Delhi District Court
M/S Deepak & Co vs The Chief Commercial Manager on 15 January, 2022
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
ARBTN No. 3484/2018
M/s Deepak & Co.
(A partnership firm duly registered with Registrar of Firms)
through its partner
Sh. Rakesh Kumar Gupta
having its office at
8690-91, Near St. Anthony's School,
Desh Bandhu Gupta Road,
Pahar Ganj,
New Delhi-110055 ...Petitioner
versus
The Chief Commercial Manager
Northern Railways,
Head Quarters Office
Baroda House, New Delhi ...Respondent
Date of Institution : 25/07/2018
Arguments concluded on : 06/12/2021
Decided on : 15/01/2022
Appearances : Sh. Naresh Thanai and Ms. Khusboo Singh,
Ld. Counsel for petitioner.
Sh. Rajeshwar Singh and Ms. Neeraj Singh, Ld.
Counsel for respondent.
AND
ARBTN No. 5369/2018
The Chief Commercial Manager
Northern Railways,
Head Quarters Office
Baroda House, New Delhi ...Petitioner
versus
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND
ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 1 of 38
M/s. Deepak & Co. (Regd.)
Through its partner
Sh. Rakesh Kumar Gupta
having its office at
8690-91, Near St. Anthony's School,
Desh Bandhu Gupta Road,
Pahar Ganj,
New Delhi-110055 ...Respondent
Date of Institution : 22/09/2018
Arguments concluded on : 06/12/2021
Decided on : 15/01/2022
Appearances : Sh. Rajeshwar Singh and Ms. Neeraj Singh,
Ld. Counsel for petitioner.
Sh. Naresh Thanai and Ms. Khusboo Singh,
Ld. Counsel for respondent.
JUDGMENT
1. Finding it expedient in the interest of justice, I shall decide by this common judgment the following two petitions under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act) filed by the parties to the arbitration as these arise out of the impugned common award dated 24/05/2018 of Ld. Sole Arbitrator Sh. Neeraj Kumar Gupta, Ld. District & Sessions Judge (Retd.). First petition is ARBTN No. 3484/2018 titled M/s Deepak & Co. (herein after referred as claimant/contractor) vs The Chief Commercial Manager, Northern Railways (herein after referred as Railways). Second petition is ARBTN No. 5369/2018 titled The Chief Commercial Manager, Northern Railways vs M/s. Deepak & Co. Ld. Sole Arbitrator awarded Rs. 7,77,008/- with 9% interest per annum from 15/12/2016 till realization and interest of Rs. 43,425/- on the security deposit amount till 13/09/2017, when it was ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 2 of 38 refunded; in favour of claimant/contractor payable by Railways.
2. I have heard Sh. Naresh Thanai and Ms. Khusboo Singh, Ld. Counsel for claimant/contractor (M/s Deepak & Company); Sh. Sh. Rajeshwar Singh and Ms. Neeraj Singh, Ld. Counsel for Railways (The Chief Commercial Manager, Northern Railways) and perused the record of the case, the arbitral proceedings record, relied upon precedents, filed brief written arguments of parties and given my thoughtful consideration to the rival contentions put forth.
3. Factual matrix of the case of the parties in brief is as follows:-
Claimant/contractor has been providing on board catering services in various trains awarded by Indian Railway Catering & Tourism Corporation (hereinafter referred to as IRCTC) and/or Railways. Pursuant to the bid submitted by claimant/contractor having been accepted, the management of onboard catering services of Train No. 4005-06, Lichchvi Express train was awarded by IRCTC vide letter dated 20/01/2009 against annual fees of Rs. 14,04,000/-. The tender documents issued by IRCTC contained the terms and conditions governing the contract. The contract was for a period of five years. After expiry of contract period, it was extended temporarily from time to time and finally it concluded on 20/09/2016. Claimant/contractor deposited Rs. 5,79,000/- towards refundable security. Pursuant to Catering Policy 2010 of Railway Board all the contracts awarded by IRCTC were taken over by the concerned Zonal Railways. In respect to the aforesaid train and/or contract, Tripartite ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 3 of 38 Agreement dated 13/01/2011 was executed between IRCTC, claimant/contractor and Railways. Said agreement provided that terms and conditions governing claimant/contractor and IRCTC shall form the basis of Tripartite Agreement dated 13/01/2011, except specifically mentioned in the agreement. IRCTC assigned its rights and liabilities as licensor to Railways and Railways became licensor qua claimant/contractor for all intents and purposes. As per claimant/contractor, contract was awarded against fixed licence fee of Rs. 14,04,000/- per annum and the terms and conditions did not envisage enhancement of licence fee.
Clauses 2.1, 12.9 and 13 of General Conditions of Licence, Section-One read as follows:-
"2.1 Refund of The Security Deposit will be Security Deposit refunded without interest by the IRCTC at the time of peaceful vacation of the pantry car/ railway premises by the Licensee after providing for settlement of all dues or arrears arising out of the use of pantry car/railway premises by the Licensee.
......................................................................................................... 12.9 General The licensor reserves the right to amend any of the clauses of the agreement and also to add fresh clauses from time to time. The rider agreement in this regard shall be executed between the parties within 15 days of the amendment / changes.
Further, IRCTC reserves the right to extend or reduce the time stipulated in any clause in the tender /licence conditions herein above, in order to meet operational exigencies. The decision of the Director of IRCTC in this regard shall be final.
................................................................................................
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 4 of 38
13. FORCE MAJEURE 13.1 In the event of any unforeseen event directly interfering with the operation of License arising during the currency of the license agreement;
such as war, insurrection, restraint imposed by the Government, act of legislature or other authority, explosion, accident, strike, riot, lock out, act of public enemy, acts of God, sabotage; the Licensee shall, within a week from the commencement thereof, notify the same in writing to the Licensor with reasonable evidence thereof. The Pantry Car shall be restored as expeditiously as possible or, as the case may be, the impediment to accessibility shall be removed as expeditiously as possible. If the Said Property cannot be rendered fit for occupation and use for more than thirty days, the Licensee shall not pay Licence Fee for such period till the said property becomes accessible and operational following cessation of force majure event mentioned above. The period of license will be further extended for the period during which License was not operational."
Clause 4.20 of General Conditions of Licence, Section- Two reads as follows:-
"4.20 Cancellation/ In case the cancellation/withdrawal/
withdrawal/non- non-operation of the train service
operation of train is for a period of 30 days or more,
service the agreement will be in abeyance.
The tenure of the agreement will be
extended by corresponding period at
the restoration of train service."
As per Policy 2010 of Railways, after expiry of license/contract, tenders were to be floated and bids invited as per Standard Bid Document. Since, the new contracts could not be finalized, the contract with claimant/contractor was extended ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 5 of 38 for period commencing 01/02/2014 till 20/09/2016 periodically for the extended period. For the extended period, claimant/ contractor was asked to deposit the licence fee at the enhanced rate, which was alleged by claimant/contractor to be illegal and claimant/contractor protested such enhancement vide various letters including letters dated 11/10/2014 and 20/11/2014. Claimant/contractor informed Railways that it was not willing to seek extension nor work for extended period at the enhanced licence fee and in case licence fees at the enhanced rate was to be insisted upon, train be taken over immediately and contract be terminated. Claimant/contractor averred that in case claimant/ contractor had withdrawn, it would have led to disruption of services. The abandonment of services would have caused injury to passengers. Besides, it could lead to black listing of claimant/ contractor, therefore, claimant/ contractor deposited licence fee at the enhanced rate without prejudice to its rights and contentions. Vide Circular dated 27/02/2012 Railway Board had instructed Chief Commercial Managers to take action against licensees who had withdrawn the services. Claimant/contractor accordingly continued with the contract. Claimant/contractor deposited Rs. 1,13,06,088/- for the period from 01/02/2014 till 20/09/2016, whereas as per contract/terms of the contract, claimant/contractor was liable to pay licence fee at the rate of Rs. 14,04,000/- per annum i.e., Rs. 37,05,000/- for the aforesaid period. Claimant/ contractor paid Rs. 76,01,088/- in excess for which he sought refund vide its letter dated 15/12/2016. Aforesaid train no. 4005- 06 Lichchvi Express during the tenure of the contract remained cancelled for 278 days, detailed in the claim filed before Ld. Sole Arbitrator. Claimant/contractor vide letters dated 01/02/2011, ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 6 of 38 07/04/2011, 09/12/2011, 26/03/2013 and 30/10/2015 requested Railways to extend the contract for the period train remained cancelled but Railways did not extend the contract for aforesaid period for which period licence fee had already been paid. Thus, claimant/contractor became entitled for refund of licence fee for 278 days amounting to Rs. 10,69,348/- at the rate Rs. 14,04,000/- per annum, which amount was demanded by claimant/contractor vide letter dated 15/12/2016. Interest free security Rs. 5,79,000/- deposited by claimant/contractor was to be refunded after the conclusion of contract. The contract concluded on 20/09/2016. Railways did not refund the licence fee. Claimant/contractor alleged of having become entitled to recover Rs. 92,49,436/- from Railways but despite demand Railways failed to pay the said amount, so claimant/contractor claimed interest @ 12% per annum for the period from 20/09/2016 till 20/05/2017 amounting to Rs. 8,44,079/-. Accordingly, claimant/contractor claimed Rs. 1,00,93,515/- from Railways. Claimant/contractor sought appointment of Ld. Sole Arbitrator in terms of Arbitration Clause contained in Tripartite Agreement dated 13/01/2011 since Railways failed to release the amount payable to claimant/ contractor but despite notice Railways failed to appoint Ld. Arbitrator. Claimant/contractor filed petition under Section 11 of the Act before Delhi High Court and Delhi High Court appointed Ld. Sole Arbitrator. Following four claims were laid by claimant/contractor before Ld. Sole Arbitrator in its statement of claim:-
"Claim I: Rs. 76,01,088/- being excess license fee deposited for the period 1st February, 2014 till 14th September, 2016;
Claim II: Rs. 10,69,348/- being refund of license fee for 278 ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 7 of 38 days for which period, train remained suspended/ cancelled calculated at the rate of Rs. 14,04,000/- per annum.
Claim III: Refund of security amount of Rs. 5,79,000/-.
Claim IV: Interest @ 12% per annum for the period 20th September, 2016 till 20th May, 2017 amounting to Rs. 8,44,079."
Arbitral proceedings culminated in the impugned arbitral award. Initially claimant/contractor made following four prayers in the petition under Section 34 of the Act.
"PRAYER In the facts and circumstances aforesaid, it is most respectfully prayed that the Hon'ble Court may be pleased to modify the Award dated 24th May, 2018, inter alia,
(a) awarding Rs. 76,01,088/- being excess of licensee fee paid by petitioner for extended period;
(b) awarding Rs. 10,69,348/- against Rs. 7,77,008/- awarded by Ld. Arbitrator.
(c) award cost in favour of petitioner and against respondent.
(d) any other further order which this Hon'ble Court may deem fit and proper be also passed."
In the course of arguments Ld. Counsel for claimant/ contractor gave statement on 02/11/2021 that claimant/ contractor is restricting the challenge to impugned arbitral award with respect to findings on rejection of claim no. 1 only and no other part of aforesaid award is impugned.
Arbitral award with respect to findings on rejection of claim no.1 has been impugned mainly on the following grounds by claimant/contractor. Impugned award is based on surmises and conjectures. Ld. Sole Arbitrator failed to appreciate the pleadings on record. It was not the case of Railways that license fee at the enhanced rate was charged from other licensees. There was no ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 8 of 38 pleading to the effect that claimant/contractor had availed benefits under the Circular dated 21/12/2012. Since it was not the case set up by Railways nor any evidence led by either of the parties, said findings/observations based on surmises and conjectures were untenable. There was no material before Ld. Sole Arbitrator to conclude that the license fee was determined by Railways in terms of Circular dated 21/12/2012 or enhanced license fee was charged from other licensees. Ld. Sole Arbitrator failed to appreciate the terms and conditions contained in the tender document, in particular Clause 12.9 of General Conditions of the License, Section-I. In case of enhancement of license fee and modification of terms of contract, it was incumbent upon Railways to execute rider agreement within 15 days of such changes, whereas witness RW1 of Railways in cross examination admitted that subsequent to tripartite agreement, there was no further agreement executed between the parties. Ld. Sole Arbitrator failed to appreciate that in the absence of plea/defense set up in reply that claimant/contractor had availed the benefit of Circular dated 21/12/2012 by selling the products at enhanced tariff there was no occasion with claimant/contractor to rebut the same much less to lead evidence and place material on record. The observations/ findings returned by Ld. Sole Arbitrator were without any basis or material, therefore, untenable. Ld. Sole Arbitrator failed to appreciate that there was no material placed on record by Railways to establish that any working was carried out to determine or enhance the license fee. No material was placed before Arbitral Tribunal, except bald averments in reply that Railways could enhance the license fee under the circular. Ld. Sole Arbitrator failed to appreciate that Circular dated ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 9 of 38 21/12/2012 required Railways to work out the amount by which license fee may go up and adopt suitable means to adjust the license fee. Implicit was the working to be carried out by Railways in accordance with law i.e., by affording an opportunity and requiring particular license fee, claimant/contractor in the present case, to participate in the process of working out. Admittedly, temporary extensions were granted after end of five years contract period by Railways pursuant to policy decision of Railway Board and claimant/contractor continued with contract uninterruptedly till 20/09/2016, whereas no rider agreement was executed in terms of Clause 12.9, aforesaid and terms could not have been changed unilaterally by Railways. Inferences drawn by Ld. Sole Arbitrator in the admitted facts and circumstances were irrational, misplaced, unsustainable and have led to miscarriage of justice. Ld. Sole Arbitrator violated the settled juristic principles and violated fundamental policy of law. Only vide letter dated 19/08/2014 license fee was enhanced for the period from 01/02/2014 till 12/05/2014, which period had already expired. Ld. Sole Arbitrator failed to appreciate that in terms of Circular dated 27/02/2012 of Railway Board, it was not upon claimant/contractor to withdraw from the services or disrupt the contract and in case claimant/contractor had withdrawn the services, it was liable to be proceeded against in terms of Clause
(iii) of said Circular dated 27/02/2012. Ld. Sole Arbitrator failed to appreciate that vide letters dated 11/10/2014 and 20/11/2014 claimant/contractor had called upon the Railways to take over the contracts in case license fee at the enhanced rate was to be charged. Observation of the Arbitral Tribunal that petitioner could have terminated the contract is misplaced and ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 10 of 38 untenable. The findings/observations returned by Ld. Sole Arbitrator are result of non appreciation of documentary evidence, which has vitiated the impugned award to that extent. In the facts and circumstances, the rejection of claim no. 1 by Ld. Sole Arbitrator is not sustainable and the award to said extent is to be modified. Ld. Counsel for claimant/contractor argued in terms of the grounds laid with respect to the challenge to impugned arbitral award with respect to finding on rejection of claim no. 1, relying upon the cases (i) Oil and Natural Gas Corporation Limited vs Western Geco International Limited, (2014) 9 SCC 263; (ii) Lift And Shift India Pvt. Ltd. vs Central Warehousing Corporation, 2017 IV AD (Delhi) 109; (iii) Hindustan Zinc Ltd. vs Friends Coal Carbonisation, (2006) 4 SCC 445 and (iv) Joshi Technologies International Inc. vs Union of India & Ors., (2015) 7 SCC 728.
4. Ld. Counsel for Railways argued that claimant/contractor was not entitled to any award as per his choice and wish. Enhancement of the license fee on rate of revision was done by Railways, as per Circular no. 78/2012 dated 21/02/2012 of Railway Board under the subject catering revised tariff. It was argued by Ld. Counsel for Railways that Clause 12.9 of General Condition of License, aforesaid, incorporated the right of Licensor Railways to amend any of the clause of the agreement and also to add fresh clause from time to time, whereas the decision of the Directors of IRCTC in that regard was to be final. It was argued that after consideration of the conditions of the IRCTC in the tender document and contract, the claimant/ contractor executed the agreement for license to the manage on ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 11 of 38 board catering services on the train in question. Ld. Counsel for Railways argued that adjudication with respect to rejection of claim no. 1 of claimant/contractor was appropriate, in accordance with the law and there is no ground to set aside the said finding.
5. Railways in their filed petition bearing ARBTN No. 5369/2018 through Counsel impugned the arbitral award with respect to awarded interest @ 9% per annum from 15/12/2016 till realization on the amount of refund of license fee to the tune of Rs. 7,77,008/- and for awarding interest of Rs. 43,425/- on the security deposit amount till 13/09/2017. Railways have impugned the arbitral award to the extent above said mainly on the following grounds. The impugned award is based on surmises and conjectures as the awarded interest @ 9% per annum was neither prayed by claimant/contractor in the Statement of Claim nor Railways were granted opportunity to contest or defend the case on the ground of interest. Arbitral Tribunal accepted the contentions of Railways which was borne out from the record filed by the parties to the arbitration. There is no policy or terms of contract of Railways for granting the interest on the refunded security amount. Claimant/contractor had failed to establish his claim by any manner. Impugned award as awarded is not sustainable in fact as well as law and is liable to be set aside. The claim petition of claimant/contractor substantiates no claim against Railways and no cause of action had arisen in favour of claimant/contractor and against Railways, whereas the claim was filed against the Railways on the basis of false plea and the award for interest granted by Ld. Sole Arbitrator is out of record, therefore, is liable to be set aside. The arbitral award deals with a ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 12 of 38 dispute not contemplated by or not falling within the terms of the submissions of the arbitration. The award contained decision on matter not submitted to arbitration and the award is separated from the submissions submitted by the parties and same is in conflict with the public policy of Railways. Claimant/contractor is not entitled for any award as per its choice and wish. Enhancement of the license fee was on the basis of revised rate, as per Circular No. 78/2012 dated 21/12/2012 of Railway Board under the subject catering revised tariff. Railways had taken over the train in question for the period of 224 days only i.e., (i) from 13/01/2012 for the period of 20 days only; (ii) from 03/12/2011 to 01/02/2012 for 60 days only; (iii) from 02/01/2013 to 18/02/2013 for 47 days only; (iv) from 28/12/2013 to 15/02/2014 for 50 days only; (v) from 31/12/2014 to 15/02/2015 for 47 days only. Ld. Counsel for Railways accordingly argued and prayed for setting aside of the awarded interest, aforesaid, by Arbitral Tribunal @ 9% per annum from 15/12/2016 till realization on the amount of refund of license fee to the tune of Rs. 7,77,008/- and for awarded interest of Rs. 43,425/- on the security deposit amount till 13/09/2017.
6. Though Ld. Counsel for claimant/contractor initially in the filed petition by claimant/contractor and as aforesaid had prayed on behalf of claimant/contractor inter alia for awarding Rs.10,69,348/- against Rs.7,77,008/- awarded by Ld. Sole Arbitrator but during the course of arguments and as above said on 02/11/2021 vide statement had restricted the challenge to impugn arbitral award with respect to finding on rejection of claim no. 1 only by Ld. Sole Arbitrator stating also that no other ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 13 of 38 part of aforesaid award was so impugned by claimant/contractor. Ld. Counsel for claimant/contractor argued that no premise is there for setting aside the interest awarded by Ld. Sole Arbitrator to claimant/contractor though prayed for by Railways in their petition.
7. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
8. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 14 of 38 thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 15 of 38 (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
9. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award....
Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 16 of 38
10. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
11. Supreme Court in the case of Patel Engineering Ltd. vs North Eastern Electric Power Corporation Ltd., MANU/SC/ 0447/2020 inter alia held that wherein the findings of Ld. Arbitrator are arrived at by taking into account irrelevant facts and by ignoring the vital clauses, the same suffers from the vice of irrationality and perversity and that the award will be liable to be set aside when while interpreting the terms of the contract, no reasonable person could have arrived at such a conclusion and the award passed by the arbitrator suffers from the vice of irrationality and perversity.
12. Annexure E of the tender document in question reads as under:-
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 17 of 38 "Annexure-'E' TARIFF FOR STANDARD MEALS, BREAKFAST TEA/COFEE ETC SN ITEM TARIFF (In Rs.)
1. Standard tea (150 ml) in 3.00 disposable cup (kullhar) of 170 ml
2. Tea with tea bag (150 ml) 4.00 in disposable cup (kullhar) of 170 ml
3. Coffee using instant coffee 5.00 powder (150 ml) in disposal cup (kullhar) of 170 ml
4. Tea in pots (285 ml) + 2 tea 5.00 bags + 2 sugar pouches
5. Coffee in pots (285 ml) + 2 7.00 Coffee sachets + 2 sugar pouches
6. Packaged Drinking water 1 12.00 litre bottle (chilled)
7. Janta Meal 10.00 Standard Breakfast
7. Vegetarian 17.00
(a) Bread butter & cutlet
(b) Idli & Vada
(c) Upma & Vada
(d) Pongal & Vada
8. Non-vegetarian 20.00
(a) Bread, butter & Omelet Casserole Meals
9. Standard Vegetarian 30.00
10. Standard non-Vegetarian 35.00 DETAILS OF MENU ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 18 of 38 SN Item Details of Menu
1. Standard tea (150 ml) Cups used should be of 170 ml capacity
2. Tea with tea bag (150 ml) Cups used should be of 170 ml capacity
3. Coffee with instant coffee Cups used should be of 170 powder (150 ml) ml capacity
4. Tea in pots (285 ml) (285 ml) + 2 tea bags + 2 sugar pouch + 2 disposable paper cups of 170 ml capacity.
5. Coffee in pots (285 ml) (285 ml) + 2 coffee sachets + 2 sugar pouch + 2 disposable paper cups of 170 ml capacity.
6. Janta Meal (in quality disposable card board boxes)
- Poories-7 nos 175 gms
- Allu dry curry 150 gms
- Pickle sachet 15 gms"
13. Railway Board of Ministry of Railways, Government of India vide Commercial Circular No. 78 of 2012 bearing no. 2012/TG-III/631/9 dated 21/12/2012 had revised with immediate effect catering tariff for tea/coffee, breakfast and standard meals as follows after the receipt of representations from various quarters to review the tariff and such menu keeping in mind that the tariff and menu was last revised on 30/04/2003:-
S. No. Item Revised Tariff**
Static mobile
1 Standard tea (150 ml) in disposable 5.00 5.00
cups of 170 ml capacity
2 Tea (with tea bag) (150 ml) in 7.00 7.00
disposable cups of 170 ml capacity
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 19 of 38 3 Coffee using instant coffee powder 7.00 7.00 (150 ml) in disposable cups of 170 ml capacity 4 Tea in pots (285 ml) + 2 tea bags + 10.00 10.00 2 sugar pouches 5 Coffee in pots (285 ml) + 2 instant 15.00 15.00 Coffee sachets + 2 sugar pouches 6 Rail Neer/ Packaged drinking water (chilled)* 6(i) 1 litre bottle/1000 ml 15.00 15.00 6(ii) 500 ml. bottle 10.00 10.00 7 Janta Meal or Economy meal or 15.00 20.00 Janta Khana 8 Standard Breakfast 8(i) Vegetarian Breakfast 25.00 30.00
a) Bread Butter & cutlet or
b) Idli & Vada or
c) Upma & Vada or
d) Pongal & Vada 8(ii) Non-Vegetarian Breakfast 30.00 35.00 Bread, Butter and omelet 9 Standard Casserole meals 9(i) Vegetarian 45.00 50.00 9(ii) Non-Vegetarian 50.00 55.00 10 Standard Thali Meals (only in Ref. Rooms) 10(i) Meals in Thalis (veg.) 35.00 10(ii) Meals in Thalis (Non-veg.) 40.00
14. Ld. Sole Arbitrator in the impugned arbitral award had appreciated the entire material before him including Statement of Claim, with Annexures; reply of Railways with Annexures;
evidence led and arguments submitted by Counsel for parties. In para 12 B of impugned arbitral award, it is the appreciation of Ld. Sole Arbitrator that it was stated that claimant is not liable to pay at the enhanced rate and the license fee stands deposited at the rate mentioned in the agreement till 31/08/2014. Also is ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 20 of 38 mentioned therein that the contention of the Claimant that in the agreement it is not mentioned that the licence fees can be enhanced and as such cannot be revised during the currency of the agreement is of no help to the Claimant, as in the agreement it is not at all stated that the licence fees shall remain fixed and as already observed since during the currency of the contract, the Claimant had availed benefit of enhanced rates over and above the rates mentioned in the tender document, and Circular dated 21/12/2012 is categoric that in view of the increase in rates of items the Railways to work out the revised rates of licence fees, the Claimant cannot make any grievance. Even the revised license fee was not charged till the period 31/01/2014, when the agreement expired. Above said Commercial Circular dated 21/12/2012 of Railway Board for revised tariff in catering for tea/coffee, breakfast and standard meals was applicable with immediate effect. Arguments of Ld. Counsel for claimant/ contractor that the adjudication of Arbitral Tribunal was beyond the pleadings and terms of contract is totally misplaced. The tariff for tea/coffee, breakfast and standard meals or catering, as above elicited in Annexure-E of tender document and as mentioned in the revised tariff in Commercial Circular No. 78/2012 dated 21/12/2012 when compared, it explicitly reveals the upward revision of such tariff for tea/coffee, breakfast and standard meals. All above said documentary evidence with oral evidence of the parties with the pleadings of parties was before Ld. Sole Arbitrator, who appreciated it in above elicited observations of Ld. Sole Arbitrator and such observations are confined to material on record. Above said Commercial Circular No. 78 of 2012 dated 21/12/2012 is the Annexure-A to reply of Railways to ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 21 of 38 the claim petition of claimant/contractor before Ld. Sole Arbitrator. Above said Annexure-E to tender document incorporating the applicable tariff for the claimant/contractor to be charged for catering for tea/coffee, breakfast and standard meals was also there before Ld. Sole Arbitrator for adjudication of the lis. It was the domain of Ld. Sole Arbitrator to adjudicate the claim referred for adjudication. Claimant/contractor availed the benefit of enhanced rate over and above rates mentioned in the tender document upon the immediate applicability of above said Circular dated 21/12/2012 since the increase in rates of items was with immediate effect and such effect is borne out from the documentary material on record. Nowhere in the pleadings or oral evidence was laid by claimant/contractor before Ld. Sole Arbitrator that pursuant to aforesaid Circular dated 21/12/2012 having become applicable, claimant/contractor in catering did not charge the enhanced rates for items supplied during such catering. Claimant/contractor cannot cry hoarse for application of revised licence fee, when such enhanced licence fee was to be determined by the Railways in terms of contract, which even do not explicitly envisage any participation of claimant/contractor in the process of determining the enhanced licence fee. This Court cannot enter into the domain of Ld. Sole Arbitrator by sitting in appeal over the adjudication of the Arbitrator or to re-appraise the evidence nor it can be said that there was an erroneous application of law or Arbitral Tribunal had reached their own conclusion or had failed to appreciate the facts.
15. Precedents relied upon by Ld. Counsel for claimant/ ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 22 of 38 contractor embody facts and circumstances which are entirely different and distinguishable to the facts and circumstances of the case in hand, so they are of no help to claimant/contractor to seek setting aside the findings of Ld. Sole Arbitrator with respect to rejection of claim no. 1.
16. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specified grounds for setting aside only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 23 of 38 Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt.Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC 296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 24 of 38 policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63.
17. Sections 28(3) and 31 (7) of The Act read as follows:
"28. Rules applicable to substance of dispute.-- ........................................................................... (3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.
..........................................................................
31. Form and contents of arbitral award.--
............................................................................ (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of the award to the date of payment.
Explanation.- The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978)."
18. In the case of Ashi Limited vs Union of India, O.M.P. 200/2015 decided by Delhi High Court on 19/05/2020, Hon'ble Ms. Justice Jyoti Singh had also appreciated law laid by Supreme Court in the case of Sree Kamatchi Amman ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 25 of 38 Constructions vs The Divisional Railway Manager (Works) Palghat & Ors. MANU/SC/0625/2010 and inter alia held as follows:
"54. In so far as the grant of interest by an Arbitrator is concerned, the law is no longer res integra, Section 31(7)(a) of the Act clearly stipulates that unless otherwise agreed by the parties, where the Award is for payment of money, the Tribunal may grant such rate as it deems reasonable, on the whole or any part of the money and for the whole or any part of the period between the date of cause of action and the date of the Award. In the case of Jaiprakash Associates Ltd. (Jal) v. Tehri Hydro Development Corporation India Ltd., MANU/SC/0157/2019, the Supreme Court after noticing the provisions of the 1996 Act and various judgments on the issue of interest, more particularly, the recent judgment in the case of Reliance Cellulose Products Ltd. v. ONGC Ltd., MANU/SC/0777/2018: (2018) 9 SCC 266, summed up the law on interest as under:
"13. Insofar as power of the arbitral tribunal in granting pre- preference and/or pendente lite interest is concerned, the principles which can be deducted from the various judgments are summed up below:
(a) A Constitution Bench judgment of this Court in the case of Secretary, Irrigation Department, Government of Orissa vs G.C. Roy exhaustively dealt with this very issue, namely, power of the arbitral tribunal to grant pre-
reference and pendente lite interest. The Constitution Bench, of course, construed the provision of the 1940 Act which Act was in vogue at that time. At the same time, the Constitution Bench also considered the principle for grant of interest applying the common law principles. It held that under the general law, the arbitrator is empowered to award interest for the pre- reference, pendente lite or post award period. This proposition was culled out with the following reasoning:
"43 The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 26 of 38 which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point).
All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas [Seth Thawardas Pherumal v.
Union of India, MANU/SC/0070/1955 : (1955) 2 SCR 48: AIR 1955 SC 468] has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [MANU/SC/ 0004/ 1987: (1988) 1 SCC 418: (1988) 1 SCR 253] almost ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 27 of 38 all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
It is clear from the above that the Court decided to fall back on general principle that a person who is deprived of the use of money to which he is legitimately entitled to, has a right to be compensated for the deprivation and, therefore, such compensation may be called interest compensation or damages.
(b) As a sequitur, the arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not.
(c) Conversely, if the agreement between the parties specifically prohibits grant of interest, the arbitrator cannot award pendente lite interest in such cases. This proposition is predicated on the principles that an arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement. This position was made amply clear in G.C Roy case in the discussion thereafter:
"44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes or refer the dispute as to interest as such to the arbitrator, he shall have the power to award interest. This does not mean that in every ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 28 of 38 case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
(d) Insofar as 1940 Act is concerned, it was silent about the jurisdiction of the arbitrator in awarding pendente lite interest. However, there is a significant departure on this aspect insofar as 1996 Act is concerned. This distinction has been spelt out in Sayeed Ahmed case in the following manner:
"Re: Interest from the date of cause of action to date of award
7. The issue regarding interest as noticed above revolves around Clause G1.09 of the Technical Provisions forming part of the contract extracted below:
"G. 1.09. No claim for interest or damages will be entertained by the Government with respect to any money or balance which may be lying with the Government or any become due owing to any dispute, difference or misunderstanding between the Engineer-in- Charge on the one hand and the contractor on the other hand or with respect to any delay on the part of the Engineer-in-Charge in making periodical or final payment or any other respect whatsoever."
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14. The decisions of this Court with reference to the awards under the old Arbitration Act making a distinction between the pre-reference period and pendente lite period and the observation therein that the arbitrator has the discretion to award interest during pendente lite period in spite of any bar against interest contained in the contract between the parties are not applicable to arbitrations governed by the Arbitration and Conciliation Act, 1996."
............................................................................
56. In the case of Union of India v. Bright Power Projects (India) (P) Ltd., MANU/SC/0712/2015 : (2015) 9 SCC 695, Supreme Court held that when agreement between the parties bars interest on the amounts from cause of action to the date of the Award, the Arbitrator is bound by it and cannot award interest as Section 31 ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 29 of 38 (7)(a) clearly begins with the words 'unless otherwise agreed by parties'.
57. In State of Haryana v. S.L Arora & Co., MANU/SC/ 0131/2010 : (2010) 3 SCC 690, Supreme Court has held that it is not open to the courts to interfere in the discretion exercised by an Arbitrator in granting the rate of interest. This is purely the domain, power and prerogative of the Arbitrator. Relevant part of the judgment reads as under:-
"23. The difference between clauses (a) and (b) of Section 31(7) of the Act may conveniently be noted at this stage. They are:
(i) Clause (a) relates to pre-award period and clause
(b) relates to post-award period. The contract binds and prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the Arbitral Tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post-award period.
(iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period.
In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract, as per discretion of the Arbitral Tribunal. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum."
19. Ld. Sole Arbitrator also appreciated in para nos. 29 and 30 of the impugned arbitral award that Clause 2.1 above said of tender documents simply stated that deposited security was to be ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 30 of 38 refunded without interest by IRCTC at the time of peaceful vacation of the Pantry Car/Railway premises by the Licencee (claimant/contractor), after providing for settlement of all dues or arrears arising out of the use of pantry car/railways premises by the Licencee.
20. It is also the fact of the matter that claimant/contractor during the term of contract or extended term of the contract till 20/09/2016 at any point of time had not peacefully vacated the pantry car/railway premises nor handed over its possession to Railways. It is also the appreciation of Ld. Sole Arbitrator in the impugned award that mere asking of claimant/contractor to Railways to terminate the contract without in fact handing over the peaceful possession of the pantry car/railway premises could not be deemed to be termination of the contract by claimant/ contractor who if aggrieved by any act of Railways, as a party to the contract had every right to appropriately terminate the contract and even seek damages from Railways.
21. It is also the appreciation of evidence and the material placed before Ld. Sole Arbitrator in para nos. 29 and 30 of the impugned award by Ld. Sole Arbitrator that in notice dated 15/12/2016 claimant/contractor clearly stated that Pantry Car/Railway premises had been handed over and admittedly, it was not a case, that there was requirement of settlement of any pending dues of Railways or any arrears were to be paid by claimant/contractor to Railways nor such a case was set up by Railways. In terms of Clause 2.1 of tender document, aforesaid, since the security deposit was to be refunded at the time of ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 31 of 38 peaceful vacation of Pantry Car/Railway premises by licencee (claimant/contractor), which was not so refunded after clear notice dated 15/12/2016, as aforesaid, Ld. Sole Arbitrator awarded interest from 15/12/2016 till 13/09/2017 @ 9% on the security deposit of Rs.5,79,000/- i.e., the amount of Rs 43,425/-.
22. Ld. Sole Arbitrator after appreciating the above said Clause No. 4.20 and Clause No. 13 of General Conditions of Contract with the material and evidence on record opined in para no. 44 of impugned arbitral award that as per claimant/contractor the train remained suspended due to fog for a total period of 101 days from 23/12/2010 to 31/01/2011 and from 02/12/2011 to 31/01/2012; for which the proportionate licence fee for 101 days period amounting to Rs. 3,88,504/- calculated on the basis of paid licence fee of Rs. 14,04,000/- for 365 days period; was liable to be returned by Railways to claimant/contractor. Ld. Sole Arbitrator had also opined that the tenure of the contract was to be extended for 101 days on account of Force Majeure Clause 13, above said. It was also the finding of Ld. Sole Arbitrator that after expiry of the contract on 31/01/2014, till 19/08/2014, no communication regarding extension was sent by Railways and for the first time vide letter dated 19/08/2014, the temporary extension was granted till 12/05/2014, whereas from 01/02/2014 to 12/05/2014, the total days were 101 days for which period it has to be taken that the contract was extended in terms of Clause 4.20 of the Contract but licence fee was again charged for said period of 101 days and it was so despite the fact that claimant/contractor had deposited the licence fee for the entire period of contract up to 31/01/2014. Ld. Sole Arbitrator had also ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 32 of 38 appreciated the fact that in terms of Clause 4.20 of contract, the contract is to remain in abeyance for the period for which the train remained unoperational because of administrative reasons for more than 30 days, therefore, it will amount to saying that during the period of abeyance none of the parties was liable to be charged on any account. Ld. Sole Arbitrator accordingly concluded that claimant/contractor was entitled to refund of licence fees deposited for extended period again which amounted to Rs. 3,88,504/- for 101 days, aforesaid, as claimant/contractor cannot be asked to deposit licence fees twice for same period without any fault on his part. Ld. Sole Arbitrator also adjudicated that on account of non operation due to force majeure and non operation under Clause 4.20 as discussed in the impugned award, the claimant/contractor was entitled to refund of licence fees to the tune of Rs. 7,77,008/- whereas the amount had been claimed by claimant/contractor vide letter dated 15/12/2016, so the claimant/contractor was held to be entitled to interest @ 9% from 15/12/2016 till realization.
23. In terms of Section 31(7) of the Act and as per law laid in precedents cited above, for pre award period comprising pre reference period and pendente lite period the interest was so awarded by Arbitral Tribunal at its discretion in the absence of any term in the contract for not to award interest on the claims whereas the only rider for award of interest was with respect to security deposit that too for the period up to the time of peaceful vacation of the pantry car/railway premises by the licencee. Also the Arbitral Tribunal awarded the future interest in terms of the award as per Section 31(7) of the Act. By no figment of ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 33 of 38 imagination the awarded rate of interest can be said to be unreasonable or excessive to compensate claimant/contractor for deprivation of the use of money to which it was legitimately entitled to.
24. Supreme Court in case of Dakshin Haryana Bijli Vitran Nigam Ltd. vs M/s Navigant Technologies Pvt. Ltd, 2021 SCC OnLine SC 157 has held that the date on which the signed award is provided to the parties is a crucial date in arbitration proceedings under the Act. It is from this date that: "(a) the period of '30 days' commences for filing an application under Section 33 for correction and interpretation of the award, or for additional award; (b) the arbitral proceedings would terminate as provided by Section 32(1) of the Act; (c) the period of limitation for filing objections to the award under Section 34 commences."
25. In the application of Railways in case ARBTN No 5369/2018 for condonation of delay in filing the said petition, it is the averment of Railways that copy of impugned award dated 24/05/2018 was provided on 24/05/2018 to Counsel for Railways and the same was provided to the Railways in the month of June 2018, it was vacations; on receipt of opinion given by Counsel the matter was placed before Law Branch of the Head Quarter and due to administrative exigencies, 25 days delay took place whereas petition under Section 34 of the Act was to be filed within period of three months from the date of receiving the impugned award; which delay is now sought to be condoned by Railways and opposed by claimant/contractor.
ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 34 of 38
26. Supreme Court in the case of State of Uttar Pradesh & Ors. vs Sabha Narain & Ors., SLP (Civil) Diary No (s) 25743/2020 decided on 22/01/2021 reiterated the current legal position with respect to the facet of condonation of delay elucidated by judgments of Supreme Court in the cases (i) Office of the Chief Post Master General & Ors. v Living Media India Ltd. & Anr., (2012) 3 SCC 563; (ii) State of Madhya Pradesh & Ors. v. Bheru Lal. [SLP (C) Diary No. 9217/2020 decided on 15.10.2020] and (iii) State of Odisha & Ors. v. Sunanda Mahakuda, [SLP (C) Diary No. 22605/2020 decided on 11/01/2021] and held that Apex Court had repeatedly discouraged State Governments and public authorities in adopting an approach for ignoring the period of limitation prescribed by the statutes, as if the Limitation statute does not apply to them. Also was held therein that the leeway which was given to the Government/public authorities on account of innate inefficiencies was the result of certain orders of Supreme Court which came at a time when technology had not advanced and thus, greater indulgence was shown, whereas said position is no more prevalent. Supreme Court also categorized such kind of cases as "certificate cases" filed with the only object to obtain a quietus from the Supreme Court on the ground that nothing could be done because the highest Court has dismissed the appeal. The objective is to complete a mere formality and save the skin of the officers who may be in default in following the due process or may have done it deliberately. Supreme Court deprecated such practice and process and held that it was time when concerned officers responsible for the same, bear the consequences. Supreme Court expressed the anguish and held ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 35 of 38 "The irony, emphasized by us repeatedly, is that no action is ever taken against the officers and if the Court pushes it, some mild warning is all that happens."
27. Supreme Court in the case of Estate Officer, Haryana Urban Development Authority & Anr. vs Gopi Chand Atreja, 2019 LawSuits (SC) 726 inter alia held that when the lawyer did not take timely steps for the party, resulting in causing delay in its filing/refiling, it cannot be recorded as sufficient cause within the meaning of Section 5 of the Limitation Act.
28. The claim on account of bureaucratic methodology of department cannot be accepted in view of modern technologies being used and available. The usual and stereotype explanation that the file was kept pending, due to considerable degree of procedural red-tape in the process, cannot be accepted. The law shelters everyone under the same light and should not be swirled for the benefit of a few. Law has to be interpreted equally to all Government or statutory bodies. They cannot ask for liberal construction on the plea that delay occurred due to bureaucratic methods. The delay cannot be condoned mechanically merely because the delay is by government department and its officers. If such an approach is adopted merely because the government department is at fault, it will make the law of limitation nugatory and redundant. Sufficient cause is a condition precedent for exercise of discretion by the Court for condoning the delay. Railways had well established legal department and panel of lawyers to defend their instant case in the court. Failure to do so, depicts deliberate inaction and gross negligence and lack of ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 36 of 38 bonafide of officers of Railways. Railways cannot claim that they have separate period of limitation when the Department was possessed with competent persons familiar with court proceedings. Put forth reasons for delay in filing the petition by Railways do not come within the ambit of "sufficient cause from making the application within period of three months" and accordingly Railways are not entitled for condonation of 28 days delay in filing the petition in the fact of the matter.
29. Relying upon the law laid in the cases of (i) Associate Builders (supra); (ii) Ssangyong Engineering & Constructions Co. Ltd. (supra); (iii) Patel Engineering Ltd. (supra) and (iv) Ashi Limited vs Union of India (supra), it can be said that not only the reasonings of Ld. Sole Arbitrator are logical, but all the material and evidence were taken note of by Ld. Sole Arbitrator and this Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of Ld. Sole Arbitrator. Cogent grounds, sufficient reasons have been assigned by Ld. Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator, who was an experienced person, Learned District and Sessions Judge (Retired), who was competent to make assessment while taking into consideration the facet of the matter. Re-appraisal of the matter cannot be done by this Court. No error is apparent in respect of the impugned award. I do not find any contradiction in the observations and findings given by Ld. Sole Arbitrator. The impugned award does ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 37 of 38 not suffer from vice of irrationality and perversity. The conclusion of Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by claimant/contractor and Railways attract Section 34 of the Act. Petition of Railways has been filed beyond period of limitation and the delay is not condonable.
30. For the foregoing reasons, the application of Railways for condonation of delay and both the petitions of the parties to the lis are hereby dismissed.
31. The parties are left to bear their own costs.
32. Files be consigned to record room.
Digitally signed by GURVINDER GURVINDER PAL
SINGH
PAL SINGH Date: 2022.01.15
12:16:50 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 15 January, 2022. Patiala House Court, New Delhi.
(DK) ARBTN No. 3484/2018 M/s Deepak & Co. vs The Chief Commercial Manager Northern Railways AND ARBTN No. 5369/2018 The Chief Commercial Manager Northern Railways vs M/s. Deepak & Co. Page 38 of 38