M/S Kanishka Builders vs Delhi Development Authority & ...
2009 Latest Caselaw 4537 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        C.S. (OS) No. 4610A/1992


                                           9th November, 2009


M/s Kanishka Builders                                      ..Petitioner
                         Through:   Mr. Harish Malhotra, Sr. Advocate
                                    with Mr. Vipul Gupta, Advocate.
             VERSUS

Delhi Development Authority & Anr.                   ...Respondent
                         Through:   Mr. Abhishek Puri, Mr. Sunil
                                    Malhotra and Mr. Dheeraj Gupta,
                                    Advocates.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA

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

     2. To be referred to the Reporter or not?

     3. Whether the judgment should be reported in the Digest?
    %

JUDGMENT (ORAL)

I.A. No.4135/1994 in CS(OS) No.4610A/1992

1. These are objections filed by the applicant/DDA against the

Award dated 1.12.1992 of the Sole Arbitrator. The counsel for the

C.S(OS)No.4610A/1992 Page 1 DDA, on instructions, has confined his challenge to Claim Nos. 1,4,7

and 8 as made by the non-objector before the Arbitrator.

2. So far as Claim No.1 is concerned, the counsel for the DDA has

strongly argued that a reference to the discussion under claim no.1

shows that it is totally bereft of reasoning and the Arbitrator has only

given his conclusions as distinguished from reasons. According to the

counsel, conclusions cannot be construed as reasons and there must be

intelligible reasons to support conclusions arrived at. A reference to

the discussion with respect to claim no.1 shows that the contention of

the counsel for the objector is absolutely justified, I find that the

Arbitrator has simply given his conclusions by holding that there is

work beyond the deviation limit but it is however not stated as to

which items are beyond the deviation limit, what is the deviation

limit, what is the document in support of the deviation limit and so

on. Similarly, with respect to allowing the contractor, categorization

of work under 9.10 instead of 9.8 (a) and (b), the Arbitrator has given

no reasoning except saying that the work should be categorized under

item 9.10. With respect to rebates also, I find that there is absolutely

C.S(OS)No.4610A/1992 Page 2 no discussion in this regard in the Award. Even in respect of the

allowing of the claim 10CC, neither is there quantification as to what is

the amount under 10CC nor as to why such claim is being allowed

and as per what reasons. This aspect of the clause 10CC claim

becomes relevant because one of the contentions of the counsel for

the Objector while arguing claim no.4 has been that there has been

double payment to the non-objector under claim no.4 which also

pertained to higher rates on account of prolongation of the period of

the contract. No doubt, the contract has been prolonged because of

the respondents, because the contract was extended without levy of

liquidated damages, however, what should be the amount with

respect to 10CC is not clear from the Award.

Accordingly, this part of the award pertaining to claim no.1

needs to be remitted back to the Arbitrator to give reasons as required

in law for allowing or disallowing of such claims. Since the claims

have been allowed in this case, it would mean that the Arbitrator, if

he sustains these claims, is bound to give intelligible reasons and which

are reasons in law for allowing of the different items of this claim.

C.S(OS)No.4610A/1992 Page 3 Accordingly, with respect to all the heads under Claim no.1, the matter

is remitted back to the Arbitrator for giving reasons and for

quantifying the claim under Clause 10CC .

3. The second objection raised by the objector is with respect to

Claim No. 4. In this claim, the non-objector has been awarded

payment of additional cost in execution beyond the stipulated date of

completion. It is a fact appearing from the record and which cannot

be challenged in objection under Sections 30 and 33 of the Arbitration

Act, 1940 that the objector has in fact been found guilty of delays and

prolongation of the contract beyond the contractual period. This

becomes more than abundantly clear because the respondent itself

extended the contractual period without levy of liquidated damages.

If the contractor was guilty of delay, then surely extension would only

be granted subject to levy of liquidated damages. The Arbitrator is

thus justified in awarding this claim. Accordingly, the challenge to this

claim fails. However, I may note that since there is already an

entitlement as claimed by the non objector for 10CC in claim no.1, if

and when the Arbitrator awards an amount under the head of clause

C.S(OS)No.4610A/1992 Page 4 10CC then such amount will be reduced from this claim awarded

under claim No.4.

4. That takes me to the objection with respect to claim no.7. The

contention of the objector is that no reasons have been given by the

Arbitrator for awarding this claim which pertains to interest on

delayed payments. I do not agree. If we look at discussion under the

claim no. 7 we find that the Arbitrator has categorized the bills under

two categories. One category pertains to those bills wherever

Arbitrator has found as a matter of fact that there are no delays in

payments of R/A bills 17th, 28th and the final bill and therefore, the

non- objector has not been awarded any interest for delayed payment

of such bills. However, with respect to other running bills, the

Arbitrator has in fact, referred to the detailed calculations as filed by

the non-objector and on the basis of such evidence has come to a

finding of fact that there is in fact delay in payment of the bills for

which the contractor is entitled to interest on the delayed payments.

This finding of fact cannot be challenged by the Objector under

Sections 30 and 33 of the Act because there is absolutely no perversity

C.S(OS)No.4610A/1992 Page 5 noticed since the finding is based on reference to necessary material

for arriving at such a conclusion.

5. That takes me to the last claim being claim no. 8 of the award

with respect to interest. Basically what the counsel for the objector

has argued is that the rate of interest granted is highly excessive and

such high rate is not justified, though an argument is also feebly raised

with respect to grant of interest.

6. So far as the grant of the interest is concerned, it cannot be

faulted with because if the money is found to be due to a person,

interest is nothing but basically compensation for the loss which is

caused to a person for not receiving the money at a correct point of

time. Interests are, therefore, effectively, in sum and substance, loss of

profits towards monies which a person would have received in time as

the person would have earned interest thereupon. Therefore, so far

as allowing of interest is concerned the same cannot be faulted with.

The high rate of interest granted, however is an issue to which I agree.

It has been recently held by the Supreme Court in the chain of

judgments reported as Rajendra Construction Co. Vs. Maharashtra

C.S(OS)No.4610A/1992 Page 6 Housing & Area Development Authority & ors.2005 (6) 678,

McDermott International Inc. Vs. Burn Standard Co. Ltd.& ors 2006

(11) SCC 181, Rajasthan State Road Transport Corpn. Vs. Indag Rubber

Ltd. (2006) 7 SCC 700 and Krishna Bhagya Jala Nigam Ltd. Vs.

G.Harischandra, 2007 (2) SCC 720 that courts must take notice of the

changed economic scenario where on account of liberalization of the

interest regime, the rates of interest have drastically fallen. I note that

this arbitration proceedings are of the year 1992. Accordingly, in view

of the aforesaid judgments, I reduce the rate of interest under the

award wherever so specified to 9% simple.

7. With the aforesaid observations, the Award is made Rule of the

Court with respect to claims against which no objections have been

pressed. With respect to all the sub-heads under claim no.1, the

matter is remitted back to the Arbitrator to give a reasoned award.

The Arbitrator, in law, is bound to give reasons which are intelligible

reasons in law. I also hold that for the present, the claim under claim

no. 4 cannot be executed because what is the amount by which claim

no. 4 would have to be reduced with respect to the amount under

C.S(OS)No.4610A/1992 Page 7 Clause 10CC is not clear. Therefore, it is only after a fresh award

under claim no.1 is passed by the Arbitrator would the award with

respect to claim no.4 be executable.

8. With the above observations, objections are partly allowed and

partly dismissed and the Award is made Rule of the Court subject to

modifications as stated above.

9. In the facts and circumstances of the case, I leave the parties to

bear their own costs.

10. The arbitration record in this court be sent by the special

messenger to the Arbitrator with respect to the matters which are

remitted back to him for reconsideration.

                                                  VALMIKI J.MEHTA, J


November 09, 2009
dkg/ib




C.S(OS)No.4610A/1992                                              Page 8