G.S. Luthra vs Delhi Development Authority And ...
2007 Latest Caselaw 1209 Del

JUDGMENT

A.K. Sikri, J.

1. The Delhi Development Authority (Objector) herein floated tenders for the construction of a Player's Building Phase-1 in 1981. The plaintiff also participated and was successful as its tender was accepted by the DDA vide letter dated June 18,1981. Formal agreement was also signed between the parties. The construction work under this contract was to be completed within Eleven (11) months. However, as it has become a common feature, this contract also got prolonged much beyond the stipulated period. The work continued till 1984 and was not completed even by that time. According to the plaintiff, between 1984 and 1987 the DDA did not give any instruction regarding the work and it remained in suspended animation. In 1987, the plaintiff received letter dated May 12,1987 from the DDA cancelling the work.

2. As per the plaintiff its dues were not settled and had many claims against the DDA for the alleged breaches committed by the DDA because of which the work got delayed and ultimately not rescinded without even allowing the plaintiff to complete the work. In view of the Clause 25 of the General Conditions of Contract which is an arbitration clause, the plaintiff requested for appointment of Arbitrator. As the needful was not done, Suit No. 934A/1988 was filed in this Court in which orders dated September 13, 1988 were passed directing the Member Engineer to appoint an Arbitrator in terms of Clause 25 of the Contract. Arbitrator was appointed pursuant to these directions. The Arbitrator, however, resigned and thereafter in his place another Arbitrator was appointed who also without completing the arbitration proceedings resigned. Ultimately Shri R.J. Bakhru was appointed as the Sole Arbitrator who has rendered the Award dated September 15,1993.

3. After receiving the notice from the Arbitrator of making and publishing the Award, the plaintiff filed Suit No. 2227A/93 which is an application under Section 14 and 17 of the Arbitration Act,1940. Directions were given in this case to the Arbitrator to file the Award. After the Arbitrator filed his Award, notice of filing the award was issued to the parties. The plaintiff has accepted the Award as it chose not to file any objections. However, DDA has preferred to file objections under Sections 30 and 33 of the Arbitration Act which are registered as IA.1117/94. Both the counsel made their submissions qua these objections.

4. First objection is to the award of amount against Claim No. 1. Under this claim, a sum of Rs. 860665/- was demanded as loss of profit due to curtailment of scope of work. A sum of Rs. 394922/- is awarded by the learned Arbitrator. It was the submission of the learned Counsel for the DDA that no work was done after August,1984 as accepted in the Award itself and, therefore, it amounted to abandoning the work by the plaintiff. Under these circumstances, if work was formally rescinded on 12.5.1987 it was not open to the plaintiff to claim 'loss of profit'.

5. There is no dispute that execution of work was delayed. There is also no dispute that between 1984 and 1987 no work was carried. The plaintiff blamed the DDA for this state of affairs alleging that it happened due to hindrances, lapses, default and failures on the part of DDA to perform their obligation. It would be of importance to note that this contention of the plaintiff found favor with the learned Arbitrator. He has, inter alia, arrived at a finding to the effect that there was a delay in handing over complete and clear site due to delay in completion of work of pile foundation executed by other agency; the site was handed over in parts from time to time with the result the work in entire area could not be taken up immediately; there were delays in giving drawings and designs, revised drawings, detailed specifications, clarifications which were given in piecemeal; there was delay in making payment of escalation in price of material and labour under Clause 10(c) and appreciable amount was blocked in materials which created serious cash flow problem for the plaintiff resulting in prolongation of work. From this the learned Arbitrator concluded that "the above-said hindrances, prolongation of work up to 12.5.1987 were entirely due to lapses, defaults acts of commission and omission and consequent breach of acts on the part of the respondent" i.e. the DDA. In view of this categorical finding that there was delay on the part of DDA because of which the work prolonged up to 12.5.1987, the argument of learned Counsel for the DDA that no work was done after August,1984 would be of no consequence. If this work was not got done by the DDA it is the DDA which is to be blamed.

6. It was next contended that whereas under Claim No. 1 the plaintiff was compensated by giving the Award for `loss of profit' the plaintiff was also at the same time awarded a sum of Rs. 11,92,378/- under Claim No. 2 which was on account of damages and loss due to "prolongation of contract period". She submitted that both the claims could not have been awarded. The plaintiff could be given damages only in one form. This plea of learned Counsel for the DDA is also not convincing. As noted above, Claim No. 1 was for loss of profit. It related to unexecuted work of which the plaintiff was deprived of. The Award would show that value of the work was raised to Rs. 2,27,08,475/- and work executed by the plaintiff was to the tune of Rs. 1,87,59,252/-. Value of unexecuted portion of work, therefore was Rs. 39,49,223/-. The plaintiff had demanded 20% of this unexecuted work as profit. However, the learned Arbitrator ultimately awarded only 10% considering that to be the reasonable component of profit had the plaintiff completed the work. On the other hand, under claim No. 2, the plaintiff had preferred claims for material and labour, site establishment, plant, tools, equipment and machinery for the period beyond stipulated date of completion i.e. on account of prolongation of contract period alleging that it had suffered losses and damages under the aforesaid heads. Thus two claims are totally different in nature. The Award would further reveals that for material and labour the learned Arbitrator found that there was increase of 27% in the prices of material and labour which would come to Rs. 9,01,014/-. The learned Arbitrator, however, awarded net amount of Rs. 817178/- after giving the adjustment of amount of Rs. 83838/- already paid by the DDA for escalation in labour clause under Clause 10(c). Clause 10(c) relates to the compensation which is paid for escalation in labour wages during the period of contract. The Arbitrator was considering the claim for the period beyond the contract period as the work was prolonged due to breaches on the part of the DDA. Likewise, a sum of Rs. 3,75,200/- is awarded for extra establishment kept by the plaintiff and the cost which it had to incur for this purpose during the extended period i.e. June,1982 to August,1984. Same is the position with regard to the plant, tool, equipment and machinery. Insofar as plant, tool, equipment and machinery is concerned, nothing was awarded under Claim No. 3 as this claim was taken care of while dealing claims 22 and 23 which were for idle centering and shuttering machinery as well as deterioration of materials, centering and shuttering machinery etc.

7. Argument was sought to be raised that the learned Arbitrator has given the contradictory reasoning while not allowing claim under plant, tool, equipment and machinery under Claim No. 3 on the ground that these were covered under Claims 22 and 23. On same parity claim for material and labour should not have been awarded as it was given under Clause 10(c) and moreover entire Claim No. 3 was covered by Clauses 1 and 2 of the Contract as per which nothing was to be paid on account of delays. It was submitted that the learned Arbitrator was supposed to adhere to the terms of the contract and as held by the Courts in many cases including in the cases of Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr. 1999 (3) Arb. Law Reporter 350 (S.C.) and Steel Authority of India Ltd. v. J.C. Budharaja, Government and Mining Contractor 1999 (3) Arb.Law Reporter 335 (S.C.) and State of Rajasthan v. Nav Bharat Construction Co. . However, the nature of claims awarded would not be covered by Clauses 1 and 2. The Claim No. 2 is on account of loss suffered under various heads due to the reason that work had prolonged entirely because of delay and default on the part of the DDA. If as a result of breaches, losses are suffered, the party would be entitled to the same under Section 73 of the Contract Act. Therefore, the judgment cited by the learned Counsel for the DDA has no application to the facts of this case. Identical plea of DDA in another case, namely, P.C. Sharma and Anr. v. D.D.A. 2006 (1) R.A.J. 521 (Delhi) was rejected by this Court with following remarks:

Claim No. 29 is on account of compensation for idle staff and machinery during the period the Contract. Learned Counsel for the respondent states that there is no Clause in the Contract providing for such payment. I am unable to accept the plea of the learned Counsel for the respondent for the reasons that if the delay is attributable to the respondent and the machinery is lying idle at the site it was certainly open for the Arbitrator to award the amount under Sections 73 and 74 under the Indian Contract Act, 1872. This aspect has been considered in the judgment of Narain Das R. Israni (Supra). In CS (OS) No. 1706/1989 titled Prem Chand Sharma and Co. v. DDA and Anr. decided on 8.11.2005 it has been held that this award is separate from any award which may be made under Clause 10CC. Thus the increase in material and labour cost during the currency of the Contract is different from issue such as idle labour and machinery at site, the loss of profitability arising from the failure of the Contractor to be able to utilise the same due to the same lying at the site etc.

8. Another submission was to the award of amount under Claim No. 4. This claim was for Rs. 2,33,881/- on account of under payment in extra and substituted items. The only grievance is that no reason is given. However, impugned award would show that the learned Arbitrator has examined each of the extra and substituted item individually and derived rates as per the terms of the contract for quantity executed. Therefore, there is no substance on this objection.

9. Objection was also raised in respect of Claim No. 5. This claim was raised in the sum of Rs. 24,278/- on account of shifting of material due to change of site. Here again the only grievance was that reason was not given in arriving the amount. This objection is also without any substance inasmuch as what is found by the learned Arbitrator that the plaintiff stacked material initially as per the instruction of DDA and plan given by it. It was not disputed that this material had to be removed and re-stacked at different places on the instructions of DDA itself. The claim is, therefore, assessed on the basis of material on record. I may point out here that the Arbitrator was technical expert appointed by the DDA itself. The Division Bench of this Court in the case of Delhi Development Authority v. Bhagat Construction Co. (P) Ltd. and Anr. 2004 (3) Arb. LR 548 (Delhi) had made the following observations which squarely applies to this case as well:

8...It is now well established principle of law that the Court will not substitute its own opinion for that of the arbitrator. In the instant case, the Arbitrator was a retired Chief Engineer of the CPWD, he has very well conversant with the kind of disputes on which he was adjudicating. It is also well settled that for the opinion taken and the decision rendered by the Arbitrator, this Court will not substitute its own view, even if this Court comes to a different conclusion, until and unless the decision of the Arbitrator is manifestly perverse or has been arrived at on the basis of wrong application of law....

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10...From the catena of cases decided by this Court as well as the Apex Court what has to be seen by the Court is whether the reasons given by the Arbitrator are perverse or no reasonable person could have come to that view. Arbitrators are not Judges, they have not to write judgments as Judges do. If from the Award, it can be inferred that the Arbitrator has applied his mind, taken into consideration the relevant material for arriving at the finding the Award cannot be interfered with....

10. Similar objection, namely, no reasons are given in support of the Award of claim Nos. 8, 9, 11, 12, 13, 14, 15, 17, 18, 21, 25 is also not sustainable. I have gone through the Award which clearly shows that each of the aforesaid claims is discussed and the learned Arbitrator has given his justification and indicated the mind as to why he was awarding the amount in respect of those claims. It is not a case of "no reason" and only "conclusion" as sought to be contended. Without discussing much, purpose would be served by quoting the following passages from the judgment of this Court in the case of M/s. P.C. Sharma and Anr. v. DDA 2006(1) R.A.J. 521 (Delhi):

3. It is also necessary to put at rest a controversy which is sought to be raised about the award being not a reasoned award. The award undoubtedly is cryptic but in my considered view cannot be said to be devoid of reasons. An Arbitrator is not like a judge who has to write a judgment and thus the parameters for determining whether an award is a reasoned award is not akin to a judgment. In this behalf the judgment of the Division Bench of this Court in DDA v. Bhagat Construction Co. Pvt. Ltd. 2004 (3) Arb LR 481 may be referred to. This question has also been recently considered in CS (OS) No. 995A of 1995 titled Shri D.C. Kapur v. DDA and Anr. decided on 8.2.2006. The judgment of the Apex Court in Goa, Daman and Diu Housing Board v. Ramakant V.P. Darvotkar was taken note of and this Court agreed with the view expressed by Hon'ble Mr. Justice Vikramajit Sen in Suit No. 21-A of 1996 Shri Anil Garg v. DDA and Ors. decided on 17.12.1999. The legal position which emerges is that so long as an Arbitrator was mindful of the contention raised and has considered the same it cannot be said that there is absence of reasons. Learned single Judge in Shri Anil Garg case (Supra) observed as under:

If, by merely referring to the rival contentions and their documents, without more, the Arbitrator in that case had been held to have given a reasoned award, where a similar practice is adopted in other cases, it would more than sufficiently comply with the need of disclosing the trend of the thought process of the Arbitrator.

4. If the aforesaid parameters are applied to the present case, it cannot be said that the award is not a reasoned award.

Same is the position in the instant case.

11. With this, we come to the rate of interest awarded which is 12% P.A. It was contended that the rate is on higher side. Interest is awarded from 16.10.1990. Award of interest @12% p.a. in the year 1990 may not be excessive keeping in view the interest rates prevailing in those days. However, keeping in view the period involved which comes to almost 17 years by now, learned Counsel for the plaintiff conceded for reduction of rate of interest to 9%. Award to this extent is modified and it is directed that interest payable shall be 9% w.e.f. 16.10.1990 till the date of decree. If the payment is made within 60 days, no future interest shall be payable. However, if no payment is made, interest @9% p.a. would become payable from the date of decree till payment. Decree be drawn accordingly. Suit No. 968A/95.

12. In this case, the work awarded by the DDA to the same plaintiff was for construction of Indoor Stadium at I.P. Estate, New Delhi. Disputes which arose were referred to the Arbitrator who made and published his Award dated 24.3.1995. The DDA has filed objections to this Award also which are of same nature as taken in Suit No. 2227/93 discussed above. It is for this reason, at the request of the parties both the cases were directed to be taken up together and counsel for the parties submitted that arguments raised in the aforesaid suit would be applicable in this case also and no separate arguments were advanced and for same reason this Award is also made a Rule of the Court subject to the modification that interest payable here also shall be 9%. If the payment is made within 60 days, no future interest shall be payable. However, if no payment is made, interest @9% p.a. would become payable from the date of decree till payment. Decree be drawn accordingly.