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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Tara Vitasta Ganju, JJ.
Power Grid Corporation of India Ltd. - Appellant
Versus
M/s Jugendra Singh And Company - Respondent
FAO (COMM) 156 of 2023 & CM No.63988 of 2023
Decided On : 06-03-2024
Arbitration - Impugned Award - Section 34 - [POWER GRID CORPORATION OF INDIA LTD.] - [Arbitration] - [Arbitration and Conciliation Act, 1996 (Section 37(1)(c), Section 34)] - The court discussed the notice under Section 21 of the A&C Act, claims barred by limitation, and unilateral appointment of the Sole Arbitrator. The impugned award was set aside due to non-receipt of the notice under Section 21, claims being barred by limitation, and the unilateral appointment of the Sole Arbitrator.
Fact of the Case:
The appellant, a Public Sector Undertaking, terminated a contract with the respondent for construction works due to non-completion. The appellant invoked arbitration, and the Sole Arbitrator partially allowed the claims. The respondent filed an application to set aside the award, alleging the impugned award was vitiated by patent illegality and no notice under Section 21 of the A&C Act was received.
Finding of the Court:
The court found that the notice under Section 21 was not received by the respondent, and the impugned award was liable to be set aside. The court also held that the claims made by the appellant were barred by limitation and the impugned award was vitiated by patent illegality. Additionally, the court found the appointment of the Sole Arbitrator to be unilateral and ineligible, and the Sole Arbitrator failed to make the mandatory disclosure as required under Section 12(1) of the A&C Act.
Issues: The issues were whether the impugned award was liable to be set aside on account of non-receipt of notice invoking arbitration, whether the claims made by the appellant were barred by limitation, and whether the appointment of the Sole Arbitrator can be faulted.
Ratio Decidendi: The impugned award was set aside due to non-receipt of the notice under Section 21, claims being barred by limitation, and the unilateral appointment of the Sole Arbitrator.
Final Decision: The appeal was dismissed, and the pending application was also dismissed.
JUDGMENT
Vibhu Bakhru, J. (Oral)
1. Power Grid Corporation of India Ltd. - a Public Sector Undertaking of the Government of India has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereafter the A&C Act) impugning the judgement dated 26.05.2023 (hereafter the impugned judgement) passed by the learned Commercial Court in OMP (COMM) 55 of 2021 captioned M/s. Jugendra Singh & Company v. M/s. Power Grid Corporation of India Limited. The respondent - M/s. Jugendra Singh & Company - had filed the said application [OMP (COMM) 55 of 2021] under Section 34 of the A&C Act for setting aside an arbitral award dated 01.05.2021 (hereafter the impugned award) rendered by an Arbitral Tribunal comprising of a Sole Arbitrator.
2. The impugned award was rendered in the context of disputes arising out of an agreement (hereafter the Contract Agreement) entered into by the parties pursuant to a Letter of Award dated 08.06.2004 (hereafter the LOA).
FACTUAL CONTEXT
3. By virtue of the LOA the respondent was awarded the work for "Construction of residential buildings (B, C and D type quarters) at 400/220 KV Sub-Station, Mainpuri (UP)". The Contract Price was fixed at Rs.2,14,23,044/- and the work under the Contract Agreement was to be completed within 10 months from the zero date, which is stated to be 03.05.2004. The Date of Completion for the works, as stipulated in the LOA, was 02.03.2005. It is averred by the appellant that four extensions were granted to the respondent for the completion of works, with the last extension being granted till 31.07.2007.
4. The appellant states that since the works was not completed, despite the extensions being granted to the respondent, it issued a Default Notice dated 21.01.2009 to the respondent. It is averred that no response was given to the Default Notice dated 21.01.2009 by the respondent and the appellant issued a Notification of Award Cancellation dated 09.04.2009 cancelling the Contract Agreement. The Contract Agreement was terminated at the risk and cost of the respondent in terms of Clause 54.0 of the General Conditions of Contract (hereafter the GCC) applicable to the Contract Agreement.
5. The appellant awarded the contract for completing the remaining works to another contractor (M/s. Vee Kay Constructions) by a Letter of Award dated 17.01.2011, which was finally amended by a letter dated 31.12.2012. The appellant made payment to M/s. Vee Kay Constructions against the Final Bill raised by it on 17.05.2013. Thereafter, the appellant issued a notice dated 24.06.2015 to the respondent for deposit of Balance Risk and Cost amount, which after adjusting the security deposit and retention amount was calculated at Rs.24,42,056/-. The appellant demanded such payment within 30 days of receiving the notice dated 24.06.2015. It is stated by the appellant that the respondent did not respond to the notice dated 24.06.2015.
6. The appellant sent a legal notice dated 30.11.2018 calling upon the respondent to pay a sum of Rs.24,42,056/- along with interest at 18% per annum. The respondent did not respond to the said notice as well.
7. The appellant claims that it invoked arbitration in terms of Section 21 of the A&C Act by issuance of a Letter of Invocation dated 09.05.2019. By the said letter, the appellant nominated an Ex-Director (Tech), NTPC Ltd. as arbitrator and requested the respondent to also nominate an arbitrator so a Presiding Arbitrator could be appointed to adjudicate the disputes. It is alleged by the appellant that since the respondent did not appoint its nominee arbitrator, the appellant appointed its nominated arbitrator as the Sole Arbitrator (hereafter the Sole Arbitrator) to adjudicate the disputes, in terms of Clauses 69 and 70 of the GCC. The relevant extract of Clause 69 of the GCC is quoted below:
"Clause 69.0: ARBITRATION AND LAWS:
Arbitration: ... For above shall otherwise stipulated apply to contracts whose value does not exceeds Rs. Fifty lakhs. For con
The main legal point established in the judgment is that the notice under Section 21 of the A&C Act must be received for the arbitration to commence, claims must be initiated within the limitation pe....
The court held that failure to disclose prior relationships with a party renders an arbitrator ineligible, thus invalidating the arbitral award under the Arbitration and Conciliation Act.
The court ruled that a notice invoking arbitration is deemed served if dispatched to the correct address, and disputes cannot be dismissed on limitation grounds when evidence suggests ongoing acknowl....
The main legal point established is the limited scope of examination under Section 11 of the A&C Act, which focuses solely on the existence of an arbitration agreement.
The unilateral appointment of an arbitrator is impermissible under the Arbitration and Conciliation Act, 1996, unless there is a valid express waiver of ineligibility subsequent to the dispute arisin....
The mandatory notice under Section 21 for arbitration commencement must be received, not just sent, and failure to disclose connections violates Section 12, compromising arbitration impartiality.
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