OMP No.50/2002 Page 1 of 44 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Date of Decision: 08.10.2010 % O.M.P. 50/2002 DELHI JAL BOARD ..... Petitioner Through: Ms. Kanika Agnihotri, Advocate versus V.K. DEWAN & CO. ..... Respondent Through: Mr. Sandeep Sharma, Advocate CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may be allowed to see the judgment? : No 2. To be referred to Reporter or not? : Yes 3. Whether the judgment should be reported in the Digest? : Yes VIPIN SANGHI, J. (Oral) 1. The petitioner has preferred the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) to seek the setting aside of the award made by the learned arbitrator dated 01.11.2001 in relation to the claims preferred by the respondent/contractor arising out of the work order/supply order No.DJB/EE (C)/Dr-IX/99-2000/1877 dated 06.12.1999 at a total cost of Rs.1,93,26,399.75, for which Contract Agreement No.28 (1999-2000) was duly executed between the parties. OMP No.50/2002 Page 2 of 44 2. The works under the contract awarded to the respondent/contractor were not completed. According to the respondent/contractor, the petitioner department was in breach of the agreement and, consequently, the works could not be completed. The respondent/contractor, therefore, invoked the arbitration agreement and laid its claims before the arbitrator, which have partially been awarded by the learned arbitrator. 3. These objections have been preferred in respect of claim nos.4, 5, 6, 7, 8 and the award rejecting the counter claims preferred by the petitioner herein. The Award 4. A perusal of the award shows that the Executive Engineer (C) DR/IX of the Delhi Jal Board invited percentage rate tenders for the balance work of construction of 12.4 Mad sewage pumping station at Ghonda-I, Shahdara, Delhi on 11.10.1999. On the basic estimate of Rs.1,71,79,022/- based on CPWD DSR 1995, the respondent had quoted 25% above the estimate. 5. Claim no.4 raised by the contractor was on account of open pumping done by the respondent, which had not been paid. According to the respondent, there was rain on the night of 16.07.2000. The pump operators who were operating the pumps in peripheral drain running along with the work site stopped pumping the drain water and the entire pit/pond got filled due to the overflow of the drain. According to the respondent, on 09.12.2000, the Superintending OMP No.50/2002 Page 3 of 44 Engineer decided that the overflown water shall be pumped out and the same shall be paid as work contract item. The respondent claims that though the said water was pumped out, the payment was not made and even record entries were not made. 6. The defence of the petitioner herein was that under general condition no.1 and special condition no.3.2, the respondent/contractor was solely responsible for combating/disposal of water stagnated due to rain/surface run off during the execution of the work. The case of the petitioner herein was that the work had been completely stopped on 11.07.2000 and remained suspended till 22.09.2000 on account of the rainy season. 7. On the other hand, the stand of the respondent/claimant was that the general conditions were not attracted as the overflow of the peripheral drain was a post tender development, which was not existing at the time of tendering. According to the contractor, special condition no.3.2 was not applicable as the same covers only contractual risks which are of the contractors making. The accumulation of water, due to the failure of the respondent, could not be covered by any contract conditions. 8. According to the respondent/claimant, the department had not rebutted the said claim of the contractor and the defence was raised only during the arbitral proceedings. The claimant also sought to place reliance on a Canadian decision contained in Hudson’s book. OMP No.50/2002 Page 4 of 44 The tribunal, after noticing the aforesaid aspects, made the following award: “Taking all facts and circumstances into account, I am inclined to agree with the contentions of the Claimants and hold this claim to be justified. I, therefore, award an amount of Rs.2,01,832/- under this claim in favour of the Claimants.” 9. Claim no.5 was made by the respondent/contractor for Rs.99,832/-. This claim was made under clause 10CC. The tribunal records that the said claim had been accepted by the respondent. I may note that there is a typographical error in the award inasmuch, as, instead of recording that the claim had been accepted by the respondent, it is recorded that the claim has been accepted by the claimant. It is, therefore, clear that the award made on claim no.5 was based on an admission of the said claim by the petitioner herein. 10. Claim no.6 was made for Rs.5 lacs for refund of security deposit made by the respondent/contractor. A sum of Rs.1 lac had been tendered as earnest money and a further sum of Rs.4 lacs had been deducted from the contractor’s bills. The contractor had claimed that the contract work was suspended w.e.f. 01.12.2000 and thereafter abrogated for various reasons, due to difficulties experienced during the execution of the works. These were the closing of the only approach road to the site of work - a narrow overcrowded street closed due to laying of sewer line; shortage of supply of cement by Jal Board; flooding of the area of sewage pumping station; site being located in a big pond; stoppage of pumping of sewage and rain water caused by OMP No.50/2002 Page 5 of 44 erratic electric supply; inadequate prechecking of the parts of the substructure to be completed and, delay in payments for work done. 11. According to the respondent, on account of payment not being made and the non-availability of cement and reinforcement steel, the work came to a stop on 01.12.2000 and the contract period expired on 05.12.2000. 12. The claimant further stated that they were left with no other option but to abandon the work and seek redressal through arbitration. The learned arbitrator allowed the claim by observing as follows:- “I have carefully examined the contentions of both the parties. While the stand of the Respondents is undoubtedly correct in normal circumstances, the case of the Claimants lies only if the work was delayed due to circumstances beyond their control and due to the defaults and latches on the part of the Respondents. After examining the contentions of both the parties in their pleadings, documents, arguments, I hold that Claimants could not carry on and complete the work due to circumstances for which they were not responsible. I, therefore, hold that the Claimants could not be held guilty of breach of contract for stopping the work before its completion. As a consequence I hold that refund of security deposit of Rs.5,00,000 /- including Rs.1,00,000/- of earnest money is justified. I, therefore, award an amount of Rs.5,00,000/- in favour of the Claimants under this claim.” 13. Claim No.7 was made by the claimant for Rs.12,78,504.66. This claim had been made towards anticipated profits on the left out/unexecuted portion of the work at the rate of 10% of the balance work. The basis for this claim made by the claimant was that the OMP No.50/2002 Page 6 of 44 claimant was not able to complete the work due to the defaults of the petitioner department and circumstances beyond their control, without any default on their own part. As per the award, the amount of claim covers infructuous expenditure also incurred for the execution of the entire work including mobilization of tools, plant and machinery and construction of stores, site office, labour camp, steel yard and cement stores etc. and idle maintenance of site staff and site telephone. The balance estimate of work was worked out at Rs.1,02,28,037.30. Since the award of the tender was 25% above the estimate, the said figure was revised to Rs.1,27,85,046.60. 14. The stand of the petitioner department was that the said claim is not maintainable as the contractor had abandoned the site and stopped the work without any rhyme or reason and so he was not entitled to any amount. While allowing the aforesaid claim, the arbitrator observed as follows: “After careful consideration and examination of the contentions of both the parties I am inclined to agree with the contentions of the Claimants to the effect that they could not compete the work due to Respondents’ defaults and circumstances beyond their control, without any defaults on their side. In view of all the facts and circumstances of the case I do hold that there was breach of contract on the side of the Respondents in the matter of providing approach to the site, adequate supply of cement for the execution of work, timely instructions and checking of the work of sub-structure, non-payment for the work of pumping out of overflown water, delay in payments. In addition there was flooding of the big pond where the sewage pump was located, due to rains and non-pumping of electric pumps due to erratic electric supply which was beyond the control of the Claimants. The stipulated period OMP No.50/2002 Page 7 of 44 of contract came to an end on account of the difficulties mentioned above and the Claimants were forced to abandon the work due to the circumstances beyond their control. In the totality of the circumstances I do hold that the claimants are justified to claim loss of anticipated profits. I do not however agree that the quantification given by the Claimants.” 15. Though the claimant had claimed 10% profit on the aforesaid amount, the learned arbitrator awarded the said claim @ 7.5% and not 10%. Consequently, the learned arbitrator awarded a sum of Rs.8,71,708/- in favour of the respondent/claimant for loss of anticipated profits of unexecuted part of the work. 16. Claim no.8 was made by the respondent/claimant towards interest @ 18% p.a. The learned arbitrator awarded interest @ 18% p.a. on the total amount of award under claim nos.3 to 6 w.e.f. 14.05.2001 and on claim no.7 from the date of the award till payment. 17. The learned arbitrator dealt with the counter claim no.1 made by the petitioner and rejected the same, which was made towards anticipated escalation for the ancillary work amounting to Rs.45,994/- by observing as follows: “The Claimants state that there is not an iota of evidence on damages suffered. They added that this tender is three years earlier and the work should have been completed much earlier. After considering the facts of the counter claim and the contentions of the Claimants this counter claim is not admissible. My award against this counter claim is therefore Nil.” OMP No.50/2002 Page 8 of 44 18. Counter claim no.2 was made towards anticipatory escalation of ancillary work for Rs.86,264/-. The arbitrator rejected the same by observing as follows: “The Claimants stated that stone masonary wall could be completed as only shifting was involved. The Claimants added that the work could not be done due to local pressures. After considering the facts and weighing the contentions of both the parties I do not hold this claim to be justified. My award against this counter claim is therefore Nil”. 19. Counter claim no.3 was made towards anticipatory pumping of water flooded in pond due to stoppage/abandoning of work by the contractor to be done at the time of starting of execution of this balance work by the new agency amounting to Rs.2,01,832/- was rejected by observing as follows: “The Claimants stated that this is not rainy water or water, it is sub-soil water for which the Claimants are not responsible. After considering the facts and weighing the contentions of both the parties this claim is not held admissible. My award against this counter-claim is therefore Nil.” 20. Counter claim no.4 made towards anticipatory additional costs due to increase of tendered rate for the balance work by the new agency amounting to Rs.12,78,505/- was rejected by observing as follows: “After considering the facts and the contentions of the Claimants mentioned earlier I do not hold this claim to be OMP No.50/2002 Page 9 of 44 admissible. My award against this counter-claim is therefore Nil.” 21. Counter claim no.5 was made towards additional consultancy charges of consultant TCE Limited amounting to Rs.22,374/-. This was also rejected by observing that both parties shall bear their own costs. Submissions of the Parties 22. The submission of learned counsel for the petitioner, Ms. Agnihotri is that the impugned award is patently illegal. She submits that the learned arbitrator has made the award contrary to the contractual terms and by completely disregarding the same. In relation to the award made under claim no.4, learned counsel for the petitioner has placed reliance on the following contractual clauses: General Conditions “1. The contractor before tendering should visit the site and acquaint himself with the nature of the work, the accessibility of site and all other details connected with the work. The contract document consisting of detailed plans, specifications, schedule of various class of work to be done, can be seen and any other information required in this connection can be had from the office of EE (C) DR- … DWS & SDU, Municipal Corporation of Delhi, Varunalaya PH-I, Jhandewalan, New Delhi-110 005”. “21. The contractor before tendering must satisfy himself as to the natural features of the ground, the quantity of work and material necessary for the entire completion of the contract and the means of access to the work or other accommodation as may be required and no claim on the ground of ignorance of any such OMP No.50/2002 Page 10 of 44 detail shall be entertained at any time”. (emphasis supplied). “41. In the event of any damage occurring of any work included in the contract through settlement of ground, slips, flooding, or any other cause whatever due to negligence on the part of the contractor or not, the contractor will be solely responsible and must re- construct, repair and make good any such damaged work at his own expenses”. “43. The cement will be supplied by the department at the rate of Rs.137/- each bag for PPC/OPC inclusive of the cost of bags. The department will be free to supply cement from its own stores or from any store of other department in Delhi or from the railway sidings and the contractor shall make his own arrangement for carting the same to the site of work and store the same properly. No payment on this account shall be made. The recovery of cement shall be made from the running bills of the contractor at the above specified rate. The tentative quantity of cement is 927.40 MT”. Special Conditions “3.1 The Contractor shall keep the works well drained until the Engineer-in-charge certifies that the whole of the works is substantially complete and shall ensure all work is carried out under dry conditions. Excavated areas shall be kept well drained and free from standing water”. 3.2 The Contractor shall construct, operate and maintain all temporary dams, water courses and other works of all kinds including pumping and well-point dewatering that may be necessary to exclude water from the works while they are in progress and till they are handed over to the DWS & SD Undertaking. This refers to surface water that may enter into the excavated construction work. No separate payment will be made for such dewatering works/measures. Percentage rates quoted by Tenderer will be deemed to have covered expenses for such dewatering works/measures. Such temporary works shall not be removed without the approval of the Engineer-in- charge. It shall be further noted that disposal of surface/sub-soil water away from the site into some existing drain/nallah shall be done by Contractor at his own cost. No claim in this regard shall be entertained. OMP No.50/2002 Page 11 of 44 3.3 Notwithstanding any approval by the Engineer- in-charge of the Contractor’s arrangements for the exclusion of water, the Contractor shall be responsible for the sufficiency thereof and for keeping the works safe at all times, particularly during any floods and for making good at his own expense any damage to the works including any that may be attributable to floods. Any loss of production or additional costs of any kind that my result from floods shall be at the Contractor’s own risk. 4.1 Contractor shall have to arrange electric connection from DESU. EE, DWS & SD Undertaking shall only sign the application for getting electricity connection in his name. Contactor shall bear all the charges to be deposited with DESU for installation of electric connection including energy consumption and other charges as demanded by DESU from time to time, failing which the DWS & SDU shall deduct the amount so demanded by DESU, from the running bills of the contractor. Nothing shall be paid by DWS & SD Undertaking on this account. 4.3 If for any reason of feasibility or whatsoever, DESU is not in a position to sanction the electric connection, the contractor shall make his own arrangements. No claim shall be entertained either on account of delay in sanction of the connection by DESU or refusal of connection by DESU.” “15.0. Sub Soil Water 15.1 Where sub-soil water is met during execution, in to electric pump sets of adequate capacity the contractor shall also arrange at his cost Diesel Generator Sets/Diesel pumps as a sufficient standby arrangement in good running condition. Pumping of subsoil water shall be continued upto the safe stage of work as directed by Engineer-in-charge so as to avoid floatation of the structure and working under dry conditions. 15.2 Payment of the items of work carried out under subsoil water shall be made as per the actual execution only for the excavation concreting, RCC and brick masonry as per the items in the schedule of quantities. Level of ground water table shall be jointly recorded and the level so ascertained shall be taken for execution of works during that particular period. Tenderer shall note that nothing extra on account of execution of any other OMP No.50/2002 Page 12 of 44 item under subsoilwater conditions or for dewatering required for safety of structure against floatation shall be payable. The Contractor shall carry out the works under dry conditions.” 23. By reference to the aforesaid clauses, it is argued that it was the sole obligation of the contractor to acquaint himself with the conditions prevailing at the work site before bidding in the tender process, and therefore, the contractor could not subsequently raise grievances founded upon his ignorance or difficulties faced at the work site due to the peculiar geographical conditions of the work site. 24. It is, therefore, submitted by learned counsel for the petitioner that in the face of the aforesaid specific clauses of the contract agreement, the award of the learned arbitrator on claim no.4 cannot be sustained. 25. In response, Mr. Sharma, learned counsel for the respondent submits that claim no.4 had been made only for an amount of Rs.2,01,832/-. This was the expenditure incurred by the contractor for pumping out the flood water which had entered into the work site on account of the overflow of the peripheral drain due to rain on the night of 16.07.2000. Mr. Sharma submits that from the peripheral drain, the water had to be pumped into the storm water drain. However, the pumping stations which were being operated by the petitioners were non-functional, inter alia, due to erratic supply of electricity. Due to the said pumps not being operated, in the peripheral drain there was OMP No.50/2002 Page 13 of 44 built up of water and this resulted in back flow of water into the contractors work site. 26. He submits that this situation was not contemplated under the contract agreement and, therefore, it was agreed by the Superintending Engineer on 09.12.2000 that the water which had come into the work site may be pumped out by the contractor and that the payment for the same would be made to the contractor. In this respect, he refers to the pleadings made in the statement of claim and also to the correspondences addressed by the claimant/contractor to the respondent. In particular, reference is made to letters dated 10.08.2000 and 15.09.2000 sent by the claimant to the department. 27. Mr. Sharma further submits that the contractor had been made payment for dewatering of the water which had overflown and this is reflected in the first running bill. He submits that there was no justification for making payment of the said item, if the respondent did nto consider the claim of the petitioner legitimate. It is not explained by the petitioner as to why the said payment had been made. 28. In her rejoinder, learned counsel for the petitioner has pointed out that, firstly, there was no obligation under the contract undertaken by the petitioner to maintain the peripheral drain. It was not the obligation of the petitioner to ensure that the water level in the said drain did not rise, such that it does not overflow back into the work site. Secondly, she submits that a perusal of the contract document OMP No.50/2002 Page 14 of 44 shows that the maintenance of the peripheral drain itself was also within the scope of work allotted to the respondent/contractor. 29. In this respect, she relies on page 46 of the tender document, wherein the “background and work involved in the scheme” has been set out. She submits that earlier the work of construction of 12.4 MGD SPS was awarded to U.P. Jal Nigam at a total cost of Rs.186.81 lacs in the year 1996. At that time, the site was unapproachable. For making the said site approachable, the U.P. Jal Nigam had decided to construct a peripheral drain along the periphery of the pond and a storm water sump was installed to take care of discharge coming into the pond. The work of construction of peripheral drain, RCC sump, coffer dam and disilting of pond etc. were not envisaged in the original estimate. To provide for the said ancillary works and extra items, an estimate of Rs.60 lacs was fixed. 30. The U.P. Jal Nigam completed the ancillary work upto 26.12.1997 and thereafter the main work under the contract, i.e. construction of 12.4 MGD SPS was started. It appears that thereafter some disputes arose between the petitioner and the U.P. Jal Nigam. Consequently, the work in question was awarded at the risk and cost of U.P. Jal Nigam to complete the balance work. The revised estimate had been worked out to Rs.2,78,87,064/-, out of which the work of Rs.1,07,08,041/- had already been completed by U.P. Jal Nigam. The balance work of Rs.1,71,79,022/- was left to be completed. The reason for the revision of estimate was primarily due to ancillary work of OMP No.50/2002 Page 15 of 44 peripheral drain, sump, desilting of pond, revision of structural design/drawings as per soil bearing capacity. The work involved in the contract between the parties herein was to complete the balance work of construction of wet sump, dry sump annexed DG set room etc. 31. On this basis, it is argued that the maintenance of the peripheral drain was also an aspect covered under the scope of the contract and the contractor was obliged to do the same. She further submits that even in its statement of claim, the contractor admits that the work involved construction of a “sewage pumping station about 8.50 metres below ground and about 6.00 metres below water table, sitted in a big pond, which needed round the clock pumping and, at the time of tender, a peripherial U-Type RCC open drain was running around the site of work which was the only out-let to drainout pumped water. This existing drain was also taking the discharge of sewage and rain water of the adjoining colony. At the down stream end of the drain, a sump was existing along with a temporary pump room fitted with non-clog electric pumps with a stand-by generating set and was manned by the conservancy wing