Delhi High Court
India Tourism Development ... vs M/S Cp & Associate Pvt. Ltd & Ors. on 3 September, 2019
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 5th July, 2019
Pronounced on:3rd September, 2019
+ O.M.P. (COMM) 252/2019, I.A. 8852/2019 & I.A. 8853/2019
INDIA TOURISM DEVELOPMENT CORPORATION ..... Petitioner
Through: Mr. Sangram Patnaik, Advocate for
Mr. Ratish Kumar, Advocate.
versus
M/S CP & ASSOCIATE PVT. LTD & ORS. ..... Respondents
Through: Mr. Sayant Lodha, Advocate with Ms.
Sanjana Saddy, Advocate for
Respondent Nos. 1 and 2.
Mr. Pawan Mathur, Standing Counsel
for DDA.
Reserved on: 9th July, 2019
Pronounced on: 3rd September, 2019
+ O.M.P. (COMM) 257/2019, I.A. 9054/2019 & I.A. 9053/2019
INDIA TOURISM DEVELOPMENT CORPORATION ..... Petitioner
Through: Mr. Sangram Patnaik
Ms.Swyamsidha, Mr. Rajiv Gupta
and Mr. Jayant Goyal, Advs. along
with Mr. Manjit Singh and Mr. Anil,
ARs of Petitioner.
versus
M/S CP & ASSOCIATES & ORS. ..... Respondents
Through: Mr. Sanjay Lodha and Ms.Sanjana
Saddy, Advs. for R-1 & 2.
Mr. Pawan Mathur, Adv. for Standing
Counsel for DDA.
O.M.P. (COMM.) 252/2019 & O.M.P. (COMM.) 257/2019 Page 1 of 23
CORAM: JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J
1. These petitions have been filed by the petitioner under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as „the Act‟)
challenging the Arbitral Award dated 6th February 2019 in OMP (Comm)
257/2019 and the Arbitral Award dated 5th February 2019 in OMP (Comm)
No. 252/2019.
2. The facts and questions of law raised in both the petitions are nearly
identical, with few material differences as shown in the following table:
Basis OMP (Comm) 257/2019 OMP (Comm) 252/2019
1. Details of LOI No. GM (Engg.)/ LOI No. GM (Engg.)/
Letter of Intent. CWG/VK-MIG/10, dated, CWG/VK-HIG/10, dated,
12th February 2010, for an 12th February 2010, for an
amount of Rs. 2,46,92,500/- amount of Rs. 3,14,52,445/-
2. Details of Work Order No. GM Work Order No. GM
Work Order. (Engg.)/ CWG/VK-MIG/10, (Engg.)/ CWG/VK-HIG/10,
dated, 19th February 2010, dated, 19th February 2010,
for an amount of Rs. for an amount of Rs.
2,46,92,500/- 3,14,52,445/-
Date of the 6th February 2019 5th February 2019.
Award.
Looking into the commonality in facts and grounds of challenge a common
order is being passed.
Brief Facts [Common]:
3. Petitioner- ITDC, is a Government of India undertaking inter alia
involved in the progressive development, promotion and expansion of
tourism in India. Respondent No.1- M/s C.P. & Associates Pvt. Ltd. is a
company carrying on the business of Real Estate development and
manufacturing furniture. Respondent No. 2- M/s India Export Today (IET),
is also engaged in the business of manufacturing and supply of furniture and
Respondent No. 3 is the Delhi Development Authority (DDA).
4. During the Commonwealth Games 2010, DDA assigned the work of
furnishing flats at Vasant Kunj, to the Petitioner vide Memorandum of
Understanding (MoU) dated 14th July 2010. The Petitioner, in turn, issued a
Notice Inviting Tender (NIT) for „Supplying Furniture for DDA Mega
Housing Project, Behind Pocket D6 and Pocket - D6 Vasant Kunj,
Akshardham, New Delhi (For Commonwealth Games 2010). Respondent
No.1 bid for the tender and on being declared the successful bidder was
awarded the abovementioned Work Order dated 19th February 2010. Before
issuance of the Work Order, a Letter of Intent dated 12th February 2010 was
also issued to Respondent No.1. The formal agreement dated 6th July 2010,
was executed between the parties with a stipulation that the NIT, Letter of
Intent and the Work Order along with certain other documents shall be read
and construed as part of this agreement. As per the terms and conditions of
Work Order, the work was to be completed on 18th July 2010.
5. Due to certain issues between the parties, Respondent No.1 could not
supply the furniture within the period stipulated in the contract in order to
facilitate the Respondent to complete the contract, Petitioner granted an
extension and permitted Respondent No. 1 to sub-contract the work in
favour of Respondent No. 2. MoUs dated 31st July 2010 and 7th August
2010 to this effect were executed between Respondent No. 1 and 2 which
were witnessed by one of the officer of Petitioner. Petitioner, vide letter
dated 10th August 2010, granted an extension of time, to Respondent Nos. 1
and 2 for completion of contract up to 31st August 2010. In terms of the
aforesaid understanding between the parties, they continued to supply goods
to the Petitioner. However, vide letter dated 3rd September 2010, Petitioner
informed the Respondent Nos. 1 and 2 that it would not accept the goods
beyond 15th September 2010. Respondent No. 1 tried to conciliate and
convince the Petitioner to accept further supply of the furniture, but the
Petitioner did not agree. As a result, Respondent No. 1 sent a legal notice
dated 27th August 2012, invoking the arbitration clause. In compliance
thereof, Petitioner appointed Sh. A.K. Singhal, DG(W), CPWD (Retd.) as the
Sole Arbitrator (hereinafter 'the Arbitrator'), for adjudication of disputes
between the parties.
6. On 28th September 2012, learned Arbitrator entered upon reference.
Petitioner urged before the Arbitrator that since Respondent No. 2 is a party to
the MoU, he should also be made a party to the proceedings. On 24th October
2013, Respondent No. 2 filed an application for impleadment and the same was
allowed. During the arbitral proceedings, Petitioner objected to separate
Statement of Claims being filed by Respondent No. 1 and 2. The objection was
sustained and the Learned Arbitrator directed Respondent No. 2 to file a joint
Statement of Claim along with Respondent No. 1. On the basis of Pleadings of
the parties, learned Arbitrator summarized the issues for adjudicating the
disputes between the parties, as noted in the impugned award. The same reads
as follows: -
"(A) Recovery of liquidated damages due to delay in supply of
furniture.
(B) The Obligation of the Respondent towards the MoU
(Memorandum of Understanding) dated 07.07.2010 & dated
31.07.2010 which were entered into between M/s C. P. Associates
(the Claimant) through its Managing Director Sh. Chander Pal
Singh Sisodia and M/s IET (M/ s India Exports Today) through
Sh. Rajiv Kumar Saxena proprietor of M.s India Exports Today in
the presence of the officers of ITDC (India Tourism Development
Corporation Ltd.)
(C) Payment of the material (including the rent of the warehouses,
their watch & ward, expenditure on insurance etc.) which is lying
in the warehouses at Nangal Dewat adjoining the project site at
Vasant Kunj New Delhi. "
7. All the issues were decided in favour of the Respondent Nos. 1 and 2 and on
the basis of the findings on the aforesaid issues, the Arbitrator partly allowed
the claims of the Respondent Nos. 1 and 2. The Petitioner has challenged the
findings of the Arbitrator on issue nos. 1 and 2, on the grounds discussed
hereinafter.
Issue No. 1: Recovery of Liquidated Damages Due to Delay in Supply of
Furniture
Case of the Petitioner:
8. Petitioner was entitled to impose liquidated damages for the delay in
supply of material, as the tender was floated with a condition that time was
the essence of the contract. The supply of material was to commence after
three months and was to be completed within three to five months. The
period of three months, for the start of delivery was kept knowing fully well
that the materials to be supplied may require time for procurement and
manufacturing. Respondent No. 1 failed to adhere to the time schedule
stipulated under Clause 45 of the NIT and supplied the material only on 8th
June 2010. The supply was incomplete and many of the items mentioned in
the tender were still awaited. Several letters were written by the Petitioner
highlighting delay in supply. Since Respondent No. 1 was lagging behind
the delivery schedule, it entered into a MoU with Respondent No. 2 for the
supply of furniture. However, despite outsourcing/sub-contracting the work,
Respondent No. 1 failed to deliver the material as per the terms of the
agreement.
9. Petitioner refutes the allegation of Respondent No. 1 regarding the fixing
of responsibility on the Petitioner for the delay caused. It is contended that
since commonwealth games were in the offing, the date of 3rd September
2010 was kept as the cutoff date for supply of the material, which was
categorically intimated to Respondent No. 1, with the condition that
furniture which is not dispatched by the said date would not be accepted by
the Petitioner at the site. Counsel for the Petitioner contends that the
deductions on account of delay were legal and justified. In support of this
submission, he relied upon Section 73 and 74 of the Contract Act and argued
that in consonance with the law laid down by the Supreme Court in ONGC
v. Saw Pipes Ltd., (2003) 5 SCC 705, Petitioner was not required to prove
any loss to claim the liquidated damages.
Analysis and Findings on Issue No. 1:
10. Before dealing with the contentions of the Petitioner, it is necessary to
note clauses of the NIT that are relevant to decide Petitioner‟s contentions,
the same are reproduced hereunder:
"Cl.2 (NIT). The supply is to be completed within 3 to 5
months but delivery should commence after third month. The
commencement date of supply will be reckoned from the 7th
day after the day on which the Project Engineer issues the
written order to commence the work which includes supply of
Furniture and installation in individual flats of DDA in respective
tower and floors/flats in commonwealth Games Village near
Akshardham, Delhi.
Cl.18 (NIT). Compensation for delay Compensation for delay
shall be 2% of the value of Furniture delayed for the first
week and 3% for the subsequent week subject to maximum
of 15% of the total value of work."
11. In addition to the above, there are certain terms of the work order which
are also relevant and are reproduced hereunder:
"Completion: The supply is to be completed within 3 to 5 months but
delivery should commence after third month. The commencement
date of order will be reckoned from the 7th day after the day on which
the Project Engineer issues the written order i.e. dated 12/02/2010 to
commence the work which includes supply of Furniture and
installation in individual flats of DDA in respective tower and floors/
flats/ in Common Wealth Games village near Akshardham, Delhi.
xxx
Phasing of work: The Corporation may require the work to be
executed in phases as may be indicated nothing extra shall be payable
for supply/execution the work in phased as required and should the
exigencies of business demand temporary stoppage of work, the
supplier would not be allowed any increase in cost thereof. The site
may be handed over in phases. Nothing extra shall be payable on this
account. The completion period of work will remain the same.
The contractor/supplier shall be solely responsible for complying with
all provisions of EPF and mise provision Act, ESI Act other extent
labour laws including obtaining requisite labour licenses, related to
manpower engaged for this contract and in event of any Liability on
ITDC by virtue of its being principal employer due to failure of the
contractor/ supplier to comply with the said Acts, the contractor shall
indemnify and reimburse the amount payable by ITDC on this
account.
xxx
Compensation for delay: Compensation for delay shall be 2% of the
value of Furniture delayed for the first week and 3% for the
subsequent week subject to maximum of 15% of the total value of
work."
12. The relevant observations of the learned Arbitrator on the question of
delay are as under:
"33. I find that there is some ambiguity in the interpretation of
the clauses starting from the date of commencement. According
to the clause relating to the completion of supply/ work given in
the LOI, these two words i.e. work & supply ·are synonymous
and convey the same meaning and include the supply of
Furniture and installation of the same in individual flats of DDA
in respective MIG flats in Vasant Kunj new Delhi. Therefore the
work which was assigned to the Claimant by Respondent was
relating to the supply of Furniture installation of the same in
individual flats of DDA in respective towers of HIG flats in
Vasant Kunj New Delhi. Five months period was given for
completion of work.
34. Regarding the date of compensation of work it was specified
in the LOI I work order I NIT that the Commencement date will
be reckoned from the 7th day after the date on which the Project
Engineer issues written orders to commence the work.
Incidentally in this case first of all the Respondent issued letter of
Intent (LOI) vide its letter dated 12.02.2010 (Exh. R-1 page 13 of
CSF). After the issue of the LOI the Respondent issued work
order dated 19.02.2010 (Exh. R-1 page 4 of CSF). But it has been
observed that the Respondent i.e. Project Engineer did not issue
any letter regarding commencement of work. The claimant
submitted that at the most the date of issue of work order can be
considered as the date of issue of commencement letter and
accordingly 19.02.2010 should be the stipulated date of start &
18.07.2010 should be the stipulated of completion. After perusal
of LOI letter dated 12.02.2010 & work order dated 19.02.2010. I
find that in work order under the subhead "completion" (page 5
of CSF) the date of issuance of LOI i.e. 12.02.2010 has been
mentioned as the date of written order by Project Engineer to
commence the work. Therefore, I consider & decide that as per
the contract as per the contract 12.02.2010 should be considered
as date of issuance of letter of commencement and accordingly
19.02.2010 & 18.07.2010 should be the stipulated dates of start
of work & completion of work respectively. "
13. On the interpretation of Clauses, relevant observation of the Arbitrator
on this issue is as under:
"36. I also find that clause 45 of NIT prima facie cannot be
considered an independent clause in isolation to levy
compensation under clause 18 of NIT for any delay in not
following the schedule of supply of furniture specified in
clause 45 of NIT because there may be a case when the
Claimant fails to adhere to the prescribed schedule specified
in clause 45 of NIT but completes the work by 18.07.2010. In
such an eventuality the Respondent will not be in a position to
levy compensation for delay in not following the prescribed
schedule mentioned .in clause 45 of NIT because the Claimant
has fulfilled the provisions of clause 2 of the NIT and has
completed the work within the stipulated period. Similarly there
can another case where the Claimant has followed the schedule
of supply of furniture prescribed in clause 45 of NIT but fails to
complete the work by stipulated date of completion. In such an.
eventuality the Claimant will be liable for compensation for
delay under Clause 2 of the NIT for not completing the work
within stipulated period. Therefore it will be seen that clause 45
of NIT is not an independent clause & is related to clause 2 of
NIT. The decision to levy compensation or not to levy
compensation for not completing the work in time could be
taken under clause 2 of the NIT only and the amount of
compensation could be decided under Clause 18 of the NIT.
However, while arriving at the decision under clause 2 of NIT,
the performance of the Claimant 1 under clause 45 of NIT could
be considered by the competent authority of the Respondent. It
seems that Respondent was also of the same view while deciding
extension of the time (EOT) and levying Compensation/penalty/
liquidated damages @ 15% of the total contract value. If the
noted dated 03.11.2011, vide which officials of ITDC decided to
grant EOT to all the vendors with levy compensation/ penalty/
liquidated damages @ 15% of the total contract value, is perused
them, it would be seen that there is no mention o clause 45 of
NIT in the entire note. The compensation/ penalty/ liquidated
damages @ 15% of the total value under clause 18 of NIT have
been levied referring to clause 2 of the NIT only. Therefore the
contention of the Respondent that the compensation/ penalty/
liquidated damages @ 15 % of the total contract value has
been levied by referring the clause 45 of NIT is incorrect and
is simply after the Respondent."
14. Learned Arbitrator has considered the aforenoted clauses of the NIT and
concluded that Clause 45 is not an independent clause to levy compensation
for delay. Clause 2 of NIT is directly connected with Clause 18 because
Clause 2 covers the total period of five months as the delivery of furniture
was to commence after three months and was to be completed within three
to five months. On the premise of the aforenoted discussion and after due
consideration of the documents bought on record in the nature of letters,
correspondence, office notes, reports etc., the Arbitrator concluded that the
Petitioner was responsible for delay as it had failed to provide the site i.e. the
flats in various towers and without providing the same, the work of
installation of furniture could not have been carried out by the Respondents.
The learned Arbitrator has held that the levy of damages/compensation by
the Petitioner was illegal as the Petitioner has not strictly adhered to the
schedule as provided in the contract. From the reading of the aforesaid
observations, it becomes evident that the learned Arbitrator has considered
the evidence led by the parties on the question of delay and has concluded
that it was the Petitioner who was responsible for the delay due to failure in
handing over of flats on time to the Respondent. This is a pure finding of
fact which is based on evidence and cannot be said to be unreasonable or
perverse and ought not be interfered by this Court under Section 34 of the
Act. Moreover, Petitioner also could not prove that it has suffered any
damages due to delay in completion of work, which is the sine qua non for
claiming damages. In this context it is relevant to refer to the observations of
the learned arbitrator:
"Further during the oral argument & in its written submission
the Claimant has alleged that irrespective of the fact whether
the word used in the relevant clause i.e. clause. 18 of NIT of the
agreement is penalty or compensation or liquidated damages, as
a precondition precedent for imposition & recovery of any
damages thereof, the party seeking to impose/recover i.e.
Respondent has to plead the nature of loss suffered in its
pleadings and evidence. Assuming though denied that it was a
genuine pre-estimate of the damages provided in clause 18 of
NIT as alleged by the Respondent though denied by the
Claimant, even then the Respondent has to plead and show as
how and on what account the amount stipulated in clause 18 of
NIT was a genuine pre-estimate of damages. This has not been
done by the Respondent. Thus the alleged levy is not
sustainable legally also.
After perusal of arguments & submissions made by the parties,
I find that in this case time was the essence of contract. The
work was to be completed as per clause 2 of NIT and in case of
failure to adhere to the time schedule there was a provision of
calculation of compensation under clause 18 of NIT. In other
words the clause 18 of NIT provided for pre-estimate of
compensation in case of delay in completion of work. After
going through the judgments quoted by both the parties, I find
that first of all if any delay had taken place in the completion of
work, it was necessary for the Respondent to establish that the
Claimant was solely responsible for the delay After it was
established that Claimant was responsible for the delay then the
Respondent was to prove that it had suffered damages due to
alleged delay and only after the above two conditions were
fulfilled, the Respondent was entitled to claim damages which
were pre-estimated under clause 18 of NIT. I agree that in a
case where there is pre-estimate of damages, it is not essential
for the Respondent to prove the extent of damages actually
suffered and claimed."
15. Further, reference may be made to the judgment of Supreme Court in
Kailash Nath Associates v. DDA, (2015) 4 SCC 136, relevant portion of
which reads as under:
"43. On a conspectus of the above authorities, the law on
compensation for breach of contract under Section 74 can be
stated to be as follows:
43.1. Where a sum is named in a contract as a liquidated
amount payable by way of damages, the party complaining of a
breach can receive as reasonable compensation such liquidated
amount only if it is a genuine pre-estimate of damages fixed by
both parties and found to be such by the court. In other cases,
where a sum is named in a contract as a liquidated amount
payable by way of damages, only reasonable compensation can
be awarded not exceeding the amount so stated. Similarly, in
cases where the amount fixed is in the nature of penalty, only
reasonable compensation can be awarded not exceeding the
penalty so stated. In both cases, the liquidated amount or
penalty is the upper limit beyond which the court cannot grant
reasonable compensation.
43.2. Reasonable compensation will be fixed on well-known
principles that are applicable to the law of contract, which are to
be found inter alia in Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for
damage or loss caused by a breach of contract, damage or loss
caused is a sine qua non for the applicability of the section.
43.4. The section applies whether a person is a plaintiff or a
defendant in a suit.
43.5. The sum spoken of may already be paid or be payable in
future.
43.6. The expression "whether or not actual damage or loss
is proved to have been caused thereby" means that where it
is possible to prove actual damage or loss, such proof is not
dispensed with. It is only in cases where damage or loss is
difficult or impossible to prove that the liquidated amount
named in the contract, if a genuine pre-estimate of damage
or loss, can be awarded."
Issue No. 2: Obligation of the Petitioner under the MoU dated 7th July
2010 and 31st July 2010 executed between the Respondent Nos. 1 and 2
16. The Petitioner challenges the findings of the arbitral award on the above
issue by contending that the MoU executed between Respondent Nos. 1 and
2 is a bipartite agreement. The Arbitrator despite taking note of the above
contention wrongly fixed the liabilities arising under the said MoU on the
Petitioner. He submits that the Petitioner‟s official signed the document
only as a witness, in their personal capacity and the same are not binding on
the Petitioner. Merely, witnessing an agreement by an officer does not
render Petitioner liable for the rights and obligations arising therefrom.
Petitioner also relies upon the judgment of the Supreme Court in Balkrishna
S. Dalwale (dead) By Lrs v. Vitabai C. Rathod (dead) by Lrs, (2010) 13
SCC 291, to contend that merely because an officer of the Petitioner has
signed the MoU as a witness, it would not make the Petitioner a party to the
MoU.
Analysis and Findings on Issue No. 2:
17. The learned Arbitrator has held that the Co-Claimant/Respondent No. 2
should be paid as per the rates contained in the agreement between Petitioner
and Respondent No. 1 so that Respondent No. 2 is not affected.
18. The contentions raised by the Petitioner, are contrary to the stand taken
before the arbitral proceedings. During the arbitral proceedings, Respondent
No. 1 contended that the MoU between Respondent No. 1 and 2 (dated 7th
July 2010 and 31st July 2010) were executed at the instance of the Petitioner
and in the presence of its official. The MoU was also signed by the official
of the Petitioner and in terms of Clause (b), Respondent No. 2 was
authorized to receive payment from Petitioner for the supply on behalf of
Respondent No. 1. Further, under Clause (c) of the MoU, Respondent No. 2
was to ensure the supply of items within a scheduled period as per the
specifications contained in the supply order dated 31st July 2010. No such
objection was raised before the Arbitrator and on the contrary, Respondent
No. 2 was impleaded in the arbitral proceedings as a Co-Claimant, at the
instance of the Petitioner. Thus, it transpires that Petitioner had in fact
consented to the inclusion of Respondent No. 2 in the arbitral proceedings,
which is evident from the pleadings filed by the Petitioner. In para 2 of the
preliminary objection/submissions of the reply filed by the Petitioner before
the Arbitral Tribunal, an objection was taken regarding non-joinder of
parties on the ground that Respondent No. 2 is a necessary and a proper
party. Besides, it has also been noted in the award that the Competent
Authority of the Petitioner had written letters dated 28th December 2012
seeking inclusion of Respondent No. 2 in the arbitral proceedings. In this
regard, the following documents are necessary to be noted:
"Para 2 of the preliminary objections/ submissions in the reply
filed by the petitioner herein to the claim filed by the Respondent
No.1 herein before the Ld. Arbitrator wherein while objections to
the claim of the respondent No. 1, it was submitted on behalf of
the petitioner herein that the said claim was bad for the non-
joinder of parties as much as India Exports (Respondent No.2
herein) had not been made a party despite the fact that claimant
has entered into MOUs dated 31.07.2010 with India Exports
Today and India Exports Today had filed claim before the
Arbitrator claiming the amounts in this regard. [Pg. 77 @ 78,
Index IV, Petition 1 and Pg. 79 @ 80, Index IV, Petition 2]
Recitals to the awards dated 05.02.2019 and 06.02.2019, that
clearly record that the competent authority of the petitioner
herein had written letters as far back as on 28.12.2012 seeking
inclusion of the Respondent No.2 in the arbitral proceedings as a
party to the same [illustratively Pg. 108-111, Index IV, Petition
1 and Pg. 110-113, Index IV, Petition 2]"
19. It is also apposite to note that in a judgment passed by the Co-ordinate
Bench of this Court in India Tourism Development Corporation v. CP
Associates Pvt. Ltd., OMP (COMM) 39/2019 & OMP (COMM) 40/2019
dated 13th March 2019, dealing with the challenge to an arbitral award
between the same parties as in the present case, a similar objection was
considered and rejected.
20. There is another reason why the contention of the Petitioner is without
any merit. Section 7 of the Act reads as under:
"7. Arbitration agreement.--(1) In this Part, "arbitration
agreement" means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which
may arise between them in respect of a defined legal
relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means
of telecommunication [including communication through
electronic means] which provide a record of the
agreement;
or
(c) an exchange of statements of claim and defence in
which the existence of the agreement is alleged by one
party and not denied by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract."
21. An Arbitration Agreement means an agreement in writing if it is
contained in an exchange of letters, telex, telegrams or other means of
telecommunications which provides a record of the Agreement. It can also
be by way of an exchange of statement of claim and defence in which the
existence of the agreement is alleged by one party and not denied by the
other. The present case would fall within the ambit of Section 7 (4) (b) and
(c) of the Act. During the course of the arbitration proceedings held on 30th
August 2016, Respondent Nos. 1 and 2 submitted a consent letter dated 16th
July 2016 for Arbitration of disputes regarding payment regarding CWG
Contract/Work Orders of Respondent No. 1 and MoU with Respondent No.
2. Vide this letter, both the parties declared and agreed that Respondent No.
2 can pursue its claims against the MoU, purchase order and authorization
letters with Petitioner. The said consent letter was taken on record by the
learned Arbitrator. Then, during the hearing held on 1st May 2017, it was
decided with the consent of the Respondent Nos. 1 and 2 and the Petitioner
that as the contract agreement was only with Respondent No. 1, both the
Respondents shall submit a "joint statement of claims" by both the parties.
However, the claims of Respondent Nos. 1 and 2 were treated as separate
claims to be pleaded by each party individually. Therefore, the objection of
Petitioner that Respondent No. 2 could not have pursued its claims before
the arbitral proceedings for the work orders of Respondent No. 1 is not
sustainable. Petitioner had consented to the same and had given
unconditional and unqualified acceptance to the proceedings dated 30th
August 2016 and did not also raise any objection to the consent letter dated
16th July 2016. The learned Arbitrator taking note of the aforesaid stand of
the parties, determined the obligations of the Petitioner under the MoU dated
7th July 2010 and 31st July 2010. The learned Arbitrator has also considered
the documents and concluded that the senior officers of Petitioner were
involved in the signing of the agreement between the Respondents. Further,
Petitioner made payments directly to Respondent No. 2 on behalf of
Respondent No. 1, which exhibits the understanding between the parties
which is binding and subsisting. I therefore, do not find any ground or
reason to interfere with the aforesaid findings.
22. Before parting, I would also like to deal with the contention raised by the
learned counsel for the Petitioner that since the furniture was purchased for
Delhi Development Authority (DDA), it was necessary to implead them as a
party to the arbitration proceedings. I do not find any merit in the said
submission. The MoU between Petitioner and DDA specifically records as
under:
"11. Any dispute between ITDC, suppliers/contractors shall be
resolved by ITDC by employing a resilient mechanism, if same is
not resolved, this can be referred to arbitrator for arbitration.
ITDC shall defend the dispute properly before the arbitrator."
23. The dispute between parties was independent of the dispute between
Petitioner and DDA. The agreement between Petitioner and Respondents
contains an independent Arbitration Agreement, in terms of Clause 23 of the
NIT, which reads as under:
"23. Arbitration and Laws
Arbitration
Except where otherwise provided for in the Contract all
questions and disputes relating to the meaning of the
specifications. Designs, drawings and instructions herein before
mentioned and as to the quality of workmanship or materials
used on the Work or as to any other question, claim right, matter
or thing whatsoever in any way arising out of or relating to the
Contract, designs, drawings, specifications, estimates,
instructions, orders or these conditions or otherwise concerning
the Works, or execution or failure to execute the same whether
arising during the progress of the Work or after the completion
or abandonment thereof shall be referred to the sole arbitration
of the Chairman & Managing Director of the India Tourism
Development Corporation or any other person appointed by him.
There will be no objection if the arbitrator so appointed is an
employee of India Tourism Development Corporation and that he
had to deal with the matters to which the Contract relates and
that in the course of his duties as such he had expressed views on
all of the matters in dispute or difference. The arbitrator to whom
the matter is originally referred being transferred or vacating
this office or being unable to act for any reason, the Chairman
& Managing Director shall appoint another person to act as
arbitrator in accordance with the terms of the Contract. Such
person shall be entitled to proceed with the reference from the
stage at which it was left by his predecessor. It is also a term of
this Contract that no person other than a person appointed by the
Chairman & Managing Director, as aforesaid should act as
Arbitrator and if for any reason that is not possible the matter is
not to be referred to Arbitration at all. In all cases where the
amount of the claim in dispute is Rs.50,000 (Rupees fifty
thousand) and above, the Arbitrator shall give reasons for the
award."
24. Therefore, the DDA was not a necessary party in the arbitral proceedings
between Petitioner and Respondent Nos. 1 and 2. The challenge to the award
on this ground is untenable. This contention is therefore devoid of merit and
liable to be rejected. It is also pertinent to note that no such objection was
raised before the Arbitrator and Petitioner cannot now be permitted to raise
the same under Section 34 of the Act.
25. In the present petition, again DDA has been impleaded as a co-
respondent. Since the arbitral award has not been passed against DDA it is
not privy to the proceedings and thus, I am unable to understand, how the
Petitioner has sought to implead DDA as a party to the present proceeding,
without the leave of the court. The same is completely misconceived and
untenable and accordingly, Respondent No. 3 is deleted from the array of
parties and a Cost of Rs. 25,000/- is also imposed on the Petitioner, which
shall be paid to Delhi Development Authority within week from today in
both the petition.
26. Lastly, it needs to be noted that none of the grounds raised by the
Petitioner in the present petition or the note of submissions falls within the
scope of Section 34 of the Act. Its trite law that, Courts do not sit in appeal
over the findings given by the Arbitrator in an Arbitral Award. The scope of
interference by the Court has been well defined and has to be within
contours of Section 34 of the Act read with the judicial pronouncements of
the Supreme Court in Associate Builders v Delhi Development Authority
(2015) 3 SCC 49, WishwaMitter Bajaj v Shipra Estate Ltd. (2019) 256
DLT 42 (DB), McDermott International Inc. v. Burn Standard Co. Ltd.,
(2006) 11 SCC 181, P.C.L Suncon (JV) v N.H.A.I., 2015 SCC Online Del
13192, P.R. Shah Shares and Stock Brokers Pvt. Ltd. v B.H.H. Securities
Pvt Ltd., 2012 (1) SCC 594, Navodaya Mass Entertainment Limited v J.M.
Combines (2015) 5 SCC 698, outlining the scope of interference. In the
present case, the grounds urged do not call for any interference as the same
would amount to reviewing the merits of the disputes between the parties.
The findings of the Arbitrator cannot be said to be arbitrary, capricious or
perverse or patently illegal or such that would shock the conscience of the
Court. On this issue, the observation of the Supreme Court in Associate
Builder v. DDA 2015 3 SCC 49 are relevant, which read as under:
"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
[Very often an arbitrator is a lay person not necessarily trained in
law. Lord Mansfield, a famous English Judge, once advised a
high military officer in Jamaica who needed to act as a Judge as
follows: "General, you have a sound head, and a good heart; take
courage and you will do very well, in your occupation, in a court
of equity. My advice is, to make your decrees as your head and
your heart dictate, to hear both sides patiently, to decide with
firmness in the best manner you can; but be careful not to assign
your reasons, since your determination may be substantially
right, although your reasons may be very bad, or essentially
wrong".It is very important to bear this in mind when awards of
lay arbitrators are challenged]. 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: (2012) 1
SCC (Civ) 342], this Court held: (SCC pp. 601-02, para 21)
"21. A court does not sit in appeal over the award of an
Arbitral Tribunal by reassessing or reappreciating 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."
...
36. The third ground of public policy is if an award is against
justice or morality. These are two different concepts in law. An
award can be said to be against justice only when it shocks the
conscience of the court. An illustration of this can be given. A
claimant is content with restricting his claim, let us say to Rs 30
lakhs in a statement of claim before the arbitrator and at no point
does he seek to claim anything more. The arbitral award
ultimately awards him Rs 45 lakhs without any acceptable reason
or justification. Obviously, this would shock the conscience of
the court and the arbitral award would be liable to be set aside on
the ground that it is contrary to "justice".
...
56. ... ... As has been held above, the expression "justice" when
it comes to setting aside an award under the public policy ground
can only mean that an award shocks the conscience of the court.
It cannot possibly include what the court thinks is unjust on the
facts of a case for which it then seeks to substitute its view for
the arbitrator's view and does what it considers to be "justice".
With great respect to the Division Bench, the whole approach to
setting aside arbitral awards is incorrect. The Division Bench has
lost sight of the fact that it is not a first appellate court and cannot
interfere with errors of fact."
27. For the foregoing reasons, I do not find merit in the present petitions and
the same are dismissed with a cost of Rs. 25,000/- to be paid to Delhi State
Legal Services Authority in both the petitions. This cost is in addition to the
cost, to be paid to DDA for impleading them as a party.
28. Both the petitions are disposed of in the above terms.
SANJEEV NARULA, J.
September 03, 2019
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