Court Can’t Re-appreciate Evidence & Material On Record As First Appellate Court & Supplant Its Opinion In Place Of Arbitral Tribunal: Delhi HC

The Municipal Corporation of Delhi (MCD) had approached the High Court by filing an appeal under Section 37(1)(c) of the Arbitration & Conciliation Act, 1996 impugning an order of the Commercial Court.

The Division Bench of Justice Vibhu Bakhru and Justice Sachin Datta affirmed, “It is apparent from the above that the Arbitral Tribunal has awarded claim for loss of profit for the period the Contract was prolonged without any evidence or material to support the claim. Thus, the impugned award is vitiated by patent illegality.”

Advocate Sanjeev Sagar represented the Appellant while Advocate Avinash Trivedi represented the Respondent.

The impugned award was rendered in the context of the disputes that had arisen between the parties in connection with the work of “construction of a poly clinic in Bawana (Narela Zone Delhi)”, which was constructed by the respondent (Contractor) at an aggregate value of Rs 1,41,42,502 in terms of the Work Order. In terms of the Agreement, the work was to be completed within a period of eighteen months. The execution of the work was inordinately delayed and the same was completed after more than seventy-six months from the stipulated date of commencement of the work.

It was the contractor’s case that he had commenced the work in right earnest immediately after the same was awarded to him. However, the MCD (erstwhile North Delhi Municipal Corporation) failed to fulfil its reciprocal promises thus disabling him to complete the work within the stipulated period. The disputes between the parties were referred to arbitration before the Arbitral Tribunal. The disputes between the parties were referred to arbitration before the Arbitral Tribunal. The Tribunal awarded a sum of over Rs 50 lakhs in favour of the Contractor. Aggrieved by the fact that few claims of the contractor were disregarded by the Tribunal, an appeal was made to the Commercial Court. The Commercial Court held the Contractor to be entitled to a sum of Rs 28,85,934 and Rs 4,54,708 under Claim Nos. 1&2 respectively.

The MCD then filed a petition under Section 34 of the A&C Act assailing the impugned award before the Commercial Court. During the course of the said proceedings, MCD did not press its challenge to the Arbitral Tribunal’s findings in respect of Claim No.3 – that is refund of security deposit. However, the Commercial Court found no infirmity in the award of the Arbitral Tribunal.

The Bench noted that the finding of the Arbitral Tribunal that the delay in execution of the work was attributable to the MCD was based on appreciation of evidence and material placed on record. “Undisputedly, a court cannot reappreciate the evidence and material on record as the First Appellate Court and supplant its opinion in place of the Arbitral Tribunal. In our view, the findings of the Arbitral Tribunal to the effect that the delay in execution of the work (approximately eleven months with effect from 27.02.2006 to 10.01.2007) for removal of trees and a further delay of about thirty-nine months on account of the MCD’s failure to supply architectural and structural drawings of the building cannot be interfered with in this proceeding. To the said extent, we concur with the learned Commercial Court that there are no grounds to set aside the said finding”, it said.

The Bench rejected MCD’s challenge to the award of escalation under Section 10C of the GCC as the escalation was required to be worked out on the labour component of the work done and the computation produced by the Contractor before the Arbitral Tribunal was not disputed.

On the issue of the Tribunal's decision to award loss of profit on account of prolongation of the Contract, the Bench observed that the computation of quantum of damages as calculated was flawed. There was no evidence or material to indicate that the Contractor would have earned 10% profit on the value of the work. Secondly, there was no material to indicate that if the Contract had not been prolonged, the Contractor would have been gainfully employed in another profitable contract.

Moreover, the Bench found that the Arbitral Tribunal had awarded a claim for loss of profit for the period the Contract was prolonged without any evidence or material to support the claim. Thus, the impugned award to the extent that the Arbitral Tribunal had awarded the Contractor’s Claim No.5 was set aside as it was vitiated by patent illegality.

Cause Title: Municipal Corporation of Delhi v. Satya Pal Gupta [Neutral Citation: 2024: DHC:8968-DB]

Appearance:

Appellant: Advocates Sanjeev Sagar, Nazia Parveen, JE MukeshKumar Meena

Respondent: Advocate Avinash Trivedi, Anurag Kaushik, Rahul Aggarwal

Click here to read/download Order