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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Telecommunication Consultants India Ltd. - Appellant
Versus
M/s. Mbl Infrastructure Ltd. - Respondent
O.M.P. (Comm) (Original Miscellaneous Petition (Comm)) No. 507 of 2020; I.A. (Interlocutory Application) No. 9398 of 2920, 11539 of 2020
Decided On : 10-02-2021
ARBITRATION - AWARD - CHALLENGE - GROUNDS - PATENT ILLEGALITY - ERRORS APPARENT ON THE FACE OF THE AWARD - AWARD SET ASIDE IN PART - INTEREST - AWARD OF COMPOUND INTEREST - JUSTIFIED - AWARD SUSTAINED.
Fact of the Case:
Petitioner, TCIL, challenged an arbitral award dated 20.01.2020 (impugned award) passed by the Arbitral Tribunal comprising of three Arbitrators. The impugned award was rendered in the context of disputes that have arisen between the parties in relation to an agreement dated 17.09.2008, as amended by an agreement dated 31.10.2008. By the impugned award, the Arbitral Tribunal has partly accepted the claims preferred by the respondent, MBL. The Arbitral Tribunal has accepted that the total amount payable to the respondent in respect of its claim would be Rs. 5,91,36,814. The Tribunal further allowed interest at the rate of 12% per annum, as per normal banking norms on the said amount calculated from 24.12.2013 (i.e. the date of filing of Statement of Claim) till the date of making and publishing the award. The Tribunal further directed that the said payment be made within a period of 30 days failing which a further interest of 12% per annum is to be applicable from the date of the Award till the date of payment. The Arbitral Tribunal also awarded cost quantified at Rs. 58,48,927/- along with simple interest at the rate of 12% per annum.
Finding of the Court:
The Court held that the Arbitral Tribunal had committed a patent error in not accounting for the adjustment of excess payment of a sum of Rs. 1,32,15,493/-, which according to TCIL was made by HSRDC on account of the inflated measurement of the work performed. The Court also held that the Arbitral Tribunal had erred in not considering the overpayment to the extent of Rs. 1,32,15,493/-. The Court further held that the Arbitral Tribunal had also erred in not accounting for the amount of Rs. 31,43,111/- deposited by TCIL as WCT and the amount of Rs. 28,18,608/- paid to MBL from the amounts of Rs. 59,61,715/- withheld by TCIL on the aforesaid account. The Court also held that the Arbitral Tribunal had erred in awarding Rs. 10,00,000/- as compensation for wrongful invocation of the Bank Guarantees by TCIL. The Court also held that the Arbitral Tribunal had erred in awarding Rs. 60,00,000/- against TCIL for its failure to confirm the certificate of performance issued by it to MBL. However, the Court held that the award of interest by the Arbitral Tribunal was justified.
Issues: 1. Whether the Arbitral Tribunal had committed a patent error in not accounting for the adjustment of excess payment of a sum of Rs. 1,32,15,493/-, which according to TCIL was made by HSRDC on account of the inflated measurement of the work performed? 2. Whether the Arbitral Tribunal had erred in not considering the overpayment to the extent of Rs. 1,32,15,493/-? 3. Whether the Arbitral Tribunal had also erred in not accounting for the amount of Rs. 31,43,111/- deposited by TCIL as WCT and the amount of Rs. 28,18,608/- paid to MBL from the amounts of Rs. 59,61,715/- withheld by TCIL on the aforesaid account? 4. Whether the Arbitral Tribunal had erred in awarding Rs. 10,00,000/- as compensation for wrongful invocation of the Bank Guarantees by TCIL? 5. Whether the Arbitral Tribunal had erred in awarding Rs. 60,00,000/- against TCIL for its failure to confirm the certificate of performance issued by it to MBL? 6. Whether the award of interest by the Arbitral Tribunal was justified?
Ratio Decidendi: 1. The Court held that the Arbitral Tribunal had committed a patent error in not accounting for the adjustment of excess payment of a sum of Rs. 1,32,15,493/-, which according to TCIL was made by HSRDC on account of the inflated measurement of the work performed. The Court also held that the Arbitral Tribunal had erred in not considering the overpayment to the extent of Rs. 1,32,15,493/-. 2. The Court held that the Arbitral Tribunal had also erred in not accounting for the amount of Rs. 31,43,111/- deposited by TCIL as WCT and the amount of Rs. 28,18,608/- paid to MBL from the amounts of Rs. 59,61,715/- withheld by TCIL on the aforesaid account. 3. The Court held that the Arbitral Tribunal had erred in awarding Rs. 10,00,000/- as compensation for wrongful invocation of the Bank Guarantees by TCIL. 4. The Court held that the Arbitral Tribunal had erred in awarding Rs. 60,00,000/- against TCIL for its failure to confirm the certificate of performance issued by it to MBL. 5. The Court held that the award of interest by the Arbitral Tribunal was justified.
Final Decision: The petition was allowed to the extent that the impugned award was set aside in part. The pending applications were also disposed of.
JUDGMENT
Vibhu Bakhru, J. - The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the A&C Act') impugning an arbitral award dated 20.01.2020 (hereinafter the 'impugned award') passed by the Arbitral Tribunal comprising of three Arbitrators, Mr. O.P. Gaddhyan, Mr. Vipan Kumar and Justice (Retd.) Reva Khetrapal as the presiding arbitrator. Whilst Mr. O.P. Gaddhyan and Justice (Retd.) Reva Khetrapal delivered the impugned award by majority, Mr. Vipan Kumar entered a dissenting opinion on 23.01.2020.
2. The impugned award has been rendered in the context of disputes that have arisen between the parties in relation to an agreement dated 17.09.2008, as amended by an agreement dated 31.10.2008.
3. By the impugned award, the Arbitral Tribunal has partly accepted the claims preferred by the respondent. The Arbitral Tribunal has accepted that the total amount payable to the respondent in respect of its claim would be Rs. 5,91,36,814. The Tribunal further allowed interest at the rate of 12% per annum, as per normal banking norms on the said amount calculated from 24.12.2013 (i.e. the date of filing of Statement of Claim) till the date of making and publishing the award. The Tribunal further directed that the said payment be made within a period of 30 days failing which a further interest of 12% per annum is to be applicable from the date of the Award till the date of payment. The Arbitral Tribunal also awarded cost quantified at Rs. 58,48,927/- along with simple interest at the rate of 12% per annum.
4. The petitioner (hereinafter 'TCIL') assails the impugned award to the extent as noted hereafter, as being patently illegal and contrary to the fundamental policy of Indian Law.
5. Briefly stated, the relevant facts that are necessary to address the controversy are as under:-
6. Haryana State Roads & Bridge Development Corporation Ltd. (hereafter 'HSRDC') invited tenders for "Construction of 144 nos. Type V and 24 nos. Type VI houses with parking in basement (C+7 Storey) in the campus of Rajiv Gandhi Thermal Power Project at Khedar in Hissar District" (hereinafter 'the project').
7. The petitioner (TCIL) submitted its tender for executing the project works on 22.07.2008. TCIL's bid of Rs. 32,29,49,824/- was accepted by HSRDC and the contract for implementation of the project was awarded to TCIL by a letter dated 21.08.2008.
8. In the aforesaid letter of acceptance, TCIL was directed to furnish a Performance Security as per Clause 34 of Section I- Instructions to Bidders, for an amount equivalent to 5% of the contract price i.e. Rs. 1,61,47,491/-, within 21 days of the receipt of the letter dated 21.08.2008. The same was duly furnished by TCIL.
9. Thereafter, TCIL approached the respondent (hereinafter MBL) to execute the said project as a sub-contractor and on 18.08.2008, MBL agreed to the terms and conditions. It was agreed that the contract would be executed on back to back basis with TCIL retaining a margin of 2.5% and disbursing the balance 97.5% to MBL. In addition, TCIL agreed to depute three engineers for co-ordination between MBL, TCIL and HSRDC and MBL agreed to bear the cost of the aforesaid at the rate of Rs. 40,000/- per month for each engineer.
10. Thereafter, on 17.09.2008, an agreement was entered into between TCIL and MBL (hereinafter 'the Agreement'). MBL agreed to complete the project within a period of eighteen months. TCIL agreed to release the payments received from HSRDC, after deducting 2.5% margin, immediately on receiving the same.
11. In terms of the Agreement dated 17.09.2008, MBL furnished a Performance Security in the form of a Bank Guarantee for the sum of Rs. 1,61,47,491 and an invoice payment Bank Guarantee for Rs. 60 lacs on 06.10.2010, in favour of TCIL.
12. On 31.10.2008, the parties agreed to an amendment to the said Agreement and the terms and condit
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