Delhi High Court
Union Of India Through Dy. Chief ... vs B.S. Sangwan on 5 September, 2017
$~OS-39
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision:05.09.2017
+ O.M.P. (COMM) 235/2017 & IA Nos.6126-6127/2017
UNION OF INDIA THROUGH DY. CHIEF ENGINEER...Petitioner
Through Mr.N.Prashant Kumar Nair, Adv.
versus
B.S. SANGWAN ..... Respondent
Through Mr.S.W.Haider, Adv.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J. (ORAL)
IA No.6127/2017(exemption)
Allowed subject to all just exceptions.
O.M.P. (COMM) 235/2017 & IA No.6126/2017(stay)
1. The present petition is filed under section 34 of the Arbitration and
Conciliation Act, 1996 seeking to impugn the Award of the learned
Arbitrator dated 21.01.2017.
2. The respondent was awarded P.Way linking and other allied works
between Rewari to Rohtak section on 29.01.2009 for Rs.5,40,11,614/-.
Fifteen months‟ time was allowed for completion of work which was to
expire on 28.4.2010. Various extensions were given to the respondent. The
time for completion of the work was extended upto 31 months and the total
period for completion of the work became 46 months. The work was
completed on 05.12.2012. The essential case of the respondent is that under
compelling circumstances he was told by the respondent to deploy staff for
watch and ward of railway property which was not covered in the rates
provided in the agreement. It was urged that the area between Rohtak to
Rewari is notorious and theft prone area. Various instances of theft and
robbery have taken place and loss has been caused for which FIR has been
registered. It was the case of the respondent that in compliance of
instructions of the Chief Engineer an NS rate of Rs.70,000/- per block
section (approximately 8 km in length) per month for watch and ward was
prepared by the Deputy Chief Engineer and it was sent for approval to the
competent authority. On receipt of approval, the respondent started the work
as instructed by the petitioner. However, the petitioner also invited tenders
for the watch and ward of its property but the work was given to M/s.
Deepak Enterprises on 21.01.2012. The respondent was directed to hand
over inventories of the said work to the said agency. The inventories were
handed over to M/s. Deepak Enterprises on 31.3.2012.
3. Based on this background the respondent invoked the arbitration
clause. As the respondent did not appoint the arbitrator, a petition was filed
in this court for appointment of an Arbitrator. Vide order dated 12.2.2015 in
Arb.P.No.479/2014 this court appointed the Sole Arbitrator. Mr. Vinod Jain
(ADJ, Retd.).
4. Before the learned Arbitrator the respondent made three claims i.e.
Claim No.1 was for Rs.1,19,88,000/- for keeping watch and ward of railway
property round the clock by deputing adequate number of people. Claim
No.2 was for Rs.19,18,080/- for price variation clause on the above claim
No.1 for the period 30.4.2010 to 31.03.2012 calculated as per RBI Index.
Claim No.3 was for interest. The learned Arbitrator framed the following
issues:-
1. Whether the claimant is entitled for the amounts claimed as alleged?
OPC
2. Whether the claimant is entitled for interest, if so, at what rate and
for what period? OPC
3. Whether the claim of the claimant is not maintainable due to
execution of supplementary agreement dated 06.05,2014? OPR
4. Relief.
5. A perusal of the Award shows that the same notes the evidence by
way of affidavit of the respondent Sh. B.S. Sangwan (CW1). The Award
concludes that he has justified that under the compulsion of circumstances,
he had to deploy staff for watch and ward not covered in the rates provided
in the agreement which was instructed to him. He further justified that on
instructions of the Chief Engineer a rate of Rs. 70,000/- per block section per
month for watch and ward was prepared by the Deputy Engineer, which was
vetted by the Chief Draftsman and justified by XEN on 06.10.2010. The
matter was sent for approval to the competent authority and that accordingly,
as instructed he deployed watch and ward staff on patrolling. Subsequently
when the tender was floated for the same work, the work was given to
Deepak Enterprises to whom the respondent was asked to handover charge.
The Award notes that the testimony of the respondent has not been seriously
assailed in cross-examination and gets full support and corroboration from
the documentary evidence. The Award also notes that the petitioner had led
the evidence of Sh. S.K. Garg/RW-1. However, the matter in issue pertained
to the period 2010-2012 when the concerned officer looking after the work
was the predecessor of Sh.S.K. Garg, namely, Sh. Naresh Chand, the then
XEN, Rohtak. There was no explanation as to why Sh. Naresh Chand was
not summoned for evidence. The learned Arbitrator concludes that the best
evidence has not been led by the petitioner and necessary inference can be
made against the petitioner and in favour of the respondent. The Award
hence accepted the version of the respondent that he deployed the watch
ward staff on the instructions of the petitioner.
6. The learned Arbitrator awarded a sum of Rs.1,19,88,000/- under claim
No.1 and of Rs.19,18,080/- under claim No.2. Interest on the amount @ 10%
per annum from the date of filing of the claim petition i.e. 12.5.2015 till the
date of the Award and @12% per annum from the date of the award till
realization was passed in favour of the respondent. Costs were also awarded
to the respondent.
7. I have heard learned counsel for the parties. Learned counsel for the
Petitioner has challenged the award. He has submitted as follows:-
(i) The contract stood discharged by way of a supplementary agreement
dated 6.5.2014 and subsequent payment of the final bill. The finding of the
learned Arbitrator that the said supplementary agreement is vitiated by
coercion is completely misplaced as there was a heavy burden of proof
against the respondent which the respondent failed to discharge.
(ii) The competent authority had rejected the proposed option for
deployment of watch and ward and there was no written agreement for the
same. Hence, no such payment could have been made to the respondent.
(iii) The respondent has failed to prove that he had executed the work for
watch and ward and no appropriate evidence in this regard was filed.
8. I will first deal with the submission of the learned counsel for the
petitioner relating to the contention that pursuant to execution of the
supplementary agreement dated 06.05.2014, no further claim of the
respondent survives.
9. The learned Arbitrator has concluded from the facts on record that the
said agreement dt. 06.05.2014 is illegal and invalid and cannot be binding
upon the respondent. The learned Arbitrator noted that the supplementary
agreement was executed on 6.5.2014 which states that the respondent has
received full payment of the final bill of Rs.57,66,376.54/- as full and final
settlement of his claim under the principal agreement. The Award notes that
this claim is false as the said payment of Rs.57,66,376.54/- was received
much after the supplementary agreement on 18.5.2014. The award also notes
that the security deposit of Rs.31,29,291/- and the earnest money of Rs.
35,84,291/- was paid to the respondent on 26.05.2014 well after execution of
the agreement. The FDR amount of Rs.4,50,000/- was released on
02.06.2014. Had there been no duress or coercion upon the respondent in
execution of the supplementary agreement, these payments would have been
released on execution of the supplementary agreement.
The award also notes that a perusal of the supplementary agreement
shows that it is on dotted lines which in normal course of business would not
have been the result of mutual agreement. It also notes that getting said
supplementary agreement executed seems to be the Modus operandi of the
respondent. The Award also notes that immediately after the so-called
supplementary agreement dated 6.5.2014, the respondent has on the next
date 7.5.2014 (Ex.CW1/8) and on 8.5.2014 (Ex.CW1/9) specifically
protested and mentioned about coercion to execute supplementary agreement
dated 6.5.2014. The award also notes that in cross-examination the
petitioners have not cross-examined the witnesses of the respondent on these
communications. Hence, the Award concludes that coercion is proved.
The learned Arbitrator has noted the judgment of the Supreme Court
in National Insurance Company Limited Vs. M/s Bhoghara Polyfab Pvt.
Ltd AIR 2009 SC 170 to come to a conclusion that the supplementary
agreement dated 06.05.2014 has been executed by the respondent under
coercion and does not bind the respondent.
10. I may look at some of the evidence relied upon by the learned
arbitrator. A perusal of the evidence by way of affidavit of Shri
B.S.Sangwan (CW1) would show that he has stated in his affidavit that he
was specifically told that unless he signs the final bill and supplementary
agreement in advance without protest, he will not get any payment which has
been pending for a long time. Under coercion, pressure and undue influence,
he signed the bill and supplementary agreement dated 06.05.2014 but
immediately thereafter on 07.05.2014 and 08.05.2014 (Ex.CW1/8 and
Ex.CW1/9) intimated the respondents about the grievance and requested for
payment of the claims.
A perusal of the cross-examination of the said witness (CW1) Shri
B.S.Sangwan would show that in his cross-examination that took place on
26.10.2016 not a single question has been asked about the execution of the
supplementary agreement dated 06.05.2014 or that it was executed
voluntarily etc.
11. The award has also noted Clause 9.8 of the Special Tender Conditions
and Instructions to Tenderer (Ex.RW1/3) whereby the respondent was
obliged to execute a supplementary agreement. The said Clause 9.8 reads as
follows:
"After the work is completed and taken over by the Railway as
per terms and conditions of the contract agreement or otherwise
concluded by the parties with mutual consent and full and final
payment is made by the Railway to the contractor for work
done under the contract the parties shall execute the
supplementary agreement annexed here to as Annexure-B."
(Emphasis supplied)."
Hence, it is obvious that it was mandatory on the part of the
respondent to execute the supplementary agreement after receiving full and
final payment. However, in the present case, the supplementary agreement
was got executed from the respondent while the payments were still not
released. It is noteworthy that the work was completed on 05.12.2012 but the
payments to the respondent were not released. Payments have been released
to the respondent almost one and a half years thereafter in May, 2014 after
execution of the supplementary agreement dated 06.05.2014.
12. Reference may be had to the judgment of the Supreme Court in
National Insurance Company Limited Vs. M/s Bhoghara Polyfab Pvt. Ltd.
(supra). The Supreme Court held as follows:
"25. In several insurance claim cases arising under
Consumer Protection Act, 1986, this Court has held that if a
complainant/ claimant satisfies the consumer forum that
discharge vouchers were obtained by fraud, coercion, undue
influence etc., they should be ignored, but if they were found
to be voluntary, the claimant will be bound by it resulting in
rejection of complaint. In United India Insurance Co. Ltd., v.
Ajmer Singh Cotton & General Mills, AIR1999SC3027, this
Court held:
The mere execution of the discharge voucher would not
always deprive the consumer from preferring claim with
respect to the deficiency in service or consequential benefits
arising out of the amount paid in default of the service
rendered. Despite execution of the discharge voucher, the
consumer may be in a position to satisfy the Tribunal or the
Commission under the Act that such discharge voucher or
receipt had been obtained from him under the circumstances
which can be termed as fraudulent or exercise of undue
influence or by misrepresentation or the like. If in a given
case the consumer satisfies the authority under the Act that
the discharge voucher was obtained by fraud,
misrepresentation, undue influence or the like, coercive
bargaining compelled by circumstances, the authority before
whom the complaint is made would be justified in granting
appropriate relief.
In the instant cases the discharge vouchers were
admittedly executed voluntarily and the complainants had not
alleged their execution under fraud, undue influence,
misrepresentation or the like. In the absence of pleadings and
evidence the State Commission was justified in dismissing
their complaints.
The above principle was followed and reiterated in National
Insurance Co. Ltd. v. Nipha Exports (P) Ltd. : (2006)8SCC156
and National Insurance Co. Ltd., v. Sehtia
Shoes:(2008)5SCC400 . It will also not be out of place to refer
to what this Court had said in Central Inland Water Transport
Corporation Ltd. v. Brojo Nath Ganguly: (1986)IILLJ171SC in
a different context (not intended to apply to commercial
transactions):
(This) principle is that the courts will not enforce and will,
when called upon to do so, strike down an unfair and
unreasonable contract, or an unfair and unreasonable clause in a
contract, entered into between parties who are not equal in
bargaining power. It is difficult to give an exhaustive list of all
bargains of this type. No court can visualize the different
situations which can arise in the affairs of men. One can only
attempt to give some illustrations. For instance, the above
principle will apply where the inequality of bargaining power is
the result of the great disparity in the economic strength of the
contracting parties. It will apply where the inequality is the
result of circumstances, whether of the creation of the parties or
not. It will apply to situations in which the weaker party is in a
position in which he can obtain goods or services or means of
livelihood only upon the terms imposed by the stronger party or
go without them. It will also apply where a man has no choice,
or rather no meaningful choice, but to give his assent to a
contract or to sign on the dotted line in a prescribed or standard
form or to accept a set of rules as part of the contract, however
unfair, unreasonable and unconscionable a clause in that
contract or form or rules may be. This principle, however, will
not apply where the bargaining power of the contracting parties
is equal or almost equal. This principle may not apply where
both parties are businessmen and the contract is a commercial
transaction. In today's complex world of giant corporations with
their vast infra- structural organizations and with the State
through its instrumentalities and agencies entering into almost
every branch of industry and commerce, there can be myriad
situations which result in unfair and unreasonable bargains
between parties possessing wholly disproportionate and unequal
bargaining power. These cases can neither be enumerated nor
fully illustrated. The court must judge each case on its own facts
and circumstances. [emphasis supplied]"
13. Hence based on the evidence on record, the finding recorded by the
learned arbitrator that the supplementary agreement was executed under
coercion and duress and cannot bind the respondent is a plausible finding
based on evidence on record and cannot be set aside as pleaded.
14. I will now deal with the second and third contention of the learned
counsel for the petitioner i.e. about absence of a written agreement and proof
of having executed the work. The learned Arbitrator has noted the various
communications between the petitioner and the respondent with regard to the
work said to have been done by the respondent. Reference was made to
documents on record i.e. Ex.CW1/15 being copy of letter dated 1.10.2010
written to Deputy Chief Engineer on the subject of theft of railway material
between Rohtak and Rewari suggesting that the respondent may be asked to
do the job, Ex.CW1/16 being letter dated 4.10.2010, Ex.CW1/18 being letter
dated 9.11.2010 written to Deputy Chief Engineer, Northern Railway, New
Delhi for sanctioning of NS item at the proposed rates based upon accepted
rates in the unit of Deputy Chief Engineer. Ex.CW1/19 being letter dated
23.12.2010 specifically mentioning that the Chief Engineer, Northern
Railway had accorded administrative approval to process the NS item i.e.
watch and ward around the clock, Ex.CW1/20 being the copy of office note
for necessary administrative approval for the NS item. Based on these
documents and other evidence, the learned Arbitrator recorded a finding of
fact that the documentary evidence proved the case of the
claimant/respondent that on instructions of the petitioner the watch and ward
work was done by the respondent for protection of railway property from
theft which was not in the original agreement. The learned Arbitrator
concluded that the respondent was orally as well as in writing asked to
deploy his men for watch and ward to avoid theft of railway property and
hence, the petitioner has to pay for the same.
15. I may see some of the evidence led by the respondent/claimant
especially the documents relied up on by the learned Arbitrator. Ex.CW1/14
is a communication dated 29.09.2010 written by the respondent pointing out
to the petitioner that many incidents of theft of fittings are taking place.
Similarly, Ex.CW1/15 is the communication dated 3.10.2010 from
XEN/C/11/ROK of the petitioner noting that the entire section between
Rewari to Rohtak is theft prone and sufficient watch men are required to be
deputed and that the contractor may be asked to do the job. Ex.CW-1/17 is a
note prepared by the officers of the petitioner, relevant portion of which
reads as follows:
SE/C/P. way & XEN/C-II/ROK have also certified that
the theft of P.Way material & fittings and fastenings is going
on and a FIR for the same has been logged in GRP, Police
station at Rewari. Similar letters have been written to
SHO/Police Chowki, Dujana (Jhajjar).
Keeping the above facts in view it is proposed to engage
chowkidars etc. from the existing agency to avoid theft of
railway property. It is proposed to process NS item for the
same based on accepted rates of same type of item vide
Dy.CE/C/PTK letter No.33-Acs/Dy.CE/C/PTK dated
16.08.10 for the work of P.Way linking in Bharoli yard in
c/with Jallandhar- Pathankot -Jammu Tawi doubling in the
existing contract. No undue benefit has been given to the
contractor due to this NS item.
The document is signed by various officers of the petitioner.
16. Similarly, a note put up by the officers for obtaining necessary
sanction was Ex.CW1/20. This note has been signed on 26.10.2016, which
reads as follows:
"PP-1
Sub:- Sanction of N.S. item for the work "P. Way linking and
other allied works such as Assembling, laying, linking &
dismantling of BG Railway tracks, points & crossings, traps,
leading of P.Way material & PRC sleepers, putting of 65 mm
machine crushed stone ballast etc. between Rewari -Rohtak
including station yards in connection with Rewari - Rohtak
New line.
The NS has been prepared on the basis of accepted rates,
the same duly signed by all concerned & technically checked
are being processed. The proper justification is also placed at
SN-9. A copy of agreement is placed at SN-1. It is also
certified that already one no. N.S. rate amounting to
Rs.21,60,600/- has been sanctioned by CE/C/NC after finance
vetting. The details are as given below:-
SN. Description Qty. Unit Rate Amount Remarks
Rs. irrespective of
Ps +ve or -ve
Rs.
1. Keeping watch 6x4= Per Rs. Rs.16,80,000/ N.S. being
& Block block 70000 processed
ward of newly months section for finance
linked track/T- per vetting &
out month the same
round the clock shall be
by deputing sanctioned
adequate no. of by
patrol men after CE/C/NC
the linking and after
two round finance
packing of concurrenc
section e
and upto CRS
inspection etc
CE/C/NC is requested to accord Administrative approval
for the above N.S.item, so that case may be processed for
Finance vetting.
Dy.FA & CAO/C/Admn. is requested to kindly vet the
NS Item amounting to Rs.16,80,000/-at the earliest.
It is also certified that:-
1. After inclusion of the variation, the revised face value of
the contract does not exceed the powers of the original tender
accepting authority.
2. Variations proposed are bare minimum and the same
does not lead to completely change the scope, character and
purpose of the original contract.
3. Tender does not vitiate after incorporating the proposed
variations.
4. No undue favour has been accorded to the contractor
after the proposed Non- Schedule item,
5. Proposed N.S. item is covered within the sanctioned
estimate.
6. The proposed N.S. item does not contain any item which
is derived from banned/restricted LAR."
17. The respondent has filed the claim for watch and ward staff deployed
stating that it was on the directions of the petitioner and has relied on various
evidence including the above documents. During the course of arguments
before this court, the court had pointed out to learned counsel for the
respondent that it would not be possible for the respondent to claim payment
for the work done in the absence of formal contract with petitioner, which is
a Government Organization. The learned counsel for the respondent had
pointed out that it is the norm in Railways that number of additional works
are done by the contractors on oral instructions of the officers of the
petitioner and the formal sanctions comes at a much later stage. It was
pointed out that even in the present contract number of additional items were
done on oral instructions of the officers of the petitioner. He submits that the
work was completed on 05.12.2012. However, the sanction of all these
additional items done on oral instructions was given in a note dated
27.08.2014. The said note reads as follows:
"Notes:
1. Total items 70 (Seventy) only i.e. 70 (Seventy) only 61
(Sixty one) items under Group „B‟ non-schedule items &
09(Nine) only under Group ASOR - 1996 items.
2. All items and conditions of agreement No.74-
W/6/159/WA/TKJ dated 01.07.2009 will remain the same.
3. The amount of agreement will increase/decrease from
Rs.6,84,80,133.08 after availing 2.71% unconditional rebate on
all items to Rs.7,16,85,828.52 after 2.71% rebate.
4. No claim decease/increase quantities.
Signature of the contractor/s (Rakesh Yadav)
M/s B.S.Sangwan Dy.Chief Engineer/Const.
4, G.F. Harry Plaza Tilak Bridge, New Delhi
Near HDFC Bank, for and on behalf of the
Subhash Chowk, Sonepat President of India
(Haryana)
Executive Engineer/
Const, Northern
Railway, Rohtak.
Rates & quantities
Technically checked.
(SSE/C/Estt.TKJ) Rates Checked.
WA/C/TKJ OS/W/C/TKJ"
The above note is signed on 27.02.2014 much after the work was
completed on 05.12.2012 and the amount of the contract, entered into with
the respondent on 01.07.2009 is increased to Rs.7,16,85,828/-.
The respondent had submitted that these items of watch and ward had
to be approved along with the above note but it appears that they have been
left out inadvertently and thereafter the petitioner has taken no steps to get
the work subject matter of this award formally approved. There is clearly
merit in the contention of the respondent.
18. I have also perused the evidence by way of affidavit of the respondent
and his cross-examination. There is nothing in the cross-examination of the
respondent to doubt the veracity of the case of the respondent.
19. Based on the above material on record, namely, the evidence of
witnesses and the documents, the learned Arbitrator has come to a
conclusion that the factum of deployment of watch and ward by the
respondents to avoid theft of railway property on the instructions of the
petitioner is amply proved.
20. In the above context, reference may be had to the judgment of the
Supreme Court in the case of Associate Builders v. Delhi Development
Authority, (2015) 3 SCC 49 where the Court held as follows:
"31...................The third juristic principle is that a decision
which is perverse or so irrational that no reasonable person
would have arrived at the same is important and requires
some degree of explanation. It is settled law that where-
1. a finding is based on no evidence, or
2. an arbitral tribunal takes into account something
irrelevant to the decision which it arrives at; or
3. ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse.
32. A good working test of perversity is contained in two
judgments. In H.B. Gandhi, Excise and Taxation Officer-
cum-Assessing Authority v. Gopi Nath & Sons,1992 Supp
(2) SCC 312 at p.317, it was held:
7. .....It is, no doubt, true that if a finding of fact is
arrived at by ignoring or excluding relevant
material or by taking into consideration
irrelevant material or if the finding so
outrageously defies logic as to suffer from the vice
of irrationality incurring the blame of being
perverse, then, the finding is rendered infirm in
law.
In Kuldeep Singh v. Commr. of Police, (1999) 2 SCC 10 at para
10, it was held:
10. A broad distinction has, therefore, to be
maintained between the decisions which are
perverse and those which are not. If a decision is
arrived at on no evidence or evidence which is
thoroughly unreliable and no reasonable person
would act upon it, the order would be perverse.
But if there is some evidence on record which is
acceptable and which could be relied upon,
howsoever compendious it may be, the
conclusions would not be treated as perverse and
the findings would not be interfered with."
33. It must clearly be understood that when a court is applying
the "public policy" test to an arbitration award, it does not act
as a court of appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate
master of the quantity and quality of evidence to be relied upon
when he delivers his arbitral award. Thus an award based on
little evidence or on evidence which does not measure up in
quality to a trained legal mind would not be held to be invalid
on this score. Once it is found that the arbitrators approach is
not arbitrary or capricious, then he is the last word on facts. In
P.R.Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities
(P) Ltd.(2012) 1 SCC 594, this Court held:
21. A court does not sit in appeal over the award of
an Arbitral Tribunal by reassessing or re-
appreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal has
examined the facts and held that both the second
respondent and the appellant are liable. The case as
put forward by the first respondent has been
accepted. Even the minority view was that the
second respondent was liable as claimed by the
first respondent, but the appellant was not liable
only on the ground that the arbitrators appointed
by the Stock Exchange under Bye-law 248, in a
claim against a non-member, had no jurisdiction to
decide a claim against another member. The
finding of the majority is that the appellant did the
transaction in the name of the second respondent
and is therefore, liable along with the second
respondent. Therefore, in the absence of any
ground under Section 34(2) of the Act, it is not
possible to re-examine the facts to find out whether
a different decision can be arrived at.
................"
21. Essentially the petitioner seeks to challenge the findings of fact
recorded by the learned Arbitrator about the fact that the respondent has
done the work for which compensation is being claimed on the instructions
of the officers of the petitioner. The conclusion in the award are a plausible
conclusion based on evidence on record.
22. There is no merit in the petition. The same is dismissed.
(JAYANT NATH)
JUDGE
SEPTEMBER 05, 2017
n
