The Delhi High Court on 2 November allowed C.P. & Associates Pvt. Ltd.'s appeal against the dismissal of its challenge to an arbitral award arising from a Rs. 33.76 crore Delhi Metro construction contract with Delhi Metro Rail Corporation Ltd. (DMRC).
A Bench of Justices Avneesh Jhingan and Shail Jain held that courts examining challenges to arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, must consider the specific objections raised by parties while remaining within the provision's limited scope of judicial interference. The judges said:
“The court dealing with the objections has a dual duty; firstly, to restrict itself to the parameters laid down under Section 34 of the Act and secondly, to apply mind to the contentions raised and consider them within the scope of Section 34 of the Act.”
The dispute arose from a contract under which DMRC engaged C.P. & Associates to carry out architectural finishing works at seven elevated stations on the Inderlok-Mundka Line of the Delhi Metro Phase-II project for Rs. 33.76 crore.
The parties executed the contract on 14 October 2008, with a completion period of 14 months from the Letter of Acceptance dated 18 July 2008.
Disputes subsequently arose over execution delays, measurement of work and settlement of the final bill. The contractor attributed the delays to the non-availability of work fronts and delayed drawings, while DMRC alleged slow progress and inadequate deployment of resources.
DMRC issued a 14-day notice on 21 May 2010 and terminated the contract on 4 June 2010. After the DMRC-nominated engineer rejected its claims, C.P. & Associates invoked arbitration on 27 August 2013.
The arbitral tribunal delivered its award on 28 September 2018, allowing seven of the contractor's 32 claims, partly allowing three and rejecting the remaining 22.
The contractor challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. However, the Single Judge dismissed its petition on 4 May 2023, prompting the contractor to appeal under Section 37.
Before the Division Bench, C.P. & Associates argued that the Single Judge had overlooked its specific objections concerning the alleged wrongful termination without the required additional two-day notice, forfeiture of approximately Rs. 1.37 crore from its performance bank guarantee, rejection of claims for additional work and recovery of Rs. 40.45 lakh towards liquidated damages.
DMRC countered that the arbitral tribunal had delivered a reasoned award after examining the technical aspects of the dispute. It argued that the limited scope of judicial interference did not permit courts to reassess the tribunal's findings.
The Court found that although the Single Judge had discussed the facts, arguments and legal principles governing judicial interference, the order did not address the contractor's specific objections. Instead, the Single Judge reproduced portions of the arbitral award and rejected the objections on the ground that the tribunal's findings were consistent with the contract.
Further, the Division Bench held that examining the objections for the first time in an appeal under Section 37 would deprive the parties of an available statutory remedy. It also found that the Single Judge's failure to consider the specific objections violated the principles of natural justice.
Accordingly, the High Court set aside the Single Judge's order and remitted the matter for fresh consideration of the contractor's objections under Section 34.
Appearances for appellant (M/s C.P. & Associates Pvt. Ltd.): Advocates Vivekanand, Abhishek Semwal.
Appearances for respondent (Delhi Metro Rail Corporation Ltd.): Advocates Tarun Johri, Ankur Gupta.