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2006 DIGILAW 1628 (DEL)

SUBHASH v. DELHI DEVELOPMENT AUTHORITY

2006-09-13

REVA KHETRAPAL

body2006
REVA KHETRAPAL, J. ( 1 ) THIS is an application filed by the respondent Delhi Development authority under Sections 30 and 33 of the Arbitration Act, 1940 whereby and whereunder the respondent has filed objections against the award made and published on 12th January, 1995 by Shri R. J. Bakhru, sole arbitrator. ( 2 ) THE facts relevant for the disposal of the present petition are as follows:-"the petitioner was awarded the work of construction of M. S. Building on plot No. 1, 2 and 5 at the District Centre, Janak Puri, New Delhi and connected shopping centre (Zone-B) to the West including internal water supply, sanitary installation, site development and land scaping work up to Plot No. 4 at DDA district Centre, Janak Puri vide agreement No. 4/ee/wd-15/dda/a/87-88. The date of the start of the work was 7th August, 1987 and the work was to be completed by 6th February, 1989. The work could not be completed by the stipulated date of completion, and the contract was finally rescinded on 13. 03. 1989 by the respondent, Delhi Development Authority. Disputes arose between the parties and the Engineer Member, DDA was pleased to appoint Shri O. P. Mittal as the sole arbitrator to adjudicate upon the said disputes. However, due to the demise of shri O. P. Mittal, sole arbitrator, Shri R. J. Bakhru was appointed as sole arbitrator. Shri Bakhru entered upon the reference on 9th March, 1993 and made and published his award on 12th January, 1995. " ( 3 ) AGGRIEVED by the said award, the respondent DDA has filed the present objection petition within the statutory period of 30 days, assailing the findings of the arbitrator on claim Nos. 1 to 6 and counter claim Nos. 1 and 7 to 13. ( 4 ) REPLY to the objection petition was filed by the petitioner, denying the averments made in the objection petition by the respondent and praying that the award be made a rule of the Court and decree passed in terms thereof. ( 5 ) ON the pleadings of the parties, the following issues were framed for consideration:- (i) Whether the award is liable to be set aside on the basis of the objections raised by the respondent" (ii) Relief and costs. ( 5 ) ON the pleadings of the parties, the following issues were framed for consideration:- (i) Whether the award is liable to be set aside on the basis of the objections raised by the respondent" (ii) Relief and costs. ( 6 ) IN the course of hearing of the petition, however, the respondent Delhi development Authority confined its challenge to the award to the findings of the learned arbitrator on claim No. 2 of the petitioner's claims, counter claim No. 13 of its own counter claim and to claim No. 6 pertaining to the interest awarded by the learned arbitrator. Objections to the remaining claims and counter claims, namely, claim No. 1, claim Nos. 3 to 5 and counter claim Nos. 1 and 7 to 12 were not pressed and hence are not being specifically dealt with. ( 7 ) FINDINGS of the Arbitrator with regard to Illegal Rescission of contract by Delhi Development Authority: at the outset, it is deemed expedient to advert to the preliminary findings of the learned arbitrator pertaining to the wrong and unjustified rescission of contract by the respondent/delhi Development Authority. The same are as follows:-"2. 0. PRELIMINARY: 2. 1. The date of start and completion as stipulated in the contract agreement were 07. 08. 1987 and 06. 02. 1989 respectively. The work could not be completed by stipulated date of completion i. e. 06. 02. 1989. The gross value of work done as per last R. A. Bill (16th) paid on 21. 01. 1989 was Rs. 1,80,91,290/- (excluding rebates) against corresponding contract value of Rs. 2,58,96,927/-i. e. 69. 87%. Provisional extension of time was granted unilaterally by respondents vide their letter dated 03. 02. 1989 (Ext. R/94) upto 31. 05. 1989. This was refuted by claimants vide their letter dated 07. 02. 1989 (Ext. C/170 ). The show cause notice for action under clause 3 (a), 3 (b) and 3 (c) was issued by respondents vide their letter dated 09. 01. 1989 (Ext. R/123 ). This was replied by claimants vide their letter dated 17. 01. 1989 (Ext. C/116 ). The contract was rescinded by respondents under sub-clauses (a), (b) and (c) of clause 3 of contract agreement vide their letter dated 13. 03. 1989 (Ext. R/100 ). 2. 2. 01. 1989 (Ext. R/123 ). This was replied by claimants vide their letter dated 17. 01. 1989 (Ext. C/116 ). The contract was rescinded by respondents under sub-clauses (a), (b) and (c) of clause 3 of contract agreement vide their letter dated 13. 03. 1989 (Ext. R/100 ). 2. 2. According to claimants, slow progress of work was due to various hindrances, defaults, lapses, acts of omission and commission on the part of respondents. These were - (i) Delay in handling over site of work. (ii) Delay in completion of water proofing work by separate agency employed by respondents. (iii) Delay/failure in issue of architectural/structural drawings, clarifications, etc. (iv) Laying of electrical conduits was delayed frequently holding up the civil work. (v) Diversion of sewer line was delayed. (vi) Delay in supply of stipulated materials e. g. cement and steel " specially during strike by D. D. A. staff from 19. 01. 1988 to 10. 02. 1988. The above hindrances were brought to the notice of respondents from time to time vide their letters at exhibits C/40, C/15, C/24, C/41 to C/57, C/60 to c/80, C/89 to C/107, C/120, C/122, etc. 2. 3. The contention of claimants vide para 2. 2 above was denied by respondents who pleaded that failure to complete the work within stipulated period was due to lack of infra-structure, resources, organization on part of claimants. They had no intention to complete the work. In support, they relied on a large number of their letters filed by them as exhibits on record. 2. 4. After study of the case, I find that - (i) There was delay of ten days in handing over the site (Ext. C/40 ). (ii) Water proofing work was completed by January, 1989 (Exts. R/86 dated 05. 01. 1989 and C/120 dated 20. 01. 1989 ). The delay was more than a year. (iii) It is seen from details given in Register of drawings (Ext. R/129a)that drawings were issued piece-meal. In many cases, the delay was even more than 12 months. The position as explained by claimants vide their letters dated 17. 01. 1989 (Ext. C/116) and dated 28. 01. 1989 (Ext. C/122) is broadly confirmed by the details in drawing Register maintained by respondents and other letters on record. (iv) There has also been some delay in laying electrical conduits and diversion of sewer line by respondents. The position as explained by claimants vide their letters dated 17. 01. 1989 (Ext. C/116) and dated 28. 01. 1989 (Ext. C/122) is broadly confirmed by the details in drawing Register maintained by respondents and other letters on record. (iv) There has also been some delay in laying electrical conduits and diversion of sewer line by respondents. (v) The Hindrance Register filed by respondents vide their exhibit R/133 contained 48 blank sheets only. The various hindrances as reflected in other records of respondents had not been entered in the above register. (vi) The revised date of completion fixed unilaterally by respondents as 31. 05. 1989 did not provide reasonable time to complete the balance work as on 03. 02. 1989. In fact, the contract was rescinded on 13. 03. 1989 before the extended date of 31. 05. 1989. (vii) In view of above, I hold that the entire delay in execution of work was due to hindrances, defaults, lapses and failure to perform contractual obligations on part of respondents. Accordingly, the rescission of contract by respondents was wrong and unjustified. " ( 8 ) OBJECTIONS to claim No. 2: as stated above, the respondent-objector in its objection petition asserts that the findings of the learned arbitrator with respect to claim No. 2 are erroneous on the face of it, inasmuch as the learned arbitrator has awarded loss of profitability to the tune of Rs. 5,47,400/- in favour of the petitioner (hereinafter referred to as claimant) by completely ignoring that the claimant was not entitled to the same as the work had been rescinded after due show cause notice. ( 9 ) IN reply, the claimant has submitted that the learned arbitrator has held that the rescission of the work was bad and illegal and as such, it would be entitled to compensation on account of illegal rescission of the contract. It is further submitted that the learned arbitrator has given a just and reasoned award by granting compensation to the claimant for the portion of the contracted work, which remained unexecuted on account of the said illegal rescission. ( 10 ) A perusal of the arbitral record shows that the claimants had claimed rs. 6,94,098. 40 towards 10% profit on balance work due to breaches committed by the respondent. ( 10 ) A perusal of the arbitral record shows that the claimants had claimed rs. 6,94,098. 40 towards 10% profit on balance work due to breaches committed by the respondent. The learned arbitrator in his award after noticing that it is a well known fact that contractors provide for a certain element of profit in their tenders, which generally varies from 10% to 15% of the value of work, gave a finding that the claimant had become entitled to receive the same in view of the fact that the rescission of the contract had been held by him to be wrong and unjustified vide para 2. 4 of the award. The learned arbitrator further held that (i) the claimants were, thus, deprived of their right to earn profit, (ii)the rates quoted by the claimants were comparable to the then prevailing market rates, and (iii) as an established practice, Government/semi-Government agencies assume an element of 10% as 'profits Over Heads' in their estimates for such works. Accordingly, profit at the rate of 7 " % of gross value of contract was considered by the arbitrator as reasonable. ( 11 ) WITH regard to the quantification of loss of profitability, the learned arbitrator stated that the contract value was Rs. 2,53,78,598/- (after deduction of unconditional rebate of 2%) against which the value of work executed was Rs. 1,80,79,938/ -. The element of profit deemed to have been earned by claimant at the rate of 7. 50% of unexecuted portion of the contracted work (that is, Rs. 72,98,660/-) works out to Rs. 5,47,399. 50. Accordingly, a sum of rs. 5,47,399. 50 was awarded by the arbitrator in favour of the claimant towards loss of profitability. ( 12 ) THUS, under claim No. 2, the arbitrator allowed compensation to the tune of Rs. 5,47,399. 50 to the claimant by way of profits at 7. 50% of gross value of the unexecuted portion of the contract work on account of breach of contract by the respondent-Delhi Development Authority. I do not find any error in the award in this regard. The arbitrator carefully scrutinized the documents filed by the parties and gave his findings that the rescission of the contract was bad and illegal. He then noticed that as a matter of practice, the margin of profitability in such kind of contracts varies from 10% to 15%. I do not find any error in the award in this regard. The arbitrator carefully scrutinized the documents filed by the parties and gave his findings that the rescission of the contract was bad and illegal. He then noticed that as a matter of practice, the margin of profitability in such kind of contracts varies from 10% to 15%. He then awarded to the claimant compensation at the rate of 7. 50% only as against 10% claim preferred by the claimant. ( 13 ) IN M/s. A. T. Brij Paul Singh and Ors. vs. State of Gujarat (1984) 4 scc 59 , the Hon'ble Supreme Court while interpreting the provisions of Section 73 of the Contract Act, held that damages can be claimed by a contractor where the Government is proved to have committed breach by improperly rescinding the contract, and for estimating the amount of damages, Court should make a broad evaluation instead of going into minute details. It was specifically held that where in a works contract, the parties entrusting the work commit breach of contract, the contractor is entitled to claim damages for loss of profit which he expected to earn by undertaking the works contract. Claims of expected profits are legally admissible on proof of the breach of contract by the erring party. It was observed as follows:-"what would be the measure of profit would depend upon facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract cannot be gainsaid. In this case we have the additional reason for rejecting the contention that for the same type of work, the work site being in the vicinity of each other and for identical type of work between the same parties, a Division Bench of the same High Court has accepted 15 per cent of the value of the balance of the works contract would not be an unreasonable measure of damages for loss of profit. We are, therefore, of the opinion that the High court was in error in wholly rejecting the claim under this head. " ( 14 ) TO the same effect is the judgment of the Apex Court in Mohd. We are, therefore, of the opinion that the High court was in error in wholly rejecting the claim under this head. " ( 14 ) TO the same effect is the judgment of the Apex Court in Mohd. Salamatullah vs. Government of Andhra Pradesh, AIR 1977 SC 1481 . After approving the grant of damages in case of breach of contract, the Apex Court held that the Appellate Court was not justified to interfere with the findings of fact regarding quantification of the damages even if it was based upon guess work. In Salamatullah's case (supra) as well as in A. T. Brij Paul Singh's case referred to in the preceding paragraph, 15% of the contract price was granted by the Court as damages to the contractor for breach of contract by the Government. ( 15 ) RELYING upon the aforesaid two decisions, the Supreme Court in the case of Dwarka Dass vs. State of Madhya Pradesh, AIR 1999 SC 1031 held that as and when the breach of contract is held to have been proved being contrary to law and terms of the agreement, the erring party is legally bound to compensate the other party to the agreement. The Appellate Court was, therefore, not justified in disallowing the claim of the appellant who had been granted only 10% of the contract price on account of damages as expected profit out of the contract which was found to have been illegally rescinded. ( 16 ) FACED with the decisions of the Apex Court in the cases of M/s. A. T. Brij Paul Singh (supra), Mohd. Salamatullah (supra) and Dwarka Dass (supra), learned Counsel for the respondent-objector was not able to point out any precedent to the contrary. Accordingly, in view of the law laid down by the hon'ble Supreme Court in the aforesaid cases, the award of Rs. 5,47,399. 50 in favour of the claimant towards profit on balance work, that is, the unexecuted portion of the contracted work cannot be faulted and is accordingly upheld. ( 17 ) COUNTER Claim No. 13 next, adverting to counter claim No. 13, the rejection of the respondent's claim of Rs. 5,47,399. 50 in favour of the claimant towards profit on balance work, that is, the unexecuted portion of the contracted work cannot be faulted and is accordingly upheld. ( 17 ) COUNTER Claim No. 13 next, adverting to counter claim No. 13, the rejection of the respondent's claim of Rs. 16,56,109/- on account of levy of compensation under clause 2 of the agreement has been assailed by learned counsel for the respondent on the ground that the said amount of compensation was levied by the S. E. vide his letter dated 14th June, 1989 on account of non-performance of the contract by the claimant, and the above claim being beyond the purview of arbitration could not have been dealt with by the arbitrator. Learned counsel for the respondent pointed out that a show cause notice for levy of compensation under clause 2 was issued by the respondent initially vide its letter dated 16th August, 1988 (Ext. C/111) and was replied by claimant vide their letter dated 05. 09. 1988 (Ext. C/112 ). The next show cause notice under clause 2 was given by respondent vide its letter dated 17. 11. 1988, which was replied by claimant vide their letter dated 22. 11. 1988 (Ext. C/113 ). Finally, show cause notice for levy of compensation under clause 2 of the agreement was issued by the S. E. vide his letter dated 31st March, 1989 (Ext. R/112 ). This was replied by claimant vide their letter dated 11. 04. 1989 (Ext. C/182) giving the details of hindrances and consequent delays on the part of the respondent. Thereafter, the compensation of Rs. 16,56,109/- was levied by the S. E. vide his letter dated 14th June, 1989 (Ext. R/113 ). ( 18 ) IT is pertinent at this juncture to note that the learned arbitrator in his award has specifically noticed that the said counter claim had been referred to him for adjudication as a dispute between the parties by the engineer Member, Delhi Development Authority vide his letter no. EM2 (36)89/arbn/3279-83 dated 5th March, 1989. Learned arbitrator observed that:-"their plea at the subsequent stage of arguments during 29th hearing on 22nd october, 1994 that the above claim is beyond the scope of arbitration is contradiction of their own action, hence not accepted. The arbitrator, therefore, gets jurisdiction to look into the whole matter relating to extension of time from the reference itself. Learned arbitrator observed that:-"their plea at the subsequent stage of arguments during 29th hearing on 22nd october, 1994 that the above claim is beyond the scope of arbitration is contradiction of their own action, hence not accepted. The arbitrator, therefore, gets jurisdiction to look into the whole matter relating to extension of time from the reference itself. "the arbitrator then concluded that in view of his findings that the entire delay in performance of contract was attributable to the various hindrances, defaults, lapses and failure to perform contractual obligations on part of respondents, therefore, the above counter claim was not justified. ( 19 ) THE question which arises is whether as urged by counsel for the respondent the arbitrator could have gone into the question of levy of compensation by the Engineer or whether under clause 2 of the agreement, the arbitrator did not have any jurisdiction to deal with the said counter claim, the same being 'excepted matter' under clause 2 of the agreement" ( 20 ) IN the above context, reliance was placed by Ms. Anusuya Salwan, learned counsel for the respondent on the judgment of the Apex Court in vishwanath Sood vs. Union of India, AIR 1989 SC 952 . Learned counsel pointed out that clause 2 of the contract agreement in Vishwanath Sood's case (supra)was in pari materia with clause 2 of the contract agreement in the instant case. It will be useful at this juncture to reproduce clause 2 of the agreement on which counter claim No. 13 of the respondent is based:-'clause 2. Compensation for delay" The time allowed for carrying out the work as entered in the tender shall be strictly observed by the contractor and shall be deemed to be the essence of the contract on the part of the contractor and shall be reckoned from the fifteenth day after the date on which the order to commence the work is issued to the contractor. The work shall throughout the stipulated period of the contract be proceeded with all due diligence and the contractor shall pay as compensation an amount equal to one per cent, or such smaller amount as the Superintending Engineer (whose decision in writing shall be final ) may decide on the amount of the estimated cost of the whole work as shown in the tender for every day that the work remains uncommenced, or unfinished, after proper dates. And further, to ensure good progress during the execution of the work, the contractor shall be bound in all cases in which the time allowed for any work exceeds, one month (save for special jobs) to complete one-eighth of the whole of the work before one-fourth of the whole time allowed under the contract has elapsed; three-eighth of the work, before one-half of such time has elapsed, and three-fourth of the work, before three-fourth of such time has elapsed. However, for special jobs if a time-schedule has been submitted by the Contractor and the same has been accepted by the Engineer-in-charge, the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the said estimated cost of the whole work for every day that the due quantity of work remains incomplete, provided always that the entire amount of compensation to be paid under the provisions of this clause shall not exceed ten per cent, on th estimated cost of the work as shown in the tender. " ( 21 ) THE interpretation of the above clause came up before the Hon'ble supreme Court in the case of Vishwanath Sood (supra) in the context of the question whether matter regarding quantum of compensation could be referred to the arbitrator. The Supreme Court held as follows:-"as we see it, clause 2 contains a complete machinery for determination of the compensation which can be claimed by the Government on the ground of delay on the part of the contractor in completing the contract as per the time schedule agreed to between the parties. The decision of the Superintending Engineer, it seems to us, is in the nature of a considered decision which he has to arrive at after considering the various mitigating circumstances that may be pleaded by the contractor or his plea that he is not liable to pay compensation at all under this clause. In our opinion the question regarding the amount of compensation leviable under clause 2 has to be decided only by the superintending Engineer and no one else. In our opinion the question regarding the amount of compensation leviable under clause 2 has to be decided only by the superintending Engineer and no one else. " ( 22 ) THE Supreme Court further held that:-"clause 25 which is the arbitration clause starts with an opening phrase excluding certain matters and disputes from arbitration and these are matters or disputes in respect of which provision has been made elsewhere or otherwise in the contract. These words in our opinion can have reference only to provisions such as the one in parenthesis in clause 2 by which certain types of determinations are left to the administrative authorities concerned. If that be not so, the words "except where otherwise provided in the contract" would become meaningless. We are therefore inclined to hold that the opening part of clause 25 clearly excludes matters like those mentioned in clause 2 in respect of which any dispute is left to be decided by a higher official of the Department. Our conclusion, therefore, is that the question of awarding compensation under clause 2 is outside the purview of the arbitrator and that the compensation, determined under clause 2 either by the Engineer-in-charge or on further reference by the Superintending Engineer will not be capable of being called in question before the arbitrator. " ( 23 ) RELIANCE was also placed by learned counsel for the respondent on the judgment of the Apex Court in AIR 1991 SC 957 M/s. Prabartak Commercial corporation Ltd. vs. The Chief Administrator Dandakaranya Project and another wherein it was held that the clause in the arbitration agreement providing for arbitration specifically excluded any dispute regarding rates of payment, making the decision of the Superintending Engineer final in this regard. Such disputes not being covered by the arbitration agreement, the awards made were without jurisdiction and hence void. ( 24 ) NEXT, reference was made to the decision of a Division Bench of this court in Delhi Development Authority vs. M/s. Sudhir Brothers, Arblr 1995 (2)306. Paragraph 4 and 6 of the said judgment are relevant and are reproduced hereunder:-"4. Our attention has been drawn to the arbitration clause and also the relevant clause which relates to exclusion of certain matters from the purview of arbitration. Paragraph 4 and 6 of the said judgment are relevant and are reproduced hereunder:-"4. Our attention has been drawn to the arbitration clause and also the relevant clause which relates to exclusion of certain matters from the purview of arbitration. The relevant clause 2 in the arbitration agreement deals with the question of compensation and directs that the concerned engineer should decide this question and his decision is final. The arbitration clause opens with the words " unless otherwise provided. " In view of this language, it is obvious from the decision of the Supreme Court in Vishwanath Sood v. Union of india and another, that the Arbitrator could not have gone into the merits of the levy of compensation by the engineer. In that view of the matter, the d. D. A. ought not to have requested the Arbitrator to include the said amount in the arbitration award. We are told by the counsel for the appellant/d. D. A. the arbitrator was in fact informed that he could not go into the matter on merits. In any event, the D. D. A. committed a blunder in requesting Arbitrator to formally include the above said amount as part of the award. Taking advantage of the said request, the contractor argued the question of levy on merits and obtained a decision from the Arbitrator in his favour. 6. It will, therefore, be for the D. D. A. to seek to recover the said amount of Rs. 5,69,743 in whatever manner it is open to it and in case any such proceedings are taken, it will be open to the contractor to raise all defences that may be open to him in law to contend that the levy is bad. In case, the d. D. A. seeks to recover the said amount of compensation from the contractor it will be open to the contractor to file a suit and raise all such contentions as he may deem fit. We make it clear that the question of limitation will not be raised by either of the parties, in view of the above unfortunate procedure adopted by both parties. " ( 25 ) ANOTHER Division Bench of this Court in Bhagat Construction Co. vs. Delhi Development Authority, 2001 (Suppl.) Arb. We make it clear that the question of limitation will not be raised by either of the parties, in view of the above unfortunate procedure adopted by both parties. " ( 25 ) ANOTHER Division Bench of this Court in Bhagat Construction Co. vs. Delhi Development Authority, 2001 (Suppl.) Arb. LR 375 (Delhi), placing reliance upon Vishwanath Sood (supra), Sudhir Brothers (supra), Prabartak Commercial corporation Ltd. (supra) and Sushil Kumar Mehta vs. Gobind Ram Bohra, JT 1989 (Suppl) SC 329, held that when a Court or an arbitrator does not have power to decide a matter and in spite of such lack of inherent jurisdiction decides the matter, the same is nullity in the eye of law and the decree/order or an award passed by the arbitrator would be deemed to be nullity, non est and void for it was passed lacking inherent jurisdiction. It is a corum non judice. Paragraphs 12, 13 and 14 are relevant, which are reproduced as under:-"12. In various decisions the Supreme Court has held that it is well established principle that a decree passed by a Court without jurisdiction is a nullity and the plea can be set up whenever and wherever the decree is sought to be enforced or relied upon, and even at the stage of execution or in collateral proceedings. In this connection reference may be made to a decision of the supreme Court in Sushil Kumar Mehta vs. Gobind Ram Bohra (deceased) through his lrs. (supra ). In this connection reference may be made to a decision of the supreme Court in Sushil Kumar Mehta vs. Gobind Ram Bohra (deceased) through his lrs. (supra ). In the said decision the Supreme Court noticed various decisions rendered by the Supreme Court at earlier stages namely the case of Ferozi Lal jain vs. Man Mal and another AIR 1979 SC 794, Bahadur Singh vs. Muni Subrat Dass 1969 (2) SCR 432, Kaushalya Devi and others vs. K. L. Bansal AIR 1970 SC 838 , chandrika Misir and another vs. Bhaiya Lal 1973 (2) SCC 474 , Peachery Property corporation vs. Robinson 1966 (2) ALL ER 981, Mathura Prasad Bajoo Jaiswal and others vs. Dossibai N. B. Jeejeebhey 1970 (3) SCR 830 , Vasudev Dhanjibhai Modi vs. Rajabhai Abdul Rehman and others 1970 (1) SCC 670 and upon considering the said decisions the Supreme Court came to the following conclusions as recorded in paragraph 24 of the said decision:"a decree passed by a Court without jurisdiction over the subject matter or on other grounds, which goes to the root of its exercise on jurisdiction, lacks inherent jurisdiction. It is a corum non judice. A decree passed by such a court is a nullity and is non est. Its invalidity can be set up whenever it is sought to be enforced or is acted upon as a foundation for a right, even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the authority of the Court to pass decree which cannot be cured by consent or waiver of the party. "13. A question of lack of inherent jurisdiction of the Court is a matter relating to the very foundation of the order and goes to the root of the matter. As held by the Supreme Court as indicated herein above, the invalidity of a decree passed by a Court without jurisdiction which is a nullity could be set up whenever and wherever it is sought to be enforced or relied upon even at the stage of execution and even in collateral proceedings. 14. As held by the Supreme Court as indicated herein above, the invalidity of a decree passed by a Court without jurisdiction which is a nullity could be set up whenever and wherever it is sought to be enforced or relied upon even at the stage of execution and even in collateral proceedings. 14. In the case in hand the validity of the award in respect of counter claim No. 2 has been challenged by the respondent in the present proceedings contending inter alia that the said award passed by the Arbitrator is without jurisdiction which goes to the root of the matter, the award therefore, passed by the Arbitrator is a nullity and is non est for the Arbitrator lacked inherent jurisdiction in passing the aforesaid award. " ( 26 ) YET another Division Bench of this Court in Union of India vs. M/s. J. N. Constructions 107 (2003) DLT 772 held as follows:-"clause 2 was incorporated in the agreement with a view to exclude the issue of determination of amount of compensation, if any, for delay in completion of work, from the scope of the arbitration clause. In Vishwanath Sood v. Union of india and Another, (1989)1 SSC 657 and Food Corporation of India v. Sreekanth transport, V (1999)SLT549= (1999) 4scc491 wherein also the agreements executed between the parties contained a similar clause, like Clause 2 in the present case, for determination of the amount of compensation for delay in execution of work and stipulated that the decision of the officer concerned would be final, it was held that the issue of determination of compensation for delay in execution of work fell in the category of 'excepted matters'. A contention was raised in the General Manager, Northern Railway (supra) that the interpretation of the arbitration clause in the agreement to find if a particular dispute fell within the category of 'excepted matters' should be left to be determined by the arbitrator but that argument was negatived by the Supreme Court in the following terms:"it has been held as the consistent view of this Court that in the event of the claims arising within the ambit of the 'excepted matters', the question of assumption of jurisdiction by any arbitrator either with or without the intervention of the Court would not arise. Union of India vs. Popular builders Calcutta, (2000) 8 SCC 1 and Steel Authority of India Ltd. vs. J. C. Budhiraja, Govt. and Mining Contractor, (1999) 8 SCC 122 , Ch. Ramlinga Reddy vs. Superintending engineer and Another, (1994) 5 Scale 12 (Pr 18), M/s Alopi parshad vs. UOI, (1960) 2 SCR 793 at 804 this Court has unequivocally expressed that an award by an arbitrator over a claim which was not arbitrable as per the terms of the contract entered into between the parties would be liable to be set aside. In M/s. Prabartak Commercial Corporation Ltd. vs. The Chief administrator, Dandakaranya Project and Another, (1991) 1 SCC 498 , a claim covered by 'excepted matter' was referred to arbitrator in spite of such reference having been objected to and the arbitrator gave an award. This Court held that the arbitrator had no jurisdiction in the matter and that the reference of the dispute to the arbitrator was invalid and the entire proceedings before the arbitrator including the awards made by him were null and void. "being an 'excepted matter' it is for the Superintending Engineer to take into account the plea of the respondent regarding delays and breaches allegedly committed by the Department, while determining the amount of compensation, if any, leviable against the respondent. The claim in question was in the circumstances not referable to arbitration as the arbitrator would have no jurisdiction to adjudicate upon the same being an 'excepted matter'. The impugned order referring the claim No. 13. 13 (h) to arbitration is thus liable to be set aside. " ( 27 ) RELIANCE was placed by the Division Bench in the aforesaid case on a number of judgments of the Supreme Court reported in General Manager, Northern railway vs. Sarvesh Chopra AIR 2002 SC 1272 , Union of India vs. Popular builders, Calcutta (2000) 8 SCC 1 , Steel Authority of India Ltd. vs. J. C. Budhiraja, Govt. and Mining Contractor (1999) 8 SCC 122 , Ch. Ramlinga Reddy vs. Superintending Engineer and Another (1994) 5 Scale 12 (pr 18), M/s. Alopi parshad vs. UOI (1960) 2 SCR 793 at 804 wherein the Apex Court has unequivocally expressed that an award by an arbitrator over a claim which is not arbitrable as per the terms of the contract entered into between the parties would be liable to be set aside. ( 28 ) KEEPING in view the aforesaid decisions of the Supreme Court and the decisions of the three Division Benches of this Court noted above, since the counter claim of the respondent pertaining to levy of compensation is an excepted matter, the award of the arbitrator awarding 'nil' compensation to the respondent cannot be sustained and has to be set aside for want of jurisdiction of the arbitrator. It was at the behest of the respondent-objector, Delhi development Authority, that the arbitrator gave his findings on an excepted matter. It will, therefore, be for the Delhi Development Authority to seek to recover the amount of Rs. 16,56,109/- claimed by it by way of compensation in whatever manner it is open to it. In case any such proceedings are taken by the delhi Development Authority, needless to state it will be open to the claimant-contractor to raise all defences that may be open to it in law to contend that the claim is bad. These directions are being issued in conformity with the directions of the learned Division Bench in the case of Sudhir Brothers (supra ). As in the case of Sudhir Brothers, it is made clear that the question of limitation will not be raised by either of the parties, in view of the unwarranted procedure adopted by the parties. Claim No. 6 ( 29 ) A reading of the award shows that simple interest @ 16% per annum was granted by the arbitrator on the sum awarded in Claim Nos. 4 and 5, i. e. , rs. 4,55,710/- w. e. f. 31st March 1989 to 3rd March 1990, i. e. the date of entry of reference by the previous arbitrator as against the claim of the petitioner for award of 18% per annum. ( 30 ) MS. ANUSUYA Salwan, counsel for the respondent contended that pre-reference interest could not have been awarded by the arbitrator in view of the provisions of the Interest Act, 1978. In this context, she placed reliance on a decision of the Hon'ble Supreme Court in Executive Engineer, Irrigation, galimala Versus Abhaduta Jena AIR 1988 SC 1520 . Counsel for the claimant, on the other hand, placed reliance on a judgment of the Constitution Bench of the supreme Court in Secretary, Irrigation Deptt. , Govt. In this context, she placed reliance on a decision of the Hon'ble Supreme Court in Executive Engineer, Irrigation, galimala Versus Abhaduta Jena AIR 1988 SC 1520 . Counsel for the claimant, on the other hand, placed reliance on a judgment of the Constitution Bench of the supreme Court in Secretary, Irrigation Deptt. , Govt. of Orissa Versus G. C. Roy (1992) 1 SCC 508 , to contend that the claimant was entitled to the award of pendente lite interest. ( 31 ) I am afraid that the reliance placed by the counsel for the claimant on Jena's case is entirely misplaced, the said case having been prospectively overruled by a five-judge Bench of the Apex Court in Executive Engineer, dhankanal Minor Irrigation Division Versus N. C. Budhiraj (2001) 2 SCC 721 . ( 32 ) IN Executive Engineer, Dhankanal Minor Irrigation Division Versus n. C. Budhiraj (1999) 9 SCC 514 , a three-Judge Bench referred the following question of law to a larger Bench of the Supreme Court for authoritative pronouncement:-"in the absence of any prohibition to claim or grant interest under the arbitration agreement whether the arbitrator has no jurisdiction to award interest for the pre-reference period under the general law or on equitable principles, although such claim may not strictly fall within the provisions of the Interest Act, 1839"". 32. The said reference was answered by the Supreme Court by holding that "the arbitrator appointed with or without the intervention of the Court, has jurisdiction to award interest, on the sums found due and payable, for the pre-reference period. In the absence of any specific stipulation or prohibition in the contract to claim or grant any such interest. The decision in Jena's case taking the contraview does not lay down the correct position and stands overruled, prospectively, which means that this decision shall not entitle any party nor shall it empower any Court to re-open proceedings which have already become final and should only apply to pending proceedings". In paragraph-25 of its judgment, the Supreme Court gave the rationale behind its decision as follows:-"25. If that be the position, courts which of late encourage litigants to opt for and avail of the alternative method of resolution of disputes, would be penalizing or placing those who avail of the same in a serious disadvantage. In paragraph-25 of its judgment, the Supreme Court gave the rationale behind its decision as follows:-"25. If that be the position, courts which of late encourage litigants to opt for and avail of the alternative method of resolution of disputes, would be penalizing or placing those who avail of the same in a serious disadvantage. Both logic and reason should counsel courts to lean more in favour of the arbitrator holding to possess all the powers as are necessary to do complete and full justice between the parties in the same manner in which the civil court seized of the same dispute could have done. By agreeing to settle all the disputes and claims arising out of or relating to the contract between the parties through arbitration instead of having recourse to civil court to vindicate their rights the party concerned cannot be considered to have frittered away and given up any claim which otherwise it could have successfully asserted before courts and obtained relief. By agreeing to have settlement of disputes through arbitration, the party concerned must be understood to have only opted for a different forum of adjudication with less cumbersome procedure, delay and expense and not to abandon all or any of its substantive rights under the various laws in force, according to which only even the arbitrator is obliged to adjudicate the claims referred to him. As long as there is nothing in the arbitration agreement to exclude the jurisdiction of the arbitrator to entertain a claim for interest on the amounts due under the contract, or any prohibition to claim interest on the amounts due and become payable under the contract, the jurisdiction of the arbitrator to consider and award interest in respect of all periods subject only to Section 29 of the Arbitration Act, 1940 and that too the powers of the court thereunder, has to be upheld. The submission that the arbitrator cannot have jurisdiction to award interest for the period prior to the date of his appointment or entering into reference which alone confers upon him power, is too stale and technical to be countenanced in our hands, for the simple reason that in every case the appointment of an arbitrator or even resort to court to vindicate rights could be only after disputes have cropped up between the parties and continue to subsist unresolved, and that if the arbitrator has the power to deal with and decide disputes which cropped up at a point of time and for the period prior to the appointment of an arbitrator, it is beyond comprehension as to why and for what reason and with what justification the arbitrator should be denied only the power to award interest for the pre-reference period when such interest becomes payable and has to be awarded as an accessory or incidental to the sum awarded as due and payable, taking into account the deprivation of the use of such sum to the person lawfully entitled to the same". ( 33 ) AS regards pendente lite interest also, the judgment of the Supreme court in Abhaduta Jena' case, stands prospectively overruled by the Constitution bench which decided G. C. Roy's case (supra ). The Constitution Bench after a critical analysis of the earlier decisions including the one in Jena's case held as follows:- (SCC PP 532-33, Para 43)"43. The question still remains whether an arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of the aforementioned decisions, the following principles emerge: (i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34 of the Civil Procedure Code and there is no reason or principle to hold otherwise in the case of an arbitrator. (ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. (iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41and Section 3 of the Arbitration Act illustrate this point ). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement. (iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. Until Jena case almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. (v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period ). For doing complete justice between the parties, such power has always been inferred. " ( 34 ) IN a subsequent judgment titled Renusagar Power Co. Ltd. vs. General electric Co. , AIR 1994 SC 860 , the Apex Court in paragraphs 134, 135 and 137 held as follows:-"134. In an international commercial arbitration, like any domestic arbitration, the award of interest would fall under the following periods: (i) period prior to the date of reference to arbitration; (ii) period during which the arbitration proceedings were pending before the arbitrators; (iii) period from the date of award till the date of institution of proceedings in a court for enforcement of the award; (iv) period from the date of institution of proceedings in a court till the passing of the decree; and (v) period subsequent to the decree till payment. 135. The interest in respect of the period covered by item (i), namely prior to the date of reference to arbitration would be governed by the proper law of the contract and the interest covered by items (ii) and (iii), i. e. , during the pendency of the arbitral proceedings and subsequent to the award till the date of institution of the proceedings in the court for the enforcement of the award would be governed by the law governing the arbitral proceedings. These are matters which have to be dealt with by the arbitrators in the award and the award in relation to these matters cannot be questioned at the stage of enforcement of the award. At that stage the court is only required to deal with interest covered by items (iv) and (v ). The award of interest in respect of these periods would be governed by lex fori, i. e. , the law of the forum where the award is sought to be enforced. According to Alen Redfern and Martin Hunter "once an arbitral award is enforced in a particular country as a judgment of a court, the arbitral post-award interest rate may be overtaken by the rate applicable to civil judgments. According to Alen Redfern and Martin Hunter "once an arbitral award is enforced in a particular country as a judgment of a court, the arbitral post-award interest rate may be overtaken by the rate applicable to civil judgments. " (See: Redfern and Hunter, Law and Practice of international Commercial Arbitration, 2nd Edn. , p. 406 ). 137. Unlike S. 34 of the Code of Civil Procedure, whereunder the Court can award interest for the period of pendency of the suit as well as for the period subsequent to the decree till realization, S. 29 of the Arbitration Act empowers the court to award interest from the date of decree only. It has, however, been held that while passing a decree in terms of the award, the Court can award interest for the period during which the proceedings were pending in the court, i. e. , the period from the date of institution of proceedings for the enforcement of the award in the court till the passing of the decree in cases arising after the Interest Act, 1978. (See: Gujarat Water Supply and Sewerage Board vs. Unique erectors (Gujarat) (P) Ltd. 1989 (1) SCR 318 at p. 328: ( AIR 1989 SC 973 at p. 978 ). " ( 35 ) RELYING upon the judgment of the Apex Court in Renusagar's case (supra), this Court in Babu Lal Barwa Versus Delhi Development and Ors. 63 (1996) DLT 35, rejecting the contention of counsel for the respondent, that interest cannot be granted from the date of award till passing of a decree, held that the court has power to grant interest from the date of the award till decree and from the date of decree till realization. ( 36 ) REFERENCE may also be made to the judgment of the Apex Court in AIR 2001 SC 816 T. P. George vs. State of Kerala wherein it has been held relying upon M/s. Jagdish Rai and Brothers vs. Union of India, AIR 1999 SC 1258 that there are four stages of grant of interest, viz. (i) from the stage of accrued of cause of action till filing of the arbitration proceedings, (ii) during pendency of the proceedings before arbitrator, (iii) future interest arising between the date of award and the date of decree, and (iv) interest arising from the date of decree till realization of award. (i) from the stage of accrued of cause of action till filing of the arbitration proceedings, (ii) during pendency of the proceedings before arbitrator, (iii) future interest arising between the date of award and the date of decree, and (iv) interest arising from the date of decree till realization of award. As per the law laid down by this court, it was held, interest can be awarded at all four stages. ( 37 ) A three-Judge Bench in B. L. Gupta Construction Pvt. Ltd. Versus Bharat co-operative Group Housing Ltd. (2004) 1 SCC 110 dealing with the contention of learned counsel for the respondent that as the appellant had not made any demand for grant of interest, no interest was payable in terms of the Interest Act, 1978 and the further contention that grant of interest being discretionary in terms of Section 34 of the Code of Civil Procedure, 1908, High Court cannot be said to have committed any error in refusing to exercise the discretion, held therein in paragraph-5 of the judgment as under:-"5. The arbitrator exercised his jurisdiction under Section 34 of the Code of Civil Procedure by grant of pendente lite interest @ 18% per annum. The High court could not have interfered with the said discretionary order; wherefor no reason was assigned. However, keeping in view the facts and circumstances of this case, we are of the opinion that the interest of justice shall be subserved if the respondent is directed to pay to the appellant the pre-reference and pendente lite interest @ 10% per annum in tune with the other part of the judgment of the High Court. " ( 38 ) AS regards interest for the post-award period, Section 29 of the arbitration Act, 1940 itself stipulates that where and in so far as an award is for payment of money, the court may, in the decree, order interest from the date of the decree, at such rate as the court deems reasonable to be paid on the principal sum as adjudged by the award and confirmed by the decree. Reference in this regard may be made to a decision of three-Judge Bench of the Hon'ble supreme Court in Hindustan Construction Company Ltd. Versus State of J and K (1992) 4 SCC 217 , wherein it was held as follows:-"5. Reference in this regard may be made to a decision of three-Judge Bench of the Hon'ble supreme Court in Hindustan Construction Company Ltd. Versus State of J and K (1992) 4 SCC 217 , wherein it was held as follows:-"5. 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 Secy. , Irrigation Deptt. Govt. of Orissa Versus G. C. Roy. 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 realization, 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 the 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 Versus Bungo Steel Furniture (P) Ltd. may be seen as also the decision in Gujarat Water Supply and Sewerage Board Versus Unique erectors (Gujarat) (P) Ltd. which upholds the said power though on a somewhat different reasoning. We, therefore, think that the award on Item 8 should have been upheld. " ( 39 ) IN view of the foregoing, the objections to the award are disposed of by modifying the award dated 12th January, 1995 published by Shri R. J. Bakhru, the sole arbitrator, as under:- (i) award pertaining to counter-claim No. 13 is set aside, but subject to directions which have already been given above; (ii) the remaining award is made rule of the court. (iii) interest pendente lite from 03. 03. 1990 to 12. 01. 1995 at the rate of 12% per annum shall be payable. ( 40 ) THE petitioner shall also be entitled to interest @ 12% per annum from the date of the award till the date of the decree. (iii) interest pendente lite from 03. 03. 1990 to 12. 01. 1995 at the rate of 12% per annum shall be payable. ( 40 ) THE petitioner shall also be entitled to interest @ 12% per annum from the date of the award till the date of the decree. The respondent shall pay the decretal amount to the petitioner within two months from today, failing which the petitioner shall be entitled to interest at the same rate from the date of the decree till the date of payment.