The Delhi High Court dismissed a petition under Section 34 of the Arbitration Act challenging an award against MCD. The court held that the High Court does not sit as an appellate court to reappreciate facts and found no merit in the challenge grounds.
Petition challenging the arbitral award is dismissed. The award remains in force.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
MCD ..... Petitioner Through Mr.V.Gangotra, Advocate for MCD.
versus M/S. HARCHARAN DASS GUPTA CONSTRUCTION PVT. LTD. .... Respondent Through Mr.Harish Malhotra, Sr. Adv. with Mr.V.K.Sharma, Adv.
CORAM: HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J.
Page 1 of 13
OMP 424/2004
The case of the respondent/claimant was that the work envisaged construction of two subways. Subway-1 being at Netaji Subhash Marg, Jain Mandir (Police Post) and Subway 2 being opposite Lajpat Rai Market, Delhi. The case is that on account of obstructions, delays and hindrances on the part of the petitioner the completion of work got delayed. The work was actually completed on 31.10.2011 i.e. after a delay of 2 years 6 months and 7 days.
Page 2 of 13
OMP 424/2004
“A. There were hindrances at site which were not being removed well in time.
B. Payment of the running account bills are not being made regularly and in time, thus, adversely affecting the plaintiff financially.
C. Site for the work was not provided in time in accordance with the agreement and even till 24th of. December, 1999 the complete site was hot handed over.
D. Designs and drawings were not provided timely thereby delaying the execution of the work. The drawings with regard to the Police Post were given only on 17th April, 2001.
E. Additional work worth about Rs. 20 lacs was required to be done by the plaintiff and in this behalf instructions were given to the plaintiff on 6th of June, 2001 only.”
Page 3 of 13
OMP 424/2004
Incharge may decide on the estimated cost of the whole work provided that the compensation will not exceed 10%. It is pleaded that in the present case there is a delay of 2 year 6 months and 7 days on account of which the petitioner had no alternative but to levy compensation by invoking clause 2 of the Agreement.
| Sl.No. | Description of Claim |
|---|---|
| Claim -1 | Non-payment of the 17thrunning account bill for Rs.22 lacs |
| Claim -2 | Claim of Rs.5 lacs approximately towards final bill after drawing of the 17thrunning account bill. |
| Claim -3 | Refund of Rs.1 lac as security deposit. |
| Claim -4 | Non-release of escalation on material and labour under clause 10 CC of the agreement. |
| Claim -5 | Interest on delay in release of payment of various passed bills as per table signed by the respondent Ex.C-21 |
| Claim -6 | Non-payment for bailing out accumulated water from the site of execution. |
| Claim -7 | Non-release of withheld amounts from |
Page 4 of 13
OMP 424/2004
| running bill and in part rates totaling Rs.2.43 lacs. |
|
|---|---|
| Claim -8 | Loss sustained due to loss of profit on work not executed as envisaged in agreement. |
| Claim -9 | Loss/damages sustained due to delay in execution of work during extended period for staff and machinery. |
| Claim -10 | Interest @ 24% on all the due payments (Pre, pendent lite and future interest. |
| Claim -11 | Cost of arbitration |
Claim No.1 which pertains to non-payment of the 17th running account bill of Rs.22 lacs. The Bill had been withheld by MCD on account of compensation levied upon the respondent for a sum of Rs.20,61,637/-. The award concludes that there is no dispute that payment of the 17th bill of Rs.21,49,604.53 is payable. Noting the issue of damages sought by MCD of Rs.20,61,637/- is sub-judice before the High Court, the award was passed for the said amount in favour of the respondent subject to decision of this court.
On claim No.2 which was towards the final bill after drawing of the 17th running account bill, the learned arbitrator noted that there is no justification for not drawing of the final bill after the 17th running account
Page 5 of 13
OMP 424/2004
bill. An award was passed in favour of the respondent for a sum of Rs.4,72,195/-.
Claim No.3 pertains to Rs.1 lac given as security deposit. MCD contested the claim on the ground that there has been leakage of water in the sub-way and the same has not been attended to by the respondent and therefore, security deposit cannot be released. The learned arbitrator noted that till close of hearing in the proceedings, no action was taken by MCD to get the work rectified nor any expenses have been incurred in this behalf. The award concludes that there is no justification to withhold the payment of security amount and directed to release to the said sum of Rs.1lac.
Claim No.4 pertains to claim of Rs.37.11 lacs towards escalation payable under clause 10-CC of the agreement. The learned arbitrator noted that the issue of delay was attributed to the respondent by the petitioner. The award notes that the parties were directed to sit together and workout the undisputed portion of the claims. MCD accepted that escalation was payable of Rs.26,94,611.71 after affecting recoveries towards income tax, work contract tax and 2% surcharge, the net amount payable being shown as Rs.25,31,857/-. The award concludes that the payment of escalation is based on increase in wages of labour and wholesale price index on which the contractor/respondent has no control and an award was passed for the claim in favour of the respondent for Rs.25,31,857/- subject to the decision of this court in the above suit.
Claim No.5 relates to interest for the delay in payment of various passed bills passed. The learned arbitrator allowed the claim in favour of the respondent @ 18% per annum.
Page 6 of 13
OMP 424/2004
Claim No.6 pertains to payment of bailing out accumulated water from the site of the execution. The award notes that quantity of water pumped at site has been produced duly signed by the claimant but it does not bear the signature of the MCD. Award notes that the only plea of MCD is that no amount is payable. An amount of Rs.2 lacs was awarded to the respondent.
Claim No.7 relates to release of amount withheld from running bills totalling Rs.2.43 lacs. The said claim was accepted.
Claim No.8 pertains to loss of profit and an award of Rs.1.60 lacs was passed in favour of the respondent.
Claim No.9 relates to loss/damages suffered by the respondent due to prolongation of the contract by 30 months. A sum of Rs.54.30 lacs was claimed. The awards notes the list of hindrances annexed with the application for extension of time being Ex. C-15 - The Award concludes that Item Nos.1 to 9 of the list cannot be attributed to the respondent whereas extension of time sought by the respondent due to rainy season or labour shortage cannot be taken in account. The hindrances due to holding of the Independence and Republic Day functions for one month was held to be justified. Therefore, 50% of the claim for Rs.28.40 lacs was awarded.
On claim No.10, pendente lite and future interest @ 18% was accordingly awarded.
Regarding Claim No.11, the claim was rejected.
Page 7 of 13
OMP 424/2004
A) That, the learned arbitrator erred in not appreciating the sub-judice nature of the various claims of the respondent and counter claims of the petitioner, due to pendency of the suit No.607 of 2003 titled as M/S Harcharan Dass Gupta Construction Pvt. Ltd. v. MCD & another.
Page 8 of 13
OMP 424/2004
B) That, the learned arbitrator erred in not appreciating that the arbitration as the whole is liable to be adjourned sine-die till the outcome of the decision of this Hon'ble court, subject to liberty to revive the same by the parties under arbitration before the learned arbitrator.
C) That, the learned arbitrator erred in not appreciating that the status of the jurisdiction of Hon'ble High Court of Delhi is above then the learned arbitrator's jurisdiction.
D) That, the learned arbitrator erred in not appreciating that he acted upon by pronouncing the award and giving his findings not being a fair arbitrator and on the basis of Principles of personal views/finding on the subject matters i.e. of conjuntures and surmises as and may affect adversely the final decision of Hon'ble High Court of Delhi in the above mentioned Suit no. 607 of 2003 titled as M/s Harcharan Dass Gupta Construction Pvt. Ltd. Versus M.C.D & Anr.
E) That, the learned arbitrator erred in not appreciating that the nature of award is null, void and ab-initio in the eyes of law as the same is not enforceable as per the verdict of the learned arbitrator himself.
F) That, the learned arbitrator erred in not appreciating that the award as the whole is against the public policy and a admittedly a patent mistake, committed on the part of learned arbitrator, in compliance of the provisions of section 34, of the arbitration Act, 1996.
G) That, the learned arbitrator erred in acting far beyond the terms and condition of the notification number MWB/Accts/003/490,dated 16.12.2003 by pronouncing the findings of the additional claim of the contractor/ respondent.
Page 9 of 13
OMP 424/2004
H) That, the learned arbitrator erred in not appreciating at the time of pronouncing of award against the contents of the terms and conditions, terms of the agreement and against the prevailing trade practices, as such, the award as a whole is against the provisions of sections 28 (3) of the Arbitration and Conciliation Act, 1996.
I) That, the learned arbitrator erred in not appreciating at the time of pronouncing of the award, under challenge, which is against the basic principles of law of evidence prevailed and appreciable to all of the matters under disputes inclusive the disputes before the arbitrators.
J) That, the learned arbitrator erred in not appreciating in course of the proceedings by not prescribing any procedure in compliance of the provisions of section 18 and 19 of the Act, so as to enable the parties, observe despite oral submission, by the petitioner in course of proceeding of the arbitration.
K) That, the learned arbitrator erred in granting any amount being interest against the petitioner.
L) That, the award of the learned arbitrator as such is based on the erroneous approach taken and therefore leads to miscarriage of Justice and is also against the public policy as such.
M) That, the present petitioner has not filed any similar petition before Supreme Court or any other court.
N) That, the impugned award 9.3.2007 but received by the petitioner MCD on 16.3.2007 and as such there is no delay in filing of the present OMP.
Page 10 of 13
OMP 424/2004
“12 ……………….The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where-
2. an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or
3. ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse. A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons ,1992 Supp (2) SCC 312 at p.317, it was held:
7. .....It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.
Page 11 of 13
OMP 424/2004
In Kuldeep Singh v. Commr. of Police , (1999) 2 SCC 10 at para 10, it was held:
10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with.”
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. 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, this Court held:
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
Page 12 of 13
OMP 424/2004
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.
…………….”
(JAYANT NATH) JUDGE
November 01, 2018/v
Page 13 of 13
3 issues framed by the court
Whether the arbitral award is liable to be set aside under section 34 of the Arbitration and Conciliation Act, 1996.
Whether the High Court can interfere with the findings of fact recorded by the arbitrator.
Whether the pendency of a parallel suit requires the adjournment of arbitration proceedings sine die.
Colour shows how this judgement treated each authority
3 provisions across 1 enactments
MCD
M/S. Harcharan Dass Gupta Construction Pvt. Ltd.
Jayant Nath
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
