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2016 Supreme(Del) 2742
IN THE HIGH COURT OF DELHI AT NEW DELHI
MANMOHAN SINGH, J.
KOCHHAR CONSTRUCTION WORKS - Plaintiff
Versus
DDA & ORS – Respondent
I.A. No.17289/2014 in CS(OS) No.1018 of 2014
Decided on : 02-08-2016
Advocate Appeared:
For the Appellant : Mr.P.S. Bindra, Adv. with Ms. Ashmita Yadav, Adv.
For the Respondents: Ms.Beenashaw N. Soni, Adv. with Mr.Aakash Yadav, Adv. for DDA.
The main legal point established in the judgment is the importance of adhering to court directions and existing pleadings in arbitration proceedings, and the consequences of deviating from them.
Headnote:
Arbitration Act - Construction Contract - Section 30, 33 of the Arbitration Act, 1940 - 14 of the Act - 12, 14, 16, 30, 33 of the Arbitration Act, 1940 - The judgment discusses the application of Sections 30 and 33 of the Arbitration Act, 1940 in the context of objections filed challenging an arbitral award. It also delves into the history of the arbitration proceedings, including the appointment of arbitrators, dismissal of objections, and subsequent re-adjudication of claims. The court analyzes the calculation methods used by the arbitrators, the validity of their decisions, and the adherence to existing pleadings and court directions. The judgment highlights the importance of following court directions and existing pleadings in arbitration proceedings and sets aside the impugned award due to errors in calculation and deviation from existing pleadings.
Fact of the Case:
The plaintiff filed objections challenging an arbitral award related to a construction contract. The history of arbitration proceedings, including the appointment of arbitrators, dismissal of objections, and subsequent re-adjudication of claims, was detailed. The plaintiff alleged errors in the calculation methods used by the arbitrators and deviation from existing pleadings and court directions.
Finding of the Court:
The court found that the Arbitrator erred in restricting the escalation and using a different calculation method, deviating from existing pleadings and court directions. The impugned award was set aside, and the objections filed by the plaintiff were allowed. The plaintiff was entitled to receive the remaining amount of the awarded sum.
Issues: The issues revolved around the validity of the arbitral award, adherence to existing pleadings and court directions, and the calculation methods used by the arbitrators.
Ratio Decidendi: The court emphasized the importance of following court directions and existing pleadings in arbitration proceedings. It held that the Arbitrator erred in deviating from existing pleadings and using a different calculation method, leading to the setting aside of the impugned award.
Final Decision: The impugned award was set aside, and the objections filed by the plaintiff were allowed. The plaintiff was entitled to receive the remaining amount of the awarded sum.
MANMOHAN SINGH, J.
1. The plaintiff has filed objections being I.A. No. 17289/2014 under Section 30 & 33 of the Arbitration Act, 1940 (hereinafter referred to as the “Act”) to the award dated 12th March, 2014 passed by Arbitrator/defendant No.2 Sh. Gurmukh Singh Bhatia.
2. It is pertinent to mention that the main suit being CS (OS) No. 1018/2014 under Section 14 of the Act was filed by the plaintiff for seeking directions to the defendant No. 2 to file the original Award dated 12th March, 2014 with depositions and the arbitration proceedings in this Court. Directions were issued accordingly to the defendant No.2. The arbitral record along with the original award dated 12th March, 2014 was filed and by order dated 28th July, 2014 the suit was disposed of. Thereafter, the above mentioned objections were filed challenging the impugned award dated 12th March, 2014.
3. The brief facts of the case are that the plaintiff was awarded the contract of construction of 120 LIG and 80 MIG Flats in ‘Pocket-D/1/C, Janakpuri’, by the defendant No.1/DDA vide Agreement bearing No.93/EE/HD-VII/80-81.
4. As disputes and differences arose between the parties, the plaintiff invoked arbitration and Sh.S.Nagarajan was appointed as sole Arbitrator by the defendant No.1/DDA vide letter dated 16th January, 1991 who heard the parties and published the award on 28th August, 1993.
5. The defendant No.1 filed objections against the aforesaid award which were dismissed and the award was made Rule of Court on 16th December, 1999 by this Court.
6. Aggrieved by the aforesaid dismissal of objections, the defendant No.1/DDA had filed an appeal being FAO(OS)No.61/2000 which was disposed of by Division Bench confirming the award on all claims except claim No.8 which was directed to be re-adjudicated on existing pleadings by freshly appointed Arbitrator on ‘item-wise’.
7. Thereafter, vide communication of defendant No.1/DDA dated 11th September, 2009, Sh. J.K.Garg, S.E. (Arbitration) was appointed as Arbitrator to re-adjudicate claim No.8 who passed an award dated 17th March, 2010.
8. Aggrieved by the said award dated 11th September, 2009, the plaintiff challenged the same on the grounds that the award made was contrary to the directions issued by the Division Bench of this Court wherein it was challenged that the deductions made in the award were completely disproportionate to the value of works in question.
9. Ultimately, the said award dated 17th March, 2010 was set aside by this Court by judgment dated 3rd September, 2012 with directions to re-adjudicate Claim No.8 on the basis of the terms listed in the judgment.
10. This time Sh.Gurmukh Singh Bhatia S.E. (Arbitration) was appointed by the defendant as the sole Arbitrator who had passed the impugned award dated 12th March, 2014 which was challenged by the plaintiff.
11. In reply to the objections, it is alleged by the defendant No.1 that the objections filed by the plaintiff are not maintainable under Sections 30 & 33 of the Act and this Court should not interfere with the award as the Arbitrator has not misconducted himself or with the proceedings or there is no error apparent on the face of the award. The said objections does not fall in any of the categories as provided under the said provision, thus, the objections are not maintainable. It is submitted that the Arbitrator had heard the parties at length and recorded item wise observation and dealt with all the 12 hindrances recorded in the order dated 17th March, 2010. It is argued on behalf of the defendant No.1/DDA that the Arbitrator had to freshly adjudicate claim No.8 and he was rightly within his rights to adopt the method of calculations, as the contract provides for cost index method as the said method is more appropriate. It is also submitted that the Arbitrator has calculated the Average Cost Index during 1981 to 1983 and then calculated the escalation. The indices adopted for calculating the escalation in respect of claim No.8 is in order and as p
