Waiver Satish.doc

MANU/DE/2044/2008

Equivalent Citation: 2008(105)DRJ370

IN THE HIGH COURT OF DELHI

C.S. (OS) 1829A/1999

Decided On: 28.07.2008

Appellants: Satish Kumar Vs. Respondent: Union of India (UOI) and Ors.

Hon'ble Judges: Reva Khetrapal, J.

Counsels: For Appellant/Petitioner/Plaintiff: Vivekanand, Adv

For Respondents/Defendant: R.C. Nangia, Adv.

Subject: Arbitration

Catch Words

Mentioned IN

Acts/Rules/Orders: Arbitration Act, 1940 - Sections 30 and 33

Cases Referred: J.G. Engineers (P) Ltd. v. Calcutta Improvement Trust AIR 2002 S.C 766; Narain Prasad Lohia v. Nikunj Kumar Lohia 2002 (1) ALR (RLR) 493 SC; State of U.P. v. Harish Chandra and Co. 1999 1 SCC 63; State of Rajasthan v. Puri Construction Co. Ltd. And Anr. (1994) 6 SCC 485; Sudarsan Trading Co. v. Govt. of Kerala (1989) 2 SCC 38; Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar (1987) 4 SCC 497; Alopi Parshad & Sons Ltd. v. Union of India (1960) 2 SCR 793 : AIR 1960 SC 588; Kapoor Nilokheri Coop. Dairy Farm Society Ltd. v. Union of India (1973) 1 SCC 708; India Oil Corporation Ltd. v. IndianCarbon Ltd. (1988) 3 SCC 36; State of Orissa v. Lall Bros. (1988) 4 SCC 153; Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd. (1967) 1 SCR 105 : AIR 1967 SC 1030

Disposition: Appeal Dismissed

Case Note: Arbitration Act, 1940 Sections 30 & 33 - Setting aside of award--Challenged the award passed by sole arbitrator--Petitioner claimed that Ld. arbitrator had given an award contrary to the agreement between parties & reason given by him was vague and baseless--Appellant failed to prove that findings of the Ld. arbitrator were without any basis or that such findings were patently unjust or perverse--Court opined that Ld. arbitrator cannot be said to have taken into consideration any matter outside the scope of reference--No merit--Hence, Appeal dismissed.

JUDGMENT

Reva Khetrapal, J.

1. The petitioner was awarded a contract for "Repairs to Passenger Platform Service with Bitumastic Flooring on Platform No. 2 at Saharanpur" vide work order No. 128-W/280/DEN-I/UMB dated 27.02.1992 by the respondent/Union of India. By a letter dated 15.06.1995, the Union of India, through the General Manager, Northern Railway, New Delhi appointed Shri Jagdeep Rai, Dy. Chief Engineer/Const/Works, Northern Railway and Shri A.KLal, Dy. F.A. & CAO/Const., Northern Railway, Delhi as Co-Arbitrators to adjudicate upon the disputes. The said Co-Arbitrators, as per terms of reference, jointly requested Shri Raj Kumar Sarkar, Dy. Chief Engineer/Deposit Work, Northern Railway, Patel Nagar, New Delhi to act as Umpire vide letter No. 94/Arb./JR-ll dated 29.6.95 which he agreed to act on 3.7.1995. The Co-Arbitrators entered into the reference on 23.11.1995, but did not hold any hearing during the period of validity, that is, four months from the date of entering into the reference. Accordingly, the petitioner invoked the arbitration clause and requested Shri Raj Kumar Sarkar to enter into the reference and to act as Umpire vide his letter dated 28.03.1998. Shri Raj Kumar Sarkar entered into the reference on 5.4.1999 and after having heard the parties and gone through the material on record, gave his award on 23.7.1999, thereby allowing the claims of the petitioner to the extent of Rs. 60,395/- (Rupees Sixty Thousand Three Hundred Ninety Five only) with simple interest @ 12% p.a. on Rs. 51,690/- (that is, Rs. 60,395/- minus Rs. 8705/- = Rs. 51690/-) from 1.10.92 till the date of payment. The learned Umpire further held that if the awarded amount was not paid within a period of 75 days from the date of publishing of the award, the respondent would be liable to pay interest @ 18% to the contractor till the payment of the award amount. The learned Umpire, however, rejected the counter claim of the Railways to the tune of Rs. 15,000/-.

2. The respondent/Union of India has filed the present objections to the award under Sections 30 and 33 of the Arbitration Act, 1940 on the ground that the learned Umpire mis-conducted the proceedings, inasmuch as he could not have awarded the said amount in accordance with the specific clauses of the agreement and also as per the evidence available with him. The award of the learned Arbitrator is, therefore, stated to be against the facts on record and bad in law. The award is also stated to be based on conjectures and surmises. Finally, it is submitted that by interpreting the clauses of the agreement in a manner different from the original agreement, the learned Umpire has exceeded the terms of reference. Thus, according to the Union of India, claims No. 1,2,4 & 5 were wrongly allowed by the arbitrator, while the counter-claim of the Railways was wrongly disallowed and accordingly the award of the learned arbitrator was liable to be set aside under the provisions of Sections 30 and 33 of the Arbitration Act, 1940.

3. The petitioner/contractor has filed a detailed reply to the objections denying the objections in seriatum and praying for the dismissal of the, objections with costs and for making the award the rule of the court with further interest @ 18% p.a. from the date of decree till the date of the payment.

4. It is proposed to deal with the objections of the respondent/UOI claim-wise and the same are accordingly dealt with as follows:

Claim No. 1:

5. The first Objection is with regard to the claim No. 1, whereby the learned arbitrator against the amount claimed of Rs. 80,000/-, awarded a sum of Rs. 10,000/- in respect of the work done. It is stated by the Objector that in accordance with Clause-45 of the General Conditions of Contract, which was part of the agreement between the parties, the measurement of work recorded between the parties was final and binding. Any claim in regard to measurement or any claim for work which was not according to the measurement, being an 'excepted matter', could not be awarded by the arbitrator. By awarding claim No. 1, the learned arbitrator has given an award contrary to the agreement between the parties. It is also contended that the reasoning given by the learned arbitrator is vague and baseless.

6. In reply it is denied that the dispute with regard to claim No. 1 was an 'excepted matter'. It is submitted that the respondent took no plea of 'excepted matter' either before the Court at the time of making of the order of reference by the Court or before the learned Arbitrator. As per the recorded measurement, the claimant was entitled to Rs. 42,681.72 for work done after deducting the running payment, the details whereof were filed before the arbitrator. Without issuance of any show cause notice or intimation in writing, some of the measurements were later on, behind the back of the claimant, struck off by the respondent on the allegation of alleged defects. There were letters and material on record to show that the claimant had rectified the defects. It was also an admitted case of the respondent that the work as done by the claimant had been put to use and was being utilized by the respondent without dismantling the same or without further rectification, either departmentally or otherwise. Thus, the learned arbitrator, keeping in view all the facts and circumstances, awarded a sum of Rs. 10,000/- to the claimant, though a much larger amount was claimed.

7. A perusal of the counter statement of facts on behalf of the respondent/UOI filed before the learned arbitrator shows that it was nowhere pleaded by the respondent that claim No. 1 was in the category of 'excepted matters'. The plea of the learned Counsel for the respondent that Claim No. 1 fell in the category of excepted matters' cannot, therefore, be entertained at this stage. Such a plea is also not sustainable in view of the judgments of the Hon'ble Supreme court in J.G. Engineers (P) Ltd. v. Calcutta Improvement Trust MANU/SC/0048/2002 : AIR 2002 S.C 766 and Narain Prasad Lohia v. Nikunj Kumar Lohia MANU/SC/0114/2002 : 2002 (1) Arbitration Law Reporter (RLR) 493 (Supreme Court), wherein applying the principal of waiver, it was held by the Hon'ble Supreme Court that the respondent not having taken the objection with regard to the non-arbitrability of the claim before the arbitrator or any objection that the said claims were 'excepted matters' and having contested the claims on merits, is estopped from raising such an objection after having suffered the award.

8. The learned arbitrator's finding that during discussion the respondent agreed that defects of some portions were removed by the claimant and, therefore, the claim was being partly allowed to the extent of Rs. 10,000/- as against the claim of Rs. 80,000/-, cannot, therefore, be faulted, more so, as the learned arbitrator has reasoned that though the respondent had entered the measurement of the whole work done by the claimant in the measurement book, later some of the measurements had been scored out on account of defects noticed. There is also nothing on record to suggest that this scoring out in the measurement book was done after issuance of notice to the claimant, in bis presence. The amount has been awarded on the basis of the measurement book and it is not the case of the respondent that no measurement was recorded. The record also shows that by letter dated 28.9.1992, the claimant had written to the respondent that the defects had been rectified and that there was no rebuttal of this fact from the side of the respondent.

Claim No. 2:

8. Claim No. 2 is towards idling of labour, staff, tools, plants and equipment and additional expenses due to faults and failures of the respondent. Against the claimed amount of Rs. 4,15,000/- (Rupees Four Lacs and Fifteen Thousand only), a sum of Rs. 41,690/- only (Rupees Forty One-Thousand Six Hundred Ninety only) has been awarded by the arbitrator to the claimant with the following break up:

Claim Description of claims Amount claimed (Rs.) Amount awarded (Rs.)

No. 2.

(i) Idling of labour, staff,, Double wages of 10 workmen @ Rs. 40 per day for 6 months,

tools plants and equipments

and additional expenses

due to faults and failures

of respondent.

(ii) Salary of supervisor

(iii) Hire charges for T & P

(iv) Salary of watch & ward

conveyance, rent, lodging,

boarding etc. for six months.

(v) Reasons of the amount

awarded.

After hearing the arguments of both claimant and the respondent and going through the records presented, the claim is partly awarded as shown against each item above due to non-removal of hindrances and non-availability of site during the day time which resulted in hindrances and labour output at site as also agreed by respondent.

4,15,000/-

72000/-

24000/-

90000/-

24000/-

33000/-

41,690/-

14400/-

4645/-

18000/-

4645/-

Nil

_________

41690/-

________

9. The reasons recorded by the arbitrator for award of this claim are that due to non-removal of hindrances and non-availability of site during the day time which resulted in hindrances and labour output at site, "as also agreed by the respondent", the claim was being partly awarded. The basis of this claim thus appears to be that the site and the electricity were not provided to the contractor within the stipulated period. In this context, apart from the fact that the learned arbitrator has recorded that, the non-removal of hindrances and non-availability of site during the day time was admitted by the respondent, the learned Counsel for the claimant has drawn my attention to an intimation sent by the Assistant Engineer, Northern Railway, Saharanpur to the S.H.O/GRP/Police, Saharanpur dated 27.04.1992 which is to the following effect:

Northern Railway

Office of the Assistant Engineer/N.Rly Saharanpur.

No. 18-A/16/535Dated 27/4/92

Sub:Repairs to pass, platform surface with bitumastic flooring of P.F. No. 2atSRE.

The above work is being carried out by Shri Satish Kumar, Contractor Saharanpur. Due to power cut in day time, the work is being done during nighttime.

Please allow contractor's labour (about 10 men) to work on the platform No. 2 & 3 during night time so that the work may be completed well in time i.e. within target date.

sd/- Assistant Engineer Northern Rly., Saharanpur.

10. The learned Counsel for the claimant submits that in view of the fact that the respondent was squarely to blame for the non-availability of the site during the day time resulting in hindrances and increased labour output at the site, the learned arbitrator was justified in granting claim No. 2 in respect of idling charges. He also points out that though the aforesaid charges were claimed for a period of six months, the learned arbitrator has awarded the same for a period of one and half month only.

11. The learned Counsel for the respondent/UOI does not dispute the letter dated 27.04.1992 or the fact that it was agreed to by the respondent before the arbitrator that there was non-availability of site during the day time. This being so, it is not understandable as to how the award of one and half month idling charges on account of non-availability of the site to the claimant can be objected to by the respondent. The contention of the respondent that the award of claim No. 2 for idle labour, staff, tools, etc. in the sum of Rs. 41,690/- by the learned arbitrator is not only contrary to the pleadings, but also against the record of the proceedings is, therefore, clearly mis-placed.

Claim No. 4:

12. In the context of claim No. 4, the findings of the learned arbitration are as follows:

Claim No. 4. Description of claims Amount claimed Amount awarded

Refund of earnest (Earnest money Rs. 2500/-

money/security deposit deposited Rs.

2500/-. Security

deposit Rs. 6383/-.

Deduct electric bill

for Rs. 2678/-. Net

amount payable Rs.

Reasons of amount

awarded

As per the final bill prepared and entered in measurement book No. D-571/UMB/90 Page-99 by the respondent, security deposit of Rs. 6383/- has been deducted from the 1st running on account bill and out of E/money of Rs. 5000/-, the respondent has adjusted Rs. 2400/- as security deposit and an amount of Rs. 2678/- is to be deducted for electricity as per electric bill from claimant. Thus, the respondent will pay Rs. 8705/- to the claimant (i.e. Rs. 6383/- + Rs. 5000/- = Rs. 11383/- minus Rs. 2678/- = Rs. 8705/-). This has already been accepted by the respondent during the arguments. Rs. 8705/-

13. At the outset, the learned Counsel for the claimant explained that though the claim under this head was made for earnest money deposited in the sum of Rs! 2,500/-, the learned arbitrator has also dealt with the security deposit under this head. It was elaborated by him that it was not that the security deposit was not claimed before the arbitrator, but that the arbitrator instead of dealing with it in claim No. 1, has dealt with it in claim No. 4.

14. A somewhat feeble attempt was made by the learned Counsel for the respondent to urge that the learned arbitrator was not justified in awarding the aforesaid claim. The learned Counsel for the petitioner, on the other hand, has drawn my attention to page 171 of the records, which contains handwritten notes with regard to the payment due to the contractor. The said handwritten records are on th6 letter-head of the Northern Railway and read as follows:

Northern Railway

Dy. Chief Engineer/Const.

N. rly, Tilak Bridge

Sh. R.K. Sarkar

Payment due to the contractor for "Repair to Passenger Platform service with bitumastic flooring of Platform No. 2 at Saharanpur.

(i) Security 10% Rs1. 6383.00 (againstCCI for Rs. 63831)

(ii)Earnest moneyRs. 5000.00

(which was later on adjusted as security deposited for Rs. 2400/_________

Total = Rs. 11383.00

Deduction for Electric Bill chargesRs. 2678.00

Net Amount Payable = Rs. 8705.00

(Eight Thousands Seven Hundred & Five only)

15. Clearly, the findings of the learned arbitrator are based on this document which emanates from the Northern Railway itself and was not disputed by the counsel for the respondent before the lelarned arbitrator. The award of the claim is, therefore, to my mind, being challenged for the sake of challenge.

Claim No. 5:

16. The learned Counsel for the respondent submits that interest @ 12% from 01.10.1992 till the date of payment could not have been awarded by the arbitrator on the amounts awarded for claim No. 1, 2 & 3, as no interest as per Clause 16(2) of the General Conditions of the Contract was payable to the contractor and on this ground also the award of the learned arbitrator is liable to be set aside. This is disputed by the counsel for the petitioner, who states that in terms of the award, the claimant is now entitled for the enhanced rate of 18% p.a. According to him, the alleged clause in any case is not a bar on the power and jurisdiction of the court to award interest, and the legal position is well settled that the arbitrator has the power, authority and discretion to award interest for all the periods on the amounts found due and payable by the arbitrator. Further, the respondent before the learned arbitrator had placed no reliance on clause 16(2) and could not, therefore, do so at this stage.

17. There is, in my view, no merit in this objection either. The Hon'ble Supreme Court in the case of State of U.P. v. Harish Chandra and Co. reported in MANU/SC/0715/1998 : 1999 1 SCC 63 has laid down that any bar provided in the contract on payment of interest, is not a prohibition against the contractor to raise a claim for interest before the arbitrator on claimed amounts and cannot operate as a bar on the power of the arbitrator to award interest to the claimant on the amounts awarded in his favour. Counter-Claim:

18. Finally, the award was assailed by the respondent's counsel on the ground that the counter-claim of the Railways for expenditure of Rs. 15,000/-incurred before the various fora was wrongly rejected. It was submitted that there was delay on the part of the claimant and in fact there were lots of defects in the works done by the contractors, on account of which the respondent had to incur expenses for rectifying the same and the rejection of the claim of Rs. 15,000/- of the Railways was accordingly unjustified. The learned Counsel for the petitioner, on the other, denied that the respondent incurred any expenses in rectifying the defects as alleged, and pointed out that no evidence had been adduced before the arbitrator in this regard nor any amount was ever demanded by the respondent from the petitioner on account of alleged rectification of defects, and that the counter claim of the Railways before the arbitrator was, therefore, an after-thought and was rightly rejected by the learned arbitrator as such.

19. A glance at the award shows that the counter claim of Rs. 15,000/-was rejected by the learned arbitrator on the ground that no termination of contract was done nor the defects were got rectified by the Railways, either departmentally or through any other agencies by the respondent and the respondent had failed to produce any record for the amount claimed. This being the position, the rejection of the claim of the respondent which was

without particulars and in support of which there is not even a scrap of paper, in my view, was wholly justified.

20. To conclude, in the present case, in my considered opinion, the arbitrator cannot be said to have taken into consideration any matter outside the scope of reference. The appellant has also failed to prove that the findings of the learned arbitrator were without any basis or that such findings were patently unjust or perverse. In the case of State of Rajasthan v. Puri Construction Co. Ltd. And Anr. MANU/SC/0865/1994 : (1994) 6 Supreme Court Cases 485, relying upon its earlier judgments in Sudarsan Trading Co. v. Govt. of Kerala MANU/SC/0361/1989 : (1989) 2 SCC 38; Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar MANU/SC/0013/1987 : (1987) 4 SCC 497; Alopi Parshad & Sons Ltd. v. Union of India MANU/SC/0057/1960 : (1960) 2 SCR 793: AIR 1960 SC 588; Kapoor Nilokheri Coop. Dairy Farm Society Ltd. v. Union of India MANU/SC/0002/1973 : (1973) 1 SCC 708; India Oil Corporation Ltd. v. IndianCarbon Ltd. MANU/SC/0194/1988 : (1988) 3 SCC 36; State of Orissa v. Lall Bros. MANU/SC/0487/1988 : (1988) 4 SCC 153; Firm Madanlal Roshanlal Mahaj an v. Hukumchand Mills Ltd. MANU/SC/0003/1966 : (1967) 1 SCR 105: AIR 1967 SC 1030, it has been held by the Hon' ble Supreme Court as under:

Even if it is assumed that on the materials on record, a different view could have been taken and the learned arbitrator has failed to consider the documents and the materials on record in their proper perspective, the award is not liable to be struck down in view of the plethora of ease law to the effect that in the anxiety to render justice to the parties to the arbitration, the court should not re-appraise the evidence intrinsically with the close scrutiny for finding out the conclusions drawn from such facts by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power, it is well settled, is alien to the scope and ambit of challenge of award under the Arbitration act. Error apparent on the face of the record does not mean that on closer scrutiny of the import of documents and materials on record, the finding made by the arbitrator may be held to be erroneous. An error of law or fact committed by an arbitrator by itself does not constitute misconduct warranting interference with the award.

21. In view of the aforesaid legal and factual position, the petition is without merit and is dismissed as such. The award is made rule of the Court. There will be no order as to costs.