Gujarat High Court
Government Of Gujarat vs M/S Watrak Infrastructure Private ... on 2 January, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/1980/2023 ORDER DATED: 02/01/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 1980 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2022
In
R/FIRST APPEAL NO. 1980 of 2023
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GOVERNMENT OF GUJARAT
Versus
M/S WATRAK INFRASTRUCTURE PRIVATE LIMITED & ANR.
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Appearance:
MS MAITHILI MEHTA ASSISTANT GOVERNMENT PLEADER for the Appellant(s)
No. 1
MR RS SANJANWALA SR. ADVOCATE with MR HARDIK P MODH & MR AMIT
LADHIYA for the Defendant(s) No. 1
NOTICE SERVED for the Defendant(s) No. 2
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 02/01/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)
1. The present appeal under Section 37 of the Arbitration and Conciliation Act, 1996 impugning the judgment and order passed by the learned 3rd Additional District Judge, Kheda at Nadiad in Civil Misc. Application No. 273 of 2019, whereby the learned District Court rejected the application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") and confirmed the award dated 25.08.2012 passed by the learned Arbitral Tribunal.
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2. The relevant facts in the present case are that the Government of Gujarat (hereinafter referred to as the "appellant") acting for and on behalf of the Government of India (hereinafter referred to as the "GoI") invited tenders in the month of April 1997 for construction of 'two lane bridge across River Watrak' at Ahmedabad - Vadodara section of the National Highway no. 8 on 'Build Operation Transfer' (BOT) basis. The offer and tender of the Larsen & Turbo was accepted. Thereafter a formal agreement (hereinafter referred to as the "concession agreement") was executed in respect of the project between the appellant, GoI and Larsen and Turbo on 01.03.1999. Under the agreement, the commencement date was fixed on 01.05.199 and the concession period was fixed as 128 months. The date of handing over the project by the Larsen and Turbo to the appellant and GoI was 31.12.2009. Sometime after the execution of the contract, Larsen and Turbo incorporated a wholly owned subsidiary, namely Larsen and Turbo Western India Toll Bridge Limited (hereinafter referred to as the 'respondent') as 'Special Purpose Vehicle' for execution of the contract work. In furtherance, Larsen and Turbo assigned all its rights and obligations under the contract by executing deed of assignment on 15.07.1999.
3. Pursuant to the assignment deed, construction work was Page 2 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined started by the respondent. There were some changes which were required for the design of the bridge. As per the respondent, the changes were significant changes in the design of both the road and bridge works There was no response either from the appellant or the GoI. Further, the GoI issued notification on 26.02.2001 authorizing the respondent to collect the toll tax as per the rates provided therein. The respondent thus, became entitled to collect toll tax and from 27.02.2001 till the end of concession period. However, difference of opinion arose and communications were exchanged between the parties. As there was no response from either the appellant or the GoI, the respondent referred the dispute to the 'Steering Group' as provided in clause-9 of the concession agreement. The Steering Group accepted these changes as variations and also agreed that the respondent was entitled to compensate for the cost incurred in executing these extra works and further it was observed that the concession period deserves to be extended. Further, as no final decision was taken on this issue till 31.12.2019, the date on which the concession period ended, the National Highways Authority of India (NHAI) took over the project from the respondent.
3.1. Due to the said aspect, a dispute arose between the parties and Page 3 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined it was submitted by the respondent that during the concession period the toll could not be collected due to circumstances which were beyond the control. Many other issues were also raised by the respondent. These disputes were thus referred to the Steering Committee Group. As no final decision on the issues was taken by the Steering Committee Group, the respondent invoked arbitration on 29.01.2010. Pursuant to the invocation of the arbitration, arbitration panel was constituted. The Arbitration Tribunal by award dated 25.08.2012 allowed the claim as raised by the respondent.
4. Being aggrieved by the arbitral award, the appellant as well as GoI preferred an application under Section 34 of the Act. The learned District Court by way of impugned order dated 04.10.2021 dismissed the application preferred under Section 34 of the Act. Being aggrieved by the order passed by the learned District Court, the appellant has preferred the present appeal under Section 37 of the Act. However, GoI who was also one of the party in the application under Section 34 of the Act before the learned District Court has not preferred any appeal. As a matter of fact GoI is assignee as a party respondent in the present First Appeal. Be that as it may, the present appeal is preferred by the appellant under Section 37 of the Act, impugning the order dated 04.10.2021 and the arbitral award dated Page 4 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined 25.08.2012.
5. We have heard Ms. Maithili Mehta, learned Assistant Government Pleader appearing for the State appellants and Mr. R. S. Sanjanwala, learned Senior Counsel assisted by Mr. Hardik Modh and Mr. Amit Ladhiya, learned counsels for the respondent.
6. It was submitted by the learned Assistant Government Pleader appearing for the State appellants that the learned District Court has failed to consider that the arbitral award is without jurisdiction as the award dated 25.08.2012 is passed in favour of the respondent who is not a party to the concession agreement. The arbitration clause can only be invoked by the parties to the agreement. Therefore, the award is without jurisdiction and the learned District Court has failed to consider this fact. It was further submitted that the Steering Committee Group held its meeting on 05.11.2009 and agreed to compensate by extending the period of concession. However, during the pendency of such proceedings, the respondent had invoked arbitration which is completely contrary to the terms of the agreement. Therefore, when the dispute was pending before the Steering Committee Group, the Arbitral Tribunal could not have assumed the jurisdiction. It was further submitted that the learned District Court has not appreciated the fact with regard to the Page 5 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined additional compensation. It was further submitted that it is a wrong presumption that the appellant having denied the claim before the Steering Committee Group and therefore, deemed to have accepted the liability. Therefore, the entire award showcase the concession and its against the morality. Based on such submissions and referring to the observations made by the learned District Court, the learned Assistant Government Pleader has prayed to allow the present appeal.
7. Per contra, Mr. R.S. Sanjanwala, learned Senior Counsel assisted by Mr. Hardikh Modh, learned advocate for the respondent would submit that the Arbitral Tribunal has considered all the documentary evidence available on record and thereafter has passed the arbitral award on 25.08.2012. The award being legal, just and proper, ought not to be interfered with. The scope of Section 34 of the Act is very limited and further the scope of Section 37 of the Act is even more very limited. Therefore, when the award is just, legal and proper, the same is not required to be interfered with. Mr. R.S. Sanjanwala, learned Senior Counsel has further referred to clause 15 i.e. variations of the contract period in the concession agreement dated 01.03.1999. By referring to clause 15.2 it was submitted by learned Senior Counsel that authorized variations shall be valued at Page 6 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined the prevailing schedule of rates of National Highway Division and the concession period may be extended in place of making any cash payment to the entrepreneur. If the concession period is not extended, there is no absolute bar on the execution of the cash compensation. Referring to clause 15.2, it was submitted by Mr. Sanjanwala, learned Senior Counsel that either the concession period had to be extended or compensation had to be paid. The appellant had no right to deny the extension as well as the compensation. The contract is on BOT basis. The execution was effected due to the reasons which were beyond the control of the parties and therefore, either the concession period had to be extended or compensation had to be given. The appellant has taken a very rigid view in not considering any of the option in favour of the respondent. Even the Steering Committee Group had accepted the applicability of compensation. Therefore, the appellant cannot be denied the compensation. On the basis of such submissions, the learned Senior Counsel has prayed to dismiss the appeal preferred by the State - appellants.
8. Having heard the learned counsels for the parties and having perused the material on record, the first contention raised by the appellant is with regard to the respondent not being party to the Page 7 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined contract and in that context it is to be observed that it is not in dispute that the respondent is an assignee of the concession agreement. The respondent is also performing in respect of terms of the contract. The appellant had accepted assignment and got performance of the contract. Therefore, it would not be open for the appellant to contend at this stage that only the contracting party can invoke arbitration. Once the appellant has been assigned the performance of the concession agreement and the parties have accepted the same and performance qua the concession agreement was done by the respondent, there cannot be dispute with regard to the applicability of the covenants of the contract vis-a-vis the respondent. The Arbitral Tribunal has categorically observed on such aspect which has been confirmed by the learned District Court and we see no reason to differ to such conclusion drawn by the Arbitral Tribunal as well as the learned District Court. Once the execution of the contract is assigned to the respondent, it is bound by the covenants of the contract. Therefore, the issue raised by the appellant with regard to the applicability of the contract vis-a-vis the respondent is absolutely meritless contention. 8.1. The second aspect which needs to be observed is that pursuant to the award passed by the Arbitral Tribunal, the Steering Committee Page 8 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined Group had also accepted the compensation aspect and had categorically communicated to the appellant to accept the same. Therefore, once the Committee had agreed upon the compensation aspect, the appellant ought not to have stretched the issue further. The other glaring aspect is that after the dispute was referred to the Steering Committee Group as per the terms of the contract, the Committee sat tight on the dispute for a long time. Therefore, there was no option to the appellant except to seek reference of the dispute to the arbitral Tribunal. Therefore, the contention raised by the learned Assistant Government Pleader that the issue ought not have been referred to the arbitration when it was pending at large before the Steering Committee Group, does not deserve any merit. 8.2. Apart from the above aspect, the appellant has raised other issues of quantum of compensation. Unfortunately, this aspect cannot be looked into as it goes to the root of appreciating the categorical reasons given by the Arbitral Tribunal. Once it is confirmed that the Arbitral award as well as the order passed by the learned District Court which was as per the law and within jurisdiction, re appreciation of the evidence and substitution of quantum of compensation cannot be looked into. Therefore, the issues raised by the appellant are wholly misconceived and meritless.
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In the present case, the learned Assistant Government Pleader could not make out any case with regard to the illegality in the Arbitral Award. On a perusal of the award,it can be categorically found that the learned Arbitrator has dealt with all the issues on merits. In view of the same, it would not be possible under Sections 37 and 34 of the Act to re appreciate the evidence.
9. We may note the decision of the Apex Court in UHL Power Company Limited vs. State of Himachal Pradesh reported in [(2022) 4 SCC 116], wherein the Apex Court has held that the jurisdiction conferred on the Courts under Section 34 of the Arbitration Act is fairly narrower, when it comes to the scope of exercise of powers under Section 37 of the Arbitration Act. Noticing its earlier decision in MMTC Ltd. vs. Vedanta Ltd., reported in [(2019) 4 SCC 163], it was noticed that the reasons for vesting such a limited jurisdiction on the Courts in exercise of powers under Section 34 of the Act, 1996, have been explained therein in para '11' as under :-
"11. As far as Section 34 is concerned, the position is well- settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2) (b) (ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the Page 10 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract."
28. By referring to various decisions of the Apex Court, it was noticed from para Nos. '18' to '21'in UHL Power Company Limited (supra) that it has been held time and again by the Apex Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the Arbitrator proceeds to accept one interpretation as against the others. The construction of the terms of contract is primarily is for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It was further noted that when the Court is applying " 'public policy test' to the arbitration award, it does not act as a court of appeal and consequentially, errors on facts cannot be corrected". A possible view by the learned Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Thus, the award based on little evidence or on evidence which does not measure up in quantity to a trained legal, would not be held to be involved on this score.
29. The requirement is that the Arbitral Tribunal must decide in accordance with the terms of the contract, but if the test is that arbitral tribunal must decide in accordance with the terms of the contract, but if term of the contract is construed in reasonable manner within the award ought not to be set aside on the ground of unreasonableness only. It was further noticed in paragraph Nos. 20 and 21 as under :-
"20. In Dyna Technologies (P) Ltd. (supra), the view taken Page 11 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined above has been reiterated in the following words:
"25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
21. An identical line of reasoning has been adopted in South East Asia Marine Engg. & Constructions Ltd.[SEAMAC Limited] V. Oil India Ltd. and it has been held as follows:
"12. It is a settled position that a court can set aside the award only on the grounds as provided in the Arbitration Act as interpreted by the courts. Recently, this Court in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656] laid down the scope of such interference. This Court observed as follows : (SCC pp. 11-12, para 24)
24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated."
13. It is also settled law that where two views are possible, Page 12 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This Court in Dyna Technologies (2019) 20 SCC 1 : 2019 observed as under :
"25. Moreover, umpteen number of judgments of this Court have categorically held that the Court should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
[emphasis supplied]"
9.1. In MMTC Ltd. (supra), the Apex Court on the scope of interference with an order made under Section 34, as per section 37, has held that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. The relevant para 14 in MMTC Ltd. (supra) be noted :-
"As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
10. In Project Director, National Highways No. 45E and 220 National Highways Authority of India vs. M. Hakeem and Page 13 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined Another reported in [(2021) 9 SCC 1], the Apex Court while considering the question of scope of the powers of the Courts under Section 34 of the Act, 1996 to set aside the award of the Arbitrator including the power to modify such award, considered its earlier decision in MMTC (supra) to record that it is settled that the Section 34 proceedings does not contain any challenge on the merits of the award. It was held that Section 34 of the Arbitration Act, 1996 vary from being in the nature of appellate provisions. It provides only for setting aside the awards only on very limited grounds, as contained in Sub-sections (2) and (3) of Section 34. The recourse to the Court against arbitral award may be made only by application for setting aside such award in accordance with Sub-sections (2) and (3). 10.1. It was observed that Section 34 of the Act, 1996 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985, under which no power to modify the award is given to the Court hearing a challenge to an award. Statutory scheme under Section 34 of the Act, 1996 is in keeping with the UNCITRAL Model Law and legislative policy of minimal judicial interference in arbitral awards.
11. Referring to the decision of the Apex Court in McDermott International Inc. vs. Burn Standard Co. Ltd. reported in Page 14 of 15 Uploaded by PHALGUNI PATEL(HC00175) on Mon Jan 06 2025 Downloaded on : Mon Jan 06 21:57:59 IST 2025 NEUTRAL CITATION C/FA/1980/2023 ORDER DATED: 02/01/2025 undefined [(2006) 11 SCC 181], it was noticed that 1996 Act makes provisions for supervisory role of the Courts in the review of the arbitral award only to ensure fairness. Interference of the Courts is envisaged in few circumstances only, like in case of fraud or bias of the Arbitrator, violation of principles of natural justice etc.. The Courts cannot correct the terms of the Arbitrator. It can only quash the awards leaving the parties to begin with the arbitration again, if it so desires. The scheme of the provisions, namely Sections 34 and 37 of the Act, 1996, thus, aims at keeping supervising role of the Courts at minimum level and this can be justified, as the parties to the agreement make a conscious decision to exclude the Court's jurisdiction by opting for arbitration as they prefer expeditious and finality over by it. It was, thus, held that there can be no doubt that given the law laid down by the Apex Court, Section 34 of the 1996 Act cannot be held to include within it a power to modify the award.
12. In view of the same, the First Appeal is devoid of merits and liable to be dismissed.
Consequently, the Civil Application also stands disposed of.
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