Delhi High Court: An appeal was filed under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 read with Section 13 of the Commercial Courts Act, 2015 assailing judgment dated 05-04-2021 passed by the District Judge, Tis Hazri, Delhi whereby the appellant’s appeal under Section 34 of the Act was dismissed and the award passed by the Sole Arbitrator was upheld. A division bench of Yashwant Varma and Anish Dayal, JJ., upheld the impugned order as no reason to interfere with the impugned judgement in the exercise of the Court’s jurisdiction under Section 37 of the Arbitration and Conciliation, 1996 was made out.
In 2001, the appellant, Director of Education under the aegis of the Directorate of Education created by the Government of NCT of Delhi, floated a tender for the implementation of the Computer Education Project (“CEP-II”) for various government/ government aided Senior Secondary Schools. The respondent, a provider of technology-based educational products and services, submitted its bid and was awarded a contract for 28 government schools, 10 single shift schools and 9 double shift schools (“subject schools”) vide agreement dated 24-04-2002.
A contract was executed between the appellant and the respondent for, inter alia, the supply of computer hardware, software, and connected accessories, setting up of computer laboratories in assigned schools, employing of teaching staff/computer instructor, supply of computer stationery, maintaining the systems etc., amounting to Rs. 3,46,17,000/- along with a bank guarantee of Rs. 8,65,425/-. Upon payment of 15% advance, the appellant was obligated to pay the balance amount in seven equal installments. While the appellant released four instalments of the payment, the balance payment of Rs. 1,06,73,575 along with a bank guarantee of Rs. 8,65,425 was withheld by the appellant on account of deficiencies highlighted in the audit report dated 27-10-2004 (“Audit Report”) published by the Account General Central Revenue (“AGCR”).
Based on the Audit Report, a Sub-Committee formed under the Chairmanship of the Joint Director of Education (“Sub-Committee”) to evaluate the deficiencies in the respondent’s performance under the Contract vide which the appellant was found to be liable to only pay Rs. 12,31,504/- to the respondent and not a sum of Rs. 1,06,73,575/- which was otherwise claimed to be outstanding by the respondent. Thus, arbitration clause was invoked, and the Sole Arbitrator directed the appellant to pay a sum of Rs. 80,10,762/- with interest @ 8% p.a. from the date of filing of the statement of claim i.e., 26-06-2009 till the date of payment to the respondent. During the pendency of the dispute, the Sole Arbitrator also passed an interim award of Rs. 12,31,504/- pursuant to an application under Order 12 Rule 6, Code of Civil Procedure, 1908 moved by the respondent. The appellant was also directed to pay interest on the said sum of Rs. 12,31,504/- from 26-6-2009 till the payment of the said amount. The appellant was further directed to return the bank guarantee of Rs. 8,65,425/- with interest.
A petition under Section 34 of Arbitration Act was filed challenging the award and the District Judge vide impugned order upheld the findings of the Sole Arbitrator.
The Court noted that the appellant kept the respondent in limbo despite repeated correspondence from the respondent’s end before and after the expiry of the Contract, including the invocation of the Right to Information Act, 2005. Admittedly, it was only vide letter dated 04-09-2008 that the appellant communicated its decision to pay a small sum of Rs. 12,31,504/- to the respondent. The respondent replied to the letter immediately on 10-10-2008 stating that the amount due and payable was to the tune of Rs. 1,06,73,575/-, and also invoked the arbitration clause soon thereafter. Therefore, the claim of the respondent was not time-barred under Article 5 of the Limitation Act, 1963.
The Court further noted that the findings of the AGCR and the Sub-Committee are unilateral and violate the principles of natural justice. The respondent was only intimated about the formation of the committee vide a letter dated 16-06-2005 and the final decision was communicated vide letter dated 04-09-2008. At no point was the respondent included in these proceedings or allowed to be heard. On the aspect that the respondent had not paid electricity charges of Rs. 11,94,800/- as well as telephone/internet charges of Rs. 4,36,160, the Court further observed that despite being given an opportunity to bring unpaid bills on record, the appellant failed to do so. Thus, no patent illegality was found in the view adopted by the District Judge insofar as the appellant failed to indicate which bills, if any, remained unpaid by the respondent.
The Court concluded that the District Judge and the Sole Arbitrator have concluded that the alleged deficiencies for which restoration costs are being claimed were never raised during the subsistence of the Contract. Moreover, it is the admitted case of the appellant that pursuant to a meeting dated 18-04-2006, it was decided that the respondent will not be liable to rectify or repair any defects after the expiry of the Contract and after handing over the relevant equipment to the Principals/Heads of subject schools. Therefore, the District Judge rightly held that no ground for interference with the Award was made out.
[GNCTD v EduComp, 2023 SCC OnLine Del 8042, decided on 15-12-2023]
Advocates who appeared in this case :
Mr. Anuj Aggarwal, ASC with Ms. Arshya Singh & Mr. Yash Upadhyaya, Advocates for appellants
Mr. Aayush Agrawal, Advocate for respondent
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