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IN THE HIGH COURT OF DELHI AT NEW DELHI
JASMEET SINGH, J.
Netaji Subhash Institute Of Technology – Appellant
Versus
M/s Surya Engineers & Another – Respondents
O.M.P. (COMM) 48 of 2020 & I.A. 1401 of 2024, OMP (ENF.) (COMM.) 8 of 2024
Decided on : 19-11-2024
(A) Arbitration and Conciliation Act, 1996 - Section 34 - Setting aside of arbitral award - The petitioner challenged the award on grounds of unjust rescission of contract and delay attributable to the petitioner - The learned Arbitrator found that the delay was primarily due to late issuance of structural drawings and that the rescission was unjustified - The court upheld the Arbitrator's findings and dismissed the petition. (Paras 1, 4, 52, 96)
(B) Contractual Interpretation - Clause 10C - The Arbitrator interpreted the escalation clause favorably towards the claimant, applying the Contra Proferentum Rule due to ambiguity in the contract terms - The court found no grounds for interference as the Arbitrator's interpretation was plausible. (Paras 85, 90)
Facts of the case:
The petitioner awarded a construction contract to the respondent, which was later rescinded due to delays attributed to the respondent. The respondent claimed various amounts for work done, while the petitioner raised counterclaims for damages due to alleged breaches.
Findings of Court:
The court upheld the Arbitrator's findings that the rescission was unjust and that the delays were attributable to the petitioner, dismissing the petition to set aside the award.
Issues: The main issues included the attribution of delay in project completion and the interpretation of the escalation clause in the contract.
Ratio Decidendi: The court ruled that the Arbitrator's findings were based on a reasonable interpretation of the evidence and contract terms, and thus, the award should not be interfered with under Section 34 of the Arbitration Act.
Result: Petition dismissed.
JUDGMENT :
JASMEET SINGH, J.
O.M.P.(COMM) 48/2020
1. This is a petition under section 34 of the Arbitration and Conciliation Act, 1996 seeking setting aside of the impugned Arbitral Award dated 04.08.2007 passed by the respondent no. 2, i.e. the learned Arbitrator.
2. The petitioner has impleaded the learned Arbitrator in the present petition. This is an unusual practice and should be deterred. The Arbitrator is not a party to the proceedings but sits as an adjudicator over the dispute between the parties. He is a creature of the agreement to adjudicate the inter-se disputes arisen between the parties and not personally involved or personally liable in any other way. Impleadment of Arbitrators, as parties to the proceedings under section 34 of the Arbitration and Conciliation Act, 1996, have the potential to jeopardize the sanctity of arbitral proceedings, especially since adequate framework for challenging the decision taken by the Arbitrator is in existence. In this view, the impleadment of the Arbitrator need not be done. Respondent No. 2 is deleted from the array of parties.
3. Henceforth, respondent no. 1 is being referred to as “respondent”.
Facts
4. The brief facts encapsulating the present petition are as under:-
a. The work for “Construction of NSIT Complex (Phase-III) Part II at Sector 3, Dwarka, New Delhi-110045. SH: Extension of Library Building & Computer Centre at NSIT, Sector-3, Dwarka” was awarded by the petitioner to the respondent(which was a partnership firm at the time of entering in the contract but is now a sole proprietorship firm) vide Agreement dated 29.08.2003.
b. Since the respondent did not adhere to provisions of the contract and the work was not completed within time (including the extended period), the contract was rescinded by the petitioner on 09.05.2005. It is stated that the work got done at the risk and cost of the respondent from M/s. Pt Munshiram & Associates (Pvt.) Ltd..
c. The disputes between the parties were referred to arbitration before learned Sole Arbitrator.
d. The respondent was the claimant before the learned Arbitrator and raised claims of Rs. 1,99,14,072.8/-under the following heads:
| Claim No. 1 | Work done but not paid | Rs. 18,34,463.73/- |
| Claim No. 2 | Escalation payments under clause 10C of the contract for increase in the prices of the materials | Rs. 49,90,618/- |
| Claim No. 3 | Refund of Security Deposit | Rs. 5,00,000/- |
| Claim No. 4 | Damages sustained on account of loss of material, tools and Plants, shuttering material etc and for the advances made to suppliers due to unjustified rescission of the contract | Rs. 15, 83,475/- |
| Claim No. 5 | Damages towards idling of manpower, staff and machinery due to various breaches | Rs. 77,52,061.67/- |
| Claim No. 6 | Damages due to loss of expected profits of the work that remained to be executed due to illegal rescission of the contract | Rs. 32,53,454.40/- |
| Claim No. 7 | PRE-SUIT, PENDENTE LITE AND - FUTURE INTEREST | @ 18% PER ANNUM |
| Claim No. 8 | Litigation Costs | Rs. 80,000/- |
e. The petitioner also raised counter claims for Rs. 2,36,27,280/-under the following heads:
| Counter Claim No.1 | Compensation under Clause 2 of the Contract | Rs. 44,83,616/- |
| Counter Claim No.2 | Damages compensations for the work remaining incomplete/unexecuted by the claimant under clause 3 of the contract | Rs. 1,82,42,056/- |
| Counter Claim No. 3 | Ground Rent for the land made available | Rs. 1,05,273/ |
| Counter Claim No. 4 | Salary/wages of the Supervisory Staff | Rs. 3,95,335/- |
| Counter Claim No. 5 | Litigation Expenses | Rs. 4,00,000/- |
| Counter Claim No.6 | Interest | @ 18% |
The court upheld the Arbitrator's findings that the rescission of the contract was unjust and delays were primarily attributable to the petitioner, affirming the award under Section 34 of the Arbitra....
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....
Arbitration authority includes interpreting contract terms and assessing evidence; coercion in contract amendments can lead to enforceable claims for damages due to delays.
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.
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.
The appellate jurisdiction under section 37 is limited to the grounds prescribed under section 34. Courts cannot re-appreciate evidence or substitute their views for that of the arbitrator, provided ....
The judgment emphasizes the limited scope of interference with arbitral awards and the principle that courts should not interfere with arbitral awards unless there is a patent illegality or violation....
An arbitrator may award escalated costs due to employer delay despite prohibitory clauses, reinforcing that delays affecting contractor performance can lead to compensatory claims.
The main legal point established in the judgment is the limited grounds for challenging arbitral awards under Section 34 of the A&C Act, emphasizing the principles of public policy and fundamental In....
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