Delhi High Court Rejects DDA Challenge To ₹62.90 Lakh Awards, Says Blacklisting Threat Negates Consent

The Delhi High Court on 28 October dismissed Delhi Development Authority (DDA)'s objections to two arbitral awards of Rs. 30.91 lakh and Rs. 31.99 lakh in favour of S.R. Ashok & Associates in a housing construction dispute, including an award directing it to refund money recovered from the contractor under threat of blacklisting.

Justice Jasmeet Singh held that a payment made under threat of blacklisting cannot be treated as voluntary or as a settlement, particularly when the DDA failed to justify the recovery made more than nine years after the final construction bill. The Bench observed:

“Once the demand and the deposit are admitted, it was for the defendant No. 1 to justify the recovery but it adduced no material to do so. A deposit made under threat of blacklisting is also not voluntary, and the defendant No. 1 cannot treat it as a settlement. The Arbitrator was therefore entitled to direct a refund.”

On 21 October 1985, two agreements were executed under which DDA awarded S.R. Ashok & Associates contracts to construct 256 Lower MIG houses each under Groups III and IV at Kondli Gharoli Complex. Construction commenced on 24 October 1985, with completion scheduled for 23 October 1986. However, the deadlines were extended until October 1990 without levy of compensation.

Disputes subsequently arose over unpaid construction bills, additional work, compensation for prolonged execution and security expenses incurred until the flats were handed over.

DDA prepared the final bill on 31 May 1995. By a letter dated 3 August 2004, it demanded Rs. 1,41,151/- from the contractor towards approval of a deviation item under Clause 12 of the agreement. The contractor deposited the amount on 2 September 2004 under protest, claiming that it had been compelled to pay under threat of blacklisting.

S.R. Ashok & Associates had invoked arbitration under Clause 25 of the respective agreements on 26 July and 22 August 1995. Following the adjournment of earlier proceedings, S.S. Jain was appointed sole arbitrator on 26 February 2007.

The arbitrator awarded Rs. 30,91,140 on 31 January 2008 and Rs. 31,99,664.80 on 28 January 2008 towards claims including unpaid construction work, additional steel cutting and straightening charges, compensation for prolonged construction, watch and ward expenses incurred to maintain security at the housing projects, and interest.

The second award also included Rs. 1,41,151 towards the refund of the disputed recovery, against the contractor's claim of Rs. 1,60,151.

DDA challenged the awards under Sections 30 and 33 of the Arbitration Act, 1940, arguing that the claims were time-barred, certain claims had been waived and the arbitrator had exceeded his jurisdiction. It also disputed the awards for prolonged construction, additional steelwork and watch and ward expenses.

The contractor maintained that it had invoked arbitration within the contractual period and that DDA had continued to withhold payments and make recoveries after the final bill.

On the disputed recovery, the Court noted that DDA had neither produced the deviation statement nor established when the deviation was approved. It found no justification for recovering the amount more than nine years after the final bill.

It also upheld the arbitrator's findings on additional steel cutting and straightening charges and found no grounds to interfere with the compensation awarded for prolonged construction.

Regarding watch and ward expenses, the Bench noted that the contractor had repeatedly requested DDA to take possession of the flats and had warned that it would claim security expenses. Rejecting DDA's allegations of misconduct against the arbitrator, it observed:

“A bare assertion that material documents were ignored, without providing proper details, cannot be regarded as misconduct.”

Further, Justice Singh held that the 2007 arbitration reference was a continuation of the original proceedings. Since DDA had consented to extending the time for making the awards, it could not subsequently challenge the extension.

Accordingly, the High Court dismissed DDA's objections, made both arbitral awards under the Rule of the Court and directed preparation of decree sheets.

Appearances for petitioner (M/s S.R. Ashok & Associates): Advocates Akshu Jain, Stuti Jain.

Appearances for respondent (Delhi Development Authority & Anr.): Advocates Kritika Gupta, Chand Chopra, Punishk Handa.