The power of Arbitral Tribunal to award interest for all the three periods namely, pre-reference, pendente lite and post award, is settled, after all. It has been held by Supreme Court, in Reliance Cellulose Products Ltd v. ONGC reported as (2018) 9 SCC 266, that interest is compensatory in nature and is parasitic on the principal amount. Following the “Reliance” ratio, it is seen that arbitrator is empowered under Section 31(7) of the Act to grant interest for all the three periods, unless the contract in so many words prohibits the “arbitrator” from granting interest under Section 31(7) of the Act. A clause in a contract that prohibits payment of interest on delayed payments, does not restrict the “arbitrator” to grant interest since it does not prohibit the “arbitrator” from granting interest under Section 31(7) of the Act and is a restriction on the contracting party to claim interest on delayed payments. As stated above, since interest in compensatory in nature, the arbitrator’s powers are not curtailed by such narrow clauses in the contract. In view thereof, the award of interest by the Arbitral Tribunal for pre-refence, pendente lite and post award periods, is neither contrary to the terms of contract nor is it in breach of Section 31(7) of the Act.
{Para 11}
Neutral Citation Number of : 2023:DHC:3728
IN THE HIGH COURT OF DELHI AT NEW DELHI
FAO 212/2010
M/S MAHESH CONSTRUCTION Vs MUNICIPAL CORPORATION OF DELHI & ANR.
CORAM:
HON'BLE MR. JUSTICE MANOJ KUMAR OHRI
Pronounced on : 25.05.2023.
Citation: MANU/DE/3574/2023
1. By way of present appeal filed under Section 37 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’), the
appellant has assailed the judgment dated 04.07.2009 passed by learned
Additional District Judge – XIII, District, Central, Tis Hazari Courts,
Delhi in Suit No. 118/2007 vide which objections filed by respondent
No. 1/MCD under Section 34 of the Act were upheld and the Arbitral
Award dated 21.07.2007 was set aside.
2. Briefly, the facts as emanate from the records and necessary to
address the controversy are that in the year 2000, MCD floated tenders
for de-silting of certain Nallas i.e., drains in the West Zone, Delhi. The
appellant, a Contractor, participated in the said tender and was awarded
the work vide work order Nos. 71, 61, 63, 24 and 28 dated 12.05.2000
and work order no. 115 dated 24.05.2000. The time period for
completion of work was one month and two months respectively.
The Contractor alleged that despite the work being completed to
the satisfaction of MCD, and the work having been recorded in the
Measurement Book (hereinafter referred to as ‘MB’) maintained by the
MCD, and the bills having been approved by the Engineer and Divisional
Accountant, the payments were not released.
The Contractor submitted the following statement of claim:
MCD resisted the aforesaid claim. It was alleged that the Claim
was time barred. On merits, it is alleged by the MCD that the Contractor
did not supply the dumping receipts, photographs, videography to prove
that the silt was dumped at the designated dumping site after its removal
from the drain. It was alleged by MCD that aforesaid proof was required
Amount on A/c of work done
(gross amount)
Rs.6,38,703
Earnest Money Rs.16,800
Interest @ 12% per annum Rs. 3,27,750
Cost of Arbitration proceeding and
legal expenses and appointment of
arbitrator
Rs. 50,000
Total Rs. 10,33,253
to be submitted by the Contractor and in the absence of the same, it
cannot be claimed by the Contractor that the work was satisfactorily
completed by it. It was further submitted that vigilance department of the
MCD had issued instructions not to release the payments in view of
complaints received by it against the Contractor.
3. The Arbitral Tribunal rejected the objection on limitation in favor
of the Contractor. The Tribunal held that no notice for final bill was ever
given by the MCD to the Contractor and even from the date of
finalization, the notice given by the Contractor on 04.03.2004 for
appointment of arbitrator, was within limitation.
4. On merits too, the Arbitral Tribunal allowed the Claim and
awarded interest on the sums claimed for pre-reference, pendente-lite,
and future.
5. Arbitral Tribunal has returned a finding that the Contractor had
dumped the silt at the sites other than the sites designated in the work
order, on the instructions of the filed staff of MCD. Arbitral Tribunal
took note of the instructions and held that there was no breach of contract
by the Contractor. It is noted by the Arbitral Tribunal that the Contractor
is entitled to be paid as per the actual lead and not the pre-fixed lead of
10-20 kms for the designated dumping sites. It has accordingly rejected
the MCD’s argument that the Contractor shall unjustly gain since he gets
paid at the actual lead and not for the pre-fixed lead cost of 10-20 kms
already built into the rates payable to the Contractor for the work done.
6. MCD filed objections under Section 34 of the Act. It re-agitated
the plea of limitation and also contended that the Contractor had failed to
prove compliance of the contract whereby it was obliged to dump the silt
at the sites designated in the contract. In absence of the same the
contractual obligation remained unfulfilled and hence bills were not
cleared. MCD also challenged the interest awarded by the arbitrator.
7. The Trial Court vide impugned order while rejecting the plea of
limitation, set aside the award by observing that in absence of SLF
receipts, which would have proved dumping of silt at the designated
sites, Contractor has failed to show completion of work as per the
Contract. MB relied upon by the Contractor only showed the quantities
of desilting carried out and does not reflect the dumping at the designated
sites. The Court below, did not concur with the finding of the Arbitral
Tribunal that in view of the instructions issued by the field staff, the
contractual condition of dumping at the designated site was waived and
he was directed to dump at new sites that were closer to the location. The
Court found the Contractor wanting compliance with the contract for the
said reason.
8. The law on scope of interference in Section 37 of the Act is well
settled. Reference in this regard be made to the decisions of Co-ordinate
benches of this Court in NHAI v. M/s. BSC-RBM-Pati Joint Venture
reported as 2018 SCC OnLine Del 6780 and Union of India v. Sikka
Engineering Company reported as 2019 SCC OnLine Del 8788. The
scope of judicial interference is very minimal and confined to the
grounds countenanced in Section 34 of the Act. The settled position of
law, through judicial decisions, is that the Court hearing objections under
Section 34 of the Act is not required to judge the arbitral award as if it
were sitting in appeal. However, out of judicial habit the Courts tend to
act like appellate courts and blur the distinction between the two very
distinct jurisdictions.
9. Applying the settled legal principles, it is felt that the Court below
exceeded its jurisdiction by supplanting its own view on the view formed by the Arbitral Tribunal, which is not permissible. The view formed by Arbitral Tribunal is a plausible view and does not appear to be manifestly perverse to call for interference.
10. The Arbitral Tribunal was of the view that dumping of silt in the
sites other than designated sites was not a breach of contract in view of specific instructions received from the field staff. MB was filed as
evidence of silting work executed by the Contractor. Arbitral Tribunal relied upon this piece of evidence and was satisfied about its sufficiency. In Associate Builders v. Delhi Development Authority reported as (2015) 3 SCC 49, it has been laid down that Arbitral Tribunal is the master of both quality and quantity of evidence to reach a finding of fact. In view of this legal position, it was not proper for the Court below to discount evidentiary value of the MBs by calling it secondary evidence. Indisputably, an arbitral award, which is based on no material or
evidence at all can be held to be vitiated by patent illegality but
insufficiency of evidence or material cannot be a ground for setting aside
an arbitral award. Pertinently, MCD’s own witnesses namely Manoj
Kumar, Executive Engineer admitted that the bills for payments were
finalized after making proper enquiries and test checks by the concerned
staff and then were passed for payment by the Ex. Engineer and the
Divisional Accountant. The bills were exhibited as well. Thus, there was
evidence and material available on the record which substantiated the
Contractor’s claim. Apparently, the Court had embarked upon an
exercise to re-evaluate the sufficiency of evidence in material produced
and faulted the Arbitral Tribunal in incorrectly appreciating the
sufficiency of the said material which is clearly outside the ambit of
Section 34 of the Act.
11. The power of Arbitral Tribunal to award interest for all the three
periods namely, pre-reference, pendentelite and post award, is settled, after all. It has been held by Supreme Court, in Reliance Cellulose Products Ltd v. ONGC reported as (2018) 9 SCC 266, that interest is compensatory in nature and is parasitic on the principal amount. Following the “Reliance” ratio, it is seen that arbitrator is empowered under Section 31(7) of the Act to grant interest for all the three periods, unless the contract in so many words prohibits the “arbitrator” from granting interest under Section 31(7) of the Act. A clause in a contract that prohibits payment of interest on delayed payments, does not restrict the “arbitrator” to grant interest since it does not prohibit the “arbitrator” from granting interest under Section 31(7) of the Act and is a restriction on the contracting party to claim interest on delayed payments. As stated above, since interest in compensatory in nature, the arbitrator’s powers are not curtailed by such narrow clauses in the contract. In view thereof, the award of interest by the Arbitral Tribunal for pre-refence, pendente lite and post award periods, is neither contrary to the terms of contract nor is it in breach of Section 31(7) of the Act.
12. This Court also takes note of the submission that insofar as subject
work orders are concerned, the same were not part of any vigilance
inquiry. The submission remained undisputed. In view of the above, the
general instructions issued by the vigilance department vide letter dated
09.10.2002 could not have been made the ground to deny payments to
the Contractor.
a
b
c
d
e
f
g
h
This is a True Court Copy™ of the judgment as appearing on the Court website.
MANU/DE/3574/2023 : Downloaded from www.manupatra.com
Printed on : 09 Sep 2023 Printed for : ADROIT CLAIMS AND ADR CONSULTANTS
Neutral Citation Number of : 2023:DHC:3728
FAO 212/2010 Page 7 of 7
13. Consequently, the impugned order is set aside and the award
passed by the Arbitral Tribunal is upheld.
(MANOJ KUMAR OHRI)
JUDGE
MAY 25, 2023
ga
a
b
c
d
e
f
g
h
This is a True Court Copy™ of the judgment as appearing on the Court website.
MANU/DE/3574/2023 : Downloaded from www.manupatra.com
Printed on : 09 Sep 2023 Printed for : ADROIT CLAIMS AND ADR CONSULTANTS
This is a True Court CopyTM of the judgment as appearing on the Court website.
Publisher has only added the page para for convenience in referencing.
a
b
c
d
e
f
g
h
This is a True Court Copy™ of the judgment as appearing on the Court website.
MANU/DE/3574/2023 : Downloaded from www.manupatra.com
Printed on : 09 Sep 2023 Printed for : ADROIT CLAIMS AND ADR CONSULTANTS
Print Page
No comments:
Post a Comment