Final Order 14

Order Details: COPY OF JUDGMENT
Pdf Text: BEFORE THE COURT OF SH. SURINDER S. RATHI, DISTRICT JUDGE
(COMM.)-11, CENTRAL, THC, DELHI
OMP (Comm.) No. 17/2025
Union of India
Executive Engineer
SWB&DCMDM-121(N), PWD (GNCTD)
NCC Building, Safdarjung Enclave
New Delhi-110029 ........Petitioner
Vs.
M/s Maa Bhagwati Associates
B-36/11, 1st floor, GT Karnal Road,
Industrial Road, Delhi-110033 ........Respondent
Date of Institution : 05.05.2025
Date of Arguments : 11.12.2025
Date of Order : 11.12.2025
Decision : Dismissed
1. Vide this order, I shall disposed off Section 34 Arbiration and
Concilation Act, 1996 petition filed by Government of NCT of Delhi
against the contested Arbitral Award dated 30.12.2024, whereby, the
Sole Arbitrator partially allowed the claim petition filed by
respondent herein.
2. I have heard arguments of Ld. Counsel for the NCT Sh. Zafar
Abbas alongwith Sh. Himanshu Gupta, who are assisted by Sh.
Amod Kumar, Executive Engineer, PWD, Delhi and Sh. Pranav
Kumar Srivastava and Ms. Rashi Jain, Ld. Counsels for
respondent claimant and have perused the court file as well as
original Arbitral Award.
OMP (Comm.) No.17/2025
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3. Brief facts necessary of disposal of this application as summarized
by Ld. Tribunal in the Arbitral Award are that the PWD, Government
of NCT of Delhi floated a ENIT for civil and electrical work worth
Rs.3,22,61,076/- in August 2020. Respondent/claimant hereinafter
referred to as “Contractor”, participated in the same and was
declared a successful bider on 26.08.2020. As directed respondent
deposited performance guarantee amount of Rs.11,59,624/-. The
work was to be concluded in 180 days starting from 01.09.2020 but
was not completed within the stipulated time. The PWD granted
extention and work could be completed on 30.09.2021.
4. The job work was carried out by the claimant and completed the
same within the extended time but with a delay of 213 days. In the
course of the job work claimant submitted several running bills were
submitted a payment of Rs.3.41 crores stood paid in all. Claimant
submitted 6 bills for civil work and 8 bills for electrical work i.e. a
total of 14 bills. However, Certain dispute arose between the parties
after the completion of the work which were raised by the
respondent on 01.11.2022, wherein, additional sum of Rs. 1.59 crore
was claimed from the PWD. alleging therein that this was the
additional cost incurred by Contractor was attributed to the PWD
under six heads namely
i. Claim on account of change of minimum wages
ii. claim due to price change on extension of time
iii. claim qua cost index on extra items added
iv. claim qua overhead expenses and loss of profit
v. claim based on modified agreement terms
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vi. claim for expenditure on labour due to hindrance in work
Total 06 Nos. Claims and 01 No. of Counter Claim have been
referred for Adjudication. The details of the claims referred are as
under:
Claim
No.
Claim Brief description of Claim Amount of Claim
(in Rs.)
1 Claim A Claim for change in minimum wage of
Unskilled Labour under Clause 10C.
1,31,184.00/-
2 Claim B Claim Under Clause 10CC or alike
clause for claim in change in prices
due to prolongation of work.
11,61,331.00/-
3 Claim C Claim under clause 12.2 and 12.3 for
non- payment of cost index on extra
items and substitute items.
3,47,313.00/-
4 Claim D Claim for overhead and loss of profit. 40,58,685.00/-
5 Claim E Claim in accordance with modified
terms and conditions of the agreement
as per market Rate vide letter dated
25.05.2021 issued by the Claimant.
72,84,164.00/-
6 Claim F Claim for labour loss on account
hindrance caused in work.
29,85,640.00/-
Total Amount of All Claims 1,59,68,317.00/-
List of Counter Claim
1 Cost of Arbitration Rs.2,00,000.00/-
5. The matter was referred to Dispute Redressal Committee which
declined the request of the Contractor. Dis-satisfied with the
response the Contractor invoke the arbitration clause vide letter
dated 09.02.2023 for appointment of Tribunal. The admitted
arbitration clause as per General Conditions of Contract of CPWD
as applicable to PWD as well reads as under:
“Except where otherwise provided in the contract, all questions and disputes
relating to the meaning of the specifications, design, drawings and instructions
here-in before mentioned and as to the quality of workmanship or materials used
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on the work or as to any other question, claim, right or the things whatsover in
any way arising out of relating to the contract, designs, drawings, specifications,
estimates, instructions, orders or these conditios or otherwise concerning the
works or the execution or failure to execute the same whether arising during the
progress of the work or after the cancellation, termination, completion or
abandonment thereof shall be dealt with as mentioned hereinafter:
(i) If the contractor considers any work demanded of him to be outside the
requirements of the contract, or disputes any drawings, record or decision given in
writing by the Engineer-in-Charge or if the Engineer in Charge considers any act
or decision of the contractor on any matter in connection with or arising out of the
contract or carrying out of the work, to be unacceptable and is disputed, such
party shall promptly within 15 days of the arising of the disputes request that
Chief Engineer/CPM, or where there is no Chief Engineer/ CPM, the Additional
Director General/Special Director General (CE/ADG/SDG) who shall refer the
disputes to Dispute Redressal Committee (DRC) within 15 days alongwith a list
of disputes with amounts claimed if any in respect of each such dispute. The
Dispute Redressal Committee (DRC) within 15 days along with a list of disputes
with amounts claimed if any in respect of each such dispute. The Dispute
Redressal Committee (DRC) give its decision within a period fof 60 days
extendable by 30 days by consent of both the parties from the receipt of reference
from CE/CPM/ADG/SDG. The constitution of Dispute Redressal Committee
(DRC) shall be as indcated in Schedule ‘F’, provided that no party shall be
represented before the Dispute Redressal Committee (DRC) by an advocate/ legal
counsel etc.
The DRC will submit its decision to the concerned ADG/SDG for acceptance,
ADG/ SDG in a time limit of 30 days from receipt of DRC decision will convey
acceptance or otherwise on the said decision if the Dispute Redressal Committee
(DRC) fails to give its decision within the aforesaid period or the ADG/SDG fails
to give his acceptance in the aforesaid time limit or any party is dissatisfied with
the decision of Dispute Redressal Committee (DRC) ADG/SDG the neither party
may within a period of 30 days from the receipt of the decision of Dispute
Redressal Committee (DRC), ADG/SDG or on expiry of aforesaid the time limits
available to DRC/ADG/SDG may give notice to the Chief Engineer/CPM, CPWD,
in charge of the work or if there be no Chief Engineer/CPM, the Additional
Director General/ Special Director General of the concerned region of CPWD or
if there be no Additional Director Genera/ Special Director General, the Director
General, CPWD for appointment of arbitraror or prescribed proforma as per
Appendix XVII under intimation to the other party.
It is a term of contract that each party invoking arbitration must exhaust the
aforesaid mechanism of settlement of claims/disputes prior to invoking
arbitration.
The CE/CPM/ADG/SDG shall in such case appoint the sole arbitrator or one of
the three arbitrators as the case may be within 30 days of receipt of such a request
and refer such disputes to arbitration. Wherever the Arbitral Tribunal consists of
three Arbitrators, the contractor shall appoint on arbitrator within 30 days of
making request for arbitration or of receipt of request by Engineer -in-charge to
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CE/ADG/SDG/DG for appointment of arbitrator, as the case may be, and two
appointed arbitrators shall appoint the third arbitrator who shall at as the
Presiding Arbitrator in the even of
(a) A party fails to appoint the second Arbitrator, or
(b) The two appointed Arbitrators fails to appoint the Presiding
Arbitrator, then the Director General, CPWD shall appoint the second or
Presiding Arbitratoras the case may be.
(ii) Disputes or difference shall be referred for adjudication through
arbitration by a Tribunal having sole arbitrator where claimed amount is
Rs. 20 crore or less. Where claimed Value is more than Rs. 20 Crore,
Tribunal shall consist of three Arbitrators as above. The requirements of
the Arbitration and Conciliation Act, 1996 (26 of 1996) and any further
statutory modification or re-enactment thereof and the rules made there
under and for the time being in force shall be applicable.
It is a term of this contract that the party invoking arbitration shall give a
list of disputes with amounts claimed, if any, in respect of each such
dispute along with the notice for appointment or arbitrator and giving
reference to the decision of the ADG/SDG on the finding /
recommendation of DRC.
It is also a term of this contract that member (S) of the Arbitration
Tribunal shall be a Graduate Engineer with experience in handling public
works engineering contracts and further he shall have earlier worked at
the level not lower than Chief Engineer/equivalent (i.e. Joint Secretary
level of Government of India). This shall be treated as a mandatory
qualification to be appointed as arbitrator.
Parties, before or at the time of appointment of Arbitral Tribunal may
agree in writing for fast track arbitration as per the Arbitration and
Conciliation Act, 1996 (26 of 1996) as amended in 2015.
Subject to provision in the Arbitration and Conciliation Act, 1996 (26 of
1996) as amended in 2015 whereby the counter claims if any can be
directly filed before the arbitrator without any requirement of reference by
the appointing authority. The arbitrator shall adjudicate on only such
disputes as are referred to him by the appointing authority and give
separte award against each dispute and claim referred to him and in all
cases where the total amount of the claims by any party exceeds
Rs.1,00,000/- the arbitrator shall give reasons for the award.
It is also a term of the contract that fees payable to arbitral tribunal shall
be as approved by DG, CPWD, OM issued vide
no.2/2006/SE(TLC)/CSQ/137 dated 19-11-2019 (or its latest amendment
as approved by DG, CPWD). This fee shall be shared equally by parties.
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The place of arbitration shall be as mentioned in Schedule F. In case there
is no mention of place of arbitration, the arbitral tribunal shall determine
the place of arbitration.
The venue of the arbitration shall be such place as may be fixed by the
Arbitral Tribunal in consultation with both the parties. Failing any such
agreement, then the Arbitral Tribunal shall decide the venue.”
6. Plain reading of the above clause shows that in order to invoke
Section 21 of Arbitration & Conciliation Act, 1996 the Contractor
is required to approach Chief Engineer and his absence Additional
Director General or Special Director General and in his absence
Director Genral for appointment of Arbitrator in Arbitral Tribunal
proforma decribed as Appendix 17. The above clause further
reveals that such officer of the PWD will carry out the appointment
of Tribunal consisting of Sole Arbitrator as per his discretion, as
long as he/she is a Graduate Engineer with experience in handling
Public Works Engineering Contracts and has served at the level of
Chief Engineer or equivalent. However, no methodology or
procedural details are provided in the clause. The clause, however,
does carry a reference that in case the tribunal has to be a three
member one, he would appoint one member and the opposite party
will appoint the other and those two members will appoint the third
one. Admittedly, in the matter in hand, neither of the party requested
for appointment of three member tribunal. Furthermore, the above
clause specifically carries a referrence that for disputes upto Rs. 20
crores, the adjudication shall be carried out by Sole Arbitrator only.
7. Court is apprised that in order to invoke Section 21 of the Act for
appointment of Sole Arbitrator, the respondent contractor applied
with Chief Engineer in Appendix 17 which is available on record as
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Annexure 6 dated 09.02.2023. In response to the request of the
contractor dated 09.02.2023 vide office order dated 14.02.2023 the
office of Cheif Engineer South who is also referred to arbitrator
appointing authority proposed names of 5 empanelled arbitrators of
PWD to the contractor. The office order 14.02.2023 is reproduced
as under:
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8. Upon plain reading, following conclusions can be arrived:
1. An official of PWD annonates himself as “Arbitraor
Appointing Authority”.
2. In exercise of his self conferred authority he is giving 5 names
for the contractor to choose from.
3. He forewarns the contractor that in case one of the five is not
chosen within 15 days of issuance of letter he will appoint one
of his choice.
9. At this juncture, Ld. Counsel for the respondent contractor submits
that despite there being serious questions qua the sanctity of the
procedures adopted by the PWD when the same is scrutnized in the
light of Section 12 (5) read with Schedule 7 of the Act and the
celebrated judgment ofs Perkins Eastman Architects DPC Vs.
HSCC India Limited, 2019 Latest Caselaw 1154 SC and TRF
Limited Vs. Energo Engineering Projects Limited, 2017 Latest
Caselaw 918 SC. For ready reference Section 12(5) of the Act and
the 7th Schedule are reproduced hereunder:
Arbitration and Conciliation Act, 1996
Sections 12(5): Grounds of Challenge
Notwithstanding any prior agreements to the contrary, any person whose
relationship with the parties or counsel or the subject matter of the dispute,
falls under any of the categories specified in Schedule 7 shall be ineligible to
be appointed as an arbitrator.
“Provided that parties may, subsequent to disputes having arisen between
them waive the applicability of this suit by an expressed agreement in
writing.”
“The Seventh Schedule”
i. The arbitrator is an employee, consultant, advisor or has any other
past or present business relationship with a party.
ii. The arbitrator currently represents or advises one of the parties or
an affiliate of one of the parties.
iii. The arbitrator currently represents the lawyer or law firm acting as
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counsel for one of the parties.
iv. The arbitrator is a lawyer in the same law firm which is representing
one of the parties.
v. The arbitrator is a manager, director or part of the management, or
has a similar controlling influence, in an affiliate of one of the
parties if the affiliate is directly involved in the matters in dispute in
the arbitration.
vi. The arbitrator’s law firm had a previous but terminated involvement
in the case without the arbitrator being invoked himself or herself.
vii. The arbitrator’s law firm currently has a significant commercial
relationship with one of the parties or an affiliate of one of the
parties.
viii. The arbitrator regularly advises the appointing party or an affiliate of
the appointing party even though neither the arbitrator nor his or her
firm derives a significant financial income therefrom.
ix. The arbitrator has a close family relationship with one of the parties
and in the case of companies with the persons in the management and
controlling the company.
x. A close family member of the arbitrator has a significant financial
interest in one of the parties or an affiliate in one of the parties.
xi. The arbitrator is a legal representative of an entity that is a party in
the arbitration.
xii. The arbitrator is a manager, director or part of the management, or
has a similar controlling influence in one of the parties.
xiii. The arbitrator has a significant financial interest in one of the parties
or the outcome of the case.
xiv. The arbitrator regularly advises the appointing party or an affiliate of
the appointing party, and the arbitrator or his or her firm derives a
significant financial income therefrom.
Relationship of the Arbitrator to the dispute
xv. The arbitrator has given legal advice or provided an expert opinion
on the dispute to a party or an affiliate of one of the parties.
xvi. The arbitrator has previous involvement in the case.
Arbitrator’s direct or indirect interest in the dispute
xvii. The arbitrator holds shares, either directly or indirectly, in one of
the parties or an affiliate of one of the parties that is privately held.
xviii. A close family member of the arbitrator has a significant financial
interest in the outcome of the dispute.
xix. The arbitrator or a close family member of the arbitrator has a close
relationship with a third party who may be liable to recourse on the
part of the unsuccessful party in the dispute.
Explanation 1-The term “close family member” refers to a spouse, sibling,
child, parent or life partner.
Explanation 2- The term “affiliate” encompasses all companies in one group
of companies including the parent company.
Explanation 3- For the removal of doubts, it is clarified that it may be the
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practice in certain specific kinds of arbitration, such as maritime or
commodities arbitration, to draw arbitrators from a small, specialized pool. If
in such fields it is the custom and practice for parties frequently to appoint the
same arbitrator in different cases, this is a relevant fact to be taken into
account while applying the rules set out above.
10. However, he has added that post the appointment of the Sole
Tribunal presided by Sh. Jayesh Kumar, Special DG, a specific
waiver letter was issued by the contractor on 25.03.2023. The same
is reproduced hereunder:
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11.Plain reading of the above shows that an explicit waiver as per 12
(5 ) has been issued by the contractor. It is argued that same shall be
treated as a document which will take care of the issue of unilateral
appointment of the arbitrator by PWD. Since the same is permissible
as per Section 12 (5) itself.
12.It is submitted by Ld. Counsel for PWD that this document is not in
the knowledge of PWD and the copy thereof was never supplied to
the PWD either during the pendency of arbtiral proceedings or any
time thereafter and is only available in the original arbitral record.
Ld. Counsel submits that this document appears to have been added
on record at a later point of time since the same is neither given an
annexure number as done for other document nor is given a
continuous number which is upto 317 in the original file. It is
submitted that Page No. 317 is of vakalatnama and as such there is
strong possibility that this document has been placed on record at a
later point of time by ante-dating the same.
13. With the assistance of both the Ld. Counsels this Court has perused
the entire arbitral record. Upon perusing the arbitral record and
cross-checking the same with the documents available with both the
sides it is found that post his appointment by Chief Engineer
(Arbitration Recording Authority) of the PWD. the first proceeding
sheet created by the tribunal was dated 20.03.2023 wherein he
specificallyobserved “I have been appointed as Sole Arbitrator by
the Chief Engineer (South) M, Delhi PWD Govt. Of NCT of
Delhi.......either party may file his objection to my appointment as
Sole Arbitrator latest by 07.04.2023 if any.” In the same proceeding
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sheet the next date is referred to as 08.04.2023 but neither any
proceedings were carried out on that day and the matter was
adjourned to 14.04.2023.
14.No proceeding sheet either of 08.04.2023 or for that matter
14.04.2023 is available on record. The next proceeding sheet which
is available is of 29.04.2023. Close perusal of this proceeding sheet
shows that there is no reference or observation or acknowledgement
qua filing of claimed written waiver letter dated 25.03.2023.
15.While making his submissions on behalf of respondent award
holder/contractor it is submitted that failure of the tribunal to
mention about the waiver application cannot be attributed to the
respondent contractor. Upon a specific query Ld. Counsel for
respondent has accepted that he does not have any documentary or
digital proof of filing of claimed waiver letter dated 25.03.2023
either before the Arbitral Tribunal or sharing a copy thereof with
PWD. Although it is submitted that the letter was delivered to the
Tribunal by hand but the fact that this letter finds no reference in the
proceedings carried out on three next hearings does not support the
plea that it was actually delivered to the Tribunal.
16. In this regard while vehemently denying that PWD was ever served
with the Waiver Letter dated 25.03.2023 or that respondent filed it
with the Tribunal as claimed attention of this Court is drawn to
internal page 4 of the impugned award where the Ld. Tribunal had
observed, “both parties were given opportunity to file any objection
to my appointment as Sole Arbitrator latest by 07.04.2023 and no
objection has been received by any party”.
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17.Plain reading of the above categorical observation shows that
nothing was filed before the Tribunal i.e. neither any letter issuing a
“No Objection” nor any waiver letter as claimed by the respondent.
18. Ld. Counsel for the respondent contractor submits that the above
observation shall be read and interpreted to show that the claimant
contractor has expressed his “No Objection” to the Tribunal’s
appointment and this was done by way of waiver letter dated
25.03.2023. this Court is not in agreement with this submission
because here the phrase “No Objection has been received by any
party” does not use the words “No Objection” as a phrase in
conjunction with each other but ex-facie reads no pause objection.
When read independently it means and clearly indicates that nothing
has been filed by either of the parties with an aim to either object or
waive the appointment.
19.It is a settled legal proposition under Indian Evidence Act now
Bhartiya Sakshya Adhiniyam that onus of proving a fact solely lies
on the party which wants the Court to believe such facts. Contractor
herein desires that the Court should believe that he did file a written
waiver letter dated 25.03.2023 before the Tribunal but absence of
any reference of the same either in the proceeding sheets or in the
impugned award indicates and shows th at this letter was introduced
at a later point of time, apparently post the passing of the impugned
award and conclusion of the arbitral proceedings.
20.It has ot be seen as to how this document was sent to this Court by
the Arbitral Tribunal. A lot of stress is laid by Ld counsel for the
contractor that reference of this document in the index at Sr. No. 5
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sent alongwith the arbitral record shows that it is part of the record.
She sheer fact that the Court notice sent by this Court to the Tribunal
is also indexed shows that the index was created post the conclusion
of the arbitral proceedings only for sending the same to the Court.
The late/subsequent inclusion of this document at a later point of
time without any trace of reference of the same from the inception to
concluson of the arbitral proceedings, is ex-facie understandable
since this arbitral record was received by this Court on 15.09.2025/.
21.The legal position which stood on the date when this unilateral
appointment was carried out by the PWD on 13.03.2023 was
governed by CORE-1 i.e. Central Organisation of Railway
Electrification Vs. ECI-SPIC-SMO-FCML(JV), 2019 Latest
Caselaw 1281 SC wherunder a three judge bench led by HMJ
Bhanumati distinguished the celebrated three Judge judgment of
TRF Limited TRF Limited Vs. Energo Engineering Projects
Limited, 2017 Latest Caselaw 918 SC. CORE-1 ended up
distinguishing the law settled by Three Judge by TRF Limited w
hich had ruled that a person or an entity who cannot become
arbitrator as per Section 12 (5) r/w Schedule 7 as introduced in the
arbitration and conciliation act, 1996 on 23.10.2015 cannot also
appoint a arbitrator. The CORE-1 judgment carved out an exception
by ruling that in case the disputing party maintains a panel, and an
option is given to the opposite party to choose an Arbitrator form the
same, the same would be regarded as a valid appointment.
22. Differing with the CORE-1 judgment HMJ R. F Nariman, in
Union of India Vs. Tantia Construction Limited SLP(c)
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12670/2020 by another Three-Judge Bench of the Apex Court led
by made an observation that a three judge judgment cannot
distinguish law settled by another Co-ordinate three judge judgment
and as such a request was made to Hon’ble CJI to constitute a five
judge bench for revisiting the findings of CORE-1. Consequently, a
Five Judge Bench was constituted which passed the salutory
CORE-2 Judgment on 08.11.2024. The CORE-2 judgment i.e.
Central Organisation of Railway Electrification Vs. ECI-SPIC-
SMO-FCML(JV) A Joint Venture Company, 2024 Latest
Caselaw 703 SC judgement dated 08.11.2024 upheld the findings of
Three Judge TRF Judgment of 2017 and ruled that forcing the
tribunal in the name of giving options through a short panel does not
stand the scrutiny of the law and is akin to a unilateral appointment.
23.By the time the CORE-2 judgment was pronounced, Ld. Arbitrator
concluded his arbitral proceedings in the matter in hand final
arguments were heard on 20.09.2024 as evident from the proceeding
sheet dated 22.09.2024 and the award was passed on 30.12.2024.
24.Apparently, apprehending any negative impact on the impugned
award which was passed, the written waiver mandated under Section
12 (5) was introduced at a later point of time to safeguard the reliefs
granted to the claimant contractor. Although the apprehension of this
Court that the document dated 25.03.2023 has been added in the
arbitral record either post announcemnet of the award dated
30.12.2024 or at any point of time after hearing the final arguments
on 20.09.2024 is further strengthened from the fact that when this
document 25.03.2023 created on a letterpad of the contractor when
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compared with another similar letter issued by the contractor at
running page 787 dated 27.11.2024 shows the one printed recently
appears to be much older and worn out when compared to the
disputed antedated Section 12 (5) written acknowledgement letter
dated 25.03.2023 filed at running page 6.
25.As far as the plea of the Ld. counsel for the claimant contractor that
the arbitrator, being a non-legal person, can falter ini maintaining the
records and creating the proceedings sheets as also in penning the
impugned arbitral award it is found that such a plea can do more self
harm since anybody who accepts appointment of an Arbitral
Tribunal is expected to maintain basic transparencey and clarity in
the proceedings sheets as well as award qua filing of documents, as
important as a written waiver clause as per Section 12 (5). Failure of
the contractor and the tribunal appears to be conjoint here since
contractor has failed to establish that the letter was filed on
25.03.2023 as claimed or that a copy was supplied to PWD and
there is not an iota of reference qua filing of the same at any point of
time right from constitution of the Arbitral Tribunal till the
impugned award was passed indicates that it has been clandestinely
placed on record only to nullify the impact of change in law and to
safeguard the impugned award from the ex-facie vices of unilateral
appointment of Arbitral Tribunal by Objector PWD.
26. In the light of the above the position when appreciated in the light of
the touchstone of the law it is found that the Arbitral Tribunal was
was unilaterally appointed by a PWD evidently while acting under
the law as interpreted by Central Organisation of Railway
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Electrification Vs. ECI-SPIC-SMO-FCML(JV), 2019 Latest
Caselaw 1281 SC. It would not be out of place to mention here that
while Three Judge TRF Limited in 2017 had categorically ruled
that any person who is mentioned in Schedule 7 of the Act cannot
become an Arbitrator and as such cannot also appoint an Arbitrator.
Accordingly, as per TRF Limited judgement the Chief Engineer
South appointed Sh. Jayesh Kumar could not have become an
Arbitrator himself and as such he too could not have appointed Sh.
Jayesh Kumar as Arbitrator but in the CORE 1, a Three Judge
Bench distinguished the above provision of law and allowed the
parties to maintain a panel of arbitrators. As detailed Supra CORE 1
judgement stands overruled by Central Organisation of Railway
Electrification Vs. ECI-SPIC-SMO-FCML(JV) A Joint Venture
Company, 2024 Latest Caselaw 703 SC judgement dated
08.11.2024. It is argued by Ld. Counsel for respondent/award holder
that since more than 5 years had elapsed post passing of the CORE 1
judgement and thousands of arbitral awards were passed and arbitral
proceedings were underway in terms of Tribunals appointed as per
CORE 1, the 5 Judge judgment in its wisdom observed that law laid
in this reference will apply prospectively to the Arbitrator’s
Appointments made after passing of the judgment.
27. In the light of the above CORE 2 judgement it is evident that the
appointment of Sh. Jayesh Kumar was ab initio bad. It is argued that
since the Five Judge judgement of Hon’ble Supreme Court, in
exercise of its power under Article 142 of the Constitution of
India, ruled that Tribunals appointed as per CORE 1 shall be treated
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as valid and that for all prospective purposes the CORE 2 judgement
shall be followed. As such, as argued, the appointment of Sh. Jayesh
Kumar as Sole Arbitrator is rendered acceptable as per prospective
application of CORE 2 judgement. Accordingly, both the parties are
invited to address the Court on the merits of the Section 34.
Arguments of Merits:-
28. The six claim heads, as detailed supra, went into arbitration before
the Tribunal. The same was opposed by the PWD by filing a
Statement of Defence. Issues were identified and parties were
invited to lead evidence. Evidence was filed by way of affidavit,
however, cross-examination was waived by both the sides. After
hearing the arguments the impugned award under the objection was
passed. From para 12 onwards in the impugned award each of the
six claim heads were dealt specifically:
Clai
m No.
Claim Brief description of Claim Amount of
Claim (in Rs.)
Amount
Awarded
1 Claim
A
Claim for change in minimum
wage of Unskilled Labour
under Clause 10C.
1,31,184.00/- Rs.45,914/-
2 Claim
B
Claim Under Clause 10CC or
alike clause for claim in
change in prices due to
prolongation of work.
11,61,331.00/- Rs.4,06,466/-
3 Claim
C
Claim under clause 12.2 and
12.3 for non- payment of cost
index on extra items and
substitute items.
3,47,313.00/- Rs.3,47,313/-
4 Claim
D
Claim for overhead and loss of
profit.
40,58,685.00/- Rs.26,84,865/-
5 Claim
E
Claim in accordance with
modified terms and conditions
of the agreement as per market
Rate vide letter dated
25.05.2021 issued by the
72,84,164.00/- No
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Claimant.
6 Claim
F
Claim for labour loss on
account hindrance caused in
work.
29,85,640.00/- Rs.16.05 lakhs
Total Amount of All Claims 1,59,68,317.00
/-
Rs.50.90 lakhs
29. As such out of the claim of Rs.1.59 crores only Rs.50.90 lakhs was
awarded with post award interest @8.5% cost.
Scope of Objection Petition.-
30.At the onset it would be appropriate to have a glance at the settled
law in this regard as to what kind of objections can be raised in a
Section 34 Arbitration and Conciliation Act petition. Section 34
of “The Act” is reproduced as under:
Section 34 Application for setting aside arbitral award. —
(1) Recourse to a Court against an arbitral award may be made only by an
application for setting aside such award in accordance with sub-section (2)
and sub-section (3).
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law
for the time being in force; or
(iii) the party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not
falling within the terms of the submission to arbitration, or it contains
decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be
separated from those not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to arbitration may be
set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was
not in accordance with the agreement of the parties, unless such agreement
was in conflict with a provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Part;
or
(b) the Court finds that—
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(i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. —Without prejudice to the generality of sub-clause (ii) it is
hereby declared, for the avoidance of any doubt, that an award is in
conflict with the public policy of India if the making of the award was
induced or affected by fraud or corruption or was in violation of section
75 or section 81.
(3) An application for setting aside may not be made after three months have
elapsed from the date on which the party making that application had received
the arbitral award or, if a request had been made under section 33, from the
date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by
sufficient cause from making the application within the said period of three
months it may entertain the application within a further period of thirty days,
but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is
appropriate and it is so requested by a party, adjourn the proceedings for a
period of time determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take such other action as
in the opinion of arbitral tribunal will eliminate the grounds for setting aside
the arbitral award.
[(5) An application under this Section shall be filed by a party only after issuing a
prior notice to the other party and such application shall be accompanied by
an affidavit by the applicant endorsing compliance with the said requirement.]
[(6) An application under this section shall be disposed of expeditiously and in any
event within a period of one year from the date on which the notice referred to
in sub-section (5) is served upon the other party.]
31.Plain reading of the above Section shows that preliminary objections
can be filed under following heads:
1. Some incapacity
2. Arbitration agreement not valid under law
3. Not given proper notice of arbitration
4. Dispute not arbitrable
5. Tribunal not constituted as per agreement
6. Award in conflict with public policy
7. Award in contravention of fundamental policy of India
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8. Award in conflict with basic notions of morality and justice
1. Some incapacity
32.As far as capacity of the Arbitrator to arbitrate the dispute is
concerned, no objection is raised by PWD and as such this ground is
not addressed.
2. Arbitration agreement not valid under law
33.It is not the case of the PWD or for that matter the contractor that
there was no valid arbitration clause. As such the award in question
is valid under this head.
3. Not given proper notice of arbitration
34.The award in question also says through the touchstone of this plea
since it is not the case of either of the parties that they were not
given notice of arbitration.
4. Dispute not arbitrable
35.There is no objection by either of the side that the dispute was not
arbitrable.
5. Tribunal not constituted as per agreement
36.In the light of the discussion carried out in detail it has already been
concluded that the appointment of the Tribunal was flawed but on
account of relief granted by 5 Judge Bench in CORE 2 judgement
this Court already ruled that the Tribunal was properly constituted.
6. Award in conflict with public policy,
7. Award in contravention of fundamental policy of India,
8. Award in conflict with basic notions of morality and justice
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37. Claim A: As per Section 34 filed in the Court the first claim qua
change in minimum wage of unskilled labour is challenged on the
ground that the finding of Ld. tribunal is erroneous. As per
judgement referred to supra, the conclusion of a Tribunal cannot be
challenged and the objection has to be limited to the aspect as to
whether the contentions were considered by the Tribunal or not. A
plea is raised by Ld. Counsel for PWD that a 0.35 factor is applied
but the reason thereof is not cited. Reference can be made to page 9
where after detailed discussion the PWD is assigned responsibility
of only 35% of the delay caused in the contract and this explains
0.35 factor. The sheer fact that a claim of Rs.1,31,184/- is reduced to
Rs.45,914/- shows that there is detailed appreciation of evidence and
around two-third of the claim by the contractor stands rejected. No
flaw is found in the award under this head.
38. Claim B: In the Section 34 petition as per objection is raised qua
Claim B that the contract was awarded with a specific rider that
Clause 10 CC would not be applicable. This plea was raised by the
PWD before Ld. Arbitrator as well. It was also concluded by Ld.
Arbitrator that while extending the work and releasing of payment,
apparently under duress the contractor was constrained to endorse
that he did not suffer any liquidated damages or that he would not
claim any extra payment for the delay caused in the work due to
hindrance from the PWD side. The impugned award refers to
judgements passed by Hon’ble High Court of Delhi in similar
circumstances where it was ruled that the contractor can claim
damages on the basis of 10 CC even if the formula was not made
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available into the contract. Yet again as against the claim of
Rs.11,61,331/-, an award of only Rs.4,06,466/- is passed by
applying a factor of 0.35 which means two-third of the claim made
by the contractor was rejected. This Court do not find any flaw in
the award as per this objection as well.
39.Claim C: This head pertains to additional civil work got executed
through the contractor. The manner in which Section 34 Arbitration
and Conciliation Act Petition is drafted leaves lot to be desired
since the language is not for a court petition but appears to be a copy
paste opinion where all the paragraphs ends with a phrase "needs to
be challenged". A plea is raised by PWD in this regard have been
dealt with at length at page 20 of the award. It is concluded that the
cost index enhancement of 16.94% was not disputed by both the
sides. It was also not disputed that extra items and substitute work
was assigned and as such out of claim of Rs.3,47,313/- was allowed.
40.Claim D: The conclusions of the Arbitrator under claim of
Rs.40,58,685/- under overhead and loss of profit out of which a sum
of Rs.26,84,865/- was allowed in that, this amount was awarded for
the Covid-19 period even though no evidence was produced by the
respondent qua actual loss incurred. These contentions are duly
covered in page 23 of the impugned award. As per Ld. Counsel for
the contractor all the relevant documents qua additional expenditure
incurred stood filed. The rival contentions were dealt with at length
at page 33 of the award where it is mentioned that the contractor had
to deploy supervisory staff, the bills for the Covid period and had
incurred expenditure even though the same was not contemplated at
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the time of issuance of work order. The Tribunal found that the plea
of PWD that the proof of actual payment is not filed is not correct.
41.Claim E: Since Claim E is concerned which was for 72.84 lakhs no
money was awarded and as such the PWD cannot have any
grievance qua the same.
42.Claim F: Coming to Claim F the claim amount was for
Rs.29,85,640/- towards labour loss work on account of the
hindrance. It is objected that no documentary evidence was led by
the claimant and no such damages was covered under the contract
and that Section 73 of Indian Contract Act was invoked. The
submissions of the PWD stands duly covered in Page 36 onwards in
the impugned award where it is mentioned that 35% of the 213 days
is attributed to the PWD which included the covid 19 period. The
plea of the PWD in this regard that loss of claim was made during
the execution of the work was considered and not accepted by the
Tribunal while relying on Delhi High Court judgement the Tribunal
awarded damages on account of labour setting idle. The award has
divided the total delay of 213 days into 3 different segments and
finally demand of Rs 27.40 lakhs was reduced to rupees 16.05 lakhs.
43.Nothing has been shown in the arbitral award by PWD which is in
conflict with public policy of India or is in contravention with
fundamental policy of Indian law or for that matter in conflict with
basic notions of morality and justice. While awarding no cost to the
Claimant the Rs.5 lakhs cost of arbitration of the PWD was also
rejected. I do not find any merits in the objection petition. The
section 34 is accordingly dismissed. Award is upheld.
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44.Original Arbitral Record be sent back.
45.File be consigned to Record Room after due compliance.
(SURINDER S. RATHI)
District Judge
Commercial Court-11
Central District, THC
Delhi/11.12.2025
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