S.S. Total Construction (I) Pvt. Ltd vs Union of India through Executive Engineer

Arun Bhansali, CJ

This appeal is directed against judgement dated 13.05.2025 passed by the Commercial Court, Bareilly whereby the application filed by the respondent - Union of India under Section 34 of the Arbitration and Conciliation Act, 1996 ('Act') against award dated 10.12.2022 has been allowed and award impugned has been set aside.

Respondent floated a composite tender (civil and electrical work) for construction of permanent infrastructure at SHQ & Bn. Headquarters, Lakhimpur Kheri under Lucknow frontier; the appellant participated in the biding process and was awarded the contract and agreement was entered into. As per the agreement, date of commencement of the work was 04.05.2016 and the stipulated time for completion was fourteen months i.e. the scheduled date of completion was 03.07.2017.

It was claimed by the appellant that upon receiving the payment as per unilateral final bill finalized by the respondent, the appellant required the respondent to release the withheld payment and also claimed that it had suffered other losses and damages due to prolongation of the contract. It was also indicated that the payment received be treated as 'payment accepted under protest' and the notice be treated as notice under Section 25(i) of the General Clauses of Contract ('GCC').

In terms of the GCC, Dispute Redressal Committee was constituted, which rendered its decision on 15.01.2021, however, the appellant being dissatisfied with the said decision sought appointment of Arbitrator. Sole Arbitrator was appointed in terms of Clause 25 of the GCC.

Statement of claim raising claims under 13 distinct heads was filed to which statement of defence along with counter-claim was filed, a rejoinder to the statement of defence and reply to the counter-claim was filed by the appellant. The Arbitrator delivered the award on 10.12.2022 awarding claims under 9 heads and dismissing the counter-claim.

Aggrieved of the award dated 10.12.2022, application under Section 34 of the Act was filed by the respondent, which was limited to claim no. 10 pertaining to claim on account of refund of GST and claim no. 12 regarding award of interest on the claim awarded besides rejection of counter-claim pertaining to appellant's liability to pay GST on reimbursement.

The Commercial Court by the judgement impugned, dealt the merit of the award under Point no. 1 pertaining to award of compensation for the delay in completion of the work and came to the conclusion that the award was patently illegal and consequently, set aside the impugned award dated 10.12.2022.

Learned counsel for the appellant made vehement submissions that the judgement passed by the commercial court is a result of non-application of mind to the dispute before the court. Submissions have been made that the commercial court has passed the judgement in a wholly mechanical manner, without even adverting to the factual aspect of the matter.

Submissions have been made that before the Arbitrator claims under 13 distinct heads were raised, out of which under 9 heads, award was made in favour of the appellant and counter-claim was rejected and the application under Section 34 of the Act was restricted only qua two claims awarded in favour of the appellant and the rejection of the counter-claim.

It is further submitted that in fact the award made under 7 heads by the Arbitrator has already been paid to the appellant, however, the Commercial Court on an issue, which was not even raised in the case, pertaining to the compensation for delayed completion of project has set aside the entire award, which determination deserves to be quashed and set aside.

Learned counsel for the Union of India could not dispute the submissions made pertaining to the limited extent of challenge laid under Section 34 of the Act, payment of rest of the award having been made and passing of the judgement by the commercial court de hors the challenge laid.

We have considered the submissions made by counsel for the parties and perused the material available on record.

A bare perusal of the award passed by the Arbitral Tribunal and challenge laid under Section 34 of the Act by the respondent, it is apparent that the challenge laid was very limited only to the extent of two claims and rejection of counter-claim. However, the Commercial Court though noticed the challenge laid pertaining to the claim on account of refund of GST and award of interest by the Arbitral Tribunal, in a wholly misguided manner and apparently without even looking at the record of the case has dealt with the issue, which did not arise in the application under Section 34 of the Act at all i.e. pertaining to the award of compensation for delayed completion of work.

The manner in which the judgement has been passed by the Commercial Court leaves much to be desired and is reflective of a total non-application of mind to the subject matter and essentially misuse of technology whereby apparently from the other judgement passed between the same parties, a part of the determination has been copy pasted in the present case, which action of the Presiding Officer of the Commercial Court cannot be appreciated and vitiates the judgement impugned.

Consequently, the appeal is allowed. The judgement dated 13.05.2025 passed by the Commercial Court is quashed and set aside.

The matter is remanded back to the Commercial Court, Bareilly for re-hearing and deciding the same afresh based on the submissions made and the record of the case.