Delhi District Court
Ultimate International Pvt. Ltd vs Tarsem Singh on 6 October, 2021
IN THE COURT OF SH GURVINDER PAL SINGH,
DISTRICT JUDGE (COMMERCIAL COURT)-02,
PATIALA HOUSE COURT, NEW DELHI
OMP (COMM.) No. 207/2019
Ultimate International Pvt. Ltd.
C-58, Defence Colony,
New Delhi-110024
Through its Director
Ms. Richa Bharadwaj ...Petitioner
versus
Tarsem Singh
Proprietor M/s. New Doaba Electricals
Shop No. C-20/1, Amar Colony,
Lajpat Nagar-IV, New Delhi-11024 ...Respondent
Date of Institution : 23/11/2019
Arguments concluded on : 06/09/2021
Decided on : 06/10/2021
Appearances : Sh. Nagendra Kumar with Sh. Kailash Chandra, Ld.
Counsel for petitioner.
Sh. S.N Khanna, Ld. Counsel for respondent.
JUDGMENT
1. Petitioner had filed the present petition under Section 34 of The Arbitration and Conciliation Act, 1996 (herein after referred as The Act), seeking setting aside of the arbitral award dated 21/08/2019 passed in case no. DAC/1521/01-17 titled Tarsem Singh vs Ultimate International Pvt. Ltd. by Sh. D.P Kaushik, Ld. Sole Arbitrator. Ld. Sole Arbitrator awarded Rs.6,57,159/- with interest @12% per annum until of date of action and Rs.20,000/- in lieu of return of tools and equipments of claimant and cost of Rs.50,000/- in favour of claimant/respondent payable by petitioner.
OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 1 of 272. I have heard Sh. Nagendra Kumar with Sh. Kailash Chandra, Ld. Counsel for petitioner; S.N. Khanna, Ld. Counsel for respondent and perused the record of the case, the arbitral proceedings record, relied upon precedents, filed brief written arguments on behalf of petitioner as well as on behalf of respondent and given my thoughtful consideration to the rival contentions put forth.
3. Adumbrated in brief the relevant facts as set up by petitioner through Ld. Counsel are as follows:-
Parties to the lis entered into Agreement dated 15/05/2014 whereby petitioner awarded to respondent electrical works of circuit wiring, cables and submains, fixing lighting fixtures, floor panel with MS conduiting and for AC works etc. (labour rate) complete at C-58, Defence Colony, New Delhi-110024, whereas the rates there under were for the entire labour works involved in installing, testing, commissioning and completion of all works at site and handing over all electrical, cabling works etc. The rates were inclusive of using own tools and equipments required of respondent, scaffolding, handling, hoisting, cutting charges, including all kind of taxes, duties, applicable service tax, freight, cartages, any other costs etc. and all challan were to be submitted from time to time for the service tax paid to the Government Department by the contractor whose copies were to be given to petitioner. Said works were to be completed by 30/09/2014 under the terms and conditions laid thereunder.
Parties entered into second Agreement dated 21/08/2015 with respect to the earthing work and wiring work (labour rate) complete at C-58, Defence Colony, New Delhi-11024 on the OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 2 of 27 terms and conditions laid therein and such works to be completed by 30/09/2015.
On 21/08/2015 petitioner also awarded another work order to respondent contractor regarding liasioning work for electricity connection at C-58, Defence Colony, New Delhi on the terms laid therein.
It is the case of petitioner that after receiving the work orders, respondent/claimant never adhered the terms and conditions of the agreement and never provided adequate number of workers at the site of petitioner and his foreman was never seen at the site of petitioner. At that time it was realized by petitioner that petitioner had chosen wrong party. Also respondent/claimant never provided the tax challan of service tax to petitioner as per agreements. Also respondent/claimant did not issue the proper invoice as per agreement to the petitioner. Therefore, until and unless proper invoices were issued as per the law, no liability of petitioner arose towards the respondent. Petitioner was very much disappointed with the performance of respondent/claimant and in this regard sent an email dated 24/10/2015 to respondent/claimant with regard to delay of the work and other issues and non performance and poor quality of the work by respondent/claimant and petitioner had given two weeks time to respondent/claimant to complete the balance work. Respondent/claimant failed to adhere the terms of the agreements and left the work incomplete, which petitioner company got completed by engaging another contractor at the risk and cost of respondent/claimant as per agreement. Petitioner waited for several months before getting the work done at risk and cost of respondent/claimant and continued to call him several times in OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 3 of 27 between to complete the work. Petitioner had also huge amount of claims against respondent/claimant. Petitioner had been paying the office rent for the delayed period of the work and the work was executed at the risk and cost of respondent/claimant which comes to total amount of Rs.5,50,687/-. Respondent/ claimant had neither himself nor his workers turned to site/ premises of petitioner to complete the work which he left incomplete since 27/02/2016. Respondent/claimant vide legal notice dated 04/05/2016 annexing alleged final bill dated 26/04/2016 to petitioner had demanded the outstanding dues of Rs.6,57,159/- from petitioner. Respondent/claimant then filed Arbitration Petition no. 505/2016 before Delhi High Court for appointment of Arbitrator in view of the arbitration clause in work order dated 15/05/2014. Vide order dated 09/01/2017, Delhi High Court appointed the Arbitrator under the rules of Delhi International Arbitration Centre (DIAC). Parties were also directed to appear before Delhi High Court Mediation and Conciliation Centre on 27/01/2017. It was further directed that if the parties were unable to resolve their disputes, the parties shall proceed to have the same resolved by arbitration as directed. Mediation was unsuccessful. Arbitral proceedings culminated into the impugned arbitral award. Impugned award was passed on the last day of extended six months time after completion of 12 months statutory period for arbitral proceedings. Petitioner has impugned the arbitral award mainly on the following grounds. Impugned award is contrary to substantive provisions of law and also against the terms of contract and is patently illegal. Ld. Arbitrator has not adopted a judicial approach i.e., has not acted in a fair, reasonable and objective approach and has OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 4 of 27 acted arbitrarily, capriciously and whimsically. Impugned award is totally vague, bald and has even no whisper as to (i) what are details of the parties, (ii) what are the brief facts/case of the respective parties, (iii) what was/were the agreement or agreements between the parties, on which disputes were based upon, (iv) how the entire disputes of the parties are squarely covered under the agreement or agreements, (v) what are those documents on which parties relied and documents were marks or exhibited and what are evidentiary value of those marked and/or exhibited documents, (vi) even what issues were framed in the present arbitration proceedings have not been mentioned in the award, (vii) award did not stipulate the date as to when the Ld. Arbitrator was appointed by the DIAC and when he entered into reference in the arbitral proceedings, (viii) when the arbitral tribunal's tenure of 12 months ended and from the date of entering reference and when further extended period of 6 months expires has not been mentioned in the award, (ix) what the Ld. Arbitrator did during the entire arbitral proceedings, (x) how many witnesses were examined by the parties, (xi) when the cross examination commenced, (xii) when the cross examination of CW-1 concluded, (xiii) when the oral arguments heard, (xiv) when the written arguments submitted by the parties, (xv) no evidentiary material on records and cross examination was discussed for each issue to reach to the conclusion.
The impugned arbitral award is totally vague, bald and unreasoned and Ld. Arbitrator has not only drawn an inference from the facts, which on the face of it is unreasonable but also violates the principles of natural justice. Findings of the impugned award are based upon only one question i.e., "Q. I put OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 5 of 27 it to you that you had failed to adhere to the terms and conditions of the agreement", which was put to respondent/claimant during the cross examination and the answer to that question i.e., "A. It is wrong to suggest" was given by respondent/claimant. Said question and answer has no legal prospective to apply squarely to get findings of all the disputed issues. Impugned award does not state the reasons upon which it is based and the same violates the mandatory provisions of Section 31(3) of the Act. Impugned arbitral award is contrary to substantive provisions of law as well as the terms of the contract. Findings in the impugned arbitral award are based on no evidence. Ld. Sole Arbitrator has taken into account something irrelevant to the decision arrived. Ld. Arbitrator has ignored vital evidence in arriving at its decision. Respondent/claimant himself admitted several facts in cross examination and Ld. Sole Arbitrator cannot over ride those facts without discussing the same in the award. It was own admission of respondent/claimant on breach of agreement that (i) no insurance policy for workers was taken by respondent/claimant while work was in progress; (ii) copy of challan of service tax was not submitted by respondent/claimant to petitioner; (iii) testing and commissioning work of entire electrical work at the site was not completed by respondent/claimant; (iv) shop drawings were not provided to petitioner by respondent/claimant;
(v) completion drawings/as built drawings were not provided to petitioner by respondent/claimant; (vi) measurements of the work were not taken by respondent/claimant when work was done;
(vii) neither rates of items were reduced nor their value in bill dated 26/04/2016 was reduced for the work which was left incomplete by respondent/claimant. Even in cross examination OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 6 of 27 respondent/claimant admitted of having not maintained books of account at the relevant time whereas the final bill dated 26/04/2016 was not shown by claimant in his any tax returns. Award passed is contrary to terms of contract as per admissions of respondent/claimant in cross examination and is thus illegal and arbitrary. In the entire statement of claim there is no whisper as to what were the tools, their number and value of those tools was not assessed and even not a single proof of tools was annexed with the statement of claim nor brought in evidence and sum of Rs.20,000/- in lieu of return of tools and equipment of claimant was passed on no evidence. Impugned award is patently illegal as Arbitral Tribunal acted beyond its jurisdiction and ignored the terms of contract, passed the award contrary to contract, acting beyond jurisdiction. Ld. Sole Arbitrator did not decide the objections of petitioner as to mode of proof of documents and as to admissibility of documents in the course of evidence of respondent/claimant or later and the impugned award is without application of judicious mind. Ld. Sole Arbitrator had misconducted himself and acted in conflict with the public policy of India. Ld. Sole Arbitrator acted arbitrarily, whimsically and with prejudice and had imposed cost of Rs 70,000/- vide order dated 26/05/2018 on petitioner for not sending an email in terms of order dated 23/04/2018 and Counsel for petitioner could not join the arbitral proceedings on 26/04/2018, whereas number of times respondent/claimant or his Counsel were accommodated, which was apparent from the arbitral proceedings. Even interest awarded @12% is on higher side for which no reason was given in the impugned award. Respondent/claimant had charged Rs.50/- per sq.ft. for the covered area, whereas as per the work OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 7 of 27 order the rate was given Rs.30/- per sq. ft. Respondent/claimant had charged Rs.25/- per sq.ft. for the terrace and open areas, drive way and balcony areas, whereas as per work order the rate was given Rs.15/- per sq.ft. Respondent/ claimant claimed more rate of the item than agreed rate as per work order. No escalation was payable and rates were valid upto the completion of the project as per contract. Final bill dated 26/04/2016 was totally exaggerated and rates of the items have been charged much higher than the agreed rates stipulated in the work order and certain extra items were billed without a work order of petitioner. No measurements of actual work were taken by respondent at the site of petitioner and its measurements were necessary to be submitted with the bill as per work order. Respondent/claimant had claimed more area of the work done than actual work done. Ld. Counsel for petitioner relied upon the following precedents:-
1. Vivek Jain vs Union of India & Anr., 2008 (3) R.A.J. 508 (Del) and
2. M/s Dyna Technologies Pvt. Ltd. vs M/s Crompton Greaves Ltd., 2020(1) R.A.J. 33 (SC).
It was prayed to set aside the impugned arbitral award.
4. Ld. Counsel for respondent argued that petition is misconceived, contrary to settled principles of law and is gross misuse and abuse of process of law. Ld Counsel for respondent argued that petition deserved dismissal and award be up held since Ld. Arbitrator was an independent arbitrator appointed by DIAC consequent to directions passed by Delhi High Court in arbitration petition filed by respondent. It was argued that petitioner misused the mechanism of law repeatedly and ample opportunities were provided to the petitioner by Delhi High OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 8 of 27 Court and even during arbitration proceedings to amicably settle the dispute with the respondent, however petitioner has misused every opportunity only to drag on the disputes for more than six years. It was argued that petitioner raised false and fictitious defenses against respondent in order to pressurize respondent by falsely claiming an amount of Rs 5 lacs, however, despite said fraudulent tactics adopted by petitioner, petitioner never filed any claim towards the said amount against respondent before any authority in law nor led any evidence in support of said claim of expenditure before Ld. Arbitrator. It was also argued that petitioner has deliberately concealed the fact that respondent had deposited Rs.49,000/- with DIAC on 06/09/2017 itself prior to initiation of arbitration proceedings towards the cost of arbitration as per rules of DIAC, which was in the knowledge of petitioner. It was argued that challenge of impugned award was not in consonance with Section 31(3) of the Act and in that regard after considering all the facts and circumstances of the case and after duly noting down the conduct of the parties during the arbitration proceedings, Ld. Arbitrator had passed the award issue wise. It was also argued that respondent had filed an application under Section 34(4) of the Act and that if this Court considers that if sufficient reasoning for the award is not there in the impugned award by Ld. Arbitrator then this Court may refer the award back to Ld. Arbitrator to pass a reasoned award. It was argued that Ld. Arbitrator has passed a reasoned award after duly appreciating all material on record and after duly considering the fact that petitioner had not led any evidence to counter the claim of respondent or to substantiate the defense raised by petitioner against the claim of respondent. Ld. Counsel for respondent OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 9 of 27 relied upon the following cases:-
1. Kinnari Mullick & Anr. Vs Ghanshyam Das Damani, Civil Appeal No. 5172 of 2017 decided by Supreme Court on 20/04/2017;
2. M/s Som Datt Builders Ltd. vs State of Kerala, Civil Appeal No. 3089 of 2006 decided by Supreme Court on 17/09/2009;
3. Union of India vs Jain Steel Industries, FAO No. 367/2013 decided by Delhi High Court on 16/04/2016;
4. NTPC Ltd vs Deconar Services, Civil Appeal No. 6483 of 2014 decided by Supreme Court on 04/03/2021;
5. Prestress Wire Industries vs Uppal Builders Pvt Ltd., Original Miscellaneous Petition; Interlocutory Application 1588 of 2014; 13751 of 2017 decided by Delhi High Court on 09/02/2018;
6. West Bengal Housing Board vs The Civcon Construction Pvt. Ltd., A.P. 810 of 2010 decided by Calcutta High Court on 17/03/2020 and
7. Kanchan Udyog Limited vs United Spirits Limited, Civil Appeal No. 1168 of 2007 decided by Supreme Court on 19/06/2017.
It was prayed that the present petition/objections against the impugned award be dismissed.
5. An arbitral award can be set aside on the grounds set out in Section 34 (2) (a), Section 34 (2) (b) and Section 34 (2A) of the Act in view of Section 5 of the Act and if an application for setting aside such award is made by party not later than 3 months from the date from which the party making such application had received the signed copy of the arbitral award or if a request had been made under Section 33 of the Act, from the date on which that request had been disposed of by the Arbitral Tribunal. If the Court is satisfied that the applicant was prevented by sufficient cause from the making the application within the said period of three months it may entertain the application within further period of 30 days, but not thereafter.
OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 10 of 276. Section 34 (1) (2), (2A) and (3) of The Arbitration and Conciliation Act, 1996 read as under:-
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 11 of 27 the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."
7. Impugned award is of date 21/08/2019. It is the averment of petitioner that one year tenure of Arbitral Tribunal was expiring on 22/02/2019 as stipulated in the order dated 22/12/2018 and same was further extended for the next six months with the consent of the parties vide order dated 11/02/2019 and thus the tenure of Arbitral Tribunal was till 21/08/2019. Ld. Arbitrator reserved the award on 13/05/2019. After over three months time OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 12 of 27 had passed, Ld. Sole Arbitrator on the last day of Arbitral Tribunal's tenure which was expiring on 21/08/2019, filed his impugned award dated 21/08/2019 in the DIAC Centre, without fixing the date for pronouncing the arbitral award in front of the parties of the arbitral proceedings. It is also averment of petitioner that it had received the photocopy of arbitral award dated 21/08/2019 on 03/09/2019 through post from office of DIAC and later applied vide application/letter dated 21/10/2019 to DIAC for the certified copy of the award. It is also averment of petitioner that it had received the certified copy of the impugned award on 01/11/2019. In arbitral proceedings record there is no proof of serving signed copy of impugned award upon petitioner by Ld Sole Arbitrator. Even no reply has been filed by respondent to petition including aforesaid contention of petitioner with respect to receipt of copy/certified copy of the impugned arbitral award from DIAC. In this fact of the matter, inescapable conclusion is that petition has been filed by petitioner within stipulated three months period of receiving of the certified copy of the impugned award.
8. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts.
The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the award can be set OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 13 of 27 aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
9. Supreme Court in case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
10. Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 14 of 27 as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse. It is held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
11. Delhi High Court in the case of Vivek Jain vs Union of India & Anr. (supra) inter alia held that Arbitrator cannot rewrite the contract between the parties and cannot create a new contract between the parties. If the Arbitrator gives an award ignoring the terms and conditions of the contract and travelled beyond the terms and conditions of the contract, the award is liable to be set aside and this conduct of the Arbitrator amounts to misconduct.
12. Supreme Court in the case of M/s Dyna Technologies Pvt. Ltd. vs M/s Crompton Greaves Ltd.(supra) inter alia held that arbitral award is to be set aside on the grounds of insufficiency and inadequacy of reasoning being unintelligible and therefore unsustainable.
13. Supreme Court in the case of Kinnari Mullick & Anr. Vs Ghanshyam Das Damani (supra) inter alia held that no power has been invested by Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in sub Section 4 of Section 34 and such legal position was expounded in the case of McDermott International Inc. vs Burn Standard Co. Ltd. & Ors., (2006) 11 OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 15 of 27 SCC 181.
14. Supreme Court in the case of M/s Som Datt Builders Ltd. vs State of Kerala (supra) passed specific directions in said case that second Additional District Judge Ernakulam shall first remit the award to the Arbitral Tribunal for stating their reasons in support of claim nos. 1 and 4B and after receipt of the reasons from the Arbitral Tribunal proceed with the hearing and disposal of objections.
15. Delhi High Court in the case of Union of India vs Jain Steel Industries (supra) inter alia held that the scope of a court hearing objections under Section 34 is limited and an award can only be interfered with if the same is illegal [Section 28(1)(a)] or against the contractual provisions [Section 28(3)] or perverse. This is the law as per the judgment of the Supreme Court in the case of O.N.G.C. vs Saw Pipes Ltd., 2003 (5) SCC 705. Courts hearing objections under Section 34 of the Act do not sit as an appellate court to substitute its own view for that of the arbitrator once arbitrator has taken one possible and plausible view. If the scope of hearing objections under Section 34 is limited then the scope of an appeal against the judgment hearing the objections has to be further limited.
16. Supreme Court in the case of NTPC Ltd vs Deconar Services (supra) appreciated that the Arbitrator in the said case had constructed the present contract, and the fixed price clause in the same manner. This construction was on the basis of the evidence on record and the submissions of the Counsel before OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 16 of 27 him. The Arbitrator had carefully delineated the period of delay attributable to the appellant, and had granted the claim of the respondent only to that limited extent.
17. Delhi High Court in the case of Prestress Wire Industries vs Uppal Builders Pvt Ltd. (supra) inter alia held that:-
"11. Clause 25 though say the escalation of price would not be entertained but the learned arbitrator rightly held such escalation of course was limited to the period of contract and not beyond it. Since the work extended over beyond the period of contract the claimant was certainly entitled for escalation of price of the work executed as per the tender items. The work executed as extra was already based on market rates and did call for escalation. Such details, as submitted, were duly certified by the architect and per whole sale price index the amount of escalation was worked to 9,94,370/-. The learned arbitrator rightly held the time though was an essence but as the contract was spilled over to further 12 months, the essence part lost its importance. The bills of the work were duly certified by the architect of the petitioner taking into consideration the wholesale price index."
18. Calcutta High Court in the case of West Bengal Housing Board vs The Civcon Construction Pvt. Ltd. (supra) inter alia held that if the Court finds that the award is bereft of reasons or is so unfair and unreasonable that it shocks the conscience of the court then said award be set aside if it rests on evidence and conclusion therefrom which no reasonable person could possibly have arrived at. Judicial decisions have also reinforced that the Arbitrator is the ultimate master of the quality and quantity of evidence and unless the Arbitrator's approach is found to be arbitrary or capricious, a court will not reopen the facts which have been argued before the Arbitrator. Also was held that as long as the findings refer to the relevant evidence and a reasonable conclusion is drawn from such evidence, an award should be sustained even if the reasons fall short of an expected OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 17 of 27 standard of articulation in the particular language in which the award is written.
19. Supreme Court in the case of Kanchan Udyog Limited vs United Spirits Limited (supra) inter alia held that the novation of a contract could take place sub silentio, which was noticed in the case of BSNL vs BPL Mobile Cellular Ltd., (2008) 13 SCC 597 as follows:-
"45.. They might have also been held bound if they accepted the new rates or the period either expressly or sub silentio.."
20. Following are some of the terms and conditions of agreements dated 15/05/2014 and 21/08/2015 inter se parties to the lis:-
"Terms & Conditions:
The Contractor shall submit the bills to the Company along with documents of performance of Work/ measurement sheet as per contract and shall be paid on the basis of those documents.
Payment will be as per the actual quantity (area) of works measured at site.
The work will be done strictly in accordance with specifications/drawings, which must be acceptable to Ultimate International/Clients.
The rates will be valid upto the completion of this project. No escalation will be paid for the duration of the whole project.
No extra items should be executed without the prior written permission given to you by M/s Ultimate International. No payment will be made for any extra item or extra quantities of work done.
The contractor should give the proof of the salary paid to his workmen and also have made payment in respect of provident fund, ESI, or any other statutory dues."
21. Respondent/claimant through Counsel sent legal notice dated 04/05/2016 to petitioner purportedly under Section 21 of OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 18 of 27 the Act invoking the arbitration clause for the dispute detailed therein enclosing copy of final bill dated 26/04/2016. Following is the text of the final bill dated 26/04/2016, aforesaid:-
"26/4/16 M/s Ultimate International C-58, Defence Colony, New Delhi.
FINAL BILL
S.NO PARTICULARS QTY. RATE AMOUNT
1. Total covered Area. 13182=58 50/- 659129=
2. Total open Area 3772=02 25/- 94300
As Final measurement.
3. Extra work bill dated 13/04/2015 35000=
4. Laisioning work for electric meter 21/08/15 90000=
5. Extra worked for Basement 07/09/15 4500=
6. Extra worked for Second Floor 07/09/15 4500=
7. Extra worked for First Floor 07/09/15 12000=
8. Extra worked for Ground Floor 07/09/15 12000=
9. Earthling worked 21/12/15 62240=
10. Extra worked CDT 6 Doorphone
Camera leasing of Generator Control
Wire 28/1/2016 29990=
11. Alignment of Projection cutting list. 3000=
12. Bath Room and servant quarter point shifting 11000=
13. Third floor conference room point shifting. 2500=
___________
1020159=00
Less Adv. -363000=00
___________
Balance Total Amount 657759=00
____________"
22. On directions parties/Counsel had placed before this Court OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 19 of 27 the copy of the Arbitration Petition no. 505/2016 filed before Delhi High Court. Prayer made therein was for appointment of Arbitrator in terms of aforesaid notice dated 04/05/2016 of the claimant/ respondent. With aforesaid notice dated 04/05/2016 of claimant/ respondent was the aforesaid copy of final bill of balance amount Rs.6,57,759/-. In aforesaid petition Delhi High Court passed order dated 09/01/2017 referring the dispute inter se parties for arbitration whereas in para 1 of said order there was mention of disputes having arisen between the parties in relation to the agreement dated 15/05/2014. In order dated 27/10/2018 and 27/11/2018 Ld. Sole Arbitrator gave the finding that subsequent agreements after first agreement dated 15/05/2014 were not of an independent character, so as not to be subject to the arbitration clause contained in agreement dated 15/05/2014. Aforesaid notice under Section 21 of the Act dated 04/05/2016 embodies averments, demands and claims raised not only on first agreement dated 15/05/2014 but subsequent additional work orders dated 21/08/2015 as well. Aforesaid legal notice formed basis of the aforesaid petition under Section 11 of the Act. The interpretation of Ld. Sole Arbitrator of the disputes inter se parties beyond agreement dated 15/05/2014 and including the second and third agreements dated 21/08/2015 to be the subject matter of arbitration appears to be plausible view and it cannot be accordingly said that the arbitral award dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration or it contains decisions on matters beyond the scope of the submission to arbitration. Afore elicited claim of amount of Rs 6,57,759/- in final bill dated 26/04/2016 formed subject matter of the aforesaid legal notice dated OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 20 of 27 04/05/2016 as well as filed petition under Section 11 of the Act by the claimant/ respondent as well as the filed Statement of Claims before Ld. Sole Arbitrator. In this fact of the matter, I am not in agreement with the contention raised by Ld. Counsel for petitioner that the arbitral award dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contained decisions on matters beyond the scope of the submission to arbitration.
23. Impugned arbitral award reads as follows:-
"Arbitration Award DAC/1521/01-17 In the matter of:
Tarsem Singh versus Ultimate Internation Pvt. Ltd.
Issues were framed in this case in the ages-old standard manner of framing of issues despite efforts of the tribunal to carry out a proceeding of the nature of first hearing in conformity with Rule 1(5) of the CPC. (mutatis mutandis). The claimant filed his affidavit of evidence. The Respondents' ld. counsels carried out cross-examination.
The defendant's ld. counsel on 03.02.2019 in cross- examination of the claimant asked him one question which if answered in the negative could have the effect of fully rounding out the claimant's case even if it was incomplete or unviable on facts set up in the statement of claims. The claimant answered the question to his full advantage. The material question and the respondent's answer thereto were these.
Q.1 I put it to you that you had failed to adhere to the terms and conditions of the agreements.
A. It is wrong to suggest.
This happened when by preceding questions and claimant's answer thereto there was hardly any doubt left in reaching the conclusion that the claimant had substantially proved a (or his) case/cause of action against the respondent. Not even a single answer of the claimant or combination of the claimant's answers was capable of causing any damage to the claimant's apparent case as set up in the statement of claims. The damage done to the OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 21 of 27 defendant's defence by cross-examination even when seen apart from the preceding or following materials) was so manifest and palpable. For final findings on the issues in view of the foregoing scenario:
1. The Issue No. 1 turned out to be superfluous and thus ceased to be one.
2. Issue No. 2 was decided whereupon trial on others of them commenced.
3. Issue No. 3 is answered in favour of the claimant and against the respondent.
4. Issue No. 4 is decided in favour of the claimant and against the respondent.
5. Issue No. 5 is decided in favour of the claimant and against the respondent. The bill dated 26/04/2016 was a proper and final bill as per work order/agreement.
6. Issue No. 6 is decided in favour of the claimant and against the respondent. The bill dated 26.04.2016 was not exaggerated as per agreement/contracts.
7. Issue No. 7 is decided in favour of the claimant and against the respondent. The claimant did not fail to adhere to the terms of the agreements. He did not leave the work in question incomplete. Hence rest of the issue at hand becomes meaningless.
8. In view of the decision on foregoing issues, Issue No. 8 becomes meaningless.
9. Decision on this issue becomes meaningless. In this scenario and on the issue of relief, I direct the respondent to
(a) pay the claimant a sum of Rs.20,000/- in lieu return of tools and equipment of the claimant.
(b) pay the claimant a sum of Rs.657,159/- along with interest @ 12% per annum until of date of action.
(c) pay the claimant no-proof costs of only Rs.50,000/-
inclusive of costs of issuance of notice as contained in clause (b) of the claimant's prayer.
Parties to make up deficiency, if any, within ten days of being informed of the award.
Sd/-
D P Kaushik Sole Arbitrator Delhi Dated: this 21st day of August 2019"
24. As afore elicited the rates of the works in agreement dated 15/05/2014 for covered area were to be @ 30/- per sq. ft. for 10000 sq. ft. (approx.) and Rs.15/- sq. ft. each for terrace and OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 22 of 27 open areas 2000 sq. ft. approx. ; driveway areas 500 sq. ft. and balcony areas 500 sq. ft. approx. After examination of respondent/claimant in evidence in great detail before Ld. Sole Arbitrator including lengthy cross examination by Ld. Counsel for petitioner/non claimant; the impugned arbitral award finds no mention of any reasoning for awarding the claimed sum, aforesaid with respect to (i) total covered area 13182.58 sq.ft. @ Rs. 50 per sq. ft. and (ii) total open area 3772.02 sq. ft @ 25/- per sq. ft, whereas the contractual rate inter se parties was Rs. 30/- per sq. ft. for covered area and Rs.15/- sq. ft. for open areas whereas also the covered area stated there in contract was 10000 sq. ft.(approx) and terrace and open areas were 2000 sq. ft approx. The impugned award mentions no reasoning for passing the impugned award with respect to claimed amount for covered area, open areas in excess to what was agreed in agreement between the parties, as aforesaid and on rates in excess to what were agreed inter se parties, as aforesaid.
25. This is not the case where Ld. Arbitrator has carefully delineated on the basis of evidence on record and submissions of the Counsel before him to adjudicate for payable amount in excess of area in excess of rates agreed inter se parties vide agreements. Findings of Ld. Sole Arbitrator do not refer to relevant evidence nor depict reasonable conclusion drawn from such evidence to sustain the award. This is not a case where reasons fall short of an expected standard of articulation in the particular language in which the award is written. This is also not a case where the novation of a contract could take place sub silentio nor parties were bound for having accepted the new rates OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 23 of 27 or the excess areas either expressly or sub silentio. Precedents relied upon by Ld. Counsel for respondent cannot come to the aid of respondent for dismissing the present petition as facts and circumstances laid in relied precedents are different and distinguishable to the facts and circumstances of the case in hand. In this case respondent was personally served with the notice of the petition on 10/01/2020 for the next date of hearing 17/01/2020. Even on 17/01/2020 respondent appeared in person in the Court. Not one but several opportunities were afforded to respondent for filing the reply to the petition but no reply to the petition was filed by respondent. Of late on 29/01/2021 an application under Section 34(4) of the Act was filed on behalf of respondent with the prayer to defer the present proceedings in order to provide an opportunity to Arbitral Tribunal to give a reasoned award. It is the submissions of Ld. Counsel for petitioner that even the copy of said application was never provided to petitioner or Counsel. As aforesaid application was filed more than one year later to service of notice and copy of petition on respondent. It was argued by Ld. Counsel for petitioner that in the case in hand it is not only the case that award lacks reasoning, is unintelligible but also that Arbitral Tribunal while making an award traveled beyond the terms of contract per contra to Section 28(3) of the Act and no case is made out even under Section 34(4) of the Act. It is also fact of the matter that impugned arbitral award was passed on the last day of extended six months period for passing/making an award later to completion of statutory twelve months period in making/passing the award by Ld. Sole Arbitrator. It is also the case of petitioner that for pronouncing the award, petitioner was OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 24 of 27 not put to notice nor Ld. Sole Arbitrator provided the signed copy of impugned award to petitioner whereas from DIAC, as aforesaid, initially photocopy and then after applying, certified copy of arbitral award was received by petitioner.
26. In arbitral proceedings dated 16/01/2019 following issues were framed by Ld. Sole Arbitrator:-
"1. Whether the Claimant had a valid electrical licence at the time of undertaking of the work of the Respondent? (OPC)
2. Whether the Claimant has not invoked the arbitration clause under agreement dated 21.08.2015, therefore, there is no reference for the dispute under agreement dated 21.08.2015? OPR
3. Whether the Claimant has locus standi to file/institute the present statement of claim? (OPC)
4. Whether the extra work done by the Claimant it out of the purview of the arbitrable disputes? OPR
5. Whether the final bill dated 26.04.2016 of the Claimant is not a proper final bill as per work order/agreement? OPR
6. Whether the final bill dated 26.04.2016 of the claimant is exaggerated as per agreements/contracts? OPR
7. Whether the Claimant had failed to adhere the terms of the agreements and he had left the work incomplete, which the Respondent company got completed by engaging another contractor at the risk and cost of the Claimant as per agreements and whether such situation/eventuality was in the contemplation of the parties? OPR
8. Whether the Respondent company suffered any monetary loss due to delay of the work and non-performance of the contract by the Claimant as per agreements? OPR
9. Whether the claimant was under no obligation to provide the service tax challans to the Respondent? OPC
10. Relief No other issue arises or pressed."
27. Bare perusal of award reproduced herein above reveals (i) it is contrary to terms of contract, as elicited in detail in preceding paras with respect to the awarded sum for areas in excess of contract as well as rates in excess of contract paras,; (ii) the findings in the impugned award are based on no evidence; (iii) the impugned award lacks appreciation of evidence and material OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 25 of 27 in the form of documents put before Ld. Sole Arbitrator; (iv) vital evidence has been ignored by Ld. Sole Arbitrator; (v) evidence led before Ld. Sole Arbitrator and documents placed before Ld. Sole Arbitrator have not been considered at all while returning the issue wise findings by Ld. Sole Arbitrator, elicited above. In the fact of the matter, no case is made out by claimant/respondent under Section 34(4) of the Act for adjourning the proceedings further, having filed aforesaid application belatedly after more than one year of service notice of petition and having chosen not to file any reply to petition despite grant of several opportunities. Also impugned award is contrary to the terms of contract with respect to the awarded sum for areas in excess of contract as well as rates in excess of contract. It is not the sole case of the impugned award lacking reasons. It is also the case where impugned award was passed by Ld. Sole Arbitrator beyond the terms of the contract. Afore said final bill dated 26/04/2016 was not supported by documents of performance of work/ measurement sheet or prior written permission of petitioner for execution of extra items or any reasons/evidence for escalation in agreed price nor proof was submitted in respect of Provident Fund, ESI or other statutory dues paid to workmen by respondent/claimant/contractor in terms of the contract, elicited herein above. Oblivious to the elicited terms of the contract, the impugned award accordingly is beyond the terms of the contract. There is no case made out for keeping the matter further pending for providing Arbitrator opportunity to give reasons for impugned award when Ld. Sole Arbitrator in the fact of matter simply chose last day of extended six months period after expiry of statutory twelve months period to pass such an award. The OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 26 of 27 impugned award ex-facie is per contra to the terms and conditions of contract, whereas Ld. Sole Arbitrator cannot rewrite the contract between the parties nor can create a new contract between the parties. The impugned arbitral award is liable to be set aside also on the ground of insufficiency and inadequacy of reasoning being unintelligible and therefore unsustainable.
28. In view of foregoing discussions, the impugned award is set aside. Parties to this lis have all their rights and remedies as available in law including under The Act including under Section 43 of The Act and may take recourse to appropriate remedy permissible in law.
29. The parties are left to bear their own costs.
30. File be consigned to record room.
Digitally signed by GURVINDER PAL GURVINDER SINGH
PAL SINGH Date: 2021.10.06
12:42:16 +0530
ANNOUNCED IN (GURVINDER PAL SINGH)
OPEN COURT District Judge (Commercial Court)-02
th
On 06 October, 2021. Patiala House Court, New Delhi.
(DK) OMP (COMM.) No. 207/2019 Ultimate International Pvt. Ltd. vs Tarsem Singh Page 27 of 27