M/S Krishna Construction Co. vs Dda & Anr.
2009 Latest Caselaw 3342 Del

              * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                           Date of Reserve: 20.07.2009
                                                        Date of Order: 25th August, 2009

CS(OS) No. 488A/1991
%                                                                         25.8.2009

       M/s Krishna Construction Co.        ... Petitioner/Plaintiff
                  Through: Mr. Harish Malhotra, Sr. Advocate with
                  Mr. Rajender Aggarwal, Advocate

              Versus


       DDA & Anr.                       ... Respondents/Defendants
                       Through: Mr. Bhupesh Narula, Advocate &
                       Mr. H.L.Narula, Advocate


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

By this order I shall dispose of objections under Section 30/33 of the

Arbitration Act, 1940 raised by the respondent/DDA against the award dated 08.1.1991

passed by the learned sole Arbitrator. In the objection petition the respondent/DDA has

stated that it seeks to challenge the award made by the Arbitrator in respect of claims

no. 2,4,5,6,7 & 8 of the original claims and in respect of additional claims no. 1, 2 & 4

made by the petitioner.

2. The facts in brief are that the petitioner was given a contract for

redevelopment of Sarai Khalil involving construction of 138 LIG and 138 MIG houses at

Sarai Khalil vide contract dated 2.2.1977. The date of commencement of work was

12.2.1977 and the work was to be completed within one year however, during

continuation of the work it was found that there was a stone quarries underneath the

land which had been filled up after extraction of the stones. Consequently, foundation

design of some of the blocks had to be changed from conventional foundation to pile

foundation and in some of the blocks strip foundation was to be done. The

contractor/claimant in this case was not competent to do the work of pile foundation

therefore an outside agency was hired by DDA to do the work of pile foundation and

after completing the work of pile foundation the blocks were handed over to the

contractor for rest of the work. It is also apparent from record that there was a stay

granted by the High Court and due to stay of the Court the work got delayed and the

time for completion of the work was accordingly extended. However, the work could not

be completed even within the extended time and the Advisory Board of the respondent

closed the work on 20.9.1980 and intimated the contractor about the same. The

contractor after closing of the work raised various claims against the respondent and

filed a suit before the High Court invoking arbitration clause. The claims raised by the

claimant in the suit were directed to be referred to the arbitration. The result was that

the respondent appointed Arbitrator in terms of clause 25 of the contract. When the

Arbitrator was proceeding with the claims some additional claims were preferred by the

claimant which were also referred by the Engineer-in-Charge to the Arbitrator subject to

their admissibility under the contract.

Objections regarding Claim No.2

3. Claim No.2 which is subject matter of challenge by the respondent

pertains to an award of Rs.81,058/- made by the learned Arbitrator in favour of the

Contractor towards additional expenditure incurred on chowkidar on account of default of

DDA in not taking over the building and material at site. The learned Arbitrator observed

that delay was due to stay granted by High Court against the construction in 4 ½ blocks

and due to pile foundation required to be done. The learned Arbitrator stated that the

claimant had contended that the work was completed in October 1980 and the dwelling

units were allotted sometime in 1985 and till then the claimant had maintained watch and

ward staff. The Arbitrator held that since non-execution of balance part of the work was

on account of failure of the respondent to make the blocks available for construction and

on account of decision to opt for pile foundation and the respondent also did not take

over material for which the secured advance had been paid, rather called upon the

claimant to refund the advance with interest, the respondent/objector was in default and

considering the locality around the site of work, the claimant had claimed reasonable

rates for watch and ward staff and the claimant was entitled for Rs.81,058/- in respect of

the claim.

4. The objector's contention is that this claim could not have been allowed

since it was petitioner's responsibility to keep the watch and ward staff till the building

and material were handed over to DDA. It is also submitted that there was no provision

in the agreement entered into between the parties providing for payment of watch and

ward staff additionally to the contractor.

5. A perusal of clause 12 of the contract between the parties would show

that it was within the power of Engineer-in-Charge to make alterations, additions or

omissions or do substitution for the drawings, designs and original specifications that

may appear to him necessary during the progress of the work and the contractor had to

carry out the work in accordance with such alterations, omissions, additions,

substitutions of the original specifications with such change in designs. It is specifically

provided that such additions or substitutions shall not invalidate the contract in any

manner and were to be carried out by the contractor on same terms and conditions on

which he had agreed to do the main work. The only thing under such circumstances to

be done was that the time for completion of the work was to be extended in proportion to

the alterations made. Over and above this, a further period to the extent of 25% of such

extension was to be allowed to the contractor. The contractor was to be entitled for

rates for such additions/alterations, to be worked out in accordance with the provisions

given in the clause 12. In case the rates for additions or substituted work could not be

determined, then the contractor within 07 days of receipt of order to carry out the work

had to inform the Engineer-in-Charge the rates, which he intended to charge for such

work and the Engineer-in-Charge either could accept the rate or cancel the order to

carry out such additional work. It is also specifically provided in the contract (under

clause 13) that the work awarded could be reduced and the contractor may not be

required to do the whole of the work tendered. The contractor under such

circumstances was not to be entitled to payment of any compensation or loss of profit.

6. It is thus clear that providing of pile foundation in view of the discovery of

stone quarries underneath the land was within the scope of the contract and in view of

this development the only thing which the contractor could demand was the extension of

time. Similarly, the respondent had no control over the stay order given by the High

Court. The plea of the claimant that respondent had failed to take effective steps for

early vacation of stay order is not tenable. Merely by taking steps by a party, a case in

the High Court is not decided early. Had it been so, there would have been no

pendency in the Courts and every party would have taken effective steps for early

disposal of his case and got the case disposed of. It is not within the hands of a party to

get the stay vacated early. I, therefore, consider that delay in this case cannot be

blamed on the part of the Objector and the Arbitrator's conclusion that delay was on the

part of DDA/Objector is contrary to contractual provisions. When the contract

specifically provided that the designs, drawings and specifications could be altered

according to ground situation during the continuation of the work, the Arbitrator's

conclusion of delay being responsibility of the respondent was not tenable.

7. For allowing any claim in respect of payment to the workers, the learned

Arbitrator could not have ignored the terms of contract. It is provided in the contract

under clause 19-D that the contractor had to submit by 4th and 19th of every month to

Engineer-in-Charge a true statement showing the number of workmen employed by him,

their working hours and wages paid to them. In this case, the contractor had only

submitted an estimate of the expenditure on wages. He had not submitted either before

the Arbitrator or to the Engineer-in-Charge the necessary evidence showing that any

workmen were employed by him. Even otherwise under Clause 19-K it was the

responsibility of contractor to see that the building under construction was not occupied

by any unauthorized person during construction and he was to handover to the

Engineer-in-Charge vacant possession of complete building. It is not recorded by the

Arbitrator that the Contractor at any point of time had offered vacant possession of the

complete building to the respondent and asked the respondent to take over the

possession of the entire building. Unless and until the contractor/claimant had offered

the building to Engineer-in-Charge who had refused to take over the building, the

contractor could not have claimed any charges for chowkidars etc. After expiry of notice

given by him for handing over building, the contractor would have been at liberty to leave

the building so that DDA could have taken the responsibility. Looking into the terms and

conditions of the contract whereunder the contractor till handing over the building was to

see that the building was not unauthorizedly occupied by somebody and it was also

responsibility of the contractor to submit fortnightly report to the Engineer-in-Charge of

the workmen employed and the wages paid, in case of absence of record of wages paid

and in absence of notice of the contractor of tendering vacant possession of the building

to Engineer-in-Charge, no amount could have been awarded by the learned Arbitrator.

The award of the Arbitrator on this count is contrary to contract and is liable to be set

aside.

Objections regarding Claim No.4

8. Under Claim No. 4, the Arbitrator had allowed a sum of Rs.12,375/- to the

contractor on account of additional expenses incurred by the contractor for extending the

bank guarantee. The learned Arbitrator after recording contention of both the sides

observed that the plea of the contractor that the contractor was required to keep the

bank guarantee alive beyond the defect liability period because of the respondent was

justified. He (learned Arbitrator) therefore allowed amount of Rs.12,375/- for keeping the

bank guarantee alive upto 4.8.1989. The contractor had taken the plea that he had to

keep the bank guarantee alive without any justification because of the demand of the

respondent/DDA. I find that allowing of this claim by the learned Arbitrator is strange. If

the demand of DDA to keep the bank guarantee was unjustified, the contractor was at

liberty not to extend the bank guarantee and let the law take its own course. The

contractor kept the bank guarantee alive for his own interests and not because of DDA.

If it was not in the interest of the contractor to keep the bank guarantee alive, the

simplest thing he was to do was to ask his banker not to extend the bank guarantee.

The learned Arbitrator could not have awarded him expenses for keeping the bank

guarantee alive. The contractor kept the bank guarantee alive because he considered

that he was on a weak footing and continued the bank guarantee as demanded by DDA.

A bank guarantee is furnished by a contractor in accordance with the contract. If a

contractor considers that he is not required to furnish a bank guarantee or to extend the

bank guarantee he is at liberty to do so. He cannot claim expenses for either furnishing

the bank guarantee or extending the bank guarantee at the instance of the

employer/DDA. I find that the award of this amount is contrary to the terms of contract.

Objections regarding Claim No.5

9. Under claim no. 5 the Arbitrator had allowed a sum of Rs.61,828/- to the

contractor on the ground that there was existence of sub-soil water and the claimant had

to pump out the water by employing pumps. It is not disputed that the claimant had

been paid for foundation in accordance with contract for quantity which involved "under

water" foundation as in the DSR. Under the contract for execution of this quantity,

removal of seepage water due to sub soil water, was the responsibility of the contractor.

The learned Arbitrator observed that he was of the opinion that the marginal difference in

the rates for excavation in dry and wet conditions as given in the contract did not

contemplate the use of long hours of continuous pumping out of water by employing

pumps and therefore allowed the claim of the contractor. It is contended by the

respondent that the learned Arbitrator went beyond the terms of contract. The contract

fully covered the excavation and laying of foundation in wet conditions "under water" and

the contractor had been paid in accordance with the terms of contract, the Arbitrator

could not have allowed additional amount to the contractor.

10. The claimant in this case had been paid as per DSR which included

charges and rates for bailing out seepage water. When there is a specific quantity

mentioned in the clause of contract, no additional amount could have been allowed by

the Arbitrator. It is settled law that the Arbitrator is prisoner of the contract and he is not

a judge in equities. It is for the contractor to tender or not to tender for work considering

the rates prescribed by the employer. Once the contractor had agreed to a specific rate,

he cannot be allowed additional amount by the Arbitrator on the ground that additional

work was involved in the item. Even otherwise, if there was an additional or substituted

work involved in a contract, under Clause 12 (v) the contractor was supposed to give a

notice within 07 days of the order for carrying out the additional work and inform the

Engineer-in-Charge of the rate which he intended to charge for such work. It is not

within the jurisdiction of the Arbitrator to determine the rates of the additional work. It

was within the jurisdiction of Engineer-in-Charge, during the continuation of the contract,

to determine the rate of additional work or to cancel the additional work to be done by

the contractor. The Arbitrator exceeded his jurisdiction in allowing this claim and mis-

conducted himself. The award under this claim is therefore liable to be set aside.

Objections regarding Claim No.6

11. Under Claim No.6 (i), the Arbitrator had allowed a sum of Rs.15,300/- to

the claimant on account of shifting of material collected on site of work so that pile

foundation could be taken up by another agency. I consider that this claim could not

have been entertained by the learned Arbitrator. The pile foundation was constructed

sometime in 1980-81 and shifting of material had taken place at that time, if the

contractor had to raise a claim in respect of shifting of material he could have submitted

the bill for shifting of material to the respondent/DDA only at that time. This shifting of

material was not a contractual item, it was an additional work which the contractor claims

to have done. He could have told DDA that he was not prepared to shift the material

and let DDA engage its own labour and in case he had agreed to shift the material, he

was to act in accordance with clause 12(v). If he had not given his rates for shifting of

material to DDA at that time he could not raise this claim afterwards. Shifting of material

was not an item provided under the contract. Moreover, a contractor is given drawings

and lay out plans of the building in advance. He had to stack material at the site

ensuring that place occupied by material was not within the construction area and was

outside construction area. If he had stacked material within the construction area, he

could not claim charges for removing material from construction area to non construction

area. It was his responsibility to keep the material at non construction area. The claim

therefore was barred for two reasons, one it was a time barred claim, the claimant could

have raised this claim within three years of shifting of material and it is also barred as

stacking of the material was part of his job under the contract and he was not to be paid

anything extra because of improper stacking of material and then shifting the same. I,

therefore find that the award under this claim being contrary to contract and of a time

barred claim is not tenable and is liable to be set aside.

12. Under Claim No. 6(ii) the learned Arbitrator awarded a sum of

Rs.1,41,172/- to the claimant for infructuous expenditure because of the stay of the High

Court. The learned Arbitrator observed that the contractor had incurred expenditure on

the shuttering and reinforcement of beams and the reinforcement material placed on the

shuttering prior to the court stay order. Since, it was the employer's responsibility to

provide site free from hindrances and DDA could not obtain vacation of stay

immediately, DDA was to bear the burden of expenditure of centering, shuttering,

reinforcement and scaffolding from 1.5.1977 to 30.9.1977 as already observed by me in

para 6 above that it is not within the hands of a party to get the stay vacated nor it is a

case that Courts do not grant ex parte stay without hearing the other party. I consider

that DDA cannot be held responsible for act of the High Court in continuing an ex parte

stay for a period of 05 months. Moreover, there is no certainty that the stay would be

vacated by the Court in any specific period. The contractor after coming to know the

stay of the Court was supposed to act accordingly. The stay is normally applicable to

the party and every other person who is indirectly involved with the subject matter of the

stay order. The stay was therefore, equally effective against the contractor who was

working at the site in question. The learned Arbitrator's observation that DDA failed to

provide hindrance-free site is therefore untenable and the awarding of this amount of

Rs.41,172/- on this ground is also not tenable and is liable to be set aside.

Objections regarding Claim No.7

13. Under the Claim No.7, the learned Arbitrator allowed additional amount

over and above the contractual amount to the claimant of Rs.95,248/- for the work done

by the claimant from 11.2.1978 to 15.4.1979 and another amount of Rs.2,56,516/- from

15.4.1979 to October, 1980 on the ground that the claimant was entitled to these

additional costs because of work getting prolonged beyond the period of one year which

was the contract period and the claimant was entitled to additional costs. It only shows

that the learned Arbitrator had not considered the terms of the contract at all. The terms

of contract provided for extension of the period of completion of contract under several

circumstances including the circumstances of change in designs, drawings as already

observed above in para 5 above. A contractor who considers that performing of contract

by him beyond the period stipulated in contract was not profitable; he is always at liberty

to walk out of the contract. In case he considers that he is entitled for additional amount

for working beyond a period, he should give a notice to the Engineer-in-Charge in terms

of the contract and unless and until the Engineer-in-Charge accepts the additional

payment as claimed by him, he should not work. If the contractor continued to work

beyond the period of one year which was the stipulated period, it only shows that he had

agreed for extended period of contract and was aware that the contract period was

extendable and the contract had to be performed within the extended period on same

terms and conditions. Merely by writing a letter that he would charge 10% or 20% or

30% extra, no concluded contract comes into operation for payment of extra amounts.

Additional payment for prolongation of the work can be claimed by the contractor only

under the contract and not beyond the contract. The concluded contract does not come

into operation between the parties if one party writes a letter and other party does not

respond to the letter. Under Clause 12(v), in case the DDA had not agreed to the

enhanced rates as demanded by the contractor, the contractor was free to stop the work

and free to walk out of the contract. DDA in such a case would have been at liberty to

get the work done from other contractor. The time as provided under the contract was

not essence of the contract rather the contract between the parties specifically provided

that the work and the time period under the contract could be increased. The designs

and specifications could be altered according to change in circumstances and the time

period for execution of the contract can be increased keeping in view changed

specifications it is specifically provided that in case of an eventuality of change in

specifications made during the continuation of the work, the contractor would not be

entitled to any additional rates except as provided in the contract and he will have to

work on the agreed rates. Under these circumstances, entertaining claim by the

Arbitrator on the ground of laying pile foundation as stone quarries were discovered

underneath of ground and on the ground of grant of stay by the High Court is contrary to

contract. The learned Arbitrator had already awarded additional amount for increase in

cost of material and labour to the contractor in terms of Clause 10C under Claim No.1

which has not been challenged by the respondent. I, therefore, consider that the

additional amounts awarded by the learned Arbitrator under claim no.7 (i) and (ii) were

not tenable and the award of this claim is liable to be set aside.

14. Under Claim no.8 claimant had claimed Rs.3,66,528/- towards

compensation for cumulative loss of productivity due to non/under utilization of

establishment, equipment and T & P and the learned Arbitrator had awarded a sum of

Rs. 45,000/- for loss of productivity and overheads and a sum of Rs.52,000/- for T&P. It

is seen that in all DDA's contracts after the contract is over, the contractors make

fantastic claims under various heads. Invariably, there is a delay in execution of the

contracts for whatsoever reasons, after the final bill is received the contractors make

claims for enhancement of costs under Clause 10C for increase in cost of labour and

material and make separate claim under Clause 10CC where it is there, apart from that

claims are made for infructuous expenditure like keeping establishment on the site for

longer period, expenditure for keeping tools and machinery idle, loss of productivity,

under-utilization of establishment/equipment, capacities etc. and loss of profits etc.. All

these claims are made by the contractors only because of one factor i.e. that the work

got delayed, claims under different heads are made for the same factor and every such

claim is made time and again. This is despite the fact that Clause 25 of the contract

between the parties specifically provides that after finalization of the last bill, if a claim is

not made within 90 days no claim could be entertained. No Arbitrator pays attention to

this clause and all such claims are entertained and fantastic amounts are allowed under

these claims irrespective of the provisions of contract between the parties. It seems that

the only intention of the contractor to make these kinds of claims is to take benefit of

DDA officials' tacit consent and the Arbitrator's latitude and to have unjust enrichment at

the cost of public exchequer.

15. The Arbitrator under no circumstances could have ignored Clause 25 of

the contract which reads as under:

Clause 25. x x x x x x x x x

It is also a term of the contract that if the contractor does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation form the Engineer-in- Charge that the Bill is ready for payment, the claim(s) of the contractor will be deemed to have been waived and absolutely barred and the Delhi Development Authority shall be discharged and released of all liabilities under the contract in respect of those claims.

16. The Arbitrator has to first ensure that the claim was raised by the claimant

in terms of this clause and conditions of it were satisfied. Unless the Arbitrator gives a

finding that the claim was within the scope of Clause 25, the Arbitrator cannot entertain

such claims. These kinds of claims smack of a kind of syndicate running in DDA

between the contractors and DDA officials, who seem to be benefitted largely from these

kinds of arbitration where the contractors are awarded amounts which are a substantial

part of the contract value after the contract is over and the contractor had already taken

the payment of contract value. I find that no reason is given by the Arbitrator while

allowing claim no.8 as to how this claim fall within the scope of Clause 25. The learned

Arbitrator has not even addressed this issue and has awarded amounts towards loss of

productivity and under-utilization of equipment and T&P on the basis he had assessed

and computed loss of productivity, overheads and T&P. No basis of his computation has

been given. I consider that this claim is not tenable and is liable to be disallowed.

Objections regarding Additional Claim No.1

17. This claim was made for Rs.2,98,256/- and a sum of Rs.1,36,362/- was

allowed by the learned Arbitrator as interest for withholding the different amounts by

respondent/DDA out of running bills. The claimant is stated to have served notices

dated 30.9.77, 8.12.77m 17.9.80 and 10.2.81 demanding interest on withheld amounts.

Thus, the cause of action for claiming this interest on alleged withheld amounts could

have survived only for three years from the date of notice. The claim itself was made

before the learned Arbitrator after expiry of period of limitation. The Arbitrator did not

consider, if any of the claims raised before him was barred by limitation or not. He

entertained every claim irrespective of fact when the claim was made, whether the claim

was within the contract or it was outside the contract, whether it was barred by limitation

or not and allowed the claims. Since, these claims were barred by limitation these could

not have been entertained. I set aside the award passed by the learned Arbitrator under

Additional Claim no.1.

Objections regarding Additional Claims No. 2 & 4

18. Under Additional Claims No. 2 & 4 the learned Arbitrator had allowed

interest to the claimant @ 15% p.a. on different claims from 14.8.1985 onwards and

pendent lite and future reckoned from the date of the Award till the date of payment.

The claimant would be entitled to this interest on the surviving claims for a period as

allowed by the Arbitrator.

19. In view of above the award in respect of claims no. 1 & 3 is upheld the

award in respect of Claims No. 2, 4, 5, 6, 7, 8 & Additional Claim no. 1 are set aside.

The award in respect of Claims No. 1 & 3 and interest thereon @ 15% p.a. from the date

of arbitration till realization of the amount is made a rule of the Court.

With this, the suit and the objections stand disposed of.

August 25, 2009                                SHIV NARAYAN DHINGRA, J.
vn