Delhi High Court: On finding no ground for interference in the arbitral award, Anup Jairam Bhambhani, J., upheld the decision of Single Judge Bench.
Instant appeal was filed under Section 13 of the Commercial Courts Act 2015 read with Section 10 of the Delhi High Court Act 1966 and Section 37 of the Arbitration and Conciliation Act 1996 impugning the decision of Single Judge of this Court. In the said decision arbitral award made by the sole arbitrator was upheld.
Background
Railways had filed a petition under Section 32 of the Arbitration and Conciliation Act challenging the arbitral award in which Railways was directed to refund to Annavaram the sum of Rs 1,22,38,125 which had been deducted/withheld by the Railways as ‘liquidated damages’ imposed upon Annavaram for alleged breach of the terms and conditions of a tender, pursuant to which a Letter of Acceptance was issued by the Railways to Annavaram for supply of 10000 Pre-Stressed Concrete Sleepers.
Non-Performance & Non-Compliance
The reason for the dispute was the non-performance and non-compliance with the terms of Letter of Acceptance. As Annavaram did not supply even a single sleeper within the stipulated time, nor did they obtain any extension of time for making such supply.
In view of the above background, penalty was imposed and then the contract was terminated.
Mr R.K. Sanghi, Senior counsel appearing for Annavaram contended that by inserting clause 1.2, a new condition came into effect whereby the parties agreed that the quantity of sleepers ordered under the original tender stood “… reduced to the number of sleepers manufactured till the date of issue of LoA for the new contract …”; and it was contended, that as a result there was no obligation on Annavaram to supply 10000 sleepers by 14-07-2009.
Consequently, it was argued that, the Railways were not justified in imposing any liquidated damages upon Annavaram.
Analysis, Law and Decision
Firstly, the High Court stated that there is limited scope and ambit of a challenge under Sections 34 and 37 of the A&C Act, which are pithily set out inter alia in the Supreme Court decision of PSA SICAL Terminals (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin, 2021 SCC OnLine SC 508, in which the Supreme Court reiterated its view on MMTC Limited v. Vendanta Limited, (2019) 4 SCC 163 wherein it was observed that:
“As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) …”
“It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.”
“…the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision.”
Therefore, Bench held that so long as the view taken by an arbitrator, is a possible view based on facts, it is irrelevant whether this Court would or would not have taken the same view on the merits of the matter, hence arbitral award was required to be upheld.
Hence, impugned judgment was upheld.
Conclusion
Annavaram entitled to receive from the Railways the amount directed to be refunded in the arbitral award along with simple interest at 6% per annum till the date of payment as per the impugned judgment. [Union of India v. Annavaram Concrete Pvt. Ltd., 2021 SCC OnLine Del 4211, decided on 31-8-2021]
Advocates before the Court:
Ms Geetanjali Mohan, Advocate.
Mr R.K. Sanghi, Senior Advocate with Mr Satjendar Kumar, Advocate and Mr Ishan Sanghi, Advocate.
Additional Reading:
Can Courts modify Arbitral Awards under S. 34 of Arbitration Act or is power limited? SC decides