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2000 DIGILAW 1039 (DEL)

SUDHIR BROTHERS v. DELHI DEVELOPMENT AUTHORITY

2000-11-30

DEVENDER GUPTA, MUKUL MUDGAL

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MUKUL MUDGAL ( 1 ) THIS is an appeal by the claimant/ contractor against the judgment of the learned Single Judge dated 20/09/1989 by which the award dated 7/01/1998 given by the arbitrator was partially made a Rule of the Court. ( 2 ) THE petitioner/appellant/contractor was awarded a contract to execute work of 192 MIG DUs at Pitam Pur Pocket K (D) by the DDA. It is not in dispute that the contract contained an arbitration clause and upon certain disputes having arisen, the contractor asked for arbitration. Mr. G. R. Hingorani was appointed as the sole arbitrator by the Delhi Development Authority (hereinafter referred to as dda ) on 14/05/1985. The award was made and published on 7/01/1988. An application was moved by the claimant seeking to make the award a rule of the Court. It was registered as Suit No. 194-A/1988. ( 3 ) THE DDA thereafter filed an application being IA No. 1676 of 1988 under Sections 30 and 33 of the Arbitration Act for setting aside the award in favour of the claimant in respect of claim Nos. 1, 2, 5, 6 and 8 and rejection of DDA s counter claims 1 to 6 and additional counterclaim No. 1. Consequently, the learned Single Judge granted a decree for Rs. 2,20,442. 00 in favour of the appellant against the objector DDA. The learned single Judge dismissed the counter claims of the Respondent- DDA. The learned Single Judge also awarded interest @ 12% per annum on the said amount from the date of decree till payment. In the absence of an appeal by the respondent DDA against the learned single Judge s order we are only concerned with that part of the order by which the learned Single Judge had set aside the finding of the arbitrator in favour of the claimant on claim No. 1 and claim No. 8. ( 4 ) THE DDA had claimed a deduction of Rs. 68,127. 00 on account of shortfall in materials in another work of 256 MIG houses by the contractor. The arbitrator had disallowed this deduction by the DDA. The learned Single Judge held that in view of clause 29 (1) of the contract, there was a dispute regarding the claim of Rs. 68,127. 68,127. 00 on account of shortfall in materials in another work of 256 MIG houses by the contractor. The arbitrator had disallowed this deduction by the DDA. The learned Single Judge held that in view of clause 29 (1) of the contract, there was a dispute regarding the claim of Rs. 68,127. 00 in respect of the other contract for 256 MIG houses between the appellant and DDA which had been referred to the arbitrator and that in the absence of any decision in respect of the other reference, the finding by the arbitrator that the amount of Rs. 68,127. 00 could not be withheld, was found erroneous and the objector/dda was held entitled to withhold Rs. 68,127. 00 from the other contract with the claimant pending finalization or adjudication of such claim. Consequently the learned Single Judge held that the arbitrator was wrong in awarding Rs. 68,127. 00 and accordingly against claim No. 1 of Rs. 1,88,181. 00 a sum of Rs. 1,12,054. 00 was awarded to the contractor. ( 5 ) IN so far as claim No. 8 towards pendente lite interest the learned Single Judge dis-allowed the interest granted by the arbitrator on the ground that this was contrary to the judgment of the Supreme Court in Executive Engineer (Irrigation) Balimela andorthers [1988 (1)SCC418]. ( 6 ) THUS by the impugned judgment dated 23/09/1989 the learned Single Judge set aside the award disallowing the deduction of Rs. 62,187. 00 by the DDA under claim No. 1 and further set aside the award under claim No. 8 in so far as it awarded pendente lite interest. The rest of the award amounting to Rs. 2,20,442. 00 was made a Rule of the Court. It is the aforesaid judgment of the learned Single Judge to the extent it disallowed a sum of Rs. 62,187. 00 under claim No. 1 and declined pendente lite interest under claim No. 8 which is in appeal before this Court. ( 7 ) LEARNED counsel for the appellant/claimant submitted that the learned Single Judge has wrongly permitted withholding of the sum of Rs. 68,127. 00 by relying on clause 29 (1) of the Contract. 62,187. 00 under claim No. 1 and declined pendente lite interest under claim No. 8 which is in appeal before this Court. ( 7 ) LEARNED counsel for the appellant/claimant submitted that the learned Single Judge has wrongly permitted withholding of the sum of Rs. 68,127. 00 by relying on clause 29 (1) of the Contract. The said clause reads as follows: "29 (1) Whenever any claim or claims for payment of a sum of money arise out of or under the contract against the contractor, the Engineer-in-charge or the DDA shall be entitled to with hold and also have alien to retain such sum or sums in whole or in part from the security, if any deposited by the contractor and for the purpose aforesaid, the Engineer-in-charge or the DDA shall be entitled to withhold the security deposit, if any, furnished as the case may be and also have a lien over the same pending finalization for adjustment of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the contractor, the Engineer-in-Charge or the DDA shall be entitled to withhold and have a lien to retain to the extent of such claimed amount or amounts referred to above, from any sum or sums found payable or which at any time thereafter may become payable to the contractor under the same contract or any other contract with the Engineer-in-Charge or the DDA or any contracting person through the Engineer-in-charge pending finalization or adjudication of any such claim. " ( 8 ) LEARNED counsel for the appellant urged that there is no dispute now in respect of the said amount withheld by the DDA. Objections were filed by the DDA in another arbitration proceeding in respect of another contract for 256 MIG houses and the award dated 14/12/1992 in the said arbitration held that the claim raised by the DDA for a sum of Rs. 68,127. 00was lacking in merit. This amount of Rs. 68,127. 00is also the withheld amount in the present appeal. The said clause 29 only permits withholding of the amount in respect of any other contract with the DDA pending finalization or adjudication of the said claim. The learned counsel for the appellant has submitted that since the adjudication in respect of the said sum of Rs. 68,127. 68,127. 00is also the withheld amount in the present appeal. The said clause 29 only permits withholding of the amount in respect of any other contract with the DDA pending finalization or adjudication of the said claim. The learned counsel for the appellant has submitted that since the adjudication in respect of the said sum of Rs. 68,127. 00 by the publishing of the award had already taken place, the DDA was not entitled to withhold the said amount of Rs. 68,1271. 00- by purporting to act under the said clause 29 (1 ). ( 9 ) LEARNED counsel for the DDA contended that the term finalization in clause 29 relates to the eventual finalization of the claim and since their objections to the award in respect of 256 MIG houses were pending in this Court, recourse could still be had to clause 29 (1) to retain the said sum of Rs. 68,127. 00 by placing reliance on the phraseology of clause 29 (1 ). i. e. pending finalization or adjudication of any such claim. ( 10 ) WE are of the view that this plea of DDA does not correctly reflect the intent behind the phraseology of clause 29 (1 ). The adjudication having been done by the arbitrator s award dated 14/12/1992, in respect of the other claim of Rs. 68,127. 00 raised by the DDA, we are fully satisfied that the withholding of Rs. 68. 127. 00 thereafter cannot be justified. The term finalization in clause 29 (1) obviously relates to finalization qua the DDA in departmental dealings. The phrase finalization can not be given the extended meaning as contended by the learned counsel for the DDA, namely, beyond the pale of judicial challenge. Firstly, the phrase finalization occurs before adjudication in clause 29 (1) making it evident that adjudication follows finalization. Secondly, if such was the intent of the DDA s own standard terms set out in Clause 29, in such a case the phraseology used would have been final adjudication . Thus, the withholding of the amount of Rs. 68,127. 00 by the DDA was not justified and learned single Judge was not right in disallowing this claim of Rs. 68,127. 0 of the petitioner/claimant. ( 11 ) THE other claim which is urged before us was claim No. 8 relating to pendente lite interest. Thus, the withholding of the amount of Rs. 68,127. 00 by the DDA was not justified and learned single Judge was not right in disallowing this claim of Rs. 68,127. 0 of the petitioner/claimant. ( 11 ) THE other claim which is urged before us was claim No. 8 relating to pendente lite interest. Learned single Judge has relied upon the judgment of the Supreme Court in Executive Engineer (Irrigation) Balimela and Ors. vs. Abhaduta Jena and Ors. (supra) to deny the pendente lite interest at the rate of 18 per cent per annum granted by the arbitrator from 10/08/1984 to the date of payment. In so far as the aforesaid judgment of Supreme Court in Abhaduta Jena s case (supra) is concerned, it stands specifically overruled by the subsequent Constitution Bench Judgment of the Supreme Court reported as Secretary, Irrigation Department, Government of Orissa and others Vs. G. C. Roy (1992) 1 SCC 508 wherein it was held that where an agreement between the parties does not prohibit the grant of interest the arbitrator has the power to award interest pendente lite. ( 12 ) SINCE the agreement in the present case has not been shown to contain a prohibition against grant of interest, the claimant is entitled to interest pendente lite in accordance with the judgment of the Supreme Court in Secretary, Irrigation Department, Government of Orissa Vs. G. C. Ray reported as 1992 (1 )SCC 508. ( 13 ) THE learned counsel for the appellant had also claimed interest for the pre reference period from 10/08/1984, when reference was first sought, to 14/05/1985 when the arbitrator entered upon the reference. Learned counsel in support of this plea for grant of interest for pre reference period relied upon a judgment of the Supreme Court in Sudhir Brothers Vs. Delhi Development Authority and another, 1996 (1) SCC 32 between the same parties, as in the present proceedings. In the said judgment the Supreme Court in paragraph 9 held as follows: "thus, the law is now well settled that the arbitrator has the power and jurisdiction to grant pre reference interest in references made after the coming into force of the Interest Act, 1978. The Division Bench of the High Court was thus clearly in error in holding that the arbitrator had no jurisdiction to award interest from 1-4-1984 till 8. 2. The Division Bench of the High Court was thus clearly in error in holding that the arbitrator had no jurisdiction to award interest from 1-4-1984 till 8. 2. 1985 (pre-reference period) in the post-Interest Act, 1978 era. So far as the grievance of the appellant pertaining to the disallowance of the claim of Rs. 23,685. 00 under clauses 1, 3 and 4 is concerned, we do not find any error to have been committed by the High Court. The above view of the Division Bench, therefore, cannot be sustained. " ( 14 ) SINCE the present reference was made on 14/05/1985, after coming into force of the Interest Act i. e. 19/08/1981, the arbitrator was justified in awarding interest for the pre reference period also in accordance with the above position of law as per Sudhir Brothers (supra) case. ( 15 ) IN so far as the award of interest from the date of the decree to the date of payment is concerned, the learned counsel has relied upon a judgment reported as Hindustan Construction Co. Ltd. Vs. State of Jammu and Kashmir, 1992 (4) SCC 217 wherein in para 5 it was held as follows: "the question of interest can be easily disposed of as it is covered by recent decisions of this Court. It is sufficient to refer to the latest decision of a five Judge Bench of this Court in Secretary, Irrigation Department, Govt. of Orissa Vs. G. C. Ray 1992 (1) SCC 508 . Though the said decision deals with the power of the arbitrator to award interest pendente lite, the principle of the decision makes it clear that the arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realisation, whichever is earlier. This is also quite logical for, while award of interest for the period prior to an arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter of procedure. Section 34 of Code of Civil procedure provides both for awarding of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before the arbitrator, though the section as such may not apply. Section 34 of Code of Civil procedure provides both for awarding of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before the arbitrator, though the section as such may not apply. In this connection, the decision in Union of India vs. Bungo Steel Furniture (P) Ltd. , (1967) 1 SCR 324 may be seen as also the decision in Gujarat Water Supply and Sewerage Board Vs. Unique Erectors (Gujarat) P. Ltd. (1989) 1 SCC 532 which upholds the said power though on a somewhat different reasoning. We, therefore, thing that the award on Item No. 8 should have been upheld. " ( 16 ) THUS in view of the above position of law the claimant is entitled to interest from the date of the decree till the date of payment which was rightly granted by the arbitrator and erroneously declined by the learned Single Judge. ( 17 ) LASTLY the learned counsel for the DDA has submitted that in view of Section 3 of the Interest Act the Interest could not be awarded at the rate of 18 per cent per annum but should have been awarded at the fixed deposit rate. The learned counsel however did not show us what was the current rate of interest in fixed deposits. The learned counsel for the appellant in reply has relied upon a judgment of this Court reported as Puri Construction (P) Ltd. Vs. Union of India and Another 1987 (1) Arbitration Law Reporter 264 to contend that the learned Single Judge of this Court in para 44 relied upon the judgment of the Union of India vs. A. L. Rallia Ram to grant interest at the rate of 18 per cent per annum. The said para 44 reads as under: "this judgment fairly and squarely applies to the facts of the present case and I see no reason to adopt a different view. On the other hand, the judgments relied upon by the learned counsel for the respondents relate to the payment of interest by way of damages for breach of contract. None of the other authorities relate to a case where no interest is payable from the date the money become due and payable. On the other hand, the judgments relied upon by the learned counsel for the respondents relate to the payment of interest by way of damages for breach of contract. None of the other authorities relate to a case where no interest is payable from the date the money become due and payable. There was sufficient evidence before the Arbitrator to show that the transaction between the Union of India and the claimant Company was a commercial one. All along the claimant Company had been demanding interest at the rate at which the monies are lent or advanced by the Nationalised Banks. The evidence before the Arbitrator further show that interest at the rate of 18% P. A. compounded quarterly was payable in terms of the market practice. Even certificate from the Banks were also produced on record. No evidence was led by the Union of India with regard to interest, whether oral or documentary. " ( 18 ) IN view of the law laid down by the aforesaid decision of this Court, we are of the view that the interest at the rate of 18 percent per annum deserves to be granted in the present case too. Therefore, the plaintiff/appellant would be entitled to interest, on the awarded amount, which would also include the sum of Rs. 68,1271. 00 and interest at the rate of 18 per cent per annum from 10/08/1984 upto the date of payment. ( 19 ) AS a result of the above finding the appeal is allowed with costs and the order of the learned single Judge stands modified to the extent indicated above. Decree shall stand modified to the extent aforesaid.