M/S S.Bedi Construction Co. vs Delhi Development Authority
2009 Latest Caselaw 2208 Del

                   * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                            Date of Reserve: 13.5.2009
                                                          Date of Order: 22nd May, 2009

CS(OS) No. 2189/1994
%                                                                         22.5.2009

       M/s S.Bedi Construction Co.                   ... Plaintiff/petitioner
                          Through: Mr.D.Moitra, Advocate

               Versus


       Delhi Development Authority                      ... Defendant/Respondent
                          Through:          Ms.Geeta Mehrotra, Advocate


IA No. 1055/1995 in CS(OS) No. 2593/1994
%

       M/s S.Bedi Construction Co.                   ... Plaintiff/petitioner
                          Through: Mr.D.Moitra, Advocate

               Versus


       Delhi Development Authority                   ... Defendant/Respondent
                          Through: Ms.Geeta Mehrotra, Advocate


JUSTICE SHIV NARAYAN DHINGRA

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

2. To be referred to the reporter or not?                                        Yes.

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

JUDGMENT

By this order I shall dispose of petition/suit filed by the petitioner for

making the award dated 26.9.1994 rule of Court and objections filed by the respondent

assailing the award whereby the learned Arbitrator had allowed the claims of the

petitioner.

2. The claimant raised 21 claims before the Arbitrator. Claim no.1 was in

respect of unpaid bills. The Arbitrator allowed this claim to the tune of Rs.1,59,881/-.

The respondent has not objected to this claim. Claim No.2 was for sum of Rs.6,550/- on

account of recovery of rebate. This rebate was claimed by the respondent on account of

timely payment of the running bills in terms of the contract. Against this claim, the

learned Arbitrator allowed a sum of Rs.3,374/-. The objection of respondent is that the

amount has been awarded without discussing as to why the rebate claimed was not

admissible. Similarly, claim no.3 was made by the petitioner for sum of Rs.4 lac on

account of increase in labour rates and prices of material like bricks, brick tiles, badarpur

and other building materials under Clause 10C. The claimant then modified its claim to

Rs.2,61,725/-. The learned Arbitrator observed that the claim of the petitioner was

justified to the extent of 50% and allowed him Rs.1,30,860/- Similarly, claim no.4 was

made by the claimant for Rs.81,300/- against overweight of steel issued by the

respondent. The learned Arbitrator observed that claim was justified to the extent of

50% and allowed Rs.40,650/-. Claim No.8 was made by the claimant on account of

disposal of surplus earth by mechanical transport as per direction of the respondent.

The learned Arbitrator observed that he considered the claim of the claimant justified to

the extent of 50% and allowed Rs.20,875/-. Claim no.12 was for on account of providing

Jamuna Sand under floors for Rs.16,000/-, which the claimant had modified to

Rs.15,698/-. The learned Arbitrator upheld the claim of the petitioner to the extent of

50% and awarded Rs.7850/-. Claim No.13 was for Rs.1 lac on account of unjust

recoveries made by the respondent for repairs to flats, reduction or penal recoveries

after the maintenance period. The learned Arbitrator held that he considered the amount

of Rs.54,470/- as the justified claim. Claim no.14 was made by the claimant alleging

short payment for marble chips, flooring. He initially made this claim for Rs.42,000/- and

then modified it to Rs.40,400/-. The learned Arbitrator upheld the claim to the extent of

50% and awarded an amount of Rs.20,200/- towards this claim. Claim No.16 was for

Rs.1,20,000/- on account of expenses on watch and ward. The learned Arbitrator

allowed almost 50% of this claim and awarded Rs.58,650/- Claim No.17 was made by

the claimant for Rs.4,00,000/- on account of additional expenditure incurred on staff

conveyance etc. due to delay in execution of the work. The learned Arbitrator allowed

25% of this and held that the petitioner/claimant was entitled to Rs.1 lac. Claim No.18

was on account of damages for rise in prices due to prolongation of the contract period.

The Claimant had made a claim of Rs. 15,00,000/- The learned Arbitrator considered

that the earlier claim made by the petitioner under Clause 10Cwas only for labour, bricks

etc., whereas building work included a number of other materials, the rate of which had

also increased. He held that the claimant was not entitled to 15,00,000/- and was

entitled to Rs.3 lac. In Claim no. 5, the claimant had claimed additional amount of

Rs.6,000/- for plastering the exterior walls above 10 m height alleging that he had to put

extra labour above 10 m height. The learned Arbitrator allowed the claim to the tune of

Rs.5734/-.

3. The counsel for the respondent (DDA) has assailed the award on the

ground of it being whimsical, illogical and totally arbitrary. She submitted that the

learned Arbitrator cannot deal with the claims in respect of contractual quantities in a

fashion that he gives different percentage of amount claimed, to the claimant.

4. It is settled law that the Arbitrator is bound by the contract between the

parties and he cannot act in a whimsical manner. All claims which are made by the

contractor before the Arbitrator are to be decided in terms of the contract and not

according to the whims and fancies of the parties or of the Arbitrator. Where price

escalation clause is provided in the contact, the price escalation can be granted only in

accordance with that clause and not otherwise. Where the prices are quoted for the

different items and the contract is entered into at the prices as mentioned by the

contractor, there is no ground for giving any benefit to the contractor for fluctuation in

price except as provided in the contract and this fluctuation of the price in terms of

contract can only be granted in terms of the contract. Clause 10C under which the

petitioner had made claim no.3 reads as under:

If during the progress of the works, the price of any material incorporated in the works, (not being a material supplied from the Engineer-in-Charge's store accordance with Clause 10 hereof) and/or wages of labour increases as a direct result of the coming into force of any fresh law, or statutory rule or order (but not due to any changes in sales tax) and such increase exceed ten percent of the price and/or wages prevailing at the time of receipt of the tender for the work, and contractor thereupon necessarily and properly pays in respect of the material (incorporated in the work) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied provided always that any increase so payable is not, in the opinion of the Superintending Engineer [whose decision shall be final and binding] attributable to delay in the execution of the contract within the control of the contractor. Provided, however, no reimbursements shall be made if the increase is not more than 10% of the said prices/wages and if so the reimbursements shall be made only on the excess over 10% and provided further that any such increase shall not be

payable if such increase has become operative after the contract or extended date of completion of the work in question.

If during the progress of the works, the price of any material incorporated in the works [not being a material supplied from the Engineer-in-Charge's stores in accordance with Clause 10 hereof] and/or wages of labour is decreased as a direct result of the coming into force of any fresh law or statutory rule or order [but not due to any changes in sales tax] and such decrease exceeds ten percent of the prices and/or wages prevailing at the time of receipt of the tender for the works. Delhi Development Authority shall in respect of materials incorporated in the works (not being materials supplied from the Engineer-in-Charge's stores in accordance with Clause 10 hereof) and/or labour engaged on the execution of the work after the date of coming into force of such law, statutory rule or order be entitled to deduct from the dues of the contractor such amount as shall be equivalent to difference between the prices of materials and/or wages as they prevailed at the time fo receipt of tender for the work minus ten percent thereof and the prices of materials and/or wages of labour on the coming into force of such law, statutory rule or order.

The contractor shall for the purpose of this condition keep such books of account and other documents as are necessary to show the amount of any increase claimed or reduction available and shall allow inspection of the same by a duly authorized representative of Delhi Development Authority and further shall, at the request of the Engineer-in-Charge furnish, verified in such a manner as the Engineer-in-Charge may require any document so kept and such other information as Engineer-in-Charge may require.

The contractor shall, within a reasonable time of his becoming aware of any alteration in the prices of any such materials and/or wages of labour, give notice thereof to the Engineer-in-Charge stating that the same is given in pursuant to this condition together with all information relating thereto which he may be in a position to supply.

5. It is apparent from the reading of this clause that if the increase in prices

of material purchased by contractor or the labour rate is more than 10% of the value of

the contract, then only the contractor can make a claim in respect of increase in prices

that also only for the amount which is beyond 10%. The Arbitrator while granting

amount under Clause 10C has necessarily to grant the claim in terms of the contract.

The learned Arbitrator had no power to say 'I grant 50% or 60% or 30% of the amount

claimed'. In the present case, the learned Arbitrator acted in a very strange manner. In

most of the claims of the claimant he granted claims on the basis of his imagination and

whims & fancies without resorting to specific clauses of the contract governing the item.

He could not have allowed the claims without considering the clauses of the contract.

Regarding filling of plinth with Jamuna sand under floors, item 1.3 reads as under:

1.3 Filling in plinth with Jamuna Sand under floors including watering, ramming consolidating and dressing complete.

               Quantity        -       15.80 Cum.
               Unit            -       Cum.
               Rate            -       25.45
               Amount          -       Rs.402/-

6. It is obvious that the filling of Jamuna Sand under floors was part of the

contract and no separate amount could have been awarded to the petitioner but the

learned Arbitrator without referring to the clause of the contract allowed an amount

claimed vide claim no. 12 to the extent of 50%. Similarly, disposal of loose

earth/excavated soil in accordance with the directions of the engineer was covered

under Clause 1.1. Whether this disposal is done through mechanical method or through

manual method would not make the difference. The Arbitrator without referring to

clause 1.1 awarded 50% amount claimed to the petitioner. In the same manner, the

clause regarding marble flooring is specifically given in item no. 7.2. The learned

Arbitrator despite the petitioner having received rates in accordance with the quantities

executed by him in terms of clause 7.2, awarded additional amount on the ground that

the top layer of marble chips was more than 6 mm thick and it was 9 mm thick. There

was no evidence before him (the Arbitrator) that the marble chips, layer was 9 mm thick,

the learned Arbitrator stated that since the floor laid could not be broken and the

evidence could not be seen so, he allowed 50% of the claim. The plastering of the walls

beyond 10 feet high was part of the contract and it was specifically provided in the

contract that no extra amount shall be paid for height above 10 feet however, without

referring to the contract, the learned Arbitrator allowed claim of this amount as well.

7. It is argued by the learned Counsel for the petitioner that the Arbitrator

was an expert and was retired CPWD Engineer. He had given his award after

considering the averments of both the sides and the evidence so, the award cannot be

set aside on this ground. He submitted that insufficiency of reasons is no ground for

setting aside the award.

8. I consider that even an expert cannot be allowed to give an award in a

mechanical manner by saying that he allows 50% of the each claim. There is no manner

of measuring that 50% of the claim of the claimant was right. If the awards are given in

this manner every claimant would make claims in an exorbitant manner and ask the

Arbitrator to give 50% or 40% of it without any necessity for the arbitrator of recording

reasons why he was allowing 50%, 40% or 30%. Every claim has to be considered in

accordance with the contract and the Arbitrator cannot travel beyond the contract and

cannot allow claims in a fanciful manner. In Union of India v. Banwari Lal & Sons (P)

Ltd. (2004) 5 SCC 304 Supreme Court had observed that an Arbitrator cannot clothe

himself with such jurisdiction so as to act arbitrarily, irrationally, capriciously or

independent of contract. The determination of quantum of damages has to be

dependent upon the facts and terms of the contract. Where the Arbitrator does not apply

the terms of the contract for determining damages and gives damages on the basis of

his experience, such an award cannot be upheld.

9. I consider that the present award, except for claim no. 1, is liable to be set

aside. I, therefore set aside the award in respect of all other claims except claim no.1.

The award in respect of claim no. 1 is hereby upheld and made rule of Court. Decree

sheet in terms of in claim no. 1 of the award be prepared. The petitioner would be

entitled to simple interest at the rate of 9% p.a. on the amount of claim no.1 from the

date of final bill till realization.

With these directions, both the suits/petitions as well as objections to the

award stand disposed of.

May 22, 2009                                             SHIV NARAYAN DHINGRA, J.
vn