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

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Digitally signed IN THE HIGH COURT OF JUDICATURE AT BOMBAY by KANCHAN KANCHAN VINOD MAYEKAR 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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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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