The absence of a formal contract does not preclude compensation under Section 70 of the Indian Contract Act, and the reasonable construction of contract terms by an Arbitrator is upheld.

1. These petitions under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) have been filed by the petitioner, Municipal Corporation of Delhi challenging the arbitration award dated 10th January, 2008 passed by the Sole Arbitrator. Though the disputes between the parties arise out of two separate Work Orders and separate reference of the same were made by this Court in petitions filed under Section 11 of the Act, the Sole Arbitrator has adjudicated such disputes by way of a common award dated 10th January, 2008. The challenge to the same is also on common grounds and, therefore, both these petitions are being taken up together for adjudication.

2. The facts noted in the order are from OMP no.273/2008 only to give a brief background as to how the disputes have arisen.

3. The petitioner had awarded the work of construction of Community Toilet Complex at various sites to the respondent vide Work Order No.EE-III/SPZ/TC/2001-02/256 dated 19th October, 2001. The other relevant details of the work order are given as under:-

(a) Date of start of work : 28.10.01

(b) Date of completion : 6 months i.e. 27.4.2002

(c) Actual date completion : 26.4.2002

4. As Running Bill and Final Bills of the respondent were not paid by the petitioner and disputes with regard to the same arose, the respondent filed applications under Section 11 of the Act before this Court and the Sole Arbitrator was appointed for adjudication of these issues vide orders dated 22nd August, 2005 and 12th December, 2005. The claim before the Arbitrator was primarily for non-payment of the running bill and the final bill. The following issues were framed by the Sole Arbitrator:-

“(i) Whether claim is barred by limitation OPR.

(ii) Whether there is no dispute what so ever to be entertained by this forum.

(iii) Whether respondent had made payment to the claimant as per agreement, claimed by them in reply OPR.

(iv) Whether respondent is liable to make payment for extra work done by claimant without sanction OPC.

(v) Whether claimant is entitled to relief with interest OPC.”

5. The Arbitrator vide impugned award, has granted certain claims in favour of the petitioner while rejecting the others, details of which are not relevant for the present adjudication inasmuch as, the objection against the same have been confined only to two aspects;

(i) whether in absence of a formal agreement/contract awarding additional works to the respondent, the respondent is entitled to make a claim for such work?

(ii) Whether under the Work Order, the respondent was entitled to claim additional amounts towards demolition of the existing structures at the sites where the Community Toilet Complex was to be constructed?

6. The Arbitrator has allowed the claim of the petitioner on both the above heads and, therefore, the petitioner has challenged the same by way of the present petition.

7. As far as the first issue with respect to the award of claim of the respondent on account of additional works is concerned, counsel for the petitioner submits that in absence of a formal contract executed in accordance with Section 201 to 203 of the Delhi Municipal Corporation Act, 1957 (hereinafter referred to as the ‘DMC Act’) between the parties, no claim for such additional work could have been granted by the Arbitrator in favour of the respondent. She places reliance on the judgment of this Court in Municipal Corporation of Delhi vs. Sahil Agencies ILR (1981) (II) Del 607 and the judgment in K.G. Bhandari vs. Delhi Jal Board & Ors. (2003) 102 DLT 938 to contend that in view of the contract not having been executed in accordance with Section 201 to 203 of the DMC Act, there cannot be said to be any concluded contract between the parties with respect to such additional works.

8. On the other hand, counsel for the respondent submits that such additional work was done by the respondent at the asking of the petitioner and in fact, the bills for the same had also been approved by t