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2022 (6) TMI 1356 - HC - Indian LawsArbitration petition - decision of Project Director in respect of levy of compensation at the rate specified therein was final and binding - levy of consequent compensation - claim for Labour Cess @ 1% and DVAT @ 3% of the amount of work done, correct or not. First contention of the petitioner-DSIIDC is that as per Clause 2 of the Agreement, decision of Project Director in respect of levy of compensation at the rate specified therein was final and binding and, therefore, the question of delay/prolongation and consequent compensation was not arbitrable - HELD THAT - This aspect has been explained in the decision of VIDYA DROLIA AND OTHERS VERSUS DURGA TRADING CORPORATION 2020 (12) TMI 1227 - SUPREME COURT decided by the Hon‟ble Supreme Court in December, 2020. It was observed that non-arbitrability is basic to arbitration as it relates to the very jurisdiction of the Arbitral Tribunal. Non-arbitrability has multiple meanings. In J.G. ENGINEERS PVT LTD VERSUS UNION OF INDIA AND ANR 2011 (4) TMI 1467 - SUPREME COURT 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. 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 the parties as to the scope of arbitration is a subjective act personal to the parties. The argument raised by the DSIIDC that the claim of the petitioner fell in an excepted manner and could not have been adjudicated 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. 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? - HELD THAT - A sum of ₹48,45,700/- which was awarded by the Tribunal as overheads on account of prolongation of works, was also challenged. The reasoning given by the Arbitral Tribunal while allowing this claim, was that HRB was required to be compensated for the prolongation of work on account of overheads incurred by it during the extended period and the sum so awarded and the Arbitral Tribunal moderated the amount as claimed by the HRB and awarded ₹48,45,700/- by applying Hudson formula. Again, it is a finding arrived at on the basis of evidence and is a factual conclusion which was found to be reasonable by the learned Single Judge and cannot be said to be perverse or patently illegal warranting interference by this Court - Similarly, the award of interest and cost had been challenged 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. 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 MEDERMOTT INTERNATIONAL INC. VERSUS BURN STANDARD CO. LTD. ORS. 2006 (5) TMI 442 - SUPREME COURT and M/S. DYNA TECHNOLOGIES PVT. LTD. VERSUS M/S. CROMPTON GREAVES LTD. 2019 (12) TMI 842 - SUPREME COURT 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.
Issues Involved:
1. Arbitrability of delay/prolongation and compensation under Clause 2 of the Agreement. 2. Award of labour cess and DVAT. 3. Escalation for labour and material components. 4. Compensation for overheads due to prolongation. 5. Award of interest and costs. 6. Dismissal of DSIIDC's counterclaim. Issue-wise Detailed Analysis: 1. Arbitrability of Delay/Prolongation and Compensation: The primary contention was whether the delay/prolongation and subsequent compensation were arbitrable under Clause 2 of the Agreement. DSIIDC argued that the decision of the Project Director regarding compensation was final and binding, making it an "excepted matter" beyond the Arbitrator's jurisdiction. The court referred to the Supreme Court's decision in Vidya Drolia vs. Durga Trading Corporation, which explained non-arbitrability in terms of jurisdiction and the scope of arbitration agreements. The court found that while the computation of compensation was an excepted matter, determining the responsibility for the delay was arbitrable. The Arbitrator's decision that the delay was not attributable to HRB was upheld as it was based on evidence and did not suffer from patent illegality. 2. Award of Labour Cess and DVAT: DSIIDC challenged the award of labour cess at 1% and DVAT at 3% on the quantum of work done. The Arbitrator found that these items were not part of the bid and referred to the CPWD Manual, which did not include these in the approved rates. The court upheld the Arbitrator's conclusion, finding it based on the material on record and not calling for interference. 3. Escalation for Labour and Material Components: DSIIDC argued that HRB had waived its claim for escalation by not including it in the bills. The Arbitrator, however, found that HRB was entitled to escalation due to the prolonged delay attributable to DSIIDC. The Arbitrator used indices published by the Director General, CPWD, which were deemed more appropriate. The court upheld this decision, finding it reasonable and based on facts. 4. Compensation for Overheads Due to Prolongation: The award of ?48,45,700/- for overheads was challenged by DSIIDC. The Arbitrator applied the Hudson formula to compensate HRB for overheads incurred during the extended period. The court found this conclusion reasonable and based on evidence, thus not perverse or patently illegal. 5. Award of Interest and Costs: DSIIDC challenged the award of interest at 8.5% as exorbitant. The court found the interest rate reasonable and based on factual determination, which could not be re-agitated in the present proceedings. 6. Dismissal of DSIIDC's Counterclaim: DSIIDC's counterclaim of ?20,00,00,000/- for loss of reputation and work was dismissed by the Arbitrator due to lack of evidence. The court upheld this dismissal, finding no arbitrariness or hypothetical conclusions in the Arbitrator's decision. Conclusion: The court found no merit in DSIIDC's appeal under Section 37 of the Arbitration and Conciliation Act, 1996, and dismissed the appeal, upholding the Arbitrator's award and the learned Single Judge's order. The findings were based on evidence, reasonable, and did not suffer from patent illegality or breach of fundamental policy of Indian law.
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