Delhi District Court
M/S Dsc Ltd vs M/S G4S Secure Solutions (India) Pvt. ... on 6 November, 2024
IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
COMMERCIAL COURT-01, SOUTH,
SAKET COURTS, DELHI
ARBTN No. : 11/2019
CNR No. DLST01-001868-2019
In the matter of :-
DSC Limited
Through its Authorized Representative
Having its Office at :
E-9, 3rd Floor,
South Extension Part - II,
New Delhi - 110049
..............Petitioner
Vs.
M/s G4S Secure Solutions (India) Pvt. Ltd.
Through its Director
Having its Registered Office at:
C-16, Community Centre, Janak Puri
Behind Janak Cinema, New Delhi - 110058
..............Respondent
Date of institution of the petition : 18.03.2019
Date of final arguments : 06.08.2024, 09.10.2024 and
18.10.2024, 26.10.2024
Date of Order : 06.11.2024
ORDER
1. This order shall dispose off petition u/s 34 of Arbitration and Conciliation Act, filed by the petitioner seeking setting aside of impugned award dated 15.11.2018 and additional award dated 28.11.2018 passed by Ld. Arbitrator.
2. Facts giving rise to present petition are that respondent was awarded several security services contracts by the petitioner for providing security services at various places and sites of petitioner across India in terms of the Agreements, so executed ARBTN No. : 11/2019 1/29 between the parties. However, petitioner committed defaults in making payments due to which contracts were terminated by respondent. Notices sent to petitioner seeking payments of the outstanding amount did not yield any result. Hence, respondent was constrained to initiate arbitral proceedings. Claim/dispute was referred for arbitration, wherein impugned award dated 15.11.2018 and additional award dated 28.11.2018 was passed by Ld. Arbitrator, which are under challenge before this court.
3. Respondent, despite permitted repeated opportunities, failed to file reply to the petition and therefore its right to file reply was closed vide order dated 16.01.2021. However, arguments were addressed by counsel for both the parties at length as well as written submissions were filed.
4. Ld. Counsel for petitioner made following submissions on the issue of privity of contract between the parties while submitting with regard to Scheme of Arrangement and Transfer of Liabilities:
(a) That, the Statement of Claim filed by respondent qua petitioner was not maintainable. Vide Scheme of Arrangement, sanctioned by Hon'ble High Court of Delhi w.e.f. the appointed date i.e. 30.11.2011, all liabilities and duties of petitioner company pertaining to EPC Undertaking stood transferred to M/s DSC Engineering Pvt. Ltd. Clause 1.10 of SOA defines the 'Effective Date' to mean the date on which the SOA would become operative - being the date or the last date on which certified copy of order of the court is filed with Registrar of Companies at Delhi.
(b) Petitioner filed the certified copy of the order of Court with ROC on 10.02.2012. Therefore, the effective date under the SOA was 10.02.2012. In terms of Clause 16.1, all legal ARBTN No. : 11/2019 2/29 proceedings by or against DSC pending and/or arising on the appointed date i.e. 30.11.2011 and relating to EPC undertaking shall be continued and enforced against DEPL only to the exclusion of DSC.
(c) Clause 16.2 is clearly for the interregnum period between the Appointed Date 30.11.2011 and the Effective Date 10.02.2012. During this period, if any proceeding is taken against the petitioner by a third party, then the petitioner ought to defend the same. This was so, because the transfer of EPC undertaking under the scheme was still to take effect in future (i.e. the effective date was yet to be determined. It would occur when certified copy of order is filed, which was filed on 10.02.2012).
However, the liability still remains of DEPL only. It is for this reason that clause 16.2 provides for indemnifying DSC and makes it clear that defending the proceeding shall be at the cost of DEPL. The present arbitral proceedings were not taken during the said interregnum period, and as such, the present case was not a case covered under clause 16.2.
(d) It is also fortified from reading of Clause 16.3 of the scheme, which obligates DEPL to get transferred into its name, the legal proceedings initiated by or against the petitioner/DSC, pertaining to EPC Undertaking, pending and/or arising on the appointed date.
(e) Contracts for providing security services were to be executed and performed at the construction sites of the petitioner which were raised by the respondent prior to appointed date i.e. 30.11.2011. Therefore, the said security services were part of and relatable to the overall construction works of the petitioner and ARBTN No. : 11/2019 3/29 the claims of respondent as raised in the arbitral proceedings were not maintainable qua the petitioner herein.
(f) Findings and decision of Ld. Arbitral Tribunal on the abovesaid point was patently illegal in as much as the same are in contravention to the terms of the SOA, as also the settled position of law qua such SOAs. Ld. Arbitral Tribunal failed to consider all the contentions specifically pleaded by the petitioner in Statement of Defence and with respect to which the respondent in its rejoinder only responded by way of a vague and formal denial, without any submissions in support thereof.
(g) The findings of Ld. Arbitrator that " DSCL/Petitioner no.1 herein had opted to use the provisions of Clause 16.2 of the Scheme and took steps to defend the matter at the cost of DEPL/Petitioner no.2 and that DSCL/Petitioner no.1 could not approbate and reprobate by taking advantage of Clause 16.1 and 16.3 but reject Clause 16.2 i.e. of accepting one part of the Scheme and rejecting the other part. DSCL/Petitioner no.1 would have to defend the Arbitration proceedings at the cost of DEPL/petitioner no.2" is wholly illegal, being against the express, wholesome and complete readings of the SOA as present case was not covered by Clause 16.2 of the SOA.
(h) Ld. Arbitrator failed to consider that the aforesaid position concerning clause 16 of the SOA was specifically pleaded by DSCL/Petitioner no.1 in paras 1.1 to 1.7 of the Statement of Defence and with respect to which the respondent in this rejoinder only responded by way of a vague and formal denial, without any submissions in support thereof.
5. Ld. Arbitrator noted that by virtue of clause 16.1, 16.2 and 16.3 of Scheme of Arrangement, if any proceedings were initiated ARBTN No. : 11/2019 4/29 against the petitioner, after the appointed date, in respect of the matters referred to in clause 16.1, petitioner was armed with power to defend it at the cost of DEPL, who shall reimburse/indemnify the petitioner against all liabilities and obligations incurred by it in respect thereof. Thus, petitioner was clothed with power to defend legal dispute at the cost of DSC Engineering Pvt. Limited. Further, DSC Engineering Pvt. Ltd. undertook to have all legal and other proceedings initiated by or against the petitioner, referred to in clause 16.1, transferred in its name and to have the same continued to the exclusion of the petitioner, as provided in clause 16.3 of the Scheme of Arrangement.
6. Ld. Counsel for respondent submitted that to counter the argument of Ld. Counsel for petitioner respondent relies on Scheme of Arrangement filed by the petitioner and entire clause 16 which clearly demonstrates the legal position qua the petitioner and the arbitral tribunal has rightly dealt with this argument of the petitioner in detail.
7. In terms of record, respondent/claimant had made the claim pertaining to the period upto 01.09.2012. Claimant/respondent got issued legal notice dated 11.12.2013, receipt of which was though disputed but thereafter another legal notice dated 29.4.2014 was served upon the petitioner which is admitted fact on record. In reply to said legal notice, petitioner referred with regard to requirement of amicable settlement prior to invocation of the arbitration clause and also did not approve the appointment of arbitrator, named by respondent. Respondent thereafter resorted to proceedings u/s 11 of Arbitration and Conciliation Act. Neither in reply to the legal notice nor in the proceedings u/s 11 of Arbitration and Conciliation Act or at any point of time, petitioner had taken the above objection. It ARBTN No. : 11/2019 5/29 was never brought to the notice of the other party as well as in the proceedings u/s 11 of Arbitration and Conciliation Act with regard to the Scheme of Arrangement and transfer of all its liabilities to DSC Engineering Private Limited w.e.f. 10.2.2012 which was prior to the date of receipt of legal notice by petitioner and invocation of arbitration by the respondent. In the proceedings pending before Ld. Arbitrator, for the first time, this objection was taken in the statement of defence.
8. Ld. Arbitrator also noted that petitioner in its reply filed before the Hon'ble High Court to the Arbitration Petition, had not mentioned that on grant of sanction to the Scheme of Arrangement, all its liabilities relatable to Engineering, Procurement and Construction undertaking stood transferred to DSC Engineering Pvt. Limited w.e.f. 30.11.2011. Ld. Arbitrator noted that :
" Evidently, the respondent opted to use the provisions of clause 16.2 of the Scheme and took steps to defend the matter at the cost of DSC Engineering Pvt. Limited. Hon'ble High Court passed an order on 06.02.2015, on the strength of which Sh. Dhanuka was appointed as Sole Arbitrator to adjudicate the disputes between the parties, including their claims and counter claims.
33. A person is said to approbate and reprobate when he takes advantage of one part of a document and rejects the rest. Approbate and reprobate is a phrase used to express the principle embodies in the English "
doctrine of election", namely, that no party can accept and reject the same instrument. Now during the arbitration proceedings, the respondent wants to take benefit out of clause 16.1 and clause 16.3, rejecting the contents of clause 16.2 of the Scheme of Arrangement.
....................
34. Clause 16.2 of the Scheme of Arrangement makes it apparent that the respondent is empowered to defend the arbitration proceedings at the cost of DSC Engineering Pvt. Limited, which recourse has been opted by it and now it wants to wriggle out of the controversy by pushing the claimant to a corner. The respondent cannot seek refuse in other clauses, negating the clause which was used by it till statement of defence was filed in the matter".
9. Ld. Arbitrator also noted that the respondent/petitioner herein after having got the scheme sanctioned, was trying to make the premium out of it, which act cannot be permitted and thereby ARBTN No. : 11/2019 6/29 concluded that respondent had to defend the arbitration proceedings at the cost of DSC Engineering Pvt. Limited which had also not come forward to get itself impleaded in those proceedings despite so required by clause 16.3 of the Scheme of Arrangement.
10. Submission of Ld. Counsel for petitioner does not find favour with this court that even if it was to be assumed that the petitioner did not convey the SOA to the respondent, the same would not act as an estoppel against the operation of the SOA, which has statutory force, and the terms of the SOA would have to be given effect to considering that scheme sanctioned under section 391 of the Act does not merely operate as an agreement between the parties but operates as a Judgment in rem. It was obligatory upon the petitioner to inform respondent regarding the scheme of arrangement and DSC Engineering Private Limited was required to seek transfer of the legal proceedings in its name to the exclusion of the petitioner. None of the abovesaid was done by either the petitioner or by DSC Engineering Private Limited, thereby the respondent was not to bear the consequences of non compliance of the obligation/duty of the petitioner or DSC Engineering Private Limited. Ld. Arbitrator rightly concluded that the respondent / petitioner herein was clothed with power to defend the legal dispute at the cost of DSC Engineering Pvt. Ltd. for the failure of DSC Engineering Private limited to perform its obligation to get all legal proceedings transferred in its name. Having noted as above, no perversity or illegality is found in the above noted observations of Ld. Arbitrator.
Extension/Validity of Agreements:-
11. Ld. Counsel for petitioner referred to the Status of Agreements in the following Tabular form in written submissions:ARBTN No. : 11/2019 7/29
S.No. Name of Expiry date Date of the Findings of Arbitral Tribunal Project Site of the Alleged Agreement invoices
3. KMP Project 18.07.2011 June to It is not a matter of dispute that the (Jasokheri) November Agreement stood expired on 2011 18.07.2011.
4. KMP Project 19.10.2010 December It is not a matter of dispute that the (Naurangpur) 2011 Agreement stood expired on & February 19.10.2010.2012
5. KMP Project 20.10.2010 December It is not a matter of dispute that the (CWS 2011, Agreement stood expired on Manesar) January 2012 20.10.2010.
& March
2012
6. KMP Project 14.07.2011 June to It is not a matter of dispute that the
(Kundli) November Agreement stood expired on
2011 14.07.2010.
12. It was submitted by Ld. counsel for petitioner that:
(a) the aspect of agreement dated 28.5.2010, for KMP Projects (All sites) being wholly distinct and separate from the agreements at S.no. 3 - 6 is evident from the fact that some of the agreements referred at s.no. 3-6 were on their own valid much beyond 31.10.2010 (being the expiry date under the Agreement dated 28.5.2010).
(b) the observation and finding of Arbitral Tribunal in para 49 that aforementioned agreements (Sr. no. 3-6) stood extended on the strength of letter Ex. CW1/15 for 11 months from 03.05.2011 to 02.04.2012 is wholly perverse and in the teeth of the records, in as much as, Ex. CW1/15 was in reference to Agreement dated 16.05.2010, which agreement, admittedly pertained to " KMP Project (Palwal)" and not to the aforementioned project sites.
(c) agreements at s. no. 3 - 6 were not extended beyond the dates mentioned in the table. Accordingly, with the alleged invoices, not being relatable to the said Agreements, the same were ARBTN No. : 11/2019 8/29 liable to be discarded and rejected on the very same principle as adopted by Ld. Arbitral Tribunal for the projects pertaining to Sainik Farm and Casting Yard Barapulla. Further, respondent has accepted and not challenged rejection of its invoices/claims pertaining to the abovenoted projects.
(d) Ex. CW1/15 was with specific reference to an Agreement dated 16.05.2010 which merely concerned KMP (Palwal). The same was so evident from not just the express reference found in Ex. CW1/15 but also from the body of the said document which expressly states to be with reference to the agreement for deployment of security personnel at KMP Project w.e.f. 05.05.2010. It is only Agreement dated 16.5.2010 concerning KMP (Palwal) which was to take effect from the said date i.e. 05.05.2010. Further, reference in the body of the said Ex. CW1/15 to existing sites/camps of KMP was only for the purposes of stipulating the applicable rate. Therefore, there are admittedly no agreements corresponding to the alleged invoices filed by the respondent concerning the four project sites i.e. KMP (Jasokheri), KMP (Naurangpur), KMP (CWS Manesar) and KMP (Kundli). In other words, there was no understanding between the parties for providing the alleged services as referred to in the alleged invoices, which were relied upon by the respondent.
(e) the respondent has referred to the agreement dated 28.05.2010 concerning KMP Project (all sites) to contend that by virtue of the same, the agreements concerning the four project sites i.e. LMP (Jasokheri), KMP (Naurangpur), KMP (CWS Maneswar) and KMP (Kundli) stood extended, and as such, the invoices, as were filed by the respondent were squarely covered within the said agreement dated 28.05.2010. Whereas, agreement dated 28.05.2010 ARBTN No. : 11/2019 9/29 was to remain valid only till 31.10.2010 which date was much prior to dates of the alleged invoices relied upon by the respondent, for KMP (Jasokheri), KMP (Naurangpur), KMP (Maneswar) and KMP (Kundli). Therefore, the said agreement dated 28.05.2010 is not relatable to the alleged invoices for which the respondent claimed money.
13. Much of the emphasis was sought to be put upon terms of undated letter Ex. CW1/15 vide which agreement dated 16.5.2010 was extended from 03.05.2011 to 02.04.2012. Ld. counsel for respondent submitted that for the extension of agreements of KMP Project, respondent relies on the extension letter marked as CW1/15 wherein it was clearly stated that the extension was with respect to all the sites/camps of KMP Projects from 30.11.2011 to 02.04.2012. This fact was also clear from the emails so exchanged between the parties from May 2011 to July 2011 Ex. C-1, in which petitioner never disputed the extension of the various agreements for various sites.
14. Reference was made by Ld. counsel for respondent to the observation of Ld. Arbitrator whereby Ex. CW1/15 was held to have extended the agreements for existing KMP Projects/sites for 11 months subject to terms and conditions of original agreement remaining unchanged. Ld. counsel for petitioner though argued that reference to the agreement dated 28.5.2010 in award, was wholly erroneous and does not come to the rescue of the respondent, in as much as, interalia, the said agreement was to remain valid only till 31.10.2010, which date was much prior to the dates of the alleged invoices relied upon by the respondent. Therefore, the said agreement is not relatable to the alleged invoices.
ARBTN No. : 11/2019 10/2915. In terms of record, parties had entered into separate agreements with regard to the different sites at KMP Projects and also for two Service Contracts at Sainik Farms and Barapulla. Ld. Arbitrator rejected the claim of respondent with regard to sites at Sainik Farms and Barapulla. The observations of Ld. Arbitrator with regard to those sites has not been challenged by respondent. Ld. Counsel for petitioner submitted that on the same analogy, there being no extension of the agreements for all the KMP sites, the claim should have been rejected for KMP Project Sites as well.
16. Respondent had placed on record before Ld. Arbitrator, copies of different agreements for different dates ranging from 26.10.2009 to 01.01.2011. Relevant copies of Agreements were pertaining to KMP Project Work dated 28.05.2010 (all sites), KMP Jasorkheri , KMP Manesar, Biduwas, Naurangpur and Kundli, all dated 4.5.2010, Agreement dated 16.5.2010 for KMP Project (Palwal). With reference to agreement dated 16.05.2010, the extension of agreement was granted w.e.f. 3.5.2011 to 02.04.2012, vide Ex. CW1/15 and following was conveyed:
" This has reference to the agreement given for deployment of Security Personnel at KMP Project w.e.f. 05th May 2010. The Management has found the services satisfactory and has decided to extend the agreement at the prevailing rates at existing sites/camps of KMP for eleven months from 03.05.2011 to 02.04.2012. The terms and conditions of the original agreement will remain unchanged".
17. It is correct that mention in Ex. CW1/15 is pertaining to existing sites/camps of KMP with reference to agreement dated 16.05.2010. Therefore, the stipulation with regard to the existing sites/camps of KMP, if is not considered and even if it is considered on record that the extension was only pertaining to KMP Palwal, the other evidence placed on record also needs to be considered. Extension letters/agreements were seemingly not part ARBTN No. : 11/2019 11/29 of arbitral record. Matter was put up for clarification twice. Counsel for respondent failed to appear or joined through VC to furnish the clarifications on that aspect. Counsel for petitioner though confirmed that the agreements, as noted above, were filed on record by respondent and no further agreements/extension agreements had been filed.
18. Perusal of record, nevertheless, reveals the undisputed email communication dated June 21,2011 between the parties Ex. C-1/14 which contains the following communication:
" This has reference to service agreement for deployment of security personnel at KMP Project. Please note that the agreement has expired on 3rd May 2011. The management has decided to extend this agreement for six months from 04.05.2011 to 03.11.2011 except at Kundli and Jasorkheri Camp premises. Please note that we are closing down both these camps where your services are required till 10th of next month. Please note that you services will continue at Kundli and Jasorkheri Chainage areas but services of 25 guards, 3 supervisors and 2 gunman deployed at both these comp premises will not be required from 11th July 2011".
19. Vide email communication dated 10.07.2011 Ex. C-1/15, it was further informed that the services of guards at Kundli camp were required till 14th of that month and at Jasorkheri Camp till 18th of that month. Ld. counsel for petitioner in the written submissions, mentioned the respective expiry dates of agreements at KMP Jasokheri, KMP Maneswar and KMP Kundli. For KMP Naurangpur and KMP Maneswar, expiry dates of the agreements were mentioned as 19.10.2010 and 20.10.2010 respectively, whereas for KMP Jasorkheri and KMP Kundli, the expiry dates as mentioned were 18.07.2011 and 14.07.2011 respectively. None of the agreements available on record had the expiry date of 03.05.2011 nor any of the agreements particularly pertaining to KMP Jasokheri and KMP Kundli referred to extension of the agreements uptill 18.07.2011 or 14.07.2011 respectively.
ARBTN No. : 11/2019 12/29Apparently, counsel for petitioner has also relied upon the emails exchanged between the parties with regard to the extension of agreements, there being no other written extension of agreements on record.
20. On query put, Ld. counsel for petitioner unsuccessfully sought to wriggle out by submitting that it was typing mistake in written submissions. This excuse is also not available to petitioner in wake of other submission that " for KMP Projects Jasorkheri and KMP Kundli, invoices ranging from June to November 2011 for Josakheri Camp and Kundli have no relation to the emails dated 21.06.2011 and 11.07.2011, as per which, the services had, at best, been extended only up till 18.07.2011 and 14.07.2011 respectively".
21. Ex. C-1/14 refers to extension of the agreements for deployment of security personnel at KMP Project without reference to any specific agreement, whereby respondent had desired continuation of services except at Kundli and Jasorkheri camp premises while also stipulating that "their services will also continue for Kundli and Jasorkheri chainage area but the security personnel employed at Jasorkheri and Kundli Camp premises will not be required". The abovenoted, in unambiguous terms, suggest the extension of agreement between the parties at least for further period of six months from 04.05.2011 for the sites at KMP Project except as mentioned in the said communication dated June 21, 2011.
22. Ld. Arbitrator also referred to the legal notice dated 11.12.2013, having been issued on behalf of respondent which was not replied. Respondent got issued another notice dated 29.04.2014 which was responded on behalf of petitioner, whereby petitioner ARBTN No. : 11/2019 13/29 pointed out with regard to the requirement of amicable settlement before invocation of arbitration clause and submitted that no effort had been made by respondent to settle the matter amicably and also they did not approve appointment of arbitrator nominated by the respondent. Consequently, respondent was constrained to take recourse to the proceedings u/s 11 of Arbitration and Conciliation Act. In the notice dated 11.12.2013, it was specifically mentioned that on the failure of the petitioner to clear the outstanding dues, respondent was constrained to terminate the contract w.e.f. 01.09.20212.
23. In Statement of Defence before Ld. Arbitrator, following was mentioned:
" It is submitted that payments were made time to time as and when the invoices were received. It is submitted that the claimant has made a vague allegation without indicating to which agreement it is referring to or in respect of which site or in respect of which invoices the claimant had not been paid. It is further submitted that the Claimant had already decided to terminate the agreement because it was not able to cope with the requirements of various sites and therefore, it was raising false allegation of non payment or delayed payment an issue. It is pertinent to mention here that at some of the sites thefts had taken place frequently either due to the nexus of the guards on duty with the local public or due to their negligence. Therefore, the respondent was compelled to issue various directions in order to check such incidents which included direction to recruit the guards from areas located at least 200 km away from sites. The fact is that the claimant had failed to discharge its contractual obligations imposed under various agreements and also failed to comply with guidelines/directions issued time to time. Instead of admitting its faults, the claimant terminated the agreement on the false and flimsy ground of the payment remaining outstanding".
24. The contents of the above submission reflect, there being no dispute with regard to the extension of agreement(s) between the parties and also the termination of the agreement(s) by the respondent which unerringly points out towards the petitioner availing the services of the respondent till the date of termination of the agreement(s) by the respondent. Therefore, irrespective of whether the agreement(s) between the parties for all the sites ARBTN No. : 11/2019 14/29 was/were extended or not vide Ex. CW1/15, petitioner had never disputed the factum with regard to continuation and extension of the agreements between the parties. Petitioner had rather been making the payments to the respondent, last payment having been made on 31.05.2013. There was no reason or occasion for the petitioner to continue making the payments if the agreement(s) were not in existence between the parties till the date of termination by the respondent itself.
25. Ld. counsel for petitioner sought to clarify that the payments made till 2013 might have been against the invoices raised in 2010-
11. Despite the impressive presentation of case by Ld. counsel for petitioner, this court is not persuaded to accept the said clarification. If the payment being made till 2013 was against the liability of 2010-11 and not payable till the date of termination of contract by respondent, petitioner was under obligation to prove the same and disprove the assertion of respondent by bringing on record the substantiating documents. Neither any such evidence was brought on record by petitioner nor put to respondent's witness to controvert their stand.
Invoices:
26. Ld. counsel for petitioner raised objection pertaining to raising of invoices and delivery of the same upon petitioner.
Following was submitted:
(a) That, the invoices were never delivered to the petitioner.
Ld. Arbitrator relied upon testimony of CW2 that the invoices were delivered personally to the officials of petitioner. No evidentiary value can be assigned to the said statement as CW2 had joined the company much after the dates of alleged invoices. Therefore, he ARBTN No. : 11/2019 15/29 cannot claim to have personal knowledge regarding alleged delivery of the alleged invoices to the petitioner by hand.
(b) That, in terms of Clause 7 of the Agreements, respondent was to submit its invoices to the petitioner for claiming payments. However, same were never delivered to the petitioner. Further, Ld. Arbitrator also found CW2's testimony as being inadmissible.
(c) That, CW1 was not the competent witness to prove the invoices as he was not involved in any manner in raising the invoices and could not give any details regarding the amounts which had been received by the respondent at various sites. Ld. Arbitrator committed a gross perversity in having to hold that "
without involving himself in the process of raising invoices, Shri Taku can be a competent witness on the count that those invoices were prepared in the office of the Claimant and sent to the respondent".
(d) That, the findings of Ld. Arbitrator that the invoices were sent by the respondent to the petitioner is also based on no evidence, and is in the teeth of CW2's deposition that there was nothing on record to show that the alleged invoices had been delivered by the respondent to the petitioner.
(e) That, the alleged invoices are not corresponding with the rates as mentioned in the Agreement. However, Ld. Arbitrator in sheer ignorance and defiance of the said position on record and without any basis, observed that the higher cost mentioned in the invoice was on account of revision in the Service Tax/Minimum Wages as notified by the Centre /State Government. Whereas neither the respondent nor its witness had taken any such stand/plea. Further, in invoices for Josakheri Camp, respondent has not computed the costs for Security Guard Services at the ARBTN No. : 11/2019 16/29 rate of Rs. 25,200/- per month for 24 hours duty in the said invoices.
(f) That, the costs claimed by the respondent in the alleged invoices of Kundli, in relation to the Supervisor Services does not correspond to the rate as mentioned in the contract agreement dated 04.05.2010. Respondent has not computed the costs for Supervisor Services at the rate of Rs. 35,800/- per month for 24 hours duty in the said invoice.
27. Ld. counsel for respondent submitted that these invoices were never challenged by the petitioner at the first instance when the emails were exhcanged between the parties and regular payments were made by the petitioner to the respondent which fact is clear from the customer ledger filed and proved by the respondent Ex. CW1/47, wherein it was clearly shown that several payments were made by the petitioner to the respondent from May 2011 till May 2013 which was rather post extension period. Further, invoices were never disputed when the legal notices dated 11.12.2013 and 29.04.2014 were issued by the respondent.
28. In response to argument of Ld. Counsel for respondent, it was contended by Ld. Counsel for petitioner that the petitioner had categorically and expressly pleaded in its Statement of Defence, more specifically para 4 thereof that the alleged invoices filed by the respondent were fabricated, which had not been delivered to the petitioner. In the wake of such specific and express pleading having been taken by the petitioner, there is no merit whatsoever in the argument of respondent of there being no dispute raised regarding the receipt of the alleged invoices and as a consequence of the alleged services mentioned therein.
ARBTN No. : 11/2019 17/2929. The above submission rather substantiates the argument of Ld. Counsel for respondent that for the first time, this objection was taken only in the statement of defence. Any objection pertaining to invoices, does not form part of record, having raised prior thereto i.e. during the existence of the agreement(s) between the parties while the parties were communicating with each other (as some of the emails form part of record) or even till the time of responding to the legal notice.
30. Ld. Arbitrator also noted that when notice Ex. CW1/48 was served upon the petitioner, not to talk of raising an eyebrow on its contents, the respondent (petitioner herein) opted to keep a silence. In Ex. CW1/48, respondent (petitioner herein) was called upon to produce 27 invoices, which were claimed to be in its possession but an eerie silence was maintained by the respondent (petitioner herein).
31. Ld. Counsel for petitioner also contended that the respondent during the course of arbitral proceedings served the petitioner with a notice under order XII Rule 8 CPC seeking production of the originals of the alleged invoices for which it was claiming money. Following submission was made by Ld. Counsel for petitioner :
(a) That, in this respect the respondent argued that since no response was addressed to the said notice, adverse inference is to be drawn against the petitioner herein regarding the invoices being in posession of the petitioner herein, and further that the copies of the alleged invoices as filed by it were to be treated as secondary evidence. Said contention of the respondent is wholly erroneous and misleading. Question of drawing adverse inference for non response to a notice under order 12 Rule 8 CPC would ARBTN No. : 11/2019 18/29 arise only after the party sending the notice would have discharged the onus of showing ( that the documents of which it was seeking production of) were infact in custody or possession of the noticee. It is only but logical that the aspect of drawing adverse inference against a party for non production of documents would arise only when it is first shown that the said documents are in the noticee's custody or possesion. Without having to first show that the documents are in custody or possession of the noticee, a party cannot be permitted to draw any such adverse inference, much less seek to prove secondary evidence thereof.
(b) Ram Naresh Mudgal & Ors. v. Munesh Chand Gupta [2010 (118) DRJ 549] - Plaintiff had filed a Suit for permanent injunction seeking restrain on the Defendant from creating third party rights in the suit property. Plaintiff had laid his claim on the basis of an Agreement to Sell, claimed to have been executed between himself and the Defendant. During the course of the proceedings, Plaintiff had served the Defendant with a Notice under Order XII Rule 8, CPC, calling upon the latter to produce the original Agreement. No response to the same was addressed by the Defendant. The Ld. Civil Court proceeded to treat the photocopy of the Agreement as filed by the Plaintiff as secondary evidence.
The said order of the Ld. Civil Court was challenged by the Defendant before the Hon'ble High Court of Delhi. The Hon'ble High Court noted that the Defendant had all along maintained that no such document was in its possession .
Taking note of Section 65 of the Indian Evidence Act, 1872, the Hon'ble High Court observed that it was mandatory ARBTN No. : 11/2019 19/29 that the person who seeks to prove secondary evidence has to show the existence of the document and how the documents came in possession of the opposite party. The Hon'ble High Court held that unless the existence of the document is shown and proved, the question of allowing secondary evidence does not arise, and that self-serving statement made by a person is no proof of the existence of the document.
(c) New India Insurance Co. Ltd. v. Kumari Lovely (Minor) & Ors. [2017 SCC OnLine Del 7712] the Appellant (being the Insurance Company) had assailed an award passed by the Motor Accident Claims Tribunal before the Hon'ble High Court of Delhi on the ground that it stood proved that the driving license of the concerned driver was fake. In this respect, the Appellant relied upon the report of the concerned licensing Authority as also upon the fact of there being no response by the driver and the owner of the vehicle to the Appellant's notice under Order XII Rule 8, CPC.
The Hon'ble High Court rejected the Appeal filed by the Insurance Company holding that not responding to a notice under Order XII Rule 8, CPC cannot lead to an adverse inference being drawn against the owner and driver of the vehicle, as the aspect of the license being fake had not been proved by the Appellant. In this respect, the High Court noted that the report of the licensing authority, which was relied upon by the Appellant, merely revealed that the record of the driving license was not traceable.
(d) Respondent by way of its purported Notice under Order XII Rule 8, CPC called upon the petitioner to produce the ARBTN No. : 11/2019 20/29 originals of the alleged Invoices for which it was claiming money in the arbitration proceedings. It was also submitted that in this regard, petitioner herein in its very first submission before the Ld. Tribunal i.e. in its Statement of Defence (being much before the purported Notice to Produce under Order XII, Rule 8, CPC) - had already categorically & expressly stated that the alleged invoices filed by the Respondent herein were fabricated and which had not been delivered to the Petitioner herein. In the wake of such position, with the aspect of the delivery of the alleged Invoices to the Petitioner being in dispute, the onus was on the Respondent herein to prove that it had delivered the said alleged Invoices to the Petitioner herein. It was only after having discharged the said onus and showing that the alleged Invoices had been delivered to the Petitioner herein - that the respondent could seek to take a plea that non-response by the petitioner herein to the Respondent's Notice under Order XII Rule 8, CPC (seeking production of the originals of the said alleged Invoices) could lead to an adverse inference being drawn against the Petitioner herein regarding the possession thereof. However, the Respondent had not only failed to discharge the said onus but its own Witness (i.e. CW-2, through which it had sought to prove delivery of the alleged Invoices to the Petitioner herein), in his cross-examination expressly came to admit and depose that "there was nothing in the invoices to show that the same were delivered to the Respondent (i.e. the Petitioner herein).
(e) That, having so deposed itself, it is wholly unmerited for the Respondent to now seek to contend that adverse inference should be drawn against the Petitioner for not having to issue a formal response to its purported Notice under ARBTN No. : 11/2019 21/29 Order XII Rule 8, CPC. In fact, without having to show that the alleged Invoices were delivered to the Petitioner herein, the respondent's purported notice did not meet the requirements of Order XII Rule 8, CPC for it to be treated as a notice thereunder, much less of it giving rise to any adverse inference against the Petitioner herein.
32. Proposition of law as noted in the authorities (supra) and as narrated by Ld. Counsel for petitioner, cannot be disputed. It is correct that the party seeking the production of the document, first of all, has to establish its existence and possession of the same with the other. Thereby, respondent had to establish, the continuation of agreement(s) between the parties, raising of invoices, delivery of the same and non payment by petitioner to establish its claim, which needs to be ascertained from record.
33. Ld. counsel for petitioner further made following submissions with regard to ledger/books of accounts:
(a) That the reliance upon its alleged ledger/books of accounts by respondent is wholly erroneous, untenable and misleading. It is settled position of law that no person can be charged with liability on the basis of mere entries in books of accounts, even where such books of accounts are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of accounts in order that a person may be charged with liability thereunder. It has been held by higher courts that value of entries in the books of account, shall not alone be sufficient evidence to charge a person with liability. Independent evidence is necessary as to trustoworthiness of those entries which is a requirement to fasten the liability.ARBTN No. : 11/2019 22/29
(b) That alleged ledger /books of account filed by the respondent had been expressly denied by the petitioner, it is wholly erroneous and untenable for the respondent herein to solely ride upon the same for the purposes of proving its claims.
(c) That respondent during the course of its arguments sought to rely upon its alleged ledged/books of accounts to assert that payments were being made by the Petitioner to the Respondent till the year 2013, and as such, there was no basis for the Petitioner to deny the invoices for the years 2012-2013. The said argument of the Respondent is wholly erroneous, untenable and misleading.
(d) That at the outset, it is stated that it is a settled position of law that no person can be charged with liability on the basis of mere entries in books of accounts, even where such books of accounts are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder.
(e) That it has been laid down by the Hon'ble Courts that value of entries in the books of account, shall not alone be sufficient evidence to charge a person with liability. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability.
(f) That such being the position, and also in view of the fact that the alleged ledger/books of accounts (as filed by the Respondent in the arbitral proceedings), had been expressly denied by the Petitioner herein - it is wholly erroneous, and ARBTN No. : 11/2019 23/29 untenable for the Respondent herein to solely ride upon the same for the purposes of proving its claims.
(g) That without prejudice to the above, the said alleged ledger/books of accounts do not in any manner prove the alleged invoices, as relied upon by the Respondent.
(h) That while, as per the Respondent, the alleged ledger shows payment of monies till May of 2013, the very fact that the Respondent was claiming monies under the said alleged invoices was itself more than suggestive of the fact that the alleged payments as referred to in the alleged ledger had no relation whatsoever with the said alleged invoices. Therefore, the alleged ledger is wholly irrelevant for purposes of the alleged invoices for which the Respondent was claiming monies in the Arbitral Proceedings.
(i) That, without prejudice to the above, it would also not be out of place to state that apart from the 6 projects for which the Respondent was claiming monies, it had also placed before the Ld. Tribunal, Agreements for providing Guarding Services for the following sites:
1. KMP Project (All sites) (Document No. C - 4)
2. KMP Project (Palwal) (Document No. C - 5)
3. KMP Project (Biduwas) (Document No. C - 9)
4. Udyog Vihar - Gurgaon (Document No. C - 11)
5. KMP Project (Sugarpur) (Document No. C - 12)
(j) That, pertinently, no claim whatsoever had been raised by the Respondent qua the said Agreements in the Arbitral proceedings. Though, it was for the Respondent to show as to for which project it had received & accounted monies (receipt of ARBTN No. : 11/2019 24/29 which is claimed by the Respondent in its alleged ledger), which it failed to do; the fact that no claim had been raised for the aforementioned projects is more than suggestive of the fact that monies which the Respondent claimed to have received have been accounted by it for the said projects. The said aspect fortifies the position that the payments as reflected in the alleged ledger have nothing to do with the alleged invoices for which it had raised a claim before the Ld. Tribunal.
34. Relinace was placed upon following:
(a) Chandradhar Goswami & Ors. Vs. The Guahati Bank Ltd. AIR 1967 SC 1058:
" 6............... It is clear from a bare perusal of the section that no person can be charged with liability merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account and does not challenge them. In the present case, however, the appellants did not accept the correctness of the books of account....."
(b) Common Cause (A Registered Society) & Ors. Vs. Union of India (UOI) & Ors. AIR 2017 SC 540:
" 17. It has further been laid down in V.C. Shukla as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability".
35. It is correct that in terms of evidence led by respondent, it could not substantiate on record delivery of invoices or receipt of same by petitioner. Nevertheless, it is also not the case of the petitioner that all the invoices raised by the respondent contained the receivings from the petitioner. Rather it is stated that all the invoices were paid as and when received from respondent. Which of the invoices were received and against which invoices, ARBTN No. : 11/2019 25/29 payment was made, the best evidence available with the petitioner was in the form of its own statement of account or the bank account statement, none of which were produced by the petitioner. No evidence was rather led by the petitioner to controvert the assertion of the respondent and also by placing their own documents on record.
36. As already noted and as ascertainable from record, agreements for the KMP sites were extended between the parties till the undisputed date of termination of the same by the respondent i.e. w.e.f. 01.09.2012. Services had been provided by the respondent for the said period, therefore invoices were required to be raised. Claimant/respondent having failed to discharge its contractual obligations or to comply with directions/guidelines, therefore, was not entitled to raise invoices or to receive payments, this defence, if so, was required to be proved by petitioner only, in terms of defence taken in statement of defence. At the cost of repetition, it may be noted that the best evidence was available with the petitioner to controvert or to establish the payment having been made against the invoices raised/received for the services received by the petitioner till the date of termination of agreements by the respondent, onus for which, had been shifted upon the petitioner which it failed to discharge.
37. Other objection taken by Ld. counsel for petitioner with regard to the limitation also does not stand hold, the agreement(s) between the parties being in existence till the date of termination by the respondent, even if the reliance placed by Ld. Arbitrator upon Ex. CW1/15 is not considered. Similarly with regard to the objections pertaining to alleged non raising of the invoices at the ARBTN No. : 11/2019 26/29 applicable rates, observation of Ld. Arbitrator with regard to invoices having been raised at the applicable Minimum Wages Rates and also the observations pertaining to non submission of attendance record, not being mandatory requirement as per the conduct of the parties is not open for scrutiny before this court.
38. Scope of jurisdiction under section 34 of the Arbitration Act is limited and is not open for appellate analysis. The court cannot sit in appeal while adjudicating a challenge to an Award. In terms of well settled law, the arbitral awards should not be interfered with, in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. The courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.
39. Reliance is placed upon following:
1. Associate Builders Vs. Delhi Development Authority, 2014 (4) Arb. LR 307 (SC):
" 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 trainedTimes New Roman 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.ARBTN No. : 11/2019 27/29
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" .
2. Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India, Judgement dated 08.05.2019, SLP (C) no. 19033 of 2017 :
" 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)" .
3. National Highway Authority of India Vs. IRB Goa Tollway Pvt. Ltd. 2022 (288) DLT 533:
ARBTN No. : 11/2019 28/29" 77. The position in law, as regards the scope of interference by a count, exercising jurisdiction under section 34 of the 1996 Act, with an arbitral award is, by now, fossilised through a number of judicial authorities, of which one may take due stock of the judgments in Sangyong Engineering & Construction Co. Ltd. Vs. NHAI (2019) 15 SCC 131: 2019 LAWPACK (SC)62532:2019 (3) R.A.J. 323 and Delhi Airport Metro Express Pvt. Ltd. Vs. DMRC (2022) 1 SCC 131 : 2021 LAWPACK (SC)65432: 2021 (5) R.A.J. 54. These decisions clearly hold that the court, exercising jurisdiction under section 34, is to interfere only in cases of "
patent illegality" or perversity in the Award under challenge. Mistakes of fact or law, or the predilection of the section 34 court to incline to a view contrary to that expressed by the Arbitral Tribunal, cannot consitute a basis for interference. Section 34 Court does not substitute its subjective view in place of the view of the arbitral tribunal".
4. Technofab Engineering Ltd. Vs. Tesla Transformers Ltd. 2021 LAWPACK (DEL) 84751:
" 14. .......
Construction and interpretation of the terms of the contract is primarily for the Arbitrator to decide and the legal position with respect to the exercise of jurisdiction under section 34 of the act, is now well established. This court cannot merely on an erroneous application of law, re-appreciate the evidence as it would be an encroachment upon the domain of the learned Arbitrator. The Supreme Court has also repeatedly observed that the scope of interference under section 34 of the Act is extremely narrow, and the court must be circumspect whilst dealing with cases".
40. Having discussed as above, it is concluded that the award passed by Ld. Arbitrator does not suffer from any patent illegality, perversity, neither is against the public policy nor is ignoring the vital evidence, calling for any interference from this court in objection petition u/s 34 of Arbitration and Conciliation Act. Accordingly, instant petition stands dismissed. File be consigned to record room after completion of necessary formalities.
Announced in the open (SAVITA RAO)
court on this 6th day DISTRICT JUDGE
of November 2024 (COMMERCIAL COURT)-01
(SOUTH) SAKET COURTS,DELHI
ARBTN No. : 11/2019 29/29