M/S R.P. Builders vs Dda
2009 Latest Caselaw 2817 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 CS(OS)No.851A/1995

%                              Date of decision:24th July, 2009

M/S R.P. BUILDERS                               ....... Petitioner
                        Through: Mr. Raman Kapur, Advocate.

                               Versus

DDA                                             ....... Respondent
                        Through: Ms. Anusuya Salwan, 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               No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The suit was registered on receipt/filing of arbitral award

dated 19th May, 1994 in this court. Notice of filing of the arbitral

award was issued to the parties and the petitioner M/s R.P. Builders

filed IA No.633/1996 under Sections 30 & 33 of the Arbitration Act

objecting to the award in so far as rejecting/declining its claims.

Pleadings in the said application were completed and on 19 th

September, 1997 the usual issues framed. Though the parties were

directed to file affidavit evidence and there is on record an affidavit

by way of evidence on behalf of the petitioner but on 24 th September,

1998 both the counsels stated that the arbitration proceedings which

had been received in this court, only be read as evidence in the

present suit and no further evidence was required to be recorded.

The respondent DDA has not filed any objections to the award. The

counsels for the parties have been heard.

2. Claim No.1 of the petitioner before the arbitrator was of

Rs.30,000/- on account of unlawful withholding of the said amount

from the final bill for the reason of quality control. During the course

of proceedings before the arbitrator the respondent DDA admitted

that a sum of Rs.20,300/- out of the said deductions was releasable in

favour of the petitioner. The petitioner also on 26th August, 1993

agreed to withdraw the claim for Rs.30,000/- subject to the amount

of Rs.20,300/- being released to him on or before 30th September,

1993. The arbitrator records that the said monies were not so

released by the respondent DDA in favour of the petitioner. The

arbitrator however under the said claim awarded the sum of

Rs.20,300/- only to the petitioner. The counsel for the petitioner has

contended that there is no reason in the award for not allowing the

entire claim of Rs.30,000/-.

3. Undoubtedly the arbitrator has been swayed by the offer of the

petitioner in the hearing on 26th August, 1993 to withdraw the entire

claim of Rs.30,000/- if Rs.20,300/- admitted by DDA were paid on or

before 30th September, 1993. Technically speaking, the offer of the

petitioner for withdrawing the claim of Rs.30,000/- was conditional

to the payment being made by the stipulated date and on that

payment being not made by the stipulated date the said offer

disappeared. However, what cannot be lost sight of is that the

arbitrator is a private court/forum chosen by the parties themselves

as an alternative to the court and for the sake of expediency.

Arbitration was/is not intended to be a first step in litigation. A party

opting for arbitration makes a conscious choice that instead of

hierarchy of courts as under the ordinary law of land being available

to him, he would be bound by the order/award of such private

court/forum. The role of the courts against the said awards is very

limited and supervisory. The parties having made such a choice take

the inherent risk of the said arbitrator's sense of justice and fair

play. The courts, unless find the sense of justice/fair play applied by

the arbitrator to be totally perverse are not to interfere with the

same. The arbitrator has in the award stated that he has examined

the statements and evidence of the parties and their respective

submissions. If after such an exercise the arbitrator has chosen to

dispose of the claim No.1 with the award for an admitted amount

only, considering the amount involved and totality of the

circumstances, in my opinion no perversity or misconduct can be

attributed to the arbitrator. The arbitrators are entitled to draw

general conclusions. The counsel for the petitioner also neither in

the objections nor at the time of hearing pointed out any such

material on the arbitral record from which it can be said that the

balance amount of Rs.9,700/- was payable and in-spite thereof not

granted by the arbitrator. I, therefore, do not find any merit in the

objections with respect to the award under claim No.1.

4. Claim No.2 of the petitioner was on account of recovery of

Rs.28,647.37p by the respondent DDA from the amounts due from

DDA to the petitioner on account of penal recovery i.e. at double the

rate of excess, cement, SCI, G.I. & L.A. Pipes not returned by the

petitioner to the respondent DDA. The arbitrator found that the

petitioner had in carrying out the work consumed the material/goods

aforesaid in excess of the agreed variations; that the petitioner was

supposed to utilize the material in optimal way without wastage; that

the petitioner having so wasted was in accordance with the terms of

the contract (clause 42) liable for payment at penal i.e. double the

issue rate of the said material. The arbitrator also found, as a matter

of fact, that the petitioner had not proved return of the excess L.A.

Pipe 150 mm dia meter and was thus liable for penal value thereof

also.

5. The petitioner objects on the ground that no penal recovery

could have been ordered without proving the actual loss; that though

the respondent DDA has sought time to submit details of the loss

suffered but no such losses were proved; that in the absence of

actual loss, no award at penal rate could have been made.

6. It is not disputed that the respondent DDA under the

agreement with the petitioner was entitled to penal recovery. The

factual finding of the arbitrator of excess consumption is non

interfereable in these proceedings and, in any case, has also not

been challenged in the objections. The Supreme Court in the short

judgment in Hindustan Tea Co. Vs. K. Sashi Kant Co. AIR 1987

SC 81 reiterated that once it is found that the award is a reasoned

one, under the law, the arbitrator is made the final arbiter of the

dispute between the parties and the award is not open to challenge

on the ground that the arbitrator has reached a wrong conclusion or

has failed to appreciate facts.

7. As far as the ground made out in law, of no penalty being

payable without proof of loss, is concerned, the Supreme Court in

ONGC Ltd. Vs. Saw Pipes Ltd. AIR 2003 SC 2629 has held that

when such contracts by pubic bodies provide for penalties, absolute

insistence on a proof of loss cannot be made. The Supreme Court

observed that in the functioning of public bodies there could be no

proof of loss. Examples were cited of no particular individual or

person suffering by delay in construction of roads or bridges. It is the

public at large which suffers. In view thereof, the petitioner's

reliance on earlier judgment of this court in A.K. Jain Vs. U.O.I. suit

No.136 of 1991 decided on 23rd March, 1993 with respect to clause

42 is of no avail.

8. The clause for penal recovery appears to have been made in

the contract, in which part of the material used in execution of the

contract is provided by the respondent DDA, to ensure that there is

no wastage of such material. It is the public at large which suffers

from such wastage. By providing penal rate of recovery, it is

expected that the contractors will ensure return of excess material.

In such a situation, in my view, no absolute insistence can be made

on proof by loss before the agreed penalty can be awarded. No error

is thus found in the award on this ground also and the objection is

rejected.

9. Claim No.3 of the petitioner was for recovery of the amounts

stated to have been wrongfully deducted out of the bills towards

agreed rebates; it is contended that the respondent DDA was entitled

to the said rebates only on timely payment of monthly bills, final

bills, release of security deposit and all of which was not done and

hence such rebates were wrongly deducted and the DDA is liable to

make good to the petitioner the amount adjusted on this account.

10. The arbitrator has found the rebates to have been correctly

availed by the respondent DDA with respect to the months of which

payments were made timely; he has further found that for the

months for which the payments were not made within the stipulated

time, the petitioner had not carried out the work of the minimum

value i.e. of Rs.25,000/- required to be carried out in that month and

thus the payments due for that month were carried forwarded to the

next month along with rebate; that even for the months for which the

payments were made, the petitioner had failed to establish of having

carried out the work of the minimum value of Rs.25,000/- and for

want of evidentiary support that part of the claim could not be

granted; that though the completion certificate was dated 20th

August, 1991, the same was subject to carrying out of substantial

works which were carried out later and the final bill was released

within the stipulated time from the said completion of works and

thus the respondent DDA was entitled to rebate with respect to final

bills also. The release of the security deposit was also found to be

within the agreed time from the date of such completion of

remaining works and thus DDA found entitled to rebate on that

account also.

11. The counsel for the petitioner has vehemently contended that

the factual finding of the arbitrator of the work of the minimum value

of Rs.25,000/- having been not carried out in months in which the

payments were not released is contrary to the document Exhibit R-30

of the respondent itself. In the objection petition, it is further

pleaded that even in the pleadings the respondent had admitted the

work done to be of the minimum value of Rs.25,000/-. With respect

to the rebate on timely payment of final bill and release of security

deposit it is contended that even in-spite of completion certificate

issued by the respondent certain works remained to be completed at

the insistence of the respondent DDA only; it is argued that the

respondent DDA has a practice of getting the works of final paint,

fixing of brass items carried out just before the delivery of

possession of the flats to the allottees so as to avoid theft/pilferage

thereof between the time of completion and allotment of the flats. It

is contended that if the date of completion certificate issued is

considered, neither was the payment of the final bill nor the release

of security deposit was within the time so as to entitle the

respondent DDA to rebate.

12. I am afraid the findings of the arbitrator are again factual in

nature and on the law aforesaid it is not appropriate to interfere with

the award on the said grounds. Undoubtedly, the courts have in

some cases interfered with the award if found to be contrary to a

particular document or pleading. However, in my view each

inconsistency does not fall within the ambit of Sections 30 & 33 of

the Act. The role of the courts is supervisory only to prevent gross

injustice or misdemeanor on the part of the arbitrators. It is not each

inconsistency or invalidity which empowers the court to set at knot

the arbitration proceedings. There must exist an element of

carelessness, dishonesty, breach of the principles of natural justice

of the category so as to shock the judicial conscience of the court or

a prudent person. It is only then the award would be set aside or

modified or remitted to the arbitrator. If the courts were to start

interfering in the arbitral awards in every case where they find any

such inconsistency, the whole purpose of arbitration would be

defeated and the jurisdiction exercised with respect thereto be akin

to that of an appellate court.

13. In the present case, though the counsel for the respondent

DDA had no reply to Annexure R-30 relied upon by the petitioner but

the fact remains that the arbitrator notwithstanding the same has

reached a conclusion of payments having been made within the time

entitling the respondent DDA to rebate. I do not consider the

present inconsistency, even if any from the record, in the finding of

the arbitrator, to remit the award for reconsideration to the

arbitrator.

14. As far as the plea of the works carried out beyond completion

certificate is concerned, it is not disputed that the completion

certificate was conditional and various works stated therein to have

been not carried out were carried out subsequently. Even if it is to

be believed that a practice has evolved in DDA and DDA is

compelling the contractors to carry out the said works later, just

before the allotment of the flats, the fact remains that the same has

no basis in contract. Nothing wrong can be found with the approach

of the arbitrator of having decided the case in accordance with the

contract and in ignoring such practice, if any. After all, the

petitioner also, probably because of several contracts and future

business with DDA, also obliged DDA by, notwithstanding having

completed the work, not putting the final touches thereto till just

before the allotment of flats. The petitioner contractor cannot now

be heard to say that though for its own reasons it earlier acted as

desired by DDA, DDA is nevertheless liable to compensate the

petitioner for the same.

15. Claim No.4 of the petitioner was for Rs.2,00,000/- under Clause

10 (cc) of the agreement and in relation to the claims under Claims

No.3,5&7. The claim No.3 and the objections with respect thereto

have already been dealt with herein above. The objections to the

claims No.5 & 7 are considered herein below. If the objections of the

petitioner thereto succeed, the petitioner shall be entitled to

proportionate amount under this claim also.

16. Claim No.5 of the petitioner was for Rs.6,340.57p on account

of unjustified and arbitrary deduction made by the respondent DDA

for smooth finishing of RCC work. The arbitrator held the action of

the respondent DDA to be strictly in terms of specifications and

mode of measurements qualifying for payments in this regard and

hence rejected the claim.

17. The objection of the petitioner as pleaded only is that the

arbitrator has given no reasons. That is not true. The arbitrator has

held that the action of DDA is in terms of the specifications and mode

of measurements. The same are reasons enough for rejecting the

claim.

18. Claim No.6 of the petitioner was for Rs.50,000/- in respect of

extra/substituted items. The arbitrator awarded Rs.3,028.80p as

admitted by the respondent DDA. Neither has any argument been

addressed in this regard nor do I, in the objections of the petitioner,

find any plea with respect to rejection for the balance amount under

the said claim.

19. Claim No.7 of the petitioner was for Rs.66,000/- on account of

unjustified and arbitrary deductions made by the respondent DDA.

The arbitrator held the same to be an excepted matter under clause

25 (b) of the agreement. Clause 25(b) provides that the decision of

the Supdt. Engineer regarding the quantum of deductions as well as

justification thereof in respect of rates for substandard work shall be

final and would not be open to arbitration. There is no dispute

between the parties that if the said claim fell within the said clause

25 (b), the same was not arbitrable. The counsel for the petitioner

however contends that while clause 25(b) is only with respect to

reductions for substandard work accepted by DDA, the claim No.7

was not for such reductions but was on account of deductions made

from the bill. In this regard, the statement of facts of the petitioner

on arbitral record was perused. The claimant has therein inter-alia

stated that the entire work was executed under the supervision and

control of DDA; that DDA had in each RA bill certified that the works

have been done as per specifications; that whatever defects or

discrepancies were pointed out by the respondent DDA were duly

rectified before completion and only whereafter the provisional

completion certificate was issued; that nevertheless the respondent

DDA had made number of deductions, items and recovered amounts

against such deductions without even giving proper notice therefor.

The details of such deductions were contained in Annexure C.7 (A) to

the statement of claim.

20. A reading of the claim No.7 of the petitioner leaves no manner

of doubt that irrespective of the terminology of reduction/deduction,

it was the case of the petitioner also that the amount claimed had

been reduced/deducted for substandard work which though DDA was

entitled to reject and not pay for, had been decided to be accepted at

reduced rates. If there was any ambiguity in this regard, a reading

of Annexure C.7 (A) further clarifies the position. Each and every

item therein is found to be on account of the work not carried out as

per the agreed specifications. In view thereof, this court at least on

reading of statement of facts to which attention was invited is not

able to find any error in the award in treating the said claim to be

within the excepted matters. The objections with respect to claim

No.7 are also thus rejected.

21. Claim No.8 of the petitioner was for Rs.1,20,000/- for

deployment of watch and ward staff and day to day maintenance of

the flats from the alleged date of completion and till the date of

allotment of the flats by the respondent DDA. It is the case of the

petitioner that the works were completed on 20th August, 1991 when

the completion certificate was given and the works mentioned to be

remaining therein were left out at the instance of the respondent

DDA as aforesaid. The petitioner thus claimed expenses for securing

the flats.

22. I have with respect to the objections under Claim No.3 herein

above held that no error/misconduct can be found with respect to the

finding of the arbitrator of the work having been completed only on

20th May, 1992. Accordingly, this claim for watch and ward staff also

does not survive and the objection with respect thereto is also

dismissed.

23. Claim No.9 of the petitioner was with respect to the increase in

prices of materials, idle labour, T&P and establishment due to

prolongation of contract by 44 months after the stipulated date. A

sum of Rs.11 lacs was claimed on this account.

24. The arbitrator did not allow the said claim for the reason (i) of

the petitioner having while applying for extension of time waiving

any such claim (ii) finding a lot of internal inconsistencies,

contradictions and factual inaccuracies in the claim of the petitioner,

(iii) the claim being unsubstantiated by any material evidence,(iv)

there being no substantial documentary evidence, books of account

or the like having been adduced by the petitioner in proof of the said

document, and (vi) the said claim being also barred by Clause No.1

of the general conditions of contract.

25. The petitioner contends that the finding of the arbitrator of the

claim being barred by clause No.1 being contrary to the judgment of

this court and the arbitrator having not given any detailed reasons.

26. As aforesaid, the arbitrator has given several reasons for

rejecting the said claim. It cannot be thus said that the rejection of

the claim is without reason.

27. The counsel for the petitioner has relied upon judgment dated

13th March, 2006 of this court in Kamal Construction Co. Vs. DDA

in CS(OS) No.794/2000 setting aside the award in favour of DDA.

However, the court in that case had found the award to be without

any reasons and mechanical. That is not the position here. The said

judgment has no application. The counsel for the petitioner has also

relied upon Umed Singh Vs. DDA 91 (2001) DLT 126 with respect

to clause No.1 of the general conditions and holding that the same is

applicable only in cases where the delay was beyond control of DDA

and unavoidable and not where the delay was otherwise on part of

DDA and allowing claim on that account. I do not feel the need to

apply the ratio of the said judgment also to the facts of the present

case in as much as the arbitrator has referred to the said clause as

only one of the five reasons for rejecting the claim. The thrust of the

arbitrator is of there being no delay by DDA and the petitioner

having waived its right to claim any damages. That reason, in my

opinion is enough not to interfere with the award.

28. I may notice that the counsel for the respondent DDA has in

this regard drawn attention to DDA Vs. Bhagat Construction Co.

Pvt. Ltd. 2004 (3) Arbitration Law Reporter 548 Delhi (DB) holding

that where the arbitrator is well-versed in the matters before him he

is not required to give a detailed judgment and it is sufficient if he

indicates his trend and gives outline to indicate basis of which he

arrived at the conclusion. Reliance was also placed on Jagdish

Chander Vs. Hindustan Vegetable Oils Corpn. AIR 1990 Delhi

204 holding that where an arbitrator is an expert his award should

not be lightly interfered with.

29. Claims No.10&11 of the petitioner were for interest. The

petition having failed, it is not deemed necessary to deal with the

objections thereto.

30. Resultantly, IA No.633/1996 is dismissed. The award dated

19th May, 1994 is made rule of the court and judgment pronounced

in terms thereof.

Decree sheet be drawn up. Parties are left to bear their own

costs.

RAJIV SAHAI ENDLAW (JUDGE) July 24, 2009 PP