Delhi High Court
New Delhi Municipal Council vs Ames Impex Electricals Pvt Ltd on 18 February, 2020
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 06.02.2020
Pronounced on: 18.02.2020
+ O.M.P. (COMM) 5/2019
AMES IMPEX ELECTRICALS PVT LTD THROUGH ITS
DIRECTOR ..... Petitioner
Through Mr.Vikas Mehta with Mr.Apoorv
Khator, Advocates
versus
NEW DELHI MUNICIPAL COUNCIL ..... Respondent
Through Mr.Yoginder Handoo with
Mr.Nishant Kumar, Advocates for
NDMC.
+ O.M.P. (COMM) 22/2019 and I.A. 530/2019 (stay)
NEW DELHI MUNICIPAL COUNCIL ..... Petitioner
Through Mr.Vikas Mehta with Mr.Apoorv
Khator, Advocates
versus
AMES IMPEX ELECTRICALS PVT LTD ..... Respondent
Through Mr.Yoginder Handoo with
Mr.Nishant Kumar, Advocates for
NDMC.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGMENT
1. O.M.P. (COMM) 5/2019 has been filed by Ames Impex Electricals
Pvt. Ltd. under Section 34 of the Arbitration and Conciliation Act, 1996
(„Act‟) for setting aside the Arbitral Award dated 06.09.2018. Ames
Impex Electricals Pvt. Ltd. is referred to as petitioner hereinafter.
O.M.P. (COMM) 22/2019 is a petition filed under Section 34 of the Act
by New Delhi Municipal Council („NDMC‟) against the same Award.
NDMC is being referred to as the respondent hereinafter. Since both the
petitions have been filed challenging the same Award, they are being
disposed of by a common judgment.
2. Shorn of unnecessary details, the brief facts to decide the present
cross petitions are that the respondent floated two tenders bearing
nos.9/2009-10/EE(S-I) for supply of 1000 KVA Dry Type Cars Rasin
Transformers for indoor duty application and the other being tender no.
4/2009-10/EE(S-I) for supply of 1600 KVA Dry Type Cars Rasin
Transformers for indoor duty application.
3. The petitioner was declared as a successful bidder in both the
tenders. A pre-bid earnest money deposit was made by the petitioner
with respect to both the tenders, which was to be returned after
completion of supply. Respondent issued a purchase order dated
09.10.2009 with respect to the first tender for supply of 57 transformers
with a total value being Rs.4,97,61,000/-. The Supply Order was
accepted by the petitioner vide acceptance report dated 13.10.2009.
Another purchase order was issued on 03.03.2010 for supply of 37
transformers against the second tender for a total value of
Rs.4,66,20,000/-. The petitioner accepted the order by an acceptance
report dated 08.03.2010.
4. It is the case of the petitioner that in both the Supply Orders, the
scope of work was restricted only to supply of the transformers after they
were duly tested by the respondent / agencies appointed by the
respondent. The scope of work did not include maintenance, erection,
commissioning, etc. The petitioner was to be discharged from its
obligations the moment the supplies were complete.
5. It is the further case of the petitioner that the Supply Orders were
for "in door duty transformers" i.e. the transformers were meant to be
kept in-doors with proper channel for ventilation and were manufactured
strictly as per the said specification. As per clause 10 of the terms and
conditions of the Supply Orders, the respondent was required to make
100% payment within 30 days of receipt of the supply. Petitioner was to
submit duly stamped and pre-receipted bills. Under clause 11, petitioner
was required to furnish a Performance Bank Guarantee of 5% of the total
value of the work, and the same was accordingly furnished by the
petitioner with respect to both the Supply Orders. As per the petitioner,
the PBGs amounting to Rs.55,06,856/- have not been returned till date.
Even the earnest money deposit had not been returned by the respondent
though supply was complete long ago.
6. Petitioner further avers that the transformers were tested and
inspected by a third party agency M/s. RITES in presence of Engineers of
the respondent. Transformers under both the Supply Orders were
successfully tested at ERDA Baroda and in fact one from each lot of
supply was picked up randomly by the inspection team of the respondent
and was tested as HEAT RUN Type. It is only when the respondent had
put the transformers to such vigorous testing that it had accepted the lots
and issued delivery statements.
7. Petitioner further avers that on a number of occasions, petitioner
had communicated to the respondent that the transformers were designed
for indoor environment and were to be stored indoors even when they
were not installed or operational. In 2011, respondent communicated to
the petitioner that some of the transformers had trouble in functioning.
Although admittedly by this time, the transformers had functioned for
about 4 months yet in good faith, petitioner conducted a joint inspection
of the site with the respondent‟s engineers and a detailed report was
submitted. The inspection report categorically reflected that the faults
were attributable to the negligent conduct of the respondent in storing and
maintaining the transformers. The transformers were kept in the open
without any shelter for over seven months and were exposed to extreme
weather conditions. On the weekends there was excess voltage and this
contributed to the malfunctioning of the transformers. There was
negligence in shifting the transformers from the stores to the erection
sites, besides lack of ventilation. The transformers were subjected to a
much higher voltage than the prescribed capacity. According to the
petitioner, these and certain other factors led to the faults in the
transformers and none of these could be categorized as manufacturing
defect.
8. Vide letter dated 08.04.2011, petitioner apprised the respondent
about the shortcomings and this stand was reiterated in subsequent letters.
It is the case of the petitioner that though the petitioner under the NIT was
not responsible to undertake any repair for the faults which occurred due
to the negligence of the respondent, however, in good faith it took back
the transformers and carried out repairs at its own costs. Since the
petitioner is a Small Scale industry and was facing a financial crunch, it
requested the respondent to release some payment against the outstanding
amount of Rs.3 Crores due to it. On 01.03.2012, petitioner again
requested for the outstanding payment but this only provoked the
respondent into issuing letters alleging that the transformers were faulty
on account of manufacturing defects. In the meantime, the petitioner kept
on extending the Bank Guarantee which should have been actually
refunded. To the shock of the petitioner, the respondent issued a show-
cause notice on 01.06.2017 alleging non-compliance in rectification of
defects and threatening to take action on account of the breach of
Contract. On 10.06.2017, the respondent wrote to the petitioner to get the
transformer tested from NABL accredited Lab. Petitioner agreed to
undertake the test but at the expense of the respondent.
9. Thereafter, on account of some disputes having arisen, petitioner
invoked Arbitration vide e-mail dated 11.10.2017 and finally the
respondent appointed a Sole Arbitrator to adjudicate the disputes.
10. The petitioner filed the following statement of claim :
―(a) This Hon'ble Arbitral Tribunal, be pleased to hold,
declare and direct the Respondent NDMC, to Release/make
the Payment of Rs.9,71,96,498/- (Rupees Nine Crores,
Seventy One Lakhs, Ninety Six Thousand, Four Hundred
Ninety Eight Only) as per our Statement of Claim attached
h/w as Annexure - S, within 1 month of the passing of the
Award to the Claimant.....‖
11. Respondent filed its statement of defence as well as the Counter
Claim. The Counter Claims of the respondent are as under :
―COUNTER-CLAIM NO. 1: On account of expenditure
incurred for replacement of burnt Transformers of 1000KVA
vide S. O. No. 07/DP/EE(S-1)/2009-10 dt.09.10.2009. (Qty. -
57 nos.) & 1600 KVA vide S. O. No. 27 /DP/EE(S-1)/2009-
10 dt.03.03.2010. (Qty. - 37 nos.) supplied by the Claimant.
COUNTER-CLAIM NO. 2: Towards cost of purchase of new
transformers against the existing Burnt/Defective
Transformers of Claimant.
COUNTER-CLAIM NO. 3: Towards costs for repairing
defective transformers.
COUNTER-CLAIM No. 4: Towards expenditure incurred by
Respondent for
inspection of transformers by RITES together with TA/DA
expenses by NDMC Engineers.
COUNTER-CLAIM NO. 5: [email protected] 18% Annually.
COUNTER-CLAIM NO. 6: Cost towards arbitration.‖
12. The Arbitral Tribunal by its Award dated 06.09.2018 awarded a
sum of Rs.1,58,28,204/- to the petitioner towards the part payment of 11
transformers alongwith the EMD deposit, as well as the refund of only
one Bank Guarantee. In so far as the respondent is concerned, the
Tribunal awarded a sum of Rs.64,14,299/- towards Counter Claim no.1,
an amount of Rs.64,49,444/- towards Counter Claim no.2. As mentioned
above, both parties have challenged the said Award of the Arbitral
Tribunal.
13. The principal contention of the learned counsel for the petitioner is
that the Tribunal has given a clear finding that the protection devices
given by the respondent were old and dilapidated and most of the failures
were on account of uncontrolled surge in power over the weekends. The
transformers were tested before their supply in presence of the engineers
of the NDMC including by an independent inspection agency RITES.
The Tribunal has given a categorical finding that the transformers were
well designed and manufactured and only on approval and acceptance,
they were supplied to the NDMC. The transformers were never defective
and nor had any manufacturing defects. Having rendered these findings
in favour of the petitioner, the Tribunal should have released the entire
pending payments to the petitioner instead of allowing the claim partly.
14. It is further contended that four Bank Guarantees were furnished
by the petitioner amounting to Rs.55,06,856/- but the Tribunal has
erroneously directed return of only one Bank Guarantee amounting to
Rs.26,61,816/- and that too as though it included 5% interest. The Award
is silent regarding the remaining BGs.
15. It is further contended that the Arbitrator has failed to award any
interest on the pending payment despite the fact that the petitioner is
registered under the MSMED Act, 2006 and is entitled to compound
interest at three times the rate of the Banks under Section 16 of the said
Act.
16. Learned counsel challenges the award of the Counter Claims in
favour of the respondent. He argues that the award is a non-speaking
award bereft of any reasons as to why the Counter Claims have been
allowed and that too despite a finding that the transformers when supplied
were not faulty and under the NIT the responsibility of the petitioner
ended on mere supply of the transformers. Petitioner was not obliged to
carry out any repairs for the faults that occurred on account of the
negligent handling of the transformers by the respondent. Learned
counsel submits that the Award suffers from a patent illegality appearing
on the face of the Award. He thus prays that the Award should be set
aside to the extent it has allowed the two Counter Claims of the
respondent and has disallowed part claims of the petitioner.
17. Learned counsel for the respondent submits that the Award has
been challenged by the respondent to the extent it has disallowed the
Counter Claim towards costs of repairing some of the transformers as
well as to the extent it has allowed the claims of the petitioner. Learned
counsel submits that after successful inspection of the transformers, the
transformers were delivered at the NDMC stores in lots. Soon after the
supplies were made, respondent started receiving wide-spread complaints
of the failures of the transformers such as malfunctioning, abnormal
sounds and burning. Despite several requests to the petitioner, it failed to
rectify the defects and repair the transformers. Petitioner through several
letters acknowledged its failure and assured that the defaults would be
rectified, but no action was taken. Though subsequently, the petitioner
undertook the task of repairing but the repairs carried out were extremely
slow and of inferior quality.
18. It is further contended that the petitioner even refused to carry out
joint inspection alongwith M/s. RITES and finally the inspection report
dated 03.12.2012 clearly revealed that the transformers had
manufacturing defects and design flaws. The same was reiterated in the
second joint inspection report dated 07.01.2016. A third joint inspection
report dated 08.04.2016 reaffirmed the manufacturing defects in the
transformers. Learned counsel submits that being a public body,
respondent faced an alarming situation as the defective transformers led
to compromising the power supply to the public in the NDMC areas. On
account of this, the PBGs and the outstanding payments of 11 units of the
transformers alongwith EMD were withheld by the respondent totaling to
about Rs.2.60 Crores.
19. Learned counsel contends that the Arbitrator has erroneously
awarded the balance cost of the transformers in favour of the petitioner
alongwith the refund of BGs and EMD. He contends that as per clauses
17 and 19 of the Supply Order, petitioner was bound to guarantee the
respondent against any defects, till the transformers became fully
operational and defect free. Having supplied defective material,
petitioner is in complete breach of the Supply Order. Respondent in fact
even filed a complaint with the police on account of the cheating by the
petitioner in supplying defective material.
20. Learned counsel argues that the Award is contradictory as, on one
hand, it holds that there were no manufacturing defects while, on the
other hand, it has awarded expenditure incurred for replacement of burnt
transformers alongwith cost of purchase of new one. Learned counsel
further points out that the Arbitrator has erred in holding that there was
improper ventilation of the sites by the respondent and ignored that the
petitioner had itself vide letter dated 28.04.2011 informed the respondent
that the site and the installation procedure in Jivan Bharti Building was
impressive.
21. I have heard the learned counsels for the parties and examined their
contentions.
22. Law on interference and judicial review under Section 34 of the
Act is no longer res integra. The parameters on which interference can be
done in an Arbitral Award are laid down in Section 34 itself and have
been elaborated in several judgments of the Supreme Court and this
Court. In the case of Associate Builders vs. Delhi Development
Authority (2015) 3 SCC 49, it has been held as under :-
―42.3. (c) Equally, the third subhead of patent illegality is
really a contravention of Section 28(3) of the Arbitration
Act, which reads as under:
―28.Rules applicable to substance of dispute.--(1)-
(2)***
(3) In all cases, the Arbitral Tribunal shall decide in
accordance with the terms of the contract and shall take
into account the usages of the trade applicable to the
transaction.‖
This last contravention must be understood with a caveat.
An Arbitral Tribunal must decide in accordance with the
terms of the contract, but if an arbitrator construes a term
of the contract in a reasonable manner, it will not mean
that the award can be set aside on this ground.
Construction of the terms of a contract is primarily for an
arbitrator to decide unless the arbitrator construes the
contract in such a way that it could be said to be
something that no fair-minded or reasonable person could
do.‖
23. In the recent judgment by the Supreme Court in Ssangyong
Engineering & Construction Co. Ltd. vs. NHAI (2017) 5 SCC 743, the
parameters have been clearly subscribed and the relevant paras are as
under :-
―35. What is clear, therefore, is that the expression
―public policy of India‖, whether contained in Section 34
or in Section 48, would now mean the ―fundamental
policy of Indian law‖ as explained in paragraphs 18 and
27 of Associate Builders (supra), i.e., the fundamental
policy of Indian law would be relegated to the
―Renusagar‖ understanding of this expression. This
would necessarily mean that the Western Geco (supra)
expansion has been done away with. In short, Western
Geco (supra), as explained in paragraphs 28 and 29
of Associate Builders (supra), would no longer obtain, as
under the guise of interfering with an award on the
ground that the arbitrator has not adopted a judicial
approach, the Court's intervention would be on the merits
of the award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are
concerned, as contained in Sections 18 and 34(2)(a)(iii)
of the 1996 Act, these continue to be grounds of challenge
of an award, as is contained in paragraph 30 of Associate
Builders (supra).
36. It is important to notice that the ground for
interference insofar as it concerns ―interest of India‖ has
since been deleted, and therefore, no longer obtains.
Equally, the ground for interference on the basis that the
award is in conflict with justice or morality is now to be
understood as a conflict with the ―most basic notions of
morality or justice‖. This again would be in line with
paragraphs 36 to 39 of Associate Builders (supra), as it is
only such arbitral awards that shock the conscience of the
court that can be set aside on this ground.
37. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paragraphs 18 and 27 of Associate
Builders (supra), or secondly, that such award is against
basic notions of justice or morality as understood in
paragraphs 36 to 39 of Associate Builders (supra).
Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to
Section 48(2)(b)(ii) was added by the Amendment Act only
so that Western Geco (supra), as understood in Associate
Builders (supra), and paragraphs 28 and 29 in particular,
is now done away with.
38. Insofar as domestic awards made in India are
concerned, an additional ground is now available under
sub-section (2A), added by the Amendment Act, 2015, to
Section 34. Here, there must be patent illegality
appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does
not amount to mere erroneous application of the law. In
short, what is not subsumed within ―the fundamental
policy of Indian law‖, namely, the contravention of a
statute not linked to public policy or public interest,
cannot be brought in by the backdoor when it comes to
setting aside an award on the ground of patent illegality.
39. Secondly, it is also made clear that re-appreciation of
evidence, which is what an appellate court is permitted to
do, cannot be permitted under the ground of patent
illegality appearing on the face of the award.‖
24. Thus, examined on the touchstone of the law as laid down by the
Supreme Court, this Court is of the opinion that the impugned Award
does suffer from a patent illegality in rejecting the claims of the
petitioner. In so far as it has allowed the Counter Claims, it is a non-
reasoned and non-speaking award.
25. The Arbitral Tribunal after a detailed narration of the chronology
of list of dates and events, has come to a clear finding that the
transformers supplied by the petitioner were never defective and did not
have any manufacturing defects, as alleged repeatedly by the respondent.
The Tribunal has also observed that there were deficiencies in the sites
where they were installed in terms of lack of ventilation, proper spacing
from the nearest obstruction, lack of protected devices, absence of
winding temperature indicator. It is also observed that the NCT was not
connected to the system in the absence of which there were sudden surge
in power which damaged the transformers. Significantly the Tribunal
also observed that the transformers had been supplied after various tests
conducted prior to the supply in the presence of the engineers of the
NDMC and RITES. The tests not only validated the design but also
certified that the transformers met all the parameters and only after the
NDMC approved and accepted the lots that the transformers were
supplied. Having so observed, the Tribunal makes an observation that
both parties were responsible for the failure of the transformers and
declined to grant complete balance payment to the petitioner as well as
return of some Bank Guarantees. It is significant to mention here that the
Supply Orders itself stipulated that the responsibility of the supplier was
only to the extent of supply and delivery. Relevant clauses of the Supply
Agreement read as under:
―1. SCOPE
1.1 The tender covers the supply and delivery of the
equipment detailed in the technical specifications
(attached in the last) hereof if the tenderers are in a
position to quote for supply in accordance with the
requirements stated in the tender form, they shall
submit the quotations in DUPLICATE to the
Executive Engineer E.(Store-I) N.D.M.C. New
Delhi on the prescribed tender form here to
annexed.
13. PRICES
x x x
13.2 F.O.R. prices shall be deemed to include packing
and forwarding charges if any,. The supplier will
be responsible until the materials arrive in good
condition at the Electric Stores, NDMC.‖
26. The Arbitrator has itself in para 4.3 of the Award observed that the
supply order was restricted to supply only and in fact has emphasized in a
bracket that it did not envisage any installation or anything further on the
part of the petitioner herein. Relevant para 4.3 is extracted hereinunder.
"4.3 ...The supply order was restricted to supply
only (No installation or anything further), after
inspection, as per the relevant standards as
approved by the Respondent's inspection agency
(M/s. Rites) and in presence of the Respondent's
Engineer."
In view of the said provision of the Supply Order as well as the
finding of the Arbitral Tribunal itself, there is a patent illegality and
perversity in the Award as is evident from a bare perusal of the same.
The Supreme Court in Ssangyong (supra) has as under:
42. What is important to note is that a decision which is
perverse, as understood in paragraphs 31 and 32
of Associate Builders (supra), while no longer being a
ground for challenge under ―public policy of India‖, would
certainly amount to a patent illegality appearing on the face
of the award. Thus, a finding based on no evidence at all or
an award which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside on the
ground of patent illegality. Additionally, a finding based on
documents taken behind the back of the parties by the
arbitrator would also qualify as a decision based on no
evidence inasmuch as such decision is not based on evidence
led by the parties, and therefore, would also have to be
characterised as perverse.‖
27. Learned counsel for the petitioner is right in its contention that
there is inherent contradiction in the Award. In one para, the Tribunal
refers to the inspection reports and gives a one line finding that there
were defects in the transformers while in the next para it arrives at a
contradictory conclusion that the transformers were neither defective nor
had any manufacturing defects. The latter finding is supported by
elaborate reasoning given by the Tribunal. As per the supply agreement,
petitioner was to supply transformers for indoor use. The transformers
were tested and inspected by RITES along with the representatives of the
respondent. In addition to the routine test, transformers from each lot of
supply were also „impulse tested‟ at ERDA and „Heat Run tested‟ and
only therefore were accepted by the respondent. The record also shows
that the petitioner had written several letters to the respondent to store the
transformers properly and operate them in conditions conducive to their
working. The petitioner, in my view, is thus right that having rendered a
finding in its favour with detailed reasoning that there were no defects in
the transformers at the time of supply, the Tribunal could not have
rejected a part of the claim for balance payments towards supply of
transformers. Relevant para of the Award is as under :
―In my view, both parties are responsible for the
failure of the proper functioning of the transformers in as
much as there were deficiencies in the sites where they
were installed. Most of the sites were not ventilated.
Ventilation helps escaping the hot air thereby keeping the
atmosphere of the area and Transformer cooled. The
medium of cooling of these Transformers is air-forced or
natural. In most the cases there were no spacing from the
nearest obstructions. Spacing helps in free flow of air
vital for cooling down the transformer. The protection
devices like HT Breakers were old and dilapidated with
their battery chargers not working. Winding temperature
indicators were not connected to them to activate the
breaker when in fault. NCT was not connected to the
system in absence of these protection sudden surge of
power did damage the transformer. It is also observed
that during weekends there was uncontrolled sustained
surge in power, which was damaging the transformer.
Most of the failures occurred due to uncontrolled power
surge in weekends. As the claimants have claimed that the
transformer from each lot of supply was again ―heat run
type tested‖ at their works and the type test reports were
attached. It has also been claimed that the inspection and
testing work conducted in presence of NDMC's Executive
Engineers and their inspection Agency M/s RITES, a govt.
of India organization. The type test not only validates the
design but by meeting all parameters in routine tests it
also proves that the transformer is well designed and
manufacture. Only on approval and acceptance of the
above testing reports by NDMC, the transformers were
supplied by the claimant to the Respondent-NDMC, which
proves that the transformers were never defective or with
any manufacturing defects as is alleged repeatedly by the
NDMC now.‖
28. During the course of arguments, the Respondent has placed
reliance on a letter dated 08.04.2011 to contend that the petitioner had
itself acknowledged that 5 transformers in Jeevan Bharti Building were
installed as per Code of Practice but they also failed to function. This
contention in my view has no merit. The Arbitrator has in its Award
clearly noted that the contributory factor to the malfunctioning of the
transformer was uncontrolled and unsustained surge in power and this
resulted in damaging the transformers and was responsible for most of the
failures. This factor again cannot be attributed to the petitioner. This part
of the Award therefore, rejecting part claim of the petitioner for balance
payment of the transformers and refund of the remaining three BGs is
hereby set aside.
29. As already mentioned above, the supply order only envisaged the
supply of the transformers by the petitioner. There was no obligation
under the Agreement to repair or maintain the transformers. Once the
Tribunal has noticed this fact and also rendered a finding that there were
no defects in the transformers when supplied, there was no reason for the
Tribunal to have allowed counter claim no.1 and counter claim no.2 in
favour of the respondent. Moreover, this part of the award is completely
unreasoned. Relevant part of the Award is as under:-
―I hereby, award a sum of Rs.64,14,299/- towards
Counter claim No.1 and also an amount of
Rs.64,49,444/- towards Counter Claim No.2 of the
Respondent-NDMC in favour of the Respondent-
NDMC.‖
30. Section 31(3) of the Act mandates that the Award shall state the
reasons upon which it is based. It has been held by the Supreme Court in
the case of Ssangyong (supra) that the Arbitrator must give a reasoned
award. Relevant para reads as under :-
"40. To elucidate, paragraph 42.1 of Associate
Builders (supra), namely, a mere contravention of the
substantive law of India, by itself, is no longer a ground
available to set aside an arbitral award. Paragraph 42.2
of Associate Builders (supra), however, would remain, for
if an arbitrator gives no reasons for an award and
contravenes Section 31(3) of the 1996 Act, that would
certainly amount to a patent illegality on the face of the
award.
31. In fact, in a very recent judgment in the case of Anuradha Bhasin
vs Union of India 2020 SCC OnLine SC 25, Supreme Court has
reiterated this position of law and has even explained what an unreasoned
Award is. Relevant para reads as under:
―36. The mandate under Section 31(3) of the
Arbitration Act is to have reasoning which is intelligible
and adequate and, which can in appropriate cases be
even implied by the Courts from a fair reading of the
award and documents referred to thereunder, if the need
be. The aforesaid provision does not require an elaborate
judgment to be passed by the arbitrators having regards
to the speedy resolution of dispute.
37. When we consider the requirement of a
reasoned order three characteristics of a reasoned order
can be fathomed. They are: proper, intelligible and
adequate. If the reasoning in the order are improper, they
reveal a flaw in the decision-making process. If the
challenge to an award is based on impropriety or
perversity in the reasoning, then it can be challenged
strictly on the grounds provided under Section 34 of the
Arbitration Act. If the challenge to an award is based on
the ground that the same is unintelligible, the same would
be equivalent of providing no reasons at all. Coming to
the last aspect concerning the challenge on adequacy of
reasons, the Court while exercising jurisdiction under
Section 34 has to adjudicate the validity of such an award
based on the degree of particularity of reasoning required
having regard to the nature of issues falling for
consideration. The degree of particularity cannot be
stated in a precise manner as the same would depend on
the complexity of the issue. Even if the Court comes to a
conclusion that there were gaps in the reasoning for the
conclusions reached by the Tribunal, the Court needs to
have regard to the documents submitted by the parties
and the contentions raised before the Tribunal so that
awards with inadequate reasons are not set aside in
casual and cavalier manner. On the other hand,
ordinarily unintelligible awards are to be set aside,
subject to party autonomy to do away with the reasoned
award. Therefore, the courts are required to be careful
while distinguishing between inadequacy of reasons in an
award and unintelligible awards.‖
32. The respondent has not assailed the rejection of counter claim nos.
3 and 4 and this part of the Award thus deserves to be upheld.
33. Accordingly, the Award dated 06.09.2018 in the opinion of this
Court suffers from perversity and patent illegality on the face of it and
deserves to be partly set aside. The Award is upheld to the extent it has
rejected counter claim nos.3 and 4 of the respondent.
34. The Award of counter claim nos.1 and 2 in favour of the
respondent is against the terms of the Supply Order as mentioned in the
earlier part of the judgment and should not have been awarded in favour
of the respondent. This part of the Award is accordingly set aside.
35. The Award dated 06.09.2018, is upheld to the extent it has allowed
part payment in favour of the petitioner towards his claims.
36. Accordingly, OMP(COMM) 5/2019 is allowed and OMP (COMM)
22/2019 is dismissed alongwith the pending application.
37. It is, however, open to the petitioner to agitate its further claims in
accordance with law.
JYOTI SINGH, J
FEBRUARY 18th, 2020
yg/rd/
