O.M.P. (COMM)/352/2024 of KUNAL FOOD PRODUCTS PVT. LTD. Vs DELHI DEVELOPMENT AUTHORITY

*IN THE HIGH COURT OF DELHI AT NEW DELHI

+O.M.P. (COMM) 352/2024 & I.A. 36484/2024

KUNAL FOOD PRODUCTS PVT. LTD......PetitionerThrough:Mr. Ajay Kumar, Advocate.

versus

DELHI DEVELOPMENT AUTHORITY.....RespondentThrough:Mr. Gaganmeet Singh Sachdeva,Advocate.

CORAM:

HON’BLE MR. JUSTICE PRATEEK JALAN

O R R%14.08.2024

1.This petition under Section 34 of the Arbitration and ConciliationAct, 1996 [“the Act”], is directed against an arbitral award dated31.05.2024 passed by learned sole arbitrator. The disputes between theparties arose under an Agreement for sale of hotel plot by therespondent-Delhi Development Authority [“DDA”] to the petitioner. Theplot was tendered by DDA and allotted to the petitioner by an allotment-cum-demand letter dated 01.06.2007.

2.The project was admittedly delayed, for which the petitioner andthe DDA blamed each other. The petitioner finally completed the projectin August, 2010, instead of the originally stipulated completion date of31.05.2009.

3.The petitioner consequently raised three claims before the learned

arbitrator:

a. Claim No. 1 for ₹5.45 crores towards business losses suffered by the petitioner due to delay in completion of the project.the petitioner due to delay in completion of the project.

b. Refund of amount of ₹70,01,000/- recovered by DDA by invocation of performance bank guarantee furnished by thepetitioner.invocation of performance bank guarantee furnished by thepetitioner.

c. Claim No. 3 of ₹5,30,649/- by way of refund of charges recovered by DDA from the petitioner for commencement of constructionprior to sanction.by DDA from the petitioner for commencement of constructionprior to sanction.

The learned arbitrator has rejected claim No. 1, and allowed claim No. 2,alongwith post-award interest at the rate of 12% per annum. Claim No. 3was withdrawn by the petitioner.

4.Mr. Ajay Kumar, learned counsel for the petitioner, presses thechallenge with respect to two aspects of the award. The first relates todenial of pre-reference and pendente lite interest on claim No. 2, and thesecond relates to denial of costs. The challenge to rejection of claim No. 1is not pressed.

5.In the impugned award, the learned arbitrator has first analysed thereasons for delay in completion of the project and come to the conclusionthat delay was attributable to both the petitioner and DDA. Theconclusion of the learned Arbitrator is based upon consideration of theterms of the agreement and the documentary evidence placed by theparties. The petitioner has not raised any ground of challenge to thisfinding, so it is unnecessary to discuss this in detail. Suffice it to say thatthe learned arbitrator has found both parties to have contributed to thedelay, in addition to other statutory agencies whose approval was

required. The learned arbitrator has also held that delay could not beapportioned to each of the parties in percentage terms. He noted,importantly, that the hotel was completed in physical terms in August,2010 before the start of the Commonwealth Games, which was theobjective of the project in question.

6.Although the challenge to denial of the petitioner’s claim for lossof profits is not pressed, it may be noted that the claim was rejected on afinding that the delay in operationalisation of the hotels were partlyattributable to the petitioner, and that the petitioner had failed to adducereliable evidence of business losses.

7.As far as claim No. 2 is concerned, the learned arbitrator found thatthe invocation of the performance bank guarantee by DDA wasunjustified. He declined to adjudicate the question of whether the clauseproviding for invocation of the bank guarantee on account of delayincorporated genuine pre-estimate of the loss, as he had alreadyrecorded finding that delay in completion of the hotel was attributableto both parties. The learned arbitrator found that the hotel was, in fact,operationalisedwiththepermissionofDDA,intimefortheCommonwealth Games, and that neither DDA nor the public at largesuffered any loss or damage, which would entitle the DDA to invocationof the bank guarantee. However, the grievances raised by the petitioner isthat, while awarding claim No. 2 in favour of the petitioner, the learnedarbitrator awarded only post award interest, on the following reasoning:

“144. In view of the aforesaid discussion an award in the sum of Rs.70,01,0001/- is passed in favour of the claimant and against therespondent.Since claimant was also partly responsible for thedelay, request for pre-suit interest and pendente-lite interest aredenied but claimant shall be entitled to interest at the rate of 12%70,01,0001/- is passed in favour of the claimant and against therespondent.Since claimant was also partly responsible for thedelay, request for pre-suit interest and pendente-lite interest aredenied but claimant shall be entitled to interest at the rate of 12%

from the date of the award till realisationof the said amount fromthe respondent.”

[Emphasis supplied.]

8.Mr. Kumar submits that this finding of the learned arbitrator,denying pre-reference interest and pendente lite interest, is inconsistentwith the finding that DDA had not suffered any loss or damage. He reliesupon Section 73 and 74 of the Indian Contract Act, 1872, and thejudgment in Kailash Nath Associates v. DDA [(2015) 4 SCC 136], in thisconnection.

9.I am unable to accept this contention. The learned arbitrator hasstated his reason for denial of pre-reference and pendente lite interest,which is that the petitioner itself was partly responsible for the delay incompletion of the project. The Supreme Court has held, in severaljudgements,thatinterpretationofacontractandconsequentdetermination of the claims on the basis thereof is the domain of thearbitral tribunal. The Court is entitled to interfere with an award, only if itis entirely devoid of reasoning, or the reasons are perverse or arbitrary, inthe sense that no reasonable tribunal could have arrived at the sameconclusion[1]. The fact that the Court might have reached conclusiondifferent from that of the learned arbitrator, or even that, in the opinion ofthe Court, the learned arbitrator has committed mistake of law and/orfact, which is short of the standard of arbitrariness and perversity asoutlined above, is insufficient to warrant interference under Section 34 ofthe Act. The learned arbitrator’s finding that both parties were partially

1 Ssangyong Engineering & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131; Dyna Technologies(P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1; UHL Power Co. Ltd. v. State of H.P., (2022) 4SCC 116; and Reliance Infrastructure Ltd. v. State of Goa, (2024) 1 SCC 479.(P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1; UHL Power Co. Ltd. v. State of H.P., (2022) 4SCC 116; and Reliance Infrastructure Ltd. v. State of Goa, (2024) 1 SCC 479.

responsible for the delay in completion of the project is plausible reasonfor declining interest until the date of the award. I find no ground tointerfere with the same.

10.As far as costs are concerned, Mr. Kumar submits that partialaward has been made in favour of the petitioner-claimant and it ought tobe granted the costs of long-drawn arbitration. However, the fact is thatthe major claim of the petitioner was on account of business losses, whichwas rejected, and that rejection is accepted by the petitioner. Thepetitioner has succeeded only in respect of its claim for refund of bankguarantee of ₹70,01,000/-. The learned arbitrator was, therefore, well within jurisdiction to refrain from making an order of costs in favour ofthe petitioner.

11.For the aforesaid reasons, I do not find any merit in the presentcase.

12.The petition, alongwith the pending application, is dismissed.

AUGUST 14, 2024‘pv’/

PRATEEK JALAN, J