Delhi District Court
Municipal Corporation Of Delhi vs City Sweep Services Llp on 8 August, 2025
-1-
DLCT010201402024
IN THE COURT OF SH. VIDYA PRAKASH
DISTRICT JUDGE (COMMERCIAL COURT)-01
CENTRAL DISTRICT, TIS HAZARI COURTS, DELHI
CNR NO.: DLCT010201402024
OMP (COMM.)/109/2024
IN THE MATTER OF:-
MUNICIPAL CORPORATION OF DELHI
THROUGH COMMISSIONER
DR. S P MUKHERJEE CIVIC CENTRE
MINTO ROAD
NEW DELHI-110002
... PETITIONER
VERSUS
CITY SWEEP SERVICES LLP
THROUGH ITS AUTHORIZED REPRESENTATIVE
MR. GAURAJ RAJORIYA
8644,8699, 2ND FLOOR, WARD NO. XII
SUBZI MANDI. ROSHANARA ROAD
NEW DELHI- 110007
... RESPONDENT
DATE OF INSTITUTION (e-filing) : 21-12-2024
DATE OF RESERVING ORDER : 19-07-2025
DATE OF PRONOUNCEMENT OF ORDER : 08-08-2025
ORDER
1. Vide this order, I shall decide the present objection petition under S. 34 of Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 'Act of 1996' in short) filed by the petitioner for setting aside arbitral award dated OMP (COMM.)/109/2024 Page 1 of 54 -2- 14-09-2024 passed by learned sole arbitrator in Arbitration Case No. 863 of 2021 titled as 'City Sweep Services LLP v. Municipal Corporation of Delhi.'
2. Brief relevant facts, as culled out from the pleadings of parties along with relevant documents including impugned arbitral award filed therewith, are as under:-
2.1 It is stated that the Petitioner/MCD is a civic body having responsibility of monitoring, upgrading and developing civic amenities in its Central and Najafgarh Zones.
2.2 The respondent is a Limited Liability Partnership Company.
2.3 It is stated that in response to bid (notice inviting tender) for implementation of work of "Sweeping of Roads having Right of Way (ROW) >60 Feet and <100 fee, within jurisdiction of MCD, by deploying Mechanical Sweeper(s) of required capacity (Group-2)" [hereinafter referred to 'the contract work'] floated by MCD/ petitioner, the respondent had participated. The MCD had accepted the bid of the respondent, being the lowest bid and the respondent was declared as Lowest Bidder (L-1).
Thus, MCD issued the Letter of Intent dated 18-02-2011 in favour of respondent, which was accepted by the respondent vide its letter dated 23-02-2011. Subsequently, a contract agreement OMP (COMM.)/109/2024 Page 2 of 54 -3- dated 03-06-2011 was executed between the parties for the aforesaid contract work, wherein the contract fee was fixed as ₹1,030/- per km. per day for roads having Central Verge (CV) and ₹828/- per km. per day for roads without Central Verge (CV) as per the Article 3 of said agreement.
2.4 It is further stated that the stipulated contract period was 07 years from the commencement date i.e. the date of agreement, which is 03-06-2011, as per Article 2.3 thereof.
2.5 During currency of the said agreement, dispute arose between the parties and hence, the respondent invoked the arbitration proceedings. It is stated that the claim of the respondent pertains to the claims for period of January, 2017 to June, 2018 only under the Contract Agreement, which is as under:-
2.5.1 Claim for interest at the rate of 15% on delayed payments towards monthly Contract fee / bills for the months of January, 2017 to June 2018 in Central and Najafgarh Zone amounting to ₹12,28,902/-(₹11,17,135/- + ₹1,11,767/-);
2.5.2 Claim for a sum of ₹21,88,850/-
(₹16,83,428/- + ₹5,05,422/-) on account of unjustified penalties and unsubstantiated deductions on monthly bills Contract fees;
OMP (COMM.)/109/2024 Page 3 of 54 -4-2.5.3 Claim for a sum of ₹72,22,308/-
(₹12,93,659/- + ₹59,28,649/-) on account of unpaid Contract fee / monthly bills for the month of October 2017 (Najafgarh Zone) and for July 2017 to June 2018 (Central Zone);
2.5.4 Claim for a sum of ₹4,81,73,924/-
(₹3,67,18,996/- + ₹1,14,54,928/-) on account of idling charges for the assets, workforce and machineries and other assets procured by the Claimant for the implementation of the contract for period of January 2017 to June 2018.
2.5.5 Claim for a sum of ₹85,87,129/- on account of supplementary bills raised by the Claimant towards revised wages of manual workforce as mandated by Labour Department for the period of April 2017 to June 2018.
2.5.6 A sum of ₹6,00,000/- towards litigation cost in relation to the proceedings under Section 11 and the present Arbitral proceedings.
2.6 By way of impugned arbitral award dated 14-09-2024, Ld. Arbitrator has partly allowed the claims of the respondent, in the following terms:-
2.6.1 Partly allowed the claim of respondent for principal amount to the extent of ₹70,69,384/ -
(₹8,99,470/- + ₹2,41,265/- + ₹59,28,649/-);
OMP (COMM.)/109/2024 Page 4 of 54 -5-2.6.2 Granted pre-award interest of 9% per annum i.e., from the date of cause of action till the initiation of present Arbitration Proceedings (30.11.2021) amounting to ₹41,21,334/- (₹11,52,144/- + ₹4,81,865/- + ₹3,43,015/- + ₹97,843/- + ₹20,46,467/-);
2.6.3 Granted pendent-lite interest @ 9% per annum on the principal awarded amounts of Claim No. 2 and 3;
2.6.4 Granted post-award interest of 9% per annum i.e., from the date of the Impugned Award till actual realization, if the awarded amounts are not paid within three (3) months; and 2.6.5 Granted costs of ₹4,00,000/- towards litigation cost in relation to the Arbitration proceedings.
2.7 Hence, the present objection petition has been preferred by the petitioner/MCD seeking setting aside of the impugned arbitral award dated 14-09-2024.
3. The case of the petitioner, in nutshell, is as under:-
3.1 It is stated that the determination of nature of the Contract is of utmost importance in present case, as the present contract happened to be a cleaning services contract in running stage and thus, there OMP (COMM.)/109/2024 Page 5 of 54 -6- was no opportunity to rectify the unsatisfactory work done by the respondent.
3.2 It is further stated that the amount deducted and penalties imposed were done in accordance with the terms of contract, due to defaults of respondent and also that the respondent is estopped by its own acceptance of the said deductions/ penalties in measurement books. Therefore, by virtue of the nature of contract and the services involved therein, the show cause notices and the written communications were for the purpose of informing and warning the respondent to perform their functions properly, going forward as to prevent the repetition of unsatisfactory work.
3.3 It is further stated that it is an admitted position that the mechanical sweepers operate during the night hours, whereas, manual cleaning was required to be done during day time to deploy 1.5 labour per kilometre and once the work has not been done i.e. work has been unsatisfactorily or not done at all, the losses were to be incurred by the petitioner (MCD) immediately, since the cleaning for the next day would be paid for in any case unlike a standard construction contract.
3.4 Under Clause 3 of the Contract Agreement, the respondent was entitled for monthly payments towards Contract Fee. Accordingly, the respondent OMP (COMM.)/109/2024 Page 6 of 54 -7- raised monthly bills from the time of implementation of works i.e. 01.01.2017 till 30.06.2018.
3.5 The mechanism/ process of payment in the present agreement was that the respondent has to submit the monthly bill and after the settlement/ verification of the said bill by both the parties i.e. the Measurement Book being prepared by the petitioner after actual inspection/ verification and the said entry in Measurement Book was duly confirmed and signed by the respondent to acknowledge as well as to accept that the said verification of work and amount towards said work. Subsequently, after above said exercise of verification/ settlement of bills and actual work by both parties, the due payment was made/ released by the petitioner (MCD).
3.6 The respondent itself has submitted unjustified and excessive bills seeking exaggerated amounts in its monthly bills from the petitioner (MCD). Further, the respondent has also submitted bills for the concerned roads in Central Zone where in Mechanical Sweeper had not even been deployed as is also evident from the GPS Maps.
3.7 It is further stated that that the respondent since start of the contract work, had lackadaisical and apathetic approach regarding submission of bills, for instances, the respondent often use to submit a OMP (COMM.)/109/2024 Page 7 of 54 -8- rough bill without any breakup or detailed information of the work done i.e. bill just merely containing the quantity of work done multiplied with rate of work. Thus, these randomly estimated bills/ rough bills submitted by the respondent in contravention to the terms of Agreement, had to be re-submitted by the respondent on requests and reminders of the petitioner (MCD) in proper format.
As such the reasons for delay in release of payment are attributable to the respondent itself.
3.8 It is further stated that the purpose of the log sheets being signed by the SI/ASI (Sanitary Inspector or Assistant Sanitary Inspector) was to ensure the fact that there was movement of the mechanical sweepers on the prescribed roads as prescribed speed. The factum of satisfactory work was to be inspected by the Sanitary Superintendent as well as the JE/ AEIEE (Junior Engineer/Assistant Engineer/ Executive Engineer) during regular inspections. It is for this purpose that the signature of the Sanitary Superintendent was necessary on the log sheets. Further, the log sheets by itself cannot be said to be indicative of work having been completed in a satisfactory way. The log sheets were to be seen together with the GPS sheets and reports coupled with the actual on-site inspections by the Sanitary Superintendent or the JE/AE/EE which are borne OMP (COMM.)/109/2024 Page 8 of 54 -9- out from the Measurement Book/Log Sheets and reflected in the correspondences between the parties to get a complete picture.
3.9 It is averred that the fact that respondent was time and again apprised of the shortcomings, which led to deductions and penalties by the authorized representative of the petitioner (MCD) and the same can be corroborated with the fact that said deficiencies/ shortcomings were duly entered in the Measurement Bill. Further, the respondent has duly accepted the said entry in Measurement book without any protest or demur at the time of finalization of the bill but has belatedly, as an afterthought, refused / disputed the same.
3.10 It is further averred that even when the bills were received by petitioner (MCD), more often than not, the bills were found to be incomplete i.e. to say that the relevant/mandatory documents which were supposed to be submitted along with bills, used to be missing. Thus, even after receipt of bill at petitioner's Office, the officers of petitioner (MCD) had to write to the respondent regarding missing documents. Once said documents were submitted and bill was complete in all sense, it used to be entered into the Measurement Book, wherefrom the verification used to be done of the actual work which was represented to respondent and thereafter, OMP (COMM.)/109/2024 Page 9 of 54 -10- in accordance with actual work executed, the payment used to be released to the respondent.
3.11 Hence, monthly payment of bills of the respondent was mainly dependent upon the date wherein the respondent had actually submitted the documents with the petitioner (MCD) for commencement of processing of bill. The delay in submission of monthly bill along with all supporting documents like GPS reports in hard-copy, was solely attributable to the respondent.
3.12 It is also stated that even the GPS link use to expire within 30 days i.e. when the bills used to be submitted to the petitioner (MCD). The respondent first failed to submit hard copies of GPS reports along with his monthly bill and secondly even the GPS link use to expire by the time the monthly bills were actually handed over to the Petitioner (MCD).
3.13 The petitioner (MCD), vide its various letters, including but not limited to letters dated 08.04.2016, 18.04.2016, 19.06.2017, 22.08.2017 and 03.07.2017, had requested the respondent to submit the missing requisite documents supporting the bill.
3.14 Hon'ble Arbitral Tribunal has failed to consider that such correspondences are an irrefutable evidence of the fact that the delay, if any in payment of bills was solely attributable to the respondent herein.
OMP (COMM.)/109/2024 Page 10 of 54 -11-3.15 Furthermore, the respondent was not entitled to any Claims whatsoever, as the deductions and penalties were solely attributable to the respondent especially considering the incomplete and unsatisfactory work (as has also been admitted by the respondent itself) and the discrepancies in bill (in lack of required documents which were to be submitted along with bill by the respondent) or lack/absence of any verification/ entry in Measurement Book (determination of actual work).
3.16 The respondent had duly accepted the payment made by the petitioner without any protest or demur after having completed the verification exercise as detailed hereinabove.
3.17 There is no clause/ article in the contract agreement between the parties, which stipulates that the respondent would have a right to claim interest on the delayed payments made by the petitioner (MCD). Furthermore, admittedly the bills were submitted to the petitioner in a delayed manner without complete supporting/ required documents like log sheets, GPS sheet, etc. 3.18 Petitioner (MCD) has, after due process and consideration, rightly imposed reasonable penalties on respondent as per the terms of the Agreement between the parties and for said purpose, the petitioner has reproduced the Article 3 of the OMP (COMM.)/109/2024 Page 11 of 54 -12- Conditions of Contract, which stipulate the mechanism of imposing penalty and the extent of it, in sub-para (t) to Para 15 of the petition.
3.19 The petitioner (MCD) has imposed penalty as per above said provision of the Agreement wherein the respondent has failed to perform the Contract in many aspects as stipulated in Article 3 of Conditions of Contract. The failures of respondent have forced the Petitioner (MCD) to impose the penalty as per provision of Article 3.1 i.e. deduction/ penalty at the rate double the amount payable to respondent; for not cleaning of bell mouth, penalty was imposed as per Article 3.3; for cloud formation during sweeping, the penalty was imposed as per Article 3.2.; for times when GPS was found to be not working, penalty was imposed as per Article 3.4.
3.20 It is further stated that the monthly bills were released after due verification and imposition of penalties as per the terms of contract, the same was duly entered in the measurement book and was duly accepted by the respondent without any protest or demur whatsoever. It is pertinent to mention herein that all the deductions/ penalties imposed by the petitioner (MCD) have been done in accordance entries / details of Measurement Book after due inspections conducted by the petitioner (MCD). The petitioner (MCD) has calculated the amount of OMP (COMM.)/109/2024 Page 12 of 54 -13- actual work done and deducted only the said amount as stipulated in contract terms after considerations. The fact that the respondent had accepted the entries made in the measurement book and amount released during the settlement of the bill without any objection/demur, provides ample clarity that the present claim is at best an after-thought.
3.21 At times, the log books submitted by the respondent regarding the details of road length swept by mechanical sweeper during a period were found to be contradictory to the specification and technical details like total kilometers of the road cleaned with the mechanical sweeper were not matching with the time period the machine had worked with prescribed speed limit required to clean the road as per technical specifications of the contract agreement. The submitted length of road can only be cleaned in such time only when the mechanical sweeper had been run at more speed than the prescribed maximum sweeping speed i.e. 15km/hr. under Article 5.0 of the contract agreement. These technical aspects are important and cannot be ignored.
3.22 It is stated that the fact that the respondent without any protest and objections have accepted the measurement and deductions made by the Petitioner (MCD) on a regular basis in itself is an admission of OMP (COMM.)/109/2024 Page 13 of 54 -14- breaches/ unsatisfactory work by respondent and evinces falsity of the averments made by it before Hon'ble Arbitral Tribunal. The issue of economic duress raised by the respondent in their submission is nothing but fallacious allegation and afterthought. There was no duress on the respondent of any type as alleged or otherwise. The Hon'ble Arbitral Tribunal has failed to consider that the respondent has taken this plea for the very first time in its Statement of Claims and the same has never been raised by the respondent in any of its communication/correspondence, before initiation of arbitral proceedings.
3.23 It is not the case of respondent that Article 3 of Conditions of Contract stipulating penalty terms, is arbitrary or otherwise bad. The penalty amounts are just pre-estimated damages, which have been agreed between the parties. Further, the important point to note is that in the present case, the services rendered by the respondent was meant for the general public, that is to say that the respondent was carrying out a public utility services to maintain and preserve a clean environment.
3.24 Further, a mere perusal of said deductions made by the Petitioner (MCD) would amply clarify that the same were imposed after due inspection wherein it was found that the respondent has failed to OMP (COMM.)/109/2024 Page 14 of 54 -15- mechanically sweep the roads, cloud formation, running the mechanical sweeper at higher speed than the prescribed maximum sweeping speed, choking of bell mouths and gully gratins etc. 3.25 In view of foregoing, it is clear that all the deductions/ penalties have been made based on contemporaneous documentary evidence and were duly accepted by respondent before commencement of the above-captioned arbitration. Further, no evidence/ document whatsoever has been filed by the respondent to suggest/ proof/ show that any deductions was either factually incorrect or beyond terms of the Agreement.
4. The impugned arbitral award has been challenged by the petitioner mainly on the following grounds:-
4.1 The impugned arbitral award is against public policy and is also against the law of the land.
4.2 The Ld. Arbitral Tribunal has grossly erred in partly allowing the claims of the Respondent herein without considering the utmost crucial, vital and fundamental issues and argument raised by the Petitioner despite having taken a note of the same and thus same suffers from the vice of perversity and is vitiated by 'patently illegal' in terms of S. 34(2A) of the Act of 1996.
4.3 Further, it is stated that Ld. Arbitral Tribunal has OMP (COMM.)/109/2024 Page 15 of 54 -16- failed to consider clear, categorical and unequivocal terms of the agreement between the Parties and evidence adduced, during the arbitration proceedings.
4.4 The most fundamental issue raised by the petitioner was to consider the nature of the Contract - as to whether the work which done by the respondent can even be termed as 'Satisfactory' or in accordance with the Contract, especially in light of several detailed show cause Notice(s) issued by the petitioner to the respondent which time and again set out in detail, the lapses and inadequacies in performance of the respondent, giving them an adequate warnings to "maintain satisfactory sanitary" and seeking a "show cause that why appropriate action should not be initiated against the respondent as per relevant clauses of the agreement"
as per and in accordance with the Contract. A table reflecting/ mentioning the details of various Show Cause notices issued by petitioner to the respondent from February 2017 onwards was recapitulated in Para 1.8.4 & Para 2.11.5 of its Statement of Defence, despite that, same were not considered and rather blatantly ignored by the Ld. Arbitral Tribunal while passing the Impugned Award.
4.5 It is further stated that another fundamental issue raised by the petitioner was that the Claimant has OMP (COMM.)/109/2024 Page 16 of 54 -17- filed misconstrued and miscalculated tables in order to exaggerate its claim, which even otherwise unfounded and not maintainable. Several discrepancies, contradictions and miscalculations in the Claims of the respondent made in table at page 340-345 & at Page 556 were brought to the notice and attention of the Ld. Arbitral Tribunal by way of its Statement of Defence, however, same were ignored by Ld. Arbitral Tribunal while passing the impugned award.
4.6 There has been complete non-adjudication of the extremely vital and crucial issues, forming core of the dispute between the parties, which in fact goes to the very roots of the dispute in the present matter, however, the Ld. Sole Arbitrator, as is apparent, has failed to adjudicate or even give a finding to that effect. In this regard, it is stated that it is an established position of law through a catena of Judgments passed by the Hon'ble Supreme Court and different High Courts that have consistently held that the complete ignorance of submissions of a party would lead to non-enforceability of the Arbitral Award, as is the case in the present matter.
4.7 It is further stated that Ld. Arbitral Tribunal has failed to consider that the present respondent i.e. M/s City Sweep Service LLP had no locus standi to claim as sought for against the petitioner/MCD in OMP (COMM.)/109/2024 Page 17 of 54 -18- respect of Contract Agreement dated 03-06-2011, to which, the respondent herein was not the party. It is stated that Ld. Arbitral Tribunal has failed to consider that the contract agreement dated 03-06-2011 was signed between MCD and M/s City Sweep Services Pvt. Ltd. which was a joint venture firm of M/s Lion Services Limited, M/s Metro Waste Handling Private Limited and M/s Ram Engineering & Construction Co., however, the instant statement of claim has been filed by M/s City Sweep Services LLP on the basis of conversion of City Sweep Service Private Limited to City Sweep Services LLP sometime in 2021. It is further stated that Ld. Arbitral Tribunal has failed to consider that the conversion of joint venture of M/s City Sweep Services Pvt. Ltd. to M/s City Sweep Service LLP has been allegedly done after the contract had expired. It is an admitted fact that the stipulated contract period of the agreement between the parties was seven years from the commencement of date. The contract was expired back on 2018, whereas, the contractor was allegedly converted into an LLP only in 2021.
4.8 It is stated that scant and superficial reasoning provided by the Ld. Sole Arbitrator is merely based on conjectures and surmises. Ld. Arbitral Tribunal, by adopting a conjectural, presumptive and OMP (COMM.)/109/2024 Page 18 of 54 -19- assumptive approach in the impugned award, has erred in going beyond the four corners of the agreement/ contract entered into between the parties, which is impermissible under the law. It is stated that parties herein are governed by the agreement/ contract, and Ld. Arbitral Tribunal and the arbitration proceedings are creatures of the contract and thus, they cannot traverse beyond what has been contemplated in the contract between the parties. Ld. Arbitral Tribunal has construed/ interpreted the terms and conditions of the agreement/ contract in a manner, which defeats the very essence of the same i.e. the defined obligations of each party. It is, thus, stated that impugned arbitral award is patently illegal, perverse and consequently, is liable to be set aside.
5. Notice of the petition was issued to the respondent. The respondent put its appearance through counsel and has filed written reply on record.
6. In its reply, the respondent has contested the objection petition by taking various preliminary objections mentioning, inter alia, this Court lacks territorial jurisdiction to try and entertain the present objection petition and present petition is barred by limitation.
7. By way of 'Parawise Reply', the respondent controverted and denied the averments made in the plaint, while stating, inter alia:-OMP (COMM.)/109/2024 Page 19 of 54 -20-
7.1 The purported show-cause notices issued by the petitioner are unilateral communications issued by the petitioner and are further not in consonance with the mechanical and manual log-sheets that recorded the quantum and quality of works executed on each day under the said Contract Agreement. Further, there is no provision in the said Contract Agreement for "unsatisfactory work". In this regard, it is stated that Clause 3 of the Conditions of Contract is very specific in providing the instances for which the petitioner can inflict recoveries from the respondent. Clause 3 of the Conditions of Contract does not provide for any recovery on account of "unsatisfactory work". The purported instances of non-performance as contained in petitioner's show cause notices are in contradiction to the log-sheets that have been executed by Petitioner's own SIs and ASIs and thus, petitioner's show cause notices are not sustainable.
7.2 There was no occasion for the petitioner to convey deficiency in the bills after receipt of the same. The deficiency, if any, had to be noted in the works being executed and not in the bills. The bills were in accordance with the joint notings as contained in the jointly executed log-sheets. Further, the bills raised by respondent themselves, mention that the log-sheets, GPS reports and all other supporting OMP (COMM.)/109/2024 Page 20 of 54 -21- documents are attached with the bills. As far as GPS report is concerned, the same was available with the respondent from the server of Map my India. It is stated that the Respondent was not under any obligation to provide GPS reports to the Petitioner on account of the petitioner already having access to the detailed GPS. The petitioners issued letters with malafide intent and in order to generate false records. It bears mention that the petitioner has admitted on record that the jointly signed log-sheets and GPS reports were independently available to the petitioner.
7.3 It is stated that work of Mechanical Sweeping of Roads was duly executed on Ring Road (Vikas Marg upto Ring Road) in the months of July, 2017 and August, 2017. A copy of the GPS reports that duly reflects the execution of Mechanical Sweeping in July 2017, August 2017 and September 2017 already form part of the arbitral record. Even the jointly executed log-sheets reflect the execution of works. As far as Indraprastha Marg is concerned same is a road having RoW of more than 100 Feet and no work was supposed to be executed on the said road under the contract agreement which forms subject matter of the present proceedings. Accordingly, it is stated that the contention of the petitioner as contained in its letters dated OMP (COMM.)/109/2024 Page 21 of 54 -22- 11.10.2017 and 17.10.2017 is incorrect. Even otherwise, the said letters were not received by the Respondent at any point of time and the Petitioner has failed to prove these purported letters in the arbitral proceedings.
7.4 Similarly, while denying the allegation of petitioner that mechanical sweeping machines were not deployed on any of the roads on 2nd January, 2017 in Petitioner's Central Zone, it is stated that the mechanical sweeping of roads on 2nd January, 2017 was carried out by vehicle bearing registration number DL 1GB 7452. Similar is the case for the dates of 3rd January 2017, 6th January 2017, 7th January 2017 (work was carried out by vehicle bearing no. DL1GB7497), 8 January 2017, 10 January 2017, 11 January 2017, 12 January 2017 and 13º January 2017. On 19 May 2017, 20 May to 25 May 2017, 31 May 2017 and 1 June, 2017, the work of Mechanical Sweeping was executed by vehicles bearing numbers DLIGB7428, DL1GB7686, DL1GB7686 and DL1GB7686 respectively. On 2 June 2017 and 3" June 2017, the work of mechanical sweeping was carried out by vehicles bearing nos. DL1GB7686. GPS records of all these dates, was duly placed on record of the Arbitral proceedings. In reply to Petitioner's contention that work was not done on Delhi OMP (COMM.)/109/2024 Page 22 of 54 -23- Secretariat Road during the period of January, 2017 to June, 2017, it is stated that such contention of the Petitioner is unfounded. In this regard, it is relevant to state that the work of Mechanical cleaning of roads was to be carried on at the stretch of Vikas Marg upto Ring Road (a stretch of 2.4 Kms.). The GPS record placed on record by Petitioner itself reflected that the work of mechanical sweeping was executed on the stretch of Vikas Marg upto Ring Road. Thus, the Petitioner's contention that work was not purportedly executed on the roads as stated in its letter dated 17.11.2017 is incorrect. Work on each of the date from January, 2017 to June, 2017 have been carried out and the same is also being reflected from the jointly signed log-sheets. It is further stated that 13 March, 2017 was the festival of Holi and hence work was not carried out on 13 March, 2017. The Petitioner was required to reimburse the Claimant for 13ª March, 2017.
7.5 In this regard, it is stated that it was understood that the bill for the days on which the festival of Holi fell, was to be raised and the same is evident from the fact that Najafgarh Zone in its Measurement Book for March, 2014, has made an entry for work done on 17.03.2014. This is on account of the fact that the festival of Holi is a prominent festival in the city of Delhi and the same was to be treated as OMP (COMM.)/109/2024 Page 23 of 54 -24- holiday and the Petitioner was not to deduct respondent's fees for that day. Without prejudice to the foregoing, it is stated that the Petitioner's letter dated 17.11.2017 was not even received by the Respondent at any point of time.
7.6 Similarly, while denying the contents of letter dated 13.07.2018, it is that the purported excess amount of ₹27,38,360/- is based on the unilateral entries made by Petitioner in its Measurement Book. Accordingly, the deduction of ₹27,28,360/-effected by Petitioner is wrongful. Even otherwise, the Petitioner's letter dated 13.07.2018 was not received by Respondent at any point of time and the Petitioner failed to prove the same before the Arbitral Tribunal.
7.7 The petitioner used to make payments for the services on 'monthly basis', which is absolute and unconditional. Further, the respondent was instructed by petitioner that for the purpose of monthly invoices, the daily log-sheets verified by ASI/SI should be further authenticated by SS. The monthly invoices were submitted by the daily log sheets authenticated by SS. There was no justification in this direction of the Petitioner/MCD. Further, the SS delayed authenticating the daily log sheets, thereby preventing the Respondent from submitting the monthly invoices on 1st day of OMP (COMM.)/109/2024 Page 24 of 54 -25- succeeding month. There is no gain to the Respondent in delaying the submission of the monthly invoices. Since delay in submission of monthly invoices was caused due to the SS, the Respondent has reckoned the liability of the Petitioner to pay interest from 30 day from the date of monthly invoices.
7.8 While denying that the respondent has no locus-standi, it is stated that the said Contract Agreement was executed between City Sweep Services Pvt. Ltd. and the Petitioner. However, with effect from 21.04.2021, City Sweep Services Pvt. Ltd. has been converted into a Limited Liability Partnership (i.e. City Sweep Services LLP). Upon such conversion, in terms of Section 58(4) of the LLP Act, 2008, all the assets, interests, rights, liabilities and obligations of City Sweep Services Pvt. Ltd. have devolved upon City Sweep Services LLP. Further, in terms of Clauses 10 and 11 of Third Schedule of the LLP Act, 2008, the City Sweep Services LLP has substituted City Sweep Services Pvt. Ltd. as a party to the Contract Agreement. Accordingly, City Sweep Service LLP (i.e. Respondent herein) was made the claimant in the Arbitral proceedings. It is further stated that in fact the petitioner has consented to substitution of City Sweep Services Pvt. Ltd. with the Respondent OMP (COMM.)/109/2024 Page 25 of 54 -26- before Ld. Sole Arbitrator. Reference in this regard is made to order dated 10.07.2021 passed in case no.676 of 2016, which was also between the same parties.
8. Similarly, by way of 'Parawise Reply to Grounds', it is stated that the impugned arbitral award is detailed, well-reasoned & just and therefore, the present objection petition is not maintainable. Further, it is not open for this Court under S. 34 of the Act of 1996 to re-appreciate reasonableness of the reasons in the arbitral award.
9. It may be noted that the petitioner/ MCD has not filed any rejoinder in this matter.
10. I have already heard Ld. counsels for both the sides.
I have also duly considered the respectful submissions made on their behalf in the light of material available on record, the written submissions filed on behalf of both the sides and the authorities cited at the Bar.
SUBMISSIONS OF PETITIONER/ OBJECTOR
11. Ld. Counsel of petitioner advanced arguments on the similar lines as raised by way of grounds of challenge to the impugned award, as already noted above. Ld. Counsel drew attention of this Court to the relevant Clauses of the agreement, documents filed along with the objection petition, as also to the relevant portions of the impugned arbitral award, in order to bring home his point OMP (COMM.)/109/2024 Page 26 of 54 -27- that the impugned arbitral award is unsustainable under the law.
12. He further submitted that the findings given by Ld. Sole Arbitrator by allowing part claims of the respondent herein, on the face of it, are perverse because the same were awarded without considering the evidence and submissions made on behalf of petitioner.
13. He argued that the respondent had agreed to the terms and conditions of the agreement with open eyes and had signed the same with its own volition after duly reading and understanding its terms and conditions whereby it had agreed to pay certain amount on account of penalty to the petitioner/ MCD in the event of breach of said agreement.
14. He further argued that by virtue of nature of contract and services involved therein, show cause notices and written communications were sent to the respondent thereby informing and warning it to perform functions properly in order to avoid repetition of unsatisfactory work, however, Arbitral Tribunal failed to consider the said documents while passing the impugned arbitral award. He also argued that Arbitral Tribunal failed to consider the fact that mechanical sweeper used to operate during night hours, whereas, manual cleaning was required to be done during day time to deploy 1.5 labour per kilometer and also that losses were to be incurred by petitioner/ MCD due to non-completion of work awarded to the respondent in satisfactory manner.OMP (COMM.)/109/2024 Page 27 of 54 -28-
15. He further argued that Arbitral Tribunal failed to appreciate that mechanism/ process of payment was agreed between the parties in contract agreement, whereby the respondent was to submit monthly bill and after settlement/ verification thereof by both the parties i.e. measurement book being prepared by petitioner/ MCD after actual inspection/ verification and said entry of measurement book being confirmed and signed by the respondent towards acknowledgment of the verification of said work and amount mentioned therein, due payment used to be released by the petitioner/MCD. Based on these submissions, it is contended that the impugned arbitral award suffers from patent illegality.
16. Ld. Counsel of petitioner further argued that the respondent itself had submitted unjustified and excessive bills seeking exaggerated amounts in its monthly bills from the petitioner / MCD, which fact has not been considered by Arbitral Tribunal while passing the impugned award.
17. It is further argued that Ld. Arbitral Tribunal failed to appreciate that the respondent was time and again apprised about the short comings which led to deduction and penalty by various representatives of petitioner/ MCD and the petitioner/ MCD had filed all the relevant documents in support thereof during arbitration proceedings, but same were not appreciated by Ld. Arbitral Tribunal in correct perspective. Further, he argued that deduction and penalty OMP (COMM.)/109/2024 Page 28 of 54 -29- imposed by MCD, was solely attributable to the respondent on account of incomplete and unsatisfactory works and moreover, the respondent had duly accepted the payment made by petitioner/ MCD without any protest or demur and hence, there was no occasion for allowing any of the claims, albeit partially in favour of respondent by Arbitral Tribunal.
18. It is further submitted that Arbitral Tribunal was not justified in awarding interest in favour of respondent in the impugned award.
19. In support of his aforesaid submissions, Ld. Counsel of petitioner has relied upon the following judgments:-
19.1 'PSA SICAL Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Others', reported as (2021) SCC OnLine SC 508;
19.2 'Associate Builders v. Delhi Development Authority', reported as (2015) 3 SCC 49;
19.3 'Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.', reported as 2021 SCC OnLine SC 695;
19.4 'State of Chhattisgarh and Another v. Sal Udyog Private Limited', reported as (2022) 2 SCC 275 19.5 'Divyam Real Estate Pvt. Ltd. v. M2K OMP (COMM.)/109/2024 Page 29 of 54 -30- Entertainment Pvt. Ltd.' reported as 2024 SCC OnLine Del 3786;
19.6 'Delhi Metro Rail Corporation Limited v. Delhi Airport Metro Express Pvt. Ltd.' reported as (2024) 6 SCC 357 SUBMISSIONS OF RESPONDENT:
20. Ld. Counsel of respondent, on the other hand, supported the impugned award by submitting that Ld. Arbitrator has duly considered all the material, including the evidence led by both the sides, and has duly dealt with all the grounds as are raised in the present objection petition, while passing the impugned arbitral award. He further submitted that the findings of Ld. Arbitrator are well reasoned, just and based on records, which are duly supported by facts, law, the terms of the contract, available evidence and circumstances of the case and thus, this Court should not interfere therein, being not sitting in appeal over the same.
21. Further, he submitted that the present petition has been filed challenging the findings of facts as well, despite well settled position of law that the findings of facts recorded by Arbitral Tribunal on the basis of appreciation of evidence, cannot be challenged unless the same are patently illegal, perverse or without any material. There is nothing on record to even indicate that the findings rendered by the Arbitral Tribunal are without any evidence or perverse.OMP (COMM.)/109/2024 Page 30 of 54 -31-
22. It is also submitted that the objections filed under Section 34 are not to be treated as Regular Appeal and re-appreciation of evidence, as sought by the petitioner, is not permissible. Thus, the present petition is not maintainable, as the same has been filed on grounds beyond the scope of Section 34 of the Act of 1996.
23. It is further submitted that the scope of objections under Section 34 of Act of 1996 is very limited and confined only to the grounds as specifically stated in Section 34. However, in the present case, the petitioner has failed to make out any ground to contend that the award is bad on any of the grounds as stipulated under Section 34 of the Arbitration & Conciliation Act.
24. Based on the documents and the evidence led by both the sides before Ld. Sole Arbitrator, Ld. Counsel of respondent argued that the impugned award has been passed on due and proper application of the relevant facts and the evidence available on record and hence, the findings returned by Ld. Sole Arbitrator do not call for any interference by this Court, the present being a petition under S. 34 of the Act of 1996 which provides very limited scope of interference and that too on the limited ground as provided therein. He, therefore, urged that the objection petition is liable to be dismissed with exemplary costs.
25. In support of his aforesaid submissions, Ld. Counsel of respondent has relied upon following judgments:-OMP (COMM.)/109/2024 Page 31 of 54 -32-
25.1 P. R. Shah Shares and Stock Brokers Pvt. Ltd. v. B. H. H. Securities Pvt. Ltd. & Ors, reported as (2012) 1 SCC 594;
25.2 M/s Telecommunication Consultants India Ltd. v.
M/s Catvision Ltd. reported as 2017 SCC OnLine Del 9235;
25.3 Union of India v. M/s Track Innovations (India) Pvt.
Ltd. (2014 SCC OnLine Del 3393;
25.4 'UHL Power Company Ltd. v. Statement of Himachal Pradesh', reported as (2022) 4 SCC 116;
25.5 Pan Development Pvt. Ltd. v. State of West Bengal & Anr. reported as (2024) 10 SCC 715;
25.6 Oriental Structural Engineers Pvt. Ltd. v. State of Kerala, reported as (2021) 6 SCC 150;
25.7 M/s Mahesh Construction v. Municipal Corporation of Delhi, reported as 2023: DHC: 3728; and 25.8 Secretary, Irrigation Department, Govt. of Orissa v.
G. C. Roy & Ors, reported as (1992) 1 SCC 508.
ANALYSIS & CONCLUSION:
26. Before proceeding to deal with rival submissions made on behalf of both the sides touching upon merits of the present case, it may be noted that the respondent had taken categorical objections in its reply to the objection petition that this Court lacks OMP (COMM.)/109/2024 Page 32 of 54 -33- territorial jurisdiction to entertain the present objection petition, as also that the present objection petition is barred by limitation. However, it may be noted that no argument has been advanced on behalf of either of the sides on both the said objections.
27. Be that as it may, both the said objections, being legal ones and going to the root of the matter, need to be decided by the Court. Indisputably, the disputes between the parties arose out of contract agreement dated 03-06-2011 executed between the parties. Copy of said contract agreement is appearing from page nos. 97 to 136 of the paper book filed by the petitioner/ MCD. Clause 12 thereof reads as under:-
"xxxx
12. DISPUTE RESOLUTION 12.1 Mediation xxxxxxx 12.2 Arbitration xxxx The place of arbitration shall be New Delhi. The language to be used in the arbitral proceedings shall be English. The dispute, controversy or claim shall be decided in accordance with the Indian Law.
xxxx"
28. Thus, it is evident from above reproduced portion of arbitration agreement existed between the parties that the place of arbitration was agreed to be New Delhi (emphasis provided).
OMP (COMM.)/109/2024 Page 33 of 54 -34-29. Moreover, it is the own case of petitioner, as mentioned in Para no. 20 of the objection petition, that as per agreement/ contract, the seat of arbitration is at New Delhi (emphasis provided).
30. Apart from above, a bare perusal of the impugned arbitral award, as available on record, would go to show that the entire arbitration proceedings were conducted before Ld. Sole Arbitrator at New Delhi (emphasis provided).
31. The law on the subject is well settled now. Hon'ble Apex Court in case of Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited, (2017) 7 SCC 678, has summarized the law as under:-
19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure, which applies to suits filed in courts, a reference to 'seat' is a concept by which a neutral venue can be chosen by the parties to an arbitration clause.
The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provision of Section 16 to 21 of CPC be attracted. In arbitration law however as has been held above, the moment 'Seat' is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purpose of regulating arbitral proceedings arising out of the agreement between the parties.
32. Later on, Hon'ble Apex Court in the case titled as ' BGS SGS Soma JV v. NHPC Limited' reported as (2020) 4 SCC 234, has categorically held as under:-
OMP (COMM.)/109/2024 Page 34 of 54 -35-"xxxx
82. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings "shall be held" at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a "venue"
and not the "seat" of the arbitral proceedings, would then conclusively show that such a clause designates a "seat" of the arbitral proceedings.....
xxxx"
33. The aforesaid view has been reiterated by Hon'ble Apex Court in its subsequent decision in the case of ' BBR (India) Private Limited v. S. P. Singla Constructions Private Limited' reported as (2022) 19 S.C.R. 977.
34. Recently, Hon'ble Delhi High Court in the case of 'Delhi Tourism and Transportation Development Corporation v. M/s Satinder Mahajan' bearing OMP (COMM.)/337/2021, decided on 01.05.2024, has held as under:-
"xxxx
16. It would be appropriate at this stage, to deal with the two judgments of the Division Bench of this Court, relied upon by Mr. Tripathy, which have considered the question of jurisdiction for the purposes of Section 34 of OMP (COMM.)/109/2024 Page 35 of 54 -36- the Arbitration Act, in the context of arbitrations under the MSME Act. In Indian Oil Corporation Supra (note 3), the arbitral proceedings were conducted by the Maharashtra Facilitation Council at Thane. The Division Bench nevertheless held that this Court had jurisdiction to entertain the petition under Section 34 the Arbitration Act, in view of an exclusive jurisdiction clause contained in the agreement between the parties therein, which was read as providing for exclusive jurisdiction of the Courts at New Delhi. The reasoning of the Division Bench is contained in the following paragraphs:
"20. In the present case, both the VENUE as well as the SEAT (by way of the jurisdiction clause) has been agreed to be at New Delhi. We, therefore, have no hesitation to say that the Courts at Delhi would have the jurisdiction to entertain the petition challenging the award passed by the MSME Council. Since the parties agreed to confer exclusive jurisdiction to Courts at New Delhi, notwithstanding the fact that the purchase order in question dated 10th March 2016, was issued by the Petitioner from its Vadodra Office to the Respondent at Navi Mumbai, and even if no cause of action has arisen in Delhi, the Courts of Delhi would have jurisdiction to entertain the petition under Section 34 of the Arbitration Act. This is pertinently because in Indus Mobile (supra) as noted in para 19 of the judgement, the Court has held that Section 16 to 21 of CPC would not be attracted. Thus notwithstanding the fact that cause of action may not have arisen in New Delhi, since the Seat has been agreed to be in Delhi, the courts here would have the jurisdiction to entertain the petition under section 34 of the Arbitration Act.
xxxx"
35. Thus, it is trite law that in the absence of any seat of arbitration being separately agreed between the parties, the place of arbitration shall be akin to the seat of arbitration.
36. In the aforesaid backdrop of the facts and circumstances of the present case, the question arising for consideration OMP (COMM.)/109/2024 Page 36 of 54 -37- before this Court, is as to whether this Court would have territorial jurisdiction to entertain and decide the present objection petition. The facts of the present case are squarely covered by above referred decisions of Hon'ble Apex Court and Hon'ble Delhi High Court and thus, this Court is of the considered view that the present petition is not maintainable before this Court for want of territorial jurisdiction, the parties having agreed the seat of arbitration to be "New Delhi". It is so held accordingly.
37. This brings me down to next objection raised by respondent as regards the present objection petition being barred by limitation. As already noted above, the impugned award is dated 14-09-2024. It is a matter of record that the present objection petition has been e-filed on 21-12-2024. Needless to say that the period of limitation for filing objection petition under S. 34 of Act of 1996 is 3 months from the date of receipt of signed copy of arbitral award, in terms of sub-section (3) of S. 34 of the Act of 1996. It is nowhere the case of petitioner/ MCD that it had received signed copy of impugned arbitral award on any other day subsequent to 14-09-2024. In fact, MCD/ petitioner has nowhere disclosed the date of receipt of signed copy of impugned award by them. Hence, it is taken that signed copy of the impugned award would have been received by MCD/ petitioner on 14-09-2024 itself. Thus, the prescribed period of 3 months, while computing the period of limitation from 14-09-2024, would have OMP (COMM.)/109/2024 Page 37 of 54 -38- expired on or about 13-12-2024. It is an admitted position on record that the petitioner/ MCD has not filed any application in terms of proviso attached to sub-section (3) to S. 34 of Act of 1996, seeking condonation of delay in filing the present objection petition. In the absence of any prayer seeking condonation of delay in filing the present objection petition by MCD/ petitioner, this Court is not inclined to condone such delay in filing the same. Hence, it is held that the petition deserves rejection, being barred by limitation.
38. Even, if it be presumed for the sake of convenience that this Court has got territorial jurisdiction to entertain and try the present objection petition, as also that delay in filing the objection petition is liable to be condoned, still, this Court is of the considered view, on the basis of material available on record and the findings rendered by Ld. Sole Arbitrator, that the present objection petition is liable to be rejected.
39. On a panoramic appreciation of the judicial precedents on the point in issue, as manifested by various decisions ranging from "Renu Sagar Power Company Ltd. v. General Electric Company" reported as 1994 Supp. (1) SCC 644 to "Associated Builders v. DDA" reported as (2015) 3 SCC 49, Hon'ble Delhi High Court in the case of "NHAI v. Hindustan Construction Company Ltd"
MANU/DE/2699/2017, has delineated the following propositions:-OMP (COMM.)/109/2024 Page 38 of 54 -39-
(i) The four reasons motivating the legislation of the Act, in 1996, were:
(a) to provide for a fair and efficient arbitral procedure,
(b) to provide for the passing of reasoned awards,
(c) to ensure that the arbitrator does not transgress his jurisdiction, and
(d) to minimize supervision, by courts, in the arbitral process.
(ii) The merits of the award are required to be examined only in certain specified circumstances, for examining whether the award is in conflict with the public policy of India.
(iii) An award would be regarded as conflicting with the public policy of India if
(a) it is contrary to the fundamental policy of Indian law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or
(e) it is so perverse, irrational, unfair or unreasonable that it shocks the conscience of the court.
(iv) An award would be liable to be regarded as contrary to the fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or the binding effect thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a "judicial approach", i.e. has not acted a fair, reasonable and objective approach, or has acted arbitrarily, capriciously or whimsically, or
(e) the arbitrator has failed to draw an inference which, on the face of the facts, ought to have been drawn, or
(f) the arbitrator has drawn an inference, from the facts, which, on the face of it, is unreasonable, or
(g) the principles of natural justice have been violated.
(v) The "patent illegality" had to go to the root of the matter.
Trivial illegalities were inconsequential.
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or
(b) the arbitration agreement is invalid under the law, Or
(c) the applicant was not given proper notice of appointment of the arbitrator, or of the arbitral proceedings, or was otherwise unable to present his case, or
(d) the award deals with a dispute not submitted to arbitration, or decides issues outside the scope of the dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, or in OMP (COMM.)/109/2024 Page 39 of 54 -40- accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the parties.
(vii) "Perversity", as a ground for setting aside an arbitral award, has to be examined on the touchstone of the Wednesbury principle of reasonableness.
(A reasoning or decision is Wednesbury unreasonable (or irrational) if it is so unreasonable that no reasonable person acting reasonably could have made it (Associated Provincial Picture Houses Ltd v Wednesbury Corporation (1948) 1 KB 223).
It would include a case in which
(a) the findings, in the award, are based on no evidence, or
(b) The Arbitral Tribunal takes into something irrelevant to the decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision.
(viii) At the same time,
(a) decision which is founded on some evidence, which could be relied upon, howsoever compendious, cannot be treated as "perverse",
(b) if the view adopted by the arbitrator is a plausible view, it has to pass muster,
(c) neither quantity, nor quality, of evidence is open to re- assessment in judicial review over the award.
(ix) "Morality" would imply enforceability, of the agreement, given the prevailing mores of the day. "Immorality", however, can constitute a ground for interfering with an arbitral award only if it shocks the judicial conscience.
(x) For examining the above aspects, the pleadings of the parties and materials brought on record would be relevant.
(xi) The court cannot sit in appeal over an arbitration award.
Errors of fact cannot be corrected under Section 34. The arbitrator is the last word on facts."
40. After recent amendment in the year 2016 to the Act of 1996, Hon'ble Supreme Court has taken into account the impact of the amendment and has laid down as to what is the scope of interference by the Court in the arbitral award, in the case titled as Ssangyong Engineering & OMP (COMM.)/109/2024 Page 40 of 54 -41- Construction Co. Ltd. v. National Highway Authority of India (NHAI) (2019) 15 SCC 131, to quote:-
23. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the Renusagar understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Courts intervention would be on the merits of the award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)
(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).
24. It is important to notice that the ground for interference insofar as it concerns interest of India has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the most basic notions of morality or justice. This again would be in line with paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
25. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done OMP (COMM.)/109/2024 Page 41 of 54 -42- away with.
26. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental policy of Indian law, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the back door when it comes to setting aside an award on the ground of patent illegality.
27. Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
30. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), 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. Thus, 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.
emphasis supplied
41. Further, after amendment of the Act of 1996, the patent illegality appearing on the face of arbitral award has become one of the grounds for setting aside the arbitral award as held in the judgment of Hon'ble Supreme Court in the case titled as "National Highway Authority of India v. P. Nagaraju alias Cheluvaiah & Anr." 2022 SCC OnLine SC 864. It is worthwhile to quote observations of Hon'ble Supreme Court contained in Para no.19, which has succinctly observed the law on the subject in following OMP (COMM.)/109/2024 Page 42 of 54 -43- terms:
19. In that background, the award passed by the Arbitrator is to be examined keeping in view the limited scope available under Section 34 of Act, 1996 to interfere with an award. The learned Additional Solicitor General while attacking the award has sought to contend that the award suffers from patent illegality which is a ground to interfere with an award as provided under Section 34(2A) of Act, 1996, yet the District Judge and High Court has failed to interfere. To contend with regard to the facets, which could be considered as patent illegality, reliance is placed on the decision in the State of Chhattisgarh vs. Sale Udyog Private Ltd. (2022) 2 SCC 275 with specific reference to paragraphs 14,15, 16 and 24 therein. The same is as hereunder:
"14. The law on interference in matters of awards under the 1996 Act has been circumscribed with the object of minimizing interference by courts in arbitration matters. One of the grounds on which an award may be set aside is "patent illegality". What would constitute "patent illegality" has been elaborated in Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], where "patent illegality" that broadly falls under the head of "Public Policy", has been divided into three sub-heads in the following words:
"42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three sub-heads:
42.1 (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act, which reads as under:
28. Rules applicable to substance of dispute -
(1) Where the place of arbitration is situated in India,-
(a) In an arbitration other than an international OMP (COMM.)/109/2024 Page 43 of 54 -44- commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;' 42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality - for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.
42.3 (c) Equally, the third sub-head of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
'28. Rules applicable to substance of dispute- (1)- (2) * * * (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.' This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set-aside on this ground.
Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair- minded or reasonable person could do."
15. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131: (2020) 2 SCC (Civ.) 213], speaking for the Bench, R.F. Nariman, J. has spelt out the contours of the limited scope of judicial interference in reviewing the arbitral awards under the 1996 Act and observed thus :
xxx
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the OMP (COMM.)/109/2024 Page 44 of 54 -45- Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law.
In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49:
(2015) 2 SCC (Civ.) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49:
(2015) 2 SCC (Civ.) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31 (3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
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 [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ.) 204], 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 ground added under Section 34 (2-A).
OMP (COMM.)/109/2024 Page 45 of 54 -46-41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders {Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ.) 204], 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. Thus, 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. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
16. In Delhi airport Metro Express (P) Ltd. [Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC 131] referring to the facets of patent illegality, this Court has held as under:
29. Patent Illegality should be illegality, which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression "patent illegality".
Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression "patent illegality". What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34 (2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator, which are based on no evidence or have been arrived at by ignoring vital OMP (COMM.)/109/2024 Page 46 of 54 -47- evidence are perverse and can be set- aside on the ground of patent illegality. Also, consideration of documents, which are not supplied to the other party is a facet of perversity falling within the expression "patent illegality".
24. The patent illegality committed by the arbitrator was to apply the 2016 Guidelines, which came into force after the issuance of the Section 3A notification, contrary to the mandate of Section 3G(7)(a) of the NH Act read with the proviso to Section 26(1) and Section 11 of the LA Act, 2013. In the seventh SLP bearing SLP(C) No.2503/2022, the 2018 Guidelines have been applied showing complete arbitrariness and whimsicality on the part of the arbitrators, resulting in wide inconsistency and uncertainty in the process relating to a common acquisition."
42. The law, which has been quoted above, shall be the guiding light for deciding the present objections. It is no more permissible for the Court to interfere with the award unless there is patent illegality in the arbitral award and patent illegality must be such which goes to the root of the matter, but which does not amount to mere erroneous application of the law. Further, it is also well settled that re-appreciation of evidence, which is what an Appellate Court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
43. It is no more res-integra that even erroneous interpretation of contractual clauses cannot be a ground for setting aside of an arbitral award. In this regard, reference with advantage can be made to the cited judgment of Hon'ble Apex Court in the case of UHL Power Company Ltd. (supra).
OMP (COMM.)/109/2024 Page 47 of 54 -48-44. Now adverting back to the facts of the present case.
45. Although, it is vehemently argued on behalf of petitioner / MCD that Ld. Arbitral Tribunal has ignored the material as was placed on record from their side and there has been non-application of mind on the part of Ld. Arbitral Tribunal, however, very fact that Ld. Arbitral Tribunal has partially rejected claims raised by the claimant/ respondent herein while partially allowing certain claims, would go to show that factual matrix was discussed and there has been due application of mind to the facts of the present case on the part of Ld. Arbitral Tribunal. In fact, the findings of Ld. Arbitral Tribunal on all the relevant claims which have been partially allowed in favour of respondent herein, would show that there has been thread-bare analysis of all the facts of the case, as also the evidence oral as well as documentary led by both the sides by Ld. Arbitral Tribunal and there is due appreciation of such evidence in the light of relevant terms and conditions appearing in the contract in question by Ld. Arbitral Tribunal. Thus, this Court is entirely in agreement with the submissions made on behalf of respondent that there is no scope at all for re-appreciation of evidence by this Court, being not permissible under the law.
46. Further, having gone through the findings rendered by Ld. Arbitral Tribunal in the light of the pleadings of the parties and the evidence led by them during arbitration proceedings, this Court is of the considered view that all OMP (COMM.)/109/2024 Page 48 of 54 -49- the contentions raised by petitioner/ objector, by way of grounds of challenge raised in the present objection petition, have already been duly considered by Ld. Sole Arbitrator while passing the impugned award. Ld. Sole Arbitrator is also found to have discussed the relevant terms and conditions of the Agreement and has also taken into consideration the evidence led by both the sides. The petitioner/ objector has failed to show that the findings given by Ld. Sole Arbitrator suffers from any patent illegality by showing that such findings are either not based on any evidence or same are perverse in any manner whatsoever. Rather, the view taken by Ld. Sole Arbitrator is found to be quite justified and in accordance with the settled cannons of law and the principles laid down by Hon'ble Apex Courts and by various Hon'ble High Courts in plethora of judgments as refereed to hereinabove.
47. Hon'ble Supreme Court in the case of Associate Builders (supra), has clearly delineated jurisdiction of the Court u/s 34 of the Act of 1996 in the following words: -
"33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score [Very often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows:OMP (COMM.)/109/2024 Page 49 of 54 -50-
"General, you have a sound head, and a good heart: take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong/"
It is very important to bear this in mind when awards of lay arbitrators are challenged.]. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594:
(2012) 1 SCC (Civ) 342], this Court held: (SCC pp. 601-02, para 21) "21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act.
The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."
34. It is with this very important caveat that the two fundamental principles, which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood.
Xxxxx
42. In the 1996 Act, this principle is substituted by the "patent illegality" principle, which, in turn, contains three subheads:
xxx OMP (COMM.)/109/2024 Page 50 of 54 -51- 42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute. (1)-(2) (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
43. In Mc Dermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 this Court held as under: (SCC pp. 225- 26, paras 112-13) "112. It is trite that the terms of the contract can be expressed or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil and Natural Gas Commission, (2003) 8 SCC 593:2003 Supp. (4) SCR 561 and D.D.Sharma v. Union of India.](2004) 5 SCC 325.
113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the fact of the award."
44. In MSK Projects (1) (JV) Ltd. v. State of Rajasthan, (2011)10 SCC 573: 2012 3 SCC (Civ) 818, the Court held:
(SCC pp. 581-82, para 17) OMP (COMM.)/109/2024 Page 51 of 54 -52- "17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something, which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something, which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See Gobardhan Das v. Lachhmi Ram, AIR 1954 SC 689, Thawardas Pherumal v. Union of India, AIR 1955 SC 468, Union of India v. Kishorilal Gupta & Bros., AIR 1959 SC 1362, Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 SC 588, Jivarajbhai Ujamshi Sheth v.
Chintamanrao Balaji, AIR 1965 SC 214 and Renusagar Power Co. Ltd. v. General Electric Co. (1984) 4 SCC 679:
AIR 1985 SC 1156)"
45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306, the Court held: (SCC pp. 320-21, paras 43-45) "43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.
44. The legal position in this behalf has been summarized in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63: (2009) 4 SCC (Civ.) 16] and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. [(2010) 11 SCC 296: (2010) 4 SCC (Civ.) 459] to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.
45. This para 43 reads as follows: (Sumitomo case [(2010) 11 SCC 296: (2010) 4 SCC (Civ.) 459], SCC p. 313)
43.... The umpire has considered the fact situation OMP (COMM.)/109/2024 Page 52 of 54 -53- and placed a construction on the clauses of the agreement, which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal.As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. [(2009) 5 SCC 142: (2009) 2 SCC (Civ.) 406] the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view, which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."
48. There is no substance in the argument advanced on behalf of petitioner/ MCD that award of interest by Ld. Arbitral Tribunal in favour of respondent, is against the principle of law and thus, the impugned arbitral award suffers from patent illegality on such ground. It is well settled law that even in the absence of any provision in the contract regarding payment of interest, the Arbitral Tribunal is well within its right to award interest by virtue of S. 31(7) of the Act of 1996. While saying so, this Court is also fortified by the decisions of Hon'ble Apex Court in the cited cases of Pam Developments Pvt. Ltd. (supra), Oriental Structural Engineers Pvt. Ltd. (supra) and M/s Mahesh Construction (supra).
49. It is quite crystal clear that all the grounds of challenge raised in the present objection petition, do not fall within the ambit of the limited grounds of challenge as provided OMP (COMM.)/109/2024 Page 53 of 54 -54- in S. 34 (2) of the Act of 1996. Rather, all these grounds would require this Court to re-appreciate the evidence led before Ld. Sole Arbitrator and to return its findings on the facts, which, in the opinion of this Court and in view of the settled legal positions laid down in above referred decisions, is impermissible under the law. Hence, this Court is of the considered view that the impugned arbitral award dated 14-09-2024 does not suffer from any illegality or perversity and does not call for any interference by this Court.
50. For the foregoing reasons and the discussion made hereinabove, the objection petition is devoid of any merit. Consequently, the objection petition is hereby dismissed. No order as to cost.
51. Arbitral Record, if any, be sent back along with copy of this order, as per the rules.
52. File be consigned to record room, after due compliance.
Digitally signed by VIDYAAnnounced in the open Court VIDYA PRAKASH Date: On 08th Day of August, 2025 PRAKASH 2025.08.08 17:32:11 +0530 (VIDYA PRAKASH) DISTRICT JUDGE (COMMERCIAL COURT)-01 CENTRAL DISTRICT/THC/DELHI.
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