Delhi Development Authority vs Madhur Krishna
2009 Latest Caselaw 896 Del

*                 HIGH COURT OF DELHI AT NEW DELHI

+                           FAO (OS) 267/1996

%                                 Decided on: 19th March, 2009


       Delhi Development Authority       ..... Appellant
                     Through Mr.Gaurav Sarin, Advocate

                  versus

       Madhur Krishna                    ..... Respondent

Through Mr.S.K. Rungta, Advocate

CORAM:

HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE S. MURALIDHAR

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

2. To be referred to the Reporter or not ? NO

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

AJIT PRAKASH SHAH, CHIEF JUSTICE :

This appeal is directed against the order dated 10 th January,

1996 passed by Devinder Gupta, J in IA No.10912/1990 and Suit

No.2431-A/1990. By the impugned order the learned Judge was

pleased to overrule the objections raised by the appellant DDA

and make the award dated 19th July, 1990 of the sole arbitrator

rule of the court.

2. The facts giving rise to the present appeal are as follows:

The appellant DDA entered into an agreement being

Agreement number 4/EE/HD/XXIX/83-84 for "Construction of

Office Building for Circle V and Divisions" with the respondent.

The work was awarded to the respondent vide letter dated 13 th

February, 1984. After the work was awarded, the site of the work

was changed from District Park on the west side of the outer ring

road to a new low lying site on the east of the outer ring road in

West Delhi. According to the respondent, in view of the urgency

of the work he had made arrangements and started work at the

old site when he was asked to shift operation to the new site.

The new site being low lying and water-logged required extensive

filling with earth to be brought from outside. There were large

variations in the nature and scope of the work to be done and the

work got abnormally delayed due to reasons beyond the control

of the respondent. Most of the claims of the respondent arose

out of the change in site and revised requirements of work. The

claims were referred to the sole arbitrator, who gave his award on

19th July, 1990 whereby various claims raised by the respondent

were partially granted. The claim for pendente lite interest was,

however, denied by the arbitrator. By the order under appeal the

award was made rule of the court.

3. The basic contention raised by Shri Gaurav Sarin, learned

counsel appearing for the DDA, is that the arbitrator has failed to

give reasons in support of the award and thereby contravened

the express requirement of clause 25 of the agreement. He

contended that the award does not disclose any application of

mind by the arbitrator to specific evidence, oral or documentary,

led before the arbitrator. The arbitrator has merely stated as to

what the party has stated / alleged before him and has not

recorded any finding or reasoning. There is no application of

mind or indication of the trend of the thought process of the

arbitrator in the award. According to the learned counsel, the

rational process of evaluating and assessing the evidence is

totally missing in the award.

4. In reply, Shri S.K. Rungta, learned counsel appearing for the

respondent, contended that it is settled legal position that where

arbitrator is required to state reasons for award, as is in the

present case, it does not imply that the arbitrator has to give a

detailed judgment. He contended that the only requirement is

that a reading of the award should indicate the thought process

of the arbitrator and if award is capable of reading the mind of

the arbitrator, the requirement of stating the reasons is met. He

submitted that the arbitrator has looked into the contentions

raised by the respective parties and also into the evidence led by

the parties by dealing with each of the claims separately. In

addition, the arbitrator has also given his findings on the basis of

his observations and on the basis of inspection of the site in

question. Furthermore, the findings of the arbitrator in respect of

each of the claims were also based on admitted facts such as the

fact that the site for which the tender was awarded and on the

basis of which the respondent gave his rates in the bid, was

shifted by the appellant and the shifted site was not of the same

nature. Therefore, according to Mr.Rungta the award cannot be

said to be a non-speaking award.

5. Having regard to the rival submissions made at the Bar, the

short question which arises for our consideration is whether the

award of the sole arbitrator is without the support of any reason.

In other words, whether the award is a non-speaking award.

There is no dispute that the arbitrator was supposed to give

reasons in view of the mandate in the arbitration agreement.

Whereas contention of the DDA is that the award on many claims

is non-speaking. The respondent, who has got the award in his

favour, contends otherwise and asserts that sufficient reasons,

which are required to be given by the arbitrator, are found in the

award.

6. Both the learned counsel agreed that it was not essential for

the arbitrator to give a detailed reasoned decision indicating each

minute step of his mental meanderings. The reasons given

should reflect the thought process of the arbitrator, whereby it

can be ascertained as to how he arrived at a particular

conclusion. This principle is succinctly laid down in College of

Vocational Studies v. S.S. Jaitley AIR 1987 Delhi 134 wherein

the Division Bench observed:

"By reasons it mean that the award should be a 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 arrived at a particular conclusion. In case of a 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."

7. In this regard reference may be made to a Division Bench

judgment of this Court in Delhi Development Authority v. M/s

Alkaram, New Delhi AIR 1982 Delhi 365. The Division Bench

held that it was not necessary for the arbitrator to set out the

actual calculations, figures, as worked out by him, what was

important was that there was material / evidence before him and

the thought process indicated that the arbitrator had taken the

said material into consideration while arriving at particular

figures. Following observations of Avadh Behari Rohatgi, J are

pertinent and need verbatim reproduction:

"What reasons are sufficient in any particular case must, of course, depend upon facts of the case. I approach the matter in this way; that reasons are not deficient merely because every process of reasoning is not set out. I further think that reasons are not insufficient merely because they fail to deal with every point raised before the arbitrator at the hearing. No universal; generalization can be made. Everything depends on the subject matter. In deciding a controversy the arbitrator works in an environment which is quite different from

that of the Judge. He is not bound by the technical rules of evidence. The „ropes and pulleys‟ that he uses in the arbitral process are different from the foot rules and set squares that we use in the judicial process. From the arbitrator what is wanted is "a practical decision on the disputed issues" (Abasalom Ltd. V. Great Western (London) Garden Village Society, 1933 AC 592 (616) per Lord Wright). He knows that businessmen want to do business and not to argue about it. He gives not judicial justice, but rough justice of the world. Because he is not bound by the "codeless myriad of precedents". Many have found salvation in the faith they reposed in this private domestic forum for the settlement of their disputes. xxxx My conclusion in his case is that the arbitrator was the final judge of fact. The Court is bound by the arbitrator‟s findings of fact and cannot review them unless they are unsupported by evidence and unless it appears from the award itself that there was no evidence to support the finding. It is not open to the court to examine the adequacy of evidence which led the arbitrator to his findings of fact. His findings are final."

8. In the concurring judgment Leila Seth, J, as she then was,

observed:

"42. There was material before him to establish that the price had risen substantially. He was

justified in not accepting the calculations of either party and arriving at his own figure in accordance with the facts ascertained by him. He has not based his decision only on the claim of the contractor, as contended by learned counsel for the appellant.

43. In these circumstances I feel that the arbitrator was well within his jurisdiction to come to this conclusion. The question whether I would have come to the same conclusion or arrived at the same figures is not material. Once there is evidence, there is no apparent error and/or misconduct. I cannot go into the sufficiency of the evidence; nor is it necessary for the arbitrator to set out the actual calculation figures as worked out by him; his reasons, as mentioned, are adequate and clear; it is not essential for him to give a detailed reasoned decision indicating each minute step of his mental meanderings."

9. In DDA v. Bhagat Construction Co. (P) Ltd. & Another

2004 (3) Arb. L.R 548 (Delhi), a Division Bench observed that if

award shows application of mind, it is to be taken as correct and

it was not necessary for the arbitrator to disclose mathematical

calculations in the award. The Court observed in para 8 of the

judgment that where the arbitrator was retired Chief Engineer of

the CPWD and thus well conversant with the kind of disputes on

which he was adjudicating and further that he had given his

detailed reasons for arriving at a finding that delay was

attributable to the DDA, thereafter while discussing each claim it

was not necessary for him to disclose the mathematical

calculations in the award for arriving at particular figures, if the

award shows the application of mind and view which is plausible

by the arbitrator.

10. In Bharat Furnishing Co. v. Delhi Development

Authority and another 1992 (1) Arb.Law Reporter 327, Jaspal

Singh, J laid down that where the arbitrator is required to give

reasons for the award, he need neither proceed to write a

detailed judgment nor set out every process of reasoning. But

there must be reasons. The Court is entitled to examine the

reasonableness of the reasons. The reasons being the links on

the material adduced before the arbitrator on which certain

inferences are drawn and conclusions are made, there has to be

some rational nexus to indicate in the award itself. The learned

Judge came to the conclusion that many claims were awarded by

the arbitrator without disclosing any reasons.

11. In an unreported decision in Anil Garg v. Delhi

Development Authority & Ors. bearing Suit No.21-A of 1996

decided on 17th December, 1999, a learned Judge of this Court

dealt with the same question. Taking into account the aforesaid

judgments as well as discussing a few judgments of the Supreme

Court, the learned Judge culled out the ratio of those judgments

as follows:

"The ratio established in Municipal Corporation of Delhi vs. Jagan Nath Ashok Kumar & Anr., AIR 1987 SC 2316 was that the reasonableness of the reasons given by an arbitrator in making his award cannot be challenged in proceedings under Article 136 of the Constitution. This was reaffirmed in the subsequent decision of the Apex Court in State of Rajasthan v. Puri Construction Co. Ltd. & Anr, JT 1994 (6) SC 412 and it was further observed that "it is not necessary to indicate in the award computation made for various heads and it is open to the arbitrator to give a lump sum award"

A Constitution Bench of the Supreme Court had reversed the decision of a Division Bench of the Bombay High Court in the case of Goa, Daman & Diu Housing Board v. Ramakant V.P. Darvotkar, AIR 1991 SC 2089, on facts singularly similar to the case in hand. A clause in the covenant between the parties stipulated that where the amount of claim in dispute was Rs.50,000/- and above, the arbitrator was bound to give reasons for his award. The arbitrator had detailed the rival contentions and the documents relied upon by them. In setting aside the award the Bombay High Court had observed that "the award nowhere contained any reasoning and did not even obliquely mention that he had adopted the reasoning of either party". Even in the context of this cryptically worded award, the

apex court had reversed the High Court‟s decision and given its imprimatur to the Award. To my mind, the legal obligation of giving reasons is far more onerous than that of disclosing the "trend of thought process", and the former would necessarily encompass the latter. By an extrapolation of the ratio of the Apex Court, if the words employed in the Bombay Award under scrutiny fulfilled the obligation of disclosing reasons (being over Rs.50,000/-), similarly used words would overwhelmingly fulfill the requirement of the Arbitrator disclosing the trend of his thought process. If, by merely referring to the rival contentions and their documents, without more, the Arbitrator in that case had been held to have given a reasoned award, where a similar practice is adopted in other cases, it would more than sufficiently comply with the need of disclosing the trend of the thought process of the Arbitrator.

The essence of the decisions of the Supreme Court appears to be that if on a reading of the award it is obvious that the arbitrator had kept the rival contentions in perspective at the time of the passing of the award, then the award sufficiently complies with the compulsion to give reasons. As shown above, AIR 1991 SC 2089 is a case of a mere narration of the parties‟ contentions, followed by the mention of the quantum awarded. It was however found to be a reasoned award

and upheld. I am fortified in distilling the various judgments thus, in large measure, by the other observations to the effect that the reasonableness of reasons is non justiciable. In any event, in the Bombay case the Supreme Court having given its approval to the award which after setting out the rival contentions immediately proceeded to specify the quantum awarded, can be inferred to have opined that in such circumstances, the thought process of the Arbitrator was obviously present. The Supreme Court had reversed the judgment of the Division Bench of the Bombay High Court which had taken the view that the impugned award was liable to be set aside for failure to give reasons therein."

12. In a recent judgment delivered in CS(OS) Nos.1436/1993,

2209/1993 titled M/s Kalyan Chandra Goyal & Co. and

another v. Delhi Development Authority & Another and

other cases delivered on 6th July, 2007, A.K. Sikri, J, after

considering the previous judgments summarised the principles as

under:

"I. The Arbitrator is not supposed to pass a speaking award except when it is provided under terms of reference or the arbitration agreement.

II. Where the arbitrator is under obligation to give reasoned award:

(i) it is not essential for the Arbitrator to give a detailed reasoned decision

indicating each minute step of his mental meanderings. The reasons given should reflect the thought process of the Arbitrator, whereby it can be ascertained as to how he arrived at a particular conclusion;

(ii) mere conclusion and verdict would not be sufficient; 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 conclusion and reasons given in the Award;

(iii) the Award shall be intelligible so that the Court may come up to the conclusion whether there is any error of law apparent on the face of the award;

(iv) it is not necessary for the Arbitrator to set out the actual calculations, figures as worked out by him; and

(v) when the reasons given by the Arbitrator are germane, relevant and have rational nexus with the conclusions arrived at by him, the reasonableness of the reasons cannot be challenged and it cannot be said to be unreasonable."

13. In the light of this well established principle, we may now

proceed to deal with the various claims raised by the respondent,

which have been partially allowed by the arbitrator.

CLAIM NO.1:

14. The respondent claimed Rs.1.35 lacs due to change in the

scope of the work and also on account of change of site

previously shown. The arbitrator awarded an amount of

Rs.45,000/- against the claim of Rs.1.35 lacs. While allowing the

amount of Rs.45,000/- towards claim No.1, the arbitrator after

recording the contentions of both the parties awarded the said

sum on the basis of records and evidence before him. On a

perusal of the award it is seen that the appellant did not dispute

the change of site on the basis of which the tender was awarded.

Furthermore, the arbitrator before proceeding to deal with the

claims and making the award, inspected both the sites in

presence of both the parties and his award is based on the

pleadings, evidence and record produced before him. In our

opinion, it clearly meets the requirement of reasoned award. The

arbitrator has based his calculations on the material placed on

record. It was not necessary for him, in view of the legal position

noted above, to give the process of mathematical calculation.

CLAIM NO.2:

15. The arbitrator has awarded an amount of Rs.2.50 lacs

against the claim of Rs.5 lacs on account of work done but not

measured and paid. The arbitrator awarded the said amount

under claim No.2 after considering the contentions of the parties.

It is seen from the contentions of the appellant DDA recorded

against this claim in the award that there was no dispute of the

quantity of work that was done by the respondent and also that

there was no dispute with regard to the fact that earth was

brought by the respondent and the appellant DDA could not

procure the earth from its own resources. On the basis of these

admitted positions, the arbitrator partly allowed the claim holding

that the truth lies in between and assessed the value of the work

at Rs.2.5 lacs. The award is clearly on the basis of the material

produced before the arbitrator. Therefore, it cannot be said that

he has not given his reasons for awarding the appropriate

amount.

CLAIM NO.3:

16. The arbitrator awarded an amount of Rs.24,785/- against

the claim of Rs.1 lacs on account of increase in the rates of

materials etc. The appellant opposed this claim on the ground

that they have already made the payment towards this claim

under clause 10(c) of the agreement. However, the arbitrator

gave his finding that the delay was mostly due to change of site

and the revised requirements of work and other impediments

created by the new circumstances and clause 10(c) does not

cover all increases in labour and material. On the basis of this

finding the arbitrator awarded a sum of Rs.24,785/-. We do not

find any illegality in the finding of the arbitrator.

CLAIM NO.4:

17. This claim is towards the loss of profit because only 2/3rd of

the work was got done by the department. As against the claim

of Rs.1 lac the arbitrator has awarded Rs.25,000/-. The arbitrator

has recorded the contentions of both the parties and from the

contention of the appellant it is evident that the claim under this

head was being opposed on the ground that the quantum of work

to be executed was intimated to the respondent at the time of

the award of work. However, since the respondent was claiming

the said amount by reference to annexure C-IV which annexure

was not in dispute, the arbitrator awarded the said sum after

considering the said annexure and as such it cannot be said that

reason for awarding the same is absent and also the mind

process of the arbitrator cannot be gathered.

CLAIM NO.5:

18. This claim was for the damages on account of loss of idling

labour, establishment, tools and plants etc. due to alleged non-

performance of contractual obligations by the department. The

respondent claimed Rs.4 lacs under this head. The arbitrator has

noted the case of the respondent that the work was got

abnormally delayed due to failure of the appellant to fulfill their

obligation under the contract and the respondent had to incur

expenditure on his establishment, idle labour, tools and plants

and due to reduced profitability and miscellaneous overheads etc.

Thus it is seen from the award that the arbitrator has looked into

the details given by the respondent in annexure C-V of the

statement of claims. The arbitrator has also noted the stand of

the appellant that they had duly fulfilled their obligations under

the contract and made available the site, drawings, decisions and

stipulated materials to the respondent in proper time. The

further case of the appellant was that the losses amounted had

not been true. From the pleadings before the arbitrator as well as

from the evidence and the arbitrator‟s own inspection, it is not in

dispute that the site originally shown and marked for the work in

question was shifted after the respondent had employed

machinery, plant and labour and in fact had started the work at

the old site. It is clear that this weighed on the mind of the

arbitrator while allowing the claim partly under this head and,

therefore, it cannot be said that while awarding the same under

this head, the arbitrator failed to give any reason or his award

was without reasons.

CLAIM NO.7:

19. The arbitrator has awarded a sum of Rs.4,862/- as against

the claim of Rs.9,723/- on account of rebate reduced from the

bills as Department could not make regular monthly payments

and also could not finalise the final bill within the time. While

awarding the said amount, after recording the contention of the

parties, the arbitrator has categorically stated that he is awarding

the above mentioned amount under this head on the basis of

usual practice that the bills are prepared and paid by the

Department. We do not find any reason to interfere with the

findings of the arbitrator.

20. In the result, we find no merit in the contention of the

appellant that the arbitrator has not given any reasons for the

award. The appeal is dismissed with costs.

                                      CHIEF JUSTICE



March 19, 2009                        (S. MURALIDHAR)
"nm"                                         JUDGE