Modern Co-Operative G/H Society ... vs Bharat Bijli Ltd.
2018 Latest Caselaw 6051 Del

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*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                   Date of Decision: 5th October, 2018
+                     CS (OS) 317A/2000
        MODERN CO-OPERATIVE G/H SOCIETY LTD.               ..... Plaintiff
                      Through: Mr.      Sunil     Dalal,       Advocate.
                                 (M:9810013399)
                      versus
        BHARAT BIJLI LTD.                               ..... Defendant
                      Through: Mr. Vinay Bhasin, Senior Advocate
                                 with Ms. Namita Sharma, Advocate.
                                 (M:9891072729)
        CORAM:
        JUSTICE PRATHIBA M. SINGH
Prathiba M. Singh, J. (Oral)

1. Modern Co-operative G/H Society Ltd. - Plaintiff had entered into an agreement on or about 30th December, 1987 with the Defendant by which it had agreed to install three passenger lifts and three passenger-cum-bed lifts in the Plaintiff Society's building. The total agreed payment to be made for installation of the said lifts was Rs.20,88,450/-. The payment was to be made in the following manner in different tranches.

1) 30% of the payment was to be made at the time of acceptance of the proposal.

2) 60% of the contract value + price variation of claim on the material portion was to be paid on receipt of advice that the material was ready for dispatch.

3) 10% of the contract value + price variation + taxes levies were to be upon installation of lifts.

2. The dates in this case are relevant and are set out herein below:

 The date of the agreement, i.e., when acceptance of the

proposal took place, is 30th December, 1987.  Completion of the installation was to take place within 65 weeks i.e. on or before 17th December, 1989.  The civil work and preparation of the lifts' pits, to enable installation of the lifts, was the obligation of the Plaintiff and the same was to be ready within 5 weeks before 17 th December, 1989 i.e. on or before 31st August, 1989.

3. The payments made by the Plaintiff were as under:

 Rs.20,000/- as an part of the initial 30% payment was paid on 30th December, 2017.

 Rs.6 Lakhs as part of the 30% payment was made on 11th July, 1988.

 Rs. 3,00,700.67 as part of the 60% payment each, was made on 29th May, 1990 for lift no.1, 21st March, 1991 for lift no.2 and 25th May, 1993 for lift no.3.

4. Admittedly, there was delay by the Plaintiff in the payment of 30% and the delay was more than 7 months. The payment was due on 30 th December, 1987 but it was made on 11th July, 1988.

5. Going by the terms of the agreement, 60% payment was to be made only upon the readiness being shown by the Defendant which payment, however, was not made till the end. Only 60% payment in respect of the three lifts was made, that too, over a period of three years i.e. from 29th May, 1990 to 25th May, 1993.

6. The Defendant then abandoned the site on the ground that the entire 60% payment had not been made for the six lifts, and hence there was a

complete stalemate between the parties, leading to disputes.

7. Ld. Sole Arbitrator was appointed in a petition under Section 20 of the Arbitration Act, 1940, by this Court, vide order dated 26th April, 1999. An award was rendered by the learned Arbitrator Justice Satpal (Retd.) on 1st January, 2000.

8. The issues framed by the Ld. Arbitrator were as under:

"(1) To what amount were the Claimants entitled towards the advance paid to the Respondents? (2) Whether the Claimants were entitled to any damages on account of alleged delay in the erection/installation of lifts?

(3) Whether the Claimants were entitled to difference of price between the agreed price with the Respondents and the price paid to the outside agency for erection of lifts? (4) Whether the Claimants were entitled to price of armoured cable supplied to Respondents, if so to what amount?

(5) Whether the Claimants were entitled to any amount alleged to have been incurred for civil work carried out on behalf of the Respondents?

(6) What amount is due and payable to the Respondents under various invoices mentioned in para 22 of their statement of claim?

(7) Whether the parties were entitled to any interest on the amount found due, if so, at what rate and for which period?"

9. The learned Arbitrator awarded a sum of Rs.18.77 lakhs, along with interest @ 18% per annum, if payment was not made within two months. The operative portion of the award is set out herein below:

"As stated herein above, some of the terms of the contract have been violated by the claimant society and the initial delay in erection of lifts was on the part of Claimant, it is, therefore, held that Claimant is not entitled to interest on the amount awarded. On the same

grounds, the Claimant is not awarded any amount as cost. It is, however, directed that in case the Respondent fails to pay the awarded amount to the Claimant within two months, the Claimant shall be entitled to recover interest @ 18% per annum from the date of award till the date of realisation.

The question now arises as to what amount be paid by the Respondent to the Claimant on this ground. As stated earlier, the Claimant has claimed a sum of Rs. 30 lacs for getting the work completed through outside agency. The witness of the Claimant namely Sh. R.D. Suyal, however, stated that the contract was finally entered between the parties for Rs. 21.75 lacs. It was further stated that besides this amount, the society would have to pay a sum of Rs. 4.50 lacs for new control panel and will have to incur a sum of about Rs. 5 lacs for contingencies and expenses, which may arise from time to time up to completion of job. The witness, however, in his cross examination has admitted that they had used material worth Rs. 7.48 lacs belonging to the Respondent company, thus the net amount comes to Rs. 23.77 lacs. Out of this amount no details were however, given about the sum of Rs. 5 lacs which according to Sh. Suyal was likely to be incurred. Thus after deducting this amount of Rs. 5 lacs the net amount payable by the Respondent; will come to Rs. 18.77 lacs to the Claimant society."

10. The award came to be challenged before this Court and vide order dated 14th September, 2012, a learned Single Judge of this Court set aside the award of the Arbitrator. This was carried in appeal by the Plaintiff and vide order dated 28th July, 2014, the matter was remanded for re-hearing in respect of claim no.4.

11. Learned counsels for the parties have been heard in respect of claim no.4. It is submitted by Mr. Bhasin, learned Senior Counsel appearing for the Defendant who has preferred the objections, that the Arbitrator, having

not gone into the issue as to whether the abandonment by the Defendant was bad, could not have awarded damages in favour of the Plaintiff in claim no.4. It is submitted that the Plaintiff itself having delayed the various payments and completion of the civil works, damages ought not to have been awarded.

12. On the other hand, Mr. Sunil Dalal, learned counsel for the Plaintiff submits that all the payments were received by the Defendant without any demur. Further, civil work was completed by 16th March, 1990, as per the admission of the Defendant's witness Mr. N. K. Suri as well as in the pleadings filed by the Plaintiff. In view of the fact that the Defendant abandoned the site, despite receiving a substantial sum, the Plaintiff was forced to get the work completed by a third party contractor and was entitled to raise a claim in respect thereof.

13. Mr. Bhasin refuted these contentions of learned counsel for the Plaintiff.

14. Most of the facts in the present case stand admitted including the payment made, dates by which the obligations were to be complied with etc., There is, however, one fact which needs to be noticed in the award i.e. there is no issue framed as to which party was in breach. In fact, there was no issue framed in respect of whether the abandonment by the Defendant was illegal and unlawful. The amount under claim no.4 was awarded under the presumption that the Defendant was in breach.

15. Plaintiff relied on the correspondence addressed to the Defendant asking the Defendant to take steps to install the lifts. In respect of this correspondence, the Plaintiff's stand is that no action was taken by the Defendant thereby forcing the Plaintiff to finally get the job executed by a

third party. The claim petition makes reference to a meeting held between the parties and it was the Plaintiff who had a grievance that despite almost payment of Rs.15 Lakhs having been made to the Defendant, the Defendant did not care to commence the work and not a single lift was made operational.

16. However, the claim petition does not contain any details as to how the third party contractor was engaged and as to whether the Defendant was put to notice that the Plaintiff is going ahead to engage a third party contractor to execute the works at its risk and costs. Claim No.4 reads as under:

"IV. Claim for the money to be paid extra by the claimant society for getting the work done through the outside agencies. The society claims for the purchase and money paid in excess on account of the breach on the part of the respondents. Rs.30,00,000/-"

17. In response, the Defendant claimed that repeated delays from the time of acceptance of the proposal were at the hands of the Plaintiff. The Plaintiff failed to cooperate with the contractor engaged by the Defendant and accordingly, given this situation, it had no option but to abandon the site. In fact, various other letters have been referred to and relied upon in the pleadings filed by the Defendant before the learned Arbitrator. The Defendant raised a counter claim to the tune of Rs.15,88,950/-.

18. In this background, the legal question that arises is as to which party was in breach and whether the Plaintiff was entitled to execute the contract at the Defendant's risk and cost.

19. A perusal of the award shows that the learned Arbitrator has primarily gone on the admission that the civil works were completed by March, 1990. However, there is no finding as to which of the parties was in breach. The

learned Arbitrator comes to a conclusion that the payments were made in a delayed manner, however, the Defendant waived and accepted the said payments.

20. This finding of waiver does not appear to be correct from the facts. At the time when payments were made belatedly, the Respondent accepted the same, under the assumption that the remaining payments would be made in a timely manner. This is evident from the letters on record including the letter dated 3rd April 1993. An extract of the said letter is set out below:

"6. Last batch of lifts will be completed by 31st December 1993 and final adjustments will take another 3-4 weeks time. We will be in a position to hand over these lifts latest by 31/01/93.

7. The above dates are given on the assumption that we will get adequate and timely civil support required at the site, which is necessary for the smooth execution of the work."

21. The subsequent minutes of meeting dated 17 th April 1993 also records that the civil work was not yet done. Subsequent minutes of meeting dated 25th April 1993 and 28th April 1993 also go to show that scaffolding work was not done by the Plaintiff. Several meetings are thereafter held and letters were exchanged which are on record which show that the civil work was not completed in time and the full payment as per the contract was also not given. Thus, the abandonment by the Defendant was fully justified. If the abandonment was justified, then the Defendant cannot be burdened with damages for the work executed at risk and cost. Thus, the award of damages is not tenable.

22. However, one fact which cannot be disputed is that the payments made to the Defendant are more than the value of the material which was

lying at the site. The total payment made by the Plaintiff was to the tune of Rs.15,22,102/-. No lift had been installed by the Defendant. The material, however, which had been procured by the Defendant, was to the tune of Rs.7.48 lakhs. The Defendant cannot be held to be entitled to retain the extra amount of Rs.7.74 lakhs. Accordingly, in respect of claim no.4, the award of the learned Arbitrator is restricted to the amount of Rs.7.74 lakhs, which is the extra payment made by the Plaintiff. The same be returned by the Defendant to the Plaintiff along with simple interest @ 8% per annum from the date of award. If the payment is made within a period of eight weeks, no further interest shall be payable. However, beyond the period of eight weeks, simple interest @ 10% per annum on the award amount will be payable.

23. The award is made rule of court to the extent of Rs. 7.74 lakhs along with simple interest @8% per annum from date of award till date of payment.

24. The suit is disposed of in the above terms.

PRATHIBA M. SINGH JUDGE OCTOBER 05, 2018/dk