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Attorney(S)
  • Inderjeet Siddhu
  • A.Salwan
  • S.PODDAR
Judges
  • Dr. M.K Sharma, J.
Acts
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Citation Codes
Equivalent Citations
citation codes
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Attorney(S)
  • Inderjeet Siddhu
  • A.Salwan
  • S.PODDAR
Judges
  • Dr. M.K Sharma, J.
Acts
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Smart Summary

Judgment Summary — Dr. M.K. Sharma, J.

Factual and Procedural Background

The petitioner entered into a contract with respondent No. 1 for construction of 300 Janta houses as part of internal development in Trans Yamuna area (Zone No. 2). Disputes arising under that contract were referred to respondent No. 2 (the Arbitrator) under the arbitration clause. The Arbitrator heard the parties, received pleadings and evidence, and passed an award on 29 December 1993. The petitioner is said to have received notice of the award on or about 30 December 1993.

The petitioner filed a petition under Section 14 of the Arbitration Act directing the Arbitrator to file the award and arbitration records in Court. The Arbitrator filed the award and records following notice. Upon service on respondent No. 1, respondent No. 1 filed objections to the award (registered as I.A. 6547/1994). The Court heard counsel for both sides (Mr. Poddar for the petitioner and Mrs. Salwan for respondent No. 1) and proceeded to examine each claim decided by the Arbitrator.

Legal Issues Presented

  1. Whether the awards made by the Arbitrator on the various claims in favour of the petitioner are justified on the evidence and law, or whether any parts of the award should be set aside or modified.
  2. Whether specific portions of interest awarded (including pendente lite interest and interest on particular claim amounts) should be sustained or modified in light of any part of the substantive award being set aside.
  3. Whether damages awarded on different heads (e.g., material price escalation and infructuous expenditure on staff/T&P) amount to double recovery.

Arguments of the Parties

Respondent No. 1's Arguments (as presented)

  • In respect of Claim No. 1(iii) respondent No. 1 argued that the petitioner failed to comply with Clause 12(a) of the contract which required, for contract or substituted items exceeding deviation limits, that the contractor claim revision of rates within 7 days of the order and support the claim with a proper analysis of rates. Because the petitioner did not lodge the claim within seven days nor submit the analysis within that time, the award for Claim No. 1(iii) should be set aside.
  • In respect of Claim No. 7 respondent No. 1 submitted that the Arbitrator's award duplicates damages already compensated under Claim No. 4 (i.e., that allowing Claim No. 7 results in awarding damages twice on the same count), and therefore Claim No. 7 should be set aside.

Petitioner's Arguments (as presented)

  • The petitioner defended the Arbitrator's allowance of Claim No. 1(iii) on the merits (though the Court records the petitioner's belated submission of rate analysis dated 13.1.1986 and a prior claim on 18.9.1985 without analysis).
  • In reply to the double-recovery contention, the petitioner argued (and the Arbitrator recorded) that Claim No. 4 relates to price increases in materials for work done after the stipulated completion date (computed by reference to the CPWD cost index), whereas Claim No. 7 relates to infructuous expenditure on staff and tools & plants (T&P) during the stipulated contract period which could not be utilized optimally because of delay attributable to respondent No. 1 — thus the two heads of compensation are distinct and not duplicative.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court examined the Arbitrator's award claim-by-claim and evaluated (a) whether the Arbitrator had considered evidence and given reasons, and (b) whether any legal or contractual requirement had been breached such that part of the award should be set aside. The Court's analysis, confined to the content of the award and the arbitration record, proceeded as follows:

Claim No. 1(i)

The Arbitrator awarded Rs. 27,185.87. The Court found that respondent No. 1 had not identified discrepancies in the claimed items, quantities and rates were not contested, and therefore the award on this part was upheld.

Claim No. 1(ii)

The Arbitrator awarded Rs. 1,00,270.80 for incorrect derivation of rates for certain extra/substituted items. The Court held that the Arbitrator's conclusion was reasoned and based on appreciation of evidence, and there was no valid objection to this award.

Claim No. 1(iii)

The Arbitrator awarded Rs. 49,262.39. The Court accepted respondent No. 1's submission that Clause 12(a) of the contract imposes a mandatory requirement that, where quantities exceed contract quantities beyond the deviation limit, the contractor must claim rate revision within seven days of the order and support the claim with proper rate analysis.

The Court found that the petitioner did not comply with Clause 12(a): the market-rate claim was first made on 18.9.1985 without analysis, and the analysis of rates was only furnished on 13.1.1986. Thus the mandatory procedure was not followed and the Engineer-in-charge was thereby deprived of the opportunity to exercise discretion (including cancellation of orders if rates were unsuitable). The Arbitrator had ignored the mandatory contractual provision. The Court therefore concluded the award for Claim No. 1(iii) suffered from an error apparent on the face of the record and, being severable from the other parts of the award, that part was set aside.

Claim No. 2

The petitioner had claimed Rs. 25,000 as wrongfully recovered from running bills; the Arbitrator awarded Rs. 21,112.72. The Court found no error apparent on the face of the record in the Arbitrator's reasoning or conclusion and therefore upheld this part of the award.

Claim No. 3

The petitioner claimed Rs. 10,000 as security deposit due. The Arbitrator allowed the claim on the basis that even after seven years since completion, the final bill had not been passed and no order forfeiting or appropriating the security deposit had been produced by respondent No. 1. The Court found no error apparent on the face of the record and upheld the award.

Claim No. 4

Claimed: Rs. 27,50,000 as escalation for work done after the stipulated completion date (stated stipulated completion: 8.9.1983; work completed 28.2.1986). The Arbitrator found delay attributable to respondent No. 1 and awarded Rs. 3,89,901 to cover extra expenses incurred by the petitioner for work done after the stipulated date. The Arbitrator's calculation used the CPWD-sanctioned building cost index to measure increase in material prices (resulting in Rs. 4,72,270), less Rs. 82,369 already paid under Clause 10(c), producing the net award of Rs. 3,89,901.

The Court concluded that the Arbitrator had given reasons, relied on evidence, and applied mathematical calculations based on the sanctioned cost index; therefore the award on this claim was justified and the respondent's objection was without merit.

Claims No. 5 and No. 6

Both claims resulted in nil awards by the Arbitrator, and no objections were filed to those parts. The Court noted this and left them undisturbed.

Claim No. 7

The petitioner had claimed Rs. 8,25,000 for infructuous expenditure on establishment, centring/shuttering, tools and plants, etc., due to prolongation arising out of breach. The Arbitrator awarded Rs. 1,02,800 after applying principles of mitigation of loss.

Respondent No. 1 argued that this award duplicates damages awarded under Claim No. 4 and therefore constitutes double recovery. The Court analysed the nature of the two awards: Claim No. 4 compensates for rise in material prices for work done after the stipulated date (computed by cost index), while Claim No. 7 addresses infructuous expenditure on staff and T&P during the stipulated period which could not be optimally utilised due to respondent No. 1's delay. The Court accepted the Arbitrator's distinction, found the computation for Claim No. 7 set out in the award and supported by reasons, and held that awarding Rs. 1,02,800 is not double recovery. Accordingly the award on Claim No. 7 was upheld.

Claim No. 8 (Interest linked to Claim No. 1(iii))

The Arbitrator had awarded simple interest @ 12% per annum on the amount allowed under Claim No. 1(iii) from 28.9.1986 to 21.2.1993. Because Claim No. 1(iii) was set aside by the Court, the Court set aside this interest entitlement on the Rs. 49,262.39 and modified the award accordingly. The remainder of the Arbitrator's award on Claim No. 8 (i.e., interest on other amounts) was upheld.

Claim No. 9 (Pendente lite interest)

The Arbitrator had awarded pendente lite interest @ 15% per annum from 22.2.1993 to the date of publication of the award, and also had a pendente lite component at a different rate on the amount relating to Claim No. 1(iii). The Court held that the petitioner is not entitled to pendente lite interest on the Rs. 49,262.39 (Claim No. 1(iii) amount) for the period and rate awarded by the Arbitrator, because that substantive claim was set aside. The remainder of the pendente lite interest award (i.e., interest at 15% per annum on the balance amounts from 22.2.1993 to publication) was upheld.

Overall Disposition

The Court allowed the objections to the extent detailed above and modified the award accordingly. The Court directed that a decree be prepared in terms of the award as modified. The Court also directed that the petitioner shall be entitled to interest at 15% per annum from the date of the decree until realisation, under Section 29 of the Arbitration Act. No costs were awarded.

Holding and Implications

Award modified as indicated; objections upheld in part.

Direct consequences and practical effects of the decision (as stated in the opinion):

  • The Court set aside the Arbitrator's award on Claim No. 1(iii) (Rs. 49,262.39) for non-compliance with Clause 12(a) of the contract and because the Arbitrator ignored the mandatory contractual procedure; that part of the award is severed and vacated.
  • The Court upheld the Arbitrator's awards for Claim No. 1(i) (Rs. 27,185.87), Claim No. 1(ii) (Rs. 1,00,270.80), Claim No. 2 (Rs. 21,112.72), Claim No. 3 (Rs. 10,000 awarded), Claim No. 4 (Rs. 3,89,901), and Claim No. 7 (Rs. 1,02,800). Claims No. 5 and No. 6 were nil and remain so.
  • Interest components specifically tied to the set-aside Claim No. 1(iii) (including simple interest @ 12% pa awarded under Claim No. 8 and the pendente lite interest element on the Rs. 49,262.39 under Claim No. 9) were set aside or modified; all other interest awards by the Arbitrator were upheld.
  • A decree is to be prepared in terms of the award as modified, and the petitioner is entitled to interest at 15% per annum from the date of the decree until realisation in terms of Section 29 of the Arbitration Act. The Court ordered no costs.

The opinion does not purport to set any new precedent; its effect is to modify the particular arbitrator's award in the respects indicated, leaving the other parts intact.

Award modified ordered accordingly.
Show full summary ...

    Suresh Chander v. Delhi Development Authority .

    Dr. M.K Sharma, J.— Disputes having arisen between the parties in respect of the contract entered into between the petitioner and the respondent No. 1 for execution of the work of construction of 300 Janta houses in connection with internal development in Trans Yamuna area in Zone No. 2, the same were referred to the respondent No. 2 for adjudication in terms of the arbitration clause. The respondent No. 2 entered upon the reference and after hearing the parties and receiving the statement of claims and reply thereto and evidence produced by the parties on record, passed an award in respect of the aforesaid disputes on 29th December, 1993. The notice of the award was stated to have been received by the petitioner on or about 30.12.1993

    2. The petitioner thereafter filed the petition in this Court under Section 14 of the Arbitration Act for directing the respondent No. 2 to file the award in the Court with records of the arbitration proceedings. This Court issued notice to the Arbitrator on the said petition and upon service of such notice, the Arbitrator filed the award along with the records of the arbitration proceedings in this Court. Notice having been issued to the respondent No. 1 and upon service thereof, the respondent No. 1 filed objection against the award passed by the Arbitrator which is registered as I.A 6547/1994. The objection filed by the respondent No. 1 appears to be against all the claims of the petitioner as allowed by the Arbitrator.

    3. Mr. Poddar appearing for the petitioner and Mrs. Salwan appearing for the respondent No. 1 took me through the award passed by the Arbitrator and also the records of the arbitration proceedings and I have heard them at length.

    4. Claim No. 1 (i): In respect of the aforesaid claim of the petitioner, the Arbitrator has awarded an amount of Rs. 27,185.87. It appears from the award passed by the Arbitrator that the respondent No. 1 could not bring out any discrepancy concerning the items that have been claimed by the petitioner. The quantities and rates claimed by the petitioner were also not contested by the respondent No. 1. In that view of the matter, this award is upheld.

    5. Claim No. 1 (ii): This claim relates to incorrect derivation of rates for certain extra/substituted items in respect of which the Arbitrator has awarded a sum of Rs. 1,00,270.80. The conclusion of the Arbitrator for awarding the aforesaid amount appears to be based on reasons and on appreciation of the evidence on record and therefore there could be no valid objection as against the aforesaid award.

    6. Claim No. 1 (iii): Mrs. Salwan appearing for the respondent No. 1 submitted that this part of the award passed by the Arbitrator awarding Rs. 49,262.39 is not justified and is required to be set aside. The learned Counsel drew my attention to Clause 12(a) of the agreement wherein it is provided that in the case of contract or substituted items which individually exceed the quantities stipulated in the contract by more than the deviation limit, the contractor is required to, within 7 days from the receipt of the order, claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit. According to the learned Counsel, the petitioner failed to comply with the provisions of clause 12(a) and did not lodge the claim within 7 days from the date of the order nor did it submit the analysis of the rate.

    7. The analysis of rates appears to have been furnished on 13.1.1986 It further appears from the records that the petitioner claimed market rates for the first time on 18.9.1985 without submitting any analysis of rates. It is, therefore, apparent that the petitioner failed to comply with the mandatory provisions laid down in Clause 12(a) of the agreement to claim revision of rates within 7 days from the receipt of the order supported by proper analysis of rates. In view of such failure on the part of the petitioner, the Engineer in-charge was deprived of exercising his discretion to cancel the orders, if according to him, the rates were unsuitable. Such opportunity could not be availed of by the Engineer in-charge in view of non-compliance by the petitioner of the mandatory provisions of clause 12(a). The Arbitrator has ignored the aforesaid mandatory provisions while awarding the amount in favour of the petitioner against this claim. Accordingly, in my considered opinion, the claim of the petitioner on this count could not have been allowed in view of non-compliance of the mandatory provisions of clause 12(a) of the agreement and, therefore, there is an error apparent on the face of the records and the award in respect of this claim being severable is set aside.

    8. Claim No. 2: In respect of this claim, the petitioner claimed Rs. 25,000/- on account of amount wrongfully recovered from running bills. The Arbitrator on consideration of the evidence adduced by the parties, confirmed the claim to be partially justified and a sum of Rs. 21,112.72 was awarded. On going through the contents of the said award, I do not find any error apparent on the face of the records in respect of the said award and the conclusion arrived at by the Arbitrator appears to be justified. Accordingly, the said part of the award is upheld.

    9. Claim No. 3: Against this claim the petitioner has claimed Rs. 10,000/- on account of amount due on account of security deposit. The Arbitrator has allowed this claim of the petitioner in its entirety. The Arbitrator has taken notice of the fact that even after expiry of 7 years since the completion of the award, final bill of the petitioner had not been passed by the respondent No. 1 and that no order forfeiting or appropriating the security deposit had been produced by the respondent No. 1. On consideration of the said fact, the Arbitrator allowed release of the aforesaid amount allowing the claim of the petitioner. No error apparent on the face of the records could be found on the said award and the same is upheld.

    10. Claim No. 4: This is a claim of the petitioner amounting to Rs. 27,50,000/- on account of amount due as escalation in respect of the work done after the stipulated date of completion due to breach of contract by the respondent No. 1. The Arbitrator after considering the entire facts and circumstances of the case and also the evidence on record awarded a sum of Rs. 3,89,901/- in respect of the aforesaid claim in favour of the petitioner holding the same to be justified to cover extra expenses incurred by the petitioner for works done after the stipulated date of completion. The stipulated date of completion of work in respect of the present contract was 8.9.1983 The work, however, could be completed only by 28.2.1986 On consideration of the evidence on record, the Arbitrator has concluded that the delay in completion of the work was due to the fault on the part of the respondent No. 1. In view of the delay in completion of the work which is entirely attributable to the respondent No. 1, the same resulted in a loss to the petitioner in respect of higher expenses incurred by him both on labour and materials.

    11. It further appears from the records that the petitioner claimed revision of rate under letter dated 15.9.1983, i.e, immediately after the expiry of the stipulated date of completion of work as the rates agreed to by the petitioner in the agreement were valid during the stipulated period of contract. Although, it was brought to the notice of the respondent No. 1 that the petitioner would be claiming revised rate for the works done after the stipulated period of contract, under the aforesaid letter dated 15.9.1983 Ex. C-3, the respondent No. 1 got the said works executed by the petitioner.

    12. In considering the aforesaid fact, the Arbitrator has held that the petitioner is entitled to receive justified market price if the breaches of the contract are on the part of the other party. The Arbitrator further held that the petitioner is considered entitled for receipt of reasonable market price for works done after the stipulated date of completion. Considering the increase in the prices of materials, subsequent to the stipulated date of completion of work, on the basis of cost index, the Arbitrator found that the said increase amounts to Rs. 4,72,270/- and after deducting an amount of Rs. 82,369/- paid to the petitioner by the respondent No. 1 towards escalation under Clause 10(c) of the contract, the Arbitrator found that a total sum of Rs. 3,89,901/- to be a justified amount to cover the extra expenses incurred by the petitioner.

    13. The aforesaid conclusion is based on reasons and was arrived at after considering the evidence on record and on the basis of mathematical calculation in respect of the cost index which is sanctioned by the CPWD. The thought process of the Arbitrator is clearly set out in the reasons recorded. Since the work could be completed only long after the stipulated date of completion in view of the delay caused by the respondent No. 1, in my considered opinion, the award passed by the Arbitrator in respect of this claim appears to be justified and the objection raised by the respondent No. 1 against the aforesaid award is without any merit.

    14. Claim No. 5: No amount was awarded in respect of this claim and there is also no objection filed in respect of this claim.

    15. Claim No. 6: In respect of this claim also, the Arbitrator has awarded nil amount. No objection is filed in respect of this award also.

    16. Claim No. 7: In respect of the present claim, an amount of Rs. 8,25,000/- was claimed by the petitioner on account of infructuous expenditure on establishments, centring and shuttering, tools and plants etc. due to prolongation of contract arising out of the breach of contract.

    17. The Arbitrator, on consideration of the evidence on record, awarded a sum of Rs. 1,02,800/- keeping in view the principles of mitigation of losses suffered by the petitioner. The learned Counsel appearing for the respondent No. 1 submitted that this award is also towards damages suffered by the petitioner. According to the learned Counsel, the Arbitrator having already awarded damages against Claim No. 4 at market rate, the present award awarding damages once again resulted in awarding damages twice over on the same count and, therefore, there is total non-application of mind on the part of the Arbitrator and this award is required to be set aside.

    18. I have also heard the learned Counsel appearing for the petitioner. A scrutiny of the award would make it crystal clear that whatever was awarded by the Arbitrator as against claim No. 4 was in respect of increases in the prices of materials beyond the stipulated date of completion which was computed on the basis of building cost index sanctioned by the CPWD. The present award, however, relates to infructuous expenditure incurred by the petitioner on staff and T&P during the stipulated contract period which could not be optimally utilised by the petitioner due to delay caused by the respondent No. 1. The two damages are, therefore, separate damages and relate to different periods.

    19. The Arbitrator in respect of this claim has clearly stated that the petitioner has been compensated for rise in prices beyond stipulated date of completion against claim No. 4. However, the fact that staff and T&P during the stipulated contract period could not be optimally utilised due to the delay attributable to the respondent No. 1 could not be denied. Since the petitioner had to incur infructuous expenditure in respect of maintenance of such staff and T&P till the stipulated date of completion, the award for a sum of Rs. 1,02,800/- cannot be said to be payment twice over on the same count. The computation for coming to the aforesaid amount is also set out in the award itself. The conclusion arrived at is supported by reasons and therefore this part of the award does not suffer from any error and is accordingly upheld.

    20. Claim No. 8: Claim No. 8 of the petitioner relates to payment of interest. Since claim in respect of claim No. 1 (iii) has been set aside, the award passed by the Arbitrator in respect of payment of simple interest on the said amount @ 12% per annum from 28.9.1986 to 21.2.1993 also stands set aside and the award in respect of this claim stands modified. It is made clear that the petitioner will not be entitled to receive any interest @ 12% per annum on the aforesaid amount of Rs. 49,262.39. The rest of the award passed by the Arbitrator in respect of this claim is upheld.

    21. Claim No. 9: Claim No. 9 relates to claim of interest on the amount of award @ 18.5% per annum. This award also stands modified. The petitioner shall not be entitled to receive pendente lite interest in respect of the award passed by the Arbitrator @ 15% per annum simple interest from 22.2.1993 to the date of publication of the award on the amount of Rs. 49,262.39 as awarded by the Arbitrator against claim No. 1 (iii) which stands set aside under this judgement and order. The rest of the award passed by the Arbitrator for payment of pendente lite simple interest @ 15% per annum on the balance amount from 22.2.1993 to the date of publication of the award is upheld.

    22. In the result, the objections stand allowed to the extent indicated above and the award stands modified as indicated herein.

    23. Let a decree be prepared in terms of the award as modified by this judgement and order. The petitioner shall also be entitled to interest @ 15% per annum from the date of decree till realisation in terms of Section 29 of the Arbitration Act. No cost.

    Award modified ordered accordingly.
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    Comments

    Suresh Chander v. Delhi Development Authority .
    (Feb 28, 1997)