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2019 Supreme(Del) 1788
IN THE HIGH COURT OF DELHI AT NEW DELHI
G.S. SISTANI, SANGITA DHINGRA SEHGAL, JJ.
Theme Engineering Services Pvt. Ltd. - Appellant
Versus
M/s Rail Vikas Nigam Ltd - Respondent
First Appeal From Order (Os) (Comm) No. 66 of 2017
Decided On : 15-10-2019
J.P. Sengh, Adv., Vibhor Verdhan, Adv., Yash Agarwal, Adv., Manish Mehta, Adv., Mrigna Shekhar, Adv., J.C. Seth, Adv.
The court emphasized the limited scope of interference under Section 37 of the Act and upheld the validity of the contract and the encashment of the Bank Guarantee by the respondent.
Headnote:
Arbitration and Conciliation Act - Termination of Contract - Bank Guarantee - Tax Liability - Performance Security - Contract Formation
Fact of the Case:
The appellant, a multidisciplinary organization, applied for the respondent's business proposal for Project Management Consultancy. The bid was accepted, but the contract remained unsigned. The respondent terminated the contract due to non-deployment of key personnel and encashed the Performance Bank Guarantee. An arbitration petition was filed, and the sole arbitrator dismissed the claims filed by the appellant.
Finding of the Court:
The court upheld the validity of the contract and the inclusion of service tax as a mere discrepancy in the Notification of Award. The court found that the appellant did not act in accordance with the RFP documents, giving the respondent the right to terminate the contract and encash the Bank Guarantee.
Issues: The primary issues were the termination of the contract, encashment of the Bank Guarantee, and tax liability.
Ratio Decidendi: The court held that the findings of fact and law of the arbitrator/Arbitral Tribunal are not amenable to interference unless contrary to the terms of the contract or ex facie, perverse. The court emphasized the narrow scope of interference under Section 37 of the Act.
Final Decision: The court dismissed the appeal, finding no grounds to interfere with the impugned order passed by the learned Single Judge under Section 34 of the Act.
JUDGMENT :
G.S. Sistani, J.
This is an appeal under Section 37 (1) (b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') read with Section 13 (1) of the Commercial Courts Act, 2015, directed against the order dated 21.11.2016 (impugned order) passed by a learned Single Judge in O.M.P.(COMM) No. 506 of 2016, by which the Arbitral award dated 18.11.2015 and the rectified award dated 07.12.2015 passed by the sole arbitrator has been upheld and the objections to the award stand dismissed.
2. The primary issues, which arose between the parties were whether the respondent (RVNL) had unilaterally terminated the contract without any reasonable justification or reason and whether the Performance Bank Guarantee (PBG) had been wrongfully encashed.
3. Brief facts necessary to be considered for disposal of this appeal are that the appellant is a multidisciplinary organization, engaged in consultancy work and the respondent is a public sector enterprise. The appellant applied for the respondent's business proposal for Project Management Consultancy (PMC) for Construction of a Road bed, Major and Minor Bridges, Track Linking and other General Electrical Work etc., in connection with Doubling works in Kharagpur Division of South Eastern Railway in the State of West Bengal. In response to the Request for Proposal ("RFP") dated 16.05.2011 of the respondent the appellant deposited a demand draft of Rs. 5000/- (Rupees Five Thousand) in lieu of RFP documents downloaded from respondent's official website (www.rvnl.org) along with the bid proposal. A sum of Rs. 8.33 lacs (Rupees Eight Lacs Thirty Three Thousand) was also submitted in the shape of Bank Guarantee (BG) dated 27.06.2011 issued by Punjab National Bank (PNB), Jaipur.
4. The appellant submitted its bid towards RFP on 30.06.2011, floated by the Chief Project Manager of the respondent vide letter dated 28.06.2011. Subsequently, the bids were opened on 1.7.2011.
5. The bid of the appellant was accepted and notified through a letter of acceptance (Award) issued on 7.11.2011. However, the inclusion of service tax was not in conformity with the clause 4.3.6 contained in the RFP & Data Sheet document, read as under: -
"Tax liability: - The consultant is liable to pay taxes as applicable. While the service tax will be reimbursed as applicable to the consultant by the Employer, all other taxes shall be payable by the Consultant. RVNL shall be deducting tax to be deducted at source as per Tax laws in India"
The appellant through letter dated 9.11.2011 requested the respondent to rectify the mistake and issue a fresh notification. Pursuant to this, the respondent issued a corrigendum dated 28.11.2011. However, the contract remained unsigned by the parties.
6. According to the terms and conditions, the appellant submitted a PBG in the sum of Rs 20,75,200 (Rupees Twenty Lacs Seventy Five Thousand Two Hundred) dated 7.12.2011 vide letter dated 12.12.2011. It is the case of the appellant that despite several reminders and personal visits, the respondent did not sign the contract. The appellant commenced the work in terms of clause 11.12 of the ITC i.e. commencement of the services within 15 days of the issue of the revised Letter of Acceptance (LOA). The respondent on 12.03.2012, issued a show cause notice to the appellant for rectifications regarding the CVs of key personnel. The appellant denied all the charges vide letter dated 20.03.2012. Thereafter, the respondent vide letter dated 4.04.2012 terminated the contract in terms of Section 15.01(a) of Article XV, GCC and forfeited the Bank Guarantee in terms of Section 15.03 on 5.04.2012. Upon failure of the parties to settle the dispute amicably, an arbitration petition under Section 11(6) was filed in this Court, on the basis of which, a sole arbitrator was appointed by an order dated 14th August, 2013.
7. The Arbitrator while dismissing the claims filed by the appellant, noted that the material ground of termination was the
