Delhi District Court
Union Of India vs Paradise Interiors on 18 October, 2023
IN THE COURT OF SH. ANURAG SAIN,
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM) No.99/2020
Union of India
Through
Garrison Engineer (Central)
Military Engineer Services
Delhi Cantt.-110010
.....Petitioner
vs.
M/s Paradise Interiors
Thru: Sh. Vijay Singh,
R/o C-15, Bharat Vihar,
Rajapuri, Uttam Nagar,
New Delhi-110059.
....Respondent
Date of Institution : 27.11.2020
Arguments heard on : 16.09.2023
Decided on : 18.10.2023
Appearances : Sh.Dipender Singh, ACGC, Ld. Counsel for petitioner
with Sh. Ram Nivas Yadav, AGE (C)
Sh. Surender Singh, Ld. Counsel for the respondent
with respondent.
JUDGMENT
1. Appellant petitioner i.e. Union of India through Garrison Engineer (Central), Military Engineer Services filed this petition against respondent i.e. M/s Paradise Interiors under Section 34 of Arbitration and Conciliation Act (in Union of India Vs. Paradise Interiors Page No.1 of 13 OMP (comm) No.99/2020 short referred to as 'Arbitration Act') for setting aside the Arbitral Award dated 18.03.2019 passed by learned sole arbitrator Er. Anil Kumar Agarwal.
2. The case of the objector/petitioner as averred in the present objection petition is that petitioner floated a tender vide tender 8816C-67/Wed/E8 dated 19.12.2016 for "special repair to building No.P-83 of Rajputana Rifle Regiment Centre, Provision of Car/Two wheeler Parking for JCO/Ors married accommodation of EETSU at 1 WEC line and certain allied works in the area of AGE B/R-1 under GE (Central) Delhi Cantt-10. The tender of the respondent was accepted for an amount of Rs.37,17,728/- and the contract agreement bearing no. GE/C-67/2016-17 was signed by both the parties. As per the agreement the work was to be commenced on 27.12.2016 and will be completed by 26.04.2017. It is averred that the respondent failed to complete the awarded work within the stipulated period and was even not completed the same even after a lapse of more than 01 year. It is averred that petitioner issued various notices to the respondent, who has sought two months extension, which was accorded to the respondent up to 24.06.2017, but the respondent company could not complete his work. It is averred in the plaint that neither the work was completed by the respondent nor any response in spite of written communication and phone calls was given, thus the petitioner compelled to cancel the contract and thus petitioner cancelled the award vide letter no.8816/C-67/79/E8 dated 05.12.2017.
3. Aggrieved upon the cancellation, the respondent filed the petition before Hon'ble High Court for appointment of arbitrator and after hearing the matter, vide order dated 18.03.2019, Hon'ble High Court appointed Er.Anil Union of India Vs. Paradise Interiors Page No.2 of 13 OMP (comm) No.99/2020 Kumar Aggarwal as sole arbitrator to resolve the disputes between the parties. It is averred that respondent has filed its claim before the ld. arbitrator, whereas the petitioner has filed statement of defenses also counter claim, thereafter, an award was passed by ld. Sole Arbitrator on 25.06.2020.
4. By way of present petition under Section 34 of the Arbitration Act, the petitioner is challenging the said award dated 25.06.2020 mainly on the following grounds:
(a) that ld. arbitrator has miserably failed to appreciate that the respondent company has breached the contractual obligation and did not complete the awarded work within the stipulated period and even could not complete the same during the extended period.
(b) That ld. arbitrator awarded the amounts against claim no. 14 b, 14 c, 14 d and 14 e and amount towards cost of arbitration are without any basis and documentary proof.
(c) That counter claim of the respondent was arbitrarily rejected by ld. Arbitrator.
(d) That Ld. Arbitrator has failed to appreciate that the petitioner has canceled the contract due to non-compliance on the part of contractor/respondent.
(e) That ld. Arbitrator has failed to take notice of the malicious efforts of the respondent company in seeking extensions and has not even on a single occasion came forward to complete the remaining work.
(f) That ld. arbitrator has completely kept aside the facts and records placed before him by the petitioner and the findings returned by the Ld. arbitrator are not sustainable on the basis of material on record.
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5. The respondent filed reply to the petition of the petitioner and stated that the petition of the petitioner is misuse of process of law. It is averred that petitioner floated tender for construction work and the respondent being the lowest bidder his quotation was accepted. It is averred that the construction site was to be handed over by the petitioner by 27.12.2016 and the time for completion of the work was four months i.e. by 26.04.2017. It is stated that the process of handing over part site by the petitioner and taken over by the respondent was done only on 15.03.2017, but the date of completion was not extended or changed. It is averred that respondent was not allowed to work with full efficiency and respondent requested the petitioner for extension of date, but petitioner did not allow the respondent to complete the work by extending time period. It is averred that delays have been caused by the petitioner and the respondent was in no way responsible for the delays.
6. I have heard arguments advanced by both the sides and given due consideration to the facts and pleadings of the case and the documents relied upon by the parties, submissions put forth by the respective counsels and the relevant legal position.
7. During the course of arguments in the present matter it has been stated by the counsel for the petitioner that respondent has paid a sum of Rs.7,72,545/- to the petitioner and which is not under dispute, and the only dispute remains with regard to claim no.14(d) for Rs. 6 lakh, which was allowed by the arbitrator as compensation to the respondent, which is without any basis and without any documentary proof and confining his submissions to Union of India Vs. Paradise Interiors Page No.4 of 13 OMP (comm) No.99/2020 that effect. He further submits that no evidence the respondent has ever placed before the Arbitrator as to how he has suffered the loss, rather the respondent himself was negligent in his work and due to which he failed to complete his work as per the contractual obligation. He argued that as per Section 73 of the Indian Contract Act 1872, when there is a breach of contract of the part who suffers by such breach, is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to him. However, such compensation is not to be given for any remote or any indirect loss. The claim of the claimant contractor is remote loss thus, the claimant is not entitled for such amount.
8. On the other hand, the counsel for the respondent argued that the award was passed by the arbitrator is well reasoned and arbitrator has taken into consideration all the facts, which are duly reflects in his award. Perusal of the award shows that while awarding the damages the arbitrator has given thoughtful consideration in the same and has infact given the reasons that the respondent has suffered loss which were directly referring to the wrongful and malafide act of the petitioner and the petitioner could not be allowed to take benefit of his wrong acts. The arbitrator has relied upon the judgment of Hon'ble Supreme Court in ONGC Vs. SAW Pipes Ltd., 2003 (2) ARBLR 5 (SC) and thus the award so made by the arbitrator qua the compensation/damages is well reasoned.
9. The scope of enquiry under section 34 is restricted to consideration whether any one of the grounds mentioned in section 34 exists for setting-aside the award.
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10. 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 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 Union of India Vs. Paradise Interiors Page No.6 of 13 OMP (comm) No.99/2020 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 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) 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 Union of India Vs. Paradise Interiors Page No.7 of 13 OMP (comm) No.99/2020 an erroneous application of the law or by re-appreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
11. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could 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. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. 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. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally Union of India Vs. Paradise Interiors Page No.8 of 13 OMP (comm) No.99/2020 not interfere with the award passed by the Arbitrator.
12. Hon'ble Supreme Court in the case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
13. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse 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. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that 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.
14. In a recent decision by the Supreme Court in the matter of PSA Union of India Vs. Paradise Interiors Page No.9 of 13 OMP (comm) No.99/2020 SICAL Terminals Pvt. Ltd. Vs. Board of Trustees of V.O Chidambranar Port Trust Tuticorin reported as 2021 SCC OnLine SC 508, the Supreme Court has reiterated its view in MMTC Limited Vs. Vedanta Limited reported as (2019) 4 SCC 163, and held as follows "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 [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] 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 Delhi Development Authority vs M/S Tomar Construction Company on 29 April, 2023 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.
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15. Now coming to the case in hand. The petitioner has challenged the award only on claim no.14 d, which is on account of loss of profit. Ld. Arbitrator while dealing with this claim has held that "after illegally cancelling the contract, the respondent prevented the contractor to participate in Board of Officer proceedings for joint measurement of the work completed by the contractor. The respondent committed breach of contract by illegally cancelling the same and then not communicated cancellation to the contractor and blacklisted the contractor from future contracts. The loss of profit cause to the claimant contractor due to loss of future opportunity of business and earnings, in my opining directly referable to the wrongful and malafide acts of the respondent......." Ld. arbitrator has supported his findings with the judgment of Hon'ble Supreme Court in ONGC Vs. Saw Pipes Ltd. (Supra).
16. Nothing has been pointed out by the petitioner's counsel from the record which would falsify these observations of the Ld. Arbitrator or would indicate that he has not applied his mind to the facts as well as evidence before him. Having examined the various contentions of the petitioner on the touchstone of the parameters of interference as explicitly laid down by the Hon'ble Supreme Court of India in several judgments referred to above, I am of the view that the impugned Award does not call for any interference. The arbitrator has given sound reasons to decide claim 14d, which is part of para 7 of the award. The same are detailed and does not suffer any illegality. Ld. Arbitrator has given ample reasons in respect of his decision on claim no. 14 d. 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, Union of India Vs. Paradise Interiors Page No.11 of 13 OMP (comm) No.99/2020 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/she delivers his/her arbitral award. Thus, an award based on little evidence or no evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once, it is found that the arbitrator's approach is not arbitrary or capricious, then it is the last word on facts. In my opinion, the view taken by Ld. Arbitrator can not be said arbitrary to the terms of the contract; provisions of law; or the fundamental policy of law. In my view, the findings of the Ld. Arbitrator can not be termed violative of the public policy. Court can not interfere in the findings of the Ld. Arbitrator if he has taken a particular view if the same is not contrary to the public policy of India or contrary to the provisions of law.
17. From the above cited judgments of Hon'ble Supreme court, it is clear that this court cannot sit as an court of appeal over the proceedings of ld. Arbitrator. The role of the court is in the supervisory nature. This court can intervene only if any ground u/s 34 (2) of the Act is made out. Court cannot interfere in the findings of ld. Arbitration by re-appreciating the evidence or the findings or reconsidering the conclusions. In arbitration, parties themselves decide to resolve their disputes through arbitrator. Ld. Arbitrator is not bound to strictly follow the procedure of a Civil Suit according to Code of Civil Procedure or The Law of Evidence. Ld. Arbitrator is free to evolve his procedure for arbitration proceedings. The main requirement is that procedure adopted by ld. Arbitrator should be in accordance with the principles of natural justice and fair to the parties concerned. Nothing is pointed out in the findings Union of India Vs. Paradise Interiors Page No.12 of 13 OMP (comm) No.99/2020 of ld. Arbitrator that procedure adopted by him was contrary to principles of natural justice or provisions of law. In fact, the arbitral proceedings reflects that all hearing were conducted by ld. Arbitrator in presence of ld. Counsels for parties and after giving fair opportunity to both the parties. This court feels unable to find any legal or factual error in the finding arrived at by the Learned Arbitrator as noted hereinabove. Having regard to the detailed reasoning given by the Learned Arbitrator, it is difficult to say that the impugned award is either in conflict with the basic notions of justice or is in contravention with the fundamental policy of Indian Law.
18. Accordingly, in my view, there is no ground to interfere in the findings of Ld. Arbitrator in original or corrected award and, therefore, the petition in hand is dismissed.
19. No order as to cost.
20. File be consigned to Record Room after due compliance.
ANNOUNCED IN THE OPEN COURT on 18th October 2023.
ANURAG SAIN District Judge (Commercial Court)-01 Patiala House Court, New Delhi.
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