Case: Associate Builders Vs. Delhi Development Authority

2. The appellant herein was awarded a certain construction work contract by the DDA vide a letter of award dated 14th May, 1992. DDA was building a colony consisting of 7,000 houses in Trilok Puri in the trans-Yamuna area. 168 Middle Income Group houses and 56 Lower Income Group houses, Grade-A Pocket- B (balance work) was awarded for the tendered amount of Rs.87,66,678/-. The contract was to be completed in 9 months. Admittedly, it was ultimately completed only in 34 months, the contractor completing 166 Middle Income Group houses and 36 Lower Income Group houses. The total value of work that was done amounted to Rs.62,84,845/-. As many as 15 claims were made by the contractor and the High Court of Delhi appointed one Shri K.D. Bali to arbitrate the present dispute.3. We are concerned here with claims 9, 10, 11 and 15, for these claims have been allowed by the Arbitrator and the DDAs objections have been dismissed by the learned Single Judge of the High Court of Delhi. The Division Bench in an appeal under Section 37 of the Arbitration Act, 1996 has stepped in to set aside the judgment of the Single Judge and negative these claims. We are also concerned with claims 12 and 13 which have been scaled down by the Division Bench.4. Claims 9, 10, 11 and 15 read asNo.9: Claimants claim Rs. 20,950/- on account of hire charges of centering shuttering due to delay in laying of conduiting.a) That the respondents had granted certain work of electrification but the said agency did not lay the conduit resulting in delay in removing the shuttering and causing hire charges. This fact was reported to the respondents vide claimants letter dated 30.10.92 followed by reminders and also found place in hindrance register.b) That this is the actual expenditure incurred and thus the claimant is entitled for its refund.c) That the detailed break-up of this claim has been appended separately.Claim No.10: Claimants claim Rs.33,450/- being the hire charges of shuttering due to stoppage of work in block no. 100 and 101.a) That the department had virtually stopped the work in block 100 & 101 on 20.7.93 and it continued up to 26.2.94. During this period no work was allowed to be executed in these two blocks resulting in blockade or centering and shuttering in the said two blocks.b) That by stoppage of work in these two blocks the claimants had suffered hire charges of shuttering due to respondents lapses and defaults.c) It is further stated that there was no justification for stoppage of work and the action was arbitrary and totally unjust.d) That the detail of this claim has been outlined and appended separately and the same shall from part of the statement of facts.Claim No. 11: Rs.2,00,000/- payable as damages on account of hire charges of tools & plants and scaffolding.a) That due to prolongation of the contract on account of the respondents the claimants had to maintain tools & plants, scaffolding etc, during the prolongation of the contract resulting in expenditure for the same.b) That the said articles remained at site beyond the stipulated period and the claimants suffered loss due to the said prolongation.Claim No. 15: Claimants claim damages Rs.6,25,979/- on account of establishment due to prolongation of the contract.a) That the claimants had contemplated maintenance of establishment during stipulated period of completion but the work was prolonged due to various delays and defaults on the part of the respondents.b) It is further stated that the claimants had to pay the establishment payment during prolongation and the said expenditure was unproductive and un contemplated.c) It is further stated that the claimants had maintained establishment beyond the stipulated completion due to the respondents breach and thus entitled for payment.d) That the respondents were also aware that the claimant has maintained regular establishment and thus, incurred expenditure and the claimants had also made several12 and 13 read asNo. 12: Claimants claim Rs.7,12,394/- as damages @20% for execution of the work.a) That the work was delayed because of the Respondents for the reasons as set out in the letter indicating hindrances encountered during execution of the work resulting delay in execution of the work for a period of 25 months.b) It is further stated that the claimants incurred unproductive after stipulated date of completion.c) It is further stated that during prolongation there had been steep rise in cost of material and labour.d) That the claim of 20% is also lent support from the cost index as issued by the competent authority and only applicable on the work which was executed during prolongation.e) That as per cost index it comes to more than 30% whereas the claimants had claimed 20 & being highly rational and just.f) That the claimants had appended the details of this claim separately based on cost index to show that the claimant had actually incurred this additional expenditure due to the respondents. Copy of the hindrances encountered during the execution of the work at the hands of the respondents has been enclosed.g) That the respondents had committed breach and thus liable for damages.h) It is further stated that the cost of material issued by the department has been deducted by assessing the cost.Claim No. 13: Claimants claim Rs.97,5000/- being the extra at 35% for the work executed in block 100 & 101 effective from 28.2.94 till actual completion.a) It is further stated that due to delayed execution of the work of these two blocks the claimants had to incur extra expenditure as the stoppage of work was utterly arbitrary.b) That the detailed break-up of this claim is appended with the statement of facts.Though the challenge to claims 2, 3 and 4 were given up before the Division Bench, they are also relevant and read asNo.2: Claimants claim Rs.1,62,387/- being the reimbursement of statutory increase in labour under clause 10-Ca) That the claimants submitted the tender on 6.2.92 and said offer was accepted on 14.5.92. The date of commencement was to be reckoned from 24.5.92. The date of stipulated completion was 9 months i.e. 23.2.93 but the work could be completed on 28.3.95.b) It is further stated that the claimants had submitted the bill for the value to the extent the work was executed till 4.10.94 for a sum of Rs. l,12,067/- as per the formula applicable.c) That the respondents however, did not make a single payment though, the work was executed after submission of the said bill.d) That however, a consolidated bill was furnished the respondents for a sum of Rs. l,62,287/-. Even the said payment has not been liquidated so far.e) That the claimants advised the statutory increase as and when enforced and the claimants also submitted the labour reports indicating the nature of the labour employed at site.f) That the respondents had also certified on the bill that the labour payment has been made as per the labour rate.g) That it is further stated that since it is a statutory increase, the same is payable by the respondents. Copy of the both the bills attached. And thus the claimants be awarded a sum of Rs. 1,62,287/- to the claimants.Claim No.3: Claimants claim Rs.l,49,862/- being the increase in cost of stone grit on account closure of the quarry by the order of the Supreme Court.a) That it is stated that the claimants had submitted the tender on the basis of the rate prevailing but due to the Honble Courts directions for closure of the stone quarry resulting in shortage of stone chips in the market and consequently rates increased.b) That the claimants informed the quantum of the increase on 22.6.92 and followed by reminders.c) That the respondents had agreed in principle to pay the increase which was prevailing in the market.d) That the detailed break-up of this claim has been appended separately.e) It is further stated that the claimant was not instrumental for increase in cost but due to the interference of the Honble Supreme Court. And the said increase has been taken into account till the stipulated completion dated 23.2.93.f) That the claimant is entitled for recovery of the said increase.Claim No. 4: Claimants claim Rs.12,922/- payable by virtue of clause 10-C of the agreement and up to the stipulated perioda) That there was steep rise in cost of steel and the claimant was exposed and the respondents were liable to pay the increase in steel.b) That the detailed break-up of this claim has been prepared and appended.The Arbitrator by a reasoned award dated 23rd May, 2005 held that the entire delay of 25 months in the execution of the project was thanks to the DDA, none of this delay being attributable to the contractor. The learned Arbitratorall the above four claims are inter linked being related to the overhead expenses and therefore dealt together.That the date of commencement of work was 24.5.92 and the period for completion was 9 months and therefore, the disputed date of completion was 23.2.93 but the work could be actually completed on 28.3.95.That there was delay of 25 months in completion of the work beyond the stipulated date of completion.That the Claimants urged that there had been various delays in the execution of work due to the lapses and defaults of the Respondents from the very commencement of work. The progress was held up time and again and the claimants therefore, as back as 17.2.93 advised the Respondents (C-9 page 167) that the Claimants are not interested to execute the work beyond the stipulated date of completion and therefore, their contract be finalized on the stipulated date of completion as the Claimants shall be exposed to incur heavy expenditure in overheads for maintaining establishment watch and ward and tools and plants and other shuttering material but the Respondents did not refute. The chief reasons for delay are highlighted below:-I) Delay in supply of structural and architectural drawings.II) That out of 9 Blocks 2 blocks are abnormally delayed as the site of the said 21 blocks was made available in piecemeal which stretched till 26.2.94 whereas the stipulated completion was 23.2.93.III) Delay in laying the conduit by the electrical agency resulting in delay in casting of RCC slab and plastering work besides development work. The said hindrance was removed lastly on 28.3.95.IV) Abnormal delay in making availability of the alignment sketch for electrical cables.V) Inordinate delay in supply of stipulated material such as cement, steel and pipes.VI) Delay in decision of finishing work in kitchen and bath rooms.VII) There was inordinate delay in making availability of colour scheme.VIII) That the Respondents also abnormally delayed the supply of door shutters which were to be supplied by the Respondents. The same were supplied as late as 8.11.94.IX) Inordinate delay in writing in the electrical conduits resulting in delay in completion of finishing work.X) Suspension of work by the Respondents for the period 17.1.94 to 25.2.94 and from 7.8.94 to 22.3.95 because of non-removal of hindrances.XI) Delayed payment due to non-sanction of Administrative Approval and Expenditure Sanction.That all the delays as set out had been duly recorded 733 to 739 and M.A.S. register pages from 747 to 768 as highlighted by the Claimants. The Claimants also relied upon certain documents of MAS Register supplied by the Respondents.That the Claimants further stated that the Claimants had also filed reasons for delay and hold up of the work various defaults of the Respondents in Annexure pages 740 to 746. The Claimants also highlighted the correspondence made by the Claimants with Respondents.That the Claimants further stated that the said hindrances were avoidable but the Respondents did not take timely steps.That the Claimants also referred the contents of the letter dated 10.7.95 (page 885) wherein it was observed that the Superintending Engineer appreciated the working of the Claimants and also observed that there was no fault of the contractor and they have successfully completed the work.The Claimants further stated that, they had incurred heavy expenditure on overheads of the lapses and default of the Respondents.As against this the Respondents stated that there was poor planning of the claimants and also contended that since the compensation has been levied under Clause 2 of the agreement therefore, claim of the claimants deserves to be rejected.That on record it is conclusively proved that the Respondents committed breach of contract as they failed to discharge their obligations in time resulting in prolongations did not deny the deployment of the tools and plants and machinery at site besides watch and ward during the prolongation.It is important to note that before the Division Bench, the learned counsel for the DDA conceded that this being a pure finding of fact, he would not be challenging it before the Division Bench.8. Of the total claim of Rs.37.28 lakhs, the learned Arbitrator awarded an amount of Rs.23.39 lakhs. Further, the learned Arbitrator has laboriously gone through all the evidence and answered each claim giving reasons for the same.9. By a judgment dated 3rd April, 2006, the learned Single Judge of the High Court of Delhi dismissed the objections of the DDA and upheld the award. In an appeal filed under Section 37 of the Arbitration Act, vide the impugned judgment dated 8th February, 2012, a Division Bench of the High Court of Delhi set aside the judgment of the Single Judge on claims 9, 10, 11 and 15, and negatived these claims in toto. Further, claims 12 and 13 were scaled down doing "rough and ready justice". Resultantly, the awarded amount of Rs.7,20,000/- was scaled down to Rs. 5,57,137.50/-.

Court's reasoning:
Thus, the award pertaining to Claim Nos. 9, 10, 11 and 15 is liable to be sent aside and it is so set aside. We need not therefore take corrective action on the apparent error i.e. the learned Arbitrator has worked out the claim on the original contract value of Rs. 87,66,678/-, of course by reducing it by 15%, but ignoring that final work executed was only in sum offor the reasons given by the Arbitrator, that 20% hike in the balance work done after the contract stipulated period i.e. benefit to be granted under this head for work done in sum of Rs.37,02,066/- and accepting the sum of Rs.7,20,000/- being the resultant figure, subtracting Rs.1,62,862.50, the figure arrived at isagain, the Division Bench has interfered wrongly with the arbitral award on several counts. It had no business to enter into a pure question of fact to set aside the Arbitrator for having applied a formula of 20 months instead of 25 months. Though this would inure in favour of the appellant, it is clear that the appellant did not file any cross objection on this score. Also, it is extremely curious that the Division Bench found that an adjustment would have to be made with claims awarded under claims 2, 3 and 4 which are entirely separate and independent claims and have nothing to do with claims 12 and 13. The formula then applied by the Division Bench was that it would itself do "rough and ready justice". We are at a complete loss to understand how this can be done by any court under the jurisdiction exercised under Section 34 of the Arbitration Act. As has been held above, the expression "justice" when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court. It cannot possibly include what the court thinks is unjust on the facts of a case for which it then seeks to substitute its view for the Arbitrators view and does what it considers to be "justice". With great respect to the Division Bench, the whole approach to setting aside arbitral awards is incorrect. The Division Bench has lost sight of the fact that it is not a first appellate court and cannot interfere with errors ofArbitrator has dealt with this clause in detail and has construed and applied the same correctly while dealing with claims 2, 3 and 4 and has obviously not applied the said clause to claims 9, 10, 11 and 15 as no occasion for applying the same arose. The award cannot be faulted on thisso far as clause 22 is concerned, the DDA did not raise any argument based on this clause before the learned Arbitrator. However, it must in fairness be stated that it was argued before the learned Single Judge. In para 15 of his judgment, the learned Judge sets the clause out and then follows a judgment of the High Court of Delhi in Kochhar Construction Works v. DDA & Anr., (1998) 2 Arb. LR 209. Apart from the fact that a learned Single Judge of the same court is bound by a previous judgment of a Single Judge, the conclusion of the learned Single Judge that if the appellant is at fault and the contract is prolonged for an inordinate period of time, it cannot be said that the respondents cannot be compensated for the same is correct. Besides, this point was not urged before the Division Bench and must be taken to be given up. Mr. Sharan cited Harsha Constructions v. Union of India & Ors., (2014) 9 SCC 246  to say that in respect of excepted matters, no arbitration is possible, and that this being a jurisdictional point, he should be allowed to raise it before us. Unfortunately for Mr. Sharan, the clause does not operate automatically. It only operates if an objection is taken stating that part of the site is not available for any reason. Nowhere has the DDA stated which part of the site is not available for any reason. Further, the learned Single Judges reason for rejecting an argument based on this clause also commends itself to us as the object of this clause is that no claim for extras should be granted only if there is an unavoidable delay. We have seen that the delay was entirely avoidable and caused solely by the DDAis thus no question of overlapping in different heads and the grievance of the petitioner isSingle Judge is clearly right. We have gone through all the 15 claims supplied to us and we find that none of these claims are in fact overlapping. They are all contained under separate heads. This argument, therefore, must also fail.