University Of Delhi And Anr. vs Sunita Construction (P) Ltd. And ...
2007 Latest Caselaw 1531 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. These matters are taken up together as they arise out of the same award made by the learned Arbitrator on 10.05.1991. Both the claimant as well as the respondent have preferred objections in respect of the award.

2. The respondent before the Arbitrator (University of Delhi) had invited an open tender for the work of construction of a boys hostel, warden flats and servant quarters in the campus of International Students House, University of Delhi. The claimant [M/s Sunita Construction Pvt. Ltd. (hereinafter referred to as 'Sunita Construction')] had submitted the tender which, after negotiation was finally accepted for an amount of Rs 36,78,703.93 by a letter dated 27.10.1983. The work was to be completed within 18 months commencing from 05.01.1983. A formal agreement was subsequently entered into for an amount of Rs 37,15,862.55. Disputes had arisen between the parties specifically with regard to delay and Sunita Construction filed a Statement of Claim enumerating as many as 19 grounds of delay which were entirely blamed upon the University. Sunita Construction filed its claim before the Arbitrator under 14 heads of claim.

3. The learned Arbitrator found that Sunita Construction was entitled to Rs 66,127.23 out of a total claim of more than Rs 20 lakhs. The claimant (Sunita Construction) is aggrieved by the fact that several of its claims were disallowed without recording any tangible reasons therefore. The University is also aggrieved by the fact that Claim No. 6 of the claimant was allowed by the learned Arbitrator when the same could not be allowed in view of the specific provisions of Clause 10-C of the contract.

4. Taking up the objections raised by Sunita Construction, it was contended by the learned Counsel appearing on behalf of Sunita Construction that the main grievance and objection is that no reasons were given by the learned Arbitrator for rejecting most of its claims under the award. He referred to Clause 25 of the agreement between the parties which contained the arbitration agreement. He specifically pointed out that the said clause required that the arbitrator give reasons for the award. In this context, he referred to the decision of a learned single Judge of this Court in the case of Saroj Bala v. Rajive Stock Brokers Ltd. and Anr. 2005 (3) Arb. LR 162 (Delhi) to submit that the obligation to record reasons has a salutary purpose. The said decision noted that the duty to act judicially arises from the nature of the jurisdiction exercised by the authority and that implicit in the duty to act judicially is the obligation to pass an order only after due and proper application of mind. According to the said decision, application of mind, in turn, can be demonstrated by the disclosure of the mind which is best done by recording reasons for the conclusion drawn by the authority.

5. The learned Counsel appearing on behalf of the claimant submitted that when the arbitration clause itself requires that the reasons be recorded, then it was incumbent upon the arbitrator to have disclosed the reasons for coming to the conclusion that he did. As an example, the learned Counsel referred to the decision of the arbitrator in respect of claim Nos. 1, 2 & 3. Referring to the award, the learned Counsel submitted that the claims under these heads have been disallowed only on the ground that there is an absence of an agreement regarding payment of interest. He submitted that the learned arbitrator did not disclose any reasons as to why Claim No. 2 which was in respect of the charges for keeping the bank guarantee alive was disallowed. He submitted that Claim No. 1 was with regard to the bank guarantee of Rs 1 lakh, Claim No. 2 was with regard to charges for the bank guarantee and Claim No. 3 was with regard to the interest element in respect of the bank guarantee. The learned arbitrator disallowed these three claims merely on the ground that there is no clause for payment of interest under the agreement.

6. Considering the submissions of the learned Counsel for the claimant, I am of the view that the learned arbitrator has firstly gone wrong in disallowing the claim of interest merely because there was no mention of it in the agreement. Unless it is otherwise barred, it is well within the province of an Arbitrator to award interest even if the contract is silent on this aspect. Secondly, the learned arbitrator has clubbed all the three claims together and not discussed the claim with regard to the charges for the bank guarantee. Insofar as the return of the bank guarantee is concerned, that issue did not survive inasmuch as the same had been withdrawn by the claimant. However, the aforesaid example indicates that the learned arbitrator did not disclose any reasons for disallowing Claim No. 2.

7. Secondly, the learned Counsel for the claimant referred to the discussion on Claim No. 5. The learned arbitrator has merely referred to the claim and said that he would be separately dealing with the question of allowing the additional expenditure involved on account of labour in terms of Clause 10-C of the contract. Thereafter, the learned arbitrator has dealt with the claim under Clause 10-C of the contract under the head of Claim No. 6. The learned Counsel for the claimant has successfully demonstrated before this Court that Claim No. 5 was independent from Claim No. 6. A sum of Rs 6,06,187/- had been claimed under Claim No. 5 and only a sum of Rs 48,971.23 had been claimed separately under Claim No. 6. There is no discussion with regard to the disallowance of Claim No. 5.

8. With regard to Claim No. 6, the learned Counsel for the University had also submitted that the conclusion of the learned arbitrator in allowing the claim is also not correct. Clause 10-C itself provides that before a claim under the said clause can be allowed, the contractor has to present proof of actual payment. The award itself records that no labour register was shown to the University, yet the learned arbitrator has gone and awarded the said amount in favor of the claimant. I agree with these submissions made by the learned Counsel for the University that the conditions of Clause 10-C have not been fulfillled inasmuch as no proof of actual payment was presented by the claimant to the University even during the stage of the proceedings before the learned arbitrator. In the absence of any such proof, the finding of the learned arbitrator in favor of the claimant cannot be sustained. Therefore, the finding in respect of Claim No. 6 is liable to be set aside and it is so set aside.

9. There are other such instances also which have been pointed out by the learned Counsel for the claimant which do go to establish the submission made by him that the reasons have not been given by the learned arbitrator to substantiate his conclusion with regard to rejection of the claimant's various claims.

10. Considering the aforesaid discussion, I deem it proper to set aside the award and to refer the matter for arbitration afresh to Justice V.S. Aggarwal (Retired). The learned arbitrator shall fix his own fee.

A copy of this order be sent to the learned arbitrator Along with the record and he shall inform the parties, upon receipt of the same, of further proceedings.