Read Order:DELHI DEVELOPMENT AUTHORITY v. M/S EROS RESORTS AND HOTELS LTD 

Tulip Kanth

New Delhi, April 12, 2022: Finding no patent illegality or violation of the fundamental policy of India in the conclusion arrived at by the Arbitral Tribunal, the Delhi High Court has reiterated that if the view taken by the arbitrator is both possible and plausible then merely because another view could also be taken, can hardly be a ground to interfere with the Arbitral award.

Observing that the scope of jurisdiction of the Court under Section 37 of the Arbitration and Conciliation Act, 1996 is very limited, the Bench of Justice Manmohan and Justice Dinesh Kumar Sharma said,”It may be reiterated that merely because the arbitrator has taken a view that is plausible and there may be another view also, the award cannot be interfered with. The award can be interfered with only if the view taken by the arbitrator is patently illegal or against the fundamental policy of India.”

The Court was considering an appeal under Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 r/w Section 37 (1) (c) of the Arbitration and Conciliation Act which had arisen out of the impugned order passed by the Single Bench under Section 34 of the said Act. In the impugned order, the Single Judge had upheld the award of the Arbitral Tribunal.

Herein, pursuant to a public notice issued by the appellant for auction of plots for the construction of hotels in Delhi, the respondent submitted its bid and was awarded contract for the Hotel Plot nos. 13 A and 13 B located at District Centre, Mayur Vihar, New Delhi. The possession of the plots was handed over to the respondent on December 5, 2006 with the stipulation that the work which was related to the project pertaining to Commonwealth Games, had to be completed on June 5, 2010. However, the work was actually completed on December 20, 2010.

During the process, the respondent submitted corrected revised building plans incorporating corrections/suggestions with a request to expedite the sanction of revised building plans. The appellant granted the sanction to erect/re-erect/add to/alteration in the building to carry out the development specified in the said application in respect of Plot Nos. 13A and 13B. The appellant, later communicated regarding invocation of clause 3.14 and stated that the performance security to the extent of 5% of the bid amount, shall be encashed as per the schedule mentioned therein and the said period would expire on June 5, 2010. The respondent was asked to submit a copy of the completion certificate and proof of making the hotel functional prior to June 5, 2010. 

The respondent explained the reasons for the delay in completion of the project. Finally, the appellant on October 20, 2010 informed that since the period of 42 months for construction of the hotel and making it functional expired on June 5, 2010, the Performance Security would be forfeited without any further notice

The respondent thereafter, approached the High Court whereby the appellant was restrained from encashing the performance security furnished by the PNB for bank guarantee. The respondent also filed a petition and Justice (Retd.) Anil Dev Singh, former Chief Justice of Rajasthan High Court was appointed as the Sole Arbitrator.

The first claim made by respondent was to release the performance bank Guarantee of Rs 5.90 crores to the respondent; second claim was of Rs 15,16,464.00 towards the expenses incurred for renewing the bank Guarantee; third claim was of Interest @ 24% P.a. on the amount spent on renewing the bank Guarantee and on the amount kept as margin money with the bank for keeping the bank Guarantee alive and the fourth claim was of Rs 37 lakhs on account of cost of arbitration.

On the other hand, the first counter-claim made by appellant was regarding respondent’s liability to pay the amount of the said performance bank Guarantee i.e. Rs 5.90 crore for the various acts, omissions, breaches and defaults; second was regarding payment of interest on the amount of performance bank Guarantee of Rs 5.90 crores @ 18 % P.a. in the amount of Rs 1,48,68,000 from June 6, 2010 till April 31, 2012 ; third was for Pendente Lite and future interest at 18 P.a on the counter claims amount and fourth one included the cost of various litigations quantified at Rs 2,00,000 as well as the actual cost of the arbitral proceedings including specifically the fee of the arbitrator.

In the impugned order which was challenged, the Single Judge had upheld the award of the Arbitral Tribunal pertaining to the first claim however, the Tribunal set aside the award pertaining to second claim and the Arbitral Tribunal had rejected third and fourth claims made by the respondents and rejected all the counterclaims raised by the appellant.The appellant aggrieved by the order of the Single Judge had invoked the jurisdiction of this Court.

Referring to the judgment of the Supreme Court in UHL Power Company Ltd. vs. State of Himachal Pradesh wherein it was held that if the view taken by the arbitrator regarding the interpretation of the relevant clauses is both possible and plausible then merely because another view could have been taken, can hardly be a ground to interfere with the Arbitral award, the Division Bench opined that the scope of the jurisdiction of this Court under Section 37 is very limited. 

The claim of the appellant was that it was entitled to encash the bank guarantee as the delay in completion of the project was in excess of 365 days, whereas the case of the respondent was that the delay in completion of the project was attributable to DDA/Appellant. The Arbitral Tribunal had found that DDA/Appellant was substantially responsible for delaying the hotel project.On this issue, the Court was of the opinion that the Arbitrator had minutely examined the delay in completion of the hotel project and reached a finding that the delay was attributable to the DDA. The findings of the Arbitral Tribunal were based on the material placed by the parties which were duly upheld by the Single Judge. 

According to the Division Bench, the Single Judge had rightly remarked that it cannot re-evaluate the evidence and supplant its opinion over that of the Arbitral Tribunal. The Arbitral Tribunal had inter alia held that no loss was suffered by the DDA /Appellant on account of the delay. The Arbitral Tribunal had also rejected the contentions of the appellant that clause 3.14 of the General Terms and Conditions of the auction referred to the damages and held that it referred to the impost as a penalty for the delay in completion of the hotel.

The Court affirmed that the appellant had not brought any material on record to show that there was any patent illegality, misconduct, jurisdictional error or any other infirmity in the arbitral award or the order passed by the Single Judge. 

As per the Division Bench, the plea of the appellant that the Single Judge and the Arbitrator had not properly construed Clause 3.14 of the General Terms and Conditions and therefore acted against the fundamental policy of Indian Law was not persuasive at all and was liable to be rejected. 

The Division Bench reiterated the proposition that merely because the arbitrator had taken a view that is plausible and there may be another view also, the award cannot be interfered with. The Court also did not find any patent illegality or violation of the fundamental policy of India in the conclusion arrived at by the Arbitral Tribunal and thus, dismissed the appeal in question.

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