Hans Construction Co. vs Delhi Development Authority
2007 Latest Caselaw 1217 Del

JUDGMENT

A.K. Sikri, J.

1. The DDA awarded contract for the work "Construction of 96 Houses under SFS Category III and Scooter Sheds Grade III at Paschim Puri, G-17, area South of Distt. Centre, New Delhi. Disputes arose between the parties. The petitioner invoked the arbitration clause. Arbitrator was appointed. Total claims of the petitioner were 14 and counter-claim was 1 before the learned Arbitrator for adjudication and award. The arbitrator has made and published the award bearing No. ARB/SCK/20/109 dated 7.6.1994.

2. The award was filed in this Court. Notice was issued to both the parties and both have filed the objections. DDA's objections are IA No. 4176/1995. The petitioner has filed objections by means of IA No. 7711/1995 which are qua claim No. 10 only. The perusal of the objections of DDA would indicate that these objections are broadly on the following premise:

(a) Non reasoned award; (b) irregularities; (c) arbitrator misconducted himself and proceedings; (d) award bad in law; (e) award without jurisdiction; (f) arbitrator gnored the material placed by the respondent/DDA and; (g) Claims not substantiated.

The aforesaid grounds are taken qua claim Nos. 1, 2, 3.3, 5, 6, 10, 13 and 14.

3. Claim No. 1 was for a sum of Rs. 1 lac towards refund of earnest money/security deposit in the shape of bank guarantee lying with the DDA. The petitioner wanted the DDA to release the said bank guarantee. The argument of the DDA was that the final bill prepared was in the negative and, therefore, there was no question of releasing the guarantee in favor of the petitioner. The learned Arbitrator has not given any reasons while directing that the bank guarantee be released in favor of the petitioner. Perusal of the impugned award would show that the learned arbitrator has remarked that the DDA wanted to encash the bank guarantee but the same was not allowed by the High Court which passed injunction order against the DDA. The Arbitrator has recorded that "in the absence of any letter of demand from Respondent (s) after finalising the bill, that this amount is to be deposited, I, decide that the Respondent (s) has no right to keep the bank guarantee, and, the same shall be released in favor of claimant (s)". Reason is clearly given in support of this direction. The argument of DDA that the final bill was in minus would be of no consequence inasmuch as, after the adjudication of the claims and counter claims, the learned Arbitrator has found that it is the petitioner who was to receive the amount from the DDA. Once the DDA has to make payment under the award, question of withholding of the security deposit in the form of bank guarantee even otherwise does not arise. This objection qua claim No. 1 is clearly unfounded.

4. Claim No. 2 was on account of final bill having not paid to the claimant for sum of Rs. 1.50 lacs under this claim. The learned Arbitrator has granted a sum of Rs. 10,178.90/- to the petitioner. The contention of the DDA is that no basis for allowing the aforesaid sum is mentioned. This is incorrect as following basis is given while allowing this:

Accordingly, the claimant (s) is entitled for payment of Rs. 8,378.92 (excluding the recovery of Rs. 1,14,587 which is matter of counter claim and RS. 32830.21 is matter of dispute under claim no. 5). Further, an amount of Rs. 14,800 has been withhold by the Respondent (s) and out of which Rs. 13,000/- have been released (Ex. R-12).

I decide that Respondent (s) do pay Rs. 10,178.90 paise (Rs. Ten thousand one hundred seventy eight and paise ninety) only, to the claimant (s).

It is clear from the above that after examining the final bill, the learned Arbitrator has worked out the exact details on the basis of which amount awarded is computed.

5. Claim No. 3.3., in respect of which the DDA preferred its next objection, was for payment of overweight steel. Though the petitioner had claimed Rs. 40,010.88/-, the learned Arbitrator awarded Rs. 36,820/- by giving following reasons:

The claimant (s) have claimed that over weight steel was issued (Ext. C-3). The Respondents have recorded the weight of steel bars of 8 mm turn and 12 mm turn steel (Ext/ R-6); but, have failed to account for the same while making payment. I, decide that the claimant (s) are entitled for Rs. 36,820.00 (Rs. Thirty six thousand eight hundred twenty) only on this account, which the Respondent (s) do pay.

The objection of the DDA is that the learned Arbitrator has failed to appreciate that the effect of overweight of steel was already accounted for in the final bill and payment was already made and that the learned Arbitrator had not given any reasons. In so far as reasons are concerned, they are clearly indicated in the award. The Arbitrator has categorically mentioned that though weight of the steel is recorded but the DDA has failed to account for the same while making the payment. Not only this amounts to giving reasons, this particular reason further proves that the contention to the effect that the payment was made to the contractor is misconceived.

6. Claim No. 5 was preferred on account of unjustified recoveries, deductions and reductions etc. by the DDA at the time of making the payments. The learned Arbitrator has allowed a sum of Rs. 6,801/- against the claim of Rs. 1 lac. Perusal of the award would show that the petitioner had conducted test on the tiles and charged for that. However, this deduction was made by the DDA alleging that it was the duty of the petitioner to carry out the mandatory test of tiles. The Arbitrator while awarding the claim to the aforesaid extent has held that the DDA was responsible to carry out the mandatory test of tiles and, therefore, the deductions on this account was not justified. Except submitting that while holding so the learned Arbitrator ignored the provisions of Clause 42, it is not shown that which part of the said clause mandates the contractor to carry out these tests. I went through Clause 42 but could not find any such provision.

7. In so far as claim No. 6 is concerned, it was for Rs. 20,000/- on account of rebate for deductions made by the DDA on the ground that DDA did not stick to contractual commitments. This claim was, however, reduced to Rs. 8,500/- by the petitioner in the statement of claim and a sum of Rs. 7,611/- is awarded by the Arbitrator. The objection of the DDA is that as per the agreement between the parties, it was obligatory for the petitioner to submit his final bill and to comply with other conditions of the contract. The petitioner failed to discharge this obligation as per Clause 8 of the agreement in submitting the bills. The surplus material was also not returned by the petitioner and, therefore, the rebate was rightly deducted by the by the DDA as it was one of the terms and conditions in the agreement between the parties. The learned Arbitrator has observed as under while awarding the claim:

The claimant (s)' claim is reduced to Rs. 8,500/- in the statement of facts. As per Ext. C-31 dt. 21st Dec. '88, drawn the claim, on certain promises by the Respondent (s). However, the claimant (s) again preferred to agitate during course of arbitration, since, the Respondent (s) have not fulfillled the promise of the payment of the final bill to the claimant (s). I find that the claim of the claimant (s) is partly justified, hence, the Respondent (s) do pay Rs. 7,611/- (Rs. Seven thousand six hundred Eleven) only, to the claimant (s).

Except stating that "I find that the claim of the claimant (s) is partly justified, hence, the Respondent (s) do pay Rs. 7,611/-", it is not at all discussed as to how this finding is arrived at. There is not semblance of reasons and only conclusion is mentioned. This claim has, therefore, to be rejected on the ground that there are no reasons given. Even in the reply to this objection, the petitioner has only mentioned that the claim is awarded on "equity and natural justice". The DDA's claim is nowhere refuted under Clause 8 that such a claim was not payable. The award under this claim is accordingly set aside as being without reasons and contrary to the provisions of the contract.

8. Under claim No. 10 extra amount on quoted rates after stipulated period is awarded to the extent of Rs. 64,568/-. The allegation of the DDA is that the petitioner had failed to substantiate his claim before the learned Arbitrator and it was beyond the scope of the Contract between the parties. It is also alleged that delayed execution of the work was solely attributable to the petitioner. The discussion under this award would show that after analysing various documents, the learned Arbitrator concluded that delay was attributable to the DDA because of the hindrances created by it. He noted that various hindrances were recorded in the Hindrance Register (Ex. R-7). Therefore, it cannot be said that delay was on the part of the petitioner. The Arbitrator has also held that time was not the essence of the contract and since the work prolonged, the petitioner was entitled for escalation. Detailed calculations are given for arriving at the figure awarded. The credit of the escalation given under Clause 10(CC) is also given to the DDA. This objection of the DDA is, therefore, ill founded.

9. Other two objections to the claim Nos. 13 and 14 are only with respect to interest and cost on the ground that there is no provision in the contract. These objections are noted to be rejected. Arbitrator has the power to award the interest in view of the judgment of the Supreme Court in the case of Secretary, Irrigation Department v. G.C. Roy . However, the Arbitrator has given pendente lite interest @12% per annum and future interest @16% which appears to be on higher side. Learned Counsel for the petitioner conceded that it may be reduced to 9% for the entire period i.e. pendentelite interet during the arbitration proceedings as well as for the period after award. Award under claim No. 13 is modified to this extent. However, cost of Rs. 4,200/- which is awarded to the petitioner under Claim No. 14 does not require any interference.

10. In the IA No. 7711/1995, the petitioner has objected to award under Claim No. 10 on the ground that proper calculations are not made. As noted above, while dealing with the objections of the DDA to the award of claim No. 10 of the petitioner, the learned Arbitrator held that it was the DDA who was responsible for the delay and, therefore, the petitioner was entitled to escalation due to prolongation of the contract. While working out the amount payable on this account, the learned Arbitrator made the following calculations:

  Gross work done up to 24th and
Final Bill (Not yet paid).                     Rs. 1,22,06,295.00
Less:
Gross work done up to 10th A
Bill paid on 29th Aug. '85:                  (-) Rs. 66,09,779.00
Work done after stipulated
date of completion.                              Rs. 55,96,516.00
Less:
Value of stipulated material
issued during prolongation period.           (-) Rs. 15,80,763.00
Word done:                                       Rs. 40,15,753.00
Less:
Value of secured advance for
material brought by claimant
up to stipulated dated.                       (-) Rs. 7,92,636.00
                                                 Rs. 32,23,117.00:
Escalation @ 20% on                              Rs. 32,23,117 is:
                                                 Rs. 6,44,623.50
Less:
Payment already made
under Clause-10 (cc)                         (-) Rs. 5,80,055.00
                                                 Rs. 64,568.00
 

11. The learned Arbitrator has, thus, taken the net amount of work done after the stipulated date of completion i.e. for the period for which the work was prolonged. Amount calculated for the work done after the stipulated date of completion came to Rs. 32,23,117/-. He has allowed escalation thereon and has thus arrived at a figure of Rs. 6,44,623.50/-. He has further held that since the payment to the dune of Rs. 5,80,055/- under Clause 10 (cc) is already made, net amount payable is Rs. 64,568/-.

12. The objection of the petitioner is that the adjustment of the entire amount paid under Clause 10(CC) is wrongly given. His submission was that out of Rs. 5,80,055/-, Rs. 2,10,662/- only was paid under Clause 10(CC) for the period after the stipulated date of completion and Rs. 3,69,393/- was the escalation under Clause 10(CC) up to the stipulated date of completion. Therefore, adjustment of Rs. 2,10,662/- only was required to be given. In this manner, there is a calculation mistake made by the learned Arbitrator and it was submitted that the said mistake can be set aside by the Court. No doubt, in principle submission of the learned Counsel for the petitioner is correct. Since the escalation under this claim is worked out as payable to the petitioner after the stipulated date of completion i.e. for the period for which the contract prolonged, payment already made under Clause 10(CC) should also be for this period alone and not the entire period of the contract. However, whether the aforesaid figure given by the petitioner are correct or not could be seen by the learned Arbitrator. There is no reply filed to the aforesaid objections of the petitioner and, therefore, for want of reply of the DDA also it is not clear whether the petitioner's calculations are correct. In fact, it was open to the petitioner to point out this arithmetical error even to the Arbitrator. In any case the only course left is to remit the aforesaid issue, raised by the petitioner on claim No. 10, back to the learned Arbitrator for his decision, which shall be rendered by him after hearing the parties on this aspect.

13. Since the award on this claim is severable, only this part can be remitted to the Arbitrator. The effect would be that rest of the award as modified above is made rule of the Court.

14. If the payment is not made as per the modified award within two months, the petitioner shall be entitled to future interest @9% per annum from the date of decree till realisation. The petitioner shall also be entitled to pendentelite interest @9% per annum from the date of award till the date of decree.

No costs.