The recovery of mobilization advance should be proportionate to the work done, and claims for excess income tax, interest, and expenses should be considered in accordance with the terms of the contract.

Shiv Narayan Dhingra, J.

1. By this order I shall dispose of objections raised by DDA against the award dated 12th October, 1993 passed by the Sole Arbitrator.

2. Brief facts relevant for the purpose of deciding the objections are that the petitioner/claimant entered into a lump sum contract with the respondent for construction of 770 MIG flats on turn-key basis on a cost of Rs. 12,59,48,130/. DDA was to give land for construction of the houses where the contractor was to plan, design and build the flats after getting the approval from the competent authority. DDA in terms of the agreement was to give a mobilization advance of Rs. 90 lac to the contractor on furnishing a bank guarantee by the contractor. This mobilization advance was recoverable from the contractor in installments starting from the second running bill or after completion of 10% of the work, whichever was earlier. The entire amount was to be recovered before completion of 80% of the work. The mobilization advance was paid by DDA in terms of the contract. The amount of Rs. 60 lac was paid on 18.8.1991, another installment of Rs. 25,32,000/- was paid on 7.2.1992 and third installment of Rs. 4,68,000/- was paid on 18.2.1992 to the contractor.

3. DDA recovered the first installment of mobilization advance of Rs. 8,30,894/-plus interest @ 18%, as agreed, on 13.11.1992 out of the second running bill of the contractor. The second installment of the mobilization advance together with interest was recovered in February, 1993 and the third installment was recovered in May, 1993. While the contention of DDA was that installments were recovered in accordance with the terms of contract, the Contractor raised a dispute that DDA had recovered first installment of mobilization advance contrary to the contract and disproportionately to the work done. Second dispute raised by the claimant was in respect of unauthorized recovery on account of income tax under Section 194-(c) of the Income Tax Act. The third dispute was in respect of non-payment of the second bill to the tune of Rs. 66.20 lac and the contractor/claimant also sought a declaration that the subsequent bill should be paid by DDA in time. The fourth claim was in respect of interest and fifth claim was in respect of cost of arbitration.

4. The learned Arbitrator vide its award found that the recovery of the mobilization advance out of second running bill i.e. first installment, was not in proportion to the work done. He under the award directed that mobilization advance installment, recovered in excess of proportion be refunded and only the amount proportionate to the work done should be retained. According to him, the first installment recoverable should have been of Rs. 8,30,894/- and not of Rs. 25,84,466/- as recovered by DDA. He therefore, awarded 18% interest on the amount of recovery in excess of due installment and calculated this interest to be Rs. 1,84,400/- and for subsequent bills he gave directions that recovery of mobilization advance should be proportionate to the value of the work done between the two running bills.

5. Regarding claim No. 2 i.e. excess income tax, he disallowed the claim as the contractor was entitled to claim refund from the income tax department. Regarding payment of second bill, he gave certain directions and regarding claim of interest he rejected the claim. He awarded Rs. 24,000 to the contractor as expense for arbitration.

6. The mobilization advance was the money of DDA advanced to the contractor and was to be recovered during the continuation of the contract. It is seen that amount recovered as the first installment was Rs. 25,84,466.00. It is apparent from the record that in the first installment the interest @ 18% had accumulated over entire mobilization advance and that is why recovery looked of a bigger amount. The second and third installments, as seen from the record, contained very less interest and therefore these installments were of lesser amount. It is not disp