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2019 Supreme(Del) 925
IN THE HIGH COURT OF DELHI AT NEW DELHI
NAVIN CHAWLA, J.
Mahanagar Telephone Nigam Ltd - Appellant
Versus
Unity Builders - Respondent
Original Miscellaneous Petition No. 974 of 2012
Decided On : 02-04-2019
S.K. Singh, Adv., Rameezuddin Raja, Adv., Anil Kumar Sharma, Adv., Vikas Sharma, Adv., Ashish, Adv.
The petitioner was within its right to exercise the power of lien on the amounts due and payable to the respondent as per the contractual terms.
Headnote:
Arbitration - Challenge to Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Clause 52.2 of the General Conditions of Contract - [Claim no.1, part of claim no.2 and claim no.3] - [Summary of Acts and Sections: Arbitration and Conciliation Act, 1996, Section 34; General Conditions of Contract, Clause 52.2] - The court held that the petitioner was within its right to exercise the power of lien on the amounts due and payable to the respondent as per the contractual terms. The court also emphasized that the effect of the Award passed in other arbitration proceedings could only be seen on passing of the said Award in separate proceedings or separate claims of the respondent raised after the passing of the Award in such other arbitration proceedings. The court referred to judgments in Electronic Enterprises vs. Union of India and Gangotri Enterprises Ltd. vs. Union of India to support its decision.
Fact of the Case:
The petitioner challenged the Arbitral Award and order passed by the Sole Arbitrator adjudicating disputes arising from a construction agreement. The challenge was to the award of claim no.1, part of claim no.2 and claim no.3, which were amounts withheld by the petitioner on account of exercise of lien under Clause 52.2 of the General Conditions of Contract.
Finding of the Court:
The court found that the petitioner was within its right to exercise the power of lien on the amounts due and payable to the respondent as per the contractual terms. The court also emphasized that the effect of the Award passed in other arbitration proceedings could only be seen on passing of the said Award in separate proceedings or separate claims of the respondent raised after the passing of the Award in such other arbitration proceedings.
Issues: Challenge to Arbitral Award, Exercise of Lien under Clause 52.2 of the General Conditions of Contract, Effect of Award passed in other arbitration proceedings
Ratio Decidendi: The court held that the petitioner was within its right to exercise the power of lien on the amounts due and payable to the respondent as per the contractual terms. The court also emphasized that the effect of the Award passed in other arbitration proceedings could only be seen on passing of the said Award in separate proceedings or separate claims of the respondent raised after the passing of the Award in such other arbitration proceedings.
Final Decision: The petition partially succeeded and the parties were directed to bear their own costs.
Navin Chawla, J.
This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") has been filed by the petitioner challenging the Arbitral Award dated 28.04.2012 along with the order dated 12.06.2012 passed by the Sole Arbitrator adjudicating the disputes that have arisen between the parties in relation to the Agreement No. EE(C) V/MTNL/AG/06-07/63 for the Construction of T.E. Building at Mayur Vihar, Phase-II, New Delhi (balance work awarded by the petitioner to the respondent).
2. The challenge to the Award is to the award of claim no.1, part of claim no.2 and claim no.3, which were amounts withheld by the petitioner on account of exercise of lien under Clause 52.2 of the General Conditions of Contract (GCC) for the amounts recoverable/claimed by the petitioner under the other contracts awarded to the respondent. Clause 52.2 of the GCC is reproduced hereinunder:
"52.2 Lien in respect of claims in other contracts. Any sum of money due and payable to the Contractor including the Performance Guarantee/Security Deposit refundable/returnable to him under the Contract may be withheld or retained by way of lien by the MTNL in respect of payment of a sum of money arising out of or under any other contract made by the Contractor with the MTNL.
It is an agreed term of the Contract that the sum of money so withheld or retained under this clause by the MTNL will be kept withheld or retained as such by the MTNL till his claim arising out of in the same contract is either mutually settled or determined by the Arbitrator ( if the Contract is governed by arbitration clause) or by the Competent Court, as the case may be and that the Contractor shall have no claim for interest or damage Whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under the clause and duly notified as such to the Contractor."
3. The Arbitrator has allowed the said claim in favour of the respondent on the ground that the petitioner has already made claim of such amounts in arbitration proceedings initiated in relation to the other contracts. In the opinion of the Arbitrator, once these amounts have been claimed in the other arbitration proceedings, retention of the amounts under Clause 52.2 of the Agreement was unjustified and unlawful. I cannot agree with the finding of the Arbitrator.
4. A reading of Clause 52.2 of the GCC clearly empowers the petitioner to retain its right of lien in respect of claims in other contracts on any sum of money due and payable to the contractor, including the performance guarantee/security deposit refundable/returnable to such contractor under the contract. Such lien can be exercised till the claim of the petitioner is either mutually settled or determined by the Arbitrator (if the contract is governed by the arbitration clause) or by the competent Court as the case may be. The petitioner was therefore, within its right to exercise this power of lien on the amounts due and payable to the respondent. This being a contractual power to which no challenge was made by the respondent, cannot be said to have been unlawfully exercised by the petitioner.
5. It is also not in dispute that as on the date of the Impugned Award, the other arbitration proceedings were still pending adjudication.
6. The Impugned Award is, therefore, ex-facie contrary to the plain reading of the contractual term and cannot be sustained.
7. Counsel for the respondent has submitted that after passing of the Impugned Award, by a separate Award dated 03.02.2017 disputes in one of the other arbitration proceedings have been adjudicated by the Sole Arbitrator appointed therein. The said Award, though in challenge in form of a petition under Section 34 of the Act, has rejected the counter claim filed by the petitioner for the amount that had been retained in the present contract under claim no.1. Relying upon the judgment of this Court in Electronic Enterprises vs. Union of In
