Delhi District Court
Chandigarh Road vs Central Ground Water Board (Cgwb) on 25 March, 2023
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 08/2022
M/s CH Electricals
2027 A/10
Chandigarh Road
Baldev Nagar, Ambala City,
Haryana .... Petitioner
Versus
Central Ground Water Board (CGWB)
Bhujal Bhawan, Faridabad-121001 .... Respondent
Date of Institution : 15/01/2022
Arguments concluded on : 16/02/2023
Decided on : 25/03/2023
Appearances : Sh. Pulkit Thareja, Ld. Counsel for petitioner.
Sh. Ram Kawar, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner had filed the 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 29/06/2021 of Ld. Sole Arbitrator Sh. Anupam Prasad, Chief Engineer, Central Water Commission in the matter titled 'M/s CH Electricals, Ambala City, Haryana vs Central Ground Water Board, Bhujal Bhawan, Faridabad'; as well as for appointment of neutral Arbitrator to adjudicate the dispute between the parties afresh.
OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 1 of 352. Despite opportunities written arguments were not filed on behalf of respondent. I have heard Sh. Pulkit Thareja, Ld. Counsel for petitioner and Sh. Ram Kawar, Ld. Counsel for respondent and perused the record of the case, including petition, its reply, arbitral proceedings record, filed brief written arguments of petitioner Counsel, relied upon precedents on behalf of parties and given my thoughtful consideration to the rival contentions put forth.
3. Adumbrated in brief, following the relevant material brief facts of the case of petitioner. Tender No. 07/2016-17/MMS Package No. 2 (ID No.2016_CGWB_115321_2) was issued by respondent for construction of Exploratory and Observation Wells in Arsenic affected areas of Bihar, Jharkhand and West Bengal. Technical bids were opened on 15/09/2016. Petitioner was awarded the work by respondent for construction of 40 Exploratory and 9 Observation Wells in Arsenic affected areas of Jharkhand vide letter of acceptance dated 09/09/2016. Petitioner wrote letter regarding submission of complete work plan of operation and list of available machinery, assuring the work will be completed within seven months subject to availability of site. Parties to the arbitration and lis entered into agreement on 02/05/2017. The total cost of the work awarded to the petitioner was Rs. 3,76,34,000/- inclusive of all taxes, duties, service charges etc. Petitioner was under an obligation to submit performance bank guarantee of 10% of contract price which was deposited with validity up to 31/01/2019 to respondent. The work of contract was to be completed within 270 days of date of OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 2 of 35 issuance of letter for commencement of work. All the packages were to be executed simultaneously. The milestone was to be treated as complete only when all the ordered items of BOQ were complete including submission of item wise data and BDR. If the bidder accelerated the cumulative progress of work and completed the work within stipulated period of 270 days; withheld amount was to be released. Petitioner was to follow the steps specified in "scope of work and technical specification" and the dimensions, material, lodging development, pumping and other parameters" as specified in BOQ/financial tender format. The pipes, gravel, platform, well cap etc. was to conform to the specifications mentioned in BOQ/tender document. The safety code provided in the BOQ/tender document was to be adhered as per guidelines issued by Apex Court for prevention of fatal accidents of small children due to their falling into abandoned bore wells and tube wells. No advance payment was agreed upon between the parties to arbitration and lis. Petitioner/claimant was to submit the bill on achievement of each milestone for release of payment. The payment was to be released within 30 days from receipt of bill provided that wells were completed in all respect including submission of data and BDR of each well. On arising of dispute inter se parties to agreement it was to be referred to Dispute Resolution Board. If such dispute was not resolved in Dispute Resolution Board then respondent had to appoint the Arbitrator. Petitioner had to contact authorized official of the board in connection with any clarification in respect of any matter connected with the contract. Arbitrator had full power to open up, review and revise any decision and any recommendation of the conciliator related to the dispute. The OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 3 of 35 mode of measurement was that the petitioner shall be paid on actual measurement of finished work on the basis of quoted rates and the monitoring and measurement criteria of different activities or exploratory drilling was to be site selection report(s) duly signed by the representatives of petitioner, State Government and respondent. In the course of work of contract, disputes arose inter se parties to arbitration and lis which could not be resolved by Dispute Resolution Board. Respondent sent final notice on 20/11/2018 regarding rescinding of contract. Petitioner wrote letter on 29/12/2018 for refund of excess amount of forfeited performance guaranteed, which was so done by respondent vide letter dated 20/11/2018 and the request of petitioner dated 24/11/2018 for reconsideration of closure of contract and forfeiture of performance guarantee did not find favor with respondent. Petitioner sent legal notice dated 20/12/2018 to respondent seeking recovery of monies amounting to Rs. 33,92,058/- with interest as prescribed under Section 16 of MSME Act, multiplied by 3 which amounts to 36% per annum. Respondent sent reply dated 28/01/2019 to petitioner to the legal notice dated 20/12/2018. In March, 2019 Ld. Sole Arbitrator was appointed by respondent. Ld. Sole Arbitrator requested to respondent to depute any official of respondent to brief Ld. Sole Arbitrator. Arbitral proceedings culminated in the impugned arbitral award.
4. Petitioner has impugned the arbitral award mainly on the following grounds and Ld. Counsel for petitioner has argued on such premise. Impugned arbitral award is liable to be set aside as Ld. Sole Arbitrator was unilaterally appointed by respondent and OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 4 of 35 not by mutual consent per contra to law laid by Supreme Court in the case of Perkins Eastman Architects DPC & Anr. vs HSBC (India) Ltd., AIR 2020 SC 59 and Delhi High Court in the case of Proddatur Cable TV Digi Services vs SITI Cable Network Limited, 2020 SCC OnLine Del 350. The independence and impartiality of the arbitrators are hallmarks of any arbitration proceedings and absence of the same would render the appointment of an arbitrator, invalid. Opportunity was not given to petitioner to lead evidence before Ld. Sole Arbitrator. Finding of Ld. Sole Arbitrator that there was no evidence was completely perverse and liable to be set aside. It not only shows lack of opportunity but also shows bias in favor of the Government body. Ld. Sole Arbitrator did not furnish any disclosure under the Sixth Schedule of the Act which was the mandatory requirement and cannot be dispensed with. Impugned arbitral award is perverse, illegal, contrary to agreement inter se parties and public policy of India, so liable to be set aside. Ld. Sole Arbitrator failed to follow the procedure established by law to reach the stage of passing of award. Ld. Sole Arbitrator failed to record evidence and gave no opportunity to claimant/petitioner to prove their case. Only in two hearings the award was passed. The proper procedure as stipulated in the Act was not followed. Petitioner even did not get an opportunity to present its case. In his own whims and fancies Ld. Sole Arbitrator decided the matter without application of mind. Award is in violation of principles of natural justice. Principles of natural justice are one of the fundamental principles of law, and compliance of same is fulcrum of any judicial process. Impugned arbitral award is illegal, contrary to public policy and passed only after one hearing. Letter of Ld. Sole OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 5 of 35 Arbitrator to Chairman of respondent to depute an officer of the respondent for a meeting to brief Ld. Sole Arbitrator clearly indicates bias and partiality and also depicts gross miscarriage of justice. Ld. Sole Arbitrator did not even provide orders passed by him on two hearings mentioned in the arbitral award. Petitioner was kept in dark with respect to said orders in said two hearings that took place before Ld. Sole Arbitrator. In absence of any opportunity to lead evidence before Ld. Sole Arbitrator, petitioner was unable to present his case and impugned award is liable to be set aside under Section 34(2)(a)(iii) of the Act. Ld. Sole Arbitrator was guided by irrelevant considerations and wrongful application of law as well as facts and impugned award suffers from complete non application of mind. Respondent was obligated to provide the petitioner the sites which were free from any obstruction. Ld. Sole Arbitrator failed to consider the said facet. Petitioner while drilling through the ground on multiple sites, encountered hindrances thereby, due to the negligence of respondent in not providing the petitioner with approachable site, led to the inability to fulfill the obligations of the contract by petitioner. Irrespective of completing the task at other sites by petitioner; respondent did not clear dues accrued to petitioner against the bills on one pretext or the other as per the contract and Ld. Sole Arbitrator failed to consider said facet. Ld. Sole Arbitrator completely ignored entitlement of claimant/ petitioner of Rs. 33,92,058/- pertaining to five bills raised by petitioner. Ld. Sole Arbitrator erred in holding that payment of Rs. 18,84,058/- was as per BOQ and agreed upon rates. Ld. Sole Arbitrator also erred in holding that petitioner could not provide documentary evidence of it having been legally deprived of the payment of the OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 6 of 35 original bills of Rs. 33,92,058/-. Bills of Rs. 33,92,058/- were already in possession of respondent and were timely raised by petitioner in terms of work that was completed by petitioner. Respondent forfeited the raw materials of the petitioner; withheld the performance security and delayed the release of amount towards the works carried out by petitioner but Ld. Sole Arbitrator failed to appreciate the said facet and Ld. Sole Arbitrator failed to apply judicial mind. Respondent had reduced the scope of work from the original awarded works of 49 sites to 18 sites, and rescinding of the contract and forfeiture of the performance security were indicative of an act of fraud. Petitioner was deprived of the utilization of their liquidity for any other purpose due to deposit of bank guarantee with respondent and respondent had forfeited and refused to refund the bank guarantee of Rs. 37,63,400/- which was for the original awarded works; however, irrespective of reduction of scope of work from 49 sites to 18 sites, respondent did not refund the bank guarantee or part thereof. Ld. Sole Arbitrator failed to acknowledge that respondent did not compensate for the material forfeited, idle labour and machinery at the sites which were unapproachable due to negligence of the respondent. Ld. Arbitral Tribunal failed to consider the heavy financial loss and mental harassment caused due to the negligence and delayed payments made by respondent. Ld. Counsel for petitioner relied upon the case of BBR (India) Private Limited vs S.P. Singla Constructions Private Limited, 2022 SCC OnLine SC 642 and argued that once the seat is fixed by Arbitral Tribunal under Section 20(2) of the Act, it would remain static and fixed, whereas the venue of arbitration can change and move from the seat to a new location.
OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 7 of 35Ld. Counsel for petitioner argued that vide letter dated 12/03/2019 respondent appointed Ld. Sole Arbitrator and said letter was issued from Sewa Bhawan, R.K. Puram, Delhi. Ld. Counsel for petitioner also argued that Ld. Sole Arbitrator addressed letter dated 28/03/2019 to respondent, calling for deputation of an official of respondent to meet Ld. Sole Arbitrator at Sewa Bhawan, R.K. Puram, Delhi. Mr. A.K. Agrawal vide letter dated 24/04/2019 enquired from Ld. Sole Arbitrator about the convenient date to reach Ld. Sole Arbitrator at Delhi. Ld. Sole Arbitrator addressed letter dated 10/10/2019 to petitioner from Sewa Bhawan, R.K. Puram, Delhi directing petitioner to submit statement of facts within 15 days of receipt of said letter for further action, thereby petitioner was asked to file its statements of facts in Delhi. Ld. Counsel for petitioner accordingly argued that all above said made it clear that seat of arbitration was at Delhi whereas only in view of transfer of Ld. Sole Arbitrator later from Delhi to Lucknow, the impugned award was rendered in Lucknow. Ld. Counsel for petitioner also relied upon the cases (i) Indus Mobile Distribution Private Limited vs Datawind Innovations Private Limited & Ors., 2017 (7) SCC 678 and (ii) Inox Renewables Ltd. vs Jayesh Electricals Ltd., 2019 SCC OnLine SC 2036 and argued that once the seat of arbitration is fixed, the same cannot be changed without the mutual consent of the parties. Ld. Counsel for petitioner also argued that in view of the above said grounds as premise laid for impugning arbitral award, the impugned award is liable to be set aside and relied upon the following precedents:-
1. Naresh Kanayalal Rajwani & Ors. vs Kotak Mahindra Bank Limited & Anr., Comm. Arbitration Petition (L) No. 1444 of 2019 with Interim Application (L) No. 30023 of OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 8 of 35 2021 decided by Bombay High Court on 23/11/2022;
2. Geeta Poddar vs Satya Developers Private Limited, ARB.P. 133/2019 decided by Delhi High Court on 31/08/2022;
3. Simmi Sethi vs Fullerton India Credit Co Ltd., O.M.P. (COMM) 334/2021 and IA No. 14577/2021 decided by Delhi High Court on 08/04/2022;
4. Envirad Projects Pvt. Ltd. vs NTPC Ltd., ARB.P 27/2022 decided by Delhi High Court on 18/01/2022;
5 Lalit Singla, Proprietor Arihanta Construction vs Prabhatam Advertising Pvt. Ltd. & Anr., O.M.P. (T) (COMM.) 96/2022 & I.A. 15378/2022 decided by Delhi High Court on 07/10/2022;
6. Ellora Paper Mills Limited vs The State of Madhya Pradesh, Civil Appeal No. 7697 of 2021 decided by Supreme Court on 04/01/2022.
5. Following are the relevant brief material averments in the filed reply of respondent to the petition and the arguments put forth in support thereof by Ld. Counsel for respondent. Petition is not maintainable and liable to be dismissed being filed in wrong territorial jurisdiction. Petitioner has tried to set up a false, frivolous and vague story to make unlawful gains to itself and wrongful loss to respondent. Petitioner has not come to the Court with clean hands, suppressed and concealed the material and vital facts. Petitioner has presented a distorted and incorrect version of the facts to misguide and mislead this Court. Petition is not maintainable as scope of interference in Section 34 of the Act is very limited and only the impugned award can be set aside on the grounds laid in Section 34 of the Act. The award of the work in question for construction of 40 Exploratory and 9 Observation Wells in Arsenic affected areas of Jharkhand vide letter of acceptance dated 03/04/2017; to petitioner by respondent is admitted. The existence of the arbitration clause 9.2 of the GCC of contract agreement is admitted by respondent. As per clause 9.2 of GCC of contract agreement, Chairman CGWB i.e., OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 9 of 35 respondent, shall appoint the Arbitrator. Request was sent to Ministry of Water Resources, RD & GR on 06/02/2019 for appointment of Arbitrator. It was on the request of petitioner that the Arbitrator was appointed by the higher authorities in the Ministry. During the entire period of arbitration and its two meetings dated 28/02/2020 and 10/12/2020 spanning almost 10 months, there was no point raised by petitioner regarding disclosure of Ld. Sole Arbitrator as per Sixth Schedule of the Act. Petitioner submitted the Statement of Claims to Ld. Sole Arbitrator and respondent received its copy through Arbitrator. Respondent had filed Statement of Defence with respect to Statement of Claims of petitioner before Ld. Sole Arbitrator vide letter dated 03/01/2020. Respondent denied of non providing of order sheets of proceedings by Ld. Sole Arbitrator to petitioner. Arbitral award was submitted by Ld. Sole Arbitrator vide letter dated 29/06/2021. There is nothing for the petitioner to feel aggrieved by the impugned award which is just and fair and no grounds are laid in accordance with Section 34 of the Act to set aside it. There was no bias in favour of respondent, a Government body, which can be inferred from impugned arbitral award. Contention of petitioner is wrong when fair opportunity was given to petitioner to lead evidence. Appointment of Arbitrator was legal and valid. Having participated in arbitration proceedings, the petitioner cannot be allowed to question the appointment of the Arbitrator just because the award is against him. Every case has its own material facts and the relied precedents are not applicable to this case. Impugned award is valid and not liable to be set aside. The contention of petitioner of award being perverse, illegal, contrary to agreement and OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 10 of 35 public policy of India is bald and vague liable for rejection. Ld. Sole Arbitrator followed the procedure. Petitioner filed no objection before Ld. Sole Arbitrator and instead participated in the arbitral proceedings. Despite grant of fair opportunity by Ld. Sole Arbitrator, petitioner did not present its case and led no evidence. Ld. Sole Arbitrator applied his mind in these circumstances to the material before him and passed reasoned and speaking award, followed the principles of natural justice. It is wrong to contend that the award is illegal or contrary to public policy or arbitrary. The briefing cannot be taken to or constructed to be bias or partiality or gross miscarriage of justice. Ld. Counsel for respondent prayed for dismissal of the petition. Ld. Counsel for respondent relied upon the following precedents:-
1. BGS SGS SOMA JV vs NHPC Ltd., Civil Appeal No. 9307 of 2019 (Arising out of SLP (Civil) No. 25618 of 2018) decided by Supreme Court on 10/12/2019;
2. BBR (India) Private Limited vs S.P. Singla Constructions Private Limited, 2022 (3) ARBLR 639 (SC);
3. Alchemist Ltd. & Anr. vs State Bank of Sikkim & Ors., (2007) 11 SCC 335;
4. Kanodia Infratech Limited vs Dalmia Cement (Bharat) Limited, O.M.P. (Comm.) 297/2021 & I.As 12902-
12904/2021 decided by Delhi High Court on 08/11/2021.
6. Supreme Court in case of Dakshin Haryana Bijli Vitran Nigam Ltd. vs M/s Navigant Technologies Pvt. Ltd, 2021 SCC OnLine SC 157 has held that the date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Act. It is from this date that: "(a) the period of '30 days' commences for filing an application under Section 33 for correction and interpretation of the award, or for additional award; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Act; (c) the period of OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 11 of 35 limitation for filing objections to the award under Section 34 commences."
7. 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 15/01/2022 is also within the period of limitation.
8. Respondent appointed Sh. Anupam Prasad, Chief Engineer, Central Water Commission as Ld. Sole Arbitrator for Jharkhand outsourcing work awarded to petitioner; vide letter dated 12/03/2019. Ld. Sole Arbitrator addressed letter dated 28/03/2019 to respondent from Sewa Bhawan, R.K. Puram, Delhi, calling for deputation of an official of respondent to meet him at Sewa Bhawan, R.K. Puram, Delhi. Mr. A.K. Agrawal vide letter dated 24/04/2019 enquired from Ld. Sole Arbitrator about the convenient date to reach Ld. Sole Arbitrator at Delhi at Sewa Bhawan, R.K. Puram, New Delhi. Ld. Sole Arbitrator addressed letter dated 10/10/2019 to petitioner from Sewa Bhawan, R.K. Puram, Delhi directing petitioner to submit statement of facts within 15 days of receipt of said letter for further action, whereby petitioner was asked to file its statements of facts in Delhi.
9. Section 20 of the Act is with respect to the place of arbitration and reads as under:-
OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 12 of 35"20. Place of arbitration.-- (1) The parties are free to agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property."
10. Arbitration clause no. 9.2 in agreement inter se parties to arbitration and the lis reads as under:-
"9.2 Arbitration Any dispute in respect of which the recommendation, if any, of the dispute resolution board has not become final and binding shall be finally settled in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modifications or re- enactment thereof and the rules made there under and for the time being in force. The arbitrator shall have full power to open up, review and revise any decision, and any recommendation of the conciliator related to the dispute.
A Sole Arbitrator shall be appointed by the appointing authority as defined in contract data within 30 days of receipt of request from either party. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with same reference from the stage at which it was left by his predecessor.
It is a term of this contract that the arbitrator shall adjudicate only such disputes as are referred to him by the appointing authority and give separate award against each dispute and claim referred to him and in all cases the arbitrator shall give reasons for the award. If any fees is payable to the arbitrator, these shall be paid equally by both the parties.
It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counterstatement of claims. The venue of the arbitration shall be such place in India as may be fixed by the arbitrator in his sole discretion.
Neither party shall be limited in the proceedings before such arbitrator to the evidence or arguments put before the conciliator for the purpose of obtaining its recommendation/decision. No recommendation shall disqualify conciliator or Employer from being called as a witness and giving evidence before the arbitrator OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 13 of 35 on any matter whatsoever relevant to the dispute."
Accordingly, as per above elicited arbitration clause 9.2 of agreement inter se parties to arbitration and the lis; the venue of the arbitration was to be such place in India as was to be fixed by the Arbitrator in his sole discretion. Accordingly, it is not the case where in terms of Section 20(1) of the Act, parties themselves had agreed on the place of arbitration.
11. Supreme Court in the case of Hindustan Construction Company Limited vs NHPC Ltd & Another, (2020) 4 SCC 310 held that once the seat of arbitration is designated, the same operates as an exclusive jurisdiction clause as a result of which only the courts where the seat is located would have the jurisdiction, to the exclusion of all other courts, even court(s) where part of the cause of action may have arisen, to entertain the application under Section 34 of The Arbitration & Conciliation Act, 1996 for setting aside an arbitral award. In said case contract between the parties was executed at Faridabad and part of cause of action arose there, whereas New Delhi was the chosen seat of the parties. Applying the law laid in the case of BGS SGS Soma JV vs NHPC Ltd., (2020) 4 SCC 234, it was held that Courts at New Delhi alone would have jurisdiction for the purposes of challenge to the award under Section 34 of the Arbitration & Conciliation Act, 1996.
12. Supreme Court in the case of Indus Mobile Distribution Pvt. Ltd. vs Datawind Innovations Pvt Ltd., (2017) 7 SCC 68 has held that if the juridical seat of arbitration is chosen by OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 14 of 35 parties in terms of arbitration agreement, such designated seat of arbitration is akin to an exclusive jurisdiction clause as the Court has supervisory powers over the arbitration. It was held that the Mumbai Courts alone thus had the jurisdiction to the exclusion of all other Courts in the country, as the juridical seat of arbitration was at Mumbai.
13. Supreme Court held in the case of Inox Renewables Ltd. vs Jayesh Electricals Ltd., 2021 SCC OnLine SC 448 that the moment the seat is chosen as Ahmedabad, it is akin to an exclusive jurisdiction clause, thereby vesting the courts at Ahmedabad with exclusive jurisdiction to deal with the arbitration. Supreme Court had also appreciated the relevant clauses of Purchase Order therein and held that two clauses must be read together as the Courts in Rajasthan have been vested with jurisdiction only because the seat of arbitration was to be at Jaipur. Once the seat of arbitration is replaced by mutual agreement to be at Ahmedabad, the Courts at Rajasthan are no longer vested with jurisdiction as exclusive jurisdiction is now vested in the Courts at Ahmedabad, given the change in the seat of arbitration. It is pertinent to mention that the purchase order therein had Clause 8.5 inter alia finding mention of venue of the arbitration shall be at Jaipur and Clause 9.11 and 9.12 of Business Transfer Agreement designated Vadodara as the seat of the arbitration between the parties, vesting the courts at Vadodara with exclusive jurisdiction qua disputes arising out of the agreement.
14. Delhi High Court in the case of Goyal MG Gases Private OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 15 of 35 Limited vs Steel Authority of India, OMP (Comm.)536/2020 decided on 18/11/2020 inter alia held that mere act of the pronouncement of an award at different place would have no impact on the agreed seat of arbitration.
15. Supreme Court in the case of BBR (India) Private Limited vs S.P. Singla Constructions Private Limited (supra) after appreciating law laid in cases (i) State of West Bengal & Ors. Vs Associated Contractors, (2015) 1 SCC 32; (ii) Bharat Aluminum Company vs Kaiser Aluminium Technical Services, Inc., (2012) 9 SCC 552 (in short BALCO case); (iii) BGS SGS Soma JV vs NHPC Limited, (2020) 4 SCC 224; (iv) Shashoua vs Sharma, (2009)EWHC 957 (Comm.); (v) C vs D, 2007 EWCA Civ 1282 (CA); (vi) Indus Mobile Distribution Private Limited vs Datawind Innovations Private Limited & Ors., (2017) 7 SCC 678; (vii) Brahmani River Pellets Limited vs Kamachi Industries Limited, (2020) 5 SCC 462; (viii) Union of India vs Hardy Exploration and Production (India) Inc., (2019) 13 SCC 472; (ix) Inox Renewables Ltd. vs Jayesh Electricals Ltd., 2019 SCC OnLine SC 2036; (x) Antrix Corpn. Ltd. vs Devas Multimedia (P) Ltd., 2018 SCC OnLine Del 9338; had held that once the seat is fixed under Section 20(2) of the Act, it would remain static and fixed, whereas the venue of arbitration can change and move from the seat to a new location. Also was held therein that the place or the venue fixed for arbitration proceedings, when sub-section (2) of Section 20 of the Act applies, will be the jurisdictional 'seat' and the courts having jurisdiction over the jurisdictional 'seat' would have exclusive jurisdiction. This principle would have exception that would OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 16 of 35 apply when by mutual consent the parties agreed that the jurisdictional 'seat' should be changed and that such consent must be express and clearly understood and agreed by the parties.
16. Letter of appointment of Ld. Sole Arbitrator issued by respondent finds clear mention of office address of Ld. Sole Arbitrator at Sewa Bhawan, R.K. Puram, New Delhi. Above elicited letter dated 28/03/2019 of Ld. Sole Arbitrator to respondent; letter dated 10/10/2019 of Ld. Sole Arbitrator to petitioner as well as letter dated 24/04/2019 of Mr. A.K. Agrawal enquiring from Ld. Sole Arbitrator find clear mention of office address of Ld. Sole Arbitrator at Sewa Bhawan, R.K. Puram, New Delhi. It was from Sewa Bhawan, R.K. Puram, New Delhi that Ld. Sole Arbitrator directed petitioner to submit statement of the facts within 15 days of receipt of said letter and at said place petitioner/claimant had filed the Statement of Claims before Ld. Sole Arbitrator.
17. Above elicited facts make it abundant clear that in accordance with Section 20(2) of the Act, Ld. Sole Arbitrator at the outset had determined the place of arbitration to be Sewa Bhawan, R.K. Puram, New Delhi. In terms of law laid in the case of BBR (India) Private Limited vs S.P. Singla Constructions Private Limited (supra) the place or venue fixed for arbitration proceedings by Ld. Sole Arbitrator in terms of Section 20(2) of the Act will be the jurisdictional 'seat' and the courts having jurisdiction over the jurisdictional 'seat' would have exclusive jurisdiction. When simply due to transfer of Ld. Sole Arbitrator from office at Sewa Bhawan, R.K. Puram, New Delhi to OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 17 of 35 Lucknow, rendering of award is at Lucknow by Ld. Sole Arbitrator; a different location would not change the jurisdictional seat already fixed earlier by Ld. Sole Arbitrator in the fact of the matter; when there had been no express mutual consent or mutual agreement by present petitioner with respondent for change of jurisdictional 'seat'. Sewa Bhawan, R.K. Puram, New Delhi falls within the territorial jurisdiction of New Delhi District and this Court. I find this Court has territorial jurisdiction over the subject matter of the lis. Reliance of Ld. Counsel for respondent on precedents (i) BGS SGS SOMA JV vs NHPC Ltd. (supra) and (ii) Alchemist Ltd. & Anr. vs State Bank of Sikkim & Ors.(supra); is accordingly misplaced as they embody the facts and circumstances entirely different and distinguishable to the facts and circumstances of the case in hand and are not applicable to the present case.
18. Under Section 12 of The Act, when a person is approached in connection with his possible appointment as an arbitrator, he is bound to disclose in writing any circumstances, such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Various grounds are set out in the Fifth Schedule as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 18 of 35 independence or impartiality of an arbitrator. The disclosure shall be made by such person in the form specified in the Sixth Schedule. An arbitrator may be challenged by the parties only if any circumstances referred to in Section 12 (3) of The Act subject to Section 13 (4) of The Act exist which provide for an agreement between the parties for such procedure for challenge. If such challenge is unsuccessful, the party may make an application for setting aside an arbitral award in accordance with Section 34 of The Act.
19. Supreme Court in the case of M/s Voestalpine Schienen GMBH vs. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665 has construed Section 12(5) of The Act (as amended) and also the Seventh Schedule to The Act and has held that under Section 12(5) of The Act, notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. It is held that in such an eventuality, when the arbitration clause finds foul with the amended provisions i.e., Section 12(5) of The Act, the appointment of an arbitrator would be beyond pale of arbitration agreement, empowering the Court to appoint such arbitrator(s), as may be permissible. Other party cannot insist for appointment of an arbitrator in terms of the arbitration agreement. In such situation, that would be the effect of non-obstante clause contained in Section 12(5) of The Act.
20. Supreme Court in case of TRF Ltd. vs Energo Engg.
OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 19 of 35Projects Ltd., (2017) 8 SCC 377 has held that by virtue of section 12(5) of The Act, if any person, who falls under any of the category specified in the Seventh Schedule shall be ineligible to be appointed as an Arbitrator. It is held that the amended law under Section 11(6-A) of The Act requires the Court to confine examination of the existence of an arbitration agreement notwithstanding the judgment of the Supreme Court or the High Court while considering an application under section 11(6) of The Act. The designated arbitrator whose ineligibility to act as an arbitrator by virtue of amendment to Section 12 of The Act by the Arbitration and Conciliation (Amendment) Act, 2015, does not have power even to nominate any other person as arbitrator. The Supreme Court and High Court in certain circumstances have exercised jurisdiction to nullify the appointments made by the authority in such situation.
21. Supreme Court in case of Bharat Broadband Network Ltd vs United Telecoms Ltd, (2019) 5 SCC 755 after construing Section 12(5) of The Act read with Fifth, Sixth and Seventh Schedule held that the Managing Director of the party, who was a named arbitrator, could not act as arbitrator nor could be allowed to appoint another arbitrator. The disclosure of a prospective arbitrator has to be made in the form specified in the Sixth Schedule and the ground stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Any prior agreement to the contrary is wiped out by the non-obstante clause in Section 12(5) of The Act the moment any person whose relationship with the parties or the counsel or OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 20 of 35 the subject matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be ineligible to be appointed as arbitrator. Such ineligibility can be removed by an express agreement in writing. It was held that learned arbitrator had become de jure ineligible to perform his function as an arbitrator.
22. Supreme Court in the case of Perkins Eastman Architects DPC & Anr. vs HSCC (India) Ltd., 2019 SCC OnLine SC 1517 has held that in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. Supreme Court has set aside the appointment of an arbitrator appointed by one of the parties having exclusive right to appoint and appointed an independent arbitrator in the application filed under Section 11(6) of The Act.
23. In the case of Proddatur Cable TV Digi Services vs. Siti Cable Network Ltd., 2020 SCC Online Del 350, it was inter alia held that following ratio of the judgment in the case of Perkins (supra), it is clear that a unilateral appointment by an authority which is interested in the outcome or decision of the dispute is impermissible in law. When the Arbitration Clause empowers the Company to appoint Sole Arbitrator, it can hardly be disputed that the Company acting through its Board of Directors will have OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 21 of 35 an interest in the outcome of the dispute. The appellant had filed the petition under Section 14 and 15 of The Act seeking declaration that the mandate of the arbitrator appointed by the respondent be terminated and an arbitrator be appointed by High Court in the provisions of The Act. Following ratio of the judgments in Perkins (supra) and Bharat Broadband Network Limited (supra), the mandate of the Arbitrator was found terminated de jure and since the present arbitrator had become unable to perform her functions as an arbitrator, her mandate was terminated and another independent Sole Arbitrator was appointed to substitute the previous arbitrator.
24. In the case of M/s Omcon Infrastructure Pvt. Ltd. vs India Bulls Investment Advisors Ltd, OMP (T) (Comm.) 35/2020 and IA 6153/2020 decided on 01/09/2020 by Hon'ble Ms. Justice Rekha Palli, wherein petition was filed under Section 14 and 15 of The Act, seeking termination of the mandate of Ld. Arbitrator unilaterally appointed by the respondent and also quashing of order passed by Ld. Arbitrator, deciding the application of petitioner under Section 12 of The Act, the ratio of the decision in case of Perkins (supra) was applied and held that once the Managing Director of the respondent Company was ineligible to appoint the arbitrator, the same would also bar the Company itself from unilaterally appointing the sole arbitrator and reference was also made to the decision of Proddatur Cable TV Digi Services (supra). Therein also the mandate of the Ld. Arbitrator was terminated and new independent Sole Arbitrator was appointed.
OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 22 of 3525. The independence and impartiality are the hallmarks of the arbitral proceedings. Arbitrator is required to rise above the partisan interest of parties. The Act provides in Section 18 for equal treatment of parties. The parties are necessarily to be treated with equality and each party has to be given a full opportunity to present its case.
26. Arbitral proceedings record sent by Ld. Sole Arbitrator contains 148 pages. Perusal of arbitral proceedings record reveals that no disclosure was made by Ld. Sole Arbitrator in the form specified in the Sixth Schedule, in terms of Section 12 of the Act. Various grounds are set out in the Fifth Schedule as a guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Ld. Sole Arbitrator did not provide any information to the petitioner with respect to any circumstances, either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Clause 1 of the Fifth as well as Seventh Schedule of the Act finds mention inter alia that when Arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party; it is a ground giving rise to justifiable doubt as to the independence or impartiality of Ld. Sole Arbitrator when the relationship of Arbitrator is to be considered OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 23 of 35 with the parties or Counsel.
27. Supreme Court in case of Ellora Paper Mills Limited vs The State of Madhya Pradesh, Civil Appeal No. 7697 of 2021 decided on 04/01/2022 had held that Arbitral Tribunal comprising of officers of respondent State therein were all ineligible to become and/or to continue as arbitrators in view of the mandate of sub-section (5) of Section 12 of the Act read with Seventh Schedule. Law laid in case of Ellora Paper Mills Limited vs The State of Madhya Pradesh (supra) was followed by Delhi High Court in case of Lalit Singla vs Prabhatam Advertising Pvt. Ltd. & Anr., O.M.P. (T) (COMM.) 96/2022 & I.A. 15378/2022 decided on 07/10/2022.
28. Mandate elicited above and laid in the Fifth Schedule, Sixth Schedule and Seventh Schedule read with Section 12 of the Act has not been complied in the case in hand. There had been no express agreement in writing between the parties to arbitration, subsequent to dispute having arisen between them, to waive the applicability of Section 12(5) of the Act for invocation of the proviso to said Section 12(5) of the Act.
29. Arbitral proceedings record makes it vivid and clear that the principle of equal treatment of parties laid in Section 18 of the Act was put to winds by Ld. Sole Arbitrator. Consequent upon receipt of letter of appointment dated 12/03/2019, above said; Ld. Sole Arbitrator issued letter dated 28/03/2019 to the Chairman of respondent asking him to depute an official from respondent who is well conversed with the works in Jharkhand, subject matter of OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 24 of 35 dispute, to meet Ld. Sole Arbitrator for explaining the case. Copy of such letter was not even issued to the petitioner who raised the dispute and invoked Section 21 of the Act for commencement of the arbitral proceedings. Meeting of appointed official of respondent with Ld. Sole Arbitrator to explain the case took place in the absence of petitioner or its representative or Counsel whereas neither petitioner was informed of such meeting nor was called upon to attend such meeting.
30. 148 pages of arbitral proceedings record is bereft of any order/proceedings sheet of any date of hearing so as to reflect what all exactly transpired in those proceedings in Arbitral Tribunal and with respect to the two meetings held on 28/02/2020 at New Delhi and on 10/12/2020 at Lucknow; as so stated at page 4 of impugned arbitral award.
31. Petitioner cried hoarse of being kept in dark with respect to any orders passed in two hearings that took place before Ld. Sole Arbitrator. What transpired, who participated, what was presented before Arbitral Tribunal, what order was passed and/or what objections were raised or decided; is not borne out of arbitral proceedings record; as there are no orders/proceedings of dates 28/02/2020 and 10/12/2020 of the meetings scheduled and held before Arbitral Tribunal as claimed in the impugned arbitral award.
32. It is the case of petitioner that petitioner was unable to present his case, was not afforded opportunity to lead evidence in Arbitral Tribunal with respect to claim laid and defence taken by OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 25 of 35 respondent to raised claims. Even the principle of audi alteram partem of natural justice which is the fulcrum of any adjudicatory process was not followed.
33. 62 pages Statement of Claims was laid by claimant/ petitioner before Ld. Sole Arbitrator. At page 15 of impugned arbitral award, Ld. Sole Arbitrator mentions that he tried to restrict the discussions and findings on the following issues relevant to this arbitration:-
"- Delay in carrying out the works by the Claimants/Contractor.
- Reductions in the Scope of work from the original awarded works and Rescinding of the Contract and forfeiture of performance security.
- Delay in release of payment."
34. There is no order/proceeding in arbitral proceedings record bearing framing of aforesaid three issues in presence of parties to arbitration or their Counsel or that these issues were disclosed to parties to arbitration or their Counsel or on these issues parties were called to either lead evidence or to address arguments in oral or in writing.
35. Section 24 of the Act reads as under:-
"24. Hearings and written proceedings.-- (1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 26 of 35 unless the parties have agreed that no oral hearing shall be held:
Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for the presentation of evidence or for oral argument on day-to-day basis, and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property. (3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties."
36. Arbitral proceedings record is bereft of decision of Arbitral Tribunal in regard to whether to hold oral hearings for the presentation of evidence or for oral arguments, or whether the proceedings shall be conducted on the basis of documents and other materials; in accordance with Section 24(1) of the Act. Even it is the not the case in hand that parties had agreed that no oral hearings shall be held for invocation of first proviso to Section 24(1) of the Act.
37. Following are the findings of Ld. Sole Arbitrator on above issues to which Ld. Sole Arbitrator restricted the discussions:-
"i) Delay in carrying out the works by the Claimants/ Contractor.
.......................................................................................................... FINDINGS:
The contract between the two parties is a symbiotic relationship OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 27 of 35 and the contractor should be a facilitator for smooth and timely execution of the work on behalf of the Client and the Client should also safeguard the interests of the Contractor within the ambit of Contract provisions in fair and just manner.
The Contractor at the onset of the execution of the project brought out the issue of not handing over clear cut approachable site which was refuted by CGWB as is evident from the above narrative. Later on the issue of GST was raised by the Contractor as he was apprehensive about who would pay the additional amount as the same was not mentioned in the Contract agreement. The Contractor on the above two issues delayed the commencement of work and started the work at the time when after about more than 180 days of the award of the contract, which was to be completed within a period of 270 days.
The Claimants during the course of discussion and the submissions made in the Statement of Claims did not produce any documents/proof from which it could be deducted that all the 27 sites were not clear cut and were unapproachable. However, the respondents placed the document in which the representative of the Claimants has put his signature alongwith other team members from the State Government and CGWB on clear cut approachable sites and copy of which were handed over to the representative of the Claimant on 22.06.2017.
Further since GST issue came up after signing of the Contract and Government of India was fully aware of cropping up of such issues for contracts signed before 01.07.2017, there was no question of it not getting resolved in a fair and just manner. Moreover, the matter was beyond the purview of the Respondents i.e. CGWB.
The Contractor also failed to give the desired progress later on in the Sahebganj Block sites even after getting two months extension without any justified reasons. Initially they cited non-availability of materials in the local market vide their letter dated 16.04.2018 and later vide their letter dated 12.05.2018 intimated that no clear cut sites have been provided to them since last 20 days and their men and machineries are lying unutilized for the last 2/3 months. The above statements are also contradictory to each other.
Since the onus of giving proof for not responsible for delay in executing the works lies on the Claimant, which they have failed to prove, I find no reason to not believe that the delay in start of the work and later slow progress in Sahebganj block lies with the Contractor. However, there was delay in the part of the Respondent in conveying the decision for shifting of the drilling machines from Udhwa Block to Sahebganj Block, but this delay was miniscule when compared with the delay in initial start of the work. Moreover the Respondents extended the period of completion of the works by OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 28 of 35 60 days in two spells.
ii) Reduction in the Scope of work from the original awarded works and Rescinding of the Contract and forfeiture of performance security.
.......................................................................................................... FINDINGS:
The scope / quantity of the works was reduced due to technical reasons by the Respondents. This reduction in the scope of works was substantial both in physical and monetary terms. Since only 2 wells could be drilled in Udhwa block and none in Rajmahal Block, the total wells which were deleted from the scope of works were 31 whose cost as per the Tender document was INR 20,763,000/-. The cost of Balance scope of works was INR 1,68,71,000/-. After reduction in the scope of works the Claimants were not supposed to carryout the construction of wells at the abandoned locations and thus were free from any contractual provisions thereof. Thus withholding of performance Guarantee against the work which the Respondents themselves decided not to be performed by the Claimants is against the contract, Improper and against natural justice.
iii) Delay in release of payment.
.......................................................................................................... FINDINGS:
The bill submitted by the Claimant during the month of June 2018 and August 2018 had some gross mistakes/descripancies which were finally rectified and finally submitted during the last week of September 2018 and the same was sent for payment to PAO, CGWB on 26.09.2018 and thereafter it took about six months to process and pay the bill due to internal issues of the Respondents for which the Claimants were not at any fault. The bill amounting to INR 18,84,580/- was finally paid on 29.03.2019. There was undue delay in processing of the bills, which could have been avoided. This delay was against the provisions of the contract document for release of payment within a period of 30 days of receipt of the bill. Regarding less payment with respect to the original bill amounting to INR 33,92,058 is concerned, the Claimant has himself later on revised and sent the bills during September 2018 after discussion with the Respondent. The Respondent made the payment according to the BOQ and withheld certain amounts like CGST/SGST/Income tax etc which are as per rules in force. The Claimants also did not challenge the less payment made (INR 18,84,580) during the course of arbitration. Though the bill was paid in March 2019, this fact was not brought out by the Claimants in their statement of Claim submitted during November, 2019."OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 29 of 35
38. At page 15 of the impugned award there is mention that Regional Director of respondent and Shri Manjeet Singh of M/s CH Electricals alongwith their representatives were present in two arbitration meetings. The discussions to which Ld. Sole Arbitrator had restricted himself in the impugned arbitral award are premised on the contents of Statement of Claims and Statement of Defence without any consequential hearings for arguments or presentation of oral or documentary evidence by parties to arbitration or their Counsel.
39. The procedure of hearings enshrined in Section 24 of the Act, elicited above, was not followed. True that as per Section 19(1) of the Act, the Arbitral Tribunal is not bound by The Code of Civil Procedure, 1908 or The Indian Evidence Act, 1872. Even as per Section 19(2) of the Act, parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings and as per Section 19(3) of the Act, on failure of agreement referred to in sub-section (2) of Section 19 of the Act, the Arbitral Tribunal may conduct the proceedings in the manner it considers appropriate. That does not give free hand to Ld. Sole Arbitrator to put the mandate laid in Section 24 of the Act, elicited above, to winds and neither afford claimant/petitioner any opportunity to present oral or documentary evidence for laid claims and/or to address oral or written arguments.
40. Supreme Court in case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 30 of 35 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.
41. Supreme Court in case of Ssangyong Engineering and Construction Co. Ltd vs National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
42. Claimant/petitioner was not treated with equality nor was given full opportunity to present his case in accordance with Section 18 of the Act. Procedure laid in Section 24 of the Act was not followed. Principles of natural justice including audi alteram partem were not followed. Hearing conducted on 28/05/2019, OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 31 of 35 when Mr. A.K. Agrawal, RD of respondent from Patna briefed about the case inter se parties to arbitration to Ld. Sole Arbitrator; was so done in the absence of petitioner or its representative/Counsel; who were not even informed for it. It clearly indicates bias and partiality on part of Ld. Sole Arbitrator and depicts gross miscarriage of justice. Ld. Sole Arbitrator did not provide any copies of orders/proceedings passed by him allegedly in two hearings in arbitral proceedings. Claimant/ respondent was not given any reasonable opportunity to present his case, to lead oral or documentary evidence and/or address oral arguments or file written arguments. In view of law laid in cases Associate Builders (supra) and Ssangyong Engineering & Construction Co. Ltd. (supra); and as per above discussions, the impugned award is liable to be set aside under Section 34(2)
(a)(iii) of The Act, Section 34(2)(a)(v) of The Act and also under Section 34 (2A) of The Act as the impugned award is vitiated by patent illegality appearing on the face of the award, as elicited in detail herein above. The impugned award is accordingly set aside.
43. Delhi High Court in case of Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games, 2014 SCC OnLine Del 4834 had inter alia held:-
34. A party like the Organizing Committee which has its claims rejected, except a part, but which subsumes into the larger amount awarded in favour of the opposite party, even if succeeds in the objections to the award would at best have the award set aside for the reason the Arbitration and Conciliation Act, 1996 as distinct from the power of the Court under the Arbitration Act, 1940, does not empower the Court to modify an award. If a claim which has been rejected by an Arbitral Tribunal is found to be faulty, the Court seized of the objections under Section 34 of the Arbitration and Conciliation Act, 1996 has to set aside the award and leave the OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 32 of 35 matter at that. It would be open to the party concerned to commence fresh proceedings (including arbitration) and for this view one may for purposes of convenience refer to sub-Section (4) of Section 43 of the Arbitration and Conciliation Act, 1996. It reads: -
"43. Limitations-
(1) xxxxx (2) xxxxx (3) xxxxx (4) Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963, for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted."
44. Aforesaid pronouncements of Delhi High Court in the case of Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games (supra) found approval of Supreme Court in case of The Project Director, National Highways No. 45 E AND 220 National Highways Authority of India vs. M. Hakeem & Anr., Civil Appeal No. of 2021 [Arising out of SLP (Civil) No.13020 of 2020] decided on 20/07/2021.
45. Division Bench of Delhi High Court in the case of Mahanagar Telephone Nigam Limited vs Fujitshu India Private Limited, MANU/DE/0459/2015 inter alia appreciated the following law laid by Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., MANU/ SC/8177/2006:(2006) 11 SCC 181 :-
"The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 33 of 35 decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
46. Supreme Court in the case of Kinnari Mullick & Anr. vs Ghanshyam Das Damani, Civil Appeal No. 5172 of 2017 [Arising out of SLP (Civil) No. 2370 of 2015 decided on 20/04/2017 appreciated the legal position expounded in the case of McDermott International Inc. vs Burn Standard Ltd., (supra) wherein it was observed that parliament had not conferred any power of remand to the Court to remit the matter to the arbitral tribunal except to adjourn the proceedings as provided under sub-section (4) of Section 34 of the Act. It was also held therein that the limited discretion available to the Court under Section 34(4) of the Act can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings. It is crystal clear that the Court cannot exercise this limited power of deferring the proceedings before it suo moto.
47. Delhi High Court in the case of Steel Authority of India Limited vs Indian Council of Arbitration & Anr., LPA 103/2016 decided on 28/03/2016 placed reliance upon the decision of Supreme Court in the case of McDermott International Inc. vs Burn Standard Ltd. (supra), wherein it was held that once an award has been set aside, the parties would be free to begin the arbitration once again.
48. Accordingly, consequent to setting aside of the impugned Arbitral Award; parties to this lis have all their rights and remedies as available in law including under The Act including OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 34 of 35 under Section 43 of The Act and may take recourse to appropriate remedies permissible in law.
49. The parties are left to bear their own costs.
50. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL SINGH
PAL SINGH Date: 2023.03.25
12:36:28 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 25 March, 2023. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 08/2022 M/s CH Electricals vs Central Ground Water Board (CGWB) Page 35 of 35