Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
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Reserved on: 26 April, 2022
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Pronounced on: 19 July, 2022
+ O.M.P. (COMM) 124/2019 & I.A. 11506/2021 .
ORCHID INFRASTRUCTURE DEVELOPERS (P). LTD.
..... Petitioner
Through: Mr. Manish Sharma, Advocate. Ms.
Jigyasa Sharma and Mr. Ninad Dogra,
Advocates.
versus
FIVE STAR CONSTRUCTIONS PVT. LTD. ..... Respondent
Through: Ms. Kawaljit Kochar, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J.:
1. The present petition under Section 34 of the Arbitration and
Conciliation Act, 1996 [ hereinafter, “ the Act ”] impugns the arbitral award
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dated 10 September, 2018, whereby the Sole Arbitrator has dismissed
Petitioner’s counter-claim and allowed Respondent’s claim in part – to the
extent of Rs. 4,33,877/-.
RIEF ACTS
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2. Petitioner – Orchid Infrastructure Developers Pvt. Ltd. [ hereinafter,
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“ O RCHID ” ] awarded a contract vide letter dated 28 December, 2012, for
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‘Construction of 21 Dwelling Units, ORCHID ISLAND at Gurugram on 7
plots bearing numbers 257 to 262 and 261-A’ [ hereinafter, “ Contract ” ] to
Respondent – Five Star Constructions Pvt. Ltd. [ hereinafter, “ F IVE S TAR ” ]
for a consideration of Rs. 2,21,01,162/-. The construction was tentatively to
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be completed within a period of twelve months i.e., on or before 31
December, 2011.
3. Dispute arose between the parties with regard to delays in completion
RCHID
of work under the Contract. O contends that it released a mobilisation
IVE TAR
advance of Rs. 11,05,058/- to F S and routinely made payments in
IVE TAR
terms of the Contract. F S repeatedly sought extensions, which were
granted by O RCHID , without prejudice to its rights to raise claims. Thereafter,
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O RCHID issued a show-cause notice dated 1 November, 2012, to which, there
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was no satisfactory response from F IVE S TAR . Ultimately, on 23 May, 2013,
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F IVE S TAR terminated the Contract. O RCHID then issued a final bill dated 20
November, 2013, which was responded by F IVE S TAR asking O RCHID to
depute a suitable person for joint verification of the work done. O RCHID
contended that a substantial portion of work was still left to be completed, and
the same was awarded to other contractors at the cost and risk of F IVE S TAR .
Further, O RCHID was also forced to pay a “delay penalty” to its customers, on
account of the delay in handing over possession of the dwelling units.
T RBITRATION
A A
IVE TAR
4. In the circumstances noted above, F S invoked arbitration under
Section 11 of the Act, which led to appointment of the Arbitral Tribunal by
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this Court vide order dated 27 May, 2016. F IVE S TAR raised claims towards:
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(i) Rs. 29,60,466/- (towards expenditure incurred on work done till 14
January, 2013); (ii) interest; and (iii) costs. O RCHID filed its counter-claim qua
mobilization advance, liquidated damages due to F IVE S TAR ’ S failure to
complete work, cost for pending work commissioned by O RCHID from other
contractors and costs.
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5. The Arbitrator, vide impugned award dated 10 September, 2018,
IVE TAR S RCHID
allowed F S ’ claim in part and directed O to pay a sum of Rs.
4,33,877/- along with post-award interest payable at 12% per annum. The
RCHID
remaining claims, as well as O ’s counter-claims, were dismissed.
C ONTENTIONS OF THE P ARTIES
O N BEHALF OF O RCHID
6. Although, O RCHID seeks setting-aside of the impugned award with
respect to award of claim and dismissal of counter-claims; however, Mr.
Manish Sharma, counsel for O RCHID , has addressed arguments only qua the
award of claim of Rs. 4,33,877/-, and no serious challenge was raised qua
dismissal of counter-claims. His submissions summarised as follows:
6.1. The impugned award is arbitrary, erroneous and against the public
policy of India – as it gives no reasoning for award of the claim in favour of
IVE TAR
F S .
6.2. The impugned award is based on conjuncture and surmises and fails to
fulfil the statutory mandate of Section 31(3) of the Act. The Arbitrator has
erroneously and mistakenly held in paragraph no. 11.28 of the impugned
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award that O RCHID (in its Statement of Defence), has admitted to the pleadings
qua interim relief, and on the basis of such “deemed admission”, ruled in
favour of F IVE S TAR . On the contrary, O RCHID had categorically refuted F IVE
S TAR ’s claim and had rather raised counter-claims of recovery of mobilisation
advance, liquidated damages, etc.
6.3. Since the Arbitrator has rejected the main claim for Rs. 29,60,466/-,
which included Rs. 4,33,877/- claimed as interim relief, axiomatically the
interim relief also had to be rejected; nonetheless it could certainly not be
granted in isolation, devoid of reasoning. The impugned award is thus,
contrary to Section 31(3) of the Act. Reliance is placed on the judgments in
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Dyna Technlogies Pvt. Ltd. v. Crompton Greaves Ltd. , and Jai Singh v.
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Delhi Development Authority and Ors.
6.4. The Arbitrator had come to a categorical finding that the final bill raised
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by F IVE S TAR dated 7 May, 2013 was not proved as per law. Having come
to this conclusion, he could not have awarded the claim of Rs. 4,33,877/-
which is based on unproved documents. Further, upon a perusal of the final
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bill dated 7 May, 2013, it is apparent that no work was done after raising the
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Bill of Quantities [ hereinafter, “ BoQ ”] for the period from 9 December,
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2012 to 7 May, 2013.
N BEHALF OF IVE TAR
O F S
IVE TAR
7. On the other hand, Ms. Kawaljit Kochar, counsel for F S ,
advanced the following contentions:
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(2019) 20 SCC 1.
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In O.M.P. No. 152/2002 decided on 4 September, 2008.
2008 (3) Arb LR 667 Del.
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7.1. The Contract could not be executed within the prescribed time as
O RCHID failed to fulfil its reciprocal obligations of supply of material(s) and
drawing(s) on time, etc. There is ample proof filed along with the Statement
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of Claims to prove the same. Contractual period was extended up to 31
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December, 2012; thereafter, in a meeting held on 16 January, 2013, followed
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by a letter dated 21 January, 2013, it was mutually decided by the parties that
balance work would be completed by O RCHID , without prejudice to rights of
IVE TAR
F S .
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IVE TAR
7.2. Admittedly, F S ’s labour force worked on the site till 7 May,
IVE TAR RCHID
2013. Thereafter, the final bill was submitted by F S ; however, O
refused to make the payment of final bill, despite terms settled in the joint
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meeting on 16 January, 2013. In these circumstances, O RCHID sent a letter
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dated 15 July, 2013, reiterating the understanding reached between the
parties during the joint meeting and demanding a payment of a sum of Rs.
4,10,247/-.
7.3. O RCHID refused to make the said payment, and accordingly, F IVE S TAR
invoked the arbitration clause and the Arbitral Tribun al stood constituted vide
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order dated 27 May, 2016. F IVE S TAR filed its statement of claims before
the Arbitrator for Rs. 29,60,446/- towards expenditure income incurred on
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execution of works till 14 January, 2013 and interest thereon till the actual
RCHID
date of payment. In response, O also filed its counter-claim.
7.4. Reliance is placed upon paragraph 12.4 of the arbitral award, which
discloses the reason given by the Arbitrator for awarding the claim. In view
RCHID
of O ’s deemed admission, evasive denial and admitted document viz.
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In Arb. P. 51/2016 vide order dated 27 May, 2016.
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Ex. R-3, it becomes evident that O RCHID had resorted to falsehood in stating
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that F IVE S TAR did not work after 14 January, 2013. The afore-said admitted
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document shows that F IVE S TAR ’s workers had worked on site till 7 May,
2013, and therefore, it was entitled to the money in respect of the work done,
despite its blameworthy conduct.
7.5. Reliance is placed upon the judgment of the Supreme Court in
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Associate Builders v. Delhi Development Authority to argue that the Court
cannot venture into deciding questions of fact to set-aside an arbitral award
under Section 34 of the Act. Reliance was also placed on the judgment in
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Indian Oil Corporation Ltd. v. Shri Ganesh Petroleum to say that the Court
does not sit in appeal over an award made by the Arbitral Tribunal.
A NALYSIS
8. The Court has considered the afore-noted contentions of the counsel.
Indeed, O RCHID had one main relief viz. Claim No. 1 for Rs. 29,60,466/-
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towards expenditure incurred on execution of work till 14 January, 2013 as
per final bill. Claim No. 2 was qua interest on the said amount and Claim No.
3 was qua costs. Both the parties led documentary as well as oral evidence.
F IVE S TAR has not impugned the award in so far as the rejection of its claim
is concerned, and rather, is only defending the impugned award to the extent
it partly allows their claims. Claim No. 1 was rejected by the Arbitrator for
the reasons disclosed in the following extracted portion of the impugned
award:
“11.25. It is extremely important to note that the factum of ‘tools and
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2015 (3) SCC 49.
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(2022) 4 SCC 463.
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plants and other materials’ (as per the list attached) of the value of Rs.20
lacs' mentioned in the said reply dated 19.09.2013 Ex.C12 , is completely
missing from the Statement of Claim as also the evidence of CW1 Sh. Praveen
Madhok. So, such a conduct of the Claimant cannot be appreciated and it
persuades me to believe that at least a portion its Claim No.1 is based on
falsehood and as such must be rejected.
11.26. In the Statement of Claim no specific amount has been claimed by the
Claimant under Claim No. 1 in relation to ‘VARIATION IN BOQ
QUANTITY’ although a mention thereof has been made. However
CW1Sh.Praveen Madhok in para 6 of his affidavit Ex.CW1/A makes a
mention of ‘Detail in r/o Claim No.2, ‘VARIATION IN BOQ QUANTITY’ and
is claiming a sum of Rs.25,26,569/-. So, this portion of evidence is not in
accordance with the pleadings and is contrary to Claimant’s own admission
as contained in Ex.C12 mentioned above. Also page 48 which is part of Mark
6, the final bill as per the claimant, in respect of the "BOQ work done' the
amount mentioned is ‘0’. So, it clear that this amounts to resorting to
falsehood and is an effort to mislead even this Tribunal.
11.27. The question is, in such a situation when both parties have resorted to
falsehood and have not been truthful, what is the way out?”
9. After having concluded that Claim No. 1 was based on falsehood, the
Arbitrator nonetheless proceeded to allow the said claim in part – which is the
subject-matter of the present petition. The reasons disclosed in the impugned
award are as under:
“11.28. In its Statement of Claim, the Claimant has specifically mentioned in
para 5 that after adjustment of Rs. 5,91,963 / -the balance mobilization
advance, towards final bill a sum of Rs.4,33,877/-towards the work done, was
payable. This has not been denied by the Respondent specifically and
therefore is deemed to have been admitted as correct. In the face of this
situation, in respect of Claim No.1 it is held that the Claimant is entitled to
receive from the Respondent a sum of Rs.4,33,877/-towards the work done by
it and the claim for balance amount is rejected being false and has remained
unproved.”
[Emphasis Supplied]
10. From the above, it becomes apparent that the Arbitrator has partly-
allowed the claim in favour of F IVE S TAR on the basis of a presumed
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admission on the part of O RCHID . Apart from that, no other reasoning is
discernible. On this aspect, a perusal of the pleadings would be apposite to
ascertain if there is indeed an admission on the part of O RCHID . For the sake
of clarity, Paragraph No. 5 of the Statement of Defence filed by O RCHID ,
which deals with the corresponding Paragraph No. 5 of the Statement of
Claim, are juxtaposed against each other as follows:
Statement of Claim [F IVE S TAR ] Statement of Defence [O RCHID ]
“5. INTERIM RELIEF:
5.1 Having explained "Brief History of
Case" here in-before, the claimant now
submits the application in terms of Section
17 of ARBITATION AND
CONCILLATION ACT 1906 for interim
relief as follow
A. The payment of undisputed portion
amounting to Rs.4,33,877/- (Four Lakh.
Thirty-Three Thousand and Eight Hundred
and Seventy-Seven only) works executed
viz works executed as per contract
provisions after adjustment of recovery. of
last installment of mobilization advance
amounting to Rs. 5,91,963/- (Five Lakh
Ninety-One Thousand Nine Hundred and
Sixty Three only) which will facilitate the
finalization of disputed claims of payment.
B. Any other relief as deemed fit by the
ARBITRAL TRIBUNAL”
“5. INTERIM RELIEF
5.1. As identified above, the brief history of
the case presented by Claimant is replete
with concealment of material documents,
non-disclosure of material facts and
misinterpretation. Even further the nature
of relief prayed for does not fall within the
purview of section 17 of the arbitration and
conciliation act which envisages and
provides only for grant of protective
measures and not for payment/release of
sums to a contesting party. Moreover, no
justification has been provided (either in
equity or in fact or towards balance of
convenience/necessity of protection) by
Claimant justifying an entitlement towards
the interim relief prayed.
A. It is denied that there is any
"undisputed portion of works executed"
as asserted. It is further pointed out that
in the said paragraph Claimant itself
refers to “finalisation of dispute of
payment” thus itself evidencing/
acknowledging disputed liability that
requires adjudication and determination.
It is the admitted position of the parties
that the contract was entered into, contains
a risk and purchase clause and that the
contract was not duly performed within the
time period provided
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and that the contract was "rescinded"
prior to completion of works by Claimant
and that on no occasion has Respondent
waived its entitlements to loss and
damages arising out of the delay and
breaches by Claimant. Pertinently
claimant admits that proceedings are
pending against the claimant for recovery
of sums against the negotiable instruments
issued by claimant and it is thus evident
that in addition to the amounts claimed
under the counter claim, these amounts are
also disputed and claimed by respondent.
B. Claimant is not entitled to "any other
relief" as claimed.”
11. The above comparison reveals no admission as held by the Arbitrator,
and rather, there is a clear denial. The Court also finds merit in Mr. Sharma’s
contention that once the Arbitrator came to the conclusion that F IVE S TAR was
disentitled to the Claim No. 1 for Rs. 29,60,466/-, he could not have proceeded
to award an interim/ ancillary amount of Rs. 4,33,877/- since the same was
included under Claim No. 1. To give further clarity, it must be noted that the
amount of Rs. 4,33,877/-, in fact, was put forth by way of an interim relief.
This also becomes apparent from the above-extracted paragraph no. 5.
12. From the above pleadings, it manifests that the amount of Rs.
4,33,877/- awarded in favour of F IVE S TAR was included in the main relief –
which stood rejected. On rejection of the main relief, axiomatically, the
interim relief ought to have been rejected. The Arbitrator has evidently not
taken note of this aspect and proceeded as if there was an admission on the
part of O RCHID for the said claim. Since no other reason for awarding this
claim is discernible, except for the alleged admission on the part of O RCHID ,
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the impugned award is liable to be set-aside being ex-facie contrary to the
record.
13. The impugned award fails to give any basis for accepting the said
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figure. The final bill (also referred to as “Mark Six”) dated 7 May, 2013 was
required to be proved by the F IVE S TAR ; however, the same could not be done.
The Arbitrator has specifically held that the said document was not proved as
per law and there were no pleadings in support of the same. The relevant
observations of the Arbitrator on this aspect read as follows:
“11.12. CW1 Sh. Praveen Madhok in para 22 has also deposed that as per
final bill Mark 6 (10 Sheets) till 14.01.2013, a sum of Rs.29,60,446/- had been
incurred towards the expenditure. How this figure has been arrived at is also
not clear.”
14. The Arbitrator came to a conclusion that no work was done for the
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period from 9 December, 2013 to 7 May, 2013, and consequently, rejected
the final bill. In light of this finding, he could not have proceeded to award
IVE TAR
Rs. 4,33,877/- under the impression that this was for work done by F S
after closure of the Contract. To this extent, the impugned award makes no
reference to any evidence to support the findings, and is thus, entirely
assumptive.
15. While there can be no quarrel as regards the general propositions of law
advanced by F IVE S TAR ; however, the judgments relied upon by F IVE S TAR
are not applicable to the facts of the present case discussed above. In view of
the above, the impugned award is patently unreasonable in so far as it awards
Rs. 4,33,877/- in favour of F IVE S TAR .
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16. In view of the above, the present petition is allowed and the impugned
award is set-aside to the extent it awards Rs. 4,33,877/- and interest thereon.
All pending applications, if any, also stand disposed of.
SANJEEV NARULA, J
JULY 19, 2022
as
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By:SAPNA SETHI
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