Delhi District Court
Gmtd Bsnl Hisar Haryana vs Suresh Kumar Security Agency on 19 November, 2024
IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
COMMERCIAL COURT-01, SOUTH,
SAKET COURTS, DELHI
CNR No. DLST01-008197-2023
OMP (Comm) No. : 52/23
In the matter of :-
GMTD BSNL, Hisar Haryana
Through CGMT BSNL, Haryana Circle
Ambala Cantt. , Haryana
............Petitioner
Vs.
Suresh Kumar Security Agency
Through its Proprietor Lt. Col. Suresh Kumar (Retd)
Having its office at:
SKS House, Main Maruti Kunj Road
Neat KIIT College
Gurugram, Haryana - 122102
..............Respondent
Date of institution of the petition : 24.08.2023
Date of final arguments : 05.11.2024 & 14.11.2024.
Date of Order : 19.11.2024
ORDER
1. This is petition u/s 34 of Arbitration and Conciliation Act, filed by the petitioner seeking setting aside of impugned award dated 30.05.2023 passed by Ld. Arbitrator.
2. Claim was filed before Ld. Arbitrator on the facts that in pursuance to ' Notice inviting tender limited to DGR Sponsored Agency' for providing security guards in Hissar, Sirsa and Fatehabad by respondent, parties had entered into two separate agreements dated 21.05.2018 whereby petitioner had appointed OMP (Comm) No. : 52/23 1/23 respondent to provide security services to its telecom installations, stores and cash counters in Hisar, Sirsa and Fatehabad. Both agreements were for the period of two years from 01.06.2018 to 31.05.2020. Petitioner vide Letter dated 05.11.2018 terminated the contract with effect from 01.12.2018. Outstanding amount due to claimant/respondent which had accrued in lieu of services rendered for the past six months was not paid by the petitioner herein, in time and was made by the petitioner in batches after repeated follow ups, spread over the period from October 2018 to December 2021. Thus, there was long delay of 35 months approximately, in clearing certain invoices which had become due in December 2018, in violation of guidelines/agreement to make the payment by the 1st day of every month. The claimant/respondent had to pay for Social Secuity benefits and salary to the security guards out of its savings and by borrowing the money from his friends and family. The principal amount of Rs. 1,36,311/- was not paid as well as delay in part payment by petitioner for the services availed, caused hardship and loss to the respondent on account of interest on the amount due, which amounts were also not paid by petitioner herein despite repeated requests. Hence, claimant/respondent herein vide notice dated 01.04.2022 invoked the Arbitration Clause. After completion of proceedings, award dated 30.05.2023 was passed by Ld. Arbitrator, which is under challenge before this court.
3. Parties contested with regard to applicability and interpretation of DGR Guidelines, delay in raising of invoices, non compliance of statutory obligations, delayed payments and claim of interest. With regard to applicability and interpreation of OMP (Comm) No. : 52/23 2/23 DGR Guidelines, it was submitted by Ld. counsel for respondent that in the present case, BSNL is the principal employer and the respondent was the security agency. As such, BSNL was to make payment to the claimant by 1st of every month and the respondent/claimant would in turn make payment to the security guards. Contrary to this, respondent availed services from the claimant. Claimant raised invoices for the services rendered as per Clause 7 of the Agreement. All invoices were raised on the 5th of every month and hence the payment became due on the 5th of every month for the services rendered in the previous month.
4. Per contra, Ld. counsel for petitioner made following submissions :
(a) That, Ld. Arbitrator has erred in giving a narrow interpretation to the DGR Guidelines alongwith the terms of the agreements. Relevant portion from the said guidelines was reproduced as under:
" Principal employer will pay wages 'due' to the security agency by the 1st of every month".
That Ld. Sole Arbitrator has erred in interpreting the aforesaid clause, as the wages due to the security guards would only contractually accrue once the services for the preceding month have been rendered. The said clause envisages that the principal employer pays the dues of the preceding month on the 1st of following month and in turn the security agency pays the guards.
(b) That, by conferring a narrow interpretation to the said guidelines read with the terms of the agreements, Ld. Sole Arbitrator has failed to appreciate the requisitions contained in OMP (Comm) No. : 52/23 3/23 the agreements viz. verification of the invoices, proof of payments made to the statutory authorities and wages paid to the guards etc. Moreover, the DGR Guidelines will not supersede the agreements as they do not have the status of law.
(c) That, Ld. Arbitrator has failed to appreciate that the petitioner could not have paid the wages to the guards on 1st of every month as, firstly, the petitioner did not exercise any control over the security guards employed by the respondent and secondly, wages could have only been paid if the respondent provided requisite details pertaining to the specific number of guards employed, which the respondent failed to provide to the petitioner since there is nothing on record to establish the said fact.
(d) That, the reasoning given by Ld. Arbitrator is erroneous and implausible as it purports that the petitioner was to make payment of wages for services rendered in June 2018 on 01.07.2018, whereas the invoice for the month of June 2018 was only raised by the respondent on 05.07.2018.
(e) That, Ld. Arbitrator without any basis and contrary to the evidence on record has returned that ".......it shows that the issue of non-payment of salary to the security guards was not taken as a serious issue in fact by the petitioner. But it was made a good excuse for non-payment of wages to the security agency.....".
5. In terms of agreements between the parties, both the parties were governed by DGR Guidelines. Agreements between the parties specifically refer to applicability of DGR Guidelines as applicable from time to time. Further, in terms of agreements between the parties, security agency was liable to make payment OMP (Comm) No. : 52/23 4/23 to its employees by each month before 7 th of each month as per wage formula promulgated by the DGR based on the Minimum Wages Act. Payment to labour was required to be made well in time on monthly basis . So much so, petitioner had right to pay wages to the employees in case security agency failed to make the payments. DGR Guidelines prescribed payment by principal employer, due to the security agency by 1st of every month and payment by security agency by 7th of each month to its security guards/supervisors. Abovenoted does not refer to the amount payable by principal employer subsequent to the payment having been made by the security agency to its employees, as sought to be suggested by Ld. counsel for petitioner. It is not open for petitioner to assert that DGR Guidelines will not supersede the agreements as they do not have the status of law once it is found mentioned in the agreement itself with regard to applicability of DGR Guidelines, besides there being no contradiction in the contents of the agreement and the DGR guidelines .
6. Ld. Arbitrator noted the deposition of petitioner's witnesses with regard to applicability of the DGR Guidelines, according to which, said guidelines were the part of binding agreements between the parties and the principal employer was bound to pay the wages due to the security agency by 1st of every month . Thereafter, security agency was bound to pay wages to the security guards by 7th of every month. Ld. Arbitrator discarded the submission of Ld. counsel for petitioner herein and observed that it could not be the spirit and intention of the guidelines that respondent/petitioner herein will start paying for security agency only after taking service of two months from security guards/agency in the beginning.
OMP (Comm) No. : 52/23 5/237. No perversity or illegality is found in observation of Ld. Arbitrator that:
"respondent has not complied with the DGR Guidelines particularly according to Clause 16 (c) and para 123 of the agreements Ex. C-1 and C-2. Evidently the respondent had been impressing upon the claimant to make the payment to the security guards at first by claimant by 7th of each month and thereafter, after verifying the bills it will make the payment on the 1st day of subsequent month i.e. from beginning of the 3rd month from the date of deployment of security guards. Once the respondent had not made the payment of bills, how could respondent ask the claimant to pay first to the guards without making payment even after taking services?"
............................
" There is neither such terms or conditions in agreements between the parties nor this fact has been proved by any cogent evidence on behalf of respondent. However, the respondent by its own interpretation has taken it that the security agency shall first pay the guards for the first month by the 7th of the month, then raised the bill, then the respondent shall pay in the next month by first of the month if bills found in order otherwise the payment could be delayed for the reason that security agency has not raised the bills properly. It is not acceptable in view of the express DGR Guidelines".
8. Ld. counsel for petitioner made following submissions with regard to delay in raising of Invoices:-
(a) That, Ld. Arbitrator has ignored various correspondences/letters dated 12.06.2020, 29.09.2020,
31.10.2020, 11.12.2020, 15.02.2021 and 20.03.2021 issued by the petitioner to the respondent calling to submit fresh invoices as per the terms and conditions of the Agreement. Despite the said letters on record, Ld. Arbitrator held that petitioner had taken advantage of delayed payment of security guards without intimating any defect to the respondent to take steps immediately to remove the defects. Moreover, Ld. Arbitrator ignoring the non- compliance of the terms and conditions of the Agreements by the respondent, has fastened the liability to pay the security guard on the petitioner being the principal employer.
OMP (Comm) No. : 52/23 6/23(b) That, fresh invoices for the months of October and November 2018 were raised and submitted by the respondent on 24.03.2021 after repeated follow-ups by the petitioner. Thus, respondent itself had contributed to the delay in processing and clearing of these invoices by causing excessive delays in compliance with other terms and conditions of the Agreements and submission of invoices without completing all formalities and complainces required under various labour laws relating to EPF, ESI and wages etc which were the sole responsibility of the respondent pursuant to Clause 25 of the Agreements.
(c) That, Ld. Arbitrator in absence of any document/evidence on record by the respondent has held that " the respondent made the payment to the security guards by borrowing money and from personal funds of the proprietor".
(d) That, CW1 Sh. Suresh Kumar in his cross-examination on 22.11.2022 had admitted that the payment for August 2018 to guards was only made by the respondent in October 2018. It was admitted that the respondent had not made payments to the security guards on time, which led to the delay of raising invoices/bills on the petitiner. Despite such admission, Ld. Arbitrator held that ".......the bills were duly raised in time after making statutory deposits, formalities and payment of salary of the security guards...".
(e) That, Ld. Arbitrator in complete ignorace of the documents/evidence on record and despite several reminder letters as mentioned above to the respondent to raise the invoices/bills as per the terms and conditions of the agreements has wrongly held that there is an " arbitrariness on the part of respondents i.e. the petitioner herein in not clearing the bills for OMP (Comm) No. : 52/23 7/23 payment and sitting over them for years without intimating the reason to the claimaner i.e. Respondent herein, is an open example of the arbitrariness on the part of respondent defeating the very purpose and intention of the guidelines".
(f) That, notations by the petitioner's officers on the invoices clearly indicate the delayed submission of the invoices as well as the delay in the payment of wages by the respondent.
(g) That, it was respondent's own admission vide undertaking/letter dated 22.08.2020 that the wages for the months of October and November, 2018, remained unpaid till as late as August 2020. Respondent failed to pay wages for the months of October and November till as late as September 2021.
(h) That, the respondent repeatedly submitted invoices without completing all formalities and compliances required under the labor laws and in terms of clause 25 of the agreements. The respondent also failed to comply with the relevant GST laws as in terms of section 31 (2) of the CGST Act, 2017 read with Rule 47 of the CGST Rules, 2017, which mandates issuance of invoices within a period of thirty days from the date of supply of services. Ld. Sole Arbitrator has failed to appreciate the cross- examination of RW-2 on this aspect.
(i) That, the respondent submitted the rectified invoice for the month of September 2018 after inordinate delay on 29.1.2019 and admitted that the delay in submissions was " due to my reasons". The inordinate delay attributable to the respondent in timely submission of invoices can further be evidenced by letters dated 12.6.2020, 29.9.2020, 31.10.2020, 11.12.2020, 15.2.2021 and 20.03.2021 sent by the petitioner.
OMP (Comm) No. : 52/23 8/239. Per contra, Ld. counsel for respondent made following submissions:
(a) That, the ground raised in the present petition that invoices were not raised on time is an afterthought and to justify the default on part of BSNL. Invoices were raised and submitted within time as can be seen from Bank Statement and details of payment produced by BSNL. The invoices were required to be raised as per Clause 7 of the Agreement, which was complied with. BSNL vide letter dated 29.09.2020 stated that bills could not be processed due to MIRO system which requires bills to be raised again in 2021. Respondent Security Agency had paid the EPF and ESI due to the security guards and deposited GST in the account of BSNL within prescribed statutory time limit. BSNL accepted the GST payment and had claimed the tax credit.
Hence, BSNL was in receipt of the invoices and had accepted the same. However, despite taking GST credit, BSNL avoided payment of Invoices depriving the Respondent Security Agency of timely payment.
(b) That, in Statement of Defence, petitioner herein had stated that there was delay in payment due to paucity of funds, which shows that the Invoices raised by the respondent were complete and accepted and BSNL was only delaying payment. As per BSNL's own document RW1/X-2, BSNL received the bills in 2018 however, delayed payment of the same by more than 30 months for clearing some invoices. Chart at Annexure 7 demonstrates that petitioner herein not only delayed in making payment, but paid meagre amounts in 28 tranches spread over 3 years to make payment of approximately Rs. 96 Lakhs against invoices raised from July 2018 to December 2018.
OMP (Comm) No. : 52/23 9/23(c) That, RW1 in his Cross Examination has admitted that bills older than 60 days could not be processed. BSNL delayed the payment of bills raised earlier and after a lapse of more than 2 years, BSNL requested SKSA to raise fresh bills in current date. However, fresh bills could not be raised as GST was paid on the original bills and EPF and ESI was also deposited. If fresh bills were to be raised, GST, EPF and ESI would have to be paid again, as BSNL has already taken credit of the GST paid earlier.
(d) That, BSNL has been changing its stand in order to justify the delay in payment of the invoices. This is clear from the Cross Examination of Respondent Witness, Sunil Sachdeva. In answer to Question 6, the witness states that Bills for June to August 2018 were not approved due to GST implication. Upon further examination, in Answer 13 and 14 the Witness states that even where there is concern regarding payment of GST by vendor, BSNL has to make payment to the vendor, withholding the amount of GST. However, in the present case no payment was made to the Respondent.
10. Ld. Arbitrator has taken note of the objection raised by the counsel for petitioner herein, with following observations:
" this is logical and in accordance with the para 16 (c) of DGR Guidelines that for the first month i.e. of June 2018, the security agency was to raise its bill by 30.06.2018 after statutory payments and the payment of wages must have been made by the respondent to the security agency by 01.07.2018 subject to verification of payment of salary to the security guards by 07.07.2018 without any delay. The bills of next month i.e. of July 2018 could be cleared after verification of the payments of salary to the guards for the month of June, 2018 i.e. previous month and statutory payments for the month of July 2018 so that the payment to the guards could be made by 07.08.2018 without any delay, and so on".
11. Even if the contention of petitioner is considered that the amount became due and was payable only after the services provided and invoices raised. In terms of record, all the invoices OMP (Comm) No. : 52/23 10/23 seem to have been raised by 5 th of following month after providing the services. At least, subsequent thereto, petitioner was duty bound to clear the payment within reasonable period so that respondent also could have made the payment to its employees in time. In case of alleged statutory non compliance by the respondent while raising the bills (though record speaks to the contrary), it was obligatory upon the petitioner to intimate respondent with regard to any such anamoly/non-compliance and further in terms of agreements and DGR Guidelines, it was obligatory upon the petitioner to make payment of wages to the security guards itself. As also noted by Ld. Arbitrator, it was not the case of petitioner herein that it made any payment of wages directly to the security guards, rather BSNL started taking advantage of its own inaction and non compliance of terms and conditions of agreements in not making the payment of amount due to the respondent. Ld. Arbitrator noted that:
" No payment was made by respondent upto October 2018 except a payment of Rs. 12,13,167/- only on 18.10.2018 against huge outstanding of Rs. 48,22,194/- as on 05.09.2018. RW1 in response to Q.no. 16 admitted in his cross-examination that BSNL did not make payments due to non availability of funds after referring the para no.14 of SOD. It has also come in his statement that BSNL system did not accept the bills older than 60 days. Thus, there was the trouble with the respondent only in not making payments as there was non availability of funds and their system was another hurdle in delaying the payments of bills. The respondent never bothered to intimate the claimant about any issue with the bills, at once. It has come in evidence that the bills were duly raised in time after making statutory deposits, formalities and payments of salary of the security guards. It has come in evidence of the claimant that he made the payment to the security guards by borrowing money and from personal funds of proprietor".
12. It was rather brought on record in terms of deposition of own witness of petitioner as noted by Ld. Arbitrator that RW2 admitted that BSNL never made payment to claimant agency by 1st of any month and also that all the bills of the security agency OMP (Comm) No. : 52/23 11/23 were processed after due verification and disbursement of wages by security agency itself. This witness also admitted that BSNL withheld the payment of invoices due to non payment of wages to security guards and also had not made payment of wages itself to the security guards. This witness also stated about receipt of bill dated 05.08.2018 which was cleared in February 2019 (with endorsement of payment having been made to security guards on 07.08.2018) with delay of six months and further, with regard to invoice dated 5.9.2018, having been verified on 20.11.2018 and payment made on 23.10.2020. Ld. Arbitrator categorically noted the dates of submission of many invoices, verification dates and the dates of payments which were paid after delay of many months. Admission of RW1 was also noted that BSNL did not make payments, due to non availability of funds. Further, BSNL System did not accept the bills older than 60 days , therefore, as noted by Ld. Arbitrator, there was trouble with petitioner herein only, in not making the payments as there was non availability of funds and their system was another hurdle in delaying the payment of bills. It is also part of record that despite the approval of bills of respondent, bills had not been cleared as MIRO could not be run due to technical error and the respondent was requested to submit the bills with current date.
13. Ld. counsel for petitioner in written submissions mentioned that the delayed submission of the invoices by the petitioner was without complying the statutory requirements coupled with the fact that petitioner was adversely impacted with the outbreak of Covid 19 resulting in delay in making the payments. Ld. Arbitrator not only has noted with regard to submission of invoices by the respondent but also with regard to OMP (Comm) No. : 52/23 12/23 not intimating any alleged defect or alleged non compliance by the petitioner, nor petitioner itself made the payment to the employees on the alleged failure of the respondent to make payment of wages to its employess in terms of agreements and DGR Guidelines.
14. Pertaining to claim of interest on the delayed payment, Ld. counsel for petitioner made following submissions:
(a) That, the agreements executed by the parties do not contain any provision for payment of interest on delayed payment.
(b) That, the agreements vide Clause 28 categorically bar payment of interest on the security deposit which interalia indicates the specific intention of the parties with respect to the payment of interest under the agreements.
(c) That, Ld. Sole arbitrator has erred in holding that the respondent was under financial difficulties and had to make payments through its own/borrowed funds without appreciating that there is no document on record substantiating such alleged statement of the respondent.
(d) That, Ld. Arbitrator without appreciating the entire documents and evidence in true sense has held that the petitioner has breached the terms of the agreements and made delayed payments to the respondent. Thus, respondent was entitled to interest on delay payment from August, 2018 without appreciating that the claim of the respondent was a time barred debt. Even otherwise, the agreement between the parties does not contain any provision for payment of interest on delayed payment. Document Ex. C-19 clearly shows that the rate of interest of 12% was in respect of business loan which was not the OMP (Comm) No. : 52/23 13/23 present case nor any evidence had been produced by the respondent in showing that 12% was the prevalent market rate.
(e) That, Ld. Arbitrator has acted beyond the scope of the agreements executed between the parties. There is no clause in the agreements conferring that the respondent was entitled to interest on delay payment.
(f) That, it was the respondent who failed to raise invoices that were compliant with the format/requirements laid out under the Agreements which was the cause of delay in payment. It is fundamental principle of law that a party cannot take advantage of its own wrong doing. Therefore, respondent was not entitled to any payment of interest. Moreover, petitioner had already paid the principal amount and the same was admitted by the respondent and recorded in the award itself.
15. Per contra, it was submitted by Ld. counsel for respondent that BSNL unjustifiably withheld payment to SKSA Security Agency for services availed. The proprietor of the Security Agency, a retired officer of the Indian Army, had to bear the expenses pertaining to salary of the Security Guards from his own resources for 31 months. As such, SKSA was entitled to interest on delayed payment, as held by the Ld. Arbitrator.
16. It was further submitted by Ld. Counsel for respondent that the view is fortified by law laid down by a Constitution Bench of the Hon'ble Supreme Court of India in Irrigation Department vs. G.C Roy (1992) 1 SCC 508. In the said case the Supreme Court was posed with the question as to whether an arbitrator has the power to award interest from the date of the dispute till the date the arbitrator enters upon the reference when the agreement does OMP (Comm) No. : 52/23 14/23 not provide for grant of such interest. In answering the question, Supreme Court laid down that:
"43. (i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. it may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principal to hold otherwise in the case of arbitrator.
(ii)...(v)...
44. Having regard to the above consideration, we think that the following is the correct principle which should be followed in this behalf:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest... "
17. Due to the inordinate delay by the petitioner itself in making the payments, respondent definitely would have been burdened with undesirable liabilities. Though it is correct that neither the agreements between the parties nor the guidelines refer to award of interest. It is also correct that in terms of clear stipulation, no interest can be claimed on the amount of security deposits . Ld. Arbitrator was conscious of this fact and noted that "as per terms and conditions of the agreements, claimant could not claim interest on the amount of security deposits but for the interest on the amount other than security deposits, outstanding amount which became due , for which payment was delayed, it was nowhere mentioned that the interest was not payable on such amount". Ld. Arbitrator took recourse to sub section 1 of section OMP (Comm) No. : 52/23 15/23 3 of Interest Act which permits award of interest and as such awarded by Ld. Arbitrator considering that claimant had sent many reminders regarding non payment of interest for the delayed period of payment and also considering the hardships caused to respondent whereby petitioner was liable to compensate the respondent for the losses sustained by it.
18. Ld. counsel for petitioner also raised plea with regard to limitation and stated that claim of respondent was time barred on the face of it as respondent relies upon invoices/interest for delay in payment from August 2018, whereas it initiated/invoked the arbitration on 01.04.2022, which was after the expiry of the limitation period of 3 years. It was further submitted that it was incumbent upon Ld. Arbitrator to consider the issue of limitation on its own accord irrespective of whether or not a party has raised the issue and there cannot be any valid award in relation to time barred claims as it is contrary to the law of the land and against the fundamental policy of Indian Law.
19. Ld. counsel for respondent though submitted that petitioner had not raised the plea of bar of limitation before the Arbitral Tribunal, hence, the same cannot be raised at this stage when the dispute has been adjudicated. Secondly, BSNL has admitted that payment was due to the respondent security agency. The fact that services were rendered and payment was due by BSNL was never disputed. In fact, during the pendency of the arbitral proceedings, BSNL made payment pertaining to the principal amount to the respondent security agency. BSNL itself, even vide the present petition, has relied upon communications dated 12.06.2020, 29.09.2020, 31.10.2020, 11.12.2020, OMP (Comm) No. : 52/23 16/23 15.02.2020 and 19.03.2021 and admitted that the invoices submitted, could not be processed due to technical issue thereby suggesting that the amount due was admitted. Hence, limitation cannot start from the date of default but from the date when the claim was disputed. Secondly, BSNL disputed payment of interest on delayed payment for the first time vide letter dated 02.09.2021 and 31.12.2021. Hence, the limitation for claim of interest will start from 02.09.2021 at best. Thirdly, due to Covid-19, Hon'ble Supreme Court in Suo Moto Writ Petition (C) No. 3 of 2020, In Re: Cognizance for Extension of Limited suspended operation of limitation from 15.03.2020 to 28.02.2022. Notice invoking arbitration culminating into the arbitral award was sent on 01.04.2022. As such, the arbitration proceedings were initiated within limitation.
20. Acknowledgement with regard to non payment of dues is part of record which extended the period of limitation for the respondent to raise the claim. Part payments had also been made which also extended the period during which respondent could raise the claim. As also submitted by Ld. Counsel for respondent, respondent was also entitled for the benefit of extension of period of limitation considering the observation of Hon'ble Apex Court in RE: Cognizance for Extension of Limitation, MANU/SC/0108/2022. Hence, irrespective whether the said plea was taken before Ld. Arbitrator or not, invocation of arbitration by respondent and filing of claim before Ld. Arbitrator was within extended period of limitation.
21. Having discussed as above, this court does not find any substance in the submission of Ld. Counel for petitioner that Ld. Arbitrator erred in not even making the faintest indication of the OMP (Comm) No. : 52/23 17/23 evidence on the basis of which the Sole Arbitrator has reached its conclusion. No error apparent is found on the face of the award nor the lack of proper analysis of evidence by Ld. Arbitrator.
22. Ld. Counsel for petitioner submitted that the award suffers from serious infirmities of the nature that can be said to be perverse and fall foul of the requirement of an award to be in line with public policy of India as laid down by Hon'ble Supreme Court from time to time. Hon'ble Supreme Court has clarified that the expression " Public Policy of India" connotes some matter which concerns public good and the public interest, and has observed that the award which is on the face of it patently in violation of statutory proviions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. It was further held that the award could be set aside if it is patently illegal. The tests for setting aside an award were formulated, that if the award is contrary to fundamental policy of India Law, or justice or morality, or is patently illegal which goes to the root of the matter, or if the award is so unfair and unreasonable that it shocks the conscience of the court.
23. It was also stated by Ld. counsel for petitioner that the award is bad in law as it is clearly contary to the well established principles of law that an arbitral tribunal cannot act in an arbitrary, capricious or whimsical manner, and should act in a fair, reasonable and objective manner. A decision which is perverse or so irrational that no reasonable person would have arrived at it will not be sustained in a court of law.
OMP (Comm) No. : 52/23 18/2324. Ld. counsel for respondent submitted that the courts are not supposed to sit in appeal and re-appreciate the evidence as an appellate court. Reliance was placed upon P.R. Shah, Shares and Stock Brokers Pvt. Ltd. Vs. B.H.H. Securities Private Limited and Ors. (2012) 1 SCC 594, wherein it was observed that :
" 21. It therefore is a settled proposition of law that section 34 of the Arbitration and Conciliation Act do not empowers the courts to re- appreciate and re-evaluate the evidences produced before the arbitral tribunal and thereafter to judge, if the findings of the arbitral tribunals are correct or wrong. It is so held by the apex court in the case of Steel Authority of India (supra) that " it is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings". It means that the findings of fact by the Arbitral Tribunal, if based on evidence, even where a different opinion can be held on the basis of that evidences, the findings given by the Arbitrator has to be accepted and the courts cannot substitute its opinion. The power to interpret the contract also lies with the Arbitrator. Once the courts reach to the conclusion that the Arbitrator has acted within its jurisdiction, even if the courts are of the view that the opinion of the Arbitrator is wrong, it cannot be disturbed unless it is against the public policy. The Apex Court in Steel Authority of India, has categoricaly held that even where " the answer involves an erroneous decision on the point of law does not make the award bad on its face". An award can be said to be bad only when it is contrary to the substantive provision of law or against the terms of the contract. The Apex Court in Steel Authority has also clearly held that " if the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award".
25. Reliance was also placed upon Steel Authority of India Limited vs. Gupta Brother Steel Tubes Limited, (2009) 10 SCC 63, wherein it was observed that:
"18. It is not necessary to multiply the references. Suffice it to say that the legal position that emerges from the decisions of this Court can be summarised thus:
(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a court.
(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by courts as such error is not an error on the face of the award.
(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.OMP (Comm) No. : 52/23 19/23
(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.
(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.
(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.
(vii) It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings."
26. Contention of Ld. Counsel for respondent is found correct that petitioner has failed to raise any ground stipulated under section 34 of the Arbitration and Conciliation Act, 1996 to assail the award dated 30.05.2023. Petitioner has sought to reagitate the issues already raised before the Arbitrator and answered in favour of the Respondent. It is not open for this court to review the dispute on merits nor set aside the award by re-appreciation of evidence.
27. Scope of jurisdiction under section 34 of the Arbitration Act is limited and is not open for appellate analysis. The court cannot sit in appeal while adjudicating a challenge to an Award. In terms of well settled law, the arbitral awards should not be interfered with, in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. The courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.
OMP (Comm) No. : 52/23 20/2328. Reliance is placed upon following:
1. Associate Builders Vs. Delhi Development Authority, 2014 (4) Arb. LR 307 (SC):
" When a court is applying the ' Public Policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of facts cannot be corrected. A possible view by the arbitrator on the facts has necessary to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trainedTimes New Roman legal mind would not be held to be invalid on this scope. Once it is found that the arbitrator's approache is not arbitrary or capricious, then he is the last word on facts" .
" An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a terms of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do".
" The expression ' justice' when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court" .
2. Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India, Judgement dated 08.05.2019, SLP (C) no. 19033 of 2017 :
" it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law and secondly, that such award is against the basic notions of justice or morality. Explanation 2 to Section 34 (2) (b) (ii) and Explanation 2 to section 48 (2) (b)
(ii) was added by the Amendment Act only so that Western Geco (Supra), as understood in Associate Builders (supra), and paragrpahs 28 and 29 in particular, is now done away with. In so far as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to section 34. Here, there must be patent illegality appearing on the fact 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 India 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.
Secondly, it is also made clear that re-appreciation 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.
To elucidate, para 42.1 of Associate Builders (supra), namely a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders OMP (Comm) No. : 52/23 21/23 (supra), however, would remain that 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.
The change made in section 28 (3) by the Amendment Act really follows what is stated in paragraphs 42.3 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitratror construes the contract in a manner that no fair minded or reasonable person would; in short take or the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted him, he commits an error of jurisidiction . This ground of challenge will now fall within the new ground added under section 34 (2A)" .
3. National Highway Authority of India Vs. IRB Goa Tollway Pvt. Ltd. 2022 (288) DLT 533:
" 77. The position in law, as regards the scope of interference by a count, exercising jurisdiction under section 34 of the 1996 Act, with an arbitral award is, by now, fossilised through a number of judicial authorities, of which one may take due stock of the judgments in Sangyong Engineering & Construction Co. Ltd. Vs. NHAI (2019) 15 SCC 131: 2019 LAWPACK (SC)62532:2019 (3) R.A.J. 323 and Delhi Airport Metro Express Pvt. Ltd. Vs. DMRC (2022) 1 SCC 131 : 2021 LAWPACK (SC)65432: 2021 (5) R.A.J. 54. These decisions clearly hold that the court, exercising jurisdiction under section 34, is to interfere only in cases of "
patent illegality" or perversity in the Award under challenge. Mistakes of fact or law, or the predilection of the section 34 court to incline to a view contrary to that expressed by the Arbitral Tribunal, cannot consitute a basis for interference. Section 34 Court does not substitute its subjective view in place of the view of the arbitral tribunal".
4. Technofab Engineering Ltd. Vs. Tesla Transformers Ltd. 2021 LAWPACK (DEL) 84751:
" 14. .......
Construction and interpretation of the terms of the contract is primarily for the Arbitrator to decide and the legal position with respect to the exercise of jurisdiction under section 34 of the act, is now well established. This court cannot merely on an erroneous application of law, re-appreciate the evidence as it would be an encroachment upon the domain of the learned Arbitrator. The Supreme Court has also repeatedly observed that the scope of interference under section 34 of the Act is extremely narrow, and the court must be circumspect whilst dealing with cases".
29. Having discussed as above, it is concluded that the award passed by Ld. Arbitrator does not suffer from any patent illegality, perversity, neither is against the public policy nor is OMP (Comm) No. : 52/23 22/23 ignoring the vital evidence, calling for any interference from this court in objection petition u/s 34 of Arbitration and Conciliation Act. Accordingly, instant petition stands dismissed. File be consigned to record room after completion of necessary formalities.
Digitally signed savita by savita rao Date: rao 2024.11.19 15:38:01 +0530 Announced in the open (SAVITA RAO) court on this 19th day DISTRICT JUDGE of November 2024 (COMMERCIAL COURT)-01 (SOUTH) SAKET COURTS,DELHI OMP (Comm) No. : 52/23 23/23