Navbharat Construction Company vs Delhi Development Authority

CM No. 3377/2010 in FAO (OS) No. 126/2010

By this application, the Appellant seeks condonation of one day delay in filing the present Appeal. It has been shown that the tentative date set by the Registry for delivery of the Certified Copy was 18.1.2010. It appears that the Certified Copy was, in fact, ready on 15.1.2010. Mr. V.K. Sharma, learned Counsel for the Appellant, had computed the last date for filing of the Appeal, taking the start of limitation to be 18.1.2010 and, therefore, had filed the Appeal on 16.2.2010, expecting it to be within time. We think that it would be unfair and impractical to expect an Advocate to check virtually every day as to whether or not the certified copy applied for has been prepared by the Registry and is ready for delivery. If a date has been given for collection of the certified copy, it is that date which should be taken into consideration for computing the period of limitation. We may immediately clarify that if the certified copy is prepared and has been collected on a date prior to the date given by the Registry, limitation would commence from the date of collection or delivery.

In these circumstances, we hold that the Appeal has been filed within time and hence the application is infructuous and stands disposed of.

FAO (OS) No. 126/2010

In the present case, as many as thirty one Claims have been raised by the Appellant against the Respondent/DDA. Some Claims have been partially allowed and others have been rejected in toto. The Objections, however, were filed pertaining only to Claim No. 29 which is for an amount of Rs. 5,30,000/- on account of Watch & Ward from July 1993 to November 1997. The Appellant had claimed that sum since as against the stipulated date of completion of work, that is, 20.3.1992, the Work was actually completed in July, 1993.

Claim No. 28 was for an amount of Rs. 62,50,000/- on account of damages for alleged prolongation of the contract. The learned Arbitrator, however, was of the view that Clause 10 CC of the Agreement between the parties adequately covered the Claim for Damages for the prolongation period. Importantly, the learned Arbitrator further recorded that the "claim for watch and ward also facilitates the claimants in terms of running their establishments and other factors as they still had to make some arrangements for the person deployed/employed on the site". While the Claim of Rs. 62,50,000/- was totally rejected by the learned Arbitrator, he obviously had formed an opinion of granting compensation under the Head of Watch & Ward. It is unfair that the Appellant should lose under both Claims.

In respect of Claim for Watch & Ward, our attention has been drawn to the Response filed by the DDA before the Arbitral Tribunal, which learned Counsel rightly contends to be vague and illusive. All that has been pleaded by the DDA is as follows:

The contractor vide his letter No. NBCC/Narela/203 Dt. 3-6-93(copy enclosed R-22) has given an undertaking to keep, watch and ward of the houses till allotment of the houses. So the claim of Rs. 5,30,000/- is not justified, denied and hence may be rejected.

In this context, it will be relevant to reproduce the contents of the letter of the Appellant/Contractor which reads as follows:

The above mentioned work has been completed by us except fixing of brass fittings, glass panes, final coat of white washing, colour washing, painting. Till the allotment is made, we will keep the watch and ward of the houses. You are requested to record the completion of the work and oblige.

The learned Arbitrator has concluded that the flats were complete on 6.7.1973 while the Final Bill was paid on 17.9.1997; the allotment started as late as in 2003. In a catena of Judgments of the Hon''ble Supreme Court and of this Court, it has been held that the arbitrator is expected to indicate his mind in his speaking order, and is not supposed to give the minute details of the computation and mental meanderings while awarding a claim [See FAO(OS) No. 267/1996 titled Delhi Development Authority v. Madhur Krishna decided on 19.3.2009]. However, in his Award, the learned Arbitrator has given the following detailed computation in support of the amount awarded against Claim No. 29 to the Appellant:

Period claimed for watch and ward - 6.7.1993 to 17.9.1997 Say 4 years and 2 months i.e. 50 months less for maintenance period (6 months) 44 months Rates as per circular No. 510

For 200 LIG Flats Rs. 6600/- per months

For further additional 50 flats Rs. 1100 per month

i.e. for (330-200) = 130 flats 1100x2 = 2200

Additional payment for 30 flats @ Rs. 1100/- per 50 flats Rs. 6600/-

Watch and Ward for 330 flats Rs. 6600/- + Rs.2200 + Rs.660 = Rs. 9460/-

Payment for 44 months Rs. 9460/-X44 = Rs. 4,16,240/-

I award Rs. 4,16,240/- on this claim.

The learned Arbitrator was not impressed with the argument that in the letter, the Appellant/Contractor had undertaken not to claim anything on account of Watch & Ward till the flats were allotted. We are also convinced that no such inference or conclusion can be drawn from the letter of the Contractor/Appellant. At the highest, all that he had conveyed was that he would assume the responsibility of Watch & Ward. There is no material on record to indicate that the DDA had earlier, or in response to the said letter, clarified that no payments will be made against Watch & Ward.

The scope of interference u/s 34 of the Arbitration & Conciliation Act, 1996 (A&C Act for short) has come in for a comprehensive review in McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others, and we can do no better than reproduce the relevant paragraphs:

Challenge to award: Legal scope of

Section 2(1)(b) of the 1996 Act reads as under:

2(1)(b) ''arbitration agreement'' means an agreement referred to in Section 7;

In terms of the 1996 Act, a departure was made so far as the jurisdiction of the court to set aside an arbitral award is concerned vis-�-vis the earlier Act. Whereas under Sections 30 and 33 of the 1940 Act, the power of the court was wide, Section 34 of the 1996 Act brings about certain changes envisaged thereunder.

Section 30 of the 1940 Act reads, thus:

Grounds for setting aside award.-An award shall not be set aside except on one or more of the following grounds, namely-

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid u/s 35;

(c) that an award has been improperly procured or is otherwise invalid.

The section did not contain the expression "error of law....". The same was added by judicial interpretation. While interpreting Section 30 of the 1940 Act, a question has been raised before the courts as to whether the principle of law applied by the arbitrator was (a) erroneous or otherwise, or (b) wrong principle was applied. If, however, no dispute existed as on the date of invocation, the question could not have been gone into by the arbitrator.

Changes under the new Act

The 1996 Act makes a radical departure from the 1940 Act. It has embodied the relevant rules of the modern law but does not contain all the provisions thereof. The 1996 Act, however, is not as extensive as the English Arbitration Act.

Different statutes operated in the field in respect of a domestic award and a foreign award prior to coming into force of the 1996 Act, namely, the 1940 Act, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. All the aforementioned statutes have been repealed by the 1996 Act and make provisions in two different parts, namely, matters relating to domestic award and foreign award respectively.

Vis-�-vis grounds for setting aside the award

After the 1996 Act came into force, u/s 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by the arbitrator would be the subject-matter of challenge u/s 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for u/s 37 of the Act.

The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court''s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.

We have extracted the ratio of McDermott for the reason that we respectfully disagree with the approach of the learned Single Judge inasmuch as he has set aside the amounts awarded in the subject Claim No. 29. We find that there is no incongruity in the agreement arrived at between the parties. If this were so, it would be entirely inadmissible, unreasonable or illogical to refer to the Appellant/Contractor''s letter allegedly "undertaking to carry on Watch & Ward". If the Contract did not envisage this responsibility, and the DDA had called upon the Contractor to perform these duties, the latter would be liable to compensate the former for the expenses incurred in the performance of this responsibility. If the letter of the Appellant is to be seen as a supplementary contract, then in that event also compensation for expenses would have to be paid.

Viewed from any angle, therefore, the conclusion of the learned Arbitrator does not manifest a perversity which would call for interference u/s 34 of the A&C Act.

For these reasons, the Appeal is allowed. The impugned Order is set aside. The effect is that the Appellant succeeds in praying for the restoration of the Award under Claim No. 29 as published by the learned Sole Arbitrator.

There shall be no order as to costs.