Municipal Corporation of Delhi vs Prabhat Construction and Another

Valmiki J Mehta, J.—By these objections under Sections 30 and 33 of the Arbitration Act, 1940, the respondent/applicant challenges the impugned Award dated 29.10.2002 passed by the sole Arbitrator. The disputes arose between the parties with respect to construction of 88 Nos. Type A Staff Quarters at Seelampur Housing Complex Part-III, Delhi and which was the subject matter of the Agreement dated 6.7.1988.

The counsel for the objector has very fairly argued his objections only with respect to Claim Nos.1 and 3 as dealt with by the Award.

Claim No. 1 is in effect a declaratory Award with respect to entitlement of the MCD/non-applicant/petitioner to withhold amounts on account of the claim of liquidated damages under Clause 2 of the Agreement. The counsel for the applicant contends that by virtue of Clause 2 read with Clause 25, this was an excepted matter and consequently, on such excepted matter no Award could have been passed by the Arbitrator. Before proceeding ahead I must clarify that what I mean by a declaratory Award, is that the monies are already with the petitioner/non-applicant and the Award, in fact only in effect justifies the action of the petitioner and not that by the Award, there is a decree for recovery of this amount against the applicant/objector. Mr. Kapur has relied upon a Division Bench judgment of this Court reported as Delhi Development Authority v. Sudhir Brothers 1995 (2) Arb. LR 306 to contend that since the issue was an excepted matter, the Arbitrator could not have decided the same. I agree that since similar clauses were in issue in the case of Sudhir Brothers (supra), and thus the Arbitrator could not have pronounced upon the merits of the imposition of the liquidated damages under Clause 2 inasmuch as this is an excepted matter by virtue of Clauses 2 and 25 of the Contract. The Award to this extent is set aside. However, I make it clear that this should not be construed as a direction to the petitioner to refund and pay the amount(if any) as appropriated by it under Clauses 2 and 25, and, if the objector seeks to recover such amount, the objector will be entitled to file such proceedings in accordance with law as available to it.

Claim No. 3 dealt with by the Award pertains to the claim of the objector for recovery of the amount of Rs. 1,39,000/- which has been withheld by the petitioner on account of various defects which had cropped up in the work. The defects in this case are as pointed out in Annexure-F to the written statement of the petitioner filed before the Arbitrator. A reference to the aforesaid Annexure-F shows that the cost which was incurred was partly towards rectifying the defective work and partly towards completion of certain work left incomplete by the objector. Since the non-objector already had Rs. 1,00,000/- with it, the Award has held the non-objector entitle to the balance amount of Rs. 39,000/-. Mr. Kapur on behalf of the objector contended that there was absolutely no proof which was filed by the petitioner in the arbitration proceedings and consequently, the Arbitrator was not justified in awarding this amount. Before I refer to Annexure-F, I may only state that the strict rules of the Evidence Act, 1872 do not apply to arbitration by virtue of Section 19 of the Arbitration & Conciliation Act, 1996. What the Arbitrator has to see is that whether reasonable material was available before him so that a legal conclusion can be arrived at. Viewed in this regard, when we see the contents of Annexure-F, it becomes clear that the contents are basically towards labour charges and a labour rate is given. Labour rate is a fixed rate or statutory rate for which only routine statement is enough. Further, another item as found in Annexure-F is cement and the rate of cement has been taken. I may note that cement was one of the items which was supplied by the petitioner to the objector for performance in the contract at a particular rate and thus the rate of cement is also such a thing for which no additional proof is required. Similarly, other items have been given by a specific rate. In my opinion, the expenses incurred for rectification of the defective and incomplete work is enough evidence, in the facts of this particular case, because of the nature of the expenditure being such, the Arbitrator was entitled to consider the evidence in the form of rates which was filed before him. In my opinion, therefore, there is no merit in objection with regard to Claim No. 3.

As already stated by me above, Mr. Kapur, on instructions from of Mr. Arvind Grover the partner of the respondent firm, does not press any other objection. With these observations, the application stands disposed of. The Award is made rule of the Court. Let a decree be drawn in terms of the Award subject to the modification as given qua Claim No. 1.