Puri And Co. vs Indian Institute Of Technology
2008 Latest Caselaw 1107 Del

      *     IN THE HIGH COURT OF DELHI AT NEW DELHI
                   +    CS(OS) 2652A/1987

                                          Reserved on: July 10,2008
                                       Pronounced on July 23, 2008

      PURI AND CO.                            ......Plaintiff.
                        Through Mr. V.K. Mishra, Advocate.

                                 Vs.

      INDIAN INSTITUTE OF TECHNOLOGY         ......Defendant.
                     Through Mr. Suresh Sinha, advocate
                      with Mr. L.P. Sinha, Advocate.

CORAM:
Hon'ble Mr. Justice S. Ravindra Bhat

1.    Whether 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

Hon'ble Mr. Justice S. Ravindra Bhat:

1.          In this suit, the claimaint/objector (hereafter referred to

as the plaintiff) challenges the award dated 20.7.1987 of a sole

arbitrator appointed by the parties, to adjudicate their inter se

disputes.

2.          The plaintiff was awarded the work of construction of a

building for the Association of Indian Universities, at 16 Kotla Road,

CS(OS) 2652A/1987                                page No.1 of 12
 New Delhi which included the building portion, Water supply,

Sanitary installation and Drainage. The works were awarded by the

defendant/Indian Institute of Technology (hereafter called "IIT").

Clause 25 of the agreement enjoined the parties to refer inter se

disputes to arbitration. The plaintiff raised certain demands which

were referred to the arbitration of Prof. N.M. Swani, a Director of the

IIT. He entered upon reference on 11.11.1986.        After considering

materials on record and the rival pleadings, the arbitrator published

his award on 20.7.1987. As against 20 claims of the plaintiff, the

arbitrator awarded six claims and partially allowed one claim. He

directed payment of 12% per annum simple interest to the claimant.

The IIT, respondent in the arbitration proceedings had counter

claimed on six heads which were rejected.

3. In these proceedings, during the course of hearing arguments

were addressed on the findings of the arbitrator in respect of claim

No.1, claim No.2 and claim Nos. 15 & 16.

4. The plaintiff had claimed refund of Rs.85,000/- on account of

2% rebate withheld by the IIT. The background to this head of claim

is that the plaintiff while tendering for the works, on 9.7.1982

offered this rebate if the contract were awarded within 30 days. It is

common ground that by letters dated 22.7.1982 and 7.8.1982 this

offer of rebate was extended if the agreement were to be finalized by

31.8.1982. The plaintiff claims to have received confirmation of

acceptance of its tender after 10.9.1982. It , therefore, argued before

the arbitrator that deduction of 2% on account of rebate was

inadmissible since the contract was awarded beyond the stipulated

time granted to the IIT in that regard. In defence, the IIT had

contended about having accepted the offer and awardrd the contract

to the plaintiff, through its letter dated 30.8.1982. The said

document was produced as Ex. C-1 with the counter statement of

facts in arbitration proceedings. The arbitrator rejected the

plaintiff's submission and held that acceptance of the tender was

conveyed before relevant date i.e. 31.8.1982 and thus the IIT was

justified in regard to the 2% rebate

5. It was contended by Mr. V.K. Mishra, learned counsel that the

findings in the award with regard to the 2% rebate are factually

untenable and legally unsound. He urged that the IIT had never

dispatched any such letter, dated 30.8.1982 and that it saw the

light of the day for the first time in arbitral proceedings. It was

contended that in terms of the contract all previous correspondence

were deemed part of the agreement. The previous letters, it was

contended by counsel, on the subject were a part of the agreement

and exchanged by the parties. Yet the letter of 30.8.1982 found no

mention and was never a part of the contract or the correspondence.

In these circumstances and in the absence of any corroborative

evidence that the contract was awarded on 30.8.1982 the IIT could

not have legitimately claimed the rebate.

6. Counsel for the IIT, on the other hand, contended that the

findings of the arbitrator are pure questions of facts based on

inferences drawn from the materials available on record. It was

argued that the plaintiff did not deny receiving the other letters

which extended the time up to 30.8.1982; it did not also deny

receiving the letter dated 10.9.1982. Counsel relied on that

document and submitted that it contained a clear reference to the

previous letter awarding the contract, on 30.8.1982 with details of

such letter. Counsel further urged that the plaintiff never protested

or commented about absence of such letter or correspondence in

time or immediately after 10.9.1982 and sought to claim refund of

the rebate for the first time in arbitral proceedings. This, it was

urged, was clearly inadmissible.

7. The court has considered the award on claim No.1. The

Arbitrator considered the letter dated 30.8.1982 which was Ex. 1 of

the counter claim of IIT. He also noticed that IIT's letter of

acceptance dated 10.9.1982 was a part of the contract at page 125

and that it clearly adverted to the previous letter of 30.8.1982

through which acceptance of the tender was conveyed. He,

therefore, concluded that the plaintiff was informed about the

acceptance of the offer before the stipulated date 31.8.1982. The

findings of the arbitrator on this claim in the opinion of the court

cannot be termed as conjectural or based on no evidence. Also the

discussion in the award shows that the arbitrator deliberated on the

rival contentions and drew his independent inference. It may be

possible for a court, while exercising its original jurisdiction to arrive

at a contrary view, in such cases. Yet that is not the standard to be

applied while judging whether the award has to be set aside for legal

misconduct. The view taken by the arbitrator is certainly a

plausible one. In these circumstances, the objections to the

findings on claim No.1 are held to be without foundation and are

therefore rejected.

8. The second challenge to the award centers round findings on

claim No.2. The plaintiff had claimed Rs.42,500/- as refund of 1%

rebate deducted from monthly running payments. The Arbitrator

allowed a portion of this claim except holding that the

respondent/IIT was entitled to retain the deduction to the extent of

Rs.9731.75. It is contended that the deduction of Rs.9731.75

permitted is in error of law as the IIT could not have adjusted this

amount against the security deposit. It is urged that this deduction

was an afterthought since a guarantee bond remained in force till

September, 1985 to indemnify the IIT. Reliance is placed on

documents such as Ex. C-68 and C-75.

9. While tendering for the work, the claimant had offered a 1%

rebate if monthly running bills were paid within one week of their

submission for the work done. This was accepted by the IIT in its

letter dated 10.9.1982. A careful reading of the award would show

that besides noticing a plaintiff's contention, the arbitrator also

independently examined other relevant documents such as Ex. 4

running bills and Ex. C-15 and C-75. Factually the findings can

hardly be characterized as errors of law or betraying an approach or

findings of fact unsupported by evidence amounting to legal mis-

conduct. Therefore, the objections on claim No.2 are also held to be

without basis.

10. The claimants have claimed Rs.62,000/- for non-issue of

cement to their work force on Respondent's off-days and also for late

issue of the cement at 9.00 a.m. instead of 8.00 a.m. on working

days. The plaintiff referred to Ex. C-27, C-28 and C-105 of P-1 in

support of its claim. They claimed that by late issue of cement i.e. at

9.00 a.m. instead of 8.00 a.m., 12.5% of their labour output was

wasted. Non-issue of ement on Institute off-days (Ex. C-27 of P-1)

in addition to the weekly off-days was contrary to provision 2c(i)

page 42 of contract Agreement (R-1). The plaintiff alleged that total

wages paid to the workers and the masons dealing with the cement

work was Rs.4,53,893.50, of which 12.5% was wasted, which the

plaintiff demanded for late issue and the balance for off-days. The

plaintiff gave reports for masons and labour employed on work

involving use of cement. The IIT argued that the plaintiff had been

making lump sum claims giving details neither in the letter asking

for arbitration nor in the statement of claims. The plaintiff, it is

claimed had not given details of their workforce which remained idle

on off-days on account of non-issue of of cement. The IIT averred it

had been issuing cement to the plaintiff continuously whenever it

sought for it, as was evident from the Registrar of cement, which

showed issue of cement on Saturdays and even on some Sundays

and other holidays. Cement could not be issued when the work was

not in progress and the plaintiff did not want it. The Register of

Cement was relied to show long gaps in the progress of work and

that the plaintiff did not work on such days. The IIT therefore,

inferred that plaintiff was not interested in doing the work regularly

and had not mustered sufficient workforce.

11. The arbitrator had rejected this claim after considering the

entries in the register of cement dated 7.3.1983, 9.3.1983,

10.3.1983, 20.3.1983, 26.3.1983 and 27.3.1983. He also

considered the testimony of Shri. J.P. Jain, Junior Engineer IIT.

The questions put to the witness and the answers given by him were

produced verbatim in the award. This court has considered the

arbitrator's findings in this regard. They can hardly be characterized

as errors in law or findings of facts unsupported by evidence. The

arbitrator noted that no written complaints had been

contemporaneously made, when the contract itself was being

worked out in 1982-83 and 1983-84. It was also noticed that the

plaintiff did not keep any particulars about its workers (who

remained idle due to lapses of the IIT in not issuing cement) or

mention at the relevant time, or disclose other relevant particulars

in that regard. In these circumstances the findings of the

arbitrator, attacked as contrary to law are unfounded; certainly also

not on the basis of any lack of consideration of evidence. After all,

the informality attached to arbitration proceedings does not imply

that every claim of a litigant, bereft of supporting proof is to be

regarded as legitimate. There may certainly be some relaxation in

the mode and manner of proving facts; yet the underlying obligation

to adduce evidence continues to rest on those who make claims,

based on factual assertions. The plaintiff failed to prove its facts

here; its objection, to the findings on the claim, have to, therefore,

fail.

12. Claim No. 16 is for the sum of Rs. 52,000 towards additional

charges on scaffolding for the work of aggregate plastering on the

surface of the building. The arbitrator had denied this claim. The

plaintiff had been awarded two contracts for separate parts of the

building. It is contended that the work of plastering could not be

taken up since IIT delayed its decision on construction of "chajjas"

and projections. The claim on this head was Rs. 4000/- per month

for 13 months. The IIT had denied this lump-sum claim as not

tenable. The arbitrator observed that the contract in question

involved construction up-to the roof slab of the third floor; the

fourth and fifth floors were covered by another contract. The

arbitrator reasoned that if the contracts for the other floors had

been awarded to another agency, these questions could possibly

have been legitimately raised. However, since the plaintiff was

awarded the contracts for both parts of the building, (the arbitrator

reasoned) as use cost of the materials was un-spelt, in the later

contract, it could be reasonable to conclude that the plaintiffs used

the materials and equipment available with it for one contract, in

the execution of another. This reasoning, in the opinion of this

court, is unexceptionable. Besides, the plaintiff did not show how it

could claim Rs. 4,000/- per month, for 13 months.

13. A court's power to interfere with an arbitration award, under

Section 30 and 33 of the old Act is well established. From Union of

India -vs- A.L. Ralia Ram AIR 1963 SC 1685 down to Food

Corporation of India -vs- Chandu Construction 2007 (4) SCC 697, it

has been ruled that to constitute misconduct implies something

unreasonable which would fall outside the jurisdiction of the

arbitrator. The standard to be applied for judging the legality of an

award is irrationality, caprice, arbitrariness or the adjudicator-

arbitrator acting beyond the terms of the agreement. (Ref. Bhagwati

Oxygen Ltd. -vs- Hindustan Copper Ltd. 2005(6) SCC 462; Rajasthan

State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and

Another, (1999) 9 SCC 283). It has been further held (U.P. State

Electricity Board v. Searsole Chemcials Ltd. (2001) 3 SCC 397), that

where the arbitrator applies his mind to the pleadings, considers the

evidence adduced before him and passes an award, the Court

cannot interfere by reappraising the matter as if it were an appeal.

14. Another test indicated by the Supreme Court, in - Chandu

Construction(supra) and Bharat Coking Coal Ltd. v. M/s. Annapurna

Construction, (2003) 8 SCC 154,) is that where the arbitrator travels

beyond the contract he acts in excess of jurisdiction in which case,

the award passed by him becomes vulnerable and can be questioned

in an appropriate Court. In this case, the arbitrator, agreed to be

appointed by the parties, was a technical man, whose experience

and judgment was relied on by both parties, and has not been

impeached in these proceedings. He has rendered an award, which

contains reasoning on each contention raised, concerning every

claim; the award is a 100 page document. Neither his approach, or

appreciation of pleadings or evidence betrays any flaw which would

vitiate the findings, in the award.

15. In view of the above reasons, the court is of the opinion that

plaintiff's objections to the award have to fail. They are accordingly

dismissed. Subject to these findings, the award has to be made a

rule of court; the suit is decreed in its terms. No costs.

July 23, 2008                                (S. RAVINDRA BHAT)
                                                   JUDGE