Delhi District Court
M/S Mvl Credits Housing And Leasing Ltd vs Agv Alfab Limited on 22 February, 2021
Through Video Conferencing via Cisco Webex
Link :https://delhidistrictcourts.webex.com/meet/ddc.vc.south12
IN THE COURT OF DISTRICT JUDGE (COMMERCIAL COURT-2)
SOUTH DISTRICT, SAKET COURTS: NEW DELHI
CS (COMM) 6/19
M/s MVL Credits Housing and Leasing Ltd.
F-79/18, Sainik Farms, New Delhi-110062 ..... Petitioner
Versus
AGV Alfab Limited
A-203, Vikas Tower,
AEZ PVR Complex, Vikaspuri,
New Delhi-110018 ..... Respondent
Date of institution : 28.01.2019
Conclusion of arguments : 22.02.2021
Date of judgment : 22.02.2021
JUDGMENT
1. This is a petition U/s 34 of Arbitration & Conciliation Act, 1996 (hereinafter referred to as "A&C Act"), filed by the petitioner i.e. M/s MVL Credits Housing and Leasing Ltd. for setting aside arbitral award dated 29.09.2018 passed by Justice P. K. Bahri (Retd.), Ld Sole Arbitrator.
BACKGROUND FACTS:
2. In brief, case of the petitioner is that petitioner approached the claimant/respondent for executing a project to develop an industrial building named MVL-1 Park, owned by the respondent at village Saloka, Gurgaon, Haryana. For the purposes of the said projects, parties signed and executed a contract dated 15.09.2009 agreeing upon the general terms and conditions of the contract. It is stated that cost of work was valued at Rs.2,70,56,493/-
and mobilization advance payment amounting to Rs.54,98,300/- was paid to MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 1 the respondent upon furnishing of Bank Guarantee of equivalent amount. It is stated that the contract works were to be completed within three months of the signing of the contract i.e. by 21.09.2009 and in case of delay in executing the work caused by the respondent/claimant, it could be levied liquidated damages to the extent of 5% of the contract value. During the executing of the work, as per the terms of the contract, respondent raised various invoices and received payment of Rs.1,77,93,535/-. Respondent allegedly raised a pre-final bill which was stated to be certified by the engineer of the respondent, which fact has been disputed by the petitioner.
3. According to petitioner, the work performed by the respondent was defective and caused several financial losses to the petitioner as it could not take possession of the building. It is contended that the claimant on account of its failure to abide by clause 1.5 (a) of GCC subjected the petitioner to loss of rent as well as payment of interest to bankers from whom the petitioner had raised finance to complete the work. Petitioner has stated that petitioner sent several letters dated 05.01.2010; 20.01.2010 and 09.09.2010 to the respondent in which petitioner pointed out the abnormal delays, the defects that the works suffered from as well as the losses they were suffering due to the delay in completion of work by the respondent. It is stated that even after reminder dated 09.09.2010, the respondent did not complete the work and the petitioner vide letters dated 01.02.2011 and 15.02.2011 informed the respondent in relation to invocation of Bank Guarantee to the tune of Rs.54,98,300/-. Despite the said letters written by petitioner to the respondent, the work was not finished or completed by the respondent therefore, the petitioner invoked the said bank guarantee and informed to the respondent vide letter dated 15.02.2011, but the respondent did not take any action against the invocation of the bank guarantee, admitting their gross failure to complete the project as per the specifications of the contract and also for the delay on their part.
MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 2
4. It is further the case of the petitioner that petitioner sent e-mails to the respondent regarding some of the defects in the works and the same were acknowledged by the respondent in its replies. It is stated that respondent itself placed on record several e-mails which clearly show failure on part of the respondent to complete the work within time. It is stated that respondent neither completed the project nor removed the defects which were being pointed out to them from time to time and kept on delaying the project and failed to remove the defects, used substandard material, unskilled labour etc.
5. It is also matter of record that petitioner had made certain payments to the claimant i.e. Rs.5,00,000/- on 15.02.2012, Rs.4,64,000/- each on 23rd April, 22nd May, 2012 and Rs.1,10,362/- on 30.06.2012. The petitioner had been retaining 5% amount of invoice as retention money to be released to the claimant on the expiry of defect liability period of one year after completion of work which amounts to Rs.16,53,556/-. It appears that for a period of about one year since May-June, 2012 till May, 2013 no correspondence had been exchanged or placed on record and brought to the notice of this court.
6. On 14.05.2013, petitioner wrote a mail to the respondent pointing out some of the defects in the work being done alongwith photographs of the site. It is stated that on receipt of the said mail, respondent wrote a mail dated 15.05.2013 and admitted the defects which were pointed out by the petitioner. Thereafter, the petitioner wrote a mail dated 16.05.2013 to the respondent bringing out the deficiencies in the work and delay alongwith "snag list" which was also attached. On account of the delay in completing the work, which resulted in non-availability of the said building or premises to the petitioner for a period of two years, the petitioner could not rent out and taking into account the total area of the building as 90822 Sq. Ft. and rent at the rate of Rs.56/- per Sq. ft per month and the petitioner suffered a loss of Rs.12.20 crores. It is stated that petitioner had to pay interest and MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 3 installments on the loan taken by bankers or financial institutions and suffered huge burden of interest for said period of two years by which the project was delayed by the respondent. It is stated that apart from the above said amount, the respondent is also liable for other charges such as providing and fixing of fire seal, damage of wood work carpet etc due to leakage at various places, sealant filing at various places, replacement of defective ACP, broken glasses at various places, liquidated damages as per general agreement Clause No. 1.5 (b) due to delay in work.
7. It is further the case of petitioner that apart from suffering the aforementioned loses, petitioner incurred losses on account of delay and defective work done by the respondent i.e. a) Providing and fixing of fire seal @ Rs.300 Sq ft for 5000 Sq ft = Rs.15 Lakhs; b) Damage of wood work, carpet etc due to leakage at various places approx. = Rs.30 Lakhs; c) Replacement of glasses with frames and doors springs estimated = Rs.5 lakhs; d) Sealant filing at various places + Rs.5,50 Lakhs; e) Replacement of defective ACP 200 Sq. ft @ Rs.500 Sq. ft = Rs.1.00 lakh; f) Broken glasses at various places 45 sq. ft @ Rs.6,000 per sq. ft = Rs.2.70 lakhs and g) Liquidated damages as per general agreement Cl. No. 1.5 (b) due to delay in work @ 5% of the contract value of Rs.2,74,91,500.00 = Rs.13,74,575/-.
8. It is stated that the respondent approached Hon'ble High Court of Delhi with the winding up petition raising claims on the petitioner which was never due as the work was neither completed nor the work was carried out in accordance with the agreed terms and conditions and in fact the work was defective and substandard. It is stated that vide order dated 12.07.2017, Hon'ble High Court referred the parties to arbitration and appointed Ld. Sole Arbitrator to adjudicate upon all the disputes between the parties. It is stated that respondent filed its claim petition and the petitioner filed its reply and counter claim before Ld. Arbitrator, who vide order dated 29.09.2018, passed the impugned Award whereby rejecting the reply and documents of the petitioner and directing the petitioner to pay to the claimant/respondent MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 4 Rs.89,14,152/- with interest @ 9% per annum w.e.f. 01.07.2013 till the date of award within three months and thereafter @ 12% per annum. Aggrieved with the aforesaid award, petitioner preferred the present petition U/s 34 of Arbitration and Conciliation Act, 1996 which was contested by the respondent by filing reply.
9. This court has heard the submissions advanced by Shri Sameer Abhyankar, Ld. counsel, appearing for the petitioner, and Shri Karan Sharma, Ld. counsel appearing for the respondent.
SUBMISSIONS ADVANCED ON BEHALF OF THE PETITIONER
10. Shri Sameer Abhyankar and Shri Varun Tandon, Ld. counsels for the petitioner has submitted that impugned Award is highly perverse and has been passed without due consideration of all evidences placed on record by the petitioner. It is further submitted that the impugned Award has not provided any cogent reason(s) for accepting the claim(s) of the respondent- claimant and has arrived to a conclusion without leading evidence. It is further submitted that the Ld. Arbitrator failed to take note that the respondent-claimant's entire case was relied upon the alleged Pre-Final Bill dated 30.01.2012, and the respondent-claimant failed to prove the authenticity of the same.
11. It is submitted that the Ld. Arbitrator put the onus of proving the illegality of such document which is against the principles of natural justice and that the mere fact that the said Pre-Final Bill was certified neither by the Engineer-in-charge nor was even sent to the applicant, itself substantiates that the said Pre-Final Bill was fabricated. Moreover, as per Clause 1.27 of the Contract, such bill could have been sent only after the issuance of Completion Certificate by the Engineer-in-charge and the applicant. Ld. counsel has further submitted that the Ld. Arbitrator failed to appreciate that the alleged Pre-Final Bill was issued by the respondent-claimant without obtaining such Completion Certificate.
MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 5
12. Ld. counsel has further submitted that the respondent-claimant has also not submitted any proof(s) with respect to the alleged additional work done by them and the Ld. Arbitrator has acknowledged the same and that the Ld. Arbitrator has completely ignored the gross delay on part of the Respondent-Claimant, i.e. delivery of the Site after 2 years. It is stated that the alleged Pre-Final Bill itself is dated 30.01.2012, i.e. 2 years from the date of completion which was 20.12.2009. Further, the applicant is also eligible to receive liquidated damages as per Cl. 1.5 (b) and Cl. 6.11 of the Contract wherein it is clearly stated that in case of delay attributable to the contractor, i.e. the respondent, the applicant was to charge liquidated damages @ 5% of the contract value. It is submitted that even after there being a gross delay of more than 2 years in completion of the work, the Ld. Arbitrator still disregarded such contention of the applicant.
13. Ld. counsel has further argued that the Ld. Arbitrator further failed to take note of the face that the respondent-claimant, at the time of signing the Contract, had informed the Applicant that they were establishing a new factory in Himachal Pradesh, and all Work at the Site would be executed through such new factory. It is stated that this fact was brought before the Ld. Arbitrator that the new factory was established at a much later stage and that the respondent-claimant must be questioned for such lacking. It is submitted that the Ld. Arbitrator directed that such issue may be raised at the time of evidence, but no evidence was led by the Ld. Arbitrator, hence, the respondent-claimant evaded this issue.
14. It is submitted that since the Ld. Arbitrator had not lead evidence, the Applicant filed Interrogatories under Order XI, Rule 1 of the Code of Civil Procedure, 1908. It is further submitted that the Ld. Arbitrator, influenced by the objections raised by the Respondent-Claimant, rejected such interrogatories solely on the ground that the same were filed at a belated stage, whereas the Hon'ble Apex Court has stated that decision of interference is upon the decision of the Arbitral Tribunal. Section 30 of the MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 6 CPC also states that the Court may, at any time, order for production of documents, hence the Ld. Arbitrator was not barred from accepting the interrogatories. Ld. counsel has referred a judgment titled, Tripura Gramin Bank v. Bijan Bhattacharjee [1998 (1) GLT 347] wherein it is held that interrogatories ought to be disposed of on merit and not be rejected merely on the ground that the same were filed at a belated stage. Ld. counsel has submitted that the Hon'ble High Court of Orissa too in Bhakta Charan Mallik vs. Nataorar Mallik and Ors. [AIR 1991 Ori 319] has held:
"As a general rule, interrogatories are to be allowed whenever the answer to them will serve either to maintain the case of the party administering them or to destroy the case of the adversary. The power to serve interrogatories as it appears is not meant to be confined within narrow technical limits. It should be used liberally whenever it can shorten the litigation and serve the interest of justice."
15. Ld. counsel for the petitioner has submitted that the Ld. Arbitrator has unjustifiably favoured the respondent-claimant. It is submitted that the impugned Award is based on mere assumptions and all quantifications of the Respondent-Claimant's claim was made without due consideration of evidence. It is further submitted that the Ld. Arbitrator has further ignored the fact that the final delivered Site had multiple defects such as rusting, leakage, etc. and appropriate photographs of the said defects were also placed on record by the Applicant. Such evidence was also rejected by the Ld. Arbitrator. It is further stated that the Ld. Arbitrator even after submission of such clear evidence of non-completion, came to the conclusion that the Work stood performed before the submission of the Final Bill.
16. Ld. counsel has further submitted that the Ld. Arbitrator wrongly stated that the applicant remained silent with respect to payments, and has yet again ignored all e-mails sent by the applicant. It is submitted that the MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 7 Impugned Award is also perverse for the reason that the Ld. Arbitrator while specifically acknowledging the fact that on 01.09.2018, the respondent- claimant was directed to file its response to the Interrogatories submitted by the applicant, nonetheless proceeded to effectively review his own order by observing that the said Interrogatories could not be entertained at such a belated stage. It is further submitted that the Ld. Arbitrator has further misread the terms of the Contract. In clause 1.8 of the Contract, it is stated that the Defects Liability Period shall be applicable for 12 (twelve) months after completion of the Work as per clause 1.7 and in accordance with the completion time periods under clause 1.5.
17. It is submitted that the Ld. Arbitrator has ignored Cl. 1.7 wherein it has been clearly stated that a Certificate of Completion issued from the Engineer-in-charge is a mandate and without such Certificate the Work stood incomplete. In fact, the applicant also never issued any Certificate of Completion, and the Ld. Arbitrator ignored such fact as well. It is submitted that the Ld. Arbitrator failed to observe that the Defects Liability Period did not commence in the first place, as no such Certificate was issued either by the Engineer-in-charge or by the Applicant. It is stated that the Impugned Award deserves to be interfered with by this Hon'ble Court, as per the observations of the Hon'ble Apex Court in Dyna Technologies Pvt. Ltd. vs. Crompton Greaves Ltd. [2020 (1) ArbLR1 (SC)]:
"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."
18. Ld. counsel for the petitioner has argued that the Impugned Award is also contrary to the fundamental policy of Indian Law viz. that the MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 8 burden of proving a fact lies on the party alleging the same. It is submitted that it was the claim of the Respondent-Claimant that the defects pointed out by the Applicant had been duly cleared by the Respondent-Claimant in the Arbitration and that this fact was ought to have been proved by the Respondent-Claimant itself. It is submitted that the Ld. Arbitrator has shifted the burden to prove this fact onto the Applicant by observing that the Applicant has not led any evidence to prove that such defects continued to exist. It is further submitted that the Impugned Award has also been passed in violation of the rights of the Applicant under the principles of natural justice since the Applicant was not given an appropriate opportunity to lead evidence when the Ld. Arbitrator permitted the Respondent-Claimant to choose not to respond to the Interrogatories in spite of a specific direction of the Ld. Arbitrator to that effect. The Hon'ble Delhi High Court in A.K. Aggarwal vs. Shanti Devi [1996 RLR 60] has held:
"A party has a right to interrogate with a view to obtaining an admission from his opponent of everything which is material and relevant to the issue raised on the pleadings. The object is to obtain an admission from the opponent which will make the burden of proof easier than it otherwise would have been."
19. Ld. counsel for the petitioner has submitted that the Impugned Award is also contrary to the fundamental policy of Indian Law, viz. that the power of review cannot exist unless conferred by a statute. It is stated that the Ld. Arbitrator by allowing the Respondent-Claimant to refuse to respond to the Interrogatories has effectively reviewed his own direction vide Order dated 01.09.2018. No such power was available to the Ld. Arbitrator under the said Contract. It is submitted that the Interrogatories submitted by the Applicant were especially essential to be responded to by the respondent- claimant in view of the specific findings of the Ld. Arbitrator that the Pre-Final MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 9 Bill dated 30.01.2012 was certified and signed by the Project Manager of the Applicant. It is stated that the said finding was rendered in the absence of any stamp of the Applicant on the document, i.e. the Pre-Final Bill. It is submitted that specific questions regarding the Pre Final Bill were therefore asked in the Interrogatories, Whether the alleged Pre-Final Bill bears any stamp of the Respondent (i.e. the Applicant, MVL Credits); How was Pre-Final Bill served to the Respondent (i.e. the Applicant, MVL Credits)?
20. Ld. counsel for the petitioner has argued that the Ld. Arbitrator, once having held that the aforementioned questions were required to be answered by the Respondent-Claimant ought to have drawn an adverse inference against the Respondent-Claimant for their refusal to answer the question and that this is in conflict with the most basic notions of morality and justice and therefore the public policy of India.
21. Ld. counsel for the petitioner has relied upon following judgments :-
Damodar Valley Corporation vs Central concrete & Allied Products Ltd. 2007 (3) Arb. LR 531 (Cal) (DB) In Transmission Corporation of A. P. Ltd and Anr. Vs Galada Power and Telecommunication Ltd. & Ors. 2007 (1) Arb. LR 447 (AP) (DB) - AVI Coach Builders and Ors. Vs UOI 2009 (1) Arb LR 254 (Del) State of UP and ors. Vs Combined Chemicals company (P) Ltd. (2011) 2 SCC 151; K.V. George vs The Secretary to Govt., Water and Power dept.
Trivandrum and AnR. AIR 1990 SC 53; Anglo Properties & Traders Pvt Ltd. & Ors. Vs The Controller General of Patents, Designs & Trademarks & Anr. (2010) 2 Cal LT 469 (HC); Chhogmal Rawatmal vs Sankalchand G. Shah 53 CWN 828; Union of India vs V. Pundaikakshudu (2003) 8 SCC 168; Som Datt Builders Ltd. Vs State of Kerala (2009) 10 SCC 259; Sardar Gurbaksh Singh vs Gurdial Singh & Anr. AIR 1927 PC 230; Kirpa Singh vs Ajaipal Singh & anr. AIR 1930 Lahore 1 ; Martand Pardharinath chaudhari vs Radhabahi krishnarao Deshmukh AIR 1931 Bombay 97.
MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 10 SUBMISSIONS ADVANCED ON BEHALF OF THE RESPONDENT
22. Ld. Counsel for respondent submitted that the present petition is filed by the Petitioner under section 34 of the Arbitration and Conciliation Act, 1996, inter alia against the award dated 29.08.2018 passed by the Learned Sole Arbitrator who had appointed by the Hon'ble High Court of Delhi vide its order dated 12.07.2017. It is submitted by Ld. counsel for respondent submitted that the present petition filed by the petitioner is not maintainable as the Arbitral award was determined by the Sole arbitrator on the merits and after due consideration of all aspects concerning the dispute and present award is a reasoned award. Ld. counsel for respondent submitted that the present petition filed by the petitioner U/S 34 of the Arbitration and Conciliation Act, 1996 is not maintainable as an arbitral award may be set aside by the court only if the Grounds mentioned in Section 34 of the Act and none of them have been established in the present case of the Applicant. Ld. counsel for respondent submitted that at this juncture it is pertinent to mention here that the Applicant withdrew all its counter claims which were filed before the arbitrator claiming damages on 07.08.2018 and the same has not been disputed by the applicant in the present proceedings.
23. Ld. counsel for respondent submitted that the applicant claimed that the award is perverse and passed without due consideration of all evidences on record. In this regard it submitted that the Ld. Arbitrator gave equal opportunities to both the parties to lead the evidence but none of the parties filed oral evidences and chose to rely on documents on record. It is further submitted that none of the parties filed the admission denial affidavits documents of the opposite disputing the site party and proceeded with the arbitration for arguments. It is submitted that Ld. counsel for petitioner had argued the matter for 3 dates and never sought opportunity either to lead oral evidence neither went in appeal/ nor filed any application seeking to file oral evidence. The effect of Non filing of affidavits of admission and denial has been decided by Hon'ble High court of Delhi In "Unileen Beheer B.V. v. Balaji MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 11 Action Buildwell, CS(COMM) 1683/2016 & CC(COMM) 38/2019 wherein, the Hon'ble High Court held that "in event of written statement being filed without affidavit of admission and denial of documents, not only shall the written statement be not taken on record but the documents filed by the Plaintiff shall also be deemed to be admitted and on the basis of which admission the court shall be entitled to proceed under order VIII Rule 10 of CPC".
24. It is submitted that if the un-liquidated damages have not been awarded for want of pleadings or any other reason, the court is not supposed to reopen the matter and decide that question for reasonableness of reasons is beyond the limits of the jurisdiction of the courts. Ld. counsel placed reliance on Roof Rites (P) Ltd. V. Union Of India (1998 ARB LR 466(DEL).Ld. counsel for respondent submitted that Ld. Arbitrator has also mentioned in the award that since no admission denial has been carried out the documents filed by the Parties can be relied upon. Hence, there was no flaw in proceeding on the claim of pre final bill. Even during the present appeal the counsel for applicant agreed to the signatures on pre final bill, which were of Mr. Rishipal, employee of the petitioner.
25. Ld. counsel further submitted that the reasoning given by the arbitrator in the award cannot be gone into by the courts. Simply because on interpretation of a contract the view of the court might have been different from the arbitrator is no ground to set aside the award. He has relied upon case reported as R.S. Builders V. D.D.A. AIR 1995 DEL 10. Ld. counsel for respondent contended that the counsel for claimant has relied on M/S Dyna Technologies Pvt. Ltd. v/s M/s Crompton Greaves Ltd. passed on 18 th December, 2019 stating the award needs to be set aside since no reasons were given. Whereas the case stated above was a case wherein the Hon'ble Supreme court has held in Para 38 that "In case of absence of reasoning the utility has been provided under of Section 34 (4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning delicious. wine then only it can be challenged under the provisions of Section 34 of the MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 12 Arbitration Act. The power vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases of the arbitral where the arbitral award does not provide any reasoning or the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced".
26. It is submitted that the same is not maintainable in the present case since the petitioner has not prayed for remitting the case back to the Ld. Arbitrator neither the same was pleaded in the pleadings. It has been held that in a matter on which the contract is open to two equally clause able interpretations, it is legitimate for the arbitrator to accept the one or the other of the available interpretation and even if the court may think that the other view is preferable, court will not and should not interfere . Ld. counsel has relied upon a case in the matter of Hind Builders vs UOI AIR 1990 SC 1340.
27. Ld. counsel for respondent submitted that the petitioner may further be directed to file and affidavit denying the signatures on the bill dated 30/1/2012. The petitioner denies the authenticity the claim of the additional work has already been dismissed by the Ld. Arbitrator and the same has not been pressed. It is also noteworthy to mention here that the Petitioner never appealed against the order dated 07.08.2018 of withdrawal of the counter claims and hence raising this plea at the appellate stage is not maintainable. The fact of establishing a new factory is irrelevant and not for the part of arbitral record.
28. Sh. Karan Sharma Ld. counsel for respondent argued that the question of delay was not adjudicated by the arbitrator since the counter claim of liquidated damages was withdrawn the contract mentioned the claim for maximum of 5% of contract value as liquidated damaged in case of delay, MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 13 since the same was withdrawn the question of delay was not adjudicated. In the present case the petitioner has released payments on 15.02.2012, 23.04.2012, 22.05.2012 & 30.06.2012 after the issuance of the pre final bill. The correspondence's exchanged between the parties on 14, 15 & 16.05.2013 (R-10 Colly) and also emails dated 08.05.2013 & 22.08.2013 shows that the claimant was asking for releasing of the balance payment.
29. It is further argued that from the date of the pre final bill the respondent never raised any issue with respect to the defective work until 14.05.2013 and only pointed out certain defects in the work executed on 16th May, 2013 . The same facts had been admitted by the petitioner in the reply to the counter claim in Para 3 also. It is submitted that vide email dated 22.08.2013, the respondent mentioned that your balance payment can only be considered after removing all the defects as mentioned in snag list. A builder cannot recover payment on a contract to execute work on land if he has not performed the contract, but this will not be so if he can prove that the building owner has accepted. In theory if a building owner accepts work done on his property he becomes liable to pay for it even though it is in some respects defective. Ld. counsel relied upon Hoeing vs ISAACS, [1952] 2 ALL ER 176.
30. It is submitted that in NHAI versus ITD Cementation India Ltd 2015 14 SCC 21 Hon'ble Supreme Court held that "it is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in matter of construction of contract. The construction of the contract agreement is within the jurisdiction of arbitrators. .... It is also trite that the correspondences exchanged between the parties are required to be taken into consideration for construction of a contract.
31. It is submitted that as per clause 1.7 (a) the contractor was to obtain completion certificate from engineer in-charge as soon as the works are completed as per the contract and to the entire satisfaction of engineer in- charge. In the present case the pre-final bill has been certified by Mr. Rishi MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 14 Pal who is the employee of the petitioner and also happens to be Chief engineer of the project. It is submitted that the petitioner failed to file admission denial affidavit refuting the pre final bill and hence in the terms of the judgment of Hon'ble Delhi High Court the same was deemed to be admitted.
32. It is submitted that as per clause 1.26 the payment of work done/supplies made on running account shall be made periodically and submission of the bills by contractors and will be treated as advance/ad-hoc payments and shall be adjusted in the final bill. It is submitted that the present pre-final bill was issued since the 5% retention money was withheld in every running bill and the final bill was to be issued incorporating the retention money(also referred to in clause 2.1 of the contract).
33. Ld. counsel for respondent further submitted that, An award passed under the arbitration act is not liable to be set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or deed of submission or an order made by the court such as the one under section 20 of section 34 of the act or the that the statute governing the arbitration requires that the arbitrator or an umpire should give reasons for the award. Ld. counsel argued that the position is firmly established in India. Limiting or setting aside an award solely because it IS unreasoned would mean virtually introducing a judicial amendment. Ld. counsel relied upon Raipur Development Authority vs Chokhamal Contractors Etc1989 (2) SCC 721. Ld. counsel further placed reliance upon a case in the matter of "ESSEL Sports Pvt ltd. vs Union of India & Ors., CS(OS) 1566/2007 decided on 26.08.2013.
34. It is submitted that in Para 103 of Volume 13 Halsbury's laws of England, 4th edition, it has been stated that the court of appeal will not lightly interfere with the judge's exercise of his discretion unless he acts on a wrong principle. That besides, it is well settled that interrogatories must be confined to matters which are in issue or sufficiently material at the particular stage of MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 15 the action at which they are sought to be delivered or to the relief claimed..."Ld. counsel for respondent submitted that in the present case the ld. Arbitrator has allowed the interrogatories to be served and the same was objected by the respondent and a clear adjudication to this effect has been given in the award that the interrogatories were filed at belated stage and they are not necessary for adjudication. It is argued that the very purpose of interrogatories is to know the case of opposite party at the earliest and shorten the litigation but in the present case the interrogatories were filed after final arguments and at the stage when written submissions were also filed by the claimant, which is clearly an abuse of the process of Law.
35. It is submitted that as per clause 1.26 the payment of work done/supplies made on running account shall be made periodically and submission of the bills by contractors and will be treated as advance/ad-hoc payments and shall be adjusted in the final bill. It is further submitted that present pre final bill was issued since the 5% retentio n money was withheld in every running bill and the final bill was to be issued incorporating retention money.
36. Shri Karan Sharma, Ld. counsel appearing for the respondent, has submitted the petitioner has claimed that the award is perverse and passed without due consideration of all evidence. In this regard, it is submitted that Ld. Arbitrator gave equal opportunity to both the parties to file oral evidences and also to file the affidavits of admission/denial but none of the parties availed that opportunity and proceeded with the oral arguments which lasted for more than six hearings during which the petitioner herein never challenged the order of proceedings with the arguments and neither filed any application seeking the opportunity to lead oral evidence or to file any affidavit denying the documents of the respondent.
37. Ld. Counsel for the respondent has submitted that the claim of the respondent based on the bill dated 30 th January, 2012, it is noteworthy to mention here that the petitioner never raised any issue with respect to the defective/incomplete work before 14 th May, 2013, wherein the issue with MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 16 respect to the defective work was raised for the first time in response to the e- mails dated 8th, 10th May, 2013 wherein the respondent requested the petitioner to release the payment due subsequent to the bill dated 30 th January, 2012. On 16th May, 2013, the respondent wrote an e-mail stating that "your balance payment can only be considered after removing all the defects as mentioned in the snag list".
38. Ld. Counsel for respondent submitted that Ld. Arbitrator has duly recorded in para 10 of the Award that the petitioner herein was only raising some concerns of quality of work and never disputed the correctness of bill in the e-mail exchanged between the parties. So the fact that the respondent never completed the work at site or left the site incomplete is not proved. He submitted that in case titled, Hoeing Vs. Isaacs (1952) 2 All ER 176, it has been held that a builder cannot recover payment on a contract to execute work on land if he has not performed the contract, but this will not be so if he can prove that the building owner has accepted. In theory if a building owner accepts the work done on his property, he becomes liable to pay for it even though it is in some respects defective.
39. It is further noteworthy to mention here that "it is trite that the terms of the contract can be expressed or implied. The conduct of the party would also be a relevant factor in matter of construction of contract. The construction of contract agreement is within the jurisdiction of Ld. Arbitrator. It is also trite that the correspondences exchanged between the parties are required to be taken into consideration for construction of a contract." (See Burns Standard Company Ltd. Vs. McDormat International & Pure Helium India Pvt. Ltd. Vs. ONGC, (2003) 8 SCC 593. It is submitted that in the present case in para 11 of the Award, Ld. Arbitrator has duly recorded that in e-mails dated 8th May, 2013 to 22nd August, 2013, pages 76 to 87 of the Statement of Claim show that the claimant was asking for release of balance payment and the petitioner never disputed or denied in any of the e-mail the correctness of alleged pre-final bill. In pursuance to this pre final bill, the MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 17 petitioner has released part payments on 15.02.2012; 23.04.2012; 22.05.2012 and 30.06.2012.
40. Ld. counsel for respondent submits that Ld. Arbitrator refused the interrogatories to be taken on record as the same were not relevant considering the stage at which they were filed. Ld. Arbitrator merely allowed the serving of interrogatories on the respondent and it does not imply that the same were corrected to be responded by the respondent. He submitted that Hon'ble Delhi High Court in SL Sports Pvt. Ltd. vs Union of India and others CS (OS) 1566/2007 has relied upon another judgment of Delhi High Court titled Smt. Sharda Dhir vs Ashok Kumar Makheeja and others 99 (2002) DLT that leave to deliver the interrogatories does not imply an order to answer them and any objection to answer can be taken under the rule. The Court is required to decide whether the appellant should be allowed to interrogate the other side but it is not to determine what question should the opposite party be compelled to answer and that it will not for the Court at this stage of granting leave to consider what particular questions the party interrogated should be compelled to answer. Proper time for considering that question is after the party interrogated has filed its affidavit.
41. Ld. Counsel submitted that in the present case, the interrogatory were served on 01.09.2018 and the arbitrator allowed the service of interrogatory which were objected to by the counsel for respondent vide email dated 05.09.2018 and subsequent to which another email was written by the counsel for petitioner on 07.09.2018 requesting the Ld. Arbitrator to direct the respondent to answer the interrogatory. Since such interrogatories were filed after the conclusion of oral arguments by the counsel for respondent, Ld. Arbitrator duly recorded in the award that such interrogatories were filed at the belated stage rejected the interrogatories. Reliance is placed upon Govind Narain and others VS Nagendra Nagda and others MANU/RH/0832/2017 wherein it has been held that the stage of the suit is a very significant aspect to be borne in mind while deciding an application MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 18 admitting or permitting interrogatories. The court can be a bit liberal in admitting interrogatories at initial stage but the same standards cannot be allowed at the advance stage of trial when the evidence of party has begun. Interrogatories cannot be permitted, once the evidence of the concerned party is over. Same view was also taken in Satya Devi and Kanta Rani and others (1999) 123 PLR 724.
42. In rebuttal, Ld. counsel for the petitioner submitted that this decision is wholly inapplicable to the present facts since it rests entirely on the Delhi High Court's original site Rules and the amendments made by the Commercial Courts Act to the CPC.
43. The aforesaid submissions of respondent calls for re- appreciation of evidence. It is submitted that the petitioner has not sought any re-appreciation of the evidence before the Ld. Arbitrator. In order to respond the aforementioned submissions, it is stated that even prior to pre- final bill dated 30th January, 2012, the petitioner had pointed out the defects in the work on 18th January, 2012. This can be seen from its 82 of the documents which are e-mails from the petitioner to the respondent wherein the e-mail dated 18th January, 2012 is referred to. In response to this e-mail, on 12th August, 2013, the respondent has not denied the fact of receipt of the e-mail dated 18.01.2012. (Page 83)
44. There is no reference by the respondent to the pre-final bill dated 30th January, 2012 in the e-mails dated 8.5.2013, 10.5.2013, 15.05.2013 (this e-mail from the respondent refers to a final certified bill and a payment certificate, none of which are attached), 16.05.2013. It is only for the first time on 18.05.2013 that the respondent referred to joint certification of an alleged final bill of 30.01.2012. This sequence of event makes it all the more essential for the Ld. Arbitrator too have questioned the very delivery and certificate of alleged pre-final bill, especially when in its pleadings the petitioner had denied both a certification and the receipt of the pre-final bill. Further the pre-final bill had also been denied by the petitioner in response MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 19 the legal notice as submitted herein above. The decision in Hoeing Vs. Isaacs (1952) 2 All ER 176 could be relied on by the respondent only if it was able to prove that the work had in fact been completed and yet the bill had not been cleared. The present facts in which, the completion of work as well as the submissions of bill has been contested by the petitioner are entirely different from the case in Hoeing Vs. Isaacs (1952) 2 All ER 176.
45. The contract between the parties specifically required the obtaining of a completion certificate by the respondent (Clause 1.7). In the absence of such completion certificate, the work could not be presumed to be complete. The respondent also had an opportunity to lead other evidence to show that the work had as a matter of fact been completed. This opportunity was not taken by the respondent. Therefore, there is no completion certificate in terms of clause 1.7 and there is no material on record to show that work has been completed.
46. Learned counsel for the petitioner submitted that the other decisions relied upon by the learned counsel for respondent are all cases where the Arbitrator had taken one of two plausible views on the interpretation of the contract. In such a scenario the court found that the view taken by the arbitrator could not be interfered. In the present facts, in para 10 of the Award, the Ld. Arbitrator has completely ignored the requirements of clause 1.7 as if to assume that no such clause existed between the parties. This amounts to ignorance of material terms of the contract which is perversity and would invite interference U/s 34 of A&C Act (MANU/DE/0004/2021 EFS Facilities Services (India) Pvt. Ltd. Vs. Indeen Bio Power Ltd.).
47. Insofar as the payments made by the petitioner to the respondent from February 2012 till June 2012 are concerned, there is no evidence on record by the respondent to show that the said payments were made against the alleged pre final bill dated 30.01.2012. Admittedly, there was running account between the parties and even as per "detail of billing and payment" filed by the respondent, it is the case of respondent that MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 20 payments may have been due against several RA bills. Assuming without admitting the same that the payments were made against the alleged pre final bill is not borne out from the documents of the respondents itself. No ledger has been filed by the respondent to show as to against which bills, which payments were made. Ld. counsel for petitioner submits that respondent was specifically called upon to respond to the interrogatories on 28.08.2018 and on 01.09.2018. Further it is submitted that the decisions relied upon by the respondent can only apply to the stage where the application for leave to deliver interrogatories is being considered ( referred para 1 of Satya Devi judgment& para 1 of SS Sports judgment). It is urged that this decision was already taken by Ld. Arbitrator. Subsequently, the interrogatories would have been rejected only on the grounds preferred to in Order XI Rule 7 CPC, there is no finding of Ld. Arbitrator in terms of order XI Rule 7 CPC. LEGAL STANDARD AS REGARDS SCOPE OF INTERFERENCE BY THE COURT
48. Sub-sections (1) and (2) of Section 34, as amended by the Arbitration and Conciliation (Amendment) Act, 2019, reads thus :
"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 a Court only if
- (a) the party making the application establishes on the basis of the record of arbitral tribunal that -
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 21
(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 the 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 the public policy of India. Explanation 1. - For the avoidance of any doubt, it is clarified that what 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 MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 22
(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 re-appreciation of evidence."
49. It is well settled that following are the basic principles while exercising jurisdiction U/s 34 of A&C Act :-
(i) The Arbitral tribunal is the final arbiter of the facts and the law. Ordinarily, conclusions of fact, or law, at which the arbitral tribunal arrives, are not amenable to interference under Section 34.
(ii) This principle is subject to the following exceptions :-
(a) Where the conclusion of the arbitral tribunal, whether on facts or on law is perverse, it merits interference.
Perversity, in such a case must be of such a degree that no reasonable man, conversant with the facts and the law, would arrive at such a decision.
(b) If the findings of the arbitral tribunal are contrary to the contract between the parties, the court is bound to interfere. This is, essentially, because the arbitral MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 23 tribunal draws its jurisdiction from the contract, and is a creature thereof. The arbitral tribunal, cannot, therefore, arrive at a conclusion which militates against the terms of the contract between the parties, merely to do equity, or for any other reason.
(c) Similarly, if the conclusion of the arbitral tribunal is contrary to the law laid down by the Supreme Court, or any other binding judicial precedent, the court can interfere. This is because any conclusion, by the arbitral tribunal, which is contrary to the extant law, is treated as violative of public policy, which is a well settled ground for interference with the award.
(iii) In other cases, as already noted above, ordinarily, interference with the arbitral award is to be scrupulously eschewed. Having elected to resolve their disputes by arbitration, the parties are ordinarily expected to defer to the decision of the arbitrator. Awards of arbitral tribunals cannot be likened with judgments of courts, which are susceptible to appeal. Else, the very raison d'etre of the establishment of the arbitral institution would stand defeated.
(iv) The court is not, therefore, entitled to sit in appeal over the decision of the arbitral tribunal. Neither can the court re-appreciate the evidence, which has been appreciated by the arbitral tribunal. If, however, the arbitral tribunal ignores material evidence, that would amount to "perversity", which would invite interference under Section34. If all the evidence has been examined by the arbitral tribunal, the court cannot interfere on the ground that the examination of the evidence, as MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 24 undertaken by the arbitral tribunal, is not, to its mind, satisfactory or sufficient. Nor can the court substitute its own view for the view of the arbitral tribunal, on the ground that, in its perception, the view of the court is "better" or "more appropriate".
50. The aforenoted principles pertain to the scope of interference with arbitral awards, by courts, on merits. These are apart from the other well established grounds on which the court may interfere, such as misconduct by the arbitrator, bias or prejudice or conducting of the arbitral proceedings in violation of the principles of natural justice, to refer to a few.
51. The legal position is well settled that a broad distinction has to be maintained between the decisions which are perverse and those which are not and interference by the Court under Section 34(2)(b)(ii) does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. An award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. (MMTC Ltd. vs. Vedanta Ltd., AIR 2019 SC 1168; Union of India vs. Chenab Construction Company (Regd.), 2019 SCC OnLine Del 10515 and Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India (NHAI) - (2019)15SC C 131), Parsa Kente Collieries Limited vs. Rajasthan Rajya Vidyut Utpadan Nigam Limited, AIR2019 SC 2908; Patel Engineering Ltd. Vs. North Eastern Electric Power Corporation Ltd. (NEEPCO) 2020 SCC OnLine SC 466 and Anglo America Metallurgical Coal PTY Ltd . vs MMTC Ltd. 2020 SCC OnLine SC 1030).
MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 25
52. In Ssangyong Engineering and Construction Company Limited, in paragraphs (39) and (40) Hon'ble Supreme Court reiterated paragraphs (42.2) and (42.3) of Associate Builders (supra) wherein,it was observed ''40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49, namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair- minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new groundadded under Section 34(2-A)."
53. In the present fact situation, it is useful to note the observations by Hon'ble Supreme court decision in a recent case, South East Asia Marine Vs. Oil India Limited decided on 11 May, 2020 in Civil Appeal No. 673 of 2012 wherein it was held as under :-
"12.It is a settled position that a Court can set aside the award only on the grounds as provided in the Arbitration Act as interpreted by the Courts. Recently, this Court in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. [2019 SCC Online SC 1656] laid down the scope of such interference. This Court observed as follows "26. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 26 interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated." (emphasis supplied)
13. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This Court in Dyna Technologies (supra) observed as under
"27. Moreover, umpteen number of judgments of this Court have categorically held that the Courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act." (emphasis supplied)
14. However, the question in the present case is whether the interpretation provided to the contract in the award of the Tribunal was reasonable and fair, so that the same passes the muster under Section 34 of the Arbitration Act MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 27 ..............................................
28. In this context, the interpretation of Clause 23 of the Contract by the Arbitral Tribunal, to provide a wide interpretation cannot be accepted, as the thumb rule of interpretation is that the document forming a written contract should be read as a whole and so far as possible as mutually explanatory. In the case at hand, this basic rule was ignored by the Tribunal while interpreting the clause.
29. The contract was entered into between the parties in furtherance of a tender issued by the Respondent herein. After considering the tender bids, the Appellant issued a Letter of Intent. In furtherance of the Letter of Intent, the contract (Contract No. CCO/FC/0040/95) was for drilling oil wells and auxiliary operations. It is important to note that the contract price was payable to the 'contractor' for full and proper performance of its contractual obligations. Further, Clauses 14.7 and 14.11 of the Contract states that the rates, terms and conditions were to be in force until the completion or abandonment of the last well being drilled.
30. From the aforesaid discussion, it can be said that the contract was based on a fixed rate. The party, before entering the tender process, entered the contract after mitigating the risk of such an increase. If the purpose of the tender was to limit the risks of price variations, then the interpretation placed by the Arbitral Tribunal cannot be said to be possible one, as it would completely defeat the explicit wordings and purpose of the contract. There MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 28 is no gainsaying that there will be price fluctuations which a prudent contractor would have taken into margin, while bidding in the tender. Such price fluctuations cannot be brought under Clause 23 unless specific language points to the inclusion.
31. The interpretation of the Arbitral Tribunal to expand the meaning of Clause 23 to include change in rate of HSD is not a possible interpretation of this contract, as the appellant did not introduce any evidence which proves the same.
32. The other contractual terms also suggest that the interpretation of the clause, as suggested by the Arbitral Tribunal, is perverse. For instance, Item 1 of List II (Consumables) of Exhibit C (Consolidated Statement of Equipment and Services Furnished by Contractor or Operator for the Onshore Rig Operation), indicates that fuel would be supplied by the contactor, at his expense. The existence of such a clause shows that the interpretation of the contract by the Arbitral Tribunal is not a possible interpretation of the contract."
RELEVANTPROVISION/GENERAL CONDITIONS OF CONTRACT Clause 1.7 Certificate of Completion
a) The contractor shall obtain completion certificate from the Engineer incharge as soon as the works are completed as per the contract and to the entire satisfaction of the Engineer-in-charge.
b) Immediately after completion of a part of a work or the whole work for which a separate period of completion has been mentioned in the contract, the Contractor shall give notice thereof to the owner. The work shall be completed to the entire satisfaction of the Owner. If satisfied the Owner MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 29 shall issue certificate of completion for the particular phase of work or the contract as a whole as the case may be.
c) If, however, the work is progressing slowly without any justification, the Owner at its sole discretion may allow the work to progress. The RA bills payments will be made only to the extent of the cash flow necessary for the physical completion of work. The owner reserves the right to enforce the penalty clause to be levied in these cases and at any state of construction.
d) The works shall not be considered as completed unless the Owner has certified in writing that they have been accepted and then defects liability period (as mentioned in clause 1.8) shall commence from the date of completion as certified by the Owner.
1.8 Defects Liability Period
a) Defects liability period shall be twelve months after completion of the works (as certified under clause 1.7) in accordance with the respective completion time period vide clause No. 1.5. Any defects in material or workmanship observed in the entire work during execution or work or within defect liability period shall be notified in writing by the Owner to the contractor and shall be rectified by him at his own cost within time as specified by Owner.
b) To facilitate prompt attention to the defects the contractor shall employ a team of tradesmen like Painters, Carpenters, Plumbers, Filters, glazer etc., and Labours covering all traders alongwith necessary materials and spares. A supervisor will also be available alongwith the maintenance team to take instructions from Owner. The maintenance team will be available throughout the defect liability period. The composition of the tradesmen will vary according to the nature of recurring defects noticed in the buildings.
c) In case of default the Owner may employ any other person to rectify or make good such defects. All expenses consequent thereon or MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 30 incidental there shall be borne by the Contractor and shall be recoverable from him by the Owner and shall be deducted from R/A bills.
e) The owner shall also certify at the end of the defect liability period regarding the state of rectification pointed out and attended by the contractor during defect liability period and its successful completion, the owner shall issue orders for release of security deposits.
1.27 Final Bill The final bill complete, in all respects including material reconciliation statement, test certificates (wherever applicable) etc., shall be submitted by Contractor within one month of issue of Certificate of completion, otherwise Consultant's Certificate of measurement including material reconciliation and total amount payable for the work accordingly shall be binding on the Contractor. Contractor shall make no further claims after submission of the final bill. Claims put up by Contractor after final bill shall be deemed to have been waived and extinguished and hence shall not be considered. ANALYSIS AND CONCLUSIONS
54. On thoughtful consideration of the submissions advanced at bar by the Ld. counsels for the parties, in the light of aforenoted legal position, this Court is in agreement with the contentions of petitioner and finds that the specific provision of the contract and the necessary requirements have been ignored by Ld. Arbitrator and therefore, it would be a case of perversity which goes to the root of the matter.
55. In para 8 of the impugned award, Ld. Arbitrator noted that the claimant i.e. the respondent herein on receiving the letters R-10 (Colly) had not sent any response refuting that it was not responsible for the delay in executing the contract which was stipulated to be completed within three months and claimant/respondent did not raise any protest or objection to the encashment of bank guarantee. Thus, it is clear that according to Ld. Arbitrator who was responsible for the delay in execution of the work. It may be noted that in para 9 of the award in question dated 29th September, 2018, MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 31 Ld. Arbitrator observed that the claimant continued to execute the work of contract and ultimately raised pre-final bill which on the face of it shows that it was duly certified and signed by the project manager of the respondent. It was further noted that respondent released part payment later on in respect of the value of the work arrived at in that bill dated 30 January, 2012.
56. As per the general condition of contract, clause 1.2 (a), the respondent had to carry out and complete all the works under the contract in accordance with the provisions of contract agreement and the directions and to the entire satisfaction of the architect/owner. According to clause 1.5 (a), the work was to be completed within a period of three months from 21.09.2009 for due execution and completion of the work. As per clause 1.5
(b) for any delays in the completion of the work the respondent was liable for liquidated damages @ 0.5% of the contract value per week subject to a maximum of 5% of the contract value. The time allowed for the execution of the work shall be the essence of the contract.
57. Admittedly, respondent had failed to obtain the completion certificate in terms of clause 1.7 (a) of the GCC, wherein the respondent was to obtain completion certificate from the Engineer in charge as soon as the work is completed as per the contract and to the entire satisfaction of the engineer in charge. Clause 1.7 (d) of the GCC specifically provided that the works shall not be considered as completed unless the Owner has certified in writing that they have been accepted and then defects liability period. Defect liability period as per clause 1.8 had to commence from the date of completion of the work as certified under clause 1.7. The said 12 months' period had to start from the completion of work in accordance with completion of time as provided in clause 1.5 above.
58. In view of the aforenoted factual situation, it was incumbent upon the Tribunal to provide an opportunity to rebut and falsify the claim of the respondent which appeared to the Ld. Arbitrator "on the face of it" only as being duly certified and signed by the project manager. In this context, it MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 32 become important that even after calling upon the respondent to answer the interrogatories vide order dated 28.08.2018, and the petitioner having filed interrogatories wherein specific question on pre-final bill, the Ld. Arbitrator in the final award, rejected the interrogatories without taking the answers of the respondent on record. On 28.08.2018, the counsel for petitioner had stated that he will file written submissions alongwith the interrogatories and supply the copy to the opposite party. Ld. Arbitrator observed that claimant may answer the interrogatories by the next date i.e. 01.09.2018 and on 01.09.2018, counsel for the petitioner herein had served interrogatories to the counsel for respondent and Ld. Arbitrator noted that be as it may , claimant may respond to the same within two days and supply copy to the opposite party and thereafter only in para 14, while passing the award on 29.09.2018 noted that at the stage of filing written submissions, respondent (petitioner herein) had served interrogatories requiring claimant (the respondent herein) to disclose certain facts and Ld. counsel for claimant objected to the same and that the said interrogatories were over used and were not found relevant for deciding any of the points arising for decision in the matter. The questions i.e. whether the pre-final bill bear any stamp of the petitioner and how the said bills were served upon the petitioner and whether respondent could provide any proof of delivery appeared to be irrelevant in the wisdom of Ld. Arbitrator. The principle of natural justice required that once having taken a decision on the application U/o XI Rule 2, Ld. Arbitrator ought to have called the respondent to respond to the same and then used the answers to the interrogatories as well instead of only overusing the interrogatories as petitioner had raised relevant specific questions regarding the pre-final bills which had been disputed by him.
59. Perusal of the material on record in the award shows that all the aforesaid agreed contractual terms regarding which there is no dispute between the parties were disregarded by Ld. Arbitrator who proceeded to pass the award. Indisputably, petitioner had denied the pre-final bill in his MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 33 reply to the claim. Admittedly, no admission/denial of documents had been taken place. The burden of establishing the fact that pre-final bills had been duly certified in accordance with the terms of the contract was upon the respondent and it is a matter of fact that pre-final bills had not been certified by the engineer in chief. Respondent had not established and proved the said fact by adducing any evidence and as regards interrogatories wherein petitioner wanted the claimant/respondent to disclose certain facts , petitioner had not been granted opportunity to seek those disclosures from the respondent which in the context of certification of the final bill could have thrown light in discovering the true facts and the state of affairs.
60. Ld. Arbitrator placed an erroneous reliance on the alleged pre- final Bill which was never certified by the Engineer in charge hired by the petitioner. As per the terms of the contract noted , it is clear that a pre-final bill could only have been raised after the work was completed to the satisfaction of the petitioner or their agents but as can be seen clearly from the documents placed on record, the petitioner had been pointed out the defects in the work performed by the respondent such as the glass being cracked, the structural work starting to rust and the epoxy filing started to leak and the petitioner had not certified that the works were completed in terms of clause 1.7 (d) of GCC and although it has been clearly noted in para 12 of the impugned award that Ld. counsel for the respondent had contended that the complainant had not completed the work and that due to delay and defective work , respondent had suffered the loss and in the written submission, it was argued by the respondent that no evidence was brought on record by the claimant i.e. respondent herein that the pre-final bill was duly certified by the engineer of the respondent. In para 13 it was noted that the respondent forgets that in the e-mails exchanged at the relevant time, the respondent did not dispute the correctness of the said bill and significantly the respondent released the certain payment towards the said bill without disputing the correctness of the bill.
MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 34
61. The fact that pre-final bills had been duly certified by the engineer in chief of the petitioner cannot be inferred from any material placed on record by the parties. However, the material on record clearly indicates that there were defects in the work executed by the respondent and inspite of verbal and written letters, the same were not rectified with the result they could not occupy the premises for their use and the snag list was again stated to have been submitted and pending since long removal of the defects and the poor quality of work done was also specified and the respondent was also reminded about the furnishing of the guarantee for a period of 10 year which had not been submitted and respondent was asked to rectify the defects and it was clear that the balance payment if any shall be considered after removing all the defects. Respondent had informed the plaintiff on 18.05.2013 stating that they were really shocked to know the contents of the 16.05.2013 mail sent by the petitioner and respondent were only made to aware to know about that as per the terms and conditions of the contract , the defect liability period was of 12 months from the date of completion of work.
62. Furthermore, the material placed on record before Ld. Arbitrator shows that on 22.08.2013 again petitioner had intimated to the respondent that no action was taken on the snag list provided on 16.05.2013 to the respondent during the monsoon, heavy leakage was observed due to poor quality of material/workmanship and poor performance of sealing with the result there was loss of their property and fixtures and as regards the fire scheme, respondent was supposed to execute the work during the currency of the work and the with the laid down specifications of the contract agreement and that the respondent had not done the said work at the appropriate stage and they were never stopped to execute the same. It was specifically clarified that if balance payment if any could only be considered after removing all the defects as mentioned in the snag list. Therefore, this observation of Ld. Arbitrator that petitioner had not disputed correctness of the bill or that the work had been completed before submission of the final bill MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 35 or defect liability period was already over before the respondent raised the question of defective work is against the specific provisions and requirement of the contract between the parties.
63. The part payment released in installment by the petitioner upto May 2012 cannot be construed as the acceptance of the pre-final bill and it is a matter of record that between May 2012 to May 2013 no exchange of correspondence has been placed on record and brought to the notice of the Court having bearing on the facts in issue. It is worth noting that in para 8 of the award, the Ld. Arbitrator after observing that the claimant/respondent on receiving letters (R-10 Colly), had not sent any response refuting that it was not responsible for the delay in executing the contract which was stipulated to be completed within three months and also did not raise any protest or objection to the encashment of bank guarantee.
64. It is noteworthy that it was observed in the impugned award in para 9 that claimant/respondent continued to execute the work of the contract and ultimately raised pre-final bill "which on the face it" shows that it was duly certified and signed by the project manager. In para 12, it was observed that Ld. counsel for the respondent (petitioner herein) had contended that the claimant/respondent here in had not completed the work and due to delay, respondent suffered significant loss and due to defective work again suffered loss. In his reply to the claim, petitioner had denied that the pre-final bill was duly certified by the chief engineer on 20.01.2012 or that it was certified on behalf of the respondent. Even in the reply, it had been stated that the work had not been completed and the claimant was liable for defective work done by them.
65. On the face of the specific provision under clause 1.7 of the general condition of contract to the effect that contractor shall obtain completion certificate from Engineer Incharge as soon as the work was completed as per the contract and to the entire satisfaction of the Engineer Incharge, clearly has been ignored which is evident from the observations of MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 36 the Ld. Arbitrator in para 10 also where it was observed "mere fact that no completion certificate was asked for by the claimant as contemplated by the contract does not mean that the claimant would not be entitled to have its genuine balance payment for the work executed by it.
66. Now, as far as release of payment is concerned, even letter of intent dated 15.09.2009 as well as the commercial terms and conditions in clause 2 of the GCC specify the manner in which the payment had to be released and the defect liability period of 12 months had to start after completion of the work as certified under clause 1.7 and the said 5% payment had to be released after expiry of defect liability period of 12 months from the date of completion accepted by the company in writing. The clause 2.1 of the agreement regarding running account payment also specifies the manner in which the final bills had to be submitted and certified. Admittedly, there is no evidence on record that the completion certificate had been obtained by the respondent/claimant.
67. Having regard to the aforenoted facts, this court finds that the award suffers from perversity since Ld. Arbitrator has completed ignored the terms of the contract viz Clause 1.7 which specifically required the respondent to obtain a completion certificate from the petitioner to certify that the work was complete. The finding at para 10 of the award cannot be said to be an exercise of interpretation of contract but is an ignorance terms of material contract or re-writing the contracts for the parties. This court is in agreement with the submissions of Ld. counsel for the petitioner that it is a recognized ground of perversity.
68. The award also suffers from perversity while recording in para 13 that the correctness of bills raised by respondent was not contested by the petitioner. This finding ignores the reply filed by the petitioner to the claim as well as the reply to legal notice and also the mails dated 22.08.2013 and other mails wherein the defects had been pointed out by the petitioner and it was mentioned that the balance payment, if any, could only be considered MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 37 after removing the defects as mentioned in the snag list. Thus, the issues of the quality and the defect, raising of the final bill and completion certificate required to be issued under the contract were inter-connected matter and the provisions of the contract could not have been totally ignored by the Ld. Arbitrator.
69. There is nothing on record to support the submissions advanced by the Ld. counsel for the respondent during arguments that all the earlier bills prior to the pre-final bill also certified by one Rishipal. The burden to establish the same fact also was on the respondent, who choose not to place on record any previous bills to establish the aforesaid submissions despite opportunity by the Ld. Arbitrator. Observations made in para 9 in this regard has already been noted above as something may be there on the face of it or on the surface but if any issue had been raised by party who is disputing a fact, then the said fact has to be established by the person who is asserting the same and also an opportunity to rebut the same even if that was after the arguments had been concluded by the parties.
70. Material on record shows that the work had not been completed. Since there were quality issues and defects were brought to the notice of the respondent by the petitioner and no completion certificate had been issued by the petitioner and the pre-final bill had not been certified by the engineer in chief as required by the contract. This specific provision of the contract and the necessary requirement had been totally ignored and discarded by the Ld. Tribunal would amount to perversity and against the fundamental policy of law.
71. The Arbitral Tribunal cannot interpret the terms of the contract in a manner such that it is essentially re-writing the terms of the agreement. It is true that where two interpretations of a contract are possible, the court would not interfere with the award. However, this court finds that this is not a case of two interpretations but a case of perversity of the award which goes to the root of the matter without there being a possibility of alternative interpretation, MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 38 which may sustain the arbitral award. In the present case, Interpretation of the terms of contract by the Arbitral Tribunal is erroneous and against the wording and purpose of the contract. Applying the limited powers under Section 34 of the Arbitration and Conciliation act, this court finds that it is a fit case for interference with an award as it has been made while overlooking the terms and conditions of the contract.
72. In view of the aforesaid reason and discussion, this Court finds that the impugned award cannot be sustained and deserves to be set-aside. Order accordingly. Petition U/s 34 of A&C Act filed by the petitioner stands allowed. Parties shall bear their own costs. File be consigned to record room. (Announced today i.e. on 22.02.2021) (VINAY KUMAR KHANNA) District Judge (Commercial Court-02) South Distt., Saket, New Delhi/22.02.2021 MVL Credits Housing and Leasing ltd. vs AGV Alfab Ltd. Page 39