Full Judgment Text
2023:DHC:3782-DB
$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 17.05.2023
+ FAO (COMM) 52/2023 and CM Nos. 9523/2023 &
9524/2023
M/S JOP INTERNATIONAL LIMITED ..... Appellant
Through: Mr Rajesh Yadav, Senior
Advocate.
versus
M/S MULTIFOLD GROUP CONTRACTOR
AND ENGINEERS ..... Respondent
Through: Mr Abhimanyu Singla,
Advocate.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE AMIT MAHAJAN
VIBHU BAKHRU, J.( ORAL )
1. The appellant has filed the present appeal under Section
37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereafter ‘ the
A&C Act ’) impugning a judgement dated 18.11.2022 (hereafter ‘ the
impugned judgement ’) passed by the learned Commercial Court in
an application preferred by the respondent under Section 34 of the
A&C Act.
2. The respondent had filed the said application seeking setting
aside of the arbitral award dated 01.09.2018 (hereafter ‘ the impugned
award ’). The impugned award was rendered in the context of the
disputes that had arisen between the parties in connection with their
agreement dated 22.03.2014 (hereafter ‘ the Agreement ’). In terms of
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the Agreement, the respondent had agreed to carry out construction
and development of works in a project named ‘JOP Palms’, located at
Sector 28, Rohtak, Haryana (hereafter ‘ the project ’).
3. The disputes were referred to an arbitral tribunal comprising of
a sole arbitrator (hereafter ‘ the Arbitral Tribunal ’). The respondent
had, inter alia , claimed a sum of ₹17,04,755/- (Claim no.1). The said
amount comprised of a sum of ₹1,09,879/- due against the Running
Account Bills and an amount of ₹15,94,876/- on account of refundable
security deposit. The Arbitral Tribunal awarded a sum of ₹15,81,705/-
being the security deposit that was retained by the appellant. Insofar as
th
claim for payment due under the 39 Running Bill is concerned, the
Arbitral Tribunal rejected the same on the ground that the respondent
(claimant in the impugned award) had failed to prove the
acknowledgement of the said bill. The balance claims (Claim nos.2 to
6), relating to miscellaneous civil work, were disallowed. Claim nos.7
and 8, relating to interest, were partly allowed to the extent of the
amount awarded under Claim no.1.
4. Claim nos.2 to 6, as summarized in the impugned judgement,
are set out below:
“ Claim No.2
Payment for Miscellaneous civil work
3BHK: Covered Area 98400 Sq.ft. @ Rs. 8/- Rs.
7,87,200/-
Balcony Area 15346 Sq.ft. @ 4/- Rs. 61,387/-
Total
Rs. 8,48,587/-
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Claim No.3
Loss due to delay in casting of slab at 2BHK Casted
on 20.03.2016 Rs. 2,00,000/-.
Claim No.4
Casting of columns at 2BHK & 3 BHK Manually
/Hand mixing Rs. 10,22,230/-.
Claim No.5
2BHK pending column quantity at basement
Rs. 2,38,122/-.
Claim No.6
Extra payment made to rigger for setting of pipeline
from the concrete pump to the point of casting Rs.
1,38,000/-.”
5. The Arbitral Tribunal had rejected the said claims, principally,
on the ground that the claimant (respondent) had failed to establish the
same. The Arbitral Tribunal held that the respondent had failed to
show any specific order or any specific bill in respect of the amounts
claimed under Claim nos.2 to 6. The Arbitral Tribunal also rejected
the emails relied upon by the respondent on the ground that such
electronic evidence could not be relied upon in the absence of a
necessary affidavit under Section 65B of the Indian Evidence Act,
1872. The relevant extract of the impugned award is set out below:
“while claim no 2 to 6 which are concerned with the
payment for misc civil work carried out at the site,
Loss due to delay in casting of slab and column at 2
BHK, pending column quantity at basement and extra
payment made to rigger by the claimant, the claimant
has explained the same in a detailed manner in his
claim and also explained the same during the course
of argument and succeed in proving the calculation so
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made by him for the purpose of the claim that the said
work has been carried out by him at the site however
the conducting of the said work is duly admitted by
the respondent, but on the pretext that the same was a
part of the work order and without these work the
project cannot be consider as completed, even
otherwise the claimant has failed to show any specific
work order or any specific bill so raised by him in
respect to the said alleged misc works etc as
mentioned in claim 2 to 6, however it is a settled
principal of commercial transaction and explained by
the apex courts in his various judgments that in case
of commercial transactions the payment has to be
made only against the demand for payment so raised
by way of bills and in the present case the claimant
has fails to prove any specific work order or bill so
raised against the alleged work carried out by him
however in this regard the claimant is purely relying
upon the e mails among the parties which are a part of
the electronic evidence and cannot be relied with
procedure so mentioned in section 65 B of evidence
act which is regarding the admissibility of electronic
records and both the parties has failed to comply with
the same, however to prove the same onus is on the
claimant and in the absence of any such bill no such
claim completely or in partial can be granted in
faovur of the claimant. Even otherwise the claimant
has failed to mention in his claim or during the course
of arguments the source of emails. While in case of
claim 7 and 8 which is regard the interest on the claim
part as well as the damage and mental agony, no
direct/indirect question has been put to any of the
witness by the claimant however the onus to prove the
same is upon the claimant and the claimant has failed
to prove the same.”
6. Aggrieved by the denial of its claims, the respondent preferred
the application under Section 34 of the A&C Act [being
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OMP(COMM) No.1 of 2018], before the learned Commercial Court,
assailing the impugned award. The learned Commercial Court
examined the impugned award and concluded that the material and
evidence placed by the respondent were sufficient to allow the claims;
accordingly, the impugned award, inasmuch as it rejected Claims nos.
2 to 6, was patently illegal and not sustainable in law.
7. Having concluded the same, the learned Commercial Court
proceeded further to allow the said claims. The relevant extract of the
impugned judgement, dispositive of the respondent’s application
under Section 34 of the A&C Act, to set aside the impugned award, is
set out below:
“27. In view of the foregoing discussions, it can
be held the impugned award passed by the arbitrator
thereby dismissing the claims no. 2 to 6 made by the
petitioner are patently illegal and is not sustainable in
law. Therefore, the impugned award dismissing the
claims no. 2 to 6 made by the petitioner is set aside.
The claim no.7 and the issue no.3 relate to the interest
which may be granted in case, the petitioner succeeds
in proving the claims no. 2 to 6. The subject
transaction was the commercial in nature. Hence, the
petitioner is held entitled to Rs. 24,46,939.00 along
with interest @ 12% pa from the date of award i.e.
01.09.2018 till realization.”
8. The appellant is aggrieved to the extent that the respondent’s
claims have been allowed by the learned Commercial Court.
9. Mr Yadav, the learned senior counsel appearing for the
appellant, contended that the impugned judgement is liable to be set
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aside as the learned Commercial Court did not have the jurisdiction to
modify the impugned award. He relied upon the decision of the
Supreme Court in Project Director, National Highways No.45 E and
1
220 National Highways Authority of India v. M. Hakeem & Anr in
support of his contention.
10. Mr Singla, the learned counsel appearing for the respondent,
countered the aforesaid submissions. He submitted that the learned
Commercial Court cannot be faulted for allowing the respondent’s
claim. He contended that it is implicit that the powers available with
the Court under Section 34 of the A&C Act would extend to allowing
the claims, if it is found that the same were erroneously rejected.
11. He referred to the decision of the Supreme Court in Alpine
Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal &
2
Ors , and on the strength of the said decision, submitted that the
Supreme Court had clarified that it was open for the Court to examine
evidence in proceedings under Section 34 of the A&C Act, prior to its
amendment by the Arbitration and Conciliation (Amendment) Act,
2019.
12. He reasoned that if the court was empowered to accept
affidavits and in given cases also permitted cross-examination in
proceedings under Section 34 of the A&C Act, it would necessarily
follow that the court would also have the jurisdiction to pass
consequential orders relating to the disputes. Thus, in cases where the
1
(2021) 9 SCC 1
2
2023 SCC OnLine SC 55
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court is of the view that the claims made are liable to be allowed, the
court could pass appropriate orders in applications filed under Section
34 of the A&C Act. He also submitted that the decision in the case of
Project Director, National Highways No.45 E and 220 National
1
Highways Authority of India v. M. Hakeem & Anr. is not applicable
in the facts of the present case as, in the said case, the Supreme Court
had agreed with the conclusion of the arbitral tribunal and had
enhanced the amounts awarded. He submitted that, in the given facts,
the same amounted to modifying the impugned award, which the
Supreme Court held was impermissible. He submitted that the said
decision would have no application where the court does not agree
with the decision of the arbitral tribunal. In that case, passing
consequential orders would not amount to modification of the award.
13. The question whether a court can exercise an award in an
application filed under Section 34 of the A&C Act is no longer res
integra. The Allahabad High Court, in the case of Managing Director
3
v. Asha Talwar , held that the Court did not have the power to grant
the original relief prayed for before the arbitrator. Referring to the
said decision, a learned Single Judge of this Court in Cybernetics
4
Network Pvt. Ltd. & Ors. v. Bisquare Technologies Pvt. Ltd.
declined to decide the claims that were wrongly rejected by the
learned arbitrator. A similar view was also expressed by this Court in
3
2009 SCC OnLine All 624
4
2012 SCC OnLine Del 1155
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5
Bharti Cellular Limited v. Department of Telecommunications .
6
14. In Central Warehousing Corporation v. A.S.A. Transport , the
Division Bench of the Madras High Court had considered an appeal
arising from a decision of the learned Single Judge setting aside the
arbitral award and further directing the appellant to appoint an
arbitrator for conducting arbitration. Although the Division Bench of
the Madras High Court concurred with the view that the arbitral award
impugned in that case was rightly set aside, it did not agree to a further
direction for appointment of an arbitrator. The Division Bench
referred to the decision of the Supreme Court in McDermott
7
International Inc. v. Burn Standard Co. Ltd. & Ors. and held that in
an application under Section 34 of the A&C Act, the Court could set
aside the award leaving the parties free to commence arbitration again,
if desired.
15. In Puri Construction P. Ltd. & Ors. v. Larsen and Toubro Ltd.
8
& Anr. , the Division Bench of this Court concurred with the decision
3
in Managing Director v. Asha Talwar ; Cybernetics Network Pvt.
4
Ltd. v. Bisquare Technologies Pvt. Ltd & Ors. ; Bharti Cellular
5
Limited v. Department of Telecommunications ; and Central
6
Warehousing Corporation v. A.S.A. Transport . The Court also
referred to the following passage from the decision of the Supreme
Court in McDermott International Inc. v. Burn Standard Co. Ltd. &
5
2012 SCC OnLine Del 4846
6
2007 SCC OnLine Mad 972
7
(2006) 11 SCC 181
8
2015 SCC OnLine Del 9126
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7
Ors. as laying down the guiding principles on the issue:
“The 1996 Act makes provision for the supervisory
role of courts, for the review of the arbitral award only
to ensure fairness. Intervention of the court is
envisaged in few circumstances only, like, in case of
fraud or bias by the arbitrators, violation of natural
justice, etc. The court cannot correct errors of the
arbitrators. It can only quash the award leaving the
parties free to begin the arbitration again if it is desired.
So, scheme of the provision aims at keeping the
supervisory role of the court at minimum level and this
can be justified as parties to the agreement make a
conscious decision to exclude the court’s jurisdiction
by opting for arbitration as they prefer the expediency
and finality offered by it.”
16. The Court accepted that the above observations in McDermott
7
International Inc. v. Burn Standard Co. Ltd. & Ors. were not in the
context of the specific issue but held that “ …it is determinative of the
Court’s approach in an enquiry under Section 34 of the Act ”. The
Court further observed that “ …a Court, while modifying or varying the
award would be doing nothing else but “correct[ing] the errors of the
arbitrators” .
17. The decision in the case of Puri Construction P. Ltd. & Ors. v.
8
Larsen and Toubro Ltd. & Anr. was referred with approval by the
1
Supreme Court in the case of M. Hakeem & Anr. . In its decision, the
Supreme Court referred to the language of Section 34 of the A&C Act
and explained as under:
“16. What is important to note is that, far from
Section 34 being in the nature of an appellate provision, it
provides only for setting aside awards on very limited
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grounds, such grounds being contained in sub-sections (2)
and (3) of Section 34. Secondly, as the marginal note of
Section 34 indicates, “recourse” to a court against an
arbitral award may be made only by an application for
setting aside such award in accordance with sub-sections
(2) and (3). “Recourse” is defined by P. Ramanatha
Aiyar’s Advanced Law Lexicon (3rd Edn.) as the
enforcement or method of enforcing a right. Where the
right is itself truncated, enforcement of such truncated
right can also be only limited in nature. What is clear
from a reading of the said provisions is that, given the
limited grounds of challenge under sub-sections (2) and
(3), an application can only be made to set aside an
award. This becomes even clearer when we see sub-
section (4) under which, on receipt of an application
under sub-section (1) of Section 34, the court may
adjourn the Section 34 proceedings and give the Arbitral
Tribunal an opportunity to resume the arbitral
proceedings or take such action as will eliminate the
grounds for setting aside the arbitral ward. Here again, it
is important to note that it is the opinion of the Arbitral
Tribunal which counts in order to eliminate the grounds
for setting aside the award, which may be indicated by
the court hearing the Section 34 application”
1
18. In M. Hakeem & Anr. the Supreme Court also rejected the
contention that the rule of purposive construction could be extended to
read in the power to modify an award under Section 34 of the A&C
Act. The relevant extract of the said decision reads as under:
“47. Purposive construction” of statutes, relevant in
the present context, is referred to in a recent concurring
judgment by Nariman, J. in Eera v. State (NCT of Delhi)
(2017) 15 SCC 133, as the theory of “creative
interpretation”. However, even “creative interpretation”
has its limits, which have been laid down in the aforesaid
judgment as follows:
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“139. A reading of the Act as a whole in the
light of the Statement of Objects and Reasons thus
makes it clear that the intention of the legislator
was to focus on children, as commonly
understood i.e. persons who are physically under
the age of 18 years. The golden rule in
determining whether the judiciary has crossed the
Lakshman Rekha in the guise of interpreting a
statute is really whether a Judge has only ironed
out the creases that he found in a statute in the
light of its object, or whether he has altered the
material of which the Act is woven. In short, the
difference is the well-known philosophical
difference between “is” and “ought”. Does the
Judge put himself in the place of the legislator and
ask himself whether the legislator intended a
certain result, or does he state that this must have
been the intent of the legislator and infuse what he
thinks should have been done had he been the
legislator. If the latter, it is clear that the Judge
then would add something more than what there is
in the statute by way of a supposed intention of
the legislator and would go beyond creative
interpretation of legislation to legislating itself. It
is at this point that the Judge crosses the
Lakshman Rekha and becomes a legislator, stating
what the law ought to be instead of what the law
is.”
(emphasis in original)
48. Quite obviously if one were to include the
power to modify an award in Section 34, one would be
crossing the Lakshman Rekha and doing what, according
to the justice of a case, ought to be done. In interpreting a
statutory provision, a Judge must put himself in the shoes
of Parliament and then ask whether Parliament intended
this result. Parliament very clearly intended that no power
of modification of an award exists in Section 34 of the
Arbitration Act, 1996. It is only for Parliament to amend
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the aforesaid provision in the light of the experience of the
courts in the working of the Arbitration Act, 1996, and
bring it in line with other legislations the world over.”
19. Clearly, in the facts of the present case, the learned Commercial
Court has modified the award and in our opinion, has erred in doing
so.
20. The proceedings under Section 34 of the A&C Act are limited
to setting aside the arbitral award, if any of the grounds as set out
under Section 34(2) and 34(3) of the A&C Act are established. Thus,
having concluded that the impugned award is patently illegal, the
learned Commercial Court could have set aside the said impugned
award but it was impermissible for it to proceed further and allow the
claims. It is not within the jurisdiction of the Court to modify an
arbitral award or correct the errors of the arbitral tribunal. In an
application under section 34 of the A&C Act, the court does not act as
a court hearing a first appeal from the decision of the arbitral tribunal;
its jurisdiction is confined to examining whether the arbitral award is
required to be set aside.
21. The foundation of arbitration is the consent between the parties.
The disputes between the parties are required to be decided by the
forum of their choice – the arbitral tribunal. Any party aggrieved by an
arbitral award is entitled to make an application under Section 34 of
the A&C Act for setting aside the arbitral award albeit on the limited
grounds as set out in Section 34 of the A&C Act. The provisions of
the A&C Act do not empower the court to re-adjudicate the said
disputes, the same would necessarily have to be adjudicated in
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arbitration.
22. In the event the parties succeed in establishing that the rejection
of its claims by the arbitral tribunal is patently illegal, the said award
may be set aside, but the claims cannot be allowed in favour of the
claimant by the court as that would amount to rewriting the award,
which is impermissible. In such cases, the said disputes would
necessarily have to be referred to arbitration and it would be open for
any party to take necessary steps in this regard.
23. Mr Singla’s reliance on the decision in the case of Alpine
Housing Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal &
2
Ors. is misplaced. The reasoning that since a court could examine the
evidence under Section 34 of the A&C Act would also necessarily
include the power to modify the award, is erroneous. As noted above,
the power of a court under Section 34 of the A&C Act is limited to
setting aside the award if the grounds set out under Section 34 of the
A&C Act are established. The decision in the case of Alpine Housing
2
Development Corporation Pvt. Ltd. v. Ashok S. Dhariwal & Ors.
relates to the scope of examination for determining whether the award
is liable to be set aside. The observations in the said decision, relied
upon by Mr Singla read as under:
“24. …..Therefore, in an exceptional case being made
out and if it is brought to the court on the matters not
containing the record of the arbitrator that certain
things are relevant to the determination of the issues
arising under section 34(2)(a), then the party who has
assailed the award on the grounds set out in section
34(2)(a) can be permitted to file affidavit in the form of
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evidence. However, the same shall be allowed unless
absolutely necessary .”
24. It is clear from the above passage that the observations made in
regard to power of the court to consider material and evidence that
was not before the arbitrator, is in the context of determination of
issues arising under Section 34(2) of the A&C Act. The opening
sentence of Sub-section (2) of Section 34 of the A&C Act reads as
“ An arbitral award may be set aside by the Court only if ….. ”. Thus
the examination is confined for determining whether any of the
grounds under Section 34(2) of the A&C Act are established. It
follows that consideration of additional material or evidence can only
be for the purpose of determining whether the arbitral award is
required to be set aside. The power of the court under Section 34 of
the A&C Act cannot be read to mean that the Supreme Court had
accepted that the jurisdiction of the Court would extend to modifying
or remitting the award.
25. In view of the above, the impugned order, to the extent that it
allows the claims of the respondent, is set aside.
26. The appeal is disposed of in the aforesaid terms. All pending
applications are also disposed of.
VIBHU BAKHRU, J
AMIT MAHAJAN, J
MAY 17, 2023
RK/GSR
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