Bharat Engineering Enterprises vs D.D.A. And Anr.
2006 Latest Caselaw 2011 Del

JUDGMENT

B.N. Chaturvedi, J.

1. The petitioner, a partnership firm was awarded the work of "Construction of 1200 MIG houses in PKT GH-14, Group IV at Paschim Vihar including water supply, sanitary, installation & internal development of land SH : Pile Foundation for Ground IV-Providing bored compaction under reamed pile foundation" and an agreement was executed between the parties in that regard. The respondent No. 1, in the course of execution of the work as also on completion thereof, failed to make payments to the petitioner giving rise to disputes between them. The petitioner, in the circumstances, invoked arbitration clause seeking appointment of an arbitrator to adjudicate upon disputes and an arbitrator was, as a result, appointed vide letter dated 20th February, 1991.

2. The arbitrator entered upon the reference and made his award on 15th June, 1993.

3. On petitioner filing instant petition under Section 14 of the Arbitration Act, pursuant to a direction, the arbitrator filed the award and the arbitration proceedings.

4. On a notice of award being served, the respondent No. 1 filed objections under Sections 30/33 of the Arbitration Act, 1940.

5. The challenge to the award is directed against award of amounts under claims No. 5, 6, 8, 9, 12, 13, 14, 15 and 16. Against award in respect of claims No. 5, 6, 8, 9 and 13 it is pleaded that the arbitrator has failed to give reasons by omitting to disclose his thought process as to how he adjudged the amounts awarded to the petitioner there under, which constitutes an error apparent on the face of the award and renders the same liable to be set aside. Additionally, in respect of award under Claim No. 5, it is alleged that the arbitrator overlooked the terms of the agreement under the head "Load Testing" in allowing the petitioner's claim and thereby misconducted himself and the proceedings which makes the award liable to be set aside. Award of amount under Claim No. 12 is assailed on the ground that the same was contrary to the terms of the agreement and thus the arbitrator misconducted himself and the proceedings making the award liable to be set aside on this count. The claim on account of refund of rebate under Claim No. 14, as allowed by the arbitrator, is questioned in view of material available before the arbitrator, which, according to the respondent No. 1, disentitled the petitioner to refund of rebate. Adjudication of claim under this head, pleads the respondent, suffers from an error apparent on the face of the award and the award needs to be modified appropriately. Award of amount under Claim No. 15 is alleged to be based on no evidence and thus could not have been allowed. Against award of interest under Claim No. 16 from the date of completion of work till the date of award and for pre-suit period particularly in relation to the amount adjudged payable to the petitioner by way of damages against Claim No. 13, is questioned on the plea that the amount awarded on account of damages was not a sum certain or determined prior to the date of award i.e. 15th June, 1993 and therefore no interest could have been awarded on that count. It is pleaded that even otherwise no interest could have been awarded on damages and the same could have at best been awarded against claims No. 5, 6, 8, 9 and 14 only. Further awarding pendente lite interest @ 18% per annum on the entire amount of award including the one on account of damages was not justified. Besides, the respondent views the rate of interest so awarded as being against the provisions of Interest Act, 1978 and seeks the award being appropriately modified.

6. In reply to the objections, it was pleaded that appreciation of documentary evidence and interpretation of terms of agreement lay within arbitrator's domain and interpretation accorded by him being final and binding, the court would not be re-appraising the material placed before him to reach a different finding. It was further pleaded that the arbitrator was neither required to give details of computation in arriving at amounts under different heads of claim nor was he obliged to write a detailed judgment. According to the petitioner since the arbitrator has indicated his thought process, the award could not be termed as one without reasons. It was denied that the award suffers from the vice of error apparent on the face of it or that the arbitrator has misconducted himself and the proceedings, as alleged, in passing the award by acting contrary to the terms of the agreement. It is also denied that the arbitrator wrongly allowed the refund of the rebate under Claim No. 14 or that the award on claim No. 15 is based on no evidence. It is pleaded that the arbitrator was competent to award pre-suit and pendente lite interest and the rate of interest awarded by him can not be interfered with in these proceedings. The petitioner accordingly seeks dismissal of the objections and award being made rule of the court. In addition, grant of interest @ 18% p.a. from the date of award till the date of payment is also sought.

7. On 13th March, 1996 following issues were framed:

1. Whether the award dated 15.6.1993 made and published by Sh. J.K. Varshney is liable to be set aside on the ground set out in objections under Section 30 and 33 (I.A. No. 3773/94) ? OPP

2. Relief.

8. I have heard the learned Counsel for the parties.

9. The petitioner made the following claims before the arbitrator:

Claim No. 1 : Rs. 1,886.96 for excavation in trenches.

Claim No. 2 : Rs. 3,332.21 for shuttering of PCC.

Claim No. 3 : Rs. 7,672.83 for overweight in steel.

Claim No. 4 : Rs. 1,221.27 for refilling of earth.

Claim No. 5 : Rs. 5,395.38 being cost of 6 nos. piles casted for initial pile load test.

Claim No. 6 : Rs. 12,066.24 on account of expenses incurred in the disposal of the excavated mud of bore holes.

Claim No. 7 : Rs. 16,600.46 on account of use of steel in overlaps.

Claim No. 8 : Rs. 2,037.73 on account of difference in cost of 8 mm. turn Steel and MS Steel in rings for pile cages.

Claim No. 9 : Rs. 22,120.00 on account of chipping of piles.

Claim No. 10 : Rs. 25,725.00 on account of increase in length per pile.

Claim No. 11 : Rs. 1,09,760.00 on account of driving charges/thrusting charges.

Claim No. 12 : Rs. 14,009.60 on account of delay in supply of cement and steel.

Claim No. 13 : Rs. 5,52,878.00 on account of damages/infructious expenses.

Claim No. 14 : Rs. 6,774.00 on account of refund of rebates.

Claim No. 15 : Rs. 6,730.58 on account of interest on bank guarantees.

Claim No. 16 : Interest @ 22% from the date of completion of work till the date of award.

10. The arbitrator disallowed the claims No. 1 to 4, 7 and 10 holding the same as unjustified. This part of the award is subject to no challenge on the part of the petitioner.

11. In Santa Sila v. Dhirendranath the Supreme Court laid down that a Court should approach an award to support it, if that is reasonably possible rather than to destroy it, by calling it illegal. In yet another decision in Puri Construction (P) Ltd. v. Union of India , the Supreme Court ruled that the jurisdiction of court when called upon to decide the objection raised by a party against an arbitral award is limited and the court has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the materials produced before the arbitrator. (See also Hindustan Construction Co. Ltd. v. Governor of Orissa ).

12. In Sudarsan Trading Co. v. Govt. of Kerala the Supreme Court ruled:

...The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator.

13. Towards costs of 6 numbers piles cast for load test, the petitioner claimed an amount of Rs. 5,395.38 on the plea that the cost of piles was not included under Item No. 2 of the agreement. The arbitrator noticing that Item No. 2 of the schedule to the agreement did not include the cost of providing test piles allowed the petitioner's claim. In its objections, the respondent pleads that the arbitrator while allowing the claim on account of cost of test piles overlooked the provisions contained under the head 'Load Testing' of the agreement and thus misconducted himself and the proceedings. In corresponding para of its counter statement to the claims of the petitioner, it is however, noticed that no such plea was ever taken before the arbitrator with reference to the provisions contained under the head 'Load Testing' of the agreement. The respondent thus cannot be allowed to raise an altogether fresh plea at this stage to question the correctness of decision arrived at by the arbitrator under claim No. 5. Moreover, the interpretation of the relevant provisions in the agreement being subject matter of arbitrator's domain, the same cannot be interfered with to upset the award of claim under this head.

14. The petitioner claimed an amount of Rs. 5,395.38 on account of cost of test piles. The details of costs so worked out were furnished by the petitioner in their statement of claim. The respondent in their counter statement did not contest the correctness of details of costs so furnished. The arbitrator accepted the details of costs as furnished in the statement of claim and awarded the same to the petitioner. Since the respondent had not questioned the correctness of the cost as detailed in their statement of claim and the same was found justified, the arbitrator was not required to reproduce the details of cost as mentioned in the statement of claim while awarding the aforesaid amount under this head.

15. The award in respect of claims No. 6, 8, 9 and 13 is assailed solely on the ground that the arbitrator has failed to give reasons by omitting to show his thought process as to how he adjudged the amount awarded there under. In this context, it would be noticed that under claim No. 6 against an amount of Rs. 12066.24 claimed on account of expenses incurred in the disposal of excavated mud of bore holes, the claim was allowed by the arbitrator to the extent of Rs. 4,524.84 only.

16. Under claim No. 8 since the respondent had failed to issue mild steel in terms of the agreement and thus the petitioner was made to use turn steel in its place for rings in pile cage, Rs. 2,037.73 on account of difference in cost, as claimed by the petitioner was awarded.

17. Against claim No. 9 though an amount of Rs. 22,120.00 was claimed on account of chipping of piles the award was made to the extent of Rs. 17,388.00 only.

18. An amount of Rs. 5,52,878.00 was claimed by the petitioner on account of damages/infructious expenses under claim No. 13. The claim so made comprised of different amounts claimed under sub heads (a) to (f). The arbitrator examined the claims so made under these sub heads and allowed the claims there under only partially under sub heads (a), (b), (e) and (f) while rejecting claims under sub heads (c) and (d). Against an amount of Rs. 5,52,878.00 only a sum totaling Rs. 2,69020.91/- was awarded.

19. The learned Counsel for the petitioner relying on a decision dated 17th December, 1999 of this Court in Suit No. 21-A/1996 and IA No. 5651/1996 titled Anil Garg v. DDA and Ors. rightly contended that it was not incumbent on the part of the arbitrator to set out the actual calculations as worked out by him to reach the figure indicated in the award under the aforesaid heads of claim and no detailed reasoned decision indicating each minute step of his mental meanderings was essential. Noticeably, the arbitrator proceeded to award entire claim under claim No. 5 and 8 only and allowed the petitioner's claim under claim No. 6, 9 and 13 only partially. Though the detailed arithmetical exercise undertaken by the arbitrator in reaching the amounts under the aforesaid heads is not reflected in the award, mental meanderings is inherently evident in the manner the arbitrator made his award under these heads.

20. In State of Rajasthan v. Puri Construction Co. Ltd. and Anr. the Supreme Court held:

it is not necessary to indicate in the award computation made for various heads and it is open to the arbitrator to give a lump sum award.

21. In the case of Sudarsan Trading Co. (supra) it was laid down that the decision if a particular amount was liable to be paid lies within the competency of the arbitrator and such a decision cannot be interfered with by the court where the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view.

22. According to the respondent, failure on the part of the arbitrator to give details of the calculations leading to particular amounts under the aforesaid heads of claim rendered the award in that respect as one without reasons which amounts to an error apparent on the face of the award and in that view the arbitrator having misconducted himself and the proceedings, the award is liable to be set aside to that extent.

23. In the case of K.P. Poulose v. State of Kerala and Anr. it was held that where an arbitrator misconducted the proceedings the award is liable to be set aside. However, such misconduct is referable to legal misconduct which arises if the arbitrator on the face of the award arrives at a decision ignoring material documents. This, of course, is not the objection raised by the respondent that in awarding the different amounts under respective heads as aforesaid the arbitrator ignored material documents.

24. The objections raised against claims No. 5, 6, 8, 9 and 13 are thus without substance and therefore liable to be dismissed.

25. During the course of execution of the work, according to the claimant on account of delay in supply of cement by the respondent, the labour force could not be utilised fully or at times not at all utilised. The claimant was thus made to pay wages to labour force without any return for the same. Details of delay in supply of cement and resultant non-utilisation of labour force finds mention in the claim statement. The arbitrator on perusal of Hindrance Register and the labour reports adjudged an amount of Rs. 1820/- against claim of Rs. 14,009.60/- and awarded the same to the claimant. Though the respondent assails this part of the award on the ground that the same was awarded contrary to the terms of the agreement but on a look at the counter statement filed by the respondent before the arbitrator, it is noticed that the claim was never contested there on such a ground. The plea of the respondent was rather to the effect that the claimant had failed to furnish proof in support of his claim as to when their labour was not utilised. There appears no denial on the part of the respondent that there was delay in supply of cement as disclosed in the claim statement. The arbitrator on perusal of Hindrance Register and labour reports found the claim justified to the extent allowed by him, leaving no scope for any interference on that account.

26. An amount of Rs. 6774 was claimed as refund of rebate of 0.25% on estimated cost of work for regular monthly payments and also for making payment of final bill. This rebate was available to the respondent on regular monthly payments and payment of final bill within six months of the date of completion of work being made. The arbitrator however noticed from the material placed before him that neither regular monthly payments had been made nor the payment of final bill was made within six months of the date of completion of the work, hence allowed the entire claim for refund of the amount so deducted. The arbitrator having seen the material placed before him to reach a finding as he did, there is no room for reappraisal of the material constituting basis of decision of the arbitrator in awarding the amount under this head and the award thus cannot be successfully questioned on the plea that the material available before the arbitrator did not support the award of the amount of Rs. 6774/-.

27. Rs. 6730.58 was claimed under this head on account of delay on the part of the respondent in releasing their bank guarantee which culminated into loss of interest on margin money and also accounted for additional bank guarantee charges being incurred. The arbitrator held the claim as fully justified and awarded the same in favor of the claimant. Though the delay as such for release of the bank guarantee as alleged by the claimant is not disputed by the respondent, it was however in their counter statement pleaded that since the payment of 7th running account and final bill was delayed on the request of the claimant, the delay in releasing the bank guarantee could not be attributed to the respondent and thus there was no justification to allow the claim. The arbitrator appears to have taken the aforesaid plea raised on behalf of the respondent into consideration but finding no substance therein allowed the claim disregarding the respondent's objections in that regard. In the circumstances, there appears no reason to scrutinize the entire material relevant to the issue with a view to reappreciate the same to reach a different finding.

28. Against a claim of interest @ 22% from the date of completion of work till the date of award, the arbitrator awarded an amount of Rs. 2,29,921.28 @ 14% p.a. from 18th July, 1986 to 25th February, 1991 representing pre-suit period. Relying on a Supreme Court judgment in Civil Appeal No. 1403/1986, Secretary Irrigation Department, Govt. of Orissa and Ors. v. G.C. Roy decided on 19th December, 1991, the arbitrator noted that the agreement between the parties did not prohibit grant of interest and as the claimants were deprived of use of their money, the respondent was liable to compensate them in that regard. The arbitrator accordingly, apart from awarding interest as aforesaid @ 14% p.a. for pre-suit period, also directed payment of pendente lite interest on the awarded amount @ 18% p.a. from 26th February, 1991 to 15th June, 1993 the date of award.

Challenge to this part of award on behalf of respondent is based on the plea that no interest on the amount of damages awarded under claim No. 13 could have been allowed for pre-suit period as it was not a sum certain or determined prior to the date of award i.e. 15th June, 1993. According to the respondent, as a matter of fact, no interest at all could have been awarded on the amount of damages and the same at best could be allowed in respect of claims under claims No. 5, 6, 8, 9 and 14 only. The rate of pendente lite interest @ 18% p.a. is also questioned on the plea that the same is contrary to the provisions of Interest Act, 1978. There is however, no substance in any of the aforesaid pleas raised on behalf of the respondent. Section 3 of the Interest Act, 1978 clearly provides that interest on account of damages as well at a rate not exceeding the current rate of interest can be granted.

29. In Jagdish Rao & Brothers v. Union of India 1999 (1) Arb. LR 696 it was laid down that the award of interest ought to be granted in all cases when there is a decree of money unless there are strong reasons to decline the same.

30. In Jagdish Rai & Brothers v. Union of India JT 1999 (2) SC 268 the apex court ruled that there are four stages of grant of interest viz. (1) from the stage of accrual of cause of action till filing of the arbitration proceedings, (2) during pendency of the proceedings before Arbitrator, (3) future interest arising between date of Award and date of the decree and (4) interest arising from date of decree till realisation of award amount.

31. In Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa, etc. v. N.C. Budharaj (Dead) by LRs etc. etc. JT 2001 (1) SC 486, the Supreme Court has held that arbitrator can award interest for the pre-reference period. Similarly the arbitrator is competent to award pendente lite interest as well as held in Secretary Irrigation Department, Govt. of Orissa and Ors. v. G.C. Roy (see also B.V. Radha Krishna v. Sponge Iron India Ltd. ). There is thus no legal impediment affecting competence of arbitrator to award interest for pre-reference period and also for the period of pendency of arbitration proceedings until making of award. For pre-reference period the arbitrator has allowed interest @ 14% p.a. and @ 18% p.a. as pendente lite interest. The respondent has placed nothing on record to show that the rate of interest as aforesaid did not represent the current rate of interest as contemplated under Section 3 of the Interest Act, 1978. Thus, there appears no force in the respondent's contention that the interest awarded by the arbitrator is contrary to the provisions of the Interest Act, 1978. The respondent is, therefore, liable to fail on this score as well.

32. In view of the aforesaid position, the objections under Sections 30 & 33 (IA No. 3773/1994) filed by the respondent are dismissed and the issue is decided in negative.

ISSUE No. 2:

33. In view of dismissal of objections under Sections 30 & 33 filed by the respondent, the award is made rule of the Court. The claimant shall be entitled to future interest from the date of award to the date of decree and thereafter from the date of decree until payment, on the awarded amount @ 10% p.a. A decree be drawn accordingly. The award shall form part of the decree.

34. The petition under Section 14 of the Arbitration Act stands disposed of in the aforesaid terms.