M/S. Anant Raj Agencies vs D.D.A & Anr.
2009 Latest Caselaw 4993 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CS(OS) 2614A /1998 & I.A. 7969/2001

M/S. ANANT RAJ AGENCIES                     ..... Petitioner
                  Through:                  Mr. Harish Malhotra, Senior
                                            Advocate with Mr. Rajender
                                            Agarwal, Advocate

                       versus

D.D.A & ANR.                                ....Respondents
                                Through:    Mr. Arjun Pant, Advocate.



%                                Date of Decision : December 04, 2009


CORAM:
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not?                                      No.
3. Whether the judgment should be reported in the Digest?                      No.

                                JUDGMENT

MANMOHAN, J: (Oral)

1. Present petition has been filed under Sections 30 and 33 of

Arbitration Act, 1940 (hereinafter referred to as "Act, 1940") raising

objections to the Award dated 13th November, 1998 made and

published by Mr. L.R. Pahwa, sole Arbitrator. By way of this petition,

objector-respondent has challenged the said Arbitrator‟s Award in

respect to the rejection of the following deductions in the final bill i.e.:-

i) Rs.1,08,179.06 on account of reduction items;

ii) Rs.30,000/- for not providing fittings;

iii) Recovery of Rs. 53,305/- for non-provision of door-shutters;

2. The petitioner has also challenged items No. 3.5(a) and 3.5(c)

relating to sanctioning and shuttering of suspended floors. The

petitioner has also challenged item 3.6 for omitting RCC work, item

3.7(a) and (b) for reinforcement of RCC work, item 6.1 for providing

and fixing T-iron frames for doors and windows and item 6.2 for

providing and fixing MS grill in steel windows. It has challenged extra

and substituted items to the tune of Rs. 10,944.26/-, items 23 for

making grooves and plaster, item 24 for chequers in the trades of the

staircase and item 25 for cutting holes upto 15 cms x 15 cms.

3. The challenge has also been made in respect to Item No. 30

under the head of Extra and Substituted Items of the final bill wherein

the Arbitrator had awarded an amount of Rs. 1,85,370/- on account of

the expenses incurred for straightening and cutting. The challenge has

also been made in respect to Item No. 2 under the Sub-Head III „other

payments due‟ of Claim No. 1 wherein the Arbitrator had awarded a

sum of Rs. 19,91,978/- on account of increase in prices of building

materials and other expenses. The petitioner has also challenged Item

no. 3 on infructuous expenditure on account of labour watch and ward

staff and staff maintenance. The challenge has also been made in

regard to the grant of interest for pre-reference, pendent elite and future

periods @ 18% per annum.

4. Though the petition records many more challenges to the Award,

subsequent to the recommendations of the arbitration scrutiny board

held on 04.11.2009, it is only these items which are impugned.

5. Mr. Arjun Pant, learned counsel for respondent-DDA stated that

the learned Arbitrator had erroneously dis-allowed the deduction of

Rs.1,08,179.06 on account of reduction item and stated that it was

against Clause 25(b) of the agreement as the decision of the

Superintendent Engineer treating the rates of reduction item was final

and not open to arbitration.

6. On the contrary, it was contended by Mr. Harish Malhotra,

learned senior counsel for the petitioner that the said recovery was

totally illegal as there was no item which could be treated as reduction

item. It was also contended that recovery had been made for the first

time in the bills submitted by the respondent during the course of

arbitration, whereas in earlier running bills the respondent had

categorically recorded that the work had been executed as per the

specification and as per the nomenclature of the item and, as such,

when the respondent itself had recorded while releasing the payments

of running bills that the work had been done as per the specification

contained in the agreement, there was no reason for the respondent to

treat the said items as reduction item at a later stage particularly when

the respondent had miserably failed to place on record any notice

showing the deficiency in the execution of the particular items for

which the reduction item statement had been prepared. Thus, the said

items could not be treated as reduction items.

7. The Arbitrator had gone into the said issue and has categorically

held that Clause 25(b) of the agreement will come into operation only

when there exists circumstances for treating any item as reduction item.

It would not have any operation when the items are executed in terms

of specifications contained in the agreement as none of the items

executed as per specifications can be treated as reduction items. Even

otherwise, before treating any item as reduction item, the respondent

has to first give an opportunity to the contractor to rectify the defect by

giving a notice under clause 14 of the contract and if the contractor fails

to remove the defects so pointed out and requests the department to

treat that item as reduction item, then any such item may be treated as

reduction item by the respondent and not otherwise. The Arbitrator has

further recorded a finding that the respondent has not followed the

provisions of Clause 14 before resorting to prepare reduction item

statement and, therefore, the respondent has no authority whatsoever to

treat the aforesaid item as reduction item and to make any recovery

thereof. There is also a finding of fact by the Arbitrator that no notice

under Clause 14 was ever given and no defect was ever pointed out in

the execution of the work. Therefore, I do not find any reason to

interfere with the said finding and the objection in this regard is

accordingly rejected.

8. Since, in my opinion, the Arbitrator‟s reasoning is a plausible

one, it requires no interference in Sections 30 and 33 proceedings under

the Act, 1940. Accordingly, the said objection is rejected.

9. Now coming to the objection in regard to Item No.30 wherein the

Arbitrator has awarded an amount of Rs.1,85,370/- on account of claim

of the petitioner for straightening and cutting of the steel bars. In this

regard, Mr. Arjun Pant submitted that the award of Rs.1,85,370/- on

account of straightening of bent up steel bars was contrary to the

provisions of the contract. In this context, he referred to a judgment

rendered in an earlier case between the present parties titled as Anant

Raj Agencies Vs. D.D.A. and Anr. reported in 2005 IV AD (Delhi) 197

which contained an identical schedule of quantities. The relevant

portion of the said judgment is reproduced hereinbelow :-

"39. Claim No. 4 in sum of Rs.5,53,506/- was for straightening bent up steel bars issued in coils and bent up bundles and, thereforee, contractor claimed to be compensated for said work.

40. Learned arbitrator has treated the work of straightening bent up steel bars as an extra work.

41. Item 3.10 of the schedule of quantities required the contractor to quote for the following work:-

"3.10 Re-enforcement for RCC work including bending, binding and placing in possession complete."

42. Offer submitted by the contractor shows that the contractor had quoted for aforesaid work. Issue which arises for consideration is whether the work of straightening bent up steel bars would be included under specification 3.10 aforesaid.

43. Learned arbitrator has relied upon a decision of a learned Single Judge of this court in Suit No. 1985-A/1984 K.C.Chibber v. DDA. Said decision which was filed before the learned arbitrator as Ex.C-70 shows that a learned Single Judge of this court, while considering a similar descriptive clause in the schedule of quantities requiring the contractor to execute the work of reinforcement for RCC works included bending, binding and placing in position held that the clause would exclude straightening of bent up steel bars for which extra was payable. Accordingly, learned arbitrator partly allowed claim No. 4 by treating the claim as an admissible claim.

44. Decision in Weer Aar Constructive Builders relied upon by counsel for DDA noted decision in K.C.Chibber's case. Decision in K.C. Chibber's case was distinguished on the ground that in K.C.Chibber's case, petitioner had notified DDA that straightening of steel was to be treated as an extra item of work and this was not objected to by DDA.

45. In Weer Aar Constructive Builder's case, learned Single Judge held that since bending, binding and placing in position steel for RCC works was included in the contract, said work necessarily required the process of straightening before cutting and, therefore it was held that no claim for extra was maintainable on said account.

46. Learned counsel for the respondent could not point out any evidence that contractor had written to DDA when work was on that he would be having a claim as an extra item for straightening of bent up steel bars issued in coils.

10. In the present case also the learned counsel for the respondent has

not been able to point out any evidence showing that the petitioner-

contractor had ever written to the DDA during the time the contract was

being executed that he would be raising a claim of an extra item for

straightening of bent up steel bars issued in coils. Thus, in accordance

with the decision in Weer Aar Constructive Builder Vs. D.D.A.

reported in 2001 (IV) AD Delhi, I set aside the impugned Award of the

Arbitrator with regard to Item No. 30.

11. Now coming to the objection against Item No.2 where the

Arbitrator has awarded a sum of Rs.19,91,978/- on account of loss

suffered due to increase in prices of building material and other

expenses. In view of the fact that under Clause 10 CC payment had

already been made, the Arbitrator was not justified in allowing the

aforesaid amount as damages. The Division Bench of this Court in the

case of Delhi Development Authority Vs. K.C. Goel reported in 2001

(II) AD Delhi 116 and DDA Vs. U. Kashyap reported in 1998 (VII) AD

Delhi 300 has held that once a particular formula is provided in the

contract, applying some other formula and awarding the claim would

amount to legal misconduct. The ratio of the two judgments, i.e., DDA

Vs. K.C. Goel (Supra) and DDA Vs. U. Kashyap (Supra) held that the

Arbitrator has committed legal misconduct in awarding a sum of

Rs.19,91,978/- on account of escalation of cost of material and labour.

Accordingly, I set aside the impugned Award with regard to Item No.2.

12. With regard to other objections, the same are general in nature

and are not within the ambit and scope of Sections 30 and 33 of the Act,

1940 and, thus, are not worth consideration. The said objections are

factual in nature and this Court in exercise of jurisdiction under

Sections 30 and 33 of the Act, 1940 cannot reappraise the evidence and

sit in appeal on the arbitrator‟s decision. Finding of facts of Arbitrator

is not interferable. These objections are devoid of merit and hence

rejected.

13. So far as the issue of rate of interest for pre-reference period is

concerned, I find from the Award that the petitioner has, in fact, given

notice to respondent under Interest Act, 1978. In this connection I may

refer to the Award wherein the learned Arbitrator has recorded a finding

that the petitioner had been demanding payment of interest from the

respondent from time to time and had also placed on record bank

certificates as well as the Gazette of India, published by Government of

India (Exhibit C-92) which provides grant of interest in the event of

with-holding the payment @ 5% over and above the highest of the

minimum lending bank rates. The aforesaid finding that interest has

been claimed has not been challenged in the objection petition filed

before me.

14. As far as pendent elite and future interest is concerned, I deem it

appropriate to reduce the rate of interest from 17.50% p.a. to 9% p.a.

simple interest. In this connection, I may refer to observations of

Supreme Court made in State of Rajasthan & Anr. Vs. M/s. Ferro

Concrete Construction Pvt. Ltd. reported in 2009 (8) SCALE 753

wherein it has been held as under :-

"36. In regard to the rate of interest, we are of the view that the award of interest at 18% per annum, in an award governed by the old Act (Arbitration Act, 1940), was an error apparent on the face of the award. In regard to award of interest governed by the Interest Act, 1978, the rate of interest could not exceed the current rate of

interest which means the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act. Therefore, we are of the view that pre-reference interest should be only at the rate of 9% per annum. It is appropriate to award the same rate of interest even by way of pendent lite interest and future interest upto date of payment."

15. Consequently, keeping in view the aforesaid judgment and the

current rate of interest, the impugned Award is modified to the extent

that Item No.30 of Claim No.1 and Item No.2 of Sub-Head III of Claim

No.1 are disallowed and rate of interest for pre-reference, pendent lite

and future periods is reduced to 9% p.a. simple interest. However, it is

made clear that in case aforesaid payment is not made by respondent

within a period of 90 days from today, the post-decretal rate of interest

would stand increased to 11% p.a. simple interest.

16. With the aforesaid modifications, Award is made rule of the

Court and Registry is directed to prepare a decree in terms thereof.

Accordingly, present petition and pending application stand disposed

of.

MANMOHAN, J.

DECEMBER 04, 2009 rn