M/S Pt. Munshi Ram & Associates ... vs Dda
2010 Latest Caselaw 920 Del

               *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            CS(OS) No.389A/1994

 %                                      Date of decision:17th February, 2010

M/S PT. MUNSHI RAM & ASSOCIATES PVT. LTD. ..... Petitioner
             Through: Mr. D. Moitra, Advocate
                                       Versus
DDA                                                           ..... Respondent
                       Through: Ms. Ansuya Salwan with Ms. Neha Mittal,
                                Advocates.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.        Whether reporters of Local papers may
          be allowed to see the judgment?                   No

2.        To be referred to the reporter or not?            No

3.        Whether the judgment should be reported           No
          in the Digest?

RAJIV SAHAI ENDLAW, J.

1. The objections preferred by the respondent/DDA under Sections 30 & 33 of the Arbitration Act, 1940 to the arbitral award dated 18th December, 1993 are for consideration. The arbitrator has allowed claims 1 to 3, 7, 8, 10, 11, 13 & 14 of the petitioner and disallowed claims no.4, 5, 6, 9 & 12. No objections have been preferred by the petitioner qua the claims which have been disallowed. Though the respondent/DDA has preferred objections against all the claims which have been allowed but after some hearing it was found that there is no merit in the objections preferred to the

claims 1 to 3, 7, 8, 11 & 13 in view of the settled legal position and the counsel for the respondent/DDA restricted the arguments to the objections to claim no.10 only.

2. The disputes between the parties had arisen with respect to the contract of construction of 448 dwelling units (SFS) at Alaknanda. The original work was required to be completed by 8th July, 1983. However, the respondent/DDA was unable to give constructive possession of the site to the petitioner in reasonable time owing to a court stay which prevented the respondent/DDA from making the complete site available to the petitioner. Consequently, some alternative site for a few dwelling units was given; after the vacation of the court stay, balance work was also got executed from the petitioner and the petitioner was awarded additional work.

3. The claim no.10, to which as aforesaid the hearing has been confined, of the petitioner was for Rs.3,93,700/- on account of damages due to prolongation of contract on account of non-fulfillment of obligations and reciprocal promises by the respondent/DDA. The arbitrator, there-under noticed that the claim has been agitated by the petitioner for the extra expenditure on site supervision and on prolonged use of equipment and machinery, in the extended period of contract by over 31 months, for the reasons attributable to the respondent/DDA. The arbitrator has further noticed that the extension of time had been granted by the respondent/DDA without levy of liquidated damages. The arbitrator further found that the petitioner had not produced evidence of actual expenditure incurred during the extended period as claimed. The arbitrator further noticed that the

quantum of work was increased by nearly 50% under the agreement and for which considerable enlargement of time was contemplated by mutual agreement when the additional work was awarded. The arbitrator held that for such agreed extended time, no compensation by way of damages was called for. However, having held so, the arbitrator proceeded to observe that the claim was only partly justified for a part of the period of actual prolongation and assessed the damages and awarded the sum of Rs.1,89,600/- under claim no.10.

4. The counsel for the respondent/DDA has urged that after having held that the petitioner had not produced any evidence of having incurred any expenditure owing to prolongation of the contract and holding that the time was prolonged owing to increase in the quantum of work, there is an error apparent on the face of the award in as far as it awards any damages to the claimant on that account. She further contends that the award for the aforesaid sum is without any reasons/basis, which reasons as per the agreement were required to be given. It is further suggested that the said claim is not governed by any clause of the contract and allowing the claim no.10 to the aforesaid extent is also inconsistent with the dismissal of claim no.12. The claim no.12 was for loss of profitability for the extended period of the contract. The arbitrator found the claim no.12 to be unjustified.

5. Per contra, the counsel for the petitioner wants this court to go through the proceedings of the 8th hearing before the arbitrator on 14th May, 1992 and has also drawn attention to page 191 of volume 3 of the arbitral record where some hand written computation/breakup under the head of

claim no.10 is given. I may also notice that there is also a rough computation alongside the said sheet and in a different handwriting and which appears to be of the arbitrator and where the figure of Rs.1,89,600/- for which the claim has been allowed has been arrived at. The said figure of Rs.1,89,600/- appears to have been reached by computing the expenditure of one Senior Engineer at the rate of Rs.3000/- per month, one Junior Engineer at the rate of Rs.1250/- per month, one Supervisor at the rate of Rs.800/- per month and three chowkidars at the rate of Rs.600/- per month. Thus the additional expenditure per month of Rs.6,850/- was worked out and which was multiplied by 24 to arrive at the figure of Rs.1,64,400/-. The arbitrator appears to have concluded that the delay attributable to the respondent was of 24 months only and not 31 months as claimed by the petitioner. To the said amount, a sum of Rs.25,200/- has been added owing to charges for mixture at the rate of Rs.80 per day and for a period of 12 months. The counsel for the petitioner has contended that detailed computations were given before the arbitrator and on the basis whereof the claim no.10 was found justified for a sum of Rs.1,89,600 only. He further contends that in law, particularly in illustration (b) to Section 54 of the Contract Act, the petitioner was entitled to be compensated on account of delay on the part of the respondent/DDA, and the absence of a clause in this regard in the contract would not come in the way of such a claim. He also contends that the arbitrator is an expert appointed by the respondent itself and the award of such experts having specialized knowledge in the field ought not to be interfered with.

6. Reliance is placed on:-

(i) Sethi Engineering Corporation Vs. Delhi Development Authority 158 (2009) DLT 19 holding that where the duration of the works got prolonged because of non-fulfillment of obligations on the part of DDA then the award for compensation on that account is justified.

(ii) M.P. Housing Board Vs. Progressive Writers & Publishers 2009 (2) R.A.J. 233 (SC) holding that if the view of the arbitrator is a plausible one, the court will refrain itself from interfering with the award under the 1940 Act and that award should be read reasonably as a whole to find out its meaning and implication and the court does not sit in appeal over the award.

(iii) Ispat Engineering & Foundry Works Vs. Steel Authority of India Ltd. 2001 INDLAW SC 294 also laying down that re-appraisal of findings by the court is not permissible unless there exists a total perversity in the award and that the award is ordinarily final and conclusive and in the absence of evidence that the arbitrator over- stepped his jurisdiction or travelled beyond his jurisdiction, the court ought not to entertain objections.

(iv) M/s Sanyukt Nirmata Vs. Delhi Development Authority 2005 (4) R.A.J. 167 (Del) laying down that the mathematical calculations are not required to be given by the arbitrator. The Single Judge of this Court held that if on the basis of material on record it could be

deciphered as to what went into the mind of the arbitrator; the award could not be set aside as being without any reason.

(v) H.P. State Electricity Board Vs. R.J. Shah & Company (1999) 4 SCC 214 laying down that in order to find out whether the arbitrator has acted in excess of jurisdiction, the court may have to examine some documents.

(vi) Prem Chand Sharma & Company Vs. DDA 127 (2006) DLT 696 reiterating that the scope of enquiry under Sections 30 & 33 of the 1940 Act does not extend to re-appraisal of evidence.

(vii) Arosan Enterprises Ltd. Vs. Union of India (1999) 9 SCC 449 laying down that if the view of the arbitrator is a plausible one, the court should not interfere.

(viii) State of Uttar Pradesh Vs. Allied Constructions 2003 INDLAW SC 596, to the same effect.

(ix) Gujarat Water Supply & Sewerage Board Vs. Unique Erectors (Gujarat) Pvt. Ltd. AIR 1989 SC 973 to the effect that unless the award is per se preposterous or absurd, reasonableness of the award is not a matter for the court to consider.

The counsel for the petitioner further states that the judgments entitling the petitioner to claim under illustration (b) to Section 55 of the Contract Act were also cited before the arbitrator.

7. Though on first blush, the contention of the counsel for the objector/DDA that the award on claim no.10 was without reason, appears to be correct owing to the claim to the extent of Rs.1,89,600/- being allowed after making general observations qua the claim, but on a perusal of the aforesaid material, it does not appear that the claim no.10 for Rs.3,93,700 was without any basis or has been allowed arbitrarily for Rs.1,89,600/-. A perusal of the arbitral record shows that there existed material before the arbitrator qua both the amounts. The arbitrator appears to have not agreed with all the claims of the petitioner aggregating to Rs.3,93,700/-. For instance, while the petitioner had claimed charges owing to delay for two Junior Engineers & three Supervisors, the arbitrator considered the charges for only one Junior Engineer and one Supervisor as sufficient. The charges for mistry, office clerk were not agreed to. Similarly, the charges for bamboo/chali were not agreed to and only the charges for mixture as aforesaid were agreed. From the record, the thought process of the arbitrator in arriving at the figure of Rs.1,89,600/- is quite evident. It is thus not as if the claim awarded is without any basis whatsoever. The Supreme Court in State of Rajasthan Vs. Puri Construction Co. Ltd. (1994) 6 SCC 485 has held that it is not necessary to indicate in the award the computation made for various heads and it is open to the arbitrator to give a lump sum award.

8. The arbitrator is not a court and is not expected to follow the procedure or language of the court. The arbitrator is an expert having specialized understanding of the subject. A number of times, the parties represent their own case before the arbitrator without even the assistance of the advocates. This court cannot view the arbitral award as a judgment or

order of the court and cannot interfere with the same for the said reason. Moreover, in any dispute of the nature aforesaid, certain thumb rules always have to be followed. From the award under claim no.10, the arbitrator is found to have found the partial prolongation of the contract attributable to the respondent. The arbitrator is found to have computed the damages due to the petitioner for such partial prolongation. I also do not agree with the contention of the counsel for the objector/DDA that the claim could not have been entertained owing to absence of a clause permitting the same in the agreement. Once it had been found that there had been delay on the part of the respondent/DDA, the petitioner is found to be entitled to compensation thereof and the court cannot re-appraise the basis on which the arbitrator has awarded Rs.1,89,600/-. I, therefore, do not find any merit in the objection qua the award on claim no.10 also.

9. The counsel for the objector/DDA has next contended that the arbitrator has awarded interest at 15% per annum on the claims which have been allowed. Objections with respect to rate of interest have also been preferred. I find that the arbitrator has awarded interest pre-reference and pendente lite at the rate of 12% per annum and future interest at the rate of 15% per annum.

10. Though in some of the judgments, taking note of the fall in the rate of interest, the courts have reduced the interests awarded by the arbitrator to 9% but I find that recently in Union of India v. Saraswat Trading Agency JT 2009 (9) SC 648, the award of interest at 18% per annum was upheld. Similarly, in M/s Sayeed Ahmed & Co. Vs. State of U.P. JT 2009 (9) SC

429, the order of the High Court reducing the rate of interest to 6% from 18%, 14% & 21% on different counts awarded by the arbitrator was set aside by the Supreme Court and the interest awarded by the arbitrator was restored. It was held that unless the award of interest is found to be unwarranted for reasons to be recorded the courts should not alter the rate of interest awarded by the arbitrator. More recently in Indian Hume Pipe Co. Ltd. v. State of Rajasthan (2009) 10 SCC 187, it has been reiterated that a person deprived of use of money which he is legitimately entitled to has a right to be compensated for the deprivation, call it by any name, it may be called interest, compensation or damages. It was further held that if the amount has been withheld wrongly and without any justification then of course the aggrieved party would be fully justified in claiming interest.

11. In the present case, I find that except for claim no.10, the objector/DDA did not really have any arguable case qua other objections. Still objections were preferred with respect to all the claims which were allowed. It is also found that the said objections were dismissed owing to default on the part of the objector / DDA and the award made rule of the court. Thereafter, an application under Order 19 Rule 13 of the CPC was moved and which was allowed. The objections therefore remained pending for the last about 15 years. In the circumstances, save qua claim no.10 aforesaid, I do not find any reason to interfere with the rate of interest awarded by the arbitrator in the exercise of discretion vested in him. However, qua claim no.10 since prima facie the award appears to be without any reason and has been upheld for reasons aforesaid, I feel that the award of future interest should be reduced from 15% to 9%.

12. The objections to the award save to the aforesaid extent are thus dismissed. The arbitration award is made rule of the court with the slight modification as aforesaid and a decree is passed in terms thereof. The petitioner under Section 29 of the 1940 Act shall also be entitled to interest from the date of the decree at 9% per annum.

RAJIV SAHAI ENDLAW (JUDGE) February 17, 2010 gsr