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Judgment
S.No.,Site No.,"Monthly Â
Licence Fee (Rs.)",Allotment Date,Hand-over Date
1,20,"2,87,000/-",12.12.2007,22.12.2007
2,21,"3,78,500/-",12.12.2007,02.01.2008
3,24,"2,15,500/-",12.12.2007,31.12.2007
4,29,"1,63,000/-",12.12.2007,31.12.2007
5,30,"2,35,500/-",12.12.2007,02.01.2008
6,37,"2,88,500/-",12.12.2007,22.12.2007
7,40,"2,35,500/-",12.12.2007,02.01.2008
8,45,"1,66,500/-",12.12.2007,02.01.2008
9,49,"4,44,500/-",12.12.2007,31.12.2007
for display of advertisements on Mobile Vans but the contract could not be operationalized as the Traffic Police had not granted permission for plying,,,,
the Mobile Vans. If the facts stated by the Claimants are true, the Respondent should, in all fairness, refund the amount when the contract could not",,,,
be operationalized due to no fault of the Claimants. However, the said contract was a separate and independent contract and the dispute between the",,,,
parties on the said contract cannot be raised under the present reference which deals with the disputes relating to display of advertisements by the,,,,
Claimants on Toilet Blocks only. The dispute pertaining to the Mobile Vans has not been referred to this Tribunal and the Tribunal is, therefore, not in",,,,
a position to adjudicate upon the said dispute. In the facts and circumstances of the case, this claim cannot be entertained by this Arbitral Tribunal.",,,,
Claim No. 6 is accordingly rejected.â€,,,,
The learned senior counsel for the petitioners submits that as there was no dispute with respect to receipt of the amount of Rs.1,04,62,004/-and the",,,,
letter dated 23rd June, 2008 of the respondent allowed adjustment of the same against other contracts, the Arbitrator has committed an error in not",,,,
allowing such refund/adjustment.,,,,
On the other hand, the learned senior counsel for the respondent has submitted that disputes arising out of various distinct contracts had been",,,,
referred to the Sole Arbitrator. As these contracts had differing terms and conditions that could not be taken up under a single reference, both the",,,,
parties agreed that the disputes should be referred to and adjudicated upon by the Arbitrator in four separate references. In view of such agreement,",,,,
the respondent, vide a fresh notification no. OSD/ (Advtt.)/2011/D-1001585 dated 24/05/2011 appointed the Sole Arbitrator to adjudicate upon the",,,,
claims and counter claims of the parties in disputes relating to maintenance and operation of the toilet sites mentioned below:-,,,,
“(i) Site No. 20 - Bahadur Shah Zafar Marg, ITO Crossing (12/12/2007 to 31/01/2010);",,,,
(ii) Site No. 21 - Ring Road in front of South Extension -1 (12/12/2007 to 01/02/2009);,,,,
(iii) Site No. 24 - Panchsheel Club, Opp. Flyover (12/12/2007 to 31/01/2010);",,,,
(iv) Site No. 29- Defence Colony Market (12/12/2007 to 31/01/2010);,,,,
(v) Site No. 30- Central Market, Lajpat Nagar (12/12/2007 to 01/02/2009);",,,,
(vi) Site No. 37 - IMA Building Existing Urinal Block, ITO (12/12/2007 to 31/01/2010);",,,,
(vii) Site No. 39- Opp. New Delhi Railway Station (12/12/2007 to 31/01/2010);,,,,
(viii) Site No. 40 - Lajpat Rai Market, Nehru Place Crossing (12/12/2007 to 31/01/2010);",,,,
(ix) Site No. 44- Corner of Bhikaji Cama Place (12/12/2007 to 12/01/2009);,,,,
(x) Site No. 45- Greater Kailash-1, M Block Market (12/12/2007 to 31/01/2010);",,,,
(xi) Site No. 49 - Road turning to CGO Complex, Near Lodhi Hotel (12/12/2007 to 31/01/2010);",,,,
(xii) Site No. 04/09 - Ring Road in front of South Extension-II (08/06/2009 to 05/02/2010);,,,,
(xiii) Site No. 05/09 - Lajpat Nagar, Opp. Police Station (08/06/2009 to 05/02/2010);",,,,
(xiv) Site No. 10/09- MMTC, Aurbindo Marg (18/06/2009 to 05/02/2010).â€",,,,
It is, therefore, submitted that the disputes between the parties, if any, with relation to the contract of advertisement rights on the mobile vans, was",,,,
not referred to for adjudication by the Sole Arbitrator and has rightly been refused by the Arbitrator.,,,,
I have considered the submissions made by the learned counsels for the parties.,,,,
It is not disputed before me by the learned senior counsel for the petitioners that the dispute with respect to the contract relating to advertisement,,,,
rights on mobile vans had not been referred to arbitration by the Sole Arbitrator. It is, however, contended that, in view of the letter dated 23rd June,",,,,
2008 of the respondent, the petitioners had a right to claim adjustment of Rs.1,04,62,004/- and there was, therefore, no dispute to be adjudicated in",,,,
respect of the contract of advertisement rights on mobile vans; the only question was whether the petitioners are entitled to such adjustment against,,,,
the dues of licence fee under the present contract relating to construction/maintenance/operation of toilet sites in question.,,,,
I may first refer to the letter dated 23rd June, 2008, which is reproduced hereinbelow:-",,,,
MUNICIPAL CORPORATION OF DELHI,,,,
(ADVERTISEMENT DEPARTMENT),,,,
206, Nigam Bhawan,",,,,
Kashmere Gate, Delhi-110006,",,,,
Tel.No. 23961884,,,,
No.ADC(Advtt.)/2008/425,,,,
Dated:23.06.2008,,,,
M/s Adwel Advertising Service,,,,
8F, Barakhamba Road,",,,,
New Delhi-110001,,,,
Sub: Contract for display of advertisement through motor vehicles in respect of South Zone â€" Refund/adjustment of security deposit,,,,
Sir,",,,,
Kindly refer to your letter dated 18.02.2008 addressed to Commissioner, MCD, on the subject cited above.",,,,
It is informed that after considering the issue, the competent authority has been pleased to allow you refund / adjustment of the security",,,,
amount deposited by you against the subject cited contract, in view of the fact that you were never allowed by various authorities to operate",,,,
the contract. However, no interest will be payable to you on the security amount.",,,,
You are requested to immediately get in touch with the Chief Advertisement inspector / G-8 Clerk of this department together with all the,,,,
relevant record / details, including original G-8 receipts issued against the payments deposited by you, from time to time for adjustment of",,,,
the amount payable to you on account of security deposit, against the contract allotted to you by this department.",,,,
Yours Faithfully,",,,,
Sd/-,,,,
(Amiya Chandra),,,,
Addl.Dy.Cmmr.(Advtt.)â€,,,,
It is to be noted that this letter allows refund/adjustment of the ‘security amount deposited’ by the petitioners. Therefore, this letter cannot",,,,
be read as allowing the adjustment/refund of ‘licence fee’ as well. Further, it calls upon the petitioners to contact the Chief Advertisement",,,,
Inspector/G-8 Clerk of the department ‘together with all the relevant record/details including G-8 receipts issued against the payments,,,,
deposited’ by the petitioners. This letter was, therefore, conditional in nature and the refund/adjustment was to be made on fulfilment of certain",,,,
conditions by the petitioners. If the petitioners were eventually not allowed to make this adjustment against the licence fee dues for the toilet sites,,,,
under the contract in question, this was still a dispute in relation to the contract for award of advertisement rights on the mobile vans and not a dispute",,,,
under the contract for the toilet sites.,,,,
As dispute under specific contracts had been referred for adjudication to the Sole Arbitrator, the Sole Arbitrator could not have gone beyond the",,,,
reference and adjudicated on the dispute between the parties in relation to the contracts not referred for his adjudication.,,,,
The learned senior counsel for the petitioners submits that as held by the Supreme Court in the case of Jitendra Kumar Khan & Ors. vs. Peerless,,,,
General Finance and Investment Co. Ltd. & Ors. (2013) 8 SCC 769, the present case was a case of equitable set-off and therefore, should have been",,,,
allowed.,,,,
I am afraid the said judgment would not be of any assistance to the petitioners as it was dealing with the case of set-off in a suit. The present case,,,,
relates to an adjudication by an arbitrator who is bound by the terms of his reference and the contract out of which the disputes have arisen.,,,,
The learned senior counsel for the petitioners has not drawn my attention to any term of the contracts of toilet sites that were referred to,,,,
arbitration and which would have allowed such a claim of set-off/adjustment. Equally, the judgment of the Supreme Court in Jitendra Kumar Khan",,,,
(supra) records that such equitable set-off cannot be claimed as a matter of right and it is the discretion of the Court to entertain and allow such a plea,,,,
or not. Paragraph 16 of the judgment reads as follows:-,,,,
“From the aforesaid enunciation of law it is quite clear that equitable set-off is different than the legal set-off; that it is independent of,,,,
the provisions of the Code of Civil Procedure; that the mutual debits and credits or cross-demands must have arisen out of the same,,,,
transaction or to be connected in the nature and circumstances; that such a plea is raised not as a matter of right; and that it is the,,,,
discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental principles,,,,
of equity, justice and good conscience. The discretion rests with the court to adjudicate upon it and the said discretion has to be exercised",,,,
in an equitable manner. An equitable set-off is not to be allowed where protracted enquiry is needed for the determination of the sum due,",,,,
as has been stated in Dobson & Barlow Ltd. v. Bengal Spg. & Wvg. Co. and Girdharilal Chaturbhuj v. Surajmal Chauthmal Agarwal.â€,,,,
(Emphasis supplied),,,,
On the other hand, learned senior counsel for the respondent relied upon the judgment of the Supreme Court in Union of India vs. Birla Cotton",,,,
Spinning and Weaving Mills Ltd. AIR 1967 SC 688, wherein the Court rejected the application filed by the Union of India under Section 34 of the",,,,
Arbitration Act, 1940 seeking stay of the suit. The stay was sought on the ground that though the liability under the contract in question was admitted,",,,,
certain dues were to be recovered from the company under distinct contract and the same were to be set-off. The Supreme Court rejected the said,,,,
application holding as under in paragraph 4 and 5:-,,,,
“4. The evidence recorded by the trial court discloses that there was no dispute between the Company and the Union arising under the,,,,
contract on which the suit was filed. The Union accepted liability to pay the amount claimed by the Company in the suit. The Union still,,,,
declined to pay the amount asserting that an amount was due from the Company to the Union under a distinct contract. This amount was not,,,,
sought to be set-off under any term of the contract under which the Company made the claim. The dispute raised by the Union was therefore,,,,
not in respect of the liability under the terms of the contract which included the arbitration clause, but in respect of an alleged liability of",,,,
the Company under another contract which it may be noted had already been referred to arbitration. The Union had no defence to the,,,,
action filed by the Company: it was not contended that the amount of Rs 10,625 was not due to the Company under the contract relied upon",,,,
by the Company. For enforcement of the arbitration clause there must exist a dispute: in the absence of a dispute between the parties to the,,,,
arbitration agreement there can be no reference.,,,,
It was urged that mere refusal by the Union to pay the amount due is sufficient to raise a dispute ""in connection with the contract"" within",,,,
the meaning of clause 21 of the Arbitration agreement. We are unable to agree with that contention. A dispute that the Union is not liable to,,,,
pay this price under the terms of the contract is undoubtedly a dispute under the contract, and in any event in connection with the contract.",,,,
But a plea that the Union though liable to pay the amount under the terms of the contract will not pay it because it desires to appropriate it,,,,
towards another claim under another independent contract cannot reasonably be regarded as a dispute ""under or in connection"" with that",,,,
contract under which the liability sought to be enforced has arisen.â€,,,,
(Emphasis supplied),,,,
Therefore, the Supreme Court in the above judgment, has clearly stated that the dispute has to be ‘under or in connection’ with the contract",,,,
under which the liability is sought to be enforced, or has arisen. In the present case, the dispute of adjustment/refund is under a different contract and,",,,,
therefore, has rightly been refused to be adjudicated upon by the Arbitrator in the present reference/award.",,,,
The learned senior counsel for the petitioners submits that, in fact, the Arbitrator also has found such amount to be payable to the petitioners but",,,,
has left it to the discretion of the respondent to refund the same or not.,,,,
In my opinion, this is a misreading of the impugned Award. The Arbitrator has clearly prefaced his view by stating that ‘if the facts stated by",,,,
the claimants are true’ and therefore, he has clearly stayed away from making any comment on the genuineness of the claim of the petitioners",,,,
under the head of recovery/adjustment of the above amount.,,,,
In respect of claim No. 9 and counter claim No. 1, learned senior counsel for the petitioners has further submitted that the Arbitrator has failed to",,,,
adjudicate on the plea of the petitioners with respect to site nos. 20, 40 and 45 that were allotted to the petitioners on 15.07.2009. It is submitted that",,,,
these sites could not be used by the petitioners for varying reasons as were mentioned in the Statement of Claim, particularly, in paragraphs 20 to 22",,,,
thereof, and therefore, no licence fee was payable by the petitioners for such sites.",,,,
I cannot accept the above argument of learned senior counsel for the petitioners. A reading of the Statement of Claim filed by the petitioners,,,,
would show that the petitioners had made specific claims with respect to non-use of various sites allotted by the respondent to the petitioners. I may,,,,
only refer to claim nos. 3 and 4 in this regard. As far as the above mentioned sites and for the period after 15.07.2009, barring making a reference in",,,,
the brief facts in the Statement of Claim, no specific claim towards the same was raised by the petitioners. Where specific claims have been raised",,,,
for other sites, it is not explained by the learned senior counsel for the petitioners, why such specific claims were not raised for site nos. 20, 40 and 45",,,,
that were allotted in petitioners’ favour on 15.07.20009. A mention of a problem qua these sites in the narration of facts, without making a claim",,,,
against the same, in my opinion, would debar the petitioners from raising such claim at the stage of challenge to the Award under Section 34 of the",,,,
Act. Respondent and the Arbitrator were to be put to specific notice of the nature of claim. Â Vague pleadings would not entitle the petitioners to,,,,
later contend that such claims were not dealt with by the Arbitrator.,,,,
It may also be of interest to note that in claim No. 9, in fact, the petitioners had claimed damages for alleged illegal termination of contracts for the",,,,
sites that were allotted to them on 15.07.2009. This is clearly contradictory to the claim now being set up by the petitioners. If the sites were not in,,,,
use, the claim would have been one of refund of licence fee and earnest money like in claim Nos. 3 and 4, and not one for damages.",,,,
The Arbitrator under the impugned award has awarded a sum of Rs.5 lacs in favour of the respondent as costs. I may only quote paragraphs 103,,,,
and 104 of the impugned award where the Arbitrator has discussed the issue of costs claimed by the respondent as Counter Claim no.4.,,,,
“103. Costs are claimed on the ground that the claims put in by the Claimants are based on illegal and arbitrary conduct of the,,,,
Claimants.,,,,
In the facts and circumstances of the case, I am inclined to award Rs.5,00,000/- in favour of the Respondent towards costs of the",,,,
proceedings.â€,,,,
Section 31 (8) of the Arbitration and Conciliation Act, 1996 before its amendment by Act ‘3’ of 2016 read as under:-",,,,
“(8) Unless otherwise agreed by the parties,--",,,,
(a) the costs of an arbitration shall be fixed by the arbitral tribunal;,,,,
(b) the arbitral tribunal shall specifyâ€",,,,
(i) the party entitled to costs,",,,,
(ii) the party who shall pay the costs,",,,,
(iii) the amount of costs or method of determining that amount, and",,,,
(iv) the manner in which the costs shall be paid.,,,,
Explanation.â€"For the purpose of clause (a), “costs†means reasonable costs relating toâ€"",,,,
(i) the fees and expenses of the arbitrators and witnesses,",,,,
(ii) legal fees and expenses,",,,,
(iii) any administration fees of the institution supervising the arbitration, and",,,,
(iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award.â€,,,,
A reading of the above sub-section would show that only ‘reasonable costs’ could be awarded by the Arbitrator.,,,,
The Supreme Court in case of Sanjeev Kumar Jain vs. Raghubir Saran Charitable Trust & Ors. 2012 1 SCC 455 has held that what can be,,,,
awarded under section 31 (8) is not ‘actual’ expenditure but ‘reasonable costs’. I may only quote from the said judgment as under:-,,,,
“Costs in arbitration matters,,,,
37) We have referred to the effect of absence of provisions for award of actual costs on civil litigation. At the other end of the spectrum is,,,,
an area where award of actual but unrealistic costs and delay in disposal is affecting the credibility of an alternative dispute resolution,,,,
process. We are referring to arbitration proceedings where usually huge costs are awarded (with reference to actual unregulated fees of,,,,
arbitrators and advocates).,,,,
38) Clause (a) of Section 31 (8) of the Arbitration and Conciliation Act, 1996 (“the Actâ€, for short) deals with costs. It provides that",,,,
unless otherwise agreed by the parties, the costs of an arbitration shall be fixed by the Arbitral Tribunal. The Explanation to sub-section (8)",,,,
of Section 31 makes it clear that “costs†means reasonable costs relating to (i) the fees and expenses of the arbitrators and witnesses,",,,,
(ii) legal fees and expenses, (iii) any administration fees of the institution supervising the arbitration, and (iv) any other expenses incurred",,,,
in connection with the arbitral proceedings and the arbitral award. Clause (b) of Section 31(8) of the Act provides that unless otherwise,,,,
agreed to by the parties, the Arbitral Tribunal shall specify (i) the party entitled to costs, (ii) the party who shall pay the costs, (iii) the",,,,
amount of costs or method of determining the amount, and (iv) the manner in which the costs shall be paid. This shows that what is",,,,
awardable is not ‘actual’ expenditure but ‘reasonable’ costs.â€,,,,
In the present case, the Arbitrator did not do the exercise that was to be done under section 31 (8) (b) of the Act specifically with regard to the",,,,
method of determining the costs. I may only note that the amount of claims and counter claims in the arbitration proceedings and the final award of a,,,,
sum of Rs.79,26,461/- in favour of the respondent does not justify the award of Rs.5 lacs to the respondent as ‘reasonable costs’.",,,,
The Arbitrator should also have taken into account the fact that the respondent in spite of directions of the arbitral tribunal, did not carry out the",,,,
reconciliation of accounts due to which, in fact, the Arbitrator even held that the respondent was not entitled to claim interest pre-reference and",,,,
pendente lite. There were other claims of the petitioner that were also allowed in their favour.,,,,
In my view, as the petitioner has been found liable to pay a sum of Rs.79,26,461/- to the respondent, cost of Rs.50,000/- in favour of the",,,,
respondent would have sufficed.,,,,
In view of the above finding, I allow the present petition only to the extent that the award so far as it directs the petitioners to pay cost of Rs.5 lacs",,,,
to the respondent is set aside and the petitioner is directed to pay a cost of Rs.50,000/- to the respondent.",,,,