. 6388/1996 (under Sections 30 & 33 of the Arbitration Act, 1940)

1. The petitioner was awarded the work of construction of houses under SFS category II in Paschim Puri in pursuance to agreement No. 6/EE/DDVI/DDA/84-85. In terms of the contract, the date of commencement of the work was stipulated as 17.08.1984 and the stipulated date of completion was 16.08.1985. The respondent was granted extension of time for completion of work without imposition of penalty up to 09.05.1988. The work was actually completed on 30.06.1988 and the final bill was made on 30.05.1995.

2. The petitioner had certain claims and in view of the disputes arising between the parties, Engineer-Member (DDA) in terms of clause 25 of the terms and conditions of the contract appointed Sh. A.C.Panchdhari, Director General of Works, CPWD (Retd.) as the sole arbitrator vide letter dated 06.09.1991. The arbitrator entered upon reference and made and published his award on 12.04.1996. The respondent aggrieved by the same, has filed the objections under Sections 30 & 33 of the Arbitration Act, 1940 (hereinafter referred to as 'the said Act').

3. Learned senior counsel for the respondent fairly stated at the inception of the hearing itself that this court is not required to sit as a court of appeal to go into each claim and examine the merits of the controversy. So long as the view taken by the arbitrator is a plausible view and is not absurd, this court is not required to interfere with the award merely on account of the fact that in the given facts and the evidence on record the court may come to a different conclusion. A catena of judgments of Apex court and this court supports the proposition including Sudarsan Trading Co. v. Govt of Kerala .

4. Learned counsel for the respondent thus referred to certain specific claims which according to the learned counsel require consideration.

5. The first such claim is claim No. 5 dealing with levy of compensation under clause 2 of the general conditions of the contract. Learned counsel contends that Superintending Engineer is the final authority in this behalf and though the amount is only Rs 5,000, the award to that extent is liable to be set aside. Learned counsel for the petitioner does not even dispute this position and concedes that this amount awarded by the arbitrator may be set aside. Learned Page 1005 counsel for the petitioner states that this concession is being made in view of the judgment of this court in Sudhir Brothers v. DDA 1995(2) Arbitration Law Reporter 437. The judgment took note of the views expressed by the Supreme Court in Vishwanath Sood v. Union of India . It was observed in Paras 10, 12.3, 15 & 16 & 22 as under:

10. Both the clauses 2 & 10C make the decision of the Superintending Engineer final and binding on the subject matter forming part of these clauses. Clause 25 which is the arbitration clause providing for questions and disputes arising between the parties to be referred to arbitration except, such questions and disputes from being referred to arbitration as to which it is provided otherwise in the agreement. The learned counsel for the respondent has submitted that with the finality attached to the decision of the Superintending Engineer, the question and disputes covered by clauses 2 & 10C could not have been referred for adjudication by the arbitrator under clause 25 and so the award given by the arbitrator on such disputes is without jurisdiction.

12.3 the principles of law laid down by their Lordships, as deducible from Vishwanath Sood's case and relevant for the purpose for the case at hand, may be summed up as under:

i)Clause 2 of the contract makes the time specified for the performance of the contract a matter of essence and emphasises the need on the part of the contractor to scrupuloulsy adhere to the time schedule approved by the Engineer in Charge;

ii) The clause envisages an amount of compensation calculated as a percentage of the estimated cost of the whole work on the basis of the number of days for which the work remains uncommenced or unfinished to the prescribed extent on the relevant date. Any moderation that may be done by the Superintending Engineer would depend upon i) the circumstances, ii) the nature and period of default, iii)the decree of negligence or default that can be attributable to the contractor. The Superintending Engineer while determining the rate of compensation chargeable will have to go into all these aspects and determine whether there is any negligence on the part of the contractor or not. The superintending Engineer may reduce or even waive the compensation;

iii)Clause 2 contains a complete machinery for determination of the compensation which can be claimed by 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 superintending engineer has to consider the various mitigating circumstances that may be pleaded by the contractor or his plea that he is not liable to any compensation at all under this clause.

iv)The question regarding the amount of compensation leviable under clause 2 has to be decided only by the Superintending Engineer and no one else.

Page 1006

v)The opening part of clause 25 clearly excludes the matters like those mentioned under clause 2 in respect of which any dispute is left to be decided by a higher official of the department. The question of awarding the compensation under clause 2 is outside the purview of the arbitrator and the compensation determined under clause 2 either by the Engineer-in-charge or on further reference by the Superintending Engineer will not be capable of being called in question before the Arbitrator.

vi)The power of the Superintending Engineer under the penalty clause is not an undefined power. The amount of compensation is strictly limited to a maximum of 10 per cent and with a wide margin of discretion to the Superintending Engineer who might not only reduce the percentage to can even reduce it to nil if the circumstances may so warrant. It is this power that is kept outside the scope of the arbitration.

vii)The assessment of compensation by the Superintending Engineer under clause 2 does not take away right of the Government to claim loss or damage from the contractor not in terms of clause 2 but under the general law or under the Contract Act.

15. Under Clause 10C also the opinion/decision of Superintending Engineer is final on attributability of delay. The Arbitrator cannot adjudicate upon any question of such delay.

16. As would be seen from the judgment of their Lordships in Vishwanath Sood's case (supra), the decision of Superintending Engineer is final even on the question of attributability of delay.

22. The learned counsel for the petitioner has tried to draw a fine distinction in the matter of interpretation of clauses 2C and 10 by submitting that decision of the Superintending Engineer was made final on the quantum of compensation and not on the question of liability for the delay; if only the arbitrator would have found and fixed liability for delay on the petitioner then the question of quantum of compensation could not have been gone into by the Arbitrator, the assumption of Superintending Engineer on the point of quantum having been attached with finality. The argument cannot be accepted in view of the law laid down in unmistakable terms by their Lordships of the Supreme Court in Vishwananth Sood's case (supra). Ratio of the case render the decision of the Superintending Engineer final upon the circumstances, the nature and period of default and the degree of negligence or default.

6. The aforesaid view was affirmed by the Division Bench in DDA v. Sudhir Brothers 1995(2) Arbitration Law Reporter 307 while dealing with the appeal from the same judgment. It was observed in 4 & 5 as under:

4. Our attention has been drawn to the arbitration clause and also the relevant clause which relates to exclusion of certain matters from the purview of arbitration. The relevant clause 2 in the arbitration agreement deals with the question of compensation and directs that the concerned engineer should decided this question and his decision is final. The arbitration clause opens with the words 'Unless otherwise provided' . In Page 1007 view of the this language, it is obvious from the decision of the Supreme Court in Vishwanath Sood v. Union of india and Anr. that the arbitrator could not have gone into the merits of the levy of compensation by the engineer. In that view of the matter, the DDA out not to have requested the arbitrator to include the said amount in the arbitration award. We are told by the counsel for the appellant/DDA the arbitrator was inf act informed that he could not go into the matter on merits. In any event, the DDA committed a blunder in requesting. Arbitrator to formally include the above said amount as part of the award. Taking advantage of the said request, the contractor argued the question of levy on merits and obtained a decision from the Arbitrator in his favor.

5. We, therefore, find that the entire procedure adopted by both the parties was totally unwarranted. If the DDA considered that it was entitled to the recovery of Rs 5,69,473 outside the arbitration, it could have taken such steps as it thought necessary instead of asking the Arbitrator to include the said amount in the award. The contractor was also wrong in taking advantage of the same and asking the Arbitrator to give a finding on the merits of the claim. The arbitrator acted totally without jurisdiction in going into the said question and deleting the said item of counter claim for Rs 5,69,473/- and holding that the contractor not liable for payment of compensation. That was not within the power of the Arbitrator In view of the said unfortunate events, we have no option but to set aside that that part of the award of the arbitrator wherein he has gone into the merits of the decision of the Superintending Engineer and had come to the conclusion that the sum of Rs 4,69,743/- was not payable by the contract. The validity of the levy of compensation is therefore taken out from the award.

7. In view of the aforesaid settled legal position, the award of claim No. 5 is set aside as the Superintending Engineer is the final authority both in respect of the attributability of delay as well as the quantum of the damages.

8. Learned counsel for the respondent next referred to claim No. 6 which is on account of Clause 10CC for escalation of material and labour rates. Learned counsel for the respondent contends that the amount under the said clause has already been paid to the petitioner calculated up to 09.05.1988 and the petitioner is not entitled to any further amount for the period beyond the said date till 30.06.1988. This is so since the time period was extended only up to 09.05.1988 while the date of completion was 30.06.1988. Learned counsel submits that in fact excess amount of Rs 4 lakh has been paid to the petitioner.

9. Learned counsel for the petitioner, on the other hand, submits that the petitioner is not even claiming any amount under clause 10CC beyond 09.05.1988 and what has been awarded by the arbitrator as part of the claim of the petitioner being the sum of Rs 1,46,192/- is for the period prior to 09.05.1988.

10. To appreciate the aforesaid plea, not much can be made from the award because there is no detailed reasoning given and the award is based on the documents produced by the parties. A perusal of the same shows that the Page 1008 petitioner had stated before the arbitrator that the payments had been made under Clause 10CC but on a wrong index of April,1988 instead of May,1988. It has also been stated that no work was carried out after 09.05.1988 up to 30.06.1988 and only quarters were being handed over to the allottees. As noticed above, only a small amount of Rs 5,000 has been imposed as penalty on this account possibly on account of this reason. The respondent also gave its calculations which are available. A comparison of the two calculations shows that the principles of calculations are same, though a difference has arisen on account of cut off dates to form the basis of the calculations. The petitioner has calculated the amount of Rs. 1,46,192/- on the basis of difference of indices between April,1988 and May,1988 amounting to Rs. 9761 and further a sum of Rs 1,36,431 on account of differential between what has been paid by the respondent and what was liable to be paid on account of escalation of material and labour rates. In my considered view, thus the amount which the petitioner has been held entitled to does not flow for the period beyond the date of 09.05.1988, the date to which the final extension was granted.

11. I am thus unable to agree with the submissions of learned counsel for the respondent.

12. Learned counsel for the respondent has lastly referred to Clause 14 on account of losses sustained by the petitioner due to prolongation of the contract by nearly two years. This is on account of watch and ward charges and idle machinery, etc. It cannot really be disputed that the petitioner is entitled to this amount apart from escalation of material and labour rates under Clause 10CC. However, learned senior counsel for the respondent contends that in view of compensation being imposed under clause 2, the petitioner is not entitled to this amount.

13. I am unable to persuade myself to agree with this submission. A minor amount is imposed as penalty under Clause 2 for the period beyond 09.05.1988. During the said period of time, handing over of quarters was taking place. The time period was extended by the respondent till 09.05.1988 without imposition of penalty. For this period, the delay is not attributable to the petitioner. The petitioner is thus entitled to the amount for this period of time and the arbitrator has given the broad calculations as to how he has come to this amount. It has been held by the Division Bench of this Court in DDA v. Bhagat Construction Co. (P) Ltd. and Anr. 2004 (3) Arb.LR 548 that a technical man if appointed as an arbitrator because he is familiar with the nature of the trade, is not expected to write a judgment in the form as written by a judge. It is not for him to give details of the calculations. A retired Chief Engineer of CPWD has been appointed as the arbitrator in the present case for the said reason and even the basic calculations have been given in the award. The award does not call for any interference on this account.

14. At this stage, learned counsel for the respondent seeks to raise the issue of claim No. 15 which is on account of losses suffered by the petitioner for late handing over of quarters by the Department to the allottees. The Page 1009 statement of monthly allotments was available before the arbitrator and the respondent found that the petitioner had to spend some months in this process and is liable to be compensated for the same. This portion of the award does not call for any interference.

15. No other objection is raised and thus the application is dismissed.

+ CS(OS) 1033A/1996

In view of the objections having been disposed of, the award of the sole arbitrator Mr. A.C.Panchdhari dated 12.04.1996 is made rule of the court. The petitioner is also entitled to future interest from the date of decree till date of realisation at the rate of 9 per cent per annum simple interest. Parties are left to bear their own costs.

Decree sheet be drawn up accordingly.

Learned counsel for the respondent states that the amount inclusive of interest was deposited in the court as recorded in the order dated 22.04.2003 and the same is lying in an FDR. The same will not, however, absolve the respondent of payment of interest in terms of judgment of this court in Hindustan Construction Corporation v. Delhi Development Authority and Ors. 2002 (65) DRJ 43. The only result would be that to the extent the amount has earned further interest, the same would go to the credit of the respondent for payment of the amount to the petitioner. The amount deposited by the respondent and lying in the FDR be released to the petitioner on maturity of the FDR to the extent of the decree. Balance amount, if any, be remitted to the respondent. The balance amount, if any, be remitted within 60 days from today, in which eventuality, the respondent shall not be liable to pay future interest.