The Delhi High Court has dismissed ITDC’s challenge to the Sole Arbitrator’s Award directing payment of over Rs. 46 lakhs along with interest, holding that the Arbitrator’s findings were based on evidence on record and did not warrant interference under Section 34 of the Arbitration Act. The Court reaffirmed the well-settled legal position that under Section 34 of the Arbitration Act, the Court does not sit in appeal over an arbitral award and interference is permissible only on the limited grounds specified therein.
A possible view taken by the Arbitrator on facts must be respected, and mere erroneous application of law or reappreciation of evidence is not a ground to set aside an award. Patent illegality must go to the root of the matter and shock the judicial conscience, and cannot be of a trivial nature, added the Court.
The Court also held that the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon, and where the findings of the Arbitrator are based on some evidence, even if it is a single witness’s testimony, the Court cannot regard the conclusion as patently illegal. The Court further held that the Arbitrator has wide discretion under Section 31(7) of the Arbitration Act to award pre-reference, pendente lite, and post-award interest at such rate as it deems reasonable, and the rate of interest can be interfered with only if it is so perverse or unreasonable as to shock the conscience of the Court.
However, the Court left open the contention regarding the post-award payment of Rs. 13.93 lakhs to be agitated before the Executing Court in accordance with law, including under Order XXI of the Code of Civil Procedure, 1908.
A Single Judge Bench of Justice Mini Pushkarna observed that the scope of interference under Section 34 of the Arbitration Act is extremely limited and the Court does not sit in appeal over an arbitral award. On the issue of the total value of work done, the Court noted that the Arbitrator’s finding of Rs. 1.97 crores were based on the categorical admissions made by ITDC’s own witness, Dinesh Mahajan, in his Evidence Affidavit, who stated the value of work as Rs. 1.95 crores along with extra items of Rs. 1.86 lakhs. The Court held that a finding based on the petitioner’s own submissions cannot be faulted with, and reappreciating such evidence is not permissible under Section 34.
On the deduction of Rs. 11.07 lakhs towards alleged non-execution of civil and electrical works, the Court observed that the Measurement Book was signed by the contractor only up to 13th August 2008, and the deductions recorded thereafter bore only the signature of the Site Engineer and not the contractor or the Architect Consultant. The Court further noted that no deficiency in execution was recorded by ITDC, no inspection was carried out by the Chief Technical Examiner, and the work was admittedly executed under the supervision of ITDC’s own officers. The Arbitrator’s exclusion of these deductions was therefore based on proper appreciation of evidence.
Regarding the deduction of Rs. 14.86 lakhs towards ESI and EPF, the Court observed that the respondent had submitted the requisite Indemnity Bonds as recorded in the 36th Arbitration Proceeding dated 21st December 2017, and the Arbitrator had rightly held that ITDC was not entitled to retain these amounts once the Indemnity Bonds were furnished. On the Service Tax deduction of Rs. 7.58 lakhs, the Court noted that the respondent had filed copies of Service Tax Challans and TDS Certificates before the Arbitrator, as recorded in the 32nd Arbitration Proceeding dated 11th August 2017, and therefore the Arbitrator’s disallowance of this deduction was justified.
On the labour cess deduction of Rs. 1.85 lakhs, the Court observed that Clause 16.1 of the GCC did not specifically mention deduction of labour cess, and the petitioner had not raised any dispute during the proceedings about the respondent’s liability towards labour cess. The Arbitrator had therefore rightly held that ITDC could not recover this amount. On the rate of interest at 12 per cent per annum, the Court observed that under Section 31(7) of the Arbitration Act, the Arbitrator has wide discretion to award interest at such rate as it deems reasonable, and the rate awarded did not shock the conscience of the Court. On the post-award payment of Rs. 13.93 lakhs made by ITDC on 9th July 2019, the Court observed that this was not a ground for challenging the Award itself but a matter to be agitated at the stage of execution.
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Briefly, India Tourism Development Corporation (ITDC) had awarded a contract to M/s Bajaj Electricals Limited for carrying out specialised illumination and lighting work at the Safdarjung Tomb Monument in New Delhi. The work was awarded through a Letter of Intent dated 4th April 2007 for a total value of Rs. 2.08 crores and a detailed Contract was signed between the parties on 22nd May 2007. The contractor completed the work and the Archaeological Survey of India took over the illumination work at the site on 1st June 2009.
The respondent thereafter submitted its final bill of Rs. 1.18 crores on 8th June 2009, but the petitioner failed to release the outstanding payments, leading to disputes between the parties. The matter was referred to a Sole Arbitrator, who passed an Award dated 30th October 2018 directing ITDC to pay a principal amount of Rs. 46.92 crores along with pre-reference interest of Rs. 33.27 lakhs, pendente lite interest of Rs. 31.17 lakhs, and future interest till the date of payment. Aggrieved by the Award, ITDC filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set it aside on grounds of perversity, patent illegality, and failure of the Arbitrator to adopt a judicial approach.
