D.R. Sharma vs Delhi Development Authority

Shiv Narayan Dhingra, J.—The respondent/DDA filed objections against award dated 24.6.1991 whereby the learned Arbitrator allowed

some of the claims of the petitioner either fully or partly.

The petitioner was awarded a contract for laying down sewerage line under Re-development Scheme of Kingsway Camp. The date of start of

work was 16.12.1984 and the stipulated date for completion of work was 15.4.1985. According to respondent/DDA the work was much behind

the schedule and was not completed by petitioner even by the end of 1986 with the result that DDA was constrained to rescind the contract vide

its notice of decision dated 22.1.1987. The dispute was raised by the petitioner in respect of its claims which was referred to the Arbitrator in

terms of Clause 25 of the Agreement between the parties and the learned Arbitrator passed the impugned award.

Claim No. 1 was made by the petitioner for a sum of Rs. 80,000/- due towards the final bill. The learned Arbitrator allowed an amount of Rs.

70,508.47. Claim No. 2 for a sum of Rs. 5,00,000/- towards extra/substituted items was rejected by the learned Arbitrator. Claim No. 3 for a

sum of Rs. 10,000/-towards amount withheld by the respondent/DDA for not conducting Disc-test by the petitioner was allowed in full. Claims

No. 4, 5 & 6 of the petitioner were rejected by the learned Arbitrator. Claim No. 7 for a sum of Rs. 2,00,000/- was made by the petitioner for

damages. The learned Arbitrator awarded a sum of Rs. 1,83,993.21. Claim No. 8 made by the claimant for increase in rates of bricks etc. was

rejected. Claim No. 9 made by the petitioner for a sum of Rs. 15,000/-claiming that the respondent had failed to release the payment in time was

allowed by the learned Arbitrator in full. Claims No. 10 & 11 made by the petitioner were rejected. Claim No. 12 was for pendent lite interest.

The learned Arbitrator allowed 12% p.a. interest from date of award to the date of actual payment or upto the date of award being made a Rule of

the Court.

Counter Claim No. 1 of the respondent/DDA for a sum of Rs. 1,79,881/- on account of contract having been rescinded under Clause 3 of the

Agreement and the balance work got done at the risk and cost of petitioner by incurring extra expenditure was rejected by the learned Arbitrator.

Counter Claim No. 2 for a sum of Rs. 1,00,889/- on account of delay in work as well as Counter Claim No. 3 for Rs. 1,00,000/- against

forfeiture of security deposit made by the DDA were rejected. Counter Claim No. 4 made by the respondent/DDA for Rs. 28,976/- on account

of rectification of defects was allowed.

The respondent/DDA has assailed the award claim-wise. It is stated by respondent/DDA that under Clause 25 of the Agreement, whereunder

the learned Arbitrator was appointed, it was obligatory on the part of the Arbitrator to give reasons for awarding any amount, if the awarded

amount was more than Rs. 50,000/-. The learned Arbitrator while allowing Claim No. 1 for Rs. 70,508.47 gave no reasons and gave a totally

non-speaking award thereby the learned Arbitrator misconducted himself and the proceedings. The award of the Arbitrator on this count was bad

in law. It is also stated that the award against claim No. 1 was otherwise bad because it was contrary to clause 7 of the agreement. On the other

hand, the petitioner has submitted that objection raised by the petitioner was baseless. Clause 7 of the agreement was not applicable and there was

no misconduct on the part of the Arbitrator.

A perusal of Award shows that while allowing a sum of Rs. 70,508.47 in favour of the petitioner under claim No. 1, the only reason given by

the learned Arbitrator was - ""After taking into consideration all the contentions put forth by both the parties and all other relevant facts arising

therefrom, I hold that claim of the claimants is partly justified, to the extent of Rs. 70,508.47"".

There is no dispute about the fact that the learned Arbitrator was required to given reasons in terms of clause 25 of the contract, the relevant

part of which reads as under:

In all cases where the amount of claim in dispute is Rs. 50,000/- (Rs. Fifty Thousand) and above, the Arbitrator will give reasons for the award.

It is obvious that the learned Arbitrator had given no reason for awarding the amount. In Gora Lal Vs. Union of India (UOI), the arbitration

clause between the parties provided that the Arbitrator on all matters referred to him shall indicate his findings along with sums awarded separately

on each individual item of the dispute. The Arbitrator in that case had not given his finding and the award was set aside by the High Court. The

matter went to Supreme Court and Supreme Court observed as under:

The point for determination in this case is: whether the arbitrator ought to have given reasons in support of his findings, along with the sums

awarded, on each item of dispute. To decide this point, we have to go by the text and the context of clause 70 of the arbitration agreement quoted

above. Under the said Clause, the arbitrator was required to identify each individual item of dispute and give his findings thereon along with the sum

awarded. In this context, one has to read the word ""findings"" with the expression ""on each item of dispute"" and if so read it is clear that the word

finding"" denotes ""reasons"" in support of the said conclusion on each item of dispute. The word ""finding"" has been defined in ""Words and Phrases,

Permanent Edn., 17, West Publishing Co."" to mean ""an ascertainment of facts and the result of investigations"". Applying the above test to Clause

70, we are of the view that the arbitrator was required to give reasons in support of his findings on the items of dispute along with the sums

awarded. We make it clear that this order is confined to the facts of this case and our interpretation is confined to Clause 70 of the arbitration

agreement in this case.

I consider that the award of the learned Arbitrator under claim No. 1 is liable to be set aside in view of clause 25 of the contract as it gives no

reason why the amount has been awarded. Even otherwise, I find that the learned Arbitrator in his discussion had observed that the claimant had

largely depended upon the theoretical calculations for the measurement claimed by them. The claim was not based on actual measurements and

could not have been allowed by the Arbitrator by a non-speaking award. The award against Claim No. 1 is set aside on this count.

Claim No. 3 was made by the petitioner for sum of Rs. 10,000/-. This amount was deducted from the bill of the petitioner as the petitioner

failed to perform the necessary Disc-test in order to ascertain the functionality of sewer lines laid by the petitioner. There is no dispute about the

fact that this disc test was not performed by the petitioner and this amount was deducted because of non-performance of this test. The learned

Arbitrator allowed this amount to the petitioner on the ground that the respondent had also not carried the Disc-test and put the sewer line to use

without the Disc-test. It is stated by respondent/DDA in objections that this amount could not have been awarded to the petitioner as the

deduction was admittedly made for not conducting the test. The fact that DDA put the sewer line to use without conducting the same test is no

ground for awarding the amount to the petitioner. The learned Counsel for petitioner has argued that the amount was justly awarded and no

recovery could be made if the amount deducted was not spent for the purpose it was withheld.

Under the contract, the petitioner was to perform the Disc-test on the sewer line. This was one of the conditions of the contract and since this

condition was not fulfilled, the amount which was to be spent on the test was deducted. It was not obligatory on the respondent/DDA to conduct

this Disc-test before putting the sewer line to use. DDA could have ensured the clearance of sewer line by manual inspection or other modes. The

Disc-test was the obligation of the contractor. The amount deducted cannot be directed to be refunded back to the contractor on the ground that

the same test was not conducted by DDA. I, therefore find that this amount was awarded to the Contractor, contrary to contract. The Arbitrator is

bound by the contract and cannot allow a claim which is contrary to contract. The award of this claim is therefore, set aside.

Claim No. 7 was raised by the claimant for damages of Rs. 2,00,000/-. The learned Arbitrator observed that the entire site was not made

available to the claimant by respondent, during currency of the stipulated contract period ie. 04 months. He observed that it was respondent/DDA,

which was liable for prolongation of the contract beyond the stipulated date of completion. The claimant at relevant time had requested respondent

to measure up the work and pay for work executed by then, or pay 40% above the Delhi Schedule of Rates, 1981, for the work yet to be

executed thereafter. The work was not measured up and paid, but the work continued. No new date for completion of remaining work was fixed

by mutual consent or otherwise. The time for completion of work was thus set at large by the conduct of the parties. The arbitrator held that under

these circumstances the delay beyond the stipulated date of completion was attributable to DDA and claimant was entitled to be compensated for

work done beyond the stipulated date of completion, due to breaches committed by DDA. He therefore awarded a sum of Rs. 1,83,993.21.

It is argued by the learned Counsel for the respondent that the award was contrary to the terms of the contract. It was specifically provided in

the contract that no compensation would be awardable in case of partial availability of site or delay in providing of material at site and the work

was to be rescheduled accordingly and in case of rescheduling of the, work the Contractor would not be entitled to any compensation or damages

for the period of delay. The learned Counsel for the petitioner on the other hand argued that as per the contract the site was to be made available

on the date of contract and the petitioner suffered loss due to site not being available and the work dragged on due to this. The rates given in the

tender were based on Delhi Schedule of Rates, 1977 whereas when the work was completed Delhi Schedule of Rates 1988 was applicable.

There was no escalation clause in the agreement because Clause 10(c) which was applicable only in case of statutory increase. The Arbitrator

therefore rightly awarded damages on the basis of difference in rates of Delhi Schedule of Rates of 1988 and 1977, since the breach was

committed on the part of the respondent.

Clause 7 of General Conditions of the contract reads as under:

The contractor is advised to see the site of work before tendering to apprise himself of the conditions existing at site of work.

It is apparent that the contractor/claimant was to see the site before even filing tender/quotations for the work and to apprise himself what was

the condition of site, the site was clear and available for work or not. Despite the fact that in notice inviting tender clause 2-A read ""The site of the

work is available"", the specifications and conditions attached with the contract specifically provided as under:

The Contractor must get acquainted with the proposed site for the works and study specifications and conditions carefully before tendering. The

works shall be executed as per program approved by the Engineer-in-Charge. If part of the site is not available for any reason or there is some

unavoidable delay in supply of materials stipulated by the department, the program of construction shall be modified accordingly and the contractor

shall have no claim for any extras or compensation on this account.

The above condition makes it abundantly clear that the non availability of site in time could not be a ground for payment of damages. This

clause also makes it clear that time was not essence of the contract and in case the site was not partly available for any reason, the period for

executing the contract could be extended and rescheduled and in case of modification of the schedule of completion of contract, the claimant was

not to lay any claim for extra compensation/damages on this ground. The learned Arbitrator ignored this condition of contract altogether. The

contention of the respondent had been that the delay was on the part of the contractor and the site order book and various letters written by the

respondent/DDA calling upon the petitioner to expedite the work have been ignored by the learned Arbitrator. Not going into this contention-

whether the Arbitrator appreciated the evidence regarding delay on the part of the contractor, still I consider that in view of the specific clause in

the contract that the contractor would not be entitled for compensation because of rescheduling of the contract, the learned Arbitrator could not

have awarded compensation. The Arbitrator himself has observed that it was due to conduct of both the parties that the time was set at large, the

learned Arbitrator could not have therefore, held that DDA alone was responsible for setting the time at large and thereafter awarded

compensation. When both the parties'' conduct set the time at large, the contractor would not be entitled for any compensation, more so in view of

the specific clause given in the contract that rescheduling of work shall not entitle the contractor for any compensation. It is also not understood in

view of the fact that there was no escalation clause provided in the contract, how the learned Arbitrator could have provided escalation to the

contractor? The Arbitrator is prisoner of the contract and he cannot write a new contract for the parties. If there is no clause for escalation, the

Arbitrator cannot introduce escalation clause and give enhancement/compensation to the contractor. I, therefore set aside this award being

contrary to contract.

Claim No. 9 was for refund of Rs. 15,000/- claimed by the DDA as rebate. The learned Arbitrator observed that this rebate was offered by

the contractor conditionally and the condition was not fulfilled by DDA while deducting the rebate. I find no reason to disturb the award of the

Arbitrator on this count.

It is submitted by learned Counsel for respondent/DDA that counter claim No. 1 was in respect of rest of the work got done at risk and cost

of the petitioner in terms of Clause 3 of the agreement and therefore could not have been rejected. Conclusion arrived at by the learned Arbitrator

was that the contractor had already done the quantum of work as per contract inclusive of deviation provided therein. This finding of the Arbitrator

cannot be assailed by the DDA I, therefore, consider that any further work beyond the original contract and deviation could not have been done at

cost and risk of the contractor. The Counter Claim has been rightly rejected by the Arbitrator. Similarly, the award of Arbitrator on Counter

Claims No. 2 & 3 is upheld. The learned Arbitrator allowed Counter Claim No. 4 of the respondent and awarded a sum of Rs. 28,976/- to the

respondent. This awarding of amount has not been assailed by the claimant/contractor by filing any objections.

As a result of my above discussion, the award of the learned Arbitrator in respect of claims No. 1, 3 & 7 are set aside and rest of the award is

upheld and made a Rule of Court. Decree Holder would be entitled to interest @ 8% p.a. from the date of award till realization.

Decree Sheet be prepared accordingly.