M.S.J. Construction (P) Ltd. Vs. Delhi Development Authority and anr. - Court Judgment

Pradeep Nandrajog, J.

1. DDA's objections to the award dated 25.1.1992 published by Shri S. Nagarajan are being decided by the present order.

2. DDA had to construct flats at Motia Khan, Delhi. The structures had to be rested on a pile foundation. Petitioner was awarded the work of providing RCC bored cast-in-situ pile foundations with pile caps and grid beams in block 1 and 2. Scope of work was listed in the agreement No. 6/EE/CPD-6/84-85.

3. 754 piles had to be casted. Contract was awarded on 27.12.1984. Date of commencement of the work was 10 days after the letter of award. Thus, date of commencement was 6.1.1985. The work had to be completed within 5 months. Thus, nearly 150 piles had to be casted per month. Work continued for 3 years. Contract was ultimately revoked by DDA on 14.7.1988. It appears that about 300 odd piles were casted.

4. Contract contained an arbitration clause. Contractor had a claim on account of:

(a) Towards hire charges for plant and machinery during extended period of contract;

(b) Wages paid to operators, supervisors and watchmen at site during contract prolonged period;

(c) Office overheads and loss of profit on account of contractor being unable to pick up other works and establish charges incurred during contractor prolonged period;

(d) Interest on the aforesaid three claims.

5. DDA had a counter claim on account of:

(a) Compensation levied under Clause 2 of the agreement;

(b) Reimbursement towards cement and steel supplied for the piles which were sub-standard and of no use;

(c) Forfeiture of the security deposit;

(d) Loss suffered on account of execution of balance work at higher rates;

(e) Interest.

6. Learned arbitrator awarded contractor sums of Rs. 6,48,000/-, Rs. 89,450/- and Rs. 98,596/- in respect of claims 1, 2 and 3. Pre suit interest @12% was awarded. Future interest was also awarded at same rate. Pendente lite interest was declined.

7. Counter claims 1, 3 and 4 raised by DDA were rejected. Counter claim No. 2 was allowed in sum of Rs. 61,349/-. DDA was awarded interest on the sum awarded to it at the same rate of interest at which contractor was awarded interest.

8. Net award is in favor of the contractor in sum of Rs. 7,74,697/-.

9. From the aforesaid facts, it is but apparent that the fulcrum on which the claims and counter claims were predicated, except counter claim No. 2 of DDA were on the substratum of the dispute as to who was responsible for the delay in execution of the work.

10. Whereas contractor alleged defaults attributable to DDA; being site not being leveled properly, obstructions due to material of other contractors lying scattered at the site, interference from jhuggi dwellers in the neighborhood and delay in supplying layout drawings DDA alleged lack of mobilization by the contractor as the principal cause for delay in execution of the work. Besides, DDA alleged that boreholes had to be abandoned from time to time as contractor could not bore the same as per required alignment.

11. Record of the arbitrator shows that over 100 documents were filed by the parties.

12. The award does not refer to a single document save and except contractor's document Ex.C-40, though there is reference to a few dates in the award which on a incisive reading of the documents can be linked to 5 or 6 documents filed before the arbitrator.

13. Discussing claim No. 1, learned arbitrator has noted that the Delhi Urban Arts Commission granted approval to the drawings of the building in March 1986 i.e. 14 months after commencement of the work and 10 months after stipulated date of completion. But, discussing claim No. 3 of the contractor, learned arbitrator has, in para 3.3.2 of the award recorded:

However, there was delay to some extent, during the short period when execution of the work was possible, on the part of the claimants.

14. It is settled law that where material document or a material evidence is ignored, it would constitute a legal misconduct. There are various decisions which hold so. I note only one. : AIR2003SC3209 , Union of India v. V. Pundarikashudu and Sons and Anr.

15. Perusal of the award, as noted above, shows that what has weighed with the learned arbitrator against DDA is the fact that the Delhi Urban Arts Commission gave approval to the drawings in March 1986. Though not stated in the award, it is apparent that learned arbitrator had in mind the fact that till layout is approved, it cannot be known where structures would be erected. Till this is not known, piling work cannot be done.

16. Principally, I agree with the said rationale, but something more has to be looked into. Why?

17. In the execution of a construction contract various drawings are necessary, for example, foundation detail drawings, structural drawings, elevation drawings, electrical and plumbing drawings etc.

18. Non availability of a particular drawing would not necessarily mean that no work could be commenced or progressed with the requisite speed. This is the reason why bar charts and pert charts are prepared when a construction project is taken up. For example, earth work would not be hampered by non- availability of any of the drawings for the reason it involves only digging operations. But, when earth work is over and foundations have to be laid, foundation detail drawings become imperative to be finalized. Only when these drawings are finalized work of foundation can proceed. Non availability of structural drawings would not hamper this work. The bar chart or the pert chart gives good guidance to ascertain which works could be carried out and at what stage particular drawings are necessary.

19. Unfortunately, learned arbitrator has lost sight of these primary principles while considering the claims and the counter claims. As I read the award, learned arbitrator has over simplified the issue.

20. But since objections are that by ignoring material documents, award suffers from a misconduct, I analyze the documentary evidence before the arbitrator in a little more depth.

21. Ex.C-2 being contractor's letter dated 11.2.1985 shows that work on test pile was taken up on 24.1.1985. So informing, contractor has written to the department that work was hampered due to building materials of other contractors lying scattered at the site, filth and rubbish material lying at the site and Jhuggi dwellers in the neighborhood preventing access to the trucks and other vehicles reaching the area and above all unhygienic conditions at the site.

22. However, in relation to the layout of piles and general layout, in para 5, I note that the contractor admitted receipt thereof. He queried that the drawing of the piles indicate that sulphate resistant cement shall be used and since cement had to be supplied by DDA, he was informed that central stores of DDA does not have sulphate resistant cement. I quote, in the words of the contractor, para 5 of the said letter. It reads as under:

We were issued the drawings for the work indicating the lay-out of piles and general lay-out. On the drawing for piles, it has been indicated that sulphate resistant cement shall be used for the piles. This point has already been pointed out by us to you. It was also submitted by us that sulphate resistant cement is not available in the Central Stores of D.D.A. It was then decided that the Department shall confirm the designers regarding the solution for sulphate resistant cement. We would request you to kindly confirm the decisions to us at an early date since it has been decided to start the work on working piles immediately.

23. This was followed by contractor's letter Ex.C-3, dated 21.2.1985, in which it wrote that test piles at site No. 5 and 6 had been installed. Indent for cement and steel had been issued to the executive engineer. However, contractor wrote that the malba and building material brought by other contractors was still lying scattered and that issue of fencing the area which was discussed needed immediate attention as persons in the neighborhood were fouling the site. On 8.3.1985, vide Ex.C-4, contractor wrote on the issue. It referred to work of test pile being carried out. Contractor wrote that since site was not cleared, with great difficulties, contractor started the layout for the first grid and marked the position for columns. He wrote that encountering large size holders, casing of the pile got delayed. Contractor raised a grievance pertaining to the rock samples in the womb of the earth. A grievance was made that cement and steel which was to be supplied by the department and for which an indent was placed were not supplied.

24. Contractor's letter Ex.C-4 was replied by the department vide letter dated 20.4.1985, Ex.R-1. The said letter reads as under:

No. F.20(13)SDI/CPDVI/DDA/85/ Dated: 20th April, 85.

To

M/s. M.S.J. Constructions Pvt. Ltd.

Central Zone,

37-Kanchan Bagh,

INDORE-452 001 (INDIA)

Sub: C/o 320 Multi storeyed flats under S.F.S. at Motia Khan.

SH: Providing RCC Bored cast-in-situ pilefoundation i/c pile caps and grade bears in Block No. 1 and 2.

Agreement No. 6/ES/CPDV/34-85.

Ref: Your letter No. MSJ/CZ/DDA/CPDVI/MK/85 dt. 8.3.85.

Dear Sir,

Inspite of several promises made by your site representative and Consultant the work has not been taken up in the right earnest and instead certain deficiencies are being pointed out by you which are otherwise required to be done by you as per the terms of the Contract. However, the points raised by you in the above mentioned letter are clarified below:

1. The location of the test pile was already decided by the Department and could be given to you on 24.1.85. As brought out to that you had no establishment/reqd. T and P for taking up the work at above site till that date.

2. The difficulty in doing a proper bore for the test pile was mainly because of insufficient tools and plants and required machinery at site of work. Since the results of previous tests conducted at this site available with the Deptt. and you had sufficient time in between to make suitable preparations for the above project which was not properly utilized.

3. Since the work was being delayed by you as in order to boost up the progress, it was decided to take up the work of routine piles which was mainly to cover up the initial delay on your part.

4. The work on the first working pile was taken up by you but on completing the bore to a depth of about 8 Mtr. It was seen that the bore is out of verticality by 22 cms. and you were requested to rectify the same. Since you could not do it so there was no alternative with you to abandoneethis bore and try on next pile.

5. The work on 2nd working pile was taken up and during the progress of bore it was seen that the bore is again out of plumb by about 18cms. and you had promised to sit it right before asking the concreting the same.

6. inspire of clear instructions issued from the department, it is regretted that a specialized firm could not keep vertical bore inspire of may efforts.

The issue on stipulated material i.e. cement and steel has been regulated by the Department right from the beginning. Necessary drawings/decision reqd. at any stage already stands issued to you but inspire of such efforts, it is brought out that you have not been able to bring required men, material and machinery at site of work, as a result practically no progress has been achieved. Even the load test on the test pile already completed has not been arranged by you till date for the reasons next to you only.

Under the above circumstances, it is once again addressed that the time being essence of the contract has to be adhered strictly. Specially when there is no hindrance from the department side.

Yours faithfully

Sd/-

(S.K. JAIN)

EXECUTIVE ENGINEER

C.P.D.VI. D.D.A.

25. Contractor wrote a letter on 3.6.1985, Ex.C-7. The same reads as under:

No. MSJ/CZ/DDA/CPD-VI/MK/85-86/503 Dated: 03.06.85

The Executive Engineer,

Commercial Project Divn. VI,

Delhi Development Authority,

Lawrence Road,

New Delhi - 110 035

Sub: Construction of Multi-storeyed flats under S.F.S at Motia Khan.

SH: Providing RCC bored cast-in-site piles foundation i/c pile caps grade beams in Block No. 1 and 2.

Dear Sir,

We are surprised to note the contents of your various letters issued in the month of April-May, 1985. It is really astonishing to note that even our letters of the month of January, February and March, all have been replied on 20th April, 1985. This clearly indicates lapses on the part of the Department in conveying the decisions/instructions to us in time. It can be observed from the correspondences that the certain clarifications which were sought by us during January-february, Suptd. Engineer, all such decisions/clarifications taken by the Department have been contradicted by your goodself in your letter dated 20th April, 1985. We had even confirmed the various decisions taken at site immediately after the discussions took place at site. We are confident that necessary internal correspondences must be available with the Department which would reflect on our submissions in connection with the various decisions taken at site by the Department.

Further the test pile was provided on 6.2.1985. We had started with the arrangements for conducting initial load test. We had filled up the bags for dead load system and mobilised kentelege system at site in the month of March, 1985. The arrangements made by us can be verified at site. Since March/April, 1985, the concerned AE and JE were not attending to the site. We had contacted them in the Division office and they told us that no decisions has been taken for the final lay-out of the blocks and that the project is in the process of being transferred to some other zone. thereforee the test could not be conducted as the division was not certain. We understood from reliable source that the orders for transfer of the project were given in the month of April, 1985 and the necessary documents would be transferred to the new Division shortly. We were advised to take up the testing work and further work with the new Division.

The decisions regarding levelling and dressing of the area was already taken by the Suptd. Engineer and it was confirmed that only the Departmental bulldozer shall be utilised in doing the same work. We understand that even the indents were placed for the bulldozer by the AE. Further we were referring to the heaps of mulba/earth which were lying in the site of block No. 1. The said heaps were put up in our area of work by another contractor who was constructing the boundary wall under CD-VI. The situation is well in your knowledge and even the Department had approached Division CD-VI asking them to instruct the contractor to remove mulba/earth from our area. The same has not been done till today as can be verified from the site.

Our TandP comprising of one complete unit is lying idle at site since January, 1985 when the work for the test pile was taken up. We have even started with the working piles under the directions of the Chief Engineer. The Department had not given us the clearance for concreting the first pile which was bored on 1.3.1985. We had been requesting the Department regularly for giving us the decisions for concreting the said bore. Please refer to our letter dated 8.3.1985 and 1.4.1985. This indicates that even till 1.4.1985 i.e. after a lapse of 30 days the Department had not given us any clearance for concreting the pile. The reason for non communication of the decisions is best known to the department. According to our information, the architects had issued a letter to the department for stopping the work on account of pending Urban Art Commission approval. This was the reason, why the AE and JE were not attending the site and no decisions were given to us. You would agree that no pile bore can be kept intact for a period of 40 days. Even our letter dated 1.4.1985 was replied by you vide your letter No. F.67(40)84/CPD-VI/A/DDA/2173 dated 13.5.1985 to the Suptd. Engineer wherein your goodself had requested the SE for the issue of revised layout plans with reference to SE letters dated 16.4.1985 and with the instructions to AE to pursuethe matter with the architect wing. This also indicates that the entire delay is attributable to the Department because the Department has failed miserably in fulfilling the contractual obligations by providing final lay-out, un-hindered site for the work. Your goodself have tried to divert the facts by changing the topic/not referring to the points raised by us. We had deputed our Machinery, TandP, Labour, material etc., which are lying idle without any use. It will not be beneficial for the Department to block our heavy investments. It would be better if the decisions is conveyed to us immediately regarding the status of the project. We would also request the Department to give us the instructions regarding removal of our T and P from the site. We would also request you to kindly inform us the AE/JE's the piles and other arrangements etc. It may be pointed out that the date of completion of above work was 5.5.1985 and till today even the final lay-outs for the blocks is not available with the Department.

The Department has also failed in fulfilling their obligations for issue of materials i.e. cement 837.0 MT and Steel 121.0 MT. Only approximately 50.0 MT of cement and 15.0 MT of steel has been issued so far. The market rates have increased a lot and in case the Department is interested to get the work done, we will be entitled for higher rates due to increase in market rates.

This also disposes off your letter No. F.67(40)84/CPD-VI/A/2067 dated 20.4.1985, No. F.67(40)84/CPD-VI/A/DDA/2061 dated 20.4.1985, No. F.20(13)SDI/CPDVI/DDA/85/2066 dated 20.4.1985, No. F.67(40)84/CPD- VI/A/DDA/2173 dated 13.5.1985 and No. F.67(40)84/CPD-VI/A/DDA/2185 dated 14.5.1985.

We would once again request you to kindly convey the decisions of the Department immediately to us and not after a lapse of sufficient period.

We hope you would find above in order.

Thanking you,

Yours faithfully,

for MSJ CONSTRUCTIONS PVT. LTD.

Sd/-

(SANJAY GUPTA)

CONSULTANT

26. Since I am inclined to set aside the award and remit the matter for re-determination, I intend not to note the contents of various other letters in details for the reason any comment in relation thereto would prejudice either party before the arbitrator who would have to decide the matter afresh; save and except to highlight the point that the aforesaid 4 letters exchanged between the parties clearly evidence that layout drawings were received by the contractor and work had commenced. The letters show that work commenced in January 1985. Whereas contractor gave reasons for delay being the ones noted in para 10 above, DDA's stand was as contained in letter dated 20th April, 1985 that contractor had not fully mobilized the site. (I may note that annexure R-1 to R-14 filed by DDA allege non proper mobilization as the real cause of delay).

27. Unfortunately, learned arbitrator has totally eschewed the entire correspondence exchanged between the parties. He has trivialized the issue by referring to the Delhi Urban Arts Commission approving drawings after 14 months of date of award of the contract. Learned arbitrator has not considered the impact thereof in relation to the work awarded to the contractor. He has ignored the primary evidence, evidenced by aforenoted correspondence between the parties that notwithstanding non approval of the drawings from the Delhi Urban Arts Commission, contractor had commenced the work at site. Layout drawings were supplied to him. Sites were identified. Boring and test piling work had commenced.

28. Were the drawings which were approved by Delhi Urban Arts Commission relevant for the execution of the works? The issue is not even been adverted to by the learned arbitrator. What was the impact of contractor commencing execution of the works in absence of the drawing approved by the Delhi Urban Arts Commission? The issue is not even been noted, much less addressed by the learned arbitrator.

29. In what manner material brought by other contractors and lying scattered at the site hampered the work awarded to the contractor? Impact thereof has not even been discussed in the award.

30. Since documents on record show commencement of the work without drawings being approved by the Delhi Urban Arts Commission, possibility of the said drawings have no concern with the works awarded to the contractor cannot be ruled out.

31. However, I discuss no further and return no conclusive finding for the reason this issue would have to be dealt with by the learned arbitrator to whom I remit the proceedings.

32. Suffice would it be for me to record that appreciation of evidence is within the jurisdiction of the arbitrator, but where a court finds that a material document has been ignored, award has to be set aside. Reappreciation of evidence, taking into account the said material document, would have to be by the arbitrator to whom proceedings are remitted.

33. There is another aspect of the matter which needs to be noted. The same is the claim of the contractor for idle machinery, supervisors and labour deployed at the site.

34. Documentary evidence produced by the contractor to show deployment was by a firm called Founders Engineering.

35. Contractor stated that said firm was a part of the group of companies and inter se the contractor and Founders Engineering it was decided that machinery and labour deployed as also supervisory staff at the site would be by Founders Engineering. Case of DDA was that contractor had not deployed the requisite machinery nor had stationed adequate staff for execution of the work.

36. Perusal of record of the arbitrator shows that this issue was discussed on 21.11.1990. But, in the award there is no reference to the elaborate arguments advanced at the hearing held on 21.11.1990.

37. Order sheet shows a four page typed note being the notes of the arguments of the parties on 21.11.1990.

38. Shri Sandeep Sharma, learned Counsel for the contractor sought to urge that the said notes justify the award pertaining to claim Nos. 2 and 3.

39. I am afraid, the notes record the respective stand of the parties. The award must reflect the process of reasoning as to why stand of DDA was rejected and that of the contractor was accepted.

40. I may hasten to record that the instant award is a reasoned award and thereforee I am not probing into the mental process of reasoning akin to a probe when the award is a non speaking award.

41. Was it not necessary for the arbitrator to record a finding that the machinery and the staff of the sister concern was actually deployed at site? Was it not necessary for the arbitrator to hold that the contractor approved paying money to the sister concern during the period staff and machinery was deployed? Relevance of whether contractor could be assigned? And, if it could be assigned, was it so assigned? All these become relevant while considering contractor's second and third claim in light of the evidence led by the contractor to establish the same.

42. Since I have found that material documents have been ignored by the learned arbitrator, in that, impugned award makes no reference to the same, additionally noting that principal reason flowing from the award on issue of delay is approval of drawings by Delhi Urban Arts Commission after 14 months of execution of the work, but letters showing work commencing notwithstanding non approval from Delhi Urban Arts Commission, it is a case of a jurisdictional issue not being decided by the learned arbitrator, i.e. whether works could progress satisfactorily in absence of approval of drawings from Delhi Urban Arts Commission. I hold it to be a case of legal misconduct.

43. Award dated 27.1.1992 published by Shri S. Nagarajan, the sole arbitrator is accordingly set aside.

44. Award shows that the learned arbitrator has since relocated in Madras. Docket explosion in this Court kept the petition on hold for 14 years. Parties would have to incur huge expenses in appearing before the arbitrator in the state of Tamil Nadu and if he is required to come to Delhi, his traveling expenses, boarding and lodging expenses would have to be paid by parties.

45. I, thereforee, do not remit the award to Shri S. Nagarajan for reconsideration.

46. I appoint Justice V.S. Aggarwal (Retd.), a former Judge of this Court, C-3, Panchsheel Enclave, New Delhi (Ph:26491797) as the arbitrator to re-decide the issue between the parties. I further direct the new arbitrator appointed to proceed from the stage of arguments for the reason pleadings and evidence of the parties has already come on record. Learned arbitrator would publish the award within 4 months of entering upon reference. Day to day hearings would be conducted. I am fixing the time limit for the reason claim of the parties are of the year 1988.

47. Fee of the learned arbitrator is capped at Rs. 1 lac to be shared equally by the parties.

48. Parties are directed to appear before the arbitrator on 29.9.2006 at 5.00 pm.

49. Registry is directed to immediately send a copy of the present order to the learned arbitrator appointed. Record of previous arbitrator be sent to Justice V.S. Aggarwal by special messenger.

50. No costs.