Anant Raj Agencies vs D.D.A & Anr.
2009 Latest Caselaw 4167 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CS(OS) 2204A/1995 & I.A. 7897/1996


ANANT RAJ AGENCIES                          ..... Petitioner
                 Through:                   Mr. Harish Malhotra, Senior
                                            Advocate with Mr. N.K.
                                            Kantawala, Mr. Priyank Sharma
                                            & Mr. Satyender,
                                            Advocates.
                     versus

D.D.A & ANR.                                ....Respondents
                              Through:      Mr. Ajay Verma, Advocate.



%                               Date of Decision : 15th October, 2009


CORAM:
HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment?
2. To be referred to the Reporter or not?                                     Yes.
3. Whether the judgment should be reported in the Digest?                     Yes.



                              JUDGMENT

MANMOHAN, J: (Oral)

1. Present petition has been filed under Sections 30 and 33 of

Indian Arbitration Act, 1940 (hereinafter referred to as "Act,

1940") raising objections to the Award dated 3rd September, 1995

made and published by Mr. K.D. Bali, Sole Arbitrator. By way of

this petition, objector-respondent-DDA has challenged the said

Arbitrator‟s Award to the extent it awards Claims No. 2 to 6, 8 to

13 and 16.

2. Mr. Ajay Verma, learned counsel for respondent-DDA stated

that the Arbitrator had erroneously awarded Rs. 13,41,591.66

under Claim No. 2 on account of infructuous expenditure. He

submitted that the said Award was in excess of jurisdiction and

contrary to Clause No. 1 of additional specifications read with

Clauses 5, 10, 10CC of General Conditions of Contract. The said

clauses are reproduced hereinbelow for ready reference :-

"CLAUSE 5. If the contractor shall desire an extension of time for completion of the work on the grounds of his having been unavoidably hindered in its execution or any other ground, he shall apply in writing to the Engineer-in- Charge within 30 days of the date of hindrance on account of which he desires such extension as aforesaid and the Engineer-in-Charge shall, if in his opinion (which shall be final) reasonable grounds be shown thereof, authorise such extension of time if any, as may in his opinion necessary or proper.

xxxxx xxxxx xxxxx CLAUSE 10. Stores supplied by Delhi Development Authority:- If the specification of schedule of items provides for the use of any special description of materials to be supplied from Engineer-in-Charge‟s stores or if it is required that the contractor shall use certain stores to be provided by the Engineer-in- Charge as shown in the schedule of materials hereto annexed, the contractor shall be bound to procure and shall be supplied, such materials and stores, as are from time to time required to be used by him for the purposes of the contract only, and the value of the full quantity of materials and stores so supplied at the rates specified in the said schedule of materials may be set off deducted from any sums then due, or thereafter to become due to the contractor under the contract, or other- wise or against or from the security deposit, or the proceeds of sale thereof if the same is held in Govt. Securities, the same or a sufficient portion thereof being in this case sold for the purpose..............

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. Provided further that the contractor shall be bound to execute the entire work if the materials are supplied by the DDA within the schedule time for completion of the work plus 50% thereof (Schedule time plus 6 months if the time of completion of the exceed 12 months) but if a part only of the materials has been supplied within the aforesaid period then the contractor shall be bound to do so much of the work as may be possible with the materials and stores supplied in the aforesaid period or the completion of the rest of the work, the contractor shall be entitled to such extension of times as may be determined by the Engineer-in-Charge, whose decision in this regard shall be final.

xxxxx xxxxx xxxxx CLAUSE 10CC. If the prices of materials (not being materials supplied of services rendered at fixed prices by the department in accordance with Clauses 10 & 34 hereof) and/or wages of labour required for execution of the work increases, the contractor shall be compensated for such increase as per provisions detailed below and the amount of the contract shall accordingly be varied, subject to the condition that such compensation for escalation in prices shall be available only for the work done during the stipulated period of the contract including such period for which the contract is validity extended under the provisions of clause 5 of the contract without any action under clause 2 and also subject to the condition that no such compensation shall be payable for a work for which the stipulated period of completion is 6 months or less. Such compensation for escalation in the prices of materials and labour, when due, shall be worked out based on the following provisions:

1. The base date for working out such escalation shall be the last date on which tenders were stipulated to be received.

2. The cost of work on with escalation will be payable shall be recokoned as 85% of the cost of work as per the bills, running or final, and from this amount the value of materials supplied under clause 10 of this contract or services rendered at fixed charges as per clause 34 of this contract, and proposed to be recovered in the particular bill, shall be deducted before the amount of compensation for escalation is worked out. In the case of

materials brought to site for which any secured advance is included in the bill the full value of such materials as assessed by the Engineer-in-Charge (and not the reduced amount for which secured advance has been paid) shall be included in the cost of work done for operation of this clause. Similarly, when such materials are incorporated in the work and the secured advance is deducted from the bill, the full assessed value of the materials originally considered for operation of this clause should be deduced from the cost of the work shown in the bill, running or final. Further the cost of work shall not include any work for which payment is made under clause 12 or 12(a) at prevailing market rates."

                        xxxxx      xxxxx       xxxxx
              SPECIFICATIONS & 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 reasons or there is some un-avoidable 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."

3. Mr. Verma stated that in view of aforesaid Clause No. 5, the

provisions of the contract applied even to the extended period.

He submitted that learned Arbitrator had erroneously held that

Clause No. 1 of additional specifications did not apply to work

executed beyond the stipulated period of completion. Mr. Verma

stated that compensation on account of delay due to non-supply

of stipulated material and/or non-availability of site was totally

prohibited. In this connection, Mr. Verma relied upon Ishwar

Singh & Sons Vs. D.D.A. reported in 1994 II AD (Delhi) 477

wherein it was held as under :

"10. Ms. Salwan has argued that the Arbitrator has committed serious irregularity in awarding this amount as specifically under the specific terms of the agreement the claimants did not have any right to claim any amount as damages. In this connection she has invited the attention of this Court to Clause (1) of Specifications and Conditions which reads as under:-

"The Contractor must get acquainted with the proposed site for the works and study specification 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 material stipulated by the Department, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extras of compensation on this account."

xxxxx xxxxx xxxxx

13. There is an obvious fallacy in the arguments of learned Counsel for the petitioner as the dispute which has to be referred for adjudication has to be the dispute arising out of the agreement. Any dispute which relates to the agreement can be referred to arbitration. Specific provision has been made in the arbitration agreement which deals with a situation when in case of non-

performance of its obligation like the present one the petitioner has a right for extension of time. Various clauses of the agreement show the intention of the parties that in case of breach of non-handing over of site to the contractor, the remedy is extension of time to complete the work. It further finds mention in Clause 10 of the agreement which reads as under:-

"Stores supplied by Delhi Development Authority. If the specifications or schedule of items provided for the use of any special materials to be supplied from Engineer-in-Charge's stores or it is required that the contractor shall use certain stores to be provided by the Engineer-in-Charge as shown in the schedule of materials hereto annexed the contractor shall be bound to procure and shall be supplied such materials and

stores as are from time to time required to be used by him or the purposes of the contractor only, and the value of the full quantity of materials and stores so supplied at the rates specified in the said schedule of materials may be set off or deducted from any sums then due, or thereafter to become due to the contractor under the contract, or otherwise or against or from the security deposit or the proceeds of sale thereof if the same is held in Government securities, the same or a sufficient portion thereof being in this case sold for the purpose. All materials so supplied to the contractor shall remain the absolute property of Delhi Development Authority and shall not be removed on any account from site of the work, all shall be at all times open to inspection by the Engineer-in-Charge at a place directed by him, by a notice in writing under his hand, if he shall so require but the contractor shall not be entitled to return any such materials unless with such consent, and shall have no claim for compensation on account of any such materials. 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. Provided further that the Delhi Development Authority within the scheduled time for completion of the work or 50 per cent thereof (Scheduled time plus 6 months if the time of completion of the work exceeds 12 months) but if a part only of the materials has been supplied within the aforesaid period then the contractor shall be bound to do so much of the work as may be possible with the materials and stores supplied in the aforesaid period. For the completion of the rest of the work the contractor shall be entitled to such extension of time as may be determined by the Engineer-in-Charge whose decision in this regard shall be final."

14. The agreement specifically prohibits the claim of damages on account of delay. thereforee, there is no force in the argument of Shri P.N. Kumar on this score....."

4. Mr. Verma also submitted that in view of the extension of

the contract, petitioner-contractor was only entitled to

compensation as contemplated by Clause 10CC of the contract

and other heads of compensation were prohibited and/or barred

by the contract executed between the parties. In this connection

Mr. Verma relied upon a recent judgment rendered by a Division

Bench of this Court in Delhi Development Authority Vs. Nav

Bharat Const. Co. reported in 159 (2009) DLT 520 (DB)

wherein following the judgment rendered in Delhi Development

Authority Vs. U. Kashyap reported in 1999 (1) Arb. L.R. 88,

the Division Bench held that "once increase as per Clause 10CC

is awarded then additional sums for increase in cost cannot be

granted."

5. Mr. Verma next submitted that the Award of Rs. 2,60,840/-

on account of straightening of bent up steel bars was contrary to

the provisions of the contract. In this context, he referred to a

judgment rendered in an earlier case between the present parties

titled as Anant Raj Agencies Vs. D.D.A. and Anr. reported in

2005 IV AD (Delhi) 197 which contained an identical schedule

of quantities. The relevant portion of the said judgment is

reproduced hereinbelow :-

"39. Claim No. 4 in sum of Rs.5,53,506/- was for straightening bent up steel bars issued in coils and bent up bundles and, thereforee, contractor claimed to be compensated for said work.

40. Learned arbitrator has treated the work of straightening bent up steel bars as an extra work.

41. Item 3.10 of the schedule of quantities required the contractor to quote for the following work:-

"3.10 Re-enforcement for RCC work including bending, binding and placing in possession complete."

42. Offer submitted by the contractor shows that the contractor had quoted for aforesaid work. Issue which arises for consideration is whether the work of straightening bent up steel bars would be included under specification 3.10 aforesaid.

43. Learned arbitrator has relied upon a decision of a learned Single Judge of this court in Suit No. 1985-A/1984 K.C.Chibber v. DDA. Said decision which was filed before the learned arbitrator as Ex.C-70 shows that a learned Single Judge of this court, while considering a similar descriptive clause in the schedule of quantities requiring the contractor to execute the work of reinforcement for RCC works included bending, binding and placing in position held that the clause would exclude straightening of bent up steel bars for which extra was payable. Accordingly, learned arbitrator partly allowed claim No. 4 by treating the claim as an admissible claim.

44. Decision in Weer Aar Constructive Builders relied upon by counsel for DDA noted decision in K.C.Chibber's case. Decision in K.C. Chibber's case was distinguished on the ground that in K.C.Chibber's case, petitioner had notified DDA that straightening of steel was to be treated as an extra item of work and this was not objected to by DDA.

45. In Weer Aar Constructive Builder's case, learned Single Judge held that since bending, binding and placing in position steel for RCC works was included in the contract, said work necessarily required the process of straightening before cutting and, thereforee it was held that no claim for extra was maintainable on said account.

46. Learned counsel for the respondent could not point out any evidence that contractor had written to DDA when work was on that he

would be having a claim as an extra item for straightening of bent up steel bars issued in coils.

47. I, thereforee, go along with the decision in Weer Aar Constructive Builder's case."

6. Mr. Verma also stated that Award of Claims No. 3 and 5

was contrary to provisions of the contract inasmuch as the

Arbitrator had failed to appreciate that delay in preparation of

the final bill was entirely attributable to petitioner-contractor as

it was they who had to prepare the final bill under Clauses 7, 8

and 8A of contract. The relevant clauses of the contract are

reproduced hereinbelow :-

"CLAUSE 7. No payment shall be made for a work estimated to cost rupees five thousand or less till after the whole of the work shall have been completed and certificate of completion given. But in the case of work estimated to cost more than Rs. Five thousand, the contractor shall, on submitting the bill be entitled to receive a monthly payment proportionate to the part thereof then executed to the satisfaction of the Enginner-in- Charge, whose certificate of the sum so payable shall be final and conclusive against the contractor. But all such intermediate payments shall be regarded as payment by way of advance against the final payment only and not as payments for work actually done and completed, and shall not preclude the requiring of bad, unsound and imperfect or unskilled work to be removed and take away and reconstructed, or re-elected or be considered as an admission of the due performance of the contract, or any part thereof, in any respect or the accruing of any claims, nor shall it conclude, determine, or affect in any way the powers of the Engineer- in-Charge under these conditions or any of them as to the final settlement and adjustment of the accounts or otherwise or in any other way vary or affect the contract. The final bill shall be submitted by the contractor within one month of the date fixed for completion of

the work or of the date of the certificate of completion furnished by the Engineer-in- Charge and Payment shall be made within three months if the amount of the contract plus that of additional items is upto Rs. 2 Lakhs and in 6 months if the same exceeds Rs. 2 Lakhs of the submission of such bill. If there shall be any dispute about any items of the work then the undisputed item or items only shall be paid within the said period of three months or six months or as the case may be. The contractor shall submit a list of the disputed items within thirty days from the disallowance thereof and if he fails to do this, his claim shall be deemed to have been fully waived and absolutely extinguished.

"Wherever there is likely to be delay in recording detailed measurements for making payments in the case of residential building, advance payments without detailed measurements for works done (other than foundations and finishing items) upto (a) lintel level (including sun shade etc.) and (b) slab level, for each floor, worked out at 75% of the tendered rates may be made in running account by the Engineer-in-Charge in his discretion on the basis of certificate from the Assistant Engineer to the effect that the work has been completed upto the level in question.

The advance payments so allowed shall be adjusted in the subsequent running bill by taking detailed measurements thereof. Final payment shall be made only on the basis of detailed measurements.

CLAUSE 8. A bill shall be submitted by the contractor each month on or before the date fixed by the Engineer-in-Charge for all work executed in the previous month, and the Engineer-in-Charge shall take or cause to be taken the requisite measurements for the purpose of having the same verified, and the claim, as far as admissible, adjusted as far as possible before the expiry of ten days from the presentation of the bill. If the contractor does not submit the bill within the time fixed as aforesaid, the Enginner-in-Charge may depute within seven days of the date fixed as aforesaid, as subordinate to measure up the said work in the presence of the contractor whose counter signature to the measurement list will be sufficient warrant, and the Enginner-in-Charge may prepare a bill from such list.

CLAUSE 8A. Before taking any measurement of any work as has been referred to in Clause 6,7 and 8 hereof the Engineer-in-Charge or a subordinate deputed by him shall give reasonable notice to the contractor. If the contractor fails to attend at the measurements after such notice or fails to countersign or to record the difference within a week from the date of measurement in the manner required by the Engineer-in-Charge than in any such event the measurements taken by the Engineer-in-Charge or by the subordinate deputed by him as the case may be shall be final and binding on the contractor and the contractor shall have no right to dispute the same."

7. Mr. Verma also stated that Award of Claims No. 8, 9, 10

and 12 was contrary to the provisions of the contract. He stated

that Arbitrator had wrongly treated the certificate dated 7th

August, 1989 as a completion certificate even though it was a

provisional one. In this context, he pointed out that by way of the

said certificate, respondent had asked the petitioner-contractor to

carry out certain repairs and rectifications.

8. According to Mr. Verma, Claim No. 11 is nothing but

duplication of Claim No. 5 and, therefore the same should be

disallowed.

9. Mr. Verma also stated that the Arbitrator while awarding a

sum of Rs. 2,50,000/- on account of loss of profitability had acted

contrary to Section 73 of Contract Act, 1872 (hereinafter referred

to as "Act, 1872") inasmuch as petitioner-contractor had failed to

prove actual loss. He stated that there was no basis for awarding

a sum of Rs. 2,50,000/- as compensation. Mr. Verma repeatedly

emphasised that in view of Claim No. 13 having been awarded,

Claim No. 2 could not have been awarded as there was an overlap

between the two claims.

10. Mr. Verma lastly submitted that the Award of interest

@17.57% per annum was usurious and in any event as the

petitioner-contractor had not issued any prior notice demanding

interest, no pre-reference interest could have been awarded. In

this connection, he referred to Sections 3(1)(b) of the Interest

Act, 1978.

11. In response, Mr. Harish Malhotra, learned senior advocate

appearing for petitioner-contractor stated that petitioner-

contractor had taken additional 974 days to complete the

contract even though the respondent-DDA had given him

additional 1013 days to complete the same. He emphasised that

delay in completion of the contract was entirely attributable to

respondent-DDA as would be apparent from the fact that

respondent-DDA had repeatedly extended the time for completion

of contract without levying any liquidated damages.

12. Mr. Malhotra referred to Clause 1 of the additional

specifications to submit that the said Clause contemplated that

the contract would be completed within the stipulated time. He

submitted that if this interpretation was not accepted then the

expression "programme of construction shall be modified

accordingly" would become otiose. According to him, the said

Clause did not contemplate a situation where petitioner‟s workers

would remain idle. In this connection, Mr. Malhotra referred to a

judgment of this Court in Shri Sunder Lal Khatri Vs. Delhi

Development Authority reported in 1994(2) Arb. L.R. 479

wherein the learned Single Judge after considering his own

judgment rendered in Ishwar Singh's case (supra) held as

under:-

7............To come within the purview of Clause 1 of General Clauses of specifications and conditions two things have to be specified. First, part of the site is not available that is to say that some part of the site could not be made available on account of certain factors. But can this stipulation be stretched in a case where Agreement is executed, work awarded, but the site where the work has to be executed is not made available and in view of the aforesaid clause latter in the day respondent can turn round taking recourse to aforesaid Clause 1, and say that the contractor cannot be awarded any compensation even though he might have incurred expenditure on mobilisation of man materials and resources. Court cannot give a loose interpretation which is not intended by the terms of the Agreement between the parties. Secondly, with regard to non-supply of materials the words occurring in the Clause is not delay in supply of materials' but 'unavoidable delay'. The use of word 'unavoidable' before 'delay' is not without meaning."

13. Mr. Malhotra laid emphasis on the Proviso to Clause No. 10

to submit that the said Clause would only apply if delay was on

account of non-supply of stores and the said delay did not exceed

50% of the scheduled time, that means, six months in the present

instance.

14. Mr. Malhotra further submitted that a Division Bench of

this Court in the case of Delhi Development Authority Vs. M/s.

S.S. Jetley reported in 2000 VII AD (Delhi) 743 has after

considering another Division Bench‟s judgment in case of U.

Kashyap (supra) had held that a contractor can claim

damages/compensation over and above Clause 10CC of the

contract in accordance with Sections 73 and 74 of Act, 1872.

15. Mr. Malhotra next submitted that the case of Anant Raj

Agencies (supra) was based on peculiar facts as in the said case

no prior notice was given to DDA stating that the contractor

would be claiming an extra amount for straightening of bent up

steel bars.

16. In the context of Claims No. 3 and 4, Mr. Malhotra

emphatically denied that the final bill had to be prepared by

petitioner-contractor. According to him, the final bill had to be

prepared by the Assistant Engineer, DDA. He laid great emphasis

on Clauses No. 8A and 9 of the General Conditions of Contract to

state that measurement had to be taken by DDA and printed

format of the bill had to be supplied by DDA.

17. Mr. Malhotra next submitted that Claims No. 8, 9, 10 and

12 had been rightly allowed by the Arbitrator as the certificate

dated 7th August, 1989 was, in fact, a completion certificate and

not a provisional one. He laid considerable stress on the fact that

the actual date of completion had itself been recorded in the said

certificate. Consequently, he stated that respondent-DDA was

not entitled for any refund but on the contrary was under

obligation to pay the contractor for the watch and ward staff that

was deployed by the contractor for additional period of twenty-

two months.

18. Mr. Malhotra vehemently denied respondent-DDA‟s

submission that award of compensation of Rs. 2,50,000/- was

contrary to Section 73 of Act, 1872. He submitted that in view of

extension of time to complete the contract, petitioner-contractor

was entitled to damages on the basis of expected profit on the

balance work. In this context, he relied upon a judgment of the

Supreme Court in case of M/s. A.T. Brij Paul Singh & Bros. Vs.

State of Gujarat reported in AIR 1984 SC 1703 wherein the

Supreme Court held as under :-

"10. ......And the second reason to reject the contention is that ordinarily a contractor while submitting his tender in response to an invitation to tender for a works contract reasonably expects to make profits. What would be the measure of profit would depend upon facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract cannot be gainsaid. In this case we have the additional reason for rejecting the contention that for the same type of work, the work site being in the vicinity of each other and for identical type of work between the same parties, a Division Bench of the same High Court has accepted 15% of the value of the balance of the works contract would not be an unreasonable measure of damages for loss of profit. We are therefore, of the opinion that the High Court was in error in wholly rejecting the claim under this head.

11. Now if it is well-established that the respondent was guilty of breach of contract inasmuch as the rescission of contract by the respondent is held to be unjustified, and the plaintiff contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15% of the value of the remaining parts of the works contract, the damages for loss of profit can be measured."

19. Mr. Malhotra fairly stated that since Claim No. 11 had

already been allowed as part of Claim No. 5, the Award should be

reduced by a sum of Rs. 18,093.03/-.

20. Mr. Malhotra lastly submitted that interest @ 17.50% p.a.

was just and fair and required no interference in proceedings

under Sections 30 and 33 of Act, 1940. According to him, no

prior notice was required for the pre-reference period interest as

the petitioner/contractor was only claiming payment of illegally

withheld amount.

21. Having heard the parties, I am of the view that before I deal

with the rival contentions, it would be appropriate to first outline

the scope of interference by this Court with an arbitrator‟s award

rendered under old Act, 1940. Section 30 of Act, 1940 stipulates

that an arbitrator‟s award shall not be set aside except for

grounds as mentioned therein, namely, (i) that an arbitrator or

umpire has misconducted himself or the proceedings; (b) that an

award has been made after the issue of an order by the Court

superseding the arbitration or after arbitration proceedings have

become invalid under section 35; and (c) that an award has been

improperly procured or is other-wise invalid. It is now well

settled that an arbitrator is the sole judge of quality as well as

quantity of the evidence and a Court cannot sit in appeal over the

arbitrator‟s views by examining and reassessing the materials. In

fact, the Supreme Court in Arosan Enterprises Ltd. Vs. Union

of India & Anr. reported in (1999) 9 SCC 449 has observed as

under :-

"36. Be it noted that by reason of a long catena of cases, it is now a well-settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award.

37. The common phraseology "error apparent on the face of the record" does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined. In this context, reference may be made to one of the recent decisions of this Court in the case of State of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485 wherein this Court relying upon the decision of Sudarsan Trading Co. case (Sudarsan Trading Co. v. Govt. of Kerala, (1989) 2 SCC

38) observed in para 31 of the Report as below: (SCC pp. 502-03, para 31) "31. A court of competent jurisdiction has both right and duty to decide the lis presented before it for adjudication according to the best understanding of law and facts involved in the lis by the Judge presiding over the court. Such decision even if erroneous either in factual determination or application of law correctly, is a valid one and binding inter partes. It does not, therefore, stand to reason that the arbitrator‟s award will be per se invalid and inoperative for the simple reason that the arbitrator has

failed to appreciate the facts and has committed error in appreciating correct legal principle in basing the award. An erroneous decision of a court of law is open to judicial review by way of appeal or revision in accordance with the provisions of law. Similarly, an award rendered by an arbitrator is open to challenge within the parameters of several provisions of the Arbitration Act. Since the arbitrator is a Judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have indicated the parameters of such challenge consistent with the provisions of the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the award as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the courts were impelled to have a fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been given the wide immunity as enjoyed earlier, by expanding the import and implication of „legal misconduct‟ of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the face of the materials on record, have been held, very rightly, as legal misconduct rendering the award as invalid. It is

necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the court should not reappraise the evidences intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to the scope and ambit of challenge of an award under the Arbitration Act. Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible viewpoints, the interference with award based on erroneous finding of fact is permissible. Similarly, if an award is based by applying a principle of law which is patently erroneous, and but for such erroneous application of legal principle, the award could not have been made, such award is liable to be set aside by holding that there has been a legal misconduct on the part of the arbitrator. In ultimate analysis, it is a question of delicate balancing between the permissible limit of error of law and fact and patently erroneous finding easily demonstrable from the materials on record and application of principle of law forming the basis of the award which is patently erroneous. It may be indicated here that however objectively the problem may be viewed, the subjective element inherent in the Judge deciding the problem, is bound to creep in and influence the decision. By long training in the art of dispassionate analysis, such subjective element is, however, reduced to minimum. Keeping the aforesaid principle in mind, the challenge to the validity of the impugned award is to be considered with reference to judicial decisions on the subject."

22. Keeping in view the aforesaid parameters, I find that the

Award in so far as it grants Claims No. 5, 8, 9, 10, 12 and 13

requires no interference. The Arbitrator‟s finding at pages 37 and

38 of Award shows beyond doubt that the responsibility for

preparing the final bill lay with the respondent-DDA. The

relevant reasoning of the Arbitrator is reproduced hereinbelow:

"As per the provision of Clause 8A it is the Respondent alone who has to record the measurement and as per the provision of Clause 7 the final bill has to be prepared on the basis of the detailed measurements which in terms of Clause 8A has to be recorded by the Respondent alone. There is no proof that at any point of time the Respondent ever gave any notice for recording the final measurements or at any point of time ever furnished the detailed measurements. Thus in the absence of detailed measurements the Claimant could not prepare the final bill. More so, the printed proforma bill clearly shows that the bill has to be prepared by the officers of the DDA and I am fully convinced that there is a practice prevailing in the DDA to prepare the bills of its own. In view of the said situation the DDA cannot escape the liability for finalizing the final bill only on the pretext that the Claimant did not furnish the bill within the time."

23. Since in my opinion, the Arbitrator‟s reasoning is a

plausible one, it requires no interference in Sections 30 and 33

proceedings under the Act, 1940.

24. As far as controversy with regard to Claims No. 8, 9, 10 &

12 are concerned, I am in agreement with Mr. Malhotra‟s

submission that the circular dated 17th August, 1989 is actually a

completion certificate and not a provisional completion certificate

as sought to be contended by Mr. Verma. In fact, in the said

certificate not only date of completion is specifically recorded as

7th August, 1989 but also it does not anywhere state that it is a

provisional one. In this connection, the relevant portion of the

said certificate is reproduced hereinbelow :-

COPY OF COMPLETION CERTIFICATE Name of work:- C/o 320 SFS houses Cat. II & 240 S/G i/c internal development of land at Mayur Vihar Phase.II on N.H. 24 by pass.

      SH:-               C/o. 160 SFS houses & 120 S/G at
                         Mayur Vihar, Phase.II Group.II.
      Agency:-      M/S. Anant Raj Agencies.

Agreement No. 33/EE/.9/DDA/85-86 Stipulated date of Start:- 9.12.85 Stipulated date of completion:-8.12.86 Actual date of start-:9.12.85 Actual date of completion7.8.89 Certified that the above mentioned work has been physically completed on 7.8.89 according to agreement No.3 DDIX/85-86. The contractor has removed from the premises which the work being executed, all scaffolding surplus mat or rubbish etc, and cleaned off the site in all respects, is however, subjected to measurements being recorded and quality being checked by the competent authority and also rectification of defects already pointed out to the contre from time to time some of which are given below:- ...."

(emphasis supplied)

25. I am also of the opinion that there is no conflict between

the decisions rendered by this Court in Ishwar Singh & Sons,

Nav Bharat Const. Co., U. Kashyap, Shri Sunder Lal Khatri

and S.S. Jetley referred to hereinabove. Clause 1 of additional

specifications prohibits payments of any extras or compensation if

there was delay in handing over the site or there was some

unavoidable delay in supply of materials, provided firstly, the

programme of construction could be modified to finish either

within the scheduled time or within six months thereafter.

Further, in my view, Clause 10CC of contract only bars petitioner-

contractor from claiming escalation of prices of materials and/or

wages during the period of a contract or during its extended

period. But a contractor may have claims for compensation on

grounds other than escalation in prices of material and wages of

labour during the initial or extended contract period and/or the

delay may be on the grounds other than delay in handing over of

site or unavoidable delay in supply of materials. Consequently,

Clause 1 and Clause 10CC of contract do not bar or prohibit

petitioner-contractor from claiming compensation under different

heads, if so permissible in law. If the petitioner-contractor has

any other claim for compensation under Sections 73 and 74 of

Act, 1872, it would be permissible for the contractor to agitate

the same.

26. However, in the present case I find that Claim No. 2 on

account of infructuous expenditure is nothing but a duplication of

Claims No. 5 and 13 which are claims on account of loss of

profitability. In my view, petitioner-contractor having received

compensation for increase in wages as well as escalation of prices

of materials (under Clause 10CC) and compensation for loss of

profitability (under Claim No. 13) cannot ask for damages on

account of infructuous expenditure which is nothing but

compensation for idling charges on account of delay and/or

overrun. Consequently, as Claim No. 2 is a repetition/duplication

of Claims No. 5 and 13, I am of the view that Award suffers from

error apparent on the face of the record and accordingly, the said

Claim is disallowed.

27. As far as Award of Claim No. 4 is concerned, I am in

respectful agreement with judgment of learned Single Judge in

Anant Raj Agencies (supra) wherein petitioner‟s claim was

disallowed because the same was contrary to item 3.10 of

schedule of quantities. In fact, it is pertinent to mention that in

the present case also the petitioner-contractor had failed to give

any prior notice that he would be claiming extra amount for

straightening of bent up steel bars.

28. As far as Claim No. 13 is concerned, I am of the opinion

that petitioner-contractor is entitled to a sum of Rs. 2,50,000/- as

compensation for loss and profit on the basis of Supreme Court‟s

judgment in the case of M/s. A.T. Brij Paul Singh (supra). In

any event, since I have disallowed Claim No. 2 after accepting

Mr. Verma‟s submission that said Claim is a duplication of Claim

No. 13, it necessary implies that the petitioner-contractor is

entitled for compensation on account of loss of profitability.

Moreover, it is settled law that an arbitrator can take into

account estimation while awarding claims (See Kochhar

Construction Works V. Delhi Development Authority and

Anr. reported in 74 (1998) DLT 118 and M/s. Bhai SARDAR

Singh & Sons Vs. Delhi Development Authority reported in

102 (2003) DLT 331).

29. As far as issue of rate of interest for pre-reference period is

concerned, I find from the Award that the petitioner-contractor

had in fact, given notice under Interest Act, 1978. In this

connection, I may refer to the Award wherein it has been

recorded as under :

"....It was contended by the Claimant that there is no term in the agreement which prohibited the grant of interest and thus the grant of interest is to be considered as an implied terms of the agreement. The Claimant also relied upon the various letters written by the Claimant during execution of work and including their letters marked as Exhibits C- 23 and C-24 claiming the interest from the Respondent."

30. The aforesaid finding that interest had been claimed vide

Exhibits C-23 and C-24 has not been challenged in the objection

petition filed before me.

31. As far as pendent lite and future interest is concerned, I

deem it appropriate to reduce the rate of interest from 17.50%

p.a. to 9% p.a. simple interest. In this connection, I may refer to

observations of Supreme Court made in State of Rajasthan &

Anr. Vs. M/s. Ferro Concrete Construction Pvt. Ltd. reported

in 2009 (8) SCALE 753 wherein it has been held as under :-

"36. In regard to the rate of interest, we are of the view that the award of interest at 18% per annum, in an award governed by the old Act (Arbitration Act, 1940), was an error apparent on the face of the award. In regard to award of interest governed by the Interest Act, 1978, the rate of interest could not exceed the current rate of interest which means the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act. Therefore, we are of the view that pre-reference interest should be only at the rate of 9% per annum. It is appropriate to award the same rate of interest even by way of pendent lite interest and future interest upto date of payment."

32. Consequently, the Arbitrator‟s Award is modified to the

extent that Claims No. 2, 4 and 11 are disallowed and rate of

interest for pre-reference, pendent lite and future is reduced to

9% p.a. simple interest. However, it is made clear that in case

aforesaid payment is not made by respondent-DDA within a

period of 90 days from today, the post-decree rate of interest

would stand increased to 11% p.a. simple interest.

33. With the aforesaid modifications, Award is made rule of the

Court and Registry is directed to prepare a decree in terms

thereof. Accordingly, present petition and pending application

stand disposed of.

MANMOHAN, J

15th October, 2009 rn