Delhi District Court
Executive Engineer, Civil Deivsion -I, ... vs Virtual Infrastructure, Contractors ... on 2 February, 2024
ARBTN No. 160/2020 Page 1 of 69
IN THE COURT OF SH. DIVYANG THAKUR
ADDL. DISTRICT JUDGE:03:
SOUTH WEST DISTRICT: DWARKA COURTS:NEW
DELHI
ARBTN No. 160/2020
CNR No. DLSW010092782017
In the matter of :
Executive Engineer, Civil DivisionI
I & FC Department, Delhi
Govt. of NCT of Delhi
Basaidarapur Office Complex
(Opp. ESI Hospital), Delhi110027
........Petitioner
Versus
M/s Virtual Infrastructure, Contractors & Engineers
7A, Taimoor Nagar, Opposite Gurudwara
New Friends Colony, New Delhi110025
......Respondent
Date of institution of the petition : 16.08.2017
Final Arguments Heard on : 15.02.2023
Date of Order/Judgment : 02.02.2024
FINAL DECISION : Dismissed
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual
Infrastructure Contractors and Engineers
ARBTN No. 160/2020 Page 2 of 69
JUDGMENT U/s 34 OF THE ARBITRATION AND
CONCILIATION ACT, 1996
ORDER :
1. Vide present order, I will decide the petition filed under Section 34 of Arbitration and Conciliation Act, 1996 (hereinafter the Act) filed by the petitioner against the impugned award dated 17.04.2017 passed by the Ld. Sole Arbitrator in favour of the Respondent under Clause 2 of the Agreement and as per the terms and conditions of the contract.
Vide the impugned award, the Ld. Sole Arbitrator awarded the amount of Rs. 12,95,243/- in favour of the Claimant- Respondent herein to be paid by the Petitioner herein along with future interest at the rate of 10% per annum.
Petition and Claim made by the Claimant/Petitioner
2. It is averred in the petition that the impugned award is in conflict with the public policy of India and against the most basic notions of morality and justice and that the conduct of the Arbitrator is highly questionable and unfair. It is alleged that the Arbitrator failed to appreciate the nature of the contract and work being executed under it which was for construction of three culverts which were to be used by the vast population of Mahavir Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 3 of 69 Enclave for crossing the Palam Link drain and that the specifications given by the Government were of paramount importance. It has been further averred that the Arbitrator has come to an incorrect finding in para 4.1.3 with respect to the standards by which the concrete used by the Contractor / Respondent was to be judged. It is submitted that as per the relevant clause, the nomenclature of item as provided in the contract was to take precedence over the CPWD Specifications 2009 Vol. I and II which were used by the Ld. Arbitrator instead. It has been further argued that the Arbitrator came to a perverse finding that the Respondent was not provided with the required drawings in full for culvert no. 1 and not at all provided the drawings for culvert no. 2 and 3. In this regard, the findings of the Ld. Arbitrator at page 12, para H have been assailed and it is submitted that there is an acknowledgement of receipt of design for culvert no. 2 and 3 has been placed on record at page no. 182 of the documents of the present petition annexed along with the petition.
It is further submitted that the Respondent had actually demolished the pre existing culvert no. 2 and they would not have done so if they were not in possession of the drawings. It is further submitted that the Ld. Arbitrator only relied upon the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 4 of 69 letters written by the Claimant and it is stated that the Ld. Arbitrator has given undue importance to the lack of response by the Petitioner to the said letters and that the said letters are a conspiracy to rob the tax payers. It is further submitted that the Ld. Arbitrator has not appreciated that the Petitioner is a Government official who has been placed on election duty and that he was not available and that the said letters were written by the Respondent taking advantage of the absence of the petitioner. The Petitioner has also challenged the findings in paras 3.2.3(j), 3.4.3(d), 3.4.3(e) and 3.4.3(f). It is submitted that the Ld. Arbitrator did not appreciate that the Respondent had to give notice to the Engineer In-charge before placing concrete in the forms as per the terms of the contract and that the Contractor had to produce the materials in advance for testing and approval and the same were to be tested in the laboratory by the Engineer In- charge. It has also been submitted that the Ld. Arbitrator has come to an arbitrary finding in para 3.3.3(f) that time did not remain the essence of the contract as the extensions of time were given in public interest. The precise claims and grounds which have been summarized above are extracted herein in para 3 for convenience.
3. The present petition was filed by the Petitioner on the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 5 of 69 following grounds which are extracted herein:
"(a) Because the impugned award is biased and contrary to documents on record and the findings based on unfounded conjectures. The Ld. Arbitrator without application of mind allowed claims of Claimant and disallowed the counter claims of present Petitioner except cost of testing by Balaji Analytical Lab.
The Award is liable to be set aside on this ground alone.
(b) Because the facts described in the above paras have to be seen in the light of the admitted facts and factual findings as contained in the impugned Award itself. This Hon'ble Court need to be examine whether the sanctity of a contract and consequences of its breach can be completely negated by the Ld. Arbitrator and whether doing so would not be against the most basic notions of morality and justice and in conflict with the public policy of India, due to the following:
(i) Such an Award puts to nought the entire statutory mechanism provided in respect of the law of contract. The award simply negates all principles of law of contract, breaches, damages etc.
(ii) This is accentuated by the fact Ld. Arbitrator has gone on to hold that there are no consequences of breach by Claimant, who would become entitled to compensation at his self derived Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 6 of 69 terms as if the contract did not exist at all.
(iii) The admitted facts even as noted by Ld. Arbitrator and findings of facts given by him, show as to how blatantly the same are in contradiction to the reliefs granted to the Respondent/Claimant and declined to present Petitioner.
(c) Because the award of Ld. Arbitrator is based on presumptions and a conscious bias in favour of the Respondent/Claimant. As a matter of fact, the award is contrary to and in contradiction to the agreement and documents on record and is tailored to suit Claimant/Respondent who has benefited out of the largesse extended by the Ld. Arbitrator. The Ld. Arbitrator has deliberately & consciously failed to consider the Acknowledgement of receipt of drawings given by Respondent to the present Petitioner showing receipt of drawings.
(d) Because the counter claims of the present Petitioner were dismissed without even due consideration as a necessary corollary to the claims being allowed and no independent mind has been even applied to the same. The Ld. Arbitrator has wrongly allowed the claims of Respondent and disallowed the counter claims of the Petitioner. The findings of Ld. Arbitrator are based on wrong assumptions, surmises and conjectures.
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 7 of 69
(e) Because the claims of the claimant as made, were not maintainable under the provisions of law, in particular, the Indian Contract Act, 1872. The Ld. Arbitrator has deliberately failed to apply his judicial mind to the facts and documents placed on record. The award, as passed by Ld. Arbitrator, is against public policy as it is violative of basic propositions of law and is liable to be set aside on this ground alone.
(f) Because the Ld. Arbitrator has not applied his judicial mind to the aspect as to whether the Respondent was able to prove its purported claims against the Petitioner. As a matter of fact, the Respondent was unable to do so.
(g) Because the Ld. Arbitrator failed to appreciate the brazen cheating and dishonesty on the part of the Respondent as borne out of the facts described above. In the totality of facts & circumstances, the conduct of Claimant was fraudulent and that of brazen dishonesty and this fraud & dishonesty has been perpetuated by Ld. Arbitrator through the impugned award.
(h) Because the Ld. Arbitrator has failed to appreciate that the Petitioner had no control on the unlawful actions and non following of directions given by the present Petitioner to the Claimant except to act in terms of the contract.
(i) Because the Ld. Arbitrator has deliberately and Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 8 of 69 maliciously failed to appreciate that the Petitioner has gone 100% by the contract in letter and spirit in all aspects and the Ld. Arbitrator has, without assigning any reasons whatsoever, dismissed the counter claims of the Petitioner mechanically without considering the facts put forward by the Petitioner.
(j) Because even from the admitted facts, it is clear that the impugned award is in conflict with the public policy of India and against the most basic notions of morality & justice. Also the conduct of Ld. Arbitrator is highly questionable and throws serious questions of unfairness which are writ large on the face of it. The Award passed by Ld. Arbitrator is biased and contrary to the established principles of law and claims of Claimant have been allowed and counter claims of Petitioner dismissed without application of mind and the entire award is containing assertions which are simply contrary to the arbitration record, which make the Award not legally sustainable.
(k) Because the Ld. Arbitrator has completely failed to appreciate the nature of the contract and work being executed under it, which was for construction of three culvert bridges, which were to be used by vast population living in a densely populated colony i.e. Mahavir Enclave for crossing the Palam Link drain. These bridges were also to provide road links to the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 9 of 69 colony for essential services like Water Tankers etc. and emergency services like Fire Tenders etc. Therefore, the specifications given by the Govt. for the material to be used and the processes to be followed, were of paramount importance as the safety of the bridges could not have been compromises in any manner, as the same could lead to very serious mishaps and loss of human life of tragic proportions.
(l) Because the Ld. Arbitrator has also completely failed to appreciate that if the present Petitioner had not adopted and insisted on these standards, it would have become a subject of enquiry in future where its officers would have been accused of dereliction of duty leading to serious endangerment to human life. In the present case, the Petitioner is being penalized for following the law and contractual provisions with respect to materials and processes and the safety standards and no accountability has been fixed in respect of the findings on the blatant violations by Claimant of the standards & specifications as contained in the contract.
(m) Because the specifications of materials and construction have effectively been diluted by the Ld. Arbitrator, which he could not have done and there was absolutely no occasion or rationale for any proportionate payment to be made to the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 10 of 69 Claimant based on any percentage of any compressive strength of concrete, particularly considering the nature of the construction being culvert bridges over a big drain. The Ld. Arbitrator's reliance upon the minimum strength criteria taking 70% as the base level, above which everything was acceptable, is completely wrong & misplaced considering the nature of construction being a bridge connecting vast number of population across a drain which is connected to a further bigger drain and loss of life which imminent in case of any mishap. In any case, the specific conditions of the contract, designed due to nature of construction under it being culvert bridges, were to take precedence over any general logics on efficacy & specifications.
(n) Because the work awarded to Claimant was through a tendering process and the contract was signed with the specifications provided in the contract itself and these were fully binding. The Ld. Arbitrator could not have validly held that there was no valid reason not to accept the concrete below a certain rate and such a finding of Ld. Arbitrator implicitly allows the Claimant to compromise on the safety standards and specifications which were part of the contract and get paid proportionately.
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 11 of 69
(o) Because the contract terms stated that the Specifications and Special conditions of the contract between the parties, had to take precedence over any CPWD specifications.
(p) Because the Ld. Arbitrator failed to appreciate that the construction under present dispute and lack of quality & non following of procedures in the construction could lead to a serious mishap in future and who would be responsible for the same. The responsibility for any future mishap had to be and still needs to be fixed even now as the Petitioner Department would face enquiries for no fault of theirs because the Ld. Arbitrator under the impugned award has condoned all defaults of the Contractor without even considering safety issues and possible future repercussions and without taking or fixing responsibility in respect of the same.
(q) Because the basic premise of the whole award is that the Claimant was not provided the required drawings in full for culvert no. 1 and not provided the drawings for culvert no. 2 &
3. This itself is factually incorrect and such inference is in complete contradiction to arbitration record which makes the award itself legally untenable. Such a finding is bizarre as the acknowledgement of receipt of design for Culvert no. 2 & 3 by Claimant is on record at pg 182 of documents filed by present Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 12 of 69 Petitioner in the arbitration. Thus the pleas of Claimant for non supply of drawings for culvert no. 2 & 3 were baseless, false and afterthought. The Claimant never showed any interest in even taking up the work of culvert no. 2 and 3 and was solely and completely responsible for non completion of work.
(r) Because the Claimant had actually demolished the then pre-existing culvert no. 2 and which was the first step towards start of work on second culvert at 450 mtrs. It is incomprehensible that Claimant would have done so without even receipt of drawings for Culvert no. 2 & 3. Despite this Ld. Arbitrator has gone out of his way to hold that the drawings for second and third culvert were not provided.
(s) Because the Ld. Arbitrator has held that there was no mention about the drawings in the letter dt. 12.06.2013 written by Executive Engineer to the Claimant, ignoring the material on record which proves that the drawings were already supplied and hence there was no occasion to refer to the same in this letter. The reality which is clearly visible from the record is that the Claimant stopped work and kept insisting on payment for work which had been done in complete contravention of the Contract executed between the parties.
(t) Because the Ld. Arbitrator has only relied upon letters Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 13 of 69 unilaterally written by Claimant which were clearly a part of the conspiracy by Claimant to illegally enrich himself at the cost of taxpayers money. The entire reasoning in the award seems to have been taken from the Letters written by the Claimant and the same makes the entire award itself highly suspect. Mere letters cleverly written to hide the clear and admitted violations of the contract cannot become the basis for award of amount by the Ld. Arbitrator.
(u) Because it is clear that the Claimant deliberately wrote letters during that period and the valid explanation of the Respondent has simply been ignored without even alluding to the fact that the official's absence due to assigned official duty was the cause for the same. The Claimant knew in advance fully well that the concerned officer of present Petitioner was on Election duty at the relevant time and therefore these letters would remain unresponded. In any case, if preemptive writing of letters in contradiction to the official written records will become a sufficient ground for award of claim, it would make a mockery of the legal provisions under Indian Law and even the basic principles of fundamental policies of Indian Law, thus being against public policy of India.
(v) Because the observations made by Ld. Arbitrator are Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 14 of 69 contrary to the specific terms of the contract as detailed in the above paragraphs.
(w) Because as per specification 2 reproduced above, Claimant had to give prior sufficient notice before placing concrete for inspection & acceptance of forms with respect to work, alignment & fitness and Claimant has placed nothing on record that any such prior notice was given to the present Petitioner let alone the sufficiency of the same. It is a completely misplaced and unfounded inference that the breach of this condition was pointed out for the first time on 26.12.2013. Precisely for that reason that no prior notice was given by Claimant, M/s Balaji Analytical Laboratories were hired for the purpose of investigation job and the quality of concrete in the slab of the 1st Culvert and they after due inspection and assessment gave the Report dt. 12.09.2013 which has been placed on record as R-20. In fact further tests were also conducted by Balaji Analytical Laboratories and Report dt. 25.10.2013 was given and which was also placed on record by the present Petitioner as R21. The above two reports of a third party reputed lab clearly mentions in their scope of investigation that the same was being done in respect of the slab of the 1 st culvert. Therefore the findings by Ld. Arbitrator are contrary and Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 15 of 69 without any basis and designed to benefit the Claimant. Thus it is completely false and contrary to the record, that this issue was an after thought and the same was raised at the earliest opportunity after coming to know about this illegal act and corrective steps were sought to be taken.
(x) Because the Ld. Arbitrator has in fact accepted the Test Reports of Balaji Laboratories dated 12.09.2013 & 25.10.2013 and allowed the cost of Rs. 80,000/- in favour of the present Petitioner and held the Claimant to liable to bear this cost. (y) Because the Ld. Arbitrator has failed to appreciate that extension of time was done by the present Petitioner in public interest as the people were suffering due to non availability of the culvert bridges and particularly due to the 2nd culvert being demolished by the Claimant. In fact the dispute was deliberately timed by the Claimant knowing the difficulty the public would undergo after the 2nd culvert was demolished by the Claimant. The records very clearly show that the extension was done by the Department subject to their right to levy of penalty / damages and the Claimant accepted the same and acted upon it. Therefore the Ld. Arbitrator has acted illegally by holding that due to time extension, time no longer remained the essence of the contract. (z) Because some other set of standards have been applied by Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 16 of 69 the Ld. Arbitrator which were simply not applicable and could not have been applied to this case and such an act of the Ld. Arbitrator makes the entire findings perverse and against the basic tenets of law and the impugned award could actually become a basis for future tragedies, the responsibility of which needs to be fixed as the Claimant will simply disappear after pocketing the Govt. money and the Ld. Arbitrator would also not take any responsibility for the same.
(aa) Because the Ld. Arbitrator has also simply failed to consider the dispute arose when the 3 rd RA Bill was raised by the Claimant and prior to that, all bills raised by Claimant were duly paid by the present Petitioner and the conduct of present Petitioner was absolutely fair with Claimant. (bb) Because the Ld. Arbitrator has taken all averments made by Claimant as gospel truths with respect to setting up of the infrastructure required for execution of the project and demobilizing and dismantling of the same. Any such claims were not permitted under the contract and therefore, the burden of proof was clearly on the Claimant to prove the maintainability and correctness of these claims as they were the one seeking compensation in respect of the same. Even the dates put forward by Claimant have been accepted by the Ld. Arbitrator simply Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 17 of 69 ignoring the documents on record and facts put forward by the present Petitioner.
(cc) Because there are serious contradictions in the impugned award. On one side, the Ld. Arbitrator has held that the test which were got conducted by Present Petitioner with respect to the slab lacked credibility as the same were not done in the presence of the Claimant. On the other hand, Ld. Arbitrator has completely believed the version of the Claimant in respect of casting the slab of the Culvert No. 1 despite the fact that the same was done in the absence of the Petitioner & their officials and nothing was placed on record by Claimant to show that they had given the advance notice to the present Petitioner to be physically present and observe the material and casting process as provided for in the specifications in the contract. In view of the Ld. Arbitrator, this was inconsequential. Therefore the Ld. Arbitrator supplanted the provisions of the contract between the parties with his own logics and the other inapplicable provisions put forward by Claimant and this is simply not allowed under law and the same vitiates the impugned award at its basic roots. (dd) Because the illegality in the award is further compounded by the fact that the Ld. Arbitrator has awarded the cost of the test in favour of the present Petitioner thereby accepting the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 18 of 69 authenticity of the test got conducted by the present Petitioner through a reputed third party lab. The Ld. Arbitrator could not have simply ignored the findings of the tests and the Reports dt. 12.09.2013 & 25.10.2013. The evidence of tests conducted by Shri Ram Institute for Industrial Research and their Reports dt. 17.09.2015 & 15.01.2016 as placed by present Petitioner, was ignored for no reason. There is absolutely nothing on record to show that workmen were mobilized or demobilized & when and the claims in this respect have been allowed without any material on record, which makes the award completely untenable as per the law & public policy of India.
(ee) Because the Claimant have raised the false bogey of hindrances and obstructions being the main cause for non construction/non execution by the Claimant in respect of Culvert No. 2 and 3. The present Petitioner had placed on record the fact that after the Claimant abandoned the site and their contract rescinded, the work was awarded to M/s Roshan Lal in respect of the Culvert Nos. 2 and 3 and the same were duly executed and completed in time as per the specifications laid down in the contract and the documents & drawings pertaining to award of work to M/s Roshan Lal and photographs showing successful completion of the work of the Culvert Nos. 2 and 3 were placed Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 19 of 69 on record by present Petitioner, but the same was ignored by Ld. Arbitrator.
(ff) Because the Ld. Arbitrator completely ignored the fact that it is the Claimant who removed men and material during the execution of work and if the basic premise of drawings having not been provided, is removed, then there was clear abandonment of contract and work. Even as per Claimant, men & material were removed much before the time when the Petitioner was compelled to terminate the contract. The Ld. Arbitrator has rewarded Claimant for such abandonment. (gg) Because the Ld. Arbitrator has failed to appreciate that this project was being undertaken & executed under the local area MLA fund and the three culverts were to be built to cater to the need of local people and therefore, being executed under his observation & supervision. The Claimant played fraud since the very beginning which is clearly visible from the facts of this case and the documentary record placed before the Ld. Arbitrator in respect of the same has been ignored by the Ld. Arbitrator for the reasons best known to him."
Proceedings and Reply of the Respondent
4. The present petition was filed on 16.08.2017 and summons of the petition and notice of application for stay of Award to the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 20 of 69 Respondents were issued on the even date. Reply was filed on behalf of the Respondent wherein it was submitted by the Respondent that the present petition is not maintainable and the Court has no territorial jurisdiction to entertain and decide the petition. It is further alleged that the present petition is barred by limitation and the Petitioner has failed to set out any legal and plausible grounds for setting aside or modification of the impugned award. It is alleged that the Petitioner has not approached the Court with clean hands and has suppressed the material facts.
5. It is submitted in the reply of the Respondent that the impugned award is well reasoned and based on settled principles of law and there is no error apparent on the face of record and the entire allegations of the Petitioner are wholly false and baseless. It is further stated that the Petitioner miserably failed to discharge its contractual obligations and for extraneous considerations, the officials of the Petitioner did not permit the Respondent to execute the work awarded in its favour. It is further submitted that the officials of the Respondent failed to pay the legitimate dues of the Respondent and terminated the contract wrongfully and illegally. It is also submitted that the culvert constructed by the Respondent is being used by the general public since the year Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 21 of 69 2013 without any problem. It was pertinently mentioned that in the instant case, for the reasons best known to the officials of the Petitioner, even the revised drawings of the work were never provided to the Respondent and the work was got executed from the Respondent under day to day instructions and supervision of the concerned officials of the Petitioner. It was also pertinently mentioned that till the time the Respondent insisted for its payment in respect of the work done, the Petitioner never complained about any defect or deficiency in the work executed by the Respondent nor took any actions against the Petitioner as was provided and envisaged under the contract between the parties. It is further stated that there is ample material on record to show that the officials of the Petitioner miserably failed to discharge their contractual obligations and they created undue problems and hurdles in the way of the execution of the work by the Respondent / Contractor. It is further averred that the Petitioner never produced any changed drawings / amendments which were required at the site. It is further alleged that admittedly, the Petitioner had neither responded to the various communications sent by the Respondent / Contractor nor had done the needful in the matter. It is further stated that the Respondent had duly and timely mobilized its resources for Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 22 of 69 proper and timely execution of the awarded work but it is the Petitioner who did not extend requisite cooperation to the Respondent / Contractor.
6. It is further stated in the reply that once the termination of the contract was not legal, valid and justified, the alleged completion of the work through some other contractor was of no legal consequence. It is alleged that the Petitioner is trying to take undue advantage of its own failure and lapses. The Respondent has also denied the grounds of the present petition.
7. It would be pertinent to reproduce the relevant portion of the impugned award herein:
"3.0 PRELIMINARY DISCUSSION AND FINDINGS:
............. The issues as brought out by Claimant along with Respondent's replies to the same, including the issue of demobilization by Claimant and the findings and inferences drawn with due reference to the submissions by the Parties are as under.
"3.2.3. Arbitrator's Findings (in respect of the issues at 3.1 and 3.2):
......G. From the foregoing it is evident that while the Claimant was writing letters repeatedly for making available the required construction drawings and about the hindrances Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 23 of 69 existing at site, especially for the remaining two culverts as also for release of payment against the RA Bill, submitted to Respondent on 29th July 2013, the Respondent appeared to have remained in a state of hibernation, maintaining total silence. It was only on 23.10.2013 (Exhibit R-16) the Respondent wrote a letter to Claimant, wherein it was brought out that provisional extension had been granted up to 30.11.2013, vide letter dated 01.10.2013; all the drawings for the three culverts to be constructed has been handed over to Claimant and hindrance free site is available; and in the end asking the Claimant to restart the work, failing which action shall be taken under relevant clauses of Contract.
H. The Respondent was however unable to produce any evidence or any acknowledgement from Claimant, about issue of any drawings as was stated by Respondent in its letter dated 23.10.2013. The Respondent's statement that the Claimant might have seen the drawings of culverts before tendering is meaningless and it reflects poorly on Respondent's personnel. Firstly, the Tender Drawings as are usually made available to be seen by the bidders are seldom same as the Working Drawings. Secondly, the work cannot be executed merely having seen the drawings, which are necessarily required at the site of work for Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 24 of 69 execution. The Claimant's reply to the above letter is dated 31.10.2013 and filed as Exhibit C-24 denied having received any drawings for the culverts No. 2 & 3.
I. There is also no record to show if any directions were issued by AE and / or JE to Claimant regarding any discrepancy in Centring / Shuttering, Bearing and the Reinforcement or any directions issued for rectification of the same as alleged by Respondent.
J. The Respondent follow CPWD practices in the management of its Works and Contacts. It is a usual CPWD procedure to maintain a Drawing Register at the site of work, which records the receipt of drawings from time to time from the concerned design authority as also it records the issue of drawings to the Contractor. No such drawing register was produced by Respondent. The Site Order Book is also sometimes used for showing issue of drawings to the Contractor. However, the Site Order Book for the instant work does not show if any drawings were issued. On the whole it is noted that the management of the work has been quite unprofessional, to say the least.
K. It is also noted that while the Claimant has repeatedly been bringing to the knowledge of Respondent the hindrances Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 25 of 69 that the site of the Culverts No. 2 & 3, the Respondent kept silent for months together and later merely gave a bland denial about any such hindrances without answering in any specific terms the issues raised by Claimant. Even by the statement of Respondent, the drawings for Culvert No. 2 & 3 were stated to have been issued several months after the stipulated period of completion of work was over, as evident from Respondent's letter exhibit R-16 dated 23.10.2013 addressed to Claimant, wherein the mention of drawings having been issued was made for the first time. L. In view of the foregoing, it is logical to accept the Claimant's charge against Respondent for not having provided the required drawings in full for Culvert No. 1 and not having provided the drawings for Culverts No. 2 & 3, besides not having provided hindrance free site for Culverts No. 2 & 3. .............................
3.3.3. Arbitrator's Findings .........D. The Respondent thus repeatedly granted extension of time. The Claimant also continued to carry on with the execution of work up to 02.07.2013.
........
F. From the Claimant's aforesaid letters dated 02.08.2013 and 12.08.2013 it is clear that the Claimant itself has stated that Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 26 of 69 Time was no more essence of the Contract; and vide its letter dated 16.08.2013 agreed to continue with the work. Thus while the Respondent had repeatedly granted extension of time; the Claimant had continued to carry on with the execution of work. G. It is clear from the foregoing and logical to conclude that the time stipulated in the Contract had expired and delay in completion of work has been accepted by both parties, setting the 'Time' at large. Thus, the 'Time' could no more be considered as "Essence of Contract."
...................
3.4.3. Arbitrator's Findings:
The matter of facts as stated by Claimant are generally found to be in order as per the contemporary records of correspondence between the Parties and the Respondent's bland denial does not hold as examined hereunder.
A. There are two aspects of this issue. One is about timely payments; and the second is about de-mobilisation of resources from the site of work. As regards the payments, the Respondent's Exhibit R-7 shows that the first two RA bills were paid by Respondent on 25.03.2013 and 09.07.2013 respectively corresponding to the values of work done by Claimant of Rs. 3,38,883/- and Rs. 3,33,871/- respectively. Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 27 of 69 ..........
C. ............. In the Claimant's letter dated 21.09.2013, Exhibit C-20, SOC pages 78-80, some criminality was also alleged against the Junior Engineer concerned for non-payment against the Bill. Such allegations of criminality against Respondent's personnel is a matter of Departmental investigations and cannot form part of arbitral proceedings; and therefore the same is not being looked into.) .............
F. ..........Therefore, I hold that the Respondent failed badly in releasing timely payments against work done as contained in the third RA Bill, the measurements of which have never been contested by Respondent.
................
3.5.3 Arbitrator's Findings:
A. It is important to note that as per Contract, the work was stipulated to be completed on 20.05.2013. The Claimant had informed Respondent vide its letter dated 16.08.2013 of the decision to demobilise the resources from the site because of breaches committed by Respondent, like not providing the required drawings, not providing hindrance free site for execution of the work as also non-payment of dues. In this regard Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 28 of 69 the Claimant's letters dated 02.08.2013 (Exhibit R-11), dated 12.08.2013 (Exhibit R-12) and dated 16.08.2013 (Exhibit R-13) are relevant.
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D. It is seen that the first and second RA Bills were for work value of about Rs. 3.3 lakh each, while the third RA Bill was for a work value of Rs. 5.8 lakh. It is not difficult to understand that for a Class IV Contractor, non-payment of such a magnitude of work will adversely impact its capability to execute further works. And the result was that the Claimant demobilised its resources after about a month of non-payment of his bill. ...........
F. It is also noted that the Executive Engineer, who is the signatory of the Contract Agreement on behalf of Respondent, in its various communications to Claimant have been relying on the reports of his Assistant Engineer, without any attempt whatsoever on his part to verify the facts himself and apply his own mind. In fact, all such communications by the Executive Engineer are a clear attempt to avoid any responsibility of its own, depending entirely on the reports of Assistant Engineer. This conduct of the Respondent was certainly not that of a responsible entity, particularly when the Claimant has raised serious allegations Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 29 of 69 against the Assistant Engineer as well as the Junior Engineer, who was directly working under the Assistant Engineer. .............
H. Further, it has been concluded against issue No.3 that 'Time' was set at large by the Parties and 'Time' was no more 'Essence of Contract'. Therefore, the question of levy of any compensation by Respondent on account of any delay in completion would not arise. Even otherwise, the Respondent have not shown if they actually suffered any loss. For the same reason, the Respondent could not have forfeited the Earnest Money Deposit and/or Performance Guarantee furnished by Claimant.
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K. Under the circumstances, the action of Respondent to rescind the Contract under the terms of Clause-3 is not considered to be lawful and therefore deemed invalid. 4.0 Claim Wise Award 4.1.3 The Arbitrator's Findings and Decision:
.........G. It is noted that the CPWD Specifications 2009, as applicable for the work required mandatory tests of compressive stength of Concrete used in the structure. There is no record to show the results, if any, of Cube Strength. Apparently therefore, Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 30 of 69 the Respondent had decided to carry out certain tests through Balaji Analytical Laboratories. The Respondent have furnished the test report dated 12.09.2013, which shows the results of UPV Test and Rebound Hammer Test. The other report dated 25.10.2013 is a repeat of UPV tests only.
H. The CPWD Specifications 2009, under Appendix B lays down 'Additional Tests for Concrete', stating there in that in case the concrete fails to achieve the required strength as per the mandatory tests, more tests could be carried out at the discretion of Engineer in Charge to satisfy the strength of the concrete laid. It also says that for the purpose of payment, 'the Hammering Test results only' shall be the criteria. ...........Thus, a greater reliance was needed to be placed on the results of Hammer Test than the UPV test. .............
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M. After considering all aspects in the matter, I am of the view that 70% of the cost of the Concrete in the RCC slab should be allowed to Claimant. However, because the Claimant have failed to produce mandatory test results of the compressive strength of concrete, the Respondent had to carry out additional tests and therefore the cost of such additional tests should be borne by Claimant. But the cost of tests carried out in September 2013 Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 31 of 69 should only be considered in this regard. The tests carried out in August 2015 appear to be an afterthought on the part of Respondent and cost of the same should not be burdened on Claimant.
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4.2.3 (C) The Claimant's valuation for the labour hutments for an amount of Rs. 67,000/- is not considered to be unreasonable. However, as per Claimant's own statements about the three RA Bills submitted by them to Respondent, the total value of work done was Rs. 3,38,883/- + Rs. 3,33,871/- + Rs. 5,86,072/- = Rs. 12,58, 826/-, which comes to nearly 25% of the Contract value of Rs. 51,43,558/- and thus the Claimant had already realised 25% value of such one-time overhead expenses. Therefore, I consider it reasonable to allow about 75% value of such overhead expenses in favour of Claimant, which in the instant item of Claim comes to Rs. 50,000/-.
.........
4.4.3 (C) The Claim has been made by Claimant for the period from 21.12.2012 to 21.09.2013 total days 252. However, the Claimant had carried out work up to 02.07.2013 and had demobilised its resources as is stated in its letter dated 16.08.2013. Therefore, the period of claim can only be from Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 32 of 69 03.07.2013 to 16.08.2013, which comes to 45 days only. D. The Respondent have denied the Claim in principle without any comments about the quantification. The rate of Rs. 1,500/- per day for the Concrete Mixer is not considered unreasonable, which however usually also includes the cost of its operator. Therefore, I consider it reasonable to allow a rate of Rs. 1,000/- per day and accordingly the amount considered in favour of Claimant comes to Rs. 45,000/-.
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4.5.3 (A) .........It is noted that the Excavator would have worked at the site of Culvert No.1 at the time of excavation of foundations, which work had been done sometime in December 2012 or maybe in January 2013 also. There would have been no logic in keeping this item of machinery at site after the excavation work was over at Culvert No.1. Since the site as also the drawings in respect of Culverts No. 2 & 3 were not available as per Claimant, bringing it again to the site is not acceptable. I therefore do not deem it fit to allow any amount in favour of Claimant for this item of machinery.
4.6.3(C) ..........Therefore, the period of claim can only be 16 days for the shuttering materials. Also I am unable appreciate the requirement of wooden planks, for which the claimed amount Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 33 of 69 is Rs. 1,13,400/-.
D. ...........Therefore, I allow the Claim on a pro rata basis for a period of 16 days in instead of 225 days in respect of shuttering materials after excluding the Vibrator and the wooden planks and accordingly the amount considered in favour of Claimant with regard to Shuttering material comes to about Rs. 44,000/-. In respect of Vibrator, the cost of idling is allowed on ad-hoc basis as Rs. 6,000/-.
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4.7.3 The Arbitrator's Findings and Decision:
A. The Claim in respect of idle labour claimed without stating the purpose and its quantum is not considered reasonable. There was no reason to keep the Labour at site when there was no work. It is also not a usual practice to keep the labour idling, when there is no work. It is also not a usual practice to keep the labour idling, when there is no work.
B. However, the claim in respect of chowkidars is valid in principle. The Claimant has claimed the same for a period of 225 days, while only 16 days could be considered as brought out earlier.
C. Accordingly, an amount of Rs. 10,600/- on pro-rata basis is considered for award in favour of Claimant. Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 34 of 69 4.8.3 The Arbitrator's Findings and Decisions: The Claim No. 8 is very similar to the Claim No. 2 & 3, and therefore the matter is decided similarly in favour of Claimant by allowing about 75% of the value of such one-time overhead expenses of Claimant. Accordingly, an amount of Rs. 11,000/- is considered for award in favour of Claimant.
4.9.3 The Arbitrator's Findings and Decisions:
A. The Claim in respect of Cement kept in Cement Godown, Steel bars and other building materials like Coarse Aggregate and Fine Aggregates.
B. The Cement Register shows that a balance of 76 bags of cement was returned to Claimant, without however any acknowledgement from Claimant. Therefore, the claim for 76 bags of cement is considered valid, because cement was kept under double lock/key with in the control of Respondent as per terms of Agreement. The cost of 76 bags @ Rs. 300/- per bag comes to Rs. 22,800/- only.
C. However, the claim in respect of other materials remains unsubstantiated. There is every reason to believe that the Claimant would have carried away the unused materials after the Contract was rescinded, just as the Claimant demobilised its other resources.
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 35 of 69 D. Accordingly, only an amount of Rs. 22,800/- in respect of Cement only is considered for award in favour of Claimant. 4.10.3 The Arbitrator's Findings and Decision: The Claim has remained largely unsubstantiated.
4.11.3 The Arbitrator's Findings and Decision: Having accepted that the action of Respondent to rescind the Contract was not valid, the EMD could not be forfeited. Therefore, the Claimant are entitled for the refund of the same. 4.12.3 The Arbitrator's Findings and Decision: Having accepted that the action of Respondent to rescind the Contract was not valid, the Performance Guarantee could not be forfeited.
Therefore, the Claimant are entitled for the refund of the same. Interest is being considered separately.
4.13.3 The Arbitrator's Findings and Decision: The Claimant had demobilised its resources of its own volition and thus terminated the Contract for the breaches by Respondent. The Claimant at the time of such termination or soon thereafter did not raise any such claim of loss of profit. Under the circumstances, taking an overall view of the matter, I do not think it fit to allow this claim.
4.14.3 The Arbitrator's Findings and Decision: Both Parties shall bear their respective costs.
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 36 of 69 ...........
5.2.3 The Arbitrator's Findings and Decision on the Counter claims:
A. It has already been held that the action of Respondent to rescind the Contract was not valid. Also, it has been held that the 'Time' was no more 'Essence of the Contract' after both the parties had accepted extensions of time. Therefore as a logical corollary the Respondent could not levy any compensation for the alleged delay in completion of work.
B. As regards the Testing Charges the Counterclaim is partially allowable and duly considered when determining the award against Claimant's Claim No. 1. Therefore, no separate amount is awardable here.
C. No Costs are awarded in favour of Respondent either." Contentions of the parties
8. Arguments were heard on behalf of the parties. Written synopsis were filed on behalf of the Objector / Petitioner. The facts of the matter in the arbitration record are detailed in the objections filed by the Petitioner. It is submitted that the tender was awarded to the Respondent M/s Virtual Infrastructure for an amount of Rs. 51,43,558/- on 07.12.2012 with stipulated date of start as 22.12.2012 and of completion as 20.05.2013 respectively.
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 37 of 69 It is further submitted that as per the scope of work, the claimant was to construct 3 culverts at RD. 305m, RD. 450m and RD. 600m of Palam Link drain and the entire of construction of above culverts had to be completed by the Claimant. It is alleged that the Claimant took up the work of only culvert no. 1. It is alleged that despite many directions / letters, the Claimant never took up the work of other two culverts on one pretext or other. It is further stated that the Claimant had executed the work of culvert no. 1 at abutment level and during the site visit by A.E. and J.E., some discrepancies were noticed by the field staff in centering, shuttering, bearing and also in the reinforcement laid by the agency for casting the deck slab of Culvert No. 1. It is alleged that the Claimant had casted the deck slab of culvert no. 1 without intimating the field staff of the present Petitioner as well as to Engineer-in-charge. It is further alleged that the Petitioner got the necessary tests done from a reputed lab i.e. Balaji Analytical Laboratories and the Assistant Engineer in-charge vide his letter dated 29.11.2013 and 12.12.2013 submitted the test report/result dated 12.09.2013 from Balaji Analytical Laboratories which found the construction to be unsatisfactory and showed the quality of construction to be unsatisfactory and also showed the quality of concrete from poor to average. The Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 38 of 69 test was conducted again and it was once again found to be poor to average vide report dated 25.10.2013.
9. Per contra, it was argued on behalf of the Respondent that the Court cannot interfere with the findings of the Arbitrator on fact and law. It was argued that all the contentions raised relate to the merits of the decision and the Petitioner has not been able to show as to how any of the grounds mentioned under Section 34 of the Arbitration Act are made out.
10. Following judgments are relied by the Respondent herein:
(a) UHL Power Company Ltd. Vs. State of Himachal Pradesh in Civil Appeal No. 10341/2011 and State of Himachal Pradesh Vs. UHL Power Company Ltd in Civil Appeal No. 10342/2011 (2022)(1) R.A.J. 193(SC) passed by Hon'ble Supreme Court of India;
(b) MCD and Anr. Vs. Jasbir Singh, Prop. Jaseb Enterprises 102 (2003) Delhi Law Times 682 dated 17.12.2002 passed by Hon'ble High Court of Delhi;
(c) India Tourism Development Corporation Ltd. Vs. Budhiraja Electricals (2003)(2) RAJ 216 (DEL) dated 07.01.2003 passed by Hon'ble High Court of Delhi;
(d) Pokhrayan Alums and Chemicals Pvt. Ltd Vs. Municipal Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 39 of 69 Corporation of Delhi (2003)(2) RAJ 221(DEL) dated 03.01.2003 passed by Hon'ble High Court of Delhi;
(e) Himachal Joint Venture Vs. Panilpina World Transport (India) Pvt. Ltd. AIR 2009 DELHI 88 dated 08.08.2008;
(f) DBS Financial Services Ltd. Vs. India Tourism Development Corpn. Ltd and Ors. AIR 2009 DELHI 94 in WP(C) No. 4304 of 1993 dated 19.03.2009;
(g) Union of India Vs. M/s Sikka Engineering Company (2019)(4) R.A.J. 507(DEL) dated 22.05.2019 passed by Hon'ble High Court of Delhi;
(h) The Project Director, National Highways No. 45E and 220 National Highways Authority of India Vs. M. Hakeem and Anr. (2021)(4) R.A.J. 1(SC) dated 20.07.2021 passed by Hon'ble Supreme Court of India.
11. LAW WITH RESPECT TO THE JURISDICTION OF THE COURT UNDER SECTION 34 OF THE ACT In Reliance Infrastructure Ltd. v. State of Goa, (2024) 1 SCC 479 : 2023 SCC OnLine SC 604 at page 514, it was held by Hon'ble Supreme Court that:
"26. In MMTC [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 :
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 40 of 69 (2019) 2 SCC (Civ) 293] , this Court took note of various decisions including that in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] and exposited on the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the 1996 Act, particularly when dealing with the concurrent findings (of the arbitrator and then of the Court). This Court, inter alia, held as under : (MMTC case [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , SCC pp. 166-67, paras 11-14) "11. As far as Section 34 is concerned, the position is well-
settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 41 of 69 a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] ; Hindustan Zinc Ltd. v. Friends Coal Carbonisation [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445] ; and McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 42 of 69 )
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 43 of 69 by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings." ..............
27. In Ssangyong Engg. [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , this Court has set out the scope of challenge under Section 34 of the 1996 Act in further details in the following words : (SCC pp. 170-71, paras 37-41) "37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), 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 policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 44 of 69
38. Secondly, it is also made clear that reappreciation 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.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, 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 matters Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 45 of 69 not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , 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. Additionally, a finding based on 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 characterised as perverse."
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28. The limited scope of challenge under Section 34 of the Act was once again highlighted by this Court in PSA Sical Terminals [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2023) 15 SCC 781 : 2021 SCC OnLine SC 508] and this Court Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 46 of 69 particularly explained the relevant tests as under : (SCC paras 40 to 42) "40. It will thus appear to be a more than settled legal position, that in an application under Section 34, the Court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Sections 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. 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". It is only such arbitral awards that shock the conscience of the Court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 47 of 69 ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.
41. A decision which is perverse, though would not be a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. However, 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.
42. To understand the test of perversity, it will also be appropriate to refer to paras 31 and 32 from the judgment of this Court in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , which read thus : (SCC pp. 75-76) '31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 48 of 69
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
32. A good working test of perversity is contained in two judgments. In CCE & Sales v. Gopi Nath & Sons [CCE & Sales v. Gopi Nath & Sons, 1992 Supp (2) SCC 312] , it was held :
(SCC p. 317, para 7) "7. ... It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law." ' "
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29. In Delhi Airport Metro Express [Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131 : (2022) 1 SCC (Civ) 330] , this Court again surveyed the case law and explained the contours of the Courts' power to review the arbitral awards.
Therein, this Court not only reaffirmed the principles aforesaid but also highlighted an area of serious concern while pointing out "a disturbing tendency" of the Courts in setting aside arbitral awards after dissecting and reassessing factual aspects. This Court also underscored the pertinent features and scope of Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 49 of 69 the expression "patent illegality" while reiterating that the Courts do not sit in appeal over the arbitral award. The relevant and significant passages of this judgment could be usefully extracted as under : (Delhi Airport Metro Express case [Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131 :
(2022) 1 SCC (Civ) 330] , SCC pp. 147-48, 150-51 & 155-56, paras 26, 28-30 & 42) "26. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, Courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or reappreciation of matters of fact as well as law. (See Uttarakhand Purv Sainik Kalyan Nigam Ltd. v.
Northern Coal Field Ltd. [Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 :
(2020) 1 SCC (Civ) 570] , Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. [Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1 SCC (Civ) 374] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 50 of 69 Saran [Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306] .) ................
28. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by Courts while examining the validity of the arbitral awards. The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 51 of 69 the said expressions.
29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression "patent illegality". Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression "patent illegality". What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 52 of 69 aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression "patent illegality".
30. Section 34(2)(b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression "public policy of India"
and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice.
42. The Division Bench referred to various factors leading to the termination notice, to conclude that the award shocks the conscience of the Court. The discussion in SCC OnLine Del para 103 of the impugned judgment [DMRC v. Delhi Airport Metro Express (P) Ltd., 2019 SCC OnLine Del 6562] amounts to appreciation or reappreciation of the facts which is not Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 53 of 69 permissible under Section 34 of the 1996 Act. The Division Bench further held [DMRC v. Delhi Airport Metro Express (P) Ltd., 2019 SCC OnLine Del 6562] that the fact of AMEL being operated without any adverse event for a period of more than four years since the date of issuance of the CMRS certificate, was not given due importance by the Arbitral Tribunal. As the arbitrator is the sole Judge of the quality as well as the quantity of the evidence, the task of being a Judge on the evidence before the Tribunal does not fall upon the Court in exercise of its jurisdiction under Section 34. [State of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485] On the basis of the issues submitted by the parties, the Arbitral Tribunal framed issues for consideration and answered the said issues. Subsequent events need not be taken into account."(emphasis supplied)
30. In Haryana Tourism [Haryana Tourism Ltd. v. Kandhari Beverages Ltd., (2022) 3 SCC 237 : (2022) 2 SCC (Civ) 87] , this Court yet again pointed out the limited scope of interference under Sections 34 and 37 of the Act; and disapproved interference by the High Court under Section 37 of the Act while entering into merits of the claim in the following words : (SCC p. 240, paras 8-9) Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 54 of 69 "8. So far as the impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act.
9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary 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. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 55 of 69 Act. The impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable."
31. As regards the limited scope of interference under Sections 34/37 of the Act, we may also usefully refer to the following observations of a three-Judge Bench of this Court in UHL Power Co. Ltd. v. State of H.P. [UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116 : (2022) 2 SCC (Civ) 401] : (SCC p. 124, paras 15-16) "15. This Court also accepts as correct, the view expressed by the appellate court that the learned Single Judge committed a gross error in reappreciating the findings returned by the Arbitral Tribunal and taking an entirely different view in respect of the interpretation of the relevant clauses of the implementation agreement governing the parties inasmuch as it was not open to the said court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a court of appeal.
16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 56 of 69 circumscribed."
In Hindustan Steel Works Construction v. Union of India 2018 SCC OnLine Del 12160, it was held by Hon'ble High Court of Delhi that:
"11. The present proceedings being under Section 37 of the Act of 1996 and the scope of jurisdiction of this Court in considering the appeal under Section 37 being very limited, as has been held by the Co-ordinate Bench of this Court in MTNL v. Finolex Cables Limited. Wherein the Bench after examining the law laid down in various judgments of the Supreme Court delineated the contours of the jurisdiction of this Court under Section 34 and 37 of the Act as under:
40. The extent of jurisdiction of the court while dealing with the challenge to an arbitral award, by now, stands authoritatively examined by a plethora of pronouncements of the Supreme Court, which travel from the judgment reported at 1994 Supp (1) SCC 644, Renusagar Power Co. Ltd. v. General Electric Co. to (2015) 3 SCC 49, Associated Builders v. DDA. On an analysis of all the said decisions, this court has, in a recent judgment reported at, NHAI v. Hindustan Construction Co. Ltd., delineated the following propositions:
"36. Associated Builders v. DDA, (2015) 3 SCC 49, may Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 57 of 69 justifiably be christened as the high watermark in the law relating to Section 34 of the Act, and any attempt to paraphrase the decision is fraught with the risk of mutilation. The decision is, almost entirely, definitively authoritative, and brooks no ambiguity or anomaly. Nonetheless, in view of the proliferation of litigation, challenging arbitral awards, in recent times, we have, in a recent decision, dated 10 th August 2017, in Shiam Cooperative Group v. Kamal Construction Co. Ltd., extracted, in extenso, the relevant paragraphs from the said decision, and respectfully culled, therefrom, the following clear principles:
(i) The four reasons motivating the legislation of the Act, in 1996, were
(a) to provide for a fair and efficient arbitral procedure,
(b) to provide for the passing of reasoned awards,
(c) to ensure that the arbitrator does not transgress his jurisdiction, and
(d) to minimize supervision, by courts, in the arbitral process.
(ii) The merits of the award are required to be examined only in certain specified circumstances, for examining whether the award is in conflict with the public policy of India.
(iii) An award would be regarded as conflicting with the public policy of India if Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 58 of 69
(a) it is contrary to the fundamental policy of Indian law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or
(e) it is so perverse, irrational, unfair or unreasonable that it shocks the conscience of the court.
(iv) An award would be liable to be regarded as contrary to the fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or the binding effect thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a "judicial approach", i.e. has not acted a fair, reasonable and objective approach, or has acted arbitrarily, capriciously or whimsically, or
(e) the arbitrator has failed to draw an inference which, on the face of the facts, ought to have been drawn, or
(f) the arbitrator has drawn an inference, from the facts, which, on the face of it, is unreasonable, or
(g) the principles of natural justice have been violated.
(v) The "patent illegality" had to go to the root of the matter.
Trivial illegalities were inconsequential. Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 59 of 69
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or
(b) the arbitration agreement is invalid under the law, or
(c) the applicant was not given proper notice of appointment of the arbitrator, or of the arbitral proceedings, or was otherwise unable to present his case, or
(d) the award deals with a dispute not submitted to arbitration, or decides issues outside the scope of the dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the parties.
(vii) "Perversity", as a ground for setting aside an arbitral award, has to be examined on the touchstone of the Wednesbury principle of reasonableness. It would include a case in which
(a) the findings, in the award, are based on no evidence, or
(b) the Arbitral Tribunal takes into account something irrelevant Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 60 of 69 to the decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision.
(viii) At the same time,
(a) a decision which is founded on some evidence, which could be relied upon, howsoever compendious, cannot be treated as "perverse",
(b) if the view adopted by the arbitrator is a possible view, it has to pass muster,
(c) neither quantity, nor quality, of evidence is open to reassessment in judicial review over the award.
(ix) "Morality" would imply enforceability, of the agreement, given the prevailing mores of the day. "Immorality", however, can constitute a ground for interfering with an arbitral award only if it shocks the judicial conscience.
(x) For examining the above aspects, the pleadings of the parties and materials brought on record would be relevant.
(x) The court cannot sit in appeal over an arbitration award. Errors of fact cannot be corrected under Section 34. The arbitrator is the last word on facts."
41. It is apparent, therefore, that, while interference by court, with arbitral awards, is limited and circumscribed, an award Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 61 of 69 which is patently illegal, on account of it being injudicious, contrary to the law settled by the Supreme Court, or vitiated by an apparently untenable interpretation of the terms of the contract, requires to be eviscerated. In view thereof, the decision of the ld. Single Judge that reasoning of the arbitral award in this regard was based on no material and was contrary to the contract, cannot be said to be deserving of any interference at our hands under Section 37 of the Act. In a pronouncement reported at, MTNL v. Fujitshu India Pvt. Ltd. (FAO(OS) No. 63/2015), the Division Bench of this court has held that "an appeal under Section 37 is like a second appeal, the first appeal being to the court by way of objections under Section 34". Being in the nature of a second appeal, this court would be hesitant to interfere, with the decision of the learned Single Judge, unless it is shown to be palpably erroneous on facts or in law, or manifestly perverse.
12. In view of our above discussion, we do not find merit in the appeal. The same is dismissed."
Before discussing the arguments of the parties, it would be relevant to note the provisions of section 34 of the act and the judicial decisions that have interpreted the said provision. Section Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 62 of 69 34 as it stands today is as follows :-
"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 4 establishes on the basis of the record of the arbitral tribunal 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 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 Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 63 of 69 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.
1[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 Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 64 of 69
(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.] 2[(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 re- appreciation of evidence.]"
12. Reasoning
(a) I find that each and every ground pleaded by the Petitioner in the present petition under Section 34 of the Arbitration Act challenges the findings of fact arrived at by the Arbitrator. Vide the present petition, the present Court has been asked to again reappreciate the evidence in the manner of an Appellate Court while hearing an appeal under Section 96 of the CPC. The Arbitrator is the final judge of the facts. At the very outset, it may be stated that though, in the petition, it has been alleged that the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 65 of 69 Arbitrator was biased and unfair and predisposed towards the Respondent herein, no circumstance or fact has been brought to the notice of this Court and therefore, the allegations of bias for which the burden on the Petitioner was heavy are not at all substantiated in the very least.
(b) Though the award has been challenged on the ground of being against public policy and suffering from patent illegality, each and every ground is merely challenging a finding on facts.
(c) The first claim made in the present petition is to challenge the findings of the Arbitrator in para 3.2.3 which deal with the claim namely (i) failure of the Petitioner to provide construction drawings and hindrance free sites and (ii) failure of the Petitioner to get the hindrances removed despite the request of the Respondent. In para (h) of the aforesaid para 3.2.3, the Ld. Arbitrator has come to a finding of fact based upon the correspondence between the parties, the delayed response of the Petitioner to the repeated letters of the Respondent to come to a finding that the Petitioner had not been able to prove that they had provided the drawings and had not been able to bring forth any acknowledgement of the receipt of the same. It is not for this Court to reappreciate the evidence to see whether the lack of response to the letters of the Respondent was sufficient for the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 66 of 69 Arbitrator to come to the aforesaid finding of fact. It is sufficient that the Ld. Arbitrator has applied the judicial mind and taken into account the various evidences led by the parties. The impugned award shows sufficient line of reasoning. While deciding the petition under section 34, this Court cannot go into depth as to whether sufficient or insufficient weight was given to one or the other circumstance by the Ld. Arbitrator who is the final authority when it comes to the appreciation of evidence. No perversity in the line of reasoning adopted by the Ld. Sole Arbitrator has been pointed out. Rather it has been averred that the delayed response and the letters of the claimant are insufficient evidence and that the circumstances have been erroneously interpreted. Such claims cannot be sustained under Section 34 of the Arbitration Act.
(d) The findings of the Ld. Sole Arbitrator in para 3.3.3 on the point of time being of the essence have also been challenged. On the similar grounds as noted above, I find that the reasoning of the Ld. Sole Arbitrator cannot be faulted merely because a different view is possible on the said issue. The award shows sufficient judicial reasoning and application of mind and is based on the evidence produced by the parties. The argument of the petitioner that the extension of time was only given due to the Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 67 of 69 contract being for public works and public interest, is again an argument which is on the merits of the case and relating to the interpretation of the contract. What is to be seen is whether the line of reasoning and application of mind are demonstrable from the bare reading of the impugned award and not whether the Ld. Arbitrator gave an erroneous interpretation.
(e) The findings of the Arbitrator in para 3.4.3 and the challenge made by the Petitioner suffers from similar infirmities as noted above. The Ld. Arbitrator has come to a specific finding that the Assistant Engineer had informed the Respondents about some defect in the work but the said defect was not specifically pointed out and was reported nearly four months after execution of work. Ld. Arbitrator also found that the letters of the Petitioner dated 18.10.2013, 31.10.2013, 04.11.2013 and 08.11.2013 were insufficient to prove their claim that the casting of culvert had been done without intimation to the A.E. and that the same was an afterthought. As noted above, the said findings of fact cannot be gone into by this Court under its jurisdiction under Section 34 of the Arbitration Act as the same are based on evidence adduced and specific circumstances which weighed in the minds of Ld. Sole Arbitrator. Even assuming that this Court was of a different view, in its jurisdiction under Section 34, I would be powerless Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 68 of 69 and acting outside the jurisdiction to substitute the said view with a view of this Court. The argument of the Petitioner that there was no evidence to show that the concerned Engineer had been intimated before laying of the RCC culvert is an argument that suffers from the same infirmity. It is reiterated that this Court cannot appreciate and weigh the evidence adduced before the Arbitrator.
(f) Similar is the situation with the finding of fact in para 3.5.3 which are based upon the correspondence between the parties and the conduct including acts and omissions of the various actors involved. The main claim throughout the present petition by the Petitioner is that the Arbitrator has come to an erroneous finding of fact. As stressed above, the said claim is unsustainable.
This Court cannot appreciate the evidence. Not a single circumstance has been pointed out that would show that the impugned award is against public policy or suffers from a patent illegality or that any fraud was played on the Arbitrator. Relief
13. I therefore, find that the present petition is without merit and has to be dismissed and the award has to be upheld under Section 34 of the Arbitration Act.
14. Parties to bear their own costs. File be consigned to Record Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers ARBTN No. 160/2020 Page 69 of 69 Room after necessary compliance.
Digitally signedby DIVYANG
DIVYANG THAKUR
THAKUR Date:
2024.02.01
16:14:05 +0530
Announced in the open court (Sh. Divyang Thakur)
On 02.02.2024 ADJ-03/South West
Dwarka / New Delhi
Executive Engineer, Civil Division-I, I & FC Department Delhi Vs. Virtual Infrastructure Contractors and Engineers