IN THE HIGH COURT OF DELHI AT NEW DELHI
Chandra Dhari Singh, J.
Department of Transport, Gnctd – Appellant
Versus
Star Bus Services Pvt. Ltd. – Respondent
O.M.P. (COMM) 495 of 2020 & I.A. 8960 of 2020
Decided On : 16-05-2023
Arbitration - Challenge to Arbitral Award - Delay in Pronouncement of Award - Whether Delay Vitiates Award - Whether Delay in Pronouncement of Award Places it in Conflict with Public Policy of India - Whether Inordinate, Substantial and Unexplained Delay in Rendering the Award Makes it Amenable to Challenge under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, that is, Being in Conflict with the Public Policy of India - Whether Section 29A of the Arbitration Act Applies - Whether Award Vitiated by Patent Illegality and is in Conflict with the Public Policy of India.
Fact of the Case:
Petitioner, a bus service provider, entered into a Concession Agreement with the Respondent, a transport authority, for the provision of bus services in Delhi. Disputes arose between the parties, leading to arbitration. The Arbitral Tribunal passed an award in favor of the Respondent, awarding a substantial amount as damages. The Petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, alleging fraud, patent illegality, and inordinate delay in the pronouncement of the award.
Finding of the Court:
The Court held that the delay in the pronouncement of the award was inordinate, substantial, and unexplained, and that the Arbitrator's mandate had expired under Section 29A(4) of the Arbitration Act. The Court found that the impugned award was vitiated by patent illegality and was in conflict with the public policy of India. The Court set aside the impugned award and allowed the parties to re-agitate the disputes afresh.
Issues: 1. Whether the delay in the pronouncement of the arbitral award vitiates the award. 2. Whether the delay in the pronouncement of the award places it in conflict with the public policy of India. 3. Whether inordinate, substantial, and unexplained delay in rendering the award makes it amenable to challenge under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, that is, being in conflict with the public policy of India. 4. Whether Section 29A of the Arbitration Act applies. 5. Whether the award is vitiated by patent illegality and is in conflict with the public policy of India.
Ratio Decidendi: 1. The Court held that the delay in the pronouncement of the arbitral award vitiates the award if it is inordinate, substantial, and unexplained. 2. The Court held that the delay in the pronouncement of the award places it in conflict with the public policy of India if it defeats justice. 3. The Court held that inordinate, substantial, and unexplained delay in rendering the award makes it amenable to challenge under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, that is, being in conflict with the public policy of India. 4. The Court held that Section 29A of the Arbitration Act applies to all arbitral proceedings, including international commercial arbitration. 5. The Court held that the award is vitiated by patent illegality and is in conflict with the public policy of India if it is rendered after the expiry of the Arbitrator's mandate under Section 29A(4) of the Arbitration Act.
Final Decision: The Court allowed the petition, set aside the impugned award, and allowed the parties to re-agitate the disputes afresh.
JUDGMENT
Chandra Dhari Singh, J.
Factual Matrix
1. The petitioner has preferred the present petition raising objections under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") for setting aside the Arbitral Award dated 9th June, 2020 passed in the matter titled "Star Bus Services Pvt Ltd. vs Department of Transport, Government of NCT of Delhi" by the Sole Arbitrator.
2. The Arbitral Tribunal passed the Impugned Award and awarded the respondent an amount of Rs.57,04,47,373/- with interest at 9% per annum from 5th June, 2016 till the date of payment. The respondent was also awarded a cost of Rs.2,29,90,875/- vide the Impugned Award.
3. Previously, in light of havoc created by the repeated fatal accidents due to rash and negligent driving by the blue line bus drivers, in the Public Interest Litigation bearing W.P. (Crl.) 878/2007 titled as "Court on its own motion vs. State of Delhi & Ors." and in furtherance of the order passed by the Hon'ble Supreme Court in M.C. Mehta vs. Union of India, (1997) 8 SCC 770, the Division Bench of this Court took suo motu action directing the GNCTD to formulate a proper policy for providing better public transport system in Delhi.
4. To provide safer and better quality public transport system, a policy was formulated by Delhi Integrated Mechanism of Transportation System Ltd. (hereinafter referred to as "DIMTS") which was entrusted with the task of formulating the said policy for the GNCTD. DIMTS classified 657 bus routes in Delhi into 17 Clusters as part of the scheme, and each cluster comprised of bunch of routes.
5. On 26th February, 2008, the Respondent invited bids for provision of bus services in Cluster-01 vide Request for Qualification (RFQ) for private stage carriage buses through corporate entities to which Claimant was an eligible entity. After due evaluation of proposals, the GNCTD accepted the proposal of the Claimant in respect of Cluster-01 and in furtherance of the same, issued a Letter of Acceptance dated 5th May 2009. Between the Claimant and the Respondent, a Concession Agreement dated 12th April, 2010 was duly executed whereby the respondent was to induct 231 low floor CNG buses for the route as specified in Cluster-I, which was a BOOT contract i.e. Build-Own-Operate-Transfer Contract. The period of concession under the Contract was 10 (ten) years beginning from Commencement Date.
6. As per the terms agreed between the Claimant and the Respondent in CA, the Respondent was required to provide a consolidated Depot at Gadaipur, Delhi, with certain civil infrastructure facilities stipulated therein. During the subsistence of the contract, issues arose between the parties due to the termination of the said contract by the respondent on 4.2.2016.
7. The lis of the provision of buses with respect to the Concession Agreement underwent a series of litigations. Finally, this Court in O.M.P. (T) (COMM.) No. 05 of 2016 and Arbitration Appeal No. 31 of 2015, with the consent of the parties, terminated the mandate of the Sole Arbitrator and appointed Justice R.C. Lahoti (Retd.), as the Sole Arbitrator to adjudicate the disputes. The Sole Arbitrator was also directed to consider the aspect of Directions dated 16.12.2015 passed in Arbitration Appeal No. 31 of 2015.
SUBMISSIONS
(on behalf of the petitioner)
8. Learned senior counsel for the petitioner submitted that the impugned award has been obtained by the respondent by inducing fraud upon the learned Arbitral Tribunal as well as the petitioner. The award has been passed beyond the terms of the Concession Agreement executed between the parties. The arbitral award is unintelligible. The learned Arbitrator failed to consider the admissions made by the respondent in its pleadings before the learned Arbitral Tribunal as well as before this Court in the matters arising out of the same proceedings.
9. It is stated that the learned Arbitrator failed to adjudicate the claims as per the order of refe
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Substantial delay in pronouncing an arbitral award undermines justice and can be grounds for setting aside the award under public policy considerations.
The limited scope of intervention by Courts in arbitral awards under Section 34 of the Arbitration and Conciliation Act, emphasizing the need to satisfy specific grounds for setting aside an arbitral....
The main legal point established in the judgment is the limited scope of interference with an Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996, and the requirement for th....
Limited grounds for interference with an Arbitral Award under Section 34 of the Arbitration Act
The main legal point established in the judgment is the narrow scope of interference with an Arbitral Award under Section 34 of the Act, 1996, and the emphasis on reasonableness, natural justice, and....
The scope for judicial intervention in arbitral awards is strictly limited to clear violations of public policy or patent illegality; mere procedural errors or delays do not warrant the award's setti....
Delay in passing an arbitral award must be justified; unexplained delays can invalidate the award under public policy.
The court clarified the limited grounds for interference with arbitral awards under Section 34 and emphasized the importance of timely goods delivery in contractual obligations.
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