Delhi District Court
National Project Constructions ... vs M/S. S. S. Sharma & Company on 20 December, 2022
IN THE COURT OF MS. PURVA SAREEN,
ADDITIONAL DISTRICT JUDGE-01
SOUTH, SAKET COURT, NEW DELHI
CS No.146/18
DLST-01-000968-2018
National Project Constructions Corporation Ltd
Raja House, 30-31,
Nehru Place, New Delhi
.....Petitioner
Versus
M/s. S. S. Sharma & Company
Manak Dhehry, Village Tanda,
District Hoshiarpur,
Punjab-144203
.... Respondent
Date of institution : 02.07.2010
Date reserved for order : 13.12.2022
Date of order : 20.12.2022
O R D E R:
Petition under Section 34 of The Arbitration & Conciliation Act 1996 against the impugned award dated 15.10.2003 The present petition has been filed under section 34 of Arbitration and Conciliation Act 1996 for setting aside the arbitration award dated 15.10.2003 passed by Sh. M. M. Kapoor, Sole Arbitrator.
1. Brief facts of the present petition are that the applicant/petitioner CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 1 of 17 is a government company registered under the Companies Act 1956 having its registered office at New Delhi. Government of Gujarat had constructed Sardar Dam on Narmada river and water was required to be taken at various places through canal and aqueducts were required to be constructed. Sardar Sarover Narmada Nigam Ltd (hereinafter referred as SSNNL) gave contract to the applicant/petitioner for constructions of four aqueducts at rivers namely Deo, Karad, Mesari and Kun for a total consideration amount of Rs.56 crores. The aqueducts constructed over the river 'Kun' took more time then the stipulated period and construction work of all four aqueducts was delayed and SSNNL terminated the entire contract of construction and construction activity at river 'Kun' was stopped thereafter.
2. An Arbitration case was presented for the work of sinking of circular wells at river 'Kun' and opponent claimed Rs.18,00,000.00 alongwith interest @ 24% per annum but the hearing could not be completed and award could not be given within prescribed period. Both the parties jointly applied for extension of time which was granted by the learned Sole Arbitrator for further proceedings of the Arbitration under new Act. An additional claim was filed by opponent. Learned Arbitrator declared the award on 15.10.2003 copy of which was received by applicant/petitioner on 23.10.2003.
3. The petitioner has filed the present petition on the following grounds :
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(i) The impugned Arbitral Award (hereinafter to be referred as ' the said award') deals with a dispute not contemplated by the terms of the submissions to arbitration ;
(ii) The said Award deals with a dispute not falling within the terms of the submission to arbitration;
(iii) The said Award containing decision on matters beyond the scope of the submission to the arbitration;
(iv) The Ld. Sole Arbitrator (hereinafter to be referred as 'LSA') has acted in totally perverse manner in adjudicating upon the issues before him;
(v) The LSA departed from all judicial principles in adjudicating the controversy before him;
(vi) The LSA has acted totally against well settled judicial norms;
(vii) The LSA had absolutely no material with him in awarding certain claims and in fact he has based his decisions merely on his personal whims and fancies;
(viii) There is no material on record for arriving at his whimsical conclusions;
(ix) The said Award suffers from the infirmities not only because of wrongful and erroneous approach of LSA to the controversies before him, but also because of his perversity in appreciating the evidence before him;
(x) The said Award of LSA is clearly in violation of the Terms and Conditions of contract between the parties;
(xi) The LSA exceeded his jurisdiction and in fact while awarding certain claims, he has acted beyond his jurisdiction and, therefore, CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 3 of 17 the said Award is vitiated;
(xii) The said Award clearly depicts various contradictions reflecting in the mind of LSA in giving his observations and findings;
(xiii) The said Award is in conflict with public policy of India;
(xiv) On page No.7 of the said Award, LSA awarded Rs.1,729.00/-
without any base and proof. The said figure of Rs.1,729.00/- was not in respect of disputed contract work, but was in respect of some other contract work. Thus, the LSA exceeded his jurisdiction and awarded the said amount;
(xv) On Page No.9, the LSA awarded Rs.5,385.74/- against the Terms of the contract. The LSA failed to consider condition No.9 on Page No.52 of Special Condition of contract which reads as under:-
(9) The final quantities of work done shall be restricted to the quantity paid to NPCC by SSNNL.
7th and Final Bill shows the quantity of presected steel was 3.46 M.T. vide M.B.80/43. So, the Opponent was given Rs.1,743.84/-. There was no question of paying Rs.3,601.90/- for said work.
(xvi) On Page No.9 and 10 of the said Award, the amount of Rs.14,096.00/- is shown as payable to the Opponent, but the LSA committed error in not referring to Technical Specification. Pages Nos. 4 and 5 which provide for Tilt and shift of well. Tabular Form on Page No.5 provides for lump-sum deduction. Accordingly, the amount of Rs.7,260.00/-+Rs.2,036.00/-
CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 4 of 17 +Rs.5,000.00/- was deducted for Tilt rectification and Silt removal, vide M.B.80/43 and 7th and Final Bill. Yet the LSA awarded Rs.14,096.00/- to the Opponent which is contrary to Terms and Conditions of contract.
(xvii) On Page No.10 and 11, the LSA has awarded Rs.6,9005.81/- which is against the Terms of Agreement. This amount is shown as recovery vide MB 80/43 in Final Bill because the Opponent was required to return the material, but he failed to return the same;
(xviii) The LSA awarded Rs.8,000.00/- on Page No.13 of the said Award which is contrary to Agreement and has no basis at all. There is no evidence to prove that the Opponent is entitled to claim such amount. De-silting work was carried out by means of crane which was provided by the Applicant Corporation who has already paid the labour charges for de-silting. Moreover, when the Opponent could not prove the quantity of aloleged de-silting , there is no question of paying any amount for de-silting at all; (xix) The LSA awarded Rs.72,500.00/- for idle labour wages on the basis of correspondence only, but LSA failed to consider following facts :
A) The Opponent had not produced Muster-Roll and Salary Register for proving the number of labourers alleged to have engaged who remainedf idle according to the Opponent. The LSA has wrongly imagined and felt about the number of alleged idle days.
(B) The Opponent had carried out contract work slowly CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 5 of 17 and had done less quantum of work as stated above. This fact goes to prove that he had not hired sufficient number of workers- labourers. So, there is no question of any loss on this score.
(C) Contract of the Applicant Corporation was terminated by 14.05.1992 as stated earlier and that fact was known to the Opponent.
(xx) The LSA wrongly awarded Rs.2.20 lacs on the ground of alleged permissible due profit of 10% on left our work; (xxi) The LSA ought to have considered that the opponent himself had committed breach by not adhering to fine schedule. His progress of work was slow, which led SSNNL to terminate the contract of applicant. So, no loss and profit could be given to the opponent;
(xxii) Only letters are not the proof for such claim; (xxiii) On page no.26, the said award, the LSA wrongly awarded Rs.2,68,090.00/- as interest at 12% pendentelite interest from the date of reference i.e. 15.04.1997 to the date of award i.e. 15.10.2003;
(xxiv) On page no.28 of the said award, the LSA awarded Rs.2,700.00/- which is against the term of contract; (xxv) On page no.28 of the said award, the LSA awarded Rs.2,600.00/- against the term of contract;
(xxvi) The LSA erred in rejecting the counter claim made by the applicant/petitioner.
(xxvii) All reasons and finding for said rejection are illegal; (xxviii) The LSA ought to have rejected claim and supplementary CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 6 of 17 claim made by the opponent and ought to have granted counter claim.
4. Arguments advanced by Ld. counsels for both the parties were heard. I have perused the Arbitral award and case file carefully.
5. The learned Arbitrator has awarded a sum of Rs.72,500/- against the claim no.2 i.e. labour idle charges in favour of the respondent (page 15 of award). It is submitted that the learned Arbitrator has awarded the above mentioned sum without any evidence produced by the respondent to prove the number of labour at the site and idle labour. The learned Arbitrator has recorded that the petitioner claims only 3-4 workmen at site in its letter dated 02.04.1992 (page 88 of File no.1) whereas the respondent claims 92 workmen in its letter dated 04.04.1992 (page 48 of file no.1) however, without any evidence to prove the number of workmen at the site, the learned Arbitrator just on assumption that about 50 workmen must have been at site awarded the said sum against the claim.
6. It is submitted that the respondent did not produce a single document such as labour reports, attendance register muster roll, salary register, labour license etc to show that if there were more than 3-4 workmen at the site. Learned Arbitrator has therefore, erred in awarding claim no.2 in favour of the respondent. It is submitted that the findings of the arbitrator are based on no CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 7 of 17 evidence and therefore, is perverse and irrational.
7. It is further submitted that the findings of learned Arbitrator is based on no evidence as the learned Arbitrator has simply assumed that at least 50 workmen must be at the site. Thus the award is based on assumption and therefore, is also in violation of Section 31(3) of the Arbitration Act which mandates that the Arbitral award shall state the reasons upon which it is based. Hon'ble Supreme Court in Associate Builders Vs Delhi Development Authority (2015) 3 SCC 49 has held that "the third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law the where (1) a finding is based on no evidence, or (2) an arbitral tribunal takes into account something irrelevant to the decision which it arrives at ; or (3) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse. A good working test of perversity is contained in two judgments".
8. The Hon'ble Supreme Court in Dyna Technologies Pvt Limited Vs Crompton Greaves Limited (2019) 20 Supreme Court Cases 1 has held that "the mandate under section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award the documents referred to thereunder, if the need be".
CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 8 of 17 "When we consider the requirement of a reasoned order, three characteristics of a reasoned order can be fathomed. They are : proper, intelligible and adequate. If the reasoning in the order are improper, they reveal a flaw in the decision making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue.
9. Learned Arbitrator has awarded a sum of Rs.2,15,100/- against the claim of loss of profit to the respondent (page 23 of award). It is submitted that learned Arbitrator has awarded the above mentioned sum without any proof or evidence produced by the respondent to establish that the respondent has suffered any loss of profit due to the actions/inactions of the petitioner.
10.In judgment Edifice Developers & Project Engineers Ltd Vs Essar Projects (India) Ltd 2013 SCC online Bom 5 the High CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 9 of 17 Court of Bombay has held that evidence has to be produced by a party to prove loss of profit. The Hon'ble High Court of Delhi in GTM Builders & Promoters Pvt. Ltd Vs Sneh Developers Pvt. Ltd MANU/DE/2321/2018 has held that it is necessary for a party to establish through evidence that in the normal course, the contract would have yielded profits to the extent as claimed.
11.The plea/objections raised by the petitioner were objected to by the respondent. It is stated by respondent that during the course of proceedings before Arbitrator, there were amendments and counter claims from both sides and the same were dealt with by the learned Arbitrator during the course of proceedings. The counter claims of both the parties were rejected being time barred. Whereas the other job work given to respondent were duly paid by the petitioner/objector and there is no dispute for that.
12.In response to Para 4 of the objections, it is stated that the job work of respondent under contract was to arrange and provide laborer at work side and, with use of nut-bolt-wiring and such like raw materials and the labour force to make structure/fabrication and hut etc total amounting to Rs.23.34 lacs and interest on delayed payment. The contents of para 5 of the objections is a matter of record because for the reasons best known to organization and change in planning/policy initially they used to stop the project intermittently/periodically cause the labour force arranged by respondent idel, the respondent paid full wage to all CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 10 of 17 the labour, finally the organization terminated the contract midway on as such there has been no fault on the part of the respondent when the contract was terminated, the payments were withheld and not released the respondent raised Arbitration. The claim includes only legitimate claims and not for additional work for which payment was released.
13.In so far as ground (i) to (x) are concerned, it has been held in catena of judgments that Section 34 petition deserves to be allowed in case the grounds as mentioned in the Section 34 are fulfilled. It has been held in Associate Builders Vs. Delhi Development Authority, AIR 2015 SC 620 that:
"It will be seen that none of the grounds contained in sub- clause 2 (a) deal with the merits of the decision rendered by an arbitral award. It is only when we come to the award being in conflict with the public policy of India that the merits of an arbitral award are to be looked into under certain specified circumstances.
Reliance is being placed on Jitender Rajpal vs. Ansal Properties & Infrastructure Ltd. (OS) (COMM) 28/19 decided on 13.02.2019 wherein it has been held that "It is apparent, therefore, that, while interference by court, with arbitral awards, is limited and circumscribed, an award which is patently illegal, on account of it being injudicious, contrary to the law settled by the Supreme Court, or vitiated by an apparently untenable interpretation of the terms of the contract, requires to be CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 11 of 17 eviscerated. In view thereof, the decision of the ld. Single Judge that reasoning of the arbitral award in this regard was based on no material and was contrary to the contract, cannot be said to be deserving of any interference at our hands under Section 37 of the Act. In a pronouncement reported at MANU/DE/0459/2015, MTNL v. Fujitshu India Pvt. Ltd. (FAO(OS) No.63/2015), the Division Bench of this court has held that "an appeal under Section 37 is like a second appeal, the first appeal being to the court by way of objections under Section 34". Being in the nature of a second appeal, this court would be hesitant to interfere, with the decision of the learned Single Judge, unless it is shown to be palpably erroneous on facts or in law, or manifestly perverse."
14.In so far as ground (xi) to (xix) are concerned the same are with respect to the appreciation of evidence by the Ld. Arbitrator. It has been held in catena of judgments that once the Arbitrator has returned a finding after appreciation of evidence, the court cannot sit in appeal against the said order and re-appreciate the evidence or discern it afresh. Perusal of Arbitral record would show that the Ld. Arbitrator had discussed each claim of the claimant minutely and after discerning the evidence led by both the parties and has decided the claims. There is no error apparent in the finding returned by the Arbitrator.
15.Reliance is being place on Sumitomo Heavy Industries Ltd vs ONGC Ltd (2010) 11 SCC 296:
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43........The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. (2009) 5 SCC 142 the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."
16.In so far as ground (xx) to (xxviii) are concerned, the same are with respect to the interpretation of the terms of contract between the parties. In so far as reconsideration of the terms of contract is concerned, it has been decided by the Hon'ble Appex court in State Trading Corporation of India Ltd. Vs. Toepfer International Asia PTE Ltd. (2014) 7 High court Cases (Del) 504 2014 SCC Online Del 3426 that "5. The challenge in this appeal is on the ground that the learned Single Judge ignored that the interpretation of the contract CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 13 of 17 between the parties given by the Arbitral Tribunal is contrary to the express terms and conditions thereof and the Arbitral Tribunal has given a meaning to the terms and conditions which is not contemplated in the contract. The senior counsel for the appellant thus wants us to read the contract between the parties, particularly the clauses relating to demurrage, and then to judge whether the interpretation thereof by the Arbitral Tribunal is correct or not.
6. In our view, the interpretation in Saw Pipes Ltd. supra of the ground in Section 34 of the Act for setting aside of the arbitral award, for the reason of the same being in conflict with the public policy of India, would not permit setting aside, in the aforesaid facts. A Section 34 proceeding, which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. In our view, mere erroneous/wrong finding of fact by the Arbitral Tribunal or even an erroneous interpretation of documents/evidence, is non-interferable under Section 34 and if such interference is done by the Court, the same will set at naught the whole purpose of amendment of the Arbitration Act.
7. Arbitration is intended to be a faster and less expensive alternative to the courts. If this is one‟s motivation and expectation, then the finality of the arbitral award is very important. The remedy provided in Section 34 against an arbitral award is in no sense an appeal. The legislative intent in Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. In appeal, the CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 14 of 17 decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review may either be invalidated in whole or in part or be left to stand if the plea for annulment is rejected. Annulment operates to negate a decision, in whole or in part, thereby depriving the portion negated of legal force and returning the parties, as to that portion, to their original litigating positions. Annulment can void, while appeal can modify. Section 34 is found to provide for annulment only on the grounds affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the decision. A remedy of appeal focuses upon both legitimacy of the process of decision and the substantive correctness of the decision. Annulment, in the case of arbitration focuses not on the correctness of decision but rather more narrowly considers whether, regardless of errors in application of law or determination of facts, the decision resulted from a legitimate process."
17. In so far as ground of calculating the number of workman/labour are concerned, unless the award is against the public policy or is covered by other grounds as mentioned in Section 34 of the Act the findings of the Ld. Arbitrator cannot be reversed. The main focus of the parties is with respect to arbitrator acted arbitrarily without collecting any evidence and simply on assumption and presumption with respect to number of workmen. However, this court is of the opinion that as the evidence cannot be tested and CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 15 of 17 the present Court cannot interfere with the findings of the arbitrator unless it is covered under clause of Section 34.
18. The grounds raised by the petitioner do not disclose as to how the award is perverse or against public policy. The reasoning given by the Ld. Arbitrator while deciding each claim cannot be faulted as he has declined the claims of the claimant where not made out. In case the evidence led by the parties was not discerned by the Ld. Arbitrator, he would have outrightly allowed all the claims of the claimant but that is not the case. Simply by writing that award is against the public policy would not suffice. It is to be specifically mentioned as to how the award is against public policy. The judgment of Associate Builders v. DDA (2015) 3 SCC 49, is very categorical in that respect. Reliance is once again placed on said judgment while deciding these issues.
19.Reliance is also being placed on judgment of State Trading Corporation of India (supra) while deciding the above.
20.It has been held in various judgments that in case in two views are available and one adopted by the Ld. Arbitrator the same cannot be reversed only because the court prefers the other view. It is once again reiterated for the sake of repetition that the award given by the Arbitrator is a reasoned award drawn after discerning the entire evidence led by both the parties.
CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 16 of 17
21.In view of the aforesaid discussions none of the grounds raised by the petitioner qualify the conditions mentioned in the sub clause
(ii) of Section 34 of Arbitration & Conciliation Act, 1996 for which the award of Ld. Arbitrator can be interfered with. Since none of the conditions are satisfied, accordingly objections raised by the petitioner through this petition under Section 34 of Arbitration & Conciliation Act 1996 stand dismissed.
File be consigned to Record Room after due compliance.
Purva Digitally signed
by Purva Sareen
Sareen Date: 2022.12.24
15:48:21 +0530
Announced in the open court (PURVA SAREEN)
today i.e. on 20th December 22 ADJ-01, SOUTH, SAKET COURT,
NEW DELHI
CS. No.146/18 National Projects Constructions Corporation Ltd Vs. M/s S. S. Sharma & Company Page 17 of 17