Delhi District Court
Greater Noida Industrial Development vs M/S Adlakha Associates Pvt. Ltd on 24 December, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 34/2022
GREATER NOIDA INDUSTRIAL DEVELOPMENT
AUTHORITY
Office at 169, Chitvan Estate,
Sector Gamma-I, Greater Noida,
Distt. Gautam Budh Nagar-201308
Through its CEO ...Petitioner
versus
1. M/S ADLAKHA ASSOCIATES PVT. LTD.
Reg. Office at F-70, 1st Floor,
Bhagat Singh Market, Gole Market,
Near Connaught Place, New Delhi-110001
Through its MD Mr. Pramod Adlakha
Email:[email protected]
2. Sh. Vinod Jain, Sole Arbitrator (Retd. A.D.J.)
381 Sector 1, IMT Manesar Gurugram HR.
Mobile no. 9468178585,
Email:- [email protected] ...Respondents
Date of Institution : 02/03/2022
Arguments concluded on : 30/11/2022
Decided on : 24/12/2022
Appearances : Sh. Vipin Saini, Ld. Counsel for petitioner.
Sh. Anurag Kaushik, Ld. Counsel for respondent no.1.
JUDGMENT
1. Petitioner had filed the present petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside of the impugned arbitral award dated 24/11/2021 passed by Ld. Sole Arbitrator Sh. Vinod Jain, OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 1 of 34 District & Sessions Judge (Retired) in Case Ref. No. DAC/2771/03-20 titled 'M/s Adlakha Associates Pvt. Ltd. vs Greater Noida Industrial Development Authority'. Ld. Sole Arbitrator awarded Rs.9,69,595/- with interest @ 12% per annum from 25/07/2014 till 24/11/2021 as well as GST @ 18% on amount of Rs.9,69,595/- and cost of Rs. 2,30,735/- payable by petitioner to respondent no. 1/claimant within a period of one months of date of award; otherwise interest @ 12% per annum on award amount was payable from 24/11/2021 till realization.
2. I have heard Sh. Vipin Saini, Ld. Counsel for petitioner; Sh. Anurag Kaushik, Ld. Counsel for respondent no. 1 and perused the record of the case; the arbitral proceedings record, filed brief written arguments on behalf of parties, relied upon precedents and given my thoughtful consideration to the rival contentions put forth.
3. Following are the brief relevant material facts of the case of respondent no. 1/claimant set up in arbitral proceedings. Claimant/respondent no. 1 is a company incorporated under The Companies Act as Consultant Architect. Sh. Pramod Adlakha is Managing Director of respondent no. 1/claimant. Petitioner is State Government Undertaking. After visiting low cost housing, site at Bawana, Delhi, which was planned and designed by respondent no. 1/claimant, a team of Projects Cell of petitioner asked the claimant/respondent no. 1 to submit its concept report for the purposes of EWS housing, which was to be set up by petitioner at Sector Omicron, Greater Noida. Claimant/ respondent no. 1 submitted its concept report, which was OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 2 of 34 accepted by petitioner and General Manager (Planning) of petitioner, issued letter dated 16/10/2006 to claimant/respondent no. 1 to start work of "EWS Housing at Omicron-I, at Greater Noida". Formal agreement dated 11/12/2007 for above said was executed between the petitioner and claimant/respondent no. 1. Petitioner was referred as Client and claimant/respondent no. 1 was referred as Consultant in said agreement. Said agreement contained the arbitration clause 8.2. Following are the relevant clauses of the said agreement:-
"2 SCHEDULE OF SERVICES:
......................................................................................................... 2.10 A Fee @ 1.0% of cost of project (excluding land cost) or 42.00 lacs whichever is less will be paid to consultants and service tax, as applicable, shall also be paid separately.
3. MODE OF PAYMENT:
For each of the services in the scope of work of the consultant shall be paid in the following stages consistent with the work done and as per note below plus reimbursable expenses as agreed upon. Payments made to the consultant from time to time shall be adjusted in the final fee payable.
Preliminary State:
Stage-1 On submission of conceptual design 10% of the total fees and preliminary estimates of cost payable.
Stage-2 On submitting the final preliminary 20% of the total fees drawings/designs and study model payable less payment along with the modified estimates already made. of cost.
State-3
On submitting preliminary drawings 30% of the total fees
of obtaining approval from statutory payable less payment
bodies. already made.
Stage-4
Working drawing stage on preparation 45% of the total fees OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 3 of 34 of basic working drawings and details payable less payments sufficient for preparing item wise already made. estimates of costs.
Stage-5 On submitting detailed specifications, 60% of the total fees bill of quantities, detailed Architectural payable less payment working drawings, structural and already made. services designs together with estimates of cost sufficient to invite tender.
Stage-6
On submission of complete set of 70% of the total fees
drawings and details sufficient for payable less payments
the execution of work. already made.
Construction Stage:
Stage-7
During the course of construction Further 25% to be paid
of work at site in installments
consistent with the
value of work from
time to time.
Stage-8
On completion of the work (to be Balance 5% payment
paid within six months of making the total
completion of the work) equivalent of 100% of
the fees payable.
Note:- 50% of the fees payable at stage 1 to 6 shall be released on submission and remaining 50% on approval of the works submitted.
4 CLIENT'S RESPONSIBILITIES:
................................................................................................................ 4.5 Pay the fees of the consultant within one month of submission of bills.
............................................................................................................... 6 EXECUTION OF THE ASSIGNMENT:
................................................................................................................ 6.16 The client shall have the liberty to postpone or not to execute any work and the consultant shall not be entitled to any compensation for such non-execution of the work except the fees which are payable to the consultant up to the stage of services performed by the Consultant.
7. PENALTY :-
OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 4 of 34 A penalty of 0.20% per month of the cost of the project (as calculated for fees payment) shall be levied for delay in the work by the Consultant. The imposition of the penalty shall be without prejudice to all other rights available to the client under the Law or this Agreement."
Claimant/respondent no. 1 was to provide preliminary estimates, detailed estimates, working drawings etc. for construction of EWS Housing of 1848 dwelling units. Based on the inputs provided by claimant/respondent no. 1, construction work thereof was awarded by petitioner to M/s Sai Construction Company in two packages. For group-I dated 07/11/2007 with date of competition of 16/11/2009 and for group-II dated 20/11/2007 with date of completion of 30/11/2009; both of equal amounts of Rs. 14,26,99,342.88p. Claimant/respondent no. 1 submitted the drawings and estimates etc. for the development works, civil part (internal roads and pathways, water supply, sewerage, drainage, park, U.G. tank RWH) for Rs. 467.90 lakhs, which was approved by petitioner for Rs. 372.57 lakhs, vide its approval letter dated 17/04/2008. Its contract was awarded by petitioner to M/s Sai Construction Company at 24.3% above the estimated cost i.e., for total sum of Rs. 454 lakhs. In March 2008, the General Manager (Planning) of petitioner requested the claimant/respondent no. 1 to provide the proposal/scheme for extension on the vacant land, also modifying the floor plans, for providing better accommodation. The General Manager (Planning) of petitioner, also requested to the claimant/ respondent no. 1 to provide drawings and estimates etc. for the Community Hall-cum-Facility Centre on that plot. Claimant/respondent no. 1 accordingly submitted its drawings etc. to them vide its letter dated 29/03/2008. Petitioner OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 5 of 34 scrutinized said drawings etc. and further requested the claimant/respondent no. 1, for its revision, in concept and to provide preliminary estimates for its administrative approval and expenditure sanction etc. Accordingly, claimant/respondent no. 1 submitted its revised proposal and preliminary estimate etc. dated 11/08/2008 to General Manager (Planning), accommodating 504 more houses, vide its letter dated 11/08/2008 with its copy to General Manager (Projects). Petitioner processed the said proposal, but later on abandoned this proposal for extension of the project for better accommodation of 504 dwelling units, because High Tension Line was passing through the vacant land and it could not be diverted, due to its heavy cost. Claimant/respondent no. 1 submitted its 2nd RA Bill dated 08/07/2010 for a sum of Rs. 12,12,028/- including service tax and petitioner paid it, on 14/12/2010 (again with a delay of 4 months and 7 days). Similarly, 3 rd RA Bill of the claimant/respondent no. 1 dated 15/12/2010 was paid belatedly on 06/04/2011. General Manager (Planning) of the petitioner informed the claimant/respondent no. 1, vide its letter dated 21/10/2010 that the competent authority had approved the concept plans of community hall-cum-facility centre, and instructed the claimant/respondent no. 1 to submit its working drawings etc. Claimant accordingly submitted detailed estimate for community hall-cum-facility centre along with its working drawings vide its letter dated 24/09/2009; which were again submitted vide its letter dated 13/04/2011. Since the cost index, was revised from 26% to 36% in year 2011, so the revised estimate, for Rs. 328.98 lakhs, was submitted by claimant/ respondent no. 1, vide its letter dated 06/05/2011.
OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 6 of 34 Claimant/respondent no. 1 then submitted its final bill dated 25/06/2014 for a sum of Rs. 8,75,953/- with respect to the housing project and also its 1st running bill dated 25/06/2014 for a sum of Rs. 1,96,800/-, which was for community hall-cum- facility centre. Since the payment of the aforesaid bill was not being made by petitioner to the claimant/respondent no. 1, so the claimant/respondent no. 1 sent its email dated 17/07/2015 to petitioner and its reminder dated 23/12/2015, which remained not replied. Claimant/respondent no. 1 then sent its notice dated 16/04/2016, through speed post, for payment; but it also remained not replied. Claimant/respondent no. 1 then invoked arbitration clause 8 of the agreement vide notice dated 18/06/2016, seeking appointment of the Arbitrator; but it also remained not replied. When aforesaid letters and notices remained not replied, claimant/respondent no. 1 filed an application dated 03/06/2017 under Right to Information Act, 2005; seeking details, from the PIO of the petitioner department as regard to the status of the aforesaid final bill and as regard to the details of the work and agreement, entered into between the parties. Claimant/respondent no. 1 then sent its reminder dated 17/11/2017. Petitioner sent replies dated 22/09/2017, 01/11/2017, 03/01/2018 and 27/02/2018. In one of the replies, claimant/respondent no. 1 was asked to visit the office of petitioner, on any working day, to inspect the files of the project. On 22/10/2018, claimant/ respondent no. 1 accordingly visited the office of petitioner, but could not find the files of the project being untraceable. Claimant/respondent no. 1 then wrote letter to petitioner dated 24/10/2018 and its reminder dated 21/01/2019. When desired information was not provided by the petitioner, OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 7 of 34 then claimant/respondent no. 1 filed appeal dated 30/04/2019 before First Appellate Authority under Right to Information Act, 2005, who vide letter dated 21/05/2019 fixed the hearing for date 03/06/2019. Claimant/respondent no. 1 only then could inspect file No. Z-173 (OPA-12077) and then order dated 20/06/2019 was passed by the authority, directing the petitioner to provide the copies of the requisite documents to claimant/ respondent no. 1 as per its application dated 03/06/2017. Claimant/respondent no. 1 than came to know that its final bill dated 25/06/2014 was not even considered by the petitioner till that date, as even no noting was recorded thereon. Claimant/ respondent no. 1 thereafter sent letter dated 26/09/2019 to petitioner, mentioning that as per clause 4.5 of the agreement, the petitioner was liable to pay the fee of the claimant/respondent no. 1 within one month of the submission of the bills but petitioner had failed to do so; so now the petitioner is liable to pay interest, for its late payment since 25/07/2014 onwards. Aforesaid letter remained not replied.
Claimant/ respondent no. 1 then filed Arbitration Petition No. 57/2020 dated 27/01/2020 under Section 11 of the Act before Delhi High Court; wherein after hearing the parties, Delhi High Court vide order dated 03/03/2020 appointed Ld. Sole Arbitrator to adjudicate the dispute between the parties. Ld. Sole Arbitrator received the above said order of Delhi High Court on 06/07/2020. Arbitral proceedings culminated in the impugned arbitral award.
4. Petitioner has impugned the arbitral award mainly on the following grounds. Arbitral Tribunal while dealing with claim no. 2 of Statement of Claim failed to adjudicate the factum of OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 8 of 34 inappropriate inclusion of the bill of community-cum-facility centre in the final bill as raised as the same was not a part and parcel of the agreement entered into between claimant/ respondent no. 1 and petitioner; hence same could not be subject for arbitration referral and Ld. Sole Arbitrator without assigning any reason while dealing with claim no. 2 awarded the claimed amount to the claimant/respondent no. 1. Ld. Sole Arbitrator had travelled out of the purview of the arbitral referral and had passed the impugned award in the mechanical manner, which is perverse to the petitioner. At the time of submitting the final bill on 25/06/2014, GST was not applicable and the arbitration agreement had the clause for service tax and not for GST. Ld. Sole Arbitrator awarded 18% GST to claimant/respondent no. 1 while dealing with claim no. 4 at a belated stage i.e., 5 plus more years which is not legally sustainable and against the principle of natural justice and equity. Per contra to final bill as submitted by claimant/respondent no. 1 to petitioner authority, which was of Rs. 40,10,000/-; out of which Rs. 32,30,405/- was paid, which includes service tax also (12.36%); Ld. Sole Arbitrator gave its own conclusion contrary to the final bill strictly on the line of the claim. Ld. Sole Arbitrator while dealing with claim no. 5 of the Statement of Claim granted interest in impugned arbitral award to claimant/respondent no. 1 but failed to adjudicate the factum of period and rate of interest, which is not justified and liable to be modified accordingly. Ld. Sole Arbitrator awarded fees of Rs. 2,99,078/- for consultation of community-cum-facility centre which is beyond the terms of agreement. Similarly award of interest @ 12% is arbitrary, for consultation of community-cum- facility centre as well. Ld. Sole Arbitrator awarded the interest to OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 9 of 34 claimant/respondent no. 1 taking reference of the delayed/penalty clause of the agreement which is 0.20% per month. Even in the absence of the interest clause in the agreement, there is no justification of award of interest @12% which was 500% greater to penalty clause of delaying project which adversely affects the policy of public exchequer against the principle of equity. Impugned arbitral award was passed only on the revised bill. In fact no copy of bill was filed by claimant/ respondent no. 1. Ld. Sole Arbitrator failed in considering the fact that the petitioner on very first instance after receiving the Statement of Claim had offered all lawful dues of the claimant/ respondent no. 1 under the arbitration agreement in the form of acknowledgment in the reply and Ld. Sole Arbitrator despite this fact kept on the arbitration proceedings to give undue benefits to claimant/ respondent no. 1 which the claimant/respondent no. 1 was not entitled and had co-joined the claim, which was out of the purview of the arbitration agreement. In the present case final bill was raised on 25/06/2014 and the intimation of the arbitration proceedings was conveyed by claimant/respondent no. 1 on 18/06/2016 as per Section 21 of the Act. Appointment of Arbitrator under Section 11 of the Act was sought by the claimant/respondent no. 1 on 27/01/2020. The entire claim was silent regarding the passage of the time passed by claimant/ respondent no. 1 for appointment of Arbitrator from 18/06/2016 to 27/01/2020; which act of the claimant/respondent no. 1 reflected the intention of claimant/respondent no. 1 and make the claim of claimant/respondent no. 1 as time barred. Ld. Counsel for petitioner relied upon the cases of (i) Major (Retd.) Inder Singh Rekhi vs Delhi Development Authority, (1988) 2 SCC OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 10 of 34 338; (ii) Wazir Chand Mahajan vs Union of India and argued that claims before Ld. Sole Arbitrator were barred by limitation. Ld. Counsel for petitioner also relied upon the cases (i) Renusagar Power Co. Ltd. vs General Electric Co., 1993 (4) SCALE 15; (ii) State of Rajasthan vs Nav Bharat Construction Co., (2006) 1 SCC 86 and argued that if the award is patently illegal and opposed to public policy of India or if the award is so unfair and unreasonable that it shocks the conscience of the Court; it can be set aside whereas an Arbitrator cannot go beyond the contract between the parties and if it is so, then such arbitrator misconducts himself. Ld. Counsel for petitioner also relied upon the cases (i) Oil & Natural Gas Corporation Ltd. vs SAW Pipes Ltd., (2003) 5 SCC 705; (ii) Ssangyong Engineering & Construction Co. Ltd. vs National Highways Authority of India (NHAI), 2019 Legal Eagle (SC) 585; (iii) Central Inland Water Transport Corporation Limited & Anr. vs Brojo Nath Ganguly & Anr., 1986 SCC (L & S) 429 and (iv) MSK Projects India (JV) Limited vs State of Rajasthan & Anr., (2011) 10 SCC
573. Ld. Counsel for petitioner argued that Ld. Sole Arbitrator committed gross illegality against the principles of natural justice; also further ignored the reply of the petitioner of admitting the principal claim and had passed the impugned arbitral award which is likely to be modified to the extent to the claim of claimant/respondent no. 1 in terms of the agreement which was duly admitted; further the rest of the claim as passed in the award is liable to be set aside. Ld. Counsel for petitioner also argued that approach of Ld. Sole Arbitrator cannot be termed as justified while passing the claim which were not the subject matter of the referral and it vitiates the entire proceeding as OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 11 of 34 illegal and the entire award is liable to be set aside as the same is adverse to the public policy whereas neither Ld. Sole Arbitrator can travel out of the purview of the referral and cannot award the claim which is barred by limitation. Ld. Counsel for petitioner prayed for setting aside of the arbitral award.
5. Ld. Counsel for claimant/respondent no. 1 argued that petition is not maintainable as it finds no mention under which ground mentioned in Section 34(2)(a) of the Act, present petition has been filed. It is also not established from the pleadings in the petition as to under which ground of Section 34(2)(a) of the Act, the award is sought to be challenged. Impugned award is detailed award and passed after appreciation of evidence put forth in arbitral proceedings by both the parties and several findings of facts have been returned by Ld. Sole Arbitrator which cannot be challenged under the guise of challenge to an award under Section 34 of the Act. The scope of interference by the Court under Section 34 of the Act is very limited. The principles upon which the arbitral award must be tested are laid by Supreme Court in the cases (i) Associate Builders vs Delhi Development Authority, MANU/SC/1076/2014; (ii) Ssangyong Engineering & Construction Co. Ltd. vs National Highways Authority of India (NHAI), MANU/SC/0705/2019 whereas none of the grounds mentioned therein are made out in the present case. Ld. Sole Arbitrator has right to interpret the contract agreement as per his own ability and prudence and if the same is plausible view, the same cannot be substituted by the Court while adjudicating the objection petition as has been held by Delhi High Court in the case of Delhi State Industrial & OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 12 of 34 Infrastructure Development Corporation Ltd. vs Rama Construction Company, 2014 (3) Arb. LR 116(Delhi)(DB) and by Supreme Court in the case Numaligarh Refinery Ltd. vs Daelim Indl. Co. Ltd., (2007) 8 SCC 466. After going through the evidences and material in arbitral proceedings record, Ld. Sole Arbitrator has returned several findings of facts against the petitioner as regards the responsibility of delay as also regarding the interpretation of the contract or application of provisions thereof in the given set of the facts. The view taken by Ld. Sole Arbitrator is a plausible one. If two views are possible either on interpretation of contract or application of provisions thereof on the given set of facts and Arbitrator has taken one of the possible views; then the Court is not to interfere in exercise of jurisdiction under Section 34 of the Act, in view of law laid by Supreme Court in the cases (i) Associated Constructions vs Pawanhans Helicopters Ltd., (2008) 16 SCC 128; (ii) G. Ramchandra Reddy vs Union of India, (2009) 6 SCC 414; (iii) Numaligarh Refinery Ltd. vs. Daelim Industrial Co. Ltd., (2007) 8 SCC 466. Ld. Counsel for claimant/respondent no. 1 argued that Supreme Court in the case of Delhi Airport Metro Express Pvt. Ltd. vs Delhi Metro Rail Corporation Ltd., MANU/SC/0623/2021 had also advocated the concept of minimal judicial interference in cases where awards are passed after detailed examination of facts and evidences. Ld. Counsel for claimant/respondent no. 1 also argued that the issue of limitation as raised is without any basis as while dealing with said issue, Ld. Sole Arbitrator categorically held that petitioner had admitted the amount of Rs. 7,79,595/- as due and payable in the statement of defence, which amounted to acknowledgment on their part and they further alleged that the OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 13 of 34 same was not being paid on account of certain compliances. Ld. Counsel for claimant/respondent no. 1 also argued that it was held by Ld. Sole Arbitrator that the cause of action was continuous in favour of claimant/respondent no. 1 and hence issue of limitation was rightly decided by Ld. Sole Arbitrator and challenge raised in the petition is liable to fail in view of the settled position of law. Ld. Counsel for claimant/respondent no. 1 argued that claim no. 1 was admitted by petitioner before Ld. Sole Arbitrator and similarly in the present petition also petitioner has not disputed the same. Ld. Counsel for claimant/respondent no. 1 argued that the challenge to award on claim no. 2 is premised on the ground that the work of community centre was not part and parcel of the agreement in question and hence it could not have been arbitrated upon. In para no. 50 of impugned arbitral award, detailed findings in this regard are given and Ld. Sole Arbitrator relied upon the letters written by petitioner giving directions to claimant/ respondent no. 1 regarding the community centre work whereas Ld. Sole Arbitrator further relied upon the evidence in the nature of the bills and letters filed on arbitral proceedings record by claimant/ respondent no. 1 to hold that claimant/respondent no. 1 is entitled for the amount as claimed under claim no. 2. Also was held in the arbitral award that the work of community centre is also of the same project and the land which was subject matter of the agreement; thus issue of the same not arising out of the contract is also of no consequence. Ld. Sole Arbitrator in para nos. 53 to 56 of the award has relied upon the evidences on record and held that claimant/respondent was entitled for the amount as per bill raised by it with respect to claim no. 3. Detailed reasons were OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 14 of 34 given in para no. 59 of award for allowing the claim no. 4 wherein reliance was placed upon the clause 2.10 of the agreement to arrive at the said finding. Such findings cannot be challenged under Section 34 of the Act. In exercise of power under Section 31(7) of the Act; Section 31(8) of the Act and Section 31A of the Act; the interest and cost were awarded by Ld. Sole Arbitrator. Ld. Counsel for claimant/respondent no. 1 prayed for dismissal of the petition.
6. Supreme Court in Suo Moto Writ Petition (Civil) no. 3 of 2020, In Re: Cognizance For Extension Of Limitation vide order dated 10/01/2022 has excluded the period from 15/03/2020 till 28/02/2022 for computing the period of limitation for any suit, appeal, application or proceedings and the petition under Section 34 of The Act is also eligible for the same. Accordingly, present petition filed on 02/03/2022 is within the period of limitation.
7. Following are the claims laid before Ld. Sole Arbitrator by claimant/respondent no. 1:-
"(i) Claim No.1: For Rs. 6,67,535.00, which is in terms of services rendered by it, as per agreement dated 11.12.2017.
(ii) Claim No. 2: For Rs. 2,99,078/- which is for its consultancy, for community-cum-facility centre work.
(iii) Claim No. 3: For Rs. 83,544/-, which is for the work done, for extension of housing block of 504 dwelling units, on the vacant land.
(iv) Claim No. 4: For Rs. 1,89,028/-, which is on account of GST @ 18%, on the total of aforesaid claims No. 1 to 3.
(v) Claim No. 5: For a sum of Rs. 7,51,575/-, which is on account of interest @12% per annum, on aforesaid claims OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 15 of 34 No. 1 and 2.
(vi) Claim No. 6: Cost of arbitration proceedings, and
(vii) Claim No. 7: For future interest @ 12% per annum, on the awarded amount, till the payment thereof."
8. Following are the issues framed by Ld. Sole Arbitrator:-
"1. Whether filing of the Statement of Claims by the claimant is within the time period of law of limitation? OPC
2. Whether the claimant is entitled for Rs. 2,32,224/- for the work of community hall-cum facility centre with interest? OPC
3. Whether the claimant is entitled for its other claims mentioned in the claim statement? OPC
4. Whether the respondent is liable to pay to the claimant only a sum of Rs. 7,79,795/- as alleged? OPR
5. Relief"
9. Following are the relevant excerpts in reply/written statement of petitioner to claim of claimant/respondent no. 1 before Ld. Sole Arbitrator:-
"7. That as per final bill dated 25 June 2014 (annexure C-15) the claimant in their final bill specifically mentioned that the total cost of the project is 40.10 cr. And as per the agreement the claimant is entitled for 1 percent of the net cost of the project. It is further submitted that the respondent has already paid Rs. 32,30,405/- to the claimant and now only 7,79,795/- is pending against the claimant for which the respondent has to pay the amount as per stage by stage as mentioned in agreement.
8. That while respondent proceeding towards the clearance of final payment i.e. Rs. 7,79,595/-. the GST act was introduced by the govt. of India and due to GST, the pending amount of the claimant i.e., Rs. 7,79,595 now being paid after the deduction of GST. It is pertinent to mention here that the claimant had submitted the final bill dated 25-june-2014 as per the service tax. The officials of answering authority had verbally and telephonically intimated several times to claimant to deposit the relevant details of GST and latest invoice as per GST and affidavit by stating that the claimant shall not raise any tax liability against the respondent except GST."
OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 16 of 34
10. Following is the finding of Ld. Sole Arbitrator on issue no.
1:-
"37. Issue No.1:
Whether filing of the Statement of Claims by the claimant is within the time period of law of limitation? OPC
38. The respondent, in its Statement of Defence has specifically pleaded that the respondent, as per final pay bill of the claimant, was proceeding to pay the remaining amount of Rs.
7,79,595/- to the claimant; that its officials had intimated the claimant several times, to sent the details of service tax, GST and latest invoice etc. and for the want thereof, that amount was not being released to the claimant. It is therefore, an acknowledgement on the part of the respondent, to pay that remaining amount to the claimant, which was not being paid for want of some compliance on the part of the claimant. Therefore, the cause of action, in favour of the claimant, was continuous and consequently it cannot be said that the filing of claim statement is barred by time. Even during the pendency of these proceedings, there was continuous acknowledgement on the part of the respondent. Therefore, the filing of the claim petition is within the period of limitation."
11. Section 21 of The Act provides that unless and otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which the request for that dispute to be referred to the arbitration is received by the respondent. Limitation in respect of which a request is made by one party to other party to refer such dispute to the arbitration stops when such notice is received by other party.
12. Bombay High Court in the case of Bhanumati J. Bhuta vs Ivory Properties & Hotels Pvt. Ltd., 2020 SCC Online Bombay 157 has held that the arbitral proceedings commence in respect of OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 17 of 34 dispute when notice invoking of arbitration agreement is received by other side.
13. Annexure C-20 to Statement of Claim of claimant/ respondent no. 1 before Ld. Sole Arbitrator is the copy of notice dated 18/06/2016 finding mention inter alia of the request of claimant/respondent no. 1 to the CEO of petitioner for dispute to be referred to arbitration and in affidavit of admission and denial of documents of claimant/ respondent no. 1 before Ld. Sole Arbitrator; petitioner admitted the receipt of aforesaid copy of notice dated 18/06/2016 from claimant/respondent no. 1 for invoking arbitration clause. Within three years period of the amount becoming due the notice was received by petitioner under Section 21 of the Act from respondent no. 1/claimant invoking arbitration clause in terms of Section 21 of the Act. Elicited excerpts of the reply/written statement before Ld. Sole Arbitrator to the claim of the claimant/ respondent no. 1 also makes it vivid and clear that admitted amount of Rs. 7,79,595/- after deduction of GST payable and outstanding by petitioner to claimant/respondent no. 1 remaining with the petitioner was there for which the petitioner had taken shelter for non payment to claimant/respondent no. 1 on the premise of having verbally and telephonically intimated several times to claimant/ respondent no. 1 to deposit the relevant details of GST and latest invoice as per GST and also asking to file affidavit by stating that the claimant/respondent no. 1 shall not raise any tax liability against the petitioner except GST. No fault can be found accordingly with the findings of Ld. Sole Arbitrator, elicited above, on the facet of limitation which are neither perverse nor against the OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 18 of 34 public policy of India nor against the fundamental policy of Indian law nor are these so unfair and unreasonable that it shocks the conscience of the Court.
14. Taking note of the fact that petitioner had admitted the pendency of part payment of Rs. 7,79,795/- to claimant/ respondent no. 1, as above said; Ld. Sole Arbitrator had taken up claim nos. 1 to 3 for adjudication together. In para no. 46 of arbitral proceedings record, Ld. Sole Arbitrator described how the correct figure for remaining outstanding payable amount to claimant/respondent no. 1 was Rs. 7,79,595/-; as at several locations in Statement of Defence it was described differently. Be that as it may, fact remains that Ld. Sole Arbitrator appreciated that final bill dated 25/06/2014 Ex CW1/15 for the work of EWS Housing at Omicron-I (1848 dwelling units) was for total professional fee of Rs. 40,10,000/-, of which claimant/respondent no. 1 was already paid Rs. 32,30,405/- and remaining payable fees as per final bill was Rs. 7,79,595/-; which also petitioner acknowledged in its Statement of Defence. In aforesaid final bill Ex CW1/15 dated 25/06/2014, claimant/respondent no. 1 had then also asked/ claimed payment of the then applicable service tax @ 12.36%. It is admitted fact that as on the date of said final bill dated 25/06/2014, GST was not made applicable by Government of India. Payment aforesaid remained outstanding and payable by petitioner to claimant/respondent no. 1. When claim was laid before the Arbitral Tribunal, the applicable tax in place of service tax was GST @ 18%. The finding of Ld. Sole Arbitrator with respect to entitlement of claimant/respondent no. 1 for GST @ 18% per annum on outstanding payable amount of OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 19 of 34 Rs. 7,79,595/- admittedly payable by petitioner to claimant/ respondent no. 1; cannot be found fault with. Challenge to finding of Ld. Sole Arbitrator on payable GST is without premise and petitioner cannot cry hoarse for it, more so when before Arbitral Tribunal it even had not denied its liability of GST at said rate. Annexure C-11, letter dated 21/10/2010 Ex CW1/11, filed with the claim petition by claimant/respondent no. 1 was admitted in the affidavit of admission and denial of documents of claimant/ respondent no. 1 by petitioner. Vide aforesaid letter dated 21/10/2010 Ex CW1/11, General Manager (Planning) of petitioner asked claimant/ respondent no. 1 to do the work on the drawings etc. for community hall-cum-facility centre situated in EWS Housing of Omicron Scheme; which were earlier provided by claimant/ respondent no. 1 and only upon such asking the claimant/ respondent no. 1 vide letter Ex CW1/13 dated 13/04/2011 had submitted its detailed estimates with drawings etc. to the petitioner. Vide subsequent letter Ex CW1/14 dated 06/05/2011 claimant/respondent no. 1 had also sent revised estimates for the community hall-cum-facility centre for Rs. 328.98 lakhs; which revision was because of the revision of cost index from 26% to 36%. Vide letter Ex CW1/42 dated 20/10/2011(admitted in the affidavit of admission and denial of documents of claimant/ respondent no. 1 by petitioner) petitioner allotted that very work of the community hall-cum-facility centre to M/s Sai Construction Company for Rs. 3,14,81,891.79p, being 31.75% above BOQ of Rs. 2,38,95,174/-. Ld. Sole Arbitrator appreciated that the above said documents were not denied by petitioner nor petitioner laid any evidence to come out of documentary evidence of claimant/ respondent no. 1 nor there OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 20 of 34 was any reason to discredit the same. Therefore, once the work was obtained by the petitioner from claimant/respondent no. 1 and the construction of that work of community centre was also allotted to M/s Sai Construction Company; in that event petitioner cannot be permitted to say that claimant/respondent no.1 is trying to build wrong claim, by making concocted story or by manipulating facts. It is the finding of fact by Ld. Sole Arbitrator based upon the pleadings of the parties, documents of parties and material placed before Ld. Sole Arbitrator that construction of community hall-cum-facility centre was in the area of EWS Housing of Sector Omicron-I, on land measuring 8.16 ha, which was the subject matter of agreement Ex CW1/3 between the parties to arbitration; so for this work, there was no need of any separate agreement between the parties and admittedly once there is no challenge of petitioner in counter evidence in the form of affidavit Ex RW1/A of any kind of denial to aforesaid documents nor any denial for having received the aforesaid detailed estimates and drawings etc. from respondent/claimant no. 1 nor petitioner denied the allotment of the construction work of community hall-cum-facility centre to M/s Sai Construction Company; so finding of Ld. Sole Arbitrator for entitlement of claimant/respondent no. 1 for Rs. 2,99,078/-, being 95% of Rs. 3,14,819/- i.e., 1% as fee of award sum of contract to M/s Sai Construction Company by petitioner is well reasoned, cogent and in it no fault can be found with. Challenge to said finding by petitioner is absolutely baseless.
15. For reaching finding of entitlement of claimant/respondent no. 1 for Rs. 84,544/- for claim no. 3, the appreciation of OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 21 of 34 evidences and material placed before Arbitral Tribunal is there in para nos. 53 to 56 of impugned arbitral award and with respect to that no challenge has been laid in the filed petition by the petitioner.
16. Sections 28(3) and 31 (7) of The Act read as follows:
"28. Rules applicable to substance of dispute.-- ........................................................................................................ (3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.
........................................................................................................
31. Form and contents of arbitral award.--
......................................................................................................... (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of the award to the date of payment.
Explanation.- The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978)."
17. In the case of Ashi Limited vs Union of India O.M.P. 200/2015 decided by Delhi High Court on 19/05/2020, Hon'ble Ms. Justice Jyoti Singh had also appreciated law laid by Supreme Court in the case of Sree Kamatchi Amman Constructions vs The Divisional Railway Manager (Works) Palghat & Ors. MANU/SC/0625/2010 and inter alia held as follows:
"54. In so far as the grant of interest by an Arbitrator is OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 22 of 34 concerned, the law is no longer res integra, Section 31(7)(a) of the Act clearly stipulates that unless otherwise agreed by the parties, where the Award is for payment of money, the Tribunal may grant such rate as it deems reasonable, on the whole or any part of the money and for the whole or any part of the period between the date of cause of action and the date of the Award. In the case of Jaiprakash Associates Ltd. (Jal) v. Tehri Hydro Development Corporation India Ltd., MANU/SC/0157/2019, the Supreme Court after noticing the provisions of the 1996 Act and various judgments on the issue of interest, more particularly, the recent judgment in the case of Reliance Cellulose Products Ltd. v. ONGC Ltd., MANU/SC/0777/2018: (2018) 9 SCC 266, summed up the law on interest as under:
"13. Insofar as power of the arbitral tribunal in granting pre- preference and/or pendente lite interest is concerned, the principles which can be deducted from the various judgments are summed up below:
(a) A Constitution Bench judgment of this Court in the case of Secretary, Irrigation Department, Government of Orissa vs G.C. Roy exhaustively dealt with this very issue, namely, power of the arbitral tribunal to grant pre-
reference and pendente lite interest. The Constitution Bench, of course, construed the provision of the 1940 Act which Act was in vogue at that time. At the same time, the Constitution Bench also considered the principle for grant of interest applying the common law principles. It held that under the general law, the arbitrator is empowered to award interest for the pre- reference, pendente lite or post award period. This proposition was culled out with the following reasoning:
"43 The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 23 of 34 arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point).
All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas [Seth Thawardas Pherumal v.
Union of India, MANU/SC/0070/1955 : (1955) 2 SCR 48: AIR 1955 SC 468] has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [MANU/SC/ 0004/ 1987: (1988) 1 SCC 418: (1988) 1 SCR 253] almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 24 of 34 substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
It is clear from the above that the Court decided to fall back on general principle that a person who is deprived of the use of money to which he is legitimately entitled to, has a right to be compensated for the deprivation and, therefore, such compensation may be called interest compensation or damages.
(b) As a sequitur, the arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not.
(c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principles that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. This position was made amply clear in G.C Roy case in the discussion thereafter:
"44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 25 of 34
(d) Insofar as 1940 Act is concerned, it was silent about the jurisdiction of the arbitrator in awarding pendente lite interest. However, there is a significant departure on this aspect insofar as 1996 Act is concerned. This distinction has been spelt out in Sayeed Ahmed case in the following manner:
"Re: Interest from the date of cause of action to date of award
7. The issue regarding interest as noticed above revolves around Clause G1.09 of the Technical Provisions forming part of the contract extracted below:
"G. 1.09. No claim for interest or damages will be entertained by the Government with respect to any money or balance which may be lying with the Government or any become due owing to any dispute, difference or misunderstanding between the Engineer-in- Charge on the one hand and the contractor on the other hand or with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or any other respect whatsoever."
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14. The decisions of this Court with reference to the awards under the old Arbitration Act making a distinction between the pre-reference period and pendente lite period and the observation therein that the arbitrator has the discretion to award interest during pendente lite period in spite of any bar against interest contained in the contract between the parties are not applicable to arbitrations governed by the Arbitration and Conciliation Act, 1996."
............................................................................
56. In the case of Union of India v. Bright Power Projects (India) (P) Ltd., MANU/SC/0712/2015 : (2015) 9 SCC 695, Supreme Court held that when agreement between the parties bars interest on the amounts from cause of action to the date of the Award, the Arbitrator is bound by it and cannot award interest as Section 31 (7)(a) clearly begins with the words 'unless otherwise agreed by parties'.
57. In State of Haryana v. S.L Arora & Co., MANU/SC/ 0131/2010 : (2010) 3 SCC 690, Supreme Court has held that it is OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 26 of 34 not open to the courts to interfere in the discretion exercised by an Arbitrator in granting the rate of interest. This is purely the domain, power and prerogative of the Arbitrator. Relevant part of the judgment reads as under:-
"23. The difference between clauses (a) and (b) of Section 31(7) of the Act may conveniently be noted at this stage. They are:
(i) Clause (a) relates to pre-award period and clause
(b) relates to post-award period. The contract binds and prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the Arbitral Tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post-award period.
(iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period.
In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract, as per discretion of the Arbitral Tribunal. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum."
18. As per clause 4.5 of agreement Ex CW1/3 dated 11/12/2007 inter se petitioner and claimant/respondent no. 1; the fees of consultant/claimant/respondent no. 1 were payable by petitioner within one month of submissions of bills and mode of payment was laid in clause 3 of aforesaid agreement, elicited above. Ld. Sole Arbitrator gave finding that Rs. 9,69,595/- was wrongly OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 27 of 34 withheld by petitioner; so it was deemed to be wrongful loss to claimant/respondent no. 1 and wrongful gain to petitioner for which claimant/respondent no. 1 was held entitled for interest on said wrongfully withheld amount. It was also taken note of the fact by Ld. Sole Arbitrator that even as per clause 7 of agreement, elicited above, claimant/respondent no. 1 was liable to pay penalty of 0.20 % per month of the cost of the project (as calculated for fees payment) for delay in the work by consultant/ claimant/respondent no. 1. As per clause 2.10 of said agreement, claimant/respondent no. 1/consultant was entitled for fees @ 1.0% of cost of project (excluding land cost) or 42 lacs whichever was less. Out of said fees, the penalty was 0.20% per month of the cost of said project. The penalty was so harsh that if there was delay in the work by the consultant for five months then it would have the effect that the entire fees payable to consultant/claimant/ respondent no. 1 would be adjusted in the penalty to be levied. Interest has been awarded @ 12% per annum by Ld. Sole Arbitrator on aforesaid amount wrongfully withheld by the petitioner.
19. Ld. Counsel for the petitioner did not point out any provision in the agreement inter se parties for no interest payable for any sum payable in terms of the contract or any provision prohibiting Arbitral Tribunal for award of interest in adjudication of disputes in arbitral proceedings. There was no term in the contract prohibiting award of interest for sums payable adjudicated under the contract. Respondent no. 1/claimant/ consultant was deprived of the use of the money to which it was legitimately entitled, having right to be compensated for the OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 28 of 34 deprivation and for the withheld money accordingly was necessarily required to be compensated, also in terms of interest for the payment withheld. By no figment of imagination the findings of the Arbitral Tribunal can be said to be beyond the terms of contract. Petitioner cannot cry hoarse of awarded rate of interest to respondent no. 1/claimant/consultant to be unreasonable, excessive or exorbitant. Also by no figment of imagination awarded rate of interest can be said to be unreasonable, excessive or exorbitant to compensate the respondent no. 1/claimant/consultant for deprivation of the use of the money to which it was legitimately entitled to. Grounds laid for impugning award of interest and/or rate of interest and/or period of interest do not hold water in view of elicited reasonings of the Arbitral Tribunal.
20. Section 31A of the Act embodies regime for costs and it was inserted in the Act with effect from 23/10/2015 by virtue of Section 17 of the Act 3 of 2016. It reads as under:-
"31A. Regime for costs.-- (1) In relation to any arbitration proceeding or a proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908), shall have the discretion to determine--
(a) whether costs are payable by one party to another;
(b) the amount of such costs; and
(c) when such costs are to be paid.
Explanation.-For the purpose of this sub-section, "costs" means reasonable costs relating to--
(i) the fees and expenses of the arbitrators, Courts and witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the arbitration; and
(iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award. (2) If the Court or arbitral tribunal decides to make an order as to payment of costs,-
OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 29 of 34
(a) the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or
(b) the Court or arbitral tribunal may make a different order for reasons to be recorded in writing.
(3) In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including--
(a) the conduct of all the parties;
(b) whether a party has succeeded partly in the case;
(c) whether the party had made a frivolous counter-claim leading to delay in the disposal of the arbitral proceedings; and
(d) whether any reasonable offer to settle the dispute is made by a party and refused by the other party.
(4) The Court or arbitral tribunal may make any order under this section including the order that a party shall pay--
(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings;
and
(g) interest on costs from or until a certain date. (5) An agreement which has the effect that a party is to pay the whole or part of the costs of the arbitration in any event shall be only valid if such agreement is made after the dispute in question has arisen."
21. Following is the finding of Ld. Sole Arbitrator for award of cost of Rs. 2,30,735/-:-
"62. Claim No.6 for cost of arbitration proceedings For getting its dues, the claimant has to resort for these arbitration proceedings. Rightful claim of the claimant was not paid but was wrongfully withheld, so the claimant is entitled for reasonable costs, incurred for getting the relief sought from this Tribunal. For this, the claimant must have incurred, some costs, including to pay fees to his lawyers for getting the undersigned appointed as Sole Arbitrator and also to pursue these proceedings. In this regard, the claimant has placed on record, his duly sworn affidavit mentioning the fees paid by him to his Lawyers; the amounts deposited in DIAC and other expenses etc. Undisputedly, he had to deposit Rs. 60,735/- in DIAC as Arbitrator's Fee and other cost of DIAC. As per this affidavit, he has paid Rs. 50,000/- to his Lawyer, for the proceedings before Hon'ble High Court of Delhi on his application under Section 11 of OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 30 of 34 Arbitration and Conciliation Act and Rs. 1,00,000/- for pursuing these proceedings before this Tribunal. He has also mentioned miscellaneous expenses of Rs. 20,000/-. Therefore, as per this affidavit the claimant has incurred cost of Rs. 2,30,735/-. He has also mentioned that all these payments were made by him through bank transfers. There is nothing to discredit it. Therefore, the claimant is entitled for these costs of Rs. 2,30,735/- from the respondent.
63. Here it is also noteworthy that the respondent in its Statement of Defence has admitted its liability to pay Rs. 7,79,595/- to the claimant. On its basis, this Tribunal, vide its order dated 22.06.2021 had required the respondent to pay this amount to the claimant, but despite it, said admitted amount has remained unpaid till date. Therefore, unnecessary harassment of the claimant, at the hands of the respondent, is writ at large.
64. Therefore, in the totality in the facts and circumstances of the case in hand, reasonable cost has been assessed for a sum of Rs. 2,30,735/- in favour of the claimant and against the respondent."
22. The impugned arbitral award for the cost is perfectly reasoned in terms of Section 31(3) of the Act and in no way it can be said that awarded cost are excessive yet less reasonable in terms of Section 31-A of the Act.
23. The facts and circumstances embodied in the precedents relied upon by Ld. Counsel for petitioner are entirely different and distinguishable to the facts and circumstances of the case in hand, so they are of no help to petitioner for setting aside of impugned arbitral award.
24. Supreme Court held in MSK Projects India (JV) Limited vs State of Rajasthan & Anr. (supra) that:-
"17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 31 of 34 outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See Gobardhan Das v. Lachhmi Ram, AIR 1954 SC 689, Thawardas Pherumal v. Union of India, AIR 1955 SC 468, Union of India v. Kishorilal Gupta & Bros., AIR 1959 SC 1362, Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 SC 588, Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji, AIR 1965 SC 214 and Renusagar Power Co. Ltd. v. General Electric Co., (1984) 4 SCC 679: AIR 1985 SC 1156)."
25. Supreme Court in case of Associate Builders vs. Delhi Development Authority (supra) 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.
Also was held therein that:
"33. "...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 fact 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 quantity and quality of evidence to be relied upon when he delivers his arbitral award.... Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
26. Supreme Court in case of Ssangyong Engineering & OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 32 of 34 Construction Co. Ltd. vs. National Highways Authority of India (supra) has held that under Section 34 (2-A) 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.
27. The impugned award was passed by an experienced Former District & Sessions Judge as Learned Sole Arbitrator whereas the findings were given, based on appreciation of facts, evidences and law after giving all reasonable opportunities to the parties to present their case. Not only the reasonings of Learned Sole Arbitrator are logical but all the material and evidences were taken note of by the Learned Sole Arbitrator. The Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of the Learned Sole Arbitrator, as per the law laid in the precedents, elicited herein above. Cogent grounds, sufficient reasons have been assigned by the Ld. Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 33 of 34 by Learned Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Learned Sole Arbitrator. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act; though concerted efforts have been made to give them colour to term the impugned arbitral award to be (i) perverse, over looking express terms of the contract; (ii) patently illegal and (iii) against the fundamental policy of Indian law.
28. For the foregoing reasons, the petition is hereby dismissed.
29. The parties are left to bear their own costs.
30. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL
SINGH
PAL SINGH Date: 2022.12.24
11:24:05 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 24 December, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 34/2022 GREATER NOIDA INDUSTRIAL DEVELOPMENT AUTHORITY vs M/S ADLAKHA ASSOCIATES PVT. LTD. & ANR. Page 34 of 34