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2023 DIGILAW 1123 (DEL)

Union of India v. Roshan Real Estate Pvt. Ltd.

2023-02-22

CHANDRA DHARI SINGH

body2023
ORDER Chandra Dhari Singh, J. (Oral) 1. The instant petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as `the Arbitration Act') has been filed on behalf of the petitioner seeking the following reliefs: "a) Set aside the claim no. 1 (Part-I) S. No. 11 and Claim 12 in Arbitral Award dated 12.03.2022 passed by the Ld. Sole Arbitrator Sh. Dinesh Kumar, in the matter between parties herein holding that the Respondent is not at all entitled for any claim, demand and money against the Petitioner in any manner whatsoever. b) This petition may kindly be allowed as prayed for with cost and/or. c) Pass such further or other orders as this Hon'ble Court may deem fit in the facts and circumstances of the case in favour of the Petitioner and against the Respondent in the interest of justice." 2. The facts delineated hereunder have led to the filing of the instant petition before this Court: a. The respondent is a Private Limited Company engaged in the business of civil engineering infrastructure projects. The petitioner invited tenders for the work of `Construction of Office Building for ASI at 24 Tilak Marg, New Delhi including Electrical Installation' for an estimated cost of Rs. 24,85,51,972/-. The respondent was declared the successful bidder for the said work vide letter No. 3983 dated 27th September 2012 and accordingly, the parties also executed an Agreement dated 18th October 2012. b. The stipulated date for the completion of work was 17th April 2014, however, the work was delayed and completed on 30th January 2017, i.e., after a delay of 2 year and 9 months. c. The final bill was raised by the respondent on 18th October 2018, however, it is the case of the respondent that the petitioner failed to clear the dues. Hence, disputes arose between the parties. For the resolution of such disputes, the petitioner vide its letter dated 31st December 2019 appointed a Sole Arbitrator. d. Arbitration proceedings were initiated amongst the parties and the Sole Arbitrator, after conclusion of the proceedings passed the Arbitral Award on 12th March 2022 and Order dated 2nd May 2022. e. The petitioner, being aggrieved by the said Award and Order has approached this Court, challenging the findings of the Sole Arbitrator for Claim Nos. 1 (Part I) S, 11 and 12, which were decided in the favour of the respondent. 3. e. The petitioner, being aggrieved by the said Award and Order has approached this Court, challenging the findings of the Sole Arbitrator for Claim Nos. 1 (Part I) S, 11 and 12, which were decided in the favour of the respondent. 3. Mr. Niraj Kumar, learned Senior Central Government counsel appearing for the petitioner submitted that the impugned Award has been passed without considering the relevant documents and claims before the Arbitrator. It is submitted that Arbitrator failed to appreciate the terms and conditions of his own appointment at the time of raising its own fee and awarding Claim No.12. 4. It is further submitted that the Arbitrator failed to appreciate that the respondent in its claim was silent on the unexplainable delay of 668 days beyond the stipulated period mentioned in the Agreement for completion work order and the Sole Arbitrator did not consider this fallacy while passing the Award. It is submitted that the delay was attributable only to the petitioner, however, the same was not considered by the Arbitrator. 5. It is submitted that the competent authority granted extension of time without levying compensation in the interest of work to finalize the contract without any dispute. The respondent was pursued from time to time to expedite the progress of the work, however, the respondent did not make sincere effort to maintain the progress as envisaged under Clause 5 of the Agreement despite repeated requests made by the petitioner. 6. It is submitted that dealing with the claims of the respondent by the Sole Arbitrator in light of the above stated clauses was beyond the powers vested in him by the prevalent laws. The Sole Arbitrator has ignored Clauses 1.14 and 1.17 under the heading of Temporary Earth Retaining Structure and Clauses 2 and 3 under the heading of Additional Specifications of Agreement. 7. It is further submitted that the respondent breached the provisions contained in Clause 12.4 of the Agreement and filed the claim of amount paid less due to difference in quantity and wrong derivation of rate of deviated items. The claim submitted by the respondent was without any analysis report and without compliance to the Clause 12.2 and 12.3 of conditions stipulated in the Agreement and same is contrary to the settled procedure of law. 8. The claim submitted by the respondent was without any analysis report and without compliance to the Clause 12.2 and 12.3 of conditions stipulated in the Agreement and same is contrary to the settled procedure of law. 8. Learned counsel further submitted that Sole Arbitrator failed to appreciate that it is a well settled principle of law that where a case has been presented beyond contract, the Arbitrator cannot travel beyond the contract and cannot write a new contract for the parties. Further, relying upon Paragon Constructions (India) Pvt. Ltd. vs. Union of India , OMP No. 385/2007 decided on 17th January 2008, learned counsel submitted that Sole Arbitrator failed to appreciate that it is also a well settled principle of law that the Arbitrator cannot adjudicate the claims between parties of his own whims and fancies and has to adjudicate the disputes on the basis of contract. 9. It is submitted that the impugned Award is in direct conflict with the public policy of the government of India issued from time to time. Furthermore, it is also in contravention with fundamental policy of Indian law and is also in direct conflict with the basic notions of morality or justice. 10. It is further submitted that the Award passed by the Sole Arbitrator is biased, arbitrary and without application of judicial mind. The Sole Arbitrator has failed to comply with the principles of natural justice while passing the Award and has not given proper reasons for the award. Further, it is submitted that the Sole Arbitrator ought to have given its reasons in the Award, however, the Sole Arbitrator has failed to weigh the evidence produced by the petitioner herein. 11. Therefore, it is prayed that while allowing the instant petition, the impugned Award dated 12th March 2022 be set aside to the extent of the findings of the Sole Arbitrator with regard to Claim Nos. 1 (Part I) S, 11 and 12. 12. Per Contra, Ms. Anusuya Salwan, learned counsel appearing on behalf of the respondent submitted that objections raised by the petitioner are in the nature of an appeal against the Award passed by the Arbitral Tribunal. It is submitted that the Arbitrator has passed a well reasoned Award and the objections are beyond the parameters of Section 34 of the Arbitration Act. 13. Anusuya Salwan, learned counsel appearing on behalf of the respondent submitted that objections raised by the petitioner are in the nature of an appeal against the Award passed by the Arbitral Tribunal. It is submitted that the Arbitrator has passed a well reasoned Award and the objections are beyond the parameters of Section 34 of the Arbitration Act. 13. It is submitted that as far as reliance placed on Clause 12 of the Agreement is concerned, the Arbitrator has duly interpreted the terms of the contract between the parties as can be seen from para 9.4 of the Award. It is well settled that interpretation of the terms of the agreement is within the domain of the Arbitral Tribunal and this Court may not substitute its own decision with that of the Arbitrator. The Arbitral Tribunal after interpreting Clause 12.2, 12.3 and 12.4 of the Agreement between the parties has come to a plausible view which can by no stretch of imagination be termed as perverse or which shocks the conscience of this Court. 14. It is further submitted that the respondent in its Statement of Claim, along with the documentary evidence, has substantiated breach of Contract on the part of the respondent and the Arbitrator, after consideration of the evidence on record and the hindrance register at paragraph, has attributed the delay on the part of the respondent. 15. It is submitted that the Arbitrator has made and published the Award after considering the entire evidence and other material on record. It is submitted that while adjudication of the disputes, three claims were raised and decided by the Arbitrator, which were duly adjudicated upon after proper consideration of the material on record and after hearing the parties. 16. It is further submitted that as per Clause 25(ii) of the Agreement, the Arbitral Tribunal had discretion in fixing the fee and awarding cost to the parties. Therefore, there is no error apparent on the face of record. 17. Learned counsel for the respondent submitted that the petitioner has failed to show that the impugned Award is against the public policy of India or in contravention of the fundamental policy of Indian law. Therefore, it is submitted that the instant petition being devoid of merit is liable to be dismissed. 18. Heard the learned counsel for the parties and perused the record. 19. Therefore, it is submitted that the instant petition being devoid of merit is liable to be dismissed. 18. Heard the learned counsel for the parties and perused the record. 19. The petitioner has raised challenge only qua certain claims, i.e., Claim Nos. 1 (Part I) S, 11 and 12, as decided by the Arbitrator and has not assailed the validity of the entire Award. The petitioner has invoked Section 34 of the Arbitration Act, which is reproduced hereunder: "34. Application for setting aside arbitral award.-- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if-- (a) the party making the application 1[establishes on the basis of the record of the arbitral tribunal that]-- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. [Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]..." 20. The contents of the provision clearly show that the intention of legislature while enacting the Arbitration Act, as well as while carrying out amendments to the same, was that there should be limited intervention of the Courts in arbitral proceedings, especially after the proceedings have been concluded and an Award thereto has been made by the concerned Arbitral Tribunal. Any claim brought forth a Court of law under Section 34 of the Arbitration Act has to be in accordance with the principle of the provision laid down under the Arbitration Act as well as interpreted by the Hon'ble Supreme Court. 21. On a bare reading of the invoked provision, it becomes evident that the words used therein are that "An arbitral award may be set aside by the Court only if", which signifies the intent of limiting the scope of interference by Courts in an Arbitral Award, passed after thorough procedure, involvement of parties, and appreciation of facts, evidence and law, `only. in the event of the circumstances delineated in the provision being met. The limited grounds which may invite the intervention and action thereupon by the Courts are explicitly laid down under the provision. in the event of the circumstances delineated in the provision being met. The limited grounds which may invite the intervention and action thereupon by the Courts are explicitly laid down under the provision. What is to be seen by a Court exercising jurisdiction under Section 34 of the Arbitration Act is that an Award passed by an Arbitral Tribunal may only be set aside if it is patently illegal, against the public policy of India, based on no evidence and delineates no reason for passing the Award. 22. While elaborating upon the grounds available under the provision, and that have been invoked by the petitioner vis-a-vis the impugned Award being in conflict with the public policy, the Hon'ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. vs. NHAI , (2019) 15 SCC 131 , held as under: "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 Court's intervention would be on the merits of the award, which cannot be permitted post amendment... 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 away with. 26. 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 away with. 26. Insofar as domestic awards made in India are concerned, an additional ground is now available under subsection (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 backdoor 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. 28. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), 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. 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. 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." 23. The petitioner has also raised the ground of patent illegality while challenging the Award. The Hon'ble Supreme Court in Associate Builders vs. DDA , (2015) 3 SCC 49 , while interpreting the same has observed as under: "42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three subheads 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 a 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 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.-- (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." 32. This last contravention must be understood with a caveat. Rules applicable to substance of dispute.-- (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." 32. 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." 24. A bare perusal of the above-referred pronouncements make it evident that the phrases are not to be construed in their plain meaning and have to be given due caution and consideration while being invoked to assail any Arbitral Award. To successfully raise a challenge against an Arbitral Award, the petitioner ought to satisfy this Court that the grounds as provided in the Section 34 of the Arbitration Act are met. It is, therefore, clear that the decisive test is that first, the Arbitrator had to adopt a judicial approach; second, the principles of natural justice have to be upheld; and third, the decision must not have been egregious, or rather, perverse. 25. In the instant petition, the petitioner has raised the grounds of contravention of public policy and fundamental policy, however, has not been able to show or establish that the findings of the learned Arbitrator are so patently illegal so as to shock the conscience of this Court. The petitioner has also raised the grounds of unreasoned Award and no evidence, however, a perusal of the impugned Award shows that while deciding Claim Nos. 1 (Part I) S, 11 and 12, the Arbitrator has given extensive findings and elaborate reasoning for such findings. 26. Moreover, the petitioner has also raised challenges that are substantially on the merits of the case. However, it is settled position of law that a Court while exercising jurisdiction and powers under Section 34 of the Arbitration Act shall not sit in appeal by examining and re- examining the case on its merits. 26. Moreover, the petitioner has also raised challenges that are substantially on the merits of the case. However, it is settled position of law that a Court while exercising jurisdiction and powers under Section 34 of the Arbitration Act shall not sit in appeal by examining and re- examining the case on its merits. The decision of the Arbitral Tribunal, passed after thorough consideration of the material on record and the submissions of the parties, is final and this Court is not required to carry out an exercise of re-adjudicating the disputes. An Arbitral Award may be impeached on the limited grounds but only under the conditions as explained by the Hon'ble Supreme Court in Delhi Airport Metro Express Pvt Ltd vs. Delhi Metro Rail Corporation , (2022) 1 SCC 131 , in the terms as reproduced hereunder: "28. The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the wellestablished principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of Courts of setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. 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 reappreciate 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. 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 reappreciate 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 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"." 27. Therefore, this Court shall also not indulge into the arguments on merits that have been raised by the petitioner, keeping in view the spirit, purpose and essence of the Arbitration Act. To enter into merits of arbitral proceedings and an arbitral award and re-appreciate all arguments while also re-adjudicating the disputes between the parties would mean to defeat the purpose of the legislation itself. CONCLUSION 28. Upon perusal of the pleadings and upon hearing the counsel for the petitioner, it is found that the grounds that have been invoked and the contentions that have been raised on behalf of the petitioner are essentially and substantially on merits of the case, dispute between the parties and the Arbitral Award. 29. As discussed in the foregoing paragraphs, this Court shall not sit in appeal and re-adjudicate the disputes between the parties while exercising its jurisdiction under Section 34 of the Arbitration Act. Hence, the petition does not stand on this ground. Secondly, the petitioner has raised the grounds of contradiction to the public policy and fundamental policy, as well as of no evidence and the Award being unreasoned, however, has miserably failed to establish the same. 30. Hence, the petition does not stand on this ground. Secondly, the petitioner has raised the grounds of contradiction to the public policy and fundamental policy, as well as of no evidence and the Award being unreasoned, however, has miserably failed to establish the same. 30. Therefore, keeping in view the contentions raised in the pleadings, the arguments advanced, the discussion on law in the foregoing paragraphs, this Court is of the considered view that there is no merit in the instant petition since no grounds as provided for under Section 34 of the Arbitration Act have been made out to successfully challenge the Arbitral Award dated 12th March 2022. 31. Accordingly, the instant petition is dismissed along with pending applications, if any. 32. The order be uploaded on the website forthwith.