Objection Regarding 'Excepted Matter' Would Be An After-Thought If It Was Not Raised Before The Arbitrator: Delhi High Court

The Division Bench of Justice Mukta Gupta and Justice Neena Bansal Krishna relied on the judgment of the Supreme Court in J.G. Engineers v. UOI (2011) 5 SCC 758 to hold that only the question of determination of the quantum of compensation for delay is an excepted matter and the issue if the compensation is payable is an arbitrable matter.

Facts

The Government of NCT Delhi launched a project for the refurbishment of the government schools. DSIIDC (Appellant) was entrusted with the said project work. Thereafter, the appellant awarded a part of the said project to the respondent and the parties entered into a contract to that effect.

There was a delay in the completion of the project work. The appellant withheld a part of the final bills as compensation for the delay caused. Consequently, a dispute arose between the parties that was referred to arbitration.

The arbitrator partly allowed the claims of the respondent and dismissed the counter-claim preferred by the appellant.

Accordingly, the appellant challenged the award under Section 34 of the A&C Act. The Ld. Single Judge dismissed the objections filed by the appellant.

Aggrieved by the decision of the Court, the appellant preferred an appeal.

The Grounds of Appeal

The appellant challenged the award and the impugned order on the following grounds:

• The arbitrator has allowed a claim that was an excepted matter under the contract between the parties and the same is beyond the jurisdiction of the arbitrator.
• The arbitrator erred in awarding labour cess and DVAT beyond the rates approved by the concerned authority.
• The arbitrator erred in computing the escalation for labour and material on the basis of cost indices as approved by the Director General, CPWD for building works in Delhi and did not use cost indices for commodities published by Economic Bureau for computing this amount as was provided in the Agreement, rendering the decision of the Arbitral Tribunal contrary to Clause 10 CC of the Agreement.
• The award of any amount in excess of 15% of the incremental value on the basis of labour and material component by the Arbitral Tribunal was completely beyond the terms of the Agreement.
• The arbitrator erred in dismissing the counter-claim of the appellant as it had suffered damages and loss of reputation on account of loss of work which was due to the delay in the execution of the project work.

The respondent countered the submissions of the appellant on the following grounds:

• Only the issue of quantum of compensation for delay was an excepted matter under the contract and the issue as to who was responsible for the delay was certainly arbitrable.
• The arbitrator has not determined the quantum of compensation but has merely held that the respondent is entitled to compensation.

Analysis by the Court

The Court held that on a reading of Clause 2 of the Agreement it was clear that only the issue of determination of compensation was an excepted matter which was to be determined by the competent authority, however, the issue preceding it is whether any compensation is payable or not is certainly arbitrable.

The Court held that the Arbitral Tribunal did not commit any jurisdictional error as it did not engage in the exercise of assessing the quantum of compensation payable in terms of Clause 2 of the Agreement which was an excepted matter. It restricted itself only to examine whether there was any delay on the basis of which the compensation could be paid

The Court further observed that the appellant had not raise any question regarding the jurisdiction of the tribunal to adjudicate Claim 2 (excepted matter). The Court held that objection regarding the excepted matter would be an after-thought if the same was not raised before the arbitral tribunal.

The Court held that the decision of the arbitrator regarding labour cess and DVAT is based on the appreciation of evidence and does not deserve any interference.

The Court further dismissed all the objections of the appellant on the ground that the decision of the arbitrator regarding those issues is based on the appreciation of evidence and does not deserve any interference from the court.

Accordingly, the Court dismissed the appeal as without merit.

Case Title: DSIIDC v. H.R. Builders, FAO(OS)(COMM) 77 of 2022

Citation: 2022 LiveLaw (Del) 614

Date: 03.06.2022

Counsel for the Appellant: Ms. Firdouse Qutub Wani with Md, Zaryab Jamal Rizvi and Mr. Gopi Ram

Counsel for the Respondent: Mr. Avinash K. Trivedi, Ms. Ritika Trivedi & Mr. Anurag Kaushik.

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