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Sikkim High Court: Commercial Court exceeds it’s Lakshman Rekha by examining and modifying Arbitral Award

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CASE TITLE – Union of India vs. M/s M.G. Contractors Pvt. Ltd. & M/s M.G. Contractors Pvt. Ltd. vs. Union of India

CASE NUMBER – Arb. A. No.1 of 2022 and Arb. A. No.2 of 2022

DATED ON – 03.05.2024

QUORUM – The Hon’ble Justice Biswanath Somadder & The Hon’ble Chief Justice Bhaskar Raj Pradhan

 

FACTS OF THE CASE

Tender was invited by CPWD, Chungthang, for construction of ITBP road sometime in the year 2010. In response, M/s M.G. Contractors Pvt. Ltd. submitted its tender which was found to be lowest, accepted and awarded in its favour. The value of work awarded under the contract was Rs.70,65,65,490/- which was 24.55% above the estimated cost put to tender of Rs.56,72,94,653/- Twenty-four months to be reckoned from 22nd day after the date of issue of acceptance letter dated 10.09.2010 was the time allowed for carrying out the work. The stipulated date of start of work was 02.10.2010 and the date of completion was 01.10.2012. The Agreement was executed in the year 2011. The work was delayed due to various reasons and finally completed on 30.06.2015. Certain disputes arose between the parties and M/s M.G. Contractors Pvt. Ltd. invoked Arbitration Clause 25 of the Agreement. The Sole Arbitrator was appointed who entered reference vide letter dated 14.03.2020. M/s M.G. Contractors Pvt. Ltd. made 15 claims by filing their Statement of Claims. The Union of India did not prefer any counter-claim. The total claim made by M/s M.G. Contractors Pvt. Ltd. was Rs.29,11,26,419/-  along with interest, GST and cost as actual. Claim No.7 was for an amount of Rs.8,16,41,135/- claimed as due and payable for escalation compensation for period October 2012 to June 2015.  Claim No.13 was for interest at the rate of 18% from due date to date of payment. Claim No. 14 was the claim for GST at applicable rate as per actual on the claim amounts. The learned Sole Arbitrator vide his Award dated 23.3.2021, awarded a sum of Rs.12,80,94,368/- along with interest and GST under Claim No.13 and Claim No.14 in favour of M/s M.G. Contractors Pvt. Ltd. The Sole Arbitrator did not grant Claim Nos. 2, 4, 5, 8, 10, 11 and 12. 7. The Union of India filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Commercial Court, being Arbitration Case No. 1 of 2021, in the matter of Union of India vs. M/s M.G. Contractors Pvt. Ltd. The Union of India prayed for setting aside Claim No.7 and associate interest under Claim No. 13 and associate GST under Claim No.14 granted in favour of M/s M.G. Contractors Pvt. Ltd on the ground that it was barred by limitation. By the impugned judgment dated 27.12.2021, the learned Commercial Court concluded that the Award delivered by the learned Sole Arbitrator under Claim No.7 and associate interest under Claim No.13 and associate GST under Claim No.14 are not barred by law of limitation. This is herein refereed to this part of the impugned judgment as its first part.

The learned Commercial Court, however, was of the opinion that the decision given under Claim No.13, awarding interest at the rate of 8% per annum to the claimant under Claim No.1, 3, 6, 7 and 9 with effect from 17.02.2020 till the date of Award, i.e., 23.03.2021, is contrary to the provisions of Section 31(7) (b) of the Arbitration and Conciliation Act, 1996. Accordingly, the learned Commercial Court modified the Award to the extent that M/s M.G. Contractors Pvt. Ltd. is entitled for interest under Claim No. 1,3,6,7 and 9 at the rate of 8% per annum with effect from 23.03.2021 till payment of Award as per Section 31(7) (b) of the Arbitration and Conciliation Act, 1996 barring the time period consumed during proceedings of the case before the learned Commercial Court. The learned Commercial Court, however, did not find any illegality in awarding Claim No.14. Thus, the Application under Section 34 of the Arbitration and Conciliation Act, 1996 was partly allowed. We shall refer to this part of the impugned judgment as the second part.

 

ISSUE

  1. Whether the arbitrator erred in determining the start date for the limitation period for Claim No. 7?
  2. Whether the interest awarded by the Sole Arbitrator from February 17, 2020, is not consistent with the provisions of Section 31(7)(b).

 

LEGAL PROVISIONS

Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, specifies that if the arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at a rate it deems reasonable, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court of Sikkim stated that in Arbitration Case No. 1 of 2021, The Union of India cannot effectively seek to modify parts of the Award that they had previously accepted and that the learned Commercial Court does not have the power to modify the Award in such a manner. After referring to judgment of the Hon’ble Supreme Court in Project Director, National Highways No.45E and 220, National Highways Authorities of India vs. M. Hakeem and another and S.V. Samudram vs. State of Karnataka and Another, modifying the Award would be outside the purview of the powers granted under Section 34, which allows for setting aside an arbitral award on specific grounds but does not extend to modifications of an accepted Award. The Commercial Court can review and set aside an arbitral award if it falls within the grounds specified under Section 34. However, since the Union of India had accepted most of the claims, including the interest and GST components, their request to set aside or modify specific parts of the Award, such as Claim No. 7 and the related interest and GST, was beyond the court’s power. This means that the Union of India is bound by the terms of the Award as accepted and cannot seek further modification or setting aside of specific parts. The Hon’ble High Court in Arbitration Case No. 1 of 2021, was of the opinion that in a proceeding under Section 37 of the Arbitration and Conciliation Act, 1996, they are not authorised to disturb concurrent findings of facts and law by the learned Sole Arbitrator and the learned Commercial Court. The learned Sole Arbitrator concluded that the work was completed on 30.06.2015, bill was finalised on 9.03.2017 and arbitration was sought before the Chief Engineer of the Union of India on 17.02.2020 and thus, the arbitration was invoked within limitation period of three years from the date of finalisation of the bill. The learned Commercial Court once again examined the issue raised by the Union of India, the relevant clauses and concluded that M/s M.G. Contractors Pvt. Ltd. completed its work on 30.06.2015 and finalised the bill on 09.03.2017. Accordingly, the learned Commercial Court was also of the opinion that the Award under Claim No.7 and its associate interest under Claim No.13 and associate GST under Claim No.14 was not barred by the law of limitation. In the circumstances, the court noticed that the Union of India has failed to make out a case for interference either under Section 34 or under Section 37 of the Arbitration and Conciliation Act, 1996. The Hon’ble High Court concluded that the first part of the impugned judgment of the learned Commercial Court, vis-à-vis, the challenge of the Union of India in its application under Section 34 of the Arbitration and Conciliation Act, 1996 need not be interfered with and accordingly, dismissed Arb. A. No. 1 of 2022. Whereas for the second part of the impugned judgment, the court learned that the Commercial Court on its own examined the Award minutely and modified the Award, vis-à-vis, Claim No.13 and while doing so the learned Commercial Court exceeded its jurisdiction. Hence allowing, Arb. A. No. 2 of 2022.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Dismissed and Disqualified : The High Court of Delhi Upholds Bid Disqualification over Documentation Discrepancy.

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Case Title – M/s. Sunshine Caterers Private Limited Vs. The Union of India

Case Number – Writ Petition (C) 4628/2024 & CM APPL. 18999-19000/2024

Dated on – 1st April, 2024

Quorum – ACJ Justice Manmohan and Justice Manmeet Pritam Singh Arora

FACTS OF THE CASE

In The Case of M/s. Sunshine Caterers Private Limited Vs. The Union of India, the second Respondent, Indian Railway Catering and Tourism Corporation Limited (IRCTC), issued a notice inviting the tender (NIT) for onboard catering services in the trains for a period of five years. The Appellant, M/s. Sunshine Caterers Private Limited, submitted their bid on the 1st of March, 2024, along with the required documents inclusive of the Annexures B, D and E, which were certified by a Chartered Accountant (CA) with a Unique Document Identification Number (UDIN). On the 27th of March, 2024, the Appellant received an E-Mail asserting that its bid was disqualified as the information in the submitted Annexures was not reflected on the Institute of Chartered Accountants of India (ICAI) website. The Appellant instituted a Writ Petition under Article 226 of the Constitution of India, seeking directions to withdraw the disqualification and declare it as qualified technically to participate in the tender.

CONTENTIONS OF THE APPELLANT

  1. The Appellant, through their counsel in the said case, contented that they submitted all the necessary documents as per the NIT, certified duly by a CA with UDIN, making it eligible, technically.
  2. The Appellant, through their counsel in the said case, contented that the rejection of the bid was solely based on the absence of the information in the downloaded UDIN Certificate from the ICAI website was unfair, as the tender possessed no such conditions.

CONTENTIONS OF THE RESPONDENT

  1. The Respondent, through their counsel in the said case, contented that for the purpose of prevention of the issuance of bogus certificates, the UDIN was introduced by the ICAI and that it is mandatory for all the CA Certificates.
  2. The Appellant, through their counsel in the said case, contented that the certified information by the CA in the Annexures must align with the UDIN certificate downloaded from the website of the ICAI.
  3. The Appellant, through their counsel in the said case, contented that the UDIN Certificates of the Appellant did not reflect the certified information, leading to the disqualification of the bid.

LEGAL PROVISIONS

  1. Article 226 of the Constitution of India prescribes the provision of the Powers of the High Courts to issue Writs.
  2. The Gazette Notification of the date 2nd of August, 2019 introduced the UDIN by ICAI to ensure the authenticity of the CA Certificates.

ISSUES

  1. The main issue of the case revolved around whether the rejection of the bid of the Appellant solely on the basis of the absence of information in the UDIN Certificate is justified?
  2. Whether the submissions of the Appellant of all the necessary documents certified by a CA with the UDIN makes it technically eligible?

COURT ANALYSIS AND JUDGMENT

The court in the case of M/s. Sunshine Caterers Private Limited Vs. The Union of India, the court delved into a subtle examination of the rejection of the bid of the Appellant for onboard catering services in trains, issued by the Indian Railway Catering and Tourism Corporation Limited (IRCTC). The court in the present case observed a pivotal disparity where the information certified by the CA of the Appellant did not coincide with the corresponding UDIN Certificates. The court observed that the UDIN serves as a indispensable reason of vindicating the genuineness of the certificates of the CA in an online format. However, due to the absence of the certified information in the UDIN Certificates, the Respondent, in the present case, rejected the bid of the Appellant. The court deemed the rejection of the bid of the Appellant by the Respondent, as reasonable, stressing on the importance of the UDIN in upholding the reliability of the CA Certification.

Despite the contentions of the Appellant that there was no specific requirement in the tender for the certified information in the annexures to be reflected in the UDIN Certificates, the court in this case held firm on the significance UDIN. The purpose of the UDIN, mandated by the ICAI, is not merely procedural but aimed at ensuring the precision and reliability of the CA Certificates. Upon carefully analysing the facts of the case and relevant provision, the court found that there was no merit in the argument of the Appellant. The rejection of the bid by the IRCTC was based on the valid grounds, given the disparities between the UDIN Certificates as well as the certified information. The court dismissed the petition along with any pending applications, stating the importance of adherence to the procedural requirements and the crucial role of the UDIN in maintaining the integrity of the financial documentation in the processes of the tenders.

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Judgement Reviewed by – Sruti Sikha Maharana

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