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TMI Blog2020 (8) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... t with such ratio of the arbitrator in imposing interest, all the more since the scope of interference under Section 34 is extremely limited. Corroborative evidence in support of the 5th RA Bill work being done - HELD THAT:- The same cannot hold water, since the RA Bill, by its very definition and nature, is a running account bill which is raised from time to time. The amount on the 1st to 4th bills were not claimed since the same was already credited to the account of the claimant. As such, the question of abandonment of work being a basis of refusal of such amount does not arise - The TDS certificate, read in conjunction with the RA bill itself, particularly in view of the clearance of the previous RA Bills, clearly weigh the preponderance of probability in favour of amount claimed on the 5th RA Bill being justifiable. It is a fallacious argument that different yardsticks were followed in respect of refusal of the claims on the 1st to 4th RA bills while granting the 5th RA bill dues. This is for the simple reason that the 1st to 4th bill amounts were already credited by the respondent company to the claimant's account and there was no claim in the arbitral proceeding, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed entitlement to the amount raised by the 1st to 4th RA Bills, the claimant was not granted any amount on such bills. 6. It was further held by the learned Arbitrator that the amount, specified above, was payable by the respondent to the claimant with interest at the rate of 15% per annum for the respective periods calculated in the following manner: (a) On the amount of 5th RA Bill namely ₹ 28,43,727/-, being part of the claim made in the statement of claim, for the period from April 1, 2008 to August 7, 2009, that is, for the pre-reference period, (b) On the sum total of the said amount calculated in terms of clause (a), from August 8, 2009 (the date of entering into the reference) till the delivery of the award, that is July 18, 2012, namely the post-reference/pendente lite period, (c) On the sum total of the amount calculated in terms of clause (b), from July 19, 2012, the date following that of the award, till realization, calculated at the same rate of 15% per annum, (d) In case the payment is not made within three months from the date of award, as calculated in terms of clause (c), then the interest shall be payable on the whole amount of the award a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was further approved in Ssangyong Engineering and Construction Company Limited vs. National Highways Authority of India (NHAI) reported at (2019) 15 SCC 131 (paragraph 41). It is argued that although Associated Builders (supra) arose from an appeal under Section 37 of the 1996 Act, the principle which emerges from paragraph 31 of the said decision would apply to this case, since it involves complete non-consideration of material evidence. 12. It is next argued on behalf of the petitioner that the claimant had failed to discharge his onus to prove the claim on the 5th RA Bill, thereby acting contrary to the principle contained in Section 101 of the Evidence Act. Learned counsel submits that no primary evidence in support of such claim, either in the form of any measurement book or any material to conclusively prove execution of work which had been built, had been disclosed by the claimant in the arbitral proceedings. 13. That apart, the petitioner argues that the award suffers from material inconsistencies and inherent contradiction in terms, since the arbitrator equated the issue of abandonment of work with the issue of defects in the work, which have no nexus with each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence period, already with interest. Such interest was granted for the pendente lite period. The third interest was granted for the post-award (till realization) period, calculated on the amount compounded in terms of the previous compounded amount and not on the principal sum. In fact, a fourth interest was granted on such compounded amount as lastly mentioned above, in the event of non-payment of the awarded amount within three months. 18. The final interest was directed to be paid at quarterly rates, even in the absence of any contract to such effect between the parties. As such, the Arbitrator allowed interest thrice over. 19. In support of the proposition that an Arbitrator cannot pass an award for interest on interest, learned counsel for the petitioner places reliance on Hyder Consulting (UK) Limited vs. Governor, State of Orissa, reported at (2015) 2 SCC 189. Such proposition, it is argued, is also evident from Section 31(7) of the 1996 Act. 20. Apart from the aforesaid grounds, the petitioner challenges the award on the ground that harsh injustice was meted out to the petitioner by directing full costs of the arbitration to be borne by it, despite the fact that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll (for the period ended March 31, 2008) and only after depositing the said tax in the bank on May 30, 2008, the petitioner issued the said TDS certificate to the claimant, which is evident from the exhibit itself. Such deduction necessarily implies that the entire amount of the RA Bill had been credited to the account of the claimant, even if not actually paid till date. In view of such circumstances, the petitioner company is now estopped from raising any dispute as regards any defect or deviation from the specification in respect of the work done under the 5th RA Bill. 26. The arbitrator recorded in paragraph 8.2.14 of the award that there was no evidence of any defect or departure from specification in respect of the 5th RA Bill reported by the RE of the petitioner company while verifying the 5th RA Bill. The allegation of the petitioner company, about the abandonment of work after receiving complaints that the work performed during November, 2007 to January, 2008 were defective, as reflected from the evidence adduced by RW1 in the arbitral proceedings, were disbelieved by the learned Arbitrator in the absence of any material evidence, as was recorded in paragraph no. 8.1.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, wherein the Supreme Court was pleased to allow pre-reference and pendente lite interest compounded monthly . 33. Hence, learned counsel for the respondent submits that this court ought not to interfere under Section 34 of the 1996 Act in the facts and circumstances of the case. 34. In order to adjudicate the present challenge, it is necessary to examine the parameters of interference under Section 34 of the 1996 Act. Paragraphs 31 to 33 of Associated Builders (supra) lay down that a decision would be perverse where: (i) a finding is based on no evidence, or (ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or (iii) ignores vital evidence in arriving at its decision. It was further held, by relying on the previous judgment of the Supreme Court itself, that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then the finding is rendered infirm in law. 35. A broad distinction, it was held, was to be main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. 39. However, paragraph no. 41 of Ssangyong Engineering and Construction Company Limited (supra) cannot be read in isolation. The view of the Supreme Court, as comprehensively reflected in paragraphs 40 and 42 of the same report, which are immediately next to paragraph 41, is that as per the change made in Section 28(3) of the 1996 Act by amendment, if the arbitrator wanders outside the contract and deals with a matter not allotted to him, he commits an error of jurisdiction. Moreover, the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would. The Supreme Court held that, given the fact that the amended Act will now apply, and that the patent illegality ground for setting aside arbitral awards in International Commercial Arbitration will not apply, it is necessary to advert to the grounds conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of morality or justice. Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2-A) An arbitral award is arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. (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 appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 34(2)(a)(iv) would not be permissible as this ground must be construed narrowly and must refer only to matters which are beyond the arbitration agreement for reference. 43. The expression most basic notions of ... justice finds mention in Explanation-1 to sub-clause (iii) of Section 34(2)(b). Here again, what is referred to is, substantially or procedurally the same fundamental principle of justice which has been breached and which shocks the conscience of the court. Public policy , as a ground for setting aside or refusal to enforce an arbitral award is very narrow in scope and has to be shocking to the conscience or be clearly injurious to the public good or wholly offensive to the ordinary reasonable and fully informed member of the public, or violate the forum's most basic notion of morality and justice . 44. When it comes to the public policy of India, it was reiterated by the Supreme Court, an argument based upon the most basic notions of justice can be attracted only in very exceptional circumstances when the conscience of the court is shocked by infraction of fundamental notions or principles of justice and is available only in very exceptional circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a contractor for work done and that a jural relationship exists between the parties. One can even go to the extent of saying that, based on the act of a person depositing tax at source, the existence of a debt is admitted to the contractor concerned; but the quantum of debt to a contractor can only be ascertained from a conjoint reading of the balance sheets of the respective parties. 49. On such considerations, the learned Single Judge was pleased to hold that there was other circumstantial evidence, including an e-mail and working notes, showing that the defendant had agreed on 95% of the bill amount and 5% commission in relation to the RA Bills enumerated in the e-mail, and accordingly a partial decree was granted in favour of the plaintiff within the ambit of Order XII Rule 6 of the Code of Civil Procedure. 50. As such, it can be clearly interpreted that the crux of the aforesaid decisions do not debar an arbitrator from considering a TDS certificate as a piece of evidence in conjunction with other evidence on record (in the present case, the RA Bill and other documentary evidence). Rather, the same would constitute an initial indicator of the admission of liability, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due at that stage. As such, since the principal awarded carried interest for the pre-litigation period, there is no bar in considering the principal sum, for the purpose of interest pendente lite at the next stage to be the sum total of the pre-litigation interest added to the interest thereon. By similar logic, each of the stages entitled the award-holder to interest and the interest component, along with the principal, of each previous stage would be taken as the principal sum for the purpose of levying interest for the next. 55. Hence, there is no justification in finding fault with such ratio of the arbitrator in imposing interest, all the more since the scope of interference under Section 34 is extremely limited. 56. As regards the argument that there was no corroborative evidence in support of the 5th RA Bill work being done, the same cannot hold water, since the RA Bill, by its very definition and nature, is a running account bill which is raised from time to time. The amount on the 1st to 4th bills were not claimed since the same was already credited to the account of the claimant. As such, the question of abandonment of work being a basis of refusal of such amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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