Delhi District Court
N.S Associates Pvt Ltd vs Gurmon Hotels Pvt Ltd on 3 March, 2025
IN THE COURT OF MS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
OMP (Comm) No. 107 of 2022
CNR No. DLND01-005616-2022
In the matter of:
N. S. Associates Pvt. Ltd.
Through its Director,
33, Zakir Bagh, Opposite Surya Hotel,
New Delhi-110025.
Email: [email protected] ........ Petitioner
Versus
Gurmon Hotels Pvt. Ltd.
Through its Directors,
Having its Registered Office at :
3-4, 1st Floor, Krishna Market,
Shivaji Park, Punjabi Bagh,
New Delhi-110026.
Email: [email protected]
Also at:
Gurmon Hotels Pvt. Ltd.
10th KM Stone, Bhondsi,
Gurgaon, Sohna Road,
Gurgaon-122102. ...... Respondent
Date of institution of suit : 05.07.2022
Date of Judgment : 03.03.2025
Digitally signed
by VINEETA
VINEETA GOYAL
GOYAL Date:
2025.03.03
17:27:14 +0530
OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 1 of 33
Appearance : Sh. Tarique Siddiqui, Sh. Sumit Verma, Sh. Mohd, Bilal,
Sh. Harsh Priya and Sh. Fajullu Rehman, Ld. Counsels for
petitioner.
Sh. Saurabh Duggal, Sh. Parth Dua and Sh.Himanshu
Kaushik, Ld. Counsels for respondent.
JUDGMENT
1 This is a petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the Act") against the award dated 10.02.2022 (hereinafter referred to as 'impugned award') passed by Ld. Sole Arbitrator in the matter of Arbitration No. DIAC/2136/07-18 titled 'N. S. Associates Pvt. Ltd.Vs. Gurmon Hotels Pvt. Ltd'.
2 The facts germane for decision in this petition are that the petitioner (claimant before Ld. Arbitrator) is engaged in the business of Civil, Architecture, Structure, Plumbing, Electrical and Interior works etc. The respondent is involved in the business of hotel. The respondent by way of Agreement dated 17.11.2011 issued work contract of Civil works for construction of building of Country Inn & Suites at Sohna Road, Gurgaon, and carrying out certain others assorted jobs incidental thereto, at an approximate cost of Rs. 7,50,00,000/- (Rupees Seven Crore Fifty Lacs Only). According to the petitioner, the work was completed in the month of May, 2013 and whereafter, the respondent commenced the work related to Mechanical Electrical & Plumbing (MEP), Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:27:24 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 2 of 33 Heating Ventilation Air Conditioning (HVAC), firefighting, lifts installations etc. According to the petitioner, it did not submit final bill for checking from respondent as the petitioner did not want to cause any obstruction in respondent's running works of interior decoration and services, etc. The petitioner sent a letter dated 26.06.2014 along with final bill regarding the work of Rs.6.80 crores approximately to the respondent and net payable amount against the final bill was Rs.40.30 lakhs. The petitioner is also entitled for a sum of Rs.34.02 lakhs being retention amount from the respondent.
2.1 The summary of statement of claims of petitioner before Ld. Arbitrator were as under :
S.No. Claims Description of Claims Amount 1 Claim No.1 Claim for work done upto Final Bill 74,32,000.00 2 Claim No.2 Claim for interest @ 12% p.a. from 56,60,304.00 26.06.2014 till 31.08.2020 3 Claim No.3 Claim for cost of arbitration TOTAL 1,30,92,304.00 2.2 The respondent, on the other hand, filed Statement of Defence and did not dispute about execution of Agreement but stated that as per the Agreement, the petitioner was bound to complete the work within eight months from the date of possession of the construction site. The time was essence of work. The Agreement also provided penalty clause for non-
completion of work. It was alleged that the petitioner failed to execute the work within agreed time limit and further failed to finish work in accordance with agreed terms, but abandoned the Digitally signed by VINEETA VINEETA GOYAL Date:
GOYAL 2025.03.03 17:27:34 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 3 of 33 site in and around March, 2013 and despite repeated requests did not complete the work. The petitioner never gave any reason for leaving the work site. The petitioner has manifestly breached the terms of contract. The respondent further alleged that as per Agreement, in case of non-completion of work or removal of defect in time, the respondent shall be free to appoint another agency to get the work done at the petitioner risk and cost. Accordingly, the respondent was constrained to hire other contractors to finish remaining construction work. The respondent further took a plea that the petitioner was aware that respondent had taken huge loan from banker and the respondent was to pay interest, yet the petitioner conducted the execution of work unprofessionally. The respondent also submitted that construction got completed and hotel was inaugurated on 01.08.2014. The work was completed after 24th - 25th months instead of eight months. It is hard to believe that the petitioner herein waited for a period of more than one year to submit its pending final bill. The respondent also alleged that it has paid substantial amount to the petitioner in extra and denied of or any outstanding amount towards the petitioner. The respondent also submitted that petitioner has not sent any bill / invoice approved by PMC. The only RA-1 and RA-2 bills were approved by PMC which were paid off by the respondent. The respondent also submitted that in response to legal notice of the petitioner dated 28.08.2015 which clarified that the petitioner had abandoned and breached the terms of contract. Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:27:44 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 4 of 33 2.3 The petitioner filed rejoinder to the statement of defence of the respondent.
2.4 The Ld. Arbitrator after considering the statement of claim, defence, rejoinder, evidence adduced by both the parties dismissed all the claims of the petitioner vide impugned award dated 10.02.2022.
3 Aggrieved by this, the petitioner has preferred the instant petition u/s. 34 of the Act raising grounds that the impugned award dated 10.02.2022 passed by the Ld. Sole Arbitrator rejecting the claims of the petitioner is not only against the facts but it is also contrary to law, grossly unjust and in contravention with fundamental policy of Indian law. The finding of Ld. Arbitrator leading to non-grant of claim No.1 of Rs.74,32,000.00 against work done claimed in 5 th RA / Final Bill dated 24.06.2014 are contrary to arbitral record.
3.1 Ld. Counsel for the petitioner argued that vide Agreement dated 17.11.2011, the respondent awarded the work contract to the petitioner for construction of Building of Country Inn and Suites at Sohna Road, Gurgaon, for an amount of Rs.7,50,00,000/- approx. and the said contract was to be completed in eight (08) months and the respondent appointed M/s. A Sharma Associates (in short 'Architect') and M/s. Swati Structures Solutions Pvt. Ltd. as a Consultant (in short 'PMC') for Digitally signed by VINEETA VINEETA GOYAL GOYAL Date: 2025.03.03 17:27:56 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 5 of 33 supervision and construction of the work and the petitioner started execution of work on 17.11.2011 and completed the entire work in the month of May, 2013. Ld. Counsel further submitted that during construction period i.e. from 17.11.2011 till May, 2013 neither respondent nor PMC or Architect appointed by respondent had raised any objections that the petitioner has delayed the execution of work or that the petitioner had not adhered to the terms and conditions of the Agreement and that the petitioner had left / abandoned the project site without completing the work. However, the respondent for the first time raised an objection on 24.12.2020 i.e. after 9 years i.e. in the Statement of Defence but failed to prove said allegations.
3.2 Ld. Counsel for petitioner further argued that during execution of work, petitioner submitted four RA Bills and respondent after deducting 5% of the retention money, made payments to the petitioner against four RA Bills. Ld. Counsel further submitted that after completion of work in May, 2013, petitioner submitted 5th / Final RA bill on 24.06.2014 for a sum of Rs.6,80,55,504.07 and in the final bill the petitioner claimed a total sum of Rs.74,32,000/-, out of which Rs.40,30,000/- was against work done and Rs.34,02,000/- was against security deposit / retention money which was being deducted by the respondent from each RA bill in terms of clause 17 of the Agreement. Since the respondent failed to make payment of Rs.74,32,000/- towards 5th Final RA Bill, the petitioner invoked arbitration clause and Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:28:05 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 6 of 33 filed its claim.
3.3 Ld. Counsel for the petitioner further stated that in the impugned award, while deciding issue nos. 1 and 2 against petitioner, the Ld. Arbitrator in para 33 has observed that no reason was given by the claimant therein as to why the final bill was submitted on 24.06.2014, whereas the work was completed by claimant therein in May, 2013 and that 'no reason' was also given by the petitioner herein for submitting 5 th / final running bill immediately thereafter, which is contrary to the contractual terms as agreed and is in conflict with public policy of India. Ld. Counsel stated that Ld. Arbitrator failed to consider the fact that petitioner in para 8 of its Statement of Claim has categorically stated that "...... claimant did not submit the final bill for checking from respondent side as the claimant did not want to cause any obstruction in respondent's running works of interior decoration and services, etc." The Ld. Arbitrator further failed to consider that the petitioner herein after waiting for defect liability period of 12 months in terms of clause 22 of General Condition of Contract (in short 'GCC'), submitted the 5th / final bill vide letter dated 24.06.2014 to the respondent and further no clause in the Agreement stipulates that final bill has to be submitted immediately after completion of work. Ld. Counsel pointed out that even in the reply dated 29.08.2015 to legal notice dated 14.08.2015 as well as Statement of Defence, the respondent categorically admitted that it has received a bill from the Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:28:14 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 7 of 33 petitioner.
3.4 Ld. Counsel further stated that the observations made by ld. Arbitrator in para 33 of the impugned award with regard to the fact that the petitioner has not been able to explain as to why 5 th / final bill was not routed through PMC is patently wrong for the reasons that the petitioner after completing of the work has vide letter dated 24.06.2014 submitted 5th RA bill to the respondent and copy was also sent to the Architect for necessary action.
3.5 Ld. Counsel for petitioner further stated that the observation of Ld. Arbitrator in para 35 of the impugned award that the petitioner has failed to produce any document explaining completion of hotel construction and also observed that neither any interim or final certificate in terms of definition clause 1(p) and (q) of GCC has been filed, is patently wrong. Ld. Counsel argued that upto the submissions of 4 th RA Bill neither any certificates either from PMC or from Architect nor any measurement of the work done had been demanded from the petitioner for releasing the payments towards RA bills without demur or objections rather the respondent has not released due payments against retention money after completion of Defect Liability Period. Even otherwise, in the terms of clause 1(p) and
(q) of GCC, it was the responsibility of the respondent, PMC and Architect to issue interim and final certificate to the petitioner and measuring the work done by petitioner before releasing the Digitally signed by VINEETA GOYAL VINEETA Date:
GOYAL 2025.03.03
17:28:23
+0530
OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 8 of 33
payment towards RA bill.
3.6 It is further stated that further observation of the Ld.
Arbitrator that petitioner had abandoned the project site in March, 2013 without completing the work is contrary to the record. The case of the petitioner is that after completing the work in May, 2013, the petitioner handed over neat and clean site to the respondent and the said fact is evident from the facts that petitioner on 08.02.2012 submitted 1st RA Bill which was duly paid and similarly, 2nd RA Bill submitted for payment on 02.03.2012, was also duly paid. Likewise 3 rd RA bill submitted for payment on 11.06.2012, was also duly paid and 4 th RA bill submitted for payment on 27.02.2013, was lastly paid on 28.05.2013. The payments made by respondent in respect of four running bills time to time and the last payment made on 28.05.2013 by respondent falsifies the plea of respondent that the petitioner had not completed the work; the petitioner abandoned the project site ; no interim certificate has been filed and bills had not been verified either by PMC or by Architect. Rather record proves that petitioner was executing the work at site till May, 2013. Had the petitioner abandoned the project site in March, 2013, the respondent would not have released the payments after March, 2013.
3.7 Ld. Counsel for petitioner further argued that it is an admitted position that respondent had not imposed any liquidated Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:28:31 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 9 of 33 damages on the petitioner for non-completion of work in time in terms of clause 11 SCC and the respondent had not issued any notice to the petitioner in terms of clause 24 of GCC, which also falsify the plea of the respondent that petitioner has delayed the project or had not adhered the terms and conditions of the Agreement or abandoned the contract.
3.8 Ld. Counsel further submitted that Ld. Arbitrator while adjudicating claim no.1, heavily relied upon the amount paid by the respondent to third parties such as M/s. Sea Rock, M/s. Surya Enterprises, M/s. Bhardwaj Construction Company, M/s. Naman Buildcom and M/s. Rajesh Chugh for getting the work done, however, neither of the said third parties stepped into the witness box to prove the documents related to them or to prove that they have completed the work at site allegedly abandoned by petitioner.
The Ld. Arbitrator erred in not considering that the respondent neither produced any person who was maintaining the ledgers / bank statements during the course of its business nor produced any invoices in support thereof. Moreover, the bank statements filed by respondent are photocopies and the same has not been filed in accordance with Section 2A of Bankers Books Evidence Act, 1891. Ld. Counsel further argued that the Ld. Arbitrator failed to consider that the report dated 19.07.2021 was issued by M/s. Swati Structure Solutions Pvt. Ltd. during the pendency of arbitration proceedings that too after a delay of 8 years as the petitioner has completed the execution work in May, 2013 Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:28:38 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 10 of 33 whereas the report was issued on 19.07.2021 and the said report was issued at the behest of respondent and is a forged and fabricated document as none of the witness has stepped into the witness box from M/s. Swati Structure Solutions Pvt. Ltd. to prove the said report dated 19.07.2021.
3.9 Ld. Counsel for petitioner further argued that the petitioner claimed a total sum of Rs.74,32,000/-, out of which Rs.40,30,000/- is against work done and Rs.34,02,000/- is against security amount/ retention money, and the respondent in terms of clause 17 SCC and Clause 6 of Appendix to Tender Form was deducting 5% retention money from 1st RA bill upto 4th RA Bill which is not in dispute between the parties and is contractually bound to release the same.
3.10 Ld. Counsel for petitioner further to buttress its case, stated that even the respondent has not filed any counter claim against the petitioner which further proves that neither the petitioner had abandoned the project site nor respondent made any payments to third companies for completion of work and further the respondent failed to prove any losses suffered by it as such the respondent cannot forfeit the retention money deducted from the afore-stated RA Bills. Since neither any counter claim has been filed nor any losses have been proved by respondent as such under Section 73 and 74 of Indian Contract Act, 1872, the respondent is not entitled to retain a sum of Rs.34,02,000/- towards retention Digitally signed by VINEETA VINEETA GOYAL Date:
GOYAL 2025.03.03 17:28:46 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 11 of 33 money and the same has been illegally and arbitrarily withheld by respondent. Even otherwise, Agreement contains the Clauses for requisition of liquidated damages and extension of time for completion, as such the time could not have essence of contract, therefore, the claim of the petitioner was wrongly rejected by the Ld. Arbitrator.
3.11 Ld. Counsel for the petitioner further argued that Hon'ble Apex Court in catena of judgments has observed that the court, under Section 34 of the Act, has power to set aside the award if the award is against the fundamental policy of India, patently illegal and illegality must go to the root of the matter, same could be set aside.
3.12 Ld. Counsel for petitioner has relied upon judgments in cases of Rajesh Gupta vs. Ram Avtar, 2022 SCC Online Del 1482 ; Welspun Speciality Solutions Ltd. vs. ONGC & ONGC vs. Remi Metal Gujarat Limited, (2022) 2 SCC 382 and Associate Builders vs. DDA, (2015) 3 SCC 49.
4. On the other hand, Ld. Counsel for respondent argued that petitioner has failed to establish any of the grounds for challenge u/s. 34 of the Act as it is without any merit or legal foundation and should be dismissed without further consideration as the petitioner had filed unexplained and unfounded claims and the claim filed by the petitioner were unsupported and unproved.Digitally signed by VINEETA
VINEETA GOYAL Date: GOYAL 2025.03.03 17:28:53 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 12 of 33 Ld. counsel for respondent further argued that by way of present petition, the petitioner is merely attempting to re-argue the entire case while seeking re-appreciation and re-valuation of evidence on record which is impermissible u/s. 34 of the Act.
4.1 Ld. Counsel for respondent further submitted that there is no infirmity in the impugned award passed by the Ld. Arbitrator. The petitioner had claimed an amount of Rs.74.32 lakhs (without interest), pursuant to construction of Country Inn and Suites Hotel, the Hotel. It is the case of the respondent that petitioner had abandoned the work site in and around March, 2013 without completing the construction of the hotel and consequently, the respondent had to get the construction of the Hotel completed by third parties at higher price. Ld. Counsel for respondent submitted that the petitioner has failed to produce even a single supporting document to justify its claim under the Final Bill and any document to show that it had completed the construction work of the hotel. It is further argued that the Final bill did not exist and same is made up and the petitioner's invocation letter dated 31.03.2015 contradicts petitioner's position as to existence of such letter. The petitioner failed to provide any detail, specification, information as to the due amount in the pleadings or through evidence.
4.2. It is settled position of law that no award of damages can be made in favour of parties unless the party adduces Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:29:01 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 13 of 33 satisfactory and convincing evidence in support of the claim made by it. In the instant matter, the petitioner has failed to prove any relevant document to show that the construction of hotel was completed by it. No interim / final certificate was issued by PMC. The petitioner has failed to provide any supporting document such as drawings, calculation, measurement books, approved bills along with supported bills to justify progress / completion of work or to due amount. The petitioner has not only failed to finish the work allotted in accordance with the construction Agreement but also abandoned the construction site in and around March, 2013. Consequently, the respondent was constrained to get the abandoned work done by third party / agency. The Ld. Arbitrator rightly rejected the claim of the petitioner. Consequently, the present petition may be rejected.
5 I have heard the arguments advanced by Ld. Counsels for the parties and examined the record as well as arbitral record. Both counsels for the parties have also filed written submissions.
6. In the case in hand, brief and undisputed facts are that the petitioner is engaged in the business of Civil, Architecture, Structure, Plumbing, Electrical and Interior works, etc. whereas the respondent is into Hotel business. An Agreement was executed between the parties on 17.11.2011 for the construction of a Hotel named as Country Inn & Suites Hotel at Sohna Road, Gurgaon, Haryana. As per the terms of the Agreement, the petitioner was to Digitally signed by VINEETA VINEETA GOYAL Date:
GOYAL 2025.03.03 17:29:07 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 14 of 33 complete the construction within 8 months from the date of handling over of possession of the construction site. The Agreement appointed Architect and PMC to supervise the construction. The dispute between the parties erupted since the petitioner claimed that it had completed the work in May, 2013 and after completion of the said work, the petitioner had sent the final bill of Rs.6,80,00,000/- approximately through letter dated 26.06.2014 in the respondent's office. However, the respondent contended that the petitioner abandoned the site without completing the project which was later on completed by involving third parties. The petitioner in the final bill as above claimed net amount payable (against the final bill) at Rs.40,30,000/-. In addition, the petitioner also claimed an amount of Rs.34,02,000/-
being refund / return of security deposit/ retention amount payable by the respondent because by June 2014, the period of defect liability has elapsed after the completion of the work, so it was entitled to the said amount.
7. On the other hand, the respondent contended that petitioner failed to complete and execute the construction work within the stipulated time and in or around March, 2013 abandoned the construction site without completing the construction. The petitioner before leaving the work site committed breach of the Agreement which includes delay caused in execution of construction, failure to obtain approval, failure to get measurements done from PMC/Architect, non-approval of Digitally signed VINEETA by VINEETA GOYAL GOYAL Date: 2025.03.03 17:29:14 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 15 of 33 Running Account Bills and delay in payments to its own vendors, etc. It was contended that due to the actions of the petitioner, the respondent had suffered financial loss because it had to get the said work completed through other agencies incurring substantial additional cost.
8. Before the Ld. Arbitrator, the petitioner claimed an amount of Rs. 74,32,000/- (Rupees Seventy-Four Lakhs Thirty- Two Thousand Only) which consisted of Rs. 40.30 lakh being the net amount payable by the respondent against the final bill. The petitioner further claimed Rs. 34.02 lakhs being security deposit/ retention amount releasable from the respondent. The total amount of Rs.74.32 Lakhs was sought in the statement of claim along with interest for @12% p.a delaying payment.
9. In the impugned award, the claim of the petitioner in respect of unpaid final bill amount of Rs. 40.30 lakhs has been denied by the Ld. Arbitrator giving the following reasoning: -
a) In paragraph 33 of the impugned award, it has been held that the claimant (petitioner herein) has filed the final bill in June 2014 whereas it is claimed that the work was completed in March 2013. Ld. Arbitrator held that the delay in sending final bill was not justified.
b) In paragraphs 34 to 39 of the impugned award, it has been held that the claimant (petitioner herein) has failed to file documentary evidence in the form of interim Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:29:23 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 16 of 33 certificate and final certificate as envisaged in clause 1(p) and 1(q) of the General Conditions. It was necessary for the petitioner to file these documents before claiming the final bill. The Ld. Arbitrator has elaborately discussed the legal aspect that it was incumbent upon the petitioner to substantiate its claim of having the work done. Ld. Arbitrator relied upon the decided case of Bareilly Electricity Supply Company Ltd. v. The Workmen & Ors., AIR 1972 SC 3300.
c) In paragraph 43 of the impugned award, Ld. Arbitrator referring to the oral evidence lead by the parties came to conclusion that the petitioner has failed to lead evidence in support of having completed the project by March 2013.
d) In paragraph 46 of the impugned award, Ld. Arbitrator has rejected the argument of the claimant (petitioner herein) that the respondent has not issued any letter/ communication for not completing the project. The reasoning given by the Ld. Arbitrator is that it was upon the petitioner to bring on record that the work has been done.
e) In the impugned award, Ld. Arbitrator in paragraphs 48, 50 and 52 relied upon the evidence lead by the respondent exhibiting that the work left out by the petitioner was completed by third parties.
Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:29:30 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 17 of 33
10. In the impugned award, the claim of refund/ return of security deposit/ retention amount payable by the respondent after the expiry of defect liability period has been dealt and denied by the Ld. Arbitrator with the same reasoning as has been ascribed to out-standing amount of the final bill. Ld. Arbitrator has also in paragraphs 61 to 69 decided issue no.(iii) in favor of the respondent that the time was essence of the contract which has been breached by the claimant (petitioner herein).
11. At the outset, it may be mentioned that the scope of section 34 is very limited and before delving into contentious issues, it is relevant to refer section 34 of the Act, which is as follows:-
"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 Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:29:38 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 18 of 33 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
(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- I 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."
ii) It is in contravention with the fundamental policy of Indian law;
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.
2 (A) 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."Digitally signed by VINEETA
VINEETA GOYAL Date:
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12. Normally, the general principles are that the decision of the Ld. Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different con-
clusion on the same facts. The court cannot reappraise the evi- dence and it is not open to the court to sit in appeal over the con- clusion of the Ld. Arbitrator. It is not open to the court to set aside a finding of fact arrived at by the Ld. Arbitrator and only grounds on which the award can be set aside are those mentioned in the Act. Where the Ld. arbitrator assigns cogent grounds and suffi- cient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in the exercise of the power vested in it.
13. In the case of Associate Builders v/s Delhi Develop- ment Authority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. The Ld. 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 can- not be of trivial nature.
14. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:29:54 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 20 of 33 SC 677, the Hon'ble Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India but 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.
15. In the case of Patel Engineering Ltd Vs. North East- ern Electric Power Corp Ltd, 2020 (7) SCC 167 , it was observed that in paragraphs (39) & (40) of Ssangyong Engineering (supra), the Court reiterated paragraphs (42.2) & (42.3) of Associate Builders (supra), wherein, it was held that construction of the terms of a contract is primarily for Ld. Arbitrator to decide, unless the Ld. Arbitrator construes a contract in a manner, which no fair minded or reasonable person would take i.e. if a view taken by the Ld. Arbitrator is not even a possible view to take. It was held that the ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the Ld. Arbitrator is found to be perverse or so irrational that no rea- sonable person would have arrived at the same; or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view.
16. Further in case of Indian Oil Corporation Ltd. vs. Sh. Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:30:02 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 21 of 33 Ganesh Petroleum, (2022) 4 SCC 463, the Hon'ble Apex Court has reiterated that Arbitrator is creature of contract, the relevant paragraphs are reproduced as below :-
"43. An Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.
44. However, a distinction has to be drawn between failure to act in terms of a contract and an erroneous interpretation of the terms of a contract. An Arbitral Tribunal is entitled to interpret the terms and conditions of a contract, while adjudicating a dispute. An error in interpretation of a contract in a case where there is valid and lawful submission of arbitral disputes to an Arbitral Tribunal is an error within jurisdiction. The Court does not sit in appeal over the award made by an Arbitral Tribunal. The Court does not ordinarily interfere with interpretation made by the Arbitral Tribunal of a contractual provision, unless such interpretation is patently unreasonable or perverse. Where a contractual provision is ambiguous or is capable of being interpreted in more ways than one, the Court cannot interfere with the arbitral award, only because the Court is of the opinion that another possible interpretation would have been a better one.
45. x x x x x x
46. In Associate Builders (supra), this Court held that an award ignoring the terms of a contract would not be in public interest. In the instant case, the award in respect of the lease rent and the lease term is in patent disregard of the terms and conditions of the lease agreement and thus against public policy. Furthermore, in Associate Builders (supra) the jurisdiction of the Arbitral Tribunal to adjudicate a dispute itself was not in issue. The Court was dealing with the circumstances in which a Court could look into the merits of an award.
47. x x x x x x
48. x x x x x x x
49. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), this Court held: Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:30:10 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 22 of 33 "76. However, when it comes to the public policy of India, argument based upon "most basic notions of justice", it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013
-- in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry's change in the base indices from 1993-
1994 to 2004-2005. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party's consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment."
50. In PSA SICAL Terminals Pvt. Ltd. v. Board of Digitally signed by VINEETA VINEETA GOYAL GOYAL Date: 2025.03.03 17:30:41 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 23 of 33 Trustees of V.O. Chidambranar Port Trust Tuticorin and Others, this Court referred to and relied upon SSangyong Engineering and Construction Company Limited (supra) and held:
"87. As such, as held by this Court in Ssangyong Engineering and Construction Company Limited (supra), the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category."
51. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court clearly held that the role of the Arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.
52. In PSA SICAL Terminals Pvt. Ltd. (supra) this Court referred to and relied upon the earlier judgment of this Court in MD. Army 4 . (2021) SCC Online SC 508, Welfare Housing Organization v. Sumangal Service (P) Ltd. 5 and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae.
53. In Satyanarayana Construction Company v. Union of India and Others, a Bench of this Court of coordinate strength held that once a rate had been fixed in a contract, it was not open to the Arbitrator to rewrite the terms of the contract and award a higher rate. Where an Arbitrator had in effect rewritten the contract and awarded a rate, higher than that agreed in the contract, the High Court was held not to commit any error in setting aside the award."
17 There is no quarrel on the legal position that the legislative mandate clearly bars the Court to re-appreciate the Digitally signed VINEETA by VINEETA GOYAL GOYAL Date: 2025.03.03 17:30:50 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 24 of 33 evidence for deciding an objection under Section 34 of the Act. The parties are also not allowed to expand the scope of defences raised before the Ld. Arbitrator to get fresh adjudication from the Court. However, in order to see whether the Ld. Arbitrator has passed the award against the basis notions of justice or it is patently illegal as alleged by the petitioner, I deem it appropriate to consider the real controversy between the parties, which gave rise to the cause of action for filing claims and the manner in which they were appreciated by the Arbitral Tribunal in reference to the terms & conditions of the Agreement.
18. Within the narrow compass as above, it is seen that the petitioner has explained the delay of one year in submitting the final bill on the ground that it did not want other agencies carrying out finishing to be disturbed. Ld. Arbitrator has not accepted this argument. The Ld. Arbitrator also relied upon the following conditions of Interim and Final Certificates:-
"1 (p). "Interim Certificate(s)" shall mean the certificate issued by the employer/ Architect/ Consultant from time to time, to the contractor who has competed the work upto a value of Rs.25.00 lacs and that such work has been measured by the Employer/ Architect/ Consultant."
"1(q). "Final Certificate" shall mean the certificate issued by the Employer/Consultant to the contractor at the expiry of the Defect Liability period or as soon as all the works have been finally completed and all de-fects and deficiency if any made good by the contractor to the true intent and meaning of this contract, as also to the absolute and complete satisfaction of the employer whichever is later."Digitally signed by VINEETA
VINEETA GOYAL GOYAL Date:
2025.03.03 17:30:58 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 25 of 33
19. Based on these two facts, Ld. Arbitrator denied the claim no.1. Ld. Arbitrator has given summary of the five bills in paragraphs 30 and 32 of the impugned award which can be further summarized as under:-
Dt. Of Amount Amount Date of Payment
invoice Claimed (INR) Approved by Payment made
PMC (INR) against the bill
(INR
1st 08.02.2012 39,72,484.99 37,86,353.00 10.01.2012 14,70,000
Running
Bill (Ex-
CW 1/6)
24.02.2012 18,92,283
Total 33,62,283
2nd 02.03.2012 84,43,597.96 79,85,228.11 10.03.2012 25,00,000
Running
Bill (Ex-
CW 1/7)
15.03.2012 15,00,000
22.03.2012 10,00,000
26.03.2012 10,00,000
31.03.2012 35,90,883
Total 95,90,883
3rd 11.06.2012 1,29,42,515.00 Neither 25.06.2012 25,00,000
Running verified
Bill (Ex- пог
CW 1/8) approved
05.07.2012 25,00,000
04.08.2012 20,00,000
20.09.2012 34,30,000
Total 1,04,30,000
4th 27.02.2013 3,99,37,806.95 Neither 15.01.2013 24,50,000
Running verified
Bill (Ex- nor
CW 1/9) approved
by PMC
19.01.2013 24,50,000
Digitally signed by
VINEETA VINEETA GOYAL
GOYAL Date: 2025.03.03
17:31:07 +0530
OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 26 of 33
06.03.2013 10,00,000
25.03.2013 15,00,000
06.04.2013 10,00,000
03.05.2013 50,000
09.05.2013 1,50,000
28.05.2013 10,000
Total 84,50,000
5th 24.06.2014 6,80,55,504.07
Running
Bill (Ex-
CW 1/10)
20. Perusal of the arbitral record shows that the Ld. Arbitrator failed to appreciate that for the bills running as 3 rd bill and 4th bill, there were admittedly neither any verification nor approval by PMC, therefore laying too much emphasis on interim and final certificates would defeat the purpose of the contract particularly where the parties have conveniently altered these terms to that extent by conduct. The conduct of the respondent in releasing payments for 3rd and 4th running bills on their own without verification/ approval of PMC constitutes an understanding that the payments of the bills can be approved even otherwise without enforcing approval of PMC. The only question remains the satisfaction of the work done for which respondent can arrive at its satisfaction otherwise also. The interpretation of terms of Agreement also depends upon the conduct of the parties at the stage of execution.
21. Another noticeable feature which emerge from the table Digitally signed by VINEETA VINEETA GOYAL GOYAL Date: 2025.03.03 17:31:14 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 27 of 33 above is that for 4th Running bill, there are substantial payments in March 2013 and particularly towards the end of March 2013, this should have raised suspicion on the claim of the respondent that the petitioner abandoned the site in March 2013. Under normal circumstances, if that was true the respondent would also have withheld the payments for the 4 th Running bill. Moreover, there is no communication brought on record that the respondent having issued any notice/ communication to the petitioner asking reasons for abandonment of the project. In absence of any document from respondent showing concern about abandonment of site by petitioner, it cannot be presumed merely on the basis of third party statement.
22. It will be useful to refer here to the judgment of Hon'ble Apex Court in McDermott International Inc. vs. Burl Standard Co. Ltd. and Ors., 2006 (11) SCC 181, wherein the Hon'ble Apex Court has held that the conduct of the parties would also be a relevant fact in a matter of construction of the contract and the correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. The relevant para of said judgment is reproduced as under :-
"112 It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the Digitally signed VINEETA by VINEETA GOYAL GOYAL Date: 2025.03.03 17:31:23 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 28 of 33 arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma v. Union of India (2004) 5 SCC 325]."
23. In the facts of the present case also the conduct of the parties and the documentary evidence placed on record by the parties, is to be read into while interpreting the terms of contract entered into between the parties. The conduct of the parties also cannot be ignored to decide the claim raised by the petitioner. The conduct of the respondent having not raised any complaint to point out any breach on the part of petitioner in fulfilling the obligation certainly mitigates against the defence of non- compliance on the part of the petitioner, as raised by the respondent.
24. Another argument raised against the petitioner was that it has submitted the final bill on 24.06.2014 which was explained by the petitioner that it did not intend to hamper the other agencies giving the final touches to the project. Ld. Arbitrator also ignored Digitally signed by VINEETA VINEETA GOYAL GOYAL Date: 2025.03.03 17:31:31 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 29 of 33 the explanation of the petitioner that it was waiting for the defect liability period to get over. The following clauses of the General Conditions of the Contract are relevant: -
(O) "Defect Liability Period" shall mean the period of one year commencing from the date of virtual completion.
(f) "Virtual Completion" shall mean that all the works have been duly completed by the Contractor pursuant to and in accordance with this Agreement and that the building, facilities and amenities are completed in the opinion of the Employer /Architect /Consultant and are fit for occupation and operations. The employer's decision shall be final and binding.
25. Ld. Arbitrator did not appreciate that there was a possible explanation when the petitioner had completed his work in March 2013 and waited for the Defect Liability Period to be over so that it could claim its final amounts from the employer. As per the definition of the "Virtual Completion" in this case may mean that by March 2013 all the works have been duly completed by the petitioner pursuant to and in accordance with this Agreement and that the building, facilities and amenities are completed. Now it was for the Employer / Architect / Consultant to express their opinion on whether such works done by the petitioner are fit for occupation and operations. The employer's decision was final and binding.
Digitally signed by VINEETAVINEETA GOYAL GOYAL Date:
2025.03.03 17:31:39 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 30 of 33
26. In the present case, there was no adverse opinion ever expressed to the petitioner which need rectification. The circumstances were that it is a case of no adverse/ objection against the works done by the petitioner. Under these circumstances, the adverse findings given in paragraph 33 of the impugned arbitral award, that the petitioner has filed the final bill in June 2014 whereas it is claimed that the work was completed in March 2013 becomes unsustainable because it was incumbent upon the employer to send notice if the project was abandoned and it intended to complete it with other parties. Similarly, Ld. Arbitrator overemphasized the need of approvals of the PMC for final bill whereas other two bills (RA 3rd and 4th ) were also paid without such approval thus the conduct of the parties to contract should be given importance rather than emphasizing on technical compliances of interim and final certifications.
27. Now adverting to denial of the claim of the petitioner regarding an amount of Rs.34,02,000/- being refund/ return of security deposit /retention amount payable by the respondent because by June 2014, the period of defect liability has elapsed after the completion of the work. The relevant Special condition 17 of the Agreement is reproduced hereunder: -
The retention percentage in the running bills will be 5% (five percent) of the completion cost of the work Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:31:45 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 31 of 33 and will be released after virtual completion of work, certified by Architect/Consultant.
28. It is equally fallacious to arrive at a conclusion that the project has not been completed by the petitioner in March 2013 when the other party claims that it had completed. The respondent has not explained as to why there was no adverse communication made to the petitioner after March 2013 when the project was allegedly abandoned by the petitioner.
29. It may be appreciated that the retention money is in fact the amount out of the admitted completed work and it is not an amount which is yet to be ascertained. Under any circumstances, the retention money is denied it amounts to imposition of penalty upon the contractor. In the impugned award, there is nothing which could lead to positive evidence that the petitioner is liable for any such penal action. Without any evidence on record and without providing any opportunity to the contractor for mitigation of losses any such infliction is against the established legal principles and against the public policy. Ld. Arbitrator has failed to appreciate the purpose of retention money and its denial on procedural aspect is unwarranted.
30. In view of foregoing discussions and judgments cited above, the impugned award dated 10.02.2022 suffers from patent illegality and the same is accordingly set aside. The petition is Digitally signed by VINEETA VINEETA GOYAL GOYAL Date: 2025.03.03 17:31:52 +0530 OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 32 of 33 accordingly allowed and disposed off with no orders as to costs.
31. File be consigned to record room.
Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2025.03.03 17:31:58 +0530 Pronounced in the open Court (VINEETA GOYAL) on 03.03.2025. District Judge (Commercial-03) Patiala House, New Delhi OMP (Comm) 107/2022 N.S. Associates Pvt. Ltd. Vs. Gurmon Hotels Pvt. Ltd. Page 33 of 33