Bharat Engg. Enterprises vs Delhi Development Authority And ...
2006 Latest Caselaw 1232 Del

JUDGMENT

Pradeep Nandrajog, J.

Page 2794

1. Vide IA No.8922/1994 objections have been filed by DDA to the award dated 15.6.1993 published by Shri J.K. Varshneya (Retd. Chief Engineer) pertaining to contractors claim in respect of construction of 1200 MIG flats in Pocket GH-14, Paschim Vihar, New Delhi.

2. Work was awarded on 22.3.1985. Date of commencement was 1.4.1985 and date of completion was 31.5.1985. Works were completed on 5.12.1985. On evidence, arbitrator has held delay attributable to DDA.

3. Contractor's case regarding delay was that under the contract, steel and cement was to be supplied by DDA and non timely supply delayed construction. That DDA was to furnish design drawing which were supplied with a delay of 31/2 months. That extra works were executed.

4. Various claims were raised by the contractor but since objections relate to only claims No.5, 6, 8, 9, 12, 13, 14, 15, 16 and 19, I would be dealing with only the said claims, the award relating thereto and the objections filed by DDA.

Page 2795

5. Claim No.5 in sum of Rs.5,624.80 has been allowed in toto. As per contractor, 6 number of piles had to be casted for initial pile load test. That only cost of initial test load was included in the item of schedule and not the cost of test piles required for purposes of initial testing of the piles in order to find out the capacity of the piles. Thus, for test piles, extra payment was demanded. Stand of DDA was that under item No.2 of the contract it was stated that work includes cost of 2 initial test in each group of piles and cost of routine test on 2 piles for 100 numbers of the working piles. Further, additional soil investigation and testing of piles was to be done by the contractor at his own cost. Thus no additional payment was payable for test piles.

6. Justification in the award is as under:

The perusal of item 2 of the schedule reveals that it does not include the cost of providing test piles, but only the cost of testing of the piles. The claimants are, therefore, entitled to the cost of providing the test piles.

7. Item 2 of the schedule reads as under:

Providing and installing bored compaction cast in situ under reamed piles reinforced cement concrete nominal mix 1:2:4 (1cement:2 coarse sand:4 graded stone agg. 22 mm nominal size) pile at minimum length 4.5.m below the bottom of graded beams/piles (i) reinforced with 6 no. 12 mm cold twisted bars/yield strength informed and 8 mm dia mild steel rings at 25 cm i/c with the full reinforcement extending to the entire length of pile complete as per direction of Engineer-in-Charge. This item covering all operations such of boring for pile and bulb with bentonite if so required in all type of soils welding reinforcing bars/mixing and puring of cement concrete in approved manners. The item includes the cost of concrete but excludes the cost of reinforcing bars in the piles. This item also covers cost of two initial test in each group of piles and cost of routing test on 2 piles per 100 nos. of the working piles or part there of.

a) 30 cm. Bore, single bulb under reamed compation pile of 20 M.T. Capacity with 75 cm bulb diameter.

8. As held in the decisions reported as T.N. Electricity Board v. Bridge Tunnel Construction & Co. D.C.M. Ltd. v. Municipal Corporation of Delhi and Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises, an arbitrator being the creature of the contract cannot ignore the specific terms of the contract and where the terms are clear he has to simply apply them, but where a term requires interpretation, the arbitrator is the final authority to interpret the terms of the contract.

Page 2796

9. I find that the arbitrator has interpreted item 2 of the schedule and has opined that it does not provide for providing test piles but only includes the cost of testing. The arbitrator had the jurisdiction to interpret the contract and has done so. The objection is thus held to be ill founded.

10. Claim No.6, 8, 9 and 12 were as under:

a) Claim No.6 : For money spent on account of disposal of excavated mud of bore holes.

b) Claim No.8 : On account of difference in cost of turn steel used instead of mild steel which was to be used as per contract.

c) Claim No. 9 : On account of chipping of piles, a work done but not stipulated in the contract.

d) Claim No. 12 : On account of idle labour as work got hindered due to delay in supply of steel and cement.

11. Qua claim No. 6 as against Rs. 11,097.65 claimed by the contractor, a sum of Rs. 4,508.40 has been awarded. Qua claim No.8 as against a sum of Rs. 2,067.55 a sum of Rs. 1,757.44 has been awarded. Qua claim No.9 as against a sum of Rs. 18,470/- a sum of Rs. 14,520/- have been awarded and qua claim No. 12 as against a sum of Rs.20,674.40 a sum of Rs.1,872/- have been awarded.

12. Objections raised are common with one additional point qua claim No.12.

13. Shri Anil Sapra, learned Counsel for DDA urged that whereas reasons for holding entitlement under head of claims except claim No.12 were valid, award was bad in law as no reasons were given to show how the sums awarded were arrived at. Relying upon 2 decisions of this Court reported as AIR 1987 Delhi 134 College of Vocational Studies v. S.S. Jaitley and 1998 (VI) A.D. Delhi 924 Anant Raj Agencies v. DDA counsel urged that reasons are the link to the findings and no linkage means no reasons.

14. Qua claim No. 12, counsel urged that under Clause 10 of the agreement it was clearly stipulated that no extra amount was payable to the contractor due to delay in supply of steel and cement.

15. What constitute the nuts and bolts of a reasoned award?

16. Every justification may not always constitute a reason. A justification which is rational and gives sufficient ground as explanation is a reason. Rationalized understanding is reason.

17. Business has to go on as business and not with arguments. Arbitrators are appointed by parties to give them justice in the sense of arriving at a fair decision and not judicial justice. Parties chose experts in the field as arbitrators and there is an implied faith in the personal judgment of an expert arbitrator. If parties rely upon the expertise of an expert arbitrator, meticulous reasons are not to be looked into in the decisions made by the expert arbitrator.

18. Counsel for DDA concedes the good reasons have been given to justify the maintainability of claims 6, 8 and 9 but urged that no reasons for the quantification are to be found.

19. A situation similar to the present case arose before the Apex Court. In the judgment reported as 1995 (22) ALR 1 State of Rajasthan v. Puri Construction Page 2797 Company, challenge was made to the award of damages without quantifying the same in accordance with any rational principle. The challenge to the award, noted in para 16 of the judgment as under:

16. The award of damages without quantifying the same in accordance with any rational principle has been assailed by contending that in a case of speaking award, the quantification of damages must be based on some principles and cannot be quantified arbitrarily by adopting rule of thumb.

20. Repelling the said argument in para 31 of the judgment, it was held as under:

Considering the magnitude of work involving costly machinery and materials, if the two arbitrators in their wide experience have quantified the total damage and have given the award of Rs.1 crore in favor of the respondent, it cannot be held that such an award is so patently unjust and irrational and shocking to the conscience of the court, that the same should be interfered with.

21. I need not speak any more save and except to note that the arbitrator has considerably reduced the amount claimed. The arbitrator is a retired Chief Engineer and had a vast experience in construction contracts. He could have well appreciated the magnitude of the works involved and cost incurred.

22. On the second submission on claim No.12, learned Counsel urged that Clause 10 of the contract prohibited any such claim.

23. A perusal of DDA's pleadings before the learned arbitrator shows that responding to claim No. 12, DDA has not placed reliance on Clause 10 of the agreement. Indeed, for the said reason, the award does not even note the said clause.

24. To question the award DDA cannot urge a plea not raised before the arbitrator.

25. Challenge to the award qua claims 6, 8, 9 and 12 as awarded fails.

26. Claim No. 13 in sum of Rs. 5,32,244/- was split into six components. Two components were rejected. Four have been awarded. The same are as under:

a) Rs. 73,934.48 towards supervision charges

b) Rs. 40,048.39 towards hire charges for tools and plant remaining idle.

c) Rs. 73,935.48 towards loss of profit, and

d) Rs. 22,935.69 towards increase in the cost of labour and materials during the extended period of the contract.

27. As noted above, works were extended by nearly 6 months and learned arbitrator has held, on appreciation of evidence, that the delay was not attributable to the contractor. Thus, decision of the learned arbitrator that the contractor is entitled to maintain claims on account of delay cannot be faulted. However, question arises whether the four amounts noted above are sustainable.

28. If a contract gets prolonged, a party would be entitled to escalation on account of price rise, if established, for the materials consumed during extended period of work as also reimbursement for extra wages paid to the workmen if it is established that labour rates increased. The party may also Page 2798 be entitled to overhead supervision charges. Party may also be entitled to be compensated for idle machinery provided it is established that the same could be used for some other work. Further, if any plant or machinery is taken on hire, hire charges can be sought. But I fail to understand any claim towards loss of profits. I accordingly hold that sum of Rs. 73,935.48 awarded under sub-head (c) is a patent illegality committed by the learned arbitrator. I may additionally note that it was not the case of the contractor that it did not bid for other works because man power was deployed at site of the work in question and due to the said fact the contractor could not take up other works.

29. Learned Counsel for the contractor could not point out any evidence as to how many engineers or supervisory staff were deployed at site. No evidence of any hire charges paid was shown. What plant remained idle was not shown. Record of the arbitration proceedings shows that there is just no evidence on the point. Bald assertions in the claim petition are not evidence. These claims cannot be adjudicated on one's personal experience because more often than not, contractors have more than two to three works at hand and depending upon the supervision required, staff is deployed. Machines are shifted from site to site. Inasmuch as one cannot speculate that machines were shifted from site to site and one cannot speculate that supervisory staff was deployed elsewhere, one cannot equally speculate that this was not done. In the absence of any evidence I hold that the award relating to payment of supervision charges (head a of para 26 above) and towards hire charges for tools and plant remaining idle (head b of para 26 above) suffers from a patent illegality i.e. award is not sustainable on account of no evidence. However, I uphold the award in so far under head No. Rs.22,935.69 has been awarded towards increase in the cost of labour and material during extended period of contract. I may additionally note that the learned arbitrator has applied the principles of Clause 10(cc) found in DDA contracts which guides, on a structured formula, how to determine escalation. Sums awarded under (a), (b) and (c) heads are set aside.

30. Objection pertaining to claim No.13 is accordingly substantially upheld as per paras 28 and 29 above.

31. Claim No. 14 in sum of Rs. 6,184/- had two components. The first component was towards rebate which contractor claimed could not be availed by DDA inasmuch as rebate was contingent upon timely payments being made under the running bills. Learned arbitrator has agreed with the contractor. I find no infirmity. The second limb of the claim was again towards rebate but qua the final bill. While accepting payment under the final bill, contractor had written "rebate will hold good". Learned arbitrator has held that this writing was obtained under duress. Objection taken by DDA is that contractor never pleaded duress.

32. I have seen the claim pertaining to claim No.14 and pleadings of the contractor pertaining thereto. I do not find any plea by the contractor that the writing in question was obtained under duress.

33. I accordingly partially set aside the award pertaining to claim No. 14, in that, half claim awarded in sum of Rs. 3,092/- is upheld. Remaining half claim in sum of Rs. 3,092/- as awarded is set aside.

Page 2799

34. Claim No. 15 awarded in sum of Rs. 6,168.46 has been challenged on the ground that there was no evidence to sustain the claim.

35. Claim was on account of bank charges to keep the bank guarantee alive for a period of six months beyond contract stipulated period.

36. Learned arbitrator has held that banks retain margin money and also charge for issuing bank guarantees. It may be true that exacting evidence is not forthcoming but it is a matter of common knowledge that banks charge for issuing bank guarantees and also retain margin money thereby depriving the party at whose instance bank guarantees are issued, use of said money.

37. I find nothing objectionable in the award pertaining to claim No.15.

38. Shri Anil Sapra after making some efforts to question award pertaining to claim No. 16 did not press on the objection, probably for the reason, the finding relates to a question of fact i.e. steel consumed.

39. The last objection which was pressed was to the grant of interest by the learned arbitrator.

40. Learned arbitrator has awarded pre-suit interest @14% per annum on the sum awarded and pendente lite and future interest till date of decree has been awarded @ 18% per annum.

41. Submission made was that the contract did not stipulate any interest, much less the rate. There was no plea nor any evidence of usage or market custom. Thus, counsel submitted that as per Interest Act,1978, interest which could be awarded was the rate at which scheduled banks were offering interest on fixed deposits.

42. There is some merit in the objection.

43. Taking note of the fact that the pre-suit interest is for the period 5.6.1986 to 25.2.1991 and pendente lite interest is post 26.2.1991, going back into memory, and enquiry from the UCO Bank, Delhi High Court Branch, I am informed that in 1986 and till about 2000, banks were offering interest between 11% per annum to 13% per annum on fixed deposits and thereafter interest rate was decreased to as low as 5.5% per annum and currently stands enhanced to 6% per annum. Therefore, I modify the award by directing a uniform rate of interest being 12% per annum on the principles sum awarded w.e.f. 5.6.1986 till date of decree. Post decretal interest is awarded at 10% per annum till date of realisation.

44. IA.8922/94 stands disposed of modifying the award dated 15.6.1993 as per paras 28, 29, 33 and 43 above. Decree be drawn.

45. CS(OS) No. 1632/93 stands disposed of .

46. No costs.