Delhi High Court
Delhi Development Authority vs M/S Verma Construction Company on 29 October, 2009
Author: Mukul Mudgal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO(OS) NO.765/2006
Date of Decision: 29TH October 2009
DELHI DEVELOPMENT AUTHORITY ...Appellant
Through Mr. Bhupesh Narula, Advocate
versus
M/S VERMA CONSTRUCTION COMPANY .....Respondent
Through Mr. Mukesh Narain, Proxy counsel for
Mr. B. M. Sehgal, Advocate
CORAM:
HON'BLE MR. JUSTICE MUKUL MUDGAL
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether the Reporters of local papers
may be allowed to see the judgment? No.
2. To be referred to the Reporter or not? Yes.
3. Whether the judgment should be
reported in the Digest? Yes.
% JUDGMENT(Oral)
FAO(OS) NO.765/2006 Page 1 of 6
MUKUL MUDGAL,J.
1. In this appeal against the judgment of the learned Single Judge
dated 18th September 2006 we are essentially concerned with the claim
No.2 amounting to Rs.1,38,099.08 which was enhanced to that figure by
the learned Single Judge from the sum awarded by the Arbitrator.
2. The facts of the case briefly stated are as follows:
(a) By the Agreement No.29/EE/NDI/87-88 work of
construction of LIG flats in Pitampura was allotted by DDA
to M/s Verma Construction Company, the contractor.
(b) Date of commencement of work was 20th December,
1987. Date of completion was 19th June 1988. Works were
completed on 19th March 1991.
(c) The respondent contractor had 19 substantive claims.
The appellant DDA had proceeded to levy liquidated
damages under Clause 2 of the Contract. The appellant had
withheld payments due to the respondent to effect recoveries
pursuant to the liquidated damages levied.
(d) Disputes between the appellant and the respondent was
referred to the arbitrator.
3. The arbitrator, S.E. (Arbitration)-II on 17th April 1994 made the
award. The objections were filed by the appellant and the respondent.
The learned Single Judge delivered the judgment thereon on 18th
September 2006.
4. In the award dated 17th April 1994, the sum of Rs.49,216.95 was
awarded under claim No.2. The awarding of the sum of Rs.49,216.95 by
the arbitrator was recorded by the learned Single Judge in the following
finding in Paragraph 24 of the judgment:
"Recording that in view of Ex.R-95, i.e., final
bill prepared by DDA, on quantities reflected as
measured by DDA, a sum of Rs.1,38,099.08 was
a justified payment, learned arbitrator has
awarded Rs.49,216.95. While doing so, learned
arbitrator has held that in view of liquidated
damages levied by the competent authority,
DDA was entitled to recover Rs.75,778/-."
5. We are not referring to the other claims as the appeal itself states
that the challenge is confined to the claim no.2. Even in claim no.2 we
are only concerned with the adjustment claimed by the appellant in
respect of the finding in paragraph 24. The settled position of law in
respect of the above has been summarized in the case of Delhi
Development Authority vs. Bhagat Construction Co. (P) Ltd. and Anr.,
2004 (3) Arb. LR 548 (Delhi) (DB) wherein it has been held that the
decision of the Superintending Engineer (S.E.) levying compensation
under Clause 2 is not arbitrable but that the decision of the S.E. will not
negate the power of the Arbitrator to decide the question as to who was
responsible for the delay in adjudicating upon the claims and counter
claims of the parties.
6. In another judgment of this High Court in the case of Delhi
Development Authority vs. M/s. Sudhir Brothers, 1995 (2) Arb. LR 306
(Delhi) (DB), the law has been thus summarized:-
"4. Our attention has been drawn to the arbitration
clause and also the relevant clause which relates to
exclusion of certain matters from the purview of
arbitration. The relevant clause 2 in the arbitration
agreement deals with the question of compensation and
directs that the concerned engineer should decide this
question and his decision is final. The arbitration clause
opens with the words "Unless otherwise provided". In
view of this language, it is obvious from the decision
of the Supreme Court in Vishwanath Sood v. Union
of India and another AIR 1989 SC 952, that the
Arbitrator could not have gone into the merits of the
levy of compensation by the engineer. In that view of
the matter, the DDA ought not to have requested the
Arbitrator to include the said amount in the arbitration
award. We are told by the counsel for the
appellant/DDA the Arbitrator was in fact informed that
he could not go into the matter on merits. In any event,
the DDA committed a blunder in requesting Arbitrator
to formally include the above said amount as part of the
award. Taking advantage of the said request, the
contractor argued the question of levy on merits and
obtained a decision from the Arbitrator in his favour."
(emphasis supplied)
"6. It will, therefore, be for the DDA to seek to recover
the said amount of Rs.5,69,743 in whatever manner it is
open to it and in case any such proceedings are taken, it
will be open to the contractor to raise all defences that
may be open to him in law to contend the levy is bad. In
case, the DDA seeks to recover the said amount of
compensation from the contractor it will be open to the
contractor to file a suit and raise all such contentions as
he may deem fit. We make it clear that the question of
limitation will not be raised by either of the parties, in
view of the above unfortunate procedure adopted by
both parties."
7. Relying upon the aforesaid two judgments, this High Court in yet
another Division Bench judgment titled Delhi Development Authority vs.
Sunder Lal Khatri & Sons decided on 24th January, 2009 in FAO(OS)
No.498/2006, relying upon paragraph 6 of the judgment in Sudhir
Brothers (supra) and setting aside the award of the Arbitrator on the
counter claim pertaining to levy of compensation by the Engineer under
Clause 2 held that it will be open to the DDA to either file a suit to
recover the said amount, or upon adjustment of such amount by the DDA
from the dues of the respondent arising from the contract in question, it
will be open to the contractor to file a suit and such suit shall be disposed
of in view of the law laid down in the case of Sudhir Brothers (supra).
8. In view of the above position of law, we are of the view that out of
total amount of Rs.1,38,099.08, a sum of Rs.62,321.08 shall be released to
the respondent contractor along with the proportionate interest, and the
balance amount of Rs.75,778/- along with the proportionate interest shall
be released to the appellant DDA. The amounts so directed shall be
released to the parties not later than six weeks from today. However, it
will be open to the respondent contractor to institute civil proceedings in
accordance with law to recover the amount of Rs.75,778/-, if so advised.
We clarify that the question of limitation will not be raised by the
appellant in the event the respondent chooses to file a suit to recover the
balance amount claimed to be due to it.
9. The appeal, accordingly, stands disposed of.
MUKUL MUDGAL
(Judge)
REVA KHETRAPAL
(Judge)
October 29, 2009
dr
