delhi high court

Delhi High Court: A petition was filed by Indian Railways, Union of India (petitioner) under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the arbitral award dated 02-05-2019 and the rectified Award dated 31-07-2019. Chandra Dhari Singh, J., held that the petitioner has failed to substantiate its grounds for setting aside the impugned Arbitral Award that the impugned award suffers from patent illegality and the findings therein are perverse, or the Arbitrator has not considered the pleadings and evidence placed before him and has arrived at a conclusion that is implausible.

The petitioner is Indian Railways, one of the transport organisation of the country and an autonomous body under the Union of India. The respondent is Besco Limited (Wagon Division), a public limited company with headquarters in Kolkata and is engaged in the business of designing and manufacturing various equipment including the rail wagons which are being supplied to the petitioner. The petitioner floated the tender for manufacturing and supply of different types of wagons with a corrigendum, as per which a new kind of wagon i.e., BCNHL wagon, had to be manufactured and all the bidders were required to submit the prototype of the wagon. The respondent was awarded the contract, as per which 2937 wagons were to be released in two tranches by the petitioner in favor of the respondent with 1469 wagons in first tranche (I Tranche) and 1468 wagons in the second tranche (II Tranche).

The disputes arose between the parties when the petitioner deducted and diverted 253 wagons from II tranche on the basis that the respondent had failed to supply 50% of the total orders outstanding in accordance with Clause 2.2 of the Contract, which were required before the release of the II tranche. A legal notice was issued, and arbitration was invoked by the respondent on the ground that the petitioner diverting wagons and delaying the release of quantities. The Award was passed on 02-05-2019 and passed the rectified award dated 31-07-2019 wherein the Tribunal partially allowed the rectification, clarification and modification.

The petitioner made two broad sets of claims before the Arbitrator as follows:

(i) for allocation of the said 253 wagons (119 BOXNHL and 134 BCNHL wagons); in the alternate compensation for Rs. 16,46,00,407/- as loss of profit,

(ii) Claim for a sum of Rs.28,56,53,627.54/- (which was subsequently revised) for loss caused on account of the said delay in releasing the second tranche order by more than eight months.

On the aspect of Claim No. 1, the Court noted that a review of the Award reveals that the Arbitrator has carefully examined the evidence presented by both parties and has provided a reasoned analysis of the facts and law. Disagreements with the arbitrator’s evaluation of the evidence do not amount to valid grounds for setting aside the Award. Cogent grounds, sufficient reasons have been assigned by Sole Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. Thus, the Court cannot re-apprise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by learned Sole Arbitrator.

Thus, the Court decided not to interfere with the Award passed by Arbitrator qua issue no. 1 regarding for allocation of the said 253 wagons in the alternate compensation for Rs. 16,46,00,407/- as loss of profit.

On the aspect of Claim No. 2, the Court noted that the Arbitrator has rightly held that without substantiating the loss accrued, such loss cannot be awarded to the petitioner. The loss can be made only if there is proof that such loss has been suffered by the party claiming such damage. Thus, the Court decided not to interfere with the award qua claim 2.

[Union of India v Besco Limited, 2023 SCC OnLine Del 4559, decided on 31-07-2023]

Advocates who appeared in this case :

Mr. Bhagwan Swarup Shukla, CGSC with Mr. Vinay Kumar Shukla, Mr. Sarvan Kumar, GP, Ms. Sunita Shukla and Mr. Daghmesh Tripathi, Advocates for the Petitioners;

Mr. Jayant Mehta, Sr. Advocate with Mr. Anirudh Bakhru, Mr. Suman Jyoti Khaitan, Mr. Vikas Kumar, Ms. Aarzu Khattar, Mr. Umang Tyagi and Mr. Aditya Sharma, Advocates for the Respondents.

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