C. L. Chaudhry ( 1 ) DELHI Development Authority, respondent, placed an order on M/s. Pawan Joinery Mills for the supply of shutters. Certain disputes arose out of the execution of the order. The Engineer Member of the Delhi Development Authority by its letter dated 2nd January, 1987 appointed Shri G. R. Hingorani, as the sole arbitrator to decide and adjudicate the disputes between the parties. The arbitrator entered upon the reference and made his award on 23rd May, 1988 and on a direction given by this court, the arbitrator filed the award as well as arbitration proceedings. ( 2 ) NOTICE of filing of the award was served on the parties. The petitioner has accepted the award but the Delhi Development Authority has challenged the award by filing objections under Sections 30 and 33 of the Arbitration Act. The objections are contested on behalf of the petitioner. ( 3 ) ON the pleadings, the following issues were framed : (1) Whether the Award is liable to be set aside on the grounds set out in the objection petition ? (2) Relief. ( 4 ) THE parties were given leave to lead evidence by way of affidavits, which they have done. I have heard learned counsel for the parties and have given my thoughtful consideration to the matter involved. My findings on the above issues are as under : ( 5 ) ISSUE No. 1 The first objection on behalf of the D. D. A. is that after filing of the claims, the counter claims, the arbitrator called the parties for discussion. No opportunity for adducing evidence was given by the learned arbitrator. The parties made submissions before the learned arbitrator but no proceeding whatsoever was recorded by the arbitrator. No minutes of proceedings were sent to the respondent except the notice about the next hearing. ( 6 ) ON behalf of the petitioner, it is alleged that after filing the counter claims, the learned arbitrator directed the parties to produce the documentary evidence as none of the parties ever wanted to produce any oral evidence. There was no question of not granting opportunity to adduce evidence by the learned arbitrator. In fact the respondent never asked for producing any oral evidence. It was denied that no proceedings were recorded by the arbitrator and no minutes of proceedings were sent to the respondent. There was no question of not granting opportunity to adduce evidence by the learned arbitrator. In fact the respondent never asked for producing any oral evidence. It was denied that no proceedings were recorded by the arbitrator and no minutes of proceedings were sent to the respondent. The arbitrator had recorded the minutes of the proceedings which were duly signed by both the parties and both the parties were supplied with the copies on the next date of hearing. The minutes of proceedings would show that the arbitrator directed the parties to submit written statements and supporting evidence by the date as given by the arbitrator in the proceedings held on 9th January, 1987 and on subsequent dates. Number of opportunities were given to the respondent to file written arguments. On 10th March 1988, the parties had already filed the written arguments but the learned arbitrator gave another opportunity to the parties to address oral arguments which also concluded on 16th April, 1988. ( 7 ) I have perused the record of the arbitration. The contention of the Delhi Development Authority has no merit. The arbitrator maintained the minutes and the record of the proceedings. From the proceedings, it appears that full opportunity was given to the parties to file documentary evidence and written arguments. I find from the record that written arguments were filed by the parties and oral arguments were also heard by the arbitrator. The objection of the Delhi Development Authority on this ground is not well founded and is rejected. ( 8 ) IT was next contended that the arbitrator had misconducted the proceedings before him. By the terms of reference, he was required to record reasons for his Award after fully applying his mind to the material placed before him. The arbitrator misconducted the proceedings. He did not apply his mind to the respective contentions and ignored the documents placed before him. ( 9 ) THE contention is denied on behalf of the petitioner. In my opinion, the objection is devoid of merit. I have perused the award. The Arbitrator has recorded reasons in support of his award. ( 10 ) THE next objection is that Arbitrator s finding on Claim No. 1 in disallowing the amount withheld for reduction items and to recover extra costs, is an error of law apparent on the face of the Award. I have perused the award. The Arbitrator has recorded reasons in support of his award. ( 10 ) THE next objection is that Arbitrator s finding on Claim No. 1 in disallowing the amount withheld for reduction items and to recover extra costs, is an error of law apparent on the face of the Award. Respondent/ D. D. A. on the assurance of the petitioner utilised partly defective quantity of shutters and the petitioner undertook to reimburse the respondent for the amounts spent on rectification, the petitioner was duly bound to stick to their commitment and had reimbursed the respondent. Further, in view of the extension of the contract period, time remained essence of the contract, By not delivering the supplies, after the initial stipulation period and not completing the supply in the circumstances, the petitioner committed breach of the contract and revocation of the same by the respondent vide their letter dated 19th March, 1987 was perfectly in order. The respondent was thus entitled to withhold a sum of Rs. 1,42,052 to recover extra cost for the procurement of the balanced undelivered quantity. The finding of the learned Arbitrator on claim No. 1 is patently wrong in law. ( 11 ) THIS has been denied on behalf of the petitioner. It is stated that respondent wants to challenge the finding on claim No. 1 by narrating even the wrong facts. It was not the case of the respondent even before the Arbitrator or in any of the letters addressed to the petitioner that the petitioner had assured the respondent at any time as alleged. In fact the record of the respondent would itself show that the shutters utilised were of good quality and such an endorsement was made on all the bills. The stand now taken by the respondent is without any basis and is an after-thought. There was no breach of the contract on behalf of the petitioner. ( 12 ) THE finding given by the arbitrator against this claim No. 1 reads as under: Claim No. 1 for Rs. 2,52,203 towards amount withheld. The stand now taken by the respondent is without any basis and is an after-thought. There was no breach of the contract on behalf of the petitioner. ( 12 ) THE finding given by the arbitrator against this claim No. 1 reads as under: Claim No. 1 for Rs. 2,52,203 towards amount withheld. In Appendix a enclosed with the Respondent s C. S. F. it has been admitted that following amounts have been wirhhold in different divisions of D. D. A. As per terms of the contract, the consignees were required to inspect the shutters in the claimant s factory at Jammu before these were despatched to Delhi. This procedure was followed by all consignees except D. D. I who directed the claimants to supply the shutters without prior inspection. On receipt of the material in Delhi, E. E. D. D. I rejected some shutters which were removed by the firm. For the remaining shutters which were utilised on D. D. A. s projects, it is now proposed to reduced the rates arbitrarily as for 2nd class quality instead of 1st class quality as per contract. There is no justification for making such a reduction at this stage, without any prior notice to the contractors. It was open to D. D. A. not to accept the shutter, if these did not conform to the specifications. Some reductions are also proposed for moisture content being marginally higher. This is also not justified as the moisture content should have been checked at the time of inspection of the shutters in the factory. The recovery on account of "extra cost is also not justified as no Risk Purchase has actually been made. Hence Claim No. 1 is justified for Rs. 2,46. 080. ( 13 ) I have considered the respective contentions of the parties. In my opinion, the objection is without merit. The reasons given by the arbitrator are valid and justified. I do not find any perversity in the reasons given by the arbitrator. Even otherwise the objection relates to the merits of the Award which cannot be gone into by this court while dealing with the Award under Section 30 of the Arbitration Act. The objection is rejected. ( 14 ) THE next contention is that the arbitrator wrongly awarded the interest for prereference period from 11. 10. 1986 to 2. 1. 1987 at the rate of 12% per annum. Mr. The objection is rejected. ( 14 ) THE next contention is that the arbitrator wrongly awarded the interest for prereference period from 11. 10. 1986 to 2. 1. 1987 at the rate of 12% per annum. Mr. Jain relied upon clause 17 of the Contract, which provided that "it is an agreed terms of the contract that the sum of or sums of money so withheld or retained under the lien referred to above by the Engineer-in-Charge or DDA be kept withheld or retained as such by the Engineer-in-Charge or DDA shall the claim arising out of or under the contract determined by the Arbitrator. If the contract is governed by the arbitration clause or by the competent court as the case may be, and that the contractor will have no claim for interest or damages whatsoever on any account in respect of such withholding or retention under the lien referred to above and duly notified as such to the contractor. " ( 15 ) IT is submitted that the arbitrator could not grant the interest in view of this clause. The arbitrator has allowed interest with the following reasons: (A) Past interest upto the institution of proceedings Under the provision of Interest Act of 1978, the claimants are entitled to payment of simple interest at 12% per annum (being the maximum rate paid by Banks or deposits) from 11. 10. 1986 (date on which they invoked the arbitration) upto 2. 1,1987 when the arbitrator was appointed. (b) Pendente life interest As perrecent Pronouncement of Supreme Court (1988) 1 S. C. C. 418 the arbitrator has no power to award pendente life interest. (c) Future interest The claimants should be paid simple interest at 18% per annum from date of award upto the date of payment or decree, which-ever is earlier. ( 16 ) IN my opinion, the reliance placed on clause 17 of the agreement is misplaced. On 11. 10. 1986 the petitioner invoked arbitration clause and the arbitrator was appointed on 2. 1. 1987. This period is not covered under clause 17 of the agreement. The arbitrator was justified in awarding the interest. The objection against the award of interest is rejected. ( 17 ) IT was then contended that the arbitrator wrongly awarded the future interest @ 18% per annum from the date of the Award upto the date of payment or decree whichever is earlier. The arbitrator was justified in awarding the interest. The objection against the award of interest is rejected. ( 17 ) IT was then contended that the arbitrator wrongly awarded the future interest @ 18% per annum from the date of the Award upto the date of payment or decree whichever is earlier. It has been denied on behalf of the petitioner that the arbitrator committed a legal error in awarding future interest. I have considered this aspect. The objection on behalf of the D. D. A. seems to be well founded on this aspect. It is settled law that the arbitrator cannot award future interest. However, the court has the power to award interest from the date of the Award to the date of the decree/payment. I set aside the Award so far as it relates to the award of future interest against claim No. 2. ( 18 ) THE next objection is that Claim No. 3 for Rs. 1,06,900 on account of security deposit has been allowed and the counter claim No. 1 of the respondent for Rs. 2,43,778 towards liquidated damages has been disallowed by the learned Arbitrator on wrong presumptions of law, which error is apparent on the face of the Award. The objection is denied on behalf of the petitioner. It is stated that the security deposits have rightly been allowed and the counter claim of the respondent was without any basis, substance and was an after-thought and the same was rightly disallowed by the learned Arbitrator as the same was unjustified. Against claim No. 3, the award of the Arbitrator is as under : Claim No. 3 for Rs. 1,06,900 on account security deposit: The period of contract was from 24. 5. 1984 to 23. 1. 1985. The show cause notice was issued on 30 8. 1986 (R-55), more than 18 months after, the completion date. The contract was annulled on 19. 3. 1987 (R-24) more than 6 months after, the issue of show cause notice. Action of E. E. to forfeit the security deposit under clause 15 of the contract is not justified. Hence the security deposit should be refunded to the claimants. ( 19 ) I have heard learned counsel for the parties. The contract was annulled on 19. 3. 1987 (R-24) more than 6 months after, the issue of show cause notice. Action of E. E. to forfeit the security deposit under clause 15 of the contract is not justified. Hence the security deposit should be refunded to the claimants. ( 19 ) I have heard learned counsel for the parties. Clause 15 of the Contract reads as under : "on the breach of any terms or conditions of this contract by the contractor, the said Chairman, shall be entitled to forfeit the security deposit, or the balance thereof that may at that time be remaining and to realise and retain the same as damages and compensation for the said breach, but without prejudice to the right of the said Chairman, to recover any further sums as damages from any sums due or which may become due to the contractor by DDA or otherwise how-soever. " ( 20 ) THE security was forfeited by the Delhi Development Authority vide letter dated 19th March, 1987. It was stated in the letter that in view of the breach of terms and conditions of the contract on the part of the contractor, DDA under clause-15 of the agreement had forfeited the security in respect of the said contract without prejudice to other rights of DDA under or by virtue of the said contract or otherwise. It was contended by Mr. Jain that there is no finding of the Arbitrator that the security was wrongly forfeited by the Delhi Development Authority. Under clause 15 of the contract, the Delhi Development Authority had a right to forfeit the security if there was a breach of any terms or conditions of the contract by the contractor. The Arbitrator did not hold that the contractor had not committed breach of any term and condition of the contract. Without holding that, the Arbitrator could not, make an award for refund of the security. ( 21 ) IT was contended on behalf of the petitioner that the contractor has not committed any breach of the agreement and that supplies were made within time. ( 22 ) IT is not for the Court to decide whether the contractor had committed the breach of the contract or not. It was for the Arbitrator to decide this matter. ( 22 ) IT is not for the Court to decide whether the contractor had committed the breach of the contract or not. It was for the Arbitrator to decide this matter. The security was forfeited by the department on the ground that there was a breach of the terms on the part of the contractor. The arbitrator did not go into this question at all. Without deciding this question, the Arbitrator could not make an award that the forfeiture of the security deposit under clause 15 of the contract was unjustified. The Award on this Claim No. 3 is perverse and cannot be sustained. I allow the objection of the Delhi Development Authority and set aside the Award against claim No. 3. ( 23 ) IT was next contended that the counter claim No. 1 for Rs. 2,43,778 towards liquidated damages has been disallowed by the learned Arbitrator on wrong presumption of law. The objection is denied on behalf of the petitioner. The Award of the Arbitrator against earlier claim No. 1 reads as under : "counter Claim No. 1 for Rs. 2,43,778 towards liquidated damages under claim 2 of the Contract : The date of Start and Completion of the contract were 24. 5. 1984 and 23. 1. 1985 respectively. The actual supply orders placed the firm were as under : 13201. htm It will be seen that only the first two supply orders amounting to about 12 lakhs were placed before the expiry date of the contract, As against this, the total supplies made by the contractor were about 25 lakhs. Hence the action of the S. E. to levy liquidated damages on 5. 2. 1987 (R -26) more than 2 years after the expiry date of contract, is not justified. " ( 24 ) I have heard learned counsel for the parties. The objection relates to merits of the Award and, therefore, I don t find any legal infirmity in the reasons given by the Arbitrator. The objection against counter claim No. 1 is without merits and is rejected. ( 25 ) IT was next contended that claim No. 5 for Rs. 12,750 has again been allowed for change in size of shutters on a wrong interpretation of terms of the contract between the parties, which error is apparent on the face of the Award. The Award against this claim is based on no evidence whatsoever. ( 25 ) IT was next contended that claim No. 5 for Rs. 12,750 has again been allowed for change in size of shutters on a wrong interpretation of terms of the contract between the parties, which error is apparent on the face of the Award. The Award against this claim is based on no evidence whatsoever. The objection is denied on behalf of the petitioner. Against claim No. 5 the Arbitrator has given the following Award : "claim No. 5 for Rs. 12. 750 towards loss caused due to change in size of shutters". On 6. 3. 1985 (C-21) E. E. D. D. 1 informed the claimants to change the size of shutters. The contractor informed the E. E. on 18. 3. 1985 (C-22) that 250 shutters had already been manufactured as per sizes given earlier and that it would cost extra labour of Rs. 25 per shutter, plus wastage of wood. The E. E. did not reply to this letter. Hence the D. D. A. is liable to pay extra cost of Rs. 12,750 as under : (a) Labour Charges 250x25= Rs. 6,250. 00 (b) Wastage of wood in breaking of styles etc. Rs. 6,500. 00 Rs. 12,750. 00 ( 26 ) I do not find any merit in the objection filed on behalf of the Delhi Development Authority. The Arbitrator has given reasons for the amount. I don t find any legal flaw or perversity in the reasons given by the Arbitrator. Even otherwise, the objection relates to the merit of the Award. The objection is rejected. ( 27 ) IT was lastly contended that counter claim No. 2 for Rs. 7. 49 lakhs towards extra expenditure likely to be incurred by D. D. A. on procurement of the balance quantity has been wrongly disallowed by the learned Arbitrator, which error is apparent on the face of the Award. ( 28 ) ON behalf of the petitioner it is stated that there is no question of any extra expenditure by respondent as from the record itself it was clear that no goods were purchased at the risk and cost of the respondent. The order was cancelled without any reason whatsoever and there is absolutely no error apparent on the face of the Award. The Award of the Arbitrator against counter claim No. 2 reads as under : "counter claim No. 2 for Rs. 7. The order was cancelled without any reason whatsoever and there is absolutely no error apparent on the face of the Award. The Award of the Arbitrator against counter claim No. 2 reads as under : "counter claim No. 2 for Rs. 7. 49 lakhs towards extra expenditure likely to be incurred by D. D. A. on procurement of balance quantity : As discussed above, supply orders for only Rs. 12 lakhs were placed by D. D. A. before the expiry date of contract. Show cause notice was issued to the contractor on 30. 8. 1986 (R-55) more than 18 months thereafter. Order for rescinding the contract was issued on 19. 3. 1987 (R-24) more than 6 months after the issue of show cause notice. D. D. A. have also not taken any action for procuring the balance quantity of shutters, through another agency. This shows that D. D. A. do not require the balance quantity of shutters. Otherwise they would have fixed the agency for Risk Purchase, immediately after issue of show cause notice on 30. 8. 1986 Hence the counter claim is hypothetical and not justified. " ( 29 ) IN my opinion, the objection against counter claim No. 2 relates to the merits of the Award. Even otherwise, I don t find any legal error in the reasons given by the Arbitrator. The Award against counter claim No. 2 does not seem to be perverse. The objection against this claim is also rejected. ( 30 ) IN view of my above discussion, the Award against counter claim No. 2 so far as it relates to future interest and award against claim No. 3 is set aside. Rest of the Award is made Rule of the court. The petitioner shall be entitled to interest at the rate of 9% per annum from the date of award till the date of payment. Decree may be drawn in terms of the award. Parties are left to bear their own costs.