Delhi District Court
Gail India Limited vs Shiv Kumar Doharey on 24 December, 2024
IN THE COURT OF MRS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
OMP (Comm) No.98 of 2020
CNR No. DLND01-010719-2020
In the matter of:
GAIL India Limited
Having its office at :
Gail Bhawan, 16 Bikaji Cama Place,
New Delhi -110029.
Through Sh. Sanjay Kumar Mehtrotra,
CGM (PC, Maintenance). ........ Petitioner
Versus
Sh. Shiv Kumar Doharey
Having its office at :-
Sanjay Nagar, Dibiyapur,
Auraiya, Uttam Nagar 204244.
Through : Sh. Manish Dixit. ...... Respondent
Date of institution of suit : 25.11.2020
Appearance : Sh. Samaksh Goyal, Ld. Counsel for petitioner.
Sh. Vikas Sharma and Sh. Ashish Chauhan, Ld. Counsels
for respondent.
And,
OMP (Comm) No.51 of 2021
CNR No. DLND01-010719-2021
Digitally signed
by VINEETA
GOYAL
VINEETA Date:
GOYAL 2024.12.24
18:06:33
+0530
OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 1 of 33
In the matter of:
Sh. Shiv Kumar Doharey
Through its Authorized Representative
Sh. Manish Dixit
Sanjay Nagar, Dibiyapur Distt.,
Auraiya, U.P.-206244. ........ Petitioner
Versus
M/s GAIL (India) Limited
Having registered office at :
Gail Bhawan, 16 Bikaji Cama Place,
R.K. Puram, New Delhi -110066. ...... Respondent
Date of institution of suit : 06.04.2021
Date of Judgment : 24.12.2024
Appearance : Sh. Vikas Sharma and Sh. Ashish Chauhan, Ld. Counsels
for petitioner.
Sh. Samaksh Goyal, Ld. Counsel for respondent.
JUDGMENT
1 This common judgment will dispose the aforesaid
two Objection Petitions filed by the respective parties under
Section 34 of the Arbitration and Conciliation Act, 1996 (as
amended) (in short ‘the Act’) against the Arbitration award dated
24.04.2020 (hereinafter referred to as the impugned award) passed
by Sh. Virender Kumar Malik, Ld. Sole Arbitrator at Delhi
International Arbitration Centre, New Delhi whereby, the Ld. Sole
Arbitrator was pleased to grant certain reliefs to the parties.
Digitally signed
by VINEETA
GOYAL
VINEETA Date:
GOYAL 2024.12.24
18:06:44
+0530
OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 2 of 33
2 For the sake of disposal of the petitions through
common judgment, the party Shiv Kumar Doharey would be
referred to as the contractor and the employer GAIL (India) Pvt.
Ltd would be referred to as GAIL. The dispute between the parties
has erupted from the work awarded by GAIL to the contractor
under the title Replacement of damaged door and windows at Gale
Gaon Dibiyapur for a total amount of Rs 58,22,420/- (Fifty Eight
Lakhs Twenty Two Thousand Four Hundred and Twenty). It is
contended that several bidders participated in the bidding process
for the said contract, but one Mrs. Usha Doharey, the sole
proprietor of a sole proprietorship concern “M/s Shiv Kumar
Doharey” successfully bid for the contract and was awarded the
contract vide Fax of Acceptance on 02.11.2013. It is also averred
that the work as envisaged in the work order was to be completed
by 01.09.2014.
3 In its instant petition, GAIL has contended that
though the Contractor was fully aware that time was of the
essence of the contract yet it failed to complete the work within
the stipulated time. The Contractor made a request for extension
of the contract period and since a large portion of the work still
remained unfinished, therefore GAIL was left with no alternative
but to extend the period of the contract as requested. Even after
extension, the Contractor failed to complete the work within the
extended period and in this process, GAIL gave not one but six
such extensions to the Contractor. This failure on the Contractor’s
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:06:52
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 3 of 33
part forced it to foreclose the contract vide letter dated 04.03.2015
and asked the Contractor to stop the work and vacate the premises
by 10.03.2015. After a lot of persuasion, the Contractor filed its
final bill dated 29.10.2015 after six months from the date of
foreclosure but yet failed to give any proof regarding payment of
service tax to the government authorities that the Contractor was
contractually required to provide. Under these circumstances, it
was forced to withhold an amount of Rs 2,84,699 – (Two Lakhs
Eighty-Four Thousand Six Hundred and Ninety-Nine) and settled
the rest of the amount of the bill in terms of the contract. It is
matter of record that the Contractor vide letter dated 20.04.2018
invoked Arbitration as per the arbitration clause in the contract.
Vide letter dated 21.05.2018, GAIL requested the Contractor to
explore the possibility of conciliation in terms of Gail Conciliation
Rules, 2010. However, the Contractor did not accept the
conciliation offer and instead filed application u/s Section 11 for
appointment of an Arbitrator before the Hon’ble High Court of
Delhi. It is averred that in its petition that in its aforesaid
application u/s Section 11, Shiv Kumar Doharey intentionally
suppressed material fact from the Hon’ble High Court that he was
not a signatory to the contract qua which he had approached the
High Court for appointment of an Arbitrator. Further, he also
suppressed material fact from the Hon’ble High Court that there
had been a change in constitution of M/s Shiv Kumar Doharey,
which was without prior written permission as was expressly
required by the contract. By suppressing such material facts, he
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:07:00
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 4 of 33
had approached Hon’ble High Court with unclean hands. Further,
being unaware of the true and correct position and due to the illicit
suppression of the material facts, Hon’ble High Court in Arb
Petition No 884/2018, referred the parties to arbitration before
Delhi International Arbitration Centre (“DIAC”) vide order dated
18.12.2018.
4 On the other side, in its petition, the Contractor
alleges that despite it had made the requisite arrangements but the
work suffered due to hindrances and lackluster approach on behalf
of GAIL for the reasons of delay in taking decisions and making
payments. The GAIL did not hand over the site to the Contractor
on time and showed its careless attitude in the appointment of the
Engineer-in-charge, supervisors etc. The Department did not issue
work order either with the FOA or thereafter. It is general
procedure that GAIL issues work order within 15 days of the
issuing of FOA. It is averred that despite letters sent to GAIL
dated 06.02.2014, 17.05.2014, 05.08.2014 there were bottlenecks
regarding non issue of labour certificate and to get the machinery
to the site so that the work could be executed and completed at
time. The Contractor in its petition quoting from various
correspondences claimed that the time for completing the work
was extended upto March 2015 without levying of any penalty as
GAIL was aware of its faults. The Contractor completed work and
submitted RA Bills. The GAIL not only delayed the payment but
also withhold 5 % of the total amount of RA Bill on the pretext of
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:07:07
+0530
OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 5 of 33
PRS. Further, it also withheld Rs. 5,00,000/- on account of Risk
and Cost of the Contractor for procuring of Flush door on its own,
when the Contractor had all the materials and was ready and could
have procured and installed the flush door. The contradiction on
account of GAIL is evident that even though the work was
extended till March 2015 but its officials foreclosed the work and
contract, in January 2015 itself. After the competition of work, the
Contractor submitted the Final Bill dated 29.10.2015 and
requested the release of Performance Guarantee and Earnest
Money. But a show-cause notice dated 03.12.2015 was issued to
the Contractor thereby levying various unfound and arbitrary
allegations and seeking reply as to why the Contractor shall not be
suspended. The Contractor immediately replied to the show cause
notice vide its reply dated 20.01.2016 annexing all the documents.
But misusing its dominant position, GAIL suspended the
Contractor and chose to withhold the payment illegally due to the
Contractor on the pretext of non-performance of work. However,
on the contrary, the GAIL vide its department letter had admitted
that the Contractor has executed the work worth Rs. 43,70,966/-
and net amount payable to the Contractor by the GAIL stands
Rs.6,30,769/-. Thereafter the Contractor vide various several
representations continuously requested GAIL to clear the Final
bill along with the already deposited bank guarantee and EMD
vide representations dated 06.09.2016 and 18.11.2017. However,
the GAIL had arbitrarily deducted Rs. 2,18,548 and Rs. 5,00,000/-
That being left with no other alternative, the Contractor vide
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:07:13
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 6 of 33
invocation notice dated 20.04.2018 had invoked the Arbitration
clause of the agreement and requested the GAIL to appoint the Ld.
Sole Arbitrator. But the GAIL vide its letter requested the
Contractor to try conciliation process. Giving due regard to the
request of the GAIL, the Contractor vide letter dated 28.05.2018
conceded to try the conciliation process of the GAIL but only at
the condition if it is commenced and finished in a time period of
month since the period of three years of limitation was
approaching near but the GAIL did not take any action for the
reasons best known to it. The matter eventually got referred to Ld.
Sole Arbitrator by the Hon’ble High Court.
5 In both the petitions above, the parties have
challenged the findings of the Arbitration award dated 24.04.2020
(hereinafter referred to as the impugned award) passed by Sh.
Virender Kumar Malik, Ld. Sole Arbitrator at Delhi International
Arbitration Centre, New Delhi. It would be useful at this stage to
take a snapshot of the findings given by the Ld. Arbitrator as it
would give clear picture of the grievance of the parties. The claim
wise details are given below:-
i. The claim no. 1 was towards the final payment of
₹7,20,894/- In the impugned arbitral award, this claim has
been dealt at page 22 and 23. The Arbitrator has partly
allowed the claim at Rs. 6,30,769/-
ii. The claim no. 2 was towards arbitrary withholding /making
deduction of an amount of ₹5,00,000 from 3 rd RA bill on
account of flush doors procured/ other non-compliances and
₹2,18,548 on account of Price reduction Schedule (PRS) in
terms of clause 27.1 of general conditions of the contract.
Digitally signed
by VINEETA
VINEETA GOYAL
Date:
GOYAL 2024.12.24
18:07:24
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 7 of 33
The total claim was amounting to ₹7,18,548/-. In the
impugned arbitral award, this claim has been dealt at page
23 to 28. The Arbitrator has dismissed both the claims of
Rs. 5,00,000/- and Rs. 2,18,548/- thus this entire claim was
rejected.
iii. The claim no. 3 was towards the payment/ Release of
performance guarantee and security deposit/ EMD of
₹4,37,966/-. In the impugned arbitral award, this claim has
been dealt at page 28. The Arbitrator has rejected the claim.
iv. The claim no. 4 was towards Watch and ward expenses
amounting to ₹1,20,000/-. At page 28 of the impugned
award this claim was rejected.
v. The claim no. 5 was interest at the rate of 18% on the claim
titled as number 1 to 4 as above. It was partly allowed by
reducing rate from 18% to 9%.
vi. The claim no. 6 is about cost of arbitration and legal
expenses of ₹5,00,000/-. This claim was partly allowed.
6 In the impugned award, the claim no. 1 dealt towards
the final payment of RA bill as claimed by the Contractor at Rs.
7,20,894/- and Ld. Arbitrator after due deliberation allowed at Rs.
6,30,769/-. Thus, the claim has substantially gone in the favour of
the Contractor. In OMP(Comm) no. 98/2020, the petitioner GAIL
has challenged that the Arbitrator has erred in allowing the claim
no. 1 towards the final payment of at Rs. 6,30,769/- ignoring the
deductions. The dispute was regarding 5th RA bill dated
29.10.2015 submitted by the contractor. The main contention of
GAIL has been that the Arbitrator has relied upon a ‘payment
calculation sheet’ but at the same time ignored the deductions
given in that very payment calculation sheet which finally made a
sum of Rs 2,84,699/- only payable to the contractor. It has also
been contended that the claim before the Ld. Arbitrator has been
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:07:32
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 8 of 33
changed by the contractor to Rs 7,20,894/- without any
justification or basis. No calculation or cause or reason for
increasing the amount payable towards the final bill has been
given. The GAIL has forcefully contended that the payment
calculation sheet should have either been rejected or accepted in
toto. The contractor in its 5th RA bill had claimed a sum of Rs
7,01,259/- towards value of the work done, Rs 39,721/- towards
service tax and Rs 701/-towards 50% SBC of 0.5%, totalling to Rs
7,41,231/-. Explaining the entries of the payment calculation
sheet, it was contended that the contractor had failed to include
number of deductions that were required to made in terms of the
contract. It is contended that in the payment sheet referred by the
Arbitrator after deductions the final amount payable to the
contractor was Rs. 2,84,699/- shown which was further subject the
contractor first submitting the requisite copy of service tax
challans and copy of the PF Payment challans etc. Ld. Arbitrator
has allowed the claim of Rs. 6,30,769/- without giving due
consideration to these facts.
7 The contentions above are not persuasive because a
reasoned justification has been given by the Ld. Arbitrator as to
how the work done has been arrived at based on the payment
calculation sheet dated 12.01.2016 by the respondent at Rs.
7,01,259/- out of which payable Service tax, contract tax etc. has
been deducted and the contractor has been allowed the claim of
Rs. 6,30,769/-. Ld. Arbitrator giving the reasoning in its impugned
Digitally signed
VINEETA by VINEETA
GOYAL
GOYAL Date: 2024.12.24
18:07:38 +0530
OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 9 of 33
award mentioned that the payment calculation sheet shows
deductions toward TDS and service tax of Rs 20,000/-, 19,635/-
and Rs 701/-. The net amount payable is shown as Rs 6,30,769/-.
The respondent/ GAIL has in its letter of 19.03.2018 stated that Rs
2,84,699/- is payable to the claimant but it is not explained how
this figure is arrived at. The payment calculation sheet, in its
column of recoveries and deductions contains two figures of 50%
serv. tax and the letter dated 19.03.2018 does not specify as to any
demand raised by the concerned department from the respondent
towards service tax or even the figure of such tax has not been
specified. In the impugned Arbitral award, it is held that in case
the Contractor still has any liability, the department shall be at
liberty to claim from it, in accordance with law, as applicable in
this regard. Based on these reasoning Ld. Arbitrator has arrived at
a considered opinion that the Contractor was entitled to Rs
6,30,769/- in terms of the payment calculation sheet. In the
present petition filed by GAIL, the challenge to these findings is
on very frail grounds that the Arbitrator has relied upon the
calculation sheet and did not consider the deductions which were
to be made. A mere look of the aforesaid payment calculation
sheet shows that below/ beyond the figure of Rs 6,30,769/- there
are further additions such as Retention in 3rd bill for risk and cost
recovery against procurement and fixing of flush door shutters,
Retention against site clearance, EMO transferred to SO,
Retention from BG encashed due to termination as per GCC
clause 29.1(a), Retention in RA bills against PRS so as to arrive at
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:07:45
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 10 of 33
figure of Rs. 17,96,316/-. Thereafter, from this amount deductions
under the heads Difference cost against job of flush door including
10%OH (under clause 78.1 of GCC), Difference cost against work
executed at risk and cost through AMC as on 31.01.2016 (under
clause 29.1 (a) of GCC), Forfeiture of SO (7.5% of contract value
(under clause 29.2 (a) of GCC), Retention against PRS (5% of the
contract value) under clause 27 have been totalled at Rs.
15,11,618/. Then the payable amount is arrived at Rs 2,84,699/-
but all these items have also been considered separately while
dealing with the other claims in the impugned Arbitral award. Ld.
Arbitrator was fully justified in taking approach that first the due
amount payable based on final bill is arrived at thereafter the
claims of the Contractor on other items would be considered on
merits. In order to fortify the findings above, it may be seen that
while dealing with the claim no. 2 of the Arbitration, Ld.
Arbitrator has rejected the claim of the contractor regarding flush
doors procured/ other non-compliances at Rs. 5,00,000/- and also
claim of Rs. 2,18,548/- on account of Price reduction Schedule
(PRS). The petitioner GAIL has not considered the effect of these
rejected claims. The contractor in OMP(Comm) no. 51/2021, has
challenged the impugned award but so far as claim no. 1 not
effectively challenged the impugned award. I do not find any
infirmity in the findings of the Ld. Arbitrator in respect of claim
no. 1.
8 The GAIL has further raised a ground on the issue that the
Digitally signed
by VINEETA
GOYAL
VINEETA Date:
GOYAL 2024.12.24
18:07:51
+0530
OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 11 of 33
Impugned Arbitral Award dated 24.04.2020 has been passed by
the Ld. Sole Arbitrator in complete disregard to the contractual
provisions and material on record. The Ld. Sole Arbitrator failed
to appreciate that the claimant in the arbitration proceedings is an
unregistered partnership firm with no locus to initiate the
arbitration proceedings but the Ld. Sole Arbitrator had allowed a
non-signatory to the agreement to file its Claim which would
render the award void-ab-initio. The Ld. Sole Arbitrator failed to
appreciate that the contract was signed by and between the
GAIL/Petitioner and the sole proprietorship concern M/s Shiv
Kumar Doharey and not between the claimant/ partnership
concern which initiated the arbitration. The Ld. Sole Arbitrator
completely ignored the fact that Clause 31 of the GCC expressly
barred Mrs. Usha Doharey, the sole proprietor of M/s Shiv Kumar
Doharey proprietorship firm from changing its constitution
without prior written consent from the Petitioner/ GAIL but Mrs.
Usha Doharey had not sought any such prior written permission
from the Petitioner/ GAIL. Further, this conversion of M/s Shiv
Kumar Doharey sole proprietorship firm into a partnership firm by
Mrs. Usha Doharey without the Petitioner’s prior written consent
was against the express terms of the contract. The Ld. Sole
Arbitrator erred in overriding the terms of the contract, which is
impermissible because the Arbitrator, being a creature of the
contract, is bound by the terms of the contract and has no power to
override them. Because the proprietorship concern M/s Shiv
Kumar Doharey and its sole proprietor were expressly barred from
Digitally signed
by VINEETA
VINEETA GOYAL
Date:
GOYAL 2024.12.24
18:08:01
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 12 of 33
assigning any of their obligations to a third party under the
contract signed thus such assignment to a third party was breach
of the terms of the contract and without the express prior written
permission of the GAIL, and as such, void. The Ld. Sole
Arbitrator traversing beyond the terms of the contract amounted to
a jurisdictional error that goes to the root of the proceedings. In
consideration of the above, the award and the proceedings are
void-ab-initio.
9 A careful consideration to the above ground of petition was
given but the same has no force for the following reasons: –
a) It is matter of record that in the present case the Ld.
Arbitrator was appointed by Hon’ble Delhi court in the
proceedings, Shiv Kumar Doharey Vs. GAIL (India) Ltd.,
ARB. P. 884/2018 vide Order dated 18.12.2018. In these
proceedings Hon’ble Court in para 4 recorded the
following: –
4. Learned counsel for the respondent does not dispute
the existence of the arbitration agreement. Learned
counsel for the respondent, however, submits that the
petitioner’s claims are time barred.
The above stand taken by the respondent/GAIL
shows that it has agreed to the petitioner being competent to
invoke arbitration.
b) It is evident from the impugned award that the aforesaid
objection was also taken by GAIL in the arbitration
proceedings on 13.07.2019 when GAIL didn’t file its
Digitally signed
by VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:08:08 +0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 13 of 33
statement of defense (S.O.D.) and chose to file an
application u/s 16 of the Arbitration and Conciliation Act,
1996, seeking dismissal of claim for want of jurisdiction, on
the ground that arbitration has been initiated by non-party,
as the civil contract was entered into with the proprietorship
concern M/s Shiv Kumar Doharey and the claim has been
filed by the partnership firm adopting the same name of the
business entity. Ld. Arbitrator after calling for reply and
hearing both the parties dismissed the said application was
vide order dated 29.08.2019. Thereafter, GAIL filed its
statement of defense and in the statement of defense the
respondent/ GAIL has raised preliminary objections about
the maintainability of the claim on the same issues as were
raised in the application filed u/s 16 of the Act. It was
argued that this Arbitral tribunal has no jurisdiction to carry
out the arbitration proceedings. It was further argued that
the Claimant/ Contractor failed to provide any proof of
partnership registered or otherwise. The preliminary issue
decided by the Ld. Arbitrator on the point of jurisdiction
was not challenged by GAIL.
c) From the impugned award, it is evident that in the
Arbitration proceedings, issues were framed on 17.10.2019.
The Ld. Arbitrator framed two issues; one Whether the
claimant is entitled to the claims as per the statement of
claims and being an authorized person on behalf of the firm.
Digitally signed
by VINEETA
GOYAL
VINEETA Date:
GOYAL 2024.12.24
18:08:14
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Second issue was the Relief. It is specifically recorded in
the impugned Arbitral award that no other issue was
claimed or pressed by either of the party. Although the
respondent/ GAIL filed suggested issues but were satisfied
with issue no.1. The aforesaid facts show that GAIL has not
further agitated the issue of the status of the claimant after
the Arbitrator has dismissed its application u/s 16 of the Act
vide order dated 29.08.2019. Further, despite raising the
issue while Ld. Arbitrator was finalizing the issues, the
GAIL did not raise any objection. It appears that the
petitioner/ GAIL has acquiesced / consented to the issue at
that stage.
d) Lastly, the contention if accepted that a non-signatory has
participated in the Arbitration proceedings has to be viewed
in the light of law having taken turn on this issue. It may be
appreciated that since the decision of Chloro Controls India
(P) Ltd v. Severn Trent Water Purification Inc (2013)
encompassing concept of Group of Companies (GOC) there
is further development on the issue of non-signatory.
Hon’ble Supreme Court of India in Cox & Kings Ltd. v.
SAP India (P) Ltd. 2023 INSC 1051 expanding upon the
concept of Group of Companies (GOC) held that a non-
signatory could be subjected to arbitration if there was a
clear intention to bind both signatory and non-signatory
parties. It also relied on the phrase “claiming through or
under” in the Act to expand the scope of arbitration to
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:08:19
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include non-signatories. The present claimant is not an alien
or complete outsider to the contract but the controversy
erupted on the allegation by the GAIL that the contract was
awarded to Mrs. Usha Doharey proprietor of M/s Shiv
Kumar Doharey proprietorship firm whereas the claimant in
the present proceedings is Shiv Kumar Doharey an
unregistered firm. During the Arbitration proceedings, both
Mrs. Usha Doharey and Sh. Manish Dixit were extensively
cross examined where he mentioned that the entity to the
arbitration is partnership firm of between him and Mrs.
Usha Doharey but there was nothing brought on record that
there was any assignment of the contract. Assuming it is a
case of where the alleged partnership entity is successor in
interest then under the new jurisprudence of non-signatory
to the contract, it becomes eligible entity for the arbitration.
Thus, there is no infirmity in the impugned award on this
ground.
10 In the impugned award, the claim no. 2 dealt towards
withholding /making deduction of an amount of ₹5,00,000 from
3rd RA bill on account of flush doors procured (and other non-
compliances). The second item was Rs. 2,18,548 on account of
Price Reduction Schedule (PRS) in terms of clause 27.1 of general
conditions of the contract. The total claim was amounting to
₹7,18,548/- under claim no. 2. In the impugned arbitral award,
this claim has been dealt at page 23 to 28. The Arbitrator has
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.12.24
18:08:25
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 16 of 33
rejected this entire claim.
11 In so far as the claim regarding flush doors is
concerned, in the impugned Arbitration award, Ld. Arbitrator
relied upon communication by GAIL to the contractor whereby
the Contractor has been advised to arrange the flush doors besides
various other materials and minimum of 40 workers within 7 days
to execute the balance job failing which action shall be taken as
per tender terms and conditions including termination of contract.
Ld. Arbitrator also considered communication by GAIL to the
contractor whereby the claimant has been asked for various
formalities including to submit sample wood, flush door etc. and
reminded of target date of 18.11.2013 but sample was yet to be
submitted for approval. Ld. Arbitrator in the impugned award
recorded finding that as the claimant has not even filed copy of 3 rd
RA-bill therefore, it is implied that Rs 5,00,000/- was claimed and
there being no proof of procurement of flush doors the deduction
of the said amount is held to be justified even as per clause 78 of
the agreed terms and conditions, the claim in this regard is not
maintainable and is rejected. The contractor in OMP(Comm) no.
51/2021, has challenged these findings by contending that it had
all the materials and was ready and could have procured and
installed the flush door, as is evident vide email dated 23.12.2014.
Further, it is alleged that the Ld. Sole Arbitrator had relied upon
the false and fabricated Purchase order submitted by GAIL
showing this part of the work awarded to M/s Northern Doors Pvt.
Digitally signed
by VINEETA
VINEETA GOYAL
Date:
GOYAL 2024.12.24
18:08:31
+0530OMP (Comm)-98/2020 & OMP (Comm) No.51/21 Page no. 17 of 33
Ltd. for the procurement of flush doors. In the present petition, it
is alleged that the said order is false and fabricated because it does
not have mentioning of the name and title of the project/ work i.e.
“Replacement of Damaged Door & Window at Gail Gaon,
Dibiyapur”. Further, it is averred that it has been the general
practice of the Respondent to mention the name and title of the
project/ work while issuing any of the documents in respect to that
project / work. None of the contentions is persuasive because the
GAIL was well within its rights to invoke the relevant clauses of
the contract to give this work to others at the risk of the contractor.
Further, in the Arbitral proceedings the documents pertaining to
M/s Northern Doors Pvt. Ltd. were submitted by GAIL and the
witness was subjected to cross examination. In the present
petition, the contractor has merely raised assumptions that these
documents are fabricated without actually establishing the claim.
12 In so far as the claim regarding the second item of
Rs. 2,18,548 on account of Price Reduction Schedule (PRS) in
terms of clause 27.1 of general conditions of the contract is
concerned, during the Arbitral proceedings it was contended that
as per clause 27 of the General conditions of contract there is no
specific order for such deductions passed by the Engineer-in-
charge. Therefore, the deductions so made on PRS are illegal and
the contractor is entitled to the refund of amount, so deducted.
13 Before the Arbitrator, GAIL has submitted that the
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reading of the beginning words of the clause 27 i.e. “Time is the
essence of the contract” would be enough to counter the
contention of the Contractor, as there is in fact, inordinate delay
caused by the Contractor. The Contractor could not complete the
entire work inspite of additional period of 8 months, whereas, as
per the contract they were provided with 8 months and by
extending time, a total of 16 months were granted. It was further
contended that the contention of not passing of any specific order
by the Engineer-in-charge is also incorrect as perusal of various
letters as referred to above are mostly signed by Mr Maan Singh.
The correspondence of the GAIL clearly speak about poor
performance and advise to the contractor for doing the job falling
which action as per tender terms and conditions, including
termination of the contract could be taken. There is a repeated
reference to the terms and conditions of the contract in letters of
the GAIL. Even the Contractor’s letter dated 20th January, 2016,
in reply to the suspension order-cum-show cause notice at
describe Shri Maan Singh, as Engineer-in-charge and as such, it
can’t be said that there is no order of the Engineer-in-charge.
Moreover, Maan Singh has been examined as CW-1, but no
question has been put to him for not taking any decision in regard
to the PRS in terms of the general conditions. As mentioned above
the contractor has been repeatedly informed about the terms and
conditions of the contract.
14 In the impugned Arbitration award, Ld. Arbitrator
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considered all the facts above before giving specific findings that
the contention of the Contractor is without any substance and
deductions made @ 5% are as per the admitted terms and
conditions of the contract. Ld. Arbitrator held that the Contractor
is not entitled to the refund of Rs 2,18,548/- deducted as PRS in
terms of clause 27.1 of the General Conditions of the Contract and
for not adhering to the time of performance as per clause 25
thereof as otherwise the whole purpose and exercise of framing
the documents for inviting tenders, bid document, terms and
conditions besides necessary approvals and fixing responsibilities
would be a futile exercise unless given effect to.
15 The Contractor in its petition has challenged these
findings on PRS by contending the same reasoning without
pointing out any further issue which has not been considered
resulting into non sustainability of the Award.
16 Ld. Arbitrator, at page 28 of the impugned award,
dealt with the claim no. 3 towards the payment / Release of
performance guarantee and security deposit/ EMD of Rs.
4,37,966/-. After due deliberation, Ld. Arbitrator has rejected the
claim which has been challenged by the contractor in its petition.
In the Arbitration proceedings, the contractor argued that action of
GAIL is malafide because they extended the time till March 2015
but yet they foreclosed the work in January 2015. It is argued in
the arbitration that the contractor protested against the arbitrary
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action but GAIL didn’t give any reasonable explanation, thus
contractor submitted final bill dated 29.10.2015 to the department/
GAIL and requested release of performance guarantee and earnest
money. The GAIL inspite of clearing the final bill chose to issue
show cause notice dated 03.12.2015 to which the contractor
replied on 20.01.2016, but using their dominant position the
contractor was suspended. Then Gail chose to withhold the
payment on the pretext of non-performance of work.
17 On the other hand, the GAIL has referred to clauses
24, 28 and 29 dealing with the contract performance security, its
forfeiture on failure to comply with the provisions of the contract.
Clause 35.3 of the bid document relate to the failure on the part of
the Contractor shall be a sufficient ground for the annulment of
the award and forfeiture of the bid security. The sole purpose of
the earnest money and bank guarantee is to bind the contractor to
perform/ execute the work assigned and it is after a long process /
documentation/number of working hours and expenditure, the
contracts are assigned. Further, the non-performance in part or full
not only delays the work but also causes further inconveniences,
exercise and additional costs for completion of the left-out work.
The Contractor was made fully aware of its responsibilities and
liabilities of the agreed terms and conditions by way of various
letters. Repelling the argument that the contract was neither
terminated nor any penalty was imposed by the respondent, GAIL
referred to the arguments of the Contractor that the contract was
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foreclosed in January 2015 and notice dated 03.12.2015 for
suspension was also issued. Therefore, it is apparent from the
record that the contract was duly terminated and penalties were
imposed. The Ld. Arbitrator considering rival contentions
recorded findings that he had already held the contractor to be
guilty of delay and non-performance and therefore, the forfeiture
is on account of the circumstances for which the Contractor is
itself responsible and it is also in terms of the agreed terms and
conditions and the claim for refund, was therefore rejected.
18 In its petition, the Contractor has challenged these
findings raising the same contentions as above. Further, it has
been contended that the contract/ agreement was never terminated
on part of the Petitioner/ Contractor but the Respondent/ GAIL
only for the reasons best known to them prolonged the work and
further foreclosed the said work in January, 2015. Furthermore,
that the Petitioner/Contractor was willing to complete the work
within extended period of time as per the EOT but the
Respondent/ GAIL with malafide intentions in order to cause
financial losses to the Petitioner/ Contractor had foreclosed the
work at site and thus the Petitioner/ Contractor cannot be
attributed for non-execution of work. The contentions have
already been considered by the Ld. Arbitrator in the Arbitration
proceedings. It is no more res-integra that the court entertaining
petition u/s 34 of the Act does not sit in appeal or re-appreciate the
evidence but only very limited scope of interference is envisaged.
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19 The mandate of the Legislature laying procedure
while deciding a petition under Section 34 of the Act is to provide
an expeditious dispute resolution process, with minimal Court
intervention. The underline philosophy of Section 34 of the Act
strives to bring a balance between the party autonomy and judicial
interference. The objective of Section 34 of the Act clearly
elucidate that there is limited scope of interference by the Courts
inside the field of the Arbitrator. It is settled proposition of law
that while considering the objection / petition under Section 34 of
the Act, the Court at this stage cannot make a roving inquiry and
has to rely upon the material placed before the learned Arbitrator.
The scheme of the Act makes it clear that Arbitral Tribunal is the
sole judge of the quality and the quantity of the evidence. The
Court is not required to re-assess the material placed before the
learned Arbitrator nor can it correct the error of arbitrator. It is
equally settled proposition that approach of the Court to an award
must be to support it if it is reasonably possible rather than annul.
The Court can only set aside the award if the findings are totally
perverse, and are contrary to the terms of contract, or in violation
of the principle of natural justice or in conflict with the public
policy, or contrary to the grounds specified in Section 34 of the
Act. Hon’ble Apex Court in case of U.P. Hotels vs. U.P. SEB,
(1989) 1 SCC 359, observed as follows :-
” 17. It appears that the main question that arises :
whether the decision of this Court in Indian
Aluminium’s case (supra) was properly understood
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and appreciated by the learned Umpire and whether he
properly applied the agreement between the parties in
the light of the aforesaid decision. It was contended
that the question was whether the sums payable under
clause 9 included discounts. On the aforesaid basis it
was contended that there was an error of law and such
error was manifest on the face of the award. Even
assuming, however, that there was an error of
construction of the agreement or even that there was
an error of law in arriving at a conclusion, such an
error is not an error which is amenable to correction
even in a reasoned award under the law. Reference
may be made to the observations of this Court in
Coimbatore Distt. P.T. Sangam v. Bala Subramania
Foundry, AlR 1987 SC 2045, where it was reiterated
that an award can only be set aside if there is an error
on its face. Further, it is an error of law and not
mistake of fact committed by the arbitrator which is
justiciable in the application before the Court. Where
the alleged mistakes or errors, if any, of which
grievances were made were mistakes of facts if at all,
and did not amount to error of law apparent on the
face of the record, the objections were not sustainable
and the award could not be set aside. See also the
observations of this Court in Delhi Municipal Corpn.
v. M/S. Jagan Nath Ashok Kumar, AIR 1987 SC 2316,
where this Court reiterated that reasonableness of the
reasons given by an arbitrator in making his award
cannot be challenged. In that case before this Court,
there was no evidence of violation of any principle of
natural justice, and in this case also there is no
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violation of the principles of natural justice. It may be
possible that on the same evidence some court might
have arrived at some different conclusion than the one
arrived at by the arbitrator but that by itself is no
ground for setting aside the award of an arbitrator.
Also see the observations of Halsbury’s Laws of
England, 4th Edn., Vol. 2, at pages 334 & 335, para
624, where it was reiterated that an arbitrator’s award
may be set aside for error of law appearing on the face
of it, though that jurisdiction is not lightly to be
exercised. If a specific question of law is submitted to
the arbitrator for his decision and he decides it, the
fact that the decision is erroneous does not make the
award bad on its face so as to permit it being set aside;
and where the question referred for arbitration is a
question of construction, which is, generally speaking,
a question of law, the arbitrator’s decision cannot be
set aside only because the court would itself have
come to a different conclusion; but if it appears on the
face of the award that the arbitrator has proceeded
illegally, as, for instance, by deciding on evidence
which was not admissible, or on principles of
construction which the law does not countenance,
there is error in law which may be ground for setting
aside the award.
18. It was contended by Mr F.S. Nariman,
counsel for the appellant, that a specific question of
law being a question of construction had been referred
to the Umpire and, hence, his decision, right or wrong,
had to be accepted. In view of clause 18, it was
submitted that in this case a specific reference had
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been made in the interpretation of the agreement
between the parties, hence, the parties were bound by
the decision of the Umpire. Our attention was drawn
to the observations of this Court in M/s. Hindustan
Tea Co. v. M/s. K. Sashikant & Co., AIR 1987 SC 81,
where this Court held that under the law, the arbitrator
is made the final arbiter of the dispute between the
parties, referred to him. The award is not open to
challenge on the ground that the arbitrator has reached
a wrong conclusion or has failed to appreciate facts.
Where the award which was a reasoned one was
challenged on the ground that the arbitrator had acted
contrary to the provisions of S.70 of the Contract Act,
it was held that the same could not be set aside.”
20 Further, in the case of Swan Gold Mining Ltd. vs.
Hindustan Copper Ltd., (2015) SCC 379, it has been observed that
arbitrator is always considered to be the final Judge of the facts
and the same cannot be interfered with on the ground that terms of
contract were not correctly interpreted by it. In the case of
Ssangyong Engg. & Constructions Co. Ltd. vs. NHAI, (2019) 15
SCC 133, the Hon’ble Apex Court observed that Section 34(2)(a)
of the Act does not entail a challenge to an arbitral award on
merits and referred to various other authorities to conclude that
there can be no challenge on merits under the grounds mentioned
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in Section 34 of the Act. The Hon’ble Apex Court also relied
upon decision of Associate Builders vs. Delhi Development
Authority, (2015) 3 SCC 49, wherein, it was held that construction
of terms of contract is primarily for an Arbitrator to decide, unless
the Arbitrator construes a contract in a manner which no fair-
minded or reasonable person would take i.e. if a view taken by the
Arbitrator is not even possible to take. The Hon’ble Apex Court in
Associate Builders v/s Delhi Development Authority, (2015) 3
SCC 49, after minutely analyzing the legal preposition enunciated
by Hon’ble Apex Court in cases of ONGC Limited Vs. Saw Pipes,
Hinustan Zink Ltd Vs. Friends Coal Carbonisation; DDA Vs. R. S.
Sharma & Co.; J. G. Engineers Pvt Ltd Vs. Union of India, Union
of India Vs. L. S. Murthy, held as under:
“33. It must clearly be understood that when a
court is applying the public policy test to an
arbitration award, it does not act as a court of appeal
and consequently errors of fact cannot be corrected. A
possible view by the arbitrator on facts has necessarily
to pass muster as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied
upon when he delivers his arbitral award. Thus an
award based on little evidence or on evidence which
does not measure up in quality to a trained legal mind
would not be held to be invalid on this score Once it isDigitally signed
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found that the arbitrators approach is not arbitrary or
capricious, then he is the last word on facts.”
21 Hon’ble Supreme Court in case of P. R. Shah, Shares
& Stock Brokers (P) Ltd vs. B. H. H. Securities (P) Ltd, [(2012) 1
SCC 594 : (2012) 1 SCC (Civ) 342)], held as under:-
21. A Court does not sit in appeal over the
award of an Arbitral Tribunal by reassessing or re-
appreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34 (2) of the Act. The Arbitral Tribunal has
examined the facts and held that both the second
respondent and the appellant are liable ……
Therefore, in the absence of any ground under Section
34 (2) of the Act, it is not possible to re-examine the
facts to find out whether a different decision can be
arrived at.”
22 In Delhi Airport Metro Express Pvt. Ltd. vs. Delhi
Metro Rail Corporation Ltd., (2021) SCC Online SC 695 , the
Hon’ble Apex Court held that:
“26. Patent illegality should be illegality which goes
to the root of the matter. In other words, every error of
law committed by the Arbitral Tribunal would not fall
within the expression ‘patent illegality’. Likewise,
erroneous application of law cannot be categorised as
patent illegality. In addition, contravention of law not
linked to public policy or public interest is beyond the
scope of the expression ‘patent illegality’. What is
prohibited is for courts to re-appreciate evidence to
conclude that the award suffers from patent illegality
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appearing on the face of the award, as courts do not sit
in appeal against the arbitral award. The permissible
grounds for interference with a domestic award under
Section 34(2-A) on the ground of patent illegality is
when the arbitrator takes a view which is not even a
possible one, or interprets a clause in the contract in
such a manner which no fair-minded or reasonable
person would, or if the arbitrator commits an error of
jurisdiction by wandering outside the contract and
dealing with matters not allotted to them. An arbitral
award stating no reasons for its findings would make
itself susceptible to challenge on this account. The
conclusions of the arbitrator which are based on no
evidence or have been arrived at by ignoring vital
evidence are perverse and can be set aside on the
ground of patent illegality. Also, consideration of
documents which are not supplied to the other party is
a facet of perversity falling within the expression
‘patent illegality’.”
23 Thus, it is clear from the above discussion that the
underline object of the Act is to give finality and encourage
resolution of dispute by the Arbitral Tribunal having consensual
jurisdiction. The Court has no jurisdiction to sit in an appeal and
examine the correctness of award on merit with reference to the
material produced before the Arbitrator. It is not permissible to re-
appreciate the evidence or to go into the questions of quality &
quantity of evidence. Thus, the conclusion of an Arbitrator on
facts, even if erroneous in the opinion of the Court cannot be
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interfered with where the view of Arbitrator is a plausible view
and cannot be ruled as one which is impossible to accept, the
Court should not substitute its own view in place of that
Arbitrator.
24 Ld. Arbitrator, while dealing with the claim no. 6 being
cost of arbitration and legal expenses claimed at Rs. 5,00,000/-
allowed only Rs. 15,000/- by observing that the claim is highly
exorbitant and the assessment is not explained. Ld. Arbitrator
further observed that in view of the amount of award for Rs
6,30,769/- it was fit and appropriate to proportionately award an
amount of Rs 15,000/- as costs of arbitration and legal expenses.
In its petition, the Contractor has challenged these findings raising
contention that the cost of arbitration and legal expenses awarded
by the Ld. Sole Arbitrator is not reasonable at all as the Petitioner/
Contractor had already incurred more than Rs. 3,00,000 in the
litigation of the aforesaid dispute and further the Petitioner/
Contractor has to file an execution petition for enforcement of the
award as till date the respondent/ GAIL had failed to release the
already amount awarded. The contention and findings recorded
cannot be faulted with in view of the limited scope available to the
court entertaining petition u/ 34 of the Act.
25 Before closing the judgment, I am tempted to quote few
of the following paragraphs from the recent judgment of Hon’ble
Supreme Court dated 20.09.2024 in the case of OPG Power
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Generation Pvt. Ltd. v. Enexio Power Cooling Solutions India Pvt
Ltd. & Anr. Neutral Citation 2024 INSC 711 and 2024 LiveLaw
(SC) 738 which would throw light on the philosophy of
Arbitration and scope of challenge of the Arbitral award.
a. The award must conflict with the most fundamental
aspects of public policy and justice, the following
was observed: –
“The expression “in contravention with the
fundamental policy of Indian law” by use of the
word ‘fundamental’ before the phrase ‘policy of
Indian law’ makes the expression narrower in its
application than the phrase “in contravention with
the policy of Indian law”, which means mere
contravention of law is not enough to make an
award vulnerable. To bring the contravention
within the fold of fundamental policy of Indian law,
the award must contravene all or any of such
fundamental principles that provide a basis for
administration of justice and enforcement of law in
this country.”
b. Expounding the phrase “most basic notions of justice
or morality” as appearing in Explanation 1 of Section
34(2)(b)(ii), observed as under:-
“Suffice it to observe, they ought to be such
elementary principles of justice that their violation
could be figured out by a prudent member of the
public who may, or may not, be judicially trained,
which means, that their violation would shock the
conscience of a legally trained mind. In other
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an arbitral award, if the award conflicts with such
elementary/ fundamental principles of justice that it
shocks the conscience of the Court.”
c. In the Judgment Hon’ble Court reiterated that courts
do not sit in appeal over arbitral awards, and
interference is permitted only on the limited grounds
set out in Section 34 of the Arbitration Act. An
arbitrator is the master of evidence, and as long as the
award is based on a possible view of the facts, it
should be respected in the following words:-
“A possible view by the arbitrator on facts is to be
respected as the arbitrator is the ultimate master of
the quantity and quality of evidence to be relied
upon. It is only when an arbitral award could be
categorized as perverse, that on an error of fact an
arbitral award may be set aside…Further, a mere
erroneous application of the law or wrong
appreciation of evidence by itself is not a ground to
set aside an award as is clear from the provisions of
sub section (2-A) of Section 34 of the 1996 Act”
d. Hon’ble Court reiterated from in Dyna Technologies
v. Crompton Greaves (2019) 20 SCC 1 that reasons
in an arbitral award must be:
i. Proper: The reasoning must be logical and not
flawed.
ii. Intelligible: It should make sense and be
understandable.
iii. Adequate: The reasoning must address the
complexity of the issues presented in the case.
Further, the Court said that arbitral awards can be
placed in three categories:
i. No reasons or unintelligible reasons: Such
awards are in conflict with Section 31(3) of the
Act and can be set aside.
ii. Improper reasons: Awards where the reasoning
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is flawed, but these can only be challenged
based on the grounds in Section 34.
iii. Inadequate reasons: Courts must carefully
evaluate whether the reasons provided are
sufficient based on the nature of the issues. If
reasons are intelligible and adequate, the award
will not be set aside merely for being
incomplete.
e. Finally, Hon’ble Court laying emphasis on full
reading of the contract held that “If the conclusion of
the arbitrator is based on a possible view of the
matter, the Court should not interfere. But where, on
a full reading of the contract, the view of the arbitral
tribunal on the terms of a contract is not a possible
view, the award would be considered perverse and as
such amenable to interference”
26 In consideration of totality of the facts of the case and
reasoning given in the impugned award and limited scope of the
court u/s 34 of the Act, there are no merits in both the petitions
above and hence both are dismissed. No order as to the costs.
27. File be consigned to Record Room.
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