Union Of India (Sr. Divisional ... vs M/S N.K.Sharma & Company
2009 Latest Caselaw 1630 Del

               * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                                       Date of Reserve: 15.4.2009
                                                                      Date of Order: April 24, 2009

OMP No. 670/2007
%                                                                                         24.4.2009

        Union of India
        (Sr. Divisional Engineer-V, DRM Office)        ... Petitioner
                          Through: Mr. S.R.Narayan, Advocate

                   Versus


        M/s N.K.Sharma & Company                    ... Respondent
                       Through: Mr. Chetan Sharma, Sr. Advocate with
                       Mr. M.S.Ahluwalia, Advocate


JUSTICE SHIV NARAYAN DHINGRA

1. Whether reporters of local papers may be allowed to see the judgment?

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?

JUDGMENT

By this petition under Section 34 of the Arbitration & Conciliation Act,

1996, the petitioner has filed objections against the award dated 20.8.2007 given by

the Arbitral Tribunal in respect of the dispute between the parties.

2. Brief facts relevant for the purpose of deciding this petition are that the

respondent was awarded a contract of replacement of worn out pipes along with

laying of new PVC pipeline for water supply between Ram Nagar Complex and

Qutub Road Complex on 16.10.2002 at an overall cost of Rs.34,47,399/- The work

was to be completed by 15.2.2003. The respondent started work and the first

running bill of the respondent was released for a sum of Rs.10,43,025/- after

deduction of rebate, income tax and surcharge etc. with the certificate that the work

was carried out to the satisfaction of the petitioner. The bill included cost of supply

of PVC pipe measuring 4833.95 m. The petitioner granted an extension upto

15.7.2003 for completion of work, without penalty, and a corrigendum was issued to

the contract. The total value of contract was also enhanced to Rs.41,17,951.28 due

to increase in scope of work in connection with water supply. There was another

corrigendum to the contract and the value of the works was enhanced to Rs.42,

79,191.57. The second running bill of the contractor was prepared by the petitioner

for Rs.16,35,077.33, which included cost of supply of PVC pipe measuring 5393.75

m. The second running bill of the respondent was approved but the amount of

second bill was not released. The contention of the respondent/claimant had been

that even in respect of second bill, a certificate was given that the work had been

executed as per specifications. However, the second bill was put in cold storage

since competitors of the claimant made some complaints against him. The

respondent however was not asked to stop the work and continued to do the

balance work at site. The respondent pleaded that he completed the work as per

contract in spite of his second bill having not been released. The petitioner later

raised an objection about the quality of PVC pipes and alleged that PVC pipes were

not of the specified quality.

3. The petitioner's case had been that two samples of PVC pipe were

collected and sent to Shri Ram Institute for Industrial Research, Delhi for testing.

The test conducted on these samples viz. PN-1 & PN-2 showed that the samples

were not of the required quality as the samples, when put on internal hydrostatic

pressure test at 27decree C for one hour, got burst during the test. It is submitted

that after the test report dated 31.10.2003 was released; a letter was received from

General Manager (Vigilance) by the petitioner directing the petitioner to recover an

amount of 7.78 lac from the respondent/contractor for supply of substandard PVC

pipe, from the due payment of CC-II on account of bill and amount available with the

petitioner. Thus, this recovery was made from the other due payments payable to

the contractor.

4. The learned Arbitral Tribunal considered the grounds of non-payment

of the bill by the petitioner viz. failing of the pipe during testing and came to the

conclusion that test results of Shri Ram Institute for Industrial Research, Delhi were

not applicable to the claimants. It was observed that the PVC pipe which the

claimant was supposed to use was to have outside diameter of 110 mm and wall

thickness of 1.1 mm as per item no. 2145(j) of Northern Railway Standard Schedule

of Rates SOR-1996. The test report was silent about the outside diameter and wall

thickness required for withstanding internal hydrostatic pressure. The learned

Arbitral Tribunal concluded that the samples were sent with incomplete

specifications for tests which were required to be conducted on them. The test

reports were also incomplete. They elaborated that when the petitioner sent

samples PN-1 & PN-2 to the laboratory for "physical test" there was no mention of

basic essential parameters like wall thickness, test pressure, class of pipe and

whether the pipes were to be used for "internal work" or "external work". These

details were required to be mentioned to the testing laboratory. It also observed that

the two test reports in respect of the two samples did not specify the required details

like at what pressure the pipe, of what wall thickness, burst during the test, what was

the wall thickness of the samples to which class of pipe they belonged. There was

no mention in the test reports as how much internal hydrostatic pressure was applied

at 27 degree C for one hour because it was different for pipes of different

specifications and it was different for pipes used in "internal works" and "external

works". The learned Arbitral Tribunal gave detailed reasons as to why the test

results were not applicable in this case. I find no reasons to disagree with the

Arbitral Tribunal on this count.

5. After concluding that test results were not applicable the learned

Arbitral Tribunal regarding claim no.1 observed that the amount of second running

bill and the amount of total work done by the claimant came to Rs.30,09,800.53

however, since the claimant had claimed only Rs.21,00,000/-, the Arbitral Tribunal

awarded maximum of Rs.21,00,000/-. The petitioner has assailed this award on the

ground that sample of PVC pipe used by the claimant failed in laboratory, so the

quality of work was not in accordance with the contract and petitioner was not liable

to pay for spurious quality. Against claim no.2, of Rs.7,00,000/-, the Arbitral Tribunal

awarded a sum of Rs. 4,20,000/-. The petitioner has assailed the awarding of this

amount of Rs.4,20,000/- against cost of material on the ground that cost of material

was included in the running bill and no separate cost of material could be awarded

regarding substandard material lying on the site. The petitioner was not liable to pay

for material dumped at site and not used, rather petitioner made a counter claim of

Rs.10,00,000/- since this dumped material continued to occupy space in the Railway

Stores from July, 2003 to March, 2007.

6. A perusal of statement of claim filed by the claimant/respondent would

show that the respondent filed 08 claims. Claims no. 1, 2 & 3 were clubbed togher

by the respondent for Rs.31,00,000/-. The claimant explained these three claims in

its claim petition together by referring to the running bills raised by the claimant and

work done. The claimant concluded that the total amount payable to the claimant

under these three claims came to Rs. 29,91,532.07 which included work done till

end. Surprisingly, the learned Arbitral Tribunal went even beyond the claims. The

total amount receivable by the claimant was stated as Rs.29,91,532.07 against all

the three claims, the Arbitral Tribunal came to the conclusion that the amount

payable against claim no.1 alone was Rs. 30,09,800.53 but since the claimant had

restricted its claim to Rs.21,00,000/- they were allowing only Rs.21,00,000/-.

7. The claimant in its claim petition had not stated that he was entitled to

payment of Rs.7,00,000/- against material lying with the petitioner. The running bills

included cost of material and that was the reason that the claimant dealt with claims

no. 1, 2 & 3 together and the claimant only dealt with running bill, work done and the

amount payable to him. He had not separately claimed the price of PVC pipe. I

therefore, consider that the learned Arbitral Tribunal without any basis and without

any justification separately considered the amount of Rs.7,00,000/- towards PVC

pipe which was not even the case of the claimant and allowed Rs.4,20,000/-. He,

thus, mis-conducted himself. I therefore, disallow this part of the award.

8. There is no infirmity in the rest of the award made by the learned

Arbitral Tribunal. The learned Arbitral Tribunal has come to the conclusion that the

report of Shri Ram Institute for Industrial Research was not relevant and was not

applicable in this case. The samples neither were drawn properly nor were the

samples sent with proper specifications and instructions. I do not find any reason to

substitute my own opinion against the opinion of the learned Arbitral Tribunal. It is

settled law that this Court does not sit as a Court of appeal over the judgment of the

Arbitrator. The Arbitrator is the judge of facts and law both.

9. In view of my above discussion, the award passed by the learned

Arbitral Tribunal is modified to the extent that the claimant is entitled to

Rs.21,00,000/-, along with simple interest of 12% p.a. from the date of publishing of

the award till payment of the amount.

April 24, 2009                                      SHIV NARAYAN DHINGRA, J.
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