M/s Krishna Construction Co., v. Dda & Another

By this order I shall dispose of objections under Section 30/33 of the Arbitration Act, 1940 raised by the respondent/DDA against the award dated 08.1.1991 passed by the learned sole Arbitrator. In the objection petition the respondent/DDA has stated that it seeks to challenge the award made by the Arbitrator in respect of claims no. 2,4,5,6,7 & 8 of the original claims and in respect of additional claims no. 1, 2 & 4 made by the petitioner.

2. The facts in brief are that the petitioner was given a contract for redevelopment of Sarai Khalil involving construction of 138 LIG and 138 MIG houses at Sarai Khalil vide contract dated 2.2.1977. The date of commencement of work was 12.2.1977 and the work was to be completed within one year however, during continuation of the work it was found that there was a stone quarries underneath the land which had been filled up after extraction of the stones. Consequently, foundation design of some of the blocks had to be changed from conventional foundation to pile foundation and in some of the blocks strip foundation was to be done. The contractor/claimant in this case was not competent to do the work of pile foundation therefore an outside agency was hired by DDA to do the work of pile foundation and after completing the work of pile foundation the blocks were handed over to the contractor for rest of the work. It is also apparent from record that there was a stay granted by the High Court and due to stay of the Court the work got delayed and the time for completion of the work was accordingly extended. However, the work could not be completed even within the extended time and the Advisory Board of the respondent closed the work on 20.9.1980 and intimated the contractor about the same. The contractor after closing of the work raised various claims against the respondent and filed a suit before the High Court invoking arbitration clause. The claims raised by the claimant in the suit were directed to be referred to the arbitration. The result was that the respondent appointed Arbitrator in terms of clause 25 of the contract. When the Arbitrator was proceeding with the claims some additional claims were preferred by the claimant which were also referred by the Engineer-in-Charge to the Arbitrator subject to their admissibility under the contract.

3. Claim No.2 which is subject matter of challenge by the respondent pertains to an award of Rs.81,058/- made by the learned Arbitrator in favour of the Contractor towards additional expenditure incurred on chowkidar on account of default of DDA in not taking over the building and material at site. The learned Arbitrator observed that delay was due to stay granted by High Court against the construction in 4 blocks and due to pile foundation required to be done. The learned Arbitrator stated that the claimant had contended that the work was completed in October 1980 and the dwelling units were allotted sometime in 1985 and till then the claimant had maintained watch and ward staff. The Arbitrator held that since non-execution of balance part of the work was on account of failure of the respondent to make the blocks available for construction and on account of decision to opt for pile foundation and the respondent also did not take over material for which the secured advance had been paid, rather called upon the claimant to refund the advance with interest, the respondent/objector was in default and considering the locality around the site of work, the claimant had claimed reasonable rates for watch and ward staff and the claimant was entitled for Rs.81,058/- in respect of the claim.

4. The objectors contention is that this claim could not have been allowed since it was petitioners responsibility to keep the watch and ward staff till the building and material were handed over to DDA. It is also submitted that there was no provision in the agreement entered into between the parties providing for payment of watch and ward staff additionally to the contractor.

5. A perusal of clause 12 of the contract between the parties would show that it was within the power of Engineer-in-Charge to make alterations, additions or omissions or do substitution for the drawings, designs and original specifications that may appear to him necessary during the progress of the work and the contractor had to carry out the work in accordance with such alterations, omissions, additions, substitutions of the original specifications with such change in designs. It is specifically provided that such additions or substitutions shall not invalidate the contract in any manner and were to be carried out by the contractor on same terms and conditions on which he had agreed to do the main work. The only thing under such circumstances to be done was that the time for completion of the work was to be extended in proportion to the alterations made. Over and above this, a further period to the extent of 25% of such extension was to be allowed to the contractor. The contractor was to be entitled for rates for such additions/alterations, to be worked out in accordance with the provisions given in the clause 12. In case the rates for additions or substituted work could not be determined, then the contractor within 07 days of receipt of order to carry out the work had to inform the Engineer-in-Charge the rates, which he intended to charge for such work and the Engineer-in-Charge either could accept the rate or cancel the order to carry out such additional work. It is also specifically provided in the contract (under clause 13) that the work awarded could be reduced and the contractor may not be required to do the whole of the work tendered. The contractor under such circumstances was not to be entitled to payment of any compensation or loss of profit.

6. It is thus clear that providing of pile foundation in view of the discovery of stone quarries underneath the land was within the scope of the contract and in view of this development the only thing which the contractor could demand was the extension of time. Similarly, the respondent had no control over the stay order given by the High Court. The plea of the claimant that respondent had failed to take effective steps for early vacation of stay order is not tenable. Merely by taking steps by a party, a case in the High Court is not decided early. Had it been so, there would have been no pendency in the Courts and every party would have taken effective steps for early disposal of his case and got the case disposed of. It is not within the hands of a party to get the stay vacated early. I, therefore, consider that delay in this case cannot be blamed on the part of the Objector and the Arbitrators conclusion that delay was on the part of DDA/Objector is contrary to contractual provisions. When the contract specifically provided that the designs, drawings and specifications could be altered according to ground situation during the continuation of the work, the Arbitrators conclusion of delay being responsibility of the respondent was not tenable.

7. For allowing any claim in respect of payment to the workers, the learned Arbitrator could not have ignored the terms of contract. It is provided in the contract under clause 19-D that the contractor had to submit by 4th and 19th of every month to Engineer-in-Charge a true statement showing the number of workmen employed by him, their working hours and wages paid to them. In this case, the contractor had only submitted an estimate of the expenditure on wages. He had not submitted either before the Arbitrator or to the Engineer-in-Charge the necessary evidence showing that any workmen were employed by him. Even otherwise under Clause 19-K it was the responsibility of contractor to see that the building under construction was not occupied by any unauthorized person during construction and he was to handover to the Engineer-in-Charge vacant possession of complete building. It is not recorded by the Arbitrator that the Contractor at any point of time had offered vacant possession of the complete building to the respondent and asked the respondent to take over the possession of the entire building. Unless and until the contractor/claimant had offered the building to Engineer-in-Charge who had refused to take over the building, the contractor could not have claimed any charges for chowkidars etc. After expiry of notice given by him for handing over building, the contractor would have been at liberty to leave the building so that DDA could have taken the responsibility. Looking into the terms and conditions of the contract whereunder the contractor till handing over the building was to see that the building was not unauthorizedly occupied by somebody and it was also responsibility of the contractor to submit fortnightly report to the Engineer-in-Charge of the workmen employed and the wages paid, in case of absence of record of wages paid and in absence of notice of the contractor of tendering vacant possession of the building to Engineer-in-Charge, no amount could have been awarded by the learned Arbitrator. The award of the Arbitrator on this count is contrary to contract and is liable to be set aside. Objections regarding Claim No.4

8. Under Claim No. 4, the Arbitrator had allowed a sum of Rs.12,375/- to the contractor on account of additional expenses incurred by the contractor for extending the bank guarantee. The learned Arbitrator after recording contention of both the sides observed that the plea of the contractor that the contractor was required to keep the bank guarantee alive beyond the defect liability period because of the respondent was justified. He (learned Arbitrator) therefore allowed amount of Rs.12,375/- for keeping the bank guarantee alive upto 4.8.1989. The contractor had taken the plea that he had to keep the bank guarantee alive without any justification because of the demand of the respondent/DDA. I find that allowing of this claim by the learned Arbitrator is strange. If the demand of DDA to keep the bank guarantee was unjustified, the contractor was at liberty not to extend the bank guarantee and let the law take its own course. The contractor kept the bank guarantee alive for his own interests and not because of DDA. If it was not in the interest of the contractor to keep the bank guarantee alive, the simplest thing he was to do was to ask his banker not to extend the bank guarantee. The learned Arbitrator could not have awarded him expenses for keeping the bank guarantee alive. The contractor kept the bank guarantee alive because he considered that he was on a weak footing and continued the bank guarantee as demanded by DDA. A bank guarantee is furnished by a contractor in accordance with the contract. If a contractor considers that he is not required to furnish a bank guarantee or to extend the bank guarantee he is at liberty to do so. He cannot claim expenses for either furnishing the bank guarantee or extending the bank guarantee at the instance of the employer/DDA. I find that the award of this amount is contrary to the terms of contract. Objections regarding Claim No.5

9. Under claim no. 5 the Arbitrator had allowed a sum of Rs.61,828/- to the contractor on the ground that there was existence of sub-soil water and the claimant had to pump out the water by employing pumps. It is not disputed that the claimant had been paid for foundation in accordance with contract for quantity which involved under water foundation as in the DSR. Under the contract for execution of this quantity, removal of seepage water due to sub soil water, was the responsibility of the contractor. The learned Arbitrator observed that he was of the opinion that the marginal difference in the rates for excavation in dry and wet conditions as given in the contract did not contemplate the use of long hours of continuous pumping out of water by employing pumps and therefore allowed the claim of the contractor. It is contended by the respondent that the learned Arbitrator went beyond the terms of contract. The contract fully covered the excavation and laying of foundation in wet conditions under water and the contractor had been paid in accordance with the terms of contract, the Arbitrator could not have allowed additional amount to the contractor.

10. The claimant in this case had been paid as per DSR which included charges and rates for bailing out seepage water. When there is a specific quantity mentioned in the clause of contract, no additional amount could have been allowed by the Arbitrator. It is settled law that the Arbitrator is prisoner of the contract and he is not a judge in equities. It is for the contractor to tender or not to tender for work considering the rates prescribed by the employer. Once the contractor had agreed to a specific rate, he cannot be allowed additional amount by the Arbitrator on the ground that additional work was involved in the item. Even otherwise, if there was an additional or substituted work involved in a contract, under Clause 12 (v) the contractor was supposed to give a notice within 07 days of the order for carrying out the additional work and inform the Engineer-in-Charge of the rate which he intended to charge for such work. It is not within the jurisdiction of the Arbitrator to determine the rates of the additional work. It was within the jurisdiction of Engineer-in-Charge, during the continuation of the contract, to determine the rate of additional work or to cancel the additional work to be done by the contractor. The Arbitrator exceeded his jurisdiction in allowing this claim and mis-conducted himself. The award under this claim is therefore liable to be set aside.

Objections regarding Claim No.6

11. Under Claim No.6 (i), the Arbitrator had allowed a sum of Rs.15,300/- to the claimant on account of shifting of material collected on site of work so that pile foundation could be taken up by another agency. I consider that this claim could not have been entertained by the learned Arbitrator. The pile foundation was constructed sometime in 1980-81 and shifting of material had taken place at that time, if the contractor had to raise a claim in respect of shifting of material he could have submitted the bill for shifting of material to the respondent/DDA only at that time. This shifting of material was not a contractual item, it was an additional work which the contractor claims to have done. He could have told DDA that he was not prepared to shift the material and let DDA engage its own labour and in case he had agreed to shift the material, he was to act in accordance with clause 12(v). If he had not given his rates for shifting of material to DDA at that time he could not raise this claim afterwards. Shifting of material was not an item provided under the contract. Moreover, a contractor is given drawings and lay out plans of the building in advance. He had to stack material at the site ensuring that place occupied by material was not within the construction area and was outside construction area. If he had stacked material within the construction area, he could not claim charges for removing material from construction area to non construction area. It was his responsibility to keep the material at non construction area. The claim therefore was barred for two reasons, one it was a time barred claim, the claimant could have raised this claim within three years of shifting of material and it is also barred as stacking of the material was part of his job under the contract and he was not to be paid anything extra because of improper stacking of material and then shifting the same. I, therefore find that the award under this claim being contrary to contract and of a time barred claim is not tenable and is liable to be set aside.

12. Under Claim No. 6(ii) the learned Arbitrator awarded a sum of Rs.1,41,172/- to the claimant for infructuous expenditure because of the stay of the High Court. The learned Arbitrator observed that the contractor had incurred expenditure on the shuttering and reinforcement of beams and the reinforcement material placed on the shuttering prior to the court stay order. Since, it was the employers responsibility to provide site free from hindrances and DDA could not obtain vacation of stay immediately, DDA was to bear the burden of expenditure of centering, shuttering, reinforcement and scaffolding from 1.5.1977 to 30.9.1977 as already observed by me in para 6 above that it is not within the hands of a party to get the stay vacated nor it is a case that Courts do not grant ex parte stay without hearing the other party. I consider that DDA cannot be held responsible for act of the High Court in continuing an ex parte stay for a period of 05 months. Moreover, there is no certainty that the stay would be vacated by the Court in any specific period. The contractor after coming to know the stay of the Court was supposed to act accordingly. The stay is normally applicable to the party and every other person who is indirectly involved with the subject matter of the stay order. The stay was therefore, equally effective against the contractor who was working at the site in question. The learned Arbitrators observation that DDA failed to provide hindrance-free site is therefore untenable and the awarding of this amount of Rs.41,172/- on this ground is also not tenable and is liable to be set aside. Objections regarding Claim No.7

13. Under the Claim No.7, the learned Arbitrator allowed additional amount over and above the contractual amount to the claimant of Rs.95,248/- for the work done by the claimant from 11.2.1978 to 15.4.1979 and another amount of Rs.2,56,516/- from 15.4.1979 to October, 1980 on the ground that the claimant was entitled to these additional costs because of work getting prolonged beyond the period of one year which was the contract period and the claimant was entitled to additional costs. It only shows that the learned Arbitrator had not considered the terms of the contract at all. The terms of contract provided for extension of the period of completion of contract under several circumstances including the circumstances of change in designs, drawings as already observed above in para 5 above. A contractor who considers that performing of contract by him beyond the period stipulated in contract was not profitable; he is always at liberty to walk out of the contract. In case he considers that he is entitled for additional amount for working beyond a period, he should give a notice to the Engineer-in-Charge in terms of the contract and unless and until the Engineer-in-Charge accepts the additional payment as claimed by him, he should not work. If the contractor continued to work beyond the period of one year which was the stipulated period, it only shows that he had agreed for extended period of contract and was aware that the contract period was extendable and the contract had to be performed within the extended period on same terms and conditions. Merely by writing a letter that he would charge 10% or 20% or 30% extra, no concluded contract comes into operation for payment of extra amounts. Additional payment for prolongation of the work can be claimed by the contractor only under the contract and not beyond the contract. The concluded contract does not come into operation between the parties if one party writes a letter and other party does not respond to the letter. Under Clause 12(v), in case the DDA had not agreed to the enhanced rates as demanded by the contractor, the contractor was free to stop the work and free to walk out of the contract. DDA in such a case would have been at liberty to get the work done from other contractor. The time as provided under the contract was not essence of the contract rather the contract between the parties specifically provided that the work and the time period under the contract could be increased. The designs and specifications could be altered according to change in circumstances and the time period for execution of the contract can be increased keeping in view changed specifications it is specifically provided that in case of an eventuality of change in specifications made during the continuation of the work, the contractor would not be entitled to any additional rates except as provided in the contract and he will have to work on the agreed rates. Under these circumstances, entertaining claim by the Arbitrator on the ground of laying pile foundation as stone quarries were discovered underneath of ground and on the ground of grant of stay by the High Court is contrary to contract. The learned Arbitrator had already awarded additional amount for increase in cost of material and labour to the contractor in terms of Clause 10C under Claim No.1 which has not been challenged by the respondent. I, therefore, consider that the additional amounts awarded by the learned Arbitrator under claim no.7 (i) and (ii) were not tenable and the award of this claim is liable to be set aside. Objections regarding Claim No. 8

14. Under Claim no.8 claimant had claimed Rs.3,66,528/- towards compensation for cumulative loss of productivity due to non/under utilization of establishment, equipment and T & P and the learned Arbitrator had awarded a sum of Rs. 45,000/- for loss of productivity and overheads and a sum of Rs.52,000/- for T&P. It is seen that in all DDAs contracts after the contract is over, the contractors make fantastic claims under various heads. Invariably, there is a delay in execution of the contracts for whatsoever reasons, after the final bill is received the contractors make claims for enhancement of costs under Clause 10C for increase in cost of labour and material and make separate claim under Clause 10CC where it is there, apart from that claims are made for infructuous expenditure like keeping establishment on the site for longer period, expenditure for keeping tools and machinery idle, loss of productivity, under-utilization of establishment/equipment, capacities etc. and loss of profits etc.. All these claims are made by the contractors only because of one factor i.e. that the work got delayed, claims under different heads are made for the same factor and every such claim is made time and again. This is despite the fact that Clause 25 of the contract between the parties specifically provides that after finalization of the last bill, if a claim is not made within 90 days no claim could be entertained. No Arbitrator pays attention to this clause and all such claims are entertained and fantastic amounts are allowed under these claims irrespective of the provisions of contract between the parties. It seems that the only intention of the contractor to make these kinds of claims is to take benefit of DDA officials tacit consent and the Arbitrators latitude and to have unjust enrichment at the cost of public exchequer.

15. The Arbitrator under no circumstances could have ignored Clause 25 of the contract which reads as under: Clause 25. x x x x x x x x x It is also a term of the contract that if the contractor does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation form the Engineer-in-Charge that the Bill is ready for payment, the claim(s) of the contractor will be deemed to have been waived and absolutely barred and the Delhi Development Authority shall be discharged and released of all liabilities under the contract in respect of those claims.

16. The Arbitrator has to first ensure that the claim was raised by the claimant in terms of this clause and conditions of it were satisfied. Unless the Arbitrator gives a finding that the claim was within the scope of Clause 25, the Arbitrator cannot entertain such claims. These kinds of claims smack of a kind of syndicate running in DDA between the contractors and DDA officials, who seem to be benefitted largely from these kinds of arbitration where the contractors are awarded amounts which are a substantial part of the contract value after the contract is over and the contractor had already taken the payment of contract value. I find that no reason is given by the Arbitrator while allowing claim no.8 as to how this claim fall within the scope of Clause 25. The learned Arbitrator has not even addressed this issue and has awarded amounts towards loss of productivity and under-utilization of equipment and T&P on the basis he had assessed and computed loss of productivity, overheads and T&P. No basis of his computation has been given. I consider that this claim is not tenable and is liable to be disallowed. Objections regarding Additional Claim No.1

17. This claim was made for Rs.2,98,256/- and a sum of Rs.1,36,362/- was allowed by the learned Arbitrator as interest for withholding the different amounts by respondent/DDA out of running bills. The claimant is stated to have served notices dated 30.9.77, 8.12.77m 17.9.80 and 10.2.81 demanding interest on withheld amounts. Thus, the cause of action for claiming this interest on alleged withheld amounts could have survived only for three years from the date of notice. The claim itself was made before the learned Arbitrator after expiry of period of limitation. The Arbitrator did not consider, if any of the claims raised before him was barred by limitation or not. He entertained every claim irrespective of fact when the claim was made, whether the claim was within the contract or it was outside the contract, whether it was barred by limitation or not and allowed the claims. Since, these claims were barred by limitation these could not have been entertained. I set aside the award passed by the learned Arbitrator under Additional Claim no.1. Objections regarding Additional Claims No. 2 & 4

18. Under Additional Claims No. 2 & 4 the learned Arbitrator had allowed interest to the claimant @ 15% p.a. on different claims from 14.8.1985 onwards and pendent lite and future reckoned from the date of the Award till the date of payment. The claimant would be entitled to this interest on the surviving claims for a period as allowed by the Arbitrator. 19. In view of above the award in respect of claims no. 1 & 3 is upheld the award in respect of Claims No. 2, 4, 5, 6, 7, 8 & Additional Claim no. 1 are set aside. The award in respect of Claims No. 1 & 3 and interest thereon @ 15% p.a. from the date of arbitration till realization of the amount is made a rule of the Court. With this, the suit and the objections stand disposed of.