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IN THE HIGH COURT AT CALCUTTA
KRISHNA RAO, J.
Union of India – Petitioner
Versus
Neo Built Corporation - Respondent
AP 1717 of 2015
Decided On : 13-07-2022
Arbitration and Conciliation Act, 1996 – Section 34 – Sought for settlement of dispute – Arbitrator Tribunal – Held, Court now come to fourth head of public policy, namely, patent illegality – It must be remembered that under Explanation to Section 34(2)(b), an award is said to be in conflict with public policy of India if making of award was induced or affected by fraud or corruption – Court finds that claimant had raised altogether 16(Sixteen) claims but Ld. Arbitral Tribunal allowed only 5 (Five) claims and Tribunal has allowed said claim after considering terms of contract and documents supplied by parties. Ld. Tribunal assigned well reasons while allowing claim of claimant – Dismissed.
JUDGMENT :
(Krishna Rao, J.) :
1. The petitioner has filed the instant application under Section 34 of the Arbitration and Conciliation Act, 1996 against the award passed by the Arbitrators dt. 01.9.2015.
2. On 03.10.2008, the Chief Engineer, Metro Railway/Calcutta had published a tender notice with respect of execution of ROB and road approaches at Kharagpur in replacement of Manned Level Crossing at KM 118/ 4-5, KM 0/18 and 123/2-3 in Kharagpur -Bhadrak Section of South Eastern Railway.
3. The respondent had participated in the said tender and the said work was awarded in favour of the respondent. The petitioners vide letter dt. 05.02.2009 accepted the rate quoted by the respondent for an amount of Rs. 18,77,85,218.89/- against the estimated value of Rs. 17,99,99,99.40/-.
4. On 29.09.2009, an agreement was executed between the petitioner and the respondent being agreement no. MTP/Civil/887 and the time of completion of the said work was 24 months from the date of issue of the letter of the acceptance.
5. On 05.02.2009 a letter of acceptance was issued in favour of the respondent but the progress of the work was very slow. In spite of several notices and reminders the progress of the work was very slow and accordingly vide notice dt. 12.07.2010, the petitioners by invoking Clause 62 of General Clause of Contract, 2001, the Contract was terminated.
6. As per the agreement the stipulated period of completion of the work was 04.02.2011 but the contract was cancelled 12.07.2010, much prior to the date of completion on the ground that the respondent had executed only 29 % of the work and 71 % of the work was remain to be completed.
7. The petitioner has terminated the Contract and has also not made the payment to the respondent and accordingly the respondent had sought for settlement of dispute through the arbitrator and accordingly, the petitioner had appointed consisting of three arbitrators.
8. The respondent had filed statement of claim consisting of 16 claims total amounting to Rs. 12,26,53,003.00/-along with interest which are as follows:-
| Claim No. | Description | Amount (Rs.) |
| 1(a) | Amount payable for the work executed but not paid (Details, vide, ANNEXURE – I,II,III) | 3,19,50,515.00 |
| 1(b) | Price Variation as per Clause No. 2. 18, Page 42, Section 2, Special condition of Contract. (Details, vide, ANNEXURE – IV). | 28,57,989.00 |
| 2 | Amount payable for refund of Security Deposit (S.D) Wrongfully forfeited : A) Earnest Money adjusted to S.D. = Rs.10,50,000.00 B) S.D. deducted from Bills = Rs. 16,82,660.00 TOTAL = Rs. 27,32,660.00 | 27,32,660.00 |
| 3. | Amount payable for refund of Performance Guarantee wrongfully encahsed/forfeited. | 93,89,261.00 |
| 4. | Amount payable for dewatering work at different stages of work for the structures falling on ‘P’ & ‘X’ lines of R.O.B. (Details, vide, ANNEXURE – V). | 2,87,725.00 |
| 5 | Amount payable for filling and leveling up the swampy land which was being used as drainage basin/receptacle of drainage water from the adjoining areas (Sub-Divisional) Hospital side, I.I.T. side etc.) with earth, moorum, sand etc. for making the area fit for execution of R.O.B. (Details, vide, ANNEXURE – VI) | 1,18,39,356.00 |
| 6 | Amount payable for expenditures incurred for carriage of steel materials and cement by Van/Hand Cart from stack yard to workplace including loading, unloading etc. complete (Details, vide, ANNEXURE-VII). | 3,53,875.00 |
| 7 | Amount payable for expenditures incurred for re-handling and re-carriage of materials due to scarcity of space in the working site for stacking of materials (Details, vide, ANNEXURE – VIII) | 2,37,200.00 |
| 8 | Amount payable for expenditures incurred for cutting trees, dismantling Goomty adjacent to Signal Cabin & making table at the Signal Cabin. (Details, Vide, ANNEXU | |
The encashment of a performance bank guarantee does not require proof of loss, but must comply with the contract's terms; failure to evaluate these terms constitutes patent illegality.
The court set aside the arbitral award due to the arbitrator's arbitrary findings regarding contract termination and lack of evidence supporting claims, establishing grounds for patent illegality und....
The court emphasized the requirement for the arbitrator to assign reasons in support of the award and the limited scope of interference by the court in arbitration awards.
An arbitrator's award may be upheld if it conforms to contract terms, despite challenges regarding procedural compliance or interpretation, provided it does not contravene public policy.
The limited grounds for interference with an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, emphasize the concept of patent illegality and the criteria for setting asi....
The judgment clarified the limited scope of arbitration interference under the Arbitration and Conciliation Act, emphasizing adherence to procedural integrity and evidence standards in awards.
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