Rajesh Kumar Menghani vs Chief Urban Planner Pd Cell
2008 Latest Caselaw 1467 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                         FAO No. 197 of 2008

                                     Date of Decision :      28-08-2008


       RAJESH KUMAR MENGHANI                  ..... Appellant
                     Through Mr. D.R.Bhatia, Advocate

                   versus

       CHIEF URBAN PLANNER PD CELL                      ..... Respondent


CORAM:
    HON'BLE MISS JUSTICE REKHA SHARMA

1.     Whether the reporters of local papers may be allowed to see the
       judgment? Yes
2.     To be referred to the reporter or not? Yes
3.     Whether the judgment should be reported in the „Digest‟? Yes


REKHA SHARMA, J.

This appeal arises out of judgment of Additional District

Judge Shri Raj Kumar Chauhan dated February 29, 2008, dismissing

the objections filed by the appellant against an arbitration award dated

January 23, 2006 made by a former Judge of this Court. The facts

relevant to the disposal of the appeal are as under:-

Pursuant to an open tender, the respondent awarded a

contract to the appellant for car/scooter/cycle etc. parking at Kanhaiya

Nagar Metro Railway Station. The contract agreement was signed on

March 25, 2004 and on the same date, the site was handed over to the

appellant. It was alleged by the appellant that the conditions as

projected in the tender were not complied with by the respondent

particularly with regard to the area of the site made available to him.

The respondent disputed the allegation of the appellant and on

October 12, 2004 terminated the Agreement. The appellant

approached the court of the District Judge for appointment of an

Arbitrator whereupon a retired Judge of this Court

Justice K.Ramamoorthy was appointed as the sole Arbitrator to

adjudicate upon the claims and counter claims of the parties. The

appellant raised the following claims before the learned Arbitrator:-

i) Refund of security deposit Rs. 6,93,833/-

ii) Compensation for the consequences Rs. 2,30,827/-

for the breaches of conditions of contract

iii) Compensation for under utilization of Rs. 6,87,600/-

staff due to pre-matured closure of contract

iv) Compensation for loss of business Rs. 1,98,000/-

which the contractor/claimant had expected to realize.

v) Cost of litigation due to impertinent Rs. 1,50,000/-

and intransigent behaviour of the respondent - DMRC

vi) Compound interest @ 18% on the To be determined above awarded amounts from the through Arbitrator date of cause of action up to date of payment.

The respondent also raised its own claims which were as

under:-

i) Total dues of license fee & interest Rs. 2,73,445.00 from 1.8.2004 to 19.10.2004

ii) Expenditure for manning Kanhaiya Rs. 25,046.66 Nagar parking by Group 4 Securities from 20.10.2004 to 7.12.2004

iii) Expenditure for publishing Rs. 63,016.33 advertisement for re-tendering the parking site.

iv)          Misc. expenses for completion         of         Rs. 25,000.00
             aforesaid process etc.


v)           Cost of litigation                               Rs. 1,50,000/-

The learned Arbitrator on the basis of the claims and

counter claims framed the following issues for consideration:-

1. Whether the Claimant had acted in accordance with the terms of the contract?

2. Whether the respondent committed breach of the terms of the contract?

3. Whether the case of the claimant that he has suffered loss is proved?

4. Whether the respondent was justified in forfeiting security deposit?

5. Whether the respondent is entitled to counter claims?

6. Whether the claimant is entitled to interest? If so, at what rate?

7. Whether the respondent is entitled to interest? If so, at what rate?

8. To what relief parties are entitled to?

The Arbitrator vide his award dated January 23, 2006

dismissed the claims of the appellant as well as the counter claims of

the respondent.

Aggrieved by the dismissal of his claims, the appellant

assailed the award before the learned Additional District Judge but

confined his challenge only to issue No. 4 i.e. "Whether the respondent

was justified in forfeiting security deposit?" Before this Court also, the

challenge has been restricted to issue No. 4.

The relevant clause of the Agreement which empowered

the respondent to forfeit the security deposit reads as under:-

"If the licensee fails to pay license fee in time for any month, the license shall stand cancelled subject to provision vide item No. (4) above, and the interest free security deposit shall stand forfeited in favour of the licensor (DMRC Ltd.). Also on such cancellation of the license, the licensee shall quit immediately and licensor shall be entitled to re-tender the parking site."

It was submitted by learned counsel for the appellant that

the Arbitrator justified the forfeiture of the security deposit by the

respondent for no other reason except on the basis of clause 4 of the

Agreement. The said clause, it was argued was in the nature of

penalty and that respondent ought not to have been allowed to forfeit

the security deposit on the basis of the clause per-se unless and until

the respondent had proved the actual loss caused to it. As per the

appellant, respondent led no evidence to prove the loss, hence, the

forfeiture of the security deposit was not justified. In this regard,

reference was made to the judgment of the Apex Court in Maula Bux

Vs. Union of India AIR 1970 SC 1955.

There can be no dispute that the Supreme Court in the

case of Maula Bux (supra) has held that where there is a stipulation in

the nature of penalty for forfeiture of an amount deposited pursuant to

the terms of contract which expressly provides for forfeiture, the court

has jurisdiction to award such sum only as it considers reasonable but

not exceeding the amount specified in the contract as liable to

forfeiture. In other words, the Supreme Court says that the clause

does not give absolute right for forfeiture of the amount specified

therein unless the loss caused to that extent is proved and it has right

to award only reasonable compensation.

No doubt the Arbitrator has disallowed the claim of the

appellant for refund of security amount but it will not be correct to say

that he has done so only on the basis of clause 4 of the Agreement.

The findings of the Arbitrator have to be understood in the over-all

context of what he has observed while rejecting the claims of the

appellant including the claim for refund of the security deposit and the

finding given by him on the counter claims of the respondent.

The basis for rejecting the claim of the appellant is

discernible from paragraphs 8 and 18 of the Award. The said

paragraphs run as under:-

"8. Mr. Rajesh Kumar Menghani, the Claimant filed his affidavit by way of evidence on 20.10.2005. He also filed documents C-10 to C-13. In the affidavit by way of evidence the Claimant has reiterated what is stated in the claim petition. The Claimant has elaborated the claim on pages 11 and 12 in the affidavit by way of evidence as Annexure C-13. In the cross-examination, the Claimant admitted that he operated on the basis of the contract in the contract places from 30.3.2004 to 19.10.2004 F.N. only. He admitted that he inspected the site before bidding. He would say that without verifying the site he took possession for operation. He admitted that the site was measured before possession was given to him. The Claimant has also admitted that the license fee would be adjusted if area fell short or additional area would be given to the contractor. He has also admitted that he collected parking charges during the period of operation.

18. Having regard to the overall facts and circumstances and the provisions of the contract there is absolutely no difficulty in coming to conclusion that the Claimant has committed breach of the terms of the contract. As a prudent businessman he must have taken care of relevant facts before bidding and signing the contract. He admits that he has visited the parking places and measurements were taken. Under clause 3 he is bound to pay the license fee as agreed. It was upto him to bid any amount. He having been highest bidder it was accepted by the respondent. Now, it is not open to the claimant to say relying upon the contract amount now obtained by the respondent and tried to develop an argument. Before making the claims, the Claimant is bound to prove in law that the respondent had acted contrary to the terms of the contract. It is settled law that Arbitral Tribunal has to adjudicate on the disputes in the light of the terms of the contract."

The reason for rejecting the counter claims of the

respondent are given in paragraphs 26 the Award which is as under:-

"On issue no. 5, the respondent has made counter claims alleging that it is on account of the breach committed by the claimant. Already the items of counter claims are extracted. The respondent put an end to the contract in October 2004 and it had forfeited the security deposit, having forfeited the security deposit, in my view, the respondent is not entitled to make the counter claims. The respondent stood amply compensated by forfeiting the security. I find that the respondent is not entitled to the amounts claimed in the counter claims."

What do the afore-mentioned paragraphs go to show?

They clearly indicate that the learned Arbitrator has found the

appellant guilty of breach of the terms of the contract and

consequently dismissed his claims. No doubt, the learned Arbitrator

also rejected the counter claims of the respondent but what is of

significance is that they were not rejected for the same reason for

which he had rejected the claims of the appellant. The counter claims

were rejected because the Arbitrator felt that by forfeiting the security

of the appellant, the respondent stood amply compensated. In other

words, the Arbitrator felt that the loss which the respondent incurred

was equivalent to the security amount which the respondent had

forfeited. In this view of the matter, nothing over and above the

security deposit was awarded to the respondent against the counter

claims. It is true that the Arbitrator has not given elaborate reasons as

to how the forfeiture of the security deposit was sufficient to

compensate the respondent vis-à-vis the counter claims but if he has

not done so, he was not required to do so. It is well settled that the

Arbitrator is not required to give detailed reasons for the conclusions

arrived at by him. It is enough if the Award reflects application of mind

which in the present case it does as the Arbitrator while deciding issue

No. 4 relating to counter claims of respondent has clearly stated that

they were not being awarded as the respondent stood amply

compensated on its forfeiting the security deposit of the appellant.

The jurisdiction of the reviewing court under the Arbitration and

Conciliation Act, 1996 is not appellate in nature and the reasons which

he records cannot be scrutinized by the court in a manner it does in

the exercise of its appellate jurisdiction. The court would not interfere

with the Award merely because it finds that the view taken by the

Arbitrator does not agree with the view of the court in the facts or on

law.

Having regard to the above findings, the refusal by the

Arbitrator to order refund of security deposit to the appellant has to be

seen in context of the finding given by him on issue No. 5. If the two

are read together, no fault can be found with the award.

Having regard to the above, I find no justification to

interfere in the impugned order. The appeal is dismissed.

REKHA SHARMA, J.

AUGUST 28, 2008 sl