Delhi High Court

Shri Sherpal Singh vs Delhi Transport Corporation on 2 July, 2009

Author: Rajiv Sahai Endlaw

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   CS(OS) 206A/1989 & CS(OS) 387A/1989

%                                      Date of decision: 02.07.2009

SHRI SHERPAL SINGH                                 ....... Petitioner
                           Through: Mr. D. Moitra, Mr. S.K. Jain and Mr.
                                    N.K. Kantawala, Advocates

                                      Versus

DELHI TRANSPORT CORPORATION                         ...... Respondent

                           Through: Mr. Vibhu Shankar, Advocate

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment? No

2.    To be referred to the reporter or not? No

3.    Whether the judgment should be reported
      in the Digest? No


RAJIV SAHAI ENDLAW, J.

1. Both suits were filed under Section 14 & 17 of the Arbitration

Act, 1940 with respect to the same arbitral award. Upon the arbitral

award being filed in CS(OS) No.206A/1989, objections under

Sections 30&33 of the 1940 Act have been preferred by the DTC to

the arbitral award. The said objections are for consideration.

2. An agreement dated 7th March, 1984 was entered into between

M/s Rajora Builders with the DTC pursuant to the acceptance of the

bid of the said M/s Rajora Builders, for the work of construction of

Bodella Depot of the DTC. Disputes and differences having arisen out

of the said contract, M/s Rajora Builders applied for reference

thereof to arbitration. Upon failure of the DTC to appoint an

arbitrator, this court was approached under Section 20 of the 1940

Act. However, the DTC thereafter on 1st May, 1986 appointed Mr.

N.L. Kakkar, District Judge (Retd.) as the arbitrator.

3. M/s Rajora Builders preferred seven claims for a total sum of

approximately over Rs.25/- lacs besides interest against the DTC.

The DTC admitted a sum of Rs.68,978.39 to be due to the said M/s

Rajora Builders but claimed Rs.3,25,803/- to be due to it by way of

penalty from the said M/s Rajora Builders and after adjusting

Rs.68,978.39 therefrom claimed a sum of Rs.2,56,824/- to be due to

it from the said M/s Rajora Builders. DTC besides the said claim,

during the course of proceedings filed counter claim for a total sum

of Rs.21,80,103.58 inclusive of the aforesaid sum of Rs.3,25,803/-

besides interest, against M/s Rajora Builders.

4. The arbitrator vide award dated 31st December, 1988 awarded

a sum of Rs.14,20,970.57 to M/s Rajora Builders with simple interest

at 15% per annum thereon from 1st October, 1985 to the date of

reference and pendente lite and future interest also at 15% per

annum on the said amount from the date of reference till the date of

actual payment or decree whichever is earlier. The counter claims of

the DTC were dismissed.

5. CS(OS) No.206A/1989 was filed by Shri Sherpal Singh as

proprietor of M/s Rajora Builders. Upon the award being filed in the

court IA No.4230/1989 in CS(OS) No.206A/1989 was filed by the

DTC under Sections 30/33 of the 1940 Act objecting to the award. On

completion of pleadings therein the usual issues were framed on 24th

November, 1989 and parties directed to file evidence by affidavits.

No objections have been preferred by M/s Rajora Builders/Mr.

Sherpal Singh. Neither party applied for cross examination on the

affidavits of the others. IA No.9350/1998 was preferred by one Shri

Sanjeev Kumar under Order 1 Rule 10 r/w Order 6 Rule 17 of the

CPC averring that though at the time of the award of the work M/s

Rajora Builders was a sole proprietorship of Shri Sherpal Singh, it

was subsequently converted into a partnership firm vide deed of

partnership dated 7th June, 1989 and whereunder all the assets and

liabilities of the sole proprietorship concern were taken over by the

partnership. Besides the said Shri Sherpal Singh and Shri Sanjeev

Kumar another Mr. Rajiv Kumar was also stated to be a partner. It

was further averred that Shri Sherpal Singh retired from the

partnership firm vide deed of retirement dated 31st August, 1989 and

his accounts were settled; that M/s Rajora Builders thereafter

continued as a partnership of said Mr. Sanjeev Kumar and Mr. Rajiv

Kumar. Shri Sherpal Singh contested the said application. However,

thereafter the objections preferred by the DTC to the award were

dismissed in default on 1st June, 2001 and consequently the arbitral

award made rule of the court and decree in terms thereof passed.

Execution was applied of the said decree and an amount of

approximately Rs.48 lacs was attached in execution and received in

this court. Thereupon DTC applied for setting aside of the ex-parte

decree and for restoration of its objections and which were allowed

on 7th August, 2002 and the amount of Rs.48 lacs received in this

court ordered to be kept in a fixed deposit. DTC subsequently

applied for release of the said sum of Rs.48 lacs deposited in this

court and ordered to be kept in FDR and the said amount was

ordered to be released to the DTC on 15th May, 2006. The application

aforesaid of Mr. Sanjeev Kumar was allowed on 22nd March, 2001.

Thus the suit was ordered to be treated as by M/s Rajora Builders, a

partnership firm instead of by Mr. Sherpal Singh as sole proprietor

of M/s Rajora Builders. IA No.10209/2003 was filed for recalling of

the order dated 22nd March, 2001 and on which vide order dated 13th

February, 2008 the order dated 22nd March, 2001 recalled and the

proceedings ordered to be continued in the name of Sherpal Singh.

It was however clarified that the said order was not detriminative of

the inter se rights of the said Shri Sherpal Singh on the one hand

and M/s Sanjeev Kumar & Rajiv Kumar on the other. FAO(OS)

No.162/2008 was preferred by the said M/s Sanjeev Kumar & Rajiv

Kumar against the said order and which was disposed of vide order

dated 30th September, 2008 by permitting the advocates of both Mr.

Sherpal Singh as well as M/s Sanjeev Kumar & Rajiv Kumar to

address this court. The counsels have accordingly been heard.

6. At the outset, it may be stated that DTC has not challenged the

arbitral award in so far as dismissing its counter claims save its

counter claim for Rs.3,25,803/-. The objections by the DTC are

confined to the award of Rs.14,20,970.57 to the plaintiff and to the

dismissal of its counter claim for Rs.3,25,803/-.

7. The objections are hereafter taken in the order in the

application under Sections 30/33 of the 1940 ACT.

8. Objections qua dismissal of counter claim of DTC of

Rs.3,25,803/-.

A. This claim was made under Clause 14 on account of

compensation levied for non rectification of defects and

deficiencies. The amount claimed represents 10% of the

contract value.

B. The arbitrator negatived this claim for the reasons:

i) The claim having not been preferred prior to the

reference and having been raised for the first time

before the arbitrator. It was held that the existence

of a dispute is an essential condition for the

jurisdiction of the arbitrator and DTC having made

no claim prior to reference the question of the

same being disputed did not arise and hence the

claim was not maintainable before the arbitrator.

ii) The claim being not maintainable for the reason of

DTC having issued the letter dated 1st May, 1986

expressing satisfaction of the work and

commending the said work. It was held that the

counter claim had been made as a counter blast to

the claim of the plaintiff and to put pressure on the

plaintiff.

iii) That the six months for defect/liability period

ceased on 30th September, 1985

iv) No notice in this regard having been issued by DTC

to the plaintiff.

      C.     The objections of the DTC are:-

             i)     That the certificate dated 1st May, 1986 has been

wrongly interpreted. It was issued in terms of the

agreement and was not meant to be in discharge of

the defect/liability of the plaintiff.

ii) That the arbitrator erred in holding that the

defect/liability period came to an end on 30th June,

1985, having himself held the works to have been

completed on 31st March, 1985.

iii) That the liability for the defects in bitumen work

(road work) in fact was for one year and for other

works was for a period of six months. Thus the

defect/liability period ended on 30th September,

1985 and 31st March, 1986.

iv) That no notice of defect/liability was required to be

issued in terms of the agreement, however letters

calling upon the plaintiff to rectify the defects had

been issued and had been ignored by the

arbitrator.

D. As far as the objection regarding date of termination of

defect/liability period concerned, I may record that

though at one place the award mentions the

defect/liability to have come to an end on 30th June, 1985

but at another place the liability is stated to have come to

an end on 30th September, 1985. It thus cannot be said

that the arbitrator has wrongly noted the date or the

award can be faulted for the said reason. 30th June, 1985

appears to be a typographical mistake.

E. Though several objections as aforesaid have been taken

but in my view, if the award on the above aspect cannot

be faulted with for anyone reason given by the arbitrator,

the other reasons even if having an error apparent on

their face, would not call for setting aside of the award

on this aspect. I find the reason given by the arbitrator

of the issuance of the letter dated 1st January, 1986 to be

one such reason. The letter dated 1st January, 1986

issued by the DTC and reproduced in para 8 of the award

records completion of the works on 31st March, 1985 and

the performance of the plaintiff to be quite satisfactory.

The said letter is admittedly issued after defect/liability

period of six months with respect to all other works

except the road work. The arbitrator has on the basis of

the said document accepted the plea of the claimant of

the defects earlier pointed out by DTC having been

satisfactorily removed and the letter having been issued

thereafter only. The arbitrator has also held the

subsequent letters dated 10 February, 1986 and 18th

March, 1986 of DTC levying penalty to be malafide for

the reason of having been issued after the plaintiff had

made his demands. The arbitrator has also noted that

the claim for the said amount was first by way of penalty

and thereafter only expressed to be by way of

compensation.

F. I find the aforesaid reasoning of the arbitrator to be such

which cannot be interfered with under Sections 30/33 of

the 1940 Act. The same pertains to a factual controversy

and/or interpretation of documents the jurisdiction of this

court under Sections 30/33 is neither appellate nor

supervisory. The court is only to satisfy itself that the

approach of the arbitrator conforms to the law and that

the award does not suffer from any patent or manifest

illegality in the findings or in the applications of law. The

counsel for the plaintiff has in this regard rightly relied

upon Vijay Power Generators Ltd. Vs. Union of India

2008 (1) Arbitration Law Reporter 475 (Delhi) and

Shree Krishna Woolen Mills (P) Ltd. Vs. Union of

India 2008 (3) Arbitration Law Reporter 477 (Delhi).

Reliance was also placed on State of Rajasthan Vs.

Puri Construction Co. Ltd. 1995 1 Arbitration Law

Reporter 1 (SC) & Sudersan Trading Co. Vs. Govt. of

Kerala 1989 2 Arbitration Law Reporter 6 (SC) laying

down that whether any particular amount was liable to

be paid lay within the competence of the arbitrator and

the court cannot take upon itself the burden of saying

that what was actually found was contrary to the

contract and as such beyond the jurisdiction of the

arbitrator. The correctness of reasonableness of the

reasons was held to be not subject to the scrutiny of the

court.

9. The next challenge by the DTC is to the finding of the

arbitrator of the delay in completion of works being attributable to

the DTC and consequences thereof.

A. The contract period was six months commencing from 11th

February, 1984 i.e. till 10th August, 1984. Actual date of

completion is 31st March, 1985. The arbitrator has found that

the prolongation of the contract was on account of non

fulfillment of reciprocal promises and contractual obligations

by the DTC. The award refers to Exhibit C-23,C-24,C-27,C-

30,C-33 & C-34 pointing to delay in making the site available

and inadequate payments by the DTC. Though the award refers

to the argument of the DTC of there being no delay on its part

and of the payments being timely and commensurate to the

work and of the letters/notices of DTC to the petitioner for

expediting the work, the arbitrator has held the delay to be

attributable to the DTC. As a consequence of the said delay the

arbitrator under claim No.5 has awarded Rs.3,30,000/- to the

petitioner @55,000/- per month for about six months delay. The

sum of Rs.55,000/- has been computed at 10% of profits that

would have accrued to the petitioner for maintenance of

rollers, trucks, employees etc.

B. The objection of the DTC is :-

That on a reading of the documents filed as R-4,R-16, R-17,

R-19,R-22,R-24,R-25&R-27, the delay could not have been

attributed to the DTC. Even though, the said objection does not

constitute a ground under Sections 30 and 33. I have looked

into the said documents. The said documents are of the time

when the time for completion of the work had already expired.

In the said documents, DTC is denying the plea of the

petitioner of the delay being attributable to it. However on

perusal thereof I am unable to decipher therefrom any error in

the finding of the arbitrator of the delay being attributed to

DTC. There is no such document which can show the finding of

the arbitrator attributing delay to the DTC to be erroneous on

the face of it. I thus decline the said objection of the DTC.

C. I am however unable to sustain the award of Rs.55,000/- per

month under claim No.5. Just like it has been held that DTC

was not entitled to levy penalty of 10% of the contract value for

non rectification of the defects, on the petitioner, in the

absence of any proof thereof on the same parity of reasoning I

find that the arbitrator could not have awarded damages of

Rs.55,000/- per month total amounting to Rs.3,30,000/- to the

petitioner for delay. The award to that extent neither has any

basis nor logic in that regard and the award to that extent is

liable to be set aside. Though in accordance with the law laid

down in Tarapore & Co. Vs. Cochin Shipyard Ltd. (1984) 2

SCC 680 even without any agreement in that regard, the

petitioner would be entitled to compensation for delay

attributable to DTC but the said compensation can be awarded

only on furnishing proof of the loss suffered by the petitioner in

that regard. Here though @10% a sum of Rs.55,000/- has been

arrived at but the award does not state as to on what basis

figure of which Rs.55,000/- is 10% has been arrived at. The

award also does not disclose whether the compensation for

delay is calculated at 10% per annum in which case the figure

would not be Rs.55,000/- per month. If it is to be 10% per

mensem, then that is not so stated in the award.

D. Moreover, the impact of delay on the rates applicable to the

work done beyond the stipulated date of completion has been

taken into consideration by the arbitrator. For this reason also

I find that the arbitrator having already compensated the

petitioner for delay by awarding higher rates than agreed, for

the work done beyond the stipulated date, could not have

separately under issue No.5 awarded damages for prolongation

of contract.

10. The next challenge by the DTC is to the award of

Rs.8,58,847.52 under claim No.1 for non- payment of the final bill

and of refund of security deposit of Rs.1 lac. The challenge by the

DTC thereto is manifold. It is pleaded that the findings under this

head of extra work having been awarded are erroneous in as much

as under Clause 12 the Engineer in charge was competent to add to

alter or substitute the work and if any additional work was awarded,

side by side certain other works were curtailed thus keeping the cost

of the executed work same. The award in this regard is also

challenged on the ground of the arbitrator having exceeded the

measurements from time to time on the basis whereof payments of

the running bills were made. Bias and favourtism is also imputed to

the arbitrator and it is alleged that records of the petitioner which

were not filed appear to have been seen by the Arbitrator. The

arbitrator is pleaded to have ignored the relevant documents

produced before him by DTC in this regard. It is further pleaded that

the arbitrator inspite of contention of the DTC did not have the site

which was existing as it is, re-measured to resolve the controversy

regarding measurements. It is further urged that the arbitrator erred

in accepting the measurements pleaded by the petitioner, without

the same being substantiated. The findings of the arbitrator, of the

petitioner being not bound by the measurements which he had

signed at the time of receiving running payments, is also challenged.

11. However, in my view if this court enters into all the aforesaid

challenges, the jurisdiction then exercised by this court would not be

different from the jurisdiction in an appeal and which is not

permissible under Sections 30&33. I thus dismiss the objections of

the DTC to this part of the award.

12. The remaining award is on the claims of the petitioner under

Clause 10 that of the agreement i.e. owing to increase in prices

during the implementation of the contract. The objection of DTC is

that neither was there any increase nor was there any evidence

before the arbitrator for granting such increase of Rs.66,509/- on

account of labour escalation and Rs.35,614/- on account of escalation

of costs of material, under claims No.2&4 respectively. The

arbitrator has held that during the execution of the work, w.e.f. 1st

June, 1984 the labour wages were increased under the orders of the

Delhi Administration, Exhibit C-13. The arbitrator has under the said

claims also taken into consideration the delay in completion of the

works being attributable to the DTC. Similarly, the arbitrator for the

purposes of granting escalation on account of increase in cost of

material has relied upon the photocopies of Joint Plan Committee

filed by the petitioner. No error on the face of the award can be

found against the said award also.

13. The arbitrator has also awarded another Rs.15,000/- to the

petitioner against its claim of Rs.30,000/- for water and electricity

charges for three months. Reference thereto is made at the end of

para 2 of the award. However, there is no reference thereto in para

13 wherein claims of petitioner are listed. However under claim No.7

(cost of arbitration), though recording that no documents have been

filed by the petitioner to substantiate the said claim, the arbitrator

has awarded Rs.15,000/- for DTC having "availed the facility of water

and electricity which was the property of the claimant". Though I do

not find any objection having been preferred by DTC to this part of

the award, but I do not find any basis for award of this amount; in

fact the same is incomprehensible. The award of this Rs.15,000/- is

set aside.

14. The arbitrator has also awarded to the petitioner interest, pre

reference, pendente lite and future at 15% per annum. In my view,

the award of the arbitrator of pre reference interest in the

circumstances of the case is not justified. It is not as if the claims of

the petitioner have been accepted in toto by the arbitrator. The

claims have been considerably reduced by the arbitrator himself and

against which no objections have been filed by the petitioner. A party

which makes exaggerated claims leading to non settlement thereof,

and leading to protracted arbitration/litigation runs the risk of being

found disentitled to any interest even on the lesser amount found

due, unless shown that the claim for exaggerated amounts was

bonafide. I do not find any bonafides in the present case. For arriving

at the amounts due, a detailed inquiry was held by the arbitrator. No

fault can be found with the respondent not making the payments

demanded by the petitioner since all the said payments have not

been found due, by the arbitrator also, to the petitioner. Thus till the

said amounts were determined, in the facts of the case the award of

interest is not found to be justified. The award of interest pre

reference and pendente lite is set aside. The petitioner is thus found

entitled to interest from the date of the award only. I find the rate of

interest applied by the arbitrator also to be excessive. It is common

knowledge that the interest rates have been falling and in fact the

courts in such arbitral matters have been awarding interest only at

9% per annum. I find the petitioner in the present case also to be not

entitled to interest at a rate higher than that. Further I may notice

that while going through the records, the findings of the arbitrator

though not found interferable in exercise of jurisdiction under

Sections 30&33, are not found to be such, which if had been

rendered by the court would not have been interfered in appeal. In

my view, the equities will be balanced by, while upholding the award

to the aforesaid extent, by reducing the rate of interest. I thus find

the petitioner entitled to interest from date of award at 6% per

annum only.

15. I therefore sum up my findings as under:-

i) The award in favour of the petitioner under Claim No.1

of Rs.9,58,847.52 is upheld.

ii) The award in favour of the petitioner under Claim No.2

of Rs.66,509/- is upheld.

iii) The award in favour of the petitioner under Claim No.4

for Rs.35,614/- is upheld.

iv) The award in favour of the petitioner under Claim No.5

of Rs.3,30,000/- is set aside.

v) The award under Claims No.3&6 of interest is modified.

The petitioner shall be entitled only to interest on the

awarded amount upheld @6% per annum from the date

of the award and till the date of this decree. The

petitioner shall also be entitled to future interest under

Section 29 of the Arbitration Act, 1940 on the principal

amount only @9% per annum from the date of the decree

till the date of payment.