Veg Sanchar Vihar Cghs Ltd vs Saptrishi Builders Private Limited on 5 July, 2021

[Cites 38, Cited by 0]

Delhi High Court

Veg Sanchar Vihar Cghs Ltd vs Saptrishi Builders Private Limited on 5 July, 2021

1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (in short 'the Act') seeks setting aside of the arbitral award dated 31st May, 2020 (as corrected vide order dated 30th September, 2020), whereby the learned Sole Arbitrator has allowed the claims of the Respondent- Saptrishi Builders Private Limited (in short 'SBPL') and awarded Rs. 1,30,02,314.13/- with interest @ 12% on the said amount for a period of 103 months till the date of award (if awarded amount was paid within 3 months of date of award, no interest was to be paid from date of award but, in case the awarded amount was not paid within the said period, the Petitioner would have to pay 12% from the date of award till payment). All the counter claims, of the Petitioner- Veg Sanchar Vihar Cooperative O.M.P. (COMM) 119/2021 Page 1 of 24 Group Housing Society Ltd. (in short 'VSV') have been rejected, with certain observations on the issue on payment of labour cess.

BRIEF FACTS

2. A succinct narration of facts would be essential to understand the dispute between the parties, before we embark upon dealing with their contentions.

The Contract:

2.1. Under the contract dated 31st May, 2002, VSV appointed SBPL as the contractor for construction of 68 flats on the plot bearing no. 19-B, Sector-6, Dwarka, New Delhi in accordance with the rates, terms and conditions set out therein. For the said construction, comprising of built-up area of 1,06,468 sq. ft., excluding the area of community facility and development work, SBPL was to be paid Rs. 6,82,55,862/-.

The Dispute:

2.2. SBPL contended that it executed the work as per the specifications provided in the contract. During the execution of the work, VSV did not raise any complaint, reservation or objection regarding workmanship or on any other issue. The five running bills for the work executed were not disputed by VSV during the relevant period, and were paid to some extent.

The final bill dated 29th May, 2008 for Rs. l,74,45,783.43/- was raised at the agreed rate, in accordance with the work done at the site, after joint inspection. At that stage, VSV raised certain issues and commented on the final bill vide its letter dated 27th December, 2008. SBPL addressed the same vide response dated 19th January, 2009. VSV neglected to make the payment O.M.P. (COMM) 119/2021 Page 2 of 24 in respect of the said bill, despite requests. Instead, they took forcible possession of the work done and materials lying at site and misappropriated the same illegally, contrary to the contract. Continuous follow up for payment yielded no response.

2.3. On the other hand, VSV countered that SBPL failed to adhere to the agreed time schedule and did not complete the construction by 30th November, 2004 i.e., within 30 months from the date of the contract. SBPL delayed the completion of the project and ultimately abandoned the incomplete work in a miserable condition, without even handing over the possession thereof. As a result, VSV had to get the leftover work completed through a third party to make the flats habitable. The Managing Director of SBPL, Mr. V. K. Bhatia was hand in glove with his brother, Mr. I. K. Bhatia, who was the earlier President of VSV. He got undue favours and advantages by submitting highly inflated bills. The fifth running bill for Rs. 1,30,59,619/- and the final bill for Rs. 1,74,45,783/- have been issued on the same date, i.e., 29th May, 2008, suggesting that the bills are fictitious. Submission of fifth running bill was SBPL's acknowledgement that work was not complete on the said date; therefore, final bill could not have been raised on the same day. The alleged final bill was forwarded to the Architect

-Vidhyarthi Associates, for verification, who, vide letters dated 11th December, 2008 and 10th January, 2009, submitted their comments and list of incomplete/defective jobs, which were reiterated in the letter to VSV dated 24th January, 2009. Since SBPL failed to complete the work in accordance with the terms of the contract and abandoned the site, VSV is not liable to pay anything to SBPL. Rather, it has to recover the losses, amounts over-paid and spent in getting the work completed from a third O.M.P. (COMM) 119/2021 Page 3 of 24 party as a consequence of SBPL's breach of the contract. The Arbitration:

2.4. In the above background SBPL vide legal notice dated 14th July, 2010, invoked arbitration and called upon VSV to agree upon the appointment of Mr. P. Bhatia (Chartered Engineer) as the Arbitrator. When VSV did not consent, on a petition (Arb. P. No. 269/2010) filed by SBPL, this Court vide judgment dated 13th January, 2012, appointed Mr. Vivekanand, Advocate, as the Sole Arbitrator.

2.5. Before the learned Arbitrator, SBPL raised the following claims:

            A. Full and complete statement and payment        Rs.
               towards the final bill dated 29th May, 2008    1,74,45,783.43
            B. Amount towards shuttering material,            Rs. 3,00,000/-
               misappropriated by the Respondent
            C. Damages towards illegal occupation of 68       Rs.
               numbers of units                               10,00,000/-
            D. Interest from 29th May, 2008 on the said
               outstanding bill calculated @ 24% per
               annum till date of the present claim
            E. And thereafter, till actual payment released
               @ 24% p.a.
            F. Litigation expenses                            5,00,000/-
            G. Costs

2.6. VSV controverted the afore-noted claims, raising several preliminary legal objections and counter-claims of its own, which read as under:

(i) "Rs.2,82,34,880/-, excess amount illegally collected by the Respondent Company from the Petitioner-Society, over and above the due payments towards the construction done by the Respondent Company for the Petitioner-Society in pursuance to the agreement dated 31.05.2002.

(ii) Rs.38,88,215/-, paid by the Petitioner-Society to the DDA for extension of time for completion of the construction and compounded levy, as the construction was delayed by the Respondent Company for approx. 4 years and 2 months (as the due date for the completion of construction was 1st November, 2004), due to which the extension for completion of construction was required to be obtained for which a fee and compound O.M.P. (COMM) 119/2021 Page 4 of 24 levy as mentioned ibid was paid by the Petitioner-Society for which the Respondent Company was responsible and liable to pay the said amount.

(iii) Rs.6,25,425/-, towards labour cess to department of labour, Govt. of Delhi, which was not paid by the Respondent Company as in terms of agreement ibid, it was the responsibility and liability of the Respondent Company as they employed labour for the construction of building of the Petitioner-Society.

(iv) Rs.50,43,453/-, spend by the Petitioner-Society for completion of the incomplete construction left by the Respondent Company.

(v) Rs.27,30,234/-, towards liquidated damages in terms of General Condition No.39 of the agreement ibid r/w Serial No. 6 of Appendix of Item referred to in General Condition.

(vi) Rs.1,42,41,600/-,towards loss suffered by members of Petitioner-Society, for payment of rent for rental accommodation, wherein the members were forced to reside due to non-completion of construction by the Respondent Company, after November, 2004 till 31.12.2010.

(vii) Rs.1,00,00,000/-, towards recovery of the amount from the Respondent Company for either non-execution of items mentioned in the agreement and use of sub-standard quality goods as compared to the brands and specifications approved by the Petitioner-Society in the agreement ibid.

(viii) Rs.11,55,000/-, for not appointing an engineer for supervision of construction work in violation of general Condition No. 11 of the agreement for 77 Months @ Rs.15,000/- per month.

(ix) Interest @ 18% on total amount as claimed in sub-serial no. (i) to (viii).

(x) Rs.5,00,000/-, towards the Cost of litigation i.e., Arbitration forced by the Respondent Company upon the Petitioner-Society."

2.7. After hearing the parties and considering the material on record, including examination of witnesses, the learned Arbitrator passed the impugned award dealing with the claims of the parties in the following manner:

    Claim A                  Allowed for Rs. 1,30,02,314.13/-
    Claim B & C              Rejected
    Claim D & E              Interest @ 12% on Rs. 1,30,02,314.13/- for a
                             period of 103 months.
    Claim F                  Expenses of Rs. 5,35,000/- towards cost of
                             arbitration proceedings.


O.M.P. (COMM) 119/2021                                                       Page 5 of 24

Counter-claims (i) All rejected, with observations on one part of to (x) the second counter-claim of Rs. 6,25,425/-

pertaining to building construction and labour cess.

ANALYSIS AND FINDINGS

3. VSV has challenged the award on multiple counts. The same as set out in the brief note of submissions and elaborated in the objection petition, are catalogued under eight different heads, enumerated and discussed as follows:

I. Whether the Sole Arbitrator was not qualified to be appointed as the Arbitrator?

4. Mr. V. V. Gautam, learned counsel for VSV, argued that the appointment of the learned Arbitrator was in contravention of the qualifications provided under Clause 43 of the contract dated 31st May, 2002, extracted hereinbelow:

"All the matters in dispute between the parties arising out of these works shall be referred to the arbitration by a mutually appointed arbitrator or a panel of 3-arbitrators in accordance with the provision of the Arbitration and Conciliation Act, 1996 an all statutory modification thereof for time being in force shall apply to all such arbitration which shall be held in New Delhi. The Arbitrator or presiding arbitrator shall be the fellow of Institute of Engineers (India) or Institute of Architects (India). The award of the Arbitrators as the case may be shall be final and binding on the parties."

5. The above clause specifically provided that the arbitrator had to be a fellow of Indian Institute of Engineers (India) or Institute of Architects (India). Mr. Vivekanand, Advocate who acted as the Sole Arbitrator, did not O.M.P. (COMM) 119/2021 Page 6 of 24 satisfy either of the criteria, and therefore his appointment should be invalidated. Mr. Shekhar Nanavaty, learned counsel for SBPL, controverted the submission by stating that the Arbitrator was appointed by this Court under Section 11 of the Act, on a petition filed by SBPL, and therefore the said appointment cannot be called into question at this juncture. Furthermore, no objection was raised at the time of appointment or under Section 13 of the Act, before the learned Arbitrator.

6. VSV's contention is ex-facie without any merit. The learned Arbitrator was appointed by this Court vide detailed order dated 31st January, 2012, wherein several arguments raised by VSV opposing the referral of the disputes to arbitration and appointment of the arbitrator were rejected. Evidently, VSV did not raise any opposition with respect to qualification of the learned Arbitrator, as none is noted in the order. VSV did not challenge the aforenoted order. Moreover, VSV also did not raise any objection with respect to the qualification of the learned Arbitrator during the course of the arbitration proceedings. Rather, it filed counter-claims before the same learned Arbitrator. Therefore, it can be implied that it accepted the appointment, and thus the objection regarding the qualification of the learned Arbitrator, at this stage, is completely devoid of merit, and is accordingly rejected.

II. Whether the subject matter of the Arbitration was not arbitrable?

7. Mr. Gautam contended that on account of the subject matter of dispute falling under Clauses 20 to 27 (except Clause 25), it beyond the scope of arbitration, as provided per Clause 42(a). In terms of Clause 42, O.M.P. (COMM) 119/2021 Page 7 of 24 SBPL ought to have attempted to settle the disputes with the employer i.e., VSV or the Architect nominated under the agreement. The decision of the Employer/Architect with regard to the disputes falling under Clauses 20 to 27 (except Clause 25) was to be final, conclusive and binding on SBPL as well as unappealable. He argued that therefore, SBPL could not seek recourse to arbitration until and unless the procedure under Clause 42 was followed.

8. It is crucial to take note of Clause 42(a), on the basis whereof this contention is premised. The said Clause reads as under:

"42 (a) The contractor shall try to settle all the matters pertaining to this contract 1st with the Employer/ Architect. The decision of the Architect may be in the form of a certificate, instruction or otherwise. The decision, opinion, direction, certificate for payment with respect to all or any of the matters under clause 20, 21, 22, 23, 24, 26 & 27 hereof (which matters are hereinafter referred to as excepted matters) of the Architect/ Employer shall be final and conclusive and binding on the contractor and shall be without appeal."

9. In terms of the above clause, the decision of the Architect/Employer was to be final, conclusive and binding upon the contractor. This decision making is however restricted to disputes of payment falling under Clauses 20 to 27 (except Clause 25) which are 'excepted matters'.

10. In this regard, the holding of the Ld. Arbitrator is as follows:

10.1. VSV had not demonstrated as to which of the claims are non-arbitrable i.e., 'excepted matters'. Apart from reproducing Clause 42(a) and (d) and stating that the disputes urged by SBPL cannot be adjudicated, VSV has not made any submissions in the pleadings on this aspect. The affidavit in evidence filed by VSV [Ex.RW-1/X] is O.M.P. (COMM) 119/2021 Page 8 of 24 also silent on this aspect.

10.2. Non-arbitrability of disputes was not even argued or clarified during oral submissions.

10.3. The term 'try' in the clause contemplated only that an attempt or effort be made to settle.

10.4. SBPL has, by submitting the final bill and replying to objections raised by VSV in the letter dated 27th December, 2008, complied with the pre-arbitration procedure and endeavoured to settle the matter amicably with VSV- thus, following the spirit of Clause 42. 10.5. The decision/certificate of the Employer/Architect relating to disputes under Clauses 20 to 27 (except Clause 25) would be final on excepted matters; but since there was no such decision/certificate pertaining to the aforementioned clauses, Clause 42 is not attracted. 10.6. The Architect named in the contract - Designarch Consultants Pvt.

Ltd., had resigned on 14th November, 2007. As on the date of submission of the final bill dated 9th December, 2008, there was no substitute architect. Vidhyarthi Associates were hired by VSV for assisting them in verifying the final bill and for carrying out the work, specifically assigned. They were not the replacement of the nominated Architect under the contract. There is no letter or agreement on record to prove the appointment of Vidhyarthi Associates. No correspondence to show that SBPL was directed to interact with the said Architect.

11. To counter the above findings, VSV argued that all the bills raised by SBPL were in respect of construction work done by them. It is submitted that since the construction work, its quality, quantity and brands of the O.M.P. (COMM) 119/2021 Page 9 of 24 material to be used and the bill thereof are duly governed and covered under Clauses 20 to 27 (except Clause 25), the observations of the learned Arbitrator are unwarranted and have been made wilfully with bias against VSV.

12. The above argument has no force. VSV has not produced any written certificate/decision of the Architect/Employer on any of the claims of SBPL, so as to bring the same within the ambit of 'excepted matters'. In absence of the decision/certificate of the Employer/Architect, Clause 42(a) would not be appliable. The learned Arbitrator has given a finding of fact that despite submission of the final bill for settlement to the Employer/Architect, the same was neither verified, nor processed. Therefore, disputes relating to bills cannot be construed as 'excepted matters'. The arbitration is entirely justified, and in consonance with the contractual scheme. There is no conflict with Clause 42 of the contract, and the objection so raised on this ground is unsustainable. The findings and reasoning of the learned Arbitrator, borne out of the pleadings and evidence, are reasonable and cannot be faulted with. VSV's contention is meritless and is accordingly rejected.

III. Whether the Arbitral Award is in conflict with the public policy of India?

13. On the ground of award being in conflict with public policy of India, Mr. Gautam urged that:

13.1. The impugned award has been obtained by SBPL by inducement, on the basis of forged and fabricated documents, and concealing true and correct facts.

O.M.P. (COMM) 119/2021 Page 10 of 24

13.2. SBPL's Managing Director, Mr. V. K. Bhatia cheated by adopting fraudulent practices in connivance with his brother, Mr. I. K. Bhatia who was the President of VSV at one point in time.

13.3. SBPL submitted highly inflated bills to recover an excess amount from VSV but the same were corrected by the VSV by way of power conferred under Clause 42(a).

13.4. Mr. V.K. Bhatia undertook to pay Rs. l Lac per day to VSV, in case SBPL does not complete the work by 25th October, 2008, vide his letter dated 20th May, 2008.

13.5. The forgery and fraud also become evident from the fact that SBPL had issued three bills dated 29th May, 2008. The first bill was issued on 29th May, 2008 as the fifth running bill for Rs. 1,30,59,619/-;

thereafter a final bill for Rs. 1,75,00,832/- was also issued on the same date. Then, another bill was issued on 29th May, 2008, for an amount of Rs. 1,74,45,783.43/- again as a 'final bill'. Multiple bills of the same date manifests fraud. If the first bill was a running bill, it would mean that at the time of issuance of said bill, the construction was not completed. Therefore, on the same day, undoubtedly a final bill could not be issued; followed by yet another final bill for a different amount. No clarification was provided by SBPL on this issue. Instead, the learned Arbitrator erroneously accepted that the final bill was actually submitted along with a letter dated 9th December, 2008. To confirm this, the learned Arbitrator relies upon the communication of the Architect (Vidhyarthi Associates) dated 11th December, 2008.

14. The challenge to the award on the ground of being in conflict with public policy, lacks material foundation. It is a well-settled proposition in O.M.P. (COMM) 119/2021 Page 11 of 24 law that construction and interpretation of the terms of the contract would fall within the domain of the Arbitrator and must not be interfered with by the Courts under the ground of conflict with public policy of India. The allegation of fraud and fabrication of documents is essentially a subject matter of appreciation of evidence which this Court cannot venture into while exercising jurisdiction under Section 34 of the Act under the scope of public policy of India. That apart, the learned Arbitrator has not found any forgery of documents or fraud on the part of SBPL. Rather, VSV had not placed any material before the learned Arbitrator on this aspect to prove cheating and forgery.

15. The burden of proof of fraud and forgery rests on the party which alleges the same. Admittedly, no document was brought on record to prove the same. In the absence thereof, the allegation of fraud or forgery cannot be held proved. After passing of the award, VSV has gotten several documents examined by a handwriting expert to demonstrate cheating and forgery. Such contentions based on these documents were never made before the learned Arbitrator. This failure is sought to be explained by VSV by contending that the relevant record was not delivered by Mr. I. K. Bhatia - RW-2, brother of the Managing Director of SBPL. This plea is vague and without any basis. Be that as it may, concededly, the opinion of the handwriting expert dated 11th September, 2020 and 2nd November, 2020, on which VSV strongly relies upon, were never part of the arbitration proceedings. The same have been obtained after the passing of the impugned award. This alleged evidence, which does not form part of the arbitral record, cannot be relied upon to challenge the impugned award and is thus disregarded.

O.M.P. (COMM) 119/2021 Page 12 of 24

16. Next, coming to the allegation of fraud and forgery relating to the three bills in question. From the facts narrated in the petition, it manifests that the controversy relating to discrepancy in date of the final bill has been given the shade of fraud and forgery, without any basis. The Court finds that the learned Arbitrator has very meticulously and carefully examined the bills in question and found nothing amiss. Upon noticing that the date of the fifth running bill seemed to be the same as that of final bill, he made the following observations while recounting the contentions of parties, which are as below:

"Arbitrator's observation is that there is no covering letter filed with Annexure D, yet during proceedings ultimately it transpired that the final bill was submitted on 09.12.2008 which is also referred in letter dated 27.12.2008 of the respondent.

xx ... xx ... xx Arb. Observes that the final bill was submitted with letter dated 9.12.2008 Ex. CW1/8 and also referred in respondent's letter dated 27.12.2008. Thus the final bill is not dated 29.05.2008 as this is 5th RA bill, and in fact the respondent in para 9 of its reply to claims stated that final bill of claimant was forwarded by it to the Architect on 09.12.2008. However the said Architects Vidhyarthi Associate not nominated in terms of contract, in its letter dated 11.12.2008 amongst others also states that the final bill of the claimant was dated 09.12.2008. Thus the final bill of the claimant filed as Annexure D ExPWI/4 is in fact dated 09.12.2008 and not dated 29.05.2008"

17. While deciding the issues, the learned Arbitrator noted that after the receipt of the final bill with the letter dated 9 th December, 2008 [Ex. CW-1/8], VSV on its own forwarded the final bill of SBPL to Vidhyarthi Associates, the Architect, for verification. In fact, it is the case of VSV that Vidhyarthi Associates had refused to verify the bills and raised objections. Although there is a controversy whether the said objections were communicated to SBPL, it is, however, not disputed that VSV vide letter O.M.P. (COMM) 119/2021 Page 13 of 24 dated 27th December, 2008, intimated certain points for compliance to SBPL. This manifests that the primary objection of VSV was not with respect to the issuance of the bill, but whether the claim made therein was correct or not. Thus, the Court does not find any merit viz. forgery or fraud relating to the final bill.

IV. Whether the impugned award is violative of Article 21 of the Constitution of India and therefore in contravention of the fundamental policy of India?

18. VSV contends that the impugned award violates the fundamental policy of Indian laws, including: (i) Sections 50 to 52 of the Delhi Cooperative Societies Act, 1972; (ii) Sections 57 to 59 of the Delhi Cooperative Societies Act, 2003 read with Rule 68 of the Delhi Cooperative Societies Rules, 2007; (iii) Sections 269SS and 269T of the Income Tax Act, 1961; (iv) various provisions of the Indian Contract Act, 1872; (vi) provisions of the Arbitration and Conciliation Act, 1996, as mentioned below; and (vii) Article 21 of the Constitution of India, 1950. It is argued that the learned Arbitrator has arbitrarily and illegally put the burden on VSV by awarding an amount of Rs. 1,30,02,314.13/- and interest amount of Rs. 1,33,92,383.55/-, by relying upon forged and fabricated documents.

19. Mr. Nanavaty submitted that it is well-settled in law that the scope of interference under Section 34 of the Act is very narrow. The impugned award does not suffer from any infirmity and is therefore, not liable to be interfered with. Mr. Nanavaty also urged that the documents relied upon by VSV during oral submissions and in the present petition do not form part of the arbitral record and thus, cannot be relied upon at this stage. He also O.M.P. (COMM) 119/2021 Page 14 of 24 submitted that the learned Arbitrator has, after considering the rival submissions and the evidence, passed a well-reasoned award which does not suffer from any infirmity or illegality and thus, ought not to be interfered with by this Court. In this regard, Mr. Nanavaty has placed reliance on the judgment of this Court in State Trading Corporation v. Toepfer International Asia PTE Ltd. 1 ; the Supreme Court in Sumitomo Heavy Industries Limited v. Oil and Natural Gas Commission of India 2 and Kwality Manufacturing Corporation v. Central Warehousing Corporation.3

20. The contention put forth by VSV is not just vague, but also completely misconceived and untenable in law. The allegations of forgery and fabrication of documents have been dealt with in the aforenoted paragraphs and need not be revisited. No contravention of fundamental policy of India has been shown by way of placing reliance on several legislations mentioned above. The learned Arbitrator has awarded the amount in favour of SBPL after a careful examination of the documents on record. The amount awarded on the basis of the bills has been arrived at after verification of each head of the work done, taking note of the measurements and the rates. The contentions of VSV regarding incompleteness and deficiency in work, has also been very meticulously examined by the learned Arbitrator. VSV is also unable to point out specifically as to which part of the impugned award, which determines the 1 2014 (3) Arb. L.R. 105 (Delhi).

Civil Appeal 3188/2015 dismissed by the Supreme Court vide order dated 7 th February, 2017 (State Trading Corporation of India Limited v. ADM Asia- Pacific Trading PTE Limited).

AIR 2010 SC 3400.

(2009) 5 SCC 142.

O.M.P. (COMM) 119/2021 Page 15 of 24

liability, is patently wrong. Although, contravention with the fundamental public policy of India law is a ground of challenge under Section 34 of the Act, but mere use of such words is not enough, as the scope of interference on this ground is constricted. The Supreme Court in Vijay Karia and Ors. v. Prysmian Cavi E Sistemi SRL and Ors,4 explained the scope of challenge to an award on this ground in following words: "The fundamental policy of Indian law, as has been held in Renusagar (supra), must amount to a breach of some legal principle or legislation which is so basic to Indian law that it is not susceptible of being compromised. "Fundamental Policy" refers to the core values of India's public policy as a nation, which may find expression not only in statutes but also time-honoured, hallowed principles which are followed by the Courts.". The Supreme Court has also repeatedly observed that the scope of interference under Section 34 is extremely narrow and the Court must be circumspect whilst dealing with cases thereunder. (See: MMTC Ltd. v. Vedanta Ltd., 5 and Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.6). The findings of fact, arrived at on the basis of the evidence led by the parties, cannot be the subject matter of interference by this Court and accordingly, the Court finds no ground to accept the contention of VSV qua the fundamental policy of India.

V. Whether the impugned award is invalid, as it is on the basis of an agreement that is unregistered and unstamped?

21. VSV argued that the learned Arbitrator could not have proceeded with conducting the arbitration, as the contract dated 31st May, 2002 was neither 4 (2020) 11 SCC 1.

(2019) 4 SCC 163.

2020 (5) SCJ 501.

O.M.P. (COMM) 119/2021 Page 16 of 24

registered in accordance with Section 49 of Registration Act, 1908 read with Section 16(l)(a) of the Arbitration and Conciliation Act, 1996; nor stamped, in terms of Section 35 of the Indian Stamp Act, 1899. The said document was required to be compulsorily stamped and in absence thereof, the unstamped agreement is inadmissible as evidence. Section 33 of Indian Stamp Act, 1899 casts the duty upon every Court, including an Arbitral Tribunal, to verify before proceeding, as to whether the agreement is duly stamped and registered, as held by the Supreme Court in SMS Tea Estates Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd. 7 Since, the award was passed by the learned Arbitrator by relying upon an agreement which was not valid in terms of the provisions of the abovementioned legislations, thus, in terms of Section 34(2)(a)(ii) of the Act, the impugned award is liable to be set aside. Since the contract in question was not registered and unstamped, therefore, it was unenforceable in law for the purpose of arbitration, and VSV has relied upon the judgment of Supreme Court in Garware Wall Ropes v. Coastal Marine Constructions and Engineering,8 and SMS Tea Estates (supra).

22. The aforesaid argument is entirely misconceived. The objection as to the contract being unregistered or unstamped was not raised by VSV before the learned Arbitrator. Before this Court also, besides relying upon the aforenoted judgments, VSV has not been able to demonstrate as to how the contract in question is in violation of the Registration Act, 1908 or the Indian Stamp Act, 1899. It may further be noted that the recent judgment of a three-judge bench of the Supreme Court in N.N. Global Mercantile Pvt.

(2011) 14 SCC 66.

AIR 2019 SC 2053.

O.M.P. (COMM) 119/2021 Page 17 of 24

Ltd. v. Indo Unique Flame Ltd. and Ors., 9 has overruled the earlier judgment in SMS Tea Estates (supra) and Garware Wall Ropes (supra). Moreover, it doubted the correctness of the findings in paras 22 and 29 of Garware Wall Ropes (supra), as affirmed in para 92 of Vidya Drolia v. Durga Trading Corporation,10 and has accordingly referred the same to a larger Bench.

VI. Whether the procedure for appointment of arbitrator and referring the matter to arbitration, as per clause 28, 30, 41(iii) (a) & (b), 42(b), was followed?

23. Mr. Gautam's submissions on this ground are as follows:

23.1. The work given to SBPL was not complete in terms of Clause 28 read with Clause 30. SBPL delayed the completion of project and ultimately abandoned the incomplete work in miserable condition without handing over possession to VSV in terms of the contract, which is evident from the photographs of some unoccupied flats by the members of the society.

23.2. Clause 41(iii) stipulates that the work shall not be considered as completed until the Architect in consultation with the Employer has certified in writing that the work has been virtually completed. In terms of Clause 30(i) of the contract, SBPL was required to get the final completion certificate by submitting an application with the Architect/Employer. As per Clauses 41(iii) (a) and (b), SBPL was to submit final bill within 60 days from date of virtual completion certificate. SBPL did not follow the procedure laid out in the 9 2021 SCC OnLine SC 13.

(2021) 2 SCC 1.

O.M.P. (COMM) 119/2021 Page 18 of 24

afore-noted clauses.

23.3. CW-1, Mr. V. K. Bhatia, stated that in the letter dated 27th December, 2008, VSV admitted that the work was complete; SBPL was to submit final bill to VSV and since there was no Architect at the time, SBPL did not apply for virtual completion certificate. This found favour with the learned Arbitrator as he observed that there was no suggestion given to CW-1 that at the time of submission of final bill by SBPL, there was an Architect appointed under the terms of the agreement. This finding of the arbitrator is contrary to the record as VSV had appointed an Architect, and on the basis of the letter of the Architect, had VSV sent the communication dated 27th December, 2008 to SBPL. The observation of the Arbitrator that the said Architect was not nominated in terms of the agreement, is erroneous and without rational basis.

23.4. VSV, during arbitration proceedings, drew the attention of the learned Arbitrator to the letters dated 11th December, 2008 and 10th January, 2009 wherein the Architect informed VSV about the incomplete work. The learned Arbitrator brushed the letters aside by stating that they were not addressed or endorsed to the Respondent. This reasoning is flawed.

23.5. Even otherwise, the appointment of Architect did not affect the issuance of the virtual completion certificate. In Clause 28, the word 'Employer' is used, thus, if the virtual completion certificate was applied for, the Employer had full authority and right to issue the same.

23.6. The learned Arbitrator has erred in relying upon the letter dated 27th December, 2008 to state that VSV had admitted to the completion of O.M.P. (COMM) 119/2021 Page 19 of 24 work therein. This is established by letters written by VSV subsequent to 27th December, 2008. On 2nd June, 2010, wherein VSV clearly expresses its dissatisfaction with the non-completion of work. The letter dated 27th December, 2008 forms the basis of an erroneous finding regarding completion of work and has thus, the awarded amount under the final bill to SBPL is wholly unfounded.

24. As regards appointment of the Architect, Vidhyarthi Associates, the observations made in the impugned award are relevant and are extracted hereinbelow:

"So far as Architect is concerned admittedly, it is born out from the record Designarch Architect was named in the contract through whom earlier bills 1 to 4 were submitted and passed, had resigned on 14.11.2007. From records it appears new Architect Vidhyarthi Associate had been hired by the respondent to assist respondent and not to discharge the duties of Architect under the contract dated 31.05.2008 in place of Design Arch. The claimant claims that when he submitted final bill the no replacement Architect was named or notified as per contract. When and why were services of Vidhyarthi Associate hired is not disclosed or proved by the respondent. However, Vidhyarthi Associate appears to have been hired by the respondent for their assistance to verify the 5th bill of the claimant some time in or after July 2008, as can be inferred from the record. The Architect as defined in contract page 35 SOC means M/s Designarch Consultants Pvt Ltd ....... Or such other firms/ persons, as shall be nominated by the Employer. Thus in terms of this the respondent has to nominate another person in place of earlier one. The earlier Architect resigned on 14.11.2007. However no evidence or document has been filed on record nominating Vidhyarthi Associates in place of Designarch nor has any intimation in writing of such nomination to the claimant been pleaded or proved on record by the respondent. Even the proposed recovery for items of works done by respondent and the bills of Vidhyarthi Associates show that M/s Vidhyarthi Associates was not regular replacement duly nominated Architect under the contract but hired for specific jobs by the respondent on job to job to job basis for Society's assistance only and not to interact with the claimant. Vidhyarthi Associates was never appointed by way of replacement of earlier Architect with same rights and liabilities that of Designarch. No letter of appointment of, conditions of appointment of and or agreement if any entered with Vidhyarthi Associates has been produced and filed. Even claimant was never directed to interact with or seek O.M.P. (COMM) 119/2021 Page 20 of 24 decisions from or submit bills through Vidhyarthi Associates. Even there is no direct correspondence between the claimant and Vidhyarthi Associates. In this view of the matter the claimant cannot be faulted with for not submitting final bill or claim or demand or dispute to the Architect as per contract, and submission of final bill for settlement to the Employer is sufficient compliance of clause 42(a)."

25. On this aspect, the learned Arbitrator has also stated the original Architect appointed under the agreement had resigned on 14th November, 2007, as a result whereof, SBPL could not obtain a virtual completion certificate. Further, the learned Arbitrator observed that VSV did not ask SBPL to seek virtual completion certificate from the new Architect (Vidhyarthi Associates) which is indicative of the fact that the new Architect did not have the same status and/or powers under the agreement. Next, by its conduct in the letter dated 27th December, 2008, VSV has admitted that the work was virtually complete barring a few pieces of work which were yet to be finished, and therefore, the objection under Clause 28 stood rejected. The learned Arbitrator did not find merit in the argument put forth by VSV that the issuance of a final completion certificate under Clause 30 was a necessary pre-requisite to invoking arbitration, as Clause 43 incorporates the words "disputes of any kind whatsoever". Since VSV refused to settle the final bill, disputes had arisen between the parties, and SBPL could not be stopped from initiating arbitration merely because it did not possess a final completion certificate. Lastly, the learned Arbitrator held that as far as Clause 41(iii) (b) is concerned, it was mandatory for VSV to get the final bill verified and certified within 60 days of its receipt and pay the same within next 30 days of certification. Even this clause is no bar to arbitration as SBPL had invoked arbitration after about seven months/210 days of submission of final bill, whereas VSV had been allowed 90 days for O.M.P. (COMM) 119/2021 Page 21 of 24 processing and finalising the final bill.

26. The aforenoted findings of fact are reasonable and germane, arrived at on the basis of appreciation of evidence and contractual provisions. The learned Arbitrator has returned the findings within the four corners of the contract and has not travelled beyond it. The amount awarded in favour of SBPL is thus falling from the express provisions of the contract. The Court cannot wade into this factual arena and re-adjudicate the merits of the dispute. The evidence and findings of fact based thereon cannot be re-appreciated while exercising jurisdiction under Section 34 of the Act. The Court does not sit in appeal against the award and the power of the Court is rather limited while scrutinising/evaluating the award. In any event, the challenge on this ground does not fall under any of the clauses of Section 34 of the Act.

VII. Whether the Contract between the parties dated 31st May, 2002 was not a valid agreement in terms of Sections 16 and 23 of the Indian Contract Act, 1872 read with Sections 17 and 18 of the said Act?

27. Next, VSV contends that the learned Arbitrator failed to observe and discard the agreement, as it was not a valid document in terms of Sections 16 and 23 of the Indian Contract Act, 1872 read with Sections 17 and 18 of the same. VSV's objection is that the agreement was acted upon by Mr. V.K. Bhatia on behalf of both the parties, directly and indirectly; that the format of the agreement did not contain certain information in blanks and was not signed by the witnesses; and that it was awarded without floating of a tender and was signed by Mr. V.K. Bhatia, Managing Director of SBPL, who himself was a member of VSV during the financial year 1996-97.

O.M.P. (COMM) 119/2021 Page 22 of 24

28. The above noted contentions are unsubstantiated and were, again, never raised before the learned Arbitrator, and thus, consequently cannot be examined for the first time by this Court. The Court also notes that the petition is replete with allegations of wrongdoings by Mr. Bhatia. However, in the opinion of the Court, there is no need to delve into the merits of said allegations, as they were not part of the defence of VSV. The impugned award also does not advert to any such submissions. If VSV has conducted the matter in a casual manner and not filed any pleadings or led evidence on these aspects, they cannot be permitted to setup a new case at this stage. Besides, VSV also raised counter-claims on the basis of the same agreement that is alleged to be invalid. Therefore, the agreement was never disputed by VSV at any stage prior hereto. They cannot, at this juncture, turn around and impugn the contract as being invalid. As for the allegations regarding Mr. V.K. Bhatia controlling VSV, it is not demonstrated as to how that would render the agreement dated 31st May, 2002 unenforceable. The objection is devoid of merit and is hence rejected.

VIII. Whether the learned Arbitrator has not taken into consideration the submissions and documents placed on record by VSV?

29. VSV contends that the learned Arbitrator has acted with a mala fide intention and bias against VSV, by relying upon false evidence to justify the wrong doings of SBPL and has made several observations contrary to the evidence and depositions made by the witnesses. The allegation of bias against the learned Arbitrator is not premised on contravention of Section 12 of the Act. VSV also did not raise any objection before the learned Arbitrator under Section 13 of the Act. The ground of bias, post the O.M.P. (COMM) 119/2021 Page 23 of 24 pronouncement of the arbitral award, is premised on the findings rendered by him. This is a fanciful argument which lacks foundation. No circumstances are shown to demonstrate partiality or unfairness on part of the learned Arbitrator. Thus, there is no substance in the allegations of mala fide intention and bias against the learned Arbitrator. In so far as the ground of non-consideration of submissions is concerned, the Court finds the contention to be unspecific and vague. A perusal of the arbitral award would indicate that the learned Arbitrator has very methodically examined all the documents on record and evaluated the evidence led by the parties, before giving his findings. Accordingly, this contention is also rejected.

30. For the foregoing reasons, the Court does not find any merit in the present petition or any ground to interfere with the impugned award. Accordingly, the same is dismissed. The pending application also stands disposed of.

SANJEEV NARULA, J JULY 5, 2021 nd O.M.P. (COMM) 119/2021 Page 24 of 24

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