M/S. Sukumar Chand Jain & Another vs Delhi Development Authority
2009 Latest Caselaw 4620 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        C.S. (OS) No. 976/1996
                                       12th November, 2009.


M/S. SUKUMAR CHAND JAIN & ANOTHER         ..Petitioner
                 Through: Mr. Sandeep Sharma, Advocate.

                         VERSUS


DELHI DEVELOPMENT AUTHORITY.                         ...Respondent
                         Through:    Ms. Anusuya Salwan, Advocate
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.11710/1996 in CS(OS) No.976/1996

1. These are objections under Sections 30 & 33 of the

Arbitration Act, 1940 to the Award dated 4.4.1996 passed by the sole

Arbitrator.

C.S(OS)No.976/1996 Page 1

2. The disputes arose between the parties as regards the work

of construction of 324 LIG Houses in Pocket 8 to 10 in Block B, Sector

18, Rohini, New Delhi, and which work was awarded by the objector

to the petitioner herein.

3. At the outset, I may say that the objector has not pressed

its objections with respect to claim Nos. 1 to 11 and 14 and has

objected only to the awarding of claim Nos.12 and 13 as awarded by

the Arbitrator.

4. Claim No.12 is the claim of the non-objector/claimant for

losses/damages due to idle establishment, tools and plant etc. due to

prolongation of the contract period on account of breach of the

contractual obligations by the contractor. The Arbitrator in this regard

in the Award has held as under:

"Claim No.12: The Claimants claim rs.18,00,000/- on account of losses/damages due to idle establishment, T&P etc. due to prolongation of the contract period on account of breach of contractual obligations by the depth.

Award: The claim of the claimant is for loss suffered due to idle establishment and T&P due to idle establishment and T&P due to prolongation of work. The stipulated date for completion of work is 6th October 1986 and the actual date of completion is 12th August 1991 thus lapse of about 5 years and 10 months. The claimant(s) C.S(OS)No.976/1996 Page 2 have requested for closer of contract with effect from 30th June 1987(Ext.C-23) but the respondent(s) have not produced any evidence attributing delay in part of claimant(s) and superintending Engineer has granted extension of time under clause-2 of agreement without levy of any compensation. Moreover, the respondent(s) specification and conditions, Sr.No.1, but have failed to justify the reasons for non-supply of full material within stipulated period of contract or thereafter, is due to unavoidable delay hence, the claim of claimant(s) is justified that the establishment and supervisory staff etc. remained idle including the T&P (Ext. C-21 & 23 & C-36). The prolongation of work beyond reasonable proportion for non delay on part of claimant(s) definitely increased the overhead expenditure also. I decide that the claim of the claimant(s) in terms of exhibit C-63 is justified only for overhead expenditure for idle staff @Rs.3,700 per month for period of 50 months hence, respondent(s) do pay Rs.1,85,000/- (Rs. One lac eighty-five thousand only) to claimant(s)."

5. Ms. Salwan has very vehemently canvassed two aspects

with this part of the Award so as to contend that the claim awarded in

this regard is clearly illegal and bound to be set aside. The first

objection is that though the Award gives reasons, in reality the Award

is a non-speaking Award because a very important contention raised

by the objector that the contractor/petitioner had written by means of

its letters dated 11.7.1989 (R-34) and 27.9.1988 (R-36) that no losses

have been suffered by the contractor has not been dealt with in the

Award. I may reproduce these letter as below:

C.S(OS)No.976/1996                                                     Page 3
            "To

             The Executive Engineer,

             RPD VI, DDA

             New Delhi

           Sub:      Const of 324 LIG flats at pkt 4-5-6 and 8-9-10
                     Sector 18 Rohini (Regarding 10 C.C)

           D/Sir,

We hereby certify and give undertaking that we have not suffered any loss due to delay in the completion of work and we shall not claim any things that over our stipulated rate as per agreement.

It is therefore requested that payment under clause 10 C.C may kindly be paid up to the month 10-6-1989.

Thanking you,

Yours faithfully,

Sd/-

To,

The Executive Engineer, RPD VI, D.D.A Rohini Project New Delhi.

           Sub;      Const of 640 LIG Flats at Pkt.4,5,6 and 8,9,10 at
           Sector                XVIII Rohini.

           D/Sir

We hereby certify and give undertaking that we have not suffered any loss due to delay in the completion of the work and we shall not claim any thing that over an stipulated rate as per agreement.

It is requested that payment under Clause 10 C.C. may kindly be paid up to the month of 30.9.88.

Thanking you,

Yours faithfully,

Sd/-"

C.S(OS)No.976/1996 Page 4

6. It is quite clear therefore that the contractor/non-objector

has itself said that he has not suffered any losses on account of

prolongation of the work and therefore this issue ought to have been

dealt with by the Arbitrator in the Award. What is a reasoned Award

is no longer res integra and in this regard I may refer to a recent

Division Bench Judgment of this Court reported as DDA Vs. Sunder Lal

Khatri 157(2009)DLT 555 and also two judgments of the Learned

Single Judges of this Court reported as Jai Singh Vs. DDA(2008)9

AD(Delhi) 453 and Saroj Bala Vs. Rajive Stock Brokers Ltd. and Anr .

2005(81)DRJ 143. The judgment in Jai Singh's case (Supra) deals

basically with the aspect as to what is a reasoned Award and what are

reasons to be given in an Award which has to be a reasoned Award.

In Jai Singh's case reference has been made to various dictionaries as

also various earlier judgments of this Court as also of the Supreme

Court. In this lucid judgment, the learned Single Judge has in great

detail gone into the issue as to the requirements of a reasoned Award.

I may also reproduce the observations of the Supreme Court in case of

C.S(OS)No.976/1996 Page 5 Mc . Dermott International Inc. Vs. Burn Standard Co.Ltd. (2006) 11

SCC 181 and as referred to in Jai Singh's case (supra) and which are as

under:

"17. ........ Reasons is a ground or motive for a belief or a course of action, a statement in justification or explanation of belief or action. It is in this sense that the award must state reasons for the amount awarded. The rationale of the requirement of reasons is that reasons assure that the arbitrator has not acted capriciously. Reasons reveal the grounds on which the Arbitrator reached the conclusion which adversely affects the interests of a party. The contractual stipulation of reasons means, as held in Poyser and Mills' Arbitration In Re, "proper adequate reasons". Such reasons shall not only be intelligible but shall be a reason connected with the case which the Court can see is proper. Contradictory reasons are equal to lack of reasons.

The meaning of the word "reason" was explained by the Kerala High Court in the context of a reasoned award.........

"Reasons are the links between the materials on which certain conclusions are based and the actual conclusions........"

A mere statement of reasons does not satisfy the requirements of Section 31(3). Reasons must be based upon the materials submitted before the arbitral tribunal. The Tribunal has to give its reasons on consideration of the relevant materials while the irrelevant material may be ignored..............

C.S(OS)No.976/1996 Page 6 Statement of reasons is mandatory requirement unless dispensed with by the parties or by a statutory provision".

7. I may also note that the learned Single Judge in Jai Singh's

case (supra) has referred to the Constitutional Bench Judgment of the

Supreme Court in S.N. Mukherjee Vs. Union of India (1990) 4 SCC

594 wherein the Supreme Court in paragraph 36 has laid down that

for a judgment to be a reasoned judgment it is necessary that the

judgment must deal with the points in controversy. Surely, this was a

point in controversy that the contractor gave letters in his own

handwriting clearly admitting that he had not suffered any losses.

Such admission made by the persons can be used against them as per

Section 21 of the Evidence Act 1872. The Arbitrator, therefore, not

having dealt with the letters of the contractor which clearly showed

that the contractor did not suffer any losses, makes it clear that the

Award is a non-reasoned Award in this regard because the necessary

contention which ought to have been dealt with as per

S.N.Mukherjee's case (supra) has not been dealt with. Mr. Sharma,

appearing for the non-objector, has contended that the contractor in

his pleadings has said that these letters were taken under pressure.

C.S(OS)No.976/1996 Page 7 However, I find that mere pleadings during later arbitration

proceedings without any revocation of those letter by

contemporaneous letters/documents, that such letters were obtained

under pressure, cannot be said to be a valid objection in law.

However, I am not going into this issue in detail because this is an

issue on merits which the Arbitrator is bound to and shall consider

while passing the Award as I intend to remit the matter back to the

Arbitrator. In this case, since this Court is of the view that the Award

is a non-reasoned Award, and when it had to be a reasoned one as

per the contractual clause, the matter is accordingly remitted back to

the Arbitrator under Section 16 of the Arbitration Act, 1940 to pass a

reasoned Award as required in law.

8. I may note that there are other contentions also raised by

Ms. Salwan to urge that the contractor has miserably failed to

discharge his onus to prove that there was in fact any idleness on the

basis of which the claim for losses/damages under this claim can be

sustained. Ms. Salwan has referred to the Ex.C-21, C-23 and C-36 as

relied upon by the Arbitrator to contend that these documents are

C.S(OS)No.976/1996 Page 8 mere letters basically pertaining to extension of time and they have

nothing to do with the issue of proof or quantification of actual losses

suffered due to idleness. I agree. Losses necessarily in a civil case have

to be proved on a balance of probabilities before allowing of a claim

under this head by which huge monetary liability is sought to be

imposed on the objector. It is settled law that the basic principles of

Evidence Act, 1872 are applicable to arbitration proceedings and it

cannot be contended that the Arbitrator can simply on the basis of

tenuous or non-existent evidence which cannot amount to a

discharge of onus in a civil case yet award monetary claim of losses

and damages. Once again, on this aspect whether such a claim stands

proved or does not stand proved, I am not going in further detail

because these aspects would be duly considered by the Arbitrator

when the fresh Award is passed by him as the matter is being remitted

back to him.

9. That takes me to the claim Nos. 13 which pertains to the

claim of pre suit, pendente lite and future interest which has been

awarded by the Arbitrator at 12% for pre suit period and 18% for

C.S(OS)No.976/1996 Page 9 pendente lite and future period. I may note that the Supreme Court

in a recent catena of judgments reported as Rajendra Construction

Co. Vs. Maharashtra 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 has held that on

account of the consistent fall in the rates of interest in the changed

economic scenario, Courts must take note of such position and reduce

the high rates of interest which have been granted by the Award.

Since the matter is being remitted back to the Arbitrator with respect

to claim No.12 and further since the Award grants a rate of interest

which is against the catena of the aforesaid Supreme Court judgments,

I set aside this claim whereby interest is granted pre suit @ 12% per

annum and future interest 18% per annum and direct the Arbitrator to

grant such rates of interest as deemed fit, of course, subject to the

mandate of the aforesaid Supreme Court judgments. I may note that

Ms. Salwan has also referred to the recent Supreme Court judgment in

State of Rajasthan Vs. Ferro Concrete Construction Private Limited C.S(OS)No.976/1996 Page 10 2009(3)Arbitration Law Reporter 140 wherein the Supreme Court has

even for the pre-reference period granted only interest @ 9% per

annum besides granting the said rate of 9% per annum both for the

pendente lite and for future periods.

10. With the abovesaid observations, the Award except so far

as the claim Nos.12 and 13 is made rule of the Court. Qua Claim Nos.

12 and 13, the same are set aside and the matter is remitted back to

the Arbitrator for passing a fresh reasoned Award in accordance with

law. The Arbitration record be therefore sent back to the Arbitrator

by a special messenger. Parties to appear before the Arbitrator for

further proceedings on 1st December, 2009 at 4.00 P.M. The counsel

for the parties shall file the fresh address of the Arbitrator where the

record of arbitration is to be sent by a special messenger of this Court.

                                              VALMIKI J.MEHTA, J
November 12, 2009
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C.S(OS)No.976/1996                                                 Page 11