ORDER
DR. M.K. Sharma, J.
1. The petitioner entered into a contract agreement with the respondent No.1 construction of 60 Janata Houses at Dilshad Garden, Delhi. The said contract agreement contained an arbitration clause being clause No. 25. Disputes arose between the parties in respect of the aforesaid contract and accordingly the said disputes were referred to arbitration by the Engineer Member of the respondent No.1, who was the appointing authority under the contract. The respondent No. 2 was appointed as the sole arbitrator to adjudicate upon the claims of the parties and the said arbitrator after
hearing the parties and receiving evidence on record, made and published his award on 10.4.1991. The said award was filed in this Court as against which objection were filed by the respondent, which were registered as I.A. No. 13100/1991. This order shall dispose of the aforesaid objections filed by the respondents as also the suit filed by the petitioner.
2. I have heard the petitioner who appears in person as also Mr. Abhilekh Verma, appearing for the respondents. Counsel appearing for the respondent/objector challenged the award passed by the arbitrator in respect of claims No. 2, 3, 4 & 8 and counter claim No. 3. The arbitrator appointed by the appointing authority was admittedly a Technical person. The petitioner who appeared in person submitted that since the arbitrator was an experienced and a technical hand the Court should not interfere with his findings. In support of his submission the petitioner relied upon the decision in M/s. Hind Builders Vs. Union of India, . In Madan Lal Vs. Union of India, 1990(1) Arbitration Law Reporter 159 and Jagdish Chander Vs. Hindustan Vegetable Oils Corporation, reported in 1990(1) Arbitration Law Reporter 159. There is no dispute with regard to the aforesaid proposition of law laid down. Although the arbitrator is a technical and experienced person there is no universal rule that such an arbitrator cannot further and/or commit error apparent on the face of the record while adjudicating upon and deciding the disputes between the parties. Thus it would be necessary to scrutinize the award passed by the arbitrator in the light of the submissions made by the counsel appearing for the parties and in order to find out whether the award passed is in accordance with law or not.
3. In the context of the submission of the learned counsel for the parties. I propose to answer the issues raised in the present proceedings claim wise seriatim.
4. Objection has been raised by the counsel for the respondent No.1 with regard to the award passed by the arbitrator in claim No. 2. Claim No. 2 relates to claim of Rs. 71,623/- towards refund of security deposit. The aforesaid amount was deposited by the petitioner in the shape of bank guarantee. The respondent refused to release the aforesaid amount of the ground that the petitioner has failed to duly fulfill the contract. According to respondent No.1 the contract work was not completed and there were many defects yet to be rectified and as such security deposit should not be released. The petitioner however, stated that they completed the work in March, 1984 and the possession of the entire flats was taken over by respondents No.1 and were already allotted to various allottees. It was stated that since the said allottees had also taken over possession of the said flats, it could not be said that there were defects in carrying out the aforesaid contract work. On the evidence on record arbitrator has also found that the respondent No.1 had neither taken any action to rescind the contract nor called upon the petitioner for rectification of the aforesaid defective work till date. The arbitrator, upon consideration of the evidence on record was satisfied that there was no justification for respond-
ent to withhold the security deposit and accordingly directed that the security deposit of the petitioner deposited with the respondent in the shape of bank guarantee be released. Counsel appearing for respondent No.1 however, submitted that the security deposit is payable only upon due fulfillment of the contract as laid down under clause 9. He further submitted that the decision of the superintending Engineer that there has not been due fulfillment of the contract is final and binding and is not arbitrable and is an Excepted matter and as such the arbitrator committed an error apparent on the face on the record to given an award on such excepted matter. In my considered opinion the aforesaid submission is fallacious. The arbitrator has found that the possession of the flats has already been handed over to the allottees about 5 years back and that there has been no communication issued by respondent No.1 for rescinding the contract or for
calling upon the petitioner to rectify the defective work, if any. Only because the Superintending Engineer has felt that the petitioner has not duly fulfillled the contract the payment of the security deposit could be kept withheld by the respondent No.1 in perpetuity without taking any action for rescission of the contract or for getting the defective work, if any, rectified. Thus I find no error in the award passed by the arbitrator in respect of this claim and the same stands upheld.
5. Objection was also filed by the respondent No.1 in respect of the award of the arbitrator for an amount of Rs. 2,150/- for the claim of the petitioner towards uncontemplated expenditure incurred for keeping the bank guarantee alive. Learned counsel appearing for respondent No.1 sought to assail the aforesaid award on the ground that it was the liability of the petitioner to keep the bank guarantee alive and therefore, he was not entitled to claim the aforesaid amount for keeping the bank guarantee alive and therefore he was not entitled to claim the aforesaid amount for keeping the bank guarantee alive. The arbitrator has awarded the aforesaid amount upholding the claim on the same reasoning on which the award was given for releasing the security deposit. I also do not find any error occurring in the findings and and conclusion of the arbitrator in respect of this claim. The same accordingly stands upheld.
6. Next objection of respondent No.1 is in respect of the award passed by the arbitrator awarding an amount of Rs. 2,64,688/- against the claim of Rs. 3,94,737/- of the petitioner on account of work done beyond the stipulated period due to prolongation of contract because of the alleged breaches caused by the department. The arbitrator considered the Statements and submissions of both the petitioner and respondent No.1. The arbitrator, on consideration of the aforesaid statements and submissions came to the finding and conclusion that from the evidence adduced and the arguments
advanced by the parties it was established that from time to time breaches were caused by the respondent in respect of supply of materials, drawings and decisions etc. Which were responsible for causing delay in the performance of the contract. He further held that the petitioner treated such breaches as partial and continued performance of the contract even beyond stipulated period of time and claimed for 20% increase in the agreement rates due to rise in the market prices and quantum of work executed thereafter. The arbitrator held that after going through the calculations submitted by the petitioner, an increase @ 20% on the agreement rates for work executed after stipulated date of completion deducting the amount of materials supplied by the department and also the payment already made under clause 10C of the agreement was found reasonable and therefore, the amount of the award against this claim was found justified working out the same to
Rs.2,64,688/-. For arriving at the aforesaid amount the calculation for the same is also set out in the award itself.
7. Counsel appearing for the respondent vehemently objected to the aforesaid award on the ground that under the provisions of clause 10 of the agreement the parties agreed that no extra claim would be entertained for prolongation of the contract even if such prolongation becomes necessary due to non-supply of the material by respondent No.1. In support of his submission the learned counsel relied upon an un-reported decision of this Court in M/s. M.L. Mahjan Vs. Delhi Development Authority, (Suit No. 2185/1987 & S. No. 2295-A/1987) disposed of on 20.7.1990. The learned
counsel also relied upon the decisions of the Supreme Court in Continental Construction Co. Ltd. Vs. State of Madhya Pradesh; and
Seth Thawardas Vs. Union of India, and also another decision of the Supreme Court in M/s. Sudershan Trading Co. Vs. The Government of Kerala and Another. AIR SC 890.
8. The petitioner who appears in person however, submitted that the petitioner has made the aforesaid claim on account of work done beyond stipulated period on account of breach committed by respondent No.1. He also submitted that in support of the aforesaid claim the petitioner had placed on record the documents indicating such expenses namely Ex. C-18, C-19 etc. He also stated that before the Arbitrator he had filed coast indices to show that there was rise of 26.34% in the cost of material and labour against which the petitioner claimed enhancement of only 20%. Since the arbitrator has given adjustment to the respondent of an amount of Rs. 82,889/- paid by it under clause 10-C and also deducted Rs. 5,67,189/- on account of the rise in prices of the material supplied by the respondent, the petitioner is entitled to the aforesaid amount claimed by him at the reasonable rate which claim was partially allowed by the arbitrator. In support of his contention the petitioner relied upon the decisions of M/s. Salwan Construction Company Vs. Union of India, reported in ILR (1977) II Delhi 748 wherein it was held that the arbitrator was competent to award
general increase in prices which is compensation for loss suffered owing to breach of contract.
He also relied upon the decisions of the Supreme Court in M/s. A.T. Brij Paul Singh & Brothers Vs. State of Gujarat, wherein it was held by the Supreme Court that in support of claim for loss of profit or damages the contractor was not required to lead any evidence and the arbitrator was entitled to grant at percentage basis. In the said case their lordships of the Supreme Court upheld 15% extra on the amount of the remaining work.
Reference was also made to the decision in Hyderabad Municipal Corporation Vs. M. Krishana Mudiliar and Another, .
Wherein it was held that the contractor can be granted extra payment at increased rate and in that case the Supreme Court upheld the award of 20% extra over and above the original rates agree.
He also relied upon a decisions of this Court in Sunder Lal Khatri Vs. Delhi Development Authority, reported in 1994 (2) ALR 479 wherein the High Court upheld the award of the arbitrator granting 30% rise. Reference was also made to the decision in Suit No. 2376/1993 titled M/S. G.D. Tewari Vs. Delhi Development Authority; wherein this Court upheld the rise granted by the arbitrator to the tune of 33%.
9. In order to resolve the dispute and to come to a conclusion in respect of the aforesaid award I looked into the provisions of clause 10 of the contract. The said clause provides that stores would be supplied by DDA. Relevant portion of the said clause may be extracted below:
“all materials so supplied to the contractor shall remain the absolute property of DDA and shall not be removed on any account from the site of the work … ….. …. provided that the contractor shall in no case be entitled to any compensation or damages on account of any delay in supply or on supply there of all or any such materials and stores. Provided further that the contractor shall be bound to execute the entire work if the material supplied by the DDA within the schedule time for completion of the work plus 50% thereof … … for the completion of the rest of the work the contractor shall be entitled to such extension of time as may be determined by the Engineer Incharge whose decision in this regard shall be final and binding.”
Relying on the aforesaid provision counsel for respondent No.1 submitted that in view of the aforesaid provisions even if there be any delay on the part of respondent No.1 for the supply of material to the petitioner he would not be entitled to any compensation. Counsel submitted that in view of the aforesaid provision the arbitrator committed manifest error of law in awarding the aforesaid amount to the petitioner in the present case. The aforesaid clause 10 came to be interpreted by this Court in case of M/s. M.L. Mahajan (supra). This Court after considering the implications of the
aforesaid clause 10 and in the light of the decision on similar issues by the Supreme Court came to the conclusion that the delay could have been mostly due to non-supply of material but because of clause 10 of the contract no extra claim was entertainable by the arbitrator. This Court held that from the award it is impossible to bifurcate the sum awarded as representing damages on account of delay of decisions etc. and delay on account of non-supply of cement and thus an objection raised on behalf of the DDA was upheld and sustained and the award of the arbitrator was set aside.
10. In M/s. Sudershan Trading Company case (supra) the Supreme Court had occasion to deal with a case whether a contractor had been awarded a sum of money contrary to the terms of the contract. While dealing with the said case the Supreme Court observed as follows:-
“Insofar as the Court held therein that an arbitrator deciding a dispute under the contract is bound by the contract, the Court is right. The Court cannot, however, substituted the decisions of the arbitrator as to what was meant by the contract, once that dispute is conceded to the arbitrator. Insofar and to the extent the aforesaid decision of the Kerala High Court decided to the contrary, the same is not the correct law.”
The aforesaid observations of the Court disapproved the arbitrator awarding money contrary to the terms of the contract and it observed that the arbitrator was bound by the contract. In Continental Construction Company cases (supra) the Supreme Court had occasion to consider a clause similar to clause 10 of the present case. In that case the clause which the Supreme Court considered was clause 3.3.15 which reads as under:-
“Time limit for unforeseen claims: Under no circumstances whatever shall the contractor be entitled to any compensation from Government on any account unless the contractor shall have submitted claim in writing to the Engineer-in-charge, within one month of the cause of such claim occurring.”
It was contended in that case that the claimant was not entitled to extra cost for material and labour. Dealing with the aforesaid the Supreme Court held thus:
“The District Judge found and in our opinion rightly, that the question regarding extra cost was a general question and not a specific legal question and the decision of the arbitrator was not final one. The arbitrator misconducted himself in allowing claim without deciding the objection of the State. In view of the specific clauses, the appellant was not legally entitled to claim for extra cost.”
In my considered opinion, the ratio laid down by the aforesaid Supreme Court decision in Continental Construction Company case (supra) and M/S. M.L. Mahajan case (supra) squarely applies to the facts and circumstances of the present case.
11. In terms of clause 10 of the contract no compensation is to be awarded although there is a delay in completion of the work on account of nonsupply of any material or stores. The arbitrator has awarded the aforesaid amount for breaches committed by the respondent in respect of materials, drawings and decisions which were responsible for causing delays in the performance of the contract. The aforesaid decision of the Supreme Court is binding on me and relying upon which the decision in M.L. Mahajan (supra) was delivered, with which I respectfully agree. Since the parties have agreed upon not to claim any compensation or damages on account of any delay in supply of all or any such materials and stores, the arbitrator as well as this Court has to give effect to the aforesaid intention of the parties in all matters and the arbitrator could not have given an award contrary to the aforesaid express provisions of the contract. The arbitrators had jurisdiction only to act in accordance with the contract which is also the principle enunciated in Continental Construction Company’s case (supra). In that view of the matter the award passed by the arbitrator in respect of this claim is set aside.
12. Claim No. 8 is with regard to award of the arbitrator with regard to grant of pre-suit interest. In view of various decisions of the Supreme Court and settled principles of law granting such a discretion to the arbitrators to allow interest to the petitioner for the pre-suit period, the objection of respondent No.1 in respect of the aforesaid award of the arbitrator granting pre-suit interest has no merit and the same accordingly, stands rejected. The award of the arbitrator in respect of this claim stands upheld.
13. With the aforesaid findings the only other issue that survives for consideration is with respect to the award of the arbitrator in counterclaim No.3. Counter-claim No. 3 relates to claim of respondent No.1 for an amount of Rs. 1,28,246/- on account of levy of compensation under clause 2 of the agreement. It was held by the arbitrator that since it was established that performance of the contract was delayed due to the respondents and the parties through their conduct had given a go-by and did not maintain time as essence of the contract the levy of compensation by respondent No.1 under the provisions of clause 2 of the agreement was not justified.
14. An objection has been filed as against the aforesaid award on the ground that the arbitrator was not competent to give his award in respect of the aforesaid claim since levy of compensation under the contract was an excepted matter inasmuch as clause (2) of the agreement stipulated that the work throughout the stipulated period of the contract would be proceeded with all due diligence and that the contractor would pay as compensation an amount equal to 1% or such other amount as the Superintending Engineer of Delhi Development Authority might decide on the amount of the estimated cost and the said decision of the Superintending Engineer in writing would be final. It is stated that since the Superintending Engineer in the instant case took a decision for levy of compensation on the petitioner because of the delay in carrying out the work, his decision was final and binding and the arbitrator could not have given an award on the aforesaid levy of compensation. Similar clause came to be interpreted by this Court in the case of Sudhir Brothers (supra) and also Vishwanath Sood Vs. Union of India and Another, 1989(1) SCC 647 at 658. In the said decision it was held that such a clauses contains a complete machinery for determination of compensation and that the decision of the Superintending Engineer is in the nature of considered decision and therefore, the question of awarding compensation under clause 2 is outside the purview of the Arbitration and such levy of compensation could not be called in question before the Arbitrator. The petitioner however, placed reliance on a decision of this Court in Bhartiya Construction Ltd. Vs. Delhi Development Authority, (1997) 2 Arb. L.R. 369 for the proposition that if the levy of the compensation by concerned Engineer is subsequent to reference, the arbitrator shall be competent to decide the same. The petitioner pointed out that here also the reference was earlier and determination of the compensation was later. In my considered opinion there can be no reference of an admitted excepted matter as the arbitrator has no jurisdiction to adjudicate such matter.
Merely because a reference is made Wrongly the arbitrator cannot assume jurisdiction which is not vested on him.
15. In the light of the aforesaid decision of this Court as also of the Supreme Court the issue with regard to justification for levying compensation under clause 2 is outside the purview of the arbitrator and the compensation awarded under clause 2 would not be capable of being called in question before the arbitrator. Reading clauses 2 and 25 it must be held that the amount of compensation chargeable under clause 2 is a matter which is to be adjudicated in accordance with that clause and the same could not have been referred to in clause 25 and the arbitrator was also not competent to give any award on the aforesaid claim. Thus the award passed by the arbitrator with regard to the aforesaid claim stands set aside.
16. Thus the award passed by the arbitrator, save and except for the award against claim No.4 and counter-claim No. 3 are made Rule of the Court. The award passed by the arbitrator in respect of claim No. 4 and counter-claim No. 3 stands set aside. The petitioner shall also be entitled to interest at 15% per annum from the date of payment till realisation on the part of award passed by the arbitrator and made a Rule of the Court. There shall be no order as to costs.
