Full Judgment Text
Neutral Citation Number : 2023/DHC/000679
* IN THE HIGH COURT OF DELHI AT NEW DELHI
FAO 271/2019 & CM. APPL. 31033/2019
Reserved on : 09.11.2022
Pronounced on : 31.01.2023
IN THE MATTER OF :
MAHANAGAR TELEPHONE NIGAM LTD. ..... Appellant
Through: Ms. Suruchi Suri, Advocate.
versus
M/S RALHAN CONSTRUCTION COMPANY ..... Respondent
Through: Ms.Anusuya Salwan, Ms.Nikita
Salwan, Mr.Bankim Garg and
Mr.Rachit Wadhwa, Advocates.
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
JUDGMENT
.
MANOJ KUMAR OHRI, J
1. By way of present appeal filed under Section 37(1)(b) of the
Arbitration & Conciliation Act, 1996 (hereinafter, referred to as ‘ the
Arbitration Act’ ), the appellant has assailed order dated 16.04.2019 passed
by the learned ADJ-07, South-East, Saket Courts, New Delhi in Arb. No.
212/2018, whereby its objections under Section 34 of the Arbitration Act to
Award dated 09.05.2018 (and subsequent amendments thereto) were
dismissed.
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2. Though the present appeal was filed by the appellant seeking setting
aside of the order dated 16.04.2019, the Award dated 09.05.2018, and the
subsequent amendments thereto, learned counsel for the appellant, on
instructions, restricted her challenge during the course of submissions only
to respondent’s claim Nos. 2 and 3, which were in relation to release of
balance payment of security deposit lying with the Department, directed to
be released to the respondent vide the Award.
3. Facts of the case, pithily put, are that the appellant had floated a
tender dated 20.11.2007 for the civil and electrical portion of construction of
Automobile Workshop-cum-Administrative building at Rohini, Sector-VI,
Delhi . The said work was awarded to the respondent for a consideration
amount of Rs. 18,68,11,252/-. The time stipulated for completion of the
work was 18 months from the date of issuance of letter of award.
Purportedly, the civil component of the work was completed on 31.12.2011
and the electrical part was completed on 07.06.2013.
A dispute arose between the parties relating to payments under the
agreement, which led the respondent to initiate arbitration proceedings in
terms of Clause 53 thereof. The matter was adjudicated by a Sole Arbitrator,
who passed an Award dated 09.05.2018, allowing all claims of the
respondent either partially or fully, except claim Nos. 18 and 20.
Subsequently, two amendments dated 11.05.2018 and 12.05.2018 were
made to the Award by the Arbitrator.
The appellant filed its objections under Section 34 of the Arbitration
Act before the learned District and Sessions Judge, West, Saket Courts,
praying that the Award dated 09.05.2018 (and the subsequent amendments
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thereto) be set aside. However, the objections were dismissed vide the order
impugned herein, i.e. order dated 16.04.2019.
4. Learned counsel for the appellant contended that the Arbitrator erred
in interpreting Clause H, Special Conditions of Contract in the Agreement
between the parties to conclude that it was the appellant’s responsibility to
file application for obtaining completion/occupancy certificate from local
authorities. It was further contended that in reaching the above conclusion,
the Arbitrator also erred in relying upon the ‘ Hand Book of Building Permit
Procedure 2006, Delhi Development Authority’ , as the same was not
executed between the parties and was an extraneous document filed by the
respondent. On strength of the aforesaid, it was argued that the impugned
Award was arbitrary, capricious and beyond the scope of mutually agreed
terms in the contract entered between the parties. Learned counsel also
contended that the concerned Arbitrator misconducted himself by carrying
out the proceedings in a biased and hasty manner. In support of her
contentions, she relied on the decision in M/s L.G. Electronics India (P) Ltd.
v. Dinesh Kalra reported as 2018 SCC OnLine Delhi 8367.
5. On the other hand, Ms. Salwan, learned counsel for the respondent,
defended the arbitral Award as well as the impugned order by submitting
that it was the duty of the architect engaged by the appellant to apply for the
completion certificate. In this regard, reference was made to an agreement
executed between the appellant and the architect namely M/s. R.K. &
Associates . It was also submitted that the said agreement was executed in
relation to the subject work order and the respondent’s obligation was to
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make efforts and co-ordinate after the appellant had filed the application for
obtaining the completion certificate.
Learned counsel further submitted that the work under the contract
was completed in the year 2011 and even during the pendency of the arbitral
proceedings, a suggestion was given that if the appellant files the requisite
application, the respondent would also make the necessary efforts, but the
appellant did not agree. Lastly, it was contended that the dispute raised
herein does not fall under the scope of interference as outlined in Section 37
of the Arbitration Act. In support of the contentions, learned counsel placed
reliance on the following decisions:
i) Food Corporation of India v. A.M. Ahmed & Co. and Another
reported as (2006) 13 SCC 779 ;
ii) K.N. Sathyapalan (Dead) by Lrs v. State of Kerala and Another
reported as (2007) 13 SCC 43.
iii) NTPC Ltd. v. Deconar Services Pvt. Ltd. reported as 2021 SCC
OnLine SC 498 ; and
iv) Reliance Industries Ltd. v. Gail (India) Ltd. reported as 2020 SCC
OnLine Del 2041 ;
v) UBV Infrastructure Ltd. v. National Highways Authority of India
reported as 2020 SCC OnLine Del 60 ;
vi) Manikaran Power Limited v. Valuehunt Advisors LLP reported as
2021 SCC OnLine Del 2774 ;
6. I have heard learned counsels for the parties and perused the entire
material placed on record.
7. The present appeal having been filed under Section 37 of the
Arbitration Act, challenging dismissal of the appellant’s objections under
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Section 34, it is deemed apposite to recapitulate the law surrounding these
provisions. In this regard, reference may profitably be made to Manikaran
Power Limited (Supra), where a Division Bench of this Court, while
declining to interfere in exercise of powers under Section 37 of the
Arbitration Act, noted as follows:
" 15. The counsel for the respondent, besides reminding us of
narrow scope of interference in the proceedings under Section
37 of the Arbitration Act, has contended that in the present case
there are concurrent findings in both fact and law in favour of
the respondent and are not interfereable at this stage. Attention
is drawn to paragraphs 8 to 10 of Reliance Industries Ltd. v.
GAIL India Limited and to MMTC Ltd. v. Vedanta Limited
(2019) 4 SCC 163. Reference is also made to Bharat Sanchar
Nigam Limited v. Aksh Optifibre Limited (2021) 277 DLT 348
(DB). It is argued that it has been held therein that a plausible
view taken by the Arbitral Tribunal is not to be disturbed."
8. The scope of interference in an appeal under Section 37 of the
Arbitration Act stands well-defined by a catena of decisions, which include
UBV Infrastructure Ltd. (Supra), where this Court held as follows:
“7. At the outset, we may delineate the scope of interference in
a Section 37 petition, as was discussed by us in a recent
judgment in Ministry of Youth Affairs & Sports v. Swiss Timing
Ltd., reported as 2019 SCC Online Del. 10934, relevant paras
whereof are reproduced herein below:-
"19. We are also mindful of the law on interference by the
courts in respect of findings of facts based on appreciation of
evidence, returned by the Arbitral Tribunal. In Sutlej
Construction Limited v. Union Territory of Chandigarh
reported as(2018) 1 SCC 718 the Supreme Court has held as
follows: -
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"11. It has been opined by this Court that when it comes to
setting aside of an award under the public policy ground, it
would mean that the award should shock the conscience of
the Court and would not include what the Court thinks is
unjust on the facts of the case seeking to substitute its view
for that of the arbitrator to do what it considers to be
"justice". Associate Builders v. DDA, (2015) 3 SCC 49.
12. The approach adopted by the learned Additional
District Judge, Chandigarh was, thus, correct in not getting
into the act of reappreciating the evidence as the first
appellate court from a trial court decree. An arbitrator is a
chosen Judge by the parties and it is on limited parameters
can the award be interfered with. (Sudarsan Trading Co. v.
State of Kerala [Sudarsan Trading Co. v. State of Kerala,
(1989) 2 SCC 38; Harish Chandra & Co. v. State of U.P.,
(2016) 9 SCC 478 and Swan Gold Mining Ltd. v. Hindustan
Copper Ltd., (2015) 5 SCC 739.
13. The learned Single Judge ought to have restrained
himself from getting into the meanderings of evidence
appreciation and acting like a second appellate court. In
fact, even in second appeals, only questions of law are to be
determined while the first appellate court is the final court
on facts. In the present case, the learned Single Judge has,
thus, acted in the first appeal against objections dismissed
as if it was the first appellate court against a decree passed
by the trial court."
20. In Ssangyong Engineering Construction Co. Ltd. v.
National Highways Authority of India reported as 2019
SCC Online SC 677, the Supreme Court has reiterated the
aforesaid view in the following words:-
35. What is clear, therefore, is that the expression "public
policy of India", whether contained in Section 34 or in
Section 48, would now mean the "fundamental policy of
Indian law" as explained in paragraphs 18 and 27 of
Associate Builders (supra), i.e., the fundamental policy of
Indian law would be relegated to the "Renusagar"
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understanding of this expression. This would necessarily
mean that the Western Geco (supra) expansion has been
done away with. In short, Western Geco (supra), as
explained in paragraphs 28 and 29 of Associate Builders
(supra), would no longer obtain, as under the guise of
interfering with an award on the ground that the
arbitrator has not adopted a judicial approach, the
Court's intervention would be on the merits of the award,
which cannot be permitted post amendment. However,
insofar as principles of natural justice are concerned, as
contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act,
these continue to be grounds of challenge of an award, as
is contained in paragraph 30 of Associate Builders
(supra).
36. It is important to notice that the ground for
interference insofar as it concerns "interest of India" has
since been deleted, and therefore, no longer obtains.
Equally, the ground for interference on the basis that the
award is in conflict with justice or morality is now to be
understood as a conflict with the "most basic notions of
morality or justice". This again would be in line with
paragraphs 36 to 39 of Associate Builders (supra), as it is
only such arbitral awards that shock the conscience of
the court that can be set aside on this ground.
37. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paragraphs 18 and 27 of Associate
Builders (supra), or secondly, that such award is against
basic notions of justice or morality as understood in
paragraphs 36 to 39 of Associate Builders (supra).
Explanation 2 to Section 34(2)(b)(ii) and Explanation 2
to Section 48(2)(b)(ii) was added by the Amendment Act
only so that Western Geco (supra), as understood in
Associate Builders (supra), and paragraphs 28 and 29 in
particular, is now done away with.
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38. Insofar as domestic awards made in India are
concerned, an additional ground is now available under
sub-section (2A), added by the Amendment Act, 2015, to
Section 34. Here, there must be patent illegality
appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does
not amount to mere erroneous application of the law. In
short, what is not subsumed within "the fundamental
policy of Indian law", namely, the contravention of a
statute not linked to public policy or public interest,
cannot be brought in by the backdoor when it comes to
setting aside an award on the ground of patent illegality."
21. Reliance is also placed on a recent judgment dated
18.10.2019 passed by the Supreme Court in SLP
No.13117/2019 , The State of Jharkhand v. HSS Integrated
SDN, wherein it has been emphasised that the Award passed
by an Arbitral Tribunal can be interfered with in
proceedings under Sections 34 and 37 of the A&C Act only
in a case where the finding is perverse and/or contrary to
the evidence and/or the same is against public policy. In the
instant case, none of the above circumstances exist for
interference."
8. Thus a scrutiny conducted under Section 37 of the Act is
more in the nature of a judicial review, only to consider as to
whether the learned Single Judge, in exercise of the powers
under Section 34 of the Act has overlooked any patent error that
may have crept in the Award or has taken a glaringly
preposterous and legally unsustainable view, which would call
for interference."
9. This Court also analysed the scope of Section 34 of the Arbitration
Act in Reliance Industries Ltd. v. Gail (India) Ltd. (Supra) and observed
thus:
" 31. One of the key questions is whether the interpretation given
by the Arbitrator can be impugned under Section 34 of the Act.
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The learned single judge relied upon the decision of the
Supreme Court in Associate Builders (supra), wherein it has
been held that, "the construction of terms of a contract is
primarily for an arbitrator to decide unless the arbitrator
construes the contract in such a way that it could be said to be
something that no fair mind need or reasonable person could
do". In the said judgment, the Supreme Court referred to the
earlier judgments in the case of Mcdermott International INC v.
Burn Standard Company Limited, (2006) 11 SCC 181, wherein
it has been held that "once, thus it is held that the arbitrator
had the jurisdiction, no further question shall be raised and
the court will not exercise its jurisdiction unless it is found
that there exists any bar on the fact of the award" . In MSK
Projects India (JV) Limited v. State of Rajasthan, (2011) 10
SCC 573, the Supreme Court has held that if an Arbitrator
commits an error in the construction of the contract, that is an
error within his jurisdiction. But if he wanders outside the
contract and deals with the matter not allotted to him, he
commits a jurisdictional error.
32. In Rashtriya Ispat Nigam Limited v. Dewan Chand Ram
Saran, (2012) 5 SCC 306 the Apex Court has held thatif a
clause was capable of two interpretations and the view taken by
the arbitrator was clearly a possible one if not a plausible one,
it is not possible to say that the arbitrator had travelled outside
his jurisdiction or that the view taken by him was against the
terms of the contract. In the case of NHAI v. Progressive-
MVR(JV), (2018) 14 SCC 688, the Supreme Court after
considering catena of judgments, held that even when the view
taken by the arbitrator is a plausible view, and/or when two
views are possible, a particular view taken by the Arbitral
Tribunal, which is also reasonable, should not be interfered
with, in proceedings under Section 34 of the Act. In
Maharashtra State Electricity Distribution company Ltd. v.
Datar Switchgear Ltd., (2018) 3 SCC 133, the Court has held
that the Arbitral Tribunal is the master of evidence and the
findings of fact which are arrived at by the arbitrator on the
basis of evidence on record are not to be scrutinized as if the
Court was sitting in appeal."
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10. Apparently, the Arbitrator in the present case, while interpreting
Clause H, Special Conditions of Contract of the Agreement between the
parties, arrived at the conclusion that primarily, it was the appellant’s
responsibility to apply for the completion certificate and the respondent had
to co-ordinate in the efforts. The interpretation was upheld by the learned
ADJ while deciding the objection petition filed by the appellant.
11. On a reading of the judicial dicta cited hereinabove, I find force in the
submission of learned counsel for respondent that if a clause can be
interpreted in two ways and the view taken by the Arbitrator is a possible
one if not a plausible one, this Court would not interfere, the scope of
enquiry being limited.
12. Besides, after going through Clause H, Special Conditions of
Contract, I am satisfied that the appellant being the owner of the site was
required to file the application for obtaining completion certificate. This
opinion is fortified by a reading of clauses (i), (j) and (k) of the Agreement
dated 26.03.1999 executed between the appellant and the abovementioned
architect, which are extracted hereunder:
“(i) Obtaining the approval of all the competent authorities
and other statutory bodies which is necessary according to the
local acts, laws, Regulations etc. and make any changes desired
by such authorities at no extra cost. The original documents of
approval will be submitted to employer.
(j) Prepare three-dimensional model of suitable scale as and
when required by the employer/local authority at no extra cost.
(k) Submission of completion plans and obtaining completion
certificate from the local bodies.”
13. Therefore, I am of the considered view that the Award dated
09.05.2018 is not vitiated by any error of fact or law on the face of the
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record, and that the Arbitrator did not misconduct himself within the
meaning of the Arbitration Act. No ground for interference with the Award
and/or the impugned order is made out. The appeal is dismissed, alongwith
the pending application.
(MANOJ KUMAR OHRI)
JUDGE
JANUARY 31, 2023
ga
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