The main legal point established in the judgment is that an arbitral award must provide reasoning and comply with the statutory mandate of the Arbitration and Conciliation Act. Arbitrary awards lacking reasoning can be set aside by the court.

JUDGMENT

Sanjeev Narula, J. - The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 [hereinafter, 'the Act'] impugns the arbitral award dated 10th September, 2018, whereby the Sole Arbitrator has dismissed Petitioner's counter-claim and allowed Respondent's claim in part - to the extent of Rs. 4,33,877/-.

BRIEF FACTS

2. Petitioner - Orchid Infrastructure Developers Pvt. Ltd. [hereinafter, 'ORCHID'] awarded a contract vide letter dated 28th December, 2012, for 'Construction of 21 Dwelling Units, ORCHID ISLAND at Gurugram on 7 plots bearing numbers 257 to 262 and 261-A' [hereinafter, 'Contract'] to Respondent - Five Star Constructions Pvt. Ltd. [hereinafter, 'FIVE STAR'] for a consideration of Rs. 2,21,01,162/-. The construction was tentatively to be completed within a period of twelve months i.e., on or before 31st December, 2011.

3. Dispute arose between the parties with regard to delays in completion of work under the Contract. ORCHID contends that it released a mobilisation advance of Rs. 11,05,058/- to FIVE STAR and routinely made payments in terms of the Contract. FIVE STAR repeatedly sought extensions, which were granted by ORCHID, without prejudice to its rights to raise claims. Thereafter, ORCHID issued a show-cause notice dated 1st November, 2012, to which, there was no satisfactory response from FIVE STAR. Ultimately, on 23rd May, 2013, FIVE STAR terminated the Contract. ORCHID then issued a final bill dated 20th November, 2013, which was responded by FIVE STAR asking ORCHID to depute a suitable person for joint verification of the work done. ORCHID contended that a substantial portion of work was still left to be completed, and the same was awarded to other contractors at the cost and risk of FIVE STAR. Further, ORCHID was also forced to pay a 'delay penalty' to its customers, on account of the delay in handing over possession of the dwelling units.

AT ARBITRATION

4. In the circumstances noted above, FIVE STAR invoked arbitration under Section 11 of the Act, which led to appointment of the Arbitral Tribunal by this Court vide order dated 27th May, 2016. FIVE STAR raised claims towards:

(i) Rs. 29,60,466/- (towards expenditure incurred on work done till 14th January, 2013);

(ii) interest; and

(iii) costs. ORCHID filed its counter-claim qua mobilization advance, liquidated damages due to FIVE STAR'S failure to complete work, cost for pending work commissioned by ORCHID from other contractors and costs.

5. The Arbitrator, vide impugned award dated 10th September, 2018, allowed FIVE STAR'S claim in part and directed ORCHID to pay a sum of Rs. 4,33,877/- along with post-award interest payable at 12% per annum. The remaining claims, as well as ORCHID's counter-claims, were dismissed.

CONTENTIONS OF THE PARTIES

ON BEHALF OF ORCHID

6. Although, ORCHID seeks setting-aside of the impugned award with respect to award of claim and dismissal of counter-claims; however, Mr. Manish Sharma, counsel for ORCHID, has addressed arguments only qua the award of claim of Rs. 4,33,877/-, and no serious challenge was raised qua dismissal of counter-claims. His submissions summarised as follows:

6.1. The impugned award is arbitrary, erroneous and against the public policy of India - as it gives no reasoning for award of the claim in favour of

FIVE STAR.

6.2. The impugned award is based on conjuncture and surmises and fails to fulfil the statutory mandate of Section 31(3) of the Act. The Arbitrator has erroneously and mistakenly held in paragraph no. 11.28 of the impugned award that ORCHID (in its Statement of Defence), has admitted to the pleadings qua interim relief, and on the basis of such 'deemed admission', ruled in favour of FIVE STAR. On the contrary, ORCHID had categorically refuted FIVE STAR's claim and had rather raised counter-claims of recovery of mobilisation advance, liquidated damages, etc.

6.3. Since the Arbitrator has rejected the main claim for Rs. 29,60,466/-, which included Rs. 4,33,877/- claimed as interim re