J.D. Kapoor, J.
1. The award dated 31.3.1995 is sought to be maderule of the court. It has been assailed and challenged bythe respondent-DDA on multifarious grounds.
2. Until and unless, award suffers from the vicesof perversity or unsound legal or factual finding or isbeyond the terms of the agreement, it should ordinarily benot disturbed as the court does not sit in appeal nor isit required to re-appreciate or re-assess the evidence ormaterial on record. Even if erroneous view has been takenby the Arbitrator, the award is not liable to be setaside.
3. Proceeding on the aforesaid premise, I set todiscuss the objections filed by the respondent.
4. Claim No. 1 is towards balance payment of finalbill. According to the claimant, although the work wascompleted on 5.4.1989, the final bill was not prepared.Ultimately, claimant prepared their own final bill on3.1.1992 claiming sum of Rs. 6,67,254.43. The final billincluded the substituted and extra items.
5. The main objection raised by Ms. Anusya Salwan,learned counsel for respondent No. 1 is that the Arbitratorhas gone beyond the terms of the agreement and hastherefore erred in law in allowing this claim particularlyin view of the fact that there was reduction in the finalbill approved by the Superintending Engineer and wastherefore an excepted matter under Clause 25.B of theagreement. Clause 25.B provides as under:-
'The decision of SE regarding the quantumof reduction as well as justification thereofin respect of rates for sub-standard work whichmay be decided to be accepted will be final andwould not be open to arbitration.'
6. Apart from this, Ms. Salwan has also contendedthat since the claimant had accepted all the paymentswithout any protest during the currency of the contract,the dispute raised by the petitioner-claimant did not comeunder the purview of the contract.
7. However, this contention of the respondent wasrepelled by the Arbitrator in view of the statement ofrespondent No. 1 that under the sub-head 'items notinitially paid though agreed to be paid' were never agreedby the respondent. Further observations of the Arbitratorin this regard are as under:-
'In respect of the Final Bill includingsubstituted and Extra items, the Respondentshave prepared on 23.9.1994, a minus bill for anamount of (-) 10,289/-. In respect of itemsnot initially paid, though agree to be paid,the wording of the items has been examined andtheir costs determined. In respect of itemNo. 6.1 'Tee Iron frames for doors, windows andventilators, the scattered nature of concretefor the hold fasts is to be measured underconcrete and the scattered nature of shutteringis to be measured under shuttering. In respectof Sand filling in plinth with J.Sand andsupply of bitumen in Act. items 2.4 and 8.4',the arguments of the Executive Engineer areaccepted. In respect of 'Cutting andstraightening of steel bars and bottom tie inAct item No '6.1' the argument of the claimantis accepted with slight reduction in rate. Thetotal works out to Rs. 1,40,105.15 only againstRs. 2,51,018.67 worked out by the Claimant inpage C-61/20 of Folder NO:3.'
8. Perusal of the record shows that the respondentraised specific objection that the reduction and deductionhas been approved by the Superintending Engineer underClause 25.B of the agreement and thereforee is not withinthe purview of the Arbitrator. Still the Arbitratorconveniently did not deal with this objection andproceeded with the merits of the matter.
9. While defending findings of the Arbitrator,Mr. D. Moitra, learned counsel for the petitioner-claimanthas contended that unless and until respondent servesnotice upon the claimant bringing out the particulars ofsub-standard work done by the claimant as required byClause 14 of the contract, the decision of the Supdt.Engineer with regard to reduction and deduction does notcome within the ambit of excepted matter. Clause 14 readsas under:-
'If it shall appear to theEngineer-in-charge or his authorisedsubordinate in charge of the work or by theChief Engineer/Additional Chief Engineer,Superintending Engineer/Chief TechnicalVigilance Commission and Chief Engineer QualityControl DDA or his authorised subordinate or byan officer of the vigilance Cell of theAuthority that any work has been executed tothe unsound, imperfect or unskilful workmanshipor with materials of any inferior scription,or that any materials or articles provided byhim for the execution of the work are unsoundor of quality inferior to that contracted foror otherwise or not in accordance with thecontract, the contractor shall on demand inwriting which shall, be made within six monthsof the completion of the work from theEngineer-in-Charge specifying the work,materials or articles complained ornotwithstanding that the same may have beenpassed, certified and paid for, forthwithrectify or remove and reconstruct the work sospecified in whole or in part, as the case mayrequire or as the case may be, remove thematerials or articles, so specified and provideother proper and suitable materials or articlesat his own proper charge and cost, and in theevent of his failing to do so within a periodto be specified by the Engineer-in-Charge inhis demand aforesaid then the contractor shallbe liable to pay compensation at the rate ofone percent on the estimated amount put totender for everyday not exceeding ten dayswhile his failure to do so shall continue andin the case of any such failure, theEngineer-in-Charge may rectify or remove andre-execute the work or remove and replace withothers, the materials or articles complained ofas the case may be at the risk & expenses inall respects of the contractor.'
10. It is contended by Mr. Moitra that the disputesreferred to the Arbitrator were never with regard to itemsnot initially paid nor with regard to excepted matters.
11. I am afraid the aforesaid contention does nothold water firstly for the reason that claimant hadaccepted the final bill without any protest; secondly theArbitrator has made grave error by not dealing with theobjection of respondent that claim No. 1 was an exceptedmatter.
12. Clause 25.B specifically lays down thatreduction and deduction approved by the Supdt. Engineershall not be brought in question and be binding and final.
13. If the contended of Mr. Moitra is accepted, thequestion of refuting the claim of the petitioner-claimantthat the items referred by the petitioner as not initiallypaid though agreed to be paid would not have arisen. Therespondent took the specific plea that respondent hadnever agreed for these items to be paid.
14. In a reasoned award, the Arbitrator is expectedto deal with substantial objections raised by the partiesand not to conveniently avoid or omit reference to thoseobjections. At first instance, the Arbitrator wasrequired to see whether the items in question were agreedto be paid or not or whether those items come within theambit of Clause 25.B or not. Until and unless, theArbitrator had first given the finding that the items notinitially paid were agreed to be paid by the respondent,the stage of allowing the claim in respect of items inquestion could not have reached.
15. The aforesaid facts show that the Arbitrator hasnot only misconducted himself legally but on factualmatrix also and thereforee the award in respect of thisclaim is not sustainable and is set aside.
16. Claims No. 2, 4 & 5 are on account of work done during the extended period of contract. According to theclaimant the work which was to be completed within 6months time was prolonged to three years time for no faultof theirs and, thereforee, on account of delay they shouldbe paid Rs. 7,34,808/- as escalation charges during theextended period of the contract as per annexure-1. On theother hand the stand of the learned counsel for the DDAwas that the site free from encroachment was handed overto he petitioner and the claimants took a lot of time inthe preliminaries such as construction of cement godownlabour huts, site office and in arranging of materials.The main cause for delay, according to the petitioner wasthat the material, drawing and designs were supplied verylate and payments were also delayed by the respondents.
17. Claim No. 2 was on account of work done duringthe extended period of the contract. Claim No. 4 was onaccount of los sand damages due to the idleness of thestaff. Claim No. 5 was on account of the loss suffered dueto the idleness of tools and plants during over run periodof the contract. The learned Arbitrator awarded claimsunder all the aforesaid Heads. The finding of theArbitrator has bene assailed mainly on two grounds;firstly that all the three claims are overlapping andsecondly the petitioner is as per the term of the agreementwere not entitled for damages in case there was delay insupply of materials and delay in handing over part site.Relevant term of the agreement is special condition No. 1stipulates that if there is a delay in supply ofstipulated material, then the claimant is not entitled toany compensation.
18. Clause 22 is also the relevant clause whichreads as under:
'All sums payable by way of compensationsunder any of these conditions shall beconsidered as reasonable compensation to beapplied to this use of Delhi DevelopmentAuthority without reference to the actual lossor damage sustained, and whether or not anydamage shall have been sustained.'
19. Thus is nutshell the contention of Ms. Salwan,learned counsel for the respondent is that the award isbad in law and facts and without jurisdiction and iscontrary to the stipulation in the contract. Furthersince the claimant could not have been paid over and abovewhat was payable under the clause of the agreement awardtowards escalation in cost of material and labour is alsobad in law. Moreover, contract also does not provide d anyescalation during the extended period of contract andtherefore escalation charges are de hors the clearstipulations of the contract. While canvassing theproposition that the award is liable to be set aside ifthe Arbitrator traverses beyond his jurisdiction.Ms. Salwan has placed reliance on (i) AssociatedEngineering Company v. Government of Andhra Pradesh andAnr. 1991 ALR 181 (SC) and (ii) Steel Authority ofIndia Limited v. J.C. Budharaja, Government and MiningContractor 1999 (30 Arb. LR 335 (S.C.)
20. In SAIL's case Clause 32 was almost identical toClause 22 of the instant contract. Observations ofSupreme Court are noteworthy and are as under:-
'....It was not open to the Arbitrator toignore the said conditions which are binding onthe contracting parties. By ignoring the same,he has acted beyond the jurisdiction conferredupon him. It is settled law that arbitratorderives the authority from the contract and if heacts in manifest disregard of the contract theaward given by him would be arbitrary one. Thedeliberate departure in the contract amounts notonly to manifest disregard of the authority ormisconduct on his part, but it may tantamount tomala fide action. In the present case, it isapparent that warding of damages of Rs. 11 lakhsand more for the alleged lapses or delay inhanding over work is, on the fact of it, againstthe terms of the contract.'
21. In another similar case titled Rajasthan StateMines and Minerals Ltd. v. Eastern EngineeringEnterprises and Anr. 1999 30 ALR 350 (S.C.) a clausethat the remuneration payable would be inclusive of theelement which includes cost of explosives etc.accessories, transportation, salary and wages. It wasalso provided that the contractor shall not be entitled toraise any such claim. Still the Arbitrator awarded theclaim for cost of explosives, transportation. It was heldthat the Arbitrator being the creature of the contractbetween the parties cannot ignore the specific terms ofthe contract as it would be a question of jurisdictionalerror which could be corrected by the Court.
22. However Mr.Moitra has relied upon a recentlydecided case titled Bengal Traders Versus West BengalState Electricity Board 2001(2) RAJ 315 (SC) wherein itwas held that such a stipulation of the term of theagreement does not apply to a claim in respect of loss ofexpenditure, overhead charges, establishment, idleness oflabour, increase of cost of execution during prolongedperiod and compensation of loss and profit.
23. Perusal of the award shows that the Arbitratorhas found that the work was held up for generalhindrances which were beyond control and, thereforee,claimant was entitled for escalation. Merely because thetitle of the claim No. 2 was that the award was not onaccount of work done during the extended period ofcontract did not mean that the award was given with regardto the work not done, the Arbitrator has rightly observedthat claimant is entitled for escalation in costs becausethe work was held up for general hindrances and for nofault of his.
24. As regards claim No. 4 the Arbitrator hasobserved that he claimant had kept the supervisory stafffor the shutters and other drawings and designs for twoyears and 8 months. It is difficult to accept and imaginethat a contractor would keep paying salary to the staffwithout getting any work from them for such a long period.The loss and damages on account of this problemscompensated by the Arbitrator are not awardable.Similarly the loss suffered by the plaintiff by way ofclaim NO. 5 due to idleness of tools and plants due to overrun period of the contract was well compensated throughthe escalation because of the extended period of contracti.e. for about 2 years 8 months. In every claim thebasis for award was the default on the part of therespondent due to the non-availability of the cement,designs etc. As is apparent from the reasons given by theArbitrator while awarding claim No. 2, 4 & 5 these werecommon and could not have been segregated from the eachother.
25. In view of this only claim No. 25 of the award isupheld whereas award with regard to claims 4 & 6 is setaside.
26. As regards the remaining claims which are onaccount of refund of the bank guarantee and interest, I donot find any merit in the objection of the respondent asthese were well within the competence of the Arbitratorand have been awarded on reason ed grounds.
27. In the result claims 2,7, & 9 are allowed. Thesuit is decreed for the amount awarded against theseclaims.
28. However the interest @ 15% shall be calculatedat the proportionate amount of award which has bene upheldin this order form the date of the award till itsrealization.