Delhi District Court
Municipal Corporation Of Delhi vs Satnam Singh on 27 May, 2014
IN THE COURT OF ADDITIONAL DISTRICT JUDGE 16
CENTRAL DISTRICT, TIS HAZARI COURTS, DELHI
ARBTN No. 15/14/07
I.D.No. 02401C0095312011
Municipal Corporation of Delhi
Through its Executive Engineer (Pr)
Under Patel Road Fly Over,
Shadipur Depot, New Delhi.
....Applicant/Objector
Versus
1. Satnam Singh
Contractors and Builders
B204, Mansarovar Park, New Delhi110015
.....Respondent no. 1
2. Sh. G.P. Thareja A.D.J (Retd.)
B201, Priya Darshani Apartments,
I.P. Extension, Pataparganj, Delhi
.....Respondent no. 2
Date of Institution : 18.05.2007
Date of reserving the Order : 12.05.2014
Date of Decision : 27.05.2014
ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 1 of 18
Objections u nder Sections
34, 28(3) and 16(6) of Arbitration and
th
Conciliation Act, 1996 against award dated 20 February, 2007
O R D E R:
1) By this order, objections filed by Municipal Corporation of Delhi through its officer Sh. S. K. Kataria, Executive Engineer (Pr) to the arbitral award passed by Sh. G.P. Thareja ADJ (Retd.) dated 20.02.2007 shall be decided.
2) The case of the applicant/objector is that it had offered tender for work for the amount of Rs.63,41,728/ and the claimant had offered rates @ 22% above for the civil work while the electric work and bore well at the schedule rate. It is stated that the total cost of the tender submitted by the claimant was Rs.76,79,100/ which was accepted by the Objector/MCD and work order No. 55/EE (P) TCK/2001 dated 25.10.2001 was issued to the claimant according to which the work was to be completed on 03.05.2002. It is submitted that the claimant delayed the execution of the work and completed it on 30.05.2002 as per the completion certificate recorded by the MCD and after the completion of the work the claimant raised certain disputes and filed Arbitration Application No. 507 of 2004 in which vide order dated 20.01.2005 Sh. G.P. Thareja A.D.J. (Retd) was ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 2 of 18 appointed as the sole Arbitrator before whom respondent no. 1 had filed certain claims. It is submitted that MCD filed reply to the said claims and also filed counter claim of Rs.6,34,170/ since the contractor/ respondent no. 1 failed to complete the work on time hence the objector MCD in terms of clause 2 of the terms and conditions agreed between the parties invoked a penalty on the contractor. It is submitted that the parties settled the matter amongst them and it was agreed that MCD would release the balance amount to the contractor and the contractor i.e. the respondent no. 1 would withdraw the arbitration under dispute and he would not raise any claim in future whatsoever including interest etc. against the said work and also undertook to deposit the share of MCD on account of Arbitration fee paid to the Arbitrator in the said case by MCD. It is submitted that the claimant filed an affidavit wherein he has agreed to the terms of settlement and stated that in case he is paid the balance amount he will withdraw the case and the balance amount of Rs.10,11,519/ as per the bill prepared by the respondent was paid to him. It is further submitted that though the matter should havr been dismissed as settled but Arbitrator vide its order dated 20.02.2007 directed MCD to make the payment of Rs.80,000/ towards the claim alongwith interest @ 6% per annum w.e.f. 7.7.2005 till the date of ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 3 of 18 award subject to the condition that the payment is made within two months from the date of the award. The Arbitration award is objected on the ground that the impugned award dated 20.02.2007 passed by the respondent no. 2 is bad in the eyes of the law as the same is illegal and arbitrary and had been passed without application of judicial mind. It is further stated that the contractor himself filed an affidavit with MCD stating that in case his balance is released he will withdraw the arbitration matter which fact has not been considered by the Arbitrator who has wrongly awarded the claimant an amount of Rs.10,000/ on account of arbitration fee whereas the respondents no. 1 himself agreed to share the MCD's fee on account of Arbitration fee. It is stated that the Arbitrator has failed to appreciate the fact that the claimant never applied for extension of time to MCD and as per the terms and conditions Clause 5 agreed between the parties it was the respondent no. 1 who had to apply with the MCD for extension of time which has not been done in the present case. It is also alleged that the Arbitrator has failed to appreciate that MCD had right to impose penalty under Clause 2 of the agreement and the same was done in the present case and it was justified on the part of MCD to deduct an amount of Rs.20,000/ on account of EOT. It is pleaded that the Arbitrator has failed to appreciate the fact that the ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 4 of 18 contractor failed to complete the work on time and never applied for extension of time so as per the terms and conditions agreed between the parties the security amount could have been refunded only after the extension of time in completion of work is obtained by the contractor from the MCD which in the present case has not been done. It is claimed that the arbitrator derives his jurisdiction only from the agreement entered into between the parties and being a creature of the agreement, he has to remain within the four corners of the agreement and has to take into consideration various terms and conditions of the agreement and cannot ignore them merely because the same may result in hardship to one of the parties and he ignored the material provision of agreement and the settlement arrived between the parties and relied on unsound propositions of law which renders the award nullity. It is further alleged that Arbitrator has failed to appreciate that the parties were free to settle the dispute themselves and after the settlement arrived between the parties the matter should have been disposed off as settled and no award should have been made. It is stated that the Arbitrator failed to appreciate that the work done by the contractor was under Yamuna Action Plan for which the grant was received from the Japan Government and the said grant was spent and there is no head under which the MCD ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 5 of 18 could have made the payment and also that due to the delay in completion of work the contractor was liable to pay damages to MCD under clause 2 and the Arbitrator has wrongly disallowed the Counter Claims of the Objector/MCD and directed MCD to make the payment of Rs.20,000/ deducted on account of EOT. It is further contended that the Arbitrator has committed illegality in awarding interest to the claimant and has failed to appreciate that there was no such condition in the agreement to grant interest to the contractor and that the claimant himself agreed that he will not claim any interest from MCD in case of release of balance amount. According to the objector the award of the Arbitrator is based on the conjectures and surmises and beyond the terms and conditions of the agreement between the objector and the respondent no. 1 and the Arbitrator has committed error in awarding Rs.10,000/ as MCD's share of Arbitration fee which was deducted from the Contractor's Final bill as he himself agreed to bear the same. It is prayed that the award be set aside as Arbitrator failed to exercise the jurisdiction fairly and reasonably and has not applied his mind to facts of the case.
3) In reply to the objections, the respondent no. 1 has stated that the award has been made in accordance with the Arbitration Agreement contained in clause No. 25 and is final and binding upon ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 6 of 18 the parties, therefore no objections could be filed by the petitioners after obtaining the award. It is also stated that there does not exit any violation of the public policy nor it is so pleaded by the petitioner/ objector and even otherwise the petitioner has not pleaded any other ground in its objection which could be covered U/s 34(2) of the Arbitration & Conciliation Act, 1996 therefore the objections are not maintainable and are required to be rejected. It is stated that an award is always required to be protected rather than to be destroyed, specifically when it is good on its face. According to the respondent the perusal of objections would show that the petitioner/objector should have been accepted the award but it has deliberately desired it to be destroyed, which is not permissible under law for which reason it is liable to be rejected more so as the petitioner/objector has neither pleaded misconduct on behalf of the Arbitrator nor proved it because the Arbitrator has granted equal opportunities to both the parties to make their respective submissions and adduce their respective evidence hence this objection petition is not maintainable. It is further submitted that this court is not sitting as court of appeal, therefore, the matter cannot be factually reconsidered by the court as has been proposed by the objector. The respondent has denied the allegations raised by the petitioner that the work was delayed by him. ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 7 of 18 It is stated that the respondent in fact never withdrew the claims when it appeared before the learned Arbitrator for the two reasons i.e. that the affidavit obtained from the respondent was under coercion, undue influence and even the terms of affidavit were not adhered to by the petitioner while releasing the payment and kept withheld by the petitioner, hence the petitioner was required to abstain himself from taking advantage of the said affidavit which was illegal and erroneous. According to the respondent, the most improper act on behalf of the petitioner was to even force the respondent to pay the arbitration cost which was assessed to Rs.10,000/ by the petitioner and was deducted/ withheld from the bill of the petitioner. It is stated that even though in the alleged affidavit despite the assurance that the entire amount shall be paid to the respondent, he was not paid Rs. 50,000/ towards the security deposit, amount of Rs.10,000/ was withheld and Rs.20,000/ deducted for grant of extension of time was also not paid and hence it cannot be treated to be a settlement. It has been stated that there was no settlement between the parties and the Arbitrator has rightly awarded a sum of Rs.80,000/ lying withheld by the respondent with interest and that the interest could have been awarded @ 18% in accordance with S. 31 of Arbitration amd Conciliation Act, 1996. It is sumitted that no grounds are given as to ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 8 of 18 how the award is illegal and arbitrary when full opportunities have been given to both the parties to lead their evidence. According to the respondent it is the petitioner who has got prepared the affidavit in his office, summoned a Notary public, obtained the signatures of the respondent and forced him to sign it and the huge money belonging to the respondent was withheld and he was penalized. According to the respondent no delay in the execution of work was attributable on the part of the respondent but the entire delay was admittedly on the part of the petitioner and hence the amount was illegally withheld by the petitioner which the Arbitrator has rightly awarded it. It is pleaded that once the work has been completed and the performance of the respondent was accepted by the petitioner and the delay in the execution of work was attributable on the part of the petitioner, then there was no need for the respondent to have asked for the extension of time since as per clause 5 of the agreement, the respondent was under an obligation to grant the extension of time. According to the respondent, the release of Rs.4,50,000/ out of the total amount of Rs. 5,00,000/ of security deposit is itself an evidence about the timely completion of work and that no extension of time was required. It has been contended that the petitioner nowhere in the agreement had alleged that the payment to the respondent shall be made under the ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 9 of 18 alleged Yamuna Action Plan. It is further stated that the payment was not to be made as the petitioner has proposed but it was required to be released in terms of the agreement. It is stated that if the petitioner had invited the tender, it was its responsibility to pay the final bill in accordance with clause 9 of the agreement. It is stated that the Arbitrator has rightly awarded the interest and even the petitioner itself has not adhered to the alleged settlement hence there is nothing wrong in awarding the interest.
4) It is well settled that an arbitrator is a creation of the agreement between the parties and the limits of his jurisdiction are prescribed by the agreement between the parties. A challenge to an award made by the arbitrator is prescribed under the provisions of Section 34 of the Arbitration & Conciliation Act, 1996. As per this provision, the jurisdiction of the court under Section 34 is limited and an arbitral award can be set aside only on the grounds stated in SubSection 2 of Section 34 of the Arbitration & Conciliation Act, 1996.
5) In the instant case, the Arbitrator was appointed by the court so the award can not be challenged on any grounds relating to incapacity of the party, validity of the arbitration agreement, notice of appointment of the arbitrator and arbitral proceedings thereafter, and the subject matter is not capable of settlement by arbitration under ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 10 of 18 the law for time being in force. The objections made in the present case are required to be put on test on the grounds that arbitral award contains decisions on matters beyond the scope of the submission to arbitration and that it is in conflict with the public policy of India. The objector has not expressly alleged and submitted that the award is against the public policy of India but considering the objections as raised in the petition it is deduced that the objections to the award are only on this ground.
6) Section 34(2)(b)(ii) of the Act also lays down one of the grounds on which an arbitral award could be set aside. It is provided, that if the court finds that the arbitral award is in conflict with the public policy of India, the same could also be set aside by the court. There is an explanation added to the aforesaid provisions, wherein it is provided that without prejudice to the generality of Subclause (ii) of Clause (b), an award is in conflict with the public policy of India, if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or Section 81.
7) So far as the expression `Public Policy of India' is concerned, it is not explained in the Act but the same has been considered by the Apex Court in its pronouncement Oil & Natural Gas Corporation of India vs. Saw Pipes reported at (2003) 5 SCC 705. In this matter, the ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 11 of 18 court noticed that this expression does not attempt of a precise definition and has to be given meaning in the light and principles underlining the Arbitration Act, Contract Act and the Constitutional provisions. In this case, after detailed consideration of the principles laid down in various judicial pronouncements, the Apex Court laid down the principles on which an arbitration award could be set aside under Section 34 of the Arbitration & Conciliation Act, 1996 which reads thus: "31. 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, patently in violation of stautory 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 ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 12 of 18 Sagar case 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, if it is patently illegal.
Illegality 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."
8) Thus it is clear that the award would be required to be set aside on the ground of `patent illegality', if the award is patently against the statutory provisions of substantive law which is enforced in India or is passed without giving an opportunity of hearing to the parties as provided under Section 24 or without giving any reason in a case where parties have not agreed that no reasons are required to be awarded.
ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 13 of 18
9) The Arbitrator while dealing with the claim formulated following points for consideration:
1. Whether the claimant was entitled to the amount claimed?
2. Whether the claimant is entitled to any interest? If so at what rate and on what amount?
3. Whether the claimant is entitled to watch and ward charges? If so what amount?
4. Whether the claimant is entitled to any security amount as claimed?
5. Whether the claimant has settled the claim? If yes to what extent?
6. Whether the respondent is entitled to any compensation/ damages? If so what amount?
7. Relief.
10) The petitioner has raised objections to the arbitral award that Arbitrator has failed to appreciate the fact that the contractor himself filed an affidavit with MCD stating that in case his balance amount is released he will withdraw the arbitration matter. It is contended on behalf of objector that the claimant did not withdraw the arbitration ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 14 of 18 matter despite receiving the balance amount and the arbitrator proceeded further and passed an award for an amount of Rs. 80,000/ along with interest.
11) It is the contention of the respondent that the amount received by him was not full and the MCD arbitrarily deducted the amount of Rs.50,000/ from the amount required to be returned on account of security, an amount of Rs. 20,000/ as EOT and sum of Rs. 10,000/ towards the fee of the arbitrator. It is contended that as the balance amount was not paid to the respondent fully he was under no obligation to withdraw the arbitration matter as it is MCD who withdrew from the settlement.
12) The Arbitrator has dealt with the submissions regarding the settlement and also withdrawal of the matter pursuant to the affidavit furnished by the claimant. It is recorded by Arbitrator that after the submission of the affidavit by the claimant, the respondent has paid to the claimant a sum of Rs.10,11,519/ as per the bill prepared by the respondent. The Arbitrator further recorded the fact of evidence of MCD Sh. Murtuza Shuja who admitted that the security balance of Rs. 50,000/ is still due to be paid to the claimant. The witness also admitted the deduction of Rs. 20,000/ towards EOT and a sum of Rs. 10,000/ towards a fee paid to the arbitrator. It is held by the ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 15 of 18 Arbitrator about the fee of the Arbitral Tribunal that the deduction of the fee paid to be arbitrator from the amount agreed by the claimant is against the statutory directions. As per Section 31(8) of the Act, the parties may agree about the cost of the arbitration and in the absence of their agreement it is Arbitral Tribunal who has to ascertain the cost. The objector has not brought on file the agreement of the parties that the claimant will bear the entire cost of the arbitral proceedings. It is contended on behalf of objector that the amount of Rs.20,000/ was deducted as per agreement and the rules as the work was not completed within time frame. The Counsel for the objector has referred the clause 29 of the General Rules and Directions as applicable to the contracts entered with MCD. Clause 29 empowered the MCD with hold the amount and right of lien in respect of sums due from contractors. As per clause 29 the MCD has to pass specific orders in regard to withheld or to have a lien to retain such sum or sums in whole or in part from the security or the amount paid or to be paid to the contractor. No such order was either produced before the Arbitrator or before the Court. During the course of submissions, it is admitted by the parties that the work was completed on 31.05.2002 and the completion certificate required to be issued by the MCD was issued on the same day by the MCD after measurement of ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 16 of 18 the work. As per rules, the bill was to be submitted by the contractor but in the present case it was prepared by the MCD on 30.05.2002 and the payment was to be made within six months. The Arbitrator has considered the facts as put by the parties and have held that the respondent illegally deducted the amount while compounding the matter outside the Arbitral Tribunal. Thus after going through the material placed by the parties, it may safely be deduced that the balance payments were not released by the MCD as such the respondent was not liable for withdrawal of the arbitration proceedings in terms of his affidavit dated 12.07.2005.
13) The petitioner has raised objections to the arbitral award in regard to directions to pay the interest. Section 31(7) of the Act gives power to the arbitrator to award interest. The Arbitrator has held that as the amount of Rs. 80,000/ was illegally withheld by the respondent, he has directed to pay the interest on the said amount @ 6% per annum from 07.07.2005 the date of the payment of the agreed amount till the date of the award considering the fact that the parties have settled the matter and the claimant himself has waived the earlier interest. The Arbitrator answered the remaining points that the claim of the parties stands settled.
14) In view of the aforesaid I hereby hold that the findings of the ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 17 of 18 learned Arbitrator on the aforesaid aspect are specific and clear. The learned Arbitrator while disposing off the issues has given reasons which are clear and reasonable and by no stretch of imagination can be deemed to be contrary to the existing law or public policy. It is settled law that this court under these circumstances cannot sit as a court of appeal and reevaluate the evidence examined before the arbitrator nor can this court substitute its own opinion for that of the Arbitrator. Therefore, the objections raised by the applicant are devoid of merits.
15) In view of the aforesaid reasons I hereby hold that the objector/ petitioner has failed to make out any case for requiring any interference with the award under Section 34 of the Arbitration and Conciliation Act, 1996 and accordingly the objections being devoid of merits are dismissed. Parties to bear their own costs. File be consigned to record room.
Announced in Open Court (Sunil Chaudhary)
th
On 27 of May, 2014 ADJ16(Central)/THC
Delhi.
ARBTN No. 15/14/07 MCD vs Satnam Singh Page No. 18 of 18