Delhi District Court
M/S Eros City Developers Pvt. Ltd vs Aati Interiors on 23 August, 2021
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM) No. 21/2018
M/s Eros City Developers Pvt. Ltd.
S-1, American Plaza,
International Trade Tower,
Nehru Place, New Delhi-110019 ...Petitioner
vs
Aati Interiors
BA-9F, DDA Flats,
Munirka, Delhi-110067 ...Respondent
Date of Institution : 31/10/2018
Arguments concluded on : 22/07/2021
Decided on : 23/08/2021
Appearances : Sh. Harish Malhotra, Senior Advocate and Sh. Vinod
Kapoor, Ld. Counsel for petitioner.
Sh. T.S Ahuja, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner had filed the present petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act) seeking setting aside of the arbitral award dated 02/08/2018 passed by Mr. S. Regunathan, I.A.S. (Retd.) in case reference no. DAC/1173/03-16 titled Aati Interiors vs Eros City Developers Pvt. Ltd. Ld. Sole Arbitrator awarded Rs.23,90,000/- with pre-reference interest @ 15% and future interest @ 18% till the date of payment in favour of claimant/present respondent payable by petitioner along with arbitration cost including miscellaneous charges, whereas the counter claim of petitioner was rejected.
OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 1 of 262. I have heard Sh. Harish Malhotra, Ld. Senior Advocate with Sh. Vinod Kapoor, Ld. Counsel for petitioner; Sh. T.S Ahuja, Ld. Counsel for respondent and perused the record of the case, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of parties and given my thoughtful consideration to the rival contentions put forth.
3. Adumbrated in brief, the facts of the case of petitioner as well as arguments setup by the petitioner through Ld. Counsel are as follows:-
Petitioner issued Work Order dated 27/07/2012 to respondent for civil plumbing and interior works for Easy Day Hyper Market Outlet at Eros Market Place, Indira Puram, Uttar Pradesh for value of Rs.76,41,670/- to be completed within two months; but the value was subsequently amended to Rs.87,91,138/- by first amendment of Work Order on 15/10/2012 and again amended by second amendment on 03/12/2012 due to change in scope of work. It is the case of petitioner that time was essence of the contract and respondent had to strictly adhere to the date of completion of works i.e., within two months from the date of final amendment of the Work Order. It is also averred that despite several requests and reminders of the petitioner, respondent failed to complete the work as per Work Order till February, 2013 and work done by respondent was not done to the satisfaction of the petitioner which caused unnecessary delay in opening the outlet by the Lessee (Bharti Walmart) which in turn had caused huge losses of revenue and further damages to the petitioner. Petitioner sent various e-mails to respondent to deploy the man power at the site but the respondent was not inclined to OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 2 of 26 take any initiative towards the same under the garb of some false pretext or the other. As per petitioner, respondent had only done work aggregating to an amount of Rs.46,18,323/- towards the entire work order of Rs.87,91,138/-, out of which petitioner had already made a payment of Rs.26,75,083/- to the respondent despite the fact that the respondent failed to complete the work order issued to it within period of two months from date of final Work Order and the same was unsatisfactory. As per petitioner, Clause 8 of the Work Order clearly stipulates that in the event the respondent failed to complete the entire work within the stipulated period of completion then the respondent was liable to pay to petitioner liquidated damages and not as penalty @1% of the contract value per week of delay which aggregates to Rs.45,23,331/- i.e., from 04/02/2013 to 03/03/2015 and towards the cost which was paid to another contractor to rectify the substandard work done by the respondent and further to complete the pending work. Petitioner further averred that it adjusted balance sum of Rs.18,46,400/- of respondent against the non completion and substandard work done by the respondent against the liquidated damages payable by respondent to petitioner in terms of the Work Order and the balance sum of Rs.27,12,566/- was payable by respondent to petitioner. It is averment of petitioner that it had to get work completed through another contractor M/s Ghanshyam Marbles and petitioner further spent an extra sum of Rs.13,63,855/- on such work. Allegedly, respondent had raised various bills without doing/completing the work as agreed between the parties and therefore, petitioner was not liable to pay any amount to respondent with interest. It is also averment of petitioner that Mr. Chinam Bala Shankar Reddy was OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 3 of 26 not the competent and authorized person to file the claim against the petitioner in the arbitral proceedings before Ld. Sole Arbitrator as no material was placed on record by the respondent to prove his authority to file the claim petition. Petitioner further averred that the impugned award was passed by Ld. Sole Arbitrator after expiry of extended period of six months starting from 31/01/2018, which expired on 31/07/2018 and after 31/07/2018 no extension was sought by respondent from competent Court in terms of Section 29A of the Act. It is also averment of petitioner that cheque of Rs.5,00,000/- dated 09/02/2013 was post dated issued by petitioner to respondent on the assurance received from the respondent that it will pull up its work force to complete the work within stipulated time period till 03/02/2013 and when respondent did not honour their commitment, request for stop payment was issued by petitioner to its bank under compulsion and respondent was requested not to encash the same but the same cheque was deposited by respondent with malafide intent to grab money of petitioner. It is also averred by the petitioner that Ld. Arbitrator erred while considering facts and circumstances, evidence and documents on record and also with respect to the fact that the person signing statement of claim as partner of petitioner was not shown as partner in the Register of Firms and the claim filed against the petitioner was not maintainable under Section 69(2) of The Indian Partnership Act, 1932. It was argued that impugned arbitral award was passed by Ld. Sole Arbitrator by misconducting the proceedings and adopting one sided approach and rejecting the counter claim of the petitioner and thus the impugned award was contrary to law and patently illegal and OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 4 of 26 perverse. It is also the averment of petitioner that grant of interest @ 15% by Ld. Sole Arbitrator from the date of bill is usurious and liable to be set aside. It is also the averment of petitioner that Ld. Sole Arbitrator failed to appreciate that respondent claimed that the work was carried out by it under the instructions of Bharti Walmart, however, the said Bharti Walmart was not party to the arbitral proceedings and in the absence of Bharti Walmart, the present dispute cannot be decided effectively. It is also averment of petitioner that Ld. Sole Arbitrator failed to appreciate that respondent failed to prove the bills on the basis of which claim was made against the petitioner and respondent had also failed to prove that who had approved the bills on the side of petitioner. Petitioner in its petition itself relied upon the cases of (i) Shreeram Finance Corporation vs Yasin Khan & Ors, AIR 1989 SC 1769; (ii) Shah Velji Narsee vs Vasantrai Umiyashankar Pandya, (2004) (2) Bom CR 352; (iii) New Bharat Chemical Industry vs Om Prakash & Ors., (1997) 117 (3) PLR 357; (iv) Punnamana Agencies vs Marubeni Corporation & Ors., RFA (OS) 121/2009 decided on 08/10/2012 and (v) Punnamana Agencies vs Marubeni Corporation & Ors., CS (OS) 1620/1995 decided on 02/09/2008 by Delhi High Court, submitting that claim of the respondent was not maintainable under Section 69(2) of the Indian Partnership Act, 1932 as name of signatory to claim petition was not reflected as partner in the documents of Registrar of Firms filed on record.
Petitioner in the claim petition also relied upon the cases of (i) Union of India vs Raman Iron Foundry, (1974) 2 SCC 231 and
(ii) ONGC Ltd. vs SAW Pipes Ltd., (2003) 5 SCC 705, submitting that agreed liquidated damages were genuine pre-
OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 5 of 26estimate of damages.
4. Ld. Senior Advocate for petitioner also argued that there is no reasoning in the impugned arbitral award given by Ld. Sole Arbitrator for rejecting the counter claim of the petitioner, whereas it was to be given as per Section 31(3) of the Act. It was prayed to set aside the impugned arbitral award.
5. Despite opportunities reply was not filed by the respondent, whereas the respondent through Counsel filed written submissions on 16/03/2021. It is the contention of Ld. Counsel for respondent that the petition does not disclose any permissible grounds for impugning the arbitral award under Section 34 of the Act. It is submitted in the written arguments that as per Section 29A (as amended by Act 33 of 2019), the limitation will start to run on completion of pleadings. In the course of oral arguments, Ld. Counsel for respondent fairly conceded that Section 29A (as amended by Act 33 of 2019) shall not be applicable for the arbitration case in hand as the arbitration proceedings had commenced much prior to the said amendment, so pre amended Section 29A shall be applicable. It was the contention of Ld. Counsel for respondent that even then, since Ld. Arbitrator was appointed on 06/02/2017 and on 31/01/2018 before Ld. Sole Arbitrator both parties agreed to extend the period of arbitration proceedings by six months and vide order dated 31/01/2018 Ld. Sole Arbitrator accordingly passed the order that the period during which the arbitration proceedings are to be completed stand extended by six months; so the twelve months period expiring on 05/02/2018 stood extended by six OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 6 of 26 months till 05/08/2018, whereas the impugned arbitral award was passed on 02/08/2018 and thus is within the period of limitation. It was argued by Ld. Counsel for respondent that the signatory partner of claimant/respondent in para 1 of the Statement of Claim had stated that he was partner of respondent, registered partnership firm and had also stated on affidavit the said fact, whereas it is not required for arbitration that partnership firm should be registered as per law laid in the case of Umesh Goel vs Himachal Pradesh Cooperative Group Housing Society Limited, 2016 SCC OnLine SC 624. It was also argued that it was a wrong contention of the petitioner that time was the essence of contract and was rejected by Ld. Sole Arbitrator. It was so that time was not essence of the contract as the respondent themselves had been amending the Work Order dated 27/07/2012, since the same was amended on 15/10/2012 and 03/12/2012; thus the time of two months for completion of project does not come in picture. The intention of the petitioner as time is not the essence of contract is very much clear from the evidence of RW-1 in reply to the question no. 55 that respondent was not in hurry to complete the work. It was also argued that such intention of petitioner that time was not essence of contract was further made clear by not making payment to the claimant as well as to the second contractor within time. The plumbing and sanitary works were added in the Work Order by amendment dated 15/10/2012. Dismantling of brick wall was added in amendment dated 03/12/2012. It was argued that the schedule of the work was approved by Bharti Walmart as per Clause 5 of the Work Order dated 27/07/2012, whereas there was no mail or correspondence by Bharti Walmart that work was not going as OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 7 of 26 per schedule or that it was delayed. Since Bharti Walmart was not party to the Work Order nor had signed the arbitration clause, so therefore Bharti Walmart could not have been made a party to the dispute before Ld. Sole Arbitrator. It was argued that there was no correspondence by petitioner to respondent either related to the work done by claimant/present respondent to be of substandard quality or related to issue of non deployment of proper staff, whereas only when respondent demanded the payment in terms of work order for the part of the work done, petitioner raised the issue of non deployment of proper staff. No quality related issue was ever raised by petitioner or by Bharti Walmart during the progress of work or after the work was done by the claimant/respondent. It was argued that even as per work contract given to third party dated 25/04/2013 there is no averment related to dismantling of previous work done by claimant/present respondent or to rectify the work done by claimant/present respondent. It was argued that neither petitioner averred nor proved any actual loss/damage suffered, as was required to prove as per Section 74 of the Contract Act for being entitled for claimed liquidated damages as per work order; so dismissal/rejection of counter claim was proper. It was argued that even RW1, main witness of petitioner was not aware as to why damages were claimed by the respondent from 04/02/2013 to 03/03/2015. It was argued that as per amendment dated 03/12/2012 the work order had been enhanced to Rs.1,00,05,238/-whereas the claimant performed the work for a sum of Rs.49,92,497/- and petitioner had given further contract to third party Ghanshyam Marbles for Rs.27,21,084/- who performed work for Rs.12,12,890/- and thus total payment made OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 8 of 26 by petitioner was Rs.49,92,497/- + Rs.12,12,890/- i.e., total Rs.62,05,387/-; thus making a profit of Rs.37,99,851/-, whereas even out of the work of Rs.49,92,497/- done by the claimant, claimant/present respondent still has outstanding payment for which award was passed by Ld. Sole Arbitrator. It was argued that as there were no complaints against the respondent for the quality of work done by respondent, as per arbitral proceedings record and evidence brought therein, there was no need for introducing third party namely Ghanshyam Marbles. It was argued that apparently Ghanshyam Marbles showed willingness to perform the work at much lower prices and petitioner felt that they could make a profit by getting work done at lower prices, so petitioner was not making due payments to the claimant/present respondent. It was argued that even the payments made to Ghanshyam Marbles by the petitioner were also highly delayed and even complete payment was not made to them, which is apparent from the evidence before Ld. Sole Arbitrator besides which even the work was not completed by Ghanshyam Marbles within one month of the work order and such work was even not completed till 01/03/2015. It was argued that petitioner failed to show any illegality or perversity in the impugned arbitral award or violation of principles of natural justice. Merely because Ld. Sole Arbitrator has not accepted the version of the petitioner it cannot be held that award can be set aside. Ld. Counsel for respondent prayed for dismissal of the petition, relying upon the following precedents:-
1. Umesh Goel vs Himachal Pradesh Cooperative Group Housing Society Ltd, 2016 SCC OnLine SC 624;
2. H.P. State Electricity Board vs R.J Shah & Company, (1999) 4 SCC 214;
3. Associate Builders vs Delhi Development Authority, 215 OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 9 of 26 (2014) DLT 204 (SC);
4. Dans Energy Pvt. Ltd vs GE Power India Ltd, O.M.P (Comm) 264/2018 & IA No.8453/2018 decided on 06/08/2018 by Delhi High Court;
5. Indian Oil Corporation vs Lloyds Steel Industries Ltd., 2007 SCC OnLine Del 1169 and
6. Fateh Chand vs Balkishan Das, MANU/SC/0258/1963.
6. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
7. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 10 of 26 in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 11 of 26 arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
8. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts.
The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 12 of 269. 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 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.
10. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
11. Following are some relevant clauses/terms of the Work Order dated 27/07/2012:-
OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 13 of 26"5. APPROVAL OF SHOP DRAWINGS/ LAYOUT:
All relevant shop drawings and technical data etc. and detailed schedule of work shall be furnished within one week from the date of this work order for approval of Bharti Wal-Mart Team prior to taking up the above works.
6. TERMS OF PAYMENT
a) 10% Advance against post dated cheque of equal amount (as security).
b) 90% shall be paid to the Contractor on pro-rata basis against Monthly R A bills. Fully documented cumulative R A Bills shall be submitted by the Contractor on Monthly basis to the Company's GM Projects with complete details and payment shall be made within 150 days after submission of monthly bills Starting from the 1st RA Bill pro-rata adjustment/deduction shall be made on account of the Defect liability from the amount of RA bills.
c) 5% of the contract value shall be deducted and retained by the Company towards Defects Liability. The Company shall deduct and retain 5% amount out of the periodical Running Account Bills submitted by the Contractor from time to time. This amount shall be released at the end of Defects Liability Period of 06 months from the date of handing over. However, this amount may be released against contractor's submission of Bank Guarantee in prescribed format, for an equal amount valid for Defects Liability period.
7. COMPLETION PERIOD:
Contractor shall complete the entire works within 02 months from the date of issue of this Work Order which is the essence of the contract and the contractor shall strictly adhere to the date of completion of works.
8. LIQUIDATED DAMAGES:
In the event of the contractor failing to complete the entire works within the stipulated period of completion they shall be liable to pay to the Company by way of liquidated damages and not as penalty @ 1% of the contract value per week of delay. The deductions of the liquidated damages shall not however absolve the contractor of their responsibility and obligations under this contract to complete the work in its entirety and shall also be without prejudice to action by the Company to terminate the contract and to get the work done at contractors' risk and cost."
12. By way of first amendment dated 15/10/2012 in the Work OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 14 of 26 Order, the petitioner enhanced the scope of work and the plumbing and sanitary work were added. By second amendment dated 03/12/2012 in the Work Order, petitioner added the work of dismantling of brick wall. The schedule of the work was approved by Bharti Walmart, as per Work Order dated 27/02/2012. In the impugned arbitral award Ld. Sole Arbitrator appreciated the material laid before it, oral and documentary evidence led as well as contentions of the parties through Counsel were appreciated. It is the finding of Ld. Sole Arbitrator that in respect of time and quality of work under various clauses of Work Order, Bharti Walmart through its site engineer had to approve/ disapprove anything which was not according to the Work Order, whereas the present petitioner did not produce any evidence from Bharti Walmart to say that the claimant/present respondent had erred in adhering to the time schedule and/or that the quality of the work was not up to the mark. It is also the finding of Ld. Sole Arbitrator that at no point of time the present petitioner ever denied that the claimant/present respondent had done work up to around Rs. 46 lacs. It is the finding of Ld. Sole Arbitrator that there was no complaint regarding time over run or quality of work either from the present petitioner or Bharti Walmart, whose role in this regard was mentioned in various clauses of the Work Order, during the progress of work executed by claimant/present respondent. Only when the claimant/present respondent demanded the payment from the petitioner in terms of Clause 6 of the Work Order dated 27/07/2012, for the first time present petitioner had sent an e-mail on 07/02/2013 raising the facet of less deployment of work force for completion of work and it had been the contention of the claimant/present OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 15 of 26 respondent that for want of payment of payable sum in terms of Clause 6 of the Work Order dated 27/07/2012 and as promised by present petitioner, claimant/present respondent was not in a position to proceed further with the works and to complete them.
It is also the finding of Ld. Sole Arbitrator in the impugned arbitral award that on the facts and evidence produced he agreed with the contention of claimant/present respondent that the delay in payment of the running bills as per the term/condition no. 6 of the work order resulted in non completion of the entire work. It is also the finding of Ld. Sole Arbitrator that since the present petitioner did not act to support their contention of time being of the essence both in manner of payment, not being made according to the terms of the contract and in regard to other requirements to complete the work, the time is of essence argument cannot stand. Well beyond period of two months from date of Work Order dated 27/07/2012, present petitioner enhanced the scope of Work Order by first amendment dated 15/10/2012 by adding plumbing and sanitary work. More than one and half months later to first amendment, the present petitioner further enhanced the scope of work by second amendment dated 03/12/2012 by including the work of dismantling of brick wall in the scope of the Work Order. Ld. Sole Arbitrator reached the finding that the intention of the present petitioner was that time was not essence of the contract, which was considering the contention of claimant that it was very much clear from the evidence of RW1 in reply to question no. 55 that the petitioner was not in hurry to complete the work. Ld. Sole Arbitrator also gathered the intention of present petitioner of time being not the essence of the contract from the fact of OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 16 of 26 petitioner not making payment to the claimant/present respondent within time and in terms of Clause 6 of the Work Order dated 27/07/2012 and from the amendments 1 and 2 in the Work Order, of which second amendment took place even after passing of more than four months of the original Work Order dated 27/07/2012. Besides that Ld. Sole Arbitrator had also appreciated the fact that no correspondence was done by present petitioner with the claimant/present respondent relating to the work done by claimant to be of sub standard quality or for non deployment of proper staff, during progress of work done by claimant/present respondent till claimant/present respondent started demanding the payment in terms of Clause 6 of Work Order dated 27/07/2012. No quality related issues were raised by present petitioner or by Bharti Walmart during the progress of work or after the work done by claimant/present respondent, whereas even in the work contract given to 3rd party namely M/s Ghanshyam Marbles dated 25/04/2013 there was no averment related to dismantling of previous work done by present petitioner or to rectify the work done by present petitioner. Accordingly, in terms of the findings of the Ld. Sole Arbitrator even if time was the essence of the contract as per the stipulation contained therein, it ceased to be the essence of contract in view of the extensions granted by the petitioner; by non payment of the amount payable to claimant/ present respondent as per Clause 6 of Work Order dated 27/07/2012 on demand of claimant/present respondent and aforesaid evidence of RW1 on record that present petitioner was not in hurry to complete the work and on no occasion before 07/02/2013 petitioner sent any communication to claimant/present OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 17 of 26 respondent regarding inferior quality of work or time over run or any complaint of Bharti Walmart regarding inferior quality of work done by claimant/present respondent. On the basis of aforesaid appreciation of the documents and evidence, Ld. Sole Arbitrator reached the finding that the present petitioner was not entitled for liquidated damages claimed in terms of Clause 8 of the Work Order dated 27/07/2021. Even the witness of petitioner RW1 could not explain the premise of calculation of liquidated damages for the period from 04/02/2013 till 03/03/2015 in the course of evidence before Ld. Sole Arbitrator as he was not aware why damages were so being claimed by present petitioner for said period. In this fact of the matter, it cannot be said that the impugned arbitral award is bereft of any reasoning for rejection of the counter claim, in terms of Section 31(3) of the Act.
13. Delhi High Court in the case of Indian Oil Corporation vs Lloyds Steel Industries Ltd. (supra) inter alia held that "Section 74 does not confer a special benefit upon any party, like the petitioner in this case. In a particular case where there is a clause of liquidated damages the Court will award to the party aggrieved only reasonable compensation which would not exceed an amount of liquidated damages stipulated in the contract. It would not, however, follow therefrom that even when no loss is suffered, the amount stipulated as liquidated damages is to be awarded. Such a clause would operate when loss is suffered but it may normally be difficult to estimate the damages and, therefore, the genesis of providing such a clause is that the damages are pre-estimated. Thus, discretion of the Court in the matter of reducing the amount of damages agreed upon is left unqualified by any specific limitation. The guiding principle is 'reasonable compensation'. In order to see what would be the reasonable compensation in a given case, the Court can adjudge the said compensation in that case. For this purpose, as held in Fateh Chand (supra) it is the duty of the Court to award compensation according to settled principles. Settled principles warrant not to award a compensation where no loss is suffered, as one cannot compensate a person who has not suffered any loss or damage. There may be cases OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 18 of 26 where the actual loss or damage is incapable of proof; facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damage. Section 74 exempts him from such responsibility and enables him to claim compensation inspite of his failure to prove the actual extent of the loss or damage, provided the basic requirement for award of 'compensation', viz. the fact that he has suffered some loss or damage is established. The proof of this basic requirement is not dispensed with by Section 74. That the party complaining of breach of contract and claiming compensation is entitled to succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from Sections 73 and 74. Section 74 is only supplementary to Section 73, and it does not make any departure from the principle behind Section 73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of Section 73. The words in Section 74 'Whether or not actual damage or loss is proved to have been caused thereby' have been employed to underscore the departure deliberately made by Indian Legislature from the complicated principles of English Common Law, and also to emphasize that reasonable compensation can be granted even in a case where extent of actual loss or damage is incapable of proof or not proved. That is why Section 74 deliberately states that what is to be awarded is reasonable compensation. In a case when the party complaining of breach of the contract has not suffered legal injury in the sense of sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy, or make amends. Therefore, he will not be entitled to compensation [see State of Kerala v. United Shippers and Dredgers Ltd., AIR 1982 Ker 281]. Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal injury has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the visual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed."
14. The proceedings under Section 34 of the Act are summary OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 19 of 26 in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by reappreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt.Ltd. & Ors., (2012) 1 SCC 594. For quantification of liquidated damages, first of all, OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 20 of 26 there has to be a delay and for ascertaining as to who was responsible for the delay, such an issue will be within the jurisdiction of the arbitrator; as was held by Supreme Court in the case of Bharat Sanchar Nigam Ltd & Anr. Vs Motorola India (P) Ltd., (2009) 2 SCC 337. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/ Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC 296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 21 of 26 corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63. Section 73 of The Indian Contract Act, 1872 necessarily presupposes that the damages are payable only if some loss has been occasioned by the breach. Same principle would therefore apply to a case of Liquidated Damages (LD) i.e., to be entitled to claim LD, the aggrieved party must prove that it had suffered some loss arising out of the breach. To put it differently, even the LD cannot be claimed if it is proved that no actual damages were caused by the breach as was held by Delhi High Court in the case of Indian Oil Corporation vs M/s Lloyds Steel Industries Ltd., 2007 SCC OnLine Del 1169.
15. Supreme Court in the case of Umesh Goel vs Himachal Pradesh Cooperative Group Housing Society Limited (supra) held that arbitral proceedings will not come under the expression "other proceedings" of Section 69(3) of the Partnership Act, 1932 and the ban imposed under Section 69 of the Partnership Act, 1932 can have no application to arbitral proceedings as well as the arbitration award.
16. Accordingly, it is not required for arbitration that the partnership firm should be registered.
17. Ld. Sole Arbitrator in the impugned arbitral award in the course of appreciation of evidence inter alia held that the witness OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 22 of 26 of claimant namely Sh. S. Reddy in his affidavit in evidence testified of the fact that he was the partner of claimant registered firm and he is one who is mentioned in the e-mail of the Work Order, whereas even the witnesses of the present petitioner were not present at the work site nor had dealt with Sh. S. Reddy and there was no evidence in arbitral proceedings record that said Sh. S. Reddy was not the signatory and correspondent of various correspondences with present petitioner; so Ld. Arbitrator had rejected the contention of the present petitioner that the claim was not signed and filed by competent person.
18. Sub-section (1) of Section 29A of The Act provides that the award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. The explanation to the said provision provides that an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. Sub- section (2) of Section 29A of The Act provides that if the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. Sub-section(3) of Section 29A of The Act provides that the parties may, by consent, extend the period specified in subsection (1) for making award for a further period not exceeding six months. Subsection (4) of Section 29A of The Act provides that if the award is not made within the period specified in sub-section (1) or the extended period specified under sub- section (3), the mandate of the arbitrator(s) shall terminate unless OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 23 of 26 the Court has, either prior to or after the expiry of the period so specified, extended the period. If the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, the Court may pass an order for reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay. Sub-section(5) of Section 29A of The Act provides that the extension may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
19. It is own case of petitioner that Ld. Sole Arbitrator was appointed by Delhi International Arbitration Centre (DAC), New Delhi vide letter dated 06/02/2017, whose copy is Annexure P-16 to present petition. Arbitration record also reveals that as per order dated 31/01/2018 of Ld. Sole Arbitrator, both the parties therein had agreed to extend the period of arbitration proceedings by six months. By aforesaid consent of the parties to arbitration, following order was passed on 31/01/2018 by Ld. Sole Arbitrator:
"Accordingly the period during which the arbitration proceedings are to be completed stands extended by six months."
20. In terms of Section 29A of the Act, there was time limit of period of twelve months to pass the award from the date the Arbitral Tribunal enters upon the reference. Ld. Sole Arbitrator was appointed by aforesaid letter dated 06/02/2017 of DAC. So Ld. Sole Arbitrator was required to pass arbitral award on or before 05/02/2018. In terms of Section 29A(3) of the Act before OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 24 of 26 Ld. Sole Arbitrator the parties had consented for extending the period of arbitration proceedings by six months upon which the order aforesaid was passed by Ld. Sole Arbitrator and in terms of the same the period during which the arbitration proceedings were to be completed stood extended by six months. Accordingly, by consent of the parties the period for making award was extended by six months from the date of expiry of period of twelve months prescribed in Section 29A of The Act and not from the date 31/01/2018 i.e., the date of order of extension of the period in view of the aforesaid order making it vivid and clear. So the extended period for passing the award by Ld. Sole Arbitrator was till 05/08/2018, whereas the impugned arbitral award was passed/made on 02/08/2018 and thus it was so passed/made within the extended period aforesaid. The contention of petitioner of impugned arbitral award having been passed after extended period of six months does not hold water.
21. The precedents relied upon by the petitioner/Ld. Counsel for the petitioner embody facts and circumstances which are entirely different and distinguishable to the facts and circumstances of the case are of no help to the petitioner for setting aside of the impugned arbitral award.
22. The impugned award was passed by former Officer of Indian Administrative Services (I.A.S) as Sole Arbitrator whereas the findings were given, based on appreciation of facts, evidences and law after giving all reasonable opportunities to the parties to lead their evidence. Not only the reasonings of Learned Sole Arbitrator are logical but all the material and evidences were OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 25 of 26 taken note of by the Learned Sole Arbitrator. The Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of the Learned Sole Arbitrator, as per the law laid in the precedents, elicited herein above. Cogent grounds, sufficient reasons have been assigned by the Learned Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Learned Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Learned Sole Arbitrator. The conclusion of the arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act.
23. For the foregoing reasons, the petition is hereby dismissed.
24. The parties are left to bear their own costs.
25. File be consigned to record room. Digitally signed by GURVINDER GURVINDER PAL SINGH PAL SINGH Date: 2021.08.23 12:07:09 +0530 ANNOUNCED IN (GURVINDER PAL SINGH) OPEN COURT District Judge (Commercial Court)-02 rd On 23 August, 2021. Patiala House Court, New Delhi.
(DK) OMP (COMM) No. 21/2018 M/s Eros City Developers Pvt. Ltd. vs Aati Interiors Page 26 of 26