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Delhi District Court

Airports Authority Of India vs M/S M S Khurana Engineering Ltd on 16 December, 2023

IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
        COMMERCIAL COURT-01, SOUTH,
             SAKET COURTS, DELHI
                   Earlier as
  DISTRICT JUDGE/ COMMERCIAL COURT-02, S/W,
            DWARKA COURTS, DELHI


CNR No. DLSW01-006448-2021
OMP (Comm) No. : 05/2021

In the matter of :-

Airports Authority of India
Northern Region Headquarter
Rangpuri, New Delhi - 110037

                                  ............Petitioner

Vs.

M/s M.S. Khurana Engineering Ltd.
2nd Floor MSK, Passport Office to Panjrapole Road,
Ambavadi, Ahmedabad
Gujarat - 380015

                                       ..............Respondent

Date of institution of the petition   : 16.07.2021
Date of final arguments               : 09.08.2023, 15.09.2023,
                                        10.10.2023, 04.11.2023
                                        and 09.12.2023
Date of judgment                      : 16.12.2023

                               ORDER

1. This is petition u/s 34 of Arbitration and Conciliation Act, filed by the petitioner seeking setting aside of impugned award dated 31.01.2021 passed by Ld. Arbitrator.

2. Petitioner is a Government Department which undertakes the works of construction, modification and management of OMP (Comm) No. : 05/2021 1/28 passenger terminals, development and management of cargo terminals including runways, parallel taxiways, apron etc., provision of communication, Navigation and Surveillance, air traffic services, passenger facilities and related amenities at its terminals, thereby ensuring safe and secure operations of aircraft, passengers and cargo of the country, whereas Respondent is a company registered under the Companies Act.

3. Airports Authority of India i.e. petitioner was desirous of getting the work of " Strengthening of Runway 16­34 including upgradation to CAT­IIIB system from CAT­II system including grading/levelling of basis strip at SGRDJ International Airport, Amritsar" and for the said purpose, it invited e­tender vide bid no. 1000008621. Respondent participated in the said tender proceess and submitted their bid dated 22.05.2015. Thereafter, respondent was declared as L1. Petitioner vide communicatin dated 18.09.2015 sent a proposal to Respondent while modifing the terms of tender, which were accepted by the respondent vide communication dated 19.09.2015. As stated by petitioner, it was only after the said acceptance, that the petitioner decided to enter into the agreement with respondent and based upon the same, Clause 10 CC was specifically deleted in the agreement. Based upon the revised offer given by respondent, a letter of award was granted in favour of respondent vide letter dated 24.09.2015 and thereafter an agreement dated 19.10.2015 was entered into between the parties. In terms of Agreement, the estimated cost was Rs. 72,97,75,185/­ and the tendered amount was Rs. 63,43,85,800/­. The time period for completion of work was 12 months wherein the date of start of work was 04.10.2015 and the OMP (Comm) No. : 05/2021 2/28 stipulated date of completion was 03.10.2016. The moment the agreement was signed, the site was handed over to the respondent and they had to start the work immediately which was not done despite sending of numerous letters by the petitioner. Petitioner, as stated, since November 2015 had been requesing the respondent to ready the plant, cement store, lab etc. However, the respondent was unable to ready the same within time and wasted considerable time. Since respondent was not adhering to the schedule of work as discussed in meeting dated 27.01.2016 held between the parties, petitioner was constrained to send a reminder letter dated 30.01.2016 to the respondent to adhere to the schedule of the work. Thereafter also respondent did not complete the work in time and on the request of respondent, extension of time for completion of work was granted by the petitioner without prejudice tothe right of petitioner to recover the liquidated damages in accordance with the provisions of clause 2 of the said agreement.

4. Respondent thereafter raised the final bill dated 28.05.2018 and received the payment for the same without any protest or demure. It was only after receiving the entire payment, the respondent sent a letter dated 09.07.2018 for review of the payment received and a request to review the indices taken into consideration and that the start date may be taken as 26.03.2016, alongwith other claims, as detailed in the plaint. The said letter was duly replied by the petitioner vide letter dated 21.01.2019. Respondent vide notice dated 24.01.2019 requested for DRC in terms of clause 25 (i) of the Agreement dated 19.10.2015. DRC proceedings were held on 24.10.2019 which after due OMP (Comm) No. : 05/2021 3/28 deliberations gave its recommendation on 19.12.2019 " to reject the claim of the Claimant in toto". Respondent was not agreeable to the decision of the DRC, hence invoked Arbitration vide notice dated 30.05.2020 seeking appointment of an Arbitrator for adjudication of disputes. Thereafter the matter was referred to Arbitrator wherein impugned award dated 31.01.2021 was passed, which is under challenge before the court.

5. Following are the submissions of Ld. Counsel for petitioner to challenge the impugned award :­ (1) That, during the entire period of contract i.e. from 4.10.2015 to 06.09.2017, even though the respondent procured the Bitumin on various dates, respondent never raised any bills or escalated price on the indices prevailing as on March 2017. Respondent also never disputed the date of start to be 4.10.2015 and stipulated date of completion to be 3.10.2016 during the entire period. In the final bill, no claim for escalated price on the basis of indices prevailing on 2017 had been made by the respondent.

(2) That, in application seeking extension of time dated 9.12.2017 submitted by respondent itself, the date of commencement of work and stipulated date of completion had been admitted by the respondent as 4.10.2015 and 3.10.2016. These two documents which are of March 2017, clearly establish that there was no protest or claim or dispute by the respondent. (3) That, in terms of Clause 9, it was agreed between the parties that no further claim shall be made by the contractor after submission of the final bill and any other claim shall be deemed OMP (Comm) No. : 05/2021 4/28 to have been waived and extinguished. Thus, from the perusal of above clause and final bill, it is clear that no claim or escalated price was ever raised or submtted in the final bill or in any of the Running Account (RA Bills) between March 2016 to March 2017. Thus, the entire claim of respondent/claimant was barred by the terms of the Agreement which the Ld. Arbitrator failed to consider.

(4) That, final payment was released to the repondent and it was only thereafter vide letter dated 9.7.2018, respondent raised the issue of difference in the date of handing over and the stipulated date of completion. The said letter was duly responded to by the respondent on 21.01.2019, pointing out various works which were carried out by the respondent between 4.10.2015 to 26.3.2016. Further extension of time was granted by the petitioner and the admission was made by the respondent in its applicatin seeking EoT. Thus, from the above, it is crystal clear that the present claim is nothing but an afterthought by the respondent.

(5) That, Ld. Arbitrator in the impugned award while dealing with the abovesaid issue wrongly relied upon Clause 5 of the Agreement . Even as per Clause 5, the date of handing over of the site is 4.10.2015.

(6) That, the narrow interpretation taken by the respondent and the Ld. Arbitrator of site Clause 2 (ii) is that the site would mean the actual Site Strip, and since the same was handed over on 26.3.2016, therefore, the date of start is considered as 26.03.2016. The said finding of Ld. Arbitrator is contrary to the terms of the agreement and ample evidence was placed on record OMP (Comm) No. : 05/2021 5/28 by the respondent which showed the work done between 4.10.2015 to 26.03.2016 and the admission made by respondent in its various communication including the agreement entered between the parties.

(7) That, the fact that the site was handed over to the respondent before March 2016 is evident from the various communications exchanged between the parties such as Bar Chart dated 13.11.2015 submitted by respondent itself and Minutes of Meeting held between the parties from November 2015 till March 2016, regadling land allotment for installation of plant, site office, basic strip cleaning for spot level of runway, in installation of plants, site office, testing lab set up etc. As submitted, the site office was already there and quite a lot of work surrounding the main air strip had already begun and this objection was also raised by petitioner in reply to the SOC before Ld. Sole Arbitrator. Documents filed by petitioner i.e. copy of Minutes of Meeting dated 20.01.2016, copies of letters dated 15.01.2016, 20.01.2016, 22.01.2016 25.01.2016, 08.02.2016, 19.03.2016, entry in work diary dated 22.01.2016 and 25.03.2016 and MOM dated 09.02.2016, reflect the said fact as well as documents filed by respondent i.e. letters dated 13.11.2015, 08.01.2016, 29.03.2016, 09.12.2017, Mobilization bill dated 01.02.2016 and Copy of Revised Bar Chart also relect the same. (8) That, all the documents which consinstuted vital evidence on record had been ignored by the Ld. Arbitrator. Ld. Arbitrator gave the award in favour of respondent by relying upon Meeting dated 15.09.2016 and one internal noting that states that start date is 26.03.2016, while he ignored the ample evidence placed on OMP (Comm) No. : 05/2021 6/28 record by the petitioner which clearly showed that there was work done between 4.10.2015 and 26.03.2016.

(9) That, present petition u/s 34 is maintainable as all the relevant facts and evidence have been ignored by the Arbitrator and impugned award is liable to be set aside in terms of law laid down by Hon'ble Apex Court in South East Asia Marine Engineering and Constructions Ltd. Vs. Oil India Limited (2020) 5 SCC 164, MANU/SC/0441/2020.

(10) That, as per the settled position of law laid down by Hon'ble Apex Court in Ssangyong Engineering and Construction Co. Ltd. Vs. National Highways Authority of India MANU/SC/0705/2019, one of the grounds available to a party for challenging an award under section 34 of Arbitration Act is that the said award has been passed against the basic principles of morality and justice which has happened in the present case. (11) That the stipulated date of completion and actual date of completion are different. The agreement was signed between the parties on 19.10.2015. In terms of agreement, the stipulated date of start was 4.10.2015 and stipulated date of completion was 3.10.2016 (12 months). The completion of work got extended due to various reasons and the respondent was granted extension of time. The actual date of completion was recorded on 6.9.2017. However, in all of this, the stipulated date of completion never changed which was fixed on the date, the agreement was signed. It is a construction contract where indices are applicable and there was no agreement between the parties that the stipulated date of completion should change. The stipulated date of Start OMP (Comm) No. : 05/2021 7/28 and Completion are part of the agreement which was mentioned at number of places of agreement dated 19.10.2015. (12) That, the work chart dated 13.11.2015 itself shows 7­8 such issues of drawings, mobilization of plant machinery and plant machinery, drwing layout for electrical drawing, purchase of indigenous items, procurement of imported items, installation of transformer housing box etc. Activities that had to be done by the respondent in terms of the agreement. If the respondent did not do this work, it could not have commenced the work in March 2016.

(13) That, for getting mobilization advance (letter dated 08.01.2016) seeking Mobilization Advance, Mobilization Bill dated 01.02.2016 and for every other activity, submission of Bank Guarantee, Security deposit, raising bills etc. , the date of start was 4.10.2015, only for the purpose of indices. Respondent had changed the date, this amounts to re­writing the terms of the agreement , which amounts to patent illegality and perversity, not permissible and therefore the award is liable to be set aside on this ground alone.

(14) That, the issue involved is not whether payment under 10 CA had to be given or not, but which indices shall be payable to the respondent. In the present case, payment under clause 10 CA had been made to the respondent based upon the indices prevalent on the stipulated date of completion (3.10.2016), whereas the respondent is now claiming that it ought to have been paid on the indices prevalent as on the actual date of completion (26.03.2017), which is not permissible in terms of the agreement.

(15) Without prejudice to the claim of petitioner and wihtout admitting the claim of respondent, it was submitted that the calculation submitted by respondent was erroneous and based on wrong variables. The amount awarded was Rs. 1,48,54,936/­ which in itself is wrong and could not have been granted. Rather the actual amount should be Rs. 1,39,68,197/­. As submitted, the difference in the amount has arisen due to the base index. The wholesale prince index is published by Office of Economic Adviser (Govt. Of India, Ministry of Commerce & Industry). Earlier, the index was published with base year as 2004­2005 and hence, the index till March 2017 are available on the website. After March 2017, the index published had base year as 2011­12. Since the price index for April 2017 with base year as 2004­05 is not available, therefore, it is required to be calculated. Morever, the escalation calculated by the respondent also had the discrepancies, as in Written submissions.

(16) That, negotiation was part of the agreement, therefore, findings of Ld. Arbitrator was wrong. By way of letter dated 18.09.2015, it was communicated to the respondent that the work site i.e. the airstrip would be handed over in February 2016, therefore, cost escalation under clause 10 CC being not payable , request was made to the respondent to submit an undertaking that respondent shall not claim any cost escalatin under Clause 10 CC or any other claim, whatsoever due to delay in handing over of the site. All clauses that cover escalation were referred to in the said communication by the petitioner. Therefore, the argument of respondent that the said letter only talks of 10 CC is wrong .

(17) That, unconditional underetaking was submitted by the respondent on 19.09.2015 wherein respondent undertook that it shall not claim anything extra under Clause 10 CC and shall not claim any other claim whatsoever , due to delay in handing over of the site.

(18) That, Schedule F (at page 389) would show that in the tender itself, clause 10 CC was deleted. Thus, the arguments of respondent that the above mentioned two letters only pertain to clause 10 CC, is wrong as the said clause already stood deleted in the tender uploaded on 10.05.2015 itself. Therefore, there was no need to send the said letter when the clause itself was deleted and the specific purpose of these letter was to take an undertaking for other clauses of contract for escalation.

(19) That, the findings of Ld. Arbitrator that post tender negotiation is invalid in law, is contrary to the basic tenets of Contract Act 1872 since tender is an invitation to offer and not a colcuded contract. The concluded contract between the parties was signed on 19.10.2015 which makes the two communications dated 18.09.2015 and 19.09.2015 as terms of contract as specified under Article 2.0 at Sl. no. 3. The said two letters are at page no. 32 and 38 of the contract entered between the parties. The letter of award dated 24.09.2015 clearly shows that the said two letters form part of the agreement. The said term was accepted by the respondent and was admitted even in their SOC. (20) That, the present award is contrary to the basic principles of construction contract, thereby for the purpose of receiving benefits, the respondent had the date of start to be 4.10.2015, OMP (Comm) No. : 05/2021 10/28 whereas for the purpose of escalation, the said date has changed to 26.03.2017.

6. Following authorities were relied upon by Ld. Counsel for petitioner:

(i) Union of India (UOI) and Ors. Vs. Bharat Enterprises MANU/SC/0335/2023 wherein it was observed that :

" 27. We cannot be entirely unmindful, however, of the fact that after submission of the final bill on 13.02.2022, the said bill was settled only after long delay of over an year. While it may be true that there is no finding that the final bill was the product of any duress or coercion, the respondent did have a case that the final bill was the result of the pressure on account of non­payment of her claims and therefore, the respondent agreed to receive the undisputed amounts. But at the same time, there is no finding as such".

(ii) Unibros Vs. All India Radio MANU/SC/1176/2023 wherein it was observed that :

" It is elementary, though it has to be restated, that a judicial decision of a superior court, which is binding on an inferior court, has to be accepted with grace by the inferior court notwithstanding that the decision of the superior court may not be palatable to the inferior court. This principle, ex proprio vigore, would be applicable to an arbitrator and a multi member arbitral tribunal as well, particularly when it is faced with a judicial decision (either under section 34 of section 37 of the Act) ordering a limited remand. In the wake of authority of judicial determination made by the court of law, any award of an arbitrator or a tribunal that seeks to overreach a binding judicial decision, in our opinion, does conflict with the fundamental public policy and cannot, therefore, sustain.

7. Following are the submissions made by Ld. Counsel for respondent:

(1) That, Ld. Arbitrator has considered the fact situation and construed on the basis of Clauses of the agreement which according to him was the correct one. One may at the highest say OMP (Comm) No. : 05/2021 11/28 that one would have preferred another construction or agreement between the parties but that cannot make the award in any way perverse nor can one substitute one's own view in such a situation, in place of the one taken by Ld. Arbitrator, which would amount to sitting in appeal. Reliance was placed upon Sumitomo Heavy Industries Ltd. Vs. Oil and Natural Gas Commission of India, 2010 (11) SCC 296 and Kwality Manufacturing Corporatin Vs. Central Warehousing Corporation (2009) 5 SCC 142.

(2) That, the undertaking was sought by petitioner specifically regarding cost escalation qua Clause 10 CC. Petitioner knowingly and purposefully did not include clause 10 CA and clause 10 C in the said letter. Also, the claims of respondent which have rightly been allowed by the Ld. Arbitrator are entirely based on clause 10 CA and clause 10 C and not on clause 10 CC.

(3) That, it is the case of petitioner ( in reply before Ld. Arbitrator) that respondent shall not claim any cost escalation under Clause 10 CC. Thus, respondent was not precluded from claiming under Clause 10 C (labour) and 10 CA (Material). Moreover, respondent has not claimed anything under clause 10 CC as per the undertaking given by it on 19.09.2015. Respondent maintained its position and filed its claims before the Ld. Arbitrator under clause 10 C and 10 CA of the agreement which had rightly been allowed by Ld. Arbitrator.

(4) That, after issuance of work order, respondent though was ready to start the execution of work, but was forced to await the handing over the work site (Operational Runway at Airport) till OMP (Comm) No. : 05/2021 12/28 such time that the DGCA clearance was given i.e. till 26.03.2016 as per letter dated 18.09.2015 and 19.03.2016. Respondent was clearly instructed to begin the work in effective NOTAM timing from 26.03.2016. Admittedly, the work commenced from 26.03.2016 and claimant accordingly procured core materials and labour from such date only. For the period between 4.10.2015 to 26.03.2016, respondent was under process of mobilizing and establishing machinery, laboratory and office, however, raw material, men, cement, etc, could not be stacked due to undertainly of the date of commencement and handing over the site.

(5) That, Clause 10 C and 10 CA and Clause 5 have to be read together and therefore for Clause 10C and 10 CA, indices for labour and material are to be considered from 26.03.2016 only i.e. from March 2016 to March 2017, which is the actual costs incurred by the respondent and factual terms when the work has been executed.

(6) That, the contract work admittedly commenced after a period of 5 months of the date of start mentioned in the contract, the delay cuased was due to the petitiner. It is also the case of petitioner (in reply before Ld. Arbitrator) that commencement of work was from 26.03.2016. Also, admittedly claimant was granted extension till 06.09.2017 without levy of any compensation. The actual costs incurred by the respondent on such core indices of material and labor were not paid to the respondent, resulting into incorrect indices being considered for calculation of escalation qua clauses 10 C and 10 CA. Same has OMP (Comm) No. : 05/2021 13/28 also resulted in deduction of excessive negative escalation from the bills of the respondent.

(7) Component qua labour was payable as per Clause 10 C and Schedule F of contract, labour component being 10% of value of work. The escalation of labour is payable as per formula given in the tender. Work commenced from 26.3.2016. Not a single RA Bill was raised till 20.03.2016 as there was no work happening at site and labour was also procured from 26.03.2016. Respondent being principal employer is duty bound to pay for wages as per prevailing Wages Act and Labour Laws. Such Labour payment was made by the respondent to the satisfaction of petitionier. Indices from 4.10.2015 considered in the final bill are inadequate and unfair as it does not even suffice for actual costs being paid by the respondent as the indices have considered to be frozen and paid as per indices of September 2016 even for August 2017.

(8) Similarly, calculation value of core material­Bitumen payable as per Clause 10 CA and Schedule F of the contract ought to have been from 26.3.2016 - when it was procured by the respondent but the indices and costs of the same was wrongly considered by the petitioner for Bitumen from symbolic date of 4.10.2015 and not from actual date of procureement of the Bitumen i.e. 26.03.2016. Same has also resulted in deducton of excessive negative escalation from the bills of respondent qua core materials.

(9) That, the escalation is mandatory to be calculated post the finalization of EOT (extension of time) as per the contract, since the levy of compensation was decided only after approval of OMP (Comm) No. : 05/2021 14/28 EOT and the escalation is calculated accordingly. In the present case, levy of compensation is nil since EOT is approved by AAI, Escalation as per clause 10 CA and clause 10 C was calculated and finalized by AAI Officers and objection raised by the respondent vide letter dated 1.6.2018. The payment for the final bill was received on 5.6.2018 by respondent herein, which is after the said objection raised.

(10) That, with regard to the submission of final bill and raising of the protest of wrong escalation indices by the respondent, it was admitted by petitioner in its reply before the Ld. Arbitrator that " it is mandatory to have actual date of completion prior to finalization of the calculation of escalation under 10 C and 10 CA, since the indices prevailing between stipulated date of start , stipulated date of completion and ADOC has a bearing". Also, it was stated by respondent in rejoinder that the amount withheld by the petitioner was ad­hoc amount and the total amount was not finalized till the finalization of EOT.

(11) Regarding Mobilisation Advance/early Mobilisation, it was submitted that it is of little or no relevance since the site was not handed over till 26.03.2016 and also that the contract work i.e. grading and levelling of the airport runway was MASSIVE. Massive work was to be done only after the runway strip was made available to the respondent by the petitioner. The labour obviously could not have been employed prior to 26.03.2016 for the MASSIVE work to be done after 26.03.2016. Similarly core material i.e. Bitumen VG 10 and VG 30 was procured only after 26.03.2016.

(12) That, petitioner in order to suit its convenience and to anyhow and somehow wriggle out of implications of DGCA circular and thereby petitioner's inabiity to hand over the air strip for renovation to respondent in time, is reading too much in the definition of the 'site' as provided into contract which even otherwise is not negatively covenanted so as to 'exclude' air strip from the purview of site. On the contrary, definition of site is quite simple, literal and unambiguous encompassing within its fold land/ or other places on, into or through which work is to be executed. For reasons apparent, same inlcudes air strip as well. It is of little or no relevance whether or not area other than runway/air strip was handed over before 26.03.2016, if implications of DGCA Circular are duly taken into account. Even otherwise, this contention of petitioner has been taken due note of and dealt with by Ld. Arbitrator in the impugned award while dealing with the definition of ' Site', where Ld. Arbitrator has come to the conclusion that petitioner itself is not clear about the date of handing over of site for determining date of start of work. (13) That petitioner on one side handed over the site on 26.03.2016 but on the other side, the payment for raw material like Bitumen, Cement etc whose prices fluctuate every fortnight and Labour although not procured before March 2016 was wrongly paid by petitioner as per the indices for October 2015 till September 2016. The same ought to have been considered from March 2016 to March 2017 and the Respondent claimed the difference in such indices as the Respondent had incurred loss on account of differential rates in material and labour, which has rightly been allowed by Ld. Arbitrator. Therefore, the indices for OMP (Comm) No. : 05/2021 16/28 clause 10 C and 10 CA ought to have been considered from 26.03.2016 as has rightly been held by Ld. Arbitrator. (14) That, petitioner has admitted handing over of site as well as date of actual commencement of work being 26.03.2016 but has wrongly considered the date being 4.10.2015 for calculation of indices resulting nto excessive deduction vide negative escalation qua core material and underpayment for labour in the bill of respondent.

(15) That, clause 5 of the contract specifically states that the execution of work shall commence from such time period as mentioned in Schedule F or from date of handing over of site, whichever is later. Thereafore, though Schedule F also provides for reckoning the date of start from 10 days of issue of letter of acceptance i.e 4.10.2015, in the present case, the same has rightly been considered from the actual date of handing over the site i.e. 26.03.2016 by Ld. Arbitrator. The principal work of procurement of core raw material and labour could not have been initiated before 26.03.2016 and therefore clause 5 of the contract is to be applied and the respondent is entitled for rates of such core material and labour as per indices from March 2016 to March 2017, which is the actual costs incurred by the respondent when the work has been executed and which fact had rightly been considered by the Ld. Arbitrator.

(16) That, the actual costs incurred by the responent on such core indices and labour were not paid to the respondent resulting into incorrect indices being considered for calculation of escalation qua clause 10 CA and 10 C, which aspect had rightly OMP (Comm) No. : 05/2021 17/28 been dealt and adjudicated by Ld. Arbitrator in favour of respondent and against the petitioner.

(17) That, petitioner itself is not clear about the actual date of handing over of site. It is the case of petitioner that the land was allotted on 3.12.2015 after approval from land department. Also, in written arguments filed before Ld. Arbitrator, it was submitted by petitioner that petitioner handed over the land to the respondent on3.12.2015. But in reply filed before Ld. Arbitrator (at page 902, first part at page 903), it was submitted by petitioner that on 15.12.2016, the respondent was informed that site shall be available from 15.2.2016 ' on daily basis'. In these circumstances, Ld. Arbitrator rightly came to the conclusion that petitioner itself was not clear about the date of handing over of the site for dertermining the date of start of work. (18) That, it was admitted by petitioner before Ld. Arbitrator that on account of non­handing over of site for taking up aspalt work/ levelling and grading of basic strip/electrical work , time extension had already been approved by the competent authority without levy of compensation. It was also admitted by petitioner that in the meeting dated 20.01.2016, commencement from 15.02.2016 dumping of soil, routes to be followed etc. were deliberated in detail.

(19) That, actual costs incurred by the Respondent on core indices and labour were not paid to the respondent resulting into incorrect indices being considered for calculation of escalation qua clause 10 CA and 10 C, which aspect has rightly been dealt and adjudicated by Ld. Arbitrator in favour of respondent and against the petitioner.

(20) That, Ld. Arbitrator after due appreciation of material available on record and after hearing submission of both the parties, had duly applied his mind to the pleadings and documents and thereafter has given clear findings considering all the material on record.

(21) That, Hon'ble Supreme court has restricted the scope of public policy, so the Court does not act as a court of Appeal and consequently errors of fact cannot be corrected. It is well settled law that unless a finding recorded by the Arbitrator amounts to pervsrsity, an interference would not be warranted by the courts either under section 34 or 37 of the Arbitration and Conciliation Act.

8. Following authorities were placed reliance upon by Ld. Counsel for respondent:

(i) NTPC Ltd. Vs. Marathon Electric Motors India Ltd.

2012 SCS Online Del 3995and Ispat Engineering and Foundry Works Vs. Steel Authority of India Ltd. AIR 2001 SC 2516 :

" Court while deciding Section 34 Objection, cannot cluminate into the Appellate Court to decide every legal and factual issue. It is only those errors of patent illegality, without jurisdiction or biasness or against the public policy where in the awards seems to be unsustainable, the courts are empowered to interfere and not in all other cases to correct errors committed by the Arbitrator. The re­appraisal of evidence by the courts is not permissible. Court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in record for the purposes of finding out whether or not the Arbitrator has committed an error of law".

(ii) Rashtriya Ispat Nigam Ltd. Vs. Dewan Chand Ram Saran (2012) 5 SCC 306 :

" in any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitraotr was clearly as possible if not OMP (Comm) No. : 05/2021 19/28 a plausible one. It is not possible to say that the aritrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator" .

(iii) SAIL Vs. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC and Sudarsan Trading Co. Vs. Government of Kerala and Anr. AIR 1989 SC 890:

" if on a view taken of a contract, the decision of the arbitrator on certain points awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the court and that the court has no jurisdiction to susbtitute its own evaluation of the conclusions of law or fact to come to the conclusion that the Arbitrator had acted contrary to the bargain between the parties. By purporting to construe the contract, the court cannot take upon itself the burden of saying that this was contrary to the contract. Therefore, there is no substance in the contentin of the objector that the Arbitraor has exceeded his jurisdiction by travelling outside the bounds of the contract and by igonring clause 7.2 of the terms and conditions".

(iv) Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd., Civil Appeal no. 5627 of 2021:

" 22. A cumulative reading of the Uncitral Model Law and Rules, the legislative intent with which the 1996 Act is made, section 5 and section 34 of 1996 Act, would make it clear that judicial interference with the Arbitral Awards is limited to the grounds in section 34. While deciding applications filed under section 34 of the Act, courts are mandated to strictly act in accordance with and within the confines of section 34, refraining from appreciation or re­appreciation of mattes of fact as well as law.

25. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal wold not fall within the expression ' patent illegality'. Likewise, erroneous application of law cannot be categorized as patent illegality".

(v) Suitomo Heavy Industries Ltd. Vs. ONGC Ltd. (2010) 11 SCC 296

(vi) Delhi Development Authority Vs. N.N. Buildcon Pvt. Ltd. (MANU/DE/1999/2017).

(vii) Southern Railway and Ors. Vs. Santosh Babu (MANU/KE/0145/2022)

(viii) P.M. Paul Vs. Union of India, 1989 Supp (1) SCC 368

(ix) Sujlet Construction Vs. Union Territory of Chandigarh (2018) 1 SCC 718

(x) Union of India Vs. Haji C.M. Abdul Khader and Ors. MANU/KE/5969/2019

(xi) Chennai - Ennore Port Road Company Ltd. Vs. Coastal - SPL (JV) ( MANU/DE/2334/2019)

(xii) Mohan Construction Company Vs. Delhi Development Authority and Ors., MANU/DE/3166/2011

(xiii)Assam State Electricity Board and Ors. Vs. Buildworth Pvt. Ltd. (2017) 8 SCC 146

(xiv)K.N. Sathyapalan (Dead) by Lrs Vs. State of Kerala and Ors. (2007) 1 SCC 43

(xv) Rashtriya Ispat Nigam Ltd. Vs. Dewan Chand Ram Saran (2012) 5 SCC 306 (xvi)NTPC Limited Vs. Marathon Electric Motors India Ltd. , MANU/DE/3598/2012 (xvii) Morgan Securities and Credits Pvt. Ltd. Vs. Videocon Industries Ltd. (2023) 1 SCC 602 (xviii)Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail Corporation Civil Appeal no. 3657 of 2022.

9. It is correct that it is not open for this court to reappreciate the evidence as the objection u/s 34 has to be established on the OMP (Comm) No. : 05/2021 21/28 basis of ground enumerated therein. Reliance is placed upon following authorities:

10. In Associate Builders Vs. Delhi Development Authority, 2014 (4) Arb. LR 307 (SC), it was observed that :

" When a court is applying the ' Public Policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of facts cannot be corrected. A possible view by the arbitrator on the facts has necessary to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this scope. Once it is found that the arbitrator's approache is not arbitrary or capricious, then he is the last word on facts" .

" An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a terms of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do".

" The expression ' justice' when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court" .

11. In Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India, Judgement dated 08.05.2019, SLP (C) no. 19033 of 2017, it was observed that :

" it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law and secondly, that such award is against the basic notions of justice or morality. Explanation 2 to Section 34 (2) (b) (ii) and Explanation 2 to section 48 (2) (b)

(ii) was added by the Amendment Act only so that Western Geco (Supra), as understood in Associate Builders (supra), and paragrpahs 28 and 29 in particular, is now done away with. In so far as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to section 34. Here, there must be patent illegality appearing on the fact of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within " the fundamental policy of India Law" ,namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

To elucidate, para 42.1 of Associate Builders (supra), namely a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain that if an arbitrator gives no reasons for an award and contravenes section 31 (3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

The change made in section 28 (3) by the Amendment Act really follows what is stated in paragraphs 42.3 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitratror construes the contract in a manner that no fair minded or reasonable person would; in short take or the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted him, he commits an error of jurisidiction . This ground of challenge will now fall within the new ground added under section 34 (2A)" .

12. In the instant matter, the admitted fact between the parties were that the tender was floated in year 2015 with last date of tender as 30.04.2015. Respondent was the lowest financial bidder at Rs. 63,43,85,800/­ which was 13.07% below the estimate cost, as stated by the petitioner itself. However, it was noted that Airport Authority of India could not undertake any construction work during the period that may affect aircraft operations and accordingly, the work for strengthening of runway was deferred upto February/March 2016. It was also pointed out that since delay in handing over of the site may result into contractual claim, an undertaking shall be taken from the respondent for refraining from cost escalation claims. The said decision of WAP was communicated to the respondent vide letter dated 18.09.2015. Vide said letter, it was made clear to respondent that the work site i.e. air strip would be handed over in February 2016 and therefore cost escalation under Clause 10 CC being not payable as per the tender document, request was made to the respondent to submit an undertakng that the respondent shall not OMP (Comm) No. : 05/2021 23/28 claim any cost escalation under Clause 10 CC or any other claim whatsoever due to delay in handing over of the site. The said unconditional undertaking was submitted by the respondent on 19.09.2015 wherein respondent undertook that it shall not claim anything extra under Clause 10 CC and shall not claim any other claim whatsoever, due to delay in handing over of the site.

13. Ld. Counsel for petitioner sought much of the emphasis from the fact that the respondent in all the claims/bills submitted, categorically mentioned about the date of start of work as 4.10.2015 with stipulated date of completion as 3.10.2016. It was submitted that the completion of work got extended due to various reasons and respondent was granted extension of time, however in all these, stipulated date of completion never changed. It was fixed on the date the agreement was signed. It was a construction contract where indices are applicable. There was no agreement betwen the parties that the stipulated date of completion should change and the agreement dated 19.10.2015 was entered between the parties with open eyes with stipulated date of start and completion as part of the agreement and mentioned at number of places. It was also reiterated that the work chart dated 13.11.2015 itself shows as issue of drawings, mobilization of plant machinery , drawing layout for electrical drawing, purchase of indigenous items, procurement of imported items, installation of transformer housing box etc. activities had to be done by the respondent in terms of the agreement. If the respondent did not do this work, he could not have commenced the work in March. It was also submitted that for getting the mobilization advance and advance for every other activity, OMP (Comm) No. : 05/2021 24/28 submission of bank guarantee, security deposit, raising bills etc, the date of start was 4.10.2015 only. For the purpose of indices, the respondent has changed the date which amounts to re­writing the terms of the agreement culminating into patent illegality and perversity.

14. It was also submitted that during the entire period of contract i.e. from 4.10.2015 to 06.09.2017, even though the respondent procured the Bitumin on various dates, respondent never raised any bills or escalated price on the indices prevailing as on March 2017. In the final bill, no claim for escalated price on the basis of indices prevailing in 2017 had been made by the respondent.

15. In terms of record, it was communicated by the petitioner only that the site was likely to be handed over in the month of February/March 2016 and therefore the undertaking was taken from respondent. Had the respondent not agreed for the undertaking who was already the lowest bidder at Rs. 63,43,85,800/­ i.e. 13.07% below the estimated cost, the petitioner would have to refloat the tender which might have caused loss to the Government Exchequer.

16. Further, though it is correct that the respondent was required to make arrangements to commence the work and in terms of own contention of the petitioner, all these activities had to be done by the respondent otherwise it could not have commenced the work in March. The said submission of petitioer itself substantiates the case of respondent only that despite all the preparations being made or required to be made by the OMP (Comm) No. : 05/2021 25/28 respondent, the actual work could have been commenced only in the month of March in after the clearance from DGCA, therefore despite the respondent having made all the preparations , the actual work could not have been commenced prior to the date of handing over of the air strip to the respondent and thereafter only the respondent could have procured the material and employ the substantial labour force for the execution of work.

17. Admittedly the substantial work commenced at the site only w.e.f. 26.03.2016, thereby the respondent was to procure the material and the substantial work force from the actual date of commencement of the work. It was clarified on record by the counsel for respondent that for the period between 4.10.2015 to 26.3.2016, respondent was in process of normalising and establishing the machinery , laboratory and office, however raw material, men cement etc. could not be stacked due to uncertainty of the date of commencement and handing over of the main site. It was also brought on record that though the respondent had moved for mobilization advance, however, not a single RA bill was raised till 20.03.2016 as there was no substantial work at the site and the substantial man force was also procured after 26.03.2016. Petitioner being Principal Employer was duty bound to pay for the wages as per prevailing Wages Act and Labour Laws and similarly payment for the value of core material price was required to be paid when it was procured by the respondent. It was sufficiently explained/clarified by Ld. Counsel for respondent that the escalation is mandatory to be calculated post the finalization of EOT (extension of time) as per the contract, since the levy of compensation is decided only after approval of OMP (Comm) No. : 05/2021 26/28 EOT and the escalation is calculated accordingly. In the present case, levy of compensation was 'Nil' since EOT was approved by AAI, Escalation as per clause 10 CA and clause 10 C was calculated and finalized by AAI Officers and objection raised by the respondent vide letter dated 1.6.2018. The payment for the final bill was received on 5.6.2018 by respondent herein, which was after the said objection raised.

18. Despite the fact that the stipulated date of commencement and completion date were written by the parties on all the documents/bills as per the original agreement, nevertheless it is admitted fact on record tht the actual date of commencement of work and the actual date of completion of work was not the stipulated date of commencement and completion. Initially because of lack of DGCA clearanace , extension period for completion time was made available to the respondent and later on also, time was extended not because of fault of respondent as is borne out of record and therefore no penalty was levied. In these circumstances, it would be rather unfair on the part of petitioner to submit that the price indices were required to be considered as per the stipulated date of commencement and completion and not as per the actual dates.

19. As noted by Ld. Arbitrator, the respondent had not made any claim as per clause 10 CC and non­consideration of price indices as per the actual date of commencement and completion of work, besides being unfair, cannot be said to be as per the standard procedure and general terms and conditions of the agreement between the parties OMP (Comm) No. : 05/2021 27/28

20. Having discussed as above, the award passed by Ld. Arbitrator does not suffer from any patent illegality, perversity or against the public policy, calling for any interference from this court in objections u/s 34 of Arbitration and Conciliation Act. Accordingly, instant petition stands dismissed. File be consigned to record room after completion of necessary formalities.

                                      SAVITA           Digitally signed by
                                                       SAVITA RAO

                                      RAO              Date: 2023.12.16
                                                       16:00:55 +0530

Announced in the open             (SAVITA RAO)
court on this 16th day           DISTRICT JUDGE
 of December 2023             (COMMERCIAL COURT)-01
                           SOUTH/SAKET COURTS, DELHI




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