Dda vs M/S. Jagan Nath Ashok Kumar
2009 Latest Caselaw 212 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

+                      FAO(OS) NO. 440/1996

%                  Date of Decision : 21.01.2009

             DDA                                   ..... Appellant
                              Through:  Ms. Monica Sharma,
                                   Advocate.
                   versus

      M/S. JAGAN NATH ASHOK KUMAR                   ..... Respondent
                          Through:          NEMO.


CORAM:
HON'BLE MR. JUSTICE MUKUL MUDGAL
HON'BLE MR. JUSTICE VIPIN SANGHI

1. Whether the Reporters of local papers may be
   allowed to see the judgment?

2. To be referred to the Reporter or not?                    Yes


3. Whether the judgment should be reported in the            Yes
   Digest?


%                           JUDGMENT (Oral)

MUKUL MUDGAL, J.

1. This appeal challenges the judgment of the Learned Single Judge

dated 21.05.1996, by which judgment the Learned Single Judge

affirmed the arbitrator's award by directing the appellant herein DDA

to pay the respondent a sum of Rs. 4,72,637/- with interest @ 12% p.a.

from 02.08.1984 till the date of payment.

2. Learned counsel for the appellant has assailed the judgment of

the Learned Single Judge in respect of Claim No.4 and Counter Claim

No.2 on the basis of Delhi Development Authority v. Sudhir

Brothers 1995(2) Arb. L.R. 306.

3. The appellant has contended, and in our view rightly, that Claim

No. 4 and Counter Claim No.2 were both excepted matters since they

pertained to the levy of damages by the Superintending Engineer

under clause 2 of the Agreement. The decision of the Superintending

Engineer was final and could not be arbitrated upon. The only remedy

available was to approach the civil Court. This aspect is squarely

covered by the aforesaid judgment.

4. The relevant para 4 and 6 of the judgment reads as follows:

"4. Our attention has been drawn to the arbitration clause and also the relevant clause which relates to exclusion of certain matters from the purview of arbitration. The relevant clause 2 in the arbitration agreement deals with the question of compensation and directs that the concerned engineer should decide this question and his decision is final. The arbitration clause opens with the words "Unless otherwise provided". In view of this language, it is obvious from the decision of the Supreme Court in Vishwanath Sood v. Union of India and another, that the Arbitrator could not have gone into the merits of the levy of compensation by the engineer. In that view of the matter, the D.D.A. ought not to have requested the Arbitrator to include the said amount in the arbitration award. We are told by the counsel for the appellant/D.D.A. the Arbitrator was in fact informed that he could not go into the matter on merits. In any event, the D.D.A. committed a blunder in requesting. Arbitrator to formally include the above said amount as part of the award. Taking advantage of the said request, the contractor argued the question of levy on merits and obtained a decision from the Arbitrator in his favour.

6. It will, therefore, be for the D.D.A. to seek to recover the said amount of Rs. 5,69,743/- in whatever manner it is open to it and in case any such proceedings are taken, it will be open to the contractor to raise all defences that may be open to him in law to contend that the levy is bad. In case, the D.D.A. seeks to recover the said amount of compensation from the contractor it will be open to the contractor to file a suit and raise all such

contentions as he may deem fit. We make it clear that the question of limitation will not be raised by either of the parties, in view of the above unfortunate procedure adopted by both parties."

5. Accordingly, in so far as the award relates to Claim No. 4 and

Counter Claim No.2, it is set aside and the judgment of the Learned

Single Judge is modified to that extent.

6. Learned counsel for the appellant then assailed the award on

Claim No.10. The said claim had been made for Rs. 6 lakhs towards

damages on the ground that the appellant DDA had failed to discharge

its responsibilities like handing over site, giving decisions and drawings

in time and issuing essential materials like cement, door shutters,

pipes etc resulting in prolongation of period of execution of works.

Damages were claimed on account of incurring Establishment

Expenditure, Overheads and Tools & Plant hire charges. The learned

Arbitrator made an award to the tune of Rs.3,20,500/- as damages

under this claim. The submission of learned counsel for the appellant is

that the learned Arbitrator had made the award in respect of claim

no.10 in contravention of the contractual term contained at page 42

which reads :-

"If part of 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."

7. Learned counsel for the appellant does not dispute the position

that before the Arbitrator, the appellant had not set up a defence

founded upon the aforesaid clause in the agreement. A perusal of the

award shows that the defence of the appellant was that all decisions

and material were given to the respondent-claimant as per the

requirement of work. The work was progressing slow because of the

inability of the respondent-claimant to push the progress of the work.

The appellant had sought to rely upon the notice issued to the

respondent by the Competent Authority as per clause 2 of the

agreement by its Superintending Engineer on the basis that the

respondent was responsible for the delay in completion of the work.

8. The afore-extracted clause, even if it is assumed to form part of

the agreement to become operative required the existence of a factual

foundation, namely, the existence of "some unavoidable delay in

supply of material stipulated by the department". As noticed

hereinabove the stand of the appellant before the Arbitrator was not

that there was any delay on its part, much less unavoidable delay. The

appellant had sought to put the entire blame for the delay on the

respondent-claimant. However the Arbitrator had returned a reasoned

finding based on the record that the delay was attributable to the

appellant. If the appellant was so minded, it ought to have taken the

defence before the Arbitrator about the existence of unavoidable delay

in supply of material and should have explained the circumstances

which made the delay "unavoidable". Had such a defence been taken,

the respondent would have had the opportunity to deal with the said

defence. However, the appellant has not even laid the factual

foundation for invoking the aforesaid clause in the agreement before

the Arbitrator. In this view of the matter, we are of the opinion that the

learned Arbitrator cannot be faulted for not having adverted to the

aforesaid clause of the agreement. Consequently we reject the

objection of the appellant in respect of claim no.10.

9. Learned counsel for the appellant has sought to place reliance

upon Steel Authority of India Limited V. J.C.Budharaja,

Government and Mining Contractor, 1993(3) Arb.LR 335(S.C) and

in particular to paragraph 15 of the said decision. The same is

reproduced hereinbelow:-

"15. Clause 32 of the agreement specifically stipulates that no claim whatsoever for not giving the entire it on award of work and for giving the site gradually will be tenable and the contractor is required to arrange the working programme accordingly. Clause 39 further stipulates that no failure or omission to carry out the provisions of the contract shall give rise to any claim by the Corporation and the contractor, one against the other, if such failure of omission arises from compliance with any statute or regulation of Government or other reasons beyond the control of either the Corporation or the Contractor. Obtaining permission from Forest Department to carry on the work in wild life sanctuary depends on statutory regulations. Clause (vi) of General condition of the contract also provides that failure or delay by the Corporation to hand over to the Contractor possession of the lands necessary for the execution of the work or any other delay by the Corporation which due to any other cause whatsoever would not entitle to damage or compensation thereof; in such cases, the only duty of the Corporation was to extend the time for completion of the work by such period as it may think necessary and proper. These conditions specifically prohibit granting claim for damages for the breaches mentioned therein. It was not open to the Arbitrator to ignore the said conditions which are binding on the contracting parties. By ignoring the

same, he has acted beyond the jurisdiction conferred upon him. 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. In the present case, it is apparent that awarding of damages of Rs.11 lakhs and more for the alleged lapses or delay in handing over work is, on the face of it, against the terms of the contract."

10. From the aforesaid it would be seen that the clauses considered

by the Supreme Court in that case were materially different from the

clause relied upon by the appellant. Moreover it does not appear from

the said decision that the reliance upon the clauses was placed for the

first time before the Court hearing the objections to the award and not

before the Arbitrator himself. In our view the said decision, therefore,

does not come to the aid of the appellant.

11. The only other challenge raised by the learned counsel for the

appellant is in respect of claim no.1, 11 and counter-claim no.1. The

respondent-claimant had raised a claim of Rs.8 lakhs towards final bill.

Related to this claim, counter-claim no.1 of the appellant was for

Rs.8,02,341/- on account of final bill, to be recovered from the

claimant. Under Claim No.11, the claimants/respondents made a claim

towards illegal deduction made for several items as per the record of

the appellant department. These claims were dealt with together by

the learned Arbitrator. The submission of the appellant before the

Arbitrator was that the Superintending Engineer, in exercise of his

rights under clause 25-A of the agreement had reduced the rates by

Rs.9,24,447.44. The case of the appellant before the Arbitrator was

that the said reduction in rates was not arbitrable since the decision of

the Superintending Engineer under Clause 25 A was final. From the

award, it appears that the learned Arbitrator took note of Clause 25A

and the aforesaid submission of the appellant.

12. The Arbitrator considered the aforesaid objection of the

appellant. However in the light of Clause 14 of the agreement, which

obligated the appellant to issue a notice to the respondent-claimant in

the event of the work of the contractor being found to be sub-

standard, the learned Arbitrator concluded that the appellant had not

followed the due procedure to invoke clause 25-A of the agreement

inasmuch as no notice under Clause 14 had been issued to the

respondent Contractor. The learned single Judge has accepted the said

decision given by the learned Arbitrator. The submission of learned

counsel for the appellant is that resort to Clause 14 of the agreement

was misplaced since the said Clause was relevant only when the sub-

standard work is rejected by the Superintending Engineer and the

Contractor is required to rectify or remove the same altogether. It does

not apply to a situation where the sub-standard work is accepted as

such by the appellant, though on reduced rates as per the decision of

the Superintending Engineer, which is final.

13. Though the submission of learned counsel for the appellant may

be plausible, it cannot be said that the interpretation given by the

learned Arbitrator to the inter-play between Clauses 14 and 25A is not

equally plausible. It also seems reasonable to us to construe that a

prior notice of the work being sub-standard should be issued to the

Contractor in terms of either clause 14 or in terms of clause 25-A is

taken by the appellant. The Contractor is at least entitled to know that

his work has been found to be sub-standard and that he would have to

suffer consequences therefor. It is well settled that it is primarily for

the Arbitrator to interpret the agreement unless the interpretation

given by the Arbitrator is such that the same cannot be accepted at all

and is founded upon a principal contrary to law. The interpretation

adopted by the Arbitrator cannot be rejected, particularly, when it

expresses a plausible view.

14. For the aforesaid reason, we see no merit in this objection of the

appellant and reject the same.

15. The order dated 22nd March, 2006 reveals that the respondent

had stated that the entire payment under the award has been made.

In view of the aforesaid modification in respect of Claim No. 4 and

Counter Claim No. 2, it shall be open to the appellant to institute a civil

suit to make recovery in respect of its counter-claim no.2 founded

upon clause 2 of the agreement in terms of the decision of this Court in

Sudhir Bros.(supra).

16. With these directions, the appeal stands disposed of.

MUKUL MUDGAL, J.

VIPIN SANGHI, J.

JANUARY 21, 2009 dp