By placing reliance on the Apex Court judgments in the cases Builders v. Delhi Development Authority, Dyna Technologies Private Limited v. Crompton Greaves Limited, Delhi High Court observed that an arbitral award can only be set aside if it is found to be in conflict with the public policy of India or under Section 34(2A) of the A&C Act if it is vitiated by patent illegality, observes Delhi High Court
A single Bench of Justice Vibhu Bhakrau by observing that none of the contentions submitted by the GAIL were within the ambit of Section 34 of the Arbitration and Conciliation Act, 1996 as did not suffer from any patent illegality dismissed the petition instituted by GAIL assailing the impugned arbitral award.
The petitioner, GAIL preferred the present petition under Section 34 of the Arbitration and Conciliation Act, 1996, against an arbitral award dated November 20, 2019 granted by an Arbitral Tribunal.
The impugned award was awarded with respect to a dispute that arose between the parties in reference to an agreement dated May 28, 2012.
Facts in brief for perusal of the present petition were that the tender was invited by GAIL for the work pertaining to setting up of a Dematrialised (DM) Water Plant and Condensate Polishing Unit (CPU) for GAIL Petrochemical Complex – II at Patna, Uttar Pradesh.
Consequently, the respondent submitted the bid for the aforesaid project on February 27, 2012. Thereafter, respondent’s bid was accepted for a consideration of Rs. 55 crores inclusive of all taxes and duties except service tax at the rate of 4.944%. The ‘Extended Stay Compensation’ was stipulated as Rs.10, 00,000/- per month. The effective date of commencement of the Project was stipulated as May 3, 2012 and the work was to be completed within a period of eighteen months, that is, on or before November 2, 2013. Thereafter, on May 28, 2012, the parties signed the Agreement.
However, the execution of the project was deferred, and thus GAIL withheld amounts as reduction of price as stipulated under Clause 27 of the GCC. It also withheld an amount of Rs.1, 20, 00,000/- as the value of Cathodic Protection System, on the ground that the same was within the scope of work but was not installed. Subsequently, dispute arose between the parties with respect to Price Reduction Schedule, installation of Cathodic Protection System, extra work performed under the agreement and bank charges.
In order to settle the dispute, the respondent approached this Court in the form of a petition under Section 11 of the A&C Act for appointment of an arbitrator. However, the impugned award was assailed by the GAIL by way of petition before this Court.
The Court after hearing the submissions of both the parties at length, dealt with the first question for consideration that was whether the impugned award is vitiated by patent illegality on account of the Arbitral Tribunal deciding the dispute regarding PRS, in favor of the respondent.
In view of the same, the Court observed that on a bare reading of Clause 27 of the GCC, it was found that EIL was given the responsibility to determine the applicability of PRS (liquidated damages). It was further observed that the each time the respondent asked for extension it was granted by EIL on provisional basis with the presumption that GAIL will not exercise its right to impose PRS, even if the same was leviable.
It was also observed by the Arbitral Tribunal that since EIL was obligated to proceed with the analysis of the day, it was beyond the realm of GAIL to levy liquidated damages, when EIL even found that the delay was attributable to the respondent. The letter dated July 2, 2016 was also took inot consideration wherein it was explicitly stated that respondent was granted extension till December 31, 2015 for completion of the agreement along with condition that the PRS shall not be levied until this time.
Thus, considering the above stated findings, the Court observed that the Arbitral Tribunal was right in its ruling and there was no reason found to interfere with the findings of the Tribunal.
The next question that was posed of consideration before this Court was GAIL’s challenge to award of an amount of Rs.80, 00,000/- out of the funds withheld by GAIL on account of CPS. As per the agreement,
the installation of CPS was not mentioned in the same. However GAIL assailed the same and contended that the installation of CPS was a part of the contract.
The Court in reference to the same considered the findings of the Arbitral Tribunal wherein the Tribunal found that CPS was included in the scope of work and was a part of the contract signed by both the parties. However, it also observed that respondent did not breach the aforesaid agreement for the reason that the installation of CPS was not directed by the EIL. Thus, the Tribunal accepted the contention of GAIL with respect to reduction in cost of CPS; however the valuation offered by GAIL was not accepted by the Tribunal.
Ultimately, it allowed the GAIL to retain an amount of Rs.40, 00,000/- in view of the respondent’s admission in its letter dated May 4, 2017 issued to EIL.
Therefore, in light of the above observations made by the Arbitral Tribunal and the same being reconsidered by this Court with no objection, this Court submitted that the impugned award requires no interference or modification and was well examined after appreciating all the evidence available on the record.
In addition to this the Court observed that none of the contentions submitted by the GAIL were within the ambit of Section 34 of the Arbitration and Conciliation Act, 1996 as an arbitral award can be set aside under Section 34(2)(b)(ii) of the A&C Act if it is found to be in conflict with the public policy of India or under Section 34(2A) of the A&C Act if it is vitiated by patent illegality, Court remarked.
Reliance was also placed on some judgments of Apex Court namely, Builders v. Delhi Development Authority, Dyna Technologies Private Limited v. Crompton Greaves Limited and Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.
Hence, the present petition was dismissed keeping in view the aforesaid observations.
Case name: GAIL (INDIA) LTD. Vs. TRIVENI ENGINEERING & INDUSTIRES LTD.
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