The arbitrator's exercise of jurisdiction in apportioning the delay was found to be within the scope of the contract.

JUDGMENT :

1. By way of this petition, under Section 34 of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as “the Act”], the petitioner [hereinafter referred to as “IRCON”] seeks setting aside of an arbitral award dated 10.02.2009. By the impugned award, a sole arbitrator adjudicated various claims and counter-claims raised by the parties under a construction contract dated 17.08.2004. After adjusting the amount awarded on the counter-claims raised by IRCON, the arbitrator awarded a net sum of Rs.17,74,332/- in favour of the respondent No.1 herein [hereinafter referred to as “CRS”].

Background

2. By way of the contract dated 17.08.2004, CRS was to construct an office building for IRCON. An arbitration clause was included in a supplementary agreement dated 02.06.2006. CRS invoked arbitration and raised twelve claims before the arbitrator. Mr. S.P. Mehta, former General Manager of Northern Railways, was appointed as the sole arbitrator, impleaded as respondent No.2 herein. During the course of proceedings, IRCON also filed a counter-claim enumerating nine claims.

3. In the present petition, Mr. Chandan Kumar, learned counsel for IRCON, has confined his arguments to challenging claim nos. 1 and 3, awarded in favour of CRS. By way of claim no.1, CRS made a claim of Rs.22,41,192/- [plus interest] on account of “unjustified recovery of excavated earth”. The arbitrator has awarded a sum of Rs.2,24,119/- and interest of Rs.67,235/- on this account. In claim no.3, on account of escalation, CRS claimed Rs.29,22,685.89/- [plus interest at the rate of 18% per annum], of which the arbitrator has awarded a sum of Rs.13,00,000/- and interest in the sum of Rs.2,60,000/-. Each of these claims, and the validity of the challenge thereto, are discussed in turn here in below.

Claim No.1

Facts:

4. Claim no. 1 raised by CRS arises out of excavation work upon the ground area. CRS was entitled to be paid at the rate of Rs.123.69 per cubic meter for this work, provided in item 1.01 of the bill of quantities [“BOQ”] in the following terms:-

“Earth work in excavation over areas (exceeding 300mm depth 1.5m in width as well as 10 sqm. in plan) including disposal of excavated earth, outside District Centre Saket, New Delhi to any other approved dumping area and lift upto 1.5m disposed earth to be levelled and neatly dressed. The rate provided was Rs.123.69/M3subjected to agreed tender %age of 5.5% above, coming to Rs. 130.49/M3.”

5. However, item 1.03 of BOQ provided that the value of the excavated earth would be credited to the account of IRCON at the rate of Rs.79.55 per cubic meter:-

“Credit for cost of excavated earth which will become property of contractor.....

Rate Rs.79.55 and with Tender % above comes to Rs.83.92.”

6. The claim of CRS was that IRCON had unlawfully deducted the value of the excavated earth from the amount due to it under item 1.01 of the BOQ. It was contended that the excavated earth was not the property of IRCON at all, as it held the plot on leasehold basis, and had no authority to sell the excavated earth. It was further contended that the engineers of the Delhi Development Authority [“DDA”], which was the owner of the plot, did not permit CRS to remove the excavated material from the plot in question. CRS referred to letters dated 03.09.2004, 15.09.2004 and 20.09.2004, by which IRCON was asked to obtain the necessary permission from DDA. CRS also contended that the contractual position was, in these circumstances, inapplicable, unless IRCON had issued a certificate that the earth excavated was its property, and had been sold to CRS. In fact, by letter dated 26.02.2005, IRCON asked DDA for permission to sell the excavated material, but did not receive any response. IRCON, however, continued to assert the applicability of item 1.03 of the BOQ, and ultimately deducted the amount due there under from the bill by CRS.

7. In the impugned award, the claim has been adjudicated as follows:-

“xxxx xxxx xxxx

4.3.3 Respondent’s argume