Delhi High Court
Dda vs M/S Krishna Construction Co. on 26 September, 2011
Author: Pradeep Nandrajog
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 22nd September, 2011
Judgment pronounced on: 26th September, 2011
+ FAO(OS) 567/2006
D.D.A ..... Appellant
Through: Ms.Anusuya Salwan, Advocate with
Ms.Renuka Arora and Ms.Neha
Mittal, Advocates
versus
M/S KRISHNA CONSTRUCTION CO ..... Respondent
Through: Mr.Harish Malhotra, Sr.Advocate
with Mr.R.K.Modi, Advocate
FAO(OS) 568/2006
D.D.A ..... Appellant
Through: Ms.Anusuya Salwan, Advocate with
Ms.Renuka Arora and Ms.Neha
Mittal, Advocates
versus
M/S KRISHNA CONSTRUCTION CO ..... Respondent
Through: Mr.Harish Malhotra, Sr.Advocate
with Mr.R.K.Modi, Advocate
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MR. JUSTICE SUNIL GAUR
1. Whether the Reporters of local papers may be allowed
to see the judgment?
2. To be referred to Reporter or not?
3. Whether the judgment should be reported in the Digest?
FAL(OS) Nos.567/2006 & 568/2006 Page 1 of 24
PRADEEP NANDRAJOG, J.
1. OMP No.392/2001 and OMP No.393/2001 which laid
a challenge to two awards dated 27.7.2001 and 28.7.2001
were disposed of by passing a detailed judgment dated
25.1.2006 in OMP No.392/2001 and a short order passed in
OMP No.393/2001. The two awards pertain to agreements
No.1/EE/DD-VIII/86-97 and No.41/EE/DD-VIII/86-97. The awards
were challenged qua claim No.9 by filing objections under
Section 34 of the Arbitration & Conciliation Act 1996.
2. Learned counsel for the parties conceded that both
contracts were pari materia and spanned around the same
time and nature of disputes were near identical, and in any
case, pertaining to claim No.9 raised by the respondent, where
sums awarded by the learned Arbitrator are `14,28,801/- in
award dated 27.7.2001 and `15,14,800/- in award dated
28.7.2001, the legal issue which arises for consideration with
respect to the challenge to the award is the same.
3. Undisputably, both contracts had a clause
numbered 10CC which stipulated that price increase in cost of
labour and material would be recompensed to the contractor
on the formula prescribed in the clause and suffice would it be
to note that in the decision pronounced by a Division Bench of
this Court reported as 1999 (1) Arb.L.R. 88 DDA vs. U.Kashyap
which was followed by another Division Bench in the decision
reported as 2001 (II) AD (Delhi) 116 DDA vs. K.C.Goel & Co.,
with reference to the decision of the Supreme Court reported
as 1991 (2) Arb.L.R. 180 Associated Engineering Co. vs. Govt.
of A.P. & Anr. it was held that where the contract specifies the
method to recompense the contractor for escalation in the
price of material and labour, the same would hold good even
during the extended period of work. Same view has been
followed by another Division Bench of this Court in the
judgment reported as 2000 (VII) AD (Delhi) 743 DDA vs.
M/s.S.S.Jetley.
4. Learned counsel for the parties were not in dispute
that as per said decisions it was clear and that there was no
scope for any argument that where a contract got prolonged
beyond the stipulated date of completion, irrespective of who
was at fault, price escalation towards material and labour had
to be determined and paid as provided in the contract and in
the instant case pertaining to the two contracts, the same had
to be as per the formula prescribed in clause 10CC of both
contracts.
5. With reference to the decision reported as 2006
(11) SCC 181 McDermott International Inc. vs. Burn Standard
Co.Ltd. & Ors. as also the decision in K.C.Goel's case (supra),
learned counsel for the parties conceded that a claim for
damages, other than a claim for recompense on account of
contract being prolonged, could be entertained by an
Arbitrator, but the said claim for damages would require
adjudication on proof of damages (not including the cost
incurred towards material and labour on actual basis for the
reason said escalation was agreed to between the parties as
per contract to be determined as per an agreed formula), and
on proper pleadings.
6. Mercifully and fortunately for us, learned counsel
were not at variance with the legal principles and lest the
reader of our decision is left wondering as to what then are we
adjudicating, we highlight that we are adjudicating whether the
principle of law, well recognized, that there cannot be any
variance between pleading and proof as held in various
decisions, only one which we highlight being the decision
reported as 2004 (6) SCC 341 M.Chinnaswamy vs.
K.C.Palanisamy & Ors. would be applicable before an Arbitrator
in the context of an arbitration under the Arbitration &
Conciliation Act 1996 keeping in view the law laid down by the
Supreme Court in the decision reported as AIR 2003 SC 2629
ONGC Ltd. vs. Saw Pipes Ltd.
7. We extract the reasoning of the learned Arbitrator
pertaining to claim No.9 (noting that it is pari materia in both
awards) and since learned counsel for the parties had argued
with reference to FAO(OS) No.567/2006, we may note the
reasoning of the learned Arbitrator pertaining to award dated
27.7.2001 which concerns said appeal. While awarding
`14,12,800/- the learned Arbitrator has reasoned as under:-
"CLAIM NO.9 The claimant claims an amount of
`16,00,000/- on account of payment by way of
compensation for additional cost in execution beyond
the stipulated date of completion on account of
prolongation of work caused by lapses, defaults and
breaches of the DDA together with interest at 18% per
annum from the date the amounts became due till the
date of reference.
Under this claim, the claimant has claimed
compensation on account of prolongation of work
caused by lapses, defaults and breaches on the part of
the DDA together with interest. In this regard,
claimant stated that as per the contract between the
parties, the stipulated date of start of work was
17.04.1986 and stipulated date of completion was
16.04.1987 while the work was actually completed on
02.05.1989. It was further contended by claimant that
the entire delay in completion of work is attributable
to the respondent which fact is clear from the fact that
the time was extended without levy of any
compensation, which is only done if there is no delay
attributable to the contract. The claimant stated that
work was delayed on account of the following reasons-
a) the delay in supplying the drawing for various
items including the drawings for foundation work,
external sewerage, water supply, drainage work;
b) the delay in giving the decisions of various items
including the decision of colour scheme;
c) the delay in giving road decisions;
d) the delay in giving the payments on due times;
e) the failure in nor arranging good earth;
The claimant referred to various documents, details of
which were given in the statement of claims. It was
stated by the claimant that on account of the said
delay, the claimant suffered losses, which is the
subject matter of this claim. The claimant says that
whenever the work is delayed, the contractor is bound
to suffer the losses for the prolongation of the contract
and as such the claimant is fully entitled to claim
compensation in this regard. The claimant relied upon
various judgments and filed in this regard written
submissions, rejoinder written submissions, as well as
made oral submissions before me. The claimant also
stated that the claimant had notified to the
respondent that on account of the delay being caused
in completion of the work, despite claimant being
ready to complete the work, the claimant will be
entitled to claim extra rates and in fact vide Exhibit C-
36 claimed 18% over and above the quoted rates. The
claimant also stated that the respondent cannot
escape from its liability by taking recourse to clause 5,
10, 10CC and additional specification No.1, as they are
not applicable in the facts and circumstances of the
case and furthermore, the delay is more than 6
months as envisaged under clause 10. On the
contrary, the respondent refuted the said claim of the
claimant and stated that claimant is not responsible to
make payment of compensation as claimed under
claim No.9 and referred to clause 1 of the specification
and conditions and also stated t hat in view of the fact
the escalation has already been paid under clause
10CC of the agreement, therefore, no further
compensation is liable to be paid and relied upon the
decision of the Hon'ble Division Bench of Delhi High
Court in case of Delhi Development Authority Vs.
U.Kashyap and also in case titled Delhi Development
Authority Vs. K.C.Goel and stated that in view of
clause 1 of the specification and condition and clause
10CC, the claimant is not entitled to claim anything
except what has already been paid under clause 10CC
of the agreement. In rejoinder, claimant refuted
contentions of the respondent and stated that the
judgment of Hon'ble Division Bench as given in DDA
Vs. U.Kashyap and DDA Vs. K.C.Goel is not applicable
to the facts of the case, as the present claim is for
compensation for prolongation of the contract and also
relied upon the subsequent judgment of the Hon'ble
Division Bench of Delhi High Court in Delhi
Development Authority Vs. S.S.Jaitley in which the
aforesaid judgment was also considered. The
respondent also filed written submissions in this
regard. I have considered arguments given by both
the sides and I have also considered all the
documentary evidence placed by both the parties in
this regard. After carefully considering the entire
arguments and the documents placed on record, I am
of the considered opinion t hat the work has been
delayed on account of various lapses on the part of
the respondent alone and that is the reason, the
respondent had granted extension of time without
levy of any compensation. The work has been delayed
because of the delay in giving drawings and in fact the
drawings have been substantially delayed; the
foundation drawing without which the work cannot be
started was given more than three and a half months
of the commencement date, i.e. only on 28.07.1986
and thereafter the drawings have been given in fits
and starts; the external sewerage, water supply and
drainage work drawings were also handed over very
late. Thus, there has been substantial delay on the
part of the respondent in furnishing the drawings,
which were the responsibility of the respondent. The
respondent also failed to approve the sanitary stacks
and delayed in giving various other decisions, which
caused delay in execution of the work. Apart from
this, the respondent also failed to arrange good earth,
which was the responsibility of the respondent. The
respondent also failed to release the payments on due
dates. Apart from this, the respondent was also guilty
in not supplying the materials in time and there was
considerable delay in giving the stipulated materials.
Since the work has been delayed on the part of the
respondent along, therefore the respondent is liable to
compensate the claimant for the ensuing losses, which
every contractor is bound to suffer in the event of
delay. The respondent cannot escape from its liability
by taking recourse to clause 5, 10, 10CC and clause
No.1 of the additional specification and conditions.
Clause 5 only deals with grant of extension of time in
the event of delay in work, but simply because time
has been extended that cannot compensate a
contractor for the losses, which the contractor has
suffered. Clause 10 exonerates the respondent from
payment compensation on account of delay in supply
of materials, but clause 10 has limited application. It
only exonerates the respondent from paying the
compensation on account of delay in supplying the
materials if the delay is confined to 6 months period,
i.e., one-half of the stipulated period, but shall not
exonerate the respondent from its liability to
compensate, if delay is more than 6 months. In the
present case, the delay is not confined to material
rather it is substantially confined to various other
factors, like supplying the drawings, giving decisions,
releasing the payments, which are not covered within
the ambit and scope of clause 10 and since substantial
delay is on account of supply of drawings, decisions
and payment, therefore, the respondent cannot
escape from its liability by taking recourse to clause
10. Similarly, reference to clause 1 of additional
specification and conditions is of no avail to the
respondent, as clause 1 only deals with change in
programme of construction whenever any site or part
site is not available at the time of doing a particular
work and that too on account of non-supply on any
material for unavoidable reason and has no
application beyond the stipulated date of contract
because it does not contain the provision of extension
of time as is otherwise provided for in clause 10. In
the present case, the respondent has not been able to
explain any unavoidable circumstances for non-supply
of material at a particular time. Moreover, the delay
caused is on account of other factors, which are
otherwise not covered in clause 1 and furthermore
while issue NIT, it was specifically made clear by the
respondent that site was fully available thus the
respondent cannot escape from its liability by taking
recourse to said clause No.1. The contention of the
respondent that since compensation for prolongation
has been paid under clause 10CC, therefore, claimant
is not entitled for any further compensation is also of
no avail. Clause 10CC is altogether different and talks
about escalation and not about the losses, which a
contractor is bound to suffer on account of
prolongation of the contract. The judgment as relied
upon by the respondent DDA Vs. U.Kashyap was
considered in another subsequent judgment of the
Hon'ble Division Bench in DDA Vs. S.S.Jaitley in which
the Hon'ble Division Bench categorically considered
the effect of the judgment of DDA v. U.Kashyap and
held that it has no application where the
compensation is claimed for prolongation of the
contract. Here also in the present case the
compensation has been claimed on account of the
prolongation of the contract. Since the work has been
delayed for more than a period of two years and one
month, therefore, the claimant is bound to suffer
losses On account of escalation in price of materials
and wages on account infructuous expenditure on
overheads on account of idle machinery, tools and
plants loss of profitability which are usual losses which
every contractor is bound to suffer on account of delay
on the part of the owner and the respondent cannot
escape from its liability to compensate the claimant,
particularly when I have held that the delay in the
present case is entirely attributable to the respondent
alone. Now, coming to the question as to how the
damages should be measured. There are different
modes of measuring the damages - one the damages
can be measured by taking recourse to cost indices;
secondly, damages can be measured by taking the
difference of the rates prevailing at the time of
tendering and during the delayed period; thirdly, by
taking into consideration the actual losses suffered on
account of the delay. In the present case, the
claimant had vide Exhibit C-36 notified that because of
the delay and because of the increase in the rates, the
claimant would be claiming 18% extra over and above
the quoted rates to which no rebuttal was ever given
by the respondent. The claimant has tried to justified
the compensation claimed by taking recourse to cost
indices and details of which have been given in
Annexure-4 wherein the claimant has worked out the
losses on the basis of cost indices as `14,75,260.65. If
the percentage method is adopted as was notified by
the claimant vide Exhibit C-36, then the damages
works out to `14,12,801/-. During the course of the
argument, the claimant had given a note showing the
details of the actual losses suffered by the claimant
and if the details of the losses are worked out on
account of infructuous expenditure in respect of the
establishment, idle staff and idle tool and plants and
reduced profitability of the firm, then the damages to
suffered by the claimant comes to `20,04,000/-, the
said details were given in Exhibit C-107. I have gone
through the details given in C-107. The claimant had
given details of four engineers, 2 Head Mistries, 8
supervisors, 8 mechanics, 1 marketing incharge, two
foreman, mechanics and thus it is stated that they
have lost @ `30,500/- per month. The said details are
on higher side. The claimant could have managed its
work with the following persons:-
Particulars No. Salary per Amount per
month month
Engineers 2 `1750.00 `3500.00
Headmistry 1 `1500.00 `1500.00
Supervisor 6 `800.00 `4800.00
Store Keeper 1 `800.00 `800.00
Cashier 1 `950.00 `950.00
Mechanic 6 `700.00 `4200.00
Mechanic 1 `1000.00 `1000.00
(Mixer Driver)
Marketing and 6 `625.00 `3750.00
Purchasing
Watch and
Ward
Foreman 2 `950.00 `1900.00
Mechanic
Total `22400.00
Thus the claimant was incurring `22,400/- per month
on fixed maintenance. Since the work was delayed for
26 months and therefore the infructuous expenditure
incurred by the claimant on account of maintenance of
fixed site staff is `22400 x 26 = `5,82,400. So far as
the infructuous expenditure on overhead is concerned
that has been rightly worked out by the claimant at
`53,730/-.
Regarding loss of idle tools and plants is concerned, I
find that the amount claimed for T & P is on higher
side as the work could have been managed with four
mixers, four vibrators, three water pumps and 3000
steel shuttering plates, 1000 Scaffolding ballies 3000
roof ballies, 800 Battas, 250 bamboo challies. Other
expenses claimed for other items are not available to
the claimant because the item regarding electric cable
for temporary connection, welding set, car, scooters,
mopeds are not only meant for a particular work and
could be utilized some where else. Thus, cost of T & P
which were rendered idle is `9,18,000 and accordingly
the loss due for optimum use would be 918000 x
20/100 x 26/12 = 397800. I have gone through the
details regarding loss of reduced profitability, I find
that the amount of `607100/- as worked out in exhibit
C-107 is absolutely in order and reasonable.
Accordingly the loss works out to `16,41,050/- on
account of infructuous overheads, idle tools and plants
and reduced profitability. I agree that the damages
can also be well measured by taking recourse to cost
indices and if cost indices are taken into consideration,
it works out to `14,75,260.65, details of which have
been properly given in Annexure-4. I have myself
checked that details and I find the same in order, but
since claimant has notified that claimant would be
charging 18% over and above the quoted rates vide
Exhibit C-36 and if calculated by that percentage, it
works out to `14,12,801/-, details of which have been
properly given in statement of claim. I have checked
the details and find the same in order, which is less
than `14,75,260.65 on cost indices and `16,41,050/-
on account of infructuous expenditure idle tool and
plant etc. I restrict the damage to `1412801/- alone
though I feel that `16,41,050/- would be adequate
compensation to the claimant. I, therefore, award
only `14,12,801/- as compensation to the claimant
under this claim against the respondent, which the
claimant has suffered due to prolongation of the
contract because of the lapses on the part of the
respondent. However, I do not propose to award any
interest from 01.22.1989 till 28.01.1994, which was
not a determined liability till then. So far as granting
of pendent lite and future interest of the said amount
is concerned, that is separately dealt under claim
No.17."
8. It is obvious that the learned Arbitrator has not
awarded the sum of `14,12,801/- on the basis of labour and
material escalation but has ostensibly recompensed, by way of
damages, towards overheads in terms of staff deployed during
the period the contract got extended and to recompense the
contractor loss toward idle tools, plant, shuttering material and
other equipment brought at the site for purposes of
constructing the flats as per the agreement.
9. We now note the pleading in the statement of claim
filed by the contractor pertaining to the award dated
27.7.2001. It reads as under:-
"CLAIM NO.9: THE CLAIMANT CLAIMS AN AMOUNT
OF `16,00,000/- ON ACCOUNT OF PAYMENT BY WAY
OF COMPENSATION FOR ADDITIONAL COST IN
EXECUTION BEYOND THE STIPULATED DATE OF
COMPLETION ON ACCOUNT OF PROLONGATION OF
WORK CAUSED BY LAPSES, DEFAULTS AND BREACHES
OF THE DDA TOGETHER WITH INTEREST AT 18% PER
ANNUM FROM THE DATE THE AMOUNTS BECAME DUE
TILL THE DATE OF REFERENCE
The Claimant has set out in detail in para 1 to 5 in
particular in para 4 the numerous breaches of the
Respondent. As a result of these breaches, the work
had to be carried on beyond the stipulated period,
subjecting the Claimant to additional cost and burden
it with losses. The Claimant is not repeating the
narration of the breaches and craves leave to have the
contents of paras 1 to 5 of Statement of Claims read
as part of this claim.
It is well settled that the additional costs and
losses which are inflicted on contractor on account of
the breaches of the employer must be compensated.
The Respondent failed to fulfill its obligations that
were fundamental and went to the root of the
performance of the contract. The failure to perform
and non compliance with the conditions of the
contract amounted to fundamental breach.
Accordingly, there could be no exemption from liability
on the part of the Respondent. Resort cannot be had
to any provision of the contract seeking to give such
an exemption. Such misperformance is not be
condoned. The work had been executed for a period
of nearly 25 months beyond the stipulated date of
completion solely due to breaches and hindrances that
were attributable to the Respondent. The extension of
time granted by the Respondent is no compensation
for the breaches and the losses suffered. Besides
compensation under Clause 10 CC does not
adequately cover the losses suffered by the Claimant
due to escalation and enhanced construction cost.
Firstly because 85% of the value of work is considered
for working out the payment under 10 CC. Secondly,
the whole sale price indices adopted for this clause is
not reflective of the real escalation in construction
cost. The computation of the Claimant's claim is as
under:-
i Quantum of work done upto the stipulated date
of completion was `1,73,47,739.00 calculated at the
tendered rates. As per 10th running bill paid.
ii. The quantum and value of work done from the
date of stipulated completion to final bill paid is
`1,18,70,627.00.
iii. Quantum of stipulated material issued from the
stipulated date of completion to the final bill paid is
`40,21,730.00.
iv. Work done beyond the stipulated date of
completion therefore comes to `1,18,70,627/- less
`40,21,730.00 = `78,48,897.00.
v. Calculated @ 18% extra rate on the aforesaid
sum of `78,48,897.00 the quantum of claim under this
claim comes to `14,12,801.00.
It will be recalled that the Claimant had duly
notified the Respondent about its claim for increase @
18% p.a. over and above the total rate for the work
done beyond the stipulated date of completion. The
Respondent did not require the Claimant to stop its
work, instead kept on giving further instructions with
regard to the execution of the work. The Respondent
is accordingly deemed to have admitted the claim of
the Claimant for payment @ 18% over and above the
tendered rate. Reference is invited to Exhibit C-36.
The Claimant states that the amount of `14,12,801.00
claimed is even otherwise reasonably computed is
fully justified in view of the steep escalation in
construction cost. This is amply borne out by the
Tenders accepted and for similar work at a higher
rates during the relevant period. Besides the amount
claimed is found to be justified even when computed
on the CPWD cost indices. These have received
judicial recognition as a fair and just method to
determine escalation. The claim computed by
applying CPWD indices works out to `14,75,260.00
(Annexure-IV). The Claimant states that the actual
loss suffered and its entitlement to compensation
works out to more than the amount claimed. The
Claimant craves leave to substantiate its claim by
such evidence as may be found necessary. The
Claimant is entitled to interest @ 18% on the amount
claimed as the amount had been wrongfully withheld.
The Claimant also claims interest @ 18% p.a. on the
said amount w.e.f. 1.11.1989 to 28.1.1994. The
Claimamnt reserves its right to claim compensation for
additional work done as may be crystallized after the
adjudication of the quantities included I the
arbitration."
10. Annexure-IV referred to in the pleadings pertaining to
Claim No.9, reads as under:-
"ANNEXURE-IV
CLAIM NO.9:COMPUTATION OF DAMAGES/LOSSES
DUE TO PROLONGATION OF THE
CONTRACT FROM 16.4.87 UPTO THE DATE
OF CONPLETION (CLAIM NO.9) BASED ON
COST INDICES.
----------------------------------------------------------
A Gross amount of Final Bill `2,92,18,366.61
Less Cost of material supplied by `1,22,07,820.61
the Respondent
----------------------
`1,70,10,546.00
Value of work done after deduction
of cost of materials supplied by
Respondent
B As per 10th RA Bill paid
immediately just after the
stipulated date of completion
Gross amount bill `1,73,47,739.00
Less cost of materials supplied by `81,86,090.56
the Respondent -------------------------
Amount of the work done after
deducting the cost of materials
supplied by the Respondent `91,61,648.44
C Net amount of work done after the
stipulated date of completion and
after deducting the cost of material
supplied by the Respondent
1,70,10,546.00 - 91,61,648.44 =
D Cost of Indices approved by the
CPWD
13.3.84 - 274
27.6.85 - 312
11.7.86 - 340
16.6.87 - 370
Taking the cost of Indices on
Average cost index on 20.4.85
when the tender was accepted.
= 274 + (312-274) x 14
------
= 274 + 33.25 = 307.25
Applicable cost index on 16.4.87 the stipulated date of
completion
= 340 + (370-340) x 10
-----
= 340 + 25
= 365.00
E Increased amount payable on account
of prolongation of work:
78,48,897.56 x 365 - 307.25
-----------------------
307.25
= `14,75,260.65"
11. Since learned counsel for the respondent sought to urge
that there is no variance between pleading and proof and for
which he drew our attention to the preliminary pleadings in the
statement of claim where the case set up by the contractor
was pleaded, we note the relevant part of the pleadings in the
statement of claim pertaining to the award in question, the
same reads as under:-
"4. That in response to the notice received from the
learned Arbitrator, the claimant is setting out the
particulars of its claims as under:-
(a) For a proper appreciation of the claims, the
following significant and relevant dates and particulars
may be noted:-
(b)
i) Date of tender 20.04.1985
ii) Date of acceptance 07.04.1986
iii) Date of Start 17.04.1986
iv) Date of Stipulated Completion 16.04.1987
v) Date of actual completion 02.05.1989
vi) Estimated cost of Tender `1,30,37,025/-
vii) Tender cost i.e. `2,10,22,202/-
contracted value 61.25% (above DSR 1981)
(c) The execution of the contract which was required
to be completed within a period of 12 months i.e. by
16.4.1987 was unduly prolonged. The work was
completed only on 2.5.1989. The work had to be
carried out for 37 months i.e. nearly 25 months
beyond the stipulated date of completion due to the
failure and breaches of the Respondent. The claimant
was subjected to increased costs of materials
(payment under 10 CC does not adequately
compensate the claimant) overheads and erosion of
profits. The breaches of the Respondent may be
summarised as under:-
(i) From the very beginning of the work, the
Respondent directed the claimant not to proceed with
the Brick work as revised drawings were to be issued.
The issue of the revised drawings was delayed which
delayed the commencement of foundation work. The
drawing of foundation work was issued only on 28.7.86
thus resulting in delay in commencement of work.
Reference is invited to Exhibit No.C-6, C-8, C-12 and C-
42. The Respondent did not make available drawing
for external sewerage, water supply and drainage
work on time. The sewerage plan was handed over on
1.12.87. The water supply drawing was handed over
on 30.5.87. Reference is invited to Exhibit C-30, C-31,
C-32 and C-43.
The work was also delayed as the Respondent failed to
approve the Sanitary Stack and to supply C.I. fittings
thereby delaying the execution of connected items
such as flooring and dado/glazed tiles etc. of kitchen
and bathroom. Reference is invited to Exhibit C-20, C-
26, C-29 and C-53.
(ii) Failure to supply stipulated materials on time
and in adequate quantities commensurate with the
work requirement. The respondent failed in its
obligation to make adequate issue of stipulated
materials such as cement, steel, C.I.fittings, glazed
tiles, shutters, bitumen etc. on time. The claimant
state that the Respondent miserably failed to issue the
requisite quantity of cement. The cement issued was
far less than the required and indented quantity and
many a times work was closed due to NIL cement
balance. It resulted in idle labour, poor and under-
utilisation of the claimant's T&P and staff. The
claimant throughout called upon the respondent to
improve and make supply commensurate to its work
requirement. Similarly steel was also in short supply.
The claimant suffered losses due to these short
supplies. The claimant invite reference of the learned
Arbitrator to letter bearing Exhibits No.C-2, C-4, C-12,
C-14, C-16, C-18, C-19, C-21, C-22, C-23 and C-25.
Respondent also delayed the issue of cast iron fitting,
bitumen, glazed tiles and shutters which were to be
issued to the contractors for incorporation in the
work. Reference is invited to Exhibits No.C-33, C-37, C-
45 and C-53. This delay in issue of stores consequently
delayed the completion of the project. The decisions in
respect of cement concrete pavement on road side,
water proofing treatment on open terrace as also were
delayed. Reference is invited to Exhibits No.C-44 and
C-47."
12. From a perusal of the pleadings i.e. the general pleadings
in the Statement of Claim preceding the pleadings constituting
the specific heads of claims, we do find that in para 4(c)(ii) it
has been pleaded that as a result of the defaults committed by
DDA there was poor and under utilization of claimants T&P and
staff and that the labour remained idle.
13. However, we find that in the same para i.e. 4(c) there are
pleadings that due to the contract being prolonged the
claimant was subjected to increased costs of material and
payments under clause 10CC did not adequately compensate
the claimant.
14. But, what we find is that when the specific heads of
claims were justified with reference to the evidence and the
loss suffered, the pleading in its entirety, refer to cost indices
to bring home the point that for the work done beyond the
stipulated date of completion, the price rise was 18% and
hence the claim was raised by specifically pleading that for the
work done after the scheduled date of completion, after
deducting the cost of material supplied, on the balance sum
i.e. `78,48,897/- damage was claimed as the prices had
escalated by 18% and hence the claim.
15. The law relating to pleadings guides us that there is a
difference between a material fact to be pleaded and material
particulars to be pleaded. Order 6 Rule 2 of the Code of Civil
Procedure requires pleadings to contain a statement in a
concise form of the material facts on which the party pleading
relies for its claim or defence and as per Rule 4 thereof,
whenever necessary, material particulars in relation to
material facts have also to be pleaded. Conscious of the fact
that the strict rules of pleadings envisaged by the Code of Civil
Procedure do not apply to pleadings before an Arbitrator, the
principles contained therein would have general applicability to
all pleadings and indeed we find that the contractor was fully
conscious thereof inasmuch as after generally setting forth his
case in the preliminary pleadings in the statement of claim, the
contractor laid bare the material particulars thereof under
individual heads of claim.
16. Contrasting and reconciling the general pleadings and
the material particulars thereof, we find that under claim No.9
the contractor never claimed damages on account of
overheads in the form of staff deployed, idle T&P, labour and
other machinery brought at the site during prolonged period of
the contract. The pleadings under claim No.9 clearly show that
the contractor pleaded that recompense under clause 10CC of
the contract was not enough to mitigate the expense incurred
by him. It is apparent that the learned Arbitrator has awarded
a sum, for which there were no pleadings.
17. It be highlighted that nowhere in the pleadings has it
been pleaded that 2 engineers, 1 head mistry, 6 supervisors, 1
storekeeper, 1 cashier, 6 mechanic (mixer driver), 1 marketing
and purchase officer, 6 watch and ward personnel and 2
foreman (mechanic) were stationed at the site. There are no
pleadings that 3000 steel shuttering plates, 1000 scaffolding
ballies, 3000 roof ballies, 800 battas, 250 bamboo challies or
any other kind of tool or plant was kept at the site. There is no
pleading with respect to the salary paid. There is no proof that
staff as claimed in the number was stationed at the site. There
is no proof of T&P and other equipment being on the site on
the basis whereof the award has been pronounced.
18. The record would show that Ex.C-119 the document on
which the claim was rested was not filed before the Arbitrator
till parties argued their case on 1.6.2001. It was only
thereafter that the said exhibit was filed, on a date not known
as it is not emerging from the record, but when DDA learnt
about the same, on 9.7.2001 its counsel addressed a
communication to the learned Arbitrator highlighting that the
claim No.9 was premised on escalation and not on anything
else and highlighted the decision of this Court in K.C.Goel's
case (supra).
19. The principle that there cannot be any variance between
pleading and proof is not to be expressly found in any
provision of the Code of Civil Procedure but has been evolved
by Courts with reference to Order 6 Rule 2 and Rule 4 thereof
as a general principle of law: You cannot win battles by
springing surprises. Pleadings of parties are intended to focus
the issues on which the parties seek a decision. It would be
unjust if parties are permitted to plead and proof at variance.
This principle would apply to pleadings and decisions before
any Fora where civil disputes are adjudicated.
20. Indeed, the principle would govern an arbitration
proceedings and where an arbitrator adjudicates upon a claim
on proof entirely different than the pleading, it would amount
to springing a surprise upon the opposite party and in violation
of justice and would amount to a material irregularity requiring
such an award to be set aside under Section 34 of the
Arbitration & Conciliation Act 1996.
21. Since learned counsel for the contractor argued that the
claim has been allowed with reference to the pleading in the
context of there being an 18% increase in price and hence
sought to justify there being no variance between pleading and
proof, we would highlight that the learned Arbitrator has
resorted to a strange process of reasoning which is rolled over.
The learned Arbitrator has listed the number of staff and the
stated monthly salary, notwithstanding there was no proof
thereof, to hold that during the prolonged period staff salary in
sum of `5,37,600/- would be payable and `49,600/- would be
payable towards infructuous overhead expenditure. Loss
towards T&P being idle has then been computed in sum of
`3,67,200/- and loss towards reduced profitability has been
determined at `5,60,400/-. The total has been worked out to
`15,14,800/-. Thereafter the learned Arbitrator states that with
reference to the cost indices and Ex.C-50, 18% increase in the
price of materials would entitle the contractor to be
recompensed in sum of `15,58,773/- and the learned Arbitrator
concludes that he would prefer to award `15,14,800/- since
this is the loss determined by him on account of idle
machinery, tools and plants, infructuous expenditure and loss
on account of reduced profitability. Now, if the claim is
towards overheads, idle machinery, tools and plants and loss
on account of reduced profitability it fouls the principle of no
variance can be allowed in pleading and proof. Further, the
award pertaining to said claim would be bad in law inasmuch
as there is firstly no evidence to establish said manner of claim
being claimed or sustained and secondly, the learned
Arbitrator, not having considered that it is the duty of every
party to take all reasonable steps to mitigate the loss, a
requirement of the explanation to Section 73 of the Indian
Contract Act 1872. If the claim has been allowed on the
strength of price increase, the same would be contrary to the
law, on which issue, as noted above parties are not at
variance.
22. The impugned decision by the learned Single Judge has
proceeded on the basis that a claim for damages due to
contract being prolonged on account of defaults of the
opposite party is different than a claim for increase in the price
of material and cost of labour during the prolonged period of
contract, but has not dealt with the issue which actually arose
for consideration. The pleadings pertaining to claim No.9 have
not been noted. The law prohibiting variance between
pleading and proof has not been noted. It has not been noted
that there was no evidence to support the quantification of the
claim as sought to be justified towards damages on account of
idle T&P, labour and overheads etc. Principle of mitigation of
loss has not been dealt with.
23. Under the circumstances both appeals are allowed.
Impugned decisions, both dated 25.1.2006 are set aside. OMP
No.392/2001 and OMP No.393/2001 are allowed to the extent
that both impugned awards are modified by setting aside the
sum awarded under claim No.9. Noting that it was only said
claim which is subject matter of dispute before us we modify
both awards by nullifying the claim awarded under claim No.9.
24. No costs.
(PRADEEP NANDRAJOG)
JUDGE
(SUNIL GAUR)
JUDGE
September 26, 2011
dk
