Back
1998 Supreme(Del) 245
High Court Of Delhi
MOHAN CONSTRUCTION COMPANY - Appellant
Versus
DELHI DEVELOPMENT AUTHORITY - Respondent
Suit 1133 of 1993
Decided On : 03/27/1998
ANUSUYA SALWAN, TARUN SHARMA
An Arbitrator cannot ignore the terms of a contract and award damages or compensation that is contrary to the terms of the contract.
Headnote:
ARBITRATION - AWARD - INTERPRETATION - CONTRACT - CONSTRUCTION - JURISDICTION - MISCONDUCT - CLAIM - COUNTER CLAIM - SPECIFIC RELIEF - DAMAGES - INTEREST - INCOME TAX.
Fact of the Case:
The petitioner entered into a contract agreement for construction of "560 MIG houses at Pitampura, Pkt A (P) including internal development SI 1:192 MIC Houses Grp. III." The contract agreement contained an arbitration Clause. Certain disputes arose between the petitioner and the respondent No. 1. In terms of arbitration Clause, R. C. Malhotra, respondent No. 2 was appointed as a Sole Arbitrator to adjudicate upon the disputes. Mr. Malhotra published his award on 29th April, 1993.
Finding of the Court:
The court found that the Arbitrator had misconducted himself by ignoring the terms of the contract contained in Clause I of Specifications and Conditions. The court also found that the award of a sum of Rs. 2,16,448.00 in favour of the Claim is totally unjustified. The court further found that the award relating to refund of the deducted amount altogether untenable and being against law, award of the refund has to be modified.
Issues: 1. Whether the Arbitrator had misconducted himself by ignoring the terms of the contract contained in Clause I of Specifications and Conditions? 2. Whether the award of a sum of Rs. 2,16,448.00 in favour of the Claim is totally unjustified? 3. Whether the award relating to refund of the deducted amount altogether untenable and being against law, award of the refund has to be modified?
Ratio Decidendi: 1. The court held that the Arbitrator had misconducted himself by ignoring the terms of the contract contained in Clause I of Specifications and Conditions. The court reasoned that the condition in the contract specifically prohibited escalation on account of delay in supply of material, and the fact that labour charges and material increased substantially during the prolonged period is certainly not germane and relevant in the circumstances in view of specific prohibition on that account. 2. The court held that the award of a sum of Rs. 2,16,448.00 in favour of the Claim is totally unjustified. The court reasoned that the condition in the contract specifically prohibited escalation on account of delay in supply of material, and the fact that labour charges and material increased substantially during the prolonged period is certainly not germane and relevant in the circumstances in view of specific prohibition on that account. 3. The court held that the award relating to refund of the deducted amount altogether untenable and being against law, award of the refund has to be modified. The court reasoned that it is a liability of the disbursing officer to deduct it and it appears that this aspect was not considered by the Arbitrator at all and an) deduction in terms of Section 149 of Income Tax Act was justified.
Final Decision: The court set aside the award of the Arbitrator and modified the award relating to refund of the deducted amount.
( 1 ) THIS judgment hall dispose of an application under Section 14, 17 and 29 of the Arbitration Act and objections against the award IA 769/94.
( 2 ) THE relevant facts are as under :
( 3 ) THE petitioner entered into a contract agreement for construction of "560 MIG houses at Pitampura, Pkt A (P) including internal development SI 1:192 MIC Houses Grp. III. The contract agreement contained an arbitration Clause. Certain disputes arose between the petitioner and the respondent No. 1. In terms of arbitration Clause, R. C. Malhotra, respondent No. 2 was appointed as a Sole Arbitrator to adjudicate upon the disputes. Mr. Malhotra published his award on 29th April, 1993.
( 4 ) THE award has been filed. Notice of filing the award was served on petitioner/claimant on 20th December, 1993 and on the respondent on 3rd January, 1994. The objections have been filed by the respondent vide IA 769/94 on 22nd January, 1994. The objections are obviously within time.
( 5 ) I have heard parties Counsel and gone through the record.
( 6 ) THERE are certain general objections to the effect that the Arbitrator has misconducted himself and the proceedings. Though the Arbitrator was required to give reasoned award, he failed to do so and the award is contrary to the basic conditions of the contract. He also ignored certain important documents. These general objections without having any reference to any Claim shall be considered wherever deemed appropriate alongwith different claims and counter claims.
( 7 ) CLAIM No. 1.
( 8 ) IN regard to Claim No. 1 (a) relating to refund of security amount of Rs. l,00,000. 00 , one of the objections taken is that the claimant had not (obtained the Clearance Certificate from the Labour Officer and therefore the security deposit has not been released. The learned Arbitrator by ignoring Clause 46 of the agreement, has misconducted the proceedings.
( 9 ) IN response to this submission, the claimants deny that the findings suffer from any error. The learned Arbitrator has given sufficient reasons for allowing the refund of security deposit for the amount which was admittedly rejected by the Objector and which was liable to be refunded to the contractor.
( 10 ) CLAUSE 46 of the agreement reads as under :
"security deposit shall not be refunded till clearance certificate from the Labour Officer is obtained by the contractor. "
( 11 ) IT is not the case of the claimant that any clearance certificate was obtained from the Labour Officer by the contractor. The facts, (i) that the provisional Completion Certificate was recorded in terms of Clause 6 of the agreement; (ii) that the provision that the bill was to be finalised within six months of the completion of the work; and (iii) that the security was to be released within one month thereafter; and the provision under Clause 17, obviously, would not amount to wiping out Clause 46. While one would agree that the Department cannot forestall finalisation of the account and items not having been sanctioned and withheld the security deposit, it is also true that the contractor also does not become entitled to refund of security deposit without obtaining clearance certificate from the Labour Officer. Since neither before the Arbitrator nor before this court it is pleaded that the clearance certificate was obtained from the Labour Officer, it would appear as if the order of refund could not be passed in viewofclause46. Learned Arbitrator certainly acted beyond his jurisdiction by notadheringtociause46. However, it is clarified that the decree holder shall be entitled to the amount, the moment he obtainsand files certificate in terms of Clause 46 from the Labour Officer and in case of non-payment of the security deposit, the claimant would beentitled to interest at the rate of 14% on this amount from the date of filing the certificate.
( 12 ) CLAIM No. 1 (b) and Counter Claim Nos. 1 and 2.
( 13 ) IN so far as Claim Nos. l (b)and I (i) and counterclaim No. (i) and (i
