Govt. of NCT of Delhi vs M/s. Ved Parkash Mehta and Another

Mukundakam Sharma, C.J.—This appeal is directed against the judgment and order dated 8th September, 2005, whereby the learned Single Judge has dismissed the objection filed by the appellant herein u/s 34 of the Arbitration and Conciliation Act, 1996. The parties hereto had entered into a contract for doing work of increasing the capacity of NG Drain from Dhansa Regulator to Bharat Nagar Bridge, SW.

During the execution of the aforesaid contract, disputes arose between the parties. The parties were governed by the provisions of an arbitration clause, namely, clause 25 to the agreement. The disputes were referred to the solo Arbitrator, who passed his award on 12th May, 1999.

Counsel appearing for the appellant has drawn our attention to the contents of the award.

There is no dispute to the fact that the Arbitrator was required to give a reasoned award, when the amount claimed in the disputes was in excess of Rs. 75,000/-.

So far claim No. 1 is concerned, the same was in respect of a claim on account of materials dumped at site amounting to Rs. 5,12,000.00. The learned arbitrator considered the evidence produced by the respondent contractor before him which were in the nature of the bills and on consideration thereof, the learned Arbitrator held that the said bills cannot form the basis of an award. It is also recorded therein that the appellant herein contested the genuineness of the said bills. Thus the Arbitrator was not satisfied with the evidence and materials produced by the respondent/claimant. Being faced with the said situation, the learned Arbitrator recorded one sentence to the following effect:

Therefore, the realistic amount of this claim is assessed on the basis of practical experience on similar construction works.

I assess as minimum and most realistic and justified claim of Rs. 4.50 lacs. Therefore, I award Rs. 4.50 lacs in favour of the claimant.

The learned Arbitrator has treated claim No. 2 also in a similar manner. He has held that claim No. 2, for non-utilization of machinery/idling of machinery amounting to Rs. 1,91,219.80 cannot be accepted on the basis of the bills produced by the respondent contractor. He also recorded that the appellant had objected to the genuineness of the bills. However, learned Arbitrator still went on to award Rs. 4.50 lacs without any reason or ground except stating that the amount was reasonable and realistic.

The next claim was a claim in respect of claim No. 3, which is a claim on account of labour wages amounting to Rs. 2,34,900.00 The said claim was partly allowed by the learned Arbitrator recording the finding:

The claim based upon the bills is not accepted and the realistic claim has been assessed based upon the minimum and most conservative assessment. This claim has been assessed as Rs. 2,00 lacs as most reasonable and justified.

So far claim No. 5 pertaining to profits and overhead on expenditure incurred amounting to Rs. 1,99,235.00 was concerned, it was also partly allowed by the learned Arbitrator has held as under:

As admissible I allow 10% of profits on the expenditure incurred by the claimant,

There is no reason given except for stating that as admissible 10% of profits is being allowed.

Claim No. 6 was in respect of interest on the amount due from time to time amounting to Rs. 5,01,176.00. Learned Arbitrator has held as under:

In pursuance of Arbitration and Conciliation Act, 1996, I award 18% interest per annum from the date of reference of the arbitration initially made by the claimant to the chief engineer till the actual date of payment on the awarded amount of each claim. This award includes claim No. 10 also.

So far claim No. 7 is concerned, that was on account of Head Office overheads and profits due to prolongation of contract amounting to Rs. 12,67,663.40. The same was also disposed of in a similar manner as was done in the case of claim No. 6 and Rs. 3.40 lacs was awarded in favour of the respondent,

Having gone through the award, we find that the same is passed by the learned Arbitrator merely on surmises and conjectures. The evidence adduced by the respondent was not accepted, yet the claims were partly allowed on the basis of the practical experience/knowledge of the Arbitrator of similar construction work, The learned Arbitrator has also himself held that there was no material and evidence to prove and establish the claims made. It is not possible to accept an award passed on no evidence and purely on the basis of "practical" experience with reference to similar construction works. Way back in 1969 the Supreme Court in the case of Dewan Singh Vs. Champat Singh and Others, observed as under:

... The proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result..........Arbitration is a reference of a dispute for hearing in a judicial manner. It is true that parties to an agreement of reference may include in it such clauses as they think fit unless prohibited by law. It is normally an implied term of an arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law-see Chandris V. Isbrandtsen Moller Co. Inc., (1957) KB 240. That rule can be departed from only if specifically provided for in the submission.

Further the Supreme Court has also observed in case of Indian Oil Corporation Ltd. Vs. Indian Carbon Ltd.,

... Arbitration procedure should be quick and that quickness of the decision can always be ensured by insisting that short intelligible indications of the grounds should be available to find out the mind of the arbitrator for his action.

... The reasons that are set out must be reasons which will not only be intelligible but also deal with the substantial points that have been raised. When the arbitration clause required the arbitrator to give a reasoned award and the arbitrator does give his reasons in the award, the sufficiency of the reasons depends upon the facts of the particular case. He is not bound to give detailed reasons.

We accordingly set aside the impugned judgment and order passed by the learned Single Judge dismissing the objection u/s 34 of the Arbitration and Conciliation act, 1996, as also the award passed by the learned Arbitrator. The amount, which is deposited by the appellant in this court, shall be refunded along with the interest accrued thereon.

With the consent of the counsel appearing for the parties, we appoint Mr. Justice V.S. Aggarwal, a former Judge of this court, as the sole Arbitrator to decide this matter. The learned Arbitrator is requested to enter into the reference as expeditiously as possible and decide the disputes preferably within a period of six months. In terms of the aforesaid order, the appeal stands disposed of.