Madras High Court
M/S.Axon Constructions Pvt.Ltd vs M/S.Amfah Infrastrucure (P) Ltd on 14 August, 2024
Author: C.Saravanan
Bench: C.Saravanan
Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 07.02.2024
Pronounced On 14.08.2024
CORAM :
THE HONOURABLE MR.JUSTICE C.SARAVANAN
Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022
and A.Nos.5370 & 5383 of 2022 &3865& 2867 of 2023
M/s.Axon Constructions Pvt.Ltd.,
Rep.by its Director,
Bhaskar Raj ... Petitioner in both O.Ps.
vs.
M/s.Amfah Infrastrucure (P) Ltd.,
Represented by its Managing Director
Mustafeez Mehidi .. Respondent in both O.Ps.
Prayer in Arb.O.P(comdiv) No.646 of 2022: Original Petition is filed
under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996,
praying to set aside impugned Arbitral Award dated 22.04.2022 passed by
the Arbitral Tribunal in respect of the Work Order dated 21.08.2010,
No.AXON/WO/019/2010-11 (Chimney II) and to direct the respondent to
pay the costs
Prayer in Arb.O.P(comdiv) No.647 of 2022: Original Petition is filed
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under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996,
praying to set aside impugned Arbitral Award dated 22.04.2022 passed by
the Arbitral Tribunal in respect of the Work Order dated 09.08.2010,
No.AXON/WO/017/2010-11 (Chimney I) and to direct the respondent to
pay the costs.
For Petitioner : Mr.B.Kumar
Mr.K.V.Sundararajan
Senior Counsel
For Respondent : Mr.V.P.Sengottuvel
Senior Counsel
for Mr.U.Bharanidharan
COMMON ORDER
These two Arbitration Original Petitions have been filed under
Section 34(2)(b)(ii) and Section 34 (2-A) of the Arbitration and
Conciliation Act, 1996 wherein the Impugned Arbitral Awards both dated
22.04.2022 have been challenged.
2. The Respondent herein was the claimant before the Arbitral
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Tribunal and had filed two claims in respect of Chimney No.I and
Chimney No.II under Work Order No.AXON/WO/017/2010-2011
(Chimney No.I) dated 09.08.2010 and Work Order
No.AXON/WO/019/2010-2011 (Chimney No.II) dated 21.08.2010
respectively.
3. In O.P.No.646 of 2022, the Petitioner has challenged the
Impugned Arbitral Award dated 22.04.2022 passed in respect of Work
Order No.AXON/WO/017/2010-2011 dated 09.08.2010 for Chimney
No.I.
4. Similarly in O.P.No.647 of 2022, also the Petitioner has
challenged the Impugned Arbitral Award dated 22.04.2022 in respect of
Work Order No.AXON/WO/019/2010-2011 dated 21.08.2010 for
Chimney No.II.
5. By the Impugned Arbitral Award, the Arbitral Tribunal has
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awarded the following amounts to the Respondent who was the Claimant:-
Table-I-
Arb.O.P.No.646 of 2022 Arb.O.P.No.647 of 2022
Chimney No.I Chimney No-II Total
Claim Amount Rs.14,71,37,932.51/- Rs.9,87,99,554.86/- Rs. 24,59,37,487.37/-
Counter Claim Rs.10,06,19,363.00/- Rs.15,88,04,578.00/- Rs.25,94,23,841.00/-
Amount
Award on Claim Rs. 3,89,27,449.51/- Rs.2,77,85,057.69/- Rs. 6,67,12,507.20/-
Cost Nil Rs.10,00,000.00/- Rs.10,00,000.00/-
Grand Total - - Rs. 6,77,22,507.20/-
Interest 18% 18%
6. The Respondent was the Claimant before the Arbitral Tribunal
while the Petitioner was the Respondent before the Arbitral Tribunal. The
Petitioner had also made a Counter Claimant before the Arbitral Tribunal.
Both the Awards have been passed by the same Arbitral Tribunal wherein
same Arbitrator was the sole Arbitrator.
7. Since the dispute pertained to two Separate Work Orders, two
separate Claim Petitions were filed before the Arbitral Tribunal. As the
documents were common in both the Claim Petitions except for the two
Work Orders and amended Work Orders, the documents were marked
commonly before the Arbitral Tribunal. The Arbitral Tribunal has
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however passed two separate Awards both dated 22.04.2022 impugned
herein.
8. Work Orders and Amended Work Orders for Chimney No.I and
Chimney No.II were marked as Ex.C1 to Ex.C4 and the rest of the
documents of the Respondent’s side were marked in a sequential order
from Ex.C5 onwards. Accordingly, document numbers in C Series were
mentioned in the Award in the same sequence.
9. However, in the index to the respective separate Awards, the
Arbitral Tribunal has shown Work Orders and Amended Work Orders
under the respective claims as Ex.C1 & Ex.C2 and rest of the exhibits
were numbered in sequence..
10. Therefore, to avoid confusion, the Exhibit Numbers shall be
referred to, as they were marked before the Arbitral Tribunal and not as
referred to in the Index to the respective Impugned Awards.
Facts of the Case
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11. A Company named RKM Powergen Pvt. Ltd. (hereinafter to
referred as the Principal Employer) was setting up a power project to
generate power with coal as a main feed at Ucchpinda, Janjar, Champa
District in Chhattisgarh State.
12. The Principal Employer had entrusted the civil and structural
engineering to the Petitioner as the main Contractor. Among the other
things, the project involved construction of two RCC Chimneys (275Mts.
Height each). The Petitioner in turn sub-contracted the work and entrusted
the construction of two Chimneys to the Respondent under Ex.C1 and
Ex.C3 Work orders dated 09.08.2010 and 21.08.2010.
13. The Petitioner issued Ex.C1 Work Order
No.AXON/WO/017/2010-2011 dated 09.08.2010 for Chimney No.I to
the Respondent. Similarly, the Petitioner issued Ex.C3 Work Order
No.AXON/WO/019/2010-2011 dated 21.08.2010 for Chimney No.II.
The indicative Contract Value and the quantities of the materials was
specified in Annexure-1 as Rs.4,38,01,975/- and the Bill of quantity
(BOQ) for Steel Structural Work was estimated as Rs.54,21,300/- in
Ex.C1 Work Order No.AXON/WO/017/2010-2011 dated 09.08.2010 for
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Chimney No.I. The work was to commence within 15 days from the date
of handing over of the site and was to be completed within a period of 18
months thereafter.
14. Similarly, the indicative Contract Value and the quantities of
the materials was specified in Annexure-1 to Ex.C3 as Rs.4,38,01,975/-
and the Bill of quantity (BOQ) for Steel Structural Work was Estimated as
Rs.54,21,300/- for Chimney No.II. Here also the work was to commence
within 15 days from the date of handing over of the site and was to be
completed within 18 months thereafter. The terms and conditions of
contract for both the work orders were more or less similar.
15. The time limit for completing the construction of both the
Chimneys was however extended on account of various factors. On
28.12.2011, the Petitioner issued Ex.C2 Amended Work Order for
Chimney-I. The scheduled date for completion as per Ex.C2 Amended
Work Order was extended to 31.07.2012.
16. Likewise, on 02.01.2012, the Petitioner issued Ex.C4 Amended
Work Order for Chimney No.II. The scheduled date for completion for
Chimney No.II was extended to 31.08.2012.
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17. The Petitioner however terminated both the Work Orders vide
Ex.C10 proceedings dated 12.05.2012 about 2 ½ months prior to the
stipulated date of completion as extended vide EX.C2 dated 28.12.2011
and EX.C4 dated 02.01.2012 alleging certain irregularities and
deficiencies in the work on the part of the Respondent-Claimant.
18. Vide Ex.C9 dated 13.05.2012, the Respondent represented that
the Termination Order was unjust when the work was in full-swing and
requested the Petitioner to reconsider its decision and withdraw the same,
to continue to construct the two Chimney work under the respective Work
Orders.
19. Vide Ex.C14 dated 22.06.2012, the Respondent-Claimant
claimed a sum of Rs.6,44,78,120/- as outstanding payment due from the
Petitioner with respect to both the Chimneys and requested the Petitioner
to convene a meeting to settle the pending issue.
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20. The Petitioner disputed the claim made by the Respondent.
While so, the Petitioner convened meetings with the Respondent on
01.03.2015, 14.05.2015 and 10.05.2016 and explored the possibility of
resolving the issues which were reduced in writing as Minutes of Meeting
which were marked as Ex.C6, Ex.C7 and Ex.C5 respectively.
21. Since the Petitioner did not come forward to settle the disputes
or to make payments to the Respondent, the disputes were referred to
Arbitral Tribunal, presided over by the Sole Arbitrator viz., Hon’ble
Mr.Justice S.Rajeswaran, a retired Judge of this Court by mutual consent
of the Petitioner and the Respondent.
22. The Respondent filed a Claim Statement under 10 different
Claims for Chimney-I and a separate Claim Statement under 6 different
Claims for Chimney No.II. Later, for Chimney No.II, the Respondent
added one more claim. Thus, the Respondent made Claim-7 for Chimney
No.II. The Petitioner filed its Statement of Defence together with a
Counter Claim during March, 2018.
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23. The Claim and Counter-Claim of the Respondent and Petitioner
before the Arbitral Tribunal for Chimney-I were as under:-
Table-II :-
S.No. CLAIM-HEADS CLAIM COUNTER COUNTER –
AMOUNT -CLAIM-HEADS CLAIM
AMOUNT
i) Cost of Store Rs.52,30,499.51 Excess payment Rs.1,00,23,280/-
Material illegally made to the
taken away by the Claimant
Petitioner
ii) Refund of Rs.15,00,000.00/- Liquidated damages Rs. 21,57,189/-
Providend Fund @ 5%
illegally retained
by the Petitioner
iii) Cost of materials Rs.2,40,80,580.00 Purchase of Rs.1,41,38,579/-
and equipment Chimney Slip
used in the work Material
iv) Refund of amount Rs.52,00,000.00 Purchase of Rs.16,49,440/-
illegally withheld additional materials
towards Stores for completing the
Work
v) Refund of the Rs.26,83,819.00 Additional cost Rs.1,07,65,073/-
amount illegally incurred by the 3rd
deducted towards Party
Liquidated
Damages
vi) Loss of Profit Rs.45,00,067.00/- Loss of Reputation Rs.1,00,00,000/-
vii) Compensation Rs.1,00,00,000.00
viii) Transportation of Rs.70,82,550/-
material etc.
Total Claim Rs.6,02,77,515.51 Rs.4,87,33,561/-
ix) Interest @ 24% Rs.8,28,36,169.26/- Interest Rs.5,18,85,802/-
p.a. on claims i to (as adjudged by the
viii Tribunal)
x) Cost of Arbitration Rs.10,00,000/-
TOTAL Rs.14,41,13,684.77 TOTAL Rs.10,06,19,363/-
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24. The Claim and Counter-Claim of the Respondent and the
Petitioner before the Arbitral Tribunal for Chimney No.II were as under:-
Table-III
S.No. CLAIM-HEADS CLAIM COUNTER COUNTER
AMOUNT -CLAIM-HEADS -CLAIM
AMOUNT
i) Cost of materials Rs.2,15,62,473.81 Excess payment Rs.80,05,943/-
and equipment used made to the
in the work Claimant
ii) Loss of Profit Rs.57,74,021.70 Liquidated Rs.21,79,588/-
damages @ 5%
iii) Compensation for Rs.1,00,00,000/- Purchase of Rs.1,42,24,353/-
non-allowing the Chimney slip
claimant to execute materials
the balance work
and the loss of
reputation
iv) Transportation of Rs.21,32,750/- Purchase of Rs.86,04,494/
material etc. additional -
materials for
completing the
Work
vii) Pending payment of Rs.40,89,833.88 Additional cost Rs.2,25,52,810/-
RA Bill No.7 incurred by the 3rd
Party
Total Rs.4,35,59,079.39 Rs.6,55,67,188/-
v) Interest @24% p.a. Rs.5,42,40,475.47 Interest Rs.9,32,37,390/-
on the claims i-iv
from the date of
letter dated
12.05.2012
vi) Cost of Arbitration Rs.10,00,000/- Loss of Reputation Rs.1,00,00,000/-
TOTAL Rs.9,87,99,554.86 TOTAL Rs.15,88,04,578
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25. On 13.04.2018, the Respondent filed its Rejoinder and Reply to
the Statement of Defence/Counter Claims of the petitioner and later the
Petitioner filed its Reply to the Rejoinder filed by the Respondent on
14.05.2018.
26. Thus, the pleadings were completed on 14.05.2018. By this time
Section 29A of the Arbitration and Conciliation Act, 1996 had been
inserted vide Act 3 of 2016 with retrospective effect from 23.10.2015. As
per the provision as it during the material time, the Award had to be
passed within 12 months from the date of the Arbitrator or the Arbitral
Tribunal entering upon reference to the dispute.
27. In this case, the Arbitral Tribunal entered upon reference on
09.01.2018. Therefore, the Award should have been passed latest by
08.01.2019 or within such extended period under Sub-Section 3 or 4 to
Section 29 -A of the Arbitration and Conciliation Act, 1996.
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28. However, during the interregnum, Section 29A of the
Arbitration and Conciliation Act, 1996 was amended vide Act 33 of 2019
with effect from 30.08.2019 as per which Award had to be passed within
12 months of completion of pleadings which is by 14.05.2019 as per the
amended Section 29A of the Arbitration and Conciliation Act, 1996.
29. After completion of pleadings on 14.05.2018, following issues
were framed on 23.06.2018 in respect of Claims relating to Chimney No.I
and Chimney No.II as detailed below :-
Table-IV
Chimney No.I and Chimney No.II
1) Who has committed breach of the Contract? Whether
the Claimant or the Respondent?
2) Whether the termination of the work order by the
Respondent is valid and sustainable?
3) What is the value of the stores used by the Respondent?
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Whether Rs.52,30,499.51/- or Rs.32,98,880.00/-?#
4) Whether the Claimant is entitled to get any
compensation as per the terms and conditions of the work
order?
5) Whether the work executed by the Claimant complied
with the prescribed standards?
6) Whether the Claimant is entitled to claim any of the
amounts as specified in paragraph 45/ 46* of the claim
petition?
7) Whether the Claimant is entitled to any interest? If so,
at what rate and on what amount?
8) Whether the claim petition is barred by limitation?
9) Whether the Respondent is entitled to make any
counter claim as specified in paragraph 31/ 32* and 33*
of the statement of defence/counter claim?
10) Whether the counter claim made by the Respondent is
barred by Limitation?
11) Whether the Claimant is entitled to cost of the
Arbitration?
12) Whether the Claimant is entitled for loss of
reputation?
13) Whether the Respondent is entitled to any interest? If
so, at what rate and on what amount?
14) Whether the Claimant and the Respondent are
entitled to any other reliefs?
# Not for Chimney No.II
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*For Chimney No.II
30. In support of their claims, the Respondent-Claimant filed 113
Document which were marked as Ex.C1 to Ex.C113. Similarly, the
Petitioner filed 51 documents; they were marked as Ex.R1 to Ex.R51.
Oral evidence was dispensed by either of the parties before the Arbitral
Tribunal.
31. The arguments of both the parties were concluded on 06.02.2020
after extensions under Section 29A of the Arbitration and Conciliation
Act, 1996. Thereafter, the Arbitral Tribunal directed both the parties to
submit their respective written arguments for both the claims in respect of
Chimney No.I and Chimney No.II.
32. On 05.03.2020, the Respondent filed Written Arguments, while
the Petitioner filed its Common Written Arguments during March, 2020.
With effect from 24.03.2020, lock was clamped due to outbreak of Covid-
19 pandemic.
33. Vide Impugned Arbitral Awards both dated 22.04.2022, the
Arbitral Tribunal has partly allowed the following claims of the
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respondent-claimant with respect to CHIMNEY NO.I and CHIMNEY
NO.II :-
S.No. CLAIM-HEADS CLAIM AMOUNT AND AWARDED
AMOUNT
CHIMNEY NO.I CHIMNEY NO.II
1. Cost of Store Material Rs.52,30,499.52* –
illegally taken away by the Rs.52,30,499.51#
Petitioner
2. Cost of materials and Rs.2,40,80,580.00* Rs.2,15,62,473.81*
equipment used in the work Rs.2,40,80,580.00# Rs.2,15,62,473.81#
3. Refund of the amount Rs.26,83,819.00* –
illegally deducted towards Rs.26,83,819.00#
Liquidated Damages.
4. Transportation of material Rs.70,82,550* Rs.21,32,750*
etc., Rs.69,32,550.00# Rs.21,32,750#
5. Cost Nil Rs.10,00,000
6. Pending payment of RA Bill Rs.40,89,833.88*
No.7 Rs.40,89,833.88#
7. Total of # Rs.3,89,27,448.51 Rs.2,87,85,057.69
8. Interest @ 24% p.a. on Rs.8,42,10,417.00* Rs.5,42,40,475.47*
claims awarded from the # @ 18% p.a. on # @ 18% from
date of letter dated claims i, iii, v and viii, 12.05.2012 on
12.05.2012 i.e., Rs.3,89,27,448.51 Rs.2,77,85,057.69
from 12.05.2012 and
until the date of actual
payment
* CLAIM AMOUNT
# AWARDED AMOUNT
34. The Arbitral Tribunal rejected the Counter-Claims of the
Petitioner towards alleged excess payment to the respondent claimant for
Chimney No.I and Chimney No.II on the ground that the same was not
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supported by any acceptable materials and evidences. The Respondent has
not challenged the Impugned Arbitral Awards in so far as they reject a
part of its claim.
35. Aggrieved by the Impugned Arbitral Awards both dated
22.04.2022, the Petitioner has filed these two Arbitration Petitions in
Arb.O.P.(Com.Div.)No.646 of 2022 and Arb.O.P.(Com.Div.)No.647 of
2022 for the Work Orders of Chimney No.I and Chimney No.II mainly on
two grounds viz., Impugned Arbitral Awards both dated 22.04.2022
being against public policy under Sec.34(2)(b)(ii) and being patently
illegal under Section 34 (2-A) of the Arbitration & Conciliation Act,
1996.
36. To drive the point on patent illegality, the learned Senior
Counsel for the Petitioner has raised a preliminary issue regarding time-
limit while passing of the Impugned Arbitral Awards both dated
22.04.2022. It is submitted that the Impugned Arbitral Awards are both
dated 22.04.2022 and were passed after the expiry of mandate of the
Arbitral Tribunal expired and also has raised the issue regarding non-
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consideration of documents and total ignorance of Counter-Claim filed
on the side of the Petitioner.
Preliminary Submissions:-
37. A preliminary submission was made by the learned Senior
Counsel for the Petitioner on 05.10.2023.
38. The arguments on this aspect is two fold. Firstly, the Arbitral
Tribunal had become functus officio after 16.07.2021 i.e., after expiry of
three months, after communication of the order dated 11.01.2021 in
Appln.No.66 of 2021 extending the mandate of the Arbitral Tribunal. It is
therefore submitted that the Impugned Arbitral Awards passed on
22.04.2022 were a nullity within the meaning of Section 29A(4) of the
Arbitration and Conciliation Act, 1996.
39. The second limb of the arguments made by the learned Senior
Counsel for the Petitioner is that the Impugned Awards were passed
against the public policy and therefore, the sting under Explanation 1(ii) to
Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996 was
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40. The learned Senior Counsel for the Petitioner would submit that
the Arbitral Tribunal entered reference on 09.01.2018. It is further
submitted that by mutual consent, the period was extended for completing
the arbitration proceedings by another six months which expired on
08.07.2019. It is submitted that thereafter series of application were filed
before this Court to extend the mandate of the Arbitral Tribunal as detailed
below and were allowed:-
TABLE -VI
Sl.No Application No. Order date Extended upto
1 Appln.No.5368 of 2019 20.08.2019 6 Months- 28.03.2020
2 Appln.No.1242 of 2020 23.03.2020 3 Months- 20.06.2020
3 Appln.No.1468 of 2020 09.07.2020 6 Months- 20.12.2020
4 Appln.No.66 of 2021 11.01.2021 3 Months- 11.04.2021
41. It is therefore submitted that by virtue of the last mentioned Order
dated 11.01.2021 passed in Appln.No.66 of 2021, the mandate of the Arbitral
Tribunal stood extended by three months till 11.01.2021. It is therefore
submitted that the Impugned Awards ought to have been passed on or before
11.04.2021. It is submitted that even if the time taken for securing the
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excluded between 11.01.2021 and 16.04.2021, the period for passing the
Award would have expired on 16.07.2021, as the copy of the Order dated
11.01.2021 in Appln.No.66 of 2021 was communicated to the Arbitrator on
16.04.2021.
42. It is therefore submitted that both the Impugned Arbitral Awards
dated 22.04.2022 were beyond the statutory period prescribed under Section
29A of the Arbitration and Conciliation Act, 1996 and were nullity and are
therefore liable to be set aside under Section 34 of the Arbitration and
Conciliation Act, 1996
43. In support of the above submission, the learned Senior Counsel
for the Petitioner referred to the following two decisions of the Hon’ble
Supreme Court in (i) Cognizance For Extension of Limitation, IN RE
[(2020) 19 SCC 10] dated 23.03.2020 and Cognizance For Extension of
Limitation, IN RE [(2022) 3 SCC 117] dated 10.01.2022 wherein period
between 15.03.2020 and 28.02.2022 shall stand excluded for the purpose
of limitation prescribed by general or special laws in respect of judicial
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44. It is submitted that although by virtue of the second mentioned
decision of the Hon’ble Supreme Court rendered in the context of Section
29-A of the Arbitration and Conciliation Act, 1996, the period prescribed
for passing the Award cannot be saved in the light of the decision of the
Hon’ble Supreme Court in Sagufa Ahmed and others Vs. Upper Assam
Polywood Products Private Limited and others [(2021) 2 SCC 317.
45. Drawing a comparison between the time limit prescribed under
Section 421(3) of the IBC Court, 2013 and the limitation prescribed under
Section 29A of the Arbitration and Conciliation Act, 1996, the second
decision of the Hon’ble Supreme Court referred to supra, the learned
Senior Counsel for the Petitioner would submit that the time for
completing and passing the Award could be extended only if the Award
was not passed within the period of first 18 months from the date of
completion of the arguments on 06.02.2020 or thereafter extension given
by the Court.
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46. The learned Senior Counsel for the Petitioner has also drawn
attention to a recent decision of the Hon’ble Supreme Court, wherein
earlier view taken by the Hon’ble Apex Court in Assam Urban Water
Supply and Sewerage Board Vs. Subash Projects and Marketing
Limited, (2012) 2 SCC 624, has been affirmed by the decision of the
Three Judges Bench of the Hon’ble Supreme Court in Sagufa Ahmed and
others Vs. Upper Assam Polywood Products Private Limited and
others, (2021) 2 SCC 317, which was reiterated by the Hon’ble Supreme
Court in Bhimashankar Sahakari Sakkare Karkhane Niyamita Vs.
Walchandnagar Industries Limited (WIL), (2023) 8 SCC 453.
47. It is submitted that applying the ratio in Sagufa Ahmed and
others Vs. Upper Assam Polywood Products Private Limited and others
[(2021) 2 SCC 317], the limitation for passing the Award beyond the
period of 12 months under Section 29A(1) and further period of six
months under Section 29A(3) alone would be saved.
48. It is further submitted that the Awards were passed beyond the
period of 18 months and thereafter beyond the period prescribed viz.,
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11.04.2021 by the fourth mentioned order dated 11.01.2021 in
Appln.No.66 of 2021 were clearly barred by law as the Arbitral Tribunal
had no mandate after 16.04.2021 even if, the time between 11.01.2021 i.e.,
date of order and its communication on 16.04.2021, the limitation would
have expired on 15.07.2021.
49. That apart, in support of the above submissions, the learned
Senior Counsel for the petitioner, has placed reliance on the decision of
the Hon’ble Supreme Court in Anil Rai vs. State of Bihar [(2001) 7 SCC
318]. A specific reference is made to Para 42 and 43 reads as under:-
“42.If delay in pronouncing judgments occurred on
the part of the judges of the subordinate
judiciary the whip of the High Court studded
with supervisory and administrative authority
could be used and it has been used quite often to
chide them and sometimes to take action against
the erring judicial officers. But what happens
when the High Court Judges do not pronounce
judgment after a lapse of several months, and
perhaps even years since completion of
arguments? The Constitution did not provide
anything in that area presumably because the
architects of the Constitution believed that no
High Court Judge would cause long and
distressing delays. Such expectation of the
makers of the Constitution remained unsullied
during the early period of the post-constitution
years. But unfortunately, the later years have_____________
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022shown slackness on the part of a few Judges of
the superior courts in India with the result that
once arguments in a list concluded before them
the records remain consigned to hibernation.
Judges themselves normally forget the details of
the facts and niceties of the legal points
advanced. Sometimes the interval is so long that
the Judges forget even the fact that such a case
is pending with them expecting judicial verdict.
Though it is an unpleasant fact, it is a stark
reality.
43. Should the situation continue to remain so
helpless for all concerned? The Apex Court
made an exhortation in 1976 through a judgment
which is reported as R.C.Sharma Vs. Union of
India for expediting delivery of judgments. I too
wish to repeat those words as follows: (SCC
Headnote)
“Nevertheless an unreasonable delay
between hearing of arguments and
delivery of judgment, unless explained
by exceptional or extraordinary
circumstances, is highly undesirable
even when written arguments are
submitted. It is not unlikely that some
points which the litigant considers
important may have escaped notice.
But, what is more important is that
litigants must have complete
confidence in the results of litigation.
This confidence tends to be shaken if
there is excessive delay between
hearing of arguments and delivery of
judgments”.
50. The learned Senior Counsel for the Petitioner has also referred
to the following decisions in support of the above proposition:-
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(i)Bharat Oman Refineries Ltd Vs. Mantech
Consultants [(2012) 3 Bom CR 754;
(ii)K.Dhanasekar Vs. Union of India, Rep by its
General Manager Southern Railway and others
[(2019) SCC Online Mad 38989;
(iii)Director General, Central Reserve Police Force
Vs. Fibroplast Marine Pvt Ltd [(2022) 290 DLT
619.
51. It is submitted that the Courts have held under similar
circumstances the Awards to be nullity and therefore submits that the
Impugned Awards are liable to be set aside.
52. The learned Senior Counsel for the Petitioner would submit that
once the period prescribed for passing the Awards expired, no further
extension could be countenanced in the light of the above mentioned
decisions of the Hon’ble Supreme Court.
53. Arguing the case on behalf of the respondent, the learned Senior
Counsel for the Respondent would submit that the provision as it stood till
30.08.2019 contemplated Arbitral Tribunal to pass an award within a
period of 12 months from the date of entering upon reference by the
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Arbitral Tribunal. Thus, the 12 month period under Section 29A(1) of the
Arbitration and Conciliation Act, 1996 expired on 08.01.2019. The
Arbitral Tribunal itself extended the mandate upto 08.07.2019.
54. It is submitted that thereafter, above mentioned four applications
were filed by the Petitioner itself for extension of the mandate as
mentioned above.
55. It is submitted that the last extension was ordered on 11.01.2021
in Appln No.66 of 2021. However, the certified copy of the order was
communicated to the learned Arbitrator by the Petitioner/ Respondent only
on 16.04.2021, by which time, the country was again under lock down due
to second wave of Covid-19 pandemic.
56. It is submitted that in fact, the country was under lock down
immediately after the 2nd Order dated 23.03.2020 was passed in Appln
No.1242 of 2020. It is submitted that Appln.No.1242 of 2020 was filed
after arguments were completed on 06.02.2020. It is submitted that in view
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of the decision of the Hon’ble Supreme Court in Cognizance For
Extension of Limitation, IN RE, (2020) 9 SCC 468, rendered on
10.07.2020, the Hon’ble Supreme Court has clarified that the order passed
earlier on 23.03.2020 and 06.05.2020 would apply for extension of time
for passing Arbitral Award under Section 29A of the Arbitration and
Conciliation Act, 1996.
57. It is submitted that the Delhi High Court has also considered a
similar issue in Harkirat Singh Sodhi Vs. Oram Foods Pvt. Limited
and others, AIR 2023 Del 237, wherein the High Court of Delhi has taken
a pragmatic view that the period that commenced on 29.08.2019 in the
said case must be deemed to have stopped to run as on 14.03.2020 and
thereafter re-commenced on 01.03.2022 in the light of the decision of the
Hon’ble Supreme Court rendered in Cognizance for extension of
limitation, IN RE, (2022) 3 SCC 117, rendered on 10.01.2022.
58. That apart, the learned Senior Counsel for the Respondent/
Claimant would also submit that all the extensions were sought for by the
Petitioner/ Respondent itself by approaching this Court. It is submitted that
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in view of the decisions of the Hon’ble Supreme Court, the Hon’ble
Arbitrator was of the view that time stood extended by a period of 90 days
from 01.03.2022. It is therefore submitted that since the Awards were
passed on 22.04.2022 there are no merits in the preliminary objection
raised by the Petitioner as the Impugned Awards came to be passed by the
learned Arbitrator on 22.04.2022, before the period was extended by the
Hon’ble Supreme Court rendered in Cognizance for extension of
limitation, IN RE, (2022) 3 SCC 117 vide its Order dated 10.01.2022.
59. I have considered the arguments advanced by the learned Senior
Counsel for the petitioner and the learned Senior Counsel for the
respondent.
60. The decision of the Hon’ble Supreme Court in Assam Urban
Water Supply and Sewerage Board Vs. Subash Projects and
Marketing Limited, (2012) 2 SCC 624, which was affirmed by the
Hon’ble Supreme Court in Sagufa Ahmed and others Vs. Upper Assam
Polywood Products Private Limited and others, (2021) 2 SCC 317 and
reiterated in Bhimashankar Sahakari Sakkare Karkhane Niyamita Vs.
Walchandnagar Industries Limited (WIL), (2023) 8 SCC 453, pertains
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to the period within which a proceeding under Section 34 of the
Arbitration and Conciliation Act, 1996, had to be instituted.
61. In Assam Urban Water Supply and Sewerage Board Vs.
Subash Projects and Marketing Limited, (2012) 2 SCC 624, the
Hon’ble Supreme Court interpreted the proviso to Section 34(3) with
Sections 4 and 2(j) of the Limitation Act, 1963. Section 34(3) of the
Arbitration and Conciliation Act, 1996 reads as under:-
Section 34.Application for setting aside the Arbitral Award
(1)…
(2)…
(3) An application for setting aside may not be made after three months
have elapsed from the date on which the party making that application
had received the arbitral award or, if a request had been made under
section 33, from the date on which that request had been disposed of by
the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by
sufficient cause from making the application within the said period of
three months it may entertain the application within a further period of
thirty days, but not thereafter.
62. Sections 2(j) and 4 of the Limitation Act, 1963, reads as under:-
2.Definition:- 4. Expiry of prescribed period when
court is closed.-
j) “period of limitation” means the Where the prescribed period for any
period of limitation prescribed for suit, appeal or application expires on
any suit, appeal or application by a day when the court is closed, the
the Schedule, and “prescribed suit, appeal or application may be
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period” means the period of instituted, preferred or made on the
limitation computed in accordance day when the court re-opens.
with the provisions of this Act;
Explanation.—A court shall be
deemed to be closed on any day
within the meaning of this section if
during any part of its normal
working hours it remains closed on
that day.
63. It was in this context, the Hon’ble Supreme Court in Assam
Urban Water Supply and Sewerage Board Vs. Subash Projects and
Marketing Limited, (2012) 2 SCC 624 also referred to the definition of
expression “ period of limitation” as defined in Section 2(j) of the
Limitation Act, 1963. In paragraph Nos.13 to 16, the Hon’ble Supreme
Court has held as under:
“13.The crucial words in Section 4 of the 1963 Act are
‘prescribed period’. What is the meaning of these words?
14.Section 2(j) of the 1963 Act defines:
“2.(j).’period of limitation’ which means the period
of limitation prescribed for any suit, appeal or
application by the Schedule, and ‘prescribed
period’ means the period of limitation computed in
accordance with the provisions of this Act.”
Section 2(j) of the 1963 Act when read in the
context of Section 34(3) of the 1996 Act, it becomes
amply clear that the prescribed period for making
an application for setting aside arbitral award is
three months. The period of 30 days mentioned in_____________
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022proviso that follows sub-section (3) of Section 34 of
the 1996 Act is not the ‘period of limitation’ and,
therefore, not ‘prescribed period’ for the purposes
of making the application for setting aside the
arbitral award. The period of 30 days beyond three
months which the court may extend on sufficient
cause being shown under the proviso appended to
sub-section (3) of Section 34 of the 1996 Act being
not the ‘period of limitation’ or, in other words,
‘prescribed period’, in our opinion, Section 4 of the
1963 Act is not, at all, attracted to the facts of the
present case.
15.Seen thus, the applications made by the
appellants on January 2, 2004, for setting aside the
arbitral award dated August 26, 2003 were liable
to be dismissed and have rightly been dismissed by
the District Judge, Kamrup, Guwahati, as time
barred.
16.The dismissal of the Arbitration Appeals (6 of
2004 and 7 of 2004) by the High Court, thus,
cannot be legally flawed for the reasons we have
indicated above.”
64. This view was affirmed by a Three Judges Bench decision of
the Hon’ble Supreme Court in Sagufa Ahmed and others Vs. Upper
Assam Polywood Products Private Limited and others, (2021) 2 SCC
317, wherein the Hon’ble Supreme Court while dealing with the appellate
remedy under Section 421 of the Companies Act, 2013, observed as under:
“11. Section 421(1) provides for a remedy of appeal
to the Appellate Tribunal as against an order of
NCLT. Sub-section (3) of Section 421 prescribes the
period of limitation for filing an appeal and the
proviso thereunder confers a limited discretion upon_____________
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022the Appellate Tribunal to condone the delay. Sub-
section (3) of Section 421 together with the proviso
thereunder reads as follows:
“421. Appeal from orders of Tribunal.—
(1)-(2)
(3) Every appeal under sub-section (1)
shall be filed within a period of forty-five
days from the date on which a copy of the
order of the Tribunal is made available to
the person aggrieved and shall be in such
form, and accompanied by such fees, as
may be prescribed:
Provided that the Appellate Tribunal may
entertain an appeal after the expiry of the
said period of forty-five days from the
date aforesaid, but within a further period
not exceeding forty-five days, if it is
satisfied that the appellant was prevented
by sufficient cause from filing the appeal
within that period.”
12. Therefore, it is true, as contended by the
appellants, that the period of limitation of 45
days prescribed in Section 421(3) would
start running only from the date on which a
copy of the order of the Tribunal is made
available to the person aggrieved. It is also
true that under Section 420(3) of the Act
read with Rule 50, the appellants were
entitled to be furnished with a certified copy
of the order free of cost.
13. Therefore if the appellants had chosen
not to file a copy application, but to await
the receipt of a free copy of the order in
terms of Section 420(3) read with Rule 50,
they would be perfectly justified in falling
back on Section 421(3), for fixing the date_____________
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But the appellants in this case, chose to
apply for a certified copy after 27 days of
the pronouncement of the order in their
presence and they now fall back upon
Section 421(3).
14. Despite the above factual position, we
do not want to hold against the appellants,
the fact that they waited from 25-10-2019
(the date of the order [Sagufa Ahmed v.
Upper Assam Plywood Products (P) Ltd.,
2019 SCC OnLine NCLT 749] of NCLT) up
to 21-11-2019, to make a copy application.
But at least from 19-12-2019, the date on
which a certified copy was admittedly
received by the counsel for the appellants,
the period of limitation cannot be stopped
from running. From 19-12-2019, the date on
which the counsel for the appellants
received the copy of the order, the
appellants had a period of 45 days to file an
appeal. This period expired on 2-2-2020.
15. By virtue of the proviso to Section 421(3), the
Appellate Tribunal was empowered to condone the delay
up to a period of 45 days. This 45 days started running
from 2-2-2020 and it expired even according to the
appellants on 18-3-2020. The appellants did not file the
appeal on or before 18-3-2020, but filed it on 20-7-
2020. It is relevant to note that the lockdown was
imposed only on 24-3-2020 and there was no
impediment for the appellants to file the appeal on or
before 18-3-2020. To overcome this difficulty, the
appellants rely upon the order of this Court dated 23-3-
2020 [Cognizance for Extension of Limitation, In re,
(2020) 19 SCC 10 : 2020 SCC OnLine SC 343] . This
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takes us to the second contention of the appellants.”
65. Sections 29-A(4) and 34(3) of the Arbitration and Conciliation
Act, 1996 and its Proviso reads as under:-
29A.Time limit for arbitral award 34.Application for setting aside
arbitral award
(1) … (1)
(2) … (2)
(3) …
(4) If the award is not made (3) An application for setting
within the period specified in aside may not be made after
sub-section (1) or the extended three months have elapsed
period specified under sub- from the date on which the
section (3), the mandate of the party making that application
arbitrator(s) shall terminate had received the arbitral
unless the Court has, either award or, if a request had
prior to or after the expiry of been made under section 33,
the period so specified, from the date on which that
extended the period: request had been disposed of
Provided that while extending by the arbitral tribunal:
the period under this sub- Provided that if the Court is
section, if the Court finds that satisfied that the applicant
the proceedings have been was prevented by sufficient
delayed for the reasons cause from making the
attributable to the arbitral application within the said
tribunal, then, it may order period of three months it may
reduction of fees of arbitrator(s) entertain the application
by not exceeding five per cent. within a further period of
for each month of such delay. thirty days, but not
Provided further that where an thereafter.
application under sub-section
(5) is pending, the mandate of
the arbitrator shall continue till
the disposal of the said_____________
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022application: Provided also that
the arbitrator shall be given an
opportunity of being heard
before the fees is reduced.”
66. The Hon’ble Supreme Court in Sagufa Ahmed and others Vs.
Upper Assam Polywood Products Private Limited and others, (2021)
2 SCC 317,ultimately held as under:-
“21.Therefore, the expression “prescribed period”
appearing in Section 4 cannot be construed to mean
anything other than the period of limitation. Any period
beyond the prescribed period, during which the court
or tribunal has the discretion to allow a person to
institute the proceedings, cannot be taken to be
“prescribed period”.
67. This Court also had an occasion to deal with an issue in the
context of Section 29-A (3) of the Arbitration and Conciliation Act, 1996,
in E.Sugumaran Vs. M.Malarmaran and another in O.P.No.627 of 2018
rendered on 26.02.2020, wherein it has been observed as under:-
“5.17. A reading of the provisions of 29 A (3) and
(4) would therefore indicate that on the expiry of
the one year period or the extended period of six
months, the mandate of the Arbitral Tribunal
would automatically come to a close. The same
can be revived only by the Court as contemplated
under Sections 29 A (4) and 29 A (5). As already
stated Section 29 A is framed on the lines of
Section 28 of the 1940 Act albeit with an
emphasis on a defined time frame even to the_____________
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022Court. Under the 1940 Act, the power was given
to the Court to extend/enlarge from time to time
the time for making the Award which indicates
that the Court can be moved several times to
extend the time for making the Arbitral Award.
However under the new regime the Courts are
permitted to enlarge the time only:
a) When the one year period had expired and
parties had not extended time.
b) When the extended period of six months has
already expired and the Award was still to be
delivered.”
68. The Hon’ble Supreme Court in Cognizance for Extension of
Limitation IN RE, (2020) 19 SCC 10, in Paragraph No.3 and 4 observed
as under:-
“3.We are exercising this power under Article 142
read with Article 141 of the Constitution of India and
declare that this order is a binding order within the
meaning of Article 141 on all courts/tribunals and
authorities.
4.This order may be brought to the notice of all the
High Courts for being communicated to all
subordinate courts/tribunals within their respective
jurisdiction.”
69. The Hon’ble Supreme Court rendered in Cognizance for
extension of limitation, IN RE, (2022) 3 SCC 117, rendered on
10.01.2022, held as under:-
“5. Taking into consideration the arguments advanced by
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022the learned counsel and the impact of the surge of the
virus on public health and adversities faced by litigants in
the prevailing conditions, we deem it appropriate to
dispose of MA No.21 of 2022 with the following
directions:-
5.1. The order dated 23.03.2020 is restored and in
continuation of the subsequent orders dated
08.03.2021, 27.04.2021 and 23.09.2021, it is
directed that the period from 15.03.2020 till
28.02.2022 shall stand excluded for the purposes of
limitation as may be prescribed under any general
or special laws in respect of all judicial or quasi-
judicial proceedings.
5.2. Consequently, the balance period of limitation
remaining as on 03.10.2021, if any, shall become
available with effect from 01.03.2022.
5.3. In cases where the limitation would have
expired during the period between 15.03.2020 till
28.02.2022, notwithstanding the actual balance
period of limitation remaining, all persons shall
have a limitation period of 90 days from
01.03.2022. In the event the actual balance period
of limitation remaining, with effect from 01.03.2022
is greater than 90 days, that longer period shall
apply.
5.4. It is further clarified that the period from
15.03.2020 till 28.02.2022 shall also stand
excluded in computing the periods prescribed
under Sections 23(4) and 29-A of the Arbitration
and Conciliation Act, 1996, Section 12-A of the
Commercial Courts Act, 2015 and provisos (b) and
(c) of Section 138 of the Negotiable Instruments
Act, 1881 and any other laws, which prescribe
period(s) of limitation for instituting proceedings,
outer limits (within which the court or tribunal can
condone delay) and termination of proceedings.
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6. As prayed for by the learned Senior Counsel, MA
No.29 of 2022 is dismissed as withdrawn.”
70. The decisions of the Hon’ble Supreme Court in Sagufa Ahmed
and others Vs. Upper Assam Polywood Products Private Limited and
others, (2021) 2 SCC 317, has no relevance to the facts of the present
case.
71. In Sagufa Ahmed and others Vs. Upper Assam Polywood
Products Private Limited and others, the National Company Law
Tribunal had passed an order on 25.10.2019.
72. The appellant therein had filed a copy application only on
21.11.2019 for Order dated 25.10.2019 passed by the National Company
Law Tribunal. The copy of order dated 25.10.2019 was received by the
counsel for the appellant on 19.12.2019. The limitation of 45 days to file
an appeal before the National Company Law Appellate Tribunal
[NCLAT] expired on 02.02.2020. The condonable period of 45 days
thereafter also expired on 18.03.2020.
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73. This was before the lockdown was imposed on 24.3.2020, on
account of the outbreak of COVID-19 pandemic. The appeal was however
filed finally on 20.7.2020. Thus, the benefit of the decision of the Hon’ble
Supreme Court dated 23.03.2020, extending the period up to 28.02.2022,
for computation of period of limitation was held not available to Sagufa
Ahmed and others.
74. However, in the present case, the pleading were completed on
14.05.2018. Ordinarily, the Award should have been passed within a
period of twelve months thereafter on 03.05.2019 as per the amended
Section 29A of the Arbitration and Conciliation Act, 1996 as it stood then.
As per the provision as it during the material time, the Award had to be
passed within twelve months from the date of the arbitrator entering upon
reference.
75. In this case, the arbitrator entered upon reference on 09.01.2018.
Therefore, the Award should have been passed latest by 08.01.2019.
During the interregnum applications were filed as mentioned above and
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time was extended by this Court. During the interregnum Section 29-A
was also amended vide Act 33 of 2019 with effect from 30.08.2019.
Thus, the timelines for passing awards changed due to statutory
interventions.
76. As far as the facts of the present case are concerned, the 18
months limitation [12+6 months] under Section 29 (A) (1) & (3) of the
Arbitration and Conciliation Act, 1996 expired on 08.07.2019 s per the pre-
amended Section 29A of the Arbitration and Conciliation Act, 1996.
77. Thereafter series of applications have been filed and last of the
extension was granted on 11.01.2021. The order of this Court dated
11.01.2021 in Appln.No.66 of 2021 was communicated to the learned
Arbitrator on 16.04.2021.
78. The decision of the Hon’ble Supreme Court in Sagufa Ahmed
and others Vs. Upper Assam Polywood Products Private Limited and
others rendered in the context of Section 421(3) of the Company Act,
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2013 is therefore no more relevance to the facts of the case. Therefore, the
preliminary objection to the Award is answered against the Petitioner.
Submissions on Merits:
79. The learned Senior Counsel for the Petitioner submits that there
are two parts to the Award. The first part of award pertains to the finding
that the Petitioner had committed breach of the contract and that
termination of the Work Order by Petitioner on 12.05.2012 vide Ex.C10
was ostensibly not sustainable. The Second part of the award pertains to
the claims, which Respondent was held entitled to and rejection of the
counter claim of the Petitioner without any discussion.
80. It is submitted that as far as the first part of the award is
concerned, the findings of the Arbitral Tribunal is that Clause 6 of the
Ex.C1 & C3 Terms and Conditions is against public policy and that no
complaint whatsoever was made with regard to petitioner’s performance,
progress and inferior quality of work before the termination. It is
submitted that this observation/finding in the impugned Award is
erroneous, perverse, and patently illegal.
81. It is submitted that the crucial terms and conditions of contract
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for both the Work Orders are more or less similar. It is submitted that it
was the duty of the Respondent to have completed the Work Order as
spelled out in the terms and conditions stipulated in Ex.C1 and Ex.C3. It
is submitted that as per the terms and conditions, the Ready Mix Concrete
(RMC) were to be provided by Petitioner. However, subsequently under a
mutual Agreement, Work Orders were given to the Respondent for
creating necessary infrastructure for Concrete batching Plant for the
purpose of producing Ready Mix Concrete (RMC).
82. Therefore, it is submitted that though in the Work Order it was
mentioned that the Ready Mix Concrete (RMC) was to be provided by
Petitioner, for the purpose of easier and smoother coordination and
facilitation with some additional work, Petitioner had given separate Work
Orders were issued to the Respondent. It is therefore submitted that there
was no delay on the part of the Petitioner in not providing the Ready-Mix
Concrete (RMC) to the respondent. It is submitted that as onus was
shifted on the Respondent to provide Ready-Mix Concrete (RMC).
83. It is submitted that Petitioner has supported Respondent in all
possible manner, namely:_
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(1) by making regular on time payments of all running
bills raised by the respondent,
(2) Mobilization advance of Rs.25 lakh;
(3) Although not a part of the contract, purchases of
major equipment at the request of the Respondent-
Claimant for which payments were made;
(4) In addition to running bill payments, cash and
advance payments were released from site ;and
(5) payment to sub-contractor/labour of the Respondent
at the request of the respondent
84. It is submitted that the Respondent however had used poor
quality materials and deployed insufficient number of manpower,
equipment and materials and delayed the project and thereby rendered the
petitioner liable for delay under the contract with its principal.
85. It is submitted the Chimneys being the critical structure towards
overall project sequence, time was the essence under the respective
Contracts. However, the Respondent has taken time to complete the
project as a result of which Petitioner was taken to task by its Principal
Employer namely RKM Powergen Pvt. Ltd.
86. It is submitted that on a review of the contract Work done by
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Respondent in 2012, it was found that the Respondent-claimant had
completed only 28% for the first Work Order for Chimney I and 12%
in the Second Work Order for Chimney No.II and that even the work
executed was of poor standard and therefore after several emails and
reminders, the Petitioner was forced to terminate the respective Work
Orders vide Ex.C10 dated 12/5/2012.
87. It is submitted that Clause 6, clause 7 and Clause 17 clearly
show that the contract could be terminated without assigning any reason
and without giving notice if the quality, progress and performance is not
up to the mark.
88. It is further submitted that Ex.R8 to R19 would show that
several issues were red-flagged by the Principal employer namely RKM
Powergen Pvt. Ltd against the progress, quality and performance of work
by the Respondent. It is submitted that some of the documents are
subsequent to extension of Work Order granted and therefore, the findings
that there was no complaint against the Respondent is patently illegal in
the fact of it.
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89. It is further submitted that clause 6 and other terms and
conditions of the contract are not in violation of Section 23 of the Contract
Act; nor against the public policy since the contract is between two private
business entities, who had signed the contract with open eyes agreeing on
the Terms and Conditions understood by them and agreeing on the
extension of contract and hence to say that the said Terms and Conditions
are against public policy is perverse and patently illegal.
90. It is further submitted that even assuming without admitting that
the termination was invalid, the 2nd part of the award allowing certain
claims of Respondent ignoring vital evidences and allowing some claims
without evidences cannot be sustained.
91. It is submitted that as regarding the Award of Rs.52,30,499.51
under the head of store Materials to Respondent in O.P. No. 646 of 2022,
the Arbitral Tribunal has referred to certain email correspondences where
except the fact that there were 212 materials, which were jointly signed
by both Petitioner and Respondent vide Ex.R-21, there was no acceptance
by the Petitioner that the price is Rs.52,30,499.51 and when Petitioner has
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stated that the price is Rs.32,92,880/- only in the Counter. It is submitted
that the Arbitral Tribunal cannot award the claim when there is no other
proof by Respondent to prove that the value of stock is Rs.52,30,499.51.
Hence, it is submitted that the Arbitral Tribunal has miserably erred and
committed patent illegality in allowing the claim of the Respondent for
Rs.52,30,499.51.
92. It is further submitted that the Tribunal failed to see that holding
212 items of Respondent, under the caption ‘store materials’, is left behind
cannot confer jurisdiction on the Arbitral Tribunal to award an arbitrary
value thereof as claimed by the claimant without any proof as to value of
each item of the store material left behind when the Petitioner has stated
that the value of the left-over items could be only Rs.32,92,880/-. Thus, it
is submitted that this also amounts to patent illegality.
93. It is submitted that apart from the Ex.C1 and Ex.C3 Work
Orders for, Chimney I and II, other related Work Orders were given to
the Respondent by the Petitioner. It is submitted that the total claim
pertaining to Running Account Bills (RA Bills) for all Work Orders listed
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and mentioned at additional Counter of Petitioner was Rs.3,14,58,345/-
(TDS not included) and this is for the amount of work done by the
Respondent for which it is entitled to claim the amounts from Petitioner.
94. It is further submitted that as regarding the claim pertaining to
cost of materials and chimney equipments, the Arbitral Tribunal has come
to the conclusion that only the quantity and the items have been accepted
by the parties but the rates were not accepted and has erroneously without
any evidence produced by the Respondent by oral or otherwise, has
accepted and fixed the rate as claimed by the Respondent, namely Rs.82/-
per kg., when the Petitioner had accepted for Rs.65/- per kg alone and
have arrived at Rs.2,40,80,580/- for Chimney I and Rs.2,15,62,473/- for
Chimney II. It is submitted that the Arbitral Tribunal has also not even
referred to the amount paid by Petitioner on behalf of Respondent for
material suppliers and labor Contractors.
95. It is further submitted that the Arbitral Tribunal has even
ignored the vital evidence of the admission made by the Respondent in its
Written Arguments, where it had admitted that payment of
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Rs.1,81,81,983/- was made by Petitioner on behalf of Respondent for the
materials that ought to have been purchased by Respondent. Similarly it is
submitted that the Respondent has also admitted to the payment of
Rs.13,36,935/-made by Petitioner to the Labour Contractors on behalf of it
and that even this admitted amount has not been deducted from the
Chimney equipment costs.
96. It is further submitted that the vital evidences, namely Exhibits
R-40, R-41, R-43 and R-51 would prove that a sum of Rs.3,28,16,224/-
was paid by Petitioner on behalf of Respondent for its material and labor
contractors apart from the direct payment of Rs.3,64,40,581/- (including
TDS) to the Respondent. It is submitted that this ignoring of vital
evidences has let to irreparable hardship and the Award is liable to be set
aside for patent illegality.
97. It is submitted that the Respondent claims that RA Bills includes
the amounts paid to Labour Contractors and Material Suppliers on behalf
of Respondent by Petitioner. It is submitted that if the Running Account
Bills includes these amounts, then the direct payment of Rs.3,64,40,581/-
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couldn’t have been made to Respondent.
98. Regarding Excess payment made by the petitioner to the
respondent and the amount admitted by the petitioner as payable to the
materials of the respondent the petitioner has given the following
tabulation:-
i) Running Account Bills (RA Bills):
Claimed by AMFAH* : Rs.3,64,40,318
AXON# Paid the entire Amount:(TDS Paid Rs.3,19,72,927
for the rest of the amount)
That the Amount paid by AXON is reflected
from Bank Statement of AMFAH (R-41)
First Minutes of Meeting (MOM)- AMFAH
has Accepted the same(“C”Series;C-
4,Volume -II)
Thus AXON has paid to the AMFAH Rs.3,64,40,318/-
*Respondent claimant
# Petitioner
II) The amount paid to Suppliers of AMFAH at his instance and also
to his Laborers:- Rs.1,37,04,975/-
According to AXON
Supplier payments : Rs.2,97,87,666
Labour : Rs. 30,28,558
TOTAL : Rs. 3,28,16,724
However AMFAH accepts only towards suppliers Rs.1,81,81,938
AMFAH accepts only towards labour Rs. 13,36,936
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Total Amount accepted by AMFAH Rs.1,95,18,919
Total amount paid by Axon towards RA Bills and Rs5,59,59,237/-
accepted payments by AMFAH towards Suppliers [Rs.3,64,40,318/-
and Labours +Rs.1,95,18,919/-]
*Respondent claimant
# Petitioner
III) As against this, the amount admitted by Axon as payable to
materials of Respondent-claimant
Value of store material used Rs 32,98,880
The cost of chimney materials accepted (R 48- Rs1,82,15,567
636) by Axon for Chimney-1
The cost of Chimney Materials accepted (R48- Rs.1,73,90,846
636) by Axon For Chimney-2
Cost of materials @ Chimney site Rs. 21,68,653
Thus total amount payable Rs. 4,10,73,946
99. Thus it is stated that the petitioner has paid Rs,1,48,85,291/-
[Rs. 5,59,59,237 (-) 4,10,73,946] in excess in respect of Running Account
bills, payment to suppliers and labours, Value of Store materials and
Chimney materials to Respondent-claimant.
100. Regarding Liquidated Damages, it is submitted that the
Liquidated Damages were never deducted from the Respondent, but the
Arbitral Tribunal has granted this claim to Respondent holding that
Liquidated Damages has been deducted. It is further submitted that the
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Respondent itself admitted that it would not have made this claim if the
threat of deducting of Liquidated Damages was not made by the Petitioner.
101. Regarding Interest, it is submitted that the Arbitral Tribunal has
erred in awarding interest at 18% p.a. effective from 12/5/2012. It is
submitted that the Parties were negotiating by mutually trying to settle the
issues, and Meetings were held on various dates as evidenced in Ex-C3,
C4 and C5 and that the Arbitration was initiated only thereafter. Hence, it
is submitted that the interest cannot be imposed from 12/5/2012 and
further submitted that that the Arbitral Tribunal itself had delayed about
two years from the date of completion of arguments in passing the
impugned award and therefore to impose interest at 18% p.a. for this
period is also patently illegal.
102. It is further submitted that the high rate of interest @ 18% p.a.
if at all, can be fixed only from the date of award. Therefore, it is
submitted that granting interest from 12/5/2012 at 18% p.a. is against the
terms and conditions of the contract and well-settled principles of law.
Thus, it is submitted that the Arbitral Tribunal has exceeded its jurisdiction
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in awarding the interest.
103. It is further submitted that after the 2015 amendment of the
Arbitration Act, the award of interest for the post-award period has to be in
compliance with Section 31(7)(b), which is 2% higher than the current rate
of interest prevalent.
104. In 2022, the interest payable for deposits is only less than 6%.
Hence, it is submitted that granting interest at 18% p.a. even for the post-
award period is highly exorbitant, and it is submitted that due to the
peculiar facts of the case, no interest should have been awarded for the
pre-award period.
105. The petitioner has Submitted interest calculations as awarded
by the Arbitral Tribunal as follows:-
Arb.OPNo,646 of 2022(CHIMNEY NO.I )
AWARD Amount Rs. 3,89,27,448.51/-
Interest as on date of Award Rs.6,96,80,152.85/-
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022(9 years, 11 Months and 10 days )
Grand Total Rs. 10,86,07,601.36/-
Arb.OPNo,647 of 2022(CHIMNEY- II)
AWARD Amount Rs. 2,77,85,057.69/-
Interest as on date of Award Rs. 4,97,35,253.20/-
i.e., from 12/05/2012 to 22/04/2022
(9 years, 11 Months and 10 days )
Grand Total Rs, 7,75,20,310.89/-
106. Regarding transport Charges, it is submitted that as per the
terms and conditions of the Work Orders the Transport of Chimney
Equipment by the Respondent cannot be burdened on the Petitioner. It is
submitted that as per Ex.C82 the bills produced by Respondent is
Rs.12,15, 100/- (for both the Chimneys), whereas, the Learned Arbitral
Tribunal has awarded Rs.69,32,550/- as charges towards transportation,
erection, cost of office building, GI Shed. It is submitted that no proof
whatsoever has been given for the above claim and another claim of
Rs.21,32,750/- in respect of Chimney II. It is submitted that proof was
provided by the Respondent only for Rs.12,15,100/-.
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107. It is further submitted that the amended claim relating to
Chimney No.II for Rs.44,58,426/- is based on a false RA Bill No. 7,
which was allegedly fabricated. It was further contended that RA Bill No.
7 was already listed in the original documents and that respondent-
claimant claim of its recent discovery is false. It was further submitted that
the RA Bill No.7 is essentially a duplicate of RA Bill No.1, making it a
fraudulent claim.
108. It is submitted the Arbitral Tribunal did not address the
petitioners counterclaims or the compliance issues related to third-party
work, which warrants setting aside the award.
109. It is submitted that the Arbitral Tribunal has ignored vital
evidences and that many findings are not backed by any evidence. It is
further submitted that the Arbitral Tribunal due to wrong application of
legal principles has erroneously partly allowed the Claim Petition and had
completely rejected the Counter Claim of the Petitioner vide the Impugned
Awards dated 22/4/2022. Hence, pays for allowing these Original
Petitions under Section 34 of the Arbitration and Conciliation Act, 1996.
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110. On the other hand, the learned counsel for the respondent on
the issue regarding patent illegality and public policy submits that the
Arbitral Tribunal framed 14 Issues and had elaborately taken into
consideration the pleadings and documents of either side before answering
to the issues. It is submitted that none of the grounds raised by the
Petitioner would come under Sec.34 (2) (b) (ii) and patent illegality under
Sec.34 (2A) of the A & C Act, 1996.
111. It is submitted that as per Ex.C1 and C3 Work Orders the time
to start the work was within 15 days from the date of handing over of the
site, and the work was to be completed by the respondents within 18
months. It is submitted that the scope of work and the Materials to be
provided by the Petitioner were stipulated clearly.
112. It is submitted that even though the Work Order for Chimney
No.I was issued on 09.08.2010 and the Work Order for Chimney No.II
was issued on 21.08.2010, the Petitioner could not hand over the site to the
Respondent to commence construction due to local issues as was
originally planned.
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113. It is further submitted that only during the end of October,
2010, the Respondent was able to raise RA Bill No.1 for Rs.2,29,113/- for
preparatory works and the same was paid vide Ex.R-5 on 29.11.2010.
114. It is further submitted that the Petitioner could issue Work
Order No./WO/26/2011 for erecting, operation and maintenance of
concrete Batching Plant and transit mixtures and supply of concrete mix,
to the Respondent only vide Ex.R-6 on 18.10.2011 as against the
scheduled date of completion of 18 months, which is 14 Months from the
date of Work Orders dated 09.08.2010 & 21.08.2010. It is submitted that
the Respondent could raise an RA Bill for Rs.18,02,914/-only on
05.11.2011 after erecting and operating of batching plant and transit
mixture.
115. It is submitted that the Respondent commenced the work under
the respective Work Orders and was making substantial progress even
though, on several occasions, the Petitioner failed to fulfill its scope of
work under the Work Orders. It is further submitted that the Respondent
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faced many local issues while the work was in progress, which was well
within the knowledge of the Petitioner as is evident from Ex.C-66 and
submitted that in fact due to delay on the part of the Petitioner in fulfilling
its scope of work, the Respondent had incurred idling charges. It is
submitted that since the delay is not attributable to the Respondent, the
Petitioner has also certified RA Bill No.3A for idling charges vide Ex.C-
69 & Ex.C-70 on 06.12.2011.
116. It is submitted that taking into consideration of the difficulty in
handing over the site as originally planned and other local issues at site,
the Petitioner thus issued Ex.C-2Amended Work Order for Chimney No.1
on 28.12.2011 wherein the scheduled date for completion of the Amended
Work Order was extended till 31.07.2012.
117. It is further submitted that due to the same issue, the Petitioner,
on 02.01.2012, issued Ex. C-4 Amended Work Order for Chimney No. 2,
wherein the scheduled completion date of the Amended Work Order was
extended till 31.08.2012.
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118. It is further submitted that the Respondent fast-tracked the
execution of the work for both Chimney-1 & Chimney-2 in spite of delay
in supplying the materials under the scope of the Petitioner. It is submitted
that in this regard, there are number of communication and
correspondence between the Employer, the Petitioner and the Respondent.
119. It is further submitted that when that being so, without any
prior intimation or opportunity of hearing, the Petitioner in its proceedings
dated 12.05.2012 issued Ex.C-10termination of Work Orders alleging
certain issues and in turn the Respondent vide Ex.C-9 dated 13.05.2012
represented to the Petitioner that the termination order was issued when
the work was in full-swing and requested for withdrawal of the same to
continue to construct the works under the Contract.
120. It is submitted that the Arbitral Tribunal primarily rejected the
arguments of the Petitioner that the delay in execution of work was
attributable to the Respondent after carefully considering the entire
pleadings and documentary evidence and by giving proper reasons. It is
further submitted that the Tribunal rejected the Petitioner’s contention on
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the delay upto the Amended Work Orders on the ground that the Amended
Work Order did not refer to any such delay attributable to the Respondent
and moreover taking into consideration of the fact that the Petitioner
themselves have paid idling charges to the Respondent until December,
2011 vide Ex.C-69 & Ex.C-70.
121. It is further submitted that the Petitioner who has to provide
materials to the Respondent as mentioned at Page No.3 of the Work
Orders has inordinately delayed in providing the materials mentioned at
the Work Order and submitted that to substantiate the same the
Respondent has produced Ex.C-61, Ex.C-62, Ex.C-63, Ex.C-66, Ex.C-
67, Ex.C-68, Ex.C-75 to Ex.C-78.
122. It is further submitted that the ground raised by the Petitioner
that documents in Ex.R-9, Ex.R-11 to Ex.R-19 were not considered by
the Tribunal is also factually incorrect, as the same has been elaborately
discussed by the Arbitral Tribunal @Page No.52, Para 3 & Page No.59,
Para 2 of the impugned Award.
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123. It is further submitted that the Arbitral Tribunal considered
Issue No.1 & 2 with respect to the validity of the termination order dated
12.05.2012 by relying on various documents filed on either side, scope of
works etc. from Page No.62 to 78 of the Award and held that the
Termination Order of the Respondent was not valid.
124. It is further submitted that the grounds of this Petition in (viii)
& (ix) to drive a point that the impugned Award is perverse and patently
illegal, is without any basis and submitted that the impugned Award
passed by the Arbitral Tribunal is in no way against the terms of the
contract as defined under Sec.28 (3) of the A & C Act, 1996.
125. It is further submitted that the Petitioner has not substantiated
the 4 reasons assigned by it to terminate the contract on 12.05.2012. It is
submitted that the documents in Ex.R-8, Ex.R-9, Ex.R-11, Ex.R-12 &
Ex.R-13 are before the issuance of Amended Work Order and therefore,
those cannot be relied on to substantiate the termination order. It is further
submitted that Ex.R-14 dated 01.01.2012, Ex.R-15 dated 03.01.2012,
Ex.R-16 dated 04.01.2012 & Ex.R-17 dated 16.01.2012 also cannot be
relied on to substantiate the termination order as the same is immediately
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after the amended Work Order dated 28.12.2011.With respect to Ex.R-18
dated 28.04.2012 & Ex.R-19 dated 05.05.2012, it is submitted that they
are emails sent by the Principal-Employer to all the Contractors / Agencies
pointing out various issues and that does not solely pertain to the
Respondent and therefore these documents also cannot be considered as
supporting document to the termination order. Hence, it is submitted that
the Tribunal has rightly held that the reasons mentioned in the termination
Order were not supported by any document.
126. It is further submitted that Ex.C-74, Ex.C-75, Ex.C-77, Ex.C-
79, Ex.C-95, Ex.C-80 and Ex.C-100 would also show that the delay in
execution of the work is not attributable to the Respondent.
127. It is further submitted that the Arbitral Tribunal while deciding
the issues has not ignored any of vital evidence. It is submitted that the
Arbitral Tribunal while arriving at a decision on Issue No.6, 7 & 11
considered Ex.C26 email containing the calculation for the cost of
materials signed by both parties and therefore submitted that the Petitioner
cannot claim that there is no evidence for payment to be made.
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128. It is submitted that the Petitioner’s reliance on Ex.R-48 is
without authentication or signatures of any of the parties but the very same
document filed by the Respondent in Ex.C-26along with working
calculation is counter-signed by both the parties and therefore it is
submitted that Ex.R-48 cannot be looked into.
129.It is further submitted that the elaborate discussion on the
pleadings and documents on the side of both the parties and the decision
on issue-by-issue commencing from Page No.49 of the Award onwards,
cannot be assailed by anyone of the grounds raised by the Petitioner as
none of the Grounds raised by the Petitioner would fall under Sec.34 of the
A & C Act, 1996, to attract interference by this Hon’ble Court. Hence,
prayed for dismissing the Original Petitions filed by the Petitioner.
130. The Respondent has relied on the following judgments on the
issues raised by the Petitioner:-
S.No. Description
Scope of interference under Sec.34 of the A& C is minimal:
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022Challenge under Sec.34 cannot be treated like a Civil Appeal
01. Dyna Technologies (P) Ltd., Vs. Crompton Greaves Ltd.,
2019 (20) SCC 1 Para 24
02. Punjab State Civil Supplies Corp., Vs. Ramesh Kumar & Co., &Ors.,
2021 SCC Online SC 1056 Para 11 & 12
03. Haryana Tourism Ltd., Vs. Kandhari Beverages Ltd.,
2022 (3) SCC 237 Para 9
Award cannot be set aside merely because another view is possible:
04. UHL Power Company Ltd., Vs. State of Himachal Pradesh
2022 (4) SCC 116 Para 16 & 17
05. Delhi Airport Metro Express (P) Ltd., Vs. Delhi Metro Rail Corp.
Ltd.,
2022 (1) SCC 131 Para 26, 28, 29, 42 & 49
06. G.M Northern Railways Vs. Poineer Publicity Pvt. Ltd &Anr.,
2023 SCC Online Del 39 Para 30, 31 & 32
Public Policy
07 Associate Builders Vs. Delhi Development Authority
2015 (3) SCC 49
Patent Illegality
08 NHAI Vs. GVK Jaipur Express Way Pvt. Ltd.,
2023 ONLINE DEL 3790 – Para 17, 24, 26 & 27
131. Having perused both the Impugned Arbitral Awards dated
22.04.2022 and having considered the submissions made by the learned
counsel for the Petitioner and the Respondent-Claimant and having over
ruled the preliminary objection of the petitioner to the respective
Impugned Arbitral Awards dated 22.04.2022, I shall now proceed with
the rest of the submissions on merits regarding the challenge to the
respective Impugned Arbitral Awards passed by the Arbitral Tribunal on
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22.04.2022 for Chimney No.I and Chimney No.II in these respective
petitions.
132. The total claim and counter claim for Chimney No.I and
Chimney No.II of the Petitioner and the Respondent-Claimant and the
amount awarded are detailed as under :-
Claim
Particulars Arb.O.P.No.646 of Arb.O.P.No.647 of Total
2022 2022
Chimney No.I Chimney No.II
Claim Rs.6,02,77,515.51 Rs.4,35,59,079.39 Rs.10,38,36,594.90
Interest Rs.8,28,36,169.26 (as Rs.5,42,40,475.47 Rs.13,70,76,644.26
adjudged by the
Tribunal)
Cost of Rs.10,00,000.00 Rs.10,00,000.00 Rs.20,00,000.00
Arbitration
Total Claim Rs.14,41,13,684.77 Rs.9,87,99,554.86 Rs.24,59,37,487.37Counter Claim
Particulars Arb.O.P.No.646 of Arb.O.P.No.647 of Total
2022 2022
Counter Claim Rs.4,87,33,561.00 Rs.6,55,67,188.00 Rs.11,43,00,749
Interest Rs.5,18,85,802.00 Rs.9,32,37,390.00 Rs.14,51,23,192
Total Counter Rs.10,06,19,363.00 Rs.15,88,04,578.00 Rs.25,94,23,841.00
Claim
Awarded Amounts_____________
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Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022Particulars Arb.O.P.No.646 of Arb.O.P.No.647 of Total
2022 2022
Awarded Rs. 3,89,27,449.51 Rs.2,77,85,057.69 Rs.6,67,12,507.20
Interest 18% 18% 18%
Cost Nil Rs.10,00,000.00 Rs.10,00,000.00
Grand Total of Rs.6,77,12,507.20
Award on
claims
excluding
interest
133. Thus, 63.97% of the total claim of the respondent-claimant of
Rs.10,58,36,594.90/- (Rs.10,38,36,594.90 + Rs.20,00,000.00) for
Chimney No.I and Chimney No.II has been allowed. It is equal to 59.24%
of the counter claim of the petitioner of Rs.11,43,00,749/-. Over and above
Interest at 18% has been awarded.
134. The Hon’ble Supreme Court in Anil Rai vs. State of Bihar
[(2001) 7 SCC 318], has recognized that a delay in passing judgment long
after the arguments are over can be fatal. Since the arbitral proceedings
have to be completed in the time bound manner and since more than four
extensions had already been obtained, the learned Arbitrator would have
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been constrained to pass the Award in a hurry.
135.Arguments were completed on 06.02.2020 before the Arbitral
Tribunal. Thereafter, the parties were called upon to give their written
submissions. The written submissions of the respondent-claimant is dated
05.03.2020 and the written submissions of the petitioner is also of March,
2020. However, the country immediately went into lockdown from
24.03.2020.
136. Thus, the learned arbitrator would have been handicapped to
formulated his thought process and dictate the Awards in absence of
proper secretarial assistance as movements were restricted due to COVID-
19 lockdown.
137. The Learned Arbitrator was under a bind to pass the award as
already several extensions were granted by this Court. Consequently, the
Impugned Awards dated 22.04.2022 was authored by the learned
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Arbitrator during the period when the learned Arbitrator was at a
disadvantage due to COVID-19 lockdown. The Impugned Awards passed
are susceptible to a valid challenge under Section 34 of the Arbitration and
Conciliation Act, 1996 for reasons I shall state hereafter.
138. At the outset, it has to be emphasized that this Court can
neither sit as a court of appeal nor re-appreciate the evidence placed before
the Arbitral Tribunal, nor can it substitute the findings of the Arbitral
Tribunal with its own conclusions on facts or evidence placed before the
Arbitral Tribunal.
139. The Hon’ble Supreme Court in The Project Director, NHAI v.
M. Hakim, (2021) 9 SCC 1, has held that the power to set aside an
Arbitral Award under Section 34 of the Arbitration and Conciliation Act,
1996, does not include the authority to modify the award. It further held
that an award can be set aside only on limited grounds as specified in
Section 34 of the Act, and it is not an appellate provision.
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140. The Hon’ble Supreme Court further held that an application
under Section 34 for setting aside an award does not entail any challenge
on the merits of the award.
141. The Honourable Supreme Court in Ssangyong Engineering
and Construction Co. Ltd. versus National Highway Authority of India,
(2019) 15 SCC 131, has held that an award can be set aside on the ground
of patent illegality under Section 34 (2-A) of the Arbitration and
Conciliation Act, 1996, only where the illegality in the award goes to the
root of the matter. The Hon’ble Supreme Court further held that the
erroneous application of law by an Arbitral Tribunal or the re-appreciation
of evidence by the court under Section 34 (2-A) of the Arbitration and
Conciliation Act, 1996, is not available.
142. The Hon’ble Supreme Court also held that the above ground is
available only where the view taken by the Arbitral Tribunal is an
impossible view while construing the contract between the parties, or
where the award of the tribunal lacks any reasons. The Hon’ble Supreme
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Court further held that an award can be set aside only if an
arbitrator/arbitral tribunal decides a question beyond the contract or
beyond the terms of reference, or if the finding arrived at by the Arbitral
Tribunal is based on no evidence, ignores vital evidence, or is based on
documents taken as evidence without notice to the parties.
143. Although the Court examining the correctness of the Award
under Section 34 of the Arbitration and Conciliation Act, 1996, is not
expected to act as an Appellate Court or substitute the finding of facts
arrived by the Arbitral Tribunal to give a different conclusion,
nevertheless, the Court has to necessarily examine the evidence and pass
an order either sustaining the Award or set it aside on any of the grounds
mentioned in Section 34 of the Arbitration and Conciliation Act, 1996 and
in the light of the above mentioned well settled principles of law.
144. The claim of the Respondent-Claimant before the Arbitral
Tribunal under various Heads as in Table No.II and Table No.III to this
Order for Chimney No.I and Chimney No.II are primarily on account of
the cost of materials and equipments stored at the site which remained
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with the petitioner and used in work by the petitioner and certain other
Heads which was partly allowed by the Arbitral Tribunal as in Table No.
IV to this order.
145. The incongruity in the claim of the Respondent-Claimant and
the counter claim of the Petitioner are writ at large. The total value of the
contract for Chimney No.I and Chimney No.II vide Ex.C1 and Ex.C3 as
amended by Ex.C2 and Ex.C4 are as under:-
Particulars Chimney No.I Chimney No.II Total
As per Indicative Rs.4,38,01,975/- Rs.4,38,01,975/- Rs.8,76,03,950/-
Ex.C1 Contract
and Value and
Ex.C3 the
quantities
of the
materials
Bill of Rs.54,21,300/- Rs.54,21,300/- Rs.1,08,42,600/-
quantity
(BOQ) for
Steel
Structural
Work
Grand Total Rs.9,84,46,550/-
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As per Indicative Rs.4,32,43,775/- Rs.4,35,91,775/- Rs.8,68,35,550/-
Ex.C2 Contract
and Value and
Ex.C4 the
quantities
of the
materials
146. Out of the aforesaid sum of Rs.8,68,35,550/- for the work to be
carried out by the Respondent-Claimant to the Petitioner, the Petitioner
has admittedly paid a sum of Rs.5,59,59,310/- to the Respondent-Claimant
under the following heads:-
Payments against various running bills for Rs.3,64,40,318/-
both Chimney No.I and Chimney No.II
Payments to suppliers vendors of the Rs.1,95,18,992/-
respondents and labours (Rs.1,81,81,987 +
13,36,935)
Total Rs.5,59,59,310/-
147. Thus, as against a total estimated value of the contract for
Chimney No.I and Chimney No.II for a sum of Rs.8,68,35,550/-, the
Respondent – Claimant has received a sum of Rs.5,59,59,310/- leaving a
balance of Rs.3,08,76,240/- (Rs.8,68,35,550/-– 5,59,59,310). Thus, 64% of
the contract amount has been already paid to the respondent-claimant by
the petitioner.
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148. Since the termination of the contract vide Ex.C10 dated
12.05.2012 has been held to be improper, over and above Rs.5,59,59,310/-
paid by the petitioner to the respondent-claimant for the work completed
for Chimney No.I and Chimney No.II, the Arbitral Tribunal has held that
the respondent-claimant was also entitled to recover a sum of
Rs.26,83,819/- being the amount allegedly retained as of 12.05.2012 by
the petitioner from the Running Bills raised for Chimney No. I on the
respondent-claimant towards liquidated damages.
149. Thus, for the work to be carried out by the Respondent-claimant,
the total amount paid and payable to the petitioner would increase to
Rs.5,86,43,129/- (Rs.5,59,59,310 + Rs.26,83,819) from and out of contract
value of Rs.8,68,35,550/- and stands confirmed if the Impugned Awards are
upheld. This is allegedly for 28/- and 12% of the work completed by the
respondent-claimant for Chimney No.I and Chimney No.II.
150. Before the Arbitral Tribunal, the Respondent-Claimant has not
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made any claim for the work done except for the RA Bill No.7 for
Chimney No.II for a sum of Rs.40,89,833/- which has been allowed by
the Impugned Award dated 22.04.2022.
151. According to the petitioner, on the date of termination of
contract vide Ex.C10 dated 12.05.2012, the work completed by the
Respondent suffered from the following deficiencies:-
i. Performance & Quality of the works are very poor;
ii. Mobilization of resources, tools & tackles not done
at the required time;
iii.Skilled manpower mobilization is not as per the
requirement till date;
iv. You never achieved the targeted progress as per your
commitment till date.
152. According to the Petitioner, on the date of termination of the
contract on 12.05.2000 vide Ex.C10 Termination Letter dated
12.05.2012, the quantum work that was reportedly completed by the
respondent-claimant for Chimney No.I and Chimney No.II was only
28% and 12% respectively. This claim of the petitioner has also not been
seriously contested by the Respondent-Claimant before the Arbitral
Tribunal.
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153. Arbitral Tribunal has found the termination of contract by the
petitioner vide Ex.C10 Termination Letter dated 12.05.2012 was not
valid and therefore unsustainable. This is contrary to express clause (vi) of
general terms and conditions in Ex.C1 dated 09.08.2010 & Ex.C3 dated
21.08.2010 which reads as under:-
vi)We reserve the right to cancel, amend or
modify the work in part or full upon being
dissatisfied regarding the quality, progress
and the performance of the work executed by
the Contractor and the behaviour of
Contractor’s supervisor staff/workmen
without assigning any reason and without
giving any notice whatsoever. Our decision
on such matters will be final and binding on
Contractor.
154. The Arbitral Tribunal has thus ignored the above clause (vi) of
the General Terms and Conditions in Ex.C1 dated 09.08.2010 & Ex.C3
dated 21.08.2010 and thus the Impugned Awards both dated 22.04.2002
violated Section 28(3) of the Arbitration and Conciliation Act,1996.
Therefore, in terms of the decision of the Hon’ble Supreme Court in
Ssangyong Engineering and Construction Co. Ltd. versus National
Highway Authority of India, (2019) 15 SCC 131, the Impugned Awards
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have to be held to be suffered from the vices of patent illegality.
155. Vide Ex.28 dated 20.08.2012, the petitioner confirmed the
quantity of materials and equipment stored at site as of Ex.C10
Termination Letter dated 12.05.2010. Vide Ex.C29 dated 22.08.2012,
the respondent-claimant valued the materials at Rs.82- per kg. Vide Ex.
C111 dated 28.8.2012, the petitioner estimated the value at Rs.65 per kg.
156. The Arbitral Tribunal has awarded as sum of
Rs.4,56,43,053.81 (Rs.2,40,80,580+ Rs.2,15,62,473.81) towards materials
and equipment stored at site as of Ex.C10 Termination Letter dated
12.05.2010. There ought to have been a proper valuation of the material
with the help of an independent report of an expert Commissioner or a
Chartered Engineer soon after the contract was terminated by the
Petitioner vide Ex.C10 Termination Letter dated 12.05.2010.
157. Neither the Petitioner nor the Respondent-Claimant have
produced any evidence to substantiate the value of Rs.4,56,43,053.81
being the cost of material and equipment used in work either at Rs.82/- or
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Rs.65/-. The Arbitral Award has however awarded the same to the
respondent-claimant without any proper discussions and proper evidence
on record.
158. The Arbitral Tribunal ought to have examined the evidence
properly and ought to have given a finding as to why the Respondent-
Claimant would have stored materials and equipments for a total sum of
Rs.4,56,43,053/- [Rs.2,40,80,580/- and Rs.2,15,62,473.81] for Chimney
No.I and Chimney No.II respectively which was valued at Rs.82/- per kg
by the Respondent-Claimant and at Rs.65/- per kg by the Petitioner.
159. A reading of the Impugned Award also indicates that there is
no clear discussion in the Impugned Award regarding the payments
allegedly made in excess against various Running Bills on the petitioner.
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160. There is also no clear discussion regarding amounts alleged to
have been illegally deducted from the Running Bills raised by the
Respondent-Claimant and appropriated towards liquidated damages after
the termination of the contract.
161. Similarly, an amount of Rs.70,82,550/- and Rs.21,32,750/-
allegedly incurred by the Respondent-claimant towards transportation of
material stored also remains unexplained in the respective Impugned
Awards for Chimney No.I and Chimney No.II. There is no clear
discussion in the respective Impugned Awards on other amounts awarded.
Thus, the Impugned Awards have resulted in a patent illegality.
162. The Arbitral Tribunal ought to have discussed the issue before
awarding huge amounts to the respondent-claimant which were over and
above the value of the contract in Ex.C1 dated 09.08.2010 and Ex.C3
dated 21.08.2010 and amended vide Ex.C2 dated 28.12.2011 and Ex.C4
dated 02.01.2012 for Chimney No.I and Chimney No.II.
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163. It is also not clear how a sum of Rs. 21,79,588/- each for
Chimney No.I and Chimney No.II which was claimed towards liquidated
damages by the petitioner in the counter claim was rejected and
Rs.26,83,819/- was awarded to the respondent-claimant as Rs.26,83,819/-
for Chimney No.I.
164. That apart, the Arbitral Tribunal ought to have given a clear
finding as to whether the delay in awarding of work order vide Ex.R6 on
18.10.2011 for setting up a Ready Mix Concrete Plant vide Ex.R6 on
18.10.2011 which was 82 days and 94 days before the expiry of the first
dead line fixed for completion of work for Chimney No.I and Chimney
No.II on 08.02.2012 and 20.02.2012 had indeed resulted in the delay by
the Respondent – claimant or not. There ought to have been discussion as
to whether premature termination of the contract vide Ex.C10 Termination
Letter dated 12.05.2012 few days before the extended period for
completion of the work for the respective Chimneys on 31.07.2012 and
31.08.2012 was justified or unjustified.
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165. That apart, the counter claim of the Petitioner has been rejected
by holding that there were no documents to substantiate the same even
though the petitioner has marked 53 documents in support of the aforesaid
claim. There is no discussion regarding these exhibits in the Impugned
Award. Thus, there is patent illegality in the Impugned Award.
166. Under these circumstances, the Court is left with no other
options except to set aside the Impugned Award. While, the Impugned
Awards are set-aside, it has to be observed that the learned Arbitrator is
not to be blamed on account of extra ordinary situations that prevailed in
the Country due to outbreak of Covid-19 and lock down imposed.
167. Since, the Impugned Award have been passed without proper
reasoning, they are therefore liable to be set aside. Liberty is however
given to the parties to work out their inter-se rights the manner known to
law. The time spent before this Court by either of the parties from the date
of filing of the respective Original Petitions till the date of receipt of
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certified copy of this order shall stand excluded for the purpose of
computation of limitation for the parties to work out their inter se rights in
the manner known to law.
168. In the result, both the Impugned Awards dated 22.04.2022 are
set aside with the above observations. Consequently these Original
Petitions are allowed. Consequently, these Applications are closed.
14.08.2024
Index : Yes/No
Neutral Citation : Yes/No
kkd
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C.SARAVANAN, J.
kkd
Pre-delivery Order in
Arb.O.P.(Com.Div.)Nos.646 & 647 of 2022
14.08.2024
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