Case: Delhi Development Authority Vs. M/s R.S. Sharma &amp; Co., New Delhi

On 18.4.1990, an Agreement was entered into between the appellant-Delhi Development Authority (hereinafter referred to as "DDA") and the respondent - M/s R.S. Sharma & Co. (hereinafter referred to as "the Company") for carrying out the work for development of the land at Pappankalan (Dwarka) Project in South-West Delhi, Phase I according to the terms and conditions mentioned in the contract. On disputes having arisen during execution of the work, mainly with respect to the extra cartage, the same were referred to the Sole Arbitrator, Shri A.P. Paracer, Additional Director General (Retd.), C.P.W.D., for adjudication. During the pendency of the arbitration proceedings, the work was still being executed by the Company. 13 Claims (including additional claims) for a sum of Rs. 55.19 lacs approximately were raised by the Company before the Arbitrator. Claim Nos. 1 to 3 were on account of extra lead involved in procurement of stone aggregate specified in agreement Item No.2 i.e., supplying and stacking of graded stone aggregate of size range 90 mm to 40 mm at site. While additional Claim Nos. 1 to 3 pertain to extra lead involved in bringing stone specified in agreement Item Nos. 3 & 4 i.e., supplying and stacking of stone screenings/chipping at site 12.5 mm nominal size. Under Claim No.1, the respondent-Company claimed an extra amount of Rs.30/- per cubic meter over and above the rates mentioned in the Agreement Item No.2 on account of extra lead involved in the procurement of the stone aggregates from the quarries at Nooh in Haryana instead of quarries at Delhi. Under Claim No.3, the respondent-Company sought declaratory Award to the effect that for all quantities of aggregate to be brought from Nooh in future, they are entitled to additional lead @ Rs.30/- per cubic meter excluding the quantity already claimed under Claim No.2. Similarly, under Additional claim Nos. 1 to 3, the respondent-Company claimed the rate of Rs.30 per cubic meter for extra lead involved in bringing stone, specified in agreement item Nos. 3 & 4, from the quarries at Nooh (Haryana). On 29.7.1992, the Arbitrator made the Award in favour of respondent-Company. Suit No.2981 of 1992 was filed by the respondent-Company for making the Award a rule of the Court. Cross Objections were filed by DDA. On 25.9.1995, the learned single Judge of the Delhi High Court set aside the Award with respect to Claim Nos. 1 to 3 as well as Additional Claim Nos. 1 to 3 and made the remaining part of the Award a rule of the Court and awarded interest @ 12% p.a. from the date of the decree till the date of payment by DDA. Aggrieved by the judgment of the learned single Judge, the Company filed FAO (OS) No.104 of 1996 before the Division Bench for setting aside the order to the extent it deals with Claim Nos. 1-3 and for making the Award dated 27.9.1992 a rule of the Court. The Division Bench of the High Court of Delhi, vide order dated 10.8.2001, set aside the order of the learned single Judge to the extent by which the Award of the Arbitrator on Claim Nos. 1 to 3 and Additional Claim Nos. 1 to 3 were set aside and the Award made by the Arbitrator on aforesaid Claims were made a rule of the Court. The Respondent - Company was also awarded interest @ 12% p.a. from the date of decree till the date of payment on the entire amount as awarded by the Arbitrator. Aggrieved by the said judgment, the present appeal is filed by DDA before this Court.

Court's reasoning:
The perusal of the Award of the Arbitrator as well as the judgment of the Division Bench clearly shows that they did not advert to the above clause 3.16. It is relevant to point out that the extra cartage has been awarded by the Arbitrator without adverting to clause 3.16 of the Agreement, hence, the learned single Judge was wholly justified in partially setting aside the Award in respect of the claims with respect to the extra cartage. We also perused the pleadings and evidence placed on record pertaining to Claim Nos. 1-3 and additional Claim Nos. 1-3. As rightly observed by the learned single Judge, there was no material on record to substantiate the case of the claimant, viz., DDA had insisted upon the claimant for using the stone aggregates brought from Nooh in Haryana. In those circumstances and of the fact that the terms and conditions of the Agreement are binding on both the parties, in the absence of specific clause with regard to payment of extra cartage and in view of clause 3.16, the respondent-claimant cannot claim extra cartage @ Rs.30/- per cubic meter on the ground of extra lead involved in bringing the stone aggregates from Nooh in Haryana. The Division Bench like the Arbitrator proceeded on the sole basis that DDA had compelled the claimant-Company from bringing the stone aggregates from Nooh in Haryana and committed an error in affirming the erroneous conclusion arrived at by the Arbitrator insofar as the additional claims are concerned. As rightly pointed out by the learned Additional Solicitor General, the Division Bench proceeded on an erroneous premise that the appellant-DDA has nowhere stipulated where the stone was to be brought from. It is true that DDA had given certain specifications required to be conformed. Further, the cost of the work was irrespective of the source or lead from where the stone was brought. The award is completely silent on the relevant clause viz. clause 3.16 of the Agreement which makes it clear that the contractor is wholly responsible for all the extra leads. In fact, the Arbitrator has given no reason whatsoever so far as the rate claimed for the extra lead by the claimant and has verbatim accepted the claim without giving any justification for the same. We are satisfied that this is an error apparent on the face of the record as well as contrary to the terms of the Agreement.17) For the sake of brevity, we point out that in terms of clause 3.16 of the Contract, it is the responsibility of the Contractor to collect and stock the material and the rates quoted by him including all leads irrespective of the source from where the material was brought. However, if DDA had refused to accept the stone aggregate brought to site by the contractor from a quarry in Delhi and insisted upon bringing the material from Nooh quarry, Haryana, the Contractor will be entitled to the extra lead for bringing the said material from Nooh. As rightly pointed out by learned counsel for the appellant, in the present case, there is nothing on record to show that the Department had insisted upon bringing the stone aggregate only from Nooh. Hence, the contractor will not be entitled to the increased rates for extra lead. Without a specific request or additional clause, the Arbitrator in respect of Claim Nos. 1-3 and additional Claim Nos. 1-3 proceeded on the wrong assumption that the Department had insisted upon the use of stone aggregate to be brought from Nooh, hence, the learned single Judge is perfectly right in holding that there is an error apparent on the face of the Award and the Award is liable to be set aside. As stated earlier, the Arbitrator has ignored clause 3.16 of the contract and made a departure from the contract while granting relief in respect of Claim Nos. 1-3 and additional Claim Nos. 1-3 and the same, in our view, cannot be sustained.