Delhi High Court
M/S Vishnurupa Developers Pvt. Ltd vs M/S S And S Technocrats Pvt. Ltd & Anr on 22 April, 2025
Author: Subramonium Prasad
Bench: Subramonium Prasad
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 22nd APRIL, 2025
IN THE MATTER OF:
+ O.M.P. (COMM) 164/2023 & I.A. 8300/2023, I.A. 8302/2023
M/S VISHNURUPA DEVELOPERS PVT. LTD. .....Petitioner
Through: Mr. Manik Dogra, Senior Advocate
with Mr. Arjun Jain, Ms. Anushree
Narain, Mr. Ankit Kumar and Mr.
Dhruv Pande, Advocates.
versus
M/S S AND S TECHNOCRATS PVT. LTD & ANR ......Respondents
Through: Mr. Manish Vashisht, Sr. Advocate
with Mr. Abhinav Sharma and Ms.
Avsi Malik, Advocates.
CORAM:
HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD
JUDGMENT
1. The Petitioner has approached this Court under Section 34 of the
Arbitration and Conciliation Act, 1996 ("the Act") challenging the Award
dated 29.11.2022 passed by the Arbitral Tribunal consisting of a Sole
Arbitrator("Impugned Award").
2. The Petitioner is a private limited company incorporated under the
Companies Act, 1956, having its corporate office at 517A, 5 th Floor, Narain
Manzil, 23, Barakhamba Road, Connaught Place, New Delhi - 110001,
engaged in the business of developing residential and commercial projects in
India.
3. The Respondent No. 1 is a private limited company incorporated
under the Companies Act, 1956, having its registered office and factory at
A-100, Shivalik, New Delhi - 110017, engaged in works pertaining to
construction.
4. The Respondent No. 2 is a Joint Venture (JV) formed between the
Respondent No. 1 and one M/s Acumen Contractors Private Limited having
its office at House No. 1014, Sector 4, Gurugram - 122001, formed for the
purpose of carrying out the works awarded by the Petitioner.
5. Shorn of unnecessary details, brief facts giving rise to the present
Petition are stated as under:
(i) It is stated that the Petitioner was engaged in developing a
project at Amritsar, namely, Dream City Next („DC Nxt‟). A
Contract dated 03.04.2018 for "External Development Works -
Road Work, Sewage, Water Supply & Storm Drainage work,
etc.," was entered into between the Petitioner and Respondents
for the Work Order bearing no. VDP;/DC-NXT/01/2017-18/30.
(ii) The time for completion of works stipulated under the Contract
was 18 months, i.e., by 30.11.2019 and the contract price was
agreed at Rs. 17,77,00,000/- (Rupees Seventeen Crores
Seventy-Seven Lakhs only).
(iii) On 01.10.2019, the Petitioner issued a Show Cause Notice to
the Respondents which stated that the Respondents had only
been able to achieve a billing of approximately Rs. 2.45 crores
in 16 months out of the total Contract Price, achieving a
completion of only 14.6% of the agreed upon scope of works.
(iv) The Petitioner had granted two Extension of Time (EoTs) to the
Respondents till 31.03.2020 and thereafter till 12.06.2020. It is
stated that vide email dated 20.11.2019, the Respondents had
inter alia committed to complete the works by 31.03.2020 and
undertaken as follows:
"...if we fail to agree to any of our commitment stated above
VDPL is authorized to take any suitable action/decision in
the interest of the project to which we shall have no
objection.‖
(v) Another Show Cause Notice dated 05.02.2020 was sent by the
Petitioner to the Respondents. In response, the Respondents
acknowledged the delay being caused by them and stood firm
on ensuring the works being completed by 31.03.2020.
However, on account of the nation-wide lockdown in view of
the COVID-19 pandemic, the works were halted in March
2020.
(vi) When certain relaxations in the COVID-19 restrictions were
granted, the parties vide an agreement dated 12.06.2020
consented to extend the date of completion of Contract till
15.09.2020. Pertinently, the parties had agreed that no
Liquidated Damages would be claimed till 15.09.2020.
(vii) Vide email dated 20.07.2020, the Petitioner informed the
Respondent about removing certain works from the scope
awarded to the Respondents and that the Petitioner would
recover the cost of Rs. 5,21,000/- from the Respondents on
account of the over-head costs of handing over de-scoped work
to the new contractor;
(viii) On 24.08.2020, the Respondents were intimated by its bankers
about the bank having received a request from the Petitioner to
encash the BGs that were submitted by the Respondents, on the
ground of non-performance of work under the Contract;
(ix) Vide letter dated 01.09.2020, the Petitioner terminated the
Contract with the Respondents.
6. Aggrieved by the termination of contract by the Petitioner and praying
for an order to restrain the Petitioner from invoking and encashing the BGs,
the Respondents invoked arbitration under Clause 35 of the Contract.
Petition under Section 9 of the Act bearing OMP (I) (COMM.) 248/2023
was filed by the Respondents. Subsequently, vide order dated 15.09.2020
passed by this Court, Justice G.P. Mittal, former Judge of this Court, was
appointed as the learned Sole Arbitrator to adjudicate upon the disputes
between the parties.
7. When the arbitral proceedings were at a preliminary stage, the parties
had agreed to carry out a joint measurement of the works at the site in the
presence of a Civil Engineer. Accordingly, the learned Sole Arbitrator vide
an order dated 09.10.2020 had appointed Mr. Narinder Salwan, Retd. AE,
PWD (B&R) as the Local Commissioner ("LC") to measure the extent of
works carried out by the Respondents. Subsequently, a mutually agreed
upon statement of joint measurement dated 22.02.2021 was placed on record
by the LC before the learned Sole Arbitrator.
8. In view of the submissions put forth by the parties, the learned Sole
Arbitrator framed the following issues for determination vide an Order dated
22.03.2021:
"i) Whether the termination of the Contract by the
Respondent is illegal? OPC
ii) Whether the Respondent delayed in providing necessary
approvals related to providing site, releasing mobilization
advances, issuance of structural drawings, providing high
tension cables, and release of payments; and made
unjustified deductions? OPC
iii) Whether Covid-19 pandemic impacted the Claimant's
performance? If so, it's effect? OPC
iv) Whether the Claimant is entitled to claim of Rs.
1,47,26,067/- against the final bills? OPC
v) Whether the Claimant is entitled to Rs. 12,27,446/-
towards withheld amount, retention money and Liquidated
Damages? OPC
vi) Whether the Claimant is entitled to Rs. 33,42,934/- for the
material purchased? OPC
vii) Whether the Claimant is entitled to Rs. 10,58,471/- for
the preliminary work? OPC
viii) Whether the Claimant is entitled to Rs. 24,70,000/- for
the remuneration paid to the staff due to prolongation of
work? OPC
ix) Whether the Claimant is entitled to Rs. 1,22,83,200/-
towards utilization of Machinery and Equipment deployed at
the site due to prolongation of work? OPC
x) Whether the Respondent is wrongfully withholding 6 Bank
Guarantees? OPC
xi) Whether the Claimant is entitled to recovery Rs.
1,07,34,815/- towards the loss of profits? OPC
xii) Whether the Claimant is entitled to Rs. 7,57,950/- on
account of change of design of plots? OPC
xiii) Whether the Claimant is entitled to Rs. 10,88,086/-
towards Price Escalation? OPC
xiv) Whether the Respondent is entitled to Rs. 1,35,55,252/-
for extra costs incurred in completion of the work left
unexecuted by the Claimant? OPR
xv) Whether the Respondent is entitled to Rs. 1,18,49,577/-
for recovery against the final bill? OPR
xvi) Whether the Respondent is entitled to Rs. 11,85,000/- for
GST input credit on mobilization advance and interest
thereon? OPR
xvii) Whether the Respondent is entitled to Rs. 25,12,000/- as
interest on unrecovered mobilization advance? OPR
xviii) Whether the Respondent is entitled to Rs. 20,64,993/-
as interest on unrecovered mobilization advance? OPR
xix) Whether the Respondent is entitled to Rs. 90,48,629/- for
wages and salaries of the staff on account of prolongation?
OPR
xx) Whether the Respondent is entitled to Rs. 14,97,888/- for
hiring the security agency? OPR
xxi) Whether the Respondent is entitled to Rs. 4,72,178/- for
payment of electricity bills for prolongation? OPR
xxii) Whether the Respondent is entitled to Rs. 2,01,808/- for
the payment of car policy during the prolonged period? OPR
xxiii) Whether the Respondent is entitled to Rs. 2,01,808/- for
the payment of car policy during the prolonged period? OPR
xxiv) Whether the Claimant or the Respondent is entitled to
any costs of arbitration. If so, to what amount?
xxv) Interest.
xxvi) Relief."
9. During the course of the arbitral proceedings and in order to reconcile
the amounts payable under the final bill, the parties had requested the
learned Sole Arbitrator to appoint an expert. Accordingly, Mr. A.C.
Varshney, Former Executive Engineer (Selection Grade) CPWD was
appointed vide order dated 08.03.2022, who had submitted a report dated
14.05.2022. In the said report dated 14.05.2022, the Expert had found Rs.
74,87,054.82/- to be payable by the Petitioner to the Respondents. However,
the same was objected to by the Petitioner.
10. A summary of the issue-wise findings of the learned Sole Arbitrator in
the Impugned Award are as follows:-
10.1. Issue (i):
(i) The learned Sole Arbitrator was of the opinion that since the
parties had mutually agreed to extend the completion period of
the contract on 12.06.2020, the only aspect that was required to
be adjudged was whether or not the Petitioner was justified in
terminating the Contract prematurely on 01.09.2020, given the
lapses of the Respondents after the said extension of time.
(ii) The learned Sole Arbitrator observed that the Petitioner was
successful in proving its contention of severe delays on part of
the Respondents and the Respondents in turn had failed to
refute the same.
(iii) Notwithstanding the aforesaid, the learned Sole Arbitrator
found that the Petitioner had failed to adhere with the
requirement of a 15-days‟ notice for a valid termination as per
Clause 47.2 of the Contract and as such, the termination notice
dated 01.09.2020 by the Petitioner was not a valid one.
10.2. Issues (ii) & (iii):
(i) On the issue of whether there was a delay on part of the
Petitioner in providing necessary approvals related to providing
site, releasing mobilization advances, issuance of structural
drawings, providing high tension cables, and release of
payments, the learned Sole Arbitrator observed that delays were
attributable to both the parties. However, the learned Sole
Arbitrator also observed that the Respondents failed to
substantiate by way of evidence, the factum of them having
raised any objection on account of the alleged delay of the
Petitioner or that any such delay had impacted the execution of
works under the contract.
(ii) The Respondents were unable to prove that the delay in release
of mobilization advance affected the execution of works so that
the works could not be completed even as of 01.09.2020.
Accordingly, both the issues were decided against the
Respondents.
10.3. Issues (iv) & (xv):
(i) With respect to the dispute qua extra items, the parties had
already arrived at a consensus which had been recorded in the
order dated 20.08.2022 passed by the Ld. Sole Arbitrator.
(ii) With respect to the liability of the Petitioner to pay for an
unnumbered extra item for a second topographical survey, the
learned Sole Arbitrator observed that the Respondent had failed
to prove that a second topographical survey was conducted by it
or that it had demanded payment specifically from the
Petitioner for such second topographical survey.
(iii) An amount of Rs. 19,21,898.58/- would be deducted from the
final bill, as per the adjustment of quantities as per the joint
measurements.
(iv) Insofar as the Petitioner‟s claim for part rates is concerned, the
learned Sole Arbitrator placed reliance on the report dated
14.05.2022 of the Expert, wherein it as observed that the
Petitioner was not entitled any part rates for items that were
partly executed by the Respondents.
(v) The amount of Rs. 15,26,420/- paid by the Petitioner to the
vendors of the Respondents ought to be deducted from the final
bill. Accordingly, the learned Sole Arbitrator held that the
Respondents would be entitled to a payment of Rs.
16,33,572.48/- towards the final bill.
10.4. Issue (v):
(i) As it had been already observed that the Petitioner had illegally
terminated the contract, the learned Sole Arbitrator observed
that the Petitioner has unjustly withheld the retention money
after the contract was illegally terminated. Accordingly, the
learned Sole Arbitrator held that the Respondents would be
entitled to be refunded Rs. 12,27,446/- by the Petitioner.
10.5. Issue (x):
(i) Since it had already been held that delays till 12.06.2020 stood
condoned in view of the agreement between the parties to
extend the completion period till 15.09.2020, the learned Sole
Arbitrator held that the Petitioner was not entitled to encash the
BGs for any alleged deficient work prior to 12.06.2020 or even
thereafter, till at least 15.09.2020.
10.6. Issue (xvi) & (xvii):
(i) The instant two issues were settled inter se between the parties
vide the joint conciliation statement dated 22.02.2022.
10.7. Issue (vi) & (vii):
(i) The learned Sole Arbitrator held that the Respondents would
not be entitled to any payment for preliminary work, as both
parties were responsible for the delays in execution of works to
some extent.
(ii) The Respondents were also held as being not entitled to any
payment for any material lying at the site, as some of it was
sold with no hindrance from the Petitioner and it is unknown
whether and how much of the material is still lying at the site.
10.8. Issues (viii), (ix), (xiii), (xix), (xx) (xxi) & (xxiii):
(i) The learned Sole Arbitrator observed that since it was the
Petitioner itself who had prematurely and illegally terminated
the Contract, it cannot turn back around and claim monies from
the Respondents for actions that have resulted as a consequence
of its own actions. Therefore, neither party was held to be
entitled to claim any amounts on account of prolongation and/or
price escalation.
(ii) Resultantly, issues (viii), (ix) and (xiii) were decided against the
Respondents, while issues (xix), (xx), (xxi) and (xxiii) were
decided against the Petitioner.
10.9. Issue (xi):
(i) Insofar as the Respondent‟s claim of loss of profits is
concerned, the learned Sole Arbitrator was of the view that the
Respondent could not prove any such loss of profit.
10.10. Issue (xii):
(i) It was held that the Respondent could not establish its case
regarding compensation on account of change of design, nor
was the claim pressed during the course of oral arguments
before the learned Sole Arbitrator. Therefore, the Respondents
were not entitled to any amount on account of change of design
and as such, Issue (xii) was decided against the Respondents.
10.11. Issue (xviii) & (xxii):
(i) Since the learned Sole Arbitrator was of the view that both
parties were responsible for delays, it was held that the
Petitioner was not entitled to recover interest on the issued
material or interest on the unrecovered amount from the
customers.
(ii) The learned Sole Arbitrator also observed that since the
Petitioner had granted an extension to the Respondents on
12.06.2020 till 15.09.2020 without any LD, and then proceeded
to prematurely terminate the contract with the Respondent, the
extent of delay could not be ascertained.
(iii) Accordingly, Issues (xviii) & (xxii) were decided against the
Petitioner.
10.12. Issue (xiv):
(i) The learned Sole Arbitrator took into account the tabular charts
produced by the Petitioner to depict the costs incurred by it to
engaged third-party agencies.
(ii) It was observed that the works assigned to such third-party
agencies included more than what was de-scoped or left
unexecuted and no evidence was provided by the Petitioner to
prove exactly how much of the Respondents‟ work had been
handed over.
(iii) Accordingly, the learned Sole Arbitrator decided Issue (xiv)
against the Petitioner.
10.13. Issue (xxiv):
(i) The learned Sole Arbitrator held that since the case before it
involved peculiar facts and circumstances where both parties
were responsible for delays caused in the Project, no party
would be entitled to the costs of arbitration.
10.14. Issue (xxv):
(i) It was observed by the learned Sole Arbitrator that the
Petitioner ought to have made the payments to the Respondents
towards the final bill in a timely manner and released the
retained money upon termination of the contract.
(ii) In the opinion of the learned Sole Arbitrator, the Petitioner had
deprived the Respondents of its legitimate dues and therefore,
the Respondents were entitled to pre-reference interest from
07.10.2020, pendente lite and future interest, all @ 10% per
annum till the date of payment of the sum awarded.
10.15. Resultantly, by way of the Impugned Award, the learned Sole
Arbitrator had granted the following reliefs:
(i) a sum of Rs.16,33,572/- in favour of the Claimant as recovery
against the final bill;
(ii) a sum of Rs.12,27,446/- in favour of the Claimant towards
money held by the Respondent as retention money;
(iii) return of bank guarantees by the Respondent to the Claimant;
(iv) Respondent‟s claim towards mobilization advance, mobilization
advance (GST) and secured advance were adjusted in the final
bill;
(v) pre-reference interest from 07.10.2020, pendente lite and future
interest @10% per annum till the date of actual payment of
amount to the Claimant.
11. Since the learned Sole Arbitrator has held the Petitioner‟s termination
of contract with the Respondents to be illegal and on that basis, has rejected
the Petitioner‟s counter-claims, the Petitioner has now approached this Court
praying for the Impugned Award to be set aside under Section 34 of the Act.
12. The overarching grievance against the impugned Award as stated by
the Ld. Senior Counsel for the Petitioner is that learned Sole Arbitrator has
held the Termination Notice dated 01.09.2020 as illegal, relying erroneously
upon Clause 47 of the GCC which required a 15 days‟ notice for termination
without assigning any reasons, instead of Clause 31 of the Contract, which
required a 7 days‟ notice for termination of the Contract for specific reasons
under sub-clause (c) of Clause 31.
13. The Petitioner is further aggrieved with the consequential denial of its
counter-claims, as they were denied solely as the Termination Notice dated
01.09.2020 was held to be illegal.
14. Per contra, learned Senior Counsel for the Respondents has inter alia
submitted as under:
(i) Finding of the learned Sole Arbitrator qua the issue of illegal
termination of the contract has no bearing or relation to the
finding/resolution qua the amount payable to the
Claimant/Respondent under the final bill;
(ii) The learned Sole Arbitrator has rightly held that by way of
extension of time, the parties had agreed to not levy any
penalty/liquidated damages till 15.09.2020 and therefore the
Petitioner was not entitled to encash Bank Guarantees for any
alleged deficient work till such date;
(iii) The Petitioner never argued before the learned Sole Arbitrator
that it had terminated the contract under Clause 31 of the
Contract and instead had relied upon Clause 47.2 of the GCC
itself.
15. The short point raised for consideration before this Court is whether
the conclusion of the learned Sole Arbitrator in holding the Termination
Notice dated 01.09.2020 as illegal in the Impugned Award and forming it the
basis of rejecting the counter-claims of the Petitioner deserves to be set aside
or not.
16. It is trite law that the court cannot interfere with the award and
substitute its view with the award and interpretation accepted by the
arbitrator, the reason being that the Court does not sit in appeal over the
findings and decision of the arbitrator while deciding an application under
Section 34 of the Act. The Arbitral Tribunal is legitimately entitled to take a
view after considering the material before him/her and interpret the contract
between the parties. The judgment of the Arbitral Tribunal should be
accepted as final and binding. Reference in this regard is apposite to the
recent pronouncement of the Supreme Court in Hindustan Construction Co.
Ltd. v. National Highways Authority of India, (2024) 2 SCC 613, wherein it
has been held as under:-
―26. The prevailing view about the standard of
scrutiny -- not judicial review, of an award, by persons
of the disputants' choice being that of their decisions to
stand -- and not interfered with, (save a small area
where it is established that such a view is premised on
patent illegality or their interpretation of the facts or
terms, perverse, as to qualify for interference, courts
have to necessarily choose the path of least
interference, except when absolutely necessary). By
training, inclination and experience, Judges tend to
adopt a corrective lens; usually, commended for
appellate review. However, that lens is unavailable
when exercising jurisdiction under Section 34 of the
Act. Courts cannot, through process of primary
contract interpretation, thus, create pathways to the
kind of review which is forbidden under Section 34. So
viewed, the Division Bench's approach, of appellate
review, twice removed, so to say (under Section 37),
and conclusions drawn by it, resulted in displacing the
majority view of the tribunal, and in many cases, the
unanimous view, of other tribunals, and substitution of
another view. As long as the view adopted by the
majority was plausible -- and this Court finds no
reason to hold otherwise (because concededly the work
was completed and the finished embankment was made
of composite, compacted matter, comprising both soil
and fly ash), such a substitution was impermissible.
27. For a long time, it is the settled jurisprudence of
the courts in the country that awards which contain
reasons, especially when they interpret contractual
terms, ought not to be interfered with, lightly. The
proposition was placed in State of U.P. v. Allied
Constructions [State of U.P. v. Allied Constructions,
(2003) 7 SCC 396] : (SCC p. 398, para 4)
―4. ... It was within his jurisdiction to interpret
Clause 47 of the Agreement having regard to the
fact-situation obtaining therein. It is submitted that
an award made by an arbitrator may be wrong
either on law or on fact and error of law on the face
of it could not nullify an award. The award is a
speaking one. The arbitrator has assigned sufficient
and cogent reasons in support thereof.
Interpretation of a contract, it is trite, is a matter for
the arbitrator to determine (see Sudarsan Trading
Co. v. State of Kerala [Sudarsan Trading Co. v.
State of Kerala, (1989) 2 SCC 38] ). Section 30 of
the Arbitration Act, 1940 providing for setting aside
an award is restrictive in its operation. Unless one
or the other condition contained in Section 30 is
satisfied, an award cannot be set aside. The
arbitrator is a Judge chosen by the parties and his
decision is final. The Court is precluded from
reappraising the evidence. Even in a case where the
award contains reasons, the interference therewith
would still be not available within the jurisdiction of
the Court unless, of course, the reasons are totally
perverse or the judgment is based on a wrong
proposition of law.‖
28. This enunciation has been endorsed in several
cases (Ref. McDermott International Inc. v. Burn
Standard Co. Ltd. [McDermott International Inc. v.
Burn Standard Co. Ltd., (2006) 11 SCC 181] ). In MSK
Projects (I) (JV) Ltd. v. State of Rajasthan [MSK
Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10
SCC 573 : (2012) 3 SCC (Civ) 818] it was held that an
error in interpretation of a contract by an arbitrator is
―an error within his jurisdiction‖. The position was
spelt out even more clearly in Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 : (2015)
2 SCC (Civ) 204] , where the Court said that :
(Associate Builders case [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , SCC p.
81, para 42)
―42. ... 42.3. ... if an arbitrator construes a term of
the contract in a reasonable manner, it will not
mean that the award can be set aside on this ground.
Construction of the terms of a contract is primarily
for an arbitrator to decide unless the arbitrator
construes the contract in such a way that it could be
said to be something that no fair-minded or
reasonable person could do.‖
17. The Apex Court in Reliance Infrastructure Ltd. v. State of Goa,
(2024) 1 SCC 479, it has been held as under:-
―26. In MMTC [MMTC Ltd. v. Vedanta Ltd., (2019) 4
SCC 163 : (2019) 2 SCC (Civ) 293] , this Court took
note of various decisions including that in Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49
: (2015) 2 SCC (Civ) 204] and exposited on the limited
scope of interference under Section 34 and further
narrower scope of appeal under Section 37 of the 1996
Act, particularly when dealing with the concurrent
findings (of the arbitrator and then of the Court). This
Court, inter alia, held as under : (MMTC case [MMTC
Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC
(Civ) 293] , SCC pp. 166-67, paras 11-14)
―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 Wednesbury
[Associated Provincial Picture Houses v.
Wednesbury Corpn., (1948) 1 KB 223 (CA)]
reasonableness. Furthermore, ―patent illegality‖
itself has been held to mean contravention of the
substantive law of India, contravention of the 1996
Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the
Court may interfere with an arbitral award in terms
of Section 34(2)(b)(ii), but such interference does
not entail a review of the merits of the dispute, and
is limited to situations where the findings of the
arbitrator are arbitrary, capricious or perverse, or
when the conscience of the Court is shocked, or
when the illegality is not trivial but goes to the root
of the matter. An arbitral award may not be
interfered with if the view taken by the arbitrator is
a possible view based on facts. (See Associate
Builders v. DDA [Associate Builders v. DDA, (2015)
3 SCC 49 : (2015) 2 SCC (Civ) 204] Also see ONGC
Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes
Ltd., (2003) 5 SCC 705] ; Hindustan Zinc Ltd. v.
Friends Coal Carbonisation [Hindustan Zinc Ltd. v.
Friends Coal Carbonisation, (2006) 4 SCC 445] ;
and McDermott International Inc. v. Burn Standard
Co. Ltd. [McDermott International Inc. v. Burn
Standard Co. Ltd., (2006) 11 SCC 181] )
13. It is relevant to note that after the 2015
Amendment to Section 34, the above position stands
somewhat modified. Pursuant to the insertion of
Explanation 1 to Section 34(2), the scope of
contravention of Indian public policy has been
modified to the extent that it now means fraud or
corruption in the making of the award, violation of
Section 75 or Section 81 of the Act, contravention of
the fundamental policy of Indian law, and conflict
with the most basic notions of justice or morality.
Additionally, sub-section (2-A) has been inserted in
Section 34, which provides that in case of domestic
arbitrations, violation of Indian public policy also
includes patent illegality appearing on the face of
the award. The proviso to the same states that an
award shall not be set aside merely on the ground of
an erroneous application of the law or by
reappreciation of evidence.
14. As far as interference with an order made under
Section 34, as per Section 37, is concerned, it cannot
be disputed that such interference under Section 37
cannot travel beyond the restrictions laid down
under Section 34. In other words, the Court cannot
undertake an independent assessment of the merits
of the award, and must only ascertain that the
exercise of power by the Court under Section 34 has
not exceeded the scope of the provision. Thus, it is
evident that in case an arbitral award has been
confirmed by the Court under Section 34 and by the
Court in an appeal under Section 37, this Court
must be extremely cautious and slow to disturb such
concurrent findings.‖
18. The factual matrix of the present case reveals that the last extension of
the completion period of the contract was by way of a mutual agreement
between the Petitioner and Respondents on 12.06.2020, till 15.09.2020.
Merely 14 days before this period would have expired, the Petitioner sent
the Termination Notice dated 01.09.2020.
19. The crux of the arguments which have been advanced from both the
sides is on the issue of the validity of termination. The relevant clauses
which are necessary for appreciating the issue at hand in the present Peititon
are Clause 31 of the Contract Agreement and Clause 47 of the General
Conditions of the Contract and the same reads as under:
"31.0 DEFAULT OF CONTRACTOR:
If the contractor being an individual or a firm commits
any "act of insolvency", or shall be adjudged an
insolvent or being an Incorporated Company shall
have an order for compulsory winding up made against
it as pass an effective resolution for winding up
voluntarily or subject to the supervision of the Court
and the official Assignee or the Liquidator in such acts
of insolvency or winding up, as the case may be, shall
be unable within seven days after notice to him
requiring him to do so, to show to the reasonable
satisfaction of the Project Manager that he is able to
carry out and full fill the contract and to give security
therefore, if so required by the Project Manager.
Or if the Contractor (when an individual firm or
incorporated Company) shall suffer execution or other
process of Court attaching property to be issued
against the Contractor.
Or shall suffer any payment under this Contract (to be
attached by or on behalf of any of the creditors of the
contractor).
Or shall assign or sublet this Contract without the
consent in writing of the Owner.
Or shall charge or in cumber this Contract or any
payments due or which may become due to the
Contractor hereunder.
Or if the Project Manager shall certify in willing to the
Owner that the Contractor
(a) Has abandoned the Contract, or
(b) Has failed to commence the works, or has without
any lawful excuse under these conditions suspended
the progress of the works for fourteen days after
receiving from the Project Manager notice to proceed
with the work,
Or
Has failed to processed with the works with such due
diligence and failed to make such due progress as
would enable the works to be completed within the
time/agreed upon, or
(d) Has failed to remove materials from the site or to
pull down and replace work for seven days after
receiving from the Project Manager written notice that
the said materials or works were condemned and
rejected by the Project Manager under these
conditions, or
(e) Has neglected or failed persistently to observe and
perform all or any of the acts, matters or things by Sis
contract to be observed and performed by the
Contractor for seven days after written notice shall
have been given to the Contractor requiring the
contractor to observe or perform the same.
Has gone on strike at site due to non-performance of
sub-contractor or labour or any other reason
Then and in any of the said cases the Owner may,
notwithstanding any previous waiver, after giving seven
days notice in writing to the Contractor, determine the
Contract, but without thereby affecting the powers of
the Project Manager or the obligations and liabilities
of the Contractor, the whole of which shall continue in
force as fully as if the Contract had not been so
determined, and as if the works subsequently executed
had been executed by or on behalf of the contractor.
And further, the owner by his agents or servants may
enter upon and take possession of the works and all
plants, tools, scaffolding, sheds, machinery, steam and
other power utensils and materials lying upon the
premises or the adjoining lands or roads and use the
same as his own property or may employ the same by
means of his own servants and workmen in carrying on
and completing the works or by employing any other
contracts shall not in any way interrupt or do any act,
matter of things to prevent or hinder such other
contractor or other person or persons employed for
completing and finishing or using the materials and
plant for the works, when the works shall be completed
or as soon, thereafter, as convenient the Project
Manager shall give a notice in willing to the contractor
to remove this surplus materials and plant and should
the contractor fail to do so within a period of fourteen
days after receipt thereof by him, the owner may sell
the same by public suction, and give credit to the
contractor for the net amount realized. The FNMC/
Architect shall thereafter, ascertain and certify in
writing under his hand what (if anything) shall be due
or payable to or by the Owner, for the value of the said
plant and materials no taken possession of by the
Owner and the expense or loss which the Owner shall
have been put to in procuring the works to be
completed and the amount if any, owing to the
contractor and the amount which shall be so certified
shall thereupon be paid by the Owner to the contractor
or by the contractor to the center, as the case may be,
and the certificate of the Project Manager Architect
shall be final and conclusive between the parties."
"47.0 Termination of Contract by Owner:
47.1 Notice to Correct:
If the Contractor fails to carry out any
obligation under the Contract, the
Owner may by notice require the
Contractor to make good the failure and
to remedy it within a specified reasonable
time.
47.2 Termination by Owner:
Termination for convenience:
Owner may by prior written notice of 15 (Fifteen) days
sent to Contractor, can terminate the Contract, in
whole or part, at any time without assigning any
reason (whatsoever) for its convenience. However, the
payment shall be released to the extent to which
performance of work executed as determined by Owner
till the dale upon which such termination becomes
effective.
The Owner shall be entitled to terminate the Contract:
In any of below events or circumstances, the Owner
may, upon giving 15 (Fifteen) days notice to the
Contractor, terminate the Contract and expel the
Contractor from the Site if the Contractor.
Abandons the Works or otherwise plainly
demonstrates the intention not to continue performance
of its obligations under the Contract,
Without reasonable excuse fails:
i) To proceed with the works in accordance with the
date of commencement schedule of completion as said
in General conditions of Contracts.
ii) To comply with a notice issued under Sub-Clause
"Notice to Correct within 15 days after receiving il
Sub Contracts the whole of the Works or assigns
the Contract without the required approvals,
becomes bankrupt or insolvent, goes into
liquidation, has a receiving or administration order
made against the Contractor, compounds with its
creditors, or carries on business under a receiver,
trustee or manager for the benefit of its creditors, or if
any act is done or event occurs which (under
applicable Lows) has a similar effect to any of these
acts or events, or
gives or offers to give (Directly or indirectly) to
any person any bribe, gift, gratuity, commission or
other thing of value, as an inducement or reward
i. for doing or forbearing to do any action in
relation to the Contract, or
ii. for showing or forbearing to show favour or
disfavour to any person in relation to the Contract
or
iii. If any of the Contractor's Personnel, Agents or
Sub-Contractors given or offers to give (directly
or Indirectly) to any person any such inducement
or reward as is described in Sub-paragraph
above.
iv. However, lawlul Inducements and rewards to
Contractor's Personnel shall not entitle
termination.
The Owner's election to terminate the Contract
shall not prejudice any other rights of the Owner,
under the Contract or otherwise.
The Contractor shall then leave the Site and
deliver any required Goods, all Contractors
Documents, and other design documents made by or
behalf of the Contractor, to the Project
manager/Owner. However, the Contractor shall use Its
best efforts to comply immediately with any reasonable
instruction included in the notice (i) for the assignment
of any Sub Contract, and (ii) for the protection of life
or property or for the safety of the works.
After termination, the Owner may complete the
works and/or arrange for any other entities to do so.
The Owner and these entities may then use any Goods.
Contractor's Documents and other design documents
made by or on behalf of the Contractor.
The Owner shall then give notice that the
Contractor's Equipment and Works will be released to
the Contractor at or near the Site, The Contractor shall
promptly arrange their removal, at the risk and cost of
the Contractor. However, if by this time the Contractor
has failed to make a payment due to the Owner in
order to recover this payment, the dues shall be
recovered out of the proceeds from the sale of the
above Equipments/Temporary works. Any balance of
the proceeds shall then be paid to the Contractor. "
20. The manner in which the Contract has to be interpreted and the
priority of the various documents which are relevant have been laid down in
Clause 16 of the Contract Agreement and the same reads as under:
"16.0 Sequence & Priority of Documents:
The document forming part of the Contract shall be
interpreted in the following order of priority, however,
the contract shall be construed as a whole containing
all of the below mentioned documents which are
integral part of the contract.
a. Contract Agreement.
b. Letter of Award/Work Order
c. Bill of Qualities
d. Special Conditions of Contract
e. GFC Drawings
f. Technical Specifications
g. General Conditions of Contract"
21. Clause 16 of the Contract Agreement gives the order of priority in
which the documents are to be interpreted, in the instance where they are in
conflict. The Contract Agreement as well as the GCC both have a
termination clause. Both the clauses have certain condition precedent before
the contract can be terminated. The Contract has been terminated by the
Petitioner on 01.09.2020. The said Termination Letter dated 01.09.2020 is
being extracted in entirety and the same reads as under:
"Reference:
1. Letter of Award bearing reference no. VDPL/DC-
NXT/01/2017-18/30 dated 3rd April2019.
2.Show Cause Notice dated 1st October 2019.
3.Show Cause Notice dated 31st January 2020.
4. Letter dated 5ª February 2020 issued by M/S ACPL-
SSIPL JV.
5. Various MOM's
6. Various emails and other communication exchanged.
SUB: NOTICE FOR TERMINATION OF LETTER OF
AWARD BEARING NO. VDPL/DC-NXT/01/2017-
18/30 DATED 3 APRIL 2018 AND ITS SUBSEQUENT
AMENDMENTS DATED 15 JUNE 2018
(AMENDMENT No.1), VDPL/DC-NXT/01/2017-
18/30/A 2 DATED 24th May 2019(AMENDMENT
No.2) &VDPL/DC NXT/01/2017-18/30/A3 DATED19
AUGUST 2019 (AMENDMENT No.3)
(HEREINAFTER REFERRED AS THE "WORK
ORDER").
Dear Sir/Madam,
This is with respect to the captioned Work Order which
was awarded to you for completion of external
developments works-road work, sewage, water supply,
storm drainage, electrical work etc. for our project
namely DC NXT, situated at Amritsar, Punjab
(hereinafter referred as the "Project"). The Work Order
was awarded for an estimated amount of
Rs.17,70,00,000/-(Seventeen Crores Seventy Thousand
Only).
Kindly note that in terms of the Work Order, you were
supposed to complete the entire scope of work as
stipulated in the Work Order within 18 months from the
date of commencement of work Le. 1 June 2018 which
comes out to be 30.11.2019. In terms of the Work Order
it was specifically agreed that time was essence of the
Work Order but despite the same, you have miserably
failed to complete the work within stipulated timeline.
We have given you various opportunities to complete
the work within the stipulated rime as mentioned in the
Work Order, but you have failed to adhere to the terms
and conditions of the Work Order. We have also issued
one show cause notice dated 1st October, 2019 wherein
we have cited various reasons attributable on your part
which has caused delay in the completion of work. We
have also categorically mentioned that if you feel to
address to the grievances that we have raised the show
cause notice within 3 days, we shall also reduce the
scope of work. And accordingly, because you have
failed to resolve our grievances, partial scope of work
was de-scoped and for balance work you had
submitted revised schedule targets as an another
opportunity to complete the work but unfortunately,
you once again failed to adhere to the revised targets.
It is important to note that after seeing your
performance and your failure to address to our
grievances, we have appointed other vendors to
complete the remaining work, as de-scoped, at your
risk and cost
Due to your inability to complete the work within the
stipulated time, you vide letter elated 20 November
2019, had requested us to give extension of time till 31
March 2020 and you have further agreed that no
escalation on any ground shall be claimed. We acceded
to your request and hand given you another
opportunity to complete the work by 31 March, 2020.
Despite multiple discussions vide various minutes of
meeting and your assurances and undertakings, you
have not been able to overcome your shortage of
manpower including labour and supervisory staff as
well as shortage of material. You have miserably failed
to consider that time schedule of completion of works
within the agreed timeline which was essence of the
Work Order. The works were awarded to you
specifically upon your assurances that you would be
able to achieve the targeted completion within the
agreed time. However, all your assurances have turned
out to be hollow and the contracted works are nowhere
near completion despite passage of 27 months
approximately.
Owing to your constant failure to complete the work,
we were constrained to issue another show cause
notice dated 31" January, 2020 wherein we have raised
our various concerns. Thereafter, you vide letter dated
5th February 2020, had duly acknowledged the delay
on your part in completing the work, you also
acknowledged that you shall submit the revised Bank
Guarantees valid upto 30 April 2020 and further you
also agreed that if you deviate from your commitments,
we are at liberty to encash the Bank Guarantees. It was
also agreed and undertaken you that, by 5th February
2020, you shall be inducing at least a sum of Rs. 65
Lakhs which shall be over and above whatever you
receive against running bills/advances.
To our utter shock and dismay, you failed to honour
even a single word of what was stated in aforesaid
letter dated 5th February 2020, so much so that you
did not induce even a single penny in the project. You
once again failed to fulfil your commitments as per the
extended date ie. 31" March 2020, your callous
attitude has immensely affected our ability in
delivering the project. Your actions have exposed us to
huge liability of delay penalty towards the allottees of
or prestigious Project.
As per our records, till date you have only completed
an estimated value of Rs. 5.15 Crores which is about
30% of the awarded value and just 58% of the
remaining works after de-scoping.
Despite our constant follow ups/show cause
notices/reminders, you have miserably failed to do the
following acts:
a. Failed to complete the work within the stipulated
timeline;
b. Failed to deploy the adequate manpower and
material on site;
c. Delay in complying with statutory compliances likes
GST, ESI, PF etc.
d. Delay in renewing the Bank Guarantees.
Please note we shall not be responsible for any of your
Vendor's payment, your staff's/employees salary or any
other issue/claim instituted by your
vendor/staff/employees/contractors against us. Further
we shall also be not responsible for any
governmental/department action instituted/will be
instituted against us which has arisen/shall arise solely
attributable because of lapse on your part in
complying with the same.
In view of the above, your persistent breaches have
caused grave financial loss to us like payments of
mobilization advance paid to other vendors which
comes out to be Rs. 25,00,000/-, Liquidated damages
to the tune of Rs. 63,00,000/-, delay caused in handing
over the project Rs 4,50,00,000/-Lakhs, total
amounting to Rs. 5,38,00,000/-(hereinafter collectively
referred as "Loss"). Without prejudice to above, we
hereby invoke clause 31 of the Work Order and
provide you seven days' time period to pay the amount
of Loss ie. Rs. 5,38,00,000/- and measure the cost of
your work, failing which the cost of work done which
we shall ascertain shall be final and binding upon you.
Please note after the 7th day from the date of this
Notice, the Work Order shall be deemed to be
terminated and, further, we shall initiate appropriate
civil and criminal proceedings against you at your own
risk and cost
Please note we are sending this notice without
prejudice to our rights and contentions. We reserve our
rights to encash Bank Guarantees. We also reserve our
right to claim any price escalation to be incurred by us
in getting the balance works completed from another
contractor, which shall solely be at your risk as to costs
and consequences. We further reserve our right to
claim damages to be suffered by us on account of your
breach of contract including delay penalty payable to
allottees." (emphasis supplied)
22. A perusal of the Termination Letter dated 01.09.2020 shows that the
Petitioner herein invoked Clause 31 of the Contract Agreement/Work Order,
while the learned Sole Arbitrator has relied on Clause 47 of the GCC. A
perusal of the impugned Award indicates that after holding that there has
been delays on both sides, the learned Sole Arbitrator has relied only on
Clause 47 of the GCC to hold the Petitioner‟s termination of the contract as
illegal. Relevant portion of the Impugned Award reads as under:
"33. Be that as it may, it cannot be disputed that Clause
47.2 of the General Conditions of Contract required
the Respondent to issue a 15 days' notice to the
Claimant in order to terminate the Contract.
Admittedly a 15 days' notice has not been given to the
Claimant; and it is clear from the letter of termination
dated 01.09.2020 that the Contract would be
terminated 7 days thereafter. For reference, the
relevant portion of the letter of termination dated
01.09.2020 is reproduced hereunder: -
"xxxx xxxx xxxx
In view of the above, your persistent
breaches have caused grave financial loss
to us like payments of mobilization
advance paid to other vendors which
comes out to be Rs, 25, 00,000/-,
Liquidated damages to the. tune of Rs,
63,00,000/-, delay caused in handing over
the project Rs 4,50,00,000/- lakhs, total
amounting to Rs, 5,38,00,000/-
(hereinafter collectively referred as
"Loss"), Without prejudice to above, we
hereby invoke clause 31 of the Work Order
and provide you seven clays' time period
to pay the amount of Loss i.e. Rs. 5,38,
00,000 I- and measure the cost of your
work, falling which the cost of work done
which we shall ascertain shall be final and
binding upon you. Please note after the
7th day from the date of this Notice, the
Work Order shall be deemed to be
terminated and, further, we shall initiate
appropriate civil and criminal proceedings
against you at your own risk and cost.
xxxx xxxx xxxx"
Thus, at best only a 7 days' notice had been given by
the Respondent to the Claimant, which is contrary to
the terms agreed under the Contract. Thus, in my view,
a reading of the Contract would show that the
Respondent has not strictly followed the procedure to
terminate the Contract, as recorded in the Contract.
But, given the facts of the case, whether or not such
strict adherence to the terms of Contract was necessary
for termination is a matter which requires
consideration.
34. As an Arbitrator I am bound by the terms of the
Contract however strict they may be. In the present
case, the Respondent was required to give a 15 days'
notice in order to terminate the Contract, but the
Respondent failed to strictly adhere to this
requirement. Therefore, although there may be some
merit in the Respondent's case that there were
compelling circumstances to terminate the Contract
prematurely, it cannot be said that the Contract was
terminated legally and in accordance with the terms of
the Contract. In view of the aforesaid, Point no. (i) is
decided against the Respondent and in favour of the
Claimant."
23. Applying Clauses 31 & 16 of the Contract Agreement as well as
Clause 47 of the GCC together to the facts of the present case, this Court is
of the opinion that there was an option to the Petitioner to terminate the
Contract either by invoking Clause 31 of the Contract Agreement or Clause
47 of the GCC after the condition precedent in both the clauses were
satisfied. In the present case, the Petitioner has invoked Clause 31 of the
Contract Agreement. Show Cause Notices have also been given by the
Petitioner to the Respondents, on which reliance has been placed in the
Termination Letter dated 01.09.2020. Having both options available to it, the
Petitioner has specifically applied Clause 31 of the Contract Agreement to
terminate the Contract, and not Clause 47 of the GCC.
24. This Court exercising jurisdiction under Section 34 of the Arbitration
Act is not an Appellate Court. Nor can this Court substitute the reasons or
give the reasons which the arbitral tribunal has not given to uphold the
award or reject the award. Simply put, this Court cannot fill the lacunae that
occur in the award rendered by an arbitral tribunal.
25. In adjudicating upon the legality of the Termination Letter dated
01.09.2020, the learned Sole Arbitrator has not given any reason as to why
he has preferred to follow Clause 47 of the GCC and not Clause 31 of the
Contract Agreement, which was the specific clause invoked by the
Petitioner.
26. In view of the above, this Court has no other option but to set aside
the findings given by the learned Sole Arbitrator in Issue No. 1.
27. Since this Court is inclined to set aside the Issue No.1, Issues No. 8, 9,
13, 19, 20, 21 & 23 which are dependent on Issue No.1, also stand set aside.
28. With these directions, the Petition is disposed of along with the
pending applications, if any.
SUBRAMONIUM PRASAD, J
APRIL 22, 2025
hsk/ap
