Delhi High Court
Kvr Aqua Clare Pvt. Ltd. vs Indian Railway Catering And Tourism ... on 25 July, 2024
Author: Prateek Jalan
Bench: Prateek Jalan
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 25 th July, 2024
+ O.M.P. (COMM) 264/2024
KVR AQUA CLARE PVT. LTD. .....Petitioner
Through: Mr. V. Chitambaresh, Sr. Advocate
with Mr. Tom Joseph, Mr. Govind
Venugopal, Ms. Arya Krishnan,
Advocates.
versus
INDIAN RAILWAY CATERING AND TOURISM
CORPORATION LIMITED (IRCTC) .....Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE PRATEEK JALAN
PRATEEK JALAN, J. (ORAL)
I.A. 32224/2024(Exemption)
Exemption allowed, subject to all just exceptions.
The application stands disposed of.
O.M.P. (COMM) 264/2024, I.A. 32223/2024 (application for stay) I.A.
32225/2024 (application seeking permission to file lengthy list of dates)&
I.A. 32226/2024 (application seeking permission to file additional
documents)
1. This petition under Section 34 of the Arbitration and Conciliation
Act ["the Act"] is directed against an arbitral award dated 11.04.2024, by
which a learned sole Arbitrator has adjudicated disputes between the
parties under a Concession Agreement dated 15.09.2014 ["Concession
Agreement"]. The learned Arbitrator has rejected the claims of the
petitioner herein and awarded various counterclaims raised by the
respondent.
2. The Concession Agreement was executed pursuant to a tender for
construction and operation of plants for packaged drinking water
["PDW"] under the brand name "Rail Neer". The petitioner was the
successful bidder in a tender issued on 08.11.2013 and was granted a
letter of award dated 10.07.2014, following which the parties executed
the Concession Agreement on 15.09.2014. The Concession Agreement
was on a Design, Build, Finance, Own, Operate and Transfer
["DBFOOT"] model. In terms of the contract, the petitioner was to
construct the plant on the land licensed to it by the respondent and to
manufacture PDW in the said plant. For this purpose, it was liable to pay
license fee for the land and was entitled to recover manufacturing costs in
terms of a formula provided in the contract. The proceeds of sale of PDW
were to be made over to the respondent.
3. The parties conducted their business under the contract smoothly
until March, 2020 when manufacturing and demand for Rail Neer were
both interrupted by COVID-19 pandemic, with the consequent lockdown
and suspension of train services.
4. The petitioner, which claims to have invested a sum of
approximately ₹8 crores in the plant, was faced with continuing fixed
costs and unsold stock. It sought waiver of license fee and various other
reliefs from the respondent. The parties entered into a "Rider
Agreement", on 21.01.2021, which inter alia provided for shortfall
compensation and for a revision in the manufacturing rate payable to the
petitioner. The petitioner sought implementation of the revised price of
manufacturing with effect from 01.04.2017 and reimbursement of excess
pay, as well as revision of the performance bank guarantee and payment
of compensation for the shortfall in supply.
5. As the parties were unable to agree upon the aforesaid demands,
the petitioner invoked arbitration on 17.09.2021. The respondent disputed
the claims, inter alia, on the ground of force majeure. The learned
arbitrator was appointed by an order of this Court dated 02.03.2022 in
ARB.P. 60/2022.
6. Before the learned Arbitrator, the petitioner raised five claims,
tabulated below:
Claim Particulars Amount claimed
No.
1. For payment of revised manufacturing P0 Rs. 78,57,679 /-
rate.
2. Against shortfall compensation for FY Rs. 2,27,95,944/-
2020-21 and FY 2021-22.
3. Against input credit amount deposited to Rs. 58,43,941/-
IRCTC at the rate of 24% interest.
4. Interest at the rate of 18% per annum -
compounded monthly.
5. Costs -
7. The respondent disputed the petitioner's claim, and also asserted
the following counterclaims:
"a. Rs.2,68,94,766/- as sale collections not having been deposited
in terms of clause 5.1.3(d)(x) till April, 2022;
b. Rs.81,09,839/- as licence fees from April, 2022 to March, 2023
for the year 2022-23;
c. Rs. 18,71,447/- against the amount directed by EPFO to be paid
by IRCTC against the dues of KACPL;
d. Rs.54,11,586/- for payment made by IRCTC against electricity
bill of KSEB for the month of February, 2022; and
e. Legal expenses.
f. Additionally, IRCTC has claimed interest at the rate of 12% per
annum in paragraph 136; while 18% has been sought in paragraph
141 of the statement of defence."
8. After completion of pleadings the learned Arbitrator framed the
following points for determination on 23.11.2022:
"1. Whether the Claimant is entitled to the claims as set out in
the Statement of Claim? OPC
2. Whether the Claimant is entitled to pendente lite interest @
18% per annum till realization? OPC
3. Whether the Claimant is entitled to costs? OPC
4. Whether Respondent has illegally and wrongly did not re-fix
the P0 calculation of manufacturing cost to the Claimant as followed
by the Respondent with other plants? OPR
5. Whether Respondent has illegally held the shortfall
compensation for the Financial Year 2020-2021 and Financial Year
2021-2022? OPR
6. Whether the Claimant regularly defaulted in remitting the
collection from the sale of Packaged Drinking Water in terms of
Clause 5.1.3(d)(x) of the Concession Agreement? OPC
7. Whether the Concession Agreement was affected by COVID-
19 Pandemic, and if so, the effect of it on the workings under the
Concession Agreement? OPC
8. Whether the Claimant regularly failed to make payment of
the salaries of the staff working at the plant at Parassala and has
also withheld making payment of statutory dues such as employees'
provident fund? OPR
9. Whether the Respondent is entitled to electricity dues under
the Concession Agreement? OPR
10. Whether the Respondent is entitled to recover an annual
license fee from April, 2022 to March, 2023? OPR
11. Whether the Respondent is entitled to recover the costs from
the Claimant along with pendente lite and future interest @ 18% per
annum until payment of the aforesaid rate of interest? OPR"
9. The parties agreed that oral evidence was not required and that the
disputes would be decided on the basis of pleadings and documents
which had been filed by them. This is also recorded in the impugned
award in the following terms:
"31. On the very same day, learned counsel for both the parties
submitted that it was not necessary to lead oral evidence and the
matter can be decided on the basis of pleadings and documents
already filed. Accordingly, the matter was kept for arguments."
10. The parties then led oral arguments, and also filed written
submissions. It appears from the impugned award that, after the
arguments of the petitioner herein [claimant before the learned Arbitrator]
had concluded, the respondent filed certain additional documents,
alongwith its written submissions on 10.04.2023. The petitioner thereafter
also filed additional documents with its written submissions, after the
arguments of the respondent herein had concluded. Neither party filed an
application for taking the additional documents on record. In the
impugned award, the learned Arbitrator declined to consider the
additional documents so filed at the stage of arguments, without leave of
the tribunal.
11. Upon a consideration of merits of the case and documents
originally filed by both parties, the learned Arbitrator has found against
the petitioner on the claims raised by it and also awarded the
counterclaims of the respondent.
12. Mr. V. Chitambaresh, learned Senior Counsel for the petitioner,
pressed the challenge only with regard to denial of the petitioner's Claim
No. 1, and award of Counterclaim (d). In this connection, he also raised
two legal arguments:
a) that the learned Arbitrator had wrongly ignored the additional
documents filed by the parties; and
b) that this Court must consider the substantive pleas of the petitioner
only after issuing notice to the respondent and requisitioning the
arbitral record.
13. The arguments before this Court were limited to these aspects. The
relevant findings of the learned Arbitrator and specific arguments in
support of the grounds of challenge, are discussed, in turn, below.
A. Claim No. 1 (For payment of revised manufacturing P0 rate):
14. Mr. Chitambaresh submitted that the petitioner was contractually
entitled to recover the price for manufacturing services, computed in
accordance with a formula in Clause 14.2 of the Concession Agreement.
The formula is reproduced below:
"R1=(R0/100)*[40+34*(P1/P0)*(W1/W0)+4*(C1/C0)+2*(B1/B0)+6*(S1/S0)
+7*(L1/L0)+7*(F1/F0)]"
15. Mr. Chitambaresh contended that one of the factors in the above
formula, viz., P0, was wrongly taken by the respondent, ignoring a trade
discount offered by the concerned manufacturer, as a result of which P0
was inflated, and the manufacturing price consequently reduced.
16. It is evident from the above formula that several variables go into
the ultimate computation of manufacturing price, including P0. P0 is
defined as the "price of RELPET GRADE-G5801 as on 15th of preceding
tender opening month". The petitioner's claim was that a rate of ₹110.90
per kg had been incorporated in the formula, whereas the manufacturer
Reliance Industries Ltd. had, in fact, offered a respondent a trade discount
of ₹8000 per metric ton [Rs. 8 per kg] in a communication dated
01.12.2013. According to the petitioner, P0, therefore, ought to have been
fixed after taking into account the trade discount, which would have led
to a higher manufacturing cost being payable to the petitioner. This claim
is elaborated in paragraphs 50 to 50.12 of the statement of claim, and the
communication dated 01.12.2013 has been exhibited therewith, as exhibit
CD-36.
17. The learned Arbitrator has rejected this claim, principally on the
ground that P0 was to remain constant during the entire tenure of the
contract and had been fixed at ₹110.90 per kg, upon the suggestion of the
petitioner itself. For this purpose, the learned Arbitrator noted paragraph
50.5 of the statement of claim and held as follows:
"49. As per the own case of KACPL, IRCTC had sought the
opinion of KACPL in this regard; which had suggested the rate of Rs.
110.90 per kg. The relevant averments in the statement of claim are
as under:
"50.5. However, in the present case, the Respondent
without disclosing the price of RELPET from the Reliance
website sought Claimant's opinion for fixation of P0 at a
price of RELPET Grade- G5801 (resin). Since Claimant
was novice to such business who had no knowledge
fixation of P0 at a price of RELPET Grade- G5801
(resin), it enquired from the available suppliers and the
Claimant vide letter dated 21.06.2018 informed
Respondent that one of its suppliers M/s. Manjushree
Techno Pack Limited has confirmed the price of Rs.
110.90/- as the value of P0 but this price was never
accepted by the Claimant for fixation of P0 as evidently
M/s. Manjushree Techno Pack Limited was not the
manufacturer of the RELPET Grade-G5801 but only a
supplier in market for the same. (Exhibit CD-35).'
(Emphasis Supplied)
50. Interestingly, KACPL admits having itself suggested the rate
of Rs.110.90/kg for RELPET Grade-G5801; however, in the same
breath, says that the very price was not accepted by it. Neither of the
parties placed the letter dated 21.06.2018 on record with their
pleadings. In any case, it is not disputed that the rate of Rs. 110.90/kg
was fixed at the suggestion of KACPL only. Once, KACPL had
suggested the rate in response to a query of IRCTC and IRCTC had
accepted the rate, it does not lie in the mouth of KACPL to suggest
that the rate was not acceptable to it. There is another reason to hold
so. IRCTC had taken P0 at Rs. 110.90/kg and implemented it with
effect from 01.04.2017. It was only on 17.02.2020 that KACPL
requested revision of P0 by deducting the trade discount being
offered by M/s Reliance Industries Limited. As such, KACPL had
remained mum on the rate being taken by IRCTC for quite some time.
51. Even otherwise, the only basis for resiling from P0 is that
M/s Manjushree Techno Pack Limited was not the manufacturer of
RELPET Grade-G5801, but only its supplier. The Concession
Agreement does not talk about the price of RELPET Grade-G581
from its manufacturer and merely refers to its price. The price
would inevitably refer to the price at which the resin is available in
the market. As such, merely because M/s Manjushree Techno Pack
Limited was a supplier does not mean that the rates quoted by it
could not be taken as a benchmark for fixing P0. That apart, even if
one were to assume that KACPL was under some mistake as to M/s
Manjushree Techno Pack Limited being a supplier or manufacturer,
the same would not affect the binding nature of rate fixed between the
parties [see section 22 of the Indian Contract Act]1."
18. I find no reason to interfere with the aforesaid analysis in the
impugned award. Mr. Chitambaresh did not dispute the finding in the
award that P0 had been fixed at ₹110.90 per kilogram at the suggestion of
the petitioner. Indeed, it was so admitted in the statement of claim itself.
The learned Arbitrator has therefore held the petitioner bound to the rate
of P0 suggested by it. The learned Arbitrator has also rejected the
petitioner's contention that the rate suggested by it ought not to have been
accepted, as it was based upon an offer made by a supplier [M/s
Manjushree Techno Pack Limited], and not by the manufacturer. The
learned Arbitrator has found no support in the contract for the argument
that P0 was intended to be only the price offered by the manufacturer. Mr.
Chitambaresh has also been unable to point me to any clause to this
effect.
19. In such matters, the finding of an arbitral tribunal is amenable to
interference only if it is found to be perverse or manifestly arbitrary. The
analysis in the impugned award is based upon the petitioner's pleadings
Emphasis supplied.
itself, to which it has been bound, and upon a plausible interpretation of
the definition of P0. I find no reason to interfere with the said reasons.
20. Mr. Chitambaresh also assailed the award on the basis of an
alternative rationale contained in paragraph 53 of the award, which reads
as follows:
"53. There is another reason for rejecting the claim of KACPL. The
request to change PO is premised in the letter dated 01.12.2013
issued by M/s Reliance Industries Limited to IRCTC wherein
discount of Rs.8000/MT has been provided. This letter was filed as
exhibit CD-36 and is completely illegible. The typed copy is at page
352. The letter stands denied by IRCTC and no effort was made by
KACPL to prove the letter or its contents. Hence, the point of
determination is decided in favour of IRCTC and against KACPL."
21. Mr. Chitambaresh submitted that the parties having agreed not to
lead oral evidence, and to proceed on the basis of the documents filed by
them, the learned Arbitrator ought not to have rejected the
communication dated 01.12.2013 on the ground that it had not been
properly proved. He drew my attention to paragraph 117 of the statement
of defence wherein, according to him, the letter dated 01.12.2013 was not
in fact denied by the respondent, and to paragraph 31 of the award in
which the parties in any event had agreed to go by the documents filed
without oral evidence.
22. The observations in paragraph 53 of the award are merely an
alternative rationale to support the conclusion arrived at by the learned
Arbitrator on Claim No. 1. I am, therefore, of the view that the argument
does not impeach the core basis of the award, so as to invite interference
of the Court under Section 34 of the Act. The primary reason rests upon
the admitted fixation of P0 at the suggestion of the petitioner, and an
interpretation of the formula in clause 14.2. In the statement of defence,
the respondent clearly disputed the relevance of the letter dated
01.12.2013, and the learned Arbitrator has accepted that contention. That
is sufficient to have arrived at the conclusion reached by the learned
Arbitrator. While exercising jurisdiction under Section 34 of the Act, the
Court must be mindful that an arbitral award is not to be interfered with
lightly, but only if it contains a fundamental deficiency which goes to the
root of the matter. Reference may be made in this connection to the
judgment of Supreme Court in Dyna Technologies (P) Ltd. vs. Crompton
Greaves Ltd.2. Where an award is sustainable on the basis on a line of
reasoning clearly articulated therein, I am of the view that it is
unnecessary to examine the alternative rationale offered.
B. Counterclaim (d): Rs.54,11,586/- for payment made by IRCTC
against electricity bill of KSEB for the month of February,
23. Mr. Chitambaresh assailed the award on Counterclaim (d) -
reimbursement of electricity charges paid by the respondent - on the
ground that no evidence of actual payment had been led by the
respondent.
24. It is the admitted position that the petitioner was to operate the
plant in terms of the agreement, including payment of all operational
dues, of which electricity charges are one. One of the counterclaims
raised by the respondent pertained to payment of electricity dues by it.
(2019) 20 SCC 1, paragraph 24.
The statement of defence and counterclaims, in regard to this claim reads
as follows:
"IX. ELECTRICITY DUES:
70. The electricity dues in relation to the said plant are paid by
the Claimant to the Kerala State Electricity Board (hereinafter
referred to as "KSEB").
71. An amount of Rs. 54,11,586/- had accrued for the month of
February, 2022 which was raised by the KSEB vide an electricity bill
dated 04.03.2022 (hereinafter referred to as the "said electricity
bill"), a copy whereof is annexed hereto and marked as Annexure R-
35. However, the Claimant failed and/or neglected to make payment
in respect thereof.
72. In order to ensure that the operations at the said plant are not
hindered or stopped in any manner on account thereof, the IRCTC
was constrained to make payment of the said electricity bill to the
tune of Rs. 54,11,586/-."
25. In the reply to the counterclaim, the petitioner dealt with this aspect
as follows:
"IX. ELECTRICITY DUES:
40. The contents of the corresponding paragraph 70 and 72 of the
SOD are denied and disputed, save and except those which are matter
of record. The matter pertains to the Kerala State Electricity Board
(hereinafter referred to as "KSEB"), which is not the subject matter of
the present Arbitration and the same does not fall within the ambit of
the IRCTC. It may also be noted that electricity bill due to KSEB are
due to non-payment of shortfall compensation to the Claimant/DCO
by the Respondent."
26. The learned Arbitrator allowed the counterclaim, holding that the
factum of IRCTC having paid the bill was not disputed. He rejected the
defence as to arbitrability of the claim. Mr. Chitambaresh submitted that
the award on this claim is unsustainable, as the respondent had not
adduced any evidence of actual payment.
27. This argument does not commend to me. The bill was adduced in
evidence, and paragraph 72 of the statement of defence and counterclaim
contains an express assertion of the payment having been made. Other
than a general omnibus denial, the averment has not been specifically
traversed in the reply to the counterclaim. None of the facts pleaded by
the petitioner suggest that this counterclaim was otherwise fanciful. It is
the petitioner, which was responsible for operation of the plant. Its reply
makes it clear that it had not in fact paid the electricity dues, and also
does not suggest that electricity dues remained unpaid.
28. Consequently, the conclusion of the learned Arbitrator cannot be
said to be devoid of evidence altogether. The sufficiency of evidence, the
weight to be attached to it, and the factual conclusions which derive
therefrom, are all aspects of evidentiary assessment which fall within the
province of the learned Arbitrator3. On this aspect also, I find no
perversity or manifest arbitrariness, so as to justify interference under
Section 34 of the Act.
C. Non-Consideration of additional documents
29. Mr. Chitambaresh submitted that the learned Arbitrator had erred
in ignoring the additional documents filed by the parties, alongwith their
written arguments. He urged that, the parties having agreed to forgo oral
evidence, all documents filed by them at any stage were liable to be
considered by the learned Arbitrator. Learned Senior Counsel argued that
Reliance Infrastructure Ltd. vs. State of Goa (2024) 1 SCC 479, paragraph 77; and Bharti Airtel
Limited vs. Jamshed Khan 2023 SCC OnLine Del 7201, paragraph 53.
the parties had accepted each other's documentary evidence and should
have been bound by such acceptance, even in respect of documents
subsequently filed.
30. I find no justification in law for this argument. Paragraph 31 of the
award, quoted above, clearly refers to the agreement of the parties for a
decision "on the basis of pleadings and documents already filed". The
parties may accept the veracity of documents filed by the other side,
without binding themselves to an anticipatory admission with regard to
documents not yet filed, which they did not have sight of.
31. In arbitral proceedings, it is for the learned Arbitrator to determine
the procedure, so long as the procedure adheres to the rules of natural
justice, parties are given a full opportunity to present their case, and are
treated equally.
32. It is not suggested that parties were not given opportunity to file
documents or to lead evidence. The documents filed by them at the
appropriate stage have been duly considered. They chose to file
additional documents belatedly, at the stage of written submissions, after
the conclusion of each other's arguments. No leave was sought for such
belated filing. The learned Arbitrator was, in my view, well within his
power to decline reference to such documents. To accept the documents
would potentially have led to the matter, which was at the stage of final
hearing, being taken back to the stage of evidence, if the party opposite
denied the documents and required formal proof thereof.
33. In connection with this argument, Mr. Chitambaresh cited the
judgment of the Supreme Court in Canara Nidhi Limited vs. M.
Shashikala and Others4, which holds that evidence can be led even before
the Court in Section 34 proceedings. He submitted that in such
circumstances, documentary evidence could have been accepted by the
learned Arbitrator even at a belated stage. The argument is misconceived.
Even if the law recognises a limited scope for leading evidence in Section
34 proceedings, it does not enjoin a duty upon an arbitrator to accept all
documents, whenever filed. Such an approach would lead to undue
prolongation of arbitral proceedings, which is wholly inconsistent with
the objective of efficient and expeditious dispute resolution. The matter
was one that was within the discretion of the learned Arbitrator, and does
not call for the Court's interference.
D. Whether the Court is bound to issue notice in every petition
under Section 34 of the Arbitration and Conciliation Act, 1996
34. Mr. Chitambaresh's final submission concerns the procedure of
this Court in dealing with petition under Section 34 of the Act. He
submits that the jurisdiction of this Court is conferred by statute, and the
Court is bound, in each and every case, to issue notice to the other side
and to requisition the arbitral record, in order to determine whether the
award is liable to be set aside. He argues that, under the Act, the Court is
not conferred with any power analogous to Order XLI Rule 11 of the
Code of Civil Procedure, 1908 ["CPC"], by which an appeal against a
decree can be dismissed in limine in certain limited circumstances.
(2019) 9 SCC 462, paragraph 20.
35. This argument, with respect, betrays a fundamental misconception
as to the limited scope of interference under Section 34 of the Act. The
power of the Court is neither an appellate power nor a supervisory power,
but one of limited scrutiny, within closely confined parameters. The
jurisprudence on this point no longer admits of any doubt or ambiguity;
suffice it to refer to the judgments of the Supreme Court in Associate
Builders vs. Delhi Development Authority5, Ssangyong Engineering and
Construction Company Limited vs. National Highways Authority of India
(NHAI)6, Larsen Air Conditioning and Refrigration Company vs. Union
of India and Ors7 and Konkan Railway Corporation Limited vs. Chenab
Bridge Project Undertaking8.
36. It is in the context of the plenary appellate power conferred by the
CPC, that a decree is liable to be examined on merits by the appellate
Court after calling for the record. Order XLI Rule 11 of the CPC provides
for a qualified exception to this rule, but its absence in the Arbitration
Act, by no means implies that the Court is obliged to issue notice and call
for the arbitral record in each and every case. The purpose of alternative
resolution of disputes by arbitration is to establish an efficient,
expeditious and reliable system of adjudication. To insist upon an
elaborate second tier review in all arbitration cases, merely on the asking
by the unsuccessful party, would tend to impair these fundamental
objectives. If, on careful consideration of the material put forth by a party
assailing an arbitral award, no ground whatsoever is made out within the
(2015) 3 SCC 49, paragraph 56.
(2019) 15 SCC 131, paragraph 76.
2023 SCC OnLine SC 982, paragraph 15.
discipline of Section 34 of the Act, I am of the view that the Court is not
just entitled, but bound, to close the proceedings at the threshold. The
present case offers an appropriate example for the exercise of such a
power.
CONCLUSION:
37. For the reasons aforesaid, I find no merit in the present petition
under Section 34 of the Act. The petition is dismissed. All pending
applications also stand disposed of.
PRATEEK JALAN, J
July 25, 2024
'pv/Kb'
(2023) 9 SCC 85, paragraph 19.
