Rajiv Narain Raina, J.@mdashHeard Mr. Gupta, learned counsel appearing for the appellant and Mr. Markanda, learned senior counsel appearing for the contractor-respondent. Mr. Gupta, appearing for the appellant, argues that the learned arbitrator has not disclosed the process of reasoning while dealing with Claim 9 inasmuch as the award mentions application of a "formula" for calculation of damages with respect to overhead expenses but does not identify or amplify which is this "formula" to achieve the purpose for which it was used. Mr. Markanda, the learned senior counsel then explains that the formula adopted is in fact the Hudson formula judicially recognised in India and accepted in Indian and international precedents. He refers to the recognition of the Hudson formula by the Supreme Court in
"There is nothing in Indian Law to show that any of the formulae adopted in other countries is prohibited in law or the same would be inconsistent with the law prevailing in India. As computation depends on circumstances and methods to compute damages, how the quantum thereof should be determined is a matter which would fall for the decision of the arbitrator. We, however, see no reason to interfere with that part of the award in view of the fact that the aforementioned formula evolved over the years, is accepted internationally and, therefore, cannot be said to be wholly contrary to the provisions of the Indian Law."
2. Though the Hudson formula is not free from criticism as noticed in the judgment, yet it would lie in the wisdom of the arbitrator to apply one or the other formula to make an award. In this regard, he Supreme Court observed in McDermott (paras 113 and 114, page 318 of SCACTC : page 533 of Arb. LR):
"We do not intend to delve deep into the matter as it is an accepted position that different formulae can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the arbitrator. If the learned arbitrator, therefore, applied the Emden formula in assessing the amount of damages, he cannot be said to have committed an error warranting interference by this court."
3. Therefore, when the calculation is set out in figures in the award under Claim No. 9, by the learned arbitrator [Justice R.K. Nehru (Retd.)] he had in fact applied the Hudson formula without actually saying so. The Hudson formula is an equation applied in the way: The profit percentage divided by 100, multiplied by the contract value, and then multiplied by delay then the figure arrived at would be divided by the period calculated in weeks or months. To express it in simple way, it is like this, a contractor is awarded damages for delay based upon the originally estimated margin, divided by the originally estimated period of construction performance, multiplied by the extra period taken for performance of work and in this way the figure so worked out is the quantum awardable. There is then nothing palpably wrong with the calculation done awarding compensation of Rs. 47,70,125 to the respondent as the principal amount, by applying one of the well recognised formulae. The learned arbitrator had a choice and was under no legal obligation or compulsion to "delve deep into the matter... (as)... different formulae can be applied in different circumstances" as explained in McDermott and afford reasons in the award as to why he chose the Hudson equation in preference to the other two. In McDermott case the learned arbitrators had applied the Emden formula.
4. Mr. Gupta has not enlightened me as to what difference would it make if one or the other is followed in terms of compensation. It is not the appellant''s case before the learned arbitrator or in their objections filed u/s 34 of the Act or in this appeal, that there are yawning gaps between the three equations in terms of money. If such was projected it would have been a different matter, worth examining. I have, therefore, no reason to interfere with the calculations made under Claim No. 9 which is in accordance with law and the present appeal preferred u/s 37 of the Arbitration and Conciliation Act, 1996 deserves to fail by upholding the award under Claim No. 9.
5. The other complaint of Mr. Gupta is that interest could not have been awarded on the principal amount by the learned arbitrator. The learned arbitrator has awarded interest @ 12% per annum on the delayed payment for the work done. However, future interest @ 9% per annum has been awarded from the date of the award till the entire awarded amount is paid to the claimant. It lies well within the jurisdiction of an arbitrator to award future interest just as it is within his domain to award interest for all stages, i.e. pre, pendente lite and post-award periods. I find nothing wrong in what the learned arbitrator has done with respect to grant of interest and the award is not open to be varied on this score and the same as well is upheld.
6. The next contention of Mr. Gupta is that an application was made before the learned arbitrator for production of additional evidence by way of two letters dated 16th August, 2004 and 28th September, 2004 and two contemporaneous affidavits of the Junior Engineers. The record indisputably bears out that the work was completed on 10.10.1999 and the letters are dated 16th August, 2004 and 28th September, 2004 making a complaint of defect in the performance of work. If the work was completed in 1999, it seems hard to believe that a defect would be pointed out after 5 years of completion of work, the work which was completed apparently to the then satisfaction of the employer. It appears that the letters were written to try and wriggle out of the contractual obligations on the pretext of pointing out defects with a view to deny payment of money. At any rate, the learned arbitrator has passed a well reasoned speaking order rejecting the application on this point. The reason assigned is that the application for additional evidence has been filed after inordinate delay and no reasons whatsoever have been assigned by the respondent-appellant to justify non-production of the documents and affidavits at an earlier stage of the proceedings which commenced in 2002. Even if the letters came into existence pendente lite and are supervening events, even then, the application was filed belatedly on 5th February, 2005 as held by the learned arbitrator. The same to my mind are clearly an afterthought and a ruse to avoid payment. In any case, the letters have no material bearing on the facts of the case and can be ignored.
7. Insofar as the affidavits are concerned, the learned arbitrator has recorded that the affidavits are of officials serving the employer and were available with the Corporation throughout the pendency of the proceedings but not produced in time. If they were kept in a drawer of an official desk then they were best left there. If the work was admittedly completed on 10th October, 1999 then the affidavits and letters originating on 16th August, 2004 pointing out defects in work done ages ago then what reliance could be placed on them as proof of defects. It is not reasonably expected from a person to complain after so many years have rolled by that work completed in 1999 suffers from defects when such were not pointed out at the earliest. A reasonably prudent person would have immediately pointed out the defects in the quality of performance of work done, if there was one, or within a reasonable period and at least within the defect rectification period of 6 months from the date of completion of work as laid down in the works contract. That period has long run over. Therefore, this argument also holds no water. No other ground was pressed.
8. The appeal fails and is dismissed. Since the appeal has failed, there is no necessity to pass orders on the application for condonation of delay in filing the appeal.
