TMI Blog2022 (6) TMI 1356X X X X Extracts X X X X X X X X Extracts X X X X ..... lar clause as under consideration in the present case, was examined and the Hon‟ble Supreme Court concluded that the decision of the specified Authority on the question whether the contractor is responsible for delay is not final and binding, but the decision of the specified Authority on the consequential issue of quantification of compensation is final. It was, thus, held that the question of determination of delay is an arbitrable dispute to be decided by the Arbitral Tribunal. Arbitration being a matter of contract, the parties are entitled to fix the boundaries so as to confer and limit the jurisdiction and legal authority of the arbitrator. An arbitration agreement can be comprehensive and broad to include any dispute or can be confined to specific disputes. The scope of arbitrator's jurisdiction invariably arises when the disputes that are arbitrable are enumerated or the arbitration agreement provides for exclusions as in case of excepted matters which are the matters where the parties expressly exclude certain disputes to be referred to arbitration in respect of which the Arbitral Tribunal may not have jurisdiction to adjudicate such disputes. The will of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT] and again reiterated in the recent decision of PROJECT DIRECTOR, NATIONAL HIGHWAYS NO. 45 E AND 220 NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS M. HAKEEM ANR. [ 2021 (7) TMI 1343 - SUPREME COURT] . The conclusions arrived at by learned Arbitrator in his Award dated 13th April, 2018, including dismissal of the counter claim, were found to be well reasoned and based on the interpretation of various Clauses of the contract and the facts, which could not be termed as perverse or patently illegal and rightly held to be beyond the scope of interference under Section 34 of the Act, 1996 by learned Single Judge in the impugned order dated 11th August, 2021. Appeal dismissed. - FAO (OS) (COMM) 77/2022 - - - Dated:- 3-6-2022 - Hon'ble Ms. Justice Mukta Gupta And Hon'ble Ms. Justice Neena Bansal Krishna For the Appellant : Ms. Firdouse Qutab Wani, Additional Standing Counsel with Md. Zaryab Jamal Rizvim, Advocate with Mr. Gopi Ram, A.E./DSIIDC. For the Respondent : Mr. Avinash K. Trivedi, Ms. Ritika Trivedi Mr. Anurag Kaushik, Advocates. JUDGMENT NEENA BANSAL KRISHNA, J. 1. The petitioner-Delhi State Industrial And Infrastructure Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts for the works reduced from the scope of the Agreement relating to two schools which were not handed over to the respondent. 4. Disputes arose and HRB invoked the Arbitration Clause for reference of disputes to arbitration. The Arbitral Tribunal was constituted and Shri O.P. Bhatia, former Additional Director General (Works Special), CPWD was appointed as the Sole Arbitrator on 24th October, 2016 by the Chief Engineer, DSIIDC. 5. HRB filed its Claim of Statement before the Arbitral Tribunal. DSIIDC also filed a statement of defence as well as counter claim in the sum of ₹20,05,00,000/- on account of loss of reputation and loss of work and also cost of arbitration.. 6. According to the appellant, HRB in its request for arbitration had made a claim for ₹53,90,498/- as payment due under the final bill but in its Statement of Claim before the Arbitral Tribunal, it made a claim of ₹1,40,94,470/- as the amount payable under the final bill. In addition, HRB also claimed ₹5,00,000/- as cost of arbitration vide Claim No.9 which was not included in the request for arbitration filed by it. Consequently, the claim before the Arbitral Tribunal included the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withheld by appellant as compensation for delay which was allowed by the learned Arbitrator. This grant of withheld amount is challenged by DSIIDC on the ground that as per Clause 2 of the Agreement, the decision of Project Director in respect of levy of compensation was final and binding and, therefore, an excepted matter and was beyond the jurisdiction of the Arbitrator. For this, reliance has been placed on the decision of Hon‟ble Supreme Court in the case of Mitra Guha Builders (India) Company vs. Oil and Natural Gas Corporation Limited 2020 (3) SCC 22. It is submitted that the levy of compensation on account of delay was not arbitrary as time was essence of the contract and, therefore, the findings of the Arbitral Tribunal to the contrary are liable to be set aside. 12. The other ground of challenge is that the award of labour cess at 1% and DVAT at 3% of the quantum of the work done, (quantified as ₹2,77,117/-) is erroneous. While the learned Arbitrator accepted that CPWD's Manual requires that the labour cess and DVAT is to be included in the analysis of rates, but has granted the claim beyond the rates approved by the concerned authority. 13. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breach of fundamental policy of Indian Law as explained in Oil Natural Gas Corporation Ltd. Vs. Saw-Pipes Ltd. (2003) 5 SCC 705. It was thus submitted that the arbitral Award dated 13th April, 2018 passed by the learned Sole Arbitrator and Order dated 11th August, 2021 of learned Single Judge dismissing the objections under Section 34 of the Act, 1996 be set aside. 17. HRB has countered the challenge to the Award in respect of the compensation and asserted that it is not the quantum of compensation which was determined by the learned Arbitrator which is an excepted matter but the determination of only of the preceding fact i.e., of delay/prolongation (which was not an excepted matter ) to conclude that the compensation was payable. The compensation has been quantified and awarded by the learned Arbitrator in accordance with the terms of LoA. It was submitted that there was no patent illegality of breach of fundamental policy of India and the appeal is without merit. 18. Submissions heard on behalf of both the parties. 19. The first contention of the petitioner-DSIIDC is that as per Clause 2 of the Agreement, decision of Project Director in respect of levy of compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not capable of being resolved through arbitration. General non-arbitrability of the subject matter would relate to non-arbitrability in law. Exclusion or non-arbitability when clearly expressed would pose no difficulty. However, exclusion or non-arbitability of subjects or disputes from the purview of a private forum like arbitration by necessary implication requires setting out of the principles that should be applied. 22. In order to appreciate the contention of the appellant in regard to arbitrability of dispute, it would be pertinent to reproduce Clause 2 of the Agreement: If the contractor fails to maintain the required progress in terms of clause 5 or to complete the work and clear the site on or before the contract extended date of completion, he shall; without prejudice to any right or remedy available under the law to the Government on account of such breach, pay as agreed compensation the amount calculated at the rates stipulated below as the authority specified in schedule 'F' (whose decision in writing shall be final and binding) may decide on the amount of tendered value of the work for every completed day/month (as applicable) that the progress remains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation payable in terms of Clause 2 of the Agreement which was an excepted matter. It restricted itself only to examine whether there was any delay on the basis of which the compensation could be paid. 27. In J.G. Enginners Pvt. Ltd. vs. Union of India and Anr. (2011) 5 SCC 758 similar clause as under consideration in the present case, was examined and the Hon‟ble Supreme Court concluded that the decision of the specified Authority on the question whether the contractor is responsible for delay is not final and binding, but the decision of the specified Authority on the consequential issue of quantification of compensation is final. It was, thus, held that the question of determination of delay is an arbitrable dispute to be decided by the Arbitral Tribunal. The relevant paragraph of the judgement reads as under: 14. Thus what is made final and conclusive by clauses (2) and (3) of the agreement, is not the decision of any authority on the issue whether the contractor was responsible for the delay or the department was responsible for the delay or on the question whether termination/rescission is valid or illegal. What is made final, is the decisions on consequential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicated by Arbitral Tribunal was found to be an after-thought and not supported by the pleadings and it has been rightly upheld by the Arbitral Tribunal's decision to award a sum of ₹1,04,60,700/- to HRD which was recovered by DSIIDC in the Final Bill. The conclusion arrived at by the learned Single Judge that the question of determination of delay was not an excepted matter, is based on the evidence and pleadings and does not suffer from any patent illegality. 31. The next question to be examined is whether the Arbitral Tribunal's decision to allow the M/s H.R. Builders's claim for Labour Cess @ 1% and DVAT @ 3% of the amount of work done is patently illegal. 32. The learned Arbitral Tribunal found that these items were not a part of the bid submitted by HRB and DSIIDC had made payments for these deviated items on the basis of analysis of rates as approved. However, it recovered Labour Cess @ 1% and DVAT @ 3% from its payments. The learned Arbitral Tribunal referred to CPWD Manual and accepted that Labour Cess and DVAT did not form part of the approved rates and, therefore, HRB was entitled to the claim in this regard. The learned Single Judge observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as being exorbitant but again grant of interest @ 8.5% was held to be reasonable. This again was a determination on facts and thus, cannot be re-agitated in the present proceedings. 36. The DSIIDC had filed a counter claim of ₹20,00,00,000/- on account of loss of name, reputation and loss of work. However, the Arbitral Tribunal found that this claim was neither raised at the material time nor had DSIIDC asserted that it had incurred any loss. Moreover, no evidence whatsoever was laid on behalf of the DSIIDC to prove any direct loss and the calculation submitted by it was found to be hypothetic. The DSIIDC again has not been able to point out any evidence to the contrary or that the conclusions of the Arbitral Tribunal were arbitrary or hypothetical. It was held to be a counter blast to the claim of HRB. 37. The scope of interference under Section 34 and Section 37 of the Act, 1996 is extremely limited to when an award is in conflict with the public policy of India, which includes cases of fraud, breach of fundamental policy of Indian law and breach of public morality or is patently illegal as held by the Apex Court in its decision in McDermott International Inc. Vs. Bur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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