Overview
In this case, the Delhi High Court examined a challenge by Indira Gandhi National Open University(IGNOU) to an arbitral award which was passed in the favour of Roshan Real Estates Pvt. Ltd.
The Court found that the arbitrator ignored the contractual terms and evidence while deciding upon several claims. It also found that the arbitrator had given the award as to damages on a basis that was not pleaded before the tribunal.
While holding that the award suffered from patent illegality, perversity and violation of natural justice, the award was set aside by the Court under Section 34 of the Arbitration and Conciliation Act 1996.
Facts of the Case
IGNOU invited bids for the construction of the office of Vice Chancellor and VIP Guest House at its campus, on 30 March 2009. Roshan Real Estates was chosen as the successful bidder. On 9 September 2009, the contract was given to them for ₹10,67,38,025. The work was to begin on 19 September 2009 and finish by 18 September 2010. It was claimed by Roshan that the work was completed on 30 November 2011.
Disputes arose later over the completion of the project, unpaid bills, and other expenses. Under Clause 25, the disputes were referred to arbitration and 17 claims were raised by Roshan. The arbitrator awarded amounts for several claims such as ₹2,62,36,935 for the work which was executed, ₹50,55,912 towards the 12th RA Bill, ₹1,27,27,431 for escalation and ₹62,00,000 for the claims which were related to idling of staff and other resources.
This award was challenged by IGNOU before the High Court of Delhi under Section 34, while arguing that the arbitrator wrongly treated the work as completed on 30 November 2011 and relied upon the material without giving IGNOU an opportunity to respond.
Legal Issues
- Whether the arbitrator correctly held that the work was completed on 30 November 2011.
- Whether the arbitrator could award the amounts contrary to the contract and on material not disclosed to the parties.
- Whether the award suffered from patent illegality, perversity or violation of natural justice under Section 34 of the Act.
Decision
The Court held that the work could not be treated as complete only because parts of the building were being used. Clause 8 required a certificate of completion, while Clause 15 required the completion of drawings and documents. The evidence showed that the defects and other requirements were pending after 30 November 2011.
The Court also found that the arbitrator relied on DSR-2007 rates, market enquiries, and other material without confronting IGNOU. This violated Section 18 and 24(3) and the principles of natural justice.
Further, the arbitrator released the performance bank guarantee despite the requirement of completion certificate.
For escalation, the arbitrator rejected Clause 10CC as applicable, but then awarded the damages under Section 55 and 73 of the Contract Act, although such an independent damages claim had not been pleaded.
It was held by the Court that the actual loss was neither pleaded nor proved. Accordingly, the award was held to fall under the scope of Section 34 and was set aside. All pending applications were disposed of.
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