Delhi District Court
Omp (Comm) 3/22 vs M/S Telecommunications Consultants ... on 16 August, 2023
IN THE COURT OF SH. AJAY KUMAR JAIN:
DISTRICT JUDGE COMMERCIAL COURT 03 - SOUTH EAST
DISTRICT, SAKET COURTS, NEW DELHI.
OMP (COMM) 3/22
M/s Shri Kamadgiri Construction
Through its Partner Sh. Gajendra Singh
Paras Ware House, Prabhat Vihar Colony
Behind R.K. Medical Centre, Satna,
Madhya Pradesh. ....Petitioner
VERSUS
1. M/s Telecommunications Consultants India Ltd.
(A Govt. of India Enterprises)
TCIL Bhawan, Greater Kailash
New Delhi-110048. ....Respondent no. 1/Claimant
2. Shri A.K. Jain (Sole Arbitrator)
Room No. 309, 3rd Floor
TCIL Bhawan, Greater Kailash-1
New Delhi= 110048.
Date of Institution : 05.01.2022
Date of final arguments : 03.08.2023
Date of Judgment : 16.08.2023
Judgment
1. Vide this judgment, I shall decide the petition under section 34 of
Arbitration and Conciliation Act, 1996 for setting aside the Ex-parte
award dated 18.02.2021 passed by Ld. Arbitrator.
OMP (COMM) 3/22 Dated. 16.08.2023 Page 1 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
2. Brief facts of the case are that the work of Rural Road works of
Package MP-2840 was awarded to TCIL on 01.09.2008 with an estimated
cost of Rs. 14.46 crores by PMGSY with date of completion on
01.03.2010 and in turn TCIL awarded the same to M/s Kamadgiri
Construction under Pre tender tie up system on 10.10.2008 with the date
of completion as 17.02.2010 with the contract amount of Rs. 12.28 crore,
however, petitioner after carrying out the work of about Rs. 6.38 crores,
submitted their inability to further execute the work vide their letter dated
05.10.2010 and requested TCIL to sign a Tripartite agreement with M/s
Tamrajman Singh for execution of balance works left out by respondent
except B.T. works. Accordingly as per consent of petitioner, a tripartite
agreement was signed on 09.11.2010 between TCIL, petitioner and M/s
Tamrajman Singh for execution of balance work except BT works left out
by petitioner on the rates agreed by both the agencies. Another tripartite
agreement was also signed on 09.11.2010 between TCIL, Petitioner and
M/s Krishna Gopal Singh for execution of the balance BT works left out
by Petitioner on the rates agreed by both the agencies. M/s Tamrajman
Singh Submitted his inability to further execute any work on 08.03.2011
in writing and in turn petitioner on 09.03.2011 & 15.03.2011 submitted
that the contract of M/s Tamrajman Singh may be terminated and
tripartite agreement may be signed with M/s Anand Narayan Shukla.
Accordingly a tripartite agreement was signed between TCIL, Petitioner
and M/s Anand Narayan Shukla for execution of balance work except BT
works left out by petitioner and Tamrajman Singh on the rates agreed by
OMP (COMM) 3/22 Dated. 16.08.2023 Page 2 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
both the agencies. M/s Anand Narayan Shukla also submitted his inability
on 05.12.2011 in writing to further execute any work and similarly M/s
Krishna Gopal Singh has also submitted his inability to further execute
the work on 10.12.2011 and requested to terminate his contract. Petitioner
on 10-3-2011 submitted that the contract of M/s Krishna Gopal Singh
may be terminated and for execution of balance BT works a Tripartite
agreement may be signed with M/s Shantnu Singh Parihar.
Claimant/respondent in view of failure of previous tripartite agencies
rejected the request of petitioner and asked them to take up works
themselves, however, due to slow progress of works, the contract of TCIL
was terminated by MPRRDA vide letter dated 09.03.2012. The
claimant/respondent in turn terminated the contract of petitioner vide its
letter dt. 20.03.2012. The contract of the tripartite agencies was also
terminated by the claimant/respondent on 20.03.2012. The petitioner was
asked to be available on 26.04.2012 for final measurements but not
attended the site on due date and time.
3. MPRRDA revoked the termination of the contract vide letter dated
11.04.2012. Claimant/respondent took up the work departmentally but the
progress of work could not be geared up due to hurdles created by
petitioner resulting termination of work by MPRRDA on 06.07.2012.
Claimant/Respondent submitted that claimant/respondent suffered huge
losses for various breaches like delay, creating obstacles on the part of the
petitioner. Thus the respondent invoked the Arbitration clause of the
OMP (COMM) 3/22 Dated. 16.08.2023 Page 3 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
contract and requested CMD TCIL to start the Arbitration procedure,
thereafter, the Ld. Sole Arbitrator was appointed.
4. The Ld. Arbitrator entered upon the reference on 15.04.2013 and
directed claimant/respondent to file statement of facts on claims within 15
days and petitioner was directed to file counter statement of facts within
15 days form the receipt of statement of facts from claimant/respondent.
The Statement of claim was taken on record on 21.06.2013, however,
petitioner was directed to file counter statement. Communication sent by
speed post, was returned back with the remarks 'refused'. The notice was
again sent on 08.07.2013, 24.09.2013 to file counter-claim but no
response was received. Notices were again sent and opportunities were
given to the petitioner to join proceedings, however, petitioner not
appeared, then on hearing the arguments of the claimant/respondent and
considering the material on record, the impugned ex-parte award was
passed.
Submissions of counsels.
5. Ld. counsel for the petitioner submitted that the impugned ex-parte
award was passed without any notice to the petitioner at any stage and
this is clear violation of the law. In the impugned award, Ld. Sole
Arbitrator awarded the alleged award in respect of claims of the
respondent in violation of law and there is biased attitude of the Ld.
Arbitrator in passing the award. No information was given to the
petitioner of appointment of Arbitrator, therefore, on this ground the
arbitration award is liable to be dismissed. The several tripartite
OMP (COMM) 3/22 Dated. 16.08.2023 Page 4 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
agreements have been executed among the petitioner, respondent no. 1
and third parties and those third parties despite being necessary parties
are not made parties in arbitration proceedings, therefore, the entire
arbitration proceedings are bad in law for non-joinder of parties. Ld.
Counsel submitted that in respect to claim no. 2, regarding the claim of
liquidated damages, the Ld. Arbitrator awarded the same in favour of the
respondent no. 1, considering the fact that the client i.e. MPRRDA has
levied liquidated damages on the respondent no. 1, however, while
dealing with claim no. 4 and 5, the Ld. Sole Arbitrator himself observed
that the said claims are not maintainable in view of the fact that the
respondent no. 2 failed to provide any evidence on record. Ld. Counsel
submitted that it is admitted possession that MPRRDA revoked the
termination of the contract vide letter dated 11.04.2012 and thereafter the
respondent no. 1 took up work by themselves. Hence, the petitioner
cannot be held liable for delay if any occurred after 11.04.2012. Ld.
Counsel submitted that ex-parte award has been passed overlooking the
provisions of the law, even otherwise, the impugned award is passed after
the amendment in the Arbitration Act. The arbitration proceedings cannot
continue in view of the section 12 (5) r/w schedule 7 of the Arbitration
and Conciliation Act and are void ab nitio and non est in law. (relied upon
'Ellora Paper Mills Limited Vs. The State of Madhya Pradesh, C.A.
7697/2021, dt. 04.01.2022').
6. Ld. counsel for the respondent no. 1 submitted that the present
petition challenging the alleged ex-parte award dated 18.02.2021 is
OMP (COMM) 3/22 Dated. 16.08.2023 Page 5 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
barred by limitation. The petitioner has been given in total nine
opportunities over the period of three years to which have been refused or
not adhered to by the petitioner. Ld. Counsel submitted that in accordance
with the clause 19 of the MoU signed between the parties, the arbitrator
was appointed on 08.04.2013. The statement of claim was filed and taken
on record on 21.06.2013. Despite number of opportunities, petitioner not
appeared and refused to take summons. Petitioner was provided all
possible support but even then the petitioner neither could gear up the
work nor maintain the quality of works. The petitioner deliberately with
malafide intention kept delaying the work due to which the respondent
had to incur major losses. The petitioner only completed the works for
Rs. 6.38 crores and also submitted its inability to execute work in
accordance with the MoU signed between the parties. Ld. Counsel
submitted that as per TCIL work order dated 10.10.2008 and agreement
with the petitioner, all the terms and conditions of the tender document of
MPRRDA are applicable to the petitioner. As per MoU, back to back
letter of award, the petitioner is totally responsible for the losses caused
to TCIL/respondent. As per the contract, the said work was to be
completed within 16 months but the claimant delayed the progress. It is
due to the act and omissions in delaying execution of the work under the
contract, claimant made itself liable for liquidated damages which are
recoverable from the respondent and the maximum limit is 10 % as per
clause 21 I of contract data to general conditions of contract, hence,
respondent is liable to pay sum of Rs. 1,22,77,143/- as liquidated
OMP (COMM) 3/22 Dated. 16.08.2023 Page 6 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
damages @ 10 % of the total contract amount. The petitioner is also
liable to pay the interest at the rate of 18 % on the said amount from the
schedule date of completion of work. MPRRDA vide letter dated
11.07.2012 revoked the contract. The respondent took up the work
departmentally on the risk and costs of the petitioner but the progress of
works could not be geared up due to continuous threats from the
petitioner and their gunmen. Ld. Counsel for the respondent submitted
that the present petition is barred by limitation as well as on merits.
Furthermore, petitioner relied upon judgment 'Ellora Paper Mills
Limited (supra)' is not applicable in the present facts, hence, the present
petition is liable to be dismissed.
7. Arguments heard. Record perused.
8. The relevant paras of impugned award dated 18.02.2021 as under :
"Whereas certain dispute arisen between Telecommunications
Consultants India Limited and M/s Shri Kamadgiri Constructions
in the matter of execution of the above mentioned works under the
above citied agreement. And whereas 1 A.K. Jain was appointed
as the Sole arbitrator by the Chairman and Managing Director,
Telecommunications Consultants India Limited vide order No.
TCIL-19/004/007/Sectt. Dated April 08, 2013.
And where as I entered upon the reference on April 15,2013 and
directed claimant to file statement of facts on claims disputes
within 15 days. Similarly respondent was directed to file counter
statement of facts within 15 days from the receipt of statement of
facts from Claimant. Whereas on the request of Claimant
extension of time for filing the statement of claims was granted
upto 7th June 2013.
Whereas statement of claim was received and taken on record and
vide order TCIL/ARB/AKJ/04 dated June 21,2013, Respondent was
directed to file counter statement of facts on the claim and counter
claims of respondent if any. However communication sent by
speed post was returned back with the remarks "Refused".
OMP (COMM) 3/22 Dated. 16.08.2023 Page 7 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
Whereas Notice were again sent on July 8, 2013, September
24,2013 to respondent to file counter claim, but no response was
received from Respondent.
Whereas notice were again sent on May 20,2014, June 17,2014
and July 24, 2014 intimating respondent that in absence of his
response case will proceed ex-parte and date was fixed for
evidence of claimant. Whereas for the sake of justice further
opportunities were given vide order dated September 9, 2014,
November 19, 2014, Dec 12, 2014 to respondent to join the
proceedings.
Whereas in the mean time communication sent on May 15, 2015
sent to respondent by speed post also returned undelivered with
the remarks "लल नल सल इइककर कर ददयक Similarly, communication
dated June 03, 2016 intimating date of evidence and argument of
claimant on 12th July 2016 sent by speed post was also returned
undelivered with the comments "पप्रा प्त करप्रार्ता नने लल नल सल इइककर दलहकजक
पपरलषक कक वकदपस"
Whereas on 12 July 2016, learned advocate of claimant argued the
case orally and also submitted written arguments which were taken
on record.
Whereas enough opportunity has been given to respondent to join
the proceedings but respondent has chosen to remain absent. As
per provisions of section 25 of Arbitration and conciliation Act.
1996 I am making an Arbitration Award on the basis of
material/documents available before me. As it is evident that
respondent has clearly evinced its intention to remain absent.
Whereas while doing so I am relying upon the judgment of Sushma
Jain Vs M/s Naveen Board Company And ORs. 2014 (IV) Delhi
392. Where it was held
"It is not open to a person who does not contest the Arbitration
proceedings eg, remaining exparte"
Similarly in the case of Amit Jain Vs M/s Madhu Appliances Pvt.
Ltd. 68(1997) Delhi Law TI,ES94, it was held = No duty is cast on
the Arbitrator to invite a recalcitrant party to be present when it
has evinced its intention to remain absent.
Fatual Matrix
The work of Rural Road works of Package MP-2840 was awarded
to TCIL on 01-09-2008 with an estimated cost of Rs. 14.46 Crores
by PMGSY with date of completion on 01-3-2010 and in turn TCIL
awarded the same to M/s Kamadgiri Construction under Pre
OMP (COMM) 3/22 Dated. 16.08.2023 Page 8 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
tender tie up system on 10-10-2008 with the date of completion as
17-02-2010 with the contract amount of Rs. 12:28 crore.
The respondent after carrying out the work of about Rs. 6.38
crores, submitted their inability to further execute the work vide
their letter dated 05-10-2010 and requested TCIL to sign a
Tripartite agreement with M/s Tamrajman Singh for execution of
balance works left out by respondent except B.T. works.
Accordingly as per consent of respondents, a tripartite agreement
was signed on 09-11-2010 between TCIL, Respondent and M/s
Tamrajman Singh for execution of balance work except BT works
left out by respondent on the rates agreed by both the agencies.
Another tripartite agreement was also signed on 09-11-2010
between TCIL, Respondent and M/s Krishna Gopal Singh for
execution of the balance BT works left out by Respondents on the
rates agreed by both the agencies. M/s Tamrajman Singh
Submitted his inability to further execute any work on 08-03-2011
in writing and in turn Respondent on 09-3-2011 & 15-03-2011
submitted that the contract of M/s Tamrajman Singh may be
terminated and tripartite agreement may be signed with M/s Anand
Narayan Shukla. Accordingly a tripartite agreement was signed
between TCIL, Respondent and M/s Anand Narayan Shukla for
execution of balance work except BT works left out by Respondent
and Tamrajman Singh on the rates agreed by both the agencies.
M/s Anand Narayan Shukla also submitted his inability on 5-12-
2011 in writing to further execute any work and similarly M/s
Krishna Gopal Singh has also submitted his inability to further
execute the work on 10-12-2011 and requested to terminate his
contract. Respondent on 10-3-2011 submitted that the contract of
M/s Krishna Gopal Singh may be terminated and for execution of
balance BT works a Tripartite agreement may be signed with M/s
Shantnu Singh Parihar. Claimant in view of failure of previous
tripartite agencies rejected the request of respondent and asked
them to take up works themselves. Due to slow progress of works,
the contract of TCIL was terminated by MPRRDA vide letter No.
2395/MPRRDA/Acc/Panna dated 09-03-2012. The claimant in
turn terminated the contract of respondent vide its letter No.
TCIL/PMGSY/MP/Panna/2011-12 dr. 20-03-2012. The contract of
the tripartite agencies was also terminated by the claimant on 20-
03-2012. The respondent was asked to be available on 26- 04-2012
for final measurements but not attended the site on due date and
time.
OMP (COMM) 3/22 Dated. 16.08.2023 Page 9 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
MPRRDA revoked the termination of the contract vide letter no.
5771/22/PMGSY dated 11-04- 2012. Claimant took up the work
departmentally but the progress of work could not be geared up
due to hurdles created by respondent resulting termination of work
by MPRRDA on 06-07-2012, Claimant submitted that the claimant
has suffered huge losses for various breaches like delay. creating
obstacles on the part of the respondent. Thus the dispute arises
and Mr. S.R. Gupta, GM, TCIL Jabalpur invoked the Arbitration
clause of the contract and requested CMD TCIL to start the
Arbitration procedure where M/s TCIL will become the claimant
and the respondent is M/s Kamadgiri Construction CMD TCIL
vide his letter no. TCIL/19/004/Sectt. dated April 08,2013
appointed me the sole arbitrator for adjudication and
determination of dispute arisen between the parties.
Oral arguments of claimant were heard during the hearing held on
12 July 2016. Claimant filed written arguments. Respondent has
not joined the arbitration proceedings inspite of number of
opportunities given to them.
Now therefore after perusal of the pleadings, examination and
considering the material in the documents produced, evidence
adduced and the arguments advanced by the claimant, I. Arun
Kumar Jain, Sole Arbitrator, DO MAKE AND PUBLISH MY EX-
PARTE AWARD AS BELOW.
Claim No. 1 - Amount of Rs. 96,06,973/+ Interest on Account of
Employers' additional cost for completing the contract work.
The respondent was awarded the work under PMGSY vide
Package No MP-2840, Panna for Rs.12.28 Crore.
Various letters and correspondence submitted by claimant reveals
that the claimant did not complete the work even after scheduled
time.
Claimant has mentioned that work done by respondent was Rs.
7,47,36,570/-. Claimant filed a letter from consultants namely M/s
Khaira & Associates with a copy to MPRDC. As per documents
filed with me above fact is not disputed by Respondent. Further
as per letter dated 20-06-2013 of MPRRDA similar deduction
under clause 53 (1) has been made by MPRRDA from claimant.
Hence claim of Rs. 96,06.975/- of claimant is justified. I allow it
accordingly.
Claim No. 2:- Rs. 1,22,77,143/- (Rupees one crore twenty two lacs,
seventy seven thousand one hundred forty three only) towards
liquidated damages.
OMP (COMM) 3/22 Dated. 16.08.2023 Page 10 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
As per clause 14 of Tender document for the said work -
Liquidated damages shall be payable for any delay due to
reasons, attributable to the contractor at the rate of 2% per week
or part thereof subject to maximum of 10% of contract value.
However the L.D. recoverable from the contractor shall be limited
to LD imposed by Client on TCIL. Further attention is invited to
clause 17 of MOU between claimant & Respondent which states
"in case of delay in execution of work LD as per terms of bidding
tender of the client shall be applicable...".
The claimant awarded the said work to respondent on 10-10-2008.
As per work order a period of 16 months from the 7th day of award
ie from 10-10-2008 was stipulated for execution and completion of
the said contract. Therefore, the date of completion as per work
order was 17-02- 2010. Cost of work awarded was Rs.
12,27,71,436/-
On examination of documents it is clear that respondent failed to
execute the work in given time. Even after agreeing to the
request of Respondent to rope in other sub contractors on his
behalf namely Krishan Gopal Singh, Anand Kumar Shukla,
Tamrajman Singh work could not be completed by respondent.
As a result of it principal client i.e. M/s MPRRDA vide letter
dated 20-06-2013 has levied Liquidated damages @10%
amounting to Rs. 1,38,90,000/- on claimant Since respondent
could not execute the work in time. Claim of claimant of Rs.
1,22,77,143/ towards Liquidated damages is justified I allow it
accordingly.
Claim No. 3 for Rs. 48,03,486/- on account of loss of Profit. The
claimant has neither given detailed calculation for justifying the
claim nor main client i.e. MPRRDA has made any such recovery
from claimant, hence claim is not justified and rejected
accordingly.
Claim No. 4 for Rs: 1,22,77,143/-(Rupees One Crore Twenty Two
Lakhs Seventy Seven Thousand One Hundred Forty Three only).
There is no evidence on record to justify the Claim. Moreover no
such recovery is made by main client MPRRDA from Claimant.
Hence the claim is rejected.
Claim No. 5 for Rs. 1.22,77,120/- (Rupees One Crore Twenty Two
Lakhs Seventy Seven Thousand One Hundred Twenty Only).
Claimant has not submitted detailed calculations along with
evidence to justify the claim and has merely mentioned over heads
@ Rs 3,83,660/- per month for 48 months amounting to Rs.
OMP (COMM) 3/22 Dated. 16.08.2023 Page 11 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
1,22,77,120/-. Further no such recovery is effected by MPRRDA
from Claimant. Claim is not justified and rejected accordingly.
Claim No. 6 for a sum of Rs. 52,75,035/-plus interest @ 18% p.a.
towards unadjusted/ outstanding advance. In support of the claim,
the claimant has submitted one statement as Annexure 13. The
statement is neither supported by copy of accounting record nor by
any other documentary evidence. Since Claim of unadjusted
advance is not supported by evidence, this claim is hereby rejected.
Adjustments
Claimant in his claim statement has accepted that following
securities of Respondent are available with claimant for which
credit is to be given to respondent.
1. Security Deposit = Rs. 31,05,181.00
2. P.B.G. Amount = Rs. 34,57,181.00
3. L.D deducted from Bills = Rs. 6,07,050.00
Total Credit = 71, 69,412.00
** ** **
Interest- Simple interest @7% from the date of termination of the
Contract till the date of award and archived payment by
respondent.
Arbitration Fee :- Arbitration fee was revised and fixed Rs. 50,000
10% clerkage by each party. Out of Pocket expenses were
quantified at Rs 20,000 shared equally by both parties. Since
respondent has not paid their share, same is already paid by
claimant.
The same is allowed to be recovered by Claimant from respondent
in addition to allowed Net Claim Rs. 1,47,14.704/- (Rupees One
Crore Forty Seven Lakhs Fourteen Thousand Seven Hundred and
Four) Plus Applicable interest as allowed.
9. In accordance to clause 19 of the MoU, the CMD of TCIL
(respondent) has appointed Sh. A.K. Jain, General Manger (LPF) TCIL as
the Sole Arbitrator vide letter dated 08.04.2013. The copy of the same
also sent to the petitioner. Thereafter, the Ld. Arbitrator entered the
reference on 15.04.2013. Therefore, there is a due compliance of Section
21 of the Act in present case.
OMP (COMM) 3/22 Dated. 16.08.2023 Page 12 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
10. The rural road works of package MP-2840 was awarded to the
claimant/respondent and in turn the claimant awarded it to the petitioner,
however, the petitioner carried the works for Rs. 6.38 crores and
thereafter, submitted its inability to execute the works. At its instance
third party were inducted and tripartite agreement was executed, however,
those parties also unable to complete the work. Due to slow progress of
the work, the contract of claimant was terminated by MPRRDA,
thereafter, the claimant terminated the contract of the petitioner, due to
which claimant suffered huge losses and prayed for six claims before the
Ld. Arbitrator.
11. The Ld. Arbitrator entered upon the reference on 15.04.2013 and
directed to parties to file statement of claim and statement of defence
respectively. Communication sent by the speed post was returned back
with the remarks by 'refused' from the petitioner. Therefore, another
notice was sent on 08.07.2013, then on 24.09.2013 to the petitioner but
no response was received. Thereafter, again notices were sent on
20.05.2014, 17.06.2014, 24.07.2014 intimating petitioner that in absence
of response. However, the Ld. Arbitrator given further opportunity vide
order dated 09.09.2014, 19.11.2014 and 22.12.2014. Another
communication dated 15.05.2015 sent to the petitioner by speed post,
returned with remarks 'refused to take'. Similarly, another
communication was returned with same remarks, thereafter, hearing the
argument and considering the material on record, the claims of the
claimant/respondent were decided. Ld. Arbitrator categorically observed
OMP (COMM) 3/22 Dated. 16.08.2023 Page 13 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
that the petitioner has not completed the work within time, therefore,
found the claim no. 1 of Rs. 96,06,975/- justified. The claim no. 2
regarding the liquidated damages of Rs. 1,22,77,143/- was also found
justified. However, rejected the claim no. 3 for loss of profit as not given
any detailed calculation. The Claim no. 4. 5 & 6 also stands rejected. The
adjustment was duly made and thereafter, the impugned award was
passed. There appears to no patent illegality in passing of the impugned
award. Neither the impugned award is contrary to the public policy of
India. The petitioner himself not appeared despite various opportunities.
Petitioner was sent notices on number of times through speed posts which
is sufficient to draw the inference of deemed service. .
12. The Hon'ble Delhi High Court in 'Shabnam Gulati v. M/S
Religare Finvest Pvt Ltd, 2017 SSC OnLine Delhi 11656' has discussed
the scope of Section 3 of the 1996 Act and held as under:
"....Section 3(1) of the Arbitration and Conciliation Act,
specifically states that a writ- ten communication is deemed to
have been received, if it is sent to the addressee's last known
place of business, habitual address or mailing address by
registered letter or by any other means which provides a
record of 'attempt to deliver it. Therefore, unlike Sub-Rule 5 of
Rule 9 of Order V of, CPC requiring proof of acknowledgment
or any other receipt of due delivery of the summons, or
drawing of a presumption of due service only where the
summons were properly addressed but the acknowledgement
was lost or misled or for any other reason was not received by
the Court. under the Arbitration and Conciliation Act; sending
of notice by registered letter or by other means at last known
place of business, habitual residence or mailing address which
provides the record of 'attempt to deliver it' is sufficient to
draw a presumption of service. In fact the sub-Section holds
that it is deemed service......."
OMP (COMM) 3/22 Dated. 16.08.2023 Page 14 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
13. Ld. counsel for the petitioner raised the plea that the impugned
award was passed after the amendment in October 2016. Furthermore, the
arbitrator was unilaterally appointment by the claimant/respondent which
is in violation of section 12 (5) r/w schedule 7 of Arbitration and
Conciliation Act, therefore, the impugned award passed is void an nitio
and non est in law. (relied upon 'Ellora Paper Mills Limited (Supra))'.
14. In present case, the arbitrator was appointed by the claimant on
08.04.2013 who entered the reference on 15.04.2013, thereafter, the
statement of claims were filed on 21.06.2013, however, despite various
communications sent through speed post, the petitioner not joined the
proceedings and speed post returned with remarks 'refused', and the
impugned award was passed on 10.02.2021. Clause 12 (5) r/w schedule 7
of Arbitration and Conciliation Act was introduced vide amendment dated
23.10.2015. However, in present case the arbitration proceedings were
initiated prior to the said amendment. Therefore, the provisions in relation
to unilateral appointment could not be applied.
15. The Hon'ble Culcutta High Court in case title 'West Bengal
Housing Board Vs. Abhisek Construction, AP 189 of 2019, dt.
11.04.2023, 2023 SCC OnLine Cal 82' have dealt this issue in detail and
held as under :
"...8. For the sake of clarity in the judgment, I have formulated the
contentions of the parties into two issues :-
1. Whether non-disclosure by the arbitrator as mandated under
Section 12(1) of the Act can be a ground for setting aside an
arbitral award?
OMP (COMM) 3/22 Dated. 16.08.2023 Page 15 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
2. Whether the provisions of 2015 Amendment Act in relation to
unilateral appointment would apply to arbitral proceedings
initiated before October 23, 2015?
*
Issue 2
13. The practice of unilateral appointments hits the crux of the arbitration process which is that of independence and impartiality in decision making. In TRF Limited (supra) and Perkins Eastman (supra), the apex court held that the Courts have a duty to uphold and safeguard the sanctity of arbitral process at every step in the entire arbitration process. By virtue of the aforesaid decisions, the apex court judicially expanded Schedule VII of the Act to include persons unilaterally appointed by one of the parties. It has now become a settled principle of law that compliance with Section 12(5) r/w Schedule VII of the Act is sine qua non for any arbitral reference to gain recognition and validity before the Courts. An arbitral reference which begins with an illegal act vitiates the entire arbitral proceedings including the award itself, and the same cannot be validated by the Courts at any later stage. Thus, it would be a logical inference to consider such arbitral proceedings and the consequent arbitral award as void ab initio.
14. However, it is to be kept in mind that ineligibility which plagues such arbitral appointments operates as a result of Section 12(5) r/w Schedule VII of the Act which in turn emerges from the 2015 Amendment Act. Ergo, it would be appropriate on my part to adjudicate upon the applicability of the said amendment in the present facts in hand.
15. As mentioned above, the issue before me is to determine whether the provisions of the 2015 Amendment Act, in relation to unilateral appointment of arbitrators, apply retrospectively to arbitral proceedings which were initiated before October 23, 2015, ('effective date') that is, before the 2015 Amendment Act came into force but where the award was passed on or after the effective date that is after the 2015 Amendment Act came into force. Therefore, to begin, it would be apt for me to reproduce the relevant provision of the 2015 Amendment Act :-
"26. Act not to apply to pending arbitral proceedings - Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to OMP (COMM) 3/22 Dated. 16.08.2023 Page 16 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
arbitral proceedings commenced on or after the date of commencement of this Act."
16. From the bare reading of Section 26 of the 2015 Amendment Act, it can be deduced that the said amendment will not apply to those arbitral proceedings which have commenced, in accordance with Section 21 of the Act, before the effective date. However, the provision permits the parties to agree on the applicability of the said amendment on pending arbitral proceedings. In the present case, the arbitral proceedings commenced way back in 2012, much prior to coming into force of the 2015 Amendment Act.
17. At this juncture, it would be prudent on my part to refer to the judicial pronouncements on the interpretation of Section 26 of the 2015 Amendment Act. While dealing with a similar situation in the case of Union of India -v- Parmar Construction reported in (2019) 15 SCC 682, the apex court outlined that by virtue of Section 26 of the 2015 Amendment Act, the 2015 Amendment Act will only apply to those arbitral proceedings which had commenced in accordance with Section 21 of the Act on or after the effective date, provided that the parties have not agreed otherwise. I have extracted the relevant paragraphs below -
"26. The conjoint reading of Section 21 read with Section 26 leaves no manner of doubt that the provisions of the 2015 Amendment Act shall not apply to such of the arbitral proceedings which have commenced in terms of the provisions of Section 21 of the principal Act unless the parties otherwise agree. The effect of Section 21 read with Section 26 of the 2015 Amendment Act has been examined by this Court in Aravali Power Co. (P) Ltd. v. Era Infra Engg. Ltd. and taking note of Section 26 of the 2015 Amendment Act laid down the broad principles as under :
*
27. We are also of the view that the 2015 Amendment Act which came into force i.e. on 23-10-2015, shall not apply to the arbitral proceedings which have commenced in accordance with the provisions of Section 21 of the principal Act, 1996 before the coming into force of the 2015 Amendment Act, unless the parties otherwise agree."
Emphasis Added
18. In another such instance in the case of Union of India -v- Pradeep Vinod Construction Co. reported in (2020) 2 SCC 464, the apex court held that for arbitral proceedings commenced before the effective date, the provisions of the 2015 Amendment OMP (COMM) 3/22 Dated. 16.08.2023 Page 17 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
Act will not apply. I have delineated the relevant paragraphs below:-
"11. The respondent(s) are registered contractors with the Railways and they are claiming certain payments on account of the work entrusted to them. The request of the respondent(s) for appointment of arbitrator invoking Clause 64 of the contract was declined by the Railways stating that their claims have been settled and the respondent(s) have issued "no claim" certificate and executed supplementary agreement recording "accord and satisfaction" and hence, the matter is not referable to arbitration. Admittedly, the request for referring the dispute was made much prior to the Amendment Act, 2015 which came into force w.e.f. 23- 10-2015. Since the request for appointment of arbitrator was made much prior to the Amendment Act, 2015 (w.e.f. 23-10-2015), the provision of the Amendment Act, 2015 shall not apply to the arbitral proceedings in terms of Section 21 of the Act unless the parties otherwise agree. As rightly pointed out by the learned counsel for the appellant, the request by the respondent(s) contractors is to be examined in accordance with the principal Act, 1996 without taking resort to the Amendment Act, 2015."
Emphasis Added
19. Expanding the view taken earlier, the Supreme Court in the case of BCCI -v- Kochi (supra) held that while the 2015 Amendment Act will not apply to arbitral proceedings initiated, in accordance with Section 21 of the Act, before the effective date, it will apply to court proceedings, which are in relation to arbitral proceedings, initiated after the effective date irrespective of when the arbitral proceedings were initiated. I have reproduced the relevant portions of the judgment below for ease of reference -
"36. All the learned counsel have agreed, and this Court has found, on a reading of Section 26, that the provision is indeed in two parts. The first part refers to the Amendment Act not applying to certain proceedings, whereas the second part affirmatively applies the Amendment Act to certain proceedings. The question is what exactly is contained in both parts. The two parts are separated by the word "but", which also shows that the two parts are separate and distinct. However, Shri Viswanathan has argued that the expression "but" means only that there is an emphatic repetition of the first part of Section 26 in the second part of the said section. For this, he relied upon Concise Oxford Dictionary OMP (COMM) 3/22 Dated. 16.08.2023 Page 18 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
on Current English, which states: "introducing emphatic repetition; definitely (wanted to see nobody, but nobody)."
Quite obviously, the context of the word "but" in Section 26 cannot bear the aforesaid meaning, but serves only to separate the two distinct parts of Section 26.
37. What will be noticed, so far as the first part is concerned, which states--
"26. Act not to apply to pending arbitral proceedings.-- Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree...." is that: (1) "the arbitral proceedings"
and their commencement is mentioned in the context of Section 21 of the principal Act; (2) the expression used is "to" and not "in relation to"; and (3) parties may otherwise agree. So far as the second part of Section 26 is concerned, namely, the part which reads, "... but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act" makes it clear that the expression "in relation to" is used; and the expression "the" arbitral proceedings and "in accordance with the provisions of Section 21 of the principal Act"
is conspicuous by its absence.
38. That the expression "the arbitral proceedings" refers to proceedings before an Arbitral Tribunal is clear from the heading of Chapter V of the 1996 Act, which reads as follows: "Conduct of arbitral proceedings" The entire chapter consists of Sections 18 to 27 dealing with the conduct of arbitral proceedings before an Arbitral Tribunal. What is also important to notice is that these proceedings alone are referred to, the expression "to" as contrasted with the expression "in relation to" making this clear. Also, the reference to Section 21 of the 1996 Act, which appears in Chapter V, and which speaks of the arbitral proceedings commencing on the date on which a request for a dispute to be referred to arbitration is received by the respondent, would also make it clear that it is these proceedings, and no others, that form the subject-matter of the first part of Section 26. Also, since the conduct of arbitral proceedings is largely procedural in nature, parties may "otherwise agree" and apply the Amendment Act to arbitral proceedings that have commenced before the Amendment Act came into force. In stark contrast to the first part of Section 26 is the second part, where the Amendment Act is made applicable "in relation to" arbitral proceedings which commenced OMP (COMM) 3/22 Dated. 16.08.2023 Page 19 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
on or after the date of commencement of the Amendment Act. What is conspicuous by its absence in the second part is any reference to Section 21 of the 1996 Act. Whereas the first part refers only to arbitral proceedings before an Arbitral Tribunal, the second part refers to court proceedings "in relation to" arbitral proceedings, and it is the commencement of these court proceedings that is referred to in the second part of Section 26, as the words "in relation to the arbitral proceedings" in the second part are not controlled by the application of Section 21 of the 1996 Act.
39. Section 26, therefore, bifurcates proceedings, as has been stated above, with a great degree of clarity, into two sets of proceedings -- arbitral proceedings themselves, and court proceedings in relation thereto. The reason why the first part of Section 26 is couched in negative form is only to state that the Amendment Act will apply even to arbitral proceedings commenced before the amendment if parties otherwise agree. If the first part of Section 26 were couched in positive language (like the second part), it would have been necessary to add a proviso stating that the Amendment Act would apply even to arbitral proceedings commenced before the amendment if the parties agree. In either case, the intention of the legislature remains the same, the negative form conveying exactly what could have been stated positively, with the necessary proviso. Obviously, "arbitral proceedings" having been subsumed in the first part cannot re- appear in the second part, and the expression "in relation to arbitral proceedings" would, therefore, apply only to court proceedings which relate to the arbitral proceedings. The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to court proceedings which have commenced on or after the Amendment Act came into force."
Emphasis Added
20. Whilst all the aforesaid decisions were delivered by the apex court considering the existence of Section 26 of the 2015 Amendment Act, there was a legislative change in circumstances when the Parliament enacted the 2019 Amendment Act wherein Section 26 of the 2015 Amendment Act was deleted and deemed to have been omitted with effect from October 23, 2015 1 and Section 87 was introduced and deemed to have been inserted in the Act with effect from October 23, 2015. Section 87 of the Act reads as follows -
OMP (COMM) 3/22 Dated. 16.08.2023 Page 20 of 31Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
"87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall--
(a) not apply to--
(i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (23rd October, 2015);
(ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015;
(b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings."
21.Considering it against the very essence of the ratio laid down by the apex court in BCCI -v- Kochi (supra), the constitutional gavel in the case of Hindustan Construction (supra) struck down deletion of Section 26 of the 2015 Amendment Act together with the insertion of Section 87 into the Act by the 2019 Amendment Act. In plain words, Section 26 of the 2015 Amendment Act and the judicial interpretation thereto stood restored. The relevant paragraphs have been extracted below:-
"59.This now sets the stage for the examination of the constitutional validity of the introduction of Section 87 into the Arbitration Act, 1996, and deletion of Section 26 of the 2015 Amendment Act by the 2019 Amendment Act against Articles 14, 19(1)(g), 21 and Article 300-A of the Constitution of India. The Srikrishna Committee Report recommended the introduction of Section 87 owing to the fact that there were conflicting High Court judgments on the reach of the 2015 Amendment Act at the time when the Committee deliberated on this subject. This was stated as follows in the Srikrishna Committee Report:
"However, Section 26 has remained silent on the applicability of the 2015 Amendment Act to court proceedings, both pending and newly initiated in case of arbitrations commenced prior to 23-10- 2015. Different High Courts in India have taken divergent views on the applicability of the 2015 Amendment Act to such court proceedings. Broadly, there are three sets of views as summarised below:OMP (COMM) 3/22 Dated. 16.08.2023 Page 21 of 31
Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
(a) The 2015 Amendment Act is not applicable to court proceedings (fresh and pending) where the arbitral proceedings to which they relate commenced before 23-10- 2015.
(b) The first part of Section 26 is narrower than the second and only excludes arbitral proceedings commenced prior to 23-10-
2015 from the application of the 2015 Amendment Act. The 2015 Amendment Act would, however, apply to fresh or pending court proceedings in relation to arbitral proceedings commenced prior to 23-10-2015.
(c) The wording "arbitral proceedings" in Section 26 cannot be construed to include related court proceedings. Accordingly, the 2015 Amendment Act applied to all arbitrations commenced on or after 23-10-2015. As far as court proceedings are concerned, the 2015 Amendment Act would apply to all court proceedings from 23-10-2015, including fresh or pending court proceedings in relation to arbitration commenced before, on or after 23-10-2015. Thus, it is evident that there is considerable confusion regarding the applicability of the 2015 Amendment Act to related court proceedings in arbitration commenced before 23-10-2015. The Committee is of the view that a suitable legislative amendment is required to address this issue. The committee feels that permitting the 2015 Amendment Act to apply to pending court proceedings related to arbitrations commenced prior to 23-10-2015 would result in uncertainty and prejudice to parties, as they may have to be heard again. It may also not be advisable to make the 2015 Amendment Act applicable to fresh court proceedings in relation to such arbitrations, as it may result in an inconsistent position. Therefore, it is felt that it may be desirable to limit the applicability of the 2015 Amendment Act to arbitrations commenced on or after 23-10-2015 and related court proceedings."
(emphasis supplied)
60. The Srikrishna Committee Report is dated 30-7-2017, which is long before this Court's judgment in Kochi Cricket case [BCCI v. Kochi Cricket (P) Ltd., (2018) 6 SCC 287 : (2018) 3 SCC (Civ) 534] . Whatever uncertainty there may have been because of the interpretation by different High Courts has disappeared as a result of Kochi Cricket [BCCI v. Kochi Cricket (P) Ltd., (2018) 6 SCC 287 : (2018) 3 SCC (Civ) 534] judgment, the law on Section 26 of the 2015 Amendment Act being laid down with great clarity. To thereafter delete this sChapter V, and which speaks of the arbitral proceedings commencing on the date on which a request for a dispute to be referred to arbitration is received by the respondent, OMP (COMM) 3/22 Dated. 16.08.2023 Page 22 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
would also make it clear that it is these proceedings, and no others, that form the subject-matter of the first part of Section 26. Also, since the conduct of arbitral proceedings is largely procedural in nature, parties may "otherwise agree" and apply the Amendment Act to arbitral proceedings that have commenced before the Amendment Act came into force.alutary provision and introduce Section 87 in its place, would be wholly without justification and contrary to the object sought to be achieved by the 2015 Amendment Act, which was enacted pursuant to a detailed Law Commission Report which found various infirmities in the working of the original 1996 statute. Also, it is not understood as to how "uncertainty and prejudice would be caused, as they may have to be heard again", resulting in an "inconsistent position". The amended law would be applied to pending court proceedings, which would then have to be disposed of in accordance therewith, resulting in the benefits of the 2015 Amendment Act now being applied. To refer to the Srikrishna Committee Report (without at all referring to this Court's judgment) even after the judgment has pointed out the pitfalls of following such provision, would render Section 87 and the deletion of Section 26 of the 2015 Amendment Act manifestly arbitrary, having been enacted unreasonably, without adequate determining principle, and contrary to the public interest sought to be subserved by the Arbitration Act, 1996 and the 2015 Amendment Act. This is for the reason that a key finding of Kochi Cricket [BCCI v. Kochi Cricket (P) Ltd., (2018) 6 SCC 287 : (2018) 3 SCC (Civ) 534] judgment is that the introduction of Section 87 would result in a delay of disposal of arbitration proceedings, and an increase in the interference of courts in arbitration matters, which defeats the very object of the Arbitration Act, 1996, which was strengthened by the 2015 Amendment Act.
61. Further, this Court has repeatedly held that an application under Section 34 of the Arbitration Act, 1996 is a summary proceeding not in the nature of a regular suit--see Canara Nidhi Ltd. v. M. Shashikala [Canara Nidhi Ltd. v. M. Shashikala, (2019) 9 SCC 462 : (2019) 4 SCC (Civ) 545] , SCC para 20. As a result, a court reviewing an arbitral award under Section 34 does not sit in appeal over the award, and if the view taken by the arbitrator is possible, no interference is called for--see Associated Construction v. Pawanhans Helicopters Ltd. [Associated Construction v. Pawanhans Helicopters Ltd., (2008) 16 SCC 128] , SCC para 17.
OMP (COMM) 3/22 Dated. 16.08.2023 Page 23 of 31Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
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63. Also, it is important to notice that the Srikrishna Committee Report did not refer to the provisions of the Insolvency Code. After the advent of the Insolvency Code on 1-12-2016, the consequence of applying Section 87 is that due to the automatic stay doctrine laid down by judgments of this Court--which have only been reversed today by the present judgment--the award-holder may become insolvent by defaulting on its payment to its suppliers, when such payments would be forthcoming from arbitral awards in cases where there is no stay, or even in cases where conditional stays are granted. Also, an arbitral award-holder is deprived of the fruits of its award--which is usually obtained after several years of litigating--as a result of the automatic stay, whereas it would be faced with immediate payment to its operational creditors, which payments may not be forthcoming due to monies not being released on account of automatic stays of arbitral awards, exposing such award-holders to the rigors of the Insolvency Code. For all these reasons, the deletion of Section 26 of the 2015 Amendment Act, together with the insertion of Section 87 into the Arbitration Act, 1996 by the 2019 Amendment Act, is struck down as being manifestly arbitrary under Article 14 of the Constitution of India.
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66. The result is that Kochi Cricket judgment will therefore continue to apply so as to make applicable the salutary amendments made by the 2015 Amendment Act to all court proceedings initiated after 23-10-2015"
Emphasis Added
22. Therefore, it becomes manifestly clear that Section 26 of the 2015 Amendment Act is the position of law on this subject whereas Section 87 in the principal Act is no longer in existence. While interpreting a particular statutory provision, the Court has to accord significance to every word, space, and character in that provision. Post BCCI -v- Kochi (supra) interpretation of Section 26 of the 2015 Amendment Act, it is crystal clear that the applicability of 2015 Amendment Act is prospective in nature, and will apply to those arbitral proceedings that have commenced, in accordance with Section 21 of the Act, on or after the effective date, and also to court proceedings which have commenced on or after the effective date.
23. Reliance can also be placed upon the decision in Ratnam Sudesh Iyer -v- Jackie Kakubhai Shroff reported in [2021] 11 OMP (COMM) 3/22 Dated. 16.08.2023 Page 24 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
S.C.R. 97 wherein after analyzing the earlier pronouncements in BCCI -v- Kochi (supra) and Hindustan Construction (supra), the apex court concluded that on a conjoint reading of Section 21 of the principal Act and Section 26 of the 2015 Amendment Act makes it apparent that unless the parties otherwise agree, provisions of 2015 Amendment Act will not apply to arbitral proceedings which had commenced in accordance with Section 21 of the Act before the effective date. The relevant portions from the aforesaid said judgment have been extracted below -
"21. In BCCI v. Kochi Cricket (P) Ltd. [(2018) 6 SCC 287] a reference was made to Section 26 of the 2015 Amendment Act which had bifurcated proceedings into arbitral proceedings and court proceedings. The said provision reads as under:
"26. Act not to apply to pending arbitral proceedings.-- Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of Section 21 of the principal Act, before the commencement of this Act, unless the parties, otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act."
22. It was clearly elucidated in para 39 of the judgment that the reason behind the first part of Section 26 of the 2015 Amendment Act being couched in the negative was only to state that the Amendment Act will apply even to arbitral proceedings commenced before the amendment if the parties otherwise agree. This is not so in the second part. The judgment derived that the intention of the legislature was to mean that the 2015 Amendment Act is prospective in nature and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the said Act, on or after the 2015 Amendment Act, and to court proceedings which had commenced on or after the 2015 Amendment Act came into force.
23. The applicability of Section 34(2-A) was further elucidated in Ssangyong Engg. & Construction Co. Ltd. v. NHAI [(2019) 15 SCC 131], where the SC categorically opined that Section 34 as amended will apply only to Section 34 applications that have been made to the Court on or after 23-10-2015, irrespective of the fact that the arbitration proceedings may have commenced prior to that date.
24. In the subsequent judgment of Hindustan Construction Co. Ltd. v. Union of [(2020) 17 SCC 324] , it was observed in para 60 that OMP (COMM) 3/22 Dated. 16.08.2023 Page 25 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
the result of the BCCI judgment was that salutary amendments made by the 2015 Amendment Act would apply to all court proceedings initiated after 23-10-2015."
Emphasis Added
24. In the instant case, the petitioner/ award debtor has presented the arbitral award before this Court to be sacrificed at the altar of unilateral appointments. The judicial expansion of Section 12(5) r/w Schedule VII of the Act to make the arbitrator de jure ineligible creates a substantive right on the parties which had not existed when the arbitrator in the instant case was appointed by the parties and therefore the arbitral proceedings had begun under the unamended Act. It is a settled principle of law that a statute which creates substantive rights and liabilities on the parties shall be construed to be prospective in operation. Hence, on one hand, due regard has to be accorded to the principles of impartiality and un- biasedness which are safeguarded by insertion of Section 12(5) r/w Schedule VII of the Act, whilst on the other hand, the Court must ensure that substantive rights and liabilities should not be imposed on a particular party retrospectively. Therefore, even though 2015 Amendment Act is applicable on court proceedings in relation to arbitral proceedings which had commenced before the effective date, the applicability cannot be said to include the substantive rights and liabilities emerging out of the 2015 Amendment Act. While I have no doubts in holding that the act of unilateral appointment is outlawed as of today and cannot be sustained at any stage whatsoever, it was not so when the unilateral appointment was made in the instant case. This Court finds itself in consonance with the arguments put forth by the counsel for the award holder that there was no bar placed on unilateral appointment of an arbitrator at the time when the appointment was made in the instant case.
25. Moving on, the perplexity which presented itself before me during pleadings was the case of Ellora Paper Mills Ltd. -v- State of MP reported in (2022) 3 SCC 1, which is the only such reported instance where the Supreme Court applied principles of Section 12(5) r/w Schedule VII of the Act to a situation where Section 21 notice was issued prior to the effective date, and the arbitral tribunal was constituted way back in the year 2001. However, before jumping the gun and making the principle of retrospective applicability universal, it needs to be kept in mind that the facts therein were peculiar and an exception. The proceedings, in that case, had not technically commenced prior OMP (COMM) 3/22 Dated. 16.08.2023 Page 26 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
to the effective date. And therefore, to my understanding, the case of Ellora Paper Mills (supra) is an extraordinary one and cannot be construed as a part of the prevailing jurisprudence on the subject.
Hence, issue no. 2 is also answered in the negative....".
16. In view of mandate of this judgment, the petitioner can not be given any benefit of the amendment which took place after initiation of arbitration proceedings. The judgment of 'Ellora Paper Mills Limited (Supra)' as relied by the petitioner is also not applicable in present facts and circumstances, as also noted in the above judgment.
17. Scope of interference with Arbitrator's award is very limited. The Court would not be justified in reappraising the material on record and substituting its own view in place of the view taken by Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail as held by Hon'ble Supreme Court in the case of Navodaya Mass Entertainments Ltd. v. J.M. Combines reported in (2015) 5 SCC 698.
18. Hon'ble Supreme Court in the case of 'Sutlej Construction Ltd. v. State (UT of Chandigarh) reported in (2018) 1 SCC 718' has held that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the court and would not include what the court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what OMP (COMM) 3/22 Dated. 16.08.2023 Page 27 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd. it considers to be "justice. Paragraph nos. 10 to 13 of the said judgment are extracted below:-
"10. We are not in agreement with the approach adopted by the learned Single Judge. The dispute in question had resulted in a reasoned award. It is not as if the arbitrator has not appreciated the evidence. The arbitrator has taken a plausible view and, an in our view, as per us the correct view, that the very nature of job to be performed would imply that there has to be an area for unloading and that too in the vicinity of 5 km as that is all that the appellant wasto be paid for. The route was also determined. In such a situation to say that the respondent owed no obligation to make available the site cannot be accepted by any stretch of imagination. The unpreparedness of the respondent is also apparent from the fact that even post-termination it took couple of years for the work to be carried out, which was meant to be completed within 45 days. The ability of the appellant to comply with its obligations was interdependent on the respondent meeting its obligations in time to facilitate appropriate areas for unloading of the earth and for its compacting. At least it is certainly a plausible view.
11. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice".
12. The approach adopted by the learned Additional District Judge, Chandigarh was, thus, correct in not getting into the act of reappreciating the evidence as the first appellate court from a trial court decree. An arbitrator is a chosen Judge by the parties and it is on limited parameters can the award be interfered with. 13. The learned Single Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court. In fact, even in second appeals, only questions of law are to be determined while the first appellate court is the final court on facts. In the present case, the learned Single Judge has, thus, acted in the first appeal against objections dismissed as if it OMP (COMM) 3/22 Dated. 16.08.2023 Page 28 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
was the first appellate court against a decree passed by the trial court."
19. The scope of interference with an arbitral award under Section 34 of the Act has been considered and discussed by Hon'ble Supreme Court in a judgment rendered in the case of 'MMTC Ltd. v. Vedanta Ltd. reported in (2019) 4 SCC 163'. Paragraph nos. 11 to 14 of the said judgment are extracted below:
"11. As far as Section 34 is concerned, the position is well- settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)
(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified.
Pursuant to the insertion of Explanation 1 to Section 34(2), the OMP (COMM) 3/22 Dated. 16.08.2023 Page 29 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.
scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
20. In the case of 'Maharashtra State Electricity Distribution Company Ltd. v. Datar C.C.L. Ltd. reported in (2018) 3 SCC 133' it has been held by Hon'ble Supreme Court that "the proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of evidence on record are not to be scrutinised as if the Court was sitting in appeal now stands settled by catena of judgments pronounced by this Court without any exception thereto."
21. Ld. Arbitrator has passed the award upon consideration of material placed before him. There is nothing on record that the relevant material is OMP (COMM) 3/22 Dated. 16.08.2023 Page 30 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd. not placed before the Ld. Arbitrator. The petitioner despite number of opportunities not joined the proceedings and remained the ex-parte. There is nothing perverse or patently illegal in the findings of the Ld. Arbitrator.
22. The Ld. Sole Arbitrator has drawn inferences and conclusions after the factual appreciation in the light of the legal principles. The views of the Ld. Sole Arbitrator can not be found fault with only for the reason that some other views can emerge by appreciating the same set of facts and evidence, until and unless it is shown that such a view is totally obnoxious and unsupported by the sound legal principles.
23. This Court cannot substitute its own views or the views of the parties with the view taken by the Ld. Arbitral Tribunal, if the view taken by the Ld. Arbitrator is not in conflict with the settled legal position. There is nothing to suggest that the findings and conclusions rendered by the Ld. Arbitrator are per-se perverse, illegal or non- sustainable.
24. Accordingly, the present petition under Section 34 of the Arbitration and Conciliation Act as pressed into service by the petitioner is therefore not sustainable within the scope and ambit of the provision, therefore, liable to be dismissed and accordingly dismissed and disposed of.
25. File be consigned to record room after necessary compliance. Announced in the open court on 16th August, 2023 (Ajay Kumar Jain) District Judge (Commercial Courts- 03), SE/Saket Courts/Delhi OMP (COMM) 3/22 Dated. 16.08.2023 Page 31 of 31 Shri Kamadgiri Construction Vs. Telecommunication Consultants India Ltd.