Delhi District Court
M/S H.S. Oberoi vs Union Of India on 4 March, 2025
IN THE COURT OF GORAKH NATH PANDEY
DISTRICT JUDGE (COMMERCIAL COURT-08),
CENTRAL DISTRICT, TIS HAZARI COURTS: DELHI.
OMP (COMM.) 70/2021
CNR NO.DLCT01-013877-2021
M/S. H. S. OBEROI BUILDTECH PVT. LTD.,
B-1119, DLF PHASE -V, SECTOR - 54,
GURGRAM HARYANA
THROUGH ITS DIRECTOR MR. H. S. OBEROI.
.....PETITIONER
VS.
UNION OF INDIA
(EARLIER IMPLEADED AS ORGANIZING
COMMITTEE COMMON WEALTH GAMES
2010)
THROUGH THE SECRETARY DEPARTMENT OF SPORTS
MINISTRY OF YOUTH AFFAIRS AND SPORTS
SHASTRI BHAWAN, NEW DELHI.
....RESPONDENT
Date of Institution : 23.10.2021
Date of final arguments : 03.02.2025
Date of decision : 04.03.2025
Decision : Dismissed.
J U D G E M E N T:
–
1. Vide this judgment, I shall decide the present petition
under Section 34 of the Arbitration & Conciliation Act, 1996
filed by petitioner for challenging the impugned award dated
05.03.2019 in case titled as “Union of India Vs. M/s. H. S.
Oberoi Building Pvt. Ltd.” (hereinafter called as impugned
award) whereby Ld. Arbitrator has passed the following award:
OMP (COMM.) 70/2021 Page no.1/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
(i) Rs.6,85,220/- towards Cess which was deposited on behalf
of the respondent.
(ii) Rs.6,66,653/- towards interest @ 2% p.a on the amount of
Rs.6,85,220/-.
(iii) Pendentelite and future interest @ 10% per annum from
the date of filing of the claim i.e. 18.07.13 till the payment.
(iv) Rs.75,000/- towards cost of arbitral proceedings and the
lawyers fee.
2. The brief facts as stated in the petition are as below:
Vide letter of acceptance dated 02.09.2018 of the
respondent, the respondent was awarded work of carrying out
interiors at the office of 5th and 6th Floor, NDCC Phase-II,
Building of NDMC, Opposite Jantar Mantar, Connaught Place,
New Delhi for total amount of Rs.7,66,88,778/- to be completed
within three months from the date of commencement which was
15th day from the date of letter (i.e. 17.09.2018). In furtherance
of the letter of acceptance, an agreement dated 16.09.2018 was
signed and executed between the parties.
On 20.06.2009, the petitioner informed the respondent to
take the premises as the work was complete though the work
could not be completed in stipulated time due to the reasons
attributed to the respondent. The respondent took over the
possession of the premises on 18.08.2009. The petitioner
submitted the final bill of Rs.7,26,54,745/- for the work done byOMP (COMM.) 70/2021 Page no.2/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
it. Against the said bill, the respondent made payment of
Rs.6,85,22,008/- and withheld the remaining payment on
frivolous grounds.
Vide letter dated 17.01.12, respondent raised issue of non-
payment of Labour Cess. Vide letter dated 06.03.2012, the
petitioner was asked to pay Rs.6,85,220/- towards Cess; vide
letter dated 18.02.13, the respondent invoked the arbitration
clause and appointed Sole Arbitrator.
The respondent herein filed claim before the Ld. Arbitrator
on 29.07.13 contending receipt of the letter/notice dated 30.12.11
from Deputy Labour Commissioner stating that the respondent
has not deposited Cess @ 1% of the total work contract valued at
Rs.41,50,98,132/- with Secretary Delhi Building & Other
Construction Workers Welfare Board. The respondent had to pay
a sum of Rs.25,98,688/- vide letter dated 30.03.2012 out of
which a sum of Rs.24,68,881/- is towards the principal amount
and Rs.1,29,807/- towards interest. The respondent vide letter
dated 06.12.12 deposited Rs.2,73,868/- under protest towards
Cess @ 1% of the amount of contract value together with interest
@ 2% per month. The claimant prayed for following reliefs in
the claim petition before the Ld. Arbitrator as under:
(1) Award an amount of Rs.6,85,220/- towards Cess calculated
@ 1% on the total payment of Rs.6,85,22,008/- made by the
claimant to the respondent for interior work carried out by it on
5th & 6th Floor, NDCC-II Building;
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
(2) Award an amount of Rs.6,66,653/- towards interest
calculated @ 2% per month on the cess amount of Rs.6,85,220/-
payable by the respondent from the due date i.e. completion of
project;
(3) Award pendentelite and future interest on the aforesaid
amount.
(4) Award cost of proceedings. (5) Award any other relief.
The petitioner herein also filed reply to the claim petition
filed by the respondent herein before the Ld. Arbitrator. Ld.
Arbitrator passed the award dated 05.03.2019 in favour of the
respondent. Hence the present petition.
3. The impugned award is challenged by the petitioner on the
grounds as mentioned below:
(i) Award is bad in law and contrary to the facts established
on record;
(ii) Ld. Sole Arbitrator has passed the impugned award in a
very mechanical manner without considering the facts and
pleadings on record and ignoring the provisions of law;
(iii) Impugned award and entire arbitral proceedings are
vitiated since there is violation of Section 12 of the Act and the
appointment of Ld. Arbitrator is vitiated;
(iv) Award is in conflict with public policy of India and the
same is patently illegal;
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
(v) Ld. Sole Arbitrator has failed to appreciate that the
respondent has never complied with any of the conditions of the
contract executed between the parties and thus violated the terms
of the contract;
(vi) Ld. Arbitrator failed to appreciate that the claim of the
respondent is against the provision of Order II Rule 2 CPC as the
respondent has filed two claims arising out of the same very
contract which is impermissible in law;
(vii) Ld. Arbitrator committed a grave error since the claim of
the respondent was based on the recovery of the cess paid by it to
the authorities.
(viii) Ld. Arbitrator committed an error in rejecting the objection
with respect to the appointment of the arbitrator.
(ix) Ld. Arbitrator failed to appreciate that the respondent
would be entitled to recovery of the sum of cess and interest paid
by it to the labour department and no other amount.
(x) Ld. Sole Arbitrator has overlooked the fact that as per The
Building and Other Construction Workers Welfare Cess Act.
(xi) Ld. Arbitrator committed an illegality and failed to
appreciate that filing of the claim after three years of the
conclusion of the work and payment thereof is barred by the law
of limitation.
(xii) Ld. Arbitrator grossly erred in not appreciating the
submission of the petitioner that there is no contract of the
respondent with the petitioner with respect of the payments of
Cess.
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
(xiii) The award of the entire amount as claimed in the statement
of claim is contrary to law and public policy and thus award is
liable to be set aside.
In view of these circumstances, it is claimed that the award
passed by the Ld. Arbitrator is not sustainable in the eyes of law
and the same is liable to be set aside.
4. The respondent did not file reply to the petition.
5. I have heard the final arguments addressed by Ld. Counsel
for both the sides and gone through the written submissions filed
on their behalf. I have also gone through the arbitral records.
Following judgments relied by the counsel for the petitioner in
support of contentions as below:
(1) UOI Vs. Reliance Industries Ltd. & Ors., FAO (OS)
(Comm.) 201/2023 decided on 14.02.2025 by Hon’ble High
Court of Delhi.
(2) Organizing Committee Commonwealth Games, 2010 Vs.
PICO Deepali Overlays Consortium and Anr, OMP (Comm) No.
30/2015 decided by Hon’ble Delhi High Court on 08.03.2016;
(3) State of Chhatisgarh Vs. M/s. Sal Udyog (P) Ltd. decided
on 08.11.2021 by Hon’ble Supreme Court of India;
(4) Delhi Metro Rail Corporation Ltd. Vs. Simplex
Infrastructure Ltd., 2011 VII AD Delhi 230;
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
(5) Sunil Kukreja Vs. North West Sales & Marketing Ltd.,
OMP (Comm) 456/2017 decided by Hon’ble Delhi High Court
on 24.04.2018.
The Ld. Counsel for the respondent vehemently argued
that the petition is liable to be dismissed and the award is entitled
to be upheld being passed as per the facts of the case. The
respondent in the written submissions relied upon the judgments
as below in support of contentions:
(1) Puri Construction Pvt. Ltd. vs. UOI, AIR 1989 SC 777;
(2) Indu Engineering & Textiles Ltd. Vs. DDA, 2001 SLT 190;
(3) Allen Berry & Co. Pvt. Ltd. Vs. UOI, AIR 1971 SC 696;
(4) Associate Builders Vs. DDA, (2015) 3 SCC 49.
(5) Union of India Vs. Popular Construction Co., 2001 SCC 8
470.
6. Alongwith the petition, an application under Section 5 read
with Section 14 of the Limitation Act was filed by the petitioner
to condone the delay of 26 days in filing the petition. As
contended, after the award was passed, it was challenged before
the Competent Court at Patiala House Courts. The petition was
returned on the ground of jurisdiction and again filed before this
court. I have considered the records. The impugned dated
05.03.2019 was challenged before the Competent Court at Patiala
House and it was returned to the petitioner vide order dated
17.09.21. There is no dispute that the award was challenged
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
before the Competent Court at Patiala House, New Delhi within
time. The petition was filed before this court on 18.10.2021. It is
contended by the petitioner that it took time in getting the
certified copy after the petition was returned on the ground of
jurisdiction. The certified copy of the order is stamped dated
07.10.2021. In view of the sufficient reasons explained by the
petitioner, the delay in filing the petition is condoned and the
application is disposed off.
7. Section 34 of the Arbitration and Conciliation Act, 1996
deals with setting aside of an arbitral award. The scope and ambit
of the jurisdiction under Section 34 was dealt and explained in
detail by Hon’ble Apex Court in Delhi Airport Metro Express
Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd., (2022) 1 SCC
131 wherein it is held as under:
“20. The 1996 Act was enacted to consolidate and
amend the law relating to domestic arbitration,
international commercial arbitration and enforcement of
foreign arbitral awards and also to define the law relating
to conciliation and for matters connected therewith, by
taking into account the United Nations Commission on
International Trade Law (UNCITRAL) Model Law on
International Commercial Arbitration and the
UNCITRAL Conciliation Rules. One of the principal
objectives of the 1996 Act is to minimize the supervisory
role of courts in the arbitral process. With respect to Part
I of the 1996 Act, Section 5 imposes a bar on intervention
by a judicial authority except where provided for,
notwithstanding anything contained in any other law for
the time being in force. An application for setting aside
an arbitral award can only be made in accordance with
provisions of Section 34 of the 1996 Act. Relevant
provisions of Section 34 (as they were prior to the
Arbitration and Conciliation (Amendment) Act, 2015)
read as under:-
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
“34. Application for setting aside arbitral award.-
(1) Recourse to a Court against an arbitral award
may be made only by an application for setting
aside such award in accordance with sub-section
(2) and sub-section (3).
(2) An arbitral award may be set aside by the Court
only if –
(a) the party making the application furnishes
proof that –
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the
law to which the parties have subjected it or,failing
any indication thereon, under the law for the time
being in force; or
(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or
of the arbitral proceedings or was otherwise unable
to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of
the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration:Provided that, if the
decisions on matters submitted to arbitration can
be separated from those not so submitted, only that
part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set
aside; or
(v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement
was in conflict with a provision of this Part from
which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Part;or
(b) the Court finds that –
(i) the subject-matter of the dispute is not capable
of settlement by arbitration under the law for the
time being in force, or
(ii) the arbitral award is in conflict with the public
policy of India.
Explanation.–Without prejudice to the generality
of sub-clause (ii), it is hereby declared, for the
avoidance of any doubt, that an award is in conflict
with the public policy of India if the making of the
award was induced or affected by fraud or
corruption or was in violation of section 75 or
section 81….”
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
22. A cumulative reading of the UNCITRAL Model Law
and Rules, the legislative intent with which the 1996 Act
is made, Section 5 and Section 34 of the 1996 Act would
make it clear that judicial interference with the arbitral
awards is limited to the grounds in Section 34. While
deciding applications filed under Section 34 of the Act,
courts are mandated to strictly act in accordance with and
within the confines of Section 34, refraining from
appreciation or re-appreciation of matters of fact as well
as law. (See: Uttarakhand Purv Sainik Kalyan Nigam
Limited. v. Northern Coal Field Limited. 2, Bhaven
Construction Through Authorised Signatory Premjibhai
K. Shah v. Executive Engineer Sardar Sarovar Narmada
Nigam Ltd. and Another and Rashtriya Ispat Nigam
Limited v. Dewan Chand Ram Saran).
23. For a better understanding of the role ascribed to
courts in reviewing arbitral awards while considering
applications filed under Section 34 of the 1996 Act, it
would be relevant to refer to a judgment of this Court in
Ssangyong Engineering and Construction Company
Limited v. National Highways Authority of India (NHAI)
5 wherein R.F. Nariman, J. has in clear terms delineated
the limited area for judicial interference, taking into
account the amendments brought about by the 2015
Amendment Act. The relevant 2 (2020) 2 SCC 455 3
2021 SCC OnLine SC 8 4 (2012) 5 SCC 306 5 (2019) 15
SCC 131 passages of the judgment in Ssangyong (supra)
are noted as under: –
“34. What is clear, therefore, is that the expression
“public policy of India”, whether contained in
Section 34 or in Section 48, would now mean the
“fundamental policy of Indian law” as explained in
paras 18 and 27 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC
(Civ) 204] i.e. the fundamental policy of Indian law
would be relegated to “Renusagar” understanding of
this expression. This would necessarily mean that
Western Geco [ONGC v. Western Geco International
Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12]
expansion has been done away with. In short,
Western Geco [ONGC v. Western Geco International
Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as
explained in paras 28 and 29 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
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M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
(2015) 2 SCC (Civ) 204] , would no longer obtain,
as under the guise of interfering with an award on
the ground that the arbitrator has not adopted a
judicial approach, the Court’s intervention would be
on the merits of the award, which cannot be
permitted post amendment. However, insofar as
principles of natural justice are concerned, as
contained in Sections 18 and 34(2) (a)(iii) of the
1996 Act, these continue to be grounds of challenge
of an award, as is contained in para 30 of Associate
Builders [Associate 24 | P a g eBuilders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .
35. It is important to notice that the ground for
interference insofar as it concerns “interest of India”
has since been deleted, and therefore, no longer
obtains. Equally, the ground for interference on the
basis that the award is in conflict with justice or
morality is now to be understood as a conflict with
the “most basic notions of morality or justice”. This
again would be in line with paras 36 to 39 of
Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is
only such arbitral awards that shock the conscience
of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paras 18 and 27 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49:
(2015) 2 SCC (Civ) 204], or secondly, that such
award is against basic notions of justice or morality
as understood in paras 36 to 39 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204]. Explanation 2 to Section
34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii)
was added by the Amendment Act only so that
Western Geco [ONGC v. Western Geco International
Ltd., 25 | P a g e(2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12] ,as understood in Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , and paras 28 and 29 in
particular, is now done away with.
37. Insofar as domestic awards made in India are
concerned, an additional ground is now available
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under sub-section (2-A), added by the Amendment
Act, 2015, to Section 34. Here, there must be patent
illegality appearing on the face of the award, which
refers to such illegality as goes to the root of the
matter but which does not amount to mere erroneous
application of the law. In short, what is not
subsumed within “the fundamental policy of Indian
law”, namely, the contravention of a statute not
linked to public policy or public interest, cannot be
brought in by the backdoor when it comes to setting
aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation
of evidence, which is what an appellate court is
permitted to do, cannot be permitted under the
ground of patent illegality appearing on the face of
the award.
39. To elucidate, para 42.1 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , namely, a mere
contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an
arbitral award. Para 42.2 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , however, would remain,
for if an arbitrator gives no reasons for an award and
contravenes Section 31(3) of the 1996 Act, that
would certainly amount to a patent illegality on the
face of the award. 40. The change made in Section
28(3) by the Amendment Act really follows what is
stated in paras 42.3 to 45 in Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , namely, that the
construction of the terms of a contract is primarily
for an arbitrator to decide, unless the arbitrator
construes the contract in a manner that no fair-
minded or reasonable person would; in short, that the
arbitrator’s view is not even a possible view to take.
Also, if the arbitrator wanders outside the contract
and deals with matters not allotted to him, he
commits an error of jurisdiction. This ground of
challenge will now fall within the new ground added
under Section 34(2-A).
41. What is important to note is that a decision
which is perverse, as understood in paras 31 and 32
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of Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while
no longer being a ground for challenge under “public
policy of India”, would certainly amount to a patent
illegality appearing on the face of the award. Thus, a
finding based on no evidence at all or an award
which ignores vital evidence in arriving at its
decision would be perverse and liable to be set aside
on the ground of patent illegality. Additionally, a
finding based on documents taken behind the back of
the parties by the arbitrator would also qualify as a
decision based on no evidence inasmuch as such
decision is not based on evidence led by the parties,
and therefore, would also have to be characterised as
perverse.”
24. This Court has in several other judgments
interpreted Section 34 of the 1996 Act to stress on the
restraint to be shown by courts while examining the
validity of the arbitral awards. The limited grounds
available to courts for annulment of arbitral awards are
well known to legally trained minds. However, the
difficulty arises in applying the well-established
principles for interference to the facts of each case that
come up before the courts. There is a disturbing tendency
of courts setting aside arbitral awards, after dissecting
and reassessing factual aspects of the cases to come to a
conclusion that the award needs intervention and
thereafter, dubbing the award to be vitiated by either
perversity or patent illegality, apart from the other
grounds available for annulment of the award. This
approach would lead to corrosion of the object of the
1996 Act and the endeavours made to preserve this
object, which is minimal judicial interference with
arbitral awards. That apart, several judicial
pronouncements of this Court would become a dead
letter if arbitral awards are set aside by categorising them
as perverse or patently illegal without appreciating the
contours of the said expressions.
25. 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
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expression ‘patent illegality’. What is prohibited is for
courts to re-appreciate evidence to conclude that the
award suffers from patent illegality 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’.
26. Section 34 (2) (b) refers to the other grounds on
which a court can set aside an arbitral award. If a dispute
which is not capable of settlement by arbitration is the
subject-matter of the award or if the award is in conflict
with public policy of India, the award is liable to be set
aside. amended by the 2015 Amendment Explanation (1),
Act, clarified the expression ‘public policy of India’ and
its connotations for the purposes of reviewing arbitral
awards. It has been made clear that an award would be in
conflict with public policy of India only when it is
induced or affected by fraud or corruption or is in
violation of Section 75 or Section 81 of the 1996 Act, if it
is in contravention with the fundamental policy of Indian
law or if it is in conflict with the most basic notions of
morality or justice. In Ssangyong (supra), this Court held
that the meaning of the expression ‘fundamental policy
of Indian law’ would be in accordance with the
understanding of this Court in Renu Sagar Power Co.
Ltd. v. General Electric Co.6 In Renu Sagar (supra), this
Court observed that violation of the Foreign Exchange
Regulation Act, 1973, a statute enacted for the ‘national
economic interest’, and disregarding the superior courts
in India would be antithetical to the fundamental policy
of Indian law. Contravention of a statute not linked to
public policy or public interest cannot be a ground to set
at naught an arbitral award as being discordant with the
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fundamental policy of Indian law and neither can it be
brought within the confines of ‘patent illegality’ as
discussed above. In other words, contravention of a
statute only if it is linked to public policy or public
interest is cause for setting aside the award as being at
odds with the fundamental policy of Indian law. If an
arbitral award shocks the conscience of the court, it can
be set aside as being in conflict with the most basic
notions of justice. The ground of morality in this context
has been interpreted by this Court to encompass awards
involving elements of sexual morality, such as
prostitution, or awards 6 1994 Supp (1) SCC 644 seeking
to validate agreements which are not illegal but would
not be enforced given the prevailing mores of the day”.
8. Permissible grounds for interference with an arbitration
award, in terms of Section 34 of the Arbitration and Conciliation
Act, 1996 (as amended upto date) which can be culled out from
the aforesaid observations of Hon’ble Supreme Court while read
in the light of the judgments of Hon’ble Supreme Court in
Ssangyog Engg. & Construction Co. Ltd. Vs. NHAI (2019) 1
SCC 131 and Associate Builders Vs. DDA (2015) 3 SCC 49 are:
1. A party to the agreement was under some incapacity; or
2. the arbitration agreement is not valid under the law; or
3. the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
4. the arbitral award deals with a dispute not contemplated by
or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration; or
5. the composition of the Arbitral Tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties or, failing such agreement, was not in accordance with
this Part; or
6. the subject-matter of the dispute was not arbitrable under
law; orOMP (COMM.) 70/2021 Page no.15/23
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7. the arbitral award is in conflict with the public policy of
India;
a) the making of the award was induced or affected by fraud
or corruption or was in violation of Section 75 or Section 81;
or
b) it is in contravention with the fundamental policy of
Indian law i.e.
i) the same is in contravention of the provisions of any statute
enacted to protect the national interest such as the Foreign
Exchange Regulation Act which is enacted to ensure that the
nation does not lose foreign exchange which is essential for
the economic survival of the nation.
ii) the same is passed while disregarding orders passed by the
superior courts in India.
iii) the same is passed disregarding the binding effect of the
judgement of a superior court.
c) it is in conflict with the most basic notions of morality
which in this context has been interpreted by Hon’ble Apex
Court to encompass awards involving elements of sexual
morality, such as prostitution, or awards seeking to validate
agreements which are not illegal but would not be enforced
given the prevailing mores of the day;
d) it is in conflict of most basic notions of justice i.e. it
shocks the conscience of the Court.
8. It is vitiated by patent illegality on the face of the award
which means-
i) if an arbitrator gives no reasons for an award; or
ii) if he construes the terms of a contract in a manner that no
fair minded or reasonable person would i.e. the arbitrator’s
view is not even a possible view to take; or
iii) if the arbitrator wanders outside the contract and deals
with matters not allotted to him; or
iv) if he gives a finding based on no evidence at all; or
v) if he passes an award which ignores vital evidence in
arriving at its decision; or
vi) if he gives a finding based on documents taken behind the
back of the parties; or
OMP (COMM.) 70/2021 Page no.16/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
vii) if he gives a finding based on documents copy of which
had not been supplied to the opposite party.
Similarly, what is not permissible for a Court in exercise
of powers under Section 34 of the Act, in the light of said
judgments can be summed up in the following manner:
i) What adjudicating whether an award is in conflict with
fundamental policy of law, the court shall not conduct review
on the merits of the dispute;
ii) an awards shall not be set aside merely on the ground of
an erroneous application of the law or by re-appreciation of
evidence;
iii) Contravention of a statute not linked to public policy or
public interest cannot be a ground to set at naught an arbitral
award as being discordant with the fundamental policy of
Indian law nor can it be brought within the confines of
“patent illegality”.
9. The agreement between the parties is not disputed. The
award is challenged by the petitioner on the ground of violation
of Section 12 of the Act. The impugned award itself contained
that the Ld. Arbitrator informed the parties regarding his
engagement as Arbitrator in other cases by the respondent herein
and also given opportunity to the petitioner to get the arbitrator
changed but no action was taken by the petitioner in this regard.
The award also contained that the claimant has given no
objection to the Ld. Arbitrator to continue with the proceedings
as recorded vide order dated 26.09.16 and 27.10.2016. The
objection of the petitioner accordingly regarding violation of
Section 12 of the Act has no merit. It is further observed that the
arbitrator was appointed by the duly authorized person who was
looking after the affairs of the claimant/respondent herein.
OMP (COMM.) 70/2021 Page no.17/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
I have gone through the claim filed by the respondent
herein before the Ld. Arbitrator. The brief and relevant facts for
the case has already mentioned above. The petitioner has assailed
the award mainly on the ground that the award is conflict with
public policy of India violating of Section 28 of the Act. It is
further argued that No Due Certificate was issued by the
respondent and the petitioner is not liable to make any payment.
It is further argued that the Ld. Arbitrator failed to appreciate the
clauses in the contract between the parties alongwith the Building
and Construction Workers Welfare Cess Act, 1996. It is argued
that there is no reason for levy the interest as awarded by the
Arbitrator.
The respondent herein in rejoinder to the reply of the
petition before the Ld. Arbitrator admitted that the petitioner was
asked to deposit the amount towards labour cess as the petitioner
failed to deposit the same with the Competent Authority in view
of the agreement.
As per the agreement entered into between the parties, the
taxes was to be paid by the petitioner herein. As the petitioner not
deposited the amount, the arbitration clause was invoked. The
relevant part of the agreement in respect to payment of taxes as
contained as below:
“8.5. The rates quoted by the tenderers shall be inclusive of all
applicable taxes including Service Tax, VAT, octroi and levies etc.
levied by Central/State Govt. and the contractor shall pay the
aforesaid taxes, levies, duties etc. directly to the Central/State Govt.
Organizing Committee, Commonwealth Games, 2010 will have noOMP (COMM.) 70/2021 Page no.18/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
liability whatsoever on any account to pay any taxes, levies, duties
etc. levied by Central/State Govt. pertaining to executive of work.
6.5 The rates for all items unless clearly specifies otherwise
cover all costs for proper execution of work including labour,
material, hires charges of machinery and other inputs involved
during execution of the work alongwith the cost of construction of
temporary arrangements. The rates should be inclusive of all
applicable taxes, direct or indirect including service Tax.”
The defence of the petitioner remained that in view of
Section 3 and sub-Rule 4 (3) of the Building and Construction
Workers Welfare Cess Act, 1996 (hereinafter referred to as the
Act), the respondent was required to deduct the labour cess from
the bills paid to the petitioner; the respondent did not deduct the
cess from the bills of the petitioner nor deposited with the
concerned authority i.e. Labour Department, Govt. of NCT of
Delhi and accordingly, the Labour Department initiated the
process of liberty from the respondent.
In view of clause 8.5 and 6.5 referred above of the
agreement, it was agreed between the parties that all the
applicable taxes, levies, duties etc shall be paid by the contractor
directly to the Centre/State Govt. It is relevant to mention the
relevant provisions i.e. Section 3 of the Act:
“there shall be levied and collected a cess for the purpose of the
Building and Other Construction Workers (Regulations of
Employment and Conditions of Service) Act, 1996, at such rate not
exceeding two percent, but not less than one percent of the cost of
construction incurred by an employer, as the central government
may, by notification in official gazette, from time to time specify.
Further sub section (2) provides that “The cess levied under sub-
section (1) shall be collected from every employer in such manner
and at such time, including deduction at source in relation to a
building or other construction work of a Government or of a public
sector undertaking or advance collection through a local authorityOMP (COMM.) 70/2021 Page no.19/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
where an approval of such building or other construction work by
such local authority is required, as may be prescribed”.
The term ’employer’ has been defined under Sec. 2(i) of
The Building and Other Construction Workers’ (Regulation of
Employment and Conditions of Service) Act, 1996. It provides:-
“2 Definitions –
(i) “employer’, in relation to an establishment means the owner
thereof and includes:-
(i) in relation to a building or other construction work carried
on by or under the authority of any department of the
Government, directly without any contractor, the authority
specified in this behalf or where no authority is specified, the
head of the department;
(ii) in relation to a building or other construction work carried
on by or on behalf of a local authority or other establishment,
directly without any contractor, the chief executive office of
that authority or establishment;
(iii) in relation to a building or other construction work carried
on by or through a contractor, or by the employment of
building workers supplied by a contractor, the contractor.
Thus is the present context it is the petitioner being a
contractor that falls in the definition of ’employer’. Under
Section 3(2) of the Act, therefore, the Cess levied under Section
3(1) is liable to be collected from petitioner. There is no merit in
the argument of the petitioner that this amount was not
recoverable from it.
Ld. Counsel for the petitioner further brought to the notice
of the court the notification GSR/149(E) dated 26.03.1998 issued
in terms of Section 4 (1) of the Act by the Central Govt. vide the
Building and Other Construction Workers Welfare Cess Rules,
OMP (COMM.) 70/2021 Page no.20/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
1998 and argued that as per rule 4(3) sub-Rule 1, where the levy
of cess pertains to building and other construction work of a
govt. or a public sector undertaking, such govt. or the public
sector undertaking shall deduct or cause to be deducted the cess
payable at the notified rates from the bills paid for such work. It
is further argued that the respondent being a Government was
required to deduct the labour cess from the bills paid to the
petitioner in which it failed and accordingly the Labour
Department initiated the process of liability from the respondent.
The contention of the petitioner in this regard has no substance as
the respondent is neither Govt. nor a Public Sector Undertaking.
It is reiterated that respondent is a Society registered under the
Society Registration Act, 1860 being registered with key objects
on 10.02.2005.
10. The Arbitral proceedings reflect that the petitioner
participated in the proceedings and contested the matter. The
Deputy Labour Commissioner in its order demanded the cess
amount alongwith penalty as referred above. The Deputy Labour
Commissioner was further empowered to impose interest in view
of Section 8 of the Act. As the respondent paid the amount of the
tax which was to be paid by the petitioner, the arbitrator further
awarded pendentelite and future interest @ 10% per annum on
the total recoverable amount. The Ld. Arbitrator had authority to
award interest in view of the judgments of Hon’ble Supreme
Court in case of Ambica Constructions Vs. UOI reported as 2017
(14) SCC 223 and Reliance Cellulose Products Ltd. Vs. Oil and
Natural Gas Ltd. reported as AIR 2018 SC 3707.
OMP (COMM.) 70/2021 Page no.21/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
It is settled law that the court can not take an independent
assessment of the merits of the award where two views are
possible, the court can not interfere in the plausible view taken
by Arbitrator. In Bharat Coking Coal Ltd., Vs. L. K. Ahuja,
(2004) 5 SCC 109, it has been observed by Hon’ble Supreme
Court of India:-
“There are limitations upon the scope of interference in awards
passed by an arbitrator. When the arbitrator has applied his mind to
the pleadings, the evidence adduced before him and the terms of the
contract, there is no scope for the court to reappraise the matter as if
this were an appeal and even if two views are possible, the view
taken by the arbitrator would prevail. So long as an award made by
an arbitrator can be said to be one by a reasonable person no
interference is called for. However, in cases where an arbitrator
exceeds the terms of the agreement or passes an award in the
absence of any evidence, which is apparent on the face of the
award, the same could be set aside”.
The impugned award appears to be passed on the basis of
record and in accordance with the provisions of law. There is no
substance in the arguments on behalf of the petitioner that the
provisions of Building and Other Construction Workers Welfare
Cess Act, 1996 have been improperly applied by the Ld.
Arbitrator while passing the impugned award. It is apparent that
the Ld. Arbitrator has considered the terms and conditions of the
agreement between the parties. The petitioner failed to bring to
the notice of this court the violation of any terms and conditions
of the agreement between the parties or violation of the
principles of law as alleged. Accordingly, no interference is
required with regard to the conclusion arrived by Ld. Arbitrator.
OMP (COMM.) 70/2021 Page no.22/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA
The petitioner has failed to show as to how the petitioner is
entitled for relief in view of provisions of Section 34 of the
Arbitration and Conciliation Act, 1996. The petition is
accordingly dismissed.
11. The copies of the judgment be issued to all the parties to
the dispute through Electronic Mail. Judgment be also uploaded
on the server.
12. File be consigned to Record Room after necessary
Digitally signed by
GORAKH
compliance. NATH
GORAKH NATH
PANDEY
Date: 2025.03.06
PANDEY 15:43:18 +0530
Announced in the open court (GORAKH NATH PANDEY)
th
on 04 March, 2025. District Judge (Commercial Court-08)
Central, Tis Hazari Courts, Delhi.
OMP (COMM.) 70/2021 Page no.23/23
M/S. H. S. OBEROI BUILDTECH PVT. LTD. VS. UNION OF INDIA