Delhi District Court
Union Of India vs M/S S.D. Technical Services Pvt. Ltd on 9 September, 2016
IN THE COURT OF SH. GURVINDER PAL SINGH
ADDITIONAL DISTRICT JUDGE01 (CENTRAL)
TIS HAZARI COURTS, DELHI
ARB84196/2016
Union of India,
Through its
Controller of Stores,
Rail Coach Factory, Kapurthala,
Indian Railways,
Office at : Tilak Bridge, New Delhi.
......Petitioner
Versus
M/s S.D. Technical Services Pvt. Ltd.,
Plot No. 46, Sector18,
Gurgaon 122015,
Through its Director
Sh. Sanjeev Kumar.
.......Respondent
PETITION U/S 34 OF THE ARBITRATION & CONCILIATION ACT, 1996 AGAINST THE AWARD DATED 23.02.2015 Date of institution of petition : 13.05.2015 Date of reserving the order : 04.08.2016 Date of pronouncement of order : 09.09.2016 ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 1 of 35 O R D E R
1. These objections have been filed under Section 34 of The Arbitration & Conciliation Act, 1996 against the award of Hon'ble Mr. Justice Shiv Narayan Dhingra (Retired), Ld. Sole Arbitrator in ARB P. 173/2013 DAC/505/1013, dated 23.02.2015. Brief facts relevant to the disposal of the aforesaid objections are as under.
2. The case of the petitioner is that the petitioner floated a tender enquiry No. 3105110214 to be opened on 25.08.2011 for supply of 832 air brakes sets (without brake cylinders) for BMBC Coaches and 110 air brakes sets (without brake cylinders) for VP Coaches. Respondent filed a petition under Section 9 of Arbitration and Conciliation Act alongwith the petition under Section 11 of Arbitration and Conciliation Act before the Hon'ble High Court in the month of April, 2013 and accordingly vide order dated 21.10.2013, Hon'ble Mr. Justice Shiv Narayan Dhingra (Retired Judge) was appointed as arbitrator. The Arbitrator vide Award dated, 23.02.2015 had held respondent/claimant ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 2 of 35 entitled to recovery of Rs. 9,76,637/ with interest @ 12% p.a. from 20.02.2013 till the recovery besides holding Rail Coach Factory, Kapurthala, petitioner to be not entitled to recovery of risk purchase amount of Rs. 4,45,367.66 from the claimant.
3. Being aggrieved by the impugned award the petitioner has filed the present objections on the ground that (i) Ld. Sole Arbitrator had not applied his judicious mind while passing the impugned award; (ii) claim no1 of the impugned award was liable to be set aside on the ground that the Ld. Arbitrator had erred in considering that another purchase order bearing no. 05800965.T1050738, dated 06.01.2011 was placed upon the respondent for supply of the material but the respondent failed to supply the store as per the contractual delivery period, as such the petitioner floated risk purchase tender in reference of purchase order dated 06.01.2011 and an amount of Rs. 29,56,342/ became due on account of differences in purchasing the material. Accordingly, demand notice dated 12.06.2012 was sent to the respondent and in between the respondent submitted a bill of Rs. 9,76,637/ in respect of subject purchase order for supply of 20 sets of material. Accordingly, as per ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 3 of 35 clause2401, 2402 and 2403 of IRS condition of contract the amount of Rs. 9,76,637/ had been withheld by the petitioner as per rule but this fact was not considered by the Ld. Arbitrator in claim no1; (iii) Ld. Arbitrator had illegally awarded claim no3 in favour of respondent and did not consider the admitted fact by both the parties before the Ld. Arbitrator to the extent that the respondent failed to supply the store within stipulated delivery period; (iv) impugned award was not a speaking award and the Ld. Arbitrator had not given any reason, as to how the petitioner was not entitled to recover the risk purchase cost from the respondent to the tune of Rs. 4,45,367.66 p, which was claimed by the petitioner as a counter claim before the Ld. Arbitrator; (v) Ld. Arbitrator had awarded the interest in favour of the respondent but no specific amount had been awarded and even the period was also not mentioned. As per clause - 0503, 2401 and 2402 of IRS Condition of Contract, the respondent was not entitled to any interest and the similar position had been mentioned in general condition of contract; (vi) no proper opportunity was given by the Ld. Arbitrator to file the documents in support of their claim; (vii) Ld. Arbitrator was not a Gazetted Railway Officer and he was not possessing the qualification agreed to by the ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 4 of 35 parties to pass the impugned award, as per provision of Section 12 (3) sub clause (b) of Arbitration and Conciliation Act; (viii) Ld. Arbitrator had ignored all the terms and conditions of the contract including IRS Conditions of Contract, which was binding effect upon both the parties and passed the impugned award in haste manner, which was against the public policy of India; (ix) the impugned award was unfair, unreasonable, opposed to public policy of India and based on erroneous legal preposition, thus requires to be adjudicated as void. The petitioner has prayed for setting aside of the impugned Award.
4. Respondent filed reply to the petition, taking preliminary objections viz., (i) no specific violation had been alleged in the petition and none of the conditions laid down under Section 34 (1) to 34 (3) are attracted to make the present case maintainable, rather the actions of the petitioner were in violation of public policy; (ii) petitioner had not come with clean hands and had added certain new documents relating to awarding of risk and purchase contract alongwith the petition, which were never part of proceedings before the High Court of Delhi or before ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 5 of 35 the Ld. Arbitrator; (iii) petitioner failed to release unilaterally and arbitrarily withheld amount of Rs. 9,76,637/ despite illegality pointed out by the Ld. Arbitrator and now raised new ground of having withheld this amount where as before the Ld. Arbitrator the plea taken was that its computers did not accept the command for payment whereas they had already security deposit made by the respondent in previous contract against which this payment was withheld/adjusted; (iv) the clause2 of the advance acceptance allows + / 30% of the ordered quantity, whereas the petitioner violated the standard terms and increased the quantity to 317 (225+92 sets) i.e., 108% that too when the offer had already lapsed;
(v) the RDSO, an agency of petitioner, arbitrarily stopped inspection of stocks abruptly and in midway from 25.07.2012 onwards and this fact was brought to the notice of the petitioner but petitioner failed to take any action and by the time the said illegal stoppage was revoked, the contract expired on 30.11.2012 and the petitioner did not extend till 14.02.2013 when the petitioner issued risk purchase notice giving one month's time to complete the supply; and (vi) the existing contract with the petitioner lapsed on 30.11.2012 and since no extension was conveyed the question of risk and purchase did not arise as well as the subsequent cancellation was ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 6 of 35 void abnitio. Respondent averred that in its letter respondent requested for suitable increase in quantity, which as per the tender terms cannot go beyond 30%, whereas the petitioner increased the quantity to over 108% in violation of tender terms that too when the offer of 6% discount on quoted rates had expired on 15.11.2011 while the quantity was enhanced on 09.01.2012. Respondent averred that the supplies by the respondent were well ahead of the schedule as it had supplied 180 Air Brake sets by 21 June 2012, which was more than 152 seats initially ordered on 27.09.2011 while the inspection agency of the petitioner arbitrarily and abruptly stopped inspection of stores from July to November 2012 and petitioner failed to take any action either to get the work restarted or to extend the contract, which stood expired on October/November 2012, wrongfully withheld the lawful dues of the respondent with a view to cause financial harassment and arbitrarily increased the quantity beyond 30% in violation tender terms as per the P.O. 27.09.2011, modified in 09.01.2012 that too after the discounted offer was over in November 2012. Respondent never acted against public policy. The impugned award was just and based on the terms of contract and rightly adjudicated upon the dispute in reference. Rest of the averments have been denied by the ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 7 of 35 respondent and prayed for dismissal of the petition of the petitioner with exemplary costs.
5. I have heard arguments addressed by Sh. V.K. Rai, Ld. Counsel for petitioner; Sh. V.N. Sharma, Ld. counsel for respondent and have given thoughts to the rival contentions put forth, pleadings of the parties, relied precedents and have also examined the arbitral proceedings record. I have also gone through the findings of the Ld. Arbitrator.
6. Ld. counsel for petitioner has relied upon : (1) Executive Engineer Dhenkanal Minor Irrigation Division, Orissa etc. Vs. N.C. Budhiraja (Dead) by LRs etc., AIR 2001 SC 626;
(2) Union of India Vs Krafters Engineering & Leasing (P) Ltd., VI (2011) SLT 101;
(3) Sree Kamatchi AmmanConstructions Vs Divisional Railway Manager (Works), Palghat & Ors., VI (2010) SLT 131;
(4) Union of India Vs Saraswat Trading Agency & Ors. (2009) 16 SCC 504;
ARB84196/2016
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(5) State of Haryana & Ors. Vs S.L. Arora &
Company, 11 (2010) SLT 298;
(6) M/s Sayeed Ahmed & Co. Vs. State of U.P. & Ors,
JT 2009 (9) SC 429;
(7) U.P. Cooperative Federation Ltd. Vs. Three
Circles, VII (2009) SLT 614;
(8) Union of India Vs. M/s Concrete Products &
Const. Co. etc., AIR 2014 SC 1914;
(9) Oil & Natural Gas Corporation Ltd. Vs. Saw
Pipes Ltd. MANU/SC/0314/2003 = AIR 2003 SC
2629.
7. Before proceeding further to decide the objections so raised by the petitioner, it is necessary to briefly discuss the statutory provisions of law.
The provisions of Section 34 (1) of the Act provide that the arbitral award may be set aside by the Court on an application for setting aside the same being made on any grounds specified in the subsection (2) and within the time prescribed. The provisions of Section 34 (2) (a) of the Act are as under : ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 9 of 35 "2(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 decision 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 ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 10 of 35 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."
SubSection 2 (a) also provides that party making such an application shall furnish proof to the court in support of such application. The Court is entitled to set aside the award only if the grounds mentioned in Subsection (2) of Section 34 read with grounds stated in Section 13 and Section 16 of the Act are proved to its satisfaction by the party making such application for setting aside the award and that too, if it satisfies the Court that the allegations are true. The onus of proving that the grounds as per subsection (2) of Section 34 of the Act exists and that the award is liable to be set aside lies on the party making such an application.
The Delhi High Court has in the case of Govt. of NCT of Delhi Vs. Khem Chand reported in AIR 2003 Delhi 314, by relying upon the ruling of the Hon'ble Apex Court in AIR 1963 SC 677, observed that : ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 11 of 35 "...... a Court should approach an award to support it if it is reasonable, possible rather than to dispute it, by calling it illegal. The law in this regard as it existed prior to enactment of Arbitration and Conciliation Act, 1996 still holds the field..... "
It was further observed that : "...... the jurisdiction of the Court when called upon to decide the objections raised by a party against an arbitral award is limited, as expressly indicated in the Arbitration and Conciliation Act, 1996. The court has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the material produced before the arbitrator, it can not sit in appeal over the views of the Arbitrator by re examining and reassessing the materials......"
The Hon'ble High Court in the above case relied upon the following observations made by Russel (Russel on Arbitration, 19th (1979) Ed. P 475) : "It is not misconduct on the part of an Arbitrator to come to an erroneous decision, whether his error is one of fact or law, and whether or not his findings of fact are supported by evidence. It may, however, be misconduct if there are gross errors in failing to hear or improperly receiving evidence."
ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 12 of 35 Similar view was also taken in the case of India Tourism and Development Corporation vs. T.P. Sharma reported in 2002 SCC on line Del 634, wherein it was observed that : "......findings of the arbitrator on the factual matrix, need not be interfered with as the Court does not sit in appeal and the Courts are also refrained from re appreciating or reevaluating the evidence or the material before the arbitrator unless perversity is writ large on the face of the award or the award suffers from the vice of jurisdictional error, sanctity of award should always be maintained...... "
Similar view was taken by Hon'ble Delhi High Court in Sh. M.C. Katosh Vs. Union of India & Ors., reported in 2004 SCC Online Del. 1039, wherein it was held that arbitrator being sole and final judge of fact and the Court is bound by the findings of arbitrator and cannot review them unless unsupported by evidence or unless it appears from award itself that there was no evidence to support findings.
Similarly in the case of India Tourism Development Corporation Ltd. Vs. Budhiraja Electricals reported in 2003 SCC ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 13 of 35 Online Del 24, it has been held that : ".....that arbitrator has exceeded his jurisdiction and the award was against public policy of India. Clause 2(b)(ii) of the Section 34 of Arbitration and Conciliation Act, 1996 provides that the arbitral award, if it is found to be in conflict with public policy, same may be set aside by the court. An explanation is added to the provision providing that an award shall be treated to be in conflict with public policy of India if making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81 of the Act.... "
This expression "public policy of India" was also considered by Hon'ble Apex Court in Renu Sagar Power Co. Ltd., Vs. General Electric Co. reported in AIR 1994 SC 860, where it was held that : "...... if the award is found to be contrary to fundamental policy of Indian Law or Indian interest or justice and moraliry, the same can also be held to be contrary to public policy of India......"
The Hon'ble Supreme Court has in the case of Oil and ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 14 of 35 Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. reported in AIR 2003 SC 2629, has while discussing the phrase Public Policy observed as under : "Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is on the face of it, is patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renu Sagar Power Co. Ltd. Vs. General Electric Co., 1994 Supp (1) SCC 644 it is required to be held that the award could be set aside if it is patently illegal. The result would be award could be set aside if it is contrary to;
(a) Fundamental policy of Indian Law; or
(b) the interest of India; or
(c) Justice or morality; or
(d) in addition, it is patently illegal.
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Illegally must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void."
In the case of Bhagwati Oxygen Ltd. Vs. Hindustan Copper Ltd., reported in AIR 2005 SC 2071, it has been observed by the Hon'ble Apex Court that : "...... In Rajasthan State Mines & Minerals Ltd. Vs. Eastern Engineering Enterprises & Anr. (1999) 9 SCC 283, this court after considering several decisions on the point held that if an Arbitrator has acted arbitrarily, irrationally, capriciously or beyond the terms of the agreement, an award passed by him can be set aside. In such cases the Arbitrator can be said to have acted beyond the jurisdiction conferred on him........"
It was further observed that : "...... In U.P. State Electricity Board Vs. Searsole Chemicals Ltd. (2001) 3 SCC 397, it was held that where the Arbitrator had applied his mind to the pleadings, considered the evidence adduced before ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 16 of 35 him and passed an award the court could not interfere by reappraising the matter as if it were an appeal......"
"...... In Indu Engineering & Textiles Ltd. Vs. Delhi Development Authority (2001) 5 SCC 691, it was held that : "An Arbitrator is a judge appointed by the parties and as such the award passed by him is not be lightly interfered with."
"...... In Bharat Coking Coal Ltd. Vs. M/s Annapurna Construction (2003) 8 SCC 154, it was held that : there is distinction between error within jurisdiction and error in excess of jurisdiction. The role of the Arbitrator is to arbitrate within the terms of the contract and if he acts in accordance with the terms of the agreement, his decision cannot be set aside. It is only when he travels beyond the contract that he acts in excess of jurisdiction in which case the award passed by him becomes vulnerable and can be questioned in an appropriate court........."
Also in the case of Kesar Enterprises Vs. DCM Shriram Industries Ltd. & Anr. reported in 2000 VII Apex Decisions (Delhi) 794 Hon'ble Mr. Justice Vikramjit Sen, has in para8 dealt with case titled M/s Sundaram Finance Ltd. Vs. M/s NEPC India Ltd., reported as AIR 1999, SC 565 and observed as under : ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 17 of 35 "...... the following passage from M/s Sundaram Finance Ltd. Vs. M/s NEPC India Ltd. reported as AIR 1999, SC 565 wholly clarifies the view of the Apex Court : "The 1996 Act is very different from the Arbitration Act, 1940. The provisions of this act have, therefore, to be interpreted and constructed independently and in fact reference to 1940 Act may actually lead to misconception. In other words, the Provisions of 1996 Act have to be interpreted being uninfluenced by the principles underlying the 1940 Act. In order to get help in constructing these provisions it is very relevant to refer to the UNCITRAL MODEL LAW rather that 1940 Act."
It was further observed that : "...... These provisions have been amended clearly with a view to circumscribe to a narrow point, the objections that can be entertained where an Arbitral Award is assailed. To widen the scope of Section 34 would be ignoring and setting at nought the legislative intent, which perhaps was itself a response to the judicial lament extracted above........."
"....... In these circumstances, I am unable to read and interpret the words "public policy of India", as ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 18 of 35 being at all attracted in cases where a particular party alleges that a point was raised before the Arbitrator but not subsequently dealt with by him in Award. I am in no manner of doubt, that such a conduct, even if it did happen, would not amount to an infraction of public policy, or for that matter, the rules of natural justice............."
Further in the case of Tribal Cooperative Marketing Development Federation of India Ltd. Vs. Auro Industries Limited & Anr. reported in 2002 SCC Online Del 418, it was observed as under : "...... Any finding of the Arbitrator either on factual or on legal matrix if on subsequent examination is found to be wholly unsound the award is liable to set aside as it amounts to factual or legal misconduct. In ordinary course the Court does not sit in Appeal nor is it required to reappreciate the evidence and the material on record produced before the Arbitrator. Even if there are erroneous findings of the Arbitrator as to the facts the Court should always refrain from interfering with it. What should irk the Court is that perversity or illegality should be writ large on the face of the award......."
Hence, in view the various authoritative pronouncements discussed above it is clear that this court is not sitting in appeal against ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 19 of 35 the award passed by the sole arbitrator and the Court is not required to re appreciate or reevaluate the evidence led before the arbitrator.
It is a settled law that this Court cannot substitute its own decision in place of Arbitrator's award and that the award of the arbitrator both on facts and law is final. In this regard the observations of the Mumbai High Court in the case of Laxmi Mathur Vs. the Chief General Manager, MTNL reported in 2000 (3) Arb. L.R. 684 is very clear : "...... Arbitral award is not invalid merely because on the basis of some inferences and some arguments it may be alleged that Arbitral Tribunal has committed some mistake in arriving at its conclusion on merits of the dispute referred to it for adjudication. When the court is called upon to decide the objections raised by a party against the arbitral award, the jurisdiction of the court is limited as expressly indicated in Section 34 of the Act and it has no jurisdiction to sit in appeal and to examine the correctness of the award on merits with reference to the material produced before the Arbitral Tribunal. The court cannot sit in appeal over the view of the Arbitral Tribunal by reexamining and re appreciating the material....."
ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 20 of 35 The Hon'ble Court has further observed that : "...... The arbitral award is not open to challenge on the ground that the Arbitral Tribunal has reached to a wrong conclusion or has failed to appreciate the facts and evidence. It is well settled that the parties constitute the Arbitral Tribunal as the sole and final judge as of the disputes arising between them and they bind themselves as a rule to accept the arbitral award as final and conclusive. The arbitral award is not liable to be set aside on the ground that either on facts or in law it is erroneous......."
In the case of Union of India Vs. Ramesh Lalwani reported in AIR 1998 Delhi 249, the Delhi High Court has observed that an award made by the Arbitrator is conclusive and the court is only entitled to set aside the same if the arbitrator has misconducted himself and the scope in this regard is limited. It is settled preposition of law that it will not be open for the court to reappraise the evidence and to arrive at a contrary conclusion which have already been rendered by the arbitrator on cogent grounds.
ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 21 of 35 Hon'ble Mr. Justice C.M. Nayar has in the same judgment relied upon the judgment in the case of Municipal Corporation of Delhi Vs. M/s Jagan Nath Ashok Kumar reported in AIR 1987 SC 2316, wherein the observations made by Lord Goddard, Chief Justice in Mediterranean & Eastern Export Co. Ltd. Vs. Fortress Fabrics Ltd., reported in (1948) 2 AII ER 186 are as under : "...... The day has long gone by when the courts looked with jealousy on the jurisdiction of the Arbitrators. The modern tendency is in my opinion, more especially in commercial arbitrations, to endeavour to uphold awards of the skilled persons that the parties themselves have selected to decide the questions at issue between them. If an arbitrator has acted within the terms of his submission and has not violated any rules of what is so often called natural justice the courts should be slow indeed to set aside his award......."
Also in the case of Municipal Corporation of Delhi Vs. M/s Jagan Nath Ashok Kumar reported in AIR 1987 SC 2316, it has been observed that : ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 22 of 35 "...... when the reasons given by the arbitrator are germane, relevant and have rational nexus with the conclusions arrived at by him, the reasonableness of the reasons cannot be challenged and it cannot be said to be unreasonable. The word "reasonable" has in law the primafacie meaning of reasonable in regard to those circumstances of which the actor called on to act reasonable knows or ought to know. Reasons vary in its conclusions according to the idiosyncrasy of the individual and the times and circumstances in which he thinks........"
In the case of M/s Sanykt Nirmata Vs. DDA & Anr. Reported in 1997 III AD (Delhi) 400 it has been observed as under : "........ It is well established that an award made by an arbitrator is conclusive as a judgment between the parties and the Court is entitled to set aside the award only if the arbitrator has misconducted himself for the proceedings or when the award has been made after the issue of an order by the Court superseding the arbitration or if the arbitration proceedings have become invalid under Section 35 of the Act, or where an award has been improperly procured or he has proceeded beyond jurisdiction or is otherwise invalid under Section 30 of the Act. The award may be set aside by the court on the ground of error on the face of the award but an award is not invalid merely because by a process of inference and ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 23 of 35 argument it may be demonstrated that the arbitrator had committed some mistake in arriving at some conclusion.........."
Further in the case of Ramesh Lalwani (supra), the Delhi High Court has relied upon the judgments in the case of Jivarajbhai Ujamshi Sheth & Ors. Vs. Chintamanrao Balaji & Ors., reported in AIR 1965 SC 214 and in the case of State of Rajasthan Vs. M/s R.S. Sharma reported in (1988) 4 SCC 353, and it has been observed that : "...... The scope of interference by Court is limited. Appraisement of evidence by the arbitrator is ordinarily never a matter which the Court questions and considers. The parties have selected their own forum and the deciding forum must be conceded the power of appraisement of evidence. The Court has no jurisdiction to sit in appeal and examine the correctness of the award on merits. The arbitrator is the sole judge of the quality as well as quantity of the evidence and it is not for the Court to take upon itself the task of being a judge of the evidence before the arbitrator. It may be possible that on the same evidence the Court might arrive at different conclusions than the one arrived at by the Arbitrator but that by itself is no ground of setting aside the award of an arbitrator where there is no violation of ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 24 of 35 principles of natural justice nor there is any allegation of misconduct nor that the arbitrator has not considered the material produced before him or has not heard the parties or has not given opportunity to lead evidence............."
It was held in the case of New India Civil Erectors (P) Ltd. Vs. Oil & Natural Gas Corporation reported in (1997) 11 SC 75 that normally the Courts would not interfere with the arbitral award and the attempt of the Court should always be to support the award within letter of law.
In the case of M/s Parmar Construction Co. Vs. DDA reported in 1996 (2) Arb. L.R. 73 : 1995 (35) DRJ 516, it was held by the Hon'ble Mr. Justice Devinder Gupta that :
".......... If the award of the arbitrator is a reasoned one and reasons have been assigned for making award against each claim, then the scope of interference to the arbitrator's award in such like case where objections are to the effect that same is bad on the ground of error apparent on the face of the record is limited. Arbitrator's award both on facts and law is final. Court cannot review and ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 25 of 35 correct any mistake in his adjudication unless objection is to the legality of award which is apparent on the face of it. An error of law apparent on the face of the record means that you can find in the award or a document actually incorporated thereto some legal preposition which is the basis of the award which you can then say is erroneous. It is not permissible to refer to any other document to show that the award is erroneous. Court cannot substitute its own decision for that of the arbitrator. Assessment of evidence is a matter within the province of the arbitrator........."
8. Before the Ld. Arbitrator no document was filed by the petitioner concerning for risk purchase and despite asking during course of arguments, petitioner counsel failed to show any such documents filed before the Ld. Arbitrator from the original arbitral proceedings record. Ld. Arbitrator in the finding of Issue no2 had held that, "Thus if the respondent (petitioner herein) had made risk purchase on account of failure of the claimant (respondent herein) to supply the material, the respondent would have been entitled to claim the difference between the price at which the goods were being supplied by the claimant and the price at which it purchased the remaining goods." In finding of Issue ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 26 of 35 no3, the Ld. Arbitrator had interalia held that, "The respondent (petitioner herein) has failed to prove that it purchased 72 sets of item no. 1 and 65 sets of item no. 2 for which it claimed the difference in price of Rs. 4,45,367.66p. Risk purchase amount can be claimed only if the purchases are made at the risk of claimant. If no purchases are made, the risk purchase amount cannot be claimed. As per the procedure of respondent (petitioner herein), after floating of tender, the purchases are made by placing a purchase order and thereafter receiving stores against that purchase order as per delivery schedule." It was observed by the Ld. Arbitrator, that in this case, the difference in price had been claimed merely on the basis of tender floated and not on the basis of purchase order placed by the respondent on any party. Also was observed that it is not enough to place on record the rates quoted by different parties against the risk purchase tender to claim risk purchase amount. By cogent evidence, the petitioner (respondent therein) was under bounden duty to prove that it purchased the material by paying higher price but neither filed any document showing it purchased the quantity for which it claimed risk purchase amount from the claimant. Ld. Counsel for respondent/claimant in accordance with his filed reply ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 27 of 35 vehemently argued that the petitioner/objector cannot rely upon any document not filed before Ld. Arbitrator and the document concluding at page53 of list of documents of objector/petitioner, was never filed before Ld. Arbitrator and is a misleading tactic. It is expected from the Officers of the Court in matters of such objections to only rely upon the documents which were part and parcel of the original arbitral proceedings and any document foreign to arbitral proceedings cannot be relied upon nor can be referred in arguments.
9. The amount of Rs. 9,76,637/ had been withheld by the petitioner/objector from the other pending bill of the respondent. In finding of Issue no1, Ld. Arbitrator had also held that aforesaid sum of Rs. 9,76,637/ was wrongly withheld by the respondent. Adverting back to the reply of objector/petitioner (respondent before Ld. Arbitrator), it is revealed that in para7, the stand taken was that since the claimant had defaulted in the payment of risk purchase amount against the earlier order to the tune of Rs. 29,56,342/, the system did not allow to pass the claimant's bill of Rs. 9,76,637/.
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10. Following are the conditions no. 2401; 2402; and 2403 of the IRS Conditions of Contract : "2401. Whenever any claim or claims for payment of a sum of money arises out of or under the contract against the Contractor, the purchaser shall be entitled to withhold and also have a lien to retain such sum or sums in whole or in part from the security, if any, deposited by the Contractor and for the purpose aforesaid, the Purchaser shall be entitled to withhold the said cash security deposit or the security, if any, furnished as the case may be and also have a lien over the same pending finalization or adjudication of any such claim. In the event of the security being insufficient to cover the claimed amount or amounts or if no security has been taken from the Contractor, the Purchaser shall be entitled to withhold and have lien to retain to the extent of the such claimed amount or amounts referred to supra, from any sum or sums found payable or which at any timethereafter may become payable to the Contractor under the same contract or any other contract with Purchaser or the Government pending finalization or adjudication of any such claim.
It is an agreed term of the contract that the sum of money or moneys so withheld or retained under the lien referred to above, by the Purchaser will be kept withheld or retained as such by the Purchaser till the claim arising out of or under the contract is determined by the Arbitrator (if the contract is ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 29 of 35 governed by the arbitration clause) or by the competent court as prescribed under clause 2703 hereinafter provided, as the case may be, and that the Contractor will have no claim for interest or damages whatsoever on any account in respect of such withholding or retention under the lien referred to supra and duly notified as such to the Contractor.
2402. For the purpose of Clause 2401, where the Contractor is a partnership firm or a limited company, the Purchaser shall be entitled to withhold and also have a lien to retain towards such claimed amount or amounts in whole or in part from any sum found payable to any partner/limited company, as the case may be, whether in his individual capacity or otherwise.
2403. Lien in respect of Claims in other Contracts -
a) Any sum of money due and payable to the Contractor (including the security deposit returnable to him) under the contract may withhold or retain by way of lien by the Purchaser or Government against any claim of the Purchaser or Government in respect of payment of a sum of money arising out of or under any other contract made by the Contractor with the Purchaser or Government.
b) It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Purchaser or Government will be kept withheld or retained as such by the Purchaser or Government till his claim arising out of the same contract or any other ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 30 of 35 contract is either mutually settled or determined by the arbitrator, if the contract is governed by the arbitration clause or by the competent court under Clause 2703 hereinafter provided, as the case may be, and that the Contractor shall have no claim for interest or damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the Contractor."
11. In findings of Issue no1, Ld. Arbitrator also interpreted the aforesaid condition no. 2401, holding that if a claim is under adjudication of Arbitrator and the amount payable to the purchaser is not crystallized, the same cannot be adjusted from the amount payable by the purchaser to the contractor against any contract.
12. It was held by the Ld. Arbitrator that in the present case the own assertion of the respondent therein (the petitioner/ objector herein) was that it had not adjusted the amount, but its computer system did not allow the bill to be passed. Same was held to be an excuse for refusal in clearing the bills of claimant.
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13. Ld. Arbitrator, a former Hon'ble Judge of High Court of Delhi, was appointed as an Arbitrator vide order of date 21.10.2013 of Hon'ble Mr. Justice Rajiv Shakdher in Arbitration Petition no. 173/2013 and copy of same in arbitration proceedings record embodies that Ld. Counsel for respondent therein (petitioner/objector herein) had made submissions that in view of the order passed by said bench in Arbitration Petition No. 436/2012, said petition would have to be allowed and the rationale and the reasons for allowing the captioned petition were contained in the orders passed that day in Arbitration Petition No. 436/2012. The parties through counsels therein agreed for the fee schedule and the rule of Delhi International Arbitration Centre (DIAC) should govern the proceedings. In this fact of the matter, it does not lie in the mouth of the objector/petitioner to now take shelter to clause 2900 of IRS Conditions of the Contract qua reference of dispute to the disposal of the sole arbitration of a Gazetted Railway Officer to be appointed as Arbitrator by the General Manager, Rail Coach Factory, Kapurthala, seeking setting aside the award under Section 12 (3) sub clause (b) of The Arbitration and Conciliation Act. Even before the Ld. Arbitrator, the petitioner/objector (respondent therein) in the filed reply or evidence led, ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 32 of 35 never took any objection qua jurisdiction of the Ld. Arbitrator.
14. Condition No. 2403 (PartB) elicited above, clearly specifies that the contractor shall have no claim for interest or damages whatsoever with respect to the sum of money so withheld or retained under this clause by the purchaser or the Government till his claim arising out of the same contract or any other contract is either mutually settled or determined by the arbitrator. The Supreme Court in the case of Union of India Vs. M/s Concrete Products & Const. Co. etc. (supra) had interpreted afore elicited clause 2403 (b) that it further provides that it is an agreed term of the contract that against the sum of money withheld or retained under lien, the contractor shall have no claim for interest or damages whatsoever provided the claim has been duly notified to the contractor. The Supreme Court also held therein that the arbitrator could not have awarded any interest from the date when the recovery was made till the award was made. However, interest would have been payable from the date when the award was made till payment/deposition in Court. The Ld. Arbitrator in his award has held interest to be payable w.e.f., 20.02.2013 i.e., the date when the claimant raised the arbitration ARB84196/2016 Union of India Vs. M/s S.D. Technical Services Pvt. Ltd. Page 33 of 35 dispute vide letter of date 20.02.2013. Relying upon the law laid aforesaid, the interest for the period prior to the date of award is per contra to the ratio decisis of aforesaid decision of the Supreme Court.
15. As as result of my discussions above, the claimant is entitled for the interest on Rs. 9,76,637/, on the rate awarded by the Ld. Arbitrator but from the date of Award i.e., 23.02.2015 till realization/payment. The amount awarded by the Ld. Arbitrator is with reasoning and no finding of the Ld. Arbitrator on factual or on legal matrix, except qua date from which interest is payable, is found to be wholly unsound and this Court is not required to either sit in appeal or to reappreciate/sift the evidence and material on record nor any finding is per contra to public policy. The scope of interference by this Court is limited. Section 31 (7) (b) of The Arbitration & Conciliation Act, 1996 embodies that the sum directed to be paid by an arbitral award shall, unless the award otherwise directs carry interest @ 18% per anum from the date of the award to the date of payment. The interest awarded by Ld. Arbitrator @ 12% per annum accordingly is neither against public policy nor against basic principles of law and conditions of the contract.
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16. For the foregoing reasons, I hold that the objections, except with respect to the date from which the interest shall be payable, are devoid of merits and are hereby dismissed. Parties are left to bear their own costs. File be consigned to record room.
Announced in open Court (GURVINDER PAL SINGH) th on 9 Day of September, 2016. Addl. Distt. Judge01 (Central) Tis Hazari Courts, Delhi.
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