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The Delhi High Court has set aside the Arbitral award against Central Reserve Police Force (CRPF) to pay Rs. 50 Crores to Fibroblast Marine Pvt Ltd over breach of agreement.

A bench of Justice Vibhu Bakhru noted, "Considering the impugned award on merits, this Court is of the view that the same is vitiated by patent illegality and in conflict with the public policy of India."

The bench opined, "The impugned award was rendered after an inordinate and unexplained delay. Further, considering the impugned award on merits, this Court is of the view that the same is vitiated by patent illegality and in conflict with the public policy of India."

The court was dealing with a petition filed by the Director-General of CRPF challenging the award of an arbitral tribunal dated May 31, 2019 over breach of an aggreement.

CRPF had issued a notification in the year 2008 inviting bids for supply of 288 numbers of Boat Assault Universal Type (BAUT) and 288 numbers of 50 HP Out Board Motor (OBM), whereas, Fibroblast was the lowest bidder and the parties entered into an agreement for the supply of the same at a consideration of Rs. 16,87,79,520. 

Later in 2009, concerns were raised by the Inspecting Agency under the Directorate General Quality Assurance, Ministry of Defence (CQAE) regarding the pilot samples which were rejected due to discrepancies in some of the materials used.

CRPF informed Fibroplast that only 48 numbers of BAUTs with OBMs were required instead of the earlier agreed quantity of 288 numbers of BAUTs with OBMs.

Later, the company invoked the arbitration clause and the Delhi High Court had appointed the Sole Arbitrator to adjudicate the disputes between the parties and further, directed that the arbitration be conducted under the aegis of the Delhi International Arbitration Centre (DIAC).

The Arbitral Tribunal passed an award of ₹18,32,22,680, in favour of the respondent along with costs quantified at ₹8,00,000. In addition, the Arbitral Tribunal also awarded pre- reference and pendente lite interest at the rate of 18% per annum. Further, the Arbitral Tribunal also awarded future interest on the awarded amount.

The High Court, however, found that in addition to the reason mentioned above, the award deserved to be set aside considering the fact that there was an inordinate and unexplained delay of nearly 18 months in rendering the same.

Court stated that one of the principal reasons for ensuring that the arbitral award is rendered within a reasonable period is to ensure that the efficacy of oral submissions is not lost.

The bench noted, "A large time gap between hearing of the oral submissions and rendering the decision would, in effect, debilitate the purpose of resorting to arbitration for expeditious adjudication of the disputes. No person can be expected to remember the same after a long period of time."

The bench further noted that the petitioner had not filed any written submissions and therefore, the Arbitral Tribunal also did not have the benefit of ready reference to the submissions made during the course of the arbitral proceedings.

"The total amount that was thus awarded is more than 50 crores. This is against an order for the purchase of BAUTs for an aggregate value of Rs.16,87,79,520. Although the respondent was awarded complete costs of the inventory along with interest and further costs purportedly incurred therewith, there is no mention in the award for delivery of the manufactured BAUTS to the petitioner," stated the bench.

Therefore setting aside the Tribunal order, Court said that it will be open for the parties to re-agitate the disputes afresh and further awarded interest at the rate of 18% per annum in favor of Fibroplast Marine Pvt. Ltd.

Case Title: Director Central Reserve Police Force (CRPF) v. Fibroplast Marine Pvt. Ltd.