2014 Supreme(SC) 832

SUPREME COURT OF INDIA
Ranjan Gogoi, R.F. Nariman, JJ.
Associate Builders – Appellant
Versus
Delhi Development Authority – Respondent
CIVIL APPEAL NO. 10531 OF 2014 (ARISING OUT OF SLP (CIVIL) NO.14767 OF 2012)
Decided On: 25-11-2014

IMPORTANT POINTS
Merits of decision by the award not a ground for setting it aside unless it is opposed to public policies, contrary to law, perverse etc.
A possible view of the Arbitrator on facts cannot be interfered to set aside the award.
Division bench of High Court cannot act as if first court of appeal.
If the appellant (DDA) is at fault for the delay, respondents (contractor) can be compensated.

Headnote:(a) Arbitration and Conciliation Act, 1996 – Section 34(2)(a) – Grounds for challenge to arbitral award – Merits of decision by the award not a ground – Merits of award to be looked into only if in conflict with the public policy of India, viz. fundamental policy of Indian law, interest of India and Justice or morality – An award which has flouted the audi alteram partem principle, a fundamental juristic principle, as contained in Sections 18 and 34 (2)(a)(iii) and which is perverse warrants looking into merits of the decision – Arbitrator’s approach not arbitrary or capricious – Finding of fact would be final – An award would be liable to be set aside for error of law – Arbitral tribunal must decide in accordance with terms of contract, construed in a reasonable manner. (Para 12)

       1994 Supp (1) SCC 644; (2003) 5 SCC 705; (2006) 4 SCC 445; (2006) 11 SCC 181; (2006) 11 SCC 245; (2008) 13 SCC 80; (2011) 5 SCC 758; (2012) 1 SCC 718; (2014) 9 SCC 263; (1999) 2 SCC 10; (2012) 1 SCC 594; 1959 Supp (2) SCR 406; 1952 1 All ER 122; AIR 1923 PC 66; (2006) 11 SCC 181; (2011) 10 SCC 573; (2012) 5 SCC 306 – Relied upon

       (b) Arbitration and Conciliation Act, 1996 – Section 34 – Arbitrator applying Hudson’s formula – Division Bench setting aside award holding mechanical application of a formula however well understood in the trade not possible for arbitrator – Division Bench exceeding jurisdiction in interfering with a possible view of the Arbitrator on facts. (Para 15, 16)

       (2006) 11 SCC 181 – Relied upon

       (c) Arbitration and Conciliation Act, 1996 – Section 34 – Hudson’s formula – Division Bench of High Court holding that to apply Hudson’s formula cost of the work completed has to be taken into account and not the contract value – Legally incorrect – Impugned judgment not sustainable. (Para 20)

       (d) Arbitration and Conciliation Act, 1996 – Section 34 – Division bench of High Court interfering with findings of fact by arbitrator as if first court of appeal – Not permissible. (Para 22)

       (e) Arbitration and Conciliation Act, 1996 – Section 34 – Clause 10C of contract – Concerns itself with the price of material incorporated in the works or wage or labour increases – Nothing to do with claims for any other items or damages – Arbitrator correctly construing and applying this clause to claims 2, 3 and 4 and not applying it to claims 9, 10, 11 and 15 – No fault. (Para 24, 25)

       (f) Arbitration and Conciliation Act, 1996 – Section 34 – Clause 22 of contract – Delay in execution of project – DDA not raising any argument based on this clause before Arbitrator but argued before Single Judge of High Court – Single Judge rightly holding that if the appellant is at fault for the delay, respondents can be compensated – Not argued before Division Bench of High Court – Compensation can be denied only if objection is taken on ground of site not being available for any reason – DDA not taking this objection anywhere anytime. (Para 26)

       (1998) 2 Arb. LR 209; (2014) 9 SCC 246 – Referred

       (g) Arbitration and Conciliation Act, 1996 – Section 34 – None of the 15 claims overlapping – All contained under separate heads – No infirmity in arbitral award. (Para 27, 28)

       

       Facts of the case:

       The appellant was awarded a certain construction work contract by the DDA. DDA was building a colony consisting of 7,000 houses in Trilok Puri in the trans-Yamuna area. 168 Middle Income Group houses and 56 Lower Income Group houses, Grade-A Pocket-B (balance work) was awarded for the tendered amount of Rs.87,66,678/-. The contract was to be completed in 9 months. It was ultimately completed only in 34 months, the contractor completing 166 Middle Income Group houses and 36 Lower Income Group houses. The total value of work that was done amounted to Rs.62,84,845/-. As many as 15 claims were made by the contractor and the High Court of Delhi appointed one Shri K.D. Bali to arbitrate the present dispute.

       Claims 9, 10, 11 and 15, have been allowed by the Arbitrator and the DDA’s objections have been dismissed by the learned Single Judge of the High Court.

       The Division Bench in an appeal has stepped in to set aside the judgment of the Single Judge and negative these claims.

       This appeal also concerns claims 12 and 13 which have been scaled down by the Division Bench.

       Finding of the Court:

       Impugned judgment is not sustainable.

       Result:

       Appeal allowed.