Shri Vasudev vs Dda
2009 Latest Caselaw 5401 Del

 *                      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                  C.S. (OS) No.3023 of 1992

%                                                                       23.12.2009
         SHRI VASUDEV                                            ......Petitioner
                                       Through: Mr. B.K. Dewan, Advocate.

                                            Versus

         DELHI DEVELOPMENT AUTHORITY                  ......Respondents
                            Through: Ms. Alpana Pandey for Mr. D.S.
                                     Mahendru, Advocate.

                                                        Date of Reserve: 19th August, 2009
                                                        Date of Order: December 23, 2009

         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. By this order I shall dispose of objections made by the DDA under Sections 30

and 33 of the Arbitration Act against an Award of the Sole Arbitrator, Sh.R.C. Malhotra,

dated 29th June, 1992.

2. The brief facts relevant for the purpose of deciding these objections are that the

contractor, Mr. Vasudev, was awarded a civil contract for construction of sewerage at

Hudson Lines, Kingsway Camp vide an agreement dated 30th September, 1987. The

work was to be completed by 4th July, 1988. However, the work did not complete by the

stipulated time and the DDA rescinded the contract vide letter dated 23rd February, 1991.

The contractor raised a dispute and sought reference of his claims to the Arbitrator. In all

28 claims were raised by the contractor and were referred to the Arbitrator. The DDA

also raised counter claims and the Award deals with these claims and counter claims. The

objections against the Award have been filed claim wise so they are being dealt with

claim wise.

3. Under claim No.1, the claimant claimed a sum of Rs.99,785/- on account of

refund of security deposit. The Arbitrator upheld the claim to the tune of Rs.90,000/-

holding that rescission of the contract on 23rd February, 1991 was unjust and wrongful

and forfeiture of security was, therefore, unjust. The Arbitrator has given reasons and

referred to the various correspondences between the parties. On the other hand, no

ground is made out by the respondent/DDA to set aside Award of this claim. This court

cannot act as a court of appeal hearing arguments on merits of the decision. The

Arbitrator's decision is based on evidence and, therefore, has to be respected.

4. Claim No.2 is for refund of Rs.70,000/- which was wrongfully withheld from the

second running bill. The Arbitrator has allowed this claim on the basis of respondent's

own documents wherein the respondent's Engineer had recommended for refund of this

amount. I find no reason made out by the respondent for setting aside this claim. The

claim is based on evidence as adduced before the Arbitrator.

5. Claim No.3 is in respect of Rs.5,000/- wrongly recovered from the 6th running

bill. This amount was recovered from 6th running bill in anticipation of grant of extension

of time. There is no provision in the Agreement between the parties that an amount can

be recovered from the bill in anticipation of granting extension. As and when the

extension is applied by the contractor, DDA can either extend the contract conditionally

or unconditionally or refuse an extension. If a condition is imposed of imposing penalty

at the time of extension, that penalty can be recovered subsequently from the bill but an

amount cannot be deducted from the bill in anticipation that a penalty would be imposed

without considering the grounds for extension. I, therefore, find no ground to set aside

award on this claim.

6. Claim No.4 was made by the claimant for refund of recovery of Rs.13,700/- at

double the issue rate of cement. The Arbitrator held that the respondent could not prove

the use of excess cement and the recovery at twice the issue rate was wrongful. The

recovery for cement could only be made at issue rate. He, therefore, allowed Rs.6,850/-

against this claim. It is contended by the respondent/DDA that Arbitrator has given no

reasons for awarding Rs.6,850/-. I find this argument baseless since the Arbitrator has

given reasons.

7. Claim No.5 made by the claimant was for Rs.35,000/- on account of balance

payment of the work done. The Arbitrator allowed payment of Rs.30,297/- against this

claim after considering the bill raised by the claimant and the fact that the payment was

not made against the bill. The DDA's contention is that according to the bill of the

claimant, the gross amount payable was shown as Rs.30,861/-. Out of this bill, 10 per

cent was to be deducted by way of security deposit, Rs.618 was to be recovered on

account of income tax and Rs.670/- was to be recovered on account of recovery for

cement and Rs.7,620/- on account of secured advance. The amount of Rs.10,295/- was

ultimately reflected under claim No.1 as the said amount of security deposit was put

under the said head and was released to the petitioner on furnishing the bank guarantee.

The Arbitrator has under claim No.1 directed the release of amount of bank guarantee,

however, the Arbitrator overlooked and did not take into consideration the other three

recoveries, namely, income tax, recovery for cement and recovery for secured advance

which were given by the DDA to the contractor and has taken into consideration the gross

amount of bill irrespective of recoveries. The learned Arbitrator has not rejected or

accepted the recoveries and observed that the recoveries shown in the bill were unjust and

thus, left the matter undecided. The recoveries to be effected from the contractor were to

the tune of Rs.19,903/- thus, the net amount payable to the respondent against the bill was

Rs.10,958/-. Out of this the credit of Rs.1,370/- as allowed by the Arbitrator has to be

adjusted and thus, the only amount which could have been awarded by the Arbitrator was

Rs.10,958/- minus Rs.1,370/-. The contention of the contractor is that only recovery of

Rs.1,370/- against cement was admissible. Rests of the recoveries were unjust and that is

why the Arbitrator has allowed the claim of the contractor. It is further submitted that the

security deposit of Rs.10,295/- could not be enforced since the claimant had furnished

bank guarantee for security deposit and the learned Arbitrator had discharged the bank

guarantee which was given in the form of security deposit. Thus, the amount of

Rs.10,295/- was not admissible. It is stated that the award of the Arbitrator on this count

has become final. However, the claimant has not refuted the contention of the respondent

that out of the bill raised by the contractor, the respondent was liable to deduct income tax

and recovery of Rs.7,620/- on account of secured advance. It is not disputed that before

the start of contract, advance was paid to the contractor which was to be adjusted out of

the running bill raised by the contractor, therefore, this secured advance had to be

deducted out of the bill of the contractor. Obviously, the Arbitrator has not taken into

account the recovery of income tax and secured advance. Maybe Rs.10,295/- by way of

security deposit was not liable to be recovered but rest of the recoveries were to be made

and the Arbitrator ignored this fact.

8. I, therefore, consider that this award of the Arbitrator is required to be modified

and out of the amount of Rs.30,297/- allowed by the Arbitrator, a deduction of Rs.7,620/-

towards secured advance, Rs.618/- as income tax are additionally required to be

recovered. The Award of the Arbitrator against this claim is, therefore, modified and a

sum of Rs.21,959/- is upheld as the justified amount payable to the claimant.

9. Claim No.7 made by the claimant was for Rs.13,000/- on account of extra cement

concrete. The Arbitrator has allowed this claim. The contention of the respondent is that

the Arbitrator has failed to give reasons as to how he found the said claim to be payable.

A perusal of the Award shows that the Arbitrator has referred to the order book and

instructions given to the respondent for providing extra 6" thick C.C. cover collars. Since

the claimant had fulfilled these instructions, the claimant was entitled for the payment on

this count and the Arbitrator had come to a conclusion that the claim made by the

claimant of Rs.13,000/- was on the lower side and was to be allowed. I find no reason to

disturb the Award.

10. Claim No.8 was made by the claimant for Rs.99,840/- on account of providing

SFRC manhole covers. The learned Arbitrator after considering the evidence awarded a

sum of Rs.75,473.65 in favour of the claimant. The objection of DDA is that the analysis

given by the claimant of Rs.520/- per cover was not supported by any cogent evidence.

Secondly, manhole No.157 was not constructed and the petitioner could not have

provided 191 numbers of covers and at the best it could have been 190 covers. The

Arbitrator has considered the entire evidence even if it is considered that instead of 191 it

were 190 covers, the difference in cost was around Rs.400/-. Thus, the award allowed by

the Arbitrator would have gone down by Rs.400/-. It is true that the Arbitrator had taken

full 191 covers instead of 190 covers. The difference between the cost of SFRC cover

and RCC cover being only Rs.395.15, the Award made by the Arbitrator is modified to

the extent that instead of Rs.75,473.65, the claimant would be entitled to Rs.75,078.50.

11. Claim No.9 was made by the claimant for Rs.1,75,000/- on account of execution

of work beyond the stipulated date of completion by claiming 25 per cent extra on

contract rate. There is no provision in the contract that if the work goes beyond the

stipulated date, the contractor would be entitled for extra rates @ 25 per cent of the work.

The contract vide clause 10C specifically deals with situation if there is an escalation in

the price of labour and material during progress of the contract and clause 10CC

specifically deals with the escalation in the wages of labour and the price of material

during the extended period. Once period of contract is extended and if there is escalation

in the price of labour and material, the contractor can only lay claim under Clause 10C or

10CC but there is no provision that where period of contract is extended or the contract

gets prolonged, the contractor's tender rates shall stand increased by 25 per cent or the

quantity rates shall increase by 25 per cent. It is settled law that an Arbitrator is prisoner

of the contract and he cannot grant compensation, which is not provided by the contract.

The Arbitrator in this case had allowed the claim of the contractor under Clause 10CC

vide claim No.11. I, therefore, consider that the award of Rs.1,35,511/- allowed by the

Arbitrator against claim No.9 was not tenable and contrary to the contract.

12. Claim No.10 was made by the claimant/contractor for a sum of Rs.31,506.25 on

account of execution of work under water. The claimant's claim was that he was entitled

for additional payment apart from contractual amount since he had to work under water

for excavation of trenches and laying of pipes. The learned Arbitrator allowed this claim

of the claimant in toto saying that it was a justified claim. It is submitted by DDA that

the letter on which the Arbitrator had relied does not give any details with regard to the

claim and the learned Arbitrator has based his decision on non-existent material and there

was gross application of mind. The contention of the claimant is that the learned

Arbitrator has decided the claim on the basis of evidence, namely, letters C-44, C-39 and

C-32 and the court cannot upset the Award as the court cannot go into merits. There was

no error apparent on the face of the award. The contractor in this case was awarded

contract of laying sewerage lines. The trenches, etc., were to be dug for laying the

sewerage lines. All rates in respect of digging trenches were agreed between the parties.

In all other claims wherever the contractor had made a claim for extra item, the contractor

had relied upon an order book or measurement book. In this case, there is no evidence of

execution of the work by the contractor by way of measurement book nor there is any

evidence on record that the trenches were dug under water and work was done under

water. It would be seen that the contractor had been writing letters to DDA during

progress of the work making various claims and seeking additional payment in respect of

various things. Mere writing of letter by contractor seeking additional payment does not

amount to evidence of the contractor of performing additional work or work beyond the

contracted items. If any contractor claims that he had executed work beyond the contract

or in respect of some item which was not provided for under the contract, he is supposed

to prove his claim by measurement book or by an order placed on him. Self-supporting

letters are not the evidence of extra items. I, therefore, consider that the learned

Arbitrator in this case allowed this claim without there being any evidence and the award

on this count is liable to be set aside.

13. Claim No.11 was made by the claimant for a sum of Rs.90,000/- on account of

reimbursement of increase in cost of work under Clause 10CC of the contract. The

learned Arbitrator after considering the cost index and taking into account the stipulated

date of completion and the actual date of completion had allowed an amount of

Rs.17,143/- in favour of the claimant. The respondent has raised objection that the

Arbitrator has not given reason as to how he arrived at the said figures. A perusal of the

proceedings shows that the Arbitrator did take into account the relevant index and the

charges. I, therefore, find no reason to set aside this Award under claim No.11.

14. Claim No.12 is for Rs.5,831.48 on account of extra waste for laying C.C. under

pipes due to revision of slopes. The Arbitrator allowed this claim. The respondent's

contention is that the Arbitrator has not given reasons and, therefore, the Award was

liable to be set aside. I find that the Arbitrator has given reasons and relied upon the

document showing that the respondent had revised the gradient for laying pipes. The

claimant had also furnished details about this revision of gradients and the amount spent

by the claimant. I find no reason to set aside the Award.

15. Claim No.13 was made by the claimant for a sum of Rs.19,062.83 on account of

extra brick work in the manholes. The learned Arbitrator allowed claim of Rs.15,690.11.

A perusal of contract (item 5) would show that the item provided "construction of brick,

circular type manhole with FPS bricks with 90 cm internal diameter at the bottom and 90

cm depth with C.I. frames of heavy duty on the top." The thickness of RCC cover is

given as 12 cm, however, there is no thickness of the brick work provided under this item

and it is obvious that the manhole was supposed to be heavy duty and strong enough to

bear the burdens of vehicles passing over it. This claim could have been allowed only if

the contractor had done something extra than what was provided in the contact. The

contract does not provide that the thickness of the wall of manhole was to be 9 inch.

Normally in all manholes, the thickness of wall is to made in accordance with the location

of the manhole i.e. if the manhole was to come in between the road or it was to remain at

an isolated place where no vehicle was to pass. "There was no specification given in the

contract that the manhole was to have side wall thickness only of 9 inch. The contractor

was told that thickness of 9" being provided by him was not suitable for the structure

consideration and he was advised to provide first course of 18 inches, second course of 13

½ inches and then start 9 inches brick work. This does not amount to any additional work.

The contractor had not specified in his tender that in the manhole, he was only going to

provide 9 inches wall throughout and he was not going to give first course of 18 inches

and second course of 13 ½ inches and then course of 9 inches brick work which is the

normal mode of construction of manholes. The claim of the claimant was, therefore, not

tenable in view of the contract between the parties. Thus brick work cannot be termed as

an extra work. If the DDA had pointed out that manhole was not of requisite strength and

needed additional strength that does not mean that the respondent had asked the

contractor to do additional work. The award against claim No.13 is, therefore, liable to

be set aside.

16. Under claim No.15, claimant claimed Rs.78,000/- and the Arbitrator allowed this

amount to him despite observing that the work was executed by the claimant as per

agreement item No.4. A perusal of agreement item No.4 would show that this item

included "providing and laying (light duty) non-pressure NP2/NP3 class, S & S R.C.C.

pipe with rubber ring confirming to ISI standard". A perusal of claim of the claimant

would show that the claimant had asserted that in the tender, schedule of quantity

contemplated provision of non-pressure NP2/NP3 class S & S RCC pipe with rubber ring.

However, his contention is that he was invited for negotiation and for reduction of rate

and he reduced rate from 38.5 per cent to 34 per cent and he clarified the rate for item

No.4 of schedule of quantities would be for NP2 class pipe. He submitted that in NP2

class pipe no rubber rings are required, but in the present case in addition to cement

concrete in the joints, he also provided rubber rings and, therefore, he was entitled for

additional amount of Rs.78,000/-. The respondent had raised objection that the Arbitrator

despite observing for the item was executed as per agreement had allowed claim of

Rs.78,000/- and this was an error apparent on the fact of it. There was no question of

awarding any extra amount since the work had been executed as per the agreement. The

contractor has refuted this and stated that he had made it clear that he would be using only

NP2 pipe, during negotiation. A perusal of the negotiation letter written by the contractor

during negotiation would show that the contractor had agreed for reduction of his rates

and observed that he would be using NP2 pipes, however, he had not stated that he would

not be using rubber rings for joints while using NP2 pipes. There is no dispute that he has

used NP2 pipes but he staked an additional claim for using rubber rings at the joints. It

was made clear in the tender document and in the contract which he signed after

negotiations that the joints are to be made by rubber and concrete. The specification

clearly shows S & S NP2 pipe with rubber. Thus, there was no confusion at the time of

execution of the contract. The item was executed as per the contract. There was no

reason for the Arbitrator to award additional amount. The award under claim No.15 is,

therefore, liable to be set aside.

17. Claim No.16 was raised by the claimant for Rs.12,783.60 as an extra amount for

excavation of malba. The Arbitrator allowed a sum of Rs.7,348.44 after relying upon the

letters written by the claimant that there was some malba in the alignment of the

sewerage line over the area. The claim has been allowed without any evidence of

removal of malba, only on the basis of analysis. I consider that no claim for extra work

can be allowed without proof of the work having been done, only on the basis of analysis.

In all civil works which are awarded by DDA to the contractor, a measurement book is

maintained and execution of all works, step by step are recorded in the measurement book

whenever an extra work is required to be done an order is to be placed by Engineer In-

charge and a cost analysis is to be given by the contractor and the Engineer In-charge has

first to accept the cost analysis in terms of clause 12. An extra work may be withdrawn

from the contractor if cost analysis is not acceptable to the Engineer In-charge. However,

there is required to be evidence that extra work was ordered to be done and it was

executed in terms of the order. In absence of evidence, mere correspondence of the

contractor that he had to do extra work cannot be a ground for allowing the claim by the

Arbitrator. The Arbitrator is bound by the contract and no extra item can be allowed by

the Arbitrator unless it has been executed in accordance with the contract and evidence is

produced before the Arbitrator of execution of the extra work. I, therefore, consider that

Award of Rs.7,348.44 for removal of malba from the site is not tenable.

18. Claim Nos.21 and 22 are in respect of allowing interest by the Arbitrator over the

withheld amount. After perusal of the Award, I find that the Arbitrator has justifiably

allowed amount against both these claims as I find that the DDA had wrongfully withheld

the amounts of the second running bill and released the amounts belatedly. I find no

reason to justify the Award of these two claims.

19. Claim No.24 has been allowed by the Arbitrator for a sum of Rs.12,000/- on the

basis of record maintained by the respondent. The respondent has stated that the

Arbitrator had not given any reasons for allowing the claim. I find that this contention

untenable since the Arbitrator had given reasons and relied upon the documents showing

the execution of the work. I, therefore, find no reason to justify the Award against this

claim.

20. Claim No. 26 has been allowed by the Arbitrator on account of damages on the

ground that the contractor had to maintain his establishment unproductively beyond the

stipulated rate of completion since it was DDA who was responsible for the delay in the

work. The claim had been allowed on hypothetical grounds without their being any

material before the Arbitrator that the establishment was actually maintained by the

contractor. There is no presumption that a contractor undertakes only one civil work at a

time and he maintains his establishment for that purpose. A contractor may be having at

hand at one point of time many contracts. It is more likely so because looking into the

manner in which payments are released by the DDA and the pace of work, it is not

possible that a contractor and his staff could survive with one work. The contractor is to

maintain his establishment for all works which he has at hand at one point of time. If a

contractor claims that he kept his staff that is Engineer, Supervisor, Mechanic, etc., posted

at the site idle, he is supposed to prove the same in order to claim the damages on account

of maintaining the establishment. The contract between the parties specifically provides

that the contractor shall maintain attendance register of all the workmen and he shall

submit this attendance register to the employer, that is, DDA from time to time. He is

also supposed to maintain wage book of each worker with full particulars of the employee

employed by him. Unless and until the contractor placed before the Arbitrator the names

of the persons employed by him and kept posted at site with sufficient evidence that those

employees and Engineers remained idle and did not work at his other works and he had

engaged separate Engineer and Supervisor for his other works, he cannot claim damages

on account of keeping idle establishment. Keeping an establishment idle cannot be a

presumptive factor. It is a real factor and has to be proved by real evidence. Cost

analysis of keeping an establishment cannot be a basis for awarding an amount to a

contractor. This will rather to be a premium on delaying the work. A contractor would

deliberately delay the work and then claim that he has to keep his establishment idle. He

would also claim damages under Clause 10 CC and it is not a difficult task to delay the

work when we have departments like DDA and MCD where the work culture is so

helpful to the contractor that every contractor ends up not only receiving with the

contractual amount but receiving almost equal amount through arbitration awards. I,

therefore, consider that the claim allowed by the Arbitrator under Claim No.26 is not

tenable and not as per terms of the agreement and liable to be set aside.

21. Claim No.27 has been allowed by the Arbitrator for a sum of Rs.2,275/- on

account that the contractor had to pay extra commission during prolongation of the

contract for maintaining bank guarantee. The contractor produced a bank certificate of

Rs.2,275/-. Since it has been held by the Arbitrator that the contract got prolonged due to

fault of DDA, I consider that the Arbitrator rightly allowed this amount.

22. Claim No.28 is in respect of allowing interest. The Arbitrator has awarded

interest @ 14 per cent per annum from 3rd September, 1990 till date of Award and he

allowed further interest of 14 per cent from the date of Award till realization. I consider

that the rate of interest @ 14 per cent upto the date of Award was justified in view of the

interest regime prevalent earlier. However, rate of interest @ 14 per cent per annum from

the date of Award till realization is on higher side in view of the fact that interest regime

changed in this country in late Nineteen. I consider that an interest of 10 per cent per

annum on the awarded sum including interest upto the date of Award will be a reasonable

interest. I, therefore allow 10 per cent interest on the awarded amount from the date of

Award till realization.

23. The Arbitrator also dealt with counter claims and rejected all counter claims of the

respondent holding that it was respondent due to whom the contract got prolonged. I find

no reason to set aside the award on counter claims.

24. Subject to the modifications in respect of claims set aside by this court or

modified by this court, the Award made by the Arbitrator is made Rule of the court. The

objections are allowed to the extent observed above.

25. The petition stands disposed of accordingly.

SHIV NARAYAN DHINGRA J.

DECEMBER 23, 2009 'AA'