North Delhi Municipal Corporation v. R&T Enterprises

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that —

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2. – For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

7. The impugned award may be divided into the following segments:

(i) recitals of facts (paras 1 to 7).

(ii) brief case of both the parties (paras 8 to 13)

(iii) findings on certain preliminary objections of the petitioner (para 14).

(iv) issues framed (para 15)

(v) findings on the issues (paras 16 to 21).

(vi) claim-wise submissions and findings (paras 23 to 68) and

(vii) final award (paras 69 and 70)

8. The impugned award may, under these heads, be set out in précis, thus: Re: Brief facts

9. The learned Arbitrator notes the brief facts of the case, which have already been set out earlier in this judgment. They are not, therefore, being repeated. Re: Respective cases of the parties

10. Case of respondent, as claimant in the arbitral proceedings 10.[1] The basic case of the respondent (as the claimant) before the learned Arbitrator is set out in paras 9 to 12 of the impugned award. The respondent submitted that, though it had mobilised and deployed the requisite resources at the site as per the date of scheduled commencement of work, i.e. 3 December 2001, ground conditions did not permit commencement. It was submitted that the members of the public and residents of the colony had put up several hindrances in the form of encroachments, as a result of which the resources of the respondent were rendered idle. The respondent brought this state of affairs to the notice of the petitioner MCD vide letter dated 31 January 2002, by which the MCD was requested to hand over the site so that work could commence. The MCD, on the other hand, alleged that the respondent was not proceeding with the requisite alacrity, vide response dated 1 March 2002. This allegation was refuted by the respondent vide letter dated 12 April 2002, in which it was pointed out that, though the work in Blocks 8, 9 and 10 was required to commence in February 2002, it could not, owing to non-availability of the site. 10.[2] In the meanwhile, submitted the respondent, the MCD called upon the respondent to start excavation and removal of malba[7] from Blocks 1 and 2. This work was duly undertaken by the respondent. Residents of Blocks 1 and 2 also protested to the carrying out of the contracted work, as it resulted in water logging. Finally, vide letter dated 1 March 2002, the MCD admitted that work could commence only on 1 February 2002. 10.[3] On 30 April 2002, the respondent again wrote to MCD stating that the hindrance free site had yet to be made available to it. It was pointed out that the residents of the locality were again hindering the progress of the work. The MCD, thereupon, visited the site and found encroachments as well as water-logging. Notices were issued by the MCD to the unauthorised occupiers and encroachers directing them to remove their materials and clear all encroachments. These notices were filed by the respondent before the learned Arbitrator. 10.[4] Further, hindrances were also put up by the residents of Blocks 8, 9 and 10, resulting in the respondent having to remove the filth and malba from the site so that work could commence. As a consequence, the resources of the respondent were rendered idle. It was only after all encroachments were removed that the respondent was able to start demolition of the cement concrete work, after which the surface was excavated and foundation trenches could be constructed. 10.[5] The respondent raised running bills on the MCD, for the work it was undertaking, and requested that they be cleared. The respondent alleged that there was considerable delay on the part of the MCD in releasing the amount against the running bills. A communication was also addressed by the respondent to the MCD in this regard on 19 June 2002, but had no effect. 10.[6] Ultimately, the MCD recorded measurements at the site of work on 3 July 2002. Even thereafter, no payment was made to the respondent till 2 September 2003. 10.[7] There was also considerable delay in the MCD dealing with the problem of water logging. At the request of the respondent, the MCD visited the site and, after ascertaining that there was water logging, proceeded to issue a fresh tender for drainage of the water. This tender was awarded to some other agency, which took its own time in completing drainage of the accumulated water. These factors, too, considerably delayed progress of the contracted work. The respondent further alleged that certain jhuggis[8] had also come up near the railway line adjacent to the reservation office, which were required to be removed before the work could be completed. This fact was also duly recorded in the hindrance register and site order book of the MCD. 10.[8] The re-organisation of the MCD further aggravated the delay. 10.[9] The hindrances were removed by the MCD in piecemeal fashion, which also hindered the progress of work by the respondent. It was only in December 2003 that the respondent was able to complete the contracted work to the satisfaction of the MCD, as was recorded by the concerned Junior Engineer (JE) in the site order book.

10.10 The respondent further alleged that there was delay in payment, by the MCD, both of the running bills as well as the final bills of the respondent. The first running bill was paid on 2 September 2003, the second running bill on 6 October 2003 and the third running bill on 31 March 2004. All these payments were highly belated. The fourth running bill was prepared on 16 December 2003 and paid to the respondent only on 31 March 2005, though the contracted work had been completed to the entire satisfaction of the MCD in December

2003. Security deposit/earnest money still remained to be paid.

10.11 Communications, from the respondent, on 28 May 2003, 5 July hutments; slums 2003, 28 December 2003, 1 July 2004, 25 November 2004, 5 February 2005, 16 July 2005 and 12 January 2006, to the MCD, for payment of the running bills as well as the final bills, fell on deaf ears.

10.12 Finally, the respondent served a notice of damages and interest, apart from other claims, vide letter dated 12 January 2006. This was followed by a formal notice invoking arbitration under Section 21 of the 1996 Act, on 18 July 2006.

11. On the notice invoking arbitration failing to elicit a favourable response, the respondent approached this Court by way of Arb. Appl. 497/2006 and 498/2006, under Section 11(6) of the 1996 Act, seeking appointment of an arbitrator. By order dated 8 August 2008, already reproduced in para 3 supra, this Court appointed the arbitrator, who has come to render the impugned award.

12. Re. case of the petitioner as respondent in the arbitral proceedings. 12.[1] As against this, on merits, the petitioner contended that there was no delay on its part and that there were no hindrances on the project site. Any delay in carrying out the projected work was, therefore, entirely attributable to the respondent. It was further asserted that the respondent’s dues were cleared in accordance with the prescribed procedure without any delay. Preliminary issues raised by the petitioner and findings thereon

13. The petitioner contended that the respondent’s claims were not maintainable in view of Clause 25 of the Agreement read with Section 16(5) of the 1996 Act. It was further pointed out that the claims were barred by time.

14. The learned Arbitrator, even while observing that the petitioner did not press these issues or seek any decision therein, but, instead, proceeded to participate in the arbitral proceedings without demur, nonetheless, went on to return findings thereon. Apropos Clause 25, the learned Arbitrator holds that the issue stands covered against the petitioner by the judgment of the Supreme Court in SBP and Co v. Patel Engineering Ltd[9] and that, therefore, Section 16(5) would not apply.

15. On limitation, the learned Arbitrator holds that the objection was a non-issue, as no evidence had been led by the petitioner that the claims were barred by time. However, later in the award, the learned Arbitrator proceeded to address the issue of limitation on merits as well, as would be noted hereinafter. Issues

16. The following issues were framed by the learned Arbitrator: “a. Whether there exist any disputes between the parties, and whether the Claimant is estopped from invoking arbitration on any technical grounds. b. Whether there was any delay in the handing over of the site and, if so, any consequences thereof.

c. Was there any delay in releasing the dues and, if so, the consequences thereof. d. Were the claims barred by limitation. e. Which party breached the contract and the consequences thereof. f. Can the Respondent rely only on photocopies of the MBs or is the production of MBs essential.” Issue-wise findings of the learned Arbitrator

17. Re. Issue a – Existence of dispute between the parties and whether respondent was stopped from invoking arbitration on any technical grounds The learned Arbitrator holds that these issues were not open for further consideration in view of the order dated 8 August 2008 of this Court in Arb. Appl. 497/2006 and 498/2006, whereby he was appointed to arbitrate on the disputes between the parties.

18. Re. Issue b - Delay in handing over site and consequences thereof 18.[1] The learned Arbitrator holds that the letters written by the respondent to the petitioner and the notices issued by the petitioner clearly evidenced delay in handing over of the project site by the petitioner to the respondent and that this situation had not been remedied even after work had commenced. It was observed that the petitioner had not replied to these communications. In that view of the matter, the petitioner could not seek to contend that there was no delay in handing over the site. 18.[2] The learned Arbitrator has also rejected the petitioner’s contention that the delay was on the respondent’s part. Had there been any delay on the respondent’s part, there was no explanation as to why the respondent had not been warned or served with any notice of liquidated damages in terms of Clause 2 of the Agreement.

19. Re. Issue c – Delay in realising dues 19.[1] The learned Arbitrator notes that payment of the final bill was governed by Clause 9 and refund of EMD/Security Deposit was governed by Clause 45 of the Agreement. Clause 9 required the respondent to submit the final bill within one month of issuance of the final completion certificate by the Engineer In-Charge and also required the petitioner to make payment against the final bill within six months, where the value of the bill was more than ₹ 5 lakhs. In breach of this stipulated time period, the final bill had not been cleared till that date. The petitioner was, therefore, in fundamental breach of the contract, resulting in the respondent being entitled to compensation. 19.[2] Release of earnest money/security deposit was governed by Clause 45 of the Agreement. For this, the respondent was required to obtain a clearance certificate from the Labour Officer. Though there was a procedure stipulated in that regard, Clause 45 further provided that, on expiry of six months, the clearance certificate would be deemed to have been received. Though correspondence in this regard was not forthcoming, as six months had elapsed, the clearance certificate was deemed to have been received. The petitioner was, therefore, contractually bound to release earnest money/security deposit within six months of submission of the final bill. This amount, too, had not been released till date, resulting in fundamental breach of the contract by the petitioner and resultant entitlement of the respondent to compensation.

20. Re: Issue d – limitation 20.[1] On limitation, the learned Arbitrator initially observes that no evidence had been led by the petitioner, who had merely chosen to make bald and vague averments. 20.[2] The learned Arbitrator has, nonetheless, dealt with the issue on merits. As observed and found by the learned Arbitrator, the contracted work was admittedly completed in December 2003. As the final bill was not paid, the respondent, vide letter dated 18 July 2006, invoked Clause 25 of the Agreement and sought appointment of an Arbitrator. On the petitioner failing to respond, the respondent was constrained to approach this Court which, vide order dated 8 August 2008, appointed the arbitrator. As the notice invoking arbitration was sent within three years from completion of work, the respondent’s claims were not barred by time. The plea of limitation was, therefore, decided against the petitioner and in favour of the respondent.

21. Re. Issue e – Who breached the contract and result thereof In view of the above findings, the learned Arbitrator holds that the petitioner had breached the contract and that the respondent was, therefore, entitled to compensation.

22. Re. Issue f – Reliance by the petitioner on photocopies of Measurement Books (MBs) The respondent contended that measurement of the work undertaken was clearly recorded in the MBs and that the petitioner had deliberately not produced all the MBs for perusal of the learned Arbitrator. The learned Arbitrator observes that sufficient opportunity had been granted to the petitioner to trace out the originals but that, in respect of MBs 725, 735, 740 and 1716, only photocopies were available, which were shown to the respondent. Claim-wise findings of the learned Arbitrator

23. Re. Claim 1 – Non payment of final bill – ₹ 5,40,419/- 23.[1] The respondent pointed out that the work had been completed to the satisfaction of the petitioner in December 2003 and that, therefore, the final bill ought to have been cleared within six months, i.e. on or before 24 June 2004. It had not, however, been ever cleared by the petitioner. This amounted to a fundamental breach of the contract, for supporting which contention the respondent relied on the judgment of the Supreme Court in Aditya Mass Communications (P) Ltd v. A.P. SRTC10 and of this Court in Samyukta Nirmata v. DDA11.

23.[2] As against this, the petitioner contended that the final bill could not be cleared because of the non-cooperative attitude of the respondent who was unwilling to accept its contractual obligations to rectify/repair certain items. 23.[3] The learned Arbitrator himself analysed the final bill, vis-a-vis the payments made, by comparing the quantities in the final bill as submitted by the respondent vis-a-vis the figures recorded in the MBs. It was observed that the total carpet area, as per the MBs available, was of 15024.31 sq m, whereas payment was reflected in the fourth running bill only against 8545.96 sq m. Work covering a carpet area of 6477.80 sq m had, therefore, remained unpaid. 23.[4] There was a similar discrepancy in removal of malba. The entries in the MBs for earth work and demolition of cement concrete reflected the total figure as 7546.22 cu m. As against this, only 5886.61 cu m had been paid for removal of malba in the MBs produced before the learned Arbitrator. This pertained to removal of malba for roads passing between Blocks 8, 9 and 10. 23.[5] The respondent had further contended that earth work as well as malba removal had also been undertaken in Blocks 1 and 2, to the extent of 734.[8] cu m. The respondent had written to the petitioner in this regard on 12 April 2002 and 30 April 2002. The petitioner did not respond. In the absence of any response, the learned Arbitrator holds that the respondent’s contention had to be treated as correct. 125 (2005) DLT 550 23.[6] Further, the learned Arbitrator notes that, though it was admitted, by the petitioner’s witness, that the final bill had to be recorded, no MB had been produced, reflecting any such record. In these circumstances, the learned Arbitrator holds that an adverse inference had to be drawn against the petitioner. 23.[7] Following these findings, the learned Arbitrator holds that the respondent had executed the claimed work and that the petitioner was bound to pay the respondent accordingly. 23.[8] The learned Arbitrator, thereafter, deals with the petitioner’s contention that non-clearance of the final bill was owing to the respondent not having cooperated in effecting rectifications/repairs at the contracted site. This submission has been rejected by the learned Arbitrator. The impugned award notes that completion of the work to the entire satisfaction of the JE was specifically recorded in the Site Order Book, as stated by the respondent in its letter dated 28 December 2003. This assertion was never rebutted by the petitioner by responding to the said letter. Nor did the petitioner produce, before the learned Arbitrator, the Site Order Book. The petitioner did not respond to any of the communications from the respondent, seeking clearance of outstanding payment, addressed on 1 July 2004, 25 November 2004, 5 February 2005, 16 July 2005, 12 January 2006 and 18 July

2006. In failing to clear the final bill within six months of 28 December 2003, therefore, the petitioner was in fundamental breach of the contract. 23.[9] No evidence had been led by the petitioner, calling upon the respondent to attend to any rectification/repair work during the defect liability period of six months. The contention of the petitioner that the final bill could not be paid owing to the inaction on the respondent’s part in carrying repair/rectification was, therefore, rejected.

23.10 The learned Arbitrator also observed, in this context, that it was not the petitioner’s case that the respondent was not entitled to the amount claimed in the final bill. The only defence that was set up by the petitioner was that the final bill could not be cleared owing to the respondent not carrying out repair/rectification work. This contention having been found to be devoid of merit, the claim of the respondent was required to be allowed.

23.11 As such, Claim 1 of the respondent for ₹ 5,40,419/- was upheld by the learned Arbitrator.

24. Re. Claim 2 – Return of EMD/security deposit 24.[1] For the same reason, the learned Arbitrator holds that the petitioner was bound to return the EMD/Security deposit paid by the respondent within six months of completion of work i.e. on or before 24 June 2004. The failure of the petitioner, to do so, constituted fundamental breach of the contract. 24.[2] As such, the learned Arbitrator has awarded, to the respondent, the claim amount of ₹ 3,73,790/- against Claim 2.

25. Re. Claim 3 - Interest @ 24% per annum on delayed payment of running bills. The learned Arbitrator has found that, for each of the running bills, there was a delay between the date when the bill was passed for payment and when the payment was made. Allowing one month for processing of the bill from the date when it was passed for payment, the petitioner has been found to be liable to pay interest for the remaining period of delay. This period has been found, in the case of the first running bill to be of 13 months, in the case of the second running bill, to be of 7 months and 6 days, in the case of the third running bill, to be of 7 months and in the case of the fourth running bill, to be of 15 months and 14 days. The learned Arbitrator, relying on the judgment of the Supreme Court in Aditya Mass Communications, holds that the petitioner was bound to pay interest to the respondent for the delay in making payment against the running bills. However, against the claim of interest @ 24% p.a, the learned Arbitrator has awarded interest @ 9% p.a. The total amount awarded towards interest for delay in payment of the running bills is, therefore, ₹ 2,04,749/-.

26. Re: Claim 4 – towards idling of establishment, tools, plants and labour – Rs. 10,49,170/- 26.[1] The respondent contended that, owing to delay on the part of the petitioner in providing a hindrance free site, despite the respondent having deployed the requisite resources in time, the respondent’s resources remained idle. The respondent, therefore, furnished a statement in which an amount of ₹ 10,49,170/- was shown as having been incurred towards idling of establishment and ₹ 19,42,920/towards idling of machinery. The respondent relied on the judgment of this Court in Nav Bharat Construction Co v. DDA12 and Samyukta Nirmata. 26.[2] The petitioner contended, per contra, that the delay was entirely attributable to the respondent. 26.[3] The learned Arbitrator, reiterating the finding that delay in completion of the work was attributable to the petitioner who had breached the contract, notes, at the outset, that the claim towards idling was restricted by the respondent to ₹ 10,49,170/-. 26.[4] On merits, the findings of the learned Arbitrator, as contained in para 46 of the impugned award, deserve to be reproduced:

26.[5] Thus, the learned Arbitrator awarded, against the Claim 4, an amount of Rs. 8,22,937.50/-. 1977(1) Arb LR 541

27. Re. Claim 5 – Towards escalation – ₹ 6 lakhs This claim has been rejected by the learned Arbitrator. As such, it does not have to be dealt with.

28. Re. Claim 6 – Towards loss of profit and profitability – ₹ 6,58,350/- 28.[1] The respondent claims compensation of ₹ 6,58,350/- towards the loss of profit which it would have earned had the work been allowed to be completed in time. As the petitioner was responsible for the delay in completion of work, a claim was raised by the respondent. Reliance was placed, by the respondent, on paras 3 and 4 of Mohd. Salamatullah v. Govt. of A.P13, para 10 of A.T. Brij Paul Singh & Bros. v. State of Gujarat14, para 9 of Dwarka Dass v. State of Madhya Pradesh15 and paras 112 to 115, 119 and 120 of McDermott International Inc. v. Burn Standard Co. Ltd16. 28.[2] As against this, the petitioner contended that delay, if any, was attributable to the respondent and that no compensation could be paid to the respondent on this count. 28.[3] The learned Arbitrator holds that an element of profit is expected to be inbuilt in every contract, and the question of whether there would have been any profit does not arise for consideration. The AIR 1997 SC 1481 AIR 1984 SC 1703 AIR 1999 SC 1031 2006 (11) SCC 181 decisions cited by the respondent, it is found, clearly set out this position. Since an element of profit is inbuilt in every contract, if execution of the contract is delayed owing to default of the employer, the contractor is entitled to be compensated. 28.[4] Following this, the learned Arbitrator holds thus: “In CPWD and any other works contract profits are expected to be even 10 to 15% and therefore the Hon'ble Supreme Court of India has held in the case, of MCDERMOTT INTERNATIONAL INC. Vs.

BURN STANDARD CO. LTD. &ORS, that such kind of payments are clearly payable. It is generally accepted that out of the 15 % towards profit and overheads, 10 % is taken for profit, whereas 5 '% for overheads. In this case the contract amount was Rs. 31,06,18.00. The contractor would be expected to make 10% profit amounting to Rs. 3,10,618.40. On this basis, the contractor was expected to make profit and deploy office overheads amounting to Rs. 31,618.00 per month. Since the prolongation has taken place by a period of 15 months the contractor is entitled for compensation for an amount of Rs. 4,74,270.00 (Rupees Four Lakhs Seventy Four Thousand Two Hundred and Seventy only) 28.[5] Thus, against the respondent’s claim, the learned Arbitrator has awarded Rs. 4,74,270/-.

29. Re. Claim 7 – Interest – pre-suit, pendente lite and future 29.[1] The respondent claimed pre-suit, pendente lite and future interest, relating to Section 31(7)(a) and (b) of the 1996 Act read with the judgments of the Supreme Court in Secretary Irrigation Deptt, Govt of Orissa v. G.C. Roy17, EE Dhenkanal Minor Irrigation Division Orissa v. N C Budhiraja18, Bhagwati Oxygen Ltd v. AIR 1992 SC 732 AIR 2001 SC 626 Hindustan Copper Ltd19, State of Haryana v. S.L. Arora and Company20 and Bhag Kathuria Engineers (P) Ltd v. DDA21. 29.[2] As against this, the petitioner merely stated that as no amount was payable to the respondent, no interest could be awarded. 29.[3] The learned Arbitrator has awarded pre-suit as well as pendente lite interest, relying on the judgments cited by the respondent, as well as decision of this Court in Bhag Kathuria Engineers (P) Ltd. However, interest has been granted @ 10%, in case of each claim from 24 June 2004 till 17 October 2014.

30. Re. Claim 8 towards costs The learned Arbitrator has awarded costs of ₹ 50,000/-.

31. Aggrieved by the above award, the respondent DMC has approached this Court by means of the present petition under Section 34 of the 1996 Act. Rival contentions

32. I have heard Ms. Renu Gupta, learned Counsel for the petitioner and Mr. Moni Cinmoy, learned Counsel for the respondent, at length.

33. Ms. Gupta submits, firstly, that the learned Arbitrator was in l997 (Suppl) Arb. LR 157 error in rejecting the petitioner’s objection to the maintainability of the respondent’s claims, predicated on Clause 25 of the Agreement, and in failing to address the said submission on merits, on the presumption that the issue stood foreclosed by the order dated 8 August 2008 by this Court in Arb. Appl. 497/2006 and 498/2006. She has relied, in this context, on para 39 of SBP as well as para 13 of the judgment of the Supreme Court in Maharishi Dayanand University v. Anand Coop. L/C Society Ltd.22 and paras 6 and 7 of the judgment of a learned Single Judge of this Court in Lalit Kala Accademy v. Svapan Const. AE23.

34. Similarly, Ms. Gupta submits that the learned Arbitrator was in error in relying on the referral order dated 8 August 2008 to hold that the objection of limitation stood decided thereby. She points out that the observation of this Court in the said order addressing the aspect of limitation, was only that the dispute did not appear to be time barred. As such, the court had not expressed any final opinion on the aspect of limitation.

35. Ms. Gupta submits that her plea of limitation is restricted to Claims 3 and 4, as raised by the respondent, and awarded by the learned Arbitrator. On the aspect of limitation, she points out that the learned Arbitrator has recorded all the claims as within time because the notice invoking arbitration was sent within three months of completion of work. With respect to Claims 3 and 4, she submits that this finding cannot sustain and refers, in this context, to Ground K in

36. Ms. Gupta, too, places reliance on the judgment of the Supreme Court in J.C. Budhraja.

37. On merits, Ms. Gupta submits, with respect to individual claims, thus: Re: Claim 1

38. Claim 1 related to the non-payment of the final bill raised by the respondent. Ms. Gupta submits that the findings of the learned Arbitrator, on this issue, are perverse, as the learned Arbitrator has relied on figures which are not available on the record. She has drawn my attention to the following averments in Ground E in the petition: “It is submitted that the discrepancies in the items and quantities mentioned by the learned Arbitrator and those recorded in the relevant measurement books are follows: M.B. No. Page No. Quantity and items as per learned Arbitrator Actual quantity and items as per measurement books Item Qty Item Qty 725 02 and Carpet Area 4622.03 sq. m. Demolishing cement concrete 383.09 cum (page 2)

Earthwork in excavation 2156.42 cum (page 3) 735 01 and Carpet Area 8647.09 sq. m. Demolishing cement concrete 112.71 cum (page 1) 1362.52 + 770.14= 2132.66 cum (page 2) 1716 14 and Carpet Area 1755.21 sq. m. Consolidation of sub grade s/s of stone chipping 1252.47 cum (page

14) 405.57 cum (page 15) Total= 1658.04 cum (page 14, 15) 1002.85 sqm (page 15) 24.91 cum (page 15) Third, in any event, the learned Arbitrator erred in taking into account "total carpet area", while no "carpet area" is mentioned in the measurement books. Fourth, the quantities specified in the measurement books correspond to specific items of work and cannot be arbitrarily clubbed as the learned Arbitrator has erroneously done while computing "total carpet area". Fifth, the learned Arbitrator erred in drawing an adverse inference against the Petitioner and holding that the Petitioner has executed the work alleged to be executed by it and for which it alleged that it had not been paid. It is submitted that given that there are discrepancies in the items and figures of quantities of work relied upon by the learned Arbitrator, as against the actual items and quantities recorded in the measurement books, the said finding of the learned Arbitrator is erroneous. Sixth, the learned Arbitrator erred in holding that it is not the case of the Petitioner that the amount, as mentioned in the final bill, is not required to be paid to the Respondent and that the Petitioner said that the final bill could not be passed due to non cooperative attitude of the Respondent. It is submitted that the Petitioner has never admitted any liability towards the Respondent for any payment under purported final bill, or otherwise. Seventh, assuming without admitting, even if there was a technical lapse on the part of the Petitioner and the purported final bill was not recorded, given the fact that the Petitioner had already paid the Respondent for complete quantities executed by it, even in the absence of a final bill, there was/is nothing due, outstanding and payable by the Petitioner to the Respondent. Eighth, no final bill was ever raised by the Respondent. Ninth, the learned Arbitrator has awarded Claim No. 1 to the Respondent on conjectures and surmises, without the Respondent proving its claim in accordance with law. Accordingly, for the reasons specified herein, said finding/part of the Award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act.”

39. Ms. Gupta submits that the figure of 4622.03 sq m, 8647.09 sq m and 1755.21 sq. m, which have been adopted by the learned Arbitrator, are not forthcoming anywhere from the record. She has also referred me to the actual Measurement Books, forming part of the arbitral record, in which, too, she submits that these figures are not available.

40. Besides, she submits that the work order was only for Blocks 8 to 10, and Blocks 1 and 2 were not part of the contracted work. As such, the work done by the respondent in Blocks 1 and 2 was beyond the contract, and the learned Arbitrator has erred in awarding any amount to the respondent for the said work.

41. For these reasons, Ms. Gupta submits that the impugned award, insofar as claim 1 is concerned, cannot sustain. Re: Claim 4

42. Ms. Gupta next addresses claim 4, which was the claim towards idling of establishment and equipment. She submits that the claim for idling could not have been granted in the absence of adequate material to indicate that the equipment was incapable of being employed elsewhere during the alleged idling period. She relies, for this purpose, on paras 23 and 24 of the judgment of a learned Single judge of this Court in P C Sharma v. DDA25.

43. Besides, she submits that para 46 of the impugned award (reproduced in para 26.[4] supra) has awarded the claim for idling on pure estimate basis, based on facts and figures, the justification for which is not forthcoming on the record or from the impugned award. Re: Claim 6 (2006) 88 DRJ 171

44. Mr. Cinmoy has fairly conceded that the learned Arbitrator could not have simultaneously awarded the respondent’s Claim 1 and Claim 6, as the loss of profit was factored into the Final Bill. As such, it is not necessary to advert to Ms. Gupta’s challenge to the award qua Claim 6. Submissions of Mr. Cinmoy

45. First addressing the issue of Clause 25 of the Agreement vis-àvis Section 16 of the 1996 Act, Mr. Cinmoy submits that, in view of paras, 20, 47 (iv) and (ix) of SBP, Section 16(2) and (3) do not apply where the arbitrator is appointed under Section 11 (6).

46. Insofar as the objection of Ms. Gupta with respect to the claims relating to Running Bills 3 and 4 on the aspect of limitation is concerned, Mr. Cinmoy submits that the said bills were passed much later on 31 March 2004 and 31 March 2005 and that the respondent had, in any case, included interest on the said unpaid bills in its Final Bill. The learned Arbitrator could not, therefore, be said to have erred in holding that the claims were within time.

47. Insofar as Claim 1 is concerned, Mr. Cinmoy further submits that the actual MBs relating to the work undertaken had not been produced by the petitioner despite opportunity having been granted by the learned Arbitrator. The work relating to Blocks 1 and 2 had to be done because of the directions issued by the Engineer In-Charge in that regard. He draws attention, in this context, to Clause 12 of the Agreement, which bound the respondent to do all such works as were directed by the Engineer In-Charge, and read thus:

The respondent had, in fact, called for production of the Site Order Book of the petitioner, so as to vouchsafe this submission and prove that the Engineer In-Charge had in fact asked the respondent to do the work relating to Blocks 1 and 2. Despite directions in this regard, the Site Order Book was not produced by the petitioner. The learned Arbitrator, therefore, drew an adverse inference and was justified in doing so. He draws my attention, in this regard, to paras 2 to 10 of the SOC filed by the respondent, which read thus:

J.E of the respondent so that the site could be handed over to the respondent and the work started in right earnest as the men, materials and tools at the site lay idle but the officials of the respondent were unable to provide clear instructions in this regard. The claimant had no other option but to keep its resources deployed at the site so that as and when any instruction from the respondent was received, the claimant would have immediately started the work.

4. That even after waiting for a month, the respondent failed to provide the site to the claimant and the claimant vide letter dated

31. 01.2002, brought this fact to the notice of the respondent. Copy of the said letter dated 31.01.2002 is annexed as Annexure C-4.

5. That it would not be out of place to mention herein that the hindrance at the site was regarding the encroachments at the site and the other problem was that the public of the adjoining blocks were fiercely protesting against the water logging and accumulation of garbage in the adjoining areas in which the residents of Block 1 and 2 were most vehement.

6. That thereafter the officials of the respondent instructed the claimant to immediately start the work in block 1 and 2 so as to pacify the residents of the locality and the work in block 8, 9 and 10 could be started only after the work in block 1 and 2 is over.

7. That the respondent further assured the claimant that the (illegible) by the claimant in Block 1 and 2 would be duly reimbursed to the claimant for the work executed in the block 1 and 2.

8. That the claimant had no other option but to start the work as per the directions of the officials of the respondent in Block 1 &

2. However even ln Block 1 and 2 there were hindrances at the site and the work could not proceed at a very rapid pace.

9. That the respondent, oblivious of the ground realities, vide letter dated 01.03.2002, directed the claimant to speed up the pace of the work and in the process admitted that even the site at Block 1 and 2 were indeed handed over to the claimant on 01.02.2002. Copy of the said letter dated 01.03.2002 is annexed as Annexure C-5.

10. That thereafter the claimant executed the work in Block 1 & 2 as per their direction to the satisfaction of the respondent and thereafter again requested the respondent to hand over the actual site in Block 8, 9 & 10.”

48. In the SOD, the petitioner chose to provide an omnibus response to paras 1 to 17 of the SOC, thus: “1-17. That it is pertinent to not beside the reply on merit that the claimant purchased the tender and after going through the each and every detail stud y of the contract, quantum of work and inspection of the site and after assessing all of the existing hurdles at the sight and assessing the maximum time for removal of the same at the site, quoted their rates and being lowest one, his tender was accepted, hence the all of the contents mentioned in para no. 1 to 17 in the claim petition have no meaning, however, the respondent's officials as per their level best to cooperate the claimant for completion of assigned job in compliance of the terms and conditions of the agreement and list of work Schedule, but the claimant is so anxious to write letters, but practically not cooperative due to his own personal mis-management arid non providence of requisite finance being his requisite investment and failed to appoint requisite staff i.e. labour, technical staff and arrangement if machinery as and when required, despite of making availability.of the site free from encumbrances and removal of hurdles from the site from time to time. All of the grievances whichever received by the respondent are duly resolved by the then officials of the respondent at the spot, however, the various letters as annexed herewith the claim petition under reply. The receipt of the same could not be ascertained due to non-availability of the then daily diary register, however, whichever letter received were duly replied and also warn the claimant by the respondent to show slow progress of work at the site on his part and also showing various 'deficiencies of his non fulfilment various contractual obligations in compliance of the terms and conditions of the agreement as the contents of all of the annexures annexed herewith save and except replied and letter issued by the department are wrong and specifically denied being incorrect and only for the purposely forged, fabricated and prepared for making his claims against the respondent on the one and another false pretext, hence the same are thereby liable to be dismissed, accordingly the contents of para no. 1 to 17 are wrong and denied being incorrect on the ground the site was handed over free from all of the encumbrances.”

49. Insofar as the figure of 4622.03 sq m, 8647.09 sq m and 1755.21 sq m, figuring in the table in Ground E of the petition is concerned, Mr. Cinmoy submits that the basis for the said figure is available in para 28 of the impugned award which reads thus: “28. As there was an element of ambiguity in the statement of the parties, I analyzed the Final Bill quantities as submitted by the Claimant, vis-a-vis the figures in recorded in the MBs. The total carpet-area as. per the MBs available is of the order of 15024.31 sq m (MB No. 725 pages 02 and 03, 4622.03 sq m, MB 735 pages 1 and 2, 8647.09 sq m, MB No 1716, pages 14 and 15, 1755.21 sq m.). The payment reflected in the fourth running bill is of the order of only 8545.96 sq m in There is thus a gap of 6477.80 sq m. Similarly there is a discrepancy in removal of malba. As per entry in MBs for earthwork and; demolition of cement concrete the figure is 6985,28 cum and 560.94 cu in, respectively, totaling 7546.22 cu -in. As against this, the removal of malba has been paid only for 5886.61 cu m, in the MBs produced before me, for Widening of carriage way of roads passing between 8, 9 & 10 Blocks, Phase-II, in West Zone. The Claimant has further contended that work was also done in Block Nos I and 2, for

734.80 for both earth work and removal of resultant malba, for which the Claimant wrote to the Respondent vide letters dated 12.04.2002 and 30.04.2002, which were never rebutted by the Respondent. The Respondent has not categorically established whether work was executed in Block Nos, 1 and 2, and in the absence of any reply to the Claimant's letters, it is to be taken that the work, as claimed, was indeed executed. The claim has been made for the discrepancy of quantities as per the recordings for the Blocks Nos 8, 9 and 10, as outlined in the text above and for the quantities executed for Blocks no. 1 and 2, as per the accepted rates in the contract. The fundamental question is that there can be no difference in earthwork recorded, cement concrete' demolished and malba removed. It just does not make any sense, unless either the recording is incomplete or any MB where this is recorded is not being produced, for whatever reason. Besides, the witness for the Respondent accepts that the final bill has to be recorded, yet no MB is produced reflecting this record. Under the circumstances have to draw adverse inference against the Respondent. I hold that the Claimant has executed the work, as claimed, and the Respondent has to pay the Claimant accordingly.”

50. To repeal the challenge of Ms. Gupta on this aspect, Mr. Cinmoy additionally cites paras 16, 26, 27 and 31 of the judgment of a learned Single Judge of this Court in Mariners Buildcon India Ltd. v. K.V Makkar Contracts26 and paras 21, 22, 28 and 29 of the judgment of a Division Bench of this Court in NHAI v. Oriental Pathways (Nagpur) Pvt Ltd27.

51. Mr. Cinmoy next addresses Ms. Gupta’s objection to the award on Claim 4. He submits that in the said claim, the respondent was only claiming for idling of equipment and establishment beyond the stipulated date of completion. He submits, therefore, that, strictly speaking, the claim was not in the nature of idling charges, but expenses incurred owing to prolongation of work. He has invited my attention, in this context, to claim no. 4 as set out in the SOC: “Claim No.4 CLAIMANT'S CLAIM TOWARDS IDLE ESTABLISHMENT TOOLS & PLANTS AND LABOUR AMOUNTING TO RS.10,49,170/-.” That as per the work order the scheduled date of start of work was 02.12.2001 and it was to be completed by 02.10.2002. The claimant duty bound as per the agreement gathered all the all the resources at his disposal and deployed his men, materials and equipments at the site. However, due to the hindrance at the site, as above mentioned, the work could not be started as per the scheduled date and the men, materials and equipment lay idle at the site. The claimant, as per the terms of the agreement, kept waiting at the site for the removal of the hindrance but to no avail. The respondent kept on assuring the claimant that the hindrance would be removed and the claimant had no other option but to keep his men material and equipment at site hoping that the respondent would play his reciprocal part, of removal of hindrance as per the agreement. Since the work was to completed on 02.10.2002 as per the stipulated time however the same was delayed by almost one year and 2 months and therefore the claimant is entitled to the claim towards idle establishment/infructuous expenditure including Engineer, supervisor, chowkidar, Mistries, and tools & plants the detail of which are Annexed as ANNEXURE C-12. It is therefore prayed that this claim be awarded in favour of the 2015 (1) Arb LR 289 (Del) 2016 (3) Arb LR 448 (Del) (DB) claimant.”

52. Mr. Cinmoy further relies on para 4 the claim wise reply of the SOD filed by the petitioner, which reads thus:

53. As such, Mr. Cinmoy submits that there is no error in the award by the learned Arbitrator on Claim 4.

54. Insofar as claim 6 is concerned, Mr. Cinmoy candidly acknowledges that this claim could not have been awarded as the loss of profit was already included in the final bill raised by the respondent and, therefore, the learned Arbitrator could not have awarded both the amount claimed in the final bill as well as the claim towards loss of profits. Analysis Scope of interference under Section 34

55. The decisions on the scope of Section 34 of the 1996 Act are too numerous to justify any paraphrasing, but the position is, by now, certain. UHL Power Co. Ltd. v. State of H.P.28 and Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.29 hold that the jurisdiction of the Court under Section 34 cannot be likened to normal appellate jurisdiction. Casual and cavalier interference with arbitral awards, and proscription from interfering on the ground that a better, alternative view was possible, stands clearly foreclosed by Ssangyong Engineering & Construction Co. Ltd v. N.H.A.I30 and Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd31. The autonomy of the Arbitral Tribunal was required to be respected and interference with arbitral awards on factual aspects firmly eschewed. At the same time, if the award was found to be perverse, or that the interpretation of the contractual covenants by the Arbitral Tribunal was one which could not possibly be accepted, the Court was bound to interfere32. Instances where the construction of the contractual clauses, by the Arbitral Tribunal, was found to be so unacceptable as to justify interference, are South East Asia Marine Engineering & Constructions Ltd. v. Oil India

56. “Perversity”, as would justify interference with an arbitral award, connotes a situation in which the finding of fact, by the Arbitral Tribunal, was arrived at by ignoring or excluding relevant material, or by taking into consideration irrelevant material, or where the finding is so outrageously in defiance of logic as to suffer from the viced of irrationality35. Associate Builders v. D.D.A.36 also placed especial reliance, on the concept of “perversity”, on the following clarification, provided in Kuldeep Singh v. Commissioner of Police37:

57. In Associate Builders and Indian Oil Corporation Ltd. v. Shree Ganesh Petroleum38, the Supreme Court clearly held that an arbitral award can only be set aside on grounds mentioned under Sections 34(2) and (3) of the said Act and not otherwise. The Court considering an application for setting aside an award, under Section 34 of the 1996 Act, cannot look into the merits of the award except when the award is in conflict with the public policy of India as provided in Section 34(2)(b)(ii) of the 1996 Act. An award could be

S.T.O. v. Gopi Nath &Sons, 1992 Supp (2) SCC 312; Associate Builders v. D.D.A., (2015) 3 SCC 49 said to be in conflict with the public policy of India, as per Associate Builders, when it is patently violative of a statutory provision, or where the approach of the Arbitral Tribunal has not been judicial, or where the award has been passed in violation of the principles of natural justice, or where the award is patently illegal, which would include a case in which it was in patent contravention of applicable substantive law or in patent breach of the 1996 Act, or where it militated against the interest of the nation, or was shocking to the judicial conscience.

58. An award which ignores the specific terms of the contract, but is not merely a case of erroneous contractual interpretation, is patently illegal39. The Supreme Court, in Indian Oil Corporation Ltd, found the case before it to be one such. Ssangyong Engineering also demonstrates an interesting example of a case in which the error in interpretation of the contract was so fundamental as to render the award in conflict with the public policy of India:

Indian Oil Corporation Ltd. gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.”

59. Yet another such example was highlighted by the Supreme Court in PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust40:

60. PSA Sical, therefore, holds that if the Arbitral Tribunal travels beyond the contract, it acts without jurisdiction, being a creature of the contract, and the award stands vitiated thereby. Following the precedent in Army Welfare Housing Organisation v. Sumangal

Services (P) Ltd.41, it was held that an Arbitral Tribunal had strictly to act within the boundaries of the contract, and could not proceed ex debito justitiae. For example, as observed in Satyanarayana Construction Co. v. U.O.I42., the Arbitral Tribunal could not award a claim at a rate higher than that specified in the contract. Rewriting of the contract is completely proscribed, and fatally imperils the arbitral award, as held in N.H.A.I. v. Bumihiway DDB (JV)43, Union Territory of Pondicherry v. P.V. Suresh44, Shree Ambica Medical Stores v. Surat People's Co-operative Bank Ltd45.

IFFCO Tokio General Insurance Co. v. Pearl Beverages Ltd.46, Tata Consultancy Services v. Cyrus Investments (P) Ltd47. and Maharashtra State Electricity Distribution Co. v. Maharashtra Electricity Regulatory Commission48.

61. Comprehensively examining and analysing the entire gamut of existing case laws and reiterating the above principles, the Supreme Court, in S.V. Samudram v. State of Karnataka49, further clarified that an arbitral award could not be modified by the Court, as held in N.H.A.I. v. M. Hakeem50 and Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd51. The latter decision, it was noted, further held that, where the Court set aside the award of the Arbitral Tribunal, the underlying dispute would be required to be decided afresh in an appropriate proceeding. In the event of the Court finding the arbitral award to justify evisceration, the Court, it was held in McDermott International and Larsen Air Conditioning & Refrigeration Co. v. U.O.I52, could only quash the award leaving the parties to reinitiate arbitration should they so choose, but could not itself rewrite or modify the award.

62. As held by a coordinate Bench of this Court in N.H.A.I. v. Trichy Thanjavur Expressway Ltd53, the M. Hakeem proscription against modification of an arbitral award by Court does not extend to setting aside of the award in part, where that part is found to be severable from the rest of the award.

63. These principles also stand exhaustively delineated in Reliance Infrastructure Ltd. v. State of Goa54. Applying these principles to the facts.

64. Re. Preliminary submission w.r.t. Clause 25 of the Agreement 64.[1] The objection of Ms. Gupta, as was articulated before the learned Arbitrator as well, is that, before issuing the Section 21 notice on 18 July 2006, the respondent did not comply with the pre-arbitral protocol envisaged by Clause 25 of the Agreement. 64.[2] The learned Arbitrator is perfectly correct in his view that, once

(2023) 304 DLT 357 the Arbitrator had been appointed by the Court under Section 11(6) of the 1996 Act, there was no hark back to Section 21, or the pre-arbitral protocol envisaged by the Agreement. To accept the submission of the petitioner, the learned Arbitrator would have to have held that the order dated 8 August 2008, of this Court, appointing him, was illegal. As a creature of the said order, the learned Arbitrator was bound by it, and could obviously not hold that it was not legal and proper. To so hold, the learned Arbitrator would have had to arbitrate, which he could have done only by virtue of the order dated 8 August 2008 of this Court. The learned Arbitrator could not, therefore, in exercise of the jurisdiction conferred on him by the order dated 8 August 2008, have proceeded to hold that the order dated 8 August 2008 was itself illegal, which would be the inevitable sequitur, were the petitioner’s submission regarding failure to adhere to the pre-arbitral protocol to be taken to its logical conclusion. The situation is, in fact, a perfect example of Catch-22, as explained in Joseph Heller’s immortal 1961 masterpiece55. 64.[3] Para 20 of SBP settles this issue:

20. Section 16 is said to be the recognition of the principle of Kompetenz-Kompetenz. The fact that the Arbitral Tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can, and possibly, ought to decide them. This can happen when the parties have gone to the Arbitral Catch 22, by Joseph Heller, and published in 1961, is regarded as one of the greatest anti-war novels ever written. “Catch-22” is thus explained in Chapter 5 of the novel: “There was only one catch and that was Catch-22, which specified that a concern for one's safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn't, but if he were sane he had to fly them. If he flew them he was crazy and didn't have to, but if he didn't want to he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.” Tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these sections, before a reference is made, Section 16 cannot be held to empower the Arbitral Tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the Arbitral Tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of Section 11(7) of the Act read with Section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence under Section 11 of the Act are incapable of being reopened before the Arbitral Tribunal. In Konkan Rly.56 what is considered is only the fact that under Section 16, the Arbitral Tribunal has the right to rule on its own jurisdiction and any objection, with respect to the existence or validity of the arbitration agreement. What is the impact of Section 11(7) of the Act on the Arbitral Tribunal constituted by an order under Section 11(6) of the Act, was not considered. Obviously, this was because of the view taken in that decision that the Chief Justice is not expected to decide anything while entertaining a request under Section 11(6) of the Act and is only performing an administrative function in appointing an Arbitral Tribunal. Once it is held that there is an adjudicatory function entrusted to the Chief Justice by the Act, obviously, the right of the Arbitral Tribunal to go behind the order passed by the Chief Justice would take another hue and would be controlled by Section 11(7) of the Act.” 64.[4] That apart, the petitioner having accepted the order dated 8 August 2008, it is clearly not open to the petitioner, now, to question the legality of the very commencement of arbitration by issuing the Section 21 notice. 64.[5] The preliminary objection of Ms. Gupta, predicated on Clause 25 of the Agreement is, therefore, rejected.

65. Limitation 65.[1] On the plea of limitation, too, the learned Arbitrator has rightly Konkan Railway Corporation Ltd v. Rani Construction Pvt Ltd, (2002) 2 SCC 388 held that, as the Section 21 notice was issued within three years of the completion of the work and issuance of the Final Bill, the claims were not barred by time. This Court had also expressed a prima facie view in that regard while relegating the dispute to arbitration by its order dated 8 August 2008, though Ms. Gupta is correct in her submission that the order did not finally decide the question. The learned Arbitrator has, however, also not contented himself by merely regarding the issue as pre-decided by the order dated 8 August 2008, but has also found, on merits, that the claims are not time barred, as they were preferred within three years of the accrual of the cause of action. 65.[2] This finding is unexceptionable. Admittedly, the contracted work was completed in December 2003. Applying Article 137 of the Limitation Act, the period of limitation for commencing arbitration was three years from the date when the last running bill was paid. Work was completed in December 2003 and the fourth and last running bill was paid only on 31 March 2005. The respondent invoked arbitration vide letter dated 18 July 2006, and filed the Section 11(6) petition within three years thereof. Both were, therefore, within limitation. 65.[3] The plea of limitation is also, therefore, rejected as devoid of merit. On merits

66. Re: Claim 1 66.[1] The only two grounds on which Ms. Gupta sought to assail the decision of the learned Arbitrator in respect of Claim 1 were, firstly, that the figures adopted by the learned Arbitrator, as reflected in the table in ground (e) in the petition, were not forthcoming from the record and, secondly, that the learned Arbitrator could not have awarded any amount for the work allegedly done by the petitioner in Blocks 1 and 2, as Blocks 1 and 2 were not part of the contracted work, which was restricted to Blocks 8, 9 and 10. 66.[2] Mr. Cinmoy has correctly pointed out that the learned Arbitrator has, in para 28 of the impugned award, clearly set out the basis for the impugned award under Claim 1. In doing so, the learned Arbitrator has compared the quantities in the final bill with the figures recorded in the MBs. Inasmuch as the payment had admittedly been done on the basis of the figures recorded in the MBs even as per the respondent, the learned Arbitrator has regarded the differential area, between the figure recorded in the final bill and the figure recorded in the MBs, as unpaid. This is clearly a justifiable mode of calculation. 66.[3] The learned Arbitrator has further relied on the letters dated 12 April 2002 and 30 April 2002 addressed by the respondent to the petitioner, setting out the work done by the respondent and the fact that the petitioner never rebutted the said letters by way of any reply. If, therefore, the learned Arbitrator regarded the assertions contained in the letters dated 12 April 2002 and 30 April 2002 as correct, there is nothing patently illegal in his doing so. The original MBs were not produced by the petitioner, despite the learned Arbitrator having given an opportunity to the petitioner to do so and, in such circumstances, the learned Arbitrator has, again justifiably, drawn an adverse inference against the petitioner. 66.[4] Insofar as the work done in Blocks 1 and 2 are concerned, it was the respondent’s case that the work had to be done as the Engineer In-charge had issued directions to the said effect. Mr. Cinmoy has also drawn my attention to Clause 12 of the Agreement, which obligated the respondent to undertake any work which was directed by the Engineer In-Charge. The respondent had submitted that these directions were reflected in the Site Order Book maintained by the petitioner. Though directions were issued to produce the Site Order Book, the petitioner failed to do so. 66.[5] There is also force in Mr. Cinmoy’s submission that the assertions, in paras 2 to 10 of the SOC filed by the respondent before the learned Arbitrator, which referred to the work done by the respondent, was allowed to remain untraversed in the corresponding paragraph of the SOD, which was an omnibus paragraph covering paras 1 to 17 of the SOC. 66.[6] Applying the standards laid down in the decisions regarding scope of interference with arbitral award under Section 34 of the 1996 Act, it cannot be said that any case has been made out, for interfering with the impugned award, insofar as it awards ₹ 5,40,419/- against Claim I preferred by the respondent.

67. Re. Claim 2 67.[1] Claim 2 was for return of EMD and security deposit paid by the respondent. As has been noted by the learned Arbitrator, there was no dispute about the fact that the EMD and security deposit remained to be refunded to the respondent. 67.[2] Clause 45 of the Agreement deals with release of security deposit and reads thus: “Clause 45 Release of security deposit after labour clearance. Security deposit of the work shall not be refunded till the contractor produces a clearance certificate from the Labour Officer. As soon as the work is virtually complete the contractor shall apply for the clearance certificate to the Labour Officer under intimation to the Engineer-in-Charge. The Engineer-in-Charge, on receipt of the said communication shall write to the Labour Officer to intimate if any complaint is pending against the contractor in respect of the work. If no complaint is pending, on record till after 3 months after completion of the work and/or no communication is received from the Labour Officer to this effect till six months after the date of completion. It will be deemed to have received the clearance certificate and the Security Deposit will be released if otherwise due.” 67.[3] On the claim of the respondent for refund of EMD/security deposit, para 18 of the impugned award holds as under: “The release of Earnest Money/Security Deposit is governed by Clause 45 of the Contract. For release of the same the contractor has to obtain clearance certificate from the Labour Officer. A procedure for the same has been prescribed therein but it is also laid down that after a period of 6 months the clearance certificate will be deemed to have been received. Although neither party has placed on record any correspondence in this regard, I have to accept that clearance certificate is deemed to have been received. Accordingly, the Respondent was contractually obliged to release the Earnest Money/Security Deposit within 6 months of the submission of the Final bill. Since the Respondent has not released the same even as on date the Respondent is clearly in breach of contract and the Claimant is entitled to be compensated.” (Emphasis supplied) 67.[4] While interference with the manner in which the arbitrator interprets a contractual covenant is usually not permissible under Section 34, nonetheless, if the arbitrator arrives at a finding contrary to the contract, the court would be seriously in error if it holds back its hands. In the present case, there is no ambiguity, insofar as the requirements of Clause 45 are concerned. The clause is capable of one, and only one, interpretation. It starts with a negative covenant, proscribing refund of security deposit till the contractor produces a clearance certificate from the Labour Officer. The assertions with respect to Claim 2 in the SOC did not make any reference to the clearance certificate having been obtained from the Labour Officer. There is, in fact, not even an assertion that the respondent ever approached the Labour Officer for a clearance certificate. Clause 45 envisages a clear and categorial protocol. On virtual completion of the work, the contractor is required to approach the Labour Officer for a clearance certificate under intimation to the EIC. On such intimation being received, the EIC has to write to Labour Officer and intimate the Labour Officer as to whether any complaint is pending against the contractor. If there is no such complaint, the Labour Officer is expected to accord clearance. It is only in these circumstances that Clause 45 deems clearance to have been granted by the Labour Officer if six months have passed from the date of completion of work. The contractor would then be eligible for release of the security deposit. 67.[5] Para 18 of the impugned award, as extracted in para 67.3, clearly observes that no correspondence had been placed on record by the respondent to indicate that any effort had been made to obtain a clearance certificate from the Labour Officer. Indeed, the SOC, too, does not so assert. If the respondent had not written to the Labour Office for obtaining a clearance certificate, the sequelae envisaged by Clause 45 would not apply. The presumption of clearance having been given by the Labour Officer on the expiry of six months from completion of work would have arisen only if

(i) the respondent had written to the Labour Officer for obtaining a clearance certificate, and

(ii) the respondent had informed the EIC of the said communication.

In that event, the responsibility would have been of the EIC to write to the Labour Officer and intimate the Labour Officer that there was no complaint pending against the respondent. It is only in such a circumstance that, on the expiry of six months from the date of completion of work, a presumption of a clearance certificate having been issued by the Labour Officer would arise. 67.[6] If the respondent had never even applied to the Labour Officer for a clearance certificate, there is no question of any presumption of such a certificate having been issued, on the expiry of six months from the completion of work, arising at all. 67.[7] The learned Arbitrator was, therefore, clearly in error in holding that he “had to accept that the clearance certificate was deemed to have been received”, ignoring the fact that there was no evidence of the respondent even having applied to the Labour Officer for the clearance certificate, which was, under Clause 45, the respondent’s primary obligation. As the respondent had never even pleaded that he had written to the Labour Officer for a clearance certificate, there is no question of any such deemed receipt of clearance certificate within the meaning of Cluse 45 of the Agreement. 67.[8] The impugned award, insofar as it allows Claim 2, is, therefore, in the teeth of Clause 45 of the Agreement. It has reduced, to a redundancy, the requirement of obtaining a clearance certificate from the Labour Officer. The learned Arbitrator could not have awarded any amount in contravention of the contractual clause, in a circumstance in which the mandatory requirements of the contract, which would entitle the contractor to the said amount, were not met. 67.[9] The manner in which the interpretation adopted by the learned arbitrator with respect to Clause 45 of the Agreement is one with which no person, aware of the facts and reasonably instructed in the law, would adopt. The impugned award to the extent it awarded ₹ 3,73,790/- against Claim 2, is, therefore, not only contrary to Clause 45 of the Agreement, but is also manifestly perverse.

67.10 The award of ₹ 3,73,790/- by the leaned Arbitrator against Claim 2, is, therefore, patently illegal within the meaning of Section 34 of the 1996 Act and cannot, therefore, sustain.

68. Re. Claim 3 – Interest on amount claimed in Claim 1 68.[1] No independent submissions were advanced by Ms Gupta on Claim 3, or the award in respect thereof. 68.[2] As this Court has found the awarding of Claim 1, by the learned Arbitrator, to be sustainable in law, Claim 3, which merely awards interest on Claim 1, is upheld.

69. Re: Claim 4 – Idling of establishment and equipment 69.[1] Claim 4 is the claim towards idling of establishment and equipment. 69.[2] The reasons for allowing Claim 4 are contained in para 46 of the impugned award, which stands reproduced in para 26.[4] supra. A bare reading of para 46 reveals that it is entirely based on certain assumed standards, the basis for which is not forthcoming on the record. The Court has perused the entire arbitral record, and has been unable to find, anywhere, the basis for the figures, or even the methodology and the assumptions, adopted in para 46 of the impugned award. The “generally acceptable norms of inputs towards employment of labour/machinery/overheads” have neither been reproduced, nor referred at any stage of the proceedings. The respondent, too, did not place reliance on any such “generally acceptable norms”. The methodology adopted by the learned Arbitrator is, therefore, his ipse dixit. 69.[3] The basis for adopting the store/material element of work at 60% labour, machinery and site overheads as 25% and profit-cumoverheads as 15% is also unknown. Having thus worked out an estimated amount of ₹ 43,89,000/-, the learned Arbitrator, again without any basis, works out the element of store-cum-material as ₹ 10,97,250/-. Thereafter, the learned Arbitrator “safely assumes” the monthly expenditure towards stores-cum-material works to be 1,09,725/-. Proceeding on these assumptions, the learned Arbitrator has awarded ₹ 8,22,937.50/- towards idling of resources for seven and a half months. 69.[4] There can be no gainsaying that an arbitrator is entitled to apply well recognised standards in arriving at an award. This, in fact, is one of the benefits of appointing persons with technical knowledge and wisdom as arbitrators. That said, however, the arbitrator cannot surprise the parties by referring, for the first time in the award, to standards which find no place in the arbitral proceedings. Such an approach is contrary to the fundamental policy of Indian law, of which principles of natural justice are an inalienable part. If the learned Arbitrator was intending to adopt “generally acceptable norms” while awarding Claim 4, it was incumbent on the arbitrator to put these norms to the parties so that they would be aware of the norms and could advance submissions thereon. At the very least, the impugned award was required to set out the basis of these generally acceptable norms, and the source from which these norms could be derived. The award is completely silent on this aspect. The basis for the norms adopted by the learned Arbitrator in para 46 of the impugned award finds no reflection either in the impugned award or in any prior proceedings before the learned Arbitrator. 69.[5] Neither Counsel – including, significantly, learned Counsel for the respondent – was able to enlighten the Court as to the basis of the “generally accepted norms” to which para 46 of the impugned award alludes, or where those norms are to be found. Nor do the written submissions of the respondent throw any light on this aspect. Mr. Cinmoy only sought to impress, on the Court, the fact that the learned Arbitrator was well versed in these matters, and that, therefore, the Court ought not to interfere with his findings. 69.[6] This Court, too, is therefore, handicapped in examining the correctness of the findings in para 46 of the impugned award as the basis of the findings is unknown. 69.[7] Rendition of an arbitral award, under the 1996 Act, is only facially, not factually, the end of the arbitral road. It is open to an aggrieved litigant before the learned Arbitral Tribunal to challenge the award, albeit on the limited grounds available in Section 34. The Court, in such a case, has to apply itself to the correctness of the award to ascertain whether it is vulnerable to interference under Section 34. For this, the Court has to be made aware of the basis of the award. 69.[8] An award which is predicated on personal knowledge of the arbitrator, the basis of which is not disclosed in the award or in the arbitral proceedings which led up to the award, is, even for that reason, contrary to fundamental policy of Indian law. It is, therefore, vitiated. 69.[9] This Court is, therefore, unable to sustain the impugned award insofar as it awards ₹ 8,22,937.50/- against Claim 4. To that extent, therefore, the award is set aside.

70. Re. Claim 7 – Interest 70.[1] Ms Gupta’s only contention, with respect to the award of interest by the learned Arbitrator under Claim 7, is that the rate of interest is exorbitant. 70.[2] The submission is without merit, as interest has been awarded, by the learned Arbitrator, only @ 10% p.a., which cannot be regarded as exorbitant by any standards. 70.[3] The challenge to the interest awarded by the learned Arbitrator under Claim 7 is, therefore, rejected. 70.[4] That said, interest would be payable only on the claims which have, by this judgment, found to have been rightly allowed by the learned Arbitrator. Conclusion

71. Accordingly, the impugned award is set aside in respect of Claims 2 and 4 and upheld in respect of all other claims.

72. The petition, thus, stands allowed in part, with no orders as to costs.

C. HARI SHANKAR, J.