The petitioner-firm entered into a contract with the Delhi Development Authority through the Executive Engineer (Electrical Division) for the execution of the work “Construction of Inter-State Bus Terminus Kashmere Gate, Delhi SH Internal Wiring, Telephones, Conduit and Public address System”. An agreement No. 30.EE/DEDI/70-71 was executed between the parties in this behalf on 26th February, 1970. The work was to start with effect from 8th March, 1970 and was to be completed within 11 months. The said agreement contained an arbitration clause (No. 25) according to which all the matters in dispute were required to be adjudicated upon by an arbitrator to be appointed by the Vice-Chairman of the Delhi Development Authority.

2. In December, 1970, the contractor (M/s. Metro Electric Company) represented to the Delhi Development Authority that the contractual period for the completion of the electrification work was 11 months but it was to be co-ordinated with the construction work, where the progress had been miserably slow. The result was that the site was not made available to the firm for the execution of its work. The said firm made a number of representations to the Executive Engineer and others about the inordinate delay in the completion of the construction work. It was also alleged that it was undergoing lot of infructuous expenditure on establishment, etc. and that the market rates of the material to be used were also rapidly rising. It was further stated that the work, which was to be completed within the stipulated period, was of the value of Rs. 5,17,990, but actually the firm could execute only to the extent of Rs. 13,500 during this period. The sole reason was the non-availability of the site. Narrating all these circumstances, the firm asked the other contracting party to make up the loss by paying adequate compensation, but the same was turned down by inviting a reference to clause 10 (c) of the agreement. It is further alleged that when, after the expiry of the stipulated period of eleven months, the firm decided not to wait indefinitely and to determine the contract, the Executive Engineer on 9th November, 1971 compelled the firm to proceed with the work, failing which legal consequences would ensue. The contractor-firm repeated its previous difficulties and also pointed out that the rates of the material had tremendously gone up. It demanded an increase of 22% over and above the agreed rates. It is stated that on account of the threat held out, the firm proceeded with the work. It, however, repeated its request for an increase of 22% in the rates. This demand was not accepted by the Executive Engineer or by his superiors. In this situation, the contractor invoked the arbitration clause.

3. The Vice-Chairman of the Delhi Development Authority appointed Shri J.V Badami, Superintending Engineer, as an Arbitrator under the relevant clause of the agreement. The contractor-firm submitted a detailed statement of claims before the Arbitrator and tried to justify its demands. In the counter-statement the Delhi Development Authority stated that in view of clause 10 (c) of the agreement, no enhancement was permissible to the firm, Shri J.V, Badami was, thereafter, transferred, Shri K.B Menon, Chief Engineer of the Delhi Development Authority, was appointed in his place. Both the parties and their counsel appeared before the new Arbitrator and reiterated their respective assertions. Ultimately, Shri Menon gave his award on 26th October, 1973. Out of five claims of the contractor, the Arbitrator partly allowed two of them. In one claim an enhancement of 18% over and above the agreed rates was found justified. Some infructuous expenditure was allowed in the other. The two claims, found partly justified, are:—

Claim Award 1. The claimants claim an enhancement of 22% over and above their accepted tendered enhancement on the quantum of work executed after the stoppage of work on or about December, 1970. The claimants are entitled to an enhancement of 18% over and above their accepted tendered enhancement on the quantum of work executed after December, 1970. 2. The claimants claim a payment of Rs. 16,500 towards infructuous expenditure on establishment which is alleged to have been suffered by them on account of stoppage of work. The claim is justified to the extent of Rs. 8,000/-.

4. The Arbitrator informed the parties about the making of his award. Thereafter on 22nd November, 1973, M/s. Metro Electric Company (contractor) made an application in this Court under Sections 14 and 17 of the Arbitration Act directing the Arbitrator to file the original award and also for making the same a rule of the Court. The Delhi Development Authority opposed this application and pointed out certain infirmities in the award. An application (I.A No. 1287 of 1974) under Sections 30 and 33 of the Arbitration Act was also filed by the Delhi Development Authority (respondent No. 1) for setting aside the award made by Shri K.B Menon, Arbitrator. It was alleged that the Arbitrator had exceeded his jurisdiction by travelling beyond the scope of the agreement and that under clause 25 of the agreement, the Arbitrator could not make a declaratory award by enhancing the contractual rate, for the work, which was yet to be undertaken. It was also stated that the Arbitrator had grossly misconducted himself by not affording full opportunity to the parties to make their submissions. Lastly, the Arbitrator could determine dispute under clause 10 (c) of the agreement alone and had no power to act beyond its ambit. In these circumstances, it has been urged that the award cannot be sustained.

5. In reply to the application of the Delhi Development Authority under Sections 30 and 33 of the Arbitration Act, the contractor-firm reasserted its claim and added that at the time the first Arbitrator was appointed, the appointing authority had clearly required him to determine, whither the claim of the contractor/claimants was justified or not, and if so, to what extent. It is further contended that clause 10 (c) of the agreement was not at all attracted in resolving the present controversy and that the Arbitrator was fully competent to make a declaratory award as it was fully covered by the terms of the reference. It is accordingly submitted that the objections of the Delhi Development Authority be repelled and the award made a rule of the Court.

6. The learned counsel for both the sides had agreed before this Court that this case be decided on affidavits alone. Affidavits and counter-affidavits were accordingly filed.

7. The agreement in question was executed between the parties on 26th February, 1970 and the starting date for the work to be completed in eleven months, was to be reckoned from 8th March, 1970. There is no dispute that the construction work of the building could not keep pace with its schedule. As for the execution of electrical work, the contractor-firm depended upon the availability of the site. This work could not make any headway on account of the slow progress on the construction side. On 16th December, 1970, the contractor complained to the Executive Engineer (Electrical) about this and also registered his grievance that out of the total electrification work for Rs. 5,17,990 the firm had been able to do to the extent of Rs. 13,500 only (See Exhibit C-2 at page 30 of the arbitration file). In this letter a claim for 16% enhancement over the agreed rates was urged. The firm then sent a number of reminders to the various officers of the department but its request for enhancement was declined by making a reference to clause 10 (c) of the agreement. It was stated by the department that in view of the said clause, no enhancement over the contractual rates could be made. The stipulated period of 11 months expired but there was no substantial progress. The firm wrote about its inability to perform the remaining part of the contract, but the department threatened action in the event of breach of the agreement.

8. The firm proceeded with the work, but at the same time it wrote to the Delhi Development Authority for referring the dispute to the Arbitrator. The Vice-Chairman of the Delhi Development Authority appointed Shri J.V Badami, Superintending Engineer as an Arbitrator to decide and make his award regarding the claims/disputes mentioned in the letter of the contractor's counsel dated 20th April, 1972 and also regarding the counter-claims of the Delhi Development Authority against the contractors to follow, if any, subject, however, to their admissibility under clause 25 of the agreement.

9. The Arbitrator sent notices to the parties to file their statements of claims or counter-claims. The contractor firm filed its claims in detail through its counsel on 3rd February, 1973 and also appended therewith copies of correspondence which had transpired between the parties. The Delhi Development Authority through the Executive Engineer (Electrical) filed counter-statement of facts. It was admitted that the contract was to commence from 8th March, 1970, but clause (5) of the agreement stipulated that on the expiry of 11 months' extension could be granted for the completion of the work on the request of the contractor. It was further stated that the enhancement of the rates claimed by the contractor was extra-contractual and, therefore, it was not covered by clause 10 (c) of the agreement. It was also admitted that the firm was asked to resume the remaining work at the agreed rates as the construction of the building was in progress. When the firm had requested for the enhancement of the rates, its attention was drawn to clause 10 (c) of the agreement.

10. With the consent of the parties and their counsel, the Arbitrator framed the following issues on 11th July, 1973:—

Claim. Dispute. 1. The Claimants claim an enhancement of 22% over and above their accepted tendered enhancement on the quantum of work executed after the stoppage of work on or about December, 1970. The arbitrator is to determine whether the claim of the claimant is justified or not and if so, to what extent? 2. The Claimants claim a payment of Rs. 16,500 towards infructuous expenditure on establishment which is alleged to have been suffered by them on account of stoppage of work. —do— 3. The Claimants claim a payment of Rs. 30,000 (Rupees thirty thousand only) for loss of profits which they alleged to have undergone during the period for which the work remained stopped. —do— 4. The Claimants claim payment of interest at 12% per annum on amounts due to them upto the date of payment. —do— 5. The Claimants claim a payment of Rs. 2,000 as cost of proceedings. —do—

On the said date Shri R.K Lakhanpal, Advocate was present on behalf of the contractor-firm, while Miss Usha Mehra represented the Delhi Development Authority. An objection was taken by Miss Mehra that issues Nos. 4 and 5 were not covered by the reference made to the Arbitrator. Regarding this objection it was submitted by the other side that in the reference order of the appointing authority, it had been mentioned that it was without prejudice to other claims which had accrued or might accrue ahead. I need not harp on these issues as the claims embodied therein had been rejected in the award.

11. Shri Badami, Arbitrator was transferred and in his place Shri K.B Menon, Chief Engineer (C and D.) of the Delhi Development Authority was appointed as a Sole Arbitrator on 15th September, 1973. On 18th September, 1973 the new Arbitrator wrote to both the parties that he would proceed with the case in continuation of the hearings already held by Shri Badami. The first hearing before him was fixed for 16th October, 1973. On the said date the parties and their counsel appeared. They put forth their respective cases and also referred to some documents. The Arbitrator asked the firm to produce vouchers showing increase in the price of various articles and also asked the proprietor of the firm to file documentary evidence in support of payments made to the staff during the idle period to substantiate the infructuous expenditure. The Executive Engineer was also directed to produce a copy of the letter which was sent in reply to the representation of the contractor. The case was adjourned to 18th October, 1973.

12. On 18th October, 1973, the copy of the letter which was to be produced by the Executive Engineer was found to be already on the record. The contractor filed some documents to show rise in the prices of various articles and relied on departmental schedule rates obtaining from 1963 to 1972. The Executive Engineer was asked by the Arbitrator to scrutinise those rates and submit his report about their authenticity. He filed his report on 23rd October, 1973. He pointed out some mistakes in the statement but testified that the percentage of increase worked out by the contractor i.e at 24.56% was correct. After collecting all this material the Arbitrator gave his award on 26th October, 1973.

13. It is submitted by the learned counsel for the respondent that from the very beginning, the Delhi Development Authority had been totally denying the claim of the contractor on the ground that the enhancement claimed was extra-contractual and that, increase, if any, was permissible only under clause 10 (c) of the agreement, but that too in the event of the happening of certain contingencies. It is submitted by Shri Keshav Dayal that at best the assertion of the contractor for the increase of contractual rate by 18% in the first instance and by 22% in the subsequent representations, amounted to an offer, which was never accepted by the petitioner. The original agreement, therefore, held good as no additional or subsequent agreement had been entered into between the parties. No doubt the prices had shown upward trend during the stipulated period of eleven months and even thereafter, but this did not modify the contract nor it brought about any change in its terms. If there had occasioned a decline in the prices and margin of profits had been higher than what was originally expected, the contract would not have been re-written or modified by bringing down the rates. When an agreement is entered into, the contracting parties are always wide awake and are conscious of the risk involved due to unforeseen circumstances.

14. Clause 10 (c) of the agreement is the main plank of the respondent. For its critical appreciation, it seems expedient to reproduce the same below:—

“If during the progress of works the price of any material incorporated in the works (not being a material supplied from the Engineer-in-Charge stores in accordance with Clause 10 hereof) and/or wages of labour increases at direct result of the coming into force of any fresh law, or statutory rule or order (but not due to any changes in sales tax) and such increase exceed ten per cent of the price and/or wages prevailing at the time of acceptance of the tender for the work, and contractor thereupon necessarily and properly pays in respect of the material (incorporated in the work) such increased price and/or in respect of labour engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied provided always that any increase so payable is not, in the opinion of the Chief Engineer (whose decision shall be final and binding) attributable to delay in the execution of the contract within the control of the contractor.”

15. This clause of the agreement speaks of increase in the price of the material or wages as a result of some fresh law or statutory rule or order only and does not envisage increase due to other reasons. The kind of increase, which was comprehended by the parties was expressly stipulated and was inserted in the agreement in explicit and absolute terms. Once the firm had signified its acceptance to the contract it was tied down to those terms and could not go back or wriggle out simply because it did not suit its interest.

16. The contractor has not brought on record any evidence to show that the rise in the prices had occurred on account of any of causes mentioned in clause 10-C. The terms of the contract could not, therefore, be varied. Any increase in the rates affects the terms of the written agreement which cannot be done unilaterally. The conclusion of an agreement between the parties pre-supposes an absolute and unconditional acceptance of the offer. In other words, the parties have to be at consensus ad idem. But that is not the case here. When an upward trend in the prices of the material started, the contractor seized this opportunity to put forth his claim for higher rates. A mere demand on his part did not automatically amend or supplement the original agreement.

17. The present is a non-speaking award. It, therefore, did not contain the reasons for the various findings. It has, however, to be seen whether there is an error of law apparent on the face of the award as alleged by the respondents. Delhi Development Authority had all along been contending that the demand for higher rates due to any increase in the material was beyond the scope of the agreement and, therefore, extra-contractual. It is submitted by Shri Keshav Dayal that any change in the terms of the concluded contract could not be brought about without the consent of the Delhi Development Authority and that a mere assertion for enhancement of the rates did not confer or vest any legal right in the contractor. The rates had been settled according to the terms embodied in the contract. The scope for increase in the rates of material and of wages of the labour was comprehended in certain circumstances and it was for this reason that clause 10-C was inserted in the agreement. This clause was to become operative if there were statutory changes as defined. The record, however, shows that there had been no such increase in the prices. The scope of clause 10-C, therefore, could not be enlarged by the Arbitrator. He was to interpret the relevant clause as it stood and could not allow any increase on the ground of equity. His powers were circumscribed by the agreement itself and their transgression amounted to legal misconduct.

18. Before proceeding further, it may be noted here that the learned counsel for both the sides have unanimously stated that the entire evidence recorded by the Arbitrator and also the documents produced before him be looked into for deciding the various points raised in the controversy. So, in view of this joint submission, the said record has been referred to by the parties, where necessary.

19. Now let us examine the other aspect of the matter. The period to perform the contract was up ton 7th February, 1971. Thereafter clause 5 could be invoked by the contractor for extension of time. This clause is in the following terms:—

“If the contractor shall desire an extension of time for completion of the work on the grounds of his having been unavoidably hindered in its execution or any other ground, he shall apply in writing to the Divisional Officer within 30 days of the date of hindrance on account of which he desires such extension as aforesaid, and the Divisional Officer shall, if in his opinion (which shall be final) reasonable grounds be shown therefore, authorise such extension of time if any, as may, in his opinion be necessary or proper.”

20. The learned counsel for the contractor has submitted that after the expiry of the contractual period, his clients had not asked for extension time but the officers of the Delhi Development Authority had forced the firm, to proceed with the work. Even before the Arbitrator, the case of the respondent was that the contractor was bound to complete the work at the rates mentioned the agreement. It is thus admitted that the contractor was obliged to proceed with the work although it was demanding an increase of 22% in the rates. This demand of the contractor was rejected by the respondent. It was clearly stated that the increase, if any, could only be allowed within the scope of clause 10-C of the agreement. Thus the demand of 22% increase was a unilateral offer made contractor and had never been accepted by the other side.

21. There is another interesting feature of this case. It is admitted by the learned counsel for the parties that the contract in question had not come to an end, but was still subsisting and alive and that both the parties are bound by its terms. So much so, the contractor has, without any pause, continued the execution of the electrification work.

22. The learned counsel for the contractor has referred to certain settled principles of law, consistently affirmed by the Privy Council and the Supreme Court (cf. AIR 1923 PC 66, AIR 1951 SC 9. AIR 1963 SC 1677 and AIR 1967 SC 1032) and has stressed that a Court, while considering an award under Section 30, does not sit in appeal over the award itself and that it has to approach the Award with a desire to support it, as far as possible, rather than to destroy it by calling it illegal. It is further submitted that the award should be set aside only if it in valves not merely an error of law but when the error of law is apparent on the face of the award. Thus even if the award contains an error of law, it will be valid unless the error is apparent on its face. While applying these principles of law, it cannot be forgotten that each case has to be considered on its own merits. The terms of the present contract had been reduced to writing. Under Article 299 of the Constitution, Government can only be bound by contracts that are entered into in a particular way and which are signed by a proper authority, (See Seth Thawardas Pherumal v. Union Of India. AIR 1955 SC 468). It has been further held in the same case that a person cannot, by a one-sided which is never accepted, particularly when the parties intend that the contract should be reduced to writing, say the contract has been concluded or varied.

23. The present dispute centres round the terms of the written contract. Clause 10-C of the agreement contemplated that only in the case of a statutory rise in the prices, the contractor would be entitled to enhancement of rates to that extent. The learned counsel for the contractor has not been able to point out any other term in the agreement which powered the Arbitrator to award higher rates. The mere fact that with the rise in the price of some material, the contractor had claimed higher rate, would not ipso facto entitled him to the same. He had not rescinded the contract at any point of time. He does not ask for damages for breach of any term of the contract, but asserts a claim for a higher rate on extraneous considerations. This does tot constitute a ground under the contract and, therefore, the arbitrator was not legally justified in allowing the enhancement.

24. The learned counsel for the claimant has tried to rely on Sections 51 to 55 and 73 and 74 of the Indian Contract Act for claiming damages under the common Law, where there had been performance of reciprocal promises. These provisions relate to breach of contract and grant of damages in consequence thereof. In the instant case, no breach of contract has been imputed, but the contractor has tried to get the terms of the existing agreement varied on account of rise in prices. Such an enhancement, if allowed, would, in effect, amount to a new contract. This was not within the power or jurisdiction of the Arbitrator, to do so.

25. Damages cannot be granted by way of equity or for loss of profits. If any terms of the contract was infringed, in that event, the contractor had to quantify the damages as a result of the breach. In the present case, compensation in the shape of higher rate has been allowed for the work which was yet to be executed. In doing so, the Arbitrator had exceeded his jurisdiction and had thus misconducted himself. This is clearly apparent on the face of the award.

26. The other objection of the respondent is that the Arbitrator had given a declaratory award by allowing an increase for the work which has yet to be undertaken by the contractor. In answer to this objection, the learned counsel for the petitioner has referred me to the head “Declaratory Awards” occurring at page 273 of Russell on Arbitration (Eighteenth Edition). It is stated there that:—

“The question sometimes arises whether an arbitrator has power in an award to make a declaration as to the rights of the parties. This is a question whose answer must depend upon the nature of disputes submitted and the terms of the arbitration agreement. Where the submission requires the arbitrator to decide a dispute as to rights (as distinct from a mere money claim) he not only may, but must make what is in effect a declaration, since the dispute cannot otherwise be finally decided. Where there is a mere money claim, certain general questions may have to be decided by the arbitrator before he can decide upon the sum to be awarded, and it may be right for his decision upon the general questions to be stated in his award, notwithstanding an increased danger that it can be held bad for error on the face of the award. If, however, what the parties want is not a mere decision of a general question for the purpose of a particular dispute, but a decision that will be binding in future disputes over the same subject-matter, then they must submit the general question and not only the particular dispute: an arbitrator is not a court, which must be inveigled into deciding the general question by wrapping it in particular facts. It should be noted also that if a particular dispute is submitted, an award going merely to the general questions involved is not a good final award, unless the particular case can then be settled by mere calculation leaving no scope for dispute: for if the particular question is submitted, it must be decided. The proper place for such a decision is an interim award.”

27. There is no row about the principle enunciated above, but each case has to be considered on its own facts. Declaratory award can be given but in the present case there is a limited scope for wing an increase over and above the contractual rates. As already stated, clause 10-C of the agreement, only envisages an increase if a fresh law or statutory rule or order has been introduced. There is no demand for increase on the basis of any of these counts. So no extra-contractual increase could be permitted, whatever stressing circumstances might be there. The Arbitrator had thus exceeded his jurisdiction and had acted beyond the scope of the agreement. The error of law is apparent on the face of the award. This part of the award, therefore, cannot be sustained.

28. Next I advert to claim No. (2). Under this, the contractor had claimed a payment of Rs. 16,500 towards infructuous expenditure on establishment which alleged to have been suffered on account of stoppage of work. The Arbitrator had partly allowed this claim by holding that it was justified to the extent of Rs. 8,000. There is no error apparent on the face of the award in respect of this claim. Moreover, no infirmity has been pointed out by the learned counsel for the Delhi Development Authority. This part of the award, therefore, has to be maintained.

29. Out of the two claims allowed by the Arbitrator, the first claim is not sustainable, whereas the other claim, partly allowed, has to be maintained. The valid part is easily severable from the rest of the award. So that can be made a rule of the Court.

30. For the reason stated above, the award of the Arbitrator dated 26th October, 1973 suffers from a manifest error apparent ex facie so far as Claim No. 1 is concerned, but there is no such error so far as the remaining part of the award is concerned, I accordingly make the award a rule of the Court, excepting the part which pertains to claim No 1. Parties are, however, left to bear their own costs.

31. Suit No. 507-A of 1973 and I.A 1287 of 1974 stand disposed of in the above terms.

Order accordingly.