Kailash Apartment vs Delux Cooperative Group Housing ...
2008 Latest Caselaw 985 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI


+   O.M.P. 260/2005

    KAILASH APARTMENT                       ..... Petitioner
                  Through                     None.

          versus

    DELUX COOP. G.H.STY              ..... Respondent
                    Through             Mr. B.B. Sawhney, Sr. Advocate with
                          Mr. Abhay N. Das and Mr. V.K. Mehta.

    CORAM:
    HON'BLE MR. JUSTICE SANJIV KHANNA


                               ORDER

% 09.07.2008

1. Inspite of second call, there is no appearance on behalf of the

petitioner.

2. The respondent Delux Cooperative Group housing society, has filed

objections under section 30 and 33 of the Arbitration Act, 1940, against

the award dated12th April, 2005 passed by learned arbitrators Mr. H.R. Laroya

and Mr. S.K. Chopra. The petitioner, Kailash Apartments Pvt. Ltd are

contractors.

3. Learned counsels for the parties were heard on 02nd July, 2008. The

objections raised by the learned counsel for the respondent, cooperative society

were noticed. At that stage, learned counsel for the respondent made a statement

that to settle the matter and to bring the litigation to an end they are ready and

willing to close the chapter with the parties giving up their rights. Learned counsel for the petitioner, Kailash Apartments (P) Ltd. sought time to take

instructions. The matter was accordingly adjourned to 07th July, 2008.

4. On 07th July, 2008, another advocate had appeared on behalf of the

petitioner/contractor and made a statement that the petitioner/contractor would

like the matter to be decided/adjudicated on merits. Thereafter matter was passed

over to be heard and concluded. Inspite of two pass overs no one appeared on

behalf of the petitioner/contractor. In the interest of justice, the matter was

adjourned to be listed on 09th July, 2008. Today, also there is no appearance on

behalf of the petitioner/contractor.

5. The respondent is a house building cooperative society. On 03 rd

February, 1986, the respondent society accepted tender given by the

petitioner/contractor for construction of 225 residential flats on the land belonging

to the respondent society. The total cost of construction as specified was Rs. 2.25

crores and the completion period was twenty one months.

6. The petitioner/contractor started construction and the same

continued even beyond stipulated period of 21 months, which had expired in

November, 1987. It appears that the contractor raised claims for payment of

additional amounts on account of increase in cost, extra construction and delay.

By the award, learned arbitrators have held that the respondent, cooperative

society is liable to pay a sum of Rs. 14,83,803/- on account of additional work,

which the contractor was called upon and required to do. This amount of Rs. 14,83,803/- is the net amount due and payable as per the award, after deducting

Rs.6, 40,462/- from Rs. 21,24,265/-, which was held to be due and payable to the

petitioner/contractor on account of additional and extra work.

7. Learned counsel for objector has drawn my attention to paragraph 9

of the award which reads as under:-

"9. while the work was in progress the petitioners and the respondents entered into an agreement to sort out certain differences towards escalation in price of materials, labour and also for extension of time on 16/5/1989 at an amount of Rs. 11,00,000/-(Rupees Eleven Lacs). The value of work done till 5/5/1989 was Rs. 3,09,16,800/- that is, the parties expected to complete the balance job worth Rs. 31,00,000/- within a period of 2-1/2 months which basically is not practical specially when works are of finishing items and the same are time consuming.

The agreement was unrealistic because there was paucity of funds and payments were being made slow and not in full. The terms of agreement for purposes of payment were not adhered to properly. At this juncture the parties had not settled for the value of increase in quantity of work of various items, rates of items which had changes in specifications or extra items carried out by the petitioners and thus the value or balance work was likely to be even more.

When the balance value of work is more than Rs. 31,00,000/- and that too of finishing items and the whereas variation items are still to be settled, entering into a short time bound agreement was unrealistic."

8. It is submitted by the objector that the award passed by learned

arbitrators suffers from errors apparent on the face of the record and contrary to law as it is contrary to the written agreement dated 16th May, 1989, between the

parties. It is submitted by the learned counsel for the respondent that learned

arbitrators could not have ignored and novated the said written agreement as it is

binding between the parties. Reference in this regard is made to the reasons given

by the learned arbitrators in paragraph 9 of their award to overlook the said

agreement.

9. I find merit in the contention made by the respondent/ society. The

execution agreement dated 16th May, 1989 between the petitioner/contractor and

the respondent/ society is not denied by any party. The agreement was executed

after disputes and differences had arisen between the parties on the question of

delay in execution of work and the amount due and payable to the

petitioner/contractor on account of additional/extra work. These facts are

mentioned in the supplementary agreement dated 16th May, 1989. The agreement

refers to disputes between the parties and states that it was mutually agreed by the

parties that the respondent/society would pay Rs. 11,00,000/- towards material,

escalation and delay as was mutually agreed in the meeting held on 09 th May,

1989 in the office of architect. The aforesaid payment of Rs. 11,00,000/- was

subject to certain conditions. One of them was that contractor would complete the

entire project latest by 30th July, 1989 in all respects. Amount of Rs. 11,00,000/-

was settled as payable towards escalation cost in full and final settlement of all

previous and present claims. Out of that amount, Rs. 7 lacs was to be paid immediately and the balance amount was to be paid in two installments on 15 th

June, 1989 and 15th July, 1989, subject to satisfactory progress of the work at site.

It was admitted by the learned counsels for the parties in the arguments on 02 nd

July, 2008 that payment of Rs. 7 lacs as stipulated in agreement dated 16th May,

1989, was made by respondent/society to the petitioner/contractor.

10. It may be relevant to reproduce some of the relevant clauses of

agreement dated 16th May, 1989.

" The society will way an amount of Rs. 11,00,000/- (Eleven Lakhs Only) towards the materials escalation as mutually agreed upon by both the parties in the meeting held on 09.5.1989 at 6.30 PM in the office of Architects. This escalation is payable to the contractor subject to the following terms and conditions:-

a) That the work of the Delux Cooperative Group Housing Society's Housing Project will be completed latest by 30.7.89 by the Contractors in all respect in all circumstances including force measure.

b) This amount of Rs. 11.00/- lakhs is payable to the Contractor on account of escalation of materials as full and final settlement and all previous/future present claims on account of materials, escalation, interest charges, contractural delays etc. are settled against this amount mutually agreed upon. No other claims by the Contractor on account of materials, escalation, interest, charges, shall be presented for previous/present/future work to be done by the contractor. In other words, the settlement has been done in totally and is full and final settlement of these issues.

c) The positions of the work progress will be presented by the Contractor and will be reviewed by all the three parties at least once in a fortnight i.e 2 nd & 4th Saturdays of each month from 27.5.89 in the office of the Architects. The contractor shall submit a programmed to complete the work latest by 30.7.89 for successful execution of works and shall clearly being out all balance work as of 9.5.89 the weekly targets shall be identified and framed up. This programme shall be submitted for approval of the society/architect and shall form basis of monitoring and payment.

An amount of Rs. 7.00/- lakhs ( Rupees Seven lakhs) shall be paid to the Contractor out of the agreed amount of Rs. 11.00 lakhs as full and final settlement (in totality) by the society latest by 15.3.89 in order to held organizing/starting the work at site. The rate of the amount shall be payable to him ion two installments i.e on 15.6.89, 15.7.89 subject to the satisfactory performance of the work at site in accordance with the programmes as above. The above agreement is done by mutual consent of both the parties i.e Contractor and the Society with the clear intention to complete the work latest by 30.7.89. All decisions as mentioned above are binding on each party and settled all previous present and future disputes/claims in respect of all escalations, interest charge, etc. from the Contractor. This agreement is also over and above all the relevant clauses of the contract/award letter etc. In respect of the above items/issues and is without prejudice to the other rights and remedies rests with both the parties.

Executed on this 16th day of May, 1989."

11. The petitioner/contractor had not challenged that the agreement

was void or voidable as it was vitiated for undue influence, force, coercion and

fraud etc., on the grounds mentioned in section 23 of the Contract Act, 1872. A mistake

of fact by one party does not invalidate a contract (see section 22 of the Contract Act).

It is apparent from the award that no such argument or plea was raised by the

petitioner/contractor. The learned arbitrators have rejected the said agreement

on the ground that the agreement was unrealistic. The reasons are stated in paragraph 9,

which has been quoted above. Whether the time specified in the agreement and the

terms mentioned therein were unrealistic or not, was not for the arbitrators to determine

or decide. The petitioner/contractor had entered into said agreement with open eyes and fully conscious and aware of the work which he had already done and was

required to do, the delay, extra work, escalation etc. He accepted his obligations and

agreed to receive extra consideration as mentioned in the agreement dated 16th

May, 1989. Parties are bound by the terms which they agreed upon. In case of

Assistant Excise Commissioner Vs. Issac Peter reported (1994) 4 SCC 104, the

supreme Court relied upon an earlier decision in case of Panna Lal Vs. State of

Rajasthan reported (1975) 2 SCC 683, to say that harshness or onerous nature of a

contract would not be enough reason for a contracting party to resile from the

contract.

12. Learned arbitrators could not have brushed aside the supplementary

agreement dated 16th May, 1989, on the ground that the petitioner/contractor had

entered into the said agreement, which was unrealistic. Contract Act and the

Arbitration Act do not permit and allow arbitrators to re-write terms of an

agreement, which the parties have entered into. The Arbitrator has to adjudicate

and decide within the four corners of the agreement and if he ignores specific

terms agreed upon by the parties, it would be a jurisdictional error on the face of

the award. Reference can be made to decisions in case of Food Corporation of

India Vs. Chandu Construction, reported in (2007) 4 SCC 697 and State of

Rajasthan Vs. Nav Bharat Construction Company, reported in (2006) 1 SCC

86. It is not the case of the petitioner/contractor that he was forced to enter into

agreement dated 16th May, 1989 or he lacked bargaining power and terms were imposed upon him by force and coersion. Learned arbitrators have not given any

such findings. The right of the parties crystallized when the parties entered into

the agreement dated 16th May, 1989, in respect of claims and disputes regarding

escalation on account of extra construction etc. Learned arbitrators have crossed

their jurisdiction and have committed error apparent on the face of the record by

ignoring the agreement and by holding that the agreement dated 16 th May, 1989

was not binding on the petitioner because it was unrealistic. Rights of the parties

have to be determined on the basis of contract dated 16 th May, 1989. The

arbitrators, therefore, have gone contrary to the written contract. The award

cannot be sustained and is accordingly liable to be set aside as it suffers from error

apparent on the face of the record. The impugned award dated 12 th May, 2005, is

therefore, set aside.

13. I may note here that learned counsel for the respondent/objector

submits that there are other errors in the award. However I need not examine

other grounds as the award cannot be sustained for the reasons given above.

14. The petition is accordingly disposed of. No Costs.

SANJIV KHANNA, J.

JULY 09, 2008 NA/VKR