Delhi Development Authority vs Madhur Krishna

Ajit Prakash Shah, C.J.—This appeal is directed against the order dated 10th January, 1996 passed by Devinder Gupta, J in IA No. 10912/1990 and Suit No. 2431-A/1990. By the impugned order the learned Judge was pleased to overrule the objections raised by the appellant DDA and make the award dated 19th July, 1990 of the sole arbitrator rule of the court.

The facts giving rise to the present appeal are as follows:

The appellant DDA entered into an agreement being Agreement number 4/EE/HD/XXIX/83-84 for "Construction of Office Building for Circle V and Divisions" with the respondent. The work was awarded to the respondent vide letter dated 13th February, 1984. After the work was awarded, the site of the work was changed from District Park on the west side of the outer ring road to a new low lying site on the east of the outer ring road in West Delhi. According to the respondent, in view of the urgency of the work he had made arrangements and started work at the old site when he was asked to shift operation to the new site. The new site being low lying and water-logged required extensive filling with earth to be brought from outside. There were large variations in the nature and scope of the work to be done and the work got abnormally delayed due to reasons beyond the control of the respondent. Most of the claims of the respondent arose out of the change in site and revised requirements of work. The claims were referred to the sole arbitrator, who gave his award on 19th July, 1990 whereby various claims raised by the respondent were partially granted. The claim for pendente lite interest was, however, denied by the arbitrator. By the order under appeal the award was made rule of the court.

The basic contention raised by Shri Gaurav Sarin, learned Counsel appearing for the DDA, is that the arbitrator has failed to give reasons in support of the award and thereby contravened the express requirement of Clause 25 of the agreement. He contended that the award does not disclose any application of mind by the arbitrator to specific evidence, oral or documentary, led before the arbitrator. The arbitrator has merely stated as to what the party has stated/alleged before him and has not recorded any finding or reasoning. There is no application of mind or indication of the trend of the thought process of the arbitrator in the award. According to the learned Counsel, the rational process of evaluating and assessing the evidence is totally missing in the award.

In reply, Shri S.K. Rungta, learned Counsel appearing for the respondent, contended that it is settled legal position that where arbitrator is required to state reasons for award, as is in the present case, it does not imply that the arbitrator has to give a detailed judgment. He contended that the only requirement is that a reading of the award should indicate the thought process of the arbitrator and if award is capable of reading the mind of the arbitrator, the requirement of stating the reasons is met. He submitted that the arbitrator has looked into the contentions raised by the respective parties and also into the evidence led by the parties by dealing with each of the claims separately. In addition, the arbitrator has also given his findings on the basis of his observations and on the basis of inspection of the site in question. Furthermore, the findings of the arbitrator in respect of each of the claims were also based on admitted facts such as the fact that the site for which the tender was awarded and on the basis of which the respondent gave his rates in the bid, was shifted by the appellant and the shifted site was not of the same nature. Therefore, according to Mr. Rungta the award cannot be said to be a non-speaking award.

Having regard to the rival submissions made at the Bar, the short question which arises for our consideration is whether the award of the sole arbitrator is without the support of any reason. In other words, whether the award is a non-speaking award. There is no dispute that the arbitrator was supposed to give reasons in view of the mandate in the arbitration agreement. Whereas contention of the DDA is that the award on many claims is non-speaking. The respondent, who has got the award in his favour, contends otherwise and asserts that sufficient reasons, which are required to be given by the arbitrator, are found in the award.

Both the learned Counsel agreed that it was not essential for the arbitrator to give a detailed reasoned decision indicating each minute step of his mental meanderings. The reasons given should reflect the thought process of the arbitrator, whereby it can be ascertained as to how he arrived at a particular conclusion. This principle is succinctly laid down in College of Vocational Studies v. S.S. Jaitley AIR 1987 Delhi 134 wherein the Division Bench observed:

By reasons it mean that the award should be a speaking one. In the reasoned award what is expected from the arbitrator is that he should indicate his mind whereby it can be ascertained as to how he arrived at a particular conclusion. In case of a reasoned award, the arbitrator is required to indicate the trend of his thought process but not his mental meanderings, the purpose of commercial arbitration being speedy certainly and a cheaper remedy.

In this regard reference may be made to a Division Bench judgment of this Court in Delhi Development Authority Vs. Alkaram, . The Division Bench held that it was not necessary for the arbitrator to set out the actual calculations, figures, as worked out by him, what was important was that there was material/evidence before him and the thought process indicated that the arbitrator had taken the said material into consideration while arriving at particular figures. Following observations of Avadh Behari Rohatgi, J are pertinent and need verbatim reproduction:

What reasons are sufficient in any particular case must, of course, depend upon facts of the case. I approach the matter in this way; that reasons are not deficient merely because every process of reasoning is not set out. I further think that reasons are not insufficient merely because they fail to deal with every point raised before the arbitrator at the hearing. No universal; generalization can be made. Everything depends on the subject matter. In deciding a controversy the arbitrator works in an environment which is quite different from that of the Judge. He is not bound by the technical rules of evidence. The "ropes and pulleys" that he uses in the arbitral process are different from the foot rules and set squares that we use in the judicial process. From the arbitrator what is wanted is "a practical decision on the disputed issues" Abasalom Ltd. v. Great Western (London) Garden Village Society 1933 AC 592 (616) per Lord Wright. He knows that businessmen want to do business and not to argue about it. He gives not judicial justice, but rough justice of the world. Because he is not bound by the "codeless myriad of precedents". Many have found salvation in the faith they reposed in this private domestic forum for the settlement of their disputes. xxxx

My conclusion in his case is that the arbitrator was the final judge of fact. The Court is bound by the arbitrator''s findings of fact and cannot review them unless they are unsupported by evidence and unless it appears from the award itself that there was no evidence to support the finding. It is not open to the court to examine the adequacy of evidence which led the arbitrator to his findings of fact. His findings are final.

In the concurring judgment Leila Seth, J, as she then was, observed:

There was material before him to establish that the price had risen substantially. He was justified in not accepting the calculations of either party and arriving at his own figure in accordance with the facts ascertained by him. He has not based his decision only on the claim of the contractor, as contended by learned Counsel for the appellant.

In these circumstances I feel that the arbitrator was well within his jurisdiction to come to this conclusion. The question whether I would have come to the same conclusion or arrived at the same figures is not material. Once there is evidence, there is no apparent error and/or misconduct. I cannot go into the sufficiency of the evidence; nor is it necessary for the arbitrator to set out the actual calculation figures as worked out by him; his reasons, as mentioned, are adequate and clear; it is not essential for him to give a detailed reasoned decision indicating each minute step of his mental meanderings.

In Delhi Development Authority Vs. Bhagat Construction Co. (P) Ltd. and Another, , a Division Bench observed that if award shows application of mind, it is to be taken as correct and it was not necessary for the arbitrator to disclose mathematical calculations in the award. The Court observed in para 8 of the judgment that where the arbitrator was retired Chief Engineer of the CPWD and thus well conversant with the kind of disputes on which he was adjudicating and further that he had given his detailed reasons for arriving at a finding that delay was attributable to the DDA, thereafter while discussing each claim it was not necessary for him to disclose the mathematical calculations in the award for arriving at particular figures, if the award shows the application of mind and view which is plausible by the arbitrator.

In Bharat Furnishing Co. v. Delhi Development Authority and Anr. 1992 (1) Arb. LR 327, Jaspal Singh, J laid down that where the arbitrator is required to give reasons for the award, he need neither proceed to write a detailed judgment nor set out every process of reasoning. But there must be reasons. The Court is entitled to examine the reasonableness of the reasons. The reasons being the links on the material adduced before the arbitrator on which certain inferences are drawn and conclusions are made, there has to be some rational nexus to indicate in the award itself. The learned Judge came to the conclusion that many claims were awarded by the arbitrator without disclosing any reasons.

In an unreported decision in Anil Garg v. Delhi Development Authority and Ors. bearing Suit No. 21-A of 1996 decided on 17th December, 1999, a learned Judge of this Court dealt with the same question. Taking into account the aforesaid judgments as well as discussing a few judgments of the Supreme Court, the learned Judge culled out the ratio of those judgments as follows:

The ratio established in Municipal Corporation of Delhi Vs. Jagan Nath Ashok Kumar and Another, was that the reasonableness of the reasons given by an arbitrator in making his award cannot be challenged in proceedings under Article 136 of the Constitution. This was reaffirmed in the subsequent decision of the Apex Court in State of Rajasthan Vs. Puri Construction Co. Ltd. and Another, and it was further observed that "it is not necessary to indicate in the award computation made for various heads and it is open to the arbitrator to give a lump sum award".

A Constitution Bench of the Supreme Court had reversed the decision of a Division Bench of the Bombay High Court in the case of Goa, Daman and Diu Housing Board Vs. Ramakant V.P. Darvotkar, , on facts singularly similar to the case in hand. A Clause in the covenant between the parties stipulated that where the amount of claim in dispute was Rs. 50,000/- and above, the arbitrator was bound to give reasons for his award. The arbitrator had detailed the rival contentions and the documents relied upon by them. In setting aside the award the Bombay High Court had observed that "the award nowhere contained any reasoning and did not even obliquely mention that he had adopted the reasoning of either party". Even in the context of this cryptically worded award, the apex court had reversed the High Court''s decision and given its imprimatur to the Award. To my mind, the legal obligation of giving reasons is far more onerous than that of disclosing the "trend of thought process", and the former would necessarily encompass the latter. By an extrapolation of the ratio of the Apex Court, if the words employed in the Bombay Award under scrutiny fulfilled the obligation of disclosing reasons (being over Rs. 50,000/-), similarly used words would overwhelmingly fulfill the requirement of the Arbitrator disclosing the trend of his thought process. If, by merely referring to the rival contentions and their documents, without more, the Arbitrator in that case had been held to have given a reasoned award, where a similar practice is adopted in other cases, it would more than sufficiently comply with the need of disclosing the trend of the thought process of the Arbitrator.

The essence of the decisions of the Supreme Court appears to be that if on a reading of the award it is obvious that the arbitrator had kept the rival contentions in perspective at the time of the passing of the award, then the award sufficiently complies with the compulsion to give reasons. As shown above, Goa, Daman and Diu Housing Board Vs. Ramakant V.P. Darvotkar, is a case of a mere narration of the parties'' contentions, followed by the mention of the quantum awarded. It was however found to be a reasoned award and upheld. I am fortified in distilling the various judgments thus, in large measure, by the other observations to the effect that the reasonableness of reasons is non justiciable. In any event, in the Bombay case the Supreme Court having given its approval to the award which after setting out the rival contentions immediately proceeded to specify the quantum awarded, can be inferred to have opined that in such circumstances, the thought process of the Arbitrator was obviously present. The Supreme Court had reversed the judgment of the Division Bench of the Bombay High Court which had taken the view that the impugned award was liable to be set aside for failure to give reasons therein.

In a recent judgment delivered in CS(OS) Nos. 1436 and 2209/1993 titled Kalyan Chandra Goyal & Co. and Anr. v. Delhi Development Authority and Anr. and other cases delivered on 6th July, 2007, A.K. Sikri, J, after considering the previous judgments summarised the principles as under:

I. The Arbitrator is not supposed to pass a speaking award except when it is provided under terms of reference or the arbitration agreement.

II. Where the arbitrator is under obligation to give reasoned award:

(i) it is not essential for the Arbitrator to give a detailed reasoned decision indicating each minute step of his mental meanderings. The reasons given should reflect the thought process of the Arbitrator, whereby it can be ascertained as to how he arrived at a particular conclusion;

(ii) mere conclusion and verdict would not be sufficient; reasons are the links on the material, documentary or oral evidence, adduced before the Arbitrator on which certain inferences are drawn and conclusions are made. There must be some rational nexus between the conclusion and reasons given in the Award;

(iii) the Award shall be intelligible so that the Court may come up to the conclusion whether there is any error of law apparent on the face of the award;

(iv) it is not necessary for the Arbitrator to set out the actual calculations, figures as worked out by him; and

(v) when the reasons given by the Arbitrator are germane, relevant and have rational nexus with the conclusions arrived at by him, the reasonableness of the reasons cannot be challenged and it cannot be said to be unreasonable.

In the light of this well established principle, we may now proceed to deal with the various claims raised by the respondent, which have been partially allowed by the arbitrator.

The respondent claimed Rs. 1.35 lacs due to change in the scope of the work and also on account of change of site previously shown. The arbitrator awarded an amount of Rs. 45,000/- against the claim of Rs. 1.35 lacs. While allowing the amount of Rs. 45,000/- towards claim No. 1, the arbitrator after recording the contentions of both the parties awarded the said sum on the basis of records and evidence before him. On a perusal of the award it is seen that the appellant did not dispute the change of site on the basis of which the tender was awarded. Furthermore, the arbitrator before proceeding to deal with the claims and making the award, inspected both the sites in presence of both the parties and his award is based on the pleadings, evidence and record produced before him. In our opinion, it clearly meets the requirement of reasoned award. The arbitrator has based his calculations on the material placed on record. It was not necessary for him, in view of the legal position noted above, to give the process of mathematical calculation.

Claim No. 2:

The arbitrator has awarded an amount of Rs. 2.50 lacs against the claim of Rs. 5 lacs on account of work done but not measured and paid. The arbitrator awarded the said amount under claim No. 2 after considering the contentions of the parties. It is seen from the contentions of the appellant DDA recorded against this claim in the award that there was no dispute of the quantity of work that was done by the respondent and also that there was no dispute with regard to the fact that earth was brought by the respondent and the appellant DDA could not procure the earth from its own resources. On the basis of these admitted positions, the arbitrator partly allowed the claim holding that the truth lies in between and assessed the value of the work at Rs. 2.5 lacs. The award is clearly on the basis of the material produced before the arbitrator. Therefore, it cannot be said that he has not given his reasons for awarding the appropriate amount.

Claim No. 3:

The arbitrator awarded an amount of Rs. 24,785/- against the claim of Rs. 1 lacs on account of increase in the rates of materials etc. The appellant opposed this claim on the ground that they have already made the payment towards this claim under Clause 10(c) of the agreement. However, the arbitrator gave his finding that the delay was mostly due to change of site and the revised requirements of work and other impediments created by the new circumstances and Clause 10(c) does not cover all increases in labour and material. On the basis of this finding the arbitrator awarded a sum of Rs. 24,785/-. We do not find any illegality in the finding of the arbitrator.

Claim No. 4:

This claim is towards the loss of profit because only 2/3rd of the work was got done by the department. As against the claim of Rs. 1 lac the arbitrator has awarded Rs. 25,000/-. The arbitrator has recorded the contentions of both the parties and from the contention of the appellant it is evident that the claim under this head was being opposed on the ground that the quantum of work to be executed was intimated to the respondent at the time of the award of work. However, since the respondent was claiming the said amount by reference to annexure C-IV which annexure was not in dispute, the arbitrator awarded the said sum after considering the said annexure and as such it cannot be said that reason for awarding the same is absent and also the mind process of the arbitrator cannot be gathered.

Claim No. 5:

This claim was for the damages on account of loss of idling labour, establishment, tools and plants etc. due to alleged non- performance of contractual obligations by the department. The respondent claimed Rs. 4 lacs under this head. The arbitrator has noted the case of the respondent that the work was got abnormally delayed due to failure of the appellant to fulfill their obligation under the contract and the respondent had to incur expenditure on his establishment, idle labour, tools and plants and due to reduced profitability and miscellaneous overheads etc.

Thus it is seen from the award that the arbitrator has looked into the details given by the respondent in annexure C-V of the statement of claims. The arbitrator has also noted the stand of the appellant that they had duly fulfilled their obligations under the contract and made available the site, drawings, decisions and stipulated materials to the respondent in proper time. The further case of the appellant was that the losses amounted had not been true. From the pleadings before the arbitrator as well as from the evidence and the arbitrator''s own inspection, it is not in dispute that the site originally shown and marked for the work in question was shifted after the respondent had employed machinery, plant and labour and in fact had started the work at the old site. It is clear that this weighed on the mind of the arbitrator while allowing the claim partly under this head and, therefore, it cannot be said that while awarding the same under this head, the arbitrator failed to give any reason or his award was without reasons.

Claim No. 7:

The arbitrator has awarded a sum of Rs. 4,862/- as against the claim of Rs. 9,723/- on account of rebate reduced from the bills as Department could not make regular monthly payments and also could not finalise the final bill within the time. While awarding the said amount, after recording the contention of the parties, the arbitrator has categorically stated that he is awarding the above mentioned amount under this head on the basis of usual practice that the bills are prepared and paid by the Department. We do not find any reason to interfere with the findings of the arbitrator.

In the result, we find no merit in the contention of the appellant that the arbitrator has not given any reasons for the award. The appeal is dismissed with costs.