R.S. Avtar Singh & Co. vs National Project Construction ...
2010 Latest Caselaw 3046 Del

            *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                           CS(OS) 2416A/2000

%                                             Date of decision: 2nd July, 2010

R.S. AVTAR SINGH & CO.                          ..... Petitioner
                   Through: Mr. Y.K. Kapur, Advocate

                                    Versus

NATIONAL PROJECT CONSTRUCTION
CORPORATION LTD. & ANR.                     ..... Respondents
                Through: Mr. Paritosh Budhiraja & Mr. Fanish K.
                        Jain, Advocates for Respondent no.1.

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 petitioner filed a petition under Section 14 of the Arbitration

Act, 1940 for directing the respondent no.2 Arbitrator to file the award

dated 29th August, 2000 in this Court. Upon the respondent no.2 Arbitrator

filing the award along with the record of arbitration before this Court,

notice of the same was issued to the petitioner and the respondent no.1,

being the parties to the arbitration. The petitioner has not preferred any

objections to the award. The respondent no.1 has by way of I.A.

No.4318/2004 under Section 30 & 33 of the Arbitration Act, 1940

preferred objections to the award and which now fall for adjudication.

2. The disputes between the parties arose out of a contract awarded by

the respondent no.1 to the petitioner for construction of a food grain

godown at Moradabad, U.P. on behalf of Food Corporation of India. The

arbitration clause was invoked and in accordance therewith the CMD of the

respondent no.1 appointed the Arbitrator. Unfortunately, the Arbitrator

appointed resigned and the successor Arbitrator also resigned. The

Arbitrator who has rendered the award was the serving Additional General

Manager (C&M) of the respondent no.1.

3. It was the case of the respondent no.1 that the petitioner was very

slow in carrying out the work from the beginning, had not adhered to the

time schedule and ultimately abandoned the work incomplete.

4. The petitioner made the following claims before the Arbitrator:

(i) for return of Performance Bank Guarantee in the sum of

Rs.75,000/-.

(ii) for refund of security deposit of Rs.1,00,000/-.

(iii) of Rs.7,10,503.20p for work done of site clearance but not

paid for.

(iv) of Rs.12,38,838.38p for work done as per contract but not paid

for.

(v) for statutory increase in labour wages and increase in the price

of steel.

(vi) for loss of profit for the balance work which could not be

completed.

(vii) for extra expenditure on idle labour, T&P etc. during the

extended period of continuance of work.

(viii) for Chowkidar charges deployed on the godown.

         (ix)       for extra items executed but not paid.

         (x)        for interest on delayed payments.

         (xi)       for refund of Rs.25,000/- deposited for purchase of steel.

         (xii) Costs of arbitration.

5. The respondent no.1 also made the following counter claims against

the petitioner:

(i) for compensation on account of delay in completion and

handing over of the work.

         (ii)       for delay in completion of work.

         (iii)      on account of defective work.

         (iv)       for overhead charges incurred on account of extended period

                    of contract.

         (v)        for excess payment made to the petitioner.





 6.       The Arbitrator has in the award:

         (i)        Allowed the claim of the petitioner for return of the bank

guarantee for the reason of the same having not been

revalidated and having been allowed to expire and thus being

of no value.

(ii) Allowed the claim of the petitioner for refund of security

deposit for the reason of the delay being not attributable to the

petitioner alone and for the reason of the respondent having

not taken any steps for forfeiting the same.

(iii) Out of the claim of Rs.7,10,503.20p on account of work done

for site clearance, allowed a sum of Rs.8,836.36p only. It was

held that the site clearance for the area of the foundation was

included in the rate contract; however, the site clearance was

required to be executed for other areas also and found to have

been carried out; no rate therefor having been provided in the

agreement, in accordance with D.S.R. rates, the award of

Rs.8,836.36p for the non foundation areas was made.

(iv) Out of the claim of Rs.12,38,838.38p on account of work done

but not paid, allowed the claim of Rs.4,62,526.37p. It was

held that the claim was not disputed except as to the quantum

of payment which was stated to require reconciliation. The

Arbitrator on going through the bills found the balance sum of

Rs.4,62,526.37p only payable.

(v) Disallowed the claim on account of increase in labour wages

and steel prices for the reason of the clause in the agreement

providing for the rates being firm and the petitioner in its

request for extensions having not claimed the escalation.

(vi) Allowed Rs.84,354.13p towards petitioner's share of

additional expenditure for statutory increase in the cost of steel

owing to delay which was held attributable to both parties.

(vii) Disallowed the claim of the petitioner for loss of profit.

(viii) Disallowed the claim of petitioner on account of extra

expenditure on idle labour, T&P etc.

(ix) Disallowed the claim of the petitioner for Chowkidar charges.

(x) Allowed the claim of Rs.1,24,427.47p for extra items executed

but not paid.

(xi) Allowed interest at 12% per annum for the period from

August, 1987 to August, 2000 amounting to Rs.55,929.66p for

delay in payment of running bills.

(xii) Disallowed the claim for refund of Rs.25,000/- deposited for

purchase of steel.

(xiii) Disallowed the claim of the petitioner for costs of arbitration

proceedings.

(xiv) Disallowed the counter claim of the respondent no.1 of

compensation for delay in completion, finding that the

petitioner alone was not responsible for non completion.

(xv) Disallowed the counter claim of the respondent no.1 for

defective work owing to the respondent no.1 having not

produced any documentary or other evidence of the same.

(xvi) Disallowed the counter claim of the respondent no.1 on

account of overhead charges for the reason of continuation of

work beyond the stipulated date being consensual.

(xvii) Disallowed the counter claim of the respondent no.1 for

refund of excess payment. It was the case of the respondent

no.1 that it was to make the payments to the petitioner only on

receipt of payment from Food Corporation of India; since the

Food Corporation of India had restricted the payment to

Rs.51,60,000/- only, the payments made by the respondent

no.1 to the petitioner in excess thereof were liable to be

refunded. The Arbitrator held that there was no such term in

the contract and the contract being an item rate one and the

payments there under having been made as per measurement,

the payments already made could not be refunded.

7. The respondent no.1 has filed objections to the award as in the case

of an appeal and losing sight of the scope of interference in an arbitration

award and the distinction between an appeal and objections under Section

30 & 33 of the Arbitration Act, 1940.

8. The counsel for the respondent no.1 has at the outset contended that

the petitioner being a partnership firm, to be able to maintain the claim and

these proceedings is required to be registered under Section 69 of the

Partnership Act and being unregistered is not entitled to maintain the

present proceedings for making the award the rule of the Court. Reliance in

this regard is placed on U.P. State Sugar Corporation Ltd. Vs. Jain

Construction Company 2004 (7) SCALE 307 and on Himachal Pradesh

Cooperative Group Housing Society Vs. M/s Umesh Goel 2007 (X) AD

(Delhi) 409. The counsel for the petitioner has opposed the said plea by

contending that neither any such objection was taken in the arbitration

proceedings nor in the objection petition before this Court and cannot thus

be allowed to be urged. It is stated that the petitioner is a registered firm

and the Certificate of Registration was filed before the Arbitrator. The

counsel for the respondent no.1 rejoined by contending that the plea being

a question of law could be raised even without any pleading. It was

however not controverted that the certificate of registration exists on the

arbitration record. An objection on the basis of Section 69 of the

Partnership Act is not such which can be permitted to be taken without

laying any foundation therefor. On such a plea been taken by the

respondent no.1 before the Arbitrator, the petitioner firm if registered could

have proved the Certificate of Registration. Without such objection having

been raised by the respondent no.1 neither in the arbitration proceedings

nor before this Court, the same cannot be permitted to be urged at the time

of final hearing. In any case, since it is not controverted that the certificate

of registration of the petitioner firm was filed before the Arbitrator, the said

objection in any case does not survive.

9. With respect to the award for return of Bank Guarantee, the counsel

for the respondent no.1 has contended that there is an error apparent in the

face of the record since the Arbitrator has proceeded on the premise that

the Bank Guarantee in question had not been extended and had lapsed; it is

contended that the Bank Guarantee was revalidated from time to time and

is alive till date. The counsel for the petitioner after taking instructions

admits that the Bank Guarantee is being extended from time to time and is

still alive.

10. The aforesaid argument has not been urged on the basis of any

material on the arbitration record but by merely raising a contention.

Strictly speaking, notwithstanding the factual admission by the counsel for

the petitioner, the error cannot be said to be apparent on the face of the

record. I have also considered whether for the said reason the award at least

to the said extent should be set aside and / or remanded or remitted to the

Arbitrator. But to what effect? Notwithstanding the Bank Guarantee

having been revalidated and being alive till date, the fact remains that the

respondent no.1 did not invoke the same. The purpose of taking a Bank

Guarantee, if the same is unconditional, was to enable the respondent no.1

to, if claiming to be entitled to amount therefor, recover the same

immediately without being required to litigate for the same. Now when the

parties have gone through the Arbitration proceedings and also through the

present proceedings for making the award rule of the Court, I do not see

any purpose in so remanding / remitting the award. The only impact of the

Bank Guarantee today can be that if the award is set aside and / or modified

and whereunder the respondent no.1 is found entitled to any amount from

the petitioner, the said amount can be recovered wholly or partly by

invoking the Bank Guarantee. However, I have after hearing the counsel

for the parties not found any amount to be due under the counter claims

also from the petitioner to the respondent no.1. Thus the occasion for

invocation of the Bank Guarantee would not arise. There is therefore

nothing warranting interference with the award in so far as directing the

respondent no.1 to return the deed of Bank Guarantee, duly discharged and

submitted by the petitioner to the respondent no.1. The objections of the

respondent no.1 to the award with respect to the said claim are dismissed.

11. The counsel for the respondent no.1 has challenged the award of

Rs.1,00,000/- for refund of security deposit. It is contended that the same

was refundable only on completion of the work; the work admittedly

having not been completed, the security deposit refundable on satisfactory

completion of work could not have been directed to be refunded and the

award is contrary to law on this ground. It is further contended that the

Arbitrator has also found the admitted delay to be attributable to the

petitioner also and for this reason also the security could not have been

awarded to be refunded.

12. In my opinion the position with respect to the security deposit is the

same as with respect to the Bank Guarantee herein above. The Arbitrator

has not found anything due from the petitioner to the respondent no.1 and

which could have been recovered by the respondent no.1 from the security

deposit. When no monies, to secure which deposit was taken, are due from

the petitioner to the respondent no.1, the respondent no.1 cannot be

permitted to retain the security deposit and no error in law is found with the

award. Only if this Court were to modify the award to the extent of monies

being due from the petitioner to the respondent no.1 could the same have

been allowed to be adjusted out of the security deposit. The said objection

is also accordingly dismissed.

13. The counsel for the respondent no.1 objector though not pressing the

objection to the award of Rs.8,836.36p towards site clearance has urged

that claim of Rs.7,10,503.20p made on that account and which has been

largely disallowed shows that the petitioner was making frivolous and

exaggerated claims.

14. With respect to the award of Rs.4,62,526.37p out of the claim of

Rs.12,38,838.38p for work done and not paid for, the respondent no.1 has

objected only to the item therein of Rs.2,15,583/- for refund of secured

advance recovered in excess and Rs.77,000/- on account of amounts

withheld from the 14th running bill. It is again contended that the claim of

Rs.12,38,838.38p on this account was highly exaggerated and the petitioner

itself was not able to sustain the same and in the written arguments had

confined the said claim to Rs.6,40,115/- only. It is urged that before the

Arbitrator also there was no claim of Rs.2,15,583/- for refund of secured

advance recovered in excess. With respect to Rs.77,000/- allowed on

account of having been withheld from the 14 th running bill, it is contended

that the same were paid vide cheque No.878032 dated 9th January, 1987

and thus could not have been awarded. It is also contended that there is no

denial in the reply by the petitioner to the objection in this respect. It is

also stated that Rs.2,15,538/- awarded was deducted from the bills owing to

having been advanced earlier by the respondent no.1 to the petitioner and /

or thus not recoverable by the petitioner.

15. The counsel for the petitioner has stated that after such long lapse of

time accounts cannot be reconciled and has conceded to the said objection

and has further contended that the award on this head, being severable,

would not affect the remaining award.

16. Accordingly, the objection to the award of Rs.2,15,583/- and

Rs.77,000/- i.e. total of Rs.2,92,583/- out of Rs.4,62,526.37p on account of

work done but not paid are allowed and the award on the said account is

reduced from that of Rs.4,62,526.37p. to Rs.1,69,943.47p.

17. The counsel for the respondent no.1 objector has next challenged the

award of Rs.84,354.13p.on account of respondent no.1's share of statutory

increase in the cost of steel. It is urged that the Arbitrator having on the

one hand held that the petitioner was not entitled to any escalation because

of a clause in the agreement, could not have allowed the said claim and

there is thus an inconsistency in the award.

18. There is merit in the aforesaid objection of the respondent no.1. The

arbitrator has in the award held no escalation to be payable for the reason

of a specific provision in the agreement providing for the rates being firm

and the petitioner in its request for extensions having not made a claim for

such escalation. No objections have been preferred by the petitioner to the

said award. The said finding has attained finality. The award of

respondent's share in escalation on account of statutory increase in

prices of steel is thus contrary to the other award. The said inconsistency,

as per the judgment in K.P. Poulose Vs. State of Kerala 1975 (2) SCC 236

amounts to misconduct. The award to the said extent is set aside and the

objections with respect thereto are allowed. However, the same will not

affect the rest of the award being severable, as held in Kwality

Manufacturing Corporation Vs. Central Warehousing Corporation

(2009) 5 SCC 142.

19. With respect to the award of Rs.1,24,427.47p on account of extra

items executed but not paid for, the counsel for the respondent no.1 has

contended that the award is arbitrary without any basis and measurement.

It is also contended that the Arbitrator has failed to appreciate the evidence

in this regard.

20. I am afraid the same do not constitute a ground for interference in

the award. The findings in this regard are factual in nature. The Arbitrator

has stated that the amount of Rs.1,24,427.47p has been arrived at by him

after keeping all the factors in view and after giving credit of the amounts

already paid on this account. I have also perused the arbitration agreement

between the parties. There is no requirement therein of giving reasons.

Even if the contention of the respondent no.1 of the award on this account

being without any reason has to be accepted, the Arbitrator was fully

entitled under the agreement to give a non speaking award and there could

be no objection against the same. The said objection to the award is thus

dismissed.

21. The counsel for the respondent no.1 has objected to the award of

Rs.55,929.66p on account of interest at 12% per annum for delay in

payment of running bills, also on the ground of the same being without any

basis. This objection is not maintainable for the same reasons as aforesaid.

22. The dismissal by the Arbitrator of the counter claims of the

respondent no.1 is also for reason of factual findings which do not permit

any interference. No arguments also were advanced with respect thereto.

The objections with respect to the award of dismissal of counter claims are

also thus dismissed.

23. The objections of the respondent no.1 to the award are thus allowed

to the extent aforesaid. I.A. No.4318/2004 is disposed of in terms of the

above.

24. Accordingly, the award as modified above is made rule of the Court.

Decree be drawn up in terms thereof.

25. The Arbitrator has not awarded any interest. The award being for

payment of money, Section 29 of the 1940 Act empowers the Court to in

the decree order interest from the date of the decree at such rate as the

Court deems reasonable. Accordingly, it is directed that if the amounts due

are not paid within eight weeks hereof, the same shall incur simple interest

at 9% per annum. Since some of the objections of the respondent no.1

have been allowed, no order as to costs.

RAJIV SAHAI ENDLAW (JUDGE) 2nd July, 2010 gsr