Union Of India vs Shri S.K. Chopra
2009 Latest Caselaw 3324 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 CS(OS) No.1764A/1996

%                                 Date of decision: 24.08.2009

UNION OF INDIA                                          ....Petitioner
                        Through: Ms. Zubeda Begum, Advocate for the
                                 Petitioner with Mr. G.R. Sangwan, Ex.
                                 Engineer.


                                Versus



SHRI S.K. CHOPRA                                      ....Respondent


                        Through: Mr. Harish Malhotra, Sr. Advocate with
                                 Mr. Rajender Agarwal & Mr. Vipul
                                 Gupta, Advocates.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?                 No

2.    To be referred to the reporter or not?          No

3.    Whether the judgment should be reported         No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The suit was registered on the filing of arbitration award dated

24th October, 1994 in this court by the arbitrator. Notice of the filing

of the award was issued to both the parties. Objections under

Sections 30 & 33 of the Arbitration Act 1940 in the form of IA

No.1118/1996 by the petitioner Union of India and IA No.1119/1996

by the respondent Shri S.K. Chopra have been preferred with

respect to the parts of the award against the respective parties and

claimed to be severable from the other part of the award. Though,

the objections have been pending for long but as per the prevalent

practice, the usual issues had remained to be framed. The same

were framed on 7th July, 2009. The counsels for the parties stated

that the arbitral record received in this court only would be relied

upon by them in support of their respective objections and no

affidavits by way of evidence are required to be filed. The counsels

for the parties have been heard.

2. The agreement between the parties with respect whereto

disputes arose, was of award of contract by the petitioner Union of

India to the respondent of construction of Flyover and Retaining

Walls near the Flated Factories at Jhandewalan, New Delhi. The

date of start of the work was 6th December, 1985 and the stipulated

date of completion was 5th December, 1986. However, the work

continued to be executed beyond the stipulated date of completion

also and the time for completion was repeatedly extended by the

petitioner Union of India. The said work was not completed by the

respondent and disputes and differences arose between the parties.

The contract was rescinded on 15th November, 1989. The award

records that only the claims of the petitioner Union of India were

referred to the arbitrator vide letter dated 9th December, 1992. The

award also records that the respondent made counter clams before

the arbitrator on which pleadings were completed though the said

counter claims had not been referred by the appointing authority to

the arbitrator. The award nevertheless deals with the claims and the

counter claims together under one head only.

3. The arbitrator has held that initially the petitioner Union of

India was in breach in its failure to handover a part of the site to the

respondent and later the respondent had inordinately prolonged the

work; the arbitrator in view of the fact that the contract had been

rescinded by the petitioner Union of India belatedly without making

the time for performance as essence, holds that legally no risk and

cost action in terms of the agreement subsists in favour of the

petitioner UOI against the respondent and nothing could be awarded

to the petitioner UOI against the respondent under the claim No.2 in

this regard. For the same reason the claim No.1 of the petitioner

UOI for levy of compensation for delay in execution of work was also

declined. On the same reasoning the counter claim No.5 of the

respondent for losses due to idle establishment etc. due to

prolongation of the contract was also declined. The award also holds

that the petitioner Union of India had already paid the escalation

under the provisions of clause 10(CC) of the agreement for the work

done during the stipulated period of the contract and finding the

delays attributable to both parties, no further payment on this

account has been allowed to the respondent. The award also

negatives the claim of the respondent for wrongful deduction of the

rebate for timely payment of the bills. The award also negatives the

claim of the respondent for centering/shuttering.

4. The award holds the respondent entitled to refund of security

deposit of Rs.1 lac and also holds the respondent entitled for the

value of work done, less recoveries admissible to the claimant. The

arbitrator has found a sum of Rs.1,47,699/- to be due to the

respondent against the final bill. The award also has allowed a sum

of Rs.5,000/- to the respondent against the wrongful withholding

from the respondent's bill of sum of Rs.4,000/- and Rs.1,000/- for

non-sanction of AHR items. Thus a total sum of Rs.2,52,699/-

(Rs.1,47,699/- + 1,00,000/- + 5,000/-) has been found due to the

respondent from the petitioner Union of India.

5. The arbitrator has found that the respondent failed to return

51.62 M.T. of steel of the value of Rs.3,35,530/- issued to it for the

purposes of the works. The arbitrator in terms of the clause 42 of

the contract held the petitioner Union of India to be entitled to

double the value of the said steel i.e. Rs.6,71,060/-.

6. Besides the said amount certain other small amounts with

respect whereto no arguments have been addressed, were also found

due to the petitioner Union of India from the respondent. Thus a

total sum of Rs.7,28,737/- was found due to the petitioner Union of

India from the respondent. After deducting Rs.2,52,699/- (Supra)

therefrom, the petitioner Union of India was held entitled to recovery

of Rs.4,76,038/- from the respondent. Costs of Rs.5,000/- and simple

interest at 12% per annum from 13th October, 1992 to the date of the

award have also been awarded to the petitioner Union of India

against the respondent.

7. As far as the objections preferred by the petitioner Union of

India are concerned, there are virtually no pleadings whatsoever

therein. It is merely stated that the award is grossly erroneous and

the arbitrator has not analyzed all the claims of the petitioner Union

of India. Besides, it is merely stated that "the petitioner is mainly

challenging Clause 2 of the arbitration". However, in view of the

submissions of the counsel, the effect of such cursory pleadings in

the petitions under Sections 30 & 33 of the Act need not be gone into

these proceedings. The counsel for the petitioner Union of India has

challenged the finding of the arbitrator of the delays being

attributable to the Union of India also. It is contended that under

Clause 2 of the contract, in the event of the contractor failing to

comply with the conditions mentioned therein he is liable for

compensation of an amount equal to 1% or such smaller amount as

the Supdt. Engineer (whose decision in writing shall be final) may

decide on the said estimated cost of the whole work. It is contended

that Supdt. Engineer had decided the liability of the respondent as

Rs.5,61,123/- on this account and the decision of the Supdt.

Engineer was final and not arbitrable. The counsel urges that

however since arbitration was claimed qua other claims, recovery in

the said amount was also shown in the claim petition but the

arbitrator was not competent or entitled to return a finding thereon,

the same being non-arbitrable.

8. Though the petitioner Union of India itself made the claim

before the arbitrator, which upon being disallowed by the arbitrator

is being challenged before this court as non-arbitrable but the said

matter is no longer res integra in view of the judgment of the

Division Bench of this court in DDA Vs. M/s Sudhir Bros. 57 (1995)

DLT 474. It has been held therein that when a matter is not

arbitrable, the court can order so in objections under Section 33 of

the Act, notwithstanding the party seeking the said relief having

itself sought arbitration with respect thereto. It was held that the

court has to in such cases merely order the said part of the award to

be struck of.

9. The senior counsel for the petitioner has also fairly conceded

that in view of the judgment aforesaid, this court may order so with

respect to the said claim of the petitioner Union of India, subject of

course to the right of the respondent to the appropriate remedy as

and when the said claim is sought to be enforced by the petitioner

Union of India against the respondent.

10. Accordingly, it is directed that the claim of the petitioner for

Rs.5,61,123/- being an accepted matter could not have been

arbitrated upon and the award in that respect shall stand struck of.

The said claim having not been arbitrated upon and thus there being

the question of this court returning any finding on the same, the

respondent shall have the remedies, if any, available to him as and

when the said claim is enforced by the petitioner Union of India

against the respondent.

11. The arguments centered around the award qua 51.62 M.T.

steel with respect whereto double the value thereof has been

awarded in favour of the petitioner. The senior counsel for the

respondent has challenged the said award on three grounds; (1) on

the ground of being without reason as required under the

agreement; (2) the finding of misappropriation of 51.62 M.T. of steel

by the petitioner being contrary to the record and (3) the law not

permitting payment of double the value thereof by way of penalty,

without proof of any loss.

12. The award deals with the contention of the respondent that he

had left the surplus steel at the work site after rescission of the

contract and the same was deemed to have been in the custody of

the petitioner and the petitioner being thus not entitled to claim the

value thereof. The arbitrator has held that it was the obligation of

the respondent to handover the surplus steel to the petitioner at the

time of closure of the contract and having not done so the

respondent is liable for the same. Another plea in this respect dealt

with in the award is on account of overweight. The arbitrator has

held that the respondent never raised the said plea at any time

during the execution of the work and is thus not entitled to raise the

same as an afterthought.

13. The senior counsel for the respondent has taken me through

the pleadings and the documents in the arbitral record in an attempt

to demonstrate that there is absolutely no basis for the arbitrator to

assume that 51.62 M.T. of steel was in excess/surplus. The senior

counsel has successfully demonstrated that the said quantity was

seriously challenged by the respondent before the arbitral tribunal.

The senior counsel for the respondent has shown the statement of

the claim of the petitioner Union of India in which it was mentioned

that 446.435 M.T. of steel had been issued to the respondent as

borne out from unstamped receipt (USR) filed as CE 19 to 36. He

has also shown the reply filed by the respondent to the said

settlement of claim wherein the respondent has denied that 446.435

M.T. of steel had been issued to it; it is further pleaded that as per

the recovery statement attached with the 19th RA Bill paid on 18th

May, 1989, a total quantity of 389 M.T. only had been recovered;

that the quantities issued as shown in the statement attached to the

final (20th Bill) were entirely different; that the total quantities as per

the USR's filed by the petitioner worked out to 436.121 M.T., out of

which 28.094 M.T. had been transferred by the petitioner to the

other works leaving a net quantity of 408.118 M.T. only issued to the

respondent; out of this 382.396 M.T. was consumed in the work and

after adding wastage and variation as per the terms of the

agreement, theoretical consumption works out to 401.746 M.T. The

fact remains that the arbitrator has not dealt with the same and from

the bare reading of the award it cannot even be said that there was

any dispute before the arbitrator as to the quantity of the steel.

14. It is not in dispute that steel consumed in the works is 382.396

M.T. It is also not in dispute that 28.094 M.T. of steel issued by the

petitioner to the respondent was transferred to other projects; this

was admitted by the petitioner in its rejoinder. The senior counsel

for the respondent has contended that the petitioner however in its

rejoinder and to which the respondent had no opportunity to file any

further pleadings, totally changed its stand; the petitioner now

contended that in fact the total quantity of steel issued to the

respondent was 474.449 M.T. and after transfer of 28.094 M.T., the

net quantity issued was worked out to 446.435 M.T.

15. The counsel for the petitioner Union of India did not controvert

the argument of respondent that the USR's on the arbitral record

were not with respect to the entire 474.449 M.T. It is however

argued that all these figures are shown in the final bill. It is

contended that there are other USR's and a register is also

separately maintained of the steel issued; the figures in the final bill

are taken from the said register which is maintained in the normal

course and that is why there is no error in the shortfall of 51.62 M.T.

believed by the arbitrator.

16. The senior counsel for the respondent has urged that in the

aforesaid circumstances, it is clear that the arbitrator being human

has erred in believing the shortfall to be 51.62 M.T. and further

having failed to decide the said disputed contentions. It is argued

that it is not a case where the arbitrator has even recorded that he

after perusal of the record he is of the opinion that the shortfall is

51.62 M.T. and not as contended by the respondent. Thus setting

aside of the award to the said extent is sought.

17. The argument of the respondent appears attractive. However,

the same is to be judged in the light of the jurisdiction being

exercised by this court i.e. under Sections 30 & 33 of the Arbitration

Act. The award on the very first page thereof records "NOW

THEFREFORE, AFTER PERUSAL OF THE PLEADINGS AND

DOCUMENTS FILED AND HAVING HEARD AND CONSIDERED

THE ARGUMENTS ADVANCED BY THE CLAIMANT AND THE

RESPONDENT, I V. NAINANI, DO HEREBY MAKE AND PUBLISH

THIS AWARD AS FOLLOWS".

18. Attention of the senior counsel for the respondent was invited

to the judgment of the Supreme Court in Arosan Enterprises Ltd.

Vs. Union of India 1999 3 Arbitration Law Reporter 310 (SC). A

five Judge Bench of the Supreme Court in Goa Daman Diu Housing

Board Vs Rama Kant V.P. Darvotkar AIR 1991 SC 2089 in an

appeal from the order of the Bombay High Court setting aside the

award for being without reasons inspite of being required to give

reasons, accepted the argument that the mere statement of the

arbitrator that the award had been made after hearing the parties

and after consideration of papers and documents filed by the parties

to be enough and it was held that such an award could not be said to

be illegal or suffering from any misconduct. It was further held that

unless there was anything to show that the arbitrator has

misconducted himself or the proceedings in any other manner or to

show that the award had been improperly procured, or that the

arbitrator has not fairly considered the submissions of the parties in

making the award in question, the award cannot be set aside. The

Supreme Court held that from the statement aforesaid of the

arbitrator it was evident that the arbitrator had considered all the

specific issues raised by the parties in the arbitration proceedings

and come to the finding returned. The Division Bench of this court in

a recent Judgment in DDA Vs Madhur Krishna

MANU/DE/0984/2009 has also relied upon the said constitution

bench judgment. In D.D. Sharma Vs Union of India (2004) 5 SCC

325 also the arbitrator had in the award stated that he had

examined and considered the pleadings submitted by and on behalf

of the parties and documentary and oral evidence produced before

him. The same was held sufficient by the Supreme Court to hold that

there did not exist any material on record to show that the

arbitration while making the award ignored any material documents.

The same was the position in Bijendra Nath Srivastava Vs

Mayank Srivastava 1994 6 SCC 117. There also the challenge to

the award for being without any reasons was met, by the arbitrator

recording the award that he had heard the parties and considered all

the points raised by them, the rights and claims of the parties

involved and the accounts and evidence produced by them.

19. The contention of the senior counsel for the respondent that

the arbitrator was performing a judicial function and must give

reason on each and every contentious issue raised is thus not

acceptable. A reading of the entire award in the present case does

not show that the arbitrator was oblivious of the case of the

respective parties before him. In the circumstances, it cannot be

said that the arbitrator has not applied himself before coming to the

conclusion that 51.62 MT of steel delivered by the respondent had

been misappropriated by the petitioner. That being the position, and

this being a finding of fact, this is his non- interferable in the

exercise of jurisdiction under Sections 30 and 33 of the Act.

20. The senior counsel for the respondent has next urged that as

per the dicta of the Five Judge Bench of the Supreme Court in Fateh

Chand Vs Balkishan Das AIR 1963 SC 1405, even if there is to be

no dispute as to the quantity of steel for which the respondent is to

compensate the petitioner, clause 42 of the contract providing for

payment of double the value of the steel is penal in nature and in the

absence of any proof of loss, the award for double the value of the

said steel is contrary to law. Reliance in this regard is also placed

upon Pearl Hosiery Mills Vs UOI 1978 RLR 1994, Marimuthu

Gounder Vs Ramaswamy Gounder AIR 1979 Madras 189 (DB),

State of Orissa Vs Calcutta Company Ltd AIR 1981 Orissa 206

Maula Bux Vs UOI AIR 1970 SC 1955.

21. The attention of the senior counsel for the respondent during

the hearing only was invited to ONGC Ltd Vs Saw Pipes Ltd AIR

2003 SC 2629. The Supreme Court in the said case though

speaking through a Bench of Two Judges only but after considering

the judgments of the larger Bench in Fateh Chand and Maula Bux

(supra) held that there could be cases where loss can not be proved.

Examples were cited of delays in construction of road or the bridge;

neither any person/individual or municipal nor any government

suffers any loss therein. The loss is of the public at large. The

Supreme Court in such a situation held that when the clause

provided for a particular amount to be paid in the event of default,

that could be directed to be paid even without proof of loss. Of

course in that case the clause was more specific, providing for the

amount to be a pre-estimate arrived at by the parties. Clause 42 is

not so specific; but in my view, the principle would be applicable also

where the government from its own stocks supplies materials to the

contractor for carrying out certain works, and obligation is placed on

the contractor to return the excess/unused material and it is further

provided that if the material is not so returned, the contractor shall

be liable to pay double the amount thereof.

22. The senior counsel for the respondent has contended that the

only loss which can be suffered by non-return of such material is of

the difference in price of the material supplied and the price

prevailing on the date of failure to return. It is argued that the same

being calculable, the loss in such cases cannot be equated to the

losses subject matter of consideration in Saw Pipes Ltd (supra)

where it was found to be incalculable. I, however, am unable to

accept the said contention. The procurement / purchase of material

by the Government / government department is not as simple.

Considerable effort goes in the same. Tenders have to be prepared,

invited, bids screened and only thereafter the material can be

procured. It is virtually impossible to calculate the costs of all the

said steps. Further, the said materials of the government are not

necessarily for one project only and can be used in other projects if

returned on time. Non return of the material and resultant delays in

procurement can also lead to consequent delays in other projects

and can have a cascading effect. In the aforesaid state of law, it

cannot be said that the award enforcing the clause for payment of

double the value of the material is so contrary to law or so

improbable which no reasonable person could have arrived at. Once

that test is satisfied, interference under Section 30 and 33 is not

permissible.

23. Thus no error is found in the part of the award challenged by

the respondent. No other plea has been urged. Also, no element of

perversity or shocking the judicial conscience, essential for the court

to set aside the award is found.

24. Accordingly, IA 1118/1996 of the petitioner Union of India is

allowed to the aforesaid extent and IA.No. 1119/1996 of the

respondent is dismissed. The award as modified above is made rule

of the court and decree is passed in terms thereof. However, in the

facts of the case, since the parties are found to have raised a bona

fide conflict for adjudication by this court, the parties are left to bear

their own costs.

RAJIV SAHAI ENDLAW (JUDGE) August 24, 2009 PP/M