Delhi High Court
The Union Of India & Ors vs M/S Rishi Engineering & ... on 30 January, 2015
Author: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 1625/2014
THE UNION OF INDIA & ORS ..... Petitioners
Through: Mr. A.S. Dateer, Advocate
Versus
M/S RISHI ENGINEERING & CONSTRUCTION
(P) LTD. ..... Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
ORDER
% 30.01.2015
1. This petition under Section 34 of the Arbitration and Conciliation
Act, 1996 seeks setting aside of the arbitral award dated 1 st September, 2014
of a sole Arbitrator (being the Deputy CE/C/T&C, Northern Railways,
Kashmere Gate, Delhi and nominated as the Arbitrator by the General
Manager, Northern Railways of the petitioner Railways, in accordance with
Clause 2900 of Indian Railway Standard Conditions of Contract) to the
extent the same allows the claim of the respondent in the sum of
Rs.46,67,344/- against the petitioner and dismisses the counter-claim of the
petitioner Railways.
2. The petition came up before this Court first on 22nd December, 2014
when after hearing the counsel for the petitioner Railways, orders on
admissibility / entertainability of the petition, were reserved.
3. Though on going through the petition and on hearing the counsel for
the petitioner Railways it appeared that no ground within the meaning of
Section 34 of the Arbitration Act for setting aside of the award was made
out, specially in the light of the judgments of the Division Bench of this
Court in Delhi Development Authority Vs. Bhardwaj Brothers
MANU/DE/1753/2014 and in State Trading Corporation of India Ltd. Vs.
Toepfer International Asia Pte Ltd. MANU/DE/1480/2014 but on further
consideration after orders were reserved, it prima facie appears that a
ground within the meaning of Sections 34(2)(a)(v) and Section 34(2)(b)(ii)
of the Arbitration Act for setting aside of the award, at least insofar as it
allows the claim of the respondent against the petitioner Railways in the
sum of Rs.46,67,344/-, is made out.
4. Section 34(2)(a)(v) makes an award liable to be set aside where the
arbitral procedure was not in accordance with Part-I of the Arbitration Act.
Section 31(3) of the Act falling in Part-I provides that the arbitral award
shall state the reasons upon which it is based. There is nothing to show that
the parties had agreed that no reason be given. The instant arbitral award
notices that for adjudication of the claim of the respondent for
Rs.46,67,344/- towards short payment on account of non-giving of the
MODVAT benefit and on which account the claim has been allowed, was
based on Clauses 7.9 and 13.8 of the agreement between the parties and
which are as under:
"Clause 7.9
The accepted contract rate is net of all MODVAT credits available to the firm on
the date of opening the tender. All MODVAT credits available on inputs on the
date of opening of tender will be fully retained by the supplier, in addition to the
contract rates. Any variation in MODVAT after opening of tender and during
the currency of the contract will be to the purchaser's account.
Clause 13.8
i. The liability of the purchaser to reimburse excise duty is limited to such as
may be found legally due and payment in respect of contracted goods after
availing full credit on all the inputs used in the manufacture of the
finished product irrespective of whether the supplier(s) has in fact availed
of the said credit or not.
ii. Offer of the rate is to be made after taking into consideration
MODVAT/CENVAT credit available on inputs on the date of opening
of tender, which is to be retained by the supplier and any variation in
MODVAT/CENVAT credit after the date of opening shall be to the
purchaser's account."
It was inter alia the defence of the petitioner that as per the aforesaid
Clauses, the liability of the petitioner as purchaser was only for
reimbursement of any variation in MODVAT after opening of tender and
during the currency of the contract and that there had been no variation in
excise duty on the subject goods after the opening of the tender and during
the currency of the contract and the respondent had not incurred any
additional amount towards excise duty and thus the question of
reimbursement did not arise. However, a reading of the award shows that
the Arbitrator, while adjudicating the said claim, has neither applied the
aforesaid Clauses of the contract nor given any reason for non-application
thereof. It prima facie also appears that Clause 13.8 takes away the benefit
on account of variation in MODVAT given under Clause 7.9. The arbitral
award, prima facie, also does not record the respondent having submitted
any proof of having incurred any additional excise duty so as to become
entitled to reimbursement thereof. In my prima facie opinion, the
requirement to give reasons on which the award is based includes a
requirement to give reasons for rejecting the defence to the claim. I am
further of the prima facie opinion that failure to give such reasons would
amount to "arbitral procedure" being "not in accordance with the agreement
of the parties" or being "not in accordance with" Part-I of the Arbitration
Act within the meaning of Section 34(2)(a)(v).
5. I am also of the prima facie opinion that the Court will rarely be in a
position to give a conclusive finding of the award being induced by fraud or
corruption. The reason therefor is that without hearing the Arbitral Tribunal,
and which is not a party to a proceeding under Section 34, no conclusive
findings of award being induced by corruption can be given. However
where, from a reading of the arbitral record an attempt to favour one of the
parties is apparent, the Court would be entitled to invoke Section
34(2)(b)(ii) for setting aside of the award. In the present case, from the
Arbitral Tribunal instead of adjudicating the claim of the respondent in
accordance with the agreement between the parties, allowing the same on
the basis of extraneous material and from not giving any reasons for
rejecting the defence of the petitioner to the claim of the respondent, such an
attempt is prima facie evident.
6. Resultantly, issue notice to the respondent by all modes including
dasti, returnable on 25th March, 2015.
7. The arbitral records be also requisitioned for the said date.
RAJIV SAHAI ENDLAW, J.
JANUARY 30, 2015
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