Unitech vs J.K.Industries Ltd.
2009 Latest Caselaw 712 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                   Date of Reserve: January 16, 2009
                                                       Date of Order: March 02, 2009
+ ARB. P. 210/2004
%                                                          02.03.2009
     Unitech                                        ...Petitioner
     Through: Mr. S.K. Maniktala with Mr. Alok Tripathi and Mr. Jeemon,
     Advocates

         Versus

         J.K. Industries Ltd.                           ...Respondent
         Through: Mr. T.K. Ganju Sr. Adv. with Ms. Meghalee, Ms. Rajeshwari, Mr.
         Rajat Bhardwaj and Mr. Ranjan Narain, Advocates


         JUSTICE SHIV NARAYAN DHINGRA

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

2.       To be referred to the reporter or not?

3.       Whether judgment should be reported in Digest?


         JUDGMENT

1. This petition under Sections 14, 17 & 29 of the Arbitration Act, 1940

(hereinafter "the said Act) read with Section 151 of CPC has been preferred

by the petitioner for making the award dated 31st August 2004 a Rule of the

Court.

2. After notice of the award was served upon the respondent, the

respondent filed objections to the award under Sections 30, 33 of the said Act

and prayed that the award be set aside. The objections were raised by the

respondent on the ground that the learned Arbitrator had mis-conducted

himself in the proceedings and there were prima facie errors apparent on the

face of the record.

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 1 Of 8

3. Brief facts are that the respondent awarded a contract for construction

of a factory building and other civil and engineering works including laying of

foundations for equipment and machinery at Banmore Tyre Plant Site in

District Morena, Madhya Pradesh to the claimant. The claimant had been

sending running bills to the respondent every month on the basis of the work

executed by the claimant and joint measurement done by the claimant and

the Consultant appointed by the respondent. After the work was over, the

claimant submitted final bill. Initially, the respondent had appointed M/s DCL

as its Consultant. DCL remained as Consultant upto 17th running bill.

Thereafter, the respondent had appointed M/s GC Sharma as its consultant

for verification and checking of the bills. M/s GC Sharma did the work of

checking the running bills and final bill from 18th running bill onwards. In the

final bill the respondent raised a dispute about the correctness of

measurements. The measurements were verified by respondent's consultant

M/s GC Sharma. Annexure C-1/A, a document duly singed by the Chief

Engineer of the respondent and representative of M/s GC Sharma shows that

against a total bill of Rs.4,14,92,192.76 after checking and verification of the

bill by M/s G.C. Sharma, an amount of Rs.3,85,39,983.88 was cleared for

payment. However, the bill finally passed by the respondent and signed by

DN Rathi was of Rs.3,62,64,224.41. Since an amount of Rs.24,37,138.57 was

deducted in respect of the earth work and lead. This amount of Rs.3,62,64,

224.41/- was also not paid to the claimant. Thus the claimant sought a

reference of the dispute to the Arbitrator and the matter was referred to the

Arbitrator. Before the learned Arbitrator, the claimant initially made total 9

claims amounting to Rs.5,79,11,729.11. However, during proceedings, the

claimant gave up certain claims and the claim stood reduced to

Rs.4,61,80,970.74. During further proceedings after reconciling the accounts

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 2 Of 8 and payments received, the claimed amount was reduced and it stood

reduced to Rs.61,73,440.74. The final proceedings before the learned

Arbitrator and the award passed by learned Arbitrator shows that the claim

was further limited to Rs.47 lac only and claimant conceded that rest of the

payment has been received.

4. The respondent also filed six counter claims amounting to around Rs.

One crore. The learned Arbitrator gave full latitude to the parties to establish

their claims; and also appointed Local Commissioner for measuring the visible

items of the constructed portions. After spending more than 9 years in the

arbitral proceedings, he ultimately gave an award of Rs.47 lac to the claimant

towards principal amount. He awarded 15% simple interest from 1st April

1993 to 1st April 1997 and thereafter 12% simple interest from 1st April 1997

to 31st March 2002 on the principal amount and from 2002, the interest was

further reduced to 9% per annum. Thus the total interest from 1 st April 1993

till passing of the award was calculated and it amounted to Rs.66,62,250/-.

The future interest of 9% on the award was allowed if the payment was not

made by 31st March 2004. Rs.3 lac was allowed as costs of Arbitration.

5. Counsel for the objector/respondent vehemently argued that the

learned Arbitrator wrongly relied upon the document Annexure C1/A. It is

submitted that this document was an internal document of the objector and

the Arbitrator could not have relied upon this document. The award based on

this document was therefore bad and this was an error apparent on the face

of award. The other ground of challenge of the award by the objector is that

as per the contract, the total value of contract was fixed at Rs.218 lac and

was revised to Rs.220.35 lacs. The contract provided a permissible increase in

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 3 Of 8 value by 25% of the contract value and further provided that the value of the

extra items covered in the contract in no case were to exceed Rs.59,85,583/-.

Thus, as per the terms of the contract, the maximum of the contract could not

exceed Rs.335.28 lac, while the claimant claimed amount more than the total

contractual value of the contract and the Arbitrator allowed amount of Rs.47

lac which was beyond the contractual value. The Arbitrator could not have

travelled beyond the contract and the award was, therefore, bad in law.

6. During arguments, counsel for the respondent also pointed out the

difference between the total running bill and the final bills. He submits that

the final bill could not have been raised by claimant more than the total of the

running bills and the calculations mentioned in the final bill of claimant

exceeded the quantities as mentioned in the running bills. It is stated that

this difference in the quantities of the final bill and the running bills was

pointed out to the Arbitrator but the Arbitrator paid no attention to this and,

therefore, the learned Arbitrator mis-conducted himself during the

proceedings.

7. I consider that none of the objections raised by the respondent are

sustainable. A perusal of the award passed by the learned Arbitrator would

show that the Arbitrator had made all efforts to reconcile the disputes

regarding measurement. He also appointed a Local Commissioner on the

suggestions of both the parties. After Local Commissioner gave report, the

parties had prepared a chart of payable amounts against different items on

the basis of agreed measurements of many of the items. The efforts of

compromise, however, fizzled out. The measurement of the items so agreed

shows that the claims made by the claimant was on the basis of actual

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 4 Of 8 measurements of the area and the work done. The Local Commissioner's

report was ultimately rejected by the Arbitrator because both the parties after

taking several hearings and opportunities to arrive at a common basis did not

come forward with any common basis. The learned Arbitrator also found that

the Local Commissioner had exceeded his jurisdiction. He even included

measurement of hidden items which could not have been measured. He, in

his report, talked of defects in the building which was not his jurisdiction,

neither the part of commission. He also subjected some parts of the building,

after taking samples, to quality control testing which was also not part of his

commission. Considering the fact that the Local Commissioner exceeded the

commission, his report was rightly rejected by the learned Arbitrator.

8. The learned Arbitrator rightly relied upon the Annexure C-1/A. The

respondent/objector could not have claimed that this document could not be

relied upon by the learned Arbitrator as it was an internal document of the

objector. It was settled between the parties that all bills sent by the claimant

were to be referred to the Consultant appointed by the Objector and the

consultant was to verify the bills. This verification of the bill was to be done

by the consultant after joint measurement. This exercise of joint

measurement was to be done by the Consultant in presence of the

representatives of the claimant. Annexure C-1/A is the document prepared by

the consultant of the respondent/objector wherein he had reduced the final

bill of the claimant after doing verification of the measurement of the work

done by claimant. It was not open to the respondent not to agree with the

consultant and say that whatever has been written by the consultant was

beyond his authority. The stand taken by the respondent that Mr. R.S.

Chadha, the person deputed by M/s GC Sharma had no authority to do the

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 5 Of 8 measurement and arrive at the amount payable to the claimant is baseless.

All the pre-final bills and the final bill were checked by a person, deputed by

M/s GC Sharma and this summersault taken by the respondent was rightly

rejected by the learned Arbitrator. Similarly, the claim of the respondent that

another measurement was carried out by Mr. Somarajan, representative of

the claimant was rightly rejected. The learned Arbitrator had found that Mr.

Somarajan had resigned from the services of the claimant much before the

date of alleged joint measurement by the objector/respondent. I consider that

this joint measurement was a false boggy raised by the respondent.

9. As far as claim of the objector regarding exceeding total value of the

contract is concerned, I find that this plea is baseless. Clause 3 of the

agreement entered into between the parties which has been reproduced in

the award reads as under:

"3. This Contract comprises the construction of buildings, machinery and equipment foundations, other civil engineering works and all other subsidiary works connected therewith within the same site as may be ordered to be done from time to time by the company for the time being although such works may not be shown on the drawings or described in the said specifications or the said schedule of rates." (emphasis added)

10. The learned Arbitrator after going through the contract has come to

conclusion that the contract was item rate contract. It is also a fact that all

running bills were passed by the consultant appointed by the objector on the

basis of contract which prescribed item-wise rates and the total value of the

running bills itself exceeded the amount being stated by the objector as the

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 6 Of 8 total amount of the contract. Had the total amount of the contract been

limited, the running bills would not have been approved on the basis of item

rate and the measurement? The mere fact that the running bills were

approved on the basis of item rates and measurement shows that the

payment was to be made for the work executed on the basis of item rates.

The estimated value of the contract specified in the contract could not have

limited the value of the total contract. If this limitation had been there, there

would have been some clause about limiting the value of the running bills and

there would have been percentage payment prescribed of the total value of

the contract at different stages. The very fact that all running bills were to be

approved on the basis of the work done item-wise and rates approved in the

contract, the plea taken by the objector must fail. I find that the learned

Arbitrator in this case had remained within the four corners of the contract

and the award rendered by the learned Arbitrator is not beyond the

provisions of the contract and the award cannot be interfered on this ground.

11. It is settled preposition of law that Court while examining an award

under Sections 14 and 17 or under Section 30 and 33 of the Arbitration and

Conciliation Act does not act as an appellate court and cannot re-appreciate

the evidence and cannot rewrite the judgment either upholding the award or

rejecting the award. The Court has only to see that the learned Arbitrator has

not committed any error apparent on the face of it and the award is not

based totally on no evidence or the learned Arbitrator was not biased towards

one party or has not conducted the proceedings in a biased manner. No

procedural error or bias of the learned Arbitrator is reflected from the

proceedings of the arbitration. The award passed by the learned Arbitrator is

a reasoned award and I do not find any preposition of law relied upon by the

Arb.P.210/2004 Unitech Vs J.K. Industries Ltd. Page 7 Of 8 learned Arbitrator which is illegal. There is no error apparent on the face of

the award. The objections raised by the objector/respondent are baseless and

untenable. The same are hereby rejected. The petition filed by the petitioner

hereby succeeds. The award passed by the learned Arbitrator is hereby made

Rule of the Court. Decree sheet be drawn accordingly.

12. The petition stands disposed of in above terms.

March 02, 2009                                       SHIV NARAYAN DHINGRA J.
rd




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