Door Sanchar Cooperative Group Housing … vs Shri R.K. Bararia on 10 August 2006

Delhi High Court
Door Sanchar Cooperative Group Housing … vs Shri R.K. Bararia on 10 August, 2006
Equivalent citations: 2006(3)ARBLR491(DELHI)
Author: Pradeep Nandrajog
Bench: Pradeep Nandrajog
JUDGMENT

Pradeep Nandrajog, J.

1. Door Sanchar Cooperative Group Housing Society Ltd. awarded work of construction of 120 dwelling units to the respondent. In respect of the civil works parties entered into an agreement dated 8.4.1987. In respect of certain items of work (civil) modifications/substitutions were effected vide agreement dated 5.5.1990. A supplementary agreement was executed in May 1991 wherein on account of material escalation objector agreed to pay a sum of Rs. 6 lacs. On 14.6.1991 further agreement pertaining to rates for earth filling work was entered into. It was followed by another agreement dated 1.8.1992 pertaining to certain extra items of works (civil) which were awarded. Vide a separate agreement dated 27.9.1989, sanitary and water supply works were awarded. This agreement was modified by another agreement dated 25.1.1993.

2. Pertaining to electrical works agreement dated 24.9.1988 was executed.

3. The period of completion of the civil works was 30 months commencing from the date of the first agreement i.e. 8.4.1987. However, works actually commenced on 1.1.1988.

4. Contract awarded works were substantially executed. There were various disputes. Original agreement dated 8.4.1987 provided for settlement of disputes by arbitration (Clause 24). In suit No. 2825A/1994, Justice G.C. Jain (Retd.) was appointed as an arbitrator vide order dated 27.9.1995. During proceedings conducted by Justice G.C. Jain (Retd.), Shri J.D. Goel, a retired chief engineer was appointed as local commissioner vide order dated 14.5.1996. Mandate of the local commissioner was to take measurements of the works executed by the contractor. Vide another order dated 27.7.1996, local commissioner was empowered to examine the quality and workmanship of the work executed.

5. Reports were filed by the learned local commissioner. Impugned awarded has proceeded to discuss the rival claims in context of the reports of the local commissioner. To iron out the creases, learned arbitrator has relied upon a report dated 25.5.1994 (Ex.RW-1/3) furnished by the architect engaged by the society.

6. On the unfortunate demise of Justice G.C. Jain (Retd.), Justice J.B.Goel (Retd.) was appointed as the substitute arbitrator.

7. Parties led evidence by way of affidavit. Contractor examined one Shri A.K.Goel as CW-2. Society, besides filing affidavit by way of evidence of its President, examined 3 witnesses, Shri Ranjit Singh, its architect as RW-1, Shri V.R. Dhyani as RW-2 and Shri Mohd. Ishrat Khan as RW-4. For record, testimony of the president of the society was treated as the testimony of the third witness of the society. Shri S.P. Singh has been referred to as RW-3.

8. Contractor had 4 claims as under:

I. Balance due for civil works …. Rs. 7,99,560/-
II. For extra items …. Rs. 12,12,190/-
III. Balance due for electrical works …. Rs. 5,04,715/-
IV. Balance due for sanitary works …. Rs. 4,88,043/-
9. Society had 7 counter claims.

10. Each party claimed pre suit, pendente lite and future interest @18% per annum.

11. I would be referring to only such parts of the award qua which objections have been raised by the society for the reason, being a dispute relating to work’s contract involving measurement of civil works, electrical works and sanitary works as also unfinished and defective works, reference to each and every head of dispute would result in a prolix decision. Needless to state, anything which is prolix tends to be obscure vis-a-vis the points in issue.

12. Since an objection has been raised to the sum awarded under claim No. 1 for civil works, a brief resume of the claim pertaining to civil works needs to be noted.

13. Alleging that the contract rate for civil work was based on covered area basis i.e. Rs. 78/- per sq.foot for stilted floor and Rs. 128/- per sq. foot for slab area other than stilted area, contractor stated that the society was not measuring the actual areas in a correct manner.

14. Eschewing other evidence, necessary for the purposes of my decision, it would be relevant to note that the learned arbitrator noted that Clause 7 of the contract provided that running payments would be made every month on monthly bills being submitted by the contractor and as certified by the architect of the society and admittedly, 19 running bills were submitted.

15. Vide letter dated 9.2.1993 the architect certified the 19th running bill and recommended payment of Rs. 6,90,815/- which was paid by the society.

16. The 19th running bill certified for payment, valued the work done up to the 19th running bill in sum of Rs. 1,77,65,587/-.

17. Contractor claimed to have submitted the 20th bill on 12.4.1994 for a gross value of Rs. 1,89,70,700/-. This bill was not certified for payment by the architect.

18. Claimant admitted recoveries effected towards cement and steel supplied by the society and income tax deductions made from the bills totalling Rs. 1,38,00,000/-.

19. Contractor had a claim of Rs. 7,99,560/- for work done post the date when the 19th running bill was submitted.

20. There was a dispute whether the 20th running bill was submitted or not. But that would be an irrelevant consideration for the reason, learned arbitrator was obliged to decided as to what works were completed by the contractor and what amount had to be paid for the said works. Needless to state, amount due and payable would have to be determined after deducting the amounts paid under the earlier running bills.

21. Learned arbitrator noted that while certifying the 19th running bills, learned arbitrator certified the bill in sum of Rs. 1,88,61,140/- which included a sum of Rs. 6 lacs payable towards material escalation in terms of the agreement entered into in May 1991. Thereafter, deduction were made pertaining to the cost of cement and steel supplied by the society. Further deductions in sum of Rs. 2 lacs for defective work and Rs. 3 lacs on account of non entitlement towards escalation were deducted.

22. Further, while certifying for payment, Rs. 2 lacs towards security deposit which had to be retained were deducted.

23. Learned arbitrator has awarded the contractor a sum of Rs. 7,23,870/- under claim No. 1. Reasons as can be culled from the award are that the sum of Rs. 2 lacs, Rs. 3 lacs and Rs. 2 lacs on account of defective works, retention towards escalation and deduction towards security deposit respectively, totalling Rs. 7 lacs, have been held to be payable. Additionally, for an item of work relating to cement plaster noting that there was a calculation mistake vis- a-vis the area, differential in sum of Rs. 23,873.78 has been determined. The figure has been rounded of to Rs. 23,870/-. Thus Rs. 7 lacs + Rs. 23,870/- have been awarded.

24. Learned arbitrator has disallowed a number of sub-claims constituting claim No. 1.

25. Learned Counsel for the objector conceded that the sum of Rs. 23,870/- on account of cement plaster cannot be faulted with as indeed there existed calculation mistakes in the 19th running bill as certified for payment. Learned Counsel urged that admittedly all works were not completed and certain defective works were noted and therefore urged that award of Rs. 2 lacs for the defective works which were noted and on account thereof Rs. 2 lacs were deducted from the 19th running bill could not be awarded and further Rs. 3 lacs could not be paid towards material escalation for the reason agreement entered into in May 1991 clearly stipulated that out of the agreed material escalation in sum of Rs. 6 lacs, Rs. 3 lacs were payable immediately and remaining Rs. 3 lacs was payable when works were completed. Counsel urged that since for non-completion of works certain counter claims have been allowed, material escalation in sum of Rs. 3 lacs was not payable.

26. The objection requires independent consideration pertaining to the award relating to the sum of Rs. 2 lacs withheld under the 19th running bill for defective works and Rs. 3 lacs withheld towards material escalation.

27. Society had a counter claim being counter claim No. 2 for works not executed, which were summarized in Annexure B. Value of the counter claim was Rs. 6,58,911.88. Counter claim No. 4 was on account of recoveries for defective work.

28. A perusal of para 21.1 to 24.6 of the award shows that counter claim No. 2 was considered in sub paras. Certain items of work alleged by the society as not executed have been held to be executed. Certain items of work were held proved as not having been executed.

29. Counter claim No. 2 had 10 sub heads. 4 have been held as not established. 6 sub heads have been held as established in sum of Rs. 5,364/-, Rs. 36,293/-, Rs. 2,15,325/-, Rs. 1,200/-, Rs. 18,000/- and Rs. 5,579/-. 30. Counter claim No. 3 of the society was on account of the alleged change in specifications of certain items. This counter claim had 6 sub heads. 4 have been disallowed. 2 have been allowed in sum of Rs. 70,000/- and Rs. 1.5 lacs.

31. Counter claim No. 4 was on account of defective works. The same has been disallowed.

32. It is apparent that the learned arbitrator has analyzed the claim of the contractor treating as if there was no defective work. Alleged defective works have been separately listed and discussed under counter claim. Similarly, in respect of works not done, amount has been quantified under counter claim. I find nothing wrong in the approach of the learned arbitrator. Learned arbitrator while quantifying the claim of the contractor could have effected adjustments as an integral part of identification of the amount payable, but that would have confused the issue. Learned arbitrator has separately worked out the recoveries to be made. Since recoveries to be made have been quantified in the counter claim I find no merits in the challenge to the award pertaining to sum of Rs. 2 lacs awarded.

33. Turning to the objection pertaining to Rs. 3 lacs awarded as escalation under claim No. 1, it is true that the agreement of May 1991 states that the said sum would be paid if work is completed, but the issue is what do the parties mean by the work being completed.

34. Perusal of counter claim No. 2 which related to the work not being completed shows that the total value of the non completed work is Rs. 2,81,761/-. Total value of the work done approximate Rs. 1.9 crores. It would be too inequitus to deny escalation of Rs. 3 lacs payable on completion of the works when admittedly, non executed works were only in sum of Rs. 2,81,761/-.

35. Percentage-wise unexecuted works are just about 1.2% of the contract value.

36. Objection to the award pertaining to the sum awarded under claim No. 1 is accordingly rejected.

37. The second objection pertains to the sum awarded under claim No. 3. Sum claimed was Rs. 4,88,043/-. Sum awarded is Rs. 5,51,391/-.

38. A two fold objection has been raised to the award pertaining to claim No. 4. The first objection is that the sum awarded cannot exceed the sum claimed. The second objection is that deficiencies were noted in the works pertaining to claim No. 4 and therefore the sum awarded suffers from a manifest non application of mind.

39. Taking the second objection first, perusal of the award shows that learned arbitrator has separately considered the counter claim which included deficiencies and defects pertaining to sanitary work under counter claim No. 4. As noted above, claim No. 4 was on account of sanitary works. As noted above, it was permissible for the arbitrator to have worked out recoveries separately on account of defective works and indeed this was counter claim No. 4 of the society. Thus, I find no error committed by the learned arbitrator in identifying the amounts under claim No. 4 by looking at the work done and quantifying the sum payable. Thereafter, looking at the deficiencies, independently, under counter claim No. 4 and part of counter claim No. 1 amount has been held payable to the society.

40. Though neither party pointed out, I note that under sub heads 9 and 10 of counter claim No. 2 dispute related to the deficiencies/non completion of items of work relating to sanitary works. Both these sub heads have been established as not proved. The second limb of the objection has thus no merits.

41. In respect of first objection that the sum awarded is more than the sum claimed, what has happened is that while working out the sum payable learned arbitrator has noted that the amount paid for sanitary work was Rs. 21,09,778/-. In respect of the work done learned arbitrator has relied upon the certification by the architect of the society to the effect that for work done as per contract agreement Rs. 26,61,169/- was payable. Thus, balance sum due comes to Rs. 5,51,391/-.

42. But the claim was for Rs. 4,88,043/-.

43. It is trite that an arbitrator cannot award a sum more than what is claimed.

44. I accordingly uphold objection to the award pertaining to claim No. 4. In that I hold that since the claim was restricted to Rs. 4,88,043/- , sum awarded cannot be in excess. I modify the award by holding that on account of claim No. 4, sum payable to the contractor is not Rs. 5,51,391/- but is Rs. 4,88,043/-.

45. Objections to the award pertaining to the counter claims may now be dealt with.

46. The first objection pertains to sub head 10 of counter claim No. 2 wherein learned arbitrator had rejected the counter claim. The item of work in dispute was CP fittings in kitchens and toilets.

47. Reason why learned arbitrator has rejected the claim is a variance between the pleading and proof.

48. Raising a counter claim in sum of Rs. 1.5 lacs, society pleaded that the CP fittings were not of the approved make. Further, based on the report of the architect it was sought to be urged that CP fittings were not provided in 25% flats. Learned arbitrator has opined as under:

No evidence has been led by the respondent to prove the make or quality of C.P. fittings providing and how these do not conform to the agreed quantity. The value of sub-standard quality of the item, if it is so, has not been proved. New plea that C.P. fittings in 25% of the flats have not been provided in view of plea taken initially shows that this item of fitting was provided and available earlier but disappeared later on. The contractor will not be responsible for missing fittings which could be due to theft or otherwise.
49. Submission of learned Counsel for the objector that the learned arbitrator ought to have accepted the report of the architect for the reason, while allowing the claims of the contractor, learned arbitrator, in para 13.12 has gone by the report dated 25.5.1994 Ex.RW-1/3 submitted by the architect.

50. The objection cannot be sustained for the reason learned arbitrator has correctly held that there cannot be variance between pleadings and proof. Case of the society was that CP fittings provided were not of the approved make. There was no plea that CP fittings provided were not of the approved make.

51. Learned arbitrator rightly declined to permit the society to make out a new case by proving something which was not pleaded.

52. Award pertaining to sub head 3 of counter claim No. 3 has been questioned.

53. Sub head 3 of counter claim No. 3 related to doors to be provided and affixed in the flats by the contractor as part of completion of civil works. Counter claim was in sum of Rs. 3,93,318.40. Counter claim has been disallowed.

54. Admitted case of the parties was that commercial veneered doors were to be provided and affixed. Counter claim of the society was based on the fact that item 23 under the head schedule of quantities in the contract it was stipulated that contractor had to supply and affix doors having both sides teak ply (non decorative type).

55. Case of the contractor was that item 23 and 28 under the caption schedule of quantities, it was provided as under:

23. Providing and fixing flush door shutters 40 mm thick non decorative type, core of board construction with frame of 1st class hard wood and well matched commercial ply veneering with vertical grains or cross bands and face veneers on both faces of shutters, providing slots, for letters where required, MS butt hinges with screws including painting/polishing of desired shade and finish complete.
xxxx xxxxx xxxxx xxxxxx

28. Providing and fixing best quality 35 mm thick flush door shutter with both side commercial (?) of an approved make (sample and manufacturer to be approved by Architect) including MS butt hinges and painting/polishing etc. complete of desired shade and finish complete.

56. Learned arbitrator has opined that vide item 23 it was clear that well matched commercial ply veneering was to be provided on both sides. Similar was the position under item No. 28, only difference being thickness of 40 mm under item 23 and 35 mm under item 28.

57. It is settled law that the mandate of the arbitrator includes a right to interpret the contract. See Steel Authority of India v. J.C. Budhiraja.

58. Learned arbitrator has interpreted various clauses of the contract and has opined that since doors provided were of commercial ply veneering on both sides, counter claim had to be disallowed.

59. I concur with the reason of the learned arbitrator.

60. While objecting to the award pertaining to sub head 5 of counter claim No. 3, it is urged that the learned arbitrator contradicted himself in not accepting the report dated 25.5.1994, Ex.RW-1/3, submitted by the architect. Counsel urged that while allowing the claim of the contractor, report has been referred to and relied upon in para 13.12 of the award. Submission made was that the learned arbitrator cannot contradict himself, in that, cannot use the report selectively.

61. Counter claim of the society in sum of Rs. 5 lacs was that contract provided for applying distemper to the walls, but the walls were white washed.

62. Learned arbitrator has noted that while submitting his report dated 25.5.1994, Ex.RW-1/3, architect had listed, amongst others, a deficiency pertaining to non applying of distemper on the walls stating that the walls were white washed. Learned arbitrator has further noted that the contractor refuted this part of the report of the architect vide letter dated 2.6.1994. Learned arbitrator has further noted that the local commissioner who was appointed by Justice G.C. Jain (Retd.) i.e. Shri J.D. Goel who inspected the works in the month of May 1996 reported that faded white distemper was visible on the walls. Noting that the local commissioner was inspecting the site after over 3 years when work was completed, learned arbitrator has concluded that white distemper was applied.

63. Objection of the society that the learned arbitrator has selectively used the report of the architect Ex.RW-1/3 is not correct. Wherever the report was either unchallenged or was corroborated by other material or evidence, learned arbitrator has gone by the report of the architect. In relation to sub head 5 of the counter claim No. 3, learned arbitrator has found that the report of the architect stood contradicted by the report of the local commissioner who inspected the site. The learned arbitrator has evaluated evidence and I cannot sit in appeal over findings of fact arrived at by the arbitrator and conclusions drawn from the evidence on record.

64. I may note that sub head 5 of counter claim No. 3 has not been rejected in toto. Recording that white distemper was applied, but since the same has faded, on account of deficiency Rs. 1.5 lacs have been awarded to the society.

65. Counter claim No. 4 had variance sub heads. Entire counter claim No. 4 has been rejected.

66. Perusal of the record of arbitration shows that alleging balance minor works and defective works listed in annexure-D. Sum claimed by the society was Rs. 57,44,937.46. During arbitration proceedings, based on the report of the architect Ex.RW-1/3, this counter claim was reduced to Rs. 18,64,965/-.

67. Whereas society heavily relied upon the report of its architect, contractor relied upon the report of the local commissioner appointed by the arbitrator. Besides, learned arbitrator has noted that Clause 14 of the agreement provided that if it appeared to the architect or the secretary of the society that any work has been executed with unsound, imperfect or unskilled workmanship, a demand for rectification of such defective work would be made within 1 year of completion of the work by the architect or the engineer in chief. Learned arbitrator has held that the society failed to establish having given any such notice. Additionally, society failed to lead any evidence that it incurred expenditure for the said defective works.

68. Learned Counsel for the objector states that the learned arbitrator committed an error in ignoring the report of the architect and further failed to note that the local commissioner had inspected only 8 unoccupied flats. Counsel urged that number of flats constructed was 120 and thereafter report based on inspection of 8 flats could not be treated as a representative of the entire lot of flats.

69. The objection of the society needs to be noted and rejected for a simple reason being that of the 3 independent reasons given by the arbitrator, the third is the most important, being that, society has led no evidence of having incurred any expense for rectification of the alleged defective works. It becomes wholly irrelevant to consider any other reasoning for the reason, said reasoning is supportive reasoning. It is trite that to claim an amount on account of recompense for rectification of defective works, amount spent has to be established as a sine qua non to sustain the claim.

70. Claim No. 5 was in sum of Rs. 15 lacs. It has been allowed in sum of Rs. 1,06,471/-.

71. The counter claim was on account of difference in escalation paid after reducing amounts claimed under counter claim No. 1 to 4.

72. Needless to state, in view of the fact that certain amounts were held payable or we may call recoverable by the society under certain counter claims, learned arbitrator has proportionately reduced the recovery claimed towards escalation.

73. The logical corollary of not awarding full counter claims 1 to 4 was the proportionate reduction made in the escalation pertaining to the items of work qua which counter claims 1 to 4 were allowed.

74. Learned Counsel for the objector sought to urge that escalation in sum of Rs. 3 lacs had not to be paid for the reason agreement entered into in May 1991 required Rs. 3 lacs out of Rs. 6 lacs agreed to be paid towards material escalation, payable when work was completed.

75. I have dealt with this issue pertaining to the objection to the award relating to claim No. 1 of the contractor. For the reasons pertaining to upholding award relating to claim No. 1 of the contractor, challenge to the award pertaining to the counter claim No. 5 relating to Rs. 3 lacs towards escalation is rejected.

76. Counter claim No. 6 was on account of loss of rent to the members due to delay caused in completion of the work under the contract.

77. Learned arbitrator has held that notwithstanding that the agreement dated 8.4.1987 pertaining to civil works stipulated that the works had to be completed in 30 months from the date of award of the work but has noted that it was not in dispute that the work could commence only on 1.1.1988. Noting that modifications were effected vide 3 separate agreements dated 5.5.1990, May 1991 and 14.6.1991 and that work relating to sanitary works awarded on 27.9.1989 was modified vide agreement dated 25.1.1993, it has been held that 30 months being the essence of the contract ceased to apply.

78. Picking on the words ‘no fresh period for completion was fixed’ in para 47.2 of the award learned Counsel for the objector states that learned arbitrator ignored the agreement dated May 1991.

79. Agreement dated May 1991, vide Clause 4, states that the contractor would increase the pace of work so as to complete all the main works by end of July 1991 except painting and white washing which may be completed by November 1991.

80. I agree with the submission made by counsel for the objector that the learned arbitrator has committed a serious error in ignoring the agreement of May 1991. The findings in the award recorded in para 47.2 that no fresh period for completion was fixed is contrary to the express agreement of May 1991.

81. But, where does that lead?

82. It is not in dispute that agreement dated 27.9.1989 relating to sanitary works was modified on 25.1.1993.

83. Partied had entered into separate contracts for civil, sanitary and electrical works. Time of completion for civil works was 30 months with effect from 8.4.1987 as modified vide agreement of May 1991, to be completed by November 1991. But, flats could not be occupied, much less used, till sanitary and electrical works were completed. Work pertaining to sanitary items was modified on 25.1.1993. Thus, overstepping the time limit prescribed for civil works has resulted in no loss to the society.

84. Though, not on the reasoning of the arbitrator, counter claim No. 6 has to be rejected.

85. Contractor was to pay for the electricity consumed for carrying out the works for which the connection was obtained in the name of the society. Society laid an additional counter claim in sum of Rs. 6,22,203.91 stating that inasmuch as work was completed in March 1994, electricity bills till said period pertaining to the connection had to be paid by the contractor.

86. Learned arbitrator has awarded a sum of Rs. 42,883/-.

87. Reason given by the learned arbitrator is that there was evidence on record that since mid 1993 certain flats were allowed to be occupied by the members. From the common connection these members used electricity connection.

88. Learned Counsel for the objector stated that admittedly work was completed in early 1994 and the question of members using electricity since mid 1993 does not arise. Submission made was that the finding was perverse.

89. Noting the consumption pattern and the work done as reflected in the running bills, learned arbitrator noted that from the running bills post February 1993 it was evident that not much work required to be completed. Learned arbitrator noted that the electricity consumed by the contractor was for grounding of flooring etc. Noting the billing pattern and the consumption of electricity pre August 1993 and post August 1993, learned arbitrator noted a quantum jump. Learned arbitrator noted that from April 1992 to July 1993 nearly 27856 units of electricity were consumed but thereafter demand raised by the DESU showed a quantum jump. In relation to one Shri N.C. Gupta, learned arbitrator noted that physical possession of the flat No. 29-B allotted to him on 14.2.1994.

90. Additional counter claim related to electricity consumed till September 1994.

91. In view of the aforenoted evidence learned arbitrator has apportioned the amounts under the bills.

92. Onus was on the society to have led clear and specific evidence as to when its members took possession of their respective flats. It does happen that as and when work is completed in a particular block, members are allowed to occupy the flats in the said block. Works in other blocks does not get affected by occupation of the completed flats.

93. In light of the wooly evidence before him, learned arbitrator has arrived at the aforenoted findings which I find cannot be called or labelled as perverse findings. Learned arbitrator was empowered to evaluate the evidence.

94. It is settled law that an arbitrator is not bound by technical rules of evidence.

95. The objection pertaining to the additional counter claim is accordingly rejected.

96. Cost has been awarded by the learned arbitrator to the contractor. Raising an objection to the same, learned Counsel for the society urged that since certain counter claims were allowed, each party should have been directed to bear the respective cost of arbitration.

97. Net award is in favor of the contractor. Awarding costs is within the discretion of the arbitrator and unless shown to be perverse, finding cannot be questioned. The award pertaining to who should bear the cost of arbitration cannot be called perverse.

98. A lame duck objection has been raised to the interest awarded. The award has granted interest to the contractor for the net sum payable @12% per annum. Objection taken is that the interest awarded is on the higher side.

99. For its counter claims society had demanded interest @18% per annum. If counter claims allowed were more than the claims of the contractor, society was claiming interest @18% per annum. It therefore does not lie in the mouth of the society to question interest awarded to the contractor @12% per annum.

100. The net result of the aforesaid discussion is that the award dated 24.1.2003 published by Justice J.B. Goel (Retd.) is modified to the limited extent, in that claim No. 4 allowed to the contractor in sum of Rs. 5,51,391/- is reduced to Rs. 4,88,043/-. Rest of the award is upheld. The result thereof would be that the net amount awarded to the contractor as quantified in para 49 of the award after adjusting the counter claims awarded and worked out in sum of Rs. 15,84,254/- stands reduced to Rs. 15,20,906/-. Proportionally interest held payable is also reduced.

101. I refrain from awarding costs.