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IN THE HIGH COURT OF DELHI
Vibhu Bakhru, J.
Malibu Estate Pvt. Ltd. - Appellant
Versus
Kiri Associates Pvt. Ltd. - Respondent
O.M.P. (COMM) 391 of 2019
Decided On : 04-05-2022
The court clarified that portions of an arbitral award can be set aside if found contrary to agreements, and parties may request re-arbitration to address disputes cooperatively.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - The petitioner challenged an arbitral award regarding construction disputes claimed against the respondent. Claims related to additional material costs and compensation for loss of profit were contested. The court agreed to set aside parts of the award and refer these claims for fresh adjudication by a Sole Arbitrator. (Paras 8, 12, 13)
(B) Nature of Arbitral Proceedings - The scope under Section 34 does not extend to appointing arbitrators but allowance was made due to prolonged disputes. (Paras 11, 12)
Facts of the case:
The petitioner issued a NIT for construction, and subsequent disputes led to arbitration. The claims involved construction costs, loss of profits, and delay-related costs.
Findings of Court:
The court set aside the award concerning claims related to additional cement and steel costs and loss of overheads, appointing a Sole Arbitrator for fresh adjudication.
Issues: The main issues included the validity of claims concerning additional material and compensation for loss and underutilization of resources.
Ratio Decidendi: The court reasoned the necessity of a fair settlement through fresh arbitration due to the ambiguity in the accepted terms of the underlying contract.
Result: Parts of the arbitral award set aside and referred for fresh adjudication.
| Table of Content |
|---|
| 1. nature of contractual dispute and claims (Para 1 , 2 , 3 , 4 , 5 , 6 , 7) |
| 2. challenging awards based on grounds of arbitrariness (Para 8 , 9) |
| 3. agreement to set aside specific claims and re-arbitrate (Para 10 , 11) |
| 4. appointment of a sole arbitrator for fresh adjudication (Para 12 , 13 , 14 , 15) |
| 5. disposal of petition with consent (Para 16 , 17) |
JUDGMENT
Vibhu Bakhru, J. (Oral)--The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter `the A&C Act') impugning an arbitral awarded dated 10.05.2019 passed by an Arbitral Tribunal comprising of three members (hereafter `the Arbitral Tribunal').
2. The impugned award was rendered in the context of the disputes that have arisen between the parties in connection with a contract for construction of a shopping arcade named `Malibu Shopping Arcade'.
3. In the month of October, 2004, the petitioner had issued a Notice Inviting Tender (NIT) for construction of the said shopping arcade. The respondent had submitted its bid pursuant to the said NIT.
4. On 12.02.2005, the petitioner issued a Letter of Intent (LoI), in favour of the respondent, for the execution of the works at a lumpsum value of Rs.4.59 crores. It is stated that thereafter, the parties entered into negotiations and the value of the work was reduced to Rs.3.60 crores. However, the petitioner agreed to provide steel and cement free of cost.
5. On 21.02.2005, the respondent furnished an undertaking, whereby it agreed that the petitioner would supply cement and steel at an aggregate value of Rs.98 lakhs, free of cost.
6. Thereafter, the petitioner issued a Letter of Award dated 21.02.2005 (LoA), which according to the respondent was backdated.
7. Certain disputes had arisen between the parties in connection with the said contract. The disputes were referred to arbitration. Before the Arbitral Tribunal, the respondent raised various claims. The summary of the claims made and the amounts awarded by the Arbitral Tribunal against the said claims, is set out below:
Summary
| Claim No. | Claim | Amount Claimed Rs. | Amount Awarded Rs. | |
| 1. | Balance payment of work done (final bill) refund to security deposit etc. | 49,08,076 | -- | |
| Sub Claim-1 | Balance payment of work done (final bill) | 47,09,865 | (-)40,97,804 | |
| Sub Claim-2 | Security deposit not refunded by the Respondents | 10,00,000 | 10,00,000 | |
| Sub Claim-3 | Cost of items of store physically handed over | 58,835 | 58,835 | |
| Sub Claim-4 | Cost of aluminum sample arising out of withdrawal of aluminum work | 50,000 | 20,000 | |
| Sub Claim-5 | Extra financial burden due to post award altering of basic terms and conditions of the Contract and drawings and wrong/excess deductions of Work-Contract Tax (WCT) | 40,006 | 40,006 | |
| 2 | Loss of profit due to the reduction in scope of work | 2,63,448 | 78,816 | |
| 3 | Cost of cement not supplied by the Respondents | 15,59,301 | 15,59,301 | |
| 4 | Cost of cement for RMC not supplied by the Respondents | 18,25,663 | 18,25,663 | |
| 5 | Balance payment of additions/variations in the work. This claim consists of 13 Sub-claims | 74,11,708 | ||
| Sub Claim-1 | Cost of PVC pipe in place of L.A. Class C.I. pipes rendered redundant due to specifications and incompatibility with structural drawings. | 1,50,000 | 55,831 | |
| Sub Claim-2 | Balance payment of variation bills 1 & 2 | 6,22,962 | Nil | |
| Sub Claim-3 | Variation Bill No. 3 for fire-fighting works due to change in specifications and capacities | 3,17,000 | 1,71,0159 | |
| Sub Claim-4 | Extra work relating to revised cable route from LT panel to new finalized location of Generators | 60,000 | 35,169 | |
| Sub Claim-5 | Variation Bill No. 4 due to change in specifications, capacities of Control Panels | 1,20,157 | 1,20,157 | |
| Sub Claim-6 | Variation Bill No. 6 due to change in the scope of work and site condition due to delay caused by design change | 10,63,429 | 1,25,994 | |
| Sub Claim-7 | Variation Bill No. 7 | 20,47,459 | 1,28,244 | |
| Sub Claim-8 | Payment of hardware fittings | 50,594 | 50,594 | |
| Sub Claim-9 | Additional fire fighting works in tower and Restaurant area | 10,28,197 | 10,28,197 | |
| Sub Claim-10 | Variation Bill No.8 due to change in specifi | |||
