Manmohan Sarin, J. (Oral):— By this order, objections filed by the respondent/DDA under Sections 30 and 33 of the Arbitration Act, 1940 against the award dated 6.8.1993, made and published by Shri R.C Malhotra, Sole Arbitrator appointed by the respondent/DDA are being disposed of. The award is a reasoned one. Counsel for the parties agreed that the objections filed by the respondent/DDA as well as the reply thereto and the arbitral record be treated as evidence for the purposes of disposal of these objections. With the consent of the parties, the case was fixed for arguments on 3.11.1999 for 15.11.1999
2. I have heard the learned counsel for the defendant in support of objections. Learned counsel first urged that the award directing refund of security deposit was liable to be set aside as it suffered from an apparent error inasmuch as the arbitrator had proceeded on the basis that it was not open to DDA to rescind the contract once the time has been set at large. Learned counsel in this regard relied on State Of Maharashtra v. Digambar Balwant Kulkarni., 1979 Volume-III Supreme Court Reports. In the cited case, it was held that:—
Time was of the essence only in the sence that if the plaintiff completed it within the original period of one year, he would not be liable to pay any compensation but in case he overstepped that limit he would have to compensate for every day of delay and that the right to rescission would accrue only when compensation due exceeded the amount of the security deposit or the plaintiff abandoned the work. Till the time it was rescinded, the contract was in force.”
3. On a perusal of the award in respect of claim No. 1, I find that though the arbitrator has noted the submission of the petitioner that recission of the contract by DDA was bad since time had elapsed and had been set at large. Hence security deposit could not have been forfeited. However, this is not the only basis on which the arbitrator had reached the conclusion that forfeiture was bad. He had appraised the evidence and reached the conclusion that defendant was in breach. Arbitrator has specifically recorded the finding that in view of the respondents own defaults and failure to fulfil the contractual obligations, the recission of the contract by the respondent was not justifiable. The award directing refund of security deposit is therefore based on the recission of the contract, which has been found to be unjustifiable by the arbitrator on merits. In this view of the matter objection of the learned counsel is devoid of merit and is rejected.
4. Learned counsel also urged that the arbitrator had erroneously rejected the evidence produced on behalf of the respondents and had failed to appreciate that it was the contractor, who was responsible for the delay. These are matters squarely within the domain of the arbitrator and this court would not sit in appeal over the said findings.
5. At this stage, I may notice another submission made by the learned counsel for the respondent with regard to the award in respect of claim No. 6. Learned counsel sub-emitted, relying on Union of India v. Jain Associates and another -1994(1) Arbitration Law Reporter 494 in support of her submission that if the arbitrator allows loss of profit as also damages without applying his mind the entire award was liable to be set aside. Learned counsel submits that once the petitioner was being compensated for idle labour and material as well as for hire charges for T & P Scaffolding materials etc., under claim No. 5, there was no justification to award loss of profit, due to wrongful recission. From a perusal of the award, it is noticed that in the instant case the element of overlapping is not there in as much as the learned arbitrator has held as under:
“Total value of the contract was about Rs. 18.08 lakhs. Out of this the claimant could execute the work to the extent of about Rs. 9.47 lakhs only before the contract was terminated. Thus the work amount to Rs. 8.61 lakhs remained unexecuted and the claimant was prevented from making the anticipated profit on this amount.”
Thus, it would be seen that the loss of profit is being awarded only in respect of the unexecuted portion of the contract for which the contractor had not been awarded damages due to prolongation of the work. The view taken by the arbitrator is a plausible view and is also supported by judicial pronouncements.
6. Learned counsel submitted that the rejection of the respondent's levy of compensation under Clause-2 of Rs. 1,34,130/- was illegal and contrary to the judgment of the Apex court in Vishwanath Sood v. Union of India - AIR 1989 SC 952 and Delhi Development Authority v. Ms Sudhir Br, 1995 (2) Arbitration Law Reporter Volume (23) 306. Learned counsel relied on the following observations of the Division Bench in Delhi Development Authority v. Ms Sudhir Br, (Supra).
“Our attention has been drawn to the arbitration clause and also the relevant clause which relates to exclusion of certain matters from the purview of arbitration. The relevant clause 2 in the arbitration agreement deals with the question of compensation and directs that the concerned engineer should decide this question and his decision is final. The arbitration clause opens with the words, “Unless otherwise provided”. In view of this language, it is obvious from the decision of the Supreme Court in Vishwanath Sood v. Union of India and another, that the Arbitrator could not have gone into the merits of the levy of compensation by the engineer. In that view of the matter, the D.D.A ought not to have requested the Arbitrator to include the said amount in the arbitration award.”
“We, therefore, find that the entire procedure adopted by both the parties was totally unwarranted. If the DDA considered that it was entitled to the recovery of Rs. 5,69,473 outside the arbitration, it could have taken such steps as it thought necessary instead of asking the Arbitrator to include the said amount in the award. The contractor was also wrong in taking advantage of the same and asking the Arbitrator to give a finding on the merits of the claim. The Arbitrator acted totally without jurisdiction in going into the said question and deleting the said item of counter claim for Rs. 5,69,473/- and holding that the contractor not liable for payment of compensation. That was not within the power of the Arbitrator. In view of the said unfortunate events, we have no option but to set aside that part of the award of the Arbitrator wherein he has come to the conclusion that the sum of Rs. 4,69,743/- was not payable by the contract. The validity of the levy of compensation is, therefore, taken out from the award.”
Learned arbitrator, in the present case, held that the action of the respondent in levying compensation under Clause-2 of the Contract was wrong and unwarranted and he, therefore, disallowed the penalty/compensation of Rs. 1,34,130/-. The arbitrator held that the judgment of the Apex Court did not apply in the case.
In my view learned arbitrator has mis-directed himself and exceeded his jurisdiction in holding that levy of compensation under Clause-2 was wrong and unwarranted. This was not the matter over which the arbitrator had jurisdiction and could adjudicate upon. Accordingly, the award of the arbitrator rejecting the levy of compensation under Clause-2 of the terms is set aside and is held to be without jurisdiction. Objections are dismissed except to the extent that the award of the arbitrator in respect of counter claim No. B is set aside. The award is made rule of the Court. Decree in terms of the award, except for the award in respect of the counter claim No. B, which has been set aside, be drawn up.