Delhi Jal Board vs Jagdish Chandra And Anr.
2006 Latest Caselaw 960 Del

JUDGMENT

Sanjay Kishan Kaul, J.

1. The petitioner has filed this petition under Sub-section 2 of Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) to set aside the award dated 7.7.1999 of Shri B.R. Taneja, Sole Arbitrator.

2. The disputes arise out of the tender invited by the petitioner in February 1995 for providing and laying 450mm. dia. outfall sewer for certain Blocks in Ramesh Nagar, West Zone, New Delhi. The respondent No. 1 was awarded the said contract. Disputes arose between the parties in the execution of the contract and in view of the Arbitration Clause existing in the Contract, the designated authority of the petitioner vide letter dated 8.10.1998, appointed Shri B.R. Taneja, as the Sole Arbitrator, who entered upon reference and made and published his award on 7.7.1999. The petitioner is aggrieved by the award.

3. Learned counsel for the petitioner seeks to contend that the objections of the petitioner fall within the parameters of a challenge to an Award as laid down by the Supreme Court in ONGC v. Saw Pipes . Learned counsel contends that the total amount of tendered work was Rs. 12,07,334.26 and the Contractor completed work only for an amount of Rs. 5,17,300/- and the balance work remained unexecuted and was abandoned by respondent No. 1. Thus the amount awarded of Rs. 12,81,442/- was astronomical and thus the award was patently illegal and perverse. The findings arrived at by the Arbitrator on perusal of the evidence was that the petitioner could not hand over the site to respondent No. 1 well in time. The tenders were received in February 1995 but were finalised only in November 1995. The respondent No. 1 waited for more than two years to carry out the work at the quoted rates. The petitioner initially rescinded the Contract on 12.7.1996 and after some days granted extension of time. There was thus an abnormal delay with the result that respondent No. 1 could not be compelled to work on the same rates beyond the stipulated date. These aspects have been considered to only show that the findings arrived at by the learned Arbitrator are against the petitioner and the fault is attributed to the petitioner.

4. Learned counsel contends that no refund of security/earnest money could have been directed when the Contractor had abandoned the work. Thus the petitioner was within his rights as per Clause 53 of the General Conditions of the Contract to retain the deposits till satisfactory completion of defect liability period, which was six months after completion of the work contract. The contract had been completed only on 17.3.1993.

5. It cannot be doubted that the security amount is only for due performance of the contract. Once the Arbitrator comes to the conclusion that the respondent No. 1 could not be bounded to complete the work at the old rates by the petitioner and was thus entitled to walk out of the contract there could be no question of retention of the security amount.

6. Learned counsel contends that it is the respondent No. 1, who left the work midway and thus claim No. 3 for loss of profit could not have been awarded. In this behalf learned Counsel has relied upon the judgment of the Apex Court in Bharat Coking Coal v. L.K. Ahuja where it was observed in para 24 as under:

24. Here when claim for escalation of wage bills and price for materials compensation has been paid and compensation for delay in the payment of the amount payable under the contract for other extra works is to be paid with interest thereon, it is rather difficult for us to accept the proposition that in addition 15% of the total profit should be computed under the heading ?Loss or Profit?. It is not unusual for the contractors to claim loss of profit arising out of diminution in turnover on account of delay in the matter of completion of work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised the same for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the absence of any evidence, the arbitrator could not have awarded the same. This aspect was very well settled in Sunley (B) and Co. Ltd. v. Cunard White Star Ltd. [(1940) 1 KB 740: (1940) 2 ALL ER 97 (CA)] by the Court of Appeal in England. Therefore, we have no hesitation in deleting a sum of Rs. 6,00,000 awarded to the claimant.

7. As a principle of law there could be no doubt what has been laid down by the Supreme Court in the aforesaid judgment, however, the question arises whether the same would apply to the facts of the present case. The Arbitrator has found that the petitioner could not even arrange for permission for laying sewer lines and the matter was inordinately delayed on that account. Thus, respondent No. 1 was held justified in abandoning the work when the petitioner was not fulfillling the obligations as per the contract/agreement. The profits have been calculated at 10 per cent of the balance work. The plea has been specifically raised in the present case and the Arbitrator has come to a finding on the basis of the material placed before him. The Supreme Court has not laid down the proposition that such loss of profit ought not be granted but only that such a specific plea should be raised that if the amount had been received under the contract the same could have been utilised for other businesses in which he could have earned profit. The said plea is required to be established.

8. In view of the aforesaid, it cannot be said that the amount awarded of Rs. 6,90,000/- is without any basis.

9. Learned counsel for the petitioner also seeks to contend that there are duplication in the claims inasmuch as that on the one hand claim No. 3 has been awarded for loss of profit while simultaneously claim No. 4 has been awarded on account of staff and over head expenses beyond the stipulated period. In my considered view the ambit and scope of the two claims are quite different. An amount of Rs. 1,20,800 has been allowed in favor of respondent No. 1 on account of extra over head expenses beyond the stipulated period of contract. Thus, if the contractor is required to make his establishment work beyond what was envisaged in the contract, quotations are naturally made on the basis of the material and work force to be deployed during a particular period of time, then the natural corollary would be that the contractor is liable to be compensated on account of delay attributable to the awarding party.

10. It has also to be kept in mind that this Court does not sit as a Court of appeal over the findings of the Arbitrator. Thus the findings that the petitioner is to blame have been arrived at on the basis of the material on record and cannot be interferred with. Even otherwise the time period taken by the petitioner in obtaining the necessary permissions itself would show that such finding can hardly be called perverse. The condition stipulated in the contract that a contractor must acquaint himself with the nature of work, accessibility of site and other details connected with the works prior to tendering does not imply that the work front itself is not made available by the petitioner. Respondent No. 1 can hardly be expected to envisage that on the one hand the contract is sought to be awarded and on the other hand the work front itself would not be available which had been held to be a direct consequence of the actions and inactions of the petitioner.

11. The scope and ambit of claim No. 6 being loss on account of hire charges as well as rental charges for tools and plants for the extended period had been calculated by the Arbitrator. The Arbitrator found that the equipment was ready to start the work but due to hindrances the work could not be started and thus respondent No. 1 suffered losses. The hindrances recorded in the department registers speak of the absence of the road cutting permission from the Road Department, the same is due to monsoon, change of climate, municipal elections and such other reasons and the total period is about 404 days. The amount has been calculated for 315 days and has been so awarded.

12. The position is more or less same for claim No. 8, which is separately made on account of idle labour. The Arbitrator has found that the labour had been sitting idle at site for 384 days as recorded in the hindrance register of the petitioner and rejected the contention of the petitioner that the reasons recorded in the register of the petitioner are itself not valid.

13. Learned counsel for the petitioner also contends that claim No. 7 awarded for escalation under Clause 10 CC would only apply when the work was in progress and extended. It has been submitted that there was no valid extension as provided in Clause 10CC but I fail to appreciate this plea for the reason that it is not disputed that the contract was being executed beyond the stipulated period of time. The object of 10CC is to take into account the increase in the cost of material and wages on account of such delays attributable to the other party. Thus this objection cannot be sustained.

14.Learned counsel for the petitioner further contends that claim No. 5 for loss suffered on account of an increase in market rate of labour and material could not have been granted as the amount had been awarded under Clause 10CC. But the Arbitrator finds that Clause 10CC does not take into account all the market rates and thus after deducting the amount under Clause 10CC has awarded the amount of Rs. 27,995/-. In my considered view the matter is no more res integra as has been held in M/s Prem Chand Sharma and Co. DDA and Anr. 2005 VIII AD (Delhi) 465, whereby it is held that once the mechanism of Clause 10CC has been placed in the contract that methodology alone should be adopted and nothing over and above the same should be awarded. Thus the award under Claim 5 is set aside.

15.It has to be observed that the amount awarded against the petitioner is more than what has been paid to the respondent for the work completed. However, this is a direct consequence of the conduct of the petitioner whereby for a period of almost a year there has been idle machinery and labour at site waiting to commence work while the petitioner was not able to make the work fronts available on account of lack of permission from one or the other authority. It is unfortunate that the petitioner did not take due care either at the stage of inviting tenders or even thereafter to ensure that the work could be carried out by the contractor without any hindrance. The consequences thus are direct results of the actions and inactions of the petitioner. The work was initially carried out by respondent No. 1 but after June 1997 the sites were not made available, which resulted in contract being repudiated by the petitioner in September 1997. The charges were deposited with the MTNL by the petitioner on 9.9.1998.

16. The last aspect urged by the learned Counsel for the petitioner is on the question of rate of interest. The Arbitrator has granted interest @ 15 per cent per annum. After some hearing learned Counsel for the respondent confines the claim of interest to 12 per cent per annum (simple interest) instead of 15 per cent per annum till date and @ 9 per cent per annum (simple interest) from today till the date of payment.

17. In view of the aforesaid the objections of the petitioner succeed to the extent of claim No. 5 being set aside and the rate of interest being curtailed to 12 per cent per annum (simple interest) till date and @ 9 per cent per annum (simple interest) from today till date of payment as against the awarded rate of 15 per cent per annum.

18. The petition accordingly stands disposed of leaving the parties to bear their own costs.