Ms. Kritika Gupta, Advocate v. M/S NARAINDAS R ISRANI

Judgment

1. The present petition has been filed raising certain objections under Section 34 of the Arbitration & Conciliation Act, 1996 (hereafter, the „A&C Act‟) against the award dated 22.01.2009 (hereafter, the „impugned award‟) delivered by the Arbitral Tribunal comprising of Sole Arbitrator (hereafter, „AT‟) with respect to Claims No. 1&39, 5, 7, 14, 16, 20, 23, 28, 31, 34, 44, 45, 46, 47, 48&49.

2. The impugned award came to be delivered in the context of contract dated 24.12.1987 which came to be executed in consequence of a Public Tender invited by the petitioner for “Construction of 152 Nos. Houses for Cat-II & Cat-III (76 Cat-II & 76 Cat-III) & 114 Scooter garages i/c water supply etc. in Group-I under SFS Sector-I, Pocket K&Lat Sarita Vihar.” Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 1 of 25 The stipulated date of start of work was 03.01.1988 and stipulated date of completion was 02.04.1989. The work actually came to be completed on

31.03.1992. DISPUTES BEFORE THE ARBITRAL TRIBUNAL

3. The respondent/Claimant approached AT and filed forty-nine claims. The AT awarded Claim Nos. 2, 3, 4, 6, 8, 9, 10, 11, 12, 13, 15, 17,18, 19, 21, 22, 24, 25, 26, 27, 29, 30, 32, 33, 35, 36, 37, 38, 40, 41, 42, 43 in favour of the petitioner and Claim Nos. 1&39, 5, 7, 14, 16, 20, 23, 28, 31, 34,44, 45, 46, 47, 48&49 against the petitioner. At the time of issuance of the notice vide order dated 13.10.2009, the petitioner had restricted the challenge to claim nos. 1, 31, and 39. However, subsequently, the petitioner filed FAO (OS) No.655/2010 assailing the order dated 13.10.2009 before the Division Bench of this Hon‟ble Court. The Division Bench of this Hon‟ble Court vide judgment dated 09.09.2011 disposed of the FAO stating that limited notice could not have been issued.

4. Out of the said claims, the petitioner in this petition has challenged Claim Nos. 1&39, 5, 7, 14, 16, 20, 23, 28, 31, 34, 44, 45, 46, 47, 48&49. During the course of submissions, the petitioner‟s counsel, on instructions, states that challenge to awarded Claim Nos. 48&49 are not being pressed. A

brief of claims challenged, amounts claimed and awarded by the arbitrator are laid down hereinafter: Claims Challenged Claimed Amount Rs.) Awarded Amount (In Rs.) (In Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 2 of 25 Claims No. 1 & 39 – Claimant 6,25,456 1,88,200 claimed expenses incurred towards labour, establishment and hire charges for tools and plants. Claim No. 5 - Claimant claims triple Balconies, as 30% extra C/S is being done. shuttering 36,000 36,000 @ Rs.185.75 Claim No. 7 – Claimant claims cost of cement concrete blocks of size 10x10x15cms executed in brick work to anchor pressed steel door frames provided as per agreement item No. 6.2. Claim No. 14 – Claimant claims for plastering walls of height above 10 metres. Claim No. 16 – Claimant claims for extra brick work in square/rectangular pillars. Claim No. 20 – Claimant claims reinforcement provided in half brick work which was not paid. Claim No. 23 – Claimant claims for dewatering of the area due to over flood of tributary/rivulets. Claim No. 28 – Claimant interest on blocked claims money due to non-timely payment of full rate of extra 20,151 6,651 21,260 21,260 397 260 8,767 8,767 50,000 32,000 1,21,669 @31% 15,149 Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 3 of 25 and substituted items. Claim No. 31 – Claimant claimed for loss of profitability to prolongation of contract period. Claim No. 34 – Claimant claims maintaining staff and labour after maintenance period handover allottees. on expenditure possession amount Claim No. 44 - Claimant claims interest on final bill Rs.67,31,755. Claim No. 45 - Claimant claims Rs.3,58,000/- on account of refund of rebate deducted wrongly on monthly running account bills. Claim No. 46 - Interest claim on late payment under Clause 10 CC Rs.27,90,125/-. Claim No. 47 - Claimant claims Rs.70,000/- on account of short measurement of SCI pipes due to adopting wrong methods Claim No. 48 & 49 - Claimants claims pre-suit, pendente lite and future interest under these claims. payment amount 45,79,000 8,33,335 5,72,400 48,000 23,67,878 @30% 7,87,729 @10% 3,58,000 2,71,194 20,18,966 1,69,737 13,438 13,438 @30% per Simple Interest @10% (pendente lite), 9% (from passing of the award till Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 4 of 25 payment/decree) per Total Awarded Amount – Rs. 24,31,720 Total Claimed Amount – Rs. 1,07,93,382 IMPUGNED AWARD

5. Claims No.1 and 39: This claim was partially allowed by the AT to the tune of Rs. 1,88,200/-by noting that the delay in completion of the physical work was attributable to the petitioner on account of initial non- availability of site, shortage of materials which was to be supplied by the petitioner. The AT rejected the claim in so far as the establishment like graduate engineer, supervisor, accountant etc were concerned and restricted the award to compensation for idle labour, machinery, centering & shuttering.

6. Claim No.5: AT accepted the claim to the tune of Rs. 36,000/- by observing that the respondent did the triple stage centering and shuttering for the RCC projected balconies which has not been denied by the Department. Moreover, it has been noted that Condition 3.15 of the agreement is loosely worded and extension of time was granted without levy of compensation.

7. Claim No.7: The claim was partially allowed to the tune of Rs.6,651/- while noting the dimensions and price of the concrete block used for fixing the lugs of the steel door frames.

8. Claim No.14: AT allowed the Claim to the extent of Rs.21,260/- in light of insertion of Item No. 9.11 in the schedule of quantities of the Contract. AT observed that the Claim for payment of plastering exterior Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 5 of 25 walls over 10 meters was justified.

9. Claim No.16: The Claim was allowed to the extent of Rs.260/- by observing that the brickwork in square/rectangular pillars was only executed in the boundary wall and accordingly, the aforesaid amount was awarded.

10. Claim No.20: AT allowed the Claim to the extent of Rs.8,767/- for reinforcement that was to be paid separately. While awarding the Claim, the AT has relied on CPWD specification 1977, Volume 1 regarding half brick masonry wherein it is stated that the reinforcement had to be provided separately.

11. Claim No.23: AT partially allowed the Claim to the extent of Rs.32,000/- for charges towards dewatering of the area due to over flood of tributary/rivulets. The AT relied on Condition 3.15 of the agreement which stipulates that the respondent has to keep all works in good condition at the site and make good the same if there is damage due to rains. AT noted that there was no damage to the work but the claim was awarded for dewatering the site.

12. Claim No.28: AT partially allowed the Claim to the extent of Rs.15,149/-, holding that the petitioner was not entitled to deduct conditional rebate while sanctioning rates of extra/substituted items without fulfilling the conditions of rebate.

13. Claim No.31:The Claim was allowed to the extent of Rs.8,33,335/- towards loss of profitability. The AT has calculated the loss suffered by the respondent in accordance with the CPWD index.

14. Claim No.34: AT allowed the Claim to the extent of Rs.48,000/- towards expenses incurred by the respondent for watch and ward of Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 6 of 25 constructed premises after construction has been complete but before the allotment of the houses.

15. Claim No.44: AT allowed the Claim to the extent of Rs.7,87,729/- towards interest on the final bill. The AT has awarded 10% interest on the following amounts: a. on Rs.7,64,302.65 for the period from 01.10.1992

23.10.2000 amounting to Rs.6,16,258/-. b. on Rs.4,24,302.65 from 24.10.2000 to 18.09.2004 amounting to Rs.1,65,652/- c. on Rs.21,696/- from 20.09.2004 to 27.05.2007 amounting to Rs.5,819/-

16. Claim No.45: AT allowed the Claim to the extent of Rs.2,71,194/- towards refund of rebate wrongly deducted by the Department. The AT has noted that the Department did not perform reciprocal obligation of clearing running bills of the respondent on time and hence, is not entitled for rebate.

17. Claim No.46: The Claim was allowed to the extent of Rs.1,69,737/-, holding that there were certain shortcomings with the formula used by the petitioner for calculating the amount to be paid under clause 10CC of the agreement.

20. Claim No.47: AT allowed the Claim to the extent of Rs.13,438/- on account of short measurement of SCI pipes due to adoption of wrong methods. It was observed by the AT that portion of spigot end of the SCI pipe goes into the socket and has not been accounted for while making payments to the respondent.

21. Claims No.48 and 49: the Claim of the respondent was allowed to Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 7 of 25 the effect of awarding 10% simple interest per annum on amounts awarded under Claim Nos. 5,7,14,16,20,23,28,45,46 and 47 with effect from

01.10.1992 and on claim No. 34 from 01.08.1993 to the date of the award. Moreover, the AT also awarded a simple interest at 9% per annum on the awarded amount of all claims from the date of award to the date of payment or decree, whichever is earlier. SUBMISSIONS BEFORE THIS COURT

22. The petitioner submits that the claims awarded in favour of the respondent has been passed without giving due consideration to the evidence and are against the provisions of the Agreement entered into between the parties. With Respect to Claims No. 1&39, the petitioner contends that the AT has failed to provide reasons for non-applicability of Clause 10 of the agreement, which bars any compensation or damages on account of any delay in non-supply of materials by the Department. The petitioner goes on to submit that the respondent has not provided any evidence for salary, wages, hire charges of machinery, PF payments, etc to prove that it incurred extra expenses due to idling of its resources. While challenging Claim No. 5, the petitioner contends that the AT has failed to consider Condition 3.15 of the Specifications and Conditions of the agreement which prescribes that the rates quoted by the respondent shall hold good for all heights and depths. In so far as Claim No. 7 is concerned, petitioner contends that Item 6.2 mentioned in the agreement also provides for press steel door frames to be fixed by M.S. Steel Lugs in CC blocks and nothing extra is payable on this account and that the AT has failed to give any finding on this contention. It Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 8 of 25 is submitted that the claim amount was reduced without providing reasons. With regards to Claim No. 14, the petitioner contends that AT failed to consider Condition 37 of the Specifications and Conditions of the agreement which states that the scaffolding shall be done from the outside for all heights and nothing extra is payable on this account. While assailing Claim No. 16, the petitioner contends that the claim has been awarded without any evidence and it was the specific case of the respondent that the material was not executed at site of work. While challenging Claim No. 20, the petitioner contends that the AT has wrongly relied on CPWD specifications as it contains numerous items which are not part of the agreement. Moreover, it is contended that the Agreement did not provide for payment of extra item on this account and that is why no claim was raised for the present item during the execution of the work. With Respect to Claim No. 23, the petitioner contends that the AT‟s reasoning is inherently contradictory and in violation of the Condition 3.15, which states that nothing extra shall be payable to the respondent for maintaining all work in good condition till the completion of the work. With respect to Claim No. 28, the petitioner contends that deductions are on account of conditional rebate of 2.70% offered by the respondent in the Agreement which are recoverable by the petitioner and the AT has wrongly awarded the claim in favour of the respondent. To challenge Claim No. 31, the petitioner submits that the AT has awarded the claim relying solely on the CPWD price index which is not approved of by this Court as in other cases it is not held to be the correct method. Moreover, she submits that no evidence was led by the respondent to buttress its claim for loss of profits. Reliance is placed on State of Signature Not Verified Digitally Signed By:GAUTAM ASWAL Signing Date:06.05.2025 18:00:55 O.M.P. (COMM) 203/2020 Page 9 of 25 Rajasthan &Anr. v Ferro Concrete Construction Pvt. Ltd.1, Bharat Coking Coal vs LK Ahuja2 and Satluj Jal Vidyut Nigam Ltd. v. Jaiprakash Hyundai Consortium and Others3 to contend that documentary evidence is sine qua non for claiming loss of profits. It is submitted that once the AT does not agree with the entire amount claimed, it needs to give reasons for reduced claims. To contest the allowance of Claim No. 34, the petitioner contends that there was no obligation on the respondent to pay for watch and ward of the constructed premises. Moreover, it is contended that the respondent did not handover the flats in one go and hence, due to its own shortcoming had to be present on the site for an extended period of time. It is further argued that the respondent has not provided any evidence with respect to payment of expenses towards deployment of watch and ward staff at site. With Respect to Claim No. 44, the petitioner contends that the respondent itself failed to submit the final bill, when it was their responsibility. Moreover, it is contended that the Claim is not supported by any document on record and the alleged letter written by the Department stating that it did not have the inputs to prepare the final bill was never written. Challenging Claim No. 45, the petitioner contends that the respondent failed to submit the bills in terms of the agreement and there was no delay in preparation of running bills by the petitioner and hence, the rebate was rightly deducted. Moreover, petitioner contends that the respondent did not dispute the same at the time of accepting the running account bill, the final bill and payment under clause 10CC, which shows that the claim before the AT is an afterthought.