Delhi Transport Corporation vs Capital Body Builders and Another

Rajiv Sahai Endlaw, J.—In a suit filed by the petitioner DTC under Sections 14 & 17 of the Arbitration Act, 1940, the respondent M/s Capital Body Builders has preferred objections in the form of IA No. 8718/2005 under Sections 30 & 33 of the said Act. The counsel for the respondent has confined his submissions to the challenge to the award on account of extra cost towards enhanced basic price, extra excise duty & sales tax paid thereon of Rs. 5,41,500/- in favour of the petitioner DTC. It is contended that the arbitrator has not given any reasons or basis whatsoever for allowing the said claim of petitioner DTC against the respondent.

The 1940 Act did not require the arbitrator to give reasons unless so agreed by parties.

On inquiry whether there was any such agreement in the present case, attention is invited to Clause 26 of the agreement providing for arbitration and which inter-alia provides that the arbitrator shall be bound to give speaking award giving detailed reasons, justifications of each item of claim. It is also contended by the counsel for the respondent that the arbitrator had on the same day announced another award in relation to another transaction between the parties and in which case also the petitioner DTC had made a claim for Rs. 3,26,105.40p on account of extra cost towards enhanced basic price, extra excise duty and sales tax paid thereon and which claim was disallowed by the arbitrator by holding that no evidence had been produced by DTC as proof thereof.

Per contra, the counsel for DTC has contended that the arbitrator has allowed the said claim of Rs. 5,41,500/- on the basis of Clause 11(iv) of the agreement between the parties. It is further demonstrated by him from the arbitral record that the petitioner DTC had placed before the arbitrator the details of the basis of its claim for the said amount and also the documents in support thereof. It is argued that the respondent having failed to comply with the contract/order placed by DTC for fabrication of bodies of 19 buses, DTC had to get the said work done from M/s Haryana Coach Builders and the said claim for Rs. 5,41,500/- is for the difference in price agreed to be paid to the respondent and that which had to be paid to M/s Haryana Coach Builders for the same work. It is contended that the same is in accordance with Clause 11(iv). The counsel for DTC also contends that no fault can be found with the award on the basis of the other award pronounced on the same day and disallowing a similar claim. It is contended that in the other case, claim has been disallowed for the reason of DTC having not placed any documents in proof thereof before the Arbitrator. However, in the present case such documents were placed before the arbitrator. However, the counsel for the respondent controverts the latter of the aforesaid submissions. It is denied that in the other case the documents in support of the claim were not filed. The arbitral records of the other case are not before this Court and as such this aspect cannot be considered.

In my view, once the agreement between the parties is for the award to be a speaking one and to give detailed reasons justifying each claim, if the award is not speaking and/or does not give reasons, the said defect in the award cannot be rectified by calling upon the court to find from the arbitral record, the reasons for the arbitrator to reach the conclusion reached. The parties having imposed an obligation on the arbitrator to give reasons, failure to give the reasons makes the award inconsistent with the agreement between the parties and liable to be set aside.

Merely because the arbitrator while allowing the claim records that the said claim is being allowed under Clause 11 (iv) of the agreement, would not satisfy the requirement of the agreement aforesaid between the parties, of giving detailed reasons giving justification for each item of claim. The law in this regard has been recently considered by me in Jai Singh v. DDA 2008 (3) Arb. LR 667 and reference in this context can also be made to the recent pronouncement of the Division Bench in Delhi Development Authority Vs. Sunder Lal Khatri and Sons, .

Merely because a clause in the agreement permits a certain claim, reference to that clause would not tantamount to be a reason for the existence of conditions in which claim under that clause could be made.

A perusal of the written statement filed by the respondent before the arbitrator to the statement of claim of the petitioner DTC would show that the respondent has set up several defences to the said claim of petitioner DTC. Therefrom, it appears that it was inter-alia the case of the respondent that the respondent had given the offer to DTC for delivery of the 19 bus bodies only after the time stipulated for delivery under the other contract with respect whereto the other award referred herein above was rendered. Though, the counsel for the petitioner DTC contends that the said averment is inaccurate since the respondent had subsequently signed the contract providing the date of delivery but the fact remains that all these contentions have not been dealt with in the award. Even if DTC was entitled under the agreement to place the contract/order on another party at the cost and risk of the respondent, without the arbitrator holding that the default was on the part of the respondent, claim under such risk purchase Clause cannot be allowed.

In the circumstances aforesaid, the award with respect to the aforesaid claim being not in compliance with the agreement requiring reasons to be stated, is set aside and the award with respect to the said claim is remitted to the arbitrator for reconsideration of the aforesaid claim of DTC. It is clarified that if the arbitrator who has rendered the award is unavailable, petitioner DTC shall be entitled to appoint any other arbitrator in accordance with the agreement between the parties. New arbitrator, if any, be appointed within four weeks and the arbitrator/to be so appointed to submit his decision on the aforesaid claim to the court within one year hereof.

In the facts, the parties are left to bear their own costs.

The arbitral record be also sent back and be handed over to counsel for DTC for delivery to the arbitrator now appointed. IA No. 8718/2005 and the suit stand disposed of.