Delhi District Court
Mr. K. L. Gugnani vs Asf Insignia Sez Pvt Ltd on 3 March, 2021
In the Court of Shri Sanjiv Jain,
District Judge (Commercial Court)-03, Patiala House Courts
New Delhi
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018
Mr. K. L. Gugnani,
2/11, Nehru Enclave, Kalkaji,
New Delhi-110019.
... Petitioner/objector
versus
ASF Insignia SEZ Pvt Ltd,
11, Babar Lane, Bengali Market,
New Delhi-110001.
Also at: 362-363, ASF Centre,
Udyog Vihar, Phase-IV,
Gurgaon-122016 (Haryana).
... Respondent/claimant
Date of institution : 31.08.2018 Date of reserving judgment : 04.02.2021 Date of decision : 03.03.2021 JUDGME NT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (as amended upto date) hereinafter called the 'Act' challenges the award dated 03.07.2018 passed by the Arbitrator Ms. Justice Manju Goel (Retd.).
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 1 of 91 Brief facts:
2. Briefly the facts as stated in the petition are that the respondent (earlier known as Canton Buildwell Pvt Ltd) was developing a Special Economic Zone (SEZ) at Gwal Pahari, Gurugram. It engaged the services of the petitioner as a technical consultant for sanction of load from the electricity distributors and for other related services. The renumeration was fixed at Rs. 1,37,35,000/- vide service agreement dated 05.02.2008.
The scope of work as per clause 3 of the agreement was as follows:
3.1.1 Submission of application with the processing fee to Dakshin Haryana Bijli Vitran Nigam Limited (DHBVNL). 3.1.2 To arrange technical feasibility for the 50 MW load applied for the project.
3.1.3 To arrange estimate for the service line up to outside / inside the owner's premises including arranging all clearances from the appropriate authorities. 3.1.4 To arrange installation of energy meter (s) as per load released. However, the owner will be required to provide land free of cost as per requirement of DHBVNL for establishing 66 KV yards on the site. 3.1.5 Liaison with relevant authorities. 3.1.6 Advise owner all relevant procedures and formalities.
3. As per clause 8.0, contract price and payment terms were as under:
8.1 The Contract Price in respect of this Agreement shall be Rs. 1,37,35,000/-, which shall be paid by the owner to the Consultant in consideration of the Services to be rendered by the Consultant for the project, in the OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 2 of 91 manner specified in the Terms of Payment, (Clause 8.4).
The Contract price shall remain fixed and is inclusive of all taxes & costs excepting Service Tax (applicable at the prevailing rate at the time of invoicing, unless a valid Service Tax exemption certificate issued by Ministry of Commerce and Industry, Government of India in favour of M/s Canton Buildwell Pvt Ltd is provided to the Consultant).
8.2 Owner agrees to pay all undisputed invoices for Consultant which become due and payable to the Consultant within fifteen days of receipt of invoices by Owner from the Consultant.
8.2.1 In case due to some unavoidable circumstances there is delay on part of DHBVNL in providing supply at 66 KV level, partial load upto 5 MVA of 11 KV voltage at Owner's cost shall be arranged immediately so as to provide electricity for the premises till such time supply at 66 KV is made available.
8.3 For the avoidance of doubt, the fees set forth herein above will be the total charge payable by the Owner to the Consultant for Services rendered, inclusive of all expenses / costs and any other charges or on account of any existing or newly created government taxes. However, the above Contract Price is exclusive of all charges payable for arranging statutory permission from concerned Government Department for the installation installed in the Owner's premises.
8.4 The payment terms shall be as under:
* 10% of the contract price as advance to
proceed.
For every lot of load permitted / approved:
* 20% of the Proportionate Contract Price load released / sanctioned / TF received.
* 25% of the Proportionate Contract Price on receipt of estimate of the proportionate load released.
* 25% of the proportionate Contract Price on erection of service line up to owner premises.
* 20% of Proportionate Contract Price on
installation of meter.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 3 of 91
4. Clause 9.0 relates to the completion period as under:
9.1 The complete load of the 50 MW shall be made available in phase out of which the first load of 4 to 5 MW shall be made available within one and a half year from the date of this agreement. The balance load shall be made available as per Owner's requirement in phases within 4 years from the date of the agreement.
9.2 If there is any variation in completion of the project, both the parties shall mutually agree on a revised time for the completion of the Consultant's obligation.
5. Clause 12.0 relates to default and remedies as under:
12.1 Default Events: Each of the following events shall constitute a default ("Default") under this Agreement and shall be considered a material breach of this Agreement, and shall allow a party, as applicable, to seek the remedies under this agreement:
(a) Failure of Consultant to timely deliver any Services to Owner as set forth in this agreement;
(b) Consultant's failure to comply with any obligations set forth in this agreement;
(c) A material breach of any representation or warranty under this agreement by either party, provided that such failure is not cured within the time frames, if any, set forth in this agreement or within thirty days of notice of said breach if no specific time to cure is specified;
12.2 Remedies upon default of owner: Consultant agrees that consultant's rights upon the default of owner are limited exclusively to the recovery of actual amounts owed by owner to consultant for the Services already performed by the consultant for which client has provided written acceptance of such service.
12.3 Remedies upon default of consultant: Upon OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 4 of 91 the occurrence of a default of consultant, owner, in addition to any other remedies available to it pursuant to law or this agreement shall be entitled to (a) recover the permitted damages from the consultant, (b) receive a refund of the amounts paid to the consultant.
6. Clause 13.0 relates to terms & termination as under:
13.1 This agreement shall come into force and be effective from the date of signing hereof and shall stand automatically terminated upon due fulfillment of all the obligations of the Consultant hereunder to the complete satisfaction of the owner in accordance with the terms hereof, unless the parties terminate this agreement by mutual consent or this agreement is terminated in accordance with Clause 13.3 hereunder;
13.2 Subject to occurrence of Force Majeure Event, this agreement shall terminate at Owner's option;
13.3 Without prejudice to the generality of sub section 13.1 above, this agreement shall be terminated at the sole option of owner during the development of the project, by notice in writing, if any of the following events occur;
13.3.1 If owner issues a termination notice to the consultant with a 1 month notice; or 13.3.2 If the letter of approval granted to owner to develop the project by the concerned authority is cancelled; or 13.3.3 If consultant is unable to discharge the functions or perform the duties imposed on it under this agreement; or 13.3.4 If consultant has persistently defaulted in complying with any direction by the owner or the relevant authorities; or 13.3.5 If Consultant's financial positions is such that it is unable to fully and efficiently discharge the duties and obligations imposed on it under this agreement;or 13.4 This agreement shall be terminated upon OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 5 of 91 dissolution or liquidation of either party. However, the termination of this agreement shall be without prejudice to any claim or right of action previously accrued to any party hereto against any other party.
13.5 The parties expressly agree that the expiry or termination of this Agreement shall be without prejudice to the rights of the parties accrued up to date of such expiry or termination.
7. Clause 14.0 relates to indemnity as under:
14.1 The consultant hereby uncondtionally and irrevocably agrees and undertakes to indemnify the owner for any loss incurred with regard to the advance (as per clause 8.4) provided by owner to the consultant under this clause, non compliance / non performance of its obligations pursuant to the agreement, and any losses, costs or expenses which may be suffered or incurred by the owner by virtue of the consultant's non fulfillment or non satisfaction of its obligations and duties under the agreement.
The Consultant undertakes to indemnify the owner pursuant to this clause upto a sum of Rs. 13,75,000/- irrespective of the number of times the owner invokes its rights under this clause.
8. Pursuant to the agreement dated 05.02.2008, a proposal was made for creation of 50 MW load. It required erection of 66 KV DC tower line for the sub station to be fed from new 220 KV, Sector 56, Gurugram. The right of way for 66 KV double circuit line was stated to be technically feasible. A tripartite agreement dated 13.07.2009 was entered by Haryana Vidyut Prasaran Nigam Ltd (HVPNL), Dakshin Haryana Bijli Vitran OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 6 of 91 Nigam Limited (DHBVNL) and the respondent. As per the agreement, the respondent was to make the space available for 2 nos. 66 KV base and hand over 66 KV sub station to HVPNL for operation and maintenance. The share cost of 220 / 66 KV transformer at the feeding station was to be borne by the respondent. It was to construct four residences for the operation and maintenance staff. It was also to arrange right of way for laying of transmission lines for HUDA, CEE and other agency.
9. Pursuant to the service agreement, the petitioner got the load of 4800 KVA (5MVA) sanctioned on 10.07.2008 from DHBVNL as a stop gap arrangement. It was energized on 01.12.2011.
10. On 31.10.2010, a contract agreement was signed by the respondent with Adeco Energy Pvt Ltd for construction and energization of 66 KV double circuit line from 220 KV sub station for the proposed Substation at Gwal Pahari. The procedures and formalities were advised / guided by the petitioner such as route approval, forest clearance, location of towers, Chief Electrical Inspector clearance, Haryana Government approval, 66 KV cable procurement and its inspection by HVPNL staff and delivery at Gwal Pahari.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 7 of 91
11. Furtherance to the agreement dated 05.02.2008, an Addendum 1 was signed by the parties on 04.11.2008 regarding withdrawal of share cost of 220 / 66 KV transformer amounting to Rs. 35.0 lakhs.
12. Before the construction of double circuit line and installation of meter, the plan changed. 66 KV sub station, which was originally to be built as Air insulated sub station (AIS) was decided to be built as Gas insulated sub station (GIS). It required a new layout plan and approval from HVPNL. To get the services of the petitioner for the change in the type of sub station, an Addendum 2 dated 15.10.2012 was signed by the parties, where, in addition to the scope of work as specified in the agreement dated 05.02.2008, clause 3.1.7 to 3.1.9 were added interalia as under:
3.1.7 Due to change in technical design, earlier given plan is revised and require approvals of HVPNL authorities for execution, completion period of the same is on or before 31st December 2012. The revised plans / layout will be got approved by the consultant within 90 days of the submission of the plan with HVPNL authorities.
3.1.8 Consultant will provide all technical support and approval also assist in finalizing the tenders for establishing 66 KV grid sub station under the approved plan of HVPNL for establishment of 66 KV sub station at ASIPL SEZ.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 8 of 91 3.1.9 All technical approval of works up to energization of 66 KV sub station shall be in scope of consultant.
13. Clause 8 was also amended. Revised contract price and payment terms were mentioned. The respondent agreed to pay Rs. 25.0 lakhs over and above the rates agreed in the agreement dated 05.02.2008. Clause 8.4 provided the payment terms for the original agreement and Addendum II, Clause 8.4.1 provided for the disbursement of 25% in advance and balance after the successful commissioning of 66 KV grid sub station as per the new scheme. It was stated in Addendum II that the rest of the payment terms and all other terms of the original service agreement dated 05.02.2008 will remain the same.
14. A service agreement dated 12.12.2011 was also signed by the parties for engaging the services of the petitioner as Consultant with respect to laying of second 11 KV line with the following scope of work:
3.1.1 Submission of application with the processing fees to DHBVNL.
3.1.2 To arrange technical feasibility for the 5 MVA load applied for the project.
3.1.3 To arrange estimate for the service line up to outside / inside the owner's premises including arranging all clearances from the appropriate authorities. 3.1.4 To arrange installation of energy meter (s) as per load released.
15. For this work, the petitioner was paid Rs. 50,000/-.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 9 of 91 He submitted a proposal to DHBVNL but it was rejected. Thereafter, no work was done by the petitioner in respect of the above agreement.
16. On 28.01.2013, the petitioner requested the respondent to shift the date for approval of GELO from 21.01.2013 to 21.04.2013. He however, could not obtain GELO within the stipulated time i.e. upto 21.04.2013. The respondent then vide notice dated 08.11.2013 terminated the agreement dated 05.02.2008 and the agreements 12.12.2011 and 15.10.2012 and asked the petitioner to refund the amount paid by way of advance. The petitioner on the contrary wrote letters demanding payments of the balance contract value and asked for the withdrawal of the termination letter offering to conclude the work assigned. This led to dispute between the parties.
17. The petitioner raised claims for Rs. 61,77,750/-
along with interest, as dues under the agreement dated 05.02.2008 (case reference no. DAC 604/08-14). He also claimed Rs. 18,75,000/- as claims arising out of Addendum II dated 15.10.2012 (case reference no. DAC 679/01-15). He invoked the arbitration clause and filed the petition under Section 11 of the Act. In both the matters, Ms. Justice Manju Goel (Retd.) was appointed as the Sole OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 10 of 91 Arbitrator. The respondent also raised the counter claims i.e. refund of Rs. 6,25,000/- as advance, Rs. 13,75,000/- as liquidated damages, Rs. 5,20,000/- as the cost incurred for doing the unfinished job under the contract (case reference no. DAC 604/08-14) and refund of Rs. 50,000/- paid as advance under the service agreement dated 12.12.2011 (case reference no. DAC 679/01-15). The parties also filed the replies / rejoinders. Ld. Arbitrator framed the following issues:
18. In the case reference no. DAC/604/08-14
1. In the claim barred by the limitation?
2. Are the service agreement dated 05.02.2008, the addendum 1 dated 04.11.2008, the agreement dated 12.12.2011 and addendum dated 15.10.2012 are independent agreements? If not are the two claims maintainable independently?
3. Has the Claimant performed his part of the contract and within the time stipulated?
4. Is the respondent justified in withholding the amount payable to the claimant as per the agreement on performance of the agreement by the claimant?
5. Is the respondent entitled to the amount claimed in the counter claim?
6. Is the claimant / counter claimant entitled to interest? If so at what rate and for what period?
7. Relief, if any.
In the case reference no. DAC/679/01-15
1. Is there an arbitration clause in the contract between the parties out of which the present claim arises?
2. Has the claimant performed his part of the contract?
3. Is the claimant entitled the amount claimed in the claim petition?
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 11 of 91
4. Is the respondent / counter claimant entitled to the counter claim amount?
5. Is any of the two parties entitled to interest? If so at what rate and for what period?
6. Relief, if any.
19. Ld. Arbitrator vide impugned award, dismissed the claims of the petitioner in the case reference no.
DAC/604/08-14 and allowed the counter claims of the respondent for Rs. 1,78,688/- along with future interest @ 12% per annum from the date of award till the actual recovery along with the cost. Ld. Arbitrator also dismissed the claims in the case reference no. DAC/679/01-15 and allowed the counter claims of the respondent for Rs. 77,860/- along with future interest @ 12% per annum from the date of award till the actual recovery along with cost.
Objections:
20. The petitioner challenged the impugned award on the following grounds:
A) That the Arbitrator erred in holding that the contract dated 05.02.2018 stood novated by the subsequent addendums dated 04.11.2008 & 15.10.2012. It is stated that the service agreement dated 05.02.2008 was independent of the two addendums. Addendum 2 was an independent contract and it did not substitute the agreement dated 05.02.2008. It is stated that the service agreement dated 05.02.2008 was not novoted since, there was no rescinding or alteration of project. The agreement is absolute silent about the sub station to be established whether AIS or GIS.
B) That the Arbitrator erred by stating that before the purpose could be achieved, plan changed from AIS to GIS sub OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 12 of 91 station because during the subsistence of the agreement dated 05.02.2008, the petitioner was successful in getting the approval for GELO for AIS on 15.04.2011. It is stated that since the purpose of addendum II was the same as that of the agreement dated 05.02.2008 i.e. to obtain connection and energization of 66 KV sub station, to hold addendum 2 as an amendment of the contract dated 05.02.2008 amounting to novation was wrong. In fact, the petitioner had completed his job with respect to the service agreement dated 05.02.2008 and nothing was left to be done. He had submitted the bill on 23.10.2013 for Rs. 61,77,750/-. The GELO was approved vide dated 15.04.2011. It is stated that since the land offered by the respondent for the construction of 66 KV sub station had some entries of the Revenue Authorities forming part of the land in possession of Municipal Corporation of Gurugram, the land was not accepted by HVPNL, which the Arbitrator failed to appreciate, though, it was clearly reflected in the letter of the petitioner dated 23.10.2013.
C) That The Arbitrator wrongly concluded that the petitioner, though, stating nothing remains to be done under the agreement dated 05.02.2008, did not ask for his dues. It is stated that the respondent has admitted to have received the letter dated 23.10.2013 in respect of the balance pending payment in respect of the above agreement and therefore, the Arbitrator was wrong in holding that the agreement dated 05.02.2008 and addendums I & II were only the one contract, the first one having been novated by the two subsequent addendums. It is stated that the Arbitrator also did not appreciate the judgment in the case of Delhi Airport Metro Express Pvt Ltd Vs. CAF (India) Pvt Ltd, 215 (2014) DLT 112 in correct perspective.
D) That the Arbitrator erred in holding the issue no. 3 & 4 in the case reference no. DAC/604/08-14 and issue no. 2 & 3 in case reference no. DAC/679/01-15 against the petitioner.
E) That the petitioner had successfully performed his part of the contract within the time stipulated in respect of the service agreement dated 05.02.2008 and therefore, the respondent was not justified in withholding the amount payable to the petitioner, which the Arbitrator failed to OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 13 of 91 appreciate. It is stated that the renumeration / contract price was fixed as per clause 8. The services to be rendered by the petitioner were specified in clause 3.1.2 to 3.1.6, which the petitioner had completed. Physical execution of the contract was not within the purview of the nature of job, which was only advisory in nature. Since, the land made available by the respondent was not free from encumbrances, project had to be shelved. Further towers construction was not done by the respondent nor the double circuit line for 66 KV was laid. Therefore, the petitioner was entitled to the balance payment as claimed vide letter dated 23.10.2013. It is stated that clause 12.2 of the agreement specified the remedy upon default of the owner. The petitioner had completed the services but the respondent failed to get the work executed from Adeco Energy India Pvt Ltd. It is stated that the GELO for AIS was approved by the efforts of the petitioner in April 2011 i.e. much before the expiry of the agreement dated 05.02.2008 (expiry date 05.02.2012). It was the respondent who delayed to appoint the contractor, (appointed on 31.10.2010). Even subsequent to its appointment, neither the towers nor any service line were laid down for which, the petitioner cannot be held responsible.
F) That the Arbitrator wrongly stated that the petitioner failed to cite any law in favour of claims viz a viz issue no. 2 & 3 in the reference no. DAC/679/01-15 and issue no. 3 & 4 in the case reference no. DAC/604/08-14. It is stated that the petitioner had successfully performed the job entrusted to him and under clause 12.2 of the agreement, he was entitled to the actual amount owed by the respondent for the services rendered by the petitioner.
G) That with respect to addendum II, GELO could not be approved within 90 days i.e. 21.04.2013 because the respondent failed to arrange cizra plan and jamabandi for the portion of land where GIS sub station was to be constructed. Respondent also failed to construct the residential houses for the operation and maintenance staff. Nevertheless, the tentative GELO was got approved with the efforts of the petitioner in November 2012 and to say that the petitioner did not do his part of the contract was wrong.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 14 of 91 H) That the Arbitrator failed to appreciate the judgment Nathu Lal Vs. Phool Chand, AIR 1976 SC546 and simply stated that it relates to a suit for specific performance of an agreement to sell and has no application in the facts of the case. It is stated that the written confirmation from the civil department for taking over the land for the sub station & staff quarters was not made available by the respondent till the termination of contract dated 08.11.2013. The Arbitrator thus erred in saying that at best the petitioner's case is one of breach of contract and is only entitled to damages suffered, which he failed to prove.
I) That the Arbitrator erred in not taking into consideration the judgment referred by the petitioner in the case of Indian Oil Corporation Vs. Lloyds Steel Industries Ltd, (2007) 4 ArbLR 84 (Del) where, it was held that if liquidated damages are awarded to the petitioner, even when the petitioner has not suffered any loss, it would amount to unjust enrichment, which cannot be countenanced and has to be eschewed. Keeping this fact in view, allowing the counter claim in both the petitions is absolutely unjust and arbitrary as held in the case of Kailash Nath Associates Vs. DDA & Anr, (2015) 4 SCC 136 that the compensation can only be given for the damages / loss suffered. In the instant case, the petitioner has not claimed any damages but the balance amount payable to him viz a viz the agreement. The Arbitrator also did not consider the judgments in the case of Maula Bax Vs. Union of India, AIR 1970 SC 1955 and Fateh Chand versus Bal Krishan Das, AIR 1963 SC 1405 , which clearly state that before any amount is awarded towards loss, the same has to be proved. Despite holding that the respondent has failed to prove any documents substantiating its counter claim particularly for its visits, the Arbitrator proceeded to allow the counter claim of the respondent and awarded Rs. 50,000/- towards the same in DAC/679/01-15.
J) The Arbitrator did not to refer the judgment relied by the petitioner Union of India & Ors Vs. Tantia Construction Pvt Ltd, 2011 (5) SCC 697 wherein it was held that variation cannot amount to substantial variation as would amount to novation of the contract.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 15 of 91 K) That the Arbitrator erred in holding that there is no evidence to show that sanction of GELO was declined on account of defect in the title of land offered by the respondent for building a sub station. In fact, letter dated 28.01.2013 of the petitioner clearly states that GELO drawings would be processed and approved by HVPNL after receipt of written confirmation from the Civil Department for taking over the land for the sub station and staff quarters as per tripartite agreement, which confirmation has still not seen the light of the day, which fact is also reflected in the letter dated 23.10.2013 of the petitioner.
L) That the respondent misled the Arbitrator by referring a letter dated 03.12.2012 about the demarcation undertaking though there was no report of acceptance of the undertaking by the Civil Department.
M) That the respondent in its letter dated 19.11.2012 admitted to have submitted the tentative GELO of GIS for technical feasibility stating that demarcation of the land was done on 07.11.2012, however, demarcation was yet to be obtained, which fact is clear from the letter dated 19.10.2012 of the Executive Engineer, HVPNL.
N) That the Arbitrator erred in holding that the petitioner would not be entitled for the amount stipulated, if the particular stage is not achieved, even if the petitioner has made efforts to achieve the end. The claim will arise only on reaching a particular milestone and not otherwise. It is stated that under no circumstances, the respondent can withhold the amount due to the petitioner for the work successfully completed by him.
O) That the Arbitrator failed to appreciate that the petitioner had completed his entire scope of work as stated in clause 3.0 of the agreement dated 05.02.2008. Partial load of 4800 KVA was applied by the respondent, which was duly sanctioned on 10.07.2008 and energized on 01.12.2011. The Arbitrator failed to appreciate that the erection of service line was not within the purview of the petitioner and the respondent was not justified in stopping the payment for that reason. Moreover, the payment in OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 16 of 91 addendum II was fixed at Rs. 25.0 lakhs against which, Rs. 6,25,000/- was given in advance and balance was to be given on the completion of the work. There was no provision that payment was to be made in stages like in clause 3 of agreement dated 05.02.2008. Arbitrator erred in holding that the petitioner has been paid an excess of Rs. 64,750/-. In fact, even by taking the principle adopted by the Arbitrator, though not admitted, the petitioner is entitled to an amount equivalent to 75% of the amount because the petitioner has completed the entire scope of work in the service agreement dated 05.02.2008. 75% of the contract price of Rs. 1,62,35,000/- comes to Rs. 1,21,76,250/-. If the petitioner is granted this sum as his renumeration, he is still entitled to an amount of Rs. 39,94,000/- (i.e. Rs. 1,21,76,250/- minus Rs. 81,82,250/-).
P) That the Arbitrator erred in allowing Rs. 50,000/- to the respondent in completing the job of obtaining GELO although, the bills filed by the respondent were in the nature of hotel bills. The Arbitrator also erred in awarding Rs. 50,000/- as counter claim viz a viz the second agreement dated 12.12.2011 as to the wrong advice given although, he had rightly advised the respondent for a second 11 KVA line in accordance with the provisions of Section 43 of the Electricity Act, 2003.
Q) That the petitioner was not given opportunity to exhibit the documents despite the order of DIAC dated 17.05.2018 and the Arbitrator proceeded to pass the award with smacks of not only a unilateral, arbitrary action but also smacks of mis-conduct on her part.
21. On getting notice of the petition, the respondent filed its reply denying the averments made in the petition. It stated that the grounds raised by the petitioner are mere reiteration of the grounds raised before the Arbitrator. He has failed to show any patent illegality in the impugned award so as to warrant interference of the Court. It is stated that the entire petition has been drafted as an appeal to OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 17 of 91 challenge the award on the ground that the Arbitrator has not correctly interpreted the covenants of the contract and wrongly construed the addendums to be the part of only one contract, though, it is well settled that the interpretation given by the Arbitrator of the contract is within his jurisdiction and even erroneous interpretation could not be a ground to interfere with the award. It is stated that the Arbitrator has followed a sound process and the award is well reasoned and does not suffer from any procedural defects. The Court cannot venture into the evidence placed and its appreciation by the Arbitrator, who is the final determiner of the quality as well as the quantity of evidence placed before her. The Court while exercising its jurisdiction under Section 34 of the Act should not sit in appeal over an arbitral award nor should investigate the merits of the case and reexamine the documentary and other evidence on record for finding out whether or not the Arbitrator has committed an error of law.
22. It is stated that the petitioner vide his claim before the Arbitrator had tried to show that addendum 2 dated 15.10.2012 and service agreement dated 05.02.2008 were the separate and independent contract, whereas, the reality was that the addendum no. 2 was an amendment to the work order / payment to the service agreement. It is stated OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 18 of 91 that if the scope of work was not achieved, the purpose of agreement i.e. completion and implementation was useless. The scope of work was to be performed in its entirety as contained in addendum 2 to the service agreement. It is stated that the Arbitrator has given a reasoned award in respect of issue no. 3 & 4 in the case reference no. DAC/604/08-14 and issue no. 2 & 3 in the case reference no. DAC/679/01-15, where, she has rightly held that the petitioner has failed to prove that he is entitled to recover any amount under any of the agreements i.e. service agreement & addendum 2 and that the respondent is justified in withholding the payment beyond what was actually paid. It is stated that issue no. 4 & 5 in the case reference no. DAC/604/08-14 have rightly been decided by the Arbitrator giving detailed reasons. It is stated that in the case reference no. DAC/604/08-14, the petitioner was only able to perform the first three tasks as per the agreement dated 05.02.2008, the rest became impossible to perform due to the defaults of the respondent (which is a question of fact). It is stated that the petitioner failed to prove what nature or extent of damage was suffered by him or to state any law which entitled the petitioner to the full value of the contract, when the respondent breached the contract. It is stated that under addendum 2, the petitioner was required to provide GELO approval within OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 19 of 91 90 days i.e upto 21.04.2013 (which was extended on the request of the petitioner) but till 21.04.2013, he failed to provide GELO approval. It is stated that though the petitioner was not responsible for the construction of sub station / lines or installation of meters but was responsible for providing / getting approvals from the authorities, which he failed to provide as defined under the agreement dated 05.02.2008 including addendum 1 & 2. It is stated that the petitioner failed to complete the assignment and in fact abandoned the same in April 2013 and therefore, the contention of the petitioner that he was ready and willing to perform his part of the agreement is without any basis. It is stated that the petitioner wrongly interpreted the law laid down in the case of Maula Baux supra and Fateh Chand supra. It is stated that it is a matter of record that the petitioner failed to achieve GELO approval for which, the petitioner had travelled to Chandigarh from New Delhi / Gurugram. The compensation was awarded by the Arbitrator qua such expenses and nothing more. In fact, the respondent had incurred higher expenses. It is stated that nothing in the letter dated 28.01.2013 proves that at the respondent's fault, the petitioner could not obtain GELO approval. On the contrary, letter dated 25.02.2013 addressed by the respondent to HPVNL shows that the petitioner had visited HPVNL office only once i.e. on OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 20 of 91 07.02.2013 during the period of 90 days, which clearly shows that he lacked in making efforts for GELO approval, which was rightly observed by the Arbitrator in Para 52 of the award. It is stated that the claim of the petitioner incurring more than Rs. 50,000/- on such travel and stay in the hotel seems unacceptable and questionable.
23. It is stated that the Arbitrator in para 56 to 67 of the award has rightly held that the parties are governed by the contract and nothing in the contract mentions about the fixed renumeration to be paid to the petitioner. He would therefore be paid in proportion to the work done, if the stage is achieved, the petitioner cannot simply ask for the price of the agreement.
24. It is stated that although, the petitioner had advised for 2nd 11 KVA for the project but he could not obtain the approval from HPVNL. He wrongly advised the respondent for the 2nd line, although, the license could be granted for one service line in a project. It not only wasted the resources of the respondent but also caused delay in the project. It is stated that fixed renumeration was to be paid only upon the completion of tasks / works under the agreement dated 05.02.2008 as amended which the petitioner failed to achieve. The Arbitrator has rightly OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 21 of 91 mentioned that even though, the respondent breached the service agreement but such breach only gives right to claim damages, not for the whole contract amount which the petitioner failed to prove.
25. The petitioner filed the rejoinder denying the averments made in the reply and reiterated what has been stated in the petition. It is stated that the admitted facts were wrongly stated by the Arbitrator with regard to the completion of work pertaining to the service agreement dated 05.02.2008 that the petitioner never claimed his dues. It is stated that on 23.10.2013, the petitioner had raised a bill claiming the balance payment of Rs. 61,77,750/-, which was also replied by the respondent but the Arbitrator in para 37 of the award wrongly stated that the petitioner did not ask for his dues under the contract stating that nothing remained to be done under the contract dated 05.02.2008. It is stated that the Arbitrator did not give opportunity to the petitioner to exhibit the documents and proceeded to pass the award, which smacks of misconduct on her part and is patently illegal.
26. It is stated that the scope of the service agreement dated 05.02.2008 was stated in clause 3, which scope in fact had been completed by the petitioner. The respondent OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 22 of 91 has wrongly alleged that plan changed to AIS to GIS because in the service agreement dated 05.02.2008, there was no mention of installation of AIS Substation. In fact, the agreement dated 05.02.2008 stood fulfilled. Since the land made available was not free from encumbrances and some portion of the land was with Municipal Corporation of Gurugram, the petitioner in order to overcome this hurdle had suggested for construction of GIS sub station, which required small area of land. Even the land made available for GIS Substation was not free from encumbrances and had no approval of the authorities, which is evident from the letter dated 28.01.2013 of the petitioner. Since, the land was not free from encumbrances, GELO for GIS could not be obtained by the petitioner, though, tentative GELO was made available by the petitioner in November 2012 itself. It is stated that the petitioner had written for settlement of his dues towards the service agreement dated 05.02.2008 vide his letter dated 23.10.2013 but as a counter blast, the respondent terminated all the service agreements vide notice dated 08.11.2013. It is stated that there was no substitution, recession or alteration of the service agreement dated 05.02.2008 and the subsequent agreements / addendums dated 04.11.2008, 12.12.2011 and 15.10.2012 were the independent contracts. Even the petitioner had completed OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 23 of 91 the works stated in addendum 1. The work in addendum 2 was also deemed completed and therefore, he is entitled to the full amount in accordance with addendum 2. It is stated that the petitioner has not claimed the damages but the actual amount which was due to him as per the service agreement.
27. It is stated that the advice for the 2nd 11 KVA line was in accordance with the Electricity Act, but due to the policy of HVPNL i.e. one line for one connection, HVPNL rejected the proposal for the 2nd KVA line. Although, the petitioner had advised to file a case but the respondent did not respond.
Arguments and contentions:-
28. I have heard Ld. Counsel Sh. Mukul Dhawan for the petitioner and Sh. Vikas Dhawan assisted by Sh. Vaibhav Jain & Sh. Shashank Pandey, Ld. Counsel for the respondent. Parties also filed their written synopsis.
29. Ld. Counsel for the petitioner reiterated what has been stated in the petition and submitted that the petitioner had completed the entire scope of work as stipulated in clause 3 of the service agreement dated 05.02.2008 and was therefore entitled to the entire amount specified in clause 8 of the agreement. Ld. Counsel referred clause 2, OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 24 of 91 3, 8, 9, 12, 1& 14 of the service agreement dated 05.02.2008 and all the agreements / addendums and stated that all the four agreements were the independent contracts but the Arbitrator erred in holding that the service agreement dated 05.02.2008 stood novated by addendum 2 dated 15.10.2012. This observation is not only factually incorrect but is perverse. Ld. counsel stated that the agreement dated 05.02.2008 was for arranging the technical feasibility of 50 MW load and for establishing a 66 KV Substation, however, addendum 2 was entered into when the respondent failed to provide the land free from encumbrances. There was a change in the technical design resulting into the plan being revised and the period of completion being extended to 31.12.2012. He stated that in order to appreciate whether there was any novation, intention of the parties is to be seen. He referred Section 62 of the Contract Act and stated that novation will occur only when there is rescinding, alteration or substitution of the old contract. He stated that in the present case, there was neither any substitution nor rescinding nor the alteration of the service agreement dated 05.02.2008. The intention of the parties was to retain the service agreement dated 05.02.2008 and because of this, clauses 3.1.1 to 3.1.6 were retained in addendum 2 dated 15.10.2012. In fact, addendum 2 was entered to effectuate the service OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 25 of 91 agreement dated 05.02.2008 and not with the intention to substitute the service agreement. Novation only occurs when there is a complete substitution of the old contract by the new contract or when the old contract need not be performed. Since, most of the clauses were retained in addendum 2, it did not completely alter the original contract. Ld. Counsel stated that the patent illegality is clear from the fact that the award is in violation of the established procedure and Section 62 of the Contract Act.
30. Ld. Counsel in support of his contentions placed reliance on the case of Delhi Airport Metro Express Pvt Ltd Vs. CAF India Pvt Ltd & Anr, 215 (2014) DLT 112, Lata Construction & Ors Vs. Dr. Ramesh Chandra Ramnik Lal Shah & Anr, 2001 SCC 586 and Chrisomar Corporation Vs. MJR Steels Pvt Ltd & Anr, 2018 (16) SCC 117 to contend that Section 62 of the Contract Act does not get satisfied if the parties do not intend to substitute the new contract in place of the old one and intend to retain the old one with certain additional obligations. A substituted contract should rescind or alter or extinguish the previous contract. The alteration must go to the very root of the original contract and change the essential character, so that the modified contract must be read as doing away with the original contract.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 26 of 91
31. Ld. Counsel stated that in the instant case, the original terms of the service agreement dated 05.02.2008 continued to be the part of addendum 2 dated 15.10.2012 as evident from clause 8.4.1. Ld. Counsel referred Para 35, 37 & 39 of the award and stated that the observation made by the Arbitrator that addendum 2 was merely amendment of the contract dated 05.02.2008 amounting to novation of the contract is wrong, perverse and fallacious because mere amendment of the contract dated 05.02.2008 under no circumstances amounts to novation.
32. Ld. Counsel contended that AIS project had to be abandoned because of the defective title in the land offered by the respondent to HVPNL in spite of the fact that GELO for AIS was approved on 15.04.2011. HVPNL vide letter dated 19.11.2012 had intimated that for the Substation to be built on GIS technology, respondent would be required to take up the matter with HVPNL for change in scope and to submit GELO for approval. In the meantime, ASF issued MOM for the revised GELO for GIS and appointed the petitioner to get the approval within 90 days and provide all technical support in finalizing the tender for 66 KV Substation but due to non fulfillment of requirement by the respondent, the petitioner could not OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 27 of 91 make available the GELO, though, he had made available the tentative GELO for GIS Substation in November 2012 itself.
33. Ld. Counsel contended that the petitioner had completed the entire scope of work as stipulated in clause 3 of the agreement dated 05.02.2008 i.e. submission of application, arranging technical feasibility of 50 MW load, arranging estimate of service line, getting clearance from the authorities and arranging installation of energy meter as per load release etc. Ld. Counsel stated that owner / respondent was to provide the land free of cost for establishing 66 KV Substation. He stated that the payments to be made for the work executed was stipulated in clause 8.4 i.e. 10% advance, 20% on getting the load sanctioned and technical feasibility, 25% on release of proportionate load, 25% on erection of service line and 20% of installation meter. Ld. Counsel stated that the Arbitrator justified the payment as 50% i.e. 5% advance, 20% on getting the load sanctioned and 25% on release of the proportionate load but she failed to appreciate that as per clause 3.1.4, 20% of the proportionate contract price was payable on the installation of meter. Ld. Counsel stated that load of MVA i.e. 4800 KVA was sanctioned on 11.07.2008 and energized in December 2011, which fact OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 28 of 91 was also admitted by DW1. Ld. Counsel stated that the load was released once the meter was installed but the Arbitrator erred in withholding 20% of the proportionate contract price on the installation of meter and stating that the petitioner was liable only for payment of 50%. Ld. Counsel contended that the petitioner is also entitled for the payment of 25% on erection of service line in terms of clause 2 as the job of the petitioner was to implement the project and render services for the execution and completion of the project. Physical execution was not within his scope. Ld. Counsel stated that the petitioner had carried out the liasoning work with the authorities for getting the route approval, forest clearance and procuring equipment to be delivered to HVPNL. Ld. Counsel stated that for construction of Substation / tower, the respondent had entered into an agreement dated 13.07.2009 with DHBVNL and HVPNL. Subsequently, it entered into an agreement on 31.12.2010 with Adeco for construction of tower and double circuit service line to be drawn from Sector 56, Gurugram but due to non providing of land free of encumbrances, neither AIS Substation nor GIS Substation could be erected, though, the petitioner had complied with all the requirements stipulated in the agreement and as such his work was deemed completed. Ld. Counsel contended that the Arbitrator failed to OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 29 of 91 appreciate the principle of deemed completion as discussed in the case of Nathu Lal Vs. Phool Chand supra in correct perspective.
34. Ld. Counsel stated that GELO in respect of addendum 2 could not be got since the title of the land was not clear. This fact was reiterated in the suggestive note of the petitioner dated 28.01.2013 and the letter dated 23.10.2013. Ld. Counsel stated that GELO designs could be processed and approved only after receiving the written confirmation from the Civil Department for taking over the land for the Substation and staff quarters, which was never received. Since, the demarcation of Substation land and letter from Revenue Department was not made available by ASF, Civil Department did not issue the written confirmation for taking over the land for the Substation and staff quarters as per TPA. Ld. Counsel stated that there is no evidence to show that GELO for GIS Substation was made available by the respondent, therefore, credit of obtaining GELO and allowing the counter claim of the respondent and awarding Rs. 50,000/- was wrong and illegal on the part of the Arbitrator.
35. Ld. Counsel stated that the fee of Rs. 3.0 lakhs in each claim, total amounting to Rs. 6.0 lakhs against the OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 30 of 91 award of Rs. 1,14,750/-, Rs. 1,78,688/-, Rs. 50,000/- along with interest @ 12% in both the reference cases was wrongly and arbitrarily awarded. Ld. Counsel referred the case of Associate Builders VS. DDA (2015) 3 SCC 49 and stated that a decision which is perverse or so irrational that no reasonable person would have arrived at the same should not be sustained in a Court of law. Ld. Counsel also referred the cases of ONGC Vs. Saw Pipes (2003) 5 SCC 705, ONGC Vs. Western Geco International Ltd, (2004) 9 SCC 263, Som Datt Builders Ltd Vs. State of Kerala, (2009) 10 SCC 259 and Vinod Seth Vs. Devinder Bajaj, (2010) 8SCC 1 to contend that the petition under Section 34 of the Act is maintainable.
36. Ld. Counsel for the respondent per contra argued that the petition is not tenable in the eyes of law, since, it is not covered under the grounds provided in Section 34 of the Act. Ld. Counsel referred the service agreement dated 05.02.2008, tripartite agreement dated 13.07.2009, letter of DHBVN to the respondent dated 06.02.2012 rejecting the proposal of 2nd KVA line, addendum 2 dated 15.10.2012, minutes of the meeting dated 12.10.2012, letter of the petitioner dated 28.01.2013, mails of the petitioner dated 08.02.2013, 11.02.2013, 15.02.2013, 01.04.2013, letters of the petitioner dated 23.10.2013, 21.11.2013, 13.01.2014, OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 31 of 91 04.03.2014, 20.05.2014, 27.05.2014, 17.07.2014, letters of the respondent dated 08.11.2013, 20.01.2014, 25.06.2014 and the extracts of the cross examination of the respondent's witness. He also referred the case of Nalini Singh Associates VS. Prime Time IP Media Services Limited, 2008 (106) DRJ 734 to contend that Section 62 of the Contract Act is based on the principle that a contract is the outcome of a mutual agreement and it is equally open to the parties to mutually agree to bring the said contract to an end, enter into a new contract or modify the earlier contract. Contractual obligations can be modified by mutual consent. Parties can vary the terms of the contract and absolve a party from the original obligations. Once Section 62 applies, parties are bound by the terms & conditions mentioned in the 2nd contract or the amended terms and not by the first contract. Breach of the subsequent contract will not revive the original contract, unless intention of the parties is to the contrary. The question is of intention of the parties, when they entered into the 2nd contract or modified the earlier terms. It does not require additional or new consideration or possibility thereof by any party, to be a valid and enforceable contract. Discharge of original contract is regarded as consideration in the new contract. Release from the past consideration is a good consideration in the new contract.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 32 of 91
37. Ld. Counsel contended that both the addendums were the part of the service agreement dated 05.02.2008 and not the separate agreements. Ld. Counsel stated that the petitioner was to arrange GELO within the specified time, which he failed to obtain even after the extended time, which made the respondent terminate the agreement. Ld. Counsel stated that the Arbitrator has dealt with each and every point extensively and no interference is required from the Court.
38. Ld. Counsel contended that the respondent had given a certificate on 05.06.2018 that it had incurred Rs. 22.18 lakhs for defending the claims filed by the petitioner, which claims were dismissed by the Arbitrator. Only the counter claims of the respondent were considered and amounts against the claims were awarded. Ld. Counsel stated that the cost of Rs. 6.0 lakhs awarded by the Arbitrator is reasonable and cannot be questioned raising the ground that the award suffers from patent illegality or the award is a non speaking award. In support of his contentions, he referred the cases of State Trading Corporation of India Ltd Vs. Toepfer International Asia PTE Ltd (2014 7 HCC (Del) 504), Ssangyong Engineering & Construction Co. Ltd Vs. NHAI (2019 SCC Online SC OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 33 of 91 677, Associated Construction Vs. Pawan Hans Helicopters Ltd (2008) 16 SCC 128, Rashtriya Ispat Nigam Limited Vs. Dewan Chand Ram Saran (2012) 5 SCC 306, Construction & Design Services Vs. Delhi Development Authority (2015) 14 SCC 263 and Maharashtra State Electricity Distribution Company Ltd VS. Datar Swichgear Limited & Ors (2018) 3 SCC 133.
Adjudication/findings:
39. I have considered the submissions as above and gone through the impugned award and the relevant documents as well as the case laws (supra).
40. Section 34 the Arbitration and Conciliation Act as under:
"34.Application for setting aside arbitral award- (1)Recourse to a court against an arbitral award may be made only by an application for set- ting aside such award in accordance with sub-sec- tion (2) and sub- section (3).
(2)An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, fail-
ing any indication thereon, under the law for the time being in force; or OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 34 of 91
(iii) the party making the application was not given proper notice of the appointment of an arbi- trator or of the arbitral proceedings or was other- wise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains deci- sions on matters beyond the scope of the submis- sion to arbitration;
Provided that, if the decisions on matters submit- ted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corrup- tion or was in violation of Section 75 or Section
81."
ii) It is in contravention with the fundamental pol- icy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation-II- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 35 of 91 [2 (A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
41. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclusion on the same facts. The court can- not reappraise the evidence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those mentioned in the Arbitration Act. Where the arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in exercise of the power vested in it.
42. In the case of Hiedelberg Cement India Ltd Vs. The Indure Pvt Ltd, OMP (Comm) No. 413/2019 decided on 29.01.2020, it was held that law of judicial review and in- terference in proceedings under Section 34 of the Act is no OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 36 of 91 more res integra. Reference of the case Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49 was made, where the Supreme Court has held as under:-
"19. When it came to construing the expression the public policy of India contained in Section 34(2)(b)(ii) of the Arbitration Act, 1996, this Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 : held: (SCC pp. 727-28 & 744-45, paras 31 & 74)
31. Therefore, in our view, the phrase public pol- icy of India used in Section 34 in context is re- quired to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in pub- lic interest or what would be injurious or harmful to the public good or public interest has varied O.M.P. (COMM) 413/2019 Page 30 of 37 from time to time. However, the award which is, on the face of it, patently in violation of statutory provi- sions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely af- fect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal.
The result would be 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.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unrea- sonable that it shocks the conscience of the court. Such award is opposed to public policy and is re- quired to be adjudged void.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 37 of 91
74. In the result, it is held that: (A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the applica- tion furnishes proof that:
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, fail-
ing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbi- trator or of the arbitral proceedings or was other- wise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the O.M.P. (COMM) 413/2019 Page 31 of 37 sub- mission to arbitration, or it contains decisions on matters beyond the scope of the submission to ar- bitration.
(2) The court may set aside the award:
(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, (b) failing such agreement, the composi-
tion of the Arbitral Tribunal was not in accordance with Part I of the Act,
(ii) if the arbitral procedure was not in accordance with: (a) the agreement of the parties, or (b) fail- ing such agreement, the arbitral procedure was not in accordance with Part I of the Act. However, ex- ception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate. (c) If the award passed by the Arbitral Tribunal is in contra- vention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 38 of 91 (3) The award could be set aside if it is against the public policy of India, that is to say, if it is con- trary to: (a) fundamental policy of Indian law; or
(b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. (4) It could be chal- lenged: (a) as provided under Section 13(5); and
(b) Section 16(6) of the Act.......
44. It was held that in the very recent judgments, the Supreme Court has once again reiterated the law related to the examination by a Court of an Award un- der Section 34 of the Act. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held as under:-
35. What is clear, therefore, is that the expression public policy of India, whether contained in Sec-
tion 34 or in Section 48, would now mean the fun- damental policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the Renusagar understand- ing of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer ob- tain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's interven- tion would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are con- cerned, as contained in Sections 18 and 34(2)(a)
(iii) of the 1996 Act, these continue to be grounds OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 39 of 91 of challenge of an award, as is contained in para- graph 30 of Associate Builders (supra).
36. It is important to notice that the ground for in- terference insofar as it concerns interest of India has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic notions of morality or justice. This again would be in line with O.M.P. (COMM) 413/2019 Page 34 of 37 paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbi- tral awards that shock the conscience of the court that can be set aside on this ground.
37. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of In- dian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or moral- ity as understood in paragraphs 36 to 39 of Asso- ciate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)
(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in par- ticular, is now done away with.
38. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental pol- icy of Indian law, namely, the contravention of a statute not linked to public policy or public inter- est, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 40 of 91
39. Secondly, it is also made clear that re-appreci- ation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
40. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would O.M.P. (COMM) 413/2019 Page 35 of 37 certainly amount to a patent illegality on the face of the award.
41. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to de- cide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with mat- ters not allotted to him, he commits an error of ju- risdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
42. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Addition- ally, a finding based on documents taken behind the back of the parties by the arbitrator would also OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 41 of 91 qualify as a decision based on no evidence inas- much as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.
45. It was also observed that recently, in Hindustan Construction Company Limited & Anr. Vs. Union of India & Ors., 2019 SCC OnLine SC 1520, the Apex Court has held as under:-
55. Further, this Court has repeatedly held that an application under Section 34 of the Arbitration Act, 1996 is a summary proceeding not in the na-
ture of a regular suit - see Canara Nidhi Ltd. v. M. Shashikala 2019 SCC O.M.P. (COMM) 413/2019 Page 36 of 37 OnLine SC 1244 at paragraph 20. As a result, a court reviewing an arbitral award under Section 34 does not sit in appeal over the award, and if the view taken by the arbitrator is possible, no interference is called for - see Associ- ated Construction v. Pawanhans Helicopters Lim- ited. (2008) 16 SCC 128 at paragraph 17.
56. Also, as has been held in the recent deci- sion Ssangyong Engineering & Construction Co. Ltd. v. NHAI 2019 SCC OnLine SC 677, after the 2015 Amendment Act, this Court cannot interfere with an arbitral award on merits. "
43. In the backdrop of the above, let me now examine the objections against the impugned award agitated by Ld. counsel for petitioner, vis-a-vis the contentions of Ld. counsel for respondent, in support of the award.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 42 of 91
44. There is no dispute relating to service agreement dated 05.02.2008, addendum 1 dated 04.11.2008, tripartite agreement dated 12.12.2011 and addendum 2 dated 15.10.2012 and the appointment of the Arbitrator to whom the petitioner and the respondent had submitted their statement of claims / counter claims. The arbitral proceedings and attendance sheet confirm that the petitioner as well as the respondent had regularly appeared before the Arbitrator and were given due opportunities to plead and / or defend their cases. Only thereafter the impugned award was passed by the Arbitrator dealing with the claims / counter claims and the rival contentions. It is not for this Court to sit in appraisal of the evidence led before the Arbitrator and this Court will not open itself to the task of being a Judge on the evidence placed before the Arbitrator which was the subject matter of dispute.
45. In the present case, the work assigned to the petitioner vide addendum 1 was duly performed and remuneration was paid. The agreement dated 12.12.2011 is not related to the first agreement dated 05.02.2008. Its scope was to obtain a 2nd 11 KV line for the SEZ of the respondent. The petitioner failed to perform the agreement since HVPNL rejected the prayer and the petitioner did not take further step in this regard.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 43 of 91
46. On a careful perusal of service agreement dated 05.02.2008 and addendum 2 dated 15.10.2012, I find that this addendum does not give all the clauses of the agreement in so many words. This document only records the difference between the agreement dated 05.02.2008 and the one dated 15.10.2012. Only the additional clauses find their place in addendum 2. In the penultimate paragraph of this addendum, there is a remark in the following language, "As such all terms and conditions as detailed in the original contract agreement dated 25.02.2008 (sic 05.02.2008) shall remain invoked"
meaning thereby that all the terms & conditions appearing in agreement dated 05.02.2008 form part of the contract / addendum 2 dated 15.10.2012.
47. The question arises whether addendum 2 was new and independent contract or merely novation of the service agreement dated 05.02.2008?
48. Section 62 of the Indian Contract Act provides that if the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the original contract need not be performed".
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 44 of 91
49. 'Novation' means substitution of existing contract with a new one. When, by an agreement between the parties to a contract, a new contact replaces an existing one, the already existing contract is thereby discharged and in its place the obligation of the parties in respect of the new contract comes into existence.
50. In Lata Construction Vs. Dr. Ramachandra Ramniklal Shah, AIR 2000 SC380, the Supreme Court has held:
"One of the essential requirements of novation, as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract has to be by agreement between the parties. The substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said to be in substitution of the earlier contract."
51. In the case of Chrisomar Corporation supra it was held that alteration must go to the very root of the original contract and change its essential character, so that the modified contract must be read as doing away with the original contract.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 45 of 91
52. In the instant case, the terms of the service agreement dated 05.02.2008 continued to be the part of the addendum 2 dated 15.10.2012. It was stated in clause 8.4.1 that rest of the payment terms and other terms and conditions of the contract entered on 05.02.2008 shall remain invoked.
53. In the case of Nalini Singh Associates Vs. Prime Time IP Media Service Ltd, 2008 (106) DRJ 734, it was held that Section 62 of the Contract Act allows novation, modification and alteration of an earlier contract with a new agreement. It gives right to parties to put a contract to an end or terminate it. Under the new agreement or upon amendment of an earlier contract, prior rights of parties are extinguished and new rights and obligations come into existence. It is based upon the principle that a contract is the outcome of a mutual agreement and it is equally open to the parties to mutually agree to bring the said contract to an end, enter into a new contract or modify the earlier contract.
54. The Arbitrator while deciding issue no. 2 in case reference no. DAC 604/08-14 has observed that this OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 46 of 91 question depends upon the interpretation of the Addendum 2, which interpretation depends upon the intention of the parties for which one must see the surrounding facts apart from the text of the two documents. It was stated that soon before the addendum 2 was signed, the parties had a meeting on 12.10.2012 to discuss the course of action to follow.
55. It was held that text of addendum 2 finds clear mention of only additional work that too only in respect of areas where there is change in the terms. Further the terms and conditions regarding payment have been incorporated in Addendum 2. The scope of work clause upto 3.1 to 3.1.6 in both the contracts is the same. Only change is shown in clause 3.1.7, 3.1.8 & 3.1.9. The addendum 2 is so drafted that the extra work required by change in technical design is clearly brought out. So is the case with the payment of the contract price.
56. Admittedly, in the service agreement dated 05.02.2008, the nature of Substation was not specifically recorded, however, both the parties had understood the Substation as "Air Insulated Substation (AIS)". This fact was also acknowledged by the petitioner in the statement of claims (reference no. 604/08-14), where he had stated OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 47 of 91 that the principals decided to change the Substation from AIS to Gas Insulated Substation (GIS). On 12.10.2012, the parties had decided to change the Substation from AIS to GIS. The technical design changed and due to change, revised plans were to be prepared and got approved from HVPNL. In the meeting held on 12.10.2012, change in the scope of work and the additional consideration, which was required to be paid to the petitioner were discussed. The extracts of the meeting Ex. RW1/3 are reproduced as under:
Mr. K. L. Gugnani explained that earlier 66 KV HT line place and 66 KVA grid Substation plan and GELO was approved by HVPNL authorities but later on due to change in technical design etc., this plan has to be revised again and will require approval of HVPNL authorities for execution. This work is to be got completed within the stipulated period of time i.e. on or before 31.12.2012 to restrict further delay. Amongst other, the following things are decided:-
1) The revised plans / layout will be got approved by Mr. K. L. Gugnani within 90 days of the submission of the plan with HVPNL authorities.
2) Mr.K. L. Gugnani will provide all technical support and assistance in finalizing the tenders for establishing the 66 KV grid Substation under the new plan and will help ASF in selecting the appropriate vendor for execution of this work.
3) For this additional work, Mr. K. L. Gugnani will be paid a sum of Rs. 50/- per KW over and above the rates agreed with him in his contract dated 05.02.2008 of the sanctioned load of 50 MW.
4) The aforesaid fee will be disbursed by 25% in advance and balance will be disbursed after successful commissioning of 66 KV grid Substation as per new OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 48 of 91 sanctioned scheme.
5) All other terms & conditions of the contract entered on 05.02.2008 will remain invoked.
6) All other technical support given by Mr. K. L. Gugnani will continue as it is, which is covered under the contract dated 05.02.2008.
7) All technical approval of works upto energization of 66 KV sub station shall be in scope of Mr. K. L. Gugnai.
57. On 15.10.2012, due to change in technical design an amendment was made to the service agreement dated 05.02.2008 by entering into addendum 2, whereby, clause 3.0 (Scope of work) and clause 8.0 (contract price & payment terms) were amended. On 28.01.2013, the petitioner sent a letter to the respondent that the modified GELO drawing dated 17.01.2013 was delivered on 21.01.2013 for tentative approval and now the matter is required to be taken up with CE / Planing, HVPNL for approval of GIS technology. He stated that he would get the layout approved within 90 days of the submission of the drawning with HVPNL i.e. by 21.04.2013. Record however shows that the petitioner failed to obtain the approval by 21.04.2013.
58. As is evident from the record, there was complete silence on the part of the petitioner for about 7-8 months.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 49 of 91 On 23.10.2013, he sent a bill for Rs. 61,77,750/- purporting to be towards the balance payment under the service agreement dated 05.02.2008 admitting that installation of energy meter and establishment of Substation have not been completed. He also sought confirmation for revival of MOM. The respondent vide letter dated 08.11.2013 terminated the service agreement dated 05.02.2008 along with addendum 2 dated 15.10.2012 alleging that for the last few months, he (petitioner) has not been taking interest; decision to change the Substation from AIS to GIS was taken as per his recommendation with an increase in the fee; the service agreement dated 12.12.2011 for 2nd 11 KVA line is in suspended animation; and the proposal was rejected by DHBVN vide letter dated 06.02.2012 resulted into huge financial losses. He was informed that he miserably failed to achieve the targeted milesstone on the revised date.
59. The petitioner replied to the letter of termination vide his letter dated 21.11.2013, wherein, he stated that the initial service agreement dated 05.02.2008 was meant for AIS and not GIS.
This very letter shows that the service agreement was for AIS and addendum was not the separate and independent agreement, rather amendment to the service OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 50 of 91 agreement dated 05.02.2008 and had no independent existence. In his letter dated 13.01.2014, the petitioner had admitted that there are pending talks, which he commits to complete. It is relevant to reproduce some of the extracts of this letter interalia as under:
".... I take the onus and commitment of completion of the following pending tasks:
a) Arrangement of estimate for service line upto inside / outside the owners premises including arranging all associated clearances from approprate authorities.
b) Arrangement for installation of energy meter (s) as per the load released......"
"....Towards this endeavour, I request your good office to kindly confirm response for expediting the pending task as detailed above thereon as agreed in the agreement of 05 Feb 2008...."
60. The respondent on the above letter wrote to the petitioner vide letter dated 20.01.2014 that an alternative arrangement has been made, which has resulted in certain progress and they are not in a position to alter the course due to extreme time pressure on the project.
It was after getting this letter, the petitioner for the first time in his letter dated 04.03.2014 took the stand that the service agreement dated 05.02.2008 is an independent agreement and the work against that agreement has already been completed. This stand is contrary to the above OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 51 of 91 referred letters, where he had admitted that the work is incomplete under the service agreement dated 05.02.2008 (letter dated 13.01.2014). Record shows that the respondent received the tentative approval of GELO drawing for the GIS Substation on 23.04.2014 and it was thereafter, the petitioner wrote to the respondent to confirm revival of MOM taking credit that the approval of GELO for GIS was completed through his efforts.
61. It was rightly observed by the Arbitrator that the purpose of the contract dated 05.02.2008 was to obtain electricity connection for the respondent's SEZ ending with energisation of 66 KV Substation. Before the purpose could be achieved, the plan changed from AIS Substation to GIS Substation. The end contract dated 05.02.2008 was still unfulfilled on 15.10.2012 when Addendum 2 was signed and the sole purpose of Addendum 2 was the same as for the contract dated 05.02.2008 i.e. to obtain the connection and energisation of 66 KV Substation.
It was held that it is clear from the above facts that the Addendum 2 was merely an amendment of the contract dated 05.02.2008 amounting to novation of contract. If the contract Addendum 2 was a distinct contract and nothing was left to be done in the contract dated 05.02.2008, the parties would have worked out the dues till then and would OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 52 of 91 have paid and received the same and would have closed the chapter, which the parties did not do. Further, the petitioner, who claimed that nothing remained to be done under the contract dated 05.02.2008, did not ask for his dues under the contract. This shows that both the parties treated the contract dated 05.02.2008 as subsisting albeit with the modifications of Addendum 2.
62. I agree with the observation of the Arbitrator that it was thus no more necessary to perform the contract dated 05.02.2008 and dues, if any, have to assessed on the basis of Addendum 2. What follows is that the petitioner's dues, if any, will have to be assessed on the basis of his work under the amended contact. Even if the two contracts are treated as two different contracts, the case of the petitioner would not actually improve. It was rightly held that the contract dated 05.02.2008 as well as the Addendum 1 & 2 together were only the one contract, the first one having been novated by the two subsequent addendums.
63. In the instant case, in addendum 2, sub-clause 3.1.7 to 3.1.9 were only added and sub clause 3.1.1 to 3.1.6 of the service agreement dated 05.02.2008 remained invoked. Clause 3.1.9 specifically provided that till the energisation of 66 KV Substation, the petitioner was responsible for OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 53 of 91 providing services and getting all technical approval. Changes were also made in clause 8.0 in respect of the contract price and service payment terms. The contract price was revised to Rs. 1,97,35,000/-. The break up is as under:
Original service contract value - Rs. 1,37,35,000/-
Addendum 1 value - Rs. 35,00,000/-
Addendum 2 value - Rs. 25,00,000/-
Total as on 12.10.2012 - Rs.1,97,35,000/-
64. As per clause 8.4, the payment terms for original service agreement dated 05.02.2008 shall be 10% of the contract value, for every lot of load permitted / approved, 20% of proportionate contract price of the load released / sanctioned / TF received, 25% on receipt of estimate of the proportionate load released, 25% on erection of service line upto owner premises and 20% on installation of meter.
As per clause 8.4.1, fee for the additional work of addendum 2 would be disbursed by 25% in advance and balance after successful commissioning of 66 KV grid Substation as per the new sanction scheme. It was specifically provided that rest of the payment terms and all of the terms & conditions of the original service contract entered on 05.02.2008 would remain invoked.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 54 of 91
65. It therefore signifies that addendum 2 was not a separate agreement or independent agreement and was only an amendment to the service agreement dated 05.02.2008. Had it been a separate or independent agreement, the total contract price would have been Rs. 25,00,000/- and not Rs. 1,97,35,000/-. The analysis of the amended contract price and payment terms also shows that the payment terms were bifurcated in two parts. 1St part dealt with the payment terms of the original agreement dated 05.02.2008 and addendum 1 while the 2 nd part dealt with the payment terms of addendum 2.
66. It is evident from the record, the petitioner could reach only the two milestone in respect of the original agreement out of the four milestones while in addendum 2, he could not reach any milestone as neither he obtained the approval of GELO for GIS nor reached the stage of successful commissioning of the Substation.
67. In the instant case, the Arbitrator has considered the contentions that there was only one contract novated on 15.10.2012 and the obligations of the parties under the contract have to be deciphered from Addendum 2 read OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 55 of 91 with the agreement dated 05.02.2008. It was observed that whatever be the situation, the petitioner's claim in the first claim petition i.e. case reference no. DAC 604/08-14, is that he performed the first three tasks and did not perform the rest as it became impossible to perform due to certain defaults of the respondent. It was held that whether the respondent was in default or in breach in any manner is a question of fact. However, the petitioner has to satisfy that he is entitled to full value of contract without performing the contract simply because the respondent made it impossible for him to carry out the rest of the tasks assigned to him. If the respondent is in breach, the petitioner will be enitled to damages caused by the breach of contract. Under no law, the petitioner can claim the entire value of contract without performing the same on the simple plea that respondent failed to do certain acts.
68. In the instant case, the parties had entered into the agreements / addendums with open eyes. So, they cannot be allowed to wriggle out of the terms mutually agreed upon. Service agreement and its addendums provide for milestones payment. Unless a milestone is achieved, the amount is not payable. In these circumstances, the service agreement dated 05.02.2008 cannot be said to be an independent or separate from the addendums.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 56 of 91
69. In the case of Delhi Airport Metro Pvt Ltd (supra), the parties had agreed not to substitute the assignment agreement in place of the maintenance agreement. They had entered into the assignment agreement in order to effectuate the maintenance agreement. It was held that it cannot be said that the assignment agreement alters the maintenance agreement, which leads to novation.
In the present case, conjoint reading of the clauses in the agreement dated 05.02.2008 and addendum 2 dated 15.02.2012 shows that there was clear intention of the parties to substitute the contract on the basis of the feasibility assessed by the parties by providing GIS Substation in place AIS Substation.
70. In the case of Union of India & Ors Vs. Tantia Construction Pvt Ltd (supra), the respondent had refused to take up the construction of the extended viaduct, which was not covered in the original agreement, which made the appellant float a separate tender. The respondent however had offered to execute varied quantity of work in respect of the balance work left over from the contract due to variation in design. Later, the appellant insisted that the respondent should carry out the entire work including the additional work of the viaduct. When the respondent OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 57 of 91 refused, the appellant terminated the contract and decided to re-tender the entire block at the risk and cost of the respondent. The Supreme Court held that the termination of the contract in releation to original tender on the basis of the said supposition was unjustified.
In the present case, it was the petitioner, who had agreed to get approval of the revised plans / layout within 90 days and provide all technical support for establishing GIS Substation under the new plan, however, he failed to obtain GELO within the specified time. Further, for 7-8 months, he did not show any interest in the project, which made the respondent terminate the contract. Further, the change in technology from AIS to GIS would not change the nature of work of the consultant / petitioner, which remained the same i.e. liaisoning, getting approvals and advisory.
71. In the instant case, clause 3.0 and clause 8.0 of the service agreement dated 05.02.2008 as amended by addendum 2 dated 15.10.2012 bind the parties. After the amendment, the work as provided under the amended / revised clause 3.0 of addendum 2 had to be completed and the revised / amended payment term as provided in addendum 2 was applicable to the transaction. The parties had mutually agreed to amend the service agreement and OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 58 of 91 had accepted clause 3.0 and 8.0 without any protest or demur. Thus, no grievance could be raised by the petitioner on this count as it was consensual and the respondent was within its rights and in terms of clause 12.0 and 13.0 to terminate the agreement / contract.
72. Now coming to 'Advance Payment Clause', in the original service agreement dated 05.02.2008, the payment terms provided that 10% of the contract price would be paid as advance. Clause 14 provided to indemnify the respondent for any loss incurred with regard to the advance. In the instant case, the respondent had paid Rs. 13,75,000/- as advance in respect of the service agreement dated 05.02.2008 and Rs. 6,25,000/- under addendum 2. There is no dispute that the petitioner failed to obtain approval of GELO for GIS Substation and the service agreement along with the addendums was terminated on 08.11.2013. The petitioner also could not obtain the approval of the revised plans / layout nor could achieve the milestone of commissioning of 66 KV grid Substation. He also could not perform the work relating to the agreement dated 12.12.2011, which was for 11 KV service line as the application, which was filed on the advice of the petitioner, was rejected.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 59 of 91 Advance by its very nature is the money received without performing any service, which has to be accounted for. In the service agreement dated 05.02.2008, there is no clause, which provides that advance is non refundable. The very purpose of advance is for the performance of the contract in full and in the event of non performance of the contract in full, whether it is due to the fault on the part of contractor or on the part of the employer, which factor is immaterial and the contractor as a matter of right cannot claim to retain advance. For the aforesaid reasons, I agree with the contention of Ld. Counsel for the respondent that the petitioner has no right to retain the advance as he had admittedly not completed the work and failed to achieve the milestone.
73. In the instant case, the petitioner has sought payments purporting to be the balance consideration payable under the service agreement as well as the addendum on the theory of 'deemed completion'. It was alleged that the title of the land was not clear as portions of land were with the Municipal Corporation, no quarters were built for the operation and maintenance staff and no towers were erected and no 66 KVDC line was erected for taking the load of 66 KV.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 60 of 91
74. I find substance in the contention of the Ld. Counsel for the respondent that the service agreement dated 05.02.2008 as amended by addendum 1 & 2 do not have any provision for 'deemed completion'. The argument of the petitioner rather contradicts his own admission that there were pending works for which he had sought revival of the service agreement / addendums. If there was deemed completion, there would not have been any pending work which was required to be taken up by the petitioner as was repeatedly sought after termination vide letters dated 28.01.2013, 23.10.2013, 21.11.2013, 13.01.2014 & 20.05.2014. If there were pending works, which were required to be taken up and for which the petitioner had asked for revival of the agreement then there could not have been any 'deemed completion'. It is pertinent to mention that the petitioner in his letter dated 28.01.2013 while specifying the time upto 21.04.2013 for obtaining the GELO approval had not placed any condition. Record on the contrary shows that GELO for GIS was obtained by the respondent on 23.04.2014 without any issue being raised regarding the title of land or house being built for operation & maintenance staff.
75. The case of Nathu Lal Vs. Phool Chand supra referred by the petitioner is distingushable on facts. In that OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 61 of 91 case, Nathu Lal had agreed to sell his factory to Phool Chand. Phool Chand had made the part payment. Nathu Lal was to get the factory transferred in his name as his brother's name was entered into the revenue records. However, Nathu Lal failed to do so. Whereas, Phool Chand was ready with the balance payment but he did not make the payment to Nathu Lal for want of transfer of land in his name. It was held that Phool Chand cannot be dispossessed from the land because he was at all times ready to make the payment and it was Nathu Lal, who did not carry out his part of the contract.
In the present case, there were pending works for which the petitioner had sought revival of the service agreement / addendums. GELO for GIS was obtained by the respondent on 23.04.2014 without any issue being raised regarding the title of the land etc. The respondent had terminated the contract, when the petitioner failed to obtain GELO approval within the specified date. That being the position, the petitioner is not entitled to payments on the theory of 'deemed completion'.
76. As regards the contention that the petitioner has not claimed damages under Section 73 of the Contract Act but the balance payment under the agreement, it is well settled law that parties are bound by the terms of the contract. No OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 62 of 91 claim, which is prohibited by the agreement can be awarded as it would be in violation of Section 28 (3) of the Act. Clause 12.2 of the agreement contains the expression 'limited' and 'exclusively' in the context of petitioner's rights upon default of the owner. Even if it is assumed that the respondent has committed a default, the remedy is limited to the recovery of actual amount owed by the respondent to the petitioner for the services already performed. In the instant case, the payment terms contained the milestone against which the payments could be made. When the contract was terminated, the petitioner could only achieve two milestones. Accordingly, he was only entitled to the remedy of recovering the milestone payment and any payment beyond what has been provided as the remedy under clause 12.2 would be in violation of Section 28 (3) of the Act.
77. In the case of Indian Oil Corporation Vs. Lloyds Steel Industries Ltd (supra), it was held that though there may not be a specific clause in the contract carrying the stipulation that the time was of the essence of contract, but such inference can be drawn from the nature of the contract. It was held that when the petitioner has not suffered any actual loss, it would not be entitled to liquidated damages stipulated in the contract.
OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 63 of 91 In the instant case, the Arbitrator has not awarded any liquidated damages to the respondent but only allowed the claims as to the expenditure incurred by the respondent in obtaining the GELO for GIS Substation.
78. On a consideration of entire facts & circumstances, I find that the Arbitrator has given a logical interpretation to the terms of the contract and arrived at the findings, which do not smack from arbitrariness. The Arbitrator has held that the contract does not prescribe payment to be made periodically nor does the contract relates payment with the efforts made. It stipulates payment of the parts of the contract price on certain stages. The petitioner cannot ask for payment for stages never reached before the contracts were terminated. It was held that for execution of addendum 2, the first thing, which the petitioner was required to do was to obtain approval of GELO, which was not obtained within the stipulated time. As a result, other activities could not take place. It was also held that the petitioner failed to show any law that the contract should be deemed to have been performed.
79. It was observed that it was the respondent, who got the proposed GELO prepared from another consultant namely T. S. Sethi and Associates. The petitioner's job was OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 64 of 91 merely to get the same approved from the electricity supplier and distributor. In the agreement itself, a time limit was given. The same was got extended by the petitioner by a communication addressed to the respondent dated 28.01.2013 (Ex. RW1/4). The petitioner has categorically stated in the letter that his work would start with effect from 21.01.2013 and the revised GELO would be got approved within 90 days from the submission of plan i.e. by 21.04.2013. Admittedly GELO was not approved till 21.04.2013.
80. The Arbitrator also considered the question whether the petitioner's failure in obtaining approval for GELO was related to respondent's failure to give an undertaking and provide Cizra plan, construct the quarters etc. It was held that in law, the petitioner was to satisfy that he was entitled to full value of contract without performing the same simply because the respondent did not take some steps advised or that on account of respondent's such failure, the contract should be deemed to have been performed. No law provides that on deemed performance, payment of full value of the contract price can be allowed without performing the contract. At best, the petitioner's case is one of breach of contract and in such a case, the petitioner is not entitled to damages suffered unless proved by him.
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81. It was observed that the contract does not prescribe payment to be made periodically like monthly or annually. Nor does the contract relates payments with efforts made. The contract stipulates payment of parts of the contract price on achieving certain stages. Five stages of payment were 10% in advance, 20% on release / sanction of load, 25%on receipt of estimate of the proportionate load released, 20% on erection of service lines and 25% on installation of meter.
82. It was held that it is not in dispute that the petitioner received the proportions of the contract prices for the stages achieved under the first contract dated 05.02.2008 plus an advance of Rs. 13,75,000/- under the first contract and an advance of Rs. 6,25,000/- under the Addendum 2. Going by the contract, the petitioner cannot ask for the payments for stages never reached before the contracts were terminated.
83. For execution of Addendum 2, the first thing, that the petitioner was required to do, was to obtain approval of GELO. The GELO having not been approved within the stipulated time, the other activities in connection with the supply of electricity of SEZ namely installation of energy OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 66 of 91 meter could not take place.
84. The Arbitrator also discussed the case referred by the petitioner i.e. Delhi Development Authority Vs. Kenneth Builders & Developers Pvt Ltd & Ors (supra), which dealt with situation where a contract became impossible to perform. It was held that DDA was bound to refund the deposit received from the respondent. The Arbitrator referred Section 56 of Indian Contract Act and held that it is not understood how the petitioner can take advantage of this judgment in any way. The petitioner could ask for the compensation for the loss caused by a situation when performance had become impossible. The petitioner did not allege that he suffered loss on account of failure to achieve subsequent stage of the contract. His plea is that since it is not possible to perform the contract on account of respondent's failure to provide land free from encumbrances, he is entitled to receive the entire value of contract. It was held that such a claim is not supported by the provisions of Section 56 of Indian Contract Act. Infact the respondent may benefit from this judgment and claim refund of excess paid since performance of the contract had become impossible. The Arbitrator also considered the contention of the petitioner that the default on the part of the respondent made it OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 67 of 91 impossible for him to obtain GELO within 21.04.2013 and held that there is no evidence or record to show that the sanction of GELO was declined on account of defect in the title of land offered by the respondent for building a Substation. The petitioner has been repeatedly pleading and deposing that the title of land offered by respondent was defective. He however has not been able to produce any evidence about the defect in the title of land. There is nothing on record to show that HVPNL ever wrote any letter expressing that the sanction of the GELO is being withheld for want of title of land. In fact the GELO prepared by T. S. Sethi and Associates has since been approved admittedly on the offer of the same piece of land six months after the agreements were terminated vide notice dated 08.11.2013 (Ex. RW1/5). Absence of construction of operation and maintenance staff quarters or default in submitting an undertaking as mentioned by the petitioner has not come in the way of granting GELO. Only after the GELO was sanctioned, the respondent was required to erect the transmission lines and construct the Substation etc and built the quarters for operation and maintenance staff in sync with the GELO. The undertaking about making a crane available was related to the construction of Substation which again was an act subsequent to the sanction of GELO. These alleged OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 68 of 91 defaults on the part of respondent therefore could not have been the cause for the petitioner's failure to obtain the sanction for GELO. There is a letter (Ex. P51) dated 08.02.2013 from the respondent to HVPNL offering crane services for lifting the heavy equipments. There is nothing on record to show that the sanction of GELO was declined on account of any default in submitting any formal undertaking apart from what was already conveyed vide letter dated 08.02.2013 (Ex. P57). Thus, even on facts, the petitioner has failed to prove that his failure to obtain the approval for GELO was caused by the acts and omissions of the respondent.
85. It was observed that the petitioner himself had agreed at the time of signing Addendum 2 that he would be able to arrange the approval of GELO within three months. On 28.01.2013, he wrote a letter with the heading "suggestive note", interalia that HVPNL had inspected the land offered and observed that GIS Substation was technically feasible on the land; that the administrative approval of estimated cost for GIS technology would take considerable time and the respondent was required to submit demarcation of land and that the time of three months given to him for getting the GELO sanctioned begins 'now' ending 21.04.2013. It was observed that OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 69 of 91 nothing of the alleged hurdles which could make the work impossible finds mention in the letter. If these were the alleged hurdles, the petitioner would not have agreed to get the GELO approved within three months without putting any condition.
86. It was held that it is clear that the petitioner did not perform his part of the contract within the stipulated time and the respondent cannot be held responsible for such failure of the petitioner. The Arbitrator also considered the letter of the respondent to HVPNL dated 25.02.2013 and held that the letter does show that the petitioner had visited the office of HVPNL only once i.e. on 07.02.2013, during three months. It shows that the respondent did not show any reluctance to provide anything necessary for laying the tower lines. It was held that the petitioner has failed to prove that failure to get sanction of GELO was due to default on the part of the respondent.
87. It was held that the sanction for GELO was eventually received by the respondent. The petitioner considers the same as the work done by him. This is not true since the contract dated 05.02.2008, Addendum I dated 04.11.2008, Addendum 2 dated 15.10.2012 as well the agreement dated 12.12.2011 were terminated vide OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 70 of 91 notice dated 08.11.2013 (Ex. RW1/5). The respondent has cited the reasons for termination i.e. defaults and failures of the petitioner including lack of interest in the work in the "last few months". It was held that letter dated 21.11.2013 Ex. P-47, where the petitioner, inter alia, writes "such undesirable words forced me not to work especially for ASF Insignia and others." confirms the position that he had abandoned the work. It was held that the petitioner has not been able to show any evidence of any work done by him in the "last few months". Nonetheless, he asked for the 'pending payments' and came out with some advice in the last paragraph of his reply dated 21.11.2013 (Ex. P-47). Subsequently, he wrote on 13.01.2014 (Ex. P48) to the respondent, "In suppression to my registered letter dated 21.11.2013", and agreed to do the job entrusted to him vide agreement dated 05.02.2008. The agreements, admittedly were never renewed or revived. It was held that nothing achieved after the termination of the agreements can be attributed to the petitioner's efforts.
88. The question also arose before the arbitrator whether the petitioner will be entitled to any amount from the respondent on achieving the first three stages either under the agreement dated 05.02.2008 or under Addendum 2. It was held that the contract between the parties lays down OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 71 of 91 the terms of payment. By the Addendum 2, the price was altered. However, the other terms of payment were not altered except the disbursement of 25% of the contract price for the additional work of Addendum 2. The arbitrator referred clauses 8.4 and 8.4.1 and observed that the petitioner was earlier granted an advance of 10% when he signed the service agreement in February, 2008. Further amount was sanctioned by way of advance for Addendum
2. Since, the Addendum 2 has the value of Rs. 25,00,000/-, the petitioner was paid an advance of Rs. 6,25,000/- i.e. 25% of the contract value for Addendum 2. According to the respondent, the petitioner cannot retain the advance paid as the advance was to be eventually adjusted / appropriated when final payment was to be done.
89. It was held that for the claim in case reference no.
DAC/604/08-14, in the contract dated 05.02.2008, the terms of payment were similar i.e. initial 10% as advance and at subsequent stages at 20%, 25%, 25% and 20%. Though the petitioner has tried to show all the efforts which he did for the fulfillment of the contract by showing the correspondences between the respondent, HVPNL and DHBVNL but it cannot be lost sight of the fact that the parties are governed by the contract and nothing beyond the contract can be granted by the Arbitrator. The service OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 72 of 91 contract dated 05.02.2008 is not a contract in which the contractor is paid a monthly remuneration. The contract does not stipulate that the contractor would be paid in proportion to the efforts made by him. Therefore, if the milestones are achieved with or without the contractor's efforts or with or without corresponding amount of efforts, the contractor can ask for the price of the agreement. If a particular stage is not achieved, even if the contractor has made efforts to achieve that end, the claim that could arise on reaching a particular milestone cannot sustain. The admitted position is that the petitioner was paid for the milestones achieved till the Addendum 2 was entered into. The advance paid to him i.e. Rs. 6,25,000/- was a part of payment that was anticipated to be made to petitioner on novation as per Addendum 2. This is clear from the language of clause 8.4.1 of Addendum 2. Hence, the petitioner cannot retain even 25% advance given to him on Addendum 2. It is not the case of the petitioner that the remuneration payable for achieving the stages reached was more than what he has already received. It was held that the respondent was justified in withholding the payment beyond what was actually paid. The Arbitrator accordingly decided issue no. 2 & 3 in the case reference no. DAC 679/01-15 and issue no. 3 & 4 in reference no. DAC 604/08-14 against the petitioner. I am of the view OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 73 of 91 that the Arbitrator has given logical interpretation to the terms of the contract and arrived at the findings, which does not call for interference.
90. The arbitrator while deciding issue no. 4 and 5 in the case reference no. DAC 604/08-14 i.e. counter claims of the respondent i.e. (i) Liquidated damages of Rs. 13,75,000/- (ii) refund of advance paid on execution of addendum 2 of Rs. 6,25,000/- and (iii) the cost incurred for vising Panchkula, Chandigarh when the respondent made its own efforts to get the sanctions from HVPNL Rs. 5,20,000/-, referred clause 12.3 and clause 14.1 and observed that Rs. 13,75,000/- is the advance that was paid when the agreement was entered into on 05.02.2008. The petitioner did not conclude the job as it stood after the amendment by Addendum 2. He failed to achieve the target for the sanction of GELO. As per the evidence on record, he did not attend to the job at all after he failed to achieve the deadline for the GELO sanction. The respondent terminated the contract vide notice dated 08.11.2013. The termination of the contract has not been challenged by the petitioner. In fact the petitioner had abandoned the contract sometime in March or April 2013. The clause 12.3 dealing with "remedies upon default of the consultant" and clause no. 14.1 dealing with OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 74 of 91 'indemnity' undertaken by the petitioner could immediately be invoked and damages under those clauses could be demanded. Rs. 6,25,000/- were similarly paid when the Addendum 2 was entered into. The clause 12.3 and 14.1 continued in vogue even after the Addendum 2 was signed. For similar reasons, the respondent could invoke the clause 12.3 and 14.1 and demand refund of the advance of Rs. 6,25,000/-. It was observed that the indemnity clause limits indemnity to Rs. 13,75,000/- which was not revised at the time of entering into Addendum 2 despite an upward revision in the value of the contract to Rs. 1,97,35,000/- and further payment of Rs. 6,25,000/-.
91. It was observed that this contract has a peculiarity, namely that no provision has been made in it prescribing the manner of adjustment of the advance. The five stages of payment were 10% in advance, 20% on release on load sanctioned, 25% on receipt of estimate of the proportionate load released, 25% on erection of service lines and 20% on installation of meter. For Addendum 2, an advance of 25% of the additional fee was paid. It was held that now an advance is merely a payment in anticipation of actual dues which would be payable in future. Such advances cannot be retained in case of failure to perform the contract. The arbitrator referred the case of Chandagiri Construction OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 75 of 91 Company Vs. State of Tamil Nadu, OP No. 287 & 596 of 2009 decided on 20.10.2010 where the Supreme Court said about such advances:
"18.7 The very purpose of mobilization and equipment advance is for the performance of the contract in full and in the event of non performance of the contract in full whether it is due to the fault on the part of Contract or on the part of the Employer, which factor is immaterial, I am of the considered view that the finding of the Ld. Arbitrator in this regard that the contractor as a matter of right cannot claim to retain mobilization and equipment advance is based on sound principles and the terms of the contract, which does not require any interference."
92. It was observed that four stages after advance make a total of 90%. The question whether the petitioner was entitled to retain advance 10% would not have arisen if the contract was fulfilled and all payments made. If the payment did not fall due, the advance had to be adjusted against the remuneration to which the petitioner was actually entitled. The petitioner admittedly achieved the first two stages and became entitled to 45% of the contract price. Since there is no provision in the contract specifying how the advance would be adjusted / appropriated, it stands to logic to adjust the advance proportionately at each stage. Thus the petitioner is entitled to recover 50% of the contract price and liable to refund anything paid in excess.
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93. It was held that the total contract price was Rs.
1,97,35,000/-. The respondent has made a total payment of Rs. 1,16,82,250/-. Both the figures viz the total value of the contract and the total payment include the sum of Rs. 35,00,000/- which was the value of Addendum1 for which the petitioner has been duly paid as the work assigned by the Addendum 1 was duly performed.
The Arbitrator also considered the contention of the respondent that the petitioner has performed 45% of the work assigned by the agreement as amended by Addendum 2 and hence he is entitled to 45% of the total value viz. Rs. 1,97,35,000/-, he then would be entitled to the sum paid i.e. Rs. 1,16,82,250/- to be deducted from the value of the work done and claim the balance. It was held that a close scrutiny shows that out of the sum paid, Rs. 35,00,000/- were towards the Addendum 1 and the petitioner is/was entitled to 100% of the value. For calculating the amount due and amount paid, this sum of Rs. 35,00,000/- cannot be included. Hence, the total value of the contract now under consideration should be the original value i.e. Rs. 1,37,35000/- plus Rs. 25,00,000/- making a total of Rs. 1,62,35,000/- and similarly the amount considered as paid for this part of the contract would be Rs. 1,16,82,250/- minus Rs. 35,00,000/- equalling Rs. 81,82,250/-. 50% of the contract price calculated above is Rs. 81,17,500/-. If OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 77 of 91 the petitioner is granted this sum as his remuneration, the excess paid amounts to Rs. 64,750/-. This amount is recoverable from the petitioner and has to be allowed by way of counter claim. The arbitrator referred Clause 12.2 i.e. Respondent's remedies upon default of the consultant and held that even if the contract gets stifled due to default of the respondent, the petitioner could claim only the amounts owed by the respondent for the services already performed. Admittedly the petitioner could actually perform only the first two stages mentioned in the clause for which he has been duly paid. He can have no further claim and is bound to refund the excess paid which has been worked out to Rs. 64,750/-.
I am of the view that the Arbitrator has given the finding after considering all the facts & circumstances and evaluating the evidence and the material in hand and it does not call for interference.
94. As to the counter claim of the respondent, it was observed that the respondent has made a further counter claim of Rs. 5,20,559/- as expenses incurred by it on travel etc. by its officials who had to visit Chandigarh on various occasions to get the revised GELO approved after the petitioner failed to do this part of his job. The arbitrator referred the testimony of RW1 who had placed a bunch of OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 78 of 91 documents i.e. hotel bills and held that the bills have not been proved at all. Even if they were proved, it was necessary to show that the cost incurred was in respect of any specific job which the petitioner was required to do under the contract.
95. The arbitrator discussed the case of Construction & Design Services Vs. DDA (supra) referred by the respondent interalia that where proof of precise loss is not possible and where loss could be assumed on breach of contract, the court may proceed on guess work to some extent as to the quantum of compensation to be allowed in the given circumstances and held that the respondent in the present case has not proved any other loss except the cost incurred on visiting Chandigarh, where the office of HVPNL is situate. It is difficult to believe that the respondent would have been required to incur such cost in hotel stay etc for so many occasions. Going to Chandigarh from Gurugram / New Delhi, one can take judicial notice of, should not take more than 4 hours by road and except on rare occasions, overnight stay is not required for such official businesses. However, since one can reasonably presume that the respondent's officials may have visited HVPNL at Chandigarh / Panchkula on a couple of occasions for the purpose of obtaining sanction for GELO, OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 79 of 91 nothing more than Rs. 50,000/- may have been spent. It was held that it would be appropriate to grant Rs. 50,000/- towards the sum incurred by the respondent in completing the job of obtaining the GELO. It was held that the respondent is entitled to a sum of Rs. 64,750/- plus Rs. 50,000/- making a total of Rs. 1,14,750/-.
I am of the view that the Arbitrator has not allowed the counter claim on the guess work rather has considered the documents and then allowed the claims.
96. While deciding issue no.4 in the case reference no.
DAC 679/01-15, it was held that although, the petitioner has invoked the Arbitration in the agreement dated 12.12.2011 and obtained an order of reference, but in actual, no claim arising out of this contract has been made by the petitioner. In the 'rejoinder arguments' submitted by the petitioner, a sum of Rs. 1,50,000/- is mentioned as dues under this contract, it was held that no notice of this claim can be taken now as the same was not claimed in the claim petition. However, the respondent has raised a counter claim on the plea that the petitioner who obtained Rs. 50,000/- as advance is liable to refund the same since the petitioner failed to perform the contract Ex. RW1/11. It was observed that the contract was entered into with a view to obtain another 11 KVA line to the respondent's OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 80 of 91 premises in addition to the already existing line of that capacity. The arbitrator discussed the scope of work provided in clause 3.1 and 3.2 and held that it became clear after the evidence that the word 'to arrange' mentioned in clause 3.1.2, 3.1.3, 3.1.4 did not actually require the petitioner to actually prepare an estimate or install an energy meter or prepare even the GELO required for the purpose of obtaining the approval of technical feasibility. The petitioner did not prepare any GELO or any estimate for construction of service lines. Nor was the petitioner actually required to install the energy meter for which the respondent would have engaged another contractor. It was observed that the respondent had submitted the application but the proposal for the 2 nd 11 KVA line was promptly rejected. It was contended by the respondent that the rejection of the application for the 2 nd 11 KVA line amounts to default on the part of the petitioner in delivering the promised service. It was held that the contract defines what would amount to default. The failure of the consultant to timely deliver any services set forth in the agreement was to be taken as default on the part of the consultant. The remedies provided for upon default of the consultant, in addition to remedies available in law, as given in clause 11. 3 of the contract were:
a) Recover the permitted damages from consultant
b) Recover the amount paid to the consultant.
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97. It was held that admittedly, the petitioner had received a sum of Rs. 50,000/- as advance. As in the case of contract dated 05.02.2008, the contractor was to receive the contract price namely Rs. 5.0 lakhs in four stages after the initial advance as per payment terms 8.4. The Arbitrator referred clause 8.4 and held that it cannot be disputed that the advance was not to be misappropriated if the same was not payable as part to the contract price. Admittedly the petitioner did not succeed in getting the load released or in achieving the other stages, so the aforesaid terms of the contract entitles the respondent to recover the advance paid.
It was held that the contract does not stipulate payment for any efforts made or advices given or liaison work done except by way of payment in the aforesaid four stages. The payment term is directly related to the stages mentioned in clause 8.4 of the contract. Since, the petitioner could not achieve any of the stages at 2, 3, 4 & 5, he is liable to refund the advance received. It was held that the respondent is entitled to an award of Rs. 50,000/-. It was observed that the petitioner did not claim that he is entitled to any part of advance received on the ground that he gave some advice and entitled to some remuneration. In fact, the respondent's plea is that advice itself was wrong as no such 2nd 11 KVA line could be obtained as per the OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 82 of 91 practice of HVPNL. It was also held that the respondent's act or omission in challenging the order of rejection would not exonerate the petitioner for his failure to provide the promised service. The respondent is therefore, entitled to an amount of Rs. 50,000/- as a counter claim.
I am of the view that the Arbitrator has given cogent reasons while awarding the above amount, which does not call for interference.
98. On a perusal of objections filed by the petitioner, I find that the challenge is on substantive questions of facts which is not permissible under law. Even otherwise, from a careful perusal of the arbitration proceedings and the award therein, I find that the Arbitrator has given the findings only after considering the pleadings, documents and arguments advanced before her, that too after taking into account the documentary evidence. Further, the scope and purview of deciding the present objections being limited one does not permit this Court to replace the finding given by the Arbitrator, by its own by re- appreciating the evidence / material produced before the Arbitrator.
99. As regards the contention that the petitioner was not given opportunity to exhibit the documents despite the OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 83 of 91 order of the DIAC dated 17.05.2018 and the Arbitrator proceeded to pass the award, on a careful perusal of the award and the documents including the evidence, I find that the Arbitrator has considered all the documents relied upon by the petitioner including the documents as referred above. The evidence affidavit also has the reference of the above documents on which, exhibit numbers have been given. It cannot therefore be said that the Arbitrator misconducted the proceedings and acted arbitrarily.
Section 19 of the Act provides that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. It may conduct the proceedings in the manner, it considers appropriate and its power includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
100. It was held in the case of State Trading Corporation of India Ltd Vs. Teopfer International Asia PTE Ltd FAO (OS) 242/2014 that Section 34 proceeding which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. Finality of the award is very important. An interpretation placed on a contract is a matter within the jurisdiction of the Arbitral Tribunal and even if an error exists, this is an error of fact OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 84 of 91 within jurisdiction which cannot be re-appreciated by the Court under Section 34 of the Act. Legal position is no more res integra that the Arbitrator having been made the final Arbiter of resolution of dispute between the parties, the award is not open to challenge on the ground that Arbitrator has reached at a wrong conclusion. If we were to start analyzing the contract between the parties and interpreting the terms and conditions thereof and which will necessarily have to be in the light of the contemporaneous conduct of the parties, it will be nothing else than sitting in appeal over the arbitral award and which is not permissible.
101. As to the interest on the amount i.e. Issue no. 5 in the case reference no. DAC 679/01-15 and issue no. 6 in the case reference no. DAC 604/08-14, the arbitrator discussed the case of M/s Hyder Consulting (UK) Ltd Vs. Governor State of Orissa (2013) 2 SCC 719 where it was held that the contracts between the parties do not prohibit imposition of interest. Following the Hyder Consulting case (supra), the arbitrator held that the Arbitrator can include interest till the award is passed and can further grant interest on such sum for the post award period. It was held that the respondent has been able to prove the counter claim to the extent of Rs. 1,14,750/- in the case reference OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 85 of 91 no. DAC 604/08-14 and Rs. 50,000/- in the case reference no. DAC 679/01-14. The claim for interest is made with effect from date of payment till the actual receipt of awarded amount. It will be appropriate to grant interest w.e.f the date of which contracts in question were terminated i.e. 08.11.2013. Neither party has made any submission on the rate of interest which should be awarded. Keeping in view the recent trend in the judgments of the Supreme Court, it will be appropriate to grant interest @ 12% per annum. Interest on Rs. 1,14,750/- from 08.11.2013 till 30.06.2018 i.e. till the award @ 12% per annum works out to Rs. 63,938/-. Hence, the award in the case reference no. DAC/604/08-14 will be for a sum of Rs. 1,75,688/-. The respondent / counter claimant can be granted further interest for future till the date of recovery.
102. In the case reference no. DAC 679/01-15, the counter claimant/respondent was found entitled to recover Rs. 50,000/-. The interest @ 12% per annum to be calculated on the sum of Rs. 50,000/- from the date of termination of contract till 30.06.2018 works out to Rs. 27,860/-. It was held that the counter claimant is therefore entitled to an award of Rs. 77,860/- in the case reference no. DAC 679/01-15. The counter claimant is also entitled to future interest at the same rate for the post award period.
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103. Section 3 of the Interest Act, 1978 provides that Arbitrator is competent to award interest at the rates prevailing in banking transaction during pendency of the proceedings and from the date of award till its realization.
In the instant case, the Arbitrator has given a reasonable interest on the award, which does not call for interference.
104. As to the costs i.e. issue no. 6 in the case reference no. DAC 679/01-15 and issue no. 7 in case reference no. DAC 604/08-14, it was observed that respondent having successfully contested the claims is entitled to the cost of the litigation vis a vis the two claims. The respondent having succeeded in the counter claim is also entitled to proportionate cost of litigation so far as it relates to counter claims. It was held that respondent has submitted a certificate of costs from its CA as per which, the respondent has made payment of Rs. 22,80,102/- to DIAC and its advocates in both the case references. Although the certificate does not indicate the break up of the payment to DIAC but the respondent is entitled to the amount paid to DIAC for the claims in the respective cases. As regards counter claims, the respondent can recover the cost proportionally viz the amount that DIAC OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 87 of 91 would have charged if the counter claims were for the amount of the counter claims awarded. The arbitrator assessed the lawyer fee in each case at Rs. 3 lakhs and held that respondent is entitled to the cost incurred for the engagement of advocates.
105. Section 31 (8) of the Act confers power on the Arbitrator to fix and award costs of arbitration. The costs include the fees and expenses of Arbitrators and witnesses, legal fees and expenses, supervision and administrative charges and other incidental expenses pertaining to the arbitral proceedings and the arbitral award. In the instant case, the Arbitrator has given cogent reasons for awarding the cost. The Arbitrator has considered the certificate submitted by the respondent, as per which, the respondent had paid Rs. 22,80,102/- to DIAC and its advocates in both the case references. After considering the claims and counter claims, the Arbitrator assessed the fee in each case @ Rs. 3,00,000/- and awarded the cost. I am of the view that the Arbitrator has assessed the realistic costs and it does not call for interference. The case of Vinod Seth Vs. Devinder Bajaj, (2010) 8 SCC 1 referred by the Ld. Counsel for the petitioner relates to imposition of costs under Section 35 & 35-A of CPC. It was held that the costs provides adequate indemnity to the successful OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 88 of 91 litigants for the expenditure incurred by him for the litigation. It should be realistic.
Conclusion:-
106. Now to sum up, in the instant case, most of the grounds raised by the petitioner to challenge the award are factual in nature which have been already considered and adjudicated in the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclusion because such an approach would defeat the purpose of arbitration proceedings. It has been consistently held that when a court is applying the public policy test to an arbitration award, it does not act as a court of appeal and consequently, errors of facts cannot be cor- rected. A possible view by the arbitrator on facts has neces- sarily to pass muster as the arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Once, it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. (P.R Shah, Shares & Stock Brokers (P) Ltd v. B.H.H Securities (P) Ltd. [(2012) 1 SCC
594).
107. In the instant case, the arbitrator has examined all the relevant aspects of the agreement, the correspondences made by the parties, the terms of the contract and the OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 89 of 91 conduct of the parties. The Arbitrator has remained inside the parameters of the contract while construing the provisions of the contract.
108. Having examined the various contentions of the petitioner on the touchstone of the parameters of interference as explicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evidence led before the learned Arbitrator and this Court will not open itself to the task of being a judge on the evidence placed before the Arbitrator which was subject matter of dispute. In the present case, the Arbitrator has deliberated on the issues under reference which were within her competence and as per the agreement entered into between the parties. The Arbitrator has duly explained the reasons for arriving at her decisions. There is nothing to indicate that award is in conflict with the basic notions of justice and the fair play and fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reasoning as pleaded in the petition.
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109. For the aforesaid reasons the petition is dismissed with no order as to costs. File be consigned to record room.
Announced in open court today i.e. 03.03.2021 (Sanjiv Jain) District Judge (Commercial) - 03 Patiala House Courts, New Delhi OMP (Comm) No. 615/2018 & ARBT No. 4620/2018 Page No. 91 of 91