Delhi High Court Upholds ₹1 Crore Arbitral Award In Favour Of Contractor For 1999 Lok Sabha Poll Supplies

The Delhi High Court has upheld an arbitral award of over ₹1 crore to a contractor who supplied tents, furniture and electrical items on hire during the 1999 Lok Sabha elections. The court rejected a challenge by election authorities who alleged that the bills were inflated.

A Division Bench of Justice Avneesh Jhingan and Justice Shail Jain held that the arbitrator had reasonably relied on evidence of physical verification by Returning Officers before the structures were dismantled. The court found no reason to interfere with the arbitrator's assessment of the evidence.

“Suffice to say that the view taken by the arbitrator is plausible, suffers from no factual or legal error, much less perversity and calls for no interference,” the court ruled.

The dispute arose after election authorities invited tenders for hiring tents, furniture and electrical items during the 1999 Lok Sabha elections. Mahlakshmi Light House was awarded the work for the Karol Bagh and Outer Delhi parliamentary constituencies on August 9, 1999.

The agreement between the parties contained an arbitration clause. The contractor raised bills of nearly ₹20 lakh for Karol Bagh and ₹80.31 lakh for Outer Delhi.

The authorities alleged that the bills were inflated. They issued a show-cause notice on March 31, 2000, alleging that the contractor had failed to submit daily challans verified by the Returning Officers.

Under Clause 19 of the agreement, the contractor had to submit copies of delivery challans to the Chief Electoral Officer's office in Delhi every day. The tentage items also had to be physically verified by the Returning Officer before the structures were dismantled.

The agreement provided for verification by a representative of the Chief Electoral Officer as well, if ordered in writing. Payment was subject to scrutiny and approval of the bills by the Returning Officer and the competent authority.

Mahlakshmi Light House invoked arbitration and claimed over ₹1 crore. The authorities admitted that ₹15.22 lakh was payable.

The arbitrator awarded the contractor the full claim. The award also granted 9% annual interest on ₹15.22 lakh from February 2000 until payment.

It provided for post-award interest at 9% per annum if payment was not made within two months. The arbitrator also awarded ₹2 lakh in costs.

The election authorities challenged the award before a Single Judge of the Delhi High Court. The Single Judge dismissed their objections on May 2, 2017, and upheld the award. The authorities then appealed.

They argued that the arbitrator had failed to consider the requirements governing the scrutiny and approval of bills. They also contended that the arbitrator had overlooked the Finance Department's objections and departmental inquiry reports alleging inflated claims.

The Light House maintained that the supplies had been physically verified by the Returning Officers. It also defended the arbitrator's assessment of the evidence.

The court noted that Returning Officer Rajiv Yaduvanshi, who was responsible for Outer Delhi, and Returning Officer Dharampal, who was responsible for Karol Bagh, testified that the bills had been signed after physical verification.

Dharampal further testified that no objections were raised about the challans after verification. The evidence of Lall Singh and R.K. Sharma, officials connected with the Karol Bagh constituency, supported his account.

The court also considered the timing of the departmental scrutiny. It began in July 2000, after the supplies had been physically verified and the structures dismantled.

A report dated October 24, 2001, recommended a deduction of ₹12.95 lakh for Karol Bagh. However, the arbitrator found the physical verification and supporting testimony more reliable than the later departmental scrutiny.

The court further noted that the authorities had pressed only one ground before the Single Judge. They argued that the arbitrator had ignored the departmental inquiry reports and objections raised by the Finance Department.

The court held that issues not raised in the challenge before the Single Judge could not be introduced for the first time in the subsequent appeal.

It also considered two inquiry reports dated January 24 and February 15, 2006, concerning H.K. Mann and J.S. Jolly, respectively. The case against Mann was not proved, while the report concerning Jolly had not been placed before the arbitrator.

Neither report concerned the Returning Officers who had physically verified the challans and bills.

Finding no factual or legal error warranting interference, the court dismissed the appeal. The arbitral award therefore remained undisturbed.

For Appellants (Chief Electoral Officer & Anr.): Advocates Dhananjaya Mishra, Navneet Dogra and Bhargav Verma.

For Respondent (M/s Mahlakshmi Light House): Senior Advocate Suhail Dutt, along with Advocates Saran Suri, Ruchi Jain, Azhar Alam, Nagashree N. Sharma and Aman Yadav.