Sethi Engineering Corporation vs Delhi Development Authority & ...
2009 Latest Caselaw 613 Del

                                            REPORTED
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                             DATE OF RESERVE: November 20, 2008

                              DATE OF DECISION: February 20, 2009

+                    CS(OS) 3248/1992

      SETHI ENGINEERING CORPORATION        ..... Claimant/Non-Objector
                       Through: Mr.Kirti Uppal with Mr.Sanjit Singh, Advocates.

                     versus


      DELHI DEVELOPMENT AUTHORITY & ANR.                          ..... Respondents
                              Through: Ms.Anusuya Salwal, Advocate.
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL

1.    Whether reporters of local papers may be allowed
      to see the judgment?
2.    To be referred to the Reporter or not?

3.    Whether judgment should be reported in Digest?


:     REVA KHETRAPAL, J.

This is a petition under Sections 30 and 33 of the Arbitration Act, 1940 for

setting aside the award dated 24th May, 2004 passed by the learned Arbitrator,

Justice K.Ramamurthy (Retired).

2. The facts relevant for deciding the objection petition are as follows: The

Delhi Development Authority had awarded work to the Claimant/Non-Objector

for construction of dwelling units - 512 MIG Houses at Pocket-I, Dilshad Garden

vide Agreement No.14/EE/ND-18/82-83. The stipulated period of completion of

the work was 12 months, which expired on 6th July, 1983. Disputes arose between

the parties which were referred to the arbitration of the Engineer (Member), DDA,

who made and published the award dated 20th July, 1992. The Claimant/Non-

Objector approached the High Court for enforcing the award and the Respondent-

DDA filed the present objections. By an order dated 19th October, 2001, the High

Court holding that since the award was severable and not hybrid, remitted back

the award insofar as the claim No.6 was concerned.

3. The aforesaid claim No.6 preferred by the Claimant/Non-Objector was in

respect of damages on account of prolongation of work beyond the stipulated date

of completion, on account of increase in the price of material, wages, labour, etc.

The claim had been preferred for Rs.14 lacs and the learned Arbitrator Shri N.

Ramamoorthy vide his award dated 20th July, 1992 had awarded Rs.11,18,720/-.

After the matter was remitted back, the learned arbitrator appointed by this Court

(Justice K. Ramamurthy) formulated the following two questions for

consideration:-

1) Whether the Respondent-DDA could rely upon Clause-1 in

answer to the claim of the claimant under Claim No.6?

2) Whether any duress was exercised by the Respondent-DDA

on the Claimant in getting the undertaking which is mentioned in

the application for extension of time and, therefore, the Claimant is

entitled to the amount?

4. On consideration of the aforesaid, the learned arbitrator (Justice

K.Ramamurthy) on 24.05.04 passed an award:

i) Directing the Respondent-DDA to pay to the Claimant/Non-

objector a sum of Rs.11,18,720/-.

ii) Directing the Respondent-DDA to pay interest @ 13% per

annum on the sum of Rs.11,18,720/- from 8.4.1988 till the date of

payment.

iii) Directing the parties to bear their respective costs.

5. It is this award which is under challenge and on which I have heard

Mr.Kirti Uppal, the learned counsel for the Claimant/Non-Objector and

Ms.Anusuya Salwan, the learned counsel for the Respondent-DDA. Before

dealing with their respective contentions, a look at Clause-1 of the General

Conditions of Contract is called for. Clause-1 reads as follows:

"The contractor must acquaint with the proposed site for the works and study the specifications and conditions carefully before tendering. The work shall be executed as per the programme approved by the Engineer In-charge. If part of the site is not available for any reason or there is some unavoidable delay in supply of materials, stipulated by the department, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extras or compensation on this account".

6. The learned counsel for the Respondent/Objector, Ms.Anusuya Salwan

raised a two-fold contention. In the first instance, she urged that the learned

arbitrator had made his award contrary to the General Conditions of the

Agreement entered into between the parties and, in particular, Clause-1 of the said

General Conditions of Contract. Secondly, the learned counsel contended that the

learned arbitrator had ignored certain important documents on record which

clearly showed that the Claimant had delayed the project; and had himself

requested for extension of time and was willing to accept the extension of time

without payment of damages.

7. Needless to say, the learned counsel for the Claimant/Non-Objector

Mr.Kirti Uppal vehemently controverted both the aforesaid contentions of the

learned counsel for the Respondent/Objector. He contended that the interpretation

of Clause-1 of the General Terms and Conditions of the Contract had fallen for

consideration before this Court in the case of Shri Sunder Lal Khatri Vs. DDA,

reported in 1994(2) Arbitration Law Reporter 479, wherein it was held that the

damages under this Clause are for the fact that if the duration of work is

prolonged because of non-fulfillment of the obligations on the part of the DDA,

then the said award is justified in favour of the Claimant/Non-Objector. The

learned counsel further submitted that an appeal against the aforesaid decision,

bearing FAO(OS) 252/1994, preferred by the DDA/Objector before the Division

Bench of this Court was dismissed.

8. On facts, it is not in dispute that the date of commencement of the work

was 7.7.1982 and the stipulated date of the completion of work was 6.7.1983. On

account of delay on the part of the DDA on various grounds, the work was

completed on 21.7.1986, that is, three years after the stipulated date of

completion. The final bill was received by DDA on 12.01.1988. It is also not in

dispute that the claimant had applied for extension of time for completion of the

work several times, giving the details of the nature of the hindrances and the

number of days of delay. The total period of hindrances came to 1300 days. A

perusal of the various hindrances listed in the applications for extension of time

shows that the delay in the execution of work beyond the stipulated date of

completion of work, i.e., 6.7.1983, was attributable to the DDA alone.

9. Then again, the DDA granted extension of time upto 27.1.1986, but

without levy of any compensation. The stand of the DDA before the arbitrator

was that an undertaking had been given by the Claimant /Non-Objector not to

claim any damages on account of the delay in the completion of work. The DDA

referred to the applications for extension of time (Exhibits R-3, R-4 and R-5), in

which the claimant had stated at the bottom of the application:

"We shall not claim any damages on account of delay in completion of the work".

10. The earlier arbitrator by his award dated 20th July, 1992, however, had

come to the conclusion that the delay in completion of the work was entirely

attributable to the DDA. He also observed that in view of this delay, it was not

expected that the statement of the Claimant that the Claimant would not claim any

damages on account of delay in the completion of the work, was voluntary in

nature. However, the award was silent on the effect of Clause-1 of the General

Terms and Conditions of the Contract and was accordingly remitted back for re-

consideration of the same to a Retired Judge of this Court, who submitted the

present award.

11. The contention of Ms.Salwan, the learned counsel for the Respondent-

DDA, as noticed hereinabove, is that Clause-1 stands attracted in the present case

and by virtue of the fact that the Claimant had accepted Clause-1 while signing

the Agreement, the claim of the Claimant in Claim No.6 is not sustainable. As

regards the interpretation of Clause-1, it was submitted by her that when extension

of time is granted, there is ipso facto 'modification' and, accordingly, the

contractor cannot be allowed to raise any claim for any extras or compensation on

this account. This was the proper construction and interpretation of Clause-1 of

the General Conditions of the Contract. Further, according to her, when the DDA

granted extension of time without any levy of compensation that would

automatically mean that the Claimant had also accepted the same.

12. In order to buttress her contention that the learned arbitrator mis-conducted

himself by ignoring the specific provisions of Clause-1 aforesaid and acted in

manifest disregard of the contract, Ms.Salwan placed reliance upon the decision

of the Hon'ble Supreme Court in Steel Authority of India Ltd. Vs. C.Budha Raja,

Govt. and Mining Contractor 1999(3) Arbitration Law Reporter 335(S.C). In

paragraph-15 of the said decision, the Hon'ble Supreme Court observed as under:-

"15. ...................It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one. The deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action.............."

13. The learned counsel for the respondent Ms. Salwan also relied upon the

decision in the case of Rajasthan State Mines and Minerals Ltd. Vs. Eastern

Engineering Enterprises & Anr.; 1999(3) Arbitration Law Reporter 350 (S.C.),

in paragraph-22 whereof the Supreme Court held as follows:

"22. It is settled law that the Arbitrator is the creature of the contract between the parties and hence if he ignores the specific terms of the contract,it would be a question of jurisdictional error which could be corrected by the Court for that limited purpose agreement is required to be considered. For deciding whether the Arbitrator has exceeded his jurisdiction reference to the terms of the contract is a must............"

14. The learned counsel for the defendant further placed reliance on the

judgment rendered by the Hon'ble Supreme Court in the case of MD. Army

Welfare Housing Organization Vs. Sumangal Services Pvt. Ltd. (2004) 9

Supreme Court Cases 619., wherein its earlier decision in Steel Authority of

India Ltd. (supra) has been specifically approved and followed.

15. Per contra, the learned counsel for the Claimant/Non-Objector Mr.Uppal

submitted that the learned arbitrator had rendered the award after hearing the

parties in detail and going into the relevant provisions of the Agreement. The

learned arbitrator, after hearing both the parties, came to the conclusion that, in

the instant case, there had been no 'modification' of the Agreement in terms of

Clause-1 thereof and that was the understanding of the DDA itself, otherwise

there was no need for taking an undertaking from the claimant in the application

for extension of time. Far from ignoring Clause-1 of the Agreement, the learned

arbitrator had squarely dealt with the same in his award dated 24.05.2004.

Reliance was placed in this context by the learned counsel for the Claimant/Non-

Objector on sub-para (vi) of paragraph 38 of the judgment of the Supreme Court

in Chairman and M.D, NTPC Ltd. Vs. Reshmi Constructions, Builders &

Contractors 2004(1) Arbitration Law Reporter 156 (S.C), wherein it was held

that:

"Only in the event, a case of creation of a new agreement is made out the question of challenging the same by the respondent would have arisen".

16. Learned counsel for the Claimant/Non-Objector further placed reliance

upon the decision of this Court in the case of Anant Raj Agencies Vs. Delhi

Development Authority and Anr. 2002(63) DRJ 259 wherein it was held that:-

"19. The delay causing escalation is bound to act adversely and the contractor is bound to suffer losses and to extract such an undertaking is undertaking obtained under duress as the extension of time sought by the contractor would neither make up his losses due to escalation nor can such an undertaking operate favourably to the authority who has caused the delay and allowed the escalation. The arbitrator rightly allowed the claim on account of the escalation by ignoring the undertaking. The undertaking

given by the claimant by no stretch of imagination was a voluntary act and was probably given under financial duress. The respondent cannot be allowed to take advantage of its own wrong or lapse and thus the claim of the petitioner in this regard was justifiably allowed."

17. After hearing counsel for both the parties, I am inclined to agree with the

submissions of the learned counsel for the Claimant/Non-Objector for the

following reasons: As noted by the learned arbitrator, it is not the case of the

DDA that at any point of time after the agreement was executed between the

parties, the DDA had approached the Claimant for any 'modification'. At the time

of the execution of the agreement, when 12 months had been fixed for completion

of the work, the DDA must have made a detailed assessment of the situation,

particularly with regard to the availability of the materials at the site. It is only in

cases where the delay is on the part of the DDA that the DDA has been given the

right to seek 'modification' with the consent of the Contractor/Claimant. In a

given situation, the Contractor may or may not agree for the 'modification'.

Indubitably, in the instant case, no 'modification' was even sought for by the

DDA. Then again, according to the understanding of the DDA itself, the

application for extension of time filed by the Claimant did not tantamount to

'modification' of the programme of construction within the meaning of Clause-1

of the Agreement, and this is evident from the fact that the DDA took a specific

undertaking from the claimant that he would not claim any damages on account of

delay. Moreover, the delay was purely on account of the DDA and the unanimous

finding of both the arbitrators in this regard is not disputed by the DDA.

Therefore, to my mind, the DDA cannot rely upon the Clause-1 of the agreement

to contend that in spite of the delay of three years in completion of the work

entirely due to the fault of the DDA, the Claimant is not entitled to the amount

claimed in Claim No.6.

18. As regards the undertaking given by the Claimant/Non-Objector, the

following Certificate issued by the DDA to the Claimant dated 4.5.1991 is

apposite for the purpose of deciding the present controversy.

"Delhi Development Authority Vikas Sadan I.N.A No.A3/F-264/EEHDXV III/82-83/1054 New Delhi, 4.5.91 From, To, TO WHOM IT MAY CONCERN

Certified that M/s Sethi Engineering Corporation, 14/24, East Patel Nagar, New Delhi-110 008. have executed the work of C/o 256 MIG Houses Pocket 'I' Group-II, including internal development of Land at Dilshad Garden, Delhi- 32 satisfactorily and the details are as follows:-

                   Date of Start                       28.6.82
                   Date of Completion                  27.6.83
                   (As per stipulated)
                   Actual date of completion           27.1.86
                   Gross Amount of Work done Rs.1,31,28,498.58
                   (Rs. One Crore Thirty One Lacs Twenty Eight

Thousand Four Hundred Ninety Eight and Paise Fifty Eight only) The case of extension of time was granted without levy of compensation, as there was no delay on

the part of the contractor.

sd/-

(S.GURBANI) Executive Engineer East Zone-3 Dilshad Garden, Delhi Development Authority 04/05/91"

19. The cross-examination of the Claimant dated 20th March, 2004 by the

Respondent before the learned arbitrator is also apposite. The relevant portion is

as follows:-

"Q-4. How do you say that you were forced to sign no claim certificate?"

The answer is:

"I was told by the then Superintending Engineer that unless and until this undertaking is given and no claim certificate is signed he would not sanction the E.O.T. (Extension of time) without levy of compensation".

20. Further, vide Clause-2 of the Agreement between the parties, in the case of

delay attributable to the contractor, the DDA was entitled to impose penalty on

the contractor. If, as contended by the DDA, there had been delay on the part of

the Claimant/Contractor in the instant case, penalty would have been levied as per

Clause-2 and that would have come to about Rs.10 lacs. No penalty was levied or

sought to be levied. Therefore, clearly the delay was entirely attributable to the

DDA.

21. In the aforesaid backdrop, it is not difficult to appreciate that the DDA,

using its superior bargaining position and authority, obtained undertaking from

the Claimant. As already stated, the Claimant in his cross-examination before the

learned Arbitrator, had clearly stated that he was forced to sign the 'No Claim

Certificate' under duress. Had he not signed the same, the extension of time would

not have been granted to him without levy of compensation and the whole matter

may also have entailed dis-qualification to the contractor, which would have

completely deprived him of his livelihood. Not a single witness was examined

from the side of the DDA to state that the delay was attributable to the Claimant,

or in any manner to controvert the statement made by the Claimant before the

learned Arbitrator in his affidavit dated 6.2.1992 as follows:-

"I was forced to give the undertaking as asked for by the Superintending Engineer, Civil Circle-III, DDA, Delhi without my free will and consent"

and further as follows:

"That he informed me he would grant necessary extension of time for completion of work upto 27.1.86 only if I give the undertaking 'We shall not claim any damages on account of delay in the completion of the work"

22. Viewed from any angle, in the instant case, when the final bill of the

claimant had not been paid for a long time and the Respondent-DDA did not pass

any formal order on the extension application, there appears to have been no other

course open to the claimant except to give an undertaking on 31.3.1987 that he

would not claim any damages on account of delay in the completion of the work.

23. In view of the aforesaid, I have no hesitation in holding that the Claimant

had been forced and compelled to give the undertaking, which is not enforceable

against the Claimant. The learned arbitrator has noted that, the fact that the

impugned award in Claim No.2 had been deducted from the total claim of Claim

No.6 is not disputed, and further, that the quantum of claim in Claim No.6 is also

not seriously disputed. The learned arbitrator has further observed that with

reference to the claim of interest it was not disputed that in case the Claimant is

held to be entitled to the claim, he would be entitled to pendente lite and future

interest.

24. The challenge to the validity of the impugned award accordingly fails and

the Objection Petition preferred by the Respondent/Objector is, therefore,

dismissed. There will be no order as to costs.

REVA KHETRAPAL, J.

FEBRUARY 20, 2009 dc