Delhi High Court Imposes Costs Of Rs.1 Lakh On Indian Oil For Taking Inconsistent Stance In Section 34 A&C Petition

Brief Facts:

The matter pertained to contracts which were entered into following tenders issued by the . Indian Oil Corporation Limited (“Respondent”) to the Petitioner, aiming at the supply, installation, and commissioning of Retail Visual Identity Elements across its nationwide retail outlets. While the contracts pertained to different State offices of the Respondent, they were otherwise identical. The disputes arising from all three contracts were jointly heard and addressed in a consolidated arbitral award. Thereafter, the Petitioner approached the Delhi High Court (“High Court”) and filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) challenging the arbitral award.

The Petitioner asserted claims totaling approximately Rs. 8.1 crores against the Respondent. These claims primarily revolved around alleged delays in the implementation of the contracts. Additionally, the Petitioner sought redress for the refund of liquidated damages deducted by the Respondent, loss of business opportunity, and price escalation. Notably, the arbitral award did not delve into the merits of these claims. Instead, it concluded that the claims were discharged through accord and satisfaction, implying a resolution through a mutual agreement resulting in a full and final settlement between the parties.

Observations by the High Court:

The High Court noted a contradiction in the Respondent's stance before the Arbitrator. Despite claiming that No Due Certificates were signed by the Petitioner, it noted that the Respondent failed to produce those certificates. Regarding the inconsistency of documents presented in arbitration proceedings, it highlighted the Respondent's inability to correlate certificates with specific work orders or match them with payments. It noted that the No Due Certificates were made prior to any payment by the Respondent. It held that there were no certificates issued after payment.

Analyzing the "No Claim/No Due Certificate," the High Court held that the certificates did not indicate settlement after payment but rather suggested that payment of the mentioned amount in the bill would be treated as a full and final settlement of claims. It further addressed the reliance on SES sheets and an additional sheet in the SES documents, pointing out that only one of several hundred sheets was presented before the Arbitrator, thereby, making it impossible to adjudicate the contention regarding deductions. Moreover, it held there was no evidence indicating that payment was made based on such a settlement or that a certificate of full and final settlement signed by the Petitioner.

Consequently, due to the absence of evidence supporting the Respondent's contentions, the High Court held that the arbitral award, solely based on accord and satisfaction without considering the merits of the Petitioner's contention, is invalid. The arbitral award was set aside.

In light of the Respondent's failure in the petition and its inconsistent stands, the High Court imposed substantial costs of Rs.1 lakh on the Respondent.

Case Title: M/S. Fiberfill Engineers Through Its Partner Mr. Rishabh Kishore Vs M/S. Indian Oil Corporation Limited Through Dy. General Manager (Engg.)

Citation: 2024 LiveLaw (Del) 261

Case Number: O.M.P. (COMM) 241/2021 & CRL.M.A. 5759/2024, I.A. 10440/2021.

Advocate for the Petitioner: Mr. Amit Gupta, Mr. Shiv Verma, Ms. Muskan Nagpal, Advocates.

Advocate for the Respondent: Mr. Jayant Mehta, Sr. Advocate with Ms. Mala Narayan, Mr. Shashwat Goel, Ms. Isha Ray, Mr. Udit Dedhiya, Advocates.

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