Delhi District Court
Delhi State Industrial & ... vs Manish Goel on 25 April, 2023
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (Comm.) No. 79/2022
Delhi State Industrial & Infrastructure
Development Corporation Ltd.
N-36, Bombay Life Building,
Connaught Circus,
New Delhi-01 .... Petitioner
Versus
Manish Goel
Sole Proprietor of M/s Manish Buildwell
Office at: Pocket B-6, House no. 110
Sector-3, Rohini, Delhi-110085 .... Respondent
Date of Institution : 21/05/2022
Arguments concluded on : 14/03/2023
Decided on : 25/04/2023
Appearances : Sh. Anuj Chaturvedi, Ld. Counsel for petitioner.
Sh. Rajnish Sharma and Rahul Sharma, Ld. Counsel for
respondent.
JUDGMENT
1. Petitioner had filed the petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act) impugning arbitral award dated 27/10/2021 of Sh. Debajyoti Behuria, Advocate, Ld. Sole Arbitrator in Case File No. DIAC/2792-D/08/20 titled 'Manish Goel vs Delhi State Industrial and Infrastructure Development Corporation Ltd.'. Ld. Sole Arbitrator awarded Rs. 44,93,071/- with interest @ 12% per annum from the date of award till the date of payment in favour of respondent/claimant payable by petitioner.
OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 1 of 402. I have heard Sh. Anuj Chaturvedi, Ld. Counsel for petitioner and Sh. Rajnish Sharma and Sh. Rahul Sharma, Ld. Counsel for respondent and perused the record of the case, including petition, its reply, arbitral proceedings record, filed brief written arguments on behalf of parties, relied upon precedents and given my thoughtful consideration to the rival contentions put forth.
3. Following is the brief factual matrix of the case of parties. Petitioner floated a tender for "Renovation of workshop, adjoining building, washing shed and washing platform etc. at Kalkaji Bus Depot, New Delhi for civil works". After bidding process the tender was awarded to M/s Manish Buildwell, a sole proprietorship concern of claimant/respondent and the parties signed the agreement dated 19/01/2016. Dispute with respect to various issues arose between parties and respondent/claimant requested Chief Engineer of petitioner vide letter dated 31/07/2019 for appointment of Arbitrator under Clause 25 of agreement for adjudication of disputes between the parties. Respondent/claimant filed petition under Section 11 of the Act before Delhi High Court for appointment of Arbitrator to adjudicate upon the dispute. Delhi High Court appointed Ld. Sole Arbitrator vide order dated 04/08/2020 to determine the disputes arising between the parties. Arbitral proceedings culminated into impugned arbitral award.
4. Petitioner has impugned the arbitral award mainly on the following grounds on which premise following arguments were also addressed by Ld. Counsel for petitioner. Findings on issue of delay in execution of works are contrary to evidence on record OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 2 of 40 and presumptuous. No evidence was in arbitral proceedings record to show that claimant/respondent ever raised/ communicated the issue of delay, or raised/communicated the issue of facing any difficulties due to delay, on part of the petitioner nor was such evidence summoned/advanced to show such raising/communication of issues/grievances regarding delay on part of petitioner. Per contra in cross examination in arbitration claimant/respondent admitted that there was no record of any communication on part of respondent to show any such communication regarding issue of facing any difficulties due to delay. Claimant/respondent also admitted in cross examination in arbitration that site was made available in part and claimant/ respondent was aware at the time of submitting the tender that the site could also be made available in part. Claimant/ respondent was supposed to conduct due diligence before submitting the tender and was also liable to obtain all necessary information as to risks etc. which may influence the tender etc. Claimant/respondent did not file nor proved any document showing the exercise of due diligence by respondent. Extension Of Time (in short EOT) was granted in view of voluntary undertaking of respondent/claimant and to have execution of work. Per contra to law laid in case of Siddharth Constructions Co. vs India Tourism Development Corporation Ltd., 2021 SCC OnLine Del 4373, Ld. Sole Arbitrator erroneously ignored that mere grant of extension of time by petitioner does not automatically prove that the delay was on part of the petitioner. In fact respondent/claimant gave a voluntary undertaking to not to claim compensation for the work done in such extended period of time. So now respondent/claimant is estopped by the same and OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 3 of 40 cannot now be allowed to go back on such undertaking. The delay in submission of final bill was solely on account of respondent/claimant. Claimant/respondent was under the sole responsibility to submit the final bill within 3 months of completion of the work or within one month of the issuance of completion certificate, as per Clause 9 of the agreement of parties to arbitration but it was erroneously ignored by Ld. Arbitrator. The work was completed on 15/09/2016. Completion certificate was issued by petitioner on 15/09/2016. It was so admitted by claimant/respondent in evidence in arbitration. Accordingly, respondent/claimant had to raise final bill by 15/10/2016 but the same was submitted only on 31/10/2017. Also respondent/claimant did not submit Guarantee Bond at the time of submission of final bill but only on 01/02/2017 it was submitted; which was in violation of the agreement and led to the delay in processing of the final bill by the petitioner. Delay in submission of final bill by claimant/respondent remained unexplained. Only in cross examination in arbitration respondent/ claimant attempted to justify the delay by mounting the belated defence of non-issuance of completion certificate and non- approval of extra/deviation/substitute items, extension of time. Petitioner cannot be saddled with any interest for the period during which respondent/claimant was himself lax in submitting the final bill and the bond, as aforesaid. Finding of Ld. Sole Arbitrator on issue of belated additional claims (Claim nos. 3, 4, 5, 6, and 8) are presumptuous and contrary to evidence on record. Additional claims were raised for the first time only on 18/04/2019 i.e., more than two and half years of the completion of the work and one and half years after the submission of the OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 4 of 40 final bill by respondent/claimant. Ld. Sole Arbitrator ignored the vital evidence in letters dated 20/06/2018 and 10/09/2018 of respondent/claimant wherein it was admitted that final bill dated 31/10/2017 was raised only to the amount of Rs.1,82,38,291/- and was complete in all respects and documentation. There was no evidence on record to justify why the said additional claims were raised belatedly; why the respondent/claimant was silent on the same for such a long period and did not mention the same in letters dated 20/06/2018 and 10/09/2018. Ld. Sole Arbitrator ignored that said non raising/non submission of the additional claims at the relevant time, and that too without any protest/ clarification/reservation on the part of respondent/claimant, is also contrary to all business practices and customs of the trade and is, in fact, an unnatural conduct contrary to sound business practices. Respondent/claimant did not perform extra work nor was required for any extra item under agreement. Clause 12 of the Agreement inter se parties to the arbitration find mentions that approval of the respondent was required for the extra work/ items needed under the agreement and it was ignored by Ld. Sole Arbitrator. Claimant/respondent failed to file on record any document which tends to show that any such approval was ever granted by petitioner to respondent/claimant. Ld. Sole Arbitrator erroneously thrust the burden of proving the non existence of extra works on the petitioner and ignored the fundamental rule of evidence that the burden of proving the claim lies on the respondent/claimant. Claimant/respondent is not liable to pay service tax for the works in question since as per entry no. 39 of Notification No. 25/2012 dated 20/06/2012 of Ministry of Finance, Government of India, the services by a government, OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 5 of 40 local authority, governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of The Constitution were exempted from payment of service tax. As per entry no. 17, in Twelfth Schedule read with Article 243-W of The Constitution, public amenities include street lighting, parking lots, bus stops and public conveniences. Petitioner is a Government Authority and by means of the agreement was providing services relating to public amenities to the Delhi Transport Corporation and, thus, was exempted from paying service tax as per entry no. 39. Own letters dated 20/11/2016, 09/11/2016 and 12/04/2017 of claimant/respondent show that claimant/respondent was made aware of the stance of the petitioner qua the payment of service tax and yet claimant/ respondent did not take legal recourse against same. Claimant/ respondent is not entitled to any reimbursement on account of PF dues, if any. Claimant/respondent failed to submit documents showing the existence, and identity of, the labour engaged by the respondent/claimant for said works and it was ignored by Ld. Sole Arbitrator that respondent/claimant is not entitled to any reimbursement on account of PF dues. Even claimant/respondent in cross examination in arbitration admitted that as per Clause 19L of agreement the reimbursement of the PF dues to the respondent/claimant was to be done on actual basis. No reliance can be placed by claimant/respondent on internal file noting of petitioner, and information contained therein in view of law laid by Supreme Court in case of Sethi Auto Service Station & Anr. vs Delhi Development Authority & Ors., (2009) 1 SCC 180. Ld. Sole Arbitrator ignored that there was no evidence on record to show the compliance of claimant/respondent with Clause 19D, OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 6 of 40 Form 19 and Form 14, as laid down in the agreement qua the identity of the labour to be engaged by the respondent/claimant. Findings of Ld. Sole Arbitrator on issue of losses for staff establishment/ overhead/ machineries/ labour etc. are presumptuous and contrary to evidence on record. Claimant/ respondent did not file in arbitration nor proved any bills substantiating such claim of losses for staff establishment/ overhead/machineries/labour etc. or for payments for said purposes for the period on which claim is based upon. Mere mentioning of the losses is insufficient and claimant/respondent was duty bound to lead evidence in arbitration to prove the losses, in terms of law laid in cases (i) Bharat Coking Coal Ltd. vs L.K. Ahuja, (2004) 5 SCC 109; (ii) Siddharth Constructions Co. vs India Tourism Development Corporation Ltd.(supra) but Ld. Sole Arbitrator ignored the settled position of law. Ld. Sole Arbitrator also ignored the settled position of law as per case of M. Lachia Setty & Sons Ltd. vs Coffee Board, Banglore, (1980) 4 SCC 636 qua the principle of mitigation of damages and erroneously omitted to consider that claimant/respondent failed to prove any steps taken by him towards the mitigation of damages. Findings of Ld. Sole Arbitrator on issue of payment on account of deviation for superstructure and foundation work to the respondent/claimant are contradictory and contrary to evidence on record. In one part of the impugned award, Ld. Sole Arbitrator held that conjoint reading of Clause 12 of the agreement is in contradiction with the Schedule 'F' of the agreement and has proceeded to grant relief in contravention of the explicit provisions of the agreement; whereas, in another part of the impugned award Ld. Sole Arbitrator has acted on the OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 7 of 40 premise that the conjoint reading of Clause 12 of the Agreement is in harmony with the Schedule 'F' of the Agreement. Such contradictory approach is patently illegal and renders the impugned award perverse and unintelligible. In cross examination in arbitration claimant/respondent admitted that as per Clause 12 of the Agreement, the work was a 'maintenance work'. Claimant/respondent never intimated to the petitioner at the time of entering into the Agreement that Schedule 'F' was 'contradictory'. Ld. Sole Arbitrator ignored vital evidence that as per Clause 12 of the Agreement the work was a 'maintenance work'; and that as per Clause 12 to Clause 16 of the Schedule 'F' of the Agreement in case of deviated quantity the payment was to be made at agreement rates only and that the claimant/ respondent had already been paid the applicable amounts at the agreement rates for the work done and no further amount was payable to the claimant/respondent. Findings of Ld. Sole Arbitrator on issue of payment of interest to the respondent are presumptuous and contrary to evidence on record. The vital evidence was ignored by Ld. Sole Arbitrator whereas claimant/ respondent was guilty of delay and laches in submitting the case for arbitration for which no reasonable explanation was given. When claimant/respondent himself occasioned delay in execution of work, no interest is payable to claimant/respondent. No interest is payable on any such additional/belated claims for the period during which such claims were never raised and petitioner cannot be penalized for the inaction and laxity of claimant/ respondent. Since claimant/respondent did not take any legal action for the recovery of amounts as per final bill till the filing of the arbitration petition, so no interest is payable by petitioner OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 8 of 40 for said period. Claimant/respondent admitted that petitioner has paid Rs.1,63,39,984/- towards final bill and that such payment was made on ad hoc basis as per the practice of petitioner; so no interest is payable by petitioner to respondent/claimant whereas Ld. Sole Arbitrator ignored the vital evidence that having accepted the payments over the years on ad hoc basis as per the practice of petitioner, without even a whisper of protest, claimant/respondent acceded to the said mode of payment and thus, was now estopped from claiming any interest for the same. Findings/directions of Ld. Sole Arbitrator on issue of payment of post award interest on the award amount and interest thereon, to claimant/respondent are contradictory, unlawful, contrary to evidence on record. Award of interest @ 12% per annum as post award interest is exorbitant and in ignorance of the prevalent market conditions and the state of economy; is punitive in nature and serves to severely penalize the petitioner as per law laid in case of Vedanta Ltd. vs Shenzhen Shandong Nuclear Power Construction Company Ltd., (2019) 11 SCC 465. Finding of Ld. Sole Arbitrator on issue of payment of legal costs or any costs otherwise to claimant/respondent are presumptuous and contrary to evidence on record. Documents submitted by claimant/ respondent towards his legal costs/fees etc. were wholly self serving, whimsical, misconceived and erroneous as these were also unsubstantiated and no proof of payments were filed on record to prove such payments towards the legal fees paid by claimant/respondent. Impugned award is perverse in as much as the same is bereft of any reasons as to the quantification and imposition of the costs on petitioner since imposition of the costs was arbitrary, whimsical and not based upon or borne out of any OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 9 of 40 logical reasoning and evidence on record. The documents for cost were submitted at last moment i.e., at the stage of final arguments and thus, petitioner was denied a chance to examine the same and raise rebuttal against the same and the same denies the fair treatment to petitioner in arbitration and said documents deserve to be struck off the record. Ld. Counsel for petitioner also relied upon the cases of (i) Delhi Airport Metro Express Private Limited vs Delhi Metro Rail Corporation Limited, (2022) 1 SCC 131 and (ii) Executive Engineer (R and B) and Ors. Vs Gokul Chandra Kanungo (Dead) Thr. his Lrs., 2022 SCC OnLine SC 1336 and prayed and argued for setting aside of the impugned arbitral award.
5. Following are the brief relevant material averments in reply of claimant/respondent and arguments addressed on it by Ld. Counsel for claimant/respondent. Impugned arbitral award has been made with judicial approach keeping in mind the principles of natural justice and reasonableness. All facts, evidence and documents placed before Arbitral Tribunal were considered. Not even a single claim was allowed or disallowed without giving a reasonable explanation or reasons by Ld. Sole Arbitrator. Reasons in detail at pages 7 to 13 of impugned arbitral award are there explaining why the delay in execution of the contract was attributable to the petitioner. Therein reference was made to documents placed on record by claimant/respondent as well as petitioner having not submitted the documents which were in its possession; legal position as under Section 114, Illustration (g) of Indian Evidence Act was adverted to and facts revealed during cross examination of witnesses of parties to arbitration were OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 10 of 40 made basis for arriving the decision. It is the finding of fact by Ld. Sole Arbitrator that 21% increase in the value of the contract was due to extra work and not due to cost escalations as petitioner failed to produce any evidence to substantiate their arguments. Impugned award finds mention that claimant/ respondent had listed their reasons for delays in their proforma submitted for extension of time which listed reasons and included extra work items and was approved by petitioner, but was not challenged by petitioner at any stage of arbitration proceedings. Impugned award from pages 13 to 18 delves into the issue of awarding of interest and compensation for delayed time. Impugned award referred to the relevant clauses of the agreement wherein the interest was allowed as pre-determined rate. Ld. Sole Arbitrator also cited extracts from judgment of Delhi High Court in case of P.C. Sharma & Other vs DDA, FAO (OS) No. 563 of 2010 negating non claiming of damages by the contractor. It establishes that Ld. Sole Arbitrator applied his mind to the issues and took into consideration all facts and materials placed on record before arriving at conclusion. Impugned arbitral award from pages 18 to 23 contains issue relating to Clause 9 of the Agreement. Petitioner has repeatedly claimed that all additional claims should be disallowed as they were made after the final bill. Claimant/respondent had submitted that such a clause in the agreement is void as it is in contravention of Section 23 and 28 of The Indian Contract Act. Ld. Sole Arbitrator after examining submissions from both the parties, cited the extract of the relevant clause of the agreement, has stated his reasoning for agreeing or disagreeing with various arguments made and also stated various extracts from judgment of Supreme Court and OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 11 of 40 relevant section of The Indian Contract Act and Limitation Act before arriving at a conclusion on the issue. So, Ld. Sole Arbitrator did not pass an order which is contrary to fundamental policy of Indian law nor is perverse in nature nor is manifestly unreasonable. Ld. Sole Arbitrator awarded claim nos. 1 and 2 but rejected claim nos. 3 and 8. Petitioner did not mention about these claim items in the petition which implies that they accept the arbitration award with respect to these claims and hence arbitral award is partially not disputed by petitioner. Ld. Sole Arbitrator allowed claim nos. 4 and 9 on account of service tax reimbursement wherein claim no. 4 was on account of reimbursement of service tax already paid and claim no. 9 was for reimbursement of any future service tax/GST liability incurred by claimant/respondent with respect to the contract in question. Petitioner had been claiming that there is no service tax liability due as petitioner and beneficiary of the contract DTC are Government enterprises and exempted from service tax. Petitioner quoted entry 39 of the constitution to prove the same. Entry 39 exempts services provided by one Government entity to another from service tax. However, in the instant case the contract is between Manish Buildwell, a private contractor and petitioner DSIIDC, a Delhi Government Undertaking. The services of renovation of bus depot are provided at a DTC Depot but DTC is not privy to the contract nor they have any rights or obligations as per the agreement in question. Factually and technically the services were provided to petitioner and billing was directly done to petitioner from Manish Buildwell. All payments etc. were also made in the account of Manish Buildwell directly by petitioner. Claimant/respondent on the OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 12 of 40 other hand has never questioned the fact of petitioner or DTC being Government Undertakings. Claimant/respondent had cited the amended service tax notification 06/2015 which clearly stated that private contractor were liable to pay service tax with effect from 01/03/2015 even when providing services to Government and hence the service tax was deposited and was to be reimbursed. Ld. Sole Arbitrator has clearly explained submissions made by both side and the relevant position of law for making decision on the same. Ld. Sole Arbitrator allowed claim no. 5 on account of provident fund reimbursement after due consideration. Ld. Sole Arbitrator interpreted the contract and impugned arbitral award clearly explained the nature of contract being item rate contract, item wise rate includes overheads and profits, nature of civil contract work and how delays results in overheads and additional expenses for the contractor and relevant clause in the contract which mandates contractor to keep technical staff etc. on the site. Impugned arbitral award clearly cites the Schedule F of the contract wherein it is stated that overhead and profits are to be added @ 15%. Ld. Sole Arbitrator had then stated his reasoning for disallowing profits and allowing overheads after providing for mitigation. Impugned arbitral award allowed claim no. 7 for claim on account of deviation. Petitioner has argued against it on the basis of Clause 12 and Schedule F of the agreement whereas claimant/respondent had stated that there is contradiction in the main agreement clause and schedule of the contract and hence main agreement clause should prevail as there is no priority clause in the agreement. Reliance was also placed on another clause of the agreement which provided for decision by OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 13 of 40 competent authority in case of contrary provisions in two places in the agreement. Claimant/respondent had also relied upon the principle of "Contra-proferentum". Award for claim no. 10 for interest was made on the basis of Section 31(7) (a) of the Act read with Clauses 7 and 9 of the agreement inter se parties to arbitration. Impugned arbitral award gives the calculation of interest and has considered the relevant dates of payments made by petitioner and has only allowed interest only on the outstanding amount payable from the due date till the date of the order. Ld. Sole Arbitrator took into consideration the delay in submission of final bill and has accordingly adjusted the interest claim. No interest has been allowed in arbitral award for the payments already received by claimant/respondent on time. Claim no. 11 for cost of arbitration and legal expenses was allowed on the basis of Section 31-A of the Act and is based upon the copies of the bills provided by claimant/respondent. The post award interest allowed by Ld. Sole Arbitrator has been wrongly interpreted by the petitioner wherein they have tried to argue that there are two post award interests. In fact Ld. Sole Arbitrator in all fairness has allowed interest at pre award interest rate of 7.5% for the payment period allowed in the award. The impugned arbitral award records awarding of post award interest @ 12% after the time allowed for the payment of award expires. Ld. Sole Arbitrator based the rate of 12% of post award interest on the prevailing prime lending rate of State Bank of India, as is clearly mentioned in impugned arbitral award. This clearly establishes that the rate of interest was in line with prevalent market conditions, state of economy and is not punitive in nature. Ld. Counsel for respondent/claimant prayed and argued for dismissal OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 14 of 40 of the petition, relying upon the cases (i) Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India (NHAI), Civil Appeal No. 4779 of 2019 (Arising out of Special Leave Petition (Civil) No. 19033 of 2017) decided by Supreme Court on 08/05/2019; (ii) Associate Builders vs Delhi Development Authority, (2015) 3 SCC 49; (iii) NTPC Ltd. vs M/s Deconar Services Pvt. Ltd., Civil Appeal No. 6483 of 2014 decided by Supreme Court on 04/03/2021 as well as on 246th Law Commission Report.
6. The scope of interference with an arbitral award under Section 34 of the Act is very limited. Arbitral award can only be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act within the period of limitation.
7. Supreme Court in Suo Moto Writ Petition (Civil) no. 3 of 2020, In Re: Cognizance For Extension Of Limitation vide order dated 10/01/2022 has excluded the period from 15/03/2020 till 28/02/2022 for computing the period of limitation for any suit, appeal, application or proceedings and the petition under Section 34 of The Act is also eligible for the same. Accordingly, present petition filed on 21/05/2022 is also within the period of limitation.
8. Following are the admitted facts of parties to arbitration and this lis:-
1 Contract agreement no. DSIIDC/EE/(CD-XX)/2015-16/3
2. Estimated Cost Rs. 1,74,58,824/-OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 15 of 40
3. Tender Amount Rs. 1,51,31,563/-
4. Stipulated date of start 19.01.2016 5 Stipulated date of 18.05.2016 completion 6 Actual date of completion 15.09.2016 as recorded by EE 7 Final value of the contract Rs. 1,82,38,291/-
as approved
9. Following issues were addressed by Ld. Sole Arbitrator before adjudicating in 63 pages arbitral award:-
"ISSUES
i) Whether the Claimant is entitled for the Award in terms of Claim no.1 to 11 in prayer clauses of Claim? OPC
ii) Whether Claimant is entitled for interest and damages as claimed by the Claimant on delayed payment? If so, at what rate? OPC
iii) Whether the Claimant performed in accordance with provisions of the agreement executed between parties? OPR
iv) Whether Claimant is entitled to any further payment from the respondent in view of terms and conditions of the agreement? OPC
v) Whether the Claim is not maintainable as relief sought by the Claimant are prohibited by the agreement? OPR"
10. Oral and documentary evidence in arbitral proceedings was appreciated by Ld. Sole Arbitrator with contentions factually and legally of the parties through Ld. Counsel and Ld. Sole Arbitrator reached the finding of fact as to why the delay in execution of contract was attributable to the petitioner as detailed in pages 7 to 13 of impugned arbitral award. It was inter alia appreciated by Ld. Sole Arbitrator that competent authority of petitioner gave EOT approval. Ld. Sole Arbitrator held that:-
OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 16 of 40"It is an undisputed fact that the project was delayed and extension of time was approved. It was well established that EOT is given on a requisite performa maintained by respondent and it contains hindrances, which lists hindrances and reasons which caused delay in the project and forms the basis for granting EOT. Respondent despite having ample opportunity on different occasions to substantiate their arguments did not file the copy of EOT and Hindrance register as evidence. There is no record of respondent's refusal on the assertion of the claimant in Para no. 6 of the claimants reply to the statement of defence, where they had listed reasons for asking for the extension of time and thereby asserting that the EOT was granted accordingly. Also the fact that extension of time was granted without levying any penalty or compensation means that respondent had no option but to grant the extension as non granting the extension might have led to consequences for the respondent. This fact is also established by respondent witness answer to question No. 9 wherein he stated that the EOT was granted to avoid any litigation in future.
Also respondent has not placed on record any documents to prove non-existence of extra work and they were not able to justify increase in the final value of the contract approved for payment being Rs. 1,82,38,291/- for any other reasons but extra scope of work.
EOT was granted without levy of penalty/compensation. The Hindrances and extra work as listed by the Claimant in their reply to statement of defence has not been disputed by the respondent. Therefore, I can safely conclude that claimant is not responsible for delaying the work and delays are attributable to the respondent."
Accordingly, petitioner as respondent in arbitration proceedings did not file copy of EOT and Hindrances register which contained reasons/causes for delay in the project and forms the basis for granting EOT. Extension of time was granted by petitioner to respondent/claimant without any levy of penalty or compensation. Witness of petitioner in evidence before Arbitral Tribunal had stated that EOT was granted to avoid any litigation in future. Ld. Sole Arbitrator inferred that petitioner had no option but to grant extension as non granting the extension might have led to consequences for the petitioner. The final value of the contract approved for payment had the element of increase OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 17 of 40 from the tender amount as well as estimated cost and petitioner had not placed on record in arbitral proceedings documents to prove non existence of extra work nor were they able to justify any increase in the final value of the contract approved for payment being Rs.1,82,38,291/- for any other reasons but extra scope of work. Findings on this facet per se appear to be justifiable and well reasoned, based on a possible view of the matter and cannot be said to be perverse.
11. Ld. Sole Arbitrator also relied upon the case of P.C. Sharma & Other vs DDA (supra) wherein Delhi High Court held that "It has been rightly noticed by the arbitrator that in the proforma for extension of time, there is no such clause requiring a contractor to give an endorsement or undertaking that he will not claim any damages. This endorsement has been obtained on the letter submitted by the appellant for extension of time, which extension was claimed on the basis that the delay was attributable to the respondent. The appellant would have had to face absence of extension and other consequences, if it had failed to do the needful. Thus, clearly such an endorsement was obtained under force." and proceeded to hold that therefore, there were no reasons to deny the claim for compensation/damages to claimant/respondent during the period of extended time because the delay/breach of contract was found to be attributable to present petitioner. Ld. Sole Arbitrator also held that claimant/respondent is entitled to get interest on delayed payment as under the Clauses 7 and 9 of the agreement, it was provided that payments delayed beyond stipulated period shall be entitled for interest @ 7.5% per annum. Ld. Sole Arbitrator OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 18 of 40 accordingly acted within the four corners of the agreements inter se parties to arbitration and this lis.
12. It being the contention of petitioner that Clause 9 of agreement inter se parties to lis and the arbitration embodied that after submission of final bill, no further claims shall be made by the contractor and such further claims shall be deemed to have been waived and extinguished. Ld. Sole Arbitrator appreciated the relied upon precedents viz., (i) Hindustan Construction Corporation vs DDA; (ii) Simplex Concrete Piles Pvt Limited vs Union of India; (iii) Bharat Coking Coal Ltd. vs Annapurna Construction, (2003) 8 SCC 154 and clarified that Clause 9 of agreement restricted the legal rights of a party for fair adjudication, so was hit by Sections 23 and 28 of The Indian Contract Act and to that extent was void. Ld. Sole Arbitrator also appreciated that in arbitral proceedings record there was nothing suggesting any final accord and settlement having reached over the disputes at the stage of payment of final bill paid by present petitioner since the disputes between the parties persisted and were raised by claimant/respondent before various authorities of present petitioner before these were referred to arbitration. It is also finding of Ld. Sole Arbitrator that there was nothing suggesting final settlement having reached between the parties. Ld. Sole Arbitrator also relied upon the case of R.L Kalathia & Co. vs State of Gujarat, wherein it was held by Supreme Court that:-
"(i) Merely because the contractor has issued "No dues Certificate", if there is acceptable claim, the court cannot reject the same on the ground of "No dues Certificate".
(ii) Even after execution of full and final discharge voucher/receipt by one of the parties, if the said party able OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 19 of 40 to establish that he is entitled to further amount for which he is having adequate materials, is not barred from claiming such amount merely because of acceptance of the final bill by mentioning 'without prejudice' or by issuing `No dues Certificate'"
13. Ld. Sole Arbitrator proceeded in the impugned award holding the claims to be within three years limitation period and the legal rights of a party seeking adjudication cannot be restrained as any such clause like Clause 9 in the agreement is hit by Sections 23 and 28 of The Indian Contract Act and is void to that extent. It is the finding of Ld. Sole Arbitrator that there was no reason to deny claimant making any further claim and claim nos. 3, 4, 5, 6, 7 and 8 were legally made.
14. Following are the reasonings and award of Ld. Sole Arbitrator on claim nos. 1, 2 and 3:-
"Claim no. 1: Claim on account of Balance payment of Security deposit & Claim no. 2 Claim on account of dues under clause 10c and 10CA of the contract ................................................................................... Reasons and Award: It is held that there is no reason to link payments with the receipts of funds from DTC and it was nowhere specified in the agreement. The Contract is between the Claimant and Respondent (DSIIDC) and not with DTC. Even if, it would have been a pre-condition to the contract, it would have been against the basic principle of contract law that every contract, to be valid, must have consideration. The indefinite postponement of consideration would be wholly unconscionable. Moreover, the respondent's claim is also that claimant refused to accept the payments offered is not proved as there is no document on record to substantiate the same and also circumstances does not support this agreement. It has been more than four years after the completion of the work. As per Clause 17 of the agreement the amount of security deposit to be released is overdue. The respondent also admitted in their statement of defence that Security deposit of Rs. 5,33,006/- and final bill due for 10 C & 10 CA amounting to Rs. 5,63,223/- are yet to be paid.
Therefore, I hereby award claim items no.1 for Rs.5,33,006/- and OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 20 of 40 Claim no. 2 for Rs. 5,63,223/- to the claimant.
Claim no. 3 The Claim on account of Clause 10 C for extra work and quantity executed beyond deviation limit. ................................................................................. Reasons and award: I find no merit in Claimants contention that the claim is only under clause 10 C of the agreement for the extra work items. The respondent's contention is that this claim is not allowable as it as it is in utter violation of the clause 12 of the agreement read with Schedule A-F. A careful reading of clause 10 C and schedule A-F clearly establishes that rates of the extra items clause of the agreement and as mentioned in the Schedule Fare same. Hence, I do not find any reason to go beyond the terms of the contract.
Therefore, I reject claim of Rs. 65,407/- made by the claimant.
15. Grounds of impugning arbitral award by petitioner find no mention about these claim items 1 to 3 with respect to award on claim nos. 1 and 2 and rejection on claim no. 3. For this part of arbitral award accordingly it is taken that there is no dispute by the petitioner.
16. Following are the reasonings and award of Ld. Sole Arbitrator on claim nos. 4 and 9:-
"Claim no. 4: The Claim on account of reimbursement of Service tax deposited & Claim No. 9: the Claim on account of Service tax/GST under the aforesaid contract, if any, demanded by concerned authorities anytime in future ................................................................................. Reasons and Award: The claim for reimbursement of service tax is as per clause 38 of the agreement. The agreement is between Manish Buildwell, a private contractor and DSIIDC, a corporation under Delhi Government. The exemption available under entry no.39 does not apply to the instant case as entry 39 states "Service provided by a local or Government authority to a municipality"
which is not the case here in the present claim. The arguments of respondent regarding DTC being a public utility service are not relevant for the facts of this case. Also entry 39 being there in the amended notification does not axiomatically proves that the contractor was exempted from the service tax levy. Government has specifically kept both entry no. 12 and 39 in the notification OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 21 of 40 and have specifically for provided for payment of Service tax on all Government Contracts taken by Private Contractors. It clearly meant that intention was to levy Service tax on private Contractors for Government Contracts.
In the instant case Manish Buildwell, a private contractor, is providing services to DSIIDC at a bus depot owned and operated by Delhi Transport Corporation (DTC) another Delhi government enterprise. DTC is not privy to the contract. The applicability of service tax will arise for a private contractor vide entry no. 12 of notification no. 06/2015 and hence Manish Buildwell will be chargeable to Service tax. Hence contention of respondent regarding applicability of entry no.39 is not acceptable. Also Respondent contention regarding clause a, c, and f for entry no, 12 stands nullified as these clause were removed vide notification no.06/2015. The claimant is entitled to get full reimbursement of the service tax already paid by them as per clause 37 of the agreement and as per proof of claim attached on page 34-35 of the statement of claim which shows that an amount of Rs.2,78,400/- has been deposited.
I award claim no.4 for Rs.2,78,400/- in the favour of the claimant and against the respondent.
As regards Claim no. 9, after receiving the award as and when the contractor deposits Service Tax/GST (as the case may be) plus any interest & penalty (if any) and submits the proof of deposit to the respondent, the respondent shall reimburse the same within 30 days from the date of the submission of the proof of deposit as per the terms of clause 38 of the agreement."
17. As per entry no. 39 of Notification No. 25/2012-Service Tax dated 20/06/2012 of Ministry of Finance (Department of Revenue) of Government of India published in the Gazette of India "Services by a government authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution" were exempted from payment of service tax.
18. Ld. Sole Arbitrator appreciated that agreement in question was between Manish Buildwell, a private contractor and DSIIDC, petitioner, Corporation under Delhi Government whereas exemption available under the above said entry no. 39 OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 22 of 40 was with respect to services provided by local or Government authority to municipality which was not the case here in the arbitration since claimant/respondent had provided services to petitioner at bus depot owned and operated by DTC another Delhi government enterprise where the DTC was not privy to the contract. In view of said finding claimant was held entitled to get full reimbursement of the service tax already paid by them as per Clause 37 of the agreement and as per proof of claim attached in statement of claim showing deposit of Rs. 2,78,400/-. Ld. Sole Arbitrator also held that as regards the claim no. 9, petitioner was liable to reimburse the same within 30 days from the date of submission of the proof of deposit of service tax/GST plus interest and penalty in terms of Clause 38 of the agreement. Factually and technically the services were provided to petitioner and billing was directly done to petitioner from Manish Buildwell. All payments were also made in the account of Manish Buildwell directly by petitioner. The arguments of Counsel for petitioner that as per aforesaid entry no. 39 of aforesaid notification respondent was not liable to pay service tax; does not hold water and is without any substance. It cannot be said that findings of Ld. Sole Arbitrator are in any manner perverse on this facet.
19. Following are the reasonings and award of Ld. Sole Arbitrator on claim no. 5:-
"Claim no. 5: The Claim on account of provident fund reimbursement for the work executed but not paid. ...................................................................................... Reasons and Award: I agree with respondent's assertion that departmental noting are internal communication and unless OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 23 of 40 communicated cannot be assumed to take any significance and are not considered for evidence. However Respondent had admitted receipt of letter dated 18.1.2018 wherein claimant had made a claim of refund of Provident fund amounting to Rs. 81,149/-. The letter on the face also stated that enclosure included 9 monthly Challans along-with salary sheet and payment vouchers. The respondent has agreed during cross examination that they did not make any correspondence with claimant with respect to Provident fund reimbursement claim as it was time-barred.
I cannot assume any lapse of the labour law compliance by the claimant prima facie as Respondent being a Corporation would not have allowed each non-compliance. The PF reimbursement letter of the claimant also mentions submission of salary sheets, payment vouchers which should be sufficient for personal details and identities of the labour working on the Claimants side. The Proof of payment was also submitted in the form of challans, which might have been consolidated with other sites, but does not in any way prove non-compliance of PF laws by the claimant. Also respondent's assertion that the PF claim was time barred is not correct as Provident fund gets deposited on monthly basis and just because claimant had made one consolidated claim at the end of the contract does not make it time barred. Moreover, the claim is made within three year period of limitation and same is not time barred.
Therefore, I award amount of Rs. 61,084/- for PF reimbursement to the claimant and against the respondent."
20. Ld. Sole Arbitrator had duly appreciated the oral and documentary evidence regarding the claim for reimbursement on account of provident fund dues filed and proved in arbitral proceedings; elicited in the reasoning and award of Ld. Sole Arbitrator. The evidence is not to be re-appreciated herein. The findings of Ld. Sole Arbitrator on this facet are cogent, reasoned and by no figment of imagination can be termed as perverse.
21. Following are the reasonings and award of Ld. Sole Arbitrator on claim no. 6:-
"Claim no. 6: Claim on account of losses / compensation /damages for staff establishment overheads @ 15% of the contract value during the prolongation of the contract. .....................................................................................OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 24 of 40
Reasons and Award: A close overview of the contract clearly indicates that the agreement is an item rate contract and contractor will be paid on the basis of item-wise rates as per schedule of quantities adjusted for the percentage of discount offered for winning the contract. It can be safely assumed that this rate was already included in the rate schedule by the respondent as there is no extra amount billed for the overheads and profits by the claimant.
I take guidance from Maula Bux vs. Union of India 1970 AIR 1955 wherein the Supreme Court of India declared the law as follows:
"It is true that in every case of breach of contract the person aggrieved by the breach is not required to prove loss or damage suffered by him before he can claim a decree, and the court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of contract.
In a recent judgment in 2015 Hon'ble Supreme Court of India while deciding a case between M/s. Construction & Design services Vs Delhi Development Authority[12] reconfirmed that the court must determine the reasonable compensation and then grant it to the injured party. It held as follows:
"Applying the above Principle to the present case, it could certainly be presumed that delay in executing the work resulted in loss for which the respondent was entitled to reasonable compensation. Evidence of precise amount of loss may not be possible but in the absence of any evidence by the party committing breach, the court has to proceed on guess work as to the quantum of compensation to be allowed in the given circumstances."
Also the Respondent's Counsel Submissions regarding mitigation of loss is well dealt in the Judgment itself M. Lachia Setty & Sons Ltd. vs. Coffee Board, Bangalore (1980) 4 SCC 636 cited by respondent. The Hon'ble Supreme Court in that judgment had observed:
"At the outset it must be observed that the principle of mitigation of loss does not give any right to the party who is breach of the contract but it is a concept that has to be borne in the mind by the court while awarding damages."
The schedule F in the contract document describes 15% on account of contractors profit and a overheads and this component is in built in the rates agreed by the parties. Therefore, if the work of the stipulated period of four months gets completed in four months, OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 25 of 40 there would not be any justification for the claim because overheads for the four months period (stipulated period of the contract) are already built in the rates agreed between the parties. However if the work gets prolonged beyond four months the contractor shall obviously spend overheads in the extended period (four months in this case). I have already found that the delay of the four months is attributable to the breach of contract by the respondent. Therefore, the extra expenses incurred in the extended period only are to be compensated by the respondent as per provisions of Section 73 of the Indian Contract Act. The nature of the Construction/civil maintenance work is such that a contractor has to deploy certain manpower/machinery when the work is being done and such resources can not be deployed or removed on a day to day basis. So if the work for a stipulated period of four months dates extended by another four months, there is certainly going to be some site overheads, establishment/manpower expenses which has to be borne by the contractor. The execution of the work would not be feasible without engaging manpower/machinery. Further as per clause 36 of the agreement it was necessary for claimant to engage technical staff and employees. It is not the contention of the respondent that the clause 36 of the agreement was not respected by the claimant. Therefore the mandatory requirement of loss gets established in the light of these facts.
The work was delayed for a period of four months which is same time period as the original stipulated period of the contract. At no stage during the course of arbitration proceeding either party has mentioned that the work was stopped by contractor and that resulted in delay and losses. Contractor continued the work and Respondent was over viewing the progress of work as per their established practices. This clearly demonstrates that claimant has acted in the ordinary course of business and have tried to complete the work as early as possible. The conduct of respondent in granting EOT without levying penalty or damages also indicates that there was no malafide on the part of contractor and they acted reasonably and with honest intent to complete the work. Hence issue of claimant not doing enough to mitigate losses is not proved.
Now this claim of 15% has two parts namely overhead and profit. I do not think that there is any loss of profit to the claimant as the contract was fully completed and whatever profits could have been envisaged would have accrued to the claimant. However, I agree with the claim for loss on account of Overheads etc. the rate of 15% claimed by the claimant includes both overheads and profits.
Once the loss is established it can be assessed, which is the settled principle of law. I choose to draw this on the basis of the contract document itself. The schedule F of the contract prescribes 15% on account of profits and overheads. Therefore, I take 7.5% as the cost of overheads. Further, considering some mitigation, I further reduce OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 26 of 40 it to 6%. The amount of overhead spent in initial four months period is included in the contract rate itself. The amount of Overheads spent in the prolonged period of four months is not covered in the contract rates and it is to be compensated. This shall work out to be 6% of the original contract value of Rs.1,51,31,563/-.
Therefore, I award claimant a sum of Rs.1,51,31,563*6%=9,07,894/- in the favour of the claimant and against the respondent."
22. Though claimant/respondent had claimed award of 15% of contract value for losses/compensation/damages for staff establishment overheads during the prolongation of the contract, yet, in the appreciation and reasoning and award, elicited above, Ld. Sole Arbitrator dissected the claim of 15% in two parts namely overhead and profit and reached the finding that there was no loss of profit to the claimant/respondent as the contract was fully completed and whatever profits could have been envisaged would have accrued to the claimant/respondent. Ld. Sole Arbitration assessed the claim for loss on account of overheads etc. on the basis of contract documents itself wherein Schedule F of the contract prescribed 15% on account of profits and overheads; therefore, Ld. Sole Arbitrator took 7.5% as the cost of overheads. Further, considering some mitigation, Ld. Sole Arbitrator further reduced it to 6% and awarded claimant/ respondent Rs.9,07,894/-, above said, on this claim. Here also Ld. Sole Arbitrator acted within the terms of the contract and had not traveled beyond the terms of contract, being the creature of the contract and his reasonings are logical, based on contractual terms of the parties to the arbitration and the lis. Reliance of Ld. Counsel for petitioner on cases (i) Bharat Coking Coal Ltd. vs L.K. Ahuja (supra); (ii) Siddharth Constructions Co. vs India OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 27 of 40 Tourism Development Corporation Ltd. (supra); (iii) M. Lachia Setty & Sons Ltd. vs Coffee Board (supra) is misplaced as these precedents embody facts and circumstances entire different and distinguishable to the case in hand.
23. Following are the reasonings and award of Ld. Sole Arbitrator on claim nos. 7 and 8:-
"Claim no. 7: Claim on account of deviation for superstructure and foundation work :
...................................................................................... Reasons and Award: After going through the whole agreement along-with its schedules, a conflict in the wording of clause 12 as reproduced by claimant and schedule F is visible. Clause 12 of the agreement on page no. 36 of the agreement reads "For maintenance works including works of upgradation, aesthetics, special additions/alterations : In case of contract items which exceeds the limits laid down in the schedule contractor shall be paid rates specified in the schedule of quantities"
Whereas schedule F to the contract specifies in clause 12 that "in case of deviated quantities beyond limit specified in schedule A to F, the payment will be made at agreement rates only"
Now the schedule rate is different from the agreement rate, Schedule rate means the rate as listed in schedule of quantities as published in the tender document, whereas the agreement rate is schedule rate minus the contractor's quoted percentage. So there is a contradiction there as clause 12 on page 36 of the agreement specifies that schedule rate (i.e. without deducting contractor quoted percentage) is applicable for the quantities exceeding deviation limits.
Also there is a provision in the agreement that Accepting authority is the deciding authority and its decision shall be binding and final. It is a fact that no such decision was given by Accepting authority. However it is also true that the opportunity to make a decision would not have arisen as the said claim was made by claimant only at the stage of arbitration. Therefore, this contention of the claimant is not valid and rejected.
The Claimant has also asserted that they are entitled to the benefit under principle of "contra proferentem". I examined this in detail OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 28 of 40 and found that the said principle of 'verba chartarum fortius accipiuntur contra proferentem' has also been applied by Hon'ble Delhi High court in Vrg Energy India Pvt. Ltd. Avni ... vs Union of India And Anr. on 14 September, 2021, wherein it was held as under:
"We would also rely on the Doctrine of 'verba chartarum fortius accipiuntur contra proferentem.' The respondent in the present case was the master of drafting the terms of the tender. If the respondent had any other intention in mind, the wordings of the Annexures should have been different as framed herein. As observed in Industrial Promotion & Investment Corporation of Signature Not Verified W.P.(C) 5750/2021 Digitally Signed By:AMIT ARORA Signing Date:15.09.2021 18:34:00 Orissa Ltd. v. New India Assurance Co. Ltd. And Anr, (2016) 15 SCC 315: "10. ..The Common Law rule of construction "verba chartarum fortius accipiuntur contra proferentem" means that ambiguity in the wording of the policy is to be resolved against the party who prepared it.
The same Principle was upheld by the Supreme Court in the case of Bank of India and Anr. V. K. Mohandas and Ors, (2009) 5 SCC 313 wherein the court observed thus:
"The fundamental position is that it is the banks who were responsible for formulation of the terms in the contractual Scheme that the optees of voluntary retirement under that Scheme will be eligible to pension under Pension Regulations, 1995, and, therefore, they bear the risk of lack of clarity, if any. It is a well-known principle of construction of contract that if the terms applied by one party are unclear, an interpretation against that party is preferred. (verba chartarum fortius accipiuntur contra proferentum)."
In the instant case the Respondent was the master of drafting the contract and hence in case of any ambiguity the interpretation of the clauses will have to be against the respondent on the basis of the principle of Contra Proferentem. The respondent's objection regarding clause 9 protection has been discussed and rejected in detail in the preceding Para's.
Therefore I decide the issue as per clause 12 (on page no.36) of the agreement which specifies that the schedule rate is payable for the quantities exceeding the deviation limits.
Hence, I award claim of Rs.4,98,871/- in the favour of Claimant and against the respondent."
Claim no. 8: Claim on account of EXTRA items provided for superstructure and foundation work as per provision of the OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 29 of 40 contract ..................................................................................... Reasons and award: I examined the clause 12 (page no.36) of the agreement as well as schedule F and found that at both the places it is mentioned that the payment for extra items in excess of limits specified in schedule F shall be at agreement rates. The payment on this basis has already been made by the respondent which is included in the payment of Rs. 1.63 crores. The terms of the contract must be respected by both the parties. I shall not go beyond the stated terms of the agreement. Therefore, I reject claim no.8 for extra items amounting to Rs. 13,67,541/-.
24. The findings of Ld. Sole Arbitrator on the claim no. 7 are premised upon principle of contra proferentem which is vivid as elicited above. The award of claim to claimant/respondent on account of deviation for superstructure and foundation work with application of principle of Contra Proferentem with application of schedule rate as payable for the quantities exceeding the deviation limits cannot be made a premise by petitioner to set aside the award for the reasoning of Ld. Sole Arbitrator for rejecting the claim no. 8 on account of extra items provided for superstructure and foundation work as per provision of the contract. Claimant/respondent in arbitration had relied upon the principle of Contra Proferentem for claim on account of deviation for superstructure and foundation work since there was contradiction between the main clause and schedule of the contract upon which Ld. Sole Arbitrator held that main agreement clause should prevail as there is no priority clause in the agreement.
25. Following are the reasonings and award of Ld. Sole Arbitrator on claim no. 10:-
"Claim no. 10: Claim on account of compensation by way of interest @ 18% p.a. on account of non payment of admissible OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 30 of 40 payments till the date of payment ...................................................................................... Reasons and Award: There is nothing on record to prove failure of claimant to discharge the contractual obligations and liabilities as respondent has already released a major chunk of payments without levying any penalty, which means contract was completed to their satisfaction. Also Respondent have not placed on record any proof for refusal to accept the payments offered by the respondent. The issue of clause 9 has been discussed and settled in earlier Para's. The Arbitration proceeding were started within the limitation period of three years and are not delayed.
I find there is not prohibition clause in the Contract, which prevents the payment of interest to cover the situation. The mandate to award interest is derived from Section 31(7)(a) of the A & C Act. Also Clause 7 and clause 9 of the agreement provides for interest on delayed payments @ 7.5% per annum for the period of delay.
I award pre-award interest at the rate of 7.5% amounting to Rs.10,35,593/- as per the table below:
Particulars O/S Due Payment Amount
amount Date date/Award
date
1. Interest on Amount 44,12,428 18-03- 27-03-2019 3,39,092
of Withheld of Rs 2018
44,12,428/- paid on
28.3.2019 due since
18.3.2018
2. Interest on Amount 7,56,578 16-09- 27-03-2019 86,592
of Security deposit 2017
due amounting to
Rs.7,56,578 (part
payment of Rs.
223,572/- released
on 28.03.2019 but
due since 16.9.2017
3. Interest on Claim 5,33,006 28-03- 22-10-2021 1,02,841
No. 1 balance 2019
amount of Security
deposit Rs.
5,33,006/- due since
16.9.2017 partly
paid on 28.3.2019
4. Interest on Claim 5,63,223 18-03- 22-10-2021 1,52,070
No. 2 on Rs. 2018
5,63,223 due on
18.3.2018
OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 31 of 40
5. Interest on Claim 2,78,400 04-11- 22-10-2021 1,03,714
No.4 Service Tax 2016
Reimbursement due
within one month
from date of
payment as per
clause 38 of the
agreement
6. Interest amount on 61,084 18-02- 22-10-2021 16,844
Claim No.5 of 2018
Rs.61,084/- due
within one month of
the claim as per
Amendment #
4amending clause
19 L
7. Interest on Claim 9,07,894 31-07- 22-10-2021 1,51,668
No.6 from the date 2019
of start of arbitration
dispute i.e. letter to
CE dated 31.7.2019
8 Interest on Claim 4,94,871 31-07- 22-10-2021 82,772
No.7 from the date 2019
of start of arbitration
dispute i.e. letter to
CE dated 31.7.2019
TOTAL AMOUNT 10,35,593
26. Section 31(7) of the Act reads as under:-
"31. Form and contents of arbitral award.
...........................................................................................................
(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent. higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.- The expression "current rate of interest" shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978)."
OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 32 of 4027. Above elicited award for claim no. 10 for interest by Ld. Sole Arbitrator was made by Ld. Sole Arbitrator on the basis of Section 31(7)(a) of the Act, elicited above. The calculation of interest, above said, brings into fore that Ld. Sole Arbitrator had considered the relevant dates of payments made by petitioner and Ld. Sole Arbitrator allowed interest only on outstanding payments from due date till the date of award. Also was taken into consideration by Ld. Sole Arbitrator of the delay in submission of final bill and for which there is adjustment in the interest claim. No interest has been allowed by Ld. Sole Arbitrator for the payment already received by claimant/ respondent on time.
28. Following are the reasonings and award of Ld. Sole Arbitrator on claim no. 11:-
"Claim No. 11: Claim for cost of arbitration and legal expenses. ...................................................................................... Reasons and Award: The power and mandate to award costs is as per Section 31-A of the Arbitration and Conciliation Act. The claimant has paid Rs. 1,60,000/- for the proceeding petitions before the Hon'ble High court of Delhi, Arbitrator fee of Rs. 1,29,051 plus rs. 10,000 as administrative fee of Delhi International Arbitration Centre and Rs. 1,50,000/- for drafting and pleading of arbitration proceeding and counsel fee of Rs. 1,50,000/- plus document expense of Rs. 10,000/- amounting to total amount of Rs. 6,19,000/-. I award Rs. 6,19,000/- as cost of arbitration and legal expenses to the claimant."
29. Section 31-A of the Act contains the regime for costs and explanation to sub Section (1) defines 'costs' meaning to the reasonable costs relating to:-
"(i) the fees and expenses of the arbitrators, Courts and witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 33 of 40 arbitration and
(iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award."
30. Award for the costs of arbitration and legal expenses was on the basis of Section 31-A of the Act and was based on the copy of bills provided by claimant/respondent in arbitral proceedings. Copy of said bills and the said facet can only be laid at the fag end of arbitral proceedings as only then it can be calculated as to how much costs have been incurred by parties in the arbitration proceedings as it would not be plausible for the parties to assess quantum of costs before incurring them.
31. Award of post award interest @ 12% per annum on two components of award i.e., principal amount and pre-award interest amount was so done by Ld. Sole Arbitrator basing the rate of post award interest on current prime lending rate of SBI which was at 12.15% per annum. Said post award interest was in consonance with Section 31(7)(b) of the Act, elicited above, so it cannot be said that the award of post award interest was not in line with prevalent market conditions and the state of economy or in any manner punitive or exorbitant in nature. Reliance of petitioner on case of Executive Engineer (R and B) and Ors. Vs Gokul Chandra Kanungo (Dead) Thr. his Lrs. (supra) is misplaced as it embodies facts and circumstances entirely different and distinguishable to the case in hand since therein Supreme Court exercised the jurisdiction under Article 142 of The Constitution of India and reduced rate of interest.
OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 34 of 4032. Supreme Court in case of Associate Builders vs. Delhi Development Authority (supra) has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
Also was held therein that:
"33. "...when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award.... Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts.."
33. Supreme Court in case of SSangyong Engineering & Construction Co. Ltd. vs National Highways Authority of India (NHAI) (supra) has held that under Section 34 (2-A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 35 of 40 by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
34. Delhi High Court in the case of Siddharth Constructions Co. vs India Tourism Development Corporation Ltd. (supra) inter alia appreciated following observations of Supreme Court in the case of Delhi Airport Metro Express Pvt. Ltd. vs Delhi Metro Rail Corporation Ltd., 2021 SCC OnLine SC 695:-
"25. 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 re-appreciate 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 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 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'."
35. The proceedings under Section 34 of the Act are summary in nature and the scope of enquiry in the proceedings under Section 34 of the Act is restricted to specify grounds for setting aside OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 36 of 40 only, as was held in the case of Canara Nidhi Limited vs M. Shashikala & Ors., 2019 SCC Online SC 1244. The Court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole purpose behind holding the arbitration proceedings as an alternative to Civil Court's forum would stand defeated, as was held in the case of Sangamner Bhag Sahakari Karkhana Ltd. vs Krupp Industries Ltd., AIR 2002 SC 2221. An award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had failed to appreciate some facts, but if there is an error apparent on the face of the award or if there is misconduct on the part of the arbitrator or legal misconduct in conducting the proceedings or in making the award, the court will interfere with the award; as was held by Supreme Court in the case of Oil & Natural Gas Corporation vs M/s Wig Brothers Builders & Engineers Pvt. Ltd., (2010)13 SCC 377. Reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under the Arbitration Act; as was held by Supreme Court in the case of Ispat Engineering & Foundry Works vs Steel Authority of India Ltd., (2001) 6 SCC 347. In order to provide a balance and to avoid excessive intervention, the award is not to be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence; as was held by Supreme Court in the case of P.R Shah, Shares & Stock Brokers Pvt. Ltd vs B.H.H. Securities Pvt. Ltd. & Ors., (2012) 1 SCC 594. At global level the doctrine of 'Contra Proferentem' is generally applied by the Judges/Arbitrator in the cases where a contract appears ambiguous to them; the Judges/Arbitrator in OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 37 of 40 India have appreciated and adopted similar line of reasoning in the cases involving ambiguous contract wherein it is believed that 'an ambiguity is needed to be resolved' in order to find the correct intention of the contract. If the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award and if the Arbitrator relies on a plausible interpretation out of the two possible views, then it would not render the award perverse; as was held by Supreme Court in the case of M/s Sumitomo Heavy Industries Ltd. vs Oil & Natural Gas Commission of India, 2010 (11) SCC
296. Award is not open to challenge on the ground that the Arbitral Tribunal had reached a wrong conclusion or had failed to appreciate the facts; the appreciation of evidence by the arbitrator is never a matter which the Court considers in the proceeding under Section 34 of the Act, as the Court is not sitting in appeal over the adjudication of the arbitrator.; as was held by Delhi High Court in the case of NTPC Ltd vs Marathon Electric Motors India Ltd., 2012 SCC OnLine Del 3995. Supreme Court in the case of Associate Builders vs Delhi Development Authority, (2015) 3 SCC 449 has restricted the scope of public policy, so the Court does not act as a Court of appeal and consequently errors of fact cannot be corrected. An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award; as was held by Supreme Court in the case of Steel Authority of India Ltd. vs Gupta Brother Steel Tubes Ltd., (2009) 10 SCC
63. OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 38 of 40
36. The impugned award was passed by an experienced Advocate/Ld. Sole Arbitrator whereas the findings were given, based on appreciation of facts, evidences and law after giving all reasonable opportunities to the parties to present their case. Not only the reasonings of Ld. Sole Arbitrator are logical but all the material and evidences were taken note of by Ld. Sole Arbitrator. The Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of Ld. Sole Arbitrator. Cogent grounds, sufficient reasons have been assigned by the Ld. Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Sole Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent in respect of the impugned award. The conclusion of the Ld. Sole Arbitrator is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Ld. Sole Arbitrator cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Act; though concerted but unsuccessful efforts have been made to give them colour to term the impugned arbitral award to be (i) perverse; (ii) suffering from patently illegal and (iii) against the fundamental policy of Indian law.
37. For the foregoing reasons, the petition is hereby dismissed.
OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 39 of 4038. The parties are left to bear their own costs.
39. File be consigned to record room.
Digitally signed by GURVINDER PAL GURVINDER SINGH
PAL SINGH Date: 2023.04.25
11:42:05 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
On 25th April, 2023. Patiala House Court, New Delhi.
(DK) OMP (Comm.) No. 79/2022 Delhi State Industrial & Infrastructure Development Corporation Ltd. vs Manish Goel Page 40 of 40