Delhi High Court
Govt Of N.C.T. Of Delhi vs Afcons Infrastructure Ltd. on 26 April, 2023
NEUTRAL CITATION NO. 2023:DHC:2818
.* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 22nd February, 2023
Pronounced on: 26th April, 2023
+ O.M.P. (COMM) 480/2022 & I.A. 20348/2022
GOVT OF N.C.T. OF DELHI ..... Petitioner
Through: Mr. Lalltaksh Joshi, Advocate
versus
AFCONS INFRASTRUCTURE LTD. ..... Respondent
Through: Mr. Abhishek Birthray, Mr.
Tanmay Nandi and Mr. Addem
Ahmed, Advocates
CORAM:
HON'BLE MR. JUSTICE CHANDRA DHARI SINGH
JUDGMENT
CHANDRA DHARI SINGH, J.
1. The instant petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter "Arbitration Act") has been filed on
behalf of the petitioner seeking the following reliefs:-
"a. Pass an order thereby setting aside/quashing the
Impugned Arbitral Award dated 13.08.2022 passed by the Ld.
Sole Arbitrator Shri Dinesh Kumar in the matter of
arbitration between „M/s Afcons Infrastructure Ltd. and
GNCTD‟ and allow the counter claim put forth by the
Petitioner before the Ld. Sole Arbitrator; or in the alternative
b. Set aside the Impugned Arbitral Award dated 13.08.2022
passed by the Ld. Sole Arbitrator Shri Dinesh Kumar in the
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matter of arbitration between „M/s Afcons Infrastructure Ltd.
and GNCTD‟ and remand the matter for fresh adjudication
as may be deemed fit by this Hon‟ble Court in the facts and
circumstances of the present case;
c. Pass an order thereby calling for the original arbitration
records;
d. Pass any other order(s) that this Hon'ble Court may deem
fit in the facts and circumstances of the present case."
BRIEF BACKGROUND
2. The following course of events have led to the filing of the instant
matter:-
a. The petitioner is acting through the Public Works
Department and its Executive Engineer, Flyover Project Division
F-123 and Executive Engineer, Flyover Electrical Division F-114.
The respondent is a company registered under the Companies Act,
1956 engaged inter alia in the business of construction and
infrastructure projects.
b. The petitioner invited tender on 2nd December 2012 for the
Project of „construction elevated road over Barapulla Nallah
starting from Sarai Kale Khan to Aurobindo Marg, near INA
market, New Delhi - Phase II, from Jawaharlal Nehru Stadium to
Aurobindo Marg with connection at Ring Road, Lala Lajpat Rai
Marg and Aurobindo Marg‟. The respondent submitted its bid vide
letter dated 28th December 2012 and after negotiation, the
petitioner awarded the Project to the respondent vide Letter of
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Acceptance dated 1st February 2013. An Agreement was also
entered into by the parties and a letter dated 8th February 2013 was
issued by the petitioner for commencement of the work. As per the
Agreement, the stipulated dates of commencement and completion
of the work were 23rd February 2013 and 22nd May 2015.
c. During the course of the Project, certain disputes arose
between the parties due to the delay caused in completion of the
Project and ultimately reference was made to arbitration by way of
invoking Arbitration Clause of the General Conditions of Contract
vide Letter dated 10th July 2020. The arbitration proceedings were
initiated and the impugned Arbitral Award was passed on 13 th
August 2022 by the learned Arbitrator so appointed to adjudicate
the disputes between the parties.
d. The petitioner is aggrieved by the Award dated 13th August
2022 to the extent of findings qua Claim No. 2, 3, 4, 6, 8, 10, 11
and Counter Claim No. 1.
SUBMISSIONS
On behalf of the Petitioner
3. The learned counsel for the petitioner submitted that the impugned
Award passed by the learned Arbitrator is perverse, illegal, unreasonable
and arbitrary and is hence liable to be set aside. The submissions made on
behalf of the petitioner are twofold. Firstly, the learned counsel has
impugned the claim-wise finding and secondly, the Arbitral Award has
been challenged while referring to the legal principles under Section 34
of the Arbitration Act.
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Submissions on claims
4. The learned counsel for the petitioner qua Claim No. 2 submitted
as under:
a. The impugned arbitral award is patently illegal as it is barred
by the provisions of Order II Rule 2 of the Code of Civil
Procedure, 1908 (hereinafter "CPC"). The impugned Arbitral
Award is perverse as the learned Arbitrator had allowed a time-
barred claim which is evident from the indisputable fact that the
respondent had already raised this claim vide its letter dated 28th
June 2014, yet it did not seek recovery thereof within the stipulated
period of 3 years.
b. The learned Arbitrator has travelled beyond the four corners
of the Agreement by awarding Claim No. 2 (i), despite the same
being a directly covered item under the Agreement. Item no. 1.3 of
Schedule of Quantity (hereinafter "SOQ") under the Agreement
expressly provides for the rates to be inclusive of fabricating,
providing and driving permanent MS liner. The learned Arbitrator
has given no reasons for not adhering to Item no. 1.3 of SOQ. The
rate, i.e., Rs. 8500/- per MT, arrived at by the learned Arbitrator is
perverse in as much as no basis or reasoning has been forthcoming
for the same.
c. The Claim No. 2(ii) is barred by the provision of Order II
Rule 2 CPC in as much as the respondent was aggrieved by the
letter dated 17th February 2015 issued by the petitioner, however,
did not raise this claim before the earlier Arbitral Tribunal which
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entered reference on 18th September 2017 nor did the respondent
seek leave of the earlier Arbitral Tribunal to raise this claim at a
later stage. For the same reason, this claim is also time barred.
d. The learned Arbitrator has given no reasons for travelling
beyond the terms of the Agreement while granting Claim No. 2 (ii)
as the Agreement under Schedule F stipulates that the rate for Road
& Bridges work shall be as per MoRT&H specifications Item no.
2.4(i)(13), whereas the learned Arbitrator adopted the rate from
DAR on the basis of a wholly inapplicable item.
e. The impugned Arbitral Award is perverse in as much as no
reasoning or basis has been furnished by the learned Arbitrator or
even the respondent while assessing the additional payment, other
than using the expression "reasonable".
5. Qua Claim No. 3, it has been submitted as follows:-
a. The learned Arbitrator has ignored the Minutes of 36th
Coordination Meeting dated 14th October 2013 which show that the
respondent had deployed only 2 nos. of piling rig at site and not 6
piling rigs as wrongly held by the learned Arbitrator solely on the
basis of unilaterally executed monthly progress report by the
respondent.
b. The learned Arbitrator has neither observed nor furnished
reason for failure to observe the sequitur of letter dated 23 rd
December 2013 and 14th March 2014 issued by the petitioner,
whereby, the use of DMC method was approved and it was also
conveyed that cost adjustment would be levied for this change. In
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view thereof, the petitioner approved the minus rate of Rs. 3850/-
per meter strictly in the spirit of Clause 12 of the Agreement.
c. It was the responsibility of the respondent to carefully
mobilize the machinery at site in terms of with Clause 2.21.3 and
2.21.2 of the Agreement. Due consideration is to be given to the
site requirement at particular point of time, in view of the terms of
the Agreement that the contractor shall deemed to have the full
knowledge of the site and it shall be deemed that the contractor has
to satisfy himself about the site condition.
d. The learned Arbitrator granted the entire amount sought by
the respondent under this claim when a mere analysis of rate
submitted by the respondent shows that the rates for using DMC
System were frivolous as the said rates were much higher than
those for using hydraulic piling rig, whereas the prevailing market
rates show that the piling by using hydraulic rig is always costlier
as compared to DMC rig being sophisticated and costly rig.
Learned Arbitrator has not appreciated that the rate analysis
submitted by the Respondent was incorrect and fabricated.
e. The learned Arbitrator perversely accepted the rates
furnished by the Respondent based on alleged work order and
without any reason brushed aside the rates approved by the
petitioner on the basis of DSR which is evident from Para 13.5.6 of
the impugned Arbitral Award, merely by unreasonably stating that
DSR, MoRT&H, etc. is not applicable.
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6. The learned counsel made the following submissions regarding
Claim No 4:-
a. The learned Arbitrator arrived at a perverse finding that the
petitioner ignored the understanding between the parties and
initiated recovery vide its letter dated 13th August 2014, without
mentioning the letter / Minutes of Meeting.
b. Learned Arbitrator did not fully appreciate the 36th
Coordination Meeting dated 5th October 2013 whereby the
petitioner allowed the change for conducting high strain dynamic
load test in lieu of static load test subject to the condition of rate
adjustment. Therefore, it is perverse for the learned Arbitrator to
hold that the petitioner ignored an alleged understanding while
proceeding with cost adjustment.
c. Learned Arbitrator granted the rates sought by the
respondent without giving any reasons and ignoring a vital
observation from the analysis of rates submitted by the respondent
that the rate worked out for high strain dynamic load test is higher
than the rate for vertical static load test on piles.
7. Qua Claim No. 6, the following submissions have been made:-
a. The learned Arbitrator has held the petitioner to be in breach
of its contractual obligation and responsible for causing delay in
completion of the works without arriving at a finding as to which
action/inaction of the petitioner was a breach or caused delay.
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b. The learned Arbitrator held that there was no bearing of
suspension period upon the delay in overall completion of the work
without furnishing any reasons or without calling for an expert
report on delay analysis.
c. The learned Arbitrator has attributed the delay caused due to
restriction imposed by Railways to the petitioner which is perverse
on the face of record in as much as the petitioner has neither any
control nor jurisdiction over the functioning and management of
the Railways. In fact, while the petitioner falls under ambit of the
Government of NCT of Delhi, the Railways come under the
jurisdiction of Central Government. Therefore, delay by one cannot
be attributed to the other. It is pointed out that reasonable extension
of time was granted by the petitioner to the respondent without levy
of compensation due to delay caused by railways as per the terms
of the Agreement, however, no weightage has been attached to it
by the learned Arbitrator.
d. The learned Arbitrator perversely expanded the obligation
of the petitioner to arrange for physical shifting of existing services
under Clause 3.21 of the Agreement to imply that the petitioner is
responsible for the delay in permission for shifting of such services
controlled by third parties. While doing so, the learned Arbitrator
has completely ignored Clause 3.22 of the Agreement.
e. Learned Arbitrator ignored vital terms of the Agreement
under the garb of following substantive law contrary to the
Judgment passed by Hon‟ble Supreme Court in Ramnath
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International Construction Pvt. Ltd. vs Union of India, (2007) 2
SCC 453.
f. The learned Arbitrator held the Clause 3.22 of the
Agreement to be unenforceable despite the fact that Clause 3.22
does not completely outcast the contractor from claiming any relief
in case of delay in removal/shifting of existing services but merely
bars the relief of compensation and provides a reasonable/suitable
extension of time in its place. There were hindrances beyond the
control of the PWD that led to delay in work. Even some of them
are force majeure events. All these hindrances are covered under
Clause 3.22 of the Agreement which bars the respondent contractor
from raising claim on account of delay resulting from any of the
hindrances.
g. The learned Arbitrator granted damages for extended stay of
the respondent i.e. prolongation of the Agreement for the entire
extended period from 22nd February 2015 (stipulated date of
completion) till 31st July 2018 (actual date of completion) despite
the fact that damages for the period upto 15 th February 2018 were
already granted in the earlier round of arbitration vide Arbitral
Award dated 5th February 2019, which stands accepted by the
petitioner in view of no challenge.
h. The learned Arbitrator effectively accepted the submission
of the petitioner in relation to double jeopardy in as much as the
entire amount of Rs. 13 Crore claimed was granted in the earlier
Arbitral Award dated 5th February 2019 for additional costs due to
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prolongation of Agreement was set off while calculating the award
under Claim No. 6. However, in so far as over lapping /
supervening period for prolongation is concerned, the same was
ignored. The learned Arbitrator merely recorded the number of
days of delay without analysing the reason behind those delays and
thereafter, proceeded to hold the petitioner liable for the entire
delay without furnishing any reasons.
i. The learned Arbitrator furnished no reasons for either of the
calculations of award made under Claim No. 6, both of which are
contrary to the terms of the Agreement, defy logic and as such are
perverse.
j. While calculating the final awarded amount under Claim No.
6, the learned Arbitrator, took mitigation measures at 30%, and
balance overheads of 10% without furnishing any reasons. Despite
failure of respondent to prove the alleged additional cost and
despite the discrepancies in evidence of CW-1, i.e. the witness of
the respondent, the learned Arbitrator granted a huge sum of
alleged additional cost to the respondent.
8. Regarding Claim No. 8 it is submitted as under:-
a. The learned Arbitrator held the provisions for escalations to
be selectively unenforceable in as much as it has been held in the
impugned Arbitral Award that the escalation provision to the extent
deprives the contractor of compensation for delay is unenforceable.
It is submitted that the escalation Clause 10CC & 10CA does not
deprive compensation to the contractor and merely stipulates that
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index applicable at the stipulated date of completion or the
prevailing index of the period under consideration, whichever is
less, shall be applicable. Therefore, by holding that the escalation
clause deprives the contractor of compensation for delay and as
such unenforceable, the learned Arbitrator has travelled beyond the
terms of the Agreement.
b. The learned Arbitrator has granted Claim No. 8 in favour of
the respondent herein despite indisputable fact that the petitioner
paid escalation upto 59th RA bill in accordance with the relevant
contractual clause. The total amount awarded by the learned
Arbitrator was Rs. 8,59,27,007/- which is not as per any ground
and beyond the provision of Clause 10CA and 10CC of the
Agreement.
c. The compensation on account of variation in the prices of
steel/cement during extended period already stood paid by the
petitioner to the respondent as per the formula specified in Clause
10CA & 10CC and therefore, the respondent‟s demand under
Claim No. 8 was not maintainable.
9. The learned counsel for the petitioner made the following
submissions regarding Claim No. 10, 11 and Counter Claim No. 1:
a. Tribunal did not allow entire amount sought by the
respondent in the final bill under Claim No.1 and 2, yet granted
interest at 10% with effect from 14th November 2019 (date of
certification of final bill) on the erroneous ground that the
respondent was deprived of using its own money inasmuch as, on a
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demurrer, indisputably the amounts sought by the respondent were
incorrect.
b. It is submitted that no reasons have been recorded for
awarding pendente lite interest to the respondent, except a vague
observation that the respondent's "own" money was blocked by the
petitioner. It is submitted that this observation is nowhere
supported with a corresponding finding that the petitioner illegally
withheld monies payable to the respondent.
c. The learned Arbitrator did not allow entire amount sought by
the respondent in the final bill under Claim No.6 and 8, yet granted
interest at 10% with effect from 10th July 2020, i.e., the date of
invocation of arbitration, on the erroneous ground that the
respondent was deprived from using its own money.
d. No reasons are forthcoming for awarding future interest.
Moreover, no reasons have been furnished for awarding future
interest @12% which is highly unreasonable. The learned
Arbitrator has erroneously granted costs to the respondent solely on
the ground that most of the claims were decided in favour of the
respondent and without any observation to the effect that the
defence raised by the petitioner was sham, etc. In absence thereof,
the awards towards costs are unreasonable and perverse.
Submissions on the legality of the impugned Award
10. While referring to Delhi Airport Metro Express Pvt Ltd. (2022) 1
SCC 131 and Associate Builders vs. DDA (2015) 3 SCC 49, it is
submitted that the learned Arbitrator has not taken a judicial approach
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while passing the impugned Award. Moreover, the impugned Award is
against the public policy of India and the fundamental policy of India.
11. It is also stated that the impugned Award is against the basic
notions of justice, morality so as to shock the conscience of the Court.
Moreover, the findings in the impugned Award suffer from illegality
which goes to the root of the matter. No reasons have been furnished by
the Arbitrator to arrive at conclusions in the impugned Arbitral Award. In
other words, the decision arrived at by the learned Arbitrator is dehors
any factual evidence or provisions under the Agreement.
12. It is settled law that actual damage and loss has to be established to
be claim the same and that requirement of proof cannot be dispensed
with. It is settled law that under Section 74 of the Indian Contract Act,
1872, damage or loss caused is a mandatory ingredient to grant
compensation. In the present case, it is possible to prove actual damage or
loss, if incurred, and as such proof thereof cannot be dispensed with. No
particulars or supporting documents or documentary evidence has been
filed by the Claimant to establish actual loss under the Claim no.4.
Reliance has been placed upon Kailash Nath Associates vs. DDA, (2015)
4 SCC 36.
13. It is settled law that the arbitrator being a creature of an agreement,
must operate within the four corners of the agreement and cannot travel
beyond it. More particularly, he cannot award any amount which is ruled
out or prohibited by the terms of the agreement. It is settled law that no
claim certificate is valid and binding when issued without any protest or
in absence of any communication to the same effect. Reliance has been
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placed upon the judgment passed in ANS Constructions vs. UOI, 2016
SCC Online Del 6304.
14. Therefore, it is submitted that the impugned Award is liable to be
set aside.
On behalf of the Respondent
15. Per contra, the learned counsel appearing on behalf of the
respondent vehemently opposed the contentions raised in the instant
petition as well as the submissions made on behalf of the petitioner and
submitted that there is no illegality in the Award passed by the learned
Arbitrator.
Submissions on claims
16. It is submitted regarding Claim No. 2 as under:-
a. Claim No. 2 relates to deviated (increased) quantities. Claim
2(i) was for additional amount towards additional quantities for
providing, fabricating and driving permanent MS Liner. Claim 2(ii)
was for additional amount towards additional quantities for
dismantling of cement concrete crash barrier. The increase in
quantity was not in dispute. The only dispute was with regard to the
rate for such additional quantities.
b. The deviation statement prepared by the petitioner had
undergone three revisions and the third revision was released by
the petitioner only on 25th June 2019, i.e., 11 months after the
stipulated date of actual completion of work.
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c. After the completion of work, the respondent had submitted
these claims as part of the final bill dated 26 th December 2018. The
said claims were denied by the petitioner while certifying the final
bill on 14th November 2019.
d. In the above circumstances, the petitioner wrongfully
contended that this claim is barred by Order II Rule 2 of the CPC
as well as the Limitation Act. The petitioner's case is that the cause
of action for these claims had arisen in 2014 and 2015 respectively,
yet the respondent omitted to raise these claims before the earlier
Tribunal, which entered reference on 18th September 2017. The
petitioner is mistaken because the cause of action had arisen only
on 14th November 2019 when these claims were rejected by the
petitioner whereas the award in the previous 5 arbitral references
was pronounced on 5th February 2019. The petitioner's contention
that these claims are barred by Order II Rule 2 of the CPC is
meritless. The learned Arbitrator considered all facts and then
decided this issue in favour of the respondent.
e. The petitioner has also erred in contending that the claims of
the respondent were time-barred. This issue has been dealt with by
the learned Arbitrator, who has given cogent reasons as to the time
when the dispute was crystallised for holding that the claims are
well within the period of limitation.
f. The petitioner has further alleged that the learned Arbitrator
has not provided reasons for the computation methods used and the
rates allowed under various heads. The same is incorrect as is
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evident from the detailed analysis provided by the learned
Arbitrator at numerous points in the award.
17. Qua Claim No. 3, it is submitted as under:-
a. As per the Contract, the respondent was required to carry out
piling work by using available hydraulically operated rotary-type
integrated piling rigs, which was mobilized by the respondent and
piling work was carried out using the same except in seven
locations where deployment of hydraulic rig was not possible due
to petitioner's failure to remove the site hindrances. The petitioner
instructed the respondent to carry out piling work in affected
locations by DMC Method using conventional rigs.
b. Since mobilization of conventional rig was additional work
beyond the original scope, the respondent claimed additional
amount. On the contrary, the petitioner alleged that conventional
rig is less expensive as compared to hydraulic rig and therefore,
deducted certain amounts at the rate of Rs. 8,350 per meter for
using conventional type ngs. 23. In the above circumstances, the
respondent made Claim No. 3 in two parts (i) claim for additional
cost for mobilization of conventional rigs; and (ii) claim for refund
of amount wrongfully deducted by the Petitioner.
c. The learned Arbitrator also held that "it is not a case of
replacement but a case of supplement". Moreover, the learned
Arbitrator held that the petitioner could not prove any cost-benefit
to the respondent on account of mobilization of conventional piling
rigs, which could be passed over to the petitioner by way of
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negative deviation. The learned Arbitrator ultimately directed the
petitioner to refund the amounts deducted while rejecting the
respondent's claim for additional amount holding that the
respondent could not properly support its claim for additional cost.
d. The petitioner wrongly asserted that the learned Arbitrator
has omitted to appreciate evidence and to provide reasons for his
decisions with regard to the claim relating to the recovery of the
amount deducted towards the extra items utilised. The learned
Arbitrator has considered the material placed before him and has
given reasons for its findings.
e. The petitioner's contention that the minutes of the 36th
Coordination Meeting dated 14th October 2013 show that the
respondent had deployed only 2 piling rigs at site is incorrect. The
learned Arbitrator had considered minutes of meeting dated 14th
October 2013 as also monthly progress reports. The said meeting
reflects the deployment for that particular time and not overall
deployment during the relevant period. The monthly progress
reports were submitted contemporaneously as per the requirement
of contract and remain uncontroverted. The learned Arbitrator
considered the evidence placed before it and returned a factual
finding in favour of the respondent. The petitioner seeks to
challenge the factual findings, which requires re-appreciation of
evidence, which is barred by law to be considered at this stage of
challenge under Section 34 of the Arbitration Act.
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f. In so far as quantification of this claim is concerned, the
petitioner's challenge to that extent is misconceived. The learned
Arbitrator has not awarded any amount to the respondent for
mobilization of conventional piling rigs as evident from para 13.5.6
and therefore, the averments made in the petition to the effect that
learned Arbitrator has fully granted the amount sought by the
respondent under this claim is wholly erroneously and incorrect.
18. Regarding Claim No. 4, it is submitted as under:-
a. The respondent was contractually required to conduct Static
Load Test on piles, which are time consuming. Having regard to
the delay in the project hitherto the parties had a discussion and
high strain dynamic pile load test was proposed. During the 36th
Coordination Meeting, the petitioner requested the respondent to
give consent for cost adjustment as will be decided by their
competent authority. In response, the respondent by letter dated 31st
January 2014 submitted cost comparison between the Static Load
Test and High Strain Dynamic Load Test. The respondent informed
that the latter is costly but timesaving. Thereafter, by letter dated
29th April 2014 the respondent clarified to the petitioner that it was
carrying out Dynamic Pile Load Test in lieu of Static Load Test
with clear understanding that it will neither charge any additional
amount nor will be made liable for any cost adjustment. The
respondent was allowed to carry out the work without any
objection but at a later date the petitioner by letter dated 13th
August 2014 sanctioned a deduction of Rs. 2,18,228 per test, which
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was revised to Rs.2,57,986 per test by letter dated 2 nd September
2017.
b. In any event the matter of interpretation by the learned
Arbitrator of the 36th Coordination Meeting falls exclusively within
the domain of the learned Arbitrator and unless perverse on the
face of it, the same cannot be interfered with. Even in cases where
an Arbitrator takes a plausible view, the same cannot be
substituted. Thus, no interference is warranted in this case.
c. The petitioner's challenge is based on erroneous assertions.
The petitioner has wrongfully contended that evidence has not been
considered and reasons have not been given by the Tribunal for the
rates that have been allowed. A bare reading of the impugned
Award will demonstrate that the petitioner's averment is without
any merit as the learned Arbitrator has duly appreciated the
evidence on the record and provided reasons for his decision.
19. Qua Claim No. 6, it is submitted as under:=
a. Claim No. 6 was for compensation for extended stay. The
contract period of 24 months was extended to 62 months for
reasons solely attributable to the Petitioner. The petitioner had
granted unconditional time extension for the entire extended
period. The last extension was granted up to 31 st July 2018 vide
letter dated 24th October 2019.
b. The respondent had claimed compensation for financial loss
suffered by it due to prolongation. It only sought reimbursement of
actual expenses incurred by it and reflected in its book of accounts.
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c. The learned Arbitrator after considering the facts and
circumstances of the case and the material placed before it returned
a factual finding in the favour of the respondent. There is no
illegality or perversity in the said finding.
d. The petitioner seeks to challenge the factual findings
relating to the cause of delay and the consequence. It is settled law
that when the finding of an arbitrator on the cause of delay in
completion of work is under challenge, the court cannot re-evaluate
the evidence and look into the material placed before the arbitrator
Reliance has been placed upon Delhi Development Authority v.
M/s Eros Resorts and Hotels Limited 2022 SCC OnLine Del 978.
Yet, the petitioner requires this Court to re-evaluate the facts and
evidence by way of the present petition.
e. The petitioner has itself admitted in its petition that the
project could not be completed within the stipulated time for
reasons not attributable to the respondent. The petitioner has
admitted that hindrances and delay were caused due to shifting of
water lines of the Delhi Jal Board, shifting of service and gas
pipelines, delay in approval of design by railways, delay in
approval from traffic police etc. In terms of the Contract, it was the
contractual obligation of the petitioner to provide hindrance-free
sites, which it failed to do; as such the learned Arbitrator has
rightly accepted the claim for prolongation made by the
respondent. In so far as the petitioner's reliance on "no damage
clause" (Clause 3.22) is concerned, the learned Arbitrator after
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considering the facts of the case and the legal precedence came to
the conclusion that (i) the present case cuts an exception to Clause
3.22 of the Contract and (ii) Clause 3.22 is not enforceable in terms
of the judgement in the case of Simplex Concrete Piles vs. Union
of India, 2010 SCC OnLine Del 821.
f. It is denied that claim for prolongation up to 15 th January
2018 was included in the previous arbitral reference. The claim in
the previous arbitral reference was a different claim altogether.
After considering the facts and circumstances of the case and
documents on records, the tribunal has decided this issue in favour
of the Respondent.
20. The learned counsel made following submissions regarding Claim
No. 8:-
a. The Contract under clause 10CA and 10CC provides for
escalation based on frozen indices. The respondent's claim before
the learned Arbitrator was that wrongful loss has been caused to it
on account of delay attributable to the petitioner. The respondent
sought damages for the loss suffered by it on account of increase in
price of labour and material. The petitioner has contended that the
learned Arbitrator has erred in his interpretation of the contract and
has in essence gone beyond the terms of the agreement. The
petitioner's contention is entirely baseless.
b. Considering the facts and circumstances of the case the
learned Arbitrator has held that the respondent is entitled to
compensation and to restore its original position in terms of law.
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The view taken by the learned learned Arbitrator is a plausible one.
The learned Arbitrator has appreciated all the evidence and law
cited before him and come to the conclusion that the Contract, to
the extent it deprives the respondent of compensation, is
unenforceable. He has discussed the legal basis on which this view
has been taken by him. Thus, it warrants no interference under
Section 34 of the Arbitration Act.
21. Regarding Claim No. 10, 11 and Counter Claim 11 it is submitted
as follows:-
a. The petitioner has also challenged the award of pendent lite
and future interest at the rates of 10 and 12 per cent
respectively. The learned Arbitrator has held that the
respondent was wrongly deprived of its funds and is,
therefore, entitled to 10 per cent pendent lite interest. The
respondent claimed for interest at 18 per cent per annum,
however, the learned Arbitrator has only awarded interest at
10 per cent. There is no perversity or illegality. No
interference is warranted insofar as award of interest and
cost are awarded by the learned Arbitrator.
b. The learned Arbitrator has awarded a reasonable rate of 12
per cent per annum by way of future interest; the said rate is
also reasonable more so since the eventuality of future
interest arises only if the petitioner fails to abide by the
award.
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c. The petitioner has failed to make out any case for
interference. The petitioner is inviting this Court to sit in
appeal to make factual enquiries and re-examine the
evidence, which is impermissible in law and hence, the
Petition is untenable.
d. Lastly, having no valid ground to challenge the Impugned
Award, the Petitioner now for the first time seeks to
invalidate the appointment of the Sole Arbitrator.
Submissions on the legality of the impugned Award
22. It is submitted that the Award has been passed by the learned
Arbitrator based on the material on the record before him and on
interpretation of the Contract. It is well settled that findings of fact
accorded by the learned Arbitrator and the interpretation taken by the
learned Arbitrator on contract are not to be interfered with in proceedings
under Section 34 of the Arbitration Act.
23. It is settled law that "judicial interference with the arbitral awards
is limited to the grounds in Section 34" as per Delhi Airport Metro
Express Private Limited v. DMRC (2022) 1 SCC 131. The grounds
enumerated in the said Section "does not entail a challenge to an arbitral
award on merits" as per Ssangyong Engg. & Construction Co. Ltd v.
NHAI (2019) 15 SCC 131.
24. The scope of review under Section 34 is supervisory and not
appellate. In this regard, it was held by the Hon'ble Supreme Court that
"Arbitral Tribunal is a master of evidence and the findings of fact which
are arrived at by the arbitrators on the basis of evidence on record are not
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to be scrutinised as if the Court was sitting in appeal." Reliance has been
placed upon the judgment of Maharashtra State Electricity Distribution
Company Limited v. Datar Switchgear Limited (2018) 2 SCC 133.
25. An award cannot be set-aside on the ground of patent illegality by
"re-appreciation of evidence" or merely because of "erroneous application
of law". Patently illegal should be illegality which goes to the root of the
matter. Thus, contravention of law not linked to public policy or public
interest is beyond the scope of the expression „patent illegality‟.
26. Construction of the terms of a contract is primarily for an arbitrator
to decide and the Courts normally do not interfere with an award for
taking a "plausible view".
27. Contrary to the aforesaid legal position, the petitioner's challenge
to the Award is based on: (i) re-appreciation of evidence, and (ii)
reinterpretation of contract, thus, falling outside the scope of Section 34
of the Arbitration Act.
28. It is further submitted that learned Arbitrator was appointed by the
Chief Engineer of the petitioner. The respondent accepted the said
appointment and both the parties submitted to the jurisdiction of the
learned Arbitrator on their own volition. The petitioner never raised any
objection as to the appointment of the learned Arbitrator or his
jurisdiction during the pendency of the arbitration proceedings. Thus,
objection as to the appointment of the Arbitrator stand waived.
29. Therefore, it is submitted that the instant petition is liable to be
dismissed for being devoid of any merit.
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30. Heard the learned counsel for the parties at length and perused the
record.
ANALYSIS
31. The petitioner has approached this Court assailing the Arbitral
Award dated 13th August 2022 under Section 34 of the Arbitration Act.
The law regarding a challenge to an arbitral award under the Arbitration
Act is no more res integra. The challenge to an award under Section 34
arising out of arbitration proceedings must satisfy the tests laid down by
virtue of the provisions of the Arbitration Act as well as the law settled by
way of pronouncements by the Hon‟ble Supreme Court.
32. At the very outset, it is pertinent to reiterate the intent of the
legislature while enacting the Arbitration Act. The expeditious and
effective disposal of matters are most certainly considered the primary
objectives of the enactment of the Arbitration Act. To fulfil the objective
of introducing the Arbitration Act, it has been deemed necessary by the
legislature as well as the Hon‟ble Supreme Court to limit interference by
the Courts in the process of arbitration, whether before, during or after the
conclusion of the proceedings.
33. The Arbitrator, who in his wisdom, passes an Award, upon
conducting the arbitration proceedings with the participation of parties to
the dispute, considering the Statement of Claim and Statement of Defence
presented by and on behalf of the parties, the relevant documents placed
on record by the parties, is considered a Court for the purposes of
adjudicating the dispute before him. An unfettered scope of intervention
in his functioning would defeat the spirit and purpose of the Arbitration
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Act. Therefore, the Hon‟ble Supreme Court has time and again reiterated
that the scope of intervention of the Courts is limited in the cases of a
challenge under Section 34.
34. In UHL Power Co. Ltd. vs. State of Himachal Pradesh, (2022) 4
SCC 116, the Hon‟ble Supreme Court reiterated the narrow scope under
Section 34 of the Arbitration Act and held as under:-
"16. As it is, the jurisdiction conferred on courts under
Section 34 of the Arbitration Act is fairly narrow, when it
comes to the scope of an appeal under Section 37 of the
Arbitration Act, the jurisdiction of an appellate court in
examining an order, setting aside or refusing to set aside an
award, is all the more circumscribed. In MMTC Ltd. v.
Vedanta Ltd. 5, the reasons for vesting such a limited
jurisdiction on the High Court in exercise of powers under
Section 34 of the Arbitration Act have been explained in the
following words: (SCC pp. 166-67, para 11)
"11. As far as Section 34 is concerned, the position is
well-settled by now that the Court does not sit in
appeal over the arbitral award and may interfere on
merits on the limited ground provided under Section
34(2)(b)(ii) i.e. if the award is against the public policy
of India. As per the legal position clarified through
decisions of this Court prior to the amendments to the
1996 Act in 2015, a violation of Indian public policy,
in turn, includes a violation of the fundamental policy
of Indian law, a violation of the interest of India,
conflict with justice or morality, and the existence of
patent illegality in the arbitral award. Additionally, the
concept of the "fundamental policy of Indian law"
would cover compliance with statutes and judicial
precedents, adopting a judicial approach, compliance
with the principles of natural justice, and
Wednesbury6 reasonableness. Furthermore, "patent
illegality" itself has been held to mean contravention
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of the substantive law of India, contravention of the
1996 Act, and contravention of the terms of the
contract."
17. A similar view, as stated above, has been taken by this
Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd. 7,
wherein it has been observed as follows: (SCC p. 540, para
2)
"2. The contours of the power of the Court under
Section 34 of the Act are too well established to
require any reiteration. Even a bare reading of Section
34 of the Act indicates the highly constricted power of
the civil court to interfere with an arbitral award. The
reason for this is obvious. When parties have chosen to
avail an alternate mechanism for dispute resolution,
they must be left to reconcile themselves to the wisdom
of the decision of the arbitrator and the role of the
court should be restricted to the bare minimum.
Interference will be justified only in cases of
commission of misconduct by the arbitrator which can
find manifestation in different forms including exercise
of legal perversity by the arbitrator"."
35. In Delhi Airport Metro Express Pvt Ltd vs. Delhi Metro Rail
Corporation, (2022) 1 SCC 131, the Hon‟ble Supreme Court on this
aspect held as under:-
"28. The limited grounds available to Courts for annulment
of arbitral awards are well known to legally trained minds.
However, the difficulty arises in applying the well established
principles for interference to the facts of each case that come
up before the courts. There is a disturbing tendency of Courts
of setting aside arbitral awards, after dissecting and
reassessing factual aspects of the cases to come to a
conclusion that the award needs intervention and thereafter,
dubbing the award to be vitiated by either perversity or
patent illegality, apart from the other grounds available for
annulment of the award."
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36. A reference to the above stated pronouncements makes it clear that
this Court while exercising its jurisdiction under Section 34 of the
Arbitration Act shall not sit in appeal and/or re-examine the facts and
evidence of the case.
37. Moreover, the Section 34 of the Arbitration Act also explicitly
limits the grounds available with a party challenging an arbitral award.
The relevant part of the provision is reproduced hereunder:-
"34. Application for setting aside arbitral award.--
(1) Recourse to a Court against an arbitral award may be
made only by an application for setting aside such award in
accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application establishes on the
basis of the record of the arbitral tribunal that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for
the time being in force; or
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms
of the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters
submitted to arbitration can be separated from those
not so submitted, only that part of the arbitral award
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which contains decisions on matters not submitted to
arbitration may be set aside; or
arbitral award which contains decisions on
matters not submitted to arbitration may be set
aside; or
(v) the composition of the arbitral tribunal or
the arbitral procedure was not in accordance
with the agreement of the parties, unless such
agreement was in conflict with a provision of
this Part from which the parties cannot
derogate, or, failing such agreement, was not in
accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not
capable of settlement by arbitration under the
law for the time being in force, or
(ii) the arbitral award is in conflict with the
public policy of India.
[Explanation 1.--For the avoidance of any doubt, it is
clarified that an award is in conflict with the public
policy of India, only if,--
(i) the making of the award was induced or
affected by fraud or corruption or was in
violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental
policy of Indian law; or
(iii) it is in conflict with the most basic notions
of morality or justice.
Explanation 2.--For the avoidance of doubt, the test as
to whether there is a contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute.]
[(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside
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by the Court, if the Court finds that the award is vitiated by
patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the
ground of an erroneous application of the law or by
reappreciation of evidence.] ..."
38. The contents of the provision clearly show that the intention of
legislature while enacting the Arbitration Act, as well as while carrying
out amendments to the same, was that there should be limited
intervention of the Courts in arbitral proceedings, especially after the
proceedings have been concluded and an Award thereto has been made
by the concerned learned Arbitrator. Any claim brought forth a Court of
law under Section 34 of the Arbitration Act shall be in accordance with
the principle of the provisions laid down under the Arbitration Act as well
as interpreted by the Hon‟ble Supreme Court.
39. The words used in the provision are "An arbitral award may be set
aside by the Court only if", which signifies the intent of limiting the scope
of interference by Courts in an Arbitral Award, passed after thorough
procedure, involvement of parties, and appreciation of facts, evidence and
law, "only" in the event of the circumstances delineated in the provision
being met. The limited grounds which may invite the intervention and
action thereupon by the Courts are explicitly laid down under the
provision. What is to be seen by a Court exercising jurisdiction under
Section 34 of the Arbitration Act is that an Award passed by an learned
Arbitrator may only be set aside if it is patently illegal, against the public
policy of India, based on no evidence and delineates no reason for
passing the Award. Hence, this Court being bound by the jurisdictional
limits shall also not examine or reappreciate evidence by acting as an
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appellate court and shall limit itself to the findings of the learned
Arbitrator.
40. The petitioner has invoked Section 34 of the Arbitration act and
challenged the findings in the impugned Award. The claim-wise
submissions have already been laid out in the section above and to
adjudicate the grounds invoked against the Award, this Court shall delve
into the observations and findings made in the impugned Award.
41. The learned counsel for the petitioner assailed the findings under
Claim Nos. 2, 3, 4, 6, 8, 10 and 11 and Counter Claim No. 1. This Court
deems it necessary to reiterate/reproduce the findings of the learned
Arbitrator qua the claims challenged by the petitioner to evaluate whether
the grounds as provided under Section 34 of the Arbitration Act are being
met making the impugned Award liable to be set aside.
42. With reference to Claim No. 2, which pertained to payment against
the deviation items the findings of the learned Arbitrator are reproduced
to evaluate whether the grounds invoked against the Award are tenable to
set aside the Award:-
Claim No. 2(i)
"11.5.7. I am thus convinced with the argument that the
respondent within a reasonable time should have at least
refuted the claim if not determined the rate. In the present
case the respondent neither approved nor refuted the
Claimant‟s rate within the period of one month as specified
in the Clause 12.2. of GCC. I have therefore no hesitation to
hold that the Claimant is entitled to payment of the deviated
quantity in dispute.
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11.5.8. On merit, I have also compared the rate analyses of
both, the claimant and the respondent and have taken a note
that the Claimant has considered transportation charges
from vesting yard to sire, testing charges @2% and liner
driving cost which the respondent did not consider. As
regards to transportation charges, I have no hesitation to
consider the transportation charges to shift the permanent
liner after fabrication at casting yard to site. I am convinced
that on account of space constrains at site due to ongoing
traffic condition, it is not possible to fabricate liner at site.
11.5.9. Regarding driving of permanent liner, it is observed
that as per working drawings, the permanent liner was to be
driven up to 15 meter from the pile cut-off level whereas the
temporary liner was to be driven up to 1.5 meter below
ground level. I am therefore convinced to include the cost of
driving permanent liner in the rate of the subject deviated
item. Supporting documents for driving permanent liner is
also on record. I also find that it is reasonable to include
testing charged @2% of the material cost in the
determination of subject rate of deviated item.
11.5.10. It is noted that while deriving a market rate always
there is a scope of estimation and difference in opinion. Thus,
minor variation of about 10% is always there which should
be ignored.
11.5.11. I have taken note of the fact that the claimant did not
give any set-off towards the cost of using temporary liner
whereas, the respondent has considered @2% of the cost of
permanent liner. More so, the claimant did not produce offer
proper justification for not giving such set-off. I find that
since SOQ item no. 1.2 and SOQ item No. 1.3 are related, set
off for not using temporary liner should be applied. I
therefore think that end of justice will be met if the claimant
is paid an additional payment for the deviated quantity of
444.98 MT at the rate of ₹8,500/- per MT which works out to
444.98x 8,500/- i.e., equal to ₹37,82,330/-."
Claim No. 2(ii)
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"12.5.2. The respondent vide letter dated 17.02.2015
determined the rate of the deviated quantity under Deviation
Statement No. 2 (CD-1/155-160). The Deviation Statement
No. 2 underwent another two revisions, and the third revision
was only on 25.06.2019 (CD-10/2389) i.e., almost 11 months
after actual completion of work. Claimant included the claim
in the final bill dated 26.12.2018 but the respondent denied
the payment while certifying the final bill dated 14.11.2019. I
am therefore convinced that question of application of
Limitation Act and Order II Rule 2 of CPC does not arise.
12.5.3. The Claimant cited the judgment in the case of Khetra
Mohon Banargee, the Supreme Court and in the case of H.M.
Serene v. State of Himachal Pradesh, the Himachal Pradesh
High Court it was held that the Respondent within a
reasonable time should at least refute the claim if not at all
determine the rate. I have noted in the present case also the
Respondent neither approved nor refuted the Claimant‟s rate
within the period of one month as specified in Clause 12.2. of
GCC. Thus, Clause 12 has not been followed properly by
both the parties.
12.5.4. On merit, I have noted that for determination of the
market rate for the deviated quantity of SOQ item no. 8.9, the
Claimant had followed rate analysis of Item no. 15.59 of
DAR 2010 (page 53, Annexure R-6) and the respondent
followed rate analysis of item no 2.4.(ii)(B) of MORT&H
Data Book (page 55, Annexure R-6). Schedule F of the
Contract provides both the references for determination of
market rate for deviated terms.
12.5.5. I have observed that item No. 15.59 of DAR 2010 id
for demolishing Cement Concrete (C.C.)/ Reinforcement
Cement Concrete (R.C.C.) work which in my view necesarrily
include SOQ item 8.9 is for dismantling of RCC crash
barrier. On the other hand, Item no. 2.4(ii)(B) of MORT&H
Data Book is general in bature which include dismantling of
masonry, woodwork, and steel work also along with
dismantling of cement concrete.
*****
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I am therefore convinced with the claimant‟s contention to
apply rate analysis of item no. 15.59 of DAR 2010 for
determination for deviated quantity of subject SOQ item no.
8.9. The Claimant is therefore entitled for additional
payment. But, while deriving market rates always there is
scope of difference in opinion. I Assess that additional
payment of at the rate of ₹ 650 per cum will be reasonable,
thus, claimant is entitled to additional payment of 3471.94 x
650 i.e., ₹22,56,761/-."
43. While considering the Claim No. 2, the learned Arbitrator
considered that the respondent neither approved nor refuted the
Claimant‟s rate within the period of one month, which was specified in
the Clause 12.2. of the GCC. Further, it was noted that the variation in the
rates were minor and could have been ignored since there is always scope
for variation while deriving the market rate. The learned Arbitrator also
observed that the claimant, i.e., the respondent herein did not give any
set-off towards the cost of using temporary liner and did not produce
offer proper justification for not giving such set-off. Therefore, the
claimant was found entitled to be paid an additional payment for the
deviated quantity. Moreover, it is observed that the claimant provided
three revisions for the deviations, which were neither approved nor
refuted by the petitioner herein. Hence, by finding the respondent entitled
for the payment against deviation, the learned Arbitrator awarded the
Claim in favour of the respondent. For the same, the learned Arbitrator
gave extensive reasoning while referring to the communications
regarding deviation in rates provided in the Data Book, DAR 2010, and
also while considering the scope of deviation in market rate.
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44. Therefore, it cannot be said that the learned Arbitrator has not
considered the submissions of the parties or the material on record.
45. Qua the Claim No. 3, by which the learned Arbitrator considered
the claim for payment of boring cast-in-situ piles with conventional piling
rig, the following observations were made:-
"13.5.2. I have taken note that in terms of clause 7.8.4 of the
contract hydraulic integrated piling rig was to be used for
carrying out piling works. From the docuements on record, I
have observed that in Ramp C, high tension electrical line
was encountered which could not be shifted fue to height
restriction available hydraulic intergrated piling rig could
not be used for piling works of seven (7) locations.... The
claimant vide letter dated 18.12.2013 (CD-1/81) intimated
that conventional piling system using Direct Mud Circulation
(DMC) was instructed to be used for the aforesaid locations.
*****
13.5.4. The Claimant vide letter dated 15.04.2014 (CD-1/94)
informed that no payment for executed quantity of piling
works using DMC method was released by the respondent.
The claimant did not agree with the cost adjustment proposal
and vide letter dated 29.04.2014 (CD-1/96) intimated that
available integrated rig could not be used and claimant is
carrying additional expenditure on account of mobilization of
additional DMC piling system and its slow rate of progress.
The Claimant submitted that it would claim the additional
expenditure in due course and requested to release payment
of already executed quantity of 238.5 meter at SOQ rate and
vide letter dated 22.11.2014 (CD1/112-130) submitted its
detailed rate analysis.
*****
13.5.6. To over the obstruction, the claimant was instructed
to bring additional piling system. The claimant has made
additional arrangement for carrying out 817 meter piling
work at obstructed site despite adequate availability of
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integrated piling rigs at site to carry out the job of 817 meter
piling work at much lesser time. It is admitted position that
conventional piling system by DMC method was used for
construction of 7 locations of piles on account of obstructions
and respondent could not prove any cost benefit to the
claimant which could be passed over to the respondent by
creating a deduction or minus item. Comparison of any
standard rate analysis like DSR, MORT&H Data Booketc.
Would not be applicable in the matter giving special facts
and circumstance i.e., obstruction of height restriction at site.
In absence of obstruction of height restriction, the claimant
could have carried out the piling work by using available
rotary hydraulic rig. In my considered opinion it is not a case
of replacement but a case of supplement. I, therefore, held
that the recovery made by the Respondent is wrongful and
the claimant is at least entitled to release of the recovered
payment on account of carrying out piling work using DMC
method. I could have happened but, the Claimant could not
properly support its claims for additional cost and hence I
reject claim no. 3(i) of the Claimant."
46. The learned Arbitrator after making the above mentioned
observations awarded a sum of Rs. 31,45,642/- to the claimant, while also
rejecting the part of the claim. The findings in the Award observed that
the respondent initiated negative extra item and also sanctioned a
deduction vide its communications to the petitioner. It was further noted
that the respondent as per its own convenience did not shift the high-
tension electric line and thereafter, sought to take the advantage of its
own convenience. A perusal of the findings as aforesaid reveals that the
learned Arbitrator considered the facts and circumstances, the
communications between the parties, the deductions made by the
respondent in the standard rates.
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47. The analysis drawn by the learned Arbitrator in the quoted
paragraphs as well as the other findings in the impugned Award with
respect of the Claim No. 3 were supported by elaborated reasoning, based
on documents and contentions of the parties.
48. The petitioner has also assailed the findings in the impugned
Award qua Claim No. 4 by which the learned Arbitrator adjudicated the
claim for refund of the amount deducted towards the extra item for
conducting the High Strain Dynamic Load test in lieu of the Vertical
Static Load test on the working pile. The relevant portion under the claim
is reproduced hereunder:-
"14.5.1. .... I find that the Claimant was carrying out SOQ
item no. 1.2 for piling works and was also carrying out 2%
routine static vertical load test. As static load test is time
consuming, high strain dynamic pile load test was proposed
for discussion and approval of the Consultant and the
Respondent.
14.5.2. During the 36th Coordination meeting dated
05.10.2013, the matter of approval for conducting high strain
dynamic load test in lieu of static load test was discussed
with the consultants, M/s VKS and M/s CCPL. Further, the
respondent requested the Claimant to give consent for cost
adjustment as will be decided by the competent authority.
Claimant while submitting cost comparison vide letter dated
31.01.2014 (CD-1/83), submitted that dynamic pile load test
is although costly by as it is time saving no additional
payment for conducting dynamic load test will be charged.
Claimant vide letter dated 29.04.02014 (CD-1/97)
categorically notified that "we are carrying out dynamic pile
load test in lieu of static load test with clear understanding
that neither we will be charging any additional payment nor
we will be liable for any cost adjustment."
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14.5.3. I have observed that the Respondent ignoring the
understanding initiated minus extra item vide letter dated
13.08.2014 (CD1/99). Respondent vide letter dated
17.02.2015 (CD1/148) sanctioned the deduction of
₹2,18,228/- per number. However, vide letter dated
22.09.2017 (CD1/207) respondent revised the rate to
₹2,57,986 per number and recovered the amount.
14.5.4. I have taken note of the fact that the claimant did not
consent for any cost adjustment. On the other hand, the
dynamic load tests were conducted by the Claimant with
clear understanding that neither it would be charging any
additional payment, nor it would be liable for any cost
adjustment. The respondent never refuted such understanding
but ultimately made the cost adjustment and recovered an
amount of ₹15,47,916/- (₹2,57,986 per number for 6 nos.)
ignoring the understanding and after the work was
completed. Further the Respondent sought cost comparison
before approval, the Claimant submitted the cost comparison
vide letter dated 31.01.2014. The Respondent did not
comment on the cost comparison but approved the change
unconditionally without any cost adjustment. The deduction
appeared to be based on unqualified assumptions of the
Respondent. I therefore have no hesitation to hold the
recovery made by the Respondent as unjustified without
giving any weightage to the benefit of doing dynamic load
test.
14.5.5. ... Under the facts and circumstance, Respondent
could not also prove any cost benefit to the claimant which
could be passed over to the respondent by creating a
deduction or minus item. On this ground also, the recovery
made by the Respondent is not justified particularly as the
Respondent is also benefited by saving of time.
49. Based on the findings above, the learned Arbitrator awarded a sum
of Rs. 15,47,916/- to the claimant. The learned Arbitrator considered the
deficiencies on the part of the respondent despite the agreement that
neither party would charge any additional payment for the dynamic load
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tests. The learned Arbitrator considered, in entirety, the circumstances in
the alternative testing. The deduction made by the petitioner was not
found to be in accordance with the terms decided between the parties and
hence, the respondent was found to be entitled for the sum of Rs.
15,47,916/-. This Court finds that Claim No. 4 was decided while
examining the material before the learned Arbitrator and after hearing the
parties at length on the challenge.
50. Challenge has also been brought before this Court regarding the
findings of the Court regarding Claim No. 6 where the sum payable
towards damages of extended stay on account of overhead charges and
plant and equipment was adjudicated upon.
51. While coming to the conclusion under Claim No. 6, the learned
Arbitrator referred extensively to the provisions under the Indian Contract
Act, 1872, (hereinafter "Contract Act") specifically Sections 51 to 54. It
was noted that as per Section 52 of the Contract Act, reciprocal promises
shall be performed in order of which the nature of transaction requires
when the order in which the reciprocal promises to be performed is not
expressly fixed by the contract. In the instant matter it was found that in
light of said provision and the facts of the cases it was the duty of the
respondent to perform its obligations and non-fulfilment amounted to a
breach. The said obligations on the part of the respondent included
handing over of possession of site, delivery of work drawings, issuance of
necessary instruction for carrying out the work, non-interference with the
progress of work and permitting the contractor to carry out the whole of
the work.
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52. The contract period for completion of work in the case at hand was
of 24 months which was extended up to 66 months. There was a delay of
41 months and the learned Arbitrator examined whether the same was
attributable to the respondent. After an elaborate and comprehensive
appreciation of the facts, circumstances, contentions, terms of the contract
and the stipulated therein, to this effect, the learned Arbitrator observed
as under:-
"16.5.9. From the above analysis and examination of
plethora of documents, I find that Work fronts were handed
over in piecemeal manner with inordinate delay. The
available work fronts were also not workable and full of
hindrances. There were inordinate delays I supply of
construction drawings and the drawings were not supplied in
consonance with the programme. Substantial delay was
observed in approval of design/drawings for flyover portion
in the Railway land which respondent contended as third-
party delay. I however do not find any merit in that
argument."
53. Referring to Clause 11 of the NIT, Clause 4.1.4 of the Scope of
Work, Clause 3.5 of the Special Conditions of Contract, Clause 11 of the
GCC, Clause 8.1 of the Particular Specification of Contract, the learned
Arbitrator noted that the respondent was under obligation to make 90% of
the site available at the time of award of the work, the work was to be
carried out as per the designs/drawings finalized by the respondent, the
contractor was not allowed to deviate from such designs, the respondent
was to furnish one copy of contract document with specifications to the
contractor and the work was to be carried out in accordance with the
Good for Construction drawings. Accordingly, the learned Arbitrator held
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that the respondent was liable for the delay caused in the work for the
delay at the abovesaid stages.
54. While observing that the respondent was also liable for wrongful
stoppage of work, the learned Arbitrator referred to K.N. Sathyapalan vs.
State of Kerala, (2007) 13 SCC 43 passed by the Hon‟ble Supreme
Court. It was found that the respondent failed to perform its duty to
provide the necessary supports for immediate recommencement of work.
The learned Arbitrator also referred to the Arbitral Award passed in the
first round of arbitration between the parties while substantiating his
findings. Finally, it was observed as under:-
"16.5.26. I have already taken the view that the delay of 882
days was attributable to the Respondent. The Respondent
includes GNCTD, Delhi Police, Railways all other Central
Government Departments, PSUs etc. which are part of UOI.
No individual can be held responsible for delays of the
project as it was the system as while is responsible and the
Claimant cannot be held responsible for the same. This fact
which is also accepted by the Respondent by granting
unconditional time extension for the entire extended period.
The last extension was granted up to 31.07.2018 vide letter
dated 24.10.2019 (CD-6/1442). The Claimant is entitled to
damages/compensation for the financial loss suffered by it
due to prolongation of the contract."
55. After holding so, the learned Arbitrator made careful deliberation
towards the quantification of the claim and after recording extensive
reasoning for the same, awarded the sum of Rs. 45,40,36,914/-. The
learned Arbitrator appreciated all the expenses, compensations, damages,
expenditure, costs incurred and after comprehensive corroboration arrived
at the amount so awarded.
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56. This Court, after perusal of the findings qua Claim No. 6, finds that
there is no scope for interference in the same since the findings of the
learned Arbitrator are based on elaborate reasoning which is based on
thorough examination of the material on record.
57. Claim No. 8 was decided in reference to the sum payable against
damages during extended stay on account of uncovered price escalation
of reinforcement bars, labour, construction material. Qua Claim No. 8,
the learned Arbitrator referred to the judgments of P.M. Paul vs. Union
of India, AIR 1989 SC 1034 and Delhi Jal Board vs. Subash Pipes Ltd.,
2005 SCC OnLine Del 180.
58. It was further observed that the contract clauses which bar
compensation for breach are unenforceable being contrary to the
provisions under the Contract Act. The learned Arbitrator in his
comprehensive findings regarding delay already observed that the
petitioner was responsible for the delay caused in the work and
accordingly, he found that on the account of delay and failure on the part
of the petitioner for performance of its obligations and breach of contract,
the petitioner was liable to pay the compensation for the losses suffered
by the respondent.
59. The learned Arbitrator again referred to and appreciated all the
relevant documents and pleadings including Office Memorandums,
provisions of the contract, letters/communications between the parties to
reach the conclusion and only thereafter, awarded the sum of Rs.
8,59,27,007/- to the respondent herein.
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60. On the question of simple interest for the period of pre-reference,
pendente lite and future from the date of the cause of action, which was
raised under Claim No. 10, the learned Arbitrator observed as under:-
"20.5.1. It is also noticeable that the agreement does not
expressly prohibits the payment of interest. Section 31(7) (a)
of Arbitration and Conciliation Act also mandates inclusion
of interest unless otherwise agreed by the parties for the
period between date on which cause of action has arisen and
the date on which award is made by the Arbitral Tribunal
where award is for payment of money subject to decision of
Hon‟ble Tribunal in this regard. It is a settled law that
Arbitrator appointed with or without intervention of the
court, has jurisdiction to award interest, on the sums found
due and payable, for the pre-reference period, in the absence
of any specific stipulation or prohibition in the contract to
claim or grant any such interest.
20.5.2. The claimant is a business entity and his money now
being awarded by this tribunal was blocked for a
considerable period and he was deprived of using his own
money by the respondent for his business and to make further
profit by circulation of money. Thus, it is considered
appropriate that, the ends of justice will be met only if the
interest is awarded to the claimant on his blocked capital.
20.5.3. So far as the rate of interest is concerned, this
tribunal is fully convinced that the judgment being relied
upon by the claimant to justify his demand of rate of interest
as 15% is not applicable in the present case since in that
case the principle of equity was applied when the rate of
interest was provided under the contract.
20.5.4. Thus, I feel it appropriate to allow the rate of interest
on the principle of equity as demanded by the claimant. The
rate of interest provided under the contract under clause 10
B (ii) for mobilisation advance is 10%. But, at the same time
the said amount if interest is to be recovered on the monthly
basis (since intermediate bills are to be paid monthly). But it
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is not so in the present case. Moreover, the mobilisation
advance is a secured loan not unsecured loan. Also, the
period of the agreement is also pre-fixed for 10% interest
against mobilisation advance. Above all, the respondent in
this case is the public authority and if he had not given the
mobilisation to the claimant, the respondent was not expected
to earn profit by using the said money in business like the
claimant who is a business entity.
20.5.5. in view of the above findings. Accordingly, as per my
assessment, I decide that it will be reasonable to allow the
claimants a simple interest @10% per annum against this
claim."
61. After looking into the reasons given above by the learned
Arbitrator, it is clear that he has taken into account the submissions made
by the parties as well as the documents which were referred by them, and
after considering them, has reached to the conclusion that the respondent
herein was entitled for the interest. It is not the case that the conclusion or
the Award by the learned Arbitrator was based on the case of no evidence
and there are clear and certain findings on the aspect of grant of interest
which are also supported by the reasoning.
62. Finally, the petitioner is aggrieved by the findings in the Claim No.
11 and the Counter Claim No. 1 wherein the cost of arbitration was
discussed. The learned Arbitrator held as under:-
"21.4.1. After overall analyses of the record placed before
this tribunal, it is found that the Claimants had to undergo
arbitration for their claims which have been found payable to
them. Although Claimant claims are found slightly
exaggerated, some of them also found justified on merits.
Accordingly, the claim of cost is also not unjustified.
Therefore they are entitled to be compensated for the cost of
arbitration."
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63. The learned Arbitrator after considering the entire findings made in
the Award and referring to the judgment of this Court in Rail Vikas
Nigam vs. Simplex Infrastructure Limited, 2020 SCC OnLine Del 2101
held the petitioner liable to pay a sum of Rs. 40,00,000/- towards the
arbitrator‟s fee.
FINDINGS
64. The law, as elaborated above, is settled that there is limited scope
when it comes to the jurisdiction of this Court under Section 34 of the
Arbitration Act. The Courts, limiting themselves to examining the Award
itself and not the facts of the case. A Court shall not conduct a roving
enquiry into the facts and evidence of the matter and neither shall the
Court sit in appeal against the Award of the Arbitrator.
65. Furthermore, an Arbitrator has wide powers while adjudicating
arbitration proceedings. There is, undoubtedly, a scrutiny on the
Arbitrator and the Awards passed by him, which has been stipulated
under the Arbitration Act. However, there is a deemed privilege of
limited intervention from the Courts which the Arbitrators have. The
same has been reiterated by the Hon‟ble Supreme Court time and again.
66. There is an extent to the accountability put upon an Arbitrator
while passing an Award. This is evident from the fact that with the
enforcement of the Arbitration and Conciliation Act, 1996, an Arbitrator
needs only to adhere to and fulfil the requirements under Section 31 of
the Act. In addition to the requirements laid down under the provision, an
arbitrator, although acting in accordance with the requirements of the
Arbitration Act, need not act as a formal Court while adjudicating a
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dispute and pass an Award which is detailed or speaking. The Hon‟ble
Supreme Court has reiterated that an Award which is not speaking shall
be set aside by the Court only in exceptional cases. While considering a
challenge to an Arbitral Award where private parties are involved, the
Court need not examine the validity of the findings or the reasoning
behind the findings given by an Arbitrator. The extent to which a Court
may exercise supervisory powers in this respect is limited to examining
whether the Award and the conclusion drawn therein is supported by
findings and not whether the findings themselves are erroneous or sound.
67. In Anand Brothers (P) Ltd. vs. Union of India & Ors., (2014) 9
SCC 212, the Hon‟ble Supreme Court on the question of a reasoned or
speaking Award observed and held as under:-
"7. Before we examine whether the expression ''finding"
appearing in Clause 70 would include reasons in support of
the conclusion drawn by the arbitrator, we consider it
appropriate to refer to the Constitution Bench decision of this
Court in Raipur Development Authority v. Chokhamal
Contractors wherein this Court was examining whether an
award without giving reasons can be remitted or set aside by
the Court in the absence of any stipulation in the arbitral
agreement obliging the arbitrator to record his reasons.
Answering the question in the negative, this Court held that a
nonspeaking award cannot be set aside except in cases where
the parties stipulate that the arbitrator shall furnish reasons
for his award. This Court held: (SCC pp. 750-51, para 33)
"33 . ... When the parties to the dispute insist upon
reasons being given, the arbitrator is, as already
observed earlier, under an obligation to give reasons.
But there may be many arbitrations in which parties to
the dispute may not relish the disclosure of the reasons
for the awards. In the circumstances and particularly
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having regard to the various reasons given by the
Indian Law Commission for not recommending to the
Government to introduce an amendment in the Act
requiring the arbitrators to give reasons for their
awards we feel that it may not be appropriate to take
the view that all awards which do not contain reasons
should either be remitted or set aside."
Having said that, this Court declared that the Government
and their instrumentalities should-as a matter of policy and
public interest-if not as a compulsion of law, ensure that
whenever they enter into an agreement for resolution of
disputes by way of private arbitrations, the requirement of
speaking awards is expressly stipulated and ensured. Any
laxity in that behalf might lend itself to and, perhaps justify
the legitimate criticism, that the Government failed to
provide against possible prejudice to public interest.
8. The following passage is in this regard apposite: (Raipur
Development Authority case, SCC pp. 752-53, para 37)
"37. There is, however, one aspect of non-speaking
awards in non-statutory arbitrations to which
Government and governmental authorities are parties
that compel attention. The trappings of a body which
discharges judicial functions and is required to act in
accordance with law with their concomitant
obligations for reasoned decisions, are not attracted to
a private adjudication of the nature of arbitration as
the latter, as we have noticed earlier, is not supposed
to exert the State's sovereign judicial power. But
arbitral awards in disputes to which the State and its
instrumentalities are parties affect public interest and
the matter of the manner in which Government and its
instrumentalities allow their interest to be affected by
such arbitral adjudications involve larger questions of
policy and public interest. Government and its
instrumentalities cannot simply allow large financial
interests of the State to be prejudicially affected by
non-reviewable---except in the limited way allowed by
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the statute-non-speaking arbitral awards. Indeed, this
branch of the system of dispute resolution has, of late,
acquired a certain degree of notoriety by the manner
in which in many cases the financial interests of
Government have come to suffer by awards which
have raised eyebrows by doubts as to their rectitude
and propriety. It will not be justifiable for
Governments or their instrumentalities to enter into
arbitration agreements which do not expressly
stipulate the rendering of reasoned and speaking
awards. Governments and their instrumentalities
should, as a matter of policy and public interest-if not
as a compulsion of law-ensure that wherever they
enter into agreements for resolution of disputes by
resort to private arbitrations, the requirement of
speaking awards is expressly stipulated and ensured. It
is for Governments and their instrumentalities to
ensure in future this requirement as a matter of policy
in the larger public interest. Any lapse in that behalf
might lend itself to and perhaps justify, the legitimate
criticism that Government failed to provide against
possible prejudice to public interest."
9. Reference may also be made to the Arbitration and
Conciliation Act, 1996 which has repealed the Arbitration
Act, 1940 and which seeks to achieve the twin objectives of
obliging the Arbitral Tribunal to give reasons for its arbitral
award and reducing the supervisory role of courts in
arbitration proceedings. Section 31(3) of the said Act obliges
the Arbitral Tribunal to state the reasons upon which it is
based unless the parties have agreed that no reasons be
given or the arbitral award is based on consent of the
parties. There is, therefore, a paradigm shift in the legal
position under the new Act which prescribes a uniform
requirement for the arbitrators to give reasons except in the
two situations mentioned above. The change in the legal
approach towards arbitration as an alternative dispute
resolution mechanism is perceptible both in regard to the
requirement of giving reasons and the scope of interference
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by the court with arbitral awards. While in regard to
requirement of giving reasons the law has brought in
dimensions not found under the old Act, the scope of
interference appears to be shrinking in its amplitude, no
matter judicial pronouncements at time appear to be heading
towards a more expansive approach that may appear to some
to be opening up areas for judicial review on newer grounds
falling under the caption "public policy" appearing in
Section 34 of the Act. We are referring to these developments
for it is one of the well-known canons of interpretation of
statutes that when an earlier enactment is truly ambiguous in
that it is equally open to diverse meanings, the later
enactment may in certain circumstances serve as the
parliamentary exposition of the former.
14. It is trite that a finding can be both: a finding of fact or a
finding of law. It may even be a finding on a mixed question
of law and fact. In the case of a finding on a legal issue the
arbitrator may on facts that are proved or admitted explore
his options and lay bare the process by which he arrives at
any such finding. It is only when the conclusion is supported
by reasons on which it is based that one can logically
describe the process as tantamount to recording a finding. It
is immaterial whether the reasons given in support of the
conclusion are sound or erroneous. That is because a
conclusion supported by reasons would constitute a "finding"
no matter the conclusion or the reasons in support of the
same may themselves be erroneous on facts or in law. It may
then be an erroneous finding but it would nonetheless be a
finding. What is important is that a finding presupposes
application of mind. Application of mind is best
demonstrated by disclosure of the mind; mind in turn is best
disclosed by recording reasons. That is the soul of every
adjudicatory process which affects the rights of the
parties...."
68. In the instant case, a perusal of the Award, as well as the findings
which have also been reproduced above, shows that the learned Arbitrator
has passed an extremely elaborate and comprehensive Award after
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dealing with each claim raised on behalf of the parties, the facts of the
case, the material on record, including documents referred to, the
precedents cited on behalf of the parties. No argument or claim was left
unheard by the learned Arbitrator which is evident from the 159-page
Award.
69. As stated above, the learned Arbitrator only needed to be supported
by reasoning, the validity of which is not for this Court to test. There is
no doubt that the award is reasoned and is supported by extensive
findings.
70. The petitioner invoked the ground of patent illegality, however, the
law has also been settled regarding the grounds under Section 34 of the
Arbitration Act. In order to set aside an Award under Section 34 the
petitioner must show that illegality which has been alleged goes to the
root of the matter and is not an illegality of trivial nature. In failure of the
same the impugned Award cannot be held to be against the public policy.
Award could also be set aside if it is so unfair and unreasonable that it
shocks the conscience of the court. Such award is opposed to public
policy and is required to be adjudged void. Reference in this regard is
made to the judgment passed in BCCI vs. Cricket Association & Ors.
(2015) 3 SCC 251 and State of Chhattisgarh vs. Sal Udyog (P) Ltd.,
(2022) 2 SCC 275 by the Hon‟ble Supreme Court.
CONCLUSION
71. The law which has been settled by the Hon‟ble Supreme Court is
that the scope of interference with an Arbitral Award under Section 34 of
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the Arbitration Act is fairly limited and narrow. The Courts shall not sit in
an appeal while adjudicating a challenge to an Award which is passed by
an Arbitrator, the master of evidence, after due consideration after facts,
circumstances, evidence and material before him.
72. To argue that the impugned Award before this Court is liable to be
set aside in the instant petition, it has been submitted that the findings of
the learned Arbitrator are patently illegal and against the fundamental
policy of India. As stipulated by the aforementioned precedents, the
words are not to be construed in their plain meaning, but the essence
which to be appreciated while adjudicating a challenge under Section 34
of the Arbitration Act is that the illegalities or deficiencies are such that
they are apparent on the face of record and/or shock the conscience of the
Court and can in no manner be sustained. In the case at hand, the
petitioner has not been able to show that the impugned Award suffers
from such illegality that is apparent on the face of record and upholding
the same would be against the law.
73. A perusal of the impugned award makes it evident that there is no
patent illegality or error apparent on the face of record. The learned
arbitrator has passed the impugned Award after considering all the
relevant material placed before it during the arbitral proceedings. The
Award is well-reasoned, detailed, is not in contravention of fundamental
policy of Indian law, and thus,s there is no reason for interfering in the
impugned Award.
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74. The petitioner has failed to show that any grounds that are
stipulated under Section 34 of the Arbitration Act are being met.
Therefore, the petition stands dismissed for being devoid of any merit.
75. Pending applications, if any, also stand disposed of.
76. The judgment be uploaded on the website forthwith.
(CHANDRA DHARI SINGH)
JUDGE
APRIL 26, 2023
gs/ms
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