Videsh Samachar Nigam Ltd. vs Ess Kay Furnishers
2009 Latest Caselaw 2415 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

                Judgment reserved on:         21.05.2009
%               Judgment delivered on:        02.07.2009

+                         OMP No. 266/1999


      VIDESH SAMACHAR NIGAM LTD.                        ..... Appellant

                         Through:    MS. Rohana Hameed          with       MS.
                                     Shika Sarin, Advocates.

                               versus

      ESS KAY FURNISHERS                                ....Respondents
                         Through:    Mr. Anip Sachthey with Mr. Mohit
                                     Paul, Advocate.

CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI

1.    Whether the Reporters of local papers may                No
      be allowed to see the judgment?

2.    To be referred to Reporter or not?                       Yes

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

                            JUDGMENT

VIPIN SANGHI, J.

1. This is a petition under Section 34 of the Arbitration and

Conciliation Act, 1996 (for short `the Act) filed by the petitioner, Videsh

Sanchar Nigam Ltd whereby objections have been raised to the award

dated 12.5.1999 passed by the Arbitral Tribunal consisting of three

arbitrators in respect of the various claims raised by the respondent,

Contractor M/s. Esskay Furnishers, arising out of a contract for

carrying out interior renovation and allied civil, plumbing, fire fighting,

electrical, fire detection and furniture work for the petitioner, for which

the petitioner issued the work order on 10.9.1996. Clause 46 (There

are two consecutive clauses numbered as 46. The second of such

clauses is the Arbitration Agreement) of the conditions of contract

contains the arbitration clause under which disputes and differences

between the parties were referable to arbitration.

2. The starting date of work was 17.9.1986 and the stipulated

date of completion was 15.3.1997. The completion period was six

months. The value of the work as per the contract was Rs.52,22,081/-.

The work was not completed by the respondent. The contract was

terminated by the petitioner. The arbitration agreement was involved

by the respondent.

3. In terms of the arbitration agreement, both parties nominated

one Arbitrator each. Shri T.R. Takulia was nominated by the

respondent, S.K.Furnishers whereas Sh. Santosh Auluck was nominated

as the Arbitrator by the petitioner, BSNL. Sh. K. L. Sahgal was

appointed as the third and presiding arbitrator by the above named

two arbitrators.

4. As per the award the arbitration proceedings commenced on

7.5.1998. The arbitrators made their award on the various claims

preferred by the respondent and the counter claims preferred by the

petitioner on 12.5.1999. While the counter claims of the petitioner

were rejected in toto, the Tribunal awarded various amounts against

the claims preferred by the respondent.

5. The petitioner VSNL has raised objections to the award made

in respect of claim nos. 1,2, 3, 4, 9 and 10. The first submission of

learned counsel for the petitioner, Mr. Rishi Aggarwal is that the

Tribunal has dealt with "excepted matters" and has therefore acted

beyond its jurisdiction. He refers to a communication dated 15.5.1998

issued by the petitioner to the Tribunal specifically raising an objection

to the making of claims involving disputes falling under clauses 2, 4,

4(ii), 5, 7, 8, 10, 11, 12, 13, 15, 20, 21, 25, 29, 30, 31, 32, 33, 39 & 40

of the conditions of contract which fall in the category of "excepted

matters" as per clause no.46 (first of the two clauses with the same

number) of the agreement. His submission is that the Tribunal had,

while rejecting the petitioner‟s objection in this behalf given no

reasons, apart from ignoring and keeping out of consideration various

material documents which had a bearing on the aspect of arbitrability

of some of the claims.

6. At this stage it would be expedient to extract the relevant

portions of the two clauses from the conditions of contract, both

bearing no.46. The first clause speaks about "disputes to be

determined by Architect" whereas the second clause, which contains

the arbitration agreement begins with the heading "settlement of

disputes, arbitration".

"46. DISPUTES TO BE DETERMINED BY ARCHITECT The decision, opinion, direction, certificate or valuation with respect to all or any of the matters under clause 2, 4, 4(ii), 5, 7, 8, 10, 11, 12, 13, 15, 20, 21, 25, 29, 30, 31, 32, 33, 39, 40 hereof (which matters are herein referred to as excepted matters shall be final and conclusive and binding on the parties hereto and shall be without Appeal. Any other decision, opinion, direction, certificate or valuation of the Architects or any refusals of the Architects to give any of the same shall be subject to the right of Arbitration add review in the same way in all respects (including the provision as to opening the Reference) as if it were a decision of the Architect under Clause No.46."

"46. SETTLEMENT OF DISPUTE, ARBITRATION All disputes and differences of any kind whatever arising out of or in connection with the contract or the carrying out of works) whether during the progress of the works or after their completion, and whether before or after the determination, abandonment or breach of the contract) shall be referred to and settled by the Architects who shall state their decision in writing. Such decision may be in the form of a final certificate or otherwise. The decision of the Architect with respect to any of the excepted mattes shall be final and without Appeal as stated in clause No.45. But if either the CLIENT or the contractor be dissatisfied with the decision of the Architect or any matter question or the dispute of any kind (except any of the excepted matters) or as to withholding by the Architect of any certificate to which the contractor may claim to be entitled, then and in any such case either party (the CLIENT or the contractor) may within 28 days after receiving notice to such decision give a written notice to the other party through the Architects requiring that such matters in dispute be arbitrated upon. Such written notice shall specify the matters which are in dispute and such dispute or difference of which

such written notice has been given and no other shall be and is hereby referred to the arbitration and final decision of a single Arbitrator being Fellow of the Indian Institute of Architects to be agreed upon and appointed by both the parties or in case of disagreement as to the appointment of a single arbitrator, to the arbitration of two Arbitrators being both Fellows of the Indian institute of Architects one to be appointed by each party, which Arbitrators shall before taking upon themselves the burden of Reference appoint an Umpire. The Arbitrator, the Arbitrators or the Umpire shall have power to open up, review and revise any certificate, opinion requisition or notice, save regard to the excepted matters referred to in clause no.47 and to determine all matters in dispute which shall be submitted to him or them and of which notice shall have been given as aforesaid.

.................The submission shall be deemed to be a submission to Arbitration within the meaning of the Indian Arbitration Act 1940 or any statutory modification thereof.

.............................." (emphasis supplied)

7. From the above arbitration agreement it is seen that first the

matters were to be referred to the Architect for his decisions, and if

either of the parties was dissatisfied with the decision of the Architect,

then the same has to be referred to an Arbitral Tribunal. The parties

have, however, repeatedly emphasized that the Arbitral Tribunal shall

have no jurisdiction to rule on decisions of the Architect which are

treated as "excepted matters". The decisions/opinion/directions/

certificate or valuation of the Architect on specific matters, which are

considered as "excepted matters" have been enumerated in the first of

the two clauses numbered as 46.

8. The Tribunal issued a communication/order dated 3.8.1999 to

the parties purportedly containing its decision on the issues raised by

the petitioner in their submission of 15.5.1998. The Tribunal observed:

".............Under the contract clause 46 provides for Arbitration in case of dispute between the parties. The claimants did not receive any satisfactory reply from the Architect regarding the various points raised by them. Therefore, both the parties nominated their Arbitrators and they in turn under Section 11(3) of Arbitration and Conciliation Act, 1996 appointed Mr. K.L.Sahgal as the Third Co- Arbitrator who shall also act as the presiding arbitrator.

Under Chapter IV Section 16 of the Arbitration and Conciliation Act 1996, the Arbitration Tribunal is competent to decide its jurisdiction to deal with matters which may be referred to by the Claimants and the respondents (Claims & Counter Claims).

After considering all the aspects of the Contract Agreement and the provisions of Arbitration and Conciliation Act 1996, the respondents contention is not accepted." (emphasis supplied).

9. The Tribunal reiterated its position on 20.1.1999 that it "will

deal with all the claims & counter claims of the claimant &

respondents. It is once again reiterated that due to the nature of the

dispute between the parties all the claims & counter claims will be

considered on merit which will form part of the Tribunal's Award as per

Arbitration and Conciliation Act, 1996. The respondents contention is

not accepted."

10. Mr. Aggarwal, learned counsel for the petitioner submits that

the Tribunal, despite these specific objections being raised by the

petitioner on the ground that the claims raised by the respondent were

"excepted matters" and therefore, not arbitrable, did not give a

reasoned finding on the same as to why it considered the issues as not

falling within the category of "excepted matters". He submits that

even in the final award made by the learned arbitrators, though the

Tribunal has recorded the factum of the aforesaid objection being

raised, it does not disclose its reasons for its conclusion. The Tribunal

merely reiterated its position contained in its communication dated

3.8.1998. He submits that on this short ground alone, the award is

liable to be set aside as "excepted matters" have been dealt with in

the award by the Tribunal.

11. To further elaborate on his aforesaid objection, Mr. Aggarwal

has referred to the various clauses of the conditions of contract, the

disputes in respect whereof are "excepted matters". Mr. Aggarwal

submits that clause 2 of the conditions of contract which deals with the

"scope of the contract" obliges the Contractor to carry out and

complete the works in accordance with the contract and the directions

issued by the Architect, and to the satisfaction of the Architects. The

Architects had absolute discretion to issue further drawings and or

written instructions etc, collectively referred to as "The Architects

Instructions" from time to time. Clause 4 deals with the

"Discrepancies" and sub-clause (ii) thereof states that if there are

varying or conflicting provisions made in any one document forming

part of the contract, the Architect shall be the deciding authority in

regard to the intention of the document. He refers to clause 25 of the

conditions of contract which, inter alia, states that "No claim for any

extra shall be allowed unless it shall have been executed under the

provisions of the clause or by the authority of the Architects...... Any

such extra is........ referred to as an authorized extra. No variations i.e.

additions, omissions or substitutions shall vitiate the contract........ The

rates of items not included in the schedule of Quantities shall be

settled by the Architects subject to final approval by the CLIENT". The

manner of arriving at the rates for additional, altered or substituted

work is also contained in clause 25.

12. Clause 31 of the Conditions of Contract deals with

Measurement of Works. It authorises the Architect to require the

parties to measure the work. The parties are obliged to attend or send

a qualified agent to assist the Architect in taking measurements and

calculations and to furnish all particulars. The measurements taken by

the Architect shall be taken as correct measurements of the work,

should the parties or either of them not attend or neglect or omit to

send their agent for measurements.

13. Clause 33 of the Conditions of Contract deals with "Certificate

& Payment". It provides that the respondent-contractor shall be paid

by the petitioner-client from time to time in instalments under interim

certificate to be issued by the Architects to the respondent-contractor

on account of the work executed, when in the opinion of the Architects

work has been executed in accordance with the contract. The

Architects have the power to withhold any certificate if the work or part

thereof are not carried out by the Contractor to their satisfaction. Sub-

clause (a) of clause 33, inter alia, states that the bills shall be

supported with measurements sheets indicating physical quantum of

work done and bills without measurement sheets will not be accepted

or paid for.

14. By reference to the first clause 46 of the Conditions of

Contract, Mr. Aggarwal submits that the decision, opinion, direction,

certificate or valuation of the Architect in respect of the aforesaid

clauses is final and falls within the "excepted matters".

15. He submits that claim no.1 raised by the claimant-respondent

and awarded by the Tribunal squarely fall within the "excepted

matters". Claim no.1 was made for Rs.18,91,653/- towards the

balance amount payable against bill no.2260 to 2265 dated 4.9.1997

i.e the 6th R.A. bill R/49. Mr. Aggarwal submits that the Architect had

approved the 4th RA Bill No.2223 to 2243 dated 9.6.1997 on 18.7.1997

by issuing the requisite certificate dated 24.6.1997. The same forms

part of the arbitral record as R/41 and is even referred to in the

impugned award. He further submits that the Architect had approved

the rate for extra framing members for partitioning and paneling vide

R/30A dated 31.7.1997 (also referred to in the award). The total

amount payable towards the 4th RA bill including the amount payable

for additional framing was worked out by the Architect at Rs.2,61,619/-

as is evident from R/30A (referred to in the Award). He submits that

the admitted position was that the quantities of all the items in the

said 6th R.A bill were the same as that of the earlier bill i.e. the 4th R.A

bill, except in respect of item nos. 9 and 12 of the civil works. The

quantities in respect of item no.9 and 12 were indicated in the

measuring sheet submitted by the respondent along with the 6 th RA

bill. In this regard reference is made by Mr. Aggarwal to the hand-

written measurement sheet forming part of the 6th R.A bill of the

respondent wherein the respondent stated as follows:-

"The quantities of all the items of this bill is same as of our earlier bill except of item no.9 & 12 of civil.

The measurement detail of item no.9 & 12 of civil of our bill raised is as below:-

It is also hereby informed that the total quantities of the partition, paneling etc. raised in this bill is same as raised in our earlier bill only its execution stage has varied.

Item No.9 of our bill no.2260 to 2265.

Providing and installing „S‟ strap, 1st class white ceramic, Indian type Orissa Pan W.C.

             Gents toilet       -     1 no.
             Ladies toilet      -     1 no.
                                      2 nos.

             Item No.12 of our bill no.2260 to 2265:-


             Providing/Fixing anodized/powder         coated
            aluminium windows.

            Internet Room     - 4x3‟11" x 4‟0" = 62.56
                                               = 5.82
                                                sq.mt."

16. Mr. Aggarwal submits that since the quantities in the 6 th RA

bill remained the same as that contained in the 4th RA bill, and the 4th

RA bill had been finalized by the Architect and the decision of the

Architect in respect of the 4th RA bill was not even challenged, the

respondent could not have raked up the decision of the Architect in

respect of the 4th RA bill by merely re-submitting the same by calling it

the 6th RA bill. He submits that the 6th RA bill dated 4.9.1997 did not

accompany measurements. It was not a proper bill as it contravened

clause 33(a) of the contract. He submits that the Architect had given

his decision in respect of the 6th RA bill of the respondent on 8th

September, 1997 vide R/50 i.e. within two days of it being received.

The Architect had specifically pointed out that the respondent was

required to submit all the measurement sheets. He submits that the

Architect once again gave his decision on the 6th RA bill on 2.4.1998

vide R/78 stating that on their checking of the bill it was observed that

the respondent-Contractor had not carried out the work as claimed by

it. The Contractor had billed the full rate of items which were partially

not carried out or not carried out at all. The Contractor had not

provided and fixed aluminium windows in internet room. Quantity of

aluminium windows measured after receipt of the 6th RA bill was found

to be the same as measured during joint measurements with the

Contractor when the 4th RA bill was checked. The Architect further

gave a finding:

"On the balance items, already billed and certified in the 4th RA bill, we do not find any change in "execution stage". In fact the contractor has not rectified bad workmanship or replaced defective materials. This is despite Mr. Kumar‟s assurances.

In view of the above, we do not find any change in status of payment for the 6th RA bill viz. 4th RA bill and our subsequent recommendation for extra framing, refer our letter dated 31st July, 1997. Our comments in the 4th RA bill hold good for the 6th RA bill. We cannot recommend any additional payment for this 6th RA bill than that recommended for the 4th RA bill."

17. Mr. Aggarwal submits that the Tribunal overlooked these two

crucial documents, viz. R/50 and R/78, the non-consideration whereof

has had a material bearing on the decision of the Tribunal on the issue

of non-arbitrability of the respondent‟s claim, as the issues covered by

this communication had attained finality and were not arbitrable. He

submits that non consideration of vital documents by the Tribunal

vitiates their award as being illegal. Mr. Aggarwal submits that the

decisions of the Architect predates the reference to arbitration. He

submits that the respondent contractor had abandoned the work on

24.9.1997. The contract was terminated by the petitioner on

26.11.1997 vide R/62. On 5.12.1997, vide R/65, the Architect furnished

the recording of the joint measurements. He also recorded that the

joint measurement had been done in the presence of the respondent‟s

representative, Sh. L.B. Pandey. The arbitration was invoked by the

respondent by an antedated communication dated 26.11.1997 (the

same date on which the agreement was terminated by the petitioner)

raising its claims against the petitioner. Mr. Aggarwal submits that the

Tribunal also failed to consider the measurements recorded by the

Architect vide R/65, a material document and consequently failed to

see that the decision of the Architect with regard to the 4th RA bill, the

6th RA bill, and the measurements of the work done by the respondent

contractor was final and constituted "excepted matters" under the

aforesaid clauses of the Conditions of Contract. The Tribunal had

either not given any reasons for its view that these decisions of the

Architect did not constitute "excepted matters" or the reasoning given

by the Tribunal is totally fallacious and unsustainable in the face of the

record.

18. He further submits that the Architect had approved the rate

for extra framing members for partitioning and framing members of

paneling vide R/30A dated 31.7.1997. Though this document is even

referred to in the award, the Tribunal has acted contrary to the

contractual terms by disregarding the rates finalized by the Architect

(which was an "excepted matter") and by arriving at their own rates of

the said additional works.

19. The submission of the learned counsel for the respondent in

answer to the aforesaid submission that claim no.1 falls within the

scope of "excepted matters" is that in spite of various letters including

the letters dated 3.10.1997 and 15.10.1997 (neither of which are

referred to in the Award), the Architect did not take any decision.

Learned counsel for the respondent submits that on account of the

failure of the Architect to take any decision on the 6th R.A Bill, the

disputes were referable to arbitration. The respondent had no other

option but to send a letter on 26.11.1997 to the petitioner invoking the

arbitration clause and requesting for appointment of an Arbitrator. The

respondent further submits that it did not receive any satisfactory

reply from the Architect regarding the various issues raised by it. The

Architect was not even in the country for a considerable period of time

and sent a fax message dated 1.11.1997 from Australia for termination

of the respondent‟s contract vide R/7N.

20. Having heard learned counsel for the parties and perused

the record, I am of the view that the finding of the learned Arbitrators

that the claims arising out of the 6th RA bill dated 4.9.1997 were

arbitrable is patently illegal and therefore unsustainable, and the

approach of the Tribunal is such as to would shock the conscience of

the Court. The finding is without any germane reasons and various

documents brought on record of the Tribunal by the petitioner, having

a material bearing on the said finding have been completely ignored

by the Tribunal.

21. First and foremost, the decision of the Tribunal contained in

the two orders passed by it dated 3.8.1999 and 20.1.1999 whereby the

Tribunal concluded that it would deal with all the claims and counter

claims of the parties, is wholly without any reason. In D.D.A V.

Sunder Lal Khatri, 2009(157) DLT 555, a Division Bench of this Court

(to which I was also a party) examined the issue as to what constitutes

reasons in an award. The Court relied upon an earlier Division Bench

decision in College of Vocational Studies V. S.S. Jaitley, AIR 1987

Delhi 134 wherein it was observed:

"19. ..................... Where under an agreement the arbitrator is required to give reasons for his award, he is not required to give a detailed judgment or detailed reasons. By reasons it means that the award should be speaking one. In the reasoned award what is expected from the arbitrator is that he should indicate his mind whereby it can be ascertained as to how he has arrived at a particular conclusion. In case of reasoned award, the arbitrator is required to indicate the trend of his thought process but not his mental meanderings, the purpose of commercial arbitration, being speedy certainly and a cheaper remedy. When the finding of the arbitrator is based on no evidence, then certainly the Court can go into such finding and set aside such an award as being perverse. The arbitrator is entitled to decide rightly or wrongly but if an error of law appears on the face of the award, then the Court can interfere and set aside the award." (emphasis supplied).

22. .......................... No doubt the arbitrator is not required to give the detailed reasons but the requirement is that he must indicate his mind as to how he has arrived at a particular finding. We are not examining the

reasonableness of the reasons, but whether the Arbitrator has given any reason.

28.............. Reasons are the links on the material, documentary or oral evidence, adduced before the arbitrator, on which certain inferences are drawn and conclusions are made. There must be some rational nexus between the two indicated in the award. The arbitrator may not set out every process of reasoning or may not deal with every point raised but must, when he is called upon to give reasons, to tell the „reason‟ why he came to the particular conclusion.............."

22. The Court held:

"It is the obligation to give reasons cast on the Arbitrator, which provides parties with comfort and assurance that the award would be free from arbitrariness, illegality, non-application of mind and corruption. This obligation is all the more essential as there are very limited grounds for interference with the arbitrator‟s award. Such an assurance becomes all the more pertinent where the parties have, while entering into an arbitration agreement, not named a specific individual person/persons to act as arbitrator(s). Therefore, when such an obligation is cast on the Arbitrator he cannot, only partly, discharge this obligation, and choose not to give reasons in respect of some part or aspects of the award. Merely because parties may have contractually agreed to resolve their disputes through arbitration, it does not mean that they are not entitled to be informed of the reasons on the basis of which the Arbitrator makes the award, and that they should suffer "clueless" as to the reasons why they have been condemned by the arbitrator, particularly where they have expressly made it obligatory for the Arbitrator to give a reasoned award."

23. The only "reason" found in the communication/order dated

3.8.1999 of the Tribunal is that the respondent did not receive any

satisfactory reply from the Architect regarding the various points

raised by him. But is that enough to clothe the arbitral tribunal with

jurisdiction to deal with disputes falling within falling within "excepted

matters"? On a plain reading of the arbitration clause, the answer is

an emphatic "No". Similarly, in the communication dated 20.1.1999,

all that the Tribunal states that it will deal with all the claims and

counter claims "due to the nature of the dispute between the parties".

This cannot be considered to be any reason in the eyes of the law. The

Tribunal has not indicated its mind to show as to how it has arrived at

the conclusion that claim no.1 does not fall within "excepted matters".

Even the trend of the though process of the tribunal has not been

indicated to show how the conclusion about arbitrability of claim no.1

was reached in the face of the above extracted two clauses bearing no.

46 and others which have been referred to earlier. There is no "link"

established by the Tribunal between the contractual terms, the facts of

the case and its conclusion that all disputes/ claims/ counter-claims

would be examined by it despite the two clauses extracted above.

24. The Tribunal has simply ignored and brushed aside the

following material brought on record by the petitioner;

(a) The decision of the Architect dated 18.7.1997 R/41 certifying for

payment the 4th RA bill no.22223 to 2243 dated 9.6.1997 which

remained unchallenged. This document, though referred to in

the award, has not been commented upon by the Tribunal.

(b) The admitted position that the 6th RA bill dated 4.9.1997 was

raised by the respondent wherein the quantities of all the items

except in respect of item nos. 9 and 12 of the civil works were

the same as those of the earlier bill. The hand written and

signed admission of the respondent -claimant forms part of C-58

which is the 6th RA bill dated 4.9.1997 submitted by the

respondent;

(c) The Architects decision with regard to the rates for

additional/extra items namely extra framing members or

partitions and paneling dated 31.7.1997 R/30A. This document

though referred to, has not been dealt with by the Tribunal.

(d) The decision of the Architect on the 6th RA bill dated 8.9.1987

contained in R/50 and dated 2.4.1998 contained in R/78 whereby

the Architect certified that no further additional payment for the

6th RA bill other than that recommended for the 4th RA bill is

being recommended as there was no change in the execution

stage from the 4th RA bill. Both these crucial documents have

not even been considered by the Tribunal while making the

award.

(e) The joint measurements taken by the Architect in the presence

of the claimant/respondents representative, Sh. L.B. Pandey on

5th December, 1997 contained in R/65. In the award made by the

Tribunal, the issuance of the aforesaid certificates by the

Architect in the light of the contractual terms has been

completely ignored by the Tribunal.

25. There is merit in the submission of the learned counsel for

the petitioner that the certification of the 4th RA bill and the 6th RA bill

by the Architect vide R/50 and R/78, under clause 33 of the Conditions

of contract was final and the same constitute an "excepted matter"

under clause 46, (the first clause with the same number) of the

conditions of contract. Similarly, the measurements contained in R-65

dated 5.12.1997 certified by the Architect was final and binding under

clause 31 of the conditions of contract and constituted an "excepted

matter". The rates for extra item/extra work in respect of the extra

framing members for partitioning and paneling was certified by the

Architect vide R/30A dated 31.7.1997 and the same was final, binding

and an "excepted matter" by virtue of clause 25 read with the first

clause 46 of the conditions of contract.

26. The reasoning given by the Tribunal that the respondent-

contractor did not receive a "satisfactory reply" from the Architect and

therefore was entitled to invoke arbitration needs only to be stated to

be rejected. The fact that the claimant/respondent found the reply of

the Architect to be unsatisfactory only meant that it was open to the

respondent-contractor to dispute the certification of the Architect in a

civil proceeding and not in arbitration. Once the contractual terms

provided that the decision of the Architect in respect of certain matters

was beyond the pale of arbitration, merely by labeling the decision of

the Architect as "unsatisfactory", the Arbitral Tribunal could not invest

itself with the jurisdiction to go into the same. The fact that on the

invocation of the arbitration agreement by the respondent/claimant,

the arbitral Tribunal was constituted with the participation of the

petitioner also does not lead to the conclusion that the petitioner

waived its objection with regard to maintainability of any of the

claimants/disputes as being beyond the jurisdiction of the arbitral

tribunal on account of being "excepted matters".

27. The arbitral Tribunal in its award notices that as per R-12

dated 20.9.1996, the consultancy contract of the Architect was

cancelled simultaneously with the termination of the respondent‟s

contract on the same date. The Tribunal observes that even after the

cancellation of the consultancy engagement of the Architect, he

continued to be associated with the work but actually for all intents

and purposes he had no control over the job. The Tribunal also holds

that the cancellation of the consultancy of the Architect was not

withdrawn. Therefore he could not co-ordinate the job for re-

measurement of works.

28. Pertinently, the Tribunal acknowledges that even after the

issuance of the aforesaid letter of termination of the Architect‟s

engagement he continued to be associated with the works. However,

there is no basis to be found on record, and none has been shown by

the respondent to exist for the Tribunal to come to the conclusion that

the Architect had "actually for all intents and purposes he had no

control over the job". There is a patent error in the award, inasmuch

as, the Tribunal observes that the letter of cancellation of consultancy

was not withdrawn and therefore the Architect could not co-ordinate

the job of measurement of works. As pointed out by learned counsel

for the petitioner, the engagement of not only the respondent but also

the Architect was restored on 26.9.96/3.10.96 by a common

communication R/14, addressed to the respondent-contractor and to

the Architect. By this communication the petitioner withdrew their fax

VSB/ND/PROJ-96/2nd floor dated 20.9.1996, which corresponds with the

letter of cancellation of engagement issued to both the

contractor/respondent and the consultant Architect. i.e. R/12. It

appears that with a view to somehow circumvent the certificates

issued by the Architect in respect of the 4th RA bill, the 6th RA bill and

the joint measurements recorded by him and the rates fixed by him for

the extra items/work, the Tribunal found the above line of reasoning as

an escape route. Astonishingly, the Tribunal did not even refer to

R/14. Non-consideration of a document of such vital importance by the

Tribunal, which led to the finding that the Architect had no control or

jurisdiction over the respondents contractual work cannot be sustained

and the said omission clearly vitiates the award of the Tribunal in so far

as the claims were barred being "excepted matters".

29. The Tribunal also observes that copies of letter (without

specifying which letter has been referred to) between the respondent

(petitioner herein) and the Architect were not sent to the claimants

(respondent herein). The finding of the Tribunal that copies of letters

exchanged between the respondent and the Architect were not sent to

the claimants also appears to be totally unfounded as the respondents

has not pointed out any such material document from the record.

Pertinently no finding has been returned that the communications

exchanged between the Architect and the petitioner herein were false

or fabricated for the purpose of opposing the claims made by the

respondent. Their genuineness has not been questioned by the

Tribunal.

30. The Tribunal also observes that as per R-82 dated 2.5.1998,

the Architect issued the final certificate after reassessing the work.

This was after the arbitration proceedings had commenced. The

finding of the Tribunal that the certificate issued by the Architect was

irregular and uncalled for as it was issued after the initiation of

arbitration is contradicted by the Tribunal‟s own finding at page 3 of

the award that the proceedings commenced before the Tribunal on

7.5.1998. i.e. 5 days after the issuance of R-82. In any event, the

certificate dated 2.4.1998 issued by the Architect recommended that

no additional payment be made to the respondent as there was no

progress in the work between the raising of the 4th and the 6th RA bills.

31. In response to the reliance placed by the petitioner herein on

the Architect‟s certificate (R-82), the respondent-claimant, inter alia,

sought to urge:

"Final Certificate of the Architect or Engineer will be conclusive and binding on both parties if following conditions amongst others are complied with.

(a) There must have been no improper interference on the part of the Employer as to the giving of the certificate.

(b) It must be given during the existence of the power of the Architect or Engineer to give Certificate."

32. The claimant/respondent relied on R-18, R-30 and R-32

(referred to in the award) in support of his aforesaid submissions. It

was claimed by the respondent that the Architect was not paid his fees

by the petitioner to interfere with his duty to issue the certificate.

Pertinently, neither in the rejoinder dated 29.7.1998 filed by the

respondent-claimant to the counter statement of facts before the

Tribunal, nor in its reply dated 19.5.1998 to the letter of the petitioner

herein dated 15.5.1998 raising the objections to the jurisdiction of the

Tribunal to go into "excepted matters", the respondent-claimant made

any averment to the effect that there was improper interference on the

part of the employer i.e. the petitioner herein as to the giving of the

certificate, or that the Architect had not given the certificate during the

existence of his power. It cannot be appreciated how the Tribunal

proceeded to even examine the aforesaid pleas of the respondent-

claimant. The Tribunal notes that the VSNL was asked to give details

of payments made to the Architect which were produced as R-140.

The Tribunal gives a finding that a close scrutiny of R-140 proves the

point "without any shadow of doubt". The Tribunal comments on the

role/position of the Architect in the following words:-

"As per the Claimants both the conditions were not met since there was improper interference by the Employer. To prove his point the Claimants Counsel quoted paras 8 & 9 of R-18, last sentence of R-30, Para 8 & 9 of R-32. The Claimants case was that Architect was not paid his fees to interfere in his issue of the Certificate. On request from claimants counsel the Respondents were asked to give the details of payments made to the Architect. Which they did vide Exhibit No. R-140. A close scrutiny of R-140 proves this point without any shadow of doubt."

33. The Tribunal has referred to paras 8 and 9 of R-18. R-18 is a

communication dated 2.6.1997 by the Architect to the petitioner.

Paras 8 and 9 of this communication read as follows:-

8. We have major anxiety for our fees as we feel that we might not be paid for all the works done by us. We again request you to clear your side on.

(a) Fees regarding revision.

(b) Fees regarding curtailment of work due to contractors non-performance.

9. Today is 2nd June‟ 97 we await our payment."

34. Reference is also made to the last sentence of R-30. R-30 is

another communication from the Architect to the petitioner dated

22.7.1997. The last sentence of this communication reads as follows:-

"...... Till date all decisions have been taken by VSNL, now that there are problems with the contractor, we feel that VSNL wants to pass all responsibility and blame onto CONCEPT. This is not acceptable."

35. Similarly paras 8 and 9 of R-32 had been relied upon by the

Tribunal. R-32 is a communication dated 24.5.1997 from the Architect

to the petitioner. Paras 8 and 9 of this communication read as follows:-

"8. Please also note that we have made drawing related to all areas and we have also carried out revisions as and when required by VIDESH SANCHAR NIGAM LTD. We will NOT ACCEPT any reduction in our fees for areas being deleted. Our services are available only after written assurance from your end on this matter.

9. We are enclosing bill for our services we expect that this bill be cleared and paid immediately. "

36. The Tribunal records that the case of the claimant/respondent

herein was that the Architect was not paid his fees to interfere in the

issuance of the certificate. When and where this case was set up is

not stated. In fact, no such case has been set up in the pleadings

before the Tribunal. The Tribunal records that it called for the details

of payments made to the Architect which were filed as Exhibit R-140.

These documents merely provides the details of payments made by

the petitioner to the Architect in a tabulated form. This tabulation

reads as follows:-

      Date      Charges Gross           TDS      Net
                Rs.     Amount          Rs.      Payment
                        Rs.                      Rs.

      30.9.96   107690    90048         4502     85546

      22.08.97 113133     45023         2251     42772

      19.02.98 107976     31896         1595     30301

37. The Tribunal holds that on a "close scrutiny of R-140 proves

this point without any shadow of doubt".

38. A perusal of the extracts from R-18, R-30 and R-32 merely

shows that the Architect was demanding his professional fee from the

petitioner employer at various times. Far from showing a relationship

of a dominant entity and dominated person between the petitioner and

the Architect, the aforesaid documents show that the Architect was

functioning in a totally independent professional manner and was not

under any influence of the employer/petitioner. The documents also

do not show that the Architect was coerced into, and brought under

undue influence to issue a false certificate. I fail to understand as to

what is the "close scrutiny" to which the Tribunal resorted to in respect

of R-140 and how the said document proves this point without any

shadow of doubt". There is absolutely no reasoning given by the

Tribunal for arriving at a finding on an aspect which is not even

pleaded before it and had no factual basis whatsoever.

39. In any event, merely because a certificate has allegedly been

obtained by the employer by alleged exercise of coercion or undue

influence on the Architect is no ground for the Tribunal to discard the

certificate. Once issued, the certificate is final and binding and the

validity of that certificate was not open to challenge before the

Tribunal. The only remedy available to the claimant/respondent herein

was to challenge the certificate in appropriate civil proceedings on

whatever grounds were available to it. I find that the approach of the

Tribunal, its reasoning and its finding that the Architect functioned

under improper influence of the employer or under coercion or undue

influence while issuing the certificate R-82 is totally fallacious to say

the least. The conclusions reached by the Tribunal on the basis of the

aforesaid documents is such as no person could have reasonably

arrived at. The said finding, in any event, is totally devoid of any

reasons and therefore cannot be sustained. Reference may be made to

Jai Singh V. DDA, 2008(3) Arb.L.R.667 (Delhi). The Tribunal in

disregarding the certificate R-82 and the other certificates/decisions

issued by the Architect from time to time also acted beyond its

jurisdiction.

40. The discussion of the Tribunal leading to the finding that the

Architect acted under the influence of the employer makes an

appalling reading. It would be appropriate to extract from the

impugned award the relevant portion. The same reads as follows:-

"The role or position of the Architect is very clear from letters R-12 dated 20th Sept. 1996 (Cancellation of Consultancy) and R-111 dated 2nd May, 1997 as mentioned above. Moreover the Architect who was out of the country for a considerable period of time, sent a Fax message dated 1st November, 1997 (R/7N) from Australia for Termination of the Contract, without inspecting the works or knowing the ground reality. It is very obvious that he was only carrying out the respondents orders without applying his professional mind or knowledge. Billed item - Interior No. 4th RA/Bill was not allowed by the Architect under instructions from respondent R-41 letter dated June 24, 1997 from the Architect)."

41. R-111 is a communication dated 2.5.1997 issued by the

Architect to the petitioner-employer in response to the petitioner‟s

letter dated 30.4.1997. In this communication, the Architect stated as

follows:-

"We are extremely disappointed by the third paragraph of your letter by which you have mentioned that "in case this dispute continues then we shall have no other alternative than to go in for Technical examination through an independent body which may reflect poorly on you as architect as well as on the contractor.

We have always maintained that you should refer our documents, drawing and various revision asked by your office to an independent Technical examiner. We have suggest that let this independent Technical examiner point out defects/shortfalls in handling this contract and only after receiving such comment we should discuss the matter with the contractor.

As aspersions have been casted, we are not willing to proceed with any further discussion with the contractor till such time you repose your trust and confidence in us.

May we remind you that based on similar documents, we have successfully carried out works in your building on 4th Floor & Ist floor beside numerous other offices for various organizations. We now await your reply in the matter before we can take further action."

42. The portion extracted from R-111 displays the independent

character of the Architect and does not show any abdication of his

authority by the Architect to favour the petitioner. As aforesaid, there

is no basis for the said finding as it was not even the case pleaded by

the respondent-claimant that the Architect was acting under the

influence of the petitioner herein. R-41 is the decision of the Architect

on the 4th RA bill. This decision not being open to challenge in

arbitration, it was wholly beyond the jurisdiction for the Tribunal to

have commented on any aspect of the same. The Tribunal could not

have picked out one line out of context to arrive at a finding that the

Architect was only carrying out the orders of the petitioner herein

without applying his professional mind or knowledge. Neither the

petitioner herein nor the Architect were given notice of the said

material being used against them (as there was no supporting

pleadings) as has been done by the Tribunal. No opportunity was

given to them to either defend or explain their position, even if R-41 is

assumed to be a document impeachable before the Tribunal. This

approach of the Tribunal was patently illegal and in contravention of

the principles of natural justice.

43. The Tribunal observes that the basis for examination of claim

no.1 is the 4th RA bill, R-51. Pertinently, R-51 had already been

certified by the Architect and was never challenged by the respondent-

claimant. The measurements recorded by the Architect were not

signed by the claimant/respondent herein, though it is wrongly

recorded that the joint measurements were not signed due to

differences between the Architect and the respondents before the

Tribunal i.e the petitioner herein. There is no material or even an

averment found on record, and none has been pointed out to suggest

that the petitioner herein did not sign the measurements on account of

any differences with the Architect. This finding of the Tribunal has no

basis.

44. The Tribunal has then proceeded to award various amounts

against the itemized claims made by the respondent. The Tribunal has

given the finding that the claim made under claim no.1 has not been

denied on merits by the petitioner herein in their counter statement of

facts. Learned counsel for the petitioner points out that this finding of

the Tribunal is patently incorrect. On a perusal of the counter

statement of facts filed by the petitioner before the Tribunal it is seen

that in respect of claim no.1, apart from raising the objection that the

same is not arbitrable, being an "excepted matter", the petitioner had

given a detailed reply to the said claim and had fully denied the said

claim on merits. In fact the stand of the petitioner herein was that the

claimants had already been over paid by Rs.5,88,332/-. It is clear that

the award on claim no.1 in so far as it pertains to claims arising out of

the 6th R.A Bill R/49 as made by the Tribunal is also a result of non-

application of mind in as much, as, the Tribunal has not even cared to

peruse the stand of the petitioner herein as contained in their counter

statement of facts and has proceeded on the premise (which is

contrary to the record) that the petitioner herein had not denied claim

no.1 on merits.

45. A perusal of the award under each of these items shows that

the Tribunal has merely given its conclusion with regard to the

adoption of rates and quantities. There is absolutely no reason given

by the Tribunal in respect of the various items dealt with it beginning

from serial no.8 [tender serial no.6 to serial no.35 to serial

no.42(tender item 1 to 8)]. To illustrate the position, I may set out the

award made in serial no.8 (tender serial no.6), serial no.12 (tender

serial no.28.0) and serial no.13 (tender certificate no.29). The same

read as follows:-

"Serial No.8 (Tender Serial No.6)

Plastering old and new masonary work. Under this item quantity to be adopted is 191.77 sq.mtr instead of 59.42 sq.mtr. Extra amount to be paid Rs.11,249-75."

Serial No.12 (Tender Serial No.28.0)

Checking, Testing, extending and repairing C.I. Pipes. Under this item Rate to be paid is Rs.15,000/- per job and not Rs.12,000/- per job. Extra amount to be paid Rs.6,000-00.

Serial No.13 (Tender Serial No.29)

Checking, testing & extending and replacing of G.I lines. Under this for 2 jobs, the rate to be adopted is Rs.15,000/- per job instead of Rs.10,000/- per job. Extra amount to be paid Rs.10,000/-"

46. The award made by the Tribunal on items Sl.no.8, 12, 13, 16,

17, 18, 19, 20, 21, 22, 30, 32, 33, 34 and 35 is wholly without any

reasons. I may again refer to the decision in Sunderlal Khatri

(supra). The Division Bench approved the decision of this Court in

Anant Raj Agencies V. DDA, 76 (1998) DL747 wherein the Court had

held:

"11...............Although the arbitrator is not required to write a detailed judgment as is required in a court of law wherever he is required to give reasons for his award the arbitrator has to give reasons for his award. The arbitrator may not also set out every process of reasoning or may not deal with every point raised but he must set out the reasons as to why he has come to the particular conclusion. If the arbitrator while coming to his conclusions ignores some important documents that would also amount to misconduct which calls for interference by a court.

12. ....................... The arbitrator has held that there was no delay on the part of the petitioner in carrying out the work but the contract had to be extended as the work could not be completed and for such delay the petitioner cannot be blamed. The arbitrator has held that since there was no delay on the part of the petitioner the petitioner is required to be compensated for the additional expenditure

incurred by him. Although the arbitrator in his findings has not spelt out the nature of additional expenditure for which compensation has been awarded by him but on a reading of the award in respect of the said claim it appears that such additional expenditure was incurred by the petitioner on establishment and other over-heads. However, while assessing the compensation at Rs.1,03,661/- the arbitrator has not given any specific reasons or criteria as to how and on what basis he has assessed the compensation at Rs.1,03,661/- and that is left to surmises and conjectures by the parties and by the court. The counsel for the petitioner tried to give an Explanation for the aforesaid assessment relying on the claims statement of the petitioner. In the light of the submissions I have also perused the claim statement of the petitioner in respect of claim No.4 including the basis for claiming a sum of Rs.5,18,300/-. The Explanation sought to be given by the petitioner was also on the basis of the total amount of contract which was fixed at Rs.36,58,654/-. The arbitrator has not indicated his thought process in the aforesaid award as to how he has arrived at the aforesaid assessment. It is disclosed from the records that up to 17.5.1985 gross work executed by the petitioner was Rs.29,45,941/- as against the gross amount of the final bill in respect of the aforesaid contract of Rs.31,63,887/-. Thus the work to the tune of Rs.2,17,146/- was carried out after 17.5.1985. It is not indicated in the award of the arbitrator as to whether this important aspect was at all considered by the arbitrator. Thus I am constrained to observe that the arbitrator failed to give any discernible reason for arriving at the conclusion that the petitioner would be entitled to receive an amount of Rs.1,03,661/-. Since the arbitrator has failed to mention the basis on which he reached the aforesaid conclusion and also failed to set out the reasons and as to how he had acted to give the award in respect of the aforesaid claim, the award is liable to be set aside, which I hereby do.................."

47. The Division Bench held:

"The reason given by the Arbitrator that the delay was attributable to the appellant and not to the respondent would undoubtedly give the

Arbitrator the justification to examine claim no.4 on its merits. However, in our view, that cannot be said to be a sufficient reason to arrive at the computation of the amount awarded as damages. The obligation to make a reasoned award, in our view, would also include the obligation to give at least some reason in the award for arriving at the awarded amount. It should be discernible from a speaking award as to on what basis the Arbitrator has arrived at the quantification of the amount. No doubt, the Arbitrator is not expected to give detailed reasons or disclose the mathematical calculations in the award to demonstrate how the exact amount awarded has been worked out. Nevertheless, that would not relieve the Arbitrator of his obligation to, at least, indicate in the award the aspects, evidence and material taken by him into consideration while awarding any particular amount against any claim. It is not disclosed as to how the arbitrator has travelled the last mile-from the point he came to the conclusion that the respondent/claimant was entitled to claim damages on account of the delays and defaults of the appellant/DDA, to the point he arrived at the awarded amount of Rs.12.50 lakhs.

From the award of the Arbitrator, it is seen that the appellant had contended that the respondent had failed to produce any documents, and they had also failed to prove on record the actual damages suffered by them. In our view, it was obligatory for the arbitrator, particularly in the light of the aforesaid stand of the appellant, to have at least recorded his finding with regard to the documents and evidence produced by the respondent in support of this claim. It is also not clear whether he has accepted the documents/evidence, if any, produced by the respondent per se, or the same has been examined by him with due application of mind. We find the award of the Arbitrator to be totally unreasoned on the quantification of damages. Even if we assume that the delay is attributable to the appellant, no reason, much less, a worthwhile reason, has been given as to how the figure of Rs.12.25 lakhs has been

arrived at. Apart from saying that the documents have been carefully considered, no reference whatsoever has been made by any other documents by the Arbitrator. In our view, the Arbitrator‟s thought process for computing the damages is not discernible in the award itself. The facts of this case are para materia with College of Vocational Studies (supra). The failure to give reasons for computation of the awarded amount , in our view, constitutes legal misconduct on the part of the Arbitrator."

48. In my view, the aforesaid ratio is squarely applicable in the

facts of the present case. Consequently, the award made on items

Sl.No: 8, 12, 13, 16, 17, 18, 19, 20, 21, 22, 30, 32, 33, 34 and 35

cannot be sustained and is therefore set aside, firstly since the award

on these items/claims was barred being "excepted matters" and the

award is therefore made beyond jurisdiction and contrary to the

contractual terms and secondly, because there are no reasons to be

found for the award made on these items/claims. There are no reasons

given by the Tribunal for their decision to entertain all the claims of the

claimant and respondent despite the objection with regard to their

non-arbitrability being raised by the petitioner. Moreover, the Tribunal

has conveniently ignored various crucial and material documents

brought on record by the petitioner which establish the fact that the

Architect had carried out measurements, and given their decisions on

the 4th & 6th R.A. bill and final rates for additional items, all of which

were "excepted matters". The failure of the Tribunal to consider all

such documents renders the award illegal as it would constitute the

infraction of its mandate by the Tribunal. Reference may be made to

para 17 of Hindustan Lever Ltd. V. Shiv Khullar, 2008 (2) Arb.L.R.

42.

49. The award on additional item serial no.47 for additional

framing of partitions and serial no.48 for additional framing of paneling

has been made by the Tribunal for Rs.7,84,900/- and 3,16,806/- in

complete ignorance of the rates fixed by the Architect on 31.7.1997

vide R/30A, clause 25 and clause 46 (first of the two clauses) of the

conditions of contract. The decision of the Architect contained in

R/30A was final and binding and an "excepted matter" and could not

have been ignored or overridden by the Tribunal. The Tribunal has

sought to arrive at its own conclusion of rates for these two additional

items which is wholly beyond jurisdiction. Reference in this regard

may be made to DDA V. Jagannath Ashok Kumar, 2009 (1) Arb.L.R

235 and Rajasthan State Mines & Minerals Ltd. Vs., Easterns

Engineering P.Ltd., 1999(9) SCC 283. The award made on additional

items Sl.No.47 and 49 is accordingly set aside.

50. The award does not disclose the consideration by the

Tribunal of the recording of joint measurements done by the Architect

on 5.12.1997 R/65. Pertinently the Tribunal rejects R-82 dated

2.5.1998 on the ground that the Architect had written the said

document after the initiation of arbitration. However a perusal of the

said documents shows that the Architect merely reiterated his

measurements taken on 5.12.1997 vide R/65. The measurements of

5.12.1997 are clearly an "excepted matter" and could not have been

disregarded by the Tribunal while making its award on the various

itemized claims.

51. The Tribunal has awarded the refund of the earnest money of

Rs.35,000/- and the security deducted by the petitioner of

Rs.1,56,204/-. No specific objection has been raised to this part of the

award. Accordingly, the same is maintained.

52. So far as claim no.2 is concerned, the same was made to

claim interest on the amount awarded under claim no.1. The rate of

interest awarded by the arbitral tribunal is 18% per annum. In my view

the rate of interest as awarded by the Tribunal is on a much higher

side considering the fact that the rate of inflation and lending has

considerably fallen over the years. The same is therefore reduced to

12% per annum till payment. The same shall be payable on the

reduced amount now payable under claim no.1 from the date of

termination of the contract i.e. 26.11.1997 till payment.

53. So far as claim no.3 is concerned, the same had been made

by the respondent towards the price of the material left at the site at

the time of termination of the contract of 26.11.1997. The case of the

respondent was that the respondent was not permitted to remove the

materials. It is clear that even according to the petitioner, the

respondent contractor was entitled to remove the materials. This is

clear from their letter dated 6.4.1999 referred to in the award itself. It

also appears that when the respondent approached the petitioner for

removing of materials, the petitioner did not permit removal of all the

materials as P Boards were required by the petitioner for carrying out

the balance works. The fact of the matter is that the respondent was

either prevented or did not collect the materials lying at site.

Ultimately, the petitioner has utilized the materials lying at the site. In

my view the Tribunal has applied its mind and given its reasons for

allowing the said claim for an amount of Rs.6,50,000/- and the finding

of the arbitrators in this regard appears to be sound.

54. Claim no.4 is the interest awarded by the Tribunal on the

awarded amount under claim no.3. Here again I find that the Tribunal

has competed interest at the rate of 18% per annum and quantified

the same at Rs.50,000/-. Since the appropriate rate of interest in my

view should have been 12% per annum the amount awarded under

claim no.4 would stand reduced. The interest would be payable w.e.f.

26.11.1997, the date of termination of the contract till realization or

payment.

55. The next objection raised by the petitioner is in relation to

claim no.9. The respondent has claimed Rs.4,89,374/- towards

escalation. The tender was submitted by the respondent on

15.7.1986. The same was to remain valid for a period of three months

from the date of submission. The Tribunal notes that as per C-71, the

offer was kept open for 45 days from the date of opening of tender

i.e.15.7.1996. The work order was placed on the respondent on

10.9.1996. This was accepted by the respondent with the condition

that the escalation due to increase in cost of materials after 28.8.1996

would have to be paid by the petitioner. The respondent stated that it

would indicate the increase in prices within a week, vide their letter

dated 10.9.1996 (C-2). The Tribunal proceeded, on the basis of the

calculations for escalation given by the respondent in Annexure VII

with the statement of claim.

56. The objection raised by the petitioner is that the award on

claim no.9 is patently contrary to the contractual terms. The contract

stipulated fixed rates under clause 37 which prohibits any escalation,

aid or rebate. The petitioner argues that the Arbitrators exceeded

their jurisdiction in granting escalation in the face of clear prohibition

in the contract. From the award, I find that the same, apart from

making reference to some of the correspondence exchanged between

the parties and to annexure VII attached to the statement of claims,

does not give reasons for disregard of the contractual term contained

in clause 37 of the contract which prohibits grant of escalation in the

180 days period from the commencement of work at the site or till the

completion of the project, including extension periods, whichever is

later. Clause 37 specifically states that due to limited time of the

project, no claim of any kind will be entertained for any escalation.

The escalation would not be paid, even in case of revision in tax,

excise, levies and labour Act. Apart from observing that "the letter of

intent cannot be considered as letter of award", the Tribunal does not

indicate its reasons for allowing escalation in the face of clause 37 of

the conditions of contract.

57. The aforesaid observation of the tribunal does not appear to

make much sense, as what had been placed by the petitioner was a

"work order" and not a mere letter of intent on 10.9.1996. Since the

award made on claim no.9 appears to be in contravention of clause 37

of the conditions of contract and also does not appears to be supported

with reasons, the same cannot be sustained and is accordingly set

aside.

58. The Tribunal has awarded pre-suit, pendent elite and future

interest at the rate of 15% per annum on the awarded amount.

Pertinently the award made in respect of claim no.2 (towards interest

on claim no.1), claim no.4 (towards interest on claim no.3.) were

quantified by the Tribunal. From the award it appears that interest on

interest has been awarded. This could not have been done and the

same constitutes a clear and patent illegality in the award. It also

appears that for some period, interest has been awarded twice, firstly

while making the award on claim no.2 and 4, and again while making

the award on claim no.10. This is wholly and patently illegal and

cannot be sustained. So far as claim nos. 1 and 3 are concerned, the

aspect of grant of interest on these claims have been addressed above

while dealing with the award made on claim nos. 2 and 4. The only

other claim awarded is claim no.7 to which no objection has been

raised. Considering my conclusions in respect of the award on claim

nos. 2 and 4, I am of the view that on the amount awarded on claim

no.7, the respondent should be granted interest @ 12% per annum

from 26.11.1997 onwards till realization.

59. No other objection has been urged by the petitioner in

respect of the award made on the respondents claims or any of the

counter-claims of the petitioner. Accordingly the award stands

modified in the aforesaid terms. Parties are left to bear their

respective costs.

(VIPIN SANGHI) JUDGE

JULY 02, 2009 as/dp