Delhi District Court
Vinod Kumar vs Union Of India on 30 September, 2021
In the Court of Shri Sanjiv Jain, District Judge,
(Commercial Court-03), Patiala House Courts New Delhi
OMP (Comm) No. 84/2020
Vinod Kumar, Proprietor of M/s Vinod Kumar
through his Legal Heir
Mrs. Vijay, wife
B-58, Lohianagar,
Ghaziabad, Uttar Pradesh ....... Petitioner
versus
Union of India
Dy. Chief Engineer/Construction
Northern Railway, Shivaji Bridge,
New Delhi. ....... Respondents
Date of institution : 13.10.2020 Date of reserving judgment : 24.09.2021 Date of decision : 30.09.2021 JUDGME NT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter called the 'Act') challenges the award dated 23.06.2020 passed by the Arbitral Tribunal comprising of Sh. B. K. Gupta, Dr. Satya Brata and Sh. Surinder Kaul, whereby, the Tribunal awarded Rs. 3,00,000/- towards release of initial security deposit, Rs. 5,85,000/- towards release of additional security amount deducted from OMP Comm No. 84/2020 Page No.1 of 43 the account bills against the work done and Rs. NIL amount towards the liquidated damages claimed by the respondent. It was held that the amounts shall be released to the petitioner within 90 days of publishing of award, failing which, the amounts shall carry a simple interest of 8% till date of payment. It was also held that though, the petitioner had made claims towards loss of profit on the unfinished work and litigation cost in his original statement of claims but no such claims were referred by the General Manager in his letter for the nomination of arbitral panel, so the arbitral panel did not consider such claims not referred by the General Manager.
Brief facts:
2. The facts leading to this petition are that on 16.02.2006, petitioner was awarded a contract of work "supplying and stacking of 65mm gauge machine hard stone ballast as per Railway Standard Specification in Zone-I, Chainage 800m-
2100m of Hapur - Kankather doubling (agreement no. W- 118/C/CSB dated 16.02.2006) ("Project")" for a value of Rs. 3,54,42,000/-. The work was to be completed upto 16.09.2006. The petitioner deposited the initial security deposit in the form of FDR bearing No. 810120 dated 13.09.2005 for Rs. 50,000/- of Syndicate Bank and TDR No. 740031 of Kuber Yojna from UCO Bank, Ghaziabad for Rs. 2,50,000/-.
3. The petitioner requested the respondent in his letter dated OMP Comm No. 84/2020 Page No.2 of 43 17.12.2005 to indicate the telegraph pole wise (TP wise) quantity of ballast required, so that the same could be supplied at the correct locations to avoid hindrance at a later stage. This letter was followed by another letter dated 02.01.2006 reminding the respondent of his earlier request informing that drawing be given to him indicating the clear availability of railway land for supply of ballast for the work in hand and to give list of TP wise requirement of ballast. The respondent vide letter dated 04.01.2006 asked the petitioner to start the work at the approach of Garhmukteshwar Bridge and Simbhaoli Station, however, it remained silent qua issuing of drawing indicating the availability of clear railway land and TP wise requirement of ballast. The petitioner again wrote to the respondent on 16.01.2006 that he has not yet received the approval of the respondent for the quality of ballast against the sample supplied by him. He informed that as per the agreement conditions, he was required to supply 100 cu.m of ballast as sample for quality check and approval of the respondent. Towards the same, he had supplied 600 cu.m of ballast at LC No. 50-c/E-2 at km 71/4-5; On 07.01.2006 SEN/C and DyCE/C had come for inspection, analyzed of ballast sample and asked him to proceed but he was not conveyed the results of the lab tests on abrasion value, impact value, water absorption etc. He also requested the respondent to indicate in writing the exact locations where the ballast could be supplied on freely available land commensurate with the requirement of the work. He also OMP Comm No. 84/2020 Page No.3 of 43 methodically explained the need for indicating on a diagram, the available and feasible sites and stack quantity requirement from both feasibility of approaches for supply and availability of land unencumbered position with railways as well from requirement of quantities for work in each stretch. The respondent vide letter dated 21.01.2006 gave two TP locations i.e. TP 72/13 to 73/7 (chainage 11450 to 12150 and TP 74/0 to 74/10 (in front of Gadhmukeshwar Station). It vide letter dated 15.02.2006 sent him the sketches for stacking the ballast of quantity 22500 cu.m. Out of these two locations, 7300 cu.m were the clear locations and remaining locations were under cultivation. The petitioner could supply only 7583.52 cu.m of ballast to the respondent at various locations. The respondent made the payments for the quantities supplied by the petitioner vide bills dated 16.02.2006, 28.02.2006 & 18.03.2006 for the quantity 7583.495 cu.m. The last measurement was recorded on 20.04.2006. The respondent did not communicate the locations of the plot for stacking the balance quantity of ballast. It, however, issued notices dated 03.02.2006 & 03.05.2006 exhorting the petitioner to increase the supply without clarifying the issues raised by the petitioner in his request. The petitioner again vide his letter dated 06.05.2006 stressed upon his earlier request and asked the respondent to give him encroachment free sites and indicate the break up of the total quantity of ballast to be supplied TP wise but even after the several reminders, the respondent did not give cogent reply OMP Comm No. 84/2020 Page No.4 of 43 indicating the locations of plot for stacking the ballast. It rather issued a 7 days notice to the petitioner under GCC forming part of the contract agreement. The petitioner replied to the notice by his letter dated 10.07.2006 expressing regret over his harassment by the respondent by continuously ignoring his request for providing the encroached free land and not providing timely details sought by him. He informed that now monsoon would set in soon and it would not be physically possible for him to supply ballast. He alleged that much loss has been caused to him. He requested the respondent to close his contract in view of totality of circumstances stating that he would submit his claims as per Section 73 of Indian Contract Act. He however, offered to complete the work by December 2006, in case, his losses are offset by enhancing his rates from Rs. 716/- per cu.m to Rs. 900/- per cu.m. On this, the respondent rescind the contract in terms of clause 62 of GCC vide letter dated 12.07.2016 stating that the work would be carried out at the risk and cost of the petitioner. The respondent prepared the agreement for the balance work on 18.06.2007.
4. The petitioner then sought the arbitration under the contract agreement vide his letter dated 17.07.2006. The General Manager, Northern Railway vide his letter dated 24.08.2007 appointed the arbitral panel. The respondent also on 24.07.2006 invited the open tenders for the balance work of the terminated contract at an advertised cost of Rs. 300.81 lacs. The OMP Comm No. 84/2020 Page No.5 of 43 tender was opened on 29.08.2006 and accepted on 28.12.2006 at a cost of Rs. 4,85,81,428.39 with date of completion as 27.09.2007. The contract for the balance work was however completed on 25.08.2008, in which, three extensions were given.
5. The petitioner submitted his statement of claims before the arbitral panel. During the proceedings, the petitioner died and his wife Mrs. Vijay presented herself before the panel. The respondent filed its reply as well as the counter claims claiming the liquidated damages of Rs. 1,85,69,311/-. The petitioner filed the reply to the counter claims.
6. During the proceedings, the parties presented their documents and letters, which were never challenged by the opposite party. They also advanced the arguments. Thereafter, the Arbitral Tribunal passed the award holding that the petitioner had been bringing to the notice of the respondent right from the beginning of the contract to provide TP wise requirement of the ballast, indicate availability of encroachment free railway line and the tests results with approval but the respondent did not provide any of the above information. Belatedly, it provided the locations for supplying 22500 cu.m ballast albeit with a caveat that the area for 15,000 cu.m was under cultivation. The petitioner right from the beginning had pointed out that the railway line by the side of tracks in the zone OMP Comm No. 84/2020 Page No.6 of 43 of the contract at most of the places is under cultivation by the farmers illegally and he cannot get it vacated. The crops would not be harvested till mid April. This fact was acknowledged by SSE of the respondent in his letter dated 15.02.2020 but the respondent did not address this issue at any point of time. It referred the contract condition 9.3 of Special Conditions relating to Site data and specifications and held that although, the petitioner kept seeking encroachment free land and directions for TP wise requirement of ballast but the respondent did not come forth to give these directions. It also referred the dates of completion of finished embankment in various stretches of Zone and supplies showing the completion date from 17.05.2007 to 27.01.2008. The Tribunal noted that the contract was awarded to the petitioner in November 2015 and was terminated in July 2006. It is seen from the table at para 4 of the award that there was no possibility for the petitioner to supply the ballast on the finished formation. The respondent could have directed the petitioner to supply ballast at the plain ground on railway boundary but no such communication was produced by the respondent before them. It made no effort to call a meeting with the petitioner nor any joint foot to foot inspection with the petitioner was done by the respondent to make the plan for stacking the ballast. This led to reasonable inference that the respondent was trying to pass time and had issued the routine notices without giving replies to the petitioner's request. Till the termination of contract, as against OMP Comm No. 84/2020 Page No.7 of 43 the tendered quantity of 49500 cu.m, the petitioner could supply only 7583.496 cu.m. The Tribunal observed that risk and cost tender was opened on 29.08.2006 and the tender was awarded on 28.12.2006 with original date of completion as 27.09.2007 (9 months) but the work was actually completed on 25.08.2008 (20 months). The principle of 'time is the essence of the contract' was not followed and different treatment was given to the contract finalized at the risk and cost in comparison to the treatment given to the original contract, which was not justified. The Tribunal also rejected the counter claim of the respondent for liquidated damages and held that it was the respondent, which failed to respond to the petitioner's persistent demand for conveying to him the TP wise requirement of ballast, approval of tests results and encroachment free land and thus failed to perform its obligation under the contract and terminated the contract without proper consideration of facts against the letter & spirit of the contract.
7. The petitioner challenged the award on the following grounds:
A. That the contract was terminated illegally and the petitioner was made victim of the same, who fought for the justice for more than 13 years just to get what he was rightfully entitled, which fact was also observed by the Tribunal in the award. It however failed to consider all the claims of the petitioner giving the reasons that no such claims with regard to loss of profit on unfinished work and litigation cost are referred by the General Manager in his letter for nomination of arbitral panel. It is stated that all the claims were clearly mentioned by OMP Comm No. 84/2020 Page No.8 of 43 the petitioner in the letter for demand for arbitration as well as in the claim petition, which should have been the basis of arbitration. Merely because, General Manager having not mentioned it in the nomination, there was no bar on the Tribunal to adjudicate the other claims raised by the petitioner. Further, General Manager cannot decide, which claims should be adjudicated by the Tribunal, otherwise, the whole purpose of arbitration would be defeated.
B. That since, the Tribunal has clearly denoted in its findings that the fault lies on the part of the respondent, so, the respondent should have been liable to pay interest @18% per annum on the claimed amount from the date of termination of contract, but the same was not considered by the Tribunal. It is stated that since the respondent retained the amount arbitrarily and illegally behind the specified period mentioned in the contract, it is liable to pay interest on the amount so retained. The interpretation of clause 16 of GCC made by the respondent is against the principles of natural justice. If the contract is terminated illegally and arbitrarily, it is liable to pay interest on the retained amount. Reference is made of the case North Delhi Municipal Corporation Vs. Prem Chand Gupta, RFA No. 623/2017, where it was held that Section 23 of the Indian contract Act shows that where a contractual provision is against a specific statutory provision or if a contractual clause is allowed to be implemented, the same will result in frustration of a right conferred by law or if the contractual clause is immoral or opposed to public policy, then in such cases, the contractual clause is invalid and void. It was also held that clause 16(2) of GCC is invalid and void as the same is hit by Section 23 of the Act. It was held that non payment of interest can under no circumstance be justified in today's world. Illegal retention of monies for a long period of time will clearly amount to immorality and violation of the public policy. Reference is also made of the case India Financial Assn., Seventh Day Adventists Vs. M. A. Unneerikutty & Anr, (2006) 6 SCC 351 to contend that the term public policy has an entirely different and more extensive meaning than the policy of law.OMP Comm No. 84/2020 Page No.9 of 43
8. The petitioner has also moved an application under Section 34 (3) of the Act for condonation of delay in filing the petition. It is stated that due to Covid-19 pandemic situation, counsel for the petitioner could not collect some relevant documents from the petitioner, which were necessary for filing this petition, which led to delays of 8 days. It is stated that delay was not intentional but it was occasioned due to the circumstances beyond the control of the petitioner.
9. On getting notice of the petitioner, respondent filed its reply denying the averments made in the petition and stated that the relief claimed by the petitioner is not supported by the terms of the contract and in fact against the clauses of contract and in arbitration, no relief can be granted against the terms of the contract. As per the contract and GCC 1999, interest is not payable on the earnest money, security deposit or any sum due. Note 3 of clause 5.2 of Special Tender Conditions and Instructions to Tenderer also provide that no interest shall be allowed on the security deposit. Clause 64 (5) of GCC 1999 also provides that where the award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which the award is made. It is stated that Section 31 (7) of the Act provides that the Arbitrator has no power to award pre reference / pendente lite interest. This view was reiterated in the case of M. B. Patel & Co. Vs. OMP Comm No. 84/2020 Page No.10 of 43 ONGC 2008 SCC 251. It is stated that clause 64.6 states that the cost of arbitration shall be borne by the respective parties.
10. It is stated that since, the petitioner failed to fulfill his contractual liability and did not complete the work despite several notices, the contract was terminated under the clauses of GCC 1999. In fact, the respondent had claimed the liquidated damages from the petitioner. It is stated that the claim no. 3 & 4 raised by the petitioner come under the category of 'excepted matters', which claims are not arbitral. It is stated that clause 21.5 of Special Tender Conditions & Instructions to Tenderer provide that no claim for idle labour and / or idle machinery etc on any account will be entertained. Similarly, no claim shall be entertained for business loss or any such loss. Clause 62 (2) (a) of GCC 1999 provides that the contractor shall have no claim for compensation for any loss sustained by him by reason of his having purchased or procured any material or entered into any commitments or made any advances on account of or with a view to the execution of the works or the performance of the contract and contractor shall not be entitled to recover or be paid any sum for any work thereto actually performed under the contract unless and until the Engineer shall have certified the performance of such work and the value payable in respect thereof and the contractor shall only be entitled to be paid the value so certified. It is stated that as per this clause, the claim OMP Comm No. 84/2020 Page No.11 of 43 for payment for loss of anticipated business profit is not maintainable as the contract was terminated owing to the petitioner's default and incompetency. Section 63 of GCC also provides that all disputes and differences of any kind whether during the progress of work or after its completion, whether before or after the determination of contract shall be referred by the contractor to the Railway and the Railway shall within 120 days after receipt of contractor's representation make and notify decisions on all matters in writing provided the matter for which, the provision has been made in clause 8 (a), 18.22 (5), 39, 43 (2), 45 (a), 55, 55-A (5), 57, 57A, 61 (1), 61 (2) and 62 (1) (b) of General Conditions of Contract and any clause of the Special Conditions of the contract shall be deemed as 'excepted matters' and decisions of the Railway authority, thereon shall be final and binding on the contractor provided further that 'excepted matter' shall stand specifically excluded from the purview of the arbitration clause and not be referred to arbitration. It is stated that this claim is specifically excluded from the purview of the Arbitrator, so the Arbitral Tribunal has rightly not taken the cognizance of this claim. It is stated that the termination of contract was as per sub clause (vi), (vii) &
(viii) 62 (1) GCC and since clause 62 (1) falls under the category of 'excepted matter', so the claim was rightly not referred by the General Manager to the Tribunal being not the subject matter of arbitration. Clause 61 (3) also provides that OMP Comm No. 84/2020 Page No.12 of 43 the contractor shall have no claim to any payment of compensation or otherwise howsoever on account of any profit or advantage which he might have derived from the execution of the work in full but which he could not derive in consequence of determination of the contract. It is stated that any claim, which is not permissible under the terms & conditions of the agreement / contract as well as GCC 1999 cannot be allowed. It is stated that after the termination of contract, the respondent had followed the procedure as laid down in the contract and GCC. It is stated that to complete the work, a new contract was awarded at the risk and cost of the petitioner to another agency and the respondent was within its right to withhold / forfeit the security deposit amount. It is stated that the Tribunal rejected the respondent's claim for the liquidated damages without giving any concrete reasons, which amounted to loss of public money. It is stated that in the case of New India Civil Erectors Pvt Ltd Vs. ONGC, AIR 1997 SC 980 it was held that as per clause 64 (1) (iii) of GCC 1999, no new claim shall be added during the proceedings by either party. A party may amend or supplement the original claim or defense during the course of proceedings subject to acceptance by the Tribunal. Since, the claim for interest was not referred by the General Manager to the Tribunal, it was not arbitrable. It is stated that Arbitrator being a creature of the agreement is required to operate within the four corners of the agreement and OMP Comm No. 84/2020 Page No.13 of 43 cannot travel beyond it and he cannot award any amount, which is ruled out or prohibited by the terms of the agreement.
11. It is stated that the petitioner has failed to point out any ground as stated in Section 34 of the Act and the petition deserves to be dismissed. Reference is made of the case ONGC Vs. Saw Pipes, (2002) 1 SCC 594, The President, Union of India & Ors Vs. Kalinga Construction Co Pvt Ltd, AIR 1971 SC 1646, Hindustan Tea Co Vs. K. Shashikant & Co, AIR 1987 SC 81, R. K. Khanna & Ors Vs. International Airport Authority of India & Ors, 1995 (1) ALR 148, State of Madhya Pradesh Vs. Babu Lal Pathak, AIR 1974 MP 179, Coimbatore District Podu Thozillar Samgam Vs. Bala Subramania Foundry & Ors, AIR 1987 SC 2045, R. J. Jiwani Vs. IRCON International ltd, Mumbai, 2010 (1) RJ 485 (Bom), NTPC Vs. WIG Brothers Builders & Engineers Ltd, 2009 (4) RAJ 239 (Del), Samantaray Construction Pvt Ltd Vs. State of Orissa, 2007 (3) RAJ 179 (Ori) to contend that the Court does not sit in appeal while deciding the petition under Section 34 of the Act. It cannot reappreciate the evidence considered by the Arbitrator and hold that the conclusion reached by the Arbitrator is wrong, even if, the Court would have taken a different view. An error of law or fact committed by an Arbitrator by itself does not constitute misconduct warranting interference with the award. The Court can interfere, if the award is perverse or the dispute not falling OMP Comm No. 84/2020 Page No.14 of 43 within the terms of submission to the Arbitrator or where there is an error apparent on the face of record.
12. It is stated that since the progress of work after the lapse of more than half of the total completion period was extremely slow i.e. about 16%, a notice under clause 62 of GCC was issued to the petitioner to deploy adequate resources but no action was taken to show the adequate progress of work. It is stated that M/s Vinod Kumar was a sole proprietorship firm owned by Vinod Kumar Gupta, who died on 04.06.2019. After his death and in the absence of succession certificate from the competent authority Smt. Vijay Gupta was not competent to appear before the Tribunal and make submissions. No reply is filed by the respondent qua the application of the petitioner for condonation of delay.
13. I have heard the arguments advanced by Ld. Counsel Sh.
Ramneet Singh Oberoi for the petitioner and Ld. Counsel Sh. Ashok Singh, for the respondent. The petitioner also filed the written synopsis supported with the judgments.
14. Ld. Counsel for the petitioner reiterated what has been stated in the petition. He contended that the Arbitrator failed to consider all the claims giving the reasons that no such claims OMP Comm No. 84/2020 Page No.15 of 43 with regard to loss of profit and litigation cost were referred by the General Manager. Ld. Counsel stated that all the claims were clearly mentioned by the petitioner in the letter for demand for arbitration as well as in the claim petition and merely just because the General Manager did not mention them in the nomination, there was no bar on the Tribunal to consider those claims for adjudication. General Manager was not the person who could decide, which claims were to be referred / adjudicated by the Tribunal. Ld. Counsel contended that the General Manager acted illegally and his approach was bias. Ld. Counsel referred the judgment in the case of BHEL Vs. C. N. Garg & Ors, decided on 29.09.2000 by the High Court of Delhi, where it was held that if the Court interference is permitted during the arbitral proceedings, the very object of speedy redressal of dispute would be frustrated. The party has to wait till the arbitral award comes and then challenge the award on various ground including bias and prejudice on the part of the Arbitrator. Ld. Counsel stated that since the termination of contract was illegal and the respondent retained the amount illegally beyond the specified period mentioned in the contract, respondent is liable to pay interest on the amount, so retained.
15. Ld. Counsel for the respondent reiterated what has been stated in reply to the petition and also referred the case of Sri OMP Comm No. 84/2020 Page No.16 of 43 Chittaranjan Maity VS. UOI, CA No. 15545-15546/2017, to contend that no interest is payable, if the contract prohibits awarding of interest.
16. I have given my thoughtful consideration to the rival contentions and perused the award and the documents.
17. First, I will dwelve upon the issue as to the maintainability of the petition on the point of limitation.
18. Section 34 (3) of the Act provides a limitation period of three months for filing objections against an arbitral award. Proviso to Section 34 (3) of the Act provides an extended period of 30 days for filing the application and the court has the discretion to condone the delay, provided sufficient cause is shown by the party which prevented it from approaching the court in the limitation period of three months. In the case of DDA v/s Durga Construction, (2013) SCC Online Del 4451, it was held that although the courts have the jurisdiction to condone the delay, the approach in exercising such jurisdiction cannot be liberal and the conduct of the applicant will have to be tested on the anvil of whether the applicant acted with due diligence and dispatch. The applicant would have to show that the delay was on account of reasons beyond the control of applicant and could not be avoided despite all possible efforts OMP Comm No. 84/2020 Page No.17 of 43 by the applicant.
19. The proviso to Section 34 (3) of the Act is similar to that of Section 5 of the Limitation Act. It also relates to extension of period of limitation. In the instant case, the petitioner in the application for condonation of delay of 08 days in filing has pleaded that due to Covid-19 pandemic situation, the counsel for the petitioner could not collect some relevant documents form the petitioner, which was necessary for filing the petition, which led to delay.
20. Admittedly, this petition has been filed beyond the period of 90 days but within the extended period of 30 days as provided under Section 34 (3) of the Act. The award was passed on 23.06.2020. This petition has been filed on 20.10.2020. During that period, due to Covid-19 pandemic, there remained lock-down. The Supreme Court in suo moto petition vide Writ Petition No. 03/2020 also extended the extension of time, which is applicable in the arbitral proceedings also.
21. In view of the directions issued by the Supreme Court, I am of the view that this petition is maintainable even without an application for condonation of delay.
22. As regards the contention that M/s Vinod Kumar, OMP Comm No. 84/2020 Page No.18 of 43 contractor was a sole proprietor firm owned by Sh. Vinod Kumar Gupta and after his death and in the absence of succession certificate Smt. Vijay Gupta, who has filed the petition was not competent to appear before the Tribunal and make submissions. Perusal of the proceedings before the Tribunal reveals that no such objection was raised by the department before the Tribunal. Smt. Vijay Gupta is the wife of deceased Vijay Kumar Gupta and being his legal heir was competent to appear in the arbitral proceedings as well as in the Court. She has filed an affidavit with this petition claiming to be the legal representative of Vinod Kumar claiming authority to sign, verify and file the petition being acquainted with the facts of the case. She has also filed the death certificate of Sh. Vinnod Kumar Gupta and the list of legal heirs / certificate issued by the SDM, Ghaziabad. In view of the above, Smt. Vijay was competent to appear before the Arbitral Tribunal and file this petition in the Court.
23. Now coming to the objections filed by the petitioner against the impugned award.
24. Section 34 of the Arbitration and Conciliation Act reads as under:
"34.Application for setting aside arbitral award-
(1)Recourse to a court against an arbitral award may be made only by an application for setting aside such OMP Comm No. 84/2020 Page No.19 of 43 award in accordance with sub-section (2) and sub- section (3).
(2)An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(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 OMP Comm No. 84/2020 Page No.20 of 43 policy of India only if 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-II- 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.
25. Normally, the principles are that the decision of the Arbi-
trator 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 conclusion on the same facts. The court cannot reappraise the evidence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. Where the arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in exercise of the power vested in it.
OMP Comm No. 84/2020 Page No.21 of 4326. In Sudarsan Trading Co. Vs. Government of Kerala & Anr, 1989 AIR 890, it was held that Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the arbitrator in the case. By purporting to construe the contract, the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction.
27. In the case of Hiedelberg Cement India Ltd Vs. The In-
dure Pvt Ltd, OMP (Comm) No. 413/2019 decided on 29.01.2020, it was held that law of judicial review and interfer- ence in proceedings under Section 34 of the Act is no more res integra. Reference of the case Associate Builders v/s Delhi De- velopment Authority, (2015) 3 SCC 49 was made, where the Supreme Court has held as under:-
"19. When it came to construing the expression the public policy of India contained in Section 34(2)(b)(ii) of the Arbitration Act, 1996, this Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 : held: (SCC pp. 727-28 & 744-45, paras 31 & 74)
31. Therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or OMP Comm No. 84/2020 Page No.22 of 43 harmful to the public good or public interest has varied O.M.P. (COMM) 413/2019 Page 30 of 37 from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal.
The result would be award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or
(b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.
74. In the result, it is held that: (A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if 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 O.M.P. (COMM) 413/2019 Page 31 of 37 submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.
OMP Comm No. 84/2020 Page No.23 of 43(2) The court may set aside the award:
(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, (b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act,
(ii) if the arbitral procedure was not in accordance with: (a) the agreement of the parties, or (b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act. However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate. (c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. (4) It could be challenged: (a) as provided under Section 13(5); and (b) Section 16(6) of the Act.......
44. It was held that in the recent judgments, the Supreme Court has once again reiterated the law related to the examination by a Court of an Award under Section 34 of the Act. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held as under:-
35. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), I.e., the fundamental policy of Indian law would be relegated to the Renusagar understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western OMP Comm No. 84/2020 Page No.24 of 43 Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).
36. It is important to notice that the ground for interference insofar as it concerns interest of India has since been deleted, and therefore, no longer obtains.
Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic notions of morality or justice. This again would be in line with O.M.P. (COMM) 413/2019 Page 34 of 37 paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
37. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
38. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental policy of Indian law, namely, the OMP Comm No. 84/2020 Page No.25 of 43 contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
39. Secondly, it is also made clear that re-
appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
40. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would O.M.P. (COMM) 413/2019 Page 35 of 37 certainly amount to a patent illegality on the face of the award.
41. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
42. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence OMP Comm No. 84/2020 Page No.26 of 43 inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.
45. It was also observed that recently, in Hindustan Construction Company Limited & Anr. Vs. Union of India & Ors.,2019 SCC OnLine SC 1520, the Apex Court has held as under:-
55. 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 2019 SCC O.M.P. (COMM) 413/2019 Page 36 of 37 OnLine SC 1244 at paragraph 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 Limited. (2008) 16 SCC 128 at paragraph
17.
56. Also, as has been held in the recent decision Ssangyong Engineering & Construction Co.
Ltd. v. NHAI 2019 SCC OnLine SC 677, after the 2015 Amendment Act, this Court cannot interfere with an arbitral award on merits. "
28. In the backdrop of above, before examining the objec-
tions, it is relevant to reproduce some of the clauses of Special Tender Conditions and General Conditions of Contract 1999 (GCC 1999).OMP Comm No. 84/2020 Page No.27 of 43
29. Special Tender Conditions and Instructions to Tenderer/s:
Clause 5.2 (Note-3): No interest will be payable upon the earnest money and security deposit or amounts payable to the contractor under the contract.
Clause 21.5: No claim for idle labour and / or idle machinery etc or any account will be entertained. Similarly, no claim shall be entertained for business loss or any such loss.
30. General Conditions of Contract 1999:-
Clause 8: ...........The contractor shall not be deemed absolved of his own responsibility and shall keep in touch with the day today position regarding their availability of materials and accordingly adjust progress of works including employment of labour and the Railway shall not in any way be liable for the supply of materials or for the non supply thereof for any reasons whatsoever nor for any loss or damage arising in consequence of such delay or non supply.
Clause 16 (3): No interest will be payable upon the earnest money and security deposit or amounts payable to the contractor under the contract, but the Government securities deposited in terms of Sub-clause (1) of this clause will be payable with interest accrued thereon.
Clause 61 (1): Railway shall be entitled to determine and terminate the contract at any time should, in the Railways OMP Comm No. 84/2020 Page No.28 of 43 opinion the cessation of work become necessary owing to paucity of funds or from any other cause whatever, in which case, the value of approved materials at site and of work done to date by the contractor will be paid for in full at the rate specified in the contract.
Clause 61 (3): The contractor shall have no claim to any payment of compensation or otherwise, howsoever on account of any profit or advantage, which he might have derived from the execution of the work in full but which he did not derive in consequence of determination of contract. Clause 62 (1): Determination of contract owing to default of contractor:
(vi) If the contractor abandons the contract, Then the Engineer on behalf of the Railway may serve contractor with a notice in writing to that effect and if the contractor does not within seven days after the delivery to him of such notice proceed to make good his default in so far as the same is capable of being made good and carry on the work or comply with such directions as aforesaid to the entire satisfaction of the Engineer, the Railway shall be entitled after giving 48 hours notice in writing under the hand of the Engineer to rescind the contract as a whole or in parts and adopt either or both of the following courses.
(x) To carry out the whole of part of the work from which the contractor has been removed by the employment of the required labour or material, the cost of which shall include lead, lift, freight, supervision and all incidental charges. (y) To measure up the whole or of part of the work from which the contractor has been removed and to OMP Comm No. 84/2020 Page No.29 of 43 get completed by another contract, the manner & method in which such work is completed shall be in the entire discretion of the Engineer, whose decision shall be final.
In both the cases, the Railway shall be entitled to forfeit the whole or such portion of the security deposit as it may consider fit and to recover from the contractor, the cost of carrying out the work in excess of the sum which would have been payable according to the certificate of the Engineer to the contractor, if the work had been carried out by the contract under the terms of the contract, such certificate being final and binding upon the contractor.......
Clause 62 (2): Right of Railway after recession of contract owing to default of contractor- In the event of any or several of the courses referred to in clause 62 (1), the contractor shall have no claim to compensation for any loss sustained by him by the reason of his having purchased or procured any material or entered into any commitments or made any advances on account of or with the view to the execution of the work or the performance of the contract and the contract shall not be entitled to recover or be paid any sum for any work thereto for actually performed under the contract, unless & until the Engineer shall have the certified the performance of such work and the value payable in respect thereof and the contractor shall only be entitled to be paid the value so certified...... Clause 63: All disputes and differences of any kind whether during the progress of work or after its completion, whether before or after the determination of contract shall be referred by OMP Comm No. 84/2020 Page No.30 of 43 the contractor to the Railway and the Railway shall within 120 days after receipt of contractor's representation make and notify decisions on all matters in writing provided the matter for which, the provision has been made in clause 8 (a), 18.22 (5), 39, 43 (2), 45 (a), 55, 55-A (5), 57, 57A, 61 (1), 61 (2) and 62 (1) (b) of General Conditions of Contract and in any clause of the Special Conditions of the contract shall be deemed as 'excepted matters' and decisions of the Railway authority, thereon shall be final and binding on the contractor provided further that 'excepted matter's shall stand specifically excluded from the purview of the arbitration clause and not be referred to arbitration.
Clause 64 (1) (i): In the event of any dispute or difference between the parties, if the Railway fails to make a decision within 120 days, then in such a case but except in any of the 'excepted matters' referred to in clause 63 of the conditions, the contractor, after 120 days but within 180 of his presenting his final claim on disputed matters shall demand in writing that the dispute or difference be referred to arbitration. Clause 64.5: Where the arbitral award is for the payment of money, no interest shall be payable on whole or any part of the money for any period till the date on which, the award is made.
Clause 64.6: The cost of arbitration shall be born by the respec- tive parties. The cost shall interalia include fee of the arbitrator OMP Comm No. 84/2020 Page No.31 of 43
(s) as per the rates fixed by the Railway Administration from time to time.
31. It is an admitted position that GCC as well as STC and Instructions to Tenderers were the part of the tender documents and were applicable in the contract. Clause 63 of GCC deals with the matters which are finally determined by the Railways. As per this clause, as and when any dispute arises in connection with the contract, whether during the progress of the work and after its competition, it shall be referred by the Contractor to the Railway, which shall within 120 days make and notify decision on such matter. This clause also says that the matters for which provision has been made in clause 8 (a), 18.22 (5), 39, 43 (2), 45 (a), 55, 55-A (5), 57, 57A, 61 (1), 61 (2) and 62 (1) (b) of GCC or in any clause of the Special Conditions of the Contract shall be deemed as 'expected matter' and decision of the Rail- way Authority thereon shall be final and binding on the contrac- tor, provided further that 'excepted matter' shall stand specifi- cally excluded from the purview of the arbitration clause and not be referred to arbitration. The law relating to the claim be- ing 'excepted matter' not referable to the arbitration was dis- cussed in the case of General Manager Northern Railway Vs. Sarvesh Chopra, 2002 (4) SCC 45, where it was held:
In our opinion those claims which are covered by sev- eral clauses of the Special Conditions of the Contract can be categorized into two. One category is of such OMP Comm No. 84/2020 Page No.32 of 43 claims which are just not leviable or entertainable. Clauses 9.2., 11.3 and 21.5 of Special Conditions are il- lustrative of such claims. Each of these clauses provides for such claims being not capable of being raised or ad- judged by employing such phraseology as "shall not be payable", "no claim whatsoever will be entertained by the Railway", or "no claim will/shall be entertained". These are 'no claim', 'no damage', or 'no liability' clauses. The other category of claims is where the dis- pute or difference has to determined by an authority of Railways as provided in the relevant clause. In such other category fall such claims as were read out by the learned counsel for the respondent by way of illustra- tion from several clauses of the contract such as General Conditions Clause 18 and Special Conditions Clause 2.4.2.(b) and 12.1.2. The first category is an 'excepted matter' because the claim as per terms and conditions of the contract is simply not entertainable; the second cate-
gory of claims falls within 'excepted matters' because the claim is liable to be adjudicated upon by an author- ity of the Railways whose decision the parties have, un- der the contract, agreed to treat as final and binding and hence not arbitrable. The expression "and decision thereon shall be final and binding on the contractor" as occurring in Clause 63 refers to the second category of 'excepted matters'.
32. In another case, M/s Harsha Construction Vs. Union of India, AIR 2015 SC 270, the Supreme Court held as under:
21. If a non-arbitrable dispute is referred to an Arbitra-
tor and even if an issue is framed by the Arbitrator in re- lation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the par- ties had agreed to refer the issue to the Arbitrator. In the instant case, the respondent authorities had raised an ob- jection relating to the arbitrability of the aforestated is- sue before the Arbitrator and yet the Arbitrator had ren- dered his decision on the said "excepted" dispute. In our opinion, the Arbitrator could not have decided the said "excepted" dispute.
OMP Comm No. 84/2020 Page No.33 of 4333. From the prepositions of law as laid down in the cases discussed as above, it is clear that if a particular claims falls in the category of 'excepted matter', the same cannot be decided by the Tribunal. The Arbitrator being a creature of the agree- ment, has to decide the disputes as per the terms & conditions of the contract and he cannot go beyond the same. In case, any of the claims of the claimant is found to be in the category of 'excepted matter' under clause 63 of GCC, it is liable to be re- jected being non arbitrable.
34. In the statement of claims filed before the Arbitrator, the petitioner besides claims for refund of initial security deposit of Rs. 3,00,000/- (claim no. 1), refund of additional security de- posit recovered from the running bills of the petitioner of Rs. 5,85,000/- had claimed Rs. 30,00,000/- towards the loss suf- fered @ 10% as the contractor's profit on the unfinished work (claim no. 3) and Rs. 22,000/- towards the cost of litigation (claim no. 4). The petitioner before the claims were referred to the Tribunal, in his letter dated 17.02.2006 had raised the claims with the department / respondent for refund of initial security deposit (claim no. 1), refund of additional security deposit (claim no. 2) and loss of 10% contractor's profit out of the un- finished work i.e. Rs. 30,00,000/- (claim no. 4). The General Manager then vide letter dated 24.08.2007 constituted an Arbi- tral Tribunal to settle the disputes and referred the claims given OMP Comm No. 84/2020 Page No.34 of 43 in Annexure A i.e. claim towards (a) refund of initial security deposit of Rs. 3,00,000/- (claim no. 1), claim towards refund of additional security deposit recovered from running bill i.e. Rs. 5,85,000/-. He had also claimed liquidated damages of Rs. 1,79,00,000/- from the petitioner. The claim of the petitioner to- wards loss of 10% contractor's profit out of the unfinished work i.e. Rs. 30,00,000/- was not referred by the General Man- ager to the Arbitral Tribunal.
35. Clause 21.5 of the Special Tender Conditions and Instruc-
tions to Tenderer clearly provide that no claim for idle labour and / or idle machinery etc on any account will be entertained. Similarly, no claim shall be entertained for the business loss or any such loss. Clause 62 (2) (a) of GCC 1999 also provides that the contractor shall have no claim for compensation for any loss sustained by him by reason of his having purchased or pro- cured any material or entered into any commitments or made any advances on account of or with a view to the execution of the work or the performance of the work nor it shall be entitled to recover for any work actually performed under the contract unless & until the Engineer had certified the performance of such work and the value payable in respect thereof. This clause clearly provides that the claim for any loss including loss of an- ticipated business profit is not maintainable. Clause 61 (3) of GCC also provides that the contractor shall have no claim for OMP Comm No. 84/2020 Page No.35 of 43 any payment of compensation or otherwise howsoever on ac- count of any profit or advantage which he might have derived from the execution of the work in full but which he could not derive in consequence of determination of the contract. Clause 63 of GCC 1999 provides that the matters for which provision has been made in clause 61 & 62 of GCC 1999 and the matter related to any clause of the Special Conditions of Contract shall be deemed as 'expected matter' and the decision of Railway Authority thereon shall be final and binding on the contractor and further, the 'expected matter' shall be excluded from the purview of the arbitration and would not be referred to arbitra- tion.
36. Since the dispute raised by the petitioner towards loss of 10% contractor's profit on the unfinished work i.e. Rs. 30,00,000/- falls under the category of 'excepted matter', so in view of clause 63 of GCC and the cases as discussed above, this claim was not arbitrable. The General Manager was right in not referring the said claim to the Arbitral Tribunal being bound by the terms & conditions of the contract agreement. The Arbitral Tribunal was also right in not considering this claim, though, claimed by the petitioner in the statement of claims and not re- ferred by the General Manager. It was held that since no such claim was referred by the General Manager in his letter for the nomination of arbitral panel, so the arbitral panel has not con-
OMP Comm No. 84/2020 Page No.36 of 43sidered such claims not referred by the General Manager. It is well settled law that if a contractor has raised claims before the department for referring to the Arbitrator for adjudication and if the department does not refer the particular claim to the Arbitra- tor for adjudication, the remedy lies with the contractor to file an application / petition under Section 11 of the Act seeking di- rections from the High Court for referring the said claim for ad- judication to the Arbitrator. In the instant case, the petitioner in- stead filing the application / petition under Section 11 of the Act, filed the statement of claims before the Arbitral Tribunal and included the claim towards loss of profit on unfinished work, which claim was not even referred by the General Man- ager.
37. In the petition under Section 34 of the Act challenging the award, the petitioner cannot be allowed to agitate the issue that all his claims mentioned by him in the letter for demand for arbitration as well as in the claim petition could have adjudi- cated by the Tribunal, which claims were not referred by the General Manager or that the General Manager was not compe- tent to decide, which claim should be adjudicated by the Tri- bunal.
The case of BHEL Vs. C. N. Garg (supra) referred by the petitioner is distinguishable on facts. In the case supra it was held that if the Court's interference is permitted during the arbi-
OMP Comm No. 84/2020 Page No.37 of 43tral proceedings, the very object of speedy redressal of dispute would be frustrated. Party would have to wait till the arbitral award comes. In this case, when one of the claims was not re- ferred by the General Manager, the recourse available to the pe- titioner was to approach the High Court under Section 11 of the Act for including that claim for adjudication by the Tribunal and there was no need for the petitioner to wait for the outcome of the arbitral award. Even otherwise, in the present case, the said claim was falling under the category of 'expected matter' and it was not arbitrable.
38. I am of the view that since the said claim falls in the cate-
gory of 'excepted matter', which is not arbitrable, it was rightly not referred by the General Manager to the Arbitral Tribunal for adjudication and Arbitral Tribunal was also right in not consid- ering this claim, which was not referred by the General Man- ager.
39. As regards claim of Rs. 22,000/- towards the cost of liti-
gation (claim no. 4) in the statement of claims, clause 64.6 of GCC clearly provides that the cost of arbitration shall be borne by the respective parties. Thus, clause clearly prohibits the Tri- bunal in awarding the cost of arbitration. The Tribunal being the creature of the contract is bound by the terms & conditions of OMP Comm No. 84/2020 Page No.38 of 43 the contract and it cannot be permitted to go beyond the con- tract. Drawing the analogy from the case of Sri Chitranjan Maity Vs. Uoi (supra), wherein, it was held that if the contract prohibits awarding of interest, no interest is payable, and since, in the present case, the contract prohibits awarding of cost, the Tribunal was right in not considering the claim of the petitioner towards cost of litigation.
40. Now coming to interest part, in the instant case, the Tri-
bunal, while deciding the claim towards release of initial secu- rity deposit and release of additional security deposit deducted from the running bills against the work done has not awarded the interest pendente lite but has held that in case the amount is not released within 90 days of publishing of the award, the amount shall carry a simple interest of 8% till the date of pay- ment.
41. Clause 5.2 (Note 3) of Special Tender Conditions and In-
structions to Tenderers clearly provide that no interest shall be allowed on the security deposit. Clause 64.5 of GCC also pro- vides that where the award is for the payment of money, no in- terest shall be payable on whole or any part of the money for any period till the date on which the award is made. Clause 16 (3) of GCC provides that no interest shall be payable upon the OMP Comm No. 84/2020 Page No.39 of 43 earnest money and security deposit or amounts payable to the contractor under the contract, but the Government securities deposited in terms of Sub-clause (1) of this clause will be payable with interest accrued thereon.
42. Section 31 (7) (a) of the Act provides that interest is payable to the other party at such rate as it deems reasonable on the whole or any part of the money. If there is prohibitory clause in the agreement barring awarding of interest, the inter- est cannot be awarded on the amount claimed. In the case of Chitranjan Maity Vs. UOI (supra), it was held that if the agree- ment prohibits award of interest, the Arbitrator cannot award in- terest for the said period.
43. In the instant case, admittedly, the Tribunal has denoted in its finding that the fault lies on the part of the respondent but in view of the prohibitory clauses in the contract agreement, the Tribunal was right in not awarding the interest for the pre litiga- tive period and interest pendente lite. The case of North Delhi Municipal Corporation Vs. Prem Chand Gupta referred by the petitioner decided by Delhi High Court on 17.07.2017, is prior to the case of Sri Chittarnjan Maity Vs. UOI (supra) decided by the Supreme Court on 03.10.2017. So in view of the settled OMP Comm No. 84/2020 Page No.40 of 43 proposition of law, the law laid down by the Supreme Court is binding on this Court.
44. In the instant case, the petitioner had deposited the initial security deposit in the form of FDR and TDR as discussed in para 2. Since, it has been held that the petitioner is entitled to refund of initial security deposit, so in case the FDR / TDR is returned as stated above towards the security deposits, the same be released without deducting the interest accrued thereon.
Conclusion:
45. Now to sum up, in the instant case, most of the grounds raised by the petitioner to challenge the award are factual in na- ture which have been already considered and adjudicated in the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclusion be- cause such an approach would defeat the purpose of arbitration proceedings. It has been consistently held that when a court is applying the public policy test to an arbitration award, it does not act as a court of appeal and consequently, errors of facts cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Once, it is found that the OMP Comm No. 84/2020 Page No.41 of 43 arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. (P.R Shah, Shares & Stock Brokers (P) Ltd v. B.H.H Securities (P) Ltd. [(2012) 1 SCC 594).
46. Having examined the various contentions of the petitioner on the touchstone of the parameters of interference as explicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evidence led before the Arbitral Tribunal and this Court will not open itself to the task of being a judge on the evidence placed before the Tribunal which was subject matter of dispute. In the present case, the Tribunal has deliberated on the issues under reference which were within its competence and as per the agreement entered into between the parties. The Tribunal has duly explained the reasons for arriving at its decisions. There is nothing to indicate that award is in conflict with the basic notions of justice and the fair play and fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reasoning as pleaded in the petition.
47. For the aforesaid reasons, the impugned award is maintained and the petition is dismissed with the direction that in case the FDR / TDR is returned towards the initial security OMP Comm No. 84/2020 Page No.42 of 43 deposits, the same be released without deducting the interest accrued thereon. No order as to costs. File be consigned to record room.
Announced in open court today i.e. 30th of September 2021 (Sanjiv Jain) District Judge (Commercial) - 03 Patiala House Courts, New Delhi OMP Comm No. 84/2020 Page No.43 of 43