Bharat Heavy Electricals Ltd. v. Frontier Civil Contractor (Delhi) Pvt. Ltd.

1. These are objections by Bharat Heavy Electricals Limited ('BHEL') under Sections 30 & and 33 of the Arbitration Act, 1940 ('Act') to the Award dated 26"" December 2006 of the sole Arbitrator in the disputes between BHEL and the Defendant M/s Frontier Civil Contractor (Delhi) Pvt. Ltd. ('FCCPL'). CS(OS) Nos.300 of2007 &351 of200S Page I of[6] 2012:DHC:8300 th

2. The learned sole Arbitrator had earlier given an Award on 30 September 1998 which was challenged by way of LA. No.4536 of 2001.

FCCPL challenged the said Award only in respect ofallowing the counter claims of BHEL. BHEL itself did not challenge the Award to the extent it allowed the claims of FCCPL. Therefore, the earlier Award dated 30"" September 1998 to the extent it allowed the claims ofFCCPL became final.

3. To the extent that the Award dated 30"' September 1998 did not consider the plea of FCCPL that BHEL's counter claims were barred by time, this Court inthe order dated 2"'' May 2006 inLA. No.4536 of2001 set aside the Award dated 30"' September 1998 insofar as BHEL's counter claims were concerned. Operative portion of the said judgment dated 2"'' May 2006 reads as under: "7. The result of the aforesaid is that the Award in so far as the counter-claim is concerned cannot be sustained and is liable to be set aside and remanded back to the Arbitrator for fresh adjudication. The result ofthe adjudication ofthe counter-claim would naturally have an effect on the fmal Award to be made and published now, since the Petitioner has not filed any objection in so far as the award of the claims in favour of the Respondent are concerned. The final finding of the Arbitrator has resulted in a net amountbeing payable by the Respondent as a consequence of counter-claim being awarded inpart. Learned counsel for the Respondent further states that in viewof the last paragraph of the Award, part of the amount has even been CS(OS) Nos.SOO of2007 &351 of2008 P^ge 2of[6] a realized by the Petitioner on account ofthe encashment ofone of the bank guarantees. The Arbitrator would have to examine this aspect while making the Award afresh in respect of the counter-claim.

10. It is agreed that only two pleas raised aforesaid are required to be re-considered by the Arbitrator and the matter does not have to be re-examined on merits otherwise."

4. BHEL has filed CS (OS) No.351 of2008 under Section 30 of the Act praying for setting aside the Award dated 26^*^ December 2006.

5. The background to the petition is that in the disputes arising between BHEL and FCCPL out of an award of the work of construction of 88 houses at4x 210 M.W., N.C.T.P.P., Dadri, a sole Arbitrator was appointed by this Court by an order dated 16^^ April 1996. As pointed out hereinbefore, the learned Arbitrator had earlier made an Award which did not consider the objections ofFCCPL to the counter claims ofBHEL and thatto the limited extent, the matter was remanded backto the learned sole Arbitrator. Two submissions urged by BHEL before the learned Arbitrator pursuant to remand were: "1. The counter claims were never referred for arbitration.

2. The counter claims were filed beyond three years from cause of action and thus were barred by limitation." CS(OS) Nos.300 of2007 & 351 of2008 A

6. On Issue No.1,the learned Arbitrator held that by the order of reference the claims of FCCPL and not of BHEL had in fact been referred to arbitration. Itwas noted that at the very first sitting on 26^^ February 1992, the learned Arbitrator directed "claims and counter claims by both the parties shall be filed by 20^ July 1992 along with all supporting documents in duplicate". At the second hearing held on 20**^ July 1992, FCCPL sought time and was granted till 30^'' July 1992 to file its claims. BHEL was to examine the claims and file its reply along with counter claims, if any, by 21^^ August 1992 with a copy to FCCPL. On 12^*^ October 1992 both the parties agreed that their claims shall be submitted on 4^ November 1992 and shall be exchanged between the parties. Consequently, the claims of FCCPL andthe counter claims ofBHEL were filed on4^ November 1992.

7. The learned Arbitrator held as under: "As such, the claims of both M/s FCC and M/s BHEL are time barred as these had not been filed before 26^'' October 1992. The submission of M/s BHEL's advocate is that the limitation would end on the date on which the Arbitrator asked both M/s FCC and M/s BHEL to file their claims. This plea carmot be accepted."

8. As regards Issue No.2 that whether BHEL's counter claims were time barred, it was first noted that BHEL had not questioned the claims of FCCPL as being time barred. Therefore, the said question was not CS(OS) JVos.300 of2007 & 351 of2008 Page 4 of[6] examined by the learned Arbitrator. As far as this claim is concerned, this Court is unable to find any error in the above observation of the learned Arbitrator which is not even factually disputed. As regards BHEL's counter claims, they were held to be time barred and were rejected. The net result was thatthe Award as regards the claim of FCCPL was not subject to any change.

9. The learned Arbitrator then considered the issue regarding encashment ofbank guarantee as under: "As per the directions of the Hon'ble High Court, the encashment of one of the bank guarantees has also to be examined. As per the Award on claims of the Claimant the amount of the Award on Claims No.2 and 4 is (-) Rs.7,60,080. This is on account of computation by the Arbitrator of the final bill of the Claimant as the final bill had not been prepared by M/s BHEL. As such, to cover this minus amount as per the Award on the claims of M/s FCC the encashment of the bank guarantee isjustified, due to minus amount of Claims No.2 and

4. After adjusting Rs.7,60,080 balance be paid to FCC. Interest on that amount be paid fi"om the date of encashment upto the • date of payment @ 12% per annum fixed as interest in the Award. The claimant be also paid interest @ 12% per annum fi-om 16^*^ April 1996 tothedate ofpayment onAward ofClaims No.5 and 9."

10. Although, an issue was raised by Mr. Arvind Minocha, learned counsel for FCCPL that no direction could have been issued by the learned CS(OS)Nos.300of2007 & 351 of2008 Page 5 of[6] jj=> Arbitrator on such encashment, the learned Arbitrator committed no error. The question of encashment of the bank guarantee was asked to be examined by this Court in its order dated 2"'* May 2006. If indeed the Award on Claim No.2 & 4 was negatived then, Rs.7,60,080 ought to be permitted to be encashed by BEEL and the balance amount paid to FCCPL.

11. This Court is unable to fmd any error in the impugned Award dated 26^^ December 2006 on any ofthe grounds under Sections 30 &33 ofthe Act.