Maharashtra State Electricity Distribution Company LTD., Kalyan, THANE.AND Anr. vs M/S. D.S.CONTRUCTIONS, Ulhasnagar.

VINOD Date: ORDINARY ORIGINAL CIVIL JURISDICTION

MAYEKAR 2025.01.16

14:36:10 +0530

APPEAL NO. 646 OF 2012

IN

ARBITRATION PETITION NO. 398 OF 2008

Maharashtra State Electricity Distribution

Company Ltd., Kalyan, Thane & Anr. ..... Appellant

VERSUS

M/s. D. S. Constructions, Ulhasnagar ..... Respondent Mr. A. Y. Sakhare, Senior Advocate i/b. Mr. Abhijeet A. Joshi for

the Appellant.

Mr. Surel Shah, Senior Advocate (Through V.C.) a/w. Mr.Uday S.

Samudrala, Mr. Shivesh J. Upadhyay for the Respondent.

Coram : A.S. Chandurkar & Rajesh S. Patil, JJ.

Date on which the arguments were heard : 3rd DECEMBER 2024 Date on which the judgment is pronounced : 15th JANUARY 2025

JUDGMENT ( PER - RAJESH S.PATIL, J.) :

1. The present appeal is filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short the Act of 1996) challenging the judgment and order dated 3 rd February 2012 passed by the learned Single Judge of this Court in Arbitration Petition No. 398 of 2008, thereby dismissing the arbitration ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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petition which was filed under Section 34 of the Act of 1996.

2. The appellant claimed that in a very short order of four paragraphs, the learned Single Judge dismissed the petitioner's arbitration petition filed under Section 34 which was challenging the arbitration award passed without reasons. The petitioner has come up with a case that the respondent was a contractor who was awarded a contract for construction of the Chief Engineer's Bungalow and Class 1 Junior Staff Quarters at Sector 19, Vashi for a total cost of Rs.41,27,853.56 only. It was the respondent's case that certain amount which was due and payable was not paid. Therefore, they invoked the arbitration clause and claimed the amount towards underutilization of overheads, underutilization of machinery, underutilization of labour force, underutilization of centring and shuttering, loss of business opportunities, unpaid amount towards work done, damages, extra work done, price variation. The Respondents filed their statement of claim before the Arbitral Tribunal of three members.

The appellants herein, being the respondent before the Arbitral ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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Tribunal filed their reply/ defence to the statement of claim on 7 th May 2005. In the said statement of defence, a specific plea of the claim being barred by limitation and claims not arbitrable was taken, apart from other grounds. It is further submitted that without framing any issue and without any witnesses being examined by the claimant, so also admittedly certain fabricated documents produced before the Tribunal which were later withdrawn by the claimant though opposed by the appellant herein, the arbitrator passed an award for a sum of Rs.

41,59,511.90.

3. Being dissatisfied by the award passed by the Tribunal, the appellant herein filed a Section 34 petition challenging the award on various grounds including the ground of the claim being barred by law of limitation and that non arbitrable disputes being considered by the Tribunal. The Single Judge while deciding the Section 34 petition, dismissed the section 34 petition on the ground that the challenge to the award was on three grounds, out of which ground no.1 i.e. the claim being barred by law of ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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limitation, ground no.2, that the claims were not arbitrable, cannot be permitted to be raised for the first time in the petition, as the said two claims according to the respondent (original claimant) were not argued before the Tribunal and there is no ground in the petition raising these two issues. As regards the third ground, the learned Single Judge in paragraph 4 and in ultimate paragraph has held that almost all claims arose out of the delay in completion of the work.

4. In paragraph 8 of the award, the Arbitral Tribunal has given reasons as to why it holds that the appellant herein alone responsible for the delay in completion of the work. Various claims made by the claimant have been awarded on the basis of that findings. The learned Judge further held that what is further to be seen is that the arbitrators were persons from the trade and therefore was conversant with the nature of work carried out.

Therefore, it cannot be said that the award made by the learned arbitrator is an unreasoned award. He has given reasons, though in brief and not elaborately, but it cannot be said that there are ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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no reasons given. Considering that, there is a clear finding of fact recorded that for delay in completion of the work, it is the petitioner alone who is responsible and all claims arose out of that delay.

5. Mr. Sakhare, learned Senior Advocate appeared on behalf of the appellant (original respondent before the Arbitral Tribunal) and made his submissions :- i. The Tribunal has allowed all the claims on its purported observations in Paragraph No.8.2 of the Award which merely states as follows: "8.2 After careful consideration of the arguments on both sides it is seen that there have been delays on the part of the Respondents due to which the completion period got extended from 12 months to 24 months. Against this background the claims of the claimant are examined and decided upon as below."

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ii. Apart from paragraph No.8.2, the Award is devoid of any reasons as to why the Tribunal found the Appellant responsible for the delay. iii. There is no discussion about any averments, arguments, or documents submitted by either party to reach the conclusion in Paragraph No.8.2 of the Award. iv. As such the Award is devoid of merits.

6. He submitted on the issue of Non-Arbitrable Claims as under :-

(i) As regards to Claim No.4 regarding PVC, Appellant had specifically pleaded non-tenability thereof by referring to Clause No.16 of the Work order which states "The price-escalation clause and price variation clause are not applicable to this contract". As ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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such the said claim was not arbitrable having been specifically barred by the Contract.

(ii) As regards to Claim 5 (Underutilization of Overheads), Claim 6 (Underutilisation of Machinery), Claim 7 (Underutilization of Labour force), Claim 8 (Underutilization of Centring and Shuttering), and Claim 9 (Loss of Business Opportunities), Appellant had specifically pleaded non-tenability thereof by referring to Clause No.15 of the Work order (Pg C41) which states that "The tendered rates for all the items under Schedule 'B' shall remain firm irrespective of the actual quantity of work executed under any sub- item/item or in the overall quantum of work done whether in excess or in deficit and to claim for revision of rates on grounds of loss of profit or increased overheads or whatsoever other ground shall be entertained by the Board." As such the said claim were not arbitrable having been specifically barred by ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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the Contract.

7. Mr. Sakhare, learned Senior Advocate relied upon following judgments :-

(a) The judgment of Supreme Court in case of Som Datt Builders Limited vs. State of Kerala with connected matter. 1 (b) The judgment of Delhi High Court in case of Samrat Constructions Company vs. Union of India 2 (c) The judgment of Supreme Court in case of Dyna Technologies Private Limited vs. Crompton Graves Limited 3 (d) The judgment of Supreme Court in case of Associate Builders vs. Delhi Development Authority 4 (e) The judgment of Supreme Court in case of McDermott International Inc. vs. Burn Standard Co.

1 (2009) 10 SCC 259

2 2024 SCC OnLine Del 2599

3 (2019) 20 SCC 1

4 (2015) 3 SCC 49

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Ltd. & Ors., 5 8. Mr. Surel Shah, learned Senior Advocate appeared on behalf of the Respondent (original respondent before the Arbitral Tribunal) and made his submissions as under :- i. The appeal seeks to take exception to the judgment and order passed by the Hon'ble Single Judge of this Hon'ble Court dated 03.02.2012 in Arbitration Petition No. 398 of 2008 (page no. 15 to 17 to the Appeal). ii. The Hon'ble Single Judge while dismissing the petition has considered the fact that only three grounds were raised in challenging the award before it. The three grounds as raised before the Hon'ble Single Judge can be discerned from para no. 1 of the impugned judgment.

5 (2006) 11 SCC 181

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iii. The Hon'ble Single Judge in para no. 2 refers to the fact that the first two grounds namely ,the claim being barred by law of limitation and the claims being non arbitrable were argued before the Ld. Arbitrator and the Arbitrator has not decided the same are not taken in the petition. Therefore, the Hon'ble Single Judge refused to consider the same in absence a specific statement being made the arbitration petition. iv. In absence of raising such a grievance before the Hon'ble Single Judge or for that matter the Arbitral Tribunal, the Appellant cannot raise the said issue that it was argued before the Arbitral Tribunal or that the ground was raised in the petition u/s. 34. v. The next contention of the Appellants is that ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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the claims were not arbitrable. vi. A bare perusal of the petitioner u/s.34 or for that matter in this appeal would indicate that the challenge is essentially to the claim being not arbitrable as the agreement prohibits such a claim being decided by the Arbitrator. vii. It is pertinent to note the non-arbitrability of a claim can be divided into two parts (1) is the subject matter non arbitrability and the (2) being non-arbitrable due to the restraint in the arbitration agreement. viii. Thus, the claim regarding non-arbitrability of the claim raised by the Appellant for the first time under section 34 cannot be raised under section 34 much less u/s. 37 of the Act.

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ix. The further contention that the claim filed by the Respondent before the Tribunal was time barred is also fallacious. x. It would be necessary to consider the defence raised by the Appellant before the Tribunal. Except a one liner contention that the claim is barred by the limitation there are no details given as to why the claim is barred by limitation. The said plea is nothing but a vague and evasive denial. In view of the settled law, vague and evasive denial cannot amount to a denial in the eyes of law. Therefore, in the humble submission of the Respondent such a plea may not be entertained. xi. Even otherwise without Prejudice to the above contention it is necessary to consider the claim which was raised by the Petitioner dated 15.02.2000. The said claim was raised towards the ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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additional amount as well as the balance due. xii. The proceedings before the Hon'ble single judge were u/s. 34 of the Act as it existed prior to the 2015 amendment. Thus, the scope of challenge to arbitral award under Section 34 is restricted only if the award is against a public policy. The Hon'ble Apex Court in the case of S.V. Samudram vs. State of Karnataka, reported in (2024) 3 SCC page 623, has considered the scope of section 34 in para 16 to 30 onwards. xiii. It is also pertinent to note that the award passed by the Tribunal is not by a judicial trained mind but by technical experts who are appointed by the Appellant themselves. Therefore, to contend that the award is not a reasoned award as is excepted from a judicial trained mind is fallacious.

The Hon'ble Apex Court in the case of S.V.

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Samudram in para 20 to 22 has considered the said aspect. xiv. The award if perused clearly considers the claims and considering the factors such as delay in issuance of contractual drawings, change in site etc. has come to conclusion after consideration of argument of both sides, that there is a delay on the part of the Appellants, then such a finding cannot be scrutinized with the microscopic lens as if it was an Award of a judicially trained mind. Therefore, the appellant cannot take a mileage of the fact that detailed reasoning for arriving at a conclusion is required, especially when the award refers to the fact that they have considered the arguments of both sides and passed the award. xv. The impugned order u/s. 34 deals with all the aspects, and therefore there is no failure to ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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exercise the jurisdiction u/s. 34. xvi. If the arguments of the appellants are to be considered the same would amount to reappreciation of evidence and facts which is not permissible under section 34 and 31, given the summary nature of proceeding u/s. 34. xvii. Having participated before the Tribunal without raising the ground of non-arbitrability of the claims in view of the agreement, the appellants have acquiesced, abandoned their plea regarding non-arbitrability especially when they could have filed an application u/s. 16 and invited a finding which could have been challenged u/s. 34. xviii. In view thereof the appeal should be dismissed.

9. Mr. Shah relied upon following judgments to buttress his ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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submissions :-

(a) The judgment of Supreme Court in case of S. V.

Samudram vs. State of Karnataka & Anr. 6 (b) The judgment of Supreme Court in case of Mohd. Akram Ansari vs. Chief Election Officer & Ors.

With connected matter. 7 (c) The judgment of Supreme Court in case of Pam Developments Private Limited vs. State of West Bengal & Anr. 8 10. We have heard learned counsel for both the sides and have gone through the documents on record. The learned Judge of this Court while deciding the Section 34 petition, has passed his order dismissing the Section 34 petition by recording reasons in just four paragraphs. The learned Judge has arrived at a

6 (2024) 3 SCC 623

7 (2008) 2 SCC 95

8 2024 SCC OnLine SC 2247 ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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conclusion as if the award is passed by a sole arbitrator, whereas the Arbitral Tribunal consisted of three members. It is a matter of record that neither issues were framed by the Tribunal nor any witnesses were examined by the parties to prove their claim and counter claim. In the Section 34 Arbitration petition, the appellant herein had mentioned ground no.(I) "claim of respondent not arbitrable" and ground no.(II) "claims are barred by limitation".

11. In the reply to the statement of claim, in paragraph nos. 22, 23, 26(i), 27(i), 28(i), 29(i), 30(ii) have raised the issue of claim being 'barred of limitation'. So also, as regards the grounds of 'claim not arbitrable', has been taken up by the appellant in ground nos. 30(1), 31(1), 31(2).

12. According to us, the appellant had at the initial stage while replying to the statement of claim raised both the issues, 'barred by the law of limitation' and 'the claim not being arbitrable'. So also raising the said two issues in the petition filed under Section ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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34, the learned Judge in the impugned order had recorded a perverse findings that both these grounds were not taken in the petition.

13. As regards the third contention of delay, we are of the view that the appellant's case is that they had specifically raised this ground and the Arbitral Tribunal had neither framed any issue nor any witness was examined by the claimant as regards to the documents in the form of receipt tendered by the claimant. The appellant had raised the plea that these were fraudulent documents. Hence, these documents be sent to the Government Press at Nashik for stamps and to the CID, Mumbai for verification. Once the report of the Security Press, Nashik came up on record, the claimant withdrew all these receipts, which was opposed by the appellant herein. However, even this point was not considered by the Arbitral Tribunal or by the learned Single Judge.

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14. On behalf of the appellant, the ratio of three judgments were relied upon. In Som Datt Builders Limited (supra), the Supreme Court held that it is obligatory on part of Arbitral Tribunal to state reasons in support of its award and that the lack of reasons makes an award legally flawed. In Dyna Technologies Private Limited (supra), the Supreme Court held that the passing of a reasoned award is not an empty formulation under the Arbitration Act. Further, the requirements of a reasoned order are that the reasons/reasoning should be: proper, intelligible and adequate. The Court while exercising jurisdiction under section 34 has to adjudicate the validity of an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. In Associate Builders (supra), the Supreme Court held that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration; also to provide that the Tribunal gives reasons for an arbitral award; to ensure that the Tribunal remains ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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within the limits of its jurisdiction; and to minimise the supervisory roles of courts in the arbitral process.

The ratio laid down by the Supreme Court in all of the above judgments are squarely applicable to the present proceedings.

15. Reliance has been placed by Mr. Shah on three Supreme Court Judgments. In S. V. Samudram (supra), in which the Supreme Court, set aside the Order passed by the High Court in Section 37 and Section 34, and the Award passed by the Tribunal was confirmed. In para no. 33, the Supreme Court held that they had carefully perused that Award passed by the Arbitrator in which materials on record were entirely considered and after due application of mind by assigning reasons, conclusion was arrived at. However, the High Court reversed that decision of the Arbitral Tribunal. In our opinion, the facts in the present proceedings are quite different. Therefore, the ratio of S. V. Samudram (supra) does not apply to the present proceedings.

15.1. In Mohd. Akram Ansari (supra) the Supreme Court was dealing with Wakf Act proceedings, in which it held that though ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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several points are taken in Memorandum of Appeal, but at the time of arguments, only some are pressed. However, the judge will deal only with points which are pressed before him in arguments and it will be presumed that the Appellants gave up the other points. In the present proceedings, the Learned Single Judge held that there was no ground in the petition raising the issue of limitation and claims not arbitrable. Bare perusal of the proceedings show that both the issues of limitation and claims not being arbitrable, were raised before the Arbitral Tribunal.

Therefore, the facts before the Supreme Court in Mohd. Akram Ansari (supra) and present proceedings are different.

15.2 In Pam Developments Private Limited (supra), the Supreme Court was mainly dealing with the issue of power of Arbitrator to award granting of pre-reference and pendente lite interest. In the present proceedings, the learned Judge had held that there was no ground taken up by the Appellants in the proceedings before the Arbitral Tribunal as regards "limitation" and "claims not arbitrable". Therefore, the ratio of Pam ::: Uploaded on - 16/01/2025 ::: Downloaded on - 16/01/2025 22:05:24 :::

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Developments Pvt. Ltd. (Supra), which is mainly dealt with the issue of granting Interest in Arbitration Proceedings will not be applicable to the present proceedings.

16. Therefore, according to us the impugned order dated 3 rd February, 2012 requires to be quashed and set aside and the arbitration proceedings filed under Section 34 of the Act of 1996 deserves to be re-considered on merits.

Order:

17.1. The order dated 3rd February 2012 passed by the learned Single Judge is quashed and set aside.

17.2. The arbitration petition filed under Section 34 of the Act of 1996 shall be decided afresh in accordance with law. It is clarified that all issues of fact and law are kept open for being considered afresh on their own merits.

17.3. The Arbitration Appeal is allowed in aforesaid terms with no order as to costs.

[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]

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