Full Text
HIGH COURT OF DELHI
Date of order : 22nd February, 2023
ROSHAN REAL ESTATE PVT LTD. ..... Petitioner
Through: Ms.Anusuya Salwan and Ms.Nikita Salwan, Advocates
Through: Mr. Sushil Kumar Pandey, Sr.
Panel Counsel with Mr. Kuldeep Singh, Advocates
CHANDRA DHARI SINGH, J (Oral)
JUDGMENT
1. The present petition under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as „the Arbitration Act‟) has been filed on behalf of the petitioner assailing the Arbitral Award dated 12th March 2022 and seeking the following reliefs:- “a. To set aside the impugned Award dated 12.03.2022 passed by the Arbitral Tribunal with respect to the Claim No. 6. b. Award costs of the proceedings in favor of the Petitioner and against the Respondent; c. Pass such further order(s) which this Hon'ble Court may deem fit and proper in the facts and circumstances of this case.”
2. The facts delineated hereunder have led to the filing of the instant petition before this Court:a. The petitioner is a private limited company engaged in the business of civil engineering infrastructure projects. The respondent invited tenders for the work of „Construction of Office Building for ASI at 24 Tilak Marg, New Delhi including Electrical Installation‟ for an estimated cost of Rs. 24,85,51,972/-. The petitioner was declared the successful bidder for the said work vide letter No. 3983 dated 27th September 2012 and accordingly, the parties also executed an Agreement dated 18th October 2012. b. The stipulated date for the completion of work was 17th April 2014, however, the work was delayed and completed on 30th January 2017, i.e. after a delay of 2 year and 9 months. c. The final bill was raised by the petitioner on 18th October 2018, however, the respondent failed to clear the dues. Hence, disputes arose between the parties. For the resolution of such disputes, the respondent vide its letter dated 31st December 2019 appointed a Sole Arbitrator. d. Arbitration proceedings were initiated amongst the parties and the Sole Arbitrator, after conclusion of the proceedings passed the Arbitral Award on 12th March 2022. e. The said Award was decided partially in favour of the petitioner, and hence, the petitioner is before this Court seeking setting aside of the findings and decision of the Arbitrator qua Claim No. 6, whereby the provision under Clause 2A of the Agreement for bonus/incentive @5% amounting to Rs. 1,09,38,144/- which was requested to be extended, was disallowed by the Arbitrator.
3. Ms. Anusuya Salwan, learned counsel appearing on behalf of the petitioner submitted that the findings of the Arbitrator regarding Claim No. 6 are patently erroneous, contrary to the evidence on record and in ignorance of the documents, including the Contract between the parties. It is submitted that the Arbitrator assumed that the petitioner was not entitled for the bonus/incentive in Claim No. 6 without considering the evidence on record.
4. It is submitted that the documents on record clearly showed that the delay caused in completion of the work was due to the respondent. It is submitted that work was delayed time and again as the respondent and the agencies employed by them such as HVAC work, fire-fighting work, lift, cable laying etc. lacked coordination and efficiency. Further, the petitioner requested for the electricity connection installed as it required technical staff and further requested for issue of drawings because the petitioner was eager to complete the work at the earliest but it was found that not a single drawing was available with the respondent. The petitioner on their part went on reminding the respondent about nonissuance of drawings but no action was taken. It is, hence, submitted that the delay caused in the completion of work was attributable to the respondent and there was no delay on the part of the petitioner.
5. It is submitted that the Arbitrator has after consideration of the documents and evidence on record under Claim No. 2 and Claim No. 5 given a finding that the whole delay in execution of the contract was on the part of the respondent. However, in contradiction to its statement held that the petitioner was not entitled to the bonus/incentive.
6. It is further submitted that additional work was also allotted to the petitioner by the respondent and the Contract was extended to that effect. Hence, the additional work which was entrusted on the petitioner, apart from the delay on the part of the respondent, also led to the delay in completion of the Contract and therefore, the date of the completion under the contract had to be extended proportionately. The extension of Contract had entitled the petitioner for the incentive which should have been awarded on the basis of the tendered value.
7. Learned counsel for the petitioner relied upon the judgment of Union of India vs. M/s N.N. Buildcon Pvt. Ltd., 2015 SCC OnLine Del 11647, wherein it was held that if the commencement of the work is delayed or there are hindrances in the completion of the work, which lead to a delay of a particular period, then the period by which the commencement is delayed and/or the period during which the hindrances occurred have to be excluded from the period stipulated for completion of the work. If after exclusion of the delay period so computed the work is completed by the contractor in a period lesser than the stipulated period for completion, the contractor would be entitled to bonus.
8. Further, reliance has been placed on Paragon Constructions (India) Pvt. Ltd. vs. Union of India, OMP No. 385/2007 decided on 17th January 2008 where a Coordinate Bench of this Court set aside an Award where the Arbitrator came to a conclusion that the other side was responsible for delay but had rejected the claim of bonus.
9. It is submitted that the findings of the Arbitrator are against the law and fact of the case. The Arbitrator failed to apply proper judicial mind to the material on record objectively and rationally. The impugned Award suffers from infirmity and perversity. Further, the impugned Award is legally and factually not sustainable in as much as there was an error apparent on the face of the record which vitiated the Award.
10. It is, therefore, submitted that the impugned Award is liable to be set aside to the extent of finding of the Arbitrator regarding Claim No. 6.
11. Per Contra, Mr. Sushil Kumar Pandey, Senior Panel Counsel appearing on behalf of the respondent vehemently opposed the instant petition and the contentions raised therein. It is submitted that there is no error in the findings regarding Claim No. 6 of the impugned Award.
12. Learned counsel for the respondent submitted that the delays in the completion of work beyond the stipulated time as per the Contract, were absolutely attributable to the petitioner. It is submitted that after consideration of the material on record as well as the oral submissions of the parties during the arbitration proceedings, the Arbitrator rightly reached the conclusion that the petitioner was not entitled to the bonus/incentive.
13. It is submitted that the petitioner on one pretext or another kept on delaying the work and claimed before the Arbitrator that the said delay was caused due to the respondent.
14. Therefore, the instant petition is liable to be dismissed for being devoid of any merit.
15. Heard leaned counsel for the parties and perused the record. The petitioner has assailed the Arbitral Award dated 12th March 2022 made by the Arbitrator, which has been thoroughly perused and considered by this Court.
16. The petitioner has raised challenge only qua Claim No. 6 as decided by the Arbitrator and has not assailed the validity of the entire Award. The petitioner has invoked Section 34 of the Arbitration Act, which is reproduced hereunder:-
17. The contents of the provision clearly show that the intention of legislature while enacting the Act, as well as while carrying out amendments to the same, was that there should be limited intervention of the Courts in arbitral proceedings, especially after the proceedings have been concluded and an Award thereto has been made by the concerned Arbitral Tribunal. Any claim brought forth a Court of law under Section 34 of the Arbitration Act has to be in accordance with the principle of the provision laid down under the Arbitration Act as well as interpreted by the Hon‟ble Supreme Court.
18. On a bare reading of the invoked provision, it becomes evident that the words used therein are that “An arbitral award may be set aside by the Court only if”, which signifies the intent of limiting the scope of interference by Courts in an Arbitral Award, passed after thorough procedure, involvement of parties, and appreciation of facts, evidence and law, „only‟ in the event of the circumstances delineated in the provision being met. The limited grounds which may invite the intervention and action thereupon by the Courts are explicitly laid down under the provision. What is to be seen by a Court exercising jurisdiction under Section 34 of the Arbitration Act is that an Award passed by an Arbitral Tribunal may only be set aside if it is patently illegal, against the public policy of India, based on no evidence and delineates no reason for passing the Award.
19. The requisites are also to be read in consonance with Section 31(3) of the Arbitration Act. The said provision provides as under:-
20. Therefore, it is imperative that the Arbitral Award passed by an Arbitral Tribunal must state the reasons for passing the findings therein, unless otherwise specifically decided amongst the parties. An Award passed without stating reasons is not only improper but also perverse.
21. The Hon‟ble Supreme Court in Dyna Technologies (P) Ltd. vs. Crompton Greaves Ltd., (2019) 20 SCC 1, while discussing the aforementioned provision of the Arbitration Act held as under:-
27. Under the Uncitral Model Law the aforesaid provision is provided as under:
28. Similar to the position under the Model Law, India also adopts a default rule to provide for reasons unless the parties agree otherwise. As with most countries like England, America and Model Law, Indian law recognises enforcement of the reasonless award if it has been so agreed between the parties.
29. There is no gainsaying that arbitration proceedings are not per se comparable to judicial proceedings before the Court. A party under Indian Arbitration Law can opt for an arbitration before any person, even those who do not have prior legal experience as well. In this regard, we need to understand that the intention of the legislature to provide for a default rule, should be given rational meaning in light of commercial wisdom inherent in the choice of arbitration.
30. A five-Judge Constitution Bench of this Court in Raipur Development Authority v. Chokhamal Contractors [Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721: AIR 1990 SC 1426], considered the scope of Section 30 of the Arbitration Act, 1940 and held as under: (SCC p. 736, para 19)
31. A three-Judge Bench of this Court in another case of S. Harcharan Singh v. Union of India [S. Harcharan Singh v. Union of India, (1990) 4 SCC 647], reiterated its earlier view that the arbitrator's adjudication is generally considered binding between the parties for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of the Arbitration Act, 1940.
32. However, the ratio of Chokhamal case [Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721: AIR 1990 SC 1426] has not found favour of the legislature, and accordingly Section 31(3) has been enacted in the Arbitration Act. This Court in Som Datt Builders Ltd. v. State of Kerala [Som Datt Builders Ltd. v. State of Kerala, (2009) 10 SCC 259: (2009) 4 SCC (Civ) 153: (2009) 4 Arb LR 13], a Division Bench of this Court has indicated that passing of a reasoned award is not an empty formulation under the Arbitration Act.
33. It may be relevant to note Russell on Arbitration, 23rd Edn. (2007), wherein he notes that: “If the Court can deduce from the award and the materials before it, which may include extracts from evidence and the transcript of hearing, the thrust of the tribunal's reasoning then no irregularity will be found….Equally, the court should bear in mind that when considering awards produced by non-lawyer arbitrators, the court should look at the substance of such findings, rather than their form, and that one should approach a reading of the award in a fair, and not in an unduly literal way.” (emphasis supplied)
34. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regard to the speedy resolution of dispute.
35. When we consider the requirement of a reasoned order, three characteristics of a reasoned order can be fathomed. They are: proper, intelligible and adequate. If the reasonings in the order are improper, they reveal a flaw in the decision making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards.
37. In case of absence of reasoning the utility has been provided under Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34(4) of the Arbitration Act to cure defects can be utilised in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced.
42. From the facts, we can only state that from a perusal of the award, in the facts and circumstances of the case, it has been rendered without reasons. However, the muddled and confused form of the award has invited the High Court to state that the arbitrator has merely restated the contentions of both parties. From a perusal of the award, the inadequate reasoning and basing the award on the approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained.”
22. Further, in the case of Som Datt Builders Ltd. vs. State of Kerala, (2009) 10 SCC 259, an elaborate finding regarding reasoned arbitral awards was made by the Hon‟ble Supreme Court, which is reproduced hereunder:-
23. In S.N. Mukherjee v. Union of India [(1990) 4 SCC 594: 1990 SCC (Cri) 669: 1991 SCC (L&S) 242: (1991) 16 ATC 445] the Constitution Bench held that recording of reasons “(i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making.” (SCC p. 612, para 35)
25. The requirement of reasons in support of the award under Section 31(3) is not an empty formality. It guarantees fair and legitimate consideration of the controversy by the Arbitral Tribunal. It is true that the Arbitral Tribunal is not expected to write a judgment like a court nor is it expected to give elaborate and detailed reasons in support of its finding(s) but mere noticing the submissions of the parties or reference to documents is no substitute for reasons which the Arbitral Tribunal is obliged to give. Howsoever brief these may be, reasons must be indicated in the award as that would reflect the thought process leading to a particular conclusion. To satisfy the requirement of Section 31(3), the reasons must be stated by the Arbitral Tribunal upon which the award is based; want of reasons would make such award legally flawed.”
23. Therefore, it is evident that the Hon‟ble Supreme Court has reiterated the significance of passing a reasoned award. As per the interpretation as aforesaid, the award is not just to be reasoned but such reasons, which give effect to the findings and the final award, must be proper, intelligible and adequate. The recording of reasons and the findings thereto is also a testament to the fact that the concerned arbitrator has applied his mind while passing the award and deciding claims in favour of either or both the parties. An award without reasons and findings is mere reiteration of the claims of the parties. Hence, the passing of a reasoned award laying down the grounds and findings was imperative for the Sole Arbitrator in the instant case.
24. For the proper adjudication of the challenge raised to the finding of the Arbitrator, the observation of the Arbitrator with respect to Claim NO. 6 is reproduced hereunder:- “As per the contract clause 2A the claimants are entitled to incentives/bonus at the rate 1% of the tender amount per month of early completion of the work. The tribunal under claim No. 2/part 1 has already held and analyze that the total delay as per hindrance register maintained by the respondents is 1317 days and adding extra period for additional work is as per the final bill paid by the respondents is 101, this total is 1418 days whereas the actual delay is only 1078 days. Though the delay are justified & hindrances are mainly due to the Respondents but the work of 18 months was delayed for 33.[5] months cannot be said to be delayed fully by the Respondents. The Claimant may also be responsible for not reminding the Respondents & not perusing with the various authorities for expediting. Therefore, it cannot be presumed that the work could have been completed early if there would have not been any hindrance. Keeping in view of above, the Claimant is not entitled for any incentive/bonus for this claim. Hence, Nil amount is awarded for this claim.”
25. A perusal of the operative and challenged part of the Award reveals that the learned Sole Arbitrator observed in clear and definite terms that the delay in completion of work was justified and the hindrances causing such delay were due to the respondent itself. The Arbitrator has, thereafter, held that the petitioner herein was not entitled to any incentive or bonus. The Arbitrator while arriving at the conclusion observed that had there been no hindrance at the behest of the respondent, it could not have been assumed that the work would have been completed on time.
26. The statement made on behalf of the Arbitrator is merely a conclusion drawn based on the assumption that it cannot be assumed that if there were no hindrances, the work would have been completed on time without delay. However, the Arbitrator failed to elaborate the bearing of this observation on the finding regarding entitlement of the petitioner to the bonus/incentive.
27. Moreover, this Court also finds force in the reliance placed upon M/s N.N. Buildcon Pvt. Ltd (Supra) by the learned counsel for the petitioner, which reads as under:-
28. Further, the observation in Paragon Constructions (India) Pvt. Ltd. (Supra) is also found relevant to be referred to pertaining to the question before this Court:-
29. Therefore, the analysis given by the Arbitrator is not substantiated by the single-sentenced assertion. The Arbitrator merely made a presumption and decided that the petitioner was not entitled to the bonus/incentive.
CONCLUSION
30. Reason is the soul of justice. As discussed in the foregoing paragraphs, one of the essential requirements while making an Award is furnishing reasons for the decision taken. While passing the Award with respect to Claim No. 6, the Arbitrator failed to furnish any reason for holding that the petitioner was not entitled to the bonus/incentives.
31. The learned Arbitrator need not have given elaborate, comprehensive or extensive decision regarding Claim No. 6 but the mere recording of reasons for the findings made was an indispensable requirement to be met. Fulfilling the requirements under Section 31(3) of the Arbitration Act, is not a mere formality, but this provision makes way for a fair, reasonable and equitable opportunity to have the objective knowledge of the reasons why a claim is not decided in their favour. Accordingly, this Court finds that the principles laid down by the Hon‟ble Supreme Court favour the case of the petitioner qua the requirement of passing a reasoned order being indispensable.
32. In light of the facts, circumstances, contentions raised in the pleadings, argument made on behalf of the parties, the observations of the Hon‟ble Supreme Court, the provisions of the Arbitration Act and the discussion in the foregoing paragraphs, this Court finds merit in the petition and is inclined to allow the same.
33. Accordingly, the instant petition is allowed and the Arbitral Award dated 12th March 2022 is set aside to the extent of the finding of the Arbitrator qua Claim No. 6.
34. The instant petition is allowed. Pending applications stand disposed of, in light of the observations made above.
35. The order be uploaded on the website forthwith.