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HIGH COURT OF TRIPURA
AGARTALA
ARB.A. NO.07 OF 2022
1.The State of Tripura,
represented by the Secretary-cum-Commissioner,
Public Works Department(R&B),
New Secretariat Building,
PO Kunjaban, Agartala, West Tripura.
2. The State of Tripura,
represented by the Executive Engineer,
PWD (R&B), Kailashahar Division, Unakoti Tripura
.......Applicant-Appellant(s)
Versus
Sri Debashish Das, Contractor.
S/o Lt. Nirmal Bikash Das,
Joynagar, Middle Road,
Agartala-799002
District:- West Tripura.
....... Respondent-contractor(s)
For the applicant-appellant(s) : Mr. K. De, Addl. GA
For the respondent-contractor(s) : Mr. Somik Deb, Sr. Advocate,
Mr. P. Chakraborty, Advocate
Date of hearing and delivery of
Judgment & Order : 31-01-2024
Whether fit for reporting : No
THE CHIEF JUSTICE MR. APARESH KUMAR SINGH
HON’BLE
HON’BLE MR. JUSTICE ARINDAM LODH
JUDGMENT & ORDER(ORAL)
222
The issue falls under consideration in this appeal is in respect of
the Agreement bearing No 01/SE(i)/EE/KLS/2014-2015(PBI) for
construction work of Central Jail, Kailashahar, Unokoti Tripura for an
estimated value of Rs.10,94,94,941/- to be completed within the stipulated
period of two years, the dispute arose between the parties which led to
appointment of an arbitrator.
2. Heard Mr. K. De, learned Addl. GA appearing for the applicant-
appellants. Also heard Mr. Somik Deb, learned senior counsel assisted by
Mr. P. Chakraborty, learned counsel for the respondent.
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3. This appeal filed under Section 37(1)(c) of Arbitration and
Conciliation Act, 1996 read with Section 13(1A) of the Commercial Courts
Act, 2015 is directed against the impugned judgment and order dated
16/03/2022 in Title Suit 04 (Arbitration) of 2020 along with Arbitral award
passed by the learned Arbitral Tribunal dated 17/06/2020, in Arbitration Case
No.ARB/SRB/2019(2) whereby and whereunder the learned District Judge,
Unokoti District, by an order dated 16/03/2022 upheld the arbitral award
passed by the sole Arbitrator and dismissed the application filed under
Section 34 of the Arbitration and Conciliation Act.
4. The relevant factual details of the case of the parties as culled
out from the pleadings on record are narrated hereunder:
4.1. On 27/12/2013 the Executive Engineer, PWD(R&B),
Kailashahar Division, Kailashahar, Unakoti Tripura published a Notice
Inviting Tender(NIT) for execution of the instant work for an estimated
amount of Rs.10,94,94,941 within a stipulated period of two years. The
respondent-contractor dropped the tender for the said work and became the
lowest tenderer at a tender value of Rs.11,71,04,839. Subsequently, the work
was awarded to the respondent-contractor by issuing work order dated
06/06/2014, with a stipulated date of completion of two years. As per work
order the stipulated date of commencement of the work was 20/06/2014 and
the date of completion of the work was stipulated on 19/06/2016.
4.2. Thereafter, an undated agreement bearing No 01/SE/11/EE/
KLSD/2014-2015 was entered between the contractor and the Executive
Engineer, who represented the State of Tripura, detailing the terms and
conditions and price schedules etc.
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4.3. Accordingly, the respondent-contractor mobilized his working
force and machinery but there was a delay in execution of the aforesaid
agreement for 165 days i.e. from 02/12/2014 to 14/01/2016 at the instance of
the appellants and as such the respondent-contractor had to remain idle for a
considerable period of time as aforementioned. In addition, the work suffered
further delay due to late supply/piece meal supply and changes in designs
and drawings on several occasions and performing additional lead and lift in
earth work due to geographical condition of site over which the respondent-
contractor had no control, resulting in prolongation of the contract period and
it became onerous for him to complete the work at the agreement rate due to
abnormal rise in prices. The respondent-contractor proposed 30%
enhancement over the agreement rate to compensate price escalation and if
the proposal so made was not acceptable, the contract would be closed. But
the appellants on 31/01/2019 rescinded the contract instead of closing it.
Moreover, the respondent-contractor also alleged that payment against
additional lift and lead in the earth work as executed by the contractor has
not been made, which cropped up as major dispute in between the claimant-
contractor and the respondent-appellants.
4.4. On the other hand, the appellants alleged that the respondent-
contractor deliberately suppressed the material fact and field realities with
the intention of causing fraud and abuse of the process of arbitration.
Moreover, the appellants by denying the contentions of the respondent-
contractor alleged that the department had handed over the clear and
undisputed site to the respondent-contractor in time and performed reciprocal
obligations as and when required. However, the department accepted the
delay for 165 days as recorded in hindrance register and agreed on principle
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to give extension for this delay without any levy of compensation as
envisaged in the L.D. Clause. Further, the appellants denied the price
escalation as demanded by the respondent-contractor as it was not as per
provision of the agreement. The appellants also alleged that the contractor
was provided enough opportunities to execute the work by extending time
and carrying out reciprocal obligations, but the respondent-contractor
suspended the work from time to time denying the instructions of the
appellants and ultimately stopped the work in the month of March, 2017 and
remained adamant to enhance the rate @30% over the agreement rate for
executing further work. But when all efforts to re-start the work failed, the
appellants rescinded the contract under the provisions of the agreement, after
serving show cause notice to the respondent-contractor.
4.5. The respondent-contractor objected to the final action taken by
the appellants depicting various grounds. As regards, payment against
additional lead and lift in the execution of earth work as claimed by
respondent-contractor, it is the stand of the appellants that the amount
claimed by the respondent-contractor is not entertainable and whatever
amount is payable on account of extra/additional lead and lift has been taken
into consideration under extra item Nos.11 and 14(in total Rs.2,92,334/-), as
th
shown in 7 RA and final bill, the balance outstanding payment of which is
yet to be paid.
4.6. As a result, disputes arose between the parties, which resulted
into appointment of a sole arbitrator on 28/5/2019 vide order
no.7(17)/CE/PWD (Building).
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4.7. Considering the controversies transpired from the respective
statement of claims and defense and the documents filed by the parties, the
learned Arbitrator framed the following issues:
1. Whether the arbitration case is maintainable in its present form.
“
2. Whether the claimant is entitled to get the balance outstanding payment
against the work executed upto 3-1-2017, but not measured? Rs
50,00,000/-
3. Whether the claimant is entitled to get the balance outstanding payment
against the extra/deviated item for additional lift, but not measured? Rs 1,
31.44,169/-
4. Whether the claimant is entitled to get the balance outstanding payment
against the work executed as extra item for additional lead, but not
measured? -Rs 1,03,95,679/-
5. Whether the claimant is entitled to get the balance outstanding payment
against the work executed and measured, but not paid? Rs 28,01,334/-
6. Whether the claimant is entitled to get refund of security deposit?
Rs.14,05,000/
6(a)- Whether the claimant is entitled to get refund of earnest money
amounting to Rs.10,95,000 ?
7. Whether the claimant is entitled to get outstanding payment against
th
price escalation bill upto 6 R.A. BILL?-Rs 1,37,99,630/-
7(a)-Whether the claimant is entitled to get loss incurred due to overhead
expenses amounting to Rs12,45,000?
7(b)-Whether the claimant is entitled to get loss on the cost of materials
brought to site amounting to Rs20,00,000?
8. Whether the rescission of contract by the respondent is lawful or not?
9. Whether the claimant is entitled to get loss of expected profit @ 15% on
the balance work remaining unexecuted?- Rs 34, 24,048/-
10. Whether the respondent Is entitled to get the difference of cost
amounting to Rs 1,10,50, 639/- for completing the unexecuted work left by
the claimant?
11. Whether the claimant and/or respondent is/are entitled to get interest
on dues to be paid to the claimant or respondent as per provisions of the
Arbitration and Conciliation Act, 1996 as amended? - As would be decided
by Arbitrator
12. Whether the claimant or respondent is entitled to any Cost? -As would
be decided by Arbitrator.
”
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4.8. On going through the documentary evidence furnished by both
the parties with their respective statement of claims and defense and having
heard the learned counsel of the parties, the learned Arbitrator by the
impugned order dated 18.04.2017 declared the award in the following
manner:
“Summary of award
Issue No-1-Whether the claim petition of the claimant contractor is
maintainable?
It is declared by the sole arbitrator that claim petition of the claimant
contractor is maintainable for the reasons as discussed under issue No-1
Issue No-2- Whether the claimant is entitled to balance outstanding
payment against work executed upto 3-1-2017, but not measured?
- Rs.50,00,000/-
This claim under issue-2 has not been established and hence NIL Award.
Issue-3.Whether the claimant is entitled to get the balance outstanding
payment against the extra/deviated item for additional lift, but not
measured? Rs 1,31,44,169/-
AND
Issue-4.Whether the claimant is entitled to get the balance outstanding
payment against the work executed as extra item for additional lead, but
not measured? -Rs 1,03,95,679/-
Both the issues are discussed together. The claims under these issues are
not established and hence NIL award.
Claim No-5.- Whether the claimant is entitled to get outstanding payment
against executed work measured but not paid ?-28,01,334
The issue has been established. The tribunal awards a sum of Rs.39,66,805
against CLAIM No-5. The awarded amount is subjected to statutory
deduction, if not already made. The amount after deduction, if any, shall
carry simple interest @ 5% from the commencement of arbitration up to
the date of making award and whereafter it shall carry interest @ 7% till
realisation.
6. Whether the claimant is entitled to get refund of security deposit? Rs.
14,05,000/-
6(a)- Whether the claimant is entitled to get refund of earnest money
amounting to 10,95,000?
The claims under these issues 6 and 6(a) are established. The security
deposit and earnest money claimed are released. The released security
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deposit and earnest money, will however carry no interest, if paid within
forty days; otherwise it will carry simple interest @ 5% per annum after
forty days from the date of publication of award up to the date of
realisation.
7.Whether the claimant is entitled to get outstanding payment against price
escalation bill upto 6 R.A. BILL?-Rs.1,37,99,630/- as revised to
th
Rs.1,44,64,88 up to 7 R.A, BILL.
The claim under the issue is partially established, Awarded a sum of
Rs.1,07,73,166 against claim under this issue, with interest @ 5% p.a.
from the commencement of arbitration up to the date of making award and
thereafter it shall carry interest @ 7% till realisation.
7(a)-Whether the claimant is entitled to get loss incurred due to overhead
expenses amounting to Rs12,45,000?
The claim under this issue is partially established. The tribunal awards a
sum of Rs. 3.32,000/--
The awarded sum shall carry interest @ 5% p.a. from the commencement
of arbitration up to the date of making award and thereafter it shall carry
interest @ 7% till realisation.
Issue-7(b)-Whether the claimant is entitled to get loss on the cost of
materials brought to site amounting to Rs20,00,000?
The claims under the issue 7(b) not established. Nil award.
-Issue No-8"Whether the rescission of contract by the respondent is lawful
or not.
The arbitral declares that the rescission of contract by the respondent is
not legally valid. Reasons are stated while discussing the issue.
Issue No-9. Whether the claimant is entitled to get loss of expected profit
@ 15% on the balance work remaining unexecuted? Rs 34, 24,048/- as
revised to Rs55,25,319
The claim under this issue is partially established. A sum of Rs 22,98,587-
is awarded under this issue. The awarded sum shall carry interest @ 5%
p.a. from the commencement of arbitration up to the date of making award
and thereafter it shall carry interest @ 7% till realisation.
Issue No-10.Whether the respondent is entitled to get the difference of cost
amounting to Rs 1,10,50, 639/- for completing the unexecuted work left by
the claimant ?
This is a counter-claim from respondent. The claim is not established. Nil
award.
imant and/or respondent is/are entitled to get
Сlaіт No.11. Whether the cla
interest on dues to be paid to the claimant or respondent as per provisions
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of the Arbitration and Conciliation. Act, 1996 as amended? - As would be
decided by Arbitrator
The tribunal has awarded interest separately, where applicable, while
discussing the issues. There is no need to discuss the issues under this
issue.
12. Whether the claimant or respondent is entitled to any Cost? -As would
be decided by the Arbitrator
Awarded a sum of Rs.5,74,230 to the claimant with direction that 35% of
the cost so awarded shall have to be paid to the respondent with interest
where applicable
.”
4.9. Being aggrieved by the award dated 17/06/2020, the appellants
filed a petition before the Court of learned District Judge, Unokoti District,
Kailashahar under Section 34 of the Arbitration and Conciliation Act, 1996
for setting aside the arbitral award passed by the learned Arbitrator in
Arbitration Proceeding No.02 ARB/SRB of 2019 which was registered as
Title Suit 04 (ARBITRATION) of 2020. The learned District Judge by an
order dated 16.03.2022 upheld the arbitral award passed by the learned
Arbitrator and rejected the petition filed by the appellants. Hence, the instant
Appeal.
5. Mr. K De, learned Addl. G.A. appearing for the appellants
submitted that learned District Judge, Unokoti Judicial District failed to
appreciate the arbitral award arrived at by the learned Sole Arbitrator.
Moreover, the learned Court below as well as the learned Sole Arbitrator
have failed to consider that none of the 13 claims as submitted by the
Contractor-Respondent is covered by the terms and conditions of the
contract. Further, the learned District Judge as well as the learned Sole
Arbitrator have failed to consider that the claimant-respondent is not at all
entitled to get payment as per issue No. 2 as the payment relating to issue No.
2 has already been paid to the Contractor-Respondent. Also, they failed to
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consider Issue No. 3 that the Contractor-Respondent is not entitled to get any
amount as the said claim for lift had already been measured and
th
Rs.1,71,906/- upto 7 RA bill and final bill had already been paid to the
Contractor Respondent. The learned District Judge, Unakoti Judicial District
as well as the Sole Arbitrator have failed to consider that the interest of 7%
so preferred for any delay beyond the time frame is not entertainable as there
is no provision of contract exists in the agreement in this regard.
5.1. Mr. De, learned Addl. GA further submitted that according to
clause 44 of the agreement price escalation clause as inserted in the
agreement will not be applicable in this case and as such the contractor
respondent is not entitled to any amount as escalation of price. As a result,
state had suffered irreparable loss due to suspension of work by the
respondent contractor. Moreover, the Respondent Contractor was never
forced to dump the materials at the work site rather, it was the duty of the
contractor concerned to procure materials according to requirement of the
work.
6. In the instant appeal, the appellants have inter alia made the
following prayers:
“(i) Admit this application;
(ii) Issue notice upon the respondent;
(iii) Call for the LC records;
(iv) After hearing the parties, set aside the judgment and order dated
16/03/2022 passed in Title Suit 04 (Arbitration) of 2020 by the Ld District
Judge, Unakoti District, Kailashahar along with arbitral Award passed by
the Ld. Arbitral Tribunal on 17/06/2020 in Arbitration Case No.
ARB/SRB/2019(2);
(v) Any other order/order(s) may pass as Your Lordship may deem fit and
proper.
AND
For this act of kindness the Appellant as in duty bound shall ever pray.”
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7. On the other hand, Mr. Somik Deb, learned senior counsel
appearing for the respondent-contractor submitted that the claimant
respondent ( c for short) had raised his claims under various Heads,
‘ laimant’
and the learned Arbitrator, by the impugned Award dated 17.06.2020 had
partly allowed the claims of the claimant. According to learned senior
counsel, ground Nos. I to IV are too vague, to inspire any confidence, and
therefore, do not merit any consideration. According to learned senior
counsel, ground No.V cannot be sustained inasmuch as the same relates to
the findings, recorded by the learned Sole Arbitrator with reference to issue
No.2 of the Claims, raised by the Claimant. The said Issue has been decided
against the Claimant, and therefore, the appellants cannot have any justifiable
reason to feel aggrieved. Moreover, Ground No.VI cannot be sustained
inasmuch as the same relates to the findings, returned by the learned Sole
Arbitrator with reference to Issue No.II raised by the Claimant as the said
Issue has also been decided, against the claimant, and hence, the appellants
cannot be treated to be as aggrieved parties against the said finding. The next
Ground namely, Ground No. VII appertains to grant of Interest, awarded by
the Learned Sole Arbitrator, in favour of the claimant. In this context, it is
submitted that the mandate, contained in the two Clauses (a & b) of Section
31(7) of the Act assumes paramount significance.
7.1. Moreover, Mr. S. Deb, learned senior counsel appearing for the
respondent-contractor submitted that Section 31(7)(a) of the Act relates to
the award of Interest by the Arbitrator from the date of accrual of the cause
of action to the date of Award. Accordingly, Section 31(7)(a) relates to
Interest pendente lite. The expression "unless otherwise aggrieved by the
parties', 'sum' & 'award is made Interest', assumes paramount significance.
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7.2. Learned senior counsel has placed reliance upon the following
judgments of the Apex Court:
i)
Hyder Consulting (UK) Ltd. v. State of Orissa, (2015) 2 SCC
189, Paragraph nos. 2, 7, 13, 26, 28 & 29
ii) Morgan Securities & Credits (P) Ltd. v. Videocon Industries
Ltd., (2023) 1 SCC 602, paragraphs 1, 4 to 6, 13, 14, 16, 17, 20
to 25, 27 & 28,
7.3. Mr. Deb, learned senior counsel for the respondent-contractor
submitted that Arbitrator would be well within his limits & jurisdiction to
award Interest, at such rate, as he may deem reasonable, on the whole/part of
the money, payable for the whole/part of the period, between the date of
accrual of cause of action to the date of making/passing of the Award. Thus,
the Arbitrator would be well within his limits & jurisdiction to award
Interest, at such rate, as he may deem reasonable.
7.4. Furthermore, Mr. Deb, learned senior counsel for the
respondent-contractor submitted that, from a conspectus of the above two
judicial pronouncements, it remains beyond the cavil of any dispute that the
Arbitrator was well within his jurisdiction, in awarding Interest, in favour of
the Claimant, and therefore, the judicial intervention, as sought for, by the
appellants, vide Ground No. VII & XI of the Memorandum of Appeal, does
not merit any consideration.
7.5. While discussing Ground No.VIII, Mr. Deb, learned senior
counsel for the respondent-contractor submitted that the Award of the
Arbitrator under Clause 44 of the agreement is sustainable.
7.6. Moreover, learned senior counsel vehemently argued that the
Work Order was issued, in favour of the Claimant on 06.06.2014, with a
stipulation that the parties to the contract should execute the Agreement
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within 15 days, from the date of issuance of the Work Order, i.e., on or
within 21.06.2014. Accordingly, the agreement was executed between the
Claimant & the employer and the scheduled date of commencement of the
work stipulated thereunder was 20.06.2014, with a stipulation that the work
had to be concluded within two years therefrom. It is also an admitted fact
that the execution of the work was hindered, on account of delay of 165 days,
solely attributable to the employer. The said act had also been noted in the
Hindrance Register, which has been adverted to by the learned Sole
Arbitrator in his Award.
7.7. Learned senior counsel has referred Clause 44 of the Agreement
which provides for Price Adjustment. Under Clause 44 of the Agreement, the
Claimant was/is entitled to price escalation inasmuch as the said Clause is
couched in a negative language, thereby embracing twin conditions, namely:-
i) value of the work to be Rs.1.00 crore and above, and
ii) the period for completion of the work is 24 months or less thereto.
7.8. For invocation of the negative stipulation, contained in Clause
44 of the Agreement, both the conditions mentioned therein, are mutually
inclusive Clauses, and hence, are not applicable in the instant case as
submitted by learned senior counsel, Mr. Deb for the respondent-contractor.
Moreover under Clause 44.1 of the Agreement, which is couched in a
positive language mandates that Price Adjustment would be admissible to a
contractor, where the estimated price of the work is more than Rs.1.00 crore,
and having a completion period of more than 24 months.
7.9. Moreover learned senior counsel appearing on behalf of the
respondent-contractor submitted that it is an admitted position that the value
of the contract in question is more than Rs.2.00 crores, and it was completed
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within a period of more than 24 months. The second sentence of Clause 44.1
of the Agreement amplifies the above position, by mandating that Price
Adjustment would be applicable, within the original contract period, as also
in the extended time for completion, due to the fault of the
respondent/employer.
7.10. Clause 44 of the Agreement employs the expression 'stipulated
time for completion', but Clause 44.1 of the Agreement employs the
expression 'having completio . The second
n period of more than 24 months’
sentence of Clause 44.1 of the Agreement i.e. This should be applicable
“
within the original contract period extended period owing to departmental
leads to a conclusion that Clauses 44 & 44.1 of the Agreement
delay”
operates in two different fields, and one is no substitute for the other, and
hence, the said claim of the claimant under Issue No. ii is sustainable, under
Clause 44.1 of the Agreement.
7.11. Further, learned senior counsel appearing on behalf of the
respondent-contractor submitted that both under Clause 44 & Clause 44.1 of
the Agreement, the Claimant was/is entitled to Price Escalation/enhanced
rate for execution of the work, which had been asserted by him.
7.12. Moreover, it is contended by the learned senior counsel
appearing on behalf of the respondent-contractor that a recital contained in
the Agreement to the effect that time is the essence of the contract, is by
itself, not conclusive of the fact that the time is the essence thereof, and
whether time is the essence of the contract is a question of intention of the
parties to the contract, to be gathered from the Terms of the contract. Further,
it is submitted that when a contract provided for imposition of penalty and
grant of extension of time, and the contractee grants extension of time,
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without imposing any penalty therefore, then in such circumstances, it cannot
be inferred that the time was the essence of such a contract.
7.13. In support of his submission, learned Counsel for the
respondent-contractor has placed reliance upon the following judgments of
the Apex Court (i) Hyderabad Municipal Corpn. v. M. Krishnaswami
Mudaliar, (1985) 2 SCC 9, (ii) Asian Techs Ltd. v. Union of India, (2009)
10 SCC 354 (iii) Asian Techs Ltd. v. Union of India, (2009) 10 SCC 354,
and argued that since, the execution of the work was hindered for 165 days,
for reasons attributable to the employer, applying the mandate, contained in
Clause 44.1 of the Agreement, it may be concluded that the said period of the
execution of the work was two years + 165 days. Since, the period of
execution of the work actually got extended beyond two years, the negative
stipulation, contained in clause 44 of the Agreement would not come into
play.
7.14. Moreover, learned senior counsel appearing on behalf of the
respondent-contractor submitted that an arbitrator is the best interpreter of
the Clauses of the Agreement, and any erroneous interpretation of a Clause
of an Agreement cannot constitute a valid basis for challenge, either under
Section 34(ii) read with the Explanation appended thereto, or Section 34(2A)
of the Act. It is submitted that the Proviso, appended to the substantive part
of Section 34(ii) of the Act amplifies the above two contention. In view of
the same, since, a challenge on the aforesaid premise is not maintainable,
under Section 34 of the Act, as a corollary thereof, it logically follows
therefrom that a challenge under the said premise, is equally not
maintainable, under Section 37(1)(c) of the Act.
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7.15. In this context, learned senior counsel appearing on behalf of the
respondent-contractor referred following judicial pronouncements:-
i) Associate Builders v. DDA, (2015) 3 SCC 49, paragraph nos.15
to 19, 27 to 30, 35, 36, 40, 42.1 & 42.2;
ii) Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15
SCC 131, paragraph nos. 20, 26, 34 to 44, 67 & 68; and
iii) Delhi Airport Metro Express (P) Ltd. v. DMRC, (2022) 1 SCC
131 Paragraph nos. 22, 24, 26, 28, 29 to 31, 37 to 43, 48 to 52.
8. We have considered the rival submissions of learned counsel
appearing for the parties and gone through the relevant materials placed on
record. We have also gone through the award returned by the learned
Arbitrator as well as the judgment and order passed by learned District
Commercial Court by which the arbitral award passed by the learned
Arbitrator has been upheld.
8.1. The scope of interference in an appeal under Section 37 of the
Act of 1996 has been delineated in the decisions rendered by the Apex Court.
We are inclined to refer to the latest decision of the Apex Court in this regard
rendered in case of S.V. Samudram v. State of Karnataka and Anr.2024
SCC Online SC 19. Paragraphs 62 to 73 are extracted here-under:
62. Moving further, we now consider the judgment impugned before us, i.e.,
“
the order of the High Court upholding such modification, under the
jurisdiction of Section 37 of the A&C Act.
63. It has been observed by this Court in MMTC Ltd. v. Vedanta Ltd.
As far as interference with an order made under Section 34, as per
“14.
Section 37, is concerned, it cannot be disputed that such interference under
Section 37 cannot travel beyond the restrictions laid down under Section 34.
In other words, the court cannot undertake an independent assessment of the
merits of the award, and must only ascertain that the exercise of power by the
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court under Section 34 has not exceeded the scope of the provision. Thus, it is
evident that in case an arbitral award has been confirmed by the court under
Section 34 and by the court in an appeal under Section 37, this Court must be
extremely cautious and slow to disturb such concurrent findings.”
(Emphasis Supplied)
64. This view has been referred to with approval by a bench of three learned
Judges in UHL Power Company Ltd v. State of Himachal Pradesh. In respect
of Section 37, this court observed:
—
As it is, the jurisdiction conferred on courts under Section 34 of the
“16.
Arbitration Act is fairly narrow, when it comes to the scope of an appeal
under Section 37 of the Arbitration Act, the jurisdiction of an appellate court
in examining an order, setting aside or refusing to set aside an award, is all
the more circumscribed
.”
65. This Court has not lost sight of the fact that, as a consequence to our
discussion as aforesaid, holding that the judgment and order under Section
34 of the A&C Act does not stand judicial scrutiny, an independent
evaluation of the impugned judgment may not be required in view of the
holding referred to supra in MMTC Ltd. However, we proceed to examine the
same.
66. We may also notice that the circumscribed nature of the exercise of
power under Sections 34 and 37 i.e., interference with an arbitral award, is
clearly demonstrated by legislative intent. The Arbitration Act of 1940 had a
provision (Section 15) which allowed for a court to interfere in awards,
however, under the current legislation, that provision has been omitted.
67. The learned Single Judge, similar to the learned Civil Judge under
Section 34, appears to have not concerned themselves with the contours of
Section 37 of the A&C Act. The impugned judgment reads like a judgment
rendered by an appellate court, for whom re-examination of merits is open to
be taken as the course of action.
68. We find the Court to have held the award to be perverse and contrary to
public policy. The basis for such a finding being the delay on the part of the
contractor in completion of the work which “could have been avoided”.
Significantly, as we have observed earlier such a finding is not backed by any
material on record.
69. What appears to have weighed with the court is that the factoring of the
cost escalation between the years 1989-1990 and 1992 by 100% was
exaggerated. But then equally, there is no justification in granting lump sum
escalation by 25% of the contract value. Well, this cannot be a reason to
modify the award for the parties are governed by the terms and conditions
and the price escalation stood justified by the petitioner based on cogent and
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reliable material as was so counted by the Arbitrator in partly accepting
and/or rejecting the claims.
70. In our considered opinion, the court while confirming the modification of
the award committed the very same mistake which the Court under Section
34 of the A&C Act, made.
71. The Court under Section 37 had only three options:
—
(a) Confirming the award of the Arbitrator;
(b) Setting aside the award as modified under Section 34; and
(c) Rejecting the application(s) under Section 34 and 37.
72. The learned single Judge has examined the reasoning adopted by the
learned Arbitrator in respect of certain claims (claims 3 and 7, particularly)
and held that allowing a claim for escalation of cost, was without satisfactory
material having been placed on record and is “perverse and contrary to the
it appears that such a holding on part of the Judge
public policy”. However,
is without giving reasons therefor. It has not been discussed as to what the
evidence was before the learned single Judge to arrive at such conclusion.
This is of course, entirely without reference to the scope delineated by
various judgments of this Court as also, the statutory scheme of the A & C
Act.
73. Having referred to J.G Engineers (P) Ltd. v. UOI and more particularly
para 27 thereof, it has been held that the award passed by the learned
Arbitrat
or is “patently illegal, unreasonable, contrary to public policy.”
There is no reason forthcoming as to how the holding of the learned
Arbitrator flies in the face of public policy.
”
9. In view of the aforesaid enunciation of law, there cannot be
quarrel that the Arbitrator is the sole judge for construction of the terms and
conditions of the agreement. But, what we find in the instant case, even
learned Commercial Court has not made any reference to grounds of
challenge relating to price escalation and applicability of Clause 44 and 44.1
of Agreement. Moreover, the Learned District Judge as well as the Sole
Arbitrator has failed to consider whether the claimant-respondent is entitled
to get payment relating to issue no.2 as the payment relating to issue no.2 has
already been paid to contractor respondent.
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10. The findings of the learned Commercial Court extracted
hereunder would unambiguously show that there has been complete non
consideration of any of the several grounds urged by the Appellant to
question the impugned Award:
tioned facts, and judgments of Hon'ble Supreme
“Looking at the above men
Court, this Court is of the opinion that the Arbitrator has legal authority to award
the pre-reference period interest, pendente lite interest and post award period
interest on the amounts which has been awarded in different heads of the Award.
The Applicant Executive Engineer, PWD(R&B), Kailashahar in his
application in his ground of challenge of award apart from challenging the award
relating to payment of interest, has also raised in dispute No 2 that payment for an
amount of Rs.1,20,425/- has also been made for 8276.651 cum @ 14.55 per cum
and as such claim as preferred by the claimant-contractor is not maintainable.
The applicant in his application has also in dispute Nos 3, 4, 5, 6, 7, 8 & 9 stated
above various items for which the claimant-contractor was not entitled to get, but
the Learned sole Arbitrator did not consider that. In my considered opinion, so far
as grounds of challenge of award relating to dispute Nos 3 to 9, are considered,
these are relating to re-examining and re-appraisal of the evidence considered by
the Arbitrator. It is also settled principle that award cannot be challenged on the
ground that Arbitrator has arrived wrong conclusion. The reasonableness of the
reason given by Arbitrator cannot be challenged. The Arbitrator is the sole Judge
of the quality of the evidence and it will not be for the Court to take upon itself the
task of being a Judge of the evidence before the Arbitrator. Moreover, scope of
interference by Courts in regard to arbitral award is limited. Courts do not sit in
appeal over the findings and decision of the Arbitration. Hence, the grounds of
challenge of award as stated by the applicant in his application as mentioned in
dispute Nos 3 to 9, cannot be considered and hence, accordingly rejected.
10. In the light of the aforesaid fact and circumstances, I am of the
considered view that the Learned sole Arbitrator has correctly passed the arbitral
award dated 17.06.2020 awarding penal interest in favour of respondent-
contractor and the same does not warrant for interference and it is not liable to be
set aside. This Court affirms the Award dated 17.06.2020.
”
11. The learned District Judge has failed to test the correctness of
the award within the contours of the grounds available under Section 34(2)
and 34(2-A) of the of the Arbitration and Conciliation Act, 1996 without
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referring to the relevant Clauses of the Agreement. Non-consideration of any
of the grounds raised under Section 34 of the Act makes the judgment of the
learned Commercial Court unreasoned and unsustainable.
12. In view of the discussions made here-in-above, we are of the
view that the matter be remitted to the learned District Court, Unakoti
District to decide the grounds urged by the appellant and also as to the
applicability of Clause 44 of the agreement and as regards to the expected
loss of profit or adjustment in accordance with law within a reasonable time
preferably 12(twelve) weeks from the date of receipt of the copy of this order
since the Arbitration proceeding was initiated way back in the year 2019.
Since the matter is remanded to the learned Commercial Court only on the
grounds that the impugned Judgment shows complete non application of
mind and non consideration of the grounds urged in the Section 34
application, we have consciously refrained from observing any opinion on
the grounds urged by the parties in the question of sustainability of the
Award rewarded by the Arbitrator at this stage.
The appeal is disposed of in the manner and to the extent as
indicated above.
(ARINDAM LODH, J) (APARESH KUMAR SINGH, CJ)
Puspita / Rohit