OBJECTION REGARDING ‘EXCEPTED MATTER’ WOULD BE AN AFTER-THOUGHT IF IT WAS NOT RAISED BEFORE THE ARBITRATOR: DELHI HIGH COURT

The Delhi High Court in the case DSIIDC v. H.R. Builders observed and has held that the objection regarding the excepted matter would be an after-thought if the same was not raised before the arbitral tribunal.

The Division bench comprising of Justice Mukta Gupta and Justice Neena Bansal Krishna observed and relied upon the judgment of the Supreme Court in the case J.G. Engineers v. UOI, to hold that only the question of determination of the quantum of compensation for delay is an excepted matter and the issue if the compensation is payable is an arbitrable matter.

Facts of the Case:

A project was launched by the Government of NCLT Delhi for the refurbishment of the government schools. The Appellant, DSIIDC was entrusted with the said project work. However, the appellant awarded a part of the said project to the respondent and the parties entered into a contract to that effect.

It was observed that there was a delay in the completion of the project work. A part of the final bills was withheld by the appellant as the compensation for the delay caused. Further, a dispute arose between the parties that was referred to arbitration.

The claims of the respondent were allowed by the arbitrator partly and the counter-claim preferred by the appellant was dismissed.

The appellant preferred an appeal, Aggrieved by the decision of the Court

Grounds of Appeal:

The award and the impugned order were challenged by the appellant on the following grounds:

The claim was allowed by the arbitrator that was an excepted matter under the contract between the parties and the same is beyond the jurisdiction of the arbitrator.

The arbitrator beyond the rates approved by the concerned authority, erred in awarding labour cess and DVAT.

on the basis of cost indices as approved by the Director General, the arbitrator erred in computing the escalation for labour and material. The CPWD for building works in Delhi and did not use cost indices for commodities published by Economic Bureau for computing this amount as was provided in the Agreement, while rendering the decision of the Arbitral Tribunal contrary to Clause 10 CC of the Agreement.

It was stated that the award of any amount in excess of 15% of the incremental value on the basis of labour and material component by the Arbitral Tribunal was completely beyond the terms of the Agreement.

The counter-claim of the appellant was dismissed by the arbitrator as it had suffered damages and loss of reputation on account of loss of work which was due to the execution of the project work, the delay caused.

The submissions of the appellant were countered by the respondent on the following grounds:

under the contract and the issue as to who was responsible for the delay was certainly arbitrable, the Only the issue of quantum of compensation for delay was an excepted matter.

The quantum of compensation has not been determined by the arbitrator but the arbitrator has merely held that the respondent is entitled to compensation.

Court Analysis:

On reading of Clause 2 of the Agreement, the Court held that it was clear that only the issue of determination of compensation was an excepted matter which was to be determined by the competent authority. Therefore, the issue preceding it is whether any compensation is payable or not is certainly arbitrable.

The Court observed and stated that the Arbitral Tribunal did not commit any jurisdictional error as it did not engage in the exercise of assessing the quantum of compensation payable in terms of the Agreement, Clause 2 which was an excepted matter. However, it restricted itself only to examine whether there was any delay on the basis of which the compensation could be paid.

Further, the court observed that the appellant had not raise any question regarding the jurisdiction of the tribunal to adjudicate Claim 2 (excepted matter). It was held by the Court that the objection regarding the excepted matter would be an after-thought if the same was not raised before the arbitral tribunal.

The Court stated that the decision of the arbitrator regarding labour cess and DVAT is based on the appreciation of evidence and does not deserve any interference.

All the objections of the appellant were dismissed by the Court on the ground that the decision of the arbitrator regarding those issues is based on the appreciation of evidence and does not deserve any interference from the court.

The Court dismissed the appeal as without merit.

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