Bombay High Court
Bharat Heavy Electricals Ltd. Nagpur ... vs Al-Bilal Group For General Contracts ... on 30 November, 2023
Author: A.S. Chandurkar
Bench: A. S. Chandurkar
2023:BHC-NAG:16608-DB
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
COMMERCIAL APPEAL NO. 11/2022
Bharat Heavy Electricals Limited, Having its ]
Registered Office at BHEL, PSWR, 345, Kingsway, ]
Nagpur - 440 001, Maharashtra, India, Through ]
Its Authorized Representative. ] APPELLANT
.....VERSUS.....
Al-Bilal Group for General Contracts Ltd., A Company ]
Registered in Iraq having its Office at Fountain Plaza, ]
Gate(2), 2nd Floor, Abdel Rahim Haj Moh'd St., ]
Sweifiyah, PO. Box 852085, Sweifiyah, Amman 11185, ]
Jordan, Through its Managing Director. ] RESPONDENT
Shri Anand Jaiswal, Senior Advocate with Shri Surjendu Das, Yash
Maheshwari, and Miss Annie Mittal, counsel for the appellant.
Shri Vijay Sharma with Ms Swagoti Batches, Rashi Verma and Kushal Jain,
counsel for the respondent.
CORAM : A. S. CHANDURKAR AND MRS. VRUSHALI V. JOSHI, JJ.
DATE ON WHICH ARGUMENTS WERE HEARD : OCTOBER 13, 2023
DATE ON WHICH JUDGMENT IS PRONOUNCED : NOVEMBER 30, 2023
[ PRONOUNCEMENT THROUGH VIDEO CONFERENCE ]
JUDGMENT (PER : A.S. CHANDURKAR, J.)
ADMIT. Heard the learned counsel for the parties at length.
2. This appeal preferred under Section 37 of the Arbitration
and Conciliation Act, 1996 (for short, 'the Act of 1996') raises a
challenge to the judgment dated 05.05.2022 passed in Criminal
Miscellaneous Application No.501 of 2012 by which the application
preferred by the appellant herein under Section 34 of the Act of 1996
came to be partly allowed. The appellant is aggrieved by that part of
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the order by which its challenge to the majority award passed by the
Arbitral Tribunal has been rejected.
3. The facts relevant for considering the challenge as raised are
that the appellant is a public sector undertaking engaged in the work of
Power Generation, Transmission, Industry and Renewable Energy. On
10.03.2009 the appellant entered into a contract with the respondent, a
construction company that has been incorporated in the year 2003 and has
been registered in Iraq. As per Clause 2.2 of the General Conditions of
Contract, the contract was to be governed by the law for the time
being in force in the Republic of India. The Civil Court at Nagpur was to
have the exclusive jurisdiction in respect of all the claims under the
contract. Clause 2.14 incorporated the arbitration clause and the Rules
of arbitration framed by the International Commercial Council were to
be adhered.
4. On disputes arising between the parties the arbitration clause
came to be invoked by the respondent herein. It raised its claim under
various heads and sought payment of outstanding amounts. The appellant
raised its defence and denied the claim as made. It also raised a
counter claim against the respondent and sought monetary relief in
that regard. In terms of the arbitration clause, the Arbitral Tribunal
consisting of three Arbitrators, one Arbitrator each nominated by the
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parties with a third Arbitrator as Chairman conducted the said
proceedings. At the conclusion thereof, two arbitrators passed a
majority award and directed the appellant to pay the respondent a sum
of US $ 368539.40 ¢. The appellant was also required to pay costs to
the respondent of US $ 2,22,500. The minority award passed by the
third Arbitrator held the appellant entitled to US $ 22,50,5000. He
also held the respondent entitled to US $ 11,00,928. The parties were
accordingly governed by the majority award as passed on 25.06.2012.
The appellant being aggrieved the said majority award filed
application under Section 34 of the Act of 1996 raising a challenge to
the same on various counts. It sought the setting aside of the award
dated 25.06.2012 to the extent its counter claim was disallowed and
the claims of the respondent were allowed. The respondent filed its
reply to the aforesaid proceedings and supported the majority award.
After the pleadings were complete the parties placed on record written
submissions as well as written arguments for consideration. The
learned District Judge - 2, Nagpur considered the said proceedings. It
was held that the award dated 25.06.2012 could not be treated as a
foreign award. On the other challenges as raised by the appellant, the
learned Judge observed that in the proceedings under Section 34 of
the Act of 1996 it was not permissible to re-appreciate and re-evaluate
the evidence on record. He further held that the reasons assigned in
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the majority award were supported by sound reasons and hence it was
not permissible to interfere with the same. On that premise, the
learned Judge proceeded to hold that the challenge to the majority
award passed by the Arbitral Tribunal did not warrant interference.
The miscellaneous civil application was accordingly dismissed on
05.05.2022. Being aggrieved the appellant has challenged the
aforesaid order in the present appeal under Section 37 of the Act of
1996.
5. Shri Anand Jaiswal, learned Senior Advocate for the appellant
submitted that the learned Judge failed to take into consideration the
specific challenges raised by the appellant to the findings recorded in
the majority award and merely observed that the scope for interference
under Section 34 of the Act of 1996 was limited and refused to examine
such challenge. Inviting attention to the adverse findings recorded in the
majority award and the challenge raised to such findings in the written
notes that were placed on record, it was submitted that the same
required due consideration by the Court exercising jurisdiction under
Section 34 of the Act of 1996. If the challenge as raised was not
acceptable, reasons for the same ought to have been indicated in the
impugned judgment. He submitted that in paragraph 48 of the impugned
judgment a finding was recorded that the award dated 25.06.2012 was
not a foreign award. Thereafter the challenges on merit have only been
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briefly referred to in paragraphs 49 to 54 and without specifically
considering individual challenges, the majority award has been upheld.
Referring to the discussion in paragraph 52 of the impugned judgment
it was submitted that various factual incorrect observations had been
made thereunder. The majority award in paragraph 20.2.2 did not
apply its own formula in the matter of awarding liquidated damages.
Reference in paragraph 20.2.2 was only in the context of the respective
pleadings of the parties. Except for stating that what was discussed in
the impugned judgment was self-explanatory, an independent analysis
was not undertaken by the learned Judge. On the aspect of delay
caused by the respondent it was submitted that the majority award
incorrectly held that the losses suffered could be quantified at US $
4000 per day. This finding was contrary to the material placed before
the Arbitral Tribunal. He referred to various other Heads of claims that
were considered by the Arbitral Tribunal and submitted that for each
of the said Heads, the appellant had sought to demonstrate the
incorrectness in the said findings. The material evidence on the aspect
of delay on the part of the respondent had been ignored while holding
against the appellant. Similar was the contention on the aspect of
unjust enrichment and the finding recorded on the claim with regard
to the caravans. It was thus submitted that the learned Judge ought to
have specifically considered the grounds of challenge as raised in
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detail. However without doing so the challenge was brushed aside by
observing that the reasons contained in the award were sufficient and
that the scope for interference was limited. In support of his
submissions, the learned Senior Advocate placed reliance on the
decisions in Oil & Natural Gas Corporation Ltd. Versus Saw Pipes Ltd.
[(2003) 5 SCC 705], Rajasthan State Mines & Minerals Ltd. Versus
Eastern Engineering Enterprises & Another [(1999) 9 SCC 283],
Hindustan Zinc Ltd. Versus Friends Coal Carbonisation [(2006) 4 SCC
445], Delhi Development Authority Versus R.S. Sharma & Company,
New Delhi [(2008) 13 SCC 80], Arulvelu & Another Versus State
represented by the Public Prosecutor & Another [(2009) 10 SCC 206],
Sumitomo Heavy Industries Limited Versus Oil and Natural Gas
Corporation Limited [(2010) 11 SCC 296], Security Printing and
Minting Corporation of India Limited & Another Versus Gandhi
Industrial Corporation [(2007) 13 SCC 236], Oil and Natural Gas
Corporation Limited Versus Western Geco International Limited
[(2014) 9 SCC 263] Associate Builders Versus Delhi Development
Authority [(2015) 3 SCC 49], Ssangyong Engineering and
Construction Company Limited Versus National Highways Authority
of India (NHAI) [(2019) 15 SCC 131], Antrix Corporation Ltd. Versus
Devas Multimedia P. Ltd. [Arbitration Petition No. 20 of 2011] decided
on 10.05.2013, Antrix Corporation Ltd. Versus Devas Multimedia Private
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Limited [O.M.P. (Comm.) 11 of 2021] decided on 29.08.2022 at Delhi
High Court, Axios Navigation Co. Ltd. Versus Indian Oil Corporation
Ltd. [2012(3) Mh.L.J. 701], Oil and Natural Gas Corporation Ltd.
Versus Interocean Shipping (India) Pvt. Ltd. [2017(5) Bom.CR 8], Modi
Entertainment Pvt. Ltd. Versus Prasar Bharati [2017(163) DRJ 291],
General Manager, BSNL Versus Anil Kumar Tripathi [Arbitration Appeal
No.01/2012] decided on 22.04.2016, Krishna Lifestyle Technology Ltd.
Versus Cotton Corporation of India Ltd. [2021 SCC OnLine Bom 12963],
Bharat Immunologicals and Biologicals Corporation Ltd. Versus
Rameshwari Devi & Others [First Appeal No.127 of 1995] decided on
01.09.1997 at High Court of Allahabad, Central Bank of India Versus
State of Gujarat & Others [(1987) 4 SCC 407], Sihor Nagar Palika Bureau
Versus Bhabhlubhai Virabhai & Co. [(2005) 4 SCC 1] and Harbhajan Kaur
Bhatia Versus M/s Aadya Trading & Investment Pvt. Ltd. & Another
[(2017) 242 DLT 360]. It was thus submitted that the impugned order
passed under Section 34 of the Act of 1996 ought to be set aside.
6. Shri Vijay Sharma, learned counsel for the respondent
opposed the aforesaid submissions and supported the order passed
under Section 34 of the Act of 1996. According to him the
observations made by the learned Judge in paragraph 20 of the
impugned judgment were correct since the appellant had restricted
consideration of the challenge on the aspect of seat of arbitration and
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other points referred to therein. Despite the allegation that the
respondent was responsible for the delay, the appellant did not take
steps whatsoever to terminate the contract. According to the learned
counsel since the Arbitral Tribunal had passed a speaking award and
had assigned reasons for its conclusions it was not necessary for the
learned Judge to have dealt with the entire proceedings and passing a
detailed order. As the learned Judge accepted the findings of the
majority award it rightly did not interfere in the proceedings under
Section 34 of the Act of 1996. There were various claims raised by the
respondent which had not been granted by the Arbitral Tribunal in
which no further grievance was raised. It therefore could not be said
that the Arbitral Tribunal acted in a biased manner against the
appellant. It was rightly held that the scope for interference under
Section 34 of the Act of 1996 was limited. In absence of any perversity
or patent illegality on the face of record the majority award was rightly
not interfered with. The learned counsel referred to various findings
recorded in the majority award and submitted that the same were in
accordance with the various terms of the contract and the Arbitrators
did not travel beyond the contract. Since the majority award had been
upheld under Section 34 of the Act of 1996 there was no reason
whatsoever to interfere in a challenge to the said judgment. To
substantiate his contentions in that regard, the learned counsel
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referred to the decisions in Delhi Airport Metro Express Private Limited
Versus Delhi Metro Rail Corporation Limited [(2022) 1 SCC 131],
Punjab State Civil Supplies Corporation Ltd. & Another Versus
Ramesh Kumar and Company & Others [AIR 2021 SC 5758],
Maharashtra State Electricity Board Versus Sterlite Industries (India)
& Another [(2001) 8 SCC 482], Dyna Technologies Private Limited
Versus Crompton Greaves Limited [(2019) 20 SCC 1], UHL Power
Company Ltd. Versus State of Himachal Pradesh [(2022) 4 SCC 116],
Haryana Tourism Limited Versus Kandhari Beverages Limited [(2022)
3 SCC 237] and Welspun Specialty Solutions Limited (Formerly known
as Remi Metals Gujarat Limited) Versus Oil and Natural Gas
Corporation Limited [(2022) 2 SCC 382] and submitted that the
appeal was liable to be dismissed.
7. We have heard the learned counsel for the parties at length
and with their assistance we have also perused the relevant documents
that were placed on record in proceedings under section 34 of the Act
of 1996. At the outset it may be stated that insofar as the finding
recorded by the learned Judge that the award dated 25.06.2012 was
not a foreign award is concerned, that finding has been accepted by
both the parties and hence it is not necessary to go into the said aspect.
The challenge raised by the appellant to the judgment passed under
Section 34 of the Act of 1996 is based on the premise that specific
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challenges raised by the appellant to various Heads in the majority
award had not been considered by the learned Judge while dismissing
the proceedings. The contentions urged have not been dealt with. In
this regard we may observe that while it is true that the scope for
interference under Section 34 of the Act of 1996 is limited to
examining as to whether the contingencies stipulated in Section 34 of
the Act of 1996 have been satisfied or not, it would nevertheless be
necessary for the Court to examine the challenge as raised on such
permissible grounds. When a specific challenge is raised to the award
in the context as permissible under Section 34 of the Act of 1996, it
would be necessary for the Court to deal with such challenge. Merely
by stating that the scope for interference under Section 34 of the Act of
1996 is limited, the Court would not be justified in refusing to examine
specific challenges to the award. Though the Court while exercising
jurisdiction under Section 34 of the Act of 1996 cannot sit in appeal
over the award passed by the Arbitrator, it would have to refer to and
deal with objections raised to the award and assign some reasons for
either accepting such challenge or for turning down the same. The
order passed under Section 34 of the Act of 1996 therefore ought to
indicate consideration of the challenges raised on the touchstone of
Section 34 of the Act of 1996 and briefly indicate the reasons for either
accepting the same or negating such challenge. The impugned
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judgment is therefore required to be examined in the aforesaid
context.
8. Perusal of the impugned judgment dated 05.05.2022
indicates that after referring to the factual aspects and rival
contentions the judgment proceeds to hold in paragraph 48 that the
award dated 25.06.2012 is not a foreign award. The other challenges
on merit have been dealt with in the remaining six paragraphs of the said
judgment. As regards the aspect of liquidated damages is concerned the
contention has been referred to that the express terms and conditions
of awarding liquidated damages had not been followed by the majority
award and the same could not have exceeded 2.5% of the total
contract cost. The learned Judge in paragraph 52 has observed that
the majority award had applied its own formula in view of the
discussion in paragraph 20.2.2. It has then observed that the reasons
discussed in paragraph 42.4 to 42.15 in the majority award were self
explanatory and on that basis has concluded that since the said aspect
was supported by sound reasons the Court under Section 34 could not
interfere.
The appellant in its written submissions in paragraphs 12 to 18 has
raised a ground that the award passed by the majority ignores express
terms of the contract insofar as liquidated damages are concerned. It
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has sought to justify its entitlement to liquidated damages and has
urged that even if the respondent was responsible for the delay of only
75 days, the appellant would be entitled to maximum liquidated
damages for delay exceeding ten weeks. It has referred to the
contractual terms in that regard. It has also sought to rely upon the
dissenting opinion on the aspect of liquidated damages to contend that
the appellant was entitled to the counter claim on this basis. We find
that in paragraph 20.2.2 the majority award has not applied any
formula as observed by the learned Judge but it merely refers to the
contentions of the parties in that regard. In this context, reference can
also be made to the stand taken in paragraphs 42 to 58 of the
application filed under Section 34 of the Act of 1996 by the appellant.
We thus find that when a specific challenge was raised by the appellant
to the majority award while adjudicating the claim for liquidated
damages that it failed to take into consideration the terms of the
contract, this contention ought to have been dealt with by the learned
Judge in the backdrop of the terms of the contract. However, the
observations in paragraph 52 of the impugned judgment do not
indicate such consideration.
9. On the aspect of claims based on caravans a specific
challenge was raised by the appellant that the majority award has
recorded an adverse finding by ignoring material evidence on record.
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According to the appellant it was not liable to make any payment in
that regard since the breach in that regard was committed by the
respondent. The purchase price of the caravans was also not available
before the Arbitral Tribunal and the claim as awarded was therefore
without any supporting evidence. The aspect of depreciation in the
value of the caravans being used for a period of more than two years
had also not been considered. Such stand has been taken in
paragraphs 38 to 42 of the written submissions. The same has also
been countered by the respondent. Paragraphs 53 and 54 of the
impugned judgment however do not indicate any such consideration in
that regard. Same is the case on the aspect of loss of profit due to de-
scoping of works as well as the claim based on Invoice No.10 as well as
the aspect of interest. It is to be noted that in paragraph 20 of the
impugned judgment reference to these aspects having been argued on
behalf of the appellant has been made which observations even
according to the learned counsel for the respondent are correct. We
however find that the impugned judgment does not specifically deal
with these challenges except for observing that what was granted in
the majority award was based on facts and supported by reasons.
Without dealing with the specific challenges as raised it has merely
been observed that it was incumbent on the part of the appellant to
show that such findings were against or beyond the scope of the terms
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and conditions of the agreement. As stated above, the specific
challenges though raised have not been dealt with and the only
observation made is that the scope for interference under Section 34 of
the Act of 1996 was limited.
10. The right conferred on a party aggrieved by an award is
required to be exercised in the manner prescribed by Section 34 of the
Act of 1996. We therefore find that such challenge having been raised
by the appellant it ought to have been considered on the basis of the
material on record. Mere observation that the scope for interference
with the award would not be sufficient in the facts of the present case
since we find from the record that detailed written submissions as well
as written notes of arguments were placed on record by both the
parties. It may be stated that both the learned counsel sought to
substantiate their respective contentions in support of and against the
award by referring to the said material. We however find that such
consideration for the first time in proceedings under Section 37 of the
Act of 1996 without there being such consideration under Section 34
of the Act of 1996 would not be feasible. We are therefore inclined to
direct re-consideration of the proceedings under Section 34 of the Act
of 1996 afresh. For this reason we have not specifically referred to the
various decisions sought to be relied upon by the learned counsel for
the parties in support of such challenge. For supporting our
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conclusion, we may only refer to the judgment of the Delhi High Court
in Harbhajan Kaur Bhatia as well as the subsequent decision in Indian
Oil Corporation Limited (supra). The learned Judge while considering
a somewhat similar challenge has observed that dismissal of objections
raised under Section 34 of the Act of 1996 except by stating that the
award was not against public policy or that it did not violate the ratio
of the judgment in Oil and Natural Gas Company Limited (supra) was
not a satisfactory manner of disposing off Section 34 objections.
11. For aforesaid reasons, the following order is passed :-
(I) The judgment dated 05.05.2022 passed in
Commercial Miscellaneous Application No.
501 of 2012 is set aside. The proceedings are
remitted to the District Court for considering
the application filed under Section 34 of the
Act of 1996 afresh and in accordance with law.
(II) Since the said proceedings were filed in the
year 2012 the same are expedited. The
District Court shall take necessary steps to
ensure that the proceedings are decided by the
end of April-2024.
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(III) It is clarified that the observations in this
judgment have been made only for dealing
with the rival submissions of the parties and
the same do not indicate consideration of such
claims on merits.
(IV) All points are expressly kept open.
12. The Commercial Appeal is allowed in aforesaid terms
leaving the parties to bear their own costs.
(MRS.VRUSHALI V. JOSHI, J.) (A.S. CHANDURKAR, J.)
APTE
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Signed by: Apte
Designation: PS To Honourable Judge
Date: 30/11/2023 18:50:45
