M/S. Pt. Munshi Ram & Associates ... vs Rites And Another
2009 Latest Caselaw 4366 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        C.S. (OS) No. 785/1997


                                          28th October, 2009.


M/S. PT. MUNSHI RAM & ASSOCIATES (P) LTD.      ..Petitioner
                   Through: Mr. Debashish Moitra, Advocate.
          VERSUS

RITES AND ANOTHER                                    ...Respondent
                         Through:    Mr. Anil Airi, Advocate with Ms.
                                    Sadhna Sharma, Advocate and Ms.
                                    Neha Kapur, 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.4200/98 in CS(OS) No.785A/1997

1. This case has a long and chequered history. The contract is of

the year 1991 and which was completed in the year 1993. The award C.S(OS)No.785/1997 Page 1 was passed in the year 1997. Objections of the respondent were first

allowed on 15.11.2006 by remitting the matter to the Arbitrator for

passing a reasoned Award. This judgment of a Learned Single Judge

of this Court was set aside by the Division Bench of this Court vide

order dated 28.7.2009 in FAO(OS) No.714/06 which the Division

Bench remanded the matter for hearing of the objections afresh in

accordance with law. That is how the matter has come up before me

for hearing and disposal. It has taken therefore over sixteen years

when the journey began on the contract having been completed on

30.6.1993.

2. This application contains the objections under Sections 30 and

33 of the Arbitration Act, 1940 to the award dated 30.3.1997 passed

by the sole Arbitrator. The disputes which arose between the parties

pertain to the contract awarded to the petitioner by the objector for

the construction of 28 type II and 24 type III quarters at INA colony,

New Delhi.

3. By the impugned award the Arbitrator has allowed and

disallowed certain claims. I will take up each claim which has been

C.S(OS)No.785/1997 Page 2 allowed by the Arbitrator and which has been objected to by the

objector in seriatim.

4. The first claim made by the petitioner before the Arbitrator

being claim No.1 pertained to the claim for work done. Whereas the

contention of the objector was that the final bill containing the

measurement as also the details of the deviation permissible under

clause 12A of the contract were contained in the final bill, the

petitioner, however, contended that his final bill which was

subsequently given in September, 1993 ought to have been accepted

by the Arbitrator. If one sees the discussion with respect to claim No.1

as given by the Arbitrator, it is noted that the Arbitrator has accepted

the contention of the objector that the value and the recording of the

measurement in the final bill dated 16th March, 1995 prepared by the

objector ought to be accepted. The final value of this bill was

Rs.1,17,62,877/-. The Arbitrator has specifically taken this bill as the

basis, meaning thereby, he has accepted finality with respect to the

final bill as prepared by the objector and meaning thereby the final bill

prepared by the contractor has been rejected. The contention,

C.S(OS)No.785/1997 Page 3 therefore, of the petitioner that he was not bound by the final bill and

it was validly retracted by it has not been accepted by the Arbitrator.

These findings are pure finding of facts and sitting as a Court, hearing

objections under Sections 30 and 33 of the Arbitration Act, 1940, I

cannot go into the reasoning of the reasons or the finding of facts as

arrived at by the Arbitrator which are not perverse. I do not find any

perversity in this finding of acceptance of the final bill as prepared by

the objector of Rs.1,17,62,877/-. The claim therefore awarded under

this head of Rs.4.65 lacs (as against the claim of Rs.7 lacs) in my

opinion, is not justified because once the Arbitrator has held that the

final bill as prepared by the objector is correct and which final bill

surely contains the details of the deviations also there remains no

scope thereafter for invoking Clause 12A for giving claims of deviation

and other measurements as claimed by the contractor. This objection

to the Award is well merited and deserves acceptance otherwise these

would result inconsistent findings qua claim No.1 as decided by the

Arbitrator.

C.S(OS)No.785/1997 Page 4

5. The other claims which have been awarded by the Arbitrator are

with respect to the disentitlement of recovery made by the objector

for rebate in payments of monthly RA bills and the final bill, meaning

thereby, contractor has been awarded the claim made for wrongful

recoveries made by the objector. Claim No.4 is for rebate of the

monthly bills and claim No.5 is for rebate towards the final bill. With

regard to the claim made for the monthly bills, I find that the award

of the Arbitrator in this regard is clearly faulty and the Arbitrator has

mis-conducted himself and the proceedings. This is because the

contractual clause 8 between the parties clearly requires that the

contractor should approach the Engineer for taking measurements and

for preparing the bills. There is no finding of fact by the Arbitrator that

the bills in question were got prepared in time and were submitted in

time. That being the position, there does not arise any justification for

not giving the rebate as claimed by the objector as it cannot be said

that the RA Bills have not been paid in time. Since the monthly bills

were not got prepared in time and it was the duty of the contractor to

seek to get the measurements done and submit bills of payment and if

that has not been done, there is no reason why the objector should C.S(OS)No.785/1997 Page 5 not be entitled to benefit of the rebate as it is not at all established

that payment of the monthly bills has not been made beyond time.

The award being against the contractual provisions, i.e. clause 8 and

para 1 of the Letter of Award dated 27.3.1991 cannot therefore be

sustained so far as the grant of recoveries made for timely payment of

R.A. bills. The other claim with respect to the rebate is for the

payment under the final bill. As per the contract in question, viz para

2 of the letter of the award dated 27.3.1991, the same clearly specifies

that 1% rebate on the final bill will be allowed to the objector only if

the payment is made within four months from the date of physical

completion of the work. I note in page 4 of the award while dealing

with the claim No.5, the Arbitrator has accepted that the work was

completed on 30.6.1993. The payment of the final bill in this case has

been made as per the objector on 16.3.1995. Clearly, that is well

beyond four months of the physical completion of the work and

therefore the objector is not entitled to any rebate in the payment of

the final bill and the total amount in the final bill dated 16.3.1995 shall

become payable to the contractor. No fault can thus be found as

regards claim No.5 allowed by the Award.

C.S(OS)No.785/1997 Page 6

6. The next claim which has been strenuously argued and which is

of a substantial amount is claim No.8. This claim which has been

made by the contractor pertains to claim for escalation under clause

10CC of the contract. If we refer to clause 10 of the contract, it

clearly specifies that this clause will not apply if the stipulated period

for completion of the contract is 12 months or less. Admittedly, the

stipulated period of completion of this contract was 12 months vis

from 6.4.1991 to 5.4.1992. The contractual clause is therefore very

clear that within a period of 12 months it is the contractor who will

have to absorb any increase of cost towards the labour or the material

component. The contractor had to submit his tender accordingly and

therefore, now, he cannot say that even for the period of 12 months

he will be entitled to escalation in the costs of labour and the material

inputs. This part of the Award is also against contractual stipulation

and thus cannot be sustained. That takes me to the issue that whether

the contractor is at all entitled to any amount for this escalation. The

facts in the present case as found by the Arbitrator are that the

objector has been found guilty of delay in performance of the contract

and it is for this reason that the objector was forced to extend the C.S(OS)No.785/1997 Page 7 period of completion without levying of any penalty/liquidated

damages upon the contractor. That being so, the contractor shall

definitely be entitled to payment in terms of clause 10CC beyond the

period of 12 months and till completion of the work. In the present

case, the extended period of completion is from 6.4.1992 till 30th

June, 1993. Therefore, the escalation amount will have to be reduced

accordingly. It is not possible for this Court to compute and calculate

such an amount because the award entitles the contractor for

complete escalation even during the period of contract and which

finding has been set aside in the earlier part of this para. Accordingly,

so far as this claim No.8 is concerned, the award needs to be remitted

back to the Arbitrator to reduce the claim awarded under claim No.8

(which has been granted for the entire period of contract) by

restricting it only to the period beyond the original 12 months

contractual period. To make it more clear the contractor will be

entitled to escalation only from 6.4.1992 to 30.6.1993. This may be

recalculated by the Arbitrator and for which purpose the matter is

being remitted back to the Arbitrator under Section 16 of the

Arbitration Act 1940.

C.S(OS)No.785/1997 Page 8

7. The next set of claims which have been awarded by the

Arbitrator are claim Nos. 10 and 16 for interest. I note that so far as

claim No.10 is concerned, the same has been allowed at Rs.9,09,918/-.

This is done by awarding interest @ 18% per annum. I may note that

it has been the contention of the counsel for the objector that the

claim with regard to this head, claim No.10, as originally filed was not

towards breach of contract by the respondent and under which head

it has been allowed by the Arbitrator. The Arbitrator has however

suo moto changed this claim and granted interest with respect to the

alleged breach of contract by the respondent. However, in sum and

substance, this claim in any case is for interest and ultimately whatever

will be allowed by this Court after the final net positioning, the award

of interest will be considered at that stage.

8. I now come therefore to claims No.13 to 15 which have been

awarded in favour of the contractor by the Arbitrator. All these

claims pertain to idling charges towards labour, plant and

machinery/tools and plants during the original contract period as well

as beyond the period of original contract. For the original period of

C.S(OS)No.785/1997 Page 9 contract the claim is claim No.15 and for the period beyond the

original period of contract the claims are claim Nos. 13 and 14. So far

as the claim No.15 is concerned, I clearly find that the Arbitrator has

mis-conducted himself and the proceedings. This is because during the

period of contract when there is no specific clause giving any increase

of charges towards idle tools and plants and labour, I fail to

understand how can the Arbitrator can grant such a claim which will

be wholly unreasonable, perverse and beyond the contractual

provisions. Once the contract is being performed during the

contractual period where arises any delay having been caused in

performance by the objector for awarding of alleged expenditure

towards idle labour and tools and plant. Within the original

contractual period obviously there is no delay and the objector cannot

be fastened with any liability on this Court. However, so far as claim

Nos.13 and 14 are concerned the claims are justified because these

claims are claims towards idle staff and plant and machinery incurred

by the contractor beyond the original contractual period and it is

because the delays caused by the objector that the period of extension

had to be granted without imposition of any penalty on the C.S(OS)No.785/1997 Page 10 contractor. Therefore, the claim which was made for a total sum of

Rs.18,00,000/- and Rs.2.5 lacs viz. Rs. 20.5 lacs and which has only

been awarded at Rs.6.6 lacs by the Arbitrator is a finding of fact and is

justified. It has been contended by the objector that the petitioner has

not discharged the onus of proof and that there is no sufficient

evidence worthy of acceptance before the Arbitrator to award such an

amount. I note that the Arbitrator is entitled to arrive at a reasonable

finding of facts by making an honest guesstimate by analysing the

extent of evidence before him. It has been regularly and repeatedly

laid down in various judgments including of Supreme Court that the

Arbitrator will be entitled to make an honest guess work as he is an

expert in the job and which judgments are reported as Mohd.

Salamatullah Vs. Government of Andhra Pradesh AIR 1977 SC 1481

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

may note that the Arbitrator in this case is a technical person, namely,

retired Director General of Works of CPWD. Accordingly, I do not

find any fault with regard to this claim of Rs.6.6 lacs which has been

awarded by the Arbitrator and which is against the claimed figure

under this head of Rs.20.5 lacs. At this stage, it is canvassed by the C.S(OS)No.785/1997 Page 11 objector that claim No.13 is for the overall period and not the

extended period only. However, I do not find that much need be said

about this because afterall the claim was for Rs.18 lacs and what has

been awarded by the Arbitrator is only a sum of Rs.6.60 lacs therefore

the equities and the alleged inequities are clearly balanced out by

reducing this particular amount.

9. That leaves me with regard to the issue of interest to be

awarded for the various claims which the contractor is entitled to. In

the recent line of judgments, the Supreme Court has said that the

Courts must be alive to the changed economic scenario whereby after

liberalization of the economy there has been a consistent fall in the

rates of interest throughout the country. There was a time when the

rates of interest charged by the nationalized banks ran as high as 18%

to 24% per annum and that too with quarterly rests. Today the rates

of interest have almost fallen down to 1/3rd or 40% of the level.

Accordingly considering the judgments of the Supreme Court 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 C.S(OS)No.785/1997 Page 12 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, I hold that the contractor will be entitled to interest @ 9% per

annum on the amount which has been awarded as per the award and

as modified/altered by me by the present judgment. So far as the

amount for which recalculation has to be done by the Arbitrator and

for which the matter has to be remitted back to the Arbitrator, the

Arbitrator may award such rate of interest as he thinks fit, keeping in

view the aforesaid judgments of the Supreme Court as stated above.

Accordingly, this objection petition is partly allowed to the extent as

stated above. With regard to the re-calculation of the amount under

claim No.8, this matter is remitted back to the Arbitrator under section

16 of the Arbitration Act, 1940.

10. I am at this stage informed that the Arbitrator who passed the

award i.e. Mr. G.S. Rao has sadly passed away. Accordingly, a fresh

Arbitrator will have to be appointed for the purpose of deciding the

issue with regard to re-calculation of the portion of the award which

is remitted back to the Arbitrator. I, therefore, appoint Sh. G.P.

Thareja resident of B-201, Priyadarshani Appartments, Patparjang, C.S(OS)No.785/1997 Page 13 New Delhi, Phone No.20906899 for the purpose of re-calculation as

regards claim No.8. The fees of the Arbitrator is fixed at Rs.55,000/-

which shall be equally shared by the parties.

11. With these observations, the present petition is disposed of. The

award dated 30.3.1997 is made Rule of the Court to the extent the

objections have been disallowed and the Award sustained and as

modified by the present judgment and as regards the claim with

regard to balance calculation, the matter is remitted back to the

Arbitrator for reconsideration and recalculation under claim No.8.

The Arbitrator will decide the proceedings in accordance with the law

after giving due hearing to both the parties. The Arbitration record

which is in this Court be sent to the Arbitrator by a special messenger

alongwith a copy of this order.

                                                 VALMIKI J.MEHTA, J


October 28, 2009
Dkg/Ne




C.S(OS)No.785/1997                                               Page 14