Delhi District Court
Represented By vs M/S Tayal & Co on 20 January, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 130/2019
Union of India
Through: Chief Engineer/TSP,
Northern Railway,
Head Quarter Office Baroda House,
New Delhi-110001
Represented by
Sh. Atul Singh,
Dy. CE/TS, Northern Railway,
Head Quarter Office Baroda House,
New Delhi-110001 ...Petitioner
versus
M/s Tayal & Co.,
Through: Its' Partner
Sh. Tanishq Tayal
Office Situated At:-
B-60, Ground Floor,
Pushpanjali Enclave, Pitampura, Phase-I,
New Delhi-110034 ...Respondent
Date of Institution : 12/07/2019
Arguments concluded on : 15/12/2021
Decided on : 20/01/2022
Appearances : Sh. Surendra Kumar Suryan, Ld. Counsel for petitioner.
Sh. Mukesh Garg, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner has filed the present objection petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside of the impugned OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 1 of 50 arbitral award dated 26/03/2019 of Ld. Sole Arbitrator Sh. Surinder Kumar, Chief Engineer-P&D, Northern Railways. Ld. Sole Arbitrator awarded (i) refund of Rs. 7,77,553.35p towards deduction/withheld amount with interest @ 9% per annum from the date of recovery till payment in favour of claimant/ respondent payable by petitioner; (ii) quashing of deduction of Rs. 12,75,387.13p by petitioner holding petitioner is not entitled to recover it from claimant/respondent; (iii) refund of Rs.25,10,835/- levied/recovered as liquidated damages to be reimbursed to claimant/respondent with interest @ 9% per annum from the date of recovery till payment by petitioner; (iv) Rs. 18,63,527.66p towards unpaid Price Variation Clause (in short PVC) as per the formula in the contract with interest @ 9% per annum till payment, payable by petitioner to respondent/ claimant; whereas the counter claims of petitioner were rejected. Award sum was payable within 45 days of award failing which 10% interest, compounded per month was payable by petitioner to respondent/claimant from date of award till date of payment.
2. I have heard Sh. Surendra Kumar Suryan, Ld. Counsel for petitioner, Sh. Mukesh Garg, Ld. Counsel for respondent and perused the record of the case, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of petitioner as well as on behalf of respondent and given my thoughtful consideration to the rival contentions put forth.
3. Shorn of unnecessary details, brief facts of the case of parties are as follows:-
Tender bearing no. C-162 of 2008 dated 24/11/2008 was OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 2 of 50 floated by petitioner for "Manufacture and supply of pre-stressed mono-block concrete sleepers (pre-tensioned type) for Broad Gauge (1673 MM) to Drawing No. T-2496 to suit 60 Kg. UIC Rail as per RDSO designs and IRS Specification No. T-39-85 (Third Revision May, 1996) as amended up to date duly loaded into wagons/road vehicles". Parties to the lis entered into an agreement on 08/01/2010 for manufacture and supply of 1,68,000 numbers of concrete sleepers. On 05/12/2011, petitioner cancelled the quantity of 8,686 sleepers and imposed penalty of Rs.7,77,553.35p. On 22/02/2012, petitioner again cancelled the quantity of 13,354 sleepers and imposed penalty of Rs.12,75,387.13p. Petitioner also imposed liquidated damages equivalent to Rs. 25,10,835/-. The Indian Railways Standard Conditions of Contract (in short IRSCC) formed part of the agreement. Clause 2900 of IRSC was arbitration clause. Disputes arose between the parties. Several petitions were filed before Delhi High Court. Thereafter, claimant/respondent initiated the arbitral proceedings. Petitioner appointed Ld. Sole Arbitrator to adjudicate upon the disputes between the parties. Arbitral proceedings culminated in the impugned arbitral award.
4. Petitioner has impugned the arbitral award dated 26/03/2019 mainly on the following grounds. Ld. Sole Arbitrator has not applied his judicious mind at the time of passing the impugned award which is against the public policy and per contra to the terms of contract and not in accordance with Section 28 (3) of the Act. Petitioner was compelled to arrange sleepers from alternative sources due to non supply of the scheduled quantity of sleepers within the original Delivery Period (in short DP) as well OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 3 of 50 as within the extended DP and claimant/respondent itself made a request for extension in original DP, which was extended thrice with Liquidated Damages (in short LD), which were never opposed by claimant/respondent during currency of contract and it continued supplying the sleepers and the same was completed. The finding given by Ld. Sole Arbitrator that issuance of letters dated 05/12/2011 and 22/02/2012, imposing and seeking recovery of LD of Rs.20,52,940.48p was totally unwarranted, unlawful and unjustified. Ld. Sole Arbitrator did not appreciate the meaning of force majeure provided in the agreement and misinterpreted the same in observations, because the shortage of cement, power cuts and ban for digging in Aravali Hills does not fall within the ambit of force majeure, so the claim of claimant/ respondent is not covered under the force majeure. As per Clause 0700 of IRSC, the time was the essence of contract and respondent/claimant was supposed to adhere the time schedule for supplying the material, but claimant/respondent failed to abide by the schedule of time and sought extension in DP, which was thrice allowed with LD. Petitioner was within it's right to impose LD on unsupplied quantities of sleepers, but Ld. Sole Arbitrator did not consider it in a proper manner, so impugned award is liable to be set aside. Ld. Sole Arbitrator did not consider Section 74 of The Indian Contract Act as well as agreed terms and conditions of the contract and in mechanical manner without applying his mind, in a hasty manner, since was to retire on 31/05/2019, passed the award in favour of claimant/ respondent and also dismissed the counter claims of petitioner inappropriately. Petitioner had right to recover from contractor the LD on the stores which the contractor had failed to deliver OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 4 of 50 within the period fixed for delivery. In this regard clarification was issued on 04/03/2008 by Government of India, Ministry of Railways vide circular no. 2003/RS(G)/779/9, wherein it was clarified that there should be normally no system of waiver of liquidated damages and imposition of token liquidated damages for delayed supplies in supply contracts. In the present case, waiver of LD is not possible and proving of actual loss is not required, as such the findings of Ld. Sole Arbitrator with regard to imposition of LD of Rs. 20,52,940.48p are patently illegal and same are liable to be set aside. Ld. Sole Arbitrator did not consider the documents and evidences placed before it by petitioner and specifically with regard to the fact that respondent had signed the subsidiary agreement dated 05/11/2012, according to which the extension in DP had been ratified between the parties to the effect that the terms and conditions of extension letter are binding upon both the parties. The detail of revised quantity was also mentioned in the said agreement. The terms and conditions of both agreements dated 08/01/2010 and 05/11/2012 were binding upon both parties and respondent/ claimant was not within its right to back out from the agreed terms and conditions of the contract, but Ld. Sole Arbitrator did not consider the subsidiary agreement executed by respondent/ claimant. The issue of duress and coercion was not pleaded by respondent/claimant either in the Statement of Claim nor in the rejoinder but was so observed by Ld. Sole Arbitrator with respect to subsidiary agreement having been entered into by respondent/ claimant under duress and coercion. Claimant/respondent had not filed any documentary evidence to show that the alleged amount of PVC of Rs.18,63,527/- was ever recovered from him, so no OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 5 of 50 question arises to refund the same along with interest. The finding on Claim no. 4 was patently illegal as for it the award was non speaking, so was liable to be set aside. All the extensions in DP were granted with LD and without PVC and same were accepted by respondent/claimant, hence no question arises to award said claim in favour of respondent/claimant. Ld. Sole Arbitrator failed to consider the material on record placed by petitioner in support of its counter claim but these were not considered by Ld. Sole Arbitrator and counter claim was out- rightly rejected, whereas the sums claimed in counter claims are liable to be allowed in favour of petitioner. The terms of contract clearly indicate the intention of the parties that the time was the essence of the contract as per Section 55 of The Indian Contract Act but the conclusion of Ld. Sole Arbitrator was perverse that since the time was extended by petitioner several times, the argument of claimant/respondent was acceptable that time was not essence of the agreement and such conclusion was patently illegal, perverse and derogatory to the provisions of the agreement dated 08/01/2010, so the impugned award is liable to be set aside. Ld. Sole Arbitrator held petitioner responsible while concluding that delay in supply of sleepers on account of non availability of sleepers, short supply of cement appearing to be one of the reasons and that the letters dated 05/12/2011 and 22/02/2012 for recovery of LD as null and void being issued beyond the terms of the provisions of contract, which conclusion was perverse. Ld. Sole Arbitrator has taken one sided view and failed to appreciate the facts on record. It was the responsibility of claimant/respondent for procurement of all raw material for manufacturing of the sleepers. Claimant/respondent was to OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 6 of 50 always maintain in reserve buffer stock of the cement adequate for at least for two months for sleeper production. As per conditions of the cement contract, it was obligatory upon to respondent/claimant to place the order with cement supplier and had to fulfill two conditions i.e., (i) minimum order should be 100 MT; (ii) and the order is to be accompanied with full advance payment. Claimant/respondent did not place on record any document to show that a valid order was placed with the cement supplier for supply of the required cement. There was no document to show that the cement supplier had defaulted to supply the cement, despite placement of valid order. Ld. Sole Arbitrator mentioned that some documents were produced later on, copy of which were not supplied to petitioner. Mention of these documents on record is against the provisions of the Act. Despite disclosing the second source for procurement of the cement, the claimant frequently shifted the cement supplier on the ground of transportation difficulties. Ld. Sole Arbitrator ignored the facts on record and reached the perverse conclusion which is liable to be set aside. The payment was to be made when the bill is raised, which has to be reconciled/scrutinized with the inspection reports and only thereafter going through different desks it is forwarded to the FA & CAO for making the payment. It is not like the ATM transaction. The time is required before the bill is cleared. Ld. Sole Arbitrator failed to take note that 90% of the price of each consignment was cleared within 15 days of receipt of the inspection report. However, 10% price of the consignment had to be paid on proof of dispatch and submission of the Indemnity Bond. Claimant was not specific as to when the bills were raised and other formalities were completed. The OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 7 of 50 perverse conclusion of Ld. Sole Arbitrator is liable to be set aside. Ld. Sole Arbitrator in impugned award directed petitioner to pay awarded amount within 45 days of publication of award, failing which 10% interest compounded per month shall be payable from the date of publication of award till the date of payment. Section 34 of the Act envisages impugning of the award by aggrieved parties within three months extendable with 30 days period. Ld. Sole Arbitrator was not within his right to snatch statutory right of petitioner to challenge the award by directing petitioner to pay it in 45 days and misconducted by passing such order.
5. Ld. Counsel for petitioner argued in terms of the grounds to impugn the arbitral award. Ld. Counsel for petitioner argued that not only the parties are bound by the contract but even the Arbitrators are bound by the agreement between the parties, as was held by Delhi High Court in the case of Sarvesh Chopra Builders Pvt. Ltd. vs Union of India, 2007 Legal Eagle (DEL) 3928. It was argued that the observations made by Ld. Sole Arbitrator were not based on pleadings and were liable to be set aside in terms of law laid in the cases of (i) Union of India & Ors. vs Master Construction Co., III (2011) SLT 629 and (ii) Mahanagar Telephone Nigam Ltd. vs Finolex Cables Limited, 2017 Leagle Eagle (DEL) 1870. Ld. Counsel for petitioner relied upon the cases of (i) J.G Engineers Private Limited vs Union of India, AIR 2011 SC 2477; (ii) Venture Global Engineering vs Satyam Computer Services Ltd & Anr., (2008) 4 SCC 190; (iii) Chief Signal & Telecommunication Engineer (Projects), South Central Railway vs M/s. Hytromics Enterprises, Hyderabad & OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 8 of 50 Ors., 2006 (2) R.A.J. 185(AP) and argued that the arbitral award was liable to be set aside as it was against public policy whereas the illegality of the award goes to the root of the matter and the award was also so unfair and unreasonable that it shocks the conscience of the Court. It was also argued by Ld. Counsel for petitioner that no pleadings and written submissions were considered by Ld. Sole Arbitrator and the award was vitiated by fraud whereas counter claim of Rs. 22,77,940.48p was liable to be allowed in favour of petitioner. Ld. Counsel for petitioner relied upon the case of United India Insurance Company Limited vs Ajay Sinha & Anr., (2008) 7 SCC 454, submitting that Supreme Court had held that the Court can enter into the merits of the award to consider whether the arbitrator was guilty of bias. Ld. Counsel for petitioner argued that Ld. Sole Arbitrator wrongly concluded that payments were delayed by petitioner and in terms of law laid by Supreme Court in the case of Dyna Technologies Pvt. Ltd. vs Crompton Greaves Ltd., 2019 Legal Eagle (SC) 1378, the requirements of reasoned order were that to be proper, intelligible and adequate, whereas in the present case in the absence of reasoning, there is complete perversity in the reasoning which makes the award liable to be set aside. Ld. Counsel for petitioner argued that the interest allowed by Ld. Sole Arbitrator was contrary to law laid by Orissa High Court in the case of State of Orissa vs Larsen & Tourbo Ltd, 2005 Legal Eagle (ORI) 84. Also was argued by Ld. Counsel for petitioner that the right to challenge the award was interpreted by Supreme Court in the case of ONGC vs SAW Pipes, (2003) 5 SCC 705. Ld. Counsel for petitioner also argued that sufficient reasons were furnished in the application of condonation of delay in OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 9 of 50 filing the petition as petitioner being Government Department, as such the file was placed before different officers and was finally approved on 10/06/2019, whereas due to summer vacations, Ld. Counsel for petitioner was out of station, who resumed the office only on 03/07/2019 and petition was filed with delay of 11 days which was neither intentional nor deliberate. Ld. Counsel for petitioner relied upon the cases of (i) State of Manipur & Ors. Vs Koting Lamkang, (2019) 10 SCC 408; (ii) State of Haryana vs Chandra Mani & Ors., (1996) 3 SCC 132; (iii) Collector, Land Acquisition, Anantnag & Anr vs Mst. Katiji & Ors, (1987) 2 SCC 107 and (iv) G. Ramegowda, Major & Ors. vs Special Land Acquisition Officer, Bangalore, (1988) 2 SCC 142 and prayed for condoning the delay in filing petition and setting aside of the impugned arbitral award terming it to be patently illegal, against public policy and also consequently to allow counter claim and direction be given to respondent to pay Rs.22,77,940.48p to petitioner with interest @18% per annum with cost.
6. Ld. Counsel for respondent argued that none of the grounds in the petition justify interference with the well reasoned award of Ld. Sole Arbitrator. Ld. Counsel for respondent relied upon the case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India (NHAI), 2019 SCC OnLine SC 677 and submitted that Court dealing with application under Section 34 of the Act is not an appellate court and does not sit in appeal over the award of an Arbitral Tribunal by re-assessing or re-appreciating the evidence. It is not possible to re-examine the facts or re-appreciate the evidence to find out OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 10 of 50 whether a different decision can be arrived at. It was argued that when a Court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact, if any, cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. An award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. The court cannot enter into a pure question of fact to set aside the award, under the jurisdiction exercised under Section 34 of the Act. It was argued that after the amendment of Section 34 of the Act, a mere contravention of substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. In order to set aside an award under Section 34 of the Act, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of law. The construction of the terms of the contract is primarily for the arbitrator to decide unless the arbitrator construes the contract in a manner that no fair minded or reasonable person would take or in short, that the arbitrator's view or such a construction is not even a possible one. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. Ld. Counsel for respondent also relied upon the cases of (i) Associate Builders vs Delhi Development Authority, 2014 Legal Eagle (SC) 846; (ii) State of Jharkhand & Ors. vs OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 11 of 50 HSS Integrated SDN & Anr., 2019 Legal Eagle (SC) 1142; (iii) Parsa Kente Collieries Limited vs Rajasthan Rajya Vidyut Utpadan Nigam Limited, 2019 Legal Eagle (SC) 634 and (iv) NTPC Ltd. vs M/s Deconar Services Pvt Ltd., 2021 SCC OnLine SC 498. It was argued that there was no ground to interfere with the well reasoned award passed by Ld. Sole Arbitrator and there was neither any conflict of public policy of India nor any patent illegality in the award that goes to the root of the matter nor there is any other ground available to the petitioner as mentioned in Section 34 of the Act, for challenging the award, which is perfectly legal, valid and justified and the same needs no interference. It was submitted that award is based on fair, just, cogent, plausible reasoning and sound principles of law and also in equity.
7. It was also argued by Ld. Counsel for respondent that Ld. Sole Arbitrator had given following findings of facts. The delay was not due to fault of respondent/claimant. The delay was attributable to petitioner/Railways and also its nominated cement company and also due to unforeseeable reasons beyond the control of respondent i.e., force majeure. As such the action of petitioner/Railways of imposing and recovering liquidated damages and penalty is unwarranted, unlawful and unjustified and also against the terms and conditions of contract. Supplementary agreement was got executed from respondent/ claimant under duress and without its free will. There was no equal bargaining power and petitioner/Railways was in a position to dominate the free will of respondent. It was argued by Ld. Counsel for respondent that these findings of facts cannot be OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 12 of 50 entered into and interfered with in proceedings under Section 34 of the Act. The proceedings under Section 34 of the Act are not appellate proceedings over the award and re-assessing or re- appreciating the evidence is not permissible by law and it is not possible to re-examine the facts to find out whether a different decision can be arrived at. Under no circumstance an arbitral award can be interfered or set aside on the question of facts. It was also argued by Ld. Counsel for respondent that while arriving at the award in the present case, cogent and plausible reasons have been given by Ld. Sole Arbitrator while allowing some of the claims in part, whereas some claims of claimant/ respondent were disallowed. There was proper application of mind by Ld. Sole Arbitrator on the respective claims. Also was argued by Ld. Counsel for respondent that respondent/claimant had inter alia pleaded in the claim petition before Ld. Sole Arbitrator that (i) as per contract, respondent could take supply of cement only from Ambuja Cement i.e., the supplier prescribed and nominated by petitioner/Railways. Two orders of 250 MT each were placed with Ambuja Cement and advance payment of Rs.21,00,000/- was also made. But the cement company delayed the supply of cement and supplied only 76 MT in two months. The fact of delayed supply was brought to the notice of petitioner/Railways vide letters; (ii) towards the end of 2011, petitioner/Railways was facing financial crunch and payments due and payable to respondent/claimant from petitioner/Railways were delayed. As claimant/respondent firm is a small scale industry, it needed regular payments of its dues from petitioner/ Railways to maintain regular and timely supplies. These facts of delayed payments were also intimated to Railway/petitioner vide OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 13 of 50 several letters; (iii) no schedule of supply was fixed in advance. No such schedule was given to respondent/claimant; (v) as per Clause 11 of the contract, LD or penalty cannot be imposed where delay in supply is not due to fault of respondent. Ld. Counsel for respondent also argued that contentions of respondent/claimant were not denied by petitioner/Railways in its reply filed before Ld. Sole Arbitrator. Only bald, vague and ambiguous averments have been made by petitioner in its reply filed before Ld. Sole Arbitrator (such as, respondent/claimant should have arranged for cement in advance, it is common knowledge that some time is taken in Railways to verify payments due to contractor, settlement of bills and getting payments from Railways is not like inserting a card in ATM, respondent/claimant has not given details of payments that were delayed by railway and delayed payment by Railways/petitioner can hardly be a defence for the contractor for delay). It was also argued by Ld. Counsel for respondent that in the rejoinder filed before Ld. Sole Arbitrator, respondent again specifically pleaded above said facts, whereas again it was not denied by petitioner/ Railways in their rejoinder/reply filed by petitioner to the rejoinder of claimant/respondent. It was argued by Ld. Counsel for respondent that it is settled law that any fact not specifically denied by a party is deemed to be admitted and as such it was deemed that petitioner/Railways had admitted the aforesaid facts i.e., delays by prescribed cement agency nominated by Railways, delay in payments of respondent/claimant by Railways and unforeseeable situation (force majeure) before Ld. Sole Arbitrator. Ld. Counsel for respondent also argued that judgment of Supreme Court in the case of Oil & Natural Gas Corporation OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 14 of 50 Ltd. vs SAW Pipes Ltd., relied upon by petitioner is no longer a good law after 23/10/2015, after the amendment of the Act in 2015 as it was specifically over ruled by Supreme Court in the case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India (NHAI) (supra), pertaining to the period before 23/10/2015 i.e., before the amendment of the Act, hence they are not applicable to the present case. It was also argued that facts and circumstances of the cases relied upon by Ld. Counsel for petitioner were different from the facts and circumstances of the present case, hence they cannot be applied in the present case. It was also argued that the award in the present case has been passed within the parameters of contract. It was also argued by Ld. Counsel for respondent that even on facts there was sufficient material on record to show that the delay in supply was not due to fault of respondent/claimant. Rather the delay was attributable to petitioner/Railways and also its nominated cement company and also due to unforeseeable reasons beyond the control of respondent i.e., force majeure. It was also argued that action of petitioner/Railways of imposing and recovering liquidated damages and penalty was unwarranted, unlawful and unjustified and also against the terms and conditions of the contract. It was also argued by Ld. Counsel for respondent that as per terms of contract, respondent/claimant cannot be made liable to pay liquidated damages and penalty, if the delay was not attributable to respondent/claimant, whereas Ld. Sole Arbitrator gave specific findings of the fact that the delay was not attributable to respondent and rather the delay was attributable to the Cement Company nominated by Railways and also due to force majeure. It was also argued by Ld. Counsel for OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 15 of 50 respondent that time was not essence of contract, which was clear from the fact that there was provision in the contract itself for extension of Delivery Period (DP), whereas petitioner itself was taking supply after DP; moreover, petitioner has not taken supply from other supplier, if the supply from respondent/claimant was getting delayed. Ld. Counsel for respondent vehemently argued that no loss, whatsoever was caused to petitioner due to the delay in supply; although the delay was attributable to petitioner/ Railways itself. It was argued by Ld. Counsel for respondent that petitioner/Railways neither alleged nor filed any document to show that any loss was caused to it or that it had procured the supply from any other source. It shows that there was no urgent requirement and no loss was suffered by petitioner/Railways. It was also argued by Ld. Counsel for respondent that DP was up to 25/12/2011, whereas LD was imposed even before that i.e., on 05/11/2011 and thereafter the DP was extended up to 30/06/2012, but LD was imposed even before that i.e., on 22/02/2012. It was argued by Ld. Counsel for respondent that in case of breach of contract by a party, the other party is entitled to recover and receive from the party who has broken the contract, only a reasonable compensation not exceeding the amount so named or stipulated for in the contract (Liquidated Damages). The amount stipulated in the contract is the higher limit. Ld. Counsel for respondent argued that in the present case, even if it is assumed for the sake of arguments, though not admitted by respondent, that the delay is due to fault of respondent and not attributable to petitioner/Railways, even then as petitioner/Railways has failed to plead or prove any loss to it, it is not automatically entitled to such highly excessive, exorbitant and unreasonable amount of OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 16 of 50 liquidated damages. Ld. Counsel for respondent prayed for dismissal of the petition with cost. Ld. Counsel for respondent also argued that the petition deserves dismissal as it has been filed beyond the period of limitation without sufficient cause for condonation of 14 days delay in filing the petition as reasons put forth are not sufficient cause but are depicting gross negligence and deliberate inaction and inactiveness on the part of concerned officers of petitioner/Counsel, whereas no action was taken to avoid and mitigate the delay. The concerned officers of petitioner were well aware that the time period to file the petition under Section 34 of the Act was three months but were so negligent and inactive that they took more than two and half months just to take a decision to challenge the award and instead of sending the file to their available Counsel from their panel sent file to the Counsel of their panel, who was out of station for about one month, whereas petitioner had well established legal department and panel of lawyers to defend their interest in Courts. Such delay cannot be condoned mechanically merely because the Government or a wing of the Government is a party. Ld. Counsel for respondent relied upon the cases of (i) Office of Chief Post Master General & Ors. vs Living Media India Ltd. & Anr., 2012 LawSuits (SC.) 124; (ii) Estate Officer, Haryana Urban Development Authority & Anr. vs Gopi Chand Atreja, 2019 LawSuits (SC) 726; (iii) Subhash Chand vs MCD, 2015 LawSuit (Del) 2863; (iv) University of Delhi vs Union of India & Ors., 2019 LawSuit (SC) 2010; (v) M/s M.L Mahajan vs DDA & Ors., 1992 RLR 242 and (vi) Maniben Devraj Shah vs Municipal Corporation of Brihan Mumbai, AIR 2012 SC 1629. Ld. Counsel for respondent argued that since petitioner had failed OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 17 of 50 to give sufficient reason and explanation for delay, so the delay is not liable to be condoned and petition deserves dismissal being time barred.
8. Clause 0702 of IRSCC reads as under:-
"0702. Failure and Termination. If the Contractor fails to deliver the stores or any installment thereof within the period fixed for such delivery in the contract or as extended or at any time repudiates the contract before the expiry of such period the Purchaser may without prejudice to his other rights-
(a) recover from the Contractor as agreed liquidated damages and not by way of penalty a sum equivalent to 2 per cent of the price of any stores (including elements of taxes, duties, freight, etc.) which the Contractor has failed to deliver within the period fixed for delivery in the contract or as extended for each month or part of a month during which the delivery of such stores may be in arrears where delivery thereof is accepted after expiry of the aforesaid period, or
(b) cancel the contract or a portion thereof and if so desired purchase or authorize the purchase of the stores not so delivered or others of a similar description (where stores exactly complying with particulars are not in, the opinion of the Purchaser, which shall be final, readily procurable) at the risk and cost of the Contractor. It shall, however, be in the discretion of the purchaser to collect or not the security deposit from the firm/firms on whom the contract is placed at the risk and expense of the defaulted firm.
Whereas action is under Sub-clause (b) above, the Contractor shall be liable for any loss which the Purchaser may sustain on that account provided the purchase, or, if there is an agreement to purchase, such agreement is made, in case of failure to deliver the stores within the period fixed for such delivery in the contract or as extended within six months from the date of such failure and in case of repudiation of the contract before the expiry of the aforesaid period of delivery, within six months from the date of cancellation of the contract. The Contractor shall not be entitled to any gain on such purchase and the manner and method of such purchase shall be in the entire discretion of the Purchaser. It shall not be necessary for the Purchaser to serve a notice of such purchase on the Contractor.
Note:- In respect of the stores which are not easily available in the market and where procurement difficulties are experienced, the period for making risk purchase shall be nine months instead of OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 18 of 50 six months provided above."
9. Clauses 10.3, 11, 12 and 13.1 of the Letter of Acceptance dated 04/12/2019 read as under:-
"10.3 If the contractor fails to deliver the store within the delivery period as per contract or as extended or at any time repudiates the contract before the expiry of such period due to any circumstances whatsoever, save as provided in Clause 10.4 and force majeure Clause 17, the purchaser reserves the right to cancel the contract for the balance quantity in whole or in part and recover from him the liquidated damages as per Clause 12. If, however, the stores are accepted after the expiry of the period fixed for delivery, the purchaser may grant an extension of the delivery period at it's sole discretion, subject to the following conditions:
(a) That the purchaser has the right to recover from the contractor the liquidated damages in terms of clause 0702 of IRS Conditions of Contract on the stores, which the contractor has failed to deliver within the period fixed for delivery;
(b) That no increase in price on account of any statutory increase in or fresh imposition of Customs Duty, Excise Duty, Sales Tax, Freight Charges or on any account of any other tax or duty leviable in respect of the stores specified in the contract, which takes place after the date of delivery period stipulated in the said Acceptance of Tender shall be admissible on such of the said stores as are delivered after said date;
(c) That not withstanding any stipulation in the contract for increase in price on any other grounds no such increase which takes place after the delivery date stipulated in the contract shall be admissible on such of the said as are delivered after the said date;
(d) But nevertheless the purchaser shall be entitled to the benefit of any decrease in price on account of reduction in or remission of Customs Duty, Excise Duty, Sales Tax or on account of any other ground which takes place after the expiry of the above mentioned date namely the delivery date stipulated in the contract. The contractor shall allow the said benefit in his bills or in the absence thereof shall certify that no decrease in price on account of any of these factors has taken place.
11. Penalty for Delays in Supplies During Delivery Period:
In case of failure on the part of the supplier to arrange OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 19 of 50 supplies as per the schedule fixed in advance, save force majeure conditions and/or delays attributable to the railways, the purchaser reserves the right to cancel the quantity in deficit at the end of monitoring periods i.e. every four month and recover from the defaulting contractor a sum equivalent to five percent of the cost of sleepers which have remained unsupplied. The shortfall in supplies due to default by the contractor may be made good by arranging equivalent supplies from alternate sources.
12. Liquidated Damages for Failure to complete Supplies Within Delivery Period or Termination of Contract:
The Liquidated damages in pursuance of clause 0702 of IRS Conditions of Contract will be limited to a maximum of 5% of the cost of stores which the contractor fails to deliver within the period fixed for delivery in the contract or as extended, where delivery of the store is accepted after expiry of the aforesaid period. In case, the delivery of the store is not accepted by the purchaser after expiry of the period fixed for delivery in the contract or as extended or the contract is terminated before expiry of the contract due to failure of the contractor to execute the contract as per the agreed terms and conditions of the contract during it's currency, the liquidated damages equivalent to 5% of the cost of sleepers undelivered/ cancelled would be recovered from the contractor. '
13. Price Variation Clause:
13.1 The accepted rate will vary in accordance with the price variation formula as detailed below in clause 13.2 to take into consideration variation in prices during execution of contract.
Price variation will be worked out by taking into consideration the Indices/basic rates for the month of production."
10. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 20 of 50 cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
11. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"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 furnishes proof 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 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 OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 21 of 50
(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 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.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
12. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 22 of 50 when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
13. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
14. Supreme Court in the case of Patel Engineering Ltd. vs OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 23 of 50 North Eastern Electric Power Corporation Ltd., MANU/SC/ 0447/2020 inter alia held that wherein the findings of Ld. Arbitrator are arrived at by taking into account irrelevant facts and by ignoring the vital clauses, the same suffers from the vice of irrationality and perversity and that the award will be liable to be set aside when while interpreting the terms of the contract, no reasonable person could have arrived at such a conclusion and the award passed by the arbitrator suffers from the vice of irrationality and perversity.
15. Following are findings of Arbitral Tribunal in impugned arbitral award on analysis of claims:-
"7.0 Analysis of Claims 7.1 Claim No.'s 1 & 2:
The Claimant has sought the deductions / withholdings / levies made vide the impugned communications to be declared as bad in law. The Claimant has contended that the deductions/withholdings/levies are clearly in the nature of penalties.
7.1.2.I have already held the Respondent to be responsible for the delay in supply of cement and delayed payments. I have also held Clause 17 (Force Majeure) to be applicable in favour of the Claimant. Therefore, on these two counts alone, no penalty/withholdings/levies can be made against the Claimant as they are not responsible for the delays. However, even otherwise, the impugned letters use the word 'penalty', whereas the subsequent impugned letters use the word 'liquidated damages'. Clearly, the change is only an afterthought, after the Respondent received unfavourable orders by the High Court. The intention is clearly to levy a penalty for default in supply, and not to recover liquidated damages.
7.1.3.My attention has been invited to the cases of Fateh Chand v.
Balkishan Das, AIR 1963 SC 1405 which holds any stipulation in a contract by way of a penalty to be void.
7.1.4.The Respondent has argued that the Claimant entered into a Supplementary Agreement vide which it waived its right to claim waiver of liquidated damages and charging the OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 24 of 50 escalation/PVC payments. The Claimant has however contended that the Supplementary Agreement was entered into under duress, and without which the Respondent was refusing to extend the delivery period. It has been contended that where a party discharges or waives certain rights under duress, such waiver cannot be said to be under free consent. Reliance has been placed on NTPC v. Reshmi Constructions, AIR 2004 SC 1330.
7.1.5.I find merit in the submission of the Claimant. Clearly the Respondent was in a stronger bargaining position. Clearly, it was exerting its position to corner the Claimant into waiving its claims. The waiver cannot therefore be said to have been obtained by consent.
7.1.6.There is also no doubt in my mind that Clause 11 of the Agreement is clearly penal in nature. There is also no doubt in my mind that the impugned communications are also clearly levying penalties. The Respondent has failed to establish that the amounts claimed are a pre-estimate of the damages it will suffer. Therefore, the question of levying any liquidated damages cannot and does not arise. Even otherwise, I have already held that the delays in supply cannot be attributed to the claimant. Further the cancellation of quantities after several years is merely an afterthought which is occasioned not due to default of the claimant but to enable the respondents to procure the sleepers from other units for the subsequent year's requirement. The impugned communications cannot, therefore, be sustained. Accordingly, they are quashed, and levies/withholdings/ recoveries of Rs. 7,77,553/- made pursuant thereto are to be reimbursed to the Claimant.
7.1.7 The Claimant has also been denied use of the amounts of levies/withholdings/recoveries made and are therefore entitled to interest thereon. I deem 9% p.a. to be a reasonable rate of interest and award the same from the date of recovery till payment.
7.2 Claim No.3 for refund of liquidated damages of Rs. 25,10,835:
Since the delay, if any, has not occurred due to any failure of the claimant, but it has taken place due to the factors beyond the control of the claimant. As such, the action of railway of imposing and recovering liquidated damages is totally unwarranted, unlawful and unjustified. Accordingly, imposing and recovering liquidated damages by the respondent is quashed, and Rs. 25,10,835/- levied/recovered as liquidated damages are to be OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 25 of 50 reimbursed to the Claimant with interest @ 9% p.a. from the date of recovery till payment.
7.3 Claim No. 4 for payment of PVC of Rs. 18,63,527.66:
There is a claim for Price Variation in terms of Clause 13.1 and 13.2 of the Agreement, and to which the Claimant is contractually entitled. As I have noted, the delays were attributable to the Respondent. Consequently, the Claimant cannot be deprived of its contractual right to claim price variation. Claim No. 4 is accordingly, awarded in favour of the Claimant.
7.4. Claim No.5:
This claim is towards loss of profit. This claim is very remote and unreasonable. The Claimant has not provided any proof of this claim I accordingly disallow and reject this claim.
8. Conclusion In the facts and circumstances, I award the following claims in favour of the Claimant:
Claimant's Claim
(i) Claim No. 1 - Refund of Rs. 7,77,553.35 towards deduction / withheld amount with interest @ 9% p.a. from the date of recovery till payment.
AWARD: Rs. 7,77,553.00 along with 9% interest w.e.f.
from the date of recovery till payment.
(ii) Claim no. 2 - Deduction of Rs. 12,75,387.13 by respondent is quashed. Respondent is not entitled to recover it from the claimant.
(iii) Claim no. 3 - Refund of Rs. 25,10,835/- levied/recovered as liquidated damages are to be reimbursed to the Claimant with interest @ 9% p.a. from the date of recovery till payment.
AWARD - Rs. 25,10,835.00 along with 9% interest w.e.f.
from the date of recovery till payment.
(iv) Claim No. 4 - Payment of Rs. 18,63,527.66 towards unpaid PVC - as per the formula in the contract with interest @ 9% p.a. till payment.
OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 26 of 50AWARD - Rs. 18,63,527 along with 9% interest w.e.f. the date of recovery till payment.
As far as Claim No. 5 is concerned, the Claimant has not provided any proof of this claim. This is, therefore, rejected.
Counter claim of Respondent
(i) Counter Claim no. 1 - Rs. 7,77,553.35 (Alongwith interest @ 24% p.a. from the date of notice of demand) - I have already found the delay, if any, has not occurred due to any failure of the claimant, but it has taken place due to the factors beyond the control of the claimant and also the Respondent to responsible for the delay, hence it cannot be awarded any counter-claim on this ground. Counter-claim no. 1 is accordingly rejected.
AWARD: Rs. 0.00
(ii) Counter Claim no. 2 - Rs. 12,75,387.13 (Alongwith interest @ 24% p.a. from the date of notice of demand) - I have already found the delay, if any, has not occurred due to any failure of the claimant, but it has taken place due to the factors beyond the control of the claimant and also the Respondent to responsible for the delay, hence it cannot be awarded any counter-claim on this ground. Counter-claim no. 2 is accordingly rejected.
AWARD: Rs. 0.00
(iii) Counter Claim no. 3 - Rs. 1,25,000 (Legal expenses of Arbitration and a sum of Rs. 1,00,000/- towards legal expenses for proceeding before Delhi High Court - as I have upheld the Claimants claims, the claims cannot be said to be frivolous and bogus as contended by Respondent. Therefore, this Counter-claim is rejected.
AWARD: Rs. 0.00"
16. In filed reply to statement of claim of respondent/claimant and/or in filed rejoinder before Ld. Sole Arbitrator, petitioner neither pleaded nor proved later in arbitral proceedings that (i) petitioner had procured the supply from any other source and/or
(ii) had suffered any loss; due to stated delay in supplies by the respondent/claimant.OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 27 of 50
17. In reaching the aforesaid findings, Arbitral Tribunal had appreciated the material and evidence before it as well as the submissions/arguments of the parties/Counsel. Ld. Sole Arbitrator appreciated the internal communication dated 19/09/2011 of petitioner and gave finding that it related to a different tender number i.e., CS-163, whereas the present dispute was concerned with CS-162; so it did not assist the petitioner with respect to alternative/extra source for procurement of cement having been nominated by Railways/petitioner and communicated to respondent/claimant. Ld. Sole Arbitrator also appreciated that Clause 4.1 of agreement between parties mandated that claimant/respondent could utilize the supply only from approved sources of petitioner and M/s Ambuja Cement Ltd. was nominated as the primarily source and admittedly no secondary source was nominated. Ld. Sole Arbitrator also appreciated the fact that the manufacture of quality sleepers for Railways was a matter of public safety and respondent/claimant was bound by the agreement and could not therefore have taken cement from any other source, whereas petitioner was in the knowledge of cement shortage and yet did nothing; so respondent/claimant cannot be blamed for that. Ld. Sole Arbitrator reached the conclusion that power cuts in Haryana and Himachal Pradesh; State Government ban for digging Arawali Hills and Commonwealth games disturbing transportation, certainly qualified as a force majeure condition under Clause 17 of the agreement as at the time of execution of the agreement, respondent/claimant could not have reasonably foreseen these factors. Ld. Sole Arbitrator also appreciated that respondent/ claimant had filed a detailed chart of delayed payments made by OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 28 of 50 respondent/claimant and it is the fact finding of Ld. Sole Arbitrator that said chart was not disputed and apart from bare denials, there was nothing on record to show that respondent/ claimant made timely payments. It is also the finding of Ld. Sole Arbitrator that to the contrary, respondent/claimant had placed on record communications to show that it frequently communicated to petitioner/Railways the delay in payments to which no response was received by respondent/claimant and on that basis of the evidence on record, Ld. Sole Arbitrator accepted that there had been delay in timely payments as brought out by respondent/claimant. All above said were part and parcel of the conclusion of Ld. Sole Arbitrator that delay, if any, was attributable only to petitioner/Railways and it did not occur due to any failure of respondent/claimant but had taken place due to the factors beyond the control of respondent/claimant. Ld. Sole Arbitrator concluded that action of petitioner/Railways of imposing and recovering penalty and liquidated damages was totally unwarranted, unlawful and unjustified.
18. In the case of M/s Tamilnadu Telecommunication Ltd vs Bharat Sanchar Nigam Ltd., OMP (Comm.) 430/16, decided by Delhi High Court on 11/11/2016, in para 17, following pronouncements of the case of ONGC Ltd. Vs Saw Pipes Ltd., (2003) 5 SCC705 were elicited:
64. ....Under Section 73, when a contract has been broken, the party who suffers by such breach is entitled to receive compensation for any loss caused to him which parties knew when they made the contract to be likely to result from the breach of it. This Section is to be read with Section 74, which deals with penalty stipulated in the contract, inter alia (relevant for the present case) provides that when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the party complaining of breach is OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 29 of 50 entitled, whether or not actual loss is proved to have been caused, thereby to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named. Section 74 emphasizes that in case of breach of contract, the party complaining of the breach is entitled to receive reasonable compensation whether or not actual loss is proved to have been caused by such breach. Therefore, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. But if the compensation named in the contract for such breach is genuine pre-estimate of loss which the parties knew when they made the contract to be likely to result from the breach of it, there is no question of proving such loss or such party is not required to lead evidence to prove actual loss suffered by him.....
67.....In our view, in such a contract, it would be difficult to prove exact loss or damage which the parties suffer because of the breach thereof. In such a situation, if the parties have pre-
estimated such loss after clear understanding, it would be totally unjustified to arrive at the conclusion that party who has committed breach of the contract is not liable to pay compensation. It would be against the specific provisions of Section 73 and 74 of the Indian Contract Act. There was nothing on record that compensation contemplated by the parties was in any way unreasonable. It has been specifically mentioned that it was an agreed genuine pre-estimate of damages duly agreed by the parties. It was also mentioned that the liquidated damages are not by way of penalty. It was also provided in the contract that such damages are to be recovered by the purchaser from the bills for payment of the cost of material submitted by the contractor. No evidence is led by the claimant to establish that stipulated condition was by way of penalty or the compensation contemplated was, in any way, unreasonable. There was no reason for the tribunal not to rely upon the clear and unambiguous terms of agreement stipulating pre-estimate damages because of delay in supply of goods ......"
19. In the case of Swan Gold Mining Ltd. vs Hindustan Copper Ltd., MANU/SC/0849/2014, the law laid in the case of Oil & Natural Gas Corporation Ltd. vs Saw Pipes Ltd., (2003) 5 SCC 705 was discussed and inter alia held that when the parties have entered into concluded contract, agreeing terms and conditions of the said contract, they cannot back out and OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 30 of 50 challenge the award on the ground that the same is against the public policy and the Court was precluded from re-appreciating the evidence and to arrive at different conclusion by holding that the arbitral award is against the public policy.
20. In the case of M/s Arosan Enterprises Ltd vs Union of India & Anr., MANU/SC/0595/1999, it was inter alia held that reappraisal of evidence by the Court is not permissible in the proceeding under the Arbitration Act. In the event of there being no reason in the award, question of interference of the court would not arise at all. In the event, however there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on wrong proposition of law. In the event, however, two views are possible on a question of law as well, the Court would not be justified in interfering with the award. Also was held that the Court as matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of arbitrator is a possible view the award or the reasoning contained therein cannot be examined. The decisions in the cases of State of Rajasthan vs Puri Construction Co. Ltd, MANU/SC/0865/1994 and Sudersan Trading Company vs Government of Kerala & Anr., MANU/SC/0361/1989 were relied. Also was held therein that where an Arbitrator makes a mistake either in law or in fact in determining the matters referred, but such mistake does not appear on the face of the award, the award is good notwithstanding the mistake, and will not be remitted or set aside.
OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 31 of 5021. In the case of MCD vs Harcharan Dass Gupta Construction Pvt Ltd., MANU/DE/4010/2018, the pronouncements in the case of Associated Builders vs Delhi Development Authority, (2015) 3 SCC 49 were relied upon. In aforesaid case of Associated Builders, it was inter alia held that:
"xxxx xxxx xxxx
33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H.Securities (P) Ltd., [(2012) 1 SCC 594: (2012) 1 SCC (Civ) 342: 2011 LAWPACK(SC) 50505:
2011(6) R.A.J. 27], this Court held: (SCC pp. 601-02, para 21) "21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-
member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.
xxxx xxxx xxxx"
22. In the case of Vishal Engineers & Builders vs Indian Oil Corporation Ltd., FAO (OS) 204 of 2010, decided by Delhi OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 32 of 50 High Court on 30/11/2011, it was inter alia held that it was duty of the Court not to enforce penalty clause but only to award a reasonable compensation, which had been held to be statutorily imposed upon Courts by Section 74 of the Contract Act and Court had to adjudge in every case, reasonable compensation for breach of contract having regard to conditions which existed on date of breach.
It was held therein that if there was absence of any loss, whatsoever, an aggrieved party could not claim that it was still entitled to liquidated damages without, at least, proving a semblance of loss.
23. Supreme Court in the case of Kailash Nath Associates vs Delhi Development Authority, MANU/SC/0019/2015 had elicited the law on compensation for breach of contract under Section 74 as follows:-
"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 33 of 50
3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."
24. Delhi High Court in the case of Essban Paints Pvt. Ltd. vs Union of India & Anr., MANU/DE/0648/2001 held that in case the contract was not performed and there was breach thereof by the petitioner, it was for the respondent to prove the loss suffered because of such breach and to forfeit the security only to the extent of loss.
25. Delhi High Court in the case of United Telecoms Limited vs Mahanagar Telephone Nigam Limited, MANU/DE/ 0969/2012 inter alia held that it is well established that in a contract on its breach, penalty can be levied on the defaulting party only if the other party had suffered and the same is proved.
26. Supreme Court in the case of Navodaya Mass Entertainment Ltd. vs J.M. Combines, MANU/SC/0735/2014 held that the scope of interference of the Court is very limited.
OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 34 of 50Court would not be justified in reappraising the material on record and substituting its own view in pace of the Arbitrator's view. Where there is an error apparent on the face of the record or the Arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail. (See: Bharat Coking Coal Ltd. v. L.K. Ahuja MANU/SC/0335/2004: (2004) 5 SCC 109; Ravindra and Associates v. Union of India MANU/SC/1761/2009 : (2010) 1 SCC 80; Madnani Construction Corporation Private Limited v. Union of India and Ors. MANU/SC/1869/2009 : (2010) 1 SCC 549; Associated Construction v. Pawanhans Helicopters Limited MANU/SC/7630/2008 : (2008) 16 SCC 128; and Satna Stone and Lime Co. Ltd. v. Union of India and Anr. MANU/SC/7640/2008 : (2008) 14 SCC 785).
27. Delhi High Court in the case of Jupiter Rubber Pvt. Ltd. vs Union of India, MANU/DE/1150/2020 inter alia held as follows:-
"44. At this stage, I would deal with the objection of the Respondent, with respect to reduction in the percentage of the LD by the Arbitrator from 10% to 3%. The Arbitrator was of the view that the LD @10% was on the higher side and came under the "umbrella of penalty and not as LD". The loss suffered by the Respondent was not so huge so as to justify LD of 10% and therefore reduced it to 3%. In ONGC (supra), Supreme Court has clearly held that under Section 74 of the Act, the emphasis is on reasonable compensation. If the compensation named in the contract is by way of penalty, consideration would be different and the party is only entitled to reasonable compensation for the loss suffered. The OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 35 of 50 Arbitrator correctly applied the law and reduced the percentage of LD from 10% to 3% as in his wisdom the imposition of LD at 10% was a penalty, being on a higher side. This Court cannot substitute the wisdom or the plausible view of the Arbitrator. The judgment relied upon by the Respondent in the case of Union of India vs. Mecano Export Import S.A. (supra) lays down a proposition that can hardly be disputed.
Under Section 31 (3) of the Act, the Arbitrator is required to give reasons for the Award and reason is a ground or a motive for a belief or course of action. The Arbitrator looking into the facts and circumstances of the case rendered a finding that the loss suffered by the Respondent, which though could not be computed in terms of money, was not enough to justify LD @ 10% and with this reasoning reduced the amount claimed. Thus, it cannot be argued that the Award is bereft of reasons. No ground is made out to interfere with this part of the Award."
28. Supreme Court in the case of M/s Dyna Technologies Pvt. Ltd. vs M/s Crompton Greaves Ltd.(supra) inter alia held that arbitral award is to be set aside on the grounds of insufficiency and inadequacy of reasoning being unintelligible and therefore unsustainable.
29. Delhi High Court in the case of Union of India vs Jain Steel Industries, FAO No. 367/2013 decided on 16/04/2016 inter alia held that the scope of a court hearing objections under Section 34 is limited and an award can only be interfered with if the same is illegal [Section 28(1)(a)] or against the contractual provisions [Section 28(3)] or perverse. This is the law as per the judgment of the Supreme Court in the case of O.N.G.C. vs Saw Pipes Ltd., 2003 (5) SCC 705. Courts hearing objections under Section 34 of the Act do not sit as an appellate court to substitute its own view for that of the arbitrator once arbitrator has taken one possible and plausible view. If the scope of hearing objections under Section 34 is limited then the scope of an appeal against the judgment hearing the objections has to be further OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 36 of 50 limited.
30. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 37 of 50 by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt.Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC
296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 38 of 50 Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63.
31. Sections 28(3) and 31 (7) of The Act read as follows:
"28. Rules applicable to substance of dispute.-- ........................................................................... (3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.
..........................................................................
31. Form and contents of arbitral award.--
............................................................................ (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of the award to the date of payment.
Explanation.- The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978)."
32. In the case of Ashi Limited vs Union of India, O.M.P. 200/2015 decided by Delhi High Court on 19/05/2020, Hon'ble Ms. Justice Jyoti Singh had also appreciated law laid by Supreme Court in the case of Sree Kamatchi Amman Constructions vs The Divisional Railway Manager (Works) Palghat & Ors. MANU/SC/0625/2010 and inter alia held as follows:
"54. In so far as the grant of interest by an Arbitrator is concerned, the law is no longer res integra, Section 31(7)(a) of OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 39 of 50 the Act clearly stipulates that unless otherwise agreed by the parties, where the Award is for payment of money, the Tribunal may grant such rate as it deems reasonable, on the whole or any part of the money and for the whole or any part of the period between the date of cause of action and the date of the Award. In the case of Jaiprakash Associates Ltd. (Jal) v. Tehri Hydro Development Corporation India Ltd., MANU/SC/0157/2019, the Supreme Court after noticing the provisions of the 1996 Act and various judgments on the issue of interest, more particularly, the recent judgment in the case of Reliance Cellulose Products Ltd. v. ONGC Ltd., MANU/SC/0777/2018: (2018) 9 SCC 266, summed up the law on interest as under:
"13. Insofar as power of the arbitral tribunal in granting pre- preference and/or pendente lite interest is concerned, the principles which can be deducted from the various judgments are summed up below:
(a) A Constitution Bench judgment of this Court in the case of Secretary, Irrigation Department, Government of Orissa vs G.C. Roy exhaustively dealt with this very issue, namely, power of the arbitral tribunal to grant pre-
reference and pendente lite interest. The Constitution Bench, of course, construed the provision of the 1940 Act which Act was in vogue at that time. At the same time, the Constitution Bench also considered the principle for grant of interest applying the common law principles. It held that under the general law, the arbitrator is empowered to award interest for the pre- reference, pendente lite or post award period. This proposition was culled out with the following reasoning:
"43 The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 40 of 50 there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point).
All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas [Seth Thawardas Pherumal v.
Union of India, MANU/SC/0070/1955 : (1955) 2 SCR 48: AIR 1955 SC 468] has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [MANU/SC/ 0004/ 1987: (1988) 1 SCC 418: (1988) 1 SCR 253] almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 41 of 50 has always been inferred."
It is clear from the above that the Court decided to fall back on general principle that a person who is deprived of the use of money to which he is legitimately entitled to, has a right to be compensated for the deprivation and, therefore, such compensation may be called interest compensation or damages.
(b) As a sequitur, the arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not.
(c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principles that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. This position was made amply clear in G.C Roy case in the discussion thereafter:
"44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
(d) Insofar as 1940 Act is concerned, it was silent about the jurisdiction of the arbitrator in awarding pendente lite interest. However, there is a significant departure on this aspect insofar as 1996 Act is OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 42 of 50 concerned. This distinction has been spelt out in Sayeed Ahmed case in the following manner:
"Re: Interest from the date of cause of action to date of award
7. The issue regarding interest as noticed above revolves around Clause G1.09 of the Technical Provisions forming part of the contract extracted below:
"G. 1.09. No claim for interest or damages will be entertained by the Government with respect to any money or balance which may be lying with the Government or any become due owing to any dispute, difference or misunderstanding between the Engineer-in- Charge on the one hand and the contractor on the other hand or with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or any other respect whatsoever."
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14. The decisions of this Court with reference to the awards under the old Arbitration Act making a distinction between the pre-reference period and pendente lite period and the observation therein that the arbitrator has the discretion to award interest during pendente lite period in spite of any bar against interest contained in the contract between the parties are not applicable to arbitrations governed by the Arbitration and Conciliation Act, 1996."
............................................................................
56. In the case of Union of India v. Bright Power Projects (India) (P) Ltd., MANU/SC/0712/2015 : (2015) 9 SCC 695, Supreme Court held that when agreement between the parties bars interest on the amounts from cause of action to the date of the Award, the Arbitrator is bound by it and cannot award interest as Section 31 (7)(a) clearly begins with the words 'unless otherwise agreed by parties'.
57. In State of Haryana v. S.L Arora & Co., MANU/SC/ 0131/2010 : (2010) 3 SCC 690, Supreme Court has held that it is not open to the courts to interfere in the discretion exercised by an Arbitrator in granting the rate of interest. This is purely the domain, power and prerogative of the Arbitrator. Relevant part of the judgment reads as under:-
OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 43 of 50"23. The difference between clauses (a) and (b) of Section 31(7) of the Act may conveniently be noted at this stage. They are:
(i) Clause (a) relates to pre-award period and clause
(b) relates to post-award period. The contract binds and prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the Arbitral Tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post-award period.
(iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period.
In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract, as per discretion of the Arbitral Tribunal. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum."
33. In terms of Section 31(7) of the Act and as per law laid in the precedents cited above, for pre award period comprising pre reference period and pendente lite period the interest was so awarded by Arbitral Tribunal at its discretion in the absence of any term in the contract for not to award interest on the claims. Ld. Counsel for petitioner did not show any term in the contract prohibiting award of interest on the claims of claimant/ respondent. Also the Arbitral Tribunal awarded the future interest in terms of the award as per Section 31(7) of the Act. By no OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 44 of 50 figment of imagination the awarded rate of interest can be said to be unreasonable or excessive to compensate claimant/ respondent for deprivation of the use of money to which it was legitimately entitled to.
34. Supreme Court in case of Dakshin Haryana Bijli Vitran Nigam Ltd. vs M/s Navigant Technologies Pvt. Ltd, 2021 SCC OnLine SC 157 has held that the date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Act. It is from this date that: "(a) the period of '30 days' commences for filing an application under Section 33 for correction and interpretation of the award, or for additional award; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Act; (c) the period of limitation for filing objections to the award under Section 34 commences."
35. In the application of petitioner for condonation of delay in filing the present petition, it is the averment of petitioner that impugned award dated 26/03/2019 was received 28/03/2019, so petitioner was supposed to file the present petition under Section 34 of the Act within period of three months from the date of receiving the impugned award i.e., upto 27/06/2019 but the same could not be filed within the stipulated period of three months as after receiving the impugned award by the concerned officer on 28/03/2019, the case was put up before senior officers for taking necessary approval as to what action is to be taken. Said file went to various tables for the said purpose and finally it was approved on 10/06/2019, wherein the competent authority of petitioner decided to challenge the impugned award before competent court OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 45 of 50 of law. After approval on 10/06/2019, entire case file with Vakalatnama was sent to office of Counsel for petitioner for preparing the petition but due to summer vacations, Ld. Counsel for petitioner was out of station, who resumed the office only on 03/07/2019 and thereafter prepared the petition and filed it without further loss of time but there was 11 days delay in filing the present petition which is now sought to be condoned by petitioner.
36. Supreme Court in the case of State of Uttar Pradesh & Ors. vs Sabha Narain & Ors., SLP (Civil) Diary No (s) 25743/2020 decided on 22/01/2021 reiterated the current legal position with respect to the facet of condonation of delay elucidated by judgments of Supreme Court in the cases (i) Office of the Chief Post Master General & Ors. v Living Media India Ltd. & Anr., (2012) 3 SCC 563; (ii) State of Madhya Pradesh & Ors. v. Bheru Lal. [SLP (C) Diary No. 9217/2020 decided on 15.10.2020] and (iii) State of Odisha & Ors. v. Sunanda Mahakuda, [SLP (C) Diary No. 22605/2020 decided on 11/01/2021] and held that Apex Court had repeatedly discouraged State Governments and public authorities in adopting an approach for ignoring the period of limitation prescribed by the statutes, as if the Limitation statute does not apply to them. Also was held therein that the leeway which was given to the Government/public authorities on account of innate inefficiencies was the result of certain orders of Supreme Court which came at a time when technology had not advanced and thus, greater indulgence was shown, whereas said position is no more prevalent. Supreme Court also categorized such kind of OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 46 of 50 cases as "certificate cases" filed with the only object to obtain a quietus from the Supreme Court on the ground that nothing could be done because the highest Court has dismissed the appeal. The objective is to complete a mere formality and save the skin of the officers who may be in default in following the due process or may have done it deliberately. Supreme Court deprecated such practice and process and held that it was time when concerned officers responsible for the same, bear the consequences. Supreme Court expressed the anguish and held "The irony, emphasized by us repeatedly, is that no action is ever taken against the officers and if the Court pushes it, some mild warning is all that happens."
37. Supreme Court in the case of Estate Officer, Haryana Urban Development Authority & Anr. vs Gopi Chand Atreja, 2019 LawSuits (SC) 726 inter alia held that when the lawyer did not take timely steps for the party, resulting in causing delay in its filing/refiling, it cannot be recorded as sufficient cause within the meaning of Section 5 of the Limitation Act.
38. The claim on account of bureaucratic methodology of department cannot be accepted in view of modern technologies being used and available. The usual and stereotype explanation that the file was kept pending, due to considerable degree of procedural red-tape in the process, cannot be accepted. The law shelters everyone under the same light and should not be swirled for the benefit of a few. Law has to be interpreted equally to all Government or statutory bodies. They cannot ask for liberal construction on the plea that delay occurred due to bureaucratic OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 47 of 50 methods. The delay cannot be condoned mechanically merely because the delay is by government department and its officers. If such an approach is adopted merely because the government department is at fault, it will make the law of limitation nugatory and redundant. Sufficient cause is a condition precedent for exercise of discretion by the Court for condoning the delay. Petitioner had well established legal department and panel of lawyers to defend their instant case in the court. Failure to do so, depicts deliberate inaction and gross negligence and lack of bonafide of officers of petitioner. Petitioner cannot claim that they have separate period of limitation when the Department was possessed with competent persons familiar with court proceedings. The concerned officers on coming to know that Counsel to whom the brief was sent was out of station for long duration, then could have resent the file to the Counsel from their panel of lawyers who was available at that time. Put forth reasons for delay in filing the petition do not come within the ambit of "sufficient cause from making the application within period of three months" and accordingly petitioner is not entitled for condonation of 14 days delay in filing the petition in the fact of the matter.
39. Relying upon the law laid in the cases of (i) Associate Builders (supra); (ii) Ssangyong Engineering & Constructions Co. Ltd. (supra); (iii) M/s Tamilnadu Telecommunication Ltd (supra); (iv) Swan Gold Mining Ltd. vs Hindustan Copper Ltd. (supra); (v) Oil & Natural Gas Corporation Ltd. vs Saw Pipes Ltd., (supra); (vi) M/s Arosan Enterprises Ltd (supra); (vii) MCD vs Harcharan Dass Gupta Construction Pvt Ltd. (supra);
OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 48 of 50(viii) Patel Engineering Ltd. (supra); (ix) G. Ramachandra Reddy & Company vs Union of India and Anr., 2009 (6) SCC 414; (x) Sutlej Construction vs Union Territory of Chandigarh, MANU/SC/1589/2017; (xi) M/s National Building Construction Corporation Ltd. vs New Delhi Municipal Council & Anr., (2016) 154 DRJ 42; (xii) Veda Research Laboratories Ltd vs Survi Projects, 2013 (2) Arb. LR 16 (Delhi); (xiii) MMTC Ltd. vs Vedanta Ltd., (2019) 4 SCC 163; (xiv) Anglo American Metallurgical Coal Pty. Ltd. vs MMTC Ltd., MANU/SC/0953/2020; (xv) Ashi Limited vs Union of India (supra); (xvi) Maula Bux vs Union of India, MANU/SC/ 0081/1969; (xvii) Rashtriya Ispat Nigam Ltd. vs Dewan Chand Ram Saran, MANU/SC/0327/2012; (xviii) Navodaya Mass Entertainment Ltd. vs J.M. Combines (supra) and (xix) Kailash Nath Associates vs Delhi Development Authority (supra) it can be said that not only the reasonings of Ld. Sole Arbitrator are logical, but all the material and evidence were taken note of by Ld. Sole Arbitrator and this Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of Ld. Sole Arbitrator. Cogent grounds, sufficient reasons have been assigned by Ld. Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator, who is experienced Chief Engineer-P&D and was competent to make assessment while taking into consideration the facet of the matter. Re-appraisal of the matter cannot be done by this Court. No error is apparent in respect of the impugned award. I do not OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 49 of 50 find any contradiction in the observations and findings given by Ld. Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act. Even the filed petition has been so filed after expiry of period of limitation without sufficient cause for petitioner to be prevented for making the application within the period of three months for getting the delay condoned. For the foregoing reasons, the application of petitioner for condonation of delay as well as petition are hereby dismissed.
40. The parties are left to bear their own costs.
41. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL SINGH
PAL SINGH Date: 2022.01.20
11:22:56 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 20 January, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 130/2019 Union of India vs M/s Tayal & Co. Page 50 of 50