Shri Vasudev vs Delhi Development Authority

Shiv Narayan Dhingra, J.—By this order I shall dispose of objections made by the DDA under Sections 30 and 33 of the Arbitration Act against an Award of the Sole Arbitrator, Sh.R.C. Malhotra, dated 29th June, 1992.

The brief facts relevant for the purpose of deciding these objections are that the contractor, Mr. Vasudev, was awarded a civil contract for construction of sewerage at Hudson Lines, Kingsway Camp vide an agreement dated 30th September, 1987. The work was to be completed by 4th July, 1988. However, the work did not complete by the stipulated time and the DDA rescinded the contract vide letter dated 23rd February, 1991. The contractor raised a dispute and sought reference of his claims to the Arbitrator. In all 28 claims were raised by the contractor and were referred to the Arbitrator. The DDA also raised counter claims and the Award deals with these claims and counter claims. The objections against the Award have been filed claim wise so they are being dealt with claim wise.

Under claim No .1, the claimant claimed a sum of Rs. 99,785/- on account of refund of security deposit. The Arbitrator upheld the claim to the tune of Rs.90,000/-holding that rescission of the contract on 23rd February, 1991 was unjust and wrongful and forfeiture of security was, therefore, unjust. The Arbitrator has given reasons and referred to the various correspondences between the parties. On the other hand, no ground is made out by the respondent/DDA to set aside Award of this claim. This Court cannot act as a court of appeal hearing arguments on merits of the decision. The Arbitrator''s decision is based on evidence and, therefore, has to be respected.

Claim No. 2 is for refund of Rs. 70,000/- which was wrongfully withheld from the second running bill. The Arbitrator has allowed this claim on the basis of respondent''s own documents wherein the respondent''s Engineer had recommended for refund of this amount. I find no reason made out by the respondent for setting aside this claim. The claim is based on evidence as adduced before the Arbitrator.

Claim No. 3 is in respect of Rs. 5,000/- wrongly recovered from the 6th running bill. This amount was recovered from 6th running bill in anticipation of grant of extension of time. There is no provision in the Agreement between the parties that an amount can be recovered from the bill in anticipation of granting extension. As and when the extension is applied by the contractor, DDA can either extend the contract conditionally or unconditionally or refuse an extension. If a condition is imposed of imposing penalty at the time of extension, that penalty can be recovered subsequently from the bill but an amount cannot be deducted from the bill in anticipation that a penalty would be imposed without considering the grounds for extension. I, therefore, find no ground to set aside award on this claim.

Claim No. 4 was made by the claimant for refund of recovery of Rs. 13,700/- at double the issue rate of cement. The Arbitrator held that the respondent could not prove the use of excess cement and the recovery at twice the issue rate was wrongful. The recovery for cement could only be made at issue rate. He, therefore, allowed Rs. 6,850/-against this claim. It is contended by the respondent/DDA that Arbitrator has given no reasons for awarding Rs. 6,850/-. I find this argument baseless since the Arbitrator has given reasons.

Claim No. 5 made by the claimant was for Rs. 35,000/- on account of balance payment of the work done. The Arbitrator allowed payment of Rs. 30,297/- against this claim after considering the bill raised by the claimant and the fact that the payment was not made against the bill. The DDA''s contention is that according to the bill of the claimant, the gross amount payable was shown as Rs. 30,861/-. Out of this bill, 10 per cent was to be deducted by way of security deposit, Rs. 618 was to be recovered on account of income tax and Rs. 670/- was to be recovered on account of recovery for cement and Rs. 7,620/- on account of secured advance. The amount of Rs. 10,295/- was ultimately reflected under claim No. 1 as the said amount of security deposit was put under the said head and was released to the petitioner on furnishing the bank guarantee. The Arbitrator has under claim No. 1 directed the release of amount of bank guarantee, however, the Arbitrator overlooked and did not take into consideration the other three recoveries, namely, income tax, recovery for cement and recovery for secured advance which were given by the DDA to the contractor and has taken into consideration the gross amount of bill irrespective of recoveries. The learned Arbitrator has not rejected or accepted the recoveries and observed that the recoveries shown in the bill were unjust and thus, left the matter undecided. The recoveries to be effected from the contractor were to the tune of Rs. 19,903/- thus, the net amount payable to the respondent against the bill was Rs. 10,958/-. Out of this the credit of Rs. 1,370/- as allowed by the Arbitrator has to be adjusted and thus, the only amount which could have been awarded by the Arbitrator was Rs. 10,958/- minus Rs. 1,370/-. The contention of the contractor is that only recovery of Rs. 1,370/- against cement was admissible. Rests of the recoveries were unjust and that is why the Arbitrator has allowed the claim of the contractor. It is further submitted that the security deposit of Rs. 10,295/- could not be enforced since the claimant had furnished bank guarantee for security deposit and the learned Arbitrator had discharged the bank guarantee which was given in the form of security deposit. Thus, the amount of Rs. 10,295/- was not admissible. It is stated that the award of the Arbitrator on this count has become final. However, the claimant has not refuted the contention of the respondent that out of the bill raised by the contractor, the respondent was liable to deduct income tax and recovery of Rs. 7,620/- on account of secured advance. It is not disputed that before the start of contract, advance was paid to the contractor which was to be adjusted out of the running bill raised by the contractor, therefore, this secured advance had to be deducted out of the bill of the contractor. Obviously, the Arbitrator has not taken into account the recovery of income tax and secured advance. Maybe Rs. 10,295/- by way of security deposit was not liable to be recovered but rest of the recoveries were to be made and the Arbitrator ignored this fact.

I, therefore, consider that this award of the Arbitrator is required to be modified and out of the amount of Rs. 30,297/- allowed by the Arbitrator, a deduction of Rs. 7,620/-towards secured advance, Rs. 618/- as income tax are additionally required to be recovered. The Award of the Arbitrator against this claim is, therefore, modified and a sum of Rs. 21,959/- is upheld as the justified amount payable to the claimant.

Claim No. 7 made by the claimant was for Rs. 13,000/- on account of extra cement concrete. The Arbitrator has allowed this claim. The contention of the respondent is that the Arbitrator has failed to give reasons as to how he found the said claim to be payable. A perusal of the Award shows that the Arbitrator has referred to the order book and instructions given to the respondent for providing extra 6" thick C.C. cover collars. Since the claimant had fulfilled these instructions, the claimant was entitled for the payment on this count and the Arbitrator had come to a conclusion that the claim made by the claimant of Rs. 13,000/- was on the lower side and was to be allowed. I find no reason to disturb the Award.

Claim No. 8 was made by the claimant for Rs. 99,840/- on account of providing SFRC manhole covers. The learned Arbitrator after considering the evidence awarded a sum of Rs. 75,473.65 in favour of the claimant. The objection of DDA is that the analysis given by the claimant of Rs. 520/- per cover was not supported by any cogent evidence. Secondly, manhole No. 157 was not constructed and the petitioner could not have provided 191 numbers of covers and at the best it could have been 190 covers. The Arbitrator has considered the entire evidence even if it is considered that instead of 191 it were 190 covers, the difference in cost was around Rs. 400/-. Thus, the award allowed by the Arbitrator would have gone down by Rs. 400/-. It is true that the Arbitrator had taken full 191 covers instead of 190 covers. The difference between the cost of SFRC cover and RCC cover being only Rs. 395.15, the Award made by the Arbitrator is modified to the extent that instead of Rs. 75,473.65, the claimant would be entitled to Rs. 75,078.50.

Claim No. 9 was made by the claimant for Rs. 1,75,000/- on account of execution of work beyond the stipulated date of completion by claiming 25 per cent extra on contract rate. There is no provision in the contract that if the work goes beyond the stipulated date, the contractor would be entitled for extra rates @ 25 per cent of the work. The contract vide clause 10C specifically deals with situation if there is an escalation in the price of labour and material during progress of the contract and clause 10CC specifically deals with the escalation in the wages of labour and the price of material during the extended period. Once period of contract is extended and if there is escalation in the price of labour and material, the contractor can only lay claim under Clause 10C or 10CC but there is no provision that where period of contract is extended or the contract gets prolonged, the contractor''s tender rates shall stand increased by 25 per cent or the quantity rates shall increase by 25 per cent. It is settled law that an Arbitrator is prisoner of the contract and he cannot grant compensation, which is not provided by the contract. The Arbitrator in this case had allowed the claim of the contractor under Clause 10CC vide claim No. 11. I, therefore, consider that the award of Rs. 1,35,511/- allowed by the Arbitrator against claim No. 9 was not tenable and contrary to the contract.

Claim No. 10 was made by the claimant/contractor for a sum of Rs. 31,506.25 on account of execution of work under water. The claimant''s claim was that he was entitled for additional payment apart from contractual amount since he had to work under water for excavation of trenches and laying of pipes. The learned Arbitrator allowed this claim of the claimant in toto saying that it was a justified claim. It is submitted by DDA that the letter on which the Arbitrator had relied does not give any details with regard to the claim and the learned Arbitrator has based his decision on non-existent material and there was gross application of mind. The contention of the claimant is that the learned Arbitrator has decided the claim on the basis of evidence, namely, letters C-44, C-39 and C-32 and the court cannot upset the Award as the court cannot go into merits. There was no error apparent on the face of the award. The contractor in this case was awarded contract of laying sewerage lines. The trenches, etc., were to be dug for laying the sewerage lines. All rates in respect of digging trenches were agreed between the parties. In all other claims wherever the contractor had made a claim for extra item, the contractor had relied upon an order book or measurement book. In this case, there is no evidence of execution of the work by the contractor by way of measurement book nor there is any evidence on record that the trenches were dug under water and work was done under water. It would be seen that the contractor had been writing letters to DDA during progress of the work making various claims and seeking additional payment in respect of various things. Mere writing of letter by contractor seeking additional payment does not amount to evidence of the contractor of performing additional work or work beyond the contracted items. If any contractor claims that he had executed work beyond the contract or in respect of some item which was not provided for under the contract, he is supposed to prove his claim by measurement book or by an order placed on him. Self-supporting letters are not the evidence of extra items. I, therefore, consider that the learned Arbitrator in this case allowed this claim without there being any evidence and the award on this count is liable to be set aside.

Claim No. 11 was made by the claimant for a sum of Rs. 90,000/- on account of reimbursement of increase in cost of work under Clause 10CC of the contract. The learned Arbitrator after considering the cost index and taking into account the stipulated date of completion and the actual date of completion had allowed an amount of Rs. 17,143/- in favour of the claimant. The respondent has raised objection that the Arbitrator has not given reason as to how he arrived at the said figures. A perusal of the proceedings shows that the Arbitrator did take into account the relevant index and the charges. I, therefore, find no reason to set aside this Award under claim No. 11.

Claim No. 12 is for Rs. 5,831.48 on account of extra waste for laying C.C. under pipes due to revision of slopes. The Arbitrator allowed this claim. The respondent''s contention is that the Arbitrator has not given reasons and, therefore, the Award was liable to be set aside. I find that the Arbitrator has given reasons and relied upon the document showing that the respondent had revised the gradient for laying pipes. The claimant had also furnished details about this revision of gradients and the amount spent by the claimant. I find no reason to set aside the Award.

Claim No. 13 was made by the claimant for a sum of Rs. 19,062.83 on account of extra brick work in the manholes. The learned Arbitrator allowed claim of Rs. 15,690.11. A perusal of contract (item 5) would show that the item provided "construction of brick, circular type manhole with FPS bricks with 90 cm internal diameter at the bottom and 90 cm depth with C.I. frames of heavy duty on the top." The thickness of RCC cover is given as 12 cm, however, there is no thickness of the brick work provided under this item and it is obvious that the manhole was supposed to be heavy duty and strong enough to bear the burdens of vehicles passing over it. This claim could have been allowed only if the contractor had done something extra than what was provided in the contact. The contract does not provide that the thickness of the wall of manhole was to be 9 inch. Normally in all manholes, the thickness of wall is to made in accordance with the location of the manhole i.e. if the manhole was to come in between the road or it was to remain at an isolated place where no vehicle was to pass. "There was no specification given in the contract that the manhole was to have side wall thickness only of 9 inch. The contractor was told that thickness of 9" being provided by him was not suitable for the structure consideration and he was advised to provide first course of 18 inches, second course of 13 � inches and then start 9 inches brick work. This does not amount to any additional work. The contractor had not specified in his tender that in the manhole, he was only going to provide 9 inches wall throughout and he was not going to give first course of 18 inches and second course of 13 � inches and then course of 9 inches brick work which is the normal mode of construction of manholes. The claim of the claimant was, therefore, not tenable in view of the contract between the parties. Thus brick work cannot be termed as an extra work. If the DDA had pointed out that manhole was not of requisite strength and needed additional strength that does not mean that the respondent had asked the contractor to do additional work. The award against claim No. 13 is, therefore, liable to be set aside.

Under claim No. 15, claimant claimed Rs. 78,000/- and the Arbitrator allowed this amount to him despite observing that the work was executed by the claimant as per agreement item No. 4. A perusal of agreement item No. 4 would show that this item included "providing and laying (light duty) non-pressure NP2/NP3 class, S & S R.C.C. pipe with rubber ring confirming to ISI standard". A perusal of claim of the claimant would show that the claimant had asserted that in the tender, schedule of quantity contemplated provision of non-pressure NP2/NP3 class S & S RCC pipe with rubber ring. However, his contention is that he was invited for negotiation and for reduction of rate and he reduced rate from 38.5 per cent to 34 per cent and he clarified the rate for item No. 4 of schedule of quantities would be for NP2 class pipe. He submitted that in NP2 class pipe no rubber rings are required, but in the present case in addition to cement concrete in the joints, he also provided rubber rings and, therefore, he was entitled for additional amount of Rs. 78,000/-. The respondent had raised objection that the Arbitrator despite observing for the item was executed as per agreement had allowed claim of Rs. 78,000/- and this was an error apparent on the fact of it. There was no question of awarding any extra amount since the work had been executed as per the agreement. The contractor has refuted this and stated that he had made it clear that he would be using only NP2 pipe, during negotiation. A perusal of the negotiation letter written by the contractor during negotiation would show that the contractor had agreed for reduction of his rates and observed that he would be using NP2 pipes, however, he had not stated that he would not be using rubber rings for joints while using NP2 pipes. There is no dispute that he has used NP2 pipes but he staked an additional claim for using rubber rings at the joints. It was made clear in the tender document and in the contract which he signed after negotiations that the joints are to be made by rubber and concrete. The specification clearly shows S & S NP2 pipe with rubber. Thus, there was no confusion at the time of execution of the contract. The item was executed as per the contract. There was no reason for the Arbitrator to award additional amount. The award under claim No. 15 is, therefore, liable to be set aside.

Claim No. 16 was raised by the claimant for Rs. 12,783.60 as an extra amount for excavation of malba. The Arbitrator allowed a sum of Rs. 7,348.44 after relying upon the letters written by the claimant that there was some malba in the alignment of the sewerage line over the area. The claim has been allowed without any evidence of removal of malba, only on the basis of analysis. I consider that no claim for extra work can be allowed without proof of the work having been done, only on the basis of analysis. In all civil works which are awarded by DDA to the contractor, a measurement book is maintained and execution of all works, step by step are recorded in the measurement book whenever an extra work is required to be done an order is to be placed by Engineer In-charge and a cost analysis is to be given by the contractor and the Engineer In-charge has first to accept the cost analysis in terms of clause 12. An extra work may be withdrawn from the contractor if cost analysis is not acceptable to the Engineer In-charge. However, there is required to be evidence that extra work was ordered to be done and it was executed in terms of the order. In absence of evidence, mere correspondence of the contractor that he had to do extra work cannot be a ground for allowing the claim by the Arbitrator. The Arbitrator is bound by the contract and no extra item can be allowed by the Arbitrator unless it has been executed in accordance with the contract and evidence is produced before the Arbitrator of execution of the extra work. I, therefore, consider that Award of Rs. 7,348.44 for removal of malba from the site is not tenable.

Claim Nos. 21 and 22 are in respect of allowing interest by the Arbitrator over the withheld amount. After perusal of the Award, I find that the Arbitrator has justifiably allowed amount against both these claims as I find that the DDA had wrongfully withheld the amounts of the second running bill and released the amounts belatedly. I find no reason to justify the Award of these two claims.

Claim No. 24 has been allowed by the Arbitrator for a sum of Rs. 12,000/- on the basis of record maintained by the respondent. The respondent has stated that the Arbitrator had not given any reasons for allowing the claim. I find that this contention untenable since the Arbitrator had given reasons and relied upon the documents showing the execution of the work. I, therefore, find no reason to justify the Award against this claim.

Claim No. 26 has been allowed by the Arbitrator on account of damages on the ground that the contractor had to maintain his establishment unproductively beyond the stipulated rate of completion since it was DDA who was responsible for the delay in the work. The claim had been allowed on hypothetical grounds without their being any material before the Arbitrator that the establishment was actually maintained by the contractor. There is no presumption that a contractor undertakes only one civil work at a time and he maintains his establishment for that purpose. A contractor may be having at hand at one point of time many contracts. It is more likely so because looking into the manner in which payments are released by the DDA and the pace of work, it is not possible that a contractor and his staff could survive with one work. The contractor is to maintain his establishment for all works which he has at hand at one point of time. If a contractor claims that he kept his staff that is Engineer, Supervisor, Mechanic, etc., posted at the site idle, he is supposed to prove the same in order to claim the damages on account of maintaining the establishment. The contract between the parties specifically provides that the contractor shall maintain attendance register of all the workmen and he shall submit this attendance register to the employer, that is, DDA from time to time. He is also supposed to maintain wage book of each worker with full particulars of the employee employed by him. Unless and until the contractor placed before the Arbitrator the names of the persons employed by him and kept posted at site with sufficient evidence that those employees and Engineers remained idle and did not work at his other works and he had engaged separate Engineer and Supervisor for his other works, he cannot claim damages on account of keeping idle establishment. Keeping an establishment idle cannot be a presumptive factor. It is a real factor and has to be proved by real evidence. Cost analysis of keeping an establishment cannot be a basis for awarding an amount to a contractor. This will rather to be a premium on delaying the work. A contractor would deliberately delay the work and then claim that he has to keep his establishment idle. He would also claim damages under Clause 10 CC and it is not a difficult task to delay the work when we have departments like DDA and MCD where the work culture is so helpful to the contractor that every contractor ends up not only receiving with the contractual amount but receiving almost equal amount through arbitration awards. I, therefore, consider that the claim allowed by the Arbitrator under Claim No. 26 is not tenable and not as per terms of the agreement and liable to be set aside.

Claim No. 27 has been allowed by the Arbitrator for a sum of Rs. 2,275/- on account that the contractor had to pay extra commission during prolongation of the contract for maintaining bank guarantee. The contractor produced a bank certificate of Rs. 2,275/-. Since it has been held by the Arbitrator that the contract got prolonged due to fault of DDA, I consider that the Arbitrator rightly allowed this amount.

Claim No. 28 is in respect of allowing interest. The Arbitrator has awarded interest @ 14 per cent per annum from 3rd September, 1990 till date of Award and he allowed further interest of 14 per cent from the date of Award till realization. I consider that the rate of interest @ 14 per cent upto the date of Award was justified in view of the interest regime prevalent earlier. However, rate of interest @ 14 per cent per annum from the date of Award till realization is on higher side in view of the fact that interest regime changed in this country in late Nineteen. I consider that an interest of 10 per cent per annum on the awarded sum including interest upto the date of Award will be a reasonable interest. I, therefore allow 10 per cent interest on the awarded amount from the date of Award till realization.

The Arbitrator also dealt with counter claims and rejected all counter claims of the respondent holding that it was respondent due to whom the contract got prolonged. I find no reason to set aside the award on counter claims.

Subject to the modifications in respect of claims set aside by this Court or modified by this Court, the Award made by the Arbitrator is made Rule of the court. The objections are allowed to the extent observed above.

The petition stands disposed of accordingly.