Delhi District Court
By This Judgment vs Girdhar Sondhi34 Held That An ... on 9 October, 2019
IN THE COURT OF SH HARGURVARINDER SINGH JAGGI,
ADDL. DISTRICT JUDGE - 02, SOUTH WEST DISTRICT,
DWARKA COURTS, DELHI
OMP (COMM) No. 56/2019
CNR No. DLSW0101139992017
IN THE MATTER OF:
1. Saini Nursery
A - 9, Rama Park, Opposite Metro Pillar No. 759
Main Najafgarh Road
New Delhi - 110059
v.
1. Netaji Subash Institute of Technology
An Institution of Government of N.C.T. Delhi
Through its Executive Engineer (C/M)
Azad Hind Fauj Marg
Sector - 3, Dwarka
New Delhi - 110078
2. Sh. A.K. Sinha (Sole Arbitrator)
Plot No. 4, D - 701, Ishwar Apartment
Sector - 12, Dwarka
New Delhi
Date of filing of petition: 01.11.2017
Date of order reserved: 04.09.2019
Date of pronouncement of order: 09.10.2019
OMP (COMM) No. 56/2019, 57/2019
Page No. 1/43
AND
OMP (COMM) No. 57/2019
CNR No. DLSW010141142017
1. Netaji Subash Institute of Technology
An Institution of Government of N.C.T. Delhi
Through its Executive Engineer (C/M)
Azad Hind Fauj Marg
Sector - 3, Dwarka
New Delhi - 110078
v.
1. M/s Saini Nursery
A - 9, Rama Park, Opposite Metro Pillar No. 759
Main Najafgarh Road
New Delhi - 110059
2. Sh. A.K. Sinha (Sole Arbitrator)
Plot No. 4, D - 701, Ishwar Apartment
Sector - 12, Dwarka
New Delhi
Date of filing of petition: 02.11.2017
Date of order reserved: 04.09.2019
Date of pronouncement of order: 09.10.2019
OMP (COMM) No. 56/2019, 57/2019
Page No. 2/43
JUDGMENT
1. By this judgment, two petitions preferred under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") shall be disposed off against the impugned arbitral award dated 04.08.2017 (hereinafter "arbitral award") passed by the sole arbitrator, namely, A.K. Sinha (hereinafter "sole arbitrator").
2. The first petition under Section 34 of the Act, titled as Saini Nursery v. Netaji Subash Institute of Technology 1 is preferred by Saini Nursery assailing the arbitral award, and whereas the second petition under Section 34 of the Act, titled as Netaji Subash Institute of Technology v. Saini Nursery2 is preferred by Netaji Subhash Institute of Technology also challenging the arbitral award. Both the parties are aggrieved by the arbitral award, as the sole arbitrator partly allowed their claims and counter-claims.
3. The claimant, namely, Netaji Subash Institute of Technology (hereinafter "claimant") had invoked the arbitration agreement and preferred certain claims against the respondent, namely, Saini Nursery (hereinafter "respondent"). In response to the statement of claim preferred by the claimant, the respondent along with its response to the statement of claim also preferred counter-claims against the respondent.
4. For the sake of clarity and convenience, the parties are hereinafter referred by their rank and status before the sole arbitrator 1 OMP (COMM) No. 56/2019 2 OMP (COMM) No. 57/2019 OMP (COMM) No. 56/2019, 57/2019 Page No. 3/43 i.e. Netaji Subash Institute of Technology, as a claimant and Saini Nursery, as a respondent/counter-claimant. Facts
5. The brief facts leading to the case are that the claimant floated a tender bid for the complete maintenance of landscape and horticulture at its NSIT Campus, Dwarka, New Delhi for a period of 2 (two) years. The estimated cost of the work was ₹1,09,10,780/- (Rupees One Crore nine lakhs ten thousand seven hundred and eighty only). The claimant by bidding the lowest turned out to be the successful bidder for an amount of ₹59,86,745/- (Rupees Fifty nine lakhs eighty six thousand seven hundred and forty five only), which was almost 45% lower than the aforesaid estimated cost.
6. As per the contract, the stipulated date of start of work was 17.02.2014 until 16.02.2016. The parties signed the agreement on 17.04.2014 and by 22.04.2014, the claimant issued a show cause notice to the respondent with regard to the non-compliance and non- adherence to the terms and conditions of the contract. By 26.05.2014, the contract was determined by the claimant. Thereafter, the dispute was referred for arbitration, wherein the claimant sought five different claims from the respondent and the respondent in response sought seven different counter-claims against the claimant. The arbitrator by the arbitral award, out of the five claims made by the claimant, partly allowed only two of the claims and rejected remaining three claims. With regard to the seven counter-claims preferred by the respondent OMP (COMM) No. 56/2019, 57/2019 Page No. 4/43 against the claimant, the arbitrator partly allowed only two of the counter-claims and rejected the remaining five counter-claims. As per the arbitral award, the net amount payable by the claimant to the respondent was ₹5,853/- (Rupees Five thousand eight hundred and fifty three only).
7. The claimant based its statement of claim on the following five counts:
(a) Claim No. 1 - ₹12,33,932/- (Rupees Twelve lakhs thirty three thousand nine hundred and thirty two only), which comprised of six sub-heads:
i. short tools and plants (T&P) - ₹4,04,250/- (Rupees Four lakhs four thousand two hundred and fifty only); ii. short labour - ₹4,85,250/- (Rupees Four lakhs eighty five thousand two hundred and fifty only); iii. income tax - ₹14,063/- (Rupees Fourteen thousand and sixty three only);
iv.labour cess - ₹6,206/- (Rupees Six thousand two hundred and six only);
v. work contract tax - ₹24,825/- (Rupees Twenty four thousand eight hundred and twenty five only), and vi.security deposit - ₹2,99,338/- (Rupees Two lakhs ninety nine thousand three hundred and thirty eight only).
OMP (COMM) No. 56/2019, 57/2019 Page No. 5/43
(b) Claim No. 2 - ₹10,18,888.50/- (Rupees Ten lakhs eighteen thousand eight hundred and eighty eight and fifty paise only) towards wages of respondent' workers, labours employed on the work;
(c) Claim No. 3 - pre-reference, pendente lite and future interest @12% p.a. on claim Nos. 1 and 2;
(d) Claim No. 4 - ₹5,00,000/- (Rupees Five lakhs only) as cost of legal proceedings, and
(e) Claim No. 5 - ₹15,00,000/- (Rupees Fifteen lakhs only) as damages, compensation for trauma, agony suffered by the claimant.
8. On the other hand, the respondent lodged the counter-claim under the following seven counts:
(a) Counter-claim No. 1 - Refund of security deposit/performance guarantee ₹3,00,000/- (Rupees Three lakhs only);
(b) Counter-claim No. 2 - ₹7,46,225/- (Rupees Seven lakhs forty six thousand two hundred and twenty five only) towards the bill raised for the work done by the respondent;
(c) Counter-claim No. 3 - ₹2,18,216/- (Rupees Two lakhs eighteen thousand two hundred and sixteen only) towards refund of earnest money deposit;
(d) Counter-claim No. 4 - ₹40,000/- (Rupees Forty thousand only) on account of mission T&P;
OMP (COMM) No. 56/2019, 57/2019 Page No. 6/43
(e) Counter-claim No. 5 - pre-reference, pendente lite and future interest @12% p.a. on claim Nos. 1 and 2;
(f) Counter-claim No. 6 - ₹2,00,000/- (Rupees Two lakhs only) as cost of legal proceedings, and
(g) Counter-claim No. 7 - ₹5,00,000/- (Rupees Five lakhs only) for termination of contract by the claimant for no fault of the respondent and loss suffered by the respondent. Grounds urged for setting aside of arbitral award and submissions by learned counsel for the parties
9. The respondent in his challenge to the arbitral award has urged 40 (forty) grounds3 in total calling for the setting aside of the arbitral award. The grounds urged by the respondent in its petition are as under:
(a) The arbitrator failed to appreciate that the claimant had unnecessarily added extra T&P, which had no use and were in duplicate with the sole intention and purpose to harass and humiliate the respondent.
(b) The arbitrator failed to appreciate that the claimant violated the terms and conditions of CPWD works manual 2012 for the purpose of benefit of the officers of the claimant.
(c) The arbitrator failed to appreciate that the authorised representative of the respondent used to sign the attendance sheet on good faith, whereas the claimant used to comment on 3 See OMP(COMM) No. 56/2019 - Ground 'A' to 'PP', p 8 - 16 of the paper-book.
OMP (COMM) No. 56/2019, 57/2019 Page No. 7/43 the same after signing of the attendance sheet, the arbitrator failed to appreciate that the attendance of respondent employees were not marked in the attendance sheet by the claimant.
(d) The arbitrator failed to appreciate that the claimant did not provide any storage place to the respondent to keep T&P, and the same were kept outside and it was dangerous to keep T&P outside in rainy season.
(e) The arbitrator also failed to appreciate that no work was affected because of scarcity of any T&P and the claimant did not hire any T&P for completion of works.
(f) The arbitrator failed to appreciate that all T&P items were not kept in the nursery, as a matter of fact the same were kept a kilometre away from the nursery and the playground.
(g) The arbitrator failed to appreciate that the respondent provided even those T&P, which were not mentioned in the tender agreement because they were necessary for completion of work.
(h) The arbitrator failed to appreciate that the respondent was compelled to sign the attendance sheet and whenever the respondent raised any objection, the authorised representative of the claimant wrote a false letter on concocted and fabricated facts.
(i) The arbitrator failed to appreciate that when any permanent worker was on a casual leave, the worker appointed by Assistant OMP (COMM) No. 56/2019, 57/2019 Page No. 8/43 Horticulture Officer (hereinafter "AHO") was not working to fill the vacuum. The respondent extra manpower for completion of work.
(j) The arbitrator failed to appreciate that all complaints were made by the labourers, who were appointed by the AHO of the claimant and not by the labourers of the respondent.
(k) The arbitrator failed to appreciate that the scarcity of workers was caused on account of the entry of female workers banned by the claimant and not by the respondent. Regardless, the arbitrator has upheld the penalty imposed by the claimant upon the respondent for the scarcity of workers.
(l) The arbitrator failed to appreciate that the respondent provided the stamp papers to the claimant within 15 days and it was the claimant who took time to prepare and make the agreement.
(m) The arbitrator failed to appreciate that the claimant was in a hurry to rescind the contract, as the agreement was signed on 17.04.2014 and a show cause notice was issued by the claimant to the respondent only after five days of the signing of the contract i.e. 22.04.2014.
(n) The arbitrator failed to appreciate that the Contract Act provides that one who suffers a loss, damage must be compensated for actual loss and not exaggerated loss or hypothetical call. The arbitrator failed to give weightage to the OMP (COMM) No. 56/2019, 57/2019 Page No. 9/43 fact that no loss was caused to the claimant for non-availability of T&P.
(o) The arbitrator failed to appreciate that there was no scarcity of labour and the claimant did not engage any labourer and even if any labourer was engaged by the claimant, the respondent paid the wages claimed by the claimant.
(p) The arbitrator failed to appreciate that the claimant fraudulently claimed one claim in two forms i.e duplication of claim. The claimant not only claimed the wages paid to the workers but also claimed the imposition of penalty.
(q) The arbitrator failed to appreciate that on account of the mala fide and dishonest activities of the claimant and its employees, grave loss was caused to the government exchequer, as the respondent has not bid but was ready and willing to perform the contract at ₹59,86,745/- (Rupees Fifty nine lakhs eighty six thousand seven hundred and forty five only), whereas, the claimant awarded the contract subsequently to another special contractor for an amount of ₹1.05 crores.
(r) The arbitrator failed to consider and appreciate the law laid down by the Superior Courts in Prominent Electric Works v. Delhi Development Authority,4 Rotary Club of Delhi Midtown v. Sunil K. Jain,5 Silor Associates SA v. Bharat Heavy 4 2009 (113) DRJ 779 5 2007 (3) R.A.J. 102 (Del) OMP (COMM) No. 56/2019, 57/2019 Page No. 10/43 Electrical Ltd.,6 Egon Zhender International Pvt. Ltd. v. Namgayal Institute for Research on Ladakh Art and Culture (NIRLAC) and Ors.,7 Indian Oil Corporation v. M/s Lloyds Steel Industries Ltd.,8 and Kailash Nath Associates v. Delhi Development Authority.9
(s) The arbitrator also failed to consider the judgment passed by the Hon'ble High Court of Delhi in S.P. Jindal v. Friedrich Ebertstifting,10 wherein it was held that breach of contract is actionable only if breach causes loss to an aggrieved party.
(t) The arbitrator failed to consider the judgment passed in Ministry of Defence, Govt. of India v. CENREX,11 where it was held that actual loss can be calculated even if there is a clause of liquidated damage yet only actual loss will be granted subject to upper limit of liquidated damages.
(u) The arbitrator failed to consider the Apex Court judgment in Sarwan Singh v. State of Punjab12 where an opponent declining to avail himself of opportunity to put his case is cross- examination evidence tendered on that issue ought to be accepted.
6 2014 (6) R.A.J. 465 (Del) 7 2013 (4) Arb.LR 273 (Delhi) 8 144 (2007) DLT 659 9 (2015) 4 SCC 136 10 CS (OS) NO. 51/2006 date of decision 28.07.2015 11 2016 (1) Arb.LR 157 12 AIR 2002 SC 3652 OMP (COMM) No. 56/2019, 57/2019 Page No. 11/43
(v) The arbitrator failed to appreciate the judgment passed by the Hon'ble High Court of Gujarat in Kalpanaben M. Shah v. Navin Chandra Jeevanlal Acharya13 that summary procedure cannot take away the right of the respondent to cross-examine. (w) The arbitrator failed to consider and give adequate weightage to the statement made by the respondent on oath and the respondent was always ready to cross-examine the claimant. The claimant failed to cross-examine the respondent herein and the evidence by way of affidavit of the respondent was binding on the claimant.
(x) The arbitrator wrongly held that after signing of the contract, the provision cannot be challenged contrary to the position that any provision of contract, in contradiction of law of land can be challenged at any time.
(y) The arbitrator wrongly held that delay in signing of agreement would raise doubt of intention of the contractor (respondent herein), particularly, due to the fact that the rates quoted by the respondent were vert low.
(z) The arbitrator wrongly held that the both the parties were responsible for non-performance of contract and the arbitrator failed to appreciate that the claimant rescinded the contract in an arbitrary and whimsical manner.
13 AIR 1995 Guj 176 OMP (COMM) No. 56/2019, 57/2019 Page No. 12/43 (aa) The arbitrator wrongly held that the amount of work stated by the respondent was not supported by any documents and the bills produced by the claimant were authentic. The arbitral award is bad, as the respondent was not allowed to prove its case.
(ab) The arbitrator wrongly held that only 6-70% of T&P articles were available, as per the stipulation in the contract. The arbitrator without application of judicious mind allowed 80% of the amount proposed by the claimant as penalty for T&P, contrary to his own finding that T&P was not required for all 24 months.
(ac) The arbitrator wrongly and in an arbitrary manner awarded 85% penalty on the account of deficit labour, upholding 85% penalty without any rational and basis. (ad) The arbitrator wrongly awarded an amount of ₹3,97,123/- (Rupees Three lakhs ninety seven one hundred and twenty three only) towards wage of respondent's labour. The arbitrator failed to appreciate that the respondent paid its employees and not only the respondent stated the same on oath but also filed his evidence by way of affidavit and was always ready for cross- examination. The arbitrator failed to appreciate that the labour was appointed(sic) by AHO for his personal gain. (ae) The arbitrator wrongly held that there was hardly any capital of either parties blocked. The arbitrator failed to OMP (COMM) No. 56/2019, 57/2019 Page No. 13/43 appreciate that the respondent's genuine bill, security amount was withheld by the claimant and the respondent is entitled for interest on the amount claimed by him in its counter-claim. (af) The arbitrator committed grave error by not awarding any compensation to respondent on account of loss suffered for untimely termination of the contract. The arbitrator also failed to appreciate that the claimant's misadventure badly affected the goodwill and reputation of the respondent and the respondent deserves to be compensated.
10. However, during the course of hearing on 04.09.2019, Sh. Divakar Kumar, learned counsel for the respondent only urged five grounds. Firstly, the arbitral award is bound to be set aside, as the sole arbitrator passed the arbitral award against the public policy of India. The learned counsel for the respondent submitted that the arbitrator failed to comply the law laid down by the Superior Courts.
11. Secondly, Sh. Kumar, learned counsel for the respondent submitted that the arbitrator also failed to follow the principles of natural justice by disallowing the application moved by the respondent seeking leave of the arbitrator to permit the respondent to lead evidence. Learned counsel further submitted that the claimant did not cross-examine the respondent' witnesses.
12. Thirdly, the arbitral award is contrary to the law of the land, as the same is in utter violation of Section 73, 74 of the Contract Act, 1872. Fourthly, the arbitrator on one hand held that disallowing female OMP (COMM) No. 56/2019, 57/2019 Page No. 14/43 workers to work by the claimant was bad, but on the other hand, the arbitrator imposed damages upon the respondent for shortage of staff.
13. Lastly, Sh. Kumar, learned counsel for the respondent submitted that there was no shortage of T&P, as the same were readily available with the respondent. The arbitrator failed to appreciate that the available T&P could not be deployed, as the claimant failed to provide space to the respondent for T&P.
14. On perusal of the petition moved by the claimant under Section 34 of the Act it is observed that the grounds urged by the claimant are that of an appeal arising out of a legal proceedings in a civil suit.
15. The claimant has urged the grounds calling for the setting aside of the arbitral award, as the arbitrator failed to consider the facts and figures given by the claimant in the statement of claim. The claimant has also urged the ground for setting aside of the arbitral award, as the arbitrator wrongly held that the determination of the contract by the claimant is bad and the claimant did not wait for three months appraisal period. The respondent was at fault from the first day of the commencement of the contract and the respondent's bill for the first month was in negative on account of short manpower and short T&P.
16. The claimant has urged that the arbitrator wrongly came to the conclusion that non-availability of certain T&P items such as aluminium ladders, PVC pipes, power chains, etc within the short span of 2 - 3 months from the date of the contract cannot be held as a valid reason for decisive action i.e. termination of contract. The arbitrator OMP (COMM) No. 56/2019, 57/2019 Page No. 15/43 wrongly held in the arbitral award that T&P articles and items were not required all through the year. The arbitrator failed to appreciate the terms and conditions and nature of the contract and wrongly denied the claimant's claim. The arbitral award without any basis computes that the claimant is entitled for only 80% of the amount claimed and not the whole claim.
17. The arbitrator wrongly concluded that the claimant declaring certain workers not skilled, semi-skilled without following a transparent procedure. The arbitrator failed to appreciate that the issue of a labourer being skilled, semi-skilled or unskilled vested with the AHO, as per the instructions issued by the government from time to time. The arbitral award without any basis computes that the claimant is entitled for only 85% of the amount claimed and not the whole claim.
18. The claimant is aggrieved by the arbitral award as the arbitrator wrongly concluded that the respondent was not given time to take corrective measures, as the contract provided quarterly appraisal.
19. The arbitrator wrongly held that with the bill being in negative, the security deposit is not recoverable. The arbitral award is bad, as once the contract is determined, the security deposit is liable for forfeiture, as per Clause 3 of the terms and conditions of the contract.
20. The arbitral award is bad on the issue of denying the costs of legal proceedings, as the arbitrator on hand held that the respondent OMP (COMM) No. 56/2019, 57/2019 Page No. 16/43 violated the terms and conditions of the contract, and on the other hand denied costs to the claimant.
21. Sh. Shyam Sunder, learned counsel for the claimant contended that the claimant is aggrieved by the claim No. 1 and claim No. 2 being allowed in part by the arbitrator in the arbitral award. Learned counsel for the claimant submitted that the arbitrator erred by only deducting the invoice raised by the claimant on the respondent but also by reducing the claim No. 1 proportionately without any basis.
22. Sh. Sunder, learned counsel for the claimant submitted that the respondent was in material breach of the contract. Learned counsel further submitted that the modus operandi of the respondent with regard to the performance of the contract was to bid way lower than the contract amount, and thereafter cut corners by non-provisioning of adequate field staff, workers, non-deployment of T&P, etc.
23. Sh. Sunder, learned counsel for the claimant submitted that the arbitral award is perverse on the ground of denying damages, adequate compensation and pre-interest, pendentelite interest and future interest to the claimant.
24. The learned counsel for the claimant also contended the submissions of the learned counsel for the respondent that the arbitral award is against the public policy of India, as the arbitrator failed to permit the respondent to cross-examine the witnesses of the claimant and vice versa.
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25. To buttress his arguments, learned counsel for the claimant placed reliance upon the pronouncements of Associate Builders v. Delhi Development Authority,14 Delhi Development Authority v. M/s R.S. Sharma & Co., New Delhi, 15 Oil & Natural Gas Corporation Ltd. v. Saw Pipes,16 and J.G. Engineers Private Limited v. Union of India and Another.17
26. Learned counsel for the claimant concluded his arguments on the note that the arbitral award to an effect of allowing the counter- claim Nos. 1 and 3 of the respondent be set aside and all five claims urged by the claimant be allowed in favour of the claimant and against the respondent.
27. Sh. Kumar, rejoined his submissions and laid great emphasis on his swan song submission that the arbitral award passed by the arbitrator is against the public policy of India, fundamental policy of Indian law, as the arbitrator declined the respondent's application under Section 19 of the Act read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter "CPC") to cross-examine the claimant's witness.
28. The Division Bench of our Hon'ble High Court in NHAI v. Progress Construction18 stressed on the settled position in law that in proceedings under Section 34 of the Act, the Court does not sit in 14 AIR 2015 SC 620 15 2008 (11) SCALE 663 16 (2003) 5 SCC 705 17 (2011) 5 SCC 758 18 240 (2017) DLT 253 (DB) OMP (COMM) No. 56/2019, 57/2019 Page No. 18/43 appeal over the award. Thus, an arbitral award passed by an arbitrator shall not be interfered with lightly. The Court can neither sit in appeal nor reassess or re-appreciate the evidence and the arbitral award can only be interfered with grounds stipulated in Section 34(2) of the Act.
29. Similarly, in MCD v. M/s Harcharan Dass Gupta Construction19 on the proposition that this Court does not sit as a Court of appeal over the findings of fact recorded by the sole arbitrator and also there are no valid grounds flagged by the petitioner to challenge the arbitral award under the realm of Section 34 of the Act.
30. The Apex Court in the landmark judgment of Associate Builders v. Delhi Development Authority 20 while setting aside the judgment passed by the Division Bench of Hon'ble High Court of Delhi culled out the legal principles after traversing the judicial pronouncements passed by the various High Courts and the Apex Court.
31. The Apex Court in Associate Builders21 observed that it is important to note that the 1996 Act i.e. the Act, was enacted to replace the Arbitration Act, 1940 in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration and also to provide that the tribunal gives reasons for an arbitral award; to ensure that the arbitral tribunal remains within the limits of 19 253 (2018) DLT 721 20 (2015) 3 SCC 49 21 ibid.
OMP (COMM) No. 56/2019, 57/2019 Page No. 19/43 its jurisdiction and to minimize the supervisory role of courts in the arbitral process.
32. The Apex Court in the case of ONGC Ltd. v. Saw Pipes22 held that the phrase 'public policy of India' used in Section 34 of the Act in context is required to be given wider meaning. The Apex Court further held that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest, has varied from time to time.
33. It is settled position in law that an award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
34. The illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that the award is against the public policy. Award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court. Such an award is opposed to public policy and is required to be adjudged void.
35. In Associate Builders v. DDA,23 the Apex Court observed that it must be clearly understood that when a Court is applying the "public policy" test to an arbitration award, it does not act, as a Court of 22 (2003) 5 SCC 705 23 (2015) 3 SCC 49 OMP (COMM) No. 56/2019, 57/2019 Page No. 20/43 appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster, as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an arbitral award based on little evidence or no evidence which does not measure up in quality to a train legal mind would not be held to be invalid on this count.
36. In paragraph No. 42 of the judgment passed in Associate Builders v. DDA24 held that in the 1996 Act, the principle of patent illegality contains three sub-heads:
(a) a contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature;
(b) a contravention of the arbitration act itself would be regarded, as a patent illegality - for example if an arbitrator gives no reason for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside, and
(c) equally, the third sub head of patent illegality is really a contravention of Section 28(3) of the Arbitration Act which pertains to the Rules applicable to substance of dispute.
37. The position in law is well settled that while dealing with an award under Section 34 of the Act, the Courts are not supposed to sit 24 ibid.
OMP (COMM) No. 56/2019, 57/2019 Page No. 21/43 in appeal and re-appreciate the evidences as an appellate Court. This proposition of law is emphasized in Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Anr., 25 Maharashtra State Electricity Board v. Sterlite Industries (India) and Another, 26 and Markfed Vanaspati and Allied Industries v. Union of India.27 This principle was again reiterated in P.R. Shah, Shares and Stock Brokers Pvt. Ltd v. B.H.H. Securities Private Limited and Ors.28
38. Section 34 of the Act does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the arbitral tribunal and thereafter to judge if the findings of the arbitral tribunals are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The findings of fact by the arbitral tribunal, if based on evidence, even where a different opinion can be held on the basis of that evidences, the findings given by the arbitrator has to be accepted and the Courts cannot substitute its opinion. The power to interpret the contract also lies with the arbitrator. Once the courts reach to the conclusion that the arbitrator has acted within its jurisdiction, even if the courts are of the view that the opinion of the arbitrator is wrong the same cannot be disturbed unless it is against the public policy.
25 (1987) 4 SCC 485 26 (2001) 8 SCC 482 27 (2007) 7 SCC 679 28 (2012) 1 SCC 594 OMP (COMM) No. 56/2019, 57/2019 Page No. 22/43
39. On careful perusal of the petition, objections, documents filed by the parties and also of the arbitral record and deliberating over the submissions advanced by the learned counsel for parties, this court observes that the main plank of challenge to the arbitral award by the respondent is that the award is against the public policy of India. The respondent is aggrieved that neither did the arbitrator permit the respondent to cross-examine the witnesses of the claimant nor examine and cross-examine the respondent' witnesses and the same is against the fundamental policy of Indian law.
40. The respondent moved an application under Section 19 of the Act and Section 151, CPC before the arbitrator to cross-examine the claimant's witness. It is observed that by order dated 24.09.2016, the arbitrator dismissed the respondent's application under Section 19 of the Act and Section 151, CPC.29
41. Before proceeding further, I deem appropriate to reproduce Section 18 and 19, nestled under Chapter V - Conduct of Arbitral Proceedings of the Act, which reads as under:
"CHAPTER V Conduct of arbitral proceedings
18. Equal treatment of parties.-- The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
19. Determination of rules of procedure.-- (1) The arbitral tribunal shall not be bound by the Code of 29 See Summary Record of Proceedings dated 24.09.2016, p. 124 - (Marked as Document No. 2 on the list of documents submitted to the Court).
OMP (COMM) No. 56/2019, 57/2019 Page No. 23/43 Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub-
section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence."
[Emphasis added by underlining]
42. I, am of the considered view that the aforesaid challenge flanked by the respondent to the arbitral award is on a very thin ice. His Lordship, D.Y. Chandrachud (as his Lordship then was), while presiding as a Single Judge in the Hon'ble High Court of Bombay in Maharashtra State Electricity Board v. Datar Switchgear Ltd. 30 observed that sub-section (1) of Section 19 of the Act has prescribed that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or by the Evidence Act, 1872. The paragraph No. 41 of the said judgment is reproduced verbatim, as under:
"41. In sub-section (1) of section 19, the Act has prescribed that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 or by the Evidence Act, 1872. These are words of amplitude and 30 2002 SCC OnLine Bom 983 OMP (COMM) No. 56/2019, 57/2019 Page No. 24/43 not of restriction. These words no not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles underlying the Civil Procedure or Evidence Act, but free the Tribunal from being bound, as would a Civil Court, by the requirement of observing the provisions of the Code and the law relating to evidence with all its rigour. Sub-section(2) of section 19 preserves the consensual nature of the arbitral proceedings by laying down that subject to the provisions of Part-I, the parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings. The freedom which is conferred upon the parties to agree on the procedure to be followed by the Arbitral Tribunal is regulated by Part-I but subject to that regulation parties are otherwise free to agree on arbitral procedure and the conduct of proceedings. In the even that parties are not agreed on the procedure to be followed in the conduct of proceedings, the Arbitral Tribunal is against, subject to Part-I, free to conduct the proceedings in a manner which it considers appropriate. Sub-section (4) of section 19 provides some indication of the contents of sub-section (3). Sub-section (4) lays down that the power of the Arbitral Tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. Sub-section (4) is of course not exhaustive of the content of sub-section (3) but provides an instance of the power conferred by sub-section (3)."
43. In paragraph No. 52 of Maharashtra State Electricity Board v. Datar Switchgear Ltd.,31 His Lordship, D.Y. Chandrachud (as his Lordship then was), eloquently reiterated the concept of an arbitral tribunal. The relevant extract of the same is as under:
31 ibid.
OMP (COMM) No. 56/2019, 57/2019 Page No. 25/43 "52. The jurisprudential concept of an Arbitral Tribunal is that it is a private forum which is chose by the parties as a means of a speedy and expeditious resolution of disputes between them. The Arbitral Tribunal is not akin to a Court of law which has ordinarily a jurisdiction in general and an existence in perpetuity. The existence of an Arbitral Tribunal arises out of an arbitral agreement between the parties and upon the invocation of arbitration. The adjudicatory powers of an Arbitral Tribunal extend to such matters as parties have referred to it. The Arbitration and Conciliation Act, 1996 is a regulatory statute which has consolidate and amended the law of arbitration. The legislature in its wisdom has conferred power upon the Arbitral Tribunal to terminate its proceedings or to suspend its hearings in situations envisaged in the statute. It would, in my view, be impermissible for an Arbitral Tribunal to transcend the ambit of the powers which the parties have conferred and what the legislature has envisaged."
44. Further, I shall not refrain to pull out a leaf of knowledge and enlightenment from the judgment pronounced by the Hon'ble High Court of Delhi in Silor Associates SA v. Bharat Heavy Electrical Ltd.,32 and also relied upon by the respondent. In Silor Associates SA v. Bharat Heavy Electrical Ltd.,33 the Hon'ble High Court while deciding a petition under Section 27 of the Act seeking necessary orders and directions to direct the respondent to produce two documents traversed through the scheme and provisions of the Act.
32 2014 (6) R.A.J. 465 (Del) 33 ibid.
OMP (COMM) No. 56/2019, 57/2019 Page No. 26/43 The relevant extract of the judgment are reproduced for ready reference as under:
"15. While hearing a petition under Section 27 of the Act, no doubt, I am not hearing an appeal from the order passed by the Tribunal. An appeal from an order passed by the Tribunal is maintainable only in terms of Section 37(2) of the Act, and not otherwise. But that does not mean that when an order passed by the Tribunal invoking Section 27 of the Act - to seek the assistance of the Court in taking evidence, is placed before the Court, the Court would simply act on the request of the Tribunal, even if it appears to the Court that the order of the Tribunal has been passed on an erroneous premise in law. The Court is not bound to act on the request of the arbitral tribunal mechanically
- even when the order appears to have been passed by the arbitral tribunal on a misconception of law. In such a situation, the Court would not only be entitled to, but would be duty bound to correct the error, if any, found in the order passed by the Tribunal. In Managing Director, Army Welfare Organisation (supra), the Supreme Court observed:
"72. This Court cannot sit in appeal over the award of the arbitrator but can certainly interfere when the award suffers from non-application of mind or when a relevant fact is ignored or an irrelevant fact not germane for deciding the dispute is taken into consideration".
In my view, the same principle applies to orders placed before this court under Section 27 of the Act.
16. Section 27(3) mandates that the Court "may" within its competence "and according to its rules on taking evidence", execute the request made by the tribunal by ordering that the evidence be provided OMP (COMM) No. 56/2019, 57/2019 Page No. 27/43 directly to the tribunal. The use of the expression "may" shows that the court is not bound to act on the request in every case where a request for taking evidence is made by the tribunal. The Court "may" decline the request of the tribunal, if either it is not within the competence of the court to make an order on the request, or the request is not in accordance with the rules of the court on taking evidence.
17. Section 19(1) of the Act, inter alia, provides that "The Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872)". This means that the Tribunal is not bound by the rigor and strict provisions of the Code of Civil Procedure, 1908 (CPC), or the Indian Evidence Act, 1872 (Evidence Act).
18. Section 19(2) states that subject to the provisions of Part I, the parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings. In the present case, the parties have not agreed on any specific procedure to be followed by the Arbitral Tribunal in conduct of its proceedings. Section 19(3) states that "failing any agreement referred to in sub-section (2), the Arbitral Tribunal may, subject to this part, conduct the proceedings in the manner it considers appropriate" (emphasis supplied). Therefore, the Arbitral Tribunal is free to devise its own procedure, subject to the condition that such procedure should conform with the provisions of Part I of the Act. The procedure that the Tribunal may devise should meet the basic tenets of an adjudicatory process, namely, that the procedure should treat parties equally, and each party should be given a full opportunity to present its case (see Section 18). The procedure to be evolved by the Tribunal cannot be such that it curtails the rights of the OMP (COMM) No. 56/2019, 57/2019 Page No. 28/43 parties under Sections 13, 16, 17, 22, 23, 24, 25 & 26 of the Act, or any of them.
19. There is nothing in the Act to contra indicate the existence of jurisdiction/power in the tribunal to require the parties to produce documents, exhibits or other evidence, as the arbitral tribunal may determine. The aforesaid provision has the effect of vesting the tribunal with much greater autonomy in the matter of regulating its procedure for conduct of the arbitration proceedings, than that exercised by a civil court- which is bound by the rigour of the Code of Civil Procedure (CPC) and the Indian Evidence Act. The scheme contained in Section 19 of the Act is not to denude the arbitral tribunal of its power to regulate its procedure for effective and expeditious conduct of the arbitration proceedings in a transparent and fair manner. On the contrary, the legislative intent appears to be vest the arbitral tribunal with autonomy and flexibility in the matter of conduct of its proceedings so as to expedite the proceedings and cut the procedural wrangles witnessed in courts - which are governed by the CPC and the Evidence Act.
20. The procedure that the Tribunal may adopt for conducting the proceedings need not be evolved by consensus of the parties. It is for the Tribunal to devise its own procedure, if the parties have themselves not evolved the procedure consensually under Section 19(2).
21. At this stage, I may take note of the procedure prescribed by the CPC, and the courts power to direct production of documents by a party to the proceedings. Section 30 CPC provides that, subject to such conditions and limitations as may be prescribed, the Court may, at any time, either on its own motion or on the application of any party make an order relating to, inter alia, production of documents. Order 11 deals OMP (COMM) No. 56/2019, 57/2019 Page No. 29/43 with the aspect of service of interrogatories, discovery, inspection and production of documents. The aspect of production of documents is dealt with in Order 11 Rule 14, which states that it shall be lawful for the court, at any time during the pendency of the suit, to order the production by any party thereto, upon oath of such of the documents in his possession or power, relating to any matter in question in such suit, as the court shall think right and the court may deal with such documents, when produced, in such manner as shall appear just.
22. Order 11 Rule 21 CPC deals with the consequences of non compliance of an order directing a party to answer interrogatories or to discover documents or grant inspection of documents. If the plaintiff fails to comply with any such direction, the suit is liable to be dismissed for want of prosecution. If the defendant is in breach of such an order, his defence is liable to be struck out. Pertinently, Order 11 Rule 21 does not take within its scope the aspect of non production of documents directed to be produced by a party under Order 11 Rule 14 CPC.
23. Order 16 CPC deals with the aspect of summoning and attendance of witnesses. Order 16 Rule 6 states that any person may be summoned to produce a document, without being summoned to give evidence, and any person summoned merely to produce a document shall be deemed to have complied with the summons if he causes such document to be produced, instead of attending personally to produce the same. The expression "any person" used in Order 16 Rule 6 CPC would include a party to the proceedings. This is evident from Order 16 Rule 20 CPC and is well accepted in judicial pronouncements referred to a little later. Order 16 Rule 10 CPC deals with the procedure to be adopted qua the person to whom summons have been issued, inter alia, for production of documents, OMP (COMM) No. 56/2019, 57/2019 Page No. 30/43 and who fails to produce the documents in compliance with such summons. If the person - without lawful excuse, fails to produce the document in compliance with the summons, the court may issue a proclamation requiring him to attend and to produce the document at a time and place to be named. If, inspite of this procedure being adopted, the person fails to produce the document, the court may issue a warrant for his arrest - with or without bail, and may make an order for attachment of his property for an amount not exceeding the amount of the costs of attachment and of fine which may be imposed under Order 16 Rule 12.
24. Order 16 Rule 15 imposes a duty upon the person summoned to give evidence or produce documents before the court. Order 16 Rule 20 provides that where any party to a suit present in court refuses, without lawful excuse when required by the court, to give evidence or to produce any document, then and there in his possession or power, the court may pronounce judgment against him or make such order in relation to the suit as it thinks fit.
25. From the above provisions, it appears that the reason why Order 11 Rule 21 does not deal with the aspect of non compliance of an order directing production of documents by a party, is that such a default is covered and dealt with by Order 16 CPC.
26. Consequently, it is evident that the discovery, inspection and production of documents by a party, at the request of the opposite party, is a matter of procedure. It is for this reason that the same has been dealt with in Order XI Rules 12 to 15 and 21, and Order 16 of the CPC. Thus, the arbitral tribunal is not powerless to direct production of a document - considered to be relevant evidence by it, by one or the other party to the proceedings. This power is statutorily conferred upon the tribunal Section 19 of OMP (COMM) No. 56/2019, 57/2019 Page No. 31/43 the Act. Exercise of this statutory power by the arbitral tribunal does not tantamount to assumption of "inherent power" by the arbitral tribunal - which power does not vest in an arbitral tribunal.
27. It is one thing to say that the arbitral tribunal does not have the power or the jurisdiction to direct production of documents by one of the parties, and it is another thing to say that the arbitral tribunal does not have the power to enforce compliance of such a direction. If a direction issued by the arbitral tribunal directing production of documents by a party is not complied with, it appears that the arbitral tribunal would be in a position to invoke Section 27 of the Act, since Section 27 of the Act deals with the aspect of taking the courts assistance for taking evidence. The aspect of production of documents is specifically dealt with in Section 27(2)(c)(ii). However, the arbitral tribunal in the present case has proceeded on an erroneous premise that it does not have the jurisdiction to direct production of documents by the respondent, even though the arbitral tribunal has found the aforesaid two documents to constitute relevant evidence, and the arbitral tribunal has straightaway invoked the provisions contained in Section 27 of the Act to seek the courts assistance for a direction to the respondent to produce the said documents.
28. The Supreme Court, in Delta Distilleries Limited v. United Spirits Ltd. & Anr., (2014) 1 SCC 113, has held that the expression "any person" used in Section 27 of the Act is wide enough to cover not merely the witnesses, but also the parties to the proceedings and that, in the event of the document not being produced as directed by the arbitral tribunal, the arbitral tribunal would be entitled to draw an adverse inference against such a party. The Supreme Court has held:
OMP (COMM) No. 56/2019, 57/2019 Page No. 32/43 "21. As seen from these two sections, Section 25(c) provides that in the event a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings, and make the arbitral award on the evidence before it. This evidence can be sought either from any third person or from a party to the proceeding itself. The substitution of the phrase "parties and witnesses" under Section 43 of the earlier act by the phrase 'any person' cannot make any difference, or cannot be read to whittle down the powers of the Arbitral Tribunal to seek assistance from the court where any person who is not cooperating with the Arbitral Tribunal or where any evidence is required from any person, be it a party to the proceedings or others. It is an enabling provision, and it has to be read as such. The term 'any person' appearing under Section 27(2)(c) is wide enough to cover not merely the witnesses, but also the parties to the proceeding. It is undoubtedly clear that if a party fails to appear before the Arbitral Tribunal, the Tribunal can proceed ex-
parte, as provided under Section 25(c).
At the same time, it cannot be ignored that the Tribunal is required to make an award on the merits of the claim placed before it. For that purpose, if any evidence becomes necessary, the Tribunal ought to have the power to get the evidence, and it is for this purpose only that this enabling section has been provided.
OMP (COMM) No. 56/2019, 57/2019 Page No. 33/43 The Supreme Court has further observed "23. It was contended that if the necessary documents are not produced, at the highest an adverse inference may be drawn against the Appellant. That is a power, of course available with the Arbitral Tribunal, and if necessary the same can be used. However, as observed by the learned Arbitrator in her order dated 27.3.2007, the documents sought in the present matter were required to arrive at the decision on the claim of the Respondent No. 1, since, the quantification in support of the claim had been done by the Respondent No. 1 on a theoretical basis. A hypothetical calculation should not be resorted to when actual Sales Tax Assessments are available, which would show as to whether the quantum of set-off allowed and claimed was in fact justified".
29. Therefore, it is evident that the arbitral tribunal is empowered on its own, without taking resort to Section 27 of the Act, to direct, a party to produce documents, and upon the failure to comply with the tribunals direction to produce documents, the aggrieved party - who is aggrieved by the non production of documents, may either require the arbitral tribunal to draw an adverse inference against the defaulting party, or may chose to require the arbitral tribunal to enforce the direction to produce the relevant document with the assistance of the court by resort to Section 27 of the Act.
30. It may be that the aggrieved party (who is aggrieved by the non production of the documents by the opposite party) may be satisfied by the arbitral OMP (COMM) No. 56/2019, 57/2019 Page No. 34/43 tribunal drawing an adverse inference against the defaulting party, and may not wish to pursue the aspect of production of documents by the opposite/defaulting party by resort to Section 27 of the Act. It is not necessary for the arbitral tribunal in every such case to seek assistance of the court, and it would depend on the facts and circumstances of each case, whether such assistance should be sought. In any event, there would be no cause to seek assistance of the court by resort to Section 27 of the Act, without first issuing a direction to the concerned party to produce the document, and only upon the failure to comply with such a direction, the arbitral tribunal would be justified in seeking the assistance of the court under Section 27 of the Act - if so desired by the aggrieved/non defaulting party.
31. I find merit in the submission advanced by the petitioner before the arbitral tribunal that if the arbitral tribunal is held not to have jurisdiction to evolve its procedure requiring production of documents (when there is no agreed procedure laid down by the parties themselves), the same would delay the conclusion of the arbitration proceedings as, in every case, the arbitral tribunal would necessarily have to move for the courts assistance under Section 27 of the Act to obtain a direction for production of the relevant documents by one of the parties, even though the party from whom documents are required to be produced may be willing to comply with such a direction if it were to be so directed by the arbitral tribunal. It would also mean that even in a case where a party requiring production of documents were to be satisfied with the drawing of adverse inference against the defaulting party, the resort to Section 27 of the Act would necessarily have to be undertaken - leading to unnecessary waste of time and resources of the parties and delay in the arbitral process.
OMP (COMM) No. 56/2019, 57/2019 Page No. 35/43
32. The scheme of the Act, when seen as a whole, is to minimise the interference by the courts during the arbitration proceedings. That is why Section 5 specifically prohibits any judicial authority to intervene in the arbitration proceedings, notwithstanding anything contained in the other law for the time being in force, in matters governed by Part I of the Act except to the extent provided for in the Act. The aforesaid scheme is also evident from Sections 13 and 16 of the Act, which provide that issues relating to challenge to the arbitral tribunal on grounds of justifiable doubt, competence (qualification), and jurisdiction of the tribunal cannot be agitated midway when the arbitral proceedings are on, and such challenges should await the making of the award by the tribunal."
[Emphasis added by underlining and highlighting of text]
45. The Apex Court in its latest judgment in Emkay Global Financial Services Ltd Vs Girdhar Sondhi34 held that an application under Section 34 of the Act for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator. I, have carefully perused the arbitral record and it is observed that as per Section 19(2) of the Act, no procedure between the parties was agreed to be followed by the arbitral tribunal in conducting its proceedings. It is further observed that the arbitrator rightfully exercised the power vested in him under the mandate of Section 19(3) and 19(4) of the Act. It is accordingly, held that the arbitral award is neither against the fundamental policy of India nor in 34 (2018) 9 SCC 49 OMP (COMM) No. 56/2019, 57/2019 Page No. 36/43 contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
46. Now moving forward to the question of setting aside of the arbitral award being contrary to Section 73 and 74 of the Contract Act, 1872. It is observed that the arbitrator partly allowed the claim Nos. 1 and 2 of the claimant, primarily on the counts of short T&P, short labour/work force, income tax, labour cess, work contract tax, security deposit and unpaid wages of labour. It is observed that the claimant under claim No. 1 sought an amount of ₹12,33,932/- (Rupees Twelve lakhs thirty three thousand nine hundred and thirty two only) and under claim No. 2 sought an amount of ₹10,18,888.50/- (Rupees Ten lakhs eighteen thousand eight hundred and eighty eight and fifty paise only) toward wages of respondent' workers employed on the work. It is further observed that qua claim No. 1 the arbitrator partly allowed the claim No. 1 to the tune of ₹1,15,240/- (Rupees One lakh fifteen thousand two hundred and forty only) and claim No. 2 to the tune of ₹3,97,123/- (Rupees Three lakhs ninety seven thousand one hundred and twenty three only). It is observed that the claimant's claim No. 5 with regard to damages, compensation, trauma, agony, etc., was denied in its entirety by the arbitrator. It is observed and held that the challenge to the arbitral award on the ground that the arbitrator awarded damages in contravention to Section 73 and 74 of the OMP (COMM) No. 56/2019, 57/2019 Page No. 37/43 Contract Act and reliance upon the pronouncements of the Superior Court in Kailash Nath Associates v. Delhi Development Authority,35 Silor Associates SA v. Bharat Heavy Electrical Ltd.,36 Egon Zhender International Pvt. Ltd. v. Namgayal Institute for Research on Ladakh Art and Culture (NIRLAC) and Ors., 37 Indian Oil Corporation v. M/s Lloyds Steel Industries Ltd., 38 are misplaced and not applicable to the case at hand. It is further observed that the claim No. 2 was partly allowed by the arbitrator, as the claimant had paid an amount of ₹3,97,123/- (Rupees Three lakhs ninety seven thousand one hundred and twenty three only) towards unpaid wages for the labour by the respondent in capacity of the principal employer and the same has been rightly allowed in part by the arbitrator.
47. The reliance placed by the respondent on Rotary Club of Delhi Midtown v. Sunil K. Jain,39 is also misplaced and does not come to aid of the respondent. It is observed that the Hon'ble High Court in paragraph 27 of the judgment held that under Section 19 of the Arbitration and Conciliation Act, the arbitral tribunal is entitled to conduct the proceedings in the manner in which it considers the same to be appropriate. The Hon'ble High Court further observed that the arbitral tribunal is not bound by the Code of Civil Procedure or by the Indian evidence Act. All that is required of his that he follows the 35 (2015) 4 SCC 136 36 2014 (6) R.A.J. 465 (Del) 37 2013 (4) Arb.LR 273 (Delhi) 38 144 (2007) DLT 659 39 2007 (3) R.A.J. 102 (Del) OMP (COMM) No. 56/2019, 57/2019 Page No. 38/43 principles of natural justice and treats the parties impartially and gives them full and equal opportunity to present their case. From perusal of the aforesaid judgment and the summary record of proceedings it is observed that the arbitrator did adhere to the principles of natural justice and treated the parties impartially and gave them full and equal opportunity to present their case.
48. The judgment passed by the Hon'ble High Court of Delhi in Prominent Electric Works v. Delhi Development Authority,40 was under the erstwhile Arbitration Act, 1940 and above all the same is clearly distinguishable on facts of the case at hand.
49. With regard to allowing the counter-claim Nos. 1 and 3 and rejecting all other counter-claims of the respondent, I find no merit to interfere with the arbitral award by exercising power under Section 34 of the Act. It is observed that the grounds urged by the respondent are frivolous to an extent that the tender was awarded to the respondent on 17.02.2014 for a period of 24 months, however, the same was determined by 26.05.2014. This court cannot lose sight of one of the grounds urged by the respondent calling for the setting aside of the award that the claimant failed to provide storage space for T&P, as they were to be kept outside in rainy season. The frivolity of the ground urged by the respondent is denuded by common sense, merely for the reason that the contract between the parties did not even last four months and the same was terminated in the peak summer season 40 2009 (113) DRJ 779 OMP (COMM) No. 56/2019, 57/2019 Page No. 39/43 of Delhi, month of May, precisely, 26.05.2014. It is beyond comprehension that how were the T&P items and articles exposed outside in rainy season.
50. Similarly, the challenge by the claimant to the award under Section 34 of the Act calling for the same being set aside is not made out. It is observed that the arbitrator rightly held that no case for the forfeiture of the security deposit is made out, as the claimant hastened to terminate the contract with waiting for the appraisal period of 3 months. It is also observed that one of the additional conditions of the bid unequivocally state that the tenderer shall inspect the suit of work and fully acquaint himself about the conditions with regard to the nature of the soil, availability of materials, suitable location for construction of godowns, stores and labour huts, local conditions, traffic restrictions and such other factors as may be required for satisfactory execution of the work.
51. The scope of this court is limited with regard to Section 34 of the Act. The position of law stands crystallized today, that findings, of fact as well as of law, of the arbitrator/arbitral tribunal are ordinarily not amenable to interference either under Sections 34 or Section 37 of the Act. The scope of interference is only where the finding of the tribunal is either contrary to the terms of the contract between the parties, or, ex facie, perverse, that interference, by this court, is absolutely necessary. The arbitrator is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of OMP (COMM) No. 56/2019, 57/2019 Page No. 40/43 perversity, do not merit interference under Sections 34 or 37 of the Act. The Hon'ble High Court of Delhi in the case of P.C.L. Suncon (JV) v NHAI,41 in paragraph No. 24 stated that:
"24. As a postscript, this Court believes that it is imperative to sound a word of caution.
Notwithstanding the considerable jurisprudence advising the Courts to remain circumspect in denying the enforcement of arbitral awards, interference with the awards challenged in the petitions before them has become a matter of routine, imperceptibly but surely erasing the distinction between arbitral tribunals and courts. Section 34 jurisdiction calls for judicial restraint and an awareness that the process is removed from appellate review. Arbitration as a form of alternate dispute resolution, running parallel to the judicial system, attempts to avoid the prolix and lengthy process of the courts and presupposes parties consciously agreeing to submit a potential dispute to arbitration with the object of actively avoiding a confrontation in the precincts of the judicial system. If a court is allowed to review the decision of the arbitral tribunal on the law or on the merits, the speed and, above all, the efficacy of the arbitral process is lost."
52. The Hon'ble Supreme Court in the case of McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., 42 held as under:
"52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the 41 2015 SCC OnLine Del 13192 42 (2006) 11 SCC 181 OMP (COMM) No. 56/2019, 57/2019 Page No. 41/43 arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
53. The position in law is well settled that this court while exercising power under Section 34 of the Act does not sit as a court of appeal. It is observed that the petition preferred by the claimant is in the tenor of an appeal and the same is not maintainable. The nature of proceedings under Section 34 of the Act is summary in nature - See M/s Canara Nidhi Limited v. M. Shashikala and Others.43
54. Thus, it is observed and held that the arbitral award is not marred by any patent illegality, as there is no contravention of the substantive law of India, which would result in the death knell of an arbitral award. It is also observed that there is no patent illegality in the arbitral award, which must go to the root of the matter. The arbitral award is also a well reasoned and a speaking award. The arbitral award is also held to not be in contravention of Section 28(3) of the Act, which pertains to the terms of the contract, trade usages applicable to the nature of contract and substance of dispute.
55. On a parting note, I would like to add, that the challenge to the various clauses of contract by the respondent, namely, Saini Nursery under the present petition i.e. Section 34 of the Act is not tenable. It is 43 Civil Appeal No. 7544-7545 of 2019 date of decision 23.09.2019 OMP (COMM) No. 56/2019, 57/2019 Page No. 42/43 observed that to challenge the terms and conditions of a contract by way of a petition under Section 34 of the Act on the ground that the same lacked consensus ad-idem smacks of cunningness and makes the respondent nothing but a fence sitter. That said, I find, no perversity in the arbitral award and the same is upheld.
56. Having given my careful consideration to the submissions urged and the complete case record in the preceding paragraphs of this judgment, I am of the view that is not a fit and proper case for exercise the jurisdiction of this court under Section 34 of the Act and interfere with the arbitral award dated 04.08.2017 and the same is upheld. All pending interim application, if any, stand disposed of as infructuous.
57. Accordingly, the petitions preferred by the respondent titled as Saini Nursery v. Netaji Subash Institute of Technology 44 and by the claimant titled as Netaji Subash Institute of Technology v. Saini Nursery45 stand dismissed. Parties to bear their own costs.
58. File be consigned to record room only after due compliance, necessary action and as per Rules. Digitally signed by HARGURVARINDER HARGURVARINDER SINGH JAGGI SINGH JAGGI Date: 2019.10.08 16:13:39 +0530 Pronounced in the open Court (Hargurvarinder Singh Jaggi) on October 09, 2019 Addl. District Judge-02 South West District Dwarka Courts Complex, Delhi 44 OMP (COMM) No. 56/2019 45 OMP (COMM) No. 57/2019 OMP (COMM) No. 56/2019, 57/2019 Page No. 43/43