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1994 Supreme(Del) 261
High Court Of Delhi
ISHWAR SINGH AND SONS - Appellant
Versus
DELHI DEVELOPMENT AUTHORITY - Respondent
Suit 764A of 1991
Decided On : 04/21/1994
ANSUYA SALVAN, P.N.Kumar
An arbitrator cannot award damages when there is a specific clause in the agreement prohibiting the contractor from claiming such damages.
Headnote:
ARBITRATION - AWARD - MODIFICATION - DAMAGES - PROHIBITION - CONTRACTUAL CLAUSE - SECTION 54 AND 55 OF THE CONTRACT ACT - APPLICABILITY - JURISDICTION OF ARBITRATOR - EXTENSION OF TIME - SECTION 10 OF THE AGREEMENT - INTERPRETATION.
Fact of the Case:
The petitioners, a construction company, filed an application challenging the objections raised by the respondents, the Delhi Development Authority (DDA), to an arbitral award. The award granted various sums to the petitioners for work done, withheld amounts, short payments, and rebate. However, the DDA objected to the award of damages amounting to Rs. 1,32,900, arguing that the specific terms of the agreement prohibited the petitioners from claiming damages.
Finding of the Court:
The court held that the arbitrator had committed serious irregularity in awarding damages as the specific terms of the agreement prohibited the petitioners from claiming such damages. The court found that Clause (1) of the Specifications and Conditions of the agreement explicitly stated that the contractor would have no claim for any extras or compensation due to non-availability of the site or delay in supply of materials. The court also noted that the agreement provided for an extension of time in case of non-performance of obligations by the DDA, and that the petitioners had agreed to this provision.
Issues: 1. Whether the arbitrator had jurisdiction to award damages in light of the specific clause in the agreement prohibiting such claims? 2. Whether the provisions of Sections 54 and 55 of the Contract Act could override the specific prohibition in the agreement?
Ratio Decidendi: 1. The court held that the arbitrator did not have jurisdiction to award damages as the specific clause in the agreement prohibited such claims. The court reasoned that the arbitration agreement only allowed for disputes arising out of the agreement to be referred for adjudication, and that the dispute regarding damages was not covered by the agreement. 2. The court held that the provisions of Sections 54 and 55 of the Contract Act could not override the specific prohibition in the agreement. The court found that the agreement reflected the intention of the parties, and that what had been knowingly not agreed to by the parties could not be hit by the provisions of Sections 54 and 55 of the Contract Act.
Final Decision: The court modified the arbitral award by setting aside the award of damages amounting to Rs. 1,32,900. The rest of the award was made a rule of the court, and a decree was passed in terms thereof. The petitioners were entitled to interest at the rate of 12% per annum from the date of the decree till realization.
( 1 ) THIS is an application by which the respondents-DDA have filed the objections to the award dated 29. 1. 1991. In all, there are 12 claims referred by the claimants. The Arbitrator has awarded a sum of Rs. 2,83,604 by virtue of the impugned award. He has awarded claim No. 1 for refund of Rs. 10,000 on account of earnest money/security deposit in favour of the claimants.
( 2 ) THE claimants have claimed Rs. 1,00,000 approximately on account of work done but not paid, under claim No. 2. These included claim for 3 m. m. extra thickness of base plaster the item of marble chips dado, external plaster above 10 meters height. On the said claim, the claimants withdrew this claim after considering the measurement. Though, there are sub-heads under this claim and the Arbitrator has, after discussing various arguments advanced by both the parties and perusing the record, awarded a sum of Rs. 44,305. In favour of the claimants and against the respondents.
( 3 ) CLAIM No. 3 is a claim for Rs. 60,000 on account of amount unjustifiably withheld. The Arbitrator has also awarded a sum of Rs. 47,407 against this claim to be paid by the respondents to the claimants. The Arbitrator has given a finding that amount of Rs. 5,000 is withheld by the respondents on account of clearance of observations of Quality Control Wing which inspected the work and pointed out certain deficiencies. Therefore, he Arbitrator has granted Rs. 5,000. Similarly, the Arbitrator has also warded the release of withheld amount for non-sanction of El/sl s. That claim of the claimants was for Rs. 42,406. 78 paise. That amount which was to be released to the claimant works out to Rs. 43,863. 27 paise. The Arbitrator has rightly awarded only Rs. 42,407 on this claim.
( 4 ) CLAIM No. 4 pertains to short payments made by the respondents Amounting to Rs. 50,000. On this claim the Arbitrator has awarded a sum of Rs. 15,783 by taking into consideration the measurement and calculations.
( 5 ) CLAIM No. 5 pertains to claim of Rs. 42,000 approximately on Account of rebate. The Arbitrator has awarded a sum of Rs. 21,663. The Arbitrator has given a finding that on perusal of the record, the said amount Of rebate became due and payable by the respondents to the claimants.
( 6 ) NO objection has been filed in relation to claim No. 6. However, against his claim, the Arbitrator has only awarded a sum of Rs. 1,546.
( 7 ) NO objection has been filed against claim No. 7 However, the Arbitrator has awarded a sum of Rs. 10,000 to be paid by the respondents to the claimants against this award.
( 8 ) NO objection has been filed against the award in relation to Claims No. 9, 10 and 11. No objection has also been filed against the award in relation to Claim No. 1. The objections were filed by the respondents against the award in relation to Claims No. 2, 3, 4, 5 and 8.
( 9 ) MS. Salwan, learned, counsel for respondents-DDA, however, has vehemently objected the award in relation to claim No. 8 for a sum of Rs. 1,32,900 in favour of the claimants by the Arbitrator. A sum of Rs. 6 lakhs was claimed by the claimants on account of damages.
( 10 ) MS. Salwan has argued that the Arbitrator has committed serious irregularity in awarding this amount as specifically under the specific terms of the agreement the claimants did not have any right to claim any amount as damages. In this connection she has invited the attention of this court to Clause (1) of Specifications and Conditions which reads as under :
"the Contractor must get acquainted with the proposed site for the works and study specification and conditions carefully before tendering. The work shall be executed as per programme approved by the Engineer-in-charge. If part of site is not available for any reason or there is some unavoidable delay in supply of material stipulated by the Department, the programme of construction shall be modified accordingly and the contractor shall have no claim for any extras of compensation on this ac
