Delhi District Court
Hindustan Aeronautics Limited vs Nitin Ravindra Khamkar on 5 May, 2026
IN THE COURT OF SH. PULASTYA PRAMACHALA
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
INDEX
Sl. HEADINGS Page
No. Nos.
1. Memo of Parties 2-3
2. Description of case 3
3. Brief Facts of the case 3-5
4. Grounds of challenge by Claimant 5-7
5. Grounds of challenge by Respondent 7-8
6. Reply of Respondent to the petition of Claimant 8-9
Resply of Claimant to the petition of Respondent 9-10
7. Arguments of Claimant 10-12
8. Arguments of Respondent 12-15
9. Appreciation of Arguments, Law & Facts 15-28
10. Decision 28-29
Digitally signed
by PULASTYA
PRAMACHALA
PULASTYA
PRAMACHALA Date:
2026.05.05
17:07:09
+0530
OMP (COMM.) No. 95/2022 & (Pulastya Pramachala)
OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01,
Page No.1 of 29 Patiala House Court, New Delhi
OMP (COMM) No. 95/2022
In the matter of: -
Nitin Ravindra Khamkar
Proprietor of M/s. Mandevi Building
Management Services and Managing
Director of BNK Manifold Services Pvt. Ltd.,
Having address at 178-5, Tulsi Building,
Khetwadi Back Road, Mumbai-400004.
Ph. 022-23858520,
[email protected]
...Petitioner
Versus
M/s. Hindustan Aeronautics Limited,
101, Aurobindo Place, Hauz Khas,
Delhi-110016,
Through its Resident Manager.
Ph. 011-26514604.
[email protected]
...Respondent
Date of Institution : 02.06.2022
Arguments heard on : 20.04.2026
Decided on : 05.05.2026
Decision : Petition is dismissed
AND
OMP (COMM) No. 110/2022
In the matter of: -
M/s. Hindustan Aeronautics Limited,
101, Aurobindo Place, Hauz Khas,
Delhi-110016,
Through its Resident Manager.
Ph. 011-26514604.
Email- [email protected]
...Petitioner
Versus
OMP (COMM.) No. 95/2022 & (Pulastya Pramachala)
OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01,
Page No.2 of 29 Patiala House Court, New Delhi
Nitin Ravindra Khamkar
Proprietor of M/s. Mandevi Building
Management Services
And
Managing Director
BNK Manifold Services Pvt. Ltd.,
Having address at 178-5, Tulsi Building,
Khetwadi Back Road, Mumbai-400004.
Ph. 022-23858520,
[email protected]
...Respondent
Date of Institution : 13.07.2022
Arguments heard on : 20.04.2026
Decided on : 05.05.2026
Decision : Petition is dismissed
JUDGMENT
DESCRIPTION OF THE CASE
1. Vide this common judgment, I shall decide two petitions of objections filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"), assailing the arbitral award dated 15.03.2022 passed by ld. Sole Arbitrator Sh. Birinder Singh. Both parties to the arbitration have assailed this award in respect of respective findings given against them, and favourable findings given for the opposite party.
BRIEF FACTS OF THE CASE
2. Briefly stated, Hindustan Aeronautics Limited (HAL) (herein after referred to as 'HAL' or 'respondent') invited sealed tenders in January 2019 for engagement of contract workmen on work package basis for transport, vehicle cleaner, and helper services at its Delhi offices. Mr. Nitin Ravindra Khamkar (herein after OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.3 of 29 Patiala House Court, New Delhi referred to as 'claimant'), submitted his bid as proprietor of M/s Mandevi Building Management Services (MBMS) and emerged as the successful bidder on the basis of experience, past service record with Government agencies/PSUs, and manpower credentials. Pursuant thereto, HAL issued work order dated 28.02.2019 and executed contract dated 27.03.2019 for a period of 24 months commencing from 01.03.2019, against which claimant furnished bank guarantee of Rs.5,31,689/- and commenced performance of contractual obligations. During the subsistence of work contract, HAL discovered through claimant's email dated 04.04.2019 that assets and liabilities of M/s Mandevi Building Management Services had already been transferred to a company namely M/s BNK Manifold Services Pvt. Ltd., pursuant to conversion/business transfer agreement executed prior to the tender process. HAL issued show cause notice alleging suppression of material facts, misrepresentation regarding legal status of bidding entity, concealment of transfer of statutory registrations, and fraudulent inducement in securing award of contract. Claimant denied allegations, contending that conversion from proprietorship to private limited company was merely a business restructuring, ownership and management remained with same individual, and goodwill, experience, rights, liabilities, and operational continuity stood vested in successor company. HAL rejected claimant's explanation and terminated contract on 06.03.2020 for concealment of vital information and material misrepresentation during tender process. HAL also forfeited the Bank Guarantee furnished by claimant, whereafter disputes were referred to arbitration, wherein claimant filed OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.4 of 29 Patiala House Court, New Delhi Statement of Claim. Respondent filed Statement of Defence with its counter claim.
3. Ld. Arbitral Tribunal held that arbitration proceedings were maintainable and claimant had validly invoked the arbitration clause. Tribunal found claimant guilty of suppression of material facts regarding transfer/conversion of proprietorship concern into a private limited company, and consequently upheld action of HAL in terminating the contract and invoking the bank guarantee. Notwithstanding such findings, Tribunal partly allowed claimant's monetary claims by awarding Rs.5,42,077/- towards unpaid bills and Rs.8,40,982.47/- towards GST reimbursement, subject to submission of GST challans and deposit statements. Claimant's claims for refund of Bank Guarantee and damages on account of loss of reputation, mental agony and litigation costs were rejected. The counter-claim raised by HAL for damages and compensation, with cost of litigation was also dismissed.
GROUNDS OF CHALLENGE BY CLAIMANT
4. Aggrieved by the arbitral award dated 15.03.2022, claimant has preferred the present objections under Section 34 of the Act, inter alia, on the following relevant grounds: -
i. That the reasoning of ld. Arbitrator that the respondent was within its rights to unilaterally invoke and encash the Bank Guarantee and/or without referring the dispute to Arbitration, is ex-facie contrary to the terms of the Contract (hence contrary to the fundamental policy of Indian law) and patently illegal and it is also in violation of the basic notions of justice. The invocation OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.5 of 29 Patiala House Court, New Delhi of the Bank Guarantee could be justified only in case any loss as alleged by the respondent was proved.
ii. That ld. Arbitrator himself held that no loss had been proved by the respondent and hence, ld. Arbitrator could not have upheld the unilateral invocation of bank guarantee.
iii. That ld. Arbitrator himself held that despite having acquired the knowledge of the fact of transfer of the proprietorship business to Private Limited Company, the respondent continued business and transactions with the claimant for another one year and hence clearly, Bank Guarantee could not be invoked by the respondent, as only after one year of knowledge it decided to terminate the contract.
iv. That ld. Arbitrator has not even looked into the terms of the contract and in fact effectively created a new contractual term between the parties, which did not exist.
v. That ld. Arbitrator rejected the said claim despite that he concluded as under: -
(a) The conversion of the proprietorship into the private limited company is not in breach of any contractual terms;
(b) The proprietorship concern as per the conversion agreement was still in existence;
(c) The respondent himself continued the work and transactions with the claimant for one and a half years and kept making part-
payments to the claimant.
(d) The respondent has failed to prove any loss incurred to it on account of the alleged suppression of the fact of conversion.
OMP (COMM.) No. 95/2022 & (Pulastya Pramachala)
OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01,
Page No.6 of 29 Patiala House Court, New Delhi
(e) The disputes between the parties were referable to arbitration in terms of Clause 13.1 of the GCC of Contract.
vi. That the finding of ld. Arbitrator that the subject contract was void ab initio, is based on no evidence. It was neither the case of the claimant nor the case of the respondent that the contract was void ab initio. In fact, the show cause notice on the basis. of which contract had been terminated, was based on the allegation of subletting of the contract, which reason has already been rejected by Ld. Arbitrator.
GROUNDS OF CHALLENGE BY RESPONDENT
5. Aggrieved by the arbitral award dated 15.03.2022, respondent has preferred the present objections under Section 34 of the Act, inter alia, on the following relevant grounds: -
i. That ld. Arbitrator allowed the amount of Rs. 5,42,077/- despite himself returning a finding that the Claimant had not given the true and correct details/calculation of payments made to him by the petitioner HAL. It is a settled law that a party which tries to mislead a judicial authority including by not fairly detailing the amounts claimed with the true basis thereof, is not entitled for any relief, whatsoever.
ii. That ld. Arbitrator completely ignored various terms of the gov-
erning contract including Clause 2.4 of the GCC, which clearly mentioned that the retention amount of 5% of the bill amounts shall be released only on compliance of the relevant labour laws and other statutory requirements by the Contractor. Whereas in the present case, admittedly, the contractor M/s Mandevi did not even possess the Labour Law-ESI, pending registrations during OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.7 of 29 Patiala House Court, New Delhi the terms of the said contract. As such, even otherwise, the said amount was not payable to the Claimant due to non-adherence to the terms of the contract.
iii. That ld. Arbitrator failed to appreciate that the Claimant quoted a wrong GSTN number of the Petitioner HAL and also did not submit the GST Challans. As such, it is clear that the Claimant also made a false statement on oath before the ld. Arbitrator qua payment of GST.
iv. That ld. Sole Arbitrator himself returned the finding that it was the Claimant only who had dragged the Petitioner into an unwarranted litigation. The ld. Arbitrator also recorded that the Petitioner HAL is entitled for litigation and arbitral expenses. However, the ld. Arbitrator erred while holding, on the basis of an unfounded assumption, that the bank Guarantee amount is sufficient to take care of the litigation expenses borne by the PSU.
v. That ld. Arbitrator had no jurisdiction to entertain any claim of a third party namely M/s BNK Manifold Pvt Ltd. However, the impugned award is passed in favour of, inter alia, the said third party entity which renders the said award as non est and therefore, the same is liable to be set aside on this ground alone. It is a settled law that a person which is not a party to an arbitration clause, cannot be a part of the arbitral proceedings.
REPLY OF THE RESPONDENT TO PETITION OF
CLAIMANT
6. Respondent filed the reply opposing the petition and contended that petition is not maintainable and the contentions therein are OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.8 of 29 Patiala House Court, New Delhi erroneous, contrary to law. The finding of ld. Arbitrator based on the records available before him, cannot be said to be perverse or incorrect so as to invite the jurisdiction of this court. It has been further replied that clause 10.3 of GCC in the absence of any of the situations specified in clause 2.3/10.3 of GCC, Bank guarantee could be invoked unilaterally. It has been further replied that there is no contradiction in the statement of claim and written submissions of the respondent as filed before ld.
Tribunal. All the pleadings and submissions of the respondent are based on documents, led in evidence before ld. Arbitrator. It has been further replied that claimant is not entitled to any such reliefs as prayed for in the petition. Prayer has been made to dismiss the present petition.
REPLY OF CLAIMANT TO PETITION OF RESPONDENT (HAL)
7. A reply was filed on behalf of claimant to the petition of respondent i.e. HAL. In the reply, claimant denied that petitioner (respondent in arbitral proceedings) had not acquiesced to the continuation of the contract/work with respondent. It has been replied on behalf of claimant that there was no false statement qua depositing the GST, in pleadings or written submissions. It has been further replied that petitioner (respondent in arbitral proceedings) had admitted that a sum of Rs.8,40,982/- standing due to be paid as GST. It has been further replied that impugned award is contrary to the terms of the contract and petitioner has not been able to demonstrate that the Award violates any terms of the contract between the parties. The ground itself is OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.9 of 29 Patiala House Court, New Delhi extremely vague without any material particulars to substantiate the same.
ARGUMENTS OF CLAIMANT
8. Ld. counsel for claimant argued that ld. Arbitrator had rejected the claim erroneously. Ld. counsel further argued that ld. Arbitrator wrongly held that the respondent could unilaterally invoke and encash the bank guarantee without first referring the dispute to arbitration. This is contrary to the contract, contrary to the fundamental policy of Indian law, patently illegal, and against basic notions of justice.
9. Ld. Arbitrator failed to properly consider the contractual provisions and effectively introduced a new contractual term that did not exist between the parties. The Arbitrator himself held that only loss or damages could justify recovery from the bank guarantee, yet also found that the respondent failed to prove any actual loss. Therefore, invocation of the bank guarantee could not legally be sustained. The ld. Arbitrator held & recorded that conversion of the proprietorship into a private limited company was not a breach of contract, and the proprietorship continued to exist after conversion as the respondent continued contractual dealings for about one and a half years and kept making payments, the respondent failed to prove any loss arising from alleged suppression and disputes were arbitrable under Clause 13.1 of the GCC. Despite these findings, the Arbitrator wrongly rejected the claimant's claim.
10. It was argued by claimant that the bank guarantee was furnished as security deposit under Clause 2 of the GCC. Under Clause 2.3, OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.10 of 29 Patiala House Court, New Delhi forfeiture was permissible only in case of breach, negligence, non-observance of contractual terms, unsatisfactory performance, or excess payment. Since none of these were established, invocation was impermissible. The bank guarantee expressly covered only loss, damage, costs, charges, expenses, or claims caused by breach of contract. Since the Arbitrator found no breach and no proven loss, encashment was contrary to the terms of the guarantee itself.
11. Claimant further argued that ld. Arbitrator treated the contract as void ab initio despite the fact that no such case was pleaded by either party; no evidence supporting such a finding; the respondent's own show cause notice being based on alleged subletting/assignment, which the Arbitrator rejected. The arbitrator unilaterally altered the contract, which is impermissible under Ssangyong Engineering and Construction Company Ltd. v. NHAI (2019) 15 SGC 131. Ld. counsel for claimant argued that as per judgement of State of Chhattisgarh v. SAL Udyog (P) Ltd (2022) 2 SCC 275 and Delhi Airport Metro Express Pvt. Ltd. v. DMRC (2022)4 SCC 131, an arbitral award contrary to contractual terms or going beyond the contract is liable to be set aside under Section 34. It was further argued by the claimant that the bid document only required disclosure of the nature of the bidding entity. The clauses in the conversion agreement restricting fresh assignments, operated only between the proprietorship and the company. They did not create any contractual breach vis-à-vis the respondent. The claimant remained proprietor of the proprietorship and Managing Director of the company. Since the proprietorship continued to exist under OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.11 of 29 Patiala House Court, New Delhi the conversion agreement, there was no contractual obligation to disclose transition into a private limited company. Therefore, the transition did not amount to assignment of the contract to a third party.
12. A written submission was also filed on behalf of claimant.
Written submission mentions that despite the fact that the Arbitrator himself held that there was no assignment, ld. Arbitrator failed to consider that respondent terminated the contract alleging assignment/subletting without consent. Since the Arbitrator himself held there was no assignment, the very basis of termination failed. Since the assignment allegation failed and no loss was proved, unilateral invocation of the bank guarantee was wholly illegal.
13. In support of the contention on behalf of claimant, reliance has been placed upon certain case laws, which are as under: -
i. Ssanyong Engineering and Construction Company Ltd. vs. NHAI, (2019) 15 SGC 131 ii. State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275 iii. Delhi Airport Metro Express Pvt. Ltd. Vs. DMRC, (2022)4 SCC
131.
iv. Uflex Ltd. v. Govt. of Tamil Nadu, (2022) 1 SCC 165.
ARGUMENT OF RESPONDENT
14. Per contra, ld. counsel for the respondent argued that petition under Section 34 of the Arbitration and Conciliation Act, 1996 is wholly misconceived and it fails to satisfy the limited grounds warranting judicial interference with an arbitral award as settled OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.12 of 29 Patiala House Court, New Delhi by the Hon'ble Supreme Court. It was contended that findings of ld. Arbitrator are neither contrary to the terms of the contract nor patently illegal, rather same are just, reasoned, and in consonance with the fundamental policy of Indian law. Respondent maintained that contractual provisions, particularly Clauses 2.3 and 10.3 of the GCC, expressly empowered forfeiture of the bank guarantee and termination of the contract in the event of breach, negligence, or non-observance of contractual terms, and that invocation thereof was justified in view of deliberate misrepresentation, concealment of material facts, and fraudulent procurement of the tender by Claimant. It was further submitted that claimant had secured the work order, by suppressing its true status and submitting the bid in the name of a defunct proprietorship concern, which had a direct bearing on its eligibility, and had such true facts been disclosed, it would neither have qualified technically nor been awarded the contract. Respondent argued that proof of actual loss was immaterial in the light of the clear contractual right to invoke the bank guarantee upon breach and that termination did not require prior invocation of the arbitration clause once fraud and suppression stood established. Respondent also opposed claimant's claim for principal amount, interest, and litigation costs, asserting that no party guilty of fraud, concealment, and misrepresentation could be permitted to derive benefit from its own wrongful acts. It was additionally contended that the ld. Arbitrator erred in awarding unpaid bills and GST amounts despite recording findings of fraud against claimant/Claimant, particularly when Claimant had allegedly furnished incorrect GST particulars and failed to OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.13 of 29 Patiala House Court, New Delhi submit requisite challans under the contract. On these grounds, respondent prayed for dismissal of the petition and maintained that arbitral award, insofar as it rejected Claimant's substantive claims, arguing that same does not suffer from perversity or patent illegality warranting interference.
15. Apart from reiterating the facts as pleaded in the reply, written submission was filed on behalf of the respondent, mentioning that the portion of the award impugned by the respondent, is against public policy. It has been further mentioned that a person who admittedly, is guilty of misrepresentation, fraud, and concealment, cannot be made to avail the advantage in the cases of commercial transactions.
16. In this regard, respondent further mentioned that the invocation of Bank Guarantee is completely dehors/independent of any loss/damage or cost suffered and such invocation is an entitlement out of contractual breach simpliciter. Section 28(3) of the Arbitration and Conciliation Act, 1996 mandates that the Arbitrator shall decide the lis between the parties on the basis of the terms and conditions of the Contract. Since the contract in question provided an unequivocal right to respondent to invoke the Bank Guarantee in case of a breach and since such invocation or receipt of amount of the Bank Guarantee was not subject to any loss/damage or costs, ld. Arbitrator could not have violated such contractual right of respondent by holding that the amount of the said Bank Guarantee should be set-off towards litigation costs borne by respondent. It has been further mentioned that there cannot be any acquiescence against law and therefore, once OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.14 of 29 Patiala House Court, New Delhi the contractor was not holding the necessary labour law licenses and registrations to provide the manpower, under no circumstances, it was entitled to claim any benefit/gains against provisions of such services.
17. The written submission filed on behalf of respondent mentions that present petition is an attempt to invite the Court to re- appreciate evidence, re-examine measurements, recalculate quantities, and reassess findings on alleged prejudice and mala fide conduct of officers of respondent, all of which were extensively considered and conclusively determined by Arbitral Tribunal. Reliance was placed upon the case titled as Uflex Ltd. v. Govt. of Tamil Nadu, (2022) 1 SCC 165, to submit that in Courts must exercise restraint in interfering in tender matters. The parties are governed by the principles of commercial prudence and to that extent, principles of equity and natural justice have to stay at a distance.
18. In support of the contention on behalf of respondent, reliance has been placed upon certain case laws, which are as under: -
i. Ssanyong Engineering and Construction Company Ltd. vs. NHAI, (2019) 15 SGC 131 ii. State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275, iii. Delhi Airport Metro Express Pvt. Ltd. Vs. DMRC, (2022)4 SCC 131, APPRECIATION OF ARGUMENTS, FACTS & LAW
19. The crux of the legal principles explained by superior courts in respect of ambit of Section 34, is that Arbitrator is a Judge of the OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.15 of 29 Patiala House Court, New Delhi 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, even if the 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 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.
20. In Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, Court held that an award could be said to be against the public policy of India, inter alia, in the following circumstances:-
"1. When an award is, on its face, in patent violation of a statutory provision.
2. When the arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute.
3. When an award is in violation of the principles of natural justice.
4. When an award is unreasonable or perverse.
5. When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act.
6. When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court."
21. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India, OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.16 of 29 Patiala House Court, New Delhi 2019 SCC OnLine SC 677, 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 was 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.
22. In the present case, on the basis of respective contentions, ld.
Arbitrator framed following issues: -
"1. What is the effect of conversion of petitioner's (claimant) sole proprietorship concern M/s. Mandevi Building Management Services into a limited company under the name and style M/s BNK Manifold Services Pvt. Ltd., on the contract agreement dt. 27.03.2019 entered into between the parties? OPR
2. Whether termination of contract and invoking of Bank Guarantee unilaterally by the Respondent/Opposite Party without resorting to dispute redressal mechanism is illegal and invalid as alleged? OPC
3. Whether the said conversion amounts to assigning of the contract without consent of the Respondent/Opposite Part? OPR
4. Whether the claimant has committed any breach of contract by converting his firm into a Pvt. Ltd. company and the opposite party has suffered any damages thereby? OPR OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.17 of 29 Patiala House Court, New Delhi
5. Whether present arbitral proceedings are not maintainable for want of locus standi and cause of action? OPR
6. Whether the claimant has supressed the material facts from this arbitral tribunal, if so, its effect? OPR
7. Whether claimant is entitled to relief as prayed for? OPP
8. Whether the Respondent/Opposite Party is entitled to the couner claim as set up in Statement of Defence? OPR
9. Relief?"
23. While deciding Issue No.1, ld. Arbitrator observed that: -
"Issue No.1 ..............
There is no doubt that minute perusal of Agreement dated 16.05.2017 (Ex.C8) shows that the proprietorship concern was to stay in passive existence till 31.03.2020. This passive existence was maintained in order to enable the said concern to complete its pending obligations and with a definite proviso that no new assignment shall be taken by the said proprietorship concern. This is what Clauses 9 & 10 of the said Agreement provide. Thus by all practical intents and purposes, the said proprietorship concern ceased to exist at the time of initiation of tendering process by the respondent HAL. When it was not in existence, at the time of. initiation of tendering process, its conversion into a Pvt. Ltd. Company much prior to that would not raise any issue as to whether it had any effect on the impugned contract."
24. While deciding Issues No.2 & 6, ld. Arbitrator observed as under: -
"Issue No.2 & 6 .............. The admitted facts of the case leaves no manner of doubt that the material facts were not disclosed about its conversion into a Pvt. Ltd. Company. Had the said factum been disclosed that would have entailed complete OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.18 of 29 Patiala House Court, New Delhi disqualification and the tender was to be simply rejected because the company was ineligible even to apply for allotment of tender. To cover this gap, the device of extinct proprietary concern was put into operation by the claimant albeit to achieve the desired result i.e. of allotment of work order. The claimant is found to have deliberately mis- represented the facts and applied for the tender surreptitiously in the name of erstwhile proprietorship firm M/s. Mandevi Buildings Management Services which had in fact ceased to exist. He intentionally concealed the said fact and obtained the work order and entered into impugned agreement with the respondent as proprietor of defunct firm on the basis of experience and business turnover of sole proprietorship firm in comparison to the two years old company i.e. M/s. BNK Manifold Management Services Pvt. Ltd. ........
Non disclosure of the admitted position thus is nothing but a clear cut contrivance to circumvent the essential stipulation of eligibility to participate in technical bid. Clause 14 of the bid document (Ex.C2) clearly mandates the bidder to observe highest standard of ethics during procurement and execution of contract wherein 'fraudulent practice' has also been defined to mean misrepresentation of facts in order to influence procurement process. A bidder during the course of the bid must make a full and complete disclosure of all facts which have bearing on the contract. Once it is established that he violated the mandatory terms and conditions of the tender, he cannot say that the termination is bad without resorting to the dispute redressal mechanism. There is no need for the Respondent HAL to invoke the arbitration clause for terminating the contract. .........
.................. It was after receiving reply of the claimant to the said notice (Ex.C5) that the action of termination of contract was taken. The termination as such is held to have been done after following due process of law i.e. after affording due opportunity of hearing to the claimant which as such cannot be held bad in the eye of law."
.................. The acceptance of bid of the claimant in such circumstances and execution of the contract with it was void OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.19 of 29 Patiala House Court, New Delhi ab initio and that be so, the Respondent HAL was very much within its rights to terminate the impugned contract and also to invoke to bank guarantee. Even the Hon'ble Supreme Court in Dr. Jain Video's case (Writ-C No.68462 of 2013) has observed that 'where the bidder has failed to maintain an ethical standard of behaviour and has indulged in a prohibited practice, the Authority is permitted to recoup itself by way of damages through the bid security. ......."
25. While deciding Issue No.4, ld. Arbitrator observed that: -
"Issue No.4 In view of the admitted facts of the case, since the sole proprietorship concern was converted into a Pvt. Ltd. Company in the year 2017 and all its assets and liabilities having been admittedly taken over in the year 2018 vide Business Transfer Agreement dated 18.10.2018 (Ex.C24), that is before inviting of tenders by Respondent HAL in January 2019 and before execution of the agreement dated 27.3.2019(Ex.C25), for awarding of work order, we cannot say that there was any breach of contract in the case because said contract was not in existence at the time of the conversion of the firm into a Pvt. Ltd. Company. The question of breach would arise on omission / commission which occur during the subsistence of contract agreement. Admittedly, during subsistence of the contract agreement, there was no breach of any of the terms of the contract. The contract no doubt was procured by misstatement of the facts regarding proprietary concern which at that time was extinct. From the admitted matrix of the case which need not be repeated again, it is quite evident that the contract dated 27.3.2019 is void ab initio and thus has no legal consequences. The question of breach thus would not arise because a legally enforceable contract never came into being."
26. While deciding Issue No.5, ld. Arbitrator observed that: -
"Issue No.5 ............ It is extinction of the firm which concomitantly is birth of the company. In fact, these are like twains which never met and could never meet. Even otherwise also law is well settled that the Proprietary Concern and Pvt. Ltd.
OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.20 of 29 Patiala House Court, New Delhi Company are different and distinct from each other and cannot be said to have the capacity to succeed one another. .....................No doubt there was no agreement of arbitration between M/s. BNK Manifold Services Pvt. Ltd. and respondent HAL. In absence of such an agreement between these two, the invocation of arbitration and filing of Statement of Claim in pursuant thereto qua the Pvt. Ltd. Company is not maintainable even if it is managed and held by the same person. Similar statement can also be made in respect of Statement of Claim filed on behalf of M/s. Mandevi Business Management Services on the ground that since it was non existent at the time of bid and at the time of execution of agreement, any claim raised on its behalf would be bad in the eye of law and hence not maintainable. But I am not inclined to take such a technical view in the peculiar facts and circumstances of the case. In this case, the claimant Mr. Nitin Ravindra Khamkar is found or rather admitted to have submitted the bid for tender in the name of erstwhile firm M/s. Mandevi Business Management Services and secured the work order on the basis of representations made by it regarding its experience in the given field of services and having providing services to the Govt. agencies/ PSUs in the past and manpower available with it. It also stands established on record and rather admitted that at no stage of the tendering process the factum of the said firm been converted into a Pvt. Ltd. Company was ever disclosed.........
Here the date of knowledge and date of action by the Respondent HAL is required to be taken note of. Despite having come to know about it on 4 th of April 2019, it continued making payments to the claimant up to April 2020 against vouchers submitted by him for the work allegedly executed by him. The last payment of Rs.3,77,784/- was made on 09.04.2020 i.e. more than 6 months after service of show cause notice and even after termination of the contract on 06.03.2020. Not only this even show cause notice was served on 16.09.2019 i.e. after lapse of a period of 5 months after knowledge of faux pas of the claimant. .........
OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.21 of 29 Patiala House Court, New Delhi To suffer repetition, notwithstanding the fact of disclosure of existence of newly formed company by the claimant to whom the payment continued to be made by HAL for the work executed, it remains a fact that resolution of dispute was referred to this Tribunal which had been established under order of the Hon'ble High Court of Delhi, and divergence whereof has not been echoed by either of the parties during the entire proceedings thus whatsoever may be the worth of the contract in legal parlance, it cannot be questioned that dispute between the parties was referred to this tribunal and given task has been accomplished without any challenge ever made by the parties in terms of provisions of the Act. This invocation of arbitration and filing of claim thereto is hence held maintainable. This issue is accordingly decided in favour of the claimant and against the Respondent HAL."
27. While deciding Issue No.7, ld. Arbitrator observed that: -
"Issue No.7 ...... the Respondent HAL has been found to have continued its dealing with the claimant even after coming to know about his having secured contract agreement in question by suppressing material facts which had a cascading effect on the question of awarding of work order to the defunct Proprietorship Concern and had also been making payments for the bills submitted by it. The last payment of Rs.3,77,784/- was admitted to have been made by the Respondent HAL to the claimant on 09.04.2020 i.e. more than 6 months after service of the Show Cause Notice dated 16.09.2019 (Ex.C5) and even after termination of the contract on 06.03.2020. Not only this even Show Cause Notice for termination of contract was served after lapse of a period of 5 months after knowledge of faux pas of the claimant. On the face of the continued dealings of the Respondent with the claimant after service of Termination Notice, in the peculiar facts and circumstances of the case, to my mind the denial of relief regarding payment for the work done, would amount to undue enrichment of the respondent for not making payment which are not disputed and pertains to the work done by the claimant under the aegis of the Respondent. Conversely undue loss would incur if payment of the work OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.22 of 29 Patiala House Court, New Delhi done under command of the Respondent payment for which is concededly due, is not made. As such the claimant is held entitled to the amount of the bills submitted by him for the work done by him and that too the payment of which is also not disputed."
28. While deciding Claim No.1: Arrears of Bill Amount, ld.
Arbitrator observed that: -
" Claim No.1: ARREARS OF BILL AMOUNT .......................... Since claimant has failed to give fair details of the principal amount of outstanding bills, reliance has to be placed upon the details of the amounts of pending bills as given by the respondent HAL.
............... The respondent has admitted the said amount to be standing due towards it on account of claimants remaining unpaid bills. Since the said amount is admitted to be due towards the respondent, the claimant is held entitled for payment of the same."
29. While deciding Claim No. 2, ld. Arbitrator held as under:-
"Claim No.2 - REPAYMENT OF BANK GUARANTEE AMOUNT ALONG WITH DAMAGES FOR LOSS OF REPUTATION In view of my finds of Issue No. 2 and 6 above, the respondent HAL was very much within its rights to terminate the impugned contract and also to invoke the Bank Guarantee. Hence claimant is held not entitled for repayment of bank guarantee amount."
30. While deciding Claim No.3, ld. Arbitrator held that: -
"Claim No.3 Repayment of GST, ... the claimant is held entitled for reimbursement of said admitted amount of Rs.8,40,982.47 towards GST subject to submission of GST Challans and monthly statement of GST deposited by him."
31. While deciding Issue No.8, ld. Arbitrator observed that: -
"There is no cogent and convincing evidence led by the Respondent to prove this issue. Merely on the basis oral assertions and oral evidence, no finding on this issue can be OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.23 of 29 Patiala House Court, New Delhi returned in favour of the Respondent. However considering the facts and circumstances of the case, the Respondent HAL of-course is entitled to reimbursement costs of litigation which has been borne by it in the shape of the arbitration fees as well as the counsel fees. To this it is safely held that the reimbursement towards that stands made out from the amount of the bank guarantee invoked by it. This issue is decided against the Respondent HAL."
32. The conclusions given by ld. Arbitrator are reproduced as under:-
"i) That the claimant is entitled to invoke the Arbitration Clause 13.1 of the contract agreement and the plea that the arbitration proceedings are not maintainable for want of locus-standi and cause of action is overruled.
ii) That the Respondent HAL was very much within its rights and entitled to terminate the contract and also to invoke the bank guarantee without resorting to dispute redressal mechanism in as much as the claimant has been found to have suppressed the material facts which had a cascading effect on the question of grant of work order in the case.
iii) That the claimant is entitled 'to recovery of Rs.5,42,077/-
only as arrears of the amount of bills submitted by him.
iv) That the claimant is entitled for reimbursement of amount of Rs. 8,40,982.47 towards GST subject to submission of GST Challans and monthly statement of GST deposited by him.
v) That the claimant is not entitled to recovery of Rs.50,000/-
as damages for alleged loss of reputation and mental agony nor to recovery of costs of litigation of Rs.1 lacs.
vi) That Respondent HAL is not entitled to counter claim as set up in defense."
33. Thus, it can be ascertained from above-mentioned observations that ld. Arbitrator did not hold that proprietorship firm continued to exist. Even findings regarding breach of contract, was not meant to give any clean chit to the claimant. It was so observed in the context of the issue that whether at the time of conversion OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.24 of 29 Patiala House Court, New Delhi of proprietorship firm into a company, there could be any case of breach of contract. Claimant has mischievously quoted from the award in bits and pieces, and has added them together, so as to present altogether contradictory interpretation of the findings given by ld. Arbitrator.
34. The findings of the Arbitral Tribunal insofar as it conclusively finds that claimant secured the contract by suppression of material facts and misrepresentation at the very inception of the tender process by bidding in the name of M/s Mandevi Building Management Services despite prior transfer of business, assets, liabilities, and statutory registrations to BNK Manifold Services Pvt. Ltd., thereby fraudulently availing goodwill, commercial standing, and eligibility credentials attached to the erstwhile proprietorship concern for obtaining award of contract, there cannot be any divergence from the view taken by ld. Arbitrator. Rather, the kind of justification given by claimant, and the arguments made to assail such findings, show the audacity of the claimant.
35. The given kind of concealment was not a mere technical lapse, but it went to the roots of contractual formation, vitiating the tender process itself, and striking at principles of fairness, transparency, and integrity governing public procurement. Therefore, findings on the action of Hindustan Aeronautics Limited in terminating the contract and invoking the bank guarantee, cannot be termed as perverse at all. Ld. Arbitrator has given sufficient reasons, for reaching such conclusion. He did not create any new contractual term, rather he gave findings on the OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.25 of 29 Patiala House Court, New Delhi basis of given act of claimant and consequence of the same in the contract. Here, it is relevant to mention that when claimant responded to NIT, in order to bid for the tender/work, it was proposal from him, which was accepted by respondent, thereby culminating into a contract. Subsequent there to, work contract was signed, which was another piece of contract. Claimant was bound to follow the terms of bidding contract, which required to disclose true and correct facts and, that condition was breached by claimant. The declaration of contract being void ab initio, is to be seen in the context of work contract. In any case, claimant cannot seek benefit on the basis of his own misdeeds, taking cover of such findings given by ld. Arbitrator.
36. Release of limited payments by HAL did not amount to waiver, acquiescence, or acknowledgment of claimant's entitlement to continue with the contract, because such payments were made purely on equitable considerations to safeguard interests of workmen and prevent hardship to labourers engaged at site, without prejudice to HAL's contractual and legal rights. Once fraudulent concealment and breach of bidding terms and conditions stood established, invocation and forfeiture of bank guarantee by HAL remained contractually justified, the same having been furnished as security against breach, misrepresentation, non-performance, and non-observance of contractual obligations.
37. The apex court in the case of Fateh Chand v. Balkishan Dass, 1963 SCC OnLine SC 49, held as under: -
"The measure of damages in the case of breach of a stipulation OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.26 of 29 Patiala House Court, New Delhi by way of penalty is by Section 74 reasonable compensation not exceeding the penalty stipulated for. In assessing damages the Court has, subject to the limit of the penalty stipulated, jurisdiction to award such compensation as it deems reasonable having regard to all the circumstances of the case. Jurisdiction of the Court to award compensation in case of breach of contract is unqualified except as to the maximum stipulated; but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. The section undoubtedly says that the aggrieved party is entitled to receive compensation from the party who has broken the contract, whether or not actual damage or loss is proved to have been caused by the breach. Thereby it merely dispenses with proof of "actual loss or damage"; it does not justify the award of compensation when in consequence of the breach, no legal injury at all has resulted, because compensation for breach of contract can be awarded to make good loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach."
38. As far as counter claim made by respondent is concerned, ld.
Arbitrator though recognised rights of the respondent to forfeit the bank guarantee, but at the same time he also noted that respondent did not bring evidence of loss. Hence, the amount of Rs. 31,22,670/- with Rs. 5 lacs as compensation, as claimed by respondent, was not awarded to it. Respondent had already forfeited bank guarantee in the sum of Rs.5,31,689/-, and ld. Arbitrator adjusted the litigation cost in the same. In absence of any specific evidence of additional loss, no questions can be raised against the decision taken by ld. Arbitrator for not passing any Award for damages in favour of respondent, as per claim made by respondent. My attention was not taken to any such evidence, if placed before ld. Arbitrator, nor is there reference to OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.27 of 29 Patiala House Court, New Delhi any such evidence in the pleadings of respondent. As far as cost of litigation is concerned, ld. Arbitrator did not say that respondent was not entitled to it. Rather it was observed that respondent was entitled to reimbursement of cost of litigation in the shape of arbitration fee and counsel fee. Ld. Arbitrator was satisfied that such amount stood made out from the amount of Bank Guarantee. Such finding in my opinion is not to be interefered with, as even if for the sake of argument, any infirmity can be found therein, it is not every minor infirmity which requires to be interefered u/s. 34 of the Act. It must be kept in mind that respondent had the benefit of appropriating amount of more than Rs.5 lacs, without establishing any actual loss.
39. Ld. Arbitrator awarded amount to claimant, only on the basis of admitted situation that such amount was claimed in respect of work already availed by respondent. Hence, even this decision cannot be termed to be perverse. GST has been awarded, on the condition of furnishing deposit receipt of the same, which does take care of respondent's concern about furnishing correct GST particulars of respondent. If claimant does not deposit GST with correct particulars of respondent mentioned therein, then he obviously cannot take benefit of such part of the award. Therefore, there is no good reason to interfere with such part of the award as well.
DECISION
40. In view of my foregoing discussions, observations and findings, I find that award in question does not call for any interference OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.28 of 29 Patiala House Court, New Delhi under Section 34 of the Act. Hence, both above-mentioned petitions are dismissed. Copy of this judgment shall be placed in both the case files.
Both files be consigned to record room after due compliance.
Digitally signed by PULASTYAPULASTYA PRAMACHALA PRAMACHALA Date:
2026.05.05 17:07:18 +0530 Pronounced in the (PULASTYA PRAMACHALA) Open Court on this District Judge (Commercial Court)-01, 05th Day of May, 2026 Patiala House Court, New Delhi OMP (COMM.) No. 95/2022 & (Pulastya Pramachala) OMP (COMM.) No. 110/2022 District Judge (Commercial Court)-01, Page No.29 of 29 Patiala House Court, New Delhi