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Esteem Projects Private Limited vs. Lloyd Insulations India Ltd. - (High Court of Delhi) (05 Dec 2022)

It is impermissible for a court to re-evaluate the material on record and supplant its view over that of the arbitral tribunal



The Appellant has filed the present appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 impugning a judgment passed by the learned Commercial Court, whereby the Appellant's application under Section 34 of the A and C Act, seeking to set aside an interim arbitral award was rejected. The limited question that falls for consideration to this Court is whether the impugned award, rejecting the Appellant's contention that the claim preferred by the Respondent is barred by limitation, is vitiated by patent illegality.

There is no dispute that the Appellant had withheld the payment of the amount of ₹37,00,000 from the amounts due and payable to the Respondent. In the statement of accounts, furnished by the Appellant, an amount was reflected as "10% retention towards anticipated liability". However, further correspondence indicates that the Appellant had treated the said amount as liquidated damages for failure to execute the work within time. The Appellant had called upon the Respondent to provide an explanation and justification for the delay in the context of levy of such liquidated damages. The Respondent had provided such explanation, however, the amount withheld was not released.

It is not in dispute that if the extension of time was permitted by the Appellant, the same would have bearing on the levy of liquidated damages. The correspondence does indicate that the Appellant had sought for details for examining whether the extension of time was justified.

The question as to when did the 'breaking point' arise in this case is a question of fact. The Arbitral Tribunal had examined this question and found that the Respondent had unequivocally denied the respondent's claim for the first time in response to its legal notice. The notice invoking arbitration was issued on 23.12.2015, which is within a period of three years of the Appellant's communication seeking documents in connection with the extension of time. This Court is unable to accept that, in the given facts, the said decision that the Respondent's claims are not barred by limitation, is vitiated by patent illegality on the face of the award. The Arbitral Tribunal's view is a plausible one.

It is settled law that, it is impermissible for a court to re-evaluate the material on record and supplant its view over that of the arbitral tribunal in proceedings under Section 34 of the A&C Act. In Delhi Airport Metro Express Private Limited v Delhi Metro Rail Corporation Limited; the Supreme Court had explained that even if it is accepted that the arbitral tribunal has committed an error, the same would not vitiate the arbitral award on the ground of patent illegality. The ground of patent illegality is available if it strikes at the root of the matter and is ex facie apparent on the face of the record.

Given the limited scope of examination under Section 34 of the A and C Act, this Court finds no fault with the learned Commercial Court in declining the Appellant's application to set aside the impugned award. Appeal dismissed.


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