The Single Bench of the Delhi High Court in the case of Delhi Development Authority vs M/S Watcon Water Specialists Pvt. Ltd. & Anr consisting of Justice Vibhu Bakhru while setting aside the impugned award observed that if the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction.
Facts
DDA issued a Notice Inviting Tender (‘NIT’) regarding 3 projects (‘the Projects’) from all eligible contractors. Pursuant to the said NIT, the respondent (‘WWS’) submitted its bids for executing the Projects which was accepted after negotiations and DDA issued three separate Letters of Award (‘LoA’). Thereafter, the Agreements were executed between the parties. Under the terms of the Agreements, DDA agreed to reimburse WWS for the service tax payable/applicable. However, the reimbursement was contingent upon the submission of proof of payment to the concerned department. Additionally, DDA was required to pay WWS the charges for airlifting of equipment as provided by WWS in its tender.
Procedural History
WWS contended that it had completed the work on or before the stipulated dates. However, DDA disputes the same. As per DDA, Project nos. 1 and 3 were completed on 15.09.2010 and Project no. 2 was completed on 28.09.2010. By a letter WWS informed DDA that the airfreight charges were billed within the price of the equipment was due to complex taxation issues and no agency was able to provide separate bills for airlifting of goods. It claimed that the charges for airlifting of goods were a part of the tender, and had already been accepted by DDA, thus, necessitating no further details. WWS claimed that DDA insisted on separate bills for air freight charges. WWS further claimed that it sent letters to the concerned authorities requesting for release of payments. However, DDA did not take any action. WWS, by a letter addressed to the Member Engineering of DDA, referred to the Dispute Resolution Clause under the Agreements and requested for the appointment of an arbitrator; however, DDA did not take any further steps pertaining to the requests made by WWS. DDA, disputes the same. WWS approached this Court by way of a petition u/s 11 of the Arbitration & Conciliation Act and requested for the appointment of a sole arbitrator to adjudicate the disputes between the parties. This Court referred the parties to arbitration and appointed the learned Sole Arbitrator.
The Arbitral Tribunal allowed majority number of claims (out of 16) preferred by WWS and passed order for the DDA to reimburse WWS. Aggrieved by the impugned award, DDA filed the present petition.
Contentions Made
Appellant: As per the relevant clauses of the Agreements, the reimbursement for air lifting charges was contingent upon WWS producing the requisite documentation as proof of having incurred the said air lifting charges. The impugned award results in unjust enrichment and the same is contrary to the fundamental policy of Indian Law. The Arbitral Tribunal has awarded interest on the interest, and it had no jurisdiction to do so.
Respondent: The term “relevant document” was unclear and ambiguous. DDA’s demand for a separate bill for airlifting charges was not stipulated in the Agreements.
Observations of the Court and Judgment
Relying on certain judgments regarding whether the Arbitral Tribunal’s interpretation vitiates the impugned award on the ground of patent illegality, it was observed that the question as to interpretation of the terms of a contract fall within the jurisdiction of the Arbitral Tribunal. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. So, bearing the aforesaid principles in mind, this Court was required to confine the examination in these proceedings to whether the view expressed by the Arbitral Tribunal was perverse and one, that no person could possibly accept.
It was also observed that given the fact that the airlifting charges were included in the evaluation of the bids and the bid of WWS was found to be the lowest; hence the airlifting charges were included as a part of the agreed consideration. Payment of the same was subject to producing the relevant documents. Here, ‘relevant documents’ would mean such documents to establish that, in fact, the goods had been transported by air. In addition, the Arbitral Tribunal also accepted the view that it was not feasible for WWS to separately indicate the airlifting charges as they were included in the bills. The Court was unable to accept that the aforesaid view of the Arbitral Tribunal was patently erroneous. Thus, DDA’s challenge to the impugned award insofar as it relates to WWS’s Claim nos. 3, 8 and 12, was liable to be rejected.
DDA’s challenge to the award of interest in respect of outstanding airlifting charges [Claim nos. 4, 9 and 13], being contingent on DDA succeeding in its challenge to Claim nos. 3, 8 and 12, also failed.
Observing that an award of interest on interest cannot be sustained, the award to the extent of Claim no. 7 was set aside. Pendente lite interest on the amount of awarded interest, in effect, amounts to awarding interest on interest, which is impermissible. Thus, the impugned award, to the extent it allowed pendente lite interests on interests, as stated above, is set aside.
Since the amounts awarded against Claim no. 7 and further pendente lite interests on interests as awarded against Claim no. 15 were partly set aside, the future interests would run only in respect of the amounts so ascertained and not on the amount of ₹1,48,21,482/-, as awarded in the impugned award. The impugned award to the extent that it relates to WWS’s Claim no.7 and further pendente lite interests on interests awarded against Claim nos. 2, 4, 6, 7, 9, 11 and 13 was set aside.
Case Name: Delhi Development Authority vs M/S Watcon Water Specialists Pvt. Ltd. & Anr
Citation: O.M.P. (COMM) 300/2020
Bench: Justice Vibhu Bakhru
Decided on: 19th April 2022
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