IN THE HIGH COURT OF DELHI AT NEW DELHI
Navin Chawla, J.
Ahluwalia Contract (india) Ltd. – Appellant
Versus
Union of India – Respondent
O.M.P. (COMM) 131 of 2016
Decided On : 08-02-2023
Arbitration - Contractual Dispute - Arbitration and Conciliation Act, 1996 - Section 34 - Claims granted and rejected by the Sole Arbitrator - Summary of the claims and findings
Fact of the Case:
The petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside the Arbitral Award that rejected certain claims raised by the petitioner. The claims related to delays and additional expenses incurred during the execution of a contract for electrical services at AIIMS, Patna.
Finding of the Court:
The court set aside the Arbitral Award on certain claims, citing incorrect application of contractual provisions and unreasoned nature of the award. The rejection of other claims was upheld for different reasons. The court also upheld the decision not to award costs of arbitration.
Issues: The issues revolved around the interpretation and application of contractual provisions, entitlement to additional expenses, loss of profit, and the premature nature of certain claims.
Ratio Decidendi: The court found that the Arbitral Award was unreasoned and incorrect in its application of contractual provisions, leading to the setting aside of certain claims. The rejection of other claims was upheld due to different reasons. The court also upheld the decision not to award costs of arbitration.
Final Decision: The court set aside the Arbitral Award on certain claims, upheld the rejection of other claims for different reasons, and upheld the decision not to award costs of arbitration.
JUDGMENT
Navin Chawla, J. (Oral)
1. The learned counsel for the respondent submits that the respondent has filed its written submission. The same are not on record, but the learned counsel has been heard on merit.
2. This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') seeking setting aside of the Arbitral Award dated 20.11.2015 passed by the learned Sole Arbitrator to the limited extent that it rejects claim nos.3, 4, 5, 7, 12, 14 and 17 raised by the petitioner.
3. Before considering the submissions made by the learned counsels for the parties, a few dates in relation to the Contract may be relevant to be noted:
(a) The petitioner was awarded the Contract for Package-III Electrical Services at AIIMS, Patna by the respondent on 29.08.2011;
(b) The work was to be completed within a period of 16 months commencing from 19.08.2011, therefore, the date of completion was 18.12.2012;
(c) The scope of work under the Contract comprised of Supply, Installation, Testing and Commissioning (in short, the 'SITC') of electrical equipments within a period of 16 months and, thereafter, comprehensive Operations and Maintenance (in short, 'O&M') thereof for a period of 5 years after expiry of 12 months' Defect Liability Period (in short, 'DLP') computed from the date of completion.
4. It was the case of the petitioner that the petitioner mobilized its men, material, and resources to execute and complete the work within the stipulated period of the Contract, however, there were delays on the part of the respondent at inception stages such as, delay in allocation of sites, the work fronts not being available even for the existing Sub-stations Buildings, the Sub-stations Buildings were unfinished and not completed/fitted with doors/ windows, exhaust fans and lighting etc., for which the electrical equipments could not be installed therein, and the building work at Substation nos.3, 4 and 4A were not completed. It was further the case of the petitioner that though, the respondent granted extension of time admitting that there was no default on the part of the petitioner in the delay caused, further claims of the petitioner with respect to the delay being attributable to the respondent were not granted.
5. In the above circumstances, the petitioner invoked the Arbitration Agreement and raised as many as 17 claims before the learned Sole Arbitrator. Out of these claims, the learned Sole Arbitrator granted 9 claims, while rejecting the remaining 8 claims of the petitioner. The details of the claims that have been granted are as under:
| Claim No. | Particulars of Claim | Amount Claimed (Rs.) | Amount Awarded (Rs.) |
| 1. | On account of repeated shifting of sub-station equipments due to non- availability of sub-station building/s. | 6,75,625/- | 6,75,625/- |
| 2. | On account of the expenses incurred on recharging of UPS and Batteries during the period from 1.12.2012 to 02.06.2014 i.e for the extended period of contract | 18,880/- | 18,880/- |
| 6. | On account of the expense incurred on deployment of security staff for the extended period of contract. | 4,15,464/- | 3,61,273/- |
| 8. | On account of expenditure incurred on renewal of Performance Bank Guarantee And Security Bank Guarantee for the extended period of contract. | 5,54,854/- + 1,26,968/- | 6,81,822 |
| 9. | On account of renewal of Insurance Policies and EAR Policy for the extended period of contract. | 9,89,690/- | 9,89,690/- |
| 10. | On account of providing vehicles with driver and fuel under clause 3(B) of Vol.II(B)/SCC for the extended period of contract. | 5,74,540/- | 4,99,600/- |
| 11. | On account of claim under Clause 10C/GCC for increase in labor wages | 32,81,601/- | 32,81,601/- |
| 13. | On account of processing of Extra/Deviation /Substituted Items. | 18,58,014.25 | 18,58,014.25 |
| 16. | On account of interest | 18% p.a. | 10% p.a., w.e.f. 26.05.2014 till actual payment. |
6. The Claims which have been rejected by the learned Sole Arbitrator are as under:
| Claim No. | Particulars of Claim | Amount Claimed (Rs.) | Amount Awarded (Rs.) |
| 3. | On acco | ||
The main legal point established in the judgment is the correct interpretation and application of contractual provisions in arbitration disputes.
The interpretation of the contract is within the exclusive domain of the learned Arbitrator, and the court would not interfere with such interpretation.
The court affirmed the limited scope of review under Section 34 of the Arbitration and Conciliation Act, emphasizing respect for arbitral awards unless stark violations of public policy or procedural....
The Court emphasized the limited scope of jurisdiction under Section 34 of the Act and the need for evidence to support claims for loss of profit.
An arbitrator's award may be upheld if it conforms to contract terms, despite challenges regarding procedural compliance or interpretation, provided it does not contravene public policy.
The main legal point established in the judgment is the restricted jurisdiction of the court under Section 34 of the Arbitration and Conciliation Act, 1996 and the principles for interference with ar....
Clauses in contracts that prohibit claims for damages are against public policy and void under Section 23 of the Indian Contract Act, 1872, as they undermine the sanctity of contracts.
The court emphasized the requirement for the arbitrator to assign reasons in support of the award and the limited scope of interference by the court in arbitration awards.
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