R.P. Builders vs DDA

Rajiv Sahai Endlaw, J.—The suit was registered on receipt/filing of arbitral award dated 19th May, 1994 in this Court. Notice of filing of the arbitral award was issued to the parties and the petitioner M/s R.P. Builders filed IA No. 633/1996 under Sections 30 & 33 of the Arbitration Act objecting to the award in so far as rejecting/declining its claims. Pleadings in the said application were completed and on 19th September, 1997 the usual issues framed. Though the parties were directed to file affidavit evidence and there is on record an affidavit by way of evidence on behalf of the petitioner but on 24th September, 1998 both the counsels stated that the arbitration proceedings which had been received in this Court, only be read as evidence in the present suit and no further evidence was required to be recorded. The respondent DDA has not filed any objections to the award. The counsels for the parties have been heard.

Claim No. 1 of the petitioner before the arbitrator was of Rs. 30,000/- on account of unlawful withholding of the said amount from the final bill for the reason of quality control. During the course of proceedings before the arbitrator the respondent DDA admitted that a sum of Rs. 20,300/- out of the said deductions was releasable in favour of the petitioner. The petitioner also on 26th August, 1993 agreed to withdraw the claim for Rs. 30,000/- subject to the amount of Rs. 20,300/- being released to him on or before 30th September, 1993. The arbitrator records that the said monies were not so released by the respondent DDA in favour of the petitioner. The arbitrator however under the said claim awarded the sum of Rs. 20,300/- only to the petitioner. The counsel for the petitioner has contended that there is no reason in the award for not allowing the entire claim of Rs. 30,000/-.

Undoubtedly the arbitrator has been swayed by the offer of the petitioner in the hearing on 26th August, 1993 to withdraw the entire claim of Rs. 30,000/- if Rs. 20,300/- admitted by DDA were paid on or before 30th September, 1993. Technically speaking, the offer of the petitioner for withdrawing the claim of Rs. 30,000/- was conditional to the payment being made by the stipulated date and on that payment being not made by the stipulated date the said offer disappeared. However, what cannot be lost sight of is that the arbitrator is a private court/forum chosen by the parties themselves as an alternative to the court and for the sake of expediency. Arbitration was/is not intended to be a first step in litigation. A party opting for arbitration makes a conscious choice that instead of hierarchy of courts as under the ordinary law of land being available to him, he would be bound by the order/award of such private court/forum. The role of the courts against the said awards is very limited and supervisory. The parties having made such a choice take the inherent risk of the said arbitrator''s sense of justice and fair play. The courts, unless find the sense of justice/fair play applied by the arbitrator to be totally perverse are not to interfere with the same. The arbitrator has in the award stated that he has examined the statements and evidence of the parties and their respective submissions. If after such an exercise the arbitrator has chosen to dispose of the claim No. 1 with the award for an admitted amount only, considering the amount involved and totality of the circumstances, in my opinion no perversity or misconduct can be attributed to the arbitrator. The arbitrators are entitled to draw general conclusions. The counsel for the petitioner also neither in the objections nor at the time of hearing pointed out any such material on the arbitral record from which it can be said that the balance amount of Rs. 9,700/- was payable and in-spite thereof not granted by the arbitrator. I, therefore, do not find any merit in the objections with respect to the award under claim No. 1.

Claim No. 2 of the petitioner was on account of recovery of Rs. 28,647.37p by the respondent DDA from the amounts due from DDA to the petitioner on account of penal recovery i.e. at double the rate of excess, cement, SCI, G.I. & L.A. Pipes not returned by the petitioner to the respondent DDA. The arbitrator found that the petitioner had in carrying out the work consumed the material/goods aforesaid in excess of the agreed variations; that the petitioner was supposed to utilize the material in optimal way without wastage; that the petitioner having so wasted was in accordance with the terms of the contract (clause 42) liable for payment at penal i.e. double the issue rate of the said material. The arbitrator also found, as a matter of fact, that the petitioner had not proved return of the excess L.A. Pipe 150 mm dia meter and was thus liable for penal value thereof also.

The petitioner objects on the ground that no penal recovery could have been ordered without proving the actual loss; that though the respondent DDA has sought time to submit details of the loss suffered but no such losses were proved; that in the absence of actual loss, no award at penal rate could have been made.

It is not disputed that the respondent DDA under the agreement with the petitioner was entitled to penal recovery. The factual finding of the arbitrator of excess consumption is non interfereable in these proceedings and, in any case, has also not been challenged in the objections. The Supreme Court in the short judgment in Hindustan Tea Co. Vs. K. Sashikant Co. and Another, reiterated that once it is found that the award is a reasoned one, under the law, the arbitrator is made the final arbiter of the dispute between the parties and the award is not open to challenge on the ground that the arbitrator has reached a wrong conclusion or has failed to appreciate facts.

As far as the ground made out in law, of no penalty being payable without proof of loss, is concerned, the Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., has held that when such contracts by pubic bodies provide for penalties, absolute insistence on a proof of loss cannot be made. The Supreme Court observed that in the functioning of public bodies there could be no proof of loss. Examples were cited of no particular individual or person suffering by delay in construction of roads or bridges. It is the public at large which suffers. In view thereof, the petitioner''s reliance on earlier judgment of this Court in A.K. Jain v. U.O.I. suit No. 136 of 1991 decided on 23rd March, 1993 with respect to Clause 42 is of no avail.

The clause for penal recovery appears to have been made in the contract, in which part of the material used in execution of the contract is provided by the respondent DDA, to ensure that there is no wastage of such material. It is the public at large which suffers from such wastage. By providing penal rate of recovery, it is expected that the contractors will ensure return of excess material. In such a situation, in my view, no absolute insistence can be made on proof by loss before the agreed penalty can be awarded. No error is thus found in the award on this ground also and the objection is rejected.

Claim No. 3 of the petitioner was for recovery of the amounts stated to have been wrongfully deducted out of the bills towards agreed rebates; it is contended that the respondent DDA was entitled to the said rebates only on timely payment of monthly bills, final bills, release of security deposit and all of which was not done and hence such rebates were wrongly deducted and the DDA is liable to make good to the petitioner the amount adjusted on this account.

The arbitrator has found the rebates to have been correctly availed by the respondent DDA with respect to the months of which payments were made timely; he has further found that for the months for which the payments were not made within the stipulated time, the petitioner had not carried out the work of the minimum value i.e. of Rs. 25,000/- required to be carried out in that month and thus the payments due for that month were carried forwarded to the next month along with rebate; that even for the months for which the payments were made, the petitioner had failed to establish of having carried out the work of the minimum value of Rs. 25,000/- and for want of evidentiary support that part of the claim could not be granted; that though the completion certificate was dated 20th August, 1991, the same was subject to carrying out of substantial works which were carried out later and the final bill was released within the stipulated time from the said completion of works and thus the respondent DDA was entitled to rebate with respect to final bills also. The release of the security deposit was also found to be within the agreed time from the date of such completion of remaining works and thus DDA found entitled to rebate on that account also.

The counsel for the petitioner has vehemently contended that the factual finding of the arbitrator of the work of the minimum value of Rs. 25,000/- having been not carried out in months in which the payments were not released is contrary to the document Exhibit R-30 of the respondent itself. In the objection petition, it is further pleaded that even in the pleadings the respondent had admitted the work done to be of the minimum value of Rs. 25,000/-. With respect to the rebate on timely payment of final bill and release of security deposit it is contended that even in-spite of completion certificate issued by the respondent certain works remained to be completed at the insistence of the respondent DDA only; it is argued that the respondent DDA has a practice of getting the works of final paint, fixing of brass items carried out just before the delivery of possession of the flats to the allottees so as to avoid theft/pilferage thereof between the time of completion and allotment of the flats. It is contended that if the date of completion certificate issued is considered, neither was the payment of the final bill nor the release of security deposit was within the time so as to entitle the respondent DDA to rebate.

I am afraid the findings of the arbitrator are again factual in nature and on the law aforesaid it is not appropriate to interfere with the award on the said grounds. Undoubtedly, the courts have in some cases interfered with the award if found to be contrary to a particular document or pleading. However, in my view each inconsistency does not fall within the ambit of Sections 30 & 33 of the Act. The role of the courts is supervisory only to prevent gross injustice or misdemeanor on the part of the arbitrators. It is not each inconsistency or invalidity which empowers the court to set at knot the arbitration proceedings. There must exist an element of carelessness, dishonesty, breach of the principles of natural justice of the category so as to shock the judicial conscience of the court or a prudent person. It is only then the award would be set aside or modified or remitted to the arbitrator. If the courts were to start interfering in the arbitral awards in every case where they find any such inconsistency, the whole purpose of arbitration would be defeated and the jurisdiction exercised with respect thereto be akin to that of an appellate court.

In the present case, though the counsel for the respondent DDA had no reply to Annexure R-30 relied upon by the petitioner but the fact remains that the arbitrator notwithstanding the same has reached a conclusion of payments having been made within the time entitling the respondent DDA to rebate. I do not consider the present inconsistency, even if any from the record, in the finding of the arbitrator, to remit the award for reconsideration to the arbitrator.

As far as the plea of the works carried out beyond completion certificate is concerned, it is not disputed that the completion certificate was conditional and various works stated therein to have been not carried out were carried out subsequently. Even if it is to be believed that a practice has evolved in DDA and DDA is compelling the contractors to carry out the said works later, just before the allotment of the flats, the fact remains that the same has no basis in contract. Nothing wrong can be found with the approach of the arbitrator of having decided the case in accordance with the contract and in ignoring such practice, if any. After all, the petitioner also, probably because of several contracts and future business with DDA, also obliged DDA by, notwithstanding having completed the work, not putting the final touches thereto till just before the allotment of flats. The petitioner contractor cannot now be heard to say that though for its own reasons it earlier acted as desired by DDA, DDA is nevertheless liable to compensate the petitioner for the same.

Claim No. 4 of the petitioner was for Rs. 2,00,000/- under Clause 10 (cc) of the agreement and in relation to the claims under Claims No. 3,5&7. The claim No. 3 and the objections with respect thereto have already been dealt with herein above. The objections to the claims No. 5 & 7 are considered herein below. If the objections of the petitioner thereto succeed, the petitioner shall be entitled to proportionate amount under this claim also.

Claim No. 5 of the petitioner was for Rs. 6,340.57p on account of unjustified and arbitrary deduction made by the respondent DDA for smooth finishing of RCC work. The arbitrator held the action of the respondent DDA to be strictly in terms of specifications and mode of measurements qualifying for payments in this regard and hence rejected the claim.

The objection of the petitioner as pleaded only is that the arbitrator has given no reasons. That is not true. The arbitrator has held that the action of DDA is in terms of the specifications and mode of measurements. The same are reasons enough for rejecting the claim.

Claim No. 6 of the petitioner was for Rs. 50,000/- in respect of extra/substituted items. The arbitrator awarded Rs. 3,028.80p as admitted by the respondent DDA. Neither has any argument been addressed in this regard nor do I, in the objections of the petitioner, find any plea with respect to rejection for the balance amount under the said claim.

Claim No. 7 of the petitioner was for Rs. 66,000/- on account of unjustified and arbitrary deductions made by the respondent DDA. The arbitrator held the same to be an excepted matter under Clause 25 (b) of the agreement. Clause 25(b) provides that the decision of the Supdt. Engineer regarding the quantum of deductions as well as justification thereof in respect of rates for substandard work shall be final and would not be open to arbitration. There is no dispute between the parties that if the said claim fell within the said Clause 25 (b), the same was not arbitrable. The counsel for the petitioner however contends that while Clause 25(b) is only with respect to reductions for substandard work accepted by DDA, the claim No. 7 was not for such reductions but was on account of deductions made from the bill. In this regard, the statement of facts of the petitioner on arbitral record was perused. The claimant has therein inter-alia stated that the entire work was executed under the supervision and control of DDA; that DDA had in each RA bill certified that the works have been done as per specifications; that whatever defects or discrepancies were pointed out by the respondent DDA were duly rectified before completion and only whereafter the provisional completion certificate was issued; that nevertheless the respondent DDA had made number of deductions, items and recovered amounts against such deductions without even giving proper notice therefor. The details of such deductions were contained in Annexure C.7 (A) to the statement of claim.

A reading of the claim No. 7 of the petitioner leaves no manner of doubt that irrespective of the terminology of reduction/deduction, it was the case of the petitioner also that the amount claimed had been reduced/deducted for substandard work which though DDA was entitled to reject and not pay for, had been decided to be accepted at reduced rates. If there was any ambiguity in this regard, a reading of Annexure C.7 (A) further clarifies the position. Each and every item therein is found to be on account of the work not carried out as per the agreed specifications. In view thereof, this Court at least on reading of statement of facts to which attention was invited is not able to find any error in the award in treating the said claim to be within the excepted matters. The objections with respect to claim No. 7 are also thus rejected.

Claim No. 8 of the petitioner was for Rs. 1,20,000/- for deployment of watch and ward staff and day to day maintenance of the flats from the alleged date of completion and till the date of allotment of the flats by the respondent DDA. It is the case of the petitioner that the works were completed on 20th August, 1991 when the completion certificate was given and the works mentioned to be remaining therein were left out at the instance of the respondent DDA as aforesaid. The petitioner thus claimed expenses for securing the flats.

I have with respect to the objections under Claim No. 3 herein above held that no error/misconduct can be found with respect to the finding of the arbitrator of the work having been completed only on 20th May, 1992. Accordingly, this claim for watch and ward staff also does not survive and the objection with respect thereto is also dismissed.

Claim No. 9 of the petitioner was with respect to the increase in prices of materials, idle labour, T&P and establishment due to prolongation of contract by 44 months after the stipulated date. A sum of Rs. 11 lacs was claimed on this account.

The arbitrator did not allow the said claim for the reason (i) of the petitioner having while applying for extension of time waiving any such claim (ii) finding a lot of internal inconsistencies, contradictions and factual inaccuracies in the claim of the petitioner, (iii) the claim being unsubstantiated by any material evidence,(iv) there being no substantial documentary evidence, books of account or the like having been adduced by the petitioner in proof of the said document, and (vi) the said claim being also barred by Clause No. 1 of the general conditions of contract.

The petitioner contends that the finding of the arbitrator of the claim being barred by clause No. 1 being contrary to the judgment of this Court and the arbitrator having not given any detailed reasons.

As aforesaid, the arbitrator has given several reasons for rejecting the said claim. It cannot be thus said that the rejection of the claim is without reason.

The counsel for the petitioner has relied upon judgment dated 13th March, 2006 of this Court in Kamal Construction Co. v. DDA in CS(OS) No. 794/2000 setting aside the award in favour of DDA. However, the court in that case had found the award to be without any reasons and mechanical. That is not the position here. The said judgment has no application. The counsel for the petitioner has also relied upon Shri Umed Singh Vs. Delhi Development Authority, with respect to clause No. 1 of the general conditions and holding that the same is applicable only in cases where the delay was beyond control of DDA and unavoidable and not where the delay was otherwise on part of DDA and allowing claim on that account. I do not feel the need to apply the ratio of the said judgment also to the facts of the present case in as much as the arbitrator has referred to the said clause as only one of the five reasons for rejecting the claim. The thrust of the arbitrator is of there being no delay by DDA and the petitioner having waived its right to claim any damages. That reason, in my opinion is enough not to interfere with the award.

I may notice that the counsel for the respondent DDA has in this regard drawn attention to Delhi Development Authority Vs. Bhagat Construction Co. (P) Ltd. and Another, holding that where the arbitrator is well-versed in the matters before him he is not required to give a detailed judgment and it is sufficient if he indicates his trend and gives outline to indicate basis of which he arrived at the conclusion. Reliance was also placed on Jagdish Chander Vs. Hindustan Vegetable Oils Corporation and Another, holding that where an arbitrator is an expert his award should not be lightly interfered with.

Claims No. 10&11 of the petitioner were for interest. The petition having failed, it is not deemed necessary to deal with the objections thereto.

Resultantly, IA No. 633/1996 is dismissed. The award dated 19th May, 1994 is made rule of the court and judgment pronounced in terms thereof. Decree sheet be drawn up. Parties are left to bear their own costs.