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2023 Supreme(Del) 1962

IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
Mas Developers Pvt. Ltd. – Appellant
Versus
Magus Consortium Orchid Avenue (P) Ltd. – Respondent
O.M.P.(COMM.) 449 of 2019
Decided On : 07-02-2023

Advocates appeared:
Mr. Bhushan Kapur and Mr. Y.K. Kapur, Advocates, for the Petitioner.
Counsel for the Respondent.

Headnote:

Arbitration - Construction Agreement - Arbitration and Conciliation Act, 1996 - Section 34 - [ARBITRATION] - [CONSTRUCTION AGREEMENT] - [Section 34] - The impugned Award was challenged under Section 34 of the Arbitration and Conciliation Act, 1996. The Court analyzed the provisions of the Agreement dated 19th July 2013 and the pleadings by the parties. The issues were narrowed down to adjudicate whether the impugned Award was well-reasoned and whether the Arbitrator rightly held that the contract was terminated vide email dated 6th March 2018 on the ground of delay while rejecting the claims of the petitioner.

Fact of the Case:

The petitioner entered into an agreement of construction with the respondent for a multi-storeyed building. The project was not completed in the stipulated time, and the respondent disengaged the petitioner from the project. The petitioner invoked arbitration proceedings, challenging the impugned Award passed by the learned Sole Arbitrator.

Finding of the Court:

The impugned Award was not well-reasoned as required by Section 31(3) of the Arbitration and Conciliation Act, 1996. The Arbitrator failed to consider the clauses of the Agreement while recalculating the area and upholding the termination. The impugned Award, being contrary to provisions of the Agreement, suffers from infirmity and patent illegality. The Court found merit in the instant petition and set aside the impugned Award.

Issues: The issues were narrowed down to adjudicate whether the impugned Award was well-reasoned and whether the Arbitrator rightly held that the contract was terminated vide email dated 6th March 2018 on the ground of delay while rejecting the claims of the petitioner.

Ratio Decidendi: The impugned Award was not well-reasoned as required by Section 31(3) of the Arbitration and Conciliation Act, 1996. The Arbitrator failed to consider the clauses of the Agreement while recalculating the area and upholding the termination. The impugned Award, being contrary to provisions of the Agreement, suffers from infirmity and patent illegality.

Final Decision: The instant petition is allowed, and the impugned Award dated 10th July 2019 passed by the Learned Sole Arbitrator is set aside.

ORDER

Chandra Dhari Singh, J. (Oral)

1. The instant petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") has been filed on behalf of the petitioner seeking to set aside the impugned Award dated 10th July 2019 passed and published by the learned Sole Arbitrator.

FACTUAL MATRIX

2. The petitioner entered into an agreement of construction with the respondent vide Agreement dated 19th July 2013 (hereinafter "the Agreement"). The contract was awarded to the petitioner for construction of a multi-storeyed building in a residential society named as "Vedanta Minaret" situated in Indirapuram, Ghaziabad, Uttar Pradesh, which included a basement and stilt along with 28 floors. The period of completion of the project was stipulated to be 21 months from the date of commencement of work which had to begin after 5 days from the date of signing of the Agreement.

3. The project was not completed in the stipulated time and the parties again entered into an extension Agreement dated 1st September 2016 in which the completion date was fixed to be 30th November 2017. Thereafter, on 6th March 2018, when the construction work was going on, the respondent sent an email to the petitioner informing that the respondent would be carrying on the work independently and disengaged the petitioner from the aforementioned project.

4. Being aggrieved, the petitioner invoked the arbitration proceedings on 12th April 2018. After completion of the arbitral proceeding, the learned Sole Arbitrator published the impugned Award on 10th July 2019 which has been challenged by the petitioner herein.

SUBMISSIONS

(On behalf of the petitioner)

5. Learned counsel on behalf of the petitioner submitted that the very first challenge to the impugned Award passed by the learned Arbitrator is on the ground that the learned Arbitrator has arbitrarily calculated and reduced the area of the work done by the petitioner as calculated by the Local Commissioner to which respondent has also not objected. It is submitted that since the work was illegally withdrawn by the respondent without settling the measurements and the payments thereof, the petitioner had earlier filed a petition bearing no. OMP (I) Comm. No. 146/2018 under Section 9 of the Act by way of which the Local Commissioner was appointed by this Court to measure the area of the work done by the petitioner. As per the measurement of Local Commissioner, the petitioner had constructed area of 74602.2 square ft. as for 1st to 12th floor, 38401 square ft. for 13th to 22nd floor, 14065 square ft. for the basement, 5147.78 square ft. for the stilt, and the measurement stood accepted by respondent as well as the arbitral tribunal.

6. Learned counsel on behalf of the petitioner further submitted that during the course of proceedings in above-mentioned petition under Section 9 of the Act, the respondent appointed the Sole Arbitrator contrary to the terms of the contract between them. The petitioner in the instant petition has objected to the appointment of the learned Arbitrator on the ground that the Arbitrator was a full time member of the Mahanadi Water Disputes Tribunal, constituted under the Inland Water Disputes Tribunal Act. Being a full time member, she was ineligible to act as an Arbitrator and the very fact of her being a member of the above-said tribunal came into the knowledge of the petitioner only after the impugned Award was published.

7. It is submitted that throughout the arbitration proceedings, the respondent neither raised any counter-claim nor claimed any set-off or adjustment. It is further contended that the learned Arbitrator did neither dispute the area measured by the Local Commissioner nor the bills raised by the petitioner. However, the learned Arbitrator, on its own without any pleading, evidence on record or written submission filed by the Respondent claiming that the shafts are more than 5 square meters, gave deduction under Clause 12 (1)(d) of the Agreement w

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