Delhi District Court
Union Of India vs M/S Bansal Brothers on 31 January, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 71/2020
Union of India
Through Executive Engineer,
S.S.K. Hospital Division,
Central Public Works Department (CPWD),
Punchkuian Road, New Delhi ..Petitioner
versus
1. M/s Bansal Brothers,
I-115, Laxmi Nagar Extn.
Delhi-110097
2. Mr. Rajesh Banga
Sole Arbitrator
Govt. of India, Ministry of Housing & Urban Affairs,
3rd Floor, Room No-C-316, Indraprastha Bhawan,
I.P Estate, (Near Vikas Minar, ITO),
New Delhi-110002 ..Respondents
Date of Institution : 19/09/2020
Arguments concluded on : 12/01/2022
Decided on : 31/01/2022
Appearances : Ms. Ruby, Ld. Counsel for petitioner.
Ms. Rajshree, Ld. Counsel for respondent no. 1.
JUDGMENT
1. Petitioner has filed the present objection petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside of the impugned arbitral award dated 18/05/2020 of Ld. Sole Arbitrator Sh. Rajesh Banga in respect of Claim No. 1.17 in case no.
ARB/RB/Delhi/124 titled M/s Bansal Brothers vs Union of India. In impugned award, Ld. Sole Arbitrator had held with respect to OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 1 of 28 Claim No. 1.17 of claimant/respondent no. 1 that present petitioner had no contractual right to deduct the amount of Rs. 4,20,278/- as levy of compensation for delay of work and said amount is to be refunded to claimant/respondent no. 1 with simple interest @ 9.5% per annum from 01/04/2018 till the date of award and in case payment of award amount is not made within three months of date of receipt of award by present petitioner then post award interest @ 11% per annum from the date of award till the date of payment was payable by present petitioner to respondent no.1/claimant.
2. I have heard Ms. Ruby, Ld. Counsel for petitioner, Ms. Rajshree, Ld. Counsel for respondent no. 1 and perused the record of the case as well as reply of respondent no. 1/claimant to present petition, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of petitioner as well as on behalf of respondent no. 1 and given my thoughtful consideration to the rival contentions put forth.
3. Adumbrated in brief, material facts of the case of parties are as follows. Claimant/respondent no. 1 entered into agreement for "Construction of 11 Nos. Rainwater Harvesting System at different locations i.e., inside Nurses Old Block, front of LHMC, behind the main LHMC Building in CPWD Officers premises, in the open area near CT Centre, Director's Bungalow, inside open area between pharmacology and Administration, in front of the College of nursing and parking area of LHMC of SSK Hospital, New Delhi" with the petitioner as job/work wherein tender amount was Rs. 43,02,784/- and six months time was for OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 2 of 28 completion from 08/11/2016 to 07/05/2017. As per petitioner, respondent no. 1 completed the work on 15/12/2017 with delay of 222 days beyond the stipulated period. Disputes arose between the parties. Respondent no. 1/claimant moved an application for arbitration. Vide reference no. 1740 dated 21/12/2018, petitioner appointed respondent no. 2 as Ld. Sole Arbitrator. Arbitral proceedings culminated into impugned arbitral award wherein only with respect to findings on Claim no. 1.17 the petitioner has impugned the award.
4. Petitioner has impugned the findings on Claim no. 1.17 in the impugned arbitral award mainly on the following grounds. Findings are bad in the eyes of law and against the spirit of law. Ld. Sole Arbitrator failed to appreciate that time is essence of the contract and respondent no. 1/claimant did not complete the job/work within the stipulated period i.e., from 08/11/2016 to 07/05/2017 and delayed the work by 222 days. Respondent no. 1/claimant started the work on 03/01/2017 nearly about two months delay at one location out of 11 locations. Despite requests of petitioner, respondent no. 1/claimant avoided to work on three locations even despite several letters of petitioner. Respondent no. 1/claimant refused to execute the work at remaining three locations and violated the terms and conditions of the agreement inter se petitioner and respondent no. 1/claimant. Ld. Sole Arbitrator failed to appreciate that respondent no. 1 himself accepted the date of actual completion of work as 15/12/2017, which is with delay of 222 days. Ld. Sole Arbitrator failed to appreciate that there can be no interference regarding the penalty imposed by Superintendent Engineer as was observed in the case OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 3 of 28 of Mitra Guha Builders (India) Company vs Oil and Natural Gas Corporation Limited, MANU/SC/1539/2019 as the adjudication of Superintendent Engineer for levy of liquidated damages/compensation in terms of Clause 2 of the agreement inter se parties to arbitration was final and same could not have been the subject matter of arbitration. Ld. Counsel for petitioner in arguments also relied upon the case of Ramkishan Singh vs Rocks Buildcon Pvt. Ltd. & Anr., 236 (2017) DLT 568 wherein it was held that it was an obligation on the Arbitrator to take into account the terms of the contract and trade usages applicable to the transaction in accordance with the mandate of Section 28(3) of the Act and for non compliance of aforesaid mandate, the impugned award cannot be sustained as it is opposed to fundamental policy of Indian law. Numerous opportunities were afforded to respondent no. 1/claimant to complete the work within the stipulated period but respondent no.1/claimant delayed the work for 222 days and did not start the work on three locations. Impugned award in respect of Claim no. 1.17 is contrary to law, weight of evidence and against the principles of natural justice besides being erroneous both on law and facts. Ld. Sole Arbitrator failed to appreciate that respondent no. 1/claimant had violated the terms and conditions of the contract. It was prayed by Ld. Counsel for petitioner accordingly to set aside the findings of Ld. Sole Arbitrator in impugned award with respect to Claim No. 1.17.
5. In the filed reply it is the averment of respondent no. 1/claimant and is also so argued by Ld. Counsel for respondent no. 1/claimant that Ld. Sole Arbitrator was sitting Chief Engineer OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 4 of 28 of petitioner, was appointed by petitioner on 21/12/2018 whereas disputes were resolved by adjudicating the claims through the impugned arbitral award. Being officer of petitioner, Ld. Sole Arbitrator was well conversant with the provisions of contract and petitioner also accepted the award as published by Ld. Sole Arbitrator and paid the amount awarded to claimant/respondent no. 1 except the award of Claim no. 1.17. Petitioner has not made out any case under Section 34 of the Act for setting aside of the impugned award with respect to findings on Claim no. 1.17. It is not the case of petitioner for any fraud or corruption against Ld. Sole Arbitrator. Filed objections are frivolous, baseless and deserve to be dismissed as parties were given full opportunities, Ld. Sole Arbitrator recorded full and detailed reasons supported with all evidences whereas neither the award is against the substantive law nor is patently illegal. As per Section 19 of the Act, Ld. Sole Arbitrator can determine the admissibility, relevance, materiality and weightage of any evidence. Objection petition has been filed beyond the period of limitation and petition also deserves to be rejected on this ground. There is no violation of principles of natural justice and impugned portion of the award is in accordance with the public policy of India. Ld. Sole Arbitrator had gone into much detail of alleged delay under Claim no. 1.17 and in fact there was no delay on the part of claimant/respondent no. 1 as work was completed on 29/05/2017 as against the stipulated date of completion on 07/05/2017, whereas petitioner had accepted that there was delay of two months on their part initially and the work was started on 16/01/2017 when the site was handed over to respondent no. 1/ claimant as per own admission in para nos. 5 and 6 of petition.
OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 5 of 28The notice of completion of the work was given by claimant/ respondent no. 1 on 29/05/2017, which was not refuted by petitioner nor any notice of non completion was given by petitioner on the said date but recorded completion as on 15/12/2017 without any reason. The delay was fully justified, therefore, no reason was there for imposing any penalty against claimant/respondent no. 1. Petitioner could not hand over three sites of rainwater harvesting system till the entire period of contract up to 07/05/2017. The work remain suspended after 29/05/2017 due to non availability of site for three numbers of system, this delay was resolved by petitioner through the intervention of Chief Engineer and abandoned the three systems and directed to record completion as no site was available even on 15/12/2017. However, the completion was recorded, as on 15/12/2017, though petitioners admitted in their extension of time case stating that no work was carried out after May, 2017 and during the meeting with Chief Engineer on 15/12/2017 it was decided to record the completion as on 15/12/2017. Claimant/ respondent no. 1 had also given notice of completion on 29/05/2017. All above facts were recorded by Ld. Sole Arbitrator in the impugned award. There was no delay on the part of claimant/respondent no. 1. The Court is not sitting in appeal to find fault in the findings of Ld. Sole Arbitrator. Findings of Ld. Sole Arbitrator in impugned award under Claim no. 1.17 are as per the facts, contract, law and justice and cannot be interfered with. Impugned award is well reasoned by interpreting the provisions of law, Clauses 2 and 5 of contract supported with other evidences placed before Ld. Sole Arbitrator by the parties. No case is made out by petitioner to challenge the findings on OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 6 of 28 Claim no. 1.17. Relevant documents were considered by Ld. Sole Arbitrator and evidence was evaluated by Ld. Sole Arbitrator. Opportunities were afforded to both parties by Ld. Sole Arbitrator for placing all relevant documents, advance argument and concluded the hearing with the consent of both parties. Justifying reasons are recorded in the impugned award which is not to be interfered with. Award is well founded with reasons and in accordance with the contractual provisions and law. Ld. Counsel for claimant/respondent no. 1 prayed for dismissal of the objection petition.
6. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
7. Perusal of arbitral proceedings record received from Ld. Sole Arbitrator reveals that claimant/respondent no. 1 after passing of impugned award on 18/05/2020 had filed an application under Section 33 of the Act dated 26/05/2020 for correction in the impugned arbitral award. Order dated OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 7 of 28 29/07/2020 of Ld. Sole Arbitrator is in the arbitral proceedings record whereby aforesaid application of claimant/respondent no. 1 under Section 33 of the Act was declined by Ld. Sole Arbitrator finding the request of claimant to be not acceptable. Present petition under Section 34 of the Act was filed by petitioner on 19/09/2020. It is accordingly well within the period of three months from the date on which the request of claimant/ respondent no. 1 made under Section 33 of the Act was disposed of by Arbitral Tribunal. Present petition is accordingly within the period of limitation.
8. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 8 of 28 from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 9 of 28 applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
9. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...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 fact cannot be corrected. A possible view by the arbitrator on facts has necessarily 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....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
10. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 10 of 28 not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
11. Supreme Court in the case of Patel Engineering Ltd. vs North Eastern Electric Power Corporation Ltd., MANU/SC/ 0447/2020 inter alia held that wherein the findings of Ld. Arbitrator are arrived at by taking into account irrelevant facts and by ignoring the vital clauses, the same suffers from the vice of irrationality and perversity and that the award will be liable to be set aside when while interpreting the terms of the contract, no reasonable person could have arrived at such a conclusion and the award passed by the arbitrator suffers from the vice of irrationality and perversity.
12. In the case of M/s Arosan Enterprises Ltd vs Union of India & Anr., MANU/SC/0595/1999, it was inter alia held that reappraisal of evidence by the Court is not permissible in the proceeding under the Arbitration Act. In the event of there being no reason in the award, question of interference of the court would not arise at all. In the event, however there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on wrong proposition of law. In the event, however, two views are possible on a question of law as well, the Court would not be justified in interfering with the award. Also was held that the Court as matter of fact, cannot OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 11 of 28 substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of arbitrator is a possible view the award or the reasoning contained therein cannot be examined. The decisions in the cases of State of Rajasthan vs Puri Construction Co. Ltd, MANU/SC/0865/1994 and Sudersan Trading Company vs Government of Kerala & Anr., MANU/SC/0361/1989 were relied. Also was held therein that where an Arbitrator makes a mistake either in law or in fact in determining the matters referred, but such mistake does not appear on the face of the award, the award is good notwithstanding the mistake, and will not be remitted or set aside.
13. In the case of Vishal Engineers & Builders vs Indian Oil Corporation Ltd., FAO (OS) 204 of 2010, decided by Delhi High Court on 30/11/2011, it was inter alia held that it was duty of the Court not to enforce penalty clause but only to award a reasonable compensation, which had been held to be statutorily imposed upon Courts by Section 74 of the Contract Act and Court had to adjudge in every case, reasonable compensation for breach of contract having regard to conditions which existed on date of breach.
It was held therein that if there was absence of any loss, whatsoever, an aggrieved party could not claim that it was still entitled to liquidated damages without, at least, proving a semblance of loss.
14. Supreme Court in the case of Kailash Nath Associates vs Delhi Development Authority, MANU/SC/0019/2015 had OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 12 of 28 elicited the law on compensation for breach of contract under Section 74 as follows:-
"43. On a conspectus of the above authorities, the law on compensation for breach of contract Under Section 74 can be stated to be as follows:
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
4. The Section applies whether a person is a Plaintiff or a Defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application."
15. Delhi High Court in the case of Essban Paints Pvt. Ltd. vs Union of India & Anr., MANU/DE/0648/2001 held that in case OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 13 of 28 the contract was not performed and there was breach thereof by the petitioner, it was for the respondent to prove the loss suffered because of such breach and to forfeit the security only to the extent of loss.
16. Delhi High Court in the case of United Telecoms Limited vs Mahanagar Telephone Nigam Limited, MANU/DE/ 0969/2012 inter alia held that it is well established that in a contract on its breach, penalty can be levied on the defaulting party only if the other party had suffered and the same is proved.
17. Supreme Court in the case of Navodaya Mass Entertainment Ltd. vs J.M. Combines, MANU/SC/0735/2014 held that the scope of interference of the Court is very limited. Court would not be justified in reappraising the material on record and substituting its own view in pace of the Arbitrator's view. Where there is an error apparent on the face of the record or the Arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail. (See: Bharat Coking Coal Ltd. v. L.K. Ahuja MANU/SC/0335/2004: (2004) 5 SCC 109; Ravindra and Associates v. Union of India, MANU/SC/1761/2009 : (2010) 1 SCC 80; Madnani Construction Corporation Private Limited v. Union of India and Ors.; MANU/SC/1869/2009 : (2010) 1 SCC 549; Associated Construction v. Pawanhans Helicopters OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 14 of 28 Limited, MANU/SC/7630/2008 : (2008) 16 SCC 128; and Satna Stone and Lime Co. Ltd. v. Union of India and Anr., MANU/SC/7640/2008 : (2008) 14 SCC 785).
18. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 15 of 28 is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt. Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC
296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 16 of 28 to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63.
19. Following are the reasons of Ld. Sole Arbitrator in the impugned award for award with respect to Claim no. 1.17 of respondent no.1/claimant:-
"1.17 Recovery of Rs 4,30,278 : It is the case of claimant that though he completed the work on 29.5.17, the respondent recorded completion on 15.12.17. Further, respondent delayed handing over site and drawings/decisions and the delay in work is attributable to respondent. The claimant contends that the levy of compensation by SE is legally not maintainable. Respondent per contra submits that compensation has been levied by SE as per terms of agreement as the delay was on the part of contractor.
1.17.1 Before adjudicating the claim, I need to examine whether this dispute can at all be adjudicated by the Arbitrator.
Both parites have alleged that the delay in work is due to breach of other party. The primary dispute here is founded on the question as to which party breached the contract causing delay in work.
I have perused the arbitration agreement i.e. clause 25 in contract agreement which mentions that except where otherwise is provided in contract, all questions and disputes arising out of and relating to contract shall be determinable through arbitration unless these are settled between parties by a process prescribed in clause 25 (i).
I find that the contract nowhere provides that the question as to who committed breach leading to delay is not to be referred to arbitration. Further it is undisputed that the parties could not reach settlement under clause 25 (i) of contract.OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 17 of 28
I now turn to clause 2 of contract agreement and reproduce the pertinent part.
If the contractor fails to maintain the required progress in terms of clause 5 or to complete the work and clear the site on or before the contract or extended date of completion, he shall, without prejudice to any other right or remedy available under the law to the Government on account of such breach, pay as agreed compensation the amount calculated at the rates stipulated below as the authority specified in schedule 'F' (whose decision in writing shall be final and binding) may decide on the amount of tendered value of the work for every completed day/month (as applicable) that the progress remains below that specified in Clause 5 or that the work remains incomplete.
A careful study of the clause reveals that the decision to levy compensation by the authority (i.e. SE) encompasses two parts as under:
(a) Whether the contractor has failed to maintain the required progress in terms of clause 5 or to complete the work on or before the contract or extended date of completion.
(b) If the answer to part (a) is 'Yes', the compensation amount is to be calculated by SE.
A careful study of the clauses reveals that it is only with regard to question (b) i.e. the resultant quantification of compensation amount where the decision of SE is said to be final and binding. The positioning of bracket expression '(whose decision in writing shall be final and binding)' in the clause is linked with the expression of amount calculation. Let us appreciate the fine delineating thread here. The determination of question at (a) i.e. whether the delay is or isn't on the part of contractor, is not the realm where the decision of SE is final and binding. In other words, the dispute on question at (a) would only be determinable through arbitration as per the arbitration agreement made by parties.
Similar light was thrown by Hon'ble Supreme Court in the matter J.G. Engineers Ltd. Vs UOI - 2011 (2) Arb. LR 84(SC), where it was held that what is final and conclusive by clause 2 is not the decision of any authority on the issue OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 18 of 28 whether contractor was responsible for the delay or department was responsible for the delay but what is made final is the decision on consequential issues relating to quantification, if there is no dispute as to who committed the breach.
Further it is more res integra that liquidated damages is not a debt and requires adjudication by Court or Arbitral Tribunal as the case may be.
In the present case, both parties are alleging that it is the opposite party that breached the contract causing delay in work. Therefore, as per the arbitration agreement made by parties, the Arbitral Tribunal has the jurisdiction to decide as to which party was responsible for delay. I clarify here that I shall not enter into the area/issue of calculation/quantification part of compensation amount.
Having decided the issue of jurisdiction, I shall now proceed further.
1.17.2 The claimant contends that he completed the job on 29.5.17 as the site for balance 3 no. pits was not available even till the end and that no work was done after 29.5.17 and yet the completion date was recorded by respondent as 15.12.17. Respondent asserts that the date of completion is 15.12.17.
I refer to AE ref dt 31.5.17 (Ex p-55 SoD) where AE identified that 3 no. RWH str. are yet to be started. This document reveals that the balance work as on 31.5.17 was only about these 3 no. RWH str.. Respondent further records that (p-3 SoD) a meeting was held with CE on 15.12.17 where the claimant refused to work on balance 3 no. RWH structure and respondent agreed on that position and decided to record the completion date as 15.12.17. The important fact is that respondent did not decide to terminate the contract as per clause 3 considering the work as incomplete and rather agreed to consider the work as complete even without execution of balance 3 RWH str.. In other words, respondent on 15.12.17 himself agreed to consider the same work which was done upto 31.5.17 as complete. Further the fact that respondent agreed for this shows that there were bona-fide reasons which made respondent to drop these 3 RWH pits. So it is not a case where the execution of work continued till 15.12.17 and it is only that the decision to consider the work as compete OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 19 of 28 has been taken 6 months later.
This establishes that the work which was considered complete by respondent on 15.12.17, was in fact completed before 31.5.17. The delay of less than a month (up to 31.5.17) is negligible when it is seen in the light of breaches of respondent as discussed in subsequent paras.
A bare reading of the clause 2 shows that the breach of contractor is to be identified which can be (a) not maintaining the progress as per clause 5 or (b) failing to complete the work by contract date or (c) failing to complete the work by the extended date of completion.
In the present case, SE has identified in his show cause dt.8.10.18 (more than an year after completion) that cause of action is the failure of contractor to complete the work before stipulated date of completion.
At the same time, I observe clause 5 (5.4) of agreement and the relevant part is reproduced as under:
In any such case the authority as indicated in Schedule F may give a fair and reasonable extension of time and reschedule the mile stones for completion of work. Such extension shall be communicated to the Contractor by the authority as indicated in Schedule F within 3 months of the date of receipt of such request. Non application by the contractor for extension of time shall not be a bar for giving a fair and reasonable extension by the authority as indicated in Schedule F and this shall be binding on the contractor.
On the happening of any delay event which is not attributable to contractor, the respondents are expected to give a fair and reasonable time extension thereby fixing the extended date of completion as per clause 5.3 and 5.4 of agreement. Even when the contractor has not requested for extension of time, there is an option under clause 5.4 to decide fair and reasonable extension of time. This is clearly for the benefit of the respondent to preserve its right to take action under clause 2. Hence, extension of time on a particular event under clause 5 has to be duly assessed as required under clause 5 and extension has to be given in time. This shall fix the extended date of completion. Non-completion of work on such extended date shall entitle the SE to levy compensation under clause
2. Thus, we deduce that proper action under clause 5 is a pre-requisite for any action under clause 2.OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 20 of 28
1.17.3 In the present case, the show-cause notice under clause 2 was issued by SE refdt. 8.10.18. The notice says that the work entrusted to you under the agreement referred abovecould not be completed within stipulated date of completion due to your wrongful delay----. The work has been completed on 15.12.17. Therefore, under the provisions of clause 2 of the above said agreement, you have rendered yourself liable to pay compensation.
The notice remains silent on why the 'extended date of completion' was not decided despite there being a number of hindrances as per own record of respondent. It is own admission of respondent (p-33 SoD) that the reinforcement drawing was issued by respondent on 16.1.17 ( i.e. 2.5 months after date of start). Further it is undisputed that the Ist RA bill submitted by contractor on 30.3.17 was paid by respondent on 14.7.17 and the 2nd RA bill submitted on 22.4.17 was paid on 13.12.17. As per clause 7 of agreement, the payment against RA bill was to be made in 10 working days, an obligation which was blatantly breached by respondent. It is obvious that the delay in payment retards the progress of work.
Despite these facts on record, I do not find any due assessment and grant of fair and reasonable extension of time fixing the 'extended date of completion'. SE concluded that the delay is on the part of contractor, one long year after his own admitted date of completion. Further SE's order dt 15.11.18 does not identify the 'extended date of completion' despite above breaches of respondent.
Long after completion of the work, an attempt has been made to fix delay on the other party and then levy compensation without taking any action under clause 5 to fix the extended date of competition in consonance with the hindrances/breaches by respondent.
This is not the scheme or mechanism contemplated in clause 2 read with clause 5. Contractual action must comply procedure given in contract. Once the respondent was failing to pay the bills of contractor, how could he expect the contractor to still, complete the work by stipulated date of completion. Respondent did not respect clause 5 and took no action to fix any extended date of completion in consonance with his own breaches. Neither OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 21 of 28 party was aware about any valid extended date of completion under clause 5, for non-completion on which date, liquidated damages would be effective as per clause 2 for days the work remaining incomplete. Hence, in the absence of operation of clause 5 as per terms of the contract, the clause 2 action is invalid.
1.17.4 The levy of compensation fails on one more ground.
Claimant refers to Delhi High Court Judgment M/s Vishal Engineers v. Indian Oil Corporation to contend that the damages cannot be allowed in the absence of loss.
I have also studied the judgement delivered by Hon'ble High Court Delhi in Indian Oil Corporation vs Lloyds Steel Industries Ltd. dt. 31 August, 2017. The Hon'ble Court pronounced as under:-
"Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal inquiry has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed. 42. It is too preposterous on the part of the petitioner to submit that it should get the liquidated damages stipulated in the contract even when no loss is suffered."
In the present case, the respondent has not contended that he suffered any loss due to the stated delay. SE's order dt 15.11.18 also does not say that any loss was suffered due to the alleged delay. On the contrary, the respondent recorded in his ref dt 10.4.18 that there is no revenue loss to Govt. due to the stated delay.
In the absence of any injury, the respondent cannot recover any compensation. The levy of compensation accordingly fails on this ground also.
1.17.5 Resultantly, the respondent has no contractual right to deduct the amount of Rs 4,20,278/- on this count and this OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 22 of 28 amount is to be refunded to claimant."
20. Clauses 2 and 25 of the agreement inter se parties in the case of Mitra Guha Builders (India) Company vs Oil and Natural Gas Corporation Limited (supra) were different and distinguishable to the relevant clauses of the General Conditions of Contract for Central P.W.D Works, 2014 (in short GCC) applicable in the case in hand; so law laid in said case is of no help to petitioner/ Counsel for setting aside the impugned findings of Ld. Sole Arbitrator on Claim no. 1.17 in question.
21. Supreme Court in the case of J.G. Engineers Pvt. Ltd. vs UOI & Anr. (supra) had also held that the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is, a Court or an Arbitral Tribunal. Reliance was placed upon the case of State of Karnataka vs Shree Rameshwara Rice Mills, (1987) 2 SCC 160, wherein Supreme Court had held that adjudication upon the issue relating to a breach of condition of contract and adjudication of assessing damages arising out of the breach are two different and distinct concepts and the right to assess damages arising out of a breach would not include a right to adjudicate upon as to whether there was any breach at all. Supreme Court had held that one of the parties to an agreement cannot reserve to himself the power to adjudicate whether the other party has committed breach. It was also so held that the OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 23 of 28 powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed.
22. Supreme Court in the case of Bharat Sanchar Nigam Ltd. & Anr. vs Motorola India Pvt. Ltd., (2009) 2 SCC 337 inter alia held that first to all there has to be delay and for ascertaining as to who was responsible for the delay, such an issue will be within the jurisdiction of Arbitrator.
23. Elicited reasonings for adjudication of Claim no. 1.17 in impugned award brings into fore the factual context that delay in completion of work was attributed by both parties to arbitration upon each other and the appreciation of Clause 2 of GCC with fine delineating thread holding that it was not the realm where the decision of Superintendent Engineer was final and binding with respect to whether or not there was the delay on the part of contractor whereas it was determinable through arbitration as per the arbitration agreement between the parties with respect to the dispute on question as to whether or not there was delay on the part of the contractor. For that elicited extracts of impugned arbitral award reveal detailed appreciation by Arbitral Tribunal of Clauses 2 and 25 of GCC applicable. In the case in hand there was clear dispute as to the fact that whether there was any delay on the part of claimant/respondent no. 1. For adjudication as to whether there was any delay on the part of claimant/respondent no. 1, Clause 2 of GCC applicable cannot be treated as an OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 24 of 28 excepted matter because of the fact that it does not provide for any adjudicatory process for decision on a question, dispute or difference, which is the condition precedent to lead to the stage of quantification of damages.
24. It is also the fact of the matter that vide letter dated 08/10/2018 show cause notice was issued by Superintendent Engineer of petitioner to claimant/respondent no. 1 to show cause within 15 days to his satisfaction why compensation should not be imposed upon claimant/respondent no. 1 under Clause 2 of GCC for delayed completion of the work. It is also the fact of the matter that claimant/respondent no. 1 gave reply dated 18/10/2018 to aforesaid show cause notice dated 08/10/2018 of Superintendent Engineer of the petitioner and in said reply various facts were averred including delay/laches on the part of officials of petitioner in (i) delays in handing over hindrance free sites; (ii) delays in supply of drawings, designs, specifications, etc.; (iii) delays in payments of RA bills; (iv) non handing over of 3 no. RWH structure; (v) non sanction of extension of time without levy of compensation under the circumstances of the case; (vi) non compliance of various clauses of GCC by officials of petitioner. In exercise of powers conferred upon Superintendent Engineer, vide letter dated 15/11/2018, Superintendent Engineer of petitioner had levied compensation of Rs. 4,20,278/- upon claimant/respondent no. 1 in terms of Clause 2 of the agreement for period of 222 days delay alleging claimant/respondent no. 1 to be solely responsible for such delay but said letter/order dated 15/11/2018 of petitioner for levy of such compensation is bereft of having taken into consideration OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 25 of 28 aforesaid reply/response of respondent no. 1/claimant dated 18/10/2018 or any of its averments/premises/grounds raised therein in response to show cause notice/letter dated 08/10/2018 of Superintendent Engineer of petitioner.
25. It is own case of petitioner borne out from letter dated 10/04/2018, Annexure-K to the petition, bearing a certificate that there was no revenue loss to the Government with respect to the contract/agreement in question for any alleged delay on part of claimant/respondent no. 1. Accordingly, before Ld. Sole Arbitrator material fact was placed that petitioner did not suffer any loss; due to stated delay in the work by claimant/respondent no. 1. Even the above said order of levy of compensation by petitioner upon claimant/respondent no. 1 does not embody any fact of petitioner having suffered any loss due to alleged delay in completion of work by claimant/respondent.
26. Elicited appreciation and findings of Ld. Sole Arbitrator also reveal that Ld. Sole Arbitrator had taken into account the terms of the contract and had adjudicated within the mandate of Section 28(3) of the Act. Accordingly in the fact of the matter, the law laid in the case of Ramkishan Singh vs Rocks Buildcon Pvt. Ltd. & Anr. (supra) is of no help to petitioner/Counsel for setting aside the impugned findings of Ld. Sole Arbitrator on Claim no. 1.17 in question.
27. Relying upon the law laid in the cases of (i) Associate Builders (supra); (ii) Ssangyong Engineering & Constructions Co. Ltd. (supra); (iii) M/s Arosan Enterprises Ltd (supra); (iv) OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 26 of 28 Patel Engineering Ltd. (supra); (v) Vishal Engineers & Builders vs Indian Oil Corporation Ltd. (supra); (vi) Essban Paints Pvt. Ltd. vs Union of India & Anr. (supra); (vii) United Telecoms Limited vs Mahanagar Telephone Nigam Limited (supra); (viii) Navodaya Mass Entertainment Ltd. vs J.M. Combines (supra); (ix) State of Rajasthan vs Puri Construction Co. Ltd (supra); (x) Sudersan Trading Company vs Government of Kerala & Anr. (supra); (xi) Canara Nidhi Limited vs M. Shashikala & Ors. (supra); (xii) Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd. (supra); (xiii) Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd. (supra); (xiv) Ispat Engineering & Foundry Works vs Steel Authority of India Ltd. (supra); (xv) P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt. Ltd. & Ors. (supra); (xvi) M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India (supra); (xvii) NTPC Ltd vs Marathon Electric Motors India Ltd. (supra); (xviii) Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd. (supra); (xix) J.G. Engineers Ltd. vs UOI (supra); (xx) State of Karnataka vs Shree Rameshwara Rice Mills (supra); (xxi) Bharat Sanchar Nigam Ltd. vs Motorola (P) Ltd. (supra) and (xxii) Kailash Nath Associates vs Delhi Development Authority (supra) it can be said that not only the reasonings of Ld. Sole Arbitrator are logical, but all the material and evidence were taken note of by Ld. Sole Arbitrator and this Court cannot substitute its own evaluation of conclusion of law or fact to come to the conclusion other than that of Ld. Sole Arbitrator. Cogent grounds, sufficient reasons have been assigned by Ld. Sole Arbitrator in reaching the just conclusion OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 27 of 28 and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator, who is experienced Chief Engineer and was competent to make assessment while taking into consideration the facet of the matter. Re-appraisal of the matter cannot be done by this Court. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Ld. Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act. For the foregoing reasons, the petition is hereby dismissed.
28. The parties are left to bear their own costs.
29. File be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL SINGH
PAL SINGH Date: 2022.01.31
11:21:06 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
st
On 31 January, 2022. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 71/2020 Union of India vs M/s Bansal Brothers & Anr. Page 28 of 28