M/S N.E. Link Express vs Mahanagar Telephone Nigam Ltd
2009 Latest Caselaw 2997 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   OMP No.393/2009

%                                   Date of decision:04.08.2009

M/S N.E. LINK EXPRESS                                     ...Petitioner
                          Through: Mr. C. Mukund, Mr. Ashok Jain & Mr.
                                   Pankaj Jain, Advocates

                                 Versus

MAHANAGAR TELEPHONE NIGAM LTD.... Respondent

                          Through: Nemo


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.      Whether reporters of Local papers may
        be allowed to see the judgment?                 Yes

2.      To be referred to the reporter or not?          Yes

3.      Whether the judgment should be reported         Yes
        in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The petition under Section 34 of the Arbitration Act, 1996 has

come up for admission. The counsel for the petitioner was heard for

some length on 21st July, 2009 when the hearing was adjourned to

enable him to place on record portions of the arbitral record sought

to be relied upon him for the purpose of issuance of notice of the

petition. It is stated that the documents were filed after the last

date. However, the same are not on record. The counsel for the

petitioner has handed over another set of the said documents in the

court and the same are taken on record. The counsel has been heard

today also.

2. The challenge is to the portions of the arbitral award dated 28th

March, 2009 of the General Manager (Marketing) of MP Circle,

Bhopal of the Department of Telecommunications, to the extent

against the petitioner.

3. The disputes arose out of an agreement dated 15th June, 2009

between the petitioner and the respondent Mahanagar Telephone

Nigam Limited (MTNL) whereunder the petitioner agreed to

undertake the job of distribution/delivery of all the telephone bills

and other letters to be handed over by the respondent to the

petitioner for delivery, within the jurisdiction of West-II Area. A rate

of Rs.2,100/- per one thousand bills was agreed. The agreement was

for an initial term of one year w.e.f. 15th June, 1999 with an option to

the respondent to extend the same for a further period of three

months. The work under the agreement however admittedly

continued till the month of November of the year 2000.

4. The petitioner raised the following claims before the

arbitrator:-

      i.   Release of Bank            Guarantee        in    the     sum    of
           Rs.1,10,000/-.

a) The case of the respondent was that in terms of the

agreement between the parties, the bank guarantee could

not be released unless & until the petitioner furnished a "No

Demand Certificate". It was further the case of the

respondent that under the agreement the bank guarantee

could be held in abeyance for at least six months from the

date of receipt of "No Demand Certificate". It was thus

contended that till all the claims were settled, the bank

guarantee could not be released.

b) The arbitrator has found that the bank guarantee could not

be released till the petitioner furnishing the "No Demand

Certificate" and which the petitioner had not submitted. The

claim has thus been disallowed.

ii. For refund of deductions of Rs.16,41,129/- from the petitioner's bills on the respondent.

a) Out of the said amount, Rs.10,43,622/- was deducted for non-

delivery of the bills, Rs.5,44,845/- was deducted as penalty

for non-delivery Rs.52,381/- was deducted as penalty for non-

satisfactory performance and Rs.481/- deducted towards

amount due against wrongly addressed bills. The case of the

respondent was that the said deductions had been made in

accordance with the terms of the agreement and after the

decision for recovery of the said amounts had been taken by

two committees of high level officials. It was further

contended that under Clause 10 of the agreement, the

decision of the MTNL with respect to the said

deductions/penalty was final and binding on the petitioner. It

was further the case of the respondent that the penalty in the

case of non-delivery of bills was provided in the agreement as

surcharge payable by the customers plus 5% of the total

amount subject to a minimum of Rs.100/-

b) The arbitrator found that a number of complainants were

received by the respondent with respect to non-receipt of

bills, certain complaints were made to Lok Adalat as well,

complaints were also received of burning of bills as well as

finding of bundels of bills in public places; on investigation by

the Vigilance Cell of MTNL it was found that the said bills

had been handed over to the claimant for delivery to the

subscribers but which the claimant had failed to deliver;

notwithstanding the same claimant raised its own bill on the

respondent for delivery of the said bills.

c) It was the case of the respondent that payment of 40% of

subscribers bills had been received by it after issuance of

duplicate bills. The respondent held the petitioner liable for

non-delivery of all the said 40% bills and made the deductions

aforesaid as per the formula provided in the agreement itself.

d) The arbitrator, however, found that the respondent in the

evidence has not been able to fully prove that payment of

40% bills had been received after issuance of duplicate bills.

The arbitrator, however, found that in-spite of the respondent

forwarding the complaints on non-delivery to the petitioner,

the petitioner never submitted any compliance reports. The

arbitrator also held that merely because the payments had

been made by the subscribers after obtaining duplicate bills

was not indicative of those many bills having been not

delivered by the petitioner. It was held that there could be

various other reasons/circumstances owing to which the

subscribers had made payment by way of duplicate bills. The

arbitrator, however, found that the respondent had

established receipt of number of complaints from the

subscribers of non-delivery. The arbitrator thus held that

only 40% of the payment received by MTNL after issuance of

duplicate bills could be because of non-delivery of bills by the

petitioner. The arbitrator thus directed refund back of 60%

of Rs.10,43,622/- deducted by the respondent on this account

to the petitioner. However, the arbitrator held that since the

satisfactory performance of the petitioner stood established,

the deductions in the sum of Rs.5,44,845/- & Rs.52,381/- and

Rs.481/- as penalty by the respondent was justified.

iii. Claim of Rs.1,48,000/- for wrong calculations.

This was sorted out during the arbitration proceedings

and does not survive.

iv. Claim of the petitioner of Rs.16,41,129/- by way of interest @ 18% p.a. for delayed payment of its bills.

The arbitrator held that there was no provision in the

agreement regarding interest to be paid on the bills and

as such the said claim could not be considered.

Accordingly, the claim was declined.

v. Claim of Rs.3 lacs per month for notice period.

a) The case of the claimant was that the agreement was for

one year extendable by three months; however, the

respondent continued to give work to the petitioner for

the period beyond that also and then all of a sudden in

November, 2000 terminated the agreement. The

petitioner claimed to be entitled to a reasonable notice of

three months of termination and claimed damages in lieu

thereof.

b) The arbitrator found that Clause 11 of the agreement

provided for one month‟s notice of termination during

the continuity/currency of the contract. It was held that

the contract in the present case having been terminated

after the expiry of terms thereof, the petitioner was not

entitled to any notice and hence the claim for damages in

lieu thereof was declined.

     vi.    Claim for additional work undertaken.

     a)     The argument of the counsel for petitioner before this

court is that in terms of the agreement, the petitioner

was to deliver 90000 bills @ Rs.2100/- per 1000 bills; the

contract permitted a variation of 25%; The bills

delivered by the petitioner were admittedly more than

the said variation also. The petitioner claimed for the

said excessive bills @ Rs.10 per bill i.e. instead of

Rs.2,100/- per 1000 bills, Rs.10,000/- per 1,000 bills. The

respondent paid for the said excessive bills also at the

contractual rate of Rs.2100/- for every 1000/- bill or

Rs.2.10p per bill.

b) The arbitrator found that the agreement was to deliver

all the bills in a particular territory irrespective of the

number and at the price agreed between the parties. The

arbitrator also found that the agreement nowhere

provided that the petitioner shall not deliver STD/ISD

bills of high value and the high value of the STD/ISD bills

did not give any right to the petitioner to demand

additional amount by calling it additional services; the

value of the bill had nothing to do to establish the cost of

delivery. The claim of the petitioner was thus not found

tenable even in terms of the agreement and the claim

was dismissed.

vii. Claim for the salary of two senior officers @ Rs.50,000/- per month for over 18 months.

The arbitrator found the said claim also to be without any

basis and dismissed the same.

5. The counsel for the petitioner had on 21st July, 2009

concentrated the challenge to the finding of the arbitrator‟s as to the

imposition of penalty and damages for non-delivery. It was argued

that the arbitrator having found the claim of the respondent for

Rs.10,43,622/- on the basis of 40% bills having not been delivered, to

have not been established, has arbitrarily reduced the said claim by

60%. The award to that extent was stated to be arbitrary, untenable

and without any reason whatsoever.

6. The parties had chosen their private forum of arbitration and

made the same the final arbitrator of disputes of facts as well as law

between them. The arbitrator has in the award not only dealt with

the respective case/pleadings of the parties, their documents but

also discussed the statements of the witnesses recorded before him.

It is on that basis that the arbitrator though finding unsatisfactory

performance of the petitioner, at the same time held that the case of

the respondent of non-delivery of 40% of the bills had not been

established. Undoubtedly, the arbitrator has apparently not given

any reason for reducing the said claim of the respondent by 60%.

However, it cannot be lost sight of that considering the nature of the

disputes, and the evidence led before the arbitrator it is very difficult

for any court or fora to find the precise number, out of thousands of

bills per month, remaining undelivered. A generalization in this

regard becomes necessary. Such generalization by a fora of the

parties choosing cannot be interfered with. Neither in the OMP nor

during arguments also, it has been shown/disclosed that on the basis

of any material before the arbitrator, the exact number can be so

determined or is less than that attributed by the arbitrator to the

petitioner. In the absence of the same it cannot be said that the

percentage should be something other than that arrived at by the

arbitrator. The finding of fact of arbitrator of petitioner being

otherwise guilty of non-delivery, is final and has not been challenged.

7. It cannot also be lost sight of that the only ground under

Section 34 of the Act which can be attracted is that provided under

Section 34 (2) (b) (ii) i.e. of the award being in conflict with the

public policy of India. In-spite of the interpretation of the Supreme

Court in ONGC Ltd. Vs. Saw Pipes Ltd. AIR 2003 SC 2629 of the

same meaning contrary to the substantive law of India, I cannot find

the award in this respect to be contrary to any substantive law. As

far as the requirement in Section 28 of giving reasons is concerned,

there can be straight jacket definition of reasons. Whether "reasons"

exist or not for a particular finding/award, depends upon the nature

of dispute and the facts and circumstances of each case. "Reason" is

a ground or motive for a belief or course of action, a statement in

justification or explanation of belief or action. It is in this sense that

the award must state reasons for the amount awarded. "Reason" is

the link between the materials by which certain conclusions are

based and the actual conclusions. This aspect is dealt in detail in Jai

Singh Vs. DDA 2008 (3) Arb. LR 667 (Delhi) and in DDA Vs.

Sunder Lal Khatri & Sons 157 (2009) DLT 555. It is in this light

that it is to be seen whether the award to this extent is without

reasons.

8. In Gujarat Water Supply & Sewerage Board Vs. Unique

Erectors (Gujarat) Pvt. Ltd. (1989) 1 SCC 532, it was held that

sufficiency of reasons depends upon the facts and circumstances of

the case.

9. Section 65 (g) of the Indian Evidence Act empowers the person

who being skilled to do so, has examined the documents which are

voluminous, to give secondary evidence of their effect and for

general result. I find the position to be the same over here. The

arbitrator who has gone into the entire record and before whom

witnesses have been examined and cross examined has on the basis

thereof returned a finding of the number of bills remaining

undelivered and with respect whereto deductions could be made

from the bills of the petitioner. Such finding, being factual cannot be

set aside for the reason of being without any reasons. The Supreme

Court recently in Kwality Manufacturing Corporation Vs.

Central Warehousing Corporation (2009) 5 SCC 142, even though

in relation of Sections 30 & 33 of the 1940 Act, restated that findings

of facts recorded by the arbitrator ought not to be interfered, unless

inconsistent.

10. In Madhya Pradesh Housing Board Vs. Progressive

Writers & Publishers (2009) 5 SCC 678 also, the challenge to the

arbitral award under the 1940 Act was inter-alia on the ground of

same being based on conjectures and surmises. The Supreme Court

however in-spite of finding that the arbitrator took judicial note of

certain facts which were in the realm of conjectures and surmises,

posed the question as to what was the effect thereof held that the

award even after ignoring the same continued to be valid and

binding between the parties. It was held that issue of fact

determined by arbitrator by taking into account the overall

agreement was not interferable by the court.

11. The counsel for the petitioner has fairly stated that the

imposition of penalty of Rs.5,44,845/- is also in terms of the

agreement. He has however urged that no loss has been proved and

which is essential for imposition of penalty. He has further urged

that for the same non-performance i.e. of non-delivery of bills,

deduction as well as penalty cannot be imposed. It is argued that the

effect thereof would be that the petitioner would be left with no

earning whatsoever out of the contract and which would make the

award unjust and unfair.

12. Once the agreement is found to provide for deduction from the

bills for non-delivery as well as for penalty, it cannot be said that the

view taken by the arbitrator is improbable which no reasonable

person could have taken. Further, I do not find any inconsistency in

the two deductions. While the first is for charging for the services

proved to have been not rendered, the second is for the loss caused

owing to such non-delivery. The said penalty has been arrived at in

accordance with the formula in the agreement. As far as the

contention of the counsel for the petitioner of the penalty being not

leviable without proof of loss, I may notice that the Supreme Court in

Saw Pipes Ltd. (Supra) has held that the conditions of proving of

loss are different where public interest is involved; it is very difficult

to prove the loss when there is a delay in construction of a road or a

bridge. In such cases, the penalty mentioned in the agreement can

be imposed even without proof of loss. In the present case, I do not

find that even to be the position. From the formula for levying of

penalty given in the agreement it is clear that the penalty is for the

loss which would be occasioned to the respondent owing to delay in

receiving payments owing to non-delivery of bills. Moreover, if such

challenges are to be entertained in a proceeding under Section 34,

the jurisdiction exercised by this court would be akin to appellate

and which is not permitted.

13. The counsel for the petitioner has today challenged the award

in so far as disallowing the interest and the claim for extra work.

14. As far as the claim for interest is concerned, it is stated that

the award is perverse. Reliance is placed on Executive Engineer,

Dhenkanal Minor Irrigation Division, Orissa Vs. N.C. Budharaj

(2001) 2 SCC 721 in paragraph 22 whereof it has been held by a five

judge bench that deprivation of monies leads to interest. It is urged

that the arbitrator has declined interest merely on the premises of

there being no provision therefor in the agreement and has not

considered that the petitioner otherwise in law is entitled to interest.

It is further urged that there is no term in the agreement prohibiting

payment of interest. Reliance is also placed on T.P. George Vs.

State of Kerala (2001) 2 SCC 758; However, in this case all that

has been held is that the arbitrator is empowered to grant interest.

15. The question which arises is, should this court interfere with

the award declining interest. It is not as if any substantive law

mandates the arbitrator to, in all circumstances award interest. The

counsel for the petitioner during the hearing also agreed that even

under the Interest Act, relied upon by him the award of interest is

discretionary. Once that be the position, in my view Section 34 does

not permit interference with such an award declining interest.

16. As far as the claim of the petitioner before the arbitrator for

additional work was concerned, admittedly there was no agreement

between the parties for the rate to be paid therefor. A perusal of the

Tender Document pursuant to which the agreement was entered into

between the parties, only in Annexure „B‟ titled "Specifications"

thereto mentions that the bills for delivery will be approximately

94000 per month. The agreement does not limit the number of

bills which were to be delivered. The counsel for the

petitioner also during the hearing did not invite attention to any

such clause. In the absence of any limitation on the number of bills

which the petitioner was to deliver, nothing wrong can be found with

the finding of the arbitrator of the petitioner being entitled to the

same rate as agreed for all the bills and being not entitled to any

higher rate for the bills over and above 94,000 per month.

17. The Division Bench of this court in Gyan Chand Totu Vs.

Subhash Chand FAO (OS) No.1 of 2004, as quoted in NTPC Ltd.

Vs. Wig Brothers Builders & Engineers Ltd. 160 (2009) DLT 642

has held that the pivotal principle while deciding the scope for

interference with awards on ground of public policy is that the award

can be set aside if it is patently illegal, but the illegality must go to

the root of the mater and if the illegalities are of trivial nature, it

cannot be held that the award is against public policy. It was further

held that the award can be set aside, if it is so unfair and

unreasonable, so as to shock the conscience of the court.

18. The necessary ingredient for exercise of jurisdiction under

Section 34, i.e. of perversity shocking the judicial conscience is

found to be missing in this case.

19. Resultantly, the petition is not found deserving of issuance of

notice even and is dismissed. No order as to costs.

RAJIV SAHAI ENDLAW (JUDGE) August 4th, 2009 pp