Durga Laxmi Builders vs Vice Chancellor University Of ...
2009 Latest Caselaw 1740 Del

 *         IN THE HIGH COURT OF DELHI AT NEW DELHI


                                 Date of Reserve: April 23, 2009
                                 Date of Order: April 29, 2009

+ CS(OS) No.2578A/1996

%                                             29.04.2009

     DURGA LAXMI BUILDERS         ... Plaintiff/Petitioner
                  Through: Mr.Sandeep Sharma, Adv.

     Versus


     VICE CHANCELLOR UNIVERSITY OF DELHI
                           ...Defendant/Respondent
                  Through: Mr. Mohinder J.S. Rupal with
                           Mr. Jatinder Khanna, Advs.

     JUSTICE SHIV NARAYAN DHINGRA

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 judgment should be reported in Digest?       Yes.


     JUDGMENT

1. Mr. P.R. Thakur was appointed as an Arbitrator to

adjudicate the dispute between the parties. He after passing an

award on 9th October, 1996 filed the award in the Court. Notice of

the award was sent to the parties and respondent filed objections

under Section 30/33 of the Arbitration and Conciliation Act, 1996

before the Court alleging therein that the Arbitrator had no

jurisdiction to decide the matter being beyond the contract and

there was no written agreement between the claimant and the

respondent as to invoke the jurisdiction of the Arbitrator. The

Arbitrator awarded a sum of Rs.2,42,288/- without any basis

invoking Clause 10 CC of CPWD Schedule. Clause 10 CC of the

CPWD Schedule was not applicable as it was nowhere provided in

the contract that any part of the guidelines of CPWD shall be

applicable in this case. The Arbitrator mis-conducted himself by not

going into the facts of the case properly. The initial contract

between the parties was for a civil construction work to the tune of

Rs.14.75 lakh. However, the contractor was given additional work

apart from the initial contract and this additional work was not to be

considered as part of the contract. Moreover, the time consumed in

the additional work has been wrongly considered by the Arbitrator

as delay in the initial contract on the part of the objector. All the

bills of additional work were submitted by the contractor as per

agreed terms and conditions and same were paid and accepted by

the contractor. The contractor had not raised issue of delay nor

made a complaint regarding delay at any point of time. It is also

stated that in the final calculation there was a calculation mistake of

around Rs.11,000/- made by the Arbitrator. The Objector submitted

that the claimant was not entitled to claims no. 1 and 3 and the

conclusion arrived at by the Arbitrator that there was delay of 14

months was contrary to the contract and the facts. It is also stated

that Arbitrator allowed claims without any rationale or basis and

mis-conducted himself in passing the impugned award.

2. The averments made by the objector/respondent were

denied by the contractor. Following issues were framed by the

Court:

"1. Whether the award dated 9.10.96 made and

published by the sole Arbitrator Shri.P.R. Thakur, is

liable to be set aside on the grounds stated in the

objection petition?

2. Relief."

3. An agreement for construction of housing complex at

South Delhi Campus, University of Delhi was executed between the

University of Delhi and the contractor in August, 1986. Prior to this

agreement a public notice of calling of tender was issued by the

petitioner. In his tender the contractor had put following 4

conditions:

1. 1% rebate for the final bill within 8 months of

completion of work and release of security deposit

within a week of expiry of maintenance period.

2. We wish our quoted charges beyond deviation

limit.

3. Rates are valid for 2 months from date of opening

of tender.

4. Any increase in price of Steel, GI and CI pipes and

their fittings (GI and CI) by Government of India will

be charged extra.

4. Initially, the price quoted by the contractor was

Rs.16,75,795/-. However, the record of arbitration shows that there

were certain modifications made in the tender and ultimate price

quoted was Rs.14,75,268.30. This tender of the petitioner was

accepted vide letter dated 28th May, 1986 wherein University

informed the contractor as under:

"Dear Sir,

Your lowest tender amounting to Rs.14,75,268.30 which is 66.47% above the estimated cost of Rs.8,86,200.00 put to tender for the work mentioned above has been accepted by the University authorities. Your letter No.Nil dated 28.2.86 in which you have withdrawn your conditions from Sl.No.1 to 4 of your above tender and confirmed the rate for item No.21 as Rs.125/- for 100 sq.meter instead of per se meter and your another letter No.Nil dated 7.5.86 in which you have extended the validity of the above tender upto 30.5.1986 shall form part of the agreement.

You are, therefore, requested kindly to call on this office along with non-judicial stamp paper of Rs.2/- in

order to complete the contractual formalities on CPWD Form No.8.

You may kindly note that the date of start of this work be reckoned from the 10th day after date of issue of this letter." (Emphasis added)

5. In pursuance of above letter, the contract between the

parties for construction of this complex was signed. The contract

between the parties did not refer to Clause 10CC of CPWD

Schedules. The contractor who had initially made a specific

condition of price increase in the tender had withdrawn this

condition before entering into agreement. The agreement provided

Clause 10C in respect of increase in price. Clause 10C provided that

if during the progress of works, the price of any material

incorporated in the works and/or wages of labour increase as a

direct result of the coming into force of any fresh law, or statutory

rule or order and such increase exceeds 10% of the price and/or

wages prevailing at the time of acceptance of the tender for the

work and if the contractor thereupon necessarily and properly pays

such increased price in respect of such materials/labour

incorporated in the execution of work, then such increase in the

material and wages if exceeds 10%, he would be entitled to

reimbursement to the extent of excess over 10%. This clause also

provided for benefit to the employer if the prices decreased.

6. It is settled law that Arbitrator is prisoner of the

contract. He cannot travel beyond the contract while considering

the dispute between the parties. In the present case, the learned

Arbitrator had awarded a sum of Rs.2,22,043/- under Clause 10CC of

CPWD guidelines relating to escalation in the prices of materials

observing that this amount was approximately 7 and a half per cent

of the cost of the work and the escalation appears to be just,

equitable and reasonable. The learned counsel for the contractor

has sought to justify awarding of this amount in view of judgment of

Narain Das R.Israni vs. DDA 1996(1) Arbitrator law Reporter 602

and K.N.Sathyapalan (dead) by LRs vs. State of Kerala and

Anr. and another decision in suit No.1832/98 between the same

parties decided by this Court on 18th January, 2002 and a decision in

suit No.1833A/98 between the same parties.

7. It is settled law that judgment in each case decides and

adjudicates the lis in that particular case and unless and until a

general law is laid down by the judgment under Article 141 of

Constitution of India, the judgment cannot be read laying down a

law. None of the judgments cited by the petitioner is relevant in this

case in view of the peculiar facts that the contractor in this case

made escalation as a pre-condition of contract in his tender

document, but later on he withdrew this condition of tender and

signed an agreement containing different escalation clause. It is

settled law that the parties are bound by the contract between them

and the Arbitrator who has to adjudicate the dispute between the

parties is also prisoner of the contract. He cannot invoke principles

of equity, fair play etc. to justify travelling beyond the contract. The

Arbitrator cannot ignore the specific terms of the contract entered

into between the parties and if he ignores he does misconduct. In

Food Corporation of India vs. Chandu Construction and Anr.

2007 (4) SCC 697, the Supreme Court observed that Arbitrator being

a creature of the agreement between the parties, has to operate

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

specific terms of the contract, it would be a question of jurisdictional

error on the face of the award, falling within the ambit of the legal

misconduct which could be corrected by the Court.

8. The Arbitrator in this case could not been relied upon

Clause 10 CC of CPWD general conditions since the contract

between the parties was very specific about price escalation and the

contractor had specifically given up his pre-condition of price

escalation before signing the contract. I therefore hold that the

award allowed by the learned Arbitrator on the basis of Clause 10CC

of the CPWD, general conditions was beyond jurisdiction. CPWD

general conditions did not form part of contract.

9. Claim no. 3 of the contract was for a sum of

Rs.3,29,400/- on account of infructuous expenditure incurred due to

prolongation of the contract. The learned Arbitrator considered that

the work got completed in 20 months instead of stipulated period of

6 months. The claimant had to maintain his establishment and

incur overhead expenditure at site for 14 additional months beyond

the contemplated period of 6 months. He therefore allowed a sum

of Rs.2,50,000/- as infructuous expenditure.

10. It is an undisputed fact that the contract for construction

awarded to the contractor was for a sum of Rs.14,75,268/-.

However the actual work carried out by the contractor was of over

Rs.30 lakh, i.e., more than double the amount of contract. As is

revealed from the documents, when the contract for the

construction of housing complex was going on, Delhi University had

other civil construction works. In normal course of business, the

University should have called fresh tenders since the other works

were of more than Rs.15 lakh but it seems that the present

contractor was a favourite of Delhi University and Delhi University

instead of issuing fresh tenders asked the contractor to do

additional civil works under the same contract. So, all subsequent

works at different places in the South Delhi Campus were allowed to

be done by the present contractor at the same rates which he

quoted for the housing complex and it is in this way that a contract

for Rs.14.75 lakh got swelled into a contract of over Rs.30 lakh.

Since the contractor had willingly undertaken to do works other than

contracted work at the rate, terms and conditions, this does not

mean that the completion period of entire work including the

additional work undertaken by the contractor had to be 6 months as

has been considered by the Arbitrator. The Arbitrator lost sight of

the material evidence that the actual contract was for Rs.14.75 lakh.

This amount had been received by the contractor long back. The

contracted work would have been completed long back and only the

bills for subsequent additional works were being given by the

contractor to Delhi University. When additional work was

undertaken by the contractor at different sites obviously additional

time in completion of work would be required. The Arbitrator could

not have considered that the additional work undertaken by the

contractor was part of the same work, neither was it the case of the

contractor or of the University that the original work swelled into the

double the amount. Rather it is the case of the contractor himself in

his claim that he had to carry his machinery at different places in

South Campus and that is why he had to spend infructuous

expenditure. The claim reads as under:

"work related to housing complex but work was got

carried out at several places in the whole of campus

which resulted in infructuous expenditure on

construction of water tanks, and brick plate forms for

mixing cement concrete and mortar at various

places. Lot of wastage of materials was there in

working at various places and there were wastage of

labour also in executing the work in various places.

              The      infructuous      expenditure      was    incurred     in

              transportation      of    cement     and    various    building

construction materials to different sites inside the

campus."

11. The contractor claimed under infructuous expenditure

the wages for engineers at the rate of Rs.3,000/- per month for 14

months, wages for work Mistri at the rate of Rs.2150/- per month for

14 months, 2 supervisors at the rate of Rs.2450/- for 14 months,

Pump and mixer operator and expenses on various other

miscellaneous matters. The claim on the face of it was frivolous and

ridiculous. If the contractor had undertaken additional work apart

from the initial housing complex at different places in the campus at

the same rate, it cannot be expected that the contractor would have

done this work without employing engineers, work mistris,

supervisors, drivers and mixers. The items rates quoted by the

contractor take care not only of the salaries of different staffs which

are employed by the contractor but also take care of his profits,

administrative expenses and overhead charges. When the

contractor accepted additional work of more than 15 lakh at

different sites in the campus he was very well aware that he would

have to get this work executed through engineers, supervisors,

mistris, etc. Claiming charges for employing engineers, work

mistris, supervisors, etc. for the work which he carried out apart

from the original work during the extended period was a surprising

claim and it is surprising that the Arbitrator entertained such a

claim. Even if original work had some additional items of work, the

claimant specifically provided under Clause 12 that in case there

were alterations, additions or substitutions in the original

specifications, drawings, designs and instructions such additions

shall not invalidate the contract and the time for completion of work

shall stand extended in the same proportion as the altered,

additional or substituted work bears to the original work. Over and

above this a further period to the extent of 25% of the time shall be

allowed to the contractor.

12. It is clear that even in case of additions and alterations

in the original contract work, the time was liable to be extended in

proportion to the additions and alterations. This case is not of the

additions to the original specifications and drawings. The original

work consisted of construction of a housing complex at one site but

the University and the contractor together agreed for more civil

works not related to housing complex, done at different places in

South Campus. The time consumed in these subsequent works

cannot be considered as delay in original work nor can be

considered that the subsequent works are part and parcels of the

original work or original contract. The subsequent works could have

been treated as part and parcel of the original contract only if the

additions or alterations were by way of change in specifications,

designs, drawings as provided in Clause 12. Even if we believe that

the additional work was to be part of the original contract, looking

into the facts that additional work was more than the original

contract, the time for the original contract was to be proportionately

increased and plus additional 25% time was to be given in terms of

Clause 12. The proportionate increase in time for the additional

work will be 7 months and if we take 25% more increase in the total

time, the work would have been required to be completed in

approximately 17 months. The work was completed in 20 months.

By no stretch of imagination, it can be said that there was 14

months delay in completion of work.

13. Moreover, there is no document to show that there was

any delay on the part of University of Delhi. A contractor, by

delaying the contract, cannot claim compensation in respect of

delay and enrich himself. Delaying the contract cannot have

premium. There is no evidence on record to show that during

currency of contract, respondent wrote any letter to university

about any hindrance being created by University in execution of

work by contractor.

14. I consider that in the present case, the Arbitrator grossly

mis-conducted himself in law by transgressing the express

provisions of the contract as stated in Clause 12 and not taking into

consideration that it was not a case of one contract but several

contracts which the contractor undertook after the present contract,

without any written agreement. I therefore consider that award of

the Arbitrator of claim no. 3 was without jurisdiction and liable to be

set aside.

15. Under claim no. 4, the Arbitrator has allowed a sum of

Rs.15,000/- to the contractor for purpose of Chowkidars and watch

and ward staff observing that though the petitioner had not

produced any Chowkidar as a witness nor had produced watch and

ward staff as a witness to show that he had employed them but

since the construction work did require watch and ward and for that

purpose Chowkidars had to be employed by the contractor he

allowed to them Rs.15,000/-. For the reasons stated in para 14

above for which I have disallowed the claim on infructuous

expenditure on account of delay of 14 months, this claim is also not

tenable. Every contractor is to employ watch and ward staff at the

construction site during the period he continues the construction.

He is not to be paid separately for watch and ward staff. It is part of

his work and job.

16. Claim no. 5 is in respect of the interest. The Arbitrator

has allowed 12% interest on different claims. I consider that 12%

interest allowed by the Arbitrator is on higher side I consider that

6% simple interest would meet the ends of justice. The award in

respect of claim no. 1(b), claim no. 3 and claim no. 4 is hereby set

aside. The award in respect of claim no. 1, claim no. 2 is upheld.

The claimant/contractor would be entitled to 6% p.a. simple interest

on these claims from the date amount became due till the payment.

The petition is disposed of in above terms.

April 29, 2009                      SHIV NARAYAN DHINGRA J.
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