M/S. A.S. Sachdeva & Sons vs Delhi Development Authority
2009 Latest Caselaw 4009 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

                             +C.S. (OS) No. 73/1996



                                                 6th October, 2009.


M/S. A.S. SACHDEVA & SONS                                  ...Petitioners

                           Through:     Mr. Raman Kapoor, Advocate with Mr.
                                        Honey Taneja, Advocate and Mr.
                                        R.P.Singh, Advocate.

              VERSUS

DELHI DEVELOPMENT AUTHORITY                                 ....Respondent

                           Through:     Mr. Bhupesh Narula, 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)

1. In this suit filed under Sections 14 and 17 of the Arbitration Act,

1940(hereinafter referred to as the Act) award dated 1.11.1995 passed by the

Arbitrator Sh.K.D. Bali has been filed. Notice of filing of the award was issued

CS(OS) 73/1996 Page 1 and objections have been filed by the respondent-DDA under Sections 30 and

33 Act.

2. The counsel for the objectors/DDA has challenged the award with respect

to the claim Nos. 7, 3, 5 and 1 as filed by the non-objector before the Arbitrator

and also with respect to additional counter claim No.1 filed by the respondent-

objector before the Arbitrator.

3. I will take each of the objections with respect to aforesaid claims one by

one.

4. Claim No.7 filed by the contractors/non-objectors pertains to claims of

the contractor on account of losses and damages due to the idle tools and

plant/machinery, establishment charges, watch and ward etc. and totalling to

Rs.8,00,000/-. The learned Arbitrator has dealt with claim No.7 at internal

pages 12 and 13 of the award. The Arbitrator has held that the objector was

guilty of breach on account of non-performance of contractual obligations.

Having held so, the Arbitrator has thereafter held that consequently the

contractor is entitled to its claim on account of losses suffered due to idle tools,

plants/machinery, establishment, watch and ward etc which has been quantified

at Rs.5,000/- per month which totals to a sum of Rs.2,20,000/- for the period of

44 months. It is, therefore, clear that the Arbitrator which is the final fact

finding authority has held that the objector is guilty of contractual breaches and

delays. This finding of fact could not be seriously challenged by the objector

before this Court. The counsel for the objector has specifically stressed two

CS(OS) 73/1996 Page 2 aspects with respect to the objection under this head. The first aspect is with

respect to non entitlement of losses and damages on account of two clauses of

the contract viz clause 10 and clause 1 of the specifications and conditions.

The relevant portion of clause 10 reads as under:

"Provided that the contractor shall in no case be entitled to any compensation or damages on account of any delay in supply or non-supply thereof all or any such materials and stores".

The relevant portion of clause 1 specifications and conditions reads as below:

"SPECIFICATIONS AND CONDITIONS

GENERAL

1. The contractor must get acquainted with the proposed site for the works and study specifications and conditions carefully before tendering. The work shall be executed as per programme approved by the Engineer-in-Charge. If part of site is not available for any reason or there is some unavoidable delay in supply of materials stipulated by the Department, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extras or compensation on this account."

5. On the basis of clause 10, the contention of counsel for the objector was

that when the contractor is caused damages and compensation is therefore

claimed by him on account of delay in supply and non-supply of materials by

the DDA, then, because of this relevant portion of clause 10, the contractor

should be denied its claim of losses and damages. Similar contention is urged

with respect to clause 1 of the specifications and conditions. The counsel for

CS(OS) 73/1996 Page 3 the respondent in support of his proposition has relied upon the following

judgments:

1. M.L. Mahajan Vs. DDA 76(1998)DLT 701

2. Steel Authority of India Limited Vs. J.C. Budhiraja AIR 1999 SC 3275

3. Republic Construction Company Vs. DDA being CS(OS) No.454/2009

decided on 13.7.2009.

6. The judgment in M.L. Mahajan's case has been relied upon particularly

with reference to its para 11 to contend that by virtue of this judgment it has

been held that in terms of clause 10 no compensation or damages should be

awarded to the contractor. The judgment in Steel Authority of India Limited's

case has been relied upon for the same proposition especially with reference to

its para 15 which holds that where the consequence of the contractual clause is

only extension of time for completion of work then contractor would not be

entitled to damages or compensation for such costs. The judgment in Republic

Construction Company's case has also been relied upon for the same purpose

and stress has been laid by the counsel on paras 11 and 12 of the said judgment

again to contend that the consequence of delay caused by DDA is that at best

the contractor is entitled to extension of time and nothing more.

7. In response, the counsel for the non-objector has relied upon the

following judgments:

1. Umed Singh Vs. DDA, 2001(2) Arbitration Law Reporter 21.

2. Krishna Bhagya Jal Nigam Vs. G. Harish Chand 2007(2)SCC 720

CS(OS) 73/1996 Page 4

3. Dwarika Dass Vs. State of Madhya Pradesh, 1999(3) SCC 500

4. C.R. Gulati Vs. Union of India, 1996(1) Arbitration Law Reporter 190 and a

recent judgment of Division Bench of this Court not reported however entitled

as DDA Vs. Madhur Krishna FAO (OS) No.267/96 decided on 19.3.2009. On

the basis of the aforesaid judgments, the counsel for the non-objector has

contended that some amount of honest guesstimate is involved in the

computation of damages by the Arbitrator and it is not necessary that the

Arbitrator must resort to detailed calculations to arrive at the figure of damages.

Relying on Madhur Krishna's case and Krishna Bhagya Jal Nigam's case, the

counsel has further contended that even if no evidence is available, the

Arbitrator can make an honest guesstimate and there is nothing illegal about the

same.

8. I would, at this stage, refer to a recent judgment of the Supreme Court

reported as G. Ramachandra Reddy and Co. Vs. Union of India and Anr.

2009(6)SCC 414. The Supreme Court in this recent judgment has held that a

contract cannot provide for non-payment of damages if the same are allowable

in law. The following paragraphs of the judgment of Supreme Court makes this

clear:-

"35. The award of the Arbitrator in respect of claim no.4 has been accepted by the Division Bench Mr. B.B. Singh had drawn our attention to Clause 11(c) of the general conditions of contract to contend that in terms thereof, no damages were payable.

The question as to whether damages were payable for illegal termination of contract cannot be a subject matter of

CS(OS) 73/1996 Page 5 contract. The learned Arbitrator has categorically held that not only the termination of contract was illegal, the same was mala fide. Furthermore, the contention raised before us Mr. Singh has not been raised before the High Court."

In view of the ratio of the Supreme Court in this recent judgment in

G.Ramachandra Reddy's case, it is clear that entitlement of damages cannot be

denied on the ground of a contractual clause. If that be the law, and which is,

the objector accordingly cannot derive any benefit of the judgments in the cases

of M.L. Mahajan's or Republic Construction Company or the Steel Authority

of India Limited's. More so, the counsel for the non-objector is in the opinion

of this Court, correct in its contention that the judgment in Steel Authority of

India's case cannot support the objector for the reason that the clause which

was dealt with by the Supreme Court did not contain the expression

„unavoidable‟ and which is the expression as found in clause 1 of the

specifications and conditions in this case. Further, and in my opinion rightly,

counsel for the non-objector is correct in contending that no plea has been

raised before the Arbitrator by the objector in its pleadings that the delays as

caused were on account of unavoidable circumstances. I have been taken

through the relevant pleadings of the objector before the Arbitrator and it is

quite clear that it is not the pleading of the objector that the delay caused was on

account of unavoidable circumstances. In any case, a reference to the

documents C-67 which is the application for extension of time filed by the

contractor and accepted by the objector shows that the reasons which have been

CS(OS) 73/1996 Page 6 given for the delay are not only those which are the subject matter of clause 10

and clause 1 of the specifications and conditions, but are a total of 13 grounds

for delay and except three grounds i.e. ground Nos. 4,10 and 11 which deal with

the delay on account of factors specified in clause 10 and 1 of the specifications

and conditions , the other factors ,which factors are 10 in number contained at

serial No. 1 to 3, 5 to 9 and 12 and 13 are diverse reasons such as non-

availability of various drawings, delays in various decisions making as required

and so on. On the basis of which the final figure of damages have been arrived

at by the Arbitrator. Therefore, it cannot be said that the damages which have

been awarded could not have been done so by the Arbitrator because of the

clause 10 and clause 1 of the specifications and conditions. Finally, the fact that

the non-objector had claimed an amount of Rs.8,00,000/- but the claimant was

only awarded Rs.2,20,000/- shows that the awarded figure has been arrived as a

result of co-mingling of all the factors and consequently this claim has been

reduced from Rs.8,00,000/- as claim of Rs.2,20,000/-. After all the Arbitrator

could also have instead of Rs.5,000/- a month awarded Rs.7,500/- a month or

Rs.10,000/- a month and so on. In view of the above discussion, I therefore

reject the contention of the objector with respect to claim No.7.

9. The second objection and contention which was urged by the counsel for

the objector was with respect to claim No.3. This claim No.3 pertains to the

claim of the contractor for statutory increase with respect to labour wages under

clause 10C of the contract. What was contended by the counsel for the objector

CS(OS) 73/1996 Page 7 was that the clause in question requires actual payment and no actual details of

payment have been filed by the contractor and consequently this claim is liable

to be disallowed in terms of the language of clause 10C. The counsel for the

non-objector, however, strenuously urged that it is not open to the objector to

urge this ground for the first time before this Court because a reading of the

relevant pleading shows that what was only urged was that details have not

been filed and it is not as if actual payment has not been made. On a reference

to the pleading of the objector before the Arbitrator, I am inclined to agree with

the argument of the counsel for the non-objector. The objection with respect to

this claim is therefore dismissed.

10. The next objection by the objector is with respect to claim No.5 whereby

the Arbitrator has awarded a sum of Rs.22,450/- on account of extra work done

by the contractor. The Arbitrator in this behalf has held as under:-

The Claimants have claimed for extra work done but not paid by the Department. The details of claim have been filed vide Annexure C-5A, in support of the claim for extra height of centering and shuttering above 3.5 Mt., extra for providing grooves in external plaster and extra for external plastering above 10 meter height.

After carefully reading the pleadings and written note of arguments filed by the parties including the contract provisions, I find that the Claimants are entitled to extra work as per terms of the agreement in respect of providing grooves in external plaster and external plastering above 10 mt. height as per DSR rate + contractor‟s percentage. Regarding the claim for extra height of centring and shuttering above 3.5 Mt., I decide that DSR rate claimed is on the higher side and I

CS(OS) 73/1996 Page 8 decide that rate of Rs.20/- per sq. mt. is reasonable and justified for extra height of centring and shuttering. The Respondents have not pointed out any mistake or discrepancy in the Annexure filed by the Claimant. Therefore, I award a sum of Rs.22,450/- only in favour of the Claimants under this claim.

Counsel for the objector has contended that the contractor was liable to

do work up to all heights and has relied upon the contractual clause 3.15 which

reads as under:-

"3.15 Rates quoted by the contractor shall hold for work at all heights and depths. The contractor shall not be paid anything extra for maintaining in good condition all the work executed till completion of the entire work nor on account of damage to the works caused by rains or other natural phenomena during the execution of works."

11. On the first blush, the argument of the objector may seem proper,

however, the contract in question specifically provides for work up to a

particular height and which has been so noted by the Arbitrator while dealing

with this claim. Therefore, once a particular height is fixed, there cannot be the

application of a general clause 3.15 which would have been the case if the

construction was of a particular number of floors where the height otherwise is

not specified. Accordingly, this objection of the respondent is also rejected.

12. The last claim for which objection was raised by the objector pertains to

the issue of penal recovery which has been denied by the Arbitrator. The

relevant clause of the contract in this regard is clause 42 which reads as under:

"CLAUSE 42.

CS(OS) 73/1996                                                               Page 9
            i)      The contractor shall see that only the required quantities

of materials are got issued. Any such material remaining unused and in perfectly good condition at the time of completion or determination or the contract shall be returned to the Engineer-in- charge at a place where directed by him, by a notice in writing under his hand, if he shall so require. Credit for such materials will be given at the prevailing market rate not exceeding the amount charged from him excluding the element of storage charges levied at the time of issue of materials to him. The contractor shall also not be entitled to cartage and incidental charges for returning the surplus materials from and to the stores where they were issued.

(ii) After completion of the work the theoretical quantity of cement to be used in work shall be calculated on the basis of statement showing quantity of cement to be used in different items of work provided in Delhi Schedule of Rate, 1985 printed by the CPWD.

In the case any item is excluded for which the standard constants for the consumption of cement are not available in the above mentioned statement or cannot be derived from this statements, the same shall be calculated on the basis of standard formula to be laid down by the Superintending Engineer of the circle concerned. Over this theoretical quality of cement, shall be allowed a variation up to 3% plus/minus for works estimated cost of which as put to tender is not more than Rs.5 lacs. The difference in the quantity of cement actually issued to the contractor and the theoretical quantity including authorized variation, if not returned by the contractor, shall be recovered at twice the issue rate, without prejudice to the provision of the relevant conditions regarding return of materials governing the contract. In the event of it being discovered that the quantity of cement used is less than the quantity ascertained as herein before provided (allowing variation on the minus side as stipulated above), the cost of quantity of cement not so used, shall be recovered from the contractor on the basis of stipulated issue rates and cartage to site."

CS(OS) 73/1996 Page 10 I am afraid, I do not agree with the objection of the objector in this regard

whereby its claim for penal recovery was dismissed by the Arbitrator, because,

the normal recovery for the material not accounted for by the contractor has

already been made by the objector from the bills of the contractor and issue is

only with respect to additional penal recovery at double the rate. This issue is

fully covered in favour of the non-objector and against the objector by the

judgment of this Court in A.K. Jain Vs. Union of India, Suit No. 136/1991

decided on 20.3.1993. It would be useful in this behalf to refer to paras 13 and

14 of the said judgment and which are reproduced below:-

"13. Learned counsel for the respondent has submitted that there was no justification for the arbitrator to have given an award for Rs.9,535/- in respect of Claim No.7. It has further been submitted that it was incumbent upon the contractor to have returned the excess quantity of cement and pig-lead, when was not used and having failed to do so, there was every justification for the Union of India to claim this amount and the arbitrator has committed great error in allowing this claim, which was based on Clause 42 of the Agreement. Learned counsel for the claimant has on the other hand, submitted that the Clause 42 was by way of penalty and in the absence of the respondent having proved any loss, they could not claim double the amount and so the claim has rightly been allowed in favour of the claimant. A perusal of the file shows that submissions were made in writing by the department, taking shelter of Clause 42, and the arbitrator has given reasons for coming to the conclusion that the claimant was entitled to recover a sum of Rs.9,353/-, which had been deducted by way of double rate recoveries by the respondent. It would, in this regard, be convenient at this stage to refer to the judgment in the case of Maula Bux versus Union of India reported as A.I.R. 1970 SC 1955, in which the following observations have been made:

CS(OS) 73/1996 Page 11 "It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree and the court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract. But the expression "whether or not actual damage or loss is proved to have been caused thereby is intended to cover different classes of contracts which come before the Courts. In case of breach of some contracts it may be impossible for the Court to assess compensation arising from breach, while in other cases compensation can be calculated in accordance with established rules. Where the Court is unable to assess the compensation, the sum named by the parties if it be regarded as a genuine pre- estimate may be taken into consideration as the measures of reasonable compensation, but not if the sum named is in the nature of a penalty. Where loss in terms of money can be determined, the party claiming compensation must prove the loss suffered by him."

14. Admittedly, the respondents had not computed or proved any loss on account of which the double rate recoveries could not be made. The aforesaid judgment of the Supreme Court has been followed by this Court in Suit No. 103-A of 1985, decided on 4.12.1985. Considering all these facts, I am of the view that no ground is made out for interfering with the award with regard to Claim No.7."

Therefore, the objector was not entitled to claim of penal recovery as per

clause 42 of the contract.

13. That leaves this Court with two issues, namely, the additional counter

claim No.1 as made by the objector and what is the rate of interest to be

awarded. As regards, additional counter claim No.1, I am of the opinion that

the objection of the objector is well taken. Indubitably, the flooring work which CS(OS) 73/1996 Page 12 has been done is under item 7.3(a) i.e. with normal cement and not item 7.3(b)

which was white cement. The contract in question contains a lesser rate for

normal cement i.e. Rs.28.11 per sq. meter as compared to a rate of 36.11 per sq.

meter in case white cement is used. Since it is quite clear from the facts and

also from the award of the Arbitrator that white cement has not been used, the

objector was justified in its claim with respect to the counter claim No.1

because the award in this regard goes against the direct contractual provision.

The award is therefore to be reduced by the amount of this claim of

Rs.34,515.07/-

14. Now, the issue of interest. The recent judgments of the Supreme Court

indicate that on account of change of economic scenario and the consistent fall

in the rates of interest it is necessary that Courts should take into account these

facts and reduce the higher rate of interest as awarded by the Arbitrator. This

issue has been recently considered by a Division Bench in the case of MMTC

Vs. M/s. Al Bamar Company Limited 2009(159)DLT 513. In this judgment, all

the recent judgments of the Supreme Court where the interest has been reduced

have been referred to. These judgments of the Supreme Court are 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.

CS(OS) 73/1996 Page 13 Accordingly, though the award with respect to interest is 16% per annum,

I therefore reduce this rate of interest from 16% to 10% per annum simple

considering the fact that the award is of the year 1995. Future interest from the

date of the award till the date of making the payment, I further reduce to 6% per

annum, provided that the DDA makes the payment from the date of this

judgment within a period of 8 weeks failing which the rate of interest will be at

10% as stated in the earlier portion of this para.

15. In the facts and circumstances of the case and duly considering them

including the fact that there is rejection of most of the objections of the

DDA/objector and also the fact that the DDA/Objector has been held entitled to

the benefit of reduction in the rate of interest, I award cost of Rs.50,000/- to the

non-objector while dismissing these objections. Cost shall also be payable

within a period of 8 weeks from today failing which interest on the same will be

payable @ 10% per annum simple till the date of actual payment. The award

dated 1.11.1995 is therefore made a rule of the Court, subject to reduction

therefrom of the amount of Rs.34,515.07/- and the reduced rate of interest as

stated above.

                                                        VALMIKI J.MEHTA, J


October 6, 2009
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CS(OS) 73/1996                                                               Page 14