Pradeep Nandrajog, J.
1. Vide is No. 4518/1996 DDA has laid a challenge to the award dated 23.12.1995 published by Shri L.R.Pawa the sole arbitrator appointed vide reference dated 21.1.1993 to decide the disputes and differences between M/s.Anand Raj Agencies (hereinafter referred to as the claimant) and DDA (hereinafter referred to as the respondent).
2. Claimant was awarded the work of construction of flats and allied works in Trilok Puri, Pocket-F, vide agreement No. 30/EE/DD-VIII/85-86. As is usual with DDA, full payment not being made, claimant raised certain claims and since the contract between the parties contained an arbitration clause, disputes were referred to arbitration. Claimant had 15 substantive claims, some of which had sub-heads. Claim No. 16 and 17 pertained to interest demanded by the claimant.
3. Claimant submitted its statement of fact vide letter dated 22.2.1993. DDA submitted counter statement of fact on 28/31.7.1993. Additional counter statement of fact was filed on 1.10.1994. Claimant filed rejoined to the original counter statement of fact on 1.11.1994. 25 hearings were held. Evidence was led. Award was published on 23.12.1995.
4. A preliminary objection was raised to the very maintainability of the claims before the learned arbitrator on the ground that the claim was barred by limitation and additionally on the ground that the final bill was not submitted by the claimant as per procedure prescribed by Clause 7, 8, 8A and 9 of the agreement.
5. Learned arbitrator held against the DDA and negated the preliminary objections which were raised.
6. On the issue of limitation, learned arbitrator held that limitation would run when there is an unequivocal denial of a right asserted by a party. Noting the fact that the DDA finalized the final bill only on 1.10.1994 after reference of disputes to arbitration, learned arbitrator held that strictly speaking limitation would commence against claimant from the date of intimation of the preparation of the final bill. Learned arbitrator noted that before the final bill was finalized, claimant had raised the dispute (probably claimant had an inclining of what DDA intended to certify). Taking note of the fact that clause 25 of the contract embodied the terms of arbitration, learned arbitrator held that the claims were not barred by limitation. On the issue of clauses 7, 8, 8A and 9, learned arbitrator held that the said clauses pertained to interim certification regarding running bills, submission of interim running bills, measurement of work and interim payment respectively. Learned arbitrator held that the clauses aforesaid were not only procedural but were directory. In this view of the matter, alternative objection to the very maintainability of the claims were rejected.
7. During course of arguments, Ms. Anusuya Salwan, learned counsel for DDA briefly touching upon the said findings in the award stated that the findings recorded by the learned arbitrator were patently erroneous for the reason, during payment of running bills, claimant had been urging the basis for finalization of the interim bills, which basis constituted the foundation of the claim. Counsel urged that limitation would run from the date the claim or the basis on which the claims were founded were first raised. On issue of clauses 7, 8, 8A and 9 learned counsel urged that the same are not directory but are mandatory.
8. Admittedly, date of commencement of the works was 23.11.1985 and stipulated date of completion of 22.11.1986. There was delay in completion of the work. As per the claimant, work was completed on 15.7.1989. Before final bill could be prepared, joint measurement had to be recorded for said measurements would have fixed the schedule of quantities on which final bill was required to be prepared. As per the claimant it had no option but to prepare and submit a final bill on 11.8.1992. Letter by which final bill was submitted is Ex.PW.C-26. DDA did not finalize the said bill and thereupon claimant sought reference of dispute to arbitration. Matter was referred to arbitration on 21.1.1993.
9. One cannot dispute the proposition that right to sue would accrue when there exists a dispute which can be the subject matter of a reference. Indeed, in the absence of a dispute between parties to an arbitration agreement, there can be no reference. See : [1964]2SCR599 UOI v. Birla Cotton and Spinning and Weaving Mills Ltd.
10. In : [1960]2SCR253 Rukhmabai v. Laxminarayanan, their Lordships of the Supreme Court held:-
The legal position may be briefly stated thus : the right to sue under Art.120 of the Lim. Act accrues when the defendant has clearly and unequivocally threatened to infringe the right asserted by the plaintiff in the suit. Every threat by a party to such a right, however ineffective and innocuous it may be, cannot be considered to be a clear and unequivocal threat so as to compel him to file a suit. Whether a particular threat gives rise to a compulsory cause of action depends upon the question whether that threat effectively invades or jeopardizes the said right.
11. In Mt. Bolo v. Mt.Koklan, law was stated as under:-
'There can be no right to sue until there is an accrual of the right asserted in the suit and its infringement or at least clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted.'
12. A Division Bench of this court in the decision reported as : AIR1985Delhi358 Shah Construction Company Ltd., Bombay v. Municipal Corporation of Delhi observed that the touch-stone is as to when the cause of action accrues because it is only then there would be a right to apply. In para 24, their lordships of the Division Bench observed as under:-
The nature of dispute or difference will have to be seen in each case and with reference to that it will have to be examined as to when the cause of action arose. A claim is not necessarily a difference between the parties unless that claim is disputed. Cause of action would thereforee, arise when the claim of one party, when it arises, is denied or there is a threat to deny. Only in that event, it becomes a dispute and cause of action arises from the date.
13. On the facts of the present case and in light of the law noted above, it cannot be said that the award of the learned arbitrator pertaining to the decision on issue of limitation is perverse or patently erroneous. Findings of the learned arbitrator on the issue of limitation have to be sustained. It may additionally be noted that as per clause 25 of the contract between the parties, which clause sets out the terms of settlement of dispute by arbitration, inter alia, it is provided:-
It is also a term of the contract that if the contractor does/do not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the engineering in charge that the bill is ready for payment, the claim(s) of the contractor(s) will be deemed to have been waived absolutely barred and the DDA shall be discharged and released of all liabilities under the contract in respect of those claiMs.
14. The contract between the parties, itself reckons limitation from the date when a bill is certified as ready for payment.
15. On the issue of clauses 7, 8, 8A and 9; being lengthy clauses, I need not reproduce the clauses, save and except note the basic content thereof. Clause 7 stipulates that no payment shall be made unless a work is completed and certificate of completion given where the work is less than Rs.5000/-, but in case of work estimated more than Rs.5000/-, contractor shall submit monthly bills and receive running payments on certification by the engineer in charge that the work billed for has been executed. Clause 8 deals with the measurement of the works when monthly bills are to be submitted. Clause 8A deals with the procedure to be followed in recording measurements. Clause 9 enjoins upon the contractor to submit bills as per the printed forMs.
16. As noted above, learned arbitrator has held that the said clauses are procedural, as indeed they are. Be that as it may, clauses deal with running bills and would have noting to do with the preparation of a final bill on completion of the work. Clause 42 of the contract refers to the procedure to be followed to work out the theoritical quantity of cement, steel and other supply items consumed in the works. Clause 43 provides that the theoretical quantities determined as per clause 42 would be worked upon to effect recoveries from the gross amount of the bill. It is obvious that inputs to a final bill being different than the inputs of the running bill, clauses 7, 8, 8A and 9 of the contract would be directory in so far as a final bill is concerned, on the assumption that the said clauses apply to the finalization of the final bill.
17. Challenge to the finding of the learned arbitrator to the alternative preliminary objection is without any legal foundation and accordingly the challenge is negated. Finding of the learned arbitrator on the second issue pertaining to the alternative preliminary objection is affirmed.
18. Claim No. 1 of the claimant in sum of Rs.4,06,425/- has been rejected by the learned arbitrator. Claimant has not challenged the award and accordingly issue stands closed between the parties.
19. Claim No. 2 in sum of Rs.66,73,000/- has been allowed by the learned arbitrator in sum of Rs.25,05,318.80.
20. Claim was on account of loss suffered in the execution of the work beyond the stipulated date of completion due to increase in prices of building materials and other expenses and losses suffered due to infrastructure expenditure, on hire charges for tools, plants and material for shuttering etc.
21. Learned arbitrator, taking note of the fact that the stipulated date of start of work was 23.11.1985 and stipulated date of completion was 22.11.1986 as also the fact that the work was completed on 15.7.1989, went into the germane question, as to who was responsible for delay.
22. Pleadings of the parties would show that as per the claimant delay was attributable to DDA under 7 separate heads, being:-
(i) Delay in handing over the complete site, delay in release of lay out plans, delay in electrical lay out and delay in release of drawings for foundation and structure.
(ii) Eractic, irregular and inadequate supply of supply items under the contract.
(iii) Delay in supply of door shutters.
(iv) Delay in finalization of the colour scheme.
(v) Delay in the sanction of extra and substituted iteMs.
(vi) Delay in payment of running account bills.
(vii) Delay in issue of road roller.
23. Learned arbitrator in reference to evidence on record and in particular Ex.C-1 to Ex.C-22, Ex.C-64 and C-65 held that delay for 966 days was attributable to DDA. Holding that DDA was liable to recompense the contractor, learned arbitrator noted that the cost index when work was to be completed was 376.94 which rose to 460.21 when work was completed, and accordingly worked out the average cost index for the extended period as the mean of the two, i.e. 418.58. On the basis of the final bill as determined by the learned arbitrator, after deducting the supply items, learned arbitrator found that work done during extended period of contract was in sum of Rs.1,29,02,801.06. Since cost index, when work commenced was 350.52, learned arbitrator determined compensation payable to the claimant for escalation in sum of Rs.25,05,318.80 on the following basis:-
1,29,02,801.06 x 418.50(-)350.52 = 25,05,318.80--------------------350.52
24. A perusal of the award pertaining to claim No. 2 shows that the learned arbitrator has recompensed the claimant for escalation on the basis of cost indices. The cost indices pertained to the cost of material. Award shows that the learned arbitrator has finalized the final bill as per contract price, subtracted there from the cost of the supply items and on the balance amount, by multiplying the mean of the cost indices between the dates of scheduled completion and the actual completion minus the cost indices as on date of commencement of the work, divided by the cost indices on the date of commencement of the work.
25. Ms. Anusuya Salwan, learned counsel for DDA pointed out that the learned arbitrator has committed a patent error for the reason that while finalizing the final bill under claim No. 5, learned arbitrator determined amount payable under clause 10 CC of the contract. Since clause 10 CC of the contract gave benefit to the contractor for increase or price of materials and labour, counsel argued that it was a patent case of double benefit under the award.
26. Clause 10CC of the contract, inter-alia stipulates as under:-
'If the prices of materials (not being) and/or wages of labour required for execution of the work increases, the contractor shall be compensated for such increase as per provisions detailed below and .......
27. The clause thereafter gives various inputs and the formula for determining the escalation.
28. Pertaining to claim No. 5, being the claim for final bill, award shows that the learned arbitrator has noted the fact that sum of Rs.18,36,094/- had been paid to the contractor under clause 10CC under various running bills. Learned arbitrator has further noted that compensation for work done under clause 10CC was already paid for the work done uptill May, 1989. Since work was completed on 15.7.1989, learned arbitrator determined escalation under clause 10CC for the period May 1989 to 15.7.1989 for the purposes of determining the final bill.
29. Award pertaining to claim No. 2 of the learned arbitrator is patently erroneous for two reasons. Firstly, as held by the Division Bench of this court in the judgment reported as 1998 7 AD (Del) 300 DDA v. U.Kashyap, where a contract provides for a formula as per which escalation has to be worked out, arbitrator, being bound by the contract between the parties cannot adopt a different methodology. Similar view has been expressed by another division bench in the judgment reported as 2001 (2) A.D. Del 116 DDA v. K.C. Goyal.
30. Award pertaining to claim No. 2 shows that the learned arbitrator has ignored the formula under clause 10CC of the contract.
31. But the second reason is more fundamental and hits at the very foundation of claim No. 2. Having sought escalation under clause 10CC as an integral part of claim No. 5, claim No. 2 becomes a patent duplication. Indeed, Mr. Harish Malhotra, learned counsel for the contractor could hardly come out of the patent illegality from which the award suffers pertaining to claim No. 2.
32. Objection of DDA to award pertaining to claim No. 2 is accordingly accepted. Finding of the learned arbitrator and award in sum of Rs.25,05,318.80 under claim No. 2 is set aside.
33. I may note a clarification here. Award pertaining to claim No. 2 has been set aside by me not for the reason that the finding of fact recorded by the learned arbitrator on issue of delay is perverse. Award pertaining to claim No. 2 has been set aside for the reason that the claim was a patent duplication and secondly escalation had to be worked out as per formula provided under the contract. Finding of fact pertaining to delay, being supported with evidence on record cannot be agitated by requiring this court to reappreciate and redraw conclusions.
34. Claim No. 3 in sum of Rs.2,75,213/- has been sustained by the learned arbitrator in sum of Rs.1,70,624.10. Claim was on account of steel issued on the averment that payment has been made on the basis of standard weights and not actual.
35. Pleadings would show that steel was issued by DDA by treating its weight on the basis of standard weight of steel per meter length. Record shows that samples of steel were taken by the respondent when steel was issued. Weight of which was recorded in the over-weight steel register. Learned arbitrator noted that the work was to be executed as per CPWD specifications and as per CPWD circular dated 15.7.1982, weighment of steel was required to be done on the basis of actual weight determined in the context of weight of different samples taken out.
36. In the context of Ex. C-3, C-23, C-24, C-50 and C-51, learned arbitrator determined that the total quantity of steel consumed, including wastage was 5,42,172.913 kgs. Accordingly, learned arbitrator determined the amount payable.
37. Ms. Anusuya Salwan, learned counsel for DDA could not show any error, much less patent or fundamental error pertaining to claim No. 3 and the sum awarded there under. I sustain the award pertaining to claim No. 3.
38. Laying a challenge to award under claim No. 4, learned counsel for DDA Ms. Anusuya Salwan relied upon a decision of a learned Single Judge of this court reported as 2001 (4) AD (Del) 65 Weer Aar Constructive Builders v. D.D.A.
39. Claim No. 4 in sum of Rs.5,53,506/- was for straightening bent up steel bars issued in coils and bent up bundles and, thereforee, contractor claimed to be compensated for said work.
40. Learned arbitrator has treated the work of straightening bent up steel bars as an extra work.
41. Item 3.10 of the schedule of quantities required the contractor to quote for the following work:-
3.10 Re-enforcement for RCC work including bending, binding and placing in possession complete.
42. Offer submitted by the contractor shows that the contractor had quoted for aforesaid work. Issue which arises for consideration is whether the work of straightening bent up steel bars would be included under specification 3.10 aforesaid.
43. Learned arbitrator has relied upon a decision of a learned Single Judge of this court in Suit No. 1985-A/1984 K.C.Chibber v. D.D.A. Said decision which was filed before the learned arbitrator as Ex.C-70 shows that a learned Single Judge of this court, while considering a similar descriptive clause in the schedule of quantities requiring the contractor to execute the work of reinforcement for RCC works included bending, binding and placing in position held that the clause would exclude straightening of bent up steel bars for which extra was payable. Accordingly, learned arbitrator partly allowed claim No. 4 by treating the claim as an admissible claim.
44. Decision in Weer Aar Constructive Builders relied upon by counsel for DDA noted decision in K.C.Chibber's case. Decision in K.C. Chibber's case was distinguished on the ground that in K.C.Chibber's case, petitioner had notified DDA that straightening of steel was to be treated as an extra item of work and this was not objected to by DDA.
45. In Weer Aar Constructive Builder's case, learned Single Judge held that since bending, binding and placing in position steel for RCC works was included in the contracted, said work necessarily required the process of straightening before cutting and, thereforee it was held that no claim for extra was maintainable on said account.
46. Learned counsel for the respondent could not point out any evidence that contractor had written to DDA when work was on that he would be having a claim as an extra item for straightening of bent up steel bars issued in coils.
47. I, thereforee, go Along with the decision in Weer Aar Constructive Builder's case.
48. Hudsons in Building & Engineering Contracts has noted that where a work is an integral part of a listed work or has to be inevitably performed to achieve the desired works, it would be deemed that said work is inclusive of the desired works and price quoted is included in the quoted price for the work in question. (see para 4.037 to 4.039 of 11th Edition).
49. Award pertaining to claim No. 4 is accordingly set aside.
50. Claim No. 5 in sum of Rs.96,32,595.98 was on account of alleged non-payment of the final bill. The claim had various subheads. I would be dealing with only such subheads to which an active challenge which merited some consideration was urged by Ms. Anusuya Salwan, learned counsel for DDA. However, I may note that in the objections filed, in generic terms all and sundry challenge has been laid to the award in its entirety.
51. Laying a challenge to the award pertaining to claim No. 5, first challenge was to the award in sum of Rs.2,88,507/- by the learned arbitrator pertaining to subheads (vii) of said claim.
52. Award shows that the learned arbitrator has held that the sums withheld on account of penal recovery for supply material, non-sanction of EI/SI items and non-settlement of quality control were unjustified.
53. Ms. Anusuya Salwan, learned counsel for DDA relied upon clause 25B of the contract and urged that these deductions made by the Superintending Engineer were final and not open to arbitration. Counsel urged that the award was without jurisdiction.
54. Clause 25B reads as under:-
The decision of Superintending Engineer regarding the quantum of reduction as well as justification thereof in respect of rates for substandard work which may be decided to be accepted will be final and would not be open to arbitration.
55. Mr. Harish Malhotra, learned counsel for the claimant, relied upon clause 12 and 12A of the agreement and urged that the issue was covered by clause 12 and 12A and, thereforee, the claim was arbitrable. On merits counsel urged that this court would not reappreciate the evidence on record in so far as the decision of the learned arbitrator related to the merits on the issue.
56. Clause 12 and 12A of the contract reads as under:-
CLAUSE 12.
The Engineer-in-Charge shall have power to make any alterations. in omissions from, additions to or substitutions for, the original specifications, drawings designs and instructions that may appear to him to be necessary during the progress of the work and the contractor shall carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-Charge and such alterations, omissions, additions or substitutions shall not in validate the contract and any altered, additional or substituted work which the contractor may be directed to do in manner above specified as part of the work shall be carried out by the contractor on the same conditions in all respects, on which he agreed to do the main work. The time for the completion of the work shall be extended in the proportion that the altered additional or substituted works bears to the original contract work and the certificate of the Engineer-in Charge shall be exclusive as to such proportion. Over and above this a further period to the extent of 25 per cent of such extension so extended shall be allowed to the contractor. The rates for such additional altered or substituted work under this clause shall be worked out in accordance with the following provisions in their respective order -
(i) if the rates for additional, altered or substituted work are specified in the contract for the work, the contractor is bound to carry out the additional, altered or substituted work at the same rates as are specified in the contract for the work.
(ii) if the rates for the additional, altered, or substituted work are not specifically provided in the contract for the work, the rates will be derived from the rates for a similar class of work as are specified in the contract for the work.
(iii) if the altered, additional or substituted work includes any work for which no rate is specified in the contract for the work and cannot be derived from the similar class of work in the contract then such work shall be carried out at the rates entered in (current C.P.W.D. Schedule of rates for Delhi) Schedule of rates 1981 with correction slips, minus/plus percentage which the total tendered amount bears to be estimated cost of the entire work put to tender.
(iv) if the rates for the altered, additional, or substituted work cannot be determined in the manner specified in Sub-Clause (i) 7 (iii) above, then the rates for such work shall be worked out on the basis of the Schedule of Rates of the District specified above minus/plus the percentage which the total tendered amount bears to the estimated cost of the entire work put to tender. Provided always that if the rate for a particular part or parts of the item is not in the schedule of rates, the rate for such part or parts will be determined by the Engineer-In Charge on the basis of the prevailing market rates when the work was done.
(v) If the rate for the altered, additional or substituted work cannot be determined in the manner specified in sun-clauses (i) to (iv) above, then the contractor shall, within 7 days of the date of receipt of order to carry out the work, inform the Engineer-in-Charge of the rate which it is his intention to charge for such calls of work, supported by analysis of the rate or rates claimed and the Engineer-In-Charge shall determine the rate or/rates on the basis of prevailing market rates, and pay the contractor accordingly, however the Engineer-In-Charge, by notice in writing, will be at-liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider advisable. But under no circumstances the contractor shall suspend the work on the plea of non-settlement of rate of items falling under the clause.
(vi) Except in case of items relating to foundations provisions contained in sub-clause (i) to (v) above shall not apply to contract or substituted items as individually exceed the percentage set out in the tender documents (referred to herein below as deviation limit) subject to the following restrictions:
(a) The deviation limit referred to above is the net effect (algebraic sum) of all additions and deduction ordered.
(b) In no case shall the additions/deductions (arithmetical sum) exceed twice the deviation limit.
(c) The deviation order on items of any individual trade included in the contract shall not exceed plus/minus 50% of the value of that trade in the contract as a whole or half the deviation limit; whichever is less.
(d) The value of additions of items of any individual trade not already included in the contract shall not exceed 10% of the derivation limit.
For the purpose of operation of clause 12 (iv) the following work shall be treated as work relating to foundations:-
(a) For Building, plinth level or 1.2 metres above ground level whichever is lower, excluding items of flooring and D.P.C. But including base concrete below the floors.
(b) For abutment piers, retaining walls of culverts and bridges, walls of water reservoirs, the bed or floor level.
(c) For retaining walls where floor level is not determinate 1.2 metres above the average ground level or bed level.
(d) For roads all items of excavations and filling including treatment of sub-base and soling work.
(e) For water supply lines, sewer lines, underground storm water drains and similar works, all items of work below ground level except items of pipe work and masonry work.
(f) For open storm water drains, all items of work except lining of drains.
Note: Individual trade means the trade sections into which a schedule of quantities annexed to the agreement has been divided or in the absence of any such division, the individual sections of the C.P.W.D. Schedule of Rates specified above, such as excavation and earthwork, concrete, wood work and joinery etc.
The rates of any such work except the items relating to foundations which is in excess of the deviation limit shall be determined in accordance with the provisions contained in clause 12-A.
CLAUSE 12A:-
In the case of contract or substituted items which individually exceed the quantity stipulated in the contract by more than the deviation limit, except the items relating to foundation work, which the contractor is required to do under Clause 12 above, the contractor shall, within 7 days from the receipt of order, claim revision of the rates supported by proper analysis in respect of such items for quantities in excess of the deviation limit, notwithstanding the fact that the rates for such items exist in the tender for the main work or can be derived in accordance with the provisions of sub-clause (ii) of Clause 12 and the Engineer-in-Charge may revise their rates, having regard to the prevailing market rates and the contractor shall be paid in accordance with the rates so fixed. The Engineer-in-Charge shall, however be at liberty to cancel his order to carry out such increased quantities of work by giving notice in writing to the contractor and arrange to carry it out in such a manner as he may consider advisable, but under no circumstances the contractor shall suspend the work on the plea of non settlement of rates of items falling under this Clause.
All the provisions of the preceding paragraph shall equally apply to the decrease in the rates of items or quantities in excess of the deviation limit, notwithstanding the fact that the rates for such item exist in the tender for the main work or can be derived in accordance with the provisions of sub-clause (ii) of the preceding Clause 12, and the Engineer-in-Charge may revise such rates having regard to the prevailing market rates.
57. Reasoning of the learned arbitrator on this issue is as under:-
'ii) The respondent has claimed the following amounts for the reasons given below against each amount.(a) Penal recovery for stipulated Rs.1,31,257.00material(b) Amount withheld for non- Rs.1,18,000.00sanction of EI/SI item @25%on the amount of Rs.4,71,636.61(c) Amount withheld for non- Rs. 29,250.00sanction of EI/SI at the rate of 50% on Rs.58488.82(d) Amount withheld on account Rs. 10,000.00of non settlement of qualitycontrol paras. -------------------Total Rs.2,88,507.00-------------------
The respondent has abruptly shown deductions of the above said amount without giving any details for the same or any cogent evidence for the admissibility of making the above said recoveries. As such respondent intention to make the above said recoveries is not valid and thereforee the same is not accepted by me and is rejected.
58. In the decision reported as AIR 1985 Del 370 Bindra Builders v. D.D.A., a learned Single Judge of this court while dealing with clauses 12 and 25B, being identical to the clauses in the present contract held that:-
. . . . . . . . . . The position of law in this regard is well settled that where the test for determining whether the dispute is one arising out of the contract or in connection with the contract is whether recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the party is justified or otherwise. If it is necessary to take recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrators have jurisdiction to decide that dispute. See in this regard the decision of the Supreme Court in Union of India v. Salween Timber and Construction Co., : [1969]2SCR224 . The controversy, thereforee, in the present case with regard to the interpretation of different terms and conditions of the contract and further whether in the context of facts which the parties may bring forth, the case would be one of substitution or of reduction is primarily within the domain of the arbitrator. If he finds that the case is of substitution, he would naturally adjudicate upon the same. If, however, he comes to the view that the case is one of reduction, then to that extent he will be bound by the decision of Chief Project Engineer in terms of Cl.25-B. Thus, I had the occasion to observe in similar circumstances in the case Suit No. 160-A of 1983 Shiv Hari Tandon v. Union of India decided on 22-4-1985 as under :Adverting to the other plea about the expected matters, it need hardly be impressed that the interpretation of the terms of contract is entirely within the domain of the arbitrator. He has to give effect to the same. In case any of the terms envisages that particular authority's decisions on certain matters have to be final, the arbitrator would certainly be bound by those decision and would not question them. By doing so he would be only acting in terms of the contract and giving effect to those terms while determining the rights of the parties. This made clear and it is directed that the arbitrator will act accordingly. Whether any particular work could be considered as extra items or not would also depend upon the interpretation of the contract and the arbitrator as such will consider them. His appointment as arbitrator arises from the clause existing in the contract and naturally he acts within the limits of the contract.
59. Award does not reflect with clarity whether the 4 items were substituted works or were regarding substandard work. However, a perusal of the pleadings and evidence before the learned arbitrator shows that the items were being treated as substituted items and not substandard work or as reduction iteMs. Accordingly, in view of the decision in Bindra Builders case I hold that the award pertaining to subhead vii of claim No. 5 is legal and valid.
60. Learned counsel for DDA relied upon a Division Bench judgment of court reported as : 97(2002)DLT976 DDA v. Prem Singh. The said decision was dealing with a clause being clause 14A which provided that the decision of the Chief Project Engineer regarding the quantum of reduction as well as justification thereof in respect of rates of substandard work was final. It was held that since the clause treated the decision as an excepted matter, not open for arbitration, decision by the learned arbitrator on an issue of quantum of reduction and substandard work was without jurisdiction.
61. The decision is clearly distinguishable for the reason that in the instant case, learned arbitrator has dealt with different issues, namely substituted iteMs.
62. The second challenge pertaining to another subhead of claim No. 5 was to the escalation worked out under clause 10CC for the work done between May, 1989 to 15.7.1989. Amount payable for escalation under Clause 10CC in sum of Rs.3,18,521.12 was challenged by Ms. Anusuya Salwan on the ground that the learned arbitrator had taken two months average indices and not 3 months as per clause 10CC of the contract.
63. Clause 10CC of the contract required:-
The index relevant for any month will be arithmetical average of the indices relevant to the 3 calendar months preceding month in question.
64. Mr. Harish Malhotra, learned counsel for the respondent urged that learned arbitrator had determined compensation under clause 10CC for month of June and July, 1989 for the reason work was completed in July 1989 and up to May 1989, benefit of clause 10CC had been given by the department itself. Since only two months were left, learned arbitrator took the arithmetical average for two calendar months and not three.
65. A perusal of the contract between the parties would show that benefit of clause 10CC had to be worked out every quarter and for said reason the clause stipulated arithmetical average of indices relevant to 3 calendar months.
66. Since, learned arbitrator had to determine compensation only for two calendar months, he rightly took into account the arithmetical average of the indices for the month of June and July, 1989. No fault can be found to the award on this issue.
67. No other finding pertaining to any other item of work was seriously challenged and I need not, thereforee, deal with the various aspects of the award pertaining to other items constituting claim No. 5.
68. Laying a challenge to claim No. 6, Ms. Anusuya Salwan learned counsel for DDA urged that the claim was wrongly allowed by the learned arbitrator pertaining to the applicability of the rate of interest. Counsel urged that in view of the provisions of the Indian Interest Act, 1978, interest which could be awarded could not be more than the rate of interest paid by scheduled banks on fixed deposits.
69. Claim No. 6 was for interest at the rate of 24.2% p.a. with quarterly rests on the amount of final bill w.e.f. 15.1.1990 till date of payment. It may be clarified that date of payment was the sum which was paid by DDA as per DDA's version as the amount payable and paid accordingly.
70. As noted above, work was completed on 15.7.1989. Claimant gave benefit of 6 months and claimed interest w.e.f. 15.1.1990.
71. Learned arbitrator has awarded interest at the rate of 17.5% p.a. with quarterly rests. Learned arbitrator has relied upon a notification issued by the Government of India, being Ex.C-63.
72. Learned arbitrator has also taken note of the fact that the claimant had issued a notice to DDA pointing out that if amount was not paid, claimant would be charging interest.
73. Ex.C-63 is nothing but The Interest on Delayed Payments to Small Scale & Ancillary Industrial Undertakings Act, 1993.
74. The Act came into force on 2.4.1993. As per the Act, small scale and ancillary industrial undertakings were entitled to interest 5% points above the floor rate for comparable lending. Floor rate being the highest of the minimum lending rates charged by scheduled banks.
75. Award shows that learned arbitrator has taken note of bank certificates being Ex.C-80 and C-82 and thereupon has awarded interest at the rate of 17.5% p.a. with quarterly rests w.e.f. 14.1.1990.
76. Learned arbitrator ignored that the Act relied upon came into effect on 2.4.1993 and, thereforee, said Act could not form the basis of interest w.e.f. 14.1.1990. Position thereforee would be that the claimant would be entitled to interest as per Interest Act 1978 w.e.f. 14.1.1990 till 2.4.1993 and thereafter as per The Interest on Delayed Payments to Small Scale & Ancillary Industrial Undertakings Act, 1993.
77. Scheduled banks were offering interest on deposits @ 12% p.a. compounded quarterly if interest was not withdrawn by the depositor in the year 1990 and up to the year 1996. Taking judicial notice of the said fact, award pertaining to claim No. 6 is modified as under:-
(i) Claimant would be entitled to interest on the final bill @ 12% p.a. with quarterly rests w.e.f. 14.1.1990 till 1.4.1993.
(ii) Claimant would be entitled to interest @ 17.5% p.a. with quarterly rests on the amount of final bill w.e.f. 2.4.1993.
78. No challenge was raised to claim No. 7 as awarded and, thereforee, I need not deal with the issue. Needless to state that the claim was for release of bank guarantee submitted by the claimant to DDA. Claim was held admissible. Second limb of the claim, it was rejected for the reason claimant could not prove that it had incurred expenses for renewal of the bank guarantee and accordingly no amount was awarded.
79. Claim No. 8 in sum of Rs.65,185/- on account of watch and ward staff beyond date of completion of the contract till 15.12.1991 has been allowed by the learned arbitrator.
80. Learned arbitrator has held that on account of minimum watch and ward, being six chowkidars and keeping one plumber and painter at site beyond 14.1.1990 when defect liability period came to end till 15.12.1991 when possession was taken over by DDA, claimant would be entitled to Rs.1,35,700/- but since claim was in sum of Rs.65,185/- arbitrator restricted the award to said sum.
81. Learned counsel for DDA could not shake the foundation of the award. Indeed, claimant was not required to keep watch and ward till officers of DDA, at their whims and fancy, chose to take possession after nearly 2 years. The award pertaining to claim No. 8 is accordingly sustained.
82. Claim Nos. 9 and 10 in sum of Rs.1,04,980/- and Rs.1,30,370.25 have been allowed by the arbitrator. The two claims were for refund of the rebate due to non-finalization of the final bill within 6 months and on account of late payment for running bills. Learned arbitrator has recorded that rebate was offered by the claimant if payment was released in time and this not having happened, in that, payments were released belatedly, held that the rebate deducted by DDA was unjustified and as a consequence claimant was entitled to refund. However, learned arbitrator did not order any amount to be paid for the reason he recorded that while finalizing claim No. 5, being the claim for amount payable under final bill, he had effected full payment and directed full amount to be made.
83. It is settled position in law that where a right is conditional upon performance of a reciprocal prior obligation, till the obligation is performed, right does not accrue. Offer of rebate being conditional on timely payment, payment not being released within the stipulated time, would disentitle the beneficiary the benefit of the rebate. Claim No. 9 and 10 as awarded have to be upheld. It may however be noted that the effect of allowing the said two claims is nil.
84. Claim No. 11 has been awarded in sum of Rs.19,362.60. Claim was on account of shuttering and centering. According to the claimant, DDA had wrongly measured and accordingly paid less while measuring the centering and shuttering for the supporting beams of the suspended floor slab.
85. Award shows that the learned arbitrator has referred to the evidence led and CPWD specifications, being Ex.C-71. Finding is a pure finding of fact and since it is based on evidence, the award has to be upheld.
86. Claim No. 12 has been allowed in sum of Rs.68,580/-. Claim was for unmeasured length of SCI pipe. Learned arbitrator has noted that DDA was adopting different yard-sticks for measuring pipes i.e. different yard-stick was applied to measure the pipe when issued and different yard-stick when measurements were taken after pipes were affixed. It has been held that mode of measuring while issuing and while measuring for payment purposes should be the same.
87. Pleadings of the parties would show that what was actually happening was that since pipes were being fitted into sockets, segment of the pipe which went inside the socket was being left un-measured when measurements were taken on completion of the work. In this manner, certain segments of the pipe were left un-accounted for purposes of payment.
88. To any reasonable person with a practical approach, it would be evident that if a pipe segment gets fitted into a socket, length of pipe remains the same. Award pertaining to claim No. 12 is legal and valid and is accordingly upheld.
89. Claim No. 13 has been rejected and there being no challenge by the claimant, I need not deal with the issue at all.
90. Claim No. 14 has been rejected and there being no challenge by the claimant, issue need not be dealt with.
91. Claim No. 15 has resulted in no sum being awarded as learned arbitrator has held that issue of delay in releasing payments has been dealt with under claim No. 6.
92. Since issue of interest has been dealt with by me while dealing with claim No. 6 and said claim as awarded stands modified, nothing survives for adjudication pertaining to claim No. 15. Indeed, Ms. Anusuya Salwan raised no issues pertaining to claim No. 15.
93. Claim Nos. 16 and 17 pertained to claim for interest from 14.1.1990 till date of reference of pendente lite and future interest respectively.
94. Learned arbitrator has awarded interested @17.5% p.a. w.e.f. 14.1.1990.
95. For the reasons stated while modifying claim No. 16 as awarded, award pertaining to claim Nos. 16 and 17 is modified, in that, interest awarded w.e.f. 14.1.1990 to 1.4.1993 is reduced to 12.5% p.a. with quarterly rests and thereafter effective from 2.4.1993 as awarded.
96. is No. 4518/1996 accordingly stands disposed of. Award dated 23.12.1995 is made a rule of the court with modifications as aforesaid. Post decretal interest is awarded to the petitioner from date of decree till date of payment @ 12% p.a. from date of decree till date of payment.
97. No costs.