Full Text
HIGH COURT OF DELHI
JUDGMENT
M/S SHIPRA ESTATE LTD & JAI KRISHAN ESTATES DEVELOPERS PVT LTD ..... Petitioner
Advocates who appeared in this case:
For the Petitioner: Mr Amit Mahajan, Mr Kabir Chhilwar, Ms
Sonali Jaitley, Mr Jaiyesh Bakshi, Mr Ravi Tyagi, Mr Tarpit Patni and Mr Akshay
Sharma.
For the Respondent: Mr Raghvendra M. Bajaj, Mr Samar S.
Kachmaha and Mr Shreyas Mehrotra.
1. M/s Shipra Estate Ltd & Jai Krishan Estates Developers Pvt. Ltd. (hereafter „Shipra‟) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter „the Act‟) assailing the arbitral award dated 03.01.2017 (hereafter „the impugned award‟) made by the sole arbitrator. By the impugned award, the arbitrator adjudicated the disputes that had arisen between the parties in respect of a Work Order dated 19.11.2005 (as subsequently amended) issued by Shipra (and accepted by the respondent) for construction of a multi-storeyed residential building at Ghaziabad. 2017:DHC:3253
2. The impugned award has been challenged mainly on two grounds: (i) that no arbitration agreement exists between the parties as the letters dated 10.11.2005, 20.02.2006 and 27.03.2006, as relied upon by the respondent are fabricated; and (ii) that the impugned award is contrary to the terms of the agreement between the parties inasmuch as the agreement was for the payment of a lump sum amount and not on item rates as claimed by the respondent. Factual background
3. Shipra is a partnership concern engaged in the business of real estate development. The respondent is also a firm engaged in the business of construction and maintenance works on contract basis. The respondent was awarded the contract for „Construction of Multistory residential Complex- 3 bedrooms (Blocks B[6] & B[7]) {(B+G+10+Pent House), (B+G+6+Pent House)} at Plot No. 4, Phase IV, Indirapuram, Ghaziabad (Civil, Electrical, Public Health & other Works)‟ by the letter dated 19.11.2005 (hereafter „the Agreement‟) issued pursuant to an offer submitted by it. The consideration as initially agreed was ₹7,07,66,614/-, however, the Agreement was later amended by letters dated 11.07.2007, 06.09.2008 and 27.04.2009 (which were accepted by the respondent) and the agreed consideration was increased to ₹8,15,40,250/-. The term of the Agreement was for a period of sixteen months, starting from December 2005. There were also five other contractors engaged by Shipra for the same project.
4. Certain disputes arose between the parties as Shipra alleged that the respondent had failed to mobilize the requisite resources at the site within the stipulated time. Shipra stated that despite there being no contractual stipulation providing for mobilization advance, an amount of ₹45,00,000/- was given to the respondent at its request. Further, the progress schedule was submitted by the respondent belatedly on 13.03.2007, that is, after 15 months of taking possession of the site. The respondent disputed the said allegations and alleged that Shipra had failed to release full and timely payment of the running bills (RA bills), supply sufficient quantity of cement and steel and give timely drawings and decisions, leading to inordinate delays in the performance of the Agreement.
5. Thereafter, in December 2010, the respondent stopped work. Shipra alleges that the respondent abandoned the site; the respondent alleges that it could not continue with the works as Shipra was not making the necessary payments. Shipra claimed that it incurred additional financial outlay to get the project completed from other contractors.
6. On 28.05.2014, the respondent filed a petition (Arb. P. 302/2014) under Section 11 of the Act in this Court for appointment of an arbitrator. This Court, by order dated 15.01.2015, appointed Justice J M Malik (retired) as the sole arbitrator to adjudicate the disputes that had arisen in connection with the Agreement.
7. The respondent filed a statement of claims before the arbitrator, inter alia, raising the following claims:-
┌──────────────────────────────────────────────────────────────────────────────────┐ │
┌────────────────────────────────────────────────────────────────────────────────────────┐ │
┌────────────────────────────────────────────────────────────────────────────────────────────────────────┐ │ Sl. Name of Floor Area (Sq.ft) Rate (Rs.) Amount (Rs.) │ │ No. │ ├────────────────────────────────────────────────────────────────────────────────────────────────────────┤ │ 1. Basement 18792 618.00 11613456.00 │ │ 2. Ground Floor 13638 297.00 4050486.00 │ │ 3. Typical Floor (1 to 10) 114277 408.00 46625016.00 │ │ th │ │ 4. Pent House (Lower) – 11 Floor 8484 408.00 3461472.00 │ │ th │ │ 5. Pent House (Upper) – 12 Floor 6314 408.00 2576112.00 │ │ th th │ │ 6. Terrace Floor – 11 & 12 7818 140.00 1094520.00 │ │ th │ │ 7. Terrace Floor – 12 Floor Roof 6894 143.00 985842.00 │ │ level │ │ 8. Terrace Floor at G.F. level 5534 65.00 359710.00 │ │ Total 70766614.00 │ │ 2. a. No mobilization/secured advance shall be paid │ │ under this contract. │ │ b. The areas are only indicative and the quantity │ │ may increase or decrease as par actual at │ │ site/drawings/direction of consultant/Engineer- │ │ in-Change. However, the quoted rates per Sq. ft. │ │ Architect, and will be considered for payment. │ │ c. The rates agreed upon are for complete turnkey │ │ work and no escalation, extra items, substitute │ │ items etc. are payable till successful completion │ │ of the above said work, unless and until │ │ expressly directed and approved in writing by the │ │ Architect/Engineer-in-charge and nothing extra │ │ in any form will be payable to the contractor. │ │ Payment shall be made as per tender stipulations. │ │ xxxx xxxx xxxx │ │ 22. The extra/substitute items shall be derived on the │ │ basis of DSR-2002 or market rates. The decision of │ │ Engineer-in-charge shall be final and binding to the │ │ contract. │ │ O.M.P. (COMM) 191/2017 Page 12 of 22 │ │ 2017:DHC:3253 │ │ xxxx xxxx xxxx │ └────────────────────────────────────────────────────────────────────────────────────────────────────────┘
28. The quoted rates shall be firm till the completion of work and no escalation whatsoever shall be applicable.”
23. The Agreement was amended by the letter dated 27.03.2006, the relevant part of which reads as under:- “Dear Sir, In continuation of your work order Ref.: SEL/JKEDPL/WMBS/05-06/51 date: 19.11.2005 and in reply to your letter dated 20.02.2006 the following amendment is carried out:- Add:
┌──────────────────────────────────────────────────────────────────────────────────────────┐ │ Sl. No. Name of Floor Area (Sq. ft) Rate (Rs.) Amount(Rs.) │ ├──────────────────────────────────────────────────────────────────────────────────────────┤ │ 1. Basement 18123.17 668.00 12106277.56 │ │ 2. Ground Floor 14860.09 360.00 5349632.40 │ │ 3. First Floor 13927.96 508.00 7075403.68 │ │ 4. Typical Floor (2 to 94207.88 508.00 47857603.04 │ │ 10) │ │ 5. Lower Pent House 7650.14 508.00 3886271.12 │ │ 6. Upper Pent House 5827.82 508.00 2960532.56 │ │ 7. Terrace │ │ a) Lower Terrace & 7850.17 140.00 1099023.80 │ │ Upper Terrace │ │ b) Top Terrace 6253.71 143.00 894280.53 │ │ c) G.F. & F.F. Terrace 4788.09 65.00 311225.85 │ │ Total 81540250.54 │ │ Terms and conditions will be same as per your previous │ │ work order dated 19.11.2005. │ │ Thanking you, │ │ Yours faithfully I/We accept the terms and │ │ conditions as Mentioned above. │ │ For SEL/JKEDPL │ │ O.M.P. (COMM) 191/2017 Page 14 of 22 │ │ 2017:DHC:3253 │ │ Sd/- For M/s Wishwa Mittar Bajaj & Sons. │ │ Authorized Signatory │ │ Sd/- │ │ (Authorized Signatory)” │ └──────────────────────────────────────────────────────────────────────────────────────────┘
29. Payment against running bill shall be made within 15 days of submission or 7 days of verification and checking of the same, whichever is earlier. All disputes in relation to the Subject Contract Agreement shall be resolved as per the provisions contained in Arbitration & Conciliation Act 1996, through appointment of a sole arbitrator by the High Court at Delhi who alone shall have exclusive jurisdiction in the subject matter. Clause „b‟ and „c‟ at Sl. No. 2 is deleted and substituted for the same be added be added to Sl. No. 22 as Para 2. The areas are only indicative. In case the quantities of items increase or decrease, after measurement, as per actual at site, as per drawings, as per directions by Engineer-In-Charge, Consultant, the quoted rates shall also stand revised from as shown in Clause 1 of the work order. Covered area shall be as per actual calculations and will be considered for payment. All other terms and Conditions will remain same as per provisions of the Work Order, dated, 19.11.2005.”
24. The Agreement was subsequently amended on 11.07.2007, 06.09.2008 and 27.04.2009 whereby the lump sum rates as provided in the Agreement were increased. The relevant extract of the letter dated 27.04.2009 whereby the Agreement was amended for the third and the last time, reads as under:- “In continuation of your work order no: SEL/JKEDPL/WMBS/05-06/51 dated 19.11.2005, SEL/JKEDPL/WMBS/07-08 dated 11.07.2007 & SEL/JKEDPL/WMBS/08-09 dated 08.06.2009. The cost of work will increase from Rs.74225285.37 to Rs 81540250.54. As detailed below:- Sl. No. Name of Floor Area (Sq. ft) Rate (Rs.) Amount(Rs.)
1. Basement 18123.17 668.00 12106277.56
2. Ground Floor 14860.09 360.00 5349632.40
3. First Floor 13927.96 508.00 7075403.68
4. Typical Floor (2 to
10) 94207.88 508.00 47857603.04
5. Lower Pent House 7650.14 508.00 3886271.12
6. Upper Pent House 5827.82 508.00 2960532.56
7. Terrace a) Lower Terrace & Upper Terrace 7850.17 140.00 1099023.80 b) Top Terrace 6253.71 143.00 894280.53 c) G.F. & F.F. Terrace 4788.09 65.00 311225.85 Total 81540250.54 Terms and conditions will be same as per your previous work order dated 19.11.2005. Thanking you, Yours faithfully I/We accept the terms and conditions as Mentioned above. For SEL/JKEDPL Sd/- For M/s Wishwa Mittar Bajaj & Sons. Authorized Signatory Sd/- (Authorized Signatory)”
25. Admittedly, the said amendments were duly accepted and signed by the respondent. This was expressly recorded in each letter of amendment as is apparent from the above. However, the respondent claims that after signing each of the amendment letters, it sent protest letters (three in number). All the protest letters are to a similar effect wherein the respondent stated that the amendments were not reasonable and justified as per actual measurement at site and that they were accepting the amendments under protest with a request to further amend the rates based on actual analysis and actual quantities of each item to be worked out jointly by them.
26. These protest letters were disputed by Shipra. However, the arbitrator had accepted the same to be genuine. Be that as it may, the said letters would be of little consequence insofar as the claim awarded is concerned as the claim awarded is not one for damages but for work done on alleged agreed rates. The only conclusion that can possibly be drawn from the protest letters is that the respondent was not happy with the rates as agreed, as according to it, the same were liable to be increased based on actual analysis of work executed. However, the consideration finally agreed to be paid by Shipra was as recorded in the amendment letter dated 27.04.2009, as there is no other material which would establish that Shipra had agreed to rates other than as reflected in the letter dated 27.04.2009.
27. A plain reading of the Agreement and the subsequent amendments indicate that the rate per sq. ft. of area for different floors had been increased. The respondent claimed that such rates were revised on adhoc basis and were not reasonable in view of details/actual measurements at site and thus were required to be further reconciled.
28. It is apparent from the above that the respondent essentially seeks to claim an amount larger than what was agreed under the Agreement (as subsequently amended). This would be plainly impermissible as the respondent had agreed to the lump sum rates and it was not open for the respondent to claim a higher amount than as agreed merely on the basis of unilaterally claiming that the rates were not reasonable or justified. The protest letters sent after expressly accepting the rates as specified in the amendment letters would be of little consequence. Since the claim awarded is on the basis that the amount awarded was contractually payable to the respondent, it would be essential for the respondent to establish that Shipra had agreed to pay the amounts claimed or at least the basis on which such amounts were computed.
29. It is essential to understand the nature of the claim awarded to the respondent under the impugned award. According to the respondent, the rates as indicated in the Agreement were based on item rates for various items comprised in the works and the amounts to be paid were arrived at by multiplying the quantities of items of works with the agreed rates. It is claimed that the lump sum consideration as specified in the Agreement was arrived at between the parties on the aforesaid basis. It is the respondent‟s case that the actual quantities of items of work involved were larger and therefore the rates as specified in the Agreement as amended on 27.04.2009 were required to be reworked. In other words, it was the respondent‟s case that the rates as accepted by it, by signing the amendment letter dated 27.04.2009 was not applicable and was required to be reworked.
30. Plainly, in order to sustain such claim, it was necessary for the respondent to establish (a) that Shipra had agreed to certain item rates for various items of work; (b) that Shipra had agreed that the scope of works would involve specified quantities of item works; (c) that the quantities of item works executed were in excess of the specified quantities of work and consequently the lump sum rate per sq. ft. of the specified floor was required to be revised; and (d) the amount paid by Shipra to the respondent for work done fell short of the amount payable on such revised rates.
31. During the course of the arguments, the learned counsel for the respondent was pointedly asked whether there was any material on record to establish the analysis of item rates and quantities providing the break-up of the rate per sq. ft. as initially agreed under the Agreement and as subsequently revised. He had fairly conceded that apart from the e-mail dated 28.12.2010 sent by Mr Rastogi, wherein Shipra had alleged that excess payments had been made to the respondent, there was no other document on record which could establish the item work quantities and the rates used to calculate the amount payable on the basis of item rates and quantities. He also added that the item rates as indicated in the said e-mail were also incorrect and did not take into account subsequent increases.
32. This Court finds it difficult to accept that the e-mail dated 28.12.2010 sent by Mr Rastogi (of Shipra) establishes that the parties had agreed that the respondent would be paid on the actual quantity of item works executed on item rates basis as per the Agreement, as the subsequent amendments signed by the parties indicate that payments were to be made on a lump sum basis. However, even if it is accepted that this was so, there is nothing on record which would establish the various item rates allegedly agreed to by Shipra considering that the respondent claims that the item rates as mentioned in the annexures to the said e-mail were not correct.
33. It is relevant to observe that the offer made by the respondent was also on a lump sum basis. The respondent had quoted rates on per sq. ft. basis for different floors. These rates were obviously subject to negotiations and the rates as finally agreed between the parties were recorded in the Agreement executed on 19.11.2005. All subsequent revisions only revised the agreed rate per sq. ft. Even if it is accepted that the initial offer and the Agreement were based on an analysis of rates and quantities, it would be essential for the respondent to not only establish the quantities of item works but also the item rates justifying the rate per sq. ft. as agreed to by the parties in the Agreement. In addition, the respondent would have to establish that the parties had agreed to revise the item rates since the respondent was not accepting the item rates as indicated in Mr Rastogi‟s e-mail dated 28.12.2010 (which as stated earlier is concededly the only document emanating from Shipra which records any separate rate for item works).
34. Further, not only was it necessary for the respondent to establish the revised item rates agreed to by Shipra but it was also necessary for the respondent to project an agreed modified rate per sq. ft. for each floor. This is so because even as per the respondent, in terms of paragraph 2 to clause 22 of the Agreement - as amended by the letter dated 27.03.2006 - the rates as quoted in the Agreement were required to be revised. Concededly, no such revised rate was projected by the respondent. To further illustrate this point one may refer to the consideration payable for the basement floor. The rate per sq. ft. of the basement floor was agreed at `618 per sq. ft. This was revised subsequently and in terms of the amendment agreed to by the parties on 27.04.2009, the said rate was increased to `668 per sq. ft. According to the respondent, such rates were required to be revised on the basis of analysis of actual quantities executed. Thus, the respondent was required to establish a revised rate (per sq. ft.) on the basis of which its claim could be computed. However, no such rate has been projected by the respondent. More importantly, there has been no determination by the arbitrator as to what rates (per sq. ft.) were to be applied in terms of the Agreement between the parties while partly awarding claim no.1 in favour of the respondent. The arbitrator has merely accepted the statement of work done as claimed by the respondent in its letter dated 14.05.2011. It is relevant to mention that in the said letter, the respondent had claimed that it had executed various quantities of items of work for which it was entitled to be paid at specified rates. There is no document or evidence on record which would establish that Shipra had agreed to pay the revised item rates as indicated in the said letter. A perusal of the impugned award also indicates that there has been no clear determination by the arbitrator of the item rates as indicated in the said letter being agreed to by Shipra. The least that was required was that a determination/ adjudication be made as to (a) the quantities of items of work executed by the respondent and (b) the agreed rates of such items of work. This Court is unable to find that there has been any such clear determination by the arbitrator.
35. Concededly, there is no material on record which would indicate that Shipra had agreed to any revised item rates of item works. Further, it is the respondent's case that the lump sum rates were amended thrice but such revision was adhoc and without any basis, thus concededly, the said revisions were not on the basis of any rate analysis of separate item of works. However even if it is assumed that Shipra had agreed to a revision of item rates which were evidenced by the amendments to the Agreement, it was still necessary for the respondent to establish the item rates for separate items of work or at least establish that the revised per sq. ft. rates translated to item rates as claimed by the respondent in its letter dated 14.05.2011, but no such exercise was carried out by the respondent or by the arbitrator.
36. Whilst, there can be no quarrel to the proposition that an arbitrator is the final fact finding authority and his decisions on questions of fact are final and binding on the parties, it is essential that there has to be a reasoned determination. A mere award without determination/adjudication of the facts necessary to return findings would render the arbitral award susceptible to challenge under Section 34 of the Act.
37. This Court has also examined the impugned award and it is apparent that the arbitrator has not determined the real questions involved in partly awarding claim no.1 in favour of the respondent. There is no determination of the agreed item rates for various items of works and when and how such rates were agreed to by Shipra; there is no determination of the quantities of separate item works to be executed under the Agreement and the quantities which were actually executed by the respondent; and there is no determination regarding the applicable revised rate (per sq. ft.) for each floor in terms of the Agreement, considering it was the respondent's case that such rate was to be revised based on actual analysis.
38. In view of the above, this Court is unable to sustain the impugned award, first of all for the reason that the claim awarded is not in terms with the Agreement (as subsequently amended) on record and secondly, there is no reasoned determination of the necessary components required for such award; thus, rendering the impugned award, arbitrary and clearly opposed to the fundamental policy of Indian Law.
39. Accordingly, the impugned award is set aside and the petition is allowed.
40. The parties are left to bear their own costs.
VIBHU BAKHRU, J JULY 04, 2017 pkv