Pt. Munshi Ram And Associates ... vs Delhi Development Authority
2006 Latest Caselaw 1028 Del

JUDGMENT

Manju Goel, J.

1. On 30.3.1995 Mr. M. Kuppuswamy, the Arbitrator, filed his original award along with arbitration proceedings and his appointment letter, in the dispute between the parties, viz, M/s R.P. Builders and the DDA- on which the suit was registered and notice of filing of the award under the provisions of Section 14 of the Arbitration Act, 1940 was issued to the parties. Objection to the award was presented by Pandit Munshi Ram and Associates Pvt. Ltd. (hereinafter referred to as the petitioner). The Delhi Development Authority, the respondent did not file any objection. It, however, contests the objections under Section 30 & 33 of the Act. The facts disclosed in the objection petition which led to the dispute and arbitration are as follow:

2. The petitioner is a company engaged in the development and construction activities in and around Delhi. The respondent awarded work of construction of 448 DU's (224 Cat II and 224 Cat III) flats and 336 scooter garage in Pocket B and C opposite Yamuna Co-operative Housing Society SH:Construction of 48 DU's (24 Cat II and 24 Cat III) and 36 scooter garages, i/c int.dev.Gr.IV. A formal agreement being agreement No. 11/EE/CDII/A/DDA/85-86 was drawn up. The agreement contained an arbitration clause in Clause No. 25. Disputes arose between the parties on account of the work which was referred to Shri M. Kuppuswamy SE(Arbitration) on or about 28.8.1992. The Arbitrator announced his award on 4.7.1994.

3. The grounds on which the award is sought to be set aside are as under:

(1) The Arbitrator misconducted the proceedings by not allowing the Claim No. 3 for Rs. 50,000/- and Claim No. 5 for Rs. 3.00 lakhs on account of compensation due to increase in the prices of materials. It is contended that Clause -10CC of the agreement provided for increase in the prices which the Arbitrator failed to take notice of.

(2) The Arbitrator misconducted the proceedings by rejecting the claim of interest. The failure to award interest is an error of law apparent on the face of the award and, therefore, the award is liable to be set aside.

4. The DDA/respondent contends, inter alia, that the Arbitrator has given reasons for rejecting the claims and that there was no error apparent on the face of the award. Similarly for the claim of interest also the respondent says that the Arbitrator duly considered the claim and rejected the same.

5. The parties have filed their affidavits in support of the objections and the reply.

6. The award rejects Claim No. 3 and a part of Claim No. 5. The claim was as under:

Claimants claimed Rs. 55,000/- on account of amount due under Clause 10CC of the agreement and claim No. 5 (part) claimants claimed Rs. 3,00,000/- on account of compensation due to increase in the price of material, labour, establishment charges, overhead on account of prolongation of work beyond the stipulated date of completion (29.7.1985)

7. The Arbitrator observed that despite the fact that final bill was signed by the claimants on 27.3.1989 they made a claim towards compensation on 29.3.1989 for a sum of Rs. 55,000/- without explaining how they could omit to make such a claim in the final bill. According to the Arbitrator claim for only Rs. 1287.68 towards compensation could be substantiated. On coming to Claim No. 5 it is found by the Arbitrator that the claim for compensation in Claim No. 5 is only continuation of Claim No. 3, viz, additional expenditure on material and labour. The Arbitrator found that the claim No. 5 was continuation of claim No. 3 and included the claim under Clause 10CC on the amount of extra item due to the claimants which has already been rejected under claim No. 2. The claimants failed to establish their case under claim No. 2. The Arbitrator therefore rejected the claim under claim Nos.3 & 5.

8. Interest is dealt with under claim Nos.11 & 12. The Arbitrator found that the claim of interest @ 20% per annum on account of delay in final bill was not established. The claim for interest on the amount of Rs. 20,000/- withheld by the DDA was not available under Clause 29 of the agreement. All that the Arbitrator finally awarded was a sum of Rs. 20,000/- as full and final settlement of all the claims. Clause 29 of the agreement is as under:

Clause-29

(1) Whenever any claim or claims for payment of a sum of money arise out of or under the contract against the contractor, the Engineer-in-Charge or the DDA shall be entitled to with-hold and also have a lien to retain such sum or sums in whole or in part from the security, if any deposited by the contractor and for the purpose aforesaid, the Engineer-in-Charge or the DDA shall be entitled to with-hold the security deposit, if any furnished as the case may be; and also have a lien over the same pending finalisation for adjustment of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the Contractor, the Engineer-in-Charge or the DDA shall be entitled to withhold and have a lien to retain to be extent of such claimed amount or amounts referred to above from any sum or sums found payable or which at any time thereafter may become payable to the contractor under the same contract or any other contract with the Engineer-in-Charge or the DDA or any contracting person through the Engineer-in-Charge pending finalisation or adjudication of any such claim.

It is an agreed term of the contract that the sum/sums of money so withheld or retained under the lien referred to above, by the Engineer-in-Charge or DDA will be kept withheld or retained as such by the Engineer-in-Charge or D.D.A. the claim arising out of or under the contract is determined by the Arbitrator (if the contract is governed by the Arbitration clause) or by the Competent Court, as the case may be and that the contractor will have no claim for interest or damage whatsoever on any account in respect of such withholding or retention under the lien referred to above and duly notified as such to the contractor. For the purpose of this clause, where the contractor is a partnership firm or a limited company, the Engineer-in-Charge or the DDA shall be entitled to withhold and also have a lien to retain towards such claimed amount or amounts in whole or in part from any sum found payable to any partner/ Limited Company as the case may be; whether in his individual capacity or otherwise.

(2) Delhi Development Authority shall have right to cause an audit and technical examination of the works and the final bills of the contractor including all supporting vouchers, abstract etc. to be made after payment of the final bill and if as a result of such audit and technical examination any sum is found to have been overpaid in respect of any work done by the contractor under the contract or any work claimed by him to have been done by him under the contract and found not to have been executed, the contractor shall be liable to refund the amount of over payment and it shall be lawful for Delhi Development Authority to recover the same from him in the manner prescribed in Sub-clause (1) of this clause or in any other manner legally permissible and if it is found that the contractor was paid less than what was due to him under the contract in respect of any work executed by him under it, the amount of such under payment shall be duly paid by Delhi Development Authority to the contractor.

Provided that Delhi Development Authority shall not be entitled to recover any sum overpaid nor the contractor shall be entitled to payment of any sum paid short there such payment has been agreed upon between the Chief Engineer or Executive Engineer on the one hand and the contractor on the other under any term of the contract permitting payment for work after assessment by the Chief Engineer or the Executive Engineer.

9. It is clear from this that for the amount withheld under the contract, the contractor would have no claim for interest or damages whatsoever. The amount withheld in this case was amount withheld under Clause 29 and, therefore, no interest was payable on this amount.

10. From the above it is clear that the Arbitrator has duly applied his minds to the facts and has come to a rational finding as to whether the compensation was awardable and whether interest was awardable. There is no error apparent on the face of the award. Nor can award be said to be perverse. It is not possible to say that the Arbitrator has misconducted the proceedings.

11. The next question that comes is whether the claimant can be said to be entitled to any interest for delay in payment of the awarded money. In other words, the question is whether the claimant can be awarded interest from the date of the award till the date of payment.

12. While examining this question in a petition under Section 30 and 33 of the Arbitration Act, this Court laid down the law on this point in the case of Babu Lal Barwa v. Delhi Development Authority and Ors. . After examining the judgments of the Supreme Court, viz., Gujarat Water Supply and Sewerage Boad v. Unique Erectos (Gujarat) (P) Ltd. and Anr. Renusagar Power Co. Ltd. v. General Electric Company , the Court concluded as under:

Thus the aforesaid two decisions of the Supreme Court make it absolutely clear that the Court has power to grant interest from the date of the award till decree and from the date of the decree till realisation.

13. In view of the said law I think it will be appropriate to grant the claimant interest on the sum of Rs. 20,000/- from the date of the award till the date of decree and thereafter till actual realisation. Keeping in view the variations in the rate of interest charged by the nationalised banks in the past one decade, I think that it will be appropriate to grant interest at the rate of 12% per annum from the date of the award till the date of the decree and at the rate of 9% from the date of the decree till realisation.

14. Therefore the award dated 4.7.1994. of Shri Kuppuswamy is hereby made rule of the Court with the modification that on the awarded amount of Rs. 20,000/- the claimant/petitioner will get interest from the date of award till the date of decree at the rate of 12% per annum and from the date of decree till realisation, at the rate of 9% per annum.