Mku Ltd.Previously Known As M/S ... vs Union Of India
2017 Latest Caselaw 4255 Del

$~OS-31
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
                                                     Reserved on: 26.05.2017
%                                               Pronounced on: 21.08.2017
+      O.M.P. (COMM) 231/2017
       MKU LTD.PREVIOUSLY KNOWN
       AS M/S MKU PVT. LTD.                    ..... Petitioner
                     Through Mr.Abhinav Vashisht, Sr. Adv. with
                             Ms.Geeta Sharma and Ms.Ayushi
                             Kiran, Adv.
                     versus
       UNION OF INDIA                                     ..... Respondent
                     Through           Mr.Mohit D. Ram, Adv. for
                                       Ms.Sunieta     Ohja,      Adv.    with
                                       Mr.S.S.Sejwal, Law Officer, CRPF
                                       and Insp. (M) Jaiveer Sharma, CRPF.

       CORAM:
       HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J.

I.A. No. 6044/2017(exemption) Allowed subject to all just exceptions O.M.P. (COMM) 231/2017 and I.A. No. 6043/2017(stay)

1. The present petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') seeking to set aside the impugned Award dated 10.03.2017 passed by the learned Arbitrator.

2. On 03.07.2009, the respondent issued a tender enquiry for procurement of 59,000 Light Weight Bullet Proof Jackets (hereinafter

referred to as Jackets). The petitioner submitted their bid. On 27.04.2010, an acceptance letter was issued by the respondent.

3. As per the contract, the delivery schedule was eight months which was to expire by 27.12.2010. 50% of the Jackets i.e. 29,500 were to be supplied within four months and the balance in the subsequent four months. Admittedly, there has been a delay in supply of the Jackets by the petitioner. However, as per the petitioner, the delay cannot be attributed due to defaults of the petitioner and took place on account of the misdeeds and defaults of the respondent. The entire jackets were supplied by 30.06.2011 and the same have been accepted by the respondent.

4. Disputes arose between the parties. The respondent vide its communication dated 26.06.2012 imposed liquidated damages on the petitioner for a sum of Rs.5,01,60,825/- for the delayed supply. The petitioner had in terms of the contract furnished five bank guarantees for a total amount of Rs.5,18,71,250/- whose encashment was threatened. The respondent also withheld balance dues payable to the petitioner.

5. The petitioner thereafter filed a petition under Section 9 of the Act being OMP No. 615/2012. Vide order dated 07.11.2012, the respondent was restrained from encashing the bank guarantees.

6. After issuing a notice invoking the arbitration clause on 05.02.2013, the petitioner moved this court under Section 11 of the Act. The said petition was disposed of on 22.07.2013 as Sh. Kranti Deo had been appointed as an Arbitrator vide letter dated 04.09.2013 by the respondent.

7. As Sh. Kranti Deo retired and a new arbitrator was not appointed, the petitioner filed a petition under Sections 14 and 15 of the Act for termination

of the mandate of the Arbitrator being OMP 30/2015. Accordingly, Sh. Inder Kumar, Ministry of Law and Justice was appointed as an Arbitrator.

8. The learned Arbitrator vide its interim Award dated 12.02.2016 directed release of the bank guarantees of the petitioner for an amount of Rs.5,18,71,520/-. The respondent was also directed to release a sum of Rs.1,99,30,22/- on account of unpaid dues. The respondent after some litigations complied with the said directions of the learned Arbitrator.

9. Now on 10.03.2017, the Arbitrator has passed his award and rejected all the claims of the petitioner. The petitioner made 8 claims before the learned Arbitrator details of which are as follows:-

       (i)     Towards unpaid amount of supplies.
       (ii)    For return of Bank Guarantees

(iii) Towards non-payment of increased SAT liability.

       (iv)    Recovery of bank expenses
       (v)     Interest paid to suppliers
       (vi)    Imposition of liquidated damages
       (vii) Interest under MESE Act
       (viii) Cost of arbitration

10. I have heard learned counsel for the parties.

11. Learned senior counsel for the petitioner has vehemently argued that in view of the communication dated 19.03.2014 of the respondent, the liquidated damages have been waived off/rescinded by respondent and the period of delivery has been extended up to 30.06.2011. Hence, he submits that the learned Arbitrator has without any reason not accepted the said plea of the petitioner. He further submits that in terms of the agreement, the liquidated damages could only be deducted from the performance security

deposits submitted by the petitioner. As the respondent have released the performance bank guarantees, they relinquished their rights to levy liquidated damages. He further submits that the respondent has withheld large dues of the petitioner for which the petitioner has not been granted any interest. It was also strongly urged that award is a non-speaking award and is liable to be set aside. Other aspects of the award were rightly not assailed.

12. I will first deal with the claim relating to liquidated damages i.e. claim No.(vi) relating to imposition of liquidated damages of Rs.5,01,60,825/- vide letter dated 26.06.2012.

13. The learned Arbitrator noted in the award the submissions of the petitioner that the delay in delivery took place on account of various hindrances. The learned Arbitrator also noted the stand of the petitioner that the respondent have vide letter dated 19.03.2014 regularized the delay in supply of the Jackets up to 30.06.2011 by which date the entire supply had been made. The learned Arbitrator however rejected the submission of the petitioner noting that the respondent had re-fixed the delivery period to facilitate the supplies without levying of LD charges but the petitioner failed to supply the stores and material within the re-fixed delivery period. It also noted that the supplies made by the petitioner failed in pre-dispatch inspection/tests because of which jackets were not acceptable as the lives of para-military commandos/soldiers would be put to risk. Thirdly, it noted that the changes of specifications in the remaining Jackets were made by the petitioner without the consent of the respondent which was not permissible. Hence, the learned Arbitrator came to the conclusion that the imposition of liquidated damages was justifiable.

14. I may first look at the communication dated 26.06.2012 by which the liquidated damages were imposed on the petitioner. The said communication reads as follows:-

"1. Whereas under the terms of the contract you were required to supply the stores contracted for on or before 27.12.2010, 50% of store in 1st 4 months and rest quantity in next four months.

2. And whereas you failed to deliver the stores 59,000 Nos. Light Weight Bullet Proof Jackets within the stipulated delivery period.

3. Under clause 14(7)(i) of the General Condition of Contract (DGS&D-68 Revised) the Government is, therefore, entitled to claim from you a sum of Rs.5,01,60,825/- (Five Crore One Lakh Sixty Thousand Eight Hundred Twenty Five) only as liquidated damages for delay in supplies.

4. You are, therefore hereby called upon to pay the sum of Rs.5,01,60,825/- (Five Crore One lakh sixty thousand eight hundred twenty five) only in any Branch of the Reserve Bank of India, State Bank of India or Government Treasury to the credit of PAO, Directorate General CRPF, New Delhi latest by 12/07/2012 failing which the purchaser will be compelled to take such further action as per terms and conditions of the contract."

15. The admitted position is that the petitioner had to supply 59,000 Jackets on or before 27.12.2010 but the jackets were supplied by 30.06.2011. The petitioner states that there were following hindrances/delays by the respondent in the timely supply of the jackets:

Hindrance No.1 Delay in supply of pattern of camouflage print by the respondent:

As the period of the contract was only eight months, the cloth samples ought to have been provided at the time of execution of the agreement. The cloth samples were provided after a delay of 25 to 44 days. Hindrance No.2 Delay in giving Excise Duty Exemption Certificate and Custom Duty Exemption Certificate by the respondent.

It is stated that as per clause 19(c) and 19(d) of the Agreement, the petitioner was entitled to Excise Duty Exemption Certificate and Custom Duty Exemption Certificate in respect of the imported raw material. These certificates should have been made available at the time of execution of the agreement. The certificates were provided only after a request from the petitioner on 30.06.2010 i.e. after a delay of 60 days. Hindrance No.3 Delay in inspection of stores by the respondent.

The stores were said to have been offered for inspection by the petitioner on 30.06.2010. The inspection was initiated only on 16.08.2010 i.e. after a delay of almost 45 days. In the interregnum, the petitioner could not resume production as it was not sure as to whether the lot could be cleared or not.

Hindrance No.4 Delay in communicating the decision on use of alternative material by the respondent.

The supply of the petitioner for lot Nos. 3 and 4 had failed the ballistic test due to inconsistency in the raw material supplied by M/s Honey Well, USA, the supplier authorized by the respondent. Hence, the petitioner used material imported from the alternative supplier authorized by the respondent

at a higher price. Yet, no permission was given for the use of the material from the alternative supplier. Similarly, the petitioner offered to use three extra layers of the material keeping into account the weight and other parameters. The acceptance of this change was communicated after a delay of 45 days.

Hindrance No.5 Delay in a re-fixation of the delivery period by the respondent.

16. The petitioner also relies upon communication dated 19.03.2014 whereby it is urged that the respondent has regularized the delivery of the material up to 30.06.2011 i.e. the date on which the last lot was received by the respondent without imposition of liquidated damages. Perusal may be had to the said letter dated 19.03.2014 written by the respondent to the petitioner. Relevant portion of the same reads as follows:

"Subject:- Regularization of DP against AT No.U.II.794/09- 10-Proc.Misc dated 17/04/2010 for supply of Light Weight Bullet Proof Jackets.

1. Please refer to this Directorate AT No. No.U.II.794/09- 10-Proc.Misc dated 17/04/2010.

2. The following amendment is hereby authorized in the Clause-10(Date of delivery) of the schedule to the subject acceptance of tender:-

FOR Existing Entry READ Delivery period of subject store is hereby regularized up to 30.06.2011 i.e. the last lot of subject store was received on 30.06.2011, subject to conditions that no price/taxes/ED increased on any account whatsoever which take place after original delivery date of the Acceptance of Tender will be allowed and also subject to condition that recovery

endorsed if any on inspection notes copies 2 and 5 will be recovered by the paying authority.

3. All other terms and conditions of the contract shall remain unaltered."

It has been strongly urged by the petitioner that in view of this communication, the respondent had regularized the delay in supply of store upto 30.06.2011 and hence the respondent cannot now back track and levy liquidated damages on the petitioner for the alleged delay in supply of the goods.

17. The learned Arbitrator notes the submissions of the respondent as to why they have imposed liquidated damages. It notes that the entire quantity of 59,000/- jackets was to be delivered by 27.12.2010 and the petitioner failed to do the needful. It further notes the stand of the respondent that out of the jackets offered, substantial number failed in the pre-discharge inspection, the specifications of some of the jackets was changed by the petitioner without the consent of the respondent, the petitioner repeatedly requested for refixation of the delivery period, and further that M/s.Honeywell is stated by the petitioner to have supplied defective material. It is admitted that M/s.Honeywell was one of the four names given by the respondent but it is claimed that in case the said M/s.Honeywell supplied inferior material, then it is the responsibility of the petitioner who should have ensured quality material.

18. The learned Arbitrator notes the above submissions but rejected all the contentions of the petitioner in the following manner:-

"I have heard the arguments of both the parties and perused the records of the case, it was argued by the Respondent

that the said regularization of Delivery Period was for the purpose of accounts. I have also perused Clause 19 (e) of the A/T which reads that "In case, the firm does not complete the supply within delivery period, liquidated damages will be [email protected] 2% of the total cost of item as per para 15.7 of DSG&D Manual and 14.7 of DGS&D-68 (Revised) and if required, action will be taken against the firm to blacklist it and also for forfeiture of its security deposit.

After considering respective contentions of the parties, examining the documents and the pleadings and clause 19 (e) of the AT, my award is as under:

I am satisfied with the submission made by the respondent that the delay was caused due to the failure of Claimant to supply stores within stipulated time as per their Tender Specification. Further, the material provided by the Claimant was rejected in test at TBRL Since, the Claimant was fully aware of the specifications and it was their duty to ensure at the very beginning that the material provided to them would be in accordance to the specification as mentioned in the A/T. It admitted fact that the respondent had Re-fixed the Delivery Period only to facilitate the supplies without the levying of LD charges. However, the claimant failed to supply the stores/material with the above re-fixed Delivery Period.

In the matter, firstly, Clause 19 (e) of AT Clearly specifies to charge [email protected] 2% of the total cost if the firm does not complete the supply within delivery period. Secondly, the supplies made by the claimant failed in pre dispatch inspection/test at TBRL being of inferior quality to make BPJ which is unacceptable, as the lives of para-military commandos/soldiers can't be risked at any cost. Thirdly, the changes of specifications of the remaining BPJ's were made by the Claimant without the consent of the purchaser which is not permissible as per A/T specification.

After considering the respective contentions/clarifications of the parties, I am of the view that the imposition of Liquidated

Damage worth of Rs. 5,01,60,825/- by the Respondent vide letter dated 26.06.2012 is legally justified."

19. Hence, what the learned Arbitrator has done is he has noted the contentions of the respondent, namely, that the material provided by the petitioner was rejected in the test, that the delivery period was re-fixed to facilitate the supplies but the petitioner failed to supply the material in the re- fixed delivery period, that changes in the specifications in the jackets were made by the petitioner without the consent of the respondent and that the jackets tested being of inferior quality could not be used as the lives of the paramilitary commandos/soldiers cannot be risked. Having noted the submissions of the respondent the learned Arbitrator has accepted the same. No reasons whatsoever are decipherable from the Award as to why the contentions of the petitioner have been rejected and the defence of the respondent accepted.

20. Section 31(3) of the Arbitration Act reads as follows:-

"Section 31(3) (3) The arbitral award shall state the reasons upon which it is based, unless--

(a) the parties have agreed that no reasons are to be given, or

(b) the award is an arbitral award on agreed terms under section

30."

21. Hence, unless agreed upon to the contrary by the parties, the award has to give reasons upon which it is based. The Supreme Court in Anand Brothers Private Limited vs. Union of India and Others, (2014) 9 SCC 212 held as follows:-

"9. Reference may also be made to The Arbitration and Conciliation Act, 1996 which has repealed the Arbitration Act of 1940 and which seeks to achieve the twin objectives of

obliging the Arbitral Tribunal to give reasons for its arbitral award and reducing the supervisory role of Courts in arbitration proceedings. Section 31(3) of the said Act obliges the arbitral tribunal to state the reasons upon which it is based unless the parties have agreed that no reasons be given or the arbitral award is based on consent of the parties. There is, therefore, a paradigm shift in the legal position under the new Act which prescribes a uniform requirement for the arbitrators to give reasons except in the two situations mentioned above. The change in the legal approach towards arbitration as an Alternative Dispute Resolution Mechanism is perceptible both in regard to the requirement of giving reasons and the scope of interference by the Court with arbitral awards. While in regard to requirement of giving reasons the law has brought in dimensions not found under the old Act, the scope of interference appears to be shrinking in its amplitude, no matter judicial pronouncements at time appear to be heading towards a more expansive approach, that may appear to some to be opening up areas for judicial review on newer grounds falling under the caption "Public Policy" appearing in Section 34 of the Act. We are referring to these developments for it is one of the well known canons of interpretation of statues that when an earlier enactment is truly ambiguous in that it is equally open to diverse meanings, the later enactment may in certain circumstances serve as the parliamentary exposition of the former.

........

14. It is trite that a finding can be both; a finding of fact or a finding of law. It may even be a finding on a mixed question of law and fact. In the case of a finding on a legal issue the Arbitrator may on facts that are proved or admitted explore his options and lay bare the process by which he arrives at any such finding. It is only when the conclusion is supported by reasons on which it is based that one can logically describe the process as tantamount to recording a finding. It is immaterial whether the reasons given in support of the conclusion are sound or

erroneous. That is because a conclusion supported by reasons would constitute a "finding" no matter the conclusion or the reasons in support of the same may themselves be erroneous on facts or in law. It may then be an erroneous finding but it would nonetheless be a finding. What is important is that a finding presupposes application of mind. Application of mind is best demonstrated by disclosure of the mind; mind in turn is best disclosed by recording reasons. That is the soul of every adjudicatory process which affects the rights of the parties. This is true also in the case of a finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 70."

22. The Supreme Court in the case of Som Datt Builders Ltd. Vs. State of Kerala, (2009) 10 SCC 259:-

"20. Section 31(3) mandates that the arbitral award shall state the reasons upon which it is based, unless - (a) the parties have agreed that no reasons are to be given or (b) the award is an arbitral award under Section 30. That the present case is not covered by Clauses (a) and (b) is not in dispute. In the circumstances, it was obligatory for the arbitral tribunal to state reasons in support of its award in respect of claim Nos. 1 and 4B. By legislative mandate, it is now essential for the arbitral tribunal to give reasons in support of the award. It is pertinent to notice here that Act, 1996 is based on UNCITRAL Model Law which has a provision of stating the reasons upon which the award is based.

21. In Union of India v. Mohan Lal Capoor, this Court said: (SCC p.854, para 28) "28. .........Reasons are the links between the materials on which certain conclusions are based and the actual conclusions."

22. In Woolcombers of India Ltd. v. Woolcombers Workers Union and Anr., this Court stated (SCC pp.320-21, para 5)

"5....The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authority on the alert and minimise the chances of unconscious infiltration of personal bias or unfairness in the conclusion. The authority will adduce reasons which will be regarded as fair and legitimate by a reasonable man and will discard irrelevant or extraneous considerations."

23. In S.N. Mukherjee v. Union of India, the Constitution Bench held that recording of reasons:

"(i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision making."

24. Learned senior counsel for the contractor referred to a decision of Delhi High Court in the case of Delhi Electric Supply Undertaking v. Victor Cable Industries Limited and submitted that where the arbitrator has referred to facts of the case and has noticed some reasoning which in view of Arbitrator was sufficient to arrive at conclusion for granting relief, award cannot be stated to be unreasoned. He also referred to yet another decision of Delhi High Court in the case of Kumar Construction Company v. Delhi Development Authority and Anr. wherein it has been observed that the Arbitrator is not expected to write elaborate judgment and where Arbitrator has noticed contentions of the counsel, it cannot be said that Arbitrator failed in stating reasons for the award.

25. The requirement of reasons in support of the award under Section 31(3) is not an empty formality. It guarantees fair and legitimate consideration of the controversy by the arbitral tribunal. It is true that arbitral tribunal is not expected to write

judgment like a court nor it is expected to give elaborate and detailed reasons in support of its finding/s but mere noticing the submissions of the parties or reference to documents is no substitute for reasons which the arbitral tribunal is obliged to give. Howsoever brief these may be, reasons must be indicated in the award as that would reflect thought process leading to a particular conclusion. To satisfy the requirement of Section 31(3), the reasons must be stated by the arbitral tribunal upon which the award is based; want of reasons would make such award legally flawed."

23. A perusal of the award shows that the learned arbitrator has in detail noted the various pleas of the petitioner as to why there has been a delay in supply of the jackets. Hindrances on the part of the respondent as claimed by the petitioner included the pleas that there has been a delay on the part of the respondent in supply of Pattern of' Camouflage Print, supply of Excise Duty Exemption Certificate and Custom Duty Exemption Certificate which was the responsibility of the respondent, delay in Inspection of Stores, delay in communicating the decisions on use of alternative material from an authorized supplier and delay in re-fixation of delivery period. It was also pleaded that the delay in supply of the jackets had been regularized vide letter dated 19.03.2014 by the respondent. No reason is given by the learned arbitrator as to why these contentions cannot be accepted or are without any merit. The learned arbitrator merely having noted them rejected the same. Learned Arbitrator then narrates the submissions of the respondent and accepts the same without giving any reasons. The award merely states that "I am satisfied with the submissions made by the respondent..." Reasons were to be given on consideration of the relevant material on record including the pleadings and evidence tendered by the parties. A mere recital of the

pleadings, evidence or arguments do not constitute reasons. It is quite clear that no cogent reasons are given in the award as to why the pleas of the petitioner on this issue are rejected other than narration of the pleadings/submissions of the respondent.

24. To the extent that the award rejects claim No.(vi) of the petitioner seeking to challenge the imposition of liquidation damages by the respondent, the award is clearly illegal and vitiated being contrary to Section 31(3) of the Act. Clearly, the Award to the extent it rejects claim No. (vi) by a non-speaking order stands vitiated.

25. Coming to the next submission of the learned counsel for the petitioner, namely, that the liquidated damages could not be imposed as the security deposits have been released, the contention is entirely misplaced. In case a claim for liquidated damages was maintainable by the respondent, they were entitled to deduct the said amount from the bills submitted by the petitioner at the time of making payments of the bills. The submission to the contrary is completely without any merit.

26. The last plea of the learned senior counsel for the petitioner was that the dues of the petitioner have been wrongly withheld and the petitioner is entitled to interest including interest under the Micro, Small and Medium Enterprises Development Act, 2006 at it was claimed that the petitioner is a small scale industry. The case of the petitioner was that large amounts were illegally withheld by the respondent from the bills of the petitioner. Reliance is placed on the response of the respondent to the petition filed by the petitioner under Sections 14 and 15 of the Act for termination of the mandate of the old Arbitrator where the respondent are said to have admitted that due

to paucity of budget only 90% payment i.e. Rs.4,64,68,890/- was released to the petitioner and all other amounts were directed to be withheld.

27. Learned Arbitrator on this plea of the petitioner noted as follows:-

"After perusal of the written submissions of the Respondent, it appears that the Claimant had failed to supply the material in terms of the specifications as agreed according to the terms of the A/T. Moreover A/T, is silent on payment of interest on delayed payment. Thus, aforesaid claim is rejected as there is no supporting rationale given by the Claimant to justify their claim."

28. Merely because the agreement between the parties was silent on payment of interest on the delayed payment said to have been received by the petitioner would not be a ground to deny compensation to the petitioner. As per the agreement the respondent were obliged to make payments as per the agreed schedule. Admittedly as can be seen from the pleadings as filed by the respondent before this court in response to the petition filed under Sections 14 and 15 of the Act by the petitioner, the respondent had prima facie withheld payments due without any rhyme or reason. In fact, a perusal of the order of this court dated 01.02.2017 in OMP (ENF)(COMM.) No.90/2016 would show that this court noted that the learned arbitrator in his interim award has directed the respondent to pay a sum of Rs.1,99,30, 225/- and that the petitioner is entitled to release of the same. A direction was passed to the respondent to make this necessary payment. Prima facie there is a delay in making payment of the dues payable to the petitioner. Despite the above facts, the only ground on which the learned Arbitrator has declined to grant any interest to the petitioner is that the agreement between the parties is silent on payment of interest on delayed payment. The reasoning of the learned Arbitrator is wholly contrary to the legal position.

29. Section 31(7) of the Act reads as follows:-

"31. Form and contents of arbitral award.-

xxx (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, and the whole or any pan of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment."

30. The Supreme Court in Mcdermott International Inc. Vs. Burn Standard Co.Ltd. And Others, (2006) 11 SCC 181 had noted as follows:-

"154. The power of the arbitrator to award interest for pre- award period, interest pendent lite and interest post-award period is not in dispute. Section 31(7)(a) provides that the arbitral tribunal may award interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which award is made, i.e., pre-award period. This, however, is subject to the agreement as regard the rate of interest on unpaid sum between the parties. The question as to whether interest would be paid on the whole or part of the amount or whether it should be awarded in the pre- award period would depend upon the facts and circumstances of each case. The arbitral tribunal in this behalf will have to exercise its discretion as regards (i) at what rate interest should be awarded; (ii) whether interest should be awarded on whole or part of the award money; and (iii) whether interest should be awarded for whole or any part of the pre-award period."

31. Hence, in the absence of an agreement between the parties, the learned Arbitral Tribunal may include interest on the sum of the Award at such rate as it deems reasonable for the period between the dates on which the cause of action arose till the date of the Award. The learned Arbitrator had powers to Award interest from the date the cause of action arose in favour of the petitioner till the date of receipt of payment for delayed payments to the petitioner. The agreement between the parties did not bar payment of interest. Section 31(7)(a) of the Act encompasses pre-reference period and pendente lite period. Further the Award also does not deal with the claim of the petitioner that it is entitled to interest under the provisions of MESE Act. The findings of the learned Arbitrator are wholly illegal and contrary to the settled legal position.

32. The Supreme Court in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 held as follows:

"In DDA v. R.S. Sharma and Co., MANU/SC/3624/2008 : (2008) 13 SCC 80, the Court summarized the law thus: "21. From the above decisions, the following principles emerge:

(a) An award, which is

(i) contrary to substantive provisions of law; or

(ii) the provisions of the Arbitration and Conciliation Act, 1996; or

(iii) against the terms of the respective contract; or

(iv) patently illegal; or

(v) prejudicial to the rights of the parties;

is open to interference by the court under Section 34(2) of the Act.

(b) The award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality.

(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.

(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.

..............."

33. In my opinion, the Award to the extent it deals with issues No. 5 and 7 i.e. relating to interest is wholly contrary to the statutory provisions of the Act. It is also contrary to the fundamental policy of Indian Law and to that extent stands vitiated being patently illegal.

34. Other than the above issues, learned senior counsel for the petitioner rightfully did not press the other components of the Award.

35. Accordingly, the Award to the extent it deals with issues No. 5 to 7 stands vitiated and is set aside. The petitioner is granted liberty to take steps for fresh adjudication on these issues as per law.

(JAYANT NATH) JUDGE AUGUST 21, 2017/rb/n/v