Full Text
HIGH COURT OF DELHI
Date of Decision: 14.08.2025
UNION OF INDIA .....Petitioner
Through: Mr. Mukul Singh CGSC
Through: Mr. Pawan Narang, Sr Adv.
JUDGMENT
1. This is a petition filed under section 34 of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”) seeking to set aside the impugned Award dated 30.03.2015 and further modified on 10.06.2015, passed by the Sole Arbitrator, to the extent it rejected the counterclaims No. 1 to 5 of the petitioner, in the arbitration case titled “M/s Prestressed Udyog vs. President of India, represented by Chief Track Engineer, N.F. Railway, Maligaon”.
2. The facts are that the Ministry of Railways, Government of India, floated an open tender No. CS-152/2002 for manufacture and supply of Pre-stressed Concrete Sleepers. The respondent participated in the said tender and emerged as the successful bidder.
3. Consequently, Ministry of Railways issued a detailed letter of acceptance dated 13.10.2003 for manufacture and supply of 1,64,000 Nos. Mono-block Pre-stressed Concrete Sleepers (“Sleepers”) for a total value of Rs. 11,73,25,600/-. To this effect, a contact agreement bearing No. CE/54 dated 01.03.2004 was executed between the parties. However, the respondent supplied only 14,933 Nos. Sleepers against the contracted 1,64,000 Nos., leaving 1,49,067 Nos. Sleepers unsupplied.
4. Ministry of Railways floated another open tender No. CS-156/2005 for manufacture and supply of Pre-stressed Concrete Sleepers, in which the respondent again emerged as the successful bidder. Consequently, Ministry of Railways issued a detailed letter of acceptance dated 30.12.2005 for supply of 10,000 Nos. Sleepers for a total value of Rs. 86,50,000/-. To this effect a contact agreement bearing No. CE/CS-02 dated 21.02.2007 was executed between the petitioner and the respondent. However, in this case too, the respondent failed to supply the entire consignment of 10,000 Nos. Sleepers.
5. For the sake of brevity, the petitioner before this Court was the respondent in the arbitration proceedings, and the respondent herein was the claimant therein.
6. The Indian Railway Standard Conditions of Contract (“IRS Conditions”) to the two contract agreements, i.e., contract agreement No. CE/54 and the contact agreement No. CE/CS-02 (“the Contract Agreements”), contained an arbitration clause, being Clause NO. 2900, which reads as under:- “2900 Arbitration (a) In the event of any question, dispute or difference arising under those conditions or any special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of a Gazetted Railway Officer appointed to be the arbitrator, by the General Manager in the case of contracts entered into by the Zonal Railways and Production Units: by any Member of the Railway Board, in the case of contracts entered into by the Railway Board and by the Head of the Organisation in respect of contracts entered into by the other organizations under the Ministry of Railways. A Gazetted Railway Officer to be appointed as arbitrator however will not be one of those who had an opportunity to deal with the matters to which the contract relates or who in the course of their duties as railway servant have expressed views on all or any of the matters under a dispute or difference. The award of the arbitrator shall be final and binding on the parties to this contract. (b) In the event of arbitrator dying, neglecting or refusing to act or resigning or being unable to act for any reason, or his award being set aside by the Court for any reason, it shall be lawful for the authority appointing the arbitrator to appoint another arbitrator in place of the outgoing arbitrator in the manner aforesaid.”
7. Due to the respondent’s failure to supply the required numbers of
┌──────────────────────────────────────────────────────────────────────────────────────────────────────────────────┐ │ Sleepers as per the Contract Agreements, certain disputes arose │ │ between the parties. Accordingly, on 04.06.2008, in terms of the │ │ arbitration clause, the respondent applied for appointment of an │ │ Arbitrator. Vide Railway Board letter No. 2003/Track- │ │ II/22/11/68/70858/NBQ/NFR dated 05.09.2008 the Sole Arbitrator │ │ was appointed. │ ├──────────────────────────────────────────────────────────────────────────────────────────────────────────────────┤ │ 8. The Sole Arbitrator passed the impugned Award on 30.03.2015 and │ │ the modification order on 10.06.2015, whereby the claims of │ │ respondent as well as the counterclaims of the petitioner were │ │ rejected. │ │ 9. Mr. Singh, learned CGSC appearing for the petitioner, submits that │ │ for the respondent’s failure to supply all the Sleepers under the │ │ Contract Agreements, it is liable to pay liquidated damages in terms │ │ of clause No. 0702 of the IRS Conditions, read with clause 13 of the │ │ Contract Agreements, at the rate of 5% of the cost of Sleepers not │ │ supplied by it. This works out to Rs. 70,51,838.03/- under contract │ │ agreement No. CE/54 and Rs. 4,73,065/- under the contact agreement │ │ No. CE/CS-02. Clause 13 of the Contract Agreements is reproduced │ │ below:- │ │
│ └──────────────────────────────────────────────────────────────────────────────────────────────────────────────────┘
10. He further states that the Sole Arbitrator’s rejection of the counterclaims No. 1 and 3, seeking liquidated damages, is arbitrary, particularly in view of the finding recorded in paragraph 10.1.[3] of the impugned Award, wherein the Sole Arbitrator held the respondent in default for not fulfilling its contractual obligations of supplying the contracted number of Sleepers. Paragraph 10.1.[3] of the impugned Award is reproduced below:- “10.1.[3] Views and finding of Arbitrator Arbitrator is of the opinion that the claimant did not take up his work properly and there were many lapses on the part of claimant as pointed out by respondent leading to poor production of sleepers and finally stoppage of production of sleepers. The issues raised by claimants are mere excuses for delaying the production of sleepers. Therefore, Sole Arbitrator declare NIL award for this claim.”
11. Learned CGSC appearing for the petitioner further states that in view of the above finding of the Sole Arbitrator, the rejection of the petitioner’s counterclaims for liquidated damages is contrary to the clauses of the Contract Agreements read with the IRS Conditions.
12. It is additionally stated that the Sole Arbitrator failed to appreciate that once the respondent failed to supply the contracted quantity of the Sleepers, the petitioner had to procure the same from NJP Sleeper Plant. Therefore, making the petitioner entitled for the amount incurred by it towards extra carriage cost involved in carrying the said Sleepers from NJP Sleeper Plant to NBQ Sleeper Plant, as claimed under counterclaim No. 2.
13. It is further stated that the petitioner is also entitled counterclaim NO. 4 towards “Salary of one IOW and one AXEN/CS”, who were sitting idle in the plant for 2 years because of non-manufacturing of Sleepers and counterclaim No. 5 towards “Difference of cost of sleepers as the work was executed at risk and cost”, which the Sole Arbitrator erroneously rejected.
14. Hence, the petitioner contends that the impugned Award, to the extent it rejects counterclaims No. 1 to 5, is contrary to the agreed terms of the Contract Agreements and is without any reason or basis. Hence, it is in contravention to the public policy of India and basic notions of morality and justice and therefore it is liable to be set aside under Section 34 of the 1996 Act.
15. Further, in reply to the objection of the respondent against this Court’s jurisdiction to adjudicate the present petition, and to the contention that only the Hon’ble Gauhati High Court has jurisdiction, Mr. Singh, learned CGSC, submits that this Court has the sole and absolute jurisdiction to adjudicate the present petition in terms of clauses NO. 25 and 26 of the contract agreement No. CE/54 and clauses No. 24 and 25 of the contact agreement No. CE/CS-02. Clauses No. 25 and 26 of the contract agreement No. CE/54, which are identical to clauses No. 24 and 25 of the contract agreement No. CE/CS-02, are extracted below:-
16. He submits that, in terms of the above clauses, since the Contract Agreements, the tender documents and acceptance of tenders were all issued from Railway Board, New Delhi, only the High Court of Delhi has the jurisdiction to decide the present petition and not the Hon’ble Gauhati High Court. He further states that the Sole Arbitrator was also appointed by Railway Board, New Delhi vide letter dated 05.09.2008.
17. Per contra, Mr. Narang, learned senior counsel for respondent, at the outset challenges the territorial jurisdiction of this Court to adjudicate the present petition. He submits that merely because the tender was floated by the Railway Ministry in New Delhi and the acceptance letters were issued by the Ministry in New Delhi does not confer jurisdiction on this Court. Instead, he contends that since the Contract Agreements were executed between the parties at Guwahati, the offices of both the petitioner and respondent are situated in Guwahati, work under the Contract Agreements was executed at Guwahati/ New Bongaigaon and even the arbitration proceedings took place in Guwahati, only the Hon’ble Gauhati High Court have jurisdiction to adjudicate the present petition. Moreover, the respondent in support of its submission has placed reliance on Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited and Ors. (2017) 7 SCC 678 and Brahmani River Pellets Limited vs. Kamachi Industries Limited, (2019) SCC OnLine SC 929. Hence, he submits, that the present petition is liable to be dismissed for want of territorial jurisdiction.
18. It is further stated that the clause 13 of the Contract Agreements, which provides for liquidated damages can only be applied when there is a failure on part of the Contractor i.e., respondent. However, he states that there was no failure on part of the respondent, instead it was the repeated intervention by the petitioner, which lead to the noncompletion of the Contract Agreements.
19. He further submits that the Sole Arbitrator, after a detailed analysis of claims and counterclaims, examination of all the issues raised by both the parties, and interpretation of the Contract Agreements’ clauses and IRS Conditions, has correctly rejected the counterclaims of the petitioner. He further states that the petitioner never raised the issue of imposition of liquidated damages at any prior given point in time and is therefore barred from claiming them now. Hence, he submits that the impugned Award is a well-reasoned and well-analyzed Award, which warrants no interference.
20. I have heard learned counsels for the parties.
21. At the outset, the respondent has challenged this Court’s jurisdiction to adjudicate the present petition on the ground that, since the Contract Agreements were executed between the parties at Guwahati, the offices of both the parties are situated in Guwahati, the work under the Contract Agreements was executed at Guwahati/ New Bongaigaon, and even the arbitration proceedings took place in Guwahati, only the Hon’ble Gauhati High Court would have jurisdiction to adjudicate the present petition.
22. However, the respondent has overlooked the express stipulation in clauses No. 25 and 26 of the contract agreement No. CE/54 (reproduced above), which undisputedly provide exclusive jurisdiction to the courts of the place from where the tender documents and acceptance of tender were issued to decide any disputes arising out of or in respect of the Contract Agreements.
23. It is not in dispute that the tender documents and acceptance of tender were issued from New Delhi. Hence, the clauses, particularly the expression “shall alone have jurisdiction”, clearly confers exclusive jurisdiction on the Courts at New Delhi.
24. The law on this issue is no longer res integra. The Hon’ble Supreme Court, in a catena of judgments, such as Hakam Singh vs. Gammon (India) Ltd., (1971) 1 SCC 286, A.B.C. Laminart Pvt. Ltd. & Anr. vs. A.P. Agencies, (1989) 2 SCC 163, Swastik Gases (P) Ltd. vs. Indian Oil Corp. Ltd., (2013) 9 SCC 32, and most recently in Rakesh Kumar Verma vs. HDFC Bank Ltd., 2025 INSC 473, has held that where two or more courts are otherwise competent, the parties may, by agreement, confer jurisdiction on one court to the exclusion of others, and such a stipulation of exclusive jurisdiction is binding.
25. Even the reliance of the respondent on Indus Mobile Distribution Private Limited (supra) and Brahmani River Pellets Limited (supra) are misplaced. Instead, the Hon’ble Supreme Court in Indus Mobile Distribution Private Limited (supra) and Brahmani River Pellets Limited (supra), upheld the principle that where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter. The relevant paragraph of Indus Mobile Distribution Private Limited (supra) reads as under:- “20. It is well settled that where more than one court has jurisdiction, it is open for parties to exclude all other courts For an exhaustive analysis of the case law, see Swastik Gases Private Limited v. Indian Oil Corporation Limited, MANU/SC/0654/2013: 2013:INSC:422: (2013) 9 SCC 32. This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal and Another v. Chhattisgarh Investment Limited, MANU/SC/0930/2014: (2015) 12 SCC
225. Having regard to the above, it is clear that Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is set aside. …”
26. This Court, while consistently applying this principle, has time and again enforced the very clause in question. In Cummins Diesel Sales Service (India) Ltd. vs. The Director General of Supplies and Disposals, New Delhi, AIR 1981 Delhi 61, and in Gupta Textile Mills vs. Union of India, (2001) 57 DRJ 485, while dealing with similar clause providing exclusive jurisdiction to the courts at the place of issuance of the acceptance of tender, this Court held that such clauses are binding, and that only such courts would be competent to adjudicate the dispute notwithstanding that parts of cause of action may have arisen elsewhere.
27. Additionally, most recently a Division Bench of the Allahabad High Court in North Eastern Railway vs. Calstar Steel Ltd., 2024:AHC:55125-DB, while considering an identical clause, held as under: -
28. Accordingly, in light of the settled law as discussed above, the parties are bound by clauses No. 25 and 26 of the contract agreement No. CE/54 and clauses No. 24 and 25 of contract agreement No. CE/CS-
02. Consequently, the Courts at New Delhi i.e., this Court, alone have jurisdiction to adjudicate the present petition, as the tender documents and the acceptance letters were issued from Delhi. The respondent’s objection is, therefore, without merit and stands rejected.
29. I shall now proceed to analyze the submissions of the learned counsels of both parties, with regards to the present petition, for setting aside of the impugned Award under Section 34 of the 1996 Act.
30. The principles with regard to the limited scope of interference by a Court under section 34 of 1996 Act against the Arbitral Award have been reiterated time and again by the Hon’ble Supreme Court and this Court, reliance has been placed on Consolidated Construction Consortium Limited vs. Software Technology Parks of India, 2025 INSC 574 (paragraph No. 23). The court in a petition under Section 34 of the 1996 Act cannot sit in appeal and reappreciate or re-evaluate the evidence.[1] In the absence of any ground under Section 34 of the 1996 Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at[2].
31. It is well settled law that the Court cannot modify or rewrite the Award and can only set it aside. However, the Court’s power to set aside an Award under Section 34 of the 1996 Act also includes the power to partially set aside an Award and sever the portions of the Award which fall foul of Section 34, subject to the condition that that claims are not so interconnected or intertwined that one cannot be segregated from the other, without affecting the rest of the Award. Reliance is placed on National Highways Authority of India vs. Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corpn. Ltd., (2024) 2 SCC 375. Trichy Thanjavur Expressway Ltd., 2023:DHC:5834; Union of India vs. Vishva Shanti Builders (India) Pvt. Ltd. 2024:DHC:5467 and Gayatri Balasamy vs. ISG Novasoft Technologies Ltd., (2025) 7 SCC 1 (paragraphs No. 250 & 251).
32. In the present case, the petitioner, in its reply to the respondent’s Statement of Claim, submitted five counterclaims. Under counterclaims No. 1 and 3, it claimed liquidated damages in terms of clause 13 of the Contract Agreements against the respondent on account of default in supplying the required numbers of Sleepers. The counterclaims filed by the petitioner are produced below: - “Sub:- Counter claim from Railway side against Arbitration case of M/s Prestressed Udyog (A unit of Buildworth Pvt. Ltd.) Ref:- (i) Your letter No.CE/C-III/ARBITRATION (CS- 152/2002 & CS-156/2005 dt.29.10.2008. With the reference to the above, the counter claim from Railway side is furnished below:- In CS-152 of CA No.CE-64 dt. 01.03.04. SL No. Nature of claim Amount
1. The firm were to manufacture & supply 1,64,000 Nos. sleepers, out of which 14,933 Nos. sleeper were supplied. Balance quantity Rs. 70,51,838.03 Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1. of 1,49,067 Nos. sleepers were not manufactured & supplied by the contractor. Therefore, in pursuance of clause 0702 of IRS Condition of Contract, L.D. @ 5% cost of undelivered store as per clause No. 13 of CA No.CE- 54 dt. 01.03.04 is calculated as under i.e. (1,64,000-14933) = 149067 Nos. sleepers. 149067x946.13x5% = 70,51,838.03 The amount of Rs. 70,51,838.00 is to be paid by the firm to fulfill the contractual obligation.
2. Since the firm fails to supply the above sleepers, the requirement of sleepers was met from NJP Sleeper Plant. Hence, extra carriage cost involved for carrying the sleeper by wagon from NJP to NBQ is calculated as under: (149067 x 202 x 1044 Rs. 4,38,86,517.00