C.B Tanwar & Co v. Delhi Development Authority.

M.S.A Siddiqui, J.— By the agreement dated 13.4.1987, the petitioner was awarded the work of construction of SFS flats at Vasant Kunj SH Peripheral sewerage in sector ‘D’ pocket 5 to 9, New Delhi. During the execution of the contract certain disputes and differences arose between the parties with regard to the claims of the petitioner arising out of and in relation to the said contract, which were referred to the sole arbitrator in terms of the arbitration agreement. The arbitrator published his award on 14.7.1994 directing the respondent DDA to pay to the petitioner a sum of Rs. 1,94,756/- together with interest @ 15% per annum. While the petitioner filed the petition under Section 17 of the Arbitration Act for making the award a rule of the Court, the respondent DDA filed objections under Sections 30/33 of the Arbitration Act against the award.

2. The respondent is mainly aggrieved by the award on the petitioner's claim Nos. 1,2, additional claim No. 1, claim No. 4 and rejection of counter claims preferred by it. The question for consideration is: whether the award dated 14.7.1994 is liable to be set aside on the basis of the objections raised by the respondent.

3. The learned counsel appearing for the respondent DDA, in support of the objections, submits that the award is liable to be set aside on the ground that the arbitrator has not given sufficient reasons for the same. In my opinion, the said submission of the learned counsel does not hold much water. It has to be borne in mind that under the Arbitration Act, 1940, even a non-speaking award was permissible and was also outside the purview of the judicial scrutiny since the Court cannot probe into the mental process of the arbitrator to find out the reasoning which compelled him to arrive at his decision. The ground for impeaching a non-speaking award and its limitation have been explained by the Apex Court in M/s Sudarsan Trading Co. v. Govt, of Kerala AIR 1989 SC 890 and it was held that the Court has no jurisdiction to substitute its own evaluation on the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. In a recent judgment rendered by the Apex Court in M/s M.K Shah Engineers and Contractors v. State of M.P J.T 1991 (1) SC 315, it was held that an award need not formally express the decision of the arbitrator on each matter of difference nor is it necessary for the award to be a speaking one. It will be presumed that the award disposes of finally all the matters of difference. However, in the instant case, the arbitrator has given reasons for deciding the claims and counter claims preferred by the parties.

4. Claim No. 1 and Counter Claim No. 4:—The petitioner preferred a claim of Rs. 70,000/- on account of balance payment towards the work done under the contract, while the respondent preferred a counter claim of Rs. 2939/- as outstanding secured advance from the petitioner. On a consideration of the material available on the record, the arbitrator has held that the petitioner has shown that an amount of Rs. 91,370.34 is payable to it for the total work executed under the contract. According to the arbitrator, the amount payable under this head works out to Rs. 80,443.34. However, taking into consideration of the respondent's counter claim of Rs. 2939, the arbitrator awarded a sum of Rs. 70,000/- to the petitioner. In my opinion, no fault can be found with the award under this head.

5. Claim No. 2 and Counter Claim No. 2;- The Claimant claimed Rs. 70,000/- on account of refund of security deposit while the respondent preferred a counter claim of Rs. 82,098/- on account of forfeiture of the said deposit under Clause 3(a) of the agreement. It is undisputed that the respondent had deducted the amount of security i.e Rs. 45391/- from the running bills submitted by the petitioner. It is also undisputed that the date of commencement of execution of the contract was 16.4.1987 and the contract was to be completed on 15.12.1987 It is further undisputed that the contract could not be completed by the stipulated date as a result whereof it was rescinded by the respondent on 5.6.1990 The arbitrator, while dealing with claim No. 3, has held that although it was mentioned in the notice inviting tenders that the site of the work was available but in fact entire site of the work was not available as substantial portion of the land in question was under stay orders. This fact was known to the respondent before awarding the contract to the petitioner. The arbitrator also held that the respondent itself committed breach of the contract in not providing total site even upto date of rescission of the contract and so the respondent's action in rescinding the contract was not valid. He further held that the claimant was entitled for refund of security deposit and the respondent's counter claim of Rs. 82,098/- was merit less. The arbitrator, therefore, rejected the respondent's counter claim and awarded a sum of Rs. 45,391/- to the petitioner under this head. In this connection it would be useful to reproduce the following observations of the arbitrator:

“The claimants started the work on available land. There were hindrances in executing the work like initially drawing was given late, alignment initially fixed was changed, DESU cables were coming in alignment, design of the sewer size was changed, materials of building contractors were lying in the alignment of sewer line, simultaneous working of storm water drainage, etc. Respondents could release only 1000 m length of pipeline alignment till July 1988 i.e till six months after the stipulated date of completion. Some more site was released thereafter and even on that site the claimants did the work. The only places where the claimants have not done the work are where road cutting was involved and where DESU cable was forming the obstruction.” “The contract was rescinded by respondents on 5-6-90. They have, however, filed no communication to show that the time was made the essence of the contract upto this date. No time extension was mutually agreed between the parties in terms of contract upto 5-6-90 where contract was rescinded. The respondents had unilaterally conveyed extension vide R-3 and that too upto 31-5-1990 only. Since the respondents had failed to provide complete site contemplated in the contract agreement till the time of rescission of contract, act of respondents in rescinding the contract cannot be held reasonable, just and valid. It is, therefore, declared that the rescission was not fair and valid and hence there is no case for any action under Clause 3(a), 3(b) and 3(c) of the contract agreement.”

6. In my opinion, the award under this head does not suffer from any legal infirmity.

7. Additional Claim No. 1 and Counter Claims No. 1:—The petitioner claimed Rs. 1,14,665/- on account of loss of profit, while the respondents preferred a counter claim of Rs. 89,254/- being the amount paid to other agency for getting the balance work executed at the risk and cost of the claimant. As noticed earlier the arbitrator has held that the respondent had committed breach of the contract in not making available the entire site of the work to the contractor and the respondent's action in rescinding the contract was not valid. The arbitrator, therefore, rejected the counter claim and awarded a sum of Rs. 79,365/- to the petitioner under this head. In this connection, it would be useful to extract the following observations of the arbitrator:

“Since rescission of contract is not valid and since claimants were still prepared to carry out the work had the site been made available and also because the market rates for the balance work as depicted by tenders for such work were lesser than claimants' rates, there is clear evidence available that if the claimants had been permitted to continue with the work, they would have earned more than normal profits. Since claimants would also have been entitled to receive escalation based on base Cost Indices prevailing in January 1987 as compared to the escalation available to the contractors doing risk and cost work based on higher base Cost Indices prevailing in January 1991, the compensation so received by claimants would have been much higher than what would have been available to the contractors doing risk and cost work. This would have further increased their margin of profit. The claimants have claimed loss of profit at 10% of the value of work remaining to be executed at the time of rescission of contract and looking into various factors as mentioned above, I am of the view that 10% is a reasonable figure in this case. However, considering the fact that claimants would have been required to incur some expenditure on staff, machinery etc. as also make investment for doing the work, I assess the loss of profits to the claimants at 7 1/2% of the value of work remaining to be executed on the date of rescission. The contract was for a value of Rs. 17,46,659/- Claimants have already been paid Rs. 6,18,458/- upto 7th R.A Bill and they have been awarded Rs. 70,000/- against Claim No. 1 for work done. Total amount of work executed by them thus works out to Rs. 6,88,458/-. The value of work remaining to be done works out to Rs. 10,58,201/-. Loss of profit at 7 1/2% on this amount works out to Rs. 79,365/- and this amount is awarded to claimants.”

8. It has to be borne in mind that where a breach of contract has been committed, the party not in default is entitled to recover damages or compensation for the loss which he or it suffered as consequence of the other party committing default. It is well settled that in awarding damages for breach of contract, the party not in default, should, so far as it can be done by money, be placed in the same position as he would have been in, if the contract had been performed (M/s. Murlidhar v. M/s. Harish Chandra AIR 1962 SC 366). In the instant case, the arbitrator has awarded a sum of Rs. 79,365/- by way of damages which resulted to the petitioner from it having been prevented from making profit which would have accrued to it if the DDA had performed its part of the contract within the stipulated period. Thus in my opinion no fault can be found with the award under this head.

9. As regards interest, it is now well settled that the arbitrator has the power to award interest (Secretary Irrigation Department, Govt. of Orissa v. G.C Rai 1992 (1) SCC 508). Thus, the arbitrator has not committed any illegality in awarding the interest.

10. For the foregoing reasons objections contained in IA No. 8682/94 are dismissed. The awacd dated 14th July, 1994 is made a rule of the Court. In addition the petitioner shall also be entitled to interest @ 12% p.a from the date of the decree till realisation. A decree be drawn up accordingly. The award dated 14th July, 1994 shall form part of the decree. No orders as to costs.