Kailash Associates vs Delhi Development Authority

S.D. Pandit, J.—The Suit No. 3516/91 is registered on account of filing of petition by M/s. Kailash Associates u/s 14 of the Arbitration Act, 1940. The petitioner M/s. Kailash Associates had taken a contract bearing No. 2/EE/WD.6/DDA/88-89 for carrying out construction building at Sunder Nagar, Rohtak Road. As regards this contract disputes arose between the petitioner and respondent No. 1 DDA. Those disputes were referred to the respondent No. 2 Shri R. C. Malhotra by letter No. EM 2(32)90/Arbn./14684-88 dated 27.8.1990. The said arbitrator entered into the reference on 14.8.1990 and passed the award on 15.8.1991. The petitioner has filed this petition to issue notice to the respondent No. 2 to file award and arbitration proceeding and then to make the award rule of the court.

After the above petition was filed it seems that due to the strike of the advocates no process fee were paid in the matter and before the notice could be served on the arbitrator, the arbitrator filed his award and arbitration proceeding in this court. On account of his filing arbitration proceeding, the said suit No. 122/92 is registered on 17.1.1992. The said suit No. 122/92, is tagged Along with the S. No. 3516/91 and the notice u/s 15 were issued to contractor M/s. Kailash Associates and Delhi Development Authority.

The respondent-DDA has filed is 3668/93 under Sections 30 and 33 by raising various objections to the award passed by the arbitrator. It is contended by the objector that the arbitrator has ignored the material on record as well as the terms of the contract and then misinterpreted the terms of the contract and acted contrary to the same. Thus, the arbitrator has misconducted himself. It is further contended that as per the clause No. 25 of the agreement arbitrator was to give reasons for his award but no reasons are awarded. The awarding of claim No. 1 and additional claims Nos. 1, 2 and 3 are disputed by the objector by contending that they are not reasons for awarding of these claims. Allowing of them is contrary to the terms of the contract and they are awarded by ignoring the documents on record.

The contractor has opposed the objection petition No. 3668/93 filed by the respondent and has contended that the claim of the petitioner that the award is without any reasons is false. It is contended that the allegations made against the arbitrator that the arbitrator has passed the award contrary to the provisions of the terms of the contract between the parties and by ignoring the documents on record is not correct. It is contended that the arbitrator has not at all misconducted himself and there are no grounds for interfering with the award passed by the arbitrator. Thus, it is contended that objection petition should be rejected and award of the arbitrator should be made the rule of the court.

It must be remembered that this court cannot proceed to consider the award in question as an Appellate Court. The court has no power in such matter to reappreciate the evidence on record and to come to a different conclusion. If the parties have selected their own forum, the deciding forum must be conceded the powers of appraisement of evidence. The arbitrator is the Sole Judge of the quality as well as quantity of evidence and it will not be for the court to take on itself that task of being a Judge on the evidence before the arbitrator. The right of appreciating the evidence is conferred by the parties on the arbitrator. It is also settled law that reasonableness of the reasons given by the arbitrator cannot be challenged before the court and Court cannot see the reasonableness of the reasons given by the arbitrator. If the view taken by the arbitrator was possible view to be taken then it could not be interfered. The arbitrator has to indicate his mind on the basis on which he has acted and that is sufficient to make the requirements even if the reasons should be stated in the award. It is one thing to say that the reasons should be stated and another thing to stay a detailed judgment to be given in support of an award. Therefore, bearing this aspect in mind regarding the position in such matter I proceed to consider the objections raised for the award in question.

The awarding of claim No. 1 by the arbitrator is disputed by the respondent. The claim No. 1 was made by the petitioner for amount of Rs. 20,000/- on account of the same being illegally and wrongfully withheld from the last bill paid. It would be proper to quote in verbatim the arbitrator''s award for awarding of the said claim in order to meet the contention raised on behalf of the respondent-DDA :

"The claim is for release of Rs. 20,000/- withheld by the respondent from the claimant''s bill. During the course of proceedings it emerged that this amount had been withheld on two accounts :

(i) Rs. 7,000/- due to labour complaint, and

(ii) Rs. 13,000/- on account of Quality Control Cell''s observations.

From the records made available and the pleadings of both the parties it transpired that the amount of Rs. 7,000/- on account of so called labour complaint has been withheld by the respondent by simply relying on the complaint made by some one on the letter head of Labour Union, without verifying the correct position. There has been no complaint from the concerned person, Sh. Kaiser Ali, Petty Contractor/Labor to whom the payment was supposedly due. On having explained the factual position by the claimant to the engineer-in-charge, the engineer-in-charge wrote to the union vide his letter dated 21.10.1989 (Ext. C-36) asking them to direct Kaiser Ali to surrender labour wage card etc. in case, payment has not been received by him. After, this there has been no response either from the union or Sh. Kaiser Ali about non-payment of the dues. Yet the respondent continued to withhold the amount. In case, the respondent was convinced that the claimant owed Rs. 7,000/- to Kaiser Ali then he could have made the payment to him. But the respondent has no right to withhold the money and keep it with him indefinitely. I have no reason to disregard Ext. C-41 filed by the claimant which is a receipt amounting to Rs. 3,950/- signed by Kaiser Ali as full and final settlement. I find that action of the deptt. in withholding the amount of Rs. 7,000/- is not justified and, as such, the same has to be refunded to the claimant.

As regards, withholding an amount of Rs. 13,000/- on account of Quality Control Cell''s observation it is found that the work was inspected by Quality Control Cell on 13.10.1988 i.e., 6 months before the work was completed and completion recorded (it was completed on 22.6.1989). The defects subsequently brought out by the engineer-in-charge and A.E. were also before completion of the work. The completion certificate recorded on 22.6.1989 was made into 3 parts, (a) the items yet to be done, (b) the defects which can be rectified, and (c) the defects which cannot be rectified. On these accounts an amount of Rs. 3,000/- was withheld at the time of payment of final bill on 22.1.1990 in addition to Rs. 10,000/- withheld earlier at the time of payment of 6th running account bill in December 1988. Although, certain defects had been recorded in completion certificate on 22.6.1989 but subsequent to that neither any notice was ever issued to the claimant under clause 6 of the contract to say that he had not rectified the defects and the same still existed, nor any action was taken to get the defects rectified under clause 14 of the contract.

In view of the above my findings are that the respondents action in simply continuing to withhold the amount without any notice within the maintenance period or even thereafter, or taking any action under clause 6 and clause-14 as per provision in the agreement has no justification. Thus, the claimant is entitled to receive back this amount of Rs. 13,000/- withheld by the respondent.

In view of the position explained above, I award Rs. 20,000/- in favor of the claimant against claim No. 1.

If the above contents of the award itself are seen then it would be quite clear that the arbitrator has clearly expressed the working of his mind and he has given sufficient reasons for awarding the said claim. After reading the reasoning given in the award, it is not at all possible to hold that the view taken by him is an impossibility Therefore, in the circumstances, the awarding of the said claim No. 1 by the arbitrator will have to be approved and confirmed.

The claim No. 2 is made by the petitioner by claiming Rs. 4 lacs, on account of the extra rates for the work to be executed beyond stipulated date of completion. The arbitrator has awarded against this claim only Rs. 95,600/- in favor of the claimant. No notice under clause 2 of contract was issued by the respondent during the currency of the contract or even during the extended period of the contract, nor any compensation was levied under this clause. The records reveal that there had been breaches on the part of the respondent by way of delays in making available site, issuing of drawings, (foundation drawing issued on 3.6.1988 stair case drawing good for construction issued on 18.11.1988) giving decisions, (the decision in regard to external finish given on 28.12.1988), delay in issue of materials Exhibits C-9, C-10, C-12, C-21, C-27, and delays in making payment - Exhibits C-4, C-9, C-12, C-16, C-29 and C-31. Since, the work was being prolonged due to defaults and breaches on the part of the respondent the claimant had informed the deptt. vide Ext. C-19 dated 26.11.1988 that he shall charge 20% extra on the work executed after the stipulated date of completion. In allowing the claim No. 2 the Arbitrator has observed as under :

In view of the position described above and taking into consideration that has emerged from the records, and the submission made by both the parties, I have no hesitation in arriving at the conclusion that delay in completion of the work has been on account of respondent and the claimant is entitled for the damages due to prolongation of the work.

Before deciding the extent of damage payable to the claimant it is mentioned that although as per the agreement, the tender cost of the work was Rs. 16,12,925/- but, due to increase quantum of work the cost of work increased to Rs. 22,92,965/-.

The estimated cost of work done after the stipulated date of completion (without adding the enhancement) is Rs. 11,96,070/-. Considering the market trend, and cost indices etc. I, find that an increase of 8% is justified against increase of 20% demanded by the claimant, and thus for the work executed after stipulated date of completion i.e., 14.11.1988, I award a sum of Rs. 95,680/- in favor of the claimant against claim No. 2.

Now as regards this claim the learned advocate for the respondent has contended before me that the arbitrator has not at all considered the important documents exhibit R-11 as well as additional condition No. 1 of the agreement between the parties and that amounts to misconduct of the arbitrator. In support of that contention. She has cited before me the case of K.P. Poulose Vs. State of Kerala and Another, , and has put reliance on the following observations :

"Misconduct u/s 30(a) has no connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or services at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision.

In the instant case the Arbitrator has misconducted the proceedings by ignoring the two very material documents to arrive at a just decision to resolve the controversy between the Department and the contractor. Even if Department did not produced those documents before the Arbitrator it was incumbent upon him to get hold of all the relevant documents, including the two documents in question for the purpose of a just decision. Further, he arrived at an inconsistent conclusion even on his own finding. The award suffered from a manifest error apparent ex facie."

Then she has also drawn may attention to condition No. 1 of the specifications and conditions of the contract which shows as under :

"The contractor must get acquainted with the proposed site for the works and study specifications and conditions carefully before tendering. The work shall be executed as per programme approved by the Engineer-in-Charge. If part of site is not available for any reason or there is some unavoidable delay in supply of materials stipulated by the Department, the programme of construction modified accordingly and the contractor shall have no claim for any extras or compensation on this account".

After citing the above cited case of the Apex Court in AIR 1973 SC 1259. She urged before me that the arbitrator has not at all taken into consideration, the documents produced by the objector before this Court and particularly the documents of R-11 and R-12 the letter addressed to the petitioner on 5th January, 1989. This letter is addressed to the petitioner in reference to his letter dated 24th December, 1988. The said letter is exhibit C-29 mentioned by the arbitrator in the award. The contents of the letter of the respondents Executive Engineer are as under :

"....... All the structural drawings up to first floor level were issued to you at a stage as when the work was at foundation level. It was clearly indicated that there was not any hindrance on account of structural drawings or decision pending on the part of deptt. on account of which the progress of the work was affected. Similarly the structural drawings of first floor level were also issued to you well in advance. It was reminded by the undersigned from time to time that the progress of the work is affected due to shortage of labour and material but you had not bothered to arrange the same. It is very much clear that on account of shortage of shuttering material you could not complete the first floor slab and staircase till date though nothing is pending on our part. Therefore, you are once again requested that you should mobilize your resources so that the work is not further delaying on this account.

You have also been reminded from time to time to arrange sample of shutters but no use. All the service drawings that is sewerage, water supply and S.N. drains had been issued to you long back but the progress of the work is not found satisfactory. Please note that there is no any hindrance on the part of department, Therefore, you will be held fully responsible for the delay. Please note that no decision is pending on the part of the department and all the structural drawings had been issued to you as and when it were demanded by you, Therefore, writing such type of letters will not serve any purpose.

It is further clarified that payment of the work will be made as per terms and conditions of tender documents and nothing extra is payable as demanded by you in your letter No. KLA/99/2/1996 dated 26th November, 1988".

Besides the said letter there are letters dated 9.12.1988, 13.9.1988, 25.8.1988, 27.7.1988 and 22.6.1988, in which the Executive Engineer of the respondent had made grievance of work and not making proper progress in work by the claimant. None of these letters are referred by the arbitrator. From his reasoning which is quoted above, it is also quite clear that he has not considered any of these letters sent by Executive Engineer and in the last letter which is quoted above the Executive Engineer has clearly mentioned that the petitioner contractor was not entitled to claim and get any amount as extra in view of the terms of the contract. The letters to which the arbitrator has made reference are also showing that the delay was only on the part of the respondent. I have already quoted above the terms of the contract which clearly mentioned that the contractor was not entitled to claim extra money on account of the revised plan for non-availability of either material or the site. When the petitioner has entered into a contract by written documents he is bound by the documents and those terms of the documents do not allow him to make the claim for extra work on account of the revised programme for non-availability of either material or the site then the arbitrator was not at all justified in awarding that amount.

Thus, the arbitrator has committed misconduct in not considering the documents produced by the respondent as well as by non-considering the terms of the contract quoted above. Similarly awarding of the claim No. 2 being contrary to the provisions of the terms, the same could not be allowed. In the case of Continental Construction, Co. Ltd. v. State of Madhya Pradesh AIR 1989 SC 1166, it has been held that when the terms of the contract does not permit, the payment of extra money on account of the revised programme, the contractor is not entitled to get the claim for the payment of the extra. I thus hold that the arbitrator has also committed a mistake apparent on the face of the record, in coming to the conclusion that the work was prolonged due to the defaults on the part of the respondent by ignoring the documents produced by the respondent. He had not taken into consideration the term of the contract. Therefore, in the circumstances the claim No. 2 is not at all sustainable and the claim No. 2 will have to be rejected.

As regards claim No. 6 the claimant had claimed Rs. 30,000/- on account of the work done but not measured by the respondent. While awarding this claim the arbitrator has observed as under :

"The measurement of rolling shutters have not been taken by the respondent correctly either with reference to the applicable CPWD specifications or with reference to I.S. specification, the claim is found to be partly justified and I award a sum of Rs. 19,838/- in favor of the claimant". As regards awarding of this claim the learned Advocate for respondent Mrs. Salwan contended before me that the learned arbitrator has not given any reasoning as to why he was allowing the amount of Rs. 19,838/- inspire of Rs. 30,000/- claimed by the applicant. When she is making that submission what she is urging is that the arbitrator ought to have given a detailed reasoned judgment as given by the court of law while awarding the said claim. If the awarding of the claim by arbitrator is considered then it would be quite clear that as the measurement taken by the respondent were not as per CPWD specification or with reference to I.S. specification the amount awarding by respondent was less. He has awarded less amount then what was claimed by the claimant, obviously on account of taking into consideration the measurements in the light of CPWD specifications, and I.S. specifications. He has not accepted the measurements given by the claimant in detail but he must have applied the test of CPWD specification as has been indicated by him. The wording used by him is disclosing the working of his mind for awarding that claim and in my opinion that is sufficient for approving the award passed by the arbitrator. Therefore, in the circumstances I am unable to accept the objections for claim No. 6.

The additional claim No. 2 is on account of the awarding of interest the arbitrator has awarded simple interest of 15%. The learned advocate for the respondent has referred to provisions of Section 3(2) of the Interest Act, 1978 and contended that there is nothing on record to show that notice was issued by the respondent. But, it must be mentioned here that under that Section 3(2) of Interest Act, 1978, the interest should be awarded from the date of the notice. In the instant case when the claimant has raised the dispute and when he had also sent notices-cum-letters regarding his various claims he was mentioning therein that he was entitled to claim and get interest. When that was the claim made by him in his claims letters then the awarding interest by the arbitrator for the period from the date of the claim till the date of reference could not be illegal or improper. I, Therefore, do not find any reason to interfere with regard as additional claim No. 2.

Thus, I hold that the objection petition will have to be partly allowed. The objection as regarding awarding of claim No. 2 is allowed consequently the final amount of award of Rs. 1,68,703/- stands modified to Rs. 83,023/-. With the above modification the award made by the arbitrator is made a Rule of the Court. Thus, the petitioner is entitled to get Rs. 83,023/- and 15% interest awarded by the arbitrator as well as Rs. 5,000/- towards the cost of the arbitration proceedings and he is entitled to get future interest at 15% on the said amount of Rs. 83,023/- from the date of the award that is 14th August, 1991 till realisation. But the suits and I.A. No. 3668/93 stands disposed of. Both the parties to bear the costs of both the suits as well as I.A.