Delhi District Court
Delhi Metro Rail Corporation Limited ... vs M/S Ashok Kumar on 30 April, 2024
IN THE COURT OF SH. AJAY KUMAR JAIN:
DISTRICT JUDGE COMMERCIAL COURT 03 - SOUTH EAST
DISTRICT, SAKET COURTS, NEW DELHI.
OMP (COMM) 16/21
DELHI METRO RAIL CORPORATION LTD.
Metro Bhawan, Fire Brigade Lane,
Barakhamba Road, New Delhi- 110001
...Petitioner
Versus
M/S ASHOK KUMAR
J-3/119, DDA Flat
Kalka Ji
New Delhi- 110019
....Respondent
Date of Institution : 12.03.2021
Date of final arguments heard : 18.04.2024
Date of Judgment : 30.04.2024
Judgment:
1. Vide this judgment, I shall decided the present petition under
section 34 of Arbitration and Conciliation Act filed by the
petitioner/claimant. The petitioner in this case has challenged the
impugned award dated 26.11.2020 limited to t he extent of the findings of
the Ld. Arbitrator that the claim filed by claimant is barred by limitation.
2. Brief facts of the case that petitioner/ claimant decided to call the
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 1 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
bids for operating/ providing the parking facilities at Shadipur Metro
Station. The respondent's tender application was accepted. Vide letter of
acceptance dt. 07.12.2012 permission has been granted to the respondent
for operating the parking site of Shadipur Metro Station on license basis
for a period of 3 years. The license fee of Rs. 3,13,300/- per month over
an area of 3573 Square meter. The respondent took the possession of the
parking area on 31.05.2012 at the midnight.
3. The respondent was found irregular in paying license fee and
therefore the claimant has been continuously writing letter for making
payment of the license fee and outstanding dues however, on 10.10.2015
on account of default committed by the respondent in violation of the
terms and conditions of license agreement the possession was taken. Note
to the effect of taking possession was prepared on 10.10.2015 signed by
both the parties. The claimant settled the final bill on 29.12.2015.
4. The claimant DMRC invoked clause 25 of the license agreement,
and matter was referred to conciliator in accordance to arbitration clause
which was initiated on 01.07.2016 and terminated on 29.09.2016. The
petitioner imposed penalties in violation of terms and conditions for total
amount of Rs. 1,44,500/- from June, 2012 to October, 2015.
5. The petitioner initiated process of appointment of sole arbitrator on
15.09.2018, and the competent authority has appointed the sole arbitrator
on 15.10.2018. The respondent appeared first time before the arbitrator
on 28.02.2019. On 08.02.2019 petitioner filed the claim before the
arbitrator for recovery of 83,82,845/-, the respondent filed reply to the
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 2 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
statement of claim then petitioner filed the rejoinder. On 10.07.2019 the
arbitrator framed three issues including the issue of whether the claim is
time barred or not. After hearing the parties, Ld. Arbitrator dismissed the
claim on the ground that the claim of the petitioner is barred by
limitation.
6. In reply, it is stated by the respondent that there is no infirmity in
the impugned award passed by the arbitrator.
Submission of counsels
7. Ld. Counsel for the petitioner stated that the present petition is
filed within limitation therefore, the Ld. Arbitrator has committed patent
illegality. As per the agreement, it was mandatory for the petitioner to
invoke arbitration procedure as per clause 25 of license Agreement. The
cause of action arose for invoking pre arbitration clause i.e. reference to
conciliation when the final bill was prepared by the petitioner and handed
over to respondent on 29.12.2015. The limitation period to invoke the
conciliation clause is not provided under any law therefore, its limitation
will be governed by Article 137 of the Arbitration Act which is three
years (relied upon Inder Singh Rekhi Vs. Delhi Development Authority
(1988) 2 SCC 338). The cause of action to make a reference to arbitration
arose after termination of the conciliation proceedings. The conciliation
proceedings terminated on 29.09.2016 therefore, the limitation period to
make the reference to arbitration is three years as provided under Article
137 of the Limitation Act. Delhi High Court in case title 'M/s Welspun
Enterprises Ltd. Vs. M/s NCC Ltd, 2022 SCC Online Del 3296', held that
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 3 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
the period of limitation for referring dispute to arbitration cannot
commence till the parties have exhausted the necessary pre reference
procedure. In present case the last date to make reference to arbitration
therefore was 29.09.2019 while the petitioner had made reference on
22.10.2018 thus within limitation period.
8. Ld. Counsel further submits that the arbitration agreement cannot
override the law of limitation as held by Hon'ble Delhi High Court in
case title 'Municipal Corporation of Delhi Vs. Natraj Construction
Company 2023 SCC Online Del 1709' wherein, it is held that statutory
provision will override the agreement between the parties. Therefore, in
present case, Ld. Arbitrator erroneously observed that reference to the
arbitration was to made within 30 days after termination of conciliation
proceedings which directly comes in tooth with Section 28 of the
Contract Act. However, Ld. Counsel submits that in another matter title
DMRC Vs. Ashok Kumar, the Ld. Arbitrator passed an award dated
01.11.2019 in favour of the petitioner by hearing that the claim was
within limitation under similar circumstances.
9. Ld. Counsel submits that even if it is assumed the cause of action
to make reference of conciliation arose on 10.10.2015 then the last date to
make reference was 10.102018, however, the conciliation was initiated on
01.07.2016 which is well within limitation period and after termination of
conciliation proceedings, the cause of action to make reference to
arbitration would arise on 29.09.2016, and will expire on 29.09.2019
therefore, the arguments that the limitation period to make reference
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 4 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
arose on 10.10.2015 is baseless and without any factual or legal merits.
Furthermore, the time spent by the parties in contractually mandatory
conciliation proceedings is to be excluded (relied on 'Geo Miller and
Company Private Limited Vs. Chairman, Rajasthan Vidyut Nigam
Limited (2020) 14 SCC 643').
10. Ld. Counsel for respondent submitted that the respondent was
allowed to continue to possession of the parking till 10.10.2015 although
the contract was terminated on 08.10.2015, and the possession of the
Shadipur Metro site was handed over to the claimant on the midnight on
10.10.2015. The limitation period has to begin from 10.10.2015. The
defendant was never served notice of conciliation proceedings however,
the arbitrator was appointed on 15.10.2018 after three years therefore, the
present claim is barred by limitation as rightly held by the Ld. Arbitrator
there is no infirmity in the impugned award passed by the Ld. Arbitrator
dismissing the claim on the ground of limitation (relied upon 'Jhang
Cooperative Group Housing Society Ltd Vs. Pt. Munshi Ra, & Ass. (P)
Ltd., 202 (2013) DLT 218 (DB)', 'Swan Gold Mining Ltd. Vs. Hindustan
Copper Ltd., VII (2014) SLT 586', 'Jivaraj Bhai Ujamshi Sheth & Ors.
Vs. Chintamanrao Balaji & Ors., AIR 1965 SC 214', 'State of Rajasthan
Vs. R. S. Sharma & Co., dt. 16.08.1988, 'New India Civil Erectors (P)
Ltd. Vs. O.N.G.C, AIR 1997 SC 980', 'M/s Parmar Construction Co. Vs.
D.D.A, 1996 (2) Arb. LR. 73', 'NDMC Vs. Kalu Ram, AIR 1976 SC
1637')
Arguments heard. Record perused.
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 5 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
11. The relevant paragraphs of the impugned award dated 26.11.2020
passed by the Ld. Arbitrator is reproduced as under :
"....ISSUE NO. 1
Whether the claim filed by the claimant is time barred and not within the
limitation period? [OPR]
The onus of this issue was on the respondent so Sh. K. D. Sharma, the
counsel of the respondent argued first and submitted that claim filed by
the claimant is not within the limitation period and thereby the claim is
not maintainable as per the provisions of the Limitations Act.
Sh. K. D. Sharma argued that the respondent was never served with any
notice Intimating Initiation of conciliation proceedings and appointment
of Sh. I. P. Singh, DGM/C & S-II as Conciliator by Sh. S. G. Pathak,
Senior DGM / C & S and thereby respondent was not aware about any of
the conciliation proceedings held before the Conciliator.
Sh. K. D. Sharma brought my attention to Annexure C-2 at page no. 38
where it has been mentioned that the operating period of the contract will
be 3 [three] years but the claimant has mentioned something else in his
claim petition and pleaded that the respondent operated the parking site
from 01.06.2012 to 10.10.2015 and thus both the submissions in the
pleading of the claimant are contradictory.
Sh. K. D. Sharma brought my attention to the pleadings in claim petition
from para 9 to para 26 and made submissions that pleading of the
claimant is silent on the points of payment made by the respondent
towards monthly payments. In all paras, only the outstanding amount at
that particular time has been mentioned but silent on the point of
payment made by the respondent towards license fee. Sh. K. D. Sharma
also argued that no calculation has been given as to how, the interest
mentioned in the paras mentioned above, has been calculated.
Sh. K. D. Sharma also argued that pleading does not reveal the dates of
payments made by the respondent so it is very difficult to say from where
limitation starts. Mr. K. D. Sharma also argued that it is also not clear
from the demand notices raised by the claimant that against which dues,
the payment made by the respondent has been adjusted. Sh. K. D. Sharma
also argued that claimant, in spite of various requests made by the
respondent, had not adjusted the security amount deposited by the
respondent against outstanding dues. Sh. K. D. Sharma also argued that
the respondent also sent a letter to the claimant and requested them to
adjust the Earnest Money Deposited by him in another NIT for other
parking sites where he was not the highest bidder, but claimant has not
adjusted such amounts against outstanding dues.
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 6 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
Mr. K. D. Sharma also relied on a case of Hon'ble Apex Court in the
matter of NDMC Vs. Kalu Ram [1976]. Mr. K. D. Sharma argued that all
legitimate dues have limitation period for civil recovery. With this, Sh. K.
D. Sharma, the counsel of the respondent concluded his submission on
the point of limitation.
Sh. Krishan Kumar, the counsel of the claimant argued at length. Sh.
Krishan Kumar argued that annexures filed by him along with statement
of claims are the part of pleading. Claim petition cannot be read in
isolation and annexed documents are part and parcel of pleadings. The
claimant has mentioned about the annexed documents with each para,
for which the respondent argued and the annexed documents are clear on
the point of amount deposited by the respondent as license fee, pending
interest against the respondent at that relevant time along with principal
amount and even the statement of payment and dues were also sent to
respondent along with their demand notice and thereby the contention of
the respondent is not relevant in present scenario and all the documents
clearly depict on the point of outstanding amount including Interest. Sh.
Krishan Kumar also argued that had the respondent found any
discrepancy in the statement of payment and dues, he should have
certainly objected to the demand at that particular time.
As regards the adjustment of payment against [which] dues, Mr. Krishan
Kumar, argued that all payments made by the respondent have been
adjusted on First In First Out [FIFO] basis.
To counter the submission of the respondent that respondent operated the
parking site from 01.06.2012 to 10.10.2015 despite 3 years License
Agreement, Sh. Krishan Kumar argued that clause 15 of the License
Agreement dated 25.06.2012 has clearly mentioned that "If the Licensee
is desirous of terminating the license hereby created before the expiry of
the period of the license, it shall give to the DMRC, 3 months' notice in
writing of its intention to terminate the license. However, the existing
parking contractor shall have to continue the parking work until a new
agency is deployed and takes over the site. However, the interest free
security deposit will stand forfeited in favour of the licensor [DMRC
Limited]. Mr. Krishan Kumar also brought my attention to a letter dated
10.10.2015 when the possession of the parking site was taken over by
Nitin Kumar, Station Manager Shadipur, Delhi Metro Rail Corporation,
from the respondent. Sh. Krishan Kumar also rebutted the contention of
the counsel of the respondent that the claimant had not adjusted the
amount of security deposit against the outstanding dues. Sh. Krishan
Kumar submitted that the license of the respondent was terminated
because he was in continuous default and thereby his security deposit
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 7 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
was forfeited as per clause 1 (xv) d & (xv) e of the "TERMS &
CONDITIONS OF TENDER FOR THE GRANT OF LICENSE FOR
COLLECTING PARKING CHARGES AND FOR RUNNING PARKING
SITE OF DELHI METRO RAIL CORPORATION LIMITED ON
MONTHLY LICENSE FEE BASIS". The License was terminated on
10.10.2015 and security deposit of Rs. 12,53,200/- was forfeited. Sh.
Krishan Kumar argued that the claim of the claimant is within limitation
period, as the conciliation proceedings have been started on 01.07.2016
and the same were terminated on 29.09.2016 as per section 62 of the
Arbitration & Conciliation Act, 1996. Sh. Krishan Kumar further argued
that the conciliation was necessary proceedings before initiating the
arbitration proceedings as per clause 25 of the License Agreement dated
25.06.2012. Sh. Krishan Kumar further argued that invoking conciliation
proceedings, in fact, is the process of initiation of recovery of claim and
thereby the present claim of the claimant is within the limitation period.
Sh. Krishan Kumar argued that as per section 21 of the Arbitration and
Conciliation Act, 1996, the proceedings have been started when the
dispute was referred to Conciliator and received by the respondent. The
proceedings have been initiated on 01.07.2016 as argued by Sh. Krishan
Kumar. Sh. Krishan Kumar further argued that his claim was within
limitation period as per section 43(3) of the Arbitration and Conciliation
Act, 1996 where the Presiding Officer can extend the limitation if undue
hardship was caused to the claimant. He further argued that the claim of
the claimant is within the limitation period as per section 77 of the
Arbitration and Conciliation Act, 1996 because the time taken in
conciliation proceedings will be excluded for computation of limitation
period.
Sh. Krishan Kumar argued that the claimant had taken possession of the
Shadipur parking site on 10.10.2015 and claimant has taken reasonable
time in preparing final account of the licensee and the same was finalized
in the month of December and letter dated 29.12.2015 was sent to the
respondent along with the Statement of Claim and thus the limitation to
file the claim was started from 29.12.2015.
Sh. Krishan Kumar had also submitted certain case laws on which he
made his reliance. The case laws on which, the counsel of the claimant
made his reliance are 1) Civil Appeal No. 1178 of 1988-Inder Singh
Rekhi Vs. Delhi Development Authority decided on 24.03.1988 by
Hon'ble Supreme Court of India; ii) OMP no. 214/2000-ITI Limited Vs.
Par Pressings & Ors. decided on 04.12.2009 by Hon'ble High Court of
Delhi; lii) Appeal (Civil) 2517 of 1999 Director of Settlement, Andhra
Pradesh & Ors. Vs. M.R. Apparao and Ors. decided on 20.03.2002 by
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 8 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
Hon'ble Supreme Court of India; iv) CS (O.S) No. 1001 A of 2001,
Bindra Builders Vs. Delhi Development Authority and Ors, decided on
30.07.2012 by Hon'ble High Court of Delhi; and v) Civil Appeal No. 126
of 2005-Hari Shankar Singhania and Ors. Vs. Gaur Hari Singhania and
Ors. decided on 04.04.2006 by Hon'ble Supreme Court of India.
Sh. Krishan Kumar moved an application for allowing the covering letter
of Annexure C33 of the Statement of Claim to be the part of his claim.
The application was contested by the respondent and I have allowed the
covering letter dated 29.12.2015 for Annexure C-33 of the Statement of
Claim to be part of Statement of Ciaim. Sh. Krishan Kumar argued that
the limitation starts from 29.12.2015 as per covering letter of Annexure
C-33 1.e. Statement of Claim.
After perusal of the pleadings of both the parties including documents
and appreciating the submissions of both the parties, my findings on each
point is as follows:
1. The submission of the respondent that pleading of the claimant is of
the evasive nature and does not disclose about the payment made by the
respondent to the claimant. I have seen the pleading of both the parties.
The claimant had also filed the demand notice in which it is mentioned
that on each and every occasion, the copy of statement of payment and
dues was also given to the respondent. In my opinion, the
submission of the respondent is not relevant and, in my view, the pleading
of the claimant is clear on all aspects.
2. That the other contention of the respondent was, that the respondent
operated the Shadipur parking site from 01.06.2012 to 10.10.2015
despite License Agreement being for a period of 3 years from 01.06.2012
to 31.05.2015. After perusal of License Agreement, I am of the view that
as per clause 15 of License Agreement dated 25.06.2012, the licensee
[respondent] shall have to continue the parking work until a new agency
is deployed and takes over the site. The possession of the Shadipur
parking site was taken over by the claimant on 10.10.2015 by Sh. Nitin
Kumar, Station Manager Shadipur, Delhi Metro Rail Corporation,
thereby the claimant has not done anything wrong by continuing with the
respondent to operate the parking beyond 3 years.
3. Sh. K. D. Sharma relied on one Hon'ble Apex Court case law in the
matter of NDMC Versus Kalu Ram & Others decided by the bench of
Justice A. C. Gupta on 20.04.1976. In this matter, it was held that legally
recoverable dues were also barred by limitation.
4. The claimant raised a point that according to section 21 of the
Arbitration and Conciliation Act, 1996, the claim proceeding was
initiated on 01.07.2016, when the dispute was referred to conciliator. The
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Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
plea of the claimant is not worthy to consider because section 21 of the
Arbitration and Conciliation Act, 1996 mandate that proceeding before
Arbitrator commence when the request for the dispute is to be referred to
the Arbitrator and thereby the section 21 of the Arbitration and
Conciliation Act, 1996 is not related to Initiation of claim before the
Concillator but in fact before the Arbitrator.
5. The other contention of the claimant that its claim was within the
limitation period as per section 43(3) of the Arbitration and Conciliation
Act, 1996 cannot be considered because the pleading has not suggested
anywhere that he was prevented from filing his claim before the
Arbitrator on any of the reasons which may be considered as undue
hardship caused to him and thereby the submission of the claimant is not
valid and his defence that his claim is within limitation period as per
section 43(3) of the Arbitration and Conciliation Act, 1996 is not worthy
to be considered.
6. The claimant has also taken the defence of section 77 of the
Arbitration and Conciliation Act, 1996 but section 77 of the Arbitration
and Conciliation Act, 1996 relates to providing the protection to the
claimant if limitation period is going to expire during the conciliation
proceedings but in the present case, the conciliation proceeding were
terminated prior to expiration of limitation period and thus the point
raised by the claimant is not considerable.
7. The clause 25 of the License Agreement executed on 25.06.2012
between the claimant and the respondent relates to Conciliation and
Arbitration. As per this clause, In the event of any dispute, difference of
opinion or dispute or claim arising out of or related to this agreement of
breach, termination or the Invalidity thereof, shall firstly be attempted by
conciliation and in the event of failure of settlement, the dispute will be
referred to sole arbitrator within 30 days of fallure to settle the dispute in
conciliation. The tirne of 30 days is of mandatory nature for referring the
matter to the arbitrator. In the present case, the conciliation was
terminated on 29.09.2016 and as per the mandate of clause 25 of the
License Agreement, the dispute was supposed to be referred to the
Arbitrator on or before 29.10.2016. But, in the present case, the matter
was referred to the Arbitrator on 22.10.2018. Thus, the claimant has
violated the provisions of clause 25 of the License Agreement and even
no explanation was submitted by the claimant in his claim petition
regarding delay.
8. The claimant relied upon civil appeal no. 1178 of 1988 in the matter of
Inder Singh Rekhi Vs. Delhi Development Authority decided by Hon'ble
Supreme Court of India on 24.03.1988. The claimant argued that
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Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
accrual of cause of action is from the date of preparing the final bill. I am
not convinced with the argument of the claimant because he cannot
postpone the accrual of cause of action by delay in preparing / raising
the bill and also by writing reminders or sending reminders. As far as the
preparation of bill is concerned, the limitation will be counted from the
date if the date of payment is fixed and when the dues are fixed and not to
be calculated according to work. In the present case, license fee as well
as interest and penal Interest was fixed as per license agreement and
thereby the claimant was well aware about the amount. I have also made
the query from the claimant about the last payment made by the
respondent and also about the fact whether respondent has
acknowledged his debt in writing after termination of the contract. The
claimant replied to my query that respondent had never acknowledged
debt by writing any letter and also made submission that last payment by
the respondent was made on 10.04.2015. The claimant terminated the
contract on 08.10.2015 [Effective 10.10.2015 midnight] and raised final
bill with due date on 10.10.2015 and thus the limitation commenced from
the date of 10.10.2015 in the present case. I have gone through the case
law titled as Inder Singh Rekhi Vs. Delhi Development Authority and
fully satisfied that observation of supra case is not applicable in
claimant's case and as per me, the cause of action arose
under Article 137 of the Limitation Act from the due date of payment of
the last bill raised by the claimant.
9. The claimant also relied on one matter i.e., OMP no. 214/2000 titled
as ITI Limited Vs. Par Pressing and ORS. decided by Hon'ble Justice
Vipin Sanghi of High Court of Delhi at New Delhi on 04.12.2019. In this
matter, the arbitrator was appointed quite late l.e. after the limitation
period but arbitration proceedings were commenced within limitation
period and thus Hon'ble Justice Vipin Sanghi observed that claim filed by
the claimant before the arbitrator to be considered within limitation
period because the arbitration proceedings were commenced within
limitation period as per Article 137 of the Limitation Act. But in the
present case, arbitration proceedings were commenced after the
Limitation period and thereby the claimant cannot take the benefit of
case decided by Hon'ble Justice Vipin Sanghi because facts of both the
cases are not identical as the arbitration proceedings were commenced
within limitation period in the matter decided by Hon'ble Justice Vipin
Sanghi but in the case before me, the arbitration proceedings were
commenced after the expiration of limitation period.
10. The claimant also relied upon a case i.e. CS(OS) no. 1001A of 2001
titled as Bindra Builders Vs. Delhi Development Authority
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 11 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
and Ors. decided by Hon'ble Justice Dr. S. Murlidhar of Hon'ble High
Court of Delhi on 30.07.2012. The claimant argued that the cause of
action arose from the date of preparing the final bill as he has a benefit
of Article 18 of the Limitation Act where bill has to be prepared after
assessing the work performed by the other party and also after giving the
completion certificate by the contractor. This case on which, the claimant
relied is different from the case which I have to decide because the
Article 18 only applies in those matters where payment is not fixed and
cause of action accrues on different dates. But in the matter, which I have
to decide, the date of payment is fixed, the amount of license fee is fixed,
the rate of interest and penal interest is fixed and thereby the claimant
cannot take benefit of Article 18 of the Limitation Act and moreover the
claimant has prepared the last bill due on 10.10.2015 and thereby the
observation of case Bindra Builders Vs. Delhi Development Authority
and Ors. is not applicable in the matter to be decided by me.
11. The claimant also relied on one matter i.e. civil appeal no. 126 of
2005 titled as Hari Shankar Singhania and Ors. Vs. Gaur Hari Singhania
and Ors. decided by Hon'ble Justice H. K. Sema and Hon'ble Justice AR
Lakshmanan of Hon'ble Supreme Court of India decided on 04.04.2006.
The claimant put his emphasis on para no. 21 of the judgement and
where it is mentioned where a settlement with or without conciliation is
not possible, then comes the stage of adjudication by way of arbitration.
Article 137, as construed in this sense, then as long as parties are in
dialogue and even the differences would have surfaced, it cannot be
asserted that a limitation under Article 137 has commenced. Such an
interpretation will compel the parties to resort to litigation / arbitration
even where there is a serious hope of parties themselves resolving the
issues." The matter, which I have to decide is quite different than the
referred matter because the liabilities and entitlement of the parties were
fixed and there was no need for any dialogue regarding any differences
and the limitation was strictly commenced as per Article 137 of the
Limitation Act because the cause of action accrued on 10.10.2015 being
the due date of payment for the final bill raised by the claimant. The case
law of Hari Shankar Singhania and Ors. Vs. Gaur Hari Singhania and
Ors. has no relevance whatsoever in the present matter and thereby the
same is not applicable in the matter to be decided.
12. The claimant also relied in a matter l.e. appeal (civil) 2517 of 1999
titled as Director of Settlement, Andhra Pradesh and Ors. Vs. M.R.
Apparao and Ors. decided by Hon'ble Justice G. B. Pattanaik, S. N.
Phukan and S. N. Varlava of Hon'ble Supreme Court of India on
20.03.2002. The claimant has put my attention on para no. 8 of the case
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Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
where the Hon'ble Judges have observed about Article 141 of the
Constitution of India. It has been mentioned in para 8 that "Article 141 of
the Constitution on unequivocally indicate that the law declared by the
Hon'ble Supreme Court of India shall be binding on all Courts within the
territory of India. The aforesaid Article empowers the Hon'ble Supreme
Court of India to declare the law. It is, therefore, an essential function of
the Court to interpret a legislation. The statement of the Court on matters
other than law like facts may have no binding force as the facts of the two
cases may not be similar".
The observation of the Court and mandate of the Article 141 of the
Constitution of India is not questionable. The above cases, on which the
claimant relied, are not applicable to the dispute in question between the
parties because the facts of each case were different from the case in
dispute between the parties and I have no adverse observation of Article
141 of the Constitution of India and I have properly interpreted the cases
on which claimant has made his reliance and my observation to these
cases in respect with my case which I have to decide was based on legal
and cogent observation.
13. I, vide my order dated 05.11.2019, allowed the application of the
claimant to place the covering letter dated 29.12.2015 for
Annexure C 33 of the statement of claim as part of the Statement of Claim
filed by the claimant. My view on this point is this that the covering letter
dated 29.12.2015 has no relevance as far as it relates to commencement
of the cause of action. The Statement of Claim has last bill for and upto
the month of September 2015, which was due on 10.10.2015. The
contract was also terminated on 08.10.2015 [Effective 10.10.2015
midnight] and the terms of contract was fixed with regard to license fee,
rate of Interest and penal interest and thereby the letter dated 29.12.2015
has no relevance for the purpose of computing the limitation period.
14. The major issue to decide is whether the claim is within the
limitation period or not and thereby I have to reproduce certain facts to
conclude this issue. The License Agreement between the claimant and the
respondent was executed on 25.06.2012 for the operation of contract
from 01.06.2012 to 31.05.2015. The respondent was allowed to continue
the operation of parking till 10.10.2015 although the contract was
terminated on 08.10.2015 [Effective 10.10.2015 midnight]. The
possession of the Shadipur parking site was handed over to the claimant
by the respondent on 10.10.2015 (midnight) and statement of account
was prepared 01.10.2015 for due date of 10.10.2015. As per the
chronology of events, the limitation period has to be started from
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Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
10.10.2015. The claimant had raised certain questions regarding the
commencement of cause of action and as per the claimant, the final bill
was prepared on 29.12.2015 hence the limitation period was started on
29.12.2015.
Article 137 of the Limitation Act is very clear on the point that limitation
period for initiating the proceedings for recovery of dues is three years.
The claimant sought the benefit of Article 18 of Limitation Act, on the
point that limitation period will commence from the date of preparation
of final bill. Article 18 of the Limitation Act comes into play In that when
no specific date for payment is fixed, limitation commence and the cause
of action accrues for the purpose of limitation on the completion of work.
This fact has been clearly mentioned in para no. 18 of CS (OS) no. 1001A
of 2001 titled as Bindra Builders Vs. Delhi Development Authority and
Ors. decided by Hon'ble Justice Dr. S. Murlidhar of Hon'ble High Court
of Delhi on 30.07.2012. But in the present matter, the date of payment is
fixed and thereby the limitation has to be commenced from the due date
of payment and thereby the claimant cannot take the benefit of Article 18
of the Limitation Act.
I observe that limitation period in the present dispute commence from
10.10.2015 and not from 29.12.2015.
15. I enquired from claimant that whether respondent has ever
acknowledged his debt in writing with you and on this, the claimant told
me that the respondent has not written any such letter and thereby the
limitation period cannot be revived under section 18 of the Limitation
Act. From the above discussion, my observation in this view is this that
the claim filed by the claimant before me is time barred.
ISSUE NO. 2
Whether the claimant is entitled to recover the amount of Rs. 83,82,855/-
from the respondent? [OPC]
The claimant filed Statement of Claim against the respondent for an
award of Rs.83,82,855/- which includes principal amount of Rs.
43,91,663/- [dues on account of license Fee, TCS, Penalty, Electrical
Bills & Interest) and interest amount of Rs. 34,91,192/- for the period
11.10.2015 to 31.01.2019 and legal expenses amounting to Rs. 5,00,000/-
In favour of claimant and against the respondent. The claimant further
seeks relief of pendent lite and future interest at contractual rate of
interest @ 24% per annum in his favour and against the respondent.
The claimant issued tender document i.e., tender for parking rights at
Shadipur Metro Station and Notice to Invite tender was issued by the
claimant and respondent submitted his tender application form with
claimant on 13.02.2012 and respondent was selected as a successful
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 14 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
bidder for operating the parking rights at Shadipur Metro Station. The
notice of Inviting tender, application by respondent as tender application
form are exhibited as CW-1/1. The letter of acceptance issued by the
claimant in favour of the respondent is exhibited as CW-1/2. After the
acceptance of tender of the respondent, a License Agreement was
executed between the claimant and the respondent on 25.06.2012 duly
signed by Mr. Jagdip Singh DGM/Civil/Structure on behalf of claimant
and Mr. Ashok Kumar on behalf of the respondent. Two persons
witnessed for claimant and two for respondent. License Agreement is
exhibited as CW-1/3. After the execution of License Agreement [Exhibit
CW-1/3], the respondent duly took possession of the parking site at
Shadipur Metro Station which was handed over to the respondent on
midnight of 31.05.2012. The letter dated 01.06.2012 for handing and
taking over the possession is exhibited as exhibit no. CW-1/4. The
respondent had agreed about submitting the tender, execution of License
Agreement and taking over the possession of parking site on 01.06.2012.
As per the Letter of Acceptance dated 07.05.2012, the respondent had to
deposit the security amount of Rs. 12,53,200/- equivalent to four
month's license fees and advance monthly license fee equivalent to one
month license fee le. Rs. 3,13,300/- aggregating to Rs. 15,66,500/-. The
respondent had paid this amount with the claimant. The License Fee for
operating the parking at Shadipur on license basis was for a period of
three years at a license fee of Rs. 3,13,300/- per month over a super area
of 3573 Sqm, which has been increased to Rs.4,18,254/- per month with
effect from March 2013 and further increased to Rs.4,69,950/- per month
with effect from December 2014 based on increase in area.
As per claimant, the respondent was irregular in paying the license fee to
the claimant and used to pay the license fee in contravention and
violation of terms & conditions of the license agreement. The claimant
has been writing letters for making payments of license fee and had
granted numerous opportunities to respondent to pay the outstanding
dues. The claimant has placed various letters 1.e. Demand Notices to the
respondent to pay their outstanding dues at relevant time. Demand
Notices were served to respondent on dated 27.08.2012, 22.10.2012,
09.11.2012, 19.12.2012, 29.01.2013, 23.03.2013, 20.05.2013,
24.06.2013, 25.10.2013, 22.12.2014, 15.01.2015, 21.01.2015,
13.02.2015, 23.03.2015, 23.04.2015, 22.05.2015, 23.06.2015,
23.07.2015, 24.08.2015 and 23.09.2015 [Exhibit Nos. CW-1/5 to CW-
1/12, CW-1/15, CW-1/18 to CW-1/27 and CW-1/32]; The claimant issued
termination notices dated 16.07.2013 [CW -1/13], to respondent for
having failed to deposit the dues of License Fee along with late Interest
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 15 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
and penalties totalling to Rs. 11,95,241/- (Rs. 10,19,858/- Principal
amount plus Rs. 1,86,034/- towards Interest). It Is further stated that if
the respondent failed to abide by the terms and condition of the contract,
then action will be taken against him as per clause 1(xv)(d) and 1(xv)(e)
of the License Agreement.
That the claimant further issued numbers of termination notices dated
26.08.2013, 18.11.2013, 03.02.2014 and 08.10.2015 [CW-1/14, CW-1/16,
CW- 1/17 and CW-1/29] and in all these termination letters, the claimant
pleaded that if respondent failed to abide the terms and condition of
License Agreement then action will be taken against him as per clause
1(xv)(d) and 1(xv)(e) of the License Agreement for termination of
contract along with forfeiting of security deposit.
The respondent denied that he was irregular in making the payment of
license fee to the claimant. The respondent pleaded that he was regular
in making the payment and was operating and maintaining the Shadipur
Parking Site as per the terms & conditions of tender documents and
license agreement. The respondent further pleaded in his written
statement / reply as well as in his evidence that he was regular in making
payment of license fee every month on time and the parking was well
maintained and running as per terms & conditions of license agreement
and tender document.
The respondent denied the contents of every demand notice issued by the
claimant and also denied the contents of all the letters of termination of
contract issued by the claimant. The respondent pleaded that the
claimant have been writing letters for vexatious reasons and with
malafide designs to claim interest and penalties despite the fact that he
was regular in making payments and all the demand notices as raised by
the claimant are self-destructive and without any basis. The respondent
stated that there is no outstanding against him and he went to the
claimant's office and met with one Mr. Hemant regarding the license fee
and after discussing the issue with him, provided him the demand draft /
pay orders of the license fee which was paid by the respondent to the
claimant.
That the claimant filed final settlement of parking rights to M/s. Ashok
Kumar at Shadipur Metro Station parking Cell [Exhibit CW-1/33]. The
total outstanding as per the settlement sheet is Rs. 43,91,663/-. The detail
of the same is given hereunder:
S.No. Particulars Amount
1. License Fee for the period from 1,64,54,134.00
01.06.2012 10.10.2015
2 Service Tax 10,85,616,00
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 16 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
3 TCS 3,50,795.00
4 Penalties 1,44,500.00
5 Electricity 12,528.00
6 Interest on delay in payment up to 7,99,105.00
10.10.2015
7 Total Due Amount [1+2+3+4+5+6] 1,88,46,678.00
8 Less: Amount paid by the respondent 1,44,55,015.00
9 Net Balance Due [7-8] 43,91,663.00
In addition to above, the claimant has also claimed Interest from
11.10.2015 to 31.01.2019 calculated @ 24% per annum as per terms &
conditions enumerated In License Agreement amounting to Rs.
34,91,192/-. The claimant also claimed pendent lite interest calculated @
24% per annum future interest till realization.
The claimant has also claimed a sum of Rs. 5,00,000/- as legal charges in
his claim. Thus, the total claim of the claimant is Rs. 83,82,855/- [Rs.
43,91,663/- + Rs. 34,91,192/- + Rs. 5,00,000/-) at the time of filing the
claim with me.
The respondent had not denied any of the figures as mentioned in CW-
1/33 but argued that the claim of the claimant is not maintainable i) on
the ground of limitation; ii) Non-adjustment of Security Deposit with
outstanding and forfeiture thereof; ill) Non-adjustment of Earning Money
Deposit for other tenders of various parking sites in the year 2013 with
the outstanding License Fee; and (v) waiver of interest as per joint
meeting with Finance Officials and DGM on 23.03.2015.
I have to decide on the following defences raised by the respondent:
(i) whether the claimant was competent to forfeit the security deposit of
Rs. 12,53,200/- or not;
(ii) Whether the Security Deposit for other parking sites can be adjusted
with the outstanding of present claim of the claimant or not;
(iii) Whether interest can be waived or not;
The respondent has deposited the amount of Rs. 12,53,200/- as Security
Deposit as per the terms & conditions of Notice Inviting Tender [Exhibit
CW-1/1). The respondent, being a successful bidder taken the possession
for operating the parking right at Shadipur Metro Station on 01.06.2012
(31.05.2012 midnight) and operated the same up to 10.10.2015. The
operation of the parking site was beyond three years i.e. period of
contract but during this period, the claimant issued a number of letters to
the respondent as Demand Notices to pay their outstanding at that
relevant time and even claimant issued number of termination notices
dated 16.07.2013, 26.08.2013, 18.11.2013, 03.02.2014 and 08.10.2015
and in all these termination letters, the claimant pleaded that if
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 17 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
respondent failed to abide by the terms and condition of License
Agreement then action will be taken against him as per clause 1(xv)(d)
and 1(xv)(e) of the License Agreement for termination of contract along
with forfeiting of security deposit. The claimant had taken the possession
of the parking site on 10.10.2015 and even a note to this effect was
prepared on the same day which was signed both by the claimant and the
respondent.
That the claimant had issued a termination letter on 08.10.2015 [Exhibit
C-1/29] and terminated the contract with effect from 10.10.2015
[Midnight] along with forfeiture of Security Deposit. The License
Agreement was in operation for a period of three years from 01.06.2012
to 31.05.2015. Exhibit CW - 1/1 l.e., terms and conditions of tenders for
grant of License, Exhibit CW - 1/2 l.e., Letter of acceptance and Exhibit
CW - 1/3 l.e. License Agreement dated 25.06.2012 are clear on the point
that period of contract will be three years. Clause 1(xvi) of the Terms &
Conditions of Tender for Grant of License [Exhibit CW - 1/1 ] reads as
under:
"The period of License will terminate on the last date of the last month of
contract period from the date of possession. On completion
of the term, the Interest free security deposit will be returned after
deduction of charges / outstanding/dues of any other claim etc., if any."
Since the respondent had taken the possession of Shadipur parking site
on 01.06.2012 [Midnight] and as per the terms and conditions of all the
documents, the contract between the claimant and the respondent was to
be terminated on the expiry of three years from the commencement of
contract i.e., on 31.05.2015.
The claimant issued a letter of termination on 08.10.2015 [Exhibit CW-
1/29] and forfeited the Security Deposit of Rs. 12,53,200/- deposited by
the respondent. As per the License Agreement dated 25.06.2012 and
other related documents, the contract was for a period of three years
from 01.06.2012, which expired on 31.05.2015. The respondent continued
to operate the Shadipur parking site thereafter till 10.10.2015 to
accommodate the claimant until new agency was deployed and took over
the site. The act of the claimant to forfeit the Security Deposit of the
respondent is illegal, unlawful and unjustified and against the principle
of equity and justice, in view of the completion of the contract on
31.05.2015. The claimant, therefore, has legal obligation to adjust the
amount of Rs. 12,53,200/- against the outstanding of respondent and has
no legal right and entitlement to forfeit the Security Deposit.
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 18 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
The respondent also claimed for adjustment of the Earnest Money
Deposit for participation in 2 NITs in the year 2013 of various parking
sites and even he had written a letter to the claimant on 10.04.2015. In
my opinion, the claim of the respondent for adjustment of such amount by
the claimant in his claim for the outstanding against parking site of
Shadipur depot is not legal one because the Security Deposit of other
parking sites are not the part of the agreed contract between the parties
for operating parking of Shadipur Metro Parking Site and all the
contracts are separate contracts and independent to each other.
The respondent pleaded that one joint meeting was held on 23.03.2015 in
the office of the claimant and the matter was discussed with Finance
Officials and DGM and in that meeting, the respondent requested the
claimant to waive his Interest as he has already informed repeatedly in
his previous letters regarding the disputes relating to parking site and the
letter to this effect was also annexed by the respondent. I find no reason
in his claim and respondent is not entitled to seek waiver of the interest
because the parties have specific mechanism to address their grievances
as per the term and conditions of the License Agreement and such prayer
of the respondent is unwarranted and without any legal claim.
The claimant has also claimed legal charges of Rs. 5,00,000/- from the
respondent and it appears that the same is on excess side but I allow an
amount of Rs. 2,20,000/- as Legal Charges to be paid to claimant by the
respondent.
I have allowed an amount of Rs. 58 ,53,412/- including interest of Rs. 24 ,
94,949/- on the revised basic amount of 0.31 ,38,463/. after giving effect
to the amount of Security Deposit forfelted by the claimant and after
allowing legal expenses of Rs. 2,20,000/- to the claimant. For the
purpose of clarity, the same is depicted in tabular form, as under:
S.No. Particulars Amount
1. Amount claimed by the claimant without interest 43,91,663.00
2 Less: Amount of Security Deposit forfeited by the 12,53,200.00
claimant but disallowed by me
3. Net Basic Amount payable to claimant without 31,38,463.00
interest [1 + 2]
4 Interest @24% per annum on Net Basic Amount 24,94,949.00
(Para 3 of the table) for 1209 days considering 365
days in a year [31,38,463 * 1209 * 24%/365 ],
calculated upto 31.01.2019
5 Legal Charges allowed by me 2,20,000.00
6 Total Amount of claim without pendent lite 58,53,412.00
Interest [3 + 4 + 5)
Issue No. 3
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 19 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
Whether the claimant is entitled to interest @ 24% per annum from the
respondent?
The onus to prove this issue is on the claimant. The claimant filed the
Statement of Claim against the respondent and sought interest @24% per
annum upto filing of the litigation, for pendent lite interest and future
interest. The respondent had not specifically denied about the rate of
Interest but pleaded in general that nothing is due against him. The
claimant exhibited documents executed between claimant and the
respondent, which gives legal right to the claimant to claim the interest.
The claimant filed Exhibit CW-1/1 i.e., terms & conditions of tender for
grant of license and in terms and conditions titled as General Conditions,
the clause 1 (d) states as under:
"The Licensee would be required to make payment of License Fee in
advance on monthly installment basis by the 10th of every month called
due date vide a demand draft only [on scheduled commercial bank)
drawn in favour of DMRC Limited. In case of failure to deposit the
License Fee on time, interest @ 24% per annum will be leviable from the
due date of the deposit until the date of deposit."
The contractual interest between the claimant and the respondent for
delay In making the payment is @ 24% per annum and thus in my
opinion, the claimant is entitled for interest @ 24% per annum on
outstanding till the date of filing the claim with me. But I have a different
opinion for his claim for pendent lite interest and future interest. 24%
Interest is at excessive side and even hardship to the defaulter and
moreover no bank is charging such high rate of Interest on any kind of
loan given by the bank including penal Interest etc. As per the Interest
Act, the appropriate interest is simple interest calculated @ 9% per
annum. Thereby, I decide that claimant is only entitled for simple Interest
calculated @ 9% per annum on pendent lite and future interest on the
awarded amount.
ISSUE NO. 4-RELIEF
The issue no. 2 that whether the claimant is entitled to recover the
amount of Rs. 83,82,855/- from the respondent is partly allowed in favour
of the claimant. The claimant is entitled to recover the amount of Rs.
58,53,412/- from the respondent, as per detail given below:
I award the amount of Rs. 58,53,412/- in favour of the claimant and
against the respondent including the interest calculated @ 24% per
annum upto 31.01.2019 and an amount of Rs. 2,20,000/- as legal
expenses to the claimant
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 20 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
The issue no. 3 whether the claimant is entitled to interest @24% per
annum from the respondent is also partly decided in favour of the
claimant. I awarded Interest @ 24% per annum on outstanding till the
date of filing of the claim i.e. up to 31.01.2019 in and thereafter 9%
simple interest per annum on pendent lite and future interest in favour of
the claimant and against the respondent.
The issue no. 1 i.e. whether the claim filed by the claimant is time
barred and not within the limitation period is decided in favour of the
respondent. The claim filed by the claimant is time barred and thereby
the claim of the claimant is dismissed without cost.
The claim of the claimant is dismissed on the ground of limitation and
thereby Stamp Fee is not required in the present award."
12. Ld. Arbitrator during proceedings framed four issues. Issue no. 1 is
regarding whether the claim filed by the claimant is time barred or not.
The Ld. Arbitrator found that the claimant is entitled to a sum of Rs.
58,53,412/- from the respondent with respect to issue no. 3 and simple
interest @ 9% per annum, pendent-lite and future on the awarded amount
with respect to issue no. 3, however dismissed the claim of ground of
limitation. This petition is challenged to the impugned award only on the
aspect of limitation.
13. While dealing with the aspect of limitation, Ld. Arbitrator observed
that the claimant had taken the defence of Section 77 of the Arbitration
and Conciliation Act and held that Section 77 relates to providing the
protection to the claimant if the limitation period is going to expire during
the conciliation proceedings but in present case conciliation proceedings
were terminated prior to expiration of limitation period. Ld. Arbitrator
also observed that Clause 25 of the license agreement also stated that in
the event of failure of settlement through conciliation, the dispute will be
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 21 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
referred to sole arbitrator within 30 days on failure of the settlement. The
conciliation was terminated on 29.09.2016 therefore, the dispute was to
be referred to arbitrator on/before 29.10.2016 but the present matter was
referred to Arbitrator on 22.10.2018 in violation of clause 25 of the
license agreement. The claimant also argued that the approval of the final
bill, however, as far as preparation of final bill is concerned, the
limitation will be counted from the date if the payment date is fixed and
when dues are fixed and not to be calculated according to work. The case
of 'Inder Singh Rekhi Vs. Delhi Development Authority (1988) 2 SCC
338' as relied on is not applicable in the present case.
14. Ld. Arbitrator observed that the respondent was allowed to
continue the operation of parking till 10.10.2015, and the possession of
the Shadipur parking side was handed over on 10.10.2015. The limitation
period thus began from 10.10.2015, however, as per claimant, the final
bill was prepared on 29.10.2015, the limitation began from that date. Ld.
Arbitrator observed that Article 137 of Limitation Act states that the
limitation period for initiating the proceedings for recovery of dues is
three years however, the claimant sought benefit of Section 18 of the
Limitation Act by alleging that limitation period will commence from the
date of preparation of final bill however, Section 18 will come into play
when no specific date of payment is fixed, but in present matter date is
fixed, license fees is fixed etc, thereby claimant cannot take benefit of
Section 18 of the limitation. Thus the limitation period in present dispute
commences from 10.10.2015 and not on 29.12.2015. Admittedly, there is
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 22 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
no acknowledgment of debt in writing therefore limitation period cannot
be revived under Section 18 of the Limitation Act, thus the claim is time
barred.
15. The Ld. Arbitrator repelled the contention of the claimant that the
limitation period will not commence from 10.10.2015 but from
29.12.2015. The Ld. Arbitrator also observed that the conciliation
proceedings has been concluded during the period of limitation therefore,
no exclusion of the said period could be given in the present facts and
circumstances. Furthermore after conclusion of conciliation proceedings
arbitration proceedings are to be initiated within 30 days in terms of
clause 25 of the agreement but the proceedings are not initiated within 30
days hence, barred by limitation therefore, dismissed the claim of the
petitioner on the ground of limitation.
16. However, the issue no. 2 and 3 are decided in favour of the
claimant to the tune of Rs. 58,53,512/- with interest.
17. Admittedly, the license agreement executed between both the
parties on 25.06.2012 and the contract was terminated on 08.10.2015, and
the possession of the parking side was taken at the midnight of
10.10.2015. The final bill was prepared on 29.12.2015. The conciliation
proceedings were conducted in terms of clause 25. The pre-arbitration is
mandatory. The final bill was prepared on 29.12.2015 and sent to the
respondent on 29.12.2015 however, there is no limitation to invoke the
conciliation clause therefore, governed by Article 137 which is three
years. The conciliation proceedings began on 01.07.2016, however, the
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 23 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
respondent not appeared therefore terminated on 29.09.2016. At this
stage, it is relevant to reproduce the clause 25 of the agreement regarding
conciliation and arbitration as under :
'25. Conciliation and Arbitration
In the event of any dispute, difference of opinion or dispute or claim
arising out of/or relating to this agreement or breach, termination or the
invalidity thereof, shall firstly be attempted to be settled by conciliation.
All disputes relating to this agreement or on any issue whether arising
during the progress of the services or after the completion or
abandonment thereof or any matter directly or indirectly connected with
this service agreement shall in the first place be referred to a sole
conciliator appointed/nominated by GM/Civil on receipt of such
requests from either parties.
The conciliator shall make the settlement agreement after the parties
reach agreement and shall give an authenticated copy thereof to each of
the parties.
The settlement agreement shall be final and binding on the parties. The
settlement agreement shall have the same status and effect of an
arbitration award.
The views expressed or the suggestions made or the admissions made by
either party in the course of conciliation proceedings shall not be
introduced as evidence in any arbitration proceedings.
Any dispute that cannot be settled through conciliation procedure shall
be referred to arbitration in accordance with the procedure given in Para
given below.
The parties agree to comply with the awards resulting from arbitration
and waive their rights to any from of appeal insofar as such waiver can
validly be made.
Arbitration procedure
if the efforts to resolve all or any of the disputes through conciliation
fall, then such disputes shall be referred within 30 days to a sole
arbitrator who would be nominated by DMRC Ltd. The venue of such
arbitration shall be at Delhi/New Delhi. The award of the sole arbitrator
shall be binding on all parties. The cost of Arbitration shall be borne by
respective parties. There will be no objection if conciliator/or sole
arbitrator nominated/appointed is an employee of DMRC.
Rules governing Arbitration Proceedings
The Arbitration Proceedings shall be governed by Indian Arbitration and
Conciliation Act 1996 as amended from time to time including provisions
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 24 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
in force at the time the reference is made.'
18. The conciliation proceedings as per this clause 25 of the agreement
is mandatory. Hon'ble High Court of Delhi in case title 'M/s Welspun
Enterprises Ltd Vs. M/s NCC ltd, 2022 SCC OnLine Del 3296' held that
'....We concur with the aforesaid view. The period of
limitation for referring the disputes to arbitration cannot
commence till the parties have exhausted the necessary pre-
reference procedure. If the arbitration clause requires the
parties to engage in negotiations or to attempt to resolve the
disputes in mediation/conciliation, the right to refer the
disputes to arbitration would arise only after the negotiations
for an amicable settlement have failed and the parties have
exhausted their endeavors to resolve the disputes through
mediation/conciliation....'.
19. As per this clause, if the conciliation proceedings fails then such
disputes shall be referred within 30 days to the Sole Arbitrator nominated
by DMRC, however in the present case, the reference to Arbitration is
admittedly not within 30 days, therefore, the Ld. Arbitrator observed that
the present arbitration proceedings are time barred as not initiated within
30 days of the expiry of the conciliation proceedings. This observation is
repelled by Hon'ble High Court of Delhi in case title 'Municipal
Corporation of Delhi Vs. Natraj Construction Company, 2023 SCC
OnLine Del 1709' the relevant paras are reproduced as under :
"...12. In Smart Commodity Broker (P) Ltd. v. Beant Singhz, this Court
reiterated the position of law surrounding amended Section 28 of the
Contract Act as follows:
"7. Learned counsel for the appellant-petitioner again argued that the
claim petition was barred by limitation, however, I would like to note
that Section 28 of the Contract Act, 1872 stood amended by Act 1 of
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 25 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
1997 with effect from 8-1-1997 whereby any contract by which a party
reduces the period of limitation as provided under the law, then such
contract cannot have the effect of extinguishing the rights of the party to
approach proper forum/court within the period being statutory limitation
period. In other words, party by contract cannot limit the limitation
period which is otherwise provided by law.
8. A learned Single Judge of this Court in Biba Sethi v. Dyna Securities
Ltd. has examined similar provisions of the National Stock Exchange
and on examining the same it has been held that the lesser period of
limitation provided would be hit by Section 28 of the Contract Act and
other reasons.
9. ... Obviously, a time-barred claim cannot be referred to arbitration but
that is not the issue in the present case because the issue is whether
arbitration could be invoked after the one year period of limitation
provided under Bye-Law 15.11 of the MCX.
Therefore, on facts the judgment in Debjyoti Gupta v. Indiabulls
Securities Ltd. is distinguishable because it does not touch the aspect as
to how a lesser limitation period than one provided under the Limitation
Act would time bar the reference to arbitration and which would
otherwise be in violation of Section 28 of the Contract Act and so held by
the learned Single Judge in Biba Sethi casels.
10. The judgment in Sharad P. Jagtiani v. Edelweiss Securities Ltd.20
does not at all deal with the issue of whether the provisions of the bye-
laws if provided for a lesser limitation period then provided under the
Limitation Act the same would have the effect of dismissing the reference
to arbitration. At the cost of repetition, the issue is that if the bye-law's
provide a lesser limitation period than as provided under the Arbitration
and Conciliation Act, and which is a period of three years under Article
137 of the Limitation Act, it is the larger period of limitation as per
Article 137 of the Limitation Act which applies for seeking of reference
of disputes to arbitration and not a lesser period as provided under the
bye-laws, and as held in Biba Sethi case.
11. I may note that the above discussion is in addition to the adapting
and agreeing with the conclusions of the arbitrator that the period of
limitation as per bye-law became three years subsequently and which
procedural provision will have retrospective application. The view of the
arbitrator is one possible view in law and cannot be interfered with in
Section 34 objections."
13. In view of the amended Section 28 of the Contract Act therefore,
the appellant cannot be permitted to press Clause 25 of the contract
agreement and restrict the period of limitation for invoking arbitration
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 26 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
clause to 120 days. The contention being meritless is rejected.
20. As per mandate of this judgment, this clause 25 of the present
contract is in teeth with Section 28 of the Contract Act, therefore the
respondent cannot be permitted to press clause 25 of the present
agreement and restrict the period of limitation for invoking the arbitration
to 30 days. The period of initiating arbitration proceedings will begin
upon termination of conciliation proceedings on 29.09.2016 and will
expire on 29.09.2019, however the present arbitration reference initiated
on 22.10.2018 thereafter within three years (period of limitation).
21. Even otherwise, the time spent in conciliation proceedings has to
be excluded, however the Ld. Arbitrator observed that Section 77 of the
Arbitration and Conciliation Act relates to providing protection to the
claimant if the limitation period is going to expire during the conciliation
proceedings, but the conciliation proceedings in the present case were
terminated prior to the expiration of the limitation period thus this point
of the claimant to claim exclusion of the said period cannot be
considered.
22. Section 77 of the Arbitration and Conciliation Act is reproduced as
under :
'77. Resort to arbitral or judicial proceedings:- The parties
shall not initiate, during the conciliation proceedings, any
arbitral or judicial proceedings in respect of a dispute that is
the subject-matter of the conciliation proceedings except that
a party may initiate arbitral or judicial proceedings where, in
his opinion, such proceedings are necessary for preserving his
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 27 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
rights.'
23. However there is nothing in this section that this period shall be
included in the period for initiation of arbitration proceeding. At this
state, it is relevant to refer to judgment of Hon'ble Apex Court 'Geo
Millar and Company Private Limited Vs. Chairman, Rajasthan Vidyut
Nigam Limited, (2020) 14 SCC 643'. In this case it is held that during the
period when the parties are bonafidely negotiating towards an amicable
settlement then that period shall be excluded for the purpose of
computing the period of limitation for reference to arbitration. In present
case, the formal conciliation proceedings as per the agreement in the
nature of amicable settlement has been initiated, however terminated as
the respondent not appeared, therefore, the said period from 01.07.2016
till 29.09.2016 is to be excluded for the purpose of computing the period
of limitation. Therefore, on this ground also the reference to the
Arbitration is within time. The decision of the Sole Arbitrator that the
claim is barred by limitation is patently in violation of the statutory
provision, hence, against the public policy of India, thus liable to be set
aside under section 34 of Arbitration and Conciliation Act. (relied upon
'S.V. Samudram Vs. State of Karnataka and Anr., 2024 SCC OnLine SC
19').
24. The petitioner sought partial modification of the award by praying
to set aside the impugned award dated 26.11.2020 to the limited extent on
the issue of limitation. In present case, the Ld. Arbitrator framed four
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 28 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
issues, however granted issue no. 2, 3 and 4 in favour of the claimant but
decided the issue no. 1 regarding limitation against the claimant. The
issue no. 1 is the legal issue regarding the limitation. As already
discussed, the arbitration proceedings are initiated within limitation.
Hon'ble High Court of Delhi in case title 'MBL Infrastructures Limited
Vs. Delhi Metro Rail Corporation, OMP (COMM) 311/2021 dated
12.12.2023' categorically permitted for partially setting aside the award.
The relevant paras are reproduced as under :
"....89. In view of the foregoing discussion, this Court is of the opinion
that clause 3 and clause 4 of the Impugned Award are on the face of it,
patently in violation of statutory provisions of Contract law therefore,
they are not in public interest. Such an award is likely to adversely affect
the administration of justice.
90. The said claims should be set aside since it is contrary to
fundamental
policy of Indian Law and patently illegal. Moreover, the illegality in
these
claims are such that they go to the root of the matter and is not of trivial
nature.
91. Furthermore, the award of the learned tribunal in terms of these
claims is so unfair and unreasonable that shocks the conscience of the
Court since, the learned tribunal despite taking into consideration the
delay caused in the project is attributable to the respondent, it did not
give any remedy to the petitioner. The tribunal gave the reasoning that
the petitioner cannot be given since, the Contract only provides for
extension of time. However, the learned Tribunal failed to appreciate the
fact that in the peculiar facts, the petitioner was not given the same and
instead, the Contract was terminated by the respondent. Such a situation
which was not anticipated in the Contract, the learned Tribunal should
have transgressed the boundary of Contract and granted the relief to the
petitioner which it is rightly entitled to and have accordingly, have also
placed material on record to support their claims.
92. In view of the aforesaid discussion, this Court will discuss the scope
of setting aside the Award under Section 34 of the Act.
93. It is a settled principle of law that various claims of the award can
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 29 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
be severed and the court by way of entertaining an application under
section 34 can set aside certain claims of the award which in the
opinion of the court is perverse and illegal. Such piecemealing of
award would not affect the claims which have been upheld by the
court.
94. Modification of the award is when, the court makes certain
changes/modification in the claim example by way of modifying the
amount of damages awarded, modifying the interest rate, etc., instead
of setting aside claim. The purpose of ensuring that there is no
modification of the award passed by the tribunal is that the
modification requires that there should be appreciation of evidence
and pleadings on record. Under section 34 of the Act, this court cannot
re appreciate the pleadings and evidence on record to arrive at
conclusion and accordingly make changes in the award passed by the
tribunal. This Court under section 34 can therefore set aside certain
claims on the grounds mentioned in section 34 of the Act.
95. Such claims which are set aside by the court does not amount to
modification of the award. It merely infers that the court has partially set
aside the award.
96. The aforesaid principle of law pertaining to setting aside of the
Award under Section 34 of the Act has been discussed in the judgment of
Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. (2019) 20 SCC 1,
this Court held as follows: (SCC p. 15, paras 36-37)
"36. At this juncture it must be noted that the legislative intention of
providing Section 34(4) in the Arbitration Act was to make the award
enforceable, after giving an opportunity to the Tribunal to undo the
curable defects. This provision cannot be brushed aside and the High
Court [Crompton Greaves Ltd. v. Dyna Technologies (P) Ltd., 2007 SCC
OnLine Mad 427] could not have proceeded further to determine the
issue on merits.
37. In case of absence of reasoning the utility has been provided under
Section 34(4) of the Arbitration Act to cure such defects. When there is
complete perversity in the reasoning then only it can be challenged
under the provisions of Section 34 of the Arbitration Act. The power
vested under Section 34(4) of the Arbitration Act to cure defects can be
utilised in cases where the arbitral award does not provide any
reasoning or if the award has some gap in the reasoning or otherwise
and that can be cured so as to avoid a challenge based on the aforesaid
curable defects under Section 34 of the Arbitration Act. However, in this
case such remand to the Tribunal would not be beneficial as this case
has taken more than 25 years for its adjudication. It is in this state of
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Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
affairs that we lament that the purpose of arbitration as an effective and
expeditious forum itself stands effaced."
97. In the judgment titled Larsen Air Conditioning and Refrigration
Company v. Union of India 2023 Scc OnLine SC 982, the Hon'ble
Supreme Court held as follows:
"15. The limited and extremely circumscribed jurisdiction of the court
under Section 34 of the Act, permits the court to interfere with an award,
sans the grounds of patent illegality, i.e., that "illegality must go to the
root of the matter and cannot be of a trivial nature"; and that the
tribunal "must decide in accordance with the terms of the contract, but if
an arbitrator construes a term of the contract in a reasonable manner, it
will not mean that the award can be set aside on this ground" [ref :
Associate Builders (supra)]. The other ground would be denial of
natural justice. In appeal, Section 37 of the Act grants narrower scope to
the appellate court to review the findings in an award, if it has been
upheld, or substantially upheld under Section 34. It is important to
notice that the old Act contained a provision which enabled the court to
modify an award. However, that power has been consciously omitted by
Parliament, while enacting the Act of 1996. This means that the
Parliamentary intent was to exclude power to modify an award, in any
manner, to the court. This position has been iterated decisively by this
court in M. Hakeem:
"42. It can therefore be said that this question has now been settled
finally by at least 3 decisions [McDermott International Inc. v. Burn
Standard Co. Ltd., (2006) 11 SCC 181], [Kinnari Mullick v. Ghanshyam
Das Damani, (2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106], [Dakshin
Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd.,
(2021) 7 SCC 657] of this Court. Even otherwise, to state that the
judicial trend appears to favour an interpretation that would read into
Section 34 a power to modify, revise or vary the award would be to
ignore the previous law contained in the 1940 Act; as also Page 71 of 83
to ignore the fact that the 1996 Act was enacted based on the Uncitral
Model Law on International Commercial Arbitration, 1985 which, as
has been pointed out in Redfern and Hunter on International
Arbitration, makes it clear that, given the limited judicial interference on
extremely limited grounds not dealing with the merits of an award, the
"limited remedy" under Section 34 is coterminous with the "limited
right", namely, either to set aside an award or remand the matter under
the circumstances mentioned in Section 34 of the Arbitration Act, 1996."
16. In view of the foregoing discussion, the impugned judgment warrants
interference and is hereby set aside to the extent of modification of rate
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Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
of interest for past, pendente-lite and future interest. The 18% per annum
rate of interest, as awarded by the arbitrator on 21.01.1999 (in Claim
No. 9) is reinstated. The respondent-state is hereby directed to
accordingly pay the dues within 8 weeks from the date of this judgment."
98. Moreover in the judgment of Union of India v. Alcon Builders &
Engineer (P) Ltd 2023 SCC OnLine Del 160, the following observations
were made :
"....On partial setting aside of an award 18. In the course of hearing the
parties, a preliminary query was raised as to whether, in exercise of its
jurisdiction under Section 34 of the A&C Act, this Court can partly set
aside an arbitral award. Learned counsel for the parties answered the
query in the affirmative, to say that in any case, the challenge was only
to the arbitrator's decision on two aspects; and the parties have
accepted and acted upon the rest of the award. That being said however,
this Court finds it necessary to refer to the decision of the Supreme Court
in NHAI v. M. Hakeem [NHAI v. M. Hakeem, (2021) 9 SCC 1], in which
case it was held that the court's power under Section 34 of the A&C Act
does of 83 not include the power to "modify" an award. The question
then arises
whether partial setting aside of an award would amount to
"modification" thereof. It would be beneficial at this point to extract
para 42 of M. Hakeem case [NHAI v. M. Hakeem, (2021) 9 SCC 1]
which reads as under : (SCC p. 28, para 42) "42. It can therefore be
said that this question has now been settled finally by at least 3 decisions
McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott
International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181],
Kinnari Mullick v. Ghanshyam Das Damani [Kinnari Mullick v.
Ghanshyam Das Damani, (2018) 11 SCC 328 : (2018) 5 SCC (Civ) 106],
Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P)
Ltd. [Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies
(P) Ltd., (2021) 7 SCC 657 : (2021) 4 SCC (Civ) 157] of this Court.
Even otherwise, to state that the judicial trend appears to favour an
interpretation that would read into Section 34 a power to modify, revise
or vary the award would be to ignore the previous law contained in the
1940 Act; as also to ignore the fact that the 1996 Act was enacted based
on the Uncitral Model Law on International Commercial Arbitration,
1985 which, as has been pointed out in Redfern and Hunter on
International Arbitration, makes it clear that, given the limited judicial
interference on extremely limited grounds not dealing with the merits of
an award, the „limited remedy‟ under Section 34 is coterminous with
the „limited right‟, namely, either to set aside an award or remand the
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 32 of 39
Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar
matter under the circumstances mentioned in Section 34 of the
Arbitration Act, 1996." 19. Upon a closer reading of M. Hakeem case
[NHAI v. M. Hakeem, (2021) 9 SCC 1] however, it transpires that the
said case concerned a claim for payment of compensation for land
acquisition and the District Court, in exercise of its powers under
Section 34 of the A&C Act, had increased the quantum of compensation
awarded by the competent authority. M. Hakeem case [NHAI v. M.
Hakeem, (2021) 9 SCC 1] therefore, was not a case where some of
several claims made before the Arbitral Tribunal were set aside. 20. In
order to better appreciate and apply M. Hakeem case [NHAI v. M.
Hakeem, (2021) 9 SCC 1], and to understand the correct meaning of
what amounts to "modification" of an arbitral award, it is necessary to
refer to the following decisions:
21. In J.G. Engineers (P) Ltd. v. Union of India [J.G. Engineers (P) Ltd.
v. Union of India, (2011) 5 SCC 758 : (2011) 3 SCC (Civ) 128] which
involved multiple claims dealt with and decided by the arbitrator, this is
what the Supreme Court had to say : (SCC p. 775, para 25)
"25. It is now well settled that if an award deals with and decides
several claims separately and distinctly, even if the court finds that the
award in regard to some items is bad, the court will segregate the
award on items which did not suffer from any infirmity and uphold the
award to that extent...."
22. Then again, in R.S. Jiwani v. Ircon International Ltd. [R.S. Jiwani v.
Ircon International Ltd., 2009 SCC OnLine Bom 2021] a Full Bench of
the Bombay High Court has dealt with the concept of severability of the
decisions on various claims/counterclaims comprised in an award and
has held as follows....
23. The judgment in R.S. Jiwani case [R.S. Jiwani v. Ircon International
Ltd., 2009 SCC OnLine Bom 2021] has been relied upon recently in a
judgment of the Bombay High Court in NHAI v. Commr. [NHAI v.
Commr., 2022 SCC OnLine Bom 1688]
*****
28. Upon a combined and meaningful reading of the provisions of the A&C Act and the aforesaid judicial precedents, in the opinion of this Court, the following position emerges:
29. A court exercising power under Section 34 of the A&C Act cannot "modify" an arbitral award;
30. The arbitrator's decision on each claim and counterclaim, taken individually, is final. "Modification" means to substitute the court's own decision for the decision made by the arbitrator on any given claim or counterclaim; which the court cannot do.
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31. If objections are filed under Section 34, impugning the arbitrator's decision only on some of the claims or counterclaims, it is not necessary for the court to set aside the entire arbitral award viz. the decision on all claims and counterclaims. This follows from the limited ambit of the court's powers under Section 34. Besides, the decision on a Section 34 petition cannot go beyond the scope of the challenge itself.
32. When the arbitrator's decisions on multiple claims and counterclaims are severable and not interdependent, the court is empowered under Section 34 to set aside or uphold the arbitrator's decisions on individual and severable claims or counterclaims; without having to set aside the entire arbitral award. That would not amount to modification of the arbitral award.
33. The above is also in line with the overarching principle that the scope of interference by the court under the A&C Act in arbitral proceedings and arbitral awards, is to be minimal. The statute does not command the court to go for the overkill. To adapt a phrase famously used by Justice Felix Frankfurter, while exercising power under Section 34, it is not necessary to burn the house to roast the pig."
99. The Coordinate Bench of this Court in the judgment of NHAI v. Trichy Thanjavur Expressway Ltd. 2023 SCC OnLine Del 5183 has summarized the law pertaining to setting aside of the Award under Section 34 as follows:
100.
"87. The Court thus records its conclusions as follows:--
A. While attempting to answer the issues flagged above, we must at the outset, acknowledge the shift in legislative policy which underlies the Act and which mandates intervention by courts to be minimal. This flows from the recognition of the theory that once parties have agreed to the resolution of their disputes by an alternative adjudigcatory forum, courts must, as a matter of first principle, refrain from interfering with the same except on the limited grounds that the statute recognises. Courts are thus obliged to bear in mind the principle of minimalist intervention insofar as awards are concerned.
B. However, at the same time while courts are enjoined to follow the minimalist intervention route, it would clearly be a travesty of justice if courts were to fail to intervene where circumstances warrant and demand corrective measures being adopted. It is these compulsions which have led to courts evolving the serious irregularity or the patent illegality grounds to interfere with an award. Section 34 is a clear and unequivocal embodiment of the Legislature's intent to balance these OMP (COMM) 16/21 dt. 30.04.2024 Page no. 34 of 39 Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar competing facets of arbitration.
C. Undisputedly, Section 34(2)(a)(iii) speaks of a part of an award being exorcised from the rest. The Court finds no justification to confer too much credence on Article 34 of the Model Law ultimately failing to allude to a partial setting aside power even though that was provisioned for in explicit terms in draft Articles 29, 30, 40 and 41. This since neither the Working Group Reports nor the contemporaneous material that we have noticed hereinbefore seem to suggest a conscious deletion of that power. The considerable material, on the aspects surrounding partial setting aside that we have had an occasion to review, does not evidence any deliberation or discussion which may have predicated or actuated its deletion. The said material is also not indicative of any principled decision that may have been taken by member nations for deletion of the partial setting aside power. Its absence from Article 34 which came to be ultimately adopted stands lost in a mist of conjecture. D. We find that the key to understanding the intent underlying the placement of the Proviso in sub-clause (iii) of Section 34(2)(a) is in the nature of the grounds for setting aside which are spoken of in clause (a). As would be manifest from a reading of the five sub-clauses which are positioned in Section 34(2)(a), those constitute grounds which would strike at the very heart of the arbitral proceedings. The grounds for setting aside which are set forth in clause (a) strike at the very foundation of validity of arbitration proceedings. Sub-Clauses (i) to (v) thus principally constitute grounds which would render the arbitration proceedings void ab initio. Although the Section 34(2)(a)(iv) ground for setting aside also falls in the same genre of a fundamental invalidity, the Legislature has sought to temper the potential fallout of the award being set aside in toto on that score.
E. The Proviso to sub-clause (iv) seeks to address a comprehensibly conceivable situation where while some parts of the award may have dealt with non-arbitrable issues or disputes falling outside the scope of the reference, its other components or parts constitute an adjudication which could have been validly undertaken by the AT. The Proviso thus seeks to address such a situation and redeems as well as rescues the valid parts of an award. This saves the parties from the spectre of commencing arbitral proceedings all over and from scratch in respect of all issues including those which could have validly formed part of the arbitration.
F. The grounds for setting aside encapsulated in Section 34(2)(b) on the other hand relate to the merits of the challenge that may be raised in respect of an award and really do not deal with fundamental invalidity.
OMP (COMM) 16/21 dt. 30.04.2024 Page no. 35 of 39 Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar However, the mere fact that the Proviso found in sub-clause (iv) of Section 34(2)(a) is not replicated or reiterated in clause (b) of that provision does not lead one to an inevitable conclusion that partial setting aside is considered alien when a court is considering a challenging to an award on a ground referable to that clause. In fact, the Proviso itself provides a befitting answer to any interpretation to the contrary. The Proviso placed in Section 34(2)(a)(iv) is not only an acknowledgment of partial setting aside not being a concept foreign to the setting aside power but also of parts of the award being legitimately viewed as separate and distinct. The Proviso itself envisages parts of an award being severable, capable of segregation and being carved out. The Proviso is, in fact, the clearest manifestation of both an award being set aside in part as well as an award comprising of distinct components and parts.
G. Undoubtedly, an award may comprise a decision rendered on multiple claims. Each claim though arising out of a composite contract or transaction may be founded on distinct facts and flowing from separate identifiable obligations. Just as claims may come to be preferred resting on a particular contractual right and corresponding obligation, the decision which an AT may render on a particular claim could also be based on a construction of a particular covenant and thus stand independently without drawing sustenance on a decision rendered in the context of another. If such claims be separate, complete and self- contained in themselves, any decision rendered thereon would hypothetically be able to stand and survive irrespective of an invalidity which may taint a decision on others. As long as a claim is not subordinate, in the sense of being entwined or interdependent upon another, a decision rendered on the same by the AT would constitute an award in itself.
H. While awards as conventionally drawn, arranged and prepared may represent an amalgam of decisions rendered by the AT on each claim, every part thereof is, in fact, a manifestation of the decision rendered by it on each claim that may be laid before it. The award rendered on each such claim rules on the entitlement of the claimant and the right asserted in that regard. One could, therefore, validly, subject of course to the facts of a particular case, be entitled to view and acknowledge them as binding decisions rendered by the AT on separate and distinct claims. I. Once an award is understood as consisting of separate components, each standing separately and independent of the other, there appears to be no hurdle in the way of courts adopting the doctrine of severability and invoking a power to set aside an award partly. The power so wielded OMP (COMM) 16/21 dt. 30.04.2024 Page no. 36 of 39 Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar would continue to remain one confined to "setting aside" as the provision bids one to do and would thus constitute a valid exercise of jurisdiction under Section 34 of the Act.
J. The Supreme Court in M. Hakeem, has enunciated the setting aside power as being equivalent to a power to annul or setting at knot an Arbitral Award. It has essentially held that bearing in mind the plain language of Section 34 coupled with the Act having desisted from adopting powers of modification or remission that existed in the erstwhile 1940 Act, a court while considering a challenge under Section 34 would not have the power to modify. K. The expression "modify"
would clearly mean a variation or modulation of the ultimate relief that may be accorded by an AT. However, when a Section 34 Court were to consider exercising a power to partially set aside, it would clearly not amount to a modification or variation of the award. It would be confined to an offending part of the award coming to be annulled and set aside. It is this distinction between a modification of an award and its partial setting aside that must be borne in mind.
L. The power to partially sever an offending part of the award would ultimately depend on whether the said decision is independent and distinct and whether an annulment of that part would not disturb or impact any other finding or declaration that may have been returned by the AT. The question of severability would have to be decided bearing in mind whether the claims are interconnected or so intertwined that one cannot be segregated from the other. This for the obvious reason that if the part which is sought to be set aside is not found to stand independently, it would be legally impermissible to partially set aside the award. A partial setting aside should not lead to a component of the award being rendered vulnerable or unsustainable. It is only when the award relates to a claim which is found to stand on its own and its setting aside would not have a cascading impact that the Court could consider adopting the aforesaid mode.
M. The Court is thus of the firm opinion that the power to set aside an award in part would have to abide by the considerations aforenoted mindful of the imperatives of walking a line which would not dislodge or disturb another part of the award. However as long as the part which is proposed to be annulled is independent and stands unattached to any other part of the award and it could be validly incised without affecting the other components of the award, the recourse to partial setting aside would be valid and justified".
101. In view of the law laid down in the aforesaid judgments, this Court is of the view that the under section 34 of the Act, the Court is vested OMP (COMM) 16/21 dt. 30.04.2024 Page no. 37 of 39 Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar with the jurisdiction to set aside certain problematic portion of the Award which are patently illegal and shocks the conscience of this Court.
102. However, the setting aside of the Award is subjected to the condition that the portion of the Award which has been upheld shall have due effect and cause no such cascading impact. 103. In the instant petition, therefore, this Court in case sets aside claim no. 3 and claim no. 4 then, the other claims shall nor be impacted by it neither have any perverse consequences.
CONCLUSION
104. In view of the aforesaid discussion, this Court discerns substantial material to establish the propositions put forth by the petitioner. Moreover, the Impugned Award passed in respect of Claim 3 and 4 is ex- facie erroneous and warrants interference of this Court.
105. The view taken by the learned Tribunal is perverse to the law since, the damages are not awarded to the petitioner despite the fact that the learned Tribunal has itself held that there is a delay on the part of respondent in completion of the project and the termination of the contract done by the respondent is wrongful. It has wrongfully held that as per the clauses of the Contract the petitioner is only liable to the extension of time, however the Tribunal failed to consider as per peculiar facts of the case the contract instead of being extended has been wrongfully terminated by the respondent.
106. The Impugned Award suffers from patent illegality since, the Tribunal despite holding that there has been delay on the part of the respondent in Claim no. 1 , did not award damages to the petitioner .
107. Such situations warrants that the petitioner who suffered damages on account of delay committed by the respondent shall be compensated by the respondent. Hence, the petitioner is entitled to recover damages from respondent on the grounds of breach of contract by the respondent.
108. In view of the foregoing discussion, the petitioner has been able to make out a claim of intervention of this Court with regard to Claim no. 3 and 4 under Section 34 of the Act.
109. In terms of the Claim no. 6, 7 and 8 this Court is of the opinion that the petitioner has failed to make out such a case and was unable to show that the Award needs interference under Section 34 of the Act. This Court is of the view that the learned tribunal was well within its jurisdiction and capacity to award the claim/compensation in favor of the respondent in terms of the aforesaid claims.
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110. A perusal of the impugned Award dated 6 th March 2020 makes it evident on the face of the record requires interference under Section 34 of the Act in terms of Claim no. 3 and Claim no. 4 which deals with the claim pertaining to damages on Account of Idling of Machines and loss of overheads and loss of profits respectively.
25. In view of the above discussions, the partial modification of the impugned award on the aspect of limitation is permissible. The findings of the Ld. Arbitrator on issue no. 1 that the present claim is barred by limitation is perverse and thus set aside. The claim petition is filed within limitation. Accordingly, the present petition is allowed. It is clarified that the findings of the Ld. Arbitrator challenged in the present petition only on the aspect of the limitation and not on other issues. The other issues as decided by the Ld. Arbitrator remained as it is. The present petition is disposed of accordingly.
26. File be consigned to record room after due compliance. Announced in the open court on 30th April 2024 (Ajay Kumar Jain) District Judge(Commercial Courts- 03), SE/Saket Courts/Delhi OMP (COMM) 16/21 dt. 30.04.2024 Page no. 39 of 39 Delhi Metro Rail Corporation Ltd. Vs. M/s Ashok Kumar